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HomeMy WebLinkAboutStaff Report 13952 City of Palo Alto (ID # 13952) City Council Staff Report Meeting Date: 2/14/2022 Report Type: Action Items City of Palo Alto Page 1 Title: Provide Direction to Staff on Negotiations with Pets in Need for Operations and Capital Improvements at the City's Animal Shelter (8:00 - 10:00 PM) From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council discuss and provide feedback to staff on negotiating with Pets in Need for continued operations and potential new capital projects at the Animal Shelter. Executive Summary The City of Palo Alto (City) and Pets in Need (PIN) have had a public/private partnership agreement for operation of the Palo Alto Animal Shelter since 2019. PIN provides animal shelter and medical services while the City’s Animal Control Division of the Police Department provides animal control services to Palo Alto, Los Altos and Los Altos Hills. A summary of the Agreement terms is provided below. In November 2021 PIN provided the City written notification of early termination of the Agreement with a timeframe of one year. PIN cited construction delays as the reason for the early termination. The Agreement requires the City to complete $3.4 million in capital projects including a renovated medical suite, a new modular office building, minor renovations to the existing kennels, and a new kennel house consisting of 16 new kennels. The City has completed all projects with the exception of construction of the new kennel building and has spent $1.8 million to date. The City and PIN both have an interest in continuing the partnership and negotiating a new or amended Agreement and have been in communications for several weeks on how this might be accomplished. PIN has indicated that construction of a new and re- designed kennel building as well as a renovated cat/small animal area is a top priority to be able to move forward with the Agreement. The City will need assurances that the shelter and medical clinic are open and available to the public during agreed upon times, and that animal care and welfare is of the highest quality. The additional capital projects identified by PIN would increase the capital improvement costs significantly beyond the $3.4 million included in the Agreement. Staff’s very preliminary estimate is City of Palo Alto Page 2 an additional $3 - $4 million above what has already been committed. There is no identified funding for these additional costs. Staff is seeking feedback from Council on future operations of the Animal Shelter and negotiations with Pets in Need. Background California requires that cities and counties provide animal control and sheltering services for the purpose of ensuring the safety of people and animals, providing for the proper care, and sheltering of abandoned or neglected domestic animals, licensing domestic animals and providing humane disposal of animals when necessary. There are several ways local jurisdictions meet these requirements; some agencies manage their own animal shelters and animal control services, while others partner with other agencies to take advantage of economies of scale and to reduce costs. Historically, Palo Alto has maintained its own shelter and provided animal services to other neighboring cities. Since 2019, Palo Alto has provided animal control and sheltering services for Palo Alto and two partner cities, Los Altos and Los Altos Hills through a public/private partnership with Pets in Need. Animal Control continues to be provided by the Palo Alto Police Department’s Animal Control Officers (ACOs). City Council approved a Professional Services Agreement (Agreement) with the non- profit Pets in Need on November 26, 2018 (Staff Report ID #9822) to operate the Animal Shelter. The term and compensation of the Agreement (Attachment A) are: • Five year term commencing January 17, 2019 • Compensation to be paid to PIN for performance of the Scope of Services in a not to exceed amount $3,440,626.10 over the five-year term • A Contingency Fund of $200,000 • A Compensation for Renovation Delays Fund of $60,000 • Completion by City of capital improvement projects not to exceed $3.4 million Key responsiblities of Pets in Need include: • Animal Shelter Services including sheltering stray, abandoned, and owner surrendered animals • Medical Services including veterinarian services to shelter animals, vaccination clinics, micro-chipping, and a low cost spay and neuter clinic • Operating schedules for shelter services, emergency veterinary services, and public hours and access (minimum of 6 days/40 hours per week) • Impoundment and transfer of wildlife • Records management and reporting • Services to Los Altos and Los Altos Hills Key responsiblities of the City include: • Provide an adequate and safe facility • Provide ACOs and their services including processing of citations • Payment of facility utilities charges • Provide or pay for animal shelter management sofware (Chameleon) City of Palo Alto Page 3 • Fund and complete capital improvement projects in an amount not to exceed $3.4 million The November 26, 2018 staff report included a cost comparison of operating the Animal Shelter in-house versus contracting with PIN for the first year of the contract (FY2020). For FY2020, the in-house scenario resulted in total costs to the City of $1.47 million and the PIN contract resulted in total costs to the City of $1.07 million. These totals do not include Animal Control expenses or costs associated with the capital improvements. The Agreement between the City and PIN included significant improvements to the shelter facility to be funded and completed by the City. At the time the Agreement was approved, the improvements totaled approximately $3.4 million and included remodeling and expanding the medical suite, installing a modular office/classroom building, minor improvements to the exisiting dog kennel building, and installing a new kennel building with approximately 16 new dog kennels. Additional compensation was added to the Agreement in the event that shelter renovation projects were delayed. The compensation amount is up to $5,000 per month for up to 12 consecutive months. Status of these capital improvements including updated costs, funds spent to date and schedule for full completion is provided below. Medical Suite The Agreement stipulated a completion date for renovations of the medical suite by November 14, 2019. The budgeted amount for this project was $800,000. The medical suite was completed in September 2020 and actual costs were $875,000. Modular Office/Classroom A modular building for PIN to use as office space and a classroom was to be installed by July 28, 2019. Until its completion, a temporary construction-type trailer was to be installed. The budgeted amount for this project was $500,000. The modular building was completed in March 2020 and actual costs were $611,000. Installation of New Dog Kennels Construction of a new kennel building with 16 new kennels was to be completed by July 30, 2020 with a budgeted amount of $2.1 million. In February 2019, City Council approved and authorized the City Manager to execute a contract with Swatt Miers Architects, Inc. (SMA) for design services in an amount not-to-exceed $397,725 (Staff Report ID #10057). The contract with SMA provides design services for the new one- level dog kennel building and the upgrades to the existing medical suite at the animal shelter (as described above). The architectural review process and round 1 of the building permit review of the new kennel building design have been completed. However, the most recent cost estimate for construction of the new kennel building resulted in a total estimated project cost of $2.44 million. Considering the actual costs of the Medical Suite and Modular Office/Classroom building projects, proceeding with City of Palo Alto Page 4 construction of the new dog kennel building would have caused the total capital investment of $3.4 million described in the agreement to be exceeded by approximately $650,000. Due to this funding gap and the timeline for completing construction of the new kennel building, PIN had requested that the City prioritize using available funding to provide upgrades to the existing kennel building that improve the day-to-day conditions for the animals. The upgrades include acoustics, mechanical system, epoxy floor and paint, and replacing the existing kennel caging system. These more extensive improvements were in addition to minor improvements made to the existing kennels in early 2019. Amendment No. 1 to the SMA contract was approved by Council on June 21, 2021 for an additional $89,000 to include the design costs for the upgrades to the existing kennel building and required code upgrades associated with permitting the new and existing kennel buildings (Staff Report ID #12164). The design work was completed and staff was prepared to go to Council in November 2021 to recommend an exemption from competitive solicitation for the purchase of new kennels, but the item did not move forward and the project was put on hold following receipt of PIN’s notification of termination. While not required by the agreement between the City and PIN, these more extensive improvements fall within the categories of improvement described in the agreement for the existing dog kennels, and do not require an amendment to the agreement. Approval of this contract amendment did not eliminate the requirement to provide a new kennel building. However, the agreement does not require the City to pay more than $3.4 million of the Animal Shelter capital projects. City staff and PIN had agreed to begin discussions about how to bridge the funding gap for the new kennel building. To date, expenditures of approximately $240,000 have been spent on the new kennel building design and $89,000 have been spent on design for the renovation of the existing kennels. Compensation for Renovation Delays The City has paid Pets in Need the full amount of $60,000 for renovation delays. Discussion On November 15, 2021, Pets in Need (PIN) provided formal notification to the City that it would exercise its right to terminate the Agreement without cause in 12 months time as allowed in Section 19.2 of the Agreement. PIN stated delays in completing the capital improvement projects as the reason for terminating the Agreement. Since that time a new Interim Exectuive Director, Valerie McCarthy, was named following the resignation of the former Executive Director, Al Mollica. Ms. McCarthy has put significant effort into understanding the operations of the Animal Shelter, familiarizing herself with the facility and getting to know City staff. City and PIN staff have been in conversations on how best to operate the Animal City of Palo Alto Page 5 Shelter for the remaining term of the Agreement and are exploring how we might continue the partnership beyond the termination date. Both the City and PIN have identified areas of concern that need to be addressed to successfully move forward beyond the 12-month termination period. • The most significant issues for PIN are expediting the construction of new upgraded dog kennels and expanding other areas of the shelter. • The City would like a commitment that the public has access to animal shelter services as stated in the current Agreement (6 days/40hours per week minimum), and that a low cost spay and neuter clinic and vaccination clinic be available to the public for a minimum number of days/hours per week. • Both PIN and City staff recognize that the relationship between the two organizations should be built on collaboration and partnership and have already made significant progress in this area. • Other topics such as transportation of wildlife, developing a plan for handling feral cats, and exploring alternate animal management software are also being discussed. The capital improvements now being proposed by PIN are substantially greater in size and scope than previously agreed to in the Agreement or those currently under design by Swatt Miers. As mentioned previously, the current Agreement required capital improvements to include a renovated medical suite, installation of a modular office building, and a new kennel building (16 kennels) with a maximum City contribution of $3.4 million. PIN has indicated that a new Agreement would need to include demolition of the existing kennel building and construction of a new kennel building with 24 new kennels, including 4 isolation kennels. A new or renovated cat/small animal area with specific size and amenity requirements including outdoor areas for adoptable and quarantined cats would also be a condition of a new Agreement. The additional costs to design and build these new capital projects would likely be the City’s responsibility; however, those negotiations have not yet started. Staff’s very preliminary estimate of the costs is $3-4 million above the $3.4 million that has already been committed. Since the Animal Shelter is located in a flood zone, staff will need to ensure that any renovations do not cost more than or equal to 50% of the depreciated value of the structure, as this could trigger FEMA requirements to raise the entire facility by approximately three feet. It is staff’s understanding that the PIN Board is supportive of rescinding its termination letter if the City commits to these capital improvements; however, there is currently no funding source identified for the additional $3-4 million costs involved. Timeline The current Agreement will expire November 15, 2022, which is 12 months since the City received formal notification of early termination. In parallel with the City Council’s discussion of this topic, the PIN Board is expected to discuss the Agreement during the week of February 7. Staff will issue a supplemental report later that week to provide City of Palo Alto Page 6 updated information. Based on feedback received from Council on this item, staff will return with further analysis of the preferred path forward, including additional costs and schedule. With the potential termination of the Agreement in November, staff anticipates needing a decision to proceed with development of alternatives by the end of March. Resource Impact There are several ways that the City could operate the animal shelter in the future. The City could: 1) re-negotiate the Agreement with Pets in Need; 2) bring operations back to an in-house model; 3) contract the services to an outside sheltering service such as the Silicon Valley Animal Control Authority (SVACA); or 4) issue a Request for Proposals for a new provider to operate the Palo Alto Animal Shelter. As mentioned previously, the FY2020 costs to operate the Animal Shelter in-house were estimated at $1.47 million and costs to the City for PIN to operate the Animal Shelter were $1.07 million (excluding Animal Control and capital improvement costs.) Signficant staff resources will be needed regardless of the path forward. Since there is an existing agreement in place with PIN and initial discussions on new terms have been initiated, one would assume a new Agreement could be finalized prior to the termination date of November 15, 2022. In the current Agreement, the City is committed to $3.4 million in capital improvements to the Animal Shelter. To date, $1.8 million has been spent on new kennel design, installation of the modular building, and renovation of the medical suite. If a new or amended Agreement with PIN were to include terms that require additional capital improvements, additional funds will need to be added to the Animal Shelter Renovation Capital Improvement Project (PE-19002) for FY23. Expanding the scope of the capital improvements at the shelter would likely increase the capital budget by $3 to $4 million in design and construction costs. A more detailed cost analysis will be conducted based on the next steps identified by Council. Policy Implications Comprehensive Plan Policy C-3.2 - Reinvest in aging facilities to improve their usefulness and appearance. Avoid deferred maintenance of City infrastructure. Stakeholder Engagement Staff from the Community Services, Public Works, and Police Departments have been working closely with PIN Interim Executive Director and PIN staff to ensure Animal Shelter operations continue through the remainder of the Agreement term, and to discuss the possibility of negotiating a new Agreement with modified terms acceptable to both parties. If a different path is pursued, Staff would evaluate the level of stakeholder engagement needed to ensure the best option for the City and partner agencies. City of Palo Alto Page 7 Environmental Review This discussion and direction are not a “project” within the meaning of CEQA. Should any future action involving the Animal Shelter require environmental review or approval by Council, staff will return at the appropriate time.