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2015-01-26 City Council Agenda Packet
CITY OF PALO ALTO CITY COUNCIL JANUARY 26, 2015 Special Meeting Council Chambers 6:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday preceding the meeting. 1 January 26, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applications and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Study Session 6:00-7:00 PM 1.Information Technology 3-Year Strategy Update Study Session Agenda Changes, Additions and Deletions City Manager Comments 7:00-7:10 PM Oral Communications 7:10-7:25 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. REVISED 2 January 26, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Consent Calendar 7:25-7:30 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 2.Policy and Services Committee Recommendation to Accept the Triennial External Quality Control Review of the Office of the City Auditor 3.Approval of the Acceptance and Expenditure of Citizens Options for Public Safety (COPS) Funds on Various Law Enforcement Equipment and Approval of a Budget Amendment Ordinance in the Amount of $105,587 for the Supplemental Law Enforcement Services Fund 4.Approval of a Construction Grant Agreement with The Association of Bay Area Governments and the San Francisco Bay Area Water Trail in the Amount of $40,000 for Palo Alto Baylands Sailing Station Accessibility Improvements and Adoption of a Related Budget Amendment Ordinance in the Capital Project Fund 5.Finance Committee Recommendation that City Council Adopt a Resolution Amending the City’s Cap-and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities, and Adopt a Resolution Amending Rate Schedules G 1, G-1-G, G 2, G-2-G, G 3, and G-3-G to Add a Rate Component for Cap-and-Trade Regulatory Compliance Costs and Combine the Administrative and Transportation Charges with the Distribution Charges Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 7:30-9:00 PM 6.PUBLIC HEARING: Approval of a Mitigated Negative Declaration and a Site & Design Review and Design Enhancement Exception Application for a Three Story Mixed-Use Building on a 27,000 Square Foot Site Zoned Service Commercial (CS) at 441 Page Mill Road. The Project Would Contain 21,540 Square Feet of Commercial Space, 91 Off-Street Parking Spaces, and Ten Apartment Units, Including Three Below Market Rate Units, and Includes a Request for Three “Off Menu” Concessions Under Palo Alto Municipal Code Section 18.15 and the State Density Bonus Law 9:00-10:30 PM 7.Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit 3 January 26, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 8. CONFERENCE WITH CITY ATTORNEY/LEGAL COUNSEL Potential Litigation (as petitioner) – one matter Subject: Caltrain Joint Powers Board – Penninsula Corridor Electrification Project – California Environmental Quality Act Authority: Government Code Section 54956.9(d)(4) Closed Session 4 January 26, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Supplemental Information City Council Meetings Council Meeting Cancellation for Monday, January 19, 2015 Council Retreat Flyer for Saturday, January 31, 2015 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Public Letters to Council SET 1 SET 2 SET 3 City of Palo Alto (ID # 5457) City Council Staff Report Report Type: Study Session Meeting Date: 1/26/2015 City of Palo Alto Page 1 Summary Title: Presentation of the City of Palo Alto IT Strategy Update Title: Information Technology 3-Year Strategy Update Study Session From: City Manager Lead Department: IT Department Recommendation: Staff recommends that Council receive an update to the City’s 3-year Information Technology (IT) Strategy presentation and offer comments and questions. Executive Summary: Technology plays an integral role in all aspects of City business. Since July 2012, the IT Department has been executing a 3-year IT Strategy. This presentation will provide an update to Council on that strategy. The current IT strategy will conclude on June 30, 2015. Background: On July 1, 2012, IT embarked upon a 3-year IT Strategy. An update of this strategy was presented to Council on May 20, 2013. Discussion: The mission of the City’s Information Technology Department is to provide innovative technology solutions that support City departments in delivering quality services to our community. In the long-term, the vision of technology for the City is to build and enable a leading smart and digital city. The following are the four core components of the current 3-year IT strategy: 1. Deploy digital city capabilities 2. Implement IT governance 3. Standardize and enhance service delivery 4. Upgrade technology infrastructure and formalize Information Security City of Palo Alto Page 2 For this study session, the IT department will present highlights of current technology trends; the City’s technology landscape; a review of our City IT strategy; what IT has accomplished including results since the launch of the strategy; lessons learned; and the plan for how the strategy will be further executed and revised in the future. CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR January 26, 2015 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Triennial External Quality Control Review of the Office of the City Auditor The Office of the City Auditor recommends acceptance of the Triennial External Quality Control Review of the Office of the City Auditor. At its meeting on December 9, 2014, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS: Attachment A: Triennial External Quality Control Review of the Office of the City Auditor (PDF) Attachment B: Policy and Services Committee Meeting Minutes Excerpt (December 9, 2014) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR December 9, 2014 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Triennial External Quality Control Review of the Office of the City Auditor BACKGROUND The Office of the City Auditor follows Government Auditing Standards, established by the Comptroller General of the United States. The standards provide a framework for conducting high quality audits with competence, integrity, objectivity, and independence. The Government Auditing Standards are mandated for use by federal audit agencies, but because they are written by government and for government, the standards are often adopted for use by state and local government audit offices. Government audit offices that use the standards are required to establish and maintain a system of internal quality control (i.e., policies and procedures) to ensure that their audits comply with the standards and to have an external quality control review, also known as a “peer review,” at least once every three years to assess the organization’s compliance with the standards. The attached letter and report contain the results of our most recent peer review. Last month, government audit professionals from the City of Toronto, Canada, and the City and County of Honolulu, HI, came to our office to conduct our peer review. Their review included reviewing our written policies and procedures, our internal monitoring procedures, the work we did to complete a sample of audit and nonaudit service engagements, and our compliance with continuing professional education requirements. The peer review was coordinated through the Association of Local Government Auditors. The team found that our office fully complied with the Government Auditing Standards for the period July 1, 2011, through April 14, 2014. The Office of the City Auditor recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Triennial External Quality Control Review of the Office of the City Auditor. Respectfully submitted, Harriet Richardson, CPA, CIA, CGAP, CRMA City Auditor Attachment A Page 2 ATTACHMENTS: Attachment A: External Quality Control Review Results (PDF) Attachment B: Response to Management Letter (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 3 Attachment A Attachment A Attachment A Attachment A Attachment A November 6, 2014 Mr. Jeffrey Griffiths Mr. Van Lee Auditor General, City of Toronto Deputy City Auditor, City and County of Honolulu Dear Mr. Griffiths and Mr. Lee, Thank you for conducting the external quality control review of the City of Palo Alto’s Office of the City Auditor, which the Government Auditing Standards required to be conducted every three years. We are committed to continuously improving and refining our audit processes, and this review allows us to identify ways in which we can improve. We are very pleased that your review found that audits we performed complied with Government Auditing Standards. We appreciate your thorough review and thoughtful feedback on our audit processes and your acknowledgement of the high quality of our reports and audit staff, and that our updated Audit Policies and Procedures Manual, dated October 13, 2014, will serve the office well in the future. We appreciate the observations and suggestions you provided for our office to enhance our adherence to Government Auditing Standards and agree with your recommendations. Our updated Audit Policies and Procedures Manual, dated October 13, 2014, includes specific language to ensure adherence to each of these Government Auditing Standards requirements: Ensure that we document the extent of supervisory review before issuing an audit report – Our updated Audit Policies and Procedures Manual states, “The City Auditor will review and approve all workpapers and reports prior [emphasis added] to issuing the audit to ensure that all findings, recommendations, and conclusions are appropriate and supported, and that the audit was performed in accordance with GAGAS. The City Auditor may delegate workpaper review to a senior performance auditor if necessitated by time constraints. If delegated, the reviewer must follow the procedures for workpaper review.” Follow Government Auditing Standards requirements for conducting nonaudit services – Our updated Audit Policies and Procedures Manual includes a chapter dedicated to performing nonaudit services to ensure that we appropriately assess our independence prior to performing a nonaudit service and that we follow Government Auditing Standards requirements for management oversight of nonaudit services and acceptance of the outcomes. We also have a template to guide us through the required procedures, which we require to be used prior to performing any nonaudit service. Fully document our assessment of fraud risks for each audit – Our updated Audit Policies and Procedures Manual requires audit staff to conduct a project-based risk assessment during the Attachment A planning phase of each audit. The risk assessment must specifically consider whether each risk represents a fraud risk, and our Audit Policies and Procedures Manual provides sample questions to help determine if fraud has occurred in the past or has the potential to occur in the future. We also have a risk-assessment template that audit staff are required to use to document the risk assessment. We would like to express our sincere appreciation to the peer review team and the Association of Local Government Auditors for their work and commitment to ensuring that government auditors adhere to Government Auditing Standards, which provide decision makers and the public with high quality audit reports. Respectfully, Harriet Richardson, CPA, CIA, CGAP, CRMA City Auditor Attachment A POLICY AND SERVICES COMMITTEE DRAFT MINUTES 1 Regular Meeting Tuesday, December 9, 2014 Chairperson Price called the meeting to order at 6:02 P.M. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Price (Chair), Scharff, Schmid Absent: Klein ORAL COMMUNICATIONS None AGENDA ITEMS 1. Triennial External Quality Control Review of the Office of the City Auditor Harriet Richardson, City Auditor, stated the Government Auditing Standards ”Standards” require auditors offices that follow the standards to have a peer review every three years. In order to ensure compliance with the standards, the triennial peer review was conducted through the Association of Local Government Auditors (ALGA). The most recent peer review covered the period of July 1, 2011 to April 14, 2014; the period was short of the three year time because of her start date. The peer review team reviewed the City Auditor’s policies and procedures manual and a mix of audit and nonaudit reports completed by the office to ensure they were performed in accordance with the standards. The reviewers concluded that the City Auditor’s policies and procedures manual and work performed were in compliance with the standards. They suggested improvements in three areas to enhance the compliance with the standards; they advised that the updated policies and procedures manual was comprehensive and complete and would serve the office well in the future. The suggested areas for improvement were; 1) document supervisory review of audits; this process should occur prior to the issuance of the report 2) appropriately evaluate the office’s independence regarding nonaudit services, and 3) assess and Attachment B 2 December 9, 2014 document the assessment of risks of fraud; there has since been a risk assessment process put into place to effectively perform the requested task. The peer review team recommended to the City Council that the Office of Management and Budget (OMB) not review the City Auditor’s office budget prior to being submitted to the Council for annual approval. She accepted each of the recommendations and incorporated them into the updated policies and procedures manual which was currently in use by the City Auditor Staff. Council Member Schmid mentioned he spoke to the visiting audit team. There was interest in the office reporting directly to the City Council and whether or not the City Manager managed or oversaw the budget of the City Auditor’s office. He questioned why the audits being reviewed did not include the time period Ms. Richardson was on Staff. Ms. Richardson stated the work the review team audited was completed. The work that had been started since her appointment was not completed and therefore not ready for review. The next review would cover the full three- year period. Council Member Schmid asked to define the boundaries of nonaudit work versus audit work. Ms. Richardson stated the boundary was not as clear as she would prefer. The Standards defined nonaudit services as anything that was not an audit. There was a clear definition of what an audit was and therefore anything outside of that designation was considered nonaudit. An audit consisted of an evaluation of audit evidence and an analysis to draw a conclusion. There were times where an analysis was performed on nonaudit work and some consider that that should be considered an audit. As chair of ALGA’S Professional Issues Committee, she was working with the Government Accountability Office in Washington D.C. to provide input on issues faced by audit offices on the nonclarity of the audit versus nonaudit. Council Member Schmid said the Auditor sat on the Ethics Committee and he assumed that was considered nonaudit work. Ms. Richardson clarified she was not a seated member of the Ethics Committee; although, her office provided input into the ethics policy. Chair Price noted Council Member Schmid was referring to the Fraud Hot Line. Attachment B 3 December 9, 2014 Ms. Richardson noted the Hot Line was considered nonaudit work. She mentioned that was an unclear area, when the office was performing an investigation. Council Member Schmid asked if the role in an investigation was not driven by an audit. Mr. Richardson stated that was correct. Council Member Schmid said it was based on the judgment of the Auditor. Ms. Richardson stated that was correct. She added most of the investigations were not handled directly by the Auditor’s office but the information was directed to the Department Head. Council Member Schmid asked if at some point there were to be a tip of financial fraud, would the Auditor’s Office create an audit and investigate. Ms. Richardson stated that was correct. There had been a situation in her prior employ and the approach was an actual audit. Council Member Schmid asked if the nonaudit work created a conflict with the audit work. Ms. Richardson said it depended on the method of the audit. If the approach was on the weaknesses that allowed for the loss of funds it would not be considered an impairment. Council Member Schmid asked if the performance report was nonaudit work. Ms. Richardson noted that specific work was treated as an audit. The standards were written so the principles were applicable based on the audit objectives. The performance report was a compilation of data from different departments rather than analysis; therefore, the Auditor’s Office was not drawing conclusions and thus not impairing their independence. Council Member Scharff asked if the City of Berkeley had an elected auditor. Ms. Richardson said yes. Council Member Scharff said in places where there was not an elected auditor, how was their office budget typically processed. Attachment B 4 December 9, 2014 Ms. Richardson stated the budget area varied widely. In the incident of the peer review auditors, both of their office budgets were sent directly to their legislative body and not through the budget office. Council Member Scharff asked if the review team suggested the Auditor’s Office put together a budget and have it routed directly through the City Council rather than through the Budget Office. Ms. Richardson said that was correct. Council Member Scharff asked if she was going to raise the issue with the City Manager or if she wished for the Council to discuss the matter. Ms. Richardson suggested addressing how the City Manager desired to approach the recommendation. Council Member Scharff noted the Auditor’s Office was a Council Appointed Office (CAO) and, therefore, if there were budget process changes, the discussion should be considered for all four CAO offices. Ms. Richardson understood and asked if the Policy & Services Committee (Committee) wished for her to approach the other CAO offices. Council Member Scharff considered the question and asked how other cities handled their budget models regarding similar offices. Ms. Richardson noted the Auditor General from Toronto; one of the peer review team members, followed the budget guidelines of his city with the exception that he turned his budget directly into the legislature rather than the budget office for review and approval. Molly Stump, City Attorney, agreed to consult with the other CAO’s to review budget processes within the CAO offices. She felt the Budget director should be highly involved to ensure their structure matched the City’s overall budget. Khashayar “Cash” Alaee, Senior Management Analyst, mentioned the budget process went before the Finance Committee and the CAO’s had ample opportunity to meet with the Council on their budgets and there were safeguards placed in the process for all offices. Council Member Scharff asked how the peer review audit was performed. Ms. Richardson stated the external auditors were on site for a week but the background information; history of peer reviews, prior recommendations, Attachment B 5 December 9, 2014 policies and procedures, along with a list of work completed in the past three years was sent out a few months in advance. The peer review team selected a sampling of work they wished to review. When they arrived at the location they were set up in an office and requested the files be pulled as needed. Council Member Scharff asked if the review team interviewed the Auditor Staff. Ms. Richardson stated the process varied depending on the organization. This specific organization requested to interview the Auditor Staff and a selected City Council Member from the Standing Committee the office presented to. Council Member Scharff asked where the reviewers were set-up for the week. Ms. Richardson said there was a vacant office in the City Manager’s area that they occupied. Council Member Scharff confirmed the team reviewed the requested files and if there were questions they spoke to the Staff member responsible for that audit. Ms. Richardson stated that was correct. Chair Price stated the City Auditor had mentioned Special Advisory Memo (SAM), she asked for more specifics. She recalled that was under the prior Auditor and noted the program was discontinued. She asked if there was a relationship with the nonaudit activities. Ms. Richardson stated yes; the prior Auditor worked on nonaudit activities and presented the information as SAM’s. There was a specific concern because the SAM’s looked as if an audit had been performed and the office should have been following the independence requirements when they were completed. MOTION: Chair Price moved, seconded by Council Member Schmid that the Policy & Services Committee approve and recommend to the City Council acceptance of the Triennial External Quality Control Review from the Office of the City Auditor. MOTION PASSED: 3-0 Klein absent Attachment B City of Palo Alto (ID # 5425) City Council Staff Report Report Type: Consent Calendar Meeting Date: 1/26/2015 City of Palo Alto Page 1 Summary Title: COPS Funding Title: Approval of the Acceptance and Expenditure of Citizens Options for Public Safety (COPS) Funds on Various Law Enforcement Equipment and Approval of a Budget Amendment Ordinance in the amount of $105,587 For The Supplemental Law Enforcement Services Fund From: City Manager Lead Department: Police RECOMMENDATION Staff recommends that Council: 1. Accept Citizens Options for Public Safety (COPS) funds from the State of California; and 2. Approve a Budget Amendment Ordinance (BAO) to increase revenue in the amount of $105,587 in the Supplemental Law Enforcement Services Fund (SLESF) and allocate that funding to Facilities and Equipment for the purchase of safety equipment. BACKGROUND Since 1997, the California State Budget Act has included allocations to counties and cities for the COPS program. This funding is intended to fill the need for additional resources at the local level to ensure public safety. Under the provisions of Government Code Section 30061, a percentage of the funds are allocated to counties and cities, based upon population, for law enforcement services. Funds must supplement existing services and cannot be used to supplant any existing funds. Each city is also required to deposit the funds into a separate Supplemental Law Enforcement Services Fund so that these funds are not intermingled with General Fund dollars. Previous uses of COPS funds have included the purchase of a replacement K-9 unit, crime scene evidence collection vehicle, firearm instructor hearing protection, surveillance equipment, interview recording system, mobile data terminals, youth program activities, upgrades to the telecommunications infrastructure, upgrades to the patrol vehicle and traffic motorcycle programs, and property and evidence operational and security improvements. Last year, Council approved COPS funding for the purchase of a secure wireless crisis negotiation system, City of Palo Alto Page 2 active shooter/rapid response vests, temporary evidence storage lockers, electronic control device warranties and accessories, a handheld electronic citation system, and GPS trackers. The Police Department has received funds each year under this program since its inception in 1998. Annual allocations have averaged $100,000 over the last few years. DISCUSSION Staff proposes to use the COPS funds in the following manner: Autocite Software ($35,000) The purchase of an electronic citation (E-Cite) system was approved as part of the 2014 COPS allocation; however, the procurement of the E-Cites will be completed in Fiscal Year 2015. Funding from the 2015 COPS allocation will provide for the development of an interface with the Department’s new Records Management Solution to enable easy data transfer from the E-Cite devices and should be completed in Fiscal Year 2016. Voice over Internet Protocol (VoIP) Phone Recording Equipment: $30,000 The Santa Clara County District Attorney’s office, by written county protocol, has directed all police agencies to record involved-party statements pursuant to criminal investigations. This policy directs the recorded statements to be preserved as evidence in criminal cases to reinforce the integrity of these investigations. The Palo Alto Police Department currently uses archaic technology designed for analog phones that records phone calls to the local PC. The City recently migrated to an Avaya VoIP phone system and the digital data is not compatible with the legacy system. The Police Department partnered with IT to identify new technology to record phone calls for investigations and other business calls. The phone recording software offered by Avaya provides the audio quality, software functionality and audit capabilities that the Department requires and is anticipated to be implemented by the end of 2015. Training Pistols: $20,000 Currently, officers utilize their duty weapon with a barrel plug inserted to render the weapon safe during training. Using a training pistol would be another step towards eliminating accidental injury. Companies are manufacturing realistic training pistols that have the same feel, weight and trigger pull as a duty pistol. Additionally, many of these training pistols can be purchased with Lasers which would help instructors better evaluate training scenarios. Body-worn surveillance equipment: $7,000 Body-worn surveillance equipment for criminal investigations will be put to use for both local criminal investigation operations as well as regional taskforce operations. The department’s current body-worn surveillance equipment is outdated, much larger and less discreet than current technology. TRACS Moving Target System: $6,250 City of Palo Alto Page 3 TRACS is a remote controlled, robotic moving target system used for modem firearms training. Reality based training has increasingly become the standard for police training scenarios throughout the United States. There are several legal cases and standards which address the need for reality based and improved training scenarios for police officers. The ability to practice firearms training with a non-stationary target is paramount to provide officers with realistic, contemporary scenarios. The TRACS system could be used by Firearms Instructors, Defensive Tactics instructors and SWAT instructors to develop training scenarios that offer more realistic circumstances. LeadsOnline Software: $6,200 LeadsOnline is the nation’s largest online investigative system used by law enforcement to solve crimes from burglary to identity theft, homicide and narcotics. Funding will be used to purchase a one-time site license in order to evaluate the system and determine if the Department should purchase an on-going subscription in the future. More than 3,000 law enforcement agencies throughout California and across America have turned to this useful tool for solving crimes. LeadsOnline helps businesses with mandated transaction reports and is the link between investigators and missing items or individuals who may turn out to be instrumental in solving a homicide, finding a meth lab, or getting stolen property back to its rightful owner. RESOURCE IMPACT A total of $105,587 of expenditures are anticipated, all of which will be covered by grant funding. There will be no impact to the General Fund as ongoing maintenance costs for the items purchased by the SLES Fund will be absorbed in the Department’s existing non-salary budget. The City received the official notice (http://www.sco.ca.gov/Files-ARD- Payments/copsdof_letter_1415_sep14.pdf) from the California Department of Finance in September 2014 that the City’s COPS allocation for Fiscal Year 2015 is $105,587. Revenues and expenditures of $105,587 will be budgeted in the City’s SLES Fund through a Budget Amendment Ordinance. POLICY IMPLICATIONS Expenditures of funds associated with COPS funds are consistent with City Policy. ENVIRONMENTAL ASSESSMENT Acceptance of COPS funding and the proposed expenditures for public safety equipment are not projects subject to CEQA requirements. Attachments: BAO XXXX - FY 2015 COPS Grant (DOCX) 1 Revised December 22, 2014 5425 ph Ordinance No. XXXX ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR FISCAL YEAR 2015 TO INCREASE REVENUE ESTIMATES FOR CITIZEN OPTIONS FOR PUBLIC SAFETY (COPS) FUNDS FROM THE STATE OF CALIFORNIA IN THE SUPPLEMENTAL LAW ENFORCEMENT SERVICES (SLES) SPECIAL REVENUE FUND BY $105,587 WITH A CORRESPONDING INCREASE TO THE FACILITIES AND EQUIPMENT ALLOCATION OF $105,587 IN THE SLES FUND. The Council of the City of Palo Alto does ordain as follows: SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 16, 2014 did adopt a budget for fiscal year 2015; and B. The City of Palo Alto received official notice from the California Department of Finance in September 2014 that the City’s Citizen Options for Public Safety (COPS) allocation for Fiscal Year 2015 is $105,587. Under the provisions of Government Code Section 30061, a percentage of the funds are allocated to counties and cities, based upon population, for law enforcement services; and C. COPS funding is intended to fill the need for additional resources at the local level to ensure public safety. Funds must supplement existing services and cannot be used to supplant any existing funds; and D. The Police Department’s spending plan for the FY 2015 SLES Funds include the purchase of software to interface the Electronic Citation (E-cite) devices with the Department’s new Records Management System (RMS); Voice over Internet Protocol (VoIP) phone recording equipment; training pistols; surveillance equipment; a TRACS moving target training system; and access to an online investigative database; and E. City Council authorization is needed to amend the 2015 budget as hereinafter set forth. SECTION 2. The revenue estimate from the State of California in the amount of One- Hundred Five Thousand Five Hundred Eighty-Seven ($105,587) is hereby increased in the Supplemental Law Enforcement Services (SLES) Special Revenue Fund. SECTION 3. The Facilities and Equipment Allocation in the Supplemental Law Enforcement Services Special Revenue Fund is hereby increased by One-Hundred Five Thousand Five Hundred Eighty-Seven ($105,587). 2 Revised December 22, 2014 5425 ph SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two- thirds vote of the City Council is required to adopt this ordinance. SECTION 5. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 6. The actions taken in this ordinance do not constitute a project requiring environmental review under the California Environmental Quality Act (CEQA). INTRODUCED AND PASSED: Enter Date Here AYES: NOES: ABSENT: ABSTENTIONS: NOT PARTICIPATING: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Assistant City Attorney City Manager ____________________________ Director of Administrative Services ____________________________ Police Chief City of Palo Alto (ID # 5335) City Council Staff Report Report Type: Consent Calendar Meeting Date: 1/26/2015 City of Palo Alto Page 1 Summary Title: Water Trail Grant Title: Approval of a Construction Grant Agreement with The Association of Bay Area Governments and the San Francisco Bay Area Water Trail in the Amount of $40,000 for Palo Alto Baylands Sailing Station Accessibility Improvements and Adoption of a Related Budget Amendment Ordinance in the Capital Project Fund From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council approve a construction grant agreement with The Association of Bay Area Governments and the San Francisco Bay Area Water Trail (Attachment A) in the amount of $40,000 for Palo Alto Baylands Sail Station accessibility improvements, and adopt a Budget Amendment Ordinance to increase the estimate for Local Revenue by $40,000 in the Capital Project Fund for the City Facility Parking Lot Maintenance project (PE-09003) in recognition of the grant award. Executive Summary The Association of Bay Area Governments (ABAG) awarded the City of Palo Alto a $40,000 grant for accessibility improvements for the Palo Alto Baylands Sailing Station in 2012. The grant was awarded to the City in connection with the Palo Alto Baylands Sailing Station being given conditional designation as a stop on the San Francisco Bay Area Water Trail. The grant process began in late 2010 when Water Trail staff toured possible locations for landing stops along the trail. Palo Alto Baylands was immediately put on their list of locations due to several factors: it is an existing facility, relatively minor work needs to be done to address compliance issues, and there are few locations which can serve the South Bay area. Open Space staff attended several Bay Area Water Trail planning meetings. When grant funding became available, the City was encouraged to apply to help offset costs of making accessibility upgrades desired by Water Trail staff. Background City of Palo Alto Page 2 The Baylands Sailing Station provides bay access to non-motorized canoes, kayaks, and other small boats that can be hand-launched. The Sailing Station, built in 1992, was designated as a conditional stop on the San Francisco Bay Water Trail in 2013. The San Francisco Bay Area Water Trail is a voluntary, planned network of access sites, or “trailheads.” These "trailheads" will make it easier for people using non-motorized small boats to safely enjoy the historic, scenic, cultural and environmental richness of San Francisco Bay through single and multiple day trips. The Baylands Sailing Station meets all the qualifications for a designated stop on the Water Trail (parking, restrooms, pathways, sailing station dock). Certain elements of the Sailing Station need accessibility improvements to meet the Americans with Disabilities Act requirements, and current accessibility standards. Upgrades that will need to be completed to change our status from conditional include: additional railings on the pier and ramps to the dock, changing the base of the pay telephone to remove wheelchair obstacles, installation of a compliant water fountain, removal of trip hazards on the pier, resurfacing of the dock, repairs to the dock edge, installation of a compliant hose bib (completed), improved compliant signage and paving access routes from parking to the pier. The San Francisco Bay Area Water Trail is a nine-county program under the leadership of the California Coastal Conservancy. It is administered in collaboration with the Association of Bay Area Governments, the San Francisco Bay Conservation and Development Agency and the California Department of Boating and Waterways. Discussion The purpose of this project is to make repairs, upgrades, and improvements to the existing launch facility at the Palo Alto Baylands Sail Station. Improvements will provide increased recreational opportunities to Palo Alto and greater San Francisco Bay Area communities and provide an accessible and useable trail head for the Bay Area Water Trail. This grant has a requirement for matching funds from the City of Palo Alto in the amount of $40,000. These funds will come from pairing the grant money with existing Public Works Department CIP City Facility Parking Lot Maintenance (PE-09003) funds intended for paving a portion of the sail station parking lot. The addition of grant money to the existing capital improvement project will add additional ADA compliance improvements, such as an upgrade of accessible parking to meet current standards and creation of firm surface routes of travel from parking to the water fountain, pay telephone, wash pad and pier. The upgraded facility will greatly enhance the availability of and accessibility to the South Bay waters for recreational boaters of all physical abilities and skill levels as individuals and family groups. City of Palo Alto Page 3 Facility upgrades will make access to the South Bay, south bayside marshes, sloughs and estuaries much easier for exercise, bird and animal viewing and general exploration. Increased accessibility will increase knowledge of and future stewardship for the San Francisco Bay. Numerous user groups use the sail station. Many users are small boaters; also using the facility are hikers, joggers, cyclists, wildlife enthusiasts, painters, and photographers. Improving this facility will benefit all of our user groups. Total visitation to the Baylands is approximately 825,000 people each year; some percentage of visitors has a mild to severe physical disability requiring accommodation. Improving the sailing station facility will increase the usability and enjoyment of the Baylands for, and increase visitation by, these users. Timeline The grant money will be used to expand the scope of services for an existing City Capital Improvement Project (PE-86070) to repave a portion of the Sailing Station Parking Lot. Completion of the parking lot project is planned for the spring of 2015. Resource Impact The grant money will be used to expand the scope of services for the City Facility Parking Lot Maintenance project (PE-09003) to repave a portion of the Sailing Station Parking Lot. Funding from this project will also satisfy the ABAG’s grant matching requirement of $40,000. There are no new costs to the City associated with receiving this grant. Policy Implications The sail station improvement project is in compliance with the following City of Palo Alto Community Services Department Goals: “Goal C-1 Palo Alto shall implement programs and strategies that sustain the health, well-being, recreation, and safety of residents and visitors.” “Goal C-2 Palo Alto shall engage the community, work with our regional partners, reach out to our schools, collaborate with non-profits, and create business partnerships in order to provide community services for all age groups.” “Goal C-3 Recognize the intrinsic value and everyday importance of our parks and community centers, libraries, and civic buildings, by investing in their maintenance and improvement.” “Goal C-4 Plan for the future in which our parks, libraries, and community facilities continue to thrive and adapt to the growth and change of Palo Alto.” “Goal C-5 Palo Alto is committed to high-quality public services and the manner in which those services are provided to our residents, businesses and visitors.” Environmental Review City of Palo Alto Page 4 A Joint Aquatics Resources Permit Application (JARPA) is being completed for the Sailing Station Parking Lot resurfacing project. THIS DOESN’T LOOK CORRECT. IT COULD READ depending on the circumstances “The award of funding under the ABAG grant agreement is not a project for purposes of CEQA and the CEQA Guidelines, therefore, no environmental review is required. When the Sailing Station Parking Lot resurfacing project is undertaken, the project will be categorically exempt from environmental review under CEQA Guidelines section 15301 (Existing Facilities) or 15304 (Minor alterations to land).” Attachments: H2O grant agreement (PDF) Attachment B: Budget Amendment Ordinance - Water Trail Grant (DOCX) 1 5335/mb Revised September 20, 2013 Ordinance No. XXXX ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 2015 IN THE CAPITAL IMPROVEMENT FUND, INCREASING THE ESTIMATE FOR LOCAL REVENUE IN THE CITY FACILITY PARKING LOT MAINTENANCE PROJECT (PE-09003) IN THE AMOUNT OF $40,000 IN RECOGNITION OF A GRANT AWARD FROM THE ASSOCIATION OF BAY AREA GOVERNMENTS (ABAG) FOR ACCESSIBILITY IMOPROVEMENTS TO THE PALO ALTO BAYLANDS SAILING STATION The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 16, 2014 did adopt a budget for Fiscal Year 2015; and B. Annually, the City Council appropriates funding for the City Facility Parking Lot Maintenance Project (PE-09003) to repair, resurface, or reconstruct parking lots and walkways at various City facilities including restriping and signage; and C. Built in 1992, the Palo Alto Baylands Sailing Station (“Station”) provides access to non-motorized canoes, kayaks, and other small boats that can be hand-launched. The Station was designated as a conditional stop on the San Francisco Bay Water Trail in 2013; and D. The Station meets all the qualifications for a designated stop on the Water Trail (parking, restrooms, pathways, sailing station dock). Certain elements of the Station need accessibility improvements to meet Americans with Disabilities Act (ADA) requirements, and current accessibility standards. E. The City of Palo Alto applied and was awarded a grant in the amount of $40,000 from the Association of Bay Area Governments (ABAG) for upgrades that include: additional railings on the pier and ramps to the dock, changing the base of the pay telephone to remove wheelchair obstacles, installation of a compliant water fountain, removal of trip hazards on the pier, resurfacing of the dock, repairs to the dock edge, installation of a compliant hose bib (completed), improved compliant signage and paving access routes from parking to the pier. F. The grant has a requirement for matching funds in the amount of $40,000 from the City of Palo Alto and these funds will come from pairing the grant money with the existing City Facility Parking Lot Maintenance Capital Improvement Project (PE-09003) resulting in no new costs to the City. 2 5335/mb Revised September 20, 2013 SECTION 2. The estimate for Local Revenue is hereby increased by the sum of Forty Thousand ($40,000) in the Capital Improvement Fund for the City Facility Parking Lot Maintenance Project (PE-09003). SECTION 3. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 5. The Council of the City of Palo Alto hereby finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: Enter Date Here AYES: NOES: ABSENT: ABSTENTIONS: NOT PARTICIPATING: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Assistant City Attorney City Manager ____________________________ Director of Administrative Services ____________________________ Director of Public Works City of Palo Alto (ID # 5397) City Council Staff Report Report Type: Consent Calendar Meeting Date: 1/26/2015 City of Palo Alto Page 1 Summary Title: Use of Cap-and-Trade Compliance Revenue Title: Finance Committee Recommendation that City Council Adopt a Resolution Amending the City’s Cap-and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities, and Adopt a Resolution Amending Rate Schedules G 1, G-1-G, G 2, G-2-G, G 3, and G-3-G to Add a Rate Component for Cap-and-Trade Regulatory Compliance Costs and Combine the Administrative and Transportation Charges with the Distribution Charges From: City Manager Lead Department: Utilities Recommendation Staff, the Finance Committee, and the Utilities Advisory Commission (UAC) recommend that the City Council: 1. Adopt a Resolution (Attachment A) to amend the City’s Cap-and-Trade Revenue Utilitization Policy to cover the use of freely allocated allowances for the City’s Natural Gas utility (Exhibit A to Attachment A); and 2. Adopt a Resolution (Attachment B) to amend Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, and G-3-G to add a rate component to collect the cost of compliance with the State’s cap-and-trade program (Exhibit A to Attachment B) and to combine the Administrative and Transportation charges with the Distribution charges. Executive Summary The Global Warming Solutions Act of 2006, also known as Assembly Bill (AB) 32, authorized the California Air Resources Board (CARB) to develop regulations to lower the state’s greenhouse gas (GHG) emissions to 1990 levels by 2020. CARB developed a cap-and-trade program as one of the strategies to achieve the 2020 goal. Under the cap-and-trade program, an overall limit on GHG emissions from capped sectors is established and facilities subject to the cap are able to trade permits (allowances) to emit GHGs. In 2012, CARB’s cap-and-trade program commenced and certain covered entities, such as electricity generators and other stationary sources of GHGs, have a compliance obligation City of Palo Alto Page 2 under the new program. The City of Palo Alto Utilities’ (CPAU’s) electric utility does not own or operate fossil fuel-based electricity generation covered by the cap-and-trade regulations. CPAU also received free allowances from CARB to mitigate the costs of reducing its GHG emissions. Since CPAU’s electric utility typically has no need to use the allowances for compliance, it must sell them into the cap-and-trade auction. In December 2012, Council adopted a policy on how to use the revenue from the sale of the allowances for the benefit of the City’s retail electric ratepayers. Starting January 2015, natural gas suppliers, including CPAU’s gas utility, are covered entities with a compliance obligation in CARB’s cap-and-trade program. As with the electric utility, the gas utility will receive free allowances from CARB annually at least until 2020. However, unlike the electric utility, the gas utility will have a compliance obligation. CPAU can use some of the allowances directly for compliance, and must sell some into the cap-and-trade auction. Proceeds from these sales must be used to the benefit of the City’s natural gas ratepayers and must be consistent with the goals of AB 32. Consistent with the regulatory restrictions on the use of the allowances and allowance value, staff recommends that Council amend its current Cap-and-Trade Revenue Utilization Policy, which currently covers only the use of freely allocated allowances for the electric utility, to cover the gas utility as well. The proposed amended policy adds a new section for gas allowances, including the following key points: A portion of the allowances will be used to meet the City’s natural gas utility’s compliance obligations. The remaining allocated allowances will be consigned to auction. The allowable uses of the auction proceeds are: o Investment in energy efficiency programs for the City’s natural gas portfolio and retail customers; o Purchases or investment in cost effective renewable bio-gas resources for the City’s gas portfolio; o Investment in other carbon reduction activities for the City’s natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; and o Rebates to natural gas retail ratepayers provided on a non-volumetric basis. In addition to the amended policy, proposed changes to the City’s gas rates add a line item to recover the cost of purchasing compliance instruments (Attachment B, Exhibit A). This new variable rate component would be updated quarterly to reflect the actual cost of compliance with the cap-and-trade regulations. The new rate component may vary between zero and $0.25 per therm over the period 2015-2020, but is expected to be about $0.02 per therm in 2015 (a rate impact of about 2%) and less than $0.10 per therm in 2020. Both the UAC and the Finance Committee voted unanimously to recommend that Council approve the proposed Policy and Rate Schedules. City of Palo Alto Page 3 Discussion The report to the Finance Committee (Staff Report 5174), which contains a full discussion of the policy and rate recommendations, is provided as Attachment C to this report. Commission and Committee Review and Recommendations The UAC discussed staff’s proposal at its October 1, 2014 meeting. Some commissioners asked if funding for “fuel switching” programs to provide incentives for customers to change from gas-fueled to electric appliances (e.g. water heaters and space heating equipment) could be added to the list of potential uses of the allowance revenue. Staff indicated that fuel switching programs were not precluded from the proposed policy, but reminded that any program funded from the revenue must be beneficial for gas ratepayers. Other commissioners did not want to include fuel switching explicitly as an option in the policy and that fuel switching in general needed additional study and an updated analysis before determining if it was cost effective and, therefore, appropriate for funding from these revenues. Additional analysis would be done prior to implementing any funding for fuel switching, to determine whether fuel switching would be cost effective and consistent with all legal and regulatory requirements. The UAC generally supported the proposed policy for how the auction proceeds could be used, but expressed a preference that the revenues be used for programs to reduce GHG emissions, rather than being returned to gas ratepayers in the form of a rebate. Staff agreed with the UAC’s recommendation and revised the proposed policy to incorporate the recommendation. The minutes of the UAC’s October 1, 2014 meeting are provided as Attachment D. Staff presented the attached Policy and Rate Schedules to the Finance Committee on December 16, 2014. Finance Committee members discussed fuel switching, and whether legislative changes would need to be made to better clarify how cap-and-trade proceeds could be used, but were supportive of the policy and rates as proposed. The minutes of the Finance Committee’s December 16, 2014 meeting are provided as Attachment E. Resource Impact The Fiscal Year (FY) 2015 budget includes projected allowance costs of approximately $233,000 and revenues of approximately $264,000. Since the program starts in January 2015 and only covers the second half of FY 2015, projections for FY 2016 are approximately double these amounts. Any adjustments for these costs will be included as a recommendation in the Fiscal Year 2016 Proposed Operating Budget. Policy Impact The proposed recommendation supports the Council-approved Utilities Strategic Plan’s environmental sustainability and customer service objectives. City of Palo Alto Page 4 Environmental Impact The proposed recommendation to amend this City policy does not meet the California Environmental Quality Act’s definition of a “project” under Public Resources Code Section 21065, thus environmental review is not required. The proposed recommendation to amend the City’s natural gas rate schedules to cover the cost of regulatory compliance with the state’s cap-and-trade program is statutorily exempt from environmental review, pursuant to Public Resources Code section 21080(b)(8). Attachments: Attachment A: Resolution Approving Amendments to Policy on the Use of Freely Allocated Allowances under the State's Cap-and-Trade Program (PDF) Exhibit A to Attachment A: Proposed Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program (PDF) Attachment B: Resolution Approving Amendments to Utility Gas Rate Schedules (PDF) Exhibit B to Attachment B: Utilities Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3 and G-3- G in redline strikeout format (PDF) Attachment C: December 16 2014 Finance Committee Staff Report ID 5174 (without attachments) (PDF) Attachment D: Excerpted Final UAC Minutes of October 1, 2014 (PDF) Attachment E: Excerpted Draft Finance Committee Minutes of 12-16-14 (PDF) ATTACHMENT A * NOT YET APPROVED * 150105 mf 6053201 Resolution No. Resolution of the Council of the City of Palo Alto Amending the Cap- and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities R E C I T A L S A. The Global Warming Solutions Act, also known as Assembly Bill 32 (AB 32), requires that California’s Greenhouse Gas (GHG) emissions by 2020 be at 1990 levels, and authorized the California Air Resources Board (CARB) to develop regulations to reach this goal. B. The GHG emission cap-and-trade program is one of several tools designed by CARB to achieve the state’s GHG reduction goal, and has been in operation since November 2012. C. As of January 2015 and in accordance with CARB’s cap-and-trade regulations, as a natural gas supplier, the City of Palo Alto will be GHG emission allowances (allowances) free of charge by CARB, to be utilized in a manner both consistent with the goals of AB 32 and exclusively for the benefit of retail gas ratepayers. D. Under the terms of CARB’s cap-and-trade regulations, including Title 17 California Code of Regulations Section 95893 (d)(3), the City is required to sell a portion of these allocated allowances in the auctions conducted by CARB and utilize the auction sale proceeds “exclusively for the benefit of retail ratepayers of each natural gas supplier” and “consistent with the goals of AB 32”. E. The Council of the City of Palo Alto supports the state’s AB 32 goals, and intends to implement the City’s Policy on the Use of Freely Allocated Allowances Under the State’s Cap- and-Trade Program (formerly titled the Cap-and-Trade Revenue Utilization Policy) in furtherance of these goals. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. The City’s Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and-Trade Program is amended as shown in Exhibit A. SECTION 2. The Council grants the City Manager or his designee the authority to implement the Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and- Trade Program and to use allowances and allocate auction revenues to projects or expenditures as defined in Exhibit A. SECTION 3. Should California’s cap-and-trade program and/or the CARB regulations implementing that program be suspended, discontinued or materially altered such that the City ATTACHMENT A * NOT YET APPROVED * 150105 mf 6053201 of Palo Alto Utilities no longer receives allocated allowances of significant monetary value, the Council reserves the right to terminate the Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and-Trade Program and discontinue any programs funded from the City’s allocated allowance revenues. SECTION 4. The Council finds that the implementation of this Policy, including the use of revenue derived from it, and the expenditures of funds necessary to implement it, represent the City’s cost of regulatory compliance with the state’s cap-and-trade program and are consistent with the goals of AB 32. Such costs therefore represent the reasonable costs of providing service to CPAU’s gas customers. SECTION 5. The Council finds that the amendment of this policy does not meet the definition of a “project” under the California Environmental Quality Act, as defined by California Public Resource Code Section 21065. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Sr. Deputy City Attorney City Manager Director of Utilities Director of Administrative Services ATTACHMENT A EXHIBIT A TO RESOLUTION NO.______ ADOPTED BY COUNCIL ON: _______ CITY OF PALO ALTO POLICY ON THE USE OF FREELY ALLOCATED ALLOWANCES UNDER THE STATE’S CAP-AND-TRADE PROGRAM This Policy applies to freely allocated greenhouse gas (GHG) emission allowances from the California Air Resources Board (CARB) to the City of Palo Alto’s electric and natural gas distribution utilities (“Allocated Allowances”). The City Manager or his designee is authorized to use Allocated Allowances and any resulting revenue in any lawful manner consistent with this policy. The City’s Policy on the Use of Freely Allocated Allowances for the Electric Utility is as follows: 1. The City shall abide by CARB’s regulations by using the auction proceeds and allowance value obtained from the City’s allocated allowances for the exclusive benefit of the City’s electric retail ratepayers, consistent with the goals of the Global Warming Solutions Act, also known as Assembly Bill 32 (AB 32), and not for the benefit of entities or persons other than such ratepayers. 2. The following uses of the City’s auction proceeds are permitted: a) Purchases or investment in renewable resources (outside Palo Alto or locally) for the electric portfolio; b) Investment in energy efficiency programs for the electric portfolio and retail customers; c) Investment in other carbon reduction activities, including those required to achieve a carbon-neutral electric portfolio; and d) Rebates to electric retail ratepayers. 3. Allocated allowances may also be used to meet the City’s electric utility’s compliance obligations for electricity scheduled into the California Independent System Operator Markets, should state law eventually permit this action. 4. Council will receive annual reports on the allowance revenues and expenditures associated with complying with CARB regulations and this policy. 5. Additional Council approval will be required for any rebates to electric ratepayers proposed under this Policy. The City’s Policy on the Use of Freely Allocated Allowances for the Gas Utility is as follows: 1. The City shall abide by CARB’s regulations by using the auction proceeds for the exclusive benefit of the City’s natural gas retail ratepayers, consistent with the goals of ATTACHMENT A EXHIBIT A TO RESOLUTION NO.______ ADOPTED BY COUNCIL ON: _______ CITY OF PALO ALTO POLICY ON THE USE OF FREELY ALLOCATED ALLOWANCES UNDER THE STATE’S CAP-AND-TRADE PROGRAM the Global Warming Solutions Act, also known as Assembly Bill 32 (AB32), and not for the benefit of entities or persons other than such ratepayers. 2. A portion of the Allocated Allowances can be used to meet the City’s natural gas utility’s compliance obligations, and the remaining Allocated Allowances will be consigned to auction. 3. The following uses of the City’s auction proceeds from the sale of Allocated Allowances are permitted, with a preference that greenhouse gas reduction measures be pursued before providing rebates: a. Investment in energy efficiency programs for the natural gas portfolio and retail customers; b. Purchases or investment in cost effective renewable bio-gas resources for the gas portfolio; c. Investment in other carbon reduction activities for the natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; d. Rebates to natural gas retail ratepayers. Rebates, if provided, must be allocated on a non-volumetric basis as stated in Title 17 CCR Section 95893 (d)(3). 4. Council will receive annual reports on the use of Allocated Allowances, including the use of auction revenues and expenditures associated with complying with CARB regulations and this policy. 5. Additional Council approval will be required for any rebates to natural gas ratepayers proposed under this policy. ATTACHMENT B * NOT YET APPROVED * 150105 mf 6053202 Resolution No. Resolution of the Council of the City of Palo Alto Amending Utility Gas Rate Schedules G-1 (Residential Gas Service), G-1-G (Residential Green Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-2-G (Residential Master-Metered and Commercial Green Gas Service), G-3 (Large Commercial Gas Service and G-3-G (Large Commercial Green Gas Service) R E C I T A L S A. Effective January 1, 2015, natural gas suppliers such as Palo Alto are covered entities under the California Air Resources Board’s (CARB’s) cap and trade program regulations, with a compliance obligation based on their retail gas sales. B. Greenhouse Gas Allowances, which may be freely allocated by CARB, or purchased from the CARB-sponsored Cap-and-Trade auctions or via the secondary market, may be used to fulfill these compliance obligations. C. The proposed rate schedule amendments reflect this new, additional regulatory compliance cost as a revenue-neutral, pass-through rate component and do not otherwise modify the rate schedules. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-1 (Residential Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G- 1, as amended, shall become effective February 1, 2015. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-1-G (Residential Green Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G-1-G, as amended, shall become effective February 1, 2015. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G-2, as amended, shall become effective February 1, 2015. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-2-G (Residential Master-Metered and Commercial Green Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G-2-G, as amended, shall become effective February 1, 2015. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G-3, as amended, shall become effective February 1, 2015. SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-3-G (Large Commercial Green Gas Service) is hereby amended as attached and incorporated. Utility Rate Schedule G-3-G, as amended, shall become effective February 1, 2015. ATTACHMENT B * NOT YET APPROVED * 150105 mf 6053202 SECTION 7. The Council finds that the revenue derived from the authorized adoption of the Rate Schedules enumerated herein shall be used only for the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo. SECTION 8. The Council finds that the authorized adoption of the Utility Gas Rates enumerated herein, including the use of revenue derived from them, and the expenditures of funds necessary to implement them, represents the City’s cost of regulatory compliance with the state’s cap-and-trade program and is consistent with the goals of AB 32. As such, such costs represent the reasonable costs of providing service to CPAU’s gas customers. SECTION 9. The Council finds that the Utility Gas Rates enumerated herein are adopted for the purposes of ensuring the City’s compliance with the state’s cap-and-trade program and such action is statutorily exempt from CEQA review pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff reports presented to Council, the Finance Committee and the Utilities Advisory Commission, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Sr. Deputy City Attorney City Manager Director of Utilities Director of Administrative Services RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-1 Effective 1x-1-20135 dated 71-1-20123 Sheet No G-1-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from City of Palo Alto Utilities: 1. sSeparately-metered single-family residential Customers.dwellings receiving natural gas service from the City of Palo Alto Utilities. 1.2. This schedule also applies to individuallySeparately-metered multi-family residential Customersdwellings in a multi-family residential facilitiescomplex. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides natural gGas Sservice. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ..........................................................................................................$9.88 Tier 1 Rates: Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2.Cap and Trade AdministrativeCompliance Charge ..........................$0.00- $0.250074 3. Transportation ................................................................................... $0.0435 Distribution Charge: .............................................................................................$0.38834392 Tier 2 Rates: (All usage over 100% of Tier 1) Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-2.00 2.Cap and Trade AdministrativeCompliance Charge ...........................$0.00- $0.250074 3. Transportation .................................................................................... $0.0435 Distribution Charge: .............................................................................................$0.90379546 ATTACHMENT B RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-2 Effective 1x-1-20135 dated 71-1-20123 Sheet No G-1-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Ttaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Ccharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Mmeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. 2. Seasonal Rate Changes: The Summer period is effective April 1 to October 31 and the Winter period is effective from November 1 to March 31. When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates for each period. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Calculation of Usage Tiers Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per day during the Summer period and 2.0 therms per day during the Winter period, rounded to the nearest whole therm, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during the Winter period months. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. {End} RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 71-1-20145 New Sheet No G-1-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Separately-metered single-family residential Customers. 2. Separately-metered multi-family residential Customers in multi-family residential facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ..........................................................................................................$9.88 Tier 1 Rates: Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Administrative Cap and Trade Compliance Charges ........................$0.00-$0.25$0.0074 3. Transportation ................................................................................... $0.0435 Distribution Charge:.............................................................................................$0.38834392 PaloAltoGreen Gas Charge .................................................................................. $0.1200 Tier 2 Rates: (All usage over 100% of Tier 1) Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-2.00 2. AdministrativeCap and Trade Compliance Charges..........................$0.00-$0.25$0.0074 3. Transportation .................................................................................... $0.0435 Distribution Charge:.............................................................................................$0.90379546 PaloAltoGreen Gas Charge .................................................................................. $0.1200 D. SPECIAL NOTES: RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 71-1-20145 New Sheet No G-1-G-2 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Ttaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity cCharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Mmeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. 2. Seasonal Rate Changes: The Summer period is effective April 1 to October 31 and the Winter period is effective from November 1 to March 31. When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates for each period. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Calculation of Usage Tiers Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per day during the Summer period and 2.0 therms per day during the Winter period, rounded to the nearest whole therm, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during the Winter period months. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 4. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s Gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 71-1-20145 New Sheet No G-1-G-3 100% of the therm usage at the Customer’s premises every month. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-1 Effective 1-1-20135 dated 7-1-2012 Sheet No G-2-1 A. APPLICABILITY: This schedule applies to the followingnon-residential Customers receiving Gas Service from the City of Palo Alto Utilities: 1. Commercial Customers who use less than 250,000 therms per year at one site. 1.2. a single address. This schedule also applies to Mmaster-metered residential Customersservices in multi-family residential facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides natural gGas sService. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$74.86 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .................................... $0.10-$2.00 2. Administrative Cap and Trade Compliance Charges ........................$0.00740.00- 0.25 3. Transportation .................................................................................... $0.0435 Distribution Charge: ........................................................................................................$0.56386147 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Ttaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity cCharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Mmeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-2 Effective 1-1-20135 dated 7-1-2012 Sheet No G-2-2 sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. {End} RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 17-1-20154 New Sheet No G-2-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Master-metered residential Customers in multi-family residential facilities. 2. Commercial Customers who use less than 250,000 therms per year at one site. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: 1. 100% Renewable/Full Green option: Per Service Monthly Service Charge: ............................................................................................$74.86 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Administrative Cap and Trade Compliance Charges ..............................$0.00-0.250.0074 3. Transportation .......................................................................................... $0.0435 Distribution Charge: ............................................................................................$0.56386147 PaloAltoGreen Gas Charge .................................................................................. $0.1200 2. 100 Therm block option: Per Service Monthly Service Charge: ............................................................................................$74.86 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Cap and Trade Compliance ChargesAdministrative ...............................$0.00-0.250.0074 3. Transportation .......................................................................................... $0.0435 Distribution Charge: ............................................................................................$0.56386147 RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 17-1-20154 New Sheet No G-2-G-2 PaloAltoGreen Gas Charge (per 100 therm block) .............................................. $12.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or tTaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity cCharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s mMeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one. A site consists of one or more contiguous parcels of land with no intervening public right-of-ways (e.g. streets). 3. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s facility every month (the 100% Renewable/Full Green option), or in 100 therm blocks. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 17-1-20154 New Sheet No G-2-G-3 {End} LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-1 Effective 1-1-20153 dated 7-1-2012 Sheet No G-3-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities: 1. large cCommercial Customers who use at least 250,000 therms per year at one site. 1.2. Customers and toat City-owned generation facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides natural gas service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: $361.18 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .................................................... $0.10-$2.00 2. Administrative Cap and Trade Compliance Charges ................. $0.00740.00-0.25 3. Transportation ...............................................................................................$0.0435 Distribution Charge: .....................................................................................................$0.55626071 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or tTaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Ccharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s mMeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-2 Effective 1-1-20153 dated 7-1-2012 Sheet No G-3-2 Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one site. A site consists of one or more contiguous parcels of land with no intervening public right-of- ways (e.g. streets). 3. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable City of Palo Alto full-service rate schedule. Customers served under this rate schedule may elect Gas Direct Access at any time. {End} LARGE COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-3-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 17-1-20154 New Sheet No G-3-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Commercial Customers who use at least 250,000 therms per year at one site. 2. Customers at City-owned generation facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: 1. 100% Renewable/Full Green option: Per Service Monthly Service Charge: $361.18 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................................... $0.10-$2.00 2. Cap and Trade Compliance Charges Administrative ....................... $0.00740.00-0.25 3. Transportation .....................................................................................................$0.0435 Distribution Charge: .........................................................................................$0.55626071 PaloAltoGreen Gas Charge: ......................................................................................$0.1200 2. 100 Therm block option: Per Service Monthly Service Charge: $361.18 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................................... $0.10-$2.00 2. Cap and Trade Compliance Charges Administrative ....................... $0.00-0.250.0074 3. Transportation .....................................................................................................$0.0435 Distribution Charge: .........................................................................................$0.55626071 PaloAltoGreen Gas Charge (per 100 therm block): ....................................................$12.00 LARGE COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-3-G CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 17-1-20154 New Sheet No G-3-G-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or tTaxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity cCharge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s mMeter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Commodity and Cap and Trade Compliance Ccharges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one site. A site consists of one or more contiguous parcels of land with no intervening public right-of-ways (e.g. streets). 3. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s facility every month, (the 100% Renewable/Full Green option), or in 100 therm blocks. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} City of Palo Alto (ID # 5174) Finance Committee Staff Report Report Type: Action Items Meeting Date: 12/16/2014 City of Palo Alto Page 1 Summary Title: Use of Cap-and-Trade Compliance Revenues Title: Utilities Advisory Recommendation that the Finance Committee Recommend that the City Council Approve a Resolution Amending the City’s Cap-and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities, and a Resolution Amending Rate Schedules G 1, G-1-G, G 2, G-2-G, G 3, and G-3-G to Add a Rate Component for Cap-and-Trade Regulatory Compliance Costs and Combine the Administrative and Transportation Charges with the Distribution Charges From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee recommend that Council adopt: 1.A Resolution (Attachment A) to amend the City of Palo Alto Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and-Trade Program to include a policy for the City’s Natural Gas utility (Exhibit A to Attachment A); and 2.A Resolution (Attachment B) to amend Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, and G-3-G to add a rate component to collect the cost of compliance with the State’s cap- and-trade program (Exhibit A to Attachment B) and to combine the Administrative and Transportation charges with the Distribution charges. Executive Summary The Global Warming Solutions Act of 2006, also known as Assembly Bill (AB) 32 authorized the California Air Resources Board (CARB) to develop regulations to meet the goal to lower the state’s greenhouse gas (GHG) emissions to 1990 levels by 2020. CARB developed a cap-and- trade program as one of the strategies to achieve the 2020 goal. Under the cap-and-trade program, an overall limit on GHG emissions from capped sectors is established and facilities subject to the cap are able to trade permits (allowances) to emit GHGs. The cap-and-trade program started in 2012 and covered GHG emitting sources such as electricity generation, along with other stationary sources. The City of Palo Alto Utilities’ ATTACHMENT C City of Palo Alto Page 2 (CPAU’s) electric utility does not own or operate fossil fuel-based electricity generation covered by the cap-and-trade regulations, and received free allowances from CARB to mitigate the costs of reducing its GHG emissions. Since the electric utility typically has no need to use the allowances for compliance, it must sell them into the cap-and-trade auction. In December 2012, Council adopted a policy on how to use the revenue from the sale of the allowances for the benefit of the City’s retail electric ratepayers. Starting January 2015, natural gas suppliers, including CPAU’s gas utility, will be covered entities with a compliance obligation in CARB’s cap-and-trade program. As with the electric utility, the gas utility will receive free allowances from CARB annually at least until 2020. However, unlike the electric utility, the gas utility will have a compliance obligation and can use some of the allowances directly for compliance, but must sell some into the cap-and-trade auction. Proceeds from these sales must be used to the benefit of the City’s natural gas ratepayers and be consistent with the goals of AB 32. Consistent with the regulatory restrictions on the use of the allowances and allowance value, staff recommends that Council amend its current Cap-and-Trade Revenue Utilization Policy, which currently covers only the use of freely allocated allowances for the electric utility, to include a policy for the gas utility. The proposed amended policy adds a new section for gas allowances, including the following key points: A portion of the allowances will be used to meet the City’s natural gas utility’s compliance obligations. The remaining allocated allowances will be consigned to auction. The following are the allowable uses of the auction proceeds: o Investment in energy efficiency programs for the City’s natural gas portfolio and retail customers; o Purchases or investment in cost effective renewable bio-gas resources for the City’s gas portfolio; o Investment in other carbon reduction activities for the City’s natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; and o Rebates to natural gas retail ratepayers provided on a non-volumetric basis. The UAC discussed staff’s proposal at its October 1, 2014 meeting and generally supported the proposed policy for how the auction proceeds could be used, but expressed a preference that the revenues be used for programs to reduce GHG emissions, rather than being returned to gas ratepayers in the form of a rebate. Staff revised the proposed policy to incorporate the recommendation from the UAC (Attachment A, Exhibit A). In addition to the amended policy, proposed changes to the City’s gas rates add a line item to recover the cost of purchasing compliance instruments (Attachment B, Exhibit A). This new variable rate component, similar to the existing gas commodity rate component, would be updated quarterly to reflect the actual cost of compliance with the cap-and-trade regulations. City of Palo Alto Page 3 The new rate component may vary between zero and $0.25 per therm over the period 2015- 2020, but is expected to be about $0.02 per therm in 2015 (a rate impact of about 2%) and less than $0.10 per therm in 2020. Background The Global Warming Solutions Act of 2006, also known as AB 32, requires that California’s GHG emissions in 2020 be at the same levels as that of year 1990, or an estimated 15% reduction compared to what emissions might otherwise have been in 2020. CARB was authorized to develop regulations to reach this goal, and the cap-and-trade program is one of several tools designed by CARB to achieve the desired GHG reduction goal. Cap-and-trade is a market based regulation that is designed to reduce GHG emissions from multiple sources. CARB’s cap-and- trade regulations set a firm limit (cap) on GHG emissions with the cap declining approximately 3 percent each year beginning in 2013. The trading mechanism is intended to create incentives to reduce GHG emissions below allowable levels through investments in clean technologies. Under CARB’s cap-and-trade program, an overall limit on GHG emissions from capped sectors of the state’s economy was set and covered facilities subject to the cap are able to trade permits, or allowances, to emit GHGs up to the capped amount. The program phased in covered entities’ participation over three ‘compliance periods’. The first period (calendar years 2013 and 2014) included electric distribution companies. CARB has freely allocated allowances to CPAU for its electric utility. CPAU utilizes the proceeds from the sale of its allowances in a manner consistent with the Council-approved policy on the use of electric utility allowance revenues -- exclusively for the benefit of retail electric ratepayers, and consistent with the goals of AB 32. (Staff Report 3342, Resolution 9307). The City’s gas utility cap-and-trade compliance obligations are distinct from those made for the electric utility. Starting in 2015 when the second compliance period begins, the scope of the cap-and-trade program expands and natural gas suppliers become covered entities with a compliance obligation based on their retail gas sales. As was the case with the electric utility, CPAU will be freely allocated allowances for the gas utility for the purpose of mitigating the cost impact of cap-and-trade compliance to retail customers. The volume of allowances provided by CARB, and available to be used directly to meet compliance obligations, is not anticipated to be enough to cover all of CPAU’s gas utility GHG emissions. Therefore, unless CPAU is able to reduce emissions through energy efficiency or through the purchase of green gas, CPAU may have to purchase allowances to cover the balance of its needs. Similar to the electric utility, allowances allocated to the gas utility can be used directly to meet compliance obligations or consigned for sale in CARB auctions. The proceeds from auction sales must be used for the benefit of retail gas ratepayers and consistent with the goals of AB 32. To meet the regulatory requirements for use of the freely allocated allowances, staff has proposed a policy for the use of the allowances and auction proceeds that has been designed to comply with the regulations while providing some flexibility to fund locally supported programs. City of Palo Alto Page 4 Discussion Title 17 of the California Code of Regulations Sections 95893(b) and (c) offer publicly-owned natural gas utilities, such as CPAU, two options for the use of the allocated allowances: 1. Place allowances in their compliance accounts to meet compliance obligations derived from their gas retail sales. 2. Offer the allowances for sale at auction. At least 25% of the allocated allowances must be made available for auction in 2015. This amount increases by 5% each year, up to 50% in 2020. CPAU will place a portion of the allocated allowances in its compliance account and make the remainder available for auction, starting in February 2015. Assuming a $12/ton allowance auction price, CPAU’s allocated allowances are estimated to have a market value of $2 million per year in year 2015. Based on CARB’s historical auction price data1 and the design of the auction market, the value of the allocated allowances is expected to increase in value through year 2020, the last year of the regulatory period. While the governing board of each gas utility is given some flexibility in determining how to utilize the allocated allowances and their value, the cap-and-trade program regulation does impose limitations. Specifically, Section 95893(d)(3) includes the following statement regarding the utilization of allowance sale proceeds by natural gas suppliers: “Auction proceeds and allowance value obtained by a natural gas supplier shall be used exclusively for the benefit of retail ratepayers of each natural gas supplier, consistent with the goals of AB 32, and may not be used for the benefit of entities or persons other than such ratepayers. Any revenue returned to ratepayers must be done in a non-volumetric manner.” Starting in June 2016, CPAU will be required to report annually to CARB on the “disposition of any auction proceeds and allowance value from allowances from the previous budget year” (Sec. 95893(e)). The report must include the monetary value of auction proceeds received by CPAU and an explanation of how the use of auction proceeds complies with the requirements of the cap-and-trade regulation. Staff understands that CARB has the authority to revoke or revise the free allocations, if the regulations are not followed. Example of Gas Utility Compliance with Cap-and-Trade The following hypothetical example illustrates how cap-and-trade compliance obligations could be calculated based on a purchase of 25,000,000 therms of gas per year: 1 http://www.arb.ca.gov/cc/capandtrade/auction/auction.htm City of Palo Alto Page 5 Table 1: Hypothetical Example of Gas Utility Cap-and-Trade Allowance and Cost Accounting Allowances provided, sold and remaining for compliance 2015 2020 Estimated gas purchases (therms) 25,000,000 25,000,000 Carbon dioxide equivalent (metric ton of CO2e) 133,000 133,000 Free allowances provided by CARB 160,000 145,000 Minimum number of allowances that must be auctioned (25%) 40,000 (50%) 72,500 Allowances needed for compliance if minimum auctioned 13,000 60,500 Cost to buy allowances for compliance at auction floor price if minimum auctioned Estimated auction floor price (per metric ton CO2e) $12.08 $15.40 Estimated cost for compliance at floor price $157,000 $932,000 Estimated retail rate impact (per therm) $0.01 $0.03 Cost to buy allowances for compliance at cost containment reserve price if min. auctioned Estimated auction reserve price (per metric ton CO2e) $60.38 $77.02 Estimated cost for compliance at reserve price $785,000 $4,659,000 Rate impact at reserve price (per therm) $0.03 $0.15 Revenue from sale of allowances at auction if minimum number of allowances are auctioned Minimum number of allowances that must be auctioned 40,000 72,500 Estimated proceeds at auction floor price $483,000 $1,117,000 Estimated proceeds at auction reserve price $2,415,000 $5,584,000 As shown in the example, the number of free allowances provided declines over time and the number of allowances that must be auctioned increases over time. Historically, the auction price for allowances has been near the auction floor price, as shown in Table 2 below. If that trend continues, then the impact on gas rates from the purchase of allowances is estimated to be about $0.02 per therm in 2015 and $0.05/therm in 2020. At the same time, the revenue from sale of the minimum number of allowances that must be sold into the auction is estimated to be about $483,000 in 2015 and $1.1 million in 2020. Table 2: Actual CARB Cap-and-Trade Auction Results Auction 1 2 3 4 5 Month Nov 2012 Feb 2013 May 2013 Aug 2013 Nov 2013 Auction of 2013 Vintage Allowances Allowances auctioned (millions) 23.126 12.925 14.522 13.865 16.615 Auction floor price ($/ton) 10.00 10.71 10.71 10.71 10.71 Auction clearing price ($/ton) 10.09 13.62 14.00 12.22 11.48 Auction 6 7 8 9 Month Feb 2014 May 2014 Aug 2014 Nov 2014 Auction of 2014 Vintage Allowances Allowances auctioned (millions) 19.539 16.947 22.473 Auction floor price ($/ton) 11.34 11.34 11.34 Auction clearing price ($/ton) 11.48 11.50 11.50 City of Palo Alto Page 6 Proposed Amendments to the Existing Cap and Trade Policy to Cover the Use of Freely Allocated Allowances for the Gas Utility Staff recommends the following amendments to the policy that comply with the regulation and minimizes any risk of future CARB action to rescind CPAU’s allowances or disallow funding of specific projects. The key points in the proposed policy include: 1. Abide by the regulatory requirement that auction proceeds be used exclusively for the benefit of retail ratepayers of the gas utility, consistent with the goals of AB 32, with allowable uses to include: a) Investment in energy efficiency programs for the City’s gas retail customers. Examples of such programs include appliance upgrades and weatherization; b) Purchasing or investment in cost effective renewable bio-gas resources for the City’s gas portfolio; c) Investment in other carbon reduction activities for the City’s gas utility, such as system maintenance activities which minimize fugitive gas emissions and/or improve the monitoring of natural gas usage and losses; and d) Rebates to the City’s gas retail ratepayers. Should credits to gas ratepayers be proposed, additional Council approval will be required. Such review would typically occur during the City’s annual budget adoption process. 2. Allow for the use of the allocated allowances to meet compliance obligations. 3. Show how the allowances and auction proceeds are being utilized to benefit the City’s gas utility ratepayers by: a) Reporting annually to Council on allowance revenues and expenditures; and b) Reporting annually to CARB on the use of allowances for compliance. Staff intends to use allowance revenues for existing efficiency and other programs to the extent possible, or for direct rebates. Staff recommends against adopting new programs solely because these revenues are projected to become available; rather new programs should be adopted only if they are deemed to benefit gas ratepayers, regardless of whether revenue from allowance auctions is available to fund them. This strategy protects ratepayers in the event CARB changes the rules regarding the number of allowances allocated to gas utilities or the way allowances and allowance value may be used. In accordance with CARB’s annual reporting requirements, staff will coordinate with the Administrative Services Department to set up a balancing or reserve account that will track the auction revenues received. CPAU will track the expenditures from the reserve account and ensure that they are consistent with the Cap-and-Trade Revenue Utilization Policy. Staff will continue to monitor state proceedings on the use of auction proceeds and provide recommendations on changes to the Policy if further guidance from CARB and the state legislature is provided. City of Palo Alto Page 7 Proposed Rate Changes to Effect Cap-and-Trade Cost Recovery and Regulatory Compliance Staff recommends introducing a variable rate component to the City’s gas rates to reflect the cost of acquiring cap-and-trade compliance instruments sufficient to cover the compliance obligation that will begin on January 1, 2015. The rate, to be effective January 1, 2015, will reflect the most recent compliance instrument purchase cost, divided by projected sales for the upcoming quarter. Differences between actual and projected sales will be trued-up in the subsequent quarter’s rate. The Cap and Trade Compliance Charge shown on the proposed amended G-1, G-1-G, G-2, G-2- G, G-3 and G-3-G rate schedules (Attachment B, Exhibit A) contains a range expected to be sufficient to cover the utility’s cost of compliance. Staff based the range of $0.00 to $0.25 per therm on historical auction prices provided by CARB and staff’s analysis of CPAU’s recent emissions levels. The auction market has a floor price (or auction reserve price) which increases annually by the consumer price index (CPI) plus 5%. Historically, allowances have been trading and settling near the floor level ($11.34 per metric ton in 2014). Proposed Rate Changes for Bill Presentation Purposes In addition, staff recommends combining the Administrative and Transportation rate components with the Distribution rate component. This cost-neutral change will simplify bill presentation. The Administrative rate component is currently $0.0074/therm and the Transportation rate component is currently $0.0435/therm, so these two rate components together comprise a small portion of the overall rate. The proposed changes remove those two rate component line items, adding those costs to the existing Distribution rate component. For example, for Rate Schedule G-1, the Distribution Charge is currently $0.3883/therm and $0.9037/therm for Tier 1 and Tier 2, respectively. After eliminating the Administration and Transportation rate components, the Distribution Charge for Rate Schedule G-1 would be increased to $0.4392/therm and $0.9546/therm for Tier 1 and Tier 2, respectively, an increase of $0.0509/therm (Administrative charge of $0.0074/therm plus Transportation charge of $0.0435/therm) for each tier. Commission Review and Recommendation The UAC reviewed staff’s recommendation at its October 1, 2014 meeting. The UAC discussed how the cap-and-trade system works, the intent of the regulations and what choices the proposed policy provides for use of the allowance revenue. Some commissioners asked if funding for “fuel switching” programs to provide incentives for customers to change from gas- using to electric-using appliances (e.g. water heaters and space heating equipment) could be added to the list of potential uses of the allowance revenue. Staff indicated that fuel switching programs were not precluded from the proposed policy, but reminded that any program funded from the revenue must be beneficial for gas ratepayers. Other commissioners did not want to include fuel switching explicitly as an option in the policy and that fuel switching in general needed additional study and an updated analysis before determining if it was cost- effective and, therefore, appropriate for funding from these revenues. Additional analysis City of Palo Alto Page 8 would be done prior to implementing any funding for fuel switching, to determine whether fuel switching would be cost effective and consistent with all legal and regulatory requirements. The option of returning the allowance revenue to customers in the form of a rebate was also discussed by the UAC. In general, that option was not supported by the UAC and there was a clear preference for funding programs that would result in reduced gas use rather than returning the funds to ratepayers. A motion was made and seconded to add: “fuel switching and” so that the third proposed use in the policy would read: “Investment in other carbon reduction activities for the natural gas utility, including fuel switching and system maintenance or replacement to reduce fugitive gas emissions”. The motion failed (2-4 with Chair Foster and Vice Chair Waldfogel voting yes, Commissioners Chang, Eglash, Hall and Melton voting no, and Commissioner Cook absent). In the end, the UAC unanimously voted to recommend that the Council: 1. Amend the City of Palo Alto Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and-Trade Program (Attachment A, Exhibit A to the Resolution) as proposed by staff with the following provisos: a. The policy should indicate a preference for programs that reduce GHG emissions from gas utilization; and b. The UAC does not support returning the funds to ratepayers in the form of a rebate; and 2. Amend Rate Schedules G-1, G-1-G, G 2, G-2-G, G 3, and G-3-G to add a rate component to collect the cost of compliance with the State’s cap-and-trade program (Attachment B, Exhibit A to the Resolution) and to combine the Administrative and Transportation charges with the Distribution charges. The motion passed unanimously (6-0 with Commissioner Cook absent). Draft minutes from the UAC’s October 1, 2014 meeting are provided as Attachment C. As a result of the UAC’s recommendation, staff adjusted the proposed policy to incorporate the UAC’s provisos. The revised policy is the one that is proposed for recommendation by the Finance Committee. Resource Impact The Fiscal Year (FY) 2015 budget includes projected allowance costs of approximately $233,000 and revenues of approximately $264,000. Since the program starts in January 2015 and only covers the second half of FY 2015, projections for FY 2016 are approximately double these amounts. Policy Impact The proposed recommendation supports the Council-approved Utilities Strategic Plan’s environmental sustainability and customer service objectives. City of Palo Alto Page 9 Environmental Impact The proposed recommendation to amend this City policy and amend the City’s natural gas rate schedules to cover the cost of regulatory compliance is exempt from the California Environmental Quality Act, pursuant to California Public Resources Code section 21080(b)(8). Attachments: Attachment A: Resolution Approving Amendments to Policy on the Use of Freely Allocated Allowances under the State's Cap-and-Trade Program (PDF) Attachment A: Exhibit A - Proposed Policy on the Use of Freely Allocated Allowances Under the State's Cap-and-Trade Program (PDF) Attachment B: Resolution Approving Amendments to Utility Gas Rate Schedules (PDF) Attachment B: Exhibit A - Utilities Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3 and G-3-G in redline strikeout format (PDF) Attachment C: Excerpted Draft UAC Minutes of October 1, 2014 (PDF) EXCERPTED FINAL MINUTES OF THE OCTOBER 1, 2014 UTILITIES ADVISORY COMMISSION MEETING ITEM 2: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend Council Amend the City’s Cap-and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities, and Amend Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3 and G-3-G to Add a Rate Component for Cap-and-Trade Regulatory Compliance Costs and Combine the Administrative and Transportation Charges with the Distribution Charges Resource Planner Eric Keniston stated that California Air Resources Board (CARB) established the cap-and-trade program as part of the implementation of the Global Warming Solutions Act (AB32). He described the proposed amendments to the City's policy on the use of cap-and- trade allowance revenue to include the Gas Utility that will be included in CARB's cap-and-trade program starting in January 2015. He stated that the compliance obligation for electricity lies with generators and importers. The City of Palo Alto Utilities’ (CPAU’s) Electric Utility is allocated free allowances from CARB to be used for compliance or for sale into the cap-and- trade auction. CPAU typically has no compliance obligation for its Electric Utility. Keniston said that in January 2015, gas utilities are added to the cap-and-trade program, and the compliance obligation is based on gas sales to end users so CPAU’s Gas utility will have a compliance obligation. CPAU will be allocated free allowances for its Gas Utility, but they may not be enough to meet total compliance obligation. In addition, a portion of the freely allocated allowances must be sold into the cap-and-trade auction. Commissioner Melton asked why allowances have to be sold into the auction and then must be bought back in the auction instead of being netted out. Compliance Manager Debbie Lloyd said that CARB wanted the cost of the allowances to be passed through to customers so it designed the program to require gas utilities to buy part of its compliance obligation in the auction and for those costs to be passed on to the end use customers. She added that even for the electric utility, the costs are passed to consumers since the electricity costs contain the allowance costs paid by the generators for compliance. Keniston illustrated how the program would work with the use of a numerical example. He said that the impact on gas rates for the first year of the program is expected to be about 2 cents per therm, or less than a 2% rate impact, if the allowance prices are at the auction's floor price, which has been where the allowances have traded since the start of the cap-and-trade auction in 2012. If there was a shortage of allowances in the auction, prices of the allowances could rise to the auction cost containment reserve price. In that case, the rate impact for the first year of the program would be about 9 cents per therm. In the fifth year of the program, the rate impact could range from 5 cents per therm (if the allowances were trading at the floor price in the auction) up to about 23 cents per therm (if the allowances were trading at the reserve price). The revenue from the allowances that must be sold into the auction could range from about $500,000 in the first year to over $1 million in the fifth year if the allowances were trading at the floor price in the auction. Keniston said that per the proposed policy, CPAU must use allowance revenues for four proposed uses. The four proposed uses are: a. Investment in energy efficiency programs for the natural gas portfolio and retail customers; b. Purchases or investment in cost effective renewable bio-gas resources for the gas portfolio; c. Investment in other carbon reduction activities for the natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; and d. Rebates to natural gas retail ratepayers. Rebates, if provided, must be allocated on a non-volumetric basis as stated in Title 17 CCR Section 95893 (d)(3). Noticing that one of the options for using the revenue is for rebates to customers on a non- volumetric basis, Commissioner Melton asked how the rebate would be implemented, especially for commercial customers. Lloyd said that the language in the regulation says “non- volumetric” so how any rebate would have to be designed to be non-volumetric. Vice Chair Waldfogel asked what the intent of the regulation is. Lloyd indicated that the goal is to reach the emission reductions outlined in AB 32 and the cap part of the cap-and-trade program will reduce the number of allowances provided each year and the trade part is used so that those who can economically reduce emissions at a cost below the allowance price will have an incentive to do that since there is a cost for carbon emissions. Vice Chair Waldfogel asked whether staff has modeled what it takes to reduce gas use commensurate with the declining allowance cap. Senior Resource Planner and Rates Manager Jon Abendschein said that he has used the financial models to evaluate that and determined that the utility can handle the decline in use and, therefore, sales and that the plan can accommodate those costs. Chair Foster asked if fuel switching can be included in the uses of the funds. Keniston indicated that the policy does not preclude fuel switching programs. Senior Deputy City Attorney Jessica Mullan indicated that the threshold question of ensuring that the use proposed met the overarching guideline that the benefits of allowance sales go to gas rate payers so fuel switching must, then, be cost-effective. Chair Foster stated that fuel switching would meet the policy objectives and financial incentives would increase as the number of free allowances decrease. He said that if the City decreases the use of natural gas, costs will decrease because the City doesn’t have to buy allowances. Chair Foster again stated that he would support adding a fifth allowable use for fuel switching programs to the policy. Mullan said that this could be problematic if the threshold question is not addressed. She indicated that the policy points are very broad and that the City would want to do additional legal analysis if it included a very specific policy around fuel switching. Commissioner Eglash said that the issues go far beyond legal issues and that adding fuel switching is not consistent with the legislature's intent and would not necessarily benefit gas ratepayers. Commissioner Eglash stated that there is a whole slew of issues around fuel switching and the City would not be doing gas or electric ratepayers any favors by using allowance revenue funds for fuel switching. He added that adding fuel switching to the proposed uses of the funds is a perversion of the intent of the policy and the proper use of allowance revenue. Vice Chair Waldfogel said that the previous presentation on the Sustainability/Climate Action Plan showed that the use of natural gas must decline to meet the GHG emissions reduction goals and asked how fuel switching could be called a perversion of the legislature's intent. He indicated that he has trouble seeing what intent there might be other than moving away from natural gas as a fuel. Commissioner Eglash said that the electric utility system is very complicated and although by some measures Palo Alto’s electric supplies are carbon neutral, the electric grid is far from carbon neutral as a large system. He said the thinking behind the cap-and-trade program is to put a price on carbon so that market forces can put rational thinking into actions to take and that if the commission wants to debate the merits of fuel switching, we should have that discussion, but it's a separate discussion from this decision on how to spend allowance revenue from the cap-and-trade auction. Keniston stated that another part of the recommendation is to add a new rate component that’s a pass-through of the cost for allowances, which could be updated quarterly based on market conditions, sales volumes; and quantity of compliance instruments required. Commissioner Chang said that the policy proposed by staff makes sense. She asked how a rebate would be presented on the bill. Keniston said that it would show up as a credit on the bill. Commissioner Chang said that not very many people study their utility bills and asked if there were any best practices for billing and number of lines to be shown on a bill. Director Fong said that there are no real benchmarks and CPAU is unique in that it bills for 7 different utilities on one bill. Commissioner Hall asked if there is any alternative in the recommendation, which basically says that the City will incur additional costs and must pass those costs as a separate line item on the bill. Keniston indicated that the cost must be passed through to customers and the proposed new line item would appear as a supply charge with the commodity charge. Commissioner Hall stated that the proposed policy is broad enough. He said that the revenues should be used for programs that support the big picture effort to reduce GHG emissions and not be returned ratepayers. He said that he hoped that staff would narrow down what it recommends spending the revenues on when the item comes back to the UAC. Lloyd stated that the basis for providing the utility the free allowances is to mitigate cost impact to customers. She said that the free allowances are not a gift to utilities, but that the utility is acting as the steward for the ratepayers and that the revenues must be used for the sole benefit of ratepayers. Lloyd said that CPAU must report annually to CARB on how it used the allowance revenues. Lloyd explained that the default for the investor-owned utilities (IOUs) regulated by the California Public Utilities Commission (CPUCU) is to give ratepayers a rebate— the “climate dividend”—and that this is the only option for the IOUs. Staff’s recommendation is to expand the uses to more than a rebate, and to have programs that reduce GHG emissions and have a benefit to ratepayers. Commissioner Chang said she preferred that the funds be spent on gas use efficiency programs. Commissioner Eglash agreed and said that the policy is so broad that it doesn't provide much policy guidance. Director Fong stated that the policy is broad since staff doesn’t know how much revenue will be received and whether certain programs that could be funded under the policy will be cost-effective. ACTION: Motion: Commissioner Hall made a motion to accept the staff recommendation but indicate that the UAC wants to see how the revenues are spent and that it doesn't support the rebate. Commissioner Eglash seconded the motion. Proposed Amendment to the Motion: Commissioner Eglash offered a friendly amendment to indicate a preference for programs that reduce GHG emissions from gas utilization. Commissioner Hall accepted the amendment. Chair Foster said that the proposed policy can accommodate fuel switching. Director Fong stated that the amount of revenues that may be available may not be large. She reminded that the program revenues in the first year are expected to be under $500,000. Second Proposed Amendment to the Motion: Chair Foster proposed an amendment to add: “fuel switching and” so that the third proposed use in the policy would read: “Investment in other carbon reduction activities for the natural gas utility, including fuel switching and system maintenance or replacement to reduce fugitive gas emissions”. Vice Chair Waldfogel seconded the amendment. Commissioner Hall declined to accept the amendment. Substitute Motion: Chair Foster proposed a substitute motion to add: “fuel switching and” so that the third proposed use in the policy would read: “Investment in other carbon reduction activities for the natural gas utility, including fuel switching and system maintenance or replacement to reduce fugitive gas emissions”. Vice Chair Waldfogel seconded the motion. Commissioner Eglash indicated that fuel switching is not necessarily a good thing for the environment given the additional use of electricity. He said that there is a risk of going from a more efficient use of natural gas to a less efficient use of electricity. In addition, the capital cost of new equipment is high, especially for those who are replacing appliances before the end of their life. He added that it warrants more study before explicitly adding it to the policy. He added that it is far from harmless to add to the policy as that would indicate that the potential use is legitimate and has some form of endorsement. Chair Foster says that adding fuel switching programs as a possible use does not mandate that fuel switching programs be funded, but simply lists it as an option for the future. Vice Chair Waldfogel agreed that it does not suggest that a decision has been made as to the value of fuel switching. It does not suggest that any decisions have been made, but it allows it to be considered and to catalyze some discussions. Vice Chair Waldfogel noted that meaningful GHG reductions tools are all on the table and that whether it’s good or bad to do fuel switching, the fact remains that burning gas causes GHG emissions. He added that it is not harmful at this point to add fuel switching to the policy and he noted that other things are included in the proposed policy such as biogas, which is not cost-effective at this time. Commissioner Melton agreed with Commissioner Eglash and indicated that fuel switching merits more discussion. He said that the UAC should talk about fuel switching on a future agenda, but that for, now, it should be left out of the policy. Commissioner Melton stated that staff should probably have an opportunity to talk to CARB staff about the idea of fuel switching as an acceptable use and asked if that language was approved by CARB. Lloyd indicated that the language in the policy is not CARB language, but it is similar to the language in the electric policy that CARB did not indicate it had a problem with. Commissioner Hall indicated that one reason he did not support the substitute motion is that there is not a huge amount of money and there are enough good choices on the list already. Vote on the Substitute Motion: The substitute motion failed (2-4 with Chair Foster and Vice Chair Waldfogel voting yes and Commissioners Chang, Eglash, Hall and Melton voting no. Commissioner Cook was absent). Vote on the Original Amended Motion: The original amended motion (to recommend Council approve staff’s recommendation policy as presented with a statement to prefer funding for programs that reduce GHG emissions from gas utilization) passed unanimously (6-0 with Commissioner Cook absent). Commissioner Hall indicated that the memo was confusing and recommended staff revise the executive summary to add clarity about the proposal. FINANCE COMMITTEE EXCERPT FINAL MINUTES Page 1 of 5 Special Meeting Tuesday, December 16, 2014 Chairperson Berman called the meeting to order at 6:27 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman (Chair), Burt, Holman, Kniss arrived at 6:49 P.M. Absent: 3.Utilities Advisory Recommendation that the Finance Committee Recommend that the City Council Approve a Resolution Amending the City’s Cap-and-Trade Revenue Utilization Policy to Cover the Use of Freely Allocated Allowances for the Gas and Electric Utilities, and a Resolution Amending Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, and G-3-G to Add a Rate Component for Cap-and-Trade Regulatory Compliance Costs and Combine the Administrative and Transportation Charges with the Distribution Charges. Eric Keniston, Resource Planner, reported that the California Air Resources Board (CARB) established the cap-and-trade program as a means to implement AB 32. In 2012, electric utilities became subject to cap-and- trade regulations. Because the City did not have fossil-fuel generation, it was not subject to compliance obligations in any given year. CARB gave the City a free allocation of allowances, which the City sold into the auction. In 2015, gas would be subject to cap-and-trade regulations, and Palo Alto would be subject to compliance obligations. The City would also receive free allocations from CARB, but allowances likely would not cover the City's total compliance obligation in any given year. The City's free allowances would decrease slightly each year, and the City was required to sell a certain amount of the allowances into the auction. The City would have to purchase allowances at the auction. Lowering consumption would help, but the City would probably always have a need to purchase in the market. Auction proceeds must be used exclusively for the benefit of gas utility ratepayers, must comply with AB 32, and must follow the spirit of CARB's regulations. In a hypothetical scenario, the City would purchase 25 million therms per year, equivalent to approximately 133,000 allowances. Each allowance was equivalent to 1 metric ton of CO2. The first year allowance allocation would ATTACHMENT E WORKING MINUTES Page 2 of 5 Finance Committee Special Meeting Working Minutes 12/16/2014 be approximately 160,000. The City would have to sell 25 percent or approximately 40,000 of those allowances, leaving 120,000 allowances for compliance obligation. The City would have to purchase approximately 13,000 allowances. The floor price for 2015 auction markets would be roughly $12.10, for a total cost of approximately $157,000. Passing the additional cost to customers would equate to a rate increase of approximately $0.01 per therm. In most markets, a certain number of allowances were offered for sale. If demand exceeded supply in the markets, the reserve market kicked in. If the cost reached the worst case scenario of $60, then the City would expend approximately $785,000, resulting in a rate increase of approximately $0.03 per therm. Selling the 40,000 allowances at the auction floor price would generate approximately $483,000, which would be used to fund programs. The proposed Allowance Revenue Policy was an update to the existing Electric Policy. Staff proposed amending it to add gas and to clarify that allowances must be used to meet compliance obligations. Staff proposed adding a new line item that reflected cap-and-trade compliance costs. As costs would be strictly pass through, the policy would include a range similar to the existing commodity rate between $0.00 to $0.25. Staff would not update prices based on quarterly market prices, but would pass on the amount actually purchased. Staff proposed combining the administration and transportation charges with the existing distribution charge. The Utilities Advisory Committee (UAC) discussed fuel switching and wished to add fuel switching to the list of allowable uses. Staff determined that was not precluded under the existing policy. Any program must be cost effective and consistent with all legal and regulatory requirements. UAC recommended Staff pursue measures that reduced Greenhouse Gas (GHG) emissions before providing rebates, to which Staff agreed. Chair Berman did not understand the logic of being given allowances, having to sell a portion of them, and then having to purchase more to meet compliance. Neither did he understand the logic of passing charges for purchasing allowances to customers, but not passing revenue from selling allowances to customers. Valerie Fong, Utilities Director, explained that CARB was convinced that gas customers had to feel a rate impact to understand that they were doing something to help the environment. Council Member Burt suggested Staff utilize graphics to help people understand allowances, costs, and rates. He noted that investor-owned utilities were subject to essentially the same requirements. He asked if investor-owned utilities were strongly discouraged from passing rebates to customers. WORKING MINUTES Page 3 of 5 Finance Committee Special Meeting Working Minutes 12/16/2014 Ms. Fong believed investor-owned utilities could continue rebates. Council Member Burt understood the PUC recommended rebates be the last use of funds. Ms. Fong clarified that the UAC expressed that wish. Council Member Burt inquired whether the City's compressed natural gas facility was outside these considerations. Debra Lloyd, Utilities Compliance Manager, advised that the Gas Utility's compliance obligations would be based on retail sales. Council Member Burt asked if Utilities sold gas at the compressed natural gas facility. Mr. Keniston replied yes. Utilities sold that to the Municipal Services Center. Ms. Fong indicated Utilities was the wholesale gas provider to that facility. The compressed natural gas facility recovered costs through its own compressed natural gas rates. Council Member Burt inquired whether purchasing compressed natural gas at the same wholesale rate as conventional natural gas would translate into more credits under the cap-and-trade program. Ms. Fong reported the Utilities Department tracked all sales within the City of Palo Alto. In theory, the cost for GHG was embedded in the City's sale and would be paid. Council Member Burt briefly explained the difference between efficiency and fuel switching. He asked if the City could incentivize ratepayers to convert from natural gas consumption to electric consumption. Jessica Mullan, Senior Deputy Attorney, advised that use of GHG revenues was subject to a Proposition 26 overlay and the gas ratepayer requirement. Legally it was not easy to jump from a traditional energy efficiency (EE) program to fuel switching because of the commingling of funds. In a typical EE program for electric, customers received a rebate for reducing their use of electric appliances. Using GHG funding to incentivizing customers to switch from gas to electric resulted in a commingling of funds. There was no case law to support that. Council Member Burt clarified his scenario regarding energy efficiency and fuel switching. WORKING MINUTES Page 4 of 5 Finance Committee Special Meeting Working Minutes 12/16/2014 Ms. Mullan reiterated that commingling of funds was tricky from a Proposition 26 and CARB regulation standpoint. Funds from one enterprise would be commingling with a second enterprise by incentivizing customers in the second enterprise. A cost-benefit analysis for any fuel-switching technology would be needed to determine compliance with Proposition 26. In addition, the cost of gas would increase for customers who remained in the gas system. Council Member Burt stated the increased cost for customers occurred anytime efficiency occurred. Ms. Mullan concurred. Council Member Burt remarked that increasing the burden on the remaining consumers existed with all efficiencies. Commingling was a separate issue. Ms. Mullan agreed regarding efficiency. The distinction was that there was no case law to support a decrease in cost for ratepayers because the City incentivized their switch from one enterprise to the other. There was no case law stating that these types of programs were acceptable. Council Member Burt wished to pursue whether the fundamental concepts of the regulations may allow the City to move in that direction. Ms. Fong indicated Staff needed to review the issues more. Council Member Burt commented that the City Attorney identified the issue in the context of the Colleague's Memo regarding fuel switching. Legislators understood that Palo Alto was at the forefront of attempting to reach the State objective of an 80 percent reduction in GHG emissions by 2050. He wanted to understand and begin identifying the kinds of statutory changes needed to accomplish the objective. MOTION: Chair Berman moved, seconded by Vice Mayor Kniss to recommend to the City Council adoption of: 1) a Resolution to amend the City of Palo Alto Policy on the Use of Freely Allocated Allowances Under the State’s Cap-and-Trade Program to include a policy of the City’s Natural Gas utility; and 2) a Resolution to amend Rate Schedules G-1, G-1-G, G-2, G-2- G, G-3, and G-3-G to add a rate component to collect the cost of compliance with the State’s Cap-and-Trade Program and to combine the Administrative and Transportation charges with the Distribution charges. Vice Mayor Kniss indicated one the City's biggest challenges was explaining to customers that using less often cost more. WORKING MINUTES Page 5 of 5 Finance Committee Special Meeting Working Minutes 12/16/2014 MOTION PASSED: 4-0 Ms. Fong requested the item be placed on the Council's Consent Calendar. Chair Berman agreed. ADJOURNMENT: Meeting adjourned at 9:00 P.M. City of Palo Alto (ID # 5284) City Council Staff Report Report Type: Action Items Meeting Date: 1/26/2015 City of Palo Alto Page 1 Summary Title: 441 Page Mill Road Title: PUBLIC HEARING: Approval of a Mitigated Negative Declaration and a Site & Design Review and Design Enhancement Exception Application for a Three Story Mixed-Use Building on a27,000 Square Foot Site Zoned Service Commercial (CS) At 441 Page Mill Road. The Project Would Contain 21,540 Square Feet of Commercial Space, 91 Off-Street Parking Spaces, and Ten Apartment Units, Including Three Below Market Rate Units, and Includes a Request for Three “Off Menu” Concessions Under Palo Alto Municipal Code Section 18.15 and the State Density Bonus Law From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council approve the Mitigated Negative Declaration (MND), the Site and Design Review application, the two Design Enhancement Exceptions (DEEs) and the three density bonus concessions for the project at 441 Page Mill Road, based on Architectural Review (AR), Design Enhancement Exception (DEE), Context Based Design Criteria and Density Bonus Findings, and subject to the conditions in the draft Record of Land Use Action (RLUA, Attachment A). Executive Summary The proposed three story, mixed-use building would replace four detached single-family residences and would provide ten rental housing units, including three below market rate units, along with office and retail spaces on the first and second floors, with structured parking facilities (at surface and below grade) providing 91 parking spaces. Commercial ground floor area includes 2,836 square feet (sf) for retail use, and 18,704 sf of second floor area is proposed for office use. Residential floor area proposed at the third floor level is 13,979 sf. In 2013, the Council approved a rezoning of the site, located on Page Mill Road, from Single Family Residential (R-1) to Service Commercial (CS)(D), requiring Site and Design Review for site development. At the time, both the Planning & Transportation Commission and the City Council recognized that commercial zoning, allowing for mixed uses, would be more appropriate on this City of Palo Alto Page 2 busy stretch of roadway than single family residential zoning. The CS zoning district permits up to 18 dwelling units on the site, along with up to 10,770 square feet of commercial space (i.e. a 0.4:1 floor area ratio or FAR). The proposed project includes ten dwelling units rather than the maximum of 18 units allowed, and proposes that three of the units be Below Market Rate (BMR) units, qualifying the project for three density bonus concessions pursuant to the State density bonus law. These concessions include a 19% increase in lot coverage, an increase in commercial FAR to permit an additional 10,770 sq. ft. of office space, and an increase in overall FAR to permit 8,595 sq. ft. of building space. The three requested concessions are not on the “menu” included in the Municipal Code Section 18.15.050(c), and necessitated preparation of a project pro forma “providing evidence that the requested concessions result in identifiable, financially sufficient, and actual cost reductions.” Pursuant to the State Density Bonus Law, the City must allow the requested concessions unless it can make one of three possible written findings, supported by substantial evidence. (See the Discussion section below.) In addition to the requested concessions under the State Density Bonus Law, the project is requesting two Design Enhancement Exceptions (DEEs), one of which would allow a 17 foot setback from Page Mill Road where the code requires a 14 foot setback. This would permit a wide sidewalk, street trees, and the County’s planned improvements to Page Mill Road at this location. The other (related) DEE would allow a three foot encroachment into the required 10 foot landscape buffer at the rear of the property because the building would be shifted towards the rear of the lot to achieve the greater front setback and the driveway ramp accessing below grade parking would intrude three feet into the 10 foot buffer. The proposed project would provide 91 off-street parking spaces, or 19 spaces less than what could be required for a project with 10 dwelling units and 21,540 sq. ft. of office/retail space. A reduction of three spaces (for a total of 107) is provided for by density bonus provisions in State Law and Municipal Code Section 18.15.050. A reduction of 16 additional spaces is based on Municipal Code Section 18.52.050, which allows the Director to approve a reduction where a mix of uses share the parking facility since the peak demand for parking associated with residential and commercial space happens at different times of the day/night. The Architectural Review Board (ARB) and the Planning and Transportation Commission (PTC) have both recommended approval of the project. Background The project site is comprised of four parcels identified as 423, 433, 441, and 451 Page Mill Road, shown on Attachment B, a location map. The total site area is approximately 26,926 sf. The site currently supports four single-story, single-family residences, one on each parcel. Adjacent uses to the northeast include the Kelly Moore Paint Store at 411 Page Mill Road and the AOL office development at 395 Page Mill Road. Adjacent uses to the southwest include an animal hospital at 461 Page Mill Road, and the AT&T retail store on the corner at 2805 El Camino Real. City of Palo Alto Page 3 To the southeast, or the rear of the site, are single family residences with the exception of a grandfathered art studio at 440 Pepper Avenue. Across Page Mill Road to the northwest are multifamily residential Planned Community (PC) developments. The site’s four single family homes appear to have been built between 1939 and 1948. At that time, Page Mill Road was not the expressway that it is today; it was a minor street that supported a mix of residential and commercial development. Arial photography records indicate that by 1965, the minor street had been transformed into the expressway. The residential properties became less desirable to live in, since there were located on a busy roadway, and deferred maintenance led to their decline. Zone Change Approval On January 14, 2013 the City Council approved a rezoning of the four parcels, from Single Family Residential District (R-1) to Service Commercial (CS) with a Site and Design (D) Combining District. The Commission and Council recognized that commercial zoning, allowing for mixed uses, would be more appropriate on this busy stretch of roadway than the existing single-family residential zoning. The Council also approved a new Comprehensive Plan land use designation of Service Commercial in conjunction with the rezoning action. Preliminary ARB Review On March 21, 2013, the ARB reviewed the conceptual building design in a noticed Preliminary Review hearing. The ARB preliminary review staff report can be found on the City’s website at the following link: http://goo.gl/V7Ylz4 Commission Review On June 11, 2014 the PTC reviewed the Site and Design Review application and Mitigated Negative Declaration, and voted 4-2 to recommend project approval as recommended in the staff report. Much of the discussion focused on the density Bonus Concessions. The dissenting perspective was a concern that the concessions granted may provide the applicant with financial benefit beyond what is needed to fund the affordable units or beyond the financial benefit that could be gained under the CS zoning without affordable units. The dissenters suggested the consultant prepare an additional analysis scenario examining the value at completion of the project. Staff concurred that this additional analysis would better inform the Council’s decision and following the Commission’s review, staff requested the consultant to provide the supplemental value at completion analysis. It is provided as Attachment G. The minutes from the June 11, 2014 Commission hearing are available as Attachment I. The Commission staff report can be found on the City’s website at the following link: http://goo.gl/EYNhi2 Formal ARB Review The project was reviewed by the ARB on three occasions (August 21, 2014 http://tinyurl.com/q26s4l3, October 2, 2014 (http://tinyurl.com/q6xc2dv) and October 30, 2014 (https://www.cityofpaloalto.org/civicax/filebank/documents/44443). City of Palo Alto Page 4 On October 30, 2014, the ARB reviewed the Site and Design Review application for a third time and voted to recommend the project for approval on a vote of (4-0-1-0). Over the course of the review and approval period, the project was modified to address concerns over the originally proposed curved entry tower element and the general architectural styling of the building. The plan was modified to eliminate the curved entry tower to better relate to the horizontality of the rest of the building and to reduce the height and massing at the upper floor. Upper floor units were also pulled back from the building face to set the third floor further back from the street. The material pallet was adjusted to place the heavier stone tile material at the base and have the lighter stucco material higher up on the building. Verbatim minutes of the ARB hearing are provided as Attachment J. Project Description The project includes the merger of four parcels into one single parcel (under separate application) of 26,926 square feet (sf). The existing homes would be demolished to make way for a three-story, mixed use building with parking facilities for 91 automobiles located one level below grade and at the ground floor, where 107 automobile spaces are required by code (accounting for the three space reduction allowed based on the Density Bonus Law). Bicycle parking spaces totaling 46 spaces (26 long-term and 20 short-term spaces) would be provided on site, where 19 such spaces are required, and a Transportation Demand Management (TDM) program would be required. Zoning Compliance and Density Bonus Concessions A zoning table (Attachment C) indicates the project’s compliance with CS zone development standards. Currently, rental residential projects are not required to provide Below Market Rate (BMR) units and the current Housing Element relies heavily on the Density Bonus law to promote affordable housing units in connection with rentals. The applicant intends to provide 30% (three) of the residential units as BMR rental units. In doing so, per State law, the City must grant three development concessions or incentives for building the three BMR units unless the Council can make strict statutory findings showing these concessions are not necessary. The three concessions requested by the developer are lot coverage, commercial floor area ratio (FAR), and total FAR. The concession items are listed in the table below: Standard Allowable Proposed Excess Lot coverage 50% (13,463 sf.) 69% (18,520 sf.) 19% (5,057 sf.) Commercial FAR 0.4:1=10,770 0.8:1=21,540 sf. 0.4:1=10,770sf. Total FAR 1:1=26,926 1.32:1=35,521 sf. 0.32:1=8,595 sf. The discussion section below provides additional information about the requested concessions as they relate to the City’s density bonus ordinance and the findings that would be required (based on substantial evidence) to deny the requests. Public Art City of Palo Alto Page 5 The project is subject to the City’s new Public Art ordinance. It has elected to provide the public art within the project in the form of large folded metal address numbers by artist Fletcher Benton. Discussion The property is located within a Site and Design combining district and therefore Site and Design Review is required. The Site and Design Review combining district is intended to provide a process for review and approval of development in environmentally and ecologically sensitive areas. This includes established community areas that may be sensitive to negative aesthetic factors, excessive noise, increased traffic, or other disruptions. This requirement provides an opportunity to review the development and assess its compatibility with other uses in the general vicinity, environmental and ecological objectives, and adherence to the city’s Comprehensive Plan. The review process begins with review and recommendation by the Commission, followed by the ARB and finally, action by the City Council. Draft findings for the Site and Design Review and Context Based findings are included in Attachment A. State Density Bonus Project The subject application is not subject to the City’s below market rate housing program, which at this time, does not apply to rental housing projects. However, the applicant is proposing a project using provisions in State law and the City’s local density bonus program to take advantage of development concessions available to qualifying projects. The density bonus program is designed to encourage private sector development of affordable housing. The City’s density bonus program provides three distinct incentives for voluntarily providing affordable housing: (1) it allows the developer to provide additional housing units beyond the zoning maximum (note, the applicant is not seeking to provide additional units and in fact is providing fewer housing units than allowed by zoning); (2) reduced parking requirements for the housing units (the applicant’s parking requirement is reduced by three spaces under density bonus law); and (3) development concessions/waivers/incentives in order to make the project as a whole economically feasible. Threshold Findings Palo Alto Municipal Code Chapter 18.15.090 requires the Council to make the following threshold findings when approving density bonus concessions: (i) The Development is eligible for the Density Bonus and any Concessions, waivers, modifications, or revised parking standards requested. (ii) Any requested Concession or Incentive will result in identifiable, financially sufficient, and actual cost reductions based upon the financial analysis and documentation provided. The City finds that the Concessions and Incentives included in Section 18.50.050(c) will result in City of Palo Alto Page 6 identifiable, financially sufficient, and actual cost reductions. (Because applicant’s request is “off menu” the City commissioned a Pro Forma analysis – see below discussion.) (iii) If the Concession or Incentive includes mixed-use development, a finding that all the requirements included in Government Code Section 65915(k)(2) have been met. (This State law provides that the commercial/office use will reduce the cost of the housing development and that such commercial/office use is compatible with the housing project and the existing or planned development in the area.) Denial Findings If the Council is unable to make the threshold findings above, the Council may deny an “off menu” concession only if it can make one of the following written findings, supported by substantial evidence: (i) The concession, incentive, waiver or modification is not required to provide for affordable rents or affordable sales prices; or (ii) The concession, incentive, waiver or modification would have a specific, adverse impact upon public health or safety or the physical environment or on real property listed in the California Register of Historic Resources, and there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact without rendering the development unaffordable to low and moderate income households. For the purpose of this subsection, “specific adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified, written public health or safety standards, policies, or conditions as they existed on the date that the application for the development was deemed complete; or (iii) The concession, incentive, waiver or modification is contrary to state or federal law. Concession Requests On January 13, 2014, the City Council approved a Density Bonus ordinance that established a menu of items that a developer may choose as incentives for providing affordable housing units. The hope was that by adopting an ordinance permitting certain concessions by right, the City would guide developers to locally preferred concessions, and away from others. The present application was submitted and in the design review process before the City’s density bonus ordinance was adopted. While three of the applicant’s requested concessions appeared in earlier drafts of the City’s density bonus ordinance menu, the final version of the Council adopted ordinance removed them from the menu list. The applicant has proposed to provide three of the 10 units as low income Below Market Rate units. This is 30% of the total number of residential units proposed for the project, allowing the applicant to request three concessions, or modifications to local development standards. In this case, the applicant has requested the following concessions: City of Palo Alto Page 7 1. Lot Coverage: The code permits a maximum lot coverage of 50% or 13,463 square feet. The applicant requests a lot coverage of 69% or 18,520 square feet. This results in an increase of 5,057 square feet of lot coverage. The city’s by-right lot coverage concession is limited to the square footage of the affordable units, which is 3,544 square feet. The proposed incentive is 1,513 square feet beyond the menu allowance. 2. Total Floor Area Ratio (FAR): The FAR for the project site is 1:1. This permits a maximum of 26,926 square feet of floor area. The applicant requests an FAR of 1.32:1, or 35,521 square feet. This results in an increase of 8,895 square feet of floor area. The city’s by-right total floor area ratio concession is limited to the square footage of the affordable units, which is 3,544 square feet, and is limited to the residential portion of the project only. The request is therefore 5,279 square feet beyond the menu allowance, and is related to commercial square footage. 3. Commercial Floor Area Ratio (FAR): The commercial FAR for the project site is 0.4:1. This permits a maximum of 10,770 square feet of commercial floor area. The applicant requests an FAR of 0.8:1, or 21,540 square feet. This is an additional 10,770 square feet of floor area. There is no by right commercial floor area ratio concession on the City’s menu. Because the project includes off-menu concessions, the applicant was required to provide pro forma documentation to substantiate the need for the requested concessions. Pro Forma Analysis As required by the City’s density bonus ordinance, the applicant has prepared a pro forma to justify the off menu concession requests. The City hired an outside consultant, Keyser Marston Associates, to analyze the pro forma and determine if the requested off-menu concessions are necessary in order to provide the three BMR units. This consultant’s analysis is provided as Attachment F and uses a development cost approach. Under this approach, the specific costs of the affordable housing units are isolated from the rest of the project through an allocation of total project development costs minus the value of the affordable units. The affordable housing costs are then compared to the incremental value realized by the project by the requested concessions. If the affordable housing costs exceed the incremental value created by the requested concessions, this would support a conclusion that the requested concessions are needed to support the “affordable housing costs.” As explained above, State Density Bonus Law provides that, as long as the proposed project satisfies other requirements of the law, the requested incentives and concessions shall be City of Palo Alto Page 8 granted unless a written finding can be made “based upon substantial evidence” that the concession “is not required in order to provide for the affordable housing costs.” The law does not provide further specificity with regard to how “affordable housing costs” are to be defined or how the analysis is to be performed. Based on Keyser Marston’s experience, there is a second, less preferred approach that has been utilized over the years to analyze “affordable housing costs” for purposes of the State Density Bonus Law. The second approach is the development return approach, and looks at the development return (a measure of profit) of the proposed project as well as a project alternative without the requested concessions. If the return for the proposed project is within industry standards (i.e. there is no excessive profit being achieved), this would support a conclusion that the requested concessions are needed to support the “affordable housing costs.” Keyser Marston believes that the development cost approach has two primary advantages over the development return approach: (1) it provides a more specific quantification of affordable housing costs in isolation from the rest of the project, and (2) it limits the subjectivity of what amount of development return is appropriate for a specific project. For these reasons, the development cost approach has been the primary emphasis for the review of the 441 Page Mill project, although using either methodology, Keyser Marston has determined that the project satisfies the requirement of the State Density Bonus Law that the requested incentives/concessions are required in order to provide the three affordable housing units. One item that came out of the PTC’s discussion of the Pro Forma Analysis was the request to perform an estimate of the project’s value at completion. Keyser Marston went back and performed a review of apartment, retail, and office building sales in the Palo Alto market as a cross check of the building valuation estimates that were made by Keyser Marston’s original report. Through the additional analysis, they found that adjustments to the original analysis would not be necessary. This supplemental analysis is provided as Attachment G. Design Enhancement Exceptions The CS zoning has no front setback requirement other than the requirement to set the building back far enough to provide an effective eight to 12 foot wide sidewalk. The term “effective” sidewalk allows the inclusion of items such as the planter strip, street trees, benches for seating, etc. within this setback area. The width of the right of way from the curb to the property line is ten feet. The existing paved sidewalks are only four to five feet wide with a two foot six inch wide planter strip that separates the sidewalk from the street. This part of Page Mill Road does have a four foot special setback. The code also requires that 50 percent of the building frontage be built up to the setback line. At the required four foot setback, 50 percent of the building would be 14 feet back from the face of the curb. Through the Design Enhancement Exception, the applicant requests a 17 foot setback, as opposed to the code required 14 foot setback from Page Mill Road. City of Palo Alto Page 9 The City is currently exploring modifications to the build to line provisions in the municipal code, including recommendations from the ARB and PTC to remove the build to line standard throughout the city, except on El Camino Real. Direction to modify this standard is based in part from community and City Council interests in allowing for greater setbacks from the roadway without having to go through a DEE process. The requested DEE complies with the underlying intent of the ordinance currently in development. The second DEE would allow the driveway ramp for the below grade parking garage to encroach three feet into the required 10 foot landscape buffer at the rea of the property. The three foot encroachment occurs in only a portion of the landscape buffer and occurs at and below grade so it will not result in a visual impact to the rear neighbors. The three foot encroachment also allows ample room to accommodate the planting of new trees for a privacy screen for the residential neighbors. As proposed, the new building would be located 27 feet from the rear property line. Street Trees The DEE to permit a 17 foot setback allows the project to provide street trees. There are currently eight street trees planted along the roadway in front of the site. They are planted within a very narrow planter strip and are planted next to the street curb. The County of Santa Clara has jurisdiction over the roadway, as it is a County expressway. The County typically does not permit trees to be within seven feet of the roadway due to safety and road maintenance concerns. The City arborist found that the existing trees would not survive, given the type of tree, its limited growing environment, and the proposed improvements to the site. There are a multitude of utilities beneath the existing sidewalk that would be cost-prohibitive to relocate. The County tree placement restrictions, combined with the challenge of relocating the utility lines running in front of the property, impacts the ability to plant new trees further back from the curb in a planter strip between the street and the sidewalk. With an approval of the DEE to move the building back three additional feet, street trees would have adequate space to grow into maturity. The trees would be located behind the sidewalk, rather than being placed within a planter strip between the sidewalk and the street. City policies support having a line of street trees providing a buffer between the busy roadway and the building. The County has plans to extend the double south bound left hand turn lanes at Page Mill Road and El Camino Real. These plans include the removal of on-street parking on Page Mill Road and the widening of the street by 2 additional feet at the project frontage. This widening would result in the removal of the existing street trees. The current proposal would provide new street trees much further back from the curb such that the future street widening project will not impact the new trees or the width of the sidewalk. Soil Contamination The project site is located within the California Olive Emerson (COE) Study area, which is known to have contaminated ground water from offsite dumping of Volatile Organic Compounds (VOCs). Based on this location, measures will need to be implemented for the proposed City of Palo Alto Page 10 development of the property to prevent vapor migration into the structure. The required measures include a vapor barrier, an active ventilation system and regular testing. These mitigations are identified in the MND and contained in conditions of approval. Parking Reductions Based on the proposed number of dwelling units (including three BMR units) and commercial square footage proposed, 107 automobile parking spaces are required. The applicant has proposed to provide 91 vehicle parking spaces, a reduction of 16 spaces. The code allows for Director approved reductions in the amount of required parking for mixed use developments. The applicant has provided a Time of Use Parking Analysis to demonstrate that the proposed project, with its mix of land uses, would not need the code-prescribed 107 parking spaces, because different uses within the project would have different demands for parking at different times of day (Attachment K). The analysis determined that the peak demand would only require 79 parking spaces. With a 10 % adjustment to allow for heavier than normal demand periods, 89 spaces were found to be an adequate number of spaces. The City’s Transportation Division staff reviewed this study and determined that the 91 spaces would be adequate to serve the proposed uses without creating an off-site parking impact. The parking reduction requires that a Transportation Demand Management (TDM) plan be implemented. At a minimum, Go Passes must be provided to the building occupants. With such close proximity to the train station, this is likely to be a very effective measure. Neighbor Concerns During the rezone application process for the property, the applicant conducted a series of public outreach meetings. During those meetings, some residential neighbors to the rear of the site expressed concerns over how a new building may impact their properties. The applicant reported that the following concerns were raised: • Density - Concern over the height and size of the future building and how it would be perceived from their properties; • Privacy - Neighbors did not want people looking down into their back yards; • Traffic - Neighbors did not want an increase to the traffic in the area; • Parking - Neighbors did not want an increase in parking on Pepper Avenue; • Page Mill visibility - Neighbors requested that the on-street parking on Page Mill Road be removed so that on-coming traffic could be seen when pulling out onto Page Mill Road from Ash Street; and • Ground water disturbance - Concern was voiced about the potential impacts of any disturbance of the contaminated ground water. The applicant has addressed some of these concerns by doing the following: • Placing the building 27 feet away from the rear property line to reduce the visual impact of the building on the residential neighbors; City of Palo Alto Page 11 • Planting a row of trees to provide a visual screen and buffer between the new building and the neighboring residences; and • Placing the window sill heights of the second floor office windows at 3 feet from the floor level, rather than floor-to-ceiling glass, for additional privacy. The applicant met with the same neighbors that had been involved in the rezoning request for the site again on January 3, 2013 and June 20, 2013 to get their feedback on the proposed building design. The applicant reported that the neighbors had the following concerns about the proposed project: • Light pollution from offices at night; • Smoking on the second floor terrace; • Seeing storage items on the patio; • Trash and recycle bin location; • Location of HVAC equipment (noise); • Odor and equipment noise from businesses; and • Homelessness Staff received six public comments on the proposal, in late summer and early fall 2013, conveying concerns related to traffic and parking, the groundwater plume beneath the site, and the size and setback of the project. At the final ARB hearing there was one public speaker and he voiced his concern over the parking reduction request. Policy Implications The proposed project is the first test of the City’s density bonus ordinance and was well along in the design development process when the City’s ordinance was adopted with a menu of “by right” design concessions. As a result, the proposed project requests concessions under the State density bonus law that are not on the City’s menu, and the developer was required to submit a pro forma demonstrating that the concessions are needed for the project to include the affordable units. Under State law, the City does not have the ability to deny the requested concessions unless written finding can be made based upon substantial evidence that the concessions are not required in order “to provide for the affordable housing costs” (see specific findings above). Based on the pro forma and the peer review by the City’s economic consultant, Keyser Marston, staff does not believe the required findings can be made for rejection of the requested concessions. Many of the Context-Based Design Criteria, and Comprehensive Plan policies are implemented by this proposal. Attachment A (RLUA) includes references to Comprehensive Plan policies and Design Criteria that are applicable to the project. The project consolidates smaller parcels to form a large enough parcel that is able to realize the elements of the various City Guidelines. Decaying single family homes would be replaced by new mixed use development that is better suited to the adjacency of the busy street. The building would provide a strong street edge along Page Mill Road, while providing an eight foot sidewalk, street trees, and various other City of Palo Alto Page 12 pedestrian amenities. The building would have outdoor seating, storefront entries that face the street, and residential balconies. The building façade would be well articulated with ample fenestration, horizontal sunshades, and multiple transitions in building materials with numerous colors and textures. The project includes surface parking and underground parking facilities that would be hidden from public view. The use of the State Density Bonus Law concessions due to the provision of three affordable housing units results in the project’s deviation from certain City zoning standards. The added floor area and lot coverage also result in a proposal that is not consistent with all text and policies of the Comprehensive Plan. For example, the Comprehensive Plan (page L-11) provides for non-residential floor areas up to 0.4 to 1 in the Service Commercial land use designation, where the current proposal would have a non-residential FAR of 0.8 to 1. Also, Policy L-6 calls for the avoidance of abrupt changes in scale and density between residential and non- residential areas and the shallow commercially-zoned parcel limits the options for gradual transitions of scale and density between the proposed development and the single family neighbors behind it. The proposal does compensate for this with the implementation of strategies to make the transition as gradual as possible. The new building would be set back from the residential neighbors 17 feet further than required, the office windows would have night shades to eliminate any lighting impacts form the offices at night, the main living spaces at the third floor would be setback to avoid privacy impacts, and a line of evergreen trees would be planted across the back of the site to provide a privacy screen and buffer between the two uses. While State mandates such as the State Density Bonus Law can result in projects that are not wholly consistent with all local zoning standards and general plan policies, the proposed project has complied with the City’s density bonus procedures (which are also in the zoning ordinance) and is, on balance, consistent with the Comprehensive Plan as a whole based on the Plan’s many policies providing for mixed uses (Policy L-9 and Policy L-31) and affordable housing units (Policies H2.1, H2.2, and H3.1). Timeline Application submittal: July 29, 2013 Mitigated Negative Declaration available for Public comment: November 8, 2013 Planning and Transportation Commission Review: June 11, 2014 Architectural Review Board Review: August 21, 2014 Architectural Review Board Review, second hearing: October 2, 2014 Architectural Review Board Review, final hearing: October 30, 2014 City Council Consideration: January 26, 2015 Environmental Review An Initial Study and Mitigated Negative Declaration (MND) have been prepared for the project and the 30 day public review and comment period began on November 8, 2013 and ended on December 9, 2013. The environmental analysis notes there are a few potentially significant City of Palo Alto Page 13 impacts that would require mitigation measures to reduce them to a less than significant level. These include mitigations for dust control during excavation, protection for nesting birds, building design for earthquake resistance, basement shoring, and measures to prevent VOC vapor intrusion into the project. These are provided in the conditions of approval within the RLUA (Attachment A) as well as the MND (Attachment H). Attachments: Attachment A: Record of Land Use Action (DOCX) Attachment B: Site Location Map (PDF) Attachment C: Zoning Compliance Table (DOCX) Attachment D: Comprehensive Plan Compliance Table (DOC) Attachment E: Applicant's Letter (PDF) Attachment F: Pro Forma Analysis (PDF) Attachment G: Pro Forma Supplement (PDF) Attachment H: Mittigated Negative Declaration-Initial Study (PDF) Attachment I: P&TC Minutes, June 11, 2014 (PDF) Attachment J: ARB Minutes, October 30, 2014 (DOC) Attachment K: Parking Analysis - Time of Use Study (PDF) 1 ATTACHMENT A ACTION NO. 2015-01 RECORD OF THE COUNCIL OF THE CITY OF PALO ALTO LAND USE APPROVAL FOR 441 PAGE MILL ROAD: SITE AND DESIGN REVIEW, DENSITY BONUS CONCESSIONS, AND DESIGN ENHANCEMENT EXCEPTIONS (13PLN-0307) On January 26, 2015, the Council of the City of Palo Alto approved the Mitigated Negative Declaration, Site and Design Review Application and Design Enhancement Exceptions (DEE) for a mixed use building in the Service Commercial (CS(D)) zone district. SECTION 1. Background. The City Council of the City of Palo Alto (“City Council”) finds, determines, and declares as follows: A. Stoecker and Northway Architects, on behalf of Norm Schwab has requested the City’s adoption and approval for the following items: (1) A Mitigated Negative Declaration, prepared in accordance with the California Environmental Quality Act (CEQA); (2) Site and Design Review application for a new 35,521 s.f. mixed-use building on a 26,929 s.f. site to provide 10 residential apartment units, including three below market rate units, and office and retail uses, with structured parking facilities (at surface and underground) providing 91 parking spaces including Design Enhancement Exceptions, (1), to allow a three foot alleviation of the build-to-line, and (2) to allow a three foot encroachment into the 10 foot landscape buffer at the rear of the site located at 423, 433, 441, and 451 Page Mill Road. (3) A Lot Coverage concession in the amount of 5,057 s.f. under the state density bonus law; (4) An FAR concession in the total amount of 8,701 s.f. under the state density bonus law; (5) An FAR concession for commercial square footage in the amount of 10,771 s.f. under the state density bonus law. 2 (6) A Parcel Map to merge four parcels into one parcel of land. (This request is subject to a separate but related application.) These properties are designated on the Comprehensive Plan land use map as Service Commercial, and are located within the Service Commercial (CS(D)) zone district. B. The Planning and Transportation Commission (Commission) reviewed the request for Site and Design Review, density bonus concessions and Mitigated Negative Declaration on June 11, 2014, and recommended approval. C. The Architectural Review Board (ARB) reviewed the application for Site and Design Review and Design Enhancement Exceptions on August 21, 2014, and continued the item for further review. The ARB reviewed the application again on October 2, 2014 and continued the item for further review. The ARB reviewed the application for a third time on October 30, 2014 and reviewed the project for consistency with Architectural Review findings, Design Enhancement Exception findings, and Context Based Design Criteria, and recommended approval. SECTION 2. Environmental Review. The City, as the lead agency for the Project, has determined that a Mitigated Negative Declaration (MND) will be required for the project subject to the provisions of the California Environmental Quality Act (CEQA). The Public Notice period for the MND began on November 08, 2013 and concluded on December 09, 2013. The City Council hereby approves the MND for the project and adopts the related Mitigation and Monitoring and Reporting Plan. SECTION 3. Site and Design Review Findings 1. The use will be constructed and operated in a manner that will be orderly, harmonious, and compatible with existing or potential uses of adjoining or nearby sites. The proposed mixed use building would introduce compatible and harmonious uses in relation to adjacent and nearby uses in this diverse and eclectic neighborhood. The proposed building and uses would be sited such that they would not result in an impact on adjacent properties. Landscaping would be added at the rear to ensure privacy for the adjacent residential uses. The traffic and parking for the project have been reviewed and it has been determined that the use would be adequately parked and that the traffic volumes would not result in an impact to 3 local intersections or roadways. The proposal removes several existing curb cuts and widens the sidewalk on the Page Mill Road frontage, improving pedestrian safety. 2. The project is consistent with the goal of ensuring the desirability of investment, or the conduct of business, research, or educational activities, or other authorized occupations, in the same or adjacent areas. The approval of the project would maintain the desirability of investment by providing a project with a mix of uses that would assist in improving the neighborhood by making better use of a series of single family parcels that have long been neglected due to their undesirable location fronting the expressway. The proposal makes more appropriate use of the property adjacent to the busy roadway by placing office and retail uses adjacent to the roadway while placing new residential uses higher above and away from the roadway on the third floor. The proposal would be executed in a manner that has the potential to improve the aesthetic quality of the area. Construction of all improvements will be governed by the regulations of the current Zoning Ordinance, the Uniform Building Code, and other applicable codes to assure safety and a high quality of development. 3. Sound principles of environmental design and ecological balance are observed in the project. The proposal, as a mixed use infill project, is intended to benefit the environment by providing new housing within the city to reduce vehicle commute times. Efficient use of space and the use of Green building practices are employed within the project. 4. The use will be in accord with the Palo Alto Comprehensive Plan. The project is compliant with several comprehensive plan policies as noted in the Comprehensive Plan Compliance Table (“Table”)attached to the Staff Report as Attachment D and incorporated by this reference. SECTION 4. ARB Findings/Context Based Design Criteria Findings/Design Enhancement Exception Findings Architectural Review Findings 1) The design of the proposed mixed use development is consistent and compatible with applicable elements of the City's Comprehensive Plan in that the site is designated as Service 4 Commercial, which allows for mixed use development and compliance with applicable Comprehensive Plan policies is outlined in the Comprehensive Plan compliance table; 2) The design is compatible with the immediate environment of the site in that the proposed building is located within a commercial zone district where a mixture of uses is appropriate. The building would be located on a significant arterial roadway where larger commercial buildings are common. The site is well utilized by the building’s design. The building fills the site creating a buffer between the busy roadway and the single-family residences behind; 3) The design is appropriate to the function of the project in that the design appropriately accommodates the varied mix of proposed uses, elevating the residences up off the street and away from the busy roadway, improving pedestrian accessibility and safety by removing curb cuts, and addressing the street in such a way as to provide building mass close to the street while maintaining a wide sidewalk; 4) In areas considered by the board as having a unified design character or historical character, the design is compatible with such character. The scale of the new three story mixed use building is consistent with the larger residential buildings directly across the street; 5) The design promotes harmonious transitions in scale and character in areas between different designated land uses in that the proposal includes ample landscape screening providing privacy between the mixed use project and the adjacent single family houses to the rear. The mixture of both commercial and residential uses helps to provide a transition between the busy roadway and the quieter single family residences; 6) The design is compatible with approved improvements both on and off the site in that the proposed mixed use building would be compatible with the other uses in the area and the uses within the building are divided in a manner to ensure they would be compatible with each other; 7) The planning and siting of the various functions and buildings on the site create an internal sense of order and provide a desirable environment for occupants, visitors and the general community in that the proposed design places the driveway at the far end of the site such that one could see the project and slowdown in time to safely enter the parking garage. It would also have a central pedestrian entry tower providing access to each of the three floors and the various uses within the building; 5 8) The amount and arrangement of open space are appropriate to the design and the function of the structures in that ample open space is provided in the form of private patio areas for the residences and there would be a large central courtyard at the third floor that would provide access to each of the residential units; 9) Sufficient ancillary functions are provided to support the main functions of the project in that the proposal includes sufficient parking and areas to accommodate trash and recycling needs of the development; 10) Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles in that adequate parking areas are proposed both at the surface and below grade, bicycle parking provided at various locations throughout the site, and safe pedestrian access through the project; 11) Natural features are appropriately preserved and integrated with the project in that the proposal will replace the street tree canopy back from the street edge to ensure their continued success after the proposed street widening; 12) The materials, textures, colors and details of construction and plant material are appropriate expressions of the design and function in that the building is proposed to have a multitude of exterior finish materials with different colors and textures providing a high level of detail and visual interest; 13) The landscape design concept for the site, as shown by the relationship of plant masses, open space, scale, plant forms and foliage textures and colors create a desirable and functional environment in that the proposal includes landscape material where possible considering that the project sits upon a below grade parking structure. Landscape planters would be placed at the third floor and street trees and privacy screen trees are provided at the front and rear of the project respectively; 14) Plant material is suitable and adaptable to the site, capable of being properly maintained on the site, and is of a variety, which would tend to be drought-resistant and to reduce consumption of water in its installation and maintenance in that appropriate plant materials have been selected that are drought tolerant and suitable for their proposed locations; 15) The project exhibits green building and sustainable design that is energy efficient, water conserving, durable and 6 nontoxic, with high quality spaces and high recycled content materials. The project would comply with the stricter CalGreen tier 2 requirements. The residential portion would comply with Build-it-Green requirements. 16) The design is consistent and compatible with the purpose of architectural review, which is to: a. Promote orderly and harmonious development in the city; b. Enhance the desirability of residence or investment in the city; c. Encourage the attainment of the most desirable use of land and improvements; d. Enhance the desirability of living conditions upon the immediate site or in adjacent areas; and e. Promote visual environments which are of high aesthetic quality and variety and which, at the same time, are considerate of each other. The project as designed, and as conditioned, would promote an environment that is of high design quality and variety. Context Based Design Criteria Findings Pursuant to PAMC 18.16.090 (a), the project shall be: (A) Responsible to its context and compatible with adjacent development, and shall promote the establishment of pedestrian oriented design. “Responsible to context” is not a desire to replicate surroundings, but provide appropriate transitions to surroundings, and (B) Compatible with adjacent development, when apparent scale and mass is consistent with the pattern of achieving a pedestrian oriented design and when new construction shares general characteristics and establishes design linkages with the overall pattern of buildings so the visual unity of the street is maintained. If there is any visual unity existing on the block now, it is the four dilapidated, single-story homes on the four lots plus one adjacent single story structure on the adjacent CN- zoned lot, in use as a veterinary office. With the recent rezoning of the site to CS, the commercial zoning of this block fronting Page Mill Road was completed. Buildings taller 7 than one story anchor the corners of this commercial block and two and three story buildings are allowed by the zoning. Pursuant to PAMC 18.16.090 (b), additional findings are applicable, related to (1) pedestrian and bicycle environment, (2) street building facades, (3) massing and setbacks, (4) low-density residential transitions, (5) project open space, (6) parking design, (7) multi-acre sites (not applicable), (8) sustainability and green building design. The findings below are draft form and would be modified during the ARB review process. 1) Pedestrian and Bicycle Environment. The design of new projects shall promote pedestrian walkability, a bicycle friendly environment, and connectivity through design elements. The proposed building provides landscaping, decorative paving at the entries, benches, a staircase from the street for residential tenant use, and a slightly deeper setback than allowed per build-to-line/front setback requirement, allowing greater sidewalk width to create an inviting and active pedestrian environment. The proposed effective sidewalk width would be 10 feet plus a two foot wide planter strip along Page Mill Road and an additional setback to the building. 2) Street Building Facades. Street facades shall be designed to provide a strong relationship with the sidewalk and the street (s), to create an environment that supports and encourages pedestrian activity through design elements. The building front wall contains two commercial doors to the retail space(s), and a pedestrian staircase leading to the residential units on the third floor. The glassy façade provides viewing opportunities, contributing to an active pedestrian oriented area. 3) Massing and Setbacks. Buildings shall be designed to minimize massing and conform to proper setbacks. The building front wall is generally similar in placement on the site as is the Kelly Moore paint store at 411 Page Mill Road. The glass wall treatment will minimize massing along Page Mill Road; the building is proposed to be set back farther than the build-to-line/front setback, for which a DEE is requested. The rear and side setbacks have proper setbacks (zoning table confirms these setbacks are in compliance with CS zoning code minimum setbacks). 8 4) Low Density Residential Transitions. Where new projects are built abutting existing lower scale residential development, care shall be taken to respect the scale and privacy of neighboring properties. Screen trees are proposed and an approval condition would require nighttime window shades to minimize light intrusion. 5) Project Open Space: Private and public open space shall be provided so that it is usable for the residents and visitors of the site. Public open space is the sidewalk area with landscaping and trees on private property offered to the public to enjoy. The usable private residential space (balconies) and common open space for the residential units is adequate 6) Parking Design: Parking shall be accommodated but shall not be allowed to overwhelm the character of the project or detract from the pedestrian environment. The project provides parking below grade and in the rear of the building, with one 20’ wide driveway - a reduction the number of driveways from four to one - to improve the pedestrian environment. 7) Large Multi-Acre Sites – not applicable 8) Sustainability and green building design: The project is designed to meet the City’s locally amended Cal Green standards (Tier 2 mandatory) for the commercial component, and green point rated for the residential component of the building. The ARB will discuss and evaluate the “green” features of the project. Design Enhancement Exception Findings: The requested Design Enhancement Exceptions (DEE) are consistent with the following findings as stated in PAMC 18.76.050 (c). Note: These draft DEE Findings are provided for ARB review. Exceptions are requested for alleviation of the build-to-line (three feet further from the front property line),and encroachment into the landscape buffer (three feet into the 10 foot landscape screen area). (1) There are exceptional or extraordinary circumstances or conditions applicable to the property or site improvements involved that do not apply generally to property in the same zone district. This Finding can be made in the affirmative. To accommodate the below grade parking the proposed building footprint would span the entire site, resulting in an expansive 9 roof capped at a restrictive 35 foot height limit as well as being subject to a zoning requirement to place 50% of the building up to the front setback line. Placing 50% of the building this close to the street in this location would not leave enough room to accommodate street trees in front of the project due to existing utility locations in the sidewalk and the future plans and regulations of Santa Clara County that has jurisdiction over Page Mill Road as a County expressway. They don’t allow street trees within seven feet of the roadway edge and they have future plans to widen the existing roadway by two feet, further reducing the sidewalk width. (2) The granting of the application will enhance the appearance of the site or structure, or improve the neighborhood character of the project and preserve an existing or proposed architectural style, in a manner which would not otherwise be accomplished through strict application of the minimum requirements of this title (Zoning) and the architectural review findings set forth in Section 18.76.020(d). This Finding can be made in the affirmative. The alleviation of the build to line and the encroachment into the landscape screen area would allow the building to be set back from the street three additional feet to provide a wider sidewalk and additional room for street trees while still maintaining appropriate room for privacy screening for the rear R-1 neighbors. (3) The exception is related to a minor architectural feature or site improvement that will not be detrimental or injurious to property or improvements in the vicinity and will not be detrimental to the public health, safety, general welfare or convenience. This Finding can be made in the affirmative in that the alleviation of the build to line and the encroachment into the landscape screen area would have the positive impact of providing wider sidewalks, pedestrian amenities, and additional room for street trees rather than any negative impact. SECTION 5. State Density Bonus Concession Findings (i) The Development is eligible for the Density Bonus and any Concessions, waivers, modifications, or revised parking standards requested. By providing three out of the 10 units as low income units the project is eligible for three concessions. The applicant has used the revised parking standards allowed by the state density bonus law resulting in a reduction of three parking spaces. 10 (ii) Any requested Concession or Incentive will result in identifiable, financially sufficient, and actual cost reductions based upon the financial analysis and documentation provided. The City finds that the Concessions and Incentives included in Section 18.50.050(c) will result in identifiable, financially sufficient, and actual cost reductions. The City’s consultant has done a fiscal analysis of the applicants pro forma and has found that the requested concessions are necessary in order to provide the three Below Market Rate dwelling units. (iii) If the Concession or Incentive includes mixed-use development, a finding that all the requirements included in Government Code Section 65915(k)(2) have been met. All the requirements of Government Code Section 65915(K)(2)have been met in that the commercial portions of the project are necessary to support the residential component and the commercial components are compatible with the residential uses and other surrounding uses. SECTION 6. Site and Design Review Approval and DEE Granted. Site and Design Review, and DEEs are granted by the City Council under Palo Alto Municipal Code Section 18.30(G).070, and Section 18.76.010 for application 13PLN-00307, subject to the conditions of approval in Section eight of the Record. SECTION 7. Plan Approval. The plans submitted for Building Permit shall be in substantial conformance with those plans prepared by Stoecker and Northway Architects, consisting of 31 pages, dated November 14, 2014, and received November 14, 2014, except as modified to incorporate the conditions of approval in Section Eight. A copy of these plans is on file in the Department of Planning and Community Environment. This document, including the conditions of approval in Section eight, shall be printed on the cover sheet of the plan set submitted with the Building Permit application. SECTION 8. Conditions of Approval. Department of Planning and Community Environment 1. The plans submitted for Building Permit shall be in substantial conformance with plans received on November 14, 2014, except as modified to incorporate the following conditions of approval and any additional conditions placed on the project 11 by the Planning Commission, Architectural Review Board, or City Council. The following conditions of approval shall be printed on the cover sheet of the plan set submitted with the Building Permit application. 2. All noise producing equipment shall not exceed the allowances specified in Section 9.10 Noise of the Palo Alto Municipal Code. 3. Any existing city street trees approved to remain shall be maintained and protected during construction per City of Palo Alto standard requirements. 4. All landscape material shall be well maintained for the life of the project and replaced if it fails . 5. Any exterior modifications to the building or property shall require Architectural Review. This includes any new signs. 6. An Affordable Rental Housing Agreement for the three units designated for Lower Income Households shall be executed and recorded prior to building permit issuance. Applicant will enter into a Regulatory Agreement restricting three units for lower income households consistent with the city’s Below Market Rate Housing Program guidelines.” 7. All of the on-site parking spaces shall remain unassigned such that no single space shall be encumbered by any individual or tenant. 8. A Parcel Map, to merge the four parcels into a single parcel, must be recorded with the County of Santa Clara prior to building permit issuance. 9. The applicant must notify the Public Art Office of their intent to fulfill the public art requirement by payment of the in-lieu fee instead of commissioning art on site. The applicant is required to submit the amount equal to 1% of the estimated construction valuation into the public art fund account prior to their application for a building permit and provide a copy of the receipt to the Public Art office. According to the original Public Art application form, the estimated art budget is $160,000. At the time of their building permit application, the estimated construction valuation will be confirmed. If the estimated construction valuation has increased at that time, the applicant will have to submit 1% of the new estimated construction valuation prior to the issuance of a 12 building permit. If the applicant chooses to implement the art on site, this condition to pay the in-lieu fee would no longer be valid. The plans submitted for building permit must include the proposed art installation if the on-site placement of art option is chosen. 10. Mitigation Measures C-1: The effects of construction activities would be increased dust fall and locally elevated levels of particulate matter downwind of construction activity. Construction dust has the potential for creating a nuisance at nearby properties. This impact is considered potentially significant but normally mitigated by implementing the following control measures: During demolition of existing structures: Water active demolition areas to control dust generation during demolition and pavement break-up. Cover all trucks hauling demolition debris from the site. Use dust-proof chutes to load debris into trucks whenever feasible. During all construction phases: Pave, apply water 3x/daily, or apply (non-toxic) soil stabilizers on all unpaved access roads, parking areas, and staging areas at construction sites. Hydro-seed or apply (non-toxic) soil stabilizers to inactive construction areas (previously graded areas inactive for ten days or more). Enclose, cover, water 2 times daily, or apply (non-toxic) soil binders to exposed stockpiles (dirt, sand, etc.). Limit traffic speeds on unpaved roads to 15 miles per hour. Install sandbags or other erosion control measures to prevent silt runoff to public roadways. Replant vegetation in disturbed areas as quickly as possible. The above measures include feasible measures for construction emissions identified by the BAAQMD for large sites. According to the District threshold of 13 significance for construction impacts, implementation of the measures would reduce construction impacts of the project to a less than significant level. 11. Mitigation Measures: See H-3 under Section VII, Hazards and Hazardous Materials 12. Mitigation Measures B-1: The applicant shall abide by all provisions of Sections 3503 and 3503.5 of the State Fish and Game Code and Migratory Bird Treaty Act of 1918 (MBTA) as published in the Federal Register (Vol. 70, No. 49; March 15, 2005). Although there is no vegetation on the project site that may contain nesting birds, there may be nesting birds in existing vegetation abutting the proposed project site. To protect any nesting birds, the proposed project may avoid construction during the nesting period. Alternatively, a qualified wildlife biologist (to be hired by the applicant) shall conduct a survey for nesting birds that are covered by the MBTA and/or Sections 3503 and 3503.5 of the State Fish and Game Code in the vicinity of the project site. This survey shall cover all areas that would be disturbed as a result of construction-related activities during the nesting period, and shall include a “buffer zone” (an area of potential sensitivity, beyond the bounds of the proposed project construction area) which shall be determined by the biologist based on his or her professional judgment and experience. This buffer zone may include off-site habitat. This biological survey shall be conducted no more than 14 days prior to the commencement of construction activities. The wildlife biologist shall provide a report to the City promptly detailing the findings of the survey. No construction shall be conducted until this report has been provided to the City and the City has authorized in writing the commencement of construction activities in accord with the biologist’s findings. 13. Mitigation Measures F-1: All earthwork and site drainage, including foundation and basement excavations, retaining wall backfill, preparation of the subgrade beneath hardscape, placement and compaction of engineered fill, and surface drainage should be performed in accordance with the Geotechnical Report prepared by Cornerstone Earth Group dated May 2, 2013. 14. Mitigation Measures F-2: The design of all buildings shall be designed in accordance with current earthquake resistant standards, including the 2007 CBC guidelines and design recommendations regarding the potential for localized 14 liquefaction presented in the Geotechnical Investigation provided by Cornerstone Earth Group. 15. Mitigation Measure F-3: Prior to building permit approval, the applicant shall submit a well-designed shoring system for the basement excavation to be designed by a licensed engineer subject to review and approval by Public Works Department. 16. Mitigation Measure F-4: The basement walls be designed for hydrostatic pressure (an additional 40pcf of fluid pressure) and waterproofed. 17. Mitigation Measure F-5: The garage/basement slab should be designed for an uplift pressure of 250 pounds per square foot, which is equivalent to approximately 4 feet of hydraulic lift. At a minimum a vapor retarder should be placed below the slab mat foundation. Due to the proximity of the slab to the ground water table, a waterproofing membrane should be in place. 18. Mitigation Measures H-1: Because the site is documented to be contaminated by VOCs, primarily trichloroethylene (TCE) a Health and Safety Plan (HASP) and a Site Mitigation Plan (SMP), shall be prepared prior to construction, and adhered to during construction and excavation activities. The SMP will provide recommended measures to mitigate the long-term environmental or health and safety risks caused by TCEs in the soil and groundwater. All workers on site should be read and understand the HASP and SMP, and copies should be maintained on site during construction and excavation at all times. The SMP shall be reviewed and approved by the Santa Clara County Department of Environmental Health, the San Francisco Bay Regional Water Quality Control Board or other appropriate agency addressing oversight to establish management practices for handling contaminated soil or other materials if encountered during demolition. The details of the SMP shall include the provision of a vapor barrier (refer to H-3) and details about ventilation systems for the garages and buildings, including air exchange rates and operation schedules for the systems. The SMP will also contain contingency plans to be implemented during excavation activities if unanticipated hazardous materials are encountered. 19. Mitigation Measures H-2: A Remedial Risk Management Plan (RRMP) shall be developed and followed by current and 15 future owners, tenants, and operators. The plan will include the implementation of the described remedies and engineering design. 20. Mitigation Measures H-3: A vapor barrier system beneath the garage slab and walls shall be installed to mitigate any issues with the potential presences of VOCs or (TCE). The membrane system should consist of a 60ml, spray applied, seamless, solvent free membrane. Specifications for the vapor barrier included in the SMP shall document proper installation, coupon samples of the membrane (to verify its thickness) and a smoke test would also need to be performed. 21. Mitigation Measure H-5: A properly designed and operating and Heating, Ventilation, Air Conditioning (HVAC) system for the building and below grade parking garage. An HVAC mechanical engineer shall be consulted to evaluate design options for a building ventilation system that helps limit potential vapor intrusion concerns. 22. Mitigation Measure H-6: A passive sub-slab depressurization system shall be designed for the project. The system inhibits soil gases from flowing into the building, reducing volatile chemical entry into the building. This design shall be reviewed by the Regional Water Quality Control Board prior to the issuance of a building permit. 23. Mitigation Measures T-1: The applicant shall provide clear sight lines for drivers exiting the site. Within the corner site triangle: o Shrubs, fencing, and signs no higher than three feet above the adjacent street surface. o Tree branches no lower than seven feet above the adjacent street surface. o No poles, trees and other tall object situated so that they would create a wall effect when viewed at an oblique angle. 24. The Development Impact Fees, approximated at $642,587.00, shall be paid prior to building permit issuance. 25. Automatic night shades shall be added to the office windows facing the single family parcels to the rear to ensure that lighting from the office uses does not disturb the residential neighbors. Public Works, Urban Forestry Division 16 PRIOR TO DEMOLITION, BUILDING OR GRADING PERMIT ISSUANCE 26. Page Mill Road Frontage. Nine existing Shumard oak trees that would not survive construction are approved for removal. Five new trees shall be planted in the right-of-way planters to function as a consistent link to the overall Urban Forest theme for this section of Page Mill Road (from El Camino Real to Park Avenue). A sixth tree, planted behind the City property adjacent to the parking garage ingress/egress, should be a different species to help differentiate the entry from the vehicular perspective. 27. ROW species (5 trees) shall be changed to Quercus shumardii (Shumard Oak). Garage planter (6th tree) shall be Chitalpa tashkentensis (Chitalpa), a flowering accent tree for native garden settings (or approved equivalent). 28. Performance standards for all trees shall conform to the following: Size: 36” box. Planting Stock, Materials and Quality meeting Tree Technical Manual Standards, Section 3.35, planted per PW Detail #603a for Structural Soil. Irrigation: each tree shall be provided with three bubblers per PW Detail #513. 29. Engineered Soil Mix (ESM). Civil plans and landscape plans shall provide for optimum root growth under sidewalk and hardscape areas. Show clearly all areas designated for ESM adjacent to tree planter areas out to curb, 24” depth minimum (or as limited by utility vault sections of various origins). Specification and Detail sheets shall show listed Engineered Soil Mix (Structural Soil), PW Specification Section 30 (all sheets) and PW Detail #603a, printing all on stamped job copy and building permit copy plan sets. 30. Canary Island Date Palm-Special Care Program. The site plan notes shall show the existing tree provision, “Protect Canary Island Date Palm using modified Type III protection (see attached handout) and chain link fencing 6’ from trunk until final landscaping and irrigation is installed. Tree shall be fertilized and sprayed for pink rot disease control. Mandatory pruning by an ISA certified tree worker shall establish an aesthetic ‘pineapple bowl’ section for maintaining a maximum 45- degreee green frond retention (60-degree pruning is detrimental and prohibited). Brown trunk shall be skinned from the bowl to the ground. Trimming equipment shall be sanitized with BMP recommended process. 31. SITE PLAN REQUIREMENTS. The Site Plans must show Type I & Type III fencing (see above) around the existing Date Palm a bold dashed line enclosing the Tree Protection Zone as shown on 17 Detail #605, Sheet T-1, and the City Tree Technical Manual, Section 6.35-Site Plans. DURING CONSTRUCTION 32. SHEET T-1. The building permit plan set must include the city-provided, Sheet T-1 (Tree Protection-it's Part of the Plan!) Applicant shall complete and sign the sheet Tree Disclosure Statement. Inspection #1 applies to this project. 33. TREE PROTECTION VERIFICATION. Prior to demolition, grading or building permit issuance, a written verification from the contractor that the required protective fencing is in place shall be submitted to the Building Inspections Division. The fencing shall contain required warning sign and remain in place until final inspection of the project. Tree fencing shall be adjusted after demolition if necessary to increase the tree protection zone as required by the project arborist. 34. TREE DAMAGE. The applicant shall be responsible for the repair or replacement of any publicly owned or protected trees that are damaged during the course of construction, pursuant to Title 8 of the Palo Alto Municipal Code, and city Tree Technical Manual, Section 2.25. 35. GENERAL. The following general tree preservation measures apply to all trees to be retained: No storage of material, topsoil, vehicles or equipment shall be permitted within the tree enclosure area. The ground under and around the tree canopy area shall not be altered. Trees to be retained shall be irrigated, aerated and maintained as necessary to ensure survival. Environmental Services Division 36. PAMC 16.09.180(b)(9) Covered Parking: Drain plumbing for interior parking garage floor drains must be connected to an oil/water separator with a minimum capacity of 100 gallons, and to the sanitary sewer system. It is recommended that the stormwater pump area in the garage be labeled: no dumping flows to Bay or similar language. 37. PAMC 16.09.055 Unpolluted Water: Unpolluted water shall not be discharged through direct or indirect connection to the sanitary sewer system. The uncovered ramp to the garage must be connected to the storm drain system. 37. PAMC 16.09.180(b)(14) Architectural Copper: on and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper granule containing 18 asphalt shingles shall not be permitted for use on any residential, commercial or industrial building for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt, provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current edition of the Palo Alto Historical and Architectural Resources Report and Inventory. 38. PAMC 16.09.180(b)(5) Condensate from HVAC: Condensate lines shall not be connected or allowed to drain to the storm drain system. 39. 16.09.215 Silver Processing: Facilities conducting silver processing (photographic or X-ray films) shall either submit a treatment application or waste hauler certification for all spent silver bearing solutions. 650-329-2421. 40. PAMC 16.09.180(b)(b) Copper Piping: Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where alternate materials are not practical. The plans must specify that copper piping will not be used for wastewater plumbing. 41. PAMC 16.09.220(c)(1) Dental Facilities That Remove or Place Amalgam Fillings: An ISO 11143 certified amalgam separator device shall be installed for each dental vacuum suction system. The installed device must be ISO 11143 certified as capable of removing a minimum of 95 percent of amalgam. The amalgam separator system shall be certified at flow rates comparable to the flow rate of the actual vacuum suction system operation. Neither the separator device nor the related plumbing shall include an automatic flow bypass. For facilities that require an amalgam separator that exceeds the practical capacity of ISO 11143 test methodology, a non-certified separator will be accepted, provided that smaller units from the same manufacturer and of the same technology are ISO-certified. 42. PAMC 16.09.205(a) Cooling Systems, Pools, Spas, Fountains, Boilers and Heat Exchangers: It shall be unlawful to discharge water from cooling systems, pools, spas, fountains boilers and heat exchangers to the storm drain system. 19 43. PAMC 16.09.165(h) Storm Drain Labeling: Storm drain inlets shall be clearly marked with the words "No dumping - Flows to Bay," or equivalent. Undesignated Retail Space: 44. PAMC 16.09 Newly constructed or improved buildings with all or a portion of the space with undesignated tenants or future use will need to meet all requirements that would have been applicable during design and construction. If such undesignated retail space becomes a food service facility the following requirements must be met: Public Works Department Engineering Division 45. SIDEWALK, CURB & GUTTER: As part of this project, the applicant must replace those portions of the existing sidewalks, curbs, gutters or driveway approaches in the public right-of-way along the frontage(s) of the property that are broken, badly cracked, displaced, or non-standard, and must remove any unpermitted pavement in the planter strip. Contact Public Works’ inspector at 650-496-6929 to arrange a site visit so the inspector can determine the extent of replacement work. The site plan submitted with the building permit plan set must show the extent of the replacement work or include a note that Public Works’ inspector has determined no work is required. The plan must note that any work in the right-of-way must be done per Public Works’ standards by a licensed contractor who must first obtain a Street Work Permit from Public Works at the Development Center. 46. STREET TREES: The applicant may be required to replace existing and/or add new street trees in the public right-of-way along the property’s frontage(s). Call the Public Works’ arborist at 650-496-5953 to arrange a site visit so he can determine what street tree work, if any, will be required for this project. The site plan submitted with the building permit plan set must show the street tree work that the arborist has determined, including the tree species, size, location, staking and irrigation requirements, or include a note that Public Works’ arborist has determined no street tree work is required. The plan must note that in order to do street tree work, the applicant must first obtain a Permit for Street Tree Work in the Public Right-of-Way from Public Works’ arborist (650-496-5953). 47. PEDESTRIAN & STREETSCAPE IMPROVEMENTS: Additional streetscape design elements and amenities such as bike racks and decorative street lights will be considered pending future 20 discussions with the Santa Clara County Department of Roads and Airports, Architectural Review Board, and other city departments. The following comments are provided to assist the applicant at the building permit phase. You can obtain various plan set details, forms and guidelines from Public Works at the City's Development Center (285 Hamilton Avenue) or on Public Works’ website: http://www.cityofpaloalto.org/gov/depts/pwd/default.asp. Include in plans submitted for a building permit: 48. LOT MERGER: A Certificate of Compliance application for lot line removal/merger must be submitted to Public Works, approved by pertinent city departments, and recorded by the Santa Clara County Clerk-Recorder’s office prior to building permit issuance. Public Works processes and routes lot line removal/merger applications and routes documents to city departments for review and comment. A $3000 Certificate of Compliance plan check fee will be collected when the lot line removal/merger application is submitted to Public Works officials. The application form, soils report waiver, and checklist are available at the Development Center at 285 Hamilton Avenue or on the city’s website. 49. BASEMENT DRAINAGE: Due to high groundwater throughout much of the City and Public Works prohibiting the pumping and discharging of groundwater, perforated pipe drainage systems at the exterior of the basement walls or under the slab are not allowed for this site. A drainage system is, however, required for all exterior basement-level spaces, such as lightwells, patios or stairwells. This system consists of a sump, a sump pump, a backflow preventer, and a closed pipe from the pump to a dissipation device onsite at least 10 feet from the property line, such as a bubbler box in a landscaped area, so that water can percolate into the soil and/or sheet flow across the site. The device must not allow stagnant water that could become mosquito habitat. Additionally, the plans must show that exterior basement-level spaces are at least 7-3/4” below any adjacent windowsills or doorsills to minimize the potential for flooding the basement. Public Works recommends a waterproofing consultant be retained to design and inspect the vapor barrier and waterproofing systems for the basement. 50. BASEMENT SHORING: Shoring for the basement excavation, including tiebacks, must not extend onto adjacent private property or into the City right-of-way without having 21 first obtained written permission from the private property owners and/or an encroachment permit from Public Works. 51. DEWATERING: Basement excavations may require dewatering during construction. Public Works only allows groundwater drawdown well dewatering. Open pit groundwater dewatering is disallowed. Dewatering is only allowed from April through October due to inadequate capacity in our storm drain system. The geotechnical report for this site must list the highest anticipated groundwater level. We recommend a piezometer to be installed in the soil boring. The contractor must determine the depth to groundwater immediately prior to excavation by using the piezometer or by drilling an exploratory hole if the deepest excavation will be within 3 feet of the highest anticipated groundwater level. If groundwater is found within 2 feet of the deepest excavation, a drawdown well dewatering system must be used, or alternatively, the contractor can excavate for the basement and hope not to hit groundwater, but if he does, he must immediately stop all work and install a drawdown well system before he continues to excavate. Public Works may require the water to be tested for contaminants prior to initial discharge and at intervals during dewatering. If testing is required, the contractor must retain an independent testing firm to test the discharge water for the contaminants Public Works specifies and submit the results to Public Works. 52. Public Works reviews and approves dewatering plans as part of a Street Work Permit. The applicant can include a dewatering plan in the building permit plan set in order to obtain approval of the plan during the building permit review, but the contractor will still be required to obtain a street work permit prior to dewatering. Alternatively, the applicant must include the above dewatering requirements in a note on the site plan. Public Works has a sample dewatering plan sheet and dewatering guidelines available at the Development Center and on our website. 53. GRADING & DRAINAGE PLAN: The plan set must include a grading & drainage plan prepared by a licensed professional that includes existing and proposed spot elevations and drainage flow arrows to demonstrate proper drainage of the site. Adjacent grades must slope away from the house a minimum of 2%. Downspouts and splashblocks should be shown on this plan, as well as any site drainage features such as swales. Grading will not be allowed that increases drainage onto, or blocks existing drainage from, neighboring properties. Public Works generally does not allow rainwater to be collected and discharged into the street gutter, but encourages the developer to keep rainwater onsite as much as feasible by directing runoff to landscaped and 22 other pervious areas of the site. See the Grading & Drainage Plan Guidelines for Residential Developments on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2717 54. GRADING & EXCAVATION PERMIT: An application for a grading & excavation permit must be submitted to Public Works when applying for a building permit. The site plan must include a table providing the cubic yardage of dirt being cut and filled outside of the building footprint. The application and guidelines are available at the Development Center and on our website. 55. STORM WATER POLLUTION PREVENTION: The City's full- sized Pollution Prevention - It's Part of the Plan sheet must be included in the plan set. Copies are available from Public Works at the Development Center or on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2732 56. STREET TREES: Show all existing street trees in the public right-of-way. Any removal, relocation or planting of street trees; or excavation, trenching or pavement within 10 feet of street trees must be approved by Public Works' arborist (phone: 650-496-5953). This approval shall appear on the plans. Show construction protection of the trees per City requirements. 57. WORK IN THE RIGHT-OF-WAY: The plans must clearly indicate any work that is proposed in the public right-of-way, such as sidewalk replacement, driveway approach, or utility laterals. The plans must include notes that the work must be done per City standards and that the contractor performing this work must first obtain a Street Work Permit from Public Works at the Development Center. If a new driveway is in a different location than the existing driveway, then the sidewalk associated with the new driveway must be replaced with a thickened (6” thick instead of the standard 4” thick) section. Additionally, curb cuts and driveway approaches for abandoned driveways must be replaced with new curb, gutter and planter strip. 58. IMPERVIOUS SURFACE AREA: The project will be creating or replacing 500 square feet or more of impervious surface. Accordingly, the applicant shall provide calculations of the existing and proposed impervious surface areas with the building permit application. The Impervious Area Worksheet for Land Developments form and instructions are available at the Development Center or on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2718 59. STORM WATER TREATMENT: This project must meet the latest State Regional Water Quality Control Board’s (SRWQCB) C.3 23 provisions. The applicant is required to satisfy all current storm water discharge regulations and shall provide calculations and documents to verify compliance. All projects that are required to treat stormwater will need to treat the permit- specified amount of storm water runoff with the following low impact development methods: rainwater harvesting and reuse, infiltration, evapotranspiration, or bio-treatment. However, bio-treatment (filtering storm-water through vegetation and soils before discharging to the storm drain system) will be allowed only where harvesting and reuse, infiltration and evapotranspiration are infeasible at the project site. Vault- based treatment will not be allowed as a stand-alone treatment measure. Where stormwater harvesting and reuse, infiltration, or evapotranspiration are infeasible, vault-based treatment measures may be used in series with bio-treatment, for example, to remove trash or other large solids. Reference: Palo Alto Municipal Code Section 16.11.030(c) 60. The applicant must incorporate permanent storm water pollution prevention measures that treat storm water runoff that are site specific. The prevention measures shall be reviewed by a qualified third-party reviewer who needs to certify that it complies with the Palo Alto Municipal Code requirements. This is required prior to the issuance of a building permit. The third-party reviewer shall be acquired by the applicant and needs to be on the Santa Clara Valley Urban Runoff Pollution Prevention Program’s (Program) list of qualified consultants. (http://www.scvurpppw2k.com/consultants2012.htm?zoom_highlight=c onsultants) Any consultant or contractor hired to design/and/or construct a storm water treatment system for the project cannot certify the project as a third-party reviewer. 61. Within 45 days of the installation of the required storm water treatment measures and prior to the issuance of an occupancy permit for the building, third-party reviewer shall also submit to the City a certification for approval that the project’s permanent measures were constructed and installed in accordance to the approved permit drawings. The project must also enter into a maintenance agreement with the City to guarantee the ongoing maintenance of the permanent C.3 storm water discharge compliance measures. The maintenance agreement shall be executed prior to permit issuance. 62. The applicant is required to paint the “No Dumping/Flows to Matadero Creek” logo in blue color on a white background, adjacent to all storm drain inlets. Stencils of the logo are available from the Public Works Environmental Compliance Division, which may be contacted at (650) 329-2598. 24 A deposit may be required to secure the return of the stencil. Include the instruction to paint the logos on the construction grading and drainage plan. Include maintenance of these logos in the Hazardous Materials Management Plan, if such a plan is part of this project. 63. BEST MANAGEMENT PRACTICES (BMP’s): The applicant is required to submit a conceptual site grading and drainage plan. In order to address potential storm water quality impacts, the plan shall identify BMP’s to be incorporated into the Storm Water Pollution Prevention Plan (SWPPP) that will be required for the project. The SWPPP shall include permanent BMP’s to be incorporated into the project to protect storm water quality. (Resources and handouts are available from PWE. Specific reference is made to Palo Alto’s companion document to “Start at the Source”, entitled “Planning Your Land Development Project”). The elements of the PWE-approved conceptual grading and drainage plan shall be incorporated into the building permit plans. 64. The developer shall require the contractor to incorporate BMP's for storm water pollution prevention in all construction operations, in conformance with the SWPPP prepared for the project. It is unlawful to discharge any construction debris (soil, asphalt, sawcut slurry, paint, chemicals, etc.) or other waste materials into gutters or storm drains. (PAMC Chapter 16.09). 65. PARKING STRUCTURE DRAINS: Drains within the covered floors of the parking structures shall be connected to oil-water separators and sanitary sewer lines. Stormwater runoff from any exposed surface or roof parking areas without canopies need to be treated per C.3 requirements. 66. GREASE/OIL REMOVAL DEVICE: If there will be a kitchen and food serving area in the new building, any drains in the food service facilities shall be connected to a grease removal device and located on private property. 67. LOADING DOCK: Any loading dock areas shall be covered and graded so that no storm water enters and flows through the space. Any runoff from the loading dock area shall be kept isolated from the storm drainage system. If the loading area/dock contains a drain, it shall be connected to the sanitary sewer through a manually operated fail-safe valve. 68. LOGISTICS PLAN: The contractor must submit a logistics plan to the Public Works Department prior to commencing work that addresses all impacts to the City’s right- of-way, including, but not limited to: pedestrian control, traffic control, truck routes, material deliveries, contractor’s 25 parking, concrete pours, crane lifts, work hours, noise control, dust control, storm water pollution prevention, contractor’s contact, noticing of affected businesses, and schedule of work. The plan will be attached to a street work permit. 69. SANTA CLARA COUNTY DEPARTMENT OF ROADS AND AIRPORTS: The Page Mill Road right of way is subject to permitting and review from the Santa Clara County Department of Roads and Airports. County right-of-way across Page Mill Road extends from property line to property line. Please include a record of county approval on the planset submitted for a building permit. 70. FINALIZATION OF BUILDING PERMIT: The Public Works Inspector shall sign off the building permit prior to the finalization of this permit. All off-site improvements shall be finished prior to this sign-off. Similarly, all as-builts, on- site grading, drainage and post-developments BMP’s shall be completed prior to sign-off Public Works, Water Quality 71. PAMC 16.09.170, 16.09.040 Discharge of Groundwater. The project is located in an area of suspected or known groundwater contamination with Volatile Organic Compounds (VOCs). If groundwater is encountered then the plans must include the following procedure for construction dewatering: Prior to discharge of any water from construction dewatering, the water shall be tested for volatile organic compounds (VOCs) using EPA Method 601/602 or Method 624. The analytical results of the VOC testing shall be transmitted to the Regional Water Quality Control Plant (RWQCP) 650-329-2598. Contaminated ground water that exceeds state or federal requirements for discharge to navigable waters may not be discharged to the storm drain system or creeks. If the concentrations of pollutants exceed the applicable limits for discharge to the storm drain system then an Exceptional Discharge Permit must be obtained from the RWQCP prior to discharge to the sanitary sewer system. If the VOC concentrations exceed the toxic organics discharge limits contained in the Palo Alto Municipal Code (16.09.040(m)) a treatment system for removal of VOCs will also be required prior to discharge to the sanitary sewer. Additionally, any water discharged to the sanitary sewer system or storm drain system must be free of sediment 72. PAMC 16.09.180(b)(9) Covered Parking 26 Drain plumbing for parking garage floor drains must be connected to an oil/water separator with a minimum capacity of 100 gallons, and to the sanitary sewer system. 73.PAMC 16.09.180(b)(10) Dumpsters for New and Remodeled Facilities New buildings and residential developments providing centralized solid waste collection, except for single-family and duplex residences, shall provide a covered area for a dumpster. The area shall be adequately sized for all waste streams and designed with grading or a berm system to prevent water runon and runoff from the area. 74. PAMC 16.09.180(b)(14) Architectural Copper On and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper granule containing asphalt shingles shall not be permitted for use on any residential, commercial or industrial building for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt, provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current edition of the Palo Alto Historical and Architectural Resources Report and Inventory. 75. PAMC 16.09.175(k) (2) Loading Docks (i) Loading dock drains to the storm drain system may be allowed if equipped with a fail-safe valve or equivalent device that is kept closed during the non-rainy season and during periods of loading dock operation. (ii) Where chemicals, hazardous materials, grease, oil, or waste products are handled or used within the loading dock area, a drain to the storm drain system shall not be allowed. A drain to the sanitary sewer system may be allowed if equipped with a fail-safe valve or equivalent device that is kept closed during the non-rainy season and during periods of loading dock operation. The area in which the drain is located shall be covered or protected from rainwater run-on by berms and/or grading. Appropriate wastewater treatment approved by the Superintendent shall be provided for all rainwater contacting the loading dock site. 76. PAMC 16.09.180(b)(5) Condensate from HVAC 27 Condensate lines shall not be connected or allowed to drain to the storm drain system. 77. 16.09.215 Silver Processing Facilities conducting silver processing (photographic or X-ray films) shall either submit a treatment application or waste hauler certification for all spent silver bearing solutions. 650-329-2421. 78. PAMC 16.09.205 Cooling Towers No person shall discharge or add to the sanitary sewer system or storm drain system, or add to a cooling system, pool, spa, fountain, boiler or heat exchanger, any substance that contains any of the following: (1) Copper in excess of 2.0 mg/liter; (2) Any tri-butyl tin compound in excess of 0.10 mg/liter; (3) Chromium in excess of 2.0 mg/liter. (4) Zinc in excess of 2.0 mg/liter; or (5) Molybdenum in excess of 2.0 mg/liter. 79. The above limits shall apply to any of the above- listed substances prior to dilution with the cooling system, pool, spa or fountain water. 80. A flow meter shall be installed to measure the volume of blow-down water from the new cooling tower. Cooling systems discharging greater than 2,000 gallons per day are required to meet a copper discharge limit of 0.25 milligrams per liter. 81. PAMC 16.09.180(b)(b) Copper Piping Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where alternate materials are not practical. The plans must specify that copper piping will not be used for wastewater plumbing. 82. PAMC 16.09.220(c)(1) Dental Facilities That Remove or Place Amalgam Fillings An ISO 11143 certified amalgam separator device shall be installed for each dental vacuum suction system. The installed device must be ISO 11143 certified as capable of removing a 28 minimum of 95 percent of amalgam. The amalgam separator system shall be certified at flow rates comparable to the flow rate of the actual vacuum suction system operation. Neither the separator device nor the related plumbing shall include an automatic flow bypass. For facilities that require an amalgam separator that exceeds the practical capacity of ISO 11143 test methodology, a non-certified separator will be accepted, provided that smaller units from the same manufacturer and of the same technology are ISO-certified. 83. PAMC 16.09.175(a) Floor Drains Interior (indoor) floor drains to the sanitary sewer system may not be placed in areas where hazardous materials, hazardous wastes, industrial wastes, industrial process water, lubricating fluids, vehicle fluids or vehicle equipment cleaning wastewater are used or stored, unless secondary containment is provided for all such materials and equipment 84. 16.09.180(12) Mercury Switches Mercury switches shall not be installed in sewer or storm drain sumps. 85. PAMC 16.09.205(a) Cooling Systems, Pools, Spas, Fountains, Boilers and Heat Exchangers It shall be unlawful to discharge water from cooling systems, pools, spas, fountains boilers and heat exchangers to the storm drain system. 86. PAMC 16.09.165(h) Storm Drain Labeling Storm drain inlets shall be clearly marked with the words "No dumping - Flows to Bay," or equivalent. Undesignated Retail Space: 87. PAMC 16.09 Newly constructed or improved buildings with all or a portion of the space with undesignated tenants or future use will need to meet all requirements that would have been applicable during design and construction. If such undesignated retail space becomes a food service facility the following requirements must be met: Designated Food Service Establishment (FSE) Project: 88. A. Grease Control Device (GCD) Requirements, PAMC Section 16.09.075 & cited Bldg/Plumbing Codes 29 89. The plans shall specify the manufacturer details and installation details of all proposed GCDs. (CBC 1009.2) 90. GCD(s) shall be sized in accordance with the 2007 California Plumbing Code. 91. GCD(s) shall be installed with a minimum capacity of 500 gallons. 92. GCD sizing calculations shall be included on the plans. See a sizing calculation example below. 93. The size of all GCDs installed shall be equal to or larger than what is specified on the plans. 94. GCDs larger than 50 gallons (100 pounds) shall not be installed in food preparation and storage areas. Santa Clara County Department of Environmental Health prefers GCDs to be installed outside. GCDs shall be installed such that all access points or manholes are readily accessible for inspection, cleaning and removal of all contents. GCDs located outdoors shall be installed in such a manner so as to exclude the entrance of surface and stormwater. (CPC 1009.5) 95. All large, in-ground interceptors shall have a minimum of three manholes to allow visibility of each inlet piping, baffle (divider) wall, baffle piping and outlet piping. The plans shall clearly indicate the number of proposed manholes on the GCD. The Environmental Compliance Division of Public Works Department may authorize variances which allow GCDs with less than three manholes due to manufacture available options or adequate visibility. 96. Sample boxes shall be installed downstream of all GCDs. 97. All GCDs shall be fitted with relief vent(s). (CPC 1002.2 & 1004) 98. GCD(s) installed in vehicle traffic areas shall be rated and indicated on plans. 99. B. Drainage Fixture Requirements, PAMC Section 16.09.075 & cited Bldg/Plumbing Codes 100. To ensure all FSE drainage fixtures are connected to the correct drain lines, each drainage fixture shall be clearly labeled on the plans. A list of all fixtures and their discharge connection, i.e. sanitary sewer or grease waste line, shall be included on the plans. 30 101. A list indicating all connections to each proposed GCD shall be included on the plans. This can be incorporated into the sizing calculation. 102. All grease generating drainage fixtures shall connect to a GCD. These include but are not limited to: Pre-rinse (scullery) sinks Three compartment sinks (pot sinks) Drainage fixtures in dishwashing room except for dishwashers shall connect to a GCD Examples: trough drains (small drains prior to entering a dishwasher), small drains on busing counters adjacent to pre-rinse sinks or silverware soaking sinks Floor drains in dishwashing area and kitchens Prep sinks Mop (janitor) sinks Outside areas designated for equipment washing shall be covered and any drains contained therein shall connect to a GCD. Drains in trash/recycling enclosures Wok stoves, rotisserie ovens/broilers or other grease generating cooking equipment with drip lines Kettles and tilt/braising pans and associated floor drains/sinks 103. The connection of any high temperature discharge lines and non-grease generating drainage fixtures to a GCD is prohibited. The following shall not be connected to a GCD: Dishwashers Steamers Pasta cookers Hot lines from buffet counters and kitchens Hand sinks Ice machine drip lines Soda machine drip lines Drainage lines in bar areas 104. No garbage disposers (grinders) shall be installed in a FSE. (PAMC 16.09.075(d)). 105. Plumbing lines shall not be installed above any cooking, food preparation and storage areas. 31 106. Each drainage fixture discharging into a GCD shall be individually trapped and vented. (CPC 1014.5) 107. C. Covered Dumpsters, Recycling and Tallow Bin Areas PAMC, 16.09.075(q)(2) Newly constructed and remodeled FSEs shall include a covered area for all dumpsters, bins, carts or container used for the collection of trash, recycling, food scraps and waste cooking fats, oils and grease (FOG) or tallow. 108. The area shall be designed and shown on plans to prevent water run-on to the area and runoff from the area. 109. Drains that are installed within the enclosure for recycle and waste bins, dumpsters and tallow bins serving FSEs are optional. Any such drain installed shall be connected to a GCD. 110. If tallow is to be stored outside then an adequately sized, segregated space for a tallow bin shall be included in the covered area. 111. These requirements shall apply to remodeled or converted facilities to the extent that the portion of the facility being remodeled is related to the subject of the requirement. 112. D. Large Item Cleaning Sink, PAMC 16.09.075(m)(2)(B) FSEs shall have a sink or other area drain which is connected to a GCD and large enough for cleaning the largest kitchen equipment such as floor mats, containers, carts, etc. Recommendation: Generally, sinks or cleaning areas larger than a typical mop/janitor sink are more useful. Utilities Department, Water Gas Wastewater Utilities Division 113. Prior to demolition, the applicant shall submit the existing water/wastewater fixture unit loads (and building as-built plans to verify the existing loads) to determine the capacity fee credit for the existing load. If the applicant does not submit loads and plans they may not receive credit for the existing water/wastewater fixtures. 114. Prior to demolition, the applicant shall submit a request to disconnect all utility services and/or meters including a signed affidavit of vacancy. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit will be issued 32 by the building inspection division after all utility services and/or meters have been disconnected and removed. 115. The applicant shall submit a completed water-gas- wastewater service connection application - load sheet(s) (one load sheet required for each unit or place of business for City of Palo Alto Utilities. The applicant must provide all the information requested for utility service demands (water in fixture units/g.p.m., gas in b.t.u.p.h, and sewer in fixture units/g.p.d.). The applicant shall provide the existing (prior) loads, the new loads, and the combined/total loads (the new loads plus any existing loads to remain). 116. The applicant shall submit improvement plans for utility construction. The plans must show the size and location of all underground utilities within the development and the public right of way including meters, backflow preventers, fire service requirements, sewer mains, sewer cleanouts, sewer lift stations and any other required utilities. 117. The applicant must show on the site plan the existence of any auxiliary water supply, (i.e. water well, gray water, recycled water, rain catchment, water storage tank, etc.). 118. The applicant shall be responsible for installing and upgrading the existing utility mains and/or services as necessary to handle anticipated peak loads. This responsibility includes all costs associated with the design and construction for the installation/upgrade of the utility mains and/or services. 119. The applicant's engineer shall submit flow calculations and system capacity study showing that the on- site and off-site water and sanitary sewer mains and services will provide the domestic, irrigation, fire flows, and wastewater capacity needed to service the development and adjacent properties during anticipated peak flow demands. Field testing may be required to determined current flows and water pressures on existing water main. Calculations must be signed and stamped by a registered civil engineer. The applicant is required to perform, at his/her expense, a flow monitoring study of the existing sewer main to determine the remaining capacity. The report must include existing peak flows or depth of flow based on a minimum monitoring period of seven continuous days or as determined by the senior wastewater engineer. The study 33 shall meet the requirements and the approval of the WGW engineering section. No downstream overloading of existing sewer main will be permitted. 120. For contractor installed water and wastewater mains or services, the applicant shall submit to the WGW engineering section of the Utilities Department four copies of the installation of water and wastewater utilities off-site improvement plans in accordance with the utilities department design criteria. All utility work within the public right-of-way shall be clearly shown on the plans that are prepared, signed and stamped by a registered civil engineer. The contractor shall also submit a complete schedule of work, method of construction and the manufacture's literature on the materials to be used for approval by the utilities engineering section. The applicant's contractor will not be allowed to begin work until the improvement plan and other submittals have been approved by the water, gas and wastewater engineering section. After the work is complete but prior to sign off, the applicant shall provide record drawings (as-builts) of the contractor installed water and wastewater mains and services per City of Palo Alto Utilities record drawing procedures. For contractor installed services the contractor shall install 3M marker balls at each water or wastewater service tap to the main and at the City clean out for wastewater laterals. 121. An approved reduced pressure principle assembly (RPPA backflow preventer device) is required for all existing and new water connections from Palo Alto Utilities to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive. The RPPA shall be installed on the owner's property and directly behind the water meter within 5 feet of the property line. RPPA’s for domestic service shall be lead free. Show the location of the RPPA on the plans. 122. An approved reduced pressure detector assembly is required for the existing or new water connection for the fire system to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive (a double detector assembly may be allowed for existing fire sprinkler systems upon the CPAU’s approval). Reduced pressure detector assemblies shall be installed on the owner's property adjacent to the property line, within 5’ of the property line. Show the location of the reduced pressure detector assembly on the plans. 34 123. All backflow preventer devices shall be approved by the WGW engineering division. Inspection by the utilities cross connection inspector is required for the supply pipe between the meter and ++the assembly. 124. Existing wastewater laterals that are not plastic (ABS, PVC, or PE) must be abandoned per WGW Utilities standards. 125. The applicant shall pay the capacity fees and connection fees associated with new utility service/s or added demand on existing services. The approved relocation of services, meters, hydrants, or other facilities will be performed at the cost of the person/entity requesting the relocation. 126. Each unit or place of business shall have its own water and gas meter shown on the plans. Each parcel shall have its own water service, gas service and sewer lateral connection shown on the plans. 127. A separate water meter and backflow preventer is required to irrigate the approved landscape plan. Show the location of the irrigation meter on the plans. This meter shall be designated as an irrigation account an no other water service will be billed on the account. The irrigation and landscape plans submitted with the application for a grading or building permit shall conform to the City of Palo Alto water efficiency standards. 128. A new gas service line installation is required. Show the new gas meter location on the plans. The gas meter location must conform with utilities standard details. 129. All existing water and wastewater services that will not be reused shall be abandoned at the main per WGW utilities procedures. 130. Utility vaults, transformers, utility cabinets, concrete bases, or other structures cannot be placed over existing water, gas or wastewater mains/services. Maintain 1’ horizontal clear separation from the vault/cabinet/concrete base to existing utilities as found in the field. If there is a conflict with existing utilities, Cabinets/vaults/bases shall be relocated from the plan location as needed to meet field conditions. Trees may not be planted within 10 feet of existing water, gas or wastewater mains/services or meters. New water, gas or wastewater services/meters may not be installed within 35 10’ or existing trees. Maintain 10’ between new trees and new water, gas and wastewater services/mains/meters. 131. To install new gas service by directional boring, the applicant is required to have a sewer cleanout at the front of the building for each lateral exiting the building. This cleanout is required so the sewer lateral can be videoed for verification of no damage after the gas service is installed by directional boring. 132. All utility installations shall be in accordance with the City of Palo Alto utility standards for water, gas & wastewater. 133. The applicant shall obtain an encroachment permit from Caltrans for all utility work in the El Camino Real right- of-way. The applicant must provide a copy of the permit to the WGW engineering section. Fire Department 134. The last 30 feet of curb space on both ends of Page Mill Road frontage shall be posted NO PARKING - FIRE LANE. 135. Sprinkler main drain must be coordinated with plumbing design so that the 200 gpm can be flowed for annual main drain testing for 90 seconds without overflowing the collection sump, and the Utilities Department approved ejector pumps will be the maximum flow rate to sanitary sewer. 136. Low-E glass can interfere with portable radios used by emergency responders. Please provide an RF Engineering analysis to determine if additional devices or equipment will be needed to maintain operability of emergency responder portable radios throughout 97% of the building in accordance with the Fire Code Appendix J as adopted by the City of Palo Alto. Transportation Division 137. The project must have approved TDM plan that is required by the director for any parking reductions allowed. TDM requirements at a minimum would include Caltrain Go Passes and an annual monitoring and reporting plan that includes a review of parking and traffic generation. 36 Building Department (August 20, 2013 conditions will be updated for ARB review based on current plans): 138. Sheet A7 (dated 7-29-2013): All bedrooms from units 3 through 7 and interior bedrooms from units 2, 8, 9 and 10 are in violation of Section 1029.1 of CBC. This section, in part, states: “Basements and sleeping rooms below the fourth story above grade plane shall have at least one exterior emergency escape and rescue opening in accordance with this section. Such openings shall open directly into a public way or to a yard or court that opens to a public way.” 139. Sheet A4 (dated 7-29-2013): The space between west wall and the property line (serving Stair # 3) constitutes an egress court. The width is required to be minimum 44”. All openings into this egress court are required to be rated per Section 1027.5 or Section 705.8, whichever is more restrictive. 140. Sheet A4 (dated 7-29-2013): Stair # 3 is required to have a door from 1st floor to the basement. 141. Sheet A4 (dated 7-29-2013): Openings along the East wall and the property line are required to be addressed per Section 705.8. 142. Sheet A7 (dated 7-29-2013): Openings along the East wall seem to be excessive. Comply with Section 705.8. 143. Sheet A6 (dated 7-29-2013): Openings along the West wall seem to be excessive (at stair #3 and rear deck). Comply with Section 705.8. 144. Check Rear wall (South) for opening limitations/protections per Section 705.8. 145. The 8’-2” parking clearance is required to be maintained throughout the parking garage levels. Utilities Department, Electrical Division The Utilities Electrical Division conditions shall be inserted prior to the ARB review. Santa Clara County Roads & Airports 37 146. A Tree Removal Encroachment Permit is required prior to any tree removed, replaced, or relocated within the County Maintained Road Right of Way, which measures over 37.7 inches in circumference at 4.5 feet above ground or which exceeds 20 feet in height. Provide plans that clearly identify species, size, and height of all existing trees and proposed trees to be removed as necessary along the project's work limits within the existing County road right-of-way. The Process for obtaining a Tree Removal Encroachment Permit involves but is not limited to completing and submitting an application to the Roads and Airport Department and review by the Board of Supervisors. Please submit a tree removal application a minimum of 60 days prior to the planned removal. Tree Removal Encroachment Permit may be processed in advance of completing plans for other permits. Please contact permits at (408) 573-2475 for complete application package and process. 147. Preliminary plans dated July 29, 2013 prepared by Stoecker and Northway Architects incorporated and the Draft Traffic Impact Analysis dated July 25, 2013 prepared by RKH Civil and Transportation Engineering indicate the existing Page Mill Road on-street parking along the property frontage be removed. Removal of on-street parking requires County Board of Supervisors Resolution. County Roads and Airports Staff supports the removal of the on-street parking along Page Mill Road and will take the necessary steps to request County Board of Supervisors’ approval of a parking prohibition resolution at the appropriate time. Please contact Dawn Cameron, (408) 573 - 2465 or by email at Dawn.Cameron@rda.sccgov.org for complete application process and timeline. 148. Preliminary plans dated July 29, 2013 prepared by Stoecker and Northway Architects incorporated and the Draft Traffic Impact Analysis dated July 25, 2013 prepared by RKH Civil and Transportation Engineering propose to construct a 25-ft commercial loading zone as shown. It appears that the location of the loading zone would be within the line of sight distance. Roads and Airports requests that the applicant pursue one of the following actions: (1) Contact neighboring property owners about possibly using their existing parking facilities for deliveries or (2) The owner’s engineer shall demonstrate through the final version of the Traffic Impact Analysis, to be reviewed and approved by Roads and Airports, that there are no site impacts or that impacts can be mitigated and owner/ applicant shall comply with the recommended mitigations. Designating a loading zone requires County Board of Supervisors Resolution. Please contact Dawn Cameron, (408) 573 -2465 or by email at Dawn.Cameron@rda.sccgov.org for complete application process and 38 timeline. 149. A Santa Clara County Roads and Airports Encroachment Permit is required prior to any work performed in the County Maintained Road Right of Way. The process for obtaining an Encroachment Permit involves but is not limited to submitting a minimum of three full size copies, one half size copy of the signed engineered final improvement plans, drainage calculations, erosion control plans, traffic control plan, and Certificate of Worker's Compensation Insurance to County Permitting Office in conjunction with an encroachment application. Please contact Permits, (408) 573 -2475 or by email at Permits@rda.sccgov.org for complete application process and timeline. 150. All structures, including but not limited to street furniture, bike racks, planter boxes, etc. shall be located outside of the County Road Right of Way. Tree replacement shall provide a minimum of 7 feet of clearance from existing face of curb to face of mature tree trunk or a minimum 5 feet of clearance from future face of curb to face of mature tree trunk. 151. Provide drainage plans and hydraulic calculations prepared by a registered civil engineer in accordance with criteria as designated in the County’s Drainage Manual that demonstrate one of the following: A. The post development runoff onto the County maintained roadway/ right of way is equal or less than the pre-development runoff; or B. The storm water runoff generated from the proposed development can safely be conveyed and contained within the existing storm drainage system, does not create and/or contribute to downstream or upstream flooding conditions, and maintains a minimum 1 foot of freeboard in the existing storm drainage system for the entire watershed. If this cannot be demonstrated, provide a detention/retention system pursuant to the Design Guidelines in the 2007 Santa Clara County Drainage Manual to be located outside the County Maintained Road Right of Way. 152. Submit final improvement plans prepared by a registered civil engineer for review and approval. Include plan, profile, typical sections, contour grading and drainage for all construction improvements located within the County Maintained Road Right of Way (ROW). All the following standards shall be consistent with the September 1997 Standard Details Manual, County of Santa Clara, Roads and Airports Department. Final Improvement Plans Shall include the following: A. Driveway Approach per County Standard B8. 39 B. Abandoned Driveway Approaches per County Standard B9. C. Traffic Control Plan during construction D. Street striping and pavement markings in accordance with the California Manual on Uniform Traffic Control Devices and August 2003 County Expressway Bicycle Accommodations Guidelines. E. All existing features located within the County Road ROW, including but not limited to, edge of pavement, existing face of curb/ future face of curb ROW, ROW dedication, above and below ground utility lines, easements, etc. F. Provide an Erosion and Sediment Control Plan that outlines seasonally appropriate erosion and sediment controls during the construction period in accordance with Sections C12-568 through C12-571 of the Grading Ordinance and Municipal Regional Permit. Erosion and Sediment Control Plan Sheets may include, but are not limited to, the following information as needed: (1) Erosion and Sediment Control: soil binders, geotextiles, mats, creek and hillside stabilization, hydroseeding, silt fence, sediment basin, check dams, fiber rolls, gravel bags, drainage inlet protection, construction entrance/ exit, street sweeping requirements, perimeter controls, etc. (2) Good Site Management: containment, spill prevention, material storage/ protection, sanitary waste management, etc. (3) Non Stormwater Management, dewatering operations, paving operations, concrete washouts, vehicle and equipment storage and refueling, etc. G. Include the following Notes on the Erosion and Sediment Control Plan: (1) “The Owner/ Owner’s contractor, agent, and/or engineer shall install and maintain throughout the duration of construction and until the establishment of permanent stabilization and sediment control within the Santa Clara County maintained ROW and any portion of the site where storm water run-off is directly flowing into the Santa Clara County maintained road ROW Best Management Practices (BMPs) to prevent construction materials, excavated materials, waste materials, and sediment caused by erosion from construction activities entering the storm drain system, waterways, and roadway infrastructure. BMPs shall include, but not be limited to, the following practices applicable to the public road and expressway facilities: (a) Reduction of pollutants in storm water discharges from the construction site and the contractor’s material and equipment laydown/staging areas (b) Prevention of tracking of mud, dirt and construction materials onto public road right of way. (c) Prevention of discharge of water runoff during dry and wet weather conditions onto public road ROW. H. Indicate on the improvement plans all existing and proposed 40 utilities, mains and services within the County Maintained Road ROW. I. All relocations, temporary facilities, and new facilities shall be included in the improvement plans. Indicate which ones are to be underground and overhead. 153. Construct all of the aforementioned improvements. Construction staking is required and shall be the responsibility of the developer. SECTION 9. Term of Approval. Site and Design Approval. In the event actual construction of the project is not commenced within two years of the date of council approval, the approval shall expire and be of no further force or effect, pursuant to Palo Alto Municipal Code Section 18.30(G).080. SECTION 10. Standard Conditions A. Except as expressly specified herein, the site plan, floor plans, building elevations and any additional information or representations, submitted by the Applicant during the Staff review and public hearing process leading to the approval of this entitlement, whether oral or written, which indicated the proposed structure or manner of operation, are deemed conditions of approval. B. The approved use and/or construction are subject to, and shall comply with, all applicable City ordinances and laws and regulations of other governmental agencies. C. California Government Code Section 66020 provides that a project applicant who desires to protest the fees, dedications, reservations, or other exactions imposed on a development project must initiate the protest at the time the development project is approved or conditionally approved or within ninety (90) days after the date that fees, dedications, reservations or exactions are imposed on the Project. Additionally, procedural requirements for protesting these development fees, dedications, reservations and exactions are set forth in Government Code Section 66020. IF YOU FAIL TO INITIATE A PROTEST WITHIN THE 90-DAY PERIOD OR FOLLOW THE PROTEST PROCEDURES DESCRIBED IN GOVERNMENT CODE SECTION 66020, YOU WILL BE BARRED FROM CHALLENGING THE VALIDITY OR 41 REASONABLENESS OF THE FEES, DEDICATIONS, RESERVATIONS, AND EXACTIONS. D. This matter is subject to the California Code of Civil Procedures (CCP) Section 1094.5; the time by which judicial review must be sought is governed by CCP Section 1094.6. E. To the extent permitted by law, the Applicant shall indemnify and hold harmless the City, its City Council, its officers, employees and agents (the “indemnified parties”) from and against any claim, action, or proceeding brought by a third party against the indemnified parties and the applicant to attack, set aside or void, any permit or approval authorized hereby for the Project, including (without limitation) reimbursing the City for its actual attorneys’ fees and costs incurred in defense of the litigation. The City may, in its sole discretion, elect to defend any such action with attorneys of its own choice. PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: _________________________ ____________________________ City Clerk Director of Planning and Community Environment APPROVED AS TO FORM: ___________________________ Senior Asst. City Attorney PLANS AND DRAWINGS REFERENCED: 1. Those plans prepared by Stoecker and Northway Architects entitled “441 Page Mill Road”, consisting of 31 pages, dated November 14, 2014, and received on November 14, 2014. ATTACHMENT B 441 Page Mill Road Mixed Use Project Zoning Compliance Table Attachment C CS Zone District Standards Proposed Project Conformance Minimum Setbacks Front yard 0’-10’ to create an effective 8’-12’ effective sidewalk width (4 foot special setback) 4 feet (7 feet back for most of the building) Complies (proposal creates a 10 foot wide sidewalk and most of the building is approximately 17 feet back from the face of curb) Rear Yard (abutting a residential zone district) 10 feet 27 feet Complies (DEE requested for a three foot encroachment into the 10 foot landscape buffer area at rear. The encroachment is for the driveway ramp and not the building.) Interior side yard none 4 feet on the right side and 5 feet on the left side complies Build-To-Lines 50% of frontage built to setback 3% built up to the four foot setback DEE request to set the building back an additional three feet for a total setback from the property line of seven feet for a majority of the building. Maximum Site Coverage 50% or 13,463 s.f. 69% or 18,520 s.f. State Density Bonus concession request for 5,057 s.f of lot coverage Usable Open Space 150 sq. ft. per unit X 10 units = 1,500 s.f. 4,658 s.f. Complies Maximum Height (When located within 150 feet of a residential zone) 35 feet 35 feet (except for entry tower at 40 feet) Complies Maximum Allowable Floor Area (FAR) Residential floor area 0.6:1 = 16,159 s.f. 0.5:1 = 13,979 s.f. Complies Commercial floor area 0.4:1 = 10,770 s.f. 0.8:1 = 21,540 s.f. State Density Bonus concession request for 10,770 s.f. Total Mixed Use floor area 1.0:1 = 26,926 s.f. 1.32:1 = 35,521 s.f. State Density Bonus concession request for 8,595 s.f. Minimum ground floor Commercial FAR 0.15:1 or 4,038 0.15:1 = 3,999 s.f. Complies Maximum Allowable Residential Density 30 DU/AC = 18 units 10 dwelling units Complies Parking Requirements Total parking spaces required Retail 2,836 sf Office 18,704 sf 2 bedroom DU 1 bedroom DU Guest parking 1 + 10% of total # of units 110 spaces required 14.18 spaces 74.82 spaces 16 spaces 3 spaces 2 spaces 91 spaces proposed BMR parking reduction of 3 spaces reduces parking required from 110 to 107 spaces. Parking reduction request 15% (16 spaces) of 107 total required spaces for shared uses. Maximum reduction allowed per Section 18.52.050 is 20% of the total or 21 spaces.). ______________________________________________________________________________ ATTACHMENT D APPLICABLE COMPREHENSIVE PLAN POLICIES 441 Page Mill Road 13PLN-00307 ______________________________________________________________________________ Land Use and Community Design Element Goal L-1: A well designed, compact city, providing residents and visitors with attractive neighborhoods, work places, shopping districts, public facilities and open spaces. Related policies L-4, L-6, and L-7 are to Maintain and Strengthen City character Policy L-4: Maintain Palo Alto’s varied residential neighborhoods while sustaining the vitality of its commercial areas and public facilities. Use the Zoning Ordinance as a tool to enhance Palo Alto’s desirable qualities. The project is in a mixed use neighborhood with access from Page Mill Road. The building height and setbacks are intended to have only minimal impact to the Pepper Avenue residential neighborhood. The upper floors are stepped back from the rear property line to meet the daylight plane requirement. The project includes retail use at the ground floor level to create continuous ground floor commercial uses along Page Mill Road from El Camino Real to the end of the block face, increasing the vitality of the block, while also providing residential use on the third floor resulting in no reduction in the number of residential units on the block (rather, the project increases the number of residential units). Policy L-6: “Where possible, avoid abrupt changes in scale and density between residential and non- residential areas and between residential and areas of different densities. To promote compatibility and gradual transitions between the land uses, place zoning district boundaries at mid-block locations rather than along street where possible.” The proposal is for multi-family residential and commercial uses on a busy thoroughfare, adjacent to single family residential to the rear (420 – 450 Pepper Ave) and commercial uses on Page Mill Road to the sides of the site. The proposed building is three stories near one and two story buildings. The lot area and proposed building are larger than other lots and buildings on the block; therefore, the result is a significant change in scale and density. The building would be set back 27 feet from the rear property line and meets the rear daylight plane abutting the single family residential neighborhood. Alternating trees (Pittospurm and Primrose) are proposed at a spacing of 25’ on center. Policy L-7: Evaluate changes in land use in the context of regional needs, overall City welfare and objectives, as well as the desires of surrounding neighborhoods. The project provides greater residential density and additional housing units to offset the City’s jobs to housing imbalance. Redevelopment of these properties is desirable; the properties have not seen significant investment for a long time. Policy-L9: Mixed Use Areas - Enhance desirable characteristics in mixed use areas, Use the planning and zoning process to create opportunities for new mixed use development. The mixed use project has both commercial and residential uses and is located within an area identified as a mixed use area (see Policy L-31 below). The opportunity for this mixed use project was created by the rezoning of the site to the C-S(D) zone district. Policy L-31: Cal Ventura Mixed Use Area Develop the Cal-Ventura area as a well-designed mixed use district with diverse land uses, two- to three-story buildings, and a network of pedestrian oriented streets providing links to California Avenue. The proposal is a three story, mixed use building in the Cal Ventura area, near a “primary entry point” and along a “scenic route” but not at the point on the route identified as a “major view corridor” (per the Community Design Features map (L-4)). The proposal is consistent with the Comprehensive Plan policy for the Cal Ventura Area, as reflected on a map created in a community workshop, showing the project site within an area suitable for mixed use development. The 10-foot-wide sidewalk is bordered by a two foot landscaped buffer area adjacent to the curb, and trees adjacent to the inner edge of the sidewalk on the property, ensuring maintenance and tree growth avoiding damage from trucks passing on the expressway. Pedestrian amenities include benches and retail display windows. Transportation Element Goal T-1: Less Reliance on Single Occupant Vehicles Program T-1: Reducing Auto Use Encourager infill redevelopment and reuse of vacant or underutilized parcels employing minimum density requirements appropriate to support transit, bicycling and walking. The project provides rental housing units and commercial uses on underutilized parcels of land and will support transit, bicycling and walking. Business and Economics Element Goal B-1: A thriving business environment that is compatible with Palo Alto’s residential character and Natural Environment. Policy B-3: Recognize that Palo Alto’s street tree system is an economic asset to the City. The mixed use project will add to a business environment along Page Mill Road and includes measures designed to reduce impacts upon the residential character of the Pepper Avenue neighborhood. The building siting is intended to minimize intrusion into the adjacent Pepper Avenue neighborhood, as the building mass is to be placed forward on the site. The project includes seven trees along the street frontage, and a mix of retail and office use. The project includes vegetation (nine trees) along the rear property line to help mitigate the privacy impacts of the proposed project upon the adjacent single family residential neighborhood. Conditions have been prepared to prohibit lighting from the office from impacting the residential homes; additional measures may be developed during the review process during Architectural Review Board hearings, as the project’s compliance with context based design guidelines are evaluated during the design review process. Goal B-2: A diverse mix of commercial, retail and professional service businesses Policy B-23: Multi-Neighborhood Center, Cal Ave/Cal-Ventura Maintain the existing local serving retail orientation of the California Avenue Business district. Discourage development that would turn the district into a regional shopping area or intrude into adjacent residential neighborhoods. Housing Element Goal H2 Support the construction of Housing near schools, transit, parks, shopping, employment, and cultural institutions Associated Policies H2.1, H2.2 and the H2 programs The project is a mixed use development near community services, supporting the City’s fair share of regional housing needs. The project meets objectives for increased residential densities and mixed use development within ½ mile of fixed rail stations, where adequate urban services are located. The sizes of the residential units range from 1-bedroom units at 800 square feet to 3-bedroom units ranging up to 1497 s.f.; though Program H2.1.4 notes units less than 900 s.f. should have reduced parking requirements, and the project is eligible to request parking reductions per State Density Bonus law. The project provides increased walkability by reducing four curb cuts to one curb cut, and providing pedestrian amenities. Goal H3 Meet underserved housing needs, and provide community resources to support our neighborhoods The project includes rental apartments and affordable dwelling units. Page 1 of 7 STOECKER AND NORTHWAY ARCHITECTS INCORPORATED 1000 ELWELL COURT SUITE 150 PALO ALTO CALIFORNIA 94303 650 965-3500 / FAX 650 965-1095 SITE & DESIGN REQUEST: 441 PAGE MILL ROAD (CURRENTLY 423‐451 PAGE MILL ROAD) ARB ‐ Revised January 5, 2015 The application before you is a request for Site & Design review and Design Enhancement Exception (DEE) consideration. We are proposing to merge the four parcels at 423‐451 Page Mill Road, now zoned CS (D), to create a single parcel of approximately 27,000 square feet. On that parcel, we are proposing a three story mixed use building with one level of underground parking using the Palo Alto Zoning Ordinance and the State Density Bonus Law (Government Code Section 65915‐65918). A mixed use building is consistent with Palo Alto’s Comprehensive Plan. Comprehensive Plan Policy L‐31 calls for development of the Cal‐Ventura area as a well‐designed mixed use district with diverse land uses. The proposed building design would also be consistent with Comprehensive Plan Policy L‐9, which calls for using the planning and zoning process to create opportunities for new mixed use development. Placing multiple residential units on the upper floor while extending ground floor retail uses along Page Mill Road would also support Comprehensive Plan Policy L‐4, which seeks to maintain varied residential neighborhoods while sustaining the vitality of commercial areas. The project is also consistent with many of the goals listed in the newly adopted Palo Alto Housing Element. Neighborhood Context Page Mill Road is a high speed, major arterial route. The neighboring properties to the northeast and extending to Park Boulevard are the Kelly Moore Paint Store at 411 Page Mill, and the AOL offices at 395 Page Mill. The adjacent properties to the southwest are a veterinary hospital at 461 Page Mill, and a parking lot at 471 that serves the AT&T store at the corner of Page Mill Road and El Camino Real. The three properties across Page Mill Road (435 Sheridan, 2700 Ash and 345 Sheridan) are multi‐family residential PC developments. The VTA parking lot on the corner of El Camino has recently been sold and is expected to be redeveloped. The adjoining properties to the southeast (along Pepper Avenue) are all occupied by single family residences, with the exception of one grandfathered use, a printing press/art gallery. The site is located between two very different scales of development: The residential scale of the Pepper Avenue neighborhood and the large arterial scale of the Page Mill Road buildings. Building and Site Design We are proposing a three story mixed use building. The single level basement is entirely parking with mechanical and storage spaces. The ground floor will be approximately 3,000 sf. of retail space located adjacent to Page Mill Road to help the vitality of the street and to create a much more pedestrian friendly environment. Hidden behind the retail space, the rest of the ground floor will be covered parking. Attachment E Page 2 of 7 Page Mill Road is a high speed, busy arterial. The Pepper Avenue neighbors experience difficulty getting onto it eastbound from Ash Street. They say that drivers still “have highway in their blood” as they race past our project site. To alleviate their problem and not create another dangerous one for the new building’s occupants as they slow down and turn into the driveway, Santa Clara County is eliminating the street parking in front of our site, we have only one driveway entrance at the far northeast side of the property and use the removed street parking to create the necessary sight lines and extra width needed to help cars get both in and out of the garage and Ash Street safely. The second floor will be all office space. Since Page Mill is such a fast, noisy road, housing is only really environmentally feasible on the third floor, as far away from the street as possible. And a mix of office and housing on the second floor would also not be desirable. In order to get a larger number of housing units and community space on the third floor, the size of the second floor has to be as large as the third floor in order to structurally support it. The third floor will provide (10) housing units for rent: (2) one bedroom units, (3) two bedroom units and (5) three bedroom units. By replacing the 4 existing housing units which used to occupy the 4 separate sites with 10 new ones, it helps the City’s goal of reaching the Housing mandate for new housing units and creates a more diverse housing community by having different sized units. Being on the top floor of a building along a busy road, it was very important in the design of the building to create a neighborhood feeling since Page Mill Road did not have one. The owner really wanted a sense of community for the housing units up there, to create a “street” that all the front doors were off of, that kitchen windows looked out onto, with larger community gathering spaces along it where neighbors could meet and kids could play while still providing private outdoor space for each tenant. To transition between the two different scales, we gradually stepped the building down from the bigger Page Mill Road scale to both the Pepper residences and the Animal Doctor to limit the building’s impact on their smaller size. We initially had located the building up against the Page Mill 4' front setback as required by the CS zone, and as requested by the Pepper neighbors. But after meeting with various City departments and Santa Clara County, who governs Page Mill, we are requesting two DEE's to move the building back 3' further. The County's current policy does not allow new trees in the public right‐of‐way, so the City has requested a row of trees inside the property line. The first DEE is for locating the building at a front setback of 7' that allows for a row of trees outside of the right‐of‐way. It also is more consistent with the recent City Council desire to not have buildings so close to the curb. The main part of the building will now be 17' from the curb. But for the street trees to have enough deep soil for roots, we also needed to push the underground basement back 3'. Because the garage design is already at the required minimums for drive aisles and parking stalls, it pushes the garage ramp 3' into the 10' required landscape buffer adjacent to residential. That means a second DEE to reduce the landscape buffer to 7', which is still enough for the particular trees that have been selected as screening along that rear property line. The allowed rear setback is 10’, but by placing the garage entrance ramp to the underground parking in the rear of the building, the first and second floors are much further back at 27’ from rear property line. The third floor walls step in and out with only the bedrooms and their higher window sills at 27', while the living rooms with full height glass doors are stepped further back to be 36' away from the rear property line. The stepping in and out of the third floor walls also serves to keep the decks private and limit the views to and from living rooms to only the properties directly behind them and not ones off to the side. Page 3 of 7 The smaller patios also physically limit the occupant's ability to use the decks for unsightly storage, a concern voiced by the Pepper neighbors. From a streetscape point of view, the new building serves as an appropriate transition between the ±35’ commercial building at the corner of El Camino and Page Mill and the ±50’ structure at 395 Page Mill. It also provides balance to the multi‐family housing across the street, ±40’ tall at 435 Sheridan and ±50’ tall at 345 Sheridan. Materials The design of the building is horizontal, responding to the nature of the site and the typical experience of it, from a car driving past it. The architecture of the lower two commercial floors alternates between open and glassy sections and solid wall sections, and the placement of the walls and vertical mullions relate to the plan of the third floor above. The glass on the front facade is taken around the corner to the south to capture the great views of the hills and sunset, and that corner glass theme is then repeated around the building. The solid wall portions on the main volume of commercial space that encompasses the main entrance lobby, retail along Page Mill and around the south corner along the side of the exterior stairs, is all covered with cream colored stone. The stone sections alternate between a thin, pedestrian‐scale, ceramic quartz tile and a rough, split face limestone of 3 different row heights. That retail volume is enveloped by the rest of the lower two floor volume that encompasses the front garage entrance, both the sides and rear of the building. The solid walls on that rear volume are covered in cream colored cement plaster to compliment the stone color and relate to the cement plaster used on the third floor above. The bottom of the glass section of the retail space is also rough split face limestone to hide any possible cabinetry, ground the building with a continuous base and tie all the adjacent walls of stone together. The main lobby and circulation is expressed as a slightly protruding, glass‐cornered square element with a stone clad (exterior and interior) elevator shaft that rises through the uppermost roof. The roof or lobby of the third floor purposely does not wrap around the shaft in order to articulate it as a vertical element. The almost continuous second floor roof and aluminum fins are used to maintain the horizontal design. Certain aluminum fins go through the solid walls at the top or go part way onto them, like the retail entrance canopies, to break up their tall mass and bring more of the dynamic diagonal exterior stair language around to the front of the building. Fritted glass, composed of close knit horizontal lines, is used for both the spandrel glass of the lower two levels, lowest band at office level along Page Mill and the third floor residential balconies, further unifying the building's floors. It is completely opaque at the spandrels, and more filtered for the railings and lowest glass band of the office floor to hide clear views of possible clutter and to protect modesty. Rectilinear aluminum roof elements above the garage and each retail entrance are a simpler version of the canopy at the main entrance, and all serve to visually call out the entrances and provide space for future signage. The rear of the building is more closed off with glass starting at 3’ above the second floor, respecting the rear neighbors’ privacy. The roof's fascia is a dark bronze colored metal with a cream colored metal at the soffit so it does not feel so heavy from the street. The cream colored cement plaster of the lower two floors has accentuated reveals between the sections to keep the lower building design simple with clean lines, especially at the north and south side elevations which are hidden by adjacent buildings. The material change from the stone of the front volume to the cement plaster of the rear building volume that occurs along the side of the exterior stair serves to highlight the stair's dynamic lines. The third floor's cement plaster walls have some color change to hint at Page 4 of 7 its different use as multifamily residential from the street level. The third floor units that pop out are covered with either a gray or wheat accent color of cement plaster, and they are separated by interior walls of the same cream colored cement plaster as the commercial floors below to tie all the floors together despite their different usage. The use of three cement plaster colors serves to emphasize the in and outs of the third floor as well as provide some individuality to each of the units and warm up the feeling of the third floor courtyard and "street". The warm‐toned Jerusalem stone for pavers and landscape walls, as well as wood for the trellises, bbq and furniture also help to warm and enliven the common community space. The elevator shaft brings up some ceramic quartz tile to the third floor from the commercial floors below, and it wraps around the corner into the courtyard. The continuous aluminum horizontal sunshade at the third floor is mainly an aesthetic element that minimizes the height of the floor and emphasizes the building's horizontal design. It is deeper where it can actually help for shading and less in areas where it just acts as a horizontal design element. The sunshade becomes a curved roof overhang at each unit entrance to mimic the curves in the landscape planter walls that welcome you into each unit entrance below it. And the end residential units facing Page Mill have corner windows with horizontal mullions, a more subtle version of the aluminum fins at the glass corners in the commercial floors below. Parking The commercial uses of the building require 89 parking spaces per the Zoning Code. The residential uses require 18 spaces using the State Density Bonus Law. Per Zoning Code Section 18.52.080(c) Shared Parking Facilities, a mixed use building does not require all of the spaces for each use independently because the uses do not occur at the same time. The commercial occupants use the spaces during the day while the residential uses use the same spaces primarily at night. So according to our Hourly Accumulation of Parking (Weekdays) Analysis, which serves as a check of the Zoning Code's Shared Parking Facilities section, we only need to provide a maximum of 79 spaces on a peak weekday for the entire building, but 87 parking spaces are recommended which includes a 10% contingency. We are proposing to provide 91 parking spaces: 34 on the first floor, and 57 in the basement. This represents only a 15% Shared Parking Facilities reduction, less than the 20% allowed by Zoning Code Section 18.52.080(c). A Transportation Demand Management Plan (TDM) is required when the Zoning Code's Shared Parking Facilities section is used, and ours will be specifically designed to provide transit passes for the office and retail workers to encourage them out of their vehicles and utilizing the nearby transit instead. The site is just outside the PTOD Zoning District but is close enough to the major transit stops for transit to be an enticing option for commuters, especially if passes are provided. The TDM is also required to be reviewed yearly, to ensure the measures taken remain effective in the future. We have also provided 26 bike locker spaces and 20 bike rack spaces, well above the respective 17 and 4 required by the Zoning Code, to further discourage car usage. And in our case, using the Zoning Code's Shared Parking Facilities section, also limits the parking garage to one level deep, which keeps the building above the contaminated groundwater table. Affordable Housing Affordable units are not required for rental projects anymore. We are proposing to use Government Code Section 65915‐65918, a State law that requires cities to grant incentives when developers voluntarily provide affordable units. We are proposing to provide 3 affordable units (30% additional) for low income households to get 3 incentives. The three affordable units would be one from each bedroom type: a one bedroom, a two bedroom and a three bedroom and also help toward the City's Housing Mandate. The incentives are as follows: Page 5 of 7 1. Lot coverage – 50% is allowed under CS zone. Our site is very wide and shallow, making it difficult to build the allowable floor area and parking while also dealing with a rear daylight plane. We are showing 69% site coverage. (The DBL ordinance allows the maximum site coverage to be exceeded but only by square footage of the affordable residential units.) 2. FAR (Exceeding amount of commercial FAR allowed) ‐ CS zone allows a mixed use building with FAR of 0.6:1 residential and 0.4:1 commercial, for a total FAR of 1.0:1. We are showing an increase in the amount of office space to 0.8 commercial FAR. Office space is financially what funds the ability to do the affordable residential units, as well as physically, because the size of the third floor housing is determined by the size of the office space beneath. (The DBL ordinance only allows residential FAR to be increased and only by the square footage of the 3 affordable units. The project is 10,770 sf. over the total allowed commercial FAR and the DBL ordinance) 3. FAR (Exceeding amount of total FAR allowed) ‐ CS zone allows a mixed use building with a total FAR of 1.0:1. Our increase in the amount of office space gives us a total overall FAR of 1.32:1. Again, office space is financially what funds the ability to do the affordable residential units, as well as physically, because the size of the third floor housing is determined by the size of the office space beneath. (This is above the square footage menu amount listed in the DBL ordinance of the 3 affordable units. The project is 8,595 sf. over the total allowed FAR. Based on the affordable units selected, their square footage is 3,544 sf., meaning we are showing approximately an additional 5,051 sf. of total FAR over the DBL ordinance) Building Height CS zone limits height to 35’ adjacent to residential. We are showing 35’ for the main building height and the residential rear daylight plane is not violated at all, not even by a roof overhang. The elevator shaft located up near Page Mill, and not visible from Pepper as shown by the site cross section, is proposed at 40’ for practical reasons. The elevator requires a tall hoist way space above the uppermost floor for the required mechanisms to make it function, and it is allowed by zoning to encroach over the height limit. Its taller height helps relate to the taller commercial buildings across Page Mill Road. Landscape Design The overall landscape approach to our project is to be a good neighbor, to both commercial properties along Page Mill Road and the residential properties that face Pepper Avenue. The landscape plan consists of essentially three different zones, 1) the face along Page Mill Road, 2) the back area that faces onto the residential, 3) courtyard area on the 3rd floor. Page Mill Road The Page Mill Road elevation at the pedestrian level will consist of street trees, benches, glazed planters and racks for bicycles. The assorted street furniture will give a friendly and lively appearance to the property. Back Area The neighbors that live on Pepper Avenue were concerned about noise, privacy, long range views and light issues. In a neighborhood meeting, the neighbors were given a choice from a variety of species of trees, both deciduous and evergreen, that would provide screening at the back property line. The 11 tree types suggested were chosen because they were fast growing had low water consumption, low pollen production, non‐messy, had non‐destructive root systems, were non‐fruit Page 6 of 7 bearing and reached a maximum height of 30’ which allowed long views over the top of them but concealed the building from Pepper. So far, the neighbors have selected only two varieties of evergreen trees (Pittosporum undulatum and Lagunaria patersonii) which are shown on the plan. They will be planted from 36” box material. At the time of planting, these trees will be 12’‐14’ with a 6’ spread. Storm Drainage Storm Drainage will be addressed via a large biorention basin in the rear of the property and self‐ treating areas with appropriate C3 planting. Residential Courtyard The outdoor courtyard spaces will be filled with plant material and enhance the feelings of connectedness to nature and create a comfortable community gathering space. Some edible plants and fruit trees were also selected as an added benefit for the residents. The paving and planter facing in the upper courtyard is a warm tone stone paver. A varied plant palette of Mediterranean/native groundcover, shrubs and trees will be selected to maximize a variety of textures, fragrance and colors. All plantings will be irrigated with an automatically controlled irrigation system and will comply with the Water Efficient Landscape Ordinance. Contaminated Groundwater The project is within the California Olive Emerson (COE) Study area and has groundwater contaminated from offsite dumping of Volatile Organic Compounds. We have specifically kept the depth of the parking garage to a single level to remain well above the contaminated water table. We engaged Cornerstone Earth Group to give us a specific environmental analysis and develop appropriate mitigations measures to ensure the safety of the neighboring buildings as well as the new building’s occupants, including treatment measures for all excavated soil before it is disposed of. They suggested three measures, each adequate to mitigate the soil vapors on their own: a vapor barrier system beneath the garage slab and walls; a properly designed and operated HVAC system for the building and garage; and a passive sub‐slab depressurization or venting system. We have opted to do all three to be safe and ensure redundancy. Neighborhood Outreach Following up on our neighborhood outreach meetings during the zone change process, we reached out again to the same neighbors from Pepper Avenue and had a meeting on January 3, 2013 showing them the preliminary design of the building before we turned in for Preliminary ARB, and another one on June 20, 2013, a month before we officially turned in for Site & Design, to show them the results of our Preliminary ARB process. We have consistently had neighbors representing 5 properties attend but they also sent our meeting notes to the larger neighborhood e‐mail distribution list. At both meetings, we introduced the design of the proposed building with plans, 3D renderings and a physical model showing building’s relationship to their properties. In general, the neighbors were happy about the greater rear setback distance, the amount of parking provided on site, the elimination of the street parking, getting to choose the tree species and at the time had no big issues with the building design itself. The issues they did have: Page 7 of 7 Parking on their street ‐ Despite the amount of parking we have provided on site, they are very concerned about the rash of development occurring in their neighborhood, and more so about the much larger projects that were coming down the pipeline. Light pollution from offices at night – We said the offices can have occupancy sensors and automatic shades at night to block any light spill into residences. Smoking on second floor terrace ‐ We said that smoking will not be allowed on the premise. Seeing storage items on tenant patios – We shrunk the patio sizes and used frosted glass railings to block views of the patios, but the developer will also manage building and can be called with concerns after the building is finished. All units are rentals, and he is willing to put in regulations against storage on patios if that becomes an issue. Trash and recycle bin location (worried about smells & noise) – We located them just inside the first floor parking garage, as far away from Pepper as possible. Location of air conditioning equipment (worried about noise) – We were able to get some of the condenser units inside the parking garage, and the ones we could not are on the roof. None of them exceed the noise limits at any of the property lines according to our noise study. We also opened up some of the walls of the first floor garage to allow more light in and allow natural ventilation to eliminate another potentially noisy exhaust system. Odor and equipment noise from businesses – Tenant(s) not yet determined but not looking for one that would generate smells or excessive equipment noises. No restaurants would be allowed. There are neighborhood issues with homeless and garbage scavenging, they recommend gates to restrict access to sides of building – We designed and show "future" gates to restrict access and discourage possible crime and garbage scavenging activities if it becomes a problem. Art Concept We are providing art on site to comply with the 1% for Art program. The approximate art budget is $160,000.00 including consultant fees. Paula Kirkeby, one of the Pepper neighbors sharing our site's rear property line, a former Public Art Commissioner and owner of Smith Anderson Editions has graciously agreed to help us as our art consultant. Paula thought sculpture that was easily seen by, but not distracting to the many passing cars on Page Mill Road, would be a good fit. Paula brought in internationally known sculptor, Fletcher Benton, who already has a very successful piece, Tilted Donut #5, a block away at the corner of Page Mill Road and El Camino Real. Fletcher has a folded square series, where he uses one square piece of steel, makes cuts and folds only, and with no waste material to create the alphabet and all the numbers. We are proposing to use three of his number series, representing the building address and place them right in front of the building. They would be brightly painted from his standard colors, approximately 36" square, each up on its own black painted steel pedestal and end up approximately 5' tall. Since the final chosen building address has some flexibility, the actual address is being decided on which sculpture numbers are the most appealing. The budget also allows us to possibly acquire one more piece and we are exploring the possibilities. The Public Art Commission fully supported our idea of the 4 sculptures from Fletcher Benton and their locations, and we redesigned the landscape plan in the front area to accommodate the numbers. We thank you for your review and consideration of our project. 160 Pacific Avenue, SUITE 204 San Francisco, CALIFORNIA 94111 PHONE: 415 398 3050 FAX: 415 397 5065 441 Page Mill Memo 5.7.14; WWW.KEYSERMARSTON.COM ClientID ADVISORS IN: REAL ESTATE REDEVELOPMENT AFFORDABLE HOUSING ECONOMIC DEVELOPMENT SAN FRANCISCO A. JERRY KEYSER TIMOTHY C. KELLY KATE EARLE FUNK DEBBIE M. KERN REED T. KAWAHARA DAVID DOEZEMA LOS ANGELES KATHLEEN H. HEAD JAMES A. RABE GREGORY D. SOO-HOO KEVIN E. ENGSTROM JULIE L. ROMEY SAN DIEGO PAUL C. MARRA MEMORANDUM To: Russ Reich, Cara Silver City of Palo Alto From:Reed Kawahara Date:May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis I. Introduction & Summary Conclusion In accordance with your request, Keyser Marston Associates, Inc. (KMA) has undertaken an analysis of the proposed development at 441 Page Mill Road in the City of Palo Alto, specifically as it relates to the request by the project’s owner and applicant (“Applicant”)1, to obtain three development incentives/concessions in exchange for inclusion of below market rate (BMR) housing units in the project. The project is eligible for incentives/concessions pursuant to the State Density Bonus Law. The purpose of KMA’s analysis is to review and analyze the development economics of the project in order to render an opinion as to whether the three requested incentives/concessions are required to offset the costs of the BMR units. In summary and as further described in this memorandum, KMA concludes that the costs of including the BMR units in the proposed project exceed the value gained from the three incentives/concessions. Therefore, it is our conclusion that the project satisfies the requirement of the State Density Bonus Law that the requested incentives/concessions are required “in order to provide for affordable housing costs” and also satisfies the city’s requirement that they result in “identifiable, financially sufficient, and actual cost reductions” that “allows the applicant to provide affordable rents or affordable sale prices”. 1 For this assignment, the Applicant has been represented by Norman Schwab. ATTACHMENT F To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 2 441 Page Mill Memo 5.7.14; ClientID II. Background: State Density Bonus Law & City’s Ordinance The City of Palo Alto recently adopted a new chapter to the city’s Municipal Code (Chapter 18.15) to implement the State Density Bonus Law (Government Code Section 65915). In summary, the State Density Bonus Law allows a development to increase its residential density by up to 35% if the project includes a certain amount of below market rate (BMR) housing. In addition, the project is entitled to up to three incentives or concessions from local planning/building standards if needed to deliver the BMR housing units. According to the State Density Bonus Law, the project is entitled to the requested incentives/concessions unless a written finding can be made, based upon substantial evidence, that the incentive/concession2: 1) is not required in order to provide for affordable housing costs; 2) would have a “specific adverse impact … upon public health and safety or the physical environment” that cannot be feasibly mitigated without rendering the development unaffordable to low- and moderate-income households; or 3) would be contrary to state or federal law. The city’s ordinance elaborates on the first requirement by stating that the requested concessions and incentives must “result in identifiable, financially sufficient, and actual cost reductions” that “allows the applicant to provide affordable rents or affordable sale prices”. III. KMA Work Tasks For this assignment, KMA has undertaken the following tasks: • Reviewed background materials regarding the proposed project; • Participated in a work session with the Applicant, the Applicant’s architect and other team members, and city staff regarding the proposed project, potential lower density alternatives, and the economics of the project alternatives; • Reviewed documentation supplied by the Applicant regarding construction cost estimates and other aspects of the project and its development economics; • Conducted independent market research and independent cost analysis in order to assess the reasonableness of the Applicant’s estimates, and to modify the estimates where KMA felt appropriate; 2 According to the State Density Bonus Law, the burden of proof is on the city or other challenger to deny an Applicant’s request for incentives or concessions. To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 3 441 Page Mill Memo 5.7.14; ClientID • Prepared an independent financial analysis of the costs of including the BMR housing units in the project and whether the three incentives/concessions are required to address those costs. IV. Project Background & Requested Incentives/Concessions The proposed project is located on a 0.62-acre site on Page Mill Road mid-block between El Camino Real and Ash Street. The site is improved with single family homes that will be cleared to allow for development of the proposed project. The site was purchased in July of 2012 for an amount equal to $147 per sq. ft. of land area, or $3,959,000 for the 0.62-acre (26,926 sq. ft.) site3. The site is zoned Service Commercial (CS zoning) which permits a maximum 0.6 FAR for residential and a 0.4 FAR for commercial, for an overall 1.0 FAR. CS zoning allows a maximum of 30 dwelling units per acre irrespective of the percentage of the site dedicated to commercial uses. The maximum density of 30 units per acre would yield a maximum of 18.6 total residential units for the subject site (averaging 870 gross square feet per unit4). Since most residential developments are larger than 870 gross square feet per unit, for all practical purposes the 0.6 residential FAR is a more limiting factor than the residential density. The proposed project is a mixed use residential/office/retail project at an overall FAR of 1.33. The project is proposed to be a three story building above grade and a one-level subterranean garage. The retail will be located on the ground floor, the office on the second floor, and the 10 rental apartment units on the third floor. The Applicant is requesting three incentives/concessions: (1) additional lot coverage, (2) additional commercial FAR, and (3) additional total FAR. In order to qualify for the three concessions, three of the 10 residential units will be restricted to Low-income households, with rents priced at 30% of 60% of Area Median Income (AMI). Based on KMA’s assessment, each of the three requested concessions provides an economic benefit to the project and helps address the cost of the BMR units. Under the city’s density bonus ordinance, the Applicant is able to increase the project’s lot coverage and FAR by the total square footage of the BMR housing units, or 3,544 sq. 3 The original site purchase included an adjoining site on Pepper Avenue which included a single family home. Subsequent to purchase, the Applicant made some improvements to the home and re-sold the property. The $3,959,000 land value represents the initial site purchase allocated to the remaining 0.62-acre site. 4 Applying a residential efficiency factor of 15%, 870 gross square feet per unit (which would include hallways, lobbies, and other common areas) would result in a net livable area of about 740 square feet. To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 4 441 Page Mill Memo 5.7.14; ClientID ft. for the three proposed units. However, the Applicant is seeking to further increase the lot coverage and FAR as shown in the following table. CS Zoning Maximum With On-Menu Concessions With Proposed Off- Menu Concessions Concession 1: Lot Coverage Coverage SF Coverage SF Coverage SF 50.0% 13,462 63.2% 17,006 68.8% 18,520 Concessions 2 & 3: FAR FAR SF FAR SF FAR SF a) Residential 0.60 16,156 0.73 19,700 0.53 14,170 b) Commercial 0.40 10,770 0.40 10,770 0.80 21,541 Total FAR 1.00 26,926 1.13 30,470 1.33 35,711 It is noted that the actual State Density Bonus is not needed for the proposed project, as the 10 proposed units equates to just 16 units per acre (compared to 30 units per acre permitted by CS zoning). V. Financial Analysis As called for in the State Density Bonus Law and the city’s implementing ordinance, in order to be eligible for the incentives/concessions, the requested incentives/concessions must be needed to in order to address the costs of the BMR housing units. In order to analyze this issue, it is necessary to undertake the following: • Quantify the cost of including the three BMR housing units in the proposed project; and • Quantify the value benefit to the project of the requested incentives/concessions. If the costs of including the BMR housing units exceed the value benefit of the incentives/concessions, it is concluded that the incentives/concessions are needed to offset the BMR housing costs. If the value of the incentives/concessions exceed the cost of the BMR housing units, one or more of the incentives/concessions may not be required. a) Cost of BMR Housing Units The net costs of developing the three below market rate (BMR) units in the proposed project is estimated by comparing the construction costs to build the three BMR units with the private investment supported by the rental income produced by those three units. The restricted rents for the Low-income units are calculated pursuant to the California Health & Safety Code Section 50052.5, which specifies that Low-income rents are to be based on 30% of 60% of the local Area Median Income (AMI), adjusted for To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 5 441 Page Mill Memo 5.7.14; ClientID household size, and net of an allowance for tenant-paid utilities. On this basis, the monthly Low-income rents are estimated at $1,227, $1,377, and $1,525 for the 1-, 2-, and 3-bedroom units respectively (there is one of each in the proposed development). After taking into account a vacancy factor, operating expenses and taxes, the project’s net operating income (NOI) is estimated at approximately $27,000 (see the following table). From the project’s NOI, the amount of supported private investment can be calculated. Based on a 7.0% unleveraged project return5, the total supported private investment is estimated at $385,000. The construction costs for the three BMR units are estimated at $2,232,000 based on a pro rata share of the total project costs (land acquisition costs have been excluded because the land costs would apply whether or not there are BMR units). Based on these calculations, the net cost of providing the three BMR units in the proposed project is $1,847,000. Net Cost of Low Income Units 1-Bedroom (Low Income) $1,227 /month $14,724 2-Bedroom (Low Income) $1,377 /month $16,524 3-Bedroom (Low Income) $1,525 /month $18,300 Gross Rental Income $49,548 (Less) Vacancy 5.0% ($2,477) (Less) Operating Expenses & Taxes ($20,100) NOI $26,971 Supported Investment 7.0% return $385,000 (Less) Construction Costs $630 /sq.ft. ($2,232,000) Net Cost of Low Income Units ($1,847,000) b) Development Program Comparison As noted previously, the proposed project is a mixed use building comprised of residential, office, and ground floor retail uses with an overall FAR of 1.33 (see the following table). In order to test whether the requested incentives and concessions are needed to offset the costs of the BMR units, it is necessary to estimate the value increment that can be realized from the incentives/concessions over an alternative case without those incentives/concessions. Since as was described previously the State Density Bonus is 5 A 7.0% return for the BMR units is higher than would be the case for unrestricted market rate units because the future escalation of BMR rents is capped by increases in median incomes. To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 6 441 Page Mill Memo 5.7.14; ClientID not needed to build the 10 BMR units, the proposed project is instead compared against a project that could be built with straight CS zoning. For the CS zoning alternative, KMA’s analysis indicates that the project that maximizes value is actually less than the maximum building permitted. Our analysis indicates that the maximum value project is a 0.4 office FAR combined with approximately seven residential units, for an overall FAR of roughly 0.78. The reason why this lower density program is financially superior to the maximum 1.0 FAR is that the 0.78 FAR building can be built with all the parking in an at-grade garage, thus relieving the project of significant excavation and underground parking costs as well as environmental remediation costs. The resulting cost savings more than offsets the fact that the fixed land acquisition costs are higher on a per building square foot basis. Alternative under CS Zoning With Proposed Off- Menu Concessions Increase Site Size 26,926 sf 26,926 sf 0 sf 0.62 acres 0.62 acres 0 acres Net Rentable SF (NSF) Residential 8,874 sf 12,417 sf 3,543 sf Office 9,693 sf 16,337 sf 6,644 sf Retail 0 sf 2,895 sf 2,895 sf Total 18,567 sf 31,649 sf 13,082 sf Gross Sq. Ft. FAR FAR Residential 10,200 sf 0.38 14,170 sf 0.53 3,970 sf Office 10,770 sf 0.40 18,646 sf 0.69 7,876 sf Retail 0 sf 0.00 2,895 sf 0.11 2,895 sf Total 20,970 sf 0.78 35,711 sf 1.33 14,741 sf Parking At grade garage Subterranean & at grade garage 47 spaces 91 spaces Residential Units Market Rate 7 units 7 units 0 units BMR (Low Income) 0 units 3 units 3 units Total 7 units 10 units 3 units c) Value of Incentives/Concessions The value of the requested incentives and concessions is quantified by comparing the development economics of the base case (CS zoning) project with the proposed project with the incentives/concessions. The economics of the two projects in their entirety are analyzed because the three requested incentives/concessions (lot coverage, commercial FAR, and total FAR) are of benefit to the entire project and not to the residential alone. As shown in the following summary table, the base case project yields an overall development return of 6.15% as compared to a 6.50% return for the proposed project To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 7 441 Page Mill Memo 5.7.14; ClientID with the incentives/concessions. Therefore, the proposed project, inclusive of the three BMR units, is an improvement over the base case alternative. This result indicates that the requested incentives/concessions, each of which contributes to the project’s value, are a financial benefit to the project (i.e. they help reduce the costs of the BMR units) and it also demonstrates why the Applicant is motivated to build the proposed project rather than the base case under CS zoning. It is noted that the returns for the two alternatives are relatively similar despite the fact that the proposed project is significantly larger. The reason for this result is attributable to the fact that the proposed project requires an expensive subterranean garage and associated environmental remediation costs, which is not assumed in the CS zoning alternative. This cost premium is a partial offset against the ability of the larger project to spread the fixed land costs over a larger building. Alternative under CS Zoning With Proposed Off- Menu Concessions Increase $/NSF Total $/NSF Total Net Operating Income (NOI) Residential $39 $346,171 $29 $363,795 $17,624 Office $63 $607,774 $63 $1,024,330 $416,556 Retail $0 $0 $57 $165,015 $165,015 Total NOI $51 $953,944 $49 $1,553,140 $599,195 Development Costs Acquisition, Carry, Environmental $239 $4,442,000 $161 $5,106,000 $664,000 Direct Construction $452 $8,384,000 $462 $14,622,000 $6,238,000 Indirects $110 $2,043,000 $99 $3,149,000 $1,106,000 Financing $35 $650,000 $32 $1,010,000 $360,000 Total Costs $836 $15,519,000 $755 $23,887,000 $8,368,000 Return on Cost (ROC) 6.15% 6.50% 0.36% Note: See Appendix I for a discussion of the assumptions behind the income and cost estimates. The value increment of the proposed project over the base case alternative can be quantified in dollar terms by capitalizing the annual income stream generated by the two alternatives and then deducting the development costs. On this basis, it is estimated that the three incentives/concessions add $1,284,000 in value to the proposed project. Alternative under CS Zoning With Proposed Off- Menu Concessions Value Increment Capitalized Project Value Gross Project Value 5.59% $17,053,000 5.82% $26,705,000 $9,652,000 (Less) Development Costs ($15,519,000) ($23,887,000) ($8,368,000) Net Project Value $1,534,000 $2,818,000 $1,284,000 *Based on a 5.0%, 6.0%, and 7.0% cap rate for residential, office, and retail respectively. To: Russ Reich, Cara Silver May 7, 2014 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 8 441 Page Mill Memo 5.7.14; ClientID d) Conclusion The net cost of delivering the three BMR units in the proposed project is estimated at $1,847,000. The net value increment of the three concessions is estimated at $1,284,000. Since the cost of the BMR housing exceeds the value increment, and since each of the three concessions independently contributes to the value increment, it is concluded that all three of the requested concessions are needed to address the BMR housing costs in the proposed project. Comparison of BMR Housing Cost to Value Increment Net Cost of 3 BMR Housing Units $1,847,000 Net Value Increment from 3 Incentives/Concessions $1,284,000 1 APPENDIX I Summary of Pro forma Assumptions 441 Page Mill Road: State Density Bonus Analysis Development Costs • Acquisition, Carry, Environmental. Land acquisition costs were based on the July 2012 purchase price for the site, adjusted for the Pepper Avenue parcel subsequently sold. Land carry costs include taxes and interest carry from the July 2012 purchase to today. Environmental mitigation costs related to the HP plume estimated at $664,000 based on a third party general contractor estimate plus a 5% contingency (provided at request of Applicant). • Direct Construction Costs. Direct construction costs were estimated by KMA based on a review of three general contractor estimates provided for the Applicant, on third party data sources such as RS Means, and on pro formas for other recent mixed-use projects in the Bay Area. Costs include tenant improvements estimated by KMA at $60 per sq. ft. for office and $40 per sq. ft. for retail. • Indirect & Financing Costs. Indirect costs include all architecture and engineering costs, governmental fees and permits, taxes, insurance, legal, leasing/marketing, and overhead/administration costs. Fees and permits costs were estimated by the Applicant based on the city’s fee worksheets and were reviewed relative to other projects in Palo Alto. Other indirect costs were estimated by KMA based on industry standards and other mixed use developments in the Bay Area. Financing costs based on an assumed 65% loan to cost and a 24-month construction/lease-up period. Operating Income • Residential Income. Market rate residential rents estimated at $4.10/sq. ft./month, or about $5,200/unit/month, based on a review of asking rents for apartments in Palo Alto, Menlo Park, and a survey of newer apartment developments in Mountain View and Sunnyvale (see Appendix II). BMR rents were based on 2014 Area Median Income (AMI) for Santa Clara County, adjusted for household size and net of estimated tenant- paid utility allowances. Operating expenses for apartments were based on current pro formas for other Bay Area apartments at similar densities. Taxes were based on the land purchase price plus apartment unit values from recently built projects in Santa Clara County. 2 • Office Income. Office rents estimated at $5.50/sq. ft./month on a triple net (NNN) basis based on rent comps for Class A office space in Palo Alto as well as third party market data from commercial brokers such as Cassidy Turley and Colliers. For reference, current and recent rent listings in downtown Palo Alto are in the range of $6.00 to $7.00 per sq. ft. on a triple net basis. A 5% vacancy rate is assumed. • Retail Income. Retail rents estimated at $5.00/sq. ft./month on a triple net basis based on recent retail listings in strong retail locations in Palo Alto (downtown and along high traffic corridors). These listings are in the rough range of $4.00 to $6.00/sq. ft./month on a triple net basis, with the higher end of the range located downtown. For reference, the 2013 average asking retail rent in the Palo Alto/Mountain View/Los Altos submarket was $37.33/sq. ft./year ($3.11/month) according to Terranomics. A 5% vacancy rate is assumed. APPENDIX II Apartment Asking Rents - Palo Alto & Menlo Park Projects 441 Page Mill Road: State Density Bonus Analysis City of Palo Alto Address BR BA Sq. Ft. Rent $/SF I. Palo Alto Comps 3875 Park Blvd.1 1 $2,050 3081 Alma St.1 1 500 $2,095 $4.19 535 Arastradero Rd.1 1 700 $2,195 $3.14 2106 Willimans St.1 1 $2,450 573 Lytton Ave. #B 1 1 $2,600 746 Sutter Ave.2 1 $2,959 2850 Middlefield Rd. (Southwood) 1 1 750 $3,035 $4.05 337 Hawthorne Ave. #337 1 1 850 $3,295 $3.88 765 San Antonio Rd.2 2 1,033 $3,300 $3.19 3085 Middlefield Rd.2 2 970 $3,495 $3.60 700 Clark Way (Stanford West) 2 2 995 $3,520 $3.54 3075 Alma St. #3075 3 2 1,100 $3,695 $3.36 565 Arastradero Rd.2 2 1,419 $3,890 $2.74 665 Waverly St.2 2 1,629 $4,200 $2.58 734 Webster 2 1 $4,250 700 Clark Way (Stanford West) 3 2 1,333 $4,340 $3.26 University South 2 2 1,240 $4,450 $3.59 427 Alma St.2 2 $4,850 565 Arastradero Rd.3 2 1,830 $4,850 $2.65 II. Menlo Park Comps 1309 Mills St.1 1 $1,925 21 Coleman Ave.1 1 $1,925 806 Coleman Ave.1 1 800 $2,095 $2.62 782 Coleman Ave.1 1 650 $2,150 $3.31 840 Coleman Ave.2 1 $2,150 786 Coleman Ave.1 1 700 $2,295 $3.28 720 Coleman Ave.2 1 $2,450 435 Encinal Ave.2 1 $2,495 744 Coleman Ave.2 1 950 $2,795 $2.94 424 Oak Grove Ave.2 2 $2,995 1028 Middle Ave.2 1 900 $3,025 $3.36 Downtown Menlo Park 2 1 900 $3,695 $4.11 424 Oak Grove Ave.3 2 $4,295 Source: Zumper.com; ApartmentGuide.com; project websites (May 2014) _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Apartment Rents 4.10.14; Palo Alto APPENDIX II Apartment Asking Rents - Newer Built Projects 441 Page Mill Road: State Density Bonus Analysis City of Palo Alto BR BA Sq. Ft.Notes Low High Low High Carmel The Village 555 San Antonio Rd, Mountain View Studio 1 537 $2,276 $2,612 $4.24 $4.86 Built in 2013 1 1 566 330 Units 1 1 585 Developer: Carmel Partners 1 1 651 $2,868 $2,910 $4.41 $4.47 1 1 678 1 1 690 1 1 693 1 1 754 $2,807 $2,950 $3.72 $3.91 1 1 890 1 1 1,004 1 1 1,079 2 2 1,054 2 2 1,141 2 2 1,070 2 2 1,098 2-Bedroom Avg 1,091 Lawrence Station Apartments 1271 Lawrence Station Rd, Sunnyvale 1 1 604 $2,205 $3,130 $3.65 $5.18 Built in 2012 1 1 703 $2,325 $3,220 $3.31 $4.58 336 Units 1 1 751 $2,340 $3,290 $3.12 $4.38 Developer: BRE Properties 1 1 1,621 $3,045 $3,940 $1.88 $2.43 2 2 1,035 $2,730 $3,970 $2.64 $3.84 2-Bedroom Avg 1,035 $2,730 $3,970 $2.64 $3.84 Solstice 299 W. Washington Avenue, Sunnyvale Studio 1 482 Built in 2013 1 1 690 $2,835 $2,945 $4.11 $4.27 280 Units 1 1 735 $2,818 $3,098 $3.83 $4.21 Developer: BRE Properties 1 1 786 $3,047 $3,112 $3.88 $3.96 1 1 904 $3,065 $3,130 $3.39 $3.46 1 1.5 1,002 2 1 937 $3,335 $3,410 $3.56 $3.64 2 2 1,085 $3,805 $3,955 $3.51 $3.65 2 2 1,187 $4,091 $4,101 $3.45 $3.45 2 2 1,137 2 2 1,272 $4,033 $4,203 $3.17 $3.30 2 2.5 1,401 2 2.5 1,439 2-Bedroom Avg 1,208 $3,914 $3,917 $3.27 $3.51 Via 621 Tasman Drive, Sunnyvale 1 1 694 $2,350 $2,861 $3.39 $4.12 Built in 2011 1 1 916 $2,551 $3,078 $2.78 $3.36 284 Units 1 1 922 $2,570 $3,191 $2.79 $3.46 Developer: Essex Property Trust 2 2 1,043 $3,054 $4,168 $2.93 $4.00 2 2 1,225 $3,279 $4,592 $2.68 $3.75 2-Bedroom Avg 1,134 $3,167 $4,380 $2.80 $3.87 Source: Property websites, Apartmentguide.com (April 2014) $4.65 $4.49 $5.18$2,495 $4,095 $4,080 $3,961 $3,285 $2.85 $2.91 $3.48 $3.28 $3.54 $3.46 $3.86 $4.46 $4.06 $4,322 $3.96 $4.46 $4.31 $3.50 Rent $/SF $2,721 $2,544 $4,893 $4,607 $3,999 $3,787 $3,662 $3,554 $3,079 $2,678 $3,079 $2,755 $3.59 $3.39 _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Apartment Rents 4.10.14.xlsx; Sheet1 Attachment G ATTACHMENT E 1 Planning and Transportation Commission 1 Verbatim Minutes 2 June 11, 2014 3 4 EXCERPT 5 6 Public Hearing 7 441 Page Mill Road [13PLN-00307]: Request by Stoecker and Northway Architects Inc. on behalf of 8 Norm Schwab for Site and Design Review of a three story, 40 foot tall, approximately 35,750 s.f mixed 9 use building, replacing four single-family residences on a 26,926 square foot parcel. The building would 10 include ten rental apartment units, and office and retail spaces. The application includes three State 11 Density Bonus Concessions and Design Enhancement Exceptions for additional height, for a tower 12 element, and alleviation of the build-to-line to allow the building to be further back from Page Mill Road. 13 A subsequent application for a Parcel Map will be submitted to merge the existing four parcels into one 14 single lot. Environmental Assessment: An Initial Study and Draft Mitigated Negative Declaration have 15 been published; the public comment period began November 8, 2013 and ended December 8, 2013. 16 **Quasi-Judicial (Continued from January 29, 2014) For more information contact Russ Reich at 17 russ.reich@cityofpaloalto.org 18 19 Chair Michael: So with that the first item is a quasi-judicial matter and before we get to the matter do 20 any of the Commissioners have any required disclosures regarding any ex parte contact with the 21 applicant or the public? Hearing none let’s move let’s open the public hearing on the first item, 441 Page 22 Mill Road and begin with a staff report. 23 24 Russ Reich, Senior Planner: Great, thank you Chair Michael and Commissioners. Good evening. The 25 application before you this evening is a request for a recommendation of approval to the City Council of a 26 site and design review application for a new mixed-use project and approval of the associated Mitigated 27 Negative Declaration (MND). The project site is centrally located in the middle of town near the 28 intersection of Page Mill Road and El Camino Real. The site is comprised of four parcels currently 29 occupied by four single-family residences. Adjacent uses include the Kelly-Moore Paint Store here to the 30 north, the pet hospital here to the south, single-family residences to the rear of the site, and then across 31 Page Mill Road there’s a number of taller multi-story multi-family dwellings. 32 33 The four parcels that comprise the site were rezoned in January of last year from R1 to Service 34 Commercial with a site and design combining district. It was understood at that time single-family uses 35 along Page Mill Road were not the most appropriate uses for the site. In March of last year the building 36 design was reviewed by the Architectural Review Board (ARB) in a preliminary review hearing. The 37 proposal includes the demolition of the four single-family homes and the construction of a new 35 foot 38 tall, three story, mixed-use building. The building would incorporate retail and parking on the first floor, 39 office on the second floor, and 10 rental residential units on the third floor. There would also be one 40 level of parking below grade. 41 42 The applicant has proposed to provide three of the ten residential units as affordable housing units, 43 which is 30 percent of the total number of units provided. Under the State’s Density Bonus Law this 44 entitles the applicant to a total of three concessions to offset the costs of providing those affordable 45 units. The concessions requested are for lot coverage, commercial square footage, and total square 46 footage. Because the three concessions requested are beyond the City’s Density Bonus Menu of 47 Concessions the applicant has, was required to provide a pro forma to substantiate the need for the 48 requested concessions. The City has hired a consultant to conduct a fiscal analysis of the applicant’s pro 49 forma to ensure that the concessions requested are necessary to enable the applicant to provide the 50 three affordable units and you’ll hear more from the consultant after my presentation. 51 52 The applicant has held a series of community outreach meetings to provide the public with opportunity to 53 comment on the proposal. A variety of concerns were voiced such as possible building height, privacy, 54 traffic, parking, light, and noise. These meetings took place during both the rezoning process as well as 55 2 during the building design phase of the project. The applicant has made several modifications in an 1 attempt to resolve the concerns that were raised. Some of the elements that had been incorporated into 2 the plan to address neighbor concerns include moving the building away from the residential neighbors 3 27 feet rather than 10 required by code, the inclusion of night shades to eliminate light from the office 4 space in the evening, and a planting of trees across the rear of the project site to create a privacy screen 5 for the residential properties behind. 6 7 The proposal also includes two Design Enhancement Exceptions (DEE). One exception is for height. And 8 I wanted to apologize, the staff report actually says that the height exception is for five feet, but it’s 9 actually only for two. That was a prior iteration of the project that didn’t get edited out. So the DEE is 10 for two feet of height for the tower element only. The rest of the building complies with the 35 foot 11 height limit. The second DEE is for alleviation of the build to line. There is a special setback on the 12 property of four feet. And so 50 percent of the building is required by the code to be up to the setback 13 line, but they are requesting to set the building further away from the street three additional feet. So it 14 would be a total of 17 feet back from the face of curb. 15 16 The project site is located over the California-Olive-Emerson (COE) Groundwater Plume. The 17 groundwater in this location is contaminated with trichloroethene (TCE) from offsite sources, namely 18 Hewlett-Packard (HP) and Varian. There are mitigations included within the MND and the Conditions of 19 Approval that require measures to ensure that the groundwater contaminants would not have a negative 20 impact on the environment. Some of these include the requirements for a vapor barrier, active 21 ventilation system, and testing. 22 23 The municipal code provides an opportunity to request up to a 20 percent reduction in required parking 24 spaces for mixed-use projects based on the concept that different uses within a mixed-use project will 25 have different demands for parking at different times of day. The applicant has requested an 18 percent 26 reduction for a total of 27 parking spaces. They have provided a time of day of study that looks at the 27 different uses proposed within the project and have determined that the reductions would not have an 28 adverse effect on parking. The City’s Transportation staff has reviewed this study and agree that the 29 parking reduction is appropriate. This would be predicated on the requirement that the parking spaces 30 within the project are all open spaces and not dedicated to any particular tenant within the building. 31 32 This is an elevation. You’ll see more of these in the applicant’s presentation, but this is a proposed view 33 of it from Page Mill Road. So at places tonight there’s a copy of the zone map that shows the various 34 zoning designations in the vicinity of the project as requested by Commissioner Keller. There’s also a 35 copy of the City’s Density Bonus Ordinance, which was also provided by, requested by Commissioner 36 Keller. You have the applicant’s project description and you have a copy of the Commissioner questions 37 and staff responses. So I’d like to now introduce Reed Kawahara of Keyser Marston. He’s the City’s 38 consultant that did the pro forma analysis and he has a presentation for you. 39 40 Reed Kawahara, Keyser Marston Associates (KMA): Good evening, my name is Reed Kawahara from 41 Keyser Marston Associates. Tonight I’m going to give a presentation of our analysis of the 441 Page Mill 42 project and specifically the State Density Bonus component. I’ll try to cover three aspects tonight: the 43 first is kind of the quick overview of the State Density Bonus Law and a quick description of the project 44 although Russ covered most of that; 2) to summarize the analysis that we performed specifically of the 45 development cost approach and we’re going to describe the two different approaches that are typically 46 taken for these projects; and third we’re going to do an overview of the two different approaches and 47 sort of the advantages and disadvantages of each. 48 49 So with that said under the State Density Bonus Law developers are granted a density bonus in exchange 50 for affordable housing units within the project and it’s based on a sliding scale depending on the amount 51 of units that are provided. The maximum density bonus is 35 percent. And as Russ indicated under the 52 State Density Bonus Law projects are also entitled to additional incentives and concessions if they provide 53 additional units at affordable levels. 54 55 3 From an economic perspective the requested incentives and concessions can “shall be granted,” and this 1 is language from the State Density Bonus Law “unless a written finding can be made based upon 2 substantial evidence that concession is not required in order to provide for affordable housing costs.” 3 I’ve highlighted sort of two phrases there that are from this Density, State Density Bonus Law that I think 4 are important that we’ll speak to later in terms of our analysis. I think it’s also important to state that the 5 law does not provide any future clarification of what is meant exactly by affordable housing costs or what 6 substantial evidence is needed. So I think from our perspective sort of some discomfort that there isn’t 7 further clarity provided in terms of analysis, but nonetheless the, these types of analyses have been done 8 over the years and basically there are two fundamental approaches to doing analysis which I’ll explain 9 later. I think finally it’s important to make the distinction here that the developers are requesting the off 10 menu concessions as opposed to the on menu concessions. And we will explain the different analyses 11 that we did with regard to each. 12 13 So first of all this is a comparison of the CS zoning as compared to the proposed project. So again, the 14 site size is about 27,000 square feet, about .62 acres. The lot coverage permitted under CS zoning is 50 15 percent and the building Floor Area Ratio (FAR) is, the maximum building FAR is 0.6 for residential and 16 0.4 for office/retail, which would allow for a total square footage of course of the 27,000 square feet. 17 The proposed project requests additional lot coverage to 68.8 percent. It shifts residential; it doesn’t 18 request the maximum residential FAR, so that’s down to .53. The office/retail FAR is increased to .8 for a 19 total FAR of 1.33. So I’ve highlighted in green in the slide there the three off menu concessions that are 20 being requested for this project. 21 22 Ok, on the next slide we for purposes of the analysis we needed to analyze two different projects. The 23 first project is the proposed project and the second is a project that would be built under CS zoning. 24 Now we initially started to do the analysis under the maximum CS zoning permitted, which was the 1.0 25 FAR, but after getting into that analysis we concluded that the maximum FAR project was not the most 26 profitable project and the reason why is because when you get to that FAR it requires the subterranean 27 parking. And because of the expense of the subterranean parking what we did was we tested an 28 alternative with actually a lower density than the maximum permitted under CS zoning and that yielded 29 actually a higher return than the maximum FAR. So this slide explains or summarizes the analysis that 30 we did under CS zoning with the lower FAR. Basically it’s a 0.38 residential and a 0.4 office/retail. The 31 reason why we kept the office/retail at 0.4, the maximum, and reduced the residential is because the 32 economics of the office are far superior to residential. So in our mind this is a project that maximizes the 33 return under straight CS zoning. So this is the project that we compared to the proposed project. 34 35 Ok, step one in our analysis was to estimate the affordable housing costs as specified in the State Density 36 Bonus Law. Again as Russ mentioned in order to qualify for the concessions 3 of the 10 units needed to 37 be at affordable housing levels, specifically low income. So what we did with those three units was to 38 allocate the costs of the proposed project to those three units, which came out to a total of $2.23 million 39 or about $630 per square foot. This is a very expensive project in part because of the underground 40 parking, in part because of the land acquisition costs, in part because of environmental remediation, and 41 by the way we reviewed cost estimates provided by the developer’s third party general contractors and 42 these cost estimates were in line with those, with those estimates. 43 44 In order to determine the net affordable housing cost we also need to take into consideration the income 45 that’s generated by those three affordable units. And we estimate the value of those, of that income to 46 be about $.38 million. Therefore, the net affordable housing cost of the three units is about $1.85 million 47 or about $615,000 per unit. That’s the first step in the analysis. 48 49 In step two what we need to do is test to see whether or not the incremental value achievable by those 50 three concessions is in excess of the affordable housing costs because if it is in excess we could 51 determine that one or more of the concessions requested were not needed. Therefore, we analyzed the 52 economics of the project under CS zoning and compared it to the economics of the project as proposed. 53 So these two columns, actually three columns are tables that come straight out of our analysis, our 54 report, summarizing the income generated from each alternative, the development costs from each 55 alternative, and because it’s a rental project there’s a need to capitalize the ongoing income in order to 56 4 compare the value of the project to the development costs. In doing so we conclude that the 1 incremental value from the three concessions is approximately $1.28 million as shown in the third 2 column. So our conclusion is based on the aforementioned analysis is that because the affordable 3 housing costs of $1.85 million exceed the incremental value from the three concessions of $1.28 million 4 that the three concessions are needed to offset the costs of the three affordable housing units. 5 6 Now the final part of the presentation deals with the question of the two different approaches to 7 analyzing this issue. Over the years we have analyzed quite a few of these different projects and have 8 been exposed to other analyses by other firms and basically there are two different approaches that have 9 been taken to analyze the economics of these projects. The first is we call the development cost 10 approach, which is the approach that I just presented. And the second approach is what I consider the 11 development return approach. And so the final slides here are for purposes of explaining the two 12 different approaches and the advantages and disadvantages of each. 13 14 The development cost approach I can go through fairly quickly because I just ran through it for the 441 15 Page Mill Project, but it compares the cost of the affordable housing units with the incremental value 16 from the concessions. And the need for the off menu concessions are determined based on whether or 17 not the affordable housing costs exceed the incremental value. And in this case the development return 18 is not the primary emphasis. Under the development return approach you would compare the proposed 19 project with an alternative without the three concessions requested to determine whether or not the 20 returns that are generated are adequate to support development of the project. 21 22 In terms of the advantages and disadvantages of each approach for the development cost approach we 23 believe that the advantages are that it isolates the affordable housing costs as specified in the State 24 Density Bonus Law and it limits subjectivity of a lot of the inputs of the return analysis such as what is an 25 adequate return? What is the appropriate amount of rents for the project? What are the development 26 costs? All those are of reduced significance in the development cost approach. And I can explain that 27 further. The disadvantages I think of the development cost approach is that they’re somewhat more 28 complex to explain, somewhat more abstract as compared to the development return approach where 29 you’re just comparing returns. Again however I think that the returns themselves are subject to a lot of 30 judgment which are debatable from one project to another. 31 32 The final slide we prepared here compares the analysis of the two approaches to this project. So again 33 we summarize on the left hand column our development cost approach and on the right hand column the 34 development return approach. I’ll explain this one. The development returns of the proposed project is 35 estimated at about six and a half percent. A project without the off menu concessions, meaning a 36 project only with the on menu concessions, yields a return that’s only five percent. Based on industry 37 standard returns both of these returns are less than satisfactory to build the project and under the 38 development return approach the conclusion would be that the concessions are needed because the 39 returns are less. That’s the conclusion of our presentation. 40 41 Chair Michael: Ok so is staff all done? 42 43 Amy French, Chief Planning Official: Yes, we’re uploading the applicant’s presentation. 44 45 Chair Michael: Ok, so let’s next hear from the applicant. Actually while we’re waiting for the applicant’s 46 presentation to get loaded I’ve got one clarifying question for our legal adviser. And on the staff report 47 at Page 9 there’s a section under it called Policy Implications, which begins with the “proposed project is 48 the first test of the City’s Density Bonus Ordinance” and it continues. Can you elaborate? What is the 49 effective date of the ordinance that was adopted by the City? 50 51 Cara Silver, Senior Assistant City Attorney: Thank you, Cara Silver, Senior Assistant City Attorney. The 52 Density Bonus Ordinance that was adopted by the City the second reading was on January 27, 2014, and 53 so it goes into effect 31 days thereafter. So that’s roughly February 28, 2014. 54 55 5 Chair Michael: And could you advise us how this ordinance which is effective as of that date applies to 1 projects which are not yet begun? 2 3 Ms. Silver: Yes. So the City has discretion in the ordinance to apply the ordinance to pipeline projects, 4 which we typically use, a term which we typically use to refer to projects that have filed an application, 5 but have not yet received formal entitlement approval. So this particular ordinance is, does apply to 6 pipeline projects. And so we do while the project was filed before the ordinance went into effect since 7 the entitlements have not been approved the ordinance does apply to the project. 8 9 Chair Michael: I’m trying to figure out if it’s within our purview this evening to have any discussion or 10 questions relating to the election to go for the off menu concessions versus the on menu concessions or 11 whether that’s simply something that’s within the discretion of the staff to determine that they’re entitled 12 to the off menu concessions of the State Bonus Law as opposed to the menu concessions that were put 13 into the City’s ordinance? 14 15 Ms. Silver: Yes. So under the City’s ordinance the ordinance sets up a preference of on menu 16 concessions. And the ordinance contains incentives for developers to seek the on menu concessions. 17 And the big incentive there is that those concessions are considered de facto acceptable concessions 18 essentially as a matter of right. The applicant is entitled to those concessions and does not need to 19 submit a pro forma and does not need to submit any economic analysis justifying those concessions. 20 That’s the incentive that’s built into our ordinance. If the developer on the other hand does not desire to 21 seek those concessions and instead the ordinance allows them to go off menu, but there is a series of 22 extra steps. So they have to submit a pro forma analysis analyzing why they are entitled to those 23 concessions and then the City enters into sort of a peer review, which is what we have done with KMA to 24 review that analysis and determine whether the project qualifies for the off menu concessions. 25 26 Chair Michael: Ok, is it a fair conclusion then that this project is being reviewed under the City’s 27 ordinance, but under the off menu option that you just explained and that it’s not being reviewed under 28 the State Density Bonus Law? 29 30 Ms. Silver: Yes, that’s exactly correct. 31 32 Chair Michael: Ok. So the materials we got about the State Density Bonus Law we’re just going to 33 ignore. We’re going to refer to the Palo Alto Density Bonus Law as the controlling ordinance? 34 35 Ms. Silver: Yeah, well the State Density Bonus Law does apply to the City. The City implements 36 procedures through its own local ordinance. So the procedurals, the procedures are set forth in the local 37 ordinance, but the underlying State Density Bonus Law still applies to the City. There are substantive 38 elements of the State Density Bonus Law that apply to the City. 39 40 Chair Michael: I’m trying to press on this because it was my understanding serving as the Commission’s 41 representative to the Regional Housing Mandate Committee that whenever the Palo Alto’s proposed 42 Density Bonus Ordinance that one of the reasons for adopting that was so that we wouldn’t be subject to 43 the State Density Bonus Law, that we would instead have the controlling ordinance would be the Palo 44 Alto version. 45 46 Hillary Gitelman, Director: Chair Michael and Commissioners, Hillary Gitelman, the Planning Director. I’m 47 remembering back to those discussions. I think what we tried to articulate at the time the Local Density 48 Bonus Ordinance was proposed that having a local ordinance allows a local agency to do what we did 49 with the creating an on menu, menu of concessions. It allows you to sort of steer applicants towards 50 things that you would find more acceptable potentially than other things and it allows you to adopt 51 procedures for review. So it was the adoption of the local ordinance that allowed us to create a menu, to 52 require a pro forma, and peer review and the whole process we’ve gone through for off menu 53 concessions. It is unfortunately not possible at a local level to just say we’re not going to consider 54 concessions under certain circumstances because it’s the State Density Bonus Law says thou shall grant 55 6 these concessions unless you can make the finding that was shown on the slide based on substantial 1 evidence. 2 3 Chair Michael: Ok. Well in general I personally am a fan of affordable housing. I personally think the 4 public policy implicit in the Density Bonus Ordinance is a virtuous goal that communities should take 5 advantage of and I’m a little bit surprised in this first instance that it’s going off menu and that we’re 6 having this other analysis and there’s sort of seemingly competing jurisdiction of the City ordinance and 7 the State because I thought that the whole effort was to sort of make it more objective, more 8 transparent, more sort of user friendly to applicants and to the public. And we’re sort of going by the 9 alternate exception path rather than on, per the menu. 10 11 Ms. Gitelman: If I can pile on I think staff shares your disappointment that the first project we’re seeing 12 under the local ordinance goes off menu, but I think that’s explained by the fact that this project was 13 already well along by the time that menu was finally adopted by the Council. I’m hopeful that projects 14 begin their way through our planning process now, now that the local ordinance has been adopted and is 15 clearly part of our worldview here that future projects will hopefully conform to the, choose things off of 16 the menu that we’ve established in our ordinance. 17 18 Chair Michael: Ok. Well I appreciate the explanation and hopefully this is an important policy. And let’s 19 go, we have one speaker card from a member of the public. Oh, applicant first; 15 minutes. And please 20 identify yourself. Thanks. 21 22 Norman Schwab: Hi, my name is Norman Schwab. I wanted to, good evening first and to Commissioners 23 and City staff and members of the public. Thanks for being here. I live here in Palo Alto and I am the 24 managing member of the group that owns the land so I’m the applicant. I wanted to at first talk about 25 the staff that’s here and just introduce from Stoecker & Northway John Northway and Alena Campagna 26 and John Chen is here as well. And we’ve got a landscape architect, Jacque Keller, who’s here and the 27 traffic consultant Richard Hopper is with us and Leigh Prince as well. And she’s a land use attorney and 28 she can deal with the questions of the Density Bonus Law. 29 30 So I’ll give a brief overview of the building here. As you see it’s three stories and the ground floor is 31 going to be retail from the right side up until the garage entrances where the lobby is going to be. 32 Second floor is office and then the third floor has 3, 10, 10 residential units 3 of which as was mentioned 33 are Below Market Rate (BMR). We thought with the street being real busy probably wouldn’t be good to 34 have residential closer down to the street so we put that up high and the common areas are closed off to 35 the frontage and they’re supposed to be quieter and more inviting. Let’s see, the other direction, ok. So 36 this is repeating as I was discussing the usage of the different floors. Under the three levels we’re going 37 to have a level of parking and the ground level behind the retail also provides parking and the ramp 38 going down to the underground. 39 40 This is a bird’s eye view of the third floor and these are the residential units in the center. You’ve got a 41 common area on the right side. We tried to design it in such a way that it would be very inviting to the 42 residents to come out and to spend time there, oriented the kitchens and public areas or common… living 43 space inside the units to face the courtyard so that so the parents can keep an eye on children if they’re 44 running around and I personally put a lot of time into trying to design this in a way that would work 45 because I started this project looking for space where I could build a residential community. This land 46 didn’t lend itself to housing only and therefore the mixed-use concept came to be, but the way this is set 47 up this third floor can be a contained community, have this neighborhood feel, and it would be a 48 comfortable place to live even though it’s on this busy throughway. And I think that also mixing the units 49 and having some BMR units and having the opportunity for different people to come and to live there 50 would provide for a diverse place and I hope that it plays out in such a way that people end up having a 51 home and a community there and not just a come in and out kind of apartment. So I’ll turn the mike 52 over now to John Northway who will talk more about the details of the design of the building. Thank 53 you. 54 55 7 John Northway, Stoecker & Northway Architects, Inc.: My computer alacrity I might shut the entire thing 1 down. I wanted to go through first the constraints that we had to operate under in order to design this 2 building. This building is actually subject to three different government agencies: the City of Palo Alto 3 controls everything inside the property lines, Santa Clara County controls Page Mill Road, and of course 4 the State of California as you’ll be hearing throughout the evening has the Density Bonus Law. Page Mill 5 Road is a very fast and busy arterial, which creates one kind of environment and there’s this large scale 6 multiple family buildings across the street. The R1 neighborhood is a sensitive neighborhood, which is 7 directly behind the building and we wanted to be very sensitive to them. We had numerous meetings 8 with them. So we increased the rear setbacks and also obeying the daylight plane and are going with a 9 lower height limit. Also on the bottom is the contaminated groundwater plume, which also limits the 10 amount of digging that we should be doing. 11 12 Just a real quick overview and cross section through the site to show you what we did. Obviously Page 13 Mill Road is the fast busy arterial. The building will serve as a very nice acoustical block to help quiet 14 down the neighborhood, which gets a lot of noise off of Page Mill Road. It be provided a greater setback 15 because we wanted to protect the privacy of the neighbors. It’s a 27 foot setback. You can see that the 16 average of the houses on the other side is between 42 and 77 feet. We do have the contaminated 17 groundwater underneath it. We moved the building; the thing where we had to coordinate with Santa 18 Clara County and the City of Palo Alto, Santa Clara County didn’t want any street trees on Page Mill Road 19 and the City did want street trees. We like street trees too so part of the DEE that we’re asking for is to 20 move the building back an additional three feet so we can get the street trees onto the property and it 21 also creates a bigger sidewalk area, something that’s certainly been discussed in the City. 22 23 On the back property line will be a row of trees. Our landscape architect is here and can fill you in, but 24 basically we gave the neighbors a menu of trees and they can select the tree that they wanted to see 25 from their own backyard. I’m going to turn the presentation now over to Alena Campagna. We’re sort of 26 rushing along because it is a lot to talk about in 15 minutes. Thank you. 27 28 Alena Campagna, Stoecker & Northway Architects, Inc.: Thanks John. Ok. Actually the DEEs again the 29 two feet for the height for just the entry feature it was for aesthetic reasons only and then pushing the 30 building back three feet to accommodate street trees, which John just talked about. Neighborhood 31 outreach meetings; we had four of them during the course of this project. Two for the zone change and 32 two for the building design. One before we turned in for our preliminary ARB and then one afterwards 33 right before we turned in for site and design just to show them the changes that had to be made because 34 of that process. 35 36 The neighbors had a number of concerns and we tried to address each one in the design of the building. 37 The first one was traffic. Per their request we removed street parking in front of the building so they had 38 better visibility when turning onto Page Mill from Ash. Lack of street parking in their neighborhood; we 39 tried to provide as much parking as possible, but using just one underground level to avoid digging 40 deeper and violating the contaminated plume underneath. We are requesting a shared parking reduction 41 for 20 spaces, which is 18 percent. The hourly accumulation of parking analysis, which you have to do to 42 show you can possibly get this shared parking reduction shows we have provided more parking than is 43 typically required during the busiest weekday. Noise and odor control was an issue. We located trash 44 and all heating, ventilation, and air conditioning (HVAC) equipment that makes noise inside the building 45 or up on the roof far away from the neighbors. Light pollution, we use nightshades on the rear facing 46 office glass. Privacy, we planted the entire back line with trees. The neighbors themselves got to pick 47 the trees. We polled the residential public spaces on the third floor back from the edge of the building 48 and used high glass at the bedrooms that were on the edge of the building and less glass at the offices 49 on that back side. We also used the bedroom location to restrict views from the residential public space 50 and the patios to basically be just in front of the unit and not off to the sides. 51 52 Building design; I am going to go through this a little fast, I’m happy to answer more questions later on 53 it. You can see from this for an elevation we use different materials to differentiate between the different 54 uses on different floors of the buildings so you see more glass on the downstairs and stone up at top. 55 Here’s the site plan. We have a lot of constraints. We located the garage entrance as far away from El 56 8 Camino as possible for safety. Again trash and transformers are up on Page Mill away from the 1 neighbors on the back side and we used the location of the office of the, I’m sorry, the garage parking 2 ramp to push the building farther back from the neighbors to create that 27 foot. And you can see the 3 trees all along the back and we also were able to get the street trees in on our property in front. 4 5 Basement we have bike lockers and backflow preventers down there to avoid street cluttering. Second 6 floor is all office space. Tenants are to be determined. Could be one, could be multiple tenants. That 7 will come in the future. And here’s the third floor. It was really important since Page Mill is not 8 conducive to residential living that we create a neighborhood of our own up top. So we created this 9 communal space. It has a lot of trees and plantings to soften it with windows that look onto it to create 10 that sense of community because Page Mill was not going to offer it. And each unit still has its own 11 private deck besides. 12 13 Some three dimensional (3-D) views on the north side it’s very blank and the reason is the paint store 14 blocks most of that side. Here’s the front of the building with the street trees. It’s a very horizontal 15 design that’s responding to the long street frontage and also the main way you’re going to experience the 16 building, which is driving, driving by it. The entry tower is s focal point. We’ve removed the street trees 17 so you can see the building better. The entry is curved. We’ve used that same curve in awnings above 18 each of the entrances that will also be where future signage could be. The egress stair on this south 19 elevation was used to create a more dynamic elevation. We consider this to be our most prominent, 20 most visible corner. The stair also serves to hold back the bulk of the building from the lower scale 21 animal hospital and for as a transition down to the scale of the animal hospital. And the back side as you 22 can see the trees that are planted there. They are supposed to grow to 30 feet tall and should primarily 23 block most of the views from Pepper of the building. 24 25 And then I just wanted to mention contrary to the staff report we do, we would like to provide art on 26 site. Since we don’t have, we haven’t gone through you guys yet we were, did not want to go through 27 that process of getting an artist yet. We have met with Elise DeMarzo and we plan if we get approval or 28 we seem to be going forward our first step is going to go to the Public Art Commission and to start that 29 process. And now I’d like to turn it over to Leigh Prince. Thank you. 30 31 Leigh Prince, Jorgenson, Siegel, McClure and Flegel, LLP: Good evening Commissioners, my name is 32 Leigh Prince. I’m an attorney at Jorgenson, Siegel, McClure and Flegel and I’ve had the opportunity to be 33 involved in a number of projects that utilize the State Density Bonus Law. So I’ll talk for a couple of 34 minutes and I’m happy to answer any questions you may have. State Density Bonus Law is found in 35 Government Code Section 65915. It does encourage and provide incentives for the provision of lower 36 income housing. And one thing I do want to note is incentive and concession are interchangeable terms. 37 So I’m using the term incentive in this presentation, staff said concession. They mean exactly the same 38 thing. 39 40 So what is an incentive? State law defines an incentive as a modification of a site development standard, 41 zoning code, or architectural design requirement that results in identifiable financially sufficient and actual 42 cost reductions. Here in Palo Alto you have an ordinance in place that preapproved certain on menu 43 incentives and concluded that those result in identifiable financially sufficient and actual cost reductions. 44 Palo Alto’s ordinance also provides in accordance with State law a process to determine whether 45 requested incentives that are off menu meet this requirement resulting in identifiable, financially 46 sufficient, and actual cost reductions. And that’s where we find ourselves today. I do also want to note 47 for the record that when this project was submitted its final application the City’s Density Bonus 48 Ordinance implementing State Density Bonus Law was in process and at the time two of the incentives 49 requested were actually on menu. At the very last moment the Council made some changes to the 50 ordinance before it approved it, which took unfortunately all of them off menu. So I do want to give 51 some credit to the developer who attempted to build to on menu, but here we are off menu. 52 53 So the three incentives as both the staff report and Reed from KMA mentioned are required by State law 54 for the provision of 30 percent of the units as low income units. These units are restricted for 30 years. 55 So the three incentives you have in front of you as have been mentioned are lot coverage, commercial 56 9 FAR, and total FAR. So these incentives allow additional commercial space in a mixed-use project to 1 offset the costs of the affordable housing and make the affordable units possible. 2 3 So I have up here the legal reasons incentives can be denied, although I think Reed mentioned it in his 4 presentation as well State law uses the language that in the absence of substantial evidence of any of 5 these three items I have up here the City shall grant the requested incentives. So as you focus on the 6 project that’s before you tonight you have three things that you’re looking at. You ask yourself are these 7 incentives required to provide for affordable housing costs? You have a report by KMA that was very well 8 done by a professional consultant that’s highly respected and it, that report concluded that the requested 9 incentives are required to provide for affordable housing costs and that they result in identifiable, 10 financially sufficient, and actual cost reductions. The second thing you’re asking is do these incentives 11 create a specific adverse impact upon public health, safety, or the physical environment or historic 12 property? This is also something that’s identified in State law, not as just something that doesn’t comply 13 with the zoning code, but something that is significant, quantifiable, direct, and unavoidable impact 14 based upon health or safety standards and I will wrap it up. 15 16 Chair Michael: I’m going to give you more time. Why don’t you take up to five more minutes? 17 18 Ms. Prince: Ok, I’m fairly close to being done and I’m happy to answer any questions. That’s also in your 19 packet this evening along with Reed’s KMA report is a MND. It concludes that the impacts are less than 20 significant with mitigation. The third and final basis on which you’re looking at is are the incentives 21 requested illegal? And I can’t find any reason to conclude that greater FAR or lot coverage is illegal. So I 22 believe that you have in front of you documentation based on from independent consultants that 23 provides substantial evidence that you cannot make these findings and that these incentives shall be 24 approved. Approving the project as proposed allows affordable units to be built and accomplishes the 25 purposes of the State Density Bonus Law to encourage such development to be achieved. And with that 26 I am happy to answer any questions. And would like to reserve a little bit of time, I know I kind of ran 27 out there at the end, but to answer any issues that come up from public comment. Thank you. 28 29 Chair Michael: I’m told by the Vice-Chair that we didn’t get the name of the first speaker when, because 30 of our recording wasn’t on. So just for the record, your name? 31 32 Mr. Schwab: It’s Norman Schwab. 33 34 Chair Michael: Thank you. Oh and the Vice-Chair also reminds me that we’re going to give you additional 35 time at the end to respond to any issues that come up. So with that let’s go to speakers from the public. 36 And we have two speakers each of whom will have 3 minutes. 37 38 Vice-Chair Keller: The first speaker is Bob Moss to be followed by Herb Borock. 39 40 Bob Moss: Yeah, thank you Chair Michael and Commissioners. I don’t have any problems with the basic 41 design and layout of the building. John Northway does nice work. So that’s not a problem, but I do have 42 some questions about the treatment for the hazardous materials onsite, which the staff recognizes. The 43 first thing that struck me is as you know this is a COE site and oversight of that area is handled by the 44 Water Board in San Francisco and I didn’t see any reference to the Water Board reviewing or 45 commenting on the project. So I’d like to know has anybody spoken to the Water Board and what did 46 they say? 47 48 Second, in the MND on Page 21 it talks about the Health and Safety Plan. And it says well, we’re going 49 to have the workers who do the construction read the plan. That’s not enough because the basement is 50 going to be going down 15 or 16 feet and the contaminated aquifer under normal conditions is about 16 51 feet deep. With the drought we’ve had the last three years it may be lower, but you have to assume 52 there’s a possibility that basement excavation is going to contact some of the aquifer, which is 53 contaminated. So what do we do? There are procedures, which are quite standard for how construction 54 is handled when you’re doing it on a site where you might get water from a contaminated aquifer, but it’s 55 not mentioned in this report at all. 56 10 1 Then it talks about air quality and vapor intrusion and again the normal requirements that the Water 2 Board has are not mentioned at all. It says we’re going to have a vapor barrier and sub slab ventilation 3 and do some testing, but what kind of testing and how often? For contrast in Mountain View the 4 Middlefield-Ellis-Whisman (MEW) site, which is overseen by Environmental Protection Agency (EPA) and 5 they require testing once or twice a year for at least a five year period. And there’s nothing in here about 6 how often it’s going to be done annually and how long it’s going on. 7 8 There’s one other aspect, which isn’t mentioned here at all which popped up again on Mountain View. 9 The building’s going to have an HVAC system and that mitigates the vapor intrusion significantly, but in 10 commercial buildings it’s quite common to turn it off on the weekends because the offices are vacant. 11 And it would found that when you do that the vapor intrusion levels into the residential areas goes up 12 significantly. So what kind of controls are we going to have on the HVAC system? This is all missing. So 13 we need to have a little more definition and a little more clarity on how you’re going to control these 14 problems. I think it’s not a big deal, but it has to be specified. 15 16 Vice-Chair Keller: Excuse me, the next speaker is Herb Borock. 17 18 Herb Borock: Good evening Chair Michael and Commissioners. The item before you this evening includes 19 a review of an environmental document the MND. And under the California Environmental Quality Act 20 (CEQA) that environmental review is, must review the whole project. And the whole project includes the 21 DEE and the building setback line. That is you can’t say that they’re not under your purview because you 22 can’t remove them from the project that’s being considered in the environmental document. When you 23 are making a recommendation on the environmental document you are making a recommendation that 24 includes those two items. 25 26 In regard to the financial analysis without doing a return on investment analysis you don’t have the true 27 cost. This project is essentially a project that is asking for twice as much commercial floor area as the 28 zoning allows. The applicant wouldn’t be doing that kind of a project unless the applicant would be 29 making much more money building twice as much commercial floor area than he otherwise could get. 30 And so what you need to do is, had to do under the Jay Paul project, which is also shown as a cost 31 project rather than return on investment is to do a return on investment analysis using both the assumed 32 investment amount shown here and a more reasonable lower investment amount and a higher loan 33 amount. And then you need to then look at both that return and also on this simple cost per unit that’s 34 been shown because I suspect that that difference in return investment in other words the magnitude 35 just overwhelms the difference in the costs that is shown on the cost basis. And that’s the kind of thing 36 that’s missing from this. So until you have that information I don’t believe that it’s possible to grant the 37 concessions. And until you take into consideration the DEE and the setback you can’t make a 38 recommendation on the environmental document. Thank you. 39 40 Chair Michael: The applicant will have five minutes to respond to the public questions or if you’d like it’s 41 not required, but… 42 43 Ms. Campagna: Alena Campagna from Stoecker & Northway. Per the we had Cornerstone was our 44 consultant, environmental consultant, and they did contact Roger Papler of the Water Board they have 45 been in contact with him and there’s another woman and this is a long time ago and I’m going off 46 memory, Melanie who works for the EPA I believe? Right. So he was, he has shown this whole project 47 and was going back and forth with both of them. Yes. We had a Phase 1 and a Phase 2 done for this 48 project, but part of it was going to the Water Board who then took it to the EPA. Sorry. 49 50 Chair Michael: So just to clarify because I think some of your comments were made off microphone. 51 52 Ms. Campagna: Sorry. 53 54 Chair Michael: If you could just summarize that you have gone through a process with the Water Board 55 and what we should understand from what you learned? 56 11 1 Ms. Campagna: Our environmental consultant did take the project to the Water Board. There’s a man 2 named Roger Papler who is the person who does the COE district and he then took it to a woman 3 Melanie I don’t remember her last name, I’m sorry, at the EPA. So both those jurisdictions have seen our 4 project and were in discussions with Cornerstone and this was probably eight, you know before we 5 turned in last July. 6 7 Chair Michael: Ok and presumably that will address some of the safety issues that, yeah. 8 9 Ms. Prince: Hi, Leigh Prince again. So I want to address the second commenter with respect to the MND. 10 If you take a look at the project description that was reviewed in the MND there is discussion of the 11 increased setback that’s part of the design enhancement as well as the additional height. In fact I think 12 it reviewed a 40 foot project, so it actually looked at something that could potentially have more 13 significant impacts than what’s in front of you. So this would be more conservative. And so the issues 14 that were raised have actually already been reviewed and addressed and determined not to be significant 15 impacts. 16 17 And then also with respect and KMA might respond to this again, but we looked at we took two different 18 approaches to the analysis. It was the return on investment as well as the cost approach and I apologize 19 if I have that wrong, but both were reviewed and both determined that these incentives were necessary 20 to result in a project that was financially viable. Thank you. 21 22 Chair Michael: Ok, thank you very much. So that closes the public hearing. Let’s come back to the 23 Commission and with a first round of questions or comments five minutes. Would anybody like to begin? 24 I’m going to call on Vice-Chair Keller. 25 26 Vice-Chair Keller: Thank you. So first let me address the parking thing, which is buried but it’s here on 27 Page, some page of RKH document and it’s a traffic analysis so there’s traffic analysis is a RKH document 28 and it talks about percentage of peak hour and parking accumulation and things like that I’m wondering 29 who is the right person to ask that question? I notice that what you’re using for the amount of parking 30 rate is different from the City’s parking rate. 31 32 Richard Hopper: Are you talking about the shared parking analysis? 33 34 Vice-Chair Keller: Yes, it says mixed-use development hourly parking accumulation of parking weekdays. 35 It looks like this. And could you identify yourself please? 36 37 Mr. Hopper: Oh, I’m Richard Hopper, I’m a consulting civil and traffic engineer and I prepared the report. 38 So you’re looking in the Appendix E. 39 40 Vice-Chair Keller: It’s. 41 42 Mr. Hopper: Yes. Alright, I have it. 43 44 Vice-Chair Keller: Unfortunately the document is not easily numbered so I can’t tell people. It looks like 45 this. It’s about this far in. 46 47 Mr. Reich: It’s third from the last page in the staff report. 48 49 Mr. Hopper: Right, yes. 50 51 Vice-Chair Keller: Thank you. 52 53 Mr. Hopper: We did two analyses of the shared parking. The first one used the data that we obtained 54 from the Institute of Transportation Engineers (ITE) and other sources in terms of the peak parking 55 demand by land use type and then we applied those peak rates to a table for the hourly demand of each 56 12 of those uses because the peak parking demand for residential does not occur simultaneous with the 1 peak parking demand of retail or office and that’s the concept of shared parking. So we looked at the 2 peak uses through 6:00 a.m. until midnight to determine what the peak parking demand for the total 3 combined uses were and it came out to be 79 spaces. 4 5 We also then took the City’s zoning code required parking for the individual uses and applied those 6 parking assuming that that was the peak parking rate, which it’s really not, but applied that to the 7 different that the three uses and came up with a peak parking demand of 93 spaces. Now in my analysis 8 of the first one I then suggested because that is the determined peak parking demand the actual amount 9 of parking to be provided should be at least 10 percent higher than that. So I came up with a total of 87 10 parking spaces, which would allow for peak seasonal variation for the retail use and also cut down on 11 cars driving around looking for a parking space. Does that answer your question? 12 13 Vice-Chair Keller: So what you said is that the amount on the City’s numbers were 93 and the amount 14 under the ITE numbers were lower than that? 15 16 Mr. Hopper: Actually came out to 79. 17 Vice-Chair Keller: 79. 18 19 Mr. Hopper: And my recommendation is to determine the or the amount of parking to be provided you 20 add 10 percent in there to allow for the seasonal variations and circulation to come up with 87 spaces. 21 22 Vice-Chair Keller: And do you know what the occupancy level is expected at that the ITE assumes in 23 terms of number of people per 1,000 square feet? 24 25 Mr. Hopper: No. That is it’s based on 85 percentile demand rate of that particular land use for office and 26 retail. 27 28 Vice-Chair Keller: So it doesn’t reflect the notion of Facebooking if you will, which is verb of people 29 basically cramming them in as many people as they can fit cheek to jowl typically 200 square foot per 30 person or less. 31 32 Mr. Hopper: No. Normally in an office building you’re looking at about one person per 300 square feet, 33 350 square feet. Three per thousand square feet in a typical office building. 34 35 Vice-Chair Keller: And is that, is that any evidence that that’s typical for Palo Alto? 36 37 Mr. Hopper: I cannot say. 38 39 Vice-Chair Keller: Thank you. 40 41 Chair Michael: Commissioner Alcheck. 42 43 Commissioner Alcheck: Good evening, thanks staff for the report. I will start by responding to the notion 44 that it’s disappointing that our first proposal under the Bonus Law has gone off menu. That’s a bit 45 dramatic for me. Are we so confident we got the menu right? I mention that because the goal here is to 46 encourage affordable housing. If the development can justify an incentive that’s off menu then I suggest 47 we welcome it with open arms, we welcome that approach without being disappointed because we 48 should be taking affordable housing in this area any way we can get it. And so if our menu is 49 consistently avoided for off menu options then I would suggest we look at our menu and potentially 50 adjust it. I know that that’s not a simple process, but I just mention it because I’m not confident that 51 what we put on the menu is what the marketplace will articulate well. And that is an important part of 52 this whole financial analysis concept. 53 54 Ok, with that said, what I want to say is going to be a little unique; I want to thank the applicant 55 actually. You know all too often developers get a bad rap in our proceedings and our local coverage. I 56 13 think this proposal is inspired, it’s respectful, and it’s a major improvement over what I believe is a 1 terribly situated series of eyesores. This is a tremendous improvement in the use of the land frankly. 2 And our independent consultant here mentioned that it would be very expensive too. I continue to be 3 thrilled that the opportunities in Palo Alto continue to justify the significant costs of top tier top quality 4 developments like this. Let’s hope that lasts through my lifetime. And I’m not really surprised that I like 5 it so much. Mr. Northway and his firm have designed a significant number of excellent projects in Palo 6 Alto and his involvement is appreciated. Actually this whole team has impressed me with their 7 presentation tonight and their professionalism so thank you for the team approach. When we met to 8 determine this site’s zoning we were a slightly different Commission, but when we met to make that 9 zoning designation change, when was that, how long ago was that? 10 11 12 Mr. Reich: End of 2012. 13 14 MOTION 15 16 Commissioner Alcheck: End of 2012, so a year and a half. We spent a great deal of time discussing the 17 uses that would be appropriate for this site and I believe this is exactly what many of us had envisioned, 18 this sort of project. I think the unit mix is healthy and it’s well laid out. I think there’s been a thoughtful 19 approach to the sense of community building for the third floor residential. I think the parking setup is 20 clever and satisfies our requirements. I continue, I will continue to believe that the trend of stuffing 21 people into Palo Alto commercial square footage is on the decline until someone suggests otherwise. I 22 just think the rents are way too high to encourage the occupancy of tenants who could theoretically go 23 anywhere. I think commercial office space on the Page Mill corridor is literally blue chip. If you go to the 24 office buildings on the other side of El Camino you are not going to find people over stuffed in office 25 buildings. You are going to find attorneys and plastic surgeons and venture capitalists who are using 26 actually far more than one per 300. They’re probably, it would probably astonish us to know exactly how 27 much office space they have per person. So I’m not really worried that the parking is going to be 28 insufficient because our requirements are not adequate in that particular site because I just think it’s not 29 going to encourage that sort of occupancy. 30 31 Finally, I also want to say that the office space meets what I believe is an extremely important criteria 32 point, which is that it’s in very close proximity to a train stop. This meets my definition of Transit 33 Oriented Development (TOD) and does it in terms of residential, TOD, commercial/residential, 34 commercial TOD. I think that’s fantastic. I’m not sure again that, and this kind of goes against what I 35 was saying earlier, which is to say that many of the occupants of this of the rents may drive themselves 36 to work because they have that luxury, but nonetheless it’s transit oriented. And then you still, the 37 applicant still managed to allow for significant amount of retail space on the street level, which I think is 38 exciting. 39 40 When we talked about this a year and a half ago it was my opinion that this is going to continue to be a 41 very difficult retail space. I actually avoid going to Kelly-Moore just because it’s a little crazy over there if 42 you’re trying to get in there any time after three. It can be hairy. And there’s a part of me that sees that 43 even just a block over from that, I’m always surprised to hear that the AT&T has a lot of foot traffic, let 44 me just put it that way. It doesn’t seem like a retail corridor. That may change significantly with the 45 developments that are happening all around. So I’m glad there’s some retail in there because it’s going 46 to continue to further that objective; so well done. 47 48 Before my time is up I would move that we accept staff’s recommendation and recommend that Council 49 approve the MND and the site and design review application we’ve reviewed tonight. 50 51 SECOND 52 53 Chair Michael: Now is there a second? Second from Commissioner Tanaka and then let’s continue. 54 Actually, before asking Commissioner Alcheck to speak to the Motion and Commissioner Tanaka to speak 55 to your second why don’t we just continue the first round of questions and comments because I think 56 14 that making the Motion preemptively sort of cuts off people’s opportunity to air their comments. So 1 would anybody like to go next? Commissioner Tanaka. 2 3 Commissioner Tanaka: Ok, so a few questions. So in terms of the I was wondering if staff could talk 4 about what kind of outreach was done for the neighborhood in terms of, in terms of notice and response 5 and reaction to this project? 6 7 Mr. Reich: I think the applicant can speak better to the meetings that they had, but they did have a 8 series of four public outreach meetings. I believe they said two happened during the zone change 9 process and then two after that during the design phase with each of the public hearings for the process 10 the requirement is a 600 foot radius notice. We have since modified that to double it. So for this hearing 11 there was double the radius for that so there was definitely a lot of City outreach in addition to outreach 12 that the applicants did. I think they actually went door to door specifically targeting those properties that 13 are adjacent and I’m not sure but I think they also targeted people across Page Mill, but they can 14 respond to that. 15 16 Commissioner Tanaka: Ok, would the applicant like to speak to this? 17 18 Mr. Schwab: Yes. We had two outreach meetings during the course of the zoning change and then we 19 had one outreach meeting when we did our initial design before we took it through the ARB and after we 20 got the ARB’s comments and we modified the design we had another neighborhood meeting to show 21 them the project which is now before you. We turned it in last July (interrupted) 22 23 Commissioner Tanaka: And how many people attended? 24 25 Mr. Schwab: Excuse me? 26 27 Commissioner Tanaka: How many people attended? 28 29 Mr. Schwab: I’m sorry. 30 31 Commissioner Tanaka: What was the attendance? 32 33 Mr. Schwab: I’ll have Alena, Alena took track of everybody and also sent out follow up e-mails to 34 everyone. And Norm did go around door to door to many of the neighbors on Pepper and Olive. 35 36 Ms. Campagna: You actually required Norm in the zone change hearings to go door to door to all the 37 people on Pepper and everybody on the block that our project was on. So he did go door to door. We 38 sent notices to everybody there, everyone across Page Mill I think you stopped us from having to send 39 personal notices across the other side of El Camino. So we had to go up and down El Camino on our 40 side, but not on the other side of El Camino. 41 42 As far as attendance the first two zone change meetings got about I think it was seven different 43 properties on Pepper and it was all the folks on Pepper. A lot of people in the two story condo that’s on 44 the corner of Pepper and Ash and then kind of all the Pepper residents that back up against our building 45 and a couple further down towards El Camino. That neighborhood is very well e-mail connected as well 46 because of a previous hotel project that was rudely squashed on that site many, many years ago. So all 47 of the people that attended were consistent just the people on Pepper, but they sent all of kind of our 48 meetings and all of the notes, I would do meeting notes after each one of our meetings and send it to 49 them and they would e-mail it to their entire group, which included not just Pepper but Olive the other 50 street behind. It was kind of all the people that were involved in smashing the old hotel project. 51 52 Commissioner Tanaka: So did staff attend any of these meetings? 53 54 Mr. Reich: Staff was not present at the public meetings, but staff did talk with the applicants and was 55 also present at the ARB hearing and the zone change meetings. 56 15 1 Commissioner Tanaka: Ok, so we don’t really have a neutral third party. 2 3 Ms. Campagna: Can I make one more comment? 4 5 Commissioner Tanaka: Sure. 6 7 Ms. Campagna: At the second zone change hearing in front of you there was another, I think it was the 8 residents who live at 420 Pepper who actually hadn’t officially attended any of our meetings, but you 9 asked, you actually asked that exact same question and he stood up and said everything that we said 10 was true because he got all the e-mail notices. He hadn’t actually been there, we never met him before 11 that second hearing of yours, but if you go back to that meeting you’ll find those notes. 12 13 Commissioner Tanaka: Ok. What has staff heard in terms of feedback from the neighborhood? 14 15 Mr. Reich: Actually since the submittal of this application staff has heard very little from the public. 16 They’ve been pretty silent. There was a series of six e-mails that came early on in the initial publication, 17 but there, those folks aren’t here tonight and staff hasn’t heard anything from those folks through the 18 process. 19 20 Commissioner Tanaka: Ok and what’s the current parking situation like on the street around this 21 neighborhood in terms of is it pretty busy? Is it like totally empty? What’s the situation like typically? 22 Like during the weekdays, evenings, etcetera? 23 24 Mr. Reich: I’ve actually been out there a number of times recently for other projects in the area that I 25 was working on and found it very easy to park on Pepper. There was one meeting where we met on site 26 for this project and the parking on Page Mill was a bit dangerous, hazardous; I didn’t want to park there 27 because of the fast moving traffic and it just wasn’t a very hospitable environment, but the parking on 28 Pepper has been no problem for all the times that I’ve been out there for other projects. 29 30 Commissioner Tanaka: Ok. 31 32 Chair Michael: Commissioner Gardias. 33 34 Commissioner Gardias: Thank you. So in general I have to complement the developer of the project. I 35 think it will be very welcomed development. I was just passing by in a car this neighborhood this 36 afternoon to get to this meeting and just making turn from Park Boulevard to Page Mill I noticed some 37 people walking along Page Mill. So if they are walking today there would be more of them tomorrow. So 38 I’m sure that whoever’s going to get this retail space will benefit a lot to himself and to the neighborhood 39 of course. 40 41 But I have a couple of questions and they are to the consultant, to Mr. Kawahara or to the Planning staff. 42 So in terms of the affordable housing do we have any data about a concession that we get how much of 43 the affordable housing we have per concession or was the concession per affordable housing in terms of 44 the FAR coverage of the lot? Do we have any data from Palo Alto? Historical data? Can we compare 45 this development to other developments that we had if not from Palo Alto do we have comparable data 46 to other cities? 47 48 Ms. Silver: As far as I know there have been two other projects that in Palo Alto that have taken 49 advantage of the Density Bonus Law. There was one at 195 Page Mill and the other one was the recent 50 one on El Camino, Equinox. And I just don’t recall offhand what the actual concessions were and the 51 value of those concessions if that was your question. 52 53 Commissioner Gardias: That’s exactly right. 54 55 Ms. Silver: We would have to research that. 56 16 1 Commissioner Gardias: Yes, I mean if you could provide it at some other time that would be welcome 2 and probably for the next projects that could be the same question because we would like to know by 3 looking at the project itself it looks of course that we have a bonus that we gain here, but how do we 4 know unless we compare with the other market’s data. Not only from Palo Alto, but also from the 5 adjacent municipalities. 6 7 Ms. Silver: Amy French just reminded me that those two projects were entitled before the City’s Density 8 Bonus Ordinance and so of course as we’ve mentioned one of the benefits of having a local Density 9 Bonus Ordinance is that even when applicants go off menu there needs to be some quantification of the 10 concessions, which is what we’ve done through the pro forma analysis and the peer review. We don’t 11 have that quantification analysis for the other two projects although we can bring back the, what the 12 exact concessions were. But we won’t be able to quantify those for those past projects. 13 14 Commissioner Gardias: Exactly. Thank you very much. It will be, it will allow us to conduct 15 quantification analysis, would allow us to pretty much to judge it properly. Right now it’s very hard to 16 say either way. I think I’ll stop here. Thank you very much. 17 18 Chair Michael: Commissioner King. 19 20 Commissioner King: Thank you. I just want to confirm with staff so for pipeline projects and moving 21 forward under our ordinance developers always have the option to either go on menu or off menu at 22 their discretion with more requirements for going off menu. Is that correct? Ok. 23 24 And then can you confirm my, it appeared to me that my understanding was that when you do 30 25 percent of the units as below market then you get three concessions. Is that accurate? I think that 26 might partially address Commissioner Gardias’ question. 27 28 Ms. French: Correct. 29 30 Commissioner King: Ok, and is there, and what if you did 20 percent? Then you get two concessions is 31 that? I don’t see a table here. Is it direct like that? 32 33 Ms. Silver: There is a table in the State law and in the local ordinance. It is the number of units or 34 percentage of the units is a different amount of concessions. 35 36 Commissioner King: Ok, thank you. Let’s see, and then referring to the pro forma so I’ve heard reference 37 to the applicant must submit a pro forma and then there’s a peer review. So is that what’s happened 38 here was the, and what was provided by the applicant versus the consultant? 39 40 Mr. Reich: The applicant provided a fiscal analysis or pro forma which KMA did a fiscal analysis of. 41 42 Commissioner King: And do we see the applicant’s pro forma? Or only (interrupted) 43 44 Mr. Reich: They actually have a copy on their PowerPoint slide if you wanted to see it, but it isn’t 45 contained in the staff report. 46 47 Commissioner King: Ok. And the regarding the option of under current CS zoning and the fact that the 48 economically optimal solution is a FAR below the maximum does the applicant agree that that would be if 49 for some reason they chose to go under current zoning path that that is the option that they would go 50 with? 51 52 Mr. Kawahara: We did not develop the CS zoning alternative in collaboration with the developer. So I 53 can’t answer the direct question as to whether they would agree that it’s the optimal under CZ zoning. 54 55 Commissioner King: Ok, so that was your output? 56 17 1 Mr. Kawahara: Correct. 2 3 Commissioner King: And they have had no input as to whether oh, yeah we agree with that (interrupted) 4 5 Mr. Kawahara: Correct. 6 7 Commissioner King: in reality they might actually go with some or maximizing the FAR. Ok. 8 9 Mr. Kawahara: Maybe it’s worth noting however you were asking about the developer’s pro forma? 10 11 Commissioner King: Yes. 12 13 Mr. Kawahara: They did run an analysis without the concessions, which was a, which yielded a far lower 14 return because of the fact that they didn’t actually test I don’t believe alternatives at a significantly lower 15 density. 16 17 Commissioner King: Ok. Thank you. Alright, so I’m sure that your report is state of the art. I appreciate 18 that, I’m as a sort of dyed in the wool skeptic I’m skeptical of some of the inputs and the analysis 19 method. When you say you’ve used the word typical for the two methods that you looked at and does 20 that mean that’s and who has determined those are typical? And let me tell you where I’m going; for me 21 a much more valuable metric would be using what is the value of the building when it’s complete, what 22 would somebody pay for that building? Because then you’re supported by actual market comps, it 23 eliminates a lot of these variables ROI what’s acceptable to investors, it just says, hey, they put in X 24 amount of money to build this building, it would be worth Y amount and so their profit would be X. So to 25 me that would be much clearer. So why isn’t that analysis used and why are these two used apparently 26 exclusively? 27 28 Mr. Kawahara: To answer the first question about typical as I said we have done a number of these types 29 of analysis ourselves and we have been exposed to other consultants’ analyses of the same subject. And 30 over the course of the years that we have been involved in these types of analyses these are the two 31 approaches that we have seen. So that’s why I characterized them as being the typical approaches to 32 this question. 33 34 Commissioner King: Ok. Ok, thank you. And so and my concern there’s much to like about the project. 35 I think the applicants have done a great job on the outreach and adapting the building. Much of the 36 design is great. My concern is what people, I think want is that we zone to our plan and then we build to 37 the zoning. And in general the residents don’t like to see these big exceptions. And this is a massive 38 exception of double the office space. And I also believe that in general residents if you look even I can 39 remember 20 years back they did some survey and the last thing that people prioritized about adding to 40 Palo Alto is more office space. So my concern, so that’s my concern with the project. Again, much to 41 like about it, but for me the things, and if I can just take another minute to just finish? 42 43 So my concern is I feel that I’m sort of drinking the Kool Aid when I look at the report and there’s so 44 many inputs that are either based on this is what we see, there’s not a substantive database where I can 45 say, oh, I could go to some other source and see the $630 per foot building cost. Again that’s, that was 46 provided by someone who in all if you were a skeptic could say well, those contractors want the business 47 they might be biased to help out the applicant the higher the cost the more benefit or the to the 48 applicant. The cap rates there are all these integer numbers and those vary over time. They go up, 49 down depending on other alternative investments. And again with all due respect I’m sure this is state of 50 the art and I don’t know what rate of borrowing the interest rate that they pay for the borrowing. So it’s 51 not very transparent to me. And also the purchase price; we sort of build in protecting the developer in a 52 situation like this because that’s part of the cost and we don’t know if they paid too much, too little, but it 53 gets built into the model so that we’re saying this is ok. 54 55 18 Now to finish I also understand that because of vaguely written State law we have this very difficult 1 requirement to provide a written finding based on substantial evidence and the report really doesn’t, we 2 have to go out on our own and get that because the report doesn’t really I mean it’s self-referential. So 3 we don’t really have any evidence other than what the report gives us. So that’s my, I guess my 4 frustration and feel free to address that Hillary if you’d like to. 5 6 Ms. Gitelman: Well let me just say that of course if the Commission has questions, alternate approaches, 7 alternate inputs or assumptions that you’d like the staff or the consultants to test you can ask for that. 8 And if we can’t provide an answer to you this evening we can go back to our desks and provide one at a 9 later date. 10 11 Commissioner King: Thank you. 12 13 Ms. Silver: Yes, I would also like to just tag on to that is that it is important to recognize that the 14 applicant did submit its own financial analysis, its own pro forma, but the City hired a separate consultant 15 who works directly for the City. We did not have the consultant was not hired by the applicant although 16 the applicant did pay for the cost, but we did do an ethical screening and the consultant peer reviewed 17 and tested all of the assumptions and data that were submitted by the applicant. 18 19 Chair Michael: Ok, so I’m mindful that the role of the Planning and Transportation Commission (PTC) is 20 an advisory body to the Council to make a recommendation on projects such as this and I think it’s our 21 opportunity and responsibility to ask all the tough questions that we can think of, which I think is 22 happening to some extent this evening. Having said that I think the project is very thoughtful, it’s 23 attractive, I think it meets a need, it in many ways surpasses my expectations for what might have been 24 done with the site. Certainly more appropriate than the houses that are in the process of about to be 25 torn down and the use of the Density Bonus Law to provide three affordable housing units obviously a 26 critical need in the community although I think that the infamous jobs/housing imbalance is going to be 27 worse off because you have more commercial space than you have residential units. So I actually don’t 28 believe in that ratio, but I’m just noting for the record that this is not going to help that. 29 30 One of the concerns that I have if I was going to be a skeptic and just blindfold Mr. Borock’s line of 31 reasoning is that is I think that the independent consultant has given us an excellent professional report 32 and I’m not going to question it. And it references the established methodology and I’m not going to 33 question that, but if I’m a skeptic I’m going to say well you know there’s a lot of times when using the 34 established methodology doesn’t necessarily answer the real question. And I in my corporate life we 35 often did Securities and Exchange Commission (SEC) disclosures of executive compensation using the 36 Black-Scholes method which is a means of evaluating exchange traded options and they used Black-37 Scholes formula for valuing employee stock options, which guess what? Exchange traded options aren’t 38 subject to vesting, they’re not subject to being terminated if you change jobs, and they’re not subject to 39 trading window blackouts and nonetheless it’s the formula you’re required to use and it’s useless in my 40 humble opinion and direct personal experience. So I think that we have to follow the rules, you followed 41 the rules, but I’m saying that essentially if you have an assumption about the useful life of a well-built 42 building it may endure for quite a long time. During that time the rents may be subject to annual 43 increases or increases every five years subject to market rates and over time the return on having a 44 certain amount of commercial space is going to be financially positive. And I think that the… and that’s 45 ok, but I think it’s just fact and it’s not factored into the cost method. 46 47 So I think that if I were the applicant I would probably do exactly what the applicant is doing. I think it’s 48 a well-designed building. I would ask for as much in the way of additional floor area as the law allows 49 and that you’ve done that and I think it appears that you’re entitled to that. On the other hand, I think 50 you’re getting a good deal and I think that that’s ok, but I think that it’s it shouldn’t be I don’t believe for 51 a minute that you’re sacrificing with by providing the affordable housing to get the additional FAR. I 52 think it’s a good deal. So good for you, but I’m a skeptic. 53 54 One thing that I am concerned about and I think that the community has been pretty consistent in saying 55 they’re concerned about parking and traffic. And this very nice project is very close to the worst 56 19 intersection in the City. So Page Mill/El Camino is Level of Service (LOS) E currently and then the 1 question of what’s happening with the California Avenue Area Concept Plan and whether the El Camino 2 Grand Boulevard and other anticipated changes is that there’s going to be some cumulative impact not 3 just of your project, but many other projects which are in the pipeline or likely to be happening. And so I 4 think that the community is justifiably sensitive to those issues and you’re kind of right in the center of 5 the cyclone. So I’m going to just note that it looks like you’ve done a great job in the Traffic Impact 6 Analysis (TIA) and it’s way too technical for me to second guess, but I do think that in this area in 7 particular in the City the cumulative impact of all these projects is a concern that I would have and I 8 think that the public has. 9 10 On parking the staff report notes that the code requirement is for 91 vehicle parking spaces and this is 17 11 spaces short of the code requirement. And I think in Vice-Chair Keller’s questions in the responses from 12 your expert there was the sense of doing the shared parking reduction that you were actually going to be 13 in good shape. And I think that rests on certain assumptions and Vice-Chair Keller was getting to how 14 many workers did you anticipate were going to be in the office space? And there’s a belief that we’re 15 seeing a trend that although the Wilson Sonsini offices and the Palo Alto Square offices are more 16 traditional that what is clearly happening in many businesses and maybe some of your best tenants will 17 be people who are taking advantage of people working differently and having maybe one per 250 square 18 feet, which is I think the standard we’ve looked at elsewhere or even less. 19 20 So and then there’s the question of because this is close to transit perhaps the people who live there will 21 actually use transit. So they may leave their car there. They won’t leave, they’re going to leave their 22 car, they’re going to walk to the train station. So if that happens then your assumption that they’re not 23 going to be there at the same time as the retail visitors and the office workers or whatnot is maybe an 24 assumption that is not going to play out exactly as it might have in the past. So my question is if you’re 25 asking for 17 spaces short of the code requirement has there been any thought given to providing some 26 number of Go Passes to employees and of the retail or the commercial space? And I wondered if you 27 would be amenable to providing say 20 Go Passes for some period of time to enhance the probability that 28 your shared parking reduction is going to play out as anticipated? And maybe if I just pose that question 29 to the applicant is that something that you are willing to respond to or? 30 31 Mr. Hopper: I’m Richard Hopper again, traffic consultant. I believe the project will have a Transportation 32 Demand Management (TDM) analysis to be provided at a later time, Transportation Demand 33 Management. And in that you can talk about incentives for transit use and we spoke about it a little bit 34 in our report of what could be done to encourage transit ridership for the office workers as well as the 35 residents to reduce the number of traffic trips and parking. So that’s something that you’ll probably be 36 looking at as a next step. 37 38 Chair Michael: Is that going to come back to us or is that going to come to the Council? 39 40 Mr. Reich: Chair Michael I’d like to draw your attention to Condition of Approval Number 137 that actually 41 does require a TDM plan that would include Go Passes. 42 43 Chair Michael: See I stopped at 136. Late, late at night. 44 45 Mr. Reich: Sorry. It is built into the project, the TDM plan hasn’t been created yet so it hasn’t specified 46 precisely how many, but we will be reviewing that and that is a requirement of the project. 47 48 Chair Michael: Ok, well I’m glad that Condition Number 137 anticipates my curiosity on this point and I 49 would really encourage whoever is going to be working on that issue to promote the incentives to 50 actually create the actual behaviors. Then my only just clarification a couple of comments related to the 51 DEE or Design Enhancement Exceptions and that is going to go to the ARB? That’s not something that 52 we’re dealing with tonight? 53 54 Mr. Reich: Yeah it is traditionally the ARB that would be making their recommendation to City Council on 55 that item. 56 20 1 Chair Michael: Ok, so I think those are really all my questions. And let me now go back to the maker of 2 the Motion and the seconder of the Motion and let you speak to your Motion. 3 4 Commissioner Alcheck: I think that the merits of this project support the Motion that I made tonight. I 5 think that this project as a first mover is a good one. I was inspired to hear in the staff report about how 6 they went out of their way to increase the setback in the front beyond the requirement. We’ve just 7 concluded a discussion about setbacks on El Camino. I think that process implies that we believe front 8 setbacks should be greater especially in a retail environment. So here we have an applicant doing just 9 that. I think the, this may not work on every site, but the location of that driveway was a very creative 10 solution which shows a great deal of respect by this developer for the residents that are directly behind 11 him. There are aspects of this proposal that should be examples to all the proposals that come forward. 12 I’m impressed by them. 13 14 I want to make another comment here with all due respect to Mr. Kawahara’s work. This pro forma 15 requirement does not sit well with me. I find the exercise of demonstrating just how, just how 16 unprofitable an affordable housing unit is to be so counterproductive. I mean I know that’s not exactly 17 what that process is designed to do, but it’s sort of what it does. I mean God forbid a developer make 18 too much money developing housing that’s affordable. It’s almost like if you made too much money 19 building homes that most of us could live in we wouldn’t want you to do it. 20 21 You know as a Commissioner I’m keenly aware of our responsibility to review these projects in 22 accordance with our City’s framework and I do my best to do that. As a young Californian I welcome our 23 State’s effort to impose themselves to encourage affordable housing. And I think there are a great deal 24 of people who would suggest that we ought to be breaking not bending our rules to encourage affordable 25 housing. I wish that you were making ten times what you’re making building these affordable units 26 because if you were maybe more of them would get built. And I think the exercise of trying to make 27 sure that you’re not making too much money with these incentives, these exceptions to justify how much 28 you’re losing on affordable housing is maybe not the best approach, but one that we have to use. So 29 based on our, based on the fact that we did go through that process and I also agree that I have a 30 significant confidence in Mr. Kawahara’s work. I think this is a no brainer so I’m glad that your proposal 31 was as inspired as it was. 32 33 Chair Michael: Commissioner Tanaka. 34 35 Commissioner Tanaka: Yeah, so I too actually think this is a pretty good project. I think it’s, it looks nice, 36 it seems to try to make a good use of the property and space, but I’ve also this Motion came early so I’ve 37 actually been listening to my fellow Commissioners comments and I’ve been thinking a bit about this 38 project more too. So while I did second it I’m actually going to make some amendments or some 39 proposed amendments that we’ll see what the response is. 40 41 Chair Michael: Hopefully this will be acceptable to the seconder of the Motion. 42 43 FRIENDLY AMENDMENT 44 45 Commissioner Tanaka: It might be. It might be, we’ll see. So one of the things, one of the comments 46 mentioned earlier was that this will not help the housing/job imbalance. And it got me thinking that a lot 47 of these are, not a lot of these, but some of these are one bedrooms, but some of them are two and 48 three bedroom units. And one of the benefits of this project is that it is providing affordable housing, but 49 it’s only providing affordable housing to three lucky people in the City or three lucky families in the City. 50 And if instead of a three bedroom or a two bedroom if it was a one bedroom or studio with the same 51 amount of square footage the benefit of this project could be a lot greater and it would help the 52 job/housing imbalance because there would be probably more workers for the same space. And I’m also 53 thinking about like school impacts and other types of issues and so I’d like to make a Motion that this, 54 the mix, not the square footage, but the mix of the units be different. And so instead of three and two 55 21 bedroom units I think this should really go for like one bedroom or studio type of units. So that’s my 1 proposed amendment. 2 3 Chair Michael: Maybe could you clarify the amendment a little bit more quantitatively or? 4 5 Commissioner Tanaka: Sure. So my proposed amendment is that the mix of the residential units instead 6 of being three, two, and one bedrooms this becomes either studios or one bedrooms left to the discretion 7 of the developer. No number of units. No, no. I’m talking about the bedrooms. Like bedrooms or 8 studios so instead of I think the units there would be certainly more units because there would be one 9 bedrooms, but it’s up to the developer to decide. 10 11 Chair Michael: Commissioner Alcheck. 12 13 Commissioner Alcheck: [Off microphone] 14 15 Ms. Gitelman: I guess we’re trying to understand exactly what the intention is. Are you suggesting a 16 reduction in residential square footage or the same residential square footage just fewer bedrooms so 17 they would be kind of loft type units instead of two and three bedroom units? 18 19 Commissioner Tanaka: No, sorry. I should be clearer. I was thinking of more units but smaller units. 20 21 Ms. Gitelman: I see. 22 23 Commissioner Tanaka: Yeah, so same square footage, same split between residential and commercial. I 24 was thinking about in terms of I think one of the fellow Commissioners mentioned job/housing 25 imbalance. Good point. I was thinking about how the City needs more affordable housing and one of 26 the most impact, there’s been a lot of single family homes being developed, but in terms of like for young 27 professionals or seniors who aren’t looking for a massive three bedroom house or five bedroom house 28 there hasn’t been a lot of that development. So I was looking more for more units, smaller units. 29 30 Ms. Gitelman: Well I think it would be appropriate to ask the applicant if they considered that approach 31 to their, meeting their objectives and what their views on that subject are. Obviously if the proposal 32 were revised to have more units staff would have to do some additional analysis of the zoning 33 conformance and some of the requirements like parking for example. 34 35 Chair Michael: Mr. Northway would you like to weigh in on the? 36 37 Commissioner Alcheck: Excuse me, before he does staff would you agree, would that completely 38 undermine the financial analysis? If you completely changed the unit mix? 39 40 Ms. Gitelman: I think it would require a lot of analysis both of zoning requirements and the financials as 41 well. 42 43 Commissioner Alcheck: Would it be safe to assume that if we did make that amendment an entirely new 44 financial analysis would be required? 45 46 Ms. French: Yes. 47 48 Chair Michael: So I’m interested in Mr. Northway’s comment on the issue posed by Commissioner 49 Tanaka. 50 51 Mr. Northway: In the process of putting this together and as you know we’ve been putting this together 52 for quite some time starting with when we did the zone change and as Norm said when, what he wants 53 to create there is this sense of community. And the sense of community is a mixture of families and 54 single people. So we’ve actually spent a lot of time coming up with this mix and we would not like to 55 change the mix. We’ve been in this process we’re going to have our year anniversary next month and 56 22 we really don’t want to change the design and then start through the process again. So this is not, I’m 1 not saying it’s not a noble idea it’s just not one we can really voluntarily do. 2 3 Chair Michael: Commissioner Alcheck. 4 5 FRIENDLY AMENDMENT REJECTED 6 7 Commissioner Alcheck: Not wanting to do something is not the best argument, but I think the best 8 argument here is that unit mix is an incredibly important component of residential multi-family design. 9 And I would suggest that a uniform unit makeup is not a healthy multi-family residential design in my 10 experience in the industry. I also think that that amendment would necessitate a second session here. 11 And the third component is while one of our Commissioners did mention the jobs/housing imbalance he 12 mentioned that he didn’t believe in it. And so I’m not sure there’s support for it among the Commission. 13 I for one don’t believe that the housing/jobs imbalance is a City by City problem. I think it’s a regional or 14 state problem. So I think I will reject that amendment or that is it an amendment? That amendment 15 and allow the Commission to maybe decide it as separate (interrupted) 16 17 Chair Michael: So it’s sufficient to reject the amendment? 18 19 Commissioner Alcheck: Yeah, well the reasons are important. 20 21 Chair Michael: Alright. So it’s back to Commissioner Tanaka. 22 23 Commissioner Tanaka: So I think there are three reasons why I’m proposing this. So first reason is 24 job/housing imbalance whether you believe it or not.. (interrupted) 25 26 Chair Michael: So are willing to make a Substitute Motion? 27 28 UNFRIENDLY AMENDMENT 29 30 Commissioner Tanaka: I want to make a Substitute Unfriendly or I guess Unfriendly Amendment. So 31 one, is the job/housing imbalance. Second one, second reason is school impacts. And the third one is to 32 maximize the benefits. So it’s not just three lucky families in Palo Alto. 33 34 Chair Michael: Ok, is there a second for the Unfriendly Amendment? Turn your mike on. 35 36 Commissioner Alcheck: Are you suggesting, requesting the applicant provide greater than 30 percent 37 affordable housing mix? 38 39 Commissioner Tanaka: No, I’m not because I think that changes the economics significantly. I’m 40 proposing everything the same, smaller, more units. 41 42 Commissioner Alcheck: So would that result in just so I’m clear here, are you suggesting the same 43 percentage of those greater number of units be affordable? 44 45 Commissioner Tanaka: Correct, I’m not changing; I’m not proposing any change because I do realize that 46 would be probably a hardship. 47 48 Ms. Gitelman: Chair Michael if I could interject just for a moment? You know if the Commission is 49 interested in pursuing this line of thought I think you would have to tie it back to the site and design 50 findings. So there has to be a reason that you can’t make the findings for the proposal that’s proposed 51 under current zoning and that you’d think the proposal would have to be amended to address these 52 findings. That’s just off the cuff our thoughts about this line of inquiry. 53 54 Chair Michael: Ok, so this is a I think it’s been a while if ever since we’ve had a matter under the City’s 55 Density Bonus Ordinance since I’ve been on the Commission. So we’re kind of learning some of this. 56 23 And the presentation from the applicant’s counsel I think was helpful in terms of what we needed to 1 justify denial it had to be either illegal or you want to maybe stand up and go over that again? 2 3 Ms. Gitelman: Well Chair Michael if I can interject though I think what Commissioner Tanaka is talking 4 about is not related to the concessions. What he’s talking about is whether this Commission can make 5 the findings for a site and design or whether there are fundamental modifications to the project that are 6 needed to make those findings. And maybe Council for the applicant disagrees, but I think that’s what 7 we’re talking about. 8 9 Chair Michael: Ok, identify yourself again. 10 11 Ms. Prince: So yes, Leigh Prince, attorney for the applicant. So those three findings are the critical ones 12 that you need to make to deny the incentive. Certainly Mr. Tanaka’s Motion isn’t to deny the three 13 incentives with respect to lot coverage, FAR, but and there is a recent case in 2011 Walmer vs. City of 14 Berkeley where the City attempted or actually the applicant or petitioner, sorry, tried to argue through 15 the courts that the City should have modified certain design elements of the project whether it had to do 16 with amenity space or other issues in that mixed-use development. And the Court said that no that really 17 you’re not the intent of State Density Bonus law is to take the project that comes to you and not to 18 design from the dais. So I would direct you to think about that case and take a look at what you’re being 19 presented tonight, is this project and can you make the findings with respect to the incentives that are 20 associated with this project and not one that you might try and redesign. Thanks. 21 22 SECOND 23 24 Chair Michael: So is there a second to the Unfriendly Amendment given what we heard? Vice-Chair Keller 25 is seconding it for the purposes of discussion. Do you want to speak to your for purposes of discussion? 26 27 SECOND WITHDRAWN 28 29 Vice-Chair Keller: Yes. So I think that I agree that we cannot redesign the project and I’m not sure that 30 we can find a site and design finding that involves reduction of the unit size. But the reason I wanted to 31 speak is that when we deal with the issue of unit sizes that we may wish to change the zoning ordinance 32 in such a way to have an average unit size and a maximum unit size. And if we change the zoning 33 ordinance to allow that then when new projects came before us we could do that. But this project is 34 under the existing zoning ordinance and therefore it’s difficult for us to redesign the project at this time. 35 So I am completely in sympathy with your intent, but I believe that we can’t do it on this project but that 36 I’m supportive of doing it in general in the zoning ordinance. So with that said I withdraw my second. 37 38 UNFRIENDLY AMENDMENT FAILED 39 40 Chair Michael: I think the Unfriendly Amendment fails for lack of a second. You still have the floor. 41 42 Commissioner Tanaka: Ok, that’s all I had to say. 43 44 Chair Michael: Any other comments on the Motion before we vote? Commissioner King. 45 46 Commissioner King: One process question. So if we were, actually two process questions. So if we were 47 to not approve the project then the applicant has the option of either coming back with some updates or 48 going directly to Council, is that correct? 49 50 Ms. French: The normal course on a site and design is if the PTC acts favorably then the next step is the 51 ARB. If there’s a vote toward not recommending the project to the Council then it wouldn’t proceed to 52 the ARB it would precede to the Council. 53 54 Commissioner King: Under appeal? Is that (interrupted) 55 56 24 Ms. French: No, just I think the way the ordinance is written it says you go to the ARB next upon a 1 favorable recommendation. 2 3 Commissioner King: And if no favorable recommendation is made then it goes to Council? 4 5 Ms. French: I believe so. We can double check that. 6 7 Commissioner King: Ok. And then my second question is so if I could not write the written finding based 8 on substantial evidence because I don’t believe I have all the evidence to vote against the project does 9 that mean I’m bound to vote for the project? I’ll ask this to Assistant City Attorney Cara Silver. 10 11 Ms. Silver: So if you feel that you don’t have sufficient information to either make the findings for site and 12 design review and I would refer you to Page 2 of Exhibit A, which contains the findings related to design 13 review, site and design review. That those are (interrupted) 14 15 Commissioner King: About where is that in the one inch stack? 16 17 Ms. Silver: Yes, so Attachment A and maybe it would be helpful just to go over your purview tonight. 18 19 Commissioner King: Thank you. 20 21 Ms. Silver: So first of all you have the MND and that is Attachment E to this large staff report. Your 22 purview there is to review that and make a recommendation to Council. The second area of purview 23 since this is a zoning compliant project, but it has a site and design overlay in the zone that was created 24 by the Council a couple of years ago you need to make the findings associated with the site and design 25 overlay. And that is, those findings are contained in Attachment A, Section 3 of the Record of Land Use 26 Action. There are four findings. And if you like I can read those findings. First that the use will be 27 constructed and operated in a manner that will be orderly, harmonious, and compatible with existing or 28 potential uses of adjoining or nearby sites. Number 2 the project is consistent with the goal of ensuring 29 the desirability of investment or the conduct of business research or educational activities or other 30 authorized occupations in the same or adjacent areas. Number 3, sound principles of environmental 31 design and ecological balance are observed in the project. And Number 4, the use will be in accord with 32 the Palo Alto Comprehensive Plan. So if you don’t have sufficient information to make those findings you 33 can always request additional information. 34 35 The final area within your purview is a recommendation regarding the Density Bonus, the three 36 concessions. And we’ve talked about that. And again if you don’t have sufficient information to make a 37 recommendation to Council my suggestion on that would be to ask for clarifying information. 38 39 Commissioner King: Ok. Thank you. Yeah, so I guess my quandary is that I don’t know what… I have 40 no problem I’m in general a free marketer whatever developers make under existing zoning is fine by me. 41 When we go out of existing zoning then I’m trying to look at what is the benefit that we’re getting? So 42 for me three units of BMR in exchange for 11,000 square feet of above zoning I know I use the term 43 zoning specific to what exists now and not the fact that the State requires us to allow a different zoning 44 doesn’t seem like a great trade off to me. That’s at 250 square foot per employee that’s 44 new 45 employees above existing zoning and my, although other Commissioners will disagree I don’t think the 46 community thinks that’s a great thing. And so I’m in a quandary though I don’t know what I would, I’m 47 skeptical again of the report just because of the variables that are in that report. 48 49 So I would in general say that I’m not in support of the project as it sits, but it sounds like really I have 50 to, I should approve it if I can’t find… I guess I could say it doesn’t agree with the Comp Plan because I 51 know there are things I could cite I could go through the Comp Plan and pull out something that says we 52 shouldn’t be adding extra density at the expense of traffic and parking issues, but that would be 53 somewhat disingenuous because I don’t, I couldn’t cite it off the top of my head. So I guess coming 54 back to you do I still it sounds like I do have to vote, I should vote yes in the absence of having a clear 55 demand for additional information? Yeah, I agree. Appointed. 56 25 1 Ms. Gitelman: Well, I don’t know that any of us here will take the step of telling you how you should 2 vote, but to answer the questions inherent in your statement I think your choices are to support the 3 Motion if you think the findings can be made and if you think you have sufficient information with which 4 to proceed with the design or with the concessions that are required under the State Density Bonus. You 5 could alternatively you could if you disagree that the findings can be made you could vote against the 6 Motion or you could request additional information with which to evaluate whether the concessions are in 7 fact needed to provide for the affordable units. 8 9 Commissioner King: Ok, thank you. 10 11 Chair Michael: Commissioner Alcheck. 12 13 Commissioner Alcheck: In theory a Commissioner could abstain from the vote? 14 15 Ms. Gitelman: Yes. 16 17 Commissioner Alcheck: They are (interrupted) 18 19 Ms. Gitelman: I think. 20 21 Commissioner Alcheck: Like it was a difficult decision or something? 22 23 Ms. Gitelman: Sure. 24 25 Chair Michael: So before we vote, ok. So I would just comment that I think that there’s an issue for the 26 Commission to improve its process of dealing with applications of this sort separate and apart from the 27 merits of the project. So I think that I’m anticipating that the project may get a favorable vote from the 28 Commission and it’s actually for all the right reasons, but I think that it’s been difficult for us tonight to go 29 through this in an efficient and orderly fashion. Part of it I think relates to the fact that we get a fairly 30 thick document with a number of appendices which aren’t well labeled. You can’t find them because it’s 31 printed on double sides, the draft MND where it starts is concealed by the staple so you can’t find it 32 looking for it. So it’s hard to actually navigate through the materials in order to prepare adequately as 33 diligent Commissioners to have this discussion and be respectful of the applicant and staff’s time and 34 whatnot. So I think probably we can do a better job of organizing the briefing materials for us to be 35 more intelligently prepared as we try to do our job, but I think that’s irrespective that’s more a procedure 36 issue for us and how we work with staff rather than not so much on the merits of the project. So Vice-37 Chair Keller you had something you wanted to say? 38 39 Vice-Chair Keller: Yes, a few things. I’d like to ask a few questions. So firstly I’d like to understand what 40 the, what the substantial evidence standard now I’m familiar with the standard of beyond a reasonable 41 doubt. I’m familiar with the standard of preponderance of evidence. Where does substantial evidence fit 42 in that sequence? 43 44 Ms. Silver: It’s substantial evidence means that there is some evidence that you can point to in the 45 record. It doesn’t have to be a preponderance of the evidence so it’s actually a lower standard, but 46 there’s some supporting documentation to support the findings that you need to make. 47 48 Vice-Chair Keller: Thank you. The other question that I have is do we have any idea what the life of such 49 a project is? Is it, would we expect a project to be there 50 years? What would be 30 years? What 50 would we expect this project to be there? I mean after all with affordable housing that is deed restricted 51 by for market rate I mean for purchased housing is typically 55 years, isn’t that right? 52 53 Ms. French: Our housing agreement that would be prepared would identify the number of years, the term 54 of the affordable housing. And typically it’s yeah, 30 years. 55 56 26 Vice-Chair Keller: So if this project were around for 50 years then for 30 years there would be a 1 restriction that it’s BMR and for 20 years beyond that they’d be able to charge market rate for the 2 property. Is that am I understanding that correctly? 3 4 Ms. French: I believe so. That’s correct. 5 6 Vice-Chair Keller: Thank you. And in terms, so firstly I don’t share the Chair’s reticence to question 7 experts. I serve as an expert witness on patent cases and my job is to fight other experts who serve as 8 expert witness on patent cases and so we’re dueling experts in that regard. So I don’t have any problem 9 questioning experts. And although I’m not an economist I am a computer scientist so I and I actually so 10 I understand assumptions and there are a lot of assumptions that are unstated in here. So the 11 assumption for this in terms of the return on investment what life of the project did you assume for that? 12 13 Mr. Kawahara: Well, first of all just to back up the analysis that we did was would be considered a sort of 14 static analysis, which means that we’re taking a point in time in terms of the income this generates an 15 annual income that’s used to generate the return estimate as compared to the estimate of development 16 costs. So what it doesn’t do which speaks to this question about how, what’s the useful life of a building 17 is a long term 30, 40, 50 year cash flow analysis that evaluates what the value of the building will be over 18 an extended period of time. That is an alternative form of analysis that could be done, but as it relates 19 to this specific question about the fact that the affordability restrictions will only run for perhaps 30 years 20 and those units can convert to market rate after that period of time having done a lot of these analyses 21 my conclusion would be likely to be that that would not impact the conclusion of our analysis. And the 22 reason why has strictly to do with the time value of money and the fact that a dollar today is worth a lot 23 more than a dollar 30, 40, or 50 years from today. So when you take into account the fact that sure 24 you’re going to be able to generate more rental income from those three units 30 years from now when 25 you bring that back to an analysis in what it means today it’s actually quite nominal. 26 27 Vice-Chair Keller: So you have here on Page 7 of your report, first of all let me talk about the chart. Can 28 we get to this analysis page of the slide? Can we go back to that please? I don’t know, it’s not 29 numbered and I would request that please number the pages in the future. But I’m talking about the last 30 page with content. Thank you. So it would be a lot easier for us to refer to slide numbers if they were 31 numbered. 32 33 So on here you on the right hand side you have development return approach and you compare the 34 development returns of the proposed project, which is 6.5 percent versus without off menu concessions. 35 And what, I don’t remember seeing that number in the report. I remember seeing it in comparison 36 between that and the project with the highest value without any BMR housing. So I’m confused about 37 that number. 38 39 Mr. Kawahara: Ok, let me clarify that point. You’re correct that that number does not appear in the 40 memo that we wrote and the reason why is because the memo was written describing the development 41 cost approach not the development return approach. So back, to back up to my earlier presentation we 42 have two alternative approaches to analyzing the economic question. We felt that the development cost 43 approach is sort of the preferred approach for the different advantages and disadvantages, reasons that 44 we were describing earlier so we were sort of focused on that approach and that’s the memo that was 45 included in the package. But we wanted to explain that there is an alternative approach, the 46 development return approach and these are the outcomes of that analysis. 47 48 Vice-Chair Keller: So what I see here is that number 6.5 seems amazingly like the 6.5 that’s in the table 49 that’s not numbered in the middle of Page 7 of your report. Am I correct? 50 51 Mr. Kawahara: I believe yes, I believe it’s the same. What we’re doing in both approaches is analyzing 52 the one commonality between the two approaches is that we are analyzing the return of the proposed 53 project. Ina this instance it’s the same, it’s the same number. 54 55 27 Vice-Chair Keller: But in that diagram in that document you have the alternative under CS zoning actually 1 has a return of 6.15 percent. So in other words this project has a higher return than the return of the 2 maximum value project that can be built under current zoning without any concessions. Am I confused 3 about that or am (interrupted) 4 5 Mr. Kawahara: No, you’ve got it correct. 6 7 Vice-Chair Keller: And in fact that’s why your sentence here says as shown on the bottom of Page 6 and 8 the top of Page 7, it basically says the results indicate that the requested incentives each one contributes 9 to project value are also project potential benefit to the project i.e. they help reduce the cost of the 10 project and also demonstrates why the applicant is motivated to fund the build, sorry, to build the 11 proposed project rather than the base case under CS zoning. In other words the applicant is actually 12 making more money, ok? So in terms of the development return approach you actually have shown that 13 the applicant is making more money than this and therefore of and there’s 6.5 and 6.15 and therefore it 14 is possible under the development return approach that a concession might be reduced so that the 2.6 15 point so you could get that down to 6.15. So is there a calculation of how much reduced concession 16 would match the 6.15 return of the maximum CS zoning? 17 18 Mr. Kawahara: Well, first of all just to back up I mean I think I would agree with your line of thinking if 19 the 6.5 was a higher return. In other words if we felt like there was some windfall profit that the 20 developer was achieving here, let’s just pick a number, let’s say they were achieving a 12 percent return 21 we would conclude from that that they may not need all three concessions to fund the affordable housing 22 costs because there’s “an excess profit” in the project. That does based on our analysis that is not the 23 case because the 6.5 percent return is not an excessive return. 24 25 SUBSTITUTE MOTION 26 27 Vice-Chair Keller: Well, what I’m trying to understand here and let me explain why I’m going through this 28 exercise so this is as was mentioned by many people this is the first project that we’ve had under the 29 Housing Density Bonus Law. And it’s the first time that we’ve had this kind of fiscal analysis. And 30 therefore we’re setting a precedent in some sense about how we do this and therefore it seems to me 31 that it’s important if you’re going to do it to do it right. That’s the first thing. 32 33 Secondly, this shows that the kind of calculation that’s done here essentially will blow our zoning out of 34 the water. So we have zoning CS. Essentially this calculation can be replicated all over the City and 35 therefore the zoning we have for CS and the limitations there are essentially meaningless because I’m 36 assuming these findings can happen anywhere. And as a result of that we would expect this kind of 37 doubling of office space to happen a lot elsewhere in this City so I think that particular scrutiny is 38 important at this juncture so that we understand this. 39 40 So I think that the issue from my point of view of substantial evidence as I understand the attorney says 41 is that the substantial evidence that the level of concessions and I interpret that as not the three 42 concessions themselves, but not only the three concessions but how much each of those concessions are. 43 So if the concession for example is they ask for five units of whatever and four units of whatever would 44 do then that’s more than they need. And so what I’m asking you to calculate and I’m going to make a 45 Motion to this effect, I’m asking for more information to calculate so that based on your rate of return of 46 6.15 how much increase in the zoning do they need to match that return? Because that’s what they’re 47 entitled to, matching the return. They are not entitled to more, they are entitled to matching. 48 49 So I’m going to make the Motion, to make the Substitute Motion. The Substitute Motion is that this item 50 be continued to a date uncertain with additional analysis of the development return approach so that the, 51 we can identify the project that is necessary to provide the same rate of return as the most beneficial CS 52 zoning. 53 54 SUBSTITUTE MOTION SECONDED 55 56 28 Chair Michael: No? You can second it. Well, I’m going to ask for a second of the Motion. It is seconded 1 by Commissioner Tanaka and then we’ve got a question from Commissioner, excuse me? Are you out of 2 order? So Vice-Chair Keller if you haven’t already done so do you want to clarify your Motion briefly? 3 4 Vice-Chair Keller: Yes. My Motion is to continue this item to a date uncertain for the, for I guess KMA to 5 redo the analysis to determine what level of concessions are needed in order to provide a rate of return 6 to the applicant that matches the rate of return of the best project that can be built under CS zoning, 7 which is that that’s on the left hand side of the middle of Page 7 under the development return approach. 8 Thank you. 9 10 Chair Michael: Commissioner Tanaka. 11 12 Commissioner Tanaka: Yeah, so I think this is kind of like the first time this has been used so I think a lot 13 of the arguments make sense. I think several other Commissioners also have expressed doubts or the 14 need for additional information which still is not very clear as to what additional information is needed. 15 Perhaps what we should do is send questions in to staff so that we could help clarify unknown, things 16 that are still unknown. So I’m going to support this. 17 18 Chair Michael: Commissioner Alcheck. 19 20 Commissioner Alcheck: I applaud your line of thinking. I think you are the staunchest advocate for this 21 pro forma analysis on this Commission but I think what you’re trying to do is play developer up here. 22 And with all due respect you’re making the assumption that five percent return would be suitable and 23 anybody would go for it. And that is an assumption I think is very dangerous. We typically don’t say 24 hey, if you get a five percent return that’s a great return. Typically the, that is not a return a rate, first of 25 all that’s not the framework we used. So I think it’s not necessarily the preferred framework we’ve heard 26 from and I think the notion that you would like to essentially get to put this developer in a situation 27 where they can make absolutely, I mean let me put it this way the analysis from the expert suggests that 28 the value of the exceptions does not outweigh the costs of the housing. That’s what it says. The 29 affordable housing costs exceed the incremental value of these concessions, which is to say that if they 30 didn’t build any affordable housing they would actually not necessarily incur the costs that would be, that 31 would fail to be outweighed by the concessions. 32 33 There has to be some sense of respect for the notion that when a owner of a parcel comes forward with 34 a proposal that meets the criteria that the staff has worked on for God knows how long, that frankly if 35 you’re interested in designing the building you should invest in the man. I think this notion that you are 36 asking I actually think that what you’re asking staff to do at this point is setting a terrible precedent for 37 the first time we go through this process. Everything about this project, it’s horizontal massing, the way 38 they’ve worked with the neighbors, their setbacks, their unit mix, their underground parking solution, the 39 avoidance of the site specific environmental, everything about it suggests that they’ve done their best to 40 put forth a proposal that satisfies nearly every requirement we have and then on top of that they’re 41 offering to do certain affordable housing units. They’re not offering, first of all the notion that we would 42 even proceed (interrupted) 43 44 Chair Michael: So are you going to wrap this up? 45 46 Commissioner Alcheck: Yeah, sure. My point is the notion we would proceed with that is to suggest a 47 different proposal and I don’t think you could justify that request because they may say they’re not going 48 to bring that proposal forward so this exercise is meaningless. 49 50 Chair Michael: Other comments from other Commissioners? Commissioner King. 51 52 Commissioner King: Let’s see so I think the developers are acting exactly as they should act. They’re 53 looking at the combination of economics and State law and applying to maximize their potential return on 54 the investment, which is what every developer would do. I because of the State law portion it’s very 55 challenging for us to challenge the what’s been presented to us, but I don’t think that your Motion, I 56 29 would not support because I don’t think that that’s the right way to go about it. That and particularly in 1 that this specific case that you’re discussing you’re looking at an option which the and correct me if I’m 2 wrong staff, but I believe that if they were to take the current zoning plan they would not have to go 3 through much through a significant longer process. That they would be able to just apply and I don’t 4 think it would even come before us. Is that correct? If they developed under existing CS zoning? 5 6 Ms. French: It’s CSD. The D was put on it specifically during that rezoning process so that it would have 7 to come to the Planning Commission. 8 9 Commissioner King: Ok, so then I may be, ok. So my point is though that for them to go to the BMR 10 housing getting the exceptions that I believe they have to put in more energy. So there are more costs 11 to them which may not be reflected in the model. Is that accurate? That the you’ve got time, value of 12 money, carrying costs so between the two paths of them taking the two options is there a difference in 13 how long it would take for them to complete the project? 14 15 Mr. Kawahara: Not specifically no. That’s a subtlety that probably was not really captured in our analysis. 16 17 Commissioner King: Ok. Ok, so your belief would be there isn’t either, either project you’ve shown here 18 in your analysis would end up going through our process at approximately the same rate and getting 19 completed at approximately the (interrupted) 20 21 Mr. Kawahara: Yes. I mean that’s a level of detail of our analysis that we just didn’t get into. 22 23 Commissioner King: Ok, did the applicant have his hand up? I don’t know. 24 25 Mr. Northway: When Reed put his report out we did spend some time looking at the less than CS zone 26 option, which Reed analyzed. We didn’t specifically design a building, but I can tell you with the analysis 27 that we did with having the parking all on the ground level that would the only way that you can do that 28 is by having the entire ground floor level be parking. It would remove the retail aspect from the project. 29 I doubt very seriously if you would be appreciative of it. I don’t think the ARB would be appreciative of it 30 and I personally would prefer not to design a building that looked that way. It would be pedestrian very 31 unfriendly because it would be all parking and some kind of phony façade on Page Mill Road. It was 32 done as a financial alternative, which Reed is charged to do. We spent the time to look and see what the 33 planning and architectural ramifications of it are and it’s a building that would never be approved in this 34 town and I don’t think many people would want to design one that was only parking on the ground floor 35 with office and housing above. 36 37 Chair Michael: Thank you. Alright Commissioner Gardias do you have any comments? 38 39 Commissioner Gardias: Yes, thank you very much. So I totally agree with the spirit of the Motion that 40 you proposed, but not with the Motion itself. I don’t think that it requires Motion. I also had some 41 questions about quantitative analysis of this lot but for the future purpose not for this project in 42 particular. I think that we should start methodology that would allow us to compare projects that have 43 affordable housing element to other projects that we have in Palo Alto and also to other municipalities 44 and I think that this what you proposed this calculation might be a part of this, but as I mentioned I don’t 45 think that Motion would be required here. So Chair please help me from the procedural perspective. I 46 would like to propose (interrupted) 47 48 Chair Michael: No, I think you’re doing fine. 49 50 Commissioner Gardias: Either a Motion or (interrupted) 51 52 Chair Michael: No, I just I think you’re indicating that you’re not going to support the (interrupted) 53 54 Commissioner Gardias: Right, but I would like to suggest something else. So (interrupted) 55 56 30 Chair Michael: Oh, please don’t. 1 2 Commissioner Gardias: Friendly amendment. I can make a Friendly amendment? 3 4 Chair Michael: Do you have to? 5 6 Commissioner Gardias: Yes. I would like to support original Motion as proposed by Commissioner 7 Alcheck. 8 9 Chair Michael: That’s, you don’t have to do that. That’s still there. 10 11 Commissioner Gardias: Thank you. 12 13 VOTE ON SUBSTITUTE MOTION 14 15 Chair Michael: Ok. So I’m inclined not to support the Unfriendly Amendment but perhaps for different 16 reasons. I’m a skeptic of the development cost approach and the development return approach not 17 withstanding that they’re established methodologies. I don’t believe they satisfy my concerns as a 18 Commissioner or as a resident. And I don’t really think they help us understand the merits of the project. 19 I think that in many ways this is an excellent project that meets a lot of the public policy goals of the City 20 and it will ultimately get decided on the basis of its merits so our discussion tonight is not going to derail 21 that at least too much. I also think that the, I’m not sure where it came from but I’m more than willing 22 to question any expert on any topic at any time. And but I don’t believe that it’s within the Commissions 23 purview to edict that there’s some acceptable return on investment or some level of risk and I don’t think 24 that’s something that we’re that’s within our competency much less our purview. Also for the record I 25 think that the passionate advocacy of Commissioner Alcheck relative to protecting the purview of 26 developers is sincere, but it’s somewhat out of place. So I think that that’s not really our role on the 27 Commission in terms of how we evaluate the materials. 28 29 I also just want to note that we comply with the Brown Act. We don’t have meetings other than right 30 here. You know to get this much material and not have any way to digest it in advance of tonight makes 31 a really unwieldy process as we sort of diligently and sincerely try to explore all the details much less that 32 the TDM are 167 of the proposed conditions of the Exhibit E of Attachment A, which isn’t identified and 33 you can’t find it even though you stayed up late trying to read the whole thing. So we’ve got to do better 34 on how we organize the materials because it does a disservice to us and to the applicant and I apologize 35 for how hard this is. 36 37 So let’s have a vote on the Unfriendly… No. I want a vote on the Unfriendly Amendment. All in favor? 38 One in favor. All opposed? Substitute Motion. Ok, so it’s defeated. So let’s have a vote on the main 39 Motion, which is… do you have to? Alright, Vice-Chair Keller. 40 41 SUBSTITUTE MOTION FAILED (1-5-1, Commissioner Rosenblum absent) 42 43 Vice-Chair Keller: So I want to make two quick observations. The first observation is that this project 44 because it involves excavation will not be able to start construction essentially until next spring because I 45 doubt if it will be able to be finished in terms of the ARB and all that process in the next, soon enough to 46 start construction. So that’s one thing. 47 48 The second thing is I do think that we are very likely to find a lot of very oversized buildings compared to 49 standard zoning in the future using this approach and essentially our zoning will, our zoning limitations 50 because of this approach will be meaningless. Thank you. 51 52 Chair Michael: So (interrupted) 53 54 Ms. Gitelman: I’m sorry, just to clarify if I could? Because of the State Density Bonus Law, not because 55 of some approach in the analysis? I mean I think we all when the Density Bonus, the local Density Bonus 56 31 Ordinance was brought to Council I think there was universal distaste for having to enact something or 1 having to react to a State mandate that does have the potential to allow densities in excess of what local 2 zoning provides for, but that is the State law and I think our economic consultant has done a very 3 credible job of providing analysis that he’s presented very well here this evening. I don’t want our 4 frustration at the law and the State mandate to reflect on the quality of that analysis. 5 6 Vice-Chair Keller: Let me just add that perhaps we should amend the our State Density Bonus Law 7 implementing ordinance to implement the kind of analysis that Commissioner King was suggesting, which 8 is a value if you will, a value based approach rather than these approaches that are here, but that we’d 9 have to amend the ordinance I think to do that. 10 11 VOTE 12 13 Chair Michael: So with that I’m going to call for a vote on the Motion, which is just to restate because we 14 may have lost track of it it’s voting the staff recommendation. Is that correct? Ok. All in favor? 15 Opposed? So Commissioners King and Vice-Chair Keller opposed, others in favor so the Motion passes 4-16 2. And we’re going to take a five minute recess. 17 18 Commissioner Alcheck: Just, I’m going to take off so I’m just letting the record know that I have to leave. 19 I have to catch a flight. 20 21 Commission Action: Motion to approve staff recommendation by Commissioner Alcheck, second by 22 Commissioner Tanaka. Unfriendly amendment by Commissioner Tanaka, second by Vice-chair Keller 23 failed. Original motion to approve staff recommendation passed 4-2-1 with Commissioner Rosenblum 24 absent. 25 26 MOTION PASSED (4-2-1, Commissioner Rosenblum absent) 27 Attachment J City of Palo Alto Page 1 1 Architectural Review Board 2 Draft Verbatim Minutes 3 October 30, 2014 4 5 EXCERPT 6 . 7 8 9 Public Hearing 10 11 Continued Items: 12 13 1. 441 Page Mill Road [13PLN-00307]: Request by Stoecker and Northway Architects Inc. on 14 behalf of Norm Schwab for Site and Design Review of a three-story, 35 foot tall, 35,521 sf mixed-15 use building replacing four single family residential homes on a 26,926 sf site, providing 91 16 parking spaces on-grade and one level below grade, including three off-menu concessions 17 requested pursuant to the State density bonus law, and requesting a Design Enhancement 18 Exception for (a) a 7' setback from the front property line (3' additional setback beyond the 19 “build-to-line” ), and (b) a three foot encroachment into the 10 foot landscape buffer area at the 20 rear of the site. Zone District: Commercial Service (CS) with a Site and Design (D) combining 21 district. Environmental Assessment: An Initial Study and Mitigated Negative Declaration were 22 prepared and published on November 8, 2013, for the initial 30 day public review and comment 23 period that ended December 9, 2013. The Planning and Transportation Commission 24 recommended approval of the project on June 11, 2014. The hearing of this item was continued 25 from the October 2, 2014 ARB meeting to this date. 26 27 Russ Reich, Senior Planner: [Note-recording starts with meeting in progress] … that rear façade was 28 mentioned as well as the light impacts to neighbors wanting nightshades for to reduce impacts of lighting 29 from the office to the residential neighbors behind, too many competing elements and lack of vocabulary 30 and readability. So the applicant has made a number of revisions to the plan. I’ll kind of go, briefly go 31 through those. I’m sure they will give a much more detailed presentation showing you how they’ve 32 changed the project. So they’ve reintroduced the richer ceramic quartz tile material at the first and 33 second floors of the building to improve the building’s skin and address some of the aesthetic concerns, 34 reduce some of the glazing at the first and second floors at the front and rear of the building with the 35 introduction of vertical bands of the ceramic quartz tile material, wall and vertical mullion placement is 36 related to the third floor plan above, the retail entry doors were located within the solid vertical walls. 37 They removed the three-story curved entry tower element so there’s no longer a Design Enhancement 38 Exception (DEE) for height and replaced it with a two-story squared up form with glass corner to 39 correspond with the design of the other corners of the building. They reduced the open tower element at 40 the third floor by recessing it back from the lower floors. The elevator tower was accentuated with the 41 ceramic quartz tile material at both the interior and exterior and they added ground floor entry canopy to 42 announce the entry for the residential and office uses. So with that I will turn it over to the applicant for 43 their presentation. Thank you. 44 45 Acting Chair Popp: Great, I’ll give you 5-10 minutes for your presentation and everything working alright? 46 Great. 47 48 Alana Campana, Stoecker & Northway Architects: Alright, Alana Campana of Stoecker & Northway 49 Architects. I will try to keep this since we’ve seen this… can you hear me? Alright, can you hear me 50 now? Alright. 51 52 Attachment J City of Palo Alto Page 2 Ok, since you have seen this before and are very familiar with it I will try to keep it brief and just stick to 1 what has changed. Just to remind you this is the previous design, which you… oh, sorry. Ok, I will try to 2 keep it brief and stick to just what has changed since the last time you saw this. Here is the previous 3 design just to remind you what you disliked. The main issues we were to resolve was the no curved or 4 three-story high entry tower design. You wanted a more cohesive design. We had too much glass at the 5 commercial facades. You wanted us to introduce more vertical elements and removal of all the stone 6 was detrimental to the building and you were hoping we could put some back in a more appropriate way. 7 8 Here is our proposed building design. The main changes we now have a two-story square entry lobby 9 with an added entrance canopy, a more dynamic version of the retail canopies. The third floor was 10 substantially reduced in height and bulk. We pulled it back from the lower floors trying to visually divorce 11 it from those lower floors. The architecture of that third floor lobby is now in keeping with the third floor 12 itself and we also have an exterior balcony on the third floor that allows for some plants right above that 13 main entry as well. The corner glass vocabulary we have now taken into the entry into the main lobby 14 space so now we’re using that same theme at the lobby all the way up, all three floors, and we have also 15 done a more subtle version of the corner glass theme on the third floor at 3 key corner units where we’ve 16 brought some windows into the corners and added horizontal in those windows to unify the whole 17 building. We also added vertical wall sections on both the front and rear commercial facades and do we 18 have a pointer here? Oops. Sorry, here we go. Here we’ve added walls, here and over here. Sorry. So 19 over by the garage there’s a wall. Over here we’ve added a vertical wall, here we’d added a vertical wall 20 on the front, and now stone is used for the main section of the two-story kind of commercial façade that 21 goes along Page Mill. It starts over here by the lobby and wraps all the way around this volume along 22 Page Mill and returns and goes up the side of the stair on the south side. So that entire volume is all 23 stone. 24 25 There we go. DEE’s we now have two DEEs. We removed the height DEE. The whole building is 35 26 feet, only the elevator tower is 40 feet and that’s allowed by code. And again to recap the two DEE’s we 27 have remaining are related to the fact that we had to pull, push the building and the basement parking 28 level below back three feet to allow for street trees per the City’s request. 29 30 Site and first floor plan: again we changed the lobby plans to square. We shifted one of the retail doors 31 towards the main entrance and that allowed us to redo the tree spacing and allow a little more space for 32 the number sculptures for the One Percent for Art Program that is going to be in the front. And then all 33 the planter shapes were also changed to rectilinear to match. And again, the walls we added as well. 34 Second floor, again changed the lobby shape to square. We’ve added the vertical walls both in front and 35 back and automatic nightshades have always been in the program for the back façade, just wanted to 36 make that clear. Third floor: again we reduce, we greatly reduced the bulk size of the third floor to pull it 37 back and divorce it from that, from the lower floors below. We now have a, we’re allowed to have a deck 38 out here that you can walk out onto with some planting. And then the stone, the ceramic quartz tile that 39 is on the lower floors and on the side of the elevator is also brought in on this entire volume. So the 40 courtyard now has one additional material from the lower floors. 41 42 Here’s the view along the Kelly-Moore side. We accentuated the elevator tower as a vertical design 43 element and we have clad it both inside the lobby spaces as well as outside with the ceramic quartz tile 44 to really accentuate as a vertical stone element. We’ve also added this entrance canopy, a little more 45 dynamic version with the angled posts to further call out the main entrance. Again, corner theme 46 vocabulary of the third floor; again, you can see the corner windows that we’ve now created. We pushed 47 all the windows on the third floor into the corners and added the mullions. We also tried to play with the 48 horizontal bands and the way that they and the canopies overlap these stone walls. So some go a couple 49 of feet, some go four, five, six feet to try and get a more dynamic diagonal that is more in keeping with 50 what’s happening at the stair elevation on the south side. And then also the vertical mullions and the 51 edges of these vertical walls tie you directly to something that’s happening above and below. So this wall 52 here is directly related to the wall above, this mullion is directly related to the wall above, over at the 53 Attachment J City of Palo Alto Page 3 garage this edge of the wall and this mullion are related to the garage entrance below, this mullion up 1 here is directly below the wall above. 2 3 Ok, again the, this lobby is now in keeping with the architecture of the third floor and it’s hard to tell, but 4 it’s the yellow accent color that matches this side over here. Then here you can see the planting on the 5 third floor a little better. And we did again reintroduce stone on this entire volume here. We treated this 6 whole thing as a big stone volume and used the base to tie all the stone vertical walls together and the 7 stone goes all the way up the side of the stair, which we can see better here. So the stone going up the 8 side of the stair provides a really nice contrast to the cement plaster of the stair and really even 9 emphasizes this dynamic stair line even more. We also added the corner glass theme here at this inset 10 for consistency. 11 12 And next, and on the rear elevation again you can see the vertical walls we’ve added. They correspond 13 to openings in the garage now below as well and they also correspond to things happening on the third 14 floor. So this wall is there aligned with the two decks on these sides. This wall is aligned with a pop out 15 here. And then we also brought this, sun shade line through the vertical wall sections here in the back. 16 It’s also true at the front in order to kind of reduce the height of these to break up that wall. Ok and 17 again that’s really what the neighbors will see. And nothing has changed in the courtyard except for the 18 reduced lobby height, which we don’t actually have a rendering of and the on the other side, but 19 everything else is the same. So again I’ll just quickly go through these so you can see what they look 20 like. Alright. 21 22 Acting Chair Popp: Thank you very much. So at this point I’ll open the public hearing. We have one card 23 from the public, Mr. Buchanan. And if anyone else wishes to speak please provide us with a card and Mr. 24 Buchanan we’ll give you three minutes to address the Board. There’s a remote microphone for you to 25 use here. Oh, I’ll since we don’t have a light for you today I’ll just warn you when you get to 30 seconds. 26 27 Neilson Buchanan: Believe it or not I’ll try to be brief and I’m glad to see Amy here because I see her, I 28 think she is a key pivot point on this project. I find it frustrating to come to talk to you because you are 29 not really equipped or empowered to address the parking impact upon neighborhoods. So I apologize for 30 taking your time, but this is the only place to introduce some issues that need to flow on up to the next 31 City Council. 32 33 I would like to take exception to one sentence in the report having to do with the parking adjustment 34 request and it basically says this is supportable since staff has determined 91 spaces would be adequate 35 to serve all proposed uses on this site without creating an offsite parking impact. My first question and I 36 hope it could be answered even in discussion or retrospectively because I think it does need to find its 37 way to the next Council: what principle is being used to form that conclusion and why is it not in the 38 report so that people can be engaged, can prepare a counterpoint to that finding? I am not an 39 architectural expert, but I have become the most qualified nonprofessional parking expert. I can’t 40 conceive of any principle that could say there’s not some reasonable chance that people will take offsite 41 parking just for a matter of preference; they are in a hurry, a visitor will take advantage of an open 42 parking space on the streets. If you, I didn’t bring my maps, but I’ve got exquisite mapping from Park 43 Avenue to West Meadow and when you look at the density of parked vehicles around that, that site there 44 is really no plausible explanation except when some people will park on the street it is simply going to 45 displace people down the street. So that’s the conversation that needs to happen at some point. I don’t 46 think this is particularly the best spot, but I think we’re leaving just assumptions that the staff report is 47 complete and I don’t blame Amy and staff for doing that because this is traditional way to present 48 projects. And the question is how do we break some tradition? Let me finish up with one thing. 49 50 Acting Chair Popp: Thirty seconds. 51 52 Mr. Buchanan: I’m glad Amy’s here because both of us were in the AOL Auditorium when Ray Paul 53 presented his project and before he withdrew it or it was retracted, but he said something that I have not 54 Attachment J City of Palo Alto Page 4 heard from any developer when to the neighbors, who the neighbors were there. He says, you don’t 1 want, I’m paraphrasing him, you don’t want this type of project unless you have residential permit 2 parking because I can’t contain my tenants because that project also was fairly severely under parked 3 openly, but I think that’s the pivot point that we’re missing. Now I don’t know if Amy remembers that, 4 but I remember it vividly and of course it’s not recorded unfortunately, but Ray Paul said, my projects, 5 which are all densely infilling (interrupted) 6 7 Acting Chair Popp: If you could wrap up please? 8 9 Mr. Buchanan: That it depends upon permit parking. And that’s the gap we have between the people, 10 the Council, and the staff and it’s just ironic if you pick up Diana Diamond’s editorial the comment paper, 11 the comments today it speaks about the gap that we have and I hope we can being to fill that as 12 opposed to have this rather contentious assertions of what the hell we’re doing. Thank you. 13 14 Acting Chair Popp: Thank you. Alright with that we will move to Architectural Board questions of the 15 applicant and staff. So Board Member Gooyer? Alright. Board Member Malone Prichard. 16 17 Board Member Malone Prichard: No questions. 18 19 Acting Chair Popp: Board Member Lew. 20 21 Board Member Lew: Well I will… I have a question for staff about parking. So I know that the parking 22 adjustment is a Director’s level decision, right? It’s not the Board’s purview and my understanding is that 23 there are a couple of factors. One on this particular project it’s mixed-use and there’s not designated 24 parking for the apartments. So the idea is to share this. So the theory is that residents go off to work 25 that parking space is vacant and it could be used by office workers and then magically at six o’clock or 26 whatever everybody switches and that’s and so that’s the idea of shared use. The Affordable Housing 27 Program also allows for other parking adjustments, but my understanding is that’s not being requested 28 on this particular project, but other projects could? 29 30 Mr. Reich: There is a parking reduction due to the Below Market Rate (BMR) housing on this project. It’s 31 three spaces. 32 33 Board Member Lew: That’s the visitor spaces? 34 35 Mr. Reich: Correct. 36 37 Board Member Lew: Ok, but it’s not the, but I was just saying the affordable housing projects I mean 38 they could actually, it’s actually reduced ratio, right? 39 40 Mr. Reich: Yes, and I think (interrupted) 41 42 Mr. Reich: Part of the parking reduction is one space as a result of that. 43 44 Ms. Campana: Sorry, I have to double check this. Off the top of my head if I remember correctly Palo 45 Alto is 1.5 spaces for a one bedroom and you’re allowed one space. So we have 2 so there’s one space. 46 We have two 1 bedrooms. Regardless even if we did the full Palo Alto parking for the residential and 47 didn’t take anything for the Affordable Housing Credit we would still be under the amount we’re allowed 48 to take off because of shared use. 49 50 Board Member Lew: And so I just a question for staff. Is that… is there a way to apply sort of a 51 suggested methodology of the mixed-use parking or for example, like what happens so like some of the 52 neighborhood, the neighbors may be concerned about this and how would they communicate with the 53 Attachment J City of Palo Alto Page 5 Director? Is this just going I mean there’s no hearing or anything for the parking adjustment or you’re 1 saying it’s here? 2 3 Mr. Reich: So this item will actually go on to City Council so there’s an additional opportunity beyond this 4 hearing to discuss parking, but certainly we invite and encourage anyone to discuss this issue with staff 5 in advance of that hearing so that they are more informed. Clearly the speaker here may not be aware 6 of the intense and detailed analysis that staff has conducted in order to determine that the parking is 7 adequate. There was a time of day study conducted to determine whether or not the requested 8 exception for parking would be acceptable and we have determined that it is. So it’s not something that 9 we just overlooked or a matter of policy of just granting these things without looking at them. It’s been 10 looked at very closely and there is analysis to back up our finding. 11 12 Amy French, Chief Planning Official: Hopefully this works. So again as Russ noted and again for the 13 public’s knowledge this is going to be a staff report to the City Council and topics such as parking will be 14 covered in that report. And certainly if it’s the desire of the public to see the parking adjustment 15 documentation that the applicant submitted and the methodology that’s, that can be available. We can 16 certainly talk about it in the CMR that goes to the City Council if that is something that’s desired. 17 18 Acting Chair Popp: Alright so with that we’ll turn around for comments or perhaps a Motion. 19 20 Board Member Gooyer: Well, actually I’m very pleased with what I see here and based on all the various 21 things we’ve gone through I can approve or let it go forward based on what I see here. 22 23 Acting Chair Popp: Alright, Board Member Malone Prichard. 24 25 Board Member Malone Prichard: First I’d like to disclose that I did have a telephone call with the 26 applicant after the prior hearing just to clarify my comments. I’m also very pleased with what I see here 27 overall I think the project is definitely approvable now and thank you for making those changes. I 28 particularly like what you’ve done with the elevator, removing the tower and just having the elevator 29 come up and the way you’ve handled that mass with the materials is very well done. I appreciate the 30 staggered horizontal fins, the entry awnings, and the integration of the third floor over the floors above. 31 And I also noticed that more dense mullion pattern on the ends sort of bookending the building. I found 32 that very pleasing. And you’ve improved the rear wall composition and detailing. So all in all, well done. 33 34 Acting Chair Popp: Board Member Lew. 35 36 Board Member Lew: Great, so thank you for the changes. And I’d say just in general on those projects 37 when I look at Sheet A2, which is like your site context photos that the general strategy of having like the 38 long, low building is actually to me it’s compatible with the multi-family buildings on Sheridan. And I 39 think like the staff findings are sort of saying that this is a fairly eclectic area and there isn’t something 40 cohesive, but I actually think that there is some sort of general overall massing thing even though it is 41 the buildings are different colors and materials and whatnot. And I think that the there was something to 42 the curve of your tower that kind of related to Sheridan or whatever, but generally you’re getting, you 43 don’t have the conflict of horizontal and verticals. 44 45 So anyway I’m in general supportive of the project. I still have like nitpicky details in my mind about 46 these are all minor, but like I’m not crazy about the two different kinds of windows that you have in the 47 lobby. It seems kind of strange to me if like you’re inside the lobby it looking out it seems kind of odd to 48 me. The, I was at the site yesterday looking at the sidewalk paving and how that would relate to the 49 projects on either side of your project. It seemed like this was like yet a third sidewalk or fourth sidewalk 50 on this very crazy street and I would kind of like it to go one, maybe one way or the other and it’s hard 51 because it’s, I mean it seems like the County has control over sort of the roadway width and whatnot, 52 but it just seems kind of crazy to do different sidewalk per project on Page Mill. There is I think some 53 details like that are missing so say like you have a fence detail for the back or you don’t have a fence, 54 Attachment J City of Palo Alto Page 6 you’re showing a new fence on the back and not on the sides is that correct? No detail and then also you 1 have like these very narrow side yards and you’re not showing any gate or whatnot and I would think 2 that that would be normally fenced off. 3 4 And then I think my other little nitpicky detail was on the stone tile here, which is I think this is very nice. 5 I’m normally hesitant about something this scale going up two stories especially commercial floors. The 6 synthetic materials are all great and they’re, usually they’re so modular that once you start going up 7 really high to me they look, they start looking fake and it’s just because they’re perfect, they’re all 8 perfectly modular. Like if you had real stone there would be more variation in the size so that’s just a 9 nitpicky thing. We’ve seen this kind of thing on like the Walgreens building on University Avenue and I 10 think it look, and it looks fine when it’s like this high and then when it goes up like a whole story it still 11 looks ok. It starts to look thin and then two stories it seems to me a bit of a stretch for that particular 12 pattern. 13 14 And then my last question then was in the Conditions of Approval there was some question mark about 15 loading zone, a commercial loading zone presumably on Page Mill. And the County is saying that you 16 can’t do it and that you have to use, try to use one of your neighbors lots if there’s a truck delivery or 17 something. And I was wondering what that, what the resolution was on that, on the truck parking? And 18 I think that’s all that I have. 19 20 Ms. Campana: Thank you Commissioner Lew. Sidewalk width: Public Works is completely dictating 21 what’s happening there and they want larger sidewalks. These sidewalks are existing in front of well, the 22 houses now is only 30 inches wide so obviously ours is eight feet wide. They are not going to make 23 Kelly-Moore or AT&T or, you know, redo their sidewalks at this point. I mean I think if the animal 24 hospital if they do a project then that’s when they kind of have everybody redo, but they’re trying to all 25 go in this direction, but we’re, we’re somewhat forced into what we have here. 26 27 Fence detail: we are doing, we are doing a new fence at the back and new fences at the side. So all 28 new, it’s all new fences. We’re not leaving anything existing. Loading space: that was worked out with 29 Transportation. They did not, we were not allowed to use Page Mill in any way, shape, or form to pull a 30 truck over. So they wanted all, basically all trucks are going to be forced to pull over on Ash if I 31 remember correctly from the traffic report and basically they’re going to have to dolly everything in if 32 they can’t use a small truck and go into the garage directly. 33 34 Board Member Lew: May I ask a follow up on that? So there’s street parking there now, right? And I 35 know that some of the neighbors wanted that removed for sight lines issues and the Fire Department has 36 some issues about staging areas I think. So what does all that extra space so there’s like eight feet of 37 parking so what do we know what the County is? 38 39 Ms. Campana: So the County wants no parking on Page Mill. I think they were a little shocked actually 40 when they came out to a site meeting we had to find out that there was still parking on Page Mill and 41 they have every intention of removing it all the way down for everybody. So it’s and then in the future 42 there is going to be a widening of Page Mill and that loading space or that parking space now is actually 43 going to become a lane because they are going to take a lane from the eastbound direction and give it to 44 the turning lane for people turning onto El Camino going southbound if that makes sense. Ao they’re 45 going to shift the roadway closer to our building to put one lane of traffic on the other side of the road 46 and they’re taking our parking for an actual lane of traffic. Plus actually a couple feet of ours, of the 47 entire Page Mill they’re going to slice it off. So when that project gets funded and done they’ll be, they’ll 48 probably do sidewalks and all sorts of things at that point as well. 49 50 Board Member Lew: Side yard gates? 51 52 Ms. Campana: Sorry. Side yard gates, we weren’t putting any in. Frankly from a fire standpoint we want 53 to make sure if there’s ever a fire in a building and people are in the back of the building they can run 54 Attachment J City of Palo Alto Page 7 out. While we could put gates or panic hardware we currently weren’t showing any. We have been told 1 there’s a homeless issue in the neighborhood and so in the future we might have to put some in, but at 2 the current time we weren’t trying to wall off our building and make it unfriendly. 3 4 Board Member Lew: And that’s all I have at this time. 5 6 Acting Chair Popp: Alright, terrific. It sounds like we’re coming to some consensus here about this, this is 7 great. I too am very pleased with what I’m seeing overall. The organization of the building and the 8 design is so dramatically improved and I really I want to just identify my appreciation for your hearing us 9 and responding and I think what you’re seeing today is you’ve moved in the right direction; so very 10 pleased for that. The rhythm of the building and the lobby elevator volume and all these pieces are 11 really coming together in a nice way. I personally think the pendulum might have swung just a little too 12 far with the, with the lobby entry and that it’s, it’s almost too subtle at this point, but I don’t really have a 13 problem with it. I think three, two dimensionally when we look at the elevations it’s hard to read, but the 14 three dimensional views show enough of a statement there that I don’t find that problematic. 15 16 Most of the comments the other Board Members have made I very much agree with and the one point 17 that I wanted to address was the comment by Board Member Lew in regard to the tile and the character 18 of that and I’d like to suggest that there might be a base and a middle to this building as there already is 19 a top. And very often we’ll see an applicant come in with rusticated material at the base of the building 20 and something that’s a little more refined as it moves up and both in surface texture and also potentially 21 in scale of material. And so I’d like to suggest that there’s one more refinement that might occur in 22 regard to the tile and the style of that tile. I did notice that the LE sheets in the set are not updated. 23 They still show the rounded lobby and it’s my expectation that the lighting will be similar and will function 24 the same way and I don’t really have a problem with that, but I just want to make sure that we point out 25 that the drawings need to get corrected and come forward with the right information. 26 27 I want to address the issue of the gates. I think that while I very much appreciate your approach and I 28 understand the concerns about fire our role is to help control the aesthetics and to make sure that things 29 are done properly. I would prefer to see you show gates on the drawings, show the details for those 30 gates and the placement of them and indicate them as optional future something like that so that we can 31 predict and control where they go versus not having control over that and it just occurring at some later 32 date. So that would be perhaps a suggestion. 33 34 So really the only comments that I had at this point. I wanted to ask a quick question of staff. The art 35 program; what is the status of that? Where does that go from here? Does that, does that come back to 36 us at all or do we, we… that just goes to the Public Art Commission? 37 38 Mr. Reich: Public Art Commission would be weighing in and I guess in this case making a 39 recommendation to Council on the art pieces. 40 41 Acting Chair Popp: Ok, so is the public art attached to the building in any way? Is it affixed or a stand 42 alone? 43 44 Ms. Campana: It’s stand alone. It’s on the sidewalk and I’ll actually have a slide in the back, it was from 45 the first presentation. It hasn’t changed so (interrupted) 46 47 Acting Chair Popp: Ok. 48 49 Acting Chair Popp: So no update on that? 50 51 Ms. Campana: Yeah. There we go. They are folded square numbers about 30 inches square and they’re 52 going to be up on little 24 inch platforms and they’ll be right on the sidewalk in between the two 53 benches. 54 Attachment J City of Palo Alto Page 8 1 Acting Chair Popp: Great. Alright, I look forward to seeing that. That’ll be fun. 2 3 Ms. Campana: Yeah and so that was approved, that went through preliminary and the Art Commission 4 loved it and it’s just a we just have to go back to them with the exact colors and exact spacing and then 5 we’re done. But at this point my understanding is they are the ones that, but we already saw them and 6 we passed the preliminary and they liked, they approved this plan and we just need to go back with the 7 exact details. 8 9 Acting Chair Popp: Great. 10 11 Ms. Campana: And the money. 12 13 Acting Chair Popp: I’m excited about that as well; looks great. So with that I will, I’ll close the public 14 hearing and just look to the Board to see if anyone is open to making a Motion? 15 16 Board Member Malone Prichard: Before we make a Motion I have a couple of housekeeping items. 17 Looking in the DEE findings I think one of the findings needs to be revised a little bit. If I can find… ok, 18 so Finding Number 1 a lot of the stuff about the tower was taken out, but it does say, “The footprint 19 spans the entire site resulting in an expansive roof capped at a restrictive 35 foot height limit.” I think 20 that portion should be struck because that has nothing to do with the DEE’s that are now being 21 requested. And in the Context Based Design Criteria Findings, Finding Number 2 street building façades 22 mentions there are three commercial doors to the retail spaces when actually there are only two. And 23 then the last thing is in the Conditions of Approval from Planning, Condition Number 9 mentions that the 24 public art is being handled by an in lieu fee. So that Condition should be struck. 25 26 Board Member Lew: I have one other, I caught one other thing, which is under Section 4, right, the 27 Architectural Review Findings Number 2 and the paragraph is “The building would be located on a 28 significant arterial roadway where larger commercial buildings are common,” I would say there is also 29 residential, large residential buildings on Page Mill as well. 30 31 Acting Chair Popp: Alright, anything else? Anyone prepared to construct a Motion here or have other 32 comments? 33 34 Board Member Lew: I have a question for staff. If we’ve seen this three, three times, right? So we have 35 to make a Motion today, right? And then if we want other things to come back is it ok for us to have 36 them come to subcommittee or is that considered a fourth meeting? It’s not. Ok, great. Thank you. 37 38 Acting Chair Popp: It’s my understanding that the three and out is more of a guideline, it’s not a rule. 39 We have the ability to at the Board’s discretion continue an item, extend our discussion if we choose to 40 do that. I know that’s occurred on projects before… if the applicant is willing. 41 42 Ms. French: Yeah, I think the applicant is entitled to a recommendation today. The recommendation is to 43 the Council. The applicant could consent to a continuance. I don’t know that that’s going to serve this 44 project well. It does need to get to Council. We have a tentative date with this Council and it would be 45 probably if possible to do some of these design tweaks if they’re minor in nature at Consent Calendar or 46 subcommittee if they don’t need to be rectified prior to the Council hearing they could happen 47 afterwards. If you feel they’re important enough to show up in the plans for Council that they’ll be into 48 those weeds we can certainly try to accommodate a subcommittee before that plan date, which I think is 49 December 8th. Yeah. 50 51 Board Member Lew: Great, thank you. 52 53 Acting Chair Popp: Alright. 54 Attachment J City of Palo Alto Page 9 1 MOTION 2 3 Board Member Gooyer: Ok, let’s see, I’d like to propose a recommendation or recommend to the City 4 Council approve the site and design review application as well as the two requested DEE’s for the project 5 at 441 Page Mill road based on architectural review, DEE, and Context Based Design Criteria Findings and 6 subject to the conditions and the draft record of land use actions, Attachment A, and are there any 7 you’ve got a whole list here of things we want to add to that or? 8 9 Board Member Malone Prichard: I’d just ask if you could add my three revisions to the findings and staff 10 conditions? 11 12 Board Member Gooyer: add them (interrupted). 13 14 SECOND 15 16 Board Member Malone Prichard: Oh, sure. Actually I will second. 17 18 Board Member Gooyer: Ok, let’s do it that way. 19 20 FRIENDLY AMENDMENT #1 21 22 Board Member Malone Prichard: And then I would suggest that we add the revisions that I suggested for 23 the DEE finding, for the Context Based Findings, and for the Conditions of Approval Findings, and also 24 Alex’s revision. That was a Conditions of Approval Finding? 25 26 Board Member Lew: Correct. 27 28 Board Member Malone Prichard: Yeah. 29 30 FRIENDLY AMENDMENT #1 ACCEPTED 31 32 Board Member Gooyer: I’m fine with that. 33 34 FRIENDLY AMENDMENT #2 35 36 Acting Chair Popp: Great and I’d like to make a friendly amendment that we have the items that we were 37 discussing return to subcommittee and those would include evaluation of the stone tile material in its 38 variation in pattern, it’s texture, the gate design and placement, and an update of the LE sheets. C1 39 sheet needs to be updated as well? And great, and an update of the C1 sheet. Will you accept that? 40 41 Board Member Gooyer: Yeah, I’m fine with that. I definitely didn’t want it to come back here so I think 42 the subcommittee would be fine. 43 44 Acting Chair Popp: Great, and Clare? 45 46 FRIENDLY AMENDMENT #2 ACCEPTED 47 48 Board Member Malone Prichard: I accept that. 49 50 VOTE 51 52 Attachment J City of Palo Alto Page 10 Acting Chair Popp: Great, so any further comments? Great, so I think we can take a vote. All those in 1 favor? Aye. All those not? So that item passes. Let’s see that would be 4-0-1-0. Great, thank you very 2 much. 3 4 MOTION PASSED (4-0-1-0, Chair Lippert absent) 5 6 MIXED USE DEVELOPMENT -441 Page Mill Road, PA HOURLY ACCUMULATION OF PARKING - WEEKDAYS LAND USE LU CODE RESIDENTIAL: 221 10 Apartment rental units, 1 to 3 BR OFFICE:701 General Office RETAIL:863 Electronics Superstore used as basis for cell phone or electronics store. Store hours assumed to be 10 AM to 8 PM COMMERCIAL PEAK PEAK USE GLFA, KSF RATE DEMAND OFFICE 18.646 3.45 64 85%tile demand rate, ITE Parking Generation, 4th Ed. RETAIL 2.895 3.03 9 Limited data (1 store). Hourly accumulations modified to fit assumed store hours. RESIDENTIAL PEAK PEAK USE DU RATE DEMAND APARTMENT 10 1.94 19 85%tile demand rate, ITE Parking Generation, 4th Ed. HOUR OFFICE (1)RETAIL (2)RESIDENTIAL (3)OFFICE RETAIL RESIDENTIAL TOTAL 6-7 3%0%92%2 0 18 20 7-8 20%0%74%13 0 14 27 8-9 63%10%64%41 1 12 54 9-10 93%25%50%60 2 10 72 10-11 100%50%40%64 4 8 76 11-12NN 100%85%38%64 7 7 79 Peak Demand 12NN-1PM 90%90%35%58 8 7 73 1-2 90%95%35%58 8 7 73 2-3 97%100%38%62 9 7 79 Peak Demand 3-4 93%90%40%60 8 8 75 4-5 77%90%44%50 8 9 66 5-6 47%90%59%30 8 11 50 6-7 23%100%69%15 9 13 37 7-8 7%75%66%5 7 13 24 8-9 7%25%75%5 2 15 21 9-10 3%0%77%2 0 15 17 10-11 3%0%92%2 0 18 20 11-12MN 0%0%94%0 0 18 18 Estimated. See Sheet 2 (1) Urban Land Institute, "Shared Parking," © 1983. (2) ITE,"Parking Generation," 4th Edition © 2010 (3) ITE, "Parking Generation," 4th Edition © 2010 RKH 11/18/13 PARKING ACCUMULATION, SPACESPERCENTAGE OF PEAK HOUR City of Palo Alto (ID # 5404) City Council Staff Report Report Type: Action Items Meeting Date: 1/26/2015 Summary Title: Establishment of an Office/R&D Annual Growth Limit Title: Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council discuss its objectives and issues associated with establishment of an annual limit on office/R&D development, and provide direction to staff regarding next steps which may include: 1. identifying alternative approaches or annual limits on office/R&D development that can be further defined and evaluated as part of the Comprehensive Plan Update process, for example: a. an annual limit of 35,000 or 50,000 net new square feet of office/R&D per year, with a competitive process for project approvals each year that applications exceed the limit; and/or b. slowing the pace of office/R&D development by imposing a more robust impact fee program. 2. Identifying zoning changes or requirements that can be considered for adoption on an interim basis until an annual limit or alternative approach to addressing the pace of office/R&D development can be adopted concurrent with the Comprehensive Plan Update. For example: a. requiring on-site parking, funding for a transportation management association, or other approaches to address traffic and parking demand associated with development; or b. a temporary reduction in allowable office densities (floor area ratio or FAR). Executive Summary One of the intriguing policy ideas that came up during the Comprehensive Plan workshops in the summer of 2014 was the idea that the City should somehow moderate or meter the pace of non-residential development. The idea was to manage growth by having an annual limit on City of Palo Alto Page 1 office development, rather than by relying on an overall multi-year cumulative “cap” on non- residential square footage like the one that the current Comprehensive Plan establishes for the Downtown (Program L-8) and the City (Policy L-8). This idea was advanced by staff as a concept worthy of exploration during the Comprehensive Plan Update. Then on December 8, 2014, the City Council directed staff to schedule a Council work session to give them an opportunity to consider and discuss the idea further. Tonight’s work session responds to this directive and this staff report focuses on a couple of big-picture questions, which could guide the Council’s discussion; Specifically: What are the objectives of establishing an annual limit program, and are there various ways those objectives could be met? What issues would have to be resolved to establish such a program? In addition, staff expects that the City Council will wish to discuss potential interim measures that can be pursued until an annual limit (or alternative approach) can be adopted. These interim measures could include new requirements for office/R&D development proposals (e.g. on-site parking, transportation management association funding, or a reduction in FAR unless affordable housing is included as part of a mixed use development.) Supporting information includes a memo (first prepared for the December 8, 2014 Council meeting) summarizing annual limit programs in three other jurisdictions, and another memo describing two datasets that are available to inform the Council’s discussion about the annual rate of office/R&D development over time. (See Attachments A and B) Background Please see Attachment A for background information regarding other jurisdictions with some form of annual growth limit on non-residential development. Attachment A also discusses the potential timing for establishment of an annual limit, and outlines some of the issues that would have to be resolved to put a limit in place. Please see Attachment B for background information regarding datasets available to characterize the pace of non-residential development over time in Palo Alto, as well as the sum total of pending (“pipeline”) development applications; It’s also important to recognize that increases in employment, which are credited with creating additional traffic and parking demand, are not directly proportional to new development of office/R&D. This is because there are other types of non-residential development that generate jobs (as explained in Attachment B) and, more importantly, the number of employees per square foot of existing building space fluctuates over time based on the economic climate and the demand for office space. The true relationship between jobs and square footage in Palo Alto will not be fully understood until the business registry is in place for one or two business cycles. City of Palo Alto Page 2 As noted in Attachment B, the City has approved significant medical uses which will come on line, related mostly to the Stanford Hospital Project, and have impacts in the coming years, although this report does not propose or discuss limits on such uses. This report also does not propose or discuss limits on housing development as such regulations can be legally problematic and staff was not directed to pursue these. Discussion Development and establishment of a growth management program with annual development restrictions will require careful consideration of program objectives, pros/cons, as well as the issues and mechanics of the program. Some initial thoughts on these topics are provided below for the Council’s consideration; What are the objectives of establishing an annual limit program, and are there various ways those objectives could be met? Attendees at the Comprehensive Plan workshops last summer expressed some frustration that the current Comprehensive Plan’s approach to growth management (i;e; an overall “cap” on non-residential development) has been ineffective at moderating the pace of growth and development in the robust economic recovery following the “great recession;” Based on this frustration and an examination of growth management strategies in use elsewhere in California, attendees suggested planning scenarios with a growth management program that moderated or metered the rate of development rather than the overall amount. This focus on the rate of development had its genesis in the impacts associated with increased employment in the City as experienced by Palo Alto residents. Impacts include traffic congestion/delay, parking demand, increased housing costs, and more. Additionally, an annual limit can be response to the ups and downs of the business cycle. Thus, the objective of an annual limit program would be to moderate the rate of non- residential development so as to reduce the rate of employment growth, reduce related impacts and allow for effective mitigation of residual impacts. Establishing an annual limit program could also ensure that the development approved under the program meets stringent requirements related to “good” planning and design, public benefit, etc., etc. Program objectives could be met by establishing an annual limit on square footage such as the one in San Francisco and Walnut Creek, or by establishing a limit on net new auto trips such as the one in Santa Monica. (All three examples are cited in Attachment A). Alternatively, this objective could be met by establishing new, stringent requirements on development, and/or by increasing the cost of development to better compensate for its impacts, for example by significantly adjusting housing and transportation impact fees. (In theory, once the business registry is in place, the City could also consider ways City of Palo Alto Page 3 to directly regulate new employment, but staff would need to do some additional research into the legal and implementation issues associated with this approach, as well as any comparable programs in other jurisdictions.) What issues would have to be resolved to establish such a program? As indicated in Attachment A, there are quite a number of issues that would need to be resolved if the City Council wished to adopt an annual limit on office/R&D development, not least of which would be to decide what the limit should be, and what procedures should be used to implement the limit on an annual basis. Staff has provided some initial thoughts on each below. What should the annual limit be? The data in Attachment B has been provided to inform this discussion and show that the rate of non-residential development in Palo Alto has varied over time. Specifically, if the Congestion Management Program (CMP) data is used, the annual rate of office/R&D development has been around 34,000 square feet per year if you look at the period from 2001-2015, about 67,000 square feet per year if you look at the period from 2008-2015, and about -2,800 square feet per year if you look at the period from 2001 to 2007 (because non-residential space was removed and replaced with housing in this period). The CMP data set separates office/R&D from other non-residential uses, including retail and medical office, and thus may provide a better basis for this discussion than the monitoring data which was initially presented in the August 29, 2014 Existing Conditions Report. (The August data set, which has been updated in Attachment B, presents the combined non-residential square footage within nine planning areas that are a legacy of the 1989 Citywide Study.) What should be the process and criteria for receiving and considering applications? Attachment A provides some explanation of the approaches in Walnut Creek, which uses a first-come-first served staff-implemented approach, and San Francisco, which has relied on their Planning Commission to decide between competing proposals using specific criteria in times when pending applications have exceeded the available allocation of square footage. Should there be a geographic component to the program? The City has historically monitored and regulated downtown Palo Alto separately from the rest of the City and should consider whether this continues to be a valuable practice. Should some areas of the City or types/sizes of projects be exempt? Walnut Creek exempts a business park where they would like development to occur from their program. Palo Alto does not have a comparable area where development is desired and where that development would not cause the impacts that the annual develop limit is intended to address. Nonetheless, the idea of exempting areas that are some distance from residential areas could be explored further. Also, the idea of exempting small City of Palo Alto Page 4 projects (less than 5,000 square feet?) could be explored as a way to protect the City’s reputation for supporting innovation and start-up businesses. Further, limited exemptions for vacant properties or highly under-utilized properties might be necessary in order to avoid legal challenges. Should unused allocations roll forward for some period of time? If the allocations were to roll forward indefinitely (as in San Francisco), there may be concerns as to whether the program objectives had been addressed. However, if unused allocations roll forward for at least several years (as in Walnut Creek), it would serve to level-out volatile economic upswings and downturns. How would applications already in the “pipeline” be handled? This would depend on how and when an annual limit is established and will require careful consideration. How would the City ensure continued conformance with the Permit Streamlining Act? We can look to San Francisco and Walnut Creek as models. In San Francisco, completed applications that did not receive an allocation under the annual limit are either continued to the next allocation period or denied, depending on the wishes of the applicant. What changes would be needed to the City’s Comprehensive Plan and zoning? Please see the Policy Implications section below for a brief overview. What would the potential impacts and benefits of the program be? As noted in the Timeline section below, conceptual approach(s) developed by the City Council will be reviewed to determine their potential fiscal and environmental impacts and benefits to the extent feasible. Timeline Adoption of an annual limit on office/R&D development would require considerable discussion and deliberations by the City Council and is likely to be controversial, requiring significant outreach to stakeholders and the community at large. Stanford University has already pointed out how the annual rate of development in the Research Park has fluctuated dramatically over time, and that opportunities would have been lost to Stanford and Palo Alto if an annual limit had constrained development in certain years. Because of the potential for controversy and the need for ample community input, staff assumes that the City Council would like to explore a couple of different approaches/annual limits, and that these would be defined in the first few months of 2015 and evaluated as part of the Comprehenisve Plan Update process. Next steps in the Comprehensive Plan Update process include a community “summit” in May 2015, preparation of a program-level environmental analysis (Draft EIR) and a fiscal study that can be used to inform community discussions and decision making. The current schedule calls for completion and adoption of the City of Palo Alto Page 5 Comprehensive Plan Update and concurrent zoning changes in the first part of 2016. Given this timeline, staff expects that the City Council will wish to discuss potential interim measures (such as those suggested earlier in this report) that can be pursued until an annual limit (or alternative approach) can be adopted. Resource Impact As noted above, adoption of an annual limit on office/R&D development would require considerable discussion and deliberations by the City Council. These deliberations in turn would require considerable staff support and analysis. Also, if a growth management program with an annual limit on office/R&D development is ultimately adopted, implementation of the program each year will require considerable staff time and time on the City Council’s agenda; The City may also wish to contract with a third party to conduct an independent review of competing proposals that seek an allocation under the annual limit. Larger fiscal impacts of a growth management program will have to be assessed carefully. At a minimum, the assessment will have to consider likely reductions in permit revenues and impact fees, potential longterm impacts to the City’s tax revenues and expenses, and a qualitative discussion of the impact on the City’s overall economic “climate;” The extent and nature of fiscal impacts will, of course, depend on the approach(es) that the City Council elects to consider, and the analysis can potentially be combined with a fiscal study of other policy choices inherent in the Comprehensive Plan Update. Planning staff is currently working with staff in the Administrative Services Department to define the scope of this study, which will have to look at expected revenues from commercial and residential property taxes, sales taxes and other sources, as well as the cost of services over time. Preparation of some kind of interim ordinance for the City Council’s consideration and adoption for the period during which an annual office/R&D limit (or other approach) is being analyzed, is potentially time consuming and resource intensive. Thus it may affect delivery of other priorities. Policy Implications If the City adopts a growth management program with an annual limit on office/R&D development, the program would effectively implement Comprensive Plan Policy B-1: “Use a variety of planning and regulatory tools, including growth limits, to ensure that business change is compatible with the needs of Palo Alto neighborhoods.” Nonetheless, it is likely that a new growth management program would require an amendment to the Comprehensive Plan as well as the City’s Municipal Code; The Comprehensive Plan amendment would likely modify or replace policies and programs that establish an overall “cap” on non-residential development in the Downtown (Program L-8) and the Citywide planning areas identified on Comprehensive Plan Map L-6 (Policy L-8), and would also have to consider compatibility with policies like Policy B-9: “Encourage new businesses that meet the City of Palo Alto Page 6 business and economic goals to locate in Palo Alto.” The Municipal Code amendment would have to establish the procedures and standards associated with the new growth management program. Environmental Review This work session is intended for City Council discussion and direction to staff. No final action will be taken and thus no review is required under the California Environmental Quality Act (CEQA). If the Council elects to proceed with establishment of an annual limit or another growth management program at some time in the future, that decision (in the form of implementing policies and regulations) will require CEQA review. Adoption of an interim ordinance or other temporary zoning requirement may also require environmental review depending on the duration and scope of the changes. The level and complexity of environmental review will depend on the nature of the program(s) and its potential to directly or indirectly stimulate a particular kind of development or focus development in a specific area. For example, limiting the development of office/R&D in Palo Alto could stimulate housing development if property owners see that as a way to increase the value of their property. Also, the City would have to consider whether limiting the development of office/R&D development in Palo Alto could focus additonal office/R&D development in adjacent communities.1 Attachments: Attachment A: Memorandum Regarding Annual Limit on Office/R&D (PDF) Attachment B: Comp. Plan Memo on Growth Trends (PDF) 1 While CEQA does not require a lead agency to speculate where specfic impacts cannot be reasonably anticipated, the City would have to at least consider this question. City of Palo Alto Page 7 Attachment A CITY OF PALO ALTO MEMORANDUM TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER & DIRECTOR OF PLANNING & COMMUNITY ENVIRONMENT AGENDA DATE: December 8, 2014 ID#: 5286 SUBJECT: COMPREHENSIVE PLAN UPDATE & ZONING CHANGES: ANNUAL LIMIT ON OFFICE/R&D DEVELOPMENT At the November 3, 2014 City Council meeting, a Councilmember asked whether the suggested Council work session regarding establishment of an annual limit on office/R&D could consider adoption of an annual limit as an interim ordinance. Subsequently, the same Councilmember also asked staff to provide information regarding other jurisdictions with annual office limits immediately, rather than as preparation for the January work session. This memo responds to both questions/requests and will be supplemented by additional staff analysis and a staff recommendation in advance of the January work session. Specifically, staff and the City Council will have to explore a number of issues when considering establishment of an annual limit on office/R&D development. At a minimum, these include the following: (1) what the annual limit should be; (2) what the process and criteria for receiving and considering applications should be (i.e. should applications be considered in the order received, or based on some criteria establishing preferences; what should those criteria be?); (3) whether there should be a geographic component to the program; (4) whether some areas of the City or types/sizes of projects should be exempt; (5) whether unused allocations should roll forward for some period of time; (6) how to handle applications already in the “pipeline-” (7) how to ensure continued conformance with the Permit Streamlining Act; (8) necessary changes to the City’s Comprehensive Plan and zoning; and (9) potential impacts and benefits. CAN THE COUNCIL CONSIDER AN ANNUAL OFFICE CAP AS AN INTERIM ORDINANCE? The short answer is yes, the Council could consider adoption of an annual cap on office/R&D development under the provision in State law (Government Code Section 65858) which allows cities to temporarily prohibit any uses that may be in conflict with a contemplated general plan, specific plan, or zoning proposal that the city is studying or intends to study within a reasonable time. To enact an interim ordinance, a 4/5 vote (8 votes) would be required, and the City Council would have to make legislative findings that there is a current and immediate threat to the public health, safety, or welfare, and that the approval of additional development would result in that threat to public health, safety, or welfare. An interim ordinance is effective for 45 days, after which it may be extended, but in no instance may it be in effect for over two years. An interim ordinance does not require review by the Planning and Transportation Commission and many are exempt from review under the California Environmental Quality Act (CEQA). This is because interim ordinances are temporary and many, in practice, perpetuate the status quo. To the extent this is not the case, additional review may be required. It should be noted again, however, that there are many complexities that would need to be resolved to establish an annual office limit, suggesting that considerable time and effort will be involved. Whether it’s adopted as an interim ordinance or concurrent with the Comprehensive Plan Update, an annual limit is also likely to cause concern by property owners in areas zoned for commercial use, resulting in the need for extended outreach, public hearings, and etc. Stanford University has already voiced its concerns about the effect that an annual office limit could have on the Research Park. WHAT OTHER JURISDICTIONS HAVE AN ANNUAL OFFICE CAP? Earlier this year, the City’s Comprehensive Plan consultants, Placeworks, gathered information regarding a number of growth management systems used by California jurisdictions to meter the amount or pace of non-residential development. They identified communities that, like Palo Alto, have some kind of cap on non-residential development (for example Cupertino), as well as communities that have attempted to cap residential development (for example Pleasanton). Page 2 December 2, 2014 Memo RE: Annual Limit on Office/R&D Placeworks identified Walnut Creek and Santa Monica as two jurisdictions that have implemented programs to govern the pace of non-residential development, and these programs are summarized below, along with the program in place in San Francisco. These three examples are presented for background information only, and are not intended as a recommendation to adopt one or more of these strategies. As the Placeworks staff observed, any program adopted in Palo Alto would need a high degree of customization to fit its unique local conditions. In addition, if a program is developed for Palo Alto, it would require careful legal analysis to ensure that it can operate effectively in tandem with the State’s Permit Streamlining Act and withstand legal challenge. Walnut Creek Walnut Creek has regulated commercial growth since 1985, when voters approved Measure H, a growth-control initiative that would have limited or prevented non-residential development until traffic congestion at major intersections improved. Measure H was a reaction to resident concerns about traffic and the construction in the late 1970s and early 1980s, when a number of large commercial office buildings in downtown Walnut Creek, primarily around the Walnut Creek BART station. A major local landowner sued the City, and the case eventually went to the California Supreme Court. In 1990, the Court ruled that Measure H was invalid because it functioned as a zoning ordinance but conflicted with the City’s adopted General Plan, which called for Walnut Creek to be a regional job and retail center. Although Measure H was invalidated, the City continued to regulate the amount of commercial and residential development allowed each year, acknowledging the residents’ desire to meter growth in Walnut Creek. In 1993, the City Council adopted a Growth Limitation Program that limited new commercial growth to 75,000 square feet per year, metered in increments of 150,000 square feet every 2 years, and was adopted for 10 years. The program helped the City to limit growth to 620,000 square feet of new commercial development in the first 10 years (1993-2003), and was extended through 2015 in the City’s 2005 General Plan Update. The Growth Limitation Program excludes the Shadelands Business Park.1 1. Does the system include an annual limit on non-residential approvals? If so, how is that set? Changed? Enforced? 1 City of Walnut Creek, Walnut Creek General Plan 2025, page 4-13. Available online at http://www.walnut- creek.org/citygov/depts/cd/planning/documents/general plan 2025.asp. Page 3 December 2, 2014 Memo RE: Annual Limit on Office/R&D Yes. The Walnut Creek Growth Management Program includes a cap of 75,000 commercial square feet/year metered in 2-year increments. Therefore allocations for 150,000 square feet of commercial development are available in each two year cycle. The cap is set in the General Plan (which incorporated an earlier Growth Limitation Program from the 1990s). It is enforced by the Planning Division. Staff tracks available allocation and a building permit cannot be issued unless an allocation is available. If the building permit is allowed to expire prior to construction, the allocation is revoked and returns to the pool. Unused allocations from one cycle are rolled over to the next cycle. Project applicants get credit for any existing commercial SF that would be demolished with construction of their project. 2. Does the system include a competitive point system pitting projects against each other? Are any categories of project exempted (e.g. certain type of industry, projects under 10k sf)? How much flexibility is there? There is no “beauty contest” type competition. Allocations are awarded on a first-come, first-served basis when the project planner deems a project application complete. Development in the Shadelands Business Park on the eastern edge of the City and specific types of Community Facilities are exempt from the Growth Management Program. Additionally, the Planning Manager can grant exemptions to larger, more complex projects so that their allocation can be reserved for longer than the 12-month period for which allocations are usually reserved. The system had a fair degree of flexibility built in – not in the cap, but rather in how it is calculated and implemented. Calculating the cap in 2-year increments of up to 150,000 sf offers some flexibility; as does carrying forward the unused allocation. In addition, the system allows project applicants to reserve allocations as soon as their application is deemed complete, with the possibility of having that reservation extended at the discretion of the Planning Manager for larger, more complex projects. Santa Monica Goal T19 in the Santa Monica Land Use and Circulation Element (LUCE) of the Santa Monica General Plan (adopted in 2010) is to “Create an integrated transportation and land use program that seeks to limit total peak period vehicle trips with a Santa Monica origin or destination to 2009 levels.” This goal is also known as the “No Net New Evening Peak Period Vehicle Trips” goal. The LUCE focuses not only on reducing vehicle trips, but also on encourage walking, bicycling and transit use, creating pedestrian-oriented neighborhoods, and reducing greenhouse gas emissions. The LUCE foresees the creation of a multi-modal transportation system and “identifies local strategies to manage trips, treating the entire City as an integrated Page 4 December 2, 2014 Memo RE: Annual Limit on Office/R&D transportation management system with aggressive requirements for trip reduction, transit enhancements, pedestrian and bike improvements, and shared parking. Transportation demand management (TDM) programs that reduce automobile travel demand and incentivize alternative modes such as carpool, vanpools, and shuttles, walking, bicycling, and shared parking are all encouraged.”2 The LUCE calls for the City to manage new trips from new development and reduce trips from existing major employers. New trips must be offset through the development of new transportation infrastructure providing alternatives to automobile travel, including public transit, bicycling, ridesharing, and walking. The LUCE also contains a list of transportation policies, projects, and programs that are necessary to accommodate projected growth with no net increase in PM peak hour vehicle trips through 2030. The LUCE identifies the establishment of fees as a tool to manage vehicle trips and increase alternative transportation options. The LUCE states that “New projects will be required to minimize the trips they generate and contribute fees to mitigate their new trips.” However, the LUCE also states that “To achieve the No Net New Trips goal, developers cannot be expected to have every project generate zero trips by itself;” rather, developers will pay mitigation fees that will fund capital improvement projects citywide, such that the net impact of each development project ultimately is zero. Fees will be used for improvements that benefit the City’s transportation system overall, such as additional buses to increase frequency, improved walking routes and new bike lanes.”3 The provision that the City as a whole will achieve no net new trips by 2030, but that individual projects will not be required to generate no net new trips, has created some confusion and concern among Santa Monica residents as the LUCE is implemented. 1. Does the system include an annual limit on non-residential approvals? If so, how is that set? Changed? Enforced? No. Santa Monica’s growth management program resembles a performance measure, rather than an annual limit, and the City is still developing the zoning ordinance that will implement the program set forth in its General Plan. 2 City of Santa Monica, Transportation Impact Fee Nexus Study (Final), April 2012. Page 1-3. Available online at http://www.smgov.net/uploadedFiles/Departments/PCD/Transportation/Developers/Santa-Monica-Nexus- Study.pdf 3 City of Santa Monica, Land Use and Circulation Element, July 2010. Page 4.0-12. Available online at http://www.smgov.net/uploadedFiles/Departments/PCD/Plans/General-Plan/Land-Use-and-Circulation- Element.pdf Page 5 December 2, 2014 Memo RE: Annual Limit on Office/R&D 2. Does the system include a competitive point system pitting projects against each other? Are any categories of project exempted (e.g. certain type of industry, projects under 10k sf)? How much flexibility is there? It does not appear that Santa Monica envisions projects competing against each other for allocations. Instead, projects that cannot achieve the “No Net New Trips” goal on their own can pay into a fund for investments that will offset their trips. San Francisco San Francisco’s Downtown Plan dates from 1985 and included the City’s first annual cap on office development, which was intended as a temporary measure. This original office cap was modified and extended by the voters when Proposition M was adopted in 1986. The annual growth limit is codified in Section 320-25 of the City’s Zoning Code and from time to time, the City’s Planning Commission has adopted implementing policies and procedures. 1. Does the system include an annual limit on approvals? If so, how is that set? Changed? Enforced? San Francisco has two office caps, one for small projects and one for larger ones. The “small” cap is 75,000 square feet per year and applies to projects between 25,000 and 50,000 square feet. The “large” cap is 875,000 square feet per year and applies to projects over 50,000 square feet. The two annual office limits were set by the voters and cannot be changed except with voter approval, although the Planning Commission has been able to adopt implementing policies and procedures as needed. Unused allocations roll forward indefinitely, and the annual cap has only been a constraint on development in periods like the dot com boom, when new office development proposals exceeded the available allocation. In the current tech boom, San Francisco is once again in this situation and the Planning Department has started discussions about policies and procedures to implement the annual limit. 2. Does the system include a competitive point system pitting projects against each other? Are there any categories of project exempted (e.g. certain type of industry, projects under 10k sf)? How much flexibility is there? Prop M itself did not include a competitive system, but the City Planning Commission has had to establish procedures to compare and select among projects when the number of projects exceed the available allocation. For example, in the 1990s, the City conducted a “beauty contest” in which large office projects competed with each other for the annual allocation. Each application was subject to analysis and environmental Page 6 December 2, 2014 Memo RE: Annual Limit on Office/R&D review, and the Planning Commission compared the projects to each other before approving one or more. Applicants whose projects were not approved had the choice to either request continuance to the next evaluation period, or to have their projects denied. The Planning Department has recently begun discussing implementation of a revised competitive process, which is expected to focus on “good planning” issues such as proximity to transit and housing displacement rather than aesthetics or public benefits. In fact, Prop M prohibits the City from considering monetary contributions in any competition, by stating that “Payments, other than those provided for under applicable ordinances, which may be made to a transit or housing fund of the City, shall not be considered.” Office projects less than 25,000 square feet are exempted from San Francisco’s annual limit, as are City projects. State, Federal, Port, and Redevelopment Agency projects are not exempt, and reduce the allocation available for private development projects. Page 7 December 2, 2014 Memo RE: Annual Limit on Office/R&D Attachment B - CITY OF PALO ALTO MEMORANDUM TO: HILLARY GITELMAN, Director, Planning & Community Environment FROM: ROLAND RIVERA, Land Use Analyst DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT AGENDA DATE: January 26, 2015 ID#: 5404 SUBJECT: Background information and data sets associated with establishment of an annual limit on office/R&D development. Per your request, the following data analysis describes the data sets regarding non-residential development that are available to inform discussions of an “annual limit” on office/R&D. The analysis presents two data sets: one grew out of Policy L-8 of our current Comprehensive Plan and the other derives from Santa Clara County’s Congestion Management Program (CMP). Key element of the approved work program for the Comprehensive Plan Update involve establishing baseline conditions utilizing new development data and identifying a realistic growth rate for development through 2030. Understanding the details and some of the limitations of the Commercial Growth Limit specified in the Comprehensive Plan Policy L-8 data set may be useful in both endeavors. Another, more straightforward, data set is derived from the City’s annual report to the Santa Clara County Valley Transportation Authority (VTA). The CMP’s Annual Land Use Monitoring Report requires that Member Agencies provide the VTA with information on all development projects approved/entitled during the fiscal year. Please review the following background information and summaries on the data sets and let me know if you have any questions. Thank you. 1989 Citywide Study and the Comprehensive Plan Policy L-8 Data A Citywide Study adopted in 1989 was an important summation of the numerous planning studies that were undertaken by the City in the 1980's. The focus of these studies was to address non-residential development and ways to improve the provision of housing and the jobs/housing imbalance. At the time, the City was experiencing commercial growth but residential growth was very limited. The 1989 Citywide Study divided the City's non-residential areas into nine analysis areas (1989 Citywide Study Area Map), which were subsequently adopted as Map L-6 in the current Comprehensive Plan. The development potential for Palo Alto identified in the Citywide Study was 3,257,900 square feet; however, that development potential did not include some Planned Community zones and public facilities such as City Offices and the Veteran's Administration Hospital, which were termed “not- monitored areas.” In 1996, the City Council asked the Policy and Services Committee to study the issue of Citywide non- residential development "limit" for the nine analysis areas and determine how to incorporate thelimit into the Comprehensive Plan. On April 1996, the City Council approved the Policy and Services Committee's recommendation to include the Citywide Study's overall future development square footage within Policy L-8 and Program L-7 into the Comprehensive Plan. POLICY L-8: Maintain a limit of 3,257,900 square feet of new non-residential development for the nine planning areas evaluated in the 1989 Citywide Land Use and Transportation Study, with the understanding that the City Council may make modifications for specific properties that allow modest additional growth. Such additional growth will count towards the 3,257,900 maximum. PROGRAM L-7: Establish a system to monitor the rate of non-residential development and traffic conditions related to both residential and non-residential development at key intersections including those identified in the 1989 Citywide Study and additional intersections identified in the Comprehensive Plan EIR. If the rate of growth reaches the point where the citywide development maximum might be reached, the City will reevaluate development policies and regulations. Policy L-8 aims to "Maintain a limit of 3,257,900 square feet of new non-residential development for the nine planning areas evaluated in the 1989 Citywide Land Use and Transportation Study," and Program L- 7 implements Policy L-8 by establishing a system to monitor the rate of non-residential development in the areas identified in the 1989 Citywide Land Use and Transportation study. Importantly, Program L-7 calls for monitoring non-residential development within the nine planning area boundaries but does not distinguish between the different types of non-residential development within those areas. Attachment A presents the annual monitoring data for all types of non-residential development collected pursuant to Program L-7 from 1989 to the present and total square footages are shown below. In both cases, the non-residential square footage is net floor area and does not include floor area that replaces demolished floor area.1 Table 1, Non-Residential Development Potential in the Nine Planning Areas per Policy L-8 Development Potential per Comprehensive Plan Policy L-8 Net square feet increase 1989 to December 2014 for the nine planning areas* Remaining in Growth Monitoring Development Potential 3,257,900 1,400,367 1,857,533 *Non-Residential net change in square feet based on Planning Entitlements from 1989 -2014. Data excludes Mayfield Development Agreement Projects which demolishes approximately 323k of non-residential square feet and replaces 300k of demolished square feet into Stanford Research Park Source: Planning and Community Environment, December 22, 2014 As shown in Attachment A, when non-residential development projects currently in the entitlement process (“pipeline projects”) are included, an additional 139,524 non-residential square feet could be entitled or approved within the nine planning areas, affecting the totals as shown below. Table 2, Non-Residential Development Potential in the Nine Planning Areas per Policy L-8 with “Pipeline Projects” Development Potential After Citywide Study Net square feet increase 1989 to December 2014 for the nine planning areas including Pipeline Projects* Remaining in Growth Monitoring Development Potential 3,257,900 1,539,891 1,718,009 *Non-Residential net change in square feet based on Planning Entitlements from 1989 -2014 and current pipeline projects. Data excludes Mayfield Development Agreement Projects which demolishes approximately 323k of non-residential square feet and replaces 300k of demolished square feet into Stanford Research Park. Source: Planning and Community Environment, December 22, 2014 As noted before, there are areas within the nine planning areas that are considered “not monitored” including some Planned Community zones and public facilities. Approvals within the “not monitored” areas currently amount to approximately 1million square feet which includes expansion of the Veterans Administration Hospital, Palo Alto Medical Foundation, Stanford Cancer Research Center and other facilities identified as “not monitored” in Map L-6. One of these “not monitored” areas includes the Stanford University Medical Center (SUMC) facility. On June 6, 2011, Council amended Policy L-8 to include language exempting the Medical Center’s expansion from the policy and amended Map L-6 to expand the “not-monitored” area to be coterminous with the boundaries of the “Hospital District” zoning district. The 1.3 million square feet entitled SUMC expansion is not reflected in Attachment A or 1 Attachment A is an updated version of the Table 8-3 in the August 29, 2014 Existing Conditions Report. An error has been corrected in data for years 2001, 2008, 2012, and 2013 and “pipeline” information has been updated as described further later in this memo. Table 8-3 of the Existing Conditions Report because build-out and occupancy is expected in the future. If it had been included, the 1.3 million square feet SUMC expansion would be listed as ‘not-monitored’ in the year 2011, when the development agreement was approved. Assuming all pipeline projects are entitled, the net square feet increase within the last 27 years (1989- 2015) could be approximately 1.5 million square feet or an average annual increase of approximately 57,000 square feet per year. The following table details average annual non-residential growth within the nine planning areas. Table 3: Annual Average Non-Residential Growth within the Nine Planning Areas per Policy L-8 Years Total Non-Residential net square feet increase Average Annual Growth (total/# of years) 1989 – 2015 1,539,891 57,033 1989 – 2007 721,074 37,951 2008 – 2015 818,817 102,352 Source: Planning and Community Environment, December 22, 2014 Projects converting non-residential to residential uses, such as 901 San Antonio Ave, 901 and 1101 East Meadow Blvd, Hyatt Rickey’s (4219 El Camino Real), contributed to the significantly lower non- residential development from 1998-2007. Policy L-8, Program L-7, and Attachment A can inform discussions regarding the amount and pace of non-residential development, but there are significant limitations to the data which should be understood. First, as noted above, Policy L-8 and the monitoring program do not distinguish between various types of non-residential development, so the square footages presented include retail and medical offices as well as general office/R&D. Secondly, monitoring is limited to the nine planning areas as defined by Map L-6, and the City increasingly has seen some development outside of these areas. For example, the project at 441 Page Mill Road which will be considered by the City Council in January, falls outside of the nine planning areas and thus is not included in the “pipeline” numbers presented here. Source: Planning and Community Environment, December 22, 2014 The CMP dataset can inform the discussions regarding non-residential development, and does not have some of the disadvantages of the Policy L-8 data described above. The CMP dataset contains citywide development information, and is collected by fiscal year as opposed to calendar year. But it does provide useful information about different non-residential land use categories. Table 5, below summarizes the key points of the Policy L-8 and the CMP datasets. Table 5: Summary of Policy L-8 and CMP Datasets Policy L-8 Dataset CMP Dataset Timeline 1989-2014 plus 2015 pipeline projects FY 2001-FY 2014 plus 2015 pipeline projects Geography Nine Planning Areas as shown on Map L-6 Citywide Non-Residential Land Use Categories Total of all Non-Residential square footage Contains information on Different Non-Residential Land Use Categories (e.g. retail, office/R&D, Hotel, etc) Exemptions Areas within the nine planning areas that are considered “not monitored” including some Planned Community zones and public facilities. 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