HomeMy WebLinkAboutStaff Report 11981
City of Palo Alto (ID # 11987)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 11/1/2021
City of Palo Alto Page 1
Title: Accept the Stanford University Medical Center (SUMC) Annual Report
for Fiscal Years 2017-2018, 2018-2019 and 2019-2020 and Find the SUMC
Parties in Compliance With the Development Agreement
From: City Manager
Lead Department: Planning and Development Services
Recommendation
Staff recommends that the City Council:
1. Review the Stanford University Medical Center (SUMC) Annual Reports for Fiscal Years
2018 through 2020, and find that Stanford Hospitals & Clinics, Lucile Packard Children’s
Hospital, and Stanford University (SUMC Parties) have complied in good faith with the
terms and conditions of the Development Agreement;
2. Find that the SUMC Parties are not in default with the terms and conditions of the
Agreement; and
3. Accept the City of Palo Alto’s (City) Annual Report Supplements regarding the funds
received from the SUMC Parties, as required under Section 12(d) of the Development
Agreement (Attachment C).
Executive Summary
The City Council is required to review the SUMC Development Agreement (the “Agreement”) to
ascertain compliance with the terms of the Agreement. The Agreement is between Stanford
Hospital and Clinics, Lucile Packard Children’s Hospital, and Stanford University (SUMC Parties)
and the City of Palo Alto.
The SUMC Parties submitted Annual Reports for Fiscal Year 2018, Fiscal Year 2019, and Fiscal
Year 2020 that summarize the construction activities and other actions taken to fulfill the
Agreement obligations. The SUMC Parties have paid approximately $44.3 million in public
benefit fees to the City since June 6, 2011 through the FY 2020 reporting period. City Council
reviewed and approved use of the funds contributed by SUMC for a wide variety of capital
projects.
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Background
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes,
a conditional use permit, annexation and design applications for the Stanford University
Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects
include the construction of a new Stanford Hospital and clinics buildings, an expansion of the
Lucile Packard Children’s Hospital (LPCH), construction of new School of Medicine (SOM)
buildings, renovation of the existing Hoover Pavilion, construction of a new medical office
building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and
Durand Way, and SUMC design guidelines. A Development Agreement (the “Agreement”)
vesting these approvals was deemed effective on June 6, 2011 and continues for thirty (30)
years from the effective date.
This report covers activities by the SUMC Parties for FY 2018, FY 2019, and FY 2020, which are
the seventh, eighth, and ninth years of the Agreement. The last annual report prepared was for
Fiscal Year 2016-2017.1 Previous annual reports and compliance documentation can be found in
Attachment D. The Agreement specifies that the City annually review the parties’ compliance.
Due to staffing issues and conflicting priorities on the City’s part, this report reflects a multiyear
review. Staff has taken steps needed to return to annual reporting for the City Council.
Discussion
Development Agreement Section 12, “Periodic Review of Compliance,” requires City Council to
ascertain SUMC Parties’ compliance with the terms of the Agreement. The discussion items
below are intended to guide City Council through the many aspects that SUMC and City staff
monitor and track throughout the year to ensure compliance.
The SUMC Annual Reports for FY 2018, FY 2019, and FY 2020 (Attachment A) describe the
activities related to Agreement implementation and ongoing annual progress toward meeting
the following obligations in Section 5 of the Agreement, “SUMC Parties’ Promises:”
• Health Care Benefits;
• Fiscal Benefits;
• Traffic Mitigation and Reduced Vehicle Trips;
• Linkages (Pedestrian, Bicycle, and Transit);
• Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing, and
• Climate Change
Staff prepared a summary of the Section 5 obligations and the staff-confirmed compliance
status (Attachment B).
Development Agreement Section 12 also includes the requirement for demonstration of good
faith compliance with the Agreement. Toward this end, SUMC has timely submitted all the
1 City Council Report, 06/11/2018 (SUMC Annual Report, Fiscal Year 2016-2017):
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=49142.31&BlobID=65285
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reports required of the SUMC Parties for FY 2018 through FY 2020. In this timeframe, City staff
and SUMC have also prioritized:
• Work in the field to help accelerate the ability of the Hospitals and other SUMC
buildings to receive occupancy approvals,
• Processing of applications that increase site improvement operational performance,
• Rapid processing of SUMC applications pertaining to COVID-19 pandemic response, and
• Maintaining all records necessary to complete the City’s obligations for the annual
review.
Construction Activities and Net New Square Footage
Detailed information on SUMC construction activities for FY 2018, FY 2019, and FY 2020 can be
found in the SUMC Annual Reports (Attachment A).
To summarize construction activities during these years:
• In FY 2018, the Lucile Packard Children’s Hospital (LPCH) Expansion project opened for
patient care in late 2017.
• In FY 2019, no new buildings gained occupancy, but construction continued on the New
Stanford Hospital Garage, New Stanford Hospital, and the School of Medicine
Biomedical Innovations Building.
• In FY 2020:
o The New Stanford Hospital Garage opened for administrative uses, parking and
circulation operation, and
o The New Stanford Hospital opened for patient care in late 2019.
A total of approximately 133,731 square feet of floor area was previously demolished at the
Stanford Hospital, Lucile Packard Children’s Hospital, and Hoover Pavilion sites. The new
Neuroscience Health Center at the Hoover Pavilion site represents 91,605 new square feet.
Lucile Packard Children’s Hospital (LPCH) Expansion added 446,088 new square feet.
The New Stanford Hospital (NSH) garage added 29,744 new square feet. The New Stanford
Hospital (NSH) project added 689,522 new square feet. These two new buildings therefore
represent 719,266 new square feet for NSH.
The School of Medicine (SOM) Biomedical Innovation Building (BMI) received a temporary
certificate of occupancy in November 2019, during FY 2020. However, final inspection approval
by the City did not occur during FY 2020. Therefore, inclusion of the SOM BMI net floor area in
the Annual Report tracking will occur in a future fiscal year.
City staff reviewed the information in the SUMC Annual Reports regarding construction
activities and net new square footage. Staff determined that they are complete and correct,
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with the exception of a minor typo in the table in Attachment A reporting 719,261 new square
feet for New Stanford Hospital Garage and New Stanford Hospital, which is five square feet less
than what is officially documented as 719,266 new square feet in the permit plans. This will be
corrected in the FY 2021 SUMC Annual Report.
Traffic Mitigation and Reduced Vehicle Trips
The SUMC Parties have made substantial progress in meeting the traffic and alternative
transportation obligations of the Agreement. Specifically, they have accomplished the
following:
• Annually purchasing Caltrain Go Passes for all eligible employees as of January 1, 2012,
which was three years ahead of the September 1, 2015 requirement in the Agreement;
• Previously purchasing shuttle buses for the Marguerite Shuttle service, as well as ongoing
annual payments to cover the net increase in operating costs for the Marguerite Shuttle
service;
• Providing annual payment to AC Transit to maintain a load factor of less than 1.0 on the U-
Line;
• Hiring and maintaining a Transportation Demand Management (TDM) coordinator position
since March 13, 2012, three years ahead of the September 1, 2015 requirement as stated in
the Agreement, and subsequently elevating the position to a TDM Program Manager
position, and
• Maintaining a rate of over 33.8% of employees using an alternative mode to get to work
instead of driving alone in FY 2018 and FY 2019.
The alternative mode share rate of 38.1% in FY 2018 and 33.8% in FY 2019 exceeds the
alternative mode share target for 2018 of 30.0% and 2021 target of 33.0%. Pedestrian, bicycle,
and transit linkage improvement projects were implemented during this time. Staff anticipates
the SUMC Parties will be able to meet or exceed the alternative mode share targets for 2021
(33.0%) and 2025 (35.1%) after all shelter-in-place restrictions and other pandemic-related
commuting factors lift for the majority of SUMC employees.
On March 27, 2020, the City conditionally approved a one-year delay in the submittal of two
reports; the FY 2020 Alternative Mode Share Report and Mitigation Measure TR 2.3 Enhanced
Stanford University Transportation Demand Management Program (TDM) report. Conditional
approval of this delay is consistent with the procedures in Section 6(p) of the Stanford
University Medical Center (SUMC) Development Agreement and no additional environmental
review was required. The reasons for the conditional approval included:
1. The SUMC Parties have attained mode share targets in past reporting years;
2. Stanford collects key performance information for the SUMC Alternative Mode Share
Report via a survey regularly administered in the April/May timeframe. Staff anticipated
the survey responses in April/May 2020 would not reflect normal SUMC staff operations
due to the shelter-in-place directives, hospital surge efforts, and other atypical
commute and working parameters associated with the COVID-19 pandemic; and
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3. The FY 2019-2020 reporting year was not a milestone target year identified in the SUMC
Development Agreement Section 5(c)(ix).
The SUMC Parties maintained all TDM requirements in FY 2020 until Santa Clara County issued
COVID-19 pandemic shelter-in-place orders in March 2020. The SUMC Parties and City staff will
continue to monitor the TDM program throughout the term of the Agreement and will continue
reporting to City Council.
Construction Sales and Use Tax Monitoring Report
SUMC submitted the annual Construction Sales & Use Tax Monitoring Report on June 30 of
2018, 2019, and 2020 for the previous calendar year. The City Auditor sent their required
response for each year. Based upon the City Auditor’s review of the annual Construction Sales
and Use Tax Monitoring Report submitted by SUMC, revenues for calendar years 2011 through
2019 have totaled $5,256,026. The City Auditor submitted a letter to Stanford Medicine noting
that this amount was $10,216 less than what was listed by SUMC. Reconciliation that ensures
that the City would receive no less than $8.1M in construction sales and tax revenue by
December 31, 2025 would occur starting in August 2026.
Supplement to the Annual Report
Section 12 requires the City to prepare a Supplement to the Annual Report. The Supplement is
to include an accounting of the funds received from the SUMC Parties to satisfy the obligations
outlined in Section 5 of the Agreement, a description of the account balances, and a summary
and description of expenditures from the funds for each Fiscal Year (Attachment C). Section 12
of the Agreement mentions preparation of the Supplement within 45-days of the June and July
receipt of the annual reports by SUMC, but there is no penalty for not doing so; after the close
of the Fiscal Year, the City conducts an annual audit of the funds in Fall/Winter in order to
demonstrate good faith in implementing the Agreement.
The SUMC Parties have already paid the City approximately $44.3 million in public benefit fees
since June 6, 2011 through the FY 2020 reporting period. This sum includes the approximately
$11.7 million third and final payment by SUMC during the FY 2018 reporting period.
Regarding fund usage during the FY 2018, FY 2019, and FY 2020 reporting periods, the City
authorized transfers for the following:
• In FY 2018, the remaining $4,966 balance for “Quarry Road Improvements” was
transferred for Quarry Road Improvements and Transit Center Access (PL-16000).
• In FY 2018, $545,034 under “Intermodal Transit Center” was transferred for Quarry
Road Improvements and Transit Center Access (PL-16000), including enhancements to
the pedestrian and bicycle connection from the west side of El Camino Real to Welch
Road, urban design elements, and wider bicycle lanes in the public right-of-way.
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• In FY 2018, $5,200,000 under “Climate Change & Sustainability” was transferred for the
implementation of the Bicycle and Pedestrian Plan-Implementation Project (PL-04010).
• In FY 2019, $11,200 under “Community and Health Safety” was transferred to pilot
traffic signal preemption for emergency vehicles (PL-19000). This funding was received
in FY 2018 as part of Opticom Payments discussed in Section 5(c)(v) of the Development
Agreement and placed in the “Community Health & Safety” cost center. As the City has
upgraded systems, the City and SUMC agreed through a letter exchange that the
$11,200 payment could be used for the new coordinated prioritization signaling at City-
maintained traffic signals.
• In FY 2020, $900,000 under “Infrastructure, Sustainable Neighborhoods and
Communities, and Affordable Housing” was transferred for the new Public Safety
Building (PE-15001).
The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund
contained an original contribution of $1,720,488 for support of affordable housing. SUMC
funding supported the Stevenson House project in FY 2013 and the remaining affordable
housing funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project.
Future Use of Development Agreement Funds
The funds received by the City as a result of the SUMC Development Agreement represent
funding for Operations and a significant portion of funding for implementation of the City’s
Capital Infrastructure Plan. For additional information about the recent past, current, and
future use of Agreement funds, please refer to the following:
• Fiscal Year 2021 Adopted Operating Budget document, Special Revenue Funds section:
• https://www.cityofpaloalto.org/civicax/filebank/documents/79371
• Fiscal Year 2021 Adopted Capital Improvement Budget document:
• https://www.cityofpaloalto.org/civicax/filebank/documents/78470
• City Council Report 11877: Community and Economic Recovery Plan, including
amendments to the FY 2021 Capital Improvement Plan:
• https://www.cityofpaloalto.org/civicax/filebank/documents/79901
• Fiscal Year 2022 Adopted Operating Budget document, Special Revenue Funds section:
• https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-
budgets/fy-2022-city-budget/adopted-budgets/operating-budget_web.pdf; and
• Fiscal Year 2022 Adopted Capital Improvement Budget document:
• https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-
budgets/fy-2022-city-budget/adopted-budgets/capital-budget-book-web.pdf.
Resource Impact
There are no impacts to the City’s budget resulting from this review of the SUMC Annual
Reports for FY 2018, FY 2019, and FY 2020. As stated above, the SUMC Parties have already
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paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through
the FY 2020 reporting period. Future fund contributions are not anticipated.
Policy Implications
This report does not represent any changes to existing City policies.
Environmental Review
Finding the SUMC Parties in compliance with the Terms of the Agreement is not a project under
the California Environmental Quality Act and no environmental assessment is required for the
annual compliance review. An environmental impact report for the entire SUMC project was
prepared and certified by the City Council prior to approval of the Agreement.
Attachments:
• Attachment9.a: Attachment A-1: SUMC Annual Report Fiscal Year 2017-2018
• Attachment9.b: Attachment A-2: SUMC Annual Report Fiscal Year 2018-2019
• Attachment9.c: Attachment A-3: SUMC Annual Report Fiscal Year 2019-2020
• Attachment9.d: Attachment B: SUMC Development Agreement, Section 5 - SUMC
Parties’ Promises
• Attachment9.e: Attachment C-1: Fiscal Year 2017-2018 Supplement
• Attachment9.f: Attachment C-2: Fiscal Year 2018-2019 Supplement
• Attachment9.g: Attachment C-3: Fiscal Year 2019-2020 Supplement
• Attachment9.h: Attachment D: Weblinks to Prior SUMC Annual Reports
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2017-18 AN NUAL REPORT
PREPARED FOR THE CITY OF PALO ALTO | JULY 6, 2018
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CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2017-2018 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
NEW STANFORD HOSPITAL 4
SCHOOL OF MEDICINE 5
NET NEW SQUARE FOOTAGE 6
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7
HEALTH CARE BENEFITS 7
SECTION 5(a)(ii). FUND FOR HEALTHCARE SERVICES 7
SECTION 5(a)(iii). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7
PALO ALTO FISCAL BENEFITS 8
SECTIONS 5(b)(i) AND 5(b)(ii). PAYMENT OF SALES AND USE TAXES 8
SECTION 5(b)(iii). FUNDING OF OPERATING DEFICIT 9
SECTION 5(b)(iv). PAYMENT OF UTILITY USER TAX 9
SECTION 5(b)(v). SCHOOL FEES 9
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 10
SECTION 5(c)(ii). MENLO PARK TRAFFIC MITIGATION 10
SECTION 5(c)(iii). EAST PALO ALTO VOLUNTARY MITIGATION 10
SECTION 5(c)(iv). CONTRIBUTIONS TO AC TRANSIT 11
SECTION 5(c)(v). OPTICOM PAYMENTS 11
SECTION 5(c)(vi). CALTRAIN GO PASSES 11
SECTION 5(c)(vii). MARGUERITE SHUTTLE SERVICE 12
SECTION 5(c)(viii). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 12
SECTION 5(c)(ix). MONITORING OF TDM PROGRAMS 12
LINKAGES 13
SECTION 5(d)(i). INTERMODAL TRANSIT FUND 13
SECTION 5(d)(ii). QUARRY ROAD FUND 13
SECTION 5(d)(iii). STANFORD BARN CONNECTION 13
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 14
SECTION 5(e). 14
CLIMATE CHANGE 14
SECTION 5(f). CLIMATE CHANGE FUND 14
SATISFACTION OF CONDITIONS OF APPROVAL 14
SECTION 5(h). SATISFACTION OF ALL CONDITIONS OF APPROVAL 14
CONCLUSION 16
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ANNUAL REPORT 2017-18 1
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine)—comprised
of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children’s Hospital, and
Stanford University—entered into a Development Agreement with the City of Palo Alto, committing to
provide a range of community benefits in exchange for vested development rights to develop and use the
Stanford Medicine Renewal and Replacement Project (“Renewal Project”) facilities in accordance with
the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.
The Renewal Project—driven by a growing demand for healthcare services, state-mandated seismic
safety requirements, and the need to replace outmoded facilities with modern, technologically advanced
spaces—holds the potential to transform the way that healthcare is delivered and research is conducted.
Today, seven years after the execution of the Development Agreement, the Lucile Packard Children’s
Hospital Expansion is now open for patient care, and the new Stanford Hospital is anticipated to open for
patient care in late 2019. Meanwhile, the School of Medicine has begun the first phase of development
of its replacement facilities.
Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of
the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in
advancing the goals of both Stanford Medicine and the broader community.
EXECUTIVE SUMMARY
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2 ANNUAL REPORT 2017-18
The Palo Alto City Council’s unanimous approval of the entitlements for the Stanford Medicine
Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new
and replacement facilities for Stanford Medicine. The project approvals—including new zoning for the
Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a
Development Agreement—allow for the construction of approximately 1.3 million net new square feet of
hospital facilities, clinics, medical offices, and medical research spaces, and will enable the Hospitals to
optimize the delivery of healthcare services to patients, and maintain their position as leading providers of
world-class healthcare.
In order to facilitate this important replacement and expansion work, the Stanford Medicine parties
entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive
package of community benefits and additional development conditions. In exchange for these benefits,
the City has vested for a period of 30 years Stanford Medicine’s rights to develop and use the property
in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent
approvals.
The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance,
and require that Stanford Medicine submit an Annual Report to the City of Palo Alto’s Director of Planning
and Community Environment each year within 30 days of the anniversary of the agreement effective
date (June 6, 2011). The Annual Report is to summarize Stanford Medicine’s progress on the Renewal
Project, including a list of net new square footage for which a certificate of occupancy has been received,
and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in
Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.
Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report,
to provide an accounting of the City’s balances and expenditures from each of the City Funds and how
they were used.
BACKGROUND AND PURPOSE
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ANNUAL REPORT 2017-18 3
The Renewal Project continues to progress, with a major milestone reached in late 2017 with the opening
of the Lucile Packard Children’s Hospital Expansion. The New Stanford Hospital continues to progress,
and construction of the first new School of Medicine facility has begun. The section to follow provides
an overview of central goals for the project elements that presently are under construction or nearing
construction, a synopsis of progress to date, as well as a preview of near-term upcoming activities.
LUCILE PACKARD CHILDREN’S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard
Children’s Hospital has opened an expanded facility. The new hospital expansion, located adjacent to
the current Packard Children’s Hospital, provides patients and doctors with the most modern clinical
advancements and technology, while also creating a more patient- and family-centered environment
of care, with additional single-patient rooms and more spaces for families to be with their child during
treatment and recovery.
The Packard Children’s expansion features a new entrance lobby, public concourse with dining, three
floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural
light and views, and the exterior grounds—more than 3.5 acres of outdoor areas and gardens—provide a
park-like setting for patients, families, and visitors.
Significant construction progress was made on the LPCH expansion project throughout 2017, and on
December 4, 2017 the new facility received its license from the State Department of Public Health; this
constituted issuance of an occupancy permit for purposes of the Development Agreement. On December
9, 2017, the Packard Children’s expansion opened for patient care, and more than 90 pediatric patients
were moved from the existing Hospital to the new facility. Certain areas of the new Hospital remain
under construction, including the surgical suites (scheduled to open Summer 2018), the Bass Center for
Childhood Cancer and Blood Diseases on the 5th floor, and the Betty Irene Moore Children’s Outpatient
Heart Center on the 1st floor (both anticipated to complete in Fall 2019). In addition, certain exterior
site work is ongoing, including the installation of final landscaping and paving; this work is scheduled to
complete in Fall 2018.
2017-2018 SUMMARY OF PROGRESS
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4 ANNUAL REPORT 2017-18
2017-2018 SUMMARY OF PROGRESS
NEW STANFORD HOSPITAL
Stanford Health Care is constructing new and replacement hospital facilities that will usher in a new era
of advanced patient care. Growth in patient volumes and rapidly changing medical technology have
rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety
requirements have accelerated the need to construct replacement facilities.
The New Stanford Hospital will substantially increase capacity, and will also address a rapidly advancing
medical landscape. High-tech spaces such as Surgery, Radiology, and Intensive Care will be replaced
to accommodate the latest advances in medical technology, while still retaining the flexibility to adapt
to future innovations. Facilities will feature new patient rooms, an enlarged Level-1 trauma center
and Emergency Department, and new surgical, diagnostic, and treatment rooms. And foremost, the
new facility will create a healing environment responsive to the needs of patients, visitors, and staff.
Upper-level pavilions will feature light-filled patient rooms, and a mid-level garden floor will offer dining,
conference, and educational facilities, as well as social and spiritual support spaces.
Substantial progress has been made on the New Stanford Hospital project over the past year. The
exterior enclosure for the Hospital is complete, and interior finish construction is progressing, with
installation of drywall, ceilings, tile flooring, and light fixtures underway. Kitchen equipment is being
delivered and installed, and medical equipment delivery is in its early stages. Outside the Hospital, site
work continues, with installation of underground utilities in the vicinity of the entry plaza underway, and
site improvement work on North Pasteur progressing. Meanwhile, at the adjacent New Stanford Hospital
Garage, interior construction of the rooftop pavilions and the rooftop landscape installation is nearly
complete. A temporary Certificate of Occupancy issued by the City in 2014 allows for contractor parking
while construction continues.
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ANNUAL REPORT 2017-18 5
SCHOOL OF MEDICINE
The Stanford University School of Medicine will replace its outmoded research buildings in the City
of Palo Alto with new state-of-the-art facilities designed to support contemporary fundamental and
translational research. The new facilities will accommodate 21st century biomedical research leading
to advancements in medical sciences, new discoveries and medical innovations, ultimately enhancing
human health. The new buildings will feature integrated laboratory suites, with easier access between
labs and support facilities, enabling transparency, flexibility, and collaboration. The new facilities will be
surrounded by landscaped areas and tree-lined walkways.
The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”) is now
underway, following City building permit issuance in December 2017. Excavation for the basement level
and tunnel connection to the existing network of School of Medicine tunnels has completed, foundations
have been poured, and structural steel erection is progressing. Meanwhile, offsite utilities work
associated with the project is also underway, with trenching for high-voltage power from the City of Palo
Alto electrical substation on Quarry Road to the project site occurring in phases through Summer 2018.
2017-2018 SUMMARY OF PROGRESS 2017-2018 SUMMARY OF PROGRESS
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6 ANNUAL REPORT 2017-18
2017-2018 SUMMARY OF PROGRESS
NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has
been issued.
PROJECT COMPONENT GROSS SQUARE FOOTAGE
NEW STANFORD HOSPITAL
1101 Welch demolished (40,100)
Total (40,100)
LUCILE PACKARD CHILDREN’S HOSPITAL EXPANSION
701 Welch demolished (56,300)
703 Welch demolished (23,500)
Lucile Packard Children’s Hospital Expansion 446,088 Total 366,288
SCHOOL OF MEDICINE
None 0
HOOVER PAVILION
Misc. shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB) 91,605
Total 77,774
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ANNUAL REPORT 2017-18 7
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
their obligations under Section 5 of the Development Agreement.
HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to
the community, as both a global leader in medical care and research, and as a community healthcare
services provider. The Renewal Project enables Stanford Medicine to continue its important work, and
the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new
hospital facilities will provide critical emergency preparedness and response resources for the community
in the event of an earthquake, pandemic, or other major disaster.
Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase
to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be
reconciled with the construction use tax payments as described in Development Agreement Section 5(b)
(ii)(C), and will be spent between 2026 and 2036.
Section 5(a)(iii). Fund for Community Health and Safety Programs
Stanford Medicine has contributed a single lump-sum payment of $4 million to establish a Community
Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected
community health programs that benefit residents of the City, including the Project Safety Net Program,
a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be
established to evaluate proposals regarding the other specific programs to receive funding, composed
of two representatives selected by Stanford Medicine and two representatives selected by the City; this
committee shall make annual recommendations to the City Council regarding proposed disbursements
from the Community Health and Safety Program Fund, and the City Council shall use its reasonable
discretion to decide whether to accept, reject, or modify the joint committee recommendations.
Stanford Medicine provided the entire required contribution to the Community Health and Safety
Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with
this Development Agreement provision. As required by Development Agreement Section 12(d), the City
will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures
from this fund, and the purposes for which the expenditures were used.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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8 ANNUAL REPORT 2017-18
PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The
project is expected to generate $8.1 million in sales and use tax revenues for the City, and multiple
mechanisms have been put into place to ensure that this target is met. The Development Agreement also
provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City’s
operating deficit, and the payment of utility user taxes and school fees.
Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes
As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales
and Use Tax monitoring report to the City on June 30, 2018. The Stanford Medicine parties will continue
to submit such a report annually during the construction period for the Renewal Project so that the City
can determine the share of construction use taxes that it has received as a result of the Renewal Project.
Each year, within 60 days of receiving the monitoring report, the City will provide its determination of
the amount of construction use taxes that it has received as a result of the Renewal Project during the
preceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct
a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes
as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).
To date, Stanford Medicine has taken the following steps detailed below to maximize the City’s allocation
of sales and use taxes associated with Project construction and operation. Documentation of each of
these items is included in the 2017 construction use tax monitoring report already submitted.
• Stanford Medicine has obtained all permits and licenses necessary to maximize the City’s allocation
of construction use taxes derived from the project, including California Seller’s Permits and Use Tax
Direct Pay Permits. Copies of permits and licenses are attached to the 2017 monitoring report.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of sale of all fixtures furnished or installed as part of the project.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of use of all materials used in the construction of the project.
• Stanford Medicine has required all contractors and subcontractors to allocate the local sales and
use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to
require contractors and subcontractors to complete and file any forms required by the State Board of
Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their existing
facilities in order to increase the City tax allocation for the Hospitals’ purchases. The Hospitals will
maintain the use tax direct pay permit for the life of the project.
• Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales
and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation,
allocation, reporting and payment of sales and use taxes derived from the Project.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the
City resulting from construction and operation of the project, Stanford Medicine has provided to the City a
single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No
further action is required by Stanford Medicine to comply with this Development Agreement provision.
Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas,
and water charges allocable to new construction completed as part of the project for the life of the project.
This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5
percent utility user tax is currently being paid by Stanford Medicine.
Section 5(b)(v). School Fees
Stanford Medicine will pay to the City—who is then to forward to the Palo Alto Unified School District—
school fees upon issuance of each building permit from the City or OSHPD, in the amount that is
generally applicable to non-residential development at the time of payment based upon net new square
footage, as defined in the Development Agreement.
School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802,
respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for
additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional
payment of school fees in the amount of $16,119 was made to account for the incremental square
footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally
planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for
incremental square footage for the New Stanford Hospital Garage.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full
project buildout. Already, Stanford Medicine provides a robust transportation demand management
program, offering a variety of incentives for employees to forego driving alone to work. As required by the
Development Agreement, Stanford Medicine has taken the additional actions outlined below.
Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in
connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable
neighborhoods and communities and affordable housing. This contribution has been made in three
equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of
$1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital
foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017,
within 30 days from issuance of the first Hospital occupancy permit.
Section 5(c)(iii). East Palo Alto Voluntary Mitigation
Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be
used for roadway and traffic signal improvements on University Avenue. This payment was made on
August 19, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. In the event that Stanford Medicine does not meet alternative transportation mode
goals specified in the Development Agreement by 2025 and is assessed a $4 million payment under
Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment
to the City of East Palo Alto.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(iv). Contributions to AC Transit
The Hospitals committed to the following actions within 30 days from issuance of the first Hospital
occupancy permit, and have fulfilled these commitments as outlined below:
• The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital
improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals
offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was
accepted, and the payment was made on January 5, 2018.
• The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not to
exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus service
to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals have commenced annual
payments to AC Transit for purposes of U-Line operating costs.
• In order to encourage Hospital employees living in the East Bay to use public transit for their
commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the Ardenwood
Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)
(iv)(C)). From May 2014 to April 30, 2018, a 100-space park-and-ride facility on Kaiser Drive at
Campus Drive in Fremont (0.9 mile from Ardenwood Park & Ride) was under lease for the use of
Stanford University and Hospital commuters, thus satisfying this requirement ahead of schedule. On
March 27, 2018, Stanford was provided with 30-days’ notice to vacate the facility, and immediately
commenced a search for replacement parking facilities. An equivalent temporary East Bay park
and ride solution has been secured in the vicinity of Ardenwood, and is already in use by SUMC
commuters from the East Bay. The Hospitals are currently in the process of securing a long-term
location.
Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay
$11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the
following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page
Mill Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus
Drive West; Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this
commitment was made, the City has determined that Opticom systems are outdated, and proposes the
purchase and installation of the ATMS.now Emergency.now package, which would allow coordinated
prioritization at all City-maintained traffic signals. Agreement to this change in traffic signal priority system
is documented in a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which
was accepted and agreed to by the SUMC Parties by countersigned letter. The required payment was
made on December 12, 2017, within 30 days of issuance of the first Hospital occupancy permit.
Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for
all existing and new Hospital employees who work more than 20 hours per week at a cost of up to
approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to
continue for a period of 51 years.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and
began providing free GO Passes to employees commencing on January 1, 2012. Further details
regarding the GO Pass purchase can be found in the Alternative Mode Share report, which was submitted
to the City on May 31, 2018.
Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase
of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased
demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In
addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount
of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand
for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid
shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments
the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.
Section 5(c)(viii). Transportation Demand Management Coordinator
The Development Agreement requires that the Hospitals employ an onsite qualified Transportation
Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015,
and continuing through the life of the Renewal Project.
Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated
the hiring of the TDM Coordinator, filling this position in March 2012. The TDM Coordinator (TDM
Program Manager) is responsible for analyzing, developing, and implementing programs to advance
the Hospitals’ TDM objectives. Specifically, the position supports the Hospitals’ TDM program by raising
awareness among commuters about alternative transportation options and Stanford’s commute incentive
programs; providing alternative commute planning assistance and responses to customer inquiries;
writing and editing electronic and print communications; coordinating and staffing outreach events, such
as free transit pass distributions and employee fairs; and providing alternative transportation information
and resources at new employee orientations.
Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees
employed over 20 hours per week; the number of employees using an alternative transportation mode as
documented by a study or survey to be completed by the Hospitals using a method mutually agreeable
to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode Targets identified in the Development Agreement. The Development Agreement specifies
payments to be made in the event that such targets are not met during particular time periods. Stanford
Medicine submitted its 2018 Alternative Mode Share Report to the City on May 31, 2018; this report
shows an alternative mode split of 38.1% for the Hospitals. This mode split exceeds the Alternative Mode
Share target for 2025.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of
pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine
has funded or will fund the following specific infrastructure improvements.
Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to
enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing
intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by the
City for the development of an attractive, landscaped passive park/green space with a clearly marked
and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required
amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford
Medicine to comply with this Development Agreement provision. As required by Development Agreement
Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the
City’s expenditures from this fund, and the purposes for which the expenditures were used.
In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary
path with associated lighting, landscaping / green space, benches, and flower borders from the transit
center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds
remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in
the future.
Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and
within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El
Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider
bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and
prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund
on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used. The City is required to construct the improvements
prior to issuance of the first Hospital Occupancy Permit, currently anticipated to be issued in late 2017.
The City has developed a design for bicycle enhancements along Quarry Road, but as agreed to with
Stanford Medicine, is delaying implementation of these improvements until planned utility trenching to the
Medical Center (currently underway) is complete.
Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian
connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to
Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy
permit. Construction of the improvements completed in November 2017, in advance of issuance of the first
Hospital Occupancy permit.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing
Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto
infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the
Development Agreement, this contribution has been made in three equal payments. The first payment, in
the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made
on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit;
and the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of
the first Hospital occupancy permit. As required by Development Agreement Section 12(d), the City will
provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from
this fund, and the purposes for which the expenditures were used.
The City will use $1,720,488 of these funds in the same manner as funds collected under the City’s
housing fee ordinance.
CLIMATE CHANGE
Section 5(f). Climate Change Fund
Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs
for a sustainable community, including programs identified in the City’s Climate Action Plan, carbon
credits, and investments in renewable energy and energy conservation. As required by the Development
Agreement, this contribution has been made in three equal payments. The first payment, in the amount
of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December
5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final
payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital
occupancy permit. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used.
SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval
Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required
by the project approvals, subject to modifications allowed by the Development Agreement, and has taken
several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval
encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in
the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
In order to implement, monitor, and report on the implementation of this diverse array of conditions,
Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking
and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring
information and documentation, and are updated by the Stanford Medicine project teams on a regular
basis, and reviewed by the City.
Note that, as authorized by Development Agreement Section 6(p), the Lucile Packard Children’s Hospital
requested changes in timing of performance for three Conditions of Approval otherwise required to be
complete prior to Hospital occupancy; these requests were conditionally approved by the City, and the
three affected Conditions are anticipated to be satisfied no later than December 21, 2018, as agreed to by
the City and the SUMC Parties.
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CONCLUSION
As the Renewal Project completes its seventh year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to forge ahead.
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PREPARED FOR THE CITY OF PALO ALTO | JULY 5, 2019
2018-19 ANNUAL REPORT
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CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2018-2019 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
NEW STANFORD HOSPITAL 4
SCHOOL OF MEDICINE 5
NET NEW SQUARE FOOTAGE 6
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7
HEALTH CARE BENEFITS 7
SECTION 5(a)(ii). FUND FOR HEALTHCARE SERVICES 7
SECTION 5(a)(iii). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7
PALO ALTO FISCAL BENEFITS 8
SECTIONS 5(b)(i) AND 5(b)(ii). PAYMENT OF SALES AND USE TAXES 8
SECTION 5(b)(iii). FUNDING OF OPERATING DEFICIT 9
SECTION 5(b)(iv). PAYMENT OF UTILITY USER TAX 9
SECTION 5(b)(v). SCHOOL FEES 9
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 9
SECTION 5(c)(ii). MENLO PARK TRAFFIC MITIGATION 9
SECTION 5(c)(iii). EAST PALO ALTO VOLUNTARY MITIGATION 10
SECTION 5(c)(iv). CONTRIBUTIONS TO AC TRANSIT 10
SECTION 5(c)(v). OPTICOM PAYMENTS 10
SECTION 5(c)(vi). CALTRAIN GO PASSES 11
SECTION 5(c)(vii). MARGUERITE SHUTTLE SERVICE 11
SECTION 5(c)(viii). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11
SECTION 5(c)(ix). MONITORING OF TDM PROGRAMS 12
LINKAGES 13
SECTION 5(d)(i). INTERMODAL TRANSIT FUND 13
SECTION 5(d)(ii). QUARRY ROAD FUND 13
SECTION 5(d)(iii). STANFORD BARN CONNECTION 13
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 14
SECTION 5(e). 14
CLIMATE CHANGE 14
SECTION 5(f). CLIMATE CHANGE FUND 14
SATISFACTION OF CONDITIONS OF APPROVAL 14
SECTION 5(h). SATISFACTION OF ALL CONDITIONS OF APPROVAL 14
CONCLUSION 16
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ANNUAL REPORT 2018-19 1
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine)—comprised
of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children’s Hospital, and
Stanford University—entered into a Development Agreement with the City of Palo Alto, committing to
provide a range of community benefits in exchange for vested development rights to develop and use the
Stanford Medicine Renewal and Replacement Project (“Renewal Project”) facilities in accordance with
the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.
The Renewal Project—driven by a growing demand for healthcare services, state-mandated seismic
safety requirements, and the need to replace outmoded facilities with modern, technologically advanced
spaces—holds the potential to transform the way that healthcare is delivered and research is conducted.
Today, eight years after the execution of the Development Agreement, the Lucile Packard Children’s
Hospital Expansion is now open for patient care, and the new Stanford Hospital is anticipated to open for
patient care in late 2019. Meanwhile, the School of Medicine has begun the first phase of development
of its replacement facilities, with its BioMedical Innovations building anticipated to be complete in Fall
2019.
Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of
the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in
advancing the goals of both Stanford Medicine and the broader community.
EXECUTIVE SUMMARY
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The Palo Alto City Council’s unanimous approval of the entitlements for the Stanford Medicine
Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new
and replacement facilities for Stanford Medicine. The project approvals—including new zoning for the
Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a
Development Agreement—allow for the construction of approximately 1.3 million net new square feet of
hospital facilities, clinics, medical offices, and medical research spaces, and will enable the Hospitals to
optimize the delivery of healthcare services to patients, and maintain their position as leading providers of
world-class healthcare.
In order to facilitate this important replacement and expansion work, the Stanford Medicine parties
entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive
package of community benefits and additional development conditions. In exchange for these benefits,
the City has vested for a period of 30 years Stanford Medicine’s rights to develop and use the property
in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent
approvals.
The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance,
and require that Stanford Medicine submit an Annual Report to the City of Palo Alto’s Director of Planning
and Community Environment each year within 30 days of the anniversary of the agreement effective
date (June 6, 2011). The Annual Report is to summarize Stanford Medicine’s progress on the Renewal
Project, including a list of net new square footage for which a certificate of occupancy has been received,
and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in
Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.
Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report,
to provide an accounting of the City’s balances and expenditures from each of the City Funds and how
they were used.
BACKGROUND AND PURPOSE
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ANNUAL REPORT 2018-19 3
The Renewal Project continues to progress, with a major milestone reached in late 2017 with the opening
of the Lucile Packard Children’s Hospital Expansion. The New Stanford Hospital is nearing completion,
and construction of the first new School of Medicine facility is also nearing completion. The section to
follow provides an overview of central goals for the project elements that presently are under construction
or nearing construction, a synopsis of progress to date, as well as a preview of near-term upcoming
activities.
LUCILE PACKARD CHILDREN’S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard
Children’s Hospital opened an expanded facility in late 2017. The new hospital, located adjacent to the
preexisting Packard Children’s Hospital, provides patients and doctors with the most modern clinical
advancements and technology, while also creating a more patient- and family-centered environment
of care, with additional single-patient rooms and more spaces for families to be with their child during
treatment and recovery.
The Packard Children’s expansion features a new entrance lobby, public concourse with dining, three
floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural
light and views, and the exterior grounds—more than 3.5 acres of outdoor areas and gardens—provide a
park-like setting for patients, families, and visitors.
In December 2017 the new facility received its license from the State Department of Public Health; this
constituted issuance of an occupancy permit for purposes of the Development Agreement. Certain areas
of the new Hospital remain under construction, including the Bass Center for Childhood Cancer and
Blood Diseases on the 5th floor, and the Betty Irene Moore Children’s Outpatient Heart Center on the 1st
floor (both anticipated to complete in Fall 2019).
2018-2019 SUMMARY OF PROGRESS
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2018-2019 SUMMARY OF PROGRESS
NEW STANFORD HOSPITAL
Stanford Health Care is constructing new and replacement hospital facilities that will usher in a new era
of advanced patient care. Growth in patient volumes and rapidly changing medical technology have
rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety
requirements have accelerated the need to construct replacement facilities.
The New Stanford Hospital will substantially increase capacity, and will also address a rapidly advancing
medical landscape. High-tech spaces such as Surgery, Radiology, and Intensive Care will be replaced
to accommodate the latest advances in medical technology, while still retaining the flexibility to adapt
to future innovations. Facilities will feature new patient rooms, an enlarged Level-1 trauma center
and Emergency Department, and new surgical, diagnostic, and treatment rooms. And foremost, the
new facility will create a healing environment responsive to the needs of patients, visitors, and staff.
Upper-level pavilions will feature light-filled patient rooms, and a mid-level garden floor will offer dining,
conference, and educational facilities, as well as social and spiritual support spaces.
Substantial progress has been made on the New Stanford Hospital project over the past year. Interior
finish work is underway, including painting and flooring and lighting installation. Furniture installation has
now begun as well, including patient beds and lounge seating; medical equipment installation is also in
progress. Outside the Hospital, landscaping work is nearing completion, and exterior art installation is
underway, including the centerpiece of the arrival plaza, a 28’ tall sculpture consisting of three nested
geodesic spheres and a series of LED lights that subtly change color and luminosity. Meanwhile, at the
adjacent New Stanford Hospital Garage, interior construction of the rooftop pavilions and the rooftop
landscape installation is complete; a Certificate of Occupancy for the Garage is anticipated in Summer
2019.
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ANNUAL REPORT 2018-19 5
SCHOOL OF MEDICINE
The Stanford University School of Medicine will replace its outmoded research buildings with new
state-of-the-art facilities designed to support contemporary translational research. The new facilities
will accommodate 21st century medical advancements and enable the development of new medical
innovations. The new buildings will feature integrated laboratory suites, with easier access between
labs and support facilities, enabling transparency, flexibility, and collaboration. The new facilities will be
surrounded by landscaped areas and tree-lined walkways.
The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”) is
underway, with substantial completion anticipated in Summer 2019. Interior finish work is currently in
progress, including installation of millwork and lab casework. On the exterior, terra cotta and metal panel
installation is underway, and site work continues along Pasteur Drive.
2018-2019 SUMMARY OF PROGRESS 2018-2019 SUMMARY OF PROGRESS
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2018-2019 SUMMARY OF PROGRESS
NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has
been issued.
PROJECT COMPONENT GROSS SQUARE
FOOTAGE
NEW STANFORD HOSPITAL
1101 Welch demolished (40,100)
Total (40,100)
LUCILE PACKARD CHILDREN’S HOSPITAL EXPANSION
701 Welch demolished (56,300)
703 Welch demolished (23,500)
Lucile Packard Children’s Hospital Expansion 446,088
Total 366,288
SCHOOL OF MEDICINE
None 0
HOOVER PAVILION
Misc. shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB) 91,605
Total 77,774
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This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
their obligations under Section 5 of the Development Agreement.
HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to
the community, as both a global leader in medical care and research, and as a community healthcare
services provider. The Renewal Project enables Stanford Medicine to continue its important work, and
the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new
hospital facilities will provide critical emergency preparedness and response resources for the community
in the event of an earthquake, pandemic, or other major disaster.
Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase
to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be
reconciled with the construction use tax payments as described in Development Agreement Section 5(b)
(ii)(C), and will be spent between 2026 and 2036.
Section 5(a)(iii). Fund for Community Health and Safety Programs
Stanford Medicine has contributed a single lump-sum payment of $4 million to establish a Community
Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected
community health programs that benefit residents of the City, including the Project Safety Net Program,
a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be
established to evaluate proposals regarding the other specific programs to receive funding, composed
of two representatives selected by Stanford Medicine and two representatives selected by the City; this
committee shall make annual recommendations to the City Council regarding proposed disbursements
from the Community Health and Safety Program Fund, and the City Council shall use its reasonable
discretion to decide whether to accept, reject, or modify the joint committee recommendations.
Stanford Medicine provided the entire required contribution to the Community Health and Safety
Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with
this Development Agreement provision. As required by Development Agreement Section 12(d), the City
will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures
from this fund, and the purposes for which the expenditures were used.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The
project is expected to generate $8.1 million in sales and use tax revenues for the City, and multiple
mechanisms have been put into place to ensure that this target is met. The Development Agreement also
provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City’s
operating deficit, and the payment of utility user taxes and school fees.
Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes
As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales
and Use Tax monitoring report to the City on June 30, 2019. The Stanford Medicine parties will continue
to submit such a report annually during the construction period for the Renewal Project so that the City
can determine the share of construction use taxes that it has received as a result of the Renewal Project.
Each year, within 60 days of receiving the monitoring report, the City will provide its determination of the
amount of construction use taxes that it has received as a result of the Renewal Project during the pre-
ceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct a
reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes
as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).
To date, Stanford Medicine has taken the following steps detailed below to maximize the City’s allocation
of sales and use taxes associated with Project construction and operation. Documentation of each of
these items is included in the 2018 construction use tax monitoring report already submitted.
• Stanford Medicine has obtained all permits and licenses necessary to maximize the City’s allocation
of construction use taxes derived from the project, including California Seller’s Permits and Use Tax
Direct Pay Permits. Copies of permits and licenses are attached to the 2018 monitoring report.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of sale of all fixtures furnished or installed as part of the project.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of use of all materials used in the construction of the project.
• Stanford Medicine has required all contractors and subcontractors to allocate the local sales and
use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to
require contractors and subcontractors to complete and file any forms required by the State Board of
Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their existing
facilities in order to increase the City tax allocation for the Hospitals’ purchases. The Hospitals will
maintain the use tax direct pay permit for the life of the project.
• Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales
and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation,
allocation, reporting and payment of sales and use taxes derived from the Project.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the
City resulting from construction and operation of the project, Stanford Medicine has provided to the City a
single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No
further action is required by Stanford Medicine to comply with this Development Agreement provision.
Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas,
and water charges allocable to new construction completed as part of the project for the life of the project.
This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5
percent utility user tax is currently being paid by Stanford Medicine.
Section 5(b)(v). School Fees
Stanford Medicine will pay to the City—which is then to forward to the Palo Alto Unified School District—
school fees upon issuance of each building permit from the City or OSHPD, in the amount that is
generally applicable to non-residential development at the time of payment based upon net new square
footage, as defined in the Development Agreement.
School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802,
respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for
additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional
payment of school fees in the amount of $16,119 was made to account for the incremental square
footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally
planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for
incremental square footage for the New Stanford Hospital Garage.
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full
project buildout. Already, Stanford Medicine provides a robust transportation demand management
program, offering a variety of incentives for employees to forego driving alone to work. As required by the
Development Agreement, Stanford Medicine has taken the additional actions outlined below.
Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in
connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable
neighborhoods and communities and affordable housing. This contribution has been made in three
equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of
$1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital
foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017,
within 30 days from issuance of the first Hospital occupancy permit. No further action is required by
Stanford Medicine to comply with this Development Agreement provision.
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Section 5(c)(iii). East Palo Alto Voluntary Mitigation
Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be
used for roadway and traffic signal improvements on University Avenue. This payment was made on
August 19, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. In the event that Stanford Medicine does not meet alternative transportation mode
goals specified in the Development Agreement by 2025 and is assessed a $4 million payment under
Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment
to the City of East Palo Alto.
Section 5(c)(iv). Contributions to AC Transit
The Hospitals committed to the following actions within 30 days from issuance of the first Hospital
occupancy permit, and have fulfilled these commitments as outlined below:
• The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital
improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals
offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was
accepted, and the payment was made on January 5, 2018.
• The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not to
exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus service
to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals have commenced annual
payments to AC Transit for purposes of U-Line operating costs.
• In order to encourage Hospital employees living in the East Bay to use public transit for their
commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the Ardenwood
Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)
(iv)(C)). From May 2014 to April 2018, a 100-space park-and-ride facility on Kaiser Drive at Campus
Drive in Fremont (0.9 mile from Ardenwood Park & Ride) was under lease for the use of Stanford
University and Hospital commuters, thus satisfying this requirement ahead of schedule. In March
2018, Stanford was provided with 30-days’ notice to vacate the facility, and immediately commenced
a search for replacement parking facilities. An equivalent temporary East Bay park and ride solution
was secured in the vicinity of Ardenwood, and is in use by SUMC commuters from the East Bay. The
Hospitals are in the process of securing a long-term location.
Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay
$11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the
following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill
Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West;
Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this commitment
was made, the City determined that Opticom systems are outdated, and proposed the purchase and
installation of the ATMS.now Emergency.now package, which would allow coordinated prioritization at all
City-maintained traffic signals. Agreement to this change in traffic signal priority system is documented in
a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which was accepted and
agreed to by the SUMC Parties by countersigned letter. The required payment was made on December
12, 2017, within 30 days of issuance of the first Hospital occupancy permit.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for
all existing and new Hospital employees who work more than 20 hours per week at a cost of up to
approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to
continue for a period of 51 years.
Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and
began providing free GO Passes to employees commencing on January 1, 2012. Further details
regarding the GO Pass purchase can be found in the Alternative Mode Share report, which was
submitted to the City on May 31, 2019.
Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase
of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased
demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In
addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount
of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand
for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid
shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments
the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.
Section 5(c)(viii). Transportation Demand Management Coordinator
The Development Agreement requires that the Hospitals employ an onsite qualified Transportation
Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015,
and continuing through the life of the Renewal Project.
Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated
the hiring of the TDM Coordinator, filling this position in March 2012. In September 2018, the position
was vacated, and the Senior Operations Manager of the Hospitals’ Parking & Access department is
currently assuming the responsibilities of this position with support from the TDM team at P&TS. The
Senior Operations Manager is currently responsible for overseeing the analysis, development, and
implementation of programs to advance the Hospitals’ TDM objectives while the TDM Coordinator
position remains open. Specific duties that are carried out in collaboration with P&TS include raising
awareness among commuters about alternative transportation options and Stanford’s commute incentive
programs; providing alternative commute planning assistance and responses to customer inquiries;
writing and editing electronic and print communications; coordinating and staffing outreach events, such
as free transit pass distributions and employee fairs; and providing alternative transportation information
and resources at new employee orientations.
Upon opening of the New Stanford Hospital, there will be a new Transportation Hub, which will serve as
an alternative transportation information center available to both staff and patients. The Transportation
Hub will incorporate a monitor screen (“Transit Screen”) that will display all mobility options in the area,
at a glance, in real time. In conjunction with opening the Hub, the Hospitals are recruiting new TDM
personnel to carry out the work currently overseen by the Senior Operations Manager.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees
employed over 20 hours per week; the number of employees using an alternative transportation mode as
documented by a study or survey to be completed by the Hospitals using a method mutually agreeable
to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode Targets identified in the Development Agreement. The Development Agreement specifies
payments to be made in the event that such targets are not met during particular time periods. Stanford
Medicine submitted its 2019 Alternative Mode Share Report to the City on May 31, 2019; this report
shows an alternative mode split of 33.8% for the Hospitals. This mode split exceeds the Alternative Mode
Share target for 2021.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of
pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine
has funded the following specific infrastructure improvements.
Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to
enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing
intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by the
City for the development of an attractive, landscaped passive park/green space with a clearly marked
and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required
amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford
Medicine to comply with this Development Agreement provision. As required by Development Agreement
Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the
City’s expenditures from this fund, and the purposes for which the expenditures were used.
In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary
path with associated lighting, landscaping / green space, benches, and flower borders from the transit
center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds
remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in
the future.
Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and
within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El
Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider
bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and
prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund
on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used. The City was required to construct the improvements
prior to issuance of the first Hospital Occupancy Permit, but as agreed to with Stanford Medicine, delayed
implementation of these improvements until utility trenching to the Medical Center was complete. In late
2018, the City completed these improvements, including enhanced crosswalks and bicycle striping and
signage.
Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian
connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to
Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy
permit. Construction of the improvements completed in November 2017, in advance of issuance of the
first Hospital Occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing
Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto
infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the
Development Agreement, this contribution has been made in three equal payments. The first payment, in
the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made
on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and
the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of the
first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision. As required by Development Agreement Section 12(d), the City will
provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from
this fund, and the purposes for which the expenditures were used.
The City will use $1,720,488 of these funds in the same manner as funds collected under the City’s
housing fee ordinance.
CLIMATE CHANGE
Section 5(f). Climate Change Fund
Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs
for a sustainable community, including programs identified in the City’s Climate Action Plan, carbon
credits, and investments in renewable energy and energy conservation. As required by the Development
Agreement, this contribution has been made in three equal payments. The first payment, in the amount
of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December
5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final
payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital
occupancy permit. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used.
SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval
Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required
by the project approvals, subject to modifications allowed by the Development Agreement, and has taken
several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval
encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in
the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
In order to implement, monitor, and report on the implementation of this diverse array of conditions,
Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking
and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring
information and documentation, and are updated by the Stanford Medicine project teams on a regular
basis, and reviewed by the City.
Note that, as authorized by Development Agreement Section 6(p), the Lucile Packard Children’s Hospital
requested changes in timing of performance for three Conditions of Approval otherwise required to be
complete prior to Hospital occupancy; these requests were conditionally approved by the City, and the
three affected Conditions were satisfied by December 21, 2018, as agreed to by the City and the SUMC
Parties.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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CONCLUSION
As the Renewal Project completes its eighth year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to forge ahead.
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PREPARED FOR THE CITY OF PALO ALTO | JULY 6, 2020
2019-20 AN N UAL REPORT
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CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2019-2020 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
NEW STANFORD HOSPITAL 4
SCHOOL OF MEDICINE 5
NET NEW SQUARE FOOTAGE 6
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7
HEALTH CARE BENEFITS 7
SECTION 5(a)(ii). FUND FOR HEALTHCARE SERVICES 7
SECTION 5(a)(iii). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7
PALO ALTO FISCAL BENEFITS 8
SECTIONS 5(b)(i) AND 5(b)(ii). PAYMENT OF SALES AND USE TAXES 8
SECTION 5(b)(iii). FUNDING OF OPERATING DEFICIT 9
SECTION 5(b)(iv). PAYMENT OF UTILITY USER TAX 9
SECTION 5(b)(v). SCHOOL FEES 9
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 9
SECTION 5(c)(ii). MENLO PARK TRAFFIC MITIGATION 9
SECTION 5(c)(iii). EAST PALO ALTO VOLUNTARY MITIGATION 10
SECTION 5(c)(iv). CONTRIBUTIONS TO AC TRANSIT 10
SECTION 5(c)(v). OPTICOM PAYMENTS 10
SECTION 5(c)(vi). CALTRAIN GO PASSES 11
SECTION 5(c)(vii). MARGUERITE SHUTTLE SERVICE 11
SECTION 5(c)(viii). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11
SECTION 5(c)(ix). MONITORING OF TDM PROGRAMS 12
LINKAGES 13
SECTION 5(d)(i). INTERMODAL TRANSIT FUND 13
SECTION 5(d)(ii). QUARRY ROAD FUND 13
SECTION 5(d)(iii). STANFORD BARN CONNECTION 13
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 14
SECTION 5(e). 14
CLIMATE CHANGE 14
SECTION 5(f). CLIMATE CHANGE FUND 14
SATISFACTION OF CONDITIONS OF APPROVAL 14
SECTION 5(h). SATISFACTION OF ALL CONDITIONS OF APPROVAL 14
CONCLUSION 16
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ANNUAL REPORT 2019-20 1
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine)—comprised
of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children’s Hospital, and
Stanford University—entered into a Development Agreement with the City of Palo Alto, committing to
provide a range of community benefits in exchange for vested development rights to develop and use the
Stanford Medicine Renewal and Replacement Project (“Renewal Project”) facilities in accordance with
the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.
The Renewal Project—driven by a growing demand for healthcare services, state-mandated seismic
safety requirements, and the need to replace outmoded facilities with modern, technologically advanced
spaces—is transforming the way that healthcare is delivered and research is conducted.
Today, nine years after the execution of the Development Agreement, the Lucile Packard Children’s
Hospital Expansion and the new Stanford Hospital are now open for patient care. Meanwhile, the School
of Medicine has nearly completed the first phase of development of its replacement facilities, with its
BioMedical Innovations building anticipated to receive certificate of occupancy in Fall 2020.
Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of
the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in
advancing the goals of both Stanford Medicine and the broader community.
EXECUTIVE SUMMARY
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The Palo Alto City Council’s unanimous approval of the entitlements for the Stanford Medicine
Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new
and replacement facilities for Stanford Medicine. The project approvals—including new zoning for the
Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a
Development Agreement—allow for the construction of approximately 1.3 million net new square feet of
hospital facilities, clinics, medical offices, and medical research spaces, and will enable the Hospitals to
optimize the delivery of healthcare services to patients, and maintain their position as leading providers of
world-class healthcare.
In order to facilitate this important replacement and expansion work, the Stanford Medicine parties
entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive
package of community benefits and additional development conditions. In exchange for these benefits,
the City has vested for a period of 30 years Stanford Medicine’s rights to develop and use the property
in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent
approvals.
The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance,
and require that Stanford Medicine submit an Annual Report to the City of Palo Alto’s Director of Planning
and Community Environment each year within 30 days of the anniversary of the agreement effective
date (June 6, 2011). The Annual Report is to summarize Stanford Medicine’s progress on the Renewal
Project, including a list of net new square footage for which a certificate of occupancy has been received,
and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in
Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.
Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report,
to provide an accounting of the City’s balances and expenditures from each of the City Funds and how
they were used.
BACKGROUND AND PURPOSE
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ANNUAL REPORT 2019-20 3
The Renewal Project continues to progress, with its most recent major milestone reached in late 2019
with the opening of the New Stanford Hospital. The construction of the first new School of Medicine
facility is also nearing completion. The section to follow provides an overview of central goals for the
project elements that presently are under construction or nearing construction, a synopsis of progress to
date, as well as a preview of near-term upcoming activities.
LUCILE PACKARD CHILDREN’S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard
Children’s Hospital opened an expanded facility in late 2017. The new Main building, located adjacent
to the preexisting Lucile Packard Children’s Hospital (West building), provides patients and doctors with
the most modern clinical advancements and technology, while also creating a more patient- and family-
centered environment of care, with additional single-patient rooms and more spaces for families to be
with their child during treatment and recovery.
The LPCH Main building features a new entrance lobby, public concourse with dining, three floors of
nursing units, and new patient rooms. Spaces have been designed with an attention to natural light and
views, and the exterior grounds—more than 3.5 acres of outdoor areas and gardens—provide a park-like
setting for patients, families, and visitors.
In December 2017, the new facility received its license from the State Department of Public Health; this
constituted issuance of an occupancy permit for purposes of the Development Agreement. In Winter
2019, additional shelled spaces within the Main building were completed and opened to patient care,
including the Bass Center for Childhood Cancer and Blood Diseases on the 5th floor, and the Betty Irene
Moore Children’s Outpatient Heart Center on the 1st floor.
2019-2020 SUMMARY OF PROGRESS
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2019-2020 SUMMARY OF PROGRESS
NEW STANFORD HOSPITAL
Stanford Health Care is constructing new and replacement hospital facilities to usher in a new era
of advanced patient care. Growth in patient volumes and rapidly changing medical technology have
rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety
requirements have accelerated the need to construct replacement facilities.
In November 2019, Stanford Health Care’s first phase of facilities renewal completed as the New
Stanford Hospital received its license from the State Department of Public Health and opened to patient
care. The facility features an advanced interventional platform that combines surgical, procedural
and imaging technologies to improve the precision of medical care. The interventional platform brings
together 20 operating rooms (ORs), 2 hybrid ORs, 8 interventional, radiology and image-guidance
rooms, 3 MRIs, 3 CTs and 1 intra-operative MRI. Here multiple surgical and procedural specialists—
cardiologists, gastroenterologists, surgeons, radiologists and pulmonologists —are brought together into
one common area. The space is further integrated with a centralized pre-operative and post-operative
prep and recovery that allows for coordinated patient care throughout the surgical process.
An expanded Emergency Department at the new Hospital serves adults and trauma patients in private
and semi-private patient bays, with imaging next door for expediency. Larger patient treatment areas
provide space for families. Pediatric patients seeking emergency services are now treated in a new
pediatric emergency department at the preexisting Stanford Hospital. As the only Level-1 Trauma Center
between San Francisco and San Jose, the new Stanford Hospital is built to withstand the strongest
earthquake and designed for readiness in the event of disaster. The parking structure connected to
the Emergency Department converts to a triage and treatment center in the event of a large-scale
emergency.
At the center of the new Stanford Hospital is a
floor dedicated to providing support and comfort
to patients, families, and caregivers, featuring a
Family Resource Center, Stanford Health Library,
interfaith chapel, and rooftop gardens. The new
Stanford Hospital places value on the healing
qualities of art and nature. Captivating murals
and large-scale art pieces displayed throughout
the hospital inspire healing and hope. Four acres
of gardens surround the new hospital, providing
patients, visitors and staff with access to natural
settings, light and open space, all proven to help
promote health and well-being.
With the new Stanford Hospital now complete,
Stanford Health Care is beginning a series of
renovations within its existing facilities, including
the conversion of shared patient rooms into
private rooms; this renovation work is planned to
proceed in phases over the next several years.
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ANNUAL REPORT 2019-20 5
SCHOOL OF MEDICINE
The Stanford University School of Medicine is replacing its outmoded research buildings with new
state-of-the-art facilities designed to support contemporary translational research. The new facilities
will accommodate 21st century medical advancements and enable the development of new medical
innovations. The new buildings will feature integrated laboratory suites, with easier access between
labs and support facilities, enabling transparency, flexibility, and collaboration. The new facilities will be
surrounded by landscaped areas and tree-lined walkways.
The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”)
features four above-grade floors of research labs and light-filled gathering places, and a lower basement
level for utility support, as well as a connective tunnel to other nearby research facilities. Building
interiors were designed for best practices for laboratory design safety and space allocation, with a
flexible template to maximize efficient use of space and ease of renovation. The four above-grade floors
provide space for a mix of disciplines, basic and clinical research, wet and dry labs, and leading-edge
translational studies. BMI-1 is now substantially complete, with a certificate of occupancy anticipated in
Fall 2020.
2019-2020 SUMMARY OF PROGRESS 2019-2020 SUMMARY OF PROGRESS
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6 ANNUAL REPORT 2019-20
2019-2020 SUMMARY OF PROGRESS
NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has
been issued.
PROJECT COMPONENT GROSS SQUARE FOOTAGE
NEW STANFORD HOSPITAL
1101 Welch demolished (40,100) 500 Pasteur 719,261 Total 679,161
LUCILE PACKARD CHILDREN’S HOSPITAL EXPANSION
701 Welch demolished (56,300)
703 Welch demolished (23,500) Lucile Packard Children’s Hospital Expansion 446,088 Total 366,288
HOOVER PAVILION
Misc. shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB) 91,605
Total 77,774 1 Final gross floor area calculations for 500 Pasteur are currently under City review as a revision to Building Permit
#12000-00444.
1
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ANNUAL REPORT 2019-20 7
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
their obligations under Section 5 of the Development Agreement.
HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to
the community, as both a global leader in medical care and research, and as a community healthcare
services provider. The Renewal Project enables Stanford Medicine to continue its important work, and
the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new
hospital facilities provide critical emergency preparedness and response resources for the community in
the event of an earthquake, pandemic, or other major disaster.
Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase
to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be
reconciled with the construction use tax payments as described in Development Agreement Section 5(b)
(ii)(C), and will be spent between 2026 and 2036.
Section 5(a)(iii). Fund for Community Health and Safety Programs
Stanford Medicine has contributed a single lump-sum payment of $4 million to establish a Community
Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected
community health programs that benefit residents of the City, including the Project Safety Net Program,
a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be
established to evaluate proposals regarding the other specific programs to receive funding, composed
of two representatives selected by Stanford Medicine and two representatives selected by the City; this
committee shall make annual recommendations to the City Council regarding proposed disbursements
from the Community Health and Safety Program Fund, and the City Council shall use its reasonable
discretion to decide whether to accept, reject, or modify the joint committee recommendations.
Stanford Medicine provided the entire required contribution to the Community Health and Safety Program
Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this
Development Agreement provision, though Stanford Medicine welcomes the opportunity to participate in
the joint committee to evaluate proposals for programs to receive funding. As required by Development
Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an
accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were
used.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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8 ANNUAL REPORT 2019-20
PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The
project is expected to generate $8.1 million in sales and use tax revenues for the City, and multiple
mechanisms have been put into place to ensure that this target is met. The Development Agreement also
provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City’s
operating deficit, and the payment of utility user taxes and school fees.
Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes
As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales
and Use Tax monitoring report to the City on June 30, 2020. The Stanford Medicine parties will continue
to submit such a report annually during the construction period for the Renewal Project so that the City
can determine the share of construction use taxes that it has received as a result of the Renewal Project.
Each year, within 60 days of receiving the monitoring report, the City will provide its determination of the
amount of construction use taxes that it has received as a result of the Renewal Project during the pre-
ceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct a
reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes
as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).
To date, Stanford Medicine has taken the following steps detailed below to maximize the City’s allocation
of sales and use taxes associated with Project construction and operation. Documentation of each of
these items is included in the 2019 construction use tax monitoring report already submitted.
• Stanford Medicine has obtained all permits and licenses necessary to maximize the City’s allocation
of construction use taxes derived from the project, including California Seller’s Permits and Use Tax
Direct Pay Permits. Copies of permits and licenses are attached to the 2019 monitoring report.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of sale of all fixtures furnished or installed as part of the project.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of use of all materials used in the construction of the project.
• Stanford Medicine has required all contractors and subcontractors to allocate the local sales and
use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to
require contractors and subcontractors to complete and file any forms required by the State Board of
Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their existing
facilities in order to increase the City tax allocation for the Hospitals’ purchases. The Hospitals will
maintain the use tax direct pay permit for the life of the project.
• Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales
and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation,
allocation, reporting and payment of sales and use taxes derived from the Project.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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ANNUAL REPORT 2019-20 9
Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the
City resulting from construction and operation of the project, Stanford Medicine has provided to the City a
single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No
further action is required by Stanford Medicine to comply with this Development Agreement provision.
Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas,
and water charges allocable to new construction completed as part of the project for the life of the project.
This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5
percent utility user tax is currently being paid by Stanford Medicine.
Section 5(b)(v). School Fees
Stanford Medicine will pay to the City—which is then to forward to the Palo Alto Unified School District—
school fees upon issuance of each building permit from the City or OSHPD, in the amount that is
generally applicable to non-residential development at the time of payment based upon net new square
footage, as defined in the Development Agreement.
School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802,
respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for
additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional
payment of school fees in the amount of $16,119 was made to account for the incremental square
footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally
planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for
incremental square footage for the New Stanford Hospital Garage.
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full
project buildout. Already, Stanford Medicine provides a robust transportation demand management
program, offering a variety of incentives for employees to forego driving alone to work. As required by the
Development Agreement, Stanford Medicine has taken the additional actions outlined below.
Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in
connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable
neighborhoods and communities and affordable housing. This contribution has been made in three
equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of
$1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital
foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017,
within 30 days from issuance of the first Hospital occupancy permit. No further action is required by
Stanford Medicine to comply with this Development Agreement provision.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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10 ANNUAL REPORT 2019-20
Section 5(c)(iii). East Palo Alto Voluntary Mitigation
Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be
used for roadway and traffic signal improvements on University Avenue. This payment was made on
August 19, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. In the event that Stanford Medicine does not meet alternative transportation mode
goals specified in the Development Agreement by 2025 and is assessed a $4 million payment under
Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment
to the City of East Palo Alto.
Section 5(c)(iv). Contributions to AC Transit
The Hospitals committed to the following actions within 30 days from issuance of the first Hospital
occupancy permit, and have fulfilled these commitments as outlined below:
• The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital
improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals
offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was
accepted, and the payment was made on January 5, 2018.
• The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not to
exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus service
to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals have commenced annual
payments to AC Transit for purposes of U-Line operating costs.
• In order to encourage Hospital employees living in the East Bay to use public transit for their
commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the Ardenwood
Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)
(iv)(C)). From May 2014 to April 2018, a 100-space park-and-ride facility on Kaiser Drive at Campus
Drive in Fremont (0.9 mile from Ardenwood Park & Ride) was under lease for the use of Stanford
University and Hospital commuters, thus satisfying this requirement ahead of schedule. In March
2018, Stanford was provided with 30-days’ notice to vacate the facility, and immediately commenced
a search for replacement parking facilities. An equivalent temporary East Bay park and ride solution
was secured in the vicinity of Ardenwood, and has been in use by Stanford Medicine commuters from
the East Bay. The Hospitals have now secured a long-term location on Fircrest Street in Newark, and
the new facility will open to Stanford Medicine commuters in July 2020.
Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay
$11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the
following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill
Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West;
Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this commitment
was made, the City determined that Opticom systems are outdated, and proposed the purchase and
installation of the ATMS.now Emergency.now package, which would allow coordinated prioritization at all
City-maintained traffic signals. Agreement to this change in traffic signal priority system is documented in
a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which was accepted and
agreed to by the SUMC Parties by countersigned letter. The required payment was made on December
12, 2017, within 30 days of issuance of the first Hospital occupancy permit.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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ANNUAL REPORT 2019-20 11
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for
all existing and new Hospital employees who work more than 20 hours per week at a cost of up to
approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to
continue for a period of 51 years.
Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and
began providing free GO Passes to employees commencing on January 1, 2012. Annual passes were
purchased again for all existing and new eligible employees for 2020.
Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase
of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased
demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In
addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount
of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand
for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid
shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments
the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.
Section 5(c)(viii). Transportation Demand Management Coordinator
The Development Agreement requires that the Hospitals employ an onsite qualified Transportation
Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015,
and continuing through the life of the Renewal Project.
Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated
the hiring of the TDM Coordinator, filling this position in March 2012. In September 2018, the position
was vacated, and while the position was vacant the Senior Operations Manager of the Hospitals’
Transportation Services department fulfilled the responsibilities of this position with support from the TDM
team at Stanford Transportation. In October 2019, the Transportation Demand Management Coordinator
position was filled again. The TDM Coordinator is responsible for overseeing the analysis, development,
and implementation of programs to advance the Hospitals’ TDM objectives. Specific duties that are
carried out in collaboration with Stanford Transportation include raising awareness among commuters
about alternative transportation options and Stanford’s commute incentive programs; providing alternative
commute planning assistance and responses to customer inquiries; writing and editing electronic and
print communications; coordinating and staffing outreach events, such as free transit pass distributions
and employee fairs; and providing alternative transportation information and resources at new employee
orientations.
In addition, the TDM Coordinator is responsible for overseeing the Transportation Hub within the new
Stanford Hospital. The Transportation Hub serves as an alternative transportation information center
available to both staff and patients, and includes a monitor screen (Transit Screen) that displays all
mobility options in the area at a glance, in real time.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees
employed over 20 hours per week; the number of employees using an alternative transportation mode as
documented by a study or survey to be completed by the Hospitals using a method mutually agreeable
to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode Targets identified in the Development Agreement. The Development Agreement specifies
payments to be made in the event that such targets are not met during particular time periods.
Due to the COVID-19 pandemic, the annual commute survey was not performed in Spring 2020, as
doing so would have generated unrepresentative data, and would have distracted staff from more
immediate needs. The Hospitals requested an extension of time for this TDM monitoring and reporting
requirement, as allowed by Section 6(p) of the Development Agreement, and the City granted this request
on March 27, 2020, with the condition that the Hospitals confirm that the TDM programs outlined in the
prior Alternative Mode Share Report were maintained up until the start of the COVID-19 pandemic; the
Hospitals provided such confirmation on April 3, 2020.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of
pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine
has funded the following specific infrastructure improvements.
Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to
enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing
intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by the
City for the development of an attractive, landscaped passive park/green space with a clearly marked
and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required
amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford
Medicine to comply with this Development Agreement provision. As required by Development Agreement
Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the
City’s expenditures from this fund, and the purposes for which the expenditures were used.
In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary
path with associated lighting, landscaping / green space, benches, and flower borders from the transit
center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds
remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in
the future.
Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and
within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El
Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider
bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and
prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund
on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used. The City was required to construct the improvements
prior to issuance of the first Hospital Occupancy Permit, but as agreed to with Stanford Medicine, delayed
implementation of these improvements until utility trenching to the Medical Center was complete. In late
2018, the City completed these improvements, including enhanced crosswalks and bicycle striping and
signage.
Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian
connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to
Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy
permit. Construction of the improvements completed in November 2017, in advance of issuance of the
first Hospital Occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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14 ANNUAL REPORT 2019-20
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing
Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto
infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the
Development Agreement, this contribution has been made in three equal payments. The first payment, in
the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made
on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and
the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of the
first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision. As required by Development Agreement Section 12(d), the City will
provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from
this fund, and the purposes for which the expenditures were used.
The City will use $1,720,488 of these funds in the same manner as funds collected under the City’s
housing fee ordinance.
CLIMATE CHANGE
Section 5(f). Climate Change Fund
Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs
for a sustainable community, including programs identified in the City’s Climate Action Plan, carbon
credits, and investments in renewable energy and energy conservation. As required by the Development
Agreement, this contribution has been made in three equal payments. The first payment, in the amount
of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December
5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final
payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital
occupancy permit. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used.
SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval
Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required
by the project approvals, subject to modifications allowed by the Development Agreement, and has taken
several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval
encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in
the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit.
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
In order to implement, monitor, and report on the implementation of this diverse array of conditions,
Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking
and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring
information and documentation, and are updated by the Stanford Medicine project teams on a regular
basis, and reviewed by the City.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
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CONCLUSION
As the Renewal Project completes its ninth year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to forge ahead.
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
1 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
DA
Section Description Summary Activity Complies?
Health Care Benefits
5(a)(ii)
Fund for
Healthcare
Services
Financial assistance
for Palo Alto
residents
SUMC establishment of a $3M fund that will
grow to $5.6M by December 31, 2025. Fund
will be used in even increments over a ten-
year period from 2026-2036 to assist Palo
Alto residents who have self-payment
responsibilities beyond their financial
means, as described in Section 5(a)(ii).
Yes, complies – No activity
required in FY 2017-2018,
FY-2018-2019, or FY 2019-
2020.
5(a)(iii)
Fund for
Community
Health and
Safety Programs
$4M fund for
selected community
health programs for
Palo Alto residents
First and only payment of $4M on August
25, 2011 to establish City fund. No joint
committee between City Council and SUMC
established to date to evaluate other
proposals/programs to receive funding, so
no there were no expenditures from this
fund other than on Project Safety Net, as
already specified in the Development
Agreement. .
Yes, complies - Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
Fiscal Benefits
5(b)(i), (ii)
Payment of
Sales and Use
Taxes
Activities to
maximize sales and
use taxes paid to the
City
SUMC contributes to General Fund Sales and
Use Tax revenues via construction-related
activities. The City Auditor reviews the
Construction Sales & Use Tax Monitoring
Report submitted by Stanford Medicine on
Yes, complies - SUMC
submitted the
Construction Sales & Use
Tax Monitoring Report on
June 30 of each year for
Attachment B 9.d
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
2 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
DA
Section Description Summary Activity Complies?
June 30 of each year. The City Auditor
submits a letter to Stanford Medicine each
year that notes local tax received from
SUMC project activities for the year. Based
upon the City Auditor’s review of the annual
Construction Sales and Use Tax Monitoring
Report submitted by SUMC, revenues for
calendar years 2011 through 2019 have
totaled $5,256,026.
the previous calendar year.
The City Auditor sent their
required response each
year. Reconciliation that
ensures that the City
would receive no less than
$8.1M in construction
sales and tax revenue by
December 31, 2025 would
occur starting in August
2026.
5(b)(iii)
Funding of
Operating
Deficit /
Expansion Cost
Mitigation
$2.417M fund to
assure City costs
associated with the
project do not
exceed revenues
resulting from
construction and
operation of the
project.
Payment of $2.417M on August 25, 2011 to
establish fund. No expenditures from this
fund during the reporting period FY 2017-
2018, FY-2018-2019, or FY 2019-2020.
Yes, complies -Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
5(b)(iv) Payment of
Utility Users Tax
5% tax on all
electricity, gas and
water charges on
new construction
Utilities confirmed that billing accounts
were created when new meters were set for
new construction, including NSH, NSH
Garage, LPCH, and BMI, and the Utility Users
Yes, complies.
Attachment B 9.d
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
3 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
DA
Section Description Summary Activity Complies?
Tax has been paid through the normal billing
process for each site.
5(b)(v)
School Fees
Payment of PAUSD
fees for net new
square footage
$342,617 fee paid for LPCH and NSH
expansion in 2012. $7,051 fee paid for NSH
and NSH Garage expansion in July 2013.
$16,119 fee paid for Hoover Medical Office
Building expansion in May 2014. $461.16 fee
paid to account for incremental square
footage for the New Stanford Hospital
Garage.
Yes, complies - SUMC
made payments to PAUSD
for all net new square
footage for which school
fees apply at the time
permit receipt.
Traffic Mitigation and Reduced Vehicle Trips
DA
Section Description Summary Activity Complies?
5(c)(ii)
Menlo Park
Traffic
Mitigation
$3,699,000 payment
for traffic mitigation,
infrastructure,
sustainable
neighborhoods,
affordable housing
First of three $1.23M payments made on
August 19, 2011. Second payment of
$1.23M made on December 5, 2012. Third
and final payment of $1.23M made on
December 14, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH).
Yes, complies - SUMC
made all required
payments to Menlo Park,
including the last and final
payment in FY 2017-2018.
5(c)(iii)
East Palo Alto
Voluntary
Mitigation
$200K for roadway
and signal
$200K payment made on
August 19, 2011. Yes, complies.
Attachment B 9.d
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
4 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
improvements on
University Ave.
5(c)(iv) Contributions
to AC Transit
U-line capital
improvements, low
load factor ratios,
parking spaces at
Ardenwood Park &
Ride
$250K payment made to AC Transit on
January 5, 2018.
SUMC is also invoiced by AC Transit for
payments over the year that total over the
$50K per year discussed in the SUMC
Development Agreement. Payments to AC
Transit are required for the life of the
project.
Since May 2014 and until April 30, 2018,
SUMC Parties leased a park-and-ride facility
on Kaiser Drive near the Ardenwood Park &
Ride. Subsequently, SUMC used an interim
temporary facility through FY 2019-2020.
Yes, complies. Also, a long-
term facility was also
secured soon after the
close of FY 2019-2020.
5(c)(v) Opticom
Payments
$11,200 payment
for Opticom traffic
control system at 7
intersections
$11.2K payment made to the City in FY
2017-2018 within 30 days from issuance of
the first Hospital Occupancy Permit (LPCH).
As the City has upgraded systems, the City
and SUMC agreed through a letter exchange
that the payment could be used for the new
coordinated prioritization signaling at City-
maintained traffic signals.
Yes, complies.
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
5 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
5(c)(vi) Caltrain Go
Passes
SUMC purchase of
passes for all
existing and new
hospital employees
working
>20hrs/week
Go Passes have been purchased per the
Development Agreement since January 1,
2012, including for FY 2017-2018, FY-2018-
2019, and FY 2019-2020.
Yes, complies.
5(c)(vii) Marguerite
Shuttle Service
Purchase of
additional shuttles
to meet demand
Since 2011, SUMC purchased additional
shuttle buses for the Marguerite Shuttle
service which now includes five renewable
diesel-electric hybrid buses and 23 all-
electric buses. Additional all-electric buses
also came online in FY 2017-2018. Shuttles
were running in FY 2017-2018, FY-2018-
2019, and FY 2019-2020.
Yes, complies.
DA
Section Description Summary Activity Complies?
5(c)(viii)
SUMC
Transportation
Demand
Management
(TDM)
Coordinator
SUMC hires
coordinator to
promote alternative
transportation
options
TDM Coordinator was hired in March 2012.
This position has since been elevated to a
TDM Program Manager position and the
position remains filled.
Yes, complies.
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
6 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
5(c)(ix)
Monitoring of
TDM Programs
Yearly report
regarding
alternative transit
mode use
The alternative mode share rate of 38.1% in
FY 2017-2018 and 33.8% in FY 2018-2019
exceeds the alternative mode share target
for 2018 of 30.0% and 2021 target of 33.0%.
Through conditional approval by the City,
the Alternative Mode Share Report was
delayed for FY 2019-2020 due to the COVID-
19 pandemic and Santa Clara County
shelter-in-place orders altering commute
patterns at the time the annual mode share
survey would have been issued in the
March/April 2020 timeframe.
Yes, complies - all interim
targets have been met or
exceeded in FY 2017-2018
and FY-2018-2019. One-
year delay conditionally
approved for FY 2019-
2020. The annual mode
share survey was released
in March 2021 in order to
provide the required
Alternative Mode Share
Report for FY 2020-2021.
Linkages
5(d)(i)
Intermodal
Transit Fund
$2.25M payment to
improve pedestrian
linkages to PA
Intermodal Transit
Center
First and only payment of $2.25M on August
25, 2011 to establish City fund. City
constructed temporary improvements prior
to the issuance of the first Hospital
Occupancy Permit (LPCH) to serve the
linkage goal and functional requirements.
Yes, complies -Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
5(d)(ii) Quarry Road
Fund
$400K payment to
improve pedestrian
linkages along
Quarry Road
First and only payment of $400K on August
25, 2011 to establish City fund. City
constructed the improvements prior to the
issuance of the first Hospital Occupancy
Yes, complies -Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
7 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
Permit (LPCH) to serve the linkage goal and
functional requirements.
5(d)(iii) Stanford Barn
Connection
SUMC budgets up to
$700K for
connections in the
vicinity of barn
SUMC constructed the Stanford Barn
Connection prior to the issuance of the first
Hospital Occupancy Permit (LPCH) to serve
the linkage goal and facilities are fully
operational.
Yes, complies.
Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing
5(e)
Infrastructure,
Sustainable
Neighborhoods
and
Communities,
and Affordable
Housing Fund
$23.2M payment for
these uses
First of three $7,733,333 payments made on
August 19, 2011. Second payment of
$7,733,333 made on December 5, 2012. The
third and final payment of $7,733,333 made
on December 12, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH).
The City expended affordable housing funds
on the Stevenson House project in FY 2013
and the remaining affordable housing funds
were fully exhausted in FY 2020 to support
the Wilton Court Housing Project. The SUMC
contribution to affordable housing is now
exhausted in accordance with Section
5(e)(ii).
Yes, complies. -Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2017-2018
FY 2018-2019
FY 2019-2020
8 SUMC Development Agreement Compliance: FY 2017-2018, FY-2018-2019, or FY 2019-2020
Climate Change
5(f)
Climate Change
– Sustainability
Programs
Benefit Fund
$12M payment for
climate change-
related projects and
programs
First of three $4M payments made on
August 19, 2011. Second payment of $4M
made on December 5, 2012. The third and
final payment of $4M made on December
12, 2017, which was within 30 days from
issuance of the first Hospital Occupancy
Permit (LPCH).
Yes, complies -Fund
activity and balances in FY
2017-2018, FY-2018-2019,
and FY 2019-2020
reported in Attachment C.
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Fiscal Year 2017-2018 Annual Report Supplement
Prepared by the City of Palo Alto
October 12, 2021
Background and Purpose
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, annexation and design applications for the Stanford University Medical Center
Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a
new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital,
construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, roadway
improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development
Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and
the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date.
The Agreement requires an annual report, prepared by SUMC that outlines the activities of the
preceding year and the efforts to fulfill the obligations of the Agreement.
Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a
supplement to the annual report that contains an accounting of the funds described in the Section 5 of
the Agreement (“SUMC Parties’ Promises”) including the fund balances and expenditures and the
purposes for which the expenditures were used.
Public Benefit Fund Accounting
This annual report supplement covers the period during the seventh year of the Agreement: June 6,
2017 through June 6, 2018. Accounting for the funds outlined in Attachment C-1 Part 2 extends through
the end of the City’s Fiscal Year 2018, June 30, 2018.
In summary, the SUMC Parties have paid approximately $44.3 million in public benefit fees to the City
since June 6, 2011 through the FY 2017-2018 reporting period.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii));
• Fund for SUMC Project Operating Deficit (Section 5(b)(iii));
Attachment C-1 – Part 1
9.e
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• Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino
Real/Quarry Road Intersection (Section 5(d)(i));
• Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on
Quarry Road (Section 5(d)(ii));
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)), and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The second payment of $11,733,333 payment on December 5, 2012 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e));
• Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).
The specific funding accounts in Attachment C-1 Part 2 are consistent with Section 5 of the Agreement.
These funds have been assigned a unique cost center number for accounting purposes. Attachment C-1
Part 2 also contains the investment earnings and the earnings allocation to the various cost centers.
Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2018 through June 30,
2018:
Fund for Quarry Road Improvements: The remaining $4,966 balance was transferred for Quarry Road
Improvements and Transit Center Access (PL-1600).
Fund for Intermodal Transit Center: $545,034 was transferred for Quarry Road Improvements and
Transit Center Access (PL-1600).
Climate Change and Sustainability: $5,200,000 was transferred for the implementation of the Bicycle &
Pedestrian Transportation Plan (PL-04010).
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9.e
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Fiscal Year 2018-2019 Annual Report Supplement
Prepared by the City of Palo Alto
October 12, 2021
Background and Purpose
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, annexation and design applications for the Stanford University Medical Center
Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a
new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital,
construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, roadway
improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development
Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and
the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date.
The Agreement requires an annual report, prepared by SUMC that outlines the activities of the
preceding year and the efforts to fulfill the obligations of the Agreement.
Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a
supplement to the annual report that contains an accounting of the funds described in the Section 5 of
the Agreement (“SUMC Parties’ Promises”) including the fund balances and expenditures and the
purposes for which the expenditures were used.
Public Benefit Fund Accounting
This annual report supplement covers the period during the eighth year of the Agreement: June 6, 2018
through June 6, 2019. Accounting for the funds outlined in Attachment C-2 Part 2 extends through the
end of the City’s Fiscal Year 2019, June 30, 2019.
In summary, the SUMC Parties have paid approximately $32.5 million in public benefit fees to the City
since June 6, 2011 through the FY 2018-2019 reporting period. There were no required new payments
from the SUMC Parties during the FY 2018-201 9reporting period.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii));
• Fund for SUMC Project Operating Deficit (Section 5(b)(iii));
Attachment C-2 – Part 1
9.f
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• Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino
Real/Quarry Road Intersection (Section 5(d)(i));
• Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on
Quarry Road (Section 5(d)(ii));
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)), and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The second payment of $11,733,333 payment on December 5, 2012 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e));
• Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).
The specific funding accounts in Attachment C-2 Part 2 are consistent with Section 5 of the Agreement.
These funds have been assigned a unique cost center number for accounting purposes. Attachment C-2
Part 2 also contains the investment earnings and the earnings allocation to the various cost centers.
Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2019 through June 30,
2019:
Fund for Community Health and Safety: $11,200 for the Emergency Vehicle Traffic Signal Preemption
System (PL-19000). Note that this funding was received in FY 2018 as part of Opticom Payments
discussed in Section 5(c)(v) of the Development Agreement and placed in the “Community Health &
Safety” cost center. As the City has upgraded systems, the City and SUMC agreed through a letter
exchange that the $11,200 payment could be used for the new coordinated prioritization signaling at
City-maintained traffic signals.
9.f
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Fiscal Year 2019-2020 Annual Report Supplement
Prepared by the City of Palo Alto
October 12, 2021
Background and Purpose
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, annexation and design applications for the Stanford University Medical Center
Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a
new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital,
construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, roadway
improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development
Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and
the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date.
The Agreement requires an annual report, prepared by SUMC that outlines the activities of the
preceding year and the efforts to fulfill the obligations of the Agreement.
Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a
supplement to the annual report that contains an accounting of the funds described in the Section 5 of
the Agreement (“SUMC Parties’ Promises”) including the fund balances and expenditures and the
purposes for which the expenditures were used.
Public Benefit Fund Accounting
This annual report supplement covers the period during the ninth year of the Agreement: June 6, 2019
through June 6, 2020. Accounting for the funds outlined in Attachment C-3 Part 2 extends through the
end of the City’s Fiscal Year 2020, June 30, 2020.
In summary, the SUMC Parties have paid approximately $44.3 million in public benefit fees to the City
since June 6, 2011 through the FY 2019-2020 reporting period. There were no required new payments
from the SUMC Parties during the FY 2019-2020reporting period.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii));
• Fund for SUMC Project Operating Deficit (Section 5(b)(iii));
Attachment C-3 – Part 1
9.g
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• Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino
Real/Quarry Road Intersection (Section 5(d)(i));
• Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on
Quarry Road (Section 5(d)(ii));
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)), and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The second payment of $11,733,333 payment on December 5, 2012 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing
(Section 5(e));
• Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and
• Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).
The specific funding accounts in Attachment C-3 Part 2 are consistent with Section 5 of the Agreement.
These funds have been assigned a unique cost center number for accounting purposes. Attachment C-3
Part 2 also contains the investment earnings and the earnings allocation to the various cost centers.
Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2020 through June 30,
2020:
Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing: $900,000 was
transferred for the new Public Safety Building (PE-15001).
The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund contained
an original contribution of $1,720,488 for support of affordable housing. SUMC funding supported the
Stevenson House project in FY 2013 and the remaining affordable housing funds were fully exhausted in
FY 2020 to support the Wilton Court Housing Project.
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Stanford University Medical Center (SUMC) Annual Reports
Prior Fiscal Year Annual Reports:
• Fiscal Year 2011-2012
http://www.cityofpaloalto.org/civicax/filebank/documents/31976
• Fiscal Year 2012-2013
https://www.cityofpaloalto.org/civicax/filebank/documents/39991
• Fiscal Year 2013-2014
http://www.cityofpaloalto.org/civicax/filebank/documents/45631
• Fiscal Year 2014-2015
http://www.cityofpaloalto.org/civicax/filebank/documents/51645
• Fiscal Year 2015-2016
https://www.cityofpaloalto.org/civicax/filebank/documents/60896
• Fiscal Year 2016-2017
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=49142.31&BlobID=65
285
9.h
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