HomeMy WebLinkAboutStaff Report 2312-2463CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, March 11, 2024
Council Chambers & Hybrid
5:30 PM
Agenda Item
6.Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2022-
2023
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: March 11, 2024
Report #:2312-2463
TITLE
Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2022-2023
RECOMMENDATION
Staff recommends that the City Council:
1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year
2022-2023, and find that Stanford Hospitals & Clinics, Lucile Packard Children’s Hospital,
and Stanford University (SUMC Parties) have complied in good faith with the terms and
conditions of the SUMC Development Agreement;
2. Find that the SUMC Parties are not in default with the terms and conditions of the
Agreement in all sections; and
3. Accept the City of Palo Alto’s (City) Annual Report Supplements regarding the funds
received from the SUMC Parties, as required under Section 12(d) of the Development
Agreement (Attachment E).
EXECUTIVE SUMMARY
The City Council is required to annually review the SUMC Development Agreement
(“Agreement”) to confirm compliance with the Agreement’s terms. The Agreement is between
Stanford Hospital and Clinics, Lucile Packard Children’s Hospital, Stanford University (SUMC
Parties or SUMC), and the City of Palo Alto. SUMC prepared their SUMC Annual Report for Fiscal
Year (FY) 2022-2023 to discuss how they met their compliance obligations during the reporting
time period (Attachment A). The City prepared this Annual Report to Council to discuss both
SUMC’s and the City’s compliance activities during the FY 2022-2023 reporting period, as well
as disseminate the City’s required Supplement to the Annual Report. The Supplement contains
an accounting of the funds received from SUMC and expenditures of those funds during the
reporting period.
As documented in this Annual Report to Council, both SUMC and the City are in compliance
with the terms of the Agreement for the reporting period FY 2022-2023.
BACKGROUND
On June 6, 2011, the Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, SUMC design guidelines, annexation, and architectural review
applications for the Stanford University Medical Center Facilities Renewal and Replacement
Project (the “Projects”). The Projects include the construction of the new Stanford Hospital and
Clinics buildings, an expansion of the Lucile Packard Children’s Hospital (LPCH), construction of
new School of Medicine (SOM) buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, and
roadway improvements along Welch Road and Durand Way. The Agreement, vesting these
approvals, became effective on June 6, 2011 and continues for 30 years from the effective date.
This Annual Report to Council is for the FY 2022-2023 reporting period, which is the 12th year
of the Agreement. The FY 2021-2022 annual report found SUMC and the City to be in
compliance with the Agreement.1 Previous annual reports and compliance documentation can
be found via the weblinks in Attachment B.
ANALYSIS
Agreement Section 12, “Periodic Review of Compliance,” requires City Council to confirm SUMC
Parties’ compliance with the terms of the Agreement. Discussion items in this report are
intended to guide City Council through the many aspects that SUMC and City staff monitor and
track throughout the year to ensure compliance.
The SUMC Annual Report for FY 2022-2023 (Attachment A) describes the activities related to
Agreement implementation and ongoing annual progress toward meeting the following
obligations in Section 5 of the Agreement, “SUMC Parties’ Promises:”
•Health Care Benefits;
•Fiscal Benefits;
•Traffic Mitigation and Reduced Vehicle Trips;
•Linkages (Pedestrian, Bicycle, and Transit);
•Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing; and
•Climate Change.
Staff prepared a summary of the Section 5 obligations and the compliance status (Attachment
C).
Agreement Section 12 also includes the requirement for demonstration of good faith
compliance with the Agreement. Toward this end, SUMC timely submitted all the reports
required of the SUMC Parties for FY 2022-2023.
Construction Activities and Net New Square Footage
1 The SUMC Annual Report to Council Fiscal Year 2021-2022 went before City Council at their April 17, 2023
meeting, see Consent Calendar Item 6 at the following meeting weblink:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=1115.
SUMC discusses their construction activities for FY 2022-2023 in the SUMC Annual Report
(Attachment A). City staff reviewed the information regarding SUMC net new square footage in
the report and determined this information is complete and correct. A summary of construction
activities and tracking of square footage demolished and added can be found in Attachment D.
Traffic Mitigation and Reduced Vehicle Trips
SUMC implemented all required transportation demand management (TDM) obligations in FY
2022-2023, such as purchasing Caltrain Go Passes, funding the AC Transit U-Line, and
administering other activities. Summaries of these activities can be found in Attachments A and
C.
Despite continuing to implement all TDM programs, as well as enhancing communications and
promotions, SUMC found that they did not meet the alternative mode share milestone targets
outlined in the Agreement for FY 2022-2023. However, the SUMC alternative mode share rate
had increased to 25.6% from 19.9% in FY 2021-2022.
To clarify, not meeting the alternative mode share targets during a reporting period is not itself
a default under the Agreement, as the Agreement outlines next steps if a target was not
achieved, such as the payment of fees, and contains a Force Majeure clause.
Amendment to Development Agreement
An application to amend the Agreement, submitted by SUMC on September 7, 2022,2 was
approved by the City Council and executed on December 28, 2023 (Development Agreement
Amendment Number 1). The amendment modified language to provide clarity on how to
implement the existing alternative transportation mode share targets with respect to the SUMC
claim of the applicability of Force Majeure.3 The amendment also included an updated timeline
for SUMC to meet the alternative mode share targets. For more information about the
amendment, please refer to the City Council reports for October 23, 2023 and November 27,
2023.4
2 Anticipating the ongoing influence of the COVID-19 pandemic on its ability to achieve the alternative
transportation mode share targets, SUMC proposed an amendment to the original Development Agreement.
SUMC suggested that the amendment language would provide clarity as to how to implement the existing
alternative transportation mode share targets and penalty payments as written in Section 5(c)(ix), given their claim
of the applicability of Section (18)(c) Force Majeure in the Development Agreement.
3 Development Agreement Section 18(c) Force Majeure provides that performance by SUMC or the City is excused
during any period of “Permitted Delay,” such as when a performance delay occurs due to circumstances beyond
the reasonable control of a party to the SUMC Development Agreement. Examples of circumstances beyond
reasonable control of a party include (a), acts of god, including without limitation earthquakes, floods, fire, and
other natural calamities, (b) civil commotion; (c) riots or terrorist acts; (d) strikes or other forms of material labor
disputes; (e) shortages of materials or supplies; and (f) vandalism.
4 The City Council October 23, 2023 Action Item 5 staff report and meeting minutes can be found online here:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13044.
The Council November 27, 2023 Consent Calendar Item 13 staff report and meeting minutes can be found online
here: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13307
Construction Sales and Use Tax Monitoring Report
SUMC submitted the annual Construction Sales & Use Tax Monitoring Report on June 30, 2023
for the preceding calendar year. The City sent its required response. Based upon the City’s
review of the annual Construction Sales and Use Tax Monitoring Report, revenues for calendar
years 2011 through 2022 have totaled $5,467,628. This annual reporting assists in the process
of ensuring that the City receives no less than $8.1 million in construction sales and use tax
revenue by December 31, 2025.
Section 5(b)(ii) of the Agreement discusses how SUMC and the City should address any surplus
or shortfall in the amount of construction sales and use tax received by the City. Discussion and
final reconciliation of any surplus or shortfall in the revenue amount that the City received
would occur in and after August 2026. Given the annual decline in construction sales and use
tax revenue since calendar year 2020 to present, it is possible that there might be a shortfall
relative to the $8.1 million required. In that case, SUMC would make a payment to relieve that
shortfall in FY 2026-2027 from the Fund for Healthcare Services, as discussed under
Development Agreement Section 5(a)(ii). After this reconciliation, SUMC would commence
activity in the Fund for Healthcare Services for 10 years from 2026 to 2036. This activity would
be reported in the SUMC Annual Report for each fiscal year.
Supplement to the Annual Report
Section 12 of the Agreement requires the City to prepare a Supplement to the Annual Report,
which is included in this report as Attachment E. This Supplement is to contain an accounting of
the funds received from SUMC, including:
•Description of the account balances for each of the funds maintained by the City under
Section 5 of the Agreement;
•Expenditures from each of the funds; and
•Purposes for which the expenditures were used.
Section 12 specifies preparation of the Supplement within 45-days of the June and July receipt
of the annual reports by SUMC, but there is no penalty for not doing so. After the close of the
Fiscal Year, the City conducts an annual audit of the funds in Fall/Winter to demonstrate good
faith in implementing the Agreement.
FISCAL/RESOURCE IMPACT
There are no fiscal or resource impacts resulting from City Council review of the SUMC
Agreement to confirm compliance with its terms. Planning for use of SUMC funds occurs
separately during the City’s Annual budgeting process.
STAKEHOLDER ENGAGEMENT
Staff did not perform specific community outreach related to preparation of this annual report.
Community members and policy makers were extensively involved in the crafting of the
Agreement and all other associated project enabling entitlements. Also, subsequent related
project entitlements continue to be processed through the City’s standard review processes, as
discussed in the Agreement and other entitlements.
ENVIRONMENTAL REVIEW
Reviewing and making findings regarding SUMC and City compliance with the Agreement is not
a project under the California Environmental Quality Act and no environmental assessment is
required for the annual compliance review. An environmental impact report for the entire
SUMC project was prepared and certified by the City Council prior to approval of the
Agreement.
ATTACHMENTS
Attachment A: SUMC Annual Report Fiscal Year 2022-2023
Attachment B: Weblinks to Prior SUMC Annual Reports
Attachment C: SUMC Development Agreement Section 5 Compliance Table
Attachment D: SUMC Construction Activities and Net New Square Footage Summary
Attachment E: Supplement to the Annual Report Fiscal Year 2022-2023
APPROVED BY:
Jonathan Lait, Planning and Development Services Director
PREPARED FOR THE CITY OF PALO ALTO | JULY 6, 2023
2022-23 ANNUAL REPORT
Image Courtesy of Nearmap US Inc, 2023
CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2022-2023 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
STANFORD HEALTH CARE 4
SCHOOL OF MEDICINE 5
BLAKE WILBUR DRIVE ROADWAY EXTENSION 6
NET NEW SQUARE FOOTAGE 7
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 8
HEALTH CARE BENEFITS 8
SECTION 5(A)(II). FUND FOR HEALTHCARE SERVICES 8
SECTION 5(A)(III). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 8
PALO ALTO FISCAL BENEFITS 8
SECTIONS 5(B)(I) AND 5(B)(II). PAYMENT OF SALES AND USE TAXES 9
SECTION 5(B)(III). FUNDING OF OPERATING DEFICIT 9
SECTION 5(B)(IV). PAYMENT OF UTILITY USER TAX 9
SECTION 5(B)(V). SCHOOL FEES 10
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 10
SECTION 5(C)(II). MENLO PARK TRAFFIC MITIGATION 10
SECTION 5(C)(III). EAST PALO ALTO VOLUNTARY MITIGATION 10
SECTION 5(C)(IV). CONTRIBUTIONS TO AC TRANSIT 10
SECTION 5(C)(V). OPTICOM PAYMENTS 11
SECTION 5(C)(VI). CALTRAIN GO PASSES 11
SECTION 5(C)(VII). MARGUERITE SHUTTLE SERVICE 11
SECTION 5(C)(VIII). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 12
SECTION 5(C)(IX). MONITORING OF TDM PROGRAMS 12
LINKAGES 13
SECTION 5(D)(I). INTERMODAL TRANSIT FUND 13
SECTION 5(D)(II). QUARRY ROAD FUND 14
SECTION 5(D)(III). STANFORD BARN CONNECTION 14
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 14
SECTION 5(E). 14
CLIMATE CHANGE 15
SECTION 5(F). CLIMATE CHANGE FUND 15
SATISFACTION OF CONDITIONS OF APPROVAL 15
SECTION 5(H). SATISFACTION OF ALL CONDITIONS OF APPROVAL 15
CONCLUSION 16
ANNUAL REPORT 2022-23 1
EXECUTIVE SUMMARY
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine)—comprised
of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children’s Hospital, and
Stanford University—entered into a Development Agreement with the City of Palo Alto, committing to
provide a range of community benefits in exchange for vested development rights to develop and use the
Stanford Medicine Renewal and Replacement Project (“Renewal Project”) facilities in accordance with
the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.
The Renewal Project—driven by a growing demand for healthcare services, state-mandated seismic
safety requirements, and the need to replace outmoded facilities with modern, technologically advanced
spaces—is transforming the way that healthcare is delivered and research is conducted.
Today, twelve years after the execution of the Development Agreement, the Lucile Packard Children’s
Hospital Expansion and the new Stanford Hospital are now open for patient care, and the School of
Medicine has completed the first phase of development of its replacement facilities, with its BioMedical
Innovations building open for research. Interior renovations within the 1989 portion of the preexisting
Stanford Hospital facility have now commenced, and are expected to continue for the next several years,
bringing the facility up to modern healthcare standards.
Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of
the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in
advancing the goals of both Stanford Medicine and the broader community.
2 ANNUAL REPORT 2022-23
BACKGROUND AND PURPOSE
The Palo Alto City Council’s unanimous approval of the entitlements for the Stanford Medicine
Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new
and replacement facilities for Stanford Medicine. The project approvals—including new zoning for the
Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a
Development Agreement—allow for the construction of approximately 1.3 million net new square feet of
hospital facilities, clinics, medical offices, and medical research spaces, and are enabling the Hospitals to
optimize the delivery of healthcare services to patients, and maintain their position as leading providers of
world-class healthcare.
In order to facilitate this important replacement and expansion work, the Stanford Medicine parties
entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive
package of community benefits and additional development conditions. In exchange for these benefits,
the City has vested for a period of 30 years Stanford Medicine’s rights to develop and use the property
in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent
approvals.
The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance,
and require that Stanford Medicine submit an Annual Report to the City of Palo Alto’s Director of Planning
and Community Environment each year within 30 days of the anniversary of the agreement effective
date (June 6, 2011). The Annual Report is to summarize Stanford Medicine’s progress on the Renewal
Project, including a list of net new square footage for which a certificate of occupancy has been received,
and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in
Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.
Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report,
to provide an accounting of the City’s balances and expenditures from each of the City Funds and how
they were used.
ANNUAL REPORT 2022-23 3
2022-2023 SUMMARY OF PROGRESS
The Renewal Project has reached key milestones in recent years, with the opening of the Lucile Packard
Children’s Hospital expansion in 2017 and the opening of the New Stanford Hospital in 2019, and most
recently the opening of the School of Medicine’s BioMedical Innovations building in 20201 . While the
COVID-19 pandemic changed the pace of progress on the Renewal Project, as Stanford Medicine
focused resources on pandemic response, including launching clinical trials for therapeutic treatments
for COVID-19 and establishing community testing and vaccination sites, it has also highlighted the
importance of modern, state-of-the-art facilities to support Stanford Medicine’s research and patient care.
The section to follow provides an overview of central goals for the project elements that presently are
under construction or nearing construction, a synopsis of progress to date, as well as a preview of near-
term upcoming activities.
LUCILE PACKARD CHILDREN’S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard
Children’s Hospital opened an expanded facility in late 2017. The new Main building, located adjacent
to the preexisting Lucile Packard Children’s Hospital (West building), provides patients and doctors with
the most modern clinical advancements and technology, while also creating a more patient- and family-
centered environment of care, with additional single-patient rooms and more spaces for families to be with
their child during treatment and recovery.
The LPCH Main building features a new entrance lobby, public concourse with dining, three floors of
nursing units, and new patient rooms. Spaces have been designed with an attention to natural light and
views, and the exterior grounds—more than 3.5 acres of outdoor areas and gardens—provide a park-like
setting for patients, families, and visitors.
1 Temporary certificate of occupancy was issued in 2020; final certificate of occupancy was issued in 2021.
4 ANNUAL REPORT 2022-23
LPCH is currently planning for improvements to its preexisting West building which will modernize its
infrastructure and provide a more comfortable patient experience. These improvements include a
redesigned main lobby entry and drop-off for the West Building; plans were formally submitted to the City
for Architectural Review in Summer 2022 and are currently under staff review.
STANFORD HEALTH CARE
Stanford Health Care is constructing new and replacement hospital facilities to usher in a new era
of advanced patient care. Growth in patient volumes and rapidly changing medical technology have
rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety
requirements have accelerated the need to construct replacement facilities.
In November 2019, Stanford Health Care’s first phase of facilities renewal completed as the New Stanford
Hospital received its license from the State Department of Public Health and opened to patient care. With
the new Stanford Hospital now complete, Stanford Health Care has begun a series of renovations within
its preexisting facilities, including the conversion of shared patient rooms into private rooms within the
1989 portion of the Hospital; this renovation work is proceeding in phases over the next several years.
In addition, to enable the conversion of shared patient rooms to private rooms, Stanford Health Care is
also planning an addition to the preexisting Hospital of approximately 37,000 square feet. This proposed
addition received Architectural Review approval in March 2022, and a City grading / excavation permit
was issued in June 2022. Grading activity is ongoing.
2022-2023 SUMMARY OF PROGRESS
ANNUAL REPORT 2022-23 5
SCHOOL OF MEDICINE
The Stanford University School of Medicine is replacing its outmoded research buildings with new
state-of-the-art facilities designed to support contemporary translational research. The new facilities
will accommodate 21st century medical advancements and enable the development of new medical
innovations, featuring integrated laboratory suites, with easier access between labs and support facilities,
enabling transparency, flexibility, and collaboration.
The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”) is now
complete, having received a certificate of occupancy in Spring 2021, and features four above-grade floors
of research labs and light-filled gathering places, and a lower basement level for utility support, as well as
a connective tunnel to other nearby research facilities. Building interiors were designed for best practices
for laboratory design safety and space allocation, with a flexible template to maximize efficient use of
space and ease of renovation. The four above-grade floors provide space for a mix of disciplines, basic
and clinical research, wet and dry labs, and leading-edge translational studies.
2022-2023 SUMMARY OF PROGRESS
6 ANNUAL REPORT 2022-23
BLAKE WILBUR DRIVE ROADWAY EXTENSION
As required by the 2011 Project Approvals, a new link roadway will be established between Sand Hill
Road and Welch Road; this roadway will connect Durand Way to Blake Wilbur Drive, and will provide
an important automobile, bicycle, and pedestrian connection in the vicinity of the Medical Center.
Specifically, it will serve as an uncongested route for emergency vehicles accessing the medical campus
via Sand Hill Road, and will provide improved access to both the Main Medical Campus and the outer
Welch medical office buildings. The scope includes two travel lanes in each direction, Class II bicycle
lanes, sidewalks with planter strips including new tree plantings and bioretention areas, new signal poles,
and underground utilities. The roadway design was approved at the schematic level by the Architectural
Review Board in 2011, but design development and construction were not immediately able to advance
as the impacted site was under third-party lease until 2020. Design work resumed in 2020, and staff-
level Architectural Review approval for the roadway improvements was issued in late 2021. Grading and
Street Work permits were issued in Spring 2023. Construction activities are ongoing and are anticipated
to be complete in Fall 2023.
2022-2023 SUMMARY OF PROGRESS
ANNUAL REPORT 2022-23 7
2022-2023 SUMMARY OF PROGRESS
NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has been
issued2.
PROJECT COMPONENT GROSS SQUARE
FOOTAGE
STANFORD HEALTH CARE
1101 Welch demolished (40,100)
500 Pasteur 719,266
Total 679,166
LUCILE PACKARD CHILDREN’S HOSPITAL EXPANSION
701 Welch demolished (56,300)
703 Welch demolished (23,500)
Lucile Packard Children’s Hospital Expansion 446,088
Total 366,288
SCHOOL OF MEDICINE
BioMedical Innovations building 196,921
Partial decant of Boswell, Grant, Alway, Lane, Edwards (22,614)
Total 174,307
HOOVER PAVILION
Miscellaneous shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB)91,605
Total 77,774
2 The square footage figure for the New Stanford Hospital has been adjusted by 5 sf from that reported in the
2021-22 Annual Report to account for a typographical error.
8 ANNUAL REPORT 2022-23
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with
its obligations under Section 5 of the Development Agreement.
HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to
the community, as both a global leader in medical care and research, and as a community healthcare
services provider. The Renewal Project enables Stanford Medicine to continue its important work, and
the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new
hospital facilities provide critical emergency preparedness and response resources for the community in
the event of an earthquake, pandemic, or other major disaster.
Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase
to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be
reconciled with the construction use tax payments as described in Development Agreement Section 5(b)
(ii)(C), and will be spent between 2026 and 2036.
Section 5(a)(iii). Fund for Community Health and Safety Programs
Stanford Medicine has contributed a single lump-sum payment of $4 million to establish a Community
Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected
community health programs that benefit residents of the City, including the Project Safety Net Program,
a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be
established to evaluate proposals regarding the other specific programs to receive funding, composed
of two representatives selected by Stanford Medicine and two representatives selected by the City; this
committee shall make annual recommendations to the City Council regarding proposed disbursements
from the Community Health and Safety Program Fund, and the City Council shall use its reasonable
discretion to decide whether to accept, reject, or modify the joint committee recommendations.
Stanford Medicine provided the entire required contribution to the Community Health and Safety
Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with
this Development Agreement provision, though in the past year Stanford Medicine has engaged with City
staff to establish the joint committee to evaluate proposals for programs to receive funding. Based on this
engagement, the City intends to use the remaining funds to support the Psychiatric Emergency Response
Team (PERT), which will be operated in partnership with the Santa Clara County Behavioral Health
Services Department. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used.
PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The
project was expected to generate $8.1 million in sales and use tax revenues for the City, and multiple
mechanisms have been put into place to ensure that this target is met. The Development Agreement also
provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City’s
operating deficit, and the payment of utility user taxes and school fees.
ANNUAL REPORT 2022-23 9
Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes
As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales
and Use Tax monitoring report to the City on June 30, 2023. The Stanford Medicine parties will continue
to submit such a report annually during the construction period for the Renewal Project so that the City
can determine the share of construction use taxes that it has received as a result of the Renewal Project.
Each year, within 60 days of receiving the monitoring report, the City will provide its determination of
the amount of construction use taxes that it has received as a result of the Renewal Project during the
preceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct
a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes
as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).
To date, Stanford Medicine has taken the following steps detailed below to maximize the City’s allocation
of sales and use taxes associated with Project construction and operation. Documentation of each of
these items is included in the 2022 construction use tax monitoring report already submitted.
• Stanford Medicine has obtained all permits and licenses necessary to maximize the City’s allocation
of construction use taxes derived from the project, including California Seller ’s Permits and Use Tax
Direct Pay Permits.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of sale of all fixtures furnished or installed as part of the project.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the
project site as the place of use of all materials used in the construction of the project.
• Stanford Medicine has required all contractors and subcontractors to allocate the local sales and
use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts
to require contractors and subcontractors to complete and file any forms required by the State
Board of Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their
existing facilities in order to increase the City tax allocation for the Hospitals’ purchases. The
Hospitals will maintain the use tax direct pay permit for the life of the project.
• Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales
and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation,
allocation, reporting and payment of sales and use taxes derived from the Project.
Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the
City resulting from construction and operation of the project, Stanford Medicine has provided to the City a
single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No
further action is required by Stanford Medicine to comply with this Development Agreement provision.
Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas,
and water charges allocable to new construction completed as part of the project for the life of the project.
This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5
percent utility user tax is currently being paid by Stanford Medicine.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
10 ANNUAL REPORT 2022-23
Section 5(b)(v). School Fees
Stanford Medicine will pay to the City—which is then to forward to the Palo Alto Unified School District—
school fees upon issuance of each building permit from the City or OSHPD, in the amount that is
generally applicable to non-residential development at the time of payment based upon net new square
footage, as defined in the Development Agreement.
School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802,
respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for
additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional
payment of school fees in the amount of $16,119 was made to account for the incremental square footage
associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally planned. In
November 2015, additional school fees in the amount of $461.16 were paid to account for incremental
square footage for the New Stanford Hospital Garage. In May 2022, school fees in the amount of
$22,641 were paid to Palo Alto Unified School District to account for Stanford Health Care’s planned
addition to the 1989 portion of the preexisting hospital.
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full
project buildout. Stanford Medicine provides a robust transportation demand management program,
offering a variety of incentives for employees to forego driving alone to work. As required by the
Development Agreement, Stanford Medicine has taken the additional actions outlined below.
Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in
connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable
neighborhoods and communities and affordable housing. This contribution has been made in three
equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of
$1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital
foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017,
within 30 days from issuance of the first Hospital occupancy permit. No further action is required by
Stanford Medicine to comply with this Development Agreement provision.
Section 5(c)(iii). East Palo Alto Voluntary Mitigation
Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be used
for roadway and traffic signal improvements on University Avenue. This payment was made on August
19, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement
provision. In the event that Stanford Medicine does not meet the alternative transportation mode goals
specified in the Development Agreement in the required timeframe, including any period of permitted
delay, and is assessed a $4 million payment under Development Agreement section 5(c)(ix)(B), the City
will be required to remit $150,000 of such payment to the City of East Palo Alto.
Section 5(c)(iv). Contributions to AC Transit
The Hospitals committed to the following actions within 30 days from issuance of the first Hospital
occupancy permit, and have fulfilled these commitments as outlined below:
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2022-23 11
• The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital
improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals
offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was
accepted, and the payment was made on January 5, 2018.
• The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not
to exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus
service to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals are making annual
payments to AC Transit for purposes of U-Line operating costs.
• In order to encourage Hospital employees living in the East Bay to use public transit for their
commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the
Ardenwood Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year
(Section 5(c)(iv)(C)). The Hospitals continue to meet this requirement, and currently lease 100
parking spaces in Newark (35263 Fircrest Drive). However, the Fircrest-Ardenwood route that
provided service to these spaces was suspended in December 2020 due to the pandemic reducing
demand and resulting low ridership. East Bay riders continue to be served by the U Line and DB
Express which continue to have capacity to service current demand.
Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay
$11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the
following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill
Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West;
Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this commitment
was made, the City determined that Opticom systems are outdated, and proposed the purchase and
installation of the ATMS.now Emergency.now package, which would allow coordinated prioritization at all
City-maintained traffic signals. Agreement to this change in traffic signal priority system is documented in
a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which was accepted and
agreed to by the SUMC Parties by countersigned letter. The required payment was made on December
12, 2017, within 30 days of issuance of the first Hospital occupancy permit.
Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for
all existing and new Hospital employees who work more than 20 hours per week at a cost of up to
approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to
continue for a period of 51 years.
Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and
began providing free GO Passes to employees commencing on January 1, 2012. Annual passes were
purchased again for all existing and new eligible employees for 2023.
Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase
of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased
demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In
addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount
of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
12 ANNUAL REPORT 2022-23
for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid
shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments
the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.
Section 5(c)(viii). Transportation Demand Management Coordinator
The Development Agreement requires that the Hospitals employ an onsite qualified Transportation
Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015,
and continuing through the life of the Renewal Project.
Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated
the hiring of the TDM Coordinator, filling this position in March 2012. The TDM Coordinator is responsible
for overseeing the analysis, development, and implementation of programs to advance the Hospitals’
TDM objectives. Specific duties that are carried out in collaboration with Stanford Transportation include
raising awareness among commuters about alternative transportation options and Stanford’s commute
incentive programs; providing alternative commute planning assistance and responses to customer
inquiries; writing and editing electronic and print communications; coordinating and staffing outreach
events, such as free transit pass distributions and employee fairs; and providing alternative transportation
information and resources at new employee orientations.
The Hospitals also established a new role, Transportation/TDM Director, that is in addition to the
previously established TDM Coordinator role, to lead the effort of increasing the use of alternative
transportation among Hospital employees.
Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees
employed over 20 hours per week; the number of employees using an alternative transportation mode as
documented by a study or survey to be completed by the Hospitals using a method mutually agreeable
to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative
Mode Targets identified in the Development Agreement. The Development Agreement specifies
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2022-23 13
payments to be made in the event that such targets are not met during particular time periods. Stanford
Medicine submitted its 2023 Alternative Mode Share Report to the City on May 31, 2023; this report
shows an alternative mode split of 25.6% for the Hospitals, representing an increase of 5.7 percentage
points in the alternative mode share relative to the Fall 2021 results (19.9%).
Stepping away from the most impactful times of the pandemic, on-campus Hospital staff have begun
shifting back to alternative modes of transportation. In previous years where the pandemic had a
pronounced impact on daily life, a continual shift was observed from alternative modes to single-
occupancy vehicles. This change in behavior was attributed to reduced levels of transit service at the time
and perceived health risks of public transportation. Further exacerbating these issues was the inability for
staff to work remotely as they primarily occupy roles which require direct patient interface or otherwise
require physical presence. Now that the pandemic is in a different phase, transit service levels have
increased and safety concerns on public transit have reduced. However, this transition back to alternative
modes of transportation is still ongoing and, as such, the Hospitals are excused from achieving, on
schedule, the alternative mode share targets of this section of the Development Agreement.
Due to the pandemic-induced circumstances noted above and as allowed by the Development
Agreement, Stanford Medicine has filed a Notice of Intent to Claim a Permitted Delay with the City which
establishes that due to the ongoing COVID-19 pandemic the Hospitals are unable to meet the alternative
mode share targets on schedule. The Hospitals expect that the period of permitted delay will extend
through a period ending one year after the May 11, 2023 expiration of the United States Secretary of
Health and Human Services’ determination that a public health emergency exists due to the COVID-19
pandemic. This anticipated period of permitted delay accounts for an end to the current public health
emergency, and the gradual return of commuter confidence in alternative transit. During this period,
other related obligations would continue to be met, including but not limited to implementing an enhanced
TDM program, monitoring progress toward meeting the alternative mode share targets, providing annual
reports to the City, striving to maximize use of alternative commute modes by Hospital employees,
and meeting with the City on a regular basis to identify potential improvements to the enhanced TDM
program. Stanford Medicine has filed an application for an amendment to the Development Agreement to
modify the alternative mode share target dates to account for the pandemic.
Stanford Medicine remains committed to increasing its alternative mode share, and enabling employees
to travel safely to work using alternative modes.
LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use
of pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford
Medicine has funded the following specific infrastructure improvements.
Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements
to enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the
existing intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by
the City for the development of an attractive, landscaped passive park/green space with a clearly marked
and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
14 ANNUAL REPORT 2022-23
amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford
Medicine to comply with this Development Agreement provision. As required by Development Agreement
Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of
the City’s expenditures from this fund, and the purposes for which the expenditures were used.
In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary
path with associated lighting, landscaping / green space, benches, and flower borders from the transit
center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds
remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in
the future.
Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and
within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El
Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider
bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and
prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund
on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used. The City was required to construct the improvements
prior to issuance of the first Hospital Occupancy Permit, but as agreed to with Stanford Medicine, delayed
implementation of these improvements until utility trenching to the Medical Center was complete. In late
2018, the City completed these improvements, including enhanced crosswalks and bicycle striping and
signage.
Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian
connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to
Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy
permit. Construction of the improvements completed in November 2017, in advance of issuance of the
first Hospital Occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision.
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND
AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable
Housing Fund
Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto
infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the
Development Agreement, this contribution has been made in three equal payments. The first payment, in
the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made
on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and
the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of the
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
ANNUAL REPORT 2022-23 15
first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this
Development Agreement provision. As required by Development Agreement Section 12(d), the City will
provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from
this fund, and the purposes for which the expenditures were used.
The City will use $1,720,488 of these funds in the same manner as funds collected under the City’s
housing fee ordinance.
CLIMATE CHANGE
Section 5(f). Climate Change Fund
Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs
for a sustainable community, including programs identified in the City’s Climate Action Plan, carbon
credits, and investments in renewable energy and energy conservation. As required by the Development
Agreement, this contribution has been made in three equal payments. The first payment, in the amount
of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December
5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final
payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital
occupancy permit. No further action is required by Stanford Medicine to comply with this Development
Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly
Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and
the purposes for which the expenditures were used.
SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval
Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required
by the project approvals, subject to modifications allowed by the Development Agreement, and has taken
several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval
encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in
the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit.
In order to implement, monitor, and report on the implementation of this diverse array of conditions,
Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking
and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring
information and documentation, and are updated by the Stanford Medicine project teams on a regular
basis, and reviewed by the City.
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
16 ANNUAL REPORT 2022-23
CONCLUSION
As the Renewal Project completes its twelfth year, Stanford Medicine looks forward to continued
engagement with the City of Palo Alto as the project continues to progress.
Stanford University Medical Center (SUMC) Annual Reports
Prior Fiscal Year Annual Reports:
•Fiscal Year 2011-2012
http://www.cityofpaloalto.org/civicax/filebank/documents/31976
•Fiscal Year 2012-2013
https://www.cityofpaloalto.org/civicax/filebank/documents/39991
•Fiscal Year 2013-2014
http://www.cityofpaloalto.org/civicax/filebank/documents/45631
•Fiscal Year 2014-2015
http://www.cityofpaloalto.org/civicax/filebank/documents/51645
•Fiscal Year 2015-2016
https://www.cityofpaloalto.org/civicax/filebank/documents/60896
•Fiscal Year 2016-2017
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=49142.31&BlobID=65285
•Fiscal Years 2017-2018, 2018-2019, and 2019-2020
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-
minutes/city-council-agendas-minutes/2021/11-november/20211101pccs-amended.pdf
•Fiscal Year 2020-2021
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-
minutes/city-council-agendas-minutes/2022/20220321/20220321pccsm-amended-linked-
revised.pdf
• Fiscal Year 2021-2022
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=1115
April 17, 2023 City Council Consent Calendar Item 6
Attachment B
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
1 SUMC Development Agreement Compliance: FY 2022-2023
Health Care Benefits
DA
Section Description Summary Activity Complies?
5(a)(ii)
Fund for
Healthcare
Services
Financial assistance
for Palo Alto
residents
SUMC establishment of a $3M fund that will
grow to $5.6M by December 31, 2025. Fund
will be used in even increments over a ten-
year period from 2026-2036 to assist Palo
Alto residents who have self-payment
responsibilities beyond their financial
means, as described in Section 5(a)(ii).
Yes, complies – No activity
required in FY 2022-2023.
SUMC will commence
activity in the Fund for
Healthcare Services for 10
years from 2026 to 2036.
This activity will be
reported in the SUMC
Annual Report for each
fiscal year.
5(a)(iii)
Fund for
Community
Health and
Safety Programs
$4M fund for
selected community
health programs for
Palo Alto residents
First and only payment of $4M on August
25, 2011 to establish City fund. There were
no expenditures from this fund during the
reporting period FY 2022-2023.
Yes, complies - Fund
activity and balances in FY
2022-2023 reported in
Attachment E.
Fiscal Benefits
DA
Section Description Summary Activity Complies?
5(b)(i), (ii)
Payment of
Sales and Use
Taxes
Activities to
maximize sales and
use taxes paid to the
City
SUMC contributes to General Fund Sales and
Use Tax revenues via construction-related
activities. The City reviews the Construction
Sales & Use Tax Monitoring Report that is
submitted by SUMC on June 30 of each year.
Yes, complies - SUMC
timely submitted the
Construction Sales & Use
Tax Monitoring Report for
the previous calendar year.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
2 SUMC Development Agreement Compliance: FY 2022-2023
The City submits a letter to SUMC each year
that notes local tax received from SUMC
project activities for the year. Based upon
the City’s review of the annual Construction
Sales and Use Tax Monitoring Report,
revenues for calendar years 2011 through
2022 have totaled $5,467,628.
The City sent their
required response. This
annual reporting assists in
the process of ensuring
that the City would receive
no less than $8.1M in
construction sales and tax
revenue by December 31,
2025. Section 5(b)(ii) of the
Agreement discusses how
SUMC and the City should
address any surplus or
shortfall in the amount of
construction sales and use
tax received by the City.
Discussion and final
reconciliation of any
surplus or shortfall in the
revenue amount that the
City received would occur
in and after August 2026.
Given the annual decline in
construction sales and use
tax revenue since calendar
year 2020 to present, it is
possible that there might
be a shortfall relative to
the $8.1 million required.
In that case, SUMC would
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
3 SUMC Development Agreement Compliance: FY 2022-2023
make a payment to relieve
that shortfall in FY 2026-
2027 from the Fund for
Healthcare Services, as
discussed under
Development Agreement
Section 5(a)(ii)
5(b)(iii)
Funding of
Operating
Deficit /
Expansion Cost
Mitigation
$2.417M fund to
assure City costs
associated with the
project do not
exceed revenues
resulting from
construction and
operation of the
project.
Payment of $2.417M on August 25, 2011 to
establish fund. There were no expenditures
from this fund during the reporting period
FY 2022-2023.
Yes, complies -Fund
activity and balances in FY
2022-2023 reported in
Attachment E.
5(b)(iv)Payment of
Utility Users Tax
5% tax on all
electricity, gas, and
water charges on
new construction
Utilities confirmed that billing accounts
were created in past fiscal years when new
meters were set for new construction,
including NSH, NSH Garage, LPCH, and BMI,
and the Utility Users Tax is paid through the
normal billing process for each site.
Yes, complies.
5(b)(v)School Fees
Payment of PAUSD
fees for net new
square footage
$342,617 fee paid for LPCH and NSH
expansion in 2012. $7,051 fee paid for NSH
and NSH Garage expansion in July 2013.
$16,119 fee paid for Hoover Medical Office
Yes, complies - SUMC
made payments to PAUSD
for all net new square
footage for which school
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
4 SUMC Development Agreement Compliance: FY 2022-2023
Building expansion in May 2014. $461.16 fee
paid to account for incremental square
footage for the New Stanford Hospital
Garage. Additional PAUSD school fees were
paid in FY 2021-2022 for the Nursing Pod
Extension project due to OSHPD requiring
these payments prior to issuance of a
construction shoring permit.
fees apply at the time
permit receipt. Staff will
reconfirm SUMC payment
of PAUSD school fees for
the Nursing Pod Extension
project when the City
issues this permit in a
future fiscal year.
Traffic Mitigation and Reduced Vehicle Trips
DA
Section Description Summary Activity Complies?
5(c)(ii)
Menlo Park
Traffic
Mitigation
$3,699,000 payment
for traffic mitigation,
infrastructure,
sustainable
neighborhoods,
affordable housing
First of three $1.23M payments made on
August 19, 2011. Second payment of
$1.23M made on December 5, 2012. Third
and final payment of $1.23M made on
December 14, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH).
Yes, complies - SUMC
made all required
payments to Menlo Park,
including the last and final
payment in FY 2017-2018.
5(c)(iii)
East Palo Alto
Voluntary
Mitigation
$200K for roadway
and signal
improvements on
University Ave.
$200K payment made on
August 19, 2011.Yes, complies.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
5 SUMC Development Agreement Compliance: FY 2022-2023
5(c)(iv)Contributions
to AC Transit
U-line capital
improvements, low
load factor ratios,
parking spaces at
Ardenwood Park &
Ride
$250K payment made to AC Transit on
January 5, 2018.
SUMC is also invoiced by AC Transit for
payments throughout the year that total
over the $50K per year discussed in the
SUMC Development Agreement. Payments
to AC Transit are required for the life of the
project.
Since May 2014 and until April 30, 2018,
SUMC Parties leased a park-and-ride facility
on Kaiser Drive near the Ardenwood Park &
Ride. SUMC used an interim temporary
facility through FY 2019-2020. In FY 2020-
2021 and FY 2021-2022, and FY 2022-2023,
SUMC leased 100 parking spaces in Newark
(35263 Fircrest Drive).
Yes, complies.
5(c)(v)Opticom
Payments
$11,200 payment
for Opticom traffic
control system at 7
intersections
$11.2K payment made to the City in FY
2017-2018 within 30 days from issuance of
the first Hospital Occupancy Permit (LPCH).
As the City has upgraded systems, the City
and SUMC agreed through a letter exchange
that the payment could be used for the new
coordinated prioritization signaling at City-
maintained traffic signals.
Yes, complies.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
6 SUMC Development Agreement Compliance: FY 2022-2023
5(c)(vi)Caltrain Go
Passes
SUMC purchase of
passes for all
existing and new
hospital employees
working
>20hrs/week
Go Passes have been purchased per the
Development Agreement since January 1,
2012, including for FY 2022-2023.
Yes, complies.
5(c)(vii)Marguerite
Shuttle Service
Purchase of
additional shuttles
to meet demand
Since 2011, SUMC purchased additional
shuttle buses for the Marguerite Shuttle
service which now includes five renewable
diesel-electric hybrid buses and 23 all-
electric buses. Additional all-electric buses
also came online in FY 2017-2018. Shuttles
were running in FY 2022-2023.
Yes, complies.
5(c)(viii)
SUMC
Transportation
Demand
Management
(TDM)
Coordinator
SUMC hires
coordinator to
promote alternative
transportation
options
TDM Coordinator was hired in March 2012.
This position has since been elevated to a
TDM Program Manager position and the
position remains filled.
Yes, complies.
5(c)(ix)Monitoring of
TDM Programs
Yearly report
regarding
The SUMC parties found that the alternative
mode share milestone target of 33%
outlined in SUMC DA Section 5(c)(ix) was not
met for FY 2022-2023, nor was it above the
Yes, complies -
SUMC timely submitted
their annual Alternative
Mode Share report for FY
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
7 SUMC Development Agreement Compliance: FY 2022-2023
alternative transit
mode use
2018 milestone target of 30%. The FY 2022-
2023 alternative mode share rate rose to
25.6% from 19.9% in FY 2021-2022.
2022-2023. A failure to
meet the alternative mode
share targets during a
reporting period is not
itself a default under the
Agreement, as the
Agreement outlines next
steps if a target was not
achieved, such as the
payment of fees, and
contains a Force Majeure
clause. SUMC filed a
Development Agreement
amendment application on
September 7, 2022. At the
close of the FY 2022-2023
reporting period, SUMC’s
application was still under
active review.
Subsequently in FY 2023-
2024, the SUMC Parties
and City Council reached
mutual agreement
regarding an updated
timeline for SUMC to meet
the alternative mode share
targets.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
8 SUMC Development Agreement Compliance: FY 2022-2023
Linkages
DA
Section Description Summary Activity Complies?
5(d)(i)Intermodal
Transit Fund
$2.25M payment to
improve pedestrian
linkages to PA
Intermodal Transit
Center
First and only payment of $2.25M on August
25, 2011 to establish City fund. City
constructed temporary improvements prior
to the issuance of the first Hospital
Occupancy Permit (LPCH) to serve the
linkage goal and functional requirements.
There were no expenditures from this fund
during the reporting period FY 2022-2023.
Yes, complies -Fund
activity and balances in FY
2022-2023 reported in
Attachment E.
5(d)(ii)Quarry Road
Fund
$400K payment to
improve pedestrian
linkages along
Quarry Road
First and only payment of $400K on August
25, 2011 to establish City fund. City
constructed the improvements prior to the
issuance of the first Hospital Occupancy
Permit (LPCH) to serve the linkage goal and
functional requirements.
Yes, complies - As of
FY2019, there is no longer
a fund balance in this
category.
5(d)(iii)Stanford Barn
Connection
SUMC budgets up to
$700K for
connections in the
vicinity of barn
SUMC constructed the Stanford Barn
Connection prior to the issuance of the first
Hospital Occupancy Permit (LPCH) to serve
the linkage goal and facilities are fully
operational.
Yes, complies.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
9 SUMC Development Agreement Compliance: FY 2022-2023
Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing
DA
Section Description Summary Activity Complies?
5(e)
Infrastructure,
Sustainable
Neighborhoods
and
Communities,
and Affordable
Housing Fund
$23.2M payment for
these uses
First of three $7,733,333 payments made on
August 19, 2011. Second payment of
$7,733,333 made on December 5, 2012. The
third and final payment of $7,733,333 made
on December 12, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH). There were no
expenditures from this fund during the
reporting period FY 2022-2023.
Of the funds in the Infrastructure,
Sustainable Neighborhoods and
Communities, and Affordable Housing Fund,
$1,720,488 was to be used for support of
affordable housing. SUMC funding
supported the Stevenson House project in
FY 2013 and the remaining affordable
housing funds were fully exhausted in FY
2020 to support the Wilton Court Housing
Project.
Yes, complies -Fund
activity and balances in FY
2022-2023 reported in
Attachment E.
SUMC Development Agreement, Section 5 - SUMC Parties’ Promises Attachment C
FY 2022-2023
10 SUMC Development Agreement Compliance: FY 2022-2023
Climate Change
DA
Section Description Summary Activity Complies?
5(f)
Climate Change
– Sustainability
Programs
Benefit Fund
$12M payment for
climate change-
related projects and
programs
First of three $4M payments made on
August 19, 2011. Second payment of $4M
made on December 5, 2012. The third and
final payment of $4M made on December
12, 2017, which was within 30 days from
issuance of the first Hospital Occupancy
Permit (LPCH). There were expenditures
from this fund during the reporting period
FY 2022-2023.
Yes, complies -Fund
activity and balances in FY
2022-2023 reported in
Attachment E.
Stanford University Medical Center (SUMC)
FY 2022-2023 Construction Activities and Net New Square Footage Summary
Overall, at the Main SUMC site, SUMC is entitled to construct and use up to 3,534,090 total
square feet of hospital/clinic and research buildings, as well as associated facilities and
infrastructure improvements, including up to 1,265,272 net new square feet. Overall, at the
Hoover Pavilion site, SUMC is entitled to construct and use up to 153,343 total square feet of
medical office/clinic buildings, as well as associated facilities, including up to 46,169 net new
square feet of medical/office buildings.
SUMC Construction Activities FY 2022-2023
SUMC did not add any new square footage in FY 2022-2023, but continued to remove square
footage from occupancy in portions of the 1959 Stone Complex. Whereas SUMC had removed
18,472 square feet from occupancy by FY 2021-2022, the total removed from occupancy is 22,614
square feet by FY 2022-2023. This suspension of use provides a temporary option to prevent
exceedance of the total occupied square footage allowed in their entitlements. While not
triggered in the FY 2022-2023 monitoring period, there are provisions in the SUMC entitlements
to have a three-year period (or up to five years with Planning Director approval) whereby SUMC
is allowed to exceed the total occupied existing and net new building square footage. This
provision is important for ensuring that SUMC can maintain existing operations while also
efficiently transfer new uses, equipment, and operations over to the new facilities.
Past SUMC Construction Activities
A total of approximately 133,731 square feet of floor area was previously demolished at the
Stanford Hospital, Lucile Packard Children’s Hospital (LPCH), and Hoover Pavilion sites.
New floor area across the SUMC sites reported in previous Fiscal Years include the following:
The new Neuroscience Health Center at the Hoover Pavilion site represents 91,605 new
square feet.
Lucile Packard Children’s Hospital (LPCH) Expansion added 446,088 new square feet.
The New Stanford Hospital (NSH) garage added 29,744 new square feet. The NSH project
added 689,522 new square feet. These two new buildings therefore represent 719,266
new square feet for NSH.
The School of Medicine (SOM) added 196,921 square feet through completion of the
Biomedical Innovation Building (BMI).
SUMC Net New Square Footage Summary
As reported in the SUMC Annual Report FY 2022-2023 (Attachment A), the following table
summarizes the net new square footage for which a certificate of occupancy has been issued.
Attachment D
PROJECT COMPONENT
GROSS SQUARE
FOOTAGE
STANFORD HEALTH CARE
1101 Welch demolished
(40,100)
500 Pasteur
719,266
Total
679,166
LUCILE PACKARD CHILDREN'S HOSPITAL EXPANSION
701 Welch demolished
(56,300)
703 Welch demolished
(23,500)
Lucile Packard Children's Hospital Expansion
446,088
Total
366,288
SCHOOL OF MEDICINE
BioMedical Innovations building
196,921
Partial decant of Boswell, Grant, Alway, Lane, Edwards
(22,614)
Total
174,307
HOOVER PAVILION
Miscellaneous shops and storage demolished
(13,831)
Stanford Neuroscience Health Center (Hoover MOB)
91,605
Total
77,774
Supplement to the Annual Report
Fiscal Year 2022-2023
Prepared by the City of Palo Alto
February 8, 2024
Background and Purpose
On June 6, 2011, the Council approved Comprehensive Plan amendments, zoning changes, a
conditional use permit, SUMC design guidelines, annexation, and architectural review
applications for the Stanford University Medical Center Facilities Renewal and Replacement
Project (the “Projects”). The Projects include the construction of the new Stanford Hospital and
Clinics buildings, an expansion of the Lucile Packard Children’s Hospital (LPCH), construction of
new School of Medicine (SOM) buildings, renovation of the existing Hoover Pavilion,
construction of a new medical office building and parking garage at Hoover Pavilion, and
roadway improvements along Welch Road and Durand Way. The SUMC Development
Agreement vesting these approvals became effective on June 6, 2011 and continues for thirty
(30) years from the effective date.
Per the requirements of Sections 12(a) and 12(d) of the Agreement, the City of Palo Alto is to
prepare a Supplement to the Annual Report. This Supplement is to contain an accounting of the
funds received from SUMC, including:
•a description of the account balances for each of the funds maintained by the City under
Section 5 of the Agreement;
•the expenditures from each of the funds; and
•the purposes for which the expenditures were used.
Fund Accounting
This SUMC Annual Report Supplement covers the period during the 12th year of the
Agreement: June 6, 2022 through June 6, 2023. Accounting for the funds outlined extends
through the end of the City’s FY 2022-2023.
The specific fund accounts reported in this Supplement are consistent with Section 5 and
Sections 12(a), 12(c), and 12(d) of the Agreement. Each fund has been assigned a unique cost
center number for accounting purposes. Along with expenditures, this Supplement also shows
investment earnings and the allocation of earnings across funds.
Attachment E
In summary, SUMC has paid approximately $44.3 million in public benefit fees to the City since
June 6, 2011 through the FY 2022-2023 reporting period. There were no required new
payments from the SUMC Parties during the FY 2022-2023 reporting period.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
•Fund for Community Health and Safety Programs, Project Safety Net (Section 5(a)(iii));
•Fund for Expansion Cost Mitigation (Section 5(b)(iii));
•Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El
Camino Real/Quarry Road Intersection (Section 5(d)(i));
•Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle
Connections on Quarry Road (Section 5(d)(ii));
•Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable
Housing (Section 5(e)), and
•Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The second payment of $11,733,333 payment on December 5, 2012 was for the following
funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable
Housing (Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The third payment and final payment of $11,744,533 on December 12, 2017 was for the
following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable
Housing (Section 5(e));
•Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and
•Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).
Fund Expenditures
Regarding use of SUMC funds during the Fiscal Year 2022-2023 reporting period, the City
authorized the following transfer:
•$2,400,000 under the “Climate Change and Sustainability” fund for Bicycle and
Pedestrian Transportation Plan Implementation (PL-04010).
Agreement Section 5(a)(iii) requires that a joint committee make annual recommendations to
the City Council regarding proposed disbursements from the Community Health and Safety
Program Fund, and the City Council may use reasonable discretion to accept, reject, or modify
these recommendations. The joint committee includes SUMC representatives and City staff from
the City Manager’s Office, Office of Transportation, Administrative Services, and Public Works
departments. Projects using Community Health and Safety funds must gain mutual support from
members of the joint committee and approval from the City Council. The joint committee met in
FY 2022-2023 and supported use of the Community Health and Safety funds toward the City’s
Psychiatric Emergency Response Team (PERT). Given that PERT was currently funded by a Santa
Clara County grant through June 2023, no Community Health and Safety funds were disbursed in
the FY 2022-2023 reporting period.
The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund
contained an original contribution of $1,720,488 for support of affordable housing. SUMC
funding supported the Stevenson House project in FY 2013 and the remaining affordable housing
funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project.
City of Palo Alto AUDITED BALANCES
Stanford Medical Center Development Agreement (Fund 260)
Fiscal Year Ended June 30, 2023
Expansion Cost Intermodal Transit Quarry Road Infrastructure &Climate Change Community Total FY 2023 FY 2023
Mitigation Improvements Afford Housing & Sustainability Health & Safety Actuals Budget
cost centers 26000000 60260010 60260020 60260030 60260040 80260010
Beginnig Fund Balances, 7/1/2022 1,720,190 1,172,897 -8,244,724 2,702,007 1,081,756 14,921,573
Revenues:
Revenues From Stanford --------
Investment Earnings / Unrealized gain (loss) 154,668 154,668 275,300
Allocate to categories (154,668)(154,668)
Allocated Investment Earnings 21,248 14,488 -101,840 3,730 13,362 154,668 -
Total Revenues 21,248 14,488 -101,840 3,730 13,362 154,668 275,300
Expenditures:
Transfer to Capital Projects -(2,400,000)(2,400,000)(2,400,000)
Total Expenditures ----(2,400,000)-(2,400,000)(2,400,000)
FY 2023 Revenues less Exp 21,248 14,488 -101,840 (2,396,270)13,362 (2,245,332)(2,124,700)
Ending Fund Balances, 6/30/2023 1,741,438 1,187,384 -8,346,564 305,737 1,095,118 12,676,241
Past and Future Use of Funds
The SUMC funds received by the City are utilized for Operations, as well as support
implementation of the City’s Capital Infrastructure Plan. For additional information about the
recent past, current, and future use of SUMC funds, please refer to the following:
•Fiscal Year 2023 Adopted Operating Budget document, Special Revenue Funds section;
•Fiscal Year 2023 Adopted Capital Improvement Budget document;
•Fiscal Year 2024 Adopted Operating Budget Document, Special Revenue Funds section;
and the
•Fiscal Year 2024 Capital Improvement Budget document.1
As outlined above, the SUMC Parties have already paid approximately $44.3 million in public
benefit fees to the City since June 6, 2011 through the FY 2022-2023 reporting period. Future
fund contributions are not anticipated at this time. However, the City is to receive no less than
$8.1 million in Construction Sales & Use Tax revenue by December 31, 2025. Revenues for
calendar years 2011 through 2022 have totaled $5,467,628. Section 5(b)(ii) of the Agreement
discusses how SUMC and the City should address any surplus or shortfall in the amount of
construction sales and use tax received by the City. Discussion and final reconciliation of any
surplus or shortfall in the revenue amount that the City received would occur in and after
August 2026. Given the annual decline in construction sales and use tax revenue since calendar
year 2020 to present, it is possible that there might be a shortfall relative to the $8.1 million
required. In that case, SUMC would make a payment to relieve that shortfall in FY 2026-2027
from the Fund for Healthcare Services, as discussed under Development Agreement Section
5(a)(ii). After this reconciliation, SUMC would commence activity in the Fund for Healthcare
Services for 10 years from 2026 to 2036. This activity would be reported in the SUMC Annual
Report for each fiscal year.
1 Fiscal Year 2023 Adopted Operating Budget document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2023-city-
budget/adopted-fy23/operating-budget_final-4.pdf.
Fiscal Year 2023 Adopted Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2023-city-
budget/adopted-fy23/operating-budget_final-4.pdf.
Fiscal Year 2024 Adopted Operating Budget Document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2024-city-
budget/adopted/fy-24-palo-alto-adopted-operating-budget-book.pdf.
Fiscal Year 2024 Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2024-city-
budget/adopted/palo-alto-adopted-capital-budget-book.pdf.