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HomeMy WebLinkAboutStaff Report 4135 City of Palo Alto (ID # 4135) Infrastructure Committee Staff Report Report Type: Meeting Date: 10/1/2013 City of Palo Alto Page 1 Summary Title: Infrastructure Finance Measure Title: Continue Discussion from September 3, 2013 Infrastructure Committee Meeting and Make Recommendations to the City Council on Next Steps in Considering a Potential Infrastructure Finance Measure From: City Manager Lead Department: City Manager Recommendation Staff recommends that the Infrastructure Committee continue discussion from the September 3, 2013 Infrastructure Committee meeting and make recommendations to the City Council on next steps in considering a potential infrastructure finance measure. Executive Summary At the September 3, 2013 Infrastructure Committee meeting, the Committee directed staff to return to the Committee with a draft plan, staff recommendation and options for a potential 2014 ballot measure, including using a Mello-Roos District (MR District) to fund parking garages. The Committee also encouraged staff to provide input on next steps, where appropriate, in light of comments received from Committee members. Staff evaluated further the use of a MR District as a solution to building additional parking garages and has provided a plan for proceeding should the Committee and Council elect to continue further study on formation of a MR District. There are a number of factors that the Committee should consider in determining whether to move forward at this time. Based on experience in other cities, the City’s research consultant does not believe that a measure to fund parking garages that requires two-thirds support from a residential taxpayer base is likely to be approved. While that may be the experience in other cities, register voters in Palo Alto may understand the particular parking issues in Palo Alto and provide a different outcome. The Committee also asked staff to evaluate potential public/private partnerships to build parking garages. Staff recommends proceeding with a request for proposals (RFP) to solicit public-private partnerships to build mixed-used parking on downtown, city-owned lots. City of Palo Alto Page 2 Staff recommends that the Committee consider whether to proceed with further opinion research on one or more of the following potential finance measures: 1. MR District to build parking garages. 2. Transient Occupancy Tax (TOT) increase to fund infrastructure needs. 3. Bundled general bond transportation measure that combines multiple projects. 4. Bundled public safety bond measure that combines the fire stations and public safety building. Concurrent to polling on any priority measures, the City’s communications consultant, recommends that the City reach out to key stakeholders for input and to help build consensus around a ballot measure proposal. For example, if the Council is considering increasing the TOT, the City should consult with Palo Alto hotel owners and managers. If the Council is considering a bundled transportation or public safety measure, the City should consult with key transportation-related or public safety-related stakeholders. Background On June 6, 2013, the City’s Infrastructure Committee reviewed the preliminary findings of a baseline survey assessing the community’s opinions about a potential finance measure to fund infrastructure needs. On August 6, 2013 and September 3, 2013, the Committee continued its discussions and assessment of a potential finance measure to fund infrastructure needs and recommendations that the Committee may make to the full Council about: 1) areas of further study for opinion research, 2) uses of current or potential new revenue sources to fund infrastructure projects, or 3) other next steps. At the September 3, 2013 Infrastructure Committee meeting, the Committee directed staff to return to the Committee with a draft plan, staff recommendation and options for a potential 2014 ballot measure, including using a MR District to fund parking garages. The Committee also encouraged staff to provide input on next steps, where appropriate, in light of comments received from Committee members. The minutes for the September 3 Infrastructure Committee meeting are included as Attachment E. Discussion Based on the baseline survey results, consultant recommendations, and Committee discussion and input over the last several meetings, staff recommends that the Committee consider whether to proceed with further opinion research on one or more of the following potential finance measures: 1. MR District to build parking garages. 2. Transient Occupancy Tax (TOT) increase to fund infrastructure needs. 3. Bundled general bond transportation measure that combines multiple projects. 4. Bundled public safety bond measure that combines the fire stations and public safety building. City of Palo Alto Page 3 An overview of each measure is described below along with an outline of next steps. At the September 3, 2013 Infrastructure Committee meeting, staff reviewed with the Committee a sample project funding scenario that included options for using a TOT increase or General Obligation bonds, as well as MR Districts or assessment districts, to provide funding for infrastructure projects. Based on feedback from the Committee and consultant recommendations, staff updated the project funding scenario information to provide four distinct funding scenarios (Scenarios #1 through #4), that are provided in Attachment A. Each of the four scenarios utilizes one infrastructure revenue measure – TOT increase, MR District, bundled transportation GO bond, or bundled public safety GO bond – to fund certain projects, with funding for other high priority projects provided by existing or projected revenue sources. All four of the scenarios would use an identical approach for the remaining projects (Surface Catch-up, Buildings Catch-up, Animal Services Center, Playing Fields, History Museum, and Cubberley Deferred Maintenance), as outlined in Attachment A. The following changes to project costs and available revenue sources are also incorporated in the funding scenarios: 1. The estimated and unaudited general fund surplus for FY 2013 is $8.5 million, and based on the Council approved reserve policy the funds are expected to be transferred to the Infrastructure Reserve. These funds are designated in the scenarios as “FY 2013 surplus.” 2. The Downtown Parking Garage estimate of $21 million has been reduced to $18.4 million. This change is due to the development of a new estimate of 303 additional spaces that could be built in garages on existing surface lots D (Hamilton Avenue & Waverly Street and P (High Street between University Avenue and Hamilton Avenue), as further described below. Other downtown lots can be considered for garage construction as well, but further funding would need to be identified. 3. The California Avenue Parking Garage estimate of $12 million has been increased to $16.5 million. This change is due to the development of a new estimate for a 391 space parking garage on Lot 8 located on Sherman Avenue between El Camino Real and Ash Street; this lot would provide an increase of 272 parking spaces over the existing 119 space surface lot as further described below. The City’s opinion research and communications consultants’ (Fairbank, Maslin, Maullin, and Metz and TBWB) recommendations on next steps are summarized below and included in Attachment B. 1. Set aside further study on a MR District. 2. Proceed with a finance measure survey with a primary focus on the TOT, and sales tax as a secondary concern. The interaction of a UUT update on the same ballot may also be measured. City of Palo Alto Page 4 3. Proceed with a bundled transportation bond measure survey. 4. Sequence further study as needed on a bundled public safety bond measure in 2014 as related funding issues are more certain. Formation of a Mello-Roos District to Build Parking Garages At the September 3, 2013 Infrastructure Committee meeting, staff outlined the basic requirements of a MR District and how it could be used to fund new parking garages. The Committee requested additional information on potential district boundaries, the number of new garages, and the potential financial impact on property owners. Before providing a preliminary and conceptual outline of a district, some of the key requirements of a MR District bear repeating: 1. If there are fewer than 12 registered voters within the district then election involves a landowner vote; if there are 12 or more registered voters in district, then election involves a registered voter election. Approval requirement is two-thirds (2/3) of voters 2. A MR District requires a “reasonable” basis for its special tax. State code defines “reasonable” as “based on a benefit received by parcels of real property, the cost of making facilities or authorized services available to each parcel, or some other reasonable basis as determined by the legislative body." 3. The special tax is levied pursuant to a rate and method of apportionment (called the "RMA" or "tax formula"), which can assign tax rates on a variety of criteria or one or more of the following factors:  Land use: the RMA could assign different tax rates to single family residential, multifamily residential, commercial, retail, etc.  Intensity of land use: the RMA could assign different tax rates based on square footage.  Proximity to a facility: the RMA could establish tax zones whereby those properties closest to the facility would pay more.  Expected burden on a garage: the RMA could assign a tax rate based on the number of car trips expected at different properties or even sales transactions. Requirements 2 and 3 above have not been fully explored and vetted. If the Committee and Council decide to move forward with a MR District, staff would hire a consultant and outside legal counsel to further evaluate the MR requirements and advise the Council on potential measures that meet these conditions. To assist the Committee, staff has delineated two potential districts, estimated costs for new garages, and developed a strictly hypothetical method of apportionment. These are provided for illustration purposes only. All assumptions and financial impacts illustrated below will change if a MR District proposal moves forward and information is refined. Again, neither a “reasonable” basis nor a final “method of apportionment” is determined in this report. City of Palo Alto Page 5 The following illustration is for building two garages in the downtown business district at Lot D (Hamilton Avenue & Waverly Street) and Lot P (High Street between University Avenue and Hamilton Avenue). Each of these sites is currently being studied along with Lots E & G (Gilman Street) and each represent potential garage sites either located in the high-demand parking areas of the downtown (Lot P) or centrally located in the Downtown (Lot D or E/G). Garages that could be built on surface lots D and P would yield 303 incremental or new spaces. The cost of both garages is estimated at $18.4 million. The rough boundaries of a potential district are El Camino to slightly east of Middlefield and from San Francisquito Creek to Melville/Embarcadero Road. Attachment C shows the hypothetical boundaries. Within this area there are 2,798 parcels which include 900 estimated commercial properties and 1,898 residential parcels. Based on a 30 year amortization period and an interest cost of 5.7 percent (tax exempt), the annual debt service for these garages is around $1.3 million. The table below shows a hypothetical method of apportionment that may or may not meet the standard outlined in requirement three above. Three scenarios are assumed whereby commercial properties bear increasingly higher costs based upon an assumed intensity of use of the garages. While residential properties would benefit from new downtown garages in that cars would be removed from surrounding neighborhoods, the assumption here is that businesses generating rising trips by employees and visitors are increasingly responsible for the use and cost for new garages. Columns A through C show rising “intensity of use” (from 5 times to 15 times higher use) and a consequent rising share of debt service allocated to commercial properties compared to residential properties. Commercial and Residential Property Share of Annual Debt Service Per Parcel for Downtown Garages Column A Column B Column C Number of Parcels 5X Scenario 10X Scenario 15X Scenario Residential 1,898 $116 per parcel $63 per parcel $43 per parcel Commercial 900 $1,221 per parcel $1,311 per parcel $1,374 per parcel This example shows that if commercial properties were found to have 15 times the responsibility for garage construction costs compared to residential landowners, they would pay $1,374 annually and residential parcels would pay $43. At 10 times the “intensity of use” residents would pay $63 annually versus $1,311 for commercial properties. Let’s suppose the City wishes to propose a citywide MR District that would support the building of two garages downtown and one in the California Avenue Business District. Assuming that City of Palo Alto Page 6 272 spaces could be added incrementally in the Cal Ave area (Lot 8 located on Sherman Avenue between El Camino Real and Ash Street), the cost to construct a garage is estimated at $16.5 million. Amortized over 30 years at an interest cost of 5.7 percent, the annual debt service for this garage is around $1.2 million. The boundaries assumed are current City boundaries excluding the Stanford Shopping Center and open space parcels. The number of parcels used in this analysis is 17,384 residential and 1,811 commercial. This excludes planned community and public facility parcels. Commercial and Residential Property Share of Annual Debt Service Per Parcel for Downtown and California Avenue Garages Column A Column B Column C Number of Parcels 5X Scenario 10X Scenario 15X Scenario Residential 17,384 $24 per parcel $13 per parcel $9 per parcel Commercial 1,811 $1,152 per parcel $1,256 per parcel $1,296 per parcel Using the same “intensity of use” assumption, this citywide example shows that if commercial properties were found to have 15 times the responsibility for garage construction costs compared to residential landowners, they would pay $1,296 annually and residential parcels would pay $9. At 10 times the “intensity of use” residents would pay $13 annually versus $1,256 for commercial properties. Each of the examples above is to provide the Committee with cost estimates for building garages, an understanding of the MR District tax allocation, and a range of financial impacts on parcels within the hypothetical districts. The information provided is meant to provide a sense of the magnitude of potential impacts on property owners given certain boundaries and assumptions. Further refinement of costs, parcel information, district boundaries, and an allocation methodology is necessary. As we move toward a citywide boundary with parcels distant from the locales of garages, policy and allocation questions will arise. Finally, there are variables e.g., interest rates and construction costs that will affect impacts cited in this report. Although staff raised the idea of investigating a MR District, the City’s research and communications consultants (FM3 and TBWB) have advised no matter how the MR District boundaries are drawn that a measure to fund parking garages that requires two-thirds support from a residential taxpayer base is not likely to be approved. There are a number of other factors for the Council to consider that suggest not moving forward with a MR District at this time. The factors are: City of Palo Alto Page 7 1. Parking garages received low ratings in the recent infrastructure survey: 44 percent for Downtown and 46 percent for California Avenue. 2. In light of an emerging and potentially widespread Residential Parking Program, will residential voters support even a nominal tax in the examples above ranging from $9 to $116 per year? 3. The assessed cost is high relative to the number of additional parking spaces created to relieve parking congestion. 4. As with current assessment districts, there is no guarantee to commercial property owners that they will have exclusive use of a space and this may generate significant opposition. The Infrastructure Committee directed staff to research a number of additional issues. These include: 1. How would a MR District be structured in a ballot measure? 2. What are the election requirements? 3. How long would it take to bring a vote to the public? 4. Are there any conflicts with current assessment districts; are there exemptions; conflicts with existing codes? 5. Are there potential public/private partnerships to build garages or are there possibilities of long-term leasing arrangements? 6. Describe an outreach plan and schedule Staff was asked to evaluate the feasibility of potential public/private partnerships to build garages or other possibilities of long-term leasing arrangements. Staff believes that there is a high likelihood of interest and recommends proceeding with a request for proposals (RFP) to solicit public-private partnerships to build mixed-used parking projects on downtown city owned lots. The Planning and Community Environment Department is currently studying the comparative advantages of building parking structures over certain downtown surface parking lots. Staff recommends proceeding directly to Council at the conclusion of the study along with the scope of work for the RFP. In the interest of brevity, the staff responses to the remaining questions are included in Attachment D. In summary, pursuing a MR district may be feasible, but will likely lead to opposition. This financial tool must be viewed in the context of bringing forward other taxes, such as a TOT increase, or a bundled transportation or public safety bond measure for voter approval, as well as a more comprehensive look at area and citywide traffic issues. The City is currently exploring the development of Residential Permit Parking (RPP) Districts around the City including Downtown. The implementation of a Downtown RPP Program may prioritize the need to build additional parking supply for Downtown customers, visitors and employees. Within the California Avenue Business District limited permit supply for employees has resulted in delays to parking permit distribution, so an additional garage in that district should also be considered if initiatives to help fund parking garage construction move forward. City of Palo Alto Page 8 Building additional parking supply, however, may increase citywide traffic concerns as it promotes the use of single-occupant vehicle trips instead of alternative transportation modes such as public/private transit, car sharing/ride sharing, or bicycling. Any parking garage construction should include considerations for a citywide Transportation Management Authority (TMA) to help reduce single-occupant vehicle trip use and encourage private sector participation in reducing vehicle trips while supporting the well-being of employees and the community. Transient Occupancy Tax Data from the baseline survey on infrastructure projects and funding mechanisms indicates a potential to pass a TOT to fund a variety of general infrastructure needs, especially those needs related to public safety and transportation. Such a measure could be structured as a general tax requiring simple majority approval from voters or as a special tax with funds earmarked for specific purposes and would require two-thirds voter approval. Only a small portion of the initial survey was devoted to a potential TOT measure. To provide a definitive recommendation as to the viability of this option, FM3 recommends a follow-up survey to test this specific funding mechanism and how to best package a measure for success. Attachment B provides additional information on the scope and schedule of the recommended survey. The survey would sample 600 likely voters, with a margin of sampling error of +/-4.0 percent. FM3 and TBWB also recommend that the survey further investigate the sales tax as an alternative funding mechanism that would generate significant revenue. Given the City’s ongoing need to seek voter approval for an update to its existing UUT ordinance, this survey may also provide an opportunity to assess the interaction between a TOT and UUT measure, determine whether it would be advisable to place these measures on the same ballot and evaluate the basic viability of a UUT update measure. If further study on a potential TOT increase is pursued, concurrent to polling on the measure, TBWB recommends commencing targeted outreach to Palo Alto hotel owners and managers to explain the City's planning for a potential TOT increase. This will allow the City to identify questions or concerns and collect feedback from impacted businesses. Similar outreach to other business leaders who might be impacted indirectly by this measure should be conducted during the same timeframe. Bundled Transportation Measure The City’s baseline survey tested the level of public support for five different potential bond or tax measures that represent combinations of individual projects, with the wording of each potential measure structured as it might appear in an actual ballot measure – minus a funding mechanism and dollar figure. Four measures were found to have support levels greater than two-thirds. City of Palo Alto Page 9 As was recommended to the Infrastructure Committee as part of the presentation of the baseline infrastructure survey results, FM3 and TBWB believe that the City has the potential to pass a bond measure to fund a portion of the identified funding needs if the projects included in a measure were bundled to focus on one of the two high priority issues of concern to voters: public safety and transportation. Accordingly, one approach to funding garages to relieve parking, traffic and related transportation concerns, would be to include these projects as part of a larger bundled transportation bond measure, which would require two-thirds approval by voters. While parking garages did not rank among the top priority projects in the voter survey, they could be packaged with other priority projects and presented as part of a comprehensive solution to Palo Alto’s transportation, traffic, and parking needs. To further evaluate the feasibility of a transportation bond measure, FM3 recommends a follow up survey devoted entirely to this measure. In this survey FM3 would test potential ballot language and project descriptions reflecting the array of Palo Alto’s transportation-related needs, sensitivity to specific bond amounts and tax rates, and the impact of supporting and opposing statements and assess the optimal timing of a transportation bond measure. As a starting point for structuring this survey, FM3 would rely on key findings from the prior survey such as voters’ expressed willingness to pay (which seems to peak at $125 per year for a measure requiring two-thirds support) and the bundled proposal that elicited support from 74% of voters (A Traffic Congestion Relief and Safe Streets, Sidewalks and Trails Measure to fund repair and improvements to streets, sidewalks, and nine miles off-road trails. This measure would provide safe routes to school for children, improve accessibility for people with disabilities, provide a network of safe bike paths and pedestrian walkways, increase the availability of parking, and upgrade traffic signals and intersections to reduce congestion and improve safety). Similar to what was described previously for evaluating a potential TOT measure, FM3 would recommend conducting a ballot measure feasibility survey among 600 likely voters, which is associated with a margin of sampling error of +/-4.0 percent. The findings of the survey will be used to inform a recommendation to the City regarding the viability of a transportation focused bond measure, recommended election dates, total bond amount and tax rates. If the City continues to be interested in pursuing a transportation bond measure, TBWB recommends building a coalition of key transportation-related constituencies and stakeholders to participate in outreach and help build consensus around a ballot measure proposal. TBWB will help identify these interested parties, organize a process to enable their participation and provide messaging and materials to allow stakeholders to communicate within their respective networks of influence. Bundled Public Safety Measure As noted previously, the baseline infrastructure survey indicates that a bundled bond measure focused on public safety needs, while polling lower than a bundled transportation measure at 68% support, also appears to be potentially viable. Accordingly, if the Infrastructure Committee and City Council wish to proceed with further study on funding public safety infrastructure City of Palo Alto Page 10 needs, the survey and outreach approaches outlined here could be applied to refine a bundled public safety measure for the ballot. This may require looking at a 2016 election or beyond for voter approved funding to allow the City to acquire land and conduct the necessary environmental review for a new public safety building. Timeline Given the current schedule, in order to provide the City with definitive recommendations as to the viability of a funding measure in 2014, it is timely for the Committee and Council to prioritize any areas for study and to initiate ballot measure polling in the immediate near term. The schedule for conducting additional surveys is included as Attachment B. Attachments:  Attachment A. Funding Scenarios (PDF)  Attachment B. FM3 and TBWB Recommendations (PDF)  Attachment C. Mello-Roos Hypothetical Boundaries (PDF)  Attachment D. Mello-Roos Response to Committee Questions (PDF)  Attachment E. September 3, 2013 Infrastructure Committee Minutes (PDF) Note: Funding from Mello Roos district, GO bonds, and COPs is for construction only and does not include financing costs WŽƚĞŶƚŝĂů/ŶĨƌĂƐƚƌƵĐƚƵƌĞWƌŽũĞĐƚ&ƵŶĚŝŶŐ^ĐĞŶĂƌŝŽηϭ (2% or 3% TOT increase) Polling Support Project Cost Funding Source Funding Amount 52%Public Safety Building and land 57 City Hall Police area lease - COPs 19.6 52%Charleston/Arastradero 7.5 TOT increase 3% - COPs 46.2 61%Bike Bridge 1.7 New hotels - COPs 33.6 na Byxbee Park 3.6 Stanford Funds 33.4 72%Fire Stations (2)14.2 Infrastructure Reserve 8 67%Sidewalks additional spending 6 FY 2013 surplus 8.5 65%Bike/Pedestrian Plan 16.25 Sum:149.3 67%Parks Catch-up 8.9 46%Cal Avenue Garage 16.5 44%Downtown Parking Garages (2)18.4 Sum:150.05 OR Funding Source Funding Amount City Hall Police area lease - COPs 19.6 TOT increase 2% - COPs 30.8 New hotels - COPs 33.6 Stanford Funds 33.4 Infrastructure Reserve 8 FY 2013 surplus 8.5 5 years annual surplus ($1M per year)5 Digital Readerboard - COPs 11.2 Sum:150.1 WŽƚĞŶƚŝĂů/ŶĨƌĂƐƚƌƵĐƚƵƌĞWƌŽũĞĐƚ&ƵŶĚŝŶŐ^ĐĞŶĂƌŝŽηϮ Mello Roos Parking Garage Measure Polling Support Bundled Projects Cost Funding Source Funding Amount 46%Cal. Avenue Parking Garage 16.5 44%Downtown Parking Garages (2)18.4 Sum:34.9 Polling Support Project Cost Funding Source Funding Amount 52%Public Safety Building and land 57 City Hall Police area lease - COPs 19.6 72%Fire Stations (2)14.2 New hotels - COPs 33.6 67%Sidewalks additional spending 6 Stanford Funds 33.4 na Byxbee Park 3.6 Infrastructure Reserve 8 67%Parks Catch-up 8.9 FY 2013 surplus 8.5 65%Bike/Pedestrian Plan 16.25 Digital Readerboard - COPs 11.2 61%Bike Bridge 1.7 Sum:114.3 52%Charleston/Arastradero 7.5 Sum:115.15 Mello Roos districts (citywide or localized)34.9 Attachment A. Potential Funding Scenarios Note: Funding from Mello Roos district, GO bonds, and COPs is for construction only and does not include financing costs WŽƚĞŶƚŝĂů/ŶĨƌĂƐƚƌƵĐƚƵƌĞWƌŽũĞĐƚ&ƵŶĚŝŶŐ^ĐĞŶĂƌŝŽηϯ Bundled Transportation GO Bond Measure Polling Support Bundled Projects Cost Funding Source Funding Amount Streets additional spending 8 GO Bonds 74.35 Sidewalks additional spending 6 Bike/Pedestrian Plan 16.25 Bike Bridge 1.7 Charleston/Arastradero 7.5 Cal. Avenue Parking Garage 16.5 Downtown Parking Garages (2)18.4 Sum:74.35 Polling Support Project Cost Funding Source Funding Amount 72%Fire Stations (2)14.2 City Hall Police area lease - COPs 19.6 52%Public Safety Building and land 57 Stanford Funds 33.4 na Byxbee Park 3.6 Infrastructure Reserve 8 67%Parks Catch-up 8.9 FY 2013 surplus 8.5 5 years new hotels ($2.4M per year)12 Sum:83.7 Sum:81.5 WŽƚĞŶƚŝĂů/ŶĨƌĂƐƚƌƵĐƚƵƌĞWƌŽũĞĐƚ&ƵŶĚŝŶŐ^ĐĞŶĂƌŝŽηϰ Bundled Public Safety GO Bond Measure Polling Support Bundled Projects Cost Funding Source Funding Amount Public Safety Building and land 57 GO Bonds 71.2 Fire Stations (2)14.2 Sum:71.2 Polling Support Project Cost Funding Source Funding Amount 67%Sidewalks additional spending 6 City Hall Police area lease - COPs 19.6 na Byxbee Park 3.6 Stanford Funds 33.4 67%Parks Catch-up 8.9 Infrastructure Reserve 8 65%Bike/Pedestrian Plan 16.25 FY 2013 surplus 8.5 61%Bike Bridge 1.7 4 years new hotels 9.6 52%Charleston/Arastradero 7.5 Sum:79.1 46%Cal. Avenue Parking Garage 16.5 44%Downtown Parking Garages (2)18.4 Sum:78.85 74% 68% Attachment A. Potential Funding Scenarios &ƵŶĚŝŶŐƉƉƌŽĂĐŚ&ŽƌZĞŵĂŝŶŝŶŐWƌŽũĞĐƚƐ Polling Support Project Cost Funding Source Funding Amount na Surface Catch-up 3.4 na Buildings Catch-up 4.2 Sum:7.6 Polling Support Project Cost Funding Source Funding Amount 47%Animal Services Center 6.9 46%Playing Fields at Golf (3)6 38%History Museum 3 na Cubberley Deferred Maintenance 6.9 Sum:22.8 Fund gradually through CIP planning process utilizing CIP funds, ongoing surpluses, and development impact fees Defer planning for potential funding or remove from project list Attachment A. Potential Funding Scenarios         TO:   City of Palo Alto  FROM:  Charles Heath and Joy Tatarka, TBWB Strategies      Dave Metz and Shakari Byerly, Fairbank, Maslin, Maullin, Metz and Associates  RE:   Recommendations Regarding Potential Infrastructure Funding Measures  DATE:   September 24, 2013  ___________________________________________________________________________________      TBWB Strategies and FM3 Research have reviewed polling conducted to date and information  provided by city staff related to the development of a Transient Occupancy Tax (TOT) to fund general  infrastructure needs and a potential Mello Roos District (MRD) or general obligation bond to fund  parking garages in the Downtown and California Avenue areas and related transportation needs.   Following is our collective assessment of the potential feasibility of these measures, alternatives for  you to consider and recommended next steps.       Transient Occupancy Tax  Data from the baseline survey on infrastructure projects and funding mechanisms indicates a  potential to pass a TOT to fund a variety of general infrastructure needs, especially those needs  related to public safety and transportation.  Such a measure could be structured as a general tax  requiring simple majority approval from voters or as a special tax with funds earmarked for specific  purposes and would require two‐thirds voter approval.      Only a small portion of the initial survey was devoted to this a potential TOT measure.  To provide a  definitive recommendation as to the viability of this option, FM3 recommends a follow‐up survey to  test this specific funding mechanism and how to best package a measure for success.  While FM3  continues to believe that focus groups would be helpful in understanding how to develop messaging  for a measure that includes funding for a public safety building and requires two‐thirds voter support,  we believe the TOT measure should first be refined by a standard ballot measure feasibility survey.      Similar to the initial baseline survey, FM3 envisions conducting a ballot measure feasibility survey  among 600 likely voters, which is associated with a margin of sampling error of +/‐4.0 percent.  The  central objective of the research will be to gauge voter attitudes toward a TOT increase of between 2  and 3 percent to fund deferred maintenance needs related to infrastructure priorities, and assess the  optimal timing of an election.      FM3 would develop the survey instrument in collaboration with the City and TBWB.  The research will  explore some of the following topics:  Attachment B 2    Gauging levels of support in response to a draft 75‐word ballot measure summary of a  potential measure;   Assessing public attitudes toward funding priorities that might be financed through the  measure;   Determining if the measure should be structured as a general tax or special tax;   Identifying project priorities and optimal project descriptions;   Assessing public sensitivity to the TOT tax rate;   Measuring sensitivity of support in the face of likely arguments from supporters and  opponents, including an argument regarding the fact that an increase in the local TOT would  bring the rate to among the highest in the state/region; and   Determining the demographic profile of the respondents to provide the necessary categories  for cross‐tabulation of the data, and to ensure that the respondents are representative of the  pool of likely voters in Palo Alto;   Provide a recommendation to the City regarding the viability of the TOT as a financing  mechanism and the specific components of a measure that will maximize the likelihood of  voter approval.    Given the City’s ongoing need to seek voter approval for an update to its existing UUT ordinance, this  survey would provide an opportunity to assess the interaction between a TOT and UUT measure,  whether it would be advisable to place these measures on the same ballot and evaluate the basic  viability of a UUT update measure.    As has been noted as part of past recommendations to the Infrastructure Committee, FM3 and TBWB  were surprised by the relatively low levels of support measured in the baseline survey for a sales tax  measure.  We suspect that the low levels of support may be have resulted from the specific language  tested or other contextual survey issues.  If deemed a priority, this survey would provide an  opportunity to further investigate the sales tax as an alternative funding mechanism that would  generate significant revenue.    FM3 is prepared to begin the proposed research immediately, at the City’s request. A proposed  timeline for conducting the research appears below:    Week of October 28, 2013   Authorization to proceed   Evaluate proposed methodology and finalize research plan   Preparation of first draft of survey questionnaire    Week of November 4, 2013   Submit draft questionnaire to City for review    Weeks of November 11‐November 18   Finalize survey questionnaire   Obtain client approval of final survey instrument   Draw sample  Attachment B 3   November 18‐22, 2013    Administer telephone survey   Generate topline and cross tabulation of survey results    November 23‐December 5, 2013   Develop presentation and reporting materials   Schedule presentation of final results to key stakeholders    Concurrent to polling on this potential TOT measure, TBWB recommends commencing targeted  outreach to Palo Alto hotel owners and managers to explain the City's planning for a potential TOT.   This will allow the City to identify questions or concerns and collect feedback from impacted  businesses. Similar outreach to other business leaders who might be impacted indirectly by this  measure should be conducted during the same timeframe.  This outreach would be conducted during  the November and early December timeframe in order to provide a summary of feedback along with  the survey results.  TBWB will work with the City to develop an outreach target list, informational  materials to facilitate these meetings and schedule for conducting the meetings and synthesizing  feedback.       It should be noted by the Committee that if this measure is designed as a general tax requiring only  simple majority voter approval, it must go to the ballot at the same time as council member elections.   The exception would be if the City declared a fiscal emergency with a unanimous vote of the Council.  Thus, if the TOT would be designed as a general tax, TBWB will develop a detailed timeline identifying  specific planning steps to prepare for the November 2014 municipal election date.  Given the limited  election date flexibility for this type of measure, the City might evaluate other election date options  (e.g. June 2014, June 2016, November 2016 or special election dates) for the other potential funding  measures under consideration.       Funding for Parking Garages and Related Transportation Needs  A review of the data from FM3’s recent survey on infrastructure needs and funding options indicates  voter support for a measure to fund parking garages in the Downtown and California Avenue areas  would fall substantially short of the two‐thirds support that would be required for approval. When  the analysis is limited to voters within the geographic areas in or near the Downtown and California  Avenue areas, support still falls well short of 66.7%.  If the boundaries were drawn broadly to spread  the cost and minimize the required tax rate, we do not believe that the project ranks as high enough  a priority for voters to generate two‐thirds support.  If the Committee is interested in a broad based  measure with a palatable tax rate to fund these needs, we believe that a citywide bond measure that  packages parking garages along with more popular transportation projects (e.g. road and sidewalk  improvements, safe routes to school, bike and pedestrian improvements, traffic relief) would be a  more viable approach.    In short, no matter how the MRD boundaries are drawn, we do not believe that a measure to fund  parking garages that requires two‐thirds support from a residential taxpayer base is likely to be  approved.  Accordingly, we offer the following alternatives and recommended next steps for securing  additional funding for parking garages:   Attachment B 4   1. MRD Focused on Non‐Residential Properties  An alternative approach would be to draw MRD boundaries tightly ringing the Downtown and  California Avenue commercial corridors to exclude all but fewer than 12 registered voters  residing within the boundaries.  Under this scenario, the MRD measure election would be  decided by a vote of property owners within the boundaries.  The City would need to develop  a convincing business case to present to the impacted property owners and conduct extensive  individual outreach among this group to gauge support.  The proposed areas are too small for  traditional public opinion research techniques and therefore would not provide reliable  results.    If the City would like to evaluate the potential feasibility of a property owner election, TBWB  will use voter mapping applications to develop possible boundary options that include fewer  than 12 registered voters and compare these boundaries against property ownership data to  develop an outreach target list.  After an analysis of how much each of these property owners  would have to pay in order to fund the projects, we would develop informational materials  and an outreach plan to measure the interest and support among the property owners.    2. Transportation Bond Measure  As was recommended to the Infrastructure Committee as part of the presentation of the  baseline infrastructure survey results, we believe that the City has the potential to pass a  bond measure to fund a portion of the identified funding needs if the projects included in a  measure were bundled to focus on one of the two high priority issues of concern to voters:  public safety and transportation.  Accordingly, one approach to funding garages to relieve  parking, traffic and related transportation concerns, would be to include these projects as part  of a larger bundled transportation bond measure, which would require two‐thirds approval by  voters.  While parking garages did not rank among the top priority projects in the voter  survey, we believe that they could be packaged with other priority projects and presented as a  comprehensive solution to Palo Alto’s transportation, traffic and parking needs.        The initial survey touched on a wide array of issues and was designed to narrow the scope of  options under consideration.  It was not designed to definitively determine the feasibility of a  single ballot measure.  To further evaluate the feasibility of a transportation bond measure,  we recommend a follow up survey devoted entirely to this measure.  In this survey FM3 would  test potential ballot language, project descriptions reflecting the array of Palo Alto’s  transportation‐related needs, sensitivity to specific bond amounts and tax rates, the impact of  supporting and opposing statements and assess the optimal timing of a transportation bond  measure.  As a starting point for structuring this survey, we would rely on key findings from  the prior survey such as voters’ expressed willingness to pay (which seems to peak at $125 per  year for a measure requiring two‐thirds support) and the bundled proposal that elicited  support from 70% of voters (A Traffic Congestion Relief and Safe Streets, Sidewalks and Trails  Measure to fund repair and improvements to streets, sidewalks, and nine miles off‐road trails.   This measure would provide safe routes to school for children, improve accessibility for people  with disabilities, provide a network of safe bike paths and pedestrian walkways, increase the  availability of parking, and upgrade traffic signals and intersections to reduce congestion and  improve safety).  Attachment B 5   Similar to what was described previously for evaluating a potential TOT measure, FM3 would  recommend conducting a ballot measure feasibility survey among 600 likely voters, which is  associated with a margin of sampling error of +/‐4.0 percent. This survey could be conducted  in lieu of the TOT survey described previously and on the same timeline.  Or this survey could  be conducted subsequently.  The findings of the survey will be used to inform a  recommendation to the City regarding the viability of a transportation focused bond measure,  recommended election dates, total bond amount and tax rates.  In order to provide the City  with definitive recommendations as to the viability of a funding measure in 2014, we  recommend testing the TOT or a bundled transportation measure, but not both at the same  time.  Testing both measures in a single poll will limit the depth into which support for either  measure can be investigated.     If the City continues to be interested in pursuing a transportation bond measure, TBWB  recommends building a coalition of key transportation‐related constituencies and  stakeholders to participate in outreach and help build consensus around a ballot measure  proposal.  TBWB will help identify these interested parties, organize a process to enable their  participation and provide messaging and materials to allow stakeholders to communicate  within their respective networks of influence.  TBWB and FM3 would appreciate guidance  from the Committee as to which of the two measures is a higher priority in order to refine a  research strategy and timeline.    As noted previously, the baseline infrastructure survey indicates that a bundled bond measure  focus on public safety needs appears just as potentially viable as a bundled transportation  measure.  The survey and outreach approaches outlined here for a bundled transportation  measure could be applied to refine a bundled public safety measure for the ballot.  However,  the uncertainty surrounding the proposed public‐private partnership to fund a public safety  facility makes this a difficult option to research at this time.   Accordingly, if the Infrastructure  Committee and/or City Council determine that funding public safety infrastructure needs is a  higher policy priority than transportation, we recommend conducting a survey on this topic  once the outcome of the public‐private partnership and related funding issues are more  certain.  We acknowledge that this may require looking at a 2016 election or beyond for voter  approved funding for public safety infrastructure.    We do not feel that the baseline survey data indicates sufficient voter support to justify  further research on a general infrastructure bond measure or any other measure requiring  two‐thirds support unless it is focused on transportation or public safety needs.        Attachment B El Camino Park El Camino Park Kellogg Park Scott Park Timothy Hopkins Park Lot A Lot D Lot G Lot H Lot F Lot O Lot P Lot Q Lot T Lot C Lot K Lot WC Cogswell Plaza Lot B Lot K Lot E Johnson Park Alma Parkette Welcome Timothy Hopkins Park LyttonPlaza Stanford Shopping Center Parkette El Palo Alto Park Civic CenterPlaza Channing House Dwtn Child Care Ctr Bryant / LyttonParking Garage Parking Tract No. 5447 PKG PKG Sunset Magazine AddisonElementary Palo AltoHigh School Castilleja School Whole Foods ParkingWhole Foods Market Oak CourtApartments Heritage Park El Palo Alto Park Timothy Hopkins Park Williams Park PAMF CLARK BUILDING PAMFPARKING STRUCTURE CVS Pharmacy Union Bank Miyake E-Trade Stanford Books GATE 1 GATE 15 GATE 14 GATE 2 GATE 3 GATE 4 GATE 5 GATE 6 GATE 7 GATE 8 GATE 9 GATE 10 GATE 11 GATE 12 EL CAMINO GROVE 09-575 GATE 13 MALONEY FIELD MASTERS GROVE BOYFA ARTIFICIAL TURF FIELD SUNKEN DIAMOND PAC-10PLAZA STEUBER FAMILY RUGBY FIELD WOMENS SOFTABLL D ARBORETUM GROVE EUCALYPTUS GROVE LASUEN GROVE TOYON GROVE Lot S Lot CC Lot N Lot R Quarry Road Arboretum Road Quarry Road Homer Avenue Lane 8 West Medical Foundation Way Lane 7 West Lane 7 East Embarcadero Road Encina Avenue El Camino Real Urban Lane Wells Avenue Forest Avenue High Street Emerson Street Cha n n i n g A v e n u e Alma StreetAlma Street PaloAltoA El Camino Real venue Mitchell Lane Hawthorne Avenue Everett Avenue Lytton Avenue Lane 15 E High Street Alma Street Bryant Street Lane 6 E Lane 11 W Lane 21 High Street Gilman Street Hamilton Avenue University Avenue Bryant Court Lane 30 Florence Street Kipling Street Tasso Street Cowper Street Ruthven Avenue Hawthorne Avenue Lane 33 PaloAltoAvenue Everett Avenue Poe Street Waverley Street Tasso Street Cowper Street Palo Alto Avenue Webster Street Everett Court Lytton Avenue Byron Street Fulton Street Middlefield Road Melville Avenue Kellogg Avenue Kingsley Avenue Lane A West Lane B West Lane B East Lane D West Lane 59 East Whitman Court Kellogg Avenue Embarcadero Road Kingsley Avenue Lincoln Avenue Addison Avenue Lincoln Avenue Forest Avenue Downing Lane Homer Avenue Lane D East Lane 39 Lane 56 Hamilton Avenue Webster Street Waverley Street Kipling Street Bryant Street Ramona Street Addison Avenue Scott Street Byron Street Lytton Avenue Guinda StreetPaloAltoAvenue Fulton Street Middlefield Road Forest Avenue Webster Street Kellogg Avenue Middlefield Road By Webster Street Cowper Street Tasso Street Cowper Street Addison Avenue Lincoln Avenue Boyce Avenu Homer Avenue Guinda Street Middlefield Road Channing Avenue Ad Guinda Street Lincoln Avenue Fulton Street Melville Avenue Byron Street Kingsley Avenue Melville Avenue Co Mi Webs Wilson Stree Ramona Street Addison Avenue Channing Avenue Waverley Street Paulsen Ln Lane 15 E Emerson Street Lane 20 W Lane 20 E University Avenue CalTrain ROW Emerson Street Waverley Street Kipling Street Orchard Lane Sand Hill Road Sand Hill Road Bryant Street Ramona Street Palo Road Shopping Center Way Shopping Center Way Shopping Center Way London Plane Way Plum Lane Sweet Olive Way Pear Lane Lane 12 W Lane 5 E Lasuen Street Pistache Place Everett Avenue Homer Avenue Palo Alto Avenue Community LaneHarker Avenue Parkinson Avenue Byron Street Emerson Street Churchill Mall Aboretum Road Aboretum Road Galvez Street Masters Mall Nelson Mall Nelson Road Palm Drive Alma Street Alma Street Hawthorne Avenue Lytton Avenue Sam McDonald Road Mall This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Parcels Counted within Proposed Boundary #03 (2,798 Parcels) Proposed Boundary # 03 (2,798 Parcels) Commercial Downtown (CD) Zoning Districts Parking Assessment District Parcels City Jurisdictional Limits 0'961' Me l l o - R o o s D i s t r i c t Po t e n t i a l B o u n d a r y # 0 3 Ex e r c i s e Un i v e r s i t y A v e n u e Ar e a M a p CITY OF PALO ALTOINCORPORATED CALI FORNIA P a l o A l t oT h e C i t y o f APRIL 1 6 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2013 City of Palo Alto rrivera, 2013-09-10 12:06:39Mello Roos UniversityAve 03 (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) Attachment C. Hypothetical Mello-Roos Boundaries ATTACHMENT D    Staff Response to Infrastructure Committee’s Questions   on forming a Mello‐Roos District  1 9/26/2013  The Infrastructure Committee directed staff to research a number of issues.      1) How long would it take to bring a vote to the public?    Response:  It would take approximately 8‐9 months to form a community facilities  district under the Mello‐Roos Act, from the first meeting to discuss the tax formula  through adoption of the final ordinance, assuming a registered voter election and a mail  ballot election that is not consolidated with another election.    If the election is consolidated with another election, then the timing may be impacted,  although it should be similar.     See Table 1 on page 3 for a typical schedule.    2) How would a Mello‐Roos (MR) District be structured in a ballot measure?    Response:  The ballot measure would approve three items: (i) the levy of the special tax  according to the Rate and Method of Apportionment of Special Tax for the purposes  specified in the Resolution of Formation (e.g., acquisition and construction of a public  parking garage at the corner of X and Y, (ii) the issuance of bonds in a maximum  amount, and (iii) an appropriations limit for the CFD. The Mello‐Roos Act allows the  three items to be consolidated in a single ballot measure    Otherwise, the general provisions of California elections law would govern the ballot  measure, and the advice of an election consultant will be useful.    3) Are there any conflicts with current assessment districts?    Response:  The special tax would be in addition to, and would not have any impact on,  existing special benefit assessments, the 1% ad valorem tax or any voter‐approved tax  overrides. It would be fair to consider the special tax to be an additional source of  revenue to build more parking garages in the City, assuming it would be described as  such in the formation proceedings.    The special tax shall be collected in the same manner as ordinary ad valorem property  taxes are collected and shall be subject to the same penalties and the same procedure,  sale, and lien priority in case of delinquency as is provided for ad valorem taxes       ATTACHMENT D  2 9/26/2013  4) Are there exemptions from the tax?     Response:  In general, properties owned by public agencies are exempt from special  taxes under the Mello‐Roos Act.  There are some exceptions, for example where the  public agency leases its property to a taxable entity.     The MR tax formula would apportion taxes among various land uses on a reasonable  basis and could identify additional exemptions, e.g., low‐income housing, nursing  homes, et. al.      5) Describe an outreach plan and the expertise necessary to form a MR district?    Response:      Information from City’s Outreach Firm, TBWB    One of the first steps is to identify the financed facilities, identify the boundaries of the  CFD (who will pay the tax) and define the special tax formula.  Because the special tax  does not need to be apportioned on the basis of special benefit, there is no need to  employ an engineer for this purpose; the City would, instead, retain a special tax  consultant, who could be an engineer, with expertise in preparing special tax formulas  and, if possible, with public parking garages in developed CFDs.  See attachment B for  more detailed plan for outreach.    6) Are there potential public/private partnerships to build garages or are their possibilities  of long‐term leasing arrangements?    Staff believes there is potential for partnerships to build garages or for long‐term leasing  arrangements, and recommends proceeding with a request for proposals.        ATTACHMENT D  3 9/26/2013  TABLE 1. TEMPLATE MELLO‐ROOS ELECTION SCHEDULE        Date  Responsible Party    Event  Before Day 1    City staff, special  tax consultant,  financial advisor,  bond counsel  (i) Identify CFD boundaries     (ii) Identify financed facilities and services    (iii) Define Rate and Method of Apportionment of  Special Taxes  Day 1 City Council Adopt: (1) Resolution Approving Local Goals and  Policies for Community Facilities District; (2)  Resolution of Intention to Establish Community  Facilities District; (3) Resolution of Intention to  issue Bonds  By Day 16 City Clerk Record Boundary Map (within 15 days of adoption  of Resolution of Intention) (Streets & Highways  Code §3111)  By [7 days prior to  public hearing]  City Clerk Publish Notice of Public Hearing (Gov. Code  §§53322; 6061)  No earlier than Day  31  City Council (1) Conduct a Public Hearing; (2) adopt Resolution  of Formation; (3) adopt Resolution Declaring  Necessity to Incur Bonded Indebtedness; (4) adopt  Resolution Calling Election (“ROE”)   Approx. Day 35 City Clerk Publish Notice of Argument Deadlines  No later than Day  44 (w/in 14 days of  ROE)  City Clerk Deadline for submission of direct arguments  (Elections Code §9286)  Approx. Day 44 City Attorney Submission of impartial analysis  Approx. Day 54  (Argument deadline  + 10 days)  City Clerk Deadline for submission of rebuttal arguments  (Elections Code §9285)  Approx. Days 55 – 64   City Clerk 10‐day public inspection period  (Elections Code §9295)          INFRASTRUCTURE COMMITTEE FINAL MINUTES   Page 1 of 13 Special Meeting September 3, 2013 The Infrastructure Committee met on this date in the Council Conference Room at 4:00 P.M. Present: Berman, Klein (Chair), Scharff, Shepherd Absent: ORAL COMMUNICATIONS None  ACTION ITEMS 1. Continue Discussion from August 6, 2013 Infrastructure Committee Meeting on Baseline Survey Results and Recommendations to the City Council on Next Steps in Considering an Infrastructure Finance Measure. Herb Borock suggested the Utility Users Tax (UUT) be increased to 5 percent for everyone. This increase would generate approximately the same amount of funds as other taxes without the need to designate a tax for a specific purpose, which would require approval by two-thirds of voters. Sheila Tucker, Assistant to the City Manager, noted the Infrastructure Committee (Committee) requested Staff return with additional information related to the Capital Improvement Program (CIP), costs and scope of projects, and revenue options. Brad Eggleston, Assistant Director Public Works, presented a draft schedule for preparing the CIP Budget and the Five Year CIP Plan. Staff reviewed and updated costs of projects and determined if projects were included in both the CIP Budget and project costs. Staff recommended removing projects from the list or reducing costs for projects because of new funding, discretionary funding, or the need for further study. Jim Keene, City Manager, was unsure whether project costs were actually reduced. For example, the Bicycle and Pedestrian Transportation Plan Attachment E FINAL MINUTES    Page 2 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 decreased from $23.5 million to $16.25 due to funding in the Five Year CIP Plan. However, only the first year was funded through the Capital Budget. There could be issues with respect to future annual funding of $1.2 million for the Bicycle and Pedestrian Transportation Plan. The Committee should remember the tradeoff between priority and funding of projects. Mr. Eggleston believed the information was incorrectly titled. A more suitable title would be "Changes to Unfunded Project Costs." Staff was not indicating that implementation of the Bicycle and Pedestrian Transportation Plan no longer cost $25 million, but that more funding was available through the Five Year CIP Plan. The remaining portion of the cost for the Bicycle and Pedestrian Transportation Plan, for which funding was needed, had decreased. Chair Klein indicated actual costs for some projects could be reduced. He inquired about the increase in funding for the Ventura Community Center. Mr. Eggleston stated that was a typographical error. A portion of funding for the Ventura Community Center was included in the Five Year CIP Plan and another portion was included in the buildings catch-up category. The project was counted twice. Vice Mayor Shepherd noted the worksheet showed the cost as $0. Chair Klein inquired whether the Ventura Community Center was included in the $41 million amount shown on the slide. Ms. Tucker answered yes. That amount should also be reduced. Mr. Keene noted the net amount was $32.75 million. Mr. Eggleston reported the project summary sheet provided the actual cost and amount of funding for projects. With the proposed changes, the amount reduced was approximately $40 million. Because the Committee discussed integration of the CIP Budget with the project list, Staff indicated the Five Year CIP funding for projects with CIP funding and the project cost as stated in polling. Joe Saccio, Assistant Director of Administrative Services, noted a 2 percent increase in the Transient Occupancy Tax (TOT) would generate $1.8 million and could be utilized to finance $25.2 million in Certificates of Participation (COP). Staff utilized the formula of $1 million in revenue to raise $14 million in project funds to calculate the amount of funds resulting from COPs. Applying a 2 percent TOT increase to new hotel revenue generated $2.2 million. A 3 percent TOT increase would generate $3.3 million including new hotels. The original assumption for the Los Altos Treatment Plant (LATP) Attachment E FINAL MINUTES    Page 3 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 revenue included building out the site. Staff revised the assumption to renting the site under current zoning without building it out and determined approximately $1.3 million annually could be generated. If the zoning changed to commercial, the upper limit for potential revenue was $2 million. Two former well sites on Middlefield Road could be made available for residential use. Staff estimated sale of the two sites could generate $2.2 million. Given the recent increase in revenues, Staff believed an additional $1 million in surplus funds could be provided for infrastructure improvements. Staff removed parcel tax and UUT from further consideration in accordance with the Committee's direction. The Mello-Roos District was mentioned with regard to financing Downtown and California Avenue parking garages. The consultant was present to discuss that if the Committee wished. Mr. Keene inquired whether the Committee discussed possible changes with respect to COPs. Mr. Saccio noted potential changes were discussed in the Staff Report. Standard and Poor's and Moody's apparently were considering downgrading COPs generally. Due to municipal bankruptcies, the market was wary of municipal debt. There was general talk of degrading COPs from a credit perspective. Ms. Tucker requested the Committee provide direction regarding other areas for additional opinion research and recommendations to the Council regarding current or new revenue sources for funding infrastructure projects. Mr. Keene expressed concern about the competition of projects and scheduling issues. He wished to provide alternate methods for the Committee to consider projects and funding sources. The projects that received positive polling totaled $88.3 million. New hotel revenue and a 3 percent TOT increase along with Infrastructure Reserve funds would total approximately $88.3 million without the need to issue bonds. The Bicycle and Pedestrian Transportation Plan and the Bike Bridge could receive funding from Stanford University Medical Center (SUMC) Development Agreement funds. Parking garages did not poll well; however, the community was concerned about parking issues. Perhaps a Mello-Roos District or an assessment district strategy was viable. Staff identified projects that could be handled better through the CIP Budget or ongoing surpluses. Staff could return with more definition of the proposals. He noted the Committee's concern with the Jay Paul Company project. Staff could not guarantee the progress of that project in relation to the Committee's planning. Without utilizing a finance measure, approximately $90 million could be available for infrastructure projects. The City had more than one option to consider for funding a Public Safety Building. Attachment E FINAL MINUTES    Page 4 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Chair Klein felt the problem was the many options. Council Member Berman inquired whether voters would have to approve a 3 percent TOT increase. Mr. Keene answered yes. Council Member Berman asked if interest rates and debt service costs for General Obligation (GO) bonds remained 15-20 percent higher than costs for COPs. Bob Gamble, Public Financial Management, expected the marginal difference to be substantially less than 15-20 percent, more in the range of 5 percent. The difference varied based on relative credit perceptions. Council Member Berman inquired whether the 12 percent TOT for new hotels had been factored into future budgets. Mr. Saccio felt it was new revenue. Staff budgeted approximately $400,000 in the Fiscal Year (FY) 2013-2014 Budget for Casa Olga. The $2.4 million amount was over and above the Casa Olga projected revenue. Council Member Berman asked when plans could proceed in relation to the LATP site. Mr. Eggleston reported a contract for the design consultant was in place. He estimated the earliest time was fall 2015 if Staff received regulatory clearances. Council Member Berman felt a conservative estimate for use of the LATP site was 2016 or 2017. Lalo Perez, Director of Administrative Services, noted the site was jointly owned by the Refuse Fund. Allocation of net revenue would have to be considered. Council Member Berman inquired about the purposes for issuing past COPs. Mr. Saccio reported COPs were issued in 1983 for civic center improvements; in 1992 for additional improvements to the civic center and for refinancing; in 1998 for improvements to the Golf Course; and in 2002 for the building next to the Bryant Street Garage and for refinancing. Council Member Berman asked which revenue sources paid for the COPs. Attachment E FINAL MINUTES    Page 5 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Mr. Saccio indicated the revenue streams from the Golf Course paid for that COP. Rent on the Bryant Street Garage was used to pay for that COP. The civic center COP was paid through General Fund revenue. Mayor Scharff inquired whether a two-thirds vote of the entire city was needed to approve a Mello-Roos District. Mr. Saccio replied yes. Mayor Scharff noted the Council could determine how many parking garages it needed before requesting community approval; and asked if the properties within the District would be required to pay the tax. Mr. Saccio responded yes. Mayor Scharff felt a Mello-Roos District was similar to an assessment district. The main difference was that all citizens voted on a Mello-Roos District. Mr. Saccio understood the City had to strictly ascribe the benefit from a property to the tax. Mayor Scharff asked if one vote could be held to create two Mello-Roos Districts. Molly Stump, City Attorney, answered yes. Mayor Scharff indicated assessments could vary depending on the number of garages built in Downtown and in California Avenue. He asked if an election was required to be held in an even year. He suggested the Council determine the number of garages needed, and then place a measure on the 2014 ballot. He inquired about the actions needed to begin the process. Mr. Keene requested the Committee direct Staff to return with more detailed information regarding a Mello-Roos District. Staff could present information expeditiously. Mr. Saccio agreed. Mayor Scharff asked when the Jay Paul Company project might be presented to the Council for a vote. The Committee needed some idea of that timeframe to determine whether there was sufficient time to place a GO bond for a Public Safety Building on the ballot. Aaron Aknin, Interim Planning Director, was doubtful the Council would vote on the project in April or May 2014, because of the time required for Attachment E FINAL MINUTES    Page 6 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 environmental review, the Planning and Transportation Commission process and the Council process. Mayor Scharff believed Staff would need at least two years to compile a Public Safety Building project if the Council did not approve the Jay Paul Company project. Therefore, it was not logical to consider funding for a Public Safety Building in the 2014 election cycle. If the Council did not approve the Jay Paul Company project, then it could consider a Public Safety Building in 2016. Chair Klein noted the same conversation was held previously. Mr. Keene stated the Council did not have to specify the use of an increase in the TOT. It would be difficult to gain approval of a bond without specifying its use. 2016 was the appropriate timeframe for a GO bond and still practically better for the TOT issue. The Council could have a successful measure in 2014. Mayor Scharff was unsure why a TOT increase would not be perfect for 2014. The Council would not want a GO bond and a TOT increase on the same ballot in 2016. Mr. Keene believed the Council could pursue a TOT increase in 2014 even if it was considering use of the TOT increase for a Public Safety Building. Vice Mayor Shepherd inquired whether the Committee was responsible for forwarding the UUT ballot item to the Council. Ms. Stump reported the Committee had discretion to forward that item to the Council. She understood the Committee verbally directed her to present it to the Council as an administrative measure. Vice Mayor Shepherd wanted to ensure the item was placed on the ballot. She inquired whether GOs were threatened with the loss of tax-exempt status. Mr. Gamble explained that consideration would apply to any tax-exempt bond including GOs, Mello-Roos Districts and COPs. Vice Mayor Shepherd inquired whether the City would have more expense in issuing those types of bonds. Mr. Gamble replied yes, depending on terms in the legislation. Vice Mayor Shepherd noted the Council considered a land swap regarding the Municipal Services Center (MSC), and inquired whether the Committee Attachment E FINAL MINUTES    Page 7 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 should discuss swapping the MSC site for a site to build the Public Safety Building. Mr. Eggleston reported Staff was finalizing the scope of a Request for Proposal (RFP) to study MSC uses. Swapping the MSC site for another site suitable for a Public Safety Building could be considered. Vice Mayor Shepherd wanted to find a way to initiate that conversation. The Staff Report provided a method for the Committee to match taxes, revenues and project costs. Chair Klein recalled the Committee discussed a possible surplus of funds as an available source of revenue, and inquired about the amount of the surplus. Mr. Perez indicated the surplus would be significantly more than $8 million, because sales tax and TOT were trending higher than expected. Staff would have a specific amount shortly. Mr. Keene asked when Staff projected having the exact amount. Mr. Perez believed within the next two weeks Staff would know the amount. Chair Klein assumed the surplus would be closer to $12 million than $8 million. Mr. Keene stated Staff would not have to perform due diligence if the amount were not significantly higher. Chair Klein understood a report on the Jay Paul Company project was coming up in September. Mr. Keene reported Staff was attempting to report to the Council in September 2013 regarding traffic and public benefits. Chair Klein felt the Council could disapprove the project if the traffic report indicated the traffic impact would be great. Mr. Keene commented that Staff had issues with the performance of the initial traffic study. Therefore, the traffic study would need to be reviewed closely. Mr. Aknin indicated the information was a preliminary traffic report, a first draft. The report provided an idea of potential traffic impacts. Staff would want to review it closely and study impacts to additional intersections. Attachment E FINAL MINUTES    Page 8 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Chair Klein inquired whether the preliminary nature of the report would provide the Council with sufficient information to understand potential impacts. Mr. Aknin felt the report would provide a picture of potential impacts; however, Staff would want additional detail and additional intersections studied. Chair Klein noted that Staff proposed using approximately half the SUMC Development Agreement funds, and requested Mr. Keene comment. Mr. Keene reported Staff was not comfortable proposing uses for the SUMC Development Agreement funds. Because the Bicycle and Pedestrian Transportation Plan appeared to meet the criteria the Council discussed for projects, Staff proposed utilization of funds for that project. A follow-up session with the Council on SUMC Development Agreement funds was scheduled within the month. Chair Klein indicated the Policy and Services Committee recommendation regarding SUMC Development Agreement funds would be presented to the Council in September 2013. He asked if there were any issues with the Committee proposing use of remaining funds for a Public Safety Building, for example. Mr. Keene stated Staff had not precluded that possibility. Council Member Berman referenced the $1 million increased funding amount included in the FY 2014 Capital Budget and Five Year Plan for sidewalks, and asked if that increased amount would accomplish the goal of completing the sidewalk 30-year cycle in 30 years. Mr. Eggleston believed the increased amount would accomplish the goal. The $6 million amount was utilized in polling and would be additional funding to complete the original sidewalk cycle. The $6 million represented the amount needed to replace approximately 7 percent of the total amount of sidewalks in the City. Council Member Berman inquired whether Staff felt there was a need for that amount of sidewalk repair. Mr. Eggleston reported in some districts, where work was performed many years ago, a great deal of work was needed. Staff did not have a good assessment of the actual amount of work needed; therefore, Staff suggested funding a study of sidewalks in the FY 2015 Budget. The study could consider options for the cost of implementing a 10-year, 15-year or 20-year cycle and other ways to organize the program. Attachment E FINAL MINUTES    Page 9 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Council Member Berman concurred with considering a Mello-Roos District. He suggested COPs based upon the revenue stream from renting the current Public Safety Building be issued to fund a new Public Safety Building. The digital reader board was another potential source of revenue. Because an increase in the TOT required a 50 percent approval vote, he felt that revenue stream should fund the least popular infrastructure items, namely a new Public Safety Building. Fire stations, the Bicycle and Pedestrian Transportation Plan, parks catch-up and sidewalks all polled very well and were better suited for a GO bond election. He preferred to increase the TOT rate first, and then utilize revenue from the new hotels for future projects and needs. The civic center and Cubberley Community Center would need major improvements at some point. He did not want to use COPs on the TOT as a first option. The Council needed to impress on the public that all these projects were catch-up items, not ongoing maintenance. Mayor Scharff felt Staff needed to provide details regarding a Mello-Roos District including the boundaries of districts, the number of garages and spaces needed, and impacts on businesses. MOTION: Mayor Scharff moved, seconded by Vice Mayor Shepherd to direct Staff to come back with a plan for a 2014 ballot measure using a Mello-Roos District. Mayor Scharff noted the Committee's concerns that an assessment district was no longer a viable funding mechanism. A Mello-Roos District would provide a solution to the parking problem, and the people who created the problem would pay for the solution. Vice Mayor Shepherd indicated the Committee needed to have sufficient information to determine whether a Mello-Roos District was viable. The public needed to know a Mello-Roos District was a possibility and provide comment on the topic. Chair Klein understood Vice Mayor Shepherd wanted information while Mayor Scharff wanted to include a Mello-Roos District on the 2014 ballot. Mayor Scharff clarified that Staff should present a detailed plan, including options and recommendations, for possibly placing a Mello-Roos District on the 2014 ballot. Chair Klein reiterated that Vice Mayor Shepherd was interested in general information, while Mayor Scharff was interested in details of actual garages and spaces. Attachment E FINAL MINUTES    Page 10 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Mayor Scharff inquired whether Vice Mayor Shepherd would agree with Staff providing information about actual Mello-Roos Districts in Downtown and California Avenue. Vice Mayor Shepherd believed detailed information was necessary for the Committee to make a decision. The discussion of Mello-Roos Districts could be iterative as the Committee requested specific details. She assumed the public would comment once they learned the Committee was considering a Mello-Roos District. She inquired whether Mayor Scharff wanted the discussion to be iterative or Staff to provide clearly-defined plans. Mayor Scharff indicated the process could be iterative; however, he wanted a timeline to place a Mello-Roos District on the 2014 ballot. The Committee could make a decision more quickly if the initial presentation was detailed. The Committee and Downtown property owners needed to know the broad impacts of a Mello-Roos District. Chair Klein would support the Motion if it was clear that the Committee was not committed to placing a Mello-Roos District on the ballot in 2014. Vice Mayor Shepherd added that the discussion would be held with the consideration that it could be placed on a 2014 ballot. Chair Klein also wanted Staff to reach out to affected neighborhoods and property owners early to provide sufficient time for public comment. Mr. Keene understood the discussion would be iterative. The question was the level of detail the Committee wanted in the initial presentation. Staff could provide a gross analysis and share information with the public. The public would also be interested in the scale of parking provided by a Mello- Roos District. In six weeks, Staff could provide a schedule for providing a first iteration. He believed the Committee would have sufficient time to discuss the information and inform the public. Vice Mayor Shepherd requested Staff indicate whether any Ordinances conflicted with a Mello-Roos District or whether a Downtown Parking District would be exempt. Mr. Keene indicated the initial presentation would not capture all information. The process would need to be iterative in order to consider many different impacts. The important point was for Staff to return as quickly as possible with as much meaningful information as possible. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to have Staff investigate a public/private Attachment E FINAL MINUTES    Page 11 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 partnership with the possibility of selling to or having a long-term lease with a developer for one of the surface parking lots. Vice Mayor Shepherd also requested information regarding possible overlap with the Transportation Demand Management (TDM) Program. Mr. Keene stated the Vice Mayor was acknowledging the fact that parking and traffic issues would not be addressed solely by building additional parking. The Council requested Staff review an intensive expansion of the TDM Program and standards. Mr. Saccio reported a consultant could be needed to determine how best to develop a tax. Chair Klein believed the Motion was simply requesting information. Work needed to begin soon. MOTION PASSED: 4-0 Mayor Scharff inquired whether Staff needed a Motion on the UUT. Ms. Stump did not believe a Motion was necessary. She would provide the needed information. Mayor Scharff felt the Committee needed to provide more details regarding a TOT increase and GO bonds. The Committee should not provide the Council with an open-ended discussion. The Committee needed more information before recommending a TOT increase or a GO bond. He wanted Staff to provide a Staff Report considering the relationship between funding sources and the Jay Paul Company project. The Committee could discuss revenue sources again in October 2013 after reviewing the preliminary traffic analysis for the Jay Paul Company project. He requested Staff comment on his suggestions. Mr. Keene agreed that the Committee should provide the Council with recommendations and clarity regarding a funding source approach soon. If the Committee chose a COP strategy, the real discussion was the use of those funds and the relationship to a back-up option. The Committee needed to tell Staff if it needed specific follow-up information regarding funding sources. If additional information was not needed, then Staff could work on the schedule and interface between funding options and the Jay Paul Company project. He advocated for the Committee choosing a lead funding source sooner rather than later, because other concerns would then fall in line for the Committee and the Council. Attachment E FINAL MINUTES    Page 12 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Mayor Scharff suggested the Committee place a TOT increase on the ballot for 2014 with the opportunity to place GO bonds on a 2016 ballot. He was unsure whether the Committee should decide which projects the revenue would fund in terms of which items were popular in the poll. Because there were many projects to fund, the Committee should maintain flexibility. MOTION: Mayor Scharff moved, seconded by Council Member XXX to direct Staff to return to the Committee with possible scenarios for a Transient Occupancy Tax Measure for the 2014 election, being sensitive to the flexible use of the funds. MOTION FAILED DUE TO LACK OF SECOND Chair Klein felt the Committee had enough information regarding a TOT increase. He wanted the TOT to total 14 percent, rather than 15 percent. He also wanted to utilize more SUMC Development Agreement funds. The Council reached consensus that those funds should be used for items with a large impact. Projects on the infrastructure list did provide large impacts. The Bicycle and Pedestrian Transportation Plan, a Public Safety Building, parks catch-up and Byxbee Park met the requirements for use of SUMC Development Agreement funds. The Committee should recommend a plan or plans for Council consideration. Vice Mayor Shepherd asked if there was a reason for Staff not linking funds in the infrastructure/housing category with funds in the sustainability category. Mr. Keene explained that listing the funds in that manner was easier. The Committee could obviously break it up. MOTION: Chair Klein moved, seconded by Mayor Scharff to continue the discussion and encourage Staff to provide input in line with the discussion in order to allow the Committee to do their homework. Mayor Scharff inquired whether the Committee needed to include a study of sidewalks in the Motion. Mr. Eggleston reported Staff discussed proposing a study as part of the CIP Budget for the following fiscal year. Mayor Scharff asked if Staff needed authority to perform that study. Mr. Eggleston replied no. Staff would propose a study as part of the upcoming CIP process. Attachment E FINAL MINUTES    Page 13 of 13 Infrastructure Committee Special Meeting Final Minutes: September 3, 2013 Chair Klein inquired whether the preliminary traffic analysis for the Jay Paul Company project would be presented to the Council in September 2013. Mr. Aknin reported Staff could include it on the September 16, 2013 Agenda. Chair Klein wanted to ensure the Committee had that information prior to the next meeting. Vice Mayor Shepherd inquired whether the Motion could include uses for the MSC site. Mr. Eggleston indicated that information would take time to compile. Vice Mayor Shepherd asked about uses for the LATP site. Mr. Eggleston knew the land uses for which the site was zoned, but the zoning could be changed. Staff did not know the number of acres of usable land the site would provide. Vice Mayor Shepherd asked when that information could be provided. Mr. Eggleston hoped to have the information in spring of 2014. MOTION PASSED: 4-0 Chair Klein inquired about possible meeting dates in October 2013. Ms. Tucker indicated October 1, 2013. Mayor Scharff noted a conflict with 4:00 P.M. on October 1. He suggested the meeting begin at 2:00 or 3:00 P.M. Chair Klein announced the next meeting would be held on October 1, 2013 at 3:00 P.M. ADJOURNMENT: The meeting was adjourned at 5:28 P.M. Attachment E