HomeMy WebLinkAbout2015-03-09 City Council Agenda PacketCITY OF PALO ALTO
CITY COUNCIL
MARCH 9, 2015
Regular 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 March 9, 2015
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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
Oral Communications 6:00-6:15 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.
Study Session 6:15-7:15 PM
1.Joint Study Session with the Human Relations Commission on
Accomplishments, Projects and Priorities in 2015
7:15-8:45 PM
2.Short-Term Rentals and Home Occupation Uses in Residential
Neighborhoods
Agenda Changes, Additions and Deletions
City Manager Comments 8:45-8:55 PM
REVISED
2 March 9, 2015
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DURING NORMAL BUSINESS HOURS.
Oral Communications 8:55-9:10 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.
Minutes Approval 9:10-9:15 PM
December 15, 2014
January 5, 2015
January 12, 2015
Consent Calendar 9:15-9:20 PM
Items will be voted on in one motion unless removed from the calendar by three Council Members.
3.Ratification of Code Enforcement Settlement Agreement –
2040 Cowper Street
4.Approval of Contract to Hunt Design for $104,600 for Design of
Downtown Parking Wayfinding and Signage and Development of a
Parking Brand, and Approve a Budget Amendment Ordinance in the
Amount of $104,600 Transferring Funds from the University Avenue
Parking Permit Fund to CIP PL-15004, Parking Wayfinding Project
5.Approval of Amendment No. 1 to Contract #C13148075 with West
Coast Arborists, Inc., for an Additional Amount of $182,410 for a Third
Year of a Three Year Term for a Total Amount Not to Exceed
$1,232,410 for Tree Pruning and Removal Services; and Adoption of a
Related Budget Amendment Ordinance in the General Fund
6.Approval of a Signage Contract with McGuire-Pacific Contractors in the
Amount Not to Exceed $368,500 and Adoption of a Related Budget
Amendment Ordinance in the Amount of $368,500
7.Request for Finding that Stevenson House Rehabilitation Proposed
Ownership Structure is Compliant With the Site-Specific Planned
Community Zoning Ordinance Adopted in June 1965
8.SECOND READING: Adoption of an Ordinance Authorizing Closing of
the Budget for the Fiscal Year Ending June 30, 2014 (First Reading:
February 9, 2015 PASSED: 8-0 Kniss absent)
3 March 9, 2015
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DURING NORMAL BUSINESS HOURS.
9.SECOND READING: Adoption of an Ordinance Amending Municipal
Code Sections 2.16.070, 2.20.020, 2.21.025, 2.25.030, 2.27.020 to
Change the Start of Terms on the Architectural Review Board, the
Historic Resources Board, the Parks and Recreation Commission and
the Planning and Transportation Commission from November 1st to
December 16th (First Reading: February 9, 2015 PASSED: 8-0 Kniss
absent)
10.SECOND READING: Adoption of an Ordinance to Update the Fiscal Year
2015 Table of Organization for Fiscal Year 2015 Incorporating
Technical Changes (First Reading: February 9, 2015 PASSED: 8-0
Kniss absent)
11.Adoption of a Resolution Approving Interim Appointment of James
Lightbody to Chief Transportation Official Position Pursuant to
Government Code Section 21221(h)
Action Items 9:20-10:30 PM
12.Finance Committee Recommendation to Accept the Fiscal Year 2016 to
2025 General Fund Long Range Financial Forecast
Inter-Governmental Legislative Affairs
Council Member Questions, Comments and Announcements
Members of the public may not speak to the item(s)
Closed Session
Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker.
13.THIS CLOSED SESSION ITEM HAS BEEN CANCELLED
Adjournment
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contact (650) 329-2550 (Voice) 24 hours in advance.
4 March 9, 2015
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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
Standing Committee Meetings
Policy and Services Committee Meeting March 10, 2015
Schedule of Meetings
Schedule of Meetings
Tentative Agenda
Tentative Agenda
Informational Report
Palo Alto Arbor Day Proclamation
City of Palo Alto Sales Tax Digest Summary - Third Quarter Sales (July -
September 2014)
Public Letters to Council
Set 1 Set 2 Set 3
City of Palo Alto (ID # 5489)
City Council Staff Report
Report Type: Study Session Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Council Study Session with the Human Relations Commission
Title: Joint Study Session with the Human Relations Commission on
Accomplishments, Projects and Priorities in 2015
From: City Manager
Lead Department: Community Services
Discussion
This report transmits the items to be discussed with the City Council during its joint meeting
with the Human Relations Commission (HRC). The HRC will review its accomplishments for the
past year as well as share information on current topics and seek feedback on its major
initiatives for the upcoming year.
Attachments:
Attachment A -Topics for Discussion HRC Council Study Session 2015 (DOC)
CITY OF PALO ALTO
MEMORANDUM
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: COMMUNITY SERVICES
DATE: MARCH 2, 2015
SUBJECT: POTENTIAL TOPICS OF DISCUSSION FOR THE JOINT STUDY
SESSION SPECIAL MEETING WITH THE HUMAN RELATIONS
COMMISSION
Below are the proposed topics of discussion for the joint study session with the City
Council and Human Relations Commission scheduled for March 2, 2015 at 6:00 PM.
1) Human Relations Commission Accomplishments
2) Human Relations Commission Priorities and Projects for 2015
3) Other items
City of Palo Alto (ID # 5492)
City Council Staff Report
Report Type: Study Session Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Vacation Rentals/HOU
Title: Short-Term Rentals and Home Occupation Uses in Residential
Neighborhoods
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
This study session is intended to allow for discussion regarding potential adjustments to the
City’s zoning regulations to address short-term rentals and home occupations in residential
districts. No action is recommended at this time, though Council may wish to provide direction.
Executive Summary
At the December 15, 2014, Council meeting Council members Kniss, Holman, Klein and Price
presented a Colleague’s Memo that identified a need for consideration of regulation for Short-
Term Rentals in Residential Neighborhoods. They asked the Council to consider studying this
issue in the immediate future, so that the City could get out in front of a potential problem. In
describing the problem, they noted the loss of transient occupancy tax revenues from such
rentals, the impact on the availability and cost of housing, potential traffic and parking impacts
in the residential neighborhoods, and neighborhood safety issues. In their discussion and
subsequent motion, the City Council requested a broader look at the commercialization of the
residential neighborhoods. (See Attachment A for the Colleagues Memo and Action Minutes
from December 15, 2014.)
Local jurisdictions throughout the country and the region are grappling with these issues, and
staff has provided two local ordinances addressing short-term rentals in residential
neighborhoods. These two ordinances, from San Francisco and San Luis Obispo, present two
different approaches to regulating short-term rentals in residential neighborhoods. In San Luis
Obispo, the focus is clearly on maintenance and protection of the quality of life in the existing
residential neighborhoods. In the City and County of San Francisco, the focus is on protecting
the existing housing stock and preserving current housing policy including San Francisco’s
City of Palo Alto Page 2
grandfathered rent control system1 and protecting the availability of affordable units. Both
jurisdictions use an administrative permit requirement to implement and enforce regulations
associated with short-term rentals. Both require that the owner or renter who is participating
obtain a business license and enroll in the Transient Occupancy Tax (TOT) program.
Enforcement is based on violation of the administrative permit, including failure to pay required
TOT, and enforcement actions vary depending upon the jurisdiction’s general approach to
enforcement.
If the City of Palo Alto were to regulate short-term rentals in a manner similar to San
Francisco or San Luis Obispo, the steps involved would take a minimum of eight or nine
months and are outlined towards the end of this staff report. This estimate presumes that
the Council would prioritize this issue over other complex zoning issues currently being
explored. At present, short term rentals are not permitted under the City’s zoning code in
almost all residential zones. Code enforcement staff are engaged in targeted and complaint-
based enforcement focusing on dormitory or de-facto hotel type arrangements.
Background
At the December 15, 2014, Council meeting, four Council members presented a Colleagues
Memo asking that the Council consider directing staff to take immediate action on an ordinance
to address Short-Term Rentals in residential neighborhoods of the City. In the Council’s
resulting action, they asked staff to prepare a report and schedule a study session to:
Identify what actions the City has taken;
Address the various questions posed by businesses that facilitate short-term rentals of
rooms, apartments or houses in residential neighborhoods;
Suggest how the increased commercialization of the residential neighborhoods can be
addressed; and
Focus on what actions the City can take.
The Council also asked staff to schedule a study session before March 31, 2015.
Current Zoning Provisions
The City’s zoning ordinance defines permitted uses in residential districts, including residential
uses and “home occupations when accessory to permitted residential uses.” Relevant sections
of the zoning code are those addressing residential uses (Attachment B: Chapter 18.10 Low
Density Residential Districts, Chapter 18.12 R-1 Single Family Residential District, Chapter 18.13
Multiple Family Residential Districts) and the definition of “dwelling unit” in Section
18.04.030(46):
“Dwelling unit” means a room or group of rooms including living, sleeping, eating,
cooking, and sanitation/bathing facilities, constituting a separate and independent
1 Cities’ authority to adopt new rent control legislation has been preempted by a State law known as “Costa
Hawkins.”
City of Palo Alto Page 3
housekeeping unit, occupied or intended for occupancy on a nontransient basis and
having not more than one kitchen.
Also relevant are the definitions of “accessory use” and “home occupation” in Sections
18.04.030(143A) and 18.04.030(71):
“Accessory use” means a use which is incidental to, and customarily associated with a
specified principal use, and which meets the applicable conditions set forth in Chapters
18.40 and 18.42.”
“Home Occupation” means an accessory activity conducted in a dwelling unit solely by
the occupants thereof, in a manner incidental to residential occupancy, in accord with
the provisions of this title. (For further provisions, see regulations for home occupations
in Section 18.42.060.)
The limitations on home occupations in Section 18.42.060 include provisions requiring that the
activity be conducted in a manner that is compatible with the residential uses permitted, not
use more than 25% of the gross floor area (or 500 square feet, whichever is less) of the
dwelling, not generate traffic or parking demand or deliveries substantially more than
customarily associated with residential occupancy of the dwelling. The City does not have a
permit process for home occupations.
Based on these code sections, the short term or “transient” rental of dwelling units or portions
of dwelling units (i.e. bedrooms) is not currently permitted, and neither is the use or rental of
dwelling units or portions of dwelling units for business activities involving employees who do
not reside in the dwelling. The City has adopted a generally accepted definition of “transient”
occupancy as “occupancy lasting less than 31 days” and collects a transient occupancy tax (TOT)
for such uses as provided in Palo Alto Municipal Code Chapter 2.33.
Note however that the Code was drafted before introduction of the “shared economy”
business model. Once Council has provided policy direction on this issue, staff will likely
recommend clarifying code changes to more specifically address these newer shared economy
models.
The City’s Code Enforcement Program
Code enforcement is a resource-intensive activity, and the level of zoning enforcement that can
be accomplished in any jurisdiction is governed to a large extent by the resources allocated to
the function. Palo Alto currently has two code enforcement officers responsible for building
and zoning code violations, including violations associated with conditions of approval adopted
in conjunction with discretionary planning entitlements. These code enforcement officers are
supported by approximately 0.2 FTE (Full Time Equivalent) in the City Attorney’s office, and
receive assistance on specific enforcement actions from building inspectors, the Police
Department, the Fire Department and other City staff.
City of Palo Alto Page 4
Largely because of these limited resources, the City’s code enforcement program operates
largely on a “complaint” basis. In other words, the code enforcement officers prioritize
investigation and abatement of violations that are reported by a member of the public who is
directly affected by the violation. For example, if a resident observes unusual levels of activity
in a house next door, and/or traffic to and from the adjacent residence is affecting the
availability of parking or the character of a quiet residential street, they can report this to the
City via phone, using a complaint link on our website www.cityofpaloalto.org, or through the
City’s 311 system. Code enforcement staff will then investigate and take appropriate steps to
abate any violation that exists. Steps routinely involve an initial notice seeking voluntary
compliance with City code requirements, and escalate if that initial notice is not effective.
In addition to complaint-based enforcement, given the large number of short-term rental
listings in the City, code enforcement officers have prioritized situations where whole houses or
apartments are turned over to short-term rental use, including especially dense uses such as
bunk beds rented separately. In the past year and a half, the City’s code enforcement staff has
received seven complaints from residents affected by short term rentals or home occupations
and has issued notices to the owners of the properties. Of the seven, two were determined not
to be code violations. Of the remaining five cases, four have been addressed and closed, with
additional monitoring as required, and one is ongoing. Many of the properties where there
have been complaints have been in the downtown neighborhoods near University Avenue. In
most of the cases the individual renting out the rooms on a short term basis has been a tenant.
In a couple of cases, the person renting the rooms has been a ‘manager’ who may or may not
be a resident on the site. These cases have been more difficult to resolve. Neighbor complaints
are often prompted by parking impacts, noise, heavy use of outdoor spaces inconsistent with
typical residential use, frequency of ‘unknown’ persons on the property, and suspected
commercial/office use of a house.
In the last year, code enforcement staff has also received ten complaints related to home
occupations. Three were investigated and closed due to insufficient evidence of a code
violation, and seven were pursued as violations and the cases were closed.
This code enforcement activity has affected a small fraction of the home occupations and short
term rentals staff believes are operational in Palo Alto. According to the San Jose Mercury
News of December 8, 2014 (cited in the December 15, 2014 Colleagues Memo), there are likely
three to four hundred Airbnb listings in Palo Alto, a number that staff has not been able to
verify. A precise inventory and comprehensive enforcement are hampered by the fact that
properties are listed on websites like Airbnb and VRBO without their addresses, and home
occupations do not require a permit from the City.
Transient Occupancy Tax
The City’s transient occupancy tax (TOT) ordinance provides for collection of a tax from
businesses who rent accommodations on a short term basis. The TOT applies to homeowners
City of Palo Alto Page 5
or companies who may be renting bedrooms or dwelling units on a short term basis, even if this
activity violates the City’s zoning ordinance. Entities required to pay TOT are also required to
register with the City, and can be audited on an as-needed basis. If a business fails to collect or
remit the TOT as required, the City may impose penalties, estimate the amount of tax due, and
bring legal action to collect the tax due.
The recent voter-approved amendment to the TOT provides that “rental agents” that collect
rent but do not directly operate transient lodging are subject to the same obligations as a hotel
operator to collect and remit the TOT. Staff is in the process of notifying Airbnb and other
brokers, websites and providers of the requirement to collect and remit the TOT.
Discussion
There are a variety of policy questions raised by the issue of short term rentals, as noted in the
Colleagues Memo and subsequent Council discussion. Not least of these is the potential effect
on the availability of housing for residential (rather than transient) use and the potential
“commercialization” of Palo Alto’s residential neighborhoods. However, there are also reports
of those who rent rooms to generate income to defray the high cost of housing or meet other
needs, such as food and health care. Community engagement prior to regulatory changes or
enhanced enforcement activities can provide more information regarding these issues and
perspectives.
Sample Ordinances
Two recent ordinances are attached, one from San Luis Obispo (effective November 2014), and
one from the City and County of San Francisco (effective February 1, 2015). These ordinances
document the differences in how the issues of commercialization represented by Short-Term
Rentals in residential neighborhoods can be addressed. Because of a strong residential
neighborhood affinity and the availability of a mix of housing, single family, duplex and multiple
family, plus affordable and inclusionary units in Palo Alto, an effective land use regulation and
enforcement program is likely to require a combination of the two approaches. However these
sample ordinances can be used to outline the decisions Palo Alto would need to consider in
crafting new regulations or enhancing enforcement activities if desired.
San Luis Obispo. This ordinance distinguishes between Bed and Breakfast Inns, Vacation
Rentals and Homestay (owner occupied short-term rentals). Vacation Rentals are defined as a
dwelling or part of a dwelling where lodging is furnished for compensation for fewer than thirty
consecutive days without concurrently being occupied by the owner/operator. The ordinance
defines a “Homestay” rental as an owner occupied dwelling unit where bedrooms are provided
for short-term rental with a maximum of 4 overnight guests. (Attachment C: City of San Luis
Obispo, Municipal Code Chapter 17.08: Uses Allowed in Several Zones and Chapter 17.222: Use
Regulation).
City of Palo Alto Page 6
Under the San Luis Obispo ordinance, homestays are permitted subject to certain procedures
and conditions and short term rentals that do not involve owner occupied units (i.e. vacation
rentals) are expressly prohibited.
The ordinance focuses on quality of neighborhood issues such as the number of guests allowed,
provision of parking, mandated inspections for building and fire safety, and the use of accessory
buildings (prohibited). Further it requires an administrative permit issued by the Community
Development Director which includes requiring a business license, evidence of enrollment to
pay TOT and TBIC taxes, verification of owner occupancy and a site plan to show where on-site
parking would be provided (one space on-site more than the parking required for the
residential unit.) Enforcement is based on the administrative permit, failure to pay TOT and
other taxes, and neighbor complaint. Enforcement is the responsibility of the Community
Development Department, which issues the Homestay Administrative Permit.
Preparation of the San Luis Obispo ordinance included not only outreach to the public and local
business organizations but also the participation of the Planning Department, the City Attorney,
the Finance Department, the City’s business liaison, and the Building and Fire Departments.
City and County of San Francisco. San Francisco’s ordinance focuses on the impact of short-
term rentals on the San Francisco housing market and on current regulations that the city
places on housing. It permits short-term rentals that meet a collection of criteria: rentals
offered by a Permanent Resident whose name appears on at least two items (driver’s license,
vehicle registration, voter registration, tax documents showing homeowner’s exemption, utility
bill); the Permanent Resident must be a ‘natural person’ not a business or corporation; the
Permanent Resident must occupy the Residential Unit for 275 days out of a calendar year; the
Permanent Resident must be in good standing in the Planning Department’s Short-Term
Residential Rental Registry; and the unit is not subject to the Inclusionary Affordable Housing
Program, is not a residential hotel unit and no other State, Federal, or municipal regulation
prohibits the resident from subleasing or renting the unit. (Attachment D: City and County of
San Francisco, Administrative, Planning Codes – Amending Regulations of Short-Term
Residential Rentals and Establishing Fee)
The ordinance places controls on Short-Term Rental Units, with a maximum number of renters
based on unit size (studio-1 person, one-bedroom- 3 people, two bedroom- 4 people, four
bedroom -8 people, or the maximum allowed under the Uniform Building (UBC) or Fire (UFC)
codes. Further, since the Permanent Resident must be on site for 275 days a year, a unit can
only be rented for 60 days without the Permanent Resident on site. The individual identified as
the Permanent Resident is also the Responsible Party for maintaining and managing the unit,
and for paying all required taxes. There can be only one Permanent Resident identified per
unit. Compliance with the UBC and UFC, including annual inspections, as well as Housing Policy
compliance is required.
City of Palo Alto Page 7
The regulations make it clear that short-term rentals do not change the type of residential use
and that it includes all kinds of housing e.g. single-family, duplex, multiple family,
condominiums (if the CC&R’s allow it), work/live units, etc. San Francisco requires that the
Permanent Resident maintain liability insurance of at least $500,000 to defend and indemnify
the owner and any tenants in the building. If the short-term rental unit is subject to rent
control the Permanent Resident cannot charge the short-term renter more than the Permanent
Resident is paying the landlord.
The City and County of San Francisco requires an Administrative Permit for Short-Term Rentals.
In order to get a permit, San Francisco requires that the applicant have both a Business License
and evidence of enrollment to pay Transient Occupancy Tax, which is the responsibility of the
Permanent Resident. A fee is paid for the permit, which results in registration of the unit as a
short-term rental. Registration is good for two years and may be renewed.
The responsibility for maintaining records on occupancy and the number of days rented and
annual reporting of such information rests with the Permanent Resident. The Permanent
Resident may contract with a hosting platform (for example Airbnb) to collect and pay the TOT
to San Francisco. Enforcement includes hefty fines for the Hosting Platform that fails to pay
required TOT as well as to the Permanent Resident. Enforcement is based on a “three
violations and you’re out” basis including violations by the listing hosting platform which fails to
remit TOT to San Francisco. Payment for the enforcement action is borne by the Permanent
Resident and/or hosting platform.
Next Steps/Actions the City Can Take
Short term rentals of dwelling units or bedrooms for less than 30 days are currently prohibited
in Palo Alto, although we know the activity is occurring and that property owners are failing to
pay TOT as required. The City currently lacks the staff resources to proactively enforce this
zoning code violation and thus has to prioritize the most intensive uses based on complaints
from affected residents. Also, the City is in the early stages of addressing the issue of unpaid
TOT. In November 2014, voters amended the TOT ordinance to explicitly require brokers and
websites to collect and remit TOT. Staff is now in the process of initiating outreach to rental
agents like Airbnb. If voluntary compliance is not obtained, additional enforcement steps could
include use of subpoenas to gather information and potential legal action to obtain compliance
with the TOT requirement.
Staff believes that enforcement could be enhanced with the addition of staff or consultant
resources. Enforcement would also be aided by an ordinance amending the zoning code to
indicate under what circumstances, if any, the City would permit short-term rentals, and instate
a permit process for such rentals. For example, the City could use the approach of San Luis
Obispo and permit short term rentals where units are owner occupied and meet certain
physical criteria. Or the City could use the approach of San Francisco, and permit short term
rentals where units are owner occupied for a percentage of the year and the number of short
term vacation rentals is limited. Other restrictions would have to address potential impacts on
City of Palo Alto Page 8
below market rate (BMR) units and rent stabilization requirements contained in Municipal Code
chapters 18.14 and 9.68.
The City could also institute a permit process for home occupations, which would allow staff to
review whether criteria in the Code would be met by the proposed use, and allow the City to
revoke the permit if violations occur and are not immediately remedied.
Timeline
Staff’s research demonstrates that regulations affecting short term rentals are controversial
and time consuming for staff and for policy makers. We estimate that it could take a minimum
of eight or nine months to develop a proposed ordinance, obtain community input, and move
through the public review and approval process.
The general steps would be as follows:
- Receive Council and public input at this study session
- Develop a proposed approach and gather public input in an organized way (public
meeting, interviews with key stakeholders, etc.)
- Return to the City Council for direction regarding details of a proposed ordinance
- Prepare a draft of the ordinance for review by the Planning and Transportation
Commission (PTC) at a public hearing
- Bring the PTC’s recommended ordinance forward to the City Council for
consideration and possible action. Thirty days after the second reading of the
ordinance and adoption action by Council, the ordinance will become law.
Resource Impact
The Department of Planning and Community Environment is currently short staffed and
prioritization of this issue may affect delivery of other requested zoning changes until staffing
vacancies are filled.
Enforcement efforts for both code violations and TOT non-compliance are labor-intensive. The
City Attorney’s Office will assess its capacity over the coming months, in light of staffing levels
and other urgent priorities.
Policy Implications
The City’s Comprehensive Plan emphasizes the importance of the City’s residential
neighorhoods and the quality of life for residents. The plan also emphasizes the need to
increase and maintain the diversity of the City’s housing stock, and sets limits “where necessary
to ensure that business and housing remain compatible” (p. 1-3).
Environmental Review
No decision is requested at this study session, so review under the California Environmental
Qualtiy Act (CEQA) is not required.
City of Palo Alto Page 9
Attachments:
Attachment A: Colleagues Memo and Excerpt Action Minutes of the December 15, 2014
City Council Hearing (PDF)
Attachment B: Palo Alto Zoning Code Chapters 18.10, 18.12, and 18.13 (PDF)
Attachment C: City of San Luis Obispo, Municipal Code Chapters 17.08 and 17.22 (PDF)
Attachment D: City and County of San Francisco, Administrative Planning Code
Amending Regulations for Short-Term Residential Rentals and Establishing Fee (PDF)
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
December 15, 2014
The Honorable City Council
Palo Alto, California
Colleagues Memo From Vice Mayor Kniss and Council Members
Holman, Klein and Price Regarding Regulation of Short-term Rentals in
Residential Neighborhoods (e.g., Airbnb and Related Businesses)
Requested Action: Direct staff to conduct a study session with Council no later
than March 31, 2015, on the various questions posed by businesses that facilitate
short-term rentals of rooms, apartments or houses in residential neighborhoods
(e.g., Airbnb, VRBO, etc.), what actions the City has taken, and what actions, if
any, the City should take.
Discussion: “Sharing economy” websites such as Airbnb, VRBO, and others
provide applications that allow owners of residential property to rent some or a
portion of their properties to travelers seeking such accommodations. Airbnb, for
example, is only four years old but it is already a world wide business with a multi-
billion dollar valuation. These businesses are also controversial.
Among the Palo Alto issues posed by these businesses are: the collection of the
transient occupancy tax on rentals and whether our zoning regulations should
allow such rentals in residential neighborhoods. Other cities are finding other
problems with the Airbnb model such as its impact on the availability and cost of
housing (San Francisco) and potential traffic and parking impacts in the
neighborhoods.
Another concern raised by community members is one of safety. Without some
form of registration, as a hotel would have, or some means of notification,
residents have no way of knowing who is taking up residence, albeit on a short
term basis, next door to them.
Palo Alto presently has about three to four hundred Airbnb listings per night,
about the same as San Jose (see S.J. Mercury News of Dec. 8, 2014). San Jose,
with a 10% TOT estimates that they have been losing $150,000 per year in taxes.
With our 14% TOT our calendar 2015 equivalent number is $210,000.
ATTACHMENT A
Page 2
San Jose, San Francisco and a few other larger cities have been negotiating
agreements with Airbnb and other similar businesses on taxation and other
matters. Our situation may be different than these larger cities in some respects,
but we believe it’s time for us to review what has been done and consider what
additional steps Palo Alto should take.
We have provided an advance copy of this memo to the Manager and Attorney
per our protocols.
Resource Impact
Existing staff (Planning, ASD and the City Attorney’s Office) will collaborate on
preparation of background material to support an initial study session. Follow up
tasks, such as community outreach and preparation of potential zoning
amendments, broad enforcement efforts or initiation of legal action, may require
substantial additional staff resources in Planning, Code Enforcement,
Communications and Legal. Reprioritization of other work and/or supplemental
outside resources may be required. These are factors that will need to be
considered, subsequent to the study session, if Council decides to make changes
in our ordinances and practice.
Department Head: Beth Minor, Acting City Clerk
CITY OF PALO ALTO CITY COUNCIL
EXCERPT MINUTES
Page 1 of 1
Regular Meeting
December 15, 2014
24. Colleagues Memo from Vice Mayor Kniss and Council Members
Holman, Klein and Price Regarding Regulation of Short-Term Rentals in
Residential Neighborhoods (e.g., Airbnb and Related Businesses)
MOTION: Council Member Klein moved, seconded by Vice Mayor Kniss to
direct staff to conduct a Study Session with City Council no later than March
31, 2015, on the various questions posed by businesses that facilitate short-
term rentals of rooms, apartments or houses in residential neighborhoods
(e.g., Airbnb, VRBO, etc.), what actions the City has taken, and what
actions, if any, the City should take.
AMENDMENT: Council Member Scharff moved seconded by Council
Member Schmid to direct Staff to return to the City Council with a Study
Session and remove the verbiage of returning no later than March 31, 2015.
AMENDMENT PASSED: 5-4 Burt, Holman, Klein, Kniss no
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE
MAKER AND SECONDER to refer to Policy and Services Committee the
review of how to contend with the increased commercialization of
residences.
MOTION AS AMENDED PASSED: 9-0
18.10.010 Purposes
) Chapter 18.10
LOW-DENSITY RESIDENTIAL (R-E, R-2 and RMD) DISTRICTS
Sections:
18.10.010
18.10.020
18.10.030
18.10.040
18.10.050
18.10.060
18.10.070
18.10.080
18.10.090
18.10.100
18.10.110
18.10.120
18.10.130
18~10.140
18.10.150
18.10.010
Purposes
Applicable Regulations
Land Uses
Development Standards
Permitted Encroachments, Projections and Exceptions
Parking
Second Dwelling Units
Accessory Uses and Facilities
Basements
Standards for Agricultural Uses
Home Improvement Exceptions
Architectural Review
Historical Review
Neighborhood Preservation Combining District (NP) Standards
Grandfathered Uses
Purposes
Three low-density residential districts are defined in this chapter. Requirements for the single-family
residential (R-1) district and related subdistricts and combining districts are included in Chapter
18.12. The specific purpose of each low-density residential district is stated below:
(a) Residential Estate District [R-E]
The R-E residential estate district is intended to create and maintain single-family living areas
·characterized by compatibility with the natural terrain and native vegetation. The R-E district
provides locations for residential, limited agricultural, and open space activities most suitably
located in areas of very low density or rural qualities. Second dwelling units and accessory
structures or buildings are appropriate where consistent with the site and neighborhood
character. Community uses and facilities should be limited unless no net loss of housing units
would result.
(b) Two Family Residential District [R-2]
The R.:2two-family residence district is intended to allow a second dwelling unit under. the
same ownership as the initial dwelling unit on appropriate sites in areas designated for single-
family use by the Palo Alto Comprehensive Plan, under regulations that preserve the
essential character of single-family use. Community uses and facilities should be limited
unless no net loss of housing would result.
(c) Two Unit Multiple-Family Residential District [RMD]
The RMD two-unit multiple-family residence district is intended to allow a second dwelling
unit under the same ownership as the initial dwelling unit on appropriate sites in areas
designated for multiple-family use by the Palo Alto Comprehensive Plan. The RMD district is
intended to minimize incentives to replace existing single-family dwellings, maintain existing
Ch. 18-10-Page 1 (Supp. No 13-10/112007)
)
I , ' 1-. J ~-1 ___/'
18.10.040 Development Standards
(4) Exemption from Floor Area for Covered Parking Required for Two-Family Uses: In the R-2 and RMD districts, for two-family.
uses, floor area limits may be exceeded by a maximum of two hundred square feet, for purposes of providing one required covered
parking space.
(5) Maximum House Size: The gross floor area of attached garages and attached second dwelling units are included in the calculation of
maximum house size. If there is no garage attached to the house, then the square footage of one detached covered parking space
shall be included in the calculation. This provision applies only to single-family residences, not to duplexes allowed in the R-2 and RMD
districts.
(b) Substandard and Flag Lots in R-2 District
The following site development regulations shall apply to all new construction on
substandard and flag lots within the R-2 district in lieu of comparable provisions in
subsection (a).
(1) Substandard Lots
(A) For the purposes of this subsection ( c ), a substandard lot shall be a lot with a width
of less than 50 feet or a depth of less than 83 feet and an area less than 83% of the
minimum area required by the zoning of the parcel.
(B) Development Standards
(i) · The maximum height shall be 17 feet, as measured to the peak of the roof.
(ii) There sh~ll be a limit of one habitable floor. Habitable floors include lofts, mez-
zanines, and similar area with interior heights of five feet (5) or more from the
roof to the floor, but exclude basements and exclude attics that have no stairway
or built-in access. The chief building official shall make the final detennination
as to whether a floor is habitable.
(iii) For lots less than 50 feet in width, the required street side setback shall be 1 O
feet.
(C) Nothing in this subsection ( c) shall affect or otherwise redefine the provisions of
Section 18.40.080 as to whether a substandard lot may be used as a lot under this
title.
(2) Flag Lots
(A) A flag lot shall be defined as set forth in Section 18.04.030(84)(B).
(B) Flag Lot Development Standards:
(i) The maximum height shall be 17 feet, as measured to the peak of the roof.
(ii) There shall be a limit of one habitable floor. Habitable floors include lofts, mez-
zanines, and similar areas with interior heights of five feet (5) or more from the
roof to the floor, but exclude basements and exclude attics that have no sta'irway
or built-in access. The chief building official shall make the final detennination
as to whether a floor is habitable.
(iii) Front Setback: I 0 feet. Flag lots are not subject to contextual front setback re-
quirements.
(iv) Flag lots are not subject to contextual garage placement requirements.
Ch. 18-10-Page 5 (Supp. No 13-10/1/2007)
)
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18.10.050 Permitted Encroachments, Projections and Exceptions
(i) Individual Review
The Individual Review provisions of Section 18.12.110 of the Zoning Ordinance shall be
applied to any single-family or two-family residence in· the R-2 or RMD districts to those
sides of a site that share an interior side lot line with the interior side or rear lot line of a
property zoned for or used for single-family or two-family dwellings, except where
architectural review board review is required for a second dwelling on an RMD-zoned site.
The individual review criteria shall be applied only to the project's effects on adjacent single-
family and two-family uses.
(Ord. 4964 § 9, 2007: Ord. 4875 § 2 (part), 2005)
18.10.050 Permitted Encroachments, Projections and Exceptions
The following projections and encroachments into required yards, daylight plane and height are per-
mitted, provided a projection shall not be pennitted to encroach into a special setback, as established
by the setback map pursuant to Chapter 20.08 of the Palo Alto Municipal Code, except as noted in
(a)(l)(D) below.
(a) Setback/Yard Encroachments and Projections
I.
(1) Horizontal Additions
In the R-2 district and the RMD district, where a single-family dwelling legally con-
structed according to existing yard and setback regulations at the time of construction
encroaches upon present required yards, one encroaching side (first floor wall) of the
existing structure at a height not to exceed 12 feet may be extended in accord with
this section. Only one such extension shall be permitted for the life of such building.
This subsection shall not be construed to allow the further extension of an encroach-
ment by any building which is the result of the granting of a variance, either before or
after such property became part of the city.
(A) Front Yard. In cases where the existing setback is less than 20 feet, but at least 14
feet, the existing encroachment may be extended for a distance of not more than
100% of the length of the encroaching wall to be extended; provided, that the total
length of the existing encroaching wall and the additional wall shall together not
exceed one-half the maximum existing width of such building.
(B) Interior Side Yard. In cases where the existing setback is less than 8 feet, but at
least 5 feet, the existing encroachment may be extended for a distance of not more
than 100% of the length of the encroaching wall to be extended, but not to exceed
20 additional feet.
(C) Street Side Yard. In cases where the existing setback is less than 16 feet, but at
least 10 feet, the existing encroachment may be extended for a distance of not
more than I 00% of the length of the encroaching wall to be extended, but not to
exceed 20 feet.
.J
(D) Special Setbacks. In cases where a Special Setback is prescribed pursuant to
Chapter 20.08 of the Municipal Code, and the existing setback is less than the Spe-
cial Setback distance, but is at least 14 feet for the front setback or at least IO feet
for the street side yard setback, the existing encroachment may be extended for a
Ch. 18-10-Page 7 (Supp. No 13 -1011/2007)
18.10.050 Permitted Encroachments, Projections and Exceptions
distance of not more than I 00% of the length of the encroaching wall to be ex-)
tended, provided that the total length of the existing encroaching wall and the ad-
ditional wall shall together not exceed one-half the maximum existing width of
such building.
(2) Rear Yard Encroachments for Portions of Homes
A portion of a main building that is less than half the maximum width of the building
may extend into the required rear yard no more than six feet and with a height of no
more than one story, except that a comer lot having a common rear property line with
an adjoining comer lot may extend into the required rear yard not more than ten feet
with a height of no more than one story.
(3) Allowed Projections
(A) Cornices, Eaves, Fireplaces, and Similar Architectural Features
For cornices, eaves, fireplaces, and similar architectural features, excluding flat or
continuous walls or enclosures of usable interior spate, the following projections
are permitted:
(i) A maximum of two feet into a required side yard. Fireplaces in a required side
yard may not exceed five feet in width. Fireplaces not exceeding five feet in
width may project into a required side yard no more than two feet.
(ii) A maximum of four feet into a required front yard
(iii) A maximum of four feet into a required rear yard
(B) Window Surfaces
. Window surfaces, such as bay windows or greenhouse windows, may extend into
a required side or rear yard a distance not to exceed two feet, or into a required
front yard a distance not exceeding three feet. The window surface may not extend
into any yard above a first story. ·
(C) Detached Storage Structures
In addition to the provisions for location of accessory structures under Section
18.12.080(b), the following further projections are permitted. For structures not
over six feet in height or twenty-five square feet in floor area, used exclusively for
storage purposes, the following projections are permitted:
(i) A maximum of two feet into a required side yard.
(ii) A ~aximum of four feet into a required front yard.
(iii) A maximum of four feet into a required rear yard.
(D) Patios, Decks, Stairways, Landings, Balconies, or Fire Escapes
For uncovered porches (less than 30 inches above grade), patios, decks, stairways,
landings, balconies, or fire escapes the following projections are permitted, pro-
vided these projections are not permitted above the first story:
(i) A maximum of three feet into a required side yard.
(ii) A maximum of six feet into a required front yard.
(Supp. No 13-10/1/2007) Ch. 18.10-Page 8
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18.10.050 Permitted Encroachments, Projections and Exceptions
(iii) A maximum of six feet into a required rear yard.
(E) Canopy or Patio Cover
A canopy or patio cover may be located in the required rear yard or that portion of the
interior side yard, which is more than 75 feet from the street lot line measured along the
common lot line. Such canopies shall be subject to the following conditions:
(i) · A canopy or patio cover shall not be more than 12 feet in height.
(ii). The canopy or patio cover shall be included in the co~putation of building coverage.
(iii) The canopy or patio cover and other structures shall not occupy more than 50 percent
of the required rear yard.
(iv) The canopy or patio cover shall not be enclosed on more than two sides.
(F) Pools, Spas, and Hot Tubs
(i)
(ii)
Pools, spas, and hot tubs may extend into a required rear yard a distance not to exceed
fourteen feet, provided that a minimum setback of six feet from the property line shall
be maintained.
No swimming pool, hot tub, spa, or similar accessory facility shall be located in any
portion of a required front or street side yard.
(iii) No swimming pool, hot tub, spa, or similar accessory facility shall be located closer
than six feet from an interior side yard property line.
(b) Height Exceptions
The following features may exceed the height limit established by the specified districts:
(1) RE and R-2 Districts: In the RE and R-2 districts, flues, chimneys, and antennas may
exceed the established height limit by not more than 15 feet.
(2) RMD District: In the RMD district, flues, chimneys, exhaust fans or air conditioning
equipment, elevator equipment, cooling towers, antennas, and similar architectural, utility,
or mechanical features may exceed the height limit established in any district by not more
than 15 feet, provided that.no such feature or structure in excess of the height limit shall be
used for habitable space, or for any commercial or advertising purposes.
Ch. 18.10 -Page 9 (Supp. No. 17 -12/2009)
18.10.060 Parking
( c) Daylight Plane Exceptions
The following features may extend beyond the daylight plane established by the applicable
district, provided that such features do not exceed the height limit for the district unless
permitted to do so by subsection (b):
( 1) RE and R-2 districts:
(A) Television and radio antennas;
(B). Chimneys and flues, provided that chimneys do not 'e~tend past the required day light
plane a distance exceeding the minimum.allowed pursuant to Chapter 16.04 of this
code;
(C) Dormers, roof decks, gables, or similar architectural features, provided that
(i) the sum of the horizontal lengths of all such features shall not exceed 15 feet on
each side; and
(ii) the height of such features does not exceed 24 feet.
\ )
(D) Cornices, eaves, and similar architectural features, excluding flat or continuous walls )._
or enclosures of usable interior space, provided such features do not extend past the '-,~
daylight plane more than 2 feet.
(2) RMD District:
(A) Television and radio antennas; and
(B) Chimneys and flues.
(Ord. 4875 § 2 (part), 2005)
18.10.060 Parking
Off-street parking and loading facilities shall be required for all permitted and conditional uses in accord
with Chapters 18.52 and 18.54 of this title. The following parking requirements apply in the R-E, R-2,
and RMD districts. These requirements are included for reference purposes only, and in the event of a
conflict between this Section 18. 10. 060 and any requirement of Chapters 18. 52 and 18. 54, Chapters
18.52 and 18.54 shall apply, except in the case of parcels created pursuantto section 18.10.130(c)
(subdivision incentive for historic preservation).
(a) Parking Requirements for Specific Uses
Table 3 shows the minimum off-street automobile parking requirements for specific uses.
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 10
)
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18.10.060 Parking
TABLE3
PARKING REQUIREMENTS FOR R-E, R-2 AND RMD USES
Use Minimum Off-Street Parking Requirement
Single-family residential use (excluding 2 spaces per unit, of which one must be covered.
second dwelling units)
Two family (IU & RMD districts) 3 spaces total, of which at least two must be covered
Second dwelling unit, attached or detached:
> 450 sf in size 2 spaces per unit, of which one must be covered
~ 450 sf in size 1 space per m\it, which may be covered or uncovered
Other Uses See Chapter 18. 40
(b) Parking and Driveway Surfaces
Parking and driveway surfaces may have either permeable or impermeable paving. Materials shall be
.those acceptable to Public Works Department standards. Gravel and similar loose materials shall not
be used for driveway or parking surfaces wi,thin 10 feet of the public right of 'Yay.
(c) Parking in Yards
( 1) No required parking space shall be located in a required front yard.
(2) No required parking space shall be located in the first ten feet adjoining the property line of a
required street side yard.
(d) Tandem Parking
Tandem parking shall be permitted for single-family uses and for single-family uses with a permitted
second dwelling unit. Tandem parking is permitted for two-family uses where both spaces in tandem
(front space and tandem space) are designated for use by the same unit.
(e) Bicycle Parking
For two family uses, at least one Class I bicycle parking space shall be required.
(f) Qesign of Parking Areas
Parking facilities shall comply with all applicable regulations of Chapter 18.83 (Parking Facility
Design Standards).
Ch. 18.10 -Page 11 (Supp. No. 17 -12/2009)
18.10.070 Second Dwelling Units
(g) Parking Facilities on Lots Created Pursuant to Section 18.10.130(c) (subdivision incentive for
historic preservation)
Legal non-conforming parking facilities existing prior to the subdivision of a parcel having a historic
residence(s) may be maintained as existing non-complying facilities or may be improved to greater
compliance with parking requirements, as approved by the Director of Planning and Community
Environment or his/her designee. Preservation covenants may allow non-historic residences to be
remodeled; however, floor area expansions. shall be subject to the Director's discretionary action
regarding improvements to on-site parking conditions associated with such increased floor area and
when floor area over 400 square feet is proposed to be added to a non-historic residence having legal
non-complyi.ng parking facilities prior to subdivision, parking facili~ies shall be brought into greater
compliance with Chapter 18.52, wherever feasible. A subdivided property having no existing on-site
parking facilities prior to subdivision may be permitted to continue as such as long as preservation
covenants allowing for this continuance and any associated access easements have been recorded.
(Ord. 5051 § 3, 2009: Ord. 4875 § 2 (part), 2005)
18.10.070 Second Dwelling Units
The intent of this section is to provide regulations to accommodate second dwelling units, in order to
provide for variety to the City's housing stock and additional affordable housing opportunities. Second
dwelling units are i~tended as separate self-contained living units, with separate entrances from the main
residence, whether attached or detached. The standards below are provided to minimize the impacts of
second dwelling units on nearby residents and to assure that the size, location and design of such
dwellings is compatible with the existing residence on the site and with other structures in the area.
· (a) Second Units iri the R-2 and RMD Districts
Second dwelling units are allowed on R-2 or RMD lots that meet lot size requirements in Table 2 to
accommodate two units on a lot. For R-2 zoned lots of 6,000 square feet or greater, but less than
7 ,500 square feet, a second dwelling unit of 450 square feet or less is permitted, subject to all other
regulations of the R-1 chapter outlined in Section 18.12.070. Any second dwelling unit, and any
airspace rights thereto, under different owners~ip from the initial dwelling unit, shall be prohibited
in the R-2 and RMD districts.
(b) Second Units in the R-E District
The following regulations apply to second dwelling units in the R-E district:
( 1) Minimum Lot Sizes
In the RE district, the minimum lot size for a second dwelling unit is one acre. Provided, for
flag lots, the minimum lot size shall be 35 % greater than the minimum lot size established by
Section 21. 20. 301 of the Subdivision Ordinance.
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 12
)
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18.10.070 Second Dwelling Units
(2) Development Standards for Attached Second Dwelling Units
Attached second dwelling units are those attached to the main dwelling. Attached unit size
counts toward the calculation of maximum house size. All attached second dwelling units shall
be subject to the following development requirements:
(A) The minimum site area shall meet the requirements specified in subsection (1) above.
(B) Maximum size of living area: 450 square feet. The second dwelling unit and covered
parking shall be included in the total floor area for the site. Any. basement space used as a
sec~nd dwelling unit or portion thereof shall be counted as. floor area for the purpose of
calculating the maximum size of the unit.
(C) Maximum size of covered parking area for the second dwelling unit: 200 square feet.
(D) Maximum height: 30 feet.
(E) Except on corner lots, the second dwelling unit may not have an entranceway facing the
same lot line (property line) as the entranceway to the main dwelling unit, and exterior
staircases to second floor units shall be located toward the interior side or rear yard of the
property.
(3) Development Standards for Detached Second Dwelling Units
Detached second dwelling units are those detached from the main dwelling. All detached second
dwelling units shall be subject to the following development requirements:
(A) The minimum site area shall meet the requirements specified in subsection (b) above.
(B) Minimum separation from the main dwelling: 12 feet.
(C) Maximum size of living area: 900 square feet. The second dwelling unit and covered
parking shall be included in the total floor area for the site. Any basement space used as a
second dweiiing unit or portion thereof shall be counted as floor area for the purpose of
calculating the maximum size of the unit.
(D) Maximum size of covered parking area for the second dwelling unit: 200 square feet.
(E) Maximum height: one story and 17 feet.
(F) The detached seco_nd dwelling shall be architecturally compatible with the main residence,
with respect to style, roof pitch, color and materials.
Ch. 18.10 -Page 12.1 (Supp. No. 17 -12/2009)
18.10.070 Second Dwelling Units
( 4) Street Access
The second dwelling unit shall have street access from a driveway in common with the main
residence in order to prevent new curb cuts, excessive paving, and elimination of street trees.
Separate driveway access may be permitted by the Zoning Administrator upon a determination
that separate access will result in fewer environmental impacts such as excessive paving,
unnecessary grading or unnecessary tree removal,. and that such separate access will not create
the appearance, from the street, of a lot division or two-family use.
(5) Parking
The following parking criteria apply to both detached and attached second dwelling units:
(A) Two parking spaces shall be provided for each second dwelling unit, with at least one of the
spaces being covered; provided, however, that if the floor area of the second dwelling unit
is 450 square feet or less, only a single parking space is required, and it may be covered or
uncovered.
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 12.2
)
18.10.080 Accessory Uses and Facilities
(B) Such parking shall be located out of required front setbacks and not closer than
15 feet from the street in a street side setback. New parking areas created in the
street side setback shall be of permeable materials if required by the Planning
Director.
(Ord. 4939 § 3, 2007: Ord. 4875 § 2 (part), 2005)
18.10.080 Accessory Uses and Facilities
Accessory uses and facilities, as referenced in Section 18.10.030, shall be permitted when incidental
to and associated with a permitted use or facility in the R-E, R-2, or RMD districts, or when inciden-
tal to and associated with an allowable and authorized conditional use therein, subject to the provi-
sions below and of Chapters 18.40 and 18.42.
(a) Types of Accessory Uses
(b)
Accessory uses and facilities include, but are not limited to, the following list of examples;
provided that each accessory use or facility shall comply with the provisions of this title:
(1) Residential garages, carports, and parking facilities, together with access and circula-
tion elements necessary thereto;
(2) Facilities for storage incidental to a pennitted use; and
(3) Recreational uses and facilities for the use and convenience of occupants or employ-
ees, or guests thereof, of a principal use or facility;
Location and Development Standards
Except as otherwise provided in this section, accessory buildings shall at all times be located
in conformance with requirements for principal buildings, and shall not be located in any
required front, side, or rear yard. See Section 18.10.050(a)(3)(C) for allowed encroachments
for small storage structures. Accessory buildings may be located in a required interior yard
subject to the following limitations:
(1) An accessory building shall not be used for living and/or sleeping purposes unless the
building was legally constructed for or was legally converted to living and/or sleeping
purposes prior to October 13, 1983.
(2) An accessory building shall not be located in a required front yard, required street
yard, or required rear yard of a through lot.
(3) An accessory building shall not be located in a required interior side or rear yard un-
less the building is at least seventy-five feet from any property line adjacent to~
street, measured along the respective lot line. Provided, on comer lots, accessory
buildings including detached garages and carports may be located in the rear yard if
located at least 75 feet from the front street and at least 20 feet from the side street
property lines.
( 4) Accessory buildings located within a required interior yard as permitted by this sec-
tion shall be subject to a maximum height established by a daylight plane beginning
at a height of eighi feet at the property line and increasing at a slope of one foot for
every three feet of distance from the property line, to a m~ximum height of twelve
feet.
Ch .. 18-10 -Page 13 (Supp. No 13-I0/112007)
18.10.090 Basements
(5) When located within a required interior yard as permitted by this section, no such ac-)
cessory building shall have more than two plumbing fixtures.
( 6) Accessory buildings located within a required interior yard, as permitted by this sec-
tion, shall not itldividually or cumulatively occupy an area exceeding fifty percent of
the required rear yard.
(7) The minimum distance between separate buildings located on the same site shall be
as required by Title 16; provided, accessory buildings in the Residential Estate (R-E)
district shall be separated from the principal building by at least three feet.
(8) A principal ·building and an accessory building, meeting the requirements of Title 16
and each located on a site as otherwise permitted for principal building and accessory
buildings, may be connected by a structure meeting the definition of a breezeway.
Such structure, or breezeway, shall be a part of the accessory building.
(Ord~ 4875 § 2 (part), 2005) .
18.10.090 Basements
Basements shall be permitted in areas that are not designated as special flood hazard areas, as defined
in Chapter 16.52, subject to the following regulations:
(a) Permitted Basement Are.a
.Basements may not extend beyond the building footprint ·and basements are not allowed ~
below any portion of a structure that extends into required setbacks, except to the extent that ~ f
the main residence is pemritted to extend into the rear yard setback by other provisions of this
code.
(b) Inclusion as Gross Floor Area
I • • ' • . • • ~ ~
Basements shall not be included in the calculation of gross floor area, provideo that: ·
(I) basement area is not deemed to be habitable space, such as a crawlspace; or
(2) basement area is deemed to be habitable space but the finished level of the first floor
is no more than three feet above the grade around the perimeter of the building foun-
dation. Grade is measured at the 10\vest point of adjacent ground elevation prior to
grading or fill, or finished grade, whichever is lower.
( c) Lightwells, Stairwells and Other Excavated Features
Excavated features shall not affect the measurement of the grade for the purposes of
detennining gross floor area, so long as such features meet the following provisions:
( 1) Lightwells, stairwells and similar excavated features along the perimeter of the base-
ment shall not affect the measurement of grade, provided that:
(A) such features are not located in the front of the building;
(B) such features shall not exceed 3 feet in width;
(C) the cumulative length of all such features does riot exceed 30% of the perimeter of
the basement;
(Supp. No I 3 -10/1/2007) Ch. 18.10-Page 14
)
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18.10.090 Basements
(D) such features do not extend more than 3 feet into a -required side yard nor more than 4 feet
into a required rear yard, but where a side yard is less than 6 feet in width, the features
shall not encroach closer than 3 feet from the adjacent side property line;.
(E) the cumulative length of any features or portions of features .that extend into a required side
or rear yard does not exceed 15 feet in length;
(F) the owner provides satisfac;tory evidence to the planning division prior to issuance of a
building permit that any features or portions of features that extend into a required side or
rear yard will not be harmful to any mature trees on the subject property or on abutting
properties; and
(G) such features have either a drainage system that meets the requirements of the public works
department or are substantially sheltered from the rain by a roof overhang or canopy of a
permanent ·nature.
(2) Below-grade patios, sunken gardens or similar excavated areas along the perimeter of the
basement that exceed the dimensions set forth in subsection ( 1), are permitted and shall not
affect the measurement of grade, provided that:
(A) such areas are not located in the front of the building;
(B) All such areas· combined do not exceed 2 % of the area of the lot or 200 square feet,
whichever is greater; that each such area does not exceed 200 square feet, and that each
such area is separated from another by a distance of at least 10 feet. Area devoted to
required stairway access shall not be induded in the 200 square foot limitation.
(C) the cumulative length of any excavated area or portion thereof that extends into a required
side or rear yard does not exceed 15 feet;
(D) such features do not extend more than 2 feet into a required side yard nor more than 4 feet
into a required rear yard;
(E) the owner provides satisfactory evidence to the planning director prior to issuance of a
building permit that any features or portions of features that extend into a required side or
rear yard will not be harmful to any mature trees on the subject property or on abutting
properties;
(F) such features have either a drainage system that meets the requirements of the public works
department or are substantially sheltered from the rain by a roof overh~ng or canopy of a
permanent nature;
(G) any roof overhang or canopy installed pursuant to subsection (F) is within and is counted
toward the site coverage requirements established in Section 18.10.040;
(H) such areas are architecturally compatible with the residence; and
Ch. 18.10 -Page 15 (Supp. No. 17 -12/2009)
18.10.100 Standards for Agricultural Use
(I) such areas are screened to off site views by means of landscaping and/ or fencing as
determined appropriate by the planning director.
(Ord. 4964 § 10, 2007: Ord. 4875 § 2 (part), 2005)
18.10.100 Standards for Agricultural Uses
In the RE district, agricultural use shall be allowed subject to the following regulations:
(a) Keeping and Raising of Livestock
Keeping and raising of livestock, poultry, or other animals may be c;onducted accessory to a
residential use, and raising of animals for commercial purposes is prohibited.
(b) Required Site Area for Keeping of Livestock
(1) At least 2l,528 square feet (0.5 acre) of site area shall be required for each horse, mule,
donkey, cow, steer or similar livestock.
(2) At least 21,528 square feet (0.5 acre) of site area shall be required for each three goats, hogs,
sheep, or similar livestock.
(c) Location of Livestock Facilities
Barns, stables, sheds, chicken houses, and other similar facilities for the shelter and feeding of
animals, exclusive of domestic household pets; shall be located a minimum of 40 feet from any lot
line (property line).
(Ord. 4875 § 2 (part), 2005)
18.10.110 Home Improvement Exceptions
Home improvement exceptions may be granted for existing single-family residences in the R-E, R-2, and
RMD districts, pursuant to the provisions of Section 18.12.120 (R-1 Residential District, Home
Improvement Exceptions).
(Ord. 4875 § 2 (part), 2005)
18.10.120 Architectural Review
Architectural review, as required in Section 18.76.020, is required in the R-E, R-2, and RMD
districts whenever three or more adjacent residential units are intended to be developed concurrently,
whether through subdivision or individual applications. Architectural review is also required for second
dwelling units of more than 900 square feet, when located in the Neighborhood Preservation Combining
District (NP).
(Ord. 4875 § 2 (part), 2005)
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 16
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18.10.130 Historical Review and Incentives
18.10.130 Historical Review and Incentives
(a) Historic home review, as required in Chapter 16.49 of Title 16 of the Municipal Code, is required in
the R-E, R-2, and RMD low density residential districts for alterations or modifications to any
residence designated on the City's Historic Inventory as a Category 1 or Category 2 historic
structure as defined in Section 16.49.020 of this code or any contributing structure located within a
locally designated historic district.
(b) Exemptions to gross floor area requirements are available for historic residences pursuant to the
definition of gross floor area in Section .18.04.030(65)(D)(vii). Home improvement exceptions
provide for additional square footage and certain other exceptions for historic homes pursuant to
Section 1s.1i.120 (R-1 Chapter).
(c) Notwithstanding other provisions of this chapter, existing parcels in the R-2 or RMD districts
containing two residences may be subdivided into two ownerships, where all of the following
circumstances exist:
(1) At least one residence is designated on the City's Historic Inventory as a Category 1, Category
2, Category 3, or Category 4 historic structure as defined in Section 16.49.020 of this code ·or
are contributing structures located within a locally designated historic district or are eligible for
listing on the California or National Registers; and
(2) No increase in the total number of residences on the site is proposed; and .
(3) Separate lots are proposed to be created, each with a minimum lot size not less than 4,000
square feet if only one residence is historic; if both residences are historic and subject to a
covenant, the allowable minimum lot size is 2,000 square feet; and
(4) The resultant parcel lines may create less than minimum lot size (no less than the area stated in
item (3) of this section), site width and depth, setback and daylight plane encroachments, floor
area and site coverage exceeding the maximum allowable for existing development with respect
to each new parcel, without the need for approval of a Variance or Home Improvement
Exception, but would not generally increase any existing non-complying building features;
however, minor additions for functional improvements may be allowed at the discretion of the
Director of Planning and Community Environment; and
(5) The Historic Resources Board has determined that at least one existing residence on the property
has historic integrity and qualifies for listing on the City's Historic Inventory.
(6) A covenant is recorded to run with the land in perpetuity, assuring that the historic residence(s)
will be preserved and maintained consistent with the Secretary of the Interior's Standards for
Historic Rehabilitation through compliance with Historic Resources Board review and
recommendations. The covenant will stipulate that HRB review is required for all major
projects on the site including significant changes to any non-historic residence. Any
modifications to a non-historic residence must be compatible with the historic residence and
satisfy the Secretary of Interior's Standards for Historic Compatibility.
Ch. 18.10 -Page 17 (Supp. No. 17 -12/2009)
18.10.140 Neighborhood-Preservation Combining District (NP)
(7) The two residences on the property were in existence as of J a~uary 28, 2009.
(8) Application of the state Historic Building Code is available for use on· any eligible building.
(9) Residences subject to a covenant must meet all goverrunent health, life and safety codes.
(Ord. 5051 § 2, 2009: Ord. 4875 § 2 (part), 2005)
18.10.140 Neighborhood Preservation Combining District (NP)
(a)· Purpose and Applicability
The neighborhood preservation combining district is intended to modify the regulations of the RMD
two unit multiple-family residential district areas where it is deemed essential to maintain the visual
and historic character of existing neighborhoods. The combining district is intended to foster
retention of existing single-family structures, to foster additions to existing properties without
demolition of sound residential structures, and to assure compatibility of design of new residential
units with existing structures on the same or surrounding properties.
Properties in the (NP) combining district are subject to the following regulations:
(b) Design Review
( 1) Purposes
The purpose of design review of properties in an (NP) combining district is to achieve
compatibility of scale, silhouette, fa~ade articulation, and materials of new construction with
existing structure on the same property or on surrounding properties within a combining district.
(2) Design Review Required
For properties on which two or more residential units are developed or modified, design review
and approval shall be required by the architectural review board in compliance with procedures
established in Section 18.76.020 for any new development or modification to any structure on
·the property and for site amenities. No design review is required for construction of or
modifications to single-family structures that constitute the only principal structure on a parcel
of land. No design review is required for construction of second dwelling units on a parcel
except when the second unit exceeds 900 square.feet in size.
(3) Design Review Guidelines
The architectural review board shall, at its discretion, develop specific design review guidelines
for each specific area to which this combining district is applied.
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 18
)
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18.10.150 Grandfathered Uses
( c) Exceptions to Development Standards
(1) Applicability
Subject to the provisions of Section 18.76.040 and the general purposes of this title to foster
retention of existing single-family structures and to maintain the existing historic and general
character of the neighborhood, the planning director may grant exceptions to site development
regulations (except limitations on residential density), parking regulations, and from the special
setback requirements of Title 20 applicable to the underlying zone district where combined with
the neighborhood preservation (NP) combining district. This exception procedure is the
exclusiye procedure for procuring an exception to development .standards in. the NP combining
district. It is· not necessary for the property owner to obtain a variance.
(2) Findings
The director may only grant an (NP) District Exception if, from the application or the facts
presented at the public hearing, . he finds:
(A) The granting of the exception will facilitate the preservation of an existing residential
structure on the same property and will be of benefit in maintaining the existing historic and·
general character of the surrounding neighborhood, and
(B) The granting of the application 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.
(3) Conditions
In granting NP District Exceptions, reasonable conditio~s or restrictions may be imposed as
deemed appropriate or necessary to protect the public health, safety, general welfare, or
convenience, and to secure the purposes of this title.
( 4) Procedures
Please referto Chapters 18.76 and 18.77 for further information regarding the procedures
applicable to requests for exceptions.
(Ord. 4875 § 2 (part), 2005)
18.10.150 Grandfathered Uses
(a) Applicability
The uses specified in subsection (b) may remain as grandfathered uses provided that those uses:
( 1) are located in the specified district;
Ch. 18.10 -Page 18.1 (Supp. No. 17 -12/2009)
18.10.150 Grandfathered Uses
(2) existed on the specified date;
(3) on that date, were lawful permitted uses or conditional uses operating-subject to a conditional
use permit; and
(4) on that date, were conforming uses.
(b) Grandfathered Uses
(1) R-2 district:
(A) Professional and medical office uses (except product testing and analysis, and prototype
development), existing on July 20, 1978 or such uses which were, prior to July 20, 1978,
located in an R-2 district which was imposed by reason of annexation of the property to the
city without benefit of prezoning and which, prior to the date of annexation, were lawful
confoi'ming permitted uses or conditional uses operating subject to a conditional use permit.
(B) Two-family uses, except where one of the units is a legal nonconforming detached single-
family dwelling on a substandard lot size, and multiple-family uses existing on July 20,
1978 or such uses which were, prior to July 20, 1978, located in an R-2 district which
was imposed by reason of annexation of the property to the city without
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 18.2
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18.10.150 Grandfathered Uses
benefit of prezoning and which, prior to the date of annexation, were lawful con-
forming pennitted uses or conditional uses operating subject to a conditional use
permit. .
(2) RMD district:
(A) Professional and medical office uses (except product testing and analysis, and proto-
type development), existing on July 20, 1978.
(B) Multiple-family uses existing on July 20, 1978.
( c) Permitted Changes
The following regulations shall apply to the grandfathered uses specified in subsection (b ):
( 1) Such uses shall be· pennitted to remodel, improve, or replace site improvements on
the same site, for continual use and occupancy by the same use, provided that
(A) such remodeling, improvement or replacement shall not:
(2)
(3)
(4)
(i) result in increased floor area;
(ii) result in an increase in the number of offices, in the case of professional or
medical office uses, or dwellings, in the case of residential uses;
(iii) result in shifting of boil.ding footprint;
(iv) increase the height, length, building envelope, or size of the improvement,
( v) increase the existing degree of noncompliance, except through the granting of a
design enhancement exception pursuant to Chapter 18.76.
If a grandfathered use ceases and thereafter remains discontinued for twelve con-
secutive months, it shall be considered abandoned and may be replaced only by a
conforming use.
A grandfathered use which is changed to or replaced by a conforming use shall not be
reestablished, and any portion of a site or any portion of a building, the use of which
changes from a grandfathered use to a conforming use, shall not thereafter be used
except to accommodate a conforming use.
The following additional regulations shall apply to grandfathered professional or
medical office uses:
(A) Any remodeling, improvement, or replacement of any building designed and con-
structed for residential use shall be subject to the issuance of a conditional use
pennit in accord with Chapter 18.76.
(B) In the event of redevelopment of all or a portion of the site for pennitted residential
uses, professional and medical office uses may not be incorporated in the redevel-
opment, except that this provision shall not apply to permanent conversion to resi-
dential use of space within an existing structure now used for professional and
medical office uses.
(d) Existing Accessory Dwellings and Guest Cottages
In the R-E district, accessory dwellings and guest cottages exi~ting on April 28, 1986, and
which prior to that date were lawful, conforming pennitted uses may remain as legal
Ch. 18-10-Page 19 (Supp. No 13 -10/1'2007)
18.10.150 Grandfathered Uses
nonconforming uses. Such uses shall be pennitted to remodel, improve or replace site y
improvements on the same site, without necessity to comply with site development
regulations for continual use and occupancy by the same use; provided that any such
·· remodeling,' improvement or replacement shall not add a kitchen nor result in increased floor
area, number of dwelling units, height, length or any other increase in the size of the
improvement without complying with the standards set forth in this subsection and applying
for and receiving a conditional use permit pursuant t() Chapter 18.76
(e) Existing Second Dwelling Units on Substandard Size Lots
In the R-2 district, notwithstanding any provisions of Chapters 18.40, 18.42 and/or 18.70, in
the case of a legal and nonconfonning second detached single-family dwelling existing prior
to July 20, 1978 on a substandard size lot, such nonconforming use shall be pennitted to
remodel, improve, or replace site improvements on the same site without necessity to comply
with site development regulations; provided, that any such remodeling, improvement or
replacement shall not result in increased floor area, number of dwelling units, height, length,
or any other increase in the size of the improvement.
(0 Existing Homes on Substandard Lots
. ,
In the R-2 district, single-family and two-family homes on substandard lots, as defined in
Section 18.10.040(b), and flag lots existing on August 1, 1991 and which prior to that date
were lawful, complying structures, may remain and be remodeled, improved, or replaced
without complying with the height and habitable floor limitations for substandard lots
specified in Section 18.10.040, provided that:
(1) any such remodeling, improvement, or replacement does not result in a height above
seventeen feet or any additional habitable floor area above a first habitable floor, except
that any structure damaged or destroyed by a natural disaster (such as fire, flood or
earthquake) may be replaced to its previous size without regard to the height and
habitable floor limitations imposed by this section; and
(2) in the case of a conflict between the provisions of this section and the provisions of
Chapter 18.70, this section shall control.
(Ord. 4875 § 2 (part), 2005)
(Supp. No 13-10/112007) Ch. 18.10 -Page 20
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18.12.010
Chapter 18.12
R-1 SINGLE-FAMILY RESIDENTIAL DISTRICT*
Sections:
18.12.010
18.12.020
18.12.030
18.12.040
18.12.050 .
18.12.060
. 18.12.070
18.12.080
18.12.090
18.12.100
18.12.110
18.12.120
18.1.2.130
18.12.140
18.12.150
Purposes
Applicable Regulations
Land Uses
Development Standards
Permitted Encroachments, Projections and Exceptions
Parking
Second Dwelling Units
Accessory Uses and Facilities
Basements
Regulations for the Single Story Overlay (S) Combining District
Single Family Individual Review
Home Improvement Exceptions
Architectural Review
Historical Review
Grandfathered Uses
Purposes
1 *. Editor's Note: This chapter was revised in its entirety by Ordinance 4869. Ordinances formerly codified in this
) chapter, and not specifically repealed by adoption of Ordinance 4869, include Ords. 3048, 3064, 3070, 3130, 3255,
.--7 3291,3345,3378,3465,3475,3489,3536,3577,3583,3662,3683,3735,3741,3850,3861,3905,4016,4043,
\
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4081, 4140, 4642, 4643, 4716, 4794 and 4826.
18.12.010 Purposes
Provisions related to the single-family residential (R-1) district, four residential R-1 subdistricts, and
the single-story (S) combining district are outlined in this chapter. Requirements for the RE, R-2 and
RMD are included in Chapter 18.10. The specific purpo·ses of each residential district are stated
below:
(a) Single Family Residential District [R-1]
(b)
The R-1 single family residential district is intended to create, preserve, and enhance areas
suitable for detached dwellings with a strong presence of nature and with open area affording
maximum privacy and opportunities for outdoor living and children's play. Minimum site
area requirements are established to create and preserve variety among neighborhoods, to
provide adequate open area, and to encourage quality design. Second dwelling units anQ
accessory structures or buildings are appropriate where consistent with the site and
neighborhood character. Community uses and facilities, such as churches and schools, should
be limited unless no net loss of housing would result.
Special Residential Building Site R-1 Subdistricts (7;000), (8,000), (10,000), (20,000)
The special residential building site R-1 subdistricts are intended to modify the site
development regulations of the R-1 single family residence district, where applied in
Ch. 18.12-Page 1 (Supp. No 13 -10/1/2007)
18.12.040 Site Development Standards
(1) Substandard Lots
(A) For the purposes of this subsection ( c ), a substandard lot shall be a lot with a width of
less than 50 feet or a depth of less than 83 feet and an area less than 83% of the
minimum area required by the zoning of the parcel.
(B) Development standards:
(i) The maximum height shall be 17 feet, as measured to the peak of the roof.
(ii) There shall be a limit of one habitable floor. Habitable floors include loft,
mezzanines, and similar areas with interior heights of five feet (5) or more from
the roof to the floor, but exclude basements and exclude attics that have no
. stairway or built-in access. The chief building official shall make the final
determination as to whether a floor is habitable.
(iii) .For lots less than 50 feet in width, the required street side setback shall be IO feet.
(iv) Substandard lots shall not be subject to the R-1 contextual garage placement
requirement.
(C) Nothing in this subsection (c) shall affect or otherwise redefine the provisions of
Section 18.40.080 as to whether a substandard lot may be used as a lot under this
title.
(2) Flag Lots
(A) A flag lot shall be defined as set forth in Section 18.04.030(a)(84)(B).
(B) Flag Lot Development Standards:
(i) The maximum height shall be 17 feet, as measured to the peak of the roof.
(ii) There shall be a limit of one habitable floor. Habitable floors include lofts,
mezzanines, and similar areas with interior heights of five feet (5) or more from
the roof to the floor, but exclude basements and exclude attics that have no
stairway or built-in access. The chief building official shall make the final
determination as to whether a floor is habitable.
(iii) Front Setback: IO feet. Flag lots are not.subject to contextual front setback
requirements.
(iv) FJag lots are not subject to contextual front setback requirements.
(d) Maximum Lot Sizes in R-1 District and R-1 Subdistricts
This provision limits the potential for lot combinations with a net loss of housing stock and
resultant homes that would be out of scale with homes in the surrounding neighborhood. In the
R-1 district and all R-1 subdistricts, no new lot shall be created equal to or exceeding two times
the minimum lot size prescribed for the district, except that where 6,000 minimum square. foot
lots are required in an R-1 district, no new lot shall exceed a maximum lot size of 9 ,999 square
feet, as prescribed in Table 2. Lots larger than the prescribed maximum size are permitted only
)
under the following circumstances: (i) where a village residential land use is approved )
concurrent with the new lot, resulting in no net loss of housing units on the site(s); (ii) where
underlying lots must be merged to eliminate nonconformities and no net loss of housing units
would result; (iii) where an adjacent substandard lot of less than 25 feet in width is combined
(Supp. No 13-10/1/2007) Ch. 18.12-Page 6
)
18.12.040 Site Development Standards
(e)
(0
(g)
(h)
with another lot,. resulting in no net loss of housing units on the site(s); or (iv) where the
number of resultant lots increases or stays the same and results in no net loss of housing units.
Contextual Front Setbacks
The minimum front yard ("setback") shall be the greater of twenty feet (20') or the average
setback, if the average front setback is 30 feet or more. "Average setback" means the average
distance between the front property line and the first main structural element, including
covered porches, on sites on the same side of the block, including existing structures on the
subject parcel. This calculation shall exclude flag lots and existing multifamily developments
of three units or more. For calculation purposes, if five (5) or more properties on the block
are counted, the single greatest and the single least setbacks shall be excluded. The street
sideyard setback of corner lots that have the frorit side of their parcel (the narrowest street-
facing lot line) facing another street shall be excluded from the calculations. For blocks
longer than 600 feet, the average setback shall be based on the ten sites located on the same
side of the street and nearest to the subject property, plus the subject site, but for a distance no
. greater than 600 feet. Blocks with three (3) or fewer parcels are not subject to contextual
setbacks. Structures on the site in no case may be located closer than twenty feet (20') from
the front property line.
Contextual Garage Placement
If the predominant neighborhood pattern is of garages or carports located within the rear half
of the site, or with no garage or carport present, attached garages shall be located in the rear
half of the house footprint. Otherwise, an attached garage may be located in the front half of
the house footprint. "Predominant neighborhood pattern" means the existing garage
placement pattern for more than half of the houses on the same side of the block, including
the subject site. This calculation shall exclude flag lots, comer lots and existing multifamily
developments of three or more units. For blocks longer than 600 feet, the calculations shall be
based on the I 0 homes located nearest to and on the same side of the block as the subject
property, plus the subject site, but for a distance no greater than 600 feet. Detached garages
shall be located in the rear half of the site and, if within a rear or side setback, at least 75 feet
from the front property line. Detached garages on lots of less than 95 feet in depth, however,
may be placed in a required interior side or rear yard if located in the rear half of the lot.
Access shall be provided from a rear alley if the existing development pattern provides for
aliey access. For the calcuiation of comer iots, the "predominant pattern" shall be established
for the street where the new garage fronts.
Garage Doors
For garages located within 50 feet from a street frontage, on lots less than 75 feet in width, the
total combined width of garage doors that are parallel to the street shall not exceed 20 feet.
Minimum Permeable Surface in Front Yard
A minimum of 60% of the required front yard shall have a permeable surface that pennits
water absorption directly into the soil. Provided, all sites may have an impervious 16' x 20'
driveway and an impervious 4' x 20' walkway within the front yard setback.
Ch. 18.12-Page 7 (Supp. No 13-1011/2007}
18.12.050 Permitted Encroachments, Projections and Exceptions
(i) Special Setbacks
Where applicable, setback lines imposed by a special setback map pursuant to Chapter 20.08
of this code shall be followed for the purpose of detennining legal setback requirements.
(j) Certification of Daylight Plane Compliance
Upon request by the building official, any person building or making improvements to a
structure shall provide a certification that the structure, as built, complies with the daylight
plane provisions in subsection (a). Such certification shall be prepared by a l_icensed engineer,
architect, or surveyor, and shall be provided prior to frame inspection.
(k) Lighting
Recreational and security lighting shall be permitted only so long as the lighting is shielded
so that the direct light does not extend beyond the property where it is located. Free-standing
recreational and security lighting installed on or later than March 11, 1991 shall be restricted
to twelve feet (12) in height. Direct light from outdoor fixtures shall only fall on the walls,
eaves, and yard areas of the site on which it is located. Outdoor fixtures shall have lens
covers or reflectors that direct the light ~'Yay from the neighboring properties.
(I) Location of Noise-Producing Equipment
All noise-producing equipment, such as air conditioners, pool equipment, generators,
commercial kitchen fans, and similar service equipment, shall be located outside of the front, \
rear and side yard setbacks. Such equipment may, however, be located up to six feet into a ~ J
street sideyard setback. All such equipment shall be insulated and housed, except that the
planning director may permit installation without housing and insulation, provided the
equipment is located within the building envelope and where a combination of technical
· noise specifications, location of equipment, and/or other screening or buffering will assure
compliance with the city's Noise Ordinance at the nearest property line. Any replacement of ·
such equipment shall conform to this section where feasible. All service equipment must
meet the city's Noise Ordinance in Chapter 9.10 of the Municipal Code.
(Ord. 4964 §§ 11 -13, 2007: Ord .. 4891 § 4, 2006: Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.050 Permitted Encroachments, Projections and Exceptions
The following projections and encroachments into required yards, daylight plane and height are
pennitted, provided a projection shall not be permitted to encroach into a special setback, as
established by the setback map pursuant to Chapter 20.08 of the Palo Alto Municipal Code, except as
noted in subsection (a)(l)(D) below.
(a) Setback/Yard Encroachments and Projections
(1) Horizontal Additions
Where a single-family dwelling legally constructed according to existing yard and
setback regulations at the time of construction encroaches upon present required
yards, one encroaching side (first floor wall) of the existing structure, at a height not
to exceed 12 feet, may be extend~d in accord with this section. Only or~e such
extension shall be permitted for the life of such building. This subsection shall not ·be
(Supp. No 13-10/112007) Ch. 18.12 -Page 8
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18.12.050
(A)
(B)
Permitted Encroachments, Projections and Exceptions
construed to allow the further extension of an encroachment by any building that is
the result of the granting of a variance, either before or after such property became
part. of the city. ·
Front Yard. In cases where the existing setback is less than 20 feet, butat least 14
feet, the existing encroachment may be extended for a distance of not more than
100% of the length of the encroaching wall to be extended; provided, that the total
length of the existing encroaching wall and the additional wall shall together not
exceed one-half the maximum existing width of such building.
Interior Side Yard. In cases where the existing setbac~ is less than 8 feet, but at least
5 feet, the existing encroachment may be extended for a distance of not more than
100% of the length of the encroaching wall to be extended but not to exceed 20
additional feet.
(C) Street Side Yard. In cases where the existing setback is less than 16 feet, but at least
IO feet, the existing encroachment may be extended for a distance of not more than
100% of the length of the encroaching wall to be extended, but not to exceed 20 feet.
(D) · Special S~tbacks. In cases where a special setback is prescribed pursuant to Chapter
20.08 of the Municipal Code, and the existing setback is less than the special setback
distance, and at least 14 feet for the front setback or at least 10 feet for the street side
yard setback, the exiting encroachment may be extended for a distance of not more
than 100% of the length of the encroaching wall to be extended, provided that the
total length of the existing encroaching wall and the additional wall shall together not
exceed one-half the maximum existing width of such building.
(2) Rear Yard Encroachments for Portions of Homes
A portion of a main building that is less than half the maximum width of the building
may ex~end into the required rear yard no· more than six feet and with a height of no
more than one story, except that for a comer lot having a common rear property line
with an adjoining comer lot, the building may extend into the required rear yard not
more than ten feet with a·height of no more than one story ..
(3) Allowed Projections
(A) Cornices, Eaves, Fireplaces, and Similar Architectural Features
For cornices, eaves, fireplaces, and similar architectural features, excluding flat or
continuous walls or enclosures of usable interior space, the following projections are
permitted:
(i) A maximum of two feet into a required side yard. Fireplaces in a required side
yard may not exceed five feet in width. Fireplaces not exceeding five feet in
width may project into a required side yard no more than two feet.
(ii) A maximum of four feet into a required front yard.
(iii) A maximum of four feet into a required rear yard.
(B) Window Surfaces
(i) Window surfaces, such as bay windows or greenhouse windows, may extend into
a required rear yard a distance not to exceed two feet, or into a required front yard
a distance not to exceed three feet.
Ch. 18.12-Page 9 (Supp. No 13-IO/ln007)
18.12.050 Permitted Encroachments, Projections and Exceptions
(ii) Window surfaces may riot extend into required side yards, with the exception that )
one greenhouse window with a maximum width of six feet, framed into a wall,
may project into the side yard no more than two feet. The window surf ace may not
. extend into any yard above a first story.
(C) Storage Structures
Storage structures not over six feet in height or twenty-five square feet in floor area
may be located in interior side yards and rear yards according to the provisions of
Section l 8.12.080(b) for accessory structures. Where the provisions of Section
18.12.080(b) for front and/or street side yard setbacks are not met, the following
projections are permitted for such .structures:
(i) ·A maximum.of two feet into a required side yard.
(ii). A maximum of four feet into a required front yard.
-(iii) . A maximum of four feet into a: required ~ear yard.
(D) Patios, Decks, Stairways, Landings, Balconies, or Fire Escapes
For uncovered porches (less than 30 inches above grade), patios,· decks, stairways,
landings, bal9onies, or fire escapes tbe following projections are pennitted, provided
these projections are not permitted above the first story:
(i) ·· A maximum of three feet into ~ required side yard.
(ii) A maximum of six feet into a required front yard.
(iii) A maximum of six feet into a required rear yard.
(E) Canopy or Patio Coyer
A canopy or patio cover may be located in the required rear yard or that portion of the
interior side yard, which is more than 75 feet from the street lot line measured along
the common lot line. Such canopies shall be subject to the following conditions:
(i) A canopy or patio cover shall not be mote than 12 feet in height.
(ii) The canopy or patio cover shall be included in the computation of building
coverage.
(iii) The canopy or patio cover and other structures shall not occupy more than fifty
percent of the r~quired rear yard.
(iv) The canopy or patio cover shall not be enclosed on more than two sides.
(F) Pools, Spas, and Hot Tubs
(i) · Pools, spas, and hot tubs may extend into a required rear yard a distance not to
exceed fourteen feet, provided that a minimum setback of six feet from the
property line shall be maintained.
(ii) No swimming pool, hot tub, spa, or similar accessory facility shall be located in
any portion of a required front or street side yard.
(Supp. No 13-l0/In007) Ch. 18.12-Page IO
18.12.060 Parking
(b) Height and Daylight Plane Exceptions
( 1) Height Exceptions
Flues, chimneys, and antennas may exceed the established height limit by not more than 15 feet.
(2) Daylight Plane Exceptions
The following features may extend. beyond the daylight plane established by the applicable
district, provided that such features do not exceed the height limit for the district unless
permitt~d to do so by subsection (b}(l) above:
(A) Television and radio antennas;
(B) Chimneys and flues that do not exceed 5 feet in width, provided that chimneys do not
extend past the required daylight plane a distance exceeding the minimum allowed pursuant
to Chapter 16. 04 of this code.
(C) Dormers, roof decks, gables, or similar architectural features, provided that:
(i) the sum of the horizontal lengths of all such features shall not exceed 15 feet on each
side; and
(ii) the height of such features does not exceed 24 feet;
(iii) no single feature exceeds 7.5 feet in length; and
(iv) there is a minimum 5 foot separation between each feature.
(D) Cornices, eaves, and similar architectural features, excluding flat or continuous walls or
enclosures of usable interior space, provided such features do not extend past the daylight
plane more than 2 feet.
(Ord. 4964 § 14, 2007: Ord. 4869 § 14 (Exh. A [part]}, 2005)
18.12.060 Parking
Off-street parking and loading facilities shall be required for all permitted and conditional uses in accord
with Chapters 18.52 and 18.54 of this title. The following parking requirements apply in the R-E, R-2
and RMD districts. These requirements are included for reference purposes only, and in the event of a
conflict between this Section 18.10.060 and any requirement of Chapters 18.52 and 18.54, Chapters
18.52 and 18.54 shall apply, except in the case of parcels created pursuant to Section 18.10.130(c)
(subdivision incentive for historic preservation).
Ch. 18.12 -Page 11 (Supp. No. 17 -12/2009)
18.12.060 Parking
(a) Parking Requirements for Specific Uses
Table 4 shows the minimum off-street automobile· parking requirements for specific uses within the
R-1 district.
Table 4 shows the minimum off-street automobile parking requirements for specific uses.*
* Editor;s Note: As set forth in Ord. 5051 § 5, 2009. Future legislation will correct the text if needed.
Table 4
Parking Requirements for Specific R-l·Uses
Use Minimum Off-Street Parking Requirement
Single-family residential use (excluding second 2 spaces per unit, ·of which one must be covered.
dwelling units)
Second dwelling unit, attached or detached 2 spaces per unit, of which one must be covered
Other Uses See Chs. 18.52 and 18.54
(b) Parking and Driveway Surfaces
Parking and driveway surfaces may have either permeable or impermeable paving. Materials shall be
those acceptable to public works department standards. Gravel and similar loose materials shall not
be used for driveway or parking surfaces within 10 feet of the public right of way.
( c) Parking in Yards
(1) No required parking space shall be located in a required front yard.
(2) No required parking space shall be located in the first ten feet adjoining the property line of a
required street side yard.
( d) Tandem Parking
T~ndem parking shall be permitted for single-family uses and for single-family uses with a permitted
second dwelling unit.
( e) Underground Parking
Underground parking is prohibited for single-family uses, except pursuant to a variance granted in
accordance with the provisions of Chapter 18.76, in which case the area of the underground garage
shall be counted in determining the floor area ratio for the site.
(Supp. No. 17 -12/2009) Ch. 18.12 -Page 12
)
18.12.070 Second Dwelling Units
(f) Design of Parking Areas
Parking facilities shall comply with all applicable regulations of Chapter 18.54 (Parking Facility
Design Standards).
(Ord. 5051 § 5, 2009: Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.070 Second Dwelling Units
The following regulations apply to second dwelling units in the R-1 district and all R-1 subdistricts.
(a) Purpose
The intent of this section is to provide regulations to accommodate second dwelling units, in order to
provide for variety to the city's housing stock and additional affordable housing opportunities.
Second dwelling units shall be separate, self-contained living units, with separate entrances from the
main residence, whether attached or detached. The standards below are provided to minimize the
impacts of second dwelling units on nearby residents and throug~out the city, and to assure that the
size, location and design of such dwellings is compatible with the existing residence on the site and
with other structures in the area.
(b) Minimum Lot Sizes
(1) In the R-1 district and all R-1 subdistricts,-the minimum lot size for a second dwelling unit shall
be 35 % greater than the minimum lot size otherwise established for the district. Provided, for
flag lots, the minimum lot size shall be 35 % greater than the minimum lot size established by
Section 21.20.301 of the Subdivision Ordinance.
Ch. 18.12 -Page 12.1 (Supp. No. 17 .-12/2009)
THIS PAGE INTENTIONALLY LEFT BLANK
1)
(Supp. No. 17 -12/2009) Ch. 18.12 -Page 12.2
18.12.070 Second Dwelling Units
) (2) Table 5 shows the minimum lot size required for a second dwelling unit, provided, in
~ -~ -7
the event of a conflict between subsection (1) and this subsection (2), subsection (1)
shall control.
TABLES
MINIMUM LOT SIZES FOR SECOND DWELLING UNITS
. R-1 8,100squarefeet("sf11
} 9,720sf
R-1 (7,000) 9,450 sf 11,340 sf
R-1 (8,000) 10,800 sf 12,960 sf
R-1 (10,000) 13,500 sf 16,200 sf
R-1 (20,000) 27,000 sf 32,400 sf
1'1 Exclusive of any portion of the lot used for access to the street
(c) Development Standards for Attached Second Dwelling Units
Attached second dwelling units are those attached to the main dwelling. Attached unit size
counts toward the calculation of maximum house size. All attached second dwelling units
shall be subject to the following development requirements:
(1)
(2)
(3)
(4)
(5)
The minimum site area shall meet the requirements specified in subsection (b) above.
Maximum size of living area: 450 square feet The second ~welling unit and covered
. parking shall be included in the total floor area for the site. Any basement space used
as a second dwelling unit or portion thereof shail be counted as floor area for the
purpose of calculating the maximum size of the second unit.
Maximum size of covered parking area for the second dwelling unit: 200 square feet.
' Maximum height: one story and 17 feet.
Except on comer lots, the second dwelling unit inay not have an entranceway facing
the same lot line (property line) as the entranceway to the main dwelling unit, and
exterior staircases to second floor units shall be located toward the interior side or
rear yard of the property.
(d) Development Standards for Detached Second Dwelling Units
Detached second dwelling units are those detached from the main dwelling. All detached
second dwelling units shall be subject to the following development requirements:
(1) The minimum site area shall meet the requirements specified in subsection (b) ~bove.
(2) Minimum separation from the main dwelling: 12 feet.
(3) Maximum size of living area: 900 square feet. The second dwelling unit and covered
parking shall be included in the total floor area for the site. Any basement space used
as a second dwelling unit or portion thereof shall be counted as floor area for the
purpose of calculating the maximum size of the second unit.
( 4) Maximum size of covered parking for the second dwelling unit: 200 square feet.
(5) Maximum height: one story and 17 feet.
Ch. 18.12-Page 13 (Supp. No 13-10/112007)
18.12.080. Accessory Uses and Facilities
( 6) The detached second dwelling shall be architecturally compatible with the main
residence, with respect to style, roof pi~ch, color and materials.
(e) Street Access
The second dwelling unit shall have street.access from a driveway in common with the main
r~sidence in order to prevent new curb cuts, excessive paving, and elimination of street trees.
Separate driveway access may be permitted by the director upon a determination that
separate access will result in fewer environmental impacts such as excessive paving,
unnecessary grading or unnecessary tree removal, and that such separate access will not
create the appearance, from the street, of a lot division or two-family use.
(f) Parking
The following parking criteria apply to both detached and attached second dwelling units:
( 1) Two parking spaq~s shal1 be provided for the second dwelling unit, with at least one
of the spaces being covered.
(2) Such parking shall be located out of required front setbacks and not closer than 1 O
feet from the street in a street side setback.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
1'8.12.080 Accessory Uses and Facilities
Accessory uses and facilities, as allowed in Section 18.12.030, shall be permitted when incidental to
and associated with a permitted use or facility in the R-1 district or R· 1 subdistricts, or when
incidental.to and associated with an allowable and authorized conditional use therein, subject to the
provisions of subsection (a), below (Types of Accessory l!ses).
(a) Types of Accessory Uses·
Accessory uses and facilities include, but are not limited to, the following list of examples;
provided that each accessory use or facility shall comply with the provisions of this title: ·
(1) Residential garages, carports, and parking facilities·, together with access and
circulation elements necessary thereto;
(2) Facil~ties for storage incidental to a permitted use; and
(3) Recreational uses and facilities for the use and convenience of occupants or
employees, or guests thereof, of a principal use or facility.
(b) · Location and Development Standards
Except as otherwise provided in this section, accessory buildings shall at all times be located
in conformance with requirements for principal buildings, and shall not be located in any
required front, side, or rear· yard. See Section l 8.12.050(a)(3)(C) for allowed encroachments
for small storage structures. Accessory buildings may be located in a requir~d interior yard
subject to the following·limitations:
(Supp. No 13-10/1/2007) Ch. 18.12-Page 14
)
\
18.12.090 Basements
) (1) An accessory building shall not be used for living and/or sleeping purposes unless the
)
--7
\,
J
building was legally constructed for or was legally converted to living and/or sleeping
purposes prior to October 13, 1983.
(2) An accessory building shall not be located in a required front yard, required street
yard, or required rear yard of a through lot.
(3) An accessory building shall not be located in a required interior side or rear yard
unless the building is placed at least seventy-five feet from the front lot line and for
comer lots at least twenty feet from the street side lot line. Additionally, on lots of
less than 95 feet in depth, detached garages and carports may be located in a required
interior side or rear yard if placed in the rear half of the lot.
(4) Accessory buildings located within a required interior yard as pennitted by this
section shall be subject to a maximum height established by a daylight plane
beginning at a height of eight feet at the property line and increasing at a slope of one
foot for every three feet of distance from the property line, to a maximum height of ·
twelve feet.
(5)
(6)
(7)
No such accessory building greater than 200 square feet in size shall have more than
two plumbing fixtures.
Accessory buildings located within a required interior yard, as permitted by this
section, shall not individually or cumulatively occupy an area ex~eeding fifty percent
of the required rear yard.
The minimum distance between separate buildings located on the same site shall be
as required by Title 16; provided, accessory buildings in the single-family residential
(R-1) district shall be separated from the principal building by at least three feet.
(8) A principal building and an accessory building, meeting the requirements of Title 16
and each located on a site as otherwise permitted for the principal building and
accessory buildings, may be connected by a structure meeting the definition of a
breezeway. Such structure, or breezeway, shall be a part of the accessory building.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.090 B_asements
Basements shall be permitted in areas.that are not designated as special flood hazard areas as defined
in Chapter 16.52, and are subject to the following regulations:
(a) Permitted Basement Area
(b)
Basements may not extend beyond the building footprint and basements are notallowed
below any portion of a structure that extends into required setbacks, except to the extent that
· the main residence is permitted to extend into the rear yard setback by other provisions of this
code.
Inclusion as Gross Floor Area
Basements shall not be included in the calculation of gross floor area, provided that:
(1) basement area is not deemed to be habitable space, such as crawlspace; or
Ch. 18.12 -Page 15 (Supp. No l3 -10/112007)
18.12.090 Basements
(2) basement area is deemed to be habitable spac~ but the finished level of the first floor )
is no more than three feet above the grade around the perimeter of the building
foundation.
Basement space used as a second dwelling unit or portion thereof shall be counted as floor
area for the purpose of calculating the maximum size of the unit (but may be excluded from
calculations of floor area for the total site). This provision is intended to assure that second
units are subordinate in size to the main dwelling and to preclude the development of duplex
zoning on the site.
(c) Lightwells, Stairwells, Below Grade Patios and other Excavated Features
( 1) Lightwells, stairwells, and similar excavated features along the perimeter of the
basement shall not affect the measurement of grade for the purposes of determining
gross floor area, provided that the following criteria are met:
(A) such features are not located in the front of the building;
(B) such features shall not exceed 3 feet in width;
(C) the cumulative length of all such features does not exceed 30% of the perimeter of the
basement; · ·
(D) such features do not extend more than 3 feet into a required side yard nor more than 4
feetinto a required rear yard, but where a side yard is less than 6 feet in width, the
features shall not encroach closer than 3 feet from the adjacent side property line;
(E) the cumulative length of any features or portions of features that extend into a
required side or rear yard does not exceed 15 feet in length;
(F) the owner provides satisfactory evidence to the planning division prior to issuance of
a building permit that any features or portions of features that extend into a required
side or rear yard will not be hannful to any mature trees on the subject property or on
abutting properties; and
(G) such features have either a drainage system that meets the requirements of the public
works department or are substantially sheltered from the rain by a roof overhang or
canopy of a permanent nature.
(2) Below-grade patios, sunken gardens, or simiiar excavated areas along the perimeter of
the basement that exceed the dimensions set forth in subsection ( 1 ), are pennitted and
shall not affect the measurement of grade for the purposes of determining gross floor
area, provided· that:
(A) such areas are not located in the front of the building;
(B) all such areas combined do not exceed 2% of the area of the lot or 200 square feet,
whichever is greater; that each such area does not exceed 200 square feet; and that
each such area is separated from another by a distance of at least 10 feet. Area
devoted to required stairway access shall not be included in the 200 square foot
limitation.
(C) such features do not extend more than 2 feet into a required side yard nor more than 4
feet into a required rear yard;.
(Supp. No 13-10/1/2007) Ch. 18.12-Page 16
)
\)
18.12.100 Regulations for the Single Story Overlay (S) Combining District
(D) the cumulative length of any excavated area or portion thereof that extends into a
required side or rear yard does not exceed 15 feet; ·
(E) the owner provides satisfactory evider.ice to the planning director prior to issuance of
a building pemiit that any features or portions of features that extend into a required
side or rear yard will not be harmful to any mature trees on the subject property or on
abutting properties;
(F) s,uch features have either a drainage system that meets the requirements of the public
works department or are S1:}bstantially sheltered from the rain by a roof overhang or
canopy of a permanent nature;
(G) any roof overhang or canopy installed pursuant to subsectfon (F) is within and is
counted toward the site coverage requirements established in Section 18.12.040;
(H) such ~reas are architecturally compati?le with the residence; and
(I) such areas are screened to off-site views by means. of landscaping and/or fencing as
detennined appropriate by the planning director .
. (Ord. 48(59 § 14 (Exh. A [part]), 2005)
18.12.100 Regulations for the Single Story Overlay (S) Combining District
(a)· Applicability of District . . .
The single-story height combining district may be combined with the R-1 single family
residence district or with any R-1 subdistrict. Where so combined, the regulations established
by this section shall apply in lieu of the comparable provisions established by Section
18.12.040. All applicable provisions of that section shall otherwise govern development in
the c_ombining district.
(b) Site Development Regulations
For sites within the single-story height combining district, the following site development
regulations shall apply in lieu of the otherwise applicable site development regulations of
Section 18.12.040:
(1). The maximum height shall be 17 feet, as measured to the_peak of the roof; provided,
in a speciai flood hazard area as defined in Chapter 16.52, the maximum height is
increased by one-half of the inc~ease in elevation required to reach base flood
elevation, up to a maximum building height of 20 feet.
(2) · There shall be a limit of one habitable floor. Habitable floors include lofts,
mezzanines and similar areas but exclude basements and exclude attics that have no
stairway or built-in access. Lofts and mezzanines include any space above the first
floor in. excess of five feet (5') from the floor to the roof above.
(c) Application for a Single Story (S) Combining District
( 1) ·Application to create or remove a single-story overlay district may be made by an owner
of record of property located in the single-story overlay district to be created or
removed.
Ch. 18.12 -Page 17 (Supp. No 13 -J0/1/2007)
18.12.110 Single Family Individual Review
(2) Application shall be made to the director on a form prescribed by the director~ and shall
contain all of the following:
(A) A written statement setting forth the reasons for the application and all facts relied
upon by the applicant in support thereof.
(B) A map of the district-to be created or removed that includes the address location of
those owners whose properties are subject to the zoning request. Boundaries shall
correspond with certain natural or man-made features (including, but not limited to,
roadways, waterways, tract boundaries and similar features) to define an identifiable
neighborhood or development. For creation of a single-story overlay district, the area
shall be of a prevailing single story character, such that a minimum of 80% of
existing homes within the boundaries are single story.
(C.) For creating a single-story overlay district, a list of signatures evidencing support by:
(i) 70% of included properties; or (ii) 60% of incl~ded properties where all included
properties are subject to recorded deed restrictions intended to limit building height to
a single story, whether or not such restrictions have been enforced. For the removal of
a single-story overlay district, a list of signatures· evidencing support by 70% of
included properties, whether or not deed restrictions intended to limit the ~uilding
height to single story apply. "Included properties" means all_those properties inside
the boundaries of the district proposed to be created or removed. The written
statement or statements accompanying the signatures must state that the signer is
)
/
indicating support for a zone map amendment that affects his or her property. One ... .la. .
signature is pennitted for each included property, and a signature evidencing support "" ~
of an included property must be by an owner of record of that property.
(D) A fee, as prescribed by the municipal fee schedule, no part of which shall be
returnable to the applicant.
(E) Such additional information as the director may deem pertinent and essential to the
application.
(3) An application for creation or removal of a single-story (S) overlay district made in
accordance with this subsection ( c) shall be processed in accordance with Chapter
18.80.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.110 Single Family Individual Review
(a) Purpose
The goals and purposes of this chapter are to:
(1) Preserve the unique character of Palo Alto neighborhoods;
(2) Promote new construction that is compatible with existing residential neighborhoods;
(3) Encourage respect for the surrounding context in which residential construction and
alteration talces place;
( 4) Foster consideration of neighbors' concerns with respect to privacy, scale and
massing, and streetscape; and
(Supp. No 13 -10/1/2007) Ch. 18.12-Page 18
)
18.12.110 Single Family Individual -Review
(5) Enable the emergence of new neighborhood design patterns that reflect awareness of
each property's eff~ct upon neighboring properties.
This program is intended only to mitigate the effects of second story construction on
neighboring homes, and should not be construed to prohibit second story construction when
this title would otherwise permit it.
(b) Applicability
The provisions of this Section 18.12.110 apply to the construction of a new singly developed
two-story structure; the construction of a new second story; or the expansion of an existing
second story by more than 150 square feet in the R-1 single family residential district. All
second-story additions on a site after November 19, 2001 shall be included in calculating
whether an addition is over 150 square feet.
(c) Individual Review Guidelines
:(d)
The director of planning and community environment shall issue guidelines to direct staff
and project applicants in implementing the goals and purposes and other provisions of this
chapter. Guidelines establishing substantive review standards for second story development
shall be -presented to the planning and transportation commission for their comment prior to
adoption or amendment by the director.
Findings
Neither the director, nor the city council on appeal, shall grant an individual review approval,
unless it is found that the application is consistent with the individual review guidelines.
(e) Conditions
In granting individual review approvals, reasonable conditions or restrictions may be
imposed if appropriate or necessary to protect the public health, safety, general welfare, or
convenience, and to secure the purposes of this title (Zoning).
(0 Application Review and Action
Applications for individual review approval shall be reviewed and acted upon as set forth in
Section 18.77.075. ·
(g) Preliminary Meeting with Planning Staff
Project applicants are strongly encouraged, before applying for individual review of a project,
to meet with planning staff to discuss designing a project that promotes the goals of this·
chapter and the individual review guidelines, and to discuss the proposed plans with their
neighbors.
(h) Changes to Approved Projects
The director may approve changes to a previously approved individual review project
without following the procedure set forth in Section 18.77.075 if those changes do not affect
compliance with the individual review guidelines. Examples of such changes include:
(1) Reductions in window or door size, or reductions in the number of windows.
Ch. 18.12-Page 19 (Supp. No 13-10/112007)
18.12.120 Home Improvement Exceptions
(2) Changes to aspeci$ of the project not reviewed under individual review, such as
materials or non-street-facing first story windows.
(3) Changes that cio not affect privacy/streetscape.
( 4) Increases in setbacks.
(5) Reductions in second floor mass that do not affect privacy or streetscape.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.120 Home Improvement Exceptions
(a) Purpose
A home improvement exception ("HIE") enables a home improvement or minor addition to
an existing single-family or two-family home, or accessory structure, or both, to be consistent
. with the existing architectural style of the house or neighborhood, to accommodate a
significant or protected tree, or to protect the integrity of a historic structure in conformance
with the Secretary of the Interior's Standards for Historic Rehabilitation. By enabling
· adaptive reuse of existing buildings, the home improvement exception promotes retention of
existing houses within the city.
(b) Applicability
A home improvement exception may be granted as part of a proposed improvement or
addition to an existing single-family or two-family structure, or accessory structure, or both,
in the RE, R-1, RMD, or R-2 district, as limited in subsection (c). A home improvement
exc~ption may be granted as described in subsections (1) through (14) of subsection (c), but
may not exceed the limits set forth in those subsections. In order to qualify for a home
improvement exception, the project must retain at least 75% of the existing exterior walls.
(c) Limits of the Home Improvement Exception
A home improvement exception may be granted only for one or more of the following, not to
exceed the specified limits:
( 1) To allow up to 100 square feet of floor area more th~n the maximum square footage
allowed on the site by the applicable zoning district regulations except when an
exception is granted under subsection ( c )( 10) for residences designated as historic
structures. · ·
(2) To allow the primary building to encroach up to 4 feet into a required front yar(J
setback.
(3) To allow the primary building to encroach up to 3 feet into a required rear yard
setback.
( 4) To allow the primary building to encroach up to 2 feet into a required interior side
yard setback.
(5) To allow the primary building to encroach up to 6 feet into a required street side yard
setback (no closer than 10 fee~ to the property line).
(Supp. No 13-10/1/2007) Ch. 18.12 -Page 20
)
j'
18.12.120
)
Home Improvement Exceptions
(6) To allowa basement to encroach, along with above grade floor area, as set forth in
items 2, 3, 4, or 5.
(7) To allow an encroaching dormer, roof deck, gable, or similar architectural feature to
exceed 24 feet in height by up to three feet. ·
(8) To allow a single dormer, roof deck, gable, or similar architectural feature that
' encroaches into the rear daylight plane to exceed 7 .5 feet in length. In no event shall
the maximum length exceed 15 feet.
(9) To permit a site with an existing two-story structure to exceed lot coverage
requirements in order to locate remaining available FAR for the site on the first floor.
(10) For any residence designated on the city's Historic Inventory as a Category I or
Category 2 historic structure as defined in Section 16.49~020 of the Palo Alto
Municipal Code or any contributing structure within a locally designated historic
district, to allow up to 2~0 square feet of floor area in excess of that allowed on the
site, provided that any requested addition or exterior modifications associated wfrh
the HIE shall be in substantial conformance with the Secretary of the Interior's
Standards for Historic Rehabilitation. The property owner who is granted a home
improvement exception under this subsection (10) shall be required to sign and
record a covenant against the propC?ftY, acceptable to the city attorney, which requires
that the property be maintained in accordance with the Secretary of the Interior's
Standards for .Historic Rehabilitation.
(11) To allow a legal non-conforming building wall that is between 3.5 and 5 feet from the
side lot line to be extended up to one-quarter of the length of the existing wall or ten
feet, whichever is shorter.
(12) To allow a horizontal extension (pursuant to Section 18.12.050(a) (Setback/Yard
· Encroachments and Projections) of a portion of an existing legal nonconforming
building wall that is more than twelve feet above grade. Such horizontal extensions
must remain within the height and daylight plane limits for the district unless an HIE
or variance for a height or daylight plane encroachment is granted.
(13) To allow an increase in the height of an existing legaliy non-confonning building
wall that encroaches into a setback. Such vertical extensions must remain within the
height and daylight plane limits for the district unless an HIE or variance for a height
or daylight plane encroachment is granted.
(14) To allow, for single-story accessory structures within rear and/or side setbacks, one or
more of the following:
(A) On a comer lot, a detached accessory structure may be as close as ten feet from the
street side property line. For detached garages and carports, the exception may be
granted as long as a minimum dimension of 18 feet remains between the back of
sidewalk and face of the garage or carport supports.
(B) Four feet additional height above the twelve foot maximum height, as long as the
side daylight plane is met.
(C) A rear daylight plane encroachment of up to three feet.
Ch. 18.12 -Page 21 (Supp. No 13 -10/1/2007)
18.12.130 Architectural Review
( 15) To allow similar minor exceptions, when detennined by the director to be similar in )
magnitude and scope to those listed in subsections (1.) through (14) above. Provided,
under no circumstances may such exceptions exceed the limits established in
subsections (1) through (14) above.
( d) Findings
Neither the director, nor the city council on appeal, shall grant a home improvement
exception unless it is found that:
( 1) The granting of the application is desirable for the preservation of an existing
architectural style, neighborhood character, protected tree as defined in Chapter 8.1 O,
or other significant tree, or of a residence that is designated on the city's Historic
Inventory as a Category I or Category 2 historic structure as .defined in Section
16.49.020 of the PaloAlto Municipal Code, or any contributing structure within a
locally designated historic district, whicJ;i would not otherwise be accomplished
through the strict application of the regulations; and
(2) The granting of the application 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; and
(3) The exception is being granted based on characteristics of the property and
improvements on the property, rather than the personal circumstances of the
applicant, and is the minimum exception necessary for the project to fulfill the
purposes of subsection (a).
( e) Conditions
In granting home improvement exceptions, reasonable conditions or restrictions may be
imposed if appropriate or necessary to protect the public health, safety, general welfare, or
convenience, and to secure the purposes of this title (Zoning).
(f) Application Review and Action
Applications for home improvement exceptions shall be reviewed and acted upon as set forth
in Section 18.77.075.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
18.12.130 Architectural Review
Architectural review, as required in Chapters 18.76 and 18.77 of the Zoning Ordinance, is required in
the R-1 district and R-1 subdistricts whenever three or more adjacent single family residences or
duplexes are intended to be developed concurrently, whetherthrough subdivision or individual
applications. In addition to the existing ARB findings contained in Chapters 18.76 and 1-8.77, the
single family individual review guidelines shall be used by the ARB in its review of such
applications.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
{Supp. No 13 -10/1/2007) Ch. 18.12 -Page 22
18.12.140 Historical Review and Incentives
18.12.140 Historical Rev~ew and Incentives
(a) Historic residence review, as required in Chapter ·16.49 of Title 16 of the Palo Alto Municipal Code,
is required in the R-1 district and R-1 subdistricts for alterations or modifications to any residence
designated on the city's Historic Inventory as Category 1 or Category 2 historic structure as defined
in Section 16.49.020 of this code or any contributing structure located within a locally designated
historic district. The Category 1 or Category 2 designation process for becoming a historic structure
is contained in Chapter 16.49 of Title 16 of the Municipal Code.
(b) Exemptions to gross floor area requirements are available for historic residences pursuant to the
definition of.gross floor area in Section 18.04.030(65)(C)(ii). Home improvement exceptions
provide for additional square footage and certain other exceptions for historic homes pursuant to
Section 18.12.120.
( c) Notwithstanding other provisions of this chapter, existing parcels containing two residences may be
subdivided into more than one .ownership, where all of the following circumstances exist:
(1) At least one residence is designated on the City's Historic Inventory as a Category 1, Category
2, Category 3, or Category 4 historic structure as defined in Section 16.49.020 of this code or
are contributing structures located within a locally designated historic district or are eligible for
the National or California Registers; and
I
(2) No increase in the total number of residences on the site is proposed; and
(3) Separate lots are proposed to be created, each with a minimum lot size not less than 4,000
square feet in the R-1 district if only one residence is historic or 80% of the minimum lot size
for the R-1 subdistricts; if both residences are historic and subject to a covenant, the .allowable
minimum lot·size is 2,000 square feet; and
( 4) The resultant parcel lines may create less than minimum lot size (no less than the area stated in
item (3) of this section), site width and depth, setback and daylight plane encroachments, floor
area and site coverage exceeding the maximum allowable for existing development with respect
to each new parcel, without the need for approval of a Variance or Home Improvement
Exception, but would not generally increase any existing noncomplying building features;
however, minor additions for functional improvements may be allowed at the discretion of the
Director of Planning and Community Environment; and
(5) The .Historic Resources Board has determined that at least one existing residence on the property
has historic integrity and qualifies for listing on the City's. Historic Inventory.
( 6) A covenant is recorded to run with the land in perpetuity, assuring that the historic residences
will be preserved and maintained consistent with the Secretary of the Interior's Standards for
Historic Rehabilitation through compliance with Historic Resources Board review and
recommendations. The covenant will stipulate that HRB review is required for all major
projects on the site including significant changes to any non-historic reside.nee. Any
Ch. 18.12 -Page 23 (Supp. No. 17 -12/2009)
)
18.12.150 Grandfathered Uses
(1) Such uses shall be permitted to remodel, improve, or replace site improvements on the same
site, for continual use and occupancy by the same use, provided that:
(A) such remodeling, improvement or replacement shall not:
(i) result in increased floor area;
(ii) result in an increase in the number of offices, in the case of professional or medical
office uses, or dwellings, .in the case of residential uses;
(iii) result in shifting of building footprint;
(iv) increase the height, leJ:?.gth, building envelope, or size of the improvement; and
(v) increase the existing degree of noncompliance, except through the granting of a design
enhancement exception pursuant to Chapter 18.76.
(2) If a grandfathered use ceases and thereafter remains discontinued for twelve consecutive months,
it shall be considered abandoned and may be replaced only py a conforming use.
(3) A grandfathered use that is changed to or replaced by a conforming use shall not be
reestablished, and any portion of a site or any portion of a building, the use of which changes
from a grandfathered use to a conforming -use, shall not thereafter be used except to
accommodate a conforming use.
( 4) The following additional regulations shall apply to grandfathered professional or medical office
uses:
(A) Any remodeling, improvement, or replacement of any building designed and constructed
for residential use shall be subject to the issuance of a conditional use permit in accord with
Chapter 18.76.
(B) In the event of redevelopment of all or a portion of the site for .permitted residential uses,
professional and medical office uses may not be incorporated in the redevelopment; except
that
(C) This provision shall not apply to permanent conversion to residential use of space within an
existing structure now used for professional and medical office uses.
( d) Existing Second Dwelling Units on Substandard Size Lots
In the R-1 district, and all R-1 subdistricts, notwithstanding any provisions of Chapters 18.40
and 18.42 and/or 18.70, in the case of a legal and nonconforming second detached single-family
dwelling ·existing prior to July 20, 1978 on a substandard size lot, such nonconforming use shall
be permitted to remodel, improve, or replace site improvements on the same site without
Ch. 18.12 -Page 25 (Supp. No. 17 -12/2009)
18.12.150 Grandfathered Uses
necessity to comply with site development regulations; provided, that any such remodeling,
improvement or replacement shall not result in increased floor area, number of dwelling units,
height, length, or any other increase in the size of the improvement.
(e) Existing Homes on Substandard Lots.
In the R-1 district and all R-1 subdistricts, single-family and two-family homes on substandard lots,
as defined in Subsection 18.12.040(c)(l), and flag lots existing on August 1, 1991 and which prior to
that date were lawful, complying structures, may remain and be remodeled, improved, or replaced
without complying with the height and habitable floor limitations for substandard lots specified in
Section 18. l~.030, provided that:
(1) any such remodeling, improvement, or replacement does not result in a height above seventeen
feet or any additional habitable floor area above a first habitable floor, except that any structure
damaged or destroyed by a natural disaster (such as fire, flood or earthquake) may be replaced
to its previous size without regard to the height and habitable floor limitations imposed by this
section; and
(2) in the case of a conflict between the provisions of this section and the provisions of Chapter
18. 70, this section shall control.
(Ord. 4869 § 14 (Exh. A [part]), 2005)
(Supp. No. 17 -12/2009) Ch. 18.12 -Page 26
)
\ )
18.12.150 Grandfathered Uses
remodeled, improved, or replaced without complying with the height and habitable floor
limitations for substandard lots specified in Section 18.12.030, provided that:
(1) any such remodeling, improvement, or replacement does not result in a height above
seventeen feet or any additional habitable floor area above a first habitable floor,
except that any structure damaged or destroyed by a natural disaster (such as fire,
flood or earthquake) may be replaced to its previous size without regard tothe height
and habitable floor limitations imposed by this section; and
(2) in the case of a conflict between the provisions of this section and the provisions of
Chapter 18. 70, this section shall control.
(Ord. 4869 § 14 (Exh. A [pai1]), 2005)
Ch~ 18.12 -Page 25 (Supp. No 13 -10/1/2007)
TmS PAGE INTENTIONALLY LEFT BLANK
)
)
(Supp. No J 3 -10/112007) Ch. 18.12-Page 26
)
~-J . ....___,,
\ j
18.13.Q10 Purposes
Chapter.18.13
MULTIPLE FAMILY RESIDENTIAL
(RM-15, RM-30 AND RM-40) DISTRICTS
Sections:
18.13.010 Purposes
18.13.020 Applicable Regulations
18.13.030 Land Use.s
18.13.040 Development Standards
18.13.050 Village Residential Development
· 18.13.060. Multiple Family Context-Based Design Criteria
18.13.070 Grandfathered Uses
18.13.010 Purposes
This section specifies regulations for three multiple family residential districts.
(a)
(b)
~-15 Low Density Multiple-Family Residence District [RM-15]
The· RM-15 low-density multiple-family residence district is intended to create, preserve and
enhance areas for a mixture of single-family and multiple-family housing which is
compatible with lower density and residential districts nearby, including single-family
residence districts. The RM-15 residence district also serves as a transition to moderate
density multiple-family districts or districts with nonresidential uses. Permitted densities in
the RM-15 residence district range from eight to fifteen dwelling units per acre.
RM-30 Medium Density Multiple-Family Residence District [RM-30]
The RM-30 medium density multiple-family residence district is intended to create, preserve
and enhance neighborhoods for multiple-family housing with site development standards and
visual characteristics intended to mitigate impacts on nearby lower density residential
districts. Projects at this density are intended for larger parcels that will enable developments
to provide their own parking spaces and to meet their open space needs in the form of garden
apartments or cluster developments. Pennitted densities in the RM-30 residence district range
from sixteen to Urirty dwelling units per acre.
(c) RM-40 High Density Multiple-Family Residence District [RM-40]
The RM-40 high density multiple-family residence district is intended to create, preserve and
enhance locations for apartment living at the highest density deemed appropriate for Palo
Alto. The most suitable locations for this district are in the downtown area, in select sites in
the California A venue area and along major transportation corridors which are close to mass
transportation facilities and major employment and service centers. Pennitted densitie$ in the
RM-40 residence district range from thirty-one to forty dwelling units per acre.
(Ord. 4964 § 2 (part), 2007)
Ch. 18.13-Page 1 (Supp. No 13 -10/112007)
\ )
18.13.040 Development Standards
-------F•~••rc•t• single-Family , p(1> p(1> p(2)
Two-Family p(1> p(1> p(1)
Multiple-Family P P P
Village Residential p (3> (3)
Mobile Homes P P P
Residential Care Homes P P P
Convalescent Facilities CUP
Day Care Centers CUP CUP P
Small Family Day Care Homes
Large Family Day Care Homes
· Small Adult Day Care Homes
Large Adult Day Care Homes
Eating and Drinking Services, except drive-
in and take-out services
p
p
p
CUP
p p
p p
p p
CUP CUP
CUP CUP
18.13.050
18.13.040(f)
Personal Services and Refail Services of a
. -~ . neighborhood~serving nature CUP CUP 18.13.040(f)
. __ Temporary Uses, subject to regulations in
Chapter 18.42 CUP CUP CUP 18.42.050
"' P = Permitted Use CUP = Conditional Use Permit Required
(1) Permitted use only on lots less than 8,500 square feet in size.
(2) Permitted use only on lots less than 6,000 square feet in size.
(3) Permitted use only if lot is substandard in size, e.g., less than 8,500 square feet or less than 70
feet in width, or at the perimeter of a site in excess of one acre where used as a transition to low-
density residential area.
(Ord. 4964 § 2 (part), 2007)
18.13.040 Development Standards
(a) Site Specifications, Building Size and Bulk, and Residential Density
The site development regulations in Table 2 shall apply in the multiple-family residence
districts, provided that more restrictive regulations may be recommended by the Architectural
Review Board and approved by the Director of Planning and Community Environment,
pursuant to the regulations set forth in Chapter 18.76, performance criteria set forth in
Chapter 18.23, and the context-based design criteria set forth in Section 18.13.060.
Ch. 18.13-Page 3 (Supp. No 13-lO/I/2007)
18.13.040 Development Standards
TABLE2
MULTIPLE FAMILY RESIDENTIAL DEVELOPMENT TABLE .....
Minimum Site Specifications
Site Area (tt2)
Site Width (ft)
Site Depth (ft)
Substandard Lot Specifications
.Site Area (tt2)
. Site Width (ft)
Minimum Setbacks
·Front Yard (ft)
On arterial roadways(1>
Interior Side Yards (ft)
Fo~ lots with width of 70 feet or greater
For lots with width of less than 70 feet
Interior Rear. Yards (ft)
· • Street Side and Street Rear Yards (ft)
Maximum Height (ft)
Maximum height for those portions of a site
within 50 feet of a more restrictive residential
district or a site containing a residential use in a
nonresidential district
Daylight Planes(7l
• Daylight Plana for side and rear lot lines for
sites abutting any R-1, R-2, RMD, or RM-15
district or abutting a site containing a single-
family or two-family residential use in a
nonresidential district:
Initial Height (ft)
Angle (degrees)
• Daylight Plane for side and rear lot lines for
sites abutting a RM-30, RM-40, Planned
Community, or nonresidential district that
does not contain a single-family or two-family
residential use:
For lots with width of 70 feet or greater
For lots with width of less than 70 feet, limited
to the first 10 feet from the property·line (no
daylight plane beyond 10 feet):
Initial Height (ft)
Angle (degrees)
8,500
70
100
Less than 8,500 square feet and/or .
· less than 70 feet in width
Setback lines imposed by a special
setback map pursuant to Chapter
20.08 of this code may apply
20 20 0-25(1)
0-20(1) 0-20(1) 0-25(1)
10 10 10
6feet
10 10 10
16 16 0-16<2>
30 35 40
35
10
45
None
10
45
[Continued on Next Page]
(Supp. No 13-10/1/2007) Ch. 18.13 -Page 4
18.13.040(b)
)
)
'-_\_ \ _}
18.13.040 Development Standards
'
Subject to
RM-15 RM-30 RM-40 regulations . m:
l\1aximum Site Coverage
Base 35% 40% 45%
Additional° area to be covered by covered 5% 5% 5%
patios or overhangs otherwise in compliance
with all applicable laws
Maximum Floor Area Ratio (FAR) <4> 0.5:1 0.6:i 1.o': 1
Maximum Residential Density (units)
Maximum number of un its per acre <3> 15 30 40
Minimum Size of Open Space (percent) 35 30 20 18.13.040(e)
Minimum Usable Open Space (sf per unit) <5> 200 150 100
Minimum Common Open Space (sf per unit) 100 75 50 18.13.040(e)
Minimum Privat~ Open Space (sf per unit) 50 50 50
Performance Criteria See provisions of Chapter 18. 23 Ch. 18.23
Landscape Requirements 18.40.130
Parking <6> See provisions of Chapter 18. 52 Ch. 18.52
( 1) Minimum front setbacks shall be determined by the Architectural Review Board upon review pursuant to criteria set
forth in Chapter 18. 76 and the context-based criteria outlined in Section 18.13.060. Arterial roadways do not include
residential arterials.
(2) Minimum street side setbacks in the RM-40 zone may be from 0 to 16 feet and shall be determined by the
Architectural Review Board upon review pursuant to criteria set forth in Chapter 18. 76 and the context-based criteria
outlined in Section 18. 13. 060.
(3) Provided that, for any lot of 5,000 square feet or greater, two units are allowed, subject to compliance with all other
deveiopment regulations.
(4) Covered parking is not included as floor area in multi-family development, up to a maximum of 230 square feet per
required parking space that is covered. Covered parking spaces in excess of required parking spaces count as floor
area.
(5) Subject to the limitations of Section 18.13.040(e). Usable open space is included as part of the minimum site open
space; required usable open space in excess of the minimum required for common and private open space may be
used as either common or private usable open space; landscaping may count towards total site open space after
usable open space requirements are met. -
(6) Tandem parking is allowed for any unit requiring two parking spaces, provided that both spaces in tandem are
intended for use by the same residential unit. For projects with more than four (4) units, not more than 25% of the
required parking spaces shall be in a tandem configuration. ,
(7) Each daylight plane applies specifically and separately to each property line according to the adjacent use.
Ch. 18.13 -Page 5 (Supp. No. 17 -12/2009)
18.12.040 Development Standards
(b) Setbacks, Daylight Planes and Height -Additional Requirements and Exceptions
( 1) Setbacks
(A) Setbacks for lot lines adjacent to an arterial street, expressway or freeway, as designated in
the Palo Alto Comprehensive Plan, shall be a minimum of twenty-five feet (25'), except
that lesser setbacks may be allowed or required by the Planning Director, upon
recommendation by the Architectural Review Board, where prescribed by the context-based
criteria outlined in Section 18 . .13. 060. Special setbacks of greater than 25 feet may not be
reduced except upon approval of a design enhancement exception or variance.
(B) Required parking spaces shall not be located in a required front yard, nor in the first ten
feet (10') adjoining the street property line of a required street side yard.
(C) Projections into yards are permitted only to the extent allowed by Section 18.40.070 of this
code.
(2) Height and Daylight Planes
(A) Exceptions to maximum height limitations are permitted only to the extent allowed by
Section 18.40.090 of this code.
)
(B) The following features may extend beyond the daylight plane established by the applicable "" ~
district, provided that such features do not exceed the height limit for the district unless
permitted to by Section 18.40.090 of this code:
i. Television and radio antennas;
ii. Chimneys and flues that do not exceed 5 feet in width, provided that chimneys do not
extend past the required daylight plane a distance exceeding the minimum allowed
pursuant to Chapter 16.04 of this code.
iii. Cornices and eaves, excluding flat or continuous walls or enclosures of usable interior
space, provided such features do not extend past the daylight plane more than 4 feet,
and so long as they do not encroach into the side setback greater than 2 feet.
(c) Single-Family and Two-Family Uses
(1) The regulations in Chapter 18.12 that apply to the R-1 district shall apply to sites in single-.
family use in the multiple-family residence districts. The regulations in Chapter 18.10 that
apply to the R-2 district may be applied, at the applicant's discretion, to sites in two-family use
in the multiple-family residence districts, in lieu of the multi-family standards.
(2) The Individual Review provisions of Section 18.12.110 of the Zoning Ordinance shall be
applied to any single-family or two-family residence in the multi-family districts, to those sides
(Supp. No. 17 -12/2009) Ch. 18.13 -Page 6
\ 'I }
\ _)
18.13.040 Development Standards
of a site that share an interior side lot line with the interior side or rear lot line of a property
zoned for or used for single-family or two-family dwellings. The Individual Review shall not be
applied to adjacent uses other than single-family and two-family uses.
(3) Notwithstanding other provisions of this chapter, existing two-family residential development in
multiple family residential districts may be divided into two separate ownership parcels where
all of the following circumstances exist:
(A) At"least one residence is designated on the City's Historic Inventory as a Category 1,
Category 2, Category 3, or Category 4 historic structure as defined in Section 16. 49. 020 of
this. code or are contributing structures located within a loc~lly designated historic district
or are eligible for the National or California Registers; and
(B) No increase in the total number of residences on the site is proposed; and
(C) Separate lots are proposed to be created, each with a minimum lot size not less than 4,000
square feet if only one residence is historic; if both residences are historic and subject to a
covenant, the allowable minimum lot size is 2,000 square feet and
(D) The resultant parcel lines may create less than minimum lot size (no less than the area stated
in item (C) of this section}, site width and depth, setback and daylight plane encroachments,
floor area and site coverage exceeding the maximum allowable for existing development
with respect to each new parcel, without the need for approval of a Variance or Home
Improvement Exception, but would not generally increase any existing non-complying
building features; however, minor additions for functional i~provements may be allowed at
the discretion of the Director of Planning and Community Environment; and
(E) The Historic Resources Board has determined that at least one existing residence on tlie
property has historic integrity and qualities for listing on the City's Historic Inventory.
(F) A covenant is recorded to run with the land in perpetuity, assuring that the historic
residences will be maintained consistent with the Secretary of the Interior's Standards for
Historic Rehabilitation through compliance with Historic Resources Board review and
recommendation. The covenant will stipulate that HRB review is required for all major
projects on the site including significant changes to any non-historic residence. Any
modifications to a non-historic residence must be compatible with the historic residence and
satisfy the Secretary of Interior's Standards for Historic Compatibility.
(G) The two residences on the property were in existence as of January 28, 2009.
(H) Application of the state Historic Building Code is available for use on any eligible building.
(I) Residences subject to a covenant must meet all government health, life and safety codes.
Ch. 18.13 -Page 7 (Supp. No. 17 -12/2009)
18.13.040 Development Standards
( d) Substandard Lots
Substandard lots in the multiple family zoning districts are those that are: 1) less than the minimum
8,500 square feet in size, or 2) less than 70 feet in width. These lots may be developed pursuant to
the regulations outlined in Table 2 or may be developed according to the regulations provided for
Village Residential development, as outlined in Section 18.13.050. Single-family and two-family
development on these lots shall be developed as outlined in subsection (c) above.
(e) Usable Open Space
The followiQg usable open space regulations shall apply:
(1) Required Minimum Site Open Space. Each site shall, at a minimum, have a portion of the site,
as prescribed in Table 2, developed into permanently maintained open space Site open space
includes all usable open space plus landscape or other uncovered areas not used for driveways,
parking, or walkways.
(2) Usable Open Space (Private and Common). Each project shall, at a minimum, have a portion of
the site, as prescribed in Table 2, developed into permanently maintained usable open space,
including private and common usable open space areas. Usable open space shall be located
protected from the activities of commercial areas and adjacent public streets and shall provide
)
noise buffering from surrounding uses where feasible. Parking, driveways and required parking )l
lot landscaping shall not be counted as usable open space. '-.. '
(A) Private Usable Open Space. Each dwelling unit shall have at least one private usable open
space area contiguous to the unit that allows the occupants of the unit the personal use of
the outdoor space. The minimum size of such areas shall be as follows:
(i) Balconies (above ground level): 50 square feet, the least dimension of which shall is 6
feet.
(ii) Patios or yards in the RM-15 and RM-30 districts: 100 square feet, the least dimension
of which is 8 feet for at least 7 5 % of the area.
(iii) Patios or yards in the RM-40 district: 80 square feet, the least dimension of which is 6
feet for at least 75% of the area.
(B) Common Usable Open Space. The minimum designated common open space area on the
site shall be 10 feet wide and each such designated area shall .comprise a minimum of 200
square feet. In the RM-30 and RM-40 districts, part or all of the required private usable
open space areas may be added to the required common usable open space in a
development, for purposes of improved design, privacy, protection and increased play area
· for children, upon a recommendation of the Architectural Review Board and approval of
the Director.
(Supp. No. 17 -12/2009) Ch. 18.13 -Page 8
18.13.040 Development Standards
(f) Personal Services, Retail Services, and Eating and Drinking Services in the RM-30 and
RM-40 Districts
Within a single residential development co~taining not less than 40 dwelling units, personal services,
retail services, and eating and drinking services solely of a neighborhood-serving nature to residents
in the development or in the general vicinity of the project may be allowed upon approval of a
conditional use permit, subject to the following limitations and to such additional conditions as may
be established by the conditional use permit:
( 1) Total gross floor area of all such uses· shall not exceed 5, 000 square feet or three percent of the
gross re.sidential floor area within the development, whichever ~s smaller, and may not occupy
any level other than the ground level or below grade levels.
(2) A maximum of 2,500 square feet of retail and/or service and/or eating and drinking uses shall
be allowed per establishment.
(3) Personal services, retail services, and eating and drinking services provided in accordance with
this section shall not be included in the gross floor area for the site.
( 4) The conditional use permit for the project may preclude certain uses and shall include conditions
that are appropriate to limit impacts of noise, lighting, odors, parking and trash disposal from
l_ J the operation of the commercial establishment. The hours of operation shall be limited to assure
-----compatibility with the residential use and surrounding residential uses.
(5) Allowable Neighborhood-Serving Uses. A neighborhood-serving use primarily serves individual
consumers and households, not businesses, is generally pedestrian oriented in design, and does
not generate noise, fumes or truck traffic greater than that typically expected for uses with a
local customer base. A neighborhood-serving use is also one to which a significant number of
local customers and clients can walk, bicycle or travel short distances, rather than· relying
primarily on automobile access or the provider of the goods or services traveling off-site.
Allowable neighborhood-serving personal services, retail services and eating and drinking
services may include, but are not limited to, "agent" dry cleaners, flower shops, convenience
grocery stores (excluding liquor stores), delicatessens, cafes, fitness facilities, day care
facilities, and similar uses found by ihe Planning Director to be compatible with the intent of
this provision.
(6) Sign programs, including size, number, color, placement, etc. shall be permitted only as
specified in the conditional use permit and by the Planning Director upon recommendation of
the Architectural Review Board
(7) Off-street parking and bicycle facilities, in addition to facilities required for residential uses,
shall be provided as may be specified by the conditional use permit. However, there shall not be
less than one parking space for each employee working or expected to be working at the same
time.
Ch. 18.13 -Page 9 (Supp. No. 17 -12/2009)
18.13.050 Village Residential Development
(8) For any project containing forty (40) or greater units and located more than 500 feet from
neighborhood commercial services, as determined by the Director, a minimum of 1,500 square
feet of neighborhood serving retail, personal service, and/or eating or drinking uses shall be
provided, subject to the above limitations. No conditional use permit is required, but the
commercial use shall be reviewed by the Architectural Review Board as part of the architectural
review approval. A minimum of one parking space for each employee working or expected to be
working at the same time shall be provided.
(g) Below Market Rate Units and Rental ·Housing Protection
(1) In developments of five or more units on sites of less than five ~cres, not less than fifteen
percent ( 15 % ) of the units shall be provided at below-market rates (BMR) to very-low, low and
moderate income households in accordance with Program H-36 of the Palo Alto Comprehensive
Plan Housing Element. In developments of five or more units on sites of five acres or more, not
less than twenty percent (20 % ) of the units shall be provided at below-market rates (BMR).
Specified percentages are applied to all proposed units in a project, including those designated as
BMRunits.
(2) Further details of the BMR program requirements, including their applicability to subdivisions
and for density bonus purposes, are found in the discussion of Programs H-36 and H-38 of the
Palo Alto ~omprehensive Plan Housing Element.
(3) Below market rate units shall be fully integrated into the development unless good cause is
shown for an exception.
(h) Performance Criteria
In addition to all other provisions of this chapter, all multi-family development shall comply with
applicable provisions of Chapter 18.23 (Performance Criteria for Multiple Family, Commercial,
Industrial and Planned Community Districts).
(Ord. 5051 § 6, 2009: Ord. 4964 § 2 (part), 2007)
18.13.050 Village Residential Development
(a) Purpose
Village Residential multiple-family development is intended to create, preserve and enhance areas for
a·mixture of single-family and multiple-family housing that is compatible with lower density and
residential districts nearby, including single-family residence districts. Housing types may include
but are not limited to single family houses on small lots, attached rowhouse/townhouse, and cottage
clusters. Village Residential development also serves as a transition to moderate density multiple-
family districts or districts with nonresidential uses. Permitted densities range from eight to twelve
dwelling units per acre. Village Residential housing also provides a means to accommodate home
ownership options in multiple-family zones.
(Supp. No. 17 -12/2009) Ch. 18.10 -Page 10
)
\ }
18.13.050 Village Residential Development
(b) Applicability of Regulations
Village Residential development standards may be applied to RM-15 multiple-family residence
district sites, as well as to substandard RM-30 and RM-40 multiple-family residence sites. It may
also be applied to the perimeter of RM-30 and RM-40 sites larger than one acre in size where a
transition to a lower-density adjacent use is desired. The Director may require the submittal of
Covenants, Conditions and Restrictions (CC&Rs), maintenance agreements, easements, and/or other
legal instruments to document and disclose conditions of the project approval.
( c) Development Standards
Table 3 spec~fies the development standards for new Village Residential developments that provide
for individual lots established for sale of one housing unit on a lot. these developments shall be
designed and constructed in compliance with the following requirements and the context-based
design criteria outlined in Section. 18.13.060, provided that more restrictive regulations may be
recommended by the architectural review board and approved by the director of planning and
community environment, pursuant to Section 18.76.020:
TABLE3
VILLAGE RESIDENTIAL DEVELOPMENT TABLE
Subject to
Village Residential regulations
in:
Minimum Site Specifications
Site Area (ft<2>) 6,000
Site Width (ft) 50
Site Depth (ft) 100
Minimum Setbacks RM-15 development standards
apply to ·perimeter of site
Minimum Lot Specifications 0>
Lot Area (ft 2), Attached Units 1,500
Lot Area (ft 2), Detached Units 2,500
Maximum Lot Area (ft 2) 4,000
Front lot setback (ft) 5
Rear lot setback (ft) 3
Side lot setback (ft) 0
Distance between detached units (ft) 3
Ch. 18.13 -Page 10.1 (Supp. No. 17 -12/2009)
18.13.050 Village Residential Development
TABLE 3 (continued)
VILLAGE RESIDENTIAL DEVELOPMENT TABLE
Subject to
Village Residential regulations
in:
Maximum House Size (ft2) 2,500 (Z)
Maximum Height (ft) 30
Daylight Planes RM-15 developm~nt standards·
apply to perimeter of site
Maximum Site Coverage RM-15 development standards
apply to site
Maximum Floor Area Ratio (FAR) <3> 0. 5: 1 applied to entire site
Maximum Residential Density (units)
Maximum number of units per acre 12
Minimum Site Open Space <4> 35% of entire sitel8.13.040 18.13.040(e)
Minimum Usable Open Space (per unit) <3> 300 sq. ft.
Minimum Common Open Space (per unit) No requirement 18.13.040(e)
Minimum Private· Open Space (per unit) 100 sq. ft.
Performance Criteria Ch. 18.23
Landscape Requirements 18.14.130
Parking <S> See provisions of Chapter 18. 52 Ch. 18.52
(1) Individual lots are created by subdividing the development site to create one for-sale lot per
dwelling unit. Overall development intensity (FAR, site coverage, landscape/open space) shall be
calculated across the entire site to comply with RM-15 zone standards, and setbacks and daylight
(Supp. No. 17 -12/2009) Ch. 18.13 -Page 10.2
\;
/
)
)
18.13.060 Multiple Family Context-Based Design Criteria
planes at the perimeter of the site shall comply with RM-15 setbacks and daylight planes. For
common-ownership developments such as condominiums and apartments, the underlying multiple-
family zone district development standards shall apply.
(2) Covered parking that is attached to the residence shall be included in the maximum house size.
(3) Covered parking is not included as floor areain multi-family development, up to a maximum of 230
square feet per required parking space that is covered. Covered parking spaGes in excess of
required parking spaces count as floor area.
(4) Subject to the limitations of Section 18.13.040(e). Usable open space is included as part of the
minimum site open space; required usable open space in excess of the minimum required for
common and private open space may be used as either common or private usable open space;
landscaping may count towards total site open space after usable open space requirements are
met.
· (5) Tandem parking is allowed for any unit requiring two parking spaces, provided that both spaces in
tandem are intended for use by the same residential unit. For projects with more than four ( 4) units,
not more than 25% of the required parking spaces shall be in a tandem configuration.
( d) Design for Entire Site
(e)
The entire development plan for a Village Residential project, including subdivision of the
site into individual lots and design of buildings, streets, driveways, parking, and open space
shall be submitted and reviewed at one time .. Design for individual lots may not be phased for
subsequent approval. ·
Post-Construction Modifications
(1) Modifications to completed units, such as additions to dwelling units, changes in
circulation or parking, exterior building design features, and provisions for open space,
must be submitted as an amendment to the Village Residential development, unless.an·
alternate review process is outlined in the initial project approval. The Director may
require the submittal of Covenants, Conditions and Restrictions (CC&Rs) and/or other
legal instruments to document and disclose the post-construction approval process.
(2) An amendment to the Village Residential approval may only be submitted by the owner
of the entire site or by an entity (such as a homeowners association) representing the
-property owners. The amendment shall be reviewed in the same manner as the original
approval and must demonstrate compliance with the applicable standards for the entire
site. Minor architectural review may be approved by staff, pursuant to the process
outlined in Section 18.76.020 for exterior architectural or site modifications deemed
minor by the Director.
(Ord. 4964 § 2 (part), 2007)
18.13.060 Multiple Family Context-Based Design Criteria
(a) Contextual and Compatibility Criteria
Development in a multiple-family residential district shall be responsible to its context and
compatible with adjacent development.
Ch. 18.13 -Page 11 (Supp. No 13-10/1/2007)
18.13.070 Grandfathered Uses
18.13.070 Grandfathered Uses
(a) Grandfathered Uses
The following uses may remain as grandfathered uses and shall not be subject to the
provisions of Chapter 18. 70:
(1) RM-15 district:
(A) Professional and medical office uses existing on July 20, 1978 and which, prior to
that date, were lawful conforming permitted uses or conditional uses operating
subject to a conditional use permit, or which uses were, prior to July 20, 1978,
located in an RM-1 or RM-2 district, which was· imposed by reason of annexation
of the property to the city without benefit of prezoning and which, prior t<;> the date
of annexation, were lawful conforming permitted uses or conditional uses
operating subject to a conditional use permit.·
(B) Two-family uses and multiple-family uses existing on July 20, 1978 and which,
prior to that date, were lawful conforming permitted uses or conditional uses
operating pursuant to a conditional use permit, or which uses were, prior to July
20, 1978, located in an RM,..l or RM-2 district, which was imposed by reason of
annexation of the property to the City without benefit of prezoning and which, prior
to the date of annexation, were lawful conforming permitted uses or conditional
uses operating subject to a conditional use permit.
(C) Motel uses existing on July 20, 1978, and which, prior to that date, were lawful
. conforming permitted uses or conditional uses subject to a conditional use permit.
(2) ~-30 district:
(A) Professional and medical office uses existing on July 20, 1978 and which, prior to
that date, were lawful conforming permitted uses or conditional uses operating
subject to a conditional use permit, or which uses were, prior to July 20, 1978,
located in an RM-3 or RM-4 district, which was imposed by reason of annexation
of the property to the city without benefit of prezoning and which, prior to the date
of annexation, were lawful conforming permitted uses or conditional uses
operating subject to a conditional use permit
(B) Two-family uses and multiple-family uses existing on July 20, 1978 and which,
prior to that date, were lawful_ conforming permitted uses or conditional uses
operating pursuant to a conditional use pennit, or which uses were, prior to July
20, 1978, located in an RM-3 or RM-4 district, which was imposed by reasop of
annexation qf the property to the city without benefit of prezoning and which, prior
to the date of annexation, were lawful conforming permitted uses or conditional
uses operating subject to a conditional use permit.
(C) Motel uses existing on July 20, 1978, and which, prior to that date, were lawful
conforming permitted uses or conditional uses subject to a conditional use permit.
(3) RM-40 district:
(A) Professional and medical office uses existing on July 20, 1978 and which, prior to
that date, were lawful conforming permitted uses or conditional uses operating
(Supp. No 13-10/1/2007) Ch. 18.13 -Page 20
\ )
)
)
18.13.070 Grandfathered Uses
subject to a conditional use permit, or which uses were, prior to July 20, 1978,
located in an RM-5 district, which was imposed by reason of annexation of the
property to the city without benefit of prezoning and which, prior to the date of
annexation, were lawful conforming pennitted uses or conditional uses operating
subject to a conditional use permit
(B) Two-family uses and multiple-family uses existing on July 20, 1978 and which,
prior to that date, were lawful conforming pennitted uses or conditional uses
operating pursuant to a conditional use pennit, or which uses were, prior to July
20, 1978, located in an RM-5 district, which was imposed by reason of annexation
of the property to the city without benefit of prezoning and which, prior to the date
of annexation, were lawful conforming permitted uses or conditional uses
operating subject to a conditional use permit.
(C) Motel uses existing on July 20, 1978, and which, prior to that date, were lawful
conforming permitted uses or conditional uses subject to a conditional use permit
(b) Permitted Changes
The following regulations shall apply to the grandfathered uses specified in_ subsection (a):
(1) Such uses shall be permitted to remodel, improve, or replace site improvements on
the same site, for continual use and occupancy by the same use~ provided that such
remodeling, improvement or replacement:
(A) shall not result in increased floor area;
(B) shall not result in an increase in the number of offices, in the case of professional
or medical office uses, or dwelling units, in the case of residential or motel uses;
(C) shall not result in shifting of building footprint;
(D) shall not increase the height, length, building envelope, or size of the improvement,
(E) shall not increase the existing degree of noncompliance, except through the
granting of a design enhancement exception pursuant to Chapter 18.76, with
respect to multiple-family, professional and medical office, and motel uses, -or a
home improvement exception pursuant to Chapter 18.76, with respect to two-
family use.
(F) in the RM-15 district, such remodeling, improvement, or replacement shall be for
continual use and occupancy by the same use.
(2) If a grandfathered use ceases and thereafter remains discontinued for twelve
consecutive months, it shall be considered abandoned and may be replaced only by a
conforming use.
(3) A grandfathered use which is changed to or replaced by a conforming use shall not be
reestablished, and any portion of a site or any portion of a building, the use of which
changes from a grandfathered use to a conforming use, shall not thereafter be used
except to accommodate a conforming use. ·
(4) The following additional regulations shall apply to grandfathered professional or
medical office uses:
Ch. 18.13 -Page 21 (Supp. No 13 -10/1/2007)
18.13.070 Grandfathered Uses
(A) Any remodeling, improvement, or replacement of any building designed and )
constructed for residential use shall be subject to the issuance of a conditional use .
permit in accord with Chapter 18.76.
(B) In the event of redevelopment of all 9r a portion of the site for permitted residential
uses, professional and medical office uses may not be incorporated in the
redevelopment, except that this provision shall not apply to permanent conversion
to residential use of space within an existing structure now used for professional
and medical office uses.
(Ord. 4964 § 2.(part), 2007)
(Supp. No 13 -10/1/2007) Ch. 18.13 -Page 22
)
ATTACHMENT C
ORDINANCE NO. 1611 (2015 Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, AMENDING TITLE 17 (ZONING
REGULATIONS) OF THE MUNICIPAL CODE REGARDING HOMESTAY
RENTALS AND APPROVING THE NEGATIVE DECLARATION OF
ENVIRONMENTAL IMPACT
(CODE 0058-2014)
WHEREAS, the City Council of the City of San Luis Obispo conducted a study session
in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on
November 12, 2013, and directed staff to temporarily suspend enforcement of Municipal Code
§ 17.22.0IO(G) related to the prohibition of vacation rentals, pending adoption of an ordinance
which provides for homestay rentals; and
WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a
public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo,
California, on October 8, 2014, for the purpose of considering the Negative Declaration of
environmental impact and amendments to Title 17 (Zoning Regulations) of the Municipal Code
to add provisions to allow homestay rentals; and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing
in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on January
6, 2015, for the purpose of considering the Negative Declaration of environmental impact and
amendments to Title 1 7 (Zoning Regulations) of the Municipal Code to add provisions to allow
homestay rentals; and
WHEREAS, the City does regulate similar transient uses with similar impacts such as
bed and breakfast establishments; and
WHEREAS, the City finds that, unless properly regulated, homestays could result in
impacts to adjacent properties; and
WHEREAS, the purpose of these regulations is to ensure that homestays conform to the
existing character of the neighborhood in which they are located and do not create impacts to
adjacent properties; and
WHEREAS, staff facilitated meetings with the public and community organizations to
gather community input on how homestay rentals should be operated, located and managed; and
WHEREAS, it is the purpose of this Ordinance to protect the public health, safety, and
welfare within the City by establishing rules and requirements for homestay rental; and
WHEREAS, notices of said public hearings were made at the time and in the manner
required by law; and
0 1611
Ordinance No. 1611 (2015 Series)
Page 2
BE IT ORDAINED by the Council of the City of San Luis Obispo as follows:
SECTION 1. Recitals. The above recitals are true and correct and incorporated herein by
this reference.
SECTION 2. Environmental Determination. The project has been found to have a
negative declaration of environmental impact through the completion of an initial study
environmental review per CEQA Guidelines. Municipal Code amendments included in Section
17.08.140 of this ordinance are summarized below which conclude that it can be seen with
certainty that proposed amendments to the Municipal Code could not have a significant effect on
the environment.
SECTION 3. Findings. Based upon all the evidence, the Council makes the following
findings:
1. The increasing popularity of homestay rentals in the City require the implementation of
appropriate regulations to the character of existing neighborhoods is maintained, while
providing an expanded type of lodging facility available within the City.
2. The Homestay Ordinance is consistent with General Plan policies, which directs the City
to provide for visitor uses and protect neighborhoods through the establishment of
requirements and standards for operation and management of homestay rentals.
3. The project has been found to have a negative declaration of environmental impact
through the completion of an initial study environmental review per CEQA Guidelines as
detailed in Section 2 above.
SECTION 4. Chapter 17.08.140 "Homestay Rentals" of the City of San Luis Obispo's
Municipal Code is added to read as follows:
SECTION 17.08.140-HOMESTAY RENTALS
A. Purpose and Intent. The purpose of these regulations is to allow owner occupied
homestay rentals in the City with reasonable standards to preserve neighborhood
character and quality of life.
B. Definitions.
1. Bed and Breakfast Inn. A building or group of buildings providing less than 15
bedrooms or suites that are rented for overnight lodging, with a common eating
area for guests.
2. Homestay. An owner-occupied dwelling unit where bedrooms are provided for
compensation for fewer than thirty consecutive days with a maximum of four
adult overnight guests.
Ordinance No. 1611 (2015 Series)
Page 3
3. Owner Occupancy. A lawfully permitted dwelling that is occupied by the
owner(s) named on the property deed as their primary residence and is occupied
by them for the major portion of the year.
4. Responsible party. A person over the age of 18 who is designated by the owner
of the property as a point of contact for the homestay rental in the event the owner
occupier is not on the property at all time during the rental to answer for the
maintenance of the property and conduct and acts of homestay guests. The
responsible party's contact information must be provided to homestay guests,
adjacent neighbors and stated on the application.
5. Vacation Rental. A dwelling or part of a dwelling where lodging is furnished for
compensation for fewer than thirty consecutive days without concurrently being
occupied by the property owner. Vacation rentals are not allowed in the City of
San Luis Obispo.
C. Permit Required. The operation of a homestay requires a homestay permit through
an administrative approval by the Community Development Director, who may add,
delete, or modify conditions to further the intent of the ordinance. Any request to
waive or modify 17.08.140 D. 4. shall require an administrative use permit.
D. Application Requirements.
1. Operators of homestays in all zones are required to obtain a homestay permit
and a business license.
2. The operator of the homestay shall pay Transient Occupancy Tax and
Tourism Business Improvement District tax as required by San Luis Obispo
Municipal Code.
3. The operator of the homestay must annually provide verification of primary
residence through the Homeowner's Property Tax Exemption or other
appropriate documentation:-
4. The operator of the homestay must provide a site plan with at least one (1) on-
site parking space in addition to their required residential parking. Parking in a
driveway that has a minimum depth of 20 feet from the back of sidewalk and
is made available during rentals shall meet the definition of a parking space.
5. The operator of the homestay must provide the name and contact information
of a responsible party in the application, if the owner occupier anticipates he
or she may not be on the premises at all times during the homestay rental.
E. Performance Standards.
1. Homestays shall comply with the property development and performance
Ordinance No. 1611 (2015 Series)
Page4
standards listed in Section 17 .18 and 17 .19.
2. All Duilding and l'ire Code and regulations shall be met.
3. The number of overnight guests shall be limited to four adults. Bedrooms
shall meet the minimum size requirements as defined in the Building Code.
4. At all times when a homestay rental is occurring, the owner or responsible
party must be within a fifteen (15) minute drive of the property. The owner or
responsible party must be available via telephone twenty-four (24) hours a
day, seven (7) days a week, to respond to complaints regarding the homestay.
Contact information for the owner and responsible party must be provided to
homestay guests, adjacent neighbors and stated on the application.
5. Upon sale or transfer of the home for which a homestay permit has been
granted, a new homestay application shall be required within 60 days of the
transfer. Failure to submit a new application as required within 60 days shall
result in the termination of the existing permitted use.
6. The homestay shall be limited to only the owner occupied dwelling unit on the
property.
7. Homestays are not permitted in guest houses or guest quarters.
8. Any advertisements for the homestay shall include the Business License
number. On-site advertising of the homestay is prohibited.
F. Revocation of a Permit.
1. Violation of these requirements and standards shall constitute grounds for
revocation of the Homestay Permit.
2. At any time, the permit can be referred to an Administrative Review Hearing
if determined by the Community Development Director upon receipt of
substantiated written complaints from any citizen, Code Enforcement Officer,
or Police Department Officer, which includes information and/or evidence
supporting a conclusion that a violation of the permit, or of City ordinances or
regulations applicable to the property or operation of the homestay, has
occurred. At the time of the Permit review, to ensure compliance with
applicable laws and conditions of permit, conditions of approval may be
added, deleted, modified, or the permit may be revoked.
G. Appeal. Appeal procedures for this section shall be as provided by Chapter 17.66
(Appeals).
SECTION 5. The definition of "Vacation rental" as set forth in Chapter 17.100.220 is
,_ 1
Ordinance No. 1611 (2015 Series)
Page 6
I IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this'L~-h-ti ay of Teanu•""1 , ?015
h• ~{)fly J. M ia)
City Clerk
-j
ATTACHMENT D
FILE NO. 140381
AMENDED IN BOARD
10/7/14
ORDINANCE NO. 218-14
1 [Administrative, Planning Codes -Amending Regulation of Short-Term Residential Rentals
and Establishing Fee]
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Ordinance amending the Administrative Code to provide an exception for permanent
residents to the prohibition on short-term residential rentals under certain conditions;
to create procedures, including a registry administered by the Planning Department, for
tracking short-term residential rentals and compliance; to establish an application fee
for the registry; amending the Planning Code to clarify that short-term residential
rentals shall not change a unit's type as residential; affirming the Planning
Department's determination under the California Environmental Quality Act; and
making findings of consistency with the General Plan, and the eight priority policies of
NOTE: Unchanged Code text and uncodified text are in plain Arial font.
Additions to Codes are in single-underline italics Times New Roman font.
Deletions to Codes are in strikethrough italics Times }leH' Roman font.
Board amendment additions are in double-underlined Arial font.
Board amendment deletions are in strikethrough /\rial font.
Asterisks (* * * *) indicate the omission of unchanged Code
subsections or parts of tables.
17 Be it ordained by the People of the City and County of San Francisco:
18 Section 1. The Board of Supervisors of the City and County of San Francisco hereby
19 finds and determines that:
20
21
(a) General Plan and Planning Code Findings.
(1) On August 7, 2014, at a duly noticed public hearing, the Planning
22 Commission in Resolution No. 19213 found that the proposed Planning Code amendments
23 contained in this ordinance were consistent with the City's General Plan and with Planning
24 Code Section 101.1 (b) and recommended that the Board of Supervisors adopt the proposed
25 Planning Code amendments. A copy of said Resolution is on file with the Clerk of the Board of
Supervisor Chiu
BOARD OF SUPERVISORS Page 1
1 Supervisors in File No. 140381 and is incorporated herein by reference. The Board finds that
2 the proposed Planning Code amendments contained in this ordinance are on balance
3 consistent with the City's General Plan and with Planning Code Section 101.1 (b) for the
4 reasons set forth in said Resolution.
5 (2) Pursuant to Planning Code Section 302, the Board finds that the
6 proposed ordinance will serve the public necessity, convenience and welfare for the reasons
7 set forth in Planning Commission Resolution No. 19213, which reasons are incorporated
8 herein by reference as though fully set forth.
9 (b) Environmental Findings. The Planning Department has determined that the
1 O actions contemplated in this ordinance comply with the California Environmental Quality Act
11 (California Public Resources Code Section 21000 et seq.). Said determination is on file with
12 the Clerk of the Board of Supervisors in File No. 140381 and is incorporated herein by
13 reference. The Board affirms this determination.
(c) General Findings. 14
15 (1) The widespread conversion of residential housing to short-term rentals,
16 commonly referred to as hotelization, was prohibited by this Board because, when taken to
17 extremes, these conversions could result in the loss of housing for permanent residents. But,
18 with the advent of new technology, the rise of the sharing economy, and the economic and
19 social benefits to residents of sharing resources, short-term rental activity continued to
20 proliferate. This has not only led the City to strengthen enforcement of short-term rental laws,
21 but also prompted an examination of parameters to regulate short-term rentals and create a
22 pathway to legalize this activity. The goal of regulation is to ensure compliance with all
23 requirements of the Municipal Code, including but not limited to the Business and Tax
24 Regulations Code and the Residential Rent Stabilization and Arbitration Ordinance, and
25 accountability for neighborhood quality of life.
Supervisor Chiu
BOARD OF SUPERVISORS Page 2
10/17/2014
1 (2) The exception created here for permanent residents would allow for
2 reasonable flexibility in renting residential spaces on an occasional basis; however, this
3 exception is only intended for residents who meet the definition of permanent resident so that
4 these units remain truly residential in use. Thus, the exception is only for primary residences
5 in which permanent residents are present for a significant majority of the calendar year.
6 (3) The hosting platforms, as part of a new but growing industry, would also
7 benefit from regulation to ensure good business standards and practices. Such regulation
8 includes required notification to users of local short-term rental laws and transient occupancy
9 tax obligations to San Francisco.
10 (4) The Office of the Treasurer & Tax Collector retains all of its existing
11 authority under the Business & Tax Regulations Code with regard to the subject matter of this
12 ordinance.
13
14 Section 2. The Administrative Code is hereby amended by revising Sections 37.9(a),
15 41A.4, 41A.5, and 41A.6, to read as follows:
16
17 SEC. 37.9. EVICTIONS. Notwithstanding Section 37.3, this Section shall apply as of
18 August 24, 1980, to all landlords and tenants of rental units as defined in Section 37.2(r).
19
20
21
(a) A landlord shall not endeavor to recover possession of a rental unit unless:
(1) The tenant:
(A) Has failed to pay the rent to which the landlord is lawfully entitled
22 under the oral or written agreement between the tenant and landlord:
23 (i) Except that a tenant's nonpayment of a charge prohibited
24 by Section 919.1 of the Police Code shall not constitute a failure to pay rent; and
25
Supervisor Chiu
BOARD OF SUPERVISORS Page 3
10/17/2014
1 (ii) Except that, commencing August 10, 2001, to and including
2 February 10, 2003, a landlord shall not endeavor to recover or recover possession of a rental
3 unit for failure of a tenant to pay that portion of rent attributable to a capital improvement
4 passthrough certified pursuant to a decision issued after April 10, 2000, where the capital
5 improvement passthrough petition was filed prior to August 10, 2001, and a landlord shall not
6 impose any late fee(s) upon the tenant for such non-payment of capital improvements costs;
7 or
8
9
(B) Habitually pays the rent late; or
(C) Gives checks which are frequently returned because there are
1 O insufficient funds in the checking account; or
11 (2) The tenant has violated a lawful obligation or covenant of tenancy other
12 than the obligation to surrender possession upon proper notice or other than an obligation to
13 pay a charge prohibited by Police Code Section 919.1, and failure to cure such violation after
14 having received written notice thereof from the landlord.
15 (A) Provided that notwithstanding any lease provision to the contrary,
16 a landlord shall not endeavor to recover possession of a rental unit as a result of subletting of
17 the rental unit by the tenant if the landlord has unreasonably withheld the right to sublet
18 following a written request by the tenant, so long as the tenant continues to reside in the rental
19 unit and the sublet constitutes a one-for-one replacement of the departing tenant(s). If the
20 landlord fails to respond to the tenant in writing within fourteen (14) days of receipt of the
21 tenant's written request, the tenant's request shall be deemed approved by the landlord.
22 (B) Provided further that where a rental agreement or lease provision
23 limits the number of occupants or limits or prohibits subletting or assignment, a landlord shall
24 not endeavor to recover possession of a rental unit as a result of the addition to the unit of a
25 tenant's child, parent, grandchild, grandparent, brother or sister, or the spouse or domestic
Supervisor Chiu
BOARD OF SUPERVISORS Page4
10/17/2014
1 partner (as defined in Administrative Code Sections 62.1 through 62.8) of such relatives, or as
2 a result of the addition of the spouse or domestic partner of a tenant, so long as the maximum
3 number of occupants stated in Section 37.9(a)(2)(B)(i) and (ii) is not exceeded, if the landlord
4 has unreasonably refused a written request by the tenant to add such occupant(s) to the unit.
5 If the landlord fails to respond to the tenant in writing within fourteen (14) days of receipt of the
6 tenant's written request, the tenant's request shall be deemed approved by the landlord. A
7 landlord's reasonable refusal of the tenant's written request may not be based on the
8 proposed additional occupant's lack of creditworthiness, if that person will not be legally
9 obligated to pay some or all of the rent to the landlord. A landlord's reasonable refusal of the
1 O tenant's written request may be based on, but is not limited to, the ground that the total
11 number of occupants in a unit exceeds (or with the proposed additional occupant(s) would
12 exceed) the lesser of (i) or (ii):
13 (i) Two persons in a studio unit, three persons in a one-
14 bedroom unit, four persons in a two-bedroom unit, six persons in a three-bedroom unit, or
15 eight persons in a four-bedroom unit; or
16 (ii) The maximum number permitted in the unit under
17 state law and/or other local codes such as the Building, Fire, Housing and Planning Codes; or
18 (3) The tenant is committing or permitting to exist a nuisance in, or is causing
19 substantial damage to, the rental unit, or is creating a substantial interference with the
20 comfort, safety or enjoyment of the landlord or tenants in the building, and the nature of such
21 nuisance, damage or interference is specifically stated by the landlord in writing as required
22 by Section 37.9(c); or
23 (4) The tenant is using or permitting a rental unit to be used for any illegal
24 purpose, provided however that a landlord shall not endeavor to recover possession of a rental unit
25
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1 solely as a result ofa first violation of Chapter 41A that has been cured within 30 davs written notice to
2 the tenant; or
3 (5) The tenant, who had an oral or written agreement with the landlord which
4 has terminated, has refused after written request or demand by the landlord to execute a
5 written extension or renewal thereof for a further term of like duration and under such terms
6 which are materially the same as in the previous agreement; provided, that such terms do not
7 conflict with any of the provisions of this Chapter; or
8 (6) The tenant has, after written notice to cease, refused the landlord access
9 to the rental unit as required by State or local law; or
10 (7) The tenant holding at the end of the term of the oral or written agreement
11 is a subtenant not approved by the landlord; or
12 (8) The landlord seeks to recover possession in good faith, without ulterior
13 reasons and with honest intent:
14 (i) For the landlord's use or occupancy as his or her principal
15 residence for a period of at least 36 continuous months;
16 (ii) For the use or occupancy of the landlord's grandparents,
17 grandchildren, parents, children, brother or sister, or the landlord's spouse, or the spouses of
18 such relations, as their principal place of residency for a period of at least 36 months, in the
19 same building in which the landlord resides as his or her principal place of residency, or in a
20 building in which the landlord is simultaneously seeking possession of a rental unit under
21 Section 37.9(a)(8)(i). For purposes of this Section 37.9(a)(8)(ii), the term spouse shall include
22 domestic partners as defined in San Francisco Administrative Code Sections 62.1 through
23 62.8.
24 (iii) For purposes of this Section 37.9(a)(8) only, as to landlords who
25 become owners of record of the rental unit on or before February 21 , 1991, the term "landlord"
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1 shall be defined as an owner of record of at least 10 percent interest in the property or, for
2 Section 37.9(a)(8)(i) only, two individuals registered as domestic partners as defined in San
3 Francisco Administrative Code Sections 62.1 through 62.8 whose combined ownership of
4 record is at least 10 percent. For purposes of this Section 37.9(a)(8) only, as to landlords who
5 become owners of record of the rental unit after February 21, 1991, the term "landlord" shall
6 be defined as an owner of record of at least 25 percent interest in the property or, for Section
7 37.9(a)(8)(i) only, two individuals registered as domestic partners as defined in San Francisco
8 Administrative Code Sections 62.1 through 62.8 whose combined ownership of record is at
9 least 25 percent.
10 (iv) A landlord may not recover possession under this Section
11 37.9(a)(8) if a comparable unit owned by the landlord is already vacant and is available, or if
12 such a unit becomes vacant and available before the recovery of possession of the unit. If a
13 comparable unit does become vacant and available before the recovery of possession, the
14 landlord shall rescind the notice to vacate and dismiss any action filed to recover possession
15 of the premises. Provided further, if a noncomparable unit becomes available before the
16 recovery of possession, the landlord shall offer that unit to the tenant at a rent based on the
17 rent that the tenant is paying, with upward or downward adjustments allowed based upon the
18 condition, size, and other amenities of the replacement unit. Disputes concerning the initial
19 rent for the replacement unit shall be determined by the Rent Board. It shall be evidence of a
20 lack of good faith if a landlord times the service of the notice, or the filing of an action to
21 recover possession, so as to avoid moving into a comparable unit, or to avoid offering a
22 tenant a replacement unit.
23 (v) It shall be rebuttably presumed that the landlord has not acted in
24 good faith if the landlord or relative for whom the tenant was evicted does not move into the
25
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1 rental unit within three months and occupy said unit as that person's principal residence for a
2 minimum of 36 continuous months.
3 (vi) Once a landlord has successfully recovered possession of a rental
4 unit pursuant to Section 37.9(a)(8)(i), then no other current or future landlords may recover
5 possession of any other rental unit in the building under Section 37.9(a)(8)(i). It is the intention
6 of this Section that only one specific unit per building may be used for such occupancy under
7 Section 37.9(a)(8)(i) and that once a unit is used for such occupancy, all future occupancies
8 under Section 37.9(a)(8)(i) must be of that same unit, provided that a landlord may file a
9 petition with the Rent Board, or at the landlord's option, commence eviction proceedings,
1 O claiming that disability or other similar hardship prevents him or her from occupying a unit
11 which was previously occupied by the landlord.
12 (vii) If any provision or clause of this amendment to Section 37.9(a)(8)
13 or the application thereof to any person or circumstance is held to be unconstitutional or to be
14 otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other
15 chapter provisions, and clauses of this Chapter are held to be severable; or
16 (9) The landlord seeks to recover possession in good faith in order to sell the
17 unit in accordance with a condominium conversion approved under the San Francisco
18 subdivision ordinance and does so without ulterior reasons and with honest intent; or
19 (10) The landlord seeks to recover possession in good faith in order to
20 demolish or to otherwise permanently remove the rental unit from housing use and has
21 obtained all the necessary permits on or before the date upon which notice to vacate is given,
22 and does so without ulterior reasons and with honest intent; provided that a landlord who
23 seeks to recover possession under this Section 37.9(a)(10) shall pay relocation expenses as
24 provided in Section 37.9C except that a landlord who seeks to demolish an unreinforced
25 masonry building pursuant to Building Code Chapters 16B and 16C must provide the tenant
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1 with the relocation assistance specified in Section 37.9A(f) below prior to the tenant's vacating
2 the premises; or
3 (11) The landlord seeks in good faith to remove temporarily the unit from
4 housing use in order to be able to carry out capital improvements or rehabilitation work and
5 has obtained all the necessary permits on or before the date upon which notice to vacate is
6 given, and does so without ulterior reasons and with honest intent. Any tenant who vacates
7 the unit under such circumstances shall have the right to reoccupy the unit at the prior rent
8 adjusted in accordance with the provisions of this Chapter. The tenant will vacate the unit only
9 for the minimum time required to do the work. On or before the date upon which notice to
1 O vacate is given, the landlord shall advise the tenant in writing that the rehabilitation or capital
11 improvement plans are on file with the Central Permit Bureau of the Department of Building
12 Inspection and that arrangements for reviewing such plans can be made with the Central
13 Permit Bureau. In addition to the above, no landlord shall endeavor to recover possession of
14 any unit subject to a RAP loan as set forth in Section 37.2(m) of this Chapter except as
15 provided in Section 32.69 of the San Francisco Administrative Code. The tenant shall not be
16 required to vacate pursuant to this Section 37.9(a)(11), for a period in excess of three months;
17 provided, however, that such time period may be extended by the Board or its Administrative
18 Law Judges upon application by the landlord. The Board shall adopt rules and regulations to
I
19 implement the application procedure. Any landlord who seeks to recover possession under
20 this Section 37.9(a)(11) shall pay relocation expenses as provided in Section 37.9C~ or
21 (12) The landlord seeks to recover possession in good faith in order to carry
22 out substantial rehabilitation, as defined in Section 37.2(s), and has obtained all the necessary
23 permits on or before the date upon which notice to vacate is given, and does so without
24 ulterior reasons and with honest intent. Notwithstanding the above, no landlord shall endeavor
25 to recover possession of any unit subject to a RAP loan as set forth in Section 37.2(m) of this
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1 Chapter except as provided in Section 32.69 of the San Francisco Administrative Code; Any
2 landlord who seeks to recover possession under this Section 37.9(a)(12) shall pay relocation
3 expenses as provided in Section 37.9C; or
4 (13) The landlord wishes to withdraw from rent or lease all rental units within
5 any detached physical structure and, in addition, in the case of any detached physical
6 structure containing three or fewer rental units, any other rental units on the same lot, and
7 complies in full with Section 37.9A with respect to each such unit; provided, however, that
8 guestrooms or efficiency units within a residential hotel, as defined in Section 50519 of the
9 Health and Safety Code, may not be withdrawn from rent or lease if the residential hotel has a
1 O permit of occupancy issued prior to January 1, 1990, and if the residential hotel did not send a
11 notice of intent to withdraw the units from rent or lease (Administrative Code Section 37.9A(f),
12 Government Code Section 7060.4(a)) that was delivered to the Rent Board prior to January 1,
13 2004; or
14 (14) The landlord seeks in good faith to temporarily recover possession of the
15 unit solely for the purpose of effecting lead remediation or abatement work, as required by
16 San Francisco Health Code Articles 11 or 26. The tenant will vacate the unit only for the
17 minimum time required to do the work. The relocation rights and remedies, established by
18 San Francisco Administrative Code Chapter 72, including but not limited to, the payment of
19 financial relocation assistance, shall apply to evictions under this Section 37.9(a)(14).
20 (15) The landlord seeks to recover possession in good faith in order to
21 demolish or to otherwise permanently remove the rental unit from housing use in accordance
22 with the terms of a development agreement entered into by the City under Chapter 56 of the
23 San Francisco Administrative Code.
24 (16) The tenant's Good Samaritan Status (Section 37.2(a)(1)(D)) has expired,
25 and the landlord exercises the right to recover possession by serving a notice of termination of
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1 Interested Party. A f}Permanent fResident ofthe building in which the ff ourist or
2 ff ransient ti-Use is alleged to occur. any homeowner association efassociated with the building
3 Residential Unit in which the Tourist or Transient Use is alleged to occur. the Owner of the
4 Residential Unit in which the Tourist or Transient Use is alleged to occur, the City and County of
5 San Francisco, or any non-profit organization exempt trom taxation pursuant to Title 26, Section 501
6 ofthe United States Code, which has the preservation or improvement of housing as a stated purpose in
7 its articles ofincorporation or bvlaws.
8 Owner. Owner includes any person who is the owner of record of the real property. As
9 used in this Chapter 41A, the term "Owner" includes a lessee where the lessee is offering a
10 fResidential ti-Unit for ff ourist or ff ransient use.
11 Permanent Resident. A person who occupies a fResidential ti-Unit for at least 60
12 consecutive days with intent to establish that unit as his or her primary residence. A f}Permanent
13 fResident may be an owner or a lessee.
14 Primarv Residence. The f}P ermanentfResident 's usual place of return for housing as
15 documented by at least two of the following: motor vehicle registration< driver's license,; voter
16 registration,~ tax documents showing the Residential Unit as the Permanent Resident's
17 residence for the purposes of a home owner's tax exemption,~ or other such evidence a utility bill.
18 A person may have only one Primary Residence.
19 (a) Residential Unit. Room or rooms, including a condominium or a room or
20 dwelling unit that forms part of a tenancy-in-common arrangement, in any building, or portion
21 thereof, which is designed, built, rented, leased, let or hired out to be occupiediQr_fResidential
22 ti-Ug or which is occupied as the home or residence of four or more households living independently
23 ofeach other in dwelling units as defined in the San Francisco Housing Code, provided that the
24 residential unit H'as occupied by a permanent resident on or after February 8, 1981. It is presumed that
25
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1 a residential unit was occupied by a permanent resident en er after February 8, 1981, and the mmer
2 has the burden efpree.fte shew that a residential unit is net subject te this Chapter.
3 (b) Residential Use. Any use for occupancy of a dwelling fResidential uUnit by a
4 pPermanent fResident.
5 Short-Term Residential Rental. A ff ourist or ff ransient uUse where all of the
6 following conditions are met:
7 .\--'(a-',L-)-~t~h~e fResidential uUnit is offered for ff ourist or ff ransient uUse by the
8 pPermanent fResident ofthe fResidential uUnit;
"'"-'{Q'-.L)-~th~e~pPermanent fResident is a natural person; 9
10 "'""'(c"'"")-~th~e~pPermanent fResident has registered the Residential Uunit and maintains
11 good standing on the Department's Short-Term Residential Rental Registry,· and
12 -1-"(d""')_~th~e~fResidential uUnit: is not subject to the Inclusionary Affordable Housing
13 Program set forth in Planning Code Section 415 et seq . .,~ is not a residential hotel unit as defined in
14 subject to the provisions of Chapter 41, unless such unit has been issued a Permit to Convert
15 under Section 41.12: is not otherwise a designated as a below market rate or income-
16 restricted Residential Unit under City, state, or federal law: and no other requirement of.federal or
17 state law, this Municipal Code, or any other application applicable law or regulation prohibits the
18 permanent resident from subleasing, renting, or otherwise allowing Short-Term Residential Rental of
19 the fResidential uUnit.
20 Short-Term Residential Rental Registry or Registry, A database ofinformation
21 maintained by the Department that includes information regardingpPermanentfResidents who are
22 permitted to offer fResidential uUnits for Short-Term Residential Rental. Only one Permanent
23 Resident per Residential Unit may be included on the Registry at any given time. The fRegistry
24 shall be available for public review to the extent required by law, except that, to the extent permitted by
25
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1 law, the Department shall redact anv pPermanent fResident names from the records available for
2 public review.
3 (c) Tourist or Transient Use. Any YY:.se of a fResidential ti-Unit for occupancy for
4 less than a 30-day term of tenancy, or occupancy for less than 30 days of a fResidential ti-Unit
5 leased or owned by a bBusiness eEntity, whether on a short-term or long.:term basis,
6 including any occupancy by employees or guests ofa bBusiness eEntity for less than 30 days
7 where payment for the fResidential ti-Unit is contracted for or paid by the bBusiness eEntity.
8 (d) Permanent Resident. A person ~who occupies a residential unit for at least 60
9 consecutive days with intent to establish that unit as his or her principal place of residence.
10 (e) Conversion or Convert. The change of the use or to rent a residential unitfrom
11 residential use to tourist or transient use.
12 (/) Owner. Owner includes any person who is the owner of record of the real property.
13 Owner includes a lessee where an interestedparty alleges that a lessee is offering a residential unitfor
14 tourist or transient use.
15 (g) Interested Party. A permanent resident of the building in which the tourist or transient
16 use is alleged to occur, tlw City and County ofSan Francisco, or any non profit organization exempt
17 from taxation pursuant to Title 26, Section 501 o.fthe United States Code, 1~·hich has the preservation
18 or improvement o.fhousing as a stated purpose in its articles of incorporation or bylaws.
(h) Director. The Director of the Department of Building Inspection.
SEC. 41A.5. UNLAWFUL CONVERSION; REMEDIES.
19
20
21
22 (a) Unlawful Actions. Except as set forth in subsection 41A.5(g), iJt shall be unlawful
23 for
24 (1) any Oowner to offer an apartment Bresidential Uunit for rent for Itourist or
25 Itransient Uuse,;_
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1 (2) any Oewner to offer a B_,,,esidential Uunit for rent to a Hhusiness &entity
2 that will allow the use of a B_,,,esidential Uunit for Itourist or Itransient Uuse,;_ or
3 (3) any Hhusiness &entity to allow the use of a B_f!esidential Uunit for Itourist
4 or Itransient Uuse.
5 (b) Records Required. The Oewner and Hhusiness &entity, if any, shall retain and
6 make available to the Department of" Building Inspection occupancy records to demonstrate
7 compliance with this Chapter 41A upon written request as provided herein. Any Permanent Resident
8 offering his or her Primary Residence as a Short-Term Residential Rental shall retain and make
9 available to the Department records to demonstrate compliance with this Chapter 41A, including but
10 not limited to records demonstrating Primary Residency_., a-REI-the number of days per calendar year he
11 or she has occupied the Residential Unit, and the number of days per calendar year. with dates
12 and the duration of each stay, the Residential Unit has been rented for Short-Term Residential
13 Rental Use.
14 (c) Determination of Violation. Upon the filing of a written Ccomplaint that an
15 Owner or Business Entity has engaged in an alleged unlawful cConversion has occurred or
16 that a Hosting Platform is not complying with the requirements of subsection (g)(a4)(A), the
17 Director shall take reasonable steps necessary to determine the validity of the Ccomplaint.
18 The Director may independently determine whether an Oewner or Hhusiness &entity may be
19 renting a B_,,,esidential Uunit for Itourist or Itransient Uuse as defined in violation of this Chapter
20 41A or whether a Hosting Platform has failed to comply with the requirements of subsection
21 !al(a4)(A). To determine if there is a violation of this Chapter 41A, the Director may initiate an
22 , investigation of the subject property or Hosting Platform's allegedly unlawful activities. This
23 investigation may include, but is not limited to, an inspection of the subject property and/or a
24 request for any pertinent information from the Oewner±_f>f-Business Entity, or Hosting Platform.
25 such as leases, business records, or other documents. The Director shall have discretion to
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1 determine whether there is a potential violation of this Chapter 41A and whether to conduct an
2 administrative review hearing as set forth below. Notwithstanding any other provision of this
3 Chapter 41A. any alleged violation related to failure to comply with the requirements of the
4 Business and Tax Regulations Code shall be enforced by the Treasurer/Tax Collector under
5 the provisions of that Code.
6 (d) Civil Action. Following the filing of a Ceomplaint and the determination of a
7 violation by the Director through an administrative review hearing as set forth in this Chapter
8 41A, the City and County of San Francisco may institute civil proceedings for injunctive and
9 monetary relief against a Hosting Platform for violation of subsection (g)(4)(A) or the City or
1 O any other +!nterested f)Party may institute civil proceedings for injunctive and monetary relief
11 against an Owner or Business Entity. In addition, tAe an Downer, or, er-~business &entity in
12 violation of this Chapter or a Hosting Platform in violation of subsection (g)(4)(A) may be liable
13 for civil penalties of not more than $1,000 per day for the period of the unlawful r-enffl-factivity. If
14 the City or the +!nterested f)Party is the prevailing party, the City or the +!nterested f)Party shall
15 be entitled to the costs of enforcing this Chapter 4JA, including reasonable attorneys' fees,--ttp
16 to the amount of the monetary award, pursuant to an order of the Court. Any monetary award
17 obtained by the City and County of San Francisco in such a civil action shall be deposited in
18 the Mayor's Office of Housing, Housing Affordability Fund less the reasonable costs incurred
19 by the City and County of San Francisco in pursuing the civil action Department to be used for
20 enforcement of Chapter 41A. The Department. through the use of these funds, shall
21 reimburse City departments and agencies, including the City Attorney's Office. for all costs
22 and fees incurred in the enforcement of this Chapter 41 A.
23 (e) Criminal Penalties. Any Downer or ~business &entity who rents a B.residential
24 Uunit for Itourist or I-transient Uuse as d(}jined in violation of this Chapter 41A without correcting
25 or remedying the violation as provided for in subsection 41A. 6(b)0) shall be guilty of a
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1 misdemeanor. Any person convicted of a misdemeanor hereunder shall be punishable by a
2 fine of not more than $1,000 or by imprisonment in the County Jail for a period of not more
3 than six months, or by both. Each B_pesidential Uunit rented for Itourist or Itransient Uuse
4 shall constitute a separate offense.
5 (f) Method of Enforcement, Director. The Director shall have the authority to
6 enforce this Chapter against violations thereof by any or all of the means provided for in this
7 Chapter 41A.
(g) Exception (or Short-Term Residential Rental. 8
9 (1) Notwithstanding the restrictions set forth in this Section 41A.5, a Permanent
1 O Resident may offer his or her Primary Residence as a ShortwTerm Residential Rental if-he or she.::.
11 (A) occupies tihe Residential Unit is occupied by the Permanent
12 Resident occupies the Residential Unit (or no less than 275 davs out of the precedingJ;}ef out of
13 1 any given the calendar year in which the Residential Unit is rented as a ShortwTerm Residential
14 Rental or. proportional share thereof if he or she if the Permanent Resident has not rented or
15 owned the Residential Unit for the full preceding calendar year. for no less than 75% of the
16 days he or she has owned or rented the Residential Unit;
17 (B) The Permanent Resident maintains records (or two years
18 demonstrating compliance with this Chapter, including but not limited to information demonstrating
19 Primary Residency, the number of days per calendar year he or she has occupied the Residential Unit,
20 the number of days per calendar year the Residential Unit has been rented as a ShortwTerm
21 Residential Rental, and compliance with the insurance requirement in Subsection (D). These records
22 shall be made available to the Department upon request,·
23 (C) The Permanent Resident complies with any and all applicable
24 provisions of state and federal law and the San Francisco Municipal Code, including but not limited to
25 the requirements o[the Business and Tax Regulations Code by, among any other applicable
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1 requirements, collecting and remitting all required transient occupancy taxes, and the occupancy
2 requirements ofthe Housing Code;
3 (D) The Permanent Resident maintains homeovmer's or renter's
4 property or casualtyliability insurance appropriate to cover the Short-Term Residential Rental
5 Use in the aggregate of not less than $150,000500.000 or conducts each Short-Term Residential
6 Rental transaction through a Hosting Platform that provides a guarantee program relating to
7 property damage in an amount not less than $150,000 to owners per incidentequal or greater
8 coverage. Such coverage shall defend and indemnify the Owner(s). as named additional
g insured. and any tenant(s) in the building for their bodily injury and property damage arising
1 O from the Short-Term Residential Use,:_
11 (E) registers, and maintains registry of, the The Residential Unit is
12 registered on the Short-Term Residential Rental Registry prior to offering the Residential Unit for
13 use as a Short Term Residential Rental,_ Offering a Residential Unit for Short Term
14 Residential Rental \Vhile not maintaining good standing on the registry shall constitute a
15 violation of this Chapter 41/\,:_arui
16 (F) includes tThe Permanent Resident includes the Department-issued
17 registration number is included on any fl-Hosting f}Platform listing or other listing offering the
18 Residential Unit for use as a Short-Term Residential Rental,·
19 (G) fFor units subject to the rent control provisions ofSection 37.3, the
20 Permanent Resident complies with the initial rent limitation (or subtenants and charges no more rent
21 than the rent the primary Permanent fResident is paying to any landlord per month.· and
22 (H) The Permanent Resident can demonstrate to the satisfaction of the
23 Department that the Residential Unit and the property on which it is located is not subject to any
24 outstanding Building, Electrical, Plumbing, Mechanical, Fire, Health. Housing, Police. or Planning
25 Code enforcement, including any notices of violation, notices to cure, orders of abatement, cease and
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1 desist orders. or correction notices. The Department shall not include a property that is subject to anv
2 such outstanding violations in the Registry. If such a violation occurs once a Residential Unit has
3 been included in the Registry. the Department shall suspend the Residential Unit's registration
4 and registration number until the violation has been cured.
5
6
(2) Additional Requirements.
(Al Offering a Residential Unit for Short-Term Residential Rental.
7 including but not limited to advertising the Residential Unit's availability. while not maintaining
8 good standing on the Registry shall constitute an unlawful conversion in violation of this
9 Chapter 41A and shall subject the person or entity offering the unit in such a manner to the
1 O administrative penalties and enforcement procedures. including civil penalties. of this Chapter.
11 (8) Only one Permanent Resident may be associated with a
12 Residential Unit on the Registry. and it shall be unlawful for any other person, even if that
13 person meets the qualifications of a "Permanent Resident", to offer a Residential Unit for
14 Short-Term Residential Rental.
15 (C) A Permanent Resident offering a Residential Unit for Short-Term
16 Residential Rental shall maintain a valid business registration certificate.
17 (0) A Permanent Resident offering a Residential Unit for Short-Term
18 Residential Rental shall post a clearly printed sign inside his or her Residential Unit on the
19 inside of the front door that provides information regarding the location of all fire extinguishers
20 in the unit and building, gas shut off valves, fire exits, and pull fire alarms.
21 ~~) Short-Term Residential Rental Registry Applications_,__aRfl Fee. and Reporting
22 Requirement.
23 (A) Application. Registration shall be for a two-year term, which may be
24 renewed by the Permanent Resident by filing a completed rene·wal application. Initial and renewal
25 applications shall be in a form prescribed by the Department. The Department shall determine, in its
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1 sole discretion, the completeness of an application. Upon receipt of a complete initial application.
2 the Department shall send mailed notice to the owner of record of the Residential Unit,
3 informing the owner that an application to the Registry for the unit has been received. If the
4 Residential Unit is in a RH-1 CD) zoning district. the Department shall also send mailed notice
5 to any directly associated homeowner association that has previously requested such notice.
6 Both the initial application and any renewal application shall contain information su(ficient to
7 show that the Residential Unit is the Primary Residence of the applicant± afl€I. that the applicant is the
8 unit's Permanent Resident, and that the applicant has the required insurance coverage and
9 business registration certificate. In addition to the information set {Orth here, the Department may
10 require any other additional in{Ormation necessary to show the Permanent Resident's compliance with
11 this Chapter 41A. Primary Residency may_ shall be established by showing the Residential Unit is
12 listed as the applicant's residence on at least two of the following: aA-Y motor vehicle registration,~
13 driver's license,~_ er-voter registration,~_erJax documents showing the Residential Unit as the
14 Permanent Resident's Primary Residence {Or home owner's tax exemption purposes,-aFtGJ~or 8-flY
15 other information as required by the Department utility bill. A renewal application shall contain
16 su(ficient in{Ormation to show that the applicant is the Permanent Resident and has occupied the unit
17 .fOr at least 275 days of each ofthe two preceding calendar years. Upon the Department's
18 determination that an application is complete, the unit shall be entered into the Short-Term Residential
19 1 Rental Registry and assigned an individual registration number.
20 (B) Fee. The fee {Or the initial application and {Or each renewal shall be
21 $50, payable to the Director. The application fee shall be due at the time of application. Beginning with
22 fiscal year 2014-2015, fees set forth in this Section may be adjusted each year, without fitrther action
23 by the Board o[Supervisors. as set {Orth in this Section. Not later than April 1Within six months of
24 the effectiveoperative date of this ordinance and after holding a duly noticed informational
25 hearing at the Planning Commission. the Director shall report to the Controller the revenues
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1 generated by the fees (or the prior fiscal year and the prior fiscal year's costs of establishing and
2 maintaining the registry and enforcing the requirements of this Chapter 41A. as well as any other
3 information that the Controller determines appropriate to the performance ofthe duties set forth in this
4 Chapter. After the hearing by the Planning Commission. but Nnot later than May 15August 1,
5 2015. the Controller shall determine whether the current fees have produced or are projected to
6 produce revenues sufficient to support the costs of establishing and maintaining the registry, enforcing
7 the requirements of this Chapter 41A and any other services set forth in this Chapter and that the
8 fees will not produce revenue that is significantly more than the costs ofproviding such services. The
9 Controller shall, if necessary, adjust the fees upward or downward (or the upcoming fiscal year as
10 appropriate to ensure that the program recovers the costs of operation without producing revenue that
11 is significantly more than such costs. The adjusted rates shall become operative on July 1.
12 (C) Reporting Requirement. To maintain good standing on the
13 Registry. the Permanent Resident shall submit a report to the Department on January 1 of
14 each year regarding the number of days the Residential Unit or any portion thereof has been
15 rented as a Short-Term Residential Rental since either initial registration or the last report,
16 whichever is more recent. and any additional information the Department may require to
17 demonstrate compliance with this Chapter 41A.
18 {45~) Requirements (or Hosting Platforms.
19 (A) Notice to Users ofHostingPlat(orm. All Hosting Platforms shall provide
20 the (allowing information in a notice to any user listing a Residential Unit located within the City and
21 County of San Francisco through the Hosting Platform's service. The notice shall be provided prior to
22 the user listing the Residential Unit and shall include the (allowing information: that Administrative
23 Code Chapters 37 and 41A regulate Short-Term Rental ofResidential Units; the requirements (or
24 Permanent Residency and registration ofthe unit with the Department.· and the transient occupancy tax
25 obligations to the City.
Supervisor Chiu
BOARD OF SUPERVISORS Page 21
10/17/2014
1 {B) A Hosting Platform shall comply with the requirements ofthe Business
2 and Tax Regulations Code by, among any other applicable requirements, collecting and remitting all
3 required Transient Occupancy Taxes, and this provision shall not relieve a Hosting Platform of!iability
4 related to an occupant's, resident's, Business Entity's, or Owner's failure to comply with the
5 requirements of the Business and Tax Regulations Code. A Hosting Platform shall maintain a record
6 demonstrating that the taxes have been remitted to the Tax Collector and shall make this
7 record available to the Department Tax Collector upon request. Additionally, a Hosting
8 Platform's failure to provide the required notice to users under subsection 41A5(g)(4)(A) shall
9 be a violation of this Chapter.
10 (C) Any &Heh-violation of a Hosting Platform's responsibilities under #Hs
11 subsection (g)(5)(A) shall subject the Hosting Platform to the administrative penalties and
12 enforcement provisions of this Chapter, including but not limited to payment of civil penalties-a
13 fine payable to the Department of up to $1±000 per day for the period ofthe failure to
14 complyprovide notice or the failure to provide the required information to the Department. with
15 the exception that any violation related to failure to comply with the requirements of the
16 Business and Tax Regulations Code shall be enforced by the Treasurer/Tax Collector under
17 that Code.
18 ffie,Q,) The exception set forth in this subsection (g) provides an exception only to the
19 requirements ofthis Chapter 4 IA. It does not confer a right to lease, sublease, or otherwise offer a
20 residential unit for Short-Term Residential Use where such use is not otherwise allowed by law, a
21 homeowners association agreement or requirements, any applicable covenant, condition, and
22 restriction, a rental agreement, or any other restriction, requirement, or enforceable agreement. All
23 Owners and residents are required to comply with the requirements of Administrative Code Chapter
24 3 7, the Residential Rent Stabilization and Arbitration Ordinance, including but not limited to the
25 requirements ofSection 37.J(c).
Supervisor Chiu
BOARD OF SUPERVISORS Page 22
10/17/2014
1 .(@+~) Department Contact Person. The Department shall designate a contact person
2 for members o[the public who wish to file Complaints under this Chapter or who otherwise seek
3 information regarding this Chapter or Short-Term Residential Rentals. This contact person shall also
4 provide information to the public upon request regarding quality oflife issues, including for example
5 noise violations. vandalism. or illegal dumping. and shall direct the member of the public and/or
6 .forward any such Complaints to the appropriate City department.
7 !JSZ> Notwithstanding any other provision ofthis Chapter, nothing in this Chapter
8 shall relieve an individual. Business Entity, or Hosting Platform o[the obligations imposed by any and
9 all applicable provisions of state law and the San Francisco Municipal Code including but not limited
1 O to those obligations imposed by the Business and Tax Regulations Code. Further, nothing in this
11 Chapter shall be construed to limit any remedies available under any and all applicable provisions of
12 state law and the San Francisco Municipal Code including but not limited to the Business and Tax
13 Regulations Code.
14 !98) Annual Department Reporting Requirement. Within one year of the
15 effective date of this ordinance and annually thereafter. the Department shall provide a report
16 to the Board of Supervisors regarding the Department's administration and enforcement of the
17 Short-Term Residential Rental proaram. The study shall make recommendations regarding
18 proposed amendments to this Chapter 41 A necessary to reduce any adverse effects of the
19 Short-Term Residential Rental program.
20 SEC. 41A.6. PROCEDURES FOR DETERMINING ADMINISTRATIVE PENALTIES.
21 (a) Notice of Complaint. Within 4-§30 days of the filing of a Ceomplaint and upon
22 the Director's independent finding that there may be a violation of this Chapter, the Director
23 shall notify the Oewner by certified mail that the Oewner's B.Fesidential Uunit is the subject of
24 an investigation for an unlawful use and provide the date, time, and place of an administrative
25 review hearing in which the eOwner can respond to the Ceomplaint. If the Director finds there
Supervisor Chiu
BOARD OF SUPERVISORS Page 23
10/17/2014
1 is no violation of this Chapter or basis for an investigation for an unlawful activity, the Director
2 shall so inform the complainant within 30 days of the filing of the Complaint. If the Complaint
3 concerns the failure of a Hosting Platform to comply with the requirements of subsection
4 ilJl(M)(A), within 4-§30 days of the filing of the Complaint and upon the Director's independent
5 finding that there may be a violation of this Chapter, the Director shall notify the Hosting
6 Platform by certified mail that the Hosting Platform is the subject of an investigation for failure
7 to comply with the requirements of this Chapterthat subsection and provide the date. time,
8 and place of an administrative review hearing in which the Hosting Platform can respond to
9 the Complaint.
10 (b) Administrative Review Hearings. In the event the Director determines that an
11 administrative review hearing shall be conducted, the Director's appointed hearing officer will
12 hold an administrative review hearing within W45 days of the filing of the Ccomplaint
13 Director's finding that there may be a violation of this Chapter 41A to review all information
14 provided by the Interested Party, members of the public, City staff± and the Owner or Hosting
15 Platform for the investigation and the hearing officer shall thereafter make a determination
16 whether the Oewner or Hosting Platform has violated this Chapter.
17 (1) For hearings regarding alleged unlawful conversions, Nnotice of the
18 hearing shall be conspicuously posted on the building that is the subject of the hearing. +Re
19 Oovmer shall state under oath at the hearing that the notice remained posted for at least
20 seven calendar days prior the hearing. The Director shall appoint a hearing officer to conduct
21 the hearing.
22 (2) Pre-hearing Submission. No less than ten 'Norking days prior to the
23 administrative review hearing, parties to the hearing shall submit written information to the
24 Director including, but not limited to, the issues to be determined by the hearing officer and
25
Supervisor Chiu
BOARD OF SUPERVISORS Page 24
10/17/2014
1 the evidence to be offered at the hearing. Such information shall be forwarded to the hearing
2 officer prior to the hearing along with any information compiled by the Director.
3 (3) Hearing Procedure. If more than one hearing is requested for B.Fesidential
4 Uunits located in the same building at or about the same time, the Director shall consolidate
5 all of the hearings into one hearing. The hearing shall be~ recorded. Any party to the
6 hearing may at his or her own expense cause the hearing to be recorded by a certified court
7 reporter. Parties may be represented by counsel and shall have the right to cross-examine
8 witnesses. All testimony shall be given under oath. Written decisions and findings shall be
9 rendered by the hearing officer within ~30 working days of the hearing. Copies of the findings
1 O and decision shall be served upon the parties by certified mail. A notice that a copy of the
11 findings and decision is available for inspection between the hours of 9:00 a.m. and 5:00 p.m.
12 Monday through Friday shall be posted by the Oewner or the Director in the building in the
13 same location in which the notice of the administrative review hearing was posted.
14 (4) Failure to Appear. In the event the Oewner. authorized Hosting Platform
15 representative, or an interested party fails to appear at the hearing, the hearing officer may
16 nevertheless make a determination based on the evidence in the record and files at the time
17 of the hearing, and issue a written decision and findings.
18 (5) Finality of the Hearing Officer's Decision and Judicial Review. The
19 decision of the hearing officer shall be final. Within 20 days after service of the hearing
20 officer's decision, any party may seek judicial review of the hearing officer's decision.
21 (6) Hearing Officer Decision and Collection of Penalties. If any imposed
22 administrative penalties and costs have not been deposited at the time of the Hearing
23 Officer's decisionUpon the Hearing Officer's decision, the Director may proceed to collect the
24 penalties and costs pursuant to the lien procedures set forth in Subsection 41A.6(eg),
25 consistent with the Hearing Officer's decision.
Supervisor Chiu
BOARD OF SUPERVISORS Page 25
10/17/2014
1 (7) Remedy of Violation. If the Hearing Officer determines that a violation has
2 occurred, the Hearing Officer's Decision shouldshall:
3 (,ii) Specify a reasonable period of time during which the Oewner"'
4 Business Entity. or Hosting Platform must correct or otherwise remedy the violation; end
5 (.!lii) State that if the violation is not corrected or other.vise remedied
6 within this period, Detail the amount of any administrative penalties the Oewner or Hosting
7 Platform shall be may be required to pay the administrative penaltiesas set forth in Subsection
8 41A.6(c),· and,
9 (C) For violations by Owners. Sstate that ifthe violation is not corrected
1 O or otherwise remedied within this period, the Department shall remove or prohibit the registration
11 of the Residential Unit from the Short-Term Residential Registry for one year even if the
12 Residential Unit otherwise meets the requirements for Short-Term Residential Rental and may
13 prohibit the offending Ovmer from including such Residential Unit on any Hosting Platform for
14 a period of one year.
15 (8) If the Hearing Officer determines that no violation has occurred, the
16 determination is final.
17 (c) Imposition of Administrative Penalties for Unabated Violations and
18 Enforcement Costs.
19 (1) Administrative Penalties. If the violation has continued unabated beyond
20 the time specified in the notice required by the Hearing Officer determines that a violation has
21 occurred, an administrative penalty ej'shall be assessed as follows:
22 (A) for the initial violation, not more than four times the standard hourly
23 administrative rate of $104. 00121. 00 shall be charged for each unlawfully converted unit. or for
24 each identified failure of a Hosting Platform to comply with the requirements of subsection
25
· Supervisor Chiu
1 I BOARD OF SUPERVISORS Page 26
10/17/2014
1 !gl(.§4). per day from the day the unlmvful use activity commenced notice of Complaint until
2 such time as the unlawful Hse activity terminates,:.
3 (B) (Or the second violation within six months of any hearing held
4 pursuant to this Chapter by the same Owner(s). Business Entity. or Hosting Platform. not more
5 than eight times the standard hourly administrative rate 0($121.00 (Or each unlawfitlly converted unit.,_
6 or for each identified failure of a Hosting Platform to comply with the requirements of
7 subsection (g)(.§4). per day from the dav the unlawful Hseactivity commenced until such time as the
8 unlawful Hse activity terminates,· and
9 (C) (Or the third and any subsequent violation 'Nithin 12 months of any
1 O hearing held pursuant to this Chapter by the same Owner(s). Business Entity. or Hosting
11 Platform. not more than twelve times the standard hourly administrative rate of$121.00 (Or each
12 unlawfully converted unit or for each identified failure of a Hosting Platform to comply with the
13 requirements of subsection (g)(.§4) per day from the day the unlawful Hse activity commenced
14 until such time as the unlawful Hse activity terminates.
15 (2) Enforcement Costs. The Oowner or Hosting Platform shall reimburse the
16 City for the costs of enforcement of this Chapter, which shall include, but not be limited to,
17 reasonable attorneys' fees.
18 __ _,_,(3_.)1---Prohibition on Registration and Listing Unit(s) on Any Hosting Plat(Orm. #-the
19 violation has continued unabated beyond the time specified in the notice required by the
20 Hearing Officerln the event of multiple violations. the Department shall remove the Residential
21 Unit(s) from the Registry for one year and include the Residential Unit(s) on a list maintained by
22 the Department of Residential Units that may not be listed by any Permanent Resident on any
23 Hosting PlatfOrm until compliance. Any Owner or Business Entity who continues to list a Residential
24 Unit in violation ofthis section shall be liable (Or additional administrative penalties and civil
25 penalties ofup to $1,000 per day ofunlawfitl inclusion.
Supervisor Chiu
BOARD OF SUPERVISORS Page 27
10/17/2014
1 (d) Notice of Continuing Violation and Imposition of Penalties. The Director shall
2 notify the Oowner or Hosting Platform by certified mail tRat of the violation has continued
3 unabated and that administrative penalties shall be imposed pursuant to this Chapter 41A.
4 The notice shall state the time of the continued existence of the violation and the resulting
5 imposition of penalties. Payment of the administrative penalties and enforcement costs shall
6 be made within 30 days of the certified mailed notice to the Oowner or Hosting Platform. If the
7 administrative penalties and enforcement costs are not paid, the Director shall refer the matter
8 to the Treasurer!Tax Collector and/or initiate lien procedures to secure the amount of the
g penalties and costs against the real property that is subject to this Chapter, under Article XX
1 O of Chapter 10 of the San Francisco Administrative Code to make the penalty, plus accrued
11 interest, a lien against the real property regulated under this Chapter. Except for the release of
12 the lien recording fee authorized by Administrative Code Section 10.237, all sums collected by
13 the Tax Collector pursuant to this ordinance shall be held in trust by the Treasurer and
14 distributed as provided in Section 41A.5(d) of this Chapter deposited as set forth in subsection
15 (e) below.
16 (e) Deposit of Penalties. Administrative penalties paid pursuant to this Chapter
17 shall be deposited in the Mayor's Office of Housing, Housing Affordability Fund less the
18 reasonable costs incurred by the City and County of San Francisco in pursuing enforcement
19 under this Chapter 41A. If enforcement costs 'Nere imposed, such funds shall be distributed
20 according to the purpose for which they \Nere collected. Any fees and penalties collected
21 pursuant to this Chapter 41A shall be deposited in the Department, which shall reimburse City
22 departments and agencies. including the City Attorney's Office. for all costs and fees incurred
23 in the enforcement of this Chapter 41 A.
24
25
Supervisor Chiu
BOARD OF SUPERVISORS Page 28
10/17/2014
1 Section 3. The Planning Code is hereby amended by revising Sections 102.7, 102.13,
2 790.88 and 890.88, to read as follows:
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
SEC. 102.7. DWELLING UNIT.
A room or suite of two or more rooms that is designed for, or is occupied by, one family
doing its own cooking therein and having only one kitchen. A housekeeping room as defined
in the Housing Code shall be a dwelling unit for purposes of this Code. For the purposes of
this Code, a live/work unit, as defined in Section 102.13 of this Code, shall not be considered
a dwelling unit. Notwithstanding the foregoing. use ofa dwelling unit as a Short-Term Residential
Rental in compliance with Administrative Code Section 4 JA. 5 shall not alter the use type as a
residential use.
* * * *
SEC. 102.13. LIVE/WORK UNIT.
A live/work unit is a structure or portion of a structure combining a residential living
space for a group of persons including not more than four adults in the same unit with an
integrated work space principally used by one or more of the residents of that unit; provided,
however, that no otherwise qualifying portion of a structure which contains a Group A
occupancy under the San Francisco Building Code shall be considered a live/work unit.
Notwithstanding the foregoing, use of a live/work unit as a Short-Term Residential Rental in
compliance with Administrative Code Section 4 JA. 5 shall not alter the use type as a live/work unit.
* * * *
SEC. 790.88. RESIDENTIAL USE.
Supervisor Chiu
BOARD OF SUPERVISORS Page 29
10/17/2014
1 A use which provides housing for San Francisco residents, rather than visitors,
2 including a dwelling unit or group housing, as defined in Subsections (a) and (b) below, or a
3 residential hotel, as defined in Section 790.4 7 of this Code and in Chapter 41 of the San
4 Francisco Administrative Code. Notwithstanding the foregoing, use ofa dwelling unit as a Short-
5 Term Residential Rental in compliance with Administrative Code Section 41A.5 shall not alter the use
6 type as a residential use.
7 (a) Dwelling Unit. A residential use which consists of a suite of two or more rooms
8 and includes sleeping, bathing, cooking, and eating facilities, but has only one kitchen.
9
10
11
12
13
14
15
16
(b) Group Housing. A residential use which provides lodging or both meals and
lodging without individual cooking facilities for a week or more at a time in a space not defined
as a dwelling unit. Group housing includes, but is not limited to, a rooming house, boarding
house, guest house, lodging house, residence club, commune, fraternity and sorority house,
monastery, nunnery, convent, and ashram. It also includes group housing operated by a
medical or educational institution when not located on the same lot as such institution.
****
17 SEC. 890.88. RESIDENTIAL USE.
18 A use which provides housing for San Francisco residents, rather than visitors,
19 including a dwelling unit or group housing, as defined in Subsections (a) and (b) below, or a
20 residential hotel, as defined in Section 890.4 7 of this Code and in Chapter 41 of the San
21 Francisco Administrative Code. Notwithstanding the foregoing, use ofa dwelling unit as a Short-
22 Term Residential Rental in compliance with Administrative Code Section 41A.5 shall not alter the use
23 type as a residential use.
24 (a) Dwelling Unit. A residential use which consists of a suite of two or more rooms
25 and includes sleeping, bathing, cooking, and eating facilities, and has only one kitchen.
Supervisor Chiu
BOARD OF SUPERVISORS Page 30
10/17/2014
1 (b) Group Housing. A residential use which provides lodging or both meals and
2 lodging without individual cooking facilities for a week or more at a time in a space not defined
3 as a dwelling unit. Group housing includes, but is not limited to, a roominghouse, boarding
4 house, guest house, lodging house, residence club, commune, fraternity and sorority house,
5 monastery, nunnery, convent, and ashram. It also includes group housing operated by a
6 medical or educational institution when not located on the same lot as such institution.
7 (c) Single Room Occupancy (SRO) Unit. A dwelling unit or group housing room
8 consisting of no more than one occupied room with a maximum gross floor area of 350 square
g feet and meeting the Housing Code's minimum floor area standards. The unit may have a
1 O bathroom in addition to the occupied room. As a dwelling unit, it would have a cooking facility
11 and bathroom. As a group housing room, it would share a kitchen with one or more other
12 single room occupancy unit/s in the same building and may also share a bathroom. A single
13 room occupancy building (or "SRO" building) is one that contains only SRO units and non
14 nonaccessory living space.
15
16
17
Section 4. Other Uncodified Provisions.
(a) Effective Date. This ordinance shall become effective 30 days after enactment.
18 Enactment occurs when the Mayor signs the ordinance, the Mayor returns the ordinance
19 unsigned or does not sign the ordinance within ten days of receiving it, or the Board of
20 Supervisors overrides the Mayor's veto of the ordinance.
21
22
(b)
(c)
Operative Date. This ordinance shall become operative on February 1. 2015.
Undertaking for the General Welfare. In enacting and implementing this
23 ordinance, the City is assuming an undertaking only to promote the general welfare. It is not
24 assuming, nor is it imposing on its officers and employees, an obligation for breach of which it
25
Supervisor Chiu
BOARD OF SUPERVISORS Page 31
10/17/2014
1 would be liable in money damages to any person who claims that such breach proximately
2 caused injury.
3 (eg) No Conflict with State or Federal Law. Nothing in this ordinance shall be
4 interpreted or applied so as to create any requirement, power, or duty in conflict with any
5 State or federal law.
6 (G,~) Severability. If any of section, subsection, sentence, clause, phrase or word of
7 this ordinance is for any reason held to be invalid or unconstitutional by a decision of any
8 court of competent jurisdiction, such decision shall not affect the validity of the remaining
9 portions of the ordinance. The Board of Supervisors hereby declares that it would have
1 O passed this ordinance and each and every section, subsection, sentence, clause, phrase, and
11 word not declared invalid or unconstitutional without regard to whether any other portion of
12 this ordinance would be subsequently declared invalid or unconstitutional.
13 (e!) Scope of Ordinance. In enacting this ordinance, the Board of Supervisors
14 intends to amend only those words, phrases, paragraphs, subsections, sections, articles,
15 numbers, punctuation marks, charts, diagrams, or any other constituent parts of the Municipal
16 Code that are explicitly shown in this ordinance as additions, deletions, Board amendment
17 additions, and Board amendment deletions in accordance with the "Note" that appears under
18 the official title of the ordinance.
19
20
21
22
23
24
25
APPROVED AS TO FORM:
DENNIS J. HERRERA, City Attorney
By: o~EN0? ~ W'
Deputy City Attorney
n:\legana\as2014\ 1200498\00963400.doc
Supervisor Chiu
BOARD OF SUPERVISORS Page 32
10/10/2014
October 07, 2014 Board of Supervisors -AMENDED
Ayes: 11 -Avalos, Breed, Campos, Chiu, Cohen, Farrell, Kim, Mar, Tang, Wiener
and Yee
October 07, 2014 Board of Supervisors -NOT AMENDED
Ayes: 5 -Avalos, Campos, Kim, Mar and Yee
Noes: 6 -Breed, Chiu, Cohen, Farrell, Tang and Wiener
October 07, 2014 Board of Supervisors -PASSED ON FIRST READING AS AMENDED
Ayes: 7 -Breed, Chiu, Cohen, Farrell, Kim, Tang and Wiener
Noes: 4 -Avalos, Campos, Mar and Yee
October 07, 2014 Board of Supervisors -DUPLICATED AS AMENDED
October 21, 2014 Board of Supervisors -NOT AMENDED
Ayes: 5 -Avalos, Campos, Kim, Mar and Yee
Noes: 6 -Breed, Chiu, Cohen, Farrell, Tang and Wiener
October 21, 2014 Board of Supervisors -NOT AMENDED
Ayes: 5 -Avalos, Campos, Kim, Mar and Yee
Noes: 6 -Breed, Chiu, Cohen, Farrell, Tang and Wiener
October 21, 2014 Board of Supervisors -NOT AMENDED
Ayes: 5 -Avalos, Campos, Kim, Mar and Yee
Noes: 6 -Breed, Chiu, Cohen, Farrell, Tang and Wiener
October 21, 2014 Board of Supervisors -FINALLY PASSED
City and County of San Francisco
Ayes: 7 -Breed, Chiu, Cohen, Farrell, Kim, Tang and Wiener
Noes: 4 -Avalos, Campos, Mar and Yee
Page3 Printed at 2:50 pm on 10/2211,4
City of Palo Alto (ID # 5495)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: 2040 Cowper Street
Title: Ratification of Code Enforcement Settlement Agreement – 2040
Cowper Street
From: City Manager
Lead Department: Development Services Department
Recommendation
Staff recommends that Council ratify the attached Code Enforcement administrative settlement
agreement, requiring the property owner to maintain the premises free of debris and waste,
and take a number steps to complete construction in a timely manner.
Under the settlement agreement, upon timely completion of construction to the satisfaction of
the Chief Building Official, the City would release the property owner from administrative
liability for maintaining an expired building permit.
In early 2014, the Council adopted Chapter 16.62 of the Palo Alto Municipal Code, imposing
penalties for failure to maintain an active building permit (CMR Nos. 4314 and 4405). Under
that chapter, any reduction or waiver of penalties greater than $10,000 must be approved by
the City Council. This is why this item is on the Council Agenda for approval.
Background
In November 2013, Noam and Yael Shazeer applied for and received a building permit to
remodel a single family residence at 2040 Cowper Street. That permit (No. 13000-03036)
expired in May 2014 and was not reactivated. In November 2014, Code Enforcement staff
investigated the property based on neighbor complaints about the un-maintained state of the
property, including debris on the sidewalk, fallen fruit in the backyard, and the continued
presence of a construction fence and porta-potty. Once contacted by staff, the property owners
acted quickly to clean up the property and explained that the project had stalled upon the
contractor’s discovery that the house was constructed almost entirely of poured concrete,
significantly complicating the planned remodel.
City of Palo Alto Page 2
Discussion
At the time they were contacted by staff in November 2014, the Shazeers were unaware that
their building permit had expired and that they could be subject to significant penalties for
failure to timely renew the permit. Once informed that their permit had expired, the Shazeers
quickly responded to staff’s requests that they address neighbor concerns, reactivate the
permit, and complete the project in a timely fashion. Because the nature of the construction
required a much larger remodeling effort, the Shazeers agreed to update the project plans and
revise the scope of work for the permit, all within reasonable timelines established by staff. In
sum, staff directed the Shazeers to:
a. Maintain the public right of way in front of 2040 Cowper Street free and clear of any
leaves, dirt, and debris.
b. Ensure that all fences on the property comply with City of Palo Alto fence regulations.
c. Provide updated plans and energy calculations to the Development Center for
processing no later than January 30, 2015.
d. Revise the scope of work on the permit, establish an appropriate project valuation for
the project, and pay all applicable fees no later than January 30, 2015.
e. Diligently progress construction activities at 2040 Cowper Street to obtain rough-in
inspections no later than March 31, 2015 and a final inspection activities no later than
November 1, 2015.
Thus far, the Shazeers have complied with each of these requirements well ahead of the stated
deadlines, completing tasks due by January 30, 2015 in mid-December 2014.
By the time staff contacted the Shazeers to inform them that their building permit had expired,
the accrued penalties that could be imposed under Chapter 16.62 totaled over $86,000. Based
on the Shazeers’ willingness to comply with staff requests, their lack of notice regarding the
penalties that were accruing, and in order to promote expedited completion of the project,
staff crafted a settlement agreement that would release the Shazeers from liability for these
penalties provided that they comply with the requirements and timelines stated above.
Although most code enforcement matters are handled entirely at the staff level, because PAMC
Chapter 16.62 requires Council approval for penalty waivers, staff is seeking Council ratification
of the conditional release contained in the attached settlement agreement.
Permit No. 1300-03036, for 2040 Cowper Street, represents the first occasion that staff has had
to apply the penalties provided in Chapter 16.62 since its terms became effective in early 2014.
When Chapter 16.62 was enacted, Council directed staff to proceed with complaint-based
enforcement of its terms. The City does not currently inform individuals when their building
City of Palo Alto Page 3
permits have expired and, by the time Code Enforcement staff investigates a complaint and
contacts the property owner, substantial fines will likely already have accrued. Staff is in the
process of evaluating potential changes to both building permit systems (e.g. automated notice
of permit expiration and potential fines), and the municipal code that will address this issue.
Until these changes can be implemented, staff will adjust its practices to seek Council approval
of penalty reductions or waivers, when appropriate as an integral part of code enforcement
action.
Resource Impact
The attached settlement agreement will not impact the Fiscal Year 2015 budget.
Policy Implications
Ratification of the attached settlement agreement is consistent the City’s Code Enforcement
objectives and with the Council’s direction that penalty reductions or waivers be approved by
Council.
Environmental Review
This project is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA
Guidelines Section 15061(b)(3), which exempts actions that do not have the potential to cause
a significant effect on the environment. It can be seen with certainty that the proposed activity
of adopting a settlement agreement to reduce penalty fees associated with a code enforcement
action will not significantly effect the environment and, therefore, no further environmental
review is required.
Attachments:
2040 Cowper Code Enforcement Settlement Agreement (PDF)
DocuSign Envelope ID: 5BE8C6CB-F7B1-49D9-BD14-9D523B14439D
STIPULATED ADMINISTRATIVE ENFORCEMENT SETTLEMENT
AND AGREEMENT BETWEEN THE CITY OF PALO ALTO
AND SHAZEER FAMILY TRUST
This Agreement is entered into between the CITY OF PALO AL TO ("CITY"), a
Chartered City and municipal corporation, whose address is P.O. Box 10250, Palo Alto,
California 94301, and YAEL SHAZEER and NOAM SHAZEER, as trustees of the SHAZEER
FAMILY TRUST ("OWNER") who is the owner of property located at 2040 Cowper Street,
Palo Alto, California 94301. CITY and OWNER may be collectiv~ly referred to as "PARTIES".
RECITALS:
A. On or about November 13, 2013, OWNER applied for and received a building
permit (Permit No. 13000-03036) for a limited remodel of her residence at 2040 Cowper Street,
Palo Alto, California, 94301.
B. On or about May 13, 2014, OWNER allowed Permit No. 13000-03036 to expire
by suspension or abandonment of work and failed to renew the permit within 30 days, in
violation of Palo Alto Municipal Code ("PAMC") Section 16.62.20.
C. On or about November 25, 2014, OWNER's representative applied to renew the
permit, pursuant to PAMC Section 16.04.090. PAMC Section 16.04.090 provides that the chief
building official may require, as a condition of permit renewal, payment of a penalty pursuant to
PAMC Chapter 16.62.
D. As of November 19, 2014, the penalty that could be assessed for OWNER's
violation of PAMC Chapter 16.62 was approximately eighty six thousand dollars ($86,000).
E. CITY and OWNER wishes to settle and resolve the CITY's claims based on or
related to the alleged violations referred to above to avoid the risks and expense of further code
enforcement action and/or litigation.
AGREEMENT
Now, therefore, in consideration of the Recitals and mutual promises made herein
and the mutual benefits to be derived from this Agreement, the PARTIES mutually agree as
follows:
1. Permit Renewal. The Chief Building Official shall renew OWNER's building
permit for the residence located at 2040 Cowper Street, subject to the original conditions and
requirements applicable to Permit No. 13000-03036.
2. Abeyance of Citation Subject to Additional Conditions. CITY shall abstain from
issuing a citation to OWNER for violation of P AMC Chapter 16.62 in connection with Permit
No. 13000-03036, provided that OWNER complies with the following terms:
1
DocuSign Envelope ID: 5BE8C6CB-F7B1-49D9-BD14-9D523B14439D
a. OWNER shall maintain the public right of way in front of 2040
Cowper Street free and clear of any leaves, dirt, and debris.
b. OWNER shall ensure that all fences on the property comply with City
of Palo Alto fence regulations.
c. OWNER shall provide updated plans and energy calculations to the
Development Center for processing no later than January 30, 2015.
d. OWNER shall revise scope of work on the permit, establish an
appropriate project valuation for the project and pay all applicable fees
no later than January 30, 2015.
e. OWNER shall diligently progress construction activities at 2040
Cowper Street to begin rough-in inspections no later than March 31,
2015 and begin final inspection activities no later than November 1,
2015.
f. OWNER shall maintain an active building permit at all times.
Amendments to the conditions set forth in this paragraph shall be in writing and signed by
OWNER and CITY's Chief Building Official.
3. Release of Claims Related to Alleged Code Violations. Subject to OWNER's
successful completion of the requirements of Paragraph 2 above, CITY shall not take
enforcement action against OWNER for the violations of the Palo Alto City Code described in
the Recitals above. "Enforcement action" includes, but is not limited to, criminal prosecution,
administrative citation, administrative compliance order, and civil litigation for money damages
to injunctive relief.
4. Breach of Agreement. In the event either party breaches the terms of this
Agreement, the other party shall be entitled to judicially enforce this Agreement, and the
prevailing party shall be entitled to reasonable legal fees.
5. Denial of Liability. It is understood by each of the PAR TIES that, by entering
into this Agreement, the PARTIES expressly deny any and all liability and wrongdoing to the
other party. This Agreement cannot be construed as an admission of liability by any party hereto
except as to the obligations created by the terms of this Agreement.
6. Binding Effect. The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the heirs, executors, administrators, successors and assigns of 0 WNER.
7. Entire Agreement. CITY and OWNER each understand that the PARTIES have
not agreed to, or promised to do, or admitted to, any act or thing not expressly set forth in this
Agreement. This Agreement sets forth the entire agreement between the PAR TIES and
supersedes any and all prior agreements and understandings, written or oral, between the
PARTIES pertaining to the subject matter contained herein. Each party shall bear its own costs
and attorney's fees.
2
City of Palo Alto (ID # 5516)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Contract Award to Hunt Design for Parking Wayfinding
Title: Approval of Contract to Hunt Design for $104,600 for Design of
Downtown Parking Wayfinding and Signage and Development of a Parking
Brand, and Approve a Budget Amendment Ordinance in the Amount of
$104,600 Transferring Funds from the University Avenue Parking Permit Fund
to CIP PL-15004, Parking Wayfinding Project
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that Council:
1. Authorize the City Manager or designee to award a contract in the amount of
$104,600 to Hunt Design for design of parking wayfinding and signage serving the
Downtown commercial core, and for development of a parking brand which would
be used on all city notices, websites and information related to public parking.
2. Approve the attached Budget Amendment Ordinance (BAO) to transfer $104,600
from the University Avenue Parking Permit Fund to Capital Improvement Project
(CIP) PL-15004, Parking Wayfinding Project.
Executive Summary
To address parking and traffic challenges with the Downtown area, the City has been working
on a multi-pronged parking strategy since early 2014. The strategy includes projects which
increase the amount and availability of parking (parking supply measures), improving how
existing parking is managed and controlled (parking management strategies) and strategies
which reduce traffic demand (transportation demand management strategies). Parking
wayfinding, a parking management strategy which helps direct customers and visitors to
parking locations using clear directional cues and easy-to-follow parking signage, emerged as a
top concern in 2014 as Staff investigated ways to encourage parking in Downtown garages and
lots. Staff released an RFP for design of improved parking wayfinding in late 2014 and received
5 proposals as a result of the solicitation; a summary of the proposals and costs received is
provided in Figure 1.
City of Palo Alto Page 2
Figure 1: Wayfinding Proposals Received
Name of Firm Proposal Cost
Merje Design ($86,900.00)
Hunt Design ($104,600.00)
GNU ($95,450.00)
Shannon Leigh ($271,040.00)
Sussman Prejza and Company ($53,140.00)
Staff interviewed all 5 firms and found that Hunt Design emerged as the most qualified
consultant based on an evaluation of relevant experience, proposed staffing approach, cost and
design aesthetic.
In addition to parking wayfinding, additional parking management strategies underway in 2015
include the implementation of PARCs (Parking Access and Revenue Control equipment) and PGS
(Parking Guidance Systems) in Downtown garages and lots. The City has posted a Request for
Proposals (RFP) for design of these systems, which would provide the infrastructure to charge
for parking, monitor garage and lot parking occupancy and provide information to a central
database on how many spaces are available at any particular time. It is envisioned that Hunt
Design will coordinate with the consultant who is selected for the PARCs and PGS design to
ensure that signage and technology are appropriately integrated. Staff will also expect to
conduct a study on paid parking for the on-street parking spaces in the Downtown commercial
core during 2015 as part of a continued parking policy discussion.
Background
As part of an exercise to look globally at parking challenges within the Downtown core and
potential solutions, the City engaged with SP Plus, the parking management firm responsible for
the Lot R valet-assist program, to provide some consulting services on potential parking
solutions which could help regulate Downtown parking more effectively. SP Plus met with city
staff and members of the parking committee in April and May of 2014 to discuss parking
challenges in the Downtown core and potential solutions, and developed a final report with
several recommendations. The report was shared with Council on August 18, 2014 (see
Attachment A for staff report 4972).
Improved parking wayfinding emerged as a top concern as part of the analysis, as existing
parking signage is not consistent between parking facilities and parking wayfinding signs are
often not at eye level and difficult for drivers to locate. In addition, it was noted that the
existing signs lacked consistency and there was no “parking brand” for the City that could help
visitors easily identify public parking facilities or parking information. Given that maximizing the
utilization of existing parking facilities is a top priority, Council directed staff to move forward
City of Palo Alto Page 3
with a solicitation for Parking Wayfinding.
In response to the SP Plus report and also following Council direction, staff initiated several
other RFPs in addition to wayfinding, including services for the development of a new public
parking website, online permit sales for the approved Downtown RPP program and the
solicitation for PARCs and PGS equipment. The RFP for wayfinding also included the
development of a recognizable parking brand that could be integrated into garage and lot
signage, the new parking website and any other public parking elements. The RFP, found in
Attachment B of this report, includes services for design and construction administration of the
new wayfinding signage and branding only; the project will be bid out competitively once
design and specifications are completed.
Discussion
As part of the wayfinding scope of work, Hunt Design will evaluate the existing parking signage
in Downtown, develop a map outlining recommendation signage locations and type, create a
parking brand for the city and develop a signage typology and design guidelines which can be
used to create future parking signage. Hunt will also coordinate with the selected designer of
the PARCs and PGS equipment, specifically for the joint development of dynamic message
signage which will provide real-time occupancy data for permit and hourly spots in garages and
lots. Additionally, Hunt will provide cost estimates of proposed signage and mockups of signage
in proposed locations as part of the design process. The project will be subject to ARB review
prior to City Council approval of a final design and staff anticipates community outreach as part
of the work.
Timeline
Staff anticipates that the design work will take at least 6-9 months to complete from contract
award, with the schedule depending on the number of ARB and design review sessions. Staff’s
goal is to complete the work in 2015 so that the construction of the project can occur early in
2016.
Resource Impact
The design contract with Hunt Design amounts to $104,600. The implementation of signage
itself and the construction associated will depend on the final design and quantities of signage,
but is estimated that cost at least $250,000. Staff requests Council approval of the attached
BAO, transferring $104,600 from the University Avenue Parking Permit Fund and appropriating
it to CIP PL-15004, Parking Wayfinding Project.
Policy Implications
Improvement of wayfinding signage is consistent with the City’s multi-pronged parking
approach which has been endorsed by Council on several occasions, and the following
comprehensive plan policies:
Goal T-8: Attractive, Convenient Public and Private Parking Facilities
City of Palo Alto Page 4
Policy T-45: Provide sufficient parking in the University Avenue/Downtown and California
Avenue business districts to address long-range needs
Environmental Review
Staff anticipates the project will replace and adjust existing signage and may be exempt from
environmental review; however, if environmental review is required based on the wayfinding
design and recommendations, staff will perform this review concurrent with the Hunt Design
scope.
Attachments:
Attachment A: Staff Report August 18 Garage Technology (PDF)
Attachment B: Contract with Hunt Design Associates (PDF)
Attachment C: Wayfinding RFP (PDF)
Attachment D: Budget Amendment Ordinance xxxx - Wayfinding Design Contract
(DOCX)
City of Palo Alto (ID # 4972)
City Council Staff Report
Report Type: Action Items Meeting Date: 8/18/2014
City of Palo Alto Page 1
Summary Title: Garage Technology Implementation Plan
Title: Status Report on Parking Garage Technologies That Can be Used to
Manage Parking Supplies and Council Direction Regarding Implementation of
Parking Guidance Systems
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council receive a presentation on the status of implementing
parking garage technologies recommended in the attached report (Attachment B), and provide
staff direction to solicit proposals for immediate implementation of Parking Guidance Systems
(PGS), or for the combined implementation of integrated Parking Guidance Systems and
Revenue and Access Control equipment.
Executive Summary
Working with the consultant, SP Plus, and downtown stakeholders, staff has explored a number
of improvements that could improve occupancies in City-owned parking garages and plans to
proceed with implementation of the following recommendations via requests for proposals this
month:
x Improved way-finding signs, most likely consisting of static signage complemented by
dynamic signs (“parking guidance systems”) directing drivers to garages with available
capacity (Report Recommendation 1)
x Improvements to the City’s website for parking permits and information (Report
Recommendation 2)
x Enabling online permit sales (Report Recommendation 4)
x Enhancing on street parking enforcement through the use of contractors when RPP is
implemented (Report Recommendation 9).
The following additional recommendations can be considered for implementation after these
initial recommendations are implemented:
City of Palo Alto Page 2
x Development of a downtown parking App (Report Recommendation 3)
x Revising the three hour time limit in garages to match the two hour limit in parking lots
(Report Recommendation 5)
x Offer more pricing options to increase the use of permit parking (Report
Recommendation 6)
x Consider elimination of the color zones used to regulate short term parking on street
and in parking lots (Report Recommendation 7)
There is one technology-related question requiring further Council direction. Report
Recommendation 8 would implement garage access and revenue controls to enable drivers to
pay to park beyond three hours in garages. Staff is seeking Council direction whether to move
forward with parking guidance systems immediately, or whether to take some additional time
and integrate parking guidance systems with deployment of access and revenue controls. See
the Discussion section, below, for more information.
Background
As part of a set of integrated strategies aimed at maximizing the utilization of existing
Downtown parking supply, on February 10, 2014 Council directed staff to issue an RFP for
garage access and revenue controls aimed at collecting “real time” data on parking occupancy,
introducing flexibility for transferable permits between employees, and supporting payment
options for downtown visitors who park longer than three hours. The Action Minutes from the
February 10 meeting are included as Attachment A.
The following initiatives were included as part of the motion:
Table 1: Parking Supply Initiatives Update
Council Direction Status
Direct staff to return with additional
information and three possible
recommendations for the location of a new
parking garage downtown, as well as updated
information about the number of additional
spaces required.
Staff is scheduled to provide
recommendations and information
concurrent with Council’s review of potential
Public-Private partnerships (see below)
Solicit Statements of Interest/Qualifications for
Public-Private Partnerships to increase Parking
Supplies on City-owned lots for discussion and
direction in August
The City initiated a Request for Information
(RFI) process for Public-Private partnerships
and proposals will bring a recommendation
to the Council in September
Solicit Proposals for Design & Environmental
Review of spaces of Satellite Parking for
discussion & possible award in June
Contract award was removed from consent in
June and approved on August 11.
Authorize permit sales to SOFA Employees at
Lot CC – Civic Center and lot CW –
Cowper/Webster immediately
City has opened permit sales to SOFA
employees for Lot CC and Lot CW.
Approximately 33 SOFA employees have
City of Palo Alto Page 3
purchased permits to-date. The City
anticipates a larger permit demand from
SOFA employees as RPP strategies are
developed.
Solicit Proposals For Parking Technology –
Access & Revenue Control Equipment and
Parking Guidance System for discussion and
possible award in August
Subject of this report
Direct staff to conduct monthly monitoring of
permit parking
See below for a discussion of monthly
monitoring.
Palo Alto Planning & Community Environment, August 2014
In May 2014, Staff issued a report on parking garage occupancy and an update on the activity of
the Lot R valet assist program (see Attachment B). The report indicated that during March and
April, the Downtown garage occupancy levels were around 70% occupied, both for permitted
and hourly spots.
Staff has continued to collect occupancy data in May, June and July. The average occupancy for
this period was 68% for the permit spaces, and 70% for hourly spaces. Occupancy levels tend to
fluctuate in the summer due to vacation schedules and irregular work patterns, but the overall
trend showed that the permit space occupancies are creeping higher as the summer months go
by, from 56% occupancy in May, to 65% occupancy in June, to 81% occupancy in July.
Staff has not changed the permit caps at any of the garages (maximum number of permits sold
for a garage) since March, as the occupancies over the summer are often too irregular to detect
a true pattern, but generally the occupancies have increased at the CW (Cowper Webster)
garage and decreased at the CC (Civic Center) and S/L (Bryant) Garage. Currently, Staff is
holding off on issuing permits to park at the CW garage as it has been reaching capacity over
the month of July, possibly due to a large number of day permits which were recently sold. Staff
will continue to monitor the occupancy of the garages through the fall and winter months, and
make adjustments to the permit caps as necessary. Staff has also requested a proposal for valet
implementation at the CC garage for consideration later in the year.
During the same period, Staff has been making progress on the design and development of the
Downtown RPP program, which is scheduled to be brought for Council consideration in
November. A survey is being distributed between August and September to residents in the
Downtown neighborhoods to solicit feedback on the design of the program before developing
the final program recommendation. Concurrently, Staff is releasing RFPs for contract
enforcement and online permit sales to support the anticipated new District. In addition, Staff
is moving forward with the implementation of a pilot program with Zipcar and the launch of a
Transportation Management Association (TMA) initiative, set for Council approval on August
11.
City of Palo Alto Page 4
Discussion
To help craft the request for proposals (RFP) for garage technologies requested by the City
Council on February 10, 2014, staff worked with SP Plus, the City’s consultant and operator of
the Lot R (High Street) attendant parking program, to outline possible technologies and their
recommendations for implementation.
SP Plus’ scope of work included engaging with Downtown businesses and SP Plus facilitated
meetings on April 16th and May 15th with a group of representatives from local businesses and
downtown property owners. The discussions included a visioning session around macro-level
parking challenges within the community, and narrowed-in on specific policy improvements
and recommend technology upgrades that could help address key goals. The stakeholders
discussed several challenges, including the following:
1. Under-utilization of garages due to lack of pricing incentives and free parking in
residential areas, despite over-selling of permits at all garages
2. Over-parking in residential areas due to employee parking
3. Inability to transfer parking permits between employees of one business
4. Lack of data about who was using the garages and when
5. Lack of centralized information on parking for visitors and residents
6. “Gaming” the existing color zone system
7. Lack of parking options for hourly and low-income workers
The group also noted that maintaining Palo Alto’s character and business-friendly environment
was a high priority, and that any implemented parking controls should reflect that necessity.
SP Plus synthesized the stakeholder comments based on their technical expertise and brought
forth a series of recommendations, some related to garage policy and some related to
infrastructure improvements. The recommendations are summarized below, along with the
status of each, and the full report is included as Attachment C.
Recommendation No. 1: Improved Branding Program and Standardized Sign Installation for
Parking Lots and Garages and Parking Guidance Systems
SP Plus noted weaknesses in the existing parking signage as well as parking branding
inconsistency, and suggested that improved signage would help visitor access to parking.
Parking Guidance Systems (PGS) would also enhance visitor ability to find available parking,
especially if signage could be integrated at key Downtown intersections as well as garage and
lot entries. Staff is developing an RFP for improved branding and “wayfinding” to be released in
August 2014 which will include provisions for architectural design (look and feel) of Parking
Guidance Systems.
Recommendation No. 2: Enhance City (Parking) Website
City of Palo Alto Page 5
SP Plus recommended that there should be a dedicated parking website for visitors and local
businesses which could serve as a first-stop information source for parking in the community.
Currently there are many places on the City’s website which have information on parking, and
so visitors may need to look on multiple sites for information on citations, permits and parking
garage locations. Staff plans to integrate parking website design into an RFP for online permit
sales that would be released in August or September.
Recommendation No. 3: Develop a Downtown Palo Alto Parking App.
SP Plus recommended a parking app that could provide information on local parking facilities
and permit purchase. Parking occupancy data is required for an application to function
properly. The City has an active pilot project with VIMOC Technologies of Mountain View, CA
to deploy on-street parking space sensors on Hamilton Avenue and Ramona Street. If the pilot
project is successful the City will release a Request for Proposals to allow for a complete
Downtown deployment. VIMOC Technologies is developing a mobile app and online tool to
support its sensors. The City also has an active Traffic Signal Management System upgrade
project scheduled for council consideration of award in September. The new Traffic Signal
Management System will include online tools to push real time traffic signal data to the public,
including parking information, dependent on sensor data. The Traffic Signal Management
System developer, Trafficware of Sugar Land, TX will partner with VIMOC Technologies to
integrate parking sensor data into the system. The signal system will then push the data online
as part of an open data source platform for other parking application developers to use and
include on multiple applications.
Recommendation No. 4: Develop Online Permit Sales
Online permit sales would streamline permit purchase process for all permit programs.
Staff is working on an RFP for online permit sales related to the anticipated Downtown RPP
District. As part of the solicitation, Staff will also request costs for online sale of other parking
permits.
Recommendation No. 5: Revise Parking Time Limits
SP Plus recommended changing all three hour spots in garages to two hour spots to be
consistent with existing lots and streets. Shortening the time period would encourage parking
turnover; also, occupancy data from several mid-peninsula cities shows that most parkers do
not stay for two hours, let alone three. Staff plans to consider this strategy at a later date, once
the City can gather additional (timed) occupancy data.
Recommendation No. 6: Expand Permit Pricing Options
SP Plus noted that Palo Alto’s limited permit options did not support different types of workers
City of Palo Alto Page 6
(e.g. professional, hourly, temp, etc.). They recommended adding ranges of permit pricing to
support lower-wage workers, as well as additional options for monthly and daily permits. Staff
plans to bring forward related analyses and recommendations following implementation of
online permit sales and other technologies.
Recommendation No. 7: Eliminate the Downtown Color Zone
SP Plus noted that many customers simply move their car between the color zones downtown,
rendering the program ineffective. Staff is currently piloting a new on-street parking occupancy
system with a local business, VIMOC, which will allow staff to collect real-time parking
occupancy and duration data. Verifying parking turnover will help provide the data needed to
support color zone elimination. Staff plans to bring forward related analyses and
recommendations once additional (timed) occupancy data is available and other technologies
are put in place.
Recommendation No. 8: Introduce Off-Street Paid Parking options through Implementation of
Access and Revenue Controls
According to SP Plus, providing customers and visitors the ability to pay to park beyond a
certain time limit by implementing revenue and access controls to the garages would have a
number of benefits, including potentially providing for permit transferability, increasing parking
turnover and gathering data on the garage and lot occupancy. Staff is seeking Council direction
regarding implementation of this recommendation.
Recommendation No. 9: Enhancement of On-Street Parking Enforcement
According to SP Plus, current enforcement operations rely on outdated technology, and
introducing advanced License Plate Recognition equipment could provide more efficient
enforcement. Staff plans to release an RFP for private-sector parking enforcement of future RPP
Districts, including the use of LPR technology.
Overview of Parking Guidance Systems & Access and Revenue Controls
Parking Guidance Systems
Parking Guidance Systems (PGS) include two elements: 1) Vehicle-counting equipment at
garage and lot entries to track vehicle occupancy, and 2) Dynamic signs placed at garage and lot
entries to provide immediate notice of parking space availability. Dynamic signs can also be
placed at gateway entry points in business districts to help efficiently guide motorists to parking
facilities. Feedback from the stakeholder group suggested that the implementation of Parking
Guidance Systems would help maximize the utilization of Downtown lots and garages, and
reduce time that drivers spend hunting for a parking spot.
PGS equipment may work in several ways. One type of technology utilizes the installation of
City of Palo Alto Page 7
sensors in individual parking bays. The sensors provide real time updates to a central server
that then pushes the data to all signage locations. A less expensive option is to track the
availability of spaces via loop detectors at each garage entry point and managed areas of the
garages. As vehicles enter and leave the garage the movement adds or subtracts from the total
available parking space supply of the site. All vehicles are managed including accessible-need
vehicles, motorcycles, and pool vehicles. Microwave detectors are another option and are
placed on the ceiling of the garages, again at either just the entry or also at managed parking
areas.
PGS signs can be designed to identify available Visitor “hourly” parking spaces and Employee
“permit” parking spaces. When permit spaces convert to hourly spaces in the evenings after
5:00PM and on weekends, the total available parking spaces in the garages are added to the
Visitor space counts and no Employee space data is provided.
SP Plus recommends that the design of PGS equipment be coordinated with improved parking
branding and wayfinding signage at garage entries and Downtown gateway locations
(Recommendation 1, above). Location of the gateway entry PGS signs will require design
consideration; this process will include soliciting input from the Architectural Review Board
(ARB).
Access and Revenue Controls
Access and Revenue controls introduce time-stamping of vehicles entering the garages and lots,
and can also control access to managed parking spaces such as Employee permit parking
spaces. This equipment can feed data to PGS dynamic signs and also integrate with parking
occupancy data to provide real-time parking data to motorists.
Several equipment options are provided in Table 2, including gated facility operations, gateless
facility operations, and simple metered parking spaces. The traditional method of tracking
vehicle exit and entry to garages and lots is through the use of barrier gates. However, the
stakeholder committee had some concern that the aesthetic of gates in garages could detract
from a “business-friendly” Downtown, so LPR (License Plate Recognition) technology was
included as an option that does not require physical gates.
LPR technology counts the number of cars entering a parking facility, connects this information
with PGS equipment, and reads license plates to identify permit holders automatically. It can
either be implemented using a “passive” or “active” enforcement strategy; in the former setup,
the entire operation eliminates the need for enforcement officers to provide citations by
processing whether or not a customer has paid for their parking and sending them an invoice in
the mail. In an “active” enforcement operation, the equipment alerts the enforcement officers
when a citation should be issued for a customer who has stayed past the allotted time
allowance. However, LPR technology is currently a developing market and detection accuracy is
still improving.
City of Palo Alto Page 8
Table 2:
Potential Options for Revenue and Access Control
(To be Determined by Vendors in Response to Request for Proposals)
Option #1:
Gated Facility
Operations
Option #2:
Gateless Facility
Operation with
Active
Enforcement
Option #3:
Gateless Facility
Operation with
Passive
Enforcement
Option #4:
Gateless
Entry and
Gated Exit
Option # 4:
Meters at
each spot
Equipment
Description
Entry: Gates.
Detection:
loops or
microwave
sensors
Pay stations:
Visitors pull
tickets or
tokens. Pay
Stations with
business valet
options.
Employees
receive RFI
“Fast Trak”-
like units to
auto open
gates.
Entry: LPR
(license plate
recognition)
technology.
Detection: Video
license plates
read for Visitors
and Employees.
Pay stations:
Visitors pay at
Pay Stations via
phone/tablet
devices via app
download.
Employee permit
holders are
stored in a
database and are
verified through
detection
equipment.
Entry: LPR
(license plate
recognition)
technology.
Detection:
Video license
plates read for
Visitors and
Employees.
Visitors pay at
Pay Stations via
phone/tablet
devices via app
download or
receive invoice
in the mail.
Employee
permit holders
are stored in a
database and
are verified
through
detection
equipment.
Entry: LPR
(license
plate
recognition)
technology.
Detection:
Video license
plates read
for Visitors
and
Employees.
Pay Stations:
Visitors pull
tickets or
tokens. Pay
Stations with
business
valet
options.
Employees
receive RFI
“Fast Trak”-
like units to
auto open
gates.
Standalone
parking
meters at
each parking
spot, could
also have
mobile
access.
Payment
Option
Either in a pay
station or at
the gate, or
mobile phone
app. Drivers
cannot leave
If the driver does
not have a valid
permit they can
pay for parking
via an onsite pay
station or parking
If the driver
does not have a
valid permit
they can pay for
parking via an
onsite pay
If the driver
does not
have a valid
permit they
can pay for
parking via
At the meter.
This option
would not
impact the
current
enforcement
City of Palo Alto Page 9
the garage
without
paying.
Credit card
payment
option at
egress gate
for
convenience.
app. The system
will alert
enforcement
offices if there is
a driver who has
not paid for
additional time
spent in the
garage. However,
if driver leaves
before being
cited they face no
penalty.
station or
parking app. If
they drive out of
the garage
without paying
for the
additional time,
they will receive
an invoice in the
mail for the
additional time
spent in the
garage (this
option is costly
due to the
citation
processing
required)
an onsite
pay station
or parking
app. They
cannot leave
the garage
without
paying.
operations of
the garages,
which require
regular patrol
by
enforcement
officers.
Rather than specify desired equipment as part of a solicitation, Staff recommends providing the
City’s overall requirements in an RFP and allow the vendors to recommend the best solution
based on those requirements. Staff requires Council direction, however, on whether to proceed
with Parking Guidance Systems in advance of Access and Revenue Controls, or whether to
implement them simultaneously. Here are the two options:
Option 1: Immediately Issue RFP for Parking Guidance Systems for Downtown Lots and Garages
Staff can solicit proposals from vendors for the design/build and placement of parking guidance
systems at the entrances of garages, and have the vendor specify the most cost-effective and
appropriate technology solution to support that signage. This option provides PGS solutions
ahead of Access and Revenue equipment. Detection equipment provided immediately as part
of this option may no longer be needed at the time Access and Revenue control solutions are
provided.
Staff estimates that PGS solutions can be implemented concurrent with RPP in Quarter 1 of
2015 via this option, however the system may need to be traded-out or modified when access
and revenue controls are later implemented.
Option 2: Issue a Combined Solicitation for Parking Guidance Systems and Access and Revenue
Controls
In addition to PGS, the installation of revenue and access controls within the garages introduce
options to both meter visitors parking beyond the current 3-Hour Free Parking period and
City of Palo Alto Page 10
introduces the ability to transfer permits between employees for businesses. Access and
Revenue controls may also help streamline parking enforcement for the garages depending on
access controls used.
This option includes soliciting proposals for immediate implementation of PGS and Access and
Revenue Controls combined. This approach would allow the systems to be part of a full-
integrated platform, avoiding multiple systems with overlapping capabilities. Combining the
two solicitations into one RFP aligns with SP Plus’s recommendation that initiatives requiring
vendor support should be integrated in one cohesive RFP. However, it will also delay the
issuance of an RFP by several months.
Timeline
As noted in the Discussion section, above, staff is proceeding with a number of technology
solutions aimed at improving utilization of downtown garages and collecting data about garage
occupancy on a continuous basis. There is one outstanding question as to whether Parking
Guidance System should be implemented in advance of Access and Revenue Controls, or
whether they should be implemented concurrently (See Option 1 and 2, above).
With Option 1, staff would issue a solicitation for PGS equipment in August or September of
2014, and then issue a subsequent solicitation for the Revenue and Access control equipment.
Option 2 would delay the issue of a combined solicitation for a few months while staff
determines the appropriate requirements for revenue and access controls, and potentially
implements some of the other policy direction initiatives suggested by SP Plus.
Resource Impact
The City has allocated $2.0 million in CIP PL-12000 (Parking & Transportation Improvements)
for the implementation of Access and Revenue Controls ($1.6 million) and Parking Guidance
System Technology ($0.4 million). Revenues gained from newly introduced metering options
from the access and revenue control equipment can be used to pay back the CIP Program, while
the $0.4 million for Parking Guidance System Technology is supported by parking permit
revenue in the University Avenue Parking Permit Fund. Cost estimates and revenue generation
estimates will be further refined as part of the RFP process.
Policy Implications
The implementation of parking garage technologies, including Parking Guidance Systems and
Revenue Access Controls, is consistent with the following Comprehensive Plan goals and
policies and would allow the City to better manage existing parking supplies:
- Goal T-8: Attractive, Convenient Public and Private Parking Facilities
- The 13-Point Parking Program, including the following points:
o Consider valet and/or paid parking on one or more appropriate Downtown lots
o Implement a new graphics program to provide signs, maps and other graphics
about Downtown parking facilities for shoppers, employers and employees
o Create and educational flyer about where parking is, how much is available and
City of Palo Alto Page 11
how much it costs each time an employee moves his or her car
- Policy T-45: Provide sufficient parking in the University Avenue/Downtown business
districts to address long-range needs
Environmental Review
This project is exempt from the California Environmental Quality Act under Section 15061(b)(3)
of the Guidelines.
Attachments:
x Attachment A: City Council Minutes dated 2-10-14 (PDF)
x Attachment B: City Council Staff Report dated 5-12-14 (PDF)
x Attachment C: Parking Improvement Report (7-31-14) (PDF)
CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
February 10, 2014
1 February 10, 2014
The City Council of the City of Palo Alto met on this date in the Council
Chambers at 6:07 P.M.
Present: Berman, Burt, Holman, Klein, Kniss, Price, Scharff,
Schmid, Shepherd
Absent:
STUDY SESSION
1. Measure E Update: The Energy/Compost Facility Request for Proposals (E/CF RFP) Identified Pricing for Privately-Funded Projects and Technologies to
Jointly Handle Food Scraps, Yard Trimmings and Biosolids and Considered
Processing at the Regional Water Quality Control Plant (RWQCP) and/or
Using the 10-Acre Measure E Site as Well as Export Options. A Summary of
the E/CF RFP Proposals, Integration with the Biosolids Facility Plan and a
Proposed Organics Plan are Included in this Staff Report.
No Action Taken
AGENDA CHANGES, ADDITIONS AND DELETIONS
City Manager Keene pulled Agenda Item Numbers 4 and 6 to be heard at a
later date. He noted that Agenda Item Number 2 was continued to
February 24, 2014 at Staff’s request.
MINUTES APPROVAL
MOTION: Council Member Berman moved, seconded by Council Member
Price to approve the minutes of January 6, 2014.
MOTION PASSED: 9-0
CONSENT CALENDAR
MOTION: Council Member Berman, Council Member Burt, and Council Member
Scharff moved to remove Agenda Item No. 5 from the Consent Calendar to
become Agenda Item Number 9a.
Attachment A
2 February 10, 2014
MOTION: Council Member Price moved, seconded by Council Member Kniss to
approve Agenda Item Numbers 3, and 7-8.
2. Approval of Contract with Standard Parking Corporation in the Amount of
$120,000 for Operation of the Lot R Parking Garage Attendant Program and
Adoption of a Budget Amendment Ordinance Amending the Fiscal Year 2014
University Avenue Parking Permit Fund Operating Budget to Provide
Additional Appropriations of $120,000 (Staff request this item be continued
to February 24, 2014).
3. Resolution 9396 entitled “Resolution of the Council of the City of Palo Alto
Determining that a Target for the City of Palo Alto Utilities to Procure Energy
Storage Systems is Not Appropriate Due to Lack of Cost-effective Options.”
4. Approval of Nine On-Call Planning and Environmental Consulting Services
Contracts for the Department of Planning and Community Environment to
Support Current Planning, Special Projects, Advance Planning, and
Environmental Review as Follows: Planning Services - 1) Dudek, 2) Arnold
Mammarella, Architecture and Consulting, 3) The Planning Center/DC&E, 4)
Metropolitan Planning Group; Environmental Services - 5) Dudek, 6) URS
Corporation, 7) ICF International, 8) Turnstone Consulting, and 9) David J
Powers & Associates in Amounts Not to Exceed $930,000.
5. Staff Recommends that City Council Authorize the City Manager to Enter into
an Agreement with the Peninsula Corridor Join Powers Board to Introduce
the Caltrain Go Pass into the Civic Center Transportation Demand
Management Program.
6. Development Impact Fees: List of Public Facilities Capital Needs.
7. Approval of a Contract With Spencon Construction, Inc. in The Amount of
$2,170,412 for The FY 2014 Sidewalk, Curb and Gutter Repairs Project.
8. Approval of Amendment No. 1 to Contract with MV Transportation to Extend
the Term Until June 30, 2014 and Add $75,000 for Provision of Regular
Shuttle Services for Crosstown Route and Additional Shuttle Service During
the Construction of California Avenue Streetscape Project.
MOTION PASSED for Agenda Item Numbers 3, 7-8: 9-0
3 February 10, 2014
ACTION ITEMS
9. Parking Supply Recommendations. Staff recommends that Council accept
the Final Report on the Downtown Parking Garage Study and authorize staff
to take the following actions aimed at increasing the parking supply in the
University Avenue and California Avenue Business Districts: 1. Authorize
staff to begin design and environmental review of a new parking garage
(240 car capacity) on Lot G located on Gilman Avenue 2. Authorize staff to
solicit qualification statements for public-private partnerships to increase
parking supplies on at least one existing surface parking lot in the University
Avenue area and one in the California Avenue Business District 3. Authorize
staff to pursue planning grants and begin planning work for a new transit
mall expansion with a 478-space parking garage on Urban Lane, in
partnership with the property owner and the Joint Powers Authority 4.
Authorize staff to begin design and environmental review of a 200-space
satellite parking facility along Embarcadero Road – East of Geng Road-Faber
Place and in the Bay Lands Athletic Center parking lot or a comparable
alternate location(s), with supporting shuttle service to the University
Avenue Business District 5. Authorize staff to expand parking permit sales to
South of Forest Avenue (SOFA) Business District Employees at the Lot CC –
Civic Center and Lot CW – Cowper Street/Webster Street parking garages 6.
Authorize staff to solicit proposals for the installation of parking garage
access and revenue controls aimed at collecting “real time” data on parking
lot and garage occupancy, introducing flexibility for transferable permits
between employees, and to support payment options for downtown visitors
who park longer than three hours.
MOTION: Council Member Scharff moved, seconded by Vice Mayor Kniss to
direct staff to: 1) Solicit Proposals for Design & Environmental Review of a
Garage on Lot D for discussion & possible award in June, 2) Solicit Statements of
Interest/Qualifications for Public-Private Partnerships to increase Parking Supplies
on City-owned lots for discussion and direction in August, 3) Solicit Proposals for
Design & Environmental Review of 200-spaces of Satellite Parking for discussion &
possible award in June, 4) Authorize permit sales to SOFA Employees at Lot CC –
Civic Center immediately, 5) Solicit Proposals For Parking Technology – Access &
Revenue Control Equipment and Parking Guidance System for discussion and
possible award in August, and 6) Direct Staff to conduct monthly monitoring of
permit parking.
AMENDMENT: Council Member Klein moved, seconded by Council Member
Price to divide the Motion into separate Motions.
AMENDMENT PASSED: 7-2 Kniss, Shepherd no
4 February 10, 2014
MOTION #1: Council Member Scharff moved, seconded by Vice Mayor
Kniss to solicit proposals for design & environmental review of a garage on
Lot D for discussion & possible award in June.
SUBSTITUTE MOTION: Council Member Holman moved, seconded by
Council Member XXX to not pursue a downtown parking garage at this time.
SUBSTITUTE MOTION FAILED DUE TO THE LACK OF A SECOND
SUBSTITUTE MOTION: Council Member Burt moved, seconded by Council
Member Klein to direct Staff to return with additional reviewed information
on the choices based on Council input tonight, provide a narrowing to three
finalists for recommendations to consider as well as consideration of the
updated information on the need of how many additional spaces are
required.
CALL THE QUESTION: Council Member Price moved, seconded by Council
Member Klein to call the question.
CALL THE QUESTION PASSED: 6-3 Scharff, Schmid, Shepherd no
SUBSTITUTE MOTION PASSED: 8-1 Shepherd no
SUBSTITUTE MOTION: Council Member Holman moved, seconded by
Council Member Schmid to not take action on Staff Recommendation
Number 2 based upon the Substitute Motion that just passed.
SUBSTITUTE MOTION FAILED: 2-7 Holman, Schmid yes
MOTION #2: Council Member Scharff moved, seconded by Vice Mayor
Kniss to Solicit Statements of Interest/Qualifications for Public-Private
Partnerships to increase Parking Supplies on City-owned lots for discussion
and direction in August.
SUBSTITUTE MOTION: Council Member Holman moved, seconded by
Council Member Schmid to not take any action on #2 at this time.
SUBSTITUTE MOTION FAILED: 2-7 Holman, Schmid yes
MOTION PASSED: 7-2 Holman, Schmid no
5 February 10, 2014
MOTION #3: Council Member Scharff moved, seconded by Vice Mayor Kniss to
solicit proposals for design & environmental review of spaces of satellite parking
for discussion & possible award in June.
MOTION PASSED: 7-2 Holman, Schmid no
MOTION #4: Council Member Scharff moved, seconded by Vice Mayor Kniss to
authorize permit sales to SOFA Employees at Lot CC – Civic Center immediately.
MOTION PASSED: 9-0
MOTION #5: Council Member Scharff moved, seconded by Vice Mayor Kniss to
solicit proposals for parking technology – access & revenue control equipment and
parking guidance system for discussion and possible award in August.
MOTION PASSED: 9-0
MOTION #6: Council Member Scharff moved, seconded by Vice Mayor Kniss to
direct Staff to conduct monthly monitoring of permit parking.
MOTION PASSED: 9-0
MOTION: Council Member Scharff moved, seconded by Vice Mayor Kniss to direct
Staff to have the ability to pursue planning grants for Stanford/Caltrain Urban
Lane Transit Mall and Parking Garage, then return in a study session or action item
if a grant is obtained.
MOTION WITHDRAWN BY THE MAKER
MOTION: Council Member Berman moved, seconded by Council Member Price to
direct Staff to authorize permit sales to (South of Forest Avenue) SOFA Employees
at Lot CW-Cowper/Webster immediately.
MOTION PASSED: 7-0-2 Scharff, Shepherd not participating
ADJOURNMENT: Meeting adjourned at 12:00 A.M.
City of Palo Alto (ID # 4717)
City Council Staff Report
Report Type: Informational Report Meeting Date: 5/12/2014
City of Palo Alto Page 1
Summary Title: Parking Data and Lot R Update
Title: Informational Report: Spring 2014 Off-street and On-street Downtown
Parking Occupancy/Inventory Data and the status of the Lot R Valet-Assist
Program
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
This is an informational report regarding Spring 2014 Downtown Parking Occupancy/Inventory
Data and the Lot R Valet-Assist Program. No action is recommended.
Executive Summary
Since 2011, Staff has been actively monitoring Downtown parking activity and occupancy data
to better manage existing parking supplies and to inform future planning efforts. Data collected
and analyzed in the last few weeks (Spring 2014) illustrates that:
x Residential neighborhoods surrounding downtown continue to experience parking
intrusions, with occupancies on some streets exceeding 100% during peak hours;
x Despite releasing 110 additional permits (74 at Lot R and 36 at other garages) since
January 1, permit spaces in the City’s Downtown garages remain somewhat
underutilized (average occupancy of 72% for hourly spots and 70% for permit spots)
except at infrequent, peak times.
On February 24, 2014, the City Council approved a one-year trial valet-assist program at the Lot
R – Alma/High Street Garage to determine if parking attendants (valets) could be used as a cost
effective way to increase utilization of existing garages. The program:
x has allowed the City to issue more permits for Lot R than might otherwise be issued;
x is usually parking between 15 and 30 cars on a daily basis; and
x can be considered for expansion or relocation to Lot CC (Civic Center Garage) in the
future to help increase the utilization of that garage.
Attachment B
City of Palo Alto Page 2
In addition, the program offering Go Passes to City employees in exchange for giving up parking
permits began on April 1 and so far has 44 participants. This program and the results of the
most recent occupancy surveys have allowed the City to release 30 additional permits for Civic
Center Garage to non-City employees in the last week of April.
The data suggests that the Lot R program has been an effective tool for addressing the parking
demand at Lot R and increasing the number of cars parked there; however, the program could
still handle additional vehicles and result in more permit sales in the Downtown. Staff will
continue to collect data on occupancy and the valet-assist program to the CC garage as well,
and will return in August with further recommendations on permit management and the valet
assist program. Data collection for Off-Street parking and permit wait list management occurs
twice monthly, while data collection for On-Street parking is collected seasonally.
Background
Despite Staff efforts to significantly over-sell the number of parking permits for permit spaces in
the Downtown garages, the upper floors of many of the garages have historically not been full,
and yet these garages regularly have wait-lists for permits. Residents have shared concern
about Downtown employees parking on residential streets rather than in the garages, as in
some cases parking in the neighborhoods is not only cheaper but more convenient for
downtown workers. As a result of Council direction, and in order to better understand the
distribution and demand for parking in the Downtown, Staff has engaged in several related
efforts:
1. Continue to regularly gather data on the parking utilization of the Downtown lots and
Garages as well as the on-street spaces in the residential areas outside the Downtown
commercial core;
2. Allow SOFA employees to purchase parking permits in the Downtown Garages at Lot CC
- Civic Center and Lot CW – Cowper/Webster and monitor permit sales and permit caps
at all Downtown garages and try to maximize sales; and
3. Implement the Valet-Assist Parking Program at Lot R – Alma/High Street Garage to help
maximize the utilization of this garage.
Staff is also moving forward the process of developing a downtown Residential Preferential
Parking (RPP) program, the implementation of which would potentially encourage existing
employees to park in Downtown garages and lots rather than neighborhoods and help align
parking supply and demand. This staff report does not cover the RPP process, but focuses on
the data collection and permit management efforts which have taken place in response to
Council direction in February.
Discussion
On-Street and Off-Street Parking Occupancy Data
Attachment A, Off-street Parking Data, shows three data sets for parking occupancy for the
Downtown parking lots and garages, gathered on March 12, 2014, April 2-3, 2014 and April 25,
City of Palo Alto Page 3
2014. While there are some spikes in garage utilization, in most cases the garages are still
underutilized. The table below shows the average occupancies of the main Downtown garages
(S, CC, CW and R) for the three days surveyed (excluding the midnight data for April 2):
Table 1: Average Occupancies for Garages CW, R, CC and S
March 12, 2014 April 2, 2014 April 25, 2014
(Friday)
Hourly
Average 80% 72% 66%
Permit
Average 82% 64% 65%
The data indicates that despite significant efforts to oversell the number of permits available,
many visitors and workers are still parking in the residential streets, which correlates with the
On-Street data shown in Attachment B.
Attachment B, On-Street Occupancy Data, shows parking counts in the residential
neighborhoods at 8:00am-10:00, 12:00pm-2:00, 7:00pm-9:00 and 12:00am-2:00am for April 3,
2014. Generally the data shows that streets are emptiest in the midnight hours and busiest
during the lunch hour. The neighborhoods north of Lytton Avenue are heavily impacted earlier
in the mornings before 10:00am, while during the lunch hour much of Downtown is saturated
with cars (above an 85% occupancy level, shown in red). The only streets that show a generally
consistent occupancy trend of lower than 50% are east of Waverley and south of Addison (the
southeast corner of Downtown).
Downtown Garage Permit Management
Figures 1, 2 and 3 illustrate the permit caps and waitlists at garages S, CC and CW. The areas
shaded underneath the waitlist curves illustrate times when permits were available for
purchase at these garages (and that there is no permit waitlist if permits are available).
Figure 1: Lot S Permit Management
Figure 2: Lot CC Permit Management
City of Palo Alto Page 4
Figure 3: Lot CW Permit Management
As illustrated by the graphs, between November 2013 and April 2014 Staff raised the permit
threshold of Lot S from six hundred fifteen (615) to six hundred fifty-five (655), and the
threshold of Lot CW from six hundred (600) to seven hundred fifty (750). Figure 4 shows the
shaded area under the waitlist curve for the CW garage, which illustrates that the garage has
had permits available for sale for the past several months. Staff has aggressively attempted to
sell more permits at this garage (including sales of permits to SOFA employees as directed by
Council) and offering permits to waitlist members at other garages, since so many are available.
22 SOFA employees have purchased permits at Lot CW but most waitlist members have
preferred to wait until permits at their preferred location became available.
At Lot S, although the waitlist has trended downward slightly, raising the permit cap did not
make a significant dent in the waitlist across the six-month period. Lot S currently has a permit
waitlist of 20.
The only garage where the permit cap was not raised over the study period was Lot CC - Civic
Center, which has consistently had a waitlist. After reviewing the most recent occupancy data,
Staff has increased the permit threshold at CC garage by 30, which brings the waitlist at the
writing of this report at CC garage to 5. All members of that waitlist are City employees that
already have a permit at another garage.
Lot R Valet Assist Update
City of Palo Alto Page 5
Council approved a one-year trial “Valet-Assist” program at Lot R with SP Plus on February 24,
2014 to help increase garage utilization. The program includes valets guiding motorists to park
within drive aisles of the garage and motorists providing their keys to a valet operator. Vehicles
are parking in regular parking spaces through daily parking turnover and motorists can claim
their vehicles back at the end of each day, before 6PM. Valet parking takes place on permit
levels only (floors three through five). Because the program allows drive aisles to be used for
parking vehicles, it has the potential to increase the total number of cars that can be parked in
the garage while not requiring any additional infrastructure (e.g. new lots or garages). Staff
estimates that up to 45 additional vehicles can be parked in Lot R through the Valet-Assist
program. Lot R has historically had the highest demand for permits as it is close to the
University Avenue Caltrain station and many technology and venture capital companies. Lot R
was chosen for a trial program, which, if successful, could be implemented at other Downtown
garages. (See staff report 4375 for detail on the Lot R Valet-Assist procurement and selection
process).
The program was initially staffed Monday through Friday, 8:00am to 6:00pm. In order to
monitor the effectiveness of the program, Staff tracked the number of cars taken by the valet
over time beginning on March 3, 2014, the first day of Valet-Assist operations.
During the first week of the program, the permit floors were rarely full and only one car was
taken by the valets. Staff gradually began to increase the number of permits sold at the garage
to give the valets more cars to park, which initially eliminated the permit waitlist. The number
of cars per day that were taken by the valet on any given day ranged from 0 (meaning that the
lot never became full) to 36. There were large variations within any given week, sometimes due
to weather or other events – generally the lots were fuller when it was raining, and less full in
sunny weather. On average, the number of cars taken in per day has ranged from 20-30.
Over the course of the first forty-five days of the program, Staff has increased the permit
threshold of Lot R from 241 to 300, a jump of 25%. There are a total of 134 marked permit
spaces available for Lot R increasing the permit-to-parking space ratio to 223%. As of the
writing of this report, there are 4 people on the waitlist at Lot R.
Figure 4 shows the increase of the Lot R permit cap over time plotted against the total number
of permit spaces at the garage, as well as the trend of the waitlist. Permits for all Downtown
garages are released monthly are managed in waves, so waitlist numbers can fluctuate daily,
but overall the trend of the waitlist has done down since the start of the Valet-Assist program
at Lot R. Not surprisingly, the general upward trend of the number of cars taken into the valet
roughly corresponds with downward trend in the Lot R waitlist.
Figure 4: Lot R Permit Management
City of Palo Alto Page 6
Other Lot R Parking Trends
Staff also tracked the time of day when the valets took in cars as a way of tracking when the
garage demand periods. If the valets took in cars at all, it usually would not be until 10am or
11am, consistent with Staff findings regarding general travel times by employees based on the
2013 Citywide Transportation Survey. Generally most workers left by 6:00pm, although in some
cases the valets would need to wait for some workers after hours. To address this, Staff
changed the hours of the program so that the first valet works 9am-5:30pm and the second
works from 10am – 6:30pm. This distribution better mirrored the patterns of downtown
workers.
Staff also began collecting data on the number of daily hangtag-style permits seen at Lot R; a
daily parking permit, which is valid at any of the Downtown garages and allows a motorist to
park either in a permit space or an hourly space and was a factor that was not previously
considered in parking occupancy studies. So far, no more than four daily permits were seen on
any one day in the permit spaces and hourly spaces at Lot R.
When the Valet-Assist Program was initially communicated to existing permit holders, some
motorists expressed concerns regarding impacts to convenience of garage use or concerns
regarding valets moving their personal vehicles. Since the start of the program, no concerns
regarding valet operations have been received.
Lot R Valet-Assist Program Cost
The primary objective of the valet-assist trial program is to determine whether the use of valets
is a cost effective way to increase parking capacity downtown, either now, or when Residential
Preferential Parking (RPP) is implemented in nearby neighborhoods. The Lot R Valet-Assist
Program is funded through the Downtown Permit Fund and based on the total number of
permits sold in the Downtown (3,160), each permit is subsidizing the Lot R Valet-Assist Program
by approximately $33 per permit.
Lot R Valet-Assist Program Cost: Program Cost / Total Permit Sales
$104,420 (SP Plus Valet Services) / 3,160
Approximately $33 per permit
City of Palo Alto Page 7
The effectiveness and cost of the program will have to be evaluated further as the City moves
towards implementation of Residential Preferential Parking (RPP) and considers investments in
capital improvements such as new parking structures.
Attachments:
x Attachment A: Off-Street Occupancy Data - Spring 2014 (PDF)
x Attachment B: Downtown Parking Occupancy Data - Spring 2014 (PDF)
OffͲStreetParkingOccupancyͲ3/12/2014
Hourly Permit Total Hourly Permit Total Hourly Permit Total
77 134 211 0 134 134 294 394 688
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 72 94% 120 90%10AM 0% 91 68%10AM 256 87% 289 73%
Noon 77 100% 134 100%Noon 0% 117 87%Noon 269 91% 322 82%
4PM 73 95% 141 105%4PM 0% 108 81%4PM 211 72% 340 86%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
201 388 589 187 519 706 63 63
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 0%0%10AM 102 55% 290 56%10AM 41 53%0%
Noon 138 69% 314 81%Noon 174 93% 350 67%Noon 50 65%0%
4PM 73 36% 343 88%4PM 177 95% 415 80%4PM 53 69%0%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
10 53 63 78 0 78 68 0 68
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 5 50% 24 45%10AM 25 32%0%10AM 15 22%0%
Noon 7 70% 35 66%Noon 76 97%0%Noon 66 97%0%
4PM 0%0%4PM 77 99%0%4PM 64 94%0%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
25 27 52 46 0 46 90 0 90
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 25 100% 24 89%10AM 30 65%0%10AM 56 62%0%
Noon 25 100% 27 100%Noon 45 98%0%Noon 60 67%0%
4PM 23 92% 8 30%4PM 31 67%0%4PM 47 52%0%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
15 41 56 86 0 86 51 0 51
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 7 47% 38 93%10AM 34 40%0%10AM 23 45%0%
Noon 11 73% 39 95%Noon 56 65%0%Noon 51 100%0%
4PM 4 27% 36 88%4PM 62 72%0%4PM 50 98%0%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
48 0 48 0 36 36 0 34 34
Hourly % Permit %Hourly % Permit %Hourly % Permit %
10AM 34 71%0%10AM 0% 12 33%10AM n/a 0% 30 88%
Noon 48 100%0%Noon 0% 23 64%Noon n/a 0% 26 76%
4PM 48 100%0%4PM 0% 22 61%4PM n/a 0% 25 74%
Hourly Permit Total Hourly Permit Total
0 5353 28 2452
Hourly % Permit %Hourly % Permit %
10AM 0% 32 60%10AM 19 68% 10 42%
Noon 0% 34 64%Noon 27 96% 11 46%
4PM 0% 30 57%4PM 21 75% 8 33%
LotC
Period
Period
LotR
Period Wednesday,3/12/14Wednesday,3/12/14 Period
LotQLotS/L
Wednesday,3/12/14
Period Period
CW CC
Period
LotB
Period
LotOEmersonHigh
Period
800High LotAEmersonLytton
Period
LotH
Period Period
LotF
LotPHighHamiltonLotDHamiltonWaverley
Period Wednesday,3/12/14 Period
Period
LotNͲEmersonRamona LotEͲGilmanBryantLotXͲSheraton
Period Period
LotT
Period
LotGͲEmersonRamona
Period
LotK
Period Wednesday,3/12/14
Attachment A: Off-Street Parking Occupancy Studies
DowntownParkingStructureCapacityUseTrendsͲHourlyandPermitParkingSpaces
OffͲStreetParkingOccupancyͲ4/02Ͳ4/03,2014
LotQ
Hourly Permit Total Hourly Permit Total Hourly Permit Total
77 134 211 Ͳ 134 134 294 394 688
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 17 22% 70 52%8amͲ10am Ͳ NA 48 36%8amͲ10am 82 28%
NoonͲ2pm 76 99% 145 108%NoonͲ2pm Ͳ NA 115 86%NoonͲ2pm 292 99%
7pmͲ9pm 77 100% 126 94%7pmͲ9pm Ͳ NA 67 50%7pmͲ9pm 297 101%
MidnightͲ2am 9 12% 20 15%MidnightͲ2am 0 NA 18 13%MidnightͲ2am 12 4%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
201 388 589 187 519 706 63 Ͳ 63
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 51 25% 191 49%8amͲ10am 182 97% 117 23%8amͲ10am 27 43%
NoonͲ2pm 182 91% 292 75%NoonͲ2pm 186 99% 365 70%NoonͲ2pm 55 87%
7pmͲ9pm 156 78% 80 21%7pmͲ9pm 174 93% 349 67%7pmͲ9pm 63 100%
MidnightͲ2am 27 13% 15 4%MidnightͲ2am 22 12% 77 15%MidnightͲ2am 15 24%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
25 27 52 78 Ͳ 78 68 Ͳ 68
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 11 44% 6 22%8amͲ10am 16 21%Ͳ NA 8amͲ10am 7 10%
NoonͲ2pm 25 100% 26 96%NoonͲ2pm 68 87%Ͳ NA NoonͲ2pm 58 85%
7pmͲ9pm 25 100% 22 81%7pmͲ9pm 78 100%Ͳ NA 7pmͲ9pm 51 75%
MidnightͲ2am 5 20% 2 7%MidnightͲ2am 17 22%Ͳ NA MidnightͲ2am 11 16%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
15 41 56 46 Ͳ 46 90 Ͳ 90
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 2 13% 26 63%8amͲ10am 5 11%Ͳ NA 8amͲ10am 31 34%
NoonͲ2pm 8 53% 39 95%NoonͲ2pm 45 98%Ͳ NA NoonͲ2pm 63 70%
7pmͲ9pm 14 93% 21 51%7pmͲ9pm 45 98%Ͳ NA 7pmͲ9pm 86 96%
MidnightͲ2am 0 0% 2 5%MidnightͲ2am 0 0%Ͳ NA MidnightͲ2am 4 4%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
48 Ͳ 48 86 Ͳ 86 51 Ͳ 51
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 24 50%Ͳ NA 8amͲ10am 24 28%Ͳ NA 8amͲ10am 11 22%
NoonͲ2pm 46 96%Ͳ NA NoonͲ2pm 67 78%Ͳ NA NoonͲ2pm 47 92%
7pmͲ9pm 48 100%Ͳ NA 7pmͲ9pm 84 98%Ͳ NA 7pmͲ9pm 51 100%
MidnightͲ2am 10 21%Ͳ NA MidnightͲ2am 4 5%Ͳ NA MidnightͲ2am 9 18%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
05353 NANANA Ͳ 34 34
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am Ͳ NA 25 47%8amͲ10am 0 NANANA 8amͲ10am Ͳ NA
NoonͲ2pm Ͳ NA 37 70%NoonͲ2pm 15 NA NA NA NoonͲ2pm Ͳ NA
7pmͲ9pm Ͳ NA 25 47%7pmͲ9pm 14 NA NA NA 7pmͲ9pm Ͳ NA
MidnightͲ2am Ͳ NA 7 13%MidnightͲ2am1 NANANA MidnightͲ2am Ͳ NA
Hourly Permit Total
28 24 52
Hourly % Permit %
8amͲ10am 1 4% 4 17%
NoonͲ2pm 27 96% 14 58%
7pmͲ9pm 26 93%20 83%
MidnightͲ2am 0 0% 2 8%
Period Wed/Thur,4/02Ͳ4/03,2014
Period Period
LotOEmersonHigh
Note:Valetparkingatthislocation;carswerebeingdoubleͲparked.
Wed/Thur,4/02Ͳ4/03,2014Wed/Thur,4/02Ͳ4/03,2014
LotC
Period Wed/Thur,4/02Ͳ4/03,2014 Period
WC
Period
LotS/L
Wed/Thur,4/02Ͳ4
CC
Wed/Thur,4/02Ͳ4/03,2014 Wed/Thur,4/02Ͳ4
LotB
Period Wed/Thur,4/02Ͳ4/03,2014
Period
LotAEmersonLytton
Wed/Thur,4/02Ͳ4
Period Wed/Thur,4/02Ͳ4
LotHLotF
Wed/Thur,4/02Ͳ4/03,2014 Period Wed/Thur,4/02Ͳ4
LotPHighHamiltonLotDHamiltonWaverley
Period Wed/Thur,4/02Ͳ4/03,2014 Period
Period Wed/Thur,4/02Ͳ4
LotNͲEmersonRamona
LotEͲGilmanBryantLotM
Period Wed/Thur,4/02Ͳ4/03,2014
Period Wed/Thur,4/02Ͳ4/03,2014
Period
LotGͲEmersonRamona
Period Wed/Thur,4/02Ͳ4/03,2014
LotT
Period Wed/Thur,4/02Ͳ4/03,2014
LotK
Period Wed/Thur,4/02Ͳ4/03,2014
LotR
DowntownParkingStructureCapacityUseTrendsͲHourlyandPermitParkingSpaces
OffͲStreetParkingOccupancyͲ4/25,2014
LotQ
Hourly Permit Total Hourly Permit Total Hourly Permit Total
77 134 211 Ͳ 134 134 381 307 688
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 33 43% 89 66%8amͲ10am N/A NA 48 36%8amͲ10am 169 44%
NoonͲ2pm 69 90% 99 74%NoonͲ2pm N/A NA 115 86%NoonͲ2pm 174 46%
4pmͲ6pm 75 97% 76 57%4pmͲ6pm N/A NA 67 50%4pmͲ6pm 302 79%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
201 388 589 187 519 706 63 Ͳ 63
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 41 20% 289 74%8amͲ10am 146 78% 124 24%8amͲ10am 12 19%
NoonͲ2pm 90 45% 321 83%NoonͲ2pm 175 94% 287 55%NoonͲ2pm 45 71%
4pmͲ6pm 105 52% 360 93%4pmͲ6pm 180 96% 239 46%4pmͲ6pm 39 62%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
25 27 52 78 Ͳ 78 68 Ͳ 68
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 18 72% 10 37%8amͲ10am 45 58%Ͳ NA 8amͲ10am 44 65%
NoonͲ2pm 24 96% 27 100%NoonͲ2pm 66 85%Ͳ NA NoonͲ2pm 42 62%
4pmͲ6pm 24 96% 24 89%4pmͲ6pm 78 100%Ͳ NA 4pmͲ6pm 61 90%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
15 41 56 46 Ͳ 46 90 Ͳ 90
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 10 67% 28 68%8amͲ10am 42 91%Ͳ NA 8amͲ10am 67 74%
NoonͲ2pm 13 87% 32 78%NoonͲ2pm 34 74%Ͳ NA NoonͲ2pm 69 77%
4pmͲ6pm 14 93% 36 88%4pmͲ6pm 35 76%Ͳ NA 4pmͲ6pm 85 94%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
48 Ͳ 48 86 Ͳ 86 51 Ͳ 51
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am 6 13%Ͳ NA 8amͲ10am 68 79%Ͳ NA 8amͲ10am 34 67%
NoonͲ2pm 41 85%Ͳ NA NoonͲ2pm 80 93%Ͳ NA NoonͲ2pm 39 76%
4pmͲ6pm 39 81%Ͳ NA 4pmͲ6pm 78 91%Ͳ NA 4pmͲ6pm 17 33%
Hourly Permit Total Hourly Permit Total Hourly Permit Total
05353 NA36NA Ͳ 34 34
Hourly % Permit %Hourly % Permit %Hourly % Pe
8amͲ10am Ͳ NA 23 43%8amͲ10am N/A NA 23 64%8amͲ10am Ͳ NA
NoonͲ2pm Ͳ NA 26 49%NoonͲ2pm N/A NA 27 75%NoonͲ2pm Ͳ NA
4pmͲ6pm Ͳ NA 24 45%4pmͲ6pm N/A NA 14 39%4pmͲ6pm Ͳ NA
Hourly Permit Total
28 24 52
Hourly % Permit %
8amͲ10am 22 79% 18 75%
NoonͲ2pm 18 64% 19 79%
4pmͲ6pm 15 54% 20 83%
Period Friday,April25
Period Period
LotOEmersonHigh
Friday,April25Friday,April25
LotC
Period
LotS/L
Friday,Apri
Period Friday,April25 Period
WC CC
Friday,April25 Friday,Apri
LotB
Period Friday,April25
Period
LotAEmersonLytton
Period Friday,Apri
LotH
Period Friday,April25 Period Friday,Apri
LotF
Friday,April25 Period Friday,Apri
LotPHighHamiltonLotDHamiltonWaverley
Period Friday,Apri
LotNͲEmersonRamona
LotEͲGilmanBryantLotXͲSheraton
Period Friday,April25
Period Friday,April25
Period
LotGͲEmersonRamona
Period Friday,April25
LotT
Period Friday,April25
LotK
Period Friday,April25
LotR
Attachment B: Off-Street Occupancy Studies
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3DUNLQJ,PSURYHPHQW5HSRUW
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Executive Summary Page 3
Goals Page 3
Recommendations Page 4
Signage Page 4
Communication Page 6
Operational Policies & Controls Page 8
• Off-Street Operations Page 8
• On-Street Operations Page 12
• On-Street Residential Operations Page 13
Conclusion Page 13
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The City of Palo Alto has hired SP+ to evaluate Downtown parking and make recommendations to improve ease of use, improve controls, and relieve congestion while supporting the goals of
the City and community stakeholders. SP+ met with City of Palo Alto Staff and Downtown parking stakeholders on April 16, 2014 and May 15, 2014 to review current parking challenges within Downtown. The group shared “issues” in Palo Alto related to parking and had a high-
level discussion about potential solutions parking management and technology strategies for off-street and on-street parking. This report provides a summary of the goals identified at the meeting and SP+’s recommendations on potential solutions.
*RDOV
Improve Parking Controls: Prioritize Parking in the Commercial Core to Downtown Businesses
& Prioritize parking on residential streets to Residents. It is estimated that the current Visitor parking supply in the Downtown Core is sufficient to
support retail operations but is impacted by commuter employee activities due to the current parking strategies. As the City plans for Residential Priority Parking (RPP) programs, improved controls are needed to restrict parking for retail operations while making permit parking more
flexible.
Make Parking Easier for Visitors and Businesses
Palo Alto’s parking program needs to provide comprehensive parking information in a clear and
concise manner. The current parking program provides some challenges to visitors and
businesses that are new to the area due to a lack of clear parking guidance. The existing signage which highlights routes to parking facilities, although robust, lacks driver attention
making it difficult for visitors to make easy decisions regarding parking availability. The current
employee parking permit process also provides some challenges. The permit management process could be improved to improve awareness and ease of use for current employee permits
and future residential permits. Develop Solutions with Minimal Impact on Downtown Charm
Part of the charm of downtown Palo Alto is the curb appeal of the business which appear
welcoming to everyone that drives by. Branding of signage can contribute to the downtown
experience and better guide motorists to parking facilities. Innovations in revenue and access controls, without gate controls, would be preferred by many stakeholders.
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We recommend improvements to the signage, communication, and operation controls. This will
allow the city to address each item as promptly as possible.
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Improve Way Finding Signage
Improved signage and permit processing will greatly enhance the parking experience for visitors and businesses. The current signage program that utilizes industry-standard parking guidance
signage has several shortcomings:
• Visibility of Guide Signs: Standard white text on green background guide signs wash away
in the background of drivers. In addition, many of the city’s existing signs are mounted high on electrical standards or are blocked by mature trees.
• Visibility of Parking Restriction Signs: The city’s color zone system parking restriction signs
are installed parallel to street curbs making it difficult for motorists to see them until after they have parked, if they are noticed by motorists at all. Industry standard practice is to
mount signs either perpendicular or slightly angled compared to the street curb face to help
improve visibility.
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• Sign Color: The pastel colors used on the city’s downtown color zone system are difficult to
read, especially on older signs that have warn due to sun exposure. In addition, the use of smaller text on these signs (designed to educate motorists on legal parking duration) make
them difficult to read. Many motorists whom have been cited for parking longer than the allowable color zone system have noted to the city that they did not understand the system. This may have a long-term impact to retail operations of the downtown.
Palo Alto Garage Entrance Signage San Jose Garage Entrance Signage
• Parking Guidance System (PGS): Customers currently have to drive through City parking
facilities to determine the availability of parking and at peak demand periods some of these customers need to drive through more than one facility before finding a parking space. PGS
programs utilize vehicle count systems installed at facilities to communicate parking
availability to customers through strategically placed street signage. These systems typically require either metal detection equipment (called loops) or optical count sensors to
be installed in the entrance and exit lanes. This count equipment would be connected to a
server with software that would track occupancy and send count information to dynamic PGS signs that would be installed at key traffic intersections. Following is an example of a
PGS sign in San Jose. Additional examples of PGS signs from other California municipalities are included in Attachment A.
The City has developed a comprehensive list of the guidance signs throughout Downtown which can be utilized to expedite the process for upgrading the signs. Successful past signage
programs such as the Parking Banner program should be integrated with any system wide updates.
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Implementing a new branding program for downtown parking that clearly identifies the parking
facilities would address all of the City’s goals. Concepts of innovative parking branding signs are provided in Attachment A. The development of a branding program also introduces an opportunity for public engagement and creates opportunities to highlight additional parking
features such as Electric Vehicle, Accessible, and Bicycle Parking, all of which are already available Downtown. The new branding program should consist of high contrast sign colors that
are consistent throughout the city with simplified instructions. Way finding sings should be
placed at key intersections and facility entrances should be clearly identified with curbside or building mounted signage. Dynamic way finding signage, typically a strategy of more robust
Parking Guidance Systems (PGS) can complement static way finding signage. Examples of
PGS signs from other California municipalities are included in Attachment A.
Existing sign installations should be manually surveyed and signs that are mounted parallel to
the street curb should be rotated to help improve motorist’s visibility.
&RPPXQLFDWLRQ
Enhance City Website & Internet Presence
The City website currently has limited parking information available for visitors, employees, and residents, and, the City does not have an Application (App) to assist customers.
An all-inclusive online tool could be created to streamline the application process and the distribution of permits to various groups. This could eliminate the need for permit holders to
enter city hall to procure permits even to renew permits.
Once some of these features are added to the City’s website, businesses can link their sites to
the City’s site to help communicate parking options to their customers and employees. Business outreach programs could also be developed to advise business where to have their
visitors and employees park.
5HFRPPHQGDWLRQ1R±(QKDQFH&LW\:HEVLWH
The City should expand the functionality of its website and offer more internet based services for their customers which could support the City’s goals to Make Parking Easier, and, Improve
Parking Controls. The website could be expanded to include information about parking
programs, maps to identify the location of parking facilities, and information about local events and businesses.
An all-inclusive online tool could be created to streamline the application process and the distribution of permits to various groups. This could eliminate the need for permit holders to
enter city hall to procure permits even to renew permits.
Once some of these features are added to the City’s website, businesses can link their sites to
the City’s site to help communicate parking options to their customers and employees. Business outreach programs could also be developed to advise business where to have their
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visitors and employees park. The City’s website should also be designed to optimize it’s view
on mobile devices. The following is an example of a city website with a direct link to parking data from the visitor
tab. Examples of municipal website parking landing pages from the City of Haverhill, Massachusetts, www.ci.KDYHUKLOO.PD.us and, the City of Montclair, New Jersey
www.PRQWFODLUQMusa.org are provided in Attachment A. The City of Haverhill site has detailed
parking information including a map of available parking facilities. The City of Montclair site has information about parking rates and a link to purchase parking online.
5HFRPPHQGDWLRQ1R±'HYHORSD'RZQWRZQ3DOR$OWR3DUNLQJ$SS
A Downtown Palo Alto App for mobile devices could also be developed and would support the
City’s goal of Making Parking Easier. The App should be developed once the City’s website has
been expanded to include more parking information. The App would direct customers to convenient parking facilities, provide parking time limit and rate information and provide parking
payment options. This can be combined with effective branding signage to help advertise the
app availability for visitors entering downtown for the first time. The App can be further promoted through partnerships with local organizations such as the Chamber of Commerce and be made
available as part of the city’s roll-out of its new business registry.
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We recommend the implementation of an online permit sales program to address all of the City’s parking permit needs and streamline permit administration. Functionality to support
online permit sales should be included in any permit related RFPs.
2SHUDWLRQ3ROLFLHV &RQWUROV
Off-Street Operations
The garages currently have the first floors reserved for three hour short term customers with the
upper floors reserved for monthly permit customers. Full day visitor daily permits are also available through the City but require the customers to obtain a permit at City Hall. Parking is
provided at no charge for the short term customers and monthly permits are sold by the City.
The separate parking zones in the garages are controlled somewhat loosely through enforcement patrols by the Police Department during limited hours throughout the week.
The current permit costs for long term and daily parking should be evaluated to help determine if opportunities exist to help encourage behavior change in the parking practices of employees.
The current rates provide few options to users of varying income levels due to the high upfront cost to obtain a permit. Long term parking permits which are sold as annual passes for $466 would be more accessible if they were sold at a monthly rate.
The daily permit rate of $17.50 is very expensive for a market where the effective long term
parking rate per day is only $2.00 (based on the commuter permit rate) and with nearby
CalTrain commuter parking at only $5.00 per day. Local municipal parking rate details are included in the Rate Survey in Attachment A.
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We recommend that the City revise the three hour time limit in the garages to be consistent with the two hour time limit for the City’s surface lot operations. This would support the City’s goals
of Making Parking Easier, and, Improving Parking Controls. It is also consistent with the average visitor length of stay data that is available for two other South Bay & Peninsula cities. The City of San Jose experiences average lengths of say at non-convention facilities of 1 hour
and 40 minutes or less. The City of San Mateo experiences average visitor length of stays under two hours. Local municipal parking rate details are included in the Rate Survey in
Attachment A.
5HFRPPHQGDWLRQ1R±2IIHU0RUH3HUPLW3ULFLQJ2SWLRQV
We recommend offering a larger variety of permit pricing options to include monthly permits, employee permits, and daily permits. This would support the City’s goal to Make Parking
Easier.
• Monthly Permits: We recommend offering a monthly rate and a discounted annual rate.
• Employee Permits: Long term parking permits could be assigned to specific facilities or on-
street parking zones. The City can explore the option of tiered parking permits so that lower-cost permits are available only to park upper floors of garages where permit
occupancy is lower than other floors or at parking facilities farther from the downtown core. Formalizing temporary permits for Construction Worker permits could be provided at discounted rates with an authentication process.
• Daily Permits: We recommend offering daily parking permits for visitors, low wage workers,
and construction workers online through a custom permit processing system, or, on-site
though the use of an access control system, at rates that are more appropriate. Local municipal parking rate details are included in the Rate Survey in Attachment A.
5HFRPPHQGDWLRQ1R±(OLPLQDWH&RORU&RGHG=RQHV
The distribution of parking between short term and long term users should also be evaluated at this time to support all of the City’s goals. We recommend eliminating the colored zones which
were intended to restrict long term use but are regularly used by long term customers who get
around the requirements by moving their vehicles or taking calculated risks of citation based on the perception of loose enforcement. We recommend establishing some visitor-only facilities
and possibly some long term only facilities. Pricing differences can also be utilized to
incentivize the public to take advantage of lower cost options in less utilized facilities. This should be included with an RFP to address the other signage recommendations in this report.
5HFRPPHQGDWLRQ1R±,PSOHPHQW2QVLWH2II6WUHHW3DLG3DUNLQJ2SWLRQV
We recommend that the City develop a program that would enable visitors to more easily obtain
and pay for daily access beyond the time limit and tighten controls to improve compliance with the City’s intended policies. We recommend that the City pursue both gated and gateless
operation options to determine the most viable and cost effective solution. With either type of paid parking operation, the City may have increased operational costs associated with
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administration of the paid parking system, monitoring equipment, auditing revenue collections,
and coordinating parking needs with local stakeholders. This would support the City’s goals to Make Parking Easier, and, Improve Parking Controls. Local municipal parking rate details are included in the Rate Survey in Attachment A.
• Gated Garage Operations: Gated operations are the traditional method for controlling
access and collecting parking fees. These operations use equipment technology that is readily available and proven in the industry. While this type of equipment would support the City’s goals to Improve Parking Controls, and, Make Parking Easier for Visitors and
Businesses, some stakeholders believe it would have a negative impact on the Downtown Charm.
Implementation of gated garage operations would require the installation of barrier gates in the entrance and exit lanes. The entrance lanes would also have a machine that would read
monthly parking access cards and dispense visitor tickets. The exit lanes would have
machines that would read monthly parking access cards and process prepaid visitor tickets or accept credit card payments. Pay station machine(s) to enable visitors to pay before they
exit would be placed in elevator lobbies or other primary pedestrian entry and exit point(s).
With this type of system, visitors would pull into the garage, take a ticket from the machine which would trigger the gate to open, and then pull into the garage and park. Signage in the
entrance lanes and throughout the garage would instruct visitors to take their tickets with them and prepay before exiting. When visitors return to the garage, signage will direct them to pay for their parking at the pay station before exiting, and, once they reach the exit lane
they will enter their ticket into the machine which will open the gate if there are no outstanding fees due, or, will instruct them to pay with a credit card.
Gated Garage Equipment Example
Since the gates will control access and compel customers to comply with parking rates,
parking enforcement would not be needed. Therefore, we estimate that the City could
somewhat reduce its enforcement costs if the this type of operation is implemented.
• Gateless Garage Operations: The use of gateless equipment would meet all of the City’s goals but is not as readily available and could have higher ongoing operating costs. There
are two types of License Plate Recognition (LPR) gateless operations that could be
considered. With these types of operations, customers would have the option of paying to
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park longer than the free period by using an onsite pay station or a parking application
(App).
P Static LPR Operation with Active Enforcement: Static LPR would meet all of the
City’s goals but would maintain or increase the City’s recurring operating costs for enforcement.
This operation would use license plate scanning equipment in the entrance and exit lanes and would require enforcement staff. The scanning equipment would be
connected to a server with software that would track vehicle length of stay and
payment information. Pay station machine(s) would be placed in elevator lobbies or other primary pedestrian entry and exit point(s) to enable visitors to pay for parking.
A remote payment App for smart phones would also be implemented to enable
customers to process payments directly from their phones.
Enforcement staff would be notified by the system when a vehicle has exceeded the
free or paid parking limit and enforcement staff would need to be dispatched to the facility to issue a ticket.
With this type of system, visitors would simply pull into the garage and park. Signage in the entrance lanes and throughout the garage would instruct visitors to
make note of their license plate and that they must process a payment at the pay station or through the remote payment App if they exceed the time limit for free parking.
P Static LPR Operation with Passive Enforcement: An LPR operation with passive
enforcement would meet all of the City’s goals and would have low recurring
operating costs. However, it would require higher parking rates to recoup the cost of citation processing, and, it would rely on technology that is relatively new to the
market and may not be immediately available.
This operation would use license plate scanning equipment in the entrance and exit
lanes and payment options that are the same as the equipment described above for
the LPR operation with active enforcement. However, with this type of operation, enforcement staff would not be required.
Access would be controlled through the distribution of parking fee invoices that would be automatically mailed to customers that the system observed entering and exiting
without processing a payment. This technology would utilize the Department of Motor Vehicles to enforce payment of parking invoices by restricting vehicle registration for customers that have not paid their parking fees.
The processing costs to mail invoices to customers that exit without paying onsite or
online for parking will be approximately $5.00 for each invoice. These processing
costs would need to be added to the City’s target revenue per transaction and would likely require higher parking rates.
Since parking invoices will be automatically distributed to customers that do not pay before exiting, parking enforcement would not be needed. Therefore, we estimate
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that the City could somewhat reduce its enforcement costs if the this type of
operation is implemented.
• Gateless Surface Lot Operations: We recommend that the City install pay station machines on the surface lots to enable customers to pay to extend their parking beyond the free period. With this type of operation one or two pay station machines would be strategically
placed on each surface lot. With this type of operation, visitors would simply pull into the lot and park. Signage in the
entrance lanes and throughout the lot would instruct visitors to make note of their license plate and that they must process a payment at the pay station or through the remote payment App if they exceed the time limit for free parking.
Enforcement for this type of operation would require regular patrols to issue citations to
vehicles that have exceeded the free period without processing a payment. This is similar to
the current enforcement requirements and is not expected to have an impact on enforcement costs.
• Equipment and Operating Cost Analysis for Gated & Gateless Operations:
Equipment Administrative* Enforcement** Total Operation
Gated Garages - Gateless Pay & Display Lots w/ Active Enforcement $1,100,000 $150,000 ($35,000)$115,000
Gateless Garages w/ Static LPR - Gateless Pay & Display Lots
Active Enforcement $600,000 $150,000 $0 $150,000
Passive Enforcement $500,000 $150,000 ($35,000)$115,000
Estimated Equipment Investment and New Annual Operating CostsType of Operation
On-Street Operations
Current enforcement efforts are hindered by manual processes and complex parking zone rules
which have resulted in relatively low compliance. Additionally, the presence of enforcement officers is viewed by businesses and customers as a somewhat stern presence in the downtown area.
5HFRPPHQGDWLRQ1R ±(QKDQFH2Q6WUHHW3DUNLQJ(QIRUFHPHQW
The current enforcement operation is relying on outdated technology. Advanced LPR equipment could be utilized to expedite patrols and facilitate more visitor support from the enforcement
staff. We recommend improving the enforcement technology to reduce enforcement costs. This
would support all of the City’s goals.
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On-Street Residential Operations
The City is developing a RPP policy that may help to normalize parking fluctuation in and around downtown for downtown visitors and employees. The evaluation of RPP is not within the
scope of this study but is being referenced as an active parking strategy currently under development. The implementation of RPP and the recommendations in this report will provide the City with a basis on which to formulate a coordinated parking management plan for the
downtown and vicinity.
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Working with the City and local stakeholders, we have identified three goals to improve the parking in Downtown Palo Alto. The goals are to Improve Parking Controls, Make Parking
Easier, and Develop Solutions with Minimal Impact on Downtown Charm. The
recommendations outlined in this report will address all of the City’s goals by improving Signage, Communication, and Operations. We recommend that the City pursue one RFP for all
of these categories to ensure that one successful bidder is responsible for delivering a
comprehensive and cohesive solution to the City’s parking needs.
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City Name Regular $ Time Max.
Burlingame Free 2 Hours $0.50 Hour
San Mateo $42.50 $0.50 Hour N/A
San Carlos $0.25 Hour $2.50
Redwood City $60.00 $30.00 Low Demand $0.50 Hour N/A Free Eve & Sun
Mountain View $50.00 Free 4 HoursSan Jose $100.00 $1.00 20 Min $20.00 $5.00 Eve/W/E
Other RatesOther
3HQLQVXODDQG6RXWK%D\5DWH6XUYH\
Visitor RatesMonthly Parking
Professional Services Rev. Feb. 2014 1
CITY OF PALO ALTO CONTRACT NO. C15156400 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND HUNT DESIGN, INC.
FOR PROFESSIONAL SERVICES
This Agreement is entered into on this 9th day of February, 2015, (“Agreement”)
by and between the CITY OF PALO ALTO, a California chartered municipal corporation
(“CITY”), and HUNT DESIGN, INC., a California corporation, located at 25 N. Mentor
Avenue, Pasadena, California, 91106, Telephone (626)793-7847 ("CONSULTANT").
RECITALS
The following recitals are a substantive portion of this Agreement.
A. CITY intends to develop a new parking wayfinding system and new parking signage at garage entrances (“Project”) and desires to engage a consultant to provide services in connection
with the Project (“Services”).
B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services.
C. CITY in reliance on these representations desires to engage CONSULTANT to provide
the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement.
NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions,
in this Agreement, the parties agree:
AGREEMENT
SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in
Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The
performance of all Services shall be to the reasonable satisfaction of CITY.
SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through February 8, 2016
unless terminated earlier pursuant to Section 19 of this Agreement.
SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term
of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and
made a part of this Agreement. Any Services for which times for performance are not specified
in this Agreement shall be commenced and completed by CONSULTANT in a reasonably
prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall
not preclude recovery of damages for delay if the extension is required due to the fault of
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CONSULTANT.
SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to
CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed One Hundred Ten Thousand Dollars ($110,000.00). The applicable rates and schedule of payment are set out in
Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of
this Agreement.
Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services
performed without the prior written authorization of CITY. Additional Services shall mean any
work that is determined by CITY to be necessary for the proper completion of the Project, but
which is not included within the Scope of Services described in Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly
invoices to the CITY describing the services performed and the applicable charges (including an
identification of personnel who performed the services, hours worked, hourly rates, and
reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY.
CONSULTANT shall send all invoices to the City’s project manager at the address specified in
Section 13 below. The City will generally process and pay invoices within thirty (30) days of
receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be
performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT
represents that it possesses the professional and technical personnel necessary to perform the
Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all
licenses, permits, qualifications, insurance and approvals of whatever nature that are legally
required to perform the Services.
All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of
similar knowledge and skill engaged in related work throughout California under the same or
similar circumstances.
SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that
may affect in any manner the Project or the performance of the Services or those engaged to
perform Services under this Agreement. CONSULTANT shall procure all permits and licenses,
pay all charges and fees, and give all notices required by law in the performance of the Services.
SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any
and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY
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gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or
other design documents to construct the Project, CONSULTANT shall be obligated to correct
any and all errors, omissions or ambiguities discovered prior to and during the course of
construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works
project, CONSULTANT shall submit estimates of probable construction costs at each phase of
design submittal. If the total estimated construction cost at any submittal exceeds ten percent
(10%) of the CITY’s stated construction budget, CONSULTANT shall make recommendations to the CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to
CITY.
SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act
as and be an independent contractor and not an agent or employee of the CITY.
SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of
CONSULTANT’s obligations hereunder without the prior written consent of the city manager.
Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any
assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of
the work to be performed under this Agreement without the prior written authorization of the city
manager or designee.
CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning
compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a
subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval
of the city manager or his designee.
SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Wayne Hunt as the
project manager to have supervisory responsibility for the performance, progress, and execution
of the Services and Jennifer Bressler as the project Designer to represent CONSULTANT during
the day-to-day work on the Project. If circumstances cause the substitution of the project
director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be
subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s
request, shall promptly remove personnel who CITY finds do not perform the Services in an
acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of
the Project or a threat to the safety of persons or property.
The City’s project manager is Jessica Sullivan, Planning & Community Environment
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Department, Transportation Division, 250 Hamilton Avenue, Palo Alto, CA 94303, Telephone
(650) 329-2453. The project manager will be CONSULTANT’s point of contact with respect to
performance, progress and execution of the Services. The CITY may designate an alternate
project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including
without limitation, all writings, drawings, plans, reports, specifications, calculations, documents,
other materials and copyright interests developed under this Agreement shall be and remain the
exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other
intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if
any, shall make any of such materials available to any individual or organization without the
prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work.
SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time
during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this
Agreement.
SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect,
indemnify, defend and hold harmless CITY, its Council members, officers, employees and
agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability
of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to
performance or nonperformance by CONSULTANT, its officers, employees, agents or
contractors under this Agreement, regardless of whether or not it is caused in part by an
Indemnified Party.
16.2. Notwithstanding the above, nothing in this Section 16 shall be construed
to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the
active negligence, sole negligence or willful misconduct of an Indemnified Party.
16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall
survive the expiration or early termination of this Agreement.
SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any
covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions,
ordinance or law, or of any subsequent breach or violation of the same or of any other term,
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covenant, condition, provision, ordinance or law.
SECTION 18. INSURANCE.
18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in
Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement
naming CITY as an additional insured under any general liability or automobile policy or
policies. 18.2. All insurance coverage required hereunder shall be provided through
carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or
authorized to transact insurance business in the State of California. Any and all contractors of
CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above.
18.3. Certificates evidencing such insurance shall be filed with CITY
concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the
insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of
the cancellation or modification. If the insurer cancels or modifies the insurance and provides
less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for
ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing
Manager during the entire term of this Agreement.
18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification
provisions of this Agreement. Notwithstanding the policy or policies of insurance,
CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss
caused by or directly arising as a result of the Services performed under this Agreement,
including such damage, injury, or loss arising after the Agreement is terminated or the term has expired.
SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES.
19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior
written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will
immediately discontinue its performance of the Services.
19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but
only in the event of a substantial failure of performance by CITY.
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19.3. Upon such suspension or termination, CONSULTANT shall deliver to the
City Manager immediately any and all copies of studies, sketches, drawings, computations, and
other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY.
19.4. Upon such suspension or termination by CITY, CONSULTANT will be
paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a
default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that
portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such
determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25.
19.5. No payment, partial payment, acceptance, or partial acceptance by CITY
will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES.
All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows:
To CITY: Office of the City Clerk
City of Palo Alto
Post Office Box 10250 Palo Alto, CA 94303
With a copy to the Purchasing Manager
To CONSULTANT: Attention of the project director
at the address of CONSULTANT recited above
SECTION 21. CONFLICT OF INTEREST.
21.1. In accepting this Agreement, CONSULTANT covenants that it presently
has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services.
21.2. CONSULTANT further covenants that, in the performance of this
Agreement, it will not employ subconsultants, contractors or persons having such an interest.
CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance
with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the
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State of California.
21.3. If the Project Manager determines that CONSULTANT is a “Consultant”
as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act.
SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section
2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status,
familial status, weight or height of such person. CONSULTANT acknowledges that it has read
and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to
Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment.
SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO
WASTE REQUIREMENTS. CONSULTANT shall comply with the City’s Environmentally
Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the City’s Zero Waste
Program. Zero Waste best practices include first minimizing and reducing waste; second,
reusing waste and third, recycling or composting waste. In particular, Consultant shall comply
with the following zero waste requirements:
All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices,
reports, and public education materials, shall be double-sided and printed on a
minimum of 30% or greater post-consumer content paper, unless otherwise
approved by the City’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-
consumer material and printed with vegetable based inks.
Goods purchased by Consultant on behalf of the City shall be purchased in
accordance with the City’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and
packaging. A copy of this policy is on file at the Purchasing Office.
Reusable/returnable pallets shall be taken back by the Consultant, at no additional
cost to the City, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION
24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the
following fiscal year, or (b) at any time within a fiscal year in the event that funds are only
appropriated for a portion of the fiscal year and funds for this Agreement are no longer available.
This section shall take precedence in the event of a conflict with any other covenant, term,
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condition, or provision of this Agreement.
SECTION 25. MISCELLANEOUS PROVISIONS.
25.1. This Agreement will be governed by the laws of the State of California. 25.2. In the event that an action is brought, the parties agree that trial of such
action will be vested exclusively in the state courts of California in the County of Santa Clara,
State of California.
25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that
action. The prevailing party shall be entitled to recover an amount equal to the fair market value
of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third
parties. 25.4. This document represents the entire and integrated agreement between the
parties and supersedes all prior negotiations, representations, and contracts, either written or oral.
This document may be amended only by a written instrument, which is signed by the parties.
25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and
consultants of the parties.
25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect.
25.7. All exhibits referred to in this Agreement and any addenda, appendices,
attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement.
25.8 If, pursuant to this contract with CONSULTANT, City shares with
CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d)
about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City
immediately upon learning that there has been a breach in the security of the system or in the
security of the Personal Information. CONSULTANT shall not use Personal Information for
direct marketing purposes without City’s express written consent.
25.9 All unchecked boxes do not apply to this agreement.
25.10 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities.
25.11 This Agreement may be signed in multiple counterparts, which shall, when
executed by all the parties, constitute a single binding agreement
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IN WITNESS WHEREOF, the parties hereto have by their duly authorized
representatives executed this Agreement on the date first above written.
CITY OF PALO ALTO
APPROVED AS TO FORM:
HUNT DESIGN, INC.
Attachments:
EXHIBIT “A”: SCOPE OF WORK
EXHIBIT “B”: SCHEDULE OF PERFORMANCE
EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS
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EXHIBIT “A” SCOPE OF SERVICES
CITY is contracting with CONSULTANT for the development of a new parking wayfinding system and new parking signage at garage entrances. The project includes the following elements and services:
Elements:
The following elements will be studied and addressed:
Vehicular directional signage, bicycle-related parking signage
Major identification signs for six garages, bicycle-related parking signage
Major identification signs for twelve surface lots
Bicycle-related parking signage
EV charging/parking signage
Parking directional signage
Services:
1. Evaluation and gap analysis of existing signage
2. Design of a new City of Palo Alto parking brand that will be used on CITY parking
notices and material, mobile apps and website
3. Design of new and replacement parking wayfinding signage that will integrate with new
CITY logo
4. Development of mock-up signage
5. Construction bid reviews
6. Construction administration for the installation of the new signage
Scope of Work
Phase 1 – Inventory, Analysis and City Orientation
1. CONSULTANT will conduct a kick-off meeting with CITY staff and stakeholders to
help clarify the goals of the program, identify likely issues, challenges and schedule.
2. CONSULTANT shall review and develop a working knowledge of community history,
culture, arts and commerce within CITY, and become familiar with other branding in use
by CITY.
3. CONSULTANT shall conduct an inventory of representative existing parking-related
signage and evaluate practicality of reuse of portions existing signage infrastructure –
poles, hardware, etc.
4. CONSULTANT shall identify primary circulation routes, intersections and decision
points leading to parking resources.
5. CONSULTANT shall identify different user groups and specific wayfinding needs
including accessibility, first-time visitors, senior citizens, employees, residents and
others.
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6. CONSULTANT shall evolve a wayfinding logic and strategy, including a ‘family’ of
signage types.
7. CONSULTANT shall prepare a preliminary Sign Location/Wayfinding Plan.
8. CONSULTANT shall work from industry sources and survey parking signage and brands
in other communities to build a state-of-the-art context for the new Palo Alto parking
brand design.
9. CONSULTANT shall summarize work and results in a written report.
Phase 1 Work Products: Wayfinding Analysis and Recommendations; Survey of existing
signage; Preliminary Sign Location Plan; Sign types definition; Written report.
Phase 2 - System Design Development
1. CONSULTANT shall develop design concepts to express a Palo Alto parking brand and
wayfinding strategy, using images and themes from local and environmental sources,
colors, visual icons and other resources. CONSULTANT shall develop design themes for
visual form for each sign type. Included will be studies of size, scale, typeface, color,
material, sequence, and relationship to architecture, landscape and streetscape elements.
CONSULTANT shall present at least three signage system concept options for review.
2. CONSULTANT shall refine designs based on feedback from CITY staff and
stakeholders, and develop best of conceptual designs into recommended design theme.
CONSULTANT shall prepare scale models of selected designs.
3. CONSULTANT shall assist CITY in facilitating public review, including any required
meetings with CITY Council and/or the Planning and Transportation Commission.
4. CONSULTANT shall assist CITY in presentation and interaction with design review
agencies, including the Architectural Review Board (ARB).
5. CONSULTANT shall refine preferred concept design theme into final design
recommendation.
6. CONSULTANT shall refine preferred concept design theme into final, detailed designs,
including the addition of secondary sign types (Design Development).
7. CONSULTANT shall assist in procurement of selected full-size mock-ups for review.
8. CONSULTANT shall prepare final draft signage/wayfinding plan.
9. CONSULTANT shall prepare project preliminary cost estimate for new signage
fabrication and construction.
Phase 2 Work Products: Presentations of designs; Scale models of potential sign types and
concepts; Statement of Probable Cost for fabrication, installation and maintenance of the
system; Final draft signage/wayfinding plan.
Phase 3 - Pre-Construction Services
1. CONSULTANT shall prepare design-intent fabrication and installation drawings
including details, sections and elevations.
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2. CONSULTANT shall prepare final Sign Location Plans.
3. CONSULTANT shall prepare technical fabrication and performance Specifications.
4. CONSULTANT shall prepare artwork for multi-media application.
5. CONSULTANT shall develop phasing plan options.
6. CONSULTANT shall revise cost estimate as necessary and present full program to CITY
Council for approval, if required.
7. CONSULTANT shall assist in combining documents with CITY procurement
information to form Construction Bid Documents necessary to solicit bids and select sign
vendor.
Phase 3 Work products: Design-intent drawings, (exact dimensions, letter heights, materials,
mounting details, color specifications, and material performance standards) with written
statement regarding rationale for design choices, materials, method of fabrication, and how
systems can be modified over time; Sign location plans; Sign messages; Specifications.
Phase 4 - Construction Administration
1. CONSULTANT shall respond to questions from bidders/sign contractors.
2. CONSULTANT shall assist in reviewing bids from sign contractors for adherence to
scope of work, and review any suggested alternates.
3. CONSULTANT shall review shop drawings, color and materials samples and mock-ups
provided by sign contractors.
4. CONSULTANT shall conduct shop visits to inspect work in progress.
5. CONSULTANT shall assist in administration and inspection for installation of typical
signage elements.
6. CONSULTANT shall prepare a “punch list” of items requiring post-installation attention
by sign contractor.
7. CONSULTANT shall prepare an Palo Alto Parking Signage Reference Manual
documenting the program and defining procedures for program reordering, expansion and
maintenance, as well as design guidelines for future signage projects.
Phase 4 Work products: Punch lists and Palo Alto Parking Signage Reference Manual, which
should include a system summary, a map of sign locations and content (in both GIS map and
spreadsheet format), prioritization of sign installation, shop drawings of each type of sign, rules
of thumb regarding sign placement, method of updating/replacing signs, and roles and
responsibilities of all parties involved in project (tracking, maintenance, ordering, etc.)
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EXHIBIT “B” SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY
so long as all work is completed within the term of the Agreement. CONSULTANT shall
provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt
of the notice to proceed. Milestone Completion
No. of Days/Weeks
From NTP
1. PHASE 1 4 Weeks
(Inventory, Analysis and City Orientation) 2. PHASE 2 5 Weeks
(System Design Development)
3. PHASE 3 5 Weeks (Pre-Construction Services)
4. PHASE 4 TBD
(Construction Administration)
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EXHIBIT “C” COMPENSATION
The CITY agrees to compensate the CONSULTANT for professional services performed
in accordance with the terms and conditions of this Agreement, and as set forth in the
budget schedule below. Compensation shall be calculated based on the hourly rate
schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below.
The compensation to be paid to CONSULTANT under this Agreement for all services
described in Exhibit “A” (“Basic Services”) and reimbursable expenses shall not exceed
$110,000.00. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for
which payment would result in a total exceeding the maximum amount of compensation
set forth herein shall be at no cost to the CITY.
CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget
amounts between any of the tasks or categories listed below provided the total
compensation for Basic Services, including reimbursable expenses, does not exceed
$110,000.00.
BUDGET SCHEDULE NOT TO EXCEED AMOUNT
Task 1 $27,400.00
(Inventory, Analysis and City Orientation)
Task 2 $31,100.00
(System Design)
Task 3 $32,800.00
(Pre-Construction Services) Task 4 $13,300.00
(Construction Administration)
Sub-total Basic Services $104,600.00
Reimbursable Expenses $5,400.00
Total Basic Services and Reimbursable expenses $110,000.00
Maximum Total Compensation $110,000.00
DocuSign Envelope ID: 84FB31EE-9128-4AE6-BA17-78D882ECF956
Professional Services
Rev. Feb. 2014 15
REIMBURSABLE EXPENSES
The administrative, overhead, secretarial time or secretarial overtime, word processing,
photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost.
Expenses for which CONSULTANT shall be reimbursed are:
A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees.
B. Blueprints, computer imagery and other normal reproduction charges.
All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $2,500.00 shall be approved in
advance by the CITY’s project manager.
ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written
authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s
request, shall submit a detailed written proposal including a description of the scope of
services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum
compensation shall be negotiated and agreed to in writing by the CITY’s Project
Manager and CONSULTANT prior to commencement of the services. Payment for
additional services is subject to all requirements and restrictions in this Agreement
DocuSign Envelope ID: 84FB31EE-9128-4AE6-BA17-78D882ECF956
Professional Services
Rev Sep. 2014 16
EXHIBIT “C-1” HOURLY RATE SCHEDULE
Scope Labor Categories Est. Hours Hourly Rates Extended Rate
Phase 1
Principal
65.00
$ 160.00
$ 10,400.00
Analysis & Program Development Sign Programmer/Designer 100.00 $ 130.00 $ 13,000.00
CADtech 40.00 $ 100.00 $ 4,000.00
TOTAL NOT TO EXCEED, TASK 1 $ 27,400.00
Phase 2 Principal 70.00 $ 160.00 $ 11,200.00
System Design Sign Programmer/Designer 130.00 $ 130.00 $ 16,900.00 CADtech 30.00 $ 100.00 $ 3,000.00
TOTAL NOT TO EXCEED, TASK 2 $ 31,100.00
Phase 3 Principal 40.00 $ 160.00 $ 6,400.00
Pre-Construction Services Sign Programmer/Designer 80.00 $ 130.00 $ 10,400.00
CADtech 160.00 $ 100.00 $ 16,000.00
TOTAL NOT TO EXCEED, TASK 3 $ 32,800.00
Phase 4 Principal 15.00 $ 160.00 $ 2,400.00
Construction Administration Sign Programmer/Designer 30.00 $ 130.00 $ 3,900.00
CADtech 70.00 $ 100.00 $ 7,000.00
TOTAL NOT TO EXCEED, TASK 4 $ 13,300.00
$104,600.00
REIMBURSABLES (NTE)
In addition to the above fees, CONSULTANT is to be reimbursed for standard expenses incurred in connection with this project
at cost. Such expenses include: travel, blueprints, computer imagery, mileage and other normal reproduction charges. In-house
color printing will be charged at $2 per page up to 11”x17”; larger format will be billed at $3 per square foot. Excluded are
multiple copies of documents for distribution.
$5,400.00
Maximum Total Compensation $110,000.00
TOTAL NOT TO EXCEED
(TASKS 1--‐ 4)
DocuSign Envelope ID: 84FB31EE-9128-4AE6-BA17-78D882ECF956
Professional Services
Rev Sep. 2014 17
EXHIBIT “D” INSURANCE REQUIREMENTS
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW:
REQUIRE
D TYPE OF COVERAGE REQUIREMENT
MINIMUM LIMITS
EACH
OCCURRENCE AGGREGATE
YES
YES
WORKER’S COMPENSATION
EMPLOYER’S LIABILITY
STATUTORY
STATUTORY
YES
GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY
BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED.
$1,000,000 $1,000,000 $1,000,000
$1,000,000 $1,000,000 $1,000,000
YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED
BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED
$1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
$1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
YES
PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS,
MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE
ALL DAMAGES $1,000,000
YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY
RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN
COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY.
C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE.
III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS”
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS.
B. CROSS LIABILITY
DocuSign Envelope ID: 84FB31EE-9128-4AE6-BA17-78D882ECF956
Professional Services
Rev Sep. 2014 18
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER,
BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-
PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
NOTICES SHALL BE EMAILED OR MAILED TO:
EMAIL: InsuranceCerts@CityofPaloAlto.org
PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO
P.O. BOX 10250 PALO ALTO, CA 94303.
DocuSign Envelope ID: 84FB31EE-9128-4AE6-BA17-78D882ECF956
Parking Wayfinding
Request for Proposals
1
Introduction
The City of Palo Alto is launching integrated programs to reduce traffic and parking demand in the
Downtown core, and is also seeking to more effectively optimize and manage its existing parking supply.
Important City goals include providing improved access to information on parking and transportation
within the Downtown, and helping motorists to find available parking quickly and efficiently.
To help meet these goals, the City is accepting proposals from qualified design teams for design of
improved branding and wayfinding signage for all Downtown/University Avenue Lots and Garages. The
intent of the program is to improve visibility and utilization of the existing garages and lots by helping to
guide visitors to available parking, making clear the distinction between public lots and private lots, and
improving the customer experience for Downtown with clear, directional cues.
Background
In early 2014, City Staff received direction from Council to move forward on a number of parking‐related
initiatives for the Downtown core, including an assessment of parking garage and lot policies and the
implementation of garage technology. Goals for potential technology platforms included the following:
1. Improved parking permit management
2. Improving utilization and visibility of garages
3. Improving visitor access to information on parking and parking facilities
4. Better vehicle counting infrastructure and parking controls in garages
Implicit in these goals was also the need to improve the experience of customer coming to Downtown.
The City determined that improved parking signage and branding, in addition to parking guidance
systems (PGS) equipment, would be a crucial initial step to boosting the utilization of the garages and
visibility of parking facilities. The branding associated with new signage could also be carried through
into improved parking website design and parking‐related mobile applications as they are developed.
Project Scope and Approach
The project will include the following components:
1. Identifying location of new wayfinding and garage/lot signage to guide motorists to parking
facilities in the Downtown area. The wayfinding and signage should replace and/or supplement
existing signage and banners in the Downtown area, depending on the consultant
recommendation. Wayfinding and signage should also include potential locations for dynamic
Parking Guidance (PGS) signs for future deployment, and suggested look and feel of these signs.
2. Design of signage for all locations, including the lots and garages themselves as well as
wayfinding (directional) signs. While the technology solution to provide the parking guidance
Parking Wayfinding
Request for Proposals
2
system information is not part of this RFP, the responsive proposal should incorporate design for
signage for parking lots and garages to enable near‐term implementation of this component.
3. Development of an identifiable Palo Alto parking brand that can be incorporated in signage,
website design and mobile parking applications. The City is also interested in expanding
wayfinding for specialty parking facilities such as bicycle parking, electric vehicle charging
stations, accessible parking, and car sharing (Zipcar) facilities.
The successful respondent should be prepared to address the following issues:
1. There is currently limited directional signage identifying where to find parking facilities
2. Signage at the surface lots has colors which are hard to read
3. Signage at surface lots is parallel rather than perpendicular to the street, making the surface lots
easy to miss
4. Some signage and banners are above eye level, making it difficult to spot for motorists
5. Branding of all of the parking garages is inconsistent
Examples of some of the existing parking signage and banners are included in Appendix A.
The proposed signage and wayfinding system should be consistent, providing the city with branding for
its parking structures and lots. The consultant is urged to consider signage concepts that deliver a brand
identity, and propose three specific signage schemes for parking wayfinding that work within the larger
concept framework.
Phase 1: Analysis and Program Development
A. Conduct kickoff meeting with City stakeholders (Parking, Facilities, Operations) and establish
project schedule, milestones and any required community input
B. Inventory parking signage and locations. Evaluate feasibility of reusing existing locations, poles,
hardware on an individual location basis, and identify areas where sign clutter is a concern.
C. Identify the user(s) and their specific needs relating to parking.
D. Examine traffic patterns to determine potential identification and decision points and map
recommended gateways and entrances to Downtown that should include parking signage. In
addition, identify preferred locations for signage and Parking Guidance Systems at parking
garages and lots.
E. Determine what sign types and wayfinding elements will be needed.
Deliverables – Phase I: Analysis and Program Development
A. Provide a Wayfinding Analysis and Recommendations. The analysis should include an evaluation
of the existing parking wayfinding and signage system and a map of recommended wayfinding
Parking Wayfinding
Request for Proposals
3
locations.
B. Detailed map showing the proposed types of signs and their locations. The map will indicate
existing locations that will be reused (if any), existing locations that will not be re‐used, and new
signage locations.
Phase 2: System Design Development
A. Analyze architectural elements, materials, themes, existing plans, and the vision for Downtown
in order to develop an appropriate graphic identity for the system. Include research on other
successful branding/wayfinding programs and/or other local examples.
B. Prepare detailed designs for select sign types, including distinct prototypes to be determined.
C. Present three (3) initial design concepts to staff for review, and consideration.
D. Conduct on‐site public meeting to coordinate, and invite stakeholder groups and general public
to review design options. May also include a preliminary review by the City Council and/or
appointed governmental bodies, such as the Architectural Review Board (ARB).
E. Complete up to two rounds of refinements of preferred design concept selected by the City,
based on stakeholder and public input.
Deliverables ‐ Phase 2: System Design Development
A. Final Design Intent Drawings (exact dimensions, letter heights, materials, mounting details, color
specifications, and material performance standards) with written statement regarding rationale
for design choices, materials, method of fabrication, and how systems can be modified over
time.
B. Scaled mock‐ups of potential sign types and concepts.
C. Statement of Probable Cost for the fabrication, installation, and maintenance of the system,
including number of various sign types, and locations.
Phase 3: Pre‐Construction
A. Add detailed specifications to the final Design Intent Drawings (exact dimensions, letter heights,
materials, mounting details, color specifications, and material performance standards).
B. Prepare Sign Location Plans and submit to City for review, and revise as needed to City’s
satisfaction.
C. Develop Bid Documents for a competitive bid.
D. Verify the Statement of Probable Cost for signage fabrication and installation, and develop a
phasing plan for implementation throughout the City and major pedestrian, bicycle, and
vehicular corridors.
E. Prepare the necessary artwork for sign fabrication, and multi‐media applications.
Parking Wayfinding
Request for Proposals
4
Deliverables ‐ Phase 3: Pre‐Construction
A. Final Bid Documents necessary for a competitive bid.
B. Prepare final sign location plan.
C. Prepare the necessary artwork for sign fabrication.
D. Verification of the Statement of Probable Cost.
E. Implementation Phasing Plan that includes priorities in terms of sites, and sign location. The
plan should include details for location, such as distance from a point of interest, or conflicts
with existing signage and infrastructure.
Phase 4: Construction Administration
A. Assist the City in evaluation of the bids as necessary, and review sign samples for compliance
with the Bid Documents.
B. Review shop drawings, and color samples as necessary; consult with the City and fabricator
during fabrication and installation.
C. Conduct a final inspection at the completion of the installation to ensure appropriate
installation, location and quality of installation.
D. Document punch list items and submit to fabricator. Coordinate any required modifications.
E. Provide a Wayfinding and Signage Reference Manual that serves as a guide for reordering
signage, and maintaining the new wayfinding system. The manual should include:
a. System summary
b. Map of sign locations and content (in both GIS map and spreadsheet format)
c. Prioritization of sign installation
d. Shop drawings of each type of sign
e. Rules of thumb regarding sign placement, method of updating/replacing signs, and roles
and responsibilities of all parties involved in project (tracking, maintenance, ordering,
etc.)
Manual should be submitted in both hardcopy, and electronically. The electronic document should be in
an editable format approved by the City.
Qualifications and Proposal Submittal Requirements
It is anticipated that the selected team shall establish a clear and consistent communication framework
for the duration of the project. The proposed scope of work should include an effective project
management structure that includes regular project updates and coordination between consultant team
members. If this proposal involves a team of consultants, the lead firm and designated project manager
shall be clearly identified.
Parking Wayfinding
Request for Proposals
5
The consultant should be prepared to submit the following:
1. Firm Description: Provide a brief description of the firm including firm size and area of
specialization.
2. Project Team: Provide names and resumes of key staff who will be assigned to the project. Each
team member’s education and qualifications shall be listed. The project manager shall be clearly
identified. If different consultants will be teaming together, indicate the lead consultant.
3. Project Understanding: Provide a statement summarizing how the consultant and/or project
team is particularly qualified for this project.
4. Scope of Services: Describe the consultant’s approach and technical plan for accomplishing the
work listed herein. The Consultant is encouraged to elaborate and improve on the tasks listed in
the RFP; however, the consultant shall not delete any requested scope tasks unless specifically
noted.
5. Project Schedule: The Consultant shall submit a schedule, itemized by task, for completing the
scope of work.
6. Project Budget: The Consultant shall submit a proposed project budget itemized by task
and total project cost stated as a firm fixed fee. Labor and direct costs should be
identified by task. Hourly rates for project staff shall also be provided.
7. Comparable Projects: Description of related, recent project experience and role of key
staff.
8. References: Three (3) references, including current contact name and phone number for
similar projects.
Evaluation Criteria
Proposals will be evaluated according to the following:
1. Qualifications of firm and project team members
2. Previous related work and references
3. Responsiveness to required project work
4. Proposal price
A B C D
E
F
GH
I
J
A
B C D
E
G F
H
IJ
Appendix A: Examples of Downtown Palo Alto Parking Signage
ORDINANCE NO. xxxx
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING
THE BUDGET FOR FISCAL YEAR 2015 TO PROVIDE ADDITIONAL
APPROPRIATION OF $104,600 IN THE UNIVERSITY AVENUE PARKING
PERMIT FUND AND TRANSFER THAT AMOUNT TO THE CAPITAL
IMPROVEMENT FUND FOR THE CAPITAL IMPROVEMENT PROJECT
PARKING WAYFINDING (PL-15004) TO FUND A PARKING WAYFINDING
DESIGN CONTRACT FOR THE DOWNTOWN COMMERCIAL CORE.
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. To alleviate downtown congestion, improving parking wayfinding emerged as
a key strategy; and
C. In late 2014, staff issued a Request for Proposal for parking wayfinding design
services; and
D. The proposal from Hunt Design in the amount of $104,600 is the most
advantageous proposal for this service.
SECTION 2. Therefore, the sum of One Hundred and Four Thousand and Six
Hundred Dollars ($104,600) is hereby appropriated and transferred from the University
Avenue Parking Permit Fund to the Capital Improvement Fund for the Parking
Wayfinding Project (PL- 15004) to fund the parking wayfinding design contract for the
downtown commercial core.
SECTION 3. As provided in Section 2.04.330 of the Palo
Alto Municipal Code, this ordinance shall become effective upon adoption.
SECTION 4. 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 Planning and Community
Services
City of Palo Alto (ID # 5270)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Contract Amendment with West Coast Arborists, Inc. and
related Budget Amendment Ordinance
Title: Approval of Amendment No. 1 to Contract #C13148075 with West
Coast Arborists, Inc., for an Additional Amount of $182,410 for a Third Year
of a Three Year Term for a Total Amount Not to Exceed $1,232,410 for Tree
Pruning and Removal Services; and Adoption of a related Budget Amendment
Ordinance in the General Fund
From: City Manager
Lead Department: Public Works
Recommended Motion
Staff recommends that Council consider the following motion:
1.Approve and authorize the City Manager to execute,Amendment No. 1 to
Contract C13148075 with West Coast Arborists, Inc. for an additional
amount of $182,410 for the third year of a three-year term for a total
amount not to exceed $1,232,410 for Tree Pruning and Removal Services
and;
2.Adopt the attached Budget Amendment Ordinance (BAO) in the amount of
$160,490 (Attachment A) to provide an appropriation for a contract
increase for Tree Pruning and Removal Services.
Background
The increased workload listed below has put a strain on Urban Forestry staff
capacity to complete pruning work requests in a timely manner, and has created
an 8-12 month backlog of requested pruning work. In order to compensate for
this deferred maintenance, meet the annual goal of pruning 5,054 trees, and
regain the high level of service expected from the City’s residents, an increase of
City of Palo Alto Page 2
$182,410 to the contract is recommended. This amount will allow WCA to assist
with outstanding pruning work orders, and eliminate the backlog in service
request pruning from FY 2014 and the anticipated backlog from FY 2015.
The Department of Public Works,Urban Forestry Section is responsible for
maintaining the health of 35,378 City-owned trees. Tree pruning is the most
important maintenance task for keeping this population healthy. The purpose of
tree pruning is to improve tree structure, enhance vigor, and maintain safe
conditions for all motorists and pedestrians as they move through the street
corridor. The benefits from an established tree pruning program on a regular
cycle include:
§The enhancement of tree condition and shape, and preservation of value
§A reduction in service request calls
§A reduction in the number or severity of storm related damages
§A reduction in power line clearance related interference
§A reduction in the number of trees which undergo drastic changes in their
appearance from before to after pruning
§A reduction in future pruning costs due to less work required on each tree
and less wood waste generated
Successful tree maintenance is achieved through pruning all City-owned trees on
a rotating basis and also involves removing trees when necessary. Within the
urban forestry profession, documented studies have shown that a five to seven-
year pruning cycle is optimal for maintaining tree condition and value, along with
being cost-effective for a community; therefore, the City is divided into
manageable areas with approximately 5,054 trees per area in order to ensure
every tree is pruned once every seven years.
Public Works Urban Forestry Division’s pruning activities include cyclical pruning
and request pruning, and both pruning activities occur all year long. Cyclical
pruning consists of scheduling all parkway trees within a specific area of the City
for pruning, and is currently contracted to West Coast Arborists, Inc. (WCA). The
City is in the second of a three-year contract with WCA totaling $1,050,000;and
approved by Council on January 14, 2013 (staff report # 3252). The contractor
performs tasks of cyclical pruning by area, tree removal, and stump grinding with
the goal of completing three of six designated pruning areas at the end of the
City of Palo Alto Page 3
three year contract term. Should an emergency or other priority situation arise,
contract crews from WCA are utilized in other areas of the city as well as part of
request pruning. Request pruning activities are completed by City of Palo Alto
Urban Forestry staff, and subject to needs such as storm damage or clearance
issues. This same staff is involved in routine tasks such as tree limb pickups, pull-
tests, injections as well as seasonal projects including tree plantings and assisting
with events that often detract from request pruning.
Discussion
Cyclical and Request Pruning Progress
In FY 2013, the combined pruning efforts by City staff augmented by contracted
services met the target pruning goal of 5,054 trees. In FY 2014, the target pruning
goal fell short of the goal to maintain a seven-year cycle by 758 trees, only
reaching 85% of the goal. In FY 2015, the target pruning goal for the first half of
the fiscal year fell short of the goal by 250 trees and this trend is anticipated for
the second half of the fiscal year, as well.This would mean only reaching 90% of
the goal.
A number of factors contributed to this goal shortage and backlog including:
1.Drought. Three years into what may be California’s worst drought in nearly
four decades is showing in the street tree population, causing stressed-tree
symptoms, tree decline and death. Cutbacks in residential watering have
worsened conditions for the trees as well. Unfortunately, this is a trend
that is forecast to continue due to the cumulative effects of drought on tree
health over time. This drought stress strongly correlates to an increase in
the number of maintenance tasks that further defer work from the pruning
program including increases in:
a.Tree Removals. The number of trees removed by City and contracted
crews rose by 48% from FY 2013 to FY 2014 likely due to the effects
of years of drought.
b.Stump Removals. The increased stump grinding associated with tree
removals depleted contract funds and reduced the amount of
anticipated tree pruning.
c.Tree Inspections and Requests. In FY 2014 there was a 45% increase
from 1,343 to 1,948 in inspections conducted by in-house staff due to
declining health of City trees likely associated with drought.
City of Palo Alto Page 4
d.Watering. Staff time spent irrigating existing trees has increased due
to the need to provide more water to young trees.
e.Wood Disposal. The amount of wood generated from the increased
removals has required staff to allocate more time to sectioning and
disposing of the wood.
f.Administrative Duties. The increase in tree removals has increased
staff time spent on the required removal notification process,
correspondence with residents, completing paperwork and data
entry.
2.Capital Improvement Projects (CIPs). In FY 2014, Urban Forestry staff
collaborated with CIP projects including the golf course, the Adobe Creek
Pedestrian Bridge, El Camino Park, and the Magical Bridge playground,
dedicating time to diligently prepare tree inventories, update databases,
and prepare areas for landscape renovation by providing tree removal
services. Collectively this amount was $21,920. These expenses are being
charged against the aforementioned projects,however the staff time spent
on these projects contributed to the lower than anticipated number of
trees pruned.
3.Development Review Process. Staff became increasingly more involved in
Development Review processes in FY 2014. Staff involvement in
development services oversight included completion of 334 tree protection
fencing inspections, review and comment for 212 planning applications,
and issuance of 66 permits related to removal or work on protected or
regulated trees. Landscape reviews and building permits were reviewed
and provided with comments. Staff time spent on the development review
process is recovered through Development Services fees.
Resource Impact
The attached Budget Amendment Ordinance will allow for the FY 2014 and
projected FY 2015 backlog in tree pruning to be addressed by West Coast
Arborists. The Budget Amendment Ordinance would increase the funding in the
Public Works Department General Fund allocation for contractual services in the
amount of $160,490, and be offset by a reduction to the Budget Stabilization
Reserve. The increase to the contract exceeds the amount of the Budget
Amendment Ordinance as a portion of the work performed by the contractor
City of Palo Alto Page 5
($21,920) will be charged to a variety of capital projects.
Policy Implications
This recommendation does not represent any change to existing City policies.
Environmental Review
The recommended action is exempt from review under the California
Environmental Quality Act pursuant to CEQA Guidelines Section 15301(h)
(maintenance of existing landscape).
Attachments:
·A -BAO -Arborists BAO (DOCX)
Attachment A
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 GENERAL FUND, INCREASING THE BUDGET FOR
THE PUBLIC WORKS DEPARTMENT BY $232,990 TO SUPPORT CONTRACTUAL STREET
TREE PRUNING, OFFSET BY A CORRESPONDING REDUCTION TO THE BUDGET
STABILIZATION RESERVE.
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 Department of Public Works Urban Forestry Section is responsible for
maintaining the health of 35,378 City-owned trees, with tree pruning being the most
important maintenance task for keeping the tree inventory healthy; and
C.The purpose of tree pruning is to improve tree structure, enhance vigor, and
maintain safe conditions for all motorists and pedestrians as they move through the street
corridor; and
D. It has been determined that a five to seven year pruning cycle is optimal for
maintaining tree condition and value. Tree pruning services in the City of Palo Alto are
performed by both City staff as well as contractors. The City is currently in the second year
of a three year contract for tree pruning services with West Coast Arborists totaling
$1,050,000; and
E. In Fiscal Year 2014, the City fell short of its goal by pruning only 4,296 trees, 758
below the target of 5,054. In the first six months of Fiscal Year 2015, the City fell short of
the goal by 250 trees. This pace is expected to continue in the second half of the year; and
F. Factors contributing to the reduction in trees being pruned include the drought,
capital improvement projects that have required the attention of staff and the contractor,
and increased staff time associated with development related activities; and
G. Increased funding is being requested to eliminate the backlog of tree pruning that
accumulated in Fiscal Years 2014 and 2015.
SECTION 2.The contractual services allocation for the Public Works Department
Street Trees Division is hereby increased by the sum of One Hundred Sixty Thousand, Four
Hundred and Ninety Dollars ($160,490) in the General Fund. This increase is offset by a
reduction to the Budget Stabilization Reserve by a corresponding amount.
Attachment A
2
5335/mb Revised September 20, 2013
SECTION 3.As provided in Section 2.04.330 of the Palo Alto Municipal Code, this
ordinance shall become effective upon adoption.
SECTION 4.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 # 5531)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: RPP Signage Contract Award and related Budget Amendment
Ordinance
Title: Approval of a Signage Contract with McGuire-Pacific Contractors in the
Amount Not to Exceed $368,500 and Adoption of a related Budget
Amendment Ordinance in the Amount of $368,500
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that Council authorize the City Manager or designee to execute a contract
with Mc Guire-Pacific Constructors in the amount of $368,500 for the installation of signage for
the Downtown Residential Preferential Parking (RPP) program, and adoption of a Budget
Amendment Ordinance (BAO) in the amount of $368,500 by increasing the General Fund
revenues in the amount of $250,000 from the Neighborhood Parking Preservation Deposit and
reducing the Budget Stabilization Reserve by $118,500.
Executive Summary
On December 2, 2014, Council directed staff to move forward with the implementation of a
new Residential Preferential Parking (RPP) program in the Downtown neighborhoods. The
implementation of the project requires several new programs, including online permit sales for
the permit sales and fulfillment process, enforcement for the new district, and fabrication and
installation of the signage which will notify parkers of the permit restrictions in the program
areas. Award of the signage contract is addressed in this staff report.
Background
The RPP program will require 12”x18” standard doubled-sided highway signage on each block
of the approved program area, indicating that parking is limited to two hours on the block
unless an RPP permit is displayed. The chosen contractor will be responsible for fabrication and
installation of all signage, and for “USA-ing” (underground service alert verification) for all of
the proposed signage locations, which the City will provide to the contractor in a work-order
type drawing. City staff will assist the chosen contractor in verifying the signage locations in the
field, making use of existing poles and streetlights as much as possible. The Request for
City of Palo Alto Page 2
Proposals (RFP) requested that costs be provided for signage in three possible configurations:
signage on an existing pole, signage on an existing street light, and signage on a new pole.
Discussion
Staff posted an RFP for the signage work on December 3, 2015 and received two responses, one
from Mc Guire-Pacific Constructors and one from D&M Traffic. The RFP scope of work is
provided in Attachment A. The City currently works with D+M Traffic for general on-call street
services and has concerns about D+M’s ability to deliver the quality of work necessary for a
successful program, in the time frame required, which was one of the key evaluation criteria for
the project. Pricing from the two contractors was provided as follows:
Figure 1 – Cost Comparison of Proposals
Signage Type Mc Guire – Pacific: Cost per sign D+M: Cost per sign
Signage on Existing Pole $210.00 $149.00
Signage on New Pole $410.00 $299.00
Signage on Existing Streetlight $195.00 $249.00
The precise number of signs is not known, but is estimated to be close to 1000. Although D+M’s
rate per sign was less, when staff ranked the two proposals based on experience, approach and
cost, Mc Guire Pacific’s rankings were higher than D+M’s.
Timeline
If the contract is approved, Mc Guire Pacific will commence work in the beginning of March,
working with the City to develop the design of the RPP signage and confirming signage
locations. The work should take 2-3 months to implement, depending on weather and the
number of new signs required vs. existing signs.
Resource Impact
Mc Guire-Pacific’s estimate for the work based on 1000 signs is estimated to total $368,500.
The actual work may cost more or less, depending on the volume of signs needed and how
many new poles, etc. are needed.
In June, 2012, the Council approved Ordinance 5158 (Attachment D), which required a public
benefit contribution from Lytton Gateway in the amount of $250,000 for a Neighborhood
Parking Preservation Deposit. The attached Budget Amendment Ordinance (BAO) recognizes
this funding in the General Fund. The balance of the required amount for this contract
($118,500) is recommended to be funded through a decrease in the General Fund Budget
Stabilization Reserve. Further, the attached BAO increases the newly established Residential
Preferential Parking Capital Improvement Project (PL-15003) through a $368,500 transfer from
the General Fund to the Capital Improvement Fund.
Policy Implications
City of Palo Alto Page 3
Implementation of an RPP program is consistent with the City’s three-pronged approach aimed
at addressing traffic and parking demand, and is also consistent with the following
comprehensive plan goals:
1. Goal T-8, Program T-49: Implement a comprehensive program of parking supply and
demand management strategies for Downtown Palo Alto
2. Policy T-47: Protect residential areas from the parking impacts of nearby business
districts
Environmental Review
Installation of new signs in the neighborhoods around downtown will not noticeably alter the
character or appearance of the existing streetscape(s) and is considered exempt from review
under the California Environmental Quality Act (CEQA) pursuant to Guidelines Section 15301,
Class One (Existing Facilities).
Attachments:
Attachment: Attachment A: RFP Scope of Work (PDF)
Attachment: Attachment B: Contract between City of Palo Alto and McGuire (PDF)
Attachment: Attachment C: Budget Amendment Ordinance XXXX - Residential
Preferential Parking (DOCX)
Attachment: Attachment D: Ordinance 5158 (PDF)
EXHIBIT A
SCOPE OF SERVICES
CONTRACTOR to perform standard highway sign installations in support of a new
Residential Preferential Parking (RPP) district in Downtown Palo Alto. The scope of
work includes fabrication of the RPP signage and the installation of the signage based
on City-generated work-orders.
The City shall provide Contractor with a work order-type improvement plan for RPP sign
installation; Contractor should provide cost estimates for completion of the work and
complete the work after written authorization to proceed.
The first phase of the work is anticipated to be completed between March and May of
2015, which a potential second phase of installation during December of 2015.
TECHNICAL SPECIFICATIONS
The following types of signage will be required to be manufactured and installed for the
project.
A) Standard Regulatory Parking Signs – Sign Installation onto Existing Sign Post
The Contractor shall install parking regulatory sign(s) onto existing sign posts that
require the addition of a riser to accommodate new sign(s). Addition of a riser shall
include the threading of the existing sign post, installation of a coupling bracket, and
pole extension to support the new sign. The Contractor shall be responsible for
providing all material.
B) Standard Regulatory Parking Signs – Sign & Sign Post Installation
The Contractor shall install parking regulatory sign(s) onto contractor-furnished and
installed sign post. Installation of a new sign post shall include coordination with
U.S.A. Underground, the use of a core drill with a 6-inch bit to cut through existing
concrete, installation of a new 2-inch sign post, and the use of a Portland cement to
secure post and finishing to grade. Signs shall be installed a minimum of 7-ft from
bottom of sidewalk or existing grade. New sign post installations shall not use any
pole risers to accommodate the new sign installation(s). The contractor shall be
responsible for providing all material.
C) Standard Regulatory Signs – Sign Installation onto Existing Streetlight
The Contractor shall install city-furnished parking regulatory sign(s) onto existing
street lights, including all required brackets and hardware. The contractor shall be
responsible for providing all material.
ADDITIONAL SERVICES
The need for additional types of General Street services may be required during the
term of this contract. The City shall work with the Contractor to identify a fee schedule
for any additional services prior to the start of work.
Provided in Attachment A is Sample Sign Bracketing Hardware used by the City of Palo
Alto. The Contractor is required to use the same sign bracketing material to ensure
compatibility with existing field hardware.
ATTACHMENT "A"
Typical Sign Hardware used by the City of Palo Alto
Typical Standard bolts for sign installations – 5/16” –Hawkins # M2G-BHX
Typical Theft-proof bolts for sign installations – 5/16” – Hawkins # M2G - BTP
Typical 2” U-Clamp with side brackets to mount signs perpendicular to 2”sign pole for
double-sided signs – Hawkins # M2G-C2WB1
Typical 2” Clamp to mount signs flush on 2” sign pole for single-sided signs – Hawkins #
M2G-C2B
Typical Type K marker and base (often used on islands) – Carsonite # - SMD615 (3-lite),
SMB800 (base)
Typical Side Mount Bracket used with banding to mount sign perpendicular to pole for
double-sided signs. Hawkins # M2G-1-SWS
Typical Flared Leg Bracket used with banding to mount sign flush with pole for single-
sided signs. Hawkins # M2G-UBF
Typical Threaded 2” L-Bracket for mounting double sided signs on top of a threaded 2”
sign pipe. Hawkins # M2G-2LBT
Typical Straight Leg Bracket used with banding to mount sign flush to pole for single-
sided signs. Hawkins # M2G-UB
Typical Non-threaded 2” L-Bracket for mounting double sided signs on top of a threaded
2” sign pipe. Hawkins # M2G-2LBT
Typical Bracket used to mount street name signs off of a light standard or traffic signal
pole. Banding must be used to attach bracket to source. Hawkins # V14(HD)SL-105
Typical 2” Pipe Cap to mount street name sign on top of 2”sign pipe – Hawkins #
V14(HD)SL
Typical 2” Cross-Bracket for mounting street name signs perpendicular to each other.
Hawkins # V14(HD)SL105
Typical 2” ID Galvanized Schedule 40 sign pipe used for mounting signs
Typical 2” Pipe Coupling for joining two pieces of 2” Schedule 40 pipe
Typical 201 Stainless Steel Banding Buckle – Band-It brand # UB256
Typical 201 Stainless Steel Banding – Hawkins # M2G-345 (UG)
Breakaway Coupler for mounting sign pipe in medians, traffic circles and other locations
where there may be frequent repairs. – Designovations Snapnsafe Breakaway Coupler #
S238R8
1 Rev. July 11, 2011
CITY OF PALO ALTO CONTRACT NO. C15157271
GENERAL SERVICES AGREEMENT
THIS AGREEMENT made and entered into on the 2nd day of March, 2015, by and between the CITY OF PALO
ALTO, a California Chartered Municipal Corporation (“CITY”), and MC GUIRE PACIFIC
CONSTRUCTORS, a Sole Proprietor, located at 12500 Locksley Lane, Auburn, California, 95602, Telephone
Number: (530) 888-0527 (“CONTRACTOR”). In consideration of their mutual covenants, the parties hereto agree
as follows:
1. SERVICES. CONTRACTOR shall provide or furnish the services (“Services”) described in the Scope of
Services, attached as Exhibit A.
2. EXHIBITS. The following exhibits are attached to and made a part of this Agreement:
“A” - Scope of Services (Attachment “A” Included) “B” - Schedule of Performance
“C” - Compensation
“D” - Insurance Requirements CONTRACT IS NOT COMPLETE UNLESS ALL EXHIBITS ARE ATTACHED.
3. TERM.
The term of this Agreement is from March 2, 2015 to March 1, 2016 inclusive, subject to the provisions of
Sections Q and V of the General Terms and Conditions.
4. SCHEDULE OF PERFORMANCE. CONTRACTOR shall complete the Services within the term of this
Agreement in a reasonably prompt and timely manner based upon the circumstances and direction
communicated to CONTRACTOR, and if applicable, in accordance with the schedule set forth in the
Schedule of Performance, attached as Exhibit B. Time is of the essence in this Agreement.
5. COMPENSATION FOR ORIGINAL TERM. CITY shall pay and CONTRACTOR agrees to accept as
not to exceed compensation for the full performance of the Services and reimbursable expenses, if any:
A sum calculated in accordance with the fee schedule set forth in Exhibit C, not to exceed a total
maximum compensation amount of Three Hundred Sixty Eight Thousand Five Hundred dollars
($368,500.00).
CONTRACTOR agrees that it can perform the Services for an amount not to exceed the total maximum
compensation set forth above. Any hours worked or services performed by CONTRACTOR for which
payment would result in a total exceeding the maximum amount of compensation set forth above for
performance of the Services shall be at no cost to CITY.
6. COMPENSATION DURING ADDITIONAL TERMS.
CONTRACTOR’S compensation rates for each additional term shall be the same as the original
term; OR
CONTRACTOR’s compensation rates shall be adjusted effective on the commencement of each
Additional Term. The lump sum compensation amount, hourly rates, or fees, whichever is
applicable as set forth in section 5 above, shall be adjusted by a percentage equal to the change in
the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco-
Oakland- San Jose area, published by the United States Department of Labor Statistics (CPI)
which is published most immediately preceding the commencement of the applicable Additional
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Term, which shall be compared with the CPI published most immediately preceding the
commencement date of the then expiring term. Notwithstanding the foregoing, in no event shall
CONTRACTOR’s compensation rates be increased by an amount exceeding five percent of the
rates effective during the immediately preceding term. Any adjustment to CONTRACTOR’s
compensation rates shall be reflected in a written amendment to this Agreement.
7. INVOICING. Send all invoices to the CITY, Attention: Project Manager. The Project Manager is: Jessica
Sullivan, Dept.: Planning & Community Environment, Transportation Division, 250 Hamilton Avenue,
Palo Alto, California, 94301, Telephone: (650) 329-2453. Invoices shall be submitted in arrears for
Services performed. Invoices shall not be submitted more frequently than monthly. Invoices shall provide
a detailed statement of Services performed during the invoice period and are subject to verification by
CITY. CITY shall pay the undisputed amount of invoices within 30 days of receipt.
GENERAL TERMS AND CONDITIONS
A. ACCEPTANCE. CONTRACTOR accepts and agrees to all terms and conditions of this Agreement. This
Agreement includes and is limited to the terms and conditions set forth in sections 1 through 6 above, these
general terms and conditions and the attached exhibits.
B. QUALIFICATIONS. CONTRACTOR represents and warrants that it has the expertise and qualifications
to complete the services described in Section 1 of this Agreement, entitled “SERVICES,” and that every
individual charged with the performance of the services under this Agreement has sufficient skill and
experience and is duly licensed or certified, to the extent such licensing or certification is required by law,
to perform the Services. CITY expressly relies on CONTRACTOR’s representations regarding its skills,
knowledge, and certifications. CONTRACTOR shall perform all work in accordance with generally
accepted business practices and performance standards of the industry, including all federal, state, and local
operation and safety regulations.
C. INDEPENDENT CONTRACTOR. It is understood and agreed that in the performance of this
Agreement, CONTRACTOR and any person employed by CONTRACTOR shall at all times be considered
an independent CONTRACTOR and not an agent or employee of CITY. CONTRACTOR shall be
responsible for employing or engaging all persons necessary to complete the work required under this
Agreement.
D. SUBCONTRACTORS. CONTRACTOR may not use subcontractors to perform any Services under this
Agreement unless CONTRACTOR obtains prior written consent of CITY. CONTRACTOR shall be solely
responsible for directing the work of approved subcontractors and for any compensation due to
subcontractors.
E. TAXES AND CHARGES. CONTRACTOR shall be responsible for payment of all taxes, fees,
contributions or charges applicable to the conduct of CONTRACTOR’s business.
F. COMPLIANCE WITH LAWS. CONTRACTOR shall in the performance of the Services comply with
all applicable federal, state and local laws, ordinances, regulations, and orders.
G. DAMAGE TO PUBLIC OR PRIVATE PROPERTY. CONTRACTOR shall, at its sole expense, repair
in kind, or as the City Manager or designee shall direct, any damage to public or private property that
occurs in connection with CONTRACTOR’s performance of the Services.
CITY may decline to approve and may withhold payment in whole or in part to such extent as may be
necessary to protect CITY from loss because of defective work not remedied or other damage to the CITY
occurring in connection with CONTRACTOR’s performance of the Services. CITY shall submit written
documentation in support of such withholding upon CONTRACTOR’s request. When the grounds
described above are removed, payment shall be made for amounts withheld because of them.
H. WARRANTIES. CONTRACTOR expressly warrants that all services provided under this Agreement shall
be performed in a professional and workmanlike manner in accordance with generally accepted business
practices and performance standards of the industry and the requirements of this Agreement.
CONTRACTOR expressly warrants that all materials, goods and equipment provided by CONTRACTOR
under this Agreement shall be fit for the particular purpose intended, shall be free from defects, and shall
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conform to the requirements of this Agreement. CONTRACTOR agrees to promptly replace or correct any
material or service not in compliance with these warranties, including incomplete, inaccurate, or defective
material or service, at no further cost to CITY. The warranties set forth in this section shall be in effect for
a period of one year from completion of the Services and shall survive the completion of the Services or
termination of this Agreement.
I. MONITORING OF SERVICES. CITY may monitor the Services performed under this Agreement to
determine whether CONTRACTOR’s work is completed in a satisfactory manner and complies with the
provisions of this Agreement.
J. CITY’S PROPERTY. Any reports, information, data or other material (including copyright interests)
developed, collected, assembled, prepared, or caused to be prepared under this Agreement will become the
property of CITY without restriction or limitation upon their use and will not be made available to any
individual or organization by CONTRACTOR or its subcontractors, if any, without the prior written
approval of the City Manager.
K. AUDITS. CONTRACTOR agrees to permit CITY and its authorized representatives to audit, at any
reasonable time during the term of this Agreement and for three (3) years from the date of final payment,
CONTRACTOR’s records pertaining to matters covered by this Agreement. CONTRACTOR agrees to
maintain accurate books and records in accordance with generally accepted accounting principles for at
least three (3) following the terms of this Agreement.
L. NO IMPLIED WAIVER. No payment, partial payment, acceptance, or partial acceptance by CITY shall
operate as a waiver on the part of CITY of any of its rights under this Agreement.
M. INSURANCE. CONTRACTOR, at its sole cost, shall purchase and maintain in full force during the term
of this Agreement, the insurance coverage described in Exhibit D. Insurance must be provided by
companies with a Best’s Key rating of A-:VII or higher and which are otherwise acceptable to the City’s
Risk Manager. The City’s Risk Manager must approve deductibles and self-insured retentions. In addition,
all policies, endorsements, certificates and/or binders are subject to approval by the Risk Manager as to
form and content. CONTRACTOR shall obtain a policy endorsement naming the City of Palo Alto as an
additional insured under any general liability or automobile policy. CONTRACTOR shall obtain an
endorsement stating that the insurance is primary coverage and will not be canceled or materially reduced
in coverage or limits until after providing 30 days prior written notice of the cancellation or modification to
the City’s Risk Manager. CONTRACTOR shall provide certificates of such policies or other evidence of
coverage satisfactory to CITY’s Risk Manager, together with the required endorsements and evidence of
payment of premiums, to CITY concurrently with the execution of this Agreement and shall throughout the
term of this Agreement provide current certificates evidencing the required insurance coverages and
endorsements to the CITY’s Risk Manager. CONTRACTOR shall include all subcontractors as insured
under its policies or shall obtain and provide to CITY separate certificates and endorsements for each
subcontractor that meet all the requirements of this section. The procuring of such required policies of
insurance shall not operate to limit CONTRACTOR’s liability or obligation to indemnify CITY under this
Agreement.
N. HOLD HARMLESS. To the fullest extent permitted by law and without limitation by the provisions of
section M relating to insurance, CONTRACTOR shall indemnify, defend and hold harmless CITY, its
Council members, officers, employees and agents from and against any and all demands, claims, injuries,
losses, or liabilities of any nature, including death or injury to any person, property damage or any other
loss and including without limitation all damages, penalties, fines and judgments, associated investigation
and administrative expenses and defense costs, including, but not limited to reasonable attorney’s fees,
courts costs and costs of alternative dispute resolution), arising out of, or resulting in any way from or in
connection with the performance of this Agreement. The CONTRACTOR’s obligations under this Section
apply regardless of whether or not a liability is caused or contributed to by any negligent (passive or active)
act or omission of CITY, except that the CONTRACTOR shall not be obligated to indemnify for liability
arising from the sole negligence or willful misconduct of the CITY. The acceptance of the Services by
CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section survive
the completion of the Services or termination of this Contract.
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O. NON-DISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONTRACTOR
certifies that in the performance of this Agreement, it shall not discriminate in the employment of any
person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual
orientation, housing status, marital status, familial status, weight or height of such person. CONTRACTOR
acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto
Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and
agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment.
P. WORKERS' COMPENSATION. CONTRACTOR, by executing this Agreement, certifies that it is aware
of the provisions of the Labor Code of the State of California which require every employer to be insured
against liability for workers' compensation or to undertake self-insurance in accordance with the provisions
of that Code, and certifies that it will comply with such provisions, as applicable, before commencing and
during the performance of the Services.
Q. TERMINATION. The City Manager may terminate this Agreement without cause by giving ten (10)
days’ prior written notice thereof to CONTRACTOR. If CONTRACTOR fails to perform any of its
material obligations under this Agreement, in addition to all other remedies provided by law, the City
Manager may terminate this Agreement immediately upon written notice of termination. Upon receipt of
such notice of termination, CONTRACTOR shall immediately discontinue performance. CITY, CITY
shall pay CONTRACTOR for services satisfactorily performed up to the effective date of termination. If
the termination if for cause, CITY may deduct from such payment the amount of actual damage, if any,
sustained by CITY due to Contractor’s failure to perform its material obligations under this Agreement.
Upon termination, CONTRACTOR shall immediately deliver to the City Manager any and all copies of
studies, sketches, drawings, computations, and other material or products, whether or not completed,
prepared by CONTRACTOR or given to CONTRACTOR, in connection with this Agreement. Such
materials shall become the property of CITY.
R. ASSIGNMENTS/CHANGES. This Agreement binds the parties and their successors and assigns to all
covenants of this Agreement. This Agreement shall not be assigned or transferred without the prior written
consent of the CITY. No amendments, changes or variations of any kind are authorized without the written
consent of the CITY.
S. CONFLICT OF INTEREST. In accepting this Agreement, CONTRACTOR covenants that it presently
has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would
conflict in any manner or degree with the performance of this Contract. CONTRACTOR further covenants
that, in the performance of this Contract, it will not employ any person having such an interest.
CONTRACTOR certifies that no City Officer, employee, or authorized representative has any financial
interest in the business of CONTRACTOR and that no person associated with contractor has any interest,
direct or indirect, which could conflict with the faithful performance of this Contract. CONTRACTOR
agrees to advise CITY if any conflict arises.
T. GOVERNING LAW. This contract shall be governed and interpreted by the laws of the State of
California.
U. ENTIRE AGREEMENT. This Agreement, including all exhibits, represents the entire agreement
between the parties with respect to the services that may be the subject of this Agreement. Any variance in
the exhibits does not affect the validity of the Agreement and the Agreement itself controls over any
conflicting provisions in the exhibits. This Agreement supersedes all prior agreements, representations,
statements, negotiations and undertakings whether oral or written.
V. NON-APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of
Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the
end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any
time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and
funds for this Contract are no longer available. This Section shall take precedence in the event of a conflict
with any other covenant, term, condition, or provision of this Contract.
W. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS.
CONTRACTOR shall comply with the City’s Environmentally Preferred Purchasing policies which are
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available at the City’s Purchasing Department which are incorporated by reference and may be amended
from time to time. CONTRACTOR shall comply with waste reduction, reuse, recycling and disposal
requirements of the City’s Zero Waste Program. Zero Waste best practices include first minimizing and
reducing waste; second, reusing waste and third, recycling or composting waste. In particular, Contractor
shall comply with the following zero waste requirements:
All printed materials provided by Contractor to City generated from a personal computer and
printer including but not limited to, proposals, quotes, invoices, reports, and public education
materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer
content paper, unless otherwise approved by the City’s Project Manager. Any submitted materials
printed by a professional printing company shall be a minimum of 30% or greater post-consumer
material and printed with vegetable based inks.
Goods purchased by Contractor on behalf of the City shall be purchased in accordance with the
City’s Environmental Purchasing Policy including but not limited to Extended Producer
Responsibility requirements for products and packaging. A copy of this policy is on file at the
Purchasing Office.
Reusable/returnable pallets shall be taken back by the Contractor, at no additional cost to the City,
for reuse or recycling. Contractor shall provide documentation from the facility accepting the
pallets to verify that pallets are not being disposed.
X. AUTHORITY. The individual(s) executing this Agreement represent and warrant that they have the legal
capacity and authority to do so on behalf of their respective legal entities.
Y. CONTRACT TERMS: All unchecked boxes do not apply to this Contract.
IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement
on the date first above written.
CITY OF PALO ALTO MC GUIRE PACIFIC CONSTRUCTORS
Approved as to form:
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owner
6 Rev. July 11, 2011
EXHIBIT A
SCOPE OF SERVICES
CONTRACTOR to perform standard highway sign installations in support of a new
Residential Preferential Parking (RPP) district in Downtown Palo Alto. The scope of work
includes fabrication of the RPP signage and the installation of the signage based on City-
generated work-orders.
The City shall provide Contractor with a work order-type improvement plan for RPP sign
installation; Contractor should provide cost estimates for completion of the work and
complete the work after written authorization to proceed.
The first phase of the work is anticipated to be completed between March and May of 2015,
which a potential second phase of installation during December of 2015.
TECHNICAL SPECIFICATIONS
The following types of signage will be required to be manufactured and installed for the
project.
A) Standard Regulatory Parking Signs – Sign Installation onto Existing Sign Post
The Contractor shall install parking regulatory sign(s) onto existing sign posts that
require the addition of a riser to accommodate new sign(s). Addition of a riser shall
include the threading of the existing sign post, installation of a coupling bracket, and pole
extension to support the new sign. The Contractor shall be responsible for providing all
material.
B) Standard Regulatory Parking Signs – Sign & Sign Post Installation
The Contractor shall install parking regulatory sign(s) onto contractor-furnished and
installed sign post. Installation of a new sign post shall include coordination with U.S.A.
Underground, the use of a core drill with a 6-inch bit to cut through existing concrete,
installation of a new 2-inch sign post, and the use of a Portland cement to secure post
and finishing to grade. Signs shall be installed a minimum of 7-ft from bottom of
sidewalk or existing grade. New sign post installations shall not use any pole risers to
accommodate the new sign installation(s). The contractor shall be responsible for
providing all material.
C) Standard Regulatory Signs – Sign Installation onto Existing Streetlight
The Contractor shall install city-furnished parking regulatory sign(s) onto existing street
lights, including all required brackets and hardware. The contractor shall be responsible
for providing all material.
ADDITIONAL SERVICES
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
7 Rev. July 11, 2011
The need for additional types of General Street services may be required during the term of
this contract. The City shall work with the Contractor to identify a fee schedule for any
additional services prior to the start of work.
Provided in Attachment A is Sample Sign Bracketing Hardware used by the City of Palo
Alto. The Contractor is required to use the same sign bracketing material to ensure
compatibility with existing field hardware.
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
ATTACHMENT "A"
Typical Sign Hardware used by the City of Palo Alto
Typical Standard bolts for sign installations – 5/16” –Hawkins # M2G-BHX
Typical Theft-proof bolts for sign installations – 5/16” – Hawkins # M2G - BTP
Typical 2” U-Clamp with side brackets to mount signs perpendicular to 2”sign pole for
double-sided signs – Hawkins # M2G-C2WB1
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Typical 2” Clamp to mount signs flush on 2” sign pole for single-sided signs – Hawkins #
M2G-C2B
Typical Type K marker and base (often used on islands) – Carsonite # - SMD615 (3-lite),
SMB800 (base)
Typical Side Mount Bracket used with banding to mount sign perpendicular to pole for
double-sided signs. Hawkins # M2G-1-SWS
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Typical Flared Leg Bracket used with banding to mount sign flush with pole for single-
sided signs. Hawkins # M2G-UBF
Typical Threaded 2” L-Bracket for mounting double sided signs on top of a threaded 2”
sign pipe. Hawkins # M2G-2LBT
Typical Straight Leg Bracket used with banding to mount sign flush to pole for single-
sided signs. Hawkins # M2G-UB
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Typical Non-threaded 2” L-Bracket for mounting double sided signs on top of a threaded
2” sign pipe. Hawkins # M2G-2LBT
Typical Bracket used to mount street name signs off of a light standard or traffic signal
pole. Banding must be used to attach bracket to source. Hawkins # V14(HD)SL-105
Typical 2” Pipe Cap to mount street name sign on top of 2”sign pipe – Hawkins #
V14(HD)SL
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Typical 2” Cross-Bracket for mounting street name signs perpendicular to each other.
Hawkins # V14(HD)SL105
Typical 2” ID Galvanized Schedule 40 sign pipe used for mounting signs
Typical 2” Pipe Coupling for joining two pieces of 2” Schedule 40 pipe
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Typical 201 Stainless Steel Banding Buckle – Band-It brand # UB256
Typical 201 Stainless Steel Banding – Hawkins # M2G-345 (UG)
Breakaway Coupler for mounting sign pipe in medians, traffic circles and other locations
where there may be frequent repairs. – Designovations Snapnsafe Breakaway Coupler #
S238R8
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
14 Rev. July 11, 2011
EXHIBIT B
SCHEDULE OF PERFORMANCE
CONTRACTOR shall perform the Services as specified in EXHIBIT “A” SCOPE OF SERVICES as to be determined by
CITY project manager.
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
15 Rev. July 11, 2011
EXHIBIT C
SCHEDULE OF FEES
CITY shall pay CONTRACTOR according to the following rate schedule. The maximum amount of compensation to be
paid to Contractor, including both payment for services and reimbursable expenses, shall not exceed Three Hundred Sixty
Eight Thousand Five Hundred Dollars ($368,500.00). Any services provided or hours worked for which payment would
result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to City.
Furnish and install, per the current Q U A N T I T Y U N I T U N I T C O S T T O T A L
Caltrans sign specifications, 12"x18"
regulatory parking sign onto an existing
standard 2" galvanized sign post with
required galvanized riser. 100 EACH $210.00 $21,000.00
EACH $410.00 $328,000.00
Furnish and install, per the current
Caltrans sign specifications, 12"x18"
regulatory parking sign, new 2"
Galvanized sign post, 6 inch core
drill into the existing sidewalk 800 EACH $410.00 $328,000.00
Furnish and install, per the current
Caltrans sign specifications, 12"x18"
regulatory parking sign, installed onto
the existing Streetlight pole with 3/4",
type 201 stainless steel banding and
heavy duty buckle with straight leg
stainless steel brackets. 100 EACH $195.00 $19,500.00
TOTAL $368,500.00
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
16 Rev. July 11, 2011
EXHIBIT D
INSURANCE REQUIREMENTS
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM
OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE
SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR
HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF
CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED,
BELOW:
REQUIRED TYPE OF COVERAGE REQUIREMENT
MINIMUM LIMITS
EACH
OCCURRENCE AGGREGATE
NO
NO
WORKER’S COMPENSATION
EMPLOYER’S LIABILITY
STATUTORY
STATUTORY
YES
GENERAL LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL
LIABILITY
BODILY INJURY
PROPERTY DAMAGE
BODILY INJURY & PROPERTY
DAMAGE COMBINED.
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
YES AUTOMOBILE LIABILITY,
INCLUDING ALL OWNED, HIRED,
NON-OWNED
BODILY INJURY
- EACH PERSON
- EACH OCCURRENCE
PROPERTY DAMAGE
BODILY INJURY AND PROPERTY
DAMAGE, COMBINED
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
NO
PROFESSIONAL LIABILITY,
INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE (WHEN
APPLICABLE), AND NEGLIGENT
PERFORMANCE
ALL DAMAGES $1,000,000
YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT
ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND
EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE
INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND
ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’
COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS
ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE
IN COVERAGE OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE
FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY.
C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL.
II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED
COVERAGE.
III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO
“ADDITIONAL INSUREDS”
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
17 Rev. July 11, 2011
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED,
INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR
CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE
ADDITIONAL INSUREDS.
B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE
POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED
AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS,
SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY
REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING
COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN
NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-
PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT
LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF
CANCELLATION.
NOTICES SHALL BE EMAILED OR MAILED TO:
EMAIL: InsuranceCerts@CityofPaloAlto.org
PURCHASING AND
CONTRACT
ADMINISTRATION
CITY OF PALO ALTO
P.O. BOX 10250
PALO ALTO, CA 94303.
DocuSign Envelope ID: 8A027567-BD9F-407D-AB90-232A7D487DB9
Certificate of Completion
Envelope Number: 8A027567BD9F407DAB90232A7D487DB9 Status: Completed
Subject: Please DocuSign this document: C15157271 McGuire Contract.pdf
Source Envelope:
Document Pages: 17 Signatures: 1 Envelope Originator:
Certificate Pages: 4 Initials: 0 Chris Anastole
AutoNav: Enabled
EnvelopeId Stamping: Enabled
250 Hamilton Ave
Palo Alto , CA 94301
chris.anastole@cityofpaloalto.org
IP Address: 199.33.32.254
Record Tracking
Status: Original
2/23/2015 2:33:55 PM PT
Holder: Chris Anastole
chris.anastole@cityofpaloalto.org
Location: DocuSign
Signer Events Signature Timestamp
John McGuire
mpci@jps.net
owner
Security Level: Email, Account Authentication
(None)Using IP Address: 66.239.61.206
Sent: 2/23/2015 2:42:06 PM PT
Viewed: 2/23/2015 3:50:07 PM PT
Signed: 2/23/2015 3:50:29 PM PT
Electronic Record and Signature Disclosure:
Accepted: 2/23/2015 3:50:07 PM PT
ID: 0985c789-f450-4d11-8394-f7502e093a2e
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Robin Ellner
robin.ellner@cityofpaloalto.org
Security Level: Email, Account Authentication
(None)
Sent: 2/23/2015 3:50:30 PM PT
Electronic Record and Signature Disclosure:
Accepted: 2/11/2015 9:51:24 AM PT
ID: efb775a7-f39e-4c9f-817a-5ec939666ecf
Notary Events Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 2/23/2015 3:50:30 PM PT
Certified Delivered Security Checked 2/23/2015 3:50:30 PM PT
Signing Complete Security Checked 2/23/2015 3:50:30 PM PT
Completed Security Checked 2/23/2015 3:50:30 PM PT
Electronic Record and Signature Disclosure
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Electronic Record and Signature Disclosure created on: 10/1/2013 3:33:53 PM
Parties agreed to: John McGuire, Robin Ellner
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1
Revised December 08, 2014
5238/eb
Attachment C
Ordinance No. XXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING
THE BUDGET FOR FISCAL YEAR 2015 TO ESTABLISH A NEW CAPITAL
PROJECT IN THE AMOUNT OF $368,500 IN THE CAPITAL IMPROVEMENT
FUND FOR A RESIDENTIAL PREFERENTIAL PARKING PROJECT (PL-15003),
TO BE OFFSET BY A TRANSFER FROM THE GENERAL FUND IN THE SAME
AMOUNT WHEREBY THE TRANSFER IS FUNDED WITH $250,000 IN
REVENUE FROM THE NEIGHBORHOOD PARKING PRESERVATION DEPOSIT
AND A CONTRIBUTION OF $118,500 FROM THE GENERAL FUND BUDGET
STABILIZATION RESERVE.
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1.
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. In June 2012, a public benefit contribution from Lytton gateway established a
$250,000 Neighborhood Parking Preservation Deposit (Ordinance 5158); and
C. On December 2, 2014, Council directed staff to establish a new Residential
Preferential Parking (RPP) program in the Downtown neighborhoods; and
D. The program requires the fabrication and installation of new signage; and
E. McGuire-Pacific Contractors submitted the most advantageous proposal to the
City in the amount of $368,500; and
SECTION 2. Therefore, Two Hundred and Fifty Thousand Dollars ($250,000) from the
Neighborhood Parking Preservation Deposit is recognized as revenue in the General Fund
and with a decrease in the General Fund Budget Stabilization Reserve in the amount of One
Hundred and Eighteen Thousand and Five Hundred Dollars ($118,500) a transfer from the
General Fund to the Capital Improvement Fund in the amount of Three Hundred and Sixty
Eight Thousand Five Hundred Dollars ($368,500) is established to be appropriated to the
new Residential Preferential Parking Project (PL-15003).
SECTION 3. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this
ordinance shall become effective upon adoption.
SECTION 4. 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.
2
Revised December 08, 2014
5238/eb
//
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 Planning and Community
Environment
City of Palo Alto (ID # 5576)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Stevenson House Rehabilitation
Title: Request for finding that Stevenson House Rehabilitation Proposed
Ownership Structure Is Compliant with the site-specific Planned Community
zoning ordinance adopted in June 1965
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council find that the Stevenson House property at 455 E.
Charleston Road will be in compliance with its existing zoning under the proposed financing and
ownership structure described in this report.
Executive Summary
The Stevenson House Property at 455 E. Charleston Road was zoned as “Planned Community”
(PC-2236) pursuant to Ordinance No. 2236 adopted June 15, 1965 (see Attachment A). Section
3 of the Ordinance states that the permitted use is: "a non-profit senior citizens housing
development with not more than one hundred and twenty (120) dwelling units and with dining,
cultural and recreational facilities for use of tenants."
Palo Alto Senior Housing Project, Inc. (PASHPI), which is a California nonprofit public benefit
corporation, is the current owner and serves low income seniors, providing 119 affordable
homes and an on-site property manager unit, meals, along with a variety of health, social and
educational services as well as recreational opportunities to residents.
PASHPI is undertaking a rehabilitation of the property, and is negotiating a loan from the City
and pursuing other financing, including low income housing tax credits. In order to secure the
tax credits, PASHPI intends to ground lease the property to PASHPI Stevenson House LP, a
California limited partnership. An affiliate of PAHSPI will be the managing general partner of
the partnership. Because the lease holder will not be a non-profit organization, an
interpretation of the PC ordinance is required.
With the requested action, the City Council would affirm that the property, which would
continue to provide affordable senior housing as provided for in the PC ordinance, would be in
City of Palo Alto Page 2
compliance with the PC ordinance, despite the ground lease to a for-profit organization.
Ownership of all improvements on the land will revert back to PAHSPI at the termination of the
ground lease. The Stevenson House is proposing this ownership structure in order to be eligible
for tax credits. Most affordable housing developments are financed in part with tax credits, and
to take advantage of tax credits, a for-profit entity that pays taxes must own the project. Any
affordable housing project in Palo Alto financed with tax credits will use this structure. The
City’s loan agreements allow for an entity structured as described above to own the property.
PASHPI Stevenson House LP would continue to operate the housing as senior housing
affordable to low income seniors, and provide services to the residents. The Property will be
subject to a HUD Section 202 Regulatory Agreement and a HUD SPRAC Use Agreement both of
which require senior housing. The Property will also be subject to a Regulatory Agreement
from the City, a Regulatory Agreement from the County of Santa Clara, a Regulatory Agreement
associated with the tax exempt bond financing for the Project, and a Regulatory Agreement
associated with the HUD FHA financing. Planning staff and the City Attorney believe these
protections are sufficient to ensure that Stevenson House continues to provide affordable
housing to seniors in our community.
Background
Stevenson House was constructed in 1968 following approval of PC Ordinance #2236, adopted
in June of 1965. The property now requires renovation. None of the existing buildings are
proposed for removal and the scope of work involves the rehabilitation of the existing
apartments, including upgrading and replacing primary building systems as needed (e.g.
plumbing and space heating) and replacement of unit interior finishes including new carpet and
resilient flooring, new kitchen and bathroom cabinets and fixtures, new appliances, and new
paint throughout. The scope of work for the buildings exteriors include seismic reinforcement
of the existing buildings, new roofs, exterior painting and repair/replacement of siding as
necessary. Site improvements include new landscaping, replacement of aging sewer lines and a
new asphalt driveway overlay. The proposed scope of work also anticipates construction of a
resident services office and private meeting space.
The Partnership intends to apply for a welfare exemption pursuant to Section 214(g) of
California’s Revenue and Taxation Code. The welfare exemption is available to limited
partnerships in which an LLC with a nonprofit 501c3 entity is the managing general partner. For
property tax purpose the property will be considered to be owned by a nonprofit entity.
Timeline & Resource Impact
On November 5, 2012, the City Council approved the Palo Alto Senior Housing Project, Inc.
request to commit $1,000,000 for the rehabilitation of Stevenson House by adopting a Budget
Amendment Ordinance (CMR# 3176) to allocate $1,000,000 from the Stanford University Medical
Center Project’s Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing Community benefit payment for the rehabilitation. Loan documents will be provided for
City of Palo Alto Page 3
the City Council’s approval in April.
Environmental Review
The requested action is an interpretation of the existing zoning ordinance for the property and
is not a project requiring review pursuant to the California Environmental Quality Act (CEQA).
Attachments:
Attachment A: Zoning Ordinance Amendment 2223 to Amend Ordinance 1324 from R-1
to PC (PDF)
Attachment B: Certification Re Planned Community Zoning - Stevenson House (DOC)
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1737\02\1657188.2
[ON LETTERHEAD]
LETTER REGARDING ZONING COMPLIANCE
February ____, 2015
TO: Palo Alto Senior Housing Project, Inc. 455 E. Charleston Road Palo Alto, CA 94306
Attention: President
FROM: [Name of City Department] SUBJECT: Adelai E. Stevenson House
455 E. Charleston Road, Palo Alto, California
(the "Property")
Existing Property:
Pursuant to Ordinance No. 2236 adopted June 15, 1965 the Property is zoned PC-2236. Section
3 of the Ordinance states the following permitted use: "a non-profit senior citizens housing development with not more than one hundred and twenty (120) dwelling units and with dining, cultural and recreational facilities for use of tenants". Palo Alto Senior Housing Project, Inc.
(PASHPI) which is a California nonprofit public benefit corporation is the current owner of the
Property. The Property currently serves low income seniors. Built in 1968, the project has
provided 119 affordable homes and an on-site property manager unit, meals, along with a variety of health, social and educational services as well as recreational opportunities to its residents.
Assumption of Facts:
PASHPI has requested the City prepare this letter regarding PASHPI’s current plans for the renovation of the Project. We base this letter on our knowledge of the Property, the construction plans submitted to the City for approval, and the following assumptions of fact provided to the
City by PASHPI:
None of the existing buildings will be demolished. The scope of work is the rehabilitation of the existing apartments. The planned rehabilitation includes upgrading
and replacing primary building systems as needed (e.g. plumbing and space heating) and
replacement of unit interior finishes including new carpet and resilient flooring, new
kitchen and bathroom cabinets and fixtures, new appliances, and new paint throughout.
The scope of work for the buildings exteriors include seismic reinforcement of the existing buildings, new roofs, exterior painting and repair/replacement of siding as
necessary. Site improvements include new landscaping, replacement of aging sewer lines
1737\02\1657188.2
and a new asphalt driveway overlay. In order to improve delivery of resident services, the
proposed rehab scope of work anticipates construction of a resident services office and
private meeting space.
PASHPI intends to ground lease the property to PASHPI Stevenson House LP, a
California limited partnership in which an affiliate of PAHSPI will be the managing
general partner of the partnership. Ownership of all improvements on the land will revert
back to PAHSPI at the termination of the lease. The limited partnership structure is necessary to facilitate the provision of low income housing tax credits as part of the financing for the rehabilitation of the buildings.
PASHPI Stevenson House LP intends to continue to operate the housing as senior
housing affordable to low income seniors, and to provide services to the residents. The Property will be subject to a HUD Section 202 Regulatory Agreement and a HUD
SPRAC Use Agreement both of which require senior housing. The Property will also be
subject to a Regulatory Agreement from the City, a Regulatory Agreement from the
County of Santa Clara, a Regulatory Agreement associated with the tax exempt bond
financing for the Project, and a Regulatory Agreement associated with the HUD FHA financing.
The Partnership intends to apply for a welfare exemption pursuant to Section 214(g) of
California’s Revenue and Taxation Code. The welfare exemption is available to limited partnerships in which an LLC with a nonprofit 501c3 entity is the managing general
partner. For property tax purpose the property will be considered to be owned by a
nonprofit entity.
Conclusion:
Based on the facts stated above the City confirms that the leasing of the property to PASHPI
Stevenson House LP in which an affiliate of PAHSPI will be the managing general partner, and
continued operation of the project as senior housing is consistent with the PC zoning of the Property.
________________________________
[Name & Title]
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
March 9, 2015
The Honorable City Council
Palo Alto, California
SECOND READING: Adoption of an Ordinance Authorizing Closing of
the Budget for the Fiscal Year Ending June 30, 2014 (First Reading:
February 9, 2015 PASSED: 8-0 Kniss absent)
This was first heard by Council on February 9, 2015, at which time there were no recommended
changes. This is the second reading of the Ordinance.
ATTACHMENTS:
A: Ordinance Closing CAFR (DOCX)
Department Head: Beth Minor, Acting City Clerk
ATTACHMENT A
Page of 4
1
ORDINANCE NO. XXXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AUTHORIZING CLOSING OF THE BUDGET FOR THE
FISCAL YEAR ENDING JUNE 30, 2014
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 and as set forth in Section 2.28.070 of the Palo
Alto Municipal Code, the Council on June 10, 2013 did adopt a budget for Fiscal Year
2014; and
B. Fiscal Year 2014 has ended and the financial results, although subject to post-
audit adjustment, are now available.
SECTION 2. Pursuant to Section 2.28.080 of the Palo Alto Municipal Code, the
City Manager during Fiscal Year 2014 did amend the budgetary accounts of the City of
Palo Alto to reflect:
A. Additional appropriations authorized by ordinance of the City Council.
B. Amendments to employee compensation plans adopted by the City Council.
C. Transfers of appropriations from the contingent account as authorized by the
City Manager.
D. Redistribution of appropriations between divisions, cost centers, and
objects within various departments as authorized by the City Manager.
E. Fiscal Year 2014 appropriations which on July 1, 2013 were encumbered by
properly executed, but uncompleted, purchase orders or contracts.
SECTION 3. The Council hereby approves adjustments to the Fiscal Year 2014
budget as shown on attached Exhibit 1.
SECTION 4. The Council hereby re-appropriates Fiscal Year 2014
appropriations in certain departments and categories, as shown on the attached Exhibit
2, which were not encumbered by purchase order or contract, at year end into the Fiscal
Year 2015 budget.
ATTACHMENT A
Page of 4
2
SECTION 5. The Fiscal Year 2014 encumbered balances for the departments
and categories shown on Exhibit 4 shall be carried forward and re-appropriated to those
same departments and categories in the Fiscal Year 2015 budget.
SECTION 6. The City Manager is authorized and directed:
A. To close the Fiscal Year 2014 budget accounts in all funds and departments
and, as required by the Charter of the City of Palo Alto, to make such interdepartmental
transfers in the 2014 budget as adopted or amended by ordinance of the Council; and
B. To close and adjust various Capital Improvement Projects (CIP) as shown in
Exhibit 3 and move all completed CIP to their respective reserve funds indicated in
Exhibit 1; and
C. To fund the Budget Stabilization Reserve in accordance with the General Fund
Reserves Policy adopted by the City Council.
SECTION 7. The General Fund Budget Stabilization Reserve is hereby
decreased by the sum of Four Million One Hundred Twenty Seven Thousand Six
Hundred Eighty Two Dollars ($4,127,682) as described in Exhibit 1.
SECTION 8. The Water Rate Stabilization Reserve is hereby decreased by the
sum of Six Million Nine Hundred Seventy Nine Thousand Six Hundred Ninety Seven
Dollars ($6,979,697) as described in Exhibit 1.
SECTION 9. The Electric Distribution Rate Stabilization Reserve is hereby
decreased by the sum of Three Hundred Seventeen Thousand Five Hundred Six Dollars
($317,506) as described in Exhibit 1.
SECTION 10. The Fiber Optics Rate Stabilization Reserve is hereby decreased by
the sum of Five Hundred Nineteen Thousand Dollars ($519,000) as described in Exhibit
1.
SECTION 11. The Gas Distribution Rate Stabilization Reserve is hereby decreased
by the sum of Eight Hundred Forty One Thousand One Hundred Ninety Six ($841,196) as
described in Exhibit 1.
SECTION 12. The Gas Supply Rate Stabilization Reserve is hereby decreased by
the sum of One Hundred Seventy Four Thousand Dollars ($174,000) as described in
Exhibit 1.
SECTION 13. The Wastewater Treatment Rate Stabilization Reserve is hereby
increased by the sum of Four Thousand Six Hundred Sixty Dollars ($4,660) as described
in Exhibit 1.
ATTACHMENT A
Page of 4
3
SECTION 14. The Refuse Rate Stabilization Reserve is hereby decreased by the
sum of Nine Hundred Seventy Seven Dollars ($977) as described in Exhibit 1.
SECTION 15. The Storm Drainage Rate Stabilization Reserve is hereby decreased
by the sum of One Thousand Five Hundred Thirty Four Dollars ($1,534) as described in
Exhibit 1.
SECTION 16. The University Avenue Parking Permit Fund is hereby increased by
Two Thousand Ten Dollars ($2,010) as described in Exhibit 1.
SECTION 17. The California Avenue Parking Permit Fund is hereby increased by
Three Hundred Dollars ($300) as described in Exhibit 1.
SECTION 18. The Federal Equitable Sharing Fund is hereby decreased by Two
Thousand Nine Hundred Sixty Dollars ($2,960) as described in Exhibit 1.
SECTION 19. The State Deferred Revenue Fund is hereby decreased by Two
Thousand One Hundred Ninety Eight ($2,198) as described in Exhibit 1.
SECTION 20. The Stanford/El Camino Fund is hereby decreased by Four Hundred
Ten Thousand Dollars ($410,000) as described in Exhibit 1.
SECTION 21. The Public Art Fund is hereby decreased by Four Thousand Six
Hundred Sixty One Dollars ($4,661) as described in Exhibit 1.
SECTION 20. The Law Enforcement Services Fund is hereby decreased by Two
Hundred Twenty Seven Thousand Seven Hundred Ten Dollars ($227,710) as described in
Exhibit 1.
SECTION 21. The Law Enforcement Block Grant Fund is hereby decreased by
Eight Hundred Twelve Dollars ($812) as described in Exhibit 1.
SECTION 22. The Technology Fund is hereby decreased by Eight Hundred
Nineteen Thousand Three Hundred Seventy Eight Dollars ($819,378) as described in
Exhibit 1.
SECTION 23. The Capital Projects Fund Reserve is hereby decreased by Three
Million, Eight Hundred Fourteen Thousand Four Hundred Dollars ($3,841,400) as
described in Exhibit 1.
SECTION 24. Upon completion of the independent audit, detailed financial
statements reflecting the changes made by the Sections 7 through 18 of this ordinance
shall be published as part of the annual financial report of the City as required by Article
ATTACHMENT A
Page of 4
4
III, Section 16, of the Charter of the City of Palo Alto and in accordance with generally
accepted accounting principles.
SECTION 25. 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 26. The Council of the City of Palo Alto hereby finds that the enactment
of this ordinance is not a project under the California Environmental Quality Act and,
therefore, no environmental impact assessment is necessary.
SECTION 27. As provided in Section 2.04.330 of the Palo Alto Municipal Code,
this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
________________________ ____________________________
City Attorney City Manager
____________________________
Director of Administrative Service
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
March 9, 2015
The Honorable City Council
Palo Alto, California
SECOND READING: Adoption of an Ordinance Amending Municipal
Code Sections 2.16.070, 2.20.020, 2.21.025, 2.25.030, 2.27.020 to
Change the Start of Terms on the Architectural Review Board, the
Historic Resources Board, the Parks and Recreation Commission and
the Planning and Transportation Commission from November 1st to
December 16th (First Reading: February 9, 2015 PASSED: 8-0 Kniss
absent)
This was first heard by Council on February 9, 2015, at which time no changes were made. This
is the second reading of the Ordinance.
ATTACHMENTS:
A: Ordinance Board and Commission Realignment (PDF)
Department Head: Beth Minor, Acting City Clerk
Page 2
*NOT YET APPROVED*
ORDINANCE NO. _____
Ordinance Amending Municipal Code Sections 2.16.070, 2.20.020,
2.21.025, 2.25.030, 2.27.020 to Change the Start of Terms on the
Architectural Review Board, the Historic Resources Board, the Parks and
Recreation Commission and the Planning and Transportation Commission
from November 1st to December 16th
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:
SECTION 2. Section 2.16.070 (Schedule of Appointments) of Chapter 2.16 (Boards
and Commissions Generally) of the Palo Alto Municipal Code is hereby amended to read as
follows:
“(a) The City Council shall review applications to fill vacancies in the following
boards and commissions in April of each year:
(1) Human Relations Commission (Chapter 2.22)
(2) Library Advisory Commission (Chapter 2.24)
(3) Public Art Commission (Chapter 2.18)
(4) Utilities Advisory Commission (Chapter 2.23)
(b) The City Council shall review applications to fill vacancies in the following boards
and commissions in October December of each year:
(1) Architectural Review Board (Chapter 2.21)
(2) Historic Resources Board (Chapter 2.27)
(3) Parks and Recreation Commission (Chapter 2.25)
(4) Planning and Transportation Commission (Chapter 2.20).
(c) The City Council shall fill vacancies in all other boards and commissions in April
or October December of each year, at its discretion.
(d) The City Council may fill mid-term vacancies during the next regularly scheduled
recruitment for the board or commission or may hold a special recruitment, at its discretion.
Special recruitments shall be subject to the requirements of Section 2.16.060.
SECTION 3. Section 2.20.020 (Term of Office) of Chapter 2.20 (Planning and
Transportation Commission) of the Palo Alto Municipal Code is hereby amended to read as
follows:
“Terms of office on the Planning and Transportation Commission shall be four
years. Effective January 1, 20146, terms of office due to expire on July October 31 of each year
shall be extended to expire on October 31December 15 of the same year, and thereafter terms
of office shall commence on the first sixteenth day of NovemberDecember. If a successor is
unavailable, a member may remain in office until his or her successor is appointed.”
150129 sh 0140128 1
*NOT YET APPROVED*
SECTION 4. Section 2.21.025 (Term of Office) of Chapter 2.21 (Architectural Review
Board) of the Palo Alto Municipal Code is hereby amended to read as follows:
“Terms of office on the Architectural Review Board shall be three years. Effective
January 1, 20164, the terms of office due to expire on September October 310 of each year
shall be extended to expire on October December 1531 of the same year, and thereafter terms
of office shall commence on the first sixteenth day of NovemberDecember. If a successor is
unavailable, a member may remain in office until his or her successor is appointed.”
SECTION 5. Section 2.25.030 (Term of Office) of Chapter 2.25 (Parks and Recreation
Commission) of the Palo Alto Municipal Code is hereby amended to read as follows:
“Terms of office on the parks and recreation commission shall be three years.
Commission appointments shall be staggered so that in each three-year cycle three members
are appointed to serve during the first year, four members are appointed to serve during the
second year, and no members are appointed to serve during the third year. Effective January 1,
20164, terms of office due to expire on December October 31 of each year shall be lengthened
to expire on October December 1531 of the following same year, and thereafter terms of office
shall commence on the first sixteenth day of NovemberDecember. If a successor is unavailable,
a member may remain in office until his or her successor is appointed.”
SECTION 6. Section 2.27.020 (Term of Office) of Chapter 2.27 (Historic Resources
Board) of the Palo Alto Municipal Code is hereby added to read as follows:
“Terms of office on the Historic Resources Board shall be three years. Terms shall
be staggered so that three positions are refilled one year, and four positions are refilled two
years later. Effective January 1, 20164, terms of office due to expire on May October 31 of each
year shall be extended to expire on October December 315 of the same year, and thereafter
terms of office shall commence on the first sixteenth day of NovemberDecember. If a successor
is unavailable, a member may remain in office until his or her successor is appointed.”
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150129 sh 0140128 2
*NOT YET APPROVED*
SECTION 7. This ordinance shall be effective on the thirty-first day after the date of
its adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
City Attorney City Manager
____________________________
Director of Administrative
Services
150129 sh 0140128 3
CITY OF PALO ALTO OFFICE OF THE CITY CLERK
March 9, 2015
The Honorable City Council
Palo Alto, California
SECOND READING: Adoption of an Ordinance to Update the Fiscal Year
2015 Table of Organization for Fiscal Year 2015 Incorporating Technical
Changes (First Reading: February 9, 2015 PASSED: 8-0 Kniss absent)
This was first heard by Council on February 9, 2015, at which time no changes were made to
the Ordinance. This is the second hearing for the Ordinance.
ATTACHMENTS:
Ordinance Table of Organization (PDF)
Department Head: Beth Minor, Acting City Clerk
Page 2
ATTACHMENT B – NOT YET ADOPTED
ORDINANCE NO. ________
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE TABLE OF ORGANIZATION FOR FISCAL
YEAR 2015 TO INCORPORATE TECHNICAL CORRECTIONS
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. As part of its Budget Amendment Ordinance No. 5255 adopting the Fiscal Year 2015 Budget,
Council adopted the Fiscal Year 2015 Table of Organization.
B. As a result of subsequent Council actions, a number of technical corrections to the Fiscal
Year 2015 Table of Organization are necessary. These changes are only needed to update
the Table of Organization; funding has been appropriated in the Fiscal Year 2015 Adopted
Budget.
SECTION 2. The Table of Organization shall be amended as provided in Exhibit “1”.
SECTION 3. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall
become effective upon adoption.
SECTION 4. The Council finds that adoption of this ordinance is not a project under the California
Environmental Quality Act and, therefore, no environmental impact assessment is necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST: APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:
City Manager
Deputy City Attorney
Director of Administrative Services
City of Palo Alto (ID # 5609)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Interim Appointment of Chief Transportation Official
Title: Adoption of a Resolution Approving Interim Appointment of James
Lightbody to Chief Transportation Official Position Pursuant to Government
Code Section 21221(h)
From: City Manager
Lead Department: City Clerk
Recommendation
Staff recommends that Council adopt the attached resolution appointing James Lightbody to a
single interim appointment as Chief Transportation Official to end no later than August 31, 2015
Background
It was not discovered until after the Council meeting on February 23, 2015 that the Resolution
was not included in the report. This was due to a computer glitch with the electronic
management system that is used. We have addressed this issue with the company and they are
working on a resolution to the problem.
Attachments:
A: RESO GC 21221h Interim Appointment of Retiree-Lightbody (DOCX)
***NOT YET APPROVED***
Resolution No._____
Resolution Approving Interim Appointment
of James Lightbody to Chief Transportation Official Position
(Gov’t. Code section 21221(h))
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Findings and Declarations:
(a) In compliance with Government Code section 21221(h) the Palo Alto City Council must
approve the appointment of a retiree to fill a vacant position on an interim basis during a
recruitment to permanently fill the vacant position.
(b) The City’s Chief Transportation Official has been vacant since February 6, 2015 and the City
currently has an open recruitment to fill the vacancy, which is a high-level manager position
in the Department of Planning and Community Environment, responsible for coordinating
and implementing all of the City’s transportation projects.
(c) The City has hired an executive recruiter to recruit qualified candidates for the Chief
Transportation Official position and anticipates permanently filling the position on or before
August 31, 2015.
(d) James Lightbody retired from Valley Transportation Authority in the position of Deputy
Director for Planning & Development, effective on or around January 31, 2005 and is
available to serve in the position of Chief Transportation Official on an interim basis until the
City finds a qualified candidate to permanently fill the vacancy.
(e) Mr. Lightbody has special skills necessary to perform the duties of the Chief Transportation
Official because he has more than forty years of experience working on a variety of public
transit projects throughout the state of California, including over thirty years at the Valley
Transportation Authority (“VTA”) and serving as its Deputy Director of Planning and
Development.
(f) CalPERS rules provide that the compensation paid to retirees cannot be less than the
minimum nor exceed the maximum monthly base salary paid to other employees
performing comparable duties, divided by 173.333 to equal the hourly rate.
(g) The maximum base monthly salary for the position of Chief Transportation Official is
$13,956.80 and the hourly equivalent is $80.52, and the minimum base monthly salary for
this position is $9,304.53 and the hourly equivalent is $53.68.
SECTION 2. The entire employment document between Mr. Lightbody has been reviewed
by this body and is attached to this Resolution as Exhibit A. Mr. Lightbody’s employment shall be limited
to 960 hours per fiscal year. The hourly rate paid to James Lightbody will be eighty dollars and fifty two
cents ($80.52). James Lightbody has not and will not receive any other benefit, incentive, compensation
in lieu of benefit or other form of compensation in addition to this hourly pay rate.
SECTION 3. The City Council hereby appoints James Lightbody for a single interim
appointment to the vacant position of Chief Transportation Official for the City of Palo Alto pursuant to
Government Code section 21221(h), effective February 24, 2015 and ending on or before August 31,
2015.
SECTION 4. The Palo Alto City Council finds that this single interim appointment is necessary
to fill the vacant position of Chief Transportation Official for the City of Palo Alto because the division
requires leadership to prioritize work, respond to community questions and requests related to
transportation needs and projects, ensure continued momentum in the community engagement and
planning work related to bicycle boulevards and manage all staff and consultants working on that
project, and monitor ongoing CIP projects in the Transportation Division to ensure that they stay on
schedule and budget. The Department of Planning and Community Environment currently has other
vacancies at the management level and therefore has neither available nor qualified existing staff to fill
this role on a temporary basis.
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SECTION 5. The Council finds that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ______________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ______________________________
City Attorney City Manager
_____________________________
Director of Administrative Services
____________________________
City of Palo Alto (ID # 5426)
City Council Staff Report
Report Type: Action Items Meeting Date: 3/9/2015
City of Palo Alto Page 1
Summary Title: Fiscal Year 2016 to 2025 General Fund Long Range Financial
Forecast
Title: Finance Committee Recommendation to Accept the Fiscal Year 2016 to
2025 General Fund Long Range Financial Forecast
From: City Manager
Lead Department: Administrative Services
Recommendation
The Finance Committee and staff recommend that the City Council accept the Fiscal Year 2016
to 2025 General Fund Long Range Financial Forecast and refer to the Finance Committee a
discussion for recommendations about means by which to address the City’s unfunded pension
and retiree healthcare liabilities.
Recommended Motion
The Finance Committee and staff recommend that the City Council consider the following
motion:
Accept the Fiscal Year 2016 to 2025 General Fund Long Range Financial Forecast and refer to
the Finance Committee a discussion for recommendations about means by which to address
the City’s unfunded pension and retiree healthcare liabilities.
Executive Summary
The Fiscal Year (FY) 2016 to 2025 General Fund Long Range Financial Forecast (LRFF), which
marks the beginning of the FY 2016 budget planning process, projects a slight General Fund
surplus of $0.5 million for FY 2016. Although economic indicators and rebounding tax revenues
reveal that the City of Palo Alto has reached a turning point from the Great Recession, this
Forecast reflects financial obligations and rising benefits costs that diminish the positive outlook
over the next 10 years.
Despite improving revenue receipts as projected forward, the City continues to face challenges
related to the funding of infrastructure, rising benefits costs, and unfunded long-term liabilities.
The Infrastructure Plan was recently approved by the City Council and contains $125.8 million in
projects recommended by the Infrastructure Committee. However, even with the voter
City of Palo Alto Page 2
approved increase in the Transient Occupancy Tax, a funding gap of $7.5 million still exists and
the plan does not include any contingencies for potentially higher land acquisition and
construction costs. Starting with FY 2016, this Forecast assumes an additional transfer of $4.7
million annually for the estimated annual debt service cost as assumed in the Infrastructure
Plan. Since it is not anticipated that debt will be issued until FY 2016, with the first debt service
due in FY 2017, the additional transfer of $4.7 million to the Capital Fund will be allocated to
address the Infrastructure Plan funding gap.
Since the Great Recession, the City Council has approved various strategies to reduce the costs
of salaries and benefits. These strategies include: (1) employees paying their own CalPERS
contribution (between 6 percent to 9 percent of salary) except for the members of the Fire
Chiefs’ Association (5 members); (2) sharing the cost of health plan costs at 90/10; (3) creating a
second pension tier for Miscellaneous Employees in 2010 and Safety Employees in 2012 (and
the state implemented a third tier effective January 1, 2013); (4) reducing professional
development expenses; (5) eliminating minimum staffing requirements and associated
overtime costs in Fire services; (6) cost of living freezes for four years; and (7) terminating the
Variable Management Compensation Plan, a bonus incentive program for managers.
Continuing with previous actions to curtail the growth of benefit costs, in 2014, as part of
approving the agreement with SEIU and the compensation plan for Management and
Professional employees, the City Council approved the cost sharing of future health plan costs.
Because of the implementation of these various strategies, the growth in salary and benefit
costs are not outpacing the growth in revenue; however, over the Forecast period, salary and
benefit costs gradually increase in comparison to the total expenditure budget. In FY 2016,
salary and benefit costs represent 62 percent of the expenditure budget; in FY 2025, salary and
benefit costs represent 65 percent of the budget. During the same period, however, benefit
costs as a percentage of total salary and benefit costs increase from 49 percent in FY 2016 to 55
percent in FY 2025.
As reported in the first quarter financial report for FY 2015, as of early November 2014, 28
percent of non-safety (Miscellaneous) employees received Tier 2 (2 percent at 60) and Tier 3 (2
percent at 62) pension benefits, and 14 percent of Safety employees received Tier 2 and Tier 3
pension benefits. However, the impact of employees hired during the last five years has had
little impact on unfunded pension plan liabilities. Per the latest CalPERS valuations for the
Miscellaneous and Safety employees (attached to Attachment A), the combined unfunded
pension liability amounts to $295.5 million. Adding on the unfunded liability for the retiree
healthcare plan in the amount of $143.6 million, the total unfunded liability for all three plans is
$439.1 million. In comparison to the previous valuations available for all three plans, the total
unfunded liability has remained approximately the same. Changes in the actuarial assumptions
and policies, which have increased total liabilities, have offset recent substantive market gains.
This Forecast provides a long-term view of the City’s General Fund to provide a strategic focus
for addressing future funding needs in the FY 2016 Proposed Budget and beyond. This Forecast
assumes FY 2015 service levels remain the same and includes funding for the City Council’s
City of Palo Alto Page 3
approved enhancements to the Shuttle Service and funding for the Transportation
Management Authority. As in past years, the Forecast has been updated based on current
information compiled from various sources, in addition to utilizing available tools to project
revenues and expenditures. This document facilitates City Council members’ and staff’s
understanding of the long-term impacts of past decisions, and identifies issues that must be
addressed in the near and long-term, including the availability of funds. The Forecast is not a
prediction or a commitment of resources; rather, it is a reasonable snapshot of the City’s future
financial condition based on various assumptions and currently available data.
A continuously improving economic climate is noted by the majority of national, state, regional,
and local economic indicators. This Forecast assumes a continued, gradual growth of the
national economy with positive impacts to the local economy, which is reflected in the
estimates of economically sensitive revenues. Consistent with previous forecasts, the
methodology for calculating changes for out-years of the Forecast (FY 2017 to FY 2025) is based
on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with
reasonable adjustments for recently observed trends. By using the historical average growth
rate that incorporates the up and down cycles over the past 20 years, there is no single year in
which a downturn is depicted. Instead, past downturns (e.g. dot.com bust and Great
Recession) have been factored into the compound growth rate used to forecast future revenue
streams. Staff performed a reasonableness test of the results and made appropriate changes to
the CAGR analysis.
As shown in the table below, the FY 2016 Forecast Budget anticipates a General Fund surplus of
approximately $0.5 million for FY 2016, and surpluses in all out-years of the Forecast except
Fiscal Year 2017. During the forecast period, surpluses range between $0.5 million and $3.4
million with an approximate cumulative one-time surplus of $17.2 million. Assuming that the
General Fund Budget Stabilization Reserve (BSR) is fully funded at the City Council approved
target level of 18.5 percent of General Fund operating expenditures, $11.6 million would have
to set aside to maintain the target level. With these funds set aside, the one-time resources
projected in this Forecast would decrease by $11.6 million from $17.2 million to $5.6 million.
Fiscal Year 2016-2025 Long Range Financial Forecast
Adopted
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Revenue $171,084 $179,637 $186,962 $194,498 $201,233 $208,304 $214,408 $221,070 $228,864 $236,926 $245,129
Total Expenditures $171,084 $179,155 $187,142 $193,437 $199,825 $205,896 $212,624 $219,358 $226,567 $234,032 $241,765
Net One-Time Surplus/(Shortfall)$0 $482 ($180)$1,061 $1,408 $2,408 $1,784 $1,712 $2,297 $2,894 $3,364
Cumulative Net Operating Margin (One-Time)$17,231
Net Operating Margin $0 ($180)$1,061 $347 $1,000 ($625)($72)$585 $597 $470
Cumulative Net Operating Margin $3,185
Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures.
The table includes a calculation for the net operating margin which reflects the year over year
change of surpluses and shortfalls. With the net operating margin, it is assumed that each
shortfall is addressed completely with ongoing solutions in the year it appears, and that each
surplus is completely expended with ongoing expenditures. Based on these assumptions, the
City of Palo Alto Page 4
cumulative net operating margin, or ongoing surplus, during the forecast period is
approximately $3.2 million.
Although this Forecast presents a positive fiscal outlook for the City’s General Fund, it does not
include the following potential impacts, which can increase or decrease the projected annual
surpluses to the FY 2016 Projected Budget and the out-years of the Forecast: (1) ongoing labor
negotiations; (2) Cadillac Healthcare Federal Excise Tax; (3) Foothills College Cubberley Lease;
(4) potential acquisition of the downtown Palo Alto Post Office; (5) potential termination of the
Fire Services Contract with Stanford University; (6) radio infrastructure investments with the
Silicon Valley Regional Interoperability Authority; (7) remaining Infrastructure Plan approved
projects and contingency for increased land acquisition and construction costs; (8) future
changes to pension plan assumptions by CalPERS; (9) any additional cost to the Infrastructure
Plan and operating budget impacts; and (10) changes in the local, regional, and national
economy.
At this time, staff projects $4.3 million in excess revenues and expenditure savings in the
General Fund for FY 2015. The FY 2015 projected surplus includes City Council approved budget
amendments to date and is driven by a $4.3 million, or 4.6 percent, increase in major tax
revenues from the Adopted Budget. This amount does not assume forthcoming
recommendations to adjust revenues and expenditures as part of the FY 2015 Midyear Budget
Review.
During the next few months, staff will continue to monitor revenues and expenditures based on
available information and include these updates in the FY 2016 Proposed Budget scheduled for
release late April/early May 2015.
As part of preparing this report, staff identified a few clerical errors in the attached Finance
Committee report. These clerical errors will be corrected when the final version of the Fiscal
Year 2016-2025 General Fund Long Range Financial Forecast will be published. The publication
of the Forecast is anticipated for March.
Finance Committee Review and Recommendation
At the December 16, 2014 Finance Committee meeting, the Finance Committee approved by
unanimous vote that the attached Fiscal Year 2016 to 2025 General Fund Long Range Financial
Forecast (see Attachment A) be forwarded to the City Council for acceptance. As part of the
approval, the Finance Committee requested that the City Council refer to the Finance
Committee a discussion for recommendations about means by which to address the City’s
unfunded pension and retiree healthcare liabilities. Related to the unfunded liabilities, Finance
Committee members mentioned that one way to reduce unfunded liabilities is to identify and
implement alternative service delivery models for services currently provided by City staff. As
part of this discussion, the Finance Committee encouraged staff to review services already
outsourced, moving services provided by sworn staff to non-sworn staff, and identify
alternative service delivery models.
City of Palo Alto Page 5
Attachments:
Attachment A - Fiscal Year 2016 to 2025 General Fund Long Range Financial Forecast
(PDF)
Attachment B - Finance Committee Minutes (PDF)
City of Palo Alto (ID # 5322)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/16/2014
City of Palo Alto Page 1
Summary Title: Fiscal Years 2016 to 2025 General Fund Long Range Financial
Forecast
Title: Fiscal Years 2016 to 2025 General Fund Long Range Financial Forecast
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee accept the Fiscal Year 2016 to 2025 General
Fund Long Range Financial Forecast and forward the Forecast to the City Council for
acceptance.
Executive Summary
The Fiscal Year (FY) 2016 to 2025 General Fund Long Range Financial Forecast (LRFF), which
marks the beginning of the FY 2016 budget planning process, projects a slight General Fund
surplus of $0.5 million in FY 2016. Although economic indicators and rebounding tax revenues
reveal that the City of Palo Alto has reached a turning point from the Great Recession, this
Forecast reflects financial obligations and rising benefits costs that diminish the positive outlook
over the next 10 years.
Despite improving revenue receipts as projected forward, the City continues to face challenges
related to the funding of infrastructure, rising benefits costs, and unfunded long-term liabilities.
The Infrastructure Plan was recently approved by the City Council and contains $125.8 million in
projects recommended by the Infrastructure Committee. However, even with the voter
approved increase in the Transient Occupancy Tax, a funding gap of $7.5 million still exists and
the plan does not include any contingencies for potentially higher land acquisition and
construction costs. Starting with FY 2016, this Forecast assumes an additional transfer of $4.7
million annually for the estimated annual debt service cost as assumed in the Infrastructure
Plan. Since it is not anticipated that debt will be issued until FY 2016, with the first debt service
due in FY 2017, the additional transfer of $4.7 million to the Capital Fund will be allocated to
address the Infrastructure Plan funding gap.
Since the Great Recession, the City Council has approved various strategies to reduce the costs
of salaries and benefits. These strategies include: (1) employees paying their own CalPERS
Attachment A
City of Palo Alto Page 2
contribution (between 6 percent to 9 percent of salary) except for the members of the Fire
Chiefs’ Association; (2) sharing the cost of health plan costs at 90/10; (3) creating a second
pension tier (and the state implemented a third tier effective January 1, 2013); (4) reducing
professional development expenses; (5) eliminating minimum staffing requirements and
associated overtime costs in Fire services; (6) cost of living freezes for four years; and (7)
terminating the Variable Management Compensation Plan. Continuing with previous actions to
curtail the growth of benefits costs, in 2014, as part of approving the agreement with SEIU and
the compensation plan for Management and Professional employees, the City Council approved
the cost sharing of future health plan costs. Because of the implementation of these various
strategies, the growth in salary and benefits cost are not outpacing the growth in revenue;
however, over the Forecast period, salary and benefit costs gradually increase in comparison to
the total expenditure budget. In FY 2016, salary and benefit costs represent 62 percent of the
expenditure budget; in FY 2025, the salary and benefit costs represent 65 percent of the
budget. During the same period, however, benefit costs as a percentage of total salary and
benefit costs increase from 49 percent in FY 2016 to 55 percent in FY 2025.
As reported in the first quarter financial report for FY 2015, as of early November 2014, 28
percent of non-safety (Miscellaneous) employees received Tier 2 (2 percent at 60) and Tier 3 (2
percent at 62) pension benefits and 14 percent of Safety employees received Tier 2 and Tier 3
pension benefits. However, the impact of employees hired during the last five years has had
little impact on unfunded pension plan liabilities. Per the latest CalPERS valuations for the
Miscellaneous (Attachment A) and Safety (Attachment B) employees, the combined unfunded
pension liability amounts to $295.5 million. Adding on the unfunded liability for the retiree
healthcare plan in the amount of $143.6 million, the total unfunded liability for all three plans is
$439.1 million. In comparison to the most recent valuations available for all three plans, the
total unfunded liability has remained approximately the same at $439.7 million. Changes in the
actuarial assumptions and policies, which have increased total liabilities, have offset recent
substantive market gains.
This Forecast provides a long-term view of the City’s General Fund to provide a strategic focus
for addressing future funding needs in the FY 2016 Proposed Budget and beyond. This Forecast
assumes FY 2015 service level remain the same and includes funding for the City Council’s
approved enhancements to the Shuttle Service and funding for the Transportation
Management Authority. As in past years, the Forecast has been updated based on current
information compiled from various sources, in addition to utilizing available tools to project
revenues and expenditures. This document facilitates City Council members and staff’s
understanding of the long-term impacts of past decisions, and identifies issues that must be
addressed in the near and long-term, including the availability of funds. The Forecast is not a
prediction or a commitment of resources; rather, it is a reasonable snapshot of the City’s future
financial condition based on various assumptions and currently available data.
A continuously improving economic climate is noted by the majority of national, state, regional,
and local economic indicators. This Forecast assumes a continued, gradual growth of the
Attachment A
City of Palo Alto Page 3
national economy with positive impacts to the local economy, which is reflective in the
estimates of economically sensitive revenue estimates. It is important to note that consistent
with previous forecasts, the methodology for calculating changes for out-years of the Forecast
(FY 2017 to FY 2025) are based on a historical analysis of increases using the Compounded
Annual Growth Rate (CAGR) with adjustments factored in for known items. By using the
historical average growth rate that incorporates the up and down cycles over the past 10 or 20
years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g.
dot.com bust and Great Recession) have been factored into the compound growth rate used to
forecast future revenue streams. Staff performed a reasonableness test of the results and
made appropriate changes to the CAGR analysis.
As shown in the table below, the FY 2016 Forecast Budget anticipates a General Fund surplus of
approximately $0.5 million for FY 2016, and surpluses in all out-years of the Forecast except
Fiscal Year 2017. During the forecast period, surpluses range between $0.5 million and $3.4
million with an approximate cumulative one-time surplus of $17.2 million. Assuming that the
General Fund Budget Stabilization Reserve (BSR) is fully funded at the City Council approved
target level of 18.5 percent of General Fund operating expenditures, $11.6 million would have
to set aside to maintain the target level. With these funds set aside, the one-time resources
projected in this Forecast would decrease by $11.6 million from $17.2 million to $5.6 million.
Fiscal Year 2016-2025 Long Range Financial Forecast
Adopted
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Revenue $171,084 $179,637 $186,962 $194,498 $201,233 $208,304 $214,408 $221,070 $228,864 $236,926 $245,129
Total Expenditures $171,084 $179,155 $187,142 $193,437 $199,825 $205,896 $212,624 $219,358 $226,567 $234,032 $241,765
Net One-Time Surplus/(Shortfall)$0 $482 ($180)$1,061 $1,408 $2,408 $1,784 $1,712 $2,297 $2,894 $3,364
Cumulative Net Operating Margin (One-Time)$17,231
Net Operating Margin $0 ($180)$1,061 $347 $1,000 ($625) ($72)$585 $597 $470
Cumulative Net Operating Margin $3,185
Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures.
The table includes a calculation for the net operating margin which reflects the year over year
change of surpluses and shortfalls. With the net operating margin, it is assumed that each
shortfall is addressed completely with ongoing solutions in the year it appears, and that each
surplus is completely expended with ongoing expenditures. Based on these assumptions, the
cumulative net operating margin, or ongoing surplus, during the forecast period is
approximately $3.2 million.
Although this Forecast presents a positive fiscal outlook for the City’s General Fund, it is
important to note that it does not include the following potential impacts, which can increase
or decrease the projected annual surpluses to the FY 2016 Projected Budget and the out-years
of the Forecast: (1) ongoing labor negotiations; (2) Cadillac Healthcare Federal Excise Tax; (3)
Foothills College Cubberley Lease; (4) potential acquisition of the downtown Palo Alto Post
Office; (5) potential termination of the Fire Services Contract with Stanford University; (6) radio
infrastructure investments with the Silicon Valley Regional Interoperability Authority; (7)
Remaining Infrastructure Plan approved projects and contingency for increased land acquisition
Attachment A
City of Palo Alto Page 4
and construction costs; (8) future changes to pension plan assumptions by CalPERS; (9)
Infrastructure Plan operating budget impacts; and (10) changes in the local, regional, and
national economy.
At this time, staff projects $4.3 million in excess revenues and expenditure savings in the
General Fund for FY 2015. The FY 2015 projected surplus includes City Council approved budget
amendments to date and is driven by a $4.3 million, or 4.6 percent, increase in major tax
revenues from the Adopted Budget. This amount does not assume forthcoming
recommendations to adjust revenues and expenditures as part of the FY 2015 Midyear Budget
Review.
During the next few months, staff will continue to monitor revenues and expenditures based on
available information and include these updates in the FY 2016 Proposed Budget scheduled for
release late April/early May 2015.
Economic Outlook
In preparing the FY 2016 to 2025 General Fund Long Range Financial Forecast, key economic
indicators and measures available through various publications and reports were reviewed.
Overall, the economic outlook for 2016 calls for continued measured optimism even as global
economic conditions continue to produce uneven economic growth across regions and sectors.
Thinking Globally
Famed American mathematician and meteorologist Dr. Edward Lornez engineered the strange
attractor notion and coined the term, Butterfly Effect. According to Lorenz, on any given day a
butterfly can flap its wings in China and in New York you get rain instead of sunshine. In the
age of globalization, where the exotic and chaotic combine to produce 24 hour cable news
fodder, economic and political conditions in all corners of the world can have as much of an
impact on the local economy as similar factors here at home. As a world renowned hub of
technological innovation, and at the heart of the Silicon Valley, Palo Alto is connected to the
global economy in immeasurable ways. From Amazon® to Zimride®, the global innovation
economy helped drive global growth by 3 percent in 2013, and that momentum is expected to
continue through 2015 and beyond.i
According to the Silicon Valley Bank’s Innovation Economy Global Outlook (2014), “across
regions, 2 in 3 executives say their company met or beat 2013 revenue targets. UK executives
reported the strongest performance, with 77 percent saying they met or beat targets. US
executives came in second, with 65 percent, and other innovation economies came in strong
with 62 percent meeting or beating revenue targets.”ii Although the International Monetary
Fund (IMF) recently lowered 2014 global growth projections by 0.4 percent to 3.3 percent to
reflect a weak first quarter in the US and a less optimistic outlook for emerging markets,
stronger growth is expected in advanced economies next year. The IMFs global growth
projection for 2015 is 3.8 percent.iii
Attachment A
City of Palo Alto Page 5
The measured optimism expressed by the IMF is due, in part, to downside risks that include
geopolitical factors from Eastern Europe to the Middle East that may have a supply side impact
on global oil prices; however, the emerging shale oil boom in the US has been mitigating some
of these concerns. The softening of Eurozone economies, most notably Germany, has caused
concern that Europe’s leading economy is struggling with weakening demand for exports,
slowing growth in Asia, and the impacts of Russian trade sanctions. In the US, the Federal
Reserve has ended the central bank’s long-term bond buying program known as Quantitative
Easing which may have an impact on long-term interest rates that affect everything from
consumer credit cards to home mortgages while the Bank of Japan and the European Central
Bank have ramped up similar programs.
A National View
The beginning of 2014 was, as Shakespeare famously wrote in Richard III, “the winter of our
discontent.” In July 2014, the Bureau of Economic Analysis revised their Q1 2014 Gross
Domestic Product (GDP) contraction to -2.1 percent, relative to Q4 2013 when real GDP grew
by 2.6 percent, while posting a modest gain of 1.9 percent for all of 2013.iv Overall, Q1 2014
was the worst first quarter showing since Q1 2009, amidst the throws of the Great Recession.
Economists attributed the sharp decline in output and productivity to unusually cold weather in
much of the US in early 2014 that affected everything from auto sales to home construction,
and became a significant drag on the economy. As bad as Q1 2014 was, Q2 2014 was, “made
glorious summer by this sun of York.” The output of goods and services in the US increased at a
robust annual rate of 4.6 percent in the second quarter of 2014, primarily driven by significant
increases in personal consumption expenditures, exports, private inventory investments, and
state and local government spending.v According to the UCLA Anderson Forecast, Q3 2014 GDP
growth is estimated at 3.5 percent and Q4 2014 growth is projected to be 2.9 percent. For
2015, GDP is projected to grow at annualized rate of 3.1 percent.vi The chart below provides a
quarterly view of GDP growth from 2009 to present.
Attachment A
City of Palo Alto Page 6
The UCLA Anderson Forecast cites several factors attributing to their favorable outlook for
2015. Leading the way is continued domestic job growth resulting in the precipitous decline of
the unemployment rate. As of September 2014, the national unemployment rate (U3) was 5.9
percent. The UCLA Anderson Forecast projects that by the end of 2016, the unemployment rate
(U3) will drop to 5.3 percent signaling that the economy is approaching full employment. The
following chart provides a multi-year view of the US unemployment rate. While a decrease in
the unemployment rate is very positive, it is important to note that the Federal Reserve’s highly
accommodative monetary policy may be driving job growth too far too fast. As the Dallas Fed
president recently noted in the Economic Letter, “Fed policymakers successfully ‘tapped the
breaks’ in the middle of three of our longest economic expansions (in the 1960s, 1980s, and
1990s), slowing—but not ending—the unemployment rate’s decline. By comparison, there are
no instances where the Fed has successfully eased the unemployment rate upward after having
overshot full employment: When the economy goes into reverse, it has a pronounced tendency
to lurch backward all the way into recession.”vii
Attachment A
City of Palo Alto Page 7
Other factors included in the UCLA Anderson Forecast that will drive growth in 2015 include
housing, non-residential construction, and investment in equipment and software. On the
housing front, despite the recovery being slower than anticipated, UCLA Anderson is
forecasting housing starts to rise from 1.025 million units in 2014 to 1.32 million units in 2015,
and 1.47 million units in 2016. According to the US Department of Housing and Urban
Development (HUD), privately-owned housing starts in September 2014 were at a seasonally
adjusted rate of 1.017 million, in line with the UCLA Anderson Forecast.viii However, according
to the National Association of Realtors (NAR), current market conditions weakened across all
property types in September 2014 compared to August 2014 at a time when the market
typically perks up. According to NAR, “confidence about the outlook for the next six months
also broadly weakened and is attributed to difficulties in obtaining a mortgage under tighter
underwriting standards and the decreased supply of ‘affordable’ homes.”ix Because of
continued investment in domestic energy production and a revival in commercial construction,
non-residential construction will start to rise rapidly in mid-2015. In 2016, investment in non-
residential construction is forecast to expand at a robust 8.2 percent. Persistent strength in
equipment and software spending will continue to buoy the economy.x
Additional macroeconomic data suggests that inflation is on the rise which is good for the
broader economy, but is falling below the Federal Open Market Committee’s (FOMC) long-run
objective of 2 percent. According to the San Francisco Fed, “overall and core consumer prices,
as measured by the price index for Personal Consumption Expenditures (PCE), rose 1.5 percent
in August 2014 compared with a year earlier,” but is being driven lower by falling commodity
prices, particularly those in the energy sector.xi Nevertheless, the FOMC is projecting PCE
inflation to increase by a range of 1.5 to 2.4 percent in 2015 and 1.6 to 2.1 percent in 2016.
Regarding interest rates, the FOMC has signaled that due to the improving labor market and
Attachment A
City of Palo Alto Page 8
rising inflation, the Fed will begin raising interest rates at its March 2015 FOMC meeting.
Thereafter, according to the UCLA Anderson Forecast, the Fed will continue to increase the
Federal Funds Rate to about 3 percent by the end of 2016.xii
California Dreaming
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of
foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of
Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we
had everything before us, we had nothing before us,” wrote Charles Dickens in his acclaimed
tome A Tale of Two Cities. Much can be said about the state of California’s economy as well—
depending upon where you live. As a whole, California’s economy has out-performed the
nation in terms of job growth and production. According to the Bureau of Labor Statistics (BLS),
California’s unemployment rate (U3) dropped from 9.0 percent in July 2013 to 7.4 percent in
July 2014, exceeding the UCLA Anderson Forecast (2013) by nearly a full percentage point (8.2
percent). California’s Gross State Product (GSP) grew at annualized rate of 2.0 percent in 2013xiii
and is projected to grow by 2.1 percent for 2014. While the data suggests that a California
comeback is in the offing, the distribution of growth among the state’s regions remains uneven.
It is not by happenstance that the state’s two municipal bankruptcies, Stockton and San
Bernardino, are located in interior regions while California’s coastal communities are enjoying
an economic renaissance.
Although the economic outlook for California is generally positive, according to the UCLA
Anderson Forecast, even though the total number of jobs is now higher than ever before, the
state remains below its potential in output and employment. California’s personal income
growth, after adjusting for inflation, is expected to grow by 4.4 percent in 2015 and 4.6 percent
in 2016.xiv California’s new home permits, as shown in the following chart, continue to bounce
back from their 2009 recessionary lows, showing continued improvement in new home
construction, but are far below their pre-recession levels. For 2013, new residential permits
were roughly equal to 1995 levels. According to the Zillow Home Value Index, “the median
home value in California is $430,700. California home values have gone up 11.5 percent over
the past year (August 2013 to August 2014) and Zillow predicts they will rise 5.8 percent within
the next year. The median price of homes currently listed in California is $424,900 while the
median price of homes sold is $409,550. The median rent price in California is $1,895.”xv
Attachment A
City of Palo Alto Page 9
Looking forward, while there are many facets of California’s economy that are encouraging, it is
important to be cognizant of downside risks to California’s economy. The UCLA Anderson
Forecast cites a host of new labor, healthcare, and environmental related policies that could
become a drag on the state’s growth. In addition, the housing market, although showing
strength, has been slow to take-off despite rising occupancy and rental rates, and is largely
attributable to the lack of housing supply as previously mentioned. According to the UCLA
Anderson Forecast, “though these risks exist, the fundamentals of California [and the United
States] suggest that the most likely evolution of California’s economy is one of more of the
same—slow, steady, and unexceptional growth.”xvi
Palo Alto Possible
In 2010, the Knight Foundation, an organization dedicated to supporting transformational ideas
that promote quality journalism, advance media innovation, engage communities, and foster
the arts, teamed up with the Gallup polling to survey 43,000 people in 26 cities to find out two
very important questions: what makes a community a desirable place to live and what draws
people to stake their future in it?xvii “The study found that the most important factors that
create emotional bonds between people and their community were not jobs and the economy,
but rather ‘physical beauty, opportunities for socializing, and a city’s openness to all people”
that made the difference.xviii While many of Palo Alto’s traditional economic indicators of
growth and prosperity—which are highlighted below—continue to shine, the future for our City
should also take into consideration those factors that provide Palo Alto residents, businesses,
and visitors with a community of enduring value. To that end, the outlook for Palo Alto is
exceptional.
Attachment A
City of Palo Alto Page 10
This year, the City launched Our Palo Alto, a comprehensive outreach effort that is designed to
build civic capacity and community engagement. It is organized into three main areas:
Ideas: creating opportunities for community conversations beyond City Hall in new and
creative ways.
Action: continuing work on important issues that impact the community such as traffic
and parking.
Design: the update of our Comprehensive Plan, the land use blueprint for the City.
The outcome of Our Palo Alto is intended to have a long lasting impact by generating civic
conversations across our community, in neighborhoods, businesses, community centers, and
schools. Our hope is that these conversations will bring people together, to deepen
understanding, and to expand the voices that actively participate in our community life and
shape the civic decisions of the City.
In a more traditional sense, most economic indicators point to an improving business
environment in Palo Alto. The unemployment rate (U3) in Palo Alto ticked up slightly in July
2014 to 3.1 percent, up from 2.8 percent in June 2014, but down from the July 2013 rate of 3.8
percent and the recessionary high of 6.3 percent in July 2009.xix According to the California
Board of Equalization (BOE), total taxable retail and food service sales in Palo Alto totaled $1.47
billion in 2012, surpassing the pre-recession high of $1.28 billion in 2006.xx Adjusted for
inflation, the 2006 figure totals approximately $1.462 billion in 2012 dollars which is slightly
lower than BOEs total for that year suggesting that Palo Alto retail and service sales
Attachment A
City of Palo Alto Page 11
outperformed expectations, albeit slightly. Finally, home values in Palo Alto continue to reach
new highs. According to the Zillow Home Value Index, “the median home value in Palo Alto is
$2.02 million. Palo Alto home values have gone up 12.1 percent over the past year (August
2013 to August 2014) and Zillow predicts they will rise 5.9 percent within the next year. The
median rent price in Palo Alto is $3,671 which is higher than the San Jose Metro median of
$2,750.”xxi
Fiscal Year 2016-2025 General Fund Long Range Financial Forecast
The FY 2016-2025 General Fund LRFF projects a General Fund surplus of $0.5 million for FY
2016. During this forecast period, the operating margin (shortfalls and surpluses) ranges
between -$0.2 million in FY 2017 and $3.4 million in FY 2025 with an approximate cumulative
one-time net surplus of $15.9 million (see table below).
In accordance with City Council policy, the General Fund Budget Stabilization Reserve (BSR) is
maintained at the range of 15 to 20 percent of General Fund operating expenditures, with a
target of 18.5 percent. Based on the 18.5 percent target, the BSR would have to increase from
$33.1 million in FY 2016 to $44.7 million in FY 2025. Over the Forecast period, $11.6 million
would have to be set aside to achieve the 18.5 percent BSR target by FY 2025, reducing the net
one-time resources projected in this Forecast from $17.2 million to $5.6 million.
The operating margin reflects the variance between the projected General Fund revenues and
expenditures for each year of the forecast or the annual surplus or deficit. With the operating
margin, the year over year change in surpluses and deficits, it is assumed that each shortfall is
addressed completely with ongoing solutions in the year it appears and that each surplus is
completely expended with ongoing expenditures. During the Forecast period, the net
operating margin fluctuates between negative $0.2 million and positive $1.1 million. Although
this Forecast projects healthy revenue growth, the revenue growth is barely keeping pace with
the projected expenditure growth. Further, the City Council approved Infrastructure Plan is not
yet fully funded and does not contain any contingency for higher land acquisition or
construction costs; and based on the latest valuation reports, the City’s pension and retiree
healthcare trust funds have a combined unfunded liability in the amount of $439.1 million.
Fiscal Year 2016-2025 Base Long Range Financial Forecast
Adopted
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Revenue $171,084 $179,637 $186,962 $194,498 $201,233 $208,304 $214,408 $221,070 $228,864 $236,926 $245,129
Total Expenditures $171,084 $179,155 $187,142 $193,437 $199,825 $205,896 $212,624 $219,358 $226,567 $234,032 $241,765
Net One-Time Surplus/(Shortfall)$0 $482 ($180)$1,061 $1,408 $2,408 $1,784 $1,712 $2,297 $2,894 $3,364
Cumulative Net Operating Margin (One-Time)$17,231
Net Operating Margin $0 ($180)$1,061 $347 $1,000 ($625) ($72)$585 $597 $470
Cumulative Net Operating Margin $3,185
Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures.
The graph below provides a representation of the operating and net operating margin of the
base model as described above.
Attachment A
City of Palo Alto Page 12
It should be noted that this Forecast, as outlined in the following sections of this report, does
not include the following potential impacts to the FY 2016 Projected Budget and the out-years
of the Forecast:
(1) Labor negotiations: The City is currently in negotiations with the Palo Alto Police Officers
Association (PAPOA) and the International Fire Fighters Association (IAFF). Any agreements
reached between the City’s bargaining units and the City will be incorporated into future
budgets and forecasts, as applicable.
(2) Cadillac Healthcare Federal Excise Tax: Beginning 2018, a 40 percent excise tax will be
imposed on the value of health insurance benefits that exceed a certain threshold. It is
expected that this tax will be included in the cost of the health care premiums. CalPERS
plans to design healthcare premiums to stay below the threshold and discussions are in the
preliminary stage.
(3) Foothill College Cubberley Lease: In November 2014, the City Council authorized extension
of the lease between the City and the Palo Alto Unified School District (PAUSD) at the
Cubberley Community Center site for an additional five years and to update the financial
terms to eliminate the Covenant Not to Develop (approximately $1.9 million annually) and
reallocate these funds to the capital investment of the Center’s aging infrastructure. Foothill
College represents a significant portion of the current tenant lease income (approximately
$1.0 million annually) of the site and the College is planning to move operations currently
housed at Cubberley to a new Sunnyvale campus. Although the forecast assumes the
Attachment A
City of Palo Alto Page 13
investment in the Center’s infrastructure, the Forecast does not assume lost revenue from
Foothill College relocating to a new campus. Per the lease agreement with the school
district, any loss in lease revenue from Foothill College will be equally shared between the
City and PAUSD.
(4) Acquisition of the downtown Palo Alto Post Office: The City may acquire the downtown Palo
Alto Post Office with the plan to relocate staff from leased facilities. The acquisition would
be financed through issuance of debt with the annual debt service paid through lease cost
savings. If the Palo Alto Post Office is acquired, it would require substantial improvements
while the City pays the annual debt service, and during that time the City will also have to
continue paying for leasing existing facilities. Staff is reviewing potential strategies, which
would reduce the impact to the General Fund in the short-term.
(5) Fire Services Contract with Stanford University: The term of the fire response service
contract between the City and Stanford is through September 30, 2026; however, at
Stanford’s request, the two parties have been in negotiations over the past two years to
restructure the contract. On October 8, 2013, the City received a Notice of Termination
letter from Stanford with the intent to terminate the contract with the City no sooner than
one year and no later than two years from the date of the notice. In order to plan for a
possible termination of services, the City requested that Stanford inform the City of the final
termination date at least three months in advance to allow for a structured potential
reduction in force in the City's Fire Department. On November 20, 2013, Stanford issued a
Request for Proposal (RFP) for Delivery of Fire Department Services for the campus, which
the City responded to by the submission deadline of January 31, 2014. This Forecast
assumes the continuation of the contract, because staff believes that the City of Palo Alto is
best suited to provide Fire Protection Services to Stanford. For FY 2016 the City is budgeted
to receive approximately $8.4 million in revenue from Stanford for fire response services
and emergency dispatch services.
(6) Radio Infrastructure Investment with the Silicon Valley Regional Interoperability Authority
(SVRIA): The SVRIA oversees a number of initiatives to enhance radio and data
interoperability in Santa Clara County and the South Bay Region, and the most ambitious
project is the build-out of the Silicon Valley Regional Communications System (SVRCS) at an
estimated cost of $35.5 million. It is envisioned that both public safety and local
government users such as Public Works, City Utilities, and Park Rangers will migrate to this
700 MHz trunked radio system. In addition to a portion of the infrastructure costs, each
participating agency will be responsible for the purchase of portable and mobile radios to
replace their legacy UHF and VHF radios. If the City chooses to participate in the SVRCS
project, the City’s total proportional infrastructure costs are estimated to be $2.5 million, of
Attachment A
City of Palo Alto Page 14
which $1.65 million would be paid by the General Fund and the remainder by several
enterprise funds. The radio replacement costs are estimated to be $1.1 million, of which
$837,500 would be paid by the General Fund and the remainder by several enterprise
funds. The total implementation cost to the General Fund would be $2.5 million, and the
remaining $1.1 million would be paid by several Utilities and Public Works enterprise funds.
Participation in this county-wide investment will be evaluated as part of future budget
processes.
(7) In June 2014, the Infrastructure Plan was approved by the City Council and contains $125.8
million in projects recommended by the Infrastructure Committee. However, even with the
voter approved increase in the Transient Occupancy Tax, a funding gap of $7.5 million still
exists and the plan does not include any contingencies for potentially higher land
acquisition and construction costs. Starting with FY 2016, this Forecast assumes an
additional transfer of $4.7 million annually for the estimated annual debt service cost as
assumed in the Infrastructure Plan. Since it is not anticipated that debt will be issued until
FY 2016 with the first debt service due in FY 2017, the additional transfer of $4.7 million to
the Capital Fund will be allocated to address the Infrastructure Plan funding gap.
(8) During the last two years, the CalPERS Board approved actuarial mortality assumptions
changes and lowered the assumed interest earnings assumption from 7.75% to 7.5%. This
Forecast does not include additional future changes to pension plan assumptions by
CalPERS. However, the Forecast does include continuous incremental pension cost
increases for the Forecast period.
(9) Infrastructure Plan operating budget impacts: In June 2014, the City Council approved the
Infrastructure Project Funding Proposal which includes $125.8 million in projects
recommended by the Infrastructure Committee. This Forecast does not assume ongoing
operating impacts as a result of the Infrastructure Plan. Future forecasts will include
operating cost impacts as the specific projects are designed.
(10) Changes in the local, regional, and national economy: This Forecast assumes a steadily
growing local economy. Any changes may have positive or negative impacts on
economically sensitive revenues such as Sales Tax and the Transient Occupancy Tax.
At this time, staff projects a $4.3 million General Fund budget surplus for FY 2015. This surplus
assumes City Council authorized budget amendments to date and includes higher revenue
estimates based on actual receipts in FY 2015 totaling $4.3 million, or a 4.7 percent increase
over the Adopted Budget. This amount does not assume forthcoming recommendations to
adjust revenues and does not include expenditure increases that may be recommended as part
of the FY 2015 Midyear Budget Review.
Attachment A
City of Palo Alto Page 15
Compared to FY 2015 Projected Budget, in FY 2016, the upward revenue trend continues with a
$3.0 million, or 3.1 percent, tax revenue increase. This revenue increase, together with a $1.0
million contribution from the Golf Course Operating Loss Reserve, significantly offsets the $3.9
million, or 3.6 percent, increase in salary and benefits. Please note that the City Council
established the Golf Course Operating Loss Reserve in the amount of $0.6 million in August
2014. As part of the FY 2015 Midyear Budget Review, staff will bring forward a
recommendation to increase the reserve amount by approximately $0.4 million to $1.0 million.
It is anticipated that the one-time FY 2016 decrease in revenues due to the Golf Course closure
is $1.0 million.
A $0.2 million budget shortfall is expected in FY 2017. This shortfall is driven by lower estimates
for Utilities Users’ Tax as explained in the revenue section of this report and a net $1.2 million
increase in operating costs due to the reopening of the Golf Course.
The next section of the report discusses the analysis and assumptions of major revenue and
expenditure categories. Consistent with the 2015-2024 LRFF, the methodology for calculating
changes for out-years of the Forecast (FY 2017 to FY 2025) are based on a historical analysis of
increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for
known items. Staff performed a reasonableness test of the results.
Revenues
City of Palo Alto tax revenues turned in another solid performance in FY 2014. This trend is
expected to continue into FY 2015 and FY 2016. The fundamental economic drivers of low
unemployment, robust business activity, demand for residential and commercial property, and
strong incomes in the Silicon Valley region are propelling tax receipts upward.
Fiscal Year 2016-2025 Long Range Revenue Forecast
Revenue
Adopted
2015
Projected
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sales Taxes $25,957 $29,238 $27,454 $28,333 $29,245 $30,199 $31,201 $32,250 $33,256 $34,280 $35,308 $36,332
Property Taxes 31,927 32,556 34,343 36,270 38,313 40,479 42,783 45,149 47,577 50,051 52,614 55,245
Transient Occupancy Tax 14,156 15,901 17,640 18,526 19,505 20,136 20,799 21,464 22,166 22,921 23,710 24,471
Documentary Transfer Tax 7,514 6,500 6,852 7,233 7,657 8,104 8,583 9,192 9,848 10,568 11,351 12,151
Utility Users Tax 11,285 10,895 11,805 12,054 12,503 12,926 13,343 13,666 14,034 14,416 14,812 15,229
Other Taxes and Fines 2,164 2,164 2,165 2,222 2,279 2,339 2,399 2,462 2,526 2,591 2,659 2,728
Subtotal: Taxes 93,003 97,254 100,259 104,638 109,502 114,183 119,108 124,183 129,407 134,827 140,454 146,156
Charges for Services 14,814 15,931 15,356 17,793 18,957 19,462 19,978 20,507 21,042 21,590 22,153 22,730
Stanford Fire & Dispatch Services 8,199 8,199 8,402 8,621 8,845 9,075 9,311 9,553 9,801 10,056 10,318 10,586
Permits and Licenses 7,804 7,738 8,005 8,213 8,427 8,646 8,871 9,101 9,338 9,581 9,830 10,085
Return on Investments 685 877 894 912 931 952 973 996 1,020 1,049 1,081 1,115
Rental Income 14,254 14,230 14,288 14,528 14,746 14,972 15,242 14,348 13,819 14,169 14,528 14,896
From Other Agencies 453 453 333 337 341 345 349 354 358 363 367 372
Charges to Other Funds 10,647 10,647 10,997 11,282 11,575 11,876 12,184 12,500 12,824 13,157 13,498 13,849
Other Revenue 1,060 1,289 1,508 1,562 1,602 1,643 1,686 1,729 1,774 1,820 1,867 1,916
Total Non-Tax Revenue 57,916 59,364 59,783 63,248 65,424 66,971 68,594 69,088 69,976 71,785 73,642 75,549
Operating Transfers-In 18,433 18,528 18,592 19,076 19,572 20,080 20,602 21,138 21,688 22,252 22,830 23,424
BSR Contribution (One-Time)1,732 1,732
Golf Operating Loss Reserve Liquidation 1,004
Total Source of Funds $171,084 $176,878 $179,638 $186,961 $194,498 $201,234 $208,305 $214,409 $221,070 $228,864 $236,926 $245,129
Attachment A
City of Palo Alto Page 16
Revenue
Adopted
2015
Projected
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sales Taxes -11.8% 12.6% -6.1% 3.2% 3.2% 3.3% 3.3% 3.4% 3.1% 3.1% 3.0% 2.9%
Property Taxes 4.4% 2.0% 5.5% 5.6% 5.6% 5.7% 5.7% 5.5% 5.4% 5.2% 5.1% 5.0%
Transient Occupancy Tax 15.5% 12.3% 10.9% 5.0% 5.3% 3.2% 3.3% 3.2% 3.3% 3.4% 3.4% 3.2%
Documentary Transfer Tax -7.7% -13.5% 5.4% 5.6% 5.9% 5.8% 5.9% 7.1% 7.1% 7.3% 7.4% 7.0%
Utility Users Tax 2.5% -3.5% 8.4% 2.1% 3.7% 3.4% 3.2% 2.4% 2.7% 2.7% 2.7% 2.8%
Other Taxes and Fines 1.4% 0.0% 0.1% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Subtotal: Taxes -0.6% 4.6% 3.1% 4.4% 4.6% 4.3% 4.3% 4.3% 4.2% 4.2% 4.2% 4.1%
Charges for Services -10.9% 7.5% -3.6% 15.9% 6.5% 2.7% 2.7% 2.6% 2.6% 2.6% 2.6% 2.6%
Stanford Fire & Dispatch Services 11.4% 0.0% 2.5% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Permits and Licenses 13.4% -0.8% 3.5% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Return on Investments -44.1% 28.0% 1.9% 2.0% 2.1% 2.3% 2.2% 2.4% 2.4% 2.8% 3.1% 3.1%
Rental Income 1.2% -0.2% 0.4% 1.7% 1.5% 1.5% 1.8% -5.9% -3.7% 2.5% 2.5% 2.5%
From Other Agencies -50.8% 0.0% -26.6% 1.2% 1.2% 1.2% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
Charges to Other Funds -3.3% 0.0% 3.3% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Other Revenue -11.1% 21.6% 17.0% 3.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Total Non-Tax Revenue -2.3% 2.5% 0.7% 5.8% 3.4% 2.4% 2.4% 0.7% 1.3% 2.6% 2.6% 2.6%
Operating Transfers-In -7.5% 0.5% 0.3% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
BSR Contribution (One-Time)0.0% -100.0%
Golf Operating Loss Reserve Liquidation -100.0%
Total Source of Funds -1.0% 3.4% 1.6% 4.1% 4.0% 3.5% 3.5% 2.9% 3.1% 3.5% 3.5% 3.5%
The tables above highlight the annual revenue estimates and year over year increases for this
Forecast. Compared to FY 2015 projected, FY 2016 revenues are estimated to increase by $2.8
million, or approximately 1.6 percent. This includes $1.0 million in one-time sources set aside
in FY 2015 for the Golf Course Operating Loss Reserve. Excluding one-time sources, ongoing
revenues in FY 2016 are estimated to increase by $3.5 million, or 2.0 percent, from FY 2015
yearend projections. Based on the economic analysis presented in the previous section of this
report, revenue estimates, which are primarily linked to the performance of the regional and
local economy, are reflective of increased consumer spending, continued rise in home prices,
and the opening of hotels. The upward trend of the City’s tax revenues is expected to continue
over the next 10 years. These tax revenues have significantly improved since the beginning of
the Great Recession. The table above illustrates the steady growth projected for the General
Fund’s revenue streams, by percentage, from FY 2016 through FY 2025.
During the 2013 Finance Committee discussions, it was recommended that staff consider use of
a historical annual growth rate derived for each tax revenue source to project future revenue
streams. This methodology was used in the final forecast presented for FY 2015 to 2024 and
has been used in this forecast as well. The Compound Annual Growth Rates (CAGR) utilized in
this Forecast is cited in each revenue section.
It is worth noting that in past forecasts a recession and falloff in economically sensitive
revenues was assumed once every nine years. While it is not staffs’ intent to predict the exact
timing of the recession, its inclusion in the forecast is to send a signal that a cyclical event,
whereby revenues can drop dramatically, will inevitably occur. By using the historical average
growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no
single year in which a downturn is depicted. Instead, past downturns (e.g. dot-com bust and
Great Recession) are factored into the compound growth rate used to forecast future revenue
streams.
Attachment A
City of Palo Alto Page 17
The graph above depicts a historical and projected view of the five major General Fund tax
revenues. It includes 10 years of actual revenue history; the projections for the remainder of FY
2015 based on actual data available for the first five months of the fiscal year; as well as the
projections for FY 2016 and the subsequent years of the Forecast, based on current available
data and application of the CAGR methodology. The following section is a detailed discussion
of General Fund Tax revenue and other major revenue sources by category.
Sales Tax
Sales taxes have rebounded from a low of $17.9 million in FY 2010 to a new high of $29.4
million in FY 2014. Results in FY 2014 are a consequence of one-time, exceptional receipts from
a single vendor. The FY 2015 projected figure is due to a planned adjustment of the sales tax
accrual period, which was discussed with the Finance Committee as part of the approval of the
FY 2014 Comprehensive Annual Financial Report. The FY 2016 projection then returns the
General Fund to a more representative level.
TABLE 1: SALES TAX REVENUE BY FISCAL YEAR (MILLIONS)
Fiscal Year 2011 2012 2013 2014 20151 20162
Revenue $20.6 $22.0 $25.6 $29.4 $29.2 $27.5
1 Projections based on fiscal year-to-date results, expected growth, and potential risks.
2 Revenues are expected to drop in Fiscal Year 2016 as a consequence of one-time receipts and accrual changes
(per an outside audit recommendation) in Fiscal Year 2015.
Attachment A
City of Palo Alto Page 18
Sales tax revenue is showing continued positive growth. Restaurant and electronic sales are
trending higher and auto sales in key, older dealerships are rising. It’s important to note that
the State has terminated its “triple flip” program so the City will receive more timely payments
of its sales tax receipts. This primarily affects cash flow, but will result in slightly better interest
earnings for the General Fund.
While overall sales tax revenue growth is continuing a positive trend from recessionary lows,
there are some potential risks that could affect the current trend. First, the breakup of Hewlett
Packard (HP) into two companies could potentially eliminate tax generating segments of HP’s
business. The split is expected to occur next year and it is important to note that HP has been
one of the City’s top ten sales tax producers. Recent news also indicates that Internet retail
sales are anticipated to increase by over 15 percent (over prior year) during the critical holiday
sales season. This trend will continue to exert downward pressure on sales tax growth, a key
source that constitutes approximately 15 percent of General Fund revenue.
The CAGR applied to the period FY 2016 through FY 2025 is 2.8 percent which is in line with
historical growth rates.
Property Tax
Since the end of the Great Recession, property values and revenues have risen at a strong rate.
Beginning in FY 2013, receipts have risen by a robust $2.0 million each year. Contributing
factors to this exceptional rise in property tax revenue include: single family home sales that
have exceeded asking prices; a healthy commercial property market; and the unleashing of
latent property values from the sale of long held homes that were “shielded” from assessed
value appreciation by Proposition 13.
The following chart is taken from a realtor (Alain Pinel) web site. It depicts the astonishing
takeoff in median Palo Alto home prices since Calendar Year 2011.
Attachment A
City of Palo Alto Page 19
The City’s property tax estimate for FY 2015 is based on information received from quarterly
meetings with the Santa Clara County Assessor’s Office. The estimate includes appeals on
record with the Assessor’s Office, additions to the roll, and movements in assessed values.
Projections beyond FY 2015 are based on historical growth rates. The CAGR used in this 10 year
forecast equals 5.4 percent.
As requested by the City Council, staff coordinates with the Palo Alto Unified School District
(PAUSD) for their assumptions in property tax growth. Typically, the initial growth assumptions
used by PAUSD in developing their budget are lower than the City’s. As the budget year
progresses, however, PAUSD will align their property tax revenue with actual increases that
tend to be closer to the City’s projections.
TABLE 2: PROPERTY TAX REVENUE BY FISCAL YEAR (MILLIONS)
Fiscal Year 2011 2012 2013 2014 20153 2016
Revenue $25.7 $26.5 $28.7 $30.6 $32.6 $34.3
In FY 2015, the Administrative Services Department contracted with a firm to produce detailed
reports on property taxes. The consultant’s reports have provided key insights into Palo Alto
real estate market that supports property taxes growing at around 5 percent per year include:
There are 8,600 residential properties in Palo Alto under $600,000 in Assessed Value.
These properties turn over at a rate of 570 annually;
Approximately 3 percent of residential parcels will increase in Assessed Value by an
average 63 percent. All other properties will increase by the historical average of 7
percent; and,
Per the 2013-201414 Assessor’s Roll, average Assessed Value of residential properties in
Palo Alto equal $944,000.
Transient Occupancy Tax (TOT)
As the table below shows, Transient Occupancy Taxes continue to perform exceptionally well.
As summarized in the table below, average daily room rates and occupancy levels continue to
demonstrate considerable strength since FY 2011. Generally, occupancy levels between 80 and
85 percent indicate full occupancy. Demand for Palo Alto rooms is strong, leading to
construction and planned construction of five new hotels. A vibrant business and tourist
environment has led to a surge in hotel bookings from San Francisco down through the
Peninsula to San Jose.
3 Projected revenue based on county year to date data and trends.
Attachment A
City of Palo Alto Page 20
TABLE 3: TRANSIENT OCCUPANCY TAX BY FISCAL YEAR (MILLIONS)
Fiscal Year 2011 2012 2013 2014 20154 2016
Revenue (millions) $8.1 $9.7 $10.8 $12.3 $15.9 $17.6
Average Daily Room Rate $147 $165 $182 $208 $198 n/a
Average Occupancy (percent) 73% 79% 80% 79% 84% n/a
This forecast includes estimated revenues for all of the new hotels built, being constructed, or
planned in the City. The Epiphany has opened and it is expected that two Hilton hotels will
open towards the end of FY 2015. The Westin Annex and a new hotel on the Ming’s restaurant
site are not expected to open until FY 2017. The voter approved TOT rate increase from 12 to
14 percent will take effect on January 1, 2015 and is expected to generate approximately $2.7
million in revenue in FY 2016. This forecast includes revenue from new hotels and the 2
percent TOT rate increase and a corresponding $4.7 million transfer to infrastructure to support
the Infrastructure Plan that was recently adopted by Council.
The CAGR applied to the period FY 2016 through FY 2025 is 4.4 percent which is in line with
historical growth rates.
Documentary Transfer Tax (DTT)
The Documentary Transfer Tax continued to outperform expectations by reaching $8.1 million
in FY 2014 as compared to an average of $5.6 million over the prior three fiscal years. This
average was affected by the Great Recession and likely caused a burst of property transactions
(due to improving prices and low interest rates) in FY 2014. There were an unusually high
number of high value commercial property sales in FY 2014.
TABLE 4: DOCUMENTARY TRANSFER TAX BY FISCAL YEAR (MILLIONS)
Fiscal Year 2011 2012 2013 2014 20155 2016
Revenue $5.2 $4.8 $6.8 $8.1 $6.5 $6.9
Through October 2014, Documentary Transfer Tax receipts are running 40 percent below the
prior year period. As a result, the Forecast includes lower expectations for FY 2015. As stated
in prior forecasts, this revenue source is somewhat unpredictable given that the volume and
mix of commercial and residential transactions can vary significantly from year to year. The
CAGR applied to the period FY 2016 through FY 2025 is 6.5 percent.
4 Projected revenue based on trend and Fiscal Year 2015 year to date data. Average Daily Room Rate and
Occupancy are year-to-date through October 2014.
5 Projected revenue based on county year to date data and trends.
Attachment A
City of Palo Alto Page 21
Utility Users Tax (UUT)
The Utility Users Tax forecast incorporates two changes approved by voters in November 2014.
The telephone UUT rate has been reduced from 5.0 percent to 4.75 percent and the large utility
user discount (which stepped down tax rates for water, gas, and electric usage) was eliminated.
These changes will be implemented in the next few months and according to state codes. On
an annual basis, the changes will reduce telephone revenues by an estimated $0.16 million
while ending the large utility user discount will raise utility related revenues by $0.55 million.
Receipts anticipated from the UUT are based on the Utilities Department’s five-year revenue
and rate projections. These estimates could change as the department discusses its proposed
rate plan with the Utilities Advisory Commission and the City Council during the annual budget
process.
Telephone receipts went down slightly from FY 2013 to FY 2014 and a lower level is expected in
FY 2015 based on the rate decrease. Unfortunately, there is little data available from
telecommunications providers to offer more informed projections.
Other Taxes & Fines
Staff anticipates that revenues in this category will remain flat in FY 2016 at $2.2 million. The
largest source of revenue in this category is derived from parking violations revenue, which
staff estimates will also hold flat in FY 2016 at $1.7 million. Additional revenue in this category,
such as traffic violations, administrative citations, and library fines and fees, are projected to
grow annually by 2.6 percent over the 10 year forecast.
Charges for Services
For FY 2016, total one-time revenues in this category will decrease by $0.6 million or 3.6
percent to $15.4 million from a FY 2015 projection of $16.0 million. The decline is largely
attributable to the Golf Course Reconfiguration Project (decrease of $1.0 million) which is
scheduled to begin in the spring of 2015 and continue through FY 2016. It is important to note
that the one-time revenue decrease from the Golf Course closure is scheduled to be offset with
the liquidation of the Golf Course Operating Loss Reserve. In August 2014, the City Council
established the Golf Course Operating Loss Reserve in the amount of $0.6 million. As part of
the FY 2015 Midyear Budget Review, staff will bring forward a recommendation to increase the
reserve amount by approximately $0.4 million to $1 million.
Ongoing, this Forecast assumes a revenue increase of $0.3 million for Community Services
Department classes and camps to align with historical trends. In addition, charges for services
revenue was increased by 3.6 percent to account for general salary and benefit increase
included in the Forecast. These figures do not include Charges for Services revenue for Stanford
Fire & Dispatch which is explained in further detail below.
Stanford Fire & Dispatch Services
The City has two separate agreements with Stanford University to provide fire response
services and emergency dispatch services. As part of these agreements, Stanford is charged
Attachment A
City of Palo Alto Page 22
30.3 percent of the Fire Department’s net cost and 16 percent of the Police Department’s
Communication and Dispatch Division to reimburse the City for Stanford’s proportional share of
these services. The FY 2016 Forecast assumes a reimbursement of $8.4 million, which is a 3.5
percent increase from the FY 2015 adopted amount of $8.1 million.
The term of the fire response service contract between the City and Stanford is through
September 30, 2026; however, at Stanford’s request, the two parties have been in negotiations
over the past two years to restructure the contract. On October 8, 2013, the City received a
Notice of Termination letter from Stanford with the intention to terminate the contract with
the City no sooner than one year and no later than two years from the date of the notice. In
order to plan for a possible termination of services, the City requested that Stanford inform the
City of the final termination date at least three months in advance to allow for a structured
potential reduction in force in the City's Fire Department. On November 20, 2013, Stanford
issued a Request for Proposal (RFP) for Delivery of Fire Department Services for the campus,
which the City responded to by the submission deadline of January 31, 2014. The FY 2016
Forecast assumes the continuation of the contract, because staff believes that the City of Palo
Alto is best suited to provide Fire Protection Services to Stanford. A modest annual increase of
2.6 percent has been built into the outer years to account for increasing salary and benefit costs
based on currently available information.
Permits and Licenses
Revenue from permits and licenses has experienced consistent growth over the past several
years, primarily due to increased development activity around Palo Alto. Based on year-to-date
estimates, FY 2015 revenues are projected to decrease by 0.8 percent from the adopted budget
revenue estimate. Staff fully anticipates meeting or exceeding FY 2015 revenue estimates for
this category based upon current activity levels. In FY 2016, revenues in this category are
expected to increase by an additional $0.3 million, or 3.5 percent, from the FY 2015 projected
level. The Planning and Community Environment and Development Services department are
currently undertaking a fee study to review the appropriateness of planning and development
fees. Staff is expecting the study to be concluded in early 2015 and will evaluate changes in
planning and development fees and corresponding revenue estimates as part of the FY 2016
budget process.
Return on Investment
Interest earnings continue to be depressed as a consequence of the Federal Reserve’s loose
monetary and interest policies. Expectations for earnings from investments are around $0.9
million which is a 1.9 percent increase from FY 2015 yearend projections.
Rental Income
The largest source of rental income comes from the City’s Enterprise Funds and the Cubberley
Community Center. Compared to the FY 2015 Adopted Budget, rental income will remain flat at
$14.3 million. An appraisal of all General Fund properties that may result in additional rental
income will be completed in January 2015. For this forecast period, starting with FY 2017, a 2.6
Attachment A
City of Palo Alto Page 23
percent growth was assumed for all rental properties, except for the Refuse Fund rent which is
assumed until FY 2021 as approved by the City Council to account for the closing costs related
to the Middlefield Well landfill site.
Revenue from Other Agencies
Included in this category is funding from Community Services Outreach theatre programs,
reimbursements from the Palo Alto Unified School District (PAUSD) for School Resource
Officers, and state and federal grants, if received. Many of these revenue streams are difficult
to predict and are dedicated often to specific purposes. In this category revenues over the past
five fiscal years have ranged from $0.1 million to $0.4 million. This forecast assumes $0.3
million for FY 2016 with a growth rate of 1 percent in subsequent years due to the
unpredictability of this funding source.
Charges to Other Funds
Approximately 87 percent of this category is General Fund administrative cost plan charges to
the Enterprise and Internal Service Funds. The FY 2016 projected amount is $11.0 million, an
increase of 3.3 percent, from the FY 2015 Adopted Budget. The increase is primarily
attributable to increased salary and benefit costs in the internal support departments. The
forecast includes increases ranging between 2.6 to 3.6 percent each year based primarily on
assumed increases in salary and benefit costs.
Other Revenues
Major revenue sources in this category are reimbursements for the Shuttle program (e.g. City of
East Palo Alto), Animal Services charges to Los Altos and Los Altos Hills, reimbursements from
PAUSD for its share of Cubberley and athletic field maintenance, donations from non-profits to
City libraries, and miscellaneous revenues. Revenues for this category are estimated to increase
by 17 percent in FY 2016, mostly due to $0.4 million in increased revenue from partner agencies
for the Shuttle program. The FY 2016 projected revenue for this category is $1.5 million, with a
3.6 percent annual increase forecasted for FY 2017 and 2.6 percent annual increases through FY
2025.
Operating Transfers In
Operating Transfers include the equity transfer from the Electric and Gas funds as well as
transfers from the University Ave Parking Permit Fund. In accordance with a methodology
approved by Council in June 2009, the equity transfer is calculated by applying a rate of return
to the capital asset base of the Electric and Gas funds. This rate of return is based on PG&E's
rate of return on equity as approved by the California Public Utilities Commission (CPUC). The
equity transfer from the Electric and Gas funds are projected to increase from $17.1 million in
FY 2015 to $17.3 million in FY 2016. Using the Utility Department’s projections from the
Electric and Gas Five Year Financial Forecasts, as approved by the City Council in spring 2014,
the equity transfer is projected to increase slightly in FY 2016 (0.9 percent) and then increase
annually by 2.6 percent over the rest of the forecast period. Overall Operating Transfers are
Attachment A
City of Palo Alto Page 24
estimated to increase from a projected FY 2015 yearend estimate of $18.6 million to $19.1
million in FY 2016, a 0.5 percent increase year over year.
Expenditures
As part of developing the FY 2016 Forecast expenditure budget, the General Fund expenditure
categories have been adjusted with removing FY 2015 Adopted Budget one-time expenditures
and updating major cost elements such as salary and benefits costs. The tables below display
the General Fund expense forecast. Compared to FY 2015 projected, FY 2016 expenditures are
estimated to increase by $6.7 million, or 3.9 percent primarily due to increased salary and
benefits, an increased transfer to infrastructure, and allocated charges costs from Enterprise
Funds and Internal Service Funds.
Fiscal Year 2016-2025 Long Range Expenditure Forecast
Expenditure
Adopted
2015
Projected
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Salary $53,788 $53,692 $56,123 $57,892 $59,510 $61,017 $62,512 $64,034 $65,587 $67,180 $68,817 $70,497
Benefits 53,177 53,094 54,524 58,073 61,212 64,436 67,780 71,260 74,882 78,660 82,601 86,717
Subtotal: Salary & Benefits 106,965 106,786 110,647 115,965 120,723 125,453 130,292 135,294 140,469 145,840 151,417 157,214
Contract Services 16,028 17,496 14,261 15,338 15,660 16,061 16,449 16,846 17,282 17,731 18,191 18,662
Supplies & Material 3,433 3,475 3,464 3,554 3,646 3,740 3,837 3,936 4,038 4,143 4,251 4,362
General Expense 5,058 5,069 4,727 4,829 4,934 5,041 5,151 5,265 5,380 5,500 5,621 5,747
Cubberley Lease 6,446 6,446 5,736 5,908 6,085 6,268 6,446 6,649 6,849 7,054 7,266 7,484
Debt Service 428 428 431 432 432 431 - - - - - -
Rents & Leases 1,356 1,365 1,391 1,427 1,464 1,502 1,541 1,581 1,622 1,664 1,708 1,752
Facilities & Equipment 556 556 486 499 512 525 539 553 567 582 597 613
Allocated Charges 15,080 15,047 15,589 15,883 16,294 16,721 17,159 17,609 18,067 18,537 19,019 19,513
Total Non Sal/Ben Before Transfers 48,385 49,882 46,085 47,870 49,027 50,290 51,121 52,438 53,807 55,211 56,653 58,133
Operating Transfers-Out 2,076 2,276 3,735 4,281 4,315 4,355 4,390 4,425 4,232 4,272 4,312 4,354
Transfer to Infrastructure 13,659 13,659 18,688 19,026 19,372 19,728 20,093 20,467 20,851 21,245 21,649 22,063
Total Use of Funds $171,084 $172,603 $179,155 $187,142 $193,437 $199,825 $205,896 $212,624 $219,358 $226,567 $234,032 $241,765
Expenditure
Adopted
2015
Projected
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Salary 6.3% -0.2% 4.5% 3.2% 2.8% 2.5% 2.5% 2.4% 2.4% 2.4% 2.4% 2.4%
Benefits 10.0% -0.2% 2.7% 6.5% 5.4% 5.3% 5.2% 5.1% 5.1% 5.0% 5.0% 5.0%
Subtotal: Salary & Benefits 8.1% -0.2% 3.6% 4.8% 4.1% 3.9% 3.9% 3.8% 3.8% 3.8% 3.8% 3.8%
Contract Services 11.8% 9.2% -18.5% 7.6% 2.1% 2.6% 2.4% 2.4% 2.6% 2.6% 2.6% 2.6%
Supplies & Material -2.2% 1.2% -0.3% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
General Expense 17.7% 0.2% -6.8% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
Cubberley Lease -11.3% 0.0% -11.0% 3.0% 3.0% 3.0% 2.8% 3.1% 3.0% 3.0% 3.0% 3.0%
Debt Service 84.5% 0.0% 0.7% 0.3% 0.0% -0.3% -100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Rents & Leases 10.2% 0.7% 1.9% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Facilities & Equipment 23.0% 0.0% -12.5% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Allocated Charges -1.8% -0.2% 3.6% 1.9% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Total Non Sal/Ben Before Transfers 3.6% 3.1% -7.6% 3.9% 2.4% 2.6% 1.7% 2.6% 2.6% 2.6% 2.6% 2.6%
Operating Transfers-Out 54.0% 9.6% 64.1% 14.6% 0.8% 0.9% 0.8% 0.8% -4.4% 0.9% 1.0% 1.0%
Transfer to Infrastructure -20.7% 0.0% 36.8% 1.8% 1.8% 1.8% 1.8% 1.9% 1.9% 1.9% 1.9% 1.9%
Total Use of Funds 4.2% 0.9% 3.8% 4.5% 3.4% 3.3% 3.0% 3.3% 3.2% 3.3% 3.3% 3.3%
Salary and Benefits
The table above depicts the salaries and benefits costs for the next ten years. Over the
Forecast period, the salaries and benefits cost gradually increase in comparison to the total
expenditure budget. In FY 2016, salaries and benefits costs represent 62 percent of the
expenditure budget; in FY 2025, the salaries and benefits cost represent 65 percent of the
budget. In the same period, though, the benefits cost as a percentage of total salaries and
benefits costs increase from 49 percent in FY 2016 to 55 percent in FY 2025. Over the Forecast
period, salaries compounded growth is 26 percent versus a compounded growth in benefits
Attachment A
City of Palo Alto Page 25
costs of 59 percent. The following sections describe the assumed increases in salary and
benefits costs and depict the reasons for the faster increasing benefits versus salaries costs.
Salary
The Forecast is consistent with the City’s change in salary budget methodology that was
implemented as part of the FY 2015 Adopted Budget. As such, positions are budgeted at actual
rate of pay including benefits as of fall 2014. Then, by position, salary costs are updated in
accordance with applicable Memoranda of Understanding (MOU) between the City and its
labor groups and the Management and Professional Personnel and Council Appointees
Compensation Plan. The Forecast also assumes merit increases for Management and
Professional employees as well as general salary increases for all labor groups consistent with
the existing MOU. Any other assumed general salary increases are assumed for planning
purposes only and do not signify a commitment of future salary increases.
A majority of the programmed salary increases for FY 2016 were approved by the City Council,
as any changes to employees’ salaries and benefits are part of the meet and confer process
with the City’s labor groups. However, the City is currently in negotiations with the Palo Alto
Police Officers Association (PAPOA) and the International Association of Fire Fighters (IAFF),
Local 1319. Pending negotiations with PAPOA and IAFF may impact the salary costs for FY 2016
Budget. Any such impacts will be included, as necessary, in the development of the FY 2016
Proposed Budget, which is scheduled for release to the City Council late April/early May 2015.
Benefits
Pension
The forecast includes the pension rates from CalPERS as of the June 30, 2013 valuation for the
City’s Miscellaneous and Safety plans. As stated in these valuations (Attachments A and B),
these valuations include the CalPERS approved actuarial mortality assumption changes; the
smoothing and amortization policies as discussed with the Finance Committee in December
2013 (CMR 4310); as well as the initial set of employees who receive the Tier 3 or Public
Employees’ Pension Reform Act (PEPRA) pension benefit level. Further, per the valuations, the
FY 2016-2017 rates, and thereafter, reflect the 18 percent investment return for FY 2014.
As shown in the table below, the FY 2016 pension contribution rates for the Miscellaneous and
Safety plans increased from the current year. For the Miscellaneous Plan, the pension
contribution rate increased by 1.6 percentage points from the FY 2015 rate of 26.1 percent to a
FY 2016 rate of 27.7 percent. For the Safety Plan, the pension contribution rate increased by
2.4 percentage points from the FY 2015 rate of 39.5 percent to a FY 2016 rate of 41.9 percent.
Per the attached valuations, the table below shows the pension contribution rates from FY
2016 through FY 2020. Thereafter, for the purpose of this Forecast, the pension contribution
rates continue to be escalated by 1.4 percent for the Miscellaneous Plan and 2.4 percent for the
Safety Plan.
Attachment A
City of Palo Alto Page 26
TABLE 5: PENSION RATES BY PLAN (FISCAL YEAR)
Pension Plans 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Miscellaneous 26.1% 27.7% 29.9% 31.4% 33.0% 34.6% 36.2% 37.8% 39.4% 41.0% 42.6%
Safety 39.5% 41.9% 45.1% 47.5% 49.9% 52.3% 54.7% 57.1% 59.5% 61.9% 64.3%
As indicated in the table below, the unfunded pension liability and funding status for
Miscellaneous and Safety (see pg. 6 of Miscellaneous and Safety Valuations for further detail)
plans have improved slightly from the last valuation. For the Miscellaneous Plan, the unfunded
liability was reduced by $12.3 million from $202.6 million to $190.3 million, and the funded
ratio improved by 3.6 percentage points from 64.8 percent to 68.4 percent. Similarly, for the
Safety Plan, the unfunded liability was reduced by $6.8 million from $112.0 million to $105.2
million, and the funded ratio improved by 3.1 percentage points from 65.8 percent to 68.9
percent. Despite these improvements, the cumulative unfunded liability for both pension plans
amounts to $295.6 million and will require continuous higher pension payments to CalPERS
during this Forecast and beyond.
TABLE 6: UNFUNDED PENSION LIABILITY BY PLAN
Miscellaneous Plan Safety Plan
June 30, 2012 June 30, 2013 June 30, 2012 June 30, 2013
1. Present Value of Projected Benefits $662,770,685 $690,227,166 $382,313,961 $392,560,445
2. Normal Accrued Liability $576,182,013 $602,540,178 $327,608,300 $338,666,499
3. Market Value of Assets $373,592,926 $412,227,784 $215,605,457 $233,417,363
4. Unfunded Liability [(2) – (3)] $202,589,087 $190,312,394 $112,002,843 $105,249,136
5. Funded Ratio [(3) / (2)] 64.8% 68.4% 65.8% 68.9%
Retiree Healthcare
This Forecast includes the Annual Required Contribution (ARC) per the May 2014 actuarial
valuation based on information as of June 30, 2013, (accepted by the City Council on June 9,
2014) for the City’s retiree healthcare plan. The City’s total ARC is increasing approximately 3.4
percent annually; however, based on the valuation report, over the next 10 years the City’s
Retiree Healthcare fund is projected to move towards a “pay as you go” model instead of
continuing to pre-fund future retiree healthcare needs due to increasing healthcare benefit
payments to current and future retirees. As a result of this shift during the Forecast period, less
of the ARC pays towards pre-funding future benefits and rather for benefits of current and
future retirees.
The City’s Retiree Healthcare Trust fund is administered by the California Employers’ Retiree
Benefit Trust, a division of CalPERS. As of August 31, 2014, the City’s Retiree Healthcare funded
ratio stands at 35.1% and the projected unfunded liability as of June 30, 2013 per the City’s
actuary is $143.6 million. Staff is evaluating an increase to the ARC with budget surpluses that
become available as part of the closing of the annual budget in order to prefund the healthcare
liability and increase the funded ratio.
Attachment A
City of Palo Alto Page 27
Healthcare
As a result of the new labor agreement between the City and the Service Employees
International Union (SEIU), the City’s contribution amount towards the medical costs for SEIU
employees changed from a 90 percent contribution from the City and a 10 percent contribution
from the employee to a flat contribution from the City and the employee contributing towards
the remaining medical plan premium. This change took effect in March 2014, and it will also be
implemented for Management and Professional employees effective January 1, 2015. All other
labor groups eligible for medical benefits will remain on the 90/10 contribution structure until
new labor agreements are reached with the City and the affected bargaining groups. This
Forecast assumes an annual health care cost inflator of 8 percent for the labor groups on the
90/10 medical benefit structure, and a 4 percent annual health care cost inflator for the labor
groups on the flat rate contribution structure. Consistent with the previous forecast and with
historical trends, the 2016-2025 LRFF assumes a 4 percent increase for dental and vision costs
for outer years.
Contract Services
The FY 2015 Adopted Budget included $16.0 million to fund contract services of which
approximately $2.8 million was for one-time items that include $1.0 million for a Cubberley
Reserve; $1.0 million for a Shuttle Reserve, $0.4 million for the Our Palo Alto community
engagement process; and $0.4 million for other activities such as a consultant led fee study for
the Planning & Community Environment and Development Services departments and data
analytic support for People Strategy & Operations. In addition, the FY 2015 Adopted Budget
assumed that the Golf Course would be closed during the fiscal year; however, due to the delay
in the Golf Course Reconfiguration project, the Golf Course is now scheduled to remain open
through February 2015 resulting in additional contract expenses of $0.6 million. Additional City
Council approved actions during the course of FY 2015 that are attributed to the 9.2 percent
increase in year-end Contract Services projections from the adopted budget include $0.1 million
for the Climate Action Plan and an additional $0.2 million for the East Palo Alto Shuttle Route,
which was offset with revenue from the City of East Palo Alto. For FY 2016, the Forecast
assumes that the Golf Course will be closed during the entire fiscal year and will resume
operations in early FY 2017 adding an additional $0.8 million of contract services in FY 2017.
When adjusting for one-time expenditures included in the FY 2015 Adopted Budget, the FY
2016 base budget for Contract Services is $13.2 million. For the FY 2016 Forecast Budget year,
$0.8 million has been added for additional Shuttle service expenses offset with revenue from
the City of East Palo Alto as approved by the Council on June 23, 2014, in addition to $0.2
million for continued Transportation Management Authority development as approved by the
Council in August 2014.
In the out-years of the Forecast, 2.6 percent of annual growth for contract services is assumed.
This is aligned to the 20 year historical average of the San Francisco Metropolitan Statistical
Area Consumer Price Index – All Urban Consumers of 2.6 percent.
Attachment A
City of Palo Alto Page 28
Supplies & Materials
The category for Supplies and Materials remains flat at $3.5 million in the FY 2016 Forecast
Budget from the current year projection. For the out-years of the Forecast, it is assumed that
costs will increase based on the 2.6 percent annual CPI increase.
General Expense
This category includes costs for travel and meetings, telephone and non-city utilities,
contingency accounts, subsidies and grants provided through the Human Resource Allocation
Process, and debt service payments for the Master Lease-Purchase Agreement related to the
Golf Course. In this category, the Forecast projects a 6.8 percent decrease from $5.0 million in
FY 2015 to $4.7 million in FY 2016. The decrease is due to a reduction of $0.3 million in one-
time election costs. For the remaining years of the forecast, this category assumes annual
increases between 2.5 and 2.7 percent. These figures do not include General Expenses for the
Cubberley Lease which is explained in further detail below.
Cubberley Lease
In the FY 2015 Adopted Budget, $6.4 million was appropriated for Cubberley Lease payments
with an additional $1.0 million set-aside in reserve pending the outcome of lease negotiations
with the Palo Alto Unified School District (PAUSD). As a result of negotiations with PAUSD, $1.9
million will be set-aside annually in a Cubberley Reserve Fund for future infrastructure
improvements. As part of the lease agreement, the City Council approved creation of a fund for
Cubberley infrastructure improvements. Therefore, the $1.9 million is classified as an
Operating Transfer Out which is discussed in further detail below. With the Cubberley reserve
funds set aside, the FY 2016 Forecast Budget includes $5.7 million for Cubberley Lease
payments, up $0.2 million or 3.0 percent from FY 2015, but in accordance with the new lease
agreement with PAUSD.
In accordance with the lease agreement, the Forecast assumes a 3.0 percent annual CPI
increase for the lease payments to the Palo Alto Unified School District (PAUSD) for the
Cubberley facility. Also, the lease agreement period is five years; however, for planning
purposes in this Forecast, it is assumed that the agreement will continue during the Forecast
period.
Rents & Leases
Rent and Lease expenses for FY 2016 are estimated to increase by $26,000 from the FY 2015
projected level of $1.3 million. The largest expense in this category is $1.0 million for the
Development Services Center. From FY 2017 onwards, this expense is expected to increase by
2.6 percent per year.
Facilities & Equipment
Facilities and equipment expenses for FY 2016 are projected to decrease by 12.5 percent, which
is attributable to decreased Golf Course operating expenses; however, projected expenses in
Attachment A
City of Palo Alto Page 29
this category of $0.5 million will remain fairly consistent in FY 2016 and beyond. Consistent
with the 20-year CPI for the San Francisco San Jose Metropolitan Statistical Area, the forecast
assumes a 2.6 percent annual increase starting in FY 2017.
Allocated Charges
Allocated charges represent expense allocations by the City’s enterprise and internal services
funds for services and products they provide to General Fund departments. In FY 2016, these
charges are estimated at $15.6 million including utilities usage (25.8 percent or $4.0 million),
liability insurance (8.3 percent or $1.3 million), technology costs (36.5 percent, or $5.7 million),
vehicle equipment and replacement costs (23.7 percent or $3.7 million), and other costs (5.7
percent, or $0.9 million). The FY 2016 charges of the forecast updates the revenue and expense
for these cost plans based on the most current information available at the time of Forecast
development. Growth of 2.6 percent is anticipated in the outer years, which is based on the
average annual expense growth over the forecast period.
Operating Transfers Out
Operating Transfers Out include transfers from the General Fund to the Debt Service Fund,
Technology Fund, and Airport Fund. Fiscal Year 2015 yearend projected transfers out total $2.3
million which is an increase of $0.2 million compared to the FY 2015 Adopted Budget amount.
The one-time increase in the amount transferred to the Airport Fund is for legal services related
to the August 2014 takeover of the airport by the City from Santa Clara County. In FY 2016, an
increase in this expense category of $1.5 million is assumed due to operating transfers of $1.9
million for the Cubberley Infrastructure Fund offset with the elimination of one-time transfers.
In FY 2017, the anticipated issuance of debt related to the golf course reconfiguration will
increase the total amount for the FY 2017 Forecast Budget by $0.5 million to $4.2 million.
A $0.3 million transfer to the Airport Fund from the General Fund is included in FY 2016
projected amounts, which represents the same figure assumed in the FY 2015 LRFF. While the
City has taken over operations of the Airport from Santa Clara County, it is anticipated that the
Airport Fund will have to rely on General Fund transfers to cover its operating expenses for a
number of years. As such, this transfer continues throughout the Forecast.
Transfer to Infrastructure
In FY 2015, the adopted transfer to the Capital Project Fund is $13.7 million. The transfer for FY
2016 is significantly higher at $18.7 million. The increase is attributable to two factors. The
primary driver of the increase is transfers associated with the City Council approved
Infrastructure Plan. A significant portion of the plan was reliant upon increased Transient
Occupancy Tax (TOT) receipts, both from the addition of new hotels in Palo Alto, as well as a
two percent increase in the tax (from twelve percent to fourteen percent), which was approved
by Palo Alto voters in November 2014. The Infrastructure Plan assumes that these new
revenues will be available to support debt service costs associated with the build-out of
infrastructure improvements included in the plan ($2.5 million related to the new hotels and
Attachment A
City of Palo Alto Page 30
$2.2 million from the tax increase for the Forecast period). Secondly, the annual transfer
amount is increased by the CPI, 2.6 percent for FY 2016. Increases of 2.6% are assumed for the
remaining years of the forecast as well.
Alternative Fiscal Year 2016-2025 Long Range Financial Forecast
CalPERS Investment Return Analysis
The attached CalPERS valuations (pages 26-27) provide a three year analysis of alternative
investment return scenarios. This alternative Forecast model builds on the information
provided by CalPERS assuming an annual investment return of 2.8 percent versus 7.5 percent
starting with FY 2018. At this time, the CalPERS Board approved an annual investment return
target of 7.5 percent. Based on the information provided by CalPERS, this alternative Forecast
model keeps the incremental annual increase of the City’s pension contribution of 2.9
percentage points for the Miscellaneous Plan and 4.7 percentage points for the Safety Plan
constant after Fiscal Year 2020 (see table below).
TABLE 7: PENSION RATES BY PLAN (FISCAL YEAR) WITH A LOWER ASSUMED INVESTMENT RETURN
Pension Plans 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Miscellaneous 26.1% 27.7% 29.9% 31.9% 34.5% 37.4% 40.3% 43.2% 46.1% 49.0% 51.9%
Safety 39.5% 41.9% 45.1% 48.3% 52.3% 57.0% 61.7% 66.4% 71.1% 75.8% 80.5%
Based on these higher annual pension rates, pension costs would increase by a total of $34.0
million over the forecast period, compared to the base model. The General Fund annual
surplus in Fiscal Year 2018, the first year impacted by the higher rates, would be reduced from
$1.1 million in the base model to $0.7 million, a 36 percent reduction. This trend would
continue through Fiscal Year 2025 as the projected General Fund surplus of $3.4 million in Fiscal
Year 2025 would become a General Fund deficit of $5.4 million. During the Forecast period, the
net operating margin fluctuates between positive $0.6 million and negative $5.4 million. This
model does not project any additional revenue growth compared to the base model, which is
the main reason expenditures begin to outpace revenue in Fiscal Year 2021 and this gap
continues to grow through Fiscal Year 2025.
Fiscal Year 2016-2025 Long Range Revenue Forecast – CalPERS Investment Return Alternate
Model
Projected
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Revenue $176,878 $179,637 $186,962 $194,498 $201,233 $208,304 $214,408 $221,070 $228,864 $236,926 $245,129
Total Expenditures $172,603 $179,155 $187,142 $193,816 $200,991 $208,179 $216,078 $224,039 $232,532 $241,342 $250,481
BSR $31,932 $33,144 $34,621 $35,856 $37,183 $38,513 $39,974 $41,447 $43,018 $44,648 $46,339
Net One-Time Surplus/(Shortfall)$4,275 $482 ($180)$682 $242 $125 ($1,670) ($2,968) ($3,669) ($4,415) ($5,352)
Cumulative Net Operating Margin (One-Time)($16,722)
Net Operating Margin $0 $0 ($180)$682 ($440)$565 ($1,670) ($2,968) ($3,669) ($4,415) ($5,352)
Cumulative Net Operating Margin ($17,447)
Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures.
Major Tax Revenue Sensitivity Analysis
Attachment A
City of Palo Alto Page 31
As discussed in this Forecast, FY 2016 total tax receipts are estimated to generate
approximately $100.3 million. This assumes an average tax receipts annual growth of 3.1%
from FY 2015 yearend projections to FY 2016. The year over year assumed growth in total tax
revenues is between 3.1% and 4.6% for the Forecast period. All other assumptions remaining
the same, if tax revenue receipts growth falls short by one percentage point from 2.1% to 3.6%
in FY 2016, the loss in revenue would be approximately $1.0 million; however, a year over year
loss of one percentage point in annual revenue growth would result in a cumulative one-time
revenue loss of approximately $47.2 million through the forecast period.
Conclusion
This Forecast projects a slight General Fund surplus of $0.5 million for FY 2016 and, except for a
slight budget shortfall in FY 2017, reflects a generally positive outlook over the next 10 years.
Economic indicators demonstrate that the local business environment is rebounding; however,
substantial financial obligations and added uncertainties may diminish the General Fund surplus
over the next 10 years.
The City Council approved Infrastructure Plan needs to be fully funded and contingencies for
land acquisition and constructions costs need to be planned for. As the City’s unfunded
pension and retiree medical liabilities have increased to $439.1 million, the City could be well
positioned if additional funds were contributed to the pension and retiree healthcare trust
funds to reduce the unfunded liabilities. This Forecast assumes the Fiscal Year 2015 service
level and supports the City Council’s plans for enhancements to the Shuttle Service and funding
for the Transportation Management Authority.
While the City is addressing these short-term and long-term issues, the City needs to continue
reviewing its operations and service delivery options. Over the last few years, the City has
outsourced services to the private sector and entered into negotiations with the non-profit
sector for public-private partnerships. In November, the City Council approved a letter of intent
with the Friends of the Palo Alto Junior Museum and Zoo with the goal to rebuild the current
facility and to enter into a 40 year lease for the Friends to operate the Junior Museum and Zoo.
While the City further explores alternative service delivery models with the goal to reduce staff
levels and related unfunded pension and retiree healthcare liabilities, the City will also review
cost recovery levels of services currently provided to the community. In early 2015, staff
intends to bring forward a policy framework for City Council discussion and input, which will
guide staff in setting appropriate fees for various services based on the values of our
community.
The City is currently updating its Comprehensive Plan. During recent discussions with the City
Council, staff was directed to assess the fiscal impacts of the simplified planning scenarios that
will be used to analyze policy choices that will have to be made as part of the update. Once the
Council approves the Comprehensive Plan update with its inherent policy choices, revenue
assumptions for future Forecasts will be aligned with the new Comprehensive Plan.
Attachment A
City of Palo Alto Page 32
During the next two months, staff will continue to monitor revenue sources as well as update
revenues and expenditures, as applicable, based on newly available information. This updated
information will be reflected in the FY 2016 Proposed Budget, which is scheduled to be released
to the City Council late April/early May 2015.
Attachments:
Attachment A - CalPERS June 30, 2013 Valuation for the Miscellaneous Plan (PDF)
Attachment B - CalPERS June 30, 2013 Valuation for the Safety Plan (PDF)
Endotes
i International Monetary Fund (IMF), World Economic Outlook, April 2014
ii Silicon Valley Bank, Innovation Economy Global Outlook, 2014
iii International Monetary Fund (IMF), World Economic Outlook, October 2014
iv Bureau of Economic Analysis (BEA), Third Quarter (Advance Estimate), October 2014
v BEA, Ibid.
vi UCLA Anderson Forecast, September 2014
vii Dallas Federal Reserve Bank, Economic Letter, Vol. 9, No. 13, October 2014
viii United States Department of Housing and Urban Development (HUD), New Residential Construction
in September 2014, October 2014
ix National Association of Realtors, Realtors Confidence Index (September 2014), October 2014
x UCLA Anderson Forecast, Op. Cit.
xi San Francisco Federal Reserve Bank, FedViews, October 2014
xii UCLA Anderson Forecast, Op. Cit.
xiii Bureau of Economic Analysis (BEA), Advance 2013 and Revised 1997 – 2012 Statistics of GDP by
State, June 2014
xiv UCLA Anderson Forecast, Op. Cit.
xv Zillow, California Home Prices & Values, Zillow Home Value Index, Accessed October 2014
xvi UCLA Anderson Forecast, Op. Cit.
xvii Knight Foundation, Soul of the Community, What Makes People Happy With Their Communities?,
Accessed October 2014
xviii Citylab, Character Is Key to an Economically Vibrant City, The Atlantic, Accessed October 2014
xix United States Bureau of Labor Statistics (BLS), Palo Alto Unemployment Rate, Accessed October
2014
xx California Board of Equalization (BOE), Taxable Retail Sales, Accessed October 2014
xxi Zillow, Palo Alto Home Prices & Values, Zillow Value Home Index, Accessed October 2014
Attachment A
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2014
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2013
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2013 actuarial valuation
report of your pension plan. Your 2013 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the Actuarial Certification Section on page 1, is available to discuss the report with you
after October 31, 2014. Future Contribution Rates
The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2015-16 and a
projected contribution rate for 2016-17, before any cost sharing. The projected rate for 2016-17
is based on the most recent information available, including an estimate of the investment return
for fiscal year 2013-14, namely 18 percent, and the impact of the actuarial assumptions adopted
by the CalPERS Board in February 2014 that will impact employer rates for the first time in fiscal
year 2016-17. For a projection of employer rates beyond 2016-17, please refer to the “Projected
Rates” in the “Risk Analysis” section, which includes rate projections through 2020-21 under a
variety of investment return scenarios. Please disregard any projections that we may have
provided you in the past.
Fiscal Year Employer Contribution Rate
2015-16 27.694%
2016-17 29.9% (projected)
Member contributions other than cost sharing (whether paid by the employer or the employee)
are in addition to the above rates. The employer contribution rates in this report do not
reflect any cost sharing arrangement you may have with your employees. The estimate for 2016-17 also assumes that there are no future contract amendments and no
liability gains or losses (such as larger than expected pay increases, more retirements than
expected, etc.). This is a very important assumption because these gains and losses do occur and
can have a significant impact on your contribution rate. Even for the largest plans, such gains
and losses often cause a change in the employer’s contribution rate of one or two percent of
payroll and may be even larger in some less common instances. These gains and losses cannot
be predicted in advance so the projected employer contribution rates are just estimates. Your
actual rate for 2016-17 will be provided in next year’s report.
Attachment A
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2013
Page 2
Changes since the Prior Year’s Valuation
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The
impact of the PEPRA changes are included in the rates and the benefit provision listings of the
June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA, please refer to
the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and
will employ an amortization and smoothing policy that will pay for all gains and losses over a
fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year
period.
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial
assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of
Administration adopted relatively modest changes to the current asset allocation that will reduce
the expected volatility of returns. The adopted asset allocation is expected to have a long- term
blended return that continues to support a discount rate assumption of 7.5 percent. The Board
also approved several changes to the demographic assumptions that more closely align with
actual experience. The most significant of these is mortality improvement to acknowledge the
greater life expectancies we are seeing in our membership and expected continued
improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will
be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a
5-year ramp-up/ramp-down in accordance with Board policy.
Besides the above noted changes, there may also be changes specific to your plan such as
contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on
your rate is included in the “Reconciliation of Required Employer Contributions.”
We understand that you might have a number of questions about these results. While we are
very interested in discussing these results with your agency, in the interest of allowing us to give
every public agency their results, we ask that you wait until after October 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
Attachment A
ACTUARIAL VALUATION
as of June 30, 2013
for the
MISCELLANEOUS PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2015 – June 30, 2016
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Attachment A
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 5
Purpose of the Report 5
Required Employer Contribution 6
Plan’s Funded Status 6 Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
ASSETS
Reconciliation of the Market Value of Assets 11 Asset Allocation 12
CalPERS History of Investment Returns 13
LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 17
(Gain) / Loss Analysis 06/30/12 - 06/30/13 18 Schedule of Amortization Bases 19
Alternate Amortization Schedules 20
Reconciliation of Required Employer Contributions 21
Employer Contribution Rate History 22
Funding History 22
RISK ANALYSIS
Volatility Ratios 25
Projected Rates 26 Analysis of Future Investment Return Scenarios 26
Analysis of Discount Rate Sensitivity 27
Hypothetical Termination Liability 28
GASB STATEMENT NO. 27
Information for Compliance with GASB Statement No. 27 31
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 35
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A1
Actuarial Methods A1 – A2
Actuarial Assumptions A3 – A20
Miscellaneous A20 – A21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B9
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C1
Active Members C2
Transferred and Terminated Members C3
Retired Members and Beneficiaries C4 – C5
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E3
(CY) FIN PROCESS CONTROL ID: 432056 (PY) FIN PROCESS CONTROL ID: 413234 REPORT ID: 76080
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2013 provided by the various
CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced.
It is our opinion that the valuation has been performed in accordance with generally accepted actuarial
principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that
the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS
Attachment A
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Attachment A
HIGHLIGHTS AND EXECUTIVE SUMMARY
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED EMPLOYER CONTRIBUTION
PLAN’S FUNDED STATUS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Introduction
This report presents the results of the June 30, 2013 actuarial valuation of the MISCELLANEOUS PLAN OF
THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the fiscal year 2015-16 required employer contribution rates.
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of
most of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the
CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing
policy, which spread investment returns over a 15-year period while experience gains and losses were
amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate
increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed
30-year period. The new amortization and smoothing policy is used in this valuation.
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will be
calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-
up/ramp-down in accordance with Board policy.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2013. The
purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2013;
Determine the required employer contribution rate for the fiscal year July 1, 2015 through June 30,
2016;
Provide actuarial information as of June 30, 2013 to the CalPERS Board of Administration and other
interested parties; and to
Provide pension information as of June 30, 2013 to be used in financial reports subject to Governmental
Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 19.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or
minus change in the discount rate.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary before
disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2014-15 2015-16
Actuarially Determined Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 12,477,785 $ 12,782,431
b) Employee Contribution1 5,408,805 5,488,848
c) Employer Normal Cost [(1a) – (1b)] 7,068,980 7,293,583
d) Unfunded Liability Contribution 10,888,594 12,207,469
e) Required Employer Contribution [(1c) + (1d)] $ 17,957,574 $ 19,501,052
Projected Annual Payroll for Contribution Year $ 68,744,341 $ 70,414,978
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 18.151% 18.153%
b) Employee Contribution1 7.868% 7.795%
c) Employer Normal Cost [(2a) – (2b)] 10.283% 10.358%
d) Unfunded Liability Rate 15.839% 17.336%
e) Required Employer Rate [(2c) + (2d)] 26.122% 27.694%
Minimum Employer Contribution Rate2 26.122% 27.694%
Annual Lump Sum Prepayment Option3 $ 17,319,822 $ 18,808,485
1For classic members this is the percentage specified in the Public Employees Retirement Law, net of any
reduction from the use of a modified formula or other factors. For PEPRA members the member contribution
rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report.
2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the
employer normal cost.
3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30. If there is contractual cost sharing or other change, this amount will change.
Plan’s Funded Status
June 30, 2012 June 30, 2013
1. Present Value of Projected Benefits $ 662,770,685 $ 690,227,166
2. Entry Age Normal Accrued Liability 576,182,013 602,540,178
3. Market Value of Assets (MVA) $ 373,592,926 $ 412,227,784
4. Unfunded Liability [(2) – (3)] $ 202,589,087 $ 190,312,394
5. Funded Ratio [(3) / (2)] 64.8% 68.4%
Superfunded Status No No
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Cost Estimates in General
What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for
the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a
number of assumptions about the future. These assumptions can be divided into two categories.
Demographic assumptions include the percentage of employees that will terminate, die, become
disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must
be understood that these assumptions are very long-term predictors and will surely not be realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of
7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of
two separate pieces.
The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a
percentage of total active payroll.
The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past
service of current members) which is expressed as a lump sum dollar amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an
orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll)
must be converted to a lump sum dollar amount (in which case the total cost is the present value of
benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which
case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary).
Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is
shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the
“Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is
shown for any plan changes, which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16
rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate
smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or
decreases in the rate phased in over a 5-year period.
A change in the calculation of termination with vested benefits liability for active members was made this year to better reflect the retirement experience. After termination with vested benefits, a miscellaneous
member is assumed to retire at age 59 and a safety member at age 54 rather than at earliest retirement
age. The higher benefit factors at these ages results in a slightly higher liability and a modest increase in
normal cost.
Public Employees’ Pension Reform Act of 2013 (PEPRA)
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a
public employer’s contribution to a defined benefit plan, in combination with employee contributions to that
defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that
some plans with surplus will be paying more than they otherwise would. For more information on PEPRA,
please refer to the CalPERS website.
Subsequent Events
Actuarial Methods and Assumptions
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns (see Risk
Analysis section of report). The adopted asset allocation is expected to have a long- term blended return
that continues to support a discount rate assumption of 7.5 percent.
The Board also approved several changes to the demographic assumptions that more closely align with
actual experience. The most significant of these is mortality improvement to acknowledge the greater life
expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase
in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be
amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. The
impact of assumption changes are included in the “Expected Rate Increases” subsection of the “Risk
Analysis” section.
Attachment A
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/12 Including Receivables $ 373,592,926
2. Receivables for Service Buybacks as of 6/30/12 2,460,789
3. Market Value of Assets as of 6/30/12 371,132,137
4. Employer Contributions 14,933,196
5. Employee Contributions 6,239,217
6. Benefit Payments to Retirees and Beneficiaries (29,655,129)
7. Refunds (315,736)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (82,508)
10. Investment Return 47,126,719
11. Market Value of Assets as of 6/30/13 $ 409,377,896
12. Receivables for Service Buybacks as of 6/30/13 2,849,888
13. Market Value of Assets as of 6/30/13 Including Receivables $ 412,227,784
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 12
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over
90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. On February 19, 2014 the CalPERS Board of Administration adopted
changes to the current asset allocation as shown in the Policy Target Allocation below expressed as
percentage of total assets. The asset allocation is has an expected long term blended rate of return of
7.5 percent.
The asset allocation and market value of assets shown below reflect the values of the Public Employees
Retirement Fund (PERF) in its entirety as of June 30, 2013. The assets for CITY OF PALO ALTO MISCELLANEOUS PLAN are part of the Public Employees Retirement Fund (PERF) and are invested
accordingly.
(A)
Asset Class
(B) Market Value
($ Billion)
(C) Policy Target
Allocation
1) Global Equity 133.4 47.0%
2) Private Equity 31.4 12.0%
3) Global Fixed Income 43.9 19.0%
4) Liquidity 10.5 2.0%
5) Real Assets 25.2 14.0%
6) Inflation Sensitive Assets 9.4 6.0%
7) Absolute Return Strategy (ARS) 7.2 0.0%
Total Fund $261.0 100.0%
Public Equity
51.1%
Private Equity
12.0%
Income
16.8%
Liquidity
4.0%
Real Assets
9.6%
Inflation
3.6%
ARS
2.8%
Asset Allocation at 6/30/2013
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30, 2013, (figures are reported as gross of fees). The geometric mean
rate of return is the average rate per period compounded over multiple periods. It should be recognized that
in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted
new asset allocation is 7.5 percent the portfolio has an expected volatility of 11.76 percent per year.
Consequently when looking at investment returns it is more instructive to look at returns over longer time
horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 13.2% 3.5% 7.0% 7.6% 9.4%
Volatility – 17.9% 13.9% 11.8% 11.6%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
2.
0
%
16
.
3
%
15
.
3
%
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.
2
%
-6.
1
%
3.
7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.
1
%
-24
.
0
%
13
.
3
%
21
.
7
%
0.
1
%
13
.
2
%
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Attachment A
LIABILITIES AND RATES
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/12 - 06/30/13
SCHEDULE OF AMORTIZATION BASES
ALTERNATE AMORTIZATION SCHEDULES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION RATE HISTORY
FUNDING HISTORY
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 297,642,775
b) Transferred Members 23,476,142
c) Terminated Members 13,166,269
d) Members and Beneficiaries Receiving Payments 355,941,980
e) Total $ 690,227,166
2. Present Value of Future Employer Normal Costs $ 48,567,418
3. Present Value of Future Employee Contributions $ 39,119,570
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 209,955,787
b) Transferred Members (1b) 23,476,142
c) Terminated Members (1c) 13,166,269
d) Members and Beneficiaries Receiving Payments (1d) 355,941,980
e) Total $ 602,540,178
5. Market Value of Assets (MVA) $ 412,227,784
6. Unfunded Liability [(4e) - (5)] $ 190,312,394
7. Funded Ratio [(5) / (4e)] 68.4%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
(Gain) /Loss Analysis 6/30/12 – 6/30/13
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or
losses, as shown below.
A Total (Gain)/Loss for the Year
1. Unfunded Accrued Liability (UAL) as of 6/30/12 $ 128,362,660 2. Expected Payment on the UAL during 2012/2013 8,305,825
3. Interest through 6/30/13 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 9,321,362
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 129,378,197
5. Change due to plan changes 0
6. Change due to assumption change 0
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 129,378,197
8. Actual UAL as of 6/30/13 190,312,394
9. Total (Gain)/Loss for 2012/2013 [(A8) - (A7)] $ 60,934,197
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 19,982,449
2. Interest on Expected Contributions 735,795 3. Actual Contributions 21,172,413
4. Interest on Actual Contributions 779,612
5. Expected Contributions with Interest [(B1) + (B2)] 20,718,244
6. Actual Contributions with Interest [(B3) + (B4)] 21,952,025
7. Contribution (Gain)/Loss [(B5) - (B6)] $ (1,233,781)
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/12 Including Receivables $ 447,819,353
2. Receivables as of 6/30/12 2,460,789
3. Actuarial Value of Assets as of 6/30/12 445,358,564
4. Contributions Received 21,172,413 5. Benefits and Refunds Paid (29,970,865)
6. Transfers and miscellaneous adjustments (82,508)
7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 33,074,877
8. Expected Assets as of 6/30/13 [(C3) + (C4) + (C5) + (C6) + (C7)] 469,552,481
9. Receivables as of 6/30/13 2,849,888
10. Expected Assets Including Receivables 472,402,369 11. Market Value of Assets as of 6/30/13 412,227,784
12. Asset (Gain)/Loss [(C10) - (C11)] $ 60,174,585
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ 60,934,197 2. Contribution (Gain)/Loss (B7) (1,233,781)
3. Asset (Gain)/Loss (C12) 60,174,585
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 1,993,393
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Schedule of Amortization Bases
There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.
The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2013. The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; fiscal year 2015-16.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies
with their employer contribution rates well in advance of the start of the fiscal year.
The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the
fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded
Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years
ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as
the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year,
based on payroll as of the valuation date.
Amounts for Fiscal 2015-16
Reason for Base Date Established
Amorti-
zation Period Balance 6/30/13
Expected
Payment 2013-14 Balance 6/30/14
Expected
Payment 2014-15 Balance 6/30/15
Scheduled
Payment for 2015-16
Payment as
Percentage of Payroll
ASSUMPTION CHANGE 06/30/03 10 $17,798,481 $1,924,538 $17,137,963 $1,982,274 $16,368,045 $2,041,742 2.900%
METHOD CHANGE 06/30/04 11 $(1,330,937) $(135,457) $(1,290,313) $(139,521) $(1,242,428) $(143,706) (0.204%)
BENEFIT CHANGE 06/30/05 11 $29,486,365 $3,000,992 $28,586,348 $3,091,022 $27,525,484 $3,183,753 4.521%
ASSUMPTION CHANGE 06/30/09 16 $26,587,215 $2,149,437 $26,352,672 $2,213,920 $26,033,681 $2,280,338 3.238%
SPECIAL (GAIN)/LOSS 06/30/09 26 $16,199,911 $1,007,314 $16,370,499 $1,037,533 $16,522,550 $1,068,659 1.518%
SPECIAL (GAIN)/LOSS 06/30/10 27 $1,332,440 $81,378 $1,347,998 $83,819 $1,362,193 $86,333 0.123%
ASSUMPTION CHANGE 06/30/11 18 $12,250,695 $924,993 $12,210,444 $952,744 $12,138,402 $981,326 1.394%
SPECIAL (GAIN)/LOSS 06/30/11 28 $(55,828) $(3,353) $(56,539) $(3,453) $(57,199) $(3,557) (0.005%)
PAYMENT (GAIN)/LOSS 06/30/12 29 $3,162,978 $434,709 $2,949,486 $177,118 $2,987,057 $182,432 0.259%
(GAIN)/LOSS 06/30/12 29 $23,946,877 $847,010 $24,864,694 $1,493,138 $25,181,428 $1,537,932 2.184%
(GAIN)/LOSS 06/30/13 30 $60,934,197 $(57,264) $65,563,634 $(61,778) $70,544,959 $992,217 1.409%
TOTAL $190,312,394 $10,174,297 $194,036,886 $10,826,816 $197,364,172 $12,207,469 17.336%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 20
Alternate Amortization Schedules
The amortization schedule shown on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the passible savings in doing so. Therefore, we have provided alternate amortization
schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments
towards your plan’s unfunded liability of $197,364,172 as of June 30, 2015, which under the minimum schedule, will
require total payments of $456,729,477. Shown below are the level rate payments required to amortize your plan’s
unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario
would increase by 3 percent for each year into the future.
If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further.
Level Rate of Payroll Amortization
Period 2015-16
Rate
2015-16
Payment
Total
Payments
Total
Interest
Difference from
Current Schedule
20 21.163% $ 14,902,066 $ 400,424,100 $ 203,059,928 $ 56,305,377
15 25.694% $ 18,092,282 $ 336,496,793 $ 139,132,621 $ 120,232,684
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Reconciliation of Required Employer Contributions
Percentage
of
Projected
Payroll
Estimated $
Based on
Projected
Payroll
1. Contribution for 7/1/14 – 6/30/15 26.122% $ 17,957,574
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 1.572% 1,107,074
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 0.000% 0
d) Effect of change in payroll - 436,404
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 1.572% 1,543,478
3. Contribution for 7/1/15 – 6/30/16 [(1)+(2g)] 27.694% 19,501,052
The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is
made or a plan change became effective after the prior year’s actuarial valuation was performed.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
Employer Contribution Rate History
The table below provides a recent history of the employer contribution rates for your plan, as determined by the
annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost Unfunded Rate
Total Employer
Contribution Rate
2010 - 2011 10.087% 7.468% 17.555%
2011 - 2012 10.100% 11.625% 21.725%
2012 - 2013 10.171% 12.799% 22.970%
2013 - 2014 10.360% 14.240% 24.600%
2014 - 2015 10.283% 15.839% 26.122%
2015 - 2016 10.358% 17.336% 27.694%
Funding History
The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets,
the funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of
Assets (MVA)
Funded
Ratio
Annual
Covered
Payroll
06/30/08 $ 443,337,130 $ 385,304,560 86.9% $ 63,933,506
06/30/09 499,199,907 288,524,538 57.8% 65,602,083
06/30/10 521,269,469 323,971,012 62.2% 62,496,037
06/30/11 552,715,631 384,056,704 69.5% 60,297,783
06/30/12 576,182,013 373,592,926 64.8% 62,910,810
06/30/13 602,540,178 412,227,784 68.4% 64,439,680
Attachment A
RISK ANALYSIS
VOLATILITY RATIOS
PROJECTED RATES
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
HYPOTHETICAL TERMINATION LIABILITY
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 25
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about very long-
term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore,
the rates will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to
investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset
volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the
current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the
contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the
table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the
asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2013
1. Market Value of Assets without Receivables $ 409,377,896
2. Payroll 64,439,680
3. Asset Volatility Ratio (AVR = 1. / 2.) 6.4
4. Accrued Liability $ 602,540,178
5. Liability Volatility Ratio (LVR = 4. / 2.) 9.4
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 26
Projected Rates
The estimated rate for 2016-17 is based on a projection of the most recent information we have available,
including an estimated 18 percent investment return for fiscal 2013-14, the impact of the new smoothing methods
adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in 2015-16 and an estimate of the impact of the new actuarial assumptions adopted by the CalPERS Board in February 2014. These
new demographic assumptions include a 20-year projection of on-going mortality improvement. A complete listing
of the new demographic assumptions to be implemented with the June 30, 2014 annual actuarial valuation and
incorporated in the projected rates for FY 2016-17 and beyond can be found on the CalPERS website at:
http://www.calpers.ca.gov/eip-docs/about/pubs/employer/actuarial-assumptions.xls
The table below shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming CalPERS earns 18 percent for fiscal year 2013-14 and 7.50 percent every fiscal year thereafter, and
assuming that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17.
New Rate Projected Future Employer Contribution Rates
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Contribution Rates: 27.694% 29.9% 31.4% 33.0% 34.6% 34.8%
Analysis of Future Investment Return Scenarios
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and
strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest
changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of
7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in
better risk characteristics than an equivalent margin for adverse deviation. The current asset allocation has an
expected standard deviation of 12.45 percent while the newly adopted asset allocation has a lower expected
standard deviation of 11.76 percent.
The investment return for fiscal year 2013-14 was announced July 14, 2014. The investment return in fiscal year
2013-14 is 18.42 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming an 18.0 percent
investment return for fiscal year 2013-14.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years
later. Specifically, the investment return for 2013-14 will first be reflected in the June 30, 2014 actuarial valuation
that will be used to set the 2016-17 employer contribution rates, the 2014-15 investment return will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates
and so forth.
Based on a 18 percent investment return for fiscal year 2013-14, the April 17, 2013 CalPERS Board-approved
amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including
20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized,
and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the
beginning of the fiscal year 2016-17, the effect on the 2016-17 Employer Rate is as follows:
Estimated 2016-17 Employer Rate Estimated Increase in Employer Rate between
2015-16 and 2016-17
29.9% 2.2%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 27
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2014-15, 2015-16 and 2016-17 on the 2017-18, 2018-19 and 2019-20 employer rates. Once
again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further
changes to assumptions, contributions, benefits, or funding will occur.
Five different investment return scenarios were selected.
The first scenario is what one would expect if the markets were to give us a 5th percentile return from
July 1, 2014 through June 30, 2017. The 5th percentile return corresponds to a -3.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The second scenario is what one would expect if the markets were to give us a 25th percentile return
from July 1, 2014 through June 30, 2017. The 25th percentile return corresponds to a 2.8 percent return
for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The third scenario assumed the return for 2014-15, 2015-16, 2016-17 would be our assumed 7.5
percent investment return which represents about a 49th percentile event.
The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2014 through June 30, 2017. The 75th percentile return corresponds to a 12.0 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2014 through June 30, 2017. The 95th percentile return corresponds to a 18.9 percent
return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2014-17 Investment
Return Scenario
Estimated Employer Rate Estimated Change in
Employer Rate
between 2016-17 and 2019-20 2017-18 2018-19 2019-20
-3.8% (5th percentile) 32.6% 36.4% 41.2% 11.3%
2.8% (25th percentile) 31.9% 34.5% 37.4% 7.6%
7.5% 31.4% 33.0% 34.6% 4.7%
12.0%(75th percentile) 31.0% 31.6% 31.7% 1.8%
18.9%(95th percentile) 30.3% 29.4% 26.9% -2.9%
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2015-16 employer contribution rates under two different discount rate
scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and
1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the
long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2015-16 Employer Contribution Rate
As of June 30, 2013 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%)
Employer Normal Cost 14.667% 10.358% 7.051%
Accrued Liability $ 677,476,681 $ 602,540,178 $ 539,962,940
Unfunded Accrued Liability $ 265,248,897 $ 190,312,394 $ 127,735,156
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 28
Hypothetical Termination Liability
Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of
June 30, 2013 using the discount rates shown below. Your plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability both compensation and service is frozen as of the valuation date and no future pay increases or service accruals are
included. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset
allocation strategy for the Terminated Agency Pool. Since the Terminated Agency Pool has limited funding sources,
expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security
for members while limiting its funding risk. This asset allocation has a lower expected rate of return than the PERF.
Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated
plans.
In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to
consult with your plan actuary before beginning this process.
Valuation
Date
Hypothetical
Termination Liability1
Market Value
of Assets (MVA)
Unfunded
Termination Liability
Termination
Funded Ratio
Termination
Liability Discount
Rate2
06/30/11 $ 770,280,910 $ 384,056,704 $ 386,224,206 49.9% 4.82%
06/30/12 1,018,052,435 373,592,926 644,459,509 36.7% 2.98%
06/30/13 950,094,236 412,227,784 537,866,452 43.4% 3.72%
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with
Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A.
2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this
hypothetical termination liability estimate, the discount rate used, is the yield on the 30-year US Treasury Separate
Trading of Registered Interest and Principal of Securities (STRIPS). Note that as of June 30, 2014 the 30-year
STRIPS rate was 3.55 percent.
Attachment A
GASB STATEMENT NO. 27
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 31
MISCELLANEOUS PLAN of the CITY OF PALO ALTO
Information for Compliance with GASB Statement No. 27
Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal
years beginning after June 15, 2014, GASB 68 replaces GASB 27. This will be the last year that GASB disclosure information will be included in your annual actuarial report. GASB 68 will require
additional reporting that CalPERS is intending to provide upon request for an additional fee. We
urge you to start discussions with your auditors on how to implement GASB 68.
Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution
(ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan
contributions for the year. The cumulative difference is called the net pension obligation (NPO). Since GASB 68
replaces GASB 27, for fiscal year 2015-16, the APC is replaced by the Actuarially Determined Contribution (ADC). The ADC for July 1, 2015 to June 30, 2016 is 27.694% percent of payroll. In order to calculate the dollar value of
the ADC for inclusion in financial statements prepared as of June 30, 2016, this contribution rate, less any
employee cost sharing, as modified by any amendments for the year, would be multiplied by the payroll of
covered employees that was actually paid during the period July 1, 2015 to June 30, 2016. The employer and the
employer’s auditor are responsible for determining the NPO, APC or ADC for a given fiscal year.
A summary of principal assumptions and methods used to determine the funded status is shown below.
Retirement Program
Valuation Date June 30, 2013
Actuarial Cost Method Entry Age Normal Cost Method Amortization Method Level Percent of Payroll
Asset Valuation Method Market Value
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment
Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into
CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year period with Direct Rate
Smoothing with a 5-year ramp up/ramp down. If the plan’s accrued liability exceeds the actuarial value of plan
assets, then the amortization payment on the total unfunded liability may not be lower than the payment
calculated over a 30-year amortization period. More detailed information on assumptions and methods is provided
in Appendix A of this report. Appendix B contains a description of benefits included in the valuation.
The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value
of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll.
Valuation
Date
Accrued
Liability (a)
Actuarial value
of Assets* (b)
Unfunded
Liability (UL) (a)-(b)
Funded Ratios
(b)/(a)
Annual
Covered Payroll (c)
UL As a % of
Payroll [(a)-(b)]/(c)
06/30/09 $ 499,199,907 $ 398,764,606 $ 100,435,301 79.9% $ 65,602,083 153.1%
06/30/10 521,269,469 416,810,087 104,459,382 80.0% 62,496,037 167.1%
06/30/11 552,715,631 434,985,547 117,730,084 78.7% 60,297,783 195.2%
06/30/12 576,182,013 447,819,353 128,362,660 77.7% 62,910,810 204.0%
06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680 295.3%
* Beginning with the 6/30/2013 valuation Actuarial Value of Assets equals Market Value of Assets per CalPERS
Direct Rate Smoothing Policy.
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Attachment A
PLAN’S MAJOR BENEFIT PROVISIONS
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Contract Package
Receiving Active
Misc
Active
Misc
Active
Misc Inactive Inactive Active
Misc
Benefit Provision
Benefit Formula 2.0% @ 55 2.7% @ 55 2.0% @ 60 2.0% @ 62
Social Security Coverage No No No No No No Full/Modified Full Full Full Full Full Full
Final Average Compensation Period 12 mos. 12 mos. 12 mos. 36 mos.
Sick Leave Credit No No No No No No
Non-Industrial Disability Standard Standard Standard Standard
Industrial Disability No No No No No No
Pre-Retirement Death Benefits
Optional Settlement 2W No No No No No No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 No No Level 1
Special No No No No No No Alternate (firefighters) No No No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
Contractual Employee Cost Sharing
Page 35
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Contract Package
Benefit Provision
Benefit Formula
Social Security Coverage Full/Modified
Final Average Compensation Period
Sick Leave Credit
Non-Industrial Disability
Industrial Disability
Pre-Retirement Death Benefits
Optional Settlement 2W
1959 Survivor Benefit Level
Special Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum
Survivor Allowance (PRSA)
COLA
Page 36
Attachment A
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PPERA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
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Attachment A
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under
this method, projected benefits are determined for all members and the associated liabilities are spread in a
manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to
the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is
equal to the present value of the benefits expected to be paid. No normal costs are applicable for these
participants.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the
unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an
amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period
with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All
changes in liability due to plan amendments (other than golden handshakes), changes in actuarial
assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5
year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in
unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. If a plan’s
accrued liability exceeds the market value of assets, the annual contribution with respect to the total
unfunded liability may not be less than the amount produced by a 30-year amortization of the unfunded liability. An exception has been made for the change in asset value from actuarial to market value in this
valuation. The CalPERS Board approved a 30-year amortization with a 5-year ramp-up/ramp-down for only
this change in method.
Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding
progress by preventing the expected funded status on a market value of assets basis to either:
Increase by at least 15 percent by June 30, 2043; or
Reach a level of 75 percent funded by June 30, 2043
The necessary additional contribution will be obtained by changing the amortization period of the gains and
losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period,
which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above
when performing each future valuation to determine whether or not additional contributions are necessary.
An exception to the funding rules above is used whenever the application of such rules results in
inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current
unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if
the annual contribution on the total unfunded liability was less than the amount produced by a 30-year
amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is
already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed
in the following situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate.
It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases,
the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be
less than five years, nor greater than 30 years.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in employer contribution rates. On April 17,
2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization
and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates,
CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed
30-year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS will no longer use an actuarial value of assets and will use the market value of assets. This direct rate
smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value
of asset corridor and a 25 year amortization period for gains and losses. The change in asset value will also
be amortized over 30 years with a 5-year ramp-up/ramp-down.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will be
calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-
up/ramp-down in accordance with Board policy. For more details, please refer to the experience study report that can be found at the following link: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/
2014-experience-study.pdf
Economic Assumptions
Discount Rate
7.5 percent compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate used for termination valuation is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For
purposes of this hypothetical termination liability estimate, the discount rate used, 3.72 percent, is
the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of
Securities (STRIPS) as of June 30, 2013. Please note, as of June 30, 2014 the 30-year STRIPS yield
was 3.55 percent.
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No
loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death
(Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007 30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013
45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017 65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 0.00021
Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically
contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be
split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate.
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356
55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546
60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798
65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184 70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528
85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017
90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775
95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331
100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS
Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected
on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30,
2010. There is no margin for future mortality improvement beyond the valuation date.
On February 19, 2014 the CalPERS Board adopted new recommended demographic assumption
based on the most recent CalPERS Experience Study. These new actuarial assumptions will be
implemented for the first time in the June 30, 2014 valuation. For purposes of the post-retirement
mortality rates, the revised rates include 20 years of projected on-going mortality improvement
using Scale BB published by the Society of Actuaries.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Marital Status
For active members, a percentage who are married upon retirement is assumed according to
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used
for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The
following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150% 61 through 64 125%
65 and above 100% (no change)
Termination with Refund
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54.
The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety
Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and
School Police.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 0.0007 0.0003
25 0.0012 0.0032 0.0015
30 0.0025 0.0064 0.0031
35 0.0037 0.0097 0.0046
40 0.0049 0.0129 0.0063
45 0.0061 0.0161 0.0078
50 0.0074 0.0192 0.0101
55 0.0721 0.0668 0.0173
60 0.0721 0.0668 0.0173
The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.
Fifty Percent of the Police Industrial Disability rates are used for School Police.
One Percent of the Police Industrial Disability rates are used for Local Prosecutors. Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the Non-Industrial Disability rate and 50
percent will become the Industrial Disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 0.025 0.035 0.042 0.048 0.054 0.060
58 0.030 0.042 0.051 0.058 0.065 0.073
59 0.035 0.049 0.060 0.068 0.076 0.085
60 0.062 0.087 0.105 0.119 0.133 0.149
61 0.079 0.110 0.134 0.152 0.169 0.190
62 0.132 0.186 0.225 0.255 0.284 0.319
63 0.126 0.178 0.216 0.244 0.272 0.305
64 0.122 0.171 0.207 0.234 0.262 0.293
65 0.173 0.243 0.296 0.334 0.373 0.418
66 0.114 0.160 0.194 0.219 0.245 0.274
67 0.159 0.223 0.271 0.307 0.342 0.384
68 0.113 0.159 0.193 0.218 0.243 0.273
69 0.114 0.161 0.195 0.220 0.246 0.276
70 0.127 0.178 0.216 0.244 0.273 0.306
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.024 0.029 0.033 0.039
51 0.013 0.016 0.020 0.024 0.027 0.033
52 0.014 0.018 0.022 0.027 0.030 0.036
53 0.017 0.022 0.027 0.032 0.037 0.043
54 0.027 0.034 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 0.092 0.112 0.134 0.153 0.182
61 0.089 0.113 0.137 0.165 0.188 0.224
62 0.128 0.162 0.197 0.237 0.270 0.322
63 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 0.247 0.282 0.336
68 0.118 0.150 0.182 0.219 0.250 0.297
69 0.116 0.147 0.179 0.215 0.246 0.293
70 0.138 0.176 0.214 0.257 0.293 0.349
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.021 0.026 0.032 0.038 0.043 0.049
53 0.026 0.033 0.040 0.048 0.055 0.062
54 0.043 0.054 0.066 0.078 0.089 0.101
55 0.088 0.112 0.136 0.160 0.184 0.208
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.083 0.105 0.128 0.150 0.173 0.195
62 0.121 0.154 0.187 0.220 0.253 0.286
63 0.105 0.133 0.162 0.190 0.219 0.247
64 0.105 0.133 0.162 0.190 0.219 0.247
65 0.143 0.182 0.221 0.260 0.299 0.338
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.085 0.109 0.132 0.155 0.178 0.202
62 0.124 0.158 0.191 0.225 0.259 0.293
63 0.107 0.137 0.166 0.195 0.224 0.254
64 0.107 0.137 0.166 0.195 0.224 0.254
65 0.146 0.186 0.225 0.265 0.305 0.345
66 0.107 0.137 0.166 0.195 0.224 0.254
67 0.107 0.137 0.166 0.195 0.224 0.254
68 0.107 0.137 0.166 0.195 0.224 0.254
69 0.107 0.137 0.166 0.195 0.224 0.254
70 0.129 0.164 0.199 0.234 0.269 0.304
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.019 0.025 0.030 0.035 0.040 0.046
53 0.025 0.032 0.038 0.045 0.052 0.059
54 0.039 0.049 0.060 0.070 0.081 0.091
55 0.083 0.105 0.128 0.150 0.173 0.195
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.080 0.102 0.123 0.145 0.167 0.189
60 0.094 0.119 0.145 0.170 0.196 0.221
61 0.088 0.112 0.136 0.160 0.184 0.208
62 0.127 0.161 0.196 0.230 0.265 0.299
63 0.110 0.140 0.170 0.200 0.230 0.260
64 0.110 0.140 0.170 0.200 0.230 0.260
65 0.149 0.189 0.230 0.270 0.311 0.351
66 0.110 0.140 0.170 0.200 0.230 0.260
67 0.110 0.140 0.170 0.200 0.230 0.260
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
51 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
52 0.0103 0.0132 0.0160 0.0188 0.0216 0.0244
53 0.0131 0.0167 0.0202 0.0238 0.0273 0.0309
54 0.0213 0.0272 0.0330 0.0388 0.0446 0.0504
55 0.0440 0.0560 0.0680 0.0800 0.0920 0.1040
56 0.0303 0.0385 0.0468 0.0550 0.0633 0.0715
57 0.0363 0.0462 0.0561 0.0660 0.0759 0.0858
58 0.00465 0.0592 0.0718 0.0845 0.0972 0.1099
59 0.0578 0.0735 0.0893 0.1050 0.1208 0.1365
60 0.0616 0.0784 0.0952 0.1120 0.1288 0.1456
61 0.0888 0.0788 0.0956 0.1125 0.1294 0.1463
62 0.0941 0.1232 0.1496 0.1760 0.2024 0.2288
63 0.1287 0.1131 0.1373 0.1615 0.1857 0.2100
64 0.1045 0.1197 0.1454 0.1710 0.1967 0.2223
65 0.1045 0.1638 0.1989 0.2340 0.2691 0.3042
66 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
67 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
68 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
69 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
70 0.1254 0.1596 0.1938 0.2280 0.2622 0.9640
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age
50
51
52
53
54 55
Rate
0.01588
0.00000
0.03442
0.01990
0.04132 0.07513
Age
56
57
58
59
60
Rate
0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50
51
52
53
54
55
Rate
0.02552
0.00000
0.01637
0.02717
0.00949
0.16674
Age
56
57
58
59
60
Rate
0.06921
0.05113
0.07241
0.07043
1.00000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 0.048 0.086
53 0.052 0.052 0.052 0.052 0.096 0.171
54 0.070 0.070 0.070 0.070 0.128 0.227
55 0.090 0.090 0.090 0.090 0.165 0.293
56 0.064 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 0.254
60 0.140 0.140 0.140 0.140 0.172 0.251
61 0.140 0.140 0.140 0.140 0.172 0.251
62 0.140 0.140 0.140 0.140 0.172 0.251
63 0.140 0.140 0.140 0.140 0.172 0.251
64 0.140 0.140 0.140 0.140 0.172 0.251
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.017 0.017 0.017 0.017 0.027 0.040
53 0.047 0.047 0.047 0.047 0.072 0.107
54 0.064 0.064 0.064 0.064 0.098 0.147
55 0.087 0.087 0.087 0.087 0.134 0.200
56 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.019 0.019 0.019 0.040 0.060
51 0.024 0.024 0.024 0.024 0.049 0.074
52 0.024 0.024 0.024 0.024 0.051 0.077
53 0.059 0.059 0.059 0.059 0.121 0.183
54 0.069 0.069 0.069 0.069 0.142 0.215
55 0.116 0.116 0.116 0.116 0.240 0.363
56 0.076 0.076 0.076 0.076 0.156 0.236
57 0.058 0.058 0.058 0.058 0.120 0.181
58 0.076 0.076 0.076 0.076 0.157 0.237
59 0.094 0.094 0.094 0.094 0.193 0.292
60 0.141 0.141 0.141 0.141 0.290 0.438
61 0.094 0.094 0.094 0.094 0.193 0.292
62 0.118 0.118 0.118 0.118 0.241 0.365
63 0.094 0.094 0.094 0.094 0.193 0.292
64 0.094 0.094 0.094 0.094 0.193 0.292
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.012 0.012 0.018 0.028 0.033
51 0.008 0.008 0.008 0.012 0.019 0.022
52 0.018 0.018 0.018 0.027 0.042 0.050
53 0.043 0.043 0.043 0.062 0.098 0.114
54 0.057 0.057 0.057 0.083 0.131 0.152
55 0.092 0.092 0.092 0.134 0.211 0.246
56 0.081 0.081 0.081 0.118 0.187 0.218
57 0.100 0.100 0.100 0.146 0.230 0.268
58 0.081 0.081 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 0.113 0.178 0.208
60 0.117 0.117 0.117 0.170 0.267 0.312
61 0.078 0.078 0.078 0.113 0.178 0.208
62 0.098 0.098 0.098 0.141 0.223 0.260
63 0.078 0.078 0.078 0.113 0.178 0.208
64 0.078 0.078 0.078 0.113 0.178 0.208
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0110 0.0110 0.0110 0.0110 0.0202 0.0361
51 0.0086 0.0086 0.0086 0.0086 0.0158 0.0281
52 0.0183 0.0183 0.0183 0.0183 0.0336 0.0599
53 0.0366 0.0366 0.0366 0.0366 0.0670 0.1194
54 0.0488 0.0488 0.0488 0.0488 0.0893 0.1592
55 0.0629 0.0629 0.0629 0.0629 0.1152 0.2052
56 0.0447 0.0447 0.0447 0.0447 0.0816 0.1455
57 0.0640 0.0640 0.0640 0.0640 0.1170 0.2086
58 0.0471 0.0471 0.0471 0.0471 0.0862 0.1537
59 0.1047 0.1047 0.1047 0.1047 0.1301 0.1908
60 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
61 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
62 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
63 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
64 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0052 0.0052 0.0052 0.0052 0.0081 0.0121
51 0.0057 0.0057 0.0057 0.0057 0.0088 0.0131
52 0.0121 0.0121 0.0121 0.0121 0.0187 0.0280
53 0.0326 0.0326 0.0326 0.0326 0.0501 0.0750
54 0.0447 0.0447 0.0447 0.0447 0.0688 0.1030
55 0.0608 0.0608 0.0608 0.0608 0.0935 01400
56 0.0545 0.0545 0.0545 0.0545 0.0840 0.1257
57 0.0811 0.0811 0.0811 0.0811 0.01248 0.1869
58 0.0593 0.0593 0.0593 0.0593 0.0913 0.1366
59 0.0547 0.0547 0.0547 0.0547 0.0842 0.1261
60 0.0851 0.0851 0.0851 0.0851 0.1310 0.1961
61 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
62 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
63 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
64 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0117 0.0117 0.0117 0.0117 0.0215 0.0382
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0471 0.0471 0.0471 0.0471 0.0861 0.1535
54 0.0627 0.0627 0.0627 0.0627 0.1148 0.2047
55 0.0764 0.0764 0.0764 0.0764 0.1398 0.2492
56 0.0542 0.0542 0.0542 0.0542 0.0991 0.1767
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0565 0.0565 0.0565 0.0565 0.1034 0.1844
59 0.1256 0.1256 0.1256 0.1256 0.1562 0.2290
60 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
61 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
62 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
63 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
64 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0077 0.0077 0.0077 0.0077 0.0119 0.0178
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0419 0.0419 0.0419 0.0419 0.0644 0.0965
54 0.0574 0.0574 0.0574 0.0574 0.0885 0.1324
55 0.0738 0.0738 0.0738 0.0738 0.1136 01700
56 0.0662 0.0662 0.0662 0.0662 0.1020 0.2077
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.1639
58 0.0711 0.0711 0.0711 0.0711 0.1095 0.1513
59 0.0656 0.0656 0.0656 0.0656 0.1011 0.2354
60 0.1022 0.1022 0.1022 0.1022 0.1572 0.2356
61 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
62 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
63 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
64 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 01900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
Miscellaneous
Superfunded Status
Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would
normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to
pay its employees’ normal member contributions.
However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a
defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be
less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee
normal member contributions.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
PEPRA Assumptions
The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new
member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled
plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New
members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the
CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30,
2013 valuation. Different assumptions for these new PEPRA members are disclosed above.
Attachment A
THIS PAGE
INTENTIONALLY
LEFT BLANK
Attachment A
APPENDIX B
PRINCIPAL PLAN PROVISIONS
Attachment A
THIS PAGE
INTENTIONALLY
LEFT BLANK
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations.
PEPRA Benefit Changes
The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new members as defined by PEPRA, that are hired after January 1, 2013. These PEPRA members are reflected in your
June 30, 2013 actuarial valuation. Members in pooled plans are reflected in the new Miscellaneous and Safety risk
pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, beginning with the
June 30, 2013 valuation.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5%
at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service.
Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65
formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for
all new members based on the Social Security Contribution and Benefit Base. For employees that participate in
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
Social Security this cap is $113,700 for 2013 and for those employees that do not participate in social security
the cap for 2013 is $136,440, the equivalent of 120 percent of the 2013 Contribution and Benefit Base.
Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at
90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3 percent of Final Compensation.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a
reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to
unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest
of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is
calculated in the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is
defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled.
The total amount paid will be at least equal to the Basic Death benefit.
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no
longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total
amount paid will be at least equal to the Basic Death Benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal
the Basic Death Benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the
following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the
1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
children under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree
who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by 2 percent.
Improved Benefit
Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one
of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula.
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may
not be greater than the cumulative change in the Consumer Price Index since the date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of
the employer contribution with or without a change in benefit. These contributions are paid in addition to the
member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any
of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited annually with 6 percent interest.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social
Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed
Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
Attachment A
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Attachment A
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2012 June 30, 2013
1. Active Members
a) Counts 794 789
b) Average Attained Age
45.88 46.31
c) Average Entry Age to Rate Plan 35.18 35.30
d) Average Years of Service 10.70 11.01
e) Average Annual Covered Pay $ 79,233 $ 81,673
f) Annual Covered Payroll 62,910,810 64,439,680
g) Projected Annual Payroll for Contribution Year 68,744,341 70,414,978
h) Present Value of Future Payroll 496,755,984 504,789,216
2. Transferred Members
a) Counts 288 295
b) Average Attained Age 46.23 45.76
c) Average Years of Service 3.49 3.48
d) Average Annual Covered Pay $ 105,875 $ 106,639
3. Terminated Members
a) Counts 321 334
b) Average Attained Age 46.83 47.27
c) Average Years of Service 3.47 3.43
d) Average Annual Covered Pay $ 62,330 $ 61,875
4. Retired Members and Beneficiaries
a) Counts 960 989
b) Average Attained Age 68.24 68.56
c) Average Annual Benefits $ 30,175 $ 30,968
5. Active to Retired Ratio [(1a) / (4a)] 0.83 0.80
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 12 0 0 0 0 0 12
25-29 33 6 1 0 0 0 40
30-34 44 26 13 2 0 0 85
35-39 43 25 25 9 0 0 102
40-44 32 21 27 14 7 0 101
45-49 32 18 29 22 15 6 122
50-54 32 21 31 28 31 19 162
55-59 22 21 13 18 7 15 96
60-64 6 8 11 13 10 3 51
65 and over 0 4 3 1 7 3 18
All Ages 256 150 153 107 77 46 789
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $55,778 $0 $0 $0 $0 $0 $55,778
25-29 68,999 71,174 70,393 0 0 0 69,360
30-34 66,225 73,055 78,041 67,762 0 0 70,157
35-39 71,848 74,273 83,848 81,745 0 0 76,257
40-44 86,209 89,671 89,214 95,538 95,353 0 89,659
45-49 87,483 83,726 80,090 90,931 91,113 90,346 86,380
50-54 77,649 91,029 81,853 83,085 84,877 103,376 85,528
55-59 80,998 79,330 85,869 87,349 92,423 93,680 85,298
60-64 82,227 72,191 80,771 88,205 101,177 90,161 86,045
65 and over 0 34,073 71,247 72,804 84,708 70,731 68,222
All Ages $75,265 $79,099 $82,800 $87,172 $89,832 $95,524 $81,673
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 2 0 0 0 0 0 2 $69,016
25-29 16 0 0 0 0 0 16 92,232
30-34 29 2 1 0 0 0 32 94,725
35-39 32 5 0 0 0 0 37 102,814
40-44 36 6 0 2 0 0 44 101,438
45-49 41 14 1 1 1 0 58 113,290
50-54 36 10 5 1 0 0 52 116,807
55-59 24 7 4 2 1 0 38 116,977
60-64 6 5 1 0 0 0 12 91,367
65 and over 2 1 1 0 0 0 4 89,948
All Ages 224 50 13 6 2 0 295 106,639
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 2 0 0 0 0 0 2 $62,303
25-29 6 1 0 0 0 0 7 56,381
30-34 33 4 0 0 0 0 37 59,849
35-39 39 3 0 0 0 0 42 58,165
40-44 35 9 1 0 0 0 45 67,296
45-49 36 15 6 1 0 0 58 61,848
50-54 47 9 5 5 1 0 67 66,794
55-59 27 8 2 0 0 1 38 63,755
60-64 19 4 2 2 0 0 27 53,603
65 and over 8 1 1 0 0 0 10 46,951
All Ages 252 54 17 8 1 1 333 61,882
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 3 3
30-34 0 0 1 0 0 1 2
35-39 0 0 2 0 0 0 2
40-44 0 1 1 0 0 0 2
45-49 1 4 2 0 0 0 7
50-54 32 12 2 0 0 2 48
55-59 114 7 1 0 0 5 127
60-64 169 10 1 0 0 14 194
65-69 196 11 2 0 0 8 217
70-74 126 6 2 0 0 17 151
75-79 70 7 1 0 0 6 84
80-84 51 4 0 0 0 19 74
85 and Over 52 2 0 0 0 24 78
All Ages 811 64 15 0 0 99 989
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $12,099 $12,099
30-34 0 0 242 0 0 10,903 5,573
35-39 0 0 249 0 0 0 249
40-44 0 8,644 239 0 0 0 4,442
45-49 17,094 12,540 618 0 0 0 9,784
50-54 32,222 12,206 885 0 0 6,888 24,857
55-59 42,841 13,975 10,894 0 0 13,610 39,848
60-64 38,551 15,189 2,031 0 0 33,285 36,779
65-69 35,459 16,858 8,908 0 0 14,121 33,485
70-74 28,386 20,616 1,759 0 0 23,916 27,222
75-79 31,204 15,461 4,014 0 0 24,240 29,071
80-84 23,966 15,178 0 0 0 20,766 22,670
85 and Over 20,996 16,768 0 0 0 20,471 20,726
All Ages $33,875 $15,103 $2,817 $0 $0 $21,675 $30,968
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 289 8 6 0 0 34 337
5-9 210 13 3 0 0 22 248
10-14 142 8 2 0 0 19 171
15-19 71 14 4 0 0 8 97
20-24 59 15 0 0 0 9 83
25-29 23 3 0 0 0 5 31
30 and Over 17 3 0 0 0 2 22
All Years 811 64 15 0 0 99 989
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $43,750 $8,668 $253 $0 $0 $27,645 $40,518
5-9 35,330 16,209 9,567 0 0 19,275 32,592
10-14 28,708 19,972 1,614 0 0 21,676 27,201
15-19 20,000 19,428 2,203 0 0 12,910 18,599
20-24 18,981 12,901 0 0 0 17,896 17,764
25-29 21,459 7,012 0 0 0 15,802 19,148
30 and Over 17,603 13,406 0 0 0 13,331 16,642
All Years $33,875 $15,103 $2,817 $0 $0 $21,675 $30,968
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
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Attachment A
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX D
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal
Cost for each respective plan on June 30, 2013.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as
well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. Since the actual demographics of new members was not known during the implementation of
PEPRA in December 2012, the normal cost rate was determined based on the average demographics of the members
in the current 2 percent at age 55 miscellaneous risk pool and the 3 percent at age 50 safety risk pool.
In analyzing the first set of PEPRA data, CalPERS staff has become concerned that, for most employers, there is
insufficient data to produce stable normal costs and member contribution rates. Further, this situation is likely to
persist for a number of years as employers gradually bring on more PEPRA members. The larger employers may
have sufficient PEPRA members in the first few years but other employers may not have stable rates for a number of
years. Staff has concluded that the best approach is to repeat the process – using the normal costs based on the
demographics of the risk pools – for the current valuation and work with stakeholders over the next year to
determine the best long-term approach to the issue of calculating PEPRA normal costs and member contribution rates. For more information on this topic please refer to the CalPERS Board of Administration agenda item 9a of the
May 20th, 2014 meeting which is available on the CalPERS website.
Basis for Current Rate Rates Effective July 1, 2015
Rate Plan
Identifier Plan
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26004 Miscellaneous PEPRA 12.50% 6.250% 12.50% 0.00% No 6.250%
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Attachment A
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and
related actuarial present values for a pension plan. These valuations are performed annually or when an
employer is contemplating a change to their plan provisions.
Actuarial Value of Assets
The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique
where investment gains and losses are partially recognized in the year they are incurred, with the remainder
recognized in subsequent years.
This method helps to dampen large fluctuations in the employer contribution rate.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Annual Required Contributions (ARC)
The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB
Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the
employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this
contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum
Prepayment.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets
indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded
ratio based on the Market Value of Assets indicates the short-term solvency of the plan.
GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members.
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-3
Superfunded
A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost.
Attachment A
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2014
SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2013
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2013 actuarial valuation
report of your pension plan. Your 2013 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the Actuarial Certification Section on page 1, is available to discuss the report with you
after October 31, 2014. Future Contribution Rates
The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2015-16 and a
projected contribution rate for 2016-17, before any cost sharing. The projected rate for 2016-17
is based on the most recent information available, including an estimate of the investment return
for fiscal year 2013-14, namely 18 percent, and the impact of the actuarial assumptions adopted
by the CalPERS Board in February 2014 that will impact employer rates for the first time in fiscal
year 2016-17. For a projection of employer rates beyond 2016-17, please refer to the “Projected
Rates” in the “Risk Analysis” section, which includes rate projections through 2020-21 under a
variety of investment return scenarios. Please disregard any projections that we may have
provided you in the past.
Fiscal Year Employer Contribution Rate
2015-16 41.932%
2016-17 45.1% (projected)
Member contributions other than cost sharing (whether paid by the employer or the employee)
are in addition to the above rates. The employer contribution rates in this report do not
reflect any cost sharing arrangement you may have with your employees. The estimate for 2016-17 also assumes that there are no future contract amendments and no
liability gains or losses (such as larger than expected pay increases, more retirements than
expected, etc.). This is a very important assumption because these gains and losses do occur and
can have a significant impact on your contribution rate. Even for the largest plans, such gains
and losses often cause a change in the employer’s contribution rate of one or two percent of
payroll and may be even larger in some less common instances. These gains and losses cannot
be predicted in advance so the projected employer contribution rates are just estimates. Your
actual rate for 2016-17 will be provided in next year’s report.
Attachment A
SAFETY PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2013
Page 2
Changes since the Prior Year’s Valuation
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The
impact of the PEPRA changes are included in the rates and the benefit provision listings of the
June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA, please refer to
the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and
will employ an amortization and smoothing policy that will pay for all gains and losses over a
fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year
period.
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial
assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of
Administration adopted relatively modest changes to the current asset allocation that will reduce
the expected volatility of returns. The adopted asset allocation is expected to have a long- term
blended return that continues to support a discount rate assumption of 7.5 percent. The Board
also approved several changes to the demographic assumptions that more closely align with
actual experience. The most significant of these is mortality improvement to acknowledge the
greater life expectancies we are seeing in our membership and expected continued
improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will
be calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a
5-year ramp-up/ramp-down in accordance with Board policy.
Besides the above noted changes, there may also be changes specific to your plan such as
contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on
your rate is included in the “Reconciliation of Required Employer Contributions.”
We understand that you might have a number of questions about these results. While we are
very interested in discussing these results with your agency, in the interest of allowing us to give
every public agency their results, we ask that you wait until after October 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
Attachment A
ACTUARIAL VALUATION
as of June 30, 2013
for the
SAFETY PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2015 – June 30, 2016
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Attachment A
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 5
Purpose of the Report 5
Required Employer Contribution 6
Plan’s Funded Status 6 Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
ASSETS
Reconciliation of the Market Value of Assets 11 Asset Allocation 12
CalPERS History of Investment Returns 13
LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 17
(Gain) / Loss Analysis 06/30/12 - 06/30/13 18 Schedule of Amortization Bases 19
Alternate Amortization Schedules 20
Reconciliation of Required Employer Contributions 21
Employer Contribution Rate History 22
Funding History 22
RISK ANALYSIS
Volatility Ratios 25
Projected Rates 26 Analysis of Future Investment Return Scenarios 26
Analysis of Discount Rate Sensitivity 27
Hypothetical Termination Liability 28
GASB STATEMENT NO. 27
Information for Compliance with GASB Statement No. 27 31
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 35
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A1
Actuarial Methods A1 – A2
Actuarial Assumptions A3 – A20
Miscellaneous A20 – A21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B9
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C1
Active Members C2
Transferred and Terminated Members C3
Retired Members and Beneficiaries C4 – C5
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E3
(CY) FIN PROCESS CONTROL ID: 432668 (PY) FIN PROCESS CONTROL ID: 413892 REPORT ID: 76454
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2013 provided by the various CalPERS
databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our
opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the
assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS
Attachment A
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Attachment A
HIGHLIGHTS AND EXECUTIVE SUMMARY
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED EMPLOYER CONTRIBUTION
PLAN’S FUNDED STATUS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Introduction
This report presents the results of the June 30, 2013 actuarial valuation of the SAFETY PLAN OF THE CITY
OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation
sets the fiscal year 2015-16 required employer contribution rates.
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of
most of the PEPRA changes are included in the rates and the benefit provision listings of the June 30, 2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the
CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing
policy, which spread investment returns over a 15-year period while experience gains and losses were
amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate
increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed
30-year period. The new amortization and smoothing policy is used in this valuation.
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will be
calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-
up/ramp-down in accordance with Board policy.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2013. The
purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2013;
Determine the required employer contribution rate for the fiscal year July 1, 2015 through June 30,
2016;
Provide actuarial information as of June 30, 2013 to the CalPERS Board of Administration and other
interested parties; and to
Provide pension information as of June 30, 2013 to be used in financial reports subject to Governmental
Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 19.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or
minus change in the discount rate.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary before
disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2014-15 2015-16
Actuarially Determined Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 6,371,908 $ 6,424,290
b) Employee Contribution1 2,057,371 2,097,372
c) Employer Normal Cost [(1a) – (1b)] 4,314,537 4,326,918
d) Unfunded Liability Contribution 4,721,544 5,413,603
e) Required Employer Contribution [(1c) + (1d)] $ 9,036,081 $ 9,740,521
Projected Annual Payroll for Contribution Year $ 22,859,681 $ 23,229,280
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 27.874% 27.656%
b) Employee Contribution1 9.000% 9.029%
c) Employer Normal Cost [(2a) – (2b)] 18.874% 18.627%
d) Unfunded Liability Rate 20.654% 23.305%
e) Required Employer Rate [(2c) + (2d)] 39.528% 41.932%
Minimum Employer Contribution Rate2 39.528% 41.932%
Annual Lump Sum Prepayment Option3 $ 8,715,170 $ 9,394,593
1For classic members this is the percentage specified in the Public Employees Retirement Law, net of any
reduction from the use of a modified formula or other factors. For PEPRA members the member contribution
rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report.
2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the
employer normal cost.
3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30. If there is contractual cost sharing or other change, this amount will change.
Plan’s Funded Status
June 30, 2012 June 30, 2013
1. Present Value of Projected Benefits $ 382,313,961 $ 392,560,445
2. Entry Age Normal Accrued Liability 327,608,300 338,666,499
3. Market Value of Assets (MVA) $ 215,605,457 $ 233,417,363
4. Unfunded Liability [(2) – (3)] $ 112,002,843 $ 105,249,136
5. Funded Ratio [(3) / (2)] 65.8% 68.9%
Superfunded Status No No
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Cost Estimates in General
What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for
the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a
number of assumptions about the future. These assumptions can be divided into two categories.
Demographic assumptions include the percentage of employees that will terminate, die, become
disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must
be understood that these assumptions are very long-term predictors and will surely not be realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of
7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of
two separate pieces.
The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a
percentage of total active payroll.
The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past
service of current members) which is expressed as a lump sum dollar amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an
orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll)
must be converted to a lump sum dollar amount (in which case the total cost is the present value of
benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which
case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary).
Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is
shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the
“Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is
shown for any plan changes, which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16
rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate
smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or
decreases in the rate phased in over a 5-year period.
A change in the calculation of termination with vested benefits liability for active members was made this year to better reflect the retirement experience. After termination with vested benefits, a miscellaneous
member is assumed to retire at age 59 and a safety member at age 54 rather than at earliest retirement
age. The higher benefit factors at these ages results in a slightly higher liability and a modest increase in
normal cost.
Public Employees’ Pension Reform Act of 2013 (PEPRA)
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a
public employer’s contribution to a defined benefit plan, in combination with employee contributions to that
defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that
some plans with surplus will be paying more than they otherwise would. For more information on PEPRA,
please refer to the CalPERS website.
Subsequent Events
Actuarial Methods and Assumptions
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns (see Risk
Analysis section of report). The adopted asset allocation is expected to have a long- term blended return
that continues to support a discount rate assumption of 7.5 percent.
The Board also approved several changes to the demographic assumptions that more closely align with
actual experience. The most significant of these is mortality improvement to acknowledge the greater life
expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution rates for public agency employers. The increase
in liability due to new actuarial assumptions will be calculated in the 2014 actuarial valuation and will be
amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. The
impact of assumption changes are included in the “Expected Rate Increases” subsection of the “Risk
Analysis” section.
Attachment A
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/12 Including Receivables $ 215,605,457
2. Receivables for Service Buybacks as of 6/30/12 327,039
3. Market Value of Assets as of 6/30/12 215,278,418
4. Employer Contributions 6,414,351
5. Employee Contributions 3,340,206
6. Benefit Payments to Retirees and Beneficiaries (19,259,784)
7. Refunds (3,702)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments 13,898
10. Investment Return 26,935,504
11. Market Value of Assets as of 6/30/13 $ 232,718,891
12. Receivables for Service Buybacks as of 6/30/13 698,472
13. Market Value of Assets as of 6/30/13 Including Receivables $ 233,417,363
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 12
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over
90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. On February 19, 2014 the CalPERS Board of Administration adopted
changes to the current asset allocation as shown in the Policy Target Allocation below expressed as
percentage of total assets. The asset allocation is has an expected long term blended rate of return of
7.5 percent.
The asset allocation and market value of assets shown below reflect the values of the Public Employees
Retirement Fund (PERF) in its entirety as of June 30, 2013. The assets for CITY OF PALO ALTO SAFETY PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly.
(A) Asset Class
(B)
Market Value ($ Billion)
(C)
Policy Target Allocation
1) Global Equity 133.4 47.0%
2) Private Equity 31.4 12.0%
3) Global Fixed Income 43.9 19.0%
4) Liquidity 10.5 2.0%
5) Real Assets 25.2 14.0%
6) Inflation Sensitive Assets 9.4 6.0%
7) Absolute Return Strategy (ARS) 7.2 0.0%
Total Fund $261.0 100.0%
Public Equity
51.1%
Private Equity
12.0%
Income
16.8%
Liquidity
4.0%
Real Assets
9.6%
Inflation
3.6%
ARS
2.8%
Asset Allocation at 6/30/2013
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30, 2013, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that
in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted
new asset allocation is 7.5 percent the portfolio has an expected volatility of 11.76 percent per year.
Consequently when looking at investment returns it is more instructive to look at returns over longer time
horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 13.2% 3.5% 7.0% 7.6% 9.4%
Volatility – 17.9% 13.9% 11.8% 11.6%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
2.
0
%
16
.
3
%
15
.
3
%
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.
2
%
-6.
1
%
3.
7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.
1
%
-24
.
0
%
13
.
3
%
21
.
7
%
0.
1
%
13
.
2
%
Attachment A
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Attachment A
LIABILITIES AND RATES
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/12 - 06/30/13
SCHEDULE OF AMORTIZATION BASES
ALTERNATE AMORTIZATION SCHEDULES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION RATE HISTORY
FUNDING HISTORY
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 136,627,084
b) Transferred Members 7,130,683
c) Terminated Members 1,166,821
d) Members and Beneficiaries Receiving Payments 247,635,857
e) Total $ 392,560,445
2. Present Value of Future Employer Normal Costs $ 36,022,369
3. Present Value of Future Employee Contributions $ 17,871,577
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 82,733,138
b) Transferred Members (1b) 7,130,683
c) Terminated Members (1c) 1,166,821
d) Members and Beneficiaries Receiving Payments (1d) 247,635,857
e) Total $ 338,666,499
5. Market Value of Assets (MVA) $ 233,417,363
6. Unfunded Liability [(4e) - (5)] $ 105,249,136
7. Funded Ratio [(5) / (4e)] 68.9%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
(Gain) /Loss Analysis 6/30/12 – 6/30/13
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or
losses, as shown below.
A Total (Gain)/Loss for the Year
1. Unfunded Accrued Liability (UAL) as of 6/30/12 $ 68,947,159 2. Expected Payment on the UAL during 2012/2013 2,623,616
3. Interest through 6/30/13 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 5,074,430
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 71,397,973
5. Change due to plan changes 0
6. Change due to assumption change 0
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 71,397,973
8. Actual UAL as of 6/30/13 105,249,136
9. Total (Gain)/Loss for 2012/2013 [(A8) - (A7)] $ 33,851,163
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 8,629,750
2. Interest on Expected Contributions 317,765 3. Actual Contributions 9,754,557
4. Interest on Actual Contributions 359,183
5. Expected Contributions with Interest [(B1) + (B2)] 8,947,515
6. Actual Contributions with Interest [(B3) + (B4)] 10,113,740
7. Contribution (Gain)/Loss [(B5) - (B6)] $ (1,166,225)
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/12 Including Receivables $ 258,661,141
2. Receivables as of 6/30/12 327,039
3. Actuarial Value of Assets as of 6/30/12 258,334,102
4. Contributions Received 9,754,557 5. Benefits and Refunds Paid (19,263,486)
6. Transfers and miscellaneous adjustments 13,898
7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 19,025,431
8. Expected Assets as of 6/30/13 [(C3) + (C4) + (C5) + (C6) + (C7)] 267,864,502
9. Receivables as of 6/30/13 698,472
10. Expected Assets Including Receivables 268,562,974 11. Market Value of Assets as of 6/30/13 233,417,363
12. Asset (Gain)/Loss [(C10) - (C11)] $ 35,145,611
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ 33,851,163 2. Contribution (Gain)/Loss (B7) (1,166,225)
3. Asset (Gain)/Loss (C12) 35,145,611
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ (128,223)
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Schedule of Amortization Bases
There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.
The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2013. The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; fiscal year 2015-16.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies
with their employer contribution rates well in advance of the start of the fiscal year.
The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the
fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded
Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years
ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as
the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year,
based on payroll as of the valuation date.
Amounts for Fiscal 2015-16
Reason for Base Date Established
Amorti-
zation Period Balance 6/30/13
Expected
Payment 2013-14 Balance 6/30/14
Expected
Payment 2014-15 Balance 6/30/15
Scheduled
Payment for 2015-16
Payment as
Percentage of Payroll
FRESH START 06/30/04 21 $(925,453) $(64,163) $(928,336) $(66,087) $(929,441) $(68,070) (0.293%)
BENEFIT CHANGE 06/30/05 11 $158,922 $16,174 $154,072 $16,660 $148,354 $17,159 0.074%
ASSUMPTION CHANGE 06/30/09 16 $7,634,175 $617,183 $7,566,829 $635,699 $7,475,235 $654,769 2.819%
SPECIAL (GAIN)/LOSS 06/30/09 26 $8,660,491 $538,511 $8,751,688 $554,666 $8,832,974 $571,306 2.459%
SPECIAL (GAIN)/LOSS 06/30/10 27 $4,107,580 $250,867 $4,155,544 $258,393 $4,199,302 $266,144 1.146%
ASSUMPTION CHANGE 06/30/11 18 $6,287,467 $474,738 $6,266,808 $488,980 $6,229,833 $503,649 2.168%
SPECIAL (GAIN)/LOSS 06/30/11 28 $2,319,200 $139,269 $2,348,742 $143,447 $2,376,169 $147,751 0.636%
PAYMENT (GAIN)/LOSS 06/30/12 29 $977,891 $(444,542) $1,512,144 $90,805 $1,531,406 $93,529 0.403%
(GAIN)/LOSS 06/30/12 29 $42,177,701 $1,987,915 $43,279,914 $2,598,982 $43,831,226 $2,676,951 11.524%
(GAIN)/LOSS 06/30/13 30 $33,851,162 $517 $36,389,463 $(14,346) $39,133,547 $550,415 2.369%
TOTAL $105,249,136 $3,516,469 $109,496,868 $4,707,199 $112,828,605 $5,413,603 23.305%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 20
Alternate Amortization Schedules
The amortization schedule shown on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the passible savings in doing so. Therefore, we have provided alternate amortization
schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments
towards your plan’s unfunded liability of $112,828,605 as of June 30, 2015, which under the minimum schedule, will
require total payments of $300,400,504. Shown below are the level rate payments required to amortize your plan’s
unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario
would increase by 3 percent for each year into the future.
If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further.
Level Rate of Payroll Amortization
Period 2015-16
Rate
2015-16
Payment
Total
Payments
Total
Interest
Difference from
Current Schedule
25 32.103% $ 7,457,343 $ 271,889,238 $ 159,060,633 $ 28,511,266
20 36.674% $ 8,519,172 $ 228,913,342 $ 116,084,737 $ 71,487,162
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Reconciliation of Required Employer Contributions
Percentage
of
Projected
Payroll
Estimated $
Based on
Projected
Payroll
1. Contribution for 7/1/14 – 6/30/15 39.528% $ 9,036,081
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 2.404% 558,345
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 0.000% 0
d) Effect of change in payroll - 146,095
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 2.404% 704,440
3. Contribution for 7/1/15 – 6/30/16 [(1)+(2g)] 41.932% 9,740,521
The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is
made or a plan change became effective after the prior year’s actuarial valuation was performed.
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
Employer Contribution Rate History
The table below provides a recent history of the employer contribution rates for your plan, as determined by the
annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost Unfunded Rate
Total Employer
Contribution Rate
2010 - 2011 16.996% 7.699% 24.695%
2011 - 2012 17.813% 12.312% 30.125%
2012 - 2013 18.015% 13.035% 31.050%
2013 - 2014 18.658% 14.786% 33.444%
2014 - 2015 18.874% 20.654% 39.528%
2015 - 2016 18.627% 23.305% 41.932%
Funding History
The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets,
the funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of
Assets (MVA)
Funded
Ratio
Annual
Covered
Payroll
06/30/08 $ 258,963,682 $ 235,054,144 90.8% $ 22,181,324
06/30/09 280,292,862 172,078,263 61.4% 22,086,992
06/30/10 293,895,452 190,527,731 64.8% 23,030,400
06/30/11 313,183,690 225,015,089 71.8% 22,774,462
06/30/12 327,608,300 215,605,457 65.8% 20,919,846
06/30/13 338,666,499 233,417,363 68.9% 21,258,082
Attachment A
RISK ANALYSIS
VOLATILITY RATIOS
PROJECTED RATES
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
HYPOTHETICAL TERMINATION LIABILITY
Attachment A
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 25
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about very long-
term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore,
the rates will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to
investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset
volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the
current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the
contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the
table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the
asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2013
1. Market Value of Assets without Receivables $ 232,718,891
2. Payroll 21,258,082
3. Asset Volatility Ratio (AVR = 1. / 2.) 10.9
4. Accrued Liability $ 338,666,499
5. Liability Volatility Ratio (LVR = 4. / 2.) 15.9
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 26
Projected Rates
The estimated rate for 2016-17 is based on a projection of the most recent information we have available,
including an estimated 18 percent investment return for fiscal 2013-14, the impact of the new smoothing methods
adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in 2015-16 and an estimate of the impact of the new actuarial assumptions adopted by the CalPERS Board in February 2014. These
new demographic assumptions include a 20-year projection of on-going mortality improvement. A complete listing
of the new demographic assumptions to be implemented with the June 30, 2014 annual actuarial valuation and
incorporated in the projected rates for FY 2016-17 and beyond can be found on the CalPERS website at:
http://www.calpers.ca.gov/eip-docs/about/pubs/employer/actuarial-assumptions.xls
The table below shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming CalPERS earns 18 percent for fiscal year 2013-14 and 7.50 percent every fiscal year thereafter, and
assuming that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2016-17.
New Rate Projected Future Employer Contribution Rates
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Contribution Rates: 41.932% 45.1% 47.5% 49.9% 52.3% 52.4%
Analysis of Future Investment Return Scenarios
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and
strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest
changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of
7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in
better risk characteristics than an equivalent margin for adverse deviation. The current asset allocation has an
expected standard deviation of 12.45 percent while the newly adopted asset allocation has a lower expected
standard deviation of 11.76 percent.
The investment return for fiscal year 2013-14 was announced July 14, 2014. The investment return in fiscal year
2013-14 is 18.42 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming an 18.0 percent
investment return for fiscal year 2013-14.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years
later. Specifically, the investment return for 2013-14 will first be reflected in the June 30, 2014 actuarial valuation
that will be used to set the 2016-17 employer contribution rates, the 2014-15 investment return will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates
and so forth.
Based on a 18 percent investment return for fiscal year 2013-14, the April 17, 2013 CalPERS Board-approved
amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including
20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized,
and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the
beginning of the fiscal year 2016-17, the effect on the 2016-17 Employer Rate is as follows:
Estimated 2016-17 Employer Rate Estimated Increase in Employer Rate between
2015-16 and 2016-17
45.1% 3.2%
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 27
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2014-15, 2015-16 and 2016-17 on the 2017-18, 2018-19 and 2019-20 employer rates. Once
again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further
changes to assumptions, contributions, benefits, or funding will occur.
Five different investment return scenarios were selected.
The first scenario is what one would expect if the markets were to give us a 5th percentile return from
July 1, 2014 through June 30, 2017. The 5th percentile return corresponds to a -3.8 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The second scenario is what one would expect if the markets were to give us a 25th percentile return
from July 1, 2014 through June 30, 2017. The 25th percentile return corresponds to a 2.8 percent return
for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The third scenario assumed the return for 2014-15, 2015-16, 2016-17 would be our assumed 7.5
percent investment return which represents about a 49th percentile event.
The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2014 through June 30, 2017. The 75th percentile return corresponds to a 12.0 percent return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2014 through June 30, 2017. The 95th percentile return corresponds to a 18.9 percent
return for each of the 2014-15, 2015-16 and 2016-17 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2014-17 Investment
Return Scenario
Estimated Employer Rate Estimated Change in
Employer Rate
between 2016-17 and 2019-20 2017-18 2018-19 2019-20
-3.8% (5th percentile) 49.4% 55.5% 63.1% 18.0%
2.8% (25th percentile) 48.3% 52.3% 57.0% 11.9%
7.5% 47.5% 49.9% 52.3% 7.2%
12.0%(75th percentile) 46.7% 47.6% 47.5% 2.4%
18.9%(95th percentile) 45.6% 43.8% 39.7% -5.4%
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2015-16 employer contribution rates under two different discount rate
scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and
1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the
long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2015-16 Employer Contribution Rate
As of June 30, 2013 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%)
Employer Normal Cost 25.365% 18.627% 13.423%
Accrued Liability $ 380,696,166 $ 338,666,499 $ 303,751,850
Unfunded Accrued Liability $ 147,278,803 $ 105,249,136 $ 70,334,487
Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 28
Hypothetical Termination Liability
Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of
June 30, 2013 using the discount rates shown below. Your plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability both compensation and service is frozen as of the valuation date and no future pay increases or service accruals are
included. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset
allocation strategy for the Terminated Agency Pool. Since the Terminated Agency Pool has limited funding sources,
expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security
for members while limiting its funding risk. This asset allocation has a lower expected rate of return than the PERF.
Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated
plans.
In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to
consult with your plan actuary before beginning this process.
Valuation
Date
Hypothetical
Termination Liability1
Market Value
of Assets (MVA)
Unfunded
Termination Liability
Termination
Funded Ratio
Termination
Liability Discount
Rate2
06/30/11 $ 458,637,906 $ 225,015,089 $ 233,622,817 49.1% 4.82%
06/30/12 610,760,250 215,605,457 395,154,793 35.3% 2.98%
06/30/13 560,471,618 233,417,363 327,054,255 41.6% 3.72%
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with
Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A.
2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this
hypothetical termination liability estimate, the discount rate used, is the yield on the 30-year US Treasury Separate
Trading of Registered Interest and Principal of Securities (STRIPS). Note that as of June 30, 2014 the 30-year
STRIPS rate was 3.55 percent.
Attachment A
GASB STATEMENT NO. 27
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Attachment A
CALPERS ACTUARIAL VALUATION - June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 31
SAFETY PLAN of the CITY OF PALO ALTO
Information for Compliance with GASB Statement No. 27
Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal
years beginning after June 15, 2014, GASB 68 replaces GASB 27. This will be the last year that GASB disclosure information will be included in your annual actuarial report. GASB 68 will require
additional reporting that CalPERS is intending to provide upon request for an additional fee. We
urge you to start discussions with your auditors on how to implement GASB 68.
Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution
(ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan
contributions for the year. The cumulative difference is called the net pension obligation (NPO). Since GASB 68
replaces GASB 27, for fiscal year 2015-16, the APC is replaced by the Actuarially Determined Contribution (ADC). The ADC for July 1, 2015 to June 30, 2016 is 41.932% percent of payroll. In order to calculate the dollar value of
the ADC for inclusion in financial statements prepared as of June 30, 2016, this contribution rate, less any
employee cost sharing, as modified by any amendments for the year, would be multiplied by the payroll of
covered employees that was actually paid during the period July 1, 2015 to June 30, 2016. The employer and the
employer’s auditor are responsible for determining the NPO, APC or ADC for a given fiscal year.
A summary of principal assumptions and methods used to determine the funded status is shown below.
Retirement Program
Valuation Date June 30, 2013
Actuarial Cost Method Entry Age Normal Cost Method Amortization Method Level Percent of Payroll
Asset Valuation Method Market Value
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment
Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into
CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur in the operation of the plan are amortized over a 30-year period with Direct Rate
Smoothing with a 5-year ramp up/ramp down. If the plan’s accrued liability exceeds the actuarial value of plan
assets, then the amortization payment on the total unfunded liability may not be lower than the payment
calculated over a 30-year amortization period. More detailed information on assumptions and methods is provided
in Appendix A of this report. Appendix B contains a description of benefits included in the valuation.
The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value
of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll.
Valuation
Date
Accrued
Liability (a)
Actuarial value
of Assets* (b)
Unfunded
Liability (UL) (a)-(b)
Funded Ratios
(b)/(a)
Annual
Covered Payroll (c)
UL As a % of
Payroll [(a)-(b)]/(c)
06/30/09 $ 280,292,862 $ 236,274,455 $ 44,018,407 84.3% $ 22,086,992 199.3%
06/30/10 293,895,452 244,413,456 49,481,996 83.2% 23,030,400 214.9%
06/30/11 313,183,690 254,304,173 58,879,517 81.2% 22,774,462 258.5%
06/30/12 327,608,300 258,661,141 68,947,159 79.0% 20,919,846 329.6%
06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082 495.1%
* Beginning with the 6/30/2013 valuation Actuarial Value of Assets equals Market Value of Assets per CalPERS
Direct Rate Smoothing Policy.
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Attachment A
PLAN’S MAJOR BENEFIT PROVISIONS
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Contract Package
Receiving Receiving Active
Police
Active
Fire
Active
Fire
Active
Police
Active
Fire
Benefit Provision
Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 2.7% @ 57 3.0% @ 50
Social Security Coverage No No No No No Full/Modified Full Full Full Full Full
Final Average Compensation Period 12 mos. 12 mos. 12 mos. 36 mos. 12 mos.
Sick Leave Credit No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard
Industrial Disability Yes Yes Yes Yes Yes
Pre-Retirement Death Benefits
Optional Settlement 2W No Yes Yes No Yes
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1
Special Yes Yes Yes Yes Yes Alternate (firefighters) No No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
Contractual Employee Cost Sharing
Page 35
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Contract Package
Active
Fire
Active
Fire
Active
Fire
Active
Police
Benefit Provision
Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 55 3.0% @ 55
Social Security Coverage No No No No
Full/Modified Full Full Full Full
Final Average Compensation Period 12 mos. 12 mos. 36 mos. 36 mos.
Sick Leave Credit No No No No
Non-Industrial Disability Standard Standard Standard Standard
Industrial Disability Yes Yes Yes Yes
Pre-Retirement Death Benefits Optional Settlement 2W Yes Yes Yes No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1
Special Yes Yes Yes Yes
Alternate (firefighters) No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No
COLA 2% 2% 2% 2%
Page 36
Attachment A
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PPERA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
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Attachment A
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under
this method, projected benefits are determined for all members and the associated liabilities are spread in a
manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to
the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is
equal to the present value of the benefits expected to be paid. No normal costs are applicable for these
participants.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the
unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an
amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period
with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All
changes in liability due to plan amendments (other than golden handshakes), changes in actuarial
assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5
year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in
unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. If a plan’s
accrued liability exceeds the market value of assets, the annual contribution with respect to the total
unfunded liability may not be less than the amount produced by a 30-year amortization of the unfunded liability. An exception has been made for the change in asset value from actuarial to market value in this
valuation. The CalPERS Board approved a 30-year amortization with a 5-year ramp-up/ramp-down for only
this change in method.
Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding
progress by preventing the expected funded status on a market value of assets basis to either:
Increase by at least 15 percent by June 30, 2043; or
Reach a level of 75 percent funded by June 30, 2043
The necessary additional contribution will be obtained by changing the amortization period of the gains and
losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period,
which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above
when performing each future valuation to determine whether or not additional contributions are necessary.
An exception to the funding rules above is used whenever the application of such rules results in
inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current
unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if
the annual contribution on the total unfunded liability was less than the amount produced by a 30-year
amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is
already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed
in the following situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate.
It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases,
the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be
less than five years, nor greater than 30 years.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in employer contribution rates. On April 17,
2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization
and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates,
CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed
30-year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS will no longer use an actuarial value of assets and will use the market value of assets. This direct rate
smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value
of asset corridor and a 25 year amortization period for gains and losses. The change in asset value will also
be amortized over 30 years with a 5-year ramp-up/ramp-down.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions will be used to set the FY 2016-17 contribution
rates for public agency employers. The increase in liability due to new actuarial assumptions will be
calculated in the 2014 actuarial valuation and will be amortized over a 20-year period with a 5-year ramp-
up/ramp-down in accordance with Board policy. For more details, please refer to the experience study report that can be found at the following link: http://www.calpers.ca.gov/eip-docs/about/pubs/employer/
2014-experience-study.pdf
Economic Assumptions
Discount Rate
7.5 percent compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate used for termination valuation is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For
purposes of this hypothetical termination liability estimate, the discount rate used, 3.72 percent, is
the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of
Securities (STRIPS) as of June 30, 2013. Please note, as of June 30, 2014 the 30-year STRIPS yield
was 3.55 percent.
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No
loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death
(Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007 30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013
45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017 65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 0.00021
Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically
contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be
split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate.
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356
55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546
60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798
65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184 70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528
85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017
90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775
95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331
100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS
Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected
on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30,
2010. There is no margin for future mortality improvement beyond the valuation date.
On February 19, 2014 the CalPERS Board adopted new recommended demographic assumption
based on the most recent CalPERS Experience Study. These new actuarial assumptions will be
implemented for the first time in the June 30, 2014 valuation. For purposes of the post-retirement
mortality rates, the revised rates include 20 years of projected on-going mortality improvement
using Scale BB published by the Society of Actuaries.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Marital Status
For active members, a percentage who are married upon retirement is assumed according to
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used
for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The
following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150% 61 through 64 125%
65 and above 100% (no change)
Termination with Refund
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54.
The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety
Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and
School Police.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 0.0007 0.0003
25 0.0012 0.0032 0.0015
30 0.0025 0.0064 0.0031
35 0.0037 0.0097 0.0046
40 0.0049 0.0129 0.0063
45 0.0061 0.0161 0.0078
50 0.0074 0.0192 0.0101
55 0.0721 0.0668 0.0173
60 0.0721 0.0668 0.0173
The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.
Fifty Percent of the Police Industrial Disability rates are used for School Police.
One Percent of the Police Industrial Disability rates are used for Local Prosecutors. Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the Non-Industrial Disability rate and 50
percent will become the Industrial Disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 0.025 0.035 0.042 0.048 0.054 0.060
58 0.030 0.042 0.051 0.058 0.065 0.073
59 0.035 0.049 0.060 0.068 0.076 0.085
60 0.062 0.087 0.105 0.119 0.133 0.149
61 0.079 0.110 0.134 0.152 0.169 0.190
62 0.132 0.186 0.225 0.255 0.284 0.319
63 0.126 0.178 0.216 0.244 0.272 0.305
64 0.122 0.171 0.207 0.234 0.262 0.293
65 0.173 0.243 0.296 0.334 0.373 0.418
66 0.114 0.160 0.194 0.219 0.245 0.274
67 0.159 0.223 0.271 0.307 0.342 0.384
68 0.113 0.159 0.193 0.218 0.243 0.273
69 0.114 0.161 0.195 0.220 0.246 0.276
70 0.127 0.178 0.216 0.244 0.273 0.306
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.024 0.029 0.033 0.039
51 0.013 0.016 0.020 0.024 0.027 0.033
52 0.014 0.018 0.022 0.027 0.030 0.036
53 0.017 0.022 0.027 0.032 0.037 0.043
54 0.027 0.034 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 0.092 0.112 0.134 0.153 0.182
61 0.089 0.113 0.137 0.165 0.188 0.224
62 0.128 0.162 0.197 0.237 0.270 0.322
63 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 0.247 0.282 0.336
68 0.118 0.150 0.182 0.219 0.250 0.297
69 0.116 0.147 0.179 0.215 0.246 0.293
70 0.138 0.176 0.214 0.257 0.293 0.349
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.021 0.026 0.032 0.038 0.043 0.049
53 0.026 0.033 0.040 0.048 0.055 0.062
54 0.043 0.054 0.066 0.078 0.089 0.101
55 0.088 0.112 0.136 0.160 0.184 0.208
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.083 0.105 0.128 0.150 0.173 0.195
62 0.121 0.154 0.187 0.220 0.253 0.286
63 0.105 0.133 0.162 0.190 0.219 0.247
64 0.105 0.133 0.162 0.190 0.219 0.247
65 0.143 0.182 0.221 0.260 0.299 0.338
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.085 0.109 0.132 0.155 0.178 0.202
62 0.124 0.158 0.191 0.225 0.259 0.293
63 0.107 0.137 0.166 0.195 0.224 0.254
64 0.107 0.137 0.166 0.195 0.224 0.254
65 0.146 0.186 0.225 0.265 0.305 0.345
66 0.107 0.137 0.166 0.195 0.224 0.254
67 0.107 0.137 0.166 0.195 0.224 0.254
68 0.107 0.137 0.166 0.195 0.224 0.254
69 0.107 0.137 0.166 0.195 0.224 0.254
70 0.129 0.164 0.199 0.234 0.269 0.304
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.019 0.025 0.030 0.035 0.040 0.046
53 0.025 0.032 0.038 0.045 0.052 0.059
54 0.039 0.049 0.060 0.070 0.081 0.091
55 0.083 0.105 0.128 0.150 0.173 0.195
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.080 0.102 0.123 0.145 0.167 0.189
60 0.094 0.119 0.145 0.170 0.196 0.221
61 0.088 0.112 0.136 0.160 0.184 0.208
62 0.127 0.161 0.196 0.230 0.265 0.299
63 0.110 0.140 0.170 0.200 0.230 0.260
64 0.110 0.140 0.170 0.200 0.230 0.260
65 0.149 0.189 0.230 0.270 0.311 0.351
66 0.110 0.140 0.170 0.200 0.230 0.260
67 0.110 0.140 0.170 0.200 0.230 0.260
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
51 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
52 0.0103 0.0132 0.0160 0.0188 0.0216 0.0244
53 0.0131 0.0167 0.0202 0.0238 0.0273 0.0309
54 0.0213 0.0272 0.0330 0.0388 0.0446 0.0504
55 0.0440 0.0560 0.0680 0.0800 0.0920 0.1040
56 0.0303 0.0385 0.0468 0.0550 0.0633 0.0715
57 0.0363 0.0462 0.0561 0.0660 0.0759 0.0858
58 0.00465 0.0592 0.0718 0.0845 0.0972 0.1099
59 0.0578 0.0735 0.0893 0.1050 0.1208 0.1365
60 0.0616 0.0784 0.0952 0.1120 0.1288 0.1456
61 0.0888 0.0788 0.0956 0.1125 0.1294 0.1463
62 0.0941 0.1232 0.1496 0.1760 0.2024 0.2288
63 0.1287 0.1131 0.1373 0.1615 0.1857 0.2100
64 0.1045 0.1197 0.1454 0.1710 0.1967 0.2223
65 0.1045 0.1638 0.1989 0.2340 0.2691 0.3042
66 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
67 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
68 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
69 0.1045 0.1330 0.1615 0.1900 0.2185 0.2470
70 0.1254 0.1596 0.1938 0.2280 0.2622 0.9640
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age
50
51
52
53
54 55
Rate
0.01588
0.00000
0.03442
0.01990
0.04132 0.07513
Age
56
57
58
59
60
Rate
0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50
51
52
53
54
55
Rate
0.02552
0.00000
0.01637
0.02717
0.00949
0.16674
Age
56
57
58
59
60
Rate
0.06921
0.05113
0.07241
0.07043
1.00000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 0.048 0.086
53 0.052 0.052 0.052 0.052 0.096 0.171
54 0.070 0.070 0.070 0.070 0.128 0.227
55 0.090 0.090 0.090 0.090 0.165 0.293
56 0.064 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 0.254
60 0.140 0.140 0.140 0.140 0.172 0.251
61 0.140 0.140 0.140 0.140 0.172 0.251
62 0.140 0.140 0.140 0.140 0.172 0.251
63 0.140 0.140 0.140 0.140 0.172 0.251
64 0.140 0.140 0.140 0.140 0.172 0.251
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.017 0.017 0.017 0.017 0.027 0.040
53 0.047 0.047 0.047 0.047 0.072 0.107
54 0.064 0.064 0.064 0.064 0.098 0.147
55 0.087 0.087 0.087 0.087 0.134 0.200
56 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.019 0.019 0.019 0.040 0.060
51 0.024 0.024 0.024 0.024 0.049 0.074
52 0.024 0.024 0.024 0.024 0.051 0.077
53 0.059 0.059 0.059 0.059 0.121 0.183
54 0.069 0.069 0.069 0.069 0.142 0.215
55 0.116 0.116 0.116 0.116 0.240 0.363
56 0.076 0.076 0.076 0.076 0.156 0.236
57 0.058 0.058 0.058 0.058 0.120 0.181
58 0.076 0.076 0.076 0.076 0.157 0.237
59 0.094 0.094 0.094 0.094 0.193 0.292
60 0.141 0.141 0.141 0.141 0.290 0.438
61 0.094 0.094 0.094 0.094 0.193 0.292
62 0.118 0.118 0.118 0.118 0.241 0.365
63 0.094 0.094 0.094 0.094 0.193 0.292
64 0.094 0.094 0.094 0.094 0.193 0.292
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.012 0.012 0.018 0.028 0.033
51 0.008 0.008 0.008 0.012 0.019 0.022
52 0.018 0.018 0.018 0.027 0.042 0.050
53 0.043 0.043 0.043 0.062 0.098 0.114
54 0.057 0.057 0.057 0.083 0.131 0.152
55 0.092 0.092 0.092 0.134 0.211 0.246
56 0.081 0.081 0.081 0.118 0.187 0.218
57 0.100 0.100 0.100 0.146 0.230 0.268
58 0.081 0.081 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 0.113 0.178 0.208
60 0.117 0.117 0.117 0.170 0.267 0.312
61 0.078 0.078 0.078 0.113 0.178 0.208
62 0.098 0.098 0.098 0.141 0.223 0.260
63 0.078 0.078 0.078 0.113 0.178 0.208
64 0.078 0.078 0.078 0.113 0.178 0.208
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0110 0.0110 0.0110 0.0110 0.0202 0.0361
51 0.0086 0.0086 0.0086 0.0086 0.0158 0.0281
52 0.0183 0.0183 0.0183 0.0183 0.0336 0.0599
53 0.0366 0.0366 0.0366 0.0366 0.0670 0.1194
54 0.0488 0.0488 0.0488 0.0488 0.0893 0.1592
55 0.0629 0.0629 0.0629 0.0629 0.1152 0.2052
56 0.0447 0.0447 0.0447 0.0447 0.0816 0.1455
57 0.0640 0.0640 0.0640 0.0640 0.1170 0.2086
58 0.0471 0.0471 0.0471 0.0471 0.0862 0.1537
59 0.1047 0.1047 0.1047 0.1047 0.1301 0.1908
60 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
61 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
62 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
63 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
64 0.1047 0.1047 0.1047 0.1047 0.1289 0.1880
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0052 0.0052 0.0052 0.0052 0.0081 0.0121
51 0.0057 0.0057 0.0057 0.0057 0.0088 0.0131
52 0.0121 0.0121 0.0121 0.0121 0.0187 0.0280
53 0.0326 0.0326 0.0326 0.0326 0.0501 0.0750
54 0.0447 0.0447 0.0447 0.0447 0.0688 0.1030
55 0.0608 0.0608 0.0608 0.0608 0.0935 01400
56 0.0545 0.0545 0.0545 0.0545 0.0840 0.1257
57 0.0811 0.0811 0.0811 0.0811 0.01248 0.1869
58 0.0593 0.0593 0.0593 0.0593 0.0913 0.1366
59 0.0547 0.0547 0.0547 0.0547 0.0842 0.1261
60 0.0851 0.0851 0.0851 0.0851 0.1310 0.1961
61 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
62 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
63 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
64 0.0852 0.0852 0.0852 0.0852 0.1312 0.1964
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0117 0.0117 0.0117 0.0117 0.0215 0.0382
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0471 0.0471 0.0471 0.0471 0.0861 0.1535
54 0.0627 0.0627 0.0627 0.0627 0.1148 0.2047
55 0.0764 0.0764 0.0764 0.0764 0.1398 0.2492
56 0.0542 0.0542 0.0542 0.0542 0.0991 0.1767
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0565 0.0565 0.0565 0.0565 0.1034 0.1844
59 0.1256 0.1256 0.1256 0.1256 0.1562 0.2290
60 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
61 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
62 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
63 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
64 0.1256 0.1256 0.1256 0.1256 0.1547 0.2255
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0077 0.0077 0.0077 0.0077 0.0119 0.0178
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0419 0.0419 0.0419 0.0419 0.0644 0.0965
54 0.0574 0.0574 0.0574 0.0574 0.0885 0.1324
55 0.0738 0.0738 0.0738 0.0738 0.1136 01700
56 0.0662 0.0662 0.0662 0.0662 0.1020 0.2077
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.1639
58 0.0711 0.0711 0.0711 0.0711 0.1095 0.1513
59 0.0656 0.0656 0.0656 0.0656 0.1011 0.2354
60 0.1022 0.1022 0.1022 0.1022 0.1572 0.2356
61 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
62 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
63 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
64 0.1022 0.1022 0.1022 0.1022 0.1574 0.2356
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 01900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
Miscellaneous
Superfunded Status
Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would
normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to
pay its employees’ normal member contributions.
However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a
defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be
less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee
normal member contributions.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
PEPRA Assumptions
The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new
member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled
plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New
members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the
CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30,
2013 valuation. Different assumptions for these new PEPRA members are disclosed above.
Attachment A
THIS PAGE
INTENTIONALLY
LEFT BLANK
Attachment A
APPENDIX B
PRINCIPAL PLAN PROVISIONS
Attachment A
THIS PAGE
INTENTIONALLY
LEFT BLANK
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations.
PEPRA Benefit Changes
The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new members as defined by PEPRA, that are hired after January 1, 2013. These PEPRA members are reflected in your
June 30, 2013 actuarial valuation. Members in pooled plans are reflected in the new Miscellaneous and Safety risk
pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, beginning with the
June 30, 2013 valuation.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5%
at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service.
Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65
formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for
all new members based on the Social Security Contribution and Benefit Base. For employees that participate in
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
Social Security this cap is $113,700 for 2013 and for those employees that do not participate in social security
the cap for 2013 is $136,440, the equivalent of 120 percent of the 2013 Contribution and Benefit Base.
Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at
90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3 percent of Final Compensation.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a
reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to
unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest
of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is
calculated in the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is
defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled.
The total amount paid will be at least equal to the Basic Death benefit.
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no
longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total
amount paid will be at least equal to the Basic Death Benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal
the Basic Death Benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the
following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the
1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
children under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree
who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by 2 percent.
Improved Benefit
Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one
of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula.
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may
not be greater than the cumulative change in the Consumer Price Index since the date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of
the employer contribution with or without a change in benefit. These contributions are paid in addition to the
member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any
of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited annually with 6 percent interest.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social
Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed
Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
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Attachment A
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2012 June 30, 2013
1. Active Members
a) Counts 180 184
b) Average Attained Age
40.16 40.56
c) Average Entry Age to Rate Plan 29.10 29.20
d) Average Years of Service 11.06 11.36
e) Average Annual Covered Pay $ 116,221 $ 115,533
f) Annual Covered Payroll 20,919,846 21,258,082
g) Projected Annual Payroll for Contribution Year 22,859,681 23,229,280
h) Present Value of Future Payroll 197,739,373 197,632,871
2. Transferred Members
a) Counts 59 59
b) Average Attained Age 43.67 42.98
c) Average Years of Service 4.16 3.77
d) Average Annual Covered Pay $ 108,463 $ 103,052
3. Terminated Members
a) Counts 31 29
b) Average Attained Age 42.78 42.21
c) Average Years of Service 3.69 2.68
d) Average Annual Covered Pay $ 73,686 $ 75,591
4. Retired Members and Beneficiaries
a) Counts 398 404
b) Average Attained Age 66.74 66.93
c) Average Annual Benefits $ 46,860 $ 48,491
5. Active to Retired Ratio [(1a) / (4a)] 0.45 0.46
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 1 0 0 0 0 0 1
25-29 12 4 0 0 0 0 16
30-34 20 20 1 0 0 0 41
35-39 5 5 12 1 0 0 23
40-44 7 7 17 8 1 0 40
45-49 1 4 6 15 10 7 43
50-54 1 1 4 2 5 2 15
55-59 0 0 1 0 0 2 3
60-64 0 0 0 0 1 1 2
65 and over 0 0 0 0 0 0 0
All Ages 47 41 41 26 17 12 184
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $88,524 $0 $0 $0 $0 $0 $88,524
25-29 91,581 109,450 0 0 0 0 96,048
30-34 101,893 115,604 116,235 0 0 0 108,931
35-39 95,071 108,102 130,488 160,784 0 0 119,239
40-44 92,479 112,025 116,911 124,615 161,660 0 114,440
45-49 184,829 104,981 107,135 123,633 127,480 139,324 124,468
50-54 110,275 115,887 112,471 101,639 131,231 131,131 119,849
55-59 0 0 141,098 0 0 161,433 154,654
60-64 0 0 0 0 115,776 116,912 116,344
65 and over 0 0 0 0 0 0 0
All Ages $98,791 $112,448 $119,594 $123,672 $129,905 $139,775 $115,533
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 0 0 0 0 0 0 0 $0
25-29 4 0 0 0 0 0 4 94,431
30-34 10 0 0 0 0 0 10 89,509
35-39 7 0 0 0 0 0 7 103,158
40-44 6 2 1 0 0 0 9 122,339
45-49 10 6 3 0 0 0 19 98,083
50-54 2 2 0 1 0 0 5 106,983
55-59 1 2 1 0 0 0 4 124,444
60-64 0 0 1 0 0 0 1 87,824
65 and over 0 0 0 0 0 0 0 0
All Ages 40 12 6 1 0 0 59 103,052
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 0 0 0 0 0 0 0 0
30-34 6 1 0 0 0 0 7 74,881
35-39 2 3 0 0 0 0 5 98,554
40-44 5 3 0 0 0 0 8 81,795
45-49 4 0 0 0 0 0 4 48,607
50-54 4 0 0 0 0 0 4 54,988
55-59 0 0 0 0 0 0 0 0
60-64 0 1 0 0 0 0 1 106,475
65 and over 0 0 0 0 0 0 0 0
All Ages 21 8 0 0 0 0 29 75,591
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 1 0 0 0 1
35-39 0 0 2 0 0 0 2
40-44 0 0 6 0 0 0 6
45-49 0 1 4 0 0 0 5
50-54 34 1 19 0 2 0 56
55-59 36 0 15 0 1 2 54
60-64 27 0 18 0 0 3 48
65-69 34 1 19 0 0 7 61
70-74 33 1 25 0 0 5 64
75-79 28 1 21 0 0 4 54
80-84 14 0 14 0 0 7 35
85 and Over 11 0 3 0 0 4 18
All Ages 217 5 147 0 3 32 404
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 50,015 0 0 0 50,015
35-39 0 0 59,693 0 0 0 59,693
40-44 0 0 53,706 0 0 0 53,706
45-49 0 80 36,520 0 0 0 29,232
50-54 79,807 31,030 59,018 0 46,762 0 70,702
55-59 70,335 0 68,425 0 26,044 57,408 68,506
60-64 76,132 0 43,849 0 0 29,846 61,133
65-69 47,138 16,350 38,531 0 0 41,217 43,273
70-74 47,039 14,012 32,953 0 0 29,749 39,670
75-79 40,619 8,676 26,936 0 0 16,830 32,944
80-84 30,248 0 24,070 0 0 32,960 28,319
85 and Over 26,597 0 24,747 0 0 11,006 22,824
All Ages $56,725 $14,030 $41,548 $0 $39,856 $30,740 $48,491
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 63 1 19 0 0 4 87
5-9 37 0 17 0 1 7 62
10-14 33 0 17 0 0 14 64
15-19 29 1 21 0 1 1 53
20-24 29 1 16 0 0 4 50
25-29 14 0 17 0 0 1 32
30 and Over 12 2 40 0 1 1 56
All Years 217 5 147 0 3 32 404
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $79,595 $80 $79,325 $0 $0 $16,281 $75,711
5-9 56,906 0 59,077 0 49,608 42,602 55,768
10-14 56,805 0 51,831 0 0 34,272 50,555
15-19 44,383 31,030 40,522 0 43,915 291 41,760
20-24 41,382 16,350 34,616 0 0 29,766 37,787
25-29 33,440 0 27,308 0 0 19,800 29,757
30 and Over 29,960 11,344 21,146 0 26,044 1,390 22,419
All Years $56,725 $14,030 $41,548 $0 $39,856 $30,740 $48,491
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
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Attachment A
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE
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Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX D
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal
Cost for each respective plan on June 30, 2013.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as
well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. Since the actual demographics of new members was not known during the implementation of
PEPRA in December 2012, the normal cost rate was determined based on the average demographics of the members
in the current 2 percent at age 55 miscellaneous risk pool and the 3 percent at age 50 safety risk pool.
In analyzing the first set of PEPRA data, CalPERS staff has become concerned that, for most employers, there is
insufficient data to produce stable normal costs and member contribution rates. Further, this situation is likely to
persist for a number of years as employers gradually bring on more PEPRA members. The larger employers may
have sufficient PEPRA members in the first few years but other employers may not have stable rates for a number of
years. Staff has concluded that the best approach is to repeat the process – using the normal costs based on the
demographics of the risk pools – for the current valuation and work with stakeholders over the next year to
determine the best long-term approach to the issue of calculating PEPRA normal costs and member contribution rates. For more information on this topic please refer to the CalPERS Board of Administration agenda item 9a of the
May 20th, 2014 meeting which is available on the CalPERS website.
Basis for Current Rate Rates Effective July 1, 2015
Rate Plan
Identifier Plan
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
25006 Safety Fire PEPRA 22.40% 11.250% 22.40% 0.00% No 11.250%
25007 Safety Police PEPRA 22.40% 11.250% 22.40% 0.00% No 11.250%
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Attachment A
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and
related actuarial present values for a pension plan. These valuations are performed annually or when an
employer is contemplating a change to their plan provisions.
Actuarial Value of Assets
The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique
where investment gains and losses are partially recognized in the year they are incurred, with the remainder
recognized in subsequent years.
This method helps to dampen large fluctuations in the employer contribution rate.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Annual Required Contributions (ARC)
The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB
Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the
employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this
contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum
Prepayment.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets
indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded
ratio based on the Market Value of Assets indicates the short-term solvency of the plan.
GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members.
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Attachment A
CALPERS ACTUARIAL VALUATION – June 30, 2013 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-3
Superfunded
A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost.
Attachment A
FINANCE COMMITTEE
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Regular Meeting
Tuesday, March 19, 2013
Council Member Burt called the meeting to order at 7:01 P.M. in the Council
Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Burt (Chair), Schmid, Shepherd
Absent: Berman
Agenda Items
1.Utilities Options for Cost Savings Modifications to Palo Alto's Street
Sweeping
Phil Bobel, Assistant Director of Environmental Services recalled the Finance
Committee (Committee) discussed street sweeping during the 2012 Budget
cycle. The Administrative Services Department (ASD) analyzed options for
street sweeping.
Ron Arp, Solid Waste Manager reported a crew within the Public Works
Department was responsible for sweeping all streets, most parking lots, and
cleaning Downtown sidewalks. The analysis was based solely on the street-
sweeping portion of the overall Public Works Department Budget. The cost
for five fulltime street sweeper operators and large sweepers was $980,000
annually, or slightly more than 40 percent of the sweeping Budget. Staff did
not evaluate savings for other tasks, such as sweeping and cleaning bike
paths, medians, parking lots, sidewalks, and garages, picking up leaves and
debris and transporting them to the Smart Station’s, or cleaning homeless
encampments. Cost savings was realized in the sweeping Budget without
significant impacts to residents and businesses. Staff recommended
reducing the frequency of sweeping in residential and light commercial areas
during the eight months of the non-leaf season. Weekly sweeping during
non-leaf season had limited value in protecting the environment. He said
contracting some of the work could save costs. Option One was the City's
current program of sweeping all public streets on a weekly basis year round,
with the exception of the Downtown area, which was swept three times per
week. The Budget cost was $980,000 annually. Approximately half of costs
Attachment B
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were Staff costs and the other half were equipment costs. Palo Alto was the
only City of those surveyed that swept weekly during the non-leaf season in
residential areas. ASD calculated a future cost for pension and healthcare
liability under Option One of $339,000 per year. Option Two was contracting
all street-sweeping tasks. He mentioned that contracting eliminated five
Full-Time Employee’s (FTE) and some equipment. Also, in Option Two,
streets in residential areas were swept every other week during the non-leaf
season. He said the Downtown area would still be swept three times per
week. The cost of contracting all street sweeping was $441,000 annually, a
savings of more than $500,000 per year. The disadvantage of contracting
street sweeping was the City's inability to respond to emergency events. In
Option Three, Staff's recommendation was a mixture of Options One and
Two where in-house crews swept streets every other week year round. A
contractor supplemented in-house crews by sweeping streets weekly during
the leaf season. All Downtown street sweeping was contracted, and
occurred three times per week year round. Option Three eliminated two
FTE’s and two machines, and was going to cost approximately $675,000,
with a savings of $305,000; Option Three retained the City's emergency
response ability. Staff recommended a pilot program to sweep selected
residential areas every other week beginning in late spring through early fall
2013. Staff intended to return to the Committee with recommendations in
late 2013, with a goal of full implementation in Fiscal Year (FY) 2015. Staff
did not request the Committee approve any of the one Option’s; rather Staff
requested input regarding feasibility of the plan and direction to proceed
with a pilot program.
Chair Burt requested Staff provide context for emergency event response.
Mr. Arp explained street sweeping crews were called out monthly to remove
mud from streets caused by water main breaks and the Police Department
occasionally called out street sweepers to remove debris from automobile
accidents.
Council Member Schmid clarified that the Committee would not recommend
one of the Options, just discuss issues and recommend implementation of a
pilot program.
Mr. Bobel agreed with his assessment.
Council Member Schmid inquired whether increased parking reduced the
effectiveness of street sweeping.
Steve Banks, Manager of Maintenance Operations agreed that increased
parking was a problem. Permanently posted signs in the Northern
Downtown area allowed a clean sweep along the curb. In other areas, Staff
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posted temporary signs four to five times a year. If residents provided
information regarding debris underneath parked vehicles, Staff would post
those areas as well.
Council Member Schmid asked if the frequency of street sweeping changed
in the past to every other week, only to return to weekly.
Mr. Bobel was not aware of that. To the best of his recollection, the City
always swept weekly.
Council Member Schmid felt the City's previous outsourcing experiences
were satisfactory, and requested Staff comment on the effectiveness of
outsourcing other services.
Lalo Perez, Director of Administrative Services reported outsourcing worked
out extremely well at the Golf Course. Effectiveness of outsourcing
depended on Staff clearly structuring the scope of services and punitive
clauses for nonperformance, and clearly establishing the level of
performance. The City had some issues with the parks contract, but Staff
was resolving those. For the most part, outsourcing was successful. Staff
needed to negotiate with labor groups if street sweeping was outsourced.
Council Member Schmid assumed Staff discussed positive and negative
aspects of outsourcing with other cities that used contractors.
Mr. Perez indicated Staff talked with other cities and mentioned that the list
on Attachment B reported results of Staff's survey.
Council Member Schmid inquired whether emergency response was the
responsibility of the Public Works Department.
Mr. Bobel answered yes. If the City contracted street sweeping services,
then Public Works Staff had less ability to meet their responsibilities.
Council Member Schmid asked if street cleaning was the only issue affected
by contracting sweeping services.
Mr. Bobel responded yes, only street sweeping.
Council Member Schmid noted street sweeping Staff had other job
responsibilities during the weeks they were not sweeping streets, and asked
if this was a new work program.
Mr. Bobel indicated these were not new work items, and asked if Council
Member Schmid meant during the pilot program.
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Council Member Schmid meant during the pilot program and under Option
Three.
Mr. Bobel reported Staff would restructure job responsibilities so that all
cleaning functions continued. No new functions were to be added.
Council Member Schmid inquired whether the number of Staff would be
reduced by sweeping every other week.
Mr. Bobel explained reducing the frequency of sweeping under Option Three
reduced Staff by two FTE’s. Reasons for implementing a pilot program were
to ensure Staff could maintain efficiency and to determine resident’s
reaction.
Council Member Schmid stated the pilot program needed to be large enough
to provide good data, yet he noted to Staff that the City needed excess
personnel during the pilot program. He mentioned that the Refuse Fund had
its own source of revenue, and asked whether Refuse rates or the General
Fund paid for street sweeping costs.
Mr. Bobel explained the Refuse Fund was an Enterprise Fund, and its
structure was the same as the Electric Fund. Refuse rates funded the Refuse
Fund, of which approximately $2 million was spent on street sweeping. The
street sweeping program under discussion comprised approximately of $1
million of the total street sweeping Budget.
Vice Mayor Shepherd favored a pilot program. She thought a contract for
street sweeping should include a charge for wear and tear on City streets by
street sweepers. She asked if residents in the pilot program would receive a
reduced fee for the reduced frequency of street sweeping.
Mr. Bobel explained the current Refuse Fund fee was $6.66.
Vice Mayor Shepherd believed the Refuse Fund fee and Household
Hazardous Waste fee totaled $10.
Mr. Bobel agreed $10 was the fixed portion of the refuse bill. He mentioned
that most likely, Staff would not recommend a reduced fee because costs
continued to rise in other areas. As the City reduced expenses, hopefully
the fee would not increase.
Vice Mayor Shepherd confirmed the fee would remain stable and inquired
whether the Public Works Department responded to toxic spills.
Mr. Arp reported a contractor cleaned larger toxic spills. The Public Works
Department cleaned small spills if they knew what the substance was.
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Mr. Bobel explained $1 million of the total $2 million Street Sweeping Budget
was utilized for the cleaning of special problems.
Vice Mayor Shepherd was excited by the opportunity to stabilize rates and to
reduce the impact of vehicles on streets. She requested additional
information regarding emergency response at a future discussion.
Mr. Bobel said he would provide that information and added that common
emergencies were when residents requested special attention in a specific
area. Those emergencies were typically handled by a street sweeper.
Vice Mayor Shepherd believed emergency response was included in the bid.
Chair Burt assumed the topic would be contentious before reviewing the
Staff Report. Approximately half of surveyed cities contracted street
sweeping. He asked how other cities responded to irregular events.
Mr. Arp reported some cities utilized Public Works crews; others contracted
at an hourly rate for contractor response. The next phase of analysis was to
gather more details regarding emergency response.
Chair Burt inquired whether the City reduced General Fund employees by 14
percent without layoffs.
Mr. Perez stated the reduction was approximately 13 percent, including
frozen positions. The City laid-off approximately seven to eight positions of
the 80 positions reduced.
Chair Burt asked if Staff planned to reassign employees.
Mr. Banks reported the Department was probably not able to accommodate
the two FTEs; during the pilot program, the FTEs were accommodated
though.
Mr. Perez suggested Staff leadership search for positions in other
Departments for reassignment of the FTE’s.
Chair Burt recalled Staff achieved reductions with minimal layoffs.
Mr. Perez indicated Staff would strive to do the same once results of the
pilot program were known.
Chair Burt was interested in a hybrid of Options Two and Three. He
assumed half of the street sweeping Staff was needed for irregular events.
He said one FTE and three outsourced employees was the ideal balance for
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handling irregular events while minimizing costs; perhaps Staff was able to
include that in their evaluation.
Mr. Bobel believed Staff would include that information because Staff wanted
to perform more analysis and include information from the pilot program.
The California Department of Transportation (Caltrans) contracted with the
City to sweep El Camino Real. If the City contracted street sweeping, it did
not need to contract with Caltrans to sweep El Camino Real. Staff was
reviewing compliance issues with the Caltrans contract. Street sweeping
was a measure in the required Storm Water Permit. In the commercial
areas, Staff ensured the City was meeting those requirements. Staff wanted
to return to the Committee with more information for outsourcing street
sweeping.
Vice Mayor Shepherd felt contracting with Caltrans increased staffing and
financial responsibilities.
MOTION: Vice Mayor Shepherd moved, seconded by Council Member
Schmid to direct Staff to 1) conduct a pilot program to modify sweeping
frequency of residential and light industrial routes from weekly service to bi-
weekly service in the late spring through early fall 2013, 2) direct Staff to
finalize the cost savings analysis in the late 2013, allowing time to
implement Council-approved modifications and any resulting contracts in
Fiscal Year 2015.
Council Member Schmid was enthusiastic about the pilot program. It
provided an opportunity to explore alternatives.
MOTION PASSED: 3-0, Berman absent
2. Utilities Advisory Commission Recommendation that Council Adopt a
Resolution to Increase Water Fund Revenues by $2.4 Million per year
Effective July 1, 2013 and Amend Water Utility Rate Schedules W-1,
W-2, W-3, W-4 and W-7.
Eric Keniston, Resource Planner reported the two main cost drivers for rate
increases were Purchase Costs of water from Hetch Hetchy and Construction
Costs. Purchase Cost estimates decreased over the prior year. One
construction project scheduled for Fiscal Year (FY) 2013 was delayed to FY
2014, and projects were moved out in successive years. Because of these
changes, Staff predicted no rate increase in FY 2014, with reserves near the
minimum requirement. He noted that in FY 2015, the rate increase could
possibly be 16 percent. Staff suggested a seven percent rate increase in FY
2014 and FY 2015. In future years, construction costs were expected to
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remain relatively flat, while water supply costs were expected to increase.
With the return of Capital Improvement Program (CIP) funds in FY 2013, the
Rate Stabilization Reserves were at the upper end of the required level. If
costs and revenues remained in line with projections, the Rate Stabilization
Reserve was at the lower end of the required level. Overall rates increased
five to seven percent. The first rate tier increased by $0.45, and the second
rate tier increased by $0.52. Smaller customers saw a slightly larger bill
impact because of the increased monthly customer service charge. The bill
impact for a median customer was projected at 2.4 percent, or slightly less
than $6. In order to increase water rates by July 1, 2013, a notice needed
to be mailed out by the middle of April 2013. A public hearing for water rate
increases was scheduled for June 2013.
Council Member Schmid noted Hetch Hetchy rebuilding costs increased rates
for the next five years, and he wished to spread that among as many users
as possible. With more users using more water, the cost per unit was
expected to decrease. Instead, proposed rates were increasing, and the
burden fell more on the small residential user. He inquired why the small
users were paying more.
Debra Lloyd, Senior Resource Planner explained rates were driven by the
Cost of Service Model. The percentage increase was slightly larger for tier
one usage; however, the actual dollar impact was larger for tier two users.
Council Member Schmid believed conservation was taking place on the
residential side rather than the large commercial group.
Mr. Keniston did not see that level of conservation yet and said conservation
seemed equal across all groups.
Council Member Schmid asked why the small user had a higher percentage
increase.
Mr. Keniston indicated the meter charge was increasing by seven percent,
and that was a large component of the residential bill. For a commercial
customer, the fixed component was much smaller.
Chair Burt asked why the monthly service charge was increasing more for
small users.
Ms. Lloyd noted the fixed charge was based on meter size, and was
comprised of a greater component of the total bill. When the fixed charge
increased, it had a greater impact on the total bill for the smaller user.
There was a slightly higher percentage increase on tier one users. The ratio
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between tier one and tier two users was decreasing slightly with this rate
increase.
Chair Burt inquired whether the fixed charge was embedded in tier one
pricing or if it was a separate line item.
Ms. Lloyd indicated it was separate.
Chair Burt believed the public would find the rate per gallon a more useful
metric. He requested an explanation for the Utility User Tax (UUT)
increasing by 3.6 percent, while the bill increase was 2.4 percent.
Mr. Keniston explained the UUT was five percent of electric, gas, and water
charges.
Chair Burt asked if electric, gas, and water rates were increasing by 3.6
percent.
Mr. Keniston stated they increased on an aggregate level by 3.6 percent.
Chair Burt inquired whether CIP costs would decrease because the
underground reservoir project costs were below budget.
Mr. Keniston reported quite a bit of funds remained from the reservoir
project, and those funds could be utilized for related projects.
MOTION: Vice Mayor Shepherd moved, seconded by Council Member
Schmid to accept the recommendation by Staff to 1) increase overall retail
water rates and annual revenues for the Water Fund by 7.0 percent, or $2.4
million per year, effective July 1, 2013; and 2) Amend Utility Rate Schedules
W-1, W-2, W-3, W-4, and W-7.
MOTION PASSED: 3-0, Berman Absent
3. Cost of Service Study Follow Up
Lalo Perez, Administrative Services Director recalled the Finance Committee
(Committee) requested Staff return with samples. Staff expected to have a
report to the Committee by June 2013. The City utilized a multi-prong
approach to stabilize long-term financial viability. One prong was the Cost
of Services. Three components of Costs of Services were: 1) services with
associated fees; 2) services without fees; and 3) administration costs.
Gail Wilcox, Management Specialist said the report was one of three
analyses performed to determine the full cost of providing services. The
primary goals of this analysis was to calculate all direct and indirect costs of
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providing fee-related services, and to determine the cost recovery level
based on revenue generated from fees. The City retained MGT of America, a
firm used to assist with this analysis. The majority of data utilized in this
analysis was provided by Staff. The City had approximately 1,000 fees.
Staff expected to submit a full report to the Committee by the end of Fiscal
Year (FY) 2013. In FY 2012, $21.7 million was generated from user fees,
approximately 15 percent of all General Fund revenues. Planning and
Community Environment Department had fee revenue of $9 million, which
represented 42 percent of all fee revenues in FY 2012. Community Services
Department (CSD) generated fee revenues of $5.7 million. Of that amount,
$2.6 million in fees were generated from the Golf Program. Fire Department
fees generated approximately $5 million, approximately half of that from
paramedic fees. The Public Works Department generated fee revenues of
approximately $1 million. The Police Department and all other fees
comprised the remaining $1 million of fee revenues. Overhead Costs were
also referred to as Indirect Costs. Indirect Costs were a significant factor in
the calculation of full costs. City-wide Overhead or Cost Plan Charges were
generally allocated to Centralized Administrative Support Departments.
There were no mandated methodologies for allocating City-wide Overheard
Costs. The State Controller and Federal Office of Management and Budget
indicated the methodology for allocating costs needed to reflect the benefit
the receiving department received. It was common practice for the Human
Resources Department costs to be allocated to the Operating Departments,
based on the number of Full-Time Employee (FTE) positions in the Operating
Department. Facility maintenance and Custodial Services provided by the
Public Works Department were allocated based on square footage of each
department. MGT's analysis incorporated a use allowance to capture the
costs of capital and fixed assets. Department and division overhead were
part of cost analysis. A productive hourly rate was utilized to recover the
cost of paid leave and other time when employees were not engaged in
delivering a particular service. Actual productive hours varied significantly
between each employee; therefore, MGT utilized 1,600 as an average
number of productive hours. The industry range was typically 1,500 to
1,700. MGT used two basic methodologies in the analysis. The first was the
top-down or program-level approach, which was almost universally used for
recreational programs. The second methodology was the bottom-up or fee-
level approach. The program-level analysis was a combination of program
direct expenses, division overhead, department overhead, and City-wide
overhead.
Jeff Wakefield, MGT of America explained the bottom-up or fee-level
approach was used for the majority of Departments. The first steps were to
acquire the class of employee for each fee category, and then identify tasks
associated with each service. For each Staff member, MGT identified the
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average number of minutes involved in each task. This determined the
estimated time for each fee category. The time figures were applied against
the fully burdened labor rates. The product of the average time multiplied
by the fully burdened labor rates resulted in the summary figures.
Ms. Wilcox stated Staff provided general information and recommendations
for new or changed fees so that the Council was able to set policy. Staff
conducted a survey of similar fees charged in eight surrounding cities, and
would provide that information. CSD was collecting utilization data
regarding the number of patrons, a breakdown of resident versus non-
resident usage, and comparable facility rental rates.
Council Member Schmid inquired whether the only State mandate was not to
charge more than 100 percent of costs without community election.
Mr. Wakefield answered yes.
Council Member Schmid inquired whether the Council could set fees between
0 and 100 percent at its discretion.
Ms. Wilcox responded yes.
Council Member Schmid noted the Indirect Cost was the major change with
substantial numbers. The ratio of Direct Costs to Indirect Costs was
interesting. He asked if Staff was requesting that Council make an explicit
decision regarding services with no fees.
James Keene, City Manager stated the Council would make an informed
choice regarding use of a standard or custom fee’s. Staff needed to provide
more clarity regarding costs and revenue. The Council had discretion to
determine who paid or how the City collected revenue.
Council Member Schmid inquired whether the Council received an analysis
point for each fee.
Ms. Wilcox reported that for the program-level analysis, CSD produced one
analysis for each program. Staff then presented a summary worksheet
indicating the current fee, total costs, total revenues, and cost recovery
amounts. MGT made a recommendation in terms of industry standards.
Council Member Schmid inquired whether Staff was reviewing the fee
schedule for CSD only, or were they reviewing the whole fee schedule.
Ms. Wilcox answered the whole fee schedule.
Council Member Schmid asked if analysis included everything.
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Ms. Wilcox responded correct.
Council Member Schmid noted service providers could question whether they
were receiving value for all the Indirect Costs, and asked if the City was
providing them with an option for outsourcing.
Mr. Perez believed if the City provided a good service, then the demand
would be there. The process demonstrated the level of recovery, which
Indirect Costs included, variations of methodology, it showed who benefited
from services, who paid for services, it included additional methods to
deliver services, levels of service, creation of efficiencies, and opportunities
for public-private partnerships and regionalization. Staff recommended
some type of outreach, which included surveys.
Council Member Schmid noted that Golf and Aquatics Departments had high
recovery rates, which were characterized by outsourcing and hourly workers.
He was startled to see that the rate of productive hours was assumed at
1,600 hours. He assumed that in outsourcing services, Staff looked for
higher rates of productive hours from contractors.
Mr. Perez found that to be the case when outsourcing services at the Golf
Course. It depended on the contractor's structure with regard to benefit
packages. The number of productive hours ranged from 1,500 to 1,700.
Council Member Schmid assumed the number of productive hours was much
higher in the private sector.
Mr. Wakefield had no specific knowledge regarding contractors. MGT
excluded holiday time, sick time, vacation time, breaks, and leave.
Council Member Schmid clarified 1,600 productive hours was assumed for
public sector employees.
Vice Mayor Shepherd asked if the example of the Golf Course was a top-
down approach.
Mr. Wilcox reported City-wide Overhead was allocated to the Departments
by different methodologies depending on the Department. If the Golf
Course represented a total of 6.67 percent of all direct expenses for CSD,
then it received 6.6 percent of City-wide Overhead allocated to CSD.
Vice Mayor Shepherd suggested all costs of the Administrative Services
Department (ASD) and the City Manager's Office be completely expensed
across all services at the allocated percentage.
Mr. Keene presumed the analysis utilized 2,080 hours.
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Vice Mayor Shepherd indicated hours started at 2,080, and then leave was
subtracted.
Mr. Keene stated many employees did not work 2,080 hours; therefore, the
overheard rate was undercharged.
Vice Mayor Shepherd believed residents paying for services with cash
subsidized residents paying with credit cards, and inquired whether the City
had a surcharge for use of credit cards.
Mr. Perez reported State law did not allow the City to implement a surcharge
for credit card use.
Vice Mayor Shepherd asked if that law pertained to municipalities only, and
asked if the City could implement a cash discount.
Mr. Perez stated the law was a municipality restriction. Staff was reviewing
other modes of payment that potentially lowered the cost. Technology was
available; however, vendors and users had to participate.
Vice Mayor Shepherd inquired whether the cost for pensioners was included
in the expense for each Department.
Mr. Perez responded yes. The recommended methodologies for Council
consideration accounted for those types of expenses. There were conflicting
impacts as a result of a particular methodology, and Staff discussed that
when making recommendations to full Council.
Vice Mayor Shepherd indicated the Council would need to review
methodology service-by-service.
Mr. Perez reported similar situations occurred under the old formula.
Vice Mayor Shepherd stated ASD had a multiplier effect based on all
activities.
Mr. Perez noted the City reduced Staff as it moved from purchase requests
to procurement cards. Lighter workloads had impacts throughout the
administrative departments.
Vice Mayor Shepherd was unsure how to navigate an increase of Staff to
support new services. The Council deliberately added services that gave
value to the community, but needed an analysis of when a new service
required more Staff.
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Mr. Perez reported Staff's goal was to identify issues and concerns as they
surfaced. He viewed the process as continual because Council could move in
a different direction then was recommended by Staff.
Vice Mayor Shepherd inquired whether the Committee would be utilizing the
information to make difficult Budget decisions.
Mr. Keene reported sorting the status quo versus reducing costs or raising
revenue would be challenging. It was good government to pursue this
information. The question of what to do with the information remained.
This sort of information was valuable in budget discussions and informed a
continuous improvement process. It allowed the Council to deepen review
and to inform potential changes. He suggested that Council review a few
services each year for deeper discussion.
Mr. Perez also believed it was good governance to reassess and understand
the City's portfolio of services. He thought this exercise could inform policy
decisions.
Mr. Keene felt the analyses informed continuous improvement of services
and efficiencies.
Vice Mayor Shepherd asked when the Committee would be reviewing the
information.
Mr. Perez reported the Committee could review analyses in May 2013, but
mostly likely Staff would wait to present the completed study.
Vice Mayor Shepherd liked the concept of reviewing Overhead Costs because
reducing Overhead Costs for services decreased subsidies.
Chair Burt stated performing analysis required time and costs. He inquired
whether there was any value in performing both bottom-up and top-down
analyses to allow comparison of outcomes.
Mr. Wakefield indicated it was very difficult to perform a top-down analysis
on all fees, and said it would probably quintuple the amount of time he used.
Chair Burt clarified he meant performing both analyses on a small sample of
services.
Mr. Wakefield said he had not performed that exercise but said the general
wisdom in the industry was that the bottom-up method was used for most
fee-related services provided and offered more accuracy. Whenever
possible, MGT utilized the bottom-up analysis.
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Chair Burt was interested in another point of comparison between other
cities. This information was a method for informing decisions and increasing
transparency and deliberateness.
Ms. Wilcox reported there were not many similar comparisons among cities
because cities bundled services differently.
Chair Burt asked how much of City outsourcing was paid by the hour and
how much was paid based on performance.
Mr. Perez said there was a hybrid because Custodial Services had hourly
rates; whereas, for Parks, there was a mixture.
Chair Burt believed the City was not concerned with how many hours were
required to provide a certain quality of service. The City wanted highly
productive contractors who met performance standards.
Mr. Perez noted a good example was refuse collection.
Robert De Geus, Division Manager reported Golf Course contracts contained
performance standards and expectations that required a minimum number
of maintenance Staff.
Chair Burt inquired whether Staff would be concerned if a contractor met
performance standards while utilizing fewer people.
Mr. De Geus indicated Staff was concerned primarily with performance;
however, having managed the Golf Course in-house, Staff wanted to
understand how the contractor could do the work with fewer employees.
Chair Burt stated Staff wanted the contractor to be transparent about how it
intended to meet performance goals, but Staff did not want to stipulate that.
Mr. De Geus agreed.
Chair Burt indicated Staff would scrutinize whether a contractor had a good
plan, but would not manage the plan or determine it in advance. He
suggested a Study Session regarding best practices in competitiveness.
Mr. Keene noted managed competition was the state-of-the-art term for that
process.
Vice Mayor Shepherd did not believe the Committee requested Staff to
change its methodology for analyses.
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Chair Burt reported the information was a tool for informing decisions. He
wanted to make that clear so there were not a variety of expectations as to
how the information was used.
NO ACTION REQUIRED
Break from 9:05 to 9:13
4. Fiscal Years 2013 to 2023 Long Range Financial Forecast (Continued
From March 5, 2013)
Lalo Perez, Administrative Services Director wanted to provide Staff with
feedback to the Finance Committee's (Committee) comments at the end of
the prior discussion, and to receive input for discussion with the Council.
The Mayor indicated he wanted the Long Range Financial Forecast (LRFF) to
be an Action Item on the Council Agenda. The first comment concerned tax
revenue associated with hotels currently under construction, and earmarking
those funds as revenue streams for infrastructure expense; He said Staff
could include that in the LRFF. The second comment concerned calculating
the pension savings from the third tier pension benefits. Staff suggested
hiring an actuary firm to assist in calculating those savings because the
alternative scenario contained an approximate $50 million impact between
the years of 2017 and 2023. He remarked that the $50 million impact
should be offset by savings. The third comment requested further
clarification on the CalPERS pension rate estimates included in the base
model. Staff suggested utilizing the actuary firm to validate their application
of the CalPERS estimates. With regard to the fourth comment from the
previous meeting, Staff requested clarification. With regard to the fifth
comment, Staff was comfortable with their estimates for sales and
Documentary Transfer Taxes. If the Committee had concerns, Staff would
note them in documentation to the Council and in the model.
Chair Burt indicated the Committee needed to decide whether to make the
first comment a recommendation to the Council.
MOTION: Vice Mayor Shepherd moved, seconded by Council Member
Schmid to have Staff put the related tax revenue associated with hotels
currently under construction in the Long Range Financial Forecast.
Chair Burt noted the comment also contained a provision to earmark
revenue streams for infrastructure expense.
Vice Mayor Shepherd did not want to earmark revenue for infrastructure
expense.
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Council Member Schmid did not recommend earmarking funds at this time.
Chair Burt wanted to earmark funds for infrastructure. He asked if Staff
needed a Motion.
James Keene, City Manager suggested the Committee move the separate
items.
MOTION RECAPPED: Vice Mayor Shepherd moved, seconded by Council
Member Schmid to include Transient Occupancy Tax for hotels currently
under construction in the Long Range Financial Forecast.
SUBSTITUTE MOTION: Council Member Burt moved to have Council
consider earmarking revenue streams for infrastructure expense.
SUBSTITUTE MOTION FAILED DUE TO LACK OF A SECOND.
Vice Mayor Shepherd did not object to the Committee asking the Council to
hold a policy discussion regarding earmarking funds.
Chair Burt inquired whether the City had other definable new revenue
sources.
Mr. Perez could not recall any new revenue sources. There were some
implied such as the Utility Users Tax (UUT).
Chair Burt stated a change in the Cubberley lease could be a new revenue
source.
Vice Mayor Shepherd reported discussion from the Infrastructure Committee
meeting indicated a bond may not be needed.
Chair Burt suggested the Finance Committee recommend that full Council
consider whether discrete new revenue streams needed to be earmarked for
specific purposes such as infrastructure.
Vice Mayor Shepherd requested Chair Burt make a suggestion that was
separate from the Motion to prevent confusion.
Chair Burt agreed.
MOTION PASSED: 3-0, Berman Absent
MOTION: Council Member Burt moved, seconded by Vice Mayor Shepherd
that the Finance Committee recommend the Council hold a discussion on
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whether discrete new revenue streams be identified for specific purposes,
such as infrastructure use.
Council Member Schmid felt the Motion was a policy change when the
Committee was considering amendments to the LRFF.
Chair Burt explained potential new revenues would have a multi-year impact
on the LRFF.
Council Member Schmid believed defining new revenue sources for
infrastructure was separate from review and approval of the LRFF.
Chair Burt stated budgeting one or two new revenue streams was a part of
the LRFF.
Vice Mayor Shepherd indicated a Committee could hold a broader discussion.
She wanted the Infrastructure Committee to develop new revenue streams;
however, she thought this would be a good conversation for the Council.
MOTION PASSED: 2-1, Schmid no, Berman absent
Chair Burt recalled the next topic was calculation of the pension savings for
third tier employees. Staff wished to hire an actuary. He inquired whether
Staff needed a Motion for Staff to hire an actuary.
Mr. Perez answered no and said hiring an actuary was within the City
Manager's authority.
Vice Mayor Shepherd inquired whether this work was within the scope of
work for Bartel Associates.
Mr. Perez replied no. The previous work was regarding retiree medical.
Vice Mayor Shepherd asked if this work could be added to Bartel Associates'
scope of work for the next cycle.
Mr. Perez reported the City had not engaged Bartel Associates for pension
services. Given the significant impact of Staff estimates, it was beneficial for
an actuarial firm to validate Staff's calculations.
Vice Mayor Shepherd wanted to understand the importance of the
information at the current time.
Mr. Perez felt it was important because Staff wanted to ensure they were
making sound decisions based on sound information and said data was
based on actual demographics; however, some assumptions were based on
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California Public Employees' Retirement System (CalPERS) experience. He
said a pattern could develop in the next five to ten years that would shift
because the City will have savings from new employees moving into the
third tier.
Vice Mayor Shepherd wanted to ensure Staff worked efficiently.
Chair Burt clarified that the actuary would project the number of employees
in the third tier and the point in time that would impact City liabilities.
Mr. Perez reported the actuary would make assumptions regarding
employees' retirement dates and the likelihood of employees being in tier
two, versus being in tier three.
Chair Burt inquired if the impact was many millions of dollars.
Mr. Perez answered yes. The unknown factor was when the impact would
occur.
Chair Burt acknowledged that the actuary could only provide a best
estimate. At the current time Staff did not include any estimate, and it was
a significant change.
Mr. Perez indicated Bartel Associates performed the same analysis for other
agencies.
Council Member Schmid stated the difference between tier two and tier three
was savings; however, CalPERS reform opened the possibility of losses for
the City.
Mr. Perez explained the two percent at age 60 could move to 2.418 percent
at age 63. In tier three, a cap on the maximum pension allowance an
employee could earn was tied to the Social Security limit. The question was
how many employees would go to in tier two.
Chair Burt stated the Committee did not need to take action on the request
to hire an actuary, and continued to the third topic.
Mr. Perez reported Staff was comfortable with their estimates. He said an
actuary could validate those estimates to ensure Staff's calculations were
sound.
Vice Mayor Shepherd said she had no confidence in CalPERS' rate of return.
She hoped the LRFF would include the effect of each 1/4 percent rate
change.
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Chair Burt did not believe this was a point of contention.
Mr. Keene indicated Staff could include a note and some calculations in the
LRFF.
Vice Mayor Shepherd wanted to ensure that was included.
Chair Burt indicated the third topic required no action by the Committee.
With regard to the fourth topic, he was concerned about projecting the prior
anticipated utility increases for the future. While capital expenditures
continued to increase for various utilities, the commodity costs on gas and
electric might not rise at historic rates. Experts in the industry were
reexamining those historic trends and escalations, and suggesting the
escalations may not occur at the same rate. Renewables and non-
renewables were experiencing market changes, which could be new trends.
He requested Staff discuss with Utilities Staff any anticipated trends that
should be factored in.
Mr. Perez indicated Staff would do so.
Council Member Schmid agreed that Staff should review that.
Vice Mayor Shepherd noted Utilities did not provide the majority of
revenues.
Chair Burt inquired whether the Report included a breakdown of revenues
from different streams.
Joe Saccio, Assistant Director of Administrative Services reported the last
LRFF included a compound annual growth of approximately 2.9 percent for
UUT. The historical 20-year compound annual growth was 3.8 percent, and
the prior ten years was 5.3 percent.
Chair Burt suggested the adjustment was included.
Mr. Saccio noted Staff had lowered the projected annual growth. It was
incumbent on Utilities to explain their forecasts in terms of prices of
commodities and capital.
Chair Burt inquired about the percentage of the Budget.
Vice Mayor Shepherd stated the sales tax had been erratic.
Chair Burt recalled the final topic was long-term projections for sales and
Documentary Transfer Taxes. The concern was that the 20-year
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compounded growth was 2.07 percent, the 10-year compounded growth was
one percent, and the forward projection was 3.38 percent for sales tax.
Mr. Saccio explained Staff reviewed the forecast and assumptions. Those
were reasonable growth rates for the next few years. Comparing the four
quarters of calendar year 2012 to the four quarters of calendar year 2011
resulted in a 12.4 percent increase.
Chair Burt felt that information was not relevant in projecting a 10-year
forecast. He requested Staff's rationale for projecting 3.4 percent growth
when the prior growth was only one or two percent.
Mr. Saccio said Staff considered the first couple of years when preparing the
LRFF.
Chair Burt indicated the LRFF did not appear to include a recession.
Mr. Saccio recalled the Committee's prior instructions were to review the
prior 20 years and include all the recessions in those 20 years in order to
determine a rate of growth.
Chair Burt asked how Staff moved from 2.0 percent growth to a projected
3.38 percent growth.
Mr. Perez reported Staff was comfortable with the projected growth for the
next five years. Staff reviewed the final five years, and either made
adjustments or stated the Committee was uncomfortable with Staff's long-
term projections for sales tax.
Council Member Schmid felt the general economic outlook as stated on
pages three and four was optimistic. He thought it would be good to have a
section about persisting economic problems.
Vice Mayor Shepherd inquired whether Staff relied on any new source of
sales tax.
Mr. Saccio responded no and said the Amazon tax would go to the
jurisdictions where warehouses were located.
Vice Mayor Shepherd indicated the Amazon tax would be ZIP code specific,
and was projected to provide $2.5 billion to the State of California.
Mr. Saccio stated the State of California would receive its share of the sales
tax, but the one percent of sales tax for local jurisdictions went to the local
jurisdictions where the Amazon warehouse is located.
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Vice Mayor Shepherd asked if the City would receive funds from the Amazon
sales tax.
Mr. Saccio replied no. Staff relied on sales tax from Hewlett Packard;
however, that had not occurred.
Vice Mayor Shepherd inquired whether Staff could resolve the higher
projection for sales tax.
Mr. Perez stated Staff would review the second of the five years of the LRFF
and would provide more detail. If Staff did not change their opinion, they
needed to provide an explanation.
Vice Mayor Shepherd asked if Staff preferred to present the LRFF to the
Council or if they preferred returning to the Committee.
Mr. Perez suggested that was preferable in light of Budget hearings
beginning in May.
Mr. Saccio noted that the major taxes over the past five years had a
cumulative growth rate of 4.1 percent. The forecast contained 4.2 percent
growth. Every year some taxes did not meet projections and others
exceeded projections. In totality, projections were close to the trend in
historical growth.
Chair Burt stated the LRFF should be as close to correct as possible. The
Amazon issue raised the question of how much Staff considered trends of
internet sales and their impact on 10 and 20-year trend. He noted that
changes in tax law could change that.
FUTURE MEETINGS AND AGENDAS
Lalo Perez, Administrative Services Director noted there was not a meeting
on April 2, 2013. The Agenda for the meeting on April 16, 2013 included
Recommendations for Community Development Block Grants (CDBG), Golf
Course Reconfiguration, the Wastewater Collection Utility Financial
Projection, the Electric Utility Financial Projection, the Gas Utility Financial
Projection, Fiber Optic Fund Financial Projection, and the Annual Rate
Schedule Increase for Storm Drains. He noted that the Finance Committee
should consider beginning its meeting at 6:00 P.M. to cover all items.
Chair Burt stated the April 16, 2013 meeting would be a Special Meeting
beginning at 6:00 P.M.
Vice Mayor Shepherd suggested sending a letter to State Representatives
explaining there was no Amazon sales tax that affected Palo Alto.
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Mr. Perez said he would refer that to the City Manager's Office because there
was a concern that Community Development Block Grant funding could be
eliminated.
4/2/2013 - canceled
4/16/2013
ADJOURNMENT: Meeting adjourned at 10:01 P.M.