HomeMy WebLinkAboutStaff Report 2303-11296.Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-
2022
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: April 17, 2023
Report #:2303-1129
TITLE
Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022
RECOMMENDATION
Staff recommends that the City Council:
1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year
2021-2022, 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 SUMC Development Agreement;
2. Find that the SUMC Parties are not in default with the terms and conditions of the
Agreement in all sections, with the exception of alternative mode share targets, for
which the SUMC Parties have claimed a permitted delay due to the effects of the COVID-
19 Pandemic; 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 E).
EXECUTIVE SUMMARY
The City Council is required to review the SUMC Development Agreement (the “Agreement”) to
confirm compliance with the Agreement’s terms. The Agreement is between Stanford Hospital
and Clinics, Lucile Packard Children’s Hospital, Stanford University (SUMC Parties), and the City
of Palo Alto. The City also uses this Annual Report to Council to provide information on the City’s
compliance obligations, such as providing the required summary and description of how the City
expended funds provided by SUMC per the Agreement.
As documented in this Annual Report to Council, both SUMC and the City are in compliance with
the terms of the Agreement for the reporting period Fiscal Year 2021-2022, with the exception
of alternative mode share targets. In regard to the achievement of the alternative mode share
milestone target, SUMC was not able to meet the specific target outlined in the Agreement. This
was due to the effect of the COVID-19 pandemic on SUMC employee use of alternative
transportation modes, such as Caltrain and other public transit systems. As received by the City
on June 14, 2022, the SUMC Parties asserted a permitted delay under the Force Majeure
provision of the Agreement. The SUMC Parties and City staff are actively engaged in discussing
an amendment to the Agreement to address this issue.
BACKGROUND
On June 6, 2011, the 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 the 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. The Development Agreement vesting these approvals became
effective on June 6, 2011, and continues for thirty (30) years from the effective date.
This report covers activities by the SUMC Parties for Fiscal Year 2021-2022, which is the eleventh
year of the Agreement. The annual report prepared for Fiscal Year 2020-2021 found the SUMC
parties to be in compliance with the Agreement.1 Previous annual reports and compliance
documentation can be found via the weblinks in Attachment B.
ANALYSIS
Agreement Section 12, “Periodic Review of Compliance,” requires City Council to confirm SUMC
Parties’ compliance with the terms of the Agreement. Discussion items in this report 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 Report for FY 2021-2022 (Attachment A) describes 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
1 City Council Report, 03/21/22 (SUMC Annual Report Fiscal Year 2020-2021):
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council-
agendas-minutes/2022/20220321/20220321pccsm-amended-linked-revised.pdf
Climate Change.
Staff prepared a summary of the Section 5 obligations and the staff-confirmed compliance status
(Attachment C).
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 reports required of the
SUMC Parties for Fiscal Year 2021-2022.
Construction Activities and Net New Square Footage
SUMC discusses their construction activities for Fiscal Year 2021-2022 in their SUMC Annual
Report (Attachment A). A summary of construction activities and tracking of square footage
demolished and added can be found in Attachment D.
SUMC did not add any net new square footage in FY 2021-2022 but continued to remove
occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use
provides a temporary option to prevent exceedance of the total occupied square footage allowed
in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are
provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning
Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new
building square footage. This provision is important for ensuring that SUMC can maintain existing
operations while also efficiently transferring new uses, equipment, and operations over to the
new facilities.
City staff reviewed the information regarding SUMC net new square footage in the report and
determined this information is complete and correct.
Traffic Mitigation and Reduced Vehicle Trips
SUMC implemented all required transportation demand management (TDM) obligations in FY
2021-2022, such as purchasing of Caltrain Go Passes, funding for the AC Transit U-Line, and other
activities. Summaries of these activities can be found in Attachments A and C.
Alternative Mode Share Milestone Targets
SUMC achieved their 2021 alternative mode share milestone target of 33% for employee trips
early and every year between 2013 and 2019. The alternative mode share rate was 38.1% in FY
2018 and 33.8% in FY 2019. 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. 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 TDM Program report. Conditional approval of this delay was consistent with the
procedures in Section 6(p) of the Agreement and no additional environmental review was
required.
In Fiscal Year 2020-2021, the SUMC parties found that the alternative mode share milestone
target of 33% outlined in Agreement Section 5(c)(ix) was not met for 2021, nor was it above the
previous 2018 milestone target of 30%. The alternative mode share rate for SUMC decreased to
28.8% between use of alternative modes versus driving alone, largely due to ongoing pandemic
conditions. SUMC identified that the share of Caltrain riders dropped most significantly (-6.5%),
followed by the carpools (-2.6%), and other forms of transit (-3%). SUMC observed modest
increases in other alternative transportation modes, including in remote work and bicycling, but
these increases were not sufficient to offset the decrease in transit usage and carpools.
In Fiscal Year 2021-2022, despite continuing to implement all TDM programs, as well as
enhancing communications and promotions, the SUMC parties found that the alternative mode
share milestone target of 33% was again not met. It had decreased to 19.9% from 28.8% in the
previous year.
Under Agreement Section 5(c)(ix) Monitoring of TDM Programs, missing the alternative mode
share milestone target for two consecutive years, FY 2020-2021 and FY 2021-2022, would require
SUMC to provide a $175,000 payment to the City for alternative transportation funding. The City
would need to use the payment to support local projects and programs that encourage use of
alternative transportation modes or otherwise reduce peak period traffic trips in the
intersections impacted by the project.
After submitting the FY 2021-2022 Alternative Mode Share report, SUMC sent the City a Notice
of Intent to claim a permitted delay as outlined in the Development Agreement Section 18(c)
Force Majeure. SUMC subsequently filed a Development Agreement Amendment application
that proposes adjusted dates for achieving alternative mode share milestone target dates to
account for the effect of the COVID-19 pandemic on SUMC employee use of alternative
transportation modes. The Amendment application is currently under review and will be
agendized for City Council consideration later this year. In the meantime, the City deferred any
action to collect the $175,000 payment.
Construction Sales and Use Tax Monitoring Report
SUMC submitted the annual Construction Sales & Use Tax Monitoring Report on June 30, 2022
(fiscal year report). The City sent its required response. Based upon the City’s review of the annual
Construction Sales and Use Tax Monitoring Report, revenues for calendar years 2011 through
2021 have totaled $5,405,338. This annual reporting assists in the process of ensuring that the
City would receive no less than $8.1M in construction sales and use tax revenue by December
31, 2025.
Supplement to the Annual Report
Section 12 of the Agreement 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 E). Section 12 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 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 2021-2022 reporting period. This sum includes the
approximately $11.7 million third and final payment by SUMC during the FY 2017-2018 reporting
period.
Regarding fund usage during the Fiscal Year 2021-2022 reporting period, the City authorized
transfers for the following:
$500,000 under “Expansion Cost Mitigation” for Rail Grade Separation (PL-17001);
$775,000 under “Infrastructure, Sustainable Neighborhoods and Communities, and
Affordable Housing” for $750,000 replacement of Fire Station Four (PE-18004) and
$25,000 University Avenue Streetscape Update (PE-21004); and
$1,250,000 under “Community Health and Safety” for $1.2 million
Charleston/Arastradero Corridor Project (PE-13011) and $50,000 to the General Fund
allocated to local non-profits through the Human Services Resource Allocation Process
(HSRAP).
Use of Development Agreement Funds
The funds received by the City through the 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 2022 Adopted Operating Budget document, Special Revenue Funds section;
Fiscal Year 2022 Adopted Capital Improvement Budget document;
City Council Report 13609 February 28, 2022 Design Services for the University Avenue
Streetscape Update Capital Improvement Project, including amendments to the FY 2022
Capital Improvement Plan;
Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section;
and the
Fiscal Year 2023 Capital Improvement Budget document.2
2 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.
The SUMC agreement Section 5(a)(iii) requires that a joint committee make annual
recommendations to the City Council regarding proposed disbursements from the Community
Health and Safety Program Fund, and the City Council may use reasonable discretion to accept,
reject, or modify these recommendations. The joint committee includes SUMC representatives
and City staff from the Office of Transportation, Administrative Services, and Public Works
departments. Projects using Community Health and Safety funds for the Fiscal Year 2021-2022
reporting period have gained mutual support from members of the joint committee and approval
from the City Council.
FISCAL/RESOURCE IMPACT
There are no impacts to the City’s budget resulting from this review of the SUMC Annual Reports
for Fiscal Year 2021-2022. As stated above, the SUMC Parties have already paid approximately
$44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2021-2022
reporting period. Future fund contributions are not anticipated.
As discussed earlier in this report, the City deferred collection of the $175,000 payment for
alternative transportation funding, pending City Council action on the SUMC Development
Agreement Amendment application. No staff analysis has been completed at this time regarding
the potential use of this payment.
STAKEHOLDER ENGAGEMENT
Staff did not perform specific community outreach related to preparation of this annual report.
Community members and policy makers were extensively involved in the crafting of the
Agreement and all other associated project enabling entitlements. Also, subsequent related
project entitlements continue to be processed through the City’s standard review processes, as
discussed in the Development Agreement and other entitlements.
ENVIRONMENTAL REVIEW
Reviewing and making findings regarding SUMC and City compliance with the Agreement is not
a project under the California Environmental Quality Act and no environmental assessment is
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.
City Council Report 13609 February 28, 2022 Design Services for the University Avenue Streetscape Update Capital
Improvement Project, including amendments to the FY 2022 Capital Improvement Plan:
https://www.cityofpaloalto.org/City-Hall/City-Council/Council-Agendas-Minutes.
Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy2023-city-
budget/adopted-fy23/operating-budget_final-4.pdf.
Fiscal Year 2023 Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy2023-city-
budget/adopted-fy23/capital-budget_final-4-online-version.pdf.
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
Attachment A: Fiscal Year 2021-2022 SUMC Annual Report
Attachment B: Weblinks to Prior SUMC Annual Reports
Attachment C: SUMC Development Agreement Section 5 Compliance Table
Attachment D: SUMC Construction Activities and Square Footage Summary
Attachment E: Supplement to the Annual Report
APPROVED BY:
Jonathan Lait, Planning and Development Services Director
PREPARED FOR THE CITY OF PALO ALTO | JULY 6, 2022
2021-22 ANNUAL REPORT
Image Courtesy of Nearmap US Inc, June 2022
CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2021-2022 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
STANFORD HEALTH CARE 4
SCHOOL OF MEDICINE 5
BLAKE WILBUR DRIVE ROADWAY EXTENSION 6
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 7
SECTIONS 5(B)(I) AND 5(B)(II). PAYMENT OF SALES AND USE TAXES 8
SECTION 5(B)(III). FUNDING OF OPERATING DEFICIT 8
SECTION 5(B)(IV). PAYMENT OF UTILITY USER TAX 8
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 9
SECTION 5(C)(IV). CONTRIBUTIONS TO AC TRANSIT 9
SECTION 5(C)(V). OPTICOM PAYMENTS 10
SECTION 5(C)(VI). CALTRAIN GO PASSES 10
SECTION 5(C)(VII). MARGUERITE SHUTTLE SERVICE 10
SECTION 5(C)(VIII). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11
SECTION 5(C)(IX). MONITORING OF TDM PROGRAMS 11
LINKAGES 12
SECTION 5(D)(I). INTERMODAL TRANSIT FUND 12
SECTION 5(D)(II). QUARRY ROAD FUND 13
SECTION 5(D)(III). STANFORD BARN CONNECTION 13
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 13
SECTION 5(E). 13
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 15
ANNUAL REPORT 2021-22 1
EXECUTIVE SUMMARY
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, eleven 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, and the School of
Medicine has completed the first phase of development of its replacement facilities, with its BioMedical
Innovations building open for research. Interior renovations within the 1989 portion of the preexisting
Stanford Hospital facility have now commenced, and are expected to continue for the next several years,
bringing the facility up to modern healthcare standards.
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.
2 ANNUAL REPORT 2021-22
BACKGROUND AND PURPOSE
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 are enabling 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.
ANNUAL REPORT 2021-22 3
2021-2022 SUMMARY OF PROGRESS
The Renewal Project has reached key milestones in recent years, with the opening of the Lucile Packard
Children’s Hospital expansion in 2017 and the opening of the New Stanford Hospital in 2019, and most
recently the opening of the School of Medicine’s BioMedical Innovations building in 20201 . While the
COVID-19 pandemic changed the pace of progress on the Renewal Project, as Stanford Medicine
focused resources on pandemic response, including launching clinical trials for therapeutic treatments
for COVID-19 and establishing community testing and vaccination sites, it has also highlighted the
importance of modern, state-of-the-art facilities to support Stanford Medicine’s research and patient care.
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.
1 Temporary certificate of occupancy was issued in 2020; final certificate of occupancy was issued in 2021.
4 ANNUAL REPORT 2021-22
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.
LPCH is currently planning for improvements to its preexisting West building which will modernize its
infrastructure and provide a more comfortable patient experience. These improvements include a
redesigned main lobby entry and drop-off for the West Building; plans are anticipated to be formally
submitted to the City for Architectural Review in Summer 2022.
STANFORD HEALTH CARE
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. With
the new Stanford Hospital now complete, Stanford Health Care has begun a series of renovations within
its preexisting facilities, including the conversion of shared patient rooms into private rooms within the
1989 portion of the Hospital; this renovation work is planned to proceed in phases over the next several
2021-2022 SUMMARY OF PROGRESS
ANNUAL REPORT 2021-22 5
years. In addition, to continue to maintain its current 600-bed count upon conversion of existing shared
patient rooms to private rooms, Stanford Health Care is also planning an addition to the preexisting
Hospital of approximately 37,000 square feet. This proposed addition received Architectural Review
approval in March 2022, and a City grading / excavation permit was issued in June 2022. Grading activity
is expected to commence in Summer 2022
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, featuring integrated laboratory suites, with easier access between labs and support facilities,
enabling transparency, flexibility, and collaboration.
The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”) is now
complete, having received a certificate of occupancy in Spring 2021, and 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.
2021-2022 SUMMARY OF PROGRESS
6 ANNUAL REPORT 2021-22
2021-2022 SUMMARY OF PROGRESS
BLAKE WILBUR DRIVE ROADWAY EXTENSION
As required by the 2011 Project Approvals, a new link roadway will be constructed between Sand Hill
Road and Welch Road; this roadway will connect Durand Way to Blake Wilbur Drive, and will provide
an important automobile, bicycle, and pedestrian connection in the vicinity of the Medical Center.
Specifically, it will serve as an uncongested route for emergency vehicles accessing the medical campus
via Sand Hill Road, and will provide improved access to both the Main Medical Campus and the outer
Welch medical office buildings. The scope includes two travel lanes in each direction, Class II bicycle
lanes, sidewalks with planter strips including new tree plantings and bioretention areas, new signal poles,
and underground utilities. The roadway design was approved at the schematic level by the Architectural
Review Board in 2011, but design development and construction were not immediately able to advance
as the impacted site was under third-party lease until 2020. Design work resumed in 2020, and staff-
level Architectural Review approval for the roadway improvements was issued in late 2021. Construction
activities are anticipated to commence in 2022, pending permit issuance.
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
STANFORD HEALTH CARE
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
SCHOOL OF MEDICINE
BioMedical Innovations building 196,921
Partial decant of 1959 Stone Complex (18,472)
Total 178,449
HOOVER PAVILION
Miscellaneous shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB)91,605
Total 77,774
ANNUAL REPORT 2021-22 7
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
its 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 has recently engaged with City staff
to establish the joint committee to evaluate proposals for programs to receive funding. Joint committee
meetings are targeted to begin in Summer 2022. 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.
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.
8 ANNUAL REPORT 2021-22
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, 2022. 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 2021 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.
• 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.
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.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2021-22 9
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. In May 2022, school fees in the amount of
$22,641 were paid to Palo Alto Unified School District to account for Stanford Health Care’s planned
addition to the 1989 portion of the preexisting hospital.
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. 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
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 the alternative transportation mode goals
specified in the Development Agreement in the required timeframe, including any period of permitted
delay, 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:
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
10 ANNUAL REPORT 2021-22
• 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 are making 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)). The Hospitals continue to meet this requirement, and currently lease 100
parking spaces in Newark (35263 Fircrest Drive). However, the Fircrest-Ardenwood route that
provided service to these spaces was suspended in December 2020 due to the pandemic reducing
demand and resulting low ridership. East Bay riders continue to be served by the U Line and DB
Express.
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.
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 2022.
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
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2021-22 11
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 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.
The Hospitals have also created a new role, Transportation/TDM Director, that is in addition to the
previously established TDM Coordinator role, to lead the effort of increasing the use of alternative
transportation among Hospital employees.
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
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
12 ANNUAL REPORT 2021-22
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 2022 Alternative Mode Share Report to the City on May 31, 2022; this report
shows an alternative mode split of 19.9% for the Hospitals, representing a significant drop in alternative
mode share since the start of the COVID-19 pandemic and a further decrease relative to the Spring
2021 results (28.8%). The continued shift from alternative modes to single-occupancy vehicles among
on-campus Hospital staff is consistent with generally observed changes in transit behavior during the
pandemic, with the key difference that the Hospitals’ on-campus employees largely do not have the
ability to perform work remotely, as they primarily occupy roles which require direct patient interface or
otherwise require physical presence. Given ongoing concerns over the safety of public transportation
during the pandemic, the further reduction in the Hospitals’ alternative mode share from the most recent
reporting year can be more easily understood. Under the circumstances, the Hospitals are excused from
achieving, on schedule, the alternative mode share targets of this section of the Development Agreement.
Due to the pandemic-induced circumstances noted above and as allowed by the Development
Agreement, Stanford Medicine has filed a Notice of Intent to Claim a Permitted Delay with the City which
establishes that due to the ongoing COVID-19 pandemic the Hospitals are unable to meet the alternative
mode share targets on schedule. The Hospitals expect that the period of permitted delay will extend
through a period ending one year after the expiration or termination of the United States Secretary of
Health and Human Services’ determination that a public health emergency exists due to the COVID-19
pandemic. This anticipated period of permitted delay accounts for an end to the current public health
emergency, and the gradual return of commuter confidence in alternative transit. During this period,
other related obligations would continue to be met, including but not limited to implementing an enhanced
TDM program, monitoring progress toward meeting the alternative mode share targets, providing annual
reports to the City, striving to maximize use of alternative commute modes by Hospital employees, and
meeting with the City on a regular basis to identify potential improvements to the enhanced TDM program.
Stanford Medicine plans to file an application for an amendment to the Development Agreement to
implement the period of permitted delay and establish viable timelines for compliance with alternative
mode share targets.
Stanford Medicine remains committed to increasing its alternative mode share, and enabling employees
to travel safely to work using alternative modes.
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
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2021-22 13
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.
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing Fund
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
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
14 ANNUAL REPORT 2021-22
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.
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
ANNUAL REPORT 2021-22 15
CONCLUSION
As the Renewal Project completes its eleventh year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to progress.
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=65285
•Fiscal Years 2017-2018, 2018-2019, and 2019-2020
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-
minutes/city-council-agendas-minutes/2021/11-november/20211101pccs-amended.pdf
•Fiscal Year 2020-2021
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-
minutes/city-council-agendas-minutes/2022/20220321/20220321pccsm-amended-linked-
revised.pdf
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
1 SUMC Development Agreement Compliance: FY 2021-20221
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Health Care Benefits
DA
Section Description Summary Activity Complies?
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 2021-2022.
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. The joint
committee formed according to the
Development Agreement approved
expenditures from this fund for FY 2021-
2022. There were expenditures from this
fund during the reporting period FY 2021-
2022.
Yes, complies - Fund
activity and balances in FY
2021-2022 reported in
Attachment E.
Fiscal Benefits
DA
Section Description Summary Activity Complies?
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 reviews the Construction
Sales & Use Tax Monitoring Report that is
submitted by SUMC on June 30 of each year.
Yes, complies - SUMC
timely submitted the
Construction Sales & Use
Tax Monitoring Report for
the previous calendar year.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
2 SUMC Development Agreement Compliance: FY 2021-20221
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The City submits a letter to SUMC each year
that notes local tax received from SUMC
project activities for the year. Based upon
the City’s review of the annual Construction
Sales and Use Tax Monitoring Report,
revenues for calendar years 2011 through
2021 have totaled $5,405,338.
The City sent their
required response. This
annual reporting assists in
the process of ensuring
that the City would receive
no less than $8.1M in
construction sales and tax
revenue by December 31,
2025.
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. There were expenditures
from this fund during the reporting period
FY 2021-2022.
Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.
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 in past fiscal years when new
meters were set for new construction,
including NSH, NSH Garage, LPCH, and BMI,
and the Utility Users Tax is paid through the
normal billing process for each site.
Yes, complies.
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.
Yes, complies - SUMC
made payments to PAUSD
for all net new square
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
3 SUMC Development Agreement Compliance: FY 2021-20221
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$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. Additional PAUSD school fees were
paid in FY 2021-2022 for the Nursing Pod
Extension project due to OSHPD requiring
these payments prior to issuance of a
construction shoring permit.
footage for which school
fees apply at the time of
past permit receipt. Staff
will reconfirm SUMC
payment of PAUSD school
fees for the Nursing Pod
Extension project when
the City issues this permit
in a future fiscal year.
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
improvements on
University Ave.
$200K payment made on
August 19, 2011.Yes, complies.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
4 SUMC Development Agreement Compliance: FY 2021-20221
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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 throughout 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. SUMC used an interim temporary
facility through FY 2019-2020. In FY 2020-
2021 and FY 2021-2022, SUMC leased 100
parking spaces in Newark (35263 Fircrest
Drive).
Yes, complies.
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.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
5 SUMC Development Agreement Compliance: FY 2021-20221
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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 2021-2022.
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 2021-2022.
Yes, 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.
5(c)(ix)Monitoring of
TDM Programs
Yearly report
regarding
alternative transit
mode use
The SUMC parties found that the alternative
mode share milestone target of 33%
outlined in SUMC DA Section 5(c)(ix) was not
met for 2022, nor was it above the previous
2018 milestone target of 30%; the
SUMC timely submitted
their annual Alternative
Mode Share report for FY
2021-2022. Monitoring in
FY 2021-2022 identified
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
6 SUMC Development Agreement Compliance: FY 2021-20221
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alternative mode share rate for SUMC
decreased to 19.9% in FY 2021-2022
between use of alternative modes versus
driving alone, largely due to ongoing
pandemic conditions.
that SUMC missed the
alternative mode share
target of 33% for two
consecutive years.
As received by the City on
June 14, 2022, the SUMC
Parties asserted a
permitted delay under the
Force Majeure provision of
the Agreement. The SUMC
Parties and City staff are
actively engaged in
developing an amendment
to the Agreement in order
to resolve this issue.
Linkages
DA
Section Description Summary Activity Complies?
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
2021-2022 reported in
Attachment E.
5(d)(ii)Quarry Road
Fund $400K payment to
improve pedestrian
First and only payment of $400K on August
25, 2011 to establish City fund. City
Yes, complies - As of
FY2019, there is no longer
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
7 SUMC Development Agreement Compliance: FY 2021-20221
0
1
5
linkages along
Quarry Road
constructed the improvements prior to the
issuance of the first Hospital Occupancy
Permit (LPCH) to serve the linkage goal and
functional requirements.
a fund balance in this
category.
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
DA
Section Description Summary Activity Complies?
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). There were
expenditures from this fund during the
reporting period FY 2021-2022.
Of the funds in the Infrastructure,
Sustainable Neighborhoods and
Communities, and Affordable Housing Fund,
$1,720,488 was to be used for support of
Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022
8 SUMC Development Agreement Compliance: FY 2021-20221
0
1
5
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.
Climate Change
DA
Section Description Summary Activity Complies?
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
2021-2022 reported in
Attachment E.
Stanford University Medical Center (SUMC)
FY 2021-2022 Construction Activities and Square Footage Summary
SUMC did not add any net new square footage in FY 2021-2022 but continued to remove
occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use
provides a temporary option to prevent exceedance of the total occupied square footage allowed
in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are
provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning
Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new
building square footage. This provision is important for ensuring that SUMC can maintain existing
operations while also efficiently transfer new uses, equipment, and operations over to the new
facilities.
Overall, at the Main SUMC site, SUMC is entitled to construct and use up to 3,534,090 total
square feet of hospital/clinic and research buildings, as well as associated facilities and
infrastructure improvements, including up to 1,265,272 net new square feet. Overall, at the
Hoover Pavilion site, SUMC is entitled to construct and use up to 153,343 total square feet of
medical office/clinic buildings, as well as associated facilities, including up to 46,169 net new
square feet of medical/office buildings.
A total of approximately 133,731 square feet of floor area was previously demolished at the
Stanford Hospital, Lucile Packard Children’s Hospital (LPCH), and Hoover Pavilion sites.
Net new floor area across the SUMC sites reported in previous Fiscal Years include the following:
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 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) added 196,921 square feet through completion of the
Biomedical Innovation Building (BMI).
Fiscal Year 2021-2022 Annual Report Supplement
Prepared by the City of Palo Alto
March 2, 2023
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 SUMC Annual Report Supplement covers the period during the eleventh year of the Agreement:
June 6, 2021 through June 6, 2022. Accounting for the funds outlined extends through the end of the
City’s FY 2022.
The specific funding accounts reported in this SUMC Annual Report Supplement are consistent with
Section 5 of the Agreement. These funds have been assigned a unique cost center number for
Attachment E
accounting purposes. This SUMC Annual Report Supplement also contains the investment earnings and
the earnings allocation to the various cost centers.
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 2021-2022 reporting period. There were no required new payments
from the SUMC Parties during the FY 2021-2022 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 Expansion Cost Mitigation (Section 5(b)(iii));
•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)).
Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2021-2022 through June
30, 2022:
•$500,000 under “Expansion Cost Mitigation” for Rail Grade Separation (PL-17001),
•$775,000 under “Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing” for $750,000 replacement of Fire Station Four (PE-18004) and $25,000 University
Avenue Streetscape Update (PE-21004), and
•$1,250,000 under “Community Health and Safety” for $1.2 million Charleston/Arastradero
Corridor Project (PE-13011) and $50,000 to the General Fund allocated to local non-profits
through the Human Services Resource Allocation Process (HSRAP).
In FY 2021, CMR# 11877 was approved by the City Council to expense $500,000 for PF-01003 (Building
System Improvements) from the Community Health and Safety Funds. In error, this was processed to
expense from the Cost Expansion Finds. As part of the FY 2022 year-end clean-up, an adjustment was
made to correct this.
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.
City of Palo Alta
Stanford Medical Center Development Agreement (Fund 260)
Fiscal Year Ended June 30, 2022
AUDITED BALANCES
Expansion Cost Intermodal Transit Cluarry Road Infrastructure & Climate Change Community Total FY 2022 FY 2022
Mitigation Improvements Afford Housing & Sustainability Health &Safety Actuals Budget
cost centers 25000000 60260010 60260020 60260030 60260040 50260010
Beginning Balances, 7/1/2021 1,849,832 1,261,292 9,641,087 2,905,643 2,913,253 18,571,136
Adustment: To correct transfer from Expanstion Cost Mitigation to
Community Health &Safety CMR#11877 500,000 (500,000)
Revenues:
Revenues From Stanford
Transferfrom Housing Residential (repayment of 2014
advances for Maybell)
Investment Earnings/ Unrealized gain (loss)
Allocate to categories
Allocated Investment Earnings
Total Revenues
(1,124,553) (1,124,563) 370,300
1,124,563 1,124,563
(129,642) (88,395) - (621,353) (203,636) (81,525) (1,124,563)
370,358 (85,395) - (621,363) (203,636) (581,526) (1,124,563) 370,300
Expenditures:
Temp Salaries/Benefits
Contract Services
Supplies Expenses
Dther expenses
Transfer to Capital Projects (500,000)
Total Expenditures (500,000)
FY 2022 Revenues less Exp (129,642)
Fund Balance Available as of 6/30/2022
(85,395)
(775,000) - (1,250,000) (2,525,000) (2,525,000)
(775.000) - (1,250,000) (2,525,000) (2,525,000)
(1,396,363) (203,636) (1,831,526) (3,649,563) (2,154,700)
1,720,190 1,172,897
8,244,724 2,702,007 1,081,756 14,921,573