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HomeMy WebLinkAboutStaff Report 2306-1724CITY OF PALO ALTO CITY COUNCIL Special Meeting Monday, August 07, 2023 Council Chambers & Hybrid 5:30 PM     Agenda Item     12.Approval of FY 2024 Budget Amendment in the Residential Housing In-Lieu Fund for the Reappropriation of $3.0 million from FY 2023 to FY 2024 for 231 Grant Avenue Loan Agreement; CEQA – Not a Project Q&A City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: Planning and Development Services Meeting Date: August 7, 2023 Report #:2306-1724 TITLE Approval of FY 2024 Budget Amendment in the Residential Housing In-Lieu Fund for the Reappropriation of $3.0 million from FY 2023 to FY 2024 for 231 Grant Avenue Loan Agreement; CEQA – Not a Project RECOMMENDATION Staff recommends that Council amend the FY 2024 Budget Appropriation for the Residential Housing In-Lieu Fund by (2/3 approval needed): a. Increasing the Grants and Subsidies expense appropriation in the amount of $3,000,000; and b. Decreasing the Ending Fund Balance in the amount of $3,000,000. CEQA review: Loans are not subject to CEQA review. EXECUTIVE SUMMARY On February 7, 2022, the City Council approved a loan for the proposed residential development at 231 Grant Avenue. The City is partnering with the County of Santa Clara in the development of a 110-unit residential development. These units will be primarily for teachers and other school district employees from participating school districts in Santa Clara and San Mateo counties. The County of Santa Clara owns the project site and is the lead agency in the development of the project. The City funds will be used for construction. Escrow closed for the Construction loan on June 30, 2023 and the developer will need the City funds in August 2023. This action will make the funds available in the correct fiscal year. BACKGROUND Two years ago, the City Council adopted a Housing Work Plan, which staff prepared in response to a City Council Colleagues’ Memorandum. The Colleagues’ Memorandum stated the desire for zoning updates to encourage diverse housing near jobs, transit, and services. The memo presented several specific concepts, many of which were also identified in the City’s Housing Element (adopted November 20141) and the updated Comprehensive Plan (adopted November 13, 20172). The Housing Work Plan identified specific policies and other actions staff should take in order to address the housing need of Palo Altans, including a policy supporting creation of affordable housing for City and School District employees. In June 2018, the President of the Santa Clara County Board of Supervisors, Joe Simitian, sent a letter to the City requesting the City set aside $3.0 million for supportive funding of a concept teacher housing project on County-owned land in Palo Alto. That same month, the City Council authorized the City Manager to set aside $3.0 million in affordable housing funds for the project to be disbursed when a suitable project concept and contract is determined to be agreeable by final project partners. The $3.0 million in funds were reserved in June 2018. The action minutes approving the reserved funds can be found here. 3On January 11, 2022, the Santa Clara County Board of Supervisors certified the Final Environmental Impact Report and approved the project. Since that time, the developers, Mercy Housing and Abode Communities, have been working in finalizing development plans and securing financing for the project. On June 30, 2023, escrow closed for the construction loan phase of the development. ANALYSIS The funds for this project were included in the Fiscal Year 2023 budget, in anticipation that they would be used within that timeframe. Some minor delays in the close of escrow for the project result in the need for funds to be disbursed in Fiscal Year 2024 instead. Ordinarily, the funds would be reappropriated as part of the standard process for reappropriations since the loan terms were not able to be finalized before the close of FY 2023. The annual reappropriation memorandum is anticipated to be presented to Council in October 2023. Given the timeliness and urgency of the funding from the loan, the budgetary actions described in the recommendation section of this report constitute an “early reappropriation”. Funding of $3.0 million is recommended to be reappropriated from FY 2023 to FY 2024 as part of this memorandum to support work related to this contract and minimize impacts to other work planned in FY 2024. The recommendation recognizes that the unspent funds from FY 2023 will 1 November 10, 2014 City of Palo Alto Housing Element: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2014/id-5191.pdf 2 November 13, 2017 Comprehensive Plan Update: https://www.cityofpaloalto.org/files/assets/public/agendas- minutes-reports/reports/city-manager-reports-cmrs/year-archive/2017/8395.pdf 3 June 25, 2018 City of Palo Alto City Council Action Minutes: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/00-archive/2018/06-25-18-action-minutes.pdf fall to fund balance, and therefore this action draws on fund balance to encumber funds for this contract; the impacts have already been incorporated into projections and discussion of available fund balance in the Residential Housing In-Lieu Fund. FISCAL/RESOURCE IMPACT If approved, the project will receive $3.0 million from the City’s Residential Housing In- Lieu Fund towards the development of the project. Sufficient funding is available to be appropriated as this funding had been previously committed and earmarked as this is a technical realignment between fiscal years. Per the Housing Funding Guidelines, the loan terms are a 3% interest rate, deferred, residual receipts, 55-year term loan. The loan may be forgiven at the City Council’s discretion at the end of the loan. If the loan is repaid, staff will bring forward budgetary adjustments to recognize the revenue during the annual budget process. ENVIRONMENTAL REVIEW Review and submittal of the attached report and the approval of the loan and related financing regulatory documents are exempt from the California Environmental Quality Act (CEQA). On January 11, 2022, the Santa Clara County Board of Supervisors certified the Final Environmental Impact Report for the project. APPROVED BY: Jonathan Lait, Planning and Development Services Director Dear Mayor and Council Members: On behalf of City Manager Ed Shikada, please find below the staff responses to questions from Councilmember Tanaka regarding the Monday, August 7 Council Meeting consent agenda items. Item 10: Approval and Authorization of the City Manager to Execute a Contract with Allied Universal Technology Services (AUTS) (C24187696) in an Amount Not-to-Exceed $778,275 over 5 years and one month period ending June 30, 2028 to provide Intrusion Detection System (IDS) monitoring and notification services. CEQA status - not a project. 1. The new contract includes annual cost increases to account for inflation expectations, which were not part of the previous contract. How are these increases calculated, and what specific costs or factors do they account for? Can you provide a detailed breakdown of the cost differences between the two contracts? Staff response: The staff recommendation has been revised in a supplemental memorandum released as part of the revised August 7, 2023 agenda, reflecting a one year contract term and no longer includes this provision. Item 12: Approval of FY 2024 Budget Amendment in the Residential Housing In-Lieu Fund for the Reappropriation of $3.0 million from FY 2023 to FY 2024 for 231 Grant Avenue Loan Agreement; CEQA – Not a Project 1. How were Mercy Housing and Abode Communities selected as the developers, and what criteria were used in the selection process? Was there an open bid for the development contract, and if not, why not? Staff response: In February 2019, Santa Clara County issued a Request for Proposals (RFP) to “create a high-quality educator workforce housing development at a central location in Palo Alto”. Both Mercy Housing and Abode Communities responded to the RFP and were later selected by the County. City staff do not have the details of the RFP criteria. For more information, please visit the Mercy Housing California and Abode Communities Frequently Asked Questions webpage. Item 14: Approval of a General Services Contract with All City Management Services in an Amount not to Exceed $3,920,865 Over a Five Year Term, for Crossing Guard Services; and Approval of a FY 2024 Budget Amendment in the General Fund (2/3 vote required); CEQA status - not a project. 1. The document also notes that the previous bid process received three bids, whereas the current one received only one. Although information about providers’ needs to provide 8- hour shifts is mentioned as an obstacle to responding, the RFP was sent to 741 vendors and no other possible explanations for the lack of responses are mentioned. Why did this bid process only result in one bid, and what efforts were made to encourage vendors to make bids? Staff response: Police Department staff can only presume to know the reason why only one company responded to the bid. Police staff are aware there are very few companies that provide crossing guard services in the region. Staff was able to identify three companies as possibly being capable of performing these services in compliance with the City of Palo Alto and State of CA traffic laws and regulations. Those three vendors were solicited. Police staff are not able to explain why the purchasing portal contains 741 potential vendors. Several cities perform crossing guard services through a city-led, internal program, if they are not contracting those services. However, the Police staff recognized, many years ago, the most cost-effective method to perform crossing guard services in Palo Alto was through an independent contractor. Staff still maintains that position due to the added workload of recruiting, hiring, staffing, and managing over 30 workers and their alternates (up to 60 part-time workers) to assign to 30 locations at short shifts, 180 days each school year. 2. The 27% cost increase is attributed to labor cost increases, but were there any other factors? If so, what were they? Regarding labor costs, it is important to note that for the previous 5-year contract, the wage rate only rose from $23.02 in 2018 to $25.25 in 2023. The last several years post- pandemic, there have been some staffing and supervision issues, due to the nature of the job and the relatively few hours per day, that staff anticipates the increase in hourly wage should alleviate. The additional labor cost can also be attributed to increases in spending for hiring/recruitment, additional in-field supervision, training, equipment, and insurance costs (according to All Cities Management Service). The current bid being reviewed has an increase of $1.63/hour each year for the 5-year period, from $30.47 in 2023 to $37.08 in 2028.