Loading...
HomeMy WebLinkAbout2015-04-27 City Council Agenda PacketCITY OF PALO ALTO CITY COUNCIL April 27, 2015 Special Meeting Council Chambers 6:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday preceding the meeting. 1 April 27, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Closed Session 6:00-7:00 PM Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 1. CONFERENCE WITH CITY ATTORNEY-Potential Litigation Significant Exposure to Litigation Pursuant to Subdivision (b) of Section 54956.9 (One Potential Case, as Defendant) Communications and Power Industries: Amortization Study Study Session 7:00-7:30 PM 2.Fiscal Year 2016 Proposed Budget Overview Agenda Changes, Additions and Deletions City Manager Comments 7:30-7:40 PM REVISED 2 April 27, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Oral Communications 7:40-7:55 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Consent Calendar 7:55-8:00 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 3.Approval of a Final Map to Subdivide One Parcel Totaling 12,375 Square Feet Into Six Condominium Units Within the RM-30 Zone District located at 405 Curtner Avenue; Environmental Assessment: Categorically Exempt From the Provisions of the California Environmental Quality Act (CEQA) Per CEQA Guidelines Sections 15303 and 15061(b)(3) 4.Preliminary Approval of the Report of the Advisory Board for Fiscal Year 2016 in Connection with the Palo Alto Downtown Business Improvement District and Adoption of the Resolution Declaring its Intention to Levy an Assessment Against Businesses within the Downtown Palo Alto Business Improvement District for Fiscal Year 2016 and Setting a Time and Place for a Public Hearing on May 18, at 7:00 PM or Thereafter, in the City Council Chambers 5.Policy and Services Committee Recommendation to Accept the Utility Meter Audit: Procurement, Inventory, and Retirement 6.Approval of the Revised Joint Exercise of Powers Agreement: Workforce Development Services for NOVA Consortium to Include the Addition of San Mateo County Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 8:00-10:00 PM 7.Comprehensive Plan Update Planning Process Status and Review of Existing Comprehensive Plan Goals and Vision Statements Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements 10:00-10:15 PM Members of the public may not speak to the item(s) Closed Session 10:15-10:30 PM Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 8.CONFERENCE WITH LABOR NEGOTIATORS Authority: Government Code section 54957.6 Agency Representatives: Mayor Karen Holman, CAO Chair Pat Burt, PSO Director Kathryn Shen Unrepresented employee: City Clerk Adjournment AMERICANS WITH DISABILITY ACT (ADA)Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 3 April 27, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Standing Committee Meetings Policy and Services Committee April 28, 2015 7:00 PM Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Public Letters to Council Set 1 Set 2 Set 3 Set 4 Set 5 City of Palo Alto (ID # 5720) City Council Staff Report Report Type: Study Session Meeting Date: 4/27/2015 City of Palo Alto Page 1 Summary Title: Fiscal Year 2016 Proposed Budget Overview Title: Fiscal Year 2016 Proposed Budgets Overview From: City Manager Lead Department: Administrative Services Background and Discussion As required by the Charter, The City Manager Proposed Operating and Capital Budget for FY 2016 will be presented to Council on April 27. The documents are still in production and will be presented to Council on the 27th. At that time, staff will also take time to provide an overview of the budget document during this Study Session. Between May 5 and May 19, the Finance Committee is scheduled to review the FY 2016 Proposed Operating and Capital budgets and provide a recommendation to the City Council for adopting the budgets. The transmittal letters in both budgets will provide a succinct overview of the General Fund, Enterprise Funds, Internal Service Funds, and the Capital Fund budgets. Public hearings for the FY 2016 budget are scheduled for June 8 and June 15 to allow for the public to provide comments and input to the City Council. The City Council is scheduled to adopt the Fiscal Year 2016 Budget on June 15, 2015. City of Palo Alto (ID # 5698) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/27/2015 City of Palo Alto Page 1 Summary Title: 405 Curtner Avenue Title: Approval of a Final Map to Subdivide One Parcel Totaling 12,375 Square Feet Into Six Condominium Units Within the RM-30 Zone District located at 405 Curtner Avenue. Environmental Assessment: Categorically exempt from the provisions of the California Environmental Quality Act (CEQA) per CEQA Guidelines Sections 15303 and 15061(b)(3) From: City Manager Lead Department: Planning and Community Environment Recommended Motion: Staff recommends that the City Council approve the Final Map on Consent Calendar pursuant to the Palo Alto Municipal Code Section 21.16 and the Subdivision Map Act. Executive Summary The applicant requests approval of a Final Map to subdivide an approved residential project into six condominium units. The Final Map application is the second of a two-phased process to subdivide the existing parcel. Council approved the Tentative Map for this six unit project on September 15, 2014, following Planning and Transportation Commission’s unanimous recommendation of August 13, 2014. The Final Map is provided for the Council’s review. The approved Record of Land Use Action (RLUA) from September 15, 2014 (Attachment A) notes how the Tentative Map is consistent with the Palo Alto Comprehensive Plan, Zoning Ordinance, and Performance Criteria. The Final Map is consistent with the previously approved Tentative Map. This matter is being placed on the Consent Calendar because approval of a Final Map is ministerial if the final Map is in substantial compliance with the approved Tentative Map. Background The staff report for the Tentative Map contains detailed background information, and is found at the following link: https://www.cityofpaloalto.org/civicax/filebank/documents/43858. The action minutes of Council’s September 15, 2014 meeting, when the Tentative Map was approved, are found at the following link: City of Palo Alto Page 2 http://www.cityofpaloalto.org/civicax/filebank/documents/44052 In summary, the applicant, Salvator Caruso, acting on behalf of the owner, Curtner Investment Group LLC, is requesting Final Map approval for the project. The site, a vacant, 12,375 square foot (sf) housing opportunity site (as listed on the City’s housing element inventory), will be developed with six condominium units, each containing three bedrooms with 1,237 sf of floor area, plus a 460 sf, two-car garage. Design and compatibility policies for the 7,425 sf, three story building were addressed by the Architectural Review Board (ARB) during public hearings prior to the Director of Planning and Community Environment’s approval in October 2013 of the project, which is in full compliance with the RM-30 zoning development standards. The Director’s approval was consistent with the ARB’s recommendation, and conditions of the Director’s approval were provided to the Commission as background when they considered the tentative map (Attachment B). The approved design includes preservation of on-site oak trees and a driveway of permeable stone pavers along the southeasterly edge of the property. Discussion The Final Map application is the second of a two-phased process to subdivide the existing parcel. The first phase of the process was the Tentative Map application approved by the City Council on September 15, 2014. For this application the existing parcel dimensions would remain the same with the only change being the six air space condominiums and the addition of easements for utility access. The Final Map is the official legal document that is recorded with the County that establishes the property lines and easements within the subdivision. The Final Map must be prepared under the direction of a registered civil engineer or a licensed land surveyor and be based on a survey. Approval of a Final Map is ministerial if the final Map is in substantial compliance with the approved Tentative Map. Pursuant to Section 66474.62 of the Subdivision Map Act, the Final Map must be approved if it is in substantial compliance with the approved Tentative Map. The Planning Division, Public Works Department and City Attorney have reviewed the Final Map and find that the Final Map is in substantial conformance with the Tentative Map previously approved by the City Council. There was one minor change to the map with the removal of a fire access easement that the Fire Department has determined to be unnecessary. It should be noted that there are no streets created or additional off-site improvements to consider as part of this application. The only off-site improvements, included as part of the approved project as conditions of approval are the replacement of the existing sidewalk, curb, and gutter (matching “in-kind” the existing improvements). The map satisfies all approval conditions for the Tentative Map. Resource Impact The proposal includes six new housing units within an existing urbanized area. This small number of new dwellings will not impact the City’s ability to provide for utility or emergency services. Development Impact fees must be paid for any net new housing units built on the site. Since the site is currently vacant and the proposal inlcudes six for-sale residential City of Palo Alto Page 3 condomimium units, the impact fees shall be applicable to all six of the new units. The fees include Community Center, Libraries, Parkland Dedication Fee and the Citywide Transportation Impact Fee. The estimated total fees, at the rates currently in effect, are $260,677.20. These fees must be paid at the rates in effect at that time, prior to issuance of a building permit. Policy Implications The Final Map is consistent with the Tentative Map, which is consistent with the Comprehensive Plan, in that the site is designated “Multi-family Residential,” a land use category that supports “residential uses.” Multi-family residential uses are also consistent with the site’s RM-30 zoning. Design and compatibility policies were addressed by the ARB during public hearings, as was the project’s compliance with the RM-30 zoning development standards. The site is near transit, where higher density housing is encouraged and the additional dwelling units would help to offset the the city’s jobs to housing imbalance. As noted earlier, the project site is shown on the Housing Inventory Sites Area Map of the City’s 2015-2023 Housing Element. Environmental Review The project is within an existing urbanized area and only proposes a total of six new residential units. It is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) per CEQA Guidelines Sections 15303 and 15061(b)(3). Attachments:  Attachment A: Record of Land Use Action (PDF)  Project Map - Councilmembers and Libraries only (TXT) ) ) APPROVAL NO. 2014-05 RECORD OF THE COUNCIL OF THE CiTY OF PALO ALTO LAND USE ACTION FOR 405 CURTNER AVENUE: TENTATIVE MAP APPLICATION [FILE N0.13PLN-00521] On September 15, 2014, the City Council approved the Tentative Map application for the creation of six condominium multi-family units on a single parcel. Making the following findings, determination and declarations: SECTION 1. BACKGROUND. The City Council of the City of Palo Alto ("City Council") finds, determines, and declares as follows: A. On December 16, 2013, Kirk Tang applied for a Tentative Map application for the creation of six multi-family condominium units on a single parcel. B. The RM-30 zoning district has a minimum lot size requirement of 8,500 square feet. The existing lot size, at 12,375 square feet, exceeds the 8,500 square foot minimum by 3,875 square feet. The Parcel Map would create six residential air space condominiums and the parcel size would remain as is. Staff has determined that the proposed project is in compliance with the applicable RM-30 development standards. C. Following staff review, the Planning and Transportation Commission (Commission) reviewed and recommended approval of the Tentative Map on August 13, 2014, adding a condition requiring the applicant to pay an in lieu BMR fee for .9 unit. SECTION 2. ENVIRONMENTAL REVIEW. In conformance with the California Environmental Quality Act (CEQA) the project is categorically exempt per CEQA Guidelines Sections 15303 and 15061(b)(3). The project is within an existing urbanized area and only proposes a total of six new residential units. SECTION 3. TENTATIVE MAP FINDINGS A legislative body of a city shall deny approval of a Preliminary Parcel Map, if it makes any of the following findings (California Government Code Section 66474): 1. That the proposed map is not consistent with applicable general and specific plans as specified in Section 65451: This finding cannot be made in the affirmative. The proposed Tentative Map is consistent with applicable Comprehensive Plan policies and programs and the design requirements of the Subdivision Ordinance, in that the project would be consistent with the Subdivision Ordinance (PAMC Section 21.20) and that the proposed map is consistent with the RM-30 zone district (PAMC 18.13, the design requirements of the Subdivision Ordinance (PAMC 21.20), and would be consistent with the City's Housing Element and Comprehensive Plan Goal H- 2: Support the construction of housing near schools, transit, parks, shopping, employment and cultural institutions and Policy H1.4 Assure that new developments provide appropriate ) ) transitions from higher density development to single family and low density residential districts in order to preserve neighborhood character in that the project includes a three story building adjacent to the commercially zoned properties of El Camino Real, creating a protective buffer to the residential neighborhood beyond. 2. That the design or improvement of the proposed subdivision is not consistent with applicable general and specific plans: This finding cannot be made in the affirmative. The site is physically suitable for the proposed six unit multi-family condominium proposal. The existing parcel would not be altered in terms of size or street access. The units are within the density range allowed by existing zoning and Comprehensive Plan land use designation and is compatible with the pattern and scale of neighboring development. There is no specific plan designated for the area; 3. That the site is not physically suitable for the type of development: This finding cannot be made in the affirmative. The site can accommodate the proposed six multifamily residential condominium units. The site is adjacent to other commercial and multi-family residential uses and is zoned to allow the prosed use and the proposed density. 4. That the site is not physically suitable for the proposed density of development: This finding cannot be made in the affirl')1ative. The subdivision would be consistent with the site's development regulations of the RM-30 zone district. The proposed density of 6 units is less than the allowable density of 30 dwelling units per gross acre (8.5 units). 5. That the design of the subdivision or the proposed improvements is likely to cause substantial environmental damage or substantially and avoidably injure fish or wildlife or their habitat: This finding cannot be made in the affirmative. The subdivision would not cause environmental damage or injure fish, wildlife, or their habitat. The project site is located in an established urban area with no riparian or tree habitat for the candidate, sensitive, or special status species in the area. The project will comply with conditions of approval for protected tree preservation. 6. That the design of the subdivision or type of improvements is likely to cause serious public health problems: This finding cannot be made in the affirmative. The subdivision of the existing parcel will not cause serious health problems. The resulting 6 condominium units will not cause a public health problem in that it is designed to provide access for emergency services, will supply ) necessary utility services, such as sanitation and water, and is designed per City and State standards to ensure public safety. 7. That the design of the subdivision or the type of improvements will conflict with easements, acquired by the public at large, for access through or use of, property within the proposed subdivision. In this connection, the governing body may approve a map if it finds that alternate easements, for access or for use, will be provided, and that these will be substantially equivalent to ones previously acquired by the public. This subsection shall apply only to easements of record or to easements established by judgment of a court of competent jurisdiction and no authority is hereby granted to a legislative body to determine that the public at large has acquired easements for access through or use of property within the proposed subdivision. This finding cannot be made in the affirmative. The subdivision of the existing parcel will not conflict with existing public easements. New utility easements will be created as necessary. Because none of the statutory findings authorizing denial can be met, the City Council hereby approves the subject "Tentative Map". SECTION 5. Conditions of Approval. Development Impact Fees 1. The development impact fees for this project are estimated to be $255,905.64, itemized as follows: Community Center, Libraries, Parkland Dedication Fee and the Citywide Transportation Impact Fee. California Government Code Section 66020 provides that a project applicant who desires to protest the fees, dedications, reservations, or other exactions imposed on a development project must initiate the protest at the time the development project is approved or conditionally approved or within ninety (90) days after the date that fees, dedications, reservations or exactions are imposed on the Project. Additionally, procedural requirements for protesting these development fees, dedications, reservations and exactions are set forth in Government Code Section 66020 .. IF YOU FAIL TO INITIATE A PROTEST WITHIN THE 90-DAY PERIOD OR FOLLOW THE PROTEST PROCEDURES DESCRIBED IN GOVERNMENT CODE SECTION 66020, YOU WILL BE BARRED FROM CHALLENGING THE VALIDITY OR REASONABLENESS OF THE FEES, DEDICATIONS, RESERVATIONS, AND EXACTIONS. If these requirements constitute fees, taxes, assessments, dedications, reservations, or other exactions as specified in Government Code Sections 66020(a) or 66021, this is to provide notification that, as of the date of this notice, the 90-day period has begun in which you may protest these requirements. 2. This matter is subject to the California Code of Civil Procedures (CCP) Section 1094.5; the time by which judicial review must be sought is governed by CCP Section 1094.6. 3. To the extent permitted by law, the Applicant shall indemnify and hold harmless the City, its City Council, its officers, employees and agents (the "indemnified parties") from and ) ) against any claim, action, or proceeding brought by a third party against the indemnified parties and the applicant to attack, set aside or void, any permit or approval authorized hereby for the Project, including (without limitation) reimbursing the City for its actual attorneys' fees and costs incurred in defense of the litigation. The City may, in its sole discretion, elect to defend any such action with attorneys of its own choice. 4. The applicant shall pay an in-lieu below market rate housing fee for 0.9 unit. Public Works Engineering 5. Off-site Improvements will be constructed per conditions of approval of the building Permit and Street Work Permit. 6. Closure Calculations shall be provided for the parcel and submitted with the Final Map application. 7. Notes shall be provided on the plans to indicate that public easement will be recorded through separate documents. Recording information shall be provided on the map if it's available prior to map recordation. 8. A current Title Report shall be provided with the Final Map application. 9. The applicant shall be required to provide payment to cover the costs of Siegfried Engineering's review, signature, and stamping of the Final Map. The estimated cost is $960.00. 10. The Final Map shall be a wet signed and stamped Mylar copy. The map shall be signed by the Owner, Notary, and surveyor. 11. The Final Map shall be recorded with the county of Santa Clara prior to building permit issuance. Planning 12. The subdivider shall be responsible for installing any required off-site improvements, including utilities, to the satisfaction of the Utilities, Public Works, and Planning Departments. These improvements shall be guaranteed by bond or other form of guarantee acceptable to the City Attorney. 13. The subdivider shall grant the necessary public utility easements to the City for the location and maintenance of required utilities. The required easements shall be shown on the face of the subdivision map. 14. The subdivider shall preserve all existing trees shown for preservation on the site plan and ) ) shall include all trees in the final landscape plans. 15. All exterior building and landscape improvements shall be maintained as shown on the approved plans unless approved for revision by the City's Architectural Review Board. 16. The project is subject to meeting all the requirements of Palo Alto Municipal Code Chapter 18.44, the City's Green Building Ordinance. 17. The final subdivision map shall be filed with the Planning Division within two years of the approval of the tentative subdivision map. 18. Apply all conditions (ARB approval 10/29/13) for protection of four protected trees on the site, Urban Forestry Section PRIOR TO DEMOLITION, BUILDING OR GRADING PERMIT ISSUANCE 19. BUILDING PERMIT SUBMITTAL-PROJECT ARBORIST CERTIFICATION LETTER. Prior to submittal for staff review, attach a Project Arborist Certification Letter that he/she has; (a) reviewed the entire building permit plan set submittal and, (b)* verified all his/her updated TPR mitigation measures and changes are incorporated in the plan set, (c) affirm that ongoing Contractor/Project Arborist site monitoring inspections and reporting have been arranged with the contractor or owner (see Sheet T-1) and, (d) understands that design revisions (site or plan changes) within a TPZ will be routed to Project Arborist/Contractor for review prior to approval from City. * (b above) Other information. Building Permit submittal set shall be accompanied by the project site arborist's typed certification letter that the plans have incorporated design changes to be consistent with the following minimum Standards, Regulations and information: a. Applicant/project arborist's final revised Tree Protection Report (TPR) with design changes and corresponding mitigation measures. (e.g.: a Pier/grade beam?=soils report w/ specs required by Bldg. Div.; a Standard foundation?= mitigation for linear 24" cut to all roots in proximity) b. Palo Alto Tree Technical Manual Standards, Section 2.00 and PAMC 8.10.080. c. Specialty items. Itemized list of any activity impact--quantified and mitigated, in the Tree Protection Zone (TPZ) for each tree. d. Oaks. That landscape and irrigation plans are consistent with CPA Tree Technical Manual, Section 5.45 and Appendix L, Landscaping under Native Oaks and PAMC 18.40.130. 20. BUILDING PERMIT/REVISIONS--COVER LETIER. Please provide a separate cover letter with Correction List along with the revised drawings when resubmitting. Cite the most significant tree impact notations and indicate the sheet number and/or detail where the correction has been made and provide: 1} corresponding revision number and 2) bubble or highlights for easy reference. Responses such as "see plans or report" or "plans comply" are not acceptable. Your ) ) response should be clear and complete to assist the re-check and approval process for your project. 21. SITE PLAN REQUIREMENTS. The final Plans submitted for building permit shall include the following information and notes on the relevant plan sheets: I a. SHEET T-1, BUILDING PERMIT. The building permit plan set will include the City's full-sized, Sheet T-1 (Tree Protection-it1S Part of the Plan!), available on the Development Center website at http:/ /www.cityofpaloalto.org/civicax/filebank/documents/31783. The Applicant shall complete and sign the Tree Disclosure Statement and recognize all relevant Tree Activity Inspections that apply to this project. Inspections and contractor monthly reporting to Urban Forestry by the project arborist are mandatory. (All projects: check #1; with tree preservation report: check #2-6; with landscape plan: check #7.) b. The Tree Preservation Report (TPR). All sheets of the Applicant's TPR approved by the City, (Title of certified arborist report entered here, dated , 20_) shall be printed on numbered Sheet T-1 (T-2, T-3, etc) and added to the sheet index. 22. Show Protective Tree Fencing Type. The Plan Set (esp. site, demolition, grading, foundation, irrigation, tree disposition, utility, etc.) must delineate/show Type I or Type II fencing around all Regulated Trees, as a bold dashed line enclosing the Tree Protection Zone as shown on Standard Dwg. #605, Sheet T-1, and the City Tree Technical Manual, Section 6.35-Site Plans; and Project Arborist's direction for each tree enclosing the Tree Protection Zone. SITE PLAN REQUIREMENTS. The Site Plans must show Type I or Type II fencing around the Street Trees a bold dashed line enclosing the Tree Protection Zone as shown on Standard Dwg. #605, Sheet T-1, and the City Tree Technical Manual, Section 6.35-Site Plans; and/or Project Arborist direction for each tree. Plans with Public Trees shall show (a) full extension of Type II street tree fencing to enclose the entire planter strip or, (b) Type I protection to the outer branch dripline for rolled curb & sidewalk or no-sidewalk situations. c. Add Site Plan Notes. (delete where not applicable) i. Note #1. Apply to the site plan stating, 11AII tree protection and inspection schedule measures, design recommendations, watering and construction scheduling shall be implemented in full by owner and contractor, as stated in the Tree Protection Report on Sheet T-1 and the approved plans". ii. Note #2. All civil plans, grading plans, irrigation plans, site plans and utility plans and relevant sheets shall add a note applying to the trees to be protected, including neighboring trees stating: 11Regulated Tree--before working in this area contact the Project Site Arborist at ( enter phone number here __ 11; iii. Note #3. "Basement or foundation plan. Soils Report and Excavation for basement construction within the TPZ of a protected tree shall specify a vertical cut (stitch piers may be necessary) in order to avoid over-excavating into the tree root zone. Any variance from this procedure requires Urban Forestry approval, please call (650) 496-5953." iv. Note #4. Utility plan sheets shall include the following note: "Utility trenching shall not occur within the TPZ of the protected tree. Contractor shall be responsible for ensuring that no ) trenching occurs within the TPZ of the protected tree by contractors, City crews or final landscape workers. See sheet T-1 for instructions." ' 23. TREE REMOVAL-PROTECTED & RIGHT-OF-WAY TREES. Existing trees (Publicly-owned or Protected) to be removed, as shown accurately located on all site plans, require approval by the Urban Forestry Tree Care Permit prior to issuance of any building, demolition or grading permit, and shall also be referenced in the required Street Work Permit from Public Works Engineering a. Add .a note for each tree to be removed, "Tree Removal. Contractor shall obtain a completed Urban Forestry Tree Care Permit # separate from the Building or Street Work Permit. Permit notice hanger and conditions apply. Contact (650-496-5953)." b. The completed Tree Care Permit shall be printed on Sheet T-2, or specific approval communication from staff clearly copied directly on the relevant plan sheet. The same Form is used for private protected tree removal requests available from the Urban Forestry webpage: http://www.cityofpaloalto.org/gov/depts/pwd/trees/default.asp 24. NEW RIGHT-OF-WAY TREES--PLAN REQUIREMENTS. New trees shall be shown on all relevant plans: site, utility, irrigation, landscape, etc. in a location 10' clear radius from any (new or existing) underground utility or curb cut. · a. Add note on the Planting Plan that states, "Tree Planting. Prior to in-ground installation, Urban Forestry inspection/approval required for tree stock, planting conditions and irrigation adequacy. Contact (650-496-5953)." b. Plans shall state Urban Forestry approved species, size and include relevant Standard Planting Dwg. #603, #603a or #604 (reference which), and shall note the tree pit dug at least twice the diameter of the root ball. c. Landscape plan shall include planting preparation details for trees specifying digging the soil to at least 30-inches deep, backfilled with a quality topsoil and dressing with 2-inches of wood or bark mulch on top of the root ball keeping clear of the trunk by l-inch. d. Add note on the Planting & Irrigation Plan that states, "Irrigation and tree planting in the right-of-way requires a street work permit per CPA Public Works standards." e. Automatic irrigation shall be provided to all trees. Standard Dwg. #513 shall be included on the irrigation plans and show two bubbler heads mounted on flexible tubing placed at the edge of the root ball. Bubblers shall not be mounted inside an aeration tube. The tree irrigation system shall be connected to a separate valve from other shrubbery and ground cover, pursuant to the City's Landscape Water Efficiency Standards. 25. NEW RIGHT-OF-WAY TREES--SOIL. Unless otherwise approved, each new large* tree shall be provided with 1,200 cubic feet of rootable soil area, utilizing Standard Dwg. #604/513. Rootable soil shall mean compaction less than 90% over the area, not including sidewalk base areas except when mitigated. Sidewalk Mitigation in lieu of compacted root conditions may use Alternative ) ) Base Material methods such as: structural grid, Engineered Soil Mix base or other method as approved. a. Minimum soil volume for tree size growth performance (in cubic feet): Large: 1,200 cu.ft. Medium: 800 cu. ft. Small: 400 cu. ft. b. Landscape Plan. When qualifying for parking area shade ordinance compliance (PAMC 18.40.130) trees shall be labeled (asS, M or L). c. Engineered Soil Mix (ESM). When applied, Engineered Soil Mix base material shall be utilized in specified areas, such as a sidewalk base or channeling to a landscape area, to achieve expected shade tree rooting potential and maximum service life ofthe sidewalk, curb, parking surfaces and compacted areas. Plans and Civil Drawings shall use CPA Public Works Engineering ESM Specifications, Section 30 and Standard Dwg. #603a. Designated areas will be identified by cross- hatch or other symbol, and specify a minimum of 24" depth. The technology may be counted toward any credits awarded for LEED or Sustainable Sites certification ratings. 26. LANDSCAPE PLANS. a. Include all changes recommended from civil engineer, architect and staff, including planting specifications if called for by the project arborist, b. Provide a detailed landscape and irrigation plan encompassing on-and off-site plantable areas out to the curb as approved by the Architectural Review Board. A Landscape Water Use statement, water use calculations and a statement of design intent shall be submitted for the project. A licensed landscape architect and qualified irrigation consultant will prepare these plans, to include: i. All existing trees identified both to be retained and removed including street trees. ii. Complete plant list indicating tree and plant species, quantity, size, and locations. iii. Irrigation schedule and plan. iv. Fence locations. v. Lighting plan with photometric data. vi. Trees to be retained shall be irrigated, aerated and maintained as necessary to ensure survival. vii. All new trees planted within the public right-of-way shall be installed per Public Works (PW) Standard Planting Diagram #603 or 604 (include on plans), and shall have a tree pit dug at least twice the diameter of the root ball. viii. Landscape plan shall include planting preparation details for trees specifying digging the soil to at least 30-inches deep, backfilled with a quality topsoil and dressing with 2-inches of wood or bark mulch on top of the root ball keeping clear of the trunk by l-inch. ix. Automatic irrigation shall be provided to all trees. For trees, Standard Dwg. #513 shall be included on the irrigation plans and show two bubbler heads mounted on flexible tubing placed at the edge of the root ball. Bubblers shall not be mounted inside an aeration tube. The tree irrigation system shall be connected to a separate valve from other shrubbery and ground cover, pursuant to the City's Landscape Water Efficiency Standards. Irrigation in the right-of-way requires a street work permit per CPA Public Works standards. x. Landscape Plan shall ensure the backflow device is adequately obscured with the appropriate screening to minimize visibility (planted shrubbery is preferred, painted dark green, decorative boulder covering acceptable; wire cages are discouraged). ) c. Add Planting notes to include the following mandatory criteria: i. Prior to any planting, all plantable areas shall be tilled to 12" depth, and all construction rubble and stones over 1" or larger shall be removed from the site. ii. Note a turf-free zone around trees 36" diameter (18" radius) for best tree performance. d. Add note for Mandatory Landscape Architect (LA) Inspections and Verification to the City. The LA of record shall verify the performance measurements are achieved with a separate letters of verification to City Planning staff, in addition to owner's representative for each of the following: i. All the above landscape plan and tree requirements are in the Building Permit set of plans. ii. Percolation & drainage checks have been performed and are acceptable. iii. Fine grading inspection of all plantable areas has been personally inspected for tilling depth, rubble removal, soil test amendments are mixed and irrigation trenching will not cut through any tree roots. iv. Tree and Shrub Planting Specifications, including delivered stock, meets Standards in the CPA Tree Technical Manual, Section 3.30-3.50. Girdling roots and previously topped trees are subject to rejection. 27. TREE PROTECTION VERIFICATION. Prior to demolition, grading or building permit issuance, a written verification from the contractor that the required protective fencing is in place shall be submitted to the Building Inspections Division. The fencing shall contain required warning sign and remain in place until final inspection of the project. DURING CONSTRUCTION 28. EXCAVATION RESTRICTIONS APPLY (TIM, Sec. 2.20 C & D). Any approved grading, digging or trenching beneath a tree canopy shall be preformed using 'air-spade' method as a preference, with manual hand shovel as a backup. For utility trenching, including sewer line, roots exposed with diameter of 1.5 inches and greater shall remain intact and not be damaged. If directional boring method is used to tunnel beneath roots, then Table 2-1, Trenching and Tunneling Distance, shall be printed on the final plans. 29. PLAN CHANGES. Revisions and/or changes to plans before or during construction shall be reviewed and responded to by the (a) project site arborist, (name of certified arborist of record and phone#), or (b) landscape architect with written letter of acceptance before submitting the revision to the Building Department for review by Planning, PW or Urban Forestry. 30. CONDITIONS. All Planning Department conditions of approval for the project shall be printed on the plans submitted for building permit. 31. TREE PROTECTION COMPLIANCE. The owner and contractor shall implement all protection and inspection schedule measures, design recommendations and construction scheduling as stated in the TPR, and is subject to code compliance action pursuant to PAMC 8.10.080. The required protective fencing shall remain in place until final landscaping and inspection of the project. Project arborist approval must be obtained and documented in the monthly activity report sent ) ) to the City. A mandatory Monthly Tree Activity Report shall be sent monthly to the City (pwps@cityofpaloalto.org) beginning with the initial verification approval, using the template in the Tree Technical Manual, Addendum 11. 32. TREE DAMAGE. Tree Damage, Injury Mitigation and Inspections apply to Contractor. Reporting, injury mitigation measures and arborist inspection schedule (1-5) apply pursuant to TTM, Section 2.20-2.30. Contractor shall be responsible for the repair or replacement of any publicly owned or protected trees that are damaged during the course of construction, pursuant to Title 8 of the Palo Alto Municipal Code, and city Tree Technical Manual, Section 2.25. 33. GENERAL. The following general tree preservation measures apply to all trees to be retained: No storage of material, topsoil, vehicles or equipment shall be permitted within the tree enclosure area. The ground under and around the tree canopy area shall not be altered. Trees to be retained shall be irrigated, aerated and maintained as necessary to ensure survival. PRIOR TO OCCUPANCY 34. URBAN FORESTRY DIGITAL FILE & INSPECTION. The applicant or architect shall provide a digital file of the landscape plan, including new off-site trees in the publicly owned right-of-way. A USB Flash Drive, with CAD or other files that show species, size and exact scaled location of each tree on public property, shall be delivered to Urban Forestry at the tree and landscape inspection. 35. LANDSCAPE INSPECTION LETTER. The Planning Department shall be in receipt of a verification letter that the Landscape Architect has inspected all trees, shrubs, planting and irrigation and that they are installed and functioning as specified in the approved plans. 36. PROJECT ARBORIST INSPECTION LETTER. The contractor shall call for a final inspection by the Project Arborist to evaluate all trees to be retained and protected, as indicated in the approved plans, of the activity, health, welfare, mitigation remedies for injuries, if any, and for the long term care of the trees for the new owner. a. The final project arborist letter report shall be provided to the Planning Department prior to written request for temporary or final occupancy. The final report may be used to navigate any outstanding issues, concerns or security guarantee return process, when applicable. 37. PLANNING INSPECTION. Prior to final sign off, contractor or owner shall contact the city planner (650-329-2441) to inspect and verify Special Conditions relating to the conditions for structures, fixtures, colors and site plan accessories. POST CONSTRUCTION (Required for all commercial projects with landscape plan) 38. MAINTENANCE. All landscape and trees shall be maintained, watered, fertilized, and pruned according to Best Management Practices-Pruning (ANSI A300-2001 or current version). Any ) vegetation that dies shall be replaced or failed automatic irrigation repaired by the current property owner within 30 days of discovery. Electric Utilities Department 39. All six electric meters shall be at the same location and served by one service. Water Gas Wastewater Department 40. Prior to demolition, the applicant shall submit the existing water/wastewater fixture unit loads (and building as-built plans to verify the existing loads) to determine the capacity fee credit for the existing load. If the applicant does not submit loads and plans they may not receive credit for the existing water/wastewater fixtures. 41. The applicant shall submit a request to disconnect all utility services and/or meters including a signed affidavit of vacancy. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit will be issued by the building inspection division after all utility services and/or meters have been disconnected and removed. FOR BUILDING PERMIT 42. The applicant shall submit completed water-gas-wastewater service connection applications - load sheets for City of Palo Alto Utilities for each unit or place of business. The applicant must provide all the information requested for utility service demands (water in fixture units/g.p.m., gas in b.t.u.p.h, and sewer in fixture units/g.p.d.). The applicant shall provide the existing (prior) loads, the new loads, and the combined/total loads (the new loads plus any existing loads to remain). 43. The applicant shall submit improvement plans for utility construction. The plans must show the size and location of all underground utilities within the development and the public right of way including meters, backflow preventers, fire service requirements, sewer mains, sewer cleanouts, sewer lift stations and any other required utilities. Plans for new wastewater laterals and mains need to include new wastewater pipe profiles showing existing potentially conflicting utilities especially storm drain pipes, electric and communication duct banks. Existing duct banks need to be daylighted by potholing to the bottom of the ductbank to verify cross section prior to plan approval and nstarting lateral installation. Plans for new storm drain mains and laterals need to include profiles showing existing potential conflicts with sewer, water and gas. 44. The applicant must show on the site plan the existence of any auxiliary water supply, (i.e. water well, gray water, recycled water, rain catchment, water storage tank, etc.). 45. The applicant shall be responsible for installing and upgrading the existing utility mains and/or services as necessary to handle anticipated peak loads. This responsibility includes all costs associated with the design and construction for the installation/upgrade of the utility mains and/or services. ) ) 46. The applicant's engineer shall submit flow calculations and system capacity study showing that the on-site and off-site water and sanitary sewer mains and services will provide the domestic, irrigation, fire flows, and wastewater capacity needed to service the development and adjacent properties during anticipated peak flow demands if required by CPAU engineer. Field testing may be required to determined current flows and water pressures on existing water main. Calculations must be signed and stamped by a registered civil engineer. The applicant is required to perform, at his/her expense, a flow monitoring study of the existing sewer main to determine the remaining capacity. The report must include existing peak flows or depth of flow based on a minimum monitoring period of seven continuous days or as determined by the senior wastewater engineer. The study shall meet the requirements and the approval of the WGW engineering section. No downstream overloading of existing sewer main will be permitted. 47. For contractor installed water and wastewater mains or services, the applicant shall submit to the WGW engineering section of the Utilities Department four copies of the installation of public water, gas and wastewater utilities improvement plans (the portion to be owned and maintained by the City) in accordance with the utilities department design criteria. All utility work within the public right-of-way shall be clearly shown on the plans that are prepared, signed and stamped by a registered civil engineer. The contractor shall also submit a complete schedule of work, method of construction and the manufacture's literature on the materials to be used for approval by the utilities engineering section. The applicant's contractor will not be allowed to begin work until the improvement plan and other submittals have been approved by the water, gas and wastewater engineering section. After the work is complete but prior to sign off, the applicant shall provide record drawings (as-builts) of the contractor installed water and wastewater mains and services per City of Palo Alto Utilities re.cord drawing procedures (see last condition). For projects that take more than one month to complete, the applicant shall provide progress record drawings of work completed on a monthly basis. 48. An approved reduced pressure principle assembly (RPPA backflow preventer device) is required for all existing and new water connections from Palo Alto Utilities to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive. The RPPA shall be installed on the owner's property and directly behind the water meter within 5 feet of the property line. RPPA's for domestic service shall be lead free. Show the location of the RPPA on the plans. 49. An approved reduced pressure detector assembly is required for the existing or new water connection for the fire system to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive (a double detector assembly may be allowed for existing fire sprinkler systems upon the CPAU's approval). Reduced pressure detector assemblies shall be installed on the owner's property adjacent to the property line, within 5' of the property line. Show the location of the reduced pressure detector assembly on the plans. ) ) 50. All backflow preventer devices shall be approved by the WGW engineering division. Inspection by the utilities cross connection inspector is required for the supply pipe between the meter and the assembly. 51. Existing wastewater laterals that are not plastic (ABS, PVC, or PE) shall be replaced at the applicant's expense. 52. Existing water services (including fire services) that are not a currently standard material shall be replaced at the applicant's expense. 53. The applicant shall pay the capacity fees and connection fees associated with new utility service/s or added demand on existing services. The approved relocation of services, meters, hydrants, or other facilities will be performed at the cost of the person/entity requesting the relocation. 54. Each unit or place of business shall have its own water and gas meter shown on the plans. Each parcel shall have its own water service, gas service and sewer lateral connection shown on the plans. 55. A separate water meter and backflow preventer is required to irrigate the approved landscape for landscaping areas in excess of 1,500 SF (including tree canopies). Show the location of the irrigation meter on the plans. This meter shall be designated as an irrigation account an no other water service will be billed on the account. The irrigation and landscape plans submitted with the application for a grading or building permit shall conform to the City of Palo Alto water efficiency standards. 56. A new water service line installation for domestic usage is required. For water meters 4" and larger the applicant's contractor must provide and install an 4' by 8' meter vault with meter reading lid covers and other required control equipment in accordance with the utilities standard detail WD-05. Water meters 4" and larger shall be in a PUE on private property, water meters 2" and smaller shall be located in the public right of way per the CPA WGW Utilities Standards. Show the location of the new water service and meter on the plans. 57. A new water service line installation for fire system usage is required. Show the location of the new water service on the plans. The applicant shall provide to the engineering department a copy of the plans for fire system including all fire department's requirements. 58. A new gas service line installation is required. Show the new gas meter location on the plans. The gas meter location must meet the WGW Utility Standards. The City of Palo Alto normal service pressure is 7" WC (.25 PSI). Increased pressure must be requested in writing and is only provided if the houseline size calculates out at greater than 2" diameter for domestic (note: domestic can only be increased to 14" WC max.) and greater than 4" diameter for commercial at standard houseline pressure (7" WC) or the appliance requires increased pressure at the inlet. Further, due to meter limitations there must a minimum of 800 CFH demand for pressures greater than 14" WC. The only available pressure increments above 7" WC are 14" WC (1/2 psi), ) / ) 1#, 2# and 5# after approval. Pressures in excess of 14" WC will require testing the house piping at not less than 60 psig for not less than 30 minutes per the California Plumbing Code section 1204.3.2, witnessed by Palo Alto Building Inspection. The City of Palo Alto will not provide increased pressure just to save contractor money on the houseline construction. Requests to increase the pressure will be evaluated with the following submittals: The manufacturer's literature for the equipment requiring increased pressure; the specific pressure you are requesting; the gas load; and the length of house gas piping from the gas meter to where the gas houseline starts branching off. 59. A new sewer lateral installation per lot is required. Show the location of the new sewer lateral on the plans 60. The applicant shall secure a public utilities easement for facilities installed in private property. The applicant's engineer shall obtain, prepare, record with the county of Santa Clara, and provide the utilities engineering section with copies of the public utilities easement across the adjacent parcels as is necessary to serve the development. 61. Where public mains are installed in private streets/PUEs for condominium and town home projects the CC&Rs and final map shall include the statement: 11Public Utility Easements: If the City's reasonable use of the Public Utility Easements, which are shown as P.U.E on the Map, results in any damage to the Common Area, then it shall be the responsibility of the Association, and not of the City, to Restore the affected portion(s) of the Common Area. This Section may not be amended without the prior written consent ofthe City". See attached P.U.E. marked up map. 62. All existing water and wastewater services that will not be reused shall be abandoned at the main per WGW utilities procedures. 63. Flushing of the fire system to sanitary sewer shall not exceed 30 GPM. Higher flushing rates shall be diverted to a detention tank to achieve the 30 GPM flow to sewer. 64. Sewage ejector pumps shall meet the following conditions: 1. The pump(s) shall be limited to a total100 GPM capacity and 2. The sewage line changes to a 4" gravity flow line at least 20' from the City clean out. 3. The tank and float is set up such that the pump run time not exceed 20 seconds each cycle. 65. Utility vaults, transformers, utility cabinets, concrete bases, or other structures cannot be placed over existing water, gas or wastewater mains/services. Maintain 1' horizontal clear separation from the vault/cabinet/concrete base to existing utilities as found in the field. If there is a conflict with existing utilities, Cabinets/vaults/bases shall be relocated from the plan location as needed to meet field conditions. Trees may not be planted within 10 feet of existing water, gas or wastewater mains/services or meters. New water, gas or wastewater services/meters may not be installed within 10' or existing trees. Maintain 10' between new trees and new water, gas and wastewater services/mains/meters. 13590.txt This attachment is for limited distribution only but available online. Page 1 City of Palo Alto (ID # 5614) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/27/2015 City of Palo Alto Page 1 Summary Title: BID Preliminary Re-Authorization Title: Preliminary Approval of the Report of the Advisory Board for Fiscal Year 2016 in Connection with the Palo Alto Downtown Business Improvement District and Adoption of Resolution Declaring its Intention to Levy an Assessment Against Businesses within the Downtown Palo Alto Business Improvement District for Fiscal Year 2016 and Setting a Time and Place for a Public Hearing on May 18, at 7:00 PM or Thereafter, in the City Council Chambers From: City Manager Lead Department: City Manager Recommendation Staff recommends the following motion: that City Council: (a) Preliminarily approve the Business Improvement District (BID) Advisory Board’s 2016 Budget Report for the BID (Attachment A) and; (b) Adopt a Resolution of Intention to Levy Assessments in the Palo Alto Downtown Business Improvement District for Fiscal Year 2016, setting a date and time for the public hearing on the levy of the proposed assessments for May 18, 2015, at 7:00 PM, or thereafter, in the City Council Chambers (Attachment B) Executive Summary This Council action includes a preliminary approval of the BID Board’s annual report, and sets a time and place for a public hearing for the staff presentation, and to determine any objections to the assessments. Since the BID inception in 2004, a number of activities consistent with State BID law have been accomplished by the Palo Alto Downtown Business and Professional Association (PADBPA), the entity with which the City contracts to provide services to the nearly 800 businesses assessed in the Downtown. These include addressing the three main issues facing downtown businesses: cleanliness, safety, and attractiveness, as well as participation in zoning, transportation, and other matters affecting downtown City of Palo Alto Page 2 businesses. Assessments for BID businesses are based on the size, type and location of the business. Assessments range from $50 for individually owned professional businesses to $500 annually for financial institutions. The PADBPA has monthly open meetings governed by the Ralph M. Brown Act which any business or individual can attend. Background The Palo Alto Downtown Business Improvement District (BID) was established by the City Council in 2004 pursuant to the California Parking and Business Improvement Area Law to promote the economic revitalization and physical maintenance of the Palo Alto Downtown business district. The Council appointed the Board of Directors of the Palo Alto Downtown Business and Professional Association (PADBPA), a non-profit corporation, as the Advisory Board for the BID. The Board’s purpose is to advise the Council on the method and basis for levy of assessments in the BID and the expenditure of revenues derived from the assessments. Pursuant to BID law, the Advisory Board must annually submit to the Council a report that proposes a budget for the upcoming Fiscal Year for the BID. The report must: 1) propose any boundary changes in the BID; 2) list the improvements and activities to be provided in the Fiscal Year; 3) estimate the cost to provide the improvements and activities; 4) set forth the method and basis for levy of assessments; 5) identify surplus or deficit revenues carried over from the prior Fiscal Year; and 6) identify amounts of contributions from sources other than assessments. The Council must then: 1) review the report and preliminarily approve it as proposed or as changed by the Council; 2) adopt a resolution of intention to levy the assessments for the upcoming Fiscal Year; and 3) set a date and time for the public hearing on the levy of assessments in the BID. Absent a majority protest at the public hearing on May 18, 2015, at the conclusion of the public hearing, the Council may adopt a resolution confirming the report for Fiscal Year 2016 as filed or as modified by the Council. The adoption of the resolution constitutes the levying of the BID assessments for Fiscal Year 2016. Discussion The Advisory Board has prepared a report (Attachment A) for the Council’s consideration which includes the proposed budget for the Palo Alto Downtown BID for Fiscal Year 2016. As required by BID law, the report has been filed with the City Clerk and contains a list of the improvements, activities, and associated costs proposed in the BID for Fiscal Year 2016. The Advisory Board has recommended no change in the BID boundaries or the method and basis for levying assessments. A map of the BID and the proposed assessment schedule is attached (Attachment C). The proposed assessments in the BID for Fiscal Year 2016 are the same as the City of Palo Alto Page 3 assessments in Fiscal Year 2015. The budget report for Fiscal Year 2016 was reviewed and approved by the Palo Alto Downtown Business and Professional Association board on April 8, 2015. As per the agreement that the City and PADBPA have entered, the City has certain responsibilities as it pertains to the invoicing and collection of BID revenues. In prior years, staff from the Planning & Community Environment and Administrative Services Departments have been involved in the collection of BID assessments by setting fees, creating and sending invoices, and managing payment collections for the first 60 days of July. To streamline the process, reduce the staff time involved, and minimize the possibility for errors to occur, staff has explored other avenues for this invoicing and collection activity to occur. If the Council moves forward with the re-authorization of the BID in FY 2016, staff recommends that the City enter an agreement with an outside firm that can handle all aspects of the City’s responsibilities to the BID in terms of invoicing, billing, and collections. Resource Impact Adoption of the proposed BID budget does not typically impact City revenue. BID assessments are restricted for use exclusively by the BID. It is anticipated that a healthy BID will encourage vitality in the retail community and consequently result in additional sales tax revenue for the City. Some staff effort is expended annually to administer the collection of the BID, but will be virtually eliminated by the new process outlined above. An informal bidding process has revealed that the billing and invoicing responsibilities of the City can be managed by Muni Services, LLC for approximately $8,500. The cost and collection of BID assessments past 60 days is borne by the BID. The Attorney's Office will continue to provide legal oversight to the BID during the annual reauthorization process. The Economic Development Manager will continue to provide oversight to the BID and will prepare the annual reauthorization. Environmental Review This action by the City Council does not meet the definition of a project under Section 21065 of the California Environmental Quality Act, and therefore no environmental assessment is necessary. Attachments:  Attachment A: PAD Annual report 2015 (PDF)  Attachment B: RESO Declaring Intention to Levy BID FY16 (DOC)  Attachment C: BID Map and Fee Schedule (Exhibit A & B) (PDF) 0 EATSGREAT THINGSIDEAS! FIND OUT WHAT’S BLOOMIN’ IN DOWNTOWN PALO ALTO THIS SPRING There are dozens of great places to shop and eat and thousands of great ideas being generated every day. Only in downtown Palo Alto. Palo Alto Downtown Business Improvement District 2015 -1 6 Annual Report Prepared  for:  Palo  Alto  City  Council               Prepared  by:  Russ  Cohen,  Executive  Director,   Palo  Alto  Downtown  Business  and  Professional  Association     1 Introduction This report from the Advisory Board of the Palo Alto Downtown Business & Professional Association (“PAd”) was prepared for City Council to review for the annual reauthorization of the Downtown Palo Alto Business Improvement District (“BID”) pursuant to Section 36533 of the Parking and Business Improvement Law of 1989 (Section 36500 and following of the California Streets and Highways code) (the “Law”). This report is for the proposed fiscal year for the BID commencing July 1, 2015 and ending June 30, 2016. (“Fiscal Year 2016-16”). As required by the Law, this report contains the following information: I. Any proposed changes in BID boundaries and benefit zones within the BID; II. The improvements and activities to be provided for Fiscal Year 2015-16; III. An estimate of the cost of providing the improvements and the activities for Fiscal Year 2015-16; IV. The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2015-16. V. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year. VI. The amount of any contributions to be made from sources other than assessments levied pursuant to the Law. Submitted by Brad Ehikian, Chair, and Russ Cohen, Executive Director on behalf of the Advisory Board (“Advisory Board”) of the Palo Alto Downtown Business & Professional Association (“PAd”). The Advisory Board approved this report on April 8, 2015. Received on file in the Office of the City Clerk of the City of Palo Alto on April __, 2015. 2 Section I: BID boundaries and Benefit Zones There have been no changes in the BID boundaries or benefit zones within the BID and no changes are proposed. The current boundaries are depicted on the map below. The area of the BID is referred to as “Downtown.” 934- 9 4 4 927 932 233 281 933 - 9 3 7 943 327 1001 942 469 475 744 459 832 801 A P T 1 - 5 427-453 920912 362 370 900 838 846 471 459 835 - 8 5 5 460 815 840836 834 845 400 803 928930 931933 835 - 8 3 7 831- 8 3 3 451453 802800 810 - 8 1 6 818 - 8 2 0 828 - 8 3 0 817- 8 1 9 823 - 8 2 5 567-569 559563 536 526 100 1 101 1 - 540 483 904 912 468 918 926 537 965-971505-507 519-521 939-945 931-935 923-925518-520 539541543 515-517 809811 420 1001 1011 1010 376 370 980960 990 34 354 326 426 4 1000 448 944 471 483948952 959947925 915 933 935 425-443 451449 463-465 936-940 458 460 440 428426 527-533 543 551 510520 558-560 903 825 837 581 575940934 813-823 501-509 511-519 521-529 531-539 541-547 556 596 904 926 561-567 569 845 580 574 566 991- 997 136 610 116-122 150 535529525 542516140 102 116124 163 145 566556 167 528 643635 635 645- 685 660- 666 620 180 164 158156 624628632636 640644 617621 151-165 171-195 203 642640636 200 151 115 125 135 514 101 440 444 436432 427 425 117119 630616 208 228220 240-248 575 530- 534536540 552 177 156 201209215225 595 229231 611-623 180 508500 625-631 170 172-174 542544 538-542 552548546 541-547 230-238 734 723 721 702- 730220-244 744 701 731 755757 771 200 160 728-732 762-776740-746 250 275 270 255741 265 724 730 651 221-225227 668 707 205 201203451449 209 219 221 233235450460470 442444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441- 445 435-439 346344 333335 342 344 431 460 450 235530 220 220 B 222 240 514278 274270 250 545 540 251485255 271 281 300310301 581 259-267 533535537 261267 518-526 532- 536 520-526 530-536 271 281 252 270 240-248202-216 228226234238 244242 210- 216 228- 234 223-229 209215 247-259 240 232230 311-317 251 344 326 340 337339 323317 400 420 332330 314 353 355 367 305 347 265272-278 418 319 321- 341 328 330 300- 310 431401 366 436 426 #1-7 369 335 319 390 301 315 375 307-311 325330 332 1&2330 1-3 324 326316 318 373-377 416- 424 361 338 340 560 345 321325 315 529 285 555 650636 628 1-12 628 A-E 385 365 375380 345 664 325650-654 661635300 690 675 555541-549533 535-539 318-324326 352 425 439-441 435429425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374376380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432428 460-476 450 635 446 430 400 745 720706 385744734 724-730 720712704 360 351 315737 332 300 653-681 683685 512 501619 609605 518 482486496 610 630 455 400 651-687 543-545 532534 542544 550 552 554556 558560562564 635-6 643-6 470 313 334 333 325326 342 303301 229 336 308 310 312 316 318 311 331 315 319 317 321 335 228220 356-360 347-367 351 357 369-379360 258-296 350 210 204 302- 316 379310 320 328 332 340 437 412 311 A-B 404 313 325 327 333 407 401385 411 452 378-390 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 344-348 418420 482 328 456 321 325 330204218 236 240 250-252 477 475 467 457 453249235225221 201 60 275 505-509 239-243209-213 210-214 513-519 460 474472228- 230 535 558 201 1612 20 209 215 223 231 521 80 239-245 530-540 544-554 212- 216 218-222 333 335-337 351 457451 465463 489-499360 530 480 420 430 480 463 451443437411405 419405401 441 480-498 347 351 355 359 525 430 473 332- 342 425415 400 570568 556 550 543 327321315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 330-332 318-320 406-418 417 542548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571530 619-6 520 440-446 579 567 523610 600 555 581 420-438 437 566 224 228 A-F 244 579 575 565 559 251 355 A-J 335329604 576 566 345-347 243245 25725920921922723502 505 610-616 727 678 676 674672 642 636-638 567 555 711 701705 725 525 759 730718 734 738-740 760 746-750 701 721-7 600 827 835 899 850 530 609 759 7517537737-62611 601 600 1013 10041000 1006 1001 623 137 145 700 780 790 744 111700 753100 825805 33 51 75 63 841 44 675 49 41 711 799 703 100 101 139654 625 160 1001 1005 1009 1010 1004 930 975945929931 948 181 940 960 145900 955 999875 853 925 81 855 901-907 909 87 98 917 921 925 735 849 707 847 842828 820248 230-232 212 825 829833 839 800 812818 882 165831 801 815 809801 841 791153 718 774 761 795745 201 209 834836 845 895 926 190 934 942 948 203 209 219 225 929200 240 904 910 926 270 935 904 909909A 217 222 148 171 421 130 312 318 324 317 301 186 192 323 329 151 325 329 334 131 129 355301 235 258 212 163 115 291247 210 201 207 64 202 235 251249 252 247 244250 177220 261 251-257 205245 231225213205 70 2206 234240 183 251 270 241-247 215- 237 210-216 219 235 62 202 245 54 52 50 203 215 221 313-317318 220- 224 238 542-550 531-539 532 759 223-239 905 911-917907 188190 251- 293 202206208 210 212 216 220 1008 275 539 201 400 27 168 865857 302 324 340 795 848 918 903903A 408412 440 483A - F 435 751 735 745 532 210 727 733 335 328 330 345 214 350 800 806 441 441A 230302306308312316 301 303 305 307 309 325 251 807 821 829 801 818-824 420 424 430 832A 832 842A 842 852A 852 862A 862 872A 872 351A 351 355A 355 359A 359 363A 363 367A 367 425 911 943 951 918 936 940 944 271 253 241 301 319 919A919 935 949 928 936 940-946 353 264 367 361 310 1005 1010 423425413 - 419 457-467 469-471473-481 454 729 A-D 733-743 734-740 724-732 936 824-828 920 949 943941 715 95 445 324 328 545 590 425447 827 565585595 904 315 507 561 706 536 200 100 280-290 150 158164 276 516 698 161 159 157777 132 127 180 528 120 247 372 524 548550 538 152 345 336 515 658 227 27 29 539 115 135 321 558 #200-202 558 #C & D 965 140 350 808 915 461 435433 945 1012 421 727 A-C 218 255 206 739 260 840 650 642 351 451 551 375 530 643 415 12 700 802 99 89 87 901 560564568572576580584588592594 906908 910912914 916918920 922924 548 423 668 901 305 -313 423 405 352354 611 320322 346 323 471 484 528 426 264 430 1001 508 756 -760 940 930 544546 515 7 745 7 549 211213 151 160 257 433-457 482 330 349 401 539 440 691 755 67 312 202 651 443445 447 716 218 398 998 262 335 218 640-646506 327 469 303 401 403 254 401 91 40 101 819 301 725 595 705 541 Quarry Road Homer Avenue Lane 8 West Medical Foundation Way Lane 7 West Lane 7 East Encina Avenue El Camino Real Urban Lane Wells Avenue Forest Avenue High Street Emerson Street Ch a n n i n g A v e n u e Alma Street El Camino Real Mitchell Lane Everett Avenue Lytton Avenue Lane 15 E High Street Alma Street Bryant Street Lane 6 E Lane 11 W Lane 21 High Street Gilman Street Hamilton Avenue University Avenue Bryant Court Lane 30 Florence Street Kipling Street Tasso Street Cowper Street Everett Avenue Waverley Street Cowper Street Webster Street Everett Court Lytton Avenue Lane A West L L La Addison Avenue Forest Avenue Downing Lane Homer Avenue La Lane 39 Lane 56 Hamilton Avenue Webster Street Waverley Street Kipling Street Bryant Street Ramona Street Addison Avenue Scott Street Webster Street Cowper Street Addison Avenue Channing Avenue Ramona Street Paulsen Ln Lane 15 E Lane 20 W Lane 20 E University Avenue CalTrain ROW Emerson Street Waverley Street Kipling Street Bryant Street Ramona Street Palo Road ay Pear Lane Lane 12 W Lane 5 E Everett Avenue Homer Avenue Emerson Street talm Dr iv e Alma Street Lytton Avenue This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc Zone A (Ground Floor) - Zone B (Upper Floors) abc Zone B 0'500' Downtown Palo AltoBusiness ImprovementDistrictArea Map CITY O F PALO A L TO INC OR P ORATE D C ALIFORN I A P a l o A l t oT h e C i t y o f AP RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2012 City of Palo Alto rrivera, 2012-04-30 16:57:54CPA BID (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) 3 Downtown Palo Alto: A snapshot Methodology: Ratio estimates based on one time data collection through quick probability samplings considered a “windshield survey.” Margin of error is estimated to be 10-15%. At a glance, there are approximately 88 restaurants and 72 retail establishments. 13 national chain restaurants or franchises exist amongst 75 privately owned restaurants. Amongst retail, there are approximately 21 national retailers and 51 independently owned stores. Summary of findings: Many perceive that there is a preponderance of restaurants vs. retail, but in reality the mix is quite balanced. That is also true for the number of chains vs. the number of independently owned businesses—it’s clear that there is much more in the way of independently owned businesses than chain or franchised businesses—thus breaking the commonly held perception of downtown being dominated by chains and restaurants. 2 Section II: 2014-15 Year in Review and Planned Activites for Fiscal Year 2015-2016 “Keeping Downtown Palo Alto Safe, Spotless and Successful. Creating a spotless downtown. The sidewalks downtown are steam cleaned once per month with powerful equipment that helps remove stubborn stains like chewing gum. (For the record, individual businesses can sweep but are prohibited from using water to “hose down” the sidewalks, as that debris will flow directly to the bay. Steam cleaning is the most effective and the most environmentally responsible method.) These methods are an improvement over years past. These increases in frequency along with better equipment and the help of the Downtown Streets Team, (founded by The Palo Alto Downtown Business and Professional Association in 2004) help to keep downtown Palo Alto “spotless.” Working in conjucntion with the city fo Palo Alto Public Works Division, other projects, like the repainting of the University Avenue tunnels, for example, (photos below) have served as a great improvement for those entering the downtown from, in particular, Caltrain. 3 Creating a safe downtown. The Palo Alto Downtown Business and Improvement Association also administers the standing committee known as the Downtown Parking Committee, a committee charged with oversight of the funds and activities associated with the garages. As a reminder, in addition to the association fees, many merchants in the downtown district also contribute fees to the downtown parking district which helped fund the building of the parking garages downtown (an ongoing cost) and fund the ongoing maintenance of the garages at an approximate cost of $1million each year. The garages are patrolled by the Palo Alto Police Department and outreach efforts by the Downtown Streets Team—both are currently funded by these fees. The return of dedicated patrols downtown with two officers assigned to the beat also ensure a presence downtown that helps deter crime and provides rapid response to downtown incidents was initiated two years ago and this year, the number of dedicated officers was increased to four. 4 Creating a destination. Keeping downtown a great place to do business, whether you are a retailer, restaurant, start-up or a one- person office is our mission. There was a time before the existence of the business association that downtown was not a thriving, vibrant place to do business. Today, it is abuzz with activity due in some part to the efforts of the Palo Alto Downtown Business and Professional Association. Making certain that downtown is its own unique brand, one that differentiates itself from any other downtown, is an area of focus for The Association. Creating this brand comes from not only ensuring an attractive downtown, but one that doesn’t mind tooting its own horn. 5 6 Creating an environment that is business friendly. The Palo Alto Downtown Business and Professional Association provides a conduit to leaders and staff at city hall. We don’t work for the city of Palo Alto; we work with it on behalf of all the business located downtown. From helping to develop public policy regarding public parking to smoking in downtown parks to noise ordinances to issues surrounding outdoor dining, we are a stakeholder with a voice that can be heard amongst other stakeholders and Palo Alto’s civic leaders. The “Downtown Crown” as presented to each business that chooses to open downtown. 7 PROJECT  STATUS  EXPECTED  COMPLETION   Beautification  and  Safety       Monthly  sidewalk   cleaning   Worked  with  the  City  to  increase  frequency  and  improve   equipment  used  for  sidewalk  cleaning.   Ongoing   Public  Art:  Downtown   Tunnel  Light  and  sound   Project   In  conjunction  with  Palo  Alto  Public  Arts  Commission.  Exec.   Dir.  will  serve  on  review  committee.  Project  awarded.  Possible   installation  in  June  2015   June  15   Downtown  Ambassador   Program   PAd  continues  to  explore  sponsorship  of  “ambassadors”  with   the  Downtown  Streets  Team,  with  individuals  who  would  be   able  to  provide  information  regarding  Downtown  and   direction  to  visitors.    Funding  being  sought.   Seeking  funding.   Meetings  have   commenced   Downtown  Streets  Team   Business  Advisory   Council   PAd  continues  to  explore  ways  to  raise  awareness  of  the   benefits  of  donating  to  social  services  organizations  rather   than  to  give  directly  to  panhandlers.  The  Business  Advisory   Group  is  working  with  DST  to  develop  a  public  awareness   campaign   TBD   Downtown  gateway   feature   Development  of  feature  to  mark  entrances  to  Downtown   being  considered   Meetings  have  been   postponed  until  further   notice   Camera  installation  in   garages     Waiting  for  the  city  of  Palo  Alto  to  install  equipment  in  CDC  as   to  be  consistent  with  further  installations   Under  development   Administration       Yearly  audit  Annual  required  financial  statement  audit  and  tax  return   completed  by  independent  accounting  firm.   In  progress  for  2014-­‐15   Annual  database  update  Annual  census  of  new  and  departed  businesses  within   Downtown  in  progress.     In  progress  for  2015   Annual  invoices  Separate  communications  from  PAd  added  to  all  City  invoices,   including  separate  welcome  letter  for  new  businesses.   Scheduled  for  July  1,   2015.  RFP  going  out  for   outsourcing  of  this   service   Membership   Communications  and   programming       Downtown  Palo  Alto   Walking  Maps   Update  of  merchants  and  locations  is  complete;  contents  In   conjunction  with  the  San  Mateo/Silicon  Valley  Visotirs  Bureau,   Pad  will  be  developing  a  printed  and  interactive  walking  map.       Pending  data  transfer   Accepted  funding   through  San  Mateo   County  Convention   8 Bureau   “Made  in  Downtown   Palo  Alto”  Magazine   Magazine  devoted  to  Downtown  businesses  under   development.    Partial  issue  was  released  during  the  Palo  Alto   Institute  Film  Festival  in  October  2012,  but  full  issue  remains   to  be  released.    When  complete,  it  will  be  available  for  free   distribution  at  Downtown  businesses.   Under  development  as   another   communications  vehicle   Media  Coverage  The  past  fiscal  year  has  seen  at  least  15  articles,  citations,   listings  or  other  references  in  media  outlets.       Ongoing   Facebook  presence    Photos,  posts  and  calendar  items  are  all  included  in  facebook   content.    The  facebook  presence  also  provides  “friends”  with   updates  on  new  and  departing  businesses  as  well  as  events   and  activities  in  the  Downtown   Ongoing   Twitter  Account  launched  Jan  13  Ongoing   Events       Holiday  Tree  Lighting  2014  tree  lighting  occurred  on  November  30.    The  2015   lighting  is  currently  scheduled  for  November  30  to  coincide   with  Small  Business  Day     Scheduled  for  Nov  30   World  Music  Day  PAd  is  involved  with  this  annual  Father’s  Day  event  through   assistance  with  securing  insurance  for  the  event  and  providing   outreach  to  the  Downtown  business  community  regarding   street  closures  and  ways  to  participate  in  the  event.   Scheduled  for  June  16   “The  Downtown  Crown”  At  the  grand  opening  of  each  new  Downtown  business,  PAd   welcomes  the  business  to  the  district  by  presenting  a  crown.       Ongoing   Breakfast  Roundtable  Breakfast  roundtables  have  been  held  in  the  past.  One  was   entitled,  “Let  the  brainiacs  of  Silicon  Valley  improve  your   downtown  business”  and  featured  three  local  startups,  Euclid   Elements,  FiveStars  loyalty  and  Google  interior  mapping.     Another  featured  parking  experts  from  San  Francisco  and   Redwood  City.  2015  will  bring  another  with  a  subject  relevant   to  the  district   Ongoing.  New  series   under  consideration     Downtown  Parking   Committee   PAd  is  actively  involved  in  ensuring  the  Downtown  parking   assessment  district  is  running  effectively.  It  engaged  in   considerable  outreach  with  Downtown  neighbors  regarding   impacts  including  the  development  of  a  pilot  RPP  program.   PAd  continues  to  be  involved  with  ongoing  Downtown  parking   studies,  working  with  City  staff  and  working  on  outreach  to   Downtown  business  and  property  owners.   Ongoing   Concert  Series   sponsorship   Pad  brought  live  music  back  to  downtown  in  2014  with  its   noontime  summer  concert  series.  PAd  is  currently  building   relationships  and  seeking  underwriters  to  resume  its  outdoor   concerts  Downtown.  To  date,  we  have  been  successful  and   anticipate  a  robust  concert  series  with  top  notch  talent   Under  development  for   2015.  Venue  change  to   King  Plaza,  Sponsorships   being  sought   Event  outreach  PAd  provides  continuous  member  outreach  regarding  street   closures,  special  events,  construction  impacts,  transportation   studies,  traffic  disruptions  and  more.   Ongoing   Completed  Projects   2011-­‐present         9 Cogswell  Park   rehabilitation     Worked  with  the  City  to  initiate  the  rehabilitation  project   and  provided  input  on  design.  Grand  re-­‐opening  was   December  12,  2012.  Wi  fi  zone  added  with  funding  help   from  PAD   Complete  Dec-­‐12  and     13   University  Ave.  Tunnel   rehabilitation   Worked  with  the  City  to  initiate  new  paint,  water  proof   sealing  and  cleaning  along  with  some  new  signage  to   brighten  and  provide  a  more  welcoming  entrance  to   Downtown.  Art  coming.  See  Mural  project  below.   Complete  Dec-­‐12   Cogswell  Park  wi-­‐fi  hot   spot   Contributed  funds  to  pilot  free  wi-­‐fi  hot  spot  program  at   Cogswell  Park;  assisted  TopCorner.org  with  fundraising.   Complete  March  -­‐13   No  Amplified  Music   Ordinance  for  Lytton   Plaza  and  Cogswell   Park   In  response  to  PAd  member  complaints,  worked  with  the   City  to  draft  language  and  provide  outreach  to   Downtown  community.  Ordinance  is  now  in  effect.   Complete    Jan-­‐13   Operation  Flagpole:  an   initiative  to  decorate   University  Ave  with   flags  for  special   occasions   Holes  installed  as  part  of  the  University  Ave  landscaping   improvements.  Palo  Alto  Rotary  and  the  University   Rotary  Club  funded  and  volunteered  to  assemble,  install   and  remove  flags  each  national  holiday   Complete  July  –  13   and  ongoing   University  Avenue   landscape  and   irrigation  rehabilitation     Working  with  the  city  of  Palo  Alto  on  outreach  to   business  community  to  add  awareness  and  address   concerns  on  scheduled  improvements.  Began  the  first  of   9  phases  of  1-­‐2  weeks  each  on  Feb  7.  Work  completed.   Complete  Apr-­‐13   Public  Art:  Aurora   installation  at  King   Plaza   PAd  worked  with  the  Pal  Alto  Arts  Commission  to  move   this  installation  to  King  Plaza.    Fundraising,  website  and   print  material  distribution  involving,  among  others,  the   Black  Rock  Art  Foundation.   Complete  Nov  -­‐13   Seasonal  lamp  post   banner  design   Expectation  of  expanding  the  program  to  include  a   greater  variety  of  banners  and  more  frequent   replacement.    Additional  funding  will  come  from  private   public  partnerships.     Complete  Spring  13   and  Summer  13  ,   Holiday  13  Spring   /Summer  14  complete   Lytton  Plaza  To  make  Lytton  Plaza  more  welcoming,  umbrellas  have   been  added  to  outdoor  seating.  A  partnership  with  the   Friends  of  LP  has  funded  the  effort.  Foliage  has  also  been   added  to  enhance  the  plaza.   Complete.  Spring  14   Sleeping  in  Vehicles   subcommittee   Served  on  the  committee  to  develop  a  pilot  program   with  the  faith  community  to  address  this  issue.   Ordinance  on  hold.   Complete  and  then   put  on  hold  pending   out  of  state  litigation   No  smoking  ordinance   for  Lytton  Plaza  and   Suggested  new  ordinance  to  City  staff  as  a  result  of  PAd   member  complaints.  Ordinance  approved  by  city  council.   Complete  June-­‐13   10 Cogswell  Park  In  effect  as  of  June  13   Palo  Alto  Downtown   Business     and  Professional   Association  re-­‐   branding   Re-­‐branding  began  in  fiscal  year  2012-­‐2013  to  increase   visibility  to  members  within  Downtown  and  to  create  a   recognizable  brand  to  Downtown  visitors.    Logo  redesign   and  initial  implementation  were  completed  in  October   2012.  New  website,  facebook  and  other  branded  media   complete  and  in  the  pipeline   Complete  Oct-­‐12   “Made  in  Downtown   Palo  Alto”  Rewards   Card   Launched  in  partnership  with  FiveStars,  Inc.  in  late  2012.     Currently,  over  [20]  Downtown  businesses  are   participating.  Thousands  of  cards  have  been  distributed.   Complete  and  ongoing   Website  redesign  Board  authorization  given  for  ED  to  proceed  with   development.   Complete    Dec  13   Outdoor  dining    In  conjunction  with  the  City,  PAd  hosted  a  meeting  on   March  18  and  in  April  with  Downtown  restaurant  owners   to  provide  information  regarding  encroachment  permit   requirements  for  outdoor  dining.    Efforts  to  facilitate   compliance  with  City  ordinances  will  be  ongoing.   Complete  June-­‐13   Enforcement  to  begin   as  of  10/13   Concert  Series   sponsorship   PAd  has  brought  back  outdoor  concerts  Downtown.  Complete  Summer  14.   Under  development   for  2015   11 Section III. Budget for 2015-16 The total funds available for activities for this fiscal year are estimated to be $148,000. The budget for providing the activities is set forth as follows: BID 2015/16 Budget INCOME Total Non-Assessment Sources Assessments $175,000 Allowance for Uncollectible Assessments ($35,000) Other Revenue $57,000 $57,000 TOTAL INCOME $197,000 $197,000 EXPENSES Operating Expenses Staff Salaries Executive Director Salary & Benefits $72,600 Payroll taxes and expense $7,260 Office Supplies & Expenses $150 Internet/Website Maintenance $500 Telephone 0 Rent $7,200 Reauthorization Advertising $2,650 Audit-Tax Returns $5,700 Legal $1,000 $1,000 Insurance - Liability $2,300 Workman's Comp $800 Nominating $1,500 Contingencies $2,000 Subtotal -- Operating Expenses $103,660 $1,000 Programs, Marketing and Events Seasonal Banners $24,000 $16,000 Location Specific Banners $6,000 Summer Concert Series $40,000 $40,000 Events $3,500 Outreach & Communication $1,250 $1,000 Downtown Streets Team $5,000 District Opportunity Reserve $13,590 Subtotal --Programs, Marketing & Events $93,340 $56,000 TOTAL EXPENSES $197,000 $57,000 12 Section IV: Method and Basis of Levying the Assessment Cost Benefit Analysis / Bid Assessments The method and basis of levying the assessment is provided in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2015-16 and is not changed from the FY 2014-15 assessment. There have been no changes made to the Cost-Benefit Analysis or to the BID Assessments since they were approved by City Council on February 2, 2004. The method of calculation used to determine the cost and benefit to each business located in the BID is described below. The BID assessments are based on three criteria: the type of business, the location of the business and the size of the business. It has been consistently demonstrated that the typical BID program places a higher priority on activities such as commercial marketing. As a result, the retail and restaurant establishments in the BID are assessed more than service and professional businesses in the district. While service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more than professional businesses such as medical, dental, architectural, consultant and legal offices with their minimal advertising and promotion needs. For these reasons, various business types are assessed according to the benefit that they receive from the BID, as follows: ! Retail and Restaurant 100% of base amount ! Service 75% of base amount ! Professional 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. The location of a business also determines the degree of benefit that accrues to that business. Centrally located businesses tend to benefit more, as do businesses located on the ground floor. For this reason, A and B benefit zones have been identified for the BID. In Palo Alto, Zone A benefit businesses are assessed 100% of the base benefit assessment while Zone B businesses are assessed 75%. A third criterion is used in the BID to determine benefit. This criterion, the size of the business, takes into consideration the number of full time employees employed by the business. Please refer to Attachment 1 for a more complete understanding of the application of these three variables to establish BID benefit. Attachment 2 is the BID assessment for each business located within the BID boundaries. Applying the criteria identified in Attachment 1, a summary of the assessment that applies to each business by size, 13 type and location is outlined. In addition to the Cost-Benefit Analysis, the assessments include the following criteria: ! An exemption for “single person professional businesses” that have 25% or fewer full time equivalent (“FTE”), including the business owner. This covers employees who work less than 10 hours a week (based on a 40 hour work week; an FTE equals approximately 2000 hours annually) ! An assessment specifically for “single person businesses” that have 26% FTE to 1 FTE in the professional business category of the BID (An FTE equals approximately 2000 hours annually) ! The tiering of other professional businesses by size based (according to benefit) on the “single person business” criteria This outline provides information by which a business can determine its annual assessment based on objective criteria. Except where otherwise defined, all terms shall have the meanings identified below: Definitions of Business Types in the Downtown Business Improvement District Retailers and Restaurants: Businesses that buy or resell goods such as clothing stores, shoe stores, office supplies as well as businesses that sell prepared food and drink. Service Businesses: Businesses that sell services such as beauty or barber shops, repair shops, most automotive businesses, dry cleaners, art and dance studios, printing firms, film processing companies, travel agencies, entertainment businesses such as theatres, etc. Hotel and Lodging: These include businesses that have as their main business the lodging of customers. This is restricted to residential businesses that provide lodging services to customers for less than 30 days. Professional Businesses: Businesses that require advanced and/or specialized licenses or academic degrees such as architects, engineers, attorneys, chiropractors, dentists, doctors, accountants, optometrists, realtors, insurance brokers, venture capital firms, consultants, advertising and marketing professionals and mortgage brokers and similar professions. Financial Institutions: Includes banking, savings and loan institutions and credit unions. Additional clarification on business definitions will be defined according to Section 18.04.030 (Definitions) of the Palo Alto Municipal Code. The Advisory Board recommends that the following businesses be exempt from the BID assessment: ! New businesses established in the BID area following the annual assessment for the year in which they locate in the BID area ! Non-profit organizations ! Newspapers ! “Single person professional businesses” that have 25% or less FTE, including the business owner 14 The Assessment calculated shall be paid to the City no later 30 days after receipt of the invoice with the amount of the annual assessment sent by the City. A second notice will be mailed as a reminder to businesses that have not remitted payment by that date. Late payment will be subject to a 10% late fee. Section V: Non-assessment Income It is estimated that $57,000.00 will be raised in fundraising, and sponsor support. Additionally, we anticipate in kind contribution towards expenses for Fiscal Year 2014-15. Projected Income for Fiscal Year 2015-16 Legal (donation) $1,000 Banners $16,000 Summer Concert Series $40,000 Outreach & Communication $1,000 Total $57,000 15 Section VI: PAd Board of Directors by Business Type Retailers and Restaurants   Georgie Gleim, Gleim the Jeweler Alex Giovanotto, Joya Travis Nichols, Keen Garage Susan Graf, Susan Graf Service Businesses Robert Peterson, Peterson Architects Hospitality Barbara Gross, Garden Court Hotel Financial Institutions Ali Agah, Boston Private Bank & Trust Company Katie Seedman, Presidio Private Bank and Trust Professional Organizations Brad Ehikian, Premier Properties Patty McGuigan, Cornish & Carey Commercial Michael Lee1, Palantir Sheila Liskar, Palo Alto Laser Skin Care Non Profit Organizations Chris Richardson, Downtown Streets Team Phil Carter, Palo Alto Farmer’s Market COMMUNITY PARTNERS Palo Alto Chamber of Commerce Judy Kleinberg, President & CEO Downtown Streets Team Eileen Richardson, Executive Director City Of Palo Alto Eric Filseth, Palo Alto City Council Thomas Fehrenbach, Manager of Economic Development Attachment 1 ATTACHMENT 1 A General Statement Regarding Cost-Benefit Analysis For BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Type Of Business: In a review of 200 California Business Improvement Districts, it is consistently demonstrated that the typical BID Program places a higher priority on Commercial Marketing Programs than on Civic Beautification and Commercial Recruitment Programs. With that trend in mind, retail and restaurant businesses, with their emphasis on, and need for, commercial marketing, are traditionally assessed more than less marketing-sensitive service-oriented or professional-oriented businesses. However, while service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more, (from commercial marketing programs), than professional businesses such as medical, dental and legal offices with their minimal advertising and promotion needs. Therefore, set forth below, is an example of how various business types might be considered regarding the computation of the annual benefit assessment. • Retail and Restaurant: 100% of base amount • Service: 75% of base amount • Professional: 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. Lodging businesses are assessed based on the total number of rooms because it is a more equitable manner of determining size. Many lodging businesses have many part time employees, but revenues are based on the room occupancies of the hotel, not the goods sold or serviced provided by employees. Criteria 2) Location of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Location of Business: It has also been consistently demonstrated that the more centrally located businesses tend to benefit from BID activities and services to a greater degree than businesses located toward the periphery of the proposed BID boundaries. Events and activities tend to originate in the central core of the Downtown area and spread benefit to the outer areas with diminishing energy and impact, much like the ripple effect of a stone tossed into a body of calm water. Furthermore, ground floor businesses tend to benefit to a greater degree than businesses located in upper floors. Therefore, in some cases, a new BID's annual benefit assessment formula also takes these street level criteria into account. As mentioned above, special events, fairs, festivals and other activities tend to take place within, or along, the Main Street core rather than in the areas at the periphery of the Downtown core. Additionally, BID-sponsored seasonal decorations, public art projects, street banners and street furniture tend to be located within the immediate core area. Attachment 1 Therefore, businesses located within the most central area of the proposed BID are considered to be within "Zone A" which should be considered the primary benefit zone. There is typically a "secondary zone" or "Zone B" within most proposed BID areas. This area receives less benefit than Zone A and should be assessed accordingly. An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. • Zone A: 100% of base benefit assessment • Zone B: 75% of base benefit assessment In the case of Downtown Palo Alto, it is recommended that all Zone A upper floor businesses, as well as any other businesses located at the periphery of the proposed BID, be considered as Zone B businesses. Please refer to the map in Attachment I. Criteria 3) Size of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Size of Business: In approximately 50% of newly established BIDs, a third assessment criterion is used. This criterion involves the size of each individual business that is based upon the businesses’ total number of full-time employees. Full-time employees are those working a total of 2,000 hours per year. Part-time employees are grouped into full-time job positions, i.e., two half-time employees total one full-time. Fractions are rounded down to the nearest whole number with no less than one person as a minimum for business. An example of how various business sizes might be treated regarding the computation of the annual benefit assessment is as follows: Retail/Restaurants Service Businesses Small 50% of base amount Under 6 FTE* Under 4 FTE Medium 75% of base amount 6 to under 11 FTE 4 to under 7 FTE Large 100% of base amount 11 or more FTE 7 or more FTE * FTE = full time employees Additionally, an exemption was established for “single person professional businesses” that have 25% or less FTE, including the business owner. This covers employees who work less 10 hours a week (based on a 40 hour work week) Since “single person businesses” that have 26% FTE to 1 FTE in the professional business category of the BID benefit the very least from the assessment, their assessments have been tiered by size based (according to benefit) on the new “single person business” criteria. Attachment 1 ATTACHMENT 2 Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A ZONE B (75% of Zone A amount) Restaurants & Retailers Under 6 FTE (50% of base amount) $225 $170 6 to under 11 FTE (75% of base amount) $340 $260 11 or more FTE (100% of base amount) $450 $340 Service Businesses Under 4 FTE (50% of base amount) $170 $130 4 to under 7 FTE (75% of base amount) $260 $200 Over 7 FTE (100% of base amount) $340 $260 Professional Businesses 25% or fewer FTE, including owner (0% of base amount) Exempt Exempt 26% FTE to under 1 FTE (25% of base amount) $60 $50 2 to 4 FTE (50% of base amount) $110 $90 5 to 9 FTE (75% of base amount) $170 $130 10+ FTE (100% of base amount) $225 $170 Lodging Businesses Up to 20 rooms (50% of base amount) $225 $170 21 to 40 rooms (75% of base amount) $340 $260 41+ rooms (100% of base amount) $450 $340 Financial Institutions $500 $500 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. Not Yet Approved 120327 jb 0130950 1 Resolution No. _____ Resolution of the Council of the City of Palo Alto Declaring Its Intention to Levy an Assessment Against Businesses Within the Downtown Palo Alto Business Improvement District for Fiscal Year 2016 and Setting a Time and Place for May 18, 2015 at 7:00 PM or Thereafter, in the Council Chambers THE CITY COUNCIL OF THE CITY OF PALO ALTO DOES HEREBY FIND, DECLARE, AND ORDER AS FOLLOWS: SECTION 1. The Parking and Business Improvement Area Law of 1989 (the "Law"), California Streets and Highways Code Sections 36500 et seq., authorizes the City Council to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. The City Council, by Resolution No. 8416, appointed the Board of Directors of the Palo Alto Downtown Business & Professional Association, a California nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board"). SECTION 4. In accordance with Section 36533 of the law, the Advisory Board prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business Improvement District, Annual Report 2015-2016" (the "Report”). The City Council hereby preliminarily approves the report. SECTION 5. The boundaries of the District are within the City limits of the City of Palo Alto (the "City") and encompass the greater downtown area of the City, generally extending from El Camino Real to the East, Webster Street to the West, Lytton Avenue to the North and Addison Avenue to the South (east of Emerson Street, the boundaries extend only to Forest Avenue to the South). Reference is hereby made to the map of the District attached hereto as Exhibit "A" and incorporated herein by reference for a complete description of the boundaries of the District. SECTION 6. The City Council hereby declares its intention, in addition to any assessments, fees, charges or taxes imposed by the City, to levy and collect an assessment against businesses within the District for fiscal year 2016 (July 1, 2015 to June 30, 2016). Such assessment is not proposed to increase from the assessment levied and collected for the prior fiscal year. The method and basis of levying the assessment is set forth in Exhibit "B" attached hereto, and incorporated herein by reference. Not Yet Approved 120327 jb 0130950 2 SECTION 7. The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by the levy of an assessment against businesses within the District are the promotion of public events which benefit businesses in the area and which take place on or in public places within the District; the furnishing of music in any public place in the District; and activities which benefit businesses located and operating in the District. SECTION 8. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, non-profit organizations, newspapers and professional "single-person businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 9. The City Council hereby fixes the time and place for a public hearing on the proposed levy of an assessment against businesses within the District for fiscal year 2016 as follows: TIME: 7:00 p.m. or soon thereafter DATE: Monday, May 18, 2015 PLACE: City Council Chambers 250 Hamilton Avenue Palo Alto, California 94301 At the public hearing, the testimony of all interested persons regarding the levy of an assessment against businesses within the District for fiscal year 2016 shall be heard. A protest may be made orally or in writing by any interested person. Any protest pertaining to the regularity or sufficiency of the proceedings must be in writing and shall clearly set forth the irregularity or defect to which the objection is made. Every written protest must be filed with the City Clerk at or before the time fixed for the public hearing. The City Council may waive any irregularity in the form or content of any written protest and at the public hearing may correct minor defects in the proceedings. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest must contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the City as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business. A written protest which does not comply with Not Yet Approved 120327 jb 0130950 3 the requirements set forth in this paragraph will not be counted in determining a majority protest (as defined below). If, at the conclusion of the public hearing, written protests are received from the owners of businesses in the District which will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50 percent (i.e., there is a majority protest), no further proceedings to levy the proposed assessment, as contained in this resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the City Council. If the majority protest is only against the furnishing of a specified type or types of improvement or activity within the District, those types of improvements or activities shall be eliminated. SECTION 10. For a full and detailed description of the improvements and activities to be provided for fiscal year 2016, the boundaries of the District and the proposed assessments to be levied against the businesses within the District for fiscal year 2016, reference is hereby made to the Report of the Advisory Board. The Report is on file with the City Clerk and open to public inspection. SECTION 11. The City Clerk is hereby authorized and directed to provide notice of the public hearing in accordance with law. // // // // // // // // // // // // Not Yet Approved 120327 jb 0130950 4 SECTION 12. The Council finds that the adoption of this resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Senior Assistant City Attorney City Manager _____________________________ Director of Administrative Services _____________________________ Director of Planning and Community Environment Not Yet Approved 120327 jb 0130950 5 934 - 9 4 4 927 932 233 281 933 - 9 3 7 943 327 1001 94 2 469 475 74 4 459 832 801 A P T 1 - 5 427-453 920 912 362 370 900 838 846 471 459 835 - 8 5 5 460 81 5 840 836 834 845 400 803 928930 931 933 835 - 8 3 7 831 - 8 3 3 451453 802800 81 0 - 8 1 6 81 8 - 8 2 0 82 8 - 8 3 0 817 - 8 1 9 82 3 - 8 2 5 567-569 559563 536 526 100 1 101 1 - 540 483 904 912 468 918 926 537 965-971505-507 519-521 939-945 931-935 923-925 518-520 539541543 515-517 809 811 420 1001 1011 1010 376 370 980960 990 34 354 326 426 4 1000 448 944 471 483948952 959947925 915 933 935 425-443 451449 463-465 936-940 458 460 440 428426 527-533 543 551 510520 558-560 903 825 837 581 575 940934 813-823 501-509 511-519 521-529 531-539 541-547 556 596 904 926 561-567 569 845 580 574 566 991- 997 136 610 116-122 150 535529 525 542516140 102 116 124 163 145 566 556 167 528 643635 635 645- 685 660- 666 620 180 164 158156 624628 632 636 640 644 617 621 151-165 171-195 203 642640 636 200 151 115 125 135 514 101 440 444 436432 427 425 117119 630616 208 228220 240-248 575 530- 534 536 540 552 177 156 201 209215 225 595 229231 611-623 180 508500 625-631 170 172-174 542544 538- 542 552 548 546 541- 547 230-238 734 723 721 702- 730220-244 744 701 731 755757 771 200 160 728-732 762- 776740-746 250 275 270 255 741 265 724 730 651 221-225 227 668 707 205 201203 451449 209 219 221 233 235450 460 470 442 444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441- 445 435- 439 346344 333 335 342 344 431 460 450 235530 220 220 B 222 240 514278 274270 250 545 540 251485255 271 281 300 310 301 581 259-267 533535537 261 267 518-526 532- 536 520-526 530-536 271 281 252 270 240-248 202- 216 228226 234238 244 242 210- 216 228- 234 223- 229 209215 247-259 240 232230 311-317 251 344 326 340 337339 323317 400 420 332330 314 353 355 367 305 347 265272-278 418 319 321- 341 328 330 300- 310 431401 366 436 426 #1-7 369 335 319 390 301 315 375 307- 311 325330 332 1&2330 1-3 324 326316 318 373- 377 416- 424 361 338 340 560 345 321325 315 529 285 555 650636 628 1-12 628 A-E 385 365 375380 345 664 325650-654 661635300 690 675 555541-549533 535- 539 318-324 326 352 425 439-441 435429425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374 376 380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432428 460-476 450 635 446 430 400 745 720706 385744 734 724-730 720 712 704 360 351 315737 332 300 653 -681 683 685 512 501619 609605 518 482486 496 610 630 455 400 651-687 543-545 532534 542544 550 552 554556 558560562564 635-6 643-6 470 313 334 333 325326 342 303301 229 336 308 310 312 316 318 311 331 315 319 317 321 335 228220 356-360 347-367 351357 369-379360 258- 296 350 210 204 302- 316 379310 320 328 332 340 437 412 311 A-B 404 313 325 327 333 407 401385 411 452 378-390 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 344-348 418420 482 328 456 321 325 330204 218 236 240 250- 252 477 475 467 457 453249235225221 201 60 275 505-509 239- 243 209- 213 210- 214 513-519 460 474472228- 230 535 558 201 16 12 20 209 215 223 231 521 80 239-245 530-540 544-554 212- 216 218-222 333 335- 337 351 457451 465463 489-499360 530 480 420 430 480 463 451443437411 405 419405401 441 480-498 347 351 355 359 525 430 473 332- 342 425415 400 570568 556 550 543 327321315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 330-332 318-320 406-418 417 542 548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571 530 619-6 520 440-446 579 567 523610 600 555 581 420-438 437 566 224 228 A-F 244 579 575 565 559 251 355 A-J 335329 604 576 566 345-347 243245 25725920921922723502 505 610-616 727 678 676 674672 642 636-638 567 555 711 701705 725 525 759 730 718 734 738-740 760 746-750 701 721-7 600 827 835 899 850 530 609 759 751753 7 737-62611 601 600 1013 10041000 1006 1001 623 137 145 700 780 790 744 111700 753100 825805 33 51 75 63 841 44 675 49 41 711 799 703 100 101 139654 625 160 1001 1005 1009 1010 1004 930 975 945929931 948 181 940 960 145900 955 999875 853 925 81 855 901-907 909 87 98 917 921 925 735 849 707 847 842828 820248 230-232 212 825 829 833 839 800 812 818 882 165831 801 815 809801 841 791153 718 774 761 795745 201 209 834836 845 895 926 190 934 942 948 203 209 219 225 929200 240 904 910 926 270 935 904 909 909A 217 222 148 171 421 130 312 318 324 317 301 186 192 323 329 151 325 329 334 131 129 355301 235 258 212 163 115 291247 210 201 207 64 202 235 251 249 252 247 244250 177220 261 251-257 205245 231225213205 70 2 206 234240 183 251 270 241-247 215- 237 210- 216 219 235 62 202 245 54 52 50 203 215 221 313-317318 220- 224 238 542-550 531-539 532 759 223-239 905 911-917907 188 190 251- 293 202 206 208 210 212 216 220 1008 275 539 201 400 27 168 865857 302 324 340 795 848 918 903 903A 408 412 440 483A - F 435 751 735 745 532 210 727 733 335 328 330 345 214 350 800 806 441 441A 230302 306 308 312 316 301 303 305 307 309 325 251 807 821 829 801 818-824 420 424 430 832A 832 842A 842 852A 852 862A 862 872A 872 351A 351 355A 355 359A 359 363A 363 367A 367 425 911 943 951 918 936 940 944 271 253 241 301 319 919A 919 935 949 928 936 940-946 353 264 367 361 310 1005 1010 423425413 - 419 457-467 469-471473-481 454 729 A-D 733-743 734-740 724-732 936 824-828 920 949 943941 715 95 445 324 328 545 590 425447 827 565 585 595 904 315 507 561 706 536 200 100 280-290 150 158164 276 516 698 161 159 157777 132 127 180 528 120 247 372 524 548550 538 152 345 336 515 658 227 27 29 539 115 135 321 558 #200-202 558 #C & D 965 140 350 808 915 461 435433 945 1012 421 727 A-C 218 255 206 739 260 840 650 642 351 451 551 375 530 643 415 12 700 802 99 89 87 901 560564568572576580584588592594 906 908 910 912 914 916 918920 922 924 548 423 668 901 305 -313 423 405 352354 611 320322 346 323 471 484 528 426 264 430 1001 508 756 - 760 940 930 544546 515 7 745 7 549 211 213 151 160 257 433-457 482 330 349 401 539 440 691 755 67 312 202 651 443 445 447 716 218 398 998 262 335 218 640-646506 327 469 303 401 403 254 401 91 40 101 819 301 725 595 705 541 Quarry Road Homer Avenue Lane 8 West Medical Foundation Way Lane 7 West Lane 7 East Encina Avenue El Camino Real Urban Lane Wells Avenue Forest Avenue High Street Emerson Street Ch a n n i n g A v e n u e Alma Street El Camino Real Mitchell Lane Everett Avenue Lytton Avenue Lane 15 E High Street Alma Street Bryant Street Lane 6 E Lane 11 W Lane 21 High Street Gilman Street Hamilton Avenue University Avenue Bryant Court Lane 30 Florence Street Kipling Street Tasso Street Cowper Street Everett Avenue Waverley Street Cowper Street Webster Street Everett Court Lytton Avenue Lane A West L L La Addison Avenue Forest Avenue Downing Lane Homer Avenue La Lane 39 Lane 56 Hamilton Avenue Webster Street Waverley Street Kipling Street Bryant Street Ramona Street Addison Avenue Scott Street Webster Street Cowper Street Addison Avenue Channing Avenue Ramona Street Paulsen Ln Lane 15 E Lane 20 W Lane 20 E University Avenue CalTrain ROW Emerson Street Waverley Street Kipling Street Bryant Street Ramona Street Palo Road ay Pear Lane Lane 12 W Lane 5 E Everett Avenue Homer Avenue Emerson Street tal m D r iv e Alma Street Lytton Avenue This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc Zone A (Ground Floor) - Zone B (Upper Floors) abc Zone B 0' 500' Downtown Palo Alto Business ImprovementDistrict Area Map CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2012 City of Palo Alto rrivera, 2012-04-30 16:57:54CPA BID (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR April 27, 2015 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Utility Meter Audit: Procurement, Inventory, and Retirement The Office of the City Auditor recommends acceptance of the Utility Meter Audit: Procurement, Inventory, and Retirement. At its meeting on March 10, 2015, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet, as well as an updated response matrix from the City Manager’s Office. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Utility Meter Audit Updated City Manager's Response Matrix (PDF)  Attachment B: Utility Meter Audit: Procurement, Inventory, and Retirement (PDF)  Attachment C: Policy and Services Committee Meeting Minutes Excerpt (March 10, 2015) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 Utility Meters: Procurement, Inventory, and Retirement 42  APPENDIX C – City Manager’s Response  The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on  implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 1: The Utilities Department has not established adequate processes and procedures for organizing and setting up meters in SAP, causing  data discrepancies and errors.  1.1 The Utilities Department should establish  written policies and procedures that clearly  define roles and responsibilities for managing  the City’s utility meters. The Utilities  Department should coordinate with  Engineering, Operations, Purchasing, and  Stores Inventory to address:  a) Defining individual and cross‐functional  responsibilities for setting up, procuring,  and receiving meters, and training key  staff to understand the workflow  process and controls.  b) The setup, user authorization, and  ongoing maintenance of meter material  master files.  c) The responsibility of assigning badge  numbers to meters, ensuring the use of  a meter type and badge number  combination for the purchase and  receipt of all meters.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities staff is updating policies and  procedures document including outlining roles  and responsibilities for organizing and managing  utility meters.    A – Polices, procedures and role responsibilities  are being updated; Utilities will schedule  quarterly training sessions for specific workflows.   B – Changes in user authorization are completed.    C – Utilities and Administrative Services  Department (ASD) agree to transfer the  responsibility of creating meter badge numbers  to Purchasing Division after Utilities completes  recommendation 1.3.    1.2 The Engineering Division of the Utilities  Department should re‐examine and update  the City’s engineering specifications to  explicitly include all utility meter types  purchased and used by the City, and make  future updates to the specifications as  changes occur. Based on these changes, and   Concurrence:Agree Target Date: Completed  Action Plan: Engineering specifications are  intended to clearly identify the functions and  minimum performance requirements that must  be satisfied.     Attachment A Utility Meters: Procurement, Inventory, and Retirement 43  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  ongoing, the Engineering Division should  work with Purchasing to ensure that meter  types established in SAP can be reconciled to  an approved list of meters.  Engineering will work with Purchasing on an  ongoing basis to ensure that sufficient detailed  information is provided so that meter types  established in SAP can be reconciled to an  approved list of meters.  1.3 The Utilities Department should review its  existing list of utility meter types in the SAP  material master list to redefine and  reorganize existing and future meter types.  This recommendation should be applied if  the Utilities Department changes from SAP to  another system.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities will review the existing list of  meter types in SAP.  Utilities will create,  discontinue or consolidate material master for a  specific meter type if required.    1.4 The Utilities Department should give  responsibility to Purchasing for assigning  badge numbers to meters and make the  process for assigning the numbers more  efficient by allowing the technology of SAP to  designate an automated badge number at  the time of procurement and use the  controls built into SAP to mitigate errors  resulting from the manual assignment of  badge numbers.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and Purchasing have agreed  to transfer the responsibility of new badge  number creation to Purchasing after Utilities  completes recommendation 1.3 including  discontinuation of duplicate and obsolete  descriptions in SAP for meter master records.   Utilities will provide Purchasing training and  documentation of the badge creation process.  Finding 2: The Utilities Department has incomplete, incorrect, and inconsistent meter records, which causes data reliability concerns and  increases the risk for incorrect customer billing.  2.1 The Utilities Department should establish a  policy for meter inventory error tolerance  and, based on this metric, develop a plan to  identify high‐risk meters, verify the accuracy  of these meters, and correct accordingly.   Concurrence:Agree Target Date: Completed  Action Plan: Utilities already has in place a testing  policy and error tolerance procedure for new and  existing meters.  Approximately 10% of all new  meters delivered are tested for accuracy and the  meters must perform within three percent of the  manufacturers’ reported meter specifications.      Attachment A Utility Meters: Procurement, Inventory, and Retirement 44  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  2.2 The Utilities Department should provide  process and SAP training to staff involved in  meter activities on the policies, processes,  and procedures for physically and  electronically maintaining meter data  accuracy.   Concurrence:Agree Target Date: Completed  Action Plan: Training has been underway for the  past several months; Utilities will continue to  conduct quarterly training sessions to ensure all  current and new staff are properly trained. All  meter testing data is electronically recorded.    2.3 The Utilities Department should work with  the Administrative Services Department and  the Information Technology Department to  integrate the various SAP modules to  automate controls or implement other  appropriate processes to ensure that meter  descriptions carry through from procurement  to retirement.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and ASD will investigate the  cost of adding automation and enhancement to  the SAP system.  Depending on the estimated  cost and outcome of the ERP system evaluation,  it may or may not be cost‐effective to implement  any enhancements at this time.  Instead of  manually assigning meter badge numbers, SAP  will automatically generate serialized badge  numbers.    2.4 The Utilities Department should take  corrective action to address the 115  incorrect water billings by notifying  customers of the error and that future  billings will reflect the correction, and  recover revenues to the City of  approximately $43,000. The Utilities  Department should also establish a policy  and procedure for the immediate correction  of future errors identified.   Concurrence:Agree Target Date: Completed  Action Plan: Utilities has notified all the  customers of the billing error.   The average back‐ bill amount for a customer was $452.54 for three  years of service. Utilities also offered payment  plans to the customers in case they wanted to  spread their payments across multiple months.   Utilities will continue to implement established  policy and procedure regarding correction of  errors.  2.5 The Purchasing Division should correct the  purchase order documents to accurately  reflect the engineering specifications.   Concurrence:Agree Target Date: Completed  Action Plan: The Purchasing Division has updated  Attachment A Utility Meters: Procurement, Inventory, and Retirement 45  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  the purchase order documents to accurately  reflect the current engineering specifications.  2.6 The Purchasing Division should ensure that  bidder’s Affidavits of Compliance are  received and documented.   Concurrence:Agree Target Date: June 2015  Action Plan: Purchasing and Utilities will develop  a process to track the vendor’s Affidavits of  Compliance.     2.7 The Utilities Department should establish  responsibility for:  a) Determining and ensuring that meter  testing is appropriately and consistently  performed.  b) Testing and analyzing the test results of  meters for compliance with performance  specifications.  c) Analyzing meter test data to determine  if use of the manufacturer’s guaranty  and warranty is needed.   Concurrence:Agree Target Date: Completed  Action Plan:    A:  Utilities will continue to test 10% of new  meters; the meters must perform within three  percent of the manufacturers reported meter  specifications.      B:  Utilities will continue to test all meters  removed from the field; testing results will be  tracked electronically for data retrieval or  analysis if needed.    C: Utilities will verify application of any  warranties for any failed meters.    2.8 The Utilities Department should reassess  and develop a maintenance and  replacement plan for all electronic meters.   Concurrence:Agree Target Date: December 2015  Action Plan: Utilities will include electronic  meters in the replacement plan.      Finding 3: The Utilities Department inaccurately reported the retirement of meters, which affected their value in the City’s accounting records.  3.1 The Utilities Department should develop a  policy, process, and procedure for the timely  and accurate retirement of meters, both   Concurrence:Agree Target Date: June 2015  Attachment A Utility Meters: Procurement, Inventory, and Retirement 46  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  physically and in SAP. Action Plan: Meter retirement policy has been  defined, procedures are updated, and staff is fully  trained on the meter retirement process. The  meters identified in the report have been  properly retired in the utility system and reported  to Accounting.  Utilities will coordinate with  Accounting on the fixed asset retirement in the  financial system.  3.2 In conjunction with Recommendations 1.3  and 3.1, the Utilities Department should  work with Accounting to align meter types  when adding and retiring meters in the SAP  asset management module.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and Accounting will review  and align meter types in SAP if necessary.  3.3 The Utilities Department should work with  the Administrative Services Department to  properly coordinate and process for meter  recycling credits.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and ASD will coordinate and  review the meter recycling processes.    Attachment A CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR March 10, 2015 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Utility Meter Audit: Procurement, Inventory, and Retirement In accordance with the Fiscal Year 2015 Annual Audit Work Plan, the Office of the City Auditor has completed the Utility Meter Audit: Procurement, Inventory, and Retirement. The audit report presents three findings with a total of fifteen recommendations. The Office of the City Auditor recommends that the Policy and Services Committee review and recommend to the City Council acceptance of the Utility Meter Audit. We would like to thank the staff of the Utilities Department and Administrative Services Department for their time, information, and cooperation during the audit process. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Utility Meter Audit: Procurement, Inventory, and Retirement (PDF) Department Head: Harriet Richardson, City Auditor Attachment B Page 2 Attachment B   H M       U Pr   Ma Harriet Ric Mimi Nguy Office TILITY rocur arch 201 hardson, C yen, Senior e of th Y ME remen 15    City Audito r Performa he City TER A nt, Inv or  ance Audito y Aud AUDIT vento or  itor  T:  ory, aand Reetiremment     Attachment B                                         Page intentionally left blank  Attachment B       Office of the City Auditor  EXECUTIVE SUMMARY:  Utility Meters: Procurement, Inventory, and Retirement  Purpose of the Audit:  The objectives of the audit were to determine if proper procedures were followed and to assess  the efficiency and effectiveness of procuring, managing, and retiring utility meters.  SUMMARY OF RESULTS  The Utilities Department has not established adequate processes and procedures for organizing and setting up  meters in SAP, causing data discrepancies and errors. We could not reconcile 50 percent of meter types to  engineering specifications and identified 13 of 60 master records that had comingled meter price data. At most, 86  percent of meters were tracked in the City’s inventory management module of SAP and some meters were not  assigned the necessary identifier for continuous tracking. When tracked, meter data contained incorrect, missing  or incomplete information. The lack of procedures to prevent errors and the lack of emphasis on maximizing the  use of SAP raises data reliability concerns and increases the risks for incorrect customer billings. The errors and  inconsistencies in meter inventory and data management carry through to the retirement of meters, which  affected the value of meters in the City’s accounting records.   The audit emphasizes:   The importance of effectively organizing and setting up meter data files in SAP to ensure data consistency and  reliability.   The value of using SAP to maintain complete and accurate meter data records, reconciling to meters actually  installed, to reduce the risk of incorrect customer billing.   Internal control is not one event, but a series of actions that occur throughout an entity’s operations;  therefore, errors can create inefficiencies across many workflow areas and can increase the cost of operations.  The use of technology with built‐in efficiencies and controls to manage data and transform raw data into  usable information for good reporting for decision making and improved performance.  Although it is difficult or often not feasible to completely eliminate all risks, most risks relating to meter  management may be mitigated through a strong commitment to develop effective, consistent, and controlled  processes. The diagram below shows the audit findings in each workflow area that collectively cause data  reliability concerns, which increases the risk for incorrect customer billing.     Attachment B   I c o R F a   F d   F v  A m nternal contr control object operations. REPORT HI FINDING 1: Th and setting up  We could  to engine master re discrepan  Some met identifier  incomplet continuou FINDING 2: Th data reliabilit  At most 8 tracked in system; a incorrect, informatio  The lack o lack of em reliability  incorrect  FINDING 3: Th value in the C  Electric m gas meter were repo incorrect  APPENDICES A meter data in rol serves as t tives. Interna IGHLIGHTS he Utilities De p meters in S not reconcile ering specific ecords with co ncies and erro ters were not to ensure its  te records an us tracking of he Utilities De ty concerns a 86 percent of  n the City’s SA nd when trac  incomplete,  on.  of procedures mphasis on th concerns and customer bill he Utilities De City’s account meters were n rs in over six m orted for retir and inconsist A & B: Two c n SAP (Pages  Office of the C Cop h the first line o l control is no S  epartment ha SAP, causing d e 50 percent  cations and id omingled data ors throughou t assigned the tracking, wh d loss of chro f meters.   epartment ha and increases  meters were  AP inventory m cked, meter d and inconsist s to prevent e e use of SAP  d increases th ling.  epartment in ting records ( ot retired in o months, and  rement, the d tent.   ase studies sh 29 & 36) City Auditor  ●  2 ies of the full re http://www.city In e ru in la a A 5 of defense in  ot one event,  as not establ data discrepa of meter type dentified 13 o a, causing  ut SAP.  e necessary  ich resulted i onological and as incomplete the risk for in continuously management data containe tent  errors and the raises data  he risk for  naccurately re (Page 26)  over a year a when meters data was  howing exam 250 Hamilton Av port are availab yofpaloalto.org/ nternal contro ntity achieve  un its operati nformation ab aws and regul re 1) Control  Activities, 4) In ) Monitoring. safeguarding but a series o lished adequa ancies and er es  f 60  n  d   Th an me pr  W sh as te au e, incorrect, a ncorrect cust y  t  d  e   Th for pro in   Th po de ret err eported the r nd  s   Th pr ac Ac mples of error venue, 7th Floor   le on the Office  /gov/depts.aud ol is a process its objectives ons efficientl bout its opera lations. The f Environment nformation an .  g assets and h of actions tha ate processes rrors (Page 8) he Utilities De nd procedures eters. Engine rocesses shou When establish hould give res ssigning badge chnology and utomatic num and inconsist tomer billing  he Utilities De r meter inven ovide process meter activit he Utilities De olicy and proc escriptions ca tirement and rors and incre retirement of he Utilities De rocess, and pr ccurate retire ccounting to a rs and incons ●  Palo Alto, CA of the City Audi d/reports/perfor s used by ma s. Internal co ly and effectiv ations, and co ive compone t, 2) Risk Asse nd Communic helps manage at occur throu s and procedu )  epartment sh s for setting u eering specific uld be update hed, the Utilit sponsibility to e numbers to d controls bui mbering. tent meter re (Page 15)  epartment sho ntory and dat s and SAP tra ties.  epartment sho cess to ensure rry through f d develop pro ease data reli f meters, whi epartment sh rocedure for t ment of mete align meter ty sistencies, an A 94301  ●  650.3 itor website at:  rmance.asp  nagement to ntrol helps an vely, report r omply with ap nts of interna essment, 3) C cation, and  ment achieve ughout an en ures for orga ould establish up and manag cation and Pu ed accordingly ties Departme o Purchasing f o meters and ilt into SAP fo ecords, which ould establish ta error tolera aining to staff  ould impleme e that meter  rom procurem cedures to pr iability. ich affected th ould develop the timely an ers, working w ypes for retire d missing or  329.2667     help an  n entity  eliable  pplicable  al control  ontrol  e internal  ntity’s  anizing  h policies  ging  urchasing  y.  ent  for  use the  or  h causes  h a policy  ance, and  f involved  ent a  ment to  revent  heir  p a policy,  nd  with  ement.  incorrect  Attachment B     TABLE OF CONTENTS  INTRODUCTION .......................................................................................................................................... 1  Audit Objective ........................................................................................................................................ 1  Background .............................................................................................................................................. 1  Audit Scope ............................................................................................................................................. 5  Audit Methodology ................................................................................................................................. 5  How to use the report ............................................................................................................................. 6  FINDING 1: The Utilities Department has not established adequate processes and procedures for  organizing and setting up meters in SAP, causing data discrepancies and errors ................................. 8  FINDING 2: The Utilities Department has incomplete, incorrect, and inconsistent meter records,  which causes data reliability concerns and increases the risk for incorrect customer billing ............. 15  FINDING 3: The Utilities Department inaccurately reported the retirement of meters, which affected  their value in the City’s accounting records ....................................................................................... 25  APPENDIX A ‐ Case Study 1: Meter management errors and inefficiencies ........................................ 29  APPENDIX B ‐ Case Study 2: Missing, incorrect, and inconsistent meter records ............................... 36  APPENDIX C ‐ City Manager’s Action Summary.................................................................................. 41  APPENDIX D ‐ City Manager’s Memorandum Response ..................................................................... 46  APPENDIX E ‐ City Auditor’s Memorandum Response ....................................................................... 50        ABBREVIATIONS   ASD Administrative Services Department  ASTM American Society for Testing and Materials  AWWA American Water Works Association  GFOA Government Finance Officers Association  MGO Macias Gini & O’Connell, LLP  NMA National Meter Automation     Attachment B                                     Page intentionally left blank    Attachment B Utility Meters: Procurement, Inventory, and Retirement 1    INTRODUCTION   Audit Objective The objectives of the audit were to determine if proper procedures were  followed and to assess the efficiency and effectiveness of procuring,  managing, and retiring utility meters.    Background The City of Palo Alto Utilities Department provides electric, gas, and water  service, which generated $198 million in operating revenues and  $160 million in operating expenses in Fiscal Year (FY) 2014. The charges  for service to customers included, but were not limited to:   Use of electric, gas, or water, based on meter size and consumption.   The cost of new meter equipment by size.    Uniquely identifying a  utility meter for tracking  A utility meter is the material used to measure electricity or water usage,  or the volume of gas flow. Approximately 74,000 meters, valued as a  $13 million asset in the City’s FY 2014 financial statements, are installed  throughout the City. Unique meter identification allows individual meters  to be tracked from procurement and receipt, through inventory and  installation at a service location, to retirement. Meter identification is also  used to track utility usage at the service location and maintenance or  testing of the meter. Having a reliable data system that effectively gathers  data, completely and accurately, for each individual meter helps protect  the asset and its use.     The procurement and specific data for each meter are maintained in the  City’s SAP Enterprise Resource Planning (SAP) system. This application  supports the City’s core business functions such as purchasing, inventory,  utilities, and accounting. It is also the data system which stores and  manages all material information such as meters.     SAP has material master tables, which are the collective repository of data  where all the information on a meter is entered, accessed, and used  throughout the SAP system. Meter data can be organized by type;  grouped by similar or separated by different attributes. Understanding the  differences between the various meters, including use of the meter data,  will determine if it can be grouped or needs to be separated.     A badge number is a City assigned number that is required to be stamped  on or affixed to all meters. The badge number is called a serial number in  SAP, which is different from the manufacturer’s serial number also shown  Attachment B Utility Meters: Procurement, Inventory, and Retirement 2        on the meter. The meter type is identified as a material number in SAP.  The terms meter type and badge number are used throughout the  document.     Unique meter identification is a way to keep track of each meter and its  data individually. In SAP, the combination of a meter type and badge  number uniquely identifies each meter. Effectively organizing meter data  and using the meter type and badge number combination ensures  complete and reliable meter data in SAP.    Organizing meter  data in SAP  As an example, a 5/8 x 3/4” bronze water meter and a 5/8 x 3/4” water  E‐meter are the same size, but because they are different in product and  price, they should be organized as two meter types. In another example, a  Class 750 House gas meter may be purchased from two different vendors  with two different descriptions but actually be the same meter type. This  would require one meter type but allow for multiple vendors. Based on  the examples, Exhibit 1 shows how these meters may be organized in SAP:   EXHIBIT 1: Sample Hierarchy for Organizing Meters by Type    MATERIAL MASTER TABLE Meter Group/Number:Water Meters (#89100)  Meter Type/Number:5/8” x 3/4" Bronze Water Meter Attributes:Size: 5/8” x 3/4", Displacement Type Vendor:Badger (Sole Source)  Vendor Meter:Recordall M25 Bronze  Price:$55.00 per meter  Meter Type/Number:5/8” x 3/4" Bronze Water E‐Meter Attributes:Size: 5/8” x 3/4", Displacement Type,  Vendor:Badger (Sole Source)  Vendor Meter:P/N E25‐SS Price:$150.00 per meter  Meter Group/Number:Gas Meters (#67001)  Meter Type/Number:Class 750 House Gas Meter  Attributes:Class 800 Type Diaphram Meter Vendor:Itron, Inc. Vendor Meter:P/N 8EA80281A5KD, AL‐800  Price:$700.00 per meter  Vendor:Meter, Valve & Control, Inc.  Vendor Meter:GMI‐800A‐NTC‐25‐45LT, CL750 House Price:$700.00 per meter  Meter Group/Number:Electric Meters (#28200)  Meter Type/Number:2S Electric Meter     Badge Number: (1 per meter)*(#58858) * The combination of a meter type and badge numbers uniquely identifies each   Source: Material Management with SAP ERP – Functionality and Technical Configuration,  Third Edition, 2011  Attachment B Utility Meters: Procurement, Inventory, and Retirement 3      EXHIBIT 2: Work Area Responsibilities for Managing Meters  DESIGN PROCURE STORE UTILIZE DISPOSE ACCOUNT  Utilities  Engineering  ASD Purchasing ASD Stores  Inventory  Utilities Meter  Operations  Utilities Meter  Operations  ASD Accounting Specification  Type  Warranty  Testing  Sole Source  Justification  Capital & Special  Projects  Procurement  Vendor  Price and Award  Material Master  Purchasing Documents  Procure  Inventory  Goods Receipt  Physical Custody  Inventory Data Mgmt  Goods Issue  Inventory  Goods Receipt  Physical Custody  Movement  Performance  Testing (new,  installed, retired)  Meter Data  Management  Disposal and  Recycling  Retired Meter  Reporting  Meter Asset  Addition &  Retirement  Recycling  Revenue  Source: City of Palo Alto Workflow Process and Procedure     Internal control1 is a process used by management to help an entity  achieve its objectives. Internal control helps an entity run its operations  efficiently and effectively, report reliable information about its operations,  and comply with applicable laws and regulations.  The five components of internal control are:  1) Control Environment ‐ The foundation for an internal control system.  It provides the discipline and structure to help an entity achieve its  objectives.  2) Risk Assessment ‐ Assesses the risks facing the entity as it seeks to  achieve its objectives. This assessment provides the basis for  developing appropriate risk responses.  3) Control Activities ‐ The actions management establishes through  policies and procedures to achieve objectives and respond to risks in                                                               1 United States Government Accountability Office (GAO‐14‐704G, September 2014), Standards for Internal Control in the  Federal Government, known as the “Green Book,” provide the overall framework for establishing and maintaining an  effective internal control system. The Green Book may be adopted by federal, state, local, and quasi‐governmental entities,  as well as not‐for‐profit organizations.  Work areas managing  utility meters  Work Areas, Roles and Responsibilities, Internal Control and Risks:  Responsibility for the accuracy, completeness, and transparancy of utility  meter data is shared across and between various work areas within the  Utilities Department and the Administrative Services Department (ASD),  as shown in Exhibit 2. However, the overall management of utility meters,  the meter management workflow, and meter data and data systems are  the main responsibility of the Utilities Department.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 4    the internal control system, which includes the entity’s information  system.  4) Information and Communication ‐ The quality information  management and personnel communicate and use to support the  internal control system.  5) Monitoring ‐ Activities management establishes and operates to  assess the quality of performance over time and promptly resolve the  findings of audits and other reviews. Internal control serves as the first line of defense in safeguarding assets  and helps management achieve internal control objectives. One internal  control objective states that management should design an internal  control system to provide reasonable assurance regarding prevention or  prompt detection and correction of unauthorized acquisition, use, or  disposition of an entity’s assets. Another states that effective operations  should produce the intended results from operational processes, while  efficient operations do so in a manner that minimizes the waste of  resources. And related to data, gathering and communicating financial and  non‐financial information is needed by management to support decision  making and evaluate performance.    Internal control is not one event, but a series of actions that occur  throughout an entity’s operations. Exhibit 3 shows the main operational  processes for managing the meter asset and Exhibit 4 shows examples of  some risks and the work area that can help mitigate the risks specific to  the meter or its use.    EXHIBIT 3: Operational Processes for Managing Meters    Each major  workflow  process serves  as a control  point to ensure  consistency,  prevent errors,  and gain  efficiency.     Controls that are  ineffective or  not enforced  cause  inefficiency  downstream and  a breakdown in  processes. Source: City of Palo Alto Workflow Process and Procedure    Attachment B Utility Meters: Procurement, Inventory, and Retirement 5    EXHIBIT 4: Risks and Mitigating Risks Relating to a Meter and Its Use  RISK PROCESS CONTROL  Meters are purchased that  do not meet accuracy and  performance requirements.  Engineering establishes clear specifications, including preformance, testing, and  warranty/guaranty requirements, for distribution and communication to the  Purchaser and Operations.  Meters are delivered  without an assigned and  affixed City badge number.  The Purchaser issues City badge numbers to the vendor/manufacturer, and  Stores receives and accepts the order after verifying the badge numbers and  registering the meters.  Not knowing the physical  location of a meter.  All departments must ensure that meters are identifiable from cradle to grave.  They do this by:   Verifying that meters have a City badge number at purchase.   Verifying that meters have a record of purchase and receiving by badge  number.   Managing meter inventory with an inventory management system.   Managing meter movement from one location to another, when installed or  uninstalled, and when retired.  Meters do not accurately  perform or record utility  usage.  The meter shops test meters through statistical sampling of new meter  shipments, aging or usage sampling of used meters, and all retired meters.  Engineering reviews and analyzes the test results from the meter shops and  manufacturer to compare with performance and accuracy requirements every six  months.  Source: Auditor’s Risk Assessment    Audit Scope We reviewed electric meter data from July 1, 2009, through  June 30, 2014, and water and gas meter data from July 1, 2009, through  June 6, 2014. During this period, the City purchased approximately 11,000  meters for $1.8 million. We did not:   Quantify the costs resulting from operational inefficiencies.   Assess the accuracy or inaccuracy of customer utility accounts and  utility bills. This will be addressed in a future audit.    Audit Methodology To conduct this audit, we:   Reviewed work completed during the Inventory Management Audit  pertaining specifically to utility meters and inventory management and  controls in SAP.   Reviewed the Municipal Code, ordinances, and the City's policies,  procedures, and processes relative to utility meter workflow specific  to meter procurement, inventory management, and retirement.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 6     Reviewed inventory management guidelines set forth by the American  Society for Testing and Materials (ASTM), the American Water Works  Association (AWWA), the Government Finance Officers Association  (GFOA), and the SAP Library (online guidance for the SAP ERP system).   Interviewed the Utilities Department and ASD staff responsible for  procuring, managing and safeguarding, and retiring the City’s utility  meters.   Reviewed meter inventory reported in the City’s financial records and  analyzed inventory data in the City's SAP system. Assessed the  accuracy and completeness of meter records.   Consulted with the City’s external auditing firm, Macias Gini &  O’Connell, LLP (MGO), regarding the valuation of meter fixed assets in  the City’s financial statements.   Determined data reliability by interviewing knowledgeable data users  and data system supporters, reviewed existing information about the  data, performed tests, traced data to and from source documents, and  reviewed selected system controls. Due to the incomplete and  inconsistent meter data in SAP system and the manual recordkeeping  of meter data outside of the SAP system, we have concerns regarding  the reliability of the data. We based our analysis of meter data on the  data that was available in or entered into the SAP system.   We conducted this performance audit of utility meter procurement,  inventory, and retirement in accordance with our FY 2014 Annual Audit  Work Plan and generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.  How to use this  report  The background section of this report provides a general understanding of  the utility meter device, how it is established in the City’s SAP system,  roles and responsibilities, and processes and controls. The body of the  report states the audit findings and provides a high‐level overview of the  issues identified. The findings are accompanied by case studies in the  appendices that provide detailed examples of the effect of those issues.   Although many of the examples used throughout this report were specific  to water meters, the findings may also be applicable to gas and electric  meters, and the audit recommendations address all types of meters.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 7            Each finding begins with a general process flow chart, separating the  procurement and inventory functions from the operation functions. The  process control areas discussed in that audit finding are shown in blue.   The case study examples in Appendices A and B should be used in  conjunction with the discussion in Findings 1 and 2.  Based on our review, we identified several areas of improvement which  resulted in recommendations to City Management stated at the end of  each finding.  We would like to thank the staff of the Utilities Department and the Administrative Services  Department for their time, information, and cooperation during the audit process.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 8    FINDING 1 The Utilities Department has not established adequate  processes and procedures for organizing and setting up meters  in SAP, causing data discrepancies and errors.   We could not reconcile 50 percent of meter types to engineering  specifications and identified 13 of 60 master records that had comingled  meter price data, causing meter data discrepancies and errors throughout  the SAP system. The Utilities Department did not consistently assign the  necessary meter type and badge number combination required to make a  meter uniquely identifiable, losing partial traceability of the meter in SAP  and its physical inventory.     An error or misstep when organizing and setting up a meter at the  beginning of the process has compounding impacts downstream. An  efficient and effective workflow requires that each work area understand  and perform its purpose and function, as well as collaborate with other  areas of interdependencies. When everyone does not clearly understand  their roles and responsibilities, vulnerabilities and misunderstandings can  develop and cause errors, inefficiencies, and ineffectiveness.  Meter types were  not clearly defined or  well organized in  SAP, resulting in the  comingling of data  and inconsistencies  The Utilities Department did not have a clear process or procedure for  organizing meters in SAP. The Engineering Division of the Utilities  Department determines and approves all meters procured and used;  however, the Purchasing and Stores Inventory Divisions of the  Administrative Services Department have the role and responsibility for  creating and maintaining the master records, procuring, receiving, and  inventory management of meters in SAP. To ensure that meters are  organized correctly when set up, procured, and received, Purchasing and  Stores Inventory need to know what meters are approved for purchase  and need a clear understanding of how to organize the meter data, by  meter type in SAP.     Attachment B Utility Meters: Procurement, Inventory, and Retirement 9      EXHIBIT 5: Count of Meter Type and Meter not  Reconcilable to Engineering Specification  Meter Number of  Meter Types  Meter Type  Not in Specs  Number of  Meters  Meter Not in  Specs  Water 18 5 7,666 639  Gas 19 9 1,799 185  Electric 23 16 1,763 1,284  TOTAL 60 30 11,228 2,108    50%  19%  SOURCE: Auditor’s reconciliation between SAP and engineering specifications    Most of the existing meter types in SAP are not well organized, having  migrated from a legacy system, and the Utilities Department did not  redefine or reorganize the meter types during system implementation.     Based on our review of 60 meter types for 11,228 meters in SAP over the  past 5 years, we could not reconcile 30 meter types to a specific meter  type listed in the engineering specification. Exhibit 5 shows that 50 percent  of meter types did not reconcile, which represents 2,108 or 19 percent of  meters.   According to Utilities staff, gas and electric meters listed under the same  meter type but given different descriptions in SAP may be grouped  correctly. The legacy practice is for Utilities staff to use the various  manufacturers’ descriptions for the same meter type; however, this practice  is not effective because it causes an inconsistency in the meter type  description across the same meter type. Meter type should have one  description and be grouped together based on similar attributes but  segregated based on key differences. We identified the following  discrepancies:    The same meter type/number had various different meter  descriptions, causing inconsistencies in the meter data.   The same meter type issued for more than one meter type number,  causing the master information for individual meter types to be  separated.   The reuse of a meter type/number when a new meter type/number  should have been created, causing the comingling of meter master files  and incorrectly changing meter prices.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 10      EXHIBIT 6: Meter Types With Different Average Moving Prices  Meter Type Average  Moving Price  Purchase  Price  Price  Difference  %  Difference  WATER *  5/8” x 3/4" $164 $59 $105 178%  3/4" x 1” $80 $91 ($11) (12%)  1” $214 $142 $72 50%  GAS  250 House $81 $73 $8 11%  ELECTRIC  12S $55 $484 ($429) (89%)  12SAMR $120 $313 ($193) (62%)  2S320CL $80 $27 $53 194%  5SKVARH $484 $674 ($324) (28%)  9SAMR $350 $674 ($324) (48%)  16S $109 $484 ($375) (78%)  2SAMI $700 $110 $590 536%  12SAMI $0 $135 ($135) (100%)  *  The 3 water meter types listed were comingled as a result of the E‐meter  purchase identified in Appendix A: Case Study 1.  SOURCE: Auditor’s analysis of prices in SAP Material Management and  Purchasing modules    Comingled meter  types in master  meter records  caused incorrect  pricing and meter  data  As a result of the Utilities Department not clearly defining and organizing  meters by type and allowing the use of different descriptions for the same  meter type, Purchasing sometimes comingled meter data in the master  records when procuring meters. This has caused changes and  inconsistencies in the purchasing data, including information on purchases  and vendor, inventory, and pricing and accounting information that are  essential for data analysis and purchasing cost control.    Comingling information of different meters types changes the original  meter type information, the average moving price, and key historical  information. The change in the average moving price is particularly  important because when Utilities takes a meter out of inventory, Stores  Inventory charges at the current average moving price stated in SAP, which  should be close to the price that the City actually paid for the meter.  In Exhibit 6, 13 of the 60 material types had a price difference of plus or  minus 10 percent between the average moving price and the purchase  price. We were unable to analyze 9 electric meter types due to the lack of  purchase price information.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 11                                                                 2 Material Management with SAP ERP – Functionality and Technical Configuration, Third Edition, 2011   We were unable to determine the actual financial impact of the average  moving prices due to unknown variables, such as how many meters were  in inventory and issued out of inventory at what average moving price at a  point in time. Exhibit 6 represents SAP’s calculated average moving price  compared to an analysis of selected purchase prices available in SAP  purchase order documents.   SAP offers guidance stating that master data files require a significant  amount of understanding, not only on the part of the SAP consultant but  also on the part of the SAP customer. The master is not just a single file but  a number of tables of information that, combined, reflect all of the  information for that meter type; it is used throughout the SAP system.  “Errors made in the Material Master can have serious effects on other  functionalities. Any change should be carefully considered before you  make it and should be audited after it is made.”2 It is important that  master files for meters are accurately maintained and effectively  organized.  Ineffective use of  meter type and  badge number to  uniquely identify all  utility meters  The meter type is not only important for organizing meters, it is also one of  the key elements in making a meter uniquely identifiable. A meter is  individually identified when it is assigned a meter type number and a  badge number at the beginning of the process. A badge number is a City‐ assigned number and is required to be stamped or affixed on the meter.  The badge number is issued when the meter is procured and registered to  the meter when received into Stores inventory. This process starts the  tracking of each individual meter, in SAP and physically, until its  retirement.   Some Utilities Department staff did not have a clear understanding of the  use, intended purpose, or importance of assigning an identifier to each  meter. According to Utilities staff, the badge number concept was  originally established so field technicians could informally determine the  age of a meter for replacement when on‐site. Our assessment determined  that this concept was ineffective and was applied inconsistently.   The meter shops were responsible for assigning the badge numbers;  however, we determined that the responsibility should be in Purchasing.  Purchasing is the work area responsible for maintaining the master file for  meters and procuring approved meters. Both areas of responsibilities are  inherently connected to the process for assigning the meter type and  Attachment B Utility Meters: Procurement, Inventory, and Retirement 12    badge number to meters. Also by working closely with Stores inventory,  Purchasing can ensure that meters are delivered in compliance with the  procurement requirements and that all meters are received into the  warehouse to begin physical inventory tracking. Assigning the  responsibility to the meter shops created work and manual processes that  caused errors, unnecessary work, and inefficiencies.   The following are some areas where we found the assigning of badge  numbers to be ineffective:      Badge numbers were requested by Purchasing, manually assigned by  meter shop staff and communicated to Purchasing by email, and later  entered into SAP by different meter shop staff. This manual process  was unnecessary and created errors in the transfer of information.   Meters were not uniquely identifiable by the badge number; electric,  gas, and water may each have the same badge numbers. Due to the  reliance on the meter type and badge number combination for  individual identification, this further emphasizes the need to effectively  organize meters by their types.   Issuing badge numbers using a numbering range to determine the  replacement of a meter based on age was ineffective because:   With each passing year, the sequential badge numbering should  change in range for a rolling replacement period; however, the  numbering information was not used to determine this.   Badge numbers for electric meters were not assigned in a  sequential order.   Meters were not stocked into or issued out of inventory, nor  installed, based on first‐in‐first‐out or lowest badge number.    Not all meters were purchased and identified with the necessary meter  type and badge number combination on the purchase order.   Some badge numbers were erroneously assigned in duplicate for the  same type of meter, and later corrected when identified by the meter  shop staff, the manufacturer, or Stores staff upon delivery.   Some badge numbers were skipped and unaccounted for in the  sequential numbering order: 173 water, 10 gas, and an unknown  number of electric meters because the Electric Shop did not  sequentially assign badge numbers.    Not every meter had a badge number affixed to it; a workaround  process allowed meters to be purchased and delivered without the  Attachment B Utility Meters: Procurement, Inventory, and Retirement 13      EXHIBIT 7: Risks and Potential Impacts as a Result of Meter Errors and Inefficiencies  Control Area Risk if Control not in Place  Potential  Output Results  Potential  Financial Result* Engineering determines meter type  approval; Purchasing enters meter  type and description; Operations  manages meter inventory and  meter installation  Meter is recorded as one size  or type of meter but a  different meter is installed  Incorrect billing Increases or  decreases revenue Purchasing assigns meter type and  badge number to all meters  procured; Stores Inventory receives  all meter orders into inventory Meter is not uniquely  identifiable and is not  traceable, in SAP or physically Incorrect billing Increases or  decreases revenue Engineering approval and  recommendation of meter  purchase or sole source; Purchasing  procurement of meters  Meter data is not organized  effectively  for analysis and procurement  Incorrect billing or  charge to fund;  overpaying for  cost of meter  Increases  expenses  Engineering, Operations, and  Purchasing clearly understand their  roles and responsibilities, ensure  compliance, and have strong  communication with each other  Processes and procedures are  ineffective  More resources or  time to complete  the task  Increases  expenses  Errors are made that require  rework  More resources or  time to correct  the errors  Increases  expenses  * The actual financial impact will be determined in a future audit.  Source: Auditor’s risk assessment and analysis    badge number affixed. When this occurred, Utilities staff should have  but did not manually affix the badge number to the meter immediately,  making the meter more susceptible to potential misplacement, loss, or  theft.  Inefficiencies and  rework increases  operating costs  An effective internal control process holds key areas responsible for  understanding and complying with the policy and procedures assigned.  The controls help to avoid workflow breakdown, mitigate inefficiencies,  and stop the compounding effects of errors that can affect operating  revenues and expenses.   The case studies in Appendices A and B show how the correction of errors  and inefficiencies directly affects the cost of operations. Exhibit 7 shows  other examples of direct and indirect impacts, including:   An efficient and effective workflow requires that each work area  understand and perform its purpose and function because when everyone  does not clearly understand their roles and responsibilities, vulnerabilities  Attachment B Utility Meters: Procurement, Inventory, and Retirement 14        and misunderstandings can develop and cause errors, inefficiencies, and  ineffectiveness. The efficiency of operations directly impacts costs – lower  costs when operations are efficient and higher costs when operations are  inefficient. Controlling costs requires managing both revenue and  expenses, such as ensuring that all utility costs are billed correctly to fully  capture all revenues and that the operation is operating efficiently to  control and minimize costs where possible. Although utility meter  management is only one of the many variables affecting the outcome of  revenues and expenses, it is one that can be controlled internally and  managed effectively and efficiently to protect revenue and control costs.    Finding 1 Recommendations to City Management:  1.1 The Utilities Department should establish written policies and procedures that clearly define roles  and responsibilities for managing the City’s utility meters. The Utilities Department should  coordinate with Engineering, Operations, Purchasing, and Stores Inventory to address:  a) Defining individual and cross‐functional responsibilities for setting up, procuring, and receiving  meters, and training key staff to understand the workflow process and controls.  b) The setup, user authorization, and ongoing maintenance of meter material master files.  c) The responsibility of assigning badge numbers to meters, ensuring the use of a meter type and  badge number combination for the purchase and receipt of all meters. (In conjunction with  recommendation 1.4)  1.2 The Engineering Division of the Utilities Department should re‐examine and update the City’s  engineering specifications to explicitly include all utility meter types purchased and used by the  City, and make future updates to the specifications as changes occur. Based on these changes, and  ongoing, the Engineering Division should work with Purchasing to ensure that meter types  established in SAP can be reconciled to an approved list of meters.  1.3 The Utilities Department should review its existing list of utility meter types in the SAP material  master list to redefine and reorganize existing and future meter types. This recommendation  should be applied if the Utilities Department changes from SAP to another system.  1.4 The Utilities Department should give responsibility to Purchasing for assigning badge numbers to  meters and make the process for assigning the numbers more efficient by allowing the technology  of SAP to designate an automated badge number at the time of procurement and use the controls  built into SAP to mitigate errors resulting from the manual assignment of badge numbers. (After  completion of recommendation 1.3)    Attachment B Utility Meters: Procurement, Inventory, and Retirement 15    FINDING 2 The Utilities Department has incomplete, incorrect, and  inconsistent meter records, which causes data reliability  concerns and increases the risk for incorrect customer billing.     Inconsistent practices and processes between the Electric, Water, and Gas  Meter Shops cause incomplete and data reliability concerns. At most,  86 percent of meters were continuously tracked in SAP; and when tracked,  meter data contained incorrect, missing or incomplete information. The  lack of procedures to prevent errors and the lack of emphasis on  maximizing the use of SAP functionality increase the risks for incorrect  customer billings. The change to different meters may require a more  rigorous testing process to ensure performance expectations are met.     Raw meter data must be maintained and transformed into usable  information to maximize its use. Data can inform and support the  fundamental utility goals of improved operational efficiency, asset  optimization, lowest possible costs, revenue protection, and customer  satisfaction. It is important to accurately record and maintain meter data  because the information about the meter type, its installation, and what it  reads generates the customer bill.    Data reliability  concerns due to  incomplete and  inconsistent meter  records  In May 2013, as part of the Inventory Management Audit, we identified  areas of concern regarding the inventory management of all utility meters.  Our concerns included Utilities having a manual inventory management  system that could not identify all meters stored at the meter shops, an  ineffective and inefficient inventory tracking system, and a lack of  safeguarding the meter asset.     Since the Inventory Management Audit, the Utilities Department has made  significant efforts to physically reorganize the water meters to a shed  location and intends to use that as a model to also reorganize gas and  Attachment B Utility Meters: Procurement, Inventory, and Retirement 16    electric meters. However, effective property management is more than  physical inventory; maintenance of adequate property records is a  fundamental responsibility.      In conjunction with Finding 1, our in‐depth review of meter data in SAP  identified data reliability concerns. Based on the information available,  Exhibit 8 shows that only 86 percent of meters were continuously tracked  in SAP. There are also an unknown number of meters not included in SAP  because meters were purchased without the meter type and badge  number and were not received into Stores inventory. Even when tracked,  meter data contained various discrepancies, incorrect meter descriptions  across the individual meter, and missing or incomplete information.    EXHIBIT 8: Incomplete Water, Gas, and Electric Meter Records in SAP Source: SAP   Inconsistent  practices and  processes between  the Electric and  Water and Gas  Meter Shops  Other areas of concern specific to recordkeeping practices, processes, and  procedures included:   The Electric Meter Shop’s practices and processes were outdated and  differed significantly from those of the Water and Gas Shops, causing  incomplete and inconsistent meter records:   Electric recorded assigned meter badge numbers in blank page  books, as shown in Exhibit 9, prenumbering all pages and assigning  badge numbers randomly. This practice does not ensure that badge  numbers are issued sequentially for effective tracking and  reconciliation.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 17    EXHIBIT 9: Electric Meter Shop’s Records for Assigning Badge Numbers to Meters        Source: Photographed by Auditor     Electric recorded meter testing and retirement information on blank  paper logs. The information was subject to handwriting  interpretation, and the raw data in this format was not usable for  reconciling or analysis. For example, the column labeled “PA#” in  Exhibit 10 lists the badge numbers of meters tested and retired,  physically and in SAP. If the data were in a computer spreadsheet  format, the badge numbers could be sorted, extracted, and entered  into an SAP query to verify that they have all been changed in SAP to  a retired status.    EXHIBIT 10: Electric Meter Shop’s Records for Meter Testing and Retirement    Source: Photographed by Auditor     Electric assigned and retired meters one at a time in the SAP system  although SAP allows for multiple and automated entries. Although  this efficiency was available, the Electric Shop staff were not aware  of this option.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 18     Most Electric meters were not stored as stock inventory in the  Stores Warehouse. As a result, inventory management information  is not available in SAP for these meter types and meters.   Insufficient inventory  recordkeeping and  tracking of meters by  the meter shops  Inventory and records management responsibilities transfer from Stores  Warehouse and Purchasing to the meter shops when meters are issued out  of Stores inventory. The meter shops physically receive and store the  meters and manage the tracking of the meters from installation to  retirement. We identified the following areas of concern:   Physical inventory lists for water and electric meters were incomplete,  and the Gas Shop did not have an inventory list. To protect the asset  and ensure its proper use, these meters should be inventoried and  subject to reconciliation.   Water, gas, and electric meter records contained inconsistent meter  type descriptions across the various SAP modules, which makes it  difficult to determine the actual meter type or size. When a meter is  being prepared for use, records are generated in other modules of SAP  that link to the individual meter. These separate modules do not  require that the meter descriptions for an individual meter be the  same. Upon review of the discrepancies, Utilities staff were unable to  confirm what meters on record in SAP were actually installed; only a  physical viewing could determine that.   Same sizes, but a different type of electric meters, were replaced in a  route designated for a specific type of meter because there were no  replacement meters in inventory. There were no formal records  documenting the service locations where the exchange was made and  there were no formal plans to replace the incorrect meter. These  meters were not subject to Stores inventory controls. This specific  example affected a process downstream; the meter reader had to  identify and manually read the meter after discovering missing  automatic reading uploads. Meter inventory levels should be managed  and stock inventory should available for meter replacement.     The process for tracking and testing uninstalled, used meters in SAP  was inconsistently applied. A work process was developed in SAP to  specifically track uninstalled meters; however, it was not used as  intended and the physical tracking was incorrect in SAP. Used meters  also need to be inventoried and subject to reconciliation and  recordkeeping because they may be reinstalled and reused.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 19    Meter data reliability  is important because  the information can  determine accurate  or inaccurate billing  The Utilities Department has not been preventive in accounting for and  managing utility meters due to a lack of emphasis on the importance of  using the SAP system to ensure complete and reliable meter data and to  maximize the City’s SAP investment. Utilities staff acknowledged that SAP  is the cornerstone of the City’s business continuity, including its integration  functionalities; however, staff at all levels of the organization have not  been trained to use and understand the capabilities of SAP to support their  workflow processes. Rather than preventing data errors and  inconsistencies, the Utilities Department has developed a reliance on  manual controls and processes downstream to identify billing inaccuracies  resulting from incomplete or unreliable data.     The utility meter, meter type, meter installation, and meter reading all  contribute to the output of a customer bill; therefore, integration of the  core businesses and utilities modules in the SAP system is critical to  maintain the consistency and integrity of meter data and ensure data  reliability. Exhibit 11 illustrates that the meter, its type and inventory, how it  is installed, and how it is executed generates the output of a customer bill.    EXHIBIT 11: Input and Output Diagram for Meters  Source: Auditor analysis    Although the “output” of this flowchart, accuracy of utility customer bills,  will be addressed in a future audit, it is identified in this audit to indicate  that the risk of incorrect billing exists and may be directly caused by  incorrect meter records of inventory or installation, and the lack of system  integration in SAP to control meter information.   Errors should be mitigated and avoided through effective processes and  procedures (preventive) because errors that have to be corrected after‐ the‐fact (reactive) create unnecessary work and can result in incorrect  Attachment B Utility Meters: Procurement, Inventory, and Retirement 20    billings. The two examples below demonstrate the effect on customer bills:    In February 2014, a meter reader on one of the City’s routes identified  incorrect billings to 115 water customers. A 1‐inch meter was installed,  but SAP records and the billing showed a 5/8‐inch meter. Water utility  customers pay a service charge based on the size of the meter;  therefore, an incorrect meter size causes an incorrect billing.   Exhibit 12 lists the differences in billing between the two sizes, dated  back to the installation date in 1995, to show the full cost; however,  the entire amount will not be cost recoverable. The undercharge to  customers resulted in an estimated $52,000 loss in revenue; the  Utilities Department expects to recover $43,000 through a back bill to  customers. The meter data migrated from a legacy system and the  error would not have been detected by reviewing the records in SAP;  only a physical viewing would show it.    EXHIBIT 12: Billing Error for 115 Water Customers  1 Meter Route of 209 Service Locations  Service Charge ‐ Per Month, Per Customer     Rate Effective Date Monthly Service  charge  Number of  Months  Difference in  rate per  customer   115 Affected  Customers   5/8”1”   7/1/95 – 6/30/99 $4.00 $4.50 48 $24.00  $2,760.00 7/1/99 – 6/30/03 $5.00 $5.63 48 $30.24  $3,477.60 7/1/03 – 6/30/07 Service charge incorporated into usage rate.  n/a 7/1/07 – 9/30/11 $5.00 $6.50 51 $76.50  $8,797.50 10/1/11 – 6/30/12 $10.00 $13.00 9 $27.00  $3,105.00* 7/1/12 – 6/30/13 $13.74 $27.35 12 $163.32  $18,781.80* 7/1/13 – 6/30/14 $14.67 $29.18 12 $174.12  $20,023.80* Total Revenue Loss:$495.18  $56,945.70 *The Utilities Department Rules and Regulations 11 states,“Where a Customer has been  undercharged or overcharged for metered service, the retroactive billing adjustment (back  bill or refund) shall not exceed three years.” The back bill is estimated to be $43,000.  Source: Auditor analysis from Utilities Rate, Rules and Regulations    The amount of time that passed before Utilities staff discovered this  error emphasizes the importance of having accurate data, whether it is  new data being entered into the SAP system or data being carried over  from a legacy system.    In a similar example, the Water Meter Shop discovered a misidentified  meter during a meter exchange In April 2014. A 1‐inch meter was  installed at a customer location; but the meter recorded in SAP was a  5/8‐inch meter. The customer was underbilled based on the incorrect  Attachment B Utility Meters: Procurement, Inventory, and Retirement 21                                                                     3 ASTM International provides a global forum for the development and publication of international voluntary consensus  standards for materials, products, systems and services. The information cited is from the Standard Practice for Establishing  the Guiding Principles of Property Management (E2279‐09) and Standard Practice for Inventory Verification: Electronic and  Physical Inventory of Assets (E2132‐11).  SAP record. Although Utilities identified the meter error and physically  exchanged it, as of November 2014, Utilities staff had not corrected  the 5/8‐inch meter to a 1‐inch E‐meter in SAP or made the billing.  Exhibit 13 shows the meter record in SAP that caused the incorrect  billing and the exchanged meter. The meter migrated from the legacy  system and was installed in 1992. This error would not have been  detected by reviewing the records in SAP; only a physical viewing. This  example is concerning because secondary controls were ineffective in  correcting the error and the meter was replaced with an E‐meter  containing inconsistent meter descriptions.  EXHIBIT 13: Input and Output Diagram for Meters  Date * In PA # In Read Size * Out PA #Out Read Size Comments  4/22/2014 58121 0 1” 32640 7945 1” CIP, found 1”, not 5/8” as in system.  The meter shop uninstalled the 5/8 x 3/4 inch size meter and replaced it with a 1” E‐meter.     * PA # is the same as badge number; “In” refers to installed and “Out” refers to uninstalled.  Source: Water Meter Shop’s daily work log and SAP report  According to ASTM International Standards, “entities should maintain  adequate records accountability systems for property under its (sic)  control, physically or electronically, to confirm the existence, location, and  quantity of assets. A key element in the asset management process is that   the system provides data that may be used for the accountability,  planning, and execution of the asset.”3  Changing meters and  rising costs may  require a more  rigorous testing and  warranty tracking  process  The City’s meters are accuracy and performance based, meaning they are  bid with the expectation that the meter will meet or exceed the accuracy  and performance requirements stated in the engineering specifications.  Meter testing and its records, whether by the manufacturer or by the  Utilities Department, should be managed to ensure that the performance  expectations are met, to provide assurance that the customer’s final meter  bill will be accurate, and to use the warranties and guarantees as  necessary.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 22        The Utilities Department requires and depends on the manufacturer to  provide certified meter test results. It is advantageous to transfer these  results to a database to establish the complete history of a meter.  Although this information is available, the Utilities Department has not  used it in combination with its own operational testing to make  informed decisions about current and future meter performance and  replacement needs.     In May 2013, the water meter test bench was not fully operable and  was not repaired or replaced by the end of our audit field work.  Utilities’ practice is to sample test a percentage of new water meters,  customer requested testing, and retired meters to keep on record to  support final billing. During this period, some testing was outsourced,  while others were not tested prior to discarding. Consisent meter  testing and recordkeeping of meter test results are important to  validate and document meter performance and accuracy.    The Manufacturers supplying the meter are required to furnish an  affidavit of compliance and testing records, and the City reserves the  right to evaluate and test any meter for approval or rejection within a  warranty period. However, neither Purchasing nor Utilities obtained  Affidavits of Compliance. They also did not track or consider warranty  and guarantee information and cited incorrect or outdated engineering  specifications in the purchase order. Warranties and guarantees  protect the City’s asset and allow for replacement, recovery, or legal  remedy if the expectations are not met.   The purchase cost of meters has increased due to the change from bronze  water meters to E‐meters. The Utilities Department’s practice is to discard  meters that are smaller than 3” after use. However, based on an estimated  123 percent increase, shown in Exhibit 14, this practice should be further  assessed. These costs may continue to increase as a modified, automatic  meter reading type of E‐meter is introduced, and according to Utilities  staff, the E‐meter may have a shorter useful life due to its battery life.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 23    EXHIBIT 14: 123 Percent Increase in Costs for E‐meters  Water  Meter  Size  Old Meter  (Cost/Meter)  New E‐meter  (Cost/Meter)  Previous  meters  purchased  over 5 yrs  Cost of  previous  meters  over 5 yrs  Cost of New  E‐meters  over 5 yrs  5/8” $59.27 $164.48 5,578 $330,608 $917,469  3/4” $91.17 $195.37 56 $5,106 $10,941  1” $142.46 $213.97 900 $128,214 $192,573  1‐1/2” $307.97 $493.45 173 $53,279 $85,367  2” $430.32 $660.38 171 $73,585 $112,925  Total investment of meters smaller than 3”: $590,792 $1,319,275  Source: Auditor’s analysis based on SAP meter records of cost and quantities purchased.     EXHIBIT 15: Increases in Meter Costs From FY 2013 to FY 2014    Source: Auditor’s analysis based on SAP meter records of cost and quantities purchased                                                                 4 The American Water Works Association is the authoritative resource for securing economy and uniformity in the  operations of water‐works. The information cited is from the Manual of Water Supply Practices (M6‐Fifth Edition), Water  Meters – Selection, Installation, Testing, and Maintenance.   Exhibit 15 shows that the actual costs of water and electric meters  purchased in fiscal years 2013 and 2014 increased by 97 percent and  197 percent, respectively, while Utilities purchased 7 percent fewer water  meters and 11 percent more electric meters.   A utility meter, like any other mechanical device, is subject to wear and  deterioration and loses its peak efficiency over time. According to the  AWWA, the only way to determine if a specific meter is operating  efficiently is to test it.4  Attachment B Utility Meters: Procurement, Inventory, and Retirement 24      The importance of testing meters, to support accurate billings to  customers, is to:   Ensure that meters are operating as intended, including meeting their  life expectency, security, accuracy, and reliability requirements.   Ensure that meters continually perform under actual conditions by  periodically reviewing and analyzing operational meter testing records.   Maintain the test record of retired meters for final billing inquiries.   Optimize the City’s investment in meters by considering the  manufacturer’s warranty and guaranty.    Finding 2 Recommendations to City Management:  2.1 The Utilities Department should establish a policy for meter inventory error tolerance and, based  on this metric, develop a plan to identify high‐risk meters, verify the accuracy of these meters, and  correct accordingly.  2.2 The Utilities Department should provide process and SAP training to staff involved in meter  activities on the policies, processes, and procedures for physically and electronically maintaining  meter data accuracy.  2.3 The Utilities Department should work with the Administrative Services Department and the  Information Technology Department to integrate the various SAP modules to automate controls  or implement other appropriate processes to ensure that meter descriptions carry through from  procurement to retirement.  2.4 The Utilities Department should take corrective action to address the 115 incorrect water billings  by notifying customers of the error and that future billings will reflect the correction, and recover  revenues to the City of approximately $43,000. The Utilities Department should also establish a  policy and procedure for the immediate correction of future errors identified.  2.5 The Purchasing Division should correct the purchase order documents to accurately reflect the  engineering specifications.  2.6 The Purchasing Division should ensure that bidder’s Affidavits of Compliance are received and  documented. (after completion of recommendation 2.7)  2.7 The Utilities Department should establish responsibility for:  a) Determining and ensuring that meter testing is appropriately and consistently performed.  b) Testing and analyzing the test results of meters for compliance with performance  specifications.  c) Analyzing meter test data to determine if use of the manufacturer’s guaranty and warranty is  needed.  2.8 The Utilities Department should reassess and develop a maintenance and replacement plan for all  electronic meters.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 25      FINDING 3 The Utilities Department inaccurately reported the  retirement of meters, which affected their value in the City’s  accounting records.     The Utilities Department did not retire electric meters for over a year and  gas meters for over six months; and when meters were reported for  retirement, the reporting was inaccurate. Combined with a myriad of  inconsistencies and inaccuracies, retired meters were underreported,  which affected their value in the City’s accounting records.        The end of a workflow process can often reveal the efficiency and  effectiveness of processes and identify vulnerabilities in a specific work  area. It offers the opportunity to reconcile and determine if the purpose  and goal of the workflow was achieved. Errors made at the beginning of a  process often continue throughout the entire process and may reveal  themselves at the end. This is true for meters.    Errors and  discrepancies with  meter asset  processes, reporting,  and retirement  Some of the concerns discussed in Findings 1 and 2, such as the lack of  defined policies and procedures, not effectively categorizing meter types  in SAP, not identifying all meters with the meter type and badge number  combination, using manual processes, and not fully utilizing the  integrated SAP system are further supported as the meters are retired.     The Utilities Department did not have formal policies or procedures, but  in practice, used both manual and automated processes for meter  retirement. The two steps to fully retire a meter include:  1) The technical retirement in the SAP system for inventory and asset  management purposes.  2) The physical retirement, which is the recycling or scrapping of the  meter.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 26     Exhibit 16 shows the most significant results of our reconciliation of  meters retired over the past five years.    Exhibit 16: Results of Meter Retirement Data Reconciliation and the Causes  Retirement Reconciliation Result Cause From Findings 1 and 2  133 meters were physically but not  technically retired because the meter badge  number did not exist or there was not a  meter record in SAP.  Meter was not entered into the SAP system  or the identifying meter number was not a  City‐assigned badge number.   3,644 meters were not retired in the same  year as reported by the meter shops.  Lack of clear procedures requiring that  reporting of meter retirement be completed  timely and coordinated with Accounting’s  fixed asset retirement schedule.  710 meters were retired twice, using the  same badge number, in two different years.  Manual processes, lack of reconciliation,  retirement systems in SAP not integrated.  933 meters were reported to Accounting for  retirement, but not listed on the meter  shop’s manual report.  Manual processes – processed in SAP, but  not recorded on paper.  2,375 meters were listed on the meter  shop’s manual report, but not reported to  Accounting for retirement.  Manual processes – recorded on paper, but  not processed in SAP.  850 meters were reported for asset  retirement, but Accounting did not retire the  asset.  The meter type or quantity for that meter  type did not exist in the asset retirement  module of SAP.  Source: Auditor’s analysis of meter retirement records in SAP     Based on our analysis, if the underreported meters were retired using the  City’s asset retirement methodology, it would likely result in a financial  overstatement of at least $280,000 (3 percent of total meter assets as of  June 30, 2014). According to the City’s external financial auditor, the  overstatement is not a material misstatement. Our calculation considers  some assumptions based on inconsistent data and does not attest to the  beginning asset balance value or the valuation of meters at the time of  addition. The overstatement does not include the calculation of 314  electric meters that we could not reconcile.  Inconsistent and  ineffective meter  retirement processes  Process: The Utilities Department did not establish a consistent and  effective process for the physical and technical retirement of meters,  including:  Attachment B Utility Meters: Procurement, Inventory, and Retirement 27     The three meter shops (water, gas, and electric) each used a different  paper‐based process to document the meter retirements, which was  inconsistently applied and subject to misinterpretation.   Although the City’s fixed asset policy and procedures require the  Utilities Department to report the retirement of meters on a quarterly  basis to Accounting, the Gas Meter Shop did not report meters that it  retired for over six months, and the Electric Meter Shop did not report  meters that it retired for over one year.   The responsibility of reporting meter retirements to Accounting was  not coordinated between Utilities staff who perform the physical and  technical retirement, causing reporting inaccuracies.    Reporting of retired  meters did not  reconcile  Reporting: Documentation of retired meters did not reconcile with the  retirement report submitted to Accounting. The errors and discrepancies  include:   Physically retired meters that did not exist in the SAP system.   Duplicate retirement of the same badge number meters in multiple  reporting periods or fiscal years.   Meters reported in a different year than reported as retired in the  meter shops.   Meters reported for retirement in the meter shops documentation but  were not reflected in reporting to Accounting, and vice‐versa.   Variance between the number of reported retirements compared to  actual number of retirements in Accounting.   Meter type descriptions were different between the inventory and  asset management systems in SAP, which caused incorrect  reconciliations of meters retired.    Refund credit of  physically retired  meters incorrectly  processed  Retirement: The physical recycling of meters as a part of the retirement  and disposal process were different for each of the meter shops.   Water recycled to National Meter Automation (NMA), which held  water meter recycling funds as a continual credit. Upon instruction  from Utilities staff, NMA applied the credits against an invoice to offset  the payment due. The recycling credits should have been issued as a  check payable to the City and recorded as other revenue, rather than  understating expenses.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 28     Gas and Electric recycled to the City’s general recycling bin located at  the Municipal Service Center.   Recycling credits for all three were applied to the General Fund  account, in accordance with the City’s Municipal Code; however, since  the recycling credit stems from Enterprise Fund expenses, the  Governmental Accounting, Auditing and Financial Reporting5 guidance  indicates it should be applied to the Enterprise Fund.                                                                      5 Governmental Accounting, Auditing and Financial Reporting (GAAFR) by the Government Finance Officers  Association.    Finding 3 Recommendations to City Management:  3.1 The Utilities Department should develop a policy, process, and procedure for the timely and  accurate retirement of meters, both physically and in SAP.  3.2 In conjunction with Recommendations 1.3 and 3.1, the Utilities Department should work with  Accounting to align meter types when adding and retiring meters in the SAP asset management  module. (After completion of recommendation 1.3)  3.3 The Utilities Department should work with the Administrative Services Department to properly  coordinate and process for meter recycling credits.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 29    Appendix A – Case Study 1: Meter Management Errors and Inefficiencies  The following example demonstrates the downstream effects of the Utilities Department not having  policies and procedures that establish roles and responsibilities and provide guidance and direction for  managing meters. Specifically, it shows the effects of incorrectly combining different meter types and  not understanding the importance of maintaining master files. This example shows the breakdown of a  workflow process that caused errors to 400 meter records, operational inefficiencies, and data reliability  concerns. Time spent to correct errors and compounding inefficiencies increase operating costs.      The Utilities Engineering Division submitted incorrect changes to Purchasing  In July 2013, Utilities Engineering Division submitted changes to replace the master file for an existing  meter type, bronze water meter to a new water E‐meter, rather than add it as a new meter type.    The price for a 5/8” x 3/4” E‐meter  was estimated at $151.25, while the  average moving price of a 5/8” x 3/4”  bronze water meter was $57.77.  Based on “Revision to Existing Stock,”  direction was given to deplete  remaining stock of the existing  5/8” x 3/4” water meters and then  replace the existing stock with the  5/8” x 3/4” E‐meters.  The Stock No. is the meter  type/number in SAP. Revisions to an  existing material master with a  different material type may  irreversibly corrupt and distort the  master data for previous meters that  were set up for that specific material  and are still in use. The form was marked as a request for  Revision rather than Addition. The price for a 5/8” x 3/4” E‐meter  was estimated at $151.25, while the  average moving price of a 5/8” x 3/4”  bronze water meter was $57.77.  Based on “Revision to Existing Stock,”  direction was given to deplete  remaining stock of the existing  5/8” x 3/4” water meters and then  replace the existing stock with the  5/8” x 3/4” E‐meters.  The Stock No. is the meter  type/number in SAP. Revisions to an  existing material master with a  different material type may  irreversibly corrupt and distort the  master data for previous meters that  were set up for that specific material  and are still in use. Attachment B Utility Meters: Procurement, Inventory, and Retirement 30    Engineering specifications lacked the guidance for Purchasing to understand that there was a difference  between the existing 5/8 x 3/4‐inch bronze water meter and the 5/8 x 3/4‐inch E‐meter; the specifications  simply allowed for the water meter upgrade.    Engineering updated the Request for Sole Source form to allow procurement of these new 5/8 x 3/4‐ inch E‐meters based on revising the existing material master number.    The specification allows  meter upgrades for  Automatic Meter Reading  (AMR) and Advanced  Metering Infrastructure  (AMI); however it does  not state that explicitly by  meter type.  As an example, meter  type number 28000  was established for a  5/8 x 3/4‐inch bronze  water meter and was  identified in  purchasing master  records as  “Displacement Meter,  Water Disp  5/8" x 3/4", Cu. Ft.  w/o Connections,  Bronze Body.”  However, it is now  replaced as a  5/8 x 3/4‐inch  E meter.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 31    Purchasing Division of the Administrative Services Department should not have processed Utilities  Engineering’s requested changes:  Purchasing processed the Inventory Stock Request form in SAP without further communication or  clarification about why Utilities Engineering was requesting a complete change of the master file. As  requested, Purchasing changed the master file description for meter type/number 028000 from  “Meter WT 5/8 x 3/4” to “Meter WT 5/8 x 3/4 E‐METER” and initiated the purchase of 304 meters. This  began the comingling and distortion of information between the two different types of meters.    Unintended changes to the material average moving price  Prior to the change, the net price for the purchase of material number 028000 was consistently priced  at about $55; however, the revision to this existing master file with a different material type (the  E‐meter) produced a change to the “moving price”:  a) Meter WT 5/8 x 3/4 is $59.27 (calculation $14,817.19/250 {Value divided by Quantity})  b) Meter WT 5/8 x 3/4 E‐METER is $164.48 (calculation $50,003.25/304 {Value divided by Quantity})                 Average moving price change caused an overcharge to Utilities for the price of the meter  As a result of the moving price change, the expense charged to Utilities when a meter is issued by  Stores Inventory for a water meter under this meter type/number would be at the recalculated moving  price, regardless of the price actually paid for the meter. This means, for example, if 50 meters from  the second most recent purchase were still in stock after the E‐meter purchase, Utilities would be  charged the new moving price of $164.48 although the moving price at the time of purchase was only  $59.27.      Changed the average  moving price from  $59.27 to $164.48.  (Note: The average  moving price is the net  price plus tax and  delivery costs; the sum is  the Net Value.)  Attachment B Utility Meters: Procurement, Inventory, and Retirement 32    Below is the accounting transaction for the next goods issued transactions subsequent to the moving  price change to $164.48. The results were similar for all transactions that followed for this material.        Neither Utilities nor Purchasing realized that the moving price changed or understood its affects. It was  not feasible for us to determine how many goods were issued, overstated transactions occurred, or the  value of the overstatement to the charged funds. It is reasonable to have incremental increases in the  moving price over time due to inflation or increases in the cost of manufacturing the meter, but  unexpected and significant increases should be an indication for concern and review. If pricing errors  are not identified and corrected timely, the overcharge error could be significant.  Purchasing and Stores Warehouse staff discovered the error in combining two different meter types  into one existing master file when the Stores Warehouse could not issue the meters affected out of  inventory. The discovery was reactive to the error it caused rather than preventive. Errors should be  mitigated and avoided through effective processes and procedures (preventive) because errors that  have to be corrected after‐the‐fact (reactive) create unnecessary work.  This specific example depicts only one meter type, the 5/8 x 3/4‐inch water meter, which affected 304  meter records; however this occurred with two other water meter types, affecting another 96 meter  records.     The overcharge was  to Fund 522, which is  the Water Fund. Attachment B U T S e t t   T W e a 0 t v T h t d Utility Meters The Enginee Six months a existing mete that Purchas the new 028 The incorrec When Stores existing mete and inaccura 028800 for a the error, me various mod The same me have the sam this example description a s: Procureme ring Division after becomi er type inste sing delete (d 800 meter t t changes m s and Purcha er types/num acies in the i a 5/8” x 3/4” eter type/nu ules in SAP.  eter type sh me descriptio e do not have across all de nt, Inventory n corrected  ng aware of ead of creati discontinue) type/numbe made to the m asing staff id mbers and m nventory ma ” E‐meter an umber and d ould all have on across all e the same m scription fie y, and Retirem and resubm f the problem ing a new m ) the purcha r for the E‐m material mas dentified the meter inform anagement  d 028802 fo description r e the same m l description meter type n lds.  ment mitted the re m caused by eter type, En se and inven meter.  ster caused   error, 400 E mation was c records. The or a 1” E‐met records rema meter type n n fields in SA number for t equest  y revising the ngineering c ntory of met errors to 40 E‐meters ha comingled, w e newly crea ter; howeve ain incorrect number, and AP for that m their meter  e master file corrected th ter type/num 00 water met d been purc which creatie ated meter ty er, despite th t and incons d each indivi meter. The E‐ type and do e description e forms requ mber 028000 ter records  chased unde ed inconsiste ype/numbe he efforts to  sistent acros idual meter  ‐meters iden o not have th 33    n for an  uesting  0 and add  r three  encies  r is  correct  s the  should  ntified in  he same  Attachment B Utility Meters: Procurement, Inventory, and Retirement 34    In the following SAP screen shot, the discrepancies and inconsistencies for the same range of meter  badge numbers were caused by the original incorrect transaction. Multiple attempts to correct the error  were not successful.  Original Report printed on June 9, 2014)                          (Report printed on November 12, 2014)      (Report printed on November 4, 2014)  Originally created under #028000, the  corrections to change it to #028800 only fixed  the meter type number for some of the meters;  the data shows both the old and the  inconsistently changed meter type numbers.  The errors and corrections created the  various discrepancies and inconsistencies  in meter description for the same meter.  Discrepancies based on how  the meter description is  selected when installed. Discrepancies resulting from  two different attempts to  correct the meter description. Meter type number  remains inconsistent  with Purchase Order. Another attempt to correct the meter  description did not correct all the  descriptions within the range of affected  badge numbers.  Attachment B Utility Meters: Procurement, Inventory, and Retirement 35      Meter data discrepancies and inaccuracies created data reliability concerns  Utilities Operations Division did not identify the meter data description discrepancies in SAP and  proceeded to install these E‐meters. As of November 5, 2014, 394 of the 400 E‐meters had been  installed to a service location.  In this instance, we were certain that these 400 meters were E‐meters and were, therefore, able to  isolate the errors. The concern, however, is that meter inventory records are inconsistent and incorrect  and may not accurately reflect what meter type or size is actually assigned to the individual meter nor  what meter type or size is actually installed at the service location.       Attachment B Utility Meters: Procurement, Inventory, and Retirement 36    Appendix B – Case Study 2: Missing, Incorrect, and Inconsistent Meter Records  The following example demonstrates the effect of what happens to inventory records when roles and  responsibilities are not well understood, procedures are not enforced, or when processes are  bypassed.      Utilities bypassed processes and lost physical control and continuous traceability of meters  In November 2013, the Water Meter Shop assigned badge numbers for the procurement of 3”  compound water meters for a replacement project, badge numbers (58191‐58213), meter information  (meter type number 28013 for 3”C), and quantity (23). The information was discussed between  Utilities staff in the Water Meter Shop and Operations.        Utilities staff completed a purchase requisition for Purchasing to procure the meters without  identifying the required meter type and badge numbers. Purchasing processed the order in SAP, with  an anticipated delivery date of January 2, 2014, without requiring Utilities to cite the meter type and  badge numbers.        When delivered, Stores Warehouse staff checked the meters for the meter type and badge numbers. If  the information is not present, the material cannot be received into inventory and the meters lose  traceability. These 23 meters were delivered in two batches, on January 9, 2014, and on  March 10, 2014. Due to the missing meter type and badge numbers, Stores could not receive them into  inventory and the meters were physically delivered to the Water Meter Shop.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 37    SAP allows materials to be received generically without a meter type or badge number, which is what  happened in this example. The concern, specific to meters, is that if they are received generically into  SAP, the meter type and badge numbers do not get registered to uniquely identify each meter.  Without the unique identifier, the meter cannot be tracked to its location even though the meters  have been physically received.    The Water Meter Shop was not aware of 23 meters physically received, of which 8 were installed,  and SAP records showed a “not‐yet received” status.  On June 30, 2014, during a meter count field visit to the Meter Shop, we identified and inquired about  a pile of meters on the side of the Meter Shop shed (shown below). The Meter Shop staff, who should  be responsible for the physical inventory of meters that are not in Stores inventory, were not aware of  what the meters were for or why they were stored there. The Meter Shop staff did not consider the  meters as inventory responsible to the Meter Shop. Upon further inquiry, another Meter Shop staff  indicated that it might be for a special project.    Photo of the meters on 6/30/14, previously delivered to the side of the meter shed.  Photo of meter serial #58203,  identified in the pile of meters.    Upon opening one of the boxes, we identified the meter serial #58203 (shown above) and looked up  the meter record in SAP. Although all the meters had been physically received in January or March and  8 of the 23 meters had already been installed into service, the status of meter serial #58203 in SAP was  “AVLB” and “PORD,” meaning available but not‐yet received, or cleared the purchase order and  inventory receiving process.    Attachment B U P s     A T M A t t t   Utility Meters Physically rece status, if receiv A chronolog The example Meter Shop  August 28, 2 the meter w the Stores w the attempts s: Procureme eived in Januar ved into Stores ical and con e below is th received the 014, the Sto as actually r warehouse, e s to correct t nt, Inventory ry or March, ho s, should be “E ntinuous trac e history scr e meter on J ores wareho received on M ven though  the initial pr y, and Retirem owever the sta ESTO” (in the w cking of a m reen in SAP f uly 11, 2014 use received March 10, 2 the physica roblem.  ment atus of meter # warehouse) or   meter is lost w for meter se 4, and issued d the meter  013, and the l location wa #58203 on Jun r “AVLB” (in th when proce erial #58203 d it back out into invento e records su as near the M ne 30,2014, w he Meter Shop      esses are not . The history t on the sam ory. There is  ggest that th Meter Shop as “PORD.” Th p).  t followed  y shows that e day. Then  no indicatio he inventory . These entr 38    he  t the  on  on that  y is in  ies were  Attachment B Utility Meters: Procurement, Inventory, and Retirement 39        In another illustration, when a meter is not assigned the necessary meter type and badge numbers at  procurement and is not registered upon receipt, the chronological and continuous tracking of the  meter is lost. The meter record shown below, ordered in the same batch as the previous example and  received on March 10, 2014, does not begin traceability until the installation date on April 29, 2014. All  prior history of what should have been received into inventory and moved between the storage  locations was not captured.            Below is an example of a properly received and continuously tracked meter from inventory to  installation:  1) The meter was received into Stores inventory on May 13, 2013.  2) Held under the responsibility of Stores, the meter was subject to inventory counting on  July 8, 2013.  3) The meter was issued by a reservation request on August 21, 2013, issued out of Stores inventory,  received into the Meter Shop inventory, and issued out of the Meter Shop for installation.  4) The meter was installed to a service location on August 23, 2013.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 40        Once the meter is issued and physically removed from inventory for installation, Utilities staff installs  the meter to a service location and activates the meter for service. According to Utilities staff, meters  are installed to a service location without verifying the meter information in SAP, which can be another  cause for having a different meter on record versus what is actually installed for service.    A key element to the meter management process is that the system provides data that can be used for  the accountability, planning, and execution of the meter. When the meter record is incorrect because  it does not reflect the meter actually installed, it may result in an incorrect billing to the customer and  incorrect revenues to the City.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 41    APPENDIX C – City Manager’s Action Summary  The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on  implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 1: The Utilities Department has not established adequate processes and procedures for organizing and setting up meters in SAP, causing  data discrepancies and errors.  1.1 The Utilities Department should establish  written policies and procedures that clearly  define roles and responsibilities for managing  the City’s utility meters. The Utilities  Department should coordinate with  Engineering, Operations, Purchasing, and  Stores Inventory to address:  a) Defining individual and cross‐functional  responsibilities for setting up, procuring,  and receiving meters, and training key  staff to understand the workflow  process and controls.  b) The setup, user authorization, and  ongoing maintenance of meter material  master files.  c) The responsibility of assigning badge  numbers to meters, ensuring the use of  a meter type and badge number  combination for the purchase and  receipt of all meters.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities staff is updating policies and  procedures document including outlining roles  and responsibilities for organizing and managing  utility meters.    A – Polices, procedures and role responsibilities  are being updated; Utilities will schedule  quarterly training sessions for specific workflows.   B – Changes in user authorization will be  completed by March 2015.    C – Utilities and Administrative Services  Department (ASD) agree to transfer the  responsibility of creating meter badge numbers  to Purchasing Division after Utilities completes  recommendation 1.3.    1.2 The Engineering Division of the Utilities  Department should re‐examine and update  the City’s engineering specifications to  explicitly include all utility meter types  purchased and used by the City, and make  future updates to the specifications as  changes occur. Based on these changes, and   Concurrence:Partially Agree  Target Date: June 2015  Action Plan: Engineering specifications are  intended to clearly identify the functions and  minimum performance requirements that must  be satisfied.     Attachment B Utility Meters: Procurement, Inventory, and Retirement 42    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  ongoing, the Engineering Division should  work with Purchasing to ensure that meter  types established in SAP can be reconciled to  an approved list of meters.  Engineering will work with Purchasing to ensure  that sufficient detailed information is provided so  that meter types established in SAP can be  reconciled to an approved list of meters.  1.3 The Utilities Department should review its  existing list of utility meter types in the SAP  material master list to redefine and  reorganize existing and future meter types.  This recommendation should be applied if  the Utilities Department changes from SAP to  another system.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities will review the existing list of  meter types in SAP.  Utilities will create, remove  or consolidate material master for a specific  meter type if required.  1.4 The Utilities Department should give  responsibility to Purchasing for assigning  badge numbers to meters and make the  process for assigning the numbers more  efficient by allowing the technology of SAP to  designate an automated badge number at  the time of procurement and use the  controls built into SAP to mitigate errors  resulting from the manual assignment of  badge numbers.   Concurrence:Agree Target Date: TBD (pending completion of 1.2 and  1.3 by Utilities)  Action Plan: Utilities and Purchasing have agreed  to transfer the responsibility of new badge  number creation to Purchasing after Utilities  completes recommendation 1.3 including  removal/discontinuation of duplicate and  obsolete descriptions in SAP for meter master  records.  Utilities will provide Purchasing training  and documentation of the badge creation  process.  Finding 2: The Utilities Department has incomplete, incorrect, and inconsistent meter records, which causes data reliability concerns and  increases the risk for incorrect customer billing.  2.1 The Utilities Department should establish a  policy for meter inventory error tolerance  and, based on this metric, develop a plan to  identify high‐risk meters, verify the accuracy  of these meters, and correct accordingly.   Concurrence:Agree Target Date: Completed  Action Plan: Utilities already has in place a testing  policy and error tolerance procedure for new and  existing meters.  Approximately 10% of all new  meters delivered are tested for accuracy and the  meters must perform within three percent of the  manufacturers’ reported meter specifications.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 43    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Utilities has a robust exception validation system  in SAP. All meters are scheduled to be read every  month and the reads must pass a rigorous review  process.  The system has pre‐defined exception  tolerance ranges for meter reads, bills and  invoices.  Customers will not be billed until all  exception records have been reviewed and  released.      2.2 The Utilities Department should provide  process and SAP training to staff involved in  meter activities on the policies, processes,  and procedures for physically and  electronically maintaining meter data  accuracy.   Concurrence:Agree Target Date: March 2015  Action Plan: Training has been underway for the  past three months; Utilities will conduct quarterly  training sessions; new employees will be given  proper training and documentation prior to  managing meter data.    2.3 The Utilities Department should work with  the Administrative Services Department and  the Information Technology Department to  integrate the various SAP modules to  automate controls or implement other  appropriate processes to ensure that meter  descriptions carry through from procurement  to retirement.   Concurrence:Agree pending confirmation of  cost‐effectiveness of any change  Target Date: June 2015  Action Plan: Utilities and ASD will investigate the  cost of adding automation and enhancement to  the SAP system.  Depending on the estimated  cost and outcome of the ERP system evaluation,  it may or may not be cost‐effective to implement  any enhancements at this time.      2.4 The Utilities Department should take  corrective action to address the 115  incorrect water billings by notifying  customers of the error and that future  billings will reflect the correction, and  recover revenues to the City of  approximately $43,000. The Utilities   Concurrence:Agree Target Date: Completed  Action Plan: Utilities has notified all the  customers of the billing error.   The average back‐ bill amount for a customer was $452.54 for three  years of service. Utilities also offered payment  plans to the customers in case they wanted to  Attachment B Utility Meters: Procurement, Inventory, and Retirement 44    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Department should also establish a policy  and procedure for the immediate correction  of future errors identified.  spread their payments across multiple months.  Utilities will continue to implement established  policy and procedure regarding correction of  errors.  2.5 The Purchasing Division should correct the  purchase order documents to accurately  reflect the engineering specifications.   Concurrence:Agree Target Date: March 2015 for Gas and Water  Meters; TBD Electric Meters (pending transfer of  meters from Utilities to Stores)  Action Plan: The Purchasing Division will update  the purchase order documents to accurately  reflect the current engineering specifications.  2.6 The Purchasing Division should ensure that  bidder’s Affidavits of Compliance are  received and documented.   Concurrence:Agree Target Date: June 2015  Action Plan: Purchasing and Utilities will develop  a process to track the vendor’s Affidavits of  Compliance.     2.7 The Utilities Department should establish  responsibility for:  a) Determining and ensuring that meter  testing is appropriately and consistently  performed.  b) Testing and analyzing the test results of  meters for compliance with performance  specifications.  c) Analyzing meter test data to determine  if use of the manufacturer’s guaranty  and warranty is needed.   Concurrence:Agree Target Date: Completed  Action Plan:    A:  Utilities will continue to test 10% of new  meters; the meters must perform within three  percent of the manufacturers reported meter  specifications.      B:  Utilities will continue to test all meters  removed from the field; testing results will be  tracked electronically for data retrieval or  analysis if needed.    C: Utilities will verify application of any  warranties for any failed meters.    Attachment B Utility Meters: Procurement, Inventory, and Retirement 45    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  2.8 The Utilities Department should reassess  and develop a maintenance and  replacement plan for all electronic meters.   Concurrence:Agree Target Date: December 2015  Action Plan: Utilities will include electronic  meters in the replacement plan.      Finding 3: The Utilities Department inaccurately reported the retirement of meters, which affected their value in the City’s accounting records.  3.1 The Utilities Department should develop a  policy, process, and procedure for the timely  and accurate retirement of meters, both  physically and in SAP.   Concurrence:Agree Target Date: March 2015  Action Plan: Meter retirement policy has been  defined, procedures are updated, and staff is fully  trained on the meter retirement process. The  meters identified in the report have been  properly retired in the utility system and reported  to Accounting.  Utilities will coordinate with  Accounting on the fixed asset retirement in the  financial system.  3.2 In conjunction with Recommendations 1.3  and 3.1, the Utilities Department should  work with Accounting to align meter types  when adding and retiring meters in the SAP  asset management module.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and Accounting will review  and align meter types in SAP if necessary.  3.3 The Utilities Department should work with  the Administrative Services Department to  properly coordinate and process for meter  recycling credits.   Concurrence:Agree Target Date: June 2015  Action Plan: Utilities and ASD will coordinate and  review the meter recycling processes.       Attachment B Utility Meters: Procurement, Inventory, and Retirement 46    APPENDIX D – City Manager’s Memorandum Response      CITY OF PALO ALTO  MEMORANDUM         TO: City Auditor     FROM: James Keene, City Manager    PREPARED BY:  Valerie Fong, Utilities Director and Lalo Perez, Administrative Services Director/CFO   DATE: February 26, 2015   SUBJECT: City Manager’s Response to Utility Meter Audit: Procurement, Inventory, and Retirement  (Audit Report)    The City Auditor’s and her staff’s attention and efforts on this audit are appreciated. The Utilities and  Administrative Services (ASD) Departments acknowledge the importance of meter management throughout the  lifecycle of the equipment from design, procurement, inventory, installation and retirement.  Many of the  findings suggest improvements that Utilities (in particular) and ASD should consider.  Since the audit, Utilities  and ASD have updated and established new policies, procedures and processes to improve consistency and  accuracy of meter record keeping.  Utilities will provide additional and ongoing SAP training to staff to enhance  operational efficiency and mitigate errors.    Staff agrees with the findings in the report and proposes corrective actions as noted in the attached matrix.    Finding 1: The Utilities Department has not established adequate processes and procedures for organizing and  setting up meters in SAP, causing data discrepancies and errors.  The City owns approximately 74,000 meters serving three utilities: electric, gas and water.  The audit covered  roughly 11,000 meters over a five year span.  The Audit Report observed some data discrepancies and errors in  SAP that stemmed from a failure to explicitly specify all of the new or existing meter types used or intended to  be used in SAP.  Utilities staff will work closely with the Purchasing Division in ASD to ensure the meters being  purchased comply with the specified needs.    The Audit Report recommends that the process for specifying meters be modified so that each meter type is  explicitly specified. Staff finds that it is more efficient and effective to clearly specify the functions and minimum  performance requirements that must be satisfied by the meter. The typical meter specification is a  performance‐based specification listing features typically found in meters for each utility. The material master  record identifies the meter features required in the specific meter being ordered. When the manufacturer  receives the request for quote, the required features can be fully identified from the material master and the  Attachment B Utility Meters: Procurement, Inventory, and Retirement 47    ordering request. The meter specifications are attached to the Request for Quotes issued by the City that define  both the performance required for the general meter and specific features identified for the meter. Due to the  many different types and sizes of meters and varying number of meters required in any given order, retaining  the current system of performance‐based specifications is the most efficient way to specify and order meters.  Furthermore, current specifications used to solicit and purchase meters are written broadly with the minimum  requirements and meter types grouped in a manner so as to not restrict vendor participation in the bidding  process.   However, over the years some duplicates have crept into the material master records. Staff will cleanse the  duplicate information from the material master lists to improve efficiency and accuracy of meter procurement.  The Audit Report discusses an occasion when Utilities staff failed to request new material master numbers for  electronic water meters (E‐meters), different from the typically‐used mechanical water meters.  It should be  noted that in that particular example, a summer intern was tasked with making the request to purchase the E‐ meters, and due to the intern’s inexperience,   failed to request new material master numbers for the E‐meters.   E‐meters have a higher cost because they provide new functionalities including: low water flow detection,  advanced meter reading capability, and cost‐effective service upgrades.  As soon as Utilities and Purchasing  became aware of the oversight, and prior to the audit, corrective actions were implemented.  All E‐meters have  been reassigned to new material master numbers with the proper attributes. It bears noting that this oversight  had no impact on customer bills.  Finding 2: The Utilities Department has incomplete, incorrect, and inconsistent meter records, which causes  data reliability concerns and increases the risk for incorrect customer billing.  Utilities staff agrees with the concept of getting things right at the beginning of any process so as not to require  re‐works and to avoid the compounding of errors.  In addition, on‐going checks offer additional protections to  customers to flag any bills that are not within a reasonable range.  While the SAP system can be characterized as  complex and user‐time‐intensive, SAP has a robust exception validation and billing system.   In the case of  electric, gas and water meters, all 74,000 meters are scheduled to be read on a monthly basis.  Every meter read  is uploaded into the utility billing system which was designed to identify certain ranges within which a meter  read will be considered to be “plausible.”     If the meter readings fall outside of the established error‐tolerance  range, the system generates a flag noting an exception for the reading.  Utilities Customer Service reviews the  exception logs daily and where the readings do not seem reasonable, will request a follow‐up reading or meter  investigation.  Once the follow‐up read or investigation is complete, Customer Service approves the read in the  system.  Utilities reviews and processes between 150,000 – 200,000 exception reads (17%‐23% of total reads)  annually.  In addition to meter read validation, the system has pre‐defined billing and invoicing exception limits.   A customer will not be invoiced and billed until all the exception records in the customer’s account have been  reviewed and released.  Customer Service processes approximately 1,000 to 1,500 billing adjustments on an  annual basis.  Given the volume of meter reads (880,000 per year) and invoices billed (290,000 per year),  Utilities processes a very low percentage of billing adjustments (0.3% ‐ 0.5% of total invoices).  In terms of meter tracking, all meters are recorded in SAP prior to installation and are monitored on a monthly  basis.  Based on the audit findings, both the gas and water meter shops have very low numbers/percentages of  incomplete or inconsistent meter records:  14 gas meters (1% of installed/exchanged gas meters) and 170 water  meters (2% of installed/exchanged water meters) over a five year period.  Under the unusual or special  circumstances involving either emergencies or special projects, meters are received directly by the meter shop  instead of the warehouse to expedite repair and service connection.  The Audit Report findings are mainly with  Attachment B Utility Meters: Procurement, Inventory, and Retirement 48    regard to the electric meter shop, primarily the result of past practice exercised in the electric utility of meter  procurement being ordered and shipped directly to the electric meter shop for testing, processing and  safeguarding.   The Audit Report pointed to the significant differences in procurement and storing of meters between the  electric meter shop and the gas and water meter shops.   As a direct result, Utilities has implemented new  policies and procedures (i.e. procurement, inventory, retirement) in the electric meter shop which are now  consistent with those in the gas and water meter shops allowing for standardized meter procurement,  recordkeeping and tracking across all three meter shops.  Utilities has also provided staff with additional SAP  training and documentation to ensure accuracy and completeness of records.  Utilities and ASD have  coordinated efforts to ensure that future meter procurement and safeguarding will be managed by the  warehouse.  The Audit Report recommends the establishment of a policy and procedure for immediate correction of future  errors identified.  In fact, there currently exists such a procedure, established in the Utilities Rules and  Regulations, which requires the collection or return of three years of back bills for erroneous charges.  The Rules  and Regulations are currently and will continue to be consistently followed by Utilities staff.    The Audit Report suggested more aggressive observation of meter warranties along with regular meter testing  prior to expiration of associated warranties.  Utilities staff will be trained to check the warranties on any meters  that fail in the field.  With regard to warranties, shipments of new meters must perform within three percent of  the manufacturers’ reported meter specifications.  To ensure the standards are met, roughly 10% of all new  meters delivered are tested for accuracy.  If the meters do not pass the test requirements, the entire batch of  meters is returned to the manufacturer.  Note that in the past eight years, Utilities has not had any issues with  meters deployed in the field during the warranty period (typically one year), nor returned any shipment while  under warranty. As an added discipline, it is a continuing practice to test all meters removed from the field, with  the test results stored for the purpose of ensuring information is available for any disputes over the final meter  readings  Finding 3: The Utilities Department inaccurately reported the retirement of meters, which affected their value  in the City’s accounting records.  After experiencing a loss of institutional knowledge (due to retirements and departures) and a backlog of  metering activities, Utilities did not retire meters in a timely manner.  Since the audit, all the meters identified in  the report have been properly retired in the utility system and reported to Accounting.  Utilities will coordinate  with Accounting on the fixed asset retirement in the financial system.  Utilities has implemented new policies  and procedures on meter retirement including controls on tracking and reconciling meter retirements.  Staff agrees that retirement of meters should be done accurately and efficiently. The report identifies the  estimated amount of the financial overstatement of retired meters analyzed of at least $280,000.  As the report  notes, this amount was deemed immaterial by the City’s external financial auditor for accounting purposes. In  addition, Utilities staff acknowledges that the methodology used to determine the value of the overstatement  follows proper accounting procedures.  For further context, Utilities notes that the original purchase costs of the  meters are approximately $156,000 and when depreciation is factored in, the value of the meters more  reasonably ranges between $13,000 to $53,000 depending on whether one regards the useful meter life as 20 or  40 years respectively.   Attachment B Utility Meters: Procurement, Inventory, and Retirement 49    As a general last comment, the City is in the process of completing a comprehensive assessment of the City’s  SAP‐based financial and utilities billing systems to determine how best to meet the  business needs of the City.   To the extent the City determines that it should migrate away from the current SAP‐based systems, and because  many of the findings do not result in customer billing impacts, solutions responsive to the Audit Report findings  should be considered in light of the costs to implement such systems versus the benefits gained.     Attachment B Utility Meters: Procurement, Inventory, and Retirement 50    APPENDIX E – City Auditor’s Memorandum Response  The City Auditor’s Office would like to thank the Utilities and Administrative Services Departments for their  participation in the meetings and discussions that led up to issuing this audit report. Despite the collaborative  efforts during the audit, we continue to have some concerns with the response.  Finding 1 emphasizes the need to have clear guidance for how to set up utility meters in SAP to ensure  consistency in the collection and monitoring of meter information; prevent comingling of records, particularly  when the affected meters have different prices; and establish a uniform system for identifying each meter  throughout its life.  The response does not recognize and accept responsibility for determining how meters are established and  organized in SAP prior to purchase. The setup and organization of meters in SAP affects many workflow areas,  including Utilities Operations, Purchasing, Inventory, and Accounting; and the data contained within the setup,  such as the average moving price, affects data analysis, purchasing cost control, and the cost to customers. To  reiterate, Utilities recently submitted requests to add new and change existing meters in the SAP system. The  requests contained incorrect and inconsistent instructions, and Purchasing rejected them. If Purchasing had set  these up based on Utilities’ request, it would have resulted in duplicating meter types, comingling meter types,  incorrect meter descriptions, and potentially incorrect average moving prices. Utilities management needs to  conscientiously determine how meters should be set up and organized in SAP to satisfy the needs of all  workflow areas, with consistency and process in mind.  Finding 2 emphasizes the importance of having complete, consistent, and reliable data to ensure accuracy as the  data flows into and is a component of customer bills. Capturing reliable meter data will also assist in tracking its  movement (e.g., receipt, issuance, inventory, installation, and retirement), analyzing meter costs, and  maximizing warranty opportunities.  The response minimizes being preventive through the use of complete and reliable data, and instead focuses  reliance on manual controls and processes downstream to identify and clarify billing inaccuracies. We analyzed  only the meter inventory management data available within SAP, which we identified as incomplete and  inconsistent. There is importance and value in enforcing the use of SAP to collect and store data completely,  effectively, and accurately. The controls inherent to the SAP system assist in eliminating work redundancies and  errors.  We identified areas of concern and inaccuracies at every control point throughout the meter workflow process,  which increases the risk for incorrect billing. The report focused on the root causes (meter setup, organization,  and identification in Finding 1 and data completeness and reliability in Finding 2), rather than the narrow  isolated causes. We wanted to address the concerns that would rectify many of the downstream inaccuracies  and inefficiencies. The response does not value and take ownership for this, but rather delays the need for data  redesign and clean up, resting it upon a comprehensive assessment of the City’s SAP‐based financial and utilities  billing system and business needs. Data will migrate to a system, regardless of the data being good or bad.  Whether the City continues with SAP or migrates to a new system, we suggest taking a preventive and proactive  approach in addressing these concerns immediately and cleansing the data to ensure consistency and accuracy  and to assure customers of correct customer billing.      Attachment B         Chairpe Chamb Present Absent Oral Co None Agenda   1. U Harriet findings describ Adminis invento recomm process causing the Uti records incorre Utilities affected recomm Staff m needs retirem James respons Assista ASD we       Po D erson Bur ers, 250 H t: Berm : ommunica a Items Utility Mete Richards s and rec ed the ste strative S ory, and r mendation ses and p g data dis lities Dep s, which c ct custom s Departm d the v mendation meeting to for a mo ment proce Keene, C se proces nce Direc ere availa olicy a RAFT rt called t Hamilton A man, Burt tions er Audit: P son, City commend eps that s Services retire the ns: 1) the procedure screpancie partment caused da mer billing ment inacc alue in ns. The ac achieve a ore accur ess. ity Manag ss from t tor of Util ble to ans and Se MINU 1 the meeti Avenue, P (Chair) D Procureme Auditor, ations of should be Departme meters. e Utilities es for org es and er has incom ata reliab g; there curately r the City ctions tak a better un ate procu ger, stated the subje lities and swer quest ervices TES   1 ng to ord Palo Alto, C uBois, Wo ent, Inven provided the Utilit taken by ent (ASD) She ident Departme ganizing a rors; ther mplete, in bility conc were 8 eported t ’s accou ken to dat nderstand urement, d in the a ects of th David Ra tions. s Com Tu der at 7:0 California. olbach ntory, and a prese ty Meter the Utilitie ) to prop tified the ent has no and settin re were 4 correct, a cerns and recomme the retirem nting rec te include ding of the inventory udit proce he audit. mberg, th mittee Re uesday, Ma 03 P.M. in . d Retireme ntation d Audit pe es Depart perly pur following ot establis ng up me 4 recomm and incon increase endations, ment of m cords; th e the ASD e individua y, asset t ess there Tomm he Assista e   gular Mee arch 10, 2 n the Cou ent. describing rformed. tment and rchase, tr findings hed adeq eters in S endations sistent m es the ris and 3) meters, w here were D and Util al departm tracking, was a for Marshall, nt Directo eting 2015 uncil the She d the rack, and uate SAP, s, 2) meter k of the which e 3 lities ment and rmal the or of Attachment C    2 March 10, 2015    Chair Burt conferred with the Policy & Services Committee (Committee) members to hear from Staff prior to Committee questions and comments. Tomm Marshall, Assistance Director of Utilities, concurred there was merit in the findings and recommendations. Staff was taking actions to correct the errors but he noted a number of the errors dated back many years. There were 76,000 meters installed with an average life span of 20 years. Mr. Keene asked Staff to add context to the discussion for a clearer understanding for the Council. He asked for an explanation of the “average moving price” that was applied to the meters. Mr. Marshall acknowledged the majority of the meters throughout the City were residential with a procurement cost of $15 to $100 each. The customer was not charged the cost of the meter. The customer billing rate was based on the market and set at a rate schedule. Mr. Keene asked Staff to specify why Utilities used the average moving price for meters rather than tracking and accounting for absolutely every meter in the system. Mr. Marshall stated the pricing of meters was a warehouse function; Utilities did not establish the method for pricing in SAP. The decision when SAP was implemented was to do average moving price for products as they came in. Essentially you buy a new meter and when it was entered into the system, the price was averaged with the existing meters. Council Member DuBois asked how SAP was maintained. Mr. Marshall stated SAP had systems maintenance which was partially the responsibility of IT Business Analysts, and Utilities had four Staff members that maintained the Utility Billing System within SAP. Administrative Services Department (ASD) had Staff performing the material management portion. Data entry was performed by a meter person. Council Member DuBois asked if any of the recommendations involved changes within the software itself. Mr. Marshall explained the SAP System was complicated; especially on the retirement side of the meters. He believed one of the recommendations was to review the SAP retirement side of the software for a more integrated and efficient process. Attachment C    3 March 10, 2015    Council Member DuBois was uncertain if the capability to make those changes was within the City Staff or if there were outside consultants required. Mr. Marshall noted making any changes to SAP was expensive and the City was looking at what amount would be spent to fix the problem while they were looking into a new billing system. Council Member DuBois asked if there was a metric for database consistency of error rate for large database systems. Ms. Richardson noted one of the recommendations was for Utilities to establish what an acceptable error rate was. The Audit Staff attempted to identify what was an industry standard. Council Member DuBois recalled Staff mentioned the value of the inventory was understated. He asked whether the remark was regarding materials. He asked what the life of the meter was and how long it was in the asset inventory. Ms. Richardson stated the meters were depreciated on a 40-year basis but they were looked at as having a 20-year lifespan. Mr. Marshall clarified the life of the meter was dependent upon how long they were on the books. There was a depreciated life and each one was reviewed individually. With depreciated materials they were brought in for review and calibration testing. If the calibration was good they were re- deployed. Ms. Richardson stated the amount was not material in reference to the financial statements. Council Member DuBois said the report referred to two steps for retiring a meter; the physical and the technological. He asked why there were two and if there could be a combination into one. Ms. Richardson explained the physical retirement was when the meter was physically being disposed of and was no longer in use or on the asset inventory. The technological retirement was when it was retired from the SAP and accounting systems. Council Member DuBois asked if the person physically removing the meter was not retiring it at the time of removal. Attachment C    4 March 10, 2015    Mr. Marshall stated yes, that was correct. Part of the process was once it was removed from the residence it was brought in to the shop for testing for accurate readings. The shop held the meter for 45-days because the customer had 30-days to contest the readings. Once the customer was satisfied, the meter would be technologically retired. Council Member DuBois asked if customers were billed incorrectly and had it been fixed. Mr. Marshall stated there was a Southgate neighborhood error which was found prior to the Meter Audit. During a physical inspection it was noticed there were 1 inch meters but the neighborhood rate was at 5/8 inch. That material mishap was from a Capital Improvement Project (CIP). Council Member DuBois asked if the matter had been corrected. Mr. Marshall stated the customers had been back billed. Council Member DuBois clarified the customers had been under billed. Mr. Marshall stated the meters only measure the cubic feet of water used. In the past few years there had been fixed charges added to the water utility meter rate which escalated the rate which created a significant gap between the rate of the 5/8 and the 1 inch meters. Those customers had been back billed to correct the billing error. Council Member DuBois asked given the size of the Utilities Department did the Auditor feel there was ample staff in her department. Ms. Richardson stated there was one auditor dedicated to the Utilities Department. She announced the reason the findings showed the Southgate error was to reflect the length of time an error could go before being detected. Council Member Berman asked how the Utilities Department came to have an audit. Ms. Richardson stated before she came to the City there was an inventory audit performed. That audit identified some issues with the meters inventories. Council Member Berman asked for clarification to the Utilities Department response to the audit findings. Attachment C    5 March 10, 2015    Mr. Marshall explained for Finding Number 1, Staff was continuing to use the same specifications although Staff was working with the Purchasing Department to make sure they had the correct materials number assigned to the correct meter. Council Member Berman asked how the issue of the incorrect badge number was resolved. Mr. Marshall stated electric meters came with serial numbers but once they were purchased by the City they were assigned an individual badge number. Council Member Berman noted the audit recommended better and more efficient ways to place badge numbers. Mr. Marshall stated Staff had agreed to allow the SAP System to assign the badge number as the meter was entered into service. Council Member Berman asked if having SAP assign the badge numbers alleviated the concerns from the Auditor’s office. Ms. Richardson stated yes, that was the recommendation. Council Member Berman asked why the format of the audit changed. He recalled the prior audits were more easily readable with findings, recommendations and response in an order. Mr. Keene clarified there was a matrix type format which was an attachment to the cover letter. He noted Auditor Recommendation 1.2 that the Utilities Department partially agreed. Council Member Berman asked what the partial disagreement was regarding. Ms. Richardson stated the Utilities Staff had addressed the issue. She believed in the beginning, Staff was unclear of what was needed from the Purchasing Staff. Her understanding was since the initial response, Staff from both departments had met and the issue had been clarified. Mr. Marshall stated initially when the specifications were written there needed to be one for each type of meter. He acknowledged that was not practical for the number of meters throughout the City. They resolved the issue by writing a specification and sat with the Purchasing Staff to provide them with a better understanding of what was needed to be ordered with any particular material number. Attachment C    6 March 10, 2015    Council Member Berman noted Finding Number 2 consisted of re-reading meters. He asked how time and cost intensive was that process. Mr. Marshall stated prior to the billing being sent out there were parameters reviewed and compared for accuracy. There were a number of items that may cause a misread; vacation where the usage was noticeably lower than the previous month or guests where the usage was noticeably higher than the previous month. Dave Yuan, Senior Management Analyst, explained during his time in customer service the exception reports were mostly from zero consumption readings. The investigations on meters were done when a read was too high or too low and the reason for the re-read was to verify the meter was reading accurately. There were three dedicated Staff members assigned to read meter readings daily. Council Member Berman asked if a 20 percent spike either direction was an industry standard. Mr. Yuan stated the three Staff members also handled the billing, invoicing, and adjustments to either item. They were not dedicated to re-readings. Council Member Berman asked if the billing invoices were strictly for the exceptions or all. Mr. Yuan stated all of the billing and invoicing including the exceptions. Council Member Wolbach noticed there were two Findings that had partial Staff agreement; Numbers 1.2 and 2.3. He asked for the City Auditor’s impression of the status of the partial agreements. He understood there had been meetings and changes since the information had been released. Ms. Richardson said Utilities Staff had met with ASD Staff and had reached an agreement regarding Number 1.2. She felt they would be changing their response from partially agree to agree. She believed on Number 2.3 there was a misunderstanding on what the audit expected of Staff. The SAP system had capabilities the audit was requesting Staff to perform; it would not take additional Staff time or increase cost. Council Member Wolbach asked if the City Manager or Assistant Director Marshall had additional information. David Ramberg, Assistant Director for Administrative Services Department, explained ASD Staff had reviewed the capability of the SAP System and concurred with the City Auditor of the system’s ability to comply with the Attachment C    7 March 10, 2015    recommendations. Once the Purchasing Department received the information from the Utilities Department they would input into SAP and generate a badge number. That badge number would follow the order to the vendor. The vendor would mark the unit with the generated badge number prior to the meter being released to the City. Mr. Marshall mentioned one of the issues in the meter retirement process was there were a lot of pieces that should be tied together but were not. That allowed the person entering the data to input incorrect or inaccurate data. Correcting the errors was not insignificant or inexpensive. Ms. Richardson agreed that SAP was a complicated system. She did not believe when the system was first deployed Staff had an understanding of those complexities. She was aware the Chief Information Officer (CIO) was looking into a new or different type of system. She expressed the importance of the new system being implemented correctly in the beginning and that the City was taking full advantage of the capabilities. SAP had the capability to connect tables so when information was entered once it was connected to the other tables necessary to follow the materials. That was not set-up initially which was how errors occurred because multiple data was entered at different times for the same item. Council Member Wolbach stated given the status of the audit, the responses and the response to the responses, he asked if there was a hesitation from the City Auditor, the City Manager or the Utilities Department not to move forward sending the recommendation to Council. Ms. Richardson felt the actions being taken were positive and she was comfortable requesting Council approval. She noted there was a follow-up process which required audited departments to report back to the Committee every 6 months after Council approval. Council Member Wolbach understood not wanting to implement modifications and changes to the existing SAP System with the knowledge of a new system being implemented. Mr. Keene stated given the new process of a 6 month follow-up that timeframe set the tempo of what was expected. He said if SAP was to migrate to a new Electronic Reporting Program (ERP) it would be a multi- year process. Mr. Marshall mentioned the Utilities Department was looking into initiatives for Smart Meters for gas, water and electric meters. Once that system was implemented there would be a full scale replacement of meters. At that time it would be more efficient to complete the discussed processes. The new Attachment C    8 March 10, 2015    meters were self-reporting so a number of the issues in the audit would no longer be valid. Council Member DuBois understood there was a 6-month check-in but most of the corrections were targeted for June. He noted the current members were only seated for a twelve-month term so as a practical matter most of the follow-up would be with a different group of members. Ms. Richardson encouraged departments to return to the Committee once implementations had occurred. She explained the 6-month return was for the benefit of the Staff because some recommendations may take longer to implement. Chair Burt asked whether there should be any effort to align the audits and the responses so that a given Committee would be able to go through a full cycle. The theory would be to have the audit presented in the first half of the year and the responses in the second; the same Committee would have continuity in the process. Ms. Richardson stated the Ordinance would need to be changed to accommodate the timeframe but Staff could reconsider the process. She was open to discussing the possibility. Chair Burt asked the City Auditor to work with the City Manager to view the cycle going forward. Ms. Richardson agreed. Chair Burt asked for more clarification from Staff regarding Recommendation 1.2 engineering specs and other descriptions as the basis for why it would not be practical to have an engineering spec for each meter. Ms. Richardson clarified the recommendation was not to write a unique spec for each item, but rather continue with the performance based specification. If there was a need to add more specific information to assist ASD, Purchasing Staff needed to understand what was needed to be purchased. Chair Burt stated the term engineering spec meant a greater detail to the Utilities Staff than what was intended in the findings. He asked Staff with the clarification from the Auditor as to what was acceptable to achieve the end result, did the Utilities Department agree with the clarified request. Mr. Marshall stated yes. Attachment C    9 March 10, 2015    Chair Burt stated under Finding 2.3, it spoke to ensuring the meter description carried through the meter procurement process to retirement. Utilities Staff’s comments were regarding the inefficiencies of the retirement process under SAP. He asked how the SAP inefficiencies effected the meter descriptions carrying through from procurement to retirement. Mr. Marshall noted there were multiple locations within the SAP System where there was a meter description; the meter material number, the utility billing section. Because those areas were entered separately and by different Staff, those descriptions for the same items did not always match. Chair Burt asked if there was an item or part number that tracked with a description. Mr. Marshall stated yes, in the materials module. Chair Burt understood there was not an issue with material numbers maintaining their consistency from procurement to retirement but the issue was the description varying. Mr. Marshall stated yes with a caveat. The retirement process alone had multiple modules in SAP. Ms. Richardson shared an example for the Committee. In the report there was a master material number: 0280000. The device category description was different from the material description in two separate places. Further below in the process it showed another input where Staff attempted to correct the error and that correction itself was different from both of the previously entered descriptions. Chair Burt asked what level of consequence occurred as a result of the mis- entry of descriptions for the same item. He understood with the current SAP System it was a difficult situation to resolve. Ms. Richardson said basically it made it difficult to know what types of meters were in the field when the descriptions did not match. The uncertainty caused inaccurate accounting. Chair Burt asked when a meter was replaced, was it replaced based on description or material number. Mr. Marshall stated the badge numbers were in sequential order and Staff could look back and see when the meter was replaced last. The SAP System was not used to determine which meters were to be replaced. Attachment C    10 March 10, 2015    Chair Burt asked what remaining problems were seen by the Auditor given the replacement description by the Utilities Staff. Ms. Richardson stated if the description information in SAP was not utilized it was not as significant as initially thought. Chair Burt understood Staff’s description of when the meters were retired was when they stopped working correctly. He felt that manner was problematic; it meant that after failures became apparent it triggered a replacement. Mr. Marshall stated some meters were replaced based on their badge number and date. He understood in the audit there were discrepancies found because some of the meters were placed prior to computers storing all of the information. Chair Burt asked if the meters did not have the ability to have calibration checks. Mr. Marshall stated that test could be performed; however, it could not be performed in the field. The meter needed to be removed from the field and brought to the shop. Dean Batchelor, Assistant Director for Utilities, explained the Utilities Department followed standards set by the American Water Works Association (AWWA). There was an association for gas as well. The typical timeframe was 17-20 years. Staff would remove the meters from the field and verify their ability prior to them becoming problematic for the customer. At the time of removal, a new meter was installed with a new badge number. Chair Burt clarified as a preventative basis the meters were being taken off line prior to the anticipated effective retirement date. He asked if there was a sampling of reliability of the meters removed at the 17 year mark. Mr. Batchelor stated each meter removed was tested. Chair Burt asked for statistics for the frequency the meters were out of spec at the time of removal. Mr. Batchelor stated yes they maintained all of those records on a yearly basis. Chair Burt asked if Staff had an approximate percentage of reliability. Attachment C    11 March 10, 2015    Mr. Batchelor noted on the water meter side they ran at approximately 91 percent accuracy. On the gas meter side they were closer to 86 percent. Chair Burt asked, based on those percentages, what would be the cost and benefit to the rate payer or the City to pull the meters at 15 years rather than 17. Mr. Batchelor stated the benefit would be to the City. Chair Burt asked if Staff felt it would be beneficial to perform a pilot sampling, enough to be statistically accurate. Mr. Batchelor stated it was possible but his concern was as the City moved forward with the meter exchange for water the average cost would rise from $50 up to $270 per meter. Chair Burt asked if the cost increase was because of the change to Smart Meters. Mr. Batchelor stated that was correct. Mr. Marshall noted the City already moved to electronic Smart Meters for water. The electronic meters had a different life cycle from the ones being discussed. It was anticipated between 15 to 17 years based on the battery life. Chair Burt believed there was value in knowing the value of accuracy at the time of removal. He felt 91 and 86 percent were low performance numbers. Mr. Marshall stated no meter had 100 percent accuracy across the range of all aspects. He agreed it was worth the effort to complete a pilot sampling analysis. Chair Burt stated water being the side of utilities with the commodity having the increase; with what may have been a cost benefit five years ago would be changed in recent years. Mr. Marshall agreed. Chair Burt asked if there were other issues with the audit that ASD played a role where Utilities Staff would like to see additional changes or were the responses from ASD fully accepted. Mr. Ramberg stated yes he felt the responses from ASD divisions were accurate and acceptable. He felt the audit was beneficial and ASD had Attachment C    12 March 10, 2015    agreed with the recommendations. Recommendations 3.2 and 3.3 had to do with steps that had not been discussed in detail during the meeting but it was relating to the retirement of meters. ASD agreed with the finding of the processes needing to be more in sync. They were putting steps and processes into place to sync with Utilities more thoroughly. He explained a new technology solution called DocuSign which was a web-based workflow tool. Paper documents were now flowing through DocuSign and they were tracked, DocuSign was the ultimate repository with unlimited space. Chair Burt asked when DocuSign was implemented. Mr. Ramberg said implementation began in the Purchasing Division in 2013 and it had begun to filter through other departments. In late 2014, the system began to be used for items such as in the audit recommendations. Chair Burt understood the South Gate matter was 20 years ago and the audit did not detect the issue. Mr. Marshall stated that was correct, the matter was detected by Utilities Staff prior to the audit. Chair Burt mentioned the audit brought forth several examples of issues. He wanted to understand if the South Gate issue example was a single exception. The audit only reviewed 15 percent of the meters. Mr. Marshall explained what happened in the South Gate area was a one off situation, having to do with a CIP project. That did not mean there were not other errors in the records. There was a Staff member assigned to track the discrepancies between the records and in the field. Ms. Richardson stated the Auditor’s Office would be using the current errors to quantify during the next audit. The next audit would include a statistically valid sample which would include actual field work for the Audit Staff. Chair Burt asked if the audit report would be updated to reflect the additional Staff work and completed responses prior to going to Council. Mr. Marshall stated yes. MOTION: Council Member Burt moved, seconded by Council Member Berman that the Policy & Services Committee recommend the City Council accept the Utility Meter Audit. MOTION PASSED: 4-0 Attachment C    13 March 10, 2015    Adjournment: Meeting was adjourned at 10:21 P.M. Attachment C City of Palo Alto (ID # 5744) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/27/2015 City of Palo Alto Page 1 Summary Title: Revised Joint Exercise of Powers Agreement: NOVA Title: Approval of the Revised Joint Exercise of Powers Agreement: Workforce Development Services for NOVA Consortium to Include the Addition of San Mateo County From: City Manager Lead Department: City Manager Recommended Motion Staff recommends that Council consider the following motion: Approve the revised Joint Exercise of Powers Agreement: Workforce Development Services for the NOVA Consortium to include the addition of San Mateo County. Recommendation Staff recommends that Council approve the revised Joint Exercise of Powers Agreement: Workforce Development Services for the NOVA Consortium to include the addition of San Mateo County. Executive Summary Since 1983, the North Valley Job Training Consortium (NOVA) has offered employment training services in various Santa Clara County cities, including Palo Alto. NOVA is seeking approval from member agencies to update the attached agreement (Attachment A) to include San Mateo County and incorporate terminology to be consistent with current law. Background In 1983, the North Valley Job Training Consortium (NOVA) was created through a Joint Exercise of Powers Agreement (Agreement) consisting of the Cities of Cupertino, Los Altos, Mountain View, Palo Alto, Santa Clara and Sunnyvale to offer employment training services provided through the Job Training and Partnership Act (JTPA). In 2000, the City of Milpitas was added to the Agreement as part of the Workforce Investment Act (WIA). Throughout the life of the JPA, the Sunnyvale City Council has served as the Governing Board of the Joint Powers Agency and City of Palo Alto Page 2 represents the other cities through the Agreement. The City of Sunnyvale assumes all financial liabilities for the program and indemnifies all other participating agencies. NOVA offers employment services to job seekers and businesses throughout Silicon Valley, including Palo Alto residents. In 2014, NOVA served approximately 5,800 customers and provided over 83,000 services. Discussion In 2014, Congress passed the Workforce Innovation and Opportunity Act (WIOA) which replaces WIA as the governing legislation for local workforce investment systems, such as NOVA. In addition, at its meeting on January 27, 2015, the San Mateo County Board of Supervisors formally requested to join NOVA. The City of Sunnyvale, as Joint Powers Agency for the Agreement, approved the inclusion of San Mateo County at its meeting on February 24, 2015. A revised Agreement has been prepared to incorporate WIOA terminology and to include San Mateo County. The addition of San Mateo County to the NOVA Consortium is beneficial for a number of reasons, including: NOVA will be better positioned to address the growing trend in regionalism; and NOVA will be more competitive for future State and Federal grants; and NOVA will be able to take advantage of economies of scale for management and administrative functions. Resource Impact Since the Sunnyvale City Council will serve as the Chief Local Elected Official for the NOVA consortium, with the City of Sunnyvale functioning as the administrative entity for the services offered through NOVA, the City of Sunnyvale assumes all financial risk for the NOVA consortium. Therefore, there is no fiscal impact to the NOVA consortium jurisdictions (such as Palo Alto) other than to the City of Sunnyvale. Environmental Review This project is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3), because it can be seen with certainty that the proposed activity will not significantly affect the environment. Attachments:  Attachment A: Joint Exercise of Powers Agreement (PDF) Joint Exercise of Powers Agreement; Workforce Development Services This AGREEMENT, dated July 1, 2015, by and between the cities of Cupertino, Los Altos, Milpitas, Mountain View, Palo Alto, Santa Clara, and Sunnyvale, municipal corporations of the State of California, and the County of San Mateo (herein.after "Jurisdictions"), WI T NE S S E TH: WHEREAS, the cities of Cupertino, Los Altos, Mountain View, Palo Alto, Santa Clara, Milpitas and Sunnyvale have been in a Joint Powers Agreement since 2000 to offer employment training services provided through the W orkforc� Investment Act ("WIA'') of 1998 throughout the North Valley ("NOVA") Job Training Consortium; and WHEREAS, the federal Workforce Innovation and Opportunity Act of 2014 ("WIOA'' - Public Law No: 113-128), as amended, replaces the WIA and provides fmancial assistance enabling local .governments to assume responsibilities for job training, employer services, community services, and for other purposes, and provides for the formation of consortia wherein combinations of governmental jurisdictions may unite to form a multi-jurisdictional area for overseeing, planning, developing and monitoring a comprehensive one-stop service-delivery system which will provide job training and employment opportunities wi� access for customers seeking to further their careers, including (but not limited to) economically disadvantaged, unemployed, and other underemployed workers; and WHEREAS, Section 6502, et. seq. of the Government Code of the State of California authorizes public agencies to enter into agreements for the purpose of jointly exercising any power common to the public agencies; and WHEREAS, public agencies have inherent power to act for the benefit of the health and general welfare of their residents; and WHEREAS, each Jurisdiction is committed to improving access to lifelong learning for our region's workers, and improving businesses' access to a qualified labor force; and WHEREAS, it will mutually benefit the Jurisdictions to enter into a joint powers agreement whereby the Jurisdictions may avail themselves of the benefits and advantages of the WIOA for the residents and businesses within their respective jurisdictional areas; and WHEREAS, the County of San Mateo has petitioned the Governor of California and the NOV A Consortium to join the consortium; and WHEREAS, the parties wish to execute a new Agreement to replace the Joint Powers Agreement executed in 2000. ' . Joint Powers Agreement NOV A Consortium July 1, 2015 NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS: (1) Joint Powers Agency. The City of Sunnyvale is hereby designated as the North Valley Workforce Development Agency, referred to herein as the Joint Powers Agency, the jurisdiction of which for purposes of this Agreement shall be the Cities of Cupertino, Los Altos, Milpitas, Mountain View, Palo Alto, Santa Clara, and Sunnyvale, and the County of San Mateo. Each of the foregoing Jurisdictions hereby delegates its authority to carry out the purpose of this Joint Powers Agreement to the Joint Powers Agency. (2) Purpose: Joint Powers Agency. The Joint Powers Agency is designated for the purpose of carrying out job training and employment programs, within a one-stop . service-delivery system, with access for customers seeking to further their careers, including (but not limited to) economically disadvantaged, unemployed and underemployed persons within its jurisdiction, according to plans pursuant to the WIOA and other workforce development legislation. (3) Authority: Joint Powers Agency. The Joint Powers Agency is hereby authorized, in its own name, to do all acts necessary for the exercise of its authority to accomplish the purpose as set forth herein, including, but not limited to, any or all of the following: 2 (a) Establish a local Workforce Investment Board ("WIB") to fulfill the. responsibilities delineated in the WIOA; (b) Enter into sub grants, contracts and other necessary agreements; ( c) Receive and expend funds; ( d) Employ personnel; ( e) Organize and train staff personnel; (:f) Prepare a comprehensive Strategic plan for the one-stop service delivery system; (g) Develop procedures for governance, planning, operation, assessment and fiscal management of the one-stop service-delivery system; (h) Evaluate program performance based on measurable outcomes and customer satisfaction and determine resulting needs and reallocation of resources; (i) Execute and/or modify grant agreements with the U.S. Department of Labor, the State of California, the County of Santa Clara and other interested investors; Joint Powers Agreement NOV A Consortium July 1, 2015 G) Prepare an annual budget and cost allocation plan. Pursuant to the WIOA, the Joint Powers Agency: shall conduct studies and make analysis of the needs for training and employment programs among the Jurisdictions; shall establish and coordinate training and employment programs within the defined area; and shall undertake any other act or acts that may be required to accomplish the purposes of this joint exercise of powers agreement and the WIOA. (4) Distribution of Job Training Services. The Joint Powers Agency shall distribute job training opportunities, business services and all other services delivered hereunder among the Jurisdictions on an equitable basis, in reasonable proportion to the needs and markets for such services, as dete'rm.ined by current census, unemployment and other objective data. All other management functions performed, hereunder, except individual reports to Jurisdictions of Agency activities, shall be on a regional basis, without partiality or regard for political boundaries among the Jurisdictions. (5) Term of Agreement. . This Agreement shall become effective as of the date of its approval by a majority of the legislative bodies of the Jurisdictions, and shall continue in full force and effect until terminated by all of the parties to this Agreement. Any Jurisdiction may terminate its participation in the Agreement as of the end of any :fiscal year by giving written notice of its intention to terminate at least six ( 6) months prior to the end of the :fiscal year in which such notice is given, to all other Jurisdictions. This Agreement may be terminated at any time by mutual agreement of all parties hereto. (6) Governing Board. The Joint Powers Agency shall be administered solely by the City Council of the City of Sunnyvale, which shall :function as its Governing Board. (7) Meetings and deliberations of the Governing Board. All official acts of the Governing Board shall be taken during public meetings, the date, place, and time of which have been published in the manner applicable to meetings of public bodies. All official actions on behalf of the Joint Powers Agency shall be taken by and designated in the official minutes of the Sunnyvale City Council. All of the rules and regulations governing meetings to be held by the City Council of the City of Sunnyvale are hereby adopted as the rules and regulations governing meetings of the Joint Powers Agency Governing Board. (8) Officers and Employees. The Governing Board shall have the responsibility and authority to designate current or additional regular employees of the City of Sunnyvale as administrative, managerial and staff personnel of the Joint Powers Agency. Such personnel shall remain employees of the CitY of Sunnyvale, subject to all of the terms and conditions of employment otherwise 3 Joint Powers Agreement NOV A Consortium July 1, 2015 applicable to Sunnyvale employees. The Governing Board is further authorized to hire temporary employees and consultants, and to provide such other facilities, supplies, equipment, office space and customary administrative resources, as are reasonably necessary to performance of the activities undertaken pursuant to this Agreement. Reimbursement for all of the foregoing personnel and administrative costs shall be exdusively from grants or funds appropriated by state or federal laws & regulations, private foundations and other investors. (9) Statement of Conditions and Criteria.. The parties hereto make the following statements and certify as follows: 4 (a) The respective addresses of the parties are as follows: City of Cupertino Office of the City Manager 10300 Torre Avenue Cupertino, California 95014 City of Los Altos Office of the City Manager I North San Antonio Road Los Altos, California 94022 City of Milpitas Office of the City Manager 455 East Calaveras Blvd. Milpitas, California 95035 City of Mountain View Office of the City Manager 500 Castro Street Mountain View, California 94041 City of Palo Alto Office of the City Manager 250 Hamilton A venue Palo Alto, California 94301 City of Santa Clara Office of the City Manager 1500 Warburton A venue Santa Clara, California 95050 City of Sunnyvale Office of the City Manager Joint Powers Agreement NOV A Consortium July 1, 2015 P.O. Box 3707 Sunnyvale, California 94088-3707 County of San Mateo Office of the County Manager 5 5 5 County Center Redwood City, California 94063 (b) The geographical area to be served by the Joint Powers Agency shall be all that area within the geographical boundaries of the parties hereto. ( c) The total population within the jurisdictional areas hereto combined is estimated to be 1,317,126. ( d) The parties, by their signatures to this Agreement and seals affixed hereto, certify that all parties are authorized pursuant to law to provide the services for which this Agreement is entered into in all of the geographical area within the jurisdiction of the parties. ( e) Attached and incorporated by this reference is a written statement of the chief legal officers of each Jurisdiction, setting forth therein the authority of the parties to enter into this Joint Powers Agreement. (f) The parties, by their signatures and seals to this agreement affixed, certify that to the extent consistent with state law and local ordinances, they accept responsibility for the operation of the programs initiated and continued pursuant to this Agreement. (10) Liability. (a) The City of Sunnyvale, and those persons, agencies and instrumentalities used by it to perform the functions authorized herein, shall be exclusively liable for damages to any person arising from activities of the Joint Powers Agency. (b) The City of Sunnyvale shall hold harmless and indemnify jurisdictions, and each of them, including their officers and employees, from any claim or liability arising from acts or omissions of the City of Sunnyvale in the administration of this Agreement, and in so doing, shall provide the Jurisdictions, and each of them, with legal defense of any and all claims or liabilities and shall pay reasonable attorney's fees and costs incurred in providing such defense. (11) Reports. The Joint Powers Agency shall, at Jurisdictions' request, provide written reports of the finances, activities and business affairs of the Agency to the Jurisdictions. (12) Breach. 5 Joint Powers Agreement NOV A Consortium July 1, 2015 If default shall be made by any party hereto, in any covenant contained in this Agreement, such default shall not excuse the party from fulfilling its obligations under this Agreement. The parties declare that this Agreement is entered into for the benefit of the Joint Powers Agency and hereby grant to the Agency the right to enforce, by whatever lawful means the Agency deems appropriate, all of the obligations of each of the parties hereunder. Each and all of the remedies given to the Agency hereunder or by law now or hereafter enacted are cumulative and the exercise of one right or remedy shall not impair the right of the Agency to any or all other remedies. (13) Severability. Should any part, term, or provision of this Agreement be decided by the courts to be illegal or in conflict with any law of the State of California or otherwise be rendered unenforceable or ineffectual, the validity of the remaining portions or provisions shall not be effected thereby. · (14) Multiple Originals; Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6 Joint Powers Agreement NOV A Consortium July 1, 2015 THEREFORE, the parties hereto have caused this Agreement to be executed by their respective officers duly authorized. Jurisdiction Cupertino Los Altos Milpitas Mountain View Palo Alto Santa Clara Sunnyvale County of San Mateo 7 OFFICER Rod G. Sinks, Mayor Jan Pepper, Mayor Jose Esteves, Mayor John McAlister, Mayor Karen Holman, Mayor Jamie L. Matthews, Mayor Carole Groom, President Board of Supervisors ATTEST Grace Schmidt, City Clerk Jon Marginot, City Clerk Mary Lavelle, City Clerk Lorrie Brewer, City Clerk Beth Minor, City Clerk Rod Diridon, Jr., City Clerk thleen Franco ons, City Clerk Jo�i� CV of the Board of Supervisors Joint Powers Agreement NOV A Consortium July 1, 2015 STATEMENT OF OPINION; LEGAL AUTHORITY TO ENTER INTO JOINT EXERCISE OF POWERS AGREEMENT FOR WORKFORCE DEVELOPMENT SERVICES I, the undersigned chief legal officer of the Jurisdiction identified below opposite my own name, am an attorney licensed to practice before the Supreme Court of the State of California. It is my opinion that the City which I represent is fully authorized by the laws of the State of California to enter into that c·ertain agreement entitled "Joint Exercise of Powers Agreement; Workforce Development Services" dated July 1, 2015, and to participate in the governmental actions described therein. JURISDICTION ATTORNEY DATE Cupertino Carol Korade Los Altos Jolie Houston Milpitas Michael J. Ogaz Mountain View Jannie L. Quinn Palo Alto Molly S. Stump Santa Clara Richard E. Nosk:y Jr. Sunnyvale Counfyof.,.;_��-/-��6:::::-r--===;;:;;...-��­ SanMateo 8 City of Palo Alto (ID # 5669) City Council Staff Report Report Type: Action Items Meeting Date: 4/27/2015 Summary Title: Status and Review of Goals and Vision Statements Title: Comprehensive Plan Update Planning Process Status and Review of Existing Comprehensive Plan Goals and Vision Statements From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council review and discuss the vision statement for each element of the Comprehensive Plan, as well as the headings, subheadings, and high level goals that serve as the underpinnings of the Comprehensive Plan. It is understood that the Council may wish to dive deeply into the subjects addressed in order to frame the community work sessions that will follow the May 30th Summit about the Comprehensive Plan Update, and may have input on the planning process itself. Executive Summary One of the City Council’s priorities this year is to move forward with the ongoing update of the City’s Comprehensive Plan. The Comprehensive Plan is the City’s “general plan,” or policy document governing land use and related issues. The Plan (which sets policy) works in tandem with zoning (which are regulations) to guide decision making about land use, transportation, housing, and related issues. The current version of the Plan is called Embracing the New Century, Palo Alto 1998-2010 Comprehensive Plan, and the City has been working on an update to the plan in some fashion since 2008. In early 2014, the Planning and Transportation Commission (PTC) forwarded their recommended changes to goals, policies, and programs of the Comprehensive Plan to the City Council for review and the City Council initiated a new phase of the process, which included public workshops and “scoping” of the Environmental Impact Report (EIR). A leadership group was formed to assist with community engagement – helping with outreach to expand awareness and participation of Palo Altans in this phase of the Comprehensive Plan process. On December 8, 2014, the City Council approved a multi-part motion which, among other things, called for Council, Commission, and community work sessions focusing on critical issues and choices that must be addressed in the updated plan. The City Council has begun these City of Palo Alto Page 1 2008 work sessions with a discussion of possible growth management strategies like an annual limit on office/R&D, and a community “summit” is planned for May 30, 2015 to kick-off community work sessions for the balance of the year. The community work sessions will be informed by Council sessions on critical issues, and will in turn help to inform Council’s review of policies and programs for the final plan. On March 16, 2015, the Council adopted a motion indicating its desire to have a deeper discussion about the overarching goals and vision statement of each element of the Comprehensive Plan before the May 30 Summit, as well as have another opportunity to discuss the planning process going forward. This agenda item provides an opportunity for the Council to discuss the goals and vision statements included in the existing Comprehensive Plan, and how these should be updated or changed. It is not expected that the Council will have time at this meeting to discuss the precise wording of each vision statement and goal, but staff anticipates that they will want to provide direction on the nature of needed refinements and/or the synthesis (or not) of the two versions presented (i.e. the current Comprehensive Plan and the PTC’s recommended changes). The Council’s insights will help to structure the community conversations that will occur in the months that follow the May 30, 2015 Summit. Background The City’s Comprehensive Plan, Embracing the New Century, Palo Alto 1998-2010 Comprehensive Plan, was adopted in the late 1990s and sets goals and policies related to land use and development issues, including transportation, housing, natural resources, community services, and safety. Every local jurisdiction (including charter cities) in California is required to have a “general plan” like this (see Government Code 65300 et seq.), and the State recommends these plans be updated on a regular basis. Palo Alto recognized the need to update its plan in 2006 and began the process in earnest in 2008, when a consultant was retained to work with staff and the City’s Planning and Transportation Commission (PTC). Early 2014 The PTC’s draft work product was provided to the City Council in early 2014, and focused on organizational changes to the document to delete redundancies and make the text more accessible and user friendly, emphasizing the existing GP themes and ensuring they were represented throughout the document. It also incorporated environmental sustainability issues and addressed a series of issues summarized in Attachment C. When the PTC’s work product was brought forward to the City Council, staff proposed a process that would complete the plan and an associated Environmental Impact Report (EIR) in parallel with expanded community engagement (Staff Report ID# 4415 from March 3, 2014). August 2014 City of Palo Alto Page 2 This approach recognized that the EIR process can be an effective way to compare various growth level scenarios and that EIR preparation itself takes approximately 18 months. Staff recommended that this effort commence immediately with “scoping” and the identification of possible alternatives for analysis in the EIR that could then be used to inform proposed revisions and additions to the Comprehensive Plan (Staff Report ID# 4944 from August 4, 2014). Public workshops and “scoping” meetings were held in the summer of 2014 and the Council requested a pause in this process on August 6th to permit consideration of potential changes to the City’s zoning code and zoning map for commercial areas. (Staff Report ID# 5033 from September 8, 2014). The Comprensive Plan and zoning are directly linked because the zoning map and zoning effectively implement the Comprehensive Plan. The Comprehensive Plan is a policy document that identifies desired land uses and intensities via a Land Use and Circulation Map and the land use designations defined on pp. L-10 through L-13 of the Comprehensive Plan. The City’s zoning ordinance and zoning map are regulatory tools, rather than policy documents, and implement the Comprehensive Plan land use designations by establishing specific uses, densities, and development standards for every area of the City. Thus zoning districts and standards are more specific than Comprehensive Plan land use designations, and each Comprehensive Plan land use designation may be implemented via more than one zoning district. December 2014 At a series of meetings culminating on December 8, 2014, the City Council discused their desire to consider zoning changes concurrently with the Comprehensive Plan Update and discussed a number of issues they would like to consider in the course of the update. (Staff Report ID# 5236 from December 8, 2014) The discussion lead to a motion directing staff to: 1. Proceed immediately (i.e. in advance of the Comp Plan Update) with zoning ordinances to address retail preservation and parking exemptions, returning to Council with a report on potential topics prior to going to Planning and Transportation Commission with a draft ordinance. 2. Schedule a Council work session to discuss parameters of an annual office/R&D growth management program and potential interim zoning changes for future consideration. 3. Schedule a series of Community/Commission/Council work sessions about “big picture” planning issues utilizing simplified planning scenarios to test the growth management program as well as; a) the potential elimination of housing sites on San Antonio and South El Camino in exchange for increased densities or new sites closer to transit and jobs/services, b) the potential for major transportation investments in the Caltrain corridor and the County Expressway system, and new public transit, c) the potential use of sustainability-based performance measures and programs, and d) potential commercial zoning changes discussed at the City Council Study Session on September 8, 2014. City of Palo Alto Page 3 4. Also use the work sessions to review goals, policies, and programs from the existing Comp Plan and the recommendations forwarded by the PTC in early 2014. 5. Prepare an impacts analysis (Draft EIR) to inform the Community/Commission/Council work sessions, presenting the impacts of simplified scenarios (and the policy choices they represent) as well as potential cumulative impacts over the next 15 years. 6. Concurrent with the Comp Plan Update, prepare a draft zoning ordinance(s) for consideration that would implement aspects of the plan, including many of the zoning ideas discussed at the City Council study session on September 8, 2014. Since the Council’s action on December 8, 2014 the City Council has held work sessions on growth management strategies, including the idea of an annual limit on office space, and staff has been working with the City’s consultants and the leadership group to plan a “summit” for May 30, 2015 and a series of community work sessions that will follow. March 2015 On March 16, 2015, the City Council received a status report on the Comprehensive Plan Update and discussed the seven themes and structure of the current Comprehensive Plan. At that time, the Council requested additional information regarding the schedule and structure of the community work sessions that will follow the May 30th Summit. The community work sessions are proposed to be topical meetings scheduled well in advance and open to all interested parties. There would be concurrent on-line input, which would be used by attendees at the meetings to ensure the plan that is ultimately adopted reflects our collective vision. This strategy of “open sourcing” community input is different from the more familiar strategy of using an appointed advisory committee. Staff proposed this approach due to the elongated planning process to date, and the many good qualities of the existing Comprehensive Plan, in conjunction with the organizational and readability changes proposed by the PTC. In addition, in re-engineering the process design backward from the previously proposed early 2016 completion date for the Comprehensive Plan, this open source approach seemed to be most effective. Several Council members have expressed a desire to discuss altering this approach for various reasons and outcomes. Council discussion at this time (pre-summit period) would be in order, whether to use an appointed committee, add and expand the period for community outreach and briefings, or other concepts or approaches. If Council would like to use an appointed committee, for example, this (pre-summit period) would be the time to make that decision. (Appointed committees involve a dedicated group of meeting attendees who participate on a regular basis and are designed to be balanced in terms of the interests they represent. Open sourcing participation can result in broader public input over a shorter period of time, but puts a greater burden on the conveners to ensure all perspectives are represented.) Current Plan and Schedule for Community Work Sessions City of Palo Alto Page 4 goals will be important, as the Council’s input can help to set the stage for discussions at the May 30 Summit and the community work sessions that follow. Timeline The Comprehensive Plan Update has been underway for many years and the City Council “reset” the process in 2014 in an effort to ensure broad community input, to identify and address critical issues facing our community, and to ensure concurrent consideration of needed zoning changes. Consistent with the Council’s direction on December 8, 2014, the City Council has begun a series of work sessions on critical issues that are likely to continue through the end of the year. Community work sessions will commence with a “summit” scheduled for May 30, 2015, and are also likely to continue at least through the end of the year. During the same period, a Draft EIR will be prepared, along with a fiscal analysis, both of which will provide data and analysis to inform ongoing Council and community discussions. A final Comprehensive Plan Update and a final EIR will be prepared for consideration by the City Council in 2016. Resource Impact Discussion of the Comprehensive Plan structure and goals is not expected to affect the cost of the project or have fiscal impaces. If Council decides to discuss significant process changes, those changes could have resource and timeline implications. Policy Implications The City’s Comprehensive Plan sets forth the City’s policies with regard to the topics addressed. The structure and goals of the Plan will inform discussions regarding updated policies, and programs. Environmental Review Adoption of an updated Comprehensive Plan will require preparation and certification of a program-level Environmental Impact Report (EIR) pursuant to the California Environmental Quality Act (CEQA). Attachments:  A: Comprehensive Plan Update – Overview of the Process & Schedule (DOCX)  B: Summary of Comprehensive Plan Headings, Subheadings & Goals (DOCX)  C: Comprehensive Plan Amendment Work Plan 2006 (DOC) City of Palo Alto Page 8 Attachment C Comprehensive Plan Amendment Work Plan 2006 1. Update Base Conditions and Growth Projections  Incorporate recent planning studies/new data into base conditions  Identify a realistic growth rate for development through 2020 2. Amend Land Use Map and Land Use Designations  Prepare land use evaluation for East Meadow Circle/Fabian Way/ West Bayshore area; identify land use and zoning changes  Prepare land use evaluation for existing Fry’s Electronics site and adjacent properties: identify land use and zoning changes  Evaluate existing definitions for non-residential land use designations and determine if housing should be restricted or disallowed under those designations  Evaluate implementation of Program H-29 (Legally indefensible, now H.1.2.1.) (Loss of Rental due to Demo and replaced w/ condos) 3. Review Pertinent Policies and Programs  Scan all programs for relevance and clarity  Focus on policies that allow conversion of non-residential land to residential uses  Add or strengthen policies that limit the loss of retail serving uses  Incorporate policies and programs addressing or strengthening provision of services where applicable  Incorporate Sustainability Goal with relevant policies and programs from City’s Climate Protection Plan underscoring City’s commitment to reduce global warming  Identify general areas for new parks and community facilities  Enhance and integrate a pattern of walkable neighborhoods  Update Housing Sites Inventory/Housing Element  Develop policy regarding design standards for private streets 4. Environmental Analysis  Prepare Environmental Impact Report for amendment  Provide thorough analysis of service needs to schools, parks and libraries resulting from project growth through 2020  Integrate CEQA significance thresholds used in EIR in appendix to Comprehensive Plan amendment 1 Major New Concepts Added by Comprehensive Plan Element Land Use Element Strategies to limit conversion of non-residential land to residential uses and limit loss of retail serving uses; Incorporate the East Meadow Circle/Fabian Way Concept Area Plan and California Avenue Concept Area Plan; Consistency with the City's Climate Protection Plan and 2020 Green House Gas (GHG) emission targets and Consistency with Baylands Master Plan, Bicycle Pedestrian Transportation Plan 2012, and Rail Corridor study. Transportation Element Support reduction of GHG emission and promote electric and alternative fuel vehicles technology; "Complete Streets" concepts and policies; Consistency with the Bicycle Pedestrian Transportation Plan 2012 and the Rail Corridor Study; Transition of the Municipal Airport from the County to the City and Strengthening policies on preservation of neighborhood residential streets, "Safe Routes to School," and general traffic safety- City’s leadership and engagement in Regional Transportation efforts. Community Services and Facilities Element Advocating for healthy lifestyles for all residents; Helping teen community to combat depression, isolation, stress, and other mental health issues; Engaging seniors in the community; Implementing recommendations of Infra Structure Blue Ribbon Committee (IBRC) and Encouraging universal access to parks, public facilities and community facilities suited for diverse uses. Natural Environment Element Protection of sensitive habitat from human threat, balancing conservation with improved open space access and encouraging low impact recreational use; Monitoring and adapting to changes caused by climate change; Addressing state regulations requirements for noise generated from transportation and limiting construction noise around sensitive receptors; and 2 Community safety and emergency preparedness. Business and Economics Element Encouraging entrepreneurship and innovation; Enhance and diversify retail mix; Create positive parking solutions for businesses in California Avenue and Downtown; Support creation of Business Registry and Enhance Palo !lto’s appeal to visitors and tourists. 3