The URL can be used to link to this page

Home My WebLink About2016-03-14 City Council Agenda PacketCITY OF PALO ALTO CITY COUNCIL March 14, 2016 Special Meeting Council Chambers 5:00 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 March 14, 2016 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 5:00-6:00 PM Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 1. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (James Keene, Molly Stump, Suzanne Mason, Rumi Portillo, Dania Torres Wong, Alison Hauk) Employee Organizations: Palo Alto Police Officers Association (PAPOA); Palo Alto Police Managers’ Association (PAPMA); Palo Alto Fire Chiefs’ Association (FCA); International Association of Fire Fighters (IAFF), Local 1319; Service Employees International Union, (SEIU) Local 521; Management, Professional and Confidential Employees; Utilities Management and Professional Association of Palo Alto (UMPAPA) Authority: Government Code Section 54957.6(a) 2 March 14, 2016 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. Special Orders of the Day 6:00-6:15 PM 2. Proclamation Welcoming Exchange Students and Chaperones From Tsuchiura, Ibaraki, Japan Study Session 6:15-7:15 PM 3. Stanford University Staff Presentation Regarding Transportation Demand Management for Stanford Research Park 7:15-8:15 PM 4. Update on the Formation of the Downtown Transportation Management Association (TMA) Agenda Changes, Additions and Deletions City Manager Comments 8:15-8:25 PM Oral Communications 8:25-8:40 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. Minutes Approval 8:40-8:45 PM 5. Approval of Action Minutes for the February 22, 23, and 29, 2016 Council Meetings Consent Calendar 8:45-8:50 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 6. Approval of Master Agreement to Sell Low Carbon Fuel Standards Credits and Utilize the Revenue for the Benefit of Current or Future Electric Vehicle Customers 7. Approval of Utilities Enterprise Fund Contract With Casey Construction, Inc. in the Amount of $2,967,000 for Sewer Lateral Replacement and Other On-Call Sewer Services for Three Years, Under Capital Improvement Program Projects WC-99013 (Sewer Lateral Rehabilitation), WC-80020 (Wastewater System Customer Connections), and WC-15002 (Wastewater System Improvements) 8. Approval of a Construction Contract With Waterproofing Associates Inc. in the Amount Not-to-Exceed $309,980 to Provide Construction 3 March 14, 2016 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. Services to Replace the Existing Roof at Fire Station Number 2 (PF- 00006) 9. Approval for Renewal of the Agreement Between the City of Palo Alto and the Palo Alto Art Center Foundation for Mutual Cooperation and Support to Facilitate the Foundation's Financial and Administrative Support of the Art Center 10. Authorize the City Attorney to Amend the Legal Services Agreement With Elisa Larson to Extend the Term of the Agreement to a Total Term of Approximately Three Years and Two Months, Formalize Temporary Changes to the Scope of Work and Applicable Rates and Increase the Not-to-Exceed Amount to a Total of $375,000 11. Approval for the Consolidation of the Unscheduled Vacancy on the Utilities Advisory Commission With the Spring 2016 Board and Commission Recruitment 12. Policy and Services Committee Recommendation to Accept the Audit of Parking Funds Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 8:50-10:00 PM 13. Local Funding Strategies for Transportation Demand Management and Other Transportation Programs 10:00-10:30 PM 14. Fiscal Years 2017 to 2026 General Fund Long Range Financial Forecast Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) 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. 4 March 14, 2016 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 Finance Committee Meeting March 15, 2016 City School Committee Meeting March 17, 2016 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Report on Surplus Property Donated to Nonprofit Organizations Transmittal of the CalPERS City of Palo Alto Pension Plan Annual Valuation Reports as of June 30, 2014 Human Relations Commission, Library Advisory Commission, and Utilities Advisory Commission Recruitment Flyer Public Letters to Council Set 1 City of Palo Alto (ID # 6701) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Proclamation- Tsuchiura, Japan Title: Proclamation Welcoming Exchange Students and Chaperones From Tsuchiura, Ibaraki, Japan From: City Manager Lead Department: City Clerk Attachments:  Attachment A: Tsuchiura Japan Proclamation (DOCX) Proclamation WELCOMING EXCHANGE STUDENTS AND CHAPERONES FROM TSUCHIURA, IBARAKI, JAPAN Whereas, exchange programs between middle schools are the foundation of the Sister City program, which attempts to promote international and intercultural understanding amongst our youth; and Whereas, Palo Alto and Tsuchiura City have worked together to involve their respective middle school students and their families in cultural and educational exchanges and special programs; and Whereas, the opportunity to host Tsuchiura students here and to send Palo Alto students to Tsuchiura, Japan has proven to be mutually beneficial; and Whereas, the City of Palo Alto thanks Tsuchiura City for their generosity and hospitality tended toward young people from Palo Alto since 1995. Now, Therefore, I, Patrick Burt, Mayor of the City of Palo Alto, on behalf of the City Council, hereby express our heartfelt welcome and record congratulations and the best wishes of the City of Palo Alto to Ms. Makiho Taguchi, Ms. Natsuko Sakurai and 15 students (Natsuki Akabane, Yumi Uchiyama, Koki Utsuno, Ran Endo, Amane Yamaguchi, Yuki Tateoka, Sara Shinohara, Yukihito Kamikubo, Chinatsu Kawasaki, Haruka Sakai, Naoya Suzuki, Haruka Inami, Miho Oishi, Haruka Watanabe, and Ririka Hoshi). PRESENTED: March 14, 2016 SIGNED: _________________________________ Patrick Burt, Mayor City of Palo Alto (ID # 6427) City Council Staff Report Report Type: Study Session Meeting Date: 3/14/2016 Summary Title: Downtown Transportation Management Association Study Session Title: Update on the Formation of the Downtown TMA (Transportation Management Association) From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council receive and review the report on the Palo Alto Transportation Management Association. This is a study session, and no action is requested. Executive Summary Since 2013, the City has been actively engaged in developing Transportation Demand Management (TDM) strategies to encourage alternatives to solo driving to address Palo !lto’s growing traffic and parking concerns. A City Council colleagues memo dated October 3, 2013 resulted in Council direction to convene a study session and develop an initial recommendation related to goals of reducing traffic and parking demand. On December 9, 2013 Council held a study session with representatives of Google, Contra Costa Centre and Stanford University, all considered Bay Area leaders in applying TDM strategies, to better understand their respective programs and their potential application to Palo !lto’s challenges. The ity ouncil subsequently requested a staff analysis and recommendation regarding establishment of a Transportation Management Association (TMA) for Palo Alto, and on February 24, 2014, directed staff to move forward with the steps necessary to form the organization. The Transportation Management Association (TMA) Steering Committee, a consortium of local employers (including the City of Palo Alto) with resident representatives, worked through 2015 to develop the vision, mission and goals intended for a new TMA. Led by a consultant team with significant experience in developing TMAs in the bay area, the team conducted the first comprehensive commute survey for Downtown, discussed potential funding sources for City of Palo Alto Page 1 ongoing programs, the need to provide services for lower wage workers in the Downtown, a variety of rideshare pilot programs and the preferred structure for TMA formation. The group voted in November to incorporate as a 501(c)3 non-profit and will have a fiscal sponsor who will collect monies on behalf of the organization, the Silicon Valley Community Foundation (SVCF). The TMA had its first official Board meeting on January 28th, and this report summarizes some of the key activities of the TM! Steering ommittee and the oard’s plan for action in 2016. As a major employer Downtown, the City is a key member of the TMA Board of Directors, and its input and participation will be critical to the TM!’s operations and success. Background & Discussion What is a TMA? A TMA is a business-member funded organization that develops, markets, manages and advocates for effective transportation programs. TMAs are formed in a variety of ways, but they generally share the common goals of reducing single-occupant vehicle trips, reducing congestion and demand for parking, and improving quality of life by reducing greenhouse gas emissions. Some other benefits of TMAs include: - TM!’s can provide a comprehensive approach to managing transportation needs in a particular area, and a framework for multiple constituents to work collaboratively on these solutions. -TM!’s can fund and offer branded services to both residents and commercial businesses cost-effectively and efficiently through a network of alliances and partnerships. Providing a one-stop resource with consistent messaging and promotion is a hugely important ‘customer service’ factor that affects awareness and utilization of TDM programs and services. In the larger context, having a TMA positions Palo Alto to work cooperatively with neighboring cities and other agencies in providing a flexible array of programs and services. While the Palo Alto TMA will initially be focused on the Downtown area, transportation programs are by nature connective and provide benefit to areas outside their targeted region. Because travel routes used by residents, employees and visitors typically cross neighborhood and city boundaries, having a TMA that recognizes key linkages is critical to developing quality programs and services. For example, Palo !lto’s TM! was developed with the idea of initially developing programs to support Downtown employee commutes, but this focus will also provide reciprocal benefit to Palo Alto Downtown residents who may be travelling the opposite way to work; e.g. to worksites in neighboring cities. City of Palo Alto Page 2 An effective TMA can have significant measurable benefits such as:  Reducing the number of single-occupancy-vehicle (SOV) trips made within and through Palo Alto, which reduces traffic congestion and the demand for parking;  Reducing the need to build new parking facilities;  Reducing total vehicle miles traveled (VMT);  Reducing greenhouse gas emissions generated both locally and at the regional level, which contributes to Palo !lto’s sustainability goals. A TMA also provides a forum for public and private entities and businesses of all sizes to work together on transportation programs. Generally, larger companies fund the majority of the cost of programs for the benefit of smaller companies. Because larger companies have more employees and hence contribute more to traffic congestion, they have more of a vested interest to work towards reducing single occupant vehicle trips. TM!’s are structured in a variety of ways. Some operate with a membership- for- services model, where a company pays membership dues based on its size and business category. Some TM!’s sell access to a collection of programs available at different levels of financial support (bus services, rideshare discounts, carshare programs, or discounted transit passes, as examples). Others receive funding from their cities, counties, and other sources and provide information and some services to all companies within the TM!’s service area. Still others are hybrids, receiving some public and some private funding- providing some ‘free’ services to everyone and charging for other programs. Some TM!’s (as well as Transportation programs such as Stanford’s) receive funding from parking fees for their TDM programs and services. Formation of the Palo Alto TMA The ity engaged a consultant group with significant experience designing ay !rea TM!’s- MIG with TMA expert Wendy Silvani. This team recommended that Palo Alto follow a standard approach of engaging a Steering Committee which would develop a work plan, mission statement for the TMA, evaluate pilots for start-up programs, and propose a structure for the TM!’s ultimate oard of Directors. !t the request of the ity, this Steering Committee, a consortium of 12+ local employers, community and residential representatives, and the City of Palo Alto, worked through 2015 to develop the vision, mission and goals for the new TMA. Last May, this team partnered with EMC research to conduct the first comprehensive commute survey for Downtown which provided the basis for the TM!’s initial priorities. The group also discussed potential funding sources for ongoing programs, the need to provide services for lower wage workers in the Downtown, and learned about a variety of rideshare pilot programs. City of Palo Alto Page 3 It determined the preferred structure for TMA formation and voted in November to incorporate as a 501(c)3 non-profit and has a fiscal sponsor who will collect monies on behalf of the organization, the Silicon Valley Community Foundation (SVCF). This structure will enable the TMA to seek funding from many public and private foundations and other financial supporters; it also gives the new TMA and its supporters the assurance of professional accounting, reporting and other administrative management. The TMA officially incorporated at the start of January and had its first official Board meeting on January 28th, 2016. Structure of the Palo Alto TMA Board Based on Business Registry data, employers with 100+ employees account for over 70% of all employees who work in Downtown Palo Alto. These companies have the greatest potential to fund and adopt TDM programs that will make a difference in reducing SOV commutes and parking demand. These companies are of sufficient size to be able to take advantage of bulk transit pass programs, and have budgets to fund TDM programs for their employees. The 2015 commute survey results also indicated that employees who work for larger companies are among the ‘most likely’ to change behavior – they live in places where transit and other non- SOV commuting is an option and they work schedules conducive to using alternatives, etc. The initial structure of the Palo Alto TMA Board has 3 large companies (300+ employees based in Palo Alto) - the City, Google, and Palantir; two medium sized companies (the Garden Court hotel and IDEO), and one small company (Philz Coffee). This ratio reflects the Business Registry data; it is flexible and designed to be inclusive, but also to ensure Board members support the TMA at a level that will provide a basis for the TMA to be successful through their financial commitments. Although Google does not have employees in Downtown currently, they are an active regional partner (they have offices in Palo Alto in the Research Park) and have significant experience in developing transportation programs which achieve sizeable SOV reduction. In addition, while the focus of the TMA is initially in the Downtown areas, the Steering Committee acknowledged that regional commute factors influence the Downtown and ultimately the focus of the TMA may expand beyond these boundaries. There are also Google employees who are residents of Downtown that could use TM! services in the “empty” direction (e.g. heading out of Downtown), which makes the services more efficient and effective. Financial Contributions and Board Size The Steering ommittee’s consultant was able to provide recommendations from an attorney who has worked on establishment of many similar organizations, and that attorney ultimately City of Palo Alto Page 4 drafted the incorporation documents and bylaws. The consultant and attorney strongly recommended that all Board members be required to make a contribution to the organization to minimize risk exposure for the organization, a contribution which is separate from membership dues which would be paid by organizations who would become members of the TMA and take advantage of the services that it sells. The Steering Committee was unanimous in not wanting the TMA to spend time trying to sell and collect nominal ‘dues’ from the many small businesses, or searching for the basics – i.e., the salary of its Executive Director. Instead, they want the Director to focus on funding for programs, marketing and managing those programs. The current Board is deliberately small, with six members who are committed to the successful rollout of programs on a ‘fast track’ that will benefit the entire downtown community. As the TMA develops, it can easily increase the size of its Board to include others. Currently, the Large Employer Board contribution is $10,000 annually, the Medium-Sized Employer Board contribution is $2,500 annually, and the Small Employer Board contribution is $1,000 annually. The Board is expected to set membership dues within the next several weeks. Advisory Committee(s) The Board will encourage participation from other companies in the TMA through an Advisory Committee. The structure of how this committee would operate is yet to be determined; it could take the shape of committees for various projects (i.e., those interested in a Lyft pilot or just the transit pass program). The Steering Committee expects that the structure for the Advisory Committee will evolve over the next few months. The requirement for a financial contribution/membership fee to the TMA would not apply to an advisory committee to ensure participation by anyone who is interested. Feedback Mechanisms The TMA Board will have feedback mechanisms for all TMA-sponsored programs so anyone can provide input, suggestions, and ideas based on their experience as the Board designs, evaluates, and refines programs and services. The focus of the TM!’s initial programs will be on offering direct subsidies to many employees whose employers can’t provide commute benefits because they are ‘too small’, and encouraging the 100+ employers for whom offering transportation benefits is realistic to do so. Other Examples It is commonplace for a City to have a seat on the Board of the TMA and to provide funding. The following TMAs are Bay Area examples: 1. City of Emeryville: The City of Emeryville provided the bulk of funding for the first 3 years for the Emery-Go-Round TMA at 90%, 75%, then 50% of the total budget, and was City of Palo Alto Page 5 also on the Board. When the TMA became part of the PBID, the City became ex-officio on the Board (no vote). 2. San Mateo Corridor TMA: The City of San Mateo is on the Board and helps fund the TMA. 3. Alameda Landing TMA: The City of Alameda has 2 representatives on the Board and is providing funding for the TMA. The ity ouncil will receive an annual report on the TM!’s activities each year. The ity’s funding will be important in initial years for the launch of TMA programs, and the City Council can provide requested funding concurrent with requests for expansion of the Board, establishment of the Advisory Committee, or pilot projects, as examples. In this way the City can influence the TM!’s programs and direction. 2016 Board Workplan While the TMA is still in fledgling stage, the group agreed to continue to work with the MIG/Silvani consulting team while recruiting for an Executive Director for the organization. Top priorities for the Board include: 1. Recruitment of an Executive Director. The ED will replace the consultant team hired by the City as the leader of the organization. While the Board members are not expected to have TDM experience, this will be a key component of the employment requirements for the ED 2. Launch of a pilot program that subsidizes low-income Downtown workers with transit passes. Prior to the incorporation of the organization, the TMA Steering Committee spent several months exploring a variety of pilot programs to determine which offered the most immediate value to the Downtown, and a low-income worker transit pass subsidy program was ultimately determined to have the most immediate impact. Stanford’s Sustainable ities class has been working with the TM! to develop the parameters of a pilot transit pass program. The students speak Mandarin and Spanish and will be able to support outreach to workers who require those languages. This program could launch as early as April or May depending on the position of the Board. The Board will be discussing the details of the proposal at their meeting on March 3. SOV Trip Goal Reduction The TMA Steering Committee felt that specific numeric goals should be set for individual programs (i.e., targeting a number of employees for the low income transit subsidy; another number for another pilot program such as Lyft subsidies, etc.) This will allow the TMA to adjust/refine/create programs against specific participation, and help the City achieve its 30% reduction goal. On an annual basis, a 30% reduction from the current overall 55% SOV trip rate is 1650 people. Broken up over a 4 year period, that equates to 412 people a year; over 5 years City of Palo Alto Page 6 330 people. The TMA Board believes that achieving this type of reduction over a 4-5 year period is a reasonable target. Policy Implications Development of a TMA is consistent with the following Comprehensive Plan Policies:  Goal T-1: Less Reliance on Single-Occupant Vehicles  Policy T-3: Support the development and expansion of comprehensive, effective programs to reduce auto use at both local and regional levels. Resource Impact In order to submit for IRS incorporation, the TMA developed a draft budget to guide its development. Projected expenses for 2016 are listed below. The TMA is a separate organization with its own revenues and expenses, so while the City will be asked to contribute resources to the TMA for program development, ultimately the organization will have multiple sources of revenue. The TM!’s proposed budget is shown in Table 1, below. Table 1. TMA Proposed Draft Budget* Executive Director Salary (Part-time, assumed starting in June) $40,000 Annual Commute Survey, included in existing consultant contract $33,000 SVCF processing fees, included in existing contract $11,400 Legal Fees for IRS filing, included in IRS contract $2,500 Low Income Transit Pass Program – assumes 120 passes per month @ $75 each for 6 months; program still in development $54,000 Marketing $10,000 General Office Supplies $2,500 Miscellaneous and Other Programs $28,000 TOTAL $182,000 *This budget estimate is for the independent non-profit TMA and is not meant to reflect City budgetary commitments or requests. City of Palo Alto Page 7 Staff will be making a budget request for $100,000 to City Council to support the TMA as part of the FY2017 budget process. This $100,000 includes $90,000 to cover overhead expenses and other costs noted above, and the requested $10,000 large employer contribution. Additionally, City staff are working on an agreement with the TMA to provide up to $100,000 in funds that were budgetted by the City in FY2016 for TMA pilot programs. Funded pilot programs could include the transit-pass subsidy program, a pilot with Lyft, and possibly development of a “commuter wallet” Mobility !s ! Service (MaaS) product. Several smaller employers have also made contributions amounting to $32,000 for development of a low-income transit subsidy program, and Google, Palantir and the Garden Court Hotel have pledged their Board Contributions (total $22,500). Timeline The TMA officially launched in January 2016. It is expected to roll-out a low-income transit subsidy in April or May of 2016. Other programs will be contingent on funding and the direction of the TMA Board. Attachments:  Attachment A: EMC Final Report on Downtown Survey (PDF)  Attachment B: Palo AltoTMA Board Packet Feb16th (PDF) City of Palo Alto Page 8 Do w n t o w n P a l o A l t o Mo d e S p l i t S u r v e y Ma y 2 0 1 5 "UUBDINFOU" Me t h o d o l o g y ` 1, 1 7 3 s u r v e y s c o n d u c t e d w i t h e m p l o y e e s a t b u s i n e s s e s l o c a t e d w i t h i n a n a r e a o f Do w n t o w n P a l o A l t o b o u n d b y E l C a m i n o Re a l , W e b s t e r S t r e e t , E v e r e t t A v e n u e , a n d Fo r e s t A v e n u e . ` Th e s u r v e y p a r t i c i p a t i o n r a t e w a s 4 4 % , w h i c h r e p r e s e n t s t h e t o t a l n u m b e r o f c o m p l e t e d su r v e y s c o m p a r e d t o t h e t o t a l n u m b e r o f e m pl o y e e s a t p a r t i c i p a t i n g b u s i n e s s e s . T h e ov e r a l l r e s p o n s e r a t e w a s 1 2 % , w h i c h r e p r e s e n t s t h e t o t a l n u m b e r o f c o m p l e t e d s u r v e y s co m p a r e d t o t h e t o t a l n u m b e r o f e m p l o y e e s i n D o w n t o w n P a l o A l t o . ` A s t r a t i f i e d r a n d o m s a m p l e o f w o r k s i t e s w a s p u l l e d b y w o r k s i t e s i z e , i n c l u d i n g s m a l l , me d i u m a n d l a r g e b u s i n e s s e s . S a m p l e d w o r k s i t e s w e r e c o n t a c t e d d i r e c t l y t o i d e n t i f y a n d re c r u i t a n o n s i t e s u r v e y c o o r d i n a t o r w h o d i s t ri b u t e d t h e s u r v e y s t o a l l e m p l o y e e s a t t h e i r re s p e c t i v e w o r k s i t e s . ` Th e s u r v e y w a s o f f e r e d i n o n l i n e a n d p a p e r fo r m a t s f o r e m p l o y e e s o f b u s i n e s s e s w i t h 5 or m o r e e m p l o y e e s , a n d w a s c o n d u c t e d b y t e l e p h o n e w i t h e m p l o y e e s o f b u s i n e s s e s w i t h 4 o r f e w e r e m p l o y e e s . ` Da t a c o l l e c t i o n b e g a n M a y 4 th an d e n d e d t h e w e e k o f M a y 2 5 th . E a c h r e s p o n d e n t w a s as k e d c o m m u t e m o d e q u e s t i o n s f o r o n e c a l e n d a r w e e k p r e v i o u s t o t h e d a t e o n w h i c h th e y t o o k t h e s u r v e y . 15 - 5 5 9 1 P a l o A l t o T M A | 2 Do w n t o w n P a l o A l t o Fo r t h i s s t u d y , D o w n t o w n P a l o A l t o w a s d e f i n e d a s t h e a r e a b o u n d b y E l C a m i n o R e a l , We b s t e r S t r e e t , E v e r e t t A v e n u e , a n d F o r e s t A v e n u e . 15 - 5 5 9 1 P a l o A l t o T M A | 3 Mo d e s o f Tr a n s p o r t a t i o n Mo d e S h a r e - O v e r a l l Mo r e t h a n h a l f ( 5 5 % ) o f t h e t r i p s t a k e n i n t o d o wn t o w n a r e s i n g l e - o c c u p a n t - v e h i c l e t r i p s . %’ s r e f l e c t t h e t o t a l a m o u n t o f t r i p s t a k e n du r i n g t h e w e e k Dr o v e a l o n e Ca l t r a i n Wa l k e d Ro d e a b i c y c l e Ca r p o o l e d Wo r k e d r e m o t e l y Ot h e r 55 % 17 % SO V T o t a l : 55 % 8% In c l u d e s d r i v e a l o n e a n d m o t o r c y c l e Tr a n s i t T o t a l : 1 9 % In c l u d e s b u s a n d r a i l 7% No n - m o t o r i z e d T o t a l : 1 5 % In c l u d e s w a l k i n g a n d r i d i n g a b i c y c l e 5% 5% 3% Q1 . T h i n k i n g b a c k t o l a s t w e e k , wh a t m o d e o f t r a n s p o r t a t i o n d i d y o u u s e t o c o m m u t e T O do w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 7 Mo d e S h a r e b y W o r k s i t e S i z e As b u s i n e s s s i z e d e c r e a s e s , t h e pe r c e n t a g e o f S O V t r i p s i n c r e a s e s . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d r e m o t e l y / O t h e r 74 % 61 % 41 % 25 % 22 % 14 % 12 % 8% 7% 7% 8% 7% 6% 5% 4% 1- 2 5 e m p . ( 2 4 % ) 26 - 1 0 0 e m p . ( 3 2 % ) 10 1 + e m p . ( 4 4 % ) Bu s i n e s s S i z e b y N u m b e r o f E m p l o y e e s Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c e n t a g e o f t h e s a m p l e fo r e a c h r e s p e c t i v e s u b g r o u p . Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 8 Mo d e S h a r e b y S e l f - R e p o r t e d C o m m u t e D i s t a n c e As t h e d i s t a n c e f r o m D o w n t o w n i n c r e a s e s , m o d e s h i f t s t o w a r d t r a n s i t . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 69 % 52 % 40 % 38 % 30 % 19 % 11 % 7% 6% 5% 6% 5% 5% 4% 1% <1 t o 1 0 ( 4 5 % ) 10 t o 5 0 ( 3 5 % ) 50 + ( 2 0 % ) Di s t a n c e T r a v e l e d i n M i l e s (s e l f - r e p o r t e d ) Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c e n t a g e o f t h e s a m p l e fo r e a c h r e s p e c t i v e s u b g r o u p . Av e r a g e D i s t a n c e T r a v e l e d : Ov e r a l l = 1 5 . 8 m i l e s | S O V = 1 5 . 9 m i l e s | T r a n s i t = 2 3 . 5 m i l e s Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 9 Mo d e S h a r e b y H o m e G e o g r a p h y Co m m u t e r s f r o m S a n F r a n c i s c o a r e t h e l e a s t l i k e l y t o d r i v e . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 76 % 70 % 65 % 63 % 48 % 41 % 20 % 18 % 16 % 12 % 12 % 10 % 9% 7% 6% 6% 5% 5% 3% 3% 3% 1% 1% 0% 0% Sa n F r a n c i s c o ( 1 0 % ) P e n i n s u l a ( 2 0 % ) S o u t h B a y ( 3 3 % ) P a l o A l t o ( 2 2 % ) E a s t B a y ( 7 % ) Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c en t a g e o f t h e s a m p l e f o r e a c h r e s p e c t i v e su b g r o u p . Re f u s e d t o r e p o r t = 8 % Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 10 Mo d e S h a r e b y A g e a n d P a r e n t a l S t a t u s Ol d e r c o m m u t e r s a n d P a r e n t s a r e m o r e l i k e l y t o d r i v e a l o n e t o w o r k . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 70 % 51 % 20 % 18 % 9% 9% 7% 7% 5% 5% 18 - 4 9 ( 6 6 % ) 50 + ( 1 9 % ) Ag e Re f u s e d t o r e p o r t = 1 5 % 66 % 50 % 20 % 19 % 11 % 8% 8% 7% 7% 4% Pa r e n t ( 2 8 % ) N o n P a r e n t ( 6 8 % ) Pa r e n t a l S t a t u s Re f u s e d t o r e p o r t = 4 % Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c e n t a g e o f t h e s a m p l e fo r e a c h r e s p e c t i v e s u b g r o u p . Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 11 Mo d e S h a r e b y W o r k S t a r t T i m e Co m m u t e r s w i t h f l e x i b l e s c h e d u l e s a r e l e s s l i k e l y t o d r i v e . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 64 % 63 % 49 % 20 % 19 % 15 % 14 % 11 % 8% 9% 8% 7% 5% 5% 2% St a r t a t a s p e c i f i c t i m e ( 3 3 % ) S c h e d u l e is f l e x i b l e ( 5 5 % ) S c h e d u l e v a r i e s ( 1 1 % ) Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c en t a g e o f t h e s a m p l e f o r e a c h r e s p e c t i v e su b g r o u p . Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 12 Mo d e S h a r e b y J o b S t a t u s Pa r t - t i m e e m p l o y e e s a r e m o r e l i k e l y t o d r i v e . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 75 % 66 % 53 % 19 % 16 % 14 % 11 % 8% 7% 7% 6% 5% 5% 4% 3% On e f u l l - t i m e j o b ( 8 4 % ) O n e p a r t - t i m e j o b ( 8 % ) M o r e t h a n o n e j o b ( 6 % ) Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c en t a g e o f t h e s a m p l e f o r e a c h r e s p e c t i v e su b g r o u p . Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 13 Mo d e S h a r e b y B u s i n e s s T y p e Em p l o y e e s i n R e t a i l , R e s t a u r a n t , a n d H o s p i t a li t y c o m p a n i e s a r e m o r e l i k e l y t o d r i v e . Dr o v e a l o n e Ca l t r a i n Wa l k / B i k e Ca r p o o l e d Wo r k e d R e m o t e l y / O t h e r 78 % 72 % 73 % 67 % 59 % 33 % 31 % 26 % 20 % 14 % 13 % 10 % 9% 10 % 10 % 10 % 7% 7% 7% 8% 7% 6% 6% 5% 4% 3% 2% 2% 1% 1% Re t a i l ( 7 % ) G o v e r n m e n t ( 9 % ) T e c h n o l o g y ( 3 9 % ) R e s t a u ra n t ( 1 2 % ) H o s p i t a l i t y ( 1 6% ) L i g h t O f f i c e ( 1 1 % ) Nu m b e r s i n p a r e n t h e s e s r e p r e s e n t t h e p e r c en t a g e o f t h e s a m p l e f o r e a c h r e s p e c t i v e su b g r o u p . Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? 15 - 5 5 9 1 P a l o A l t o T M A | 14 Dr i v e A l o n e M o d e R a n k e d Re s p o n d e n t s w h o l i v e i n t h e E a s t B a y , a r e e m p l o y e d p a r t t i m e , a n d w o r k a t a s m a l l co m p a n y a n d r e t a i l c o m p a n y a r e m o r e l i k e l y t o d r i v e a l o n e . 73 % 72 % 70 % 67 % 66 % 66 % 65 % 64 % 63 % 63 % 61 % 59 % 55 % 53 % 51 % 50 % 49 % 41 % 41 % 33 % 18 % Re t a i l Ea s t B a y On e p a r t - t i m e j o b 1- 2 5 e m p . Ho s p i t a l i t y Re s t a u r a n t Ag e 5 0 + Li g h t o f f i c e Pa r e n t Mo r e t h a n o n e j o b So u t h B a y St a r t a t s p e c i f i c t i m e Sc h e d u l e v a r i e s Pe n i n s u l a 26 - 1 0 0 e m p . Go v e r n m e n t Ov e r a l l On e f u l l - t i m e j o b A g e 1 8 - 4 9 No n P a r e n t Sc h e d u l e i s f l e x i b l e 10 1 + e m p . Pa l o A l t o Te c h n o l o g y Sa n F r a n c i s c o 78 % 76 % 75 % 74 % Pe r c e n t a g e o f S O V tr i p s b y e m p l o y e e de m o g r a p h i c s 15 - 5 5 9 1 P a l o A l t o T M A | 15 Q1 . T h i n k i n g b a c k t o l a s t w e e k , w h a t mo d e o f t r a n s p o r t a t i o n di d y o u u s e t o c o m m u t e T O d o w n t o w n P a l o A l t o ? Tr a n s p o r t a t i o n At t i t u d e s Dr i v i n g A t t i t u d e s Tw o - t h i r d s ( 6 7 % ) o f d r i v e r s s a y t h e y p r e f e r t o d r i v e a n d p l a n o n co n t i n u i n g t o d o s o . Am o n g S O V D r i v e r s , 7 7 2 n St r o n g l y So m e w h a t To t a l ag r e e a g r e e Ag r e e I p r e f e r t o d r i v e t o w o r k a n d p l a n o n co n t i n u i n g t o d o s o . I n e e d t o d r i v e t o w o r k b e c a u s e I m a k e o t h e r st o p s , s u c h a s f o r s c h o o l , k i d s , o r o t h e r er r a n d s , b e f o r e o r a f t e r w o r k . I w o u l d r a t h e r n o t d r i v e t o w o r k , b u t I h a v e n o ot h e r g o o d o p t i o n s . I n e e d t o d r i v e t o w o r k b e c a u s e I u s e m y c a r fo r m e e t i n g s , d e l i v e r i e s , o r o t h e r w o r k - r e l a t e d ta s k s . I w o u l d t a k e a c a r p o o l o r v a n p o o l t o w o r k i f i t wa s c o n v e n i e n t , s a f e , a n d e a s y t o f i n d . 42 % 35 % 27 % 23 % 13 % 24 % 25 % 23 % 20 % 22 % 67 % 60 % 50 % 44 % 35 % Q1 0 - Q 2 0 . P l e a s e i n d i c a t e w h e t h e r y o u s t r o n g l y a g r e e , s o m e w h a t a g r e e , s o m e w h a t di s a g r e e , o r s t r o n g l y d i s a g r e e w i t h e a ch o f t h e f o l l o w i n g s t a t e m e n t s . 15 - 5 5 9 1 P a l o A l t o T M A | 17 Tr a n s i t A t t i t u d e s Sc h e d u l e , f r e q u e n c y , a n d c o n v e n i e n c e a p p e a r t o be s l i g h t l y l a r g e r o b s t a c l e s t o i n c r e a s i n g tr a n s i t r i d e r s h i p t h a n c o s t . Am o n g S O V D r i v e r s , 7 7 2 n St r o n g l y So m e w h a t To t a l ag r e e a g r e e Ag r e e I w o u l d t a k e t r a n s i t t o w o r k i f t h e s e r v i c e wa s f a s t e r o r m o r e f r e q u e n t . I w o u l d t a k e t r a n s i t t o w o r k i f t h e s c h e d u l e wa s b e t t e r a n d i t r a n w h e n I n e e d e d i t . I w o u l d t a k e t r a n s i t t o w o r k i f i t w a s e a s i e r to g e t t o a t r a n s i t s t o p . I w o u l d t a k e t r a n s i t t o w o r k i f i t w a s l e s s ex p e n s i v e o r I w a s g i v e n a d i s c o u n t e d tr a n s i t p a s s . 47 % 46 % 26 % 25 % 24 % 22 % 21 % 20 % 19 % 16 % 43 % 38 % Q1 0 - Q 2 0 . P l e a s e i n d i c a t e w h e t h e r y o u s t r o n g l y a g r e e , s o m e w h a t a g r e e , s o m e w h a t di s a g r e e , o r s t r o n g l y d i s a g r e e w i t h e a ch o f t h e f o l l o w i n g s t a t e m e n t s . 15 - 5 5 9 1 P a l o A l t o T M A | 18 Ag r e e : W o u l d R a t h e r N o t D r i v e Dr i v e r s w h o f e e l t h e y h a v e n o o t h e r g o o d o p t i on s b e l i e v e t r a n s i t w i l l n o t f i t t h e i r s c h e d u l e or i s n o t c o n v e n i e n t f o r t h e m . Am o n g t h e 5 0 % o f S O V D r i v e r s w h o w o u l d p r e f e r n o t t o dr i v e b u t f e e l t h e y h a v e n o o t h e r g o o d o p t i o n s . Ag r e e I wo u l d t a k e t r a n s i t i f s e r v i c e w a s f a s t e r / m o r e f r e q u e n t 63 % I w o u l d t a k e t r a n s i t if t h e s c h e d u l e w a s b e t t e r / i t r a n w h e n I n e e d i t 61 % I wo u l d t a k e t r a n s i t i f i t w a s e a s i e r t o g e t t o a s t o p 59 % I w o u l d t a k e t r a n s i t i f i t w a s l e s s ex p e n s i v e o r I r e c e i v e d a d i s c o u n t e d p a s s 47 % Q1 0 - Q 2 0 . P l e a s e i n d i c a t e w h e t h e r y o u s t r o n g l y a g r e e , s o m e w h a t a g r e e , s o m e w h a t di s a g r e e , o r s t r o n g l y d i s a g r e e w i t h e a ch o f t h e f o l l o w i n g s t a t e m e n t s . 15 - 5 5 9 1 P a l o A l t o T M A | 19 Re a s o n s f o r N O T T a k i n g T r a n s i t Ne e d o f a c a r , p e r s o n a l p r e f e r e n c e , a n d l a ck o f c o n v e n i e n c e a r e t h e p r i m a r y r e a s o n s dr i v e r s d o n o t t a k e t r a n s i t m o r e o f t e n . Am o n g S O V D r i v e r s , 7 7 2 n Ne e d c a r f o r e r r a n d s / m e e t i n g s I p r e f e r t o d r i v e Sc h e d u l e i s n o t c o n v e n i e n t Ro u t e s n o t w h e r e n e e d e d St o p s n o t c o n v e n i e n t Ta k e t r a n s i t a s n e e d e d To o e x p e n s i v e Un r e l i a b l e It w o u l d t a k e l o n g e r Ot h e r / D o n ' t k n o w 21 % 17 % 16 % 12 % 12 % 5% 5% 4% 2% 6% 21 . W h a t i s t h e m a i n r e a s o n y o u do n o t t a k e t r a n s i t m o r e o f t e n ? 15 - 5 5 9 1 P a l o A l t o T M A | 20 Bi k i n g a n d W a l k i n g A t t i t u d e s Be t t e r r o u t e s a n d b e t t e r p a r k i n g / s t o r a g e op t i o n s a p p e a r t o b e a f a c t o r f o r s o m e co m m u t e r s w h o p o t e n t i a l l y l i v e c l o s e en o u g h t o w a l k o r b i k e t o w o r k . %’ s r e f l e c t t h e t o t a l a m o u n t o f t r i p s t a k e n du r i n g t h e we e k a m o n g t h o s e w h o l i v e w i t h i n a 3 m i l e r a d i u s Dr o v e a l o n e 43 % Wa l k e d 26 % Ro d e a b i c y c l e 19 % Ca r p o o l e d 5% Wo r k e d r e m o t e l y 3% Ot h e r 3% Ca l t r a i n 1% Am o n g r e s p o n d e n t s w h o l i v e w i t h i n a 3 mi l e r a d i u s o f D o w n t o w n P a l o A l t o , 3 2 6 n St r o n g l y So m e w h a t To t a l ag r e e a g r e e Ag r e e I w o u l d w a l k o r b i k e t o wo r k i f t h e r e w e r e b e t t e r 23 % 17 % 40 % pa t h s , t r a i l s , a n d si d e w a l k s . I w o u l d b i k e t o w o r k i f th e r e w a s b e t t e r p a r k i n g 16 % 16 % 32 % or s t o r a g e o p t i o n s f o r m y bi k e a t m y w o r k l o c a t i o n . Q1 0 - Q 2 0 . P l e a s e i n d i c a t e w h e t h e r y o u s t r o n g l y a g r e e , s o m e w h a t a g r e e , s o m e w h a t di s a g r e e , o r s t r o n g l y d i s a g r e e w i t h e a ch o f t h e f o l l o w i n g s t a t e m e n t s . 15 - 5 5 9 1 P a l o A l t o T M A | 21 Pa r k i n g Pa r k i n g Mo r e t h a n h a l f o f c o m m u t e r s p a r k i n pu b l i c o r p r i v a t e g a r a g e s o r l o t s ; fi f t e e n p e r c e n t p a r k on n e i g h b o r h o o d s t r e e t s . 30 % 21 % 15 % 4% 3% 2% 24 % Pu b l i c g a r a g e Pr i v a t e / e m p l o y e r Ne i g h b o r h o o d It v a r i e s I n a 2 - o r 3 - h o u r Ca l t r a i n p a r k i n g l o t O t h e r / D K / or p a r k i n g l o t ga r a g e o r p a r k i n g st r e e t s on - s t r e e t p a r k i n g Do n ’ t d r i v e lo t zo n e Wh e r e d o y o u t y p i c a l l y p a r k w h e n y o u d r i v e t o w o r k ? 4. 15 - 5 5 9 1 P a l o A l t o T M A | 23 Pa r k i n g b y W o r k s i t e S i z e Co m m u t e r s w h o p a r k o n n e i g h b o r h o o d s t r ee t s a r e m o s t l i k e l y t o w o r k f o r a me d i u m - s i z e d b u s i n e s s . Bu s i n e s s S i z e b y N u mb e r o f E m p l o y e e s 1- 2 5 26 - 1 0 0 10 1 + 63 % 26 % 46 % 12 % 34 % 7% 41 % 47 % 25 % Pu b l i c g a r a g e o r Pr i v a t e / e m p l o y e r Ne i g h b o r h o o d pa r k i n g l o t ga r a g e o r p a r k i n g l o t st r e e t s (3 0 % ) (2 1 % ) (1 5 % ) Wh e r e d o y o u t y p i c a l l y p a r k w h e n y o u d r i v e t o w o r k ? 4. 15 - 5 5 9 1 P a l o A l t o T M A | 24 Pa r k i n g b y B u s i n e s s T y p e Co m m u t e r s w h o u s e p u b l i c g a r a g e s a n d l o t s a r e mo r e l i k e l y t o b e G o v e r n m e n t w o r k e r s . Re t a i l Go v ' t Te c h Re s t a u r a n t Ho s p i t a l i t y Li g h t O f f i c e 55 % 28 % 10 % 31 % 29 % 2% 22 % 19 % 12 % 17 % 33 % 18 % 36 % 5% 28 % 35 % 37 % 8% Pu b l i c g a r a g e o r Pr i v a t e / e m p l o y e r Ne i g h b o r h o o d pa r k i n g l o t ga r a g e o r p a r k i n g l o t st r e e t s (3 0 % ) (2 1 % ) (1 5 % ) Wh e r e d o y o u t y p i c a l l y p a r k w h e n y o u d r i v e t o w o r k ? 4. 15 - 5 5 9 1 P a l o A l t o T M A | 25 Co m m u t e r Se g m e n t a t i o n s Dr i v e r S e g m e n t a t i o n Ab o u t h a l f ( 4 9 % ) o f d r i v e r s a r e o p e n t o a l t e r n a t i v e s t o d r i v i n g . Am o n g S O V D r i v e r s , 7 7 2 n Dr i v e a l o n e a n d Dr i v e a l o n e a n d a r e Dr i v e a l o n e b u t El s e al w a y s w i l l op e n t o o t h e r o p t i o n s w o u l d p r e f e r n o t t o 49 % 42 % 24 % 25 % 9% Dr i v e a l o n e a n d a l w a y s w i l l : Dr i v e a l o n e a t l e a s t o n c e a w e e k a n d s t r o n g l y a g r e e t h a t t h e y pr e f e r t o d r i v e a n d p l a n o n c o n t i n u i n g t o d o s o . Dr i v e a l o n e a n d a r e o p e n t o o t h e r o p t i o n s : Dr i v e a l o n e a t l e a s t o n c e a w e e k a n d s o m e w h a t ag r e e t h a t t h e y p r e f e r t o d r i v e a n d p l a n o n c o n t i n u i n g t o d o s o . Dr i v e a l o n e b u t w o u l d p r e f e r n o t t o : Dr i v e a l o n e a t l e a s t o n c e a w e e k a n d d i s a g r e e t h a t t h e y pr e f e r t o d r i v e a n d p l a n o n c o n t i n u i n g t o d o s o . El s e : Dr i v e a l o n e a t l e a s t o n c e a w e e k a n d d i d n o t a n s w e r t h a t t h e y pr e f e r t o d r i v e a n d p l a n o n co n t i n u i n g t o d o s o . 15 - 5 5 9 1 P a l o A l t o T M A | 27 De m o g r a p h i c s T h a t A r e M o s t L i k e l y t o C h a n g e H a b i t s Dr i v e r s i n S a n F r a n c i s c o , w h o w o r k f o r a l a rg e o r T e c h c o m p a n y , h a v e f l e x i b l e w o r k sc h e d u l e s a n d a r e y o u n g e r a r e m o r e l i k e l y to c o n s i d e r o t h e r t r a n s p o r t a t i o n o p t i o n s . 72 % 66 % 62 % 60 % 57 % 53 % 53 % 52 % 52 % 51 % 51 % 51 % 50 % 49 % 49 % 48 % 48 % 47 % 44 % 44 % 43 % 43 % 41 % 41 % 41 % 35 % 32 % 31 % Te c h n o l o g y Sa n F r a n c i s c o 10 1 + e m p . Go v e r n m e n t Wo r k s c h e d u l e i s f l e x i b l e Li g h t o f f i c e Ag e 1 8 - 4 9 Pe a k h o u r c o m m u t e r So u t h B a y Fu l l t i m e w o r k e r Co m m u t e 1 0 t o 5 0 m i l e s No n - P a r e n t Pa l o A l t o Co m m u t e 5 0 + m i l e s Ov e r a l l Ea s t B a y Co m m u t e 1 - 1 0 m i l e s Pa r e n t Re t a i l 26 - 1 0 0 e m p . No n p e a k h o u r c o m m u t e r Pa r t t i m e w o r k e r Pe n i n s u l a St a r t w o r k a t a s p e c i f i c t i m e 1- 2 5 e m p . Ho s p i t a l i t y Ag e 5 0 + Re s t a u r a n t % o f S O V d r i v e r s w h o wo u l d p r e f e r n o t t o dr i v e , b y d e m o s 15 - 5 5 9 1 P a l o A l t o T M A | 28 Ov e r a l l E m p l o y e e L o c a t i o n Th e m a p r e p r e s e n t s t h e pe r c e n t a g e o f d o w n t o w n em p l o y e e s b y h o m e z i p c o d e . 15 - 5 5 9 1 P a l o A l t o T M A | 29 Te c h n o l o g y W o r k e r C o m m u t e r L o c a t i o n Th e m a p r e p r e s e n t s t h e pe r c e n t a g e o f T a r g e t D r i v e r s wh o w o r k f o r t e c h c o m p a n i e s , by h o m e z i p c o d e . 15 - 5 5 9 1 P a l o A l t o T M A | 36 Go v e r n m e n t W o r k e r s C o m m u t e r L o c a t i o n Th e m a p r e p r e s e n t s t h e pe r c e n t a g e o f T a r g e t D r i v e r s wh o w o r k f o r t h e G o v e r n m e n t , by h o m e z i p c o d e . 15 - 5 5 9 1 P a l o A l t o T M A | 37 Co n c l u s i o n s Co n c l u s i o n s ` Cu r r e n t l y j u s t m o r e t h a n h a l f ( 5 5 % ) o f e m p l o y e e t r i p s in t o D o w n t o w n P a l o A l t o a r e S O V t r i p s . – Ne a r l y h a l f ( 4 9 % ) o f t h e s e S O V d r i v e r s e x p r e s s e d a n in t e r e s t i n s e e k i n g a l t e r n a t i v e t r a n s p o r t a t i o n o p t i o n s . – Th o s e m o s t l i k e l y t o s e e k a l t e r n a t i v e o p t i o n s a r e m o r e li k e l y t o w o r k f o r t e c h c o m p a n i e s a n d / o r l a r g e e m p l o y e r s , be y o u n g e r , l i v e m o r e t h a n 1 0 m i l e s f r o m P a l o A l t o , a n d ha v e a f l e x i b l e w o r k s c h e d u l e . – Th e y h a v e c o n c e r n s a b o u t t r a n s i t a s a n a l t e r n a t i v e , w i t h pr i m a r y c o n c e r n s b e i n g a r e a l o r p e r c e i v e d l a c k o f co n v e n i e n c e f o r r o u t e s , s c h e d u l e s , a n d l o c a t i o n s o f s t o p s . Co s t i s a l s o a c o n c e r n f o r s o m e . 15 - 5 5 9 1 P a l o A l t o T M A | 39 Co n t a c t I n f o r m a t i o n To m P a t r a s to m @ e m c r e s e a r c h . c o m 61 4 . 8 2 7 . 9 6 7 7 Sa r a L a B a t t sa r a @ e m c r e s e a r c h . c o m 51 0 . 5 5 0 . 8 9 2 4 Do u g M a c D o w e l l do u g @ e m c r e s e a r c h . c o m 61 4 . 8 2 7 . 9 6 7 3 15 - 5 5 9 1 P a l o A l t o T M A | 40 Attachment B - CITY OF PALO ALTO OFFICE OF THE CITY CLERK March 14, 2016 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the February 22, 23, and 29, 2016 Council Meetings Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS:  Attachment A: 02-22-16 DRAFT Action Minutes (DOC)  Attachment B: 02-23-16 DRAFT Action Minutes (DOC)  Attachment C: 02-29-16 DRAFT Action Minutes (DOC) Department Head: Beth Minor, City Clerk Page 2 CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 6 Special Meeting February 22, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:01 P.M. Present: Berman, Burt, DuBois, Filseth, Holman arrived at 7:25 P.M., Kniss, Scharff, Schmid, Wolbach Absent: Closed Session 1. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (James Keene, Molly Stump, Suzanne Mason, Rumi Portillo, Dania Torres Wong, Alison Hauk) Employee Organizations: Palo Alto Police Officers Association (PAPOA); Palo Alto Police Managers’ Association (PAPMA); Palo Alto Fire Chiefs’ Association (FCA); International Association of Fire Fighters (IAFF), Local 1319; Service Employees International Union, (SEIU) Local 521; Management, Professional and Confidential Employees; Utilities Management and Professional Association of Palo Alto (UMPAPA) Authority: Government Code Section 54957.6(a). MOTION: Council Member Berman moved, seconded by Council Member Kniss to go into Closed Session. MOTION PASSED: 8-0 Holman absent Council went into Closed Session at 6:02 P.M. Council returned from Closed Session at 7:15 P.M. Mayor Burt announced no reportable action. DRAFT ACTION MINUTES Page 2 of 6 City Council Meeting Draft Action Minutes: 2/22/16 Agenda Changes, Additions and Deletions None. Minutes Approval 2. Approval of Action Minutes for the January 30, February 1 and 8, 2016 Council Meetings. MOTION: Council Member DuBois moved, seconded by Vice Mayor Scharff to approve the Action Minutes for the January 30, February 1, and 8, 2016 Council Meetings. MOTION PASSED: 9-0 Consent Calendar MOTION: Council Member Kniss moved, seconded by Council Member Berman to approve Agenda Item Number 3. 3. Resolution 9576 Entitled, “Resolution of the Council of the City of Palo Alto Approving the City of Palo Alto Utilities Legislative Policy Guidelines.” MOTION PASSED: 9-0 Action Items 4. Comprehensive Plan Update: Discussion Regarding Development of a Fifth Scenario With an Improved Jobs / Housing Balance for Inclusion in the Environmental Impact Report and the Overall Project Schedule. MOTION: Council Member Schmid moved, seconded by Council Member XX to include a cap on the increase of square footage in Palo Alto at 100,000 square feet per year as part of a “fifth scenario”. MOTION FAILED DUE TO THE LACK OF A SECOND DRAFT ACTION MINUTES Page 3 of 6 City Council Meeting Draft Action Minutes: 2/22/16 MOTION: Vice Mayor Scharff moved, seconded by Council Member DuBois to direct Staff to develop a “fifth scenario” for analysis in a supplement to the Draft Environmental Impact Report (DEIR) that: A. Adds the sustainability options from the current scenarios, which reduce impacts, including traffic, greenhouse gas impacts, etc.; and B. Includes further mitigations for a scenario that improves the quality of life in Palo Alto by mitigating the impacts of future growth and development; and C. Wherever possible, the scenario will use Palo Alto specific data; and D. Where possible to integrate the Sustainability Climate Action Plan (S/CAP) in the fifth scenario. AMENDMENT: Council Member DuBois moved, seconded by Council Member XX to add to the Motion, “propose a mechanism to use in existing office buildings.” AMENDMENT RESTATED AND INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “evaluating mechanisms for regulating employment densities in existing buildings.” New Part E INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “evaluating regulation triggers if mitigation measures are failing.” New Part F INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “evaluating relaxing regulations if mitigation measures are succeeding.” New Part G INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to Motion Parts F and G, “transportation and parking” after “evaluating.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to combine and restate Parts F and G as, “evaluating transportation and parking regulation triggers if mitigation measures are failing or exceeding expectations.” New Part F DRAFT ACTION MINUTES Page 4 of 6 City Council Meeting Draft Action Minutes: 2/22/16 INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to Motion Part A, “noise” after “greenhouse gas impacts.” AMENDMENT: Council Member Holman moved, seconded by Council Member XX to add to Motion Part B, “along with mitigation enforcement measures” after “further mitigations.” AMENDMENT RESTATED AND INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to Motion Part B, “along with prospective mitigation enforcement measures” after “further mitigations.” AMENDMENT: Council Member DuBois moved, seconded by Council Member XX to add to Motion Part B, “assuming job growth below Scenario 2” after “growth and development.” AMENDMENT FAILED DUE TO LACK OF SECOND INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to Motion Part E, “below Scenario 2 including” after “regulating employment.” AMENDMENT: Council Member Holman moved, seconded Council Member Kniss to add to the Motion after Part E, “evaluate lower General Office and R/D development than Scenario 2” (New Part F) and remove from the Motion Part E, “below Scenario 2 including.” AMENDMENT PASSED: 5-4 Berman, Filseth, Scharff, Wolbach no AMENDMENT: Council Member Holman moved, seconded by Council Member XX to add to the Motion, “direct Staff to return with comments regarding reducing Level Of Service (LOS) impacts to zero.” AMENDMENT FAILED DUE TO THE LACK OF A SECOND AMENDMENT: Council Member Wolbach moved, seconded by Council Member XX to add to the Motion, “evaluate higher housing growth than in Scenario 4.” AMENDMENT FAILED DUE TO THE LACK OF A SECOND DRAFT ACTION MINUTES Page 5 of 6 City Council Meeting Draft Action Minutes: 2/22/16 AMENDMENT: Council Member Schmid moved, seconded by Council Member Wolbach to add to the Motion, “return to the jobs housing balance of 2.5 jobs for each employed resident.” AMENDMENT RESTATED: Council Member Schmid moved, seconded by Council Member Wolbach to add to the Motion, “evaluate a return to the jobs housing balance of 2.5 jobs for each employed resident.” AMENDMENT FAILED: 2-7 Schmid, Wolbach yes MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member DuBois to direct Staff to develop a “fifth scenario” for analysis in a supplement to the Draft Environmental Impact Report (DEIR) that: A. Adds the sustainability options from the current scenarios, which reduce impacts, including traffic, greenhouse gas impacts, noise, etc.; and B. Includes further mitigations along with prospective mitigation enforcement measures for a scenario that improves the quality of life in Palo Alto by mitigating the impacts of future growth and development; and C. Wherever possible, the scenario will use Palo Alto specific data; and D. Where possible to integrate the Sustainability Climate Action Plan (S/CAP) in the fifth scenario; and E. Evaluate mechanisms for regulating employment densities in existing buildings; and F. Evaluate lower General Office and R/D development than Scenario 2; and G. Evaluate transportation and parking regulation triggers if mitigation measures are failing or exceeding expectations. MOTION AS AMENDED PASSED: 8-1 Schmid no DRAFT ACTION MINUTES Page 6 of 6 City Council Meeting Draft Action Minutes: 2/22/16 Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Kniss announced the League of California Cities, Peninsula Division bocce ball event will be held on April 20, 2016. Mayor Burt reported his attendance at the Chinese New Year event at the Mitchell Park Community Center on Sunday. He felt the event highlighted the efforts of Former Mayor Yiaway Yeh in welcoming new members of the community. Adjournment: The meeting was adjourned at 11:46 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 3 Special Meeting February 23, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 3:05 P.M. Present: DuBois, Filseth, Kniss, Schmid, Wolbach Absent: Berman, Burt, Holman, Scharff At this time Council heard Agenda Items 1 and 2 concurrently. Action Items 1. Ordinance 5380 Entitled, “Ordinance of the Council of the City of Palo Alto to add Section 10.50.085 (Eligibility Areas) and to Amend Section 10.50.090 (Modification or Termination of Districts) of the Palo Alto Municipal Code Relating to Residential Parking Programs (FIRST READING: February 1, 2016 PASSED: 5-0 Berman, Burt, Holman, Scharff absent).” 2. Resolution 9577 Entitled, “Resolution of the Council of the City of Palo Alto Amending Resolution 9473 to Implement Phase 2 of the Downtown Residential Preferential Parking District Pilot Program (Continued from February 8, 2016).” Beth Minor, City Clerk advised Mayor Burt, Council Members Berman, Filseth, and Holman, live within the Residential Preferential Parking Permit (RPP) District and Vice Mayor Scharff owns a business property within the RPP District, requiring their recusal from this Agenda Item. Following random selection in February 1, 2016, pursuant to California Code of Regulations Section 18705 (Legally Required Participation), Council Member Filseth will participate in this Agenda Item. Council took a break from 5:06 P.M. to 5:15 P.M. DRAFT ACTION MINUTES Page 2 of 3 City Council Meeting Draft Action Minutes: 2/23/16 MOTION: Council Member Filseth moved, seconded by Council Member DuBois to: A. Adopt a Resolution amending Resolution 9473 to implement Phase 2 of the Downtown Residential Preferential Parking (RPP) District Pilot Program; and B. Direct Staff to make corresponding changes to the Council approved RPP Administrative Guidelines. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “include dailies and scratchers in the Resolution.” New Part C INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “move up Council review to six months.” New Part D INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace Part C of the Motion with, “add to Resolution Section 5(c)(2)(g)(1) ‘no daily or five day scratchers will be sold in Zones 9 and 10’ after ‘be sold randomly.’” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace in the Motion Part D, “six” with “four.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “add to Resolution Section 6.D., a Number 3, ‘reduced rate for Addison Elementary School employees - $100/year.’” New Part E MOTION RESTATED: Council Member Filseth moved, seconded by Council Member DuBois to: A. Adopt a Resolution amending Resolution 9473 to implement Phase 2 of the Downtown Residential Preferential Parking (RPP) District Pilot Program; and B. Direct Staff to make corresponding changes to the Council approved RPP Administrative Guidelines; and DRAFT ACTION MINUTES Page 3 of 3 City Council Meeting Draft Action Minutes: 2/23/16 C. Add to Resolution Section 5(C)(2)(g)(1) “no daily or five day scratchers will be sold in Zones 9 and 10” after “be sold randomly;” and D. Move up Council review to four months; and E. Add to Resolution Section 6.D., a Number 3, “Reduced rate for Addison Elementary School employees - $100/year.” MOTION AS AMENDED PASSED: 5-0 Berman, Burt, Holman, Scharff absent MOTION: Council Member DuBois moved, seconded by Council Member Kniss to adopt an Ordinance of the Council of the City of Palo Alto to add Section 10.50.085 (Eligibility Areas) and to Amend Section 10.50.090 (Modification or Termination of Districts) of the Palo Alto Municipal Code Relating to Residential Parking Programs. MOTION PASSED: 5-0 Berman, Burt, Holman, Scharff absent Adjournment: The meeting was adjourned at 6:31 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 4 Special Meeting February 29, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:05 P.M. Present: Berman arrived at 7:12 P.M., Burt, DuBois, Filseth, Holman, Kniss, Scharff, Schmid, Wolbach Absent: Study Session 1. Finance Committee Recommends the City Council Review the Assessment Results of the Enterprise Resource Planning System (ERP) Needs; Review Recommendation to Plan for the Acquisition of a new Integrated Government-Oriented ERP System and Separate Provisioning of Utilities Billing Systems. Agenda Changes, Additions and Deletions None. Consent Calendar MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to approve Agenda Item Numbers 2-7. 2. Approval and Acceptance of Palo Alto Fire Department Quarterly Performance Report for Second Quarter Fiscal Year 2016. 3. Approval of a Professional Services Contract With Plante & Moran, PLLC in an Amount Not-to-Exceed $359,925 for Enterprise Resource Planning System (ERP) and Utility Billing Planning and System Selection. DRAFT ACTION MINUTES Page 2 of 4 City Council Meeting Draft Action Minutes: 2/29/16 4. Approval of the Acceptance and Expenditure of Citizens Options for Public Safety (COPS) Funds for Various Law Enforcement Equipment and Approval of a Budget Amendment in the Amount of $104,621 for the Supplemental Law Enforcement Services Fund. 5. Authorization to Apply for "Art Works" Grant From the National Endowment for the Arts for Temporary art at Cubberley Community Center. 6. Approval of a Contract With Breneman Inc. in the Amount Not-to- Exceed $250,000 for the Bowden Park Improvements Capital Project PE-13008. 7. Finance Committee Recommends Approval of Amendment to Table of Organization by Adding 1.0 Management Analyst in the Development Services Department. MOTION PASSED: 8-0 Berman absent Action Items 8. PUBLIC HEARING: Adoption of two Ordinances: 1) Ordinance Amending the Palo Alto Municipal Code Regulations Related to Hazardous Materials use, Storage and Handling in the Office, Research and Manufacturing Zoning Districts and Nonconforming Uses and Facilities; and 2) Ordinance Regarding Amortization of Nonconforming Uses at Communications & Power Industries LLC (CPI) Located at 607-811 Hansen Way. Amendments to the Municipal Code Affect the Following Sections and can be Reviewed at the Planning Department’s Offices During Regular Business Hours at 250 Hamilton Avenue, Palo Alto, 5th Floor: a. Chapter 18.04 (Definitions) Section 18.04.030 (66) (A) and (B) and (127.7); b. Chapter 18.20 Office, Research, and Manufacturing [MOR, ROLM, RP and GM] Section 18.20.030 (Land Uses) Table 1 (Industrial/Manufacturing District Land Uses); Section 18.20.040 Subsections (b) and (c); and Section 18.20.050 (Performance Criteria) c. Chapter 18.23 (Performance Criteria for Multiple Family, Commercial, Manufacturing and Planned Community Districts) Section 18.23.100 (Hazardous Materials) Subsection (B) d. Chapter 18.70 (Nonconforming Uses and Noncomplying Facilities) Sections 18.70.020 Through 18.70.100, Including Section 18.70.070 (Nonconforming Use - Required Termination) e. Chapter 17.16 (Hazardous Materials Management Plan) Sections 17.16.010 DRAFT ACTION MINUTES Page 3 of 4 City Council Meeting Draft Action Minutes: 2/29/16 (Hazardous Materials Management Plan) and 17.16.025 (Supplemental Requirements for Emergency Response Plans) and f. Chapter 17.20 (Hazardous Materials Inventory) Section 17.20.020 (Information required). Environmental Assessment: As a Regulatory Action That Would Modify the List of Permitted Uses in Industrial Zones to Protect the Health and Life Safety of Palo Alto Residents, the Proposed Ordinances are Categorically Exempt From Review Under Section 15308 (Class 8, Actions for Protection of the Environment) of the State Guidelines for the California Environmental Quality Act. Public Hearing opened at 7:38 P.M. Public Hearing closed at 7:45 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to: A. Adopt the hazardous materials Ordinance included in the Staff Report as Attachment A; and B. Adopt the amortization Ordinance included in the Staff Report as Attachment C, including the added text referencing a possible agreement between the City and Communications & Power Industries LLC (CPI). MOTION PASSED: 9-0 9. Agreement With Empowerment Institute on Cool Block Small Pilot Program (Continued From February 1, 2016). MOTION: Vice Mayor Scharff moved, seconded by Council Member DuBois to authorize the City Manager or his designee to sign the Cool Block Pilot Memorandum of Understanding between the City of Palo Alto and Empowerment Institute with the deletion of “City of Palo Alto Deliverables” Number 2- “Participate with the Office of Sustainability and other City Staff to integrate the Cool Block Program into the S/CAP strategy and encourage the participation of the S/CAP Advisory Board.” MOTION PASSED: 9-0 DRAFT ACTION MINUTES Page 4 of 4 City Council Meeting Draft Action Minutes: 2/29/16 Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Kniss announced her attendance at the National League of Cities Congressional City Conference in Washington D.C. from March 5 through March 8. She reminded Council Members of the League of California Cities, Peninsula Division bocce ball event being held on April 20, 2016. She will attend the Cities Association of Santa Clara County Board of Directors Meeting on March 10. She has submitted her name to continue serving on the Bay Area Air Quality Management District. Vice Mayor Scharff advised that Council Member Kniss may be elected as Chair of the Bay Area Air Quality Management District. He reminded Council Members to participate in a survey relating to the merger of the Association of Bay Area Governments (ABAG) and Metropolitan Transit Commission (MTC). He attended an ABAG meeting on this topic on Friday. He is also attending the National League of Cities Congressional City Conference along with the American Public Power Association meeting during the same trip. Mayor Burt will also be attending the National League of Cities Congressional City Conference and plans to meet with congressional representatives to discuss airplane noise and other priorities for the City. He had an opportunity to speak at the East Bay Islamic Center on Sunday. The event highlighted the region’s values including community and tolerance. Adjournment: The meeting was adjourned at 9:18 P.M. City of Palo Alto (ID # 6489) City Council Staff Report Report Type: Consent Calendar Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Use of Low Carbon Fuel Standard Credits to Encourage Electric Vehicles Title: Approval of Master Agreement to Sell Low Carbon Fuel Standards Credits and Utilize the Revenue for the Benefit of Current or Future Electric Vehicle Customers From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council: 1. Approve the attached master agreement (Attachment A) to sell Low Carbon Fuel Standard (LCFS) credits the California Air Resources Board has allocated to Palo Alto to utilize the funds for the benefit of current or future electric vehicle (EV) customers in accordance with LCFS regulations; and 2. Delegate to the City Manager, or his designee, the authority to approve and execute non-substantive and municipal code-compliant changes to the approved LCFS master agreement as needed to finalize LCFS credit sales with counterparties. Executive Summary The California Air Resources Board (CARB) developed the Low Carbon Fuel Standard (LCFS) program in compliance with AB 32 (the Global Warming Solutions Act of 2006) to reduce the carbon intensity of transportation fuels used in California by 10% by 2020. Under the LCFS, providers of alternate fuels generate credits that can be sold to producers of traditional fossil fuels, helping those entities meet AB 32 emission reduction requirements. Electric utilities that provide electricity to charge EVs are eligible to receive LCFS credits based on the number of EVs in their service territory.1 CARB approved the City of Palo Alto Utilities’ (CPAU’s) application to participate in the LCFS program in April 2014, and has been allocating LCFS credits to the CPAU since then. The 2014 credits are currently valued at $200,000. More credits are expected to be allocated to Palo Alto in 2015 as the number of EVs increase. The value of these credits for EV charging could be as much as $600,000 per year by 2020. 1 CARB’s LCFS program overview is provided here: http://www.arb.ca.gov/fuels/lcfs/lcfs.htm City of Palo Alto Page 2 The LCFS program also allows dispensers of compressed natural gas (CNG) to earn LCFS credits. Since the City dispenses CNG at its CNG station at the Municipal Service Center, it is eligible to receive LCFS credits worth about $28,000/year. Staff seeks Council approval of a LCFS master agreement to enable Palo Alto to sell LCFS credits to qualified buyers. The potential buyers of these credits are the suppliers of transportation fuels in California, entities who are required to reduce the carbon content of the fossil fuels they supply in California by 10% by 2020. In order to be eligible to receive LCFS credits for transportation fuel supplied through publicly accessible EV charging stations, the City must use all credit proceeds to benefit current or future EV customers, educate the public on the benefits of EV transportation, provide rates that encourage off-peak charging and minimize grid impacts, and provide CARB with an annual compliance report. Options include providing rebates to EV owners in Palo Alto, and funding the installation of public EV chargers. Proceeds from the sale of LCFS credits for CNG can be used for capital projects to enable greater public access to the City’s CNG station. After seeking input from stakeholders, staff plans to return to Council in the spring of 2016 with a recommendation on how to utilize the LCFS credit funds. Background The Low Carbon Fuel Standard (LCFS) mandate aims to reduce the carbon intensity of transportation fuels used in California by 10% by 2020. The primary method for reducing the carbon content of transportation fuels is by blending standard fuels with fuels such as cellulosic ethanol or biodiesel which have lower carbon intensities. Similarly, electricity and CNG are also recognized as low carbon intensive transportation fuels. After a court ruling that found procedural issues related to the original adoption of the LCFS, CARB re-adopted the LCFS regulation in September 2015, and the changes went into effect on January 1, 2016. The regulation provides for LCFS credits to be generated by electric utilities for providing the electricity for charging EVs. These credits are allocated by CARB based on the number of EVs registered in the electric utility service territory. Palo Alto had approximately 1,200 EVs as of December 2015. Under CARB’s formula, each EV generates approximatively 2 LCFS credits per year. Credits for CNG vehicles are based on the amount of CNG actually dispensed at the City’s fueling station and amount to approximately 3.5 credits per 1000 gallons of gas equivalent (gge) for light duty vehicles and 3.18 credits per 1000 gge for heavy duty vehicles. Discussion Although Palo Alto has a carbon neutral electric supply, Palo Alto receives LCFS credits based on the state’s electricity supply’s mix2. In 2014 CARB allocated CPAU 1,855 credits and in 2015 the 2 The allocation of credits is based on the number of electric vehicles in Palo Alto and several other state level estimated parameters such as carbon content of electricity and number of miles travelled by EVs. City of Palo Alto Page 3 number is expected to increase by about 40%, corresponding to the increase of EVs in Palo Alto. The market price for the credits has increased substantially in recent months with the re- adoption of LCFS regulations by CARB. Prices which hovered around $20/credit in 2014, have increased to $100/credit in December 2015. At a market price of $100/credit, the 1,855 credits currently in Palo Alto’s account with CARB3 have a value of $185,000. If the EV count in Palo Alto increases to 3,000 by 2020, the value of these credits could be close to $600,000/year by the end of the decade. The LCFS regulations and access to these funds are anticipated to remain in place even after 2020. The Public Works Department registered the CNG fueling station at the Municipal Service Center with CARB in February 2016. The CNG fueling station dispenses about 84,000 gge of CNG per year, which is anticipated to result in LCFS credits worth $28,000/year. The value of LCFS credits for CNG could potentially reduce the price of CNG at the pump by 35 cents/gge, or about 15% at prevailing CNG prices. Contractual Form to Sell LCFS Credits & Process to Make the Sale Attachment A provides the master agreement template modified by staff and is based on an industry standard template created by the Leadership for Energy Automated Processing group (LEAP). LEAP is a trade group made up of energy trading entities, whose mission is to promote efficient and automated transaction processing in the industry. The template is freely available for use by LEAP members and has been adopted by other electric utilities in California to facilitate the purchase and sale of LCFS credits. The City Attorney’s Office modified the template to comply with the City’s municipal code and Council-adopted policy, making the following changes: 1. Governing Law changed from New York to California, and the venue for dispute resolution changed to Santa Clara County; 2. Requires the agreement to be publicly accessible in compliance with the Public Records Act; and 3. A number of provisions appropriate for this type of agreement will be selected on the agreement’s coversheet, including: no defaults under other trading agreements shall count as an event of default under this agreement, no cross-default, and bilateral close- out setoff payments are required upon termination. Since staff will sell/transfer credits owned by Palo Alto to buyers through a CARB platform with CARB regulated parties. The credit risk of a buyer not paying for the purchase is minimal and fund transfers must take place within 30 days. Upon approval of the contractual form by Council, staff will make the contract publicly available online and anticipates seeking interest from multiple potential buyers who wish to execute master LCFS agreements and become contractually enabled to buy credits from Palo Alto. Once master agreements are executed with 3 The online tool is called LRT-CBTS, LCFS Reporting Tool and Credit Bank and Transfer System. The tool is used for CARB to deposit credits into Palo Alto accounts. This tool also enables Palo Alto to transfer the credits to the CARB registered entity that buys the credits from Palo Alto. City of Palo Alto Page 4 such buyers, Palo Alto will competitively seek prices from all of the enabled counterparties and transact with the buyer who quotes the highest price. Staff also seeks Council approval for the City Manager or his designee to make non-substantive and municipal code-compliant changes to the LCFS master agreements as needed to finalize LCFS credit sales with counterparties. Use of Funds from the Proceeds of Sale Staff has preliminarily identified a number of options for utilizing the funds that will be realized from the sale of its LCFS credits for the benefit of EV owners. Alternatives include providing rebates directly to EV owners; providing rebates for installing public EV charging stations at multi-family facilities and publicly accessible locations; and discounting fees for EV permits, electric distribution system upgrades or electricity used for EV charging. Options for using the LCFS funds received for dispensing CNG include funding the installation of a credit card reader at the pump to expand the number of CNG vehicle owners that could use the station; funding necessary annual service and maintenance costs at the public CNG station; and reducing the CNG retail rate charged. Staff will return to Council with a recommendation on how to utilize the LCFS funds in the spring of 2016. Resource Impact The sale of LCFS credits is expected to net $200,000 to $600,000 per year through 2020. The administration burden to comply with the regaulatory requirement to disburse these funds to benefit EV owners is anticipated to be approximately $40,000 initially and $20,000 per year thereafter. Current staff resources are sufficient to complete this work. Policy Implications This recommendation is consistent with the Council-approved EV Infrastructure Policy (Staff Report 2360) to facilitate the adoption of EVs in Palo Alto. It is also in line with Council direction to explore ways to facilitate electrification in Palo Alto and is an element of the electrification work plan approved by Council in August 2015 (Staff report 5961). Environmental Review Approval of a master agreement to sell LCFS credits does not meet the definition of a project pursuant to section 21065 of the California Environmental Quality Act (CEQA). Attachments:  Attachment A - Agreement LEAP-LCFS-Master Agreement 2-11-16 (PDF) Page 1 LCFS Agreement Version 1.0 160211 jb 6053668 MASTER AGREEMENT FOR PURCHASING AND SELLING LOW CARBON FUEL STANDARD CREDITS Version 1.0 Effective as of COVER SHEET This Master Agreement for Purchasing and Selling Low Carbon Fuel Standard Credits Version 1.0 (“LCFS Agreement”) together with, and as amended by, this Cover Sheet and any annexes, schedules and written supplements hereto, and all Transactions (including any Confirmations) shall be referred to collectively as this “Agreement”. The parties to this Agreement are as follows: and (“Party A”) (“Party B”) U.S. Federal Tax ID No.:_ U.S. Federal Tax ID No.:_ Notices: Notices: Mail address: _ Mail address: Attn: Phone: Fax: Attn: Phone: Fax: Wire Transfer or ACH Numbers (if applicable): Wire Transfer or ACH Numbers (if applicable): BANK: ABA: ACCT: BANK: ABA: ACCT: Notices for Default: Notices for Default: Attn: Phone: Fax: Other Details: Attn: Phone: Fax: Other Details: The Parties hereby agree that the General Terms and Conditions of this Master Agreement for Purchasing and Selling Low Carbon Fuel Standard Credits set forth below are incorporated herein subject to the following elections and modifications: Section 8 – Events of Default THE FOLLOWING EVENTS OF DEFAULT ARE APPLICABLE UNDER THIS AGREEMENT (CHECK ALL PROVISIONS THAT ARE APPLICABLE): 8.1(d) Default Under Other Trading Agreements: [ ] Applicable. If not checked, inapplicable. “Aggregate Delinquency Amount” means for purposes of Section 8.1(d) (if applicable): With respect to Party A, Party A’s Credit Support Provider and each applicable Specified Affiliate of Party A: With respect to Party B, Party B’s Credit Support Provider and each applicable Specified Affiliate of Party B: “Specified Affiliate” means for purposes of Section 8.1(d) (if applicable): With respect to Party A: With respect to Party B: 8.1(e) Cross Default: [ ] Applicable. If not checked, inapplicable. [ ] Cross Acceleration. If Section 8.1(e) is applicable, the words “, or becoming capable at such time of being declared,” in Section 8.1(e) shall be deleted. If not checked, these words shall not be deleted. “Threshold Amount” means for purposes of Section 8.1(e) (if applicable): With respect to Party A: With respect to Party B: ATTACHMENT A Page 2 LCFS Agreement Version 1.0 160211 jb 6053668 Section 9 – Termination and Liquidation 9.3 Closeout Setoff: For purposes of Section 9.3, the Parties agree that (select one): [ ] Option A (Bilateral Setoff) is applicable. (Applicable if no other election made.) [ ] Option B (Triangular Setoff) is applicable. [ ] Option C (Rectangular Setoff) is applicable. [ ] Option D (No Setoff) is applicable. Section 10 – Force Majeure 10.5 Force Majeure Termination Payment: [ ] Applicable. If not checked, inapplicable. If applicable, the following provisions will apply: Notwithstanding anything to the contrary in Section 10, a Termination Payment will be payable in respect of Term Transactions that are terminated due to Force Majeure pursuant to Section 10.5 within two (2) California Business Days of termination. The Termination Payment and the Party that owes such Termination Payment will be calculated and determined pursuant to the methodology set forth in Section 9.2 by the Party that is not claiming Force Majeure (which Party will be deemed the “Performing Party” for purposes of applying the terms of Section 9.2 for purposes of this provision), except that only the Transactions being terminated pursuant to Section 10.5 will be taken into account in determining the amount of such payment and all other Transactions will remain outstanding and unaffected by such termination. If both Parties are claiming Force Majeure, then both Parties will calculate a Termination Payment, and the amount payable will equal one-half of the difference between the Termination Payment of the Party with the higher Termination Payment (“X”) and the Termination Payment of the Party with the lower Termination Payment (“Y”). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. Section 18 – Written Confirmations Confirming Party: [ ] Party A [ ] Party B Section 19 – New or Changed Laws or Regulations 19.1 Material Adverse Effect: [ ] Applicable. If not checked, inapplicable. 19.2 Disrupted Transactions: [ ] Applicable. If not checked, inapplicable. Other Modifications to the LCFS Agreement Specify, if any: Schedule to the LCFS Agreement IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written. and (“Party A”) (“Party B”) By: Name: Title: Date: By: Name: Title: Date: DOCUMENTARY HISTORY and DISCLAIMER This original version of this agreement was developed by the Leadership for Energy Automated Processing group, “LEAP” (http://www.energyleap.org/), with slight modifications to suit the needs, Council-adopted policies, and municipal code of the City of Palo Alto. USE OF THIS AGREEMENT IS NOT RESTRICTED AND LEAP HEREBY AUTHORIZES ANYONE TO USE THIS AGREEMENT OR ANY PROVISION THEREOF. NONE OF LEAP, ANY LEAP MEMBER COMPANY OR ANY OF THEIR AGENTS, REPRESENTATIVES OR ATTORNEYS SHALL BE RESPONSIBLE FOR THE USE OF THIS AGREEMENT, OR ANY DAMAGES OR LOSSES RESULTING THEREFROM. BY PROVIDING THIS AGREEMENT, LEAP DOES NOT OFFER LEGAL ADVICE AND ALL USERS ARE URGED TO CONSULT THEIR OWN LEGAL COUNSEL AND TAX ADVISORS TO ENSURE THAT THIS AGREEMENT WILL ACHIEVE THEIR COMMERCIAL OBJECTIVES AND THEIR LEGAL INTERESTS ARE ADEQUATELY PROTECTED. Page 3 LCFS Agreement Version 1.0 160211 jb 6053668 GENERAL TERMS AND CONDITIONS In consideration of the mutual undertakings in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the Parties agree as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions (a) “Accepted” or “Acceptance” has the meaning specified in Section 2.2.2. (b) “Affected Party” has the meaning specified in Section 19.1. (c) “Affected Transaction” has the meaning specified in Section 19.1. (d) “Affiliate” means, in relation to any person, an entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person. (e) “Aggregate Delinquency Amount” means, with respect to a Party, the amount specified as the Aggregate Delinquency Amount for such Party in respect of Section 8.1(d) in the Cover Sheet. (f) “Agreement” has the meaning set out in the preamble to the Cover Sheet. (g) “Applicable Law” means any federal, national, state or local law, statute, regulation, code, ordinance, license, permit, compliance requirement, decision, order, writ, injunction, directive, judgment, policy, decree, including any judicial or administrative interpretations thereof, or any agreement, concession or arrangement with any Governmental Authority, applicable to either Party or either Party’s performance under any Transaction, and any amendments or modifications to the foregoing. (h) “Alternative Settlement Amount” has the meaning specified in Section 19.1. (i) “ARB” means the California Air Resources Board or successor agency. (j) “Bankrupt” means, with respect to a Party, that such Party: (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv)(A) institutes, or has instituted against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official, or (B) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and such proceeding or petition is instituted or presented by a person or entity not described in clause (A) above; (v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (vii) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets; (viii) causes or is subject to any event with respect to it which, under the Applicable Law, has an analogous effect to any of the events specified in clauses (i) to (vii) (inclusive); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts. (k) “Bankruptcy Code” has the meaning specified in Section 9.7. (l) “Business Day” or “California Business Day” is any day except a Saturday, Sunday, or any day observed as a legal holiday by the City. (m) “Buyer” means the Party obligated to purchase or acquire LCFS Credits under a Transaction. (n) “Confirmation” means (i) any electronic confirmation setting forth the trade details of a Transaction (and any special conditions) between the Parties and matched by the Parties on an electronic confirmation matching system and (ii) absent the ability to confirm a Transaction through an electronic confirmation matching system, any other written or electronic confirmation between the Parties that contains the relevant trade details (and any special conditions) of the Transaction, in either case based on those set forth in the sample form attached as Exhibit 1. (o) “Contract Price” means the price (expressed in U.S. Dollars) of an LCFS Credit as specified in a Confirmation. Page 4 LCFS Agreement Version 1.0 160211 jb 6053668 (p) “Contract Value” means the number of the LCFS Credits remaining to be delivered or purchased under a Transaction multiplied by the Contract Price. (q) “Credit Support Provider” means a Party’s guarantor or other person providing Performance Assurance for such Party. (r) “Credit Transfer Form” means the Credit Transfer Form that is incorporated by reference into the LCFS Regulations in 17 CCR §95488(c)(1)(B), properly completed and executed by Seller in accordance with the LCFS Regulations. (s) “Defaulting Party” has the meaning specified in Section 9.1. (t) “Deficient LCFS Credit” has the meaning specified in Section 7.1. (u) “Designated Event” means, with respect to a Party for purposes of Section 8.1(f): (i) the consolidation or amalgamation of a Party with, the merger of a Party with or into, or the transfer of all or substantially all of a Party’s assets to, another entity; (ii) the reorganization, reincorporation or reconstitution of a Party into or as another entity; (iii) the acquisition by any person directly or indirectly of the majority of the beneficial ownership of the Party such that such person may exercise control of the Party; or (iv) a substantial change in the capital structure of a Party by means of the issuance or guaranty of debt. (v) “Disrupted Transaction” has the meaning specified in Section 19.2. (w) “Early Termination Date” has the meaning specified in Section 9.1. (x) “Eastern Prevailing Time” means the time prevailing on the East Coast of the U.S., taking into account daylight savings time if it is in effect. (y) “Event of Default” has the meaning specified in Section 8.1. (z) “Executive Officer” has the meaning specified in the LCFS Regulations. (aa) “Expert” means a person reasonably agreed upon by the Parties who shall be qualified by education, experience or training to resolve the applicable issue and who shall not be a current or former employee of either Party or otherwise have a stake in the outcome of the dispute. (bb) “Expert Decision” has the meaning specified in Section 19.1. (cc) “Force Majeure” has the meaning specified in Section 10.1. (dd) “Force Majeure Termination Payment” has the meaning specified in Section 10.5. (ee) “Governmental Authority” means any U.S. federal, state, regional, local or municipal governmental body, agency, instrumentality, authority or entity established or controlled by a government or subdivision thereof, including any legislative, administrative or judicial body, or any person acting on behalf thereof. (ff) “Independent Dealer” means a leading dealer in the relevant physical trading markets for the Affected Transactions that is not a Party or an Affiliate of a Party. (gg) “Inappropriate Payments” has the meaning specified in Section 20.4. (hh) “Initiate” means the submission of a sell transaction in the LRT-CBTS by Seller provided, however, that a Seller shall not be deemed to have submitted any LCFS Credits where Seller cancels such sell transaction in the LRT-CBTS before Buyer accepts it in the LRT-CBTS. (ii) “Invoice” has the meaning set forth in Section 4.1. (jj) “LCFS Account” means the account of a Party showing the LCFS Credits and LCFS Deficits generated by the Party or transferred, purchased or acquired by the Party, as established with ARB or another governmental authority pursuant to the LCFS Regulations. (kk) “LCFS Regulations” means the regulations, orders, decrees and standards issued by a governmental authority implementing or otherwise applicable to the California Low Carbon Fuel Standard as set forth in 17 CCR § 95480 et seq. and each successor regulation, as may be subsequently amended, modified, restated from time to time. (ll) “LCFS Credit” means a Credit as defined in the LCFS Regulations. (mm) “LCFS Deficit” means a deficit as defined in the LCFS Regulations. (nn) “LRT-CBTS” means “LCFS Reporting Tool and Credit Bank and Transfer System”. Page 5 LCFS Agreement Version 1.0 160211 jb 6053668 (oo) “LRT Transfer Notification” has the meaning specified in Section 2.2.1. (pp) “LCFS Agreement” has the meaning specified in the Cover Sheet. (qq) “Market Value” means the amount of the LCFS Credits remaining to be Initiated under a Transaction multiplied by the market price for an equivalent transaction for Qualified Replacement LCFS Credits as determined by the Performing Party (or determining party, as the case may be) in a commercially reasonable manner. To ascertain the Market Value, the Performing Party may consider, among other valuations, quotations from leading dealers in swap contracts or physical trading markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for the length of the term, relevant Payment Due Dates, Transfer Dates, and Transaction Volume. A Party shall not be required to enter into a replacement transaction in order to determine the Market Value of a Transaction. For the avoidance of doubt, any option pursuant to which one Party has the right to extend the term of a Transaction shall be considered in determining Contract Value and Market Values. (rr) “Original Index” has the meaning specified in Section 19.2. (ss) “Other Amounts” has the meaning specified in Section 9.3. (tt) “Other Trading Agreement” has the meaning specified in Section 8.1(d). (uu) “Party” means Party A or Party B, individually, and “Parties” means Party A and Party B, collectively. (vv) “Party A” is the party designated as such in the introduction on page 1 of the Cover Sheet. (ww) “Party B” is the party designated as such in the introduction on page 1 of the Cover Sheet. (xx) “Payment Due Date” means the payment due date specified in the Confirmation (or otherwise agreed in writing by the Parties), provided that if the Payment Due Date is not so specified or agreed, then it shall be five (5) California Business Days after the later of (A) the Transfer Date or (B) the payer’s receipt of the payee’s Invoice. (yy) “Pending Credits” has the meaning specified in Section 7.3. (zz) “Performance Assurance” has the meaning specified in Section 6.1. (aaa) “Performing Party” has the meaning specified in Section 9.1. (bbb) “Physical Pathway Code” has the meaning specified in the LCFS Regulations in 17 CCR §95481(a)(48). (ccc) “Posting Party” has the meaning specified in Section 6.1. (ddd) “Prepayment” has the meaning specified in Section 6.2. (eee) “Prepayment Amount” has the meaning specified in Section 6.2. (fff) “Prepayment Due Date” has the meaning specified in Section 6.2. (ggg) “Qualified Institution” has the meaning specified in Section 6.1(b). (hhh) “Qualified Replacement LCFS Credit” means a valid LCFS Credit meeting the specifications set forth in the relevant Confirmation. (iii) “Quantity” means, with respect to a Transfer Date, the number of LCFS Credits to be purchased and sold pursuant to a Transaction as specified in the Confirmation. (jjj) “Reference Price” means a price that is determined by reference to a specified pricing source. (kkk) “Renegotiation Notice” has the meaning specified in Section 19.1. (lll) “Renegotiation Option” has the meaning specified in Section 19.1. (mmm) “Secured Party” has the meaning specified in Section 6.1. (nnn) “Seller” means the Party obligated to sell or Transfer LCFS Credits under a Transaction. (ooo) “Specified Affiliate” means, with respect to a Party, the entity or entities specified as the Specified Affiliate(s) with respect to such Party in respect of Section 8.1(d) in the Cover Sheet. Page 6 LCFS Agreement Version 1.0 160211 jb 6053668 (ppp) “Termination Date” has the meaning specified in Section 19.1. (qqq) “Termination Payment” has the meaning specified in Section 9.2. (rrr) “Termination Value” means the aggregate value of all Affected Transactions determined by valuing each Affected Transaction at its Market Value as reasonably determined by the determining party as of the Termination Date and then determining the amount by which such then prevailing Market Value differs from the Contract Value (it being understood that (i) in the event the prevailing Market Value of an Affected Transaction exceeds the Contract Value, the difference in value shall be due from Seller to Buyer, and (ii) in the event that the prevailing Market Value of an Affected Transaction is less than the Contract Value, the difference in value shall be due from Buyer to Seller) and adding to such value, without duplication, any amounts then payable under the Affected Transaction (including amounts due in respect of LCFS Credits Initiated and Accepted hereunder). The terms “Market Value” and “Contract Value” as used in this definition shall have the meanings specified in Section 1, provided that each reference to “Performing Party” shall be replaced by “determining party”. (sss) “Term Transaction” means a Transaction contemplating multiple Transfers with a delivery period the duration of which is one (1) calendar month or more. (ttt) “Threshold Amount” has the meaning specified in the Cover Sheet in respect of Section 8.1(e). (uuu) “Trade Date” means the date a Transaction is entered into between the Parties. (vvv) “Transaction” has the meaning specified in Section 1.3. (www) “Transfer” or “Transferred” has the meaning specified in Section 2.3. (xxx) “Transfer Date” has the meaning specified in Section 2.3 (b) (yyy) “Transfer Obligations” has the meaning specified in Section 2.2.1. (zzz) “Transfer Period” means, for a Transaction, the date range as specified in the Confirmation during which Seller must Initiate the Quantity of LCFS Credits specified in the Confirmation. (aaaa) “U.S.” means United States of America, and every reference to money, price, or Contract Price pertains to U.S. Dollars. 1.2 Interpretation Unless otherwise specified, all section references in this Agreement are to the Sections of this Agreement. All headings in this Agreement are intended solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement. Unless expressly provided otherwise, the word “including” as used herein does not limit the preceding words or terms and shall be read to be followed by the words “without limitation” or words having similar import and the words “other” and “otherwise” shall not be construed as being limited by the context in which they appear or the words that precede them. The word “or” is not exclusive. Unless otherwise expressly stated, the words “hereof”, “herein” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “will” and “shall” are expressions of command, not merely expressions of future intent or expectation. Unless expressly provided otherwise, references to “consent” mean the prior written consent of the Party at issue. Unless provided otherwise, when a Party’s response is required hereunder within a specific time period following receipt of notice or documentation, as applicable, the day of receipt thereof by such Party shall be considered day zero. The Parties acknowledge that they and their counsel have reviewed and revised this Agreement and that no presumption of contract interpretation or construction shall apply to the advantage or disadvantage of the drafter of this Agreement. Any specific references to laws, statutes, or regulations will include any amendments, replacements, or modifications thereto. 1.3 Scope; Single Agreement This Agreement is intended to apply exclusively to transactions for the purchase and sale of LCFS Credits between Seller and Buyer, the details of which are set forth in a Confirmation (a “Transaction”). All Transactions are entered into in reliance on the fact that this Agreement and all Transactions hereunder form a single agreement between the Parties. 1.4 Inconsistency In the event of any inconsistency between the provisions of any Confirmation and this Agreement, such Confirmation will preva il for the purposes of the relevant Transaction; provided however, any changes which conflict with any provisions of this Agreement regarding Section 6: Credit, Section 8: Events of Default, and Section 9: Termination and Liquidation must be agreed in writing by both Parties. For the avoidance of doubt, any repetition in a Confirmation of any section or any part of such section of this LCFS Agreement shall be for emphasis only and shall not by reason of such repetition exclude any other part of such section or any other section or any part thereof of this LCFS Agreement unless such intention to override the LCFS Agreement is explicitly expressed in the Confirmation. Page 7 LCFS Agreement Version 1.0 160211 jb 6053668 2. GENERAL PURCHASE AND SALE OBLIGATIONS; TITLE TRANSFER 2.1 Purchase Pursuant to each Transaction, and subject to the terms and conditions of the Confirmation governing such Transaction and this LCFS Agreement, Seller agrees to sell and Initiate to Buyer the Quantity of LCFS Credits at the Contract Price during the Transfer Period, all as specified in the Confirmation, and Buyer agrees to purchase and Accept the LCFS Credits from Seller, subject to its rights under Section 2.4, within fifteen (15) calendar days of Initiation. 2.2.1 Initiation Each Party shall take all actions required by the LCFS Regulations to effect a transfer of the LCFS Credits from Seller to Buyer during the Transfer Period (the “Transfer Obligations”). The LCFS Credits shall be deemed initiated (“Initiated”) by Seller to Buyer upon: (a) Buyer’s receipt from Seller of a Credit Transfer Form or a notification of an electronic transfer of LCFS Credits via the LRT-CBTS (each such notification, a “LRT Transfer Notification”); and (b) Seller’s satisfaction of all other Transfer Obligations applicable to Seller, if any. Seller shall Initiate LCFS Credits on or before the end of the Transfer Period as indicated on the Confirmation. 2.2.2 Acceptance LCFS Credits that are Initiated by Seller shall be deemed accepted (“Accepted”) by Buyer upon: (a) either Buyer’s submission of the Credit Transfer Form to the Executive Officer in accordance with the LCFS Regulations or Buyer’s acceptance, via the LRT-CBTS, of a LRT Transfer Notification; and (b) Buyer’s satisfaction of all other Transfer Obligations applicable to Buyer, if any; and Buyer’s submission of the Credit Transfer Form or Buyer’s acceptance of a LRT Transfer Notification, together with the satisfaction of all other Buyer Transfer Obligations, if any, shall constitute the acceptance (the “Acceptance”) by Buyer of the LCFS Credits. 2.3 Title Transfer Title to the LCFS Credits shall be deemed to transfer from Seller to Buyer after (a) Initiation and Acceptance of the LCFS Credits; and (b) Upon the recordation of the addition of the LCFS Credits to the LCFS Account balance of Buyer and the subtraction of the LCFS Credits from the LCFS Account balance of Seller by the Executive Officer (the title transfer of LCFS Credits as set forth above hereafter referred to as the “Transfer” of the LCFS Credits and the date on which the Transfer occurs is the “Transfer Date”). 2.4 Buyer Right to Reject Buyer shall have the right, at its reasonable discretion, to reject any LCFS Credits Initiated by Seller upon notice to Seller within fifteen (15) calendar days of Initiation. For the avoidance of doubt, and without limitation, Buyer shall be conclusively deemed to have reasonably exercised its discretion to reject where: (a) Buyer reasonably believes that the Credit Transfer Form or the information in a LRT Transfer Notification does not reflect the terms of the Transaction; (b) the LCFS Credits are invalid under the LCFS Regulations or are subject to a proceeding by a governmental authority or are otherwise encumbered; (c) There is a reasonable prospect that the LCFS Credits will be invalid under the LCFS Regulations; or (d) Buyer does not have information sufficient to verify that any of the LCFS Credits are valid and to verify that there is no reasonable prospect of such LCFS Credits becoming invalid under the LCFS Regulations. For purposes of making its assessment it shall be reasonable for Buyer to disregard the benefit of any warranties given to it under this Agreement. Without prejudice to the application of Section 10, it is not a reasonable exercise of discretion for Buyer to reject LCFS Cr edits solely on the basis of market conditions and/or the market price of, LCFS Credits. 2.5 Recordation by the Executive Officer Page 8 LCFS Agreement Version 1.0 160211 jb 6053668 Upon notification from the Executive Officer that any transfer of all or a portion of the LCFS Credits will not be recorded, the Parties shall promptly confer and shall cooperate in taking all reasonable actions necessary to cure any defects in the proposed transfer, so that the Transfer of such LCFS Credits can be recorded. Each Party shall notify the other Party and the Executive Officer of any errors in the Credit Transfer Form within five (5) business days of the discovery of such an error. 3. REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties by Both Parties Each Party represents, warrants and covenants to the other Party as of the date of this Agreement (which representations and warranties are deemed to be repeated by each Party on each Transfer Date with respect to a Transaction) that: (a) it is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (b) it has all necessary power and authority to execute, deliver, and perform its obligations hereunder; (c) the execution, delivery, and performance of this Agreement by such Party has been duly authorized by all necessary action and does not violate any of the terms or conditions of its governing documents, any contract to which it is a party, or any Applicable Law; (d) there is no pending or, to such Party’s knowledge, threatened litigation or administrative proceeding that may materially adversely affect its ability to perform this Agreement; (e) this Agreement constitutes a legal, valid and binding obligation of such Party, except as the enforceability of this Agreement may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor s’ rights generally and by general principles of equity; and (f) Seller and Buyer shall comply with Applicable Law in the performance of their respective obligations under this Agreement and each Transaction. 3.2 Representations and Warranties by Seller Seller represents and warrants to Buyer that on each Transfer Date: (a) Seller conveys good title to all LCFS Credits it sells hereunder, free and clear of any liens, security interests, and encumbrances or any interest in or to them by any third party; (b) each LCFS Credit transferred to Buyer hereunder is valid as contemplated by the LCFS Regulations and is, indefeasibly, a “Credit” as defined by the LCFS Regulations; (c) each LCFS Credit was deposited into Seller’s LCFS Account, or otherwise transferred and recorded by the Executive Officer in Seller’s LCFS Account, prior to Initiation hereunder and Seller has good title to each LCFS Credit prior to Initiation hereunder; (d) the Quantity of LCFS Credits Initiated does not exceed the number of total LCFS Credits in the Seller’s LCFS Account as determined in accordance with §95487(c)(1) of the LCFS Regulations; (e) upon Transfer and recordation of the LCFS Credits in Buyer’s LCFS Account, the LCFS Credits shall be available for Buyer’s use for retirement, transfer to a third party or otherwise; (f) Seller has not sold, transferred or encumbered (nor become legally obligated to do the same) any rights, title, or interest in the LCFS Credits to any person other than Buyer; and (g) to the best of Seller’s knowledge and belief, neither the Seller, nor any of its associated or parent organizations or affiliates or its customers or the party that owns the project(s) producing the fuel that is the basis for the generation of the LCFS Credits, has claimed (or will be entitled to claim) directly or indirectly, including on any voluntary or mandatory greenhouse gas registry program, any of the LCFS Credits as anything other than sold to Buyer. OTHER THAN THE WARRANTIES AND REPRESENTATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. 4. PAYMENTS AND INVOICES 4.1 Trade Documentation Page 9 LCFS Agreement Version 1.0 160211 jb 6053668 Payee (generally Seller) shall promptly send payer (generally Buyer) a written invoice (“Invoice”) showing sufficient detail to determine the amount due, how such amount was calculated, and the Payment Due Date for the Transaction in question, as set forth in the sam ple forms attached as Exhibit 2. 4.2 Making Payment All payments shall be made in U.S. Dollars by the Payment Due Date via wire transfer in same day funds. Except as provided herein or as otherwise agreed by the Parties, payment shall be made without deduction, withholding or setoff. If a Payment Due Date falls on a Saturday or a day that is neither a California Business Day nor a Monday, payment shall be made on the preceding California Business Day. If a Payment Due Date falls on a Sunday or Monday that is not a California Business Day, payment shall be made on the following California Business Day. 4.3 Price Rounding All U.S. dollar amounts shall be rounded to the nearest cent (and half cents shall be rounded upward). 4.4 Interest Any amount payable hereunder, if not paid when due, and any amount payable as a refund as a result of an overpayment, shall b ear interest from the Payment Due Date or the date of overpayment (as applicable) until the date payment is received at an annual rate (based upon the actual number of days in the relevant calendar year) equal to the rate of two (2) percentage points above the prime rate of interest effective for the Payment Due Date as published in the Wall Street Journal under “Money Rates”. If there is no publication on the Payment Due Date, then the preceding day’s publication will be used. The relevant Party shall pay any interest due within three (3) California Business Days following receipt of the interest invoice. 4.5 Payment Dispute If a Party, in good faith, disputes the accuracy of the amount due in respect of a Transaction, such Party will timely pay such amount as it believes to be correct and provide written notice stating the reasons why the remaining disputed amount is incorrect, along with supporting documentation acceptable in industry practice. Payment of the disputed amount shall not be required until the dispute is resolved. In the event the Parties are unable to resolve such dispute, either Party may pursue any remedy available at law or in equity to enforce its rights pursuant to this Agreement. In the event that it is determined that the Party that is disputing the amount due must pay the disputed amount, then such Party shall pay interest in accordance with Section 4.4 on such disputed amount from and including the originally scheduled Payment Due Date to, but excluding the date paid. 5. CONCURRENT TRANSACTIONS – PAYMENT NETTING 5.1 Payment Netting The Parties agree to net amounts that are due to each other on the same Payment Due Date in respect of purchases and sales of LCFS Credits, and the Parties shall confirm at least two (2) California Business Days prior to the Payment Due Date, orally or in writing, the payment obligations owed in respect of purchases and sales of LCFS Credits and any and all amounts remaining due after net-out. Any remaining balance after net-out shall be paid by the Party owing such amount to the other Party on the applicable Payment Due Date. The owing Party’s payment of a net amount shall satisfy each Party’s payment obligations under the relevant Transactions in respect of the payment obligations in respect of purchases and sales of LCFS Credits included in the settlement on a Payment Due Date. The Parties understand and agree that such netting of payment obligations is expressly limited to amounts owed from purchases and sales of LCFS Credits between the Parties and that netting out any other amounts due in respect of any Transaction or any Other Trading Agreement or any other agreement, instrument or undertaking, for any reason whatsoever, including amounts due in respect of interest payments, is strictly prohibited unless otherwise agreed in writing. 6. CREDIT 6.1 Notwithstanding any other Applicable Law, including the Uniform Commercial Code, if a Party (the “Secured Party”) has commercially reasonable grounds for insecurity with respect to the other Party’s (the “Posting Party”) creditworthiness or performance under this Agreement, the Secured Party shall provide the Posting Party with written notice requesting an amount of Performance Assurance determined by the Secured Party in a commercially reasonable manner. “Performance Assurance” means either: (a) prepayment, received by the Secured Party no later than two (2) California Business Days after such notice, and in any event prior to commencing the delivery period; or (b) establishing, at the Posting Party’s cost, no later than two (2) California Business Days after such notice an irrevocable standby letter of credit in a form and term acceptable to the Secured Party, opened by a Qualified Institution. “Qualified Institution” means either: (i) a commercial bank, unaffiliated with either Party, organized in a jurisdiction reasonably acceptable to the Secured Party, that has: Page 10 LCFS Agreement Version 1.0 160211 jb 6053668 (A) at least an A- Long Term Rating issued by Standard & Poor’s Ratings Group (“S&P”) and at least an A3 Deposit Rating issued by Moody’s Investor Services, Inc. (“Moody’s”); and (B) total equity of at least ten billion U.S. dollars ($10,000,000,000); (C) not exceeded any internal credit limits as established by the Secured Party at the time of the establishment of the letter of credit; or (ii) a bank acceptable to the Secured Party in its sole discretion; or (c) other Performance Assurance acceptable to the Secured Party in its sole discretion. 6.2 Notwithstanding anything to the contrary in this Agreement, if required by Seller, pursuant to Section 6.1 or as a result of a failure to pay or Event of Default, Buyer shall make advance payment in U.S. Dollars by electronic funds transfer to Seller for LCFS Credits purchased by Buyer pursuant to one or more Transactions under this Agreement (“Prepayment”). Specifically, for each Transaction pursuant to which Seller is obligated to transfer LCFS Credits to Buyer and for which Seller requires Buyer to make a Prepayment, Seller shall issue an invoice to Buyer and Buyer shall make the Prepayment to Seller by the date specified on Seller’s invoice (“Prepayment Due Date”). All Prepayments shall be in an amount equal to the price (or estimated price if the price is based on an index and is not known at the time the invoice is issued) multiplied by the total quantity (or estimated quantity if the actual quantity is not known at the time the invoice is issued) of LCFS Credits to be purchased for each outstanding Transaction for which Prepayment is required (each a “Prepayment Amount”). Each Prepayment Amount shall be paid by electronic funds transfer, in same day funds (without setoff, counterclaim or deduction), to the account specified by Seller. If, pursuant to a Transaction, the actual quantity of LCFS Credits transferred differs from the contract quantity or the price differs from the estimated price upon which Prepayment was made or other amounts are owing by or to Buyer (including, without limitation, other charges related to the Transaction(s) or amounts arising from any overpayments or underpayments for prior periods), the Party owing such amounts shall pay such amounts owing by it within two (2) Business Days of receipt of request by the Party to whom the payment is owed. In the event Buyer fails to timely make the Prepayment, Seller shall have the right to immediately withhold or suspend transfer of LCFS Credits until such time as the required payment is received. Such suspension of transfer of LCFS Credits shall not relieve Buyer of its obligation to purchase LCFS Credits pursuant to any Transaction and shall be in addition to, and not in replacement of, any other right or remedy available to Seller under this Agreement. 7. REMEDIES FOR FAILURE TO INITIATE OR ACCEPT LCFS CREDITS, AND DEFICIENT LCFS CREDITS 7.1 In the event that, in relation to a Transaction: (a) Seller fails to Initiate all or a part of the LCFS Credits by the end of the Transfer Period; (b) Buyer exercises its right to reject all or part of a Quantity of LCFS Credits pursuant to Section 2.4 that Seller Initiated; (c) Seller breaches any of its representations or warranties in Section 3.2, or any representation or warranty specified as subject to this Section 7 in the applicable Confirmation; (d) LCFS Credits that have been Accepted by Buyer are or become invalid for purposes of the LCFS Regulations; or (e) the Executive Officer invalidates a Transfer of LCFS Credits from Seller to Buyer, for any reason, and Buyer and Seller, cooperating in good faith, are unable to remedy the invalidated Transfer; (In the case of one of the events defined in Section 7.1(a) through (e) above, affected LCFS credits should be deemed “Deficient LCFS Credits” then, Seller shall, at Seller’s sole cost and expense, Initiate a quantity of Qualified Replacement LCFS Credits equal to the quantity of Deficient LCFS Credits that satisfy the requirements under the applicable Transaction within (i) in the case of Sections 7.1(a) or (b), three (3) Business Days after Seller receives notice from Buyer that the circumstances in Section 7.1(a) or (b) apply, or (ii) in the case of Sections 7.1(c), (d) or (e), ten (10) Business Days after the earlier of (A) Seller’s receipt of notice from Buyer that the circumstances in Sections 7.1(c), (d) or (e) apply and (B) Seller’s becoming aware that the circumstances in Sections 7.1(c), (d) or (e) apply. 7.2 Except where Section 7.3 applies, if Seller fails to timely or fully comply with its Initiation obligation in Section 7.1, then Seller shall, at Buyer’s election by notice either (i) Initiate replacement LCFS Credits equal to the quantity of Deficient LCFS Credits that satisfy the requirements under the applicable Transaction in accordance with Section 7.1 above, or (ii) pay to Buyer, within five (5) Business Days of receipt of Buyer’s invoice, unless otherwise mutually agreed between the Parties, the positive difference, if any, between ( 1) the Market Value of the Qualified Replacement LCFS Credits and (2) the product of the quantity of Deficient LCFS Credits and the Contract Price specified in the Confirmation for the applicable LCFS Credits, with such sum increased by any amount already paid by Buyer to Seller on account of the Deficient LCFS Credits. Seller shall also reimburse Buyer for all reasonable broker costs associated with Buyer obtaining Qualified Replacement LCFS Credits in a quantity equal to the Deficient LCFS Credits. For purposes of this Section 7.2, (i) the phrase “the quantity of LCFS Credits that remain to be Initiated under that Transaction” as used in the defined terms “Market Value” shall refer to and mean the quantity of Deficient LCFS Credits; and (ii) the Market Value shall be determined by Buyer as of the Business Day notified by Buyer that falls no sooner than the last day for performance of Seller’s obligations under Section 7.1 and no later than three (3) Business Days after the date Buyer gives notice of its election. Page 11 LCFS Agreement Version 1.0 160211 jb 6053668 7.3 In the event that Buyer fails to Accept, or provide notice of its rejection of, all or part of a Quantity of LCFS Credits Delivered by Seller or any replacement LCFS Credits as contemplated under Section 2.4, Seller shall provide written notice of such failure to Buyer. If Buyer fails to Accept or reject any portion of those LCFS Credits (the “Pending Credits”) within two (2) Business Days of receiving such notice, then Seller’s obligation to sell and Initiate and Buyer’s obligation to purchase and Accept shall be reduced to the extent of such Pending Credits, and Buyer shall pay Seller an amount equal to the positive difference, if any, between (i) the product of the quantity of Pending Credits and the Contract Price specified in the Confirmation for the applicable LCFS Credits and (ii )the Market Value of the Pending Credits. The Transaction in respect of the Pending Credits shall be deemed to be cancelled and the related Credit Transfer Form or LRT Transfer Notification, as applicable, shall be deemed ineffective. For purposes of this Section 7.3, Market Value shall be determined by Seller in a commercially reasonable manner with the date of determination as of the date of cancellation. 7.4 In the event the provisions of this Section 7 are invoked, Seller and Buyer agree to work together in good faith to pursue an efficient, commercial and practical resolution consistent with the foregoing options (or any combination thereof) in order to cure any b reach of transfer obligations resulting in Deficient LCFS Credits or Pending Credits, provided, however, any replacement LCFS Credits must satisfy all of the requirements that the Parties originally agreed to for the applicable Transaction unless otherwise mutually agreed. 7.5 Seller shall deliver to Buyer a Credit Transfer Form or LRT Transfer Notification accurately describing any Qualified Replacement LCFS Credits. Buyer and Seller shall otherwise be subject to the general obligations set forth in Section 2. 7.6 Section 7.1(b), (c), (d), (e) and, for the avoidance of doubt, Section 2.4 shall apply equally to any Qualified Replacement LCFS Credits. 7.7 Except in respect of a failure to pay any amount due under Section 7.2 or Section 7.3, the remedies set out in this Section 7 are exclusive remedies for the occurrence of the events described in Section 7. 8. EVENTS OF DEFAULT 8.1 An “Event of Default” shall mean the occurrence with respect to a Party of one of the following events: (a) Failure to Pay. A Party fails to make payment of any amount due when required under this Agreement or any Transaction, within two (2) California Business Days following receipt of a written notice of such failure from the other Party. (b) Failure to Provide Performance Assurance. A Party fails to provide acceptable Performance Assurance support as requested by the Secured Party pursuant to Section 6. (c) Breach of Agreement. Except for any breach or event described in Section 7.1(a) through (e) (the exclusive remedies for which are specified in Section 7.2) or Section 7.3, and except for any event described in Section 8.1(a) and (b) above, a Party fails to perform or repudiates any material obligation to the other Party under this Agreement or breaches any representation, covenant or warranty in any material respect under this Agreement and, in each case, if capable of being cured, is not cured to the satisfaction of the other Party in its sole discretion, within two (2) California Business Days following receipt of written notice to such Party that corrective action is needed. (d) Default Under Other Trading Agreements. If specified as applicable in the Cover Sheet, a Party, any Credit Support Provider of such Party, or any applicable Specified Affiliate of such Party: (i) fails to make payment when due under any trading agreement (that is not a Transaction under this Agreement) with the other Party, any Credit Support Provider of such other Party or any Specified Affiliate of such other Party, including any agreement to purchase, sell or exchange LCFS Credits or any other commodities or any agreement in respect of an interest rate transaction, equity transaction, bond transaction, foreign exchange transaction, credit protection transaction, repurchase transaction, buy/sell-back transaction, securities lending transaction, forward transaction, any transaction similar to the foregoing, any swap, forward, future, option or other derivative transaction with respect to the foregoing or any combination of these transactions (each, an “Other Trading Agreement”) within the cure period for payment defaults specified therein, or if no period is provided, within two (2) California Business Days following receipt of a demand for payment by the other Party; or (ii) commits or suffers an Event of Default or other similar event or condition, fails to perform or repudiates any obligation to the other Party, any Credit Support Provider of such other Party or any Specified Affiliate of such other Party under any Other Trading Agreement, or breaches any representation, covenant or warranty in any material respect under any Other Trading Agreement; and, in the case of either of subclauses (i) or (ii) above, (1) such failure, breach or default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions outstanding under the documentation applicable to such Other Trading Agreement; and (2) the aggregate amount owed by the Defaulting Party in respect of the liquidation of, acceleration of obligations under or early termination of all transactions outstanding under the documentation applicable to such Other Trading Agreement(s) is not less than the Aggregate Delinquency Amount applicable to such Party (it being agreed that the failure to make a payment or delivery the value of which exceeds the Aggregate Delinquency Amount on the last payment or delivery date of an Other Trading Agreement transaction where that transaction is the only transaction outstanding under the applicable documentation will satisfy conditions (1) and (2)). (e) Cross Default. A default, Event of Default or other similar condition or event occurs and is continuing in respect of a Party or its Credit Support Provider (if any) under one or more agreements or instruments, individually or collectively, relating to indebtedness for borrowed money in an aggregate amount of not less than the Threshold Amount applicable to such Part y and which results in Page 12 LCFS Agreement Version 1.0 160211 jb 6053668 such indebtedness becoming, or becoming capable at such time of being declared, immediately due and payable; or (ii) a Party or its Credit Support Provider (if any) fails to make on the due date thereof one or more payments, individually or collectively, in an aggregate amount of not less than the Threshold Amount applicable to such Party. (f) Designated Event. A Designated Event occurs with respect to a Party or its Credit Support Provider (if any), and the creditworthiness of the Party or its Credit Support Provider or, if applicable, the successor, surviving or transferee entity of the Party or its Credit Support Provider (as applicable) is materially weaker than that of the Party or its Credit Support Provider immediately prior to such Designated Event. (g) Credit Support Failure. A Party’s guarantor or other provider of credit support for such Party (a “Credit Support Provider”) with respect to the Party, if any, (i) fails to satisfy, perform or comply with any agreement or obligation to be complied with or performed by it in accordance with the credit support document and such failure continues after any applicable grace or notice period, (ii) makes any representation or warranty that proves to be incorrect or misleading in any material respect when made in connection with such Performance Assurance and/or credit support document, or (iii) repudiates, disclaims, disaffirms or rejects, in who le or part, any obligation under, or challenges the validity of, its Performance Assurance and/or credit support document. (h) Bankruptcy. A Party or its Credit Support Provider, if any, is or becomes Bankrupt. (i) Merger Without Assumption. If a Designated Event (as such term is defined in 1.1(t) and notwithstanding the reference to Section 8.1(f) therein) occurs with respect to a Party or any Credit Support Provider of such Party and: (i) the resulting, surviving or transferee entity fails to assume all the obligations of such Party or such Credit Support Provider under this Agreement or any credit support document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party to this Agreement; or (ii) the benefits of any credit support document fail to extend (without the consent of the other Party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. 9. TERMINATION AND LIQUIDATION 9.1 Notwithstanding any other provision of this Agreement or the existence of any Performance Assurance, if at any time an Event of Default has occurred and is continuing with respect to a Party (such Party, the “Defaulting Party”), the other Party (the “Performing Party”) may, in its sole discretion, designate a date (not earlier than the date of such notice and not later than twenty (20) days after the date of such notice (an “Early Termination Date”)) on which to terminate, liquidate and accelerate all outstanding Transactions and calculate a Termination Payment (as defined below) in the manner set forth in Section 9.2 and Section 9.3. To the extent that, in the reasonable opinion of the Performing Party, certain Transactions may not be liquidated and terminated under Applicable Law on the Early Termination Date, such Transactions shall be terminated as soon thereafter as is reasonably practicable, in which case the actual termination date for such Transactions will be the Early Termination Date in respect thereof for purposes of Section 9.2. Notwithstanding the foregoing, if the Defaulting Party is governed by a system of law that does not permit termination to take place after the occurrence of an Event of Default described in Section 8.1(h), then no prior notice shall be required upon the occurrence of such Event of Default, in which case the Early Termination Date shall be deemed designated immediately preceding the occurrence of such event. 9.2 On or as soon as reasonably practicable following the Early Termination Date, the Performing Party shall determine the final amount payable between the Parties under this Agreement as provided in this Section 9.2 (the “Termination Payment”) and shall provide notice of the Termination Payment to the Defaulting Party. The Performing Party shall calculate the Termination Payment by (a) valuing each Transaction at its Market Value as reasonably determined by the Performing Party as of the Early Termination Date and then determining the amount by which such then prevailing Market Value differs from the Contract Value (it being understood that (i) in the event the prevailing Market Value of a Transaction exceeds the Contract Value, the difference in value shall be due from Seller to Buyer, and (ii) in the event that the prevailing Market Value of a Transaction is less than the Contract Value, the difference in value shall be due from Buyer to Seller), (b) determining any other damages, costs or expenses incurred by the Performing Party as a result of the early termination of such Transactions including those contemplated by Section 9.4 (without duplication and subject always to Section 13.1), (c) determining any other amounts payable from one Party to the other Party under this Agreement (including amounts due in respect of LCFS Cr edits Initiated and Accepted hereunder) and (d) netting or aggregating the foregoing amounts into a single liquidated amount. If the Defaulting Party owes the Termination Payment to the Performing Party, then, within one (1) California Business Day of the date upon which the Performing Party’s notice of the Termination Payment is effective, the Defaulting Party shall pay the Termination Payment, less the value of any Performance Assurance or other collateral or credit support held by the Performing Party with respect to which the Performing Party has notified the Defaulting Party in writing of its election to exercise its setoff rights under Section 9.3. If the Performing Party owes the Termination Payment to the Defaulting Party, then, within one (1) California Business Day of the date upon which the Performing Party’s notice of the Termination Payment is effective, the Performing Party shall pay the Termination Payment, less the value of any Performance Assurance or other collateral or credit support held and not returned by the Defaulting Party. 9.3 Closeout Setoff Option A (Bilateral Setoff) If no option or Option A is specified as applicable in the Cover Sheet, then the following provision shall apply: Page 13 LCFS Agreement Version 1.0 160211 jb 6053668 If the Performing Party elects to designate an Early Termination Date under Section 9.1, and the Termination Payment is payable to the Defaulting Party, the Performing Party shall be entitled, at its option and in its discretion (and without prior notice to the Defaulting Party), to setoff against such Termination Payment any amounts (“Other Amounts”) payable by the Defaulting Party to the Performing Party under any other agreements, instruments or undertakings between the Defaulting Party and the Performing Party (whether or not arising under this Agreement, matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation). To the extent that any Other Amounts are so setoff, those Other Amounts will be discharged promptly and in all respects. The Performing Party will give notice to the other Party of any setoff effected under this Section 9.3. For this purpose, either the Termination Payment or the Other Amounts (or the relevant portion of such amounts) may be converted by the Performing Party into the currency in which the other is denominated at the rate of exchange at which the Performing Party would be able, in good faith and using commercially reasonable procedures, to purchase the relevant amount of such currency. Option B (Triangular Setoff) If Option B is specified as applicable in the Cover Sheet, then the following provision shall apply: If the Performing Party elects to designate an Early Termination Date under Section 9.1, and the Termination Payment is payable to the Defaulting Party, the Performing Party shall be entitled, at its option and in its discretion (and without prior notice to the Defaulting Party), to setoff against such Termination Payment any amounts (“Other Amounts”) payable by the Defaulting Party to the Performing Party or any of the Performing Party’s Affiliates under any other agreements, instruments or undertakings between the Defaulting Party and the Performing Party or any of its Affiliates (whether or not arising under this Agreement, matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation). To the extent that any Other Amounts are so setoff, those Other Amounts will be discharged promptly and in all respects. The Performing Party will give notice to the other Party of any setoff effected under this Section 9.3. For this purpose, either the Termination Payment or the Other Amounts (or the relevant portion of such amounts) may be converted by the Performing Party into the currency in which the other is denominated at the rate of exchange at which the Performing Party would be able, in good faith and using commercially reasonable procedures, to purchase the relevant amount of such currency. Option C (Rectangular Setoff) If Option C is specified as applicable in the Cover Sheet, then the following provision shall apply: If the Performing Party elects to designate an Early Termination Date under Section 8.1, the Performing Party shall be entitled, at its option and in its discretion (and without prior notice to the Defaulting Party), to setoff against such Termination Payment (whether such Termination Payment is payable to the Performing Party or to the Defaulting Party) any amounts (“Other Amounts”) payable between the Defaulting Party or any of its Affiliates and the Performing Party or any of its Affiliates under any other agreements, instruments or undertakings between the Defaulting Party or any of its Affiliates to the Performing Party or any of its Affiliates (whether or not arising under this Agreement, matured or contingent and irrespective of the currency, place of payment or place of booking of the obligation). To the extent that any Other Amounts are so setoff, those Other Amounts will be discharged promptly and in all respects. The Performing Party will give notice to the other Party of any setoff effected under this Section 9.3. For this purpose, either the Termination Payment or the Other Amounts (or the relevant portion of such amounts) may be converted by the Performing Party into the currency in which the other is denominated at the rate of exchange at which the Performing Party would be able, in good faith and using commercially reasonable procedures, to purchase the relevant amount of such currency. Option D (No Setoff) If Option D is specified as applicable in the Cover Sheet, then no setoff provisions shall apply. 9.4 No delay or failure on the part of a Performing Party to exercise any right or remedy shall constitute an abandonment of such right or remedy, and the Performing Party shall be entitled to exercise such right or remedy at any time after an Event of Default has occurred, so long as such Event of Default is continuing. The Defaulting Party shall indemnify and hold harmless the Performing Party for and against any and all reasonable out-of-pocket expenses incurred by the Performing Party by reason of the enforcement of and protection of its rights under this Agreement or as a result of the early termination of any Transactions, including reasonable attorney’s fees and costs of collection. 9.5 Grant of Security Interest/Remedies To the extent a Party requires Performance Assurance and/or has received a credit support document under this Agreement, then the Posting Party hereby grants to the Secured Party a present and continuing security interest in same. Upon or at any time after the designation or deemed designation of an Early Termination Date, the Defaulting Party must return all remaining Performance Assurance transferred to it pursuant to this Agreement, as applicable, and all proceeds resulting therefrom or the liquidation thereof. 9.6 Suspension of Performance Notwithstanding any other provision of this Agreement, if (a) an Event of Default or (b) an event that, with the lapse of time or the giving of notice or both, would constitute an Event of Default shall have occurred and be continuing, the Performing Party, upon written notice to the Defaulting Party, shall have the right (i) to suspend performance under any or all Transactions; provided, however, in no event shall any such suspension continue for longer than ten (10) California Business Days with respect to any single Transaction, unless an Early Page 14 LCFS Agreement Version 1.0 160211 jb 6053668 Termination Date shall have been declared and notice thereof given pursuant to Section 9.1, and (ii) to the extent an Event of Default shall have occurred and be continuing, to exercise any remedy available at law or in equity. 9.7 Bankruptcy Acknowledgements The Parties intend that each Transaction shall constitute a “forward contract” under § 101(25) of Title 11 of the United States Code, 11 U.S.C. § 101 et seq., in effect as of the Execution Date of this Agreement (the “Bankruptcy Code”). 10. FORCE MAJEURE 10.1 Subject to Section 10.2, a Party shall be excused from the performance of its obligations with respect to a Transaction to the extent its performance of such obligations is prevented, in whole or in part, due to the occurrence of any event or circumstance, whether foreseeable or unforeseeable, that is reasonably beyond the control of such Party and which, by the exercise of due diligence, such Party could not have remedied, avoided or overcome (any such event, a “Force Majeure”), which may include, without limitation, any of the following events: (a) Compliance with Applicable Law, provided however, that Seller shall not be excused from performance where the LCFS Credits it Initiates or intends to Initiate are invalid under the LCFS Regulations; (b) Hostilities of war (declared or undeclared), embargoes, blockades, civil unrest, riots or disorders, acts of terrorism, or sabotage; (c) Fires, explosions, lightning, maritime peril, collisions, storms, landslides, earthquakes, floods, and other acts of nature; (d) Strikes, lockouts, or other labor difficulties (whether or not involving employees of Seller or Buyer); provided, however, that the decision to settle a strike or other labor difficulties shall be wholly within the discretion of the Party facing such difficulty; or (e) Disruption or breakdown of production or transportation facilities, equipment, labor or materials, including, without limitation, the closing of harbors, railroads or pipelines. For purposes of this Agreement, the term “Force Majeure” expressly excludes (i) a failure of performance of any person other than the Parties, except to the extent that such failure was caused by an event that would otherwise satisfy the definition of a Force Majeure event as set forth in this Section 10, (ii) the loss of Buyer’s market or any market conditions for any LCFS Credits that are unfavorable for Buyer or Seller, (iii) the loss of Seller’s intended supply of LCFS Credits, (iv) the failure of Seller’s intended supplier of LCFS Credits to perform, (v) any failure by a Party to apply for, obtain or maintain any permit, license, approval or right of way necessary under Applicable Law for the performance of any obligation hereunder, and (vi) a Party’s inability to economically perform its obligations under this Agreement. LRT-CBTS Unavailability. In the event that LRT-CBTS is disrupted or unavailable, the affected obligations of the parties will be suspended (but not discharged) until LRT-CBTS is not disrupted and is available. 10.2 Notwithstanding the provisions of Section 10.1, nothing contained in this Agreement shall relieve a Party of its obligation to make payments when due with respect to performance prior to the occurrence of a Force Majeure event, including Buyer’s obligation to pay in full the purchase price or any other amounts due for the LCFS Credits actually Initiated and Accepted hereunder. 10.3 In the event that a Party believes a Force Majeure event has occurred that will require it to invoke the provisions in this Section 10, such Party shall use commercially reasonable efforts to give prompt oral notice to the other Party followed by written notice within two (2) California Business Days following the occurrence of such event, of the underlying circumstances of the particular causes of Force Majeure, the expected duration thereof and the volume of the LCFS Credits affected. The Party claiming Force Majeure shall also use commercially reasonable efforts to give the other Party such notice of cessation of the Force Majeure event and the date when performance is expected to resume. 10.4 Notwithstanding anything to the contrary in this Agreement, (a) if an event or circumstance which would otherwise constitute or give rise to a Force Majeure event under this Section 10 also constitutes an Event of Default other than an Event of Default under Section 8.1(h), it will be treated as a Force Majeure event and not as an Event of Default; and (b) if an event or circumstance which would otherwise constitute or give rise to a Force Majeure event under this Section 10 also constitutes an Event of Default under Section 8.1(h), it will be treated as an Event of Default and not as a Force Majeure event. 10.5 If Initiations and Acceptances in respect of a Term Transaction are suspended pursuant to this Section 10 and said suspension continues for a period of thirty (30) days or more, such Term Transaction may be terminated at the option of (a) either Party, if the “ Force Majeure Termination Payment” provision is specified as applicable in the Cover Sheet, or (b) the Party that is not claiming Force Majeure, if the Force Majeure Termination Payment provision is not specified as applicable in the Cover Sheet, in either case, by giving written notice to the other Party. If a Party terminates a Term Transaction pursuant to this Section 10.5, neither Party shall have any further liability to the other Party hereunder with respect to such Term Transaction except for (a) any payment or indemnification obligations arising in respect of the performance of such Term Transaction prior to the date of termination and (b) if the Force Majeure Termination Payment provision is specified as applicable in the Cover Sheet, the obligation to make a Force Majeure Termination Payment, if any, pursuant to such Page 15 LCFS Agreement Version 1.0 160211 jb 6053668 provision. 11. GOVERNING LAW AND SETTLEMENT OF DISPUTES 11.1 This Agreement shall be governed by and construed in accordance with the laws of the State of California. The Parties hereby submit to the exclusive jurisdiction of the federal courts for the Northern District of the State of California; provided, however, that if such federal courts sitting in the Northern District of the State of California refuse jurisdiction, the Parties agree to the exclusive jurisdiction of the state courts sitting in the County of Santa Clara, State of California. 11.2 The Parties expressly agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. 12. TAXES 12.1 Tax Obligations Generally Each Party shall be responsible for any taxes that may be imposed on it arising from the sale or purchase, respectively, of LCFS Credits pursuant to any Transaction. 13. LIMITATION OF LIABILITY 13.1 NO PARTY SHALL BE REQUIRED TO PAY OR BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, EXEMPLARY, SPECIAL OR PUNITIVE DAMAGES OR FOR LOST PROFITS OR ANY FINES OR PENALTIES ASSESSED BY ANY GOVERNMENTAL AUTHORITY INCLUDING, BUT NOT LIMITED TO, FINES OR PENALTIES UNDER THE LCFS REGULATIONS (WHETHER OR NOT ARISING FROM ITS NEGLIGENCE) TO ANY OTHER PARTY EXCEPT TO THE EXTENT THAT THE PAYMENTS REQUIRED TO BE MADE PURSUANT TO THIS AGREEMENT (INCLUDING PAYMENTS REQUIRED TO BE MADE PURSUANT TO SECTIONS 7, 9 AND 19) ARE DEEMED TO BE SUCH DAMAGES. IF AND TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO THIS AGREEMENT IS DEEMED TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE AND AGREE THAT SUCH DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THAT SUCH PAYMENT IS INTENDED TO BE A REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES AND NOT A PENALTY. EACH PARTY SHALL TAKE REASONABLE STEPS TO MITIGATE DAMAGES FROM ANY BREACH HEREOF. 14. ASSIGNMENT 14.1 This Agreement shall not be assigned, in whole or in part, by either Party without the prior written consent of the other Party, such consent not to be unreasonably withheld. Any assignment in violation of this provision shall be void and of no legal effect. Subject to this Section 14, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns. 14.2 Notwithstanding anything to the contrary in Section 14.1, either Party may, without the other Party’s consent, transfer, sell , pledge, encumber or assign such Party’s right and interest in and to the accounts, revenues, or proceeds of this Agreement in connection with any financing or other financial arrangement. For the avoidance of doubt, all payment obligations under this Agreement will be satisfied if the relevant payment is made to the account of the other Party and the foregoing sentence shall not require a Party to make payments to any third party, unless otherwise agreed in writing. 15. NON-WAIVER 15.1 No waiver by either Party of any breach by the other Party of any of the representations, covenants, warranties, terms or conditions of this Agreement shall be construed as a waiver of any succeeding breach of the same or of any other covenant or condition hereof. 16. ENTIRE AGREEMENT; AMENDMENTS 16.1 No statement or agreement, oral or written, made prior to the signing of this Agreement, shall vary or modify the written terms hereof. Neither Party shall claim any amendment to, modification of, or release from any provisions of this Agreement, whether set out in an annex, schedule, supplement or Confirmation or otherwise, unless such amendment, modification or release is in writing, is signed by the Parties and specifically states that it is an amendment to, modification of, or release from this Agreement or one or more Transactions. 17. NOTICES 17.1 All notices and other communications under this Agreement shall be deemed given on the date of the addressee’s receipt thereof and shall be given only in writing by letter, facsimile or electronic data transmission. Provided that if transmitted by facsimile or electronic data transmission and it is received after close of business on a California Business Day, it shall be deemed to have been received on the following California Business Day. Page 16 LCFS Agreement Version 1.0 160211 jb 6053668 18. WRITTEN CONFIRMATIONS 18.1 The Parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation may be generated electronically by an electronic confirmation matching service or be executed a nd delivered in counterparts (including by facsimile transmission or by other means agreed between the Parties), which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. 18.2 Absent the availability of an electronic confirmation matching service, the Confirming Party shall confirm a Transaction by forwarding a written Confirmation to the other Party (via facsimile or other means agreed between the Parties) within five (5) California Banking Days after the Trade Date. If the other Party objects to any term(s) of such written Confirmation, it shall notify the Confirming Party in writing of such objection within ten (10) calendar days of the Party’s receipt thereof. If the other Party fails to object within ten ( 10) calendar days, such failure shall be deemed acceptance of the terms, absent manifest error. 19. NEW OR CHANGED LAWS OR REGULATIONS 19.1 Material Adverse Effect If this Section 19.1 is specified as applicable in the Cover Sheet, then the following provision shall apply to Transactions under this Agreement: It is understood by the Parties that each Party is entering into this Agreement in reliance on the Applicable Laws in effect on the date hereof. In the event that at any time, and from time to time, during the term of this Agreement any Applicable Laws are changed or new Applicable Laws are promulgated and have a material adverse economic effect upon either Party (such Party being the “ Affected Party”), and such event does not constitute a Force Majeure, the Affected Party shall have the option (the “Renegotiation Option”) to request renegotiation of the Price or other terms of the affected transaction(s) (the “Affected Transactions”). The Renegotiation Option may be exercised by the Affected Party within a commercially reasonable period of time after such changed or new Applicable Law is promulgated, by written notice of the Affected Party’s desire to renegotiate, such notice to contain specific information about the new or changed Applicable Law and how it has a material adverse economic effect upon the Affected Party and the new Price or terms desired by the Affected Party to remedy or reverse such material adverse economic effect (the “Renegotiation Notice”). The issue as to whether the changed or new Applicable Law has a material adverse economic effect on the Affected Party shall be submitted promptly for resolution to an Expert, provided that the other Party shall have the option to agree that there has been a material adverse economic effect and waive its right to an Expert resolution at any time. The cost of the Expert shall be shared equally between the Parties. The Expert shall determine that the Applicable Law either has a material adverse economic effect or does not. The Expert’s decision (the “Expert’s Decision”) shall be final and binding, absent fraud, and shall be provided to the Parties in the form of a report prepared by the Expert that contains facts and other data supporting the Expert’s Decision. If the Expert’s Decision concludes that the new or changed Applicable Law has a material adverse economic effect on the Affected Party, then the Parties shall in good faith renegotiate the Price or other terms in order to appropriately address the material adverse economic effects of the new or changed Applicable Laws. If an Expert does not provide an Expert’s Decision within thirty (30) days after receipt of the Renegotiation Notice by the other Party, or such other time period as agreed between the parties, the new or changed Applicable Law shall be deemed to have a material adverse economic effect on the Affected Party. If the Parties fail to agree upon a new Contract Price or terms satisfactory to both Parties within thirty (30) days after the other Party receives the Renegotiation Notice, or such other time period as agreed between the parties, the Affected Party shall have the right to terminate the Affected Transactions as of the end of the applicable thirty (30) day period (the “Termination Date” ) by giving written notice thereof to the other Party on or before such Termination Date in which case each Party shall make a determination of the Termination Value of the Affected Transactions within three (3) California Business Days of the Termination Date. The amount payable in settlement of the termination of the Affected Transactions (the “Settlement Amount”) shall equal the sum of (i) one-half of the difference between the Termination Values calculated by the two Parties, and (ii) the lesser of such two Termination Values. If either Party disputes the resulting Settlement Amount as commercially unreasonable by written notice to the other Party within five (5) California Business Days of the Termination Date, each Party shall appoint one Independent Dealer to make a determination regarding whether the Settlement Amount is commercially reasonable. If both Independent Dealers agree that the Settlement Amount is commercially reasonable, then that value shall be final and binding and shall be paid promptly by the Party owing the Settlement Amount to the other Party. If one or more of the Independent Dealers determines that the Settlement Amount is not commercially reasonable, then each Independent Dealer will make an alternative determination of the Termination Value, and the amount payable between the Parties with respect to Affected Transactions (the “Alternative Settlement Amount”) will be an amount equal to the sum of (i) one-half of the difference between the alternative Termination Values calculated by the two Independent Dealers, and (ii) the lesser of such two alternative Termination Values. Each Party’s and, if applicable, each Independent Dealer’s, determination of the Termination Value shall not take into account changes to the economics of the Affected Transactions that would result from the new or changed Applicable Laws. In the event that the first Independent Dealer approached by a Party refuses to act as Independent Dealer for purposes of dis pute resolution hereunder, the Party will approach at least one additional Independent Dealer to assess whether it would be willing to act as Independent Dealer for purposes of dispute resolution hereunder. If either Party is unable to find an Independent Dealer willing to make a determination of the Termination Value for purposes of dispute resolution after approaching at least two Independent Dealers, then the originally determined Settlement Amount shall be deemed final and binding. Page 17 LCFS Agreement Version 1.0 160211 jb 6053668 Upon the successful appointment of an Independent Dealer, each of the Parties may submit written support for the Transaction Value determined by such Party to the Independent Dealer. Copies of all information submitted by a Party to any Independent Dealer shall be provided to the other Party. Any LCFS Credits Transferred within thirty (30) days of the Renegotiation Notice shall be provisionally invoiced and paid, but will be subject to adjustment based on the renegotiated price or terms, if agreement is reached on price or terms. 19.2 Disrupted Transactions If this Section 19.2 is specified as applicable in the Cover Sheet then the following Provisions shall apply to Transactions under this Agreement: If the price of a Transaction is based on an industry reference index (the “Original Index”) that ceases to be published or is not published for any period applicable to calculation of the Reference Price of one or more Transactions (the “Disrupted Transactions”), the Parties shall in good faith (a) select an alternative index that reflects as nearly as possible the same information as published in the Original Index; or (b) negotiate an interim Reference Price for the Disrupted Transaction until the Original Index recommences publishing or an alternative index can be identified to replace the Original Index. In the event the Parties are unable to agree on an alternative index or otherwise agree on a price within ten (10) days after the Original Index ceases to be published or is not published for any period applicable to calculation of the Reference Price of a Disrupted Transaction, then the issue shall be promptly submitted to an Expert for resolution. The cost of the Expert shall be shared equally between the Parties. Upon appointment of the Expert, each Party shall submit to the Expert its determination of the Price for the Disrupted Transaction. The Expert shall select from the two submissions the Price that it determines best reflects the Price that would have applied to the Disrupted Transaction based on the Original Index in the absence of its disruption. The Expert’s decision shall be final and binding, absent fraud, and shall be provided to the Parties in the form of a report that contains the facts and other data supporting the Expert’s decision. The Expert’s decision shall be provided to the Parties within thirty (30) days after the Original Index ceases to be published or is not published for any period applicable to calculation of the Reference Price of a Disrupted Transaction. 20. MISCELLANEOUS 20.1 Severability If any Governmental Authority of competent jurisdiction declares any provision of this Agreement unlawful, void or unenforceable, such provision will not invalidate, void or make unenforceable any other provision of this Agreement. The remaining terms and conditions shall remain in full force and effect, and the Parties will negotiate in good faith to reform this Agreement in order to give effect to the original intention of the Parties. 20.2 No Third Party Beneficiaries Nothing expressed or implied in this Agreement is intended to create any rights, interests, obligations or benefits under this Agreement in any person other than the Parties and their respective successors and permitted assigns. 20.3 Ethics Each Party warrants that neither the Party nor its directors, employees, agents, or subcontractors have given commissions, rebates, payments, kickbacks, or lavish or expensive gifts, entertainments or other things of value (individually and collectively referred to as “Inappropriate Payments”) to any director, employee, agent, or subcontractor of the other Party in connection with the Agreement and acknowledges that the giving of Inappropriate Payments may result in the cancellation of this and all other future Agreements. Each Party will notify the other Party of any such Inappropriate Payments by any of its directors, employees, agent or subcontractors. 20.4 Counterparts This Agreement (including any Confirmation) may be executed in any number of counterparts and by different Parties in separate counterparts, any of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. 20.5 Confidentiality (a) Public Records Act and Confidential Information Designated by Buyer. Buyer acknowledges that Seller is a public agency subject to the disclosure requirements of the California Public Records Act, Cal. Gov. Code § 6250 et seq. (“CPRA”). If documents or information submitted to Seller contain Buyer’s proprietary and confidential information and Buyer claims that such information falls within one or more CPRA exemptions, Buyer must clearly mark such information “CONFIDENTIAL AND PROPRIETARY”, and identify the specific lines containing such information (the “Confidential Information”). Seller shall disclose such Confidential Information to third parties only to the extent required by California law (including, without limitation, the California Constitution, the CPRA and the Brown Act) as set forth in this Section 20.5 Page 18 LCFS Agreement Version 1.0 160211 jb 6053668 (b) Disclosure of Confidential Information by Seller. In the event of a third party request for Seller to disclose such Confidential Information, Seller shall make reasonable efforts to provide notice to Buyer prior to disclosure. If Buyer contends that any Confidential Information is exempt from the CPRA and wishes to prevent disclosure, Buyer shall obtain a protective order, injunctive relief or other appropriate remedy from a court of law in Santa Clara County before Seller’s deadline for responding to the CPRA request. If Buyer fails to obtain such remedy prior to Seller’s deadline for responding to the CPRA request, Buyer agrees that Seller may disclose the requested Confidential Information. Buyer further agrees that Seller shall have no liability to Buyer arising out of any disclosure by Seller of any Seller Confidential Information before Buyer has timely obtained an order, injunctive relief or other appropriate remedy to prevent Seller from making the requested third party disclosure. This Section 20.5 shall survive the termination of this Agreement. (c) Non-Confidential Information. Notwithstanding anything to the contrary in this Section 20.5 nothing shall restrict any Party from using or disclosing confidential information in any manner it chooses which (i) is or becomes generally available to the public other than as a result of a disclosure directly or indirectly by the disclosing Party or its representative(s); (ii) was within the using or disclosing Party’s possession prior to it being furnished hereunder, provided that such information is not subject to another confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any other party with respect to such information; (iii) is rightfully obtained by a Party from third parties authorized to make such disclosure without restriction; (iv) is legally required to be disclosed by judicial or other governmental action as determined by such Party’s attorney acting in good faith (including, but not limited to, the California Constitution, the CPRA and the Brown Act); or (v) is disclosed without a duty of confidentiality to a third party by, or with the authorization of, the disclosing Party; or (vi) is independently developed by the recipient. (d) Disclosure to the City Council of Palo Alto. Notwithstanding any provision to the contrary in this Section 20.5, Seller shall be permitted to disclose this Agreement and related information to the City Council of Palo Alto for the express purpose of obtaining approval to execute this Agreement, including any written amendment or modification thereto. 21. PRIOR TRANSACTIONS Any transaction entered into between the parties, now existing or hereafter, identified as a Transaction in this Agreement or the relevant Confirmation, whether before, on or after the effective date of this Agreement, is incorporated into this Agreement by reference, shall be a Transaction hereunder and shall be subject to the terms herein. 22. TERMINATION 22.1 This Agreement may be terminated by either Party upon thirty (30) days’ prior written notice of a Party’s decision to terminate; provided however, that this Agreement shall remain in effect with respect to any Transactions entered into prior to such termination. The obligations of either Party to make payment hereunder or with respect to any Transactions entered into prior to the effective date of such termination, including any related adjustments, shall survive the termination of this Agreement. Page 19 LCFS Agreement Version 1.0 EXHIBIT 1 160211 jb 6053668 SAMPLE FORM OF CONFIRMATION FOR LCFS CREDITS TRANSACTION To: *** Attention: *** Phone Number: *** Facsimile Number: *** Email Address: *** Date: *** Reference: *** This Confirmation evidences the terms of the binding agreement between Seller and Buyer named below regarding the Transaction. This Confirmation supplements, forms a part of, and is subject to the Master Agreement for the Purchase and Sale of LCFS Credits dated as of, as amended and supplemented by agreement in writing from time to time (the “LCFS Agreement”) between Seller and Buyer. All provisions of the Agreement shall govern this Confirmation, except as expressly modified below. In the event of any inconsistency between this Confirmation and the LCFS Agreement, this Confirmation will govern for purposes of the Transaction. Capitalized terms used in this Confirmation and not defined in this Confirmation shall have the respective meanings assigned in the LCFS Agreement. TRADE DATE: *** SELLER: [Name and Address] SELLER’S FEIN NUMBER: BUYER: [Name and Address] BUYER’S FEIN NUMBER QUANTITY: *** LCFS Credits. TRANSFER PERIOD: *** CONTRACT PRICE: US$ ***/ LCFS Credit CONTRACT AMOUNT: US$ *** PAYMENT DUE DATE: *** SPECIAL CONDITIONS: Page 20 LCFS Agreement Version 1.0 EXHIBIT 2 160211 jb 6053668 To: *** SAMPLE FORM OF INVOICE FOR LCFS CREDITS TRANSACTION Attention: Phone Number: *** *** Email Address: Date: Invoice Number Invoice Date: *** *** *** *** TRADE DATE: *** Facsimile Number: *** SELLER: [Name and Address] SELLER’S FEIN NUMBER: BUYER: [Name and Address] BUYER’S FEIN NUMBER: QUANTITY: *** LCFS Credits. TRANSFER DATE: *** CONTRACT PRICE: *** CONTRACT AMOUNT: *** SELLER BANKING DETAILS: *** PAYMENT DUE DATE: *** City of Palo Alto (ID # 6591) City Council Staff Report Report Type: Consent Calendar Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Sewer Lateral and On-Call Services Contract Title: Approval of Utilities Enterprise Fund Contract With Casey Construction, Inc. in the Amount of $2,967,000 for Sewer Lateral Replacement and Other On-Call Sewer Services for Three Years, Under Capital Improvement Program Projects WC-99013 (Sewer Lateral Rehabilitation), WC-80020 (Wastewater System Customer Connections), and WC-15002 (Wastewater System Improvements) From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached three year contract with Casey Construction, Inc. (Attachment A) in a not to exceed amount of $2,967,000 for sewer lateral replacement and other on-call sewer services under the WC-99013 (Sewer Lateral Rehabilitation), WC-80020 (Wastewater System Customer Connections), and WC-15002 (Wastewater System Improvements) Capital Improvement Program (CIP) projects. Background This project continues the City’s program to replace individual sewer laterals that have reached the end of their useful life. The City currently owns roughly 11,000 sewer laterals made from vitrified clay pipe (VCP), tar and paper, asbestos concrete, and cast iron. The City owns and maintains the lower portion of each lateral, with the upper portion owned and maintained by the property owner. The City has a routine maintenance program to clear roots and other obstructions from these lower laterals until they can be replaced with plastic laterals on the Sewer System Rehabilitation and Replacement CIP project. Laterals are prioritized for replacement based on damage that causes blockages resulting in sewage overflows, or as a condition of new development. Since 2004 the City has contracted for assistance with replacing these laterals. Discussion This contract will allow for replacement of up to 420 sewer laterals over its three year term. City of Palo Alto Page 2 The contract may also be used when the City replaces non-plastic laterals due to new development. The lateral replacement covered by this contract will reduce maintenance costs associated with laterals and reduce the likelihood of sewer overflows. This contract also allows for on-call work to assist with occasional repairs to manholes and sewer mains, or minor reconfigurations of the sewer system not included as part of a Sewer System Rehabilitation and Replacement CIP project. These projects are rare, but consume significant staff time when performed in-house resulting in a backlog of critical maintenance work. This sewer service contract will reduce or eliminate those operational and customer service impacts. This contract was solicited for bid in December 2015. At that time the City received two bids. The City issued a Notice of Award to the lowest bidder, C2R Engineering, Inc. but subsequently received a bid protest from the second bidder, Casey Construction, Inc., questioning the experience of C2R Engineering, Inc. The City required 15,000 feet of experience using pipe bursting techniques to install sewer mains and laterals with a 4” or larger diameter. C2R Engineering, Inc. listed more than 15,000 feet of experience, but some of that experience had not been directly performed by C2R. As a result, the City notified C2R Engineering, Inc. that its bid was non-responsive. Bid Summary Bid Name/Number Sewer Lateral Replacement and On-call Sewer Work, IFB Number 161479 Proposed Length of Project 845 calendar days Number of Bids Mailed to Contractors 6 (electronic documents were available in CPA website) Number of Contractors notified via bidding platform 156 Number of Contractors downloading bid documents 12 Total Days to Respond to Bid 21 Pre-Bid Meeting? Yes (Non-mandatory) Number of Company Attendees at Pre-Bid Meeting 2 Number of Bids Received: 2 Bid Price Range $955,569 to $1,010,245 per year (three-year average) *Bid summary provided in Attachment B. Staff has reviewed the submitted bids and recommends that the bid of $1,010,245 per fiscal year (three-year average), which would be a total of $3,030,735, submitted by Casey Construction, Inc., be accepted and that Casey Construction, Inc. be declared the lowest responsible bidder. The bid is approximately two percent (2%) above the available budget of $2,967,000 over the three fiscal year period. But the work quantities specified in the Invitation for Bids (IFB) for this on-call service contract were for bidding purposes only, and can be changed by the City, as stated in the bid documents. The IFB also states that the total work awarded is limited by the available budget, and that the budget amount is an upper limit on City of Palo Alto Page 3 spending, not a commitment to spend a certain amount. Thus, staff recommends Council approve the attached contract for the budgeted amount of $2,967,000. The term of the Agreement will be from the date of its full execution until June 30, 2018 (fiscal years FY 2016 through FY 2018). Staff confirmed with the Contractor's State License Board that the contractor has an active license on file. Casey Construction, Inc. has contracted with the City Utilities Department in the past for on-call sewer lateral replacement. Resource Impact Funds for the first fiscal year of this capital project ($977,600) are available in the Wastewater Collection Capital Improvement Program projects WC-99013 (Sewer Lateral Rehabilitation), WC-80020 (Wastewater System Customer Connections), and WC-15002 (Wastewater System Improvements), and funds for subsequent years are included in future years of the approved FY 2016 Capital Improvement Program budget. Funding for subsequent years is subject to continuing budget approval by Council, as stated in the IFB and contract. Policy Implications The approval of this contract is consistent with existing City policies including the Council approved Utilities Strategic Plan-Strategic Objectives: BP1. Ensure a reliable supply of utility resources, BP2. Operate the utility systems safely, and BP3. Replace infrastructure before the end of its useful life. In addition, this contract helps the City of Palo Alto comply with its duty to actively maintain its system with the goal of preventing sewer system overflows, as required by the City’s National Pollution Discharge Elimination System (NPDES) permit (San Francisco Regional Water Quality Control Board Order R2-2009-0032), and to comply with elements of the City’s Sewer System Management Plan (SSMP), which is required by State Water Resources Control Board Order NO. 2006-0003-DWQ. Environmental Review This project is categorically exempt from California Environmental Quality Act (CEQA) pursuant to Title 14 of the California Code of Regulations, sections 15301 (repair, maintenance of existing facilities, and 15302 (replacement or reconstruction of existing facilities). Attachments:  Attachment A: Contract with Casey Construction, Inc. for Sewer Lateral Replacement and On-Call Sewer Services (PDF)  Attachment B: Bid Evaluation (PDF) Invitation for Bid (IFB) Package 1 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. C16161479 City of Palo Alto Project: “Sewer Lateral Replacement and On-call Sewer System Work” ATTACHMENT A Invitation for Bid (IFB) Package 2 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co-operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 Invitation for Bid (IFB) Package 3 Rev. April 20, 2015 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST RANSFERS………………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13 15.1 Remedies Upon Default……………………………………………………………………………………….13 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….15 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 Invitation for Bid (IFB) Package 4 Rev. April 20, 2015 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non-Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 30.1 Amendments of Laws…………………………………………………………………………………………..19 Invitation for Bid (IFB) Package 5 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 Invitation for Bid (IFB) Package 6 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on March 7, 2016 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and CASEY CONSTUCTION, INC. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a corporation duly organized and in good standing in the State of California, Contractor’s License Number 798190, DIR Number 1000003162. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On November 23, 2016, City issued an Invitation for Bids (IFB) to contractors for the “Sewer Lateral Replacement and On-call Sewer System Work” (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the “Sewer Lateral Replacement and On-call Sewer System Work” Project, located in Palo Alto, CA. ("Project"). Invitation for Bid (IFB) Package 7 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. Invitation for Bid (IFB) Package 8 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than March 31, 2019. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of five hundred dollars ($500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Invitation for Bid (IFB) Package 9 Rev. April 20, 2015 CONSTRUCTION CONTRACT Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents for the not to exceed Contract Sum of Two Million Nine Hundred Sixty Seven Thousand Dollars ($2,967,000). [This amount includes the Base Bid and Additive Alternates.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. Invitation for Bid (IFB) Package 10 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 11 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Invitation for Bid (IFB) Package 12 Rev. April 20, 2015 CONSTRUCTION CONTRACT City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Jon Abendschein In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Casey Construction, Inc. Mel Casey 619 Sylvan Way Emerald Hills, CA 94062 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB) Package 13 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally Invitation for Bid (IFB) Package 14 Rev. April 20, 2015 CONSTRUCTION CONTRACT liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. Invitation for Bid (IFB) Package 15 Rev. April 20, 2015 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, Invitation for Bid (IFB) Package 16 Rev. April 20, 2015 CONSTRUCTION CONTRACT submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. Invitation for Bid (IFB) Package 17 Rev. April 20, 2015 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. Invitation for Bid (IFB) Package 18 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. Invitation for Bid (IFB) Package 19 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” Invitation for Bid (IFB) Package 20 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records at the end of each week during the Project. Invitation for Bid (IFB) Package 21 Rev. April 20, 2015 CONSTRUCTION CONTRACT (iv) If the certified payroll records are not produced to the project manager within the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: ____________________________ Senior Deputy City Attorney CASEY CONSTRUCTION, INC. By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total A-1. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 20 Each 5,900.00$ 118,000.00$ 6,220.00$ 124,400.00$ A-2. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 70 Each 5,500.00$ 385,000.00$ 5,400.00$ 378,000.00$ A-3. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 5 Each 6,000.00$ 30,000.00$ 6,000.00$ 30,000.00$ A-4. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst 5 Each 5,600.00$ 28,000.00$ 5,900.00$ 29,500.00$ A-5. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 5 Each 6,000.00$ 30,000.00$ 6,200.00$ 31,000.00$ A-6. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 5 Each 5,600.00$ 28,000.00$ 5,600.00$ 28,000.00$ A-7. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 3 Each 6,200.00$ 18,600.00$ 6,000.00$ 18,000.00$ A-8. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst. 2 Each 5,700.00$ 11,400.00$ 6,200.00$ 12,400.00$ A-9. Demo of 4” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,000.00$ 20,000.00$ 5,000.00$ 25,000.00$ A-10.Demo of 6” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,000.00$ 20,000.00$ 5,000.00$ 25,000.00$ A-11. Demo of 4” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,000.00$ 20,000.00$ 5,000.00$ 25,000.00$ A-12. Demo of 6” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,250.00$ 21,250.00$ 5,000.00$ 25,000.00$ PERIOD 1 (BASE BID)730,250.00$ 751,300.00$ C2R - Low Bidder Casey ATTACHMENT B Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total C2R - Low Bidder Casey B-1. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 20 Each 6,100.00$ 122,000.00$ 6,318.00$ 126,360.00$ B-2. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 70 Each 5,700.00$ 399,000.00$ 5,516.00$ 386,120.00$ B-3. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 5 Each 6,100.00$ 30,500.00$ 6,240.00$ 31,200.00$ B-4. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst 5 Each 5,700.00$ 28,500.00$ 6,136.00$ 30,680.00$ B-5. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 5 Each 6,120.00$ 30,600.00$ 6,448.00$ 32,240.00$ B-6. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 5 Each 5,712.00$ 28,560.00$ 5,824.00$ 29,120.00$ B-7. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 3 Each 6,300.00$ 18,900.00$ 6,240.00$ 18,720.00$ B-8. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst. 2 Each 5,800.00$ 11,600.00$ 6,448.00$ 12,896.00$ B-9. Demo of 4” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,100.00$ 20,500.00$ 5,200.00$ 26,000.00$ B-10.Demo of 6” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,200.00$ 21,000.00$ 5,200.00$ 26,000.00$ B-11. Demo of 4” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,100.00$ 20,500.00$ 5,200.00$ 26,000.00$ B-12. Demo of 6” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,500.00$ 22,500.00$ 5,200.00$ 26,000.00$ PERIOD 2 (BASE BID)754,160.00$ 771,336.00$ Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total C2R - Low Bidder Casey C-1. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 20 Each 6,200.00$ 124,000.00$ 6,576.00$ 131,520.00$ C-2. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 70 Each 5,750.00$ 402,500.00$ 5,740.00$ 401,800.00$ C-3. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 5 Each 6,300.00$ 31,500.00$ 6,489.00$ 32,445.00$ C-4. Removing and Replacing Existing 4” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst 5 Each 5,900.00$ 29,500.00$ 6,381.00$ 31,905.00$ C-5. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Open Cut 5 Each 6,300.00$ 31,500.00$ 6,705.00$ 33,525.00$ C-6. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral up to 8’ invert depth by Pipe Burst 5 Each 5,900.00$ 29,500.00$ 6,056.00$ 30,280.00$ C-7. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Open Cut 3 Each 6,500.00$ 19,500.00$ 6,489.00$ 19,467.00$ C-8. Removing and Replacing Existing 6” Sanitary Sewer Service Lateral greater than 8’ invert depth up to 12’ invert depth by Pipe Burst. 2 Each 6,000.00$ 12,000.00$ 6,705.00$ 13,410.00$ C-9. Demo of 4” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,300.00$ 21,500.00$ 5,408.00$ 27,040.00$ C-10.Demo of 6” Sanitary Sewer Service Lateral up to 8’ invert depth 5 Each 4,400.00$ 22,000.00$ 5,408.00$ 27,040.00$ C-11. Demo of 4” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,500.00$ 22,500.00$ 5,408.00$ 27,040.00$ C-12. Demo of 6” Sanitary Sewer Service Lateral greater 8’ invert depth up to 12’ invert depth 5 Each 4,800.00$ 24,000.00$ 5,408.00$ 27,040.00$ PERIOD 3 (BASE BID)770,000.00$ 802,512.00$ Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total C2R - Low Bidder Casey D-1. Removing Existing Sanitary Sewer Main and Replacing with 6” Sanitary Sewer Main up to 8’ invert depth 300 LF 80.00$ 24,000.00$ 125.00$ 37,500.00$ D-2. Removing Existing Sanitary Sewer Main and Replacing with 8” Sanitary Sewer Main up to 8’ invert depth 300 LF 110.00$ 33,000.00$ 130.00$ 39,000.00$ D-3. Removing Existing Sanitary Sewer Main and Replacing with 10” Sanitary Sewer Main up to 8’ invert depth 100 LF 115.00$ 11,500.00$ 140.00$ 14,000.00$ D-4. Removing Existing Sanitary Sewer Main and Replacing with 12” Sanitary Sewer Main up to 8’ invert depth 100 LF 125.00$ 12,500.00$ 160.00$ 16,000.00$ D-5. Removing Existing Sanitary Sewer Main and Replacing with 15” Sanitary Sewer Main up to 8’ invert depth 100 LF 118.00$ 11,800.00$ 180.00$ 18,000.00$ D-6. Additional Cost, excavation greater than 8’ invert depth up to 12’ invert depth for main replacement 300 LF 125.00$ 37,500.00$ 70.00$ 21,000.00$ D-7.Spot Repair 6” thru 10” Sewer Main up to 8’ invert depth 1 each 5,200.00$ 5,200.00$ 6,800.00$ 6,800.00$ D-8.Spot Repair 12” to 15” Sewer Main up to 8’ invert depth 1 Each 5,500.00$ 5,500.00$ 7,800.00$ 7,800.00$ D-9.Spot Repair 6” to 10” Sewer Main greater than 8’ invert depth up to 12’ invert depth 1 Each 6,000.00$ 6,000.00$ 8,200.00$ 8,200.00$ D-10. Spot Repair 12” to 15” Sewer Main greater than 8’ invert depth up to 12’invert depth 1 Each 6,000.00$ 6,000.00$ 10,200.00$ 10,200.00$ D-11.Replacing a 48” dia. Manhole up to 8’ invert depth 1 Each 6,000.00$ 6,000.00$ 6,200.00$ 6,200.00$ D-12.Replacing a 60” dia. Manhole up to 8’ invert depth 1 Each 7,000.00$ 7,000.00$ 8,500.00$ 8,500.00$ D-13.Constructing a New 48” dia. Manhole up to 8’ invert depth 1 Each 6,000.00$ 6,000.00$ 6,200.00$ 6,200.00$ D-14.Constructing a New 60” dia. Manhole up to 8’ invert depth 1 Each 7,000.00$ 7,000.00$ 8,500.00$ 8,500.00$ D-15.Installing or Replacing 4” to 6” Sewer Lateral Cleanout up to 8’ invert depth 1 Each 600.00$ 600.00$ 2,500.00$ 2,500.00$ D-16. Surface Restoration of AC greater than 8” and up to 10” for AC Pavement Restoration. 300 sf 25.00$ 7,500.00$ 10.00$ 3,000.00$ D-17. Surface Restoration of PCC greater than 6” and up to 8” for PCC Pavement Restoration. 300 sf 20.00$ 6,000.00$ 18.00$ 5,400.00$ D-18. Surface Restoration of AC over PCC. AC greater than 2” and up to 4”, PCC greater than 4” up to 6” for AC over PCC Pavement Restoration. 300 sf 17.50$ 5,250.00$ 25.00$ 7,500.00$ PERIOD 1 (ADDITIVE BID)198,350.00$ 226,300.00$ Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total C2R - Low Bidder Casey E-1. Removing Existing Sanitary Sewer Main and Replacing with 6” Sanitary Sewer Main up to 8’ invert depth 300 LF 100.00$ 30,000.00$ 130.00$ 39,000.00$ E-2. Removing Existing Sanitary Sewer Main and Replacing with 8” Sanitary Sewer Main up to 8’ invert depth 300 LF 100.00$ 30,000.00$ 135.00$ 40,500.00$ E-3. Removing Existing Sanitary Sewer Main and Replacing with 10” Sanitary Sewer Main up to 8’ invert depth 100 LF 110.00$ 11,000.00$ 145.00$ 14,500.00$ E-4. Removing Existing Sanitary Sewer Main and Replacing with 12” Sanitary Sewer Main up to 8’ invert depth 100 LF 115.00$ 11,500.00$ 166.00$ 16,600.00$ E-5. Removing Existing Sanitary Sewer Main and Replacing with 15” Sanitary Sewer Main up to 8’ invert depth 100 LF 120.00$ 12,000.00$ 187.00$ 18,700.00$ E-6. Additional Cost, excavation greater than 8’ invert depth up to 12’ invert depth for main replacement 300 LF 128.00$ 38,400.00$ 72.00$ 21,600.00$ E-7.Spot Repair 6” thru 10” Sewer Main up to 8’ invert depth 1 each 5,304.00$ 5,304.00$ 7,072.00$ 7,072.00$ E-8.Spot Repair 12” to 15” Sewer Main up to 8’ invert depth 1 Each 5,610.00$ 5,610.00$ 8,112.00$ 8,112.00$ E-9.Spot Repair 6” to 10” Sewer Main greater than 8’ invert depth up to 12’ invert depth 1 Each 6,120.00$ 6,120.00$ 8,528.00$ 8,528.00$ E-10. Spot Repair 12” to 15” Sewer Main greater than 8’ invert depth up to 12’invert depth 1 Each 6,120.00$ 6,120.00$ 10,608.00$ 10,608.00$ E-11.Replacing a 48” dia. Manhole up to 8’ invert depth 1 Each 6,120.00$ 6,120.00$ 6,448.00$ 6,448.00$ E-12.Replacing a 60” dia. Manhole up to 8’ invert depth 1 Each 7,140.00$ 7,140.00$ 8,840.00$ 8,840.00$ E-13.Constructing a New 48” dia. Manhole up to 8’ invert depth 1 Each 6,120.00$ 6,120.00$ 6,448.00$ 6,448.00$ E-14.Constructing a New 60” dia. Manhole up to 8’ invert depth 1 Each 7,140.00$ 7,140.00$ 8,840.00$ 8,840.00$ E-15.Installing or Replacing 4” to 6” Sewer Lateral Cleanout up to 8’ invert depth 1 Each 612.00$ 612.00$ 2,500.00$ 2,500.00$ E-16. Surface Restoration of AC greater than 8” and up to 10” for AC Pavement Restoration. 300 sf 26.00$ 7,800.00$ 11.00$ 3,300.00$ E-17. Surface Restoration of PCC greater than 6” and up to 8” for PCC Pavement Restoration. 300 sf 22.00$ 6,600.00$ 19.00$ 5,700.00$ E-18. Surface Restoration of AC over PCC. AC greater than 2” and up to 4”, PCC greater than 4” up to 6” for AC over PCC Pavement Restoration. 300 sf 18.00$ 5,400.00$ 26.00$ 7,800.00$ PERIOD 2 (ADDITIVE BID)202,986.00$ 235,096.00$ Bid Evaulation Sheet: Sewer Lateral Replacement and On-Call Sewer Work Bid Item Description Count Rate Total Rate Total C2R - Low Bidder Casey F-1. Removing Existing Sanitary Sewer Main and Replacing with 6” Sanitary Sewer Main up to 8’ invert depth 300 LF 102.00$ 30,600.00$ 135.00$ 40,500.00$ F-2. Removing Existing Sanitary Sewer Main and Replacing with 8” Sanitary Sewer Main up to 8’ invert depth 300 LF 102.00$ 30,600.00$ 140.00$ 42,000.00$ F-3. Removing Existing Sanitary Sewer Main and Replacing with 10” Sanitary Sewer Main up to 8’ invert depth 100 LF 112.00$ 11,200.00$ 150.00$ 15,000.00$ F-4. Removing Existing Sanitary Sewer Main and Replacing with 12” Sanitary Sewer Main up to 8’ invert depth 100 LF 117.00$ 11,700.00$ 172.00$ 17,200.00$ F-5. Removing Existing Sanitary Sewer Main and Replacing with 15” Sanitary Sewer Main up to 8’ invert depth 100 LF 125.00$ 12,500.00$ 194.00$ 19,400.00$ F-6. Additional Cost, excavation greater than 8’ invert depth up to 12’ invert depth for main replacement 300 LF 130.00$ 39,000.00$ 74.00$ 22,200.00$ F-7.Spot Repair 6” thru 10” Sewer Main up to 8’ invert depth 1 each 5,300.00$ 5,300.00$ 7,354.00$ 7,354.00$ F-8.Spot Repair 12” to 15” Sewer Main up to 8’ invert depth 1 Each 5,500.00$ 5,500.00$ 8,436.00$ 8,436.00$ F-9.Spot Repair 6” to 10” Sewer Main greater than 8’ invert depth up to 12’ invert depth 1 Each 6,100.00$ 6,100.00$ 8,869.00$ 8,869.00$ F-10. Spot Repair 12” to 15” Sewer Main greater than 8’ invert depth up to 12’invert depth 1 Each 6,200.00$ 6,200.00$ 11,032.00$ 11,032.00$ F-11.Replacing a 48” dia. Manhole up to 8’ invert depth 1 Each 6,240.00$ 6,240.00$ 6,705.00$ 6,705.00$ F-12.Replacing a 60” dia. Manhole up to 8’ invert depth 1 Each 7,280.00$ 7,280.00$ 9,193.00$ 9,193.00$ F-13.Constructing a New 48” dia. Manhole up to 8’ invert depth 1 Each 6,240.00$ 6,240.00$ 6,705.00$ 6,705.00$ F-14.Constructing a New 60” dia. Manhole up to 8’ invert depth 1 Each 7,280.00$ 7,280.00$ 9,193.00$ 9,193.00$ F-15.Installing or Replacing 4” to 6” Sewer Lateral Cleanout up to 8’ invert depth 1 Each 620.00$ 620.00$ 2,704.00$ 2,704.00$ F-16. Surface Restoration of AC greater than 8” and up to 10” for AC Pavement Restoration. 300 sf 32.00$ 9,600.00$ 12.00$ 3,600.00$ F-17. Surface Restoration of PCC greater than 6” and up to 8” for PCC Pavement Restoration. 300 sf 26.00$ 7,800.00$ 20.00$ 6,000.00$ F-18. Surface Restoration of AC over PCC. AC greater than 2” and up to 4”, PCC greater than 4” up to 6” for AC over PCC Pavement Restoration. 300 sf 24.00$ 7,200.00$ 27.00$ 8,100.00$ PERIOD 3 (ADDITIVE BID)210,960.00$ 244,191.00$ TOTAL BID Period 1 (Base + Additive)928,600.00$ 977,600.00$ Period 2 (Base + Additive)957,146.00$ 1,006,432.00$ Period 3 (Base + Additive)980,960.00$ 1,046,703.00$ GRAND TOTAL (Period 1 + 2 + 3) / 3 955,568.67$ 1,010,245.00$ City of Palo Alto (ID # 6634) City Council Staff Report Report Type: Consent Calendar Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Fire Station No.2 Roofing Replacement Title: Approval of a Construction Contract With Waterproofing Associates Inc. in the Amount Not-to-Exceed $309,980 to Provide Construction Services to Replace the Existing Roof at Fire Station Number 2 (PF-00006) From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1.Approve and authorize the City Manager or his designee to execute a contract with Waterproofing Associates Inc. in an amount not to exceed $281,800, for the Fire Station No. 2 Roofing Replacement project budgeted in the recurring Capital Improvement Program project Roofing Replacements (PF-00006). 2.Authorize the City Manager or his designee to negotiate and execute one or more changes to the contract with Waterproofing Associates Inc. for related, additional but unforeseen work, which may develop during the project, the total value of which shall not exceed $28,180. Background The existing tar and gravel roof on Fire Station No. 2 is beyond its useful life and no longer meets code or Title 24 requirements. Leaking has caused extensive water damage in the women’s locker room and along hallways, increasing maintenance needs both to the roof and the interior spaces affected. Discussion This project will improve employee health and safety and reduce maintenance costs. Under contract, Waterproofing Associates Inc. will remove the existing tar and gravel roofing system down to the Zonolite substrate and the equipment and City of Palo Alto Page 2 skylights from their current curb supports. Curbs will then be dismantled and rebuilt higher and equipment and skylights reinstalled. View Attachment C for specifications and drawings. Waterproofing Associates Inc. will provide and install a modified bituminous membrane roofing system throughout with R-9 insulation, new traffic crickets and drainage swells to direct rainwater to existing roof drains, a new permanently- fixed metal bracket for extension ladder use and walkway traffic pads to access rooftop mechanical equipment. Bid Process An Invitation for Bid for the project was posted on Planet Bids on October 1, 2015. The bid period was 20 calendar days. Four bids were received on October 20, 2015 (Attachment A). Summary of Solicitation Process Invitation For Bid (IFB) Published 10/01/2015 Mandatory Pre-Bid Site Walk 10/07/2015 Number of Company Attendees at Pre-Proposal Meeting 8 Number of Bids Received 4 Bid Opening 10/20/2015 Bid Proposal $ Range $281,800 to $322,000 The bids ranged from a low of $281,800.00 to a high of $322,000.00 and ranged from 6% below to 9% above the engineer’s estimate. Staff have reviewed all bids submitted and recommend that the base bid and allowances totaling $281,800.00 submitted by Waterproofing Associates Inc. be accepted and that Waterproofing Associates Inc. be declared the lowest responsible bidder. A change order amount of $28,180.00, ten percent of the total contract, is requested for related, additional, but unforeseen work, which may develop during the project. Resource Impact Funds for this project were budgeted in Fiscal Year 2016 of the recurring Capital Improvement Program Roofing Replacements project PF-00006. City of Palo Alto Page 3 Environmental Review This project is categorically exempt from the California Environmental Quality Act (CEQA) under Section 15301c of the CEQA Guidelines as repair, maintenance and/or minor alteration of the existing facilities and no further environmental review is necessary. Attachments:  Bid Summary - Attachment A (PDF)  C16159537 Fire Station No.2 Re-Roof Contract - Attachment B (PDF)  Fire Station #2 Specs and Drawing - Attachment C (PDF) JOB No.PF-00006 DESCRIPTION: FIRE STATION #2 RE-ROOF SHEET No.: 1 of 1 BID SUMMARY PREPARED BY: Cecil R. Lectura, Engineering Tech III DATE: 10/20/15 IFB No.:159537 CHECKED BY: Jimmy Y. Chen, Project Manager DATE : 10/20/15 BASE BID DESCRIPTION BID WATERPROOFING ASSOC Best Contracting Services State Roofing Systems Pioneer Contractors ITEM QTY UNIT BID BID BID BID A1 Remove existing roof equipment, etc. prior to prepping/replacing existing tar & gravel roof for new capsheet roofing, replace flashing and sleepers, install ladder brackers, install walkway pads, repair fascia boards, & repair dry-rot where occurs 1 LS $271,800 $274,895 $285,000 $312,000 A2 Allowance (for unforseen Zonolite substrate repairs)1LS $5,000 $5,000 $5,000 $5,000 A3 Allowance (for unforseen structural roofing repairs)1LS $5,000 $5,000 $5,000 $5,000 Base Bid Total $281,800 $284,895 $295,000 $322,000 Attachment A Invitation for Bid (IFB) Package 1 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. C16159537 City of Palo Alto “Fire Station No.2 Re-Roof Project” Attachment B Invitation for Bid (IFB) Package 2 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co-operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 Invitation for Bid (IFB) Package 3 Rev. April 20, 2015 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST TRANSFERS…………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13 15.1 Remedies Upon Default……………………………………………………………………………………….13 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….15 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 Invitation for Bid (IFB) Package 4 Rev. April 20, 2015 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non-Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 30.1 Amendments of Laws…………………………………………………………………………………………..19 Invitation for Bid (IFB) Package 5 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 Invitation for Bid (IFB) Package 6 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on 14th day of March 2016 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and WATERPROOFING ASSOCIATES, INC.. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a corporation duly organized and in good standing in the State of California, Contractor’s License Number 649862 and registered with California Department of Industrial Relations (DIR) under registration number 1000000647. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On October 5, 2015, City issued an Invitation for Bids (IFB) to contractors for the “Fire Station No.2 Re-roof Project” (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the Fire Station No.2 Re-roof Project, located at 2675 Hanover Street, Palo Alto, CA. 94304 ("Project"). Invitation for Bid (IFB) Package 7 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. Invitation for Bid (IFB) Package 8 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed within sixty calendar days (60) after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of five hundred dollars ($500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Invitation for Bid (IFB) Package 9 Rev. April 20, 2015 CONSTRUCTION CONTRACT Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Two Hundred Eighty One Thousand Eight Hundred Dollars ($281,800.00). [This amount includes the Base Bid and Additive Alternates.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. Invitation for Bid (IFB) Package 10 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 11 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Jimmy Chen Invitation for Bid (IFB) Package 12 Rev. April 20, 2015 CONSTRUCTION CONTRACT City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Waterproofing Associates, Inc. 975 Terra Bella Avenue Mountain View, CA 94043 Attn: Matt Rabong 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB) Package 13 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally Invitation for Bid (IFB) Package 14 Rev. April 20, 2015 CONSTRUCTION CONTRACT liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. Invitation for Bid (IFB) Package 15 Rev. April 20, 2015 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, Invitation for Bid (IFB) Package 16 Rev. April 20, 2015 CONSTRUCTION CONTRACT submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. Invitation for Bid (IFB) Package 17 Rev. April 20, 2015 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. Invitation for Bid (IFB) Package 18 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. Contractor shall regularly provide electronic copies of certified payrolls of the contracted project to the City of Palo Alto in the following manner: Generate copies of certified payroll in PDF format. The naming Invitation for Bid (IFB) Package 19 Rev. April 20, 2015 CONSTRUCTION CONTRACT convention of the document must contain at a minimum the contract the acronym “PWCP, number of this contract document, and the title of project (i.e. PWCP_C16123456_Project Title). Failure to include the prescribed naming convention may cause an untimely delay of meeting SB7 compliance of the State Labor Code, which could impact project payments. The appropriately named electronic document(s) must be emailed on the agreed scheduled basis to the following location: purchasingsupport@cityofpaloalto.org SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: Invitation for Bid (IFB) Package 20 Rev. April 20, 2015 CONSTRUCTION CONTRACT “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. Invitation for Bid (IFB) Package 21 Rev. April 20, 2015 CONSTRUCTION CONTRACT (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records at the end of each week during the Project. (iv) If the certified payroll records are not produced to the project manager within the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: ____________________________ Deputy City Attorney APPROVED: ____________________________ Public Works Director WATERPROOFING ASSOCIATES, INC. By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ TECHNICAL SPECIFICATIONS FOR FIRE STATION NO. 2 RE-ROOF PF-00006-080 AT 2675 HANDOVER STREET PALO ALTO, CALIFORNIA April 23, 2015 Issued by: City of Palo Alto Department of Public Works Public Works Engineering Capital Improvement Projects Prepared by: ________________________________ Cecil R. Lectura Project Engineer Approved by: ________________________________ Jimmy Y. Chen Project Manager Attachment C Fire Station #2 Re-Roof Specification PF-00006 TABLE OF CONTENTS Page 1 TABLE OF CONTENTS SECTION 01 11 00 GENERAL REQUIREMENTS SECTION 01 74 00 TEMPORARY CONDITIONS SECTION 01 77 00 CONTRACT CLOSEOUT SECTION 02 41 00 DEMOLITION SECTION 06 10 00 ROUGH CARPENTRY SECTION 07 01 50 THERMAL AND MOISTURE PROTECTION SECTION 07 51 13 COLD-PROCESS MODIFIED BITUMEN MEMBRANE ROOFING SECTION 07 60 00 FLASHING AND SHEET METAL SECTION 07 92 00 JOINT SEALANTS SECTION 09 91 13 EXTERIOR PAINTING AND FINISHING APPENDIX - PROJECT DRAWINGS - COLD-APPLIED MODIFIED BITUMEN ROOFING INSTALLATION GUIDE Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 2 SECTION 01 11 00 - GENERAL REQUIREMENTS PART 1 - GENERAL 1.1 SCOPE OF WORK The contractor shall be responsible for all labor, material, tools, equipment, and services necessary for removing existing gravel roof, as well as installing a new roof, approximately 10,500 SF, at Fire Station No. 2, located at 2675 Hanover St., in Palo Alto, California. Contractors bidding the project shall, at their discretion, measure and verify the roof areas during the mandatory bid walk. The project includes but is not limited to the following: A. Verify and clear all roof drains and drainage pipes servicing as downspouts. Install pre-fab mesh insert below all drain caps. There shall be no clogged drains prior to Final Inspection. B. Existing active, roof-mounted communication equipment: antennae, satellite dish, etc. and their respective wiring, guide wires, etc. to remain intact during entire construction period. Coordinate with City of Palo Alto project manager re: any temporary support procedures to place during that period. C. Remove existing tar & gravel roofing system throughout three (3) roof areas (of varying heights) down to the existing Zonolite substrate. D. Remove existing base assemblies of all roof-mounted HVAC equipment and skylights (where noted on drawings.) All equipment and skylights to be re- installed onto new higher roof curbs per the drawings. E. Remove all existing galv. edge metal perimeter flashing throughout roofs. Replace with new galv. flashing, pre-finished with Kynar 500 coating – color to match existing trim color. F. Remove and replace all conduit-topped 2x wood sleepers and metal clamps with new 4x p.t.d.f. wood sleepers with galv. metal clamps, at all roofs. Remove and replace all gas piping-topped 4x wood sleepers and metal clamps with new rubber Durablok sleepers with galv. metal clamps. G. Patch/repair roof substrate as necessary before installing modified bituminous membrane roofing over fiberboard over min. R-19 rigid insulation throughout roof (where noted on drawings) and around pipe and exhaust ductwork penetrations. Roof over Apparatus Room to receive no Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 3 insulation. Install crickets/drainage swales to direct rainwater to existing drain units per the construction drawings. Apply acrylic Title-24, CRRC- approved white or light-colored reflective coating over all roofing material areas as final step, after all other roof work completed. H. Install and secure new galv. wire mesh screen covers securely over pipe jacks, to prevent both vandalism and pest encroachment. I. Provide for Project Manager review/approval: three (3) OSHA-approved, permanently-fixed metal brackets for extension ladder use prior to installing at provided locations on construction drawings. Provide ladder extension system, “Safe-T-Climb & Safe-T Ladder System” in orange color by Western Safety Products or OSHA-approved equal (subject to Project Manager review / approval). J. Install standard-size walkway traffic pads over new roof system, per the suggested plan configuration on the construction drawings. Install per manufacturer-recommended minimal distances between pads. K. Re-attach existing fire warning light fixture at higher location (under Level B overhang), after re-roofing completed. Patch stucco as required to match existing conditions. 1.2 RELATED WORK Reference the drawings and specifications for this project. 1.3 PRE-BID CONFERENCE The bidding Contractor shall attend a mandatory pre-bid meeting and job site visit, and be prepared to raise any questions he/she may have about the renovation area, methods, procedures, required inspections, plans, specifications, and the contract documents. 1.4 PRE-CONSTRUCTION MEETING, SCHEDULE The City shall schedule a pre-construction meeting to review the project with the Contractor. At the time of the meeting, the Contractor shall furnish to the Project Manager for review and approval, a Microsoft Project bar-graph schedule covering various phases of the operations, and all required submittals. The approved progress schedule shall be followed throughout the contract. The Contractor shall also provide emergency contact numbers for after-hours calls. Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 4 Copies of all product data must be submitted and approved by the City of Palo Alto’s Project Manager, prior to their installation. 1.5 CONSTRUCTION SCHEDULE Contractor shall begin work within seven (7) calendar days after receiving the Notice to Proceed, and shall complete all work covered by this contract within 60 calendar days from the Notice to Proceed date. If bad weather or unforeseeable site conditions occur, the Contractor may be granted extra days to complete the job only after a letter requesting for the time extension is submitted and approved by the Project Manager. Contractor shall adjust his schedule for any special events occurring at the site. No additional overhead will be paid. The Contractor shall notify the City of Palo Alto’s Project Manager at least five (5) working days prior to commencing work, when weather conditions allow for an uninterrupted, 60-day appropriated rain-free or temperature-conflicting period of time. All noise-producing demolition work shall be done during business hours. Building will be in use throughout construction. All utilities to areas outside the work area must be maintained. Maintain both ingress and egress to/from building at all times and clear walkways for public use (as applicable.) 1.6 PROTECTION OF EXISTING BUILDING A. Contractor shall use proper and diligent care to protect any and all property belonging to the City of Palo Alto, or others, including existing buildings, doors, floors, walks, pavements, pipe systems, ceiling structures, etc. Contractor shall take all reasonable steps to minimize any dirt, noise, dust, traffic, or other problems, i.e. damage to surrounding property or buildings attributable to any action by the Contractor. B. Contractor shall not overload any part of the premises or the building with any excess material or equipment. If so, he shall do so at his own risk and he shall be solely responsible for any and all loss, damage, and/or injury arising or resulting from the overloading. Protect interior floors and concrete sidewalks not only with heavy plywood sheets to evenly distribute trucks loads, but also when carting materials and debris over them. Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 5 1.7 SAFETY A. Contractor is solely responsible for safety on the job site and shall follow all OSHA safety requirements, and all state safety regulations and orders. 1. Strictly observe safety precautions, and erect temporary barricades, warning lines, signs, and protective railings to protect persons in, around, and under the work areas. Dropping or throwing of objects from above is prohibited. 2. Follow NRCA and OSHA fire protection and prevention provisions including, but not limited to, those listed in OSHA 1962; Chapter 150, 151, 152, 153, and OSHA Chapter 110, 1191 – 110 as they apply to torch application. Comply with all federal, state, and local regulations. 1.8 DRAWINGS A. The location and design of the required construction are shown on the drawings accompanying these Specifications. The following listed drawings are hereby made a part of these Specifications and this contract. Sheet No. Title Date A-1 Roof Plan, Project Data October 18, 2015 A-2 Roofing Details October 18, 2015 A-3 Roofing and Skylight Details October 18, 2015 B. Any part of the work that is mentioned in either the specifications or on the drawings shall be understood by the Contractor to be part of the full scope of work to be done. 1.9 CONTRACT DOCUMENTS AT THE JOB SITE The Contractor shall keep one copy of all the contract documents at the job site in complete and good order. These shall be available to City representatives and public agencies having jurisdiction, and shall include all approved drawings, shop drawings, specifications, addenda, and change orders. Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 6 1.10 INCLUSION OF GENERAL CONDITIONS AND DIVISION ONE Sections of Division 1 are a part of each and every section of these specifications and apply to each and every section as fully as if repeated in each case therein. 1.11 SITE INVESTIGATION Contractor shall visit the site, verify the general and location conditions, and note all other matters that will affect the proposed work. Failure to do so will not relieve the Contractor from his responsibility of underestimating the difficulty or the cost of the work. 1.12 SITE CONDITIONS AND SURVEYS Before beginning the work, the Contractor shall compare actual site conditions with the requirements of the drawings, and shall verify all existing conditions and dimensions. Any discrepancies should be reported immediately to the Project Manager before proceeding with any of the work. Data and information shown and indicated on the drawings should be field-verified. 1.13 CONTRACTOR SUPERVISION Contractor’s Project Superintendent shall have full authority to make minor changes and shall be responsible for the supervision and direction of the construction area. Questions regarding ANY revisions shall be addressed to City's Project Manager via a written Request For Information (RFI). Project Superintendent shall be present on site daily. 1.14 COORDINATION OF WORK Contractor shall coordinate all work with the City's Project Manager. 1.15 DESIGNATED CITY REPRESENTATIVE A. All communications and interface, including written correspondence by the Contractor, shall be with the City of Palo Alto Public Works Engineering, P.O. Box 10250, Palo Alto, CA 94303, phone (650) 496-6900, ATTN: Cecil R. Lectura. B. The Project Engineer is Cecil R. Lectura at (650) 496-6921. Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 7 1.16 WARRANTY A. Contractor shall submit a warranty certificate, covering the roofing product for a period of twenty (20) years, from the date of final project acceptance. The certificate shall be included in the base bid proposal at no additional cost to the City. B. Contractor shall also submit a contractor warranty certificate, covering work performed under this contract for a period of two (2) years from the date of final project acceptance. The certificate shall be included in the base bid proposal at no additional cost to the City. 1.17 PERSONNEL REQUIREMENTS A. Contractor is required to have the Project Superintendent or lead onsite daily to manage the work during construction. B. Proper protective gear is required at all time during construction. These include hard hats, safety goggles, sound and respiratory protection, safety gloves, safety shoes, and full-length clothing. C. All Contractor’s employees shall wear either badges or have clothing identified with the company’s name. D. Contractor is responsible for his/her employees and subcontractor’s proper conduct, appearances, behavior and language used while on the job site. E. Copies of all current MSDS for all components must be kept on site. Provide all crewmembers with appropriate safety data and training as is related to the specific chemical compound he or she may be expected to come in contact with. Each crewmember shall be fully aware of first-aid measures to be used in case of accidents. 1.19 OVERLOADING Contractor shall not overload any part of the premises or the building with any excess material or equipment. If so, he shall do so at his own risk and he shall be solely responsible for any and all loss, damage, and/or injury arising or resulting from the overloading. Fire Station #2 Re-Roof Specification PF-00006 Section 01 11 00 Page 8 1.20 DELIVERY OF MATERIALS OR EQUIPMENT Contractor is responsible for the storage of all equipment and materials. Contractor assumes all risk for storage of his/her materials. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 01 74 00 Page 1 SECTION 01 74 00 - TEMPORARY CONDITIONS PART 1 - GENERAL 1.1 WATER, LIGHT AND POWER All utilities shall be available to the Contractor for construction purposes at no charge. The Contractor is responsible for any temporary connections, extensions and distributions, including all wiring, piping, fittings, fixtures, devices, etc. Utilities must remain operational to all areas of the building at all times. Coordinate any required utilities shut down with Project Manager at least 48 hours in advance. 1.2 TEMPORARY SANITARY FACILITIES Contractor shall provide and install, without extra cost to the City, one or more portable and lockable chemical toilet(s) located where permitted by the City and kept continually in sanitary odor-free condition during project. Remove portable toilet(s) on project completion. Place portable toilet(s) in conformance with applicable laws, codes, and regulations. 1.3 DELIVERY AND STORAGE OF MATERIALS AND EQUIPMENT A. There will be a designated area for storage outside of the building and all the space in the work area is also available as storage space during construction. Material shall be neatly stored in the construction area. B. The Contractor shall assume full responsibility for protection and safe keeping of any materials, tools, and equipment stored on City's property. C. Store materials and equipment only in areas designated by the City for this purpose. D. It is anticipated that Contractor's materials will be placed in the job area. The Contractor shall coordinate delivery requirements with the City Project Manager. E. The Contractor shall be held fully responsible for safe mounting, use, storage and disassembly of the equipment; repair or restoration of the existing structure, its surfaces and finishes, landscaped areas and walkways, or other damage caused by the equipment Fire Station #2 Re-Roof Specification PF-00006 Section 01 74 00 Page 2 1.4 DEBRIS AND CLEANING A. Waste All debris from demolition, framing removal, and other construction-related activities shall be carefully handled and discarded in a manner to minimize the generation of dirt and dust. Keep construction areas clean of waste material daily. All work areas shall be left broom-clean daily. B. All debris shall be removed by Contractor or Contractor’s employees. If debris boxes are used, they must be owned by Contractor or rented from Green Waste only. If rental debris boxes are used, they must be rented from the Palo Alto Sanitation Company (Green Waste), 2000 Geng Road, Palo Alto, CA (650) 493-4894. C. Contractor shall recycle all possible construction debris, including packaging of new materials. Contractor shall comply with City’s Green Building Ordinance. Contractor shall register itself and the project on the City of Palo Alto’s waste management website: greenhalosystems.com. Follow the instructions on the website to create and submit a plan, as well as to track the project’s recycling efforts. Provide documentation & receipts of all recycled materials prior to final request for payment and for final inspection. END OF SECTION Fire Station #2 Re-Roof Specification F001-14 Section 01 77 00 Page 1 SECTION 01 77 00 - CONTRACT CLOSEOUT PART 1 - GENERAL 1.1 CLOSEOUT PROCEDURES A. When contractor considers work has reached final completion, including all change orders and punch list, submit written certification that: 1) contract documents have been reviewed, 2) work has been inspected, 3) work is complete and in accordance with contract documents, and 4) project is ready for Project Manager’s inspection. B. In addition to submittal required by the general conditions of the contract, submit a final statement of accounting, giving total adjusted contract sum. Project will not be considered complete until all project documents are submitted. C. Return all keys and access badges to owner. 1.2 FINAL CLEANING A. Execute prior to final inspection. B. Clean all surfaces. Remove temporary labels, stains and foreign substances. C. Remove waste and surplus materials, rubbish, and temporary facilities from the project site. D. Re-do final cleaning if not cleaned to owner’s standards. 1.3 WARRANTIES AND BONDS Contractor shall assemble documents provided by subcontractors, suppliers, and manufacturers and file in a three ring binder with durable plastic cover. Provide a table of contents and warranty certificates covering 1) all roofing materials for 20 (15 min.) years, and 2) labor for two (2) years from the date of final project acceptance. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 02 41 00 Page 1 SECTION 02 41 00 - DEMOLITION PART 1 - GENERAL 1.1 RELATED DOCUMENTS Drawings and general requirements of the Contract, including General Requirements, Special Provisions and Division 1 Specification Sections, apply to this Section. 1.2 SCOPE OF WORK Refer to constructions drawings for roof area designations: A. Removal of all existing roofing system: gravel, mineral cap roofing, asphalt underlayment, down to the zonolite substrate. B. Temporary removal of remaining rooftop equipment (HVAC, skylights) as required to re-install onto new, higher wood-framed bases. C. Removal and disposal of all visible damaged underlayment, after removing existing roofing system. Dry rot and/or damaged underlayment must be confirmed with the City’s Project Engineer or Project Manager prior to removal, disposal, and/or replacement. 1.3 REGULATORY REQUIREMENTS A. Conform to applicable codes for removal of materials from site. Comply with all regulations and requirements for dust control and disposal. 1.4 CONTRACTOR REQUIREMENTS A. Contractor State Licensing Board: (C-39) - Roofing Contractor. 1.5 PROJECT CONDITIONS A. Owner’s occupants will occupy portions of building immediately within affected areas. Conduct improvements so occupants’ operations will not be disrupted. All noise-producing demolition work shall be done during business hours. B. Maintain access to all walkways, corridors, and other adjacently occupied or used areas in and around the facility. Fire Station #2 Re-Roof Specification PF-00006 Section 02 41 00 Page 2 C. Provide, place, and maintain temporary barriers and security devices for safety of the occupants during the duration of the project. D. Do not allow roof debris and construction materials to fall onto any walking area surfaces during the entire project. These include the interior floors, outdoor walkways, and parking areas. E. Ensure protection and use care with all roof-located antenna, cabling, and/or mechanical equipment. Contractor shall be responsible for any and all damage that occurs to this equipment. F. Prevent debris from entering or blocking roof drains or plumbing vents. 1.6 WEATHER LIMITATIONS A. Proceed with demolition only when existing and forecasted weather conditions permit Work to proceed without water entering into existing roofing system or building. B. Contractor shall be responsible for any and all temporary weather proofing if required. PART 2 - PRODUCTS 2.1 TEMPORARY ROOFING MATERIALS Selection of materials and design of temporary roofing is responsibility of Contractor. PART 3 - EXECUTION 3.1 DEMOLITION OF ROOFING MATERIAL For removing roofing material and/or substrate, the contractor shall ensure that the following work practices are followed: 1. Worker sign-in and on-site safety talk. 2. Roofing material shall be removed in an intact state to the extent feasible. Fire Station #2 Re-Roof Specification PF-00006 Section 02 41 00 Page 3 3. Wet methods shall be used to remove roofing materials that are not intact, or that will be rendered not intact during removal, unless such wet methods are not feasible or will create safety hazards. 4. Cutting machines shall be continuously misted during use, unless competent person determines that misting substantially decreases worker safety. 5. Upon being lowered, unwrapped material shall be transferred to a closed Receptacle in such manner so as to preclude the dispersion of dust. 6. Roof level heating and ventilation air intake sources shall be isolated or the ventilation system shall he shut down. 3.2 DISPOSAL A. Collect and place demolished materials in containers. Promptly dispose of demolished materials. Do not allow demolished materials to accumulate on-site. B. Contractor shall comply with Palo Alto Municipal Code Chapter 5.24 Requirements to Divert Construction and Demolition Waste from Landfill and under heading 1.4, Section 01 74 00, “Temporary Conditions”, located herein these Technical Specifications. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 06 10 00 Page 1 SECTION 06 10 00 - ROUGH CARPENTRY PART 1 - GENERAL 1.0 SCOPE OF WORK Contractor shall furnish all labor, materials, tools, and equipment to remove and replace all worn and/or damaged framing supports and pipe sleepers. 1.1 RELATED SECTIONS A. Section 02 41 00 - Demolition. B. Section 07 51 13 - Cold-Process Modified Bitumen membrane Roofing C. Section 07 60 00 - Flashing and Sheet Metal. General requirements for fabrication of sheet metal flashings and trim. D. Section 07 92 00 - Joint Sealants: Sealing of all roof joints. 1.2 QUALITY ASSURANCE A. Grading rules of the following associations apply to lumber furnished under this Section: 1. West Coast Lumber Inspection Bureau (WCLIB). 2. Western Wood Products Association (WWPA). 3. Redwood Inspection Service (RIS). B. Plywood shall conform to Product Standard PS 1-74. 1.3 PRODUCT DELIVERY, STORAGE AND HANDLING A. Immediately upon delivery to job site, place materials in area protected from weather. B. Store materials & cover with protective waterproof covering, providing for adequate air circulation & ventilation. Polyethylene cover is unacceptable. C. Do not allow materials to be exposed to any moisture during transportation, storage, handling and installation. Fire Station #2 Re-Roof Specification PF-00006 Section 06 10 00 Page 2 1.3 COORDINATION Coordinate carpentry work with the work of other trades, ensuring timely performance of carpentry work as required to meet the construction schedule. PART 2 - PRODUCTS 2.0 MATERIALS A. Blocking, edgings, curbs attached to substrate framing: S4S, Douglas fir, Douglas Fir-larch, or Hem-Fir, No. 2 grade or better. B. Pressure-treated D.F. 2” X 4” sleeper for all non-gas pipes and conduits. C. At all gas piping, install rubber sleepers by Durablok, appropriately sized for pipe size. Provide submittal for City of Palo Alto review/approval prior to ordering. 2.1 NAILS FOR STRUCTURE A. Nails shall be as per NRCA and UBC, and JM roof manufacturer. PART 3 - EXECUTION 3.0 DESCRIPTION A. All workmanship shall be in accordance with the best practice, shall be accurate, with exact measurements and layout and shall be performed in a neat and careful fashion. B. Where necessary to avoid splitting, nail holes shall be sub-bored. Split pieces shall be removed and replaced. C. Cleaning up - Upon completion of his work, the Contractor shall remove all staging and other apparatus used in the work. Contractor shall also clean up and remove all scrap material and debris and leave the job and surrounding areas in a clean and workmanlike manner. END OF DIVISION Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 1 SECTION 07 01 50 - THERMAL AND MOSTURE PROTECTION PART 1 - GENERAL 1.1 SECTION INCLUDES A. Anchor sheet/roof deck protection. 1.02 RELATED SECTIONS 1. Section 06 10 00 - Rough Carpentry: Framing and wood decking. 2. Section 07 60 00 - Flashing and Sheet Metal: Sheet metal flashing; gutters and downspouts. 1.3 REFERENCES American Society for Testing and Materials (ASTM) - Annual Book of ASTM Standards: A. ASTM D1970 - Standard Specification for Self-Adhering Polymer Modified Bituminous Sheet Materials Used as Steep Roofing Underlayment for Ice Dam Protection. B. Underwriters Laboratories (UL) - Roofing Systems and Materials Guide (TGFU R1306). C. Sheet Metal and Air Conditioning Contractors National Association, Inc. (SMACNA) - Architectural Sheet Metal Manual. D. Asphalt Roofing Manufacturers Association (ARMA) E. National Roofing Contractors Association (NRCA) F. U.S. Green Building Council (USGBC) G. Leadership in Energy and Environmental Design (LEED) H. Miami Dade County Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 2 1.4 DEFINITIONS Roofing Terminology: Refer to ASTM D1079 and the glossary of the National Roofing Contractors Association (NRCA) Roofing and Waterproofing Manual for definitions of roofing terms related to this section. 1.5 LEED CERTIFICATION Roofing Terminology: Refer to ASTM D1079 and the glossary of the National Roofing Contractors Association (NRCA) Roofing and Waterproofing Manual for definitions of roofing terms related to this section. A. Provide a roofing system that will achieve or aid in the qualification of points satisfying 1. Materials & Resource credit 4 - Recycled Content. 2. Materials & Resource credit 5 - Local and Regional Materials. 1.6 SUBMITTALS A. Product Data: Provide product data sheets for each type of product indicated in this section. B. Shop Drawings: Provide manufacturers standard details and approved shop drawings for the tile roof underlayment specified. C. Submit copies of GAFMC product data sheets, detail drawings and samples for each type of roofing product. D. Certificates: Installer shall provide written documentation from the manufacturer of their authorization to install the roof system, and eligibility to obtain the warranty specified in this section. E. L.E.E.D. submittal: Coordinate with Section 01115 - Green Building Requirements, for LEED certification submittal forms and certification templates. 1.7 QUALITY ASSURANCE A. Manufacturer Qualifications: GAFMC shall provide all primary roofing underlayment products, leak barrier, and ventilation, by a single manufacturer. Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 3 B. Installer Qualifications: Installer must be approved for installation of all roofing products to be installed under this section. 1.8 REGULATORY REQUIREMENTS A. Exterior Fire Test Exposure: Provide a roofing system that will achieve an Underwriters Laboratories rating for roof slopes indicated. 1. UL Class A B. Install all roofing products in accordance with all federal, state and local building codes. C. All work shall be performed in a manner consistent with current OSHA guidelines. 1.9 PRE-INSTALLATION MEETING A. General: For all projects in excess of 250 squares of roofing, a pre- installation meeting is strongly recommended. B. Timing: The meeting shall take place at the start of the roofing installation, no more than 2 weeks into the roofing project. C. Attendees: Meeting to be called for by manufacturer’s certified contractor. Meeting’s mandatory attendees shall include the certified contractor and the manufacturer’s representative. Non-mandatory attendees shall include the owner’s representative, architect or engineer’s representative, and the general contractor’s representative. D. Topics: Certified contractor and manufacturer’s representative shall review all pertinent requirements for the project, including but not limited to, scheduling, weather considerations, project duration, and requirements for the specified warranty. 1.10 DELIVERY, STORAGE, AND HANDLING A. Deliver all roofing materials to the site in original containers, with factory seals intact. All products are to carry either a GAFMC or BMCA® label. Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 4 B. Remove manufacturer supplied plastic covers from materials provided with such. Use “breathable” type covers such as canvas tarpaulins to allow venting and protection from weather and moisture. Cover and protect materials at the end of each work day. Do not remove any protective tarpaulins until immediately before the material is to be installed. C. Store products in a covered, ventilated area, at temperature not more than 55 degrees F (12.6 degrees C). D. Do not expose materials to moisture in any form before, during, or after delivery to the site. Reject delivery of materials that show evidence of contact with moisture. E. Store bundles on a flat surface. Maximum stacking height shall not exceed GAFMC’s recommendations. Store all rolls on end. 1.11 WEATHER CONDITIONS A. Proceed with work only when existing and forecasted weather conditions will permit work to be performed in accordance with GAFMC’s recommendations. 1.12 WARRANTY A. Provide GAFMC® Blue Diamond Guarantee or approved equal, where the manufacturer agrees to repair or replace the portion of the roofing materials, which have resulted in a leak due to a manufacturing defect or defects caused by ordinary wear and tear. 1. Duration: Twenty (20) years from the date of completion. PART 2 - PRODUCTS 2.1 MANUFACTURERS A. Acceptable Manufacturers: 1. GAFMC, 1361 Alps Rd. Wayne NJ 07470. Tel: 1-973-628-3000 2. Tremco Inc., Cleveland, OH Tel: 1-216-292-5000. Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 5 2.2 FIRE BARRIER SHEET A. Non-woven fiberglass mat underlayment coated on both sides suing a highly filled polymer. Provides a fire barrier and water resistant. Approved by Dade Country, Florida Building Code, and ICC approval. Each roll contains approximately 3.5 squares (350 gross sq. ft.) of material and is 42" x 100' (1.07m x 30.5 ft). VersaShield Underlayment® by GAFMC or approved equal. 2.3 ANCHOR SHEET A. Premium, water repellant, breather type non-asphaltic underlayment. UV stabilized polypropylene construction. Meets or exceeds ASTM D226 and D4869. Approved by Dade Country, Florida Building Code, and ICC. Each roll contains approximately 10 squares (1003 sq. ft.) of material and is 54” x 223’. Deck-Armor™ Premium Breathable Roof Deck Protection, by GAFMC or approved equal. 2.4 ROOFING CEMENT & PRIMER A. SBS Cement: ASTM D4586, Matrix 201 Premium SBS Flashing Cement, by GAFMC® or approved equal. B. Asphalt Primer: ASTM D41, Matrix 307 Premium Asphalt Primer, by GAFMC® or approved equal. C. Asphalt Plastic Roofing Cement meeting the requirements of ASTM D 4586, Type I or II. 2.5 NAILS A. Refer to Section 07 51 13, Part 2.5 Assembly Fasteners for nail type and acceptable manufacturers. B. Plastic cap nails by others. 2.6 PLATES & SCREWS A. Standard duty alloy steel insulation fastener with CR-10 coating with a .215” diameter thread. Factory Mutual Standard 4470 Approved, #3 Phillips head for use on steel and wood decks, Drill•Tec Standard Screws by GAFMC or approved equal. Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 6 B. Galvalume coated steel 3" diameter plates. Miami Dade and Factory Mutual Standard 4470 Approved and suitable for use with Drill•Tec Philips head fasteners and Drill•Tec extra heavy duty fasteners. Made for east use with Drill•Tec AccuTrac stand up tool, Drill•Tec Accuseam Plates by GAFMC or approved equal. 2.7 METAL FLASHING A. 24 gauge hot-dip galvanized steel sheet, complying with ASTM A 653/A 653M, G90/Z275. PART 3 - EXECUTION 3.01 EXAMINATION A. Verify that the surfaces and site conditions are ready to receive work. B. Verify that the deck is supported and secured. C. Verify that the deck is clean, dry and smooth, free of ice or snow, depressions, waves, or projections, and properly sloped to drains, valleys, eaves, scuppers or gutters. D. Verify that all roof openings or penetrations through the roof are solidly set, and that all flashings are tapered. E. If roof deck preparation is the responsibility of another installer, notify the architect or building owner of unsatisfactory preparation before proceeding. 3.02 GENERAL PREPARATION A. Verify that the surfaces and site conditions are ready to receive work. B. Verify that the deck is supported and secured. C. Verify that the deck is clean, dry and smooth, free of ice or snow, depressions, waves, or projections, and properly sloped to drains, valleys, eaves, scuppers or gutters. D. Verify that all roof openings or penetrations through the roof are solidly set, and that all flashings are tapered. Fire Station #2 Re-Roof Specification PF-00006 Section 07 01 50 Page 7 E. If roof deck preparation is the responsibility of another installer, notify the architect or building owner of unsatisfactory preparation before proceeding. 3.3 SUBSTRATE PREPARATION A. Metal Deck 1. Refer to Section 07 51 13, Part 3.3 Preparation. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 1 SECTION 07 51 13 - COLD-PROCESS MODIFIED BITUMEN MEMBRANE ROOFING PART 1 - GENERAL 1.1 SECTION INCLUDES A. The attached are components of this section: 1. Scope of work. 2. General Conditions. 3. Specifications. 1.2 PRODUCTS INSTALLED BUT NOT FURNISHED UNDER THIS SECTION A. Sheet metal flashing and trim. B. Sheet metal roofing specialties. 1.3 RELATED SECTIONS A. Section 06 10 00 - Rough Carpentry. B. Section 07 60 00 - Flashing and Sheet Metal. 1.4 REFERENCE STANDARDS A. References in these specifications to standards, test methods and codes, are implied to mean the latest edition of each such standard adopted. The following is an abbreviated list of associations, institutions, and societies which may be used as references throughout this specification section 1. ASTM - American Society for Testing and Materials, Philadelphia, PA. 2. FS - Federal Specification. 3. NRCA - National Roofing Contractors Association; Rosemont, IL. 4. UL - Underwriters Laboratories; Northbrook, IL. a. UL790 Class A. 5. FM - Factory Mutual 4470. a. Class I-90 wind uplift. 6. OSHA - Occupational Safety and Health Administration; Wash., DC. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 2 7. SMACNA - Sheet Metal and Air Conditioning Contractors National Association; Chantilly, VA. 1.5 SCOPE OF WORK A. Furnish and install cold process roofing, insulation, flashings, Title 24 compliant Cool Roof coating, and miscellaneous materials. B. Work includes: 1. Removal of existing roofing system, insulation, and any unused equipment. Reuse existing drains. Installation of designated new roofing and flashing. Make special precautions for falling debris in interior space during removal phase. 2. Installation of: a. Mechanically attached trilaminate base sheet to LWIC deck. Adhered multi layer insulation: Adhere tapered insulation system with average R19 using polyisocyanurate and adhered 1/2" single layer of fiberboard insulation. Apparatus high bay roof to receive base sheet and ½” fiberboard. Cold process, two ply SBS modified base sheets, then reinforced SBS/SEBS/SIS modified bitumen capsheet built-up roofing system with Cool Roof white coating. 3. Base flashings: a. Powerply Standard Plus FR with one composite ply as flashing ply by Tremco. 4. Roof Membrane Surfacing: a. SBS/SEBS/SIS reinforced modified bitumen capsheet – Powerply Standard Plus FR by Tremco. Apply Cool Roof white reflective coating after activity has ended. 5. Install new edge termination metal, two piece surface mounted counterflashing on two lower roof levels at CMU wall, cap flashing at condenser unit platform. 6. Install new 4 lb. lead flashing around all pipe penetrations. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 3 a. All metal work to be SMACNA approved detail. 7. Manufacturer to provide (3) days of part time project inspection. 8. Provide new foam blocking and unitstrut clamps at conduit lines. 9. Install traffic pads under communication equipment resting on the roof and at ladder access point. 1.6 QUALITY CONTROL A. Contractor shall: 1. Be experienced in cold process roofing ten years minimum under same company name. 2. Be acceptable by Owner and roofing material supplier. 3. Maintain a copy of roofing specification on the job site at all times. 4. Shall be a Certified Applicator by the material manufacturer. 5. Utilizing Tremco's technical inspectors, Contractor will acquire three (3) job site inspection days as required by material manufacturer and Owner. B. Roofing material supplier shall: 1. Be Associate Member in good standing with National Roofing Contractors' Association (NRCA). 2. Be nationally recognized in roofing, waterproofing, and moisture survey industry. 3. Provide Owner names of at least four (4) certified applicators. 4. Provide local Field Representative to make periodic site visits, report work quality and job progress. Provide a field inspector to make job site inspections and submit daily reports and photographs of work. 5. The presence and activity of the manufacturer's/specifier's representative and/or owner's representative shall in no way relieve the contractor of his contractual responsibilities or duties. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 4 C. Plans and specifications: 1. Contractor must notify owner and specifier of any omissions, contradictions or conflicts seven (7) days before bid date. Owner and specifier will provide necessary corrections or additions to plans and specifications by addendum. If he does not so notify owner and specifier of any such condition, it will be assumed he has included the necessary items in his bid to complete this specification. 2. It is the intent that this be a completed project as far as the contract documents set forth. It is not the intent that different phases of work on this project be delegated to various trades and subcontractors by the contract documents. Contractor must make his own contracts with various subcontractors, setting forth the work these subcontractors will be held responsible for. Contractor alone will be held responsible by the owner for the completed project. 3. If the contractor feels a conflict exists between what is considered good roofing practice and these specifications he shall state in writing all objections prior to submitting quotations. 4. It is the contractor's responsibility during the course of the work, to bring to the attention of the owner's representative any defective membrane, insulation or deck discovered where not previously identified. D. Project meetings: 5. Pre-Construction Meeting: a. Will be scheduled by Owner within seven (7) days after receipt of the City of Palo Alto’s Notice to Proceed letter, signed by the contractor. b. Attendance: - Representative of Owner. - Roofing material manufacturer/specifier. - Contractor. c. Agenda: - Submittal of insurance certificates. - Submittal of executed bonds and insurance certificates. - Execution of Owner-Contractor Agreement. - Distribution of contract documents. - Submittal of list of subcontractors, material submittals, and Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 5 progress schedule. - Designation of responsible personnel. - Walkover inspection. E. Progress meetings: 1. Will be scheduled by Owner as required. 2. Attendance: a. Owner. b. Contractor. c. Job superintendent. d. Roofing material manufacturer/specifier. e. Subcontractors, as appropriate. 3. Minimum agenda: a. Review of work progress. b. Field observations, problems, and decisions. c. Identification of problems which impede planned progress. d. Maintenance of progress schedule. e. Maintenance of quality and work standards. f. Effect of proposed changes on progress schedule and coordination. g. Protection of area around work zone due to ongoing operations. F. Final inspection: 1. Will be scheduled by roofing material manufacturer upon job completion. Attendance: a. Owner. b. Contractor. c. Roofing material manufacturer/specifier. 4. Minimum agenda: a. Walkover inspection. b. Identification of problems which may impede issuance of warranty. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 6 1.7 SUBMITTALS A. The performance requirements outlined in Section II of this specification shall be strictly adhered to. Submittal of alternate materials and/or systems not conforming to these performance specifications will result in the disqualification of the bidder. Bidders shall submit the following with the bid: 1. Product compatibility: a. Written verification from roofing material supplier that major roofing components, including (but not limited to) coatings, cold process adhesives; roofing ply sheets; reinforcement fabric felts and mats; mastics; and sealants are all compatible with each other. 2. Test reports: a. Written verification from roofing material supplier that roofing system meets or exceeds regulatory agency/s requirements. A photocopy of the UL Class "A" listing for the specified system with proposed manufacturer as listed in the 2015 UL Building Materials Directory. 3. Red label products: a. Written verification from roofing material supplier that cold process coatings are not red label. 4. Product data: a. Product data sheets. b. Material safety data sheets. 1.8 DELIVERY, STORAGE AND HANDLING A. Delivery of materials: 1. Deliver materials to job-site in new, dry, unopened, and well-marked containers showing product and manufacturer's name. 2. Deliver materials in sufficient quantity to allow continuity of work. 3. Coordinate delivery with Owner – location TBD. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 7 4. Store roll goods on ends only. Discard rolls which have been flattened, creased, or otherwise damaged. Place materials on pallets. Do not stack pallets. 5. Stack insulation on pallets. 6. Store materials marked "keep from freezing" in areas where temperatures will remain above 40 degrees F. 7. Rooftop storage: Disperse material to avoid concentrated loading. 8. Cover top and sides of all exterior stored materials with canvas tarpaulin (or polyethylene). Secure tarpaulin. 9. No materials may be stored in open or in contact with ground or roof surface. 10. Should Contractor be required to quickly cover material temporarily, such as during an unanticipated rain shower, all materials shall be stored on a raised platform covered with secured canvas tarpaulin (or polyethylene), top to bottom. This is only a temporary covering, since at end of each day's work, all roofing materials and accessories are to be stored in trailers. 11. Contractor shall assume full responsibility for the protection and safekeeping of products stored on premises. 1.9 SITE CONDITIONS A. Field measurements and material quantities: 1. Applicator shall have SOLE responsibility for accuracy of all measurements, estimates of material quantities and sizes, and site conditions that will affect work. Contractor will be responsible for determining entire existing roof assembly. All asbestos testing results shall be provided to contractors at the pre-bid conference, if applicable. B. Existing conditions: 1. Access to roof shall be from exterior only or as approved by Owner. No unauthorized roofing employees will be allowed within building. 2. Air-conditioning units and other equipment shall be moved/lifted as required to install roofing materials complete and in accordance with plans and specifications. When units and equipment are to be moved, they shall be carefully disconnected and moved to a protected area so as not to damage any part or component thereof, and shall be Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 8 reconnected in such a way that they are restored to a prior work operating condition. 3. All disconnection and re-connection shall be performed by a mechanical and/or electrical company licensed to perform such work. C. Asbestos: 1. Owner agrees to exonerate, indemnify, defend, and hold harmless contractor and roofing material manufacturer from and against all claims, demands, lawsuits, damages, expenses and losses incurred by Contractor's removal of asbestos-containing materials from Owner's building and work site provided Contractor conducts its operations according to applicable requirements established by: a. Occupation Safety and Health Administration (OSHA). b. Environmental Protection Agency (EPA). D. Environmental requirements: 1. Do not work in rain, snow, or in presence of water. 2. Do not work in temperatures below 40 degrees F. 3. Do not install materials marked "keep from freezing" when daily temperatures are scheduled to fall below 40 degrees F. 4. Do not perform masonry work below 35 degrees F. Make proper provisions to protect work from freezing 48 hours after laying if work is performed between 35 degrees F. and 45 degrees F. 5. Remove any work exposed to freezing. E. Safety requirements: 1. All application, material handling, and associated equipment shall conform to and be operated in conformance with OSHA safety requirements. 2. Comply with federal, state, local and Owner fire and safety requirements. 3. Advise Owner whenever work is expected to be hazardous to Owner employees and/or operators. 4. Maintain a crewman as a floor area guard whenever roof decking is being repaired or replaced. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 9 5. Maintain fire extinguisher within easy access whenever power tools, roofing kettles, and torches are being used. 6. Advise Owner when volatile materials are to be used near air ventilation intakes so that they can be shut down or blocked. 7. OSHA fall protection and job zone ground protection will be enforced. F. Security requirements: 1. Comply with Owner security requirements. 2. Provide Owner with current list of accredited persons. 3. Require identification be displayed by all persons employed on this project. G. Temporary sanitary facilities: 1. Furnish, install, and maintain temporary sanitary facilities for employee use during project. Remove on project completion. 2. Place portable toilets in conformance with applicable laws, codes, and regulations. 1.10 SUBSTITUTIONS A. When a particular make or trade name is specified, it shall be indicative of standard required. 1. Owner reserves right to be final authority on acceptance or rejection of any substitute. 1.11 PAYMENT SECURITY A. Progress payments: 1. Payment to the Contractor shall be progress payment as agreed to by owner and contractor. 2. Final payment shall be withheld until all provisions of the specifications are met. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 10 1.12 QUANTITIES INCLUDED IN THE BASE BID A. Include the following items in your base bid: 1. Walkpad installation around all serviceable equipment in addition to added linear feet. 2. All wood blocking and fastening components. 3. All perimeter flashing and metal components. 4. All tapered edge and cant strips. 5. All existing or new counterflashing. 6. All surface mastics, coatings, stripping ply, etc. 7. All warranty/inspection charges. 1.13 WARRANTY/GUARANTEE A. Warranty: 1. Upon project completion, material manufacturer's acceptance, and once complete payment has been received by both Contractor and material manufacturer, material manufacturer shall deliver to owner a Twenty (20) year Roofing System Warranty and Owner's Manual. Visits to the roof by the materials manufacturer shall be made at years’ 2, 5, 10, and 15. A formal site inspection report by manufacturer's field technicians shall be made at those times. B. The Manufacturers Warranty must include labor & material coverage against leakage on all components; including those manufactured by others. Included: 1. Insulation materials, fasteners, and adhesives. 2. All roof membrane components and adhesives. 3. All drain assemblies, scuppers, expansion joints, pitch pans, lead jacks, excluding interior plumbing. 4. Any leaks or other problems caused by substrate movement, excluding decks, shall not be excluded from the written warranty. 5. Wind damage from speeds up to 74 mph. C. Guarantee: 1. Upon project completion and Owner acceptance, effective upon complete payment, Contractor shall issue Owner a guarantee against defective workmanship and materials for a period of two (2) years. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 11 D. This roofing system will be inspected on a regular basis by the local manufacturer's representative and WTI field inspectors during installation. Before a system warranty is granted, the entire system as specified will have undergone final inspection by a certified inspector from the manufacturer's Technical Services Department. E. All roofing drawings and flashing details as provided by this specification shall be bid accordingly. There shall be no substitutes allowed to the details. PART 2 PRODUCTS 2.1 GENERAL A. Comply with quality control, references, specifications, and manufacturer's data. Products containing asbestos are prohibited on this project. Use only asbestos-free products. 2.2 BASIS OF DESIGN MANUFACTURER A. Tremco Inc., Cleveland, OH 216/292-5000. 2.3 WOOD BLOCKING & CURBS A. Sleepers: 4" x 4" or as specified. A. All exterior wood to be treated wood. 2.4 INSULATION A. Recovery board, tapered edge strip and cant strip: 1. Wood fiberboard. Insulation: Temple Inland HD 1/2" x 4' x 8'. 2. Tapered insulation system base layer at two lower roof levels in field: Polyisocyanurate. Tapered insulation to provide avg. R19 and to provide min. ¼” slope to drain. 2.5 ASSEMBLY FASTENERS A. One (1) inch cap nails: 1. Type: Spiral or annular ring shank, twelve (12) gage minimum, with in- tegral one (1) inch cap. 2. Acceptable manufacturers: Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 12 a. Hillwood Manufacturing Co., Cleveland, OH. b. Hoffler Wire Products Co., Inc., Nevada City, CA. c. Independent Nail, Inc., Bridgewater, MA. d. W. H. Maze Co., Peru, IL. e. National Nail Corp., Grand Rapids, MI. f. Simplex Nails, Inc., Americus, GA. B. Galvanized sheet steel to wood blocking: 1. FS FF-N-105B(3) Type II, Style 20, roofing nails; galvanized steel wire, flat head, diamond point, round, barbed shank. 2. Length: Sufficient to penetrate wood blocking 1-1/4 inches minimum. C. Drawband: 1. Gold Seal stainless steel worm gear clamp by Murray Corporation, Cockeysville, MD. 2. Power-Seal stainless steel worm drive clamps by Breeze Clamp Company, Saltsburg, PA. D. Termination Bar: 1. 16 ga. galvanized steel "C" bar, 2 1/2" wide with 1/2" receivers and 1/4" x 3/8" oblong holes placed 8" o.c. E. Base sheet to LWIC deck: 1. Mechanically attached using Tremco Base Sheet Fasteners. F. Counterflashing/termination bar to wall: 1. Lead masonry anchors. 2.6 ROOFING MATERIALS A. Adhesives: 1. Interply adhesive. a. Cold process interply mastic - Powerply Standard Cold Adhesive LV. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 13 B. T-24 compliant Cool Roof coating: 1. Solargard 6083 Reflective Coating by Tremco. C. Modified Bitumen SBS Base sheet: 1. Powerply HT Base Sheet. D. Reinforcing membrane: 1. Composite Ply Base sheet. E. Roofing system: 1. Cold Process BUR - Powerply Standard Plus FR built up system. F. Related materials: 1. Asphalt mastic: a. Asphalt mastic - ELS. 2. Asphalt primer: a. Water based primer - Tremprime WB. 3. Elastomeric mastic: a. Modified asphalt mastic - Polyroof LV. 4. Flashing adhesive: a. ELS for modified bitumen membrane. 5. Flashing ply: a. Composite Ply base sheet. 6. Surface and Base Flashing membrane: a. Powerply Standard Plus FR capsheet. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 14 7. Sealants: a. General purpose sealant: High performance, low modulus polyurethane sealant Tremseal D. 8. Flashing Tape: a. Butyl tape – Tremco Flashing Tape. 9. Insulation: a. Recover board: Temple Inland. Polyisocyanurate: Any approved by roofing materials manufacturer. 10. Traffic pad: a. APOC or Meadows. 11. Insulation Adhesive: a. Low Rise Foam by Tremco. 2.7 METAL FLASHINGS A. Counterflashing metal: 1. All metal to be 24 gauge. 2. Kick and hem all metal. 3. Install metal per SMACNA APPROVED DETAIL. 4. Cleat metal to be 22 ga. B. Plumbing Vents and drain lead: 5. ASTM B 29-79 (1984), four (4) lb. sheet lead. C. Perimeter edge metal: 1. All metal to be 24 gage, Kynar 500 finished to match existing fascia trim color. 2. Kick and hem all metal. 3. Install metal per SMACNA APPROVED DETAIL. 4. Cleat metal to be 22 ga.. 5. Provide cover plates at all joints. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 15 PART 3 EXECUTION 3.1 EXAMINATION A. Verify conditions as satisfactory to receive work. B. Do not begin roofing until all unsatisfactory conditions are corrected. Beginning work constitutes acceptance of conditions. C. Verify that work of other trades penetrating roof deck or requiring men and equipment to traverse roof deck has been approved by Owner, manufacturer, and roofing contractor. D. Check projections, curbs, and deck for inadequate anchorage, foreign material, moisture, or unevenness that would prevent quality and execution of new roofing system. 3.2 GENERAL WORKMANSHIP A. Substrate: Free of foreign particles prior to laying roof membrane. B. Phased application: Not permitted. All plies shall be completed each day. C. Traffic and equipment: Kept off completed plies until adhesive has set. D. Wrapper and packaging materials: Not to be included in roofing system. E. Mechanical fasteners: 1. Seated firmly in discs with fastener heads flush or below disc's top surface. F. Base flashing height: 1. Not less than eight (8) inches above finished roof surface, unless approved by manufacturer. 3.3 PREPARATION A. Protection: 1. Contractor shall be responsible for protection of property during course of work. Lawns, shrubbery, paved areas, and building shall be protected from damage. Repair damage at no extra cost to Owner. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 16 2. Provide at site prior to commencing removal of debris, a dumpster or dump truck to be located adjacent to building where directed by Owner. 3. Roofing, flashings, membrane repairs, and insulation shall be installed and sealed in a watertight manner on same day of installation or before arrival of inclement weather. 4. At start of each work day drains within daily work area shall be plugged. Plugs to be removed at end of each work day or before arrival of inclement weather. 5. Preparation work shall be limited to those areas that can be covered with installed roofing material on same day or before arrival of inclement weather. 6. Arrange work sequence to avoid use of newly constructed roofing for storage, walking surface, and equipment movement. Move equipment and ground storage areas as work progresses. 7. Provide clean plywood walkways and take other precautions required to prevent tracking of aggregate/debris from existing membrane into new work area where aggregate/debris pieces can be trapped within new roofing membrane. Contractor shall instruct and police his workmen to ensure that aggregate/debris is not tracked into new work areas on workmen's shoes or equipment wheels. Discovery of entrapped aggregate/debris within new membrane is sufficient cause for its rejection. 8. Surface preparation: a. Remove: Designated roofing, to roof deck. b. Sweep clean roof deck. c. Remove designated existing perimeter metal. d. Remove designated flashings to substrate. 3.4 THERMAL INSULATION A. Mechanically attach base sheet using base sheet fasteners to LWIC. B. Install tapered insulation system and recovery board by adhering in Low Rise Foam insulation adhesive. High bay roof over Apparatus Room to receive only base sheet and ½” fiberboard. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 17 3.5 ROOF SYSTEM APPLICATION A. Embed two Comp Base Plies in a uniform and continuous application of interply mastic. Interply application rate: 2.5 gallons per 100 sq. ft. B. Immediately after installation, broom and/or roll ply sheet. Ensure complete and continuous seal and contact between adhesive and felts, including ends, edges and laps without wrinkles, fish mouths, or blisters. Broom/roller width: Thirty-four (34) inches minimum. C. Apply uniform and continuous pressure to exposed edge and end laps to ensure complete adhesion. D. Avoid walking on plies until mastic adhesive has set. E. Overlap previous day's work twenty-four (24) inches. F. Lap ply membrane ends four (4) inches. Stagger end laps three (3) feet minimum. G. Ply shall never touch ply, even at roof edges, laps, tapered edge strips, and cants. H. Fit plies into roof scupper drain; install housing with lead flanges and finishing plies; install strainer screen. I. Extend roofing membrane to top edge of cant at wall and projection bases. J. Cut out fishmouths/side laps which are not completely sealed; patch. Replace all sheets which are not fully and continuously bonded. 3.6 DAILY WATERSTOP/TIE-INS A. Envelope insulation with eighteen (18) inch wide No. 15 ply sheet. Adhere envelope to deck and insulation with a continuous 1/16 inch thick application of tie-off mastic. Glaze cut-off with surfacing mastic. 3.7 FLASHINGS A. General flashing requirements: 1. Modified Bitumen flashing membrane: Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 18 a. Adhere flashing ply and capsheet membrane in ELS mastic. b. No strip in ply required. c. Heat weld all vertical seams. 2. Base flashing height: a. Not less than eight (8) inches, not higher than twelve (12) inches above finished roofing surface. 3. Two-Ply Stripping: a. Set flange in asphalt mastic. Seal flange with two (2) stripping composite plies embedded between alternate applications of stripping adhesive/bitumen. Extend first ply four (4) inches beyond flange; second ply two (2) inches beyond first ply. A. At perimeter gravel stop: 1. Install additional wood nailer to match new insulation height. Ensure edge metal matches existing profile and color. Flange width: 4”. Fascia width: to conform with existing trim. Install continuous cleat or J hooks. Install cover plates and set in Polyroof LV. B. At CMU walls: 1. Set flashing ply and capsheet membrane in ELS mastic. Heat weld vertical seams.Ensure complete bond and continuity without wrinkles or voids. Lap sheeting ends six (6) inches; splice ends with lap adhesive; steel roll. 2. MB width: Sufficient to extend at least six (6) inches beyond toe of cant onto new roof. 3. Top coat all flashings with white coating. 4. Mechanically fasten with masonry anchors top edge of all flashings with termination bar with TF tape backing. Fasten 8” o.c. to pre-drilled wall. 5. Install new counterflashing – GSM with kick and hem and receiver. Fasten 8” o.c. with TF tape backing. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 19 C. At plumbing vents: 1. Remove existing stack flashing. 2. Wedge plumbing vent tight against deck. 3. Provide tapered edge at vent base. Firmly butt edge strip to blocking; miter corners. Mechanically attach edge strip to deck. 4. Apply 1/16 inch uniformly thick layer of asphalt mastic to surface receiving metal flange. a. Pipe outside diameter greater than two (2) inches: Bend lead inside pipe one (1) inch minimum with pliers or rubber/plastic mallet; replace cracked lead. \ b. Pipe outside diameter two (2) inches or less: Cut lead at vent top; fabricate and install integral lead cap. 5. Seal flange with two (2) strips of flashing ply flashing embedded between alternate applications of asphalt mastic. Extend first ply two (2) inches beyond flange; second ply two (2) inches beyond first ply. D. Drains: 1. Reuse existing drain hardware after cleaning. Replace parts if needed. Flash according to Tremco warranty guidelines and NRCA standards. E. Flanged vents: 1. Install nailers equal to final insulation height where flanged will be secured. Install base sheet. 2. Set primed flange in bed of asphalt mastic and nailer 3” o.c. staggered. 3. Install two ply strip in with asphalt mastic. 3.8 SURFACING APPLICATION A. Capsheet membrane: 1. Over the roof surface spray apply uniform and continuous interply mastic at 2.5 gallons per 100 sq. ft. 2. Immediately install Powerply Standard Plus FR. Fire Station #2 Re-Roof Specification PF-00006 Section 07 51 13 Page 20 3. After installation activities are complete, lightly prime capsheet with Tremprime WB. Apply Solargard 6083 Coating in a two step application at minimum of 2 gallons per 100 sq.ft. 3.9 MISCELLANEOUS A. Painting: 1. Paint all small metal vents and pipes with Solargard 6083 coating to match the new finish roof coating. B. Cap metal and counter flashings: 1. Install 24 ga. cap metal and counter flashings where designated. C. Pipes and conduit: 1. Capture all conduit projections with a lead jack and storm collar. D. Traffic pads: 1. Install traffic pads under any communication equipment resting on rooftop. Install traffic pads at any serviceable equipment. Install traffic pads at ladder access to roof. 3.10 ADJUSTING AND CLEANING A. Clean-up: 1. Immediately upon job completion, roof membrane and metal surfaces shall be cleaned of debris. 2. Clean grounds around building of any debris from roofing project. 3. Ensure all drains are flowing freely by testing. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 1 SECTION 07 60 00 - FLASHING AND SHEET METAL PART 1 - GENERAL 1.1 RELATED DOCUMENTS A. Drawings and general requirements of the Contract, including General Conditions, Special Provisions and Division 1 Specification Sections, apply to this Section. 1.2 SCOPE OF WORK A. Install new perimeter edge flashing throughout. B. Miscellaneous sheet metal accessories. Install new galv. wire mesh screen covers securely over pipe jacks. 1.3 PERFORMANCE REQUIREMENTS A. General: Install sheet metal flashing and trim to withstand wind loads, structural movement, thermally induced movement, and exposure to weather without failing, rattling, leaking, and fastener disengagement. B. Fabricate and install flashings and copings capable of resisting forces for the appropriate wind zone, per Factory Mutual's Loss Prevention Data Sheet 1-49. C. Temperature Range: 120 deg F ambient; 180 deg F, material surface. D. Thermal Movements: Provide sheet metal flashing and trim that allow for thermal movements resulting from the maximum range of ambient and surface temperatures provided above by preventing buckling, opening of joints, hole elongation, overstressing of components, failure of sealant joints, failure of connections, and other detrimental effects. Provide clips that resist rotation and avoid shear stress as a result of sheet metal and trim thermal movements. Base engineering calculations on surface temperatures of materials due to both solar heat gain and nighttime sky heat loss. E. Water Infiltration: Provide sheet metal flashing and trim that do not allow water infiltration to the building interior. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 2 1.4 SUBMITTALS A. Product Data: For each type of product indicated. Include construction details, material descriptions, dimensions of individual components and profiles, and finishes for each manufactured product and accessory. B. Shop Drawings: Describe material profiles, jointing pattern, jointing details, fastening methods, interface with other work and installation details. 1. Material. 2. Thickness of material. 3. Weight. 4. Finish. 5. Location of each item and details of expansion joint covers, including the direction of expansion and contraction. 1.5 QUALITY ASSURANCE A. Comply with "Architectural Sheet Metal Manual" by SMACNA, for each general category of work required. B. Applicator: Applicator who has complete sheet metal flashing and trim work similar in material, design, and extent to that indicated for this project and with a record of successful in-service performance and with 5 years minimum experience. C. Pre-installation Conference: Conduct conference at Project site to comply with requirements in Division 1 Section "Project Management and Coordination." 1. Meet with Owner, Architect, Owner's insurer if applicable, Installer, and installers whose work interfaces with or affects sheet metal flashing and trim including installers of roofing materials, roof accessories, unit skylights, and roof-mounted equipment. 2. Review methods and procedures related to sheet metal flashing and trim. 3. Examine substrate conditions for compliance with requirements, including flatness and attachment to structural members. 4. Document proceedings, including corrective measures and actions required, and furnish copy of record to each participant. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 3 1.6 DELIVERY, STORAGE, AND HANDLING A. Deliver sheet metal flashing materials and fabrications undamaged. Protect sheet metal flashing and trim materials and fabrications during transportation and handling. B. Unload, store, and install sheet metal flashing materials and fabrications in a manner to prevent bending, warping, twisting, and surface damage. C. Stack materials on platforms or pallets, covered with a suitable weather-tight and ventilated covering. Do not store sheet metal flashing and trim materials in contact with other materials that might cause staining, denting, or other surface damage PART 2 - PRODUCTS 2.1 MATERIALS, GENERAL A. Recycled Content: Provide products made from steel sheet with average recycled content such that postconsumer recycled content plus one-half of pre-consumer recycled content is not less than the following: 1. Sheet Metal Flashings: Minimum 30 percent post-consumer recycled content. B. Local/Regional Materials: Give preference to manufacturer’s whose facilities are within a 500 mile radius of the project site. Also give preference to materials that are harvested, extracted, mined, quarried, etc. within a 500 mile radius of the project site. 2.2 MATERIALS A. Zinc-Coated (Galvanized) Steel Sheet: ASTM A653/A653M, G90 (Z275) coating designation; structural quality, mill-phosphatized where indicated for field painting. 1. Do not apply an acrylic passivator coating to galvanized sheet metal schedule to be painted, or remove this coating mechanically before delivery to the project site. B. Sealant: ASTM C920, polyurethane-based sealant; of type, grade, class, and use classifications required to seal joints in sheet metal flashing and trim and remain watertight. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 4 1. SikaFlex-15LM or equal C. Flux: FS O-F-506. D. Epoxy Seam Sealer: Two-part, noncorrosive, aluminum seam-cementing compound, recommended by aluminum manufacturer for exterior nonmoving joints, including riveted joints. E. Butyl Sealant: ASTM C1311, single-component, solvent-release butyl rubber sealant; polyisobutylene plasticized; heavy bodied for hooked-type expansion joints with limited movement. F. Bituminous Coating: Cold-applied asphalt emulsion complying with ASTM D1187. G. Neoprene Flashing Components: 1. Manufacturer: Gaco Western, Inc. unless noted otherwise. H. Solder: 1. For Zinc-Coated (Galvanized) Steel Sheet: ASTM B32, Grade Sn50, 50 percent tin and 50 percent lead or Grade Sn60, 60 percent tin and 40 percent lead. I. Bedding Compound: Rubber-asphalt type. J. Plastic Cement: Asphaltic base cement. K. Sealing Tape: Pressure-sensitive, 100 percent solids, polyisobutylene compound sealing tape with release-paper backing. Provide elastic, non-sag, nontoxic, non- staining tape. 2.3 MANUFACTURED SHEET METAL FLASHING AND TRIM A. Reglets: Units of type, material, and profile indicated, formed to provide secure interlocking of separate reglet and counter-flashing pieces, and compatible with flashing indicated. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 5 1. Available Manufacturers: Subject to compliance with requirements, manufacturers offering products that may be incorporated into the Work include, but are not limited to, the following: a. Fry Reglet. b. MM Systems. c. Heckmann Building Products, Inc. d. Substitutions: Under provisions of Section 01630. 2. Surface-Mounted Type: Provide with slotted holes for fastening to substrate, with neoprene or other suitable weatherproofing washers and with channel for sealant at top edge. 3. Stucco Type: Provide with upturned fastening flange and extension leg of length to match thickness of applied finish materials. 4. Flexible Flashing Retainer: Provide resilient plastic or rubber accessory to secure flexible flashing in reglet where clearance does not permit use of standard metal counter-flashing or where Drawings show reglet without metal counter-flashing. 5. Counter-flashing Wind-Restraint Clips: Provide clips to be installed before counter-flashing to prevent wind uplift of counter-flashing lower edge. B. EPDM Flashing: Sheet flashing product made from ethylene-propylene-diene terpolymer, complying with ASTM D4637, 0.040-inch (1.0 mm) thick. 1. Available Products: Heckmann Building Products Inc.; No. 81 EPDM Thru- Wall Flashing. 2.4 FABRICATION A. General: Custom fabricate sheet metal flashing and trim to comply with recommendations in SMACNA's "Architectural Sheet Metal Manual" that apply to design, dimensions, metal, and other characteristics of item indicated. Shop fabricate items where practicable. Obtain field measurements for accurate fit before shop fabrication. B. Fabricate sheet metal with flat-lock seams; solder with type solder and flux recommended by manufacturer, except seal aluminum seams with sealant and, where required for strength, rivet seams and joints. C. Fabricate sheet metal flashing and trim in thickness and weight needed to comply with performance requirements, but not less than that specified for each application of metal. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 6 D. Fabricate corners, transitions, and terminations as a single unit; extend a minimum of 4-inches and a maximum of 8-inches in any direction. E. Fabricate cleats and attachment devices from the same material as the accessory being anchored or from a compatible, non-corrosive metal. The thickness of these cleats and attachment devices should be as recommended by SMACNA's 'Architectural Sheet Metal Manual' and Factory Mutual's Loss Prevention Data Sheet 1-49 for the given application, but not less than the thickness of the metal being secured. F. Sealed Joints: Form non-expansion but movable joints in metal to accommodate elastomeric sealant to comply with SMACNA recommendations. G. Coat backside of fabricated sheet metal with 15-mil sulfur-free bituminous coating, SSPC-Paint 12, where required to separate metals from corrosive substrates, including cementitious materials, wood or other absorbent materials; or provide other permanent separation. H. Provide for thermal expansion of running sheet metal work by overlaps of expansion joints in fabricated work. Where required for watertight construction, provide hooked flanges filled with polyisobutylene mastic for 1-inch embedment of flanges. I. Space expansion joints at intervals of not more than 50-feet. Conceal expansion provisions where possible. J. Roof-Penetration Flashing: Fabricate from the following material: 1. Galvanized Steel: 0.0276-inch (0.7 mm) thick. 2.5 MISCELLANEOUS SHEET METAL FABRICATIONS A. Equipment Support Flashing: Fabricate from galvanized steel 0.0276-inch (0.7 mm) thick. 2.6 FINISHES A. Comply with NAAMM's "Metal Finishes Manual for Architectural and Metal Products" for recommendations for applying and designating finishes. B. Finish: Standard (dull) mill finish; painted unless noted otherwise on Drawings. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 7 PART 3 - EXECUTION 3.1 EXAMINATION A. Examine substrates and conditions under which sheet metal flashing and trim are to be installed and verify that work may properly commence. Do not proceed with installation until unsatisfactory conditions have been corrected. Beginning of installation means acceptance of existing conditions. 3.2 PREPARATION A. Allow wet substrates to dry thoroughly. B. Clean debris from all substrates. 3.3 INSTALLATION A. General: Anchor sheet metal flashing and trim and other components of the Work securely in place, with provisions for thermal and structural movement. Use fasteners, solder, welding rods, protective coatings, separators, sealants, and other miscellaneous items as required to complete sheet metal flashing and trim system. 1. Torch cutting of sheet metal flashing and trim is not permitted. B. Anchor work in place with non-corrosive fasteners, adhesives, setting compounds, tapes and other materials and devices as recommended by manufacturer of each material or system. C. Install self-adhesive flashing prior to or in conjunction with sheet metal items, as shown on Drawings. D. Provide for thermal expansion and building movements. Comply with recommendations of "Architectural Sheet Metal Manual" by SMACNA. E. Install exposed sheet metal flashing and trim without excessive oil canning, buckling, and tool marks. F. Install sheet metal flashing and trim to fit substrates and to result in watertight performance. Verify shapes and dimensions of surfaces to be covered before fabricating sheet metal. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 8 G. Install sheet metal flashing and trim true to line and levels indicated. Provide uniform, neat seams with minimum exposure of solder, welds, and sealant. H. Metal Protection: Where dissimilar metals will contact each other or corrosive substrates, protect against galvanic action by painting contact surfaces with bituminous coating or by other permanent separation as recommended by fabricator or manufacturers of dissimilar metals. I. Composition Stripping: Cover flanges (edges) of work set on bituminous substrate with 5 courses of glass fiber fabric (ASTM D1668) set in and covered with asphaltic roofing cement. J. Fasteners: Use fasteners of sizes that will penetrate substrate not less than 1-1/4- inches (32 mm) for nails and not less than 3/4-inch (19 mm) for wood screws. 1. Galvanized or pre-painted, Metallic-Coated Steel: Use stainless-steel fasteners. 2. Use concealed fasteners wherever possible. Exposed fasteners should have bonded neoprene washers or should be sealed. K. Seal moving joints in metal work with butyl joint sealants, complying with requirements specified in Section 07920 as required for watertight construction. 1. Where sealant-filled joints are used, embed hooked flanges of joint members not less than 1-inch (25 mm) into sealant. Form joints to completely conceal sealant. When ambient temperature at time of installation is moderate, between 40 and 70 deg F (4 and 21 deg C), set joint members for 50 percent movement either way. Adjust setting proportionately for installation at higher ambient temperatures. Do not install sealant-type joints at temperatures below 40 deg F (4 deg C). L. Soldered Joints: Clean surfaces to be soldered, removing oils and foreign matter. Pre-tin edges of sheets to be soldered to a width of 1-1/2-inches (38 mm) except where pre-tinned surface would show in finished Work. 1. Do not use open-flame torches for soldering. Heat surfaces to receive solder and flow solder into joints. Fill joints completely. Completely remove flux and spatter from exposed surfaces. 2. Clean metal surfaces of soldering flux and other substances that could cause corrosion. Fire Station #2 Re-Roof Specification PF-00006 Section 07 60 00 Page 9 3.4 MISCELLANEOUS FLASHING INSTALLATION A. Equipment Support Flashing: Coordinate installation of equipment support flashing with installation of roofing and equipment. Weld or seal flashing with elastomeric sealant to equipment support member. 3.5 CLEANING AND PROTECTION A. Clean and neutralize flux materials. Clean off excess solder and sealants. B. Remove temporary protective coverings and strippable films as sheet metal flashing and trim are installed. On completion of installation, clean finished surfaces, including removing unused fasteners, metal filings, pop rivet stems, and pieces of flashing. Maintain in a clean condition during construction. C. Replace sheet metal flashing and trim that have been damaged or that have deteriorated beyond successful repair by finish touchup or similar minor repair procedures. D. Performance: Watertight and weatherproof performance of flashing and sheet metal work is required. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 1 SECTION 07 92 00 - JOINT SEALANTS PART 1 - GENERAL 1.1 RELATED DOCUMENTS A. Drawings and general requirements of the Contract, including General Conditions, Special Provisions and Division 1 Specification Sections, apply to this Section. 1.2 SCOPE OF WORK A. The Work of this Section consist of furnishing and installing the following: 1. Exterior sealants. 2. Joint sealant primers and accessories. 1.3 RELATED SECTIONS A. Section 076000 - Flashing and Sheet Metal: Sealant installation with flashings. 1.4 SUBMITTALS A. Product Data: Provide data and installation instructions for each type of joint sealant required. B. Certification by joint sealant manufacturer that sealants plus the primers and cleaners required for sealant installation comply with local regulations controlling use of volatile organic compounds (VOCs). C. Submit manufacturer’s letter of certification that products are appropriate for the uses intended. 1.5 QUALITY ASSURANCE A. Sealant applicator shall specialize in the installation of joint sealants with a minimum of 2 years experience. B. Elastomeric joint sealants shall be produced and installed to establish and to maintain watertight continuous seals without causing staining or deterioration of joint substrates. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 2 C. Sealant manufacturer shall confirm in writing that all materials contacting the sealants, including joint backings, gaskets, spacers, and joint substrates, are compatible with the sealant to be installed. Schedule sufficient time to test these materials for compatibility with the sealant, as necessary. Compatibility tests shall be performed to the sealant manufacturer’s standards. D. Sealant manufacturer shall confirm in writing the appropriate joint preparation and priming techniques required to obtain rapid, acceptable adhesion of the joint sealants to the joint substrates. E. Perform field adhesion testing of joint sealants to all surface types. Field adhesion testing shall be completed and results shall be reviewed and approved by sealant manufacturer and installer before commencing sealant installation. F. Pre-installation meeting: Review joint application procedures, compatibility tests, adhesion tests, and warranty requirements in a meeting involving installer, manufacturer or manufacturer’s representative, building owner or manager, consultant, and contractor. G. Sealant manufacturer shall provide one announced and one unannounced quality control check/adhesion test with the sealant installer at the job site. 1.6 DELIVERY, STORAGE, AND HANDLING A. Deliver materials to Project site in original unopened containers or bundles with labels indicating manufacturer, product name and designation, color, expiration period for use, pot life, curing time, and mixing instructions for multi-component materials intact and legible. B. Store and handle materials in compliance with manufacturer's recommendations to prevent their deterioration or damage due to moisture, high or low temperatures, contaminants, or other causes. 1.7 PROJECT CONDITIONS A. Do not proceed with installation of joint sealants under the following conditions: 1 1. When ambient and substrate temperature conditions are outside the limits permitted by joint sealant manufacturer. 2. Below 40 deg F (4.4 deg C). 3. When joint substrates are wet or retaining moisture. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 3 B. Joint Width Conditions: Do not proceed with installation of joint sealants where joint widths are less than allowed by joint sealant manufacturer for application indicated. C. Joint Substrate Conditions: Do not proceed with installation of joint sealants until contaminants capable of interfering with their adhesion are removed from joint substrates. PART 2 - PRODUCTS 2.1 MATERIALS A. Compatibility: Provide joint sealants, joint fillers, and other related materials that are compatible with one another and with joint substrates under conditions of service and application, as demonstrated by sealant manufacturer based on testing and field experience. B. Colors: Provide color of exposed joint sealants to match colors indicated by reference to manufacturer's standard designations. C. Provide selections made by Architect from manufacturer's full range of standard colors for products of type indicated. 2.2 JOINT SEALANTS A. Weatherproofing Sealant: Provide product complying ASTM C920, also with ASTM C1193 and tested under ASTM C719; Type S, Grade NS, Class 25; that accommodates joint movement of not more than 25 percent in both extension and compression for a total of 50 percent, use at conventional glazing and for weatherproofing. 1. Dow Corning Corporation; Dow Corning 790, 791, or 795. 2. Tremco; Spectrem II or Spectrem III. 3. Pecora Corporation; 895. B. Flashings Sealant: ASTM C920, Type S, Grade NS, Class 25; single component elastomeric accommodating joint movement of not more than 25 percent in both extension and compression for a total of 50 percent. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 4 1. Dow Corning Corporation; Dow Corning 791, 795, or Contractors Weatherproofing Sealant. C. Reglets and Flashings Sealant: ASTM C920, Type S, Grade NS, Class 25; single component elastomeric accommodating joint movement of not more than 25 percent in both extension and compression for a total of 50 percent. 1. Dow Corning Corporation; Dow Corning 791, 795, or Contractors Weatherproofing Sealant. D. Self-Leveling Sealant: ASTM C920, Type S, Grade SL; single component, chemical curing, non-staining, non-bleeding, non-sagging type; color as selected; use in concrete expansion and control joints in parking garages, plaza and terrace decks, floor and sidewalk joints. 1. Dow Corning Corporation; Dow Corning 890SL. 2. Pecora Corporation; Urexpan NR-200 -. 3. Tremco; THC-900. 4. Sika Corporation, Inc.; Sikaflex 2C-FL. 2.3 JOINT SEALANT BACKING A. General: Provide sealant backings and accessory materials, including primers, of material and type that are non-staining; are compatible with joint substrates, sealants, and other joint fillers; and are approved for applications indicated by sealant manufacturer based on field experience and laboratory testing. B. Foam Joint Fillers: Non-gassing, preformed, compressible, resilient, non-staining, non-waxing, non-extruding strips of flexible plastic foam of material indicated below and of size, shape, and density to control sealant depth, prevent three-sided adhesion, provide a surface against which to tool, and otherwise contribute to producing optimum sealant performance: 1. Cylindrical Sealant Backings: ASTM C1330, Type C (closed-cell material with a surface skin) or Type B (bicellular material with a surface skin), and of size and density to control sealant depth and otherwise contribute to producing optimum sealant performance and as recommended by sealant manufacturer. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 5 2. Elastomeric Tubing Sealant Backings: Neoprene, butyl, EPDM, or silicone tubing complying with ASTM D1056, nonabsorbent to water and gas, and capable of remaining resilient at temperatures down to minus 26 deg F (minus 32 deg C). Provide products with low compression set and of size and shape to provide a secondary seal, to control sealant depth, and to otherwise contribute to optimum sealant performance. 2.4 MISCELLANEOUS MATERIALS A. Primer: Material recommended by joint sealant manufacturer where required for adhesion of sealant to joint substrates indicated, as determined from pre- construction joint sealant-substrate tests and field tests. Certify that primer will not permanently stain adjacent joint surfaces. B. Cleaners for Nonporous Surfaces: Chemical cleaners acceptable to manufacturers of sealants and sealant backing materials, free of oily residues or other substances capable of staining or harming in any way joint substrates and adjacent nonporous surfaces, and formulated to promote optimum adhesion of sealants with joint substrates. C. Masking Tape: Non-staining, nonabsorbent material compatible with joint sealants and surfaces adjacent to joints, to mask off adjacent joint surfaces where sealant is not permanently intended to be applied. D. Bondbreaker Tape: Polyethylene pressure sensitive adhesive tape, to be used in areas where backer rod cannot fit and where three-sided adhesion is to be avoided. PART 3 - EXECUTION 3.1 EXAMINATION A. Examine joints indicated to receive joint sealants, with Installer present, for compliance with requirements for joint configuration, installation tolerances, and other conditions affecting joint sealant performance. B. Verify that joint sizes and surfaces are free of defects and acceptable for installation of joint sealants. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 6 C. Verify joint dimensions and shapes to ensure they are within the sealant manufacturer’s guidelines. Resolve any variances prior to installation. Do not proceed with sealant installation until the unsatisfactory conditions have been corrected. 3.2 PREPARATION A. Surface Cleaning of Joints: Clean out joints immediately before installing joint sealants to comply with recommendations of joint sealant manufacturer. B. Thoroughly clean the areas that the new sealant will contact using a de-greasing solvent such as toluene or xylene and the two-rag wipe technique. IPA (isopropyl alcohol) is not a degreasing solvent. The new sealant should have a minimum contact area of 1/4”. C. Remove all foreign material from joint substrates that could interfere with adhesion of joint sealant, including dust, paints (except for permanent, protective coatings tested and approved for sealant adhesion and compatibility by sealant manufacturer), oil, grease, waterproofing, water repellents, water, surface dirt, and frost. D. Clean porous joint substrate surfaces by oil-free brushing, grinding, blast cleaning, mechanical abrading, or a combination of these methods to produce a clean, sound substrate capable of developing optimum bond with joint sealants. Do not damage finished surface of materials while performing cleaning operations. Remove loose particles remaining from above cleaning operations by vacuuming or blowing out joints with oil-free compressed air. E. Clean metal, glass, porcelain enamel, glazed surfaces of ceramic tile, and other nonporous surfaces with chemical cleaners or other means that do not stain, harm substrates, or leave residues capable of interfering with adhesion of joint sealants. F. Masking Tape: Use masking tape where required to prevent contact of sealant with adjoining surfaces that otherwise would be permanently stained or damaged by such contact or by cleaning methods required to remove sealant smears. Remove tape immediately after tooling without disturbing joint seal. 3.3 JOINT PRIMING A. Prime joint substrates where indicated or where recommended by joint sealant manufacturer based on pre-construction joint sealant-substrate tests or prior experience. Apply primer to comply with joint sealant manufacturer's recommendations. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 7 B. Confine primers to areas of joint sealant bond; do not allow spillage or migration onto adjoining surfaces. C. Allow primer to dry. Do not prime areas that cannot be sealed the same day. 3.4 INSTALLATION OF SEALANT BACKINGS A. Install joint fillers of type indicated to provide support of sealants during application and at position required to produce the cross-sectional shapes and depths of installed sealants relative to joint widths that allow optimum sealant movement capability. B. Do not leave gaps between ends of joint fillers. C. Do not stretch, twist, puncture, or tear joint fillers. D. Remove absorbent joint fillers that have become wet prior to sealant application and replace with dry material. E. Tolerances: 1. Minimum Sealant Contact Area: 1/4-inch. 2. Minimum Joint Depth: 1/4 + 1/8-inch, with the joint width at least twice the joint depth to allow the sealant its maximum movement capability. 3.5 INSTALLATION OF JOINT SEALANTS A. General: Comply with joint sealant manufacturer's printed installation instructions applicable to products and applications indicated, except where more stringent requirements apply. B. Sealant Installation Standard: Comply with recommendations of ASTM C1193 for use of joint sealants as applicable to materials, applications, and conditions indicated. C. Installation of Sealants: Install sealants by proven techniques that result in sealants directly contacting and fully wetting joint substrates, completely filling recesses provided for each joint configuration, and providing uniform, cross- sectional shapes and depths relative to joint widths that allow optimum sealant movement capability. Install sealants at the same time sealant backings are installed. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 8 D. Tooling of Non-sag Sealants: Immediately after sealant application and prior to time skinning or curing begins, tool sealants to form smooth, uniform beads of configuration indicated, to eliminate air pockets, and to ensure contact and adhesion of sealant with sides of joint. Remove excess sealants from surfaces adjacent to joint. Do not use tooling agents that discolor sealants or adjacent surfaces or are not approved by sealant manufacturer. 1. Remove excess sealant from surfaces adjacent to joints. 2. Use tooling agents that are approved in writing by sealant manufacturer and that do not discolor sealants or adjacent surfaces. 3. Provide concave joint configuration per Figure 5A in ASTM C1193, unless otherwise indicated. 4. Provide flush joint configuration where indicated per Figure 5B in ASTM C1193. 3.6 FIELD QUALITY CONTROL A. Field-Adhesion Testing: Field test joint-sealant adhesion to joint substrates as follows: 1. Extent of Testing: Test completed elastomeric sealant joints as follows: a. Perform 10 tests for the first 1000 feet (300 m) of joint length for each type of elastomeric sealant and joint substrate. 2. Test Method: Test joint sealants as appropriate for type of joint-sealant application indicated. a. For joints with dissimilar substrates, verify adhesion to each substrate separately; do this by extending cut along one side, verifying adhesion to opposite side. Repeat procedure for opposite side. 3. Inspect joints for complete fill, for absence of voids, and for joint configuration complying with specified requirements. Record results in a field-adhesion-test log. 4. Inspect tested joints and report on the following: a. Whether sealants in joints connected to pulled-out portion failed to adhere to joint substrates or tore cohesively. Include data on pull distance used to test each type of product and joint substrate. Compare these results to determine if adhesion passes sealant manufacturer's field-adhesion hand-pull test criteria. b. Whether sealants filled joint cavities and are free of voids. c. Whether sealant dimensions and configurations comply with specified requirements. Fire Station #2 Re-Roof Specification PF-00006 Section 07 92 00 Page 9 5. Record test results in a field-adhesion-test log. Include dates when sealants were installed, names of persons who installed sealants, test dates, test locations, whether joints were primed, adhesion results and percent elongations, sealant fill, sealant configuration, and sealant dimensions. 6. Repair sealants pulled from test area by applying new sealants following same procedures used originally to seal joints. Ensure that original sealant surfaces are clean and that new sealant contacts original sealant. B. Evaluation of Field Test Results: Sealants not evidencing adhesive failure from testing or noncompliance with other indicated requirements will be considered satisfactory. Remove sealants that fail to adhere to joint substrates during testing or to comply with other requirements. Retest failed applications until test results prove sealants comply with indicated requirements. 3.7 CLEANING A. Construction Waste Management: Manage construction waste in accordance with provisions of Section 01524 Construction Waste Management. Submit documentation for Credit MR 2.1 and Credit MR 2.2to satisfy the requirements of that Section. B. Clean off excess sealants and sealant smears adjacent to joints as the Work progresses by methods and with cleaning materials approved in writing by manufacturers of joint sealants and of products in which joints occur. C. Leave finished work in a neat, clean condition with no evidence of spillovers onto adjacent surfaces. 3.8 PROTECTION A. Protect joint sealants during and after curing period from contact with contaminating substances or from damage resulting from construction operations or other causes so that they are without deterioration or damage at time of Substantial Completion. B. If, despite such protection, damage or deterioration occurs, cut out and remove damaged or deteriorated joint sealants immediately so that and installations with repaired areas are indistinguishable from original work. END OF SECTION Fire Station #2 Re-Roof Specification PF-00006 Section 09 91 13 Page 1 SECTION 09 91 13 - EXTERIOR PAINTING AND FINISHING PART 1 - GENERAL 1.0 WORK INCLUDED A. Surface preparation of all new perimeter edge flashing throughout all roof levels - pre-finished with Kynar 500 coating – color to match existing trim color. B. Surface finish priming and painting of all new perimeter edge flashing throughout all roof levels - pre-finished with Kynar 500 coating – color to match existing trim color. 1.1 RELATED WORK A. Section 06 10 00 - Rough Carpentry. B. Section 07 51 13 - Cold-applied Modified Bitumen Roofing C. Section 07 60 00 - Flashing and Sheet Metal. 1.2 REFERENCES A. ANSI/ASTM D16 - Definitions of Terms Relating to Paint, Varnish, Lacquer, and Related Products. B. ASTM D2016 - Test Method for Moisture Content of Wood. 1.3 DEFINITIONS Conform to ANSI/ASTM D16 for interpretation of terms used in this section. 1.4 QUALITY ASSURANCE A. Product Manufacturer - Company specializing in manufacturing quality paints and finish products with five years experience. B. Applicator - Company or individual knowledgeable in commercial painting and finishing with five (5) years documented experience. Fire Station #2 Re-Roof Specification PF-00006 Section 09 91 13 Page 2 1.5 SUBMITTALS A. Submit product data. B. Provide product data on all finishing products. C. Submit samples. D. Submit manufacturer's application instructions. 1.6 ENVIRONMENTAL REQUIREMENTS Do not apply exterior coatings during rain or when relative humidity is above 50 percent, unless required otherwise by manufacturer's instructions. PART 2 - PRODUCTS 2.0 ACCEPTABLE MANUFACTURERS - PAINT A. Kelly Moore or approved equal. 2.1 MATERIALS Accessory Materials - Linseed oil, shellac, turpentine, paint thinners and other materials not specifically indicated but required to achieve the finishes specified, of commercial quality. 2.2 FINISHES Refer to schedule at end of Section for surface finish schedule. Colors to match existing. PART 3 - EXECUTION 3.0 INSPECTION A. Verify that surfaces are ready to receive work as instructed by the product manufacturer. B. Examine surfaces scheduled to be finished prior to commencement of Fire Station #2 Re-Roof Specification PF-00006 Section 09 91 13 Page 3 work. Report any condition that may potentially affect proper application. C. Measure moisture content of surfaces using an electronic moisture meter. Do not apply finishes unless moisture content of surfaces is below the following maximums: 1. Fifteen percent (15%) measured in accordance with ASTM D2016. D. Beginning of installation means acceptance of substrate. 3.1 PREPARATION A. Correct minor defects and clean surfaces which affect work of the section. B. Galvanized Surfaces - Remove surface contamination and oils and wash with solvent. Apply coat of etching primer. 3.2 PROTECTION A. Protect elements surrounding the work of this section from damage or disfiguration. B. Repair damage to other surfaces caused by work of this section. C. Furnish drop cloths, shields, and protective methods to prevent spray or droppings from disfiguring other surfaces. 3.3 APPLICATION A. Apply products in accordance with manufacturer's instructions. B. Sand lightly between coats to achieve required finish. C. Allow applied coat to dry before next coat is applied. D. Prime back surfaces of exterior woodwork with primer paint. 3.4 CLEANING A. As work proceeds, promptly remove paint where spilled, splashed, or spattered. Fire Station #2 Re-Roof Specification PF-00006 Section 09 91 13 Page 4 B. Collect cotton waste, cloths and material, which may constitute a fire hazard, place in closed metal containers and remove daily from site. 3.5 SCHEDULE - EXTERIOR SURFACES A. Wood - Painted 1. One coat primer, 2201722 latex 2. Two coats exterior paint, 1250 acrylic latex B. Steel - Unprimed 1. One coat zinc chromate primer, 1710 red oxide 2. Two coats exterior paint, 1250 acrylic latex C. Steel - Galvanized 1. One coat primer, 122 latex 2. Two coats exterior paint, 1250 acrylic latex oxford brown. END SECTION 1/8" = 1'-0" ROOF PLAN 1" = 50'-0" EXISTING SITE PLAN NO SCALE VICINITY MAP NO SCALE VICINITY MAP City of Palo Alto (ID # 6553) City Council Staff Report Report Type: Consent Calendar Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Renewal of Agreement Between the City of Palo Alto and The Palo Alto Art Center Foundation Title: Approval for Renewal of the Agreement Between the City of Palo Alto and the Palo Alto Art Center Foundation for Mutual Cooperation and Support to Facilitate the Foundation's Financial and Administrative Support of the Art Center From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council approve the renewal of a mutual cooperation and support memorandum of understanding (MOU) with the Palo Alto Art Center Foundation (Attachment A) that extends the previous agreement for another five years. Executive Summary This MOU Between the City of Palo Alto and the Palo Alto Art Center Foundation for Mutual Cooperation and Support (Attachment A) continues the partnership agreement approved by Council on October 10, 2010 (CMR 350:10). This w MOU outlines overall responsibilities, procedures, and processes for decision making, use of funds, property, and facilities and staff management. Background The Palo Alto Art Center Foundation (Foundation) has played an integral role in the support and operation of the Palo Alto Art Center (PAAC) since its inception in 1973. (Note that from 1973 to 2000 the organization was identified as the Palo Alto Cultural Center Guild). The mission of the Foundation, a 501(c)(3) nonprofit organization, is to expand the reach and impact of the Palo Alto Art Center through fundraising and advocacy. This MOU represents a five-year renewal of the first mutual cooperation and support agreement between the City of Palo Alto and the Palo Alto Art Center Foundation in 2010 (CMR: 350:10). In addition, previous agreements between the City of Palo Alto and the Palo Alto Art Center Foundation were created to facilitate improvements of the City of Palo Alto Page 2 Center facility (CMR 288:07, 107:08, 465:08, 168:09). The $9.1.M renovation of the Palo Alto Art Center building (the former City Hall building) represented one of the largest public/private partnerships in the City’s history and relied upon $4.7M in contributions from the Palo Alto Art Center Foundation and community members. Similar public/private partnership agreements have been developed for the Friends of the Junior Museum & Zoo, Friends of the Children’s Theatre, and Palo Alto Recreation Foundation and Friends of Palo Alto Parks.. As outlined in the August 2007 Public/Private Partnerships Policy Statement (Attachment B), the relationship between the Foundation and the PAAC is that of an alliance: “This type of public/private partnership involves organizations that have been created for the sole purpose of supporting a City program or array of City programs.” Discussion This MOU is identical to the previous agreement developed in 2010. In order to enhance their efforts as a support organization, in 2010 City staff and the Foundation proposed a concept in which the partnership between the City and the Foundation would be strengthened through a written agreement that outlines overall responsibilities, procedures, and processes for decision making, use of funds, property, and facilities and staff management. The previous agreement (CMR 350:10), approved by Council on October 10, 2010, clarified the roles and responsibilities of both parties. In addition, the agreement helped the City to leverage resources and work in collaboration with the community through its relationship with the Foundation. This renewal agreement will continue the important policies and processes outlined in the previous foundational agreement. Timeline The previous agreement between the City of Palo Alto and the Foundation expired in October of 2015. The new MOU will also have a five-year duration and will expire in February of 2021. Resource Impact This written agreement does not have an explicit implication financially however, it includes language that outlines overall responsibilities, procedures, and processes around the use of funding. Policy Implications This partnership would be categorized as an Alliance under the City’s Public/Private Partnership Policy. This MOU is consistent with and furthers the intention of Comprehensive Plan Policy C- 1; Encourage the creation of partnerships within the Mid-Peninsula or the greater Bay City of Palo Alto Page 3 Area to seek effective solutions to shared problems and community service needs and Program B-3: On an ongoing basis, evaluate opportunities for City involvement in public/private partnerships including public investment in infrastructure and other improvements, siting of public art, and modifiation of land use regulations and other development controls. Attachments:  00710143 AGMT Art Center Foundation Supplement to PPP with ep edits_2.10.2016KK(v2)(clean) (DOCX)  public private partnerships (PDF) 121210 dm 00710143 1 Attachment A MEMORANDUM OF UNDERSTANDING BETWEEN THE CITY OF PALO ALTO AND THE PALO ALTO ART CENTER FOUNDATION FOR MUTUAL COOPERATION AND SUPPORT This Memorandum of Understanding (the “MOU”), dated as of ____________________, 2016 (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation (the "City"), and the PALO ALTO ART CENTER FOUNDATION, a California public benefit corporation organized under the California Nonprofit Public Benefit Corporation Law (the "Foundation") (individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances: RECITALS: A. The City owns and operates the Palo Alto Art Center (the “Art Center”), located at 1313 Newell Road, Palo Alto. The Art Center serves the community through a diverse and accessible range of art programs with the mission of fostering creative process and thought by forging a greater appreciation and understanding of the visual arts through exhibitions, studio experiences, and related educational programs. The Art Center is a program of the City’s Division of Arts and Sciences, Community Services Department. B. The Foundation is a § 501(c)(3) public benefit corporation, which was founded in 1973 with the mission of supporting the mission and goals of the Art Center, promoting unique experiences and education for people of all ages, and serving as the Art Center’s advocates and ambassadors in the community. By its operations- and education-related programs, activities and opportunities, the Foundation has assisted the CSD’s Art Center manager (the “Manager”) and other staff in supporting and advocating on behalf of the Art Center’s operations, programs and activities over the past thirty-seven years. C. The Parties wish to more closely collaborate and mutually cooperate and support each other in the future, to improve, enhance, and sustain the capacity of the Art Center to develop and provide educational opportunities and related services to the Palo Alto community. AGREEMENT: NOW, THEREFORE, in consideration of Recitals A, B, and C the following covenants, terms, conditions and provisions of this MOU, the Parties agree: 121210 dm 00710143 2 SECTION 1. TERM; TERMINATION 1.1 The term of this MOU will commence as of the Effective Date, and shall continue for five (5) years (the “Term”), unless it is earlier terminated by a Party as herein provided. 1.2 This MOU is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code (the “PAMC”). This MOU will terminate without penalty: (A) at the end of the fiscal year in the event that funds are not appropriated by the City for the Art Center’s programs for the following fiscal year or (B) at any time within a fiscal year in the event that funds are appropriated for a portion of the fiscal year and funds for this MOU are no longer available. This Section 1.2 will take precedence in the event of a conflict with any other covenant, term, condition, or provision of this MOU. Nothing in this Section 1.2 is intended to affect the Foundation’s rights and remedies as may be available under applicable laws. SECTION 2. RESPONSIBILITIES OF THE PARTIES 2.1 Responsibilities of the City A. The management of the Art Center's facilities, programs and the CSD staff employees assigned to the Art Center, including, without limitation, the Manager, and any and all independent contractors, subcontractors, consultants and volunteers hired by the City. The City will hire, supervise, evaluate and otherwise exercise supervision and control of its employees at the Art Center; provided, however, the City may invite the Foundation to assist the City in the selection of key CSD employees, who are or may be directly involved in the Art Center's management, operations and programs; B. The construction, alterations, repairs and maintenance of the Art Center building facilities and open air spaces; C. The provision of furnishings, fixtures and improvements, the performance of landscaping at the Art Center, and the provision of utility services to the Art Center; D. The selection of one or more individuals to serve as the City's liaison to the Foundation's board of directors and/or any board committee or subcommittee (the "Board") meetings, including (1) a Council Member, if any, who will serve as the official liaison of the City to the Board, and (2) the Manager, whose duties may include providing assistance directly to the Foundation, including the Board, in selected fundraising activities, as may be directed or approved by the City Manager, or designee; E. The review of all community-related activities that the Foundation may propose for inclusion in the Art Center's programs. All activities of the Foundation will be pre-approved by the Manager, or designee; F. Develop and provide educational programs relating to the Art Center's programs and activities and supervise community volunteers in connection therewith; 121210 dm 00710143 3 G. Manage the Art Center exhibition and education programs in accordance with City, CSD, California and federal laws, museum procedures and applicable professional standards; H. Provide mailing services and volunteer staffing and supervision for certain bulk mailings to the Foundation's members, and including any assistance deemed reasonably necessary arising in connection with annual fundraising activities; I. Provide supervisory assistance in connection with cash handling and credit card transaction handling services relating to the Foundation's fundraising events, all in accordance with the City's cash handling policies and procedures, Policy and Procedures 1-3; and J. Any other obligation that the City, the CSD or the Art Center may undertake in accordance with this MOU, upon reasonable notice to the Foundation; provided, however, any such undertaking will be memorialized, in writing, by an amendment to this MOU, in order that such undertaking will be binding upon the City. 2.2 Responsibilities of the Foundation A. The supervision and management of its directors, officers, employees, volunteers, independent contractors, subcontractors and consultants, while they, and each of them, are exercising rights and/or performing obligations on behalf of the Foundation pursuant to this MOU; provided, however, the Parties acknowledge that, although certain Foundation employees, independent contractors, subcontractors, consultants and volunteers may be paid by the Foundation, to the extent such persons are also employees of the City and report to the Manager, the City and not the Foundation shall be primarily responsible for the management and supervision of such persons. B. The rendering of assistance to the Manager (through the Board and/or staff), at the Manager's request, including voluntary attendance and contribution of recommendations and advice at staff meetings of the Manager; C. Subject to the availability of adequate funding, the provision and staffing of activities to educate the public about the mission of the Art Center and its programs and amenities, and the mobilization of volunteers for the Art Center's projects and programs; D. The development of a fundraising strategy to solicit cash and in-kind contributions from individuals, businesses and other similar entities (such as partnerships and corporations) and the implementation of a grants writing program to seek out funds for the support of the Art Center's programs and activities, which may include both capital and non-capital projects; E. The acquisition and maintenance of charitable donations database management software for the purpose of recording and monitoring pertinent information relating to the Foundation's supporters and donors; F. The purchase and maintenance of bulk mail privileges with the United States Postal Service for the purpose of facilitating the Foundation's fundraising activities; 121210 dm 00710143 4 G. At the Foundation's discretion, the acquisition as appropriate of personal property for the benefit of the City and the CSD, in particular, which the Foundation will endeavor to acquire for the purpose of donating the same to the City, and with respect to which the City will exercise all rights and obligations relating thereto; and H. The rendering of any other service beyond those included in the annual Art Center Plan and related to the preservation, protection and enhancement of the Art Center and the artworks contained therein, as may be approved, in writing, by the Manager. I. Subject to the availability of adequate funding and at the Foundation's discretion, the operation, management, staffing and implementation of the Cultural Kaleidoscope program, or any equivalent program, which is intended to match classrooms in neighboring communities and Palo Alto schools with artists whose residences will enable students to experience multicultural art activities; and J. Subject to the availability of adequate funding and at the Foundation's discretion, the staffing, operation, and maintenance of the gallery shop in the Art Center, where unique handmade objects are sold. 2.2.1 Rendering assistance to the Manager and her successor, upon her request, as that assistance may relate to the integration of the Parties’ programs. 2.3 The responsibilities of the Parties will include the following: A. Under the direction of the Manager, develop a long-term strategic plan to enhance and improve the vision of the Art Center (the “Strategic Plan”); and B. Under the direction of the Manager and consistent with the Strategic Plan, develop on an annual basis, effective as of July 1 of each year, a work plan that among other things establishes program, budget, fundraising, and administrative and operational priorities and activities for the applicable fiscal year of operations (each, an “Art Center Plan”). Each Art Center Plan will delineate the rights and obligations of the Parties and identify each Party’s duly authorized representative who is responsible for executing such rights and duties in connection therewith. 2.4 Notwithstanding any provision of this MOU to the contrary and in consideration of the facts and circumstances described in Section 2, any and all funds received by the Foundation (through donations, grants, or otherwise) shall remain the property of and shall be solely under the control of the Foundation. To the extent that the Foundation conducts its own funding activities without the participation of the City at or in connection with the Art Center, the Foundation shall control the method and timing of such funding. 2.5. To the extent that Section 2 does not specifically identify the Party who will be primarily responsible for any action or decision in regard to the Art Center, the Parties agree that the City will be the party to assume all rights and obligations in connection with such decision. 121210 dm 00710143 5 SECTION 3. INDEMNITY 3.1 Except as provided under Section 3.2, and except to the extent caused by the negligence, willful misconduct or breach of this MOU by the City or its agents, employees or contractors, the Foundation hereby waives all claims, liability and recourse against the City, including the right of contribution for loss or damage or injury to persons or damage to property arising from, growing out of, or in any way connected with or related to the Foundation’s negligent acts or omissions arising under this MOU. Subject to the limitations on liability set forth in Section 4.3.D. of the MOU, the Foundation will protect, indemnify, hold harmless and defend the City, its officials, officers, employees, contractors, subcontractors, representatives and agents, from and against any and all claims, losses, liability, demands, damages, costs, expenses or attorneys' fees, caused by or arising out of the Foundation’s negligent acts or omissions, or willful misconduct, in the performance or nonperformance of its obligations under the covenants, terms, conditions and provisions of this MOU. The preceding sentence notwithstanding, no personal liability will attach to any Foundation board member under the provisions of this Section 3 for any negligent action or inaction attributed to the Foundation. In the event the City is named as co-defendant in any action with the Foundation, the Foundation will notify, in writing, the City, by calling to the attention of the City’s City Attorney, such facts, and it will represent the City in such legal action, unless the City undertakes to represent itself as a co- defendant in such legal action, in which event the Foundation will pay to the City its legal costs and expenses, including reasonable attorneys' fees. 3.2 The City will protect, indemnify, hold harmless and defend the Foundation, its directors, officers, employees and agents, against any and all claims, losses, liability, demands, damages, costs, expenses or attorneys' fees arising out of the City's negligent performance or nonperformance of its obligations arising under the covenants, terms, conditions and provisions of this MOU. SECTION 4. INSURANCE 4.1 As of the Effective Date, the Foundation, at its sole cost and expense, will obtain and maintain the following insurance coverage, acceptable to the City's insurance risk manager (the "Risk Manager") in full force and effect during the Term, insuring not only the Foundation but, with the exception of worker's compensation and employer's liability insurance, naming the City as an additional insured, concerning the Foundation's participation under this MOU. POLICY MINIMUM LIMITS OF LIABILITY Worker’s Liability Statutory Commercial Automobile Liability Bodily Injury: $1,000,000 each person Property Damage: $1,000,000 each person, including owned, hired, and non-owned automobiles Comprehensive General Liability Bodily Injury: $1,000,000 each person $1,000,000 each occurrence, $1,000,000 121210 dm 00710143 6 aggregate including products Property Damage: $1,000,000 each occurrence and completed operations Personal Injury: $1,000,000 each occurrence broad form contractual and personal injury. 4.2 Any deductibles must be declared to and accepted by the Risk Manager. The Foundation's insurance will be carried in full force and effect on or before the Effective Date. The insurance provided by the Foundation shall satisfy the following requirements: A. The Foundation shall deliver a certificate of insurance in which the party issuing the certificate shall endeavor to provide thirty (30) days' prior written notice of any proposed cancellation of the policy to: City of Palo Alto/Palo Alto Art Center Manager, P.O. Box 10250, Palo Alto, CA 94303. B. The City of Palo Alto shall be added by endorsement or otherwise as an additional insured as respects operations of the named insured at or from the Art Center. C. Any insurance maintained by the City of Palo Alto will apply in excess of, and not contribute to, insurance provided by each policy provided by the Foundation. 4.3 Evidence of Insurance Coverage and/or Changes will be, as follows: A. Certificate of Insurance. The Foundation agrees to deposit with the Manager before the Effective Date, certificates of insurance necessary to satisfy the City that the insurance provisions of this MOU have been complied with, and to ensure that such insurance is kept in effect, with the certificates of deposit with the City, during the Term. B. Review of Coverage. The City will retain the right, at any time, to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of the Risk Manager, the insurance provisions in this MOU do not provide adequate protection for the City and for members of the public using the Art Center in connection with City-Foundation events and Foundation-only events, the City Manager, or designee, may require, and the City will endeavor to give the Foundation at least sixty (60) days' prior written notice, an amount to provide adequate protection as determined by the Risk Manager. The City's requirements shall be reasonable and shall be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required. The Foundation may terminate this MOU upon thirty (30) days' prior written notice if the Foundation will not agree to pay for additional insurance coverage as required by the Risk Manager. 121210 dm 00710143 7 C. Reserved. D. Limit of Liability. As long as the Foundation obtains and maintains the policy or policies of insurance required by this Section 4, the Foundation's obligation under Section 3.1 will be limited to the coverage(s) afforded by such policy or policies of insurance. E. Acceptability of Insurers. Insurance shall be placed with insurers with a current A.M. Best's rating of no less than A-VII. SECTION 5. GENERAL LICENSE TO THE FOUNDATION 5.1 The City hereby grants the Foundation, its directors, officers, employees, contractors, subcontractors and consultants a nonexclusive license to enter upon and use the Art Center facilities in connection with the Foundation’s execution of its individual and/or joint responsibilities established by the Art Center Plan, including, but not limited to, organizing small group meetings and large group/community meetings and events, such as fundraising events, programs, and tours of the Art Center facilities, and using the office space provided to the Foundation, at no cost to the Foundation, under a license to use the Art Center’s facilities in connection with the exercise of its rights and responsibilities under this MOU. The City will not revoke this license while this MOU remains in effect. Any use of the Art Center facilities by the Foundation will be approved by the Manager in regards to program scheduling, space availability, and the functionality of shared Art Center spaces for staff use. The City will provide to the employees of the Foundation security card access to the Art Center premises as licenses. These licenses may be revoked only for cause by the City; any additional cards will be approved by the Manager, upon request, in writing. SECTION 6. WAIVER 6.1 The waiver by either Party of any breach or violation of any covenant, term, or condition of this MOU or of the provisions of the Palo Alto Municipal Code or other City law, rule or regulation, will not be deemed to be a waiver of any such covenant, term, condition, or provision or of any subsequent breach or violation of the same or any other covenant, term, condition, or provision. The subsequent acceptance by either Party of any consideration which may become due or payable hereunder will not be deemed to be a waiver of any preceding breach or violation by the other Party. SECTION 7. ASSIGNMENT 7.1 Neither Party may assign, transfer, or convey this MOU or any interest that it may have in this MOU without the other Party’s express consent or approval. Any attempted assignment by a Party without the required consent or approval of the other Party will be void and will confer no right, title, or interest in this MOU, or part thereof. In the event of an unauthorized assignment, at the option of the Party not making the assignment, this MOU may be terminated upon reasonable notice to the Party making the assignment. 121210 dm 00710143 8 SECTION 8. INDEPENDENT CONTRACTOR 8.1 In the exercise of its rights and responsibilities under this MOU, each Party acts at all times as an independent contractor and not as an employee of the other Party. Nothing in this MOU will be construed to establish a partnership, joint venture, group, pool, syndicate or agency between or among the Parties. No provision contained herein will be construed as authorizing or empowering any Party to assume or create any obligation or responsibility whatsoever, express or implied, on behalf, or in the name of, the other Party in any manner, or to make any representation, warranty or commitment on behalf of the other Party. In no event will either Party be liable for (a) any loss incurred by the other Party in the course of its performance hereunder, or (b) any debts, obligations or liabilities of the other Party, whether due or to become due. SECTION 9. NOTICES 9.1 Any notice, request, consent or approval by a Party that is required to be furnished by this MOU, will be given, in writing, and delivered by personal service, the United States Postal Service, mailed, first class, postage prepaid, or by facsimile transmission, to the following: To CITY: City Clerk City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303-4303 Copy to: Manager, Art Center City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 TO FOUNDATION: President Palo Alto Art Center Foundation 1313 Newell Road Palo Alto, CA 94303 SECTION 10. MISCELLANEOUS 10.1 This MOU will be governed by and construed in accordance with the laws of the State of California, the Charter of the City of Palo Alto and the Palo Alto Municipal Code. The Parties will comply with all applicable federal, state and local laws in the exercise of their rights and the performance of their obligations under this MOU. 10.2 All covenants, terms, conditions, and provisions of this MOU, whether covenants or conditions, will be deemed to be both covenants and conditions. 10.3 This MOU represents the entire agreement between the Parties and supersedes all prior negotiations, representations and contracts, written or oral. This MOU may be amended by an instrument, in writing, signed by the Parties. This MOU may be executed in any number of 121210 dm 00710143 9 counterparts, each of which will be an original, but all of which together will constitute one and the same instrument. 10.4 The Parties agree that the normal rule of construction to the effect that any ambiguity is to be resolved against the drafting party will not be employed in the interpretation of this MOU or any exhibit or amendment thereto. 10.6 In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. 10.7 The prevailing Party in any action brought to enforce the provisions of this MOU may recover its reasonable costs and attorneys' fees expended in connection with that action. 10.8 If a court of competent jurisdiction finds or rules that any provision of this MOU or any exhibit or amendment thereto is void or unenforceable, the unaffected provisions of this MOU and any exhibit or amendment thereto will remain in full force and effect. // // IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this MOU as of the Effective Date. APPROVED AS TO FORM: CITY OF PALO ALTO ______________________________ ___________________________________ Senior Asst. City Attorney City Manager APPROVED: PALO ALTO ART CENTER FOUNDATION ______________________________ ___________________________________ Director of Administrative Services President ______________________________ Director of Community Services POLICY AND PROCEDURES 1-25/MGR REVISED: AUGUST 2007 1 PUBLIC/PRIVATE PARTNERSHIPS POLICY STATEMENT The City of Palo Alto encourages the formation of public/private partnerships for the benefits the community receives. For the purposes of this policy, “public/private” also encompasses “public/nonprofit” partnerships. Definitions Public/private partnership: A public/private partnership is an agreement between the City and a nonprofit or private organization to provide services or to assist in funding of public facilities and programs. Such partnerships may take various forms, including: •Acceptance of or solicitation of service or facility proposals •Facilitation of such proposals through the City's regulatory process •Waiver of City General Fund fees to help reduce project costs. •Contributions of City matching funds for construction of facilities to be owned and controlled or operated by the City. •Provision of facilities to the private partner at no charge or at a subsidized rent. Public/private partnerships typically fall into one of three categories: co-sponsorship, alliances or joint ventures. Co-Sponsorships: This is the most common type of public/private partnership. An organization furthers the mission of the City by supporting a City activity or program in conjunction with pursuit of that organization’s own mission or program. Co-sponsorships can take the form of one-time events or annual agreements. Some examples of co-sponsorships include the Palo Alto Tennis Club use of City courts to provide a youth tennis program and American Youth Soccer Organization’s use of space in a City facility to train referees. Co- sponsorships are entered into by staff and normally have no or minimal financial impact. Alliances: This type of public/private partnership involves organizations that have been created for the sole purpose of supporting a City program or an array of City programs. The organization does not expect to receive any direct financial benefit or to alter City policy and/or operations, but undertakes to work closely and cooperatively with staff to implement City goals. Alliance organizations include the Recreation Foundation, the Art Center Foundation (Project Look or Cultural Kaleidoscope), the Friends of the Children’s Theatre (the Magic Castle), the Library Foundation and the Friends of the Palo Alto Library (financial assistance with the renovation and expansion of the Children’s Library). Alliances are approved by the Council if there are any staffing or budgetary implications to the partnership. POLICY AND PROCEDURES 1-25/MGR REVISED: AUGUST 2007 2 Joint Ventures: This type of partnership involves organizations which have programs or missions independent of the City and involve the City entering into a contractual relationship with the public or nonprofit organization with both parties contributing to the partnership for their mutual benefit. Each joint venture is uniquely negotiated by the staff and approved by the City Council. Examples of Joint Ventures include TheatreWorks, Palo Alto Players and West Bay Opera’s use of the Community Theatre and use of the former police station by older adult service provider, Avenidas. PROCEDURES Initiation of partnerships: Public/private partnerships may be initiated in one of three ways: • By staff: Staff identifies an opportunity for such a partnership and undertakes an informal or formal request for proposal process to identify partners. • By Council: The City Council directs staff to work with a private or nonprofit organization to develop such a partnership. • By a private or nonprofit organization: An organization makes a partnership proposal to the staff or City. City Manager Review: If the partnership proposal involves more than one City department, the City Manager’s Office will appoint a team with representatives of all City departments who are stakeholders in the partnership proposal. The team will analyze the proposal and inform the City Manager of the resource implications of the proposal, including staffing and monetary commitments. This would include proposed fee waivers. If the proposal will require a re-ordering of department priorities that have already been approved by the Council in setting its annual priorities or in the budget process, Council approval will be required prior to commitment to the partnership. Council approval will also be required if the partnership requires a new or adjusted allocation of operating or capital funding. Note: Co-sponsorships usually only involve a single department and do not necessitate the formation of an interdepartmental committee, the involvement of the City Manager’s Office or the approval of the City Council. City-Initiated Partnerships: Such partnerships will be guided by existing policies and procedures governing purchasing and outsourcing, using “requests for proposals” and/or bid processes as the method of initiating a partnership. A City-initiated partnership may incorporate incentives including naming rights, waiver of non-enterprise fund building and planning fees, reduced lease rates, free use of space, subsidies, and staff resources. All incentives may be negotiated on a case-by-case basis. POLICY AND PROCEDURES 1-25/MGR REVISED: AUGUST 2007 3 Evaluation of Viability of Partnering Organization: Staff will provide the City Manager and/or City Council with its assessment of the viability of the proposed partnership, based on the partnering organization’s possession of sound organizational, administrative and fiscal management, and its demonstrated experience to achieve and sustain project tasks, such as fundraising and building community support. For proposed facility improvement or expansion initiatives, the nonprofit or private organization should have the ability and commitment to make a substantial pledge to the project’s cost. Facilities Proposals: • If a City facility is to be renovated, expanded or otherwise be directly affected by the partnership, the Infrastructure Management Plan will have to be adjusted appropriately. • Long-term staffing, operational and maintenance costs must be identified in the proposal. The project’s applicable costs and funding sources for furnishings, fixtures and equipment will be identified. • The parties will negotiate the joint or separate financial responsibility for any project cost overruns on a project-by-project basis. • Staff may recommend that any standard City processing or use fee authorized under the Municipal Fee Schedule, excluding fees and charges levied by City of Palo Alto Utilities or other City enterprise fund programs, should be waived as a condition of the City's participation. Waiver of fees may be granted by the Council and limited to those fees associated with a construction or capital improvement project which, upon its completion, results in a new or improved public facility, building or park, or some portion thereof, that will be solely owned or controlled by the City. In the event that only a portion of a construction or capital improvement project will result in a new or improved City facility, building or park, or portion thereof, then the Council may waive only that portion of any associated fee directly relating to the construction, improvement or enhancement of the City facility, building or park. As appropriate, the summary and recommendation in the report to the Council will include a staff recommendation on waiving fees which the Council can approve or reject. • The City will determine whether the nonprofit or private organization shall use or may forego a formal or informal competitive selection process in the hiring of professionals who will perform the management, design and/or construction phases of the project. The City shall review and approve the requirements for and the performance of all phases of design, planning and construction work for the project. CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY March 14, 2016 The Honorable City Council Palo Alto, California Authorize the City Attorney to Amend the Legal Services Agreement With Elisa Larson to Extend the Term of the Agreement to a Total Term of Approximately Three Years and Two Months, Formalize Temporary Changes to the Scope of Work and Applicable Rates and Increase the Not-to-Exceed Amount to a Total of $375,000 EXECUTIVE SUMMARY The City Attorney's Office requests that Council authorize the City Attorney to execute an amendment to the Legal Services Agreement (“Contract No. S15159099” or “Agreement”) between the City and Elisa Larson, Attorney at Law, to extend the term of the Agreement for a total term of approximately three years and two months, formalize changes to the Scope of Work and applicable rates on a temporary basis and increase the not-to-exceed amount to $375,000. BACKGROUND: In February 2015, the City executed S15159099 to retain Elisa Larson to provide legal advice and assistance to the City concerning:  State and federal laws applicable to municipal utilities engaged in energy trading activities;  Development, drafting, negotiation, interpretation and modification of power and natural gas purchase and sale contracts and related documents, including industry form contracts, renewable power purchase agreements, greenhouse-gas/offset and other climate change related documentation, and underground natural gas storage facilities contracts; and  Other utilities matters as assigned. The original agreement was for a term of two years (February 2015 – February 2017) with a total not-to-exceed amount of $65,000. The City Attorney requests authorization to amend the agreement to extend the term and add funding to support temporary increased need for utilities-related legal services. DISCUSSION Page 2 The City Attorney’s Office is requesting Council authorization to execute an amendment to the agreement that would:  Extend the term from its current expiration date of February 22, 2017 to April 30, 2018, for a total term of three years and two months;  Implement a two-tier rate structure by adding a lower rate for generalized advice work to supplement in-house staff during periods of staff leave, retirements, and other temporary staffing shortages; and  Increase the not-to-exceed compensation from the original amount of sixty-five thousand dollars ($65,000) by one hundred forty thousand dollars ($140,000) to a total not-to-exceed amount of two hundred five thousand dollars ($205,000) through April 30, 2016; add a not-to-exceed amount of eighty-five thousand dollars ($85,000) for the period May 1, 2016 through April 30, 2017; and add a not-to-exceed amount of eighty- five thousand dollars ($85,000) for the period May 1, 2017 through April 30, 2018. Revised not-to-exceed amounts are set forth in the table below: Time Period Not-to-Exceed Amount Effective Date through April 30, 2016 $205,000 May 1, 2016 through April 30, 2017 $85,000 May 1, 2017 through April 30, 2018 $85,000 TOTAL NOT-TO-EXCEED AMOUNT $375,000 RESOURCE IMPACT Contract No. S15159099 is funded by the Utilities Department’s budget. Funding for this contract amendment does not require additional budgetary authority as it can be accommodated within the Utilities Department FY 2016 budget. ENVIRONMENTAL REVIEW Amendment of a legal services contract does not meet the California Environmental Quality Act’s definition of a project set forth in California Public Resources Code section 21065, thus no environmental review is required. Department Head: Molly Stump, City Attorney CITY OF PALO ALTO OFFICE OF THE CITY CLERK March 14, 2016 The Honorable City Council Palo Alto, California Approval for the Consolidation of the Unscheduled Vacancy on the Utilities Advisory Commission With the Spring 2016 Board and Commission Recruitment Recommendation Staff recommends the City Council direct Staff to include the recruitment of the unscheduled vacant term of Garth Hall on the Utilities Advisory Commission with the Spring 2016 Board and Commission Recruitment. Discussion On February 22, 2016, the City Clerk’s Office was notified that Garth Hall was resigning from the Utilities Advisory Commission (UAC) effective May 31, 2016. Commissioner Hall’s term would have expired on May 31, 2017. The City Clerk’s Office is currently recruiting to fill three scheduled vacancies on the UAC (Eglash, Foster, and Schwartz) as part of the Spring 2016 Board and Commission recruitment. These new terms will expire May 31, 2019. Consolidating the unscheduled vacancy on the UAC with the Spring 2016 recruitment will require less Staff time and advertising costs than conducting a special recruitment to fill the unscheduled vacancy. Department Head: Beth Minor, City Clerk CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR March 14, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Audit of Parking Funds The Office of the City Auditor recommends acceptance of the Audit of Parking Funds. At its meeting on December 15, 2015, the Policy and Services Committee approved and unanimously recommended that the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Audit of Parking Funds (PDF)  Attachment B: Policy and Services Committee Meeting Minutes Excerpt (December 15, 2015) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR December 15, 2015 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Audit of Parking Funds In accordance with the Fiscal Year 2015 Annual Audit Work Plan, the Office of the City Auditor has completed the Audit of Parking Funds. The audit report presents two findings with a total of eight recommendations. The Office of the City Auditor recommends that the Policy and Services Committee review and recommend to the City Council acceptance of the Audit of Parking Funds. We would like to thank management and staff in the Planning, Community, and Environment Department; Administrative Services Department, Public Works Department; Police Department; and Community Services Department for their time, cooperation, and assistance during the audit process. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Audit of Parking Funds (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 2 Attachment A Audit of Parking Funds December 2015 Office of the City Auditor Harriet Richardson, City Auditor Yuki Matsuura, Senior Performance Auditor Attachment A Page intentionally left blank Attachment A Office of the City Auditor EXECUTIVE SUMMARY: Audit of Parking Funds Purpose of the Audit: The purpose of the audit was to determine if the City’s parking in‐lieu and parking permit fees are collected, accounted for, and used in accordance with applicable laws, regulations, policies, and governing documents. REPORT HIGHLIGHTS Finding 1: The City does not have policies and procedures to ensure that it accurately calculates and assesses parking in‐lieu fees and tracks expenditures related to construction of public parking spaces. (Page 7) Summary: The City potentially overcharged parking in‐lieu fees on four development projects due to a combination of decentralized processes and clerical errors, including not recalculating the fee until almost four years after garage construction was complete. These overcharges totaled $272,576. On another project, the City did not collect $182,250 for three parking spaces that one applicant was required to pay based on its settlement agreement with the City. The table below summarizes the overcharges and undercharges. Garage construction costs that were paid with fees transferred from the Parking In‐lieu Fund were also drawn down from the bond proceeds, which left some of the proceeds unused. Recommendations:  ASD defease and reduce the bond debt by the $1,790,295 that was inadvertently drawn down from the garage bond proceeds and the $240,402 of double‐counted garage expenditures.  PCE work with the City Attorney’s Office to initiate refunds for the four overpaid development projects, and bill for the underpayment for the project at 180 Hamilton Avenue.  PCE, ASD, and Public Works coordinate with each other and the City Attorney’s Office to revise the Municipal Code to clarify how to calculate and adjust the parking in‐lieu fee, when to collect the fee and the rates to be used, and reporting requirements.  After updating the Municipal Code, PCE, ASD, and Public Works work together to develop written policies and procedures, and communicate and train staff on the policies and procedures. Parking In‐Lieu Fee Payments Since FY 2012 and Auditor’s Recalculation Project Address Number of Spaces Per Space Parking In‐Lieu Fee Total Amount Charged Auditor’s Recalculation Paid Auditor’s Recalculation Potential (Overcharge)/ Undercharge 564 University Ave. 8 $67,100 $59,158 $536,800 $473,264 ($63,536) 101 Lytton Ave. 22 $67,100 $60,460 $1,476,200 $1,330,120 ($146,080) 135 Hamilton Ave. 16 $60,750 $60,460 $972,000 $967,360 ($4,640) 240 Hamilton Ave. 8 $67,750 $60,460 $542,000 $483,680 ($58,320) 180 Hamilton Ave. 8 $60,750 $60,750 $303,750 $486,000 $182,250 Source: PCE records and auditor’s analysis Finding 2: Combining College Terrace RPP and Crescent Park NOP parking permit revenues and not fully tracking and analyzing financial and performance data reduced the ability to make informed decisions. (Page 14) Summary: Departments involved in College Terrace RPP fund activities have had little guidance, and their processes evolved over time without sufficient documentation or coordination. As a result, program revenues and expenditures were not tracked and reported accurately, completely, and consistently to allow systematic evaluation of the funds’ financial performance over time. Recommendations:  PCE and ASD work together to establish supplemental policies and procedures.  PCE identify financial and performance data required for effective program evaluation, and work with ASD and Police to establish data tracking and monitoring procedures and assignment. This should also occur prior to implementing each new program. Attachment A Council designated the permit fees as cost recovery fees for the College Terrace RPP Program, but not for the Crescent Park NOP Program. However, the revenues for both programs were recorded in the College Terrace RPP Program Fund, and the expenditures were not sufficiently tracked to know the actual costs of administering the programs. Having inaccurate or incomplete financial information limits the Council’s ability to evaluate program performance and make an informed decision regarding permit fees.  PCE improve the reliability and usefulness of its annual report to the City Council on the parking programs Office of the City Auditor ● 250 Hamilton Avenue, 7th Floor ● Palo Alto, CA 94301 ● 650.329.2667 Copies of the full report are available on the Office of the City Auditor website at: http://www.cityofpaloalto.org/gov/depts.aud/reports/performance.asp Attachment A TABLE OF CONTENTS OBJECTIVE .................................................................................................................................................. 1 BACKGROUND ............................................................................................................................................. 1 SCOPE ....................................................................................................................................................... 4 METHODOLOGY .......................................................................................................................................... 4 FINDING 1: The City does not have policies and procedures to ensure that it accurately calculates and assesses parking in‐lieu fees and tracks expenditures related to construction of public parking spaces ................................................................................................................................................. 7 Finding 1 Recommendations ........................................................................................................... 12 FINDING 2: Combining College Terrace RPP and Crescent Park NOP parking permit revenues and not fully tracking and analyzing financial and performance data reduced the ability to make informed decisions ........................................................................................................................................... 14 Finding 2 Recommendations ........................................................................................................... 17 APPENDIX 1: Parking In‐Lieu Payments Since FY 2012 and Details of Auditor’s Recalculation .............. 18 APPENDIX 2: City Managers Response .................................................................................................... 19 ABBREVIATIONS ASD Administrative Services Department BID Business Improvement District CD Commercial District CIP Capital Improvement Program FY Fiscal Year NOP No Overnight Parking OMB Office of Management and Budget Division PCE Planning and Community Environment RPP Residential Parking Permit Attachment A Page intentionally left blank Attachment A Audit of Parking Funds 1 INTRODUCTION Objective The purpose of this audit was to determine if the City’s parking in‐lieu and parking permit fees are collected, accounted for, and used in accordance with applicable laws, regulations, policies, and governing documents. Background The City has several parking activities that are the focus of this audit:  Parking in‐lieu – fees collected for required parking spaces that development projects do not provide; funds are used to fund future construction of public parking spaces.  College Terrace Residential Parking Permit (RPP) – fees collected to limit on‐street parking in the College Terrace neighborhood.  Crescent Park No Overnight Parking (NOP) trial program – fees collected to prohibit overnight parking in the Crescent Park neighborhood.  University Avenue and California Avenue parking permits – fees collected for use of public parking spaces. Historically, these fees have been used to operate and maintain public parking facilities. Each of these parking activities is discussed in more detail below. Businesses also pay fees to support other activities in assessment districts. We have described these activities to clarify the differences between them and the similarly named parking activities above, but they are not part of this audit:  University Avenue Area Off‐street Parking and California Avenue Parking Assessment Districts – formed to finance the purchase and construction of public parking garages by issuing bonds and levying assessments on the properties within the respective districts to pay for the bonds. As the fiduciary agent for these districts, the City holds money collected from property owners that is awaiting transfer to the districts’ bond trustees. The City has no decision‐ making authority regarding how the districts spend the funds and cannot use the funds for City operations. The bonds for the California Avenue Parking Assessment District will be paid in full in fiscal year (FY) 2016.  The Downtown Business Improvement District (BID) – established to fund activities such as promotion, marketing, and beautification that benefit businesses located and operating in the district, through the levy of an assessment against those businesses. The Board of Directors of the Palo Alto Downtown Business and Professional Association operates the BID. Attachment A Audit of Parking Funds 2 Parking In‐Lieu Program Palo Alto Municipal Code sections 18.18.090 and 18.52.070 allow applicants to pay a fee for each required onsite parking space that they do not provide for their development projects, due to site constraints, in the Commercial Downtown (CD) district. Municipal Code Chapter 16.57 describes how the City is to calculate the fee and requires the fees to be used to construct public parking spaces to serve parking needs within the district that were created by the developments that paid the fees. The City established the parking in‐lieu fee in 1995. The initial fee was $17,800 and was revised to $30,250 in 1998 to reflect the estimated combined construction costs for the parking garages to be built at 528 High Street and 445 Bryant Street, divided by the number of spaces to be built. The Municipal Code requires the Chief Transportation Official in the Planning and Community Environment (PCE) Department to:  Recalculate the fee when the construction contract is awarded to reflect actual design costs plus the estimated construction costs.  Recalculate the fee after construction is complete and the final payment is made to reflect the total project costs. The recalculated fee may be higher or lower than the initial fee.  Adjust the fee annually by an amount equal to the change in the construction cost index for the preceding year. The Municipal Code requires applicants to pay required parking in‐ lieu fees prior to receiving a building permit. However, it allows payment to be deferred to the final building inspection approval date if the applicant enters into an extended payment agreement with the City. Administrative Services Department (ASD) staff track parking in‐ lieu payments received. The City tracks the parking in‐lieu fees collected in a dedicated fund. Since FY 2012, the City has collected $4,455,750 in parking in‐lieu fees from five development projects. Exhibit 1 shows the fees received and net funds available as of the end of each fiscal year. Attachment A Audit of Parking Funds 3 EXHIBIT 1: Parking In‐Lieu Fees Collected and Net Funds Available (as of December 31, 2014) Prior to FY 20031 FY 2012 FY 2013 FY 2014 FY 2015 Parking in‐lieu fee collected $1,627,573 $536,800 $0 $1,275,750 $2,643,2004 Net Funds Available as of June 302, 3 $100,592 $642,432 $657,961 $1,961,600 N/A 1 No parking in‐lieu fees were collected from FY 2003 through FY 2011 because development projects used parking exemptions available at the time. 2 The net funds available at the end of FY 2011 was based on a combination of gains on investments and disbursements to the garage capital project. 3 The net funds available exceed the prior year’s balance plus the current year’s net revenue due to gains on investments. 4 Includes a financial contribution of $625,000 that the City collected from the project at 101 Lytton Avenue, as required by Ordinance No. 5158. Source: City’s financial records College Terrace Residential Parking Permit (RPP) Program The City Council adopted Municipal Code chapter 10.46 in October 2009 to implement a RPP program in the College Terrace neighborhood. The program limits on‐street parking to two hours on Monday through Friday, from 8 a.m. to 5 p.m. Residents can purchase a permit to be exempt from the time restriction for $40 a year or $5 a day. The program was initially funded by $100,000 that the City received as a condition of approval for Stanford’s General Use Permit. The City tracks the program’s revenues and expenditures in the College Terrace RPP Program Fund, a special revenue fund. Crescent Park No Overnight Parking (NOP) Trial Program In September 2013, the City Council adopted a resolution that established a one‐year trial program that prohibited overnight parking from 2 a.m. to 5 a.m. in the Crescent Park neighborhood and later extended the trial program. The program allows residents to purchase up to two overnight parking permits per household for $100 each and additional single‐use permits for $5 each. Enforcement is primarily by request. There is not a dedicated fund to track revenues collected from these permits. University Avenue and California Avenue Parking Permits Employees of businesses in the University Avenue and California Avenue assessment districts may purchase annual or quarterly parking permits, and the public may purchase daily permits. The City tracks the fees collected from these permits in separate, dedicated funds. Historically, the fees are used to operate and maintain parking facilities and public areas, including sweeping, landscaping, signage, and lighting, and for Capital Improvement Program (CIP) projects such as resurfacing and restriping. Exhibit 2 shows the permit fee revenue and net funds available as of fiscal year end. Attachment A Audit of Parking Funds 4 EXHIBIT 2: University Avenue and California Avenue Parking Permit Funds Permit Revenue and Net Funds Available FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 University Avenue Parking Permit Fund Permit Fee Revenue1 $1,109,648 $1,200,661 $1,378,138 $1,674,352 $1,762,351 Net Revenue (Net Expenditure) $157,641 $21,772 ($139,194) $133,141 $454,748 Net Funds Available as of June 302 $608,202 $628,602 $472,059 $628,656 $1,006,181 California Avenue Parking Permit Fund Permit Fee Revenue3 $128,891 $174,476 $175,704 $135,521 $206,105 Net Revenue (Net Expenditure) ($34,025) $39,716 ($22,705) $18,493 ($123,815) Net Funds Available as of June 302 $336,344 $378,406 $354,882 $387,283 $254,942 1 Permits for off‐street parking lots and garages in the downtown business district, including a total of 92 public benefit permit parking spaces in the 800 High Street garage and the Sheraton lot (shown as Lot X on the City’s parking map). 2 The net funds available do not equal the prior year’s balance plus the current year’s net revenue due to gains and losses on investments. 3 Permits for off‐street parking lots and garages in the California Avenue business district. Source: City’s financial records Scope We reviewed the Parking In‐Lieu Fund, College Terrace RPP Program Fund, revenues and expenditures for the Crescent Park NOP Trial Program, and the University Avenue and California Avenue Parking Permit Funds. We focused on the five development projects that were subject to the parking in‐lieu fee from FY 2012 through December 2014, and on fund and financial activities during FY 2014 for the other parking funds and activities. We reviewed additional data and documents dating back to FY 1997 to understand and evaluate relevant information but were unable to review data that was in IFAS, the City’s financial system prior to FY 2004, because it was no longer accessible. We did not evaluate whether development projects met the eligibility criteria in Municipal Code section 18.18.090 for participation in the Parking In‐lieu Program. Methodology To accomplish our audit objective, we:  Interviewed staff from the PCE, ASD, Public Works, Police, and Community Services Departments to understand the City’s parking funds and the processes to administer them.  Reviewed applicable sections of the Palo Alto Municipal Code, California Government Code, City Council resolutions and ordinances, and City policies and procedures to understand the regulatory environment and requirements over parking funds.  Consulted with the City Attorney’s Office regarding relevant legal and regulatory issues and criteria for compliance. Attachment A Audit of Parking Funds 5  Reviewed the City’s Comprehensive Annual Financial Reports, Operating and Capital Budget documents, SAP1 system records, and other departmental records to understand parking funds’ financial status.  Identified risks that could prevent achieving the program objectives and procedures implemented to mitigate the risks.  Mapped relevant processes in coordination with PCE staff.  Analyzed the parking in‐lieu fund: o Reviewed ASD’s and Public Works’ supporting documentation and records regarding construction costs for the parking garages at 528 High Street and 445 Bryant Street. o Reviewed the parking in‐lieu fee schedules and supporting documentation to determine if the fees were calculated and adjusted as required by the Municipal Code. o Reviewed PCE’s supporting documentation and SAP and Accela2 system records to determine if the parking in‐lieu fees were collected accurately and timely in accordance with the Municipal Code. o Reviewed ordinances, staff reports, and supporting documentation to determine if the parking in‐lieu fund was used and reported in accordance with the Municipal Code.  Analyzed the parking permit funds: o Reviewed the Police Department’s semiannual reports of College Terrace RPP revenues and costs and compared them to SAP and Inglewood Citation Management System3 records to determine if the revenues that Police reported were recorded accurately and timely. o Reviewed SAP system records and supporting documentation, compared budgeted to actual revenues and expenditures, and worked with the responsible departments to follow up on significant variances to identify the cause. o Reviewed staff reports on parking permit funds and evaluated their reliability and usefulness by comparing them to SAP system records and other documents. 1 SAP is the City’s enterprise resource planning system that supports the City’s core business functions, including accounting, purchasing, and utilities. 2 Accela is the planning and permitting system that PCE uses to track development applications, projects, and code enforcement cases. 3 The City purchases parking citation processing services from the City of Inglewood, CA, under a government shared‐ service program. Attachment A Audit of Parking Funds 6 Data reliability To assess the reliability of the data needed to answer the audit objectives, we interviewed City staff, reviewed relevant documentation, and cross‐referenced data from multiple sources. We could not independently verify the reliability of information that was recorded in IFAS prior to FY 2004 for the garages built at 528 High Street and 445 Bryant Street because the system is no longer accessible. However, we compared reports that ASD had obtained from IFAS and retained to support bond drawdowns for the garages with other available documents to determine data consistency and reasonableness. When we identified discrepancies, we discussed them with City staff and made appropriate adjustments to the transaction data used in our analysis. From these efforts, we believe that the data were sufficiently reliable for the purposes of this report. Compliance with government auditing standards We conducted this audit of parking funds in accordance with our FY 2015 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. We would like to thank management and staff in the Planning, Community, and Environment Department; Administrative Services Department; Public Works Department; Police Department; and Community Services Department for their time, cooperation, and assistance during the audit process. Attachment A Audit of Parking Funds 7 Finding 1 The City does not have policies and procedures to ensure that it accurately calculates and assesses parking in‐lieu fees and tracks expenditures related to construction of public parking spaces. Finding Summary The City potentially overcharged parking in‐lieu fees on four development projects due to a combination of decentralized processes and clerical errors, including not recalculating the fee until almost four years after garage construction was complete. These overcharges totaled $272,576. On another project, the City did not collect $182,250 for three parking spaces that one applicant was required to pay based on its settlement agreement with the City. Garage construction costs that were paid with fees transferred from the Parking In‐lieu Fund were also drawn down from the bond proceeds, which left some of the proceeds unused. Parking in‐lieu fees not accurately calculated or collected in a timely manner A combination of errors occurred in calculating or collecting parking in‐lieu fees because processes are decentralized and neither the Municipal Code nor policies and procedures clearly define the roles of each department involved. The Municipal Code assigns responsibility for calculating the fee to the Chief Transportation Official in the Planning, Community, and Environment Department (PCE), but the Administrative Services and Public Works Departments also have roles in administering the parking in‐lieu program. The fee was incorrect because:  PCE did not recalculate the parking in‐lieu fee when garage construction was complete as required by the Municipal Code, which resulted in a higher fee for FY 2012, when development projects started using the parking in‐lieu provision again.  ASD overstated the total garage construction costs by $306,772, which caused the parking in‐lieu fee to be overstated.  PCE did not consistently apply and monitor payment terms required by the Municipal Code to ensure their accuracy and timeliness.  The City did not assign responsibility for collecting additional parking in‐lieu fees required in a settlement agreement. Each of these issues is discussed below. Parking in‐lieu fee not recalculated when garage construction was complete The fee established in 2003 was based on the estimated costs to design and construct the parking garages at 538 High Street and 445 Bryant Street, which added a total of 704 parking spaces. PCE did not recalculate the fee to reflect the actual costs upon completion of garage construction in July 2008. The lack of adjustments did not have an immediate impact because the City did not assess any Attachment A Audit of Parking Funds 8 parking in‐lieu fees from FY 2003 through FY 2011 when most downtown development projects used parking exemptions available at the time. However, as discussed later in this finding, it did affect projects beginning in FY 2012. This oversight was partially remedied in January 2012 when ASD staff assisted PCE in adjusting the FY 2012 fee for the past construction cost indices. However, the recalculated fee of $67,100 per parking space did not incorporate the actual construction costs, which were less than the estimated costs. Overstated garage construction costs caused a higher parking in‐lieu fee After receiving a public inquiry, ASD staff recalculated the fee in April 2012 to reflect the actual garage design and construction costs. However, the revised calculation of $31.8 million overstated the total cost by $306,772 due to double counting of some expenditures. This caused the fee to be overstated by $436 per parking space. Double counting the expenditures also caused ASD staff to draw down $240,402 more from the bond proceeds than the actual project expenditures, leaving unused funds in the Capital Improvement Fund. Incorrect parking in‐lieu fee applied to two projects after ASD’s April 2012 recalculation ASD’s April 2012 calculation reduced the fee to $60,750 per parking space, which Council approved in June 2012, to be effective in August 2012 for FY 2013.4 However, before the corrected fee became effective, PCE project planners assessed parking in‐lieu fees of $67,100 per space on two development projects – 564 University Avenue in May 2012 and 101 Lytton Avenue in July 2012 – because they were not aware that the fee had been corrected. Exhibit 3 shows our recalculation of the parking in‐lieu fee based on both the final construction costs and the published construction cost index for each year. 4 The parking in‐lieu fee is adopted annually as part of the City’s municipal fee schedule but is not effective until 60 days after adoption, in accordance with California Government Code. Attachment A Audit of Parking Funds 9 EXHIBIT 3: Parking In‐Lieu Fee Schedule – City Records and Auditor’s Recalculation Fiscal Year ASD Calculations Auditor’s Recalculation (based on actual construction costs and construction cost indices) January 2012 Calculation (based on the estimated construction costs upon contract award) April 2012 Calculation (based on ASD’s records of actual construction costs) CCI1 % Fee CCI %4 Fee CCI % Fee 2003 $50,994 $45,239 $44,803 2004 3.3 $52,677 2.0 $46,144 2.0 $45,699 2005 2.0 $53,730 2.0 $47,067 2.54 $46,842 2006 4.02 $55,880 2 2.4 $48,196 2.4 $47,966 2007 2.4 $57,221 2.6 $49,449 2.6 $49,213 2008 2.1 $58,422 7.8 $53,306 7.8 $53,051 2009 3.2 $60,292 0.5 $53,573 0.5 $53,317 2010 6.6 $64,271 6.6 $57,109 6.6 $56,836 2011 (0.3)3 $64,271 3 (0.3) $56,937 (0.3) $56,665 2012 4.4 $67,100 4.4 $59,442 4.4 $59,158 2013 2.2 $60,750 2.2 $60,460 2014 0 $60,750 0 $60,460 2015 5.1 $63,848 5.1 $63,543 1 CCI means Construction Cost Index. 2 ASD adjusted the 2006 fee by 4.0%, although their spreadsheet showed that they used the 2005 CCI increase of 2.4%. 3 The 2011 fee was not adjusted by the CCI decrease. 4 The January 2012 calculation used a different CCI for some years, which staff revised upon recalculation in April 2012. This may have been due to the published CCI being updated after its initial publication. We reviewed the revised percentages for consistency with the published CCI, and further revised the FY 2005 percentage in our recalculation. Source: City’s financial records, PCE records, ASD records, and auditor’s analysis Overcharging of four projects occurred for various reasons PCE did not always ensure that applicants paid their parking in‐lieu fees prior to the City issuing a building permit or, if the owner entered into a written deferred‐payment agreement with the City, require payment based on the rate in effect on the payment date, as required by the Municipal Code:  564 University Avenue – PCE issued the first building permit for this project in April 2009, although the applicant had not paid the parking in‐lieu fees and there was not a deferred‐payment agreement. The applicant subsequently sold the property, and the new owner paid the parking in‐lieu fees in May 2012, prior to the City issuing a new building permit. The amount paid was based on the fee in effect that, as stated above, had not been updated to reflect the final garage construction costs.  101 Lytton Avenue – PCE approved this project in July 2012, but did not enter into an agreement with the applicant to defer the parking in‐lieu fee payment until November 2012, three months Attachment A Audit of Parking Funds 10 after the effective date of the FY 2013 fee. PCE issued the building permit two weeks after entering into the agreement. The agreement required the applicant to pay the fees within 18 months of obtaining the building permit (i.e., May 2014), but the City did not receive payment until July 2014. The agreement did not specify that the fee would be calculated at the rate in effect on the deferred payment date, as required by the Municipal Code, and instead specified the rate in effect on the project approval date.  135 Hamilton Avenue and 240 Hamilton Avenue – The applicants paid their parking in‐lieu fees for these projects prior to the City issuing the building permits. The overcharges were due to the overstated garage construction costs, which caused a higher parking in‐lieu fee, as described above. There was an additional clerical error for 240 Hamilton Avenue; PCE assessed a parking in‐ lieu fee of $67,750 per parking space instead of the approved FY 2013 fee of $60,750. The City did not collect additional parking in‐lieu fees resulting from a settlement agreement PCE assessed only $303,750, instead of $486,000, for the project at 180 Hamilton Avenue. The City Attorney’s Office entered into a settlement agreement with the applicant that required parking in‐lieu fees for eight parking spaces, at $60,750 per space, instead of the five spaces specified in the conditions of approval. The PCE project planner was not aware of the agreement and did not charge for the three additional spaces, which resulted in an undercharge of $182,250. Exhibit 4 summarizes our recalculation of the overcharges and undercharge, and Appendix 1 provides additional details of our recalculation. EXHIBIT 4: Parking In‐Lieu Fee Payments Since FY 2012 and Auditor’s Recalculation Project Address Number of Spaces Per Space Parking In‐Lieu Fee Total Amount Charged Auditor’s Recalculation Paid Auditor’s Recalculation Potential (Overcharge)/ Undercharge 564 University Ave. 8 $67,100 $59,158 $536,800 $473,264 ($63,536) 101 Lytton Ave. 22 $67,100 $60,460 $1,476,200 $1,330,120 ($146,080) 135 Hamilton Ave. 16 $60,750 $60,460 $972,000 $967,360 ($4,640) 240 Hamilton Ave. 8 $67,750 $60,460 $542,000 $483,680 ($58,320) 180 Hamilton Ave. 8 $60,750 $60,750 $303,750 $486,000 $182,250 Source: PCE records and auditor’s analysis Attachment A Audit of Parking Funds 11 More effective guidance needed to administer the parking in‐lieu fee Many of these issues occurred because some parts of the Municipal Code are outdated and inconsistent with actual responsibilities and requirements and because there were not policies and procedures to effectively administer the parking in‐lieu fee, which is complex and necessitates coordination among several departments. For example:  The Municipal Code states that the eligibility criteria for the parking in‐lieu fee is in section 18.49.100, which was repealed and replaced with section 18.18.090 in 2006.  The Municipal Code requires the Chief Transportation Official to calculate and adjust the parking in‐lieu fee. However, the Chief Transportation Official’s responsibilities did not involve estimating garage construction costs or awarding the construction contracts and, therefore, meant the incumbent would have had to rely on other departments to obtain those costs.  Organizational changes and turnover of key positions, including the Director, Assistant Director, and Chief Transportation Official in PCE during the last decade caused a lack of continuity and loss of knowledge.  The Municipal Code requires the Chief Transportation Official to review and report the findings to the City Council at a noticed public hearing regarding the reasonable relationship between the continued need for parking and the impacts of pending or anticipated nonresidential development within the University Avenue Assessment District. Although the City Council reviews and accepts the annual report on impact fees provided by ASD, which includes the parking in‐lieu fee and is designed to comply with state law, the annual noticed public hearing to satisfy the Municipal Code requirement has not been held.  Communication and coordination do not always occur at key points among those involved with the Parking In‐Lieu Program. PCE staff calculate and assess parking in‐lieu fees; Public Works staff track project expenditures as garages are built; and ASD staff receive parking in‐lieu fee payments, draw down bond funds as expenditures occur, and prepare the annual status report on parking in‐lieu fees to the City Council. Because the Municipal Code provides only general requirements, written policies and procedures for how to apply the requirements likely would have reduced the confusion over roles and responsibilities for administering the parking in‐lieu fee and ensured continuity and effective oversight. Attachment A Audit of Parking Funds 12 Costs paid with transferred parking in‐lieu fees were also drawn down from bond proceeds The City collected parking in‐lieu fees totaling $1.7 million from development projects during FYs 1996 through 2002 while the garages at 528 High Street and 445 Bryant Street were in the early planning stages. The fees accrued interest while in the parking in‐lieu fund. The City made three transfers from the fund, totaling $1,790,295, to the CIP project to fund costs associated with planning and designing the garages. After the assessment district was formed and the special assessment bonds were issued, the City deducted those same initial project costs from the bond proceeds. Doing that caused the bond proceeds allocated to the project to exceed the cost of the project by the $1,790,295 that was transferred from the Parking In‐lieu Fund. Exhibit 5 shows the parking in‐lieu fees collected during those early years, the interest earned on those fees, and the disbursements made to the garage CIP project. EXHIBIT 5: Parking In‐Lieu Fund – Fees Collected and Used From FY 1996 Through FY 2002 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 TOTAL Parking in‐lieu fee collected $231,400 $517,590 $0 $235,614 $432,120 $201,201 $65,796 $1,683,721 Interest and unrealized gain/loss on investment $1,698 $28,467 $42,296 $14,484 $26,394 $56,886 $9,648 $179,873 Transfer to the garage construction project $0 $0 ($798,000) $0 $0 ($766,295) ($226,000) ($1,790,295) Fund Balance $233,098 $779,155 $23,451 $273,549 $732,063 $223,855 $73,299 $73,299 Source: ASD records Recommendations We recommend that: 1.1. ASD defease and reduce the bond debt by the $1,790,295 that was inadvertently drawn down from the garage bond proceeds and the $240,402 of double‐counted garage expenditures. 1.2. PCE work with the City Attorney’s Office to initiate refunds for the four overpaid development projects shown in Exhibit 4. 1.3. PCE bill for the underpayment shown in Exhibit 4 for the project at 180 Hamilton Avenue. 1.4. PCE, ASD, and Public Works coordinate with each other and the City Attorney’s Office to revise the Municipal Code to clarify:  How to calculate and adjust the parking in‐lieu fee, including clarifying what costs should be included when calculating the fee.  When to collect the fee and the rate to be used. Attachment A Audit of Parking Funds 13  Reporting requirements.  Other updates, if necessary, that could help ensure that the fee will reasonably reflect the approximate cost of constructing new garage spaces. 1.5. After updating the Municipal Code, PCE, ASD, and Public Works work together to develop written policies and procedures to:  Clarify roles and responsibilities for applying the Municipal Code requirements and monitoring compliance.  Ensure that the parking in‐lieu fee is calculated, collected, and reported accurately, consistently, and timely.  Ensure that appropriations, funding sources, actual revenues, and capital expenditures are accurately and completely tracked during the life of each CIP project.  Verify final project costs for accuracy, close out the project, and release unused project funds upon completion of the project.  Ensure that complete records related to the costs of planning and constructing a garage(s) are retained for the entire period for which they serve as the basis for calculating the parking in‐ lieu fee. Communicate and train staff on the policies and procedures. Attachment A Audit of Parking Funds 14 Finding 2 Combining College Terrace RPP and Crescent Park NOP parking permit revenues and not fully tracking and analyzing financial and performance data reduced the ability to make informed decisions. Finding Summary Departments involved in College Terrace RPP fund activities have had little guidance, and their processes evolved over time without sufficient documentation or coordination. As a result, program revenues and expenditures were not tracked and reported accurately, completely, and consistently to allow systematic evaluation of the funds’ financial performance over time. Council designated the permit fees as cost recovery fees for the College Terrace RPP Program, but not for the Crescent Park NOP Program. However, the revenues for both programs were recorded in the College Terrace RPP Program Fund, and the expenditures were not sufficiently tracked to know the actual costs of administering the programs. Having inaccurate or incomplete financial information limits the Council’s ability to evaluate program performance and make an informed decision regarding permit fees. Financial data for College Terrace RPP and Crescent Park NOP Programs not reliable and useful City staff have not tracked and analyzed financial data for the College Terrace RPP or Crescent Park NOP programs to provide reliable and useful information for setting fees and determining the amount, if any, of General Fund subsidies. College Terrace RPP permit fees intended to recover costs of program; Crescent Park NOP permit fees are not Permit fees for the College Terrace RPP Program were intended to recover the program’s costs. The City established a special revenue fund to track revenues and expenditures for the program and to maintain General Fund neutrality. In contrast, the Council adopted fees for the Crescent Park NOP Trial Program at a level that would require General Fund subsidies to cover the costs, and the City did not establish a separate fund for this program. Instead, the intent was to record permit revenues in the General Fund, charge the initial program costs to a capital improvement project, and reimburse the capital project from the General Fund. Crescent Park NOP permit fees recorded in College Terrace RPP Program Fund Expenditures for the Crescent Park NOP Program were recorded in a CIP for parking and transportation improvements, but an estimated $24,000 in program revenues were recorded in the College Terrace RPP Program Fund and have not been used to reimburse the CIP project for the Crescent Park costs. The FY 2014 expenditures recorded in the CIP project included $23,210 for new signs and installation and $3,386 for permit costs. Attachment A Audit of Parking Funds 15 Initial College Terrace RPP funding differed from what was reported to Council The College Terrace RPP Program was initially funded by the $100,000 received from Stanford in 2001 as a condition of its general‐ use permit, of which $46,200 was used for consultant fees related to developing the RPP program. PCE reported to Council in 2010 that the balance of $53,800, plus $36,839 of interest earned, would be used to implement the program. However, only $53,139 of the $90,639 was transferred into the College Terrace RPP Program Fund. Current PCE staff did not know why the remaining $37,500 was not transferred into the fund. General Fund subsidized both the College Terrace RPP and Crescent Park NOP Programs The General Fund has consistently absorbed a portion of PCE’s program administration costs, the Police Department’s enforcement costs, and ASD’s permit processing costs for the College Terrace RPP Program, which was intended to be a cost‐recovery program. For example, the General Fund absorbed approximately $53,650 of the Police Department’s enforcement costs and $37,500 of ASD’s permit processing costs in FY 2010. The annual permit initially cost $15, was increased to $40 in FY 2011, and was $40 through FY 2015. The higher permit fee has contributed to a decrease in General Fund subsidies. For example, we estimated that the General Fund absorbed approximately $9,400 of the Police Department’s enforcement costs and $19,700 of ASD’s permit processing costs in FY 2014. The General Fund has also subsidized the Crescent Park NOP Program, which is a trial program and not expected to be a cost‐recovery program. Financial data not tracked or analyzed for either program Although PCE staff initially tracked and analyzed the General Fund subsidies for the College Terrace RPP Program, they have not done so in recent years for either program to determine if they are reasonable or aligned with Council direction. PCE has reported that the College Terrace Program operates at a loss, but the net funds available in the College Terrace RPP Program Fund have increased over the last five years. The increase was due to the General Fund subsidies and the Crescent Park NOP Program revenues being recorded in the College Terrace RPP Program Fund during FY 2014, as described above. The net funds available is an important component, in addition to knowing full program costs, for determining the permit fee for the following year. Exhibit 6 shows the net revenues (expenditures) and net funds available as of fiscal year end for 2010 through 2014. Attachment A Audit of Parking Funds 16 EXHIBIT 6: College Terrace RPP Program Fund Net Revenue and Net Funds Available FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Net Revenue (Net Expenditures) $58,062 $9,527 $24,942 ($6,437) $4,980 Net Funds Available as of June 30* $51,694 $67,590 $92,530 $86,093 $91,064 * Net funds available does not equal the prior year’s balance plus the current year’s net revenue due to rounding and $6,368 set aside as reserve for encumbrances in FY 2010. Source: City’s financial records and municipal fee schedules The City also has not established an effective system to capture and monitor performance data, which requires staff to manually produce requested data. For example:  Number of citations – Police staff relied on a manual process to determine the number of citations issued and paid for the College Terrace RPP Program instead of extracting system data for more efficient and accurate analysis. In addition, the citation codes used to enforce Crescent Park NOP Program violations are not unique to the program. Therefore, Police can only estimate the number of citations by counting those that have applicable codes on citations issued between 2 a.m. and 5 a.m.  Number of permits sold – The City's parking permit system captures vehicle and permit information, while the payment processing system captures the purchase date and amount. Neither system tracks both the number of permits sold by permit type and the corresponding revenue. ASD staff maintained manual records of annual permits sold for each program and estimated the corresponding revenue. The number of day‐use permits sold for each program cannot be determined because they have not been separately tracked. When multiple departments have a role in overseeing activities such as these parking permit programs, a coordinated and holistic approach is needed to systematically monitor and analyze financial and performance data for effective decision making. For example, because citation revenues are recorded when paid rather than when the citation is issued, the actual revenues have to be monitored and analyzed in combination with the trend in the number of citations issued to predict future revenues. Exhibit 7 shows that the program budget and performance data is not aligned. Also, the projections have not always been developed before the upcoming fiscal year's budget and approval of municipal fees because the program year is different from the City's fiscal year. Attachment A Audit of Parking Funds 17 EXHIBIT 7: College Terrace RPP Program Fund Citation Revenues and Performance Data Revenues and Performance Data FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Citation Revenue Budget $28,800 $43,200 $43,200 $43,200 $15,000 Actual $29,714 $49,359 $29,228 $12,044* $35,546* Number of Citations Issued Actual 1,193 988 793 606 613 *$10,627 of the FY 2014 citation revenues was not recorded until FY 2015. Source: City’s financial records and Inglewood Citation Management System data Recommendations We recommend that: 2.1. PCE and ASD work together to establish supplemental policies and procedures to ensure that:  Roles and responsibilities for managing parking programs and parking permit funds are clearly defined and assigned, including responsibility for tracking all expenditures associated with each parking permit program activity.  Budgeting and fee‐setting procedures are coordinated among PCE, ASD, and Police and are based on analysis of budgeted and actual revenues and expenditures, including trend analysis. 2.2. PCE identify financial and performance data required for effective program evaluation, and work with ASD and Police to establish data tracking and monitoring procedures and assignment. This should also occur prior to implementing each new program. This includes:  Defining and communicating which cost center and general ledger account is used to budget and capture each revenue and expenditure item in the SAP system to allow effective monitoring of program performance.  Ensuring that financial transactions are recorded in the SAP system and necessary reporting capabilities are made available to allow efficient monitoring of program revenues and expenditures.  Aligning the program year with the City’s fiscal year to improve use of existing data and simplified program analysis.  Exploring opportunities to streamline and reduce manual processes, where possible. 2.3. PCE improve the reliability and usefulness of its annual report to the City Council on the parking programs by:  Including financial and performance data for effective program decision making.  Assigning staff with fiscal responsibility and knowledge to review the Resource Impact section of the report. Attachment A Audit of Parking Funds 18 APPENDIX 1 – Parking In‐Lieu Payments Since FY 2012 and Details of Auditor’s Recalculation Project Address Number of Spaces Project Approval Date(s) Building Permit Issue Date(s) Payment Date Deferred Payment Agreement Parking In‐Lieu Fee1 Total Amount Notes Charged Auditor’s Recalculation Paid Auditor’s Recalculation Potential Revenue Recovery (Refund) 564 University Avenue 8 7/1/08 4/22/09 n/a None $67,100 $59,158 $536,800 $473,264 ($63,536)The first building permit was issued prior to payment. The rate in effect as of the payment date (FY 2012 fee) was charged. 7/16/12 8/30/12 5/16/12 None 101 Lytton Avenue 22 7/12/12 11/26/12 7/14/14 Executed on 11/13/12 $67,100 $60,460 $1,476,200 $1,330,120 ($146,080)The agreement specified the amount, which was calculated using the FY 2012 rate of $67,100. The payment was made two months after the agreed‐ upon due date of May 2012. We recalculated the fee using the rate in effect as of the payment date (FY 2014 fee), which is a Municipal Code requirement and overrides the agreement terms. 135 Hamilton Avenue 16 2/7/13 2/26/14 12/31/13 None $60,750 $60,460 $972,000 $967,360 ($4,640)The rate in effect as of the project approval date (FY 2013 fee) was charged because the payment was made prior to building permit issuance. 240 Hamilton Avenue 8 7/23/13 11/21/14 10/10/14 None $67,750 $60,460 $542,000 $483,680 ($58,320)An incorrect rate was charged.The rate in effect as of the project approval date (FY 2013 fee) was $60,750. 180 Hamilton Avenue 5+3 7/23/12 4/5/13 2/7/14 Oct. 2012 Settlement Agreement2 $60,750 $60,750 $303,750 $486,000 $182,250 The conditions of approval required five parking spaces, but the settlement agreement required an additional three and the applicant only paid for five. The settlement agreement specified the FY 2013 rate of $60,750. Because this was a settlement agreement, it overrides the Municipal Code requirements. 1 The parking in‐lieu fee is adopted annually as part of the City’s municipal fee schedule but becomes effective 60 days from the adoption along with other impact fees. 2 This was a settlement agreement rather than a deferred‐payment agreement. Source: PCE records and auditor’s analysis Attachment A Audit of Parking Funds 19 APPENDIX 2 – City Manager’s Response Date: November 19, 2015 To: Harriet Richardson, City Auditor From: Ed Shikada, Assistant City Manager The staff appreciates the work of the City Auditor in assessing parking funds and programs and agrees with many of the findings and recommendations of the audit. The audit looks at two main areas: Parking In‐Lieu fees and fund, and residential parking programs. The issues identified in both areas are directly related to the complexity of the system. Staff agrees that the Municipal Code covering Parking In‐Lieu fees is outdated and not uniform with the Municipal Code for the other In‐Lieu and Development Impact Fees. Planning and Community Environment (PCE) has already undertaken a project to align calculation and payment of these fees. Working with other departments, PCE will examine the code to identify additional changes that bring clarity to the assessment, application, and collection of fees. Residential parking programs are established to address a pressing need in the community and by necessity, make use of the City’s existing organizational structure, involving multiple departments to handle everything from fee collection to record keeping and maintenance, data collection, and enforcement. Staff from these departments work together to manage these programs and respect the urgency with which the City Council would like to address the community need. Impact fee and assessment programs require significant ongoing administration and need to be resourced accordingly. PCE will be requesting a Parking Analyst position in the Fiscal Year 2017 Operating Budget. The request will need to go through the budget process, with due consideration to level of effort required and contractual options. My office has reviewed the audit and provided the responses in Appendix 2 and will report progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been addressed. Attachment A Audit of Parking Funds 20 APPENDIX 2 – City Manager’s Response ‐ continued The City Manager has reviewed and provided the following responses 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 addressed. Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status Finding 1: The City does not have policies and procedures to ensure that it accurately calculates and assesses parking in‐lieu fees and tracks expenditures related to construction of public parking spaces. 1.1. ASD defease and reduce the bond debt by the $1,790,295 that was inadvertently drawn down from the garage bond proceeds and the $240,402 of double‐counted garage expenditures. Administrative Services Concurrence: Partially agree Target Date: Depends upon action. If Council prefers to transfer, this can be done as part of the midyear budget adjustment, which will be completed in March or April. If Council chooses to defease the bonds, this should be completed by June. If the decision is to offset debt service, then property owners will see in 2016/2017 property tax bills. Action Plan: City staff will explore with its Financial Advisor whether it is more efficient and cost‐effective to follow the Audit’s recommendation to defease $1.79 million in assessment district bonds or to offset annual upcoming assessments to downtown property owners. This information will be presented to Council prior to receiving Council direction. 1.2. PCE work with the City Attorney’s Office to initiate refunds for the four overpaid development projects shown in Exhibit 4. Planning and Community Environment; City Attorney Concurrence: Partially agree Target Date: Begin immediately Action Plan: The City Attorney will examine 101 Lytton to determine if some of the alleged overpayments could be construed as community benefits under the PC ordinance, rather than in‐ lieu fees. In the case of 240 Hamilton, PCE caught the clerical error and refunded $56,000 in June, 2015 for the overpayment of $7,000 for each of the eight spaces. Attachment A Audit of Parking Funds 21 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status 1.3. PCE bill for the underpayment shown in Exhibit 4 for the project at 180 Hamilton Avenue. Concurrence:Agree Target Date: Completed March 2015 Action Plan: The $182,250 in parking in‐lieu fees that was inadvertently not billed under the agreement cited in this report has been collected by the City. Payment was received and revenue posted on March 12, 2015. 1.4. PCE, ASD, and Public Works coordinate with each other and the City Attorney’s Office to revise the Municipal Code to clarify:  How to calculate and adjust the parking in‐ lieu fee, including clarifying what costs should be included when calculating the fee.  When to collect the fee and the rate to be used.  Reporting requirements.  Other updates, if necessary, that could help ensure that the fee will reasonably reflect the approximate cost of constructing new garage spaces. Planning and Community Environment, Public Works, City Attorney, Administrative Services Concurrence: Agree Target Date: Impact fee collection process – In Process; Municipal Code review ‐ Begin Immediately; Updating Fee ‐ Defer Action Plan: PCE initiated an impact fee project almost a year ago to automate the calculation and collection of impact and in‐lieu fees using Accela, the City’s permit system. This will ensure consistent calculation and improve tracking and monitoring of these fees. The final step of this project is aligning the Municipal Code with Accela by revising the Municipal Code for all impact and in‐lieu fees to make them as uniform as possible for rate calculation and time of payment. The department has been working with the City Attorney’s office to develop suggested Municipal Code changes for consideration by the City Council. This is a major work effort which has taken a backseat to other initiatives. Departments will work together to review the Municipal Code and recommend additional changes to update the code, clarifying reporting requirements and removing areas of contradiction and confusion. Updating the parking in‐lieu fee will be deferred until final design is completed for new parking garage(s). Changes to the in‐lieu fee amount and calculation method may require a nexus study. Attachment A Audit of Parking Funds 22 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status 1.5. After updating the Municipal Code, PCE, ASD, and Public Works work together to develop written policies and procedures to:  Clarify roles and responsibilities for applying the Municipal Code requirements and monitoring compliance.  Ensure that the parking in‐lieu fee is calculated, collected, and reported accurately, consistently, and timely.  Ensure that appropriations, funding sources, actual revenues, and capital expenditures are accurately and completely tracked during the life of each CIP project.  Verify final project costs for accuracy, close out the project, and release unused project funds upon completion of the project.  Ensure that complete records related to the costs of planning and constructing a garage(s) are retained for the entire period for which they serve as the basis for calculating the parking in‐lieu fee. Communicate and train staff on the policies and procedures. Planning and Community Environment, Administrative Services, Public Works, City Clerk Concurrence: Partially agree Target Date: 2016 Action Plan: Staff concurs that enhanced coordination and communication should occur among PCE, PW, and ASD regarding the parking in‐lieu fee. However, rather than creating detailed procedures, staff recommends prioritizing the code amendments referenced above and developing a simple, high level protocol that briefly outlines the steps and responsibilities for calculating and charging the parking in‐lieu fee. ● The PCE impact fee and in‐lieu fee project mentioned above will ensure consistent and timely fee calculation. Accela will flag the need for fee payment before permit signoff. ● Ensuring that appropriations, funding sources, actual revenues, and capital expenditures are accurately and completely tracked during the life of each CIP project is the goal of every department. ● A process for verifying ﬁnal project costs and identification of the responsible department will be included in the high level protocol mentioned above. ● The goal of retaining complete records related to the costs of planning and constructing garages will require a clarification in the City’s Records Retention Policy. The Policy does not clearly identify the need to retain these records in perpetuity nor does it identify the responsible department. The responsible departments will raise this issue with the City Clerk’s office. Attachment A Audit of Parking Funds 23 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status Finding 2: Combining College Terrace RPP and Crescent Park NOP parking permit revenues and not fully tracking and analyzing financial and performance data reduced the ability to make informed decisions. 2.1. PCE and ASD work together to establish supplemental policies and procedures to ensure that:  Roles and responsibilities for managing parking programs and parking permit funds are clearly defined and assigned, including responsibility for tracking all expenditures associated with each parking permit program activity.  Budgeting and fee‐setting procedures are coordinated among PCE, ASD, and Police and are based on analysis of budgeted and actual revenues and expenditures, including trend analysis. Administrative Services, Planning and Community Environment, Public Works, Police Concurrence:Partially agree Target Date: Immediate Action Plan: ● Staff concurs that enhanced coordination and communication should occur among PCE and ASD regarding residential parking programs and funds. Staff has taken steps to start this process with the development of the Fiscal Year 2017 budget. ● Staff will coordinate to determine budgeƟng and fee‐setting procedures based upon analyses. Practically, these are often based on estimates due to limitations inherent in the program’s structure and the inconsistent timing of revenue receipts. 2.2. PCE identify financial and performance data required for effective program evaluation, and work with ASD and Police to establish data tracking and monitoring procedures and assignment. This should also occur prior to implementing each new program. This includes:  Defining and communicating which cost center and general ledger account is used to budget and capture each revenue and expenditure item in the SAP system to allow effective monitoring of program performance.  Ensuring that financial transactions are recorded in the SAP system and necessary reporting capabilities are made available to allow efficient monitoring of program revenues and expenditures. Planning and Community Environment, Administrative Services, Police Concurrence: Partially agree Target Date: Fiscal Year 2017 Action Plan: ● PCE currently works with OMB to establish separate cost centers for new programs prior to initiation. For example, before the launch of the Downtown RPP, cost center 60239020 was established to isolate program expenses and revenues. ● PCE will work with other departments building the budgets for parking programs so that transactions can be more accurately captured in the financial system. PCE will request a Parking Analyst position in the Fiscal Year 2017 budget in order to efficiently monitor programs and provide reporting information. ● Aligning the program year with the ﬁscal year Attachment A Audit of Parking Funds 24 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status  Aligning the program year with the City’s fiscal year to improve use of existing data and simplified program analysis.  Exploring opportunities to streamline and reduce manual processes, where possible. will have a significant impact on the capacity of Revenue Collections staff. The biggest renewal of parking permits for City garages is in the December/January and June/July timeframes. Moving the program year will result in parking permit renewals to be due in July, adding to the already significant workload of Revenue Collections and impacting customer service. Aligning the program year with the fiscal year should be considered once all permits are fully available online. ● Staff concur that streamlining and reducing manual processes would be beneficial. While it is not feasible to completely automate all programs immediately, staff’s eventual goal is to accurately and completely streamline processes through automation. 2.3. PCE improve the reliability and usefulness of its annual report to the City Council on the parking programs by:  Including financial and performance data for effective program decision making.  Assigning staff with fiscal responsibility and knowledge to review the Resource Impact section of the report. Planning and Community Environment Concurrence: Agree Target Date: Fiscal Year 2017 Action Plan: Staff concurs that financial and performance data should be included in the annual report. Staff also concurs that resource impact sections should be reviewed by knowledgeable staff. Attachment A POLICY AND SERVICES COMMITTEE TRANSCRIPT Page 1 of 7 Special Meeting December 15, 2015 Chairperson Burt called the meeting to order at 7:03 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Berman, Burt (Chair), DuBois, Wolbach Absent: Agenda Items 3. Audit of Parking Funds. Chair Burt: Our next item is the audit of Parking Funds. Council Member Berman: I know we're all doing this, but if we can just keep an eye on the clock. These are two meaty items that are coming up. Council Member DuBois: I think we could all assume we all read this item. I don't know if we need to ... Chair Burt: I'm sorry? Council Member DuBois: Can we assume we all read this item on the parking? Chair Burt: Harriet, go ahead and assume that the Committee has read the item. Harriet Richardson, City Auditor: (inaudible) you have it there in front of you. Do you want us to go through it? It's 9:00. I'm not sure what you're thinking as far as time. It would just summarize the information that's in the audit. Attachment B TRANSCRIPT Page 2 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 Chair Burt: Maybe with an emphasis on any Committee input that you're seeking. Ms. Richardson: Good evening, Harriet Richardson, City Auditor. With me is Yuki Matsuura, Senior Performance Auditor, who conducted this audit. I think primarily while we would want a motion at the end, primarily we'd want to go over some of the reasons the Parking In-Lieu Fee—that's the major finding in here—was miscalculated and really kind of summarizing that you've got multiple departments involved. Planning is the one who tells the developer, "You need to pay a parking in-lieu fee based on the number of spaces that you are required to provide and the number of spaces you can provide based on the site conditions." Public Works is responsible for constructing the garages. They have the records as far as the contract, what records are being kept during the time of construction. When the final payment is made, the fee is supposed to be recalculated. At that point it's supposed to go back to Planning to calculate the fee. In this particular instance, there were bonds. ASD tracked the bond draw downs as they were made. That ended up becoming the primary source of our information for what did the garages cost. I think the main issue here is really you've got multiple departments involved. It's a complex process. You don't necessarily have a good coordination process. There was turnover in Planning that affected the issue. Turnover in Public Works that affected the issue. Our recommendation really—there were four projects that were overcharged, one project that was undercharged. Planning has corrected two of those already. One of them, they want to look at to see—101 Lytton, they want to have the City Attorney look at it to see was that part of the parking or the public benefits that the developer was supposed to pay. I think our real focus for this particular finding would be resolving the issue about what to do with the overpaid bond—unused bond proceeds. Also how to in the future make sure, especially because there's some discussion in the works about new garages, to make sure that the fee is calculated correctly throughout the life of a project and beyond. For the College Terrace RPP and Crescent Park no overnight parking programs, the main issue on that one is really segregating the costs so that you know the cost of each program and really know are you setting the fee at a reasonable amount. In a nutshell, that summarizes what we have in all the slides. Chair Burt: Thank you. It was a very informative report. Anyone like to follow up with questions or comments? I guess one that I would have is I think there was a concern that we were perhaps undercharging. What we found is a higher pattern of overcharging than undercharging. This other big one that we basically double billed on this cost paid with transferred parking in lieu fees were also reimbursed by the bond? Attachment B TRANSCRIPT Page 3 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 Ms. Richardson: Correct. Chair Burt: That's pretty interesting. Do you feel like we have the corrective mechanisms to get this operating (crosstalk). Ms. Richardson: I think the City Manager's response to the recommendations will fix the problems. I don't think it's a simple overnight fix. There's definitely some work that needs to be done in correcting the Muni Code, and then some decisions be made about who's really responsible for what and getting a good mechanism in place for tracking costs as you're constructing a project. Chair Burt: Ed. Ed Shikada, Assistant City Manager: To that point, I would note that having experience with impact fees in a number of other contexts, this is the most complex system I've ever encountered. The requirement for both the pre- estimate, the payment and the reconciliation on the tail end is a very labor intensive system. As a result, part of the recommendation coming out of Planning is the necessity of some Staff to track this on an ongoing basis and do reconciliations as is necessary. Unfortunately, that's the system we've got in place, so we will have ensure that the resources are provided on an ongoing basis including some of the historical knowledge that will be necessary in order to track projects over the course of years. Again, that's the system as it's designed. Following through on the administrative requirements will involve those next steps. Ms. Richardson: One more thing I think is worth mentioning. One of the reasons we had difficulty in making sure that the costs we capture were accurate was that there was a system change from the old IFIS system to SAP at some point in time. As we look at in the future moving to a new ERP system, making sure that information transitions in a way or that the legacy system stays available where, if necessary, people can go back and get those costs. We were not able to go into the old system and get the costs. Chair Burt: Marc, did you have something? Council Member Berman: Yeah, just a quick question. I guess two quick questions now. Ed, I don't know if this possible given the complexity. Is there a time when we could shift from our current complex setup to a more streamlined, simple approach? I'm sure that's complicated with previous obligations. Attachment B TRANSCRIPT Page 4 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 Mr. Shikada: Right. I suspect it would be difficult to unwind the complexity that exists. To a certain extent perhaps thinking big picture, that the—in the longer term perhaps transitioning to one that does not necessarily require the reconciliation on the tail end would be simpler administratively, as long as we could identify some assurance for the payers that the funds they're depositing into the in lieu fee accounts will be used in a manner that's consistent with the original intent. Council Member Berman: I just want to make sure that we're providing guidance on any decision points that we're supposed to be providing guidance on. One that pops up is in the City Manager's response matrix on 1-1. It says ASD defease and reduce the bond debt by the $1.8 million that was inadvertently drawn down. Blah, blah, blah. Then target date depends upon action. If Council prefers to transfer, this can be done as part of the midyear budget adjustment, etc. If Council chooses to defease the bonds, this should be complete by June. Do you guys need an answer from us? If you do, then I need a little more explanation of what that means and what the ramifications of it are. Joe Saccio, Administrative Services Assistant Director: Joe Saccio, Assistant Director of ASD. As Council Member Burt said, we used bond proceeds when we should not have and have used in lieu fees. The appropriate thing to do in our opinion is to take those monies and defease bonds, because it provides relief to the property owners Downtown that would otherwise have to pay—it would pay for these bonds unless we defease them. Rather than offset debt service, it would seem that we really need to reduce the bonds and the burden in the future. Just a little history. On the two garages, we had excess bond funds. We did defease bond funds. The project came in way under cost. We defeased bonds. Staff took the initiative in 2012 to refinance those bonds, and we did. We save the Downtown people $2 million in net present value savings. In this instance, it's more appropriate, we think, to defease the bonds than to do anything else. Council Member Berman: Thank you, Joe. Does the City Auditor's Office have an opinion? Ms. Richardson: That was our initial recommendation to defease the bonds. We didn't look at the other options as much. We felt like just reducing the bonds now was the way to go. Council Member Berman: I'm glad everyone's on the same page on that. I think that's it. Attachment B TRANSCRIPT Page 5 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 Chair Burt: Tom. Council Member DuBois: Thank you for the audit. It seemed to be a really good audit. The recommendations were clear, and it was very understandable. I think most of my comments are really about the actions we're taking. I had a question about how we can simplify the system. That's been asked. What does it mean to defease a bond? Does it just affect future payments? Are we actually refunding money? Ms. Richardson: I'll let ASD answer that, because they deal with that part of it. Mr. Saccio: I'll sit over so I can answer your questions more quickly. What we need to do on this is put these monies into an escrow account so that they can grow over time. The recommendation of the financial adviser is we keep them in escrow, they grow, and then we defease a certain portion of the outstanding bonds in the future. You're basically relieving the property owners of paying the principal and the interest on that set of bonds. There are always requirements about when you can call bonds back and defease them. The financial adviser has provided us with guidance on when we should do that. Basically the bonds will be called back, and we will not have to pay—the bondholders get paid. I'm sorry. The property owners will not have to pay the principal and interest on that. Council Member DuBois: Thanks. Chair Burt: Explain to me how this affects our financial statements. Do these dollars that will be paid back, is it really just a balance sheet adjustment and not a one-time (crosstalk)? Mr. Saccio: Right now, the funds that we need to use to repay the bonds are sitting in our Capital Improvement Fund. We need to reduce that fund in order to take out the money to put in escrow to defease the future bonds. I don't have a real clear answer for how it's going to affect the financial statements. It's not as though the money isn't there; it's just going to be less than what we would have liked it to be. Chair Burt: It'll be that much less in the Capital Improvement Fund. Mr. Saccio: Yes, that is true. That's correct. Attachment B TRANSCRIPT Page 6 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 Council Member DuBois: Thank you. Some different questions. The net revenue on the University Avenue and Cal. Avenue parking garages, did you guys make any judgment on whether the expenses are reasonable compared to what's typical for a garage? Yuki Matsuura, Senior Performance Auditor: What we found was it was really a policy decision. Annually, you review as Council Members the Budget is presented and you review, so that's the process. We didn't find inappropriate expenditures. It seems like what was approved was being spent for that purpose. Council Member DuBois: It seemed to vary quite a bit year to year, but you're saying it's a policy decision, what gets spent. I see that the money that we wrote has already been paid. Ms. Richardson: Which money has already been paid? Council Member DuBois: The money that we undercharged. It says it's already been collected. Ms. Richardson: Yes, yes. Council Member DuBois: I guess the last question was really on the separation of the Crescent Park from College Terrace. The concurrence said partially agree. Are we definitely separating those accounts going forward? That's 2.2. Mr. Saccio: Planning and budget group will work together. We have established cost centers. Sherry can speak to this, because Planning Department is in charge of those cost centers. We're going to establish cost centers for Crescent Park, College Terrace and the RPP piece. We have funds for the University Avenue Parking Permit Fund and the Cal. Avenue Parking Permit Fund. At the very beginning with College Terrace, especially Crescent Park—Crescent Park is really small in terms of expenditures and revenues. I'll look to Sherry, but we're going to implement in this next budget process make sure these cost centers are separate and try with our best efforts to separate out the revenues and expenses for each. Sherry Nikzat, Senior Management Analyst: Sherry Nikzat, Planning and Community Environment. I'm the Senior Management Analyst in that department. We actually did set up—when we started RPP, we set up a separate cost center. At that point the Office and Management and Budget Attachment B TRANSCRIPT Page 7 of 7 Policy and Services Committee Special Meeting Transcript 12/15/15 separated cost centers for College Terrace, Crescent Park and RPP. That is the approach we will be taking for any other future parking programs. Council Member DuBois: Thank you. I think it's the last question. Yeah, last question. There was a discussion on 1.5 about the record retention policy which we just updated. I wondered if that actually got included. Ms. Richardson: I don't believe it did. This recommendation hadn't been finalized by the time that was submitted. I don't think that's included in there. We'd have to go back and double check. Council Member DuBois: It'll be caught the next time, I guess. It sounds like. Thank you. Chair Burt: If we don't have any other questions, we need a motion that would recommend that Policy and Services Committee recommend to the City Council acceptance of the Audit of the Parking Funds. Council Member Wolbach: So moved. Council Member Berman: Second. MOTION: Council Member Wolbach moved, seconded by Council Member Berman to recommend the City Council accept the Audit of Parking Funds. Chair Burt: Any discussion? All in favor. That passes unanimously. Thank you very much. MOTION PASSED: 4-0 Attachment B City of Palo Alto (ID # 6679) City Council Staff Report Report Type: Action Items Meeting Date: 3/14/2016 Summary Title: Transporation Demand Management Funding Title: Local Funding Strategies for Transportation Demand Management & Other Transportation Programs From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council discuss potential alternative funding strategies for Transportation Demand Management and other local transportation programs, and refer the matter to the Policy & Services Committee or an ad hoc committee for discussion and development of a recommended approach. Executive Summary The ity ouncil’s agenda for Garch 14, 2016 includes two study sessions: one regarding the Transportation Management Association (TMA) that has been formed to reduce single- occupant vehicle (SOV) trips to and from Downtown, and one regarding a program of Transportation Demand Management (TDM) measures that has been initiated to address SOV trips to and from the Stanford Research Park. The current item has been agendized to permit the Council to discuss transportation programs more generally and provide follow-up direction to staff and/or to refer questions to the Policy & Services Committee. Background & Discussion In February 2014, the City Council requested that staff work towards creation of a TMA for Downtown Palo Alto, aimed at the goal of reducing SOV trips by 30 percent. The TMA was formed as an independent non-profit organization earlier this year, with the City as an important “large employer” oard member, and will be providing the ity Council with an update on formation of the organization and pilot programs at a study session on March 14. Stanford University has been working in parallel with major employers on a related strategy for the Stanford Research Park. TG!’s are typically funded by employers who are members of the association, with assistance City of Palo Alto Page 1 in their formative years from local agency partners, and with funding from new development that occurs in their service areas. TMA Board Members typically represent companies that have a vested interest in improving the quality of transportation options for their employees and are willing to invest in these programs. The City of Palo Alto has an interest in seeing both the Downtown TMA and the Stanford program succeed, and would also like to see enhanced shuttle service, transit incentives, and other TDM programs throughout the City. The Council is scheduled to receive an update on planning for expanded shuttle service in April or May. The Valley Transportation Agency (VTA) and the County of Santa Clara are considering placement of a County-wide transportation sales tax on the November 2016 ballot, which will likely include some funding for transportation projects in Palo Alto. The City Council discussed the County sales tax measure at meetings in August 2015 and October 2015, and on February 8, 2016. Possible local funding mechanisms that could supplement the countywide sales tax and that could be used to help fund TDM and shuttle programs as well as major transportation investments like railroad grade separations include: public/private partnerships, impact fees on new development, parking fees, assessment districts (or similar mechanisms) some form of value capture, and/or a business tax or sales tax. Value capture is a financing method that recovers some or all of the value that public infrastructure (e.g. railroad grade separations) or public investments (e.g. transit) generates for private landowners. It can involve establishment of assessment districts, development fees and incentives, or other implementing mechanisms. The Draft Environmental Impact Report (EIR) for the Comprehensive Plan Update includes Mitigation Measure Trans1a (p. 4.13-51), which would effectively set a “cap” on new vehicle trips by requiring new development to meet stringent TDM performance measures and to offset any new trips that cannot be reduced. Offsets could be accomplished by contracting with another property owner or organization (like a TMA) or by paying an annual fee to the City for use in reducing vehicle trips through transit and shuttle programs, rideshare incentives, bicycle lanes, and other similar programs and improvements. Policy Implications Establishment of new local transportation funding mechanisms require careful thought and input from community stakeholders; Relevant policies and programs identified in the ity’s Comprehensive Plan include:  Policy T-2: Consider economic, environmental, and social cost issues in local transportation decisions.  Program T-4: Consider the use of additional parking fees and tax revenues to fund alternative transportation projects. City of Palo Alto Page 2  Program B-1: Initiate assessment districts or other programs to facilitate neighborhood shopping center improvements such as landscaping, parking, and access to public transportation. Resource Impact & Timeline ased on the ity ouncil’s specific direction, the ity Ganager may need to return with an estimate of consultant resources needed to complete an analysis, as well as a schedule for requested actions. If the City Council would like to refine the impact fee (“trip cap”) approach included in the Comprehensive Plan Update Draft EIR, comments should be provided at the Draft EIR hearing scheduled for April 25, 2016. If the Council would like to consider placement of a local tax of some sort on the November ballot, the ballot language would need to be adopted prior to ouncil’s summer break beginning July 2, 2016. Council may wish to explore polling or other survey methods in advance of its decision, to best inform what approach for a tax on business, for example, should take and timing for voter approval. Environmental Review This is a discussion item that may result in direction to staff and/or a referral to the Policy & Services ommittee; Eeither are “projects” requiring review pursuant to the California Environmental Quality Act. City of Palo Alto Page 3 City of Palo Alto (ID # 6734) City Council Staff Report City of Palo Alto Page 1 Report Type: Action Items Meeting Date: 3/14/2016 Summary Title: Fiscal Years 2017 to 2026 General Fund Long Range Financial Forecast Title: Fiscal Years 2017 to 2026 General Fund Long Range Financial Forecast From: City Manager Lead Department: Administrative Services Staff requests this item be continued to April 04, 2016 City Council Meeting. ITEM # 14 City of Palo Alto (ID # 6544) City Council Staff Report Report Type: Informational Report Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: Surplus Property Donated to Nonprofit Organizations Title: Report on Surplus Property Donated to Nonprofit Organizations From: City Manager Lead Department: Administrative Services Recommendation This is an informational report and no Council action is required. Discussion On October 6, 2008, Council adopted an ordinance amending Section 2.31.010 of Chapter 2.31 to Title 2 of the Palo Alto Municipal Code, to allow the donation of unusable or obsolete City property and equipment to nonprofit organizations supporting the city’s programs. The ordinance specified that the City’s donation of surplus property “shall be contingent on a written agreement that any profits from the sale of such items shall be used for the purchase of equipment, books or capital expenses related to the program supported by the nonprofit organization.” It also specified that the City Manager “shall identify all property donated to nonprofit agencies pursuant [to the ordinance, and] in January of each year, the City Manager shall provide a report to the city council that includes an inventory of the items donated by the City and all contributions made to the City from nonprofit organizations that have received surplus city property.” After a year of actively trying to sell seven double-sided library wheeled carts, they were donated by the City with no value to Habitat for Humanity in calendar year 2015. City of Palo Alto (ID # 6582) City Council Staff Report Report Type: Informational Report Meeting Date: 3/14/2016 City of Palo Alto Page 1 Summary Title: CalPers Pension 2015 Title: Transmittal of the CalPERS City of Palo Alto Pension Plan Annual Valuation Reports as of June 30, 2014 From: City Manager Lead Department: Administrative Services Recommendation This in an informational item and no Council action is necessary. Background The City of Palo Alto provides a defined pension benefit to its employees through the State of California Pension Retirement System (CalPERS), which manages and administers the program. The CalPERS program maintains two trust accounts: 1) for safety employees (fire and police); and 2) for miscellaneous employees (all other non-safety personnel such as field personnel, administrative support and managers). This report provides updated actuarial information for both pension plans as of June 30, 2014. Pursuant to CalPERS rules, City employees vest in the pension program after 5 years of service and, over time, the City has offered different pension payout formulas. Fire (safety) employees hired up to June 7, 2012 are Tier 1 with a retirement formula of 3 percent for each year worked and eligibility starts at 50 years of age (3%@50). Fire employees hired after this date are Tier 2 and receive 3%@55. Police (safety) employees hired up to December 6, 2012 are Tier 1 with a retirement formula of 3 percent for each year worked and eligibility starts at 50 years of age (3%@50). Police employees hired after this date receive Tier 2, 3%@55. The majority of current miscellaneous employees are in Tier 1 and the formula is 2.7 percent per year worked with eligibility starting at the age of 55 (2.7%@55). Effective July 16, 2010 the City changed the formula for new employees to Tier 2 and 2 percent per year with eligibility starting at the age of 60 (2%@60). The California Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated a third tier pension formula of 2%@62 for Miscellaneous and 2.7%@57 for Safety, effective January 1, 2013. This change provides the lower benefit for those hired and who are new to CalPERS on or after January 1, 2013. As a result of the new formulas, which lower the pension benefit for City of Palo Alto Page 2 newer employees, the City will experience small savings for employees in the 2017 pension rates just received. This is due to the increasing number of employees in Tiers 2 and 3. In addition to the lower pension formula for Tier 3, there is a pension compensation limit of $140,424 for calendar year 2015 for all employees in this tier. The breakdown of employees in each tier, as of November 2015, is shown in the table below: Tier 1 Tier 2 Tier 3 Miscellaneous 67% 15% 18% Safety 84% 6% 10% Discussion CalPERS prepares an annual actuarial analysis to determine the City’s pension liability and annual required contribution for the two trusts. The actuarial is based on current employees’ accrued benefit and former employees that are vested but have yet to retire and retired employees as of June 30, 2014. Staff received the actuarial reports dated October 2015 in late December 2015. The CalPERS actuarial analysis by practice is completed two years in arrears. The rates outlined below are based on an estimated 2.4 percent investment return in Fiscal Year 2015 and an assumed 7.5 percent investment return every fiscal year thereafter. City of Palo Alto Page 3 The chart below reflects the rates paid for Fiscal Year 2016 and the projected rates for Fiscal Year 2017. PERS Projected Rates Current Next Year Year to Payment Payment Year FY16 FY17 Change Miscellaneous1 27.694% 28.89% 1.196% Safety2 41.932% 45.426% 3.494% The chart below reflects the CalPERS projected rates for FY18 - FY22. PERS Projected Rates Projected Projected Year to Projected Year to Projected Year to Projected Year to Payment Payment Year Payment Year Payment Year Payment Year FY18 FY19 Change FY20 Change FY21 Change FY22 Change Miscellaneous1 31.0% 33.1% 2.1% 35.2% 2.1% 35.9% 0.7% 36.4% 0.5% Safety2 48.8% 52.1% 3.3% 55.5% 3.4% 56.4% 0.90% 57.3% 0.9% 1 The employee share of pension costs for Miscellaneous employees in Tier 1 are 8 percent, Tier 2 are 7 percent and Tier 3 are 6.25 percent. Safety employees in Tiers 1 and 2 are 9 percent and Tier 3 are 11.25 percent. 2 The employee share of pension costs for Safety employees is 9% or 11.25% also depending on the tier. City of Palo Alto Page 4 (MVA) - Based on a point in time (June 30, 2014 in this case) comparison between the Market Value of Assets and the Actuarial Liability. Discount Rate Sensitivity Another change is the inclusion of an Analysis of Discount Rate Sensitivity. This has also been an area of discussion among the member agencies and associated governing boards. This is the language from page 21 of the CalPERS actuarial report (Attachment A and B). “The following analysis looks at the FY17 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1% lower and 1% higher than the current valuation discount rate. This analysis gives an indication of the potential plan impacts if the Public Employees Retirement Fund were to realize investment returns of 6.50% or 8.50% over the long-term. This type of analysis gives the reader a sense of the long-term risk of the employer contribution rates”. The pension liability and current funding for safety and miscellaneous employees is shown here: FY16 FY17 Difference Safety 1 Present Value of Projected Benefits $392,560,445 $ 426,369,163 $33,808,718 9% 2 Entry Age Normal Accrued Liability $338,666,499 $ 367,478,634 $28,812,135 9% 3 Market Value of Assets (MVA) $233,417,363 $ 264,145,000 $30,727,637 13% 4 Unfunded Liability [(2)-(3)] $105,249,136 $ 103,333,634 $(1,915,502) -2% 5 Funded Ratio [(3)/(2)] 68.9% 71.9% 3% Miscellaneous 1 Present Value of Projected Benefits $690,227,166 $ 756,332,825 $66,105,659 10% 2 Entry Age Normal Accrued Liability $602,540,178 $ 666,978,627 $64,438,449 11% 3 Market Value of Assets (MVA) $412,227,784 $ 475,566,994 $63,339,210 15% 4 Unfunded Liability [(2)-(3)] $190,312,394 $ 191,411,633 $ 1,099,239 1% 5 Funded Ratio [(3)/(2)] 68.4% 71.3% 2.9% Total Employer Contribution Miscellaneous $ 19,501,052 $ 21,404,510 $ 1,903,458 10% Safety $ 9,740,521 $ 10,560,036 $ 819,515 8% Total $ 29,241,573 $ 31,964,546 $ 2,722,973 9% City of Palo Alto Page 5 Sensitivity Analysis for Safety As of June 30, 2014 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 35.350% 28.120% 22.585% Accrued Liability $414,719,728 $367,478,634 $328,467,693 Unfunded Accrued Liability $150,574,728 $103,333,634 $64,322,693 Sensitivity Analysis for Miscellaneous As of June 30, 2014 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 22.482% 18.014% 14.615% Accrued Liability $752,918, 029 $666,978,627 $595,625,159 Unfunded Accrued Liability $277,351,035 $191,411,633 $120,058,165 Financial Impacts Staff will include the required and projected pension contribution rates in the development of the FY17 Proposed budget and the Long Range Financial Forecast. The two actuarial reports are attached for further details. Attachments:  Attachment A: Safety Plan of the City of Palo Alto Annual Valuation Report as of June 30, 2014 (PDF)  Attachment B: Miscellaneous Plan of the City of Palo Alto Annual Valuation Report as of June 30, 2014 (PDF) California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov October 2015 SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2014 actuarial valuation report of your pension plan. Your 2014 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the Actuarial Certification Section on page 1, is available to discuss the report with you after November 30, 2015. Future Contribution Rates The exhibit below displays the Minimum Employer Contribution Rate for Fiscal Year 2016-17 and a projected contribution rate for 2017-18, before any cost sharing. The projected rate for 2017- 18 is based on the most recent information available, including an estimate of the investment return for Fiscal Year 2014-15, namely 2.4 percent. For a projection of employer rates beyond 2017-18, please refer to the “Projected Rates” in the “Risk Analysis” section, which includes rate projections through 2021-22. The 5-year projection of future employer contribution rates supersedes any previous projections we have provided. The Risk Analysis section of your valuation report also contains estimated employer contribution rates in future years under a variety of investment return scenarios. Fiscal Year Employer Contribution Rate 2016-17 45.426% 2017-18 48.8% (projected) Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above rates. The employer contribution rates in this report do not reflect any cost sharing arrangement you may have with your employees. The estimate for 2017-18 also assumes that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on your contribution rate. Even for the largest plans, such gains and losses often cause a change in the employer’s contribution rate of one or two percent of payroll and may be even larger in some less common instances. These gains and losses cannot be predicted in advance so the projected employer contribution rates are just estimates. Your actual rate for 2017-18 will be provided in next year’s report. SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Page 2 Changes since the Prior Year’s Valuation This actuarial valuation includes Board adopted changes to the demographic assumptions based on the most recent experience study report. The most significant of these is the improvement in post-retirement mortality acknowledging the greater life expectancies we are seeing in our membership and expected continued improvements. The actuarial assumptions and methods used in CalPERS public agency valuations are approved by the Board of Administration upon the recommendation of the Chief Actuary. The individual plan actuary whose signature appears in the actuarial certification in the accompanying report does not set plan specific actuarial assumptions. Besides the above noted changes, there may also be changes specific to your plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on your rate is included in the “Reconciliation of Required Employer Contributions” Section. Effective with the 2014 actuarial valuation, Governmental Accounting Standards Board Statement No. 27 financial reporting information is no longer provided in CalPERS annual actuarial valuation reports. GASB 27 has been replaced with GASB 68 for financial statement reporting purposes. CalPERS is providing separate accounting valuation reports on a fee for service basis for our public agency employers. More details on GASB 68 and instructions for ordering your GASB 68 report are available on our website. Potential Changes to Future Year Valuations One of CalPERS strategic goals is to improve the long-term pension benefit sustainability of the system through an integrated view of pension assets and liabilities. The Board of Administration has been engaging in discussions on the funding risks faced by the system and possible risk mitigation strategies to better protect our members. Recent Board actions on a new asset allocation, new actuarial assumptions and new smoothing and amortization policies have already lowered risk. However, future contribution rate volatility is expected as CalPERS pension plans continue to mature. Two approaches under consideration are a flexible glide path methodology, a lowering of the discount rate and expected investment volatility following a great investment return and a blended glide path methodology which is similar to the flexible glide path but with check points over time that would trigger additional asset allocation changes and lowering of the discount rate if investment returns did not result in a sufficient reduction in volatility. Either approach requires thoughtful discussion as it involves tradeoffs between short and long-term system impacts and potential future increases in required contributions. Additional information can be found on the CalPERS website with possible Board action on risk mitigation strategy and policy at the November 2015 Board meeting. SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Page 3 We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after November 30 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary THIS PAGE INTENTIONALLY LEFT BLANK ACTUARIAL VALUATION as of June 30, 2014 for the SAFETY PLAN of the CITY OF PALO ALTO (CalPERS ID: 6373437857) (Rate Plan ID: 5080) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2016 – June 30, 2017 TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 3 Purpose of the Report 3 Required Employer Contribution 4 Plan’s Funded Status 4 Cost 5 Changes Since the Prior Year’s Valuation 6 Subsequent Events 6 ASSETS Reconciliation of the Market Value of Assets 8 Asset Allocation 9 CalPERS History of Investment Returns 10 LIABILITIES AND RATES Development of Accrued and Unfunded Liabilities 12 (Gain) / Loss Analysis 06/30/13 - 06/30/14 13 Schedule of Amortization Bases 14 Alternate Amortization Schedules 15 Reconciliation of Required Employer Contributions 16 Employer Contribution Rate History 17 Funding History 17 RISK ANALYSIS Volatility Ratios 19 Projected Rates 20 Analysis of Future Investment Return Scenarios 20 Analysis of Discount Rate Sensitivity 21 Hypothetical Termination Liability 22 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 24 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A21 Miscellaneous A21 – A22 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2 (CY) FIN PROCESS CONTROL ID: 466096 (PY) FIN PROCESS CONTROL ID: 432668 REPORT ID: 89794 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2014 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS HIGHLIGHTS AND EXECUTIVE SUMMARY  INTRODUCTION  PURPOSE OF THE REPORT  REQUIRED EMPLOYER CONTRIBUTION  PLAN’S FUNDED STATUS  COST  CHANGES SINCE THE PRIOR YEAR’S VALUATION  SUBSEQUENT EVENTS CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 3 Introduction This report presents the results of the June 30, 2014 actuarial valuation of the SAFETY PLAN OF THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the Fiscal Year 2016-17 required employer contribution rates. This actuarial valuation includes Board adopted changes to the demographic assumptions based on the most recent experience study report. The most significant of these is the improvement in post-retirement mortality acknowledging the greater life expectancies we are seeing in our membership and expected continued improvements. The actuarial assumptions and methods used in CalPERS public agency valuations are approved by the Board of Administration upon the recommendation of the Chief Actuary. The individual plan actuary whose signature appears in the actuarial certification in this report does not set plan specific actuarial assumptions. Effective with the 2014 actuarial valuation, Governmental Accounting Standards Board Statement No. 27 financial reporting information is no longer provided in CalPERS annual actuarial valuation reports. GASB 27 has been replaced with GASB 68 for financial statement reporting purposes. CalPERS is providing separate accounting valuation reports on a fee for service basis for our public agency employers. More details on GASB 68 and instructions for ordering your GASB 68 report are available on our website. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2014. The purpose of the report is to:  Set forth the assets and accrued liabilities of this plan as of June 30, 2014;  Determine the required employer contribution rate for the Fiscal Year July 1, 2016 through June 30, 2017;  Provide actuarial information as of June 30, 2014 to the CalPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on our website. The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 14. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:  A “Deterministic Stress Test,” projecting future results under different investment income scenarios  A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 4 Required Employer Contribution Fiscal Year Fiscal Year 2015-16 2016-17 Actuarially Determined Employer Contributions 1. Contribution in Projected Dollars a) Total Normal Cost $ 6,424,290 $ 6,536,972 b) Employee Contribution1 2,097,372 2,125,446 c) Employer Normal Cost [(1a) – (1b)] 4,326,918 4,411,526 d) Unfunded Liability Contribution 5,413,603 6,148,510 e) Required Employer Contribution [(1c) + (1d)] $ 9,740,521 $ 10,560,036 Projected Annual Payroll for Contribution Year $ 23,229,280 $ 23,246,697 2. Contribution as a Percentage of Payroll a) Total Normal Cost 27.656% 28.120% b) Employee Contribution1 9.029% 9.143% c) Employer Normal Cost [(2a) – (2b)] 18.627% 18.977% d) Unfunded Liability Rate 23.305% 26.449% e) Required Employer Rate [(2c) + (2d)] 41.932% 45.426% Minimum Employer Contribution Rate2 41.932% 45.426% Annual Lump Sum Prepayment Option3 $ 9,394,593 $ 10,185,003 1 For classic members this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2 The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the employer normal cost. The timing of contributions made during the year coincides with the employer’s payroll reporting periods. § 20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a contracting agency fails to remit the required contributions when due. 3 The Annual Lump Sum Prepayment can be made between July 1 and July 15 and should be made before the contributions for the first payroll reporting period of the new fiscal year are due. If there is contractual cost sharing or other change, this amount will change. Plan’s Funded Status June 30, 2013 June 30, 2014 1. Present Value of Projected Benefits $ 392,560,445 $ 426,369,163 2. Entry Age Normal Accrued Liability 338,666,499 367,478,634 3. Market Value of Assets (MVA) $ 233,417,363 $ 264,145,000 4. Unfunded Liability [(2) – (3)] $ 105,249,136 $ 103,333,634 5. Funded Ratio [(3) / (2)] 68.9% 71.9% CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 5 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories.  Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year.  Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of your plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2014, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.  The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll.  The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount. To communicate the total cost, either the Normal Cost must be converted to a lump sum dollar amount or the Past Service Cost must be converted to a percent of payroll. Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period, and the employer rate will vary depending on the amortization period chosen. CalPERS Board amortization and smoothing policies specify the amortization period used for each amortization base. These policies permit a restructuring of the amortization bases (also known as a “fresh start”) when the application of the amortization policy would not otherwise achieve the goals of the policy – to eliminate the unfunded liabilities in a manner that maintains benefit security while minimizing substantial variations in employer contribution rates. Currently unfunded liabilities are paid as a percent of payroll. However, in the future, unfunded liabilities may be billed as dollar amounts as is the case for plans that are in risk pools. CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 6 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is shown for any plan changes which were already included in the prior year’s valuation. Actuarial Methods and Assumptions The CalPERS Board of Administration approved several changes to the demographic assumptions that more closely align with actual experience based on the most recent experience study. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions are used to set the Fiscal Year 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions calculated in this actuarial valuation is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board amortization policy. Subsequent Events Actuarial Methods and Assumptions One of CalPERS strategic goals is to improve the long-term pension benefit sustainability of the system through an integrated view of pension assets and liabilities. The Board of Administration has been engaging in discussions on the funding risks faced by the system and possible risk mitigation strategies to better protect our members. Recent Board actions on a new asset allocation, new actuarial assumptions and new smoothing and amortization policies have already lowered risk. However, future contribution rate volatility is expected as CalPERS pension plans continue to mature. Two approaches under consideration are a flexible glide path methodology, a lowering of the discount rate and expected investment volatility following a great investment return and a blended glide path methodology which is similar to the flexible glide path but with check points over time that would trigger additional asset allocation changes and lowering of the discount rate if investment returns did not result in a sufficient reduction in volatility. Either approach requires thoughtful discussion as it involves tradeoffs between short and long-term system impacts and potential future increases in required contributions. Additional information can be found on the CalPERS website with possible Board action on risk mitigation strategy and policy at the November 2015 Board meeting. ASSETS  RECONCILIATION OF THE MARKET VALUE OF ASSETS  ASSET ALLOCATION  CALPERS HISTORY OF INVESTMENT RETURNS CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 8 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/13 Including Receivables $ 233,417,363 2. Change in Receivables for Service Buybacks as of 6/30/13 250,715 3. Employer Contributions 7,615,779 4. Employee Contributions 1,940,660 5. Benefit Payments to Retirees and Beneficiaries (19,895,092) 6. Refunds (90,014) 7. Lump Sum Payments 0 8. Transfers and Miscellaneous Adjustments 821,555 9. Investment Return 40,084,034 10. Market Value of Assets as of 6/30/14 Including Receivables $ 264,145,000 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 9 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014 the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as percentage of total assets. The asset allocation has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees Retirement Fund (PERF) in its entirety as of June 30, 2014. The assets for CITY OF PALO ALTO SAFETY PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation Global Equity 158.2 50.0% Private Equity 31.5 14.0% Global Fixed Income 58.8 17.0% Liquidity 9.0 4.0% Real Assets 29.6 11.0% Inflation Sensitive Assets 9.9 4.0% Absolute Return Strategy (ARS) 4.5 0.0% Total Fund $301.5 100.0% Global Equity 52.5% Private Equity 10.4% Global Fixed Income 19.5% Liquidity 3.0% Real Assets 9.8% Inflation 3.3% ARS 1.5% Asset Allocation at 6/30/2014 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 10 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2014, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76 percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed in percent. Consequently when looking at investment returns it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 17.7% 13.0% 7.1% 8.4% 10.1% Volatility – 8.1% 14.0% 11.9% 11.4% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 16 . 3 % 15 . 3 % 20 . 1 % 19 . 5 % 12 . 5 % 10 . 5 % -7. 2 % -6. 1 % 3. 7 % 16 . 6 % 12 . 3 % 11 . 8 % 19 . 1 % -5. 1 % -24 . 0 % 13 . 3 % 21 . 7 % 0. 1 % 13 . 2 % 17 . 7 % LIABILITIES AND RATES  DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES  (GAIN) / LOSS ANALYSIS 06/30/13 - 06/30/14  SCHEDULE OF AMORTIZATION BASES  ALTERNATE AMORTIZATION SCHEDULES  RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS  EMPLOYER CONTRIBUTION RATE HISTORY  FUNDING HISTORY CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 12 Development of Accrued and Unfunded Liabilities Prior Year Assumptions New Assumptions June 30, 2013 June 30, 2014 June 30, 2014 1. Present Value of Projected Benefits a) Active Members $ 136,627,084 133,349,075 143,593,466 b) Transferred Members 7,130,683 8,427,844 8,951,761 c) Terminated Members 1,166,821 1,792,497 1,471,564 d) Members and Beneficiaries Receiving Payments 247,635,857 260,904,383 272,352,372 e) Total $ 392,560,445 404,473,799 426,369,163 2. Present Value of Future Employer Normal Costs $ 36,022,369 35,205,123 39,135,076 3. Present Value of Future Employee Contributions $ 17,871,577 18,552,665 19,755,453 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 82,733,138 79,591,287 84,702,937 b) Transferred Members (1b) 7,130,683 8,427,844 8,951,761 c) Terminated Members (1c) 1,166,821 1,792,497 1,471,564 d) Members and Beneficiaries Receiving Payments (1d) 247,635,857 260,904,383 272,352,372 e) Total $ 338,666,499 350,716,011 367,478,634 5. Market Value of Assets (MVA) $ 233,417,363 264,145,000 264,145,000 6. Unfunded Liability [(4e) - (5)] $ 105,249,136 86,571,011 103,333,634 7. Funded Ratio [(5) / (4e)] 68.9% 75.3% 71.9% CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 13 (Gain) /Loss Analysis 6/30/13 – 6/30/14 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. A Total (Gain)/Loss for the Year 1. Unfunded Accrued Liability (UAL) as of 6/30/13 $ 105,249,136 2. Expected Payment on the UAL during 2013/2014 3,516,469 3. Interest through 6/30/14 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 7,764,202 4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 109,496,869 5. Change due to plan changes 0 6. Change due to assumption change 16,762,623 7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 126,259,492 8. Actual UAL as of 6/30/14 103,333,634 9. Total (Gain)/Loss for 2013/2014 [(A8) - (A7)] $ (22,925,858) B Contribution (Gain)/Loss for the Year 1. Expected Contribution (Employer and Employee) $ 9,578,328 2. Interest on Expected Contributions 352,694 3. Actual Contributions 9,556,439 4. Interest on Actual Contributions 351,888 5. Expected Contributions with Interest [(B1) + (B2)] 9,931,022 6. Actual Contributions with Interest [(B3) + (B4)] 9,908,327 7. Contribution (Gain)/Loss [(B5) - (B6)] $ 22,695 C Asset (Gain)/Loss for the Year 1. Market Value of Assets as of 6/30/13 $ 233,417,363 2. Receivables PY (698,472) 3. Receivables CY 949,187 4. Contributions Received 9,556,439 5. Benefits and Refunds Paid (19,985,106) 6. Transfers and miscellaneous adjustments 821,555 7. Expected Int. [.075 x (C1 + C2) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 17,100,163 8. Expected Assets as of 6/30/14 [(C1) + (C2) + (C3) + (C4) + (C5) + (C6) + (C7)] 241,161,129 9. Market Value of Assets as of 6/30/14 264,145,000 10. Asset (Gain)/Loss [(C8) - (C9)] $ (22,983,871) D Liability (Gain)/Loss for the Year 1. Total (Gain)/Loss (A9) $ (22,925,858) 2. Contribution (Gain)/Loss (B7) 22,695 3. Asset (Gain)/Loss (C10) (22,983,871) 4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 35,318 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 14 Schedule of Amortization Bases There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.  The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2014.  The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; Fiscal Year 2016-17. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year. The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Amounts for Fiscal 2016-17 Reason for Base Date Established Amorti-zation Period Balance 6/30/14 Expected Payment 2014-15 Balance 6/30/15 Expected Payment 2015-16 Balance 6/30/16 Scheduled Payment for 2016-17 Payment as Percentage of Payroll FRESH START 06/30/04 20 $(928,336) $(66,087) $(929,441) $(68,070) $(928,572) $(70,112) (0.302%) BENEFIT CHANGE 06/30/05 10 $154,072 $16,660 $148,354 $17,159 $141,689 $17,674 0.076% ASSUMPTION CHANGE 06/30/09 15 $7,566,829 $635,699 $7,475,235 $654,769 $7,356,998 $674,413 2.901% SPECIAL (GAIN)/LOSS 06/30/09 25 $8,751,688 $554,666 $8,832,974 $571,306 $8,903,104 $588,446 2.531% SPECIAL (GAIN)/LOSS 06/30/10 26 $4,155,544 $258,393 $4,199,302 $266,144 $4,238,306 $274,129 1.179% ASSUMPTION CHANGE 06/30/11 17 $6,266,808 $488,980 $6,229,833 $503,649 $6,174,876 $518,759 2.232% SPECIAL (GAIN)/LOSS 06/30/11 27 $2,348,742 $143,447 $2,376,169 $147,751 $2,401,190 $152,183 0.655% PAYMENT (GAIN)/LOSS 06/30/12 28 $1,512,144 $90,805 $1,531,406 $93,529 $1,549,288 $96,335 0.414% (GAIN)/LOSS 06/30/12 28 $43,279,914 $2,598,982 $43,831,226 $2,676,951 $44,343,046 $2,757,260 11.861% (GAIN)/LOSS 06/30/13 29 $36,389,463 $(14,346) $39,133,547 $550,415 $41,497,881 $1,133,854 4.877% ASSUMPTION CHANGE 06/30/14 20 $16,762,623 $(162,370) $18,188,169 $(167,241) $19,725,681 $375,729 1.616% (GAIN)/LOSS 06/30/14 30 $(22,925,857) $(72,979) $(24,569,630) $(91,238) $(26,317,755) $(370,160) (1.592%) TOTAL $103,333,634 $4,471,850 $106,447,144 $5,155,124 $109,085,732 $6,148,510 26.449% CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Page 15 Alternate Amortization Schedules The amortization schedule shown on the previous page shows the minimum contribution required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. Therefore, we have provided alternate amortization schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments towards your plan’s unfunded liability of $109,085,732 as of June 30, 2016, which under the minimum schedule, will require total payments of $259,430,114. Shown below are the level rate payments required to amortize your plan’s unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario would increase by 3 percent for each year into the future. If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further. Level Rate of Payroll Amortization Period 2016-17 Rate 2016-17 Payment Total Payments Total Interest Difference from Current Schedule 20 35.431% $8,236,565 $221,319,582 $112,233,851 $38,110,532 15 43.016% $9,999,838 $185,986,130 $76,900,399 $73,443,984 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 16 Reconciliation of Required Employer Contributions Percentage of Projected Payroll Estimated $ Based on Projected Payroll 1. Contribution for 7/1/15 – 6/30/16 41.932% $ 9,740,521 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics and financial results 1.137% 264,287 b) Effect of plan changes 0.000% 0 c) Effect of changes in Assumptions 2.357% 547,925 d) Effect of change in payroll - 7,303 e) Effect of elimination of amortization base 0.000% 0 f) Effect of changes due to Fresh Start 0.000% 0 g) Net effect of the changes above [Sum of (a) through (f)] 3.494% 819,515 3. Contribution for 7/1/16 – 6/30/17 [(1)+(2g)] 45.426% 10,560,036 The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 17 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate 2011 - 2012 17.813% 12.312% 30.125% 2012 - 2013 18.015% 13.035% 31.050% 2013 - 2014 18.658% 14.786% 33.444% 2014 - 2015 18.874% 20.654% 39.528% 2015 - 2016 18.627% 23.305% 41.932% 2016 - 2017 18.977% 26.449% 45.426% Funding History The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Unfunded Liability Funded Ratio Annual Covered Payroll 06/30/09 $ 280,292,862 $ 172,078,263 $ 108,214,599 61.4% $ 22,086,992 06/30/10 293,895,452 190,527,731 103,367,721 64.8% 23,030,400 06/30/11 313,183,690 225,015,089 88,168,601 71.8% 22,774,462 06/30/12 327,608,300 215,605,457 112,002,843 65.8% 20,919,846 06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082 06/30/14 367,478,634 264,145,000 103,333,634 71.9% 21,274,021 RISK ANALYSIS  VOLATILITY RATIOS  PROJECTED RATES  ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS  ANALYSIS OF DISCOUNT RATE SENSITIVITY  HYPOTHETICAL TERMINATION LIABILITY CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 19 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about very long- term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore, the rates will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures. Rate Volatility As of June 30, 2014 1. Market Value of Assets without Receivables $ 263,195,813 2. Payroll 21,274,021 3. Asset Volatility Ratio (AVR = 1. / 2.) 12.4 4. Accrued Liability $ 367,478,634 5. Liability Volatility Ratio (LVR = 4. / 2.) 17.3 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Projected Rates The estimated rate for 2017-18 is based on a projection of the most recent information we have available, including an estimated 2.4 percent investment return for Fiscal Year 2014-15. The table below shows projected employer contribution rates (before cost sharing) for the next five fiscal years, assuming CalPERS earns 2.4 percent for Fiscal Year 2014-15 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected contribution rates do not reflect that the plan’s normal cost will decline over time as new employees are hired into PEPRA and other lower cost benefit tiers. Required Rate Projected Future Employer Contribution Rates 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Contribution Rates: 45.426% 48.8% 52.1% 55.5% 56.4% 57.3% Analysis of Future Investment Return Scenarios In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in better risk characteristics than an equivalent margin for adverse deviation. The previous asset allocation had an expected standard deviation of 12.45 percent while the current asset allocation has a lower expected standard deviation of 11.76 percent. The investment return for Fiscal Year 2014-15 was announced July 13, 2015. The investment return in Fiscal Year 2014-15 is 2.4 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming a 2.4 percent investment return for Fiscal Year 2014-15. The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years later. Specifically, the investment return for 2014-15 will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates. The 2015-16 investment return will first be reflected in the June 30, 2016 actuarial valuation that will be used to set the 2018-19 employer contribution rates and so forth. Based on a 2.4 percent investment return for Fiscal Year 2014-15, the April 17, 2013 CalPERS Board-approved amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including 20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the Fiscal Year 2017-18, the effect on the 2017-18 Employer Rate is as follows: Estimated 2017-18 Employer Rate Estimated Increase in Employer Rate between 2016-17 and 2017-18 48.8% 3.4% CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 21 As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2015-16, 2016-17 and 2017-18 on the 2018-19, 2019-20 and 2020-21 employer rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected.  The first scenario is what one would expect if the markets were to give us a 5th percentile return from July 1, 2015 through June 30, 2018. The 5th percentile return corresponds to a -3.8 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  The second scenario is what one would expect if the markets were to give us a 25th percentile return from July 1, 2015 through June 30, 2018. The 25th percentile return corresponds to a 2.8 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  The third scenario assumed the return for 2015-16, 2016-17, 2017-18 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.  The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from July 1, 2015 through June 30, 2018. The 75th percentile return corresponds to a 12.0 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return from July 1, 2015 through June 30, 2018. The 95th percentile return corresponds to a 18.9 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years. The table below shows the estimated projected contribution rates and the estimated increases for your plan under the five different scenarios. 2015-18 Investment Return Scenario Estimated Employer Rate Estimated Change in Employer Rate between 2017-18 and 2020-21 2018-19 2019-20 2020-21 (3.8%) (5th percentile) 54.0% 61.0% 67.1% 18.3% 2.8% (25th percentile) 52.9% 57.8% 61.0% 12.3% 7.5% 52.1% 55.5% 56.4% 7.6% 12.0%(75th percentile) 51.4% 53.2% 51.7% 2.9% 18.9%(95th percentile) 50.2% 49.5% 44.0% (4.8%) Analysis of Discount Rate Sensitivity The following analysis looks at the 2016-17 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to the contribution rates. Sensitivity Analysis As of June 30, 2014 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 35.350% 28.120% 22.585% Accrued Liability $414,719,728 $367,478,634 $328,467,693 Unfunded Accrued Liability $150,574,728 $103,333,634 $64,322,693 CALPERS ACTUARIAL VALUATION - June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 22 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of June 30, 2014. Your plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are included. For the Terminated Agency Pool the CalPERS Board adopted a more conservative investment policy and asset allocation strategy. Since the Terminated Agency Pool has limited funding sources due to the fact that no future employer contributions will be made, expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security for members while limiting its funding risk. However, this asset allocation has a lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during the period from July 1, 2013 through June 30, 2015. Valuation Date Market Value of Assets (MVA) Hypothetical Termination Liability1,2 @ 2.00% Unfunded Termination Liability @ 2.00% Hypothetical Termination Liability1,2 @ 3.75% Unfunded Termination Liability @ 3.75% 06/30/14 $ 264,145,000 $ 754,928,119 $ 490,783,119 $ 582,112,545 $ 317,967,545 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 3.00% on June 30, 2014. In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to consult with your plan actuary before beginning this process. PLAN’S MAJOR BENEFIT PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Police Active Fire Active Fire Active Police Active Fire Active Police Active Fire Benefit Provision Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 2.7% @ 57 3.0% @ 55 3.0% @ 55 2.7% @ 57 Social Security Coverage No No No No No No No Full/Modified Full Full Full Full Full Full Full Employee Contribution Rate 9.00% 9.00% 9.00% 11.25% 9.00% 9.00% 11.25% Final Average Compensation Period One Year One Year One Year Three Year Three Year Three Year Three Year Sick Leave Credit No No No No No No No Non-Industrial Disability Standard Standard Standard Standard Standard Standard Standard Industrial Disability Yes Yes Yes Yes Yes Yes Yes Pre-Retirement Death Benefits Optional Settlement 2W No Yes Yes No Yes No Yes 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Special Yes Yes Yes Yes Yes Yes Yes Alternate (firefighters) No No No No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No No No COLA 2% 2% 2% 2% 2% 2% 2% Page 24 CALPERS ACTUARIAL VALUATION – June 30, 2014 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Fire Receiving Fire Receiving Police Benefit Provision Benefit Formula 3.0% @ 50 Social Security Coverage No Full/Modified Full Employee Contribution Rate 9.00% Final Average Compensation Period One Year Sick Leave Credit No Non-Industrial Disability Standard Industrial Disability Yes Pre-Retirement Death Benefits Optional Settlement 2W Yes 1959 Survivor Benefit Level Level 1 Special Yes Alternate (firefighters) No Post-Retirement Death Benefits Lump Sum $500 $500 $500 Survivor Allowance (PRSA) No No No COLA 2% 2% 2% Page 25 APPENDICES  APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS  APPENDIX B – PRINCIPAL PLAN PROVISIONS  APPENDIX C – PARTICIPANT DATA  APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES  APPENDIX E – GLOSSARY OF ACTUARIAL TERMS APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS  ACTUARIAL DATA  ACTUARIAL METHODS  ACTUARIAL ASSUMPTIONS  MISCELLANEOUS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the employer contribution rates. Actuarial Methods Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes), changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding progress by preventing the expected funded status on a market value of assets basis to either:  Increase by at least 15 percent by June 30, 2043; or  Reach a level of 75 percent funded by June 30, 2043 The necessary additional contribution will be obtained by changing the amortization period of the gains and losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period, which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above when performing each future valuation to determine whether or not additional contributions are necessary. An exception to the funding rules above is used whenever the application of such rules results in inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current unfunded actuarial liability is projected and amortized over a set number of years. However, in the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate. It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases, the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be greater than 30 years. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the members of the System while minimizing substantial variations in employer contribution rates. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS employs an amortization and smoothing policy that pays for all gains and losses over a fixed 30- year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS no longer uses an actuarial value of assets and only uses the market value of assets. This direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. PEPRA Normal Cost Rate Methodology Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefits shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system. Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is preferable to determine normal cost using a large active population ongoing so that this rate remains relatively stable. The total PEPRA normal cost will be calculated using all active members within a non- pooled plan. Accordingly plans will be funded equally between employer and employee based on the demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions are used in this valuation to set the Fiscal Year 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. These new actuarial assumptions are set forth below. For more details, please refer to the experience study report that can be found on the CalPERS website under: Forms and Publications Center; Employers Section. Click on View employer publications; Actuarial Reports and scroll down to CalPERS Experience Study. Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. Previously, for purposes of the hypothetical termination liability estimate, the discount rate used was the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS). However, this point in time estimate for the termination discount rate can be significantly different from the calculated discount rate for a plan termination based on prevailing market rates. Rather than using a point estimate the hypothetical termination liabilities in this report are calculated using an observed range of market interest rates. This range is based on the 20-year Treasury bond which has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The securities purchased for the Terminated Agency Pool (TAP), however, consist solely of STRIPS, TIPS, and cash with varying maturity dates over the next 30 years. As a result, the methodology to set the discount rate for the TAP needs to be modified to ensure the discount rate is consistent with the yield rate of the portfolio. Beginning with the June 30, 2014 valuation the discount rate will be calculated by using a weighted average of the yields of the securities effective in the portfolio as of the last day of the most recent month of termination. This methodology would result in a discount rate that more closely reflects the yield rate of the TAP. As of June 30, 2014 this discount rate is 2.91 percent as opposed to the yield on the 30-year Strip of 3.55 percent. Furthermore, when a plan with a large liability terminates a contingency immunization calculation is performed using actual cash flows of the terminating agency. Large liability terminations are expected to have large annual cash flows that may have an impact on the TAP’s cash flows thus creating a need to rebalance the portfolio. Pricing the actual cash flows at current market rates would have the same effect as a rebalance. A large liability plan is defined as one that would cause a 50 percent reduction of the existing TAP surplus as of the latest annual valuation. Quotes would be retrieved from securities necessary to immunize the additional liability. The termination discount rate is determined using the methodology above with the calculation being based on the yields of the quoted securities as opposed to the entire TAP portfolio. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1220 0.1160 0.1020 1 0.0990 0.0940 0.0830 2 0.0860 0.0810 0.0710 3 0.0770 0.0720 0.0630 4 0.0700 0.0650 0.0570 5 0.0640 0.0600 0.0520 10 0.0460 0.0430 0.0390 15 0.0420 0.0400 0.0360 20 0.0390 0.0380 0.0340 25 0.0370 0.0360 0.0330 30 0.0350 0.0340 0.0320 Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.2000 0.1980 0.1680 1 0.1490 0.1460 0.1250 2 0.1200 0.1160 0.0990 3 0.0980 0.0940 0.0810 4 0.0820 0.0780 0.0670 5 0.0690 0.0640 0.0550 10 0.0470 0.0460 0.0420 15 0.0440 0.0420 0.0390 20 0.0420 0.0390 0.0360 25 0.0400 0.0370 0.0340 30 0.0380 0.0360 0.0340 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1500 0.1470 0.1310 1 0.1160 0.1120 0.1010 2 0.0950 0.0920 0.0830 3 0.0810 0.0780 0.0700 4 0.0700 0.0670 0.0600 5 0.0610 0.0580 0.0520 10 0.0450 0.0430 0.0370 15 0.0450 0.0430 0.0370 20 0.0450 0.0430 0.0370 25 0.0450 0.0430 0.0370 30 0.0450 0.0430 0.0370 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Salary Growth (continued) Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1770 0.1670 0.1500 1 0.1340 0.1260 0.1140 2 0.1080 0.1030 0.0940 3 0.0900 0.0860 0.0790 4 0.0760 0.0730 0.0670 5 0.0650 0.0620 0.0580 10 0.0470 0.0450 0.0410 15 0.0460 0.0450 0.0390 20 0.0460 0.0450 0.0380 25 0.0460 0.0450 0.0380 30 0.0460 0.0440 0.0380 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0900 0.0880 0.0820 1 0.0780 0.0750 0.0700 2 0.0700 0.0680 0.0630 3 0.0650 0.0630 0.0580 4 0.0610 0.0590 0.0540 5 0.0580 0.0560 0.0510 10 0.0460 0.0450 0.0410 15 0.0420 0.0410 0.0380 20 0.0390 0.0380 0.0350 25 0.0370 0.0350 0.0330 30 0.0350 0.0330 0.0310  The Miscellaneous salary scale is used for Local Prosecutors.  The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. Conversion of Employer Paid Member Contributions (EPMC) CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates are used for Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00031 0.00020 0.00003 25 0.00040 0.00023 0.00007 30 0.00049 0.00025 0.00010 35 0.00057 0.00035 0.00012 40 0.00075 0.00050 0.00013 45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015 55 0.00228 0.00138 0.00016 60 0.00308 0.00182 0.00017 65 0.00400 0.00257 0.00018 70 0.00524 0.00367 0.00019 75 0.00713 0.00526 0.00020 80 0.00990 0.00814 0.00021 Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Post-Retirement Mortality Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466 55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416 60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518 65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319 80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910 85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251 90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887 95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489 100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017 105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The post-retirement mortality rates above include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor Miscellaneous Load Factor Safety 50 190% 310% 51 110% 190% 52 110% 105% 53 through 54 100% 105% 55 100% 140% 56 and above 100% (no change) 100% (no change) Termination with Refund CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 Termination with Vested Benefits Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000  When a member is eligible to retire, the termination with vested benefits probability is set to zero.  After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54.  The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety Plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003 25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002 35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004 40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010 45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019 50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024 55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021 60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014  The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors.  The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police. Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0001 0.0000 0.0004 25 0.0003 0.0017 0.0013 30 0.0007 0.0048 0.0025 35 0.0016 0.0079 0.0037 40 0.0030 0.0110 0.0051 45 0.0053 0.0141 0.0067 50 0.0277 0.0185 0.0092 55 0.0409 0.0479 0.0151 60 0.0583 0.0602 0.0174  The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.  Fifty Percent of the Police Industrial Disability rates are used for School Police.  One Percent of the Police Industrial Disability rates are used for Local Prosecutors.  Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the Non-Industrial Disability rate and 50 percent will become the Industrial Disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.010 0.013 0.015 0.018 0.019 0.021 51 0.009 0.011 0.014 0.016 0.017 0.019 52 0.011 0.014 0.017 0.020 0.022 0.024 53 0.010 0.012 0.015 0.017 0.020 0.021 54 0.015 0.019 0.023 0.025 0.029 0.031 55 0.022 0.029 0.035 0.040 0.045 0.049 56 0.018 0.024 0.028 0.033 0.036 0.040 57 0.024 0.032 0.038 0.043 0.049 0.053 58 0.027 0.036 0.043 0.049 0.055 0.061 59 0.033 0.044 0.054 0.061 0.068 0.076 60 0.056 0.077 0.092 0.105 0.117 0.130 61 0.071 0.097 0.118 0.134 0.149 0.166 62 0.117 0.164 0.198 0.224 0.250 0.280 63 0.122 0.171 0.207 0.234 0.261 0.292 64 0.114 0.159 0.193 0.218 0.244 0.271 65 0.150 0.209 0.255 0.287 0.321 0.358 66 0.114 0.158 0.192 0.217 0.243 0.270 67 0.141 0.196 0.238 0.270 0.301 0.337 68 0.103 0.143 0.174 0.196 0.219 0.245 69 0.109 0.153 0.185 0.209 0.234 0.261 70 0.117 0.162 0.197 0.222 0.248 0.277 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.018 0.021 0.025 0.027 0.031 51 0.012 0.014 0.017 0.020 0.021 0.025 52 0.013 0.017 0.019 0.023 0.025 0.028 53 0.015 0.020 0.023 0.027 0.030 0.034 54 0.026 0.033 0.038 0.045 0.051 0.059 55 0.048 0.061 0.074 0.088 0.100 0.117 56 0.042 0.053 0.063 0.075 0.085 0.100 57 0.044 0.056 0.067 0.081 0.091 0.107 58 0.049 0.062 0.074 0.089 0.100 0.118 59 0.057 0.072 0.086 0.103 0.118 0.138 60 0.067 0.086 0.103 0.123 0.139 0.164 61 0.081 0.103 0.124 0.148 0.168 0.199 62 0.116 0.147 0.178 0.214 0.243 0.288 63 0.114 0.144 0.174 0.208 0.237 0.281 64 0.108 0.138 0.166 0.199 0.227 0.268 65 0.155 0.197 0.238 0.285 0.325 0.386 66 0.132 0.168 0.203 0.243 0.276 0.328 67 0.122 0.155 0.189 0.225 0.256 0.304 68 0.111 0.141 0.170 0.204 0.232 0.274 69 0.114 0.144 0.174 0.209 0.238 0.282 70 0.130 0.165 0.200 0.240 0.272 0.323 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.019 0.029 0.049 0.094 51 0.004 0.009 0.019 0.029 0.049 0.094 52 0.004 0.009 0.020 0.030 0.050 0.095 53 0.008 0.014 0.025 0.036 0.058 0.104 54 0.024 0.034 0.050 0.066 0.091 0.142 55 0.066 0.088 0.115 0.142 0.179 0.241 56 0.042 0.057 0.078 0.098 0.128 0.184 57 0.041 0.057 0.077 0.097 0.128 0.183 58 0.045 0.061 0.083 0.104 0.136 0.192 59 0.055 0.074 0.098 0.123 0.157 0.216 60 0.066 0.088 0.115 0.142 0.179 0.241 61 0.072 0.095 0.124 0.153 0.191 0.255 62 0.099 0.130 0.166 0.202 0.248 0.319 63 0.092 0.121 0.155 0.189 0.233 0.302 64 0.091 0.119 0.153 0.187 0.231 0.299 65 0.122 0.160 0.202 0.245 0.297 0.374 66 0.138 0.179 0.226 0.272 0.329 0.411 67 0.114 0.149 0.189 0.229 0.279 0.354 68 0.100 0.131 0.168 0.204 0.250 0.322 69 0.114 0.149 0.189 0.229 0.279 0.354 70 0.127 0.165 0.209 0.253 0.306 0.385 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.014 0.035 0.055 0.095 51 0.002 0.006 0.011 0.030 0.050 0.090 52 0.006 0.012 0.017 0.038 0.059 0.099 53 0.010 0.017 0.024 0.046 0.068 0.110 54 0.032 0.044 0.057 0.085 0.113 0.160 55 0.076 0.101 0.125 0.165 0.205 0.265 56 0.055 0.074 0.093 0.127 0.160 0.214 57 0.050 0.068 0.086 0.118 0.151 0.204 58 0.055 0.074 0.093 0.127 0.161 0.215 59 0.061 0.082 0.102 0.138 0.174 0.229 60 0.069 0.093 0.116 0.154 0.192 0.250 61 0.086 0.113 0.141 0.183 0.225 0.288 62 0.105 0.138 0.171 0.218 0.266 0.334 63 0.103 0.135 0.167 0.215 0.262 0.329 64 0.109 0.143 0.177 0.226 0.275 0.344 65 0.134 0.174 0.215 0.270 0.326 0.401 66 0.147 0.191 0.235 0.294 0.354 0.433 67 0.121 0.158 0.196 0.248 0.300 0.372 68 0.113 0.147 0.182 0.232 0.282 0.352 69 0.117 0.153 0.189 0.240 0.291 0.362 70 0.141 0.183 0.226 0.283 0.341 0.418 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.018 0.024 0.039 0.040 0.091 51 0.009 0.014 0.019 0.034 0.034 0.084 52 0.014 0.020 0.026 0.043 0.044 0.096 53 0.016 0.023 0.031 0.048 0.050 0.102 54 0.026 0.036 0.045 0.065 0.070 0.125 55 0.043 0.057 0.072 0.096 0.105 0.165 56 0.042 0.056 0.070 0.094 0.103 0.162 57 0.049 0.065 0.082 0.108 0.119 0.180 58 0.057 0.076 0.094 0.122 0.136 0.199 59 0.076 0.100 0.123 0.157 0.175 0.244 60 0.114 0.148 0.182 0.226 0.255 0.334 61 0.095 0.123 0.152 0.190 0.214 0.288 62 0.133 0.172 0.211 0.260 0.294 0.378 63 0.129 0.166 0.204 0.252 0.285 0.368 64 0.143 0.185 0.226 0.278 0.315 0.401 65 0.202 0.260 0.318 0.386 0.439 0.542 66 0.177 0.228 0.279 0.340 0.386 0.482 67 0.151 0.194 0.238 0.292 0.331 0.420 68 0.139 0.179 0.220 0.270 0.306 0.391 69 0.190 0.245 0.299 0.364 0.414 0.513 70 0.140 0.182 0.223 0.274 0.310 0.396 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000 51 0.000 0.000 0.000 0.000 0.000 0.000 52 0.010 0.013 0.016 0.019 0.022 0.024 53 0.013 0.017 0.020 0.024 0.027 0.031 54 0.021 0.027 0.033 0.039 0.045 0.050 55 0.044 0.056 0.068 0.080 0.092 0.104 56 0.030 0.039 0.047 0.055 0.063 0.072 57 0.036 0.046 0.056 0.066 0.076 0.086 58 0.046 0.059 0.072 0.085 0.097 0.110 59 0.058 0.074 0.089 0.105 0.121 0.137 60 0.062 0.078 0.095 0.112 0.129 0.146 61 0.062 0.079 0.096 0.113 0.129 0.146 62 0.097 0.123 0.150 0.176 0.202 0.229 63 0.089 0.113 0.137 0.162 0.186 0.210 64 0.094 0.120 0.145 0.171 0.197 0.222 65 0.129 0.164 0.199 0.234 0.269 0.304 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0159 0.0000 0.0344 0.0199 0.0413 0.0751 Age 56 57 58 59 60 Rate 0.1108 0.0000 0.0950 0.0441 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0255 0.0000 0.0164 0.0272 0.0095 0.1667 Age 56 57 58 59 60 Rate 0.0692 0.0511 0.0724 0.0704 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.017 0.089 51 0.005 0.005 0.005 0.005 0.017 0.087 52 0.018 0.018 0.018 0.018 0.042 0.132 53 0.044 0.044 0.044 0.044 0.090 0.217 54 0.065 0.065 0.065 0.065 0.126 0.283 55 0.086 0.086 0.086 0.086 0.166 0.354 56 0.067 0.067 0.067 0.067 0.130 0.289 57 0.066 0.066 0.066 0.066 0.129 0.288 58 0.066 0.066 0.066 0.066 0.129 0.288 59 0.139 0.139 0.139 0.139 0.176 0.312 60 0.123 0.123 0.123 0.123 0.153 0.278 61 0.110 0.110 0.110 0.110 0.138 0.256 62 0.130 0.130 0.130 0.130 0.162 0.291 63 0.130 0.130 0.130 0.130 0.162 0.291 64 0.130 0.130 0.130 0.130 0.162 0.291 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.009 0.009 0.009 0.009 0.013 0.020 51 0.013 0.013 0.013 0.013 0.020 0.029 52 0.018 0.018 0.018 0.018 0.028 0.042 53 0.052 0.052 0.052 0.052 0.079 0.119 54 0.067 0.067 0.067 0.067 0.103 0.154 55 0.089 0.089 0.089 0.089 0.136 0.204 56 0.083 0.083 0.083 0.083 0.127 0.190 57 0.082 0.082 0.082 0.082 0.126 0.189 58 0.088 0.088 0.088 0.088 0.136 0.204 59 0.074 0.074 0.074 0.074 0.113 0.170 60 0.100 0.100 0.100 0.100 0.154 0.230 61 0.072 0.072 0.072 0.072 0.110 0.165 62 0.099 0.099 0.099 0.099 0.152 0.228 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.004 0.004 0.004 0.015 0.086 51 0.014 0.014 0.014 0.014 0.034 0.114 52 0.026 0.026 0.026 0.026 0.060 0.154 53 0.038 0.038 0.038 0.038 0.083 0.188 54 0.071 0.071 0.071 0.071 0.151 0.292 55 0.061 0.061 0.061 0.061 0.131 0.261 56 0.072 0.072 0.072 0.072 0.153 0.295 57 0.065 0.065 0.065 0.065 0.140 0.273 58 0.066 0.066 0.066 0.066 0.142 0.277 59 0.118 0.118 0.118 0.118 0.247 0.437 60 0.065 0.065 0.065 0.065 0.138 0.272 61 0.084 0.084 0.084 0.084 0.178 0.332 62 0.108 0.108 0.108 0.108 0.226 0.405 63 0.084 0.084 0.084 0.084 0.178 0.332 64 0.084 0.084 0.084 0.084 0.178 0.332 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.001 0.001 0.001 0.006 0.016 0.069 51 0.002 0.002 0.002 0.006 0.018 0.071 52 0.012 0.012 0.012 0.021 0.040 0.098 53 0.032 0.032 0.032 0.049 0.085 0.149 54 0.057 0.057 0.057 0.087 0.144 0.217 55 0.073 0.073 0.073 0.109 0.179 0.259 56 0.064 0.064 0.064 0.097 0.161 0.238 57 0.063 0.063 0.063 0.095 0.157 0.233 58 0.065 0.065 0.065 0.099 0.163 0.241 59 0.088 0.088 0.088 0.131 0.213 0.299 60 0.105 0.105 0.105 0.155 0.251 0.344 61 0.118 0.118 0.118 0.175 0.282 0.380 62 0.087 0.087 0.087 0.128 0.210 0.295 63 0.067 0.067 0.067 0.100 0.165 0.243 64 0.067 0.067 0.067 0.100 0.165 0.243 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.099 0.240 0.314 51 0.034 0.034 0.034 0.072 0.198 0.260 52 0.033 0.033 0.033 0.071 0.198 0.259 53 0.039 0.039 0.039 0.080 0.212 0.277 54 0.045 0.045 0.045 0.092 0.229 0.300 55 0.052 0.052 0.052 0.105 0.248 0.323 56 0.042 0.042 0.042 0.087 0.221 0.289 57 0.043 0.043 0.043 0.088 0.223 0.292 58 0.054 0.054 0.054 0.109 0.255 0.333 59 0.054 0.054 0.054 0.108 0.253 0.330 60 0.060 0.060 0.060 0.121 0.272 0.355 61 0.048 0.048 0.048 0.098 0.238 0.311 62 0.061 0.061 0.061 0.122 0.274 0.357 63 0.057 0.057 0.057 0.115 0.263 0.343 64 0.069 0.069 0.069 0.137 0.296 0.385 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.020 0.020 0.020 0.040 0.130 0.192 51 0.008 0.008 0.008 0.023 0.107 0.164 52 0.023 0.023 0.023 0.043 0.136 0.198 53 0.023 0.023 0.023 0.043 0.135 0.198 54 0.027 0.027 0.027 0.048 0.143 0.207 55 0.043 0.043 0.043 0.070 0.174 0.244 56 0.053 0.053 0.053 0.085 0.196 0.269 57 0.054 0.054 0.054 0.086 0.197 0.271 58 0.052 0.052 0.052 0.084 0.193 0.268 59 0.075 0.075 0.075 0.116 0.239 0.321 60 0.065 0.065 0.065 0.102 0.219 0.298 61 0.076 0.076 0.076 0.117 0.241 0.324 62 0.068 0.068 0.068 0.106 0.224 0.304 63 0.027 0.027 0.027 0.049 0.143 0.208 64 0.094 0.094 0.094 0.143 0.277 0.366 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.011 0.011 0.011 0.020 0.036 51 0.009 0.009 0.009 0.009 0.016 0.028 52 0.018 0.018 0.018 0.018 0.034 0.060 53 0.037 0.037 0.037 0.037 0.067 0.119 54 0.049 0.049 0.049 0.049 0.089 0.159 55 0.063 0.063 0.063 0.063 0.115 0.205 56 0.045 0.045 0.045 0.045 0.082 0.146 57 0.064 0.064 0.064 0.064 0.117 0.209 58 0.047 0.047 0.047 0.047 0.086 0.154 59 0.105 0.105 0.105 0.105 0.130 0.191 60 0.105 0.105 0.105 0.105 0.129 0.188 61 0.105 0.105 0.105 0.105 0.129 0.188 62 0.105 0.105 0.105 0.105 0.129 0.188 63 0.105 0.105 0.105 0.105 0.129 0.188 64 0.105 0.105 0.105 0.105 0.129 0.188 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012 51 0.006 0.006 0.006 0.006 0.009 0.013 52 0.012 0.012 0.012 0.012 0.019 0.028 53 0.033 0.033 0.033 0.033 0.050 0.075 54 0.045 0.045 0.045 0.045 0.069 0.103 55 0.061 0.061 0.061 0.061 0.094 0.140 56 0.055 0.055 0.055 0.055 0.084 0.126 57 0.081 0.081 0.081 0.081 0.125 0.187 58 0.059 0.059 0.059 0.059 0.091 0.137 59 0.055 0.055 0.055 0.055 0.084 0.126 60 0.085 0.085 0.085 0.085 0.131 0.196 61 0.085 0.085 0.085 0.085 0.131 0.196 62 0.085 0.085 0.085 0.085 0.131 0.196 63 0.085 0.085 0.085 0.085 0.131 0.196 64 0.085 0.085 0.085 0.085 0.131 0.196 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.021 0.038 52 0.025 0.025 0.025 0.025 0.046 0.081 53 0.047 0.047 0.047 0.047 0.086 0.154 54 0.063 0.063 0.063 0.063 0.115 0.205 55 0.076 0.076 0.076 0.076 0.140 0.249 56 0.054 0.054 0.054 0.054 0.099 0.177 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.057 0.057 0.057 0.057 0.103 0.184 59 0.126 0.126 0.126 0.126 0.156 0.229 60 0.126 0.126 0.126 0.126 0.155 0.226 61 0.126 0.126 0.126 0.126 0.155 0.226 62 0.126 0.126 0.126 0.126 0.155 0.226 63 0.126 0.126 0.126 0.126 0.155 0.226 64 0.126 0.126 0.126 0.126 0.155 0.226 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.012 0.018 52 0.016 0.016 0.016 0.016 0.025 0.038 53 0.042 0.042 0.042 0.042 0.064 0.096 54 0.057 0.057 0.057 0.057 0.088 0.132 55 0.074 0.074 0.074 0.074 0.114 0.170 56 0.066 0.066 0.066 0.066 0.102 0.153 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.071 0.071 0.071 0.071 0.110 0.164 59 0.066 0.066 0.066 0.066 0.101 0.151 60 0.102 0.102 0.102 0.102 0.157 0.235 61 0.102 0.102 0.102 0.102 0.157 0.236 62 0.102 0.102 0.102 0.102 0.157 0.236 63 0.102 0.102 0.102 0.102 0.157 0.236 64 0.102 0.102 0.102 0.102 0.157 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Superfunded Status Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to pay its employees’ normal member contributions. However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions. Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-22 Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. PEPRA Assumptions The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled plans, these new members were first reflected in the June 30, 2013 non-pooled plan valuations. New members in pooled plans were first reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30, 2013 valuation. Assumptions for PEPRA members are disclosed in Appendix A tables. APPENDIX B PRINCIPAL PLAN PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations. For a full listing of all optional benefits refer to the PERS-CON-40 available on CalPERS website by choosing Employer Information > Retirement Benefit Programs & Contracting Services > Retirement Benefits Program > Contract Information > Optional Benefits Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service. Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation.  The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-2 Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700%  The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.  The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security Contribution and Benefit Base. For employees that participate in Social Security this cap is $115,064 for 2014 and for those employees that do not participate in social security the cap for 2014 is $138,077, the equivalent of 120 percent of the 2013 Contribution and Benefit Base. Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.  Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-3 applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.  The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:  Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or  Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of Final Compensation. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial Disability Retirement benefit, the member may choose to receive the larger benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-5 Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post Retirement Survivor Allowance) Employers have the option to contract for the post retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-6 Eligibility An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Basic Death benefit. Benefit The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled. The total amount paid will be at least equal to the Basic Death benefit. Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-7 Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal the Basic Death Benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:  if 1 eligible child: 12.5 percent of final compensation  if 2 eligible children: 20.0 percent of final compensation  if 3 or more eligible children: 25.0 percent of final compensation Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-8 Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2 percent (when inflation is high after several years of low inflation). Improved Benefit Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-9 Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited annually with 6 percent interest. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-10 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. APPENDIX C PARTICIPANT DATA  SUMMARY OF VALUATION DATA  ACTIVE MEMBERS  TRANSFERRED AND TERMINATED MEMBERS  RETIRED MEMBERS AND BENEFICIARIES CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2013 June 30, 2014 1. Active Members a) Counts 184 187 b) Average Attained Age 40.56 40.06 c) Average Entry Age to Rate Plan 29.20 29.11 d) Average Years of Service 11.36 10.95 e) Average Annual Covered Pay $ 115,533 $ 113,765 f) Annual Covered Payroll 21,258,082 21,274,021 g) Projected Annual Payroll for Contribution Year 23,229,280 23,246,697 h) Present Value of Future Payroll 197,632,871 214,199,671 2. Transferred Members a) Counts 59 63 b) Average Attained Age 42.98 44.06 c) Average Years of Service 3.77 3.71 d) Average Annual Covered Pay $ 103,052 $ 106,767 3. Terminated Members a) Counts 29 31 b) Average Attained Age 42.21 42.38 c) Average Years of Service 2.68 3.10 d) Average Annual Covered Pay $ 75,591 $ 81,322 4. Retired Members and Beneficiaries a) Counts 404 411 b) Average Attained Age 66.93 67.44 c) Average Annual Benefits $ 48,491 $ 50,485 5. Active to Retired Ratio [(1a) / (4a)] 0.46 0.45 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 4 0 0 0 0 0 4 25-29 14 1 0 0 0 0 15 30-34 18 21 0 0 0 0 39 35-39 12 9 8 4 0 0 33 40-44 5 7 11 11 0 0 34 45-49 2 1 10 11 15 4 43 50-54 0 1 4 4 3 2 14 55-59 0 1 1 0 0 1 3 60-64 0 0 0 0 1 1 2 65 and over 0 0 0 0 0 0 0 All Ages 55 41 34 30 19 8 187 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $75,362 $0 $0 $0 $0 $0 $75,362 25-29 87,309 105,999 0 0 0 0 88,555 30-34 95,183 118,553 0 0 0 0 107,767 35-39 98,214 109,821 128,588 141,272 0 0 113,962 40-44 93,217 118,561 113,365 126,158 0 0 115,610 45-49 152,067 110,237 110,520 118,620 131,930 151,926 125,838 50-54 0 157,331 108,465 112,632 126,836 108,455 117,081 55-59 0 111,366 141,692 0 0 213,418 155,492 60-64 0 0 0 0 115,970 117,208 116,589 65 and over 0 0 0 0 0 0 0 All Ages $94,288 $116,899 $116,367 $123,606 $130,286 $144,405 $113,765 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 3 0 0 0 0 0 3 103,772 30-34 8 0 0 0 0 0 8 94,240 35-39 9 0 0 0 0 0 9 96,913 40-44 10 1 1 0 0 0 12 117,697 45-49 10 6 1 0 0 0 17 106,586 50-54 4 1 1 1 1 0 8 106,001 55-59 1 3 1 0 0 0 5 125,216 60-64 0 0 1 0 0 0 1 90,458 65 and over 0 0 0 0 0 0 0 0 All Ages 45 11 5 1 1 0 63 106,767 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 1 1 0 0 0 0 2 98,698 30-34 2 1 0 0 0 0 3 83,871 35-39 7 2 0 0 0 0 9 81,133 40-44 2 2 0 0 0 0 4 82,851 45-49 5 2 1 0 0 0 8 84,051 50-54 3 0 0 0 0 0 3 53,483 55-59 1 0 0 0 0 0 1 71,031 60-64 0 1 0 0 0 0 1 106,475 65 and over 0 0 0 0 0 0 0 0 All Ages 21 9 1 0 0 0 31 81,322 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 0 0 30-34 0 0 1 0 0 0 1 35-39 0 0 1 0 0 0 1 40-44 0 0 6 0 0 0 6 45-49 0 1 3 0 0 0 4 50-54 34 0 16 0 1 0 51 55-59 42 1 17 0 2 1 63 60-64 29 0 18 0 0 3 50 65-69 30 1 19 0 0 3 53 70-74 31 0 24 0 0 9 64 75-79 31 2 19 0 0 3 55 80-84 17 0 15 0 0 10 42 85 and Over 12 0 5 0 0 4 21 All Ages 226 5 144 0 3 33 411 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $0 $0 30-34 0 0 50,780 0 0 0 50,780 35-39 0 0 57,632 0 0 0 57,632 40-44 0 0 56,989 0 0 0 56,989 45-49 0 81 43,511 0 0 0 32,654 50-54 89,801 0 57,966 0 50,599 0 79,045 55-59 72,521 31,649 68,325 0 35,377 63,711 69,421 60-64 71,128 0 44,568 0 0 35,357 59,420 65-69 53,197 16,678 45,192 0 0 43,958 49,116 70-74 46,425 0 29,001 0 0 37,944 38,698 75-79 42,446 11,335 32,987 0 0 14,212 36,507 80-84 32,648 0 25,371 0 0 28,104 28,967 85 and Over 28,858 0 19,561 0 0 11,016 23,246 All Ages $59,354 $14,216 $42,582 $0 $40,451 $30,633 $50,485 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 61 0 16 0 0 5 82 5-9 41 1 18 0 1 7 68 10-14 39 0 16 0 0 12 67 15-19 22 1 20 0 1 3 47 20-24 33 0 15 0 0 4 52 25-29 14 1 16 0 0 1 32 30 and Over 16 2 43 0 1 1 63 All Years 226 5 144 0 3 33 411 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $86,120 $0 $84,434 $0 $0 $15,690 $81,497 5-9 56,403 81 61,724 0 50,599 37,378 54,939 10-14 62,158 0 55,271 0 0 37,988 56,185 15-19 37,839 31,649 43,677 0 44,793 24,716 39,502 20-24 48,741 0 37,496 0 0 29,900 44,048 25-29 35,151 16,678 24,284 0 0 19,797 28,660 30 and Over 30,688 11,335 22,350 0 25,960 1,393 23,842 All Years $59,354 $14,216 $42,582 $0 $40,451 $30,633 $50,485 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX D SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA D-1 DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2014. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. The PEPRA total normal cost for your plan is calculated assuming the entire active population, including classic members, were subject to the adopted PEPRA formula and applicable compensation limits. Should the total normal cost of your plan change by one percent or more from the original total normal cost established for your plan this change in normal cost shall be equally shared between employer and member. Basis for Current Rate Rates Effective July 1, 2016 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 25006 Safety Fire PEPRA 22.400% 11.250% 21.276% 1.124% Yes 10.750% 25007 Safety Police PEPRA 22.400% 11.250% 21.276% 1.124% Yes 10.750% APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX E SAFETY PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets. Actuarial Valuation The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX E SAFETY PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-2 Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The prior accounting standard governing a state or local governmental employer’s accounting for pensions. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Rolling Amortization Period An amortization period that remains the same each year, rather than declining. Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability (UAL) When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov October 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2014 actuarial valuation report of your pension plan. Your 2014 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the Actuarial Certification Section on page 1, is available to discuss the report with you after November 30, 2015. Future Contribution Rates The exhibit below displays the Minimum Employer Contribution Rate for Fiscal Year 2016-17 and a projected contribution rate for 2017-18, before any cost sharing. The projected rate for 2017- 18 is based on the most recent information available, including an estimate of the investment return for Fiscal Year 2014-15, namely 2.4 percent. For a projection of employer rates beyond 2017-18, please refer to the “Projected Rates” in the “Risk Analysis” section, which includes rate projections through 2021-22. The 5-year projection of future employer contribution rates supersedes any previous projections we have provided. The Risk Analysis section of your valuation report also contains estimated employer contribution rates in future years under a variety of investment return scenarios. Fiscal Year Employer Contribution Rate 2016-17 28.890% 2017-18 31.0% (projected) Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above rates. The employer contribution rates in this report do not reflect any cost sharing arrangement you may have with your employees. The estimate for 2017-18 also assumes that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on your contribution rate. Even for the largest plans, such gains and losses often cause a change in the employer’s contribution rate of one or two percent of payroll and may be even larger in some less common instances. These gains and losses cannot be predicted in advance so the projected employer contribution rates are just estimates. Your actual rate for 2017-18 will be provided in next year’s report. MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Page 2 Changes since the Prior Year’s Valuation This actuarial valuation includes Board adopted changes to the demographic assumptions based on the most recent experience study report. The most significant of these is the improvement in post-retirement mortality acknowledging the greater life expectancies we are seeing in our membership and expected continued improvements. The actuarial assumptions and methods used in CalPERS public agency valuations are approved by the Board of Administration upon the recommendation of the Chief Actuary. The individual plan actuary whose signature appears in the actuarial certification in the accompanying report does not set plan specific actuarial assumptions. Besides the above noted changes, there may also be changes specific to your plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on your rate is included in the “Reconciliation of Required Employer Contributions” Section. Effective with the 2014 actuarial valuation, Governmental Accounting Standards Board Statement No. 27 financial reporting information is no longer provided in CalPERS annual actuarial valuation reports. GASB 27 has been replaced with GASB 68 for financial statement reporting purposes. CalPERS is providing separate accounting valuation reports on a fee for service basis for our public agency employers. More details on GASB 68 and instructions for ordering your GASB 68 report are available on our website. Potential Changes to Future Year Valuations One of CalPERS strategic goals is to improve the long-term pension benefit sustainability of the system through an integrated view of pension assets and liabilities. The Board of Administration has been engaging in discussions on the funding risks faced by the system and possible risk mitigation strategies to better protect our members. Recent Board actions on a new asset allocation, new actuarial assumptions and new smoothing and amortization policies have already lowered risk. However, future contribution rate volatility is expected as CalPERS pension plans continue to mature. Two approaches under consideration are a flexible glide path methodology, a lowering of the discount rate and expected investment volatility following a great investment return and a blended glide path methodology which is similar to the flexible glide path but with check points over time that would trigger additional asset allocation changes and lowering of the discount rate if investment returns did not result in a sufficient reduction in volatility. Either approach requires thoughtful discussion as it involves tradeoffs between short and long-term system impacts and potential future increases in required contributions. Additional information can be found on the CalPERS website with possible Board action on risk mitigation strategy and policy at the November 2015 Board meeting. MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2014 Page 3 We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after November 30 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary THIS PAGE INTENTIONALLY LEFT BLANK ACTUARIAL VALUATION as of June 30, 2014 for the MISCELLANEOUS PLAN of the CITY OF PALO ALTO (CalPERS ID: 6373437857) (Rate Plan ID: 8) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2016 – June 30, 2017 TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 3 Purpose of the Report 3 Required Employer Contribution 4 Plan’s Funded Status 4 Cost 5 Changes Since the Prior Year’s Valuation 6 Subsequent Events 6 ASSETS Reconciliation of the Market Value of Assets 8 Asset Allocation 9 CalPERS History of Investment Returns 10 LIABILITIES AND RATES Development of Accrued and Unfunded Liabilities 12 (Gain) / Loss Analysis 06/30/13 - 06/30/14 13 Schedule of Amortization Bases 14 Alternate Amortization Schedules 15 Reconciliation of Required Employer Contributions 16 Employer Contribution Rate History 17 Funding History 17 RISK ANALYSIS Volatility Ratios 19 Projected Rates 20 Analysis of Future Investment Return Scenarios 20 Analysis of Discount Rate Sensitivity 21 Hypothetical Termination Liability 22 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 24 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A21 Miscellaneous A21 – A22 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2 (CY) FIN PROCESS CONTROL ID: 463712 (PY) FIN PROCESS CONTROL ID: 432056 REPORT ID: 89713 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2014 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS HIGHLIGHTS AND EXECUTIVE SUMMARY  INTRODUCTION  PURPOSE OF THE REPORT  REQUIRED EMPLOYER CONTRIBUTION  PLAN’S FUNDED STATUS  COST  CHANGES SINCE THE PRIOR YEAR’S VALUATION  SUBSEQUENT EVENTS CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 3 Introduction This report presents the results of the June 30, 2014 actuarial valuation of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the Fiscal Year 2016-17 required employer contribution rates. This actuarial valuation includes Board adopted changes to the demographic assumptions based on the most recent experience study report. The most significant of these is the improvement in post-retirement mortality acknowledging the greater life expectancies we are seeing in our membership and expected continued improvements. The actuarial assumptions and methods used in CalPERS public agency valuations are approved by the Board of Administration upon the recommendation of the Chief Actuary. The individual plan actuary whose signature appears in the actuarial certification in this report does not set plan specific actuarial assumptions. Effective with the 2014 actuarial valuation, Governmental Accounting Standards Board Statement No. 27 financial reporting information is no longer provided in CalPERS annual actuarial valuation reports. GASB 27 has been replaced with GASB 68 for financial statement reporting purposes. CalPERS is providing separate accounting valuation reports on a fee for service basis for our public agency employers. More details on GASB 68 and instructions for ordering your GASB 68 report are available on our website. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2014. The purpose of the report is to:  Set forth the assets and accrued liabilities of this plan as of June 30, 2014;  Determine the required employer contribution rate for the Fiscal Year July 1, 2016 through June 30, 2017;  Provide actuarial information as of June 30, 2014 to the CalPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on our website. The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 14. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:  A “Deterministic Stress Test,” projecting future results under different investment income scenarios  A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 4 Required Employer Contribution Fiscal Year Fiscal Year 2015-16 2016-17 Actuarially Determined Employer Contributions 1. Contribution in Projected Dollars a) Total Normal Cost $ 12,782,431 $ 13,346,592 b) Employee Contribution1 5,488,848 5,690,120 c) Employer Normal Cost [(1a) – (1b)] 7,293,583 7,656,472 d) Unfunded Liability Contribution 12,207,469 13,748,038 e) Required Employer Contribution [(1c) + (1d)] $ 19,501,052 $ 21,404,510 Projected Annual Payroll for Contribution Year $ 70,414,978 $ 74,090,105 2. Contribution as a Percentage of Payroll a) Total Normal Cost 18.153% 18.014% b) Employee Contribution1 7.795% 7.680% c) Employer Normal Cost [(2a) – (2b)] 10.358% 10.334% d) Unfunded Liability Rate 17.336% 18.556% e) Required Employer Rate [(2c) + (2d)] 27.694% 28.890% Minimum Employer Contribution Rate2 27.694% 28.890% Annual Lump Sum Prepayment Option3 $ 18,808,485 $ 20,644,343 1 For classic members this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2 The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the employer normal cost. The timing of contributions made during the year coincides with the employer’s payroll reporting periods. § 20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a contracting agency fails to remit the required contributions when due. 3 The Annual Lump Sum Prepayment can be made between July 1 and July 15 and should be made before the contributions for the first payroll reporting period of the new fiscal year are due. If there is contractual cost sharing or other change, this amount will change. Plan’s Funded Status June 30, 2013 June 30, 2014 1. Present Value of Projected Benefits $ 690,227,166 $ 756,332,825 2. Entry Age Normal Accrued Liability 602,540,178 666,978,627 3. Market Value of Assets (MVA) $ 412,227,784 $ 475,566,994 4. Unfunded Liability [(2) – (3)] $ 190,312,394 $ 191,411,633 5. Funded Ratio [(3) / (2)] 68.4% 71.3% CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 5 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories.  Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year.  Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of your plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2014, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.  The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll.  The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount. To communicate the total cost, either the Normal Cost must be converted to a lump sum dollar amount or the Past Service Cost must be converted to a percent of payroll. Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period, and the employer rate will vary depending on the amortization period chosen. CalPERS Board amortization and smoothing policies specify the amortization period used for each amortization base. These policies permit a restructuring of the amortization bases (also known as a “fresh start”) when the application of the amortization policy would not otherwise achieve the goals of the policy – to eliminate the unfunded liabilities in a manner that maintains benefit security while minimizing substantial variations in employer contribution rates. Currently unfunded liabilities are paid as a percent of payroll. However, in the future, unfunded liabilities may be billed as dollar amounts as is the case for plans that are in risk pools. CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 6 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or rate is shown for any plan changes which were already included in the prior year’s valuation. Actuarial Methods and Assumptions The CalPERS Board of Administration approved several changes to the demographic assumptions that more closely align with actual experience based on the most recent experience study. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions are used to set the Fiscal Year 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions calculated in this actuarial valuation is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board amortization policy. Subsequent Events Actuarial Methods and Assumptions One of CalPERS strategic goals is to improve the long-term pension benefit sustainability of the system through an integrated view of pension assets and liabilities. The Board of Administration has been engaging in discussions on the funding risks faced by the system and possible risk mitigation strategies to better protect our members. Recent Board actions on a new asset allocation, new actuarial assumptions and new smoothing and amortization policies have already lowered risk. However, future contribution rate volatility is expected as CalPERS pension plans continue to mature. Two approaches under consideration are a flexible glide path methodology, a lowering of the discount rate and expected investment volatility following a great investment return and a blended glide path methodology which is similar to the flexible glide path but with check points over time that would trigger additional asset allocation changes and lowering of the discount rate if investment returns did not result in a sufficient reduction in volatility. Either approach requires thoughtful discussion as it involves tradeoffs between short and long-term system impacts and potential future increases in required contributions. Additional information can be found on the CalPERS website with possible Board action on risk mitigation strategy and policy at the November 2015 Board meeting. ASSETS  RECONCILIATION OF THE MARKET VALUE OF ASSETS  ASSET ALLOCATION  CALPERS HISTORY OF INVESTMENT RETURNS CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 8 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/13 Including Receivables $ 412,227,784 2. Change in Receivables for Service Buybacks as of 6/30/13 248,109 3. Employer Contributions 17,399,732 4. Employee Contributions 5,094,854 5. Benefit Payments to Retirees and Beneficiaries (31,447,662) 6. Refunds (332,871) 7. Lump Sum Payments 0 8. Transfers and Miscellaneous Adjustments 1,249,806 9. Investment Return 71,127,242 10. Market Value of Assets as of 6/30/14 Including Receivables $ 475,566,994 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 9 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014 the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as percentage of total assets. The asset allocation has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees Retirement Fund (PERF) in its entirety as of June 30, 2014. The assets for CITY OF PALO ALTO MISCELLANEOUS PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation Global Equity 158.2 50.0% Private Equity 31.5 14.0% Global Fixed Income 58.8 17.0% Liquidity 9.0 4.0% Real Assets 29.6 11.0% Inflation Sensitive Assets 9.9 4.0% Absolute Return Strategy (ARS) 4.5 0.0% Total Fund $301.5 100.0% Global Equity 52.5% Private Equity 10.4% Global Fixed Income 19.5% Liquidity 3.0% Real Assets 9.8% Inflation 3.3% ARS 1.5% Asset Allocation at 6/30/2014 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 10 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2014, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76 percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed in percent. Consequently when looking at investment returns it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 17.7% 13.0% 7.1% 8.4% 10.1% Volatility – 8.1% 14.0% 11.9% 11.4% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 16 . 3 % 15 . 3 % 20 . 1 % 19 . 5 % 12 . 5 % 10 . 5 % -7. 2 % -6. 1 % 3. 7 % 16 . 6 % 12 . 3 % 11 . 8 % 19 . 1 % -5. 1 % -24 . 0 % 13 . 3 % 21 . 7 % 0. 1 % 13 . 2 % 17 . 7 % LIABILITIES AND RATES  DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES  (GAIN) / LOSS ANALYSIS 06/30/13 - 06/30/14  SCHEDULE OF AMORTIZATION BASES  ALTERNATE AMORTIZATION SCHEDULES  RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS  EMPLOYER CONTRIBUTION RATE HISTORY  FUNDING HISTORY CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 12 Development of Accrued and Unfunded Liabilities Prior Year Assumptions New Assumptions June 30, 2013 June 30, 2014 June 30, 2014 1. Present Value of Projected Benefits a) Active Members $ 297,642,775 310,497,721 328,196,243 b) Transferred Members 23,476,142 27,328,717 28,487,782 c) Terminated Members 13,166,269 12,157,218 11,097,567 d) Members and Beneficiaries Receiving Payments 355,941,980 369,324,828 388,551,233 e) Total $ 690,227,166 719,308,484 756,332,825 2. Present Value of Future Employer Normal Costs $ 48,567,418 47,127,131 49,756,329 3. Present Value of Future Employee Contributions $ 39,119,570 40,130,267 39,597,869 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 209,955,787 223,240,323 238,842,045 b) Transferred Members (1b) 23,476,142 27,328,717 28,487,782 c) Terminated Members (1c) 13,166,269 12,157,218 11,097,567 d) Members and Beneficiaries Receiving Payments (1d) 355,941,980 369,324,828 388,551,233 e) Total $ 602,540,178 632,051,086 666,978,627 5. Market Value of Assets (MVA) $ 412,227,784 475,566,994 475,566,994 6. Unfunded Liability [(4e) - (5)] $ 190,312,394 156,484,092 191,411,633 7. Funded Ratio [(5) / (4e)] 68.4% 75.2% 71.3% CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 13 (Gain) /Loss Analysis 6/30/13 – 6/30/14 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. A Total (Gain)/Loss for the Year 1. Unfunded Accrued Liability (UAL) as of 6/30/13 $ 190,312,394 2. Expected Payment on the UAL during 2013/2014 10,174,297 3. Interest through 6/30/14 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 13,898,791 4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 194,036,888 5. Change due to plan changes 0 6. Change due to assumption change 34,927,541 7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 228,964,429 8. Actual UAL as of 6/30/14 191,411,633 9. Total (Gain)/Loss for 2013/2014 [(A8) - (A7)] $ (37,552,796) B Contribution (Gain)/Loss for the Year 1. Expected Contribution (Employer and Employee) $ 22,122,741 2. Interest on Expected Contributions 814,605 3. Actual Contributions 22,494,586 4. Interest on Actual Contributions 828,297 5. Expected Contributions with Interest [(B1) + (B2)] 22,937,346 6. Actual Contributions with Interest [(B3) + (B4)] 23,322,883 7. Contribution (Gain)/Loss [(B5) - (B6)] $ (385,537) C Asset (Gain)/Loss for the Year 1. Market Value of Assets as of 6/30/13 $ 412,227,784 2. Receivables PY (2,849,888) 3. Receivables CY 3,097,997 4. Contributions Received 22,494,586 5. Benefits and Refunds Paid (31,780,533) 6. Transfers and miscellaneous adjustments 1,249,806 7. Expected Int. [.075 x (C1 + C2) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 30,407,435 8. Expected Assets as of 6/30/14 [(C1) + (C2) + (C3) + (C4) + (C5) + (C6) + (C7)] 434,847,187 9. Market Value of Assets as of 6/30/14 475,566,994 10. Asset (Gain)/Loss [(C8) - (C9)] $ (40,719,807) D Liability (Gain)/Loss for the Year 1. Total (Gain)/Loss (A9) $ (37,552,796) 2. Contribution (Gain)/Loss (B7) (385,537) 3. Asset (Gain)/Loss (C10) (40,719,807) 4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 3,552,548 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 14 Schedule of Amortization Bases There is a two-year lag between the Valuation Date and the Contribution Fiscal Year.  The assets, liabilities and funded status of the plan are measured as of the valuation date; June 30, 2014.  The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date; Fiscal Year 2016-17. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance of the start of the fiscal year. The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined by the actuarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Amounts for Fiscal 2016-17 Reason for Base Date Established Amorti-zation Period Balance 6/30/14 Expected Payment 2014-15 Balance 6/30/15 Expected Payment 2015-16 Balance 6/30/16 Scheduled Payment for 2016-17 Payment as Percentage of Payroll ASSUMPTION CHANGE 06/30/03 9 $17,137,963 $1,982,274 $16,368,045 $2,041,742 $15,478,726 $2,102,994 2.838% METHOD CHANGE 06/30/04 10 $(1,290,313) $(139,521) $(1,242,428) $(143,706) $(1,186,612) $(148,017) (0.200%) BENEFIT CHANGE 06/30/05 10 $28,586,348 $3,091,022 $27,525,484 $3,183,753 $26,288,910 $3,279,266 4.426% ASSUMPTION CHANGE 06/30/09 15 $26,352,672 $2,213,920 $26,033,681 $2,280,338 $25,621,903 $2,348,748 3.170% SPECIAL (GAIN)/LOSS 06/30/09 25 $16,370,499 $1,037,533 $16,522,550 $1,068,659 $16,653,731 $1,100,719 1.486% SPECIAL (GAIN)/LOSS 06/30/10 26 $1,347,998 $83,819 $1,362,193 $86,333 $1,374,845 $88,923 0.120% ASSUMPTION CHANGE 06/30/11 17 $12,210,444 $952,744 $12,138,402 $981,326 $12,031,321 $1,010,766 1.364% SPECIAL (GAIN)/LOSS 06/30/11 27 $(56,539) $(3,453) $(57,199) $(3,557) $(57,801) $(3,663) (0.005%) PAYMENT (GAIN)/LOSS 06/30/12 28 $2,949,486 $177,118 $2,987,057 $182,432 $3,021,937 $187,905 0.254% (GAIN)/LOSS 06/30/12 28 $24,864,694 $1,493,138 $25,181,428 $1,537,932 $25,475,473 $1,584,070 2.138% (GAIN)/LOSS 06/30/13 29 $65,563,634 $(61,778) $70,544,959 $992,217 $74,807,078 $2,043,968 2.759% ASSUMPTION CHANGE 06/30/14 20 $34,927,541 $(402,960) $37,964,904 $(415,048) $41,242,603 $785,576 1.060% (GAIN)/LOSS 06/30/14 30 $(37,552,794) $733,308 $(41,129,563) $777,721 $(45,020,639) $(633,217) (0.855%) TOTAL $191,411,633 $11,157,164 $194,199,513 $12,570,142 $195,731,475 $13,748,038 18.556% CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Page 15 Alternate Amortization Schedules The amortization schedule shown on the previous page shows the minimum contribution required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. Therefore, we have provided alternate amortization schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating payments towards your plan’s unfunded liability of $195,731,475 as of June 30, 2016, which under the minimum schedule, will require total payments of $398,981,993. Shown below are the level rate payments required to amortize your plan’s unfunded liability assuming a fresh start over the various periods noted. Note that the payments under each scenario would increase by 3 percent for each year into the future. If you are interested in changing your plan’s amortization schedule please contact your plan actuary to discuss further. Level Rate of Payroll Amortization Period 2016-17 Rate 2016-17 Payment Total Payments Total Interest Difference from Current Schedule 20 19.947% $14,778,789 $397,111,592 $201,380,116 $1,870,401 15 24.217% $17,942,613 $333,713,123 $137,981,647 $65,268,870 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 16 Reconciliation of Required Employer Contributions Percentage of Projected Payroll Estimated $ Based on Projected Payroll 1. Contribution for 7/1/15 – 6/30/16 27.694% $ 19,501,052 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics and financial results (0.441%) (327,187) b) Effect of plan changes 0.000% 0 c) Effect of changes in Assumptions 1.637% 1,212,855 d) Effect of change in payroll - 1,017,790 e) Effect of elimination of amortization base 0.000% 0 f) Effect of changes due to Fresh Start 0.000% 0 g) Net effect of the changes above [Sum of (a) through (f)] 1.196% 1,903,458 3. Contribution for 7/1/16 – 6/30/17 [(1)+(2g)] 28.890% 21,404,510 The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 17 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate 2011 - 2012 10.100% 11.625% 21.725% 2012 - 2013 10.171% 12.799% 22.970% 2013 - 2014 10.360% 14.240% 24.600% 2014 - 2015 10.283% 15.839% 26.122% 2015 - 2016 10.358% 17.336% 27.694% 2016 - 2017 10.334% 18.556% 28.890% Funding History The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Unfunded Liability Funded Ratio Annual Covered Payroll 06/30/09 $ 499,199,907 $ 288,524,538 $ 210,675,369 57.8% $ 65,602,083 06/30/10 521,269,469 323,971,012 197,298,457 62.2% 62,496,037 06/30/11 552,715,631 384,056,704 168,658,927 69.5% 60,297,783 06/30/12 576,182,013 373,592,926 202,589,087 64.8% 62,910,810 06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680 06/30/14 666,978,627 475,566,994 191,411,633 71.3% 67,802,942 RISK ANALYSIS  VOLATILITY RATIOS  PROJECTED RATES  ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS  ANALYSIS OF DISCOUNT RATE SENSITIVITY  HYPOTHETICAL TERMINATION LIABILITY CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 19 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about very long- term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore, the rates will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures. Rate Volatility As of June 30, 2014 1. Market Value of Assets without Receivables $ 472,468,997 2. Payroll 67,802,942 3. Asset Volatility Ratio (AVR = 1. / 2.) 7.0 4. Accrued Liability $ 666,978,627 5. Liability Volatility Ratio (LVR = 4. / 2.) 9.8 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Projected Rates The estimated rate for 2017-18 is based on a projection of the most recent information we have available, including an estimated 2.4 percent investment return for Fiscal Year 2014-15. The table below shows projected employer contribution rates (before cost sharing) for the next five fiscal years, assuming CalPERS earns 2.4 percent for Fiscal Year 2014-15 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected contribution rates do not reflect that the plan’s normal cost will decline over time as new employees are hired into PEPRA and other lower cost benefit tiers. Required Rate Projected Future Employer Contribution Rates 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Contribution Rates: 28.890% 31.0% 33.1% 35.2% 35.9% 36.4% Analysis of Future Investment Return Scenarios In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long- term blended return that continues to support a discount rate assumption of 7.5 percent. The newly adopted asset allocation has a lower expected investment volatility which will result in better risk characteristics than an equivalent margin for adverse deviation. The previous asset allocation had an expected standard deviation of 12.45 percent while the current asset allocation has a lower expected standard deviation of 11.76 percent. The investment return for Fiscal Year 2014-15 was announced July 13, 2015. The investment return in Fiscal Year 2014-15 is 2.4 percent before administrative expenses. This year, there will be no adjustment for real estate and private equities. For purposes of projecting future employer rates, we are assuming a 2.4 percent investment return for Fiscal Year 2014-15. The investment return realized during a fiscal year first affects the contribution rate for the fiscal year two years later. Specifically, the investment return for 2014-15 will first be reflected in the June 30, 2015 actuarial valuation that will be used to set the 2017-18 employer contribution rates. The 2015-16 investment return will first be reflected in the June 30, 2016 actuarial valuation that will be used to set the 2018-19 employer contribution rates and so forth. Based on a 2.4 percent investment return for Fiscal Year 2014-15, the April 17, 2013 CalPERS Board-approved amortization and rate smoothing method change, the February 18, 2014 new demographic assumptions including 20-year mortality improvement using Scale BB and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of the Fiscal Year 2017-18, the effect on the 2017-18 Employer Rate is as follows: Estimated 2017-18 Employer Rate Estimated Increase in Employer Rate between 2016-17 and 2017-18 31.0% 2.1% CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 21 As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2015-16, 2016-17 and 2017-18 on the 2018-19, 2019-20 and 2020-21 employer rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected.  The first scenario is what one would expect if the markets were to give us a 5th percentile return from July 1, 2015 through June 30, 2018. The 5th percentile return corresponds to a -3.8 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  The second scenario is what one would expect if the markets were to give us a 25th percentile return from July 1, 2015 through June 30, 2018. The 25th percentile return corresponds to a 2.8 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  The third scenario assumed the return for 2015-16, 2016-17, 2017-18 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.  The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from July 1, 2015 through June 30, 2018. The 75th percentile return corresponds to a 12.0 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years.  Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return from July 1, 2015 through June 30, 2018. The 95th percentile return corresponds to a 18.9 percent return for each of the 2015-16, 2016-17 and 2017-18 fiscal years. The table below shows the estimated projected contribution rates and the estimated increases for your plan under the five different scenarios. 2015-18 Investment Return Scenario Estimated Employer Rate Estimated Change in Employer Rate between 2017-18 and 2020-21 2018-19 2019-20 2020-21 (3.8%) (5th percentile) 34.2% 38.4% 42.1% 11.1% 2.8% (25th percentile) 33.5% 36.5% 38.6% 7.6% 7.5% 33.1% 35.2% 35.9% 4.9% 12.0%(75th percentile) 32.6% 33.8% 33.1% 2.1% 18.9%(95th percentile) 32.0% 31.7% 10.3% (20.6%) Analysis of Discount Rate Sensitivity The following analysis looks at the 2016-17 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to the contribution rates. Sensitivity Analysis As of June 30, 2014 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 22.482% 18.014% 14.615% Accrued Liability $752,918,029 $666,978,627 $595,625,159 Unfunded Accrued Liability $277,351,035 $191,411,633 $120,058,165 CALPERS ACTUARIAL VALUATION - June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 22 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of June 30, 2014. Your plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are included. For the Terminated Agency Pool the CalPERS Board adopted a more conservative investment policy and asset allocation strategy. Since the Terminated Agency Pool has limited funding sources due to the fact that no future employer contributions will be made, expected benefit payments are secured by risk-free assets. With this change, CalPERS increased benefit security for members while limiting its funding risk. However, this asset allocation has a lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during the period from July 1, 2013 through June 30, 2015. Valuation Date Market Value of Assets (MVA) Hypothetical Termination Liability1,2 @ 2.00% Unfunded Termination Liability @ 2.00% Hypothetical Termination Liability1,2 @ 3.75% Unfunded Termination Liability @ 3.75% 06/30/14 $ 475,566,994 $ 1,307,783,976 $ 832,216,982 $ 1,016,093,153 $ 540,526,159 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 3.00% on June 30, 2014. In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS strongly advises you to consult with your plan actuary before beginning this process. PLAN’S MAJOR BENEFIT PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Misc Active Misc Active Misc Inactive Misc Receiving Misc Benefit Provision Benefit Formula 2.7% @ 55 2.0% @ 60 2.0% @ 62 2.0% @ 55 Social Security Coverage No No No No Full/Modified Full Full Full Full Employee Contribution Rate 8.00% 7.00% 6.25% Final Average Compensation Period One Year One Year Three Year One Year Sick Leave Credit No No No No Non-Industrial Disability Standard Standard Standard Standard Industrial Disability No No No No Pre-Retirement Death Benefits Optional Settlement 2W No No No No 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Special No No No No Alternate (firefighters) No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No COLA 2% 2% 2% 2% 2% Page 24 CALPERS ACTUARIAL VALUATION – June 30, 2014 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Benefit Provision Benefit Formula Social Security Coverage Full/Modified Employee Contribution Rate Final Average Compensation Period Sick Leave Credit Non-Industrial Disability Industrial Disability Pre-Retirement Death Benefits Optional Settlement 2W 1959 Survivor Benefit Level Special Alternate (firefighters) Post-Retirement Death Benefits Lump Sum Survivor Allowance (PRSA) COLA Page 25 APPENDICES  APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS  APPENDIX B – PRINCIPAL PLAN PROVISIONS  APPENDIX C – PARTICIPANT DATA  APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES  APPENDIX E – GLOSSARY OF ACTUARIAL TERMS APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS  ACTUARIAL DATA  ACTUARIAL METHODS  ACTUARIAL ASSUMPTIONS  MISCELLANEOUS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the employer contribution rates. Actuarial Methods Funding Method The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. Commencing with the June 30, 2013 valuation all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes), changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding progress by preventing the expected funded status on a market value of assets basis to either:  Increase by at least 15 percent by June 30, 2043; or  Reach a level of 75 percent funded by June 30, 2043 The necessary additional contribution will be obtained by changing the amortization period of the gains and losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period, which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above when performing each future valuation to determine whether or not additional contributions are necessary. An exception to the funding rules above is used whenever the application of such rules results in inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current unfunded actuarial liability is projected and amortized over a set number of years. However, in the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate. It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases, the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be greater than 30 years. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate unfunded accrued liabilities or surpluses in a manner that maintains benefit security for the members of the System while minimizing substantial variations in employer contribution rates. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS employs an amortization and smoothing policy that pays for all gains and losses over a fixed 30- year period with the increases or decreases in the rate spread directly over a 5-year period. CalPERS no longer uses an actuarial value of assets and only uses the market value of assets. This direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. PEPRA Normal Cost Rate Methodology Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefits shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system. Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is preferable to determine normal cost using a large active population ongoing so that this rate remains relatively stable. The total PEPRA normal cost will be calculated using all active members within a non- pooled plan. Accordingly plans will be funded equally between employer and employee based on the demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014 CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014 the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions are used in this valuation to set the FY 2016-17 contribution rates for public agency employers. The increase in liability due to new actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. These new actuarial assumptions are set forth below. For more details, please refer to the experience study report that can be found on the CalPERS website under: Forms and Publications Center; Employers Section. Click on View employer publications; Actuarial Reports and scroll down to CalPERS Experience Study. Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. Previously, for purposes of the hypothetical termination liability estimate, the discount rate used was the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS). However, this point in time estimate for the termination discount rate can be significantly different from the calculated discount rate for a plan termination based on prevailing market rates. Rather than using a point estimate the hypothetical termination liabilities in this report are calculated using an observed range of market interest rates. This range is based on the 20-year Treasury bond which has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The securities purchased for the Terminated Agency Pool (TAP), however, consist solely of STRIPS, TIPS, and cash with varying maturity dates over the next 30 years. As a result, the methodology to set the discount rate for the TAP needs to be modified to ensure the discount rate is consistent with the yield rate of the portfolio. Beginning with the June 30, 2014 valuation the discount rate will be calculated by using a weighted average of the yields of the securities effective in the portfolio as of the last day of the most recent month of termination. This methodology would result in a discount rate that more closely reflects the yield rate of the TAP. As of June 30, 2014 this discount rate is 2.91 percent as opposed to the yield on the 30-year Strip of 3.55 percent. Furthermore, when a plan with a large liability terminates a contingency immunization calculation is performed using actual cash flows of the terminating agency. Large liability terminations are expected to have large annual cash flows that may have an impact on the TAP’s cash flows thus creating a need to rebalance the portfolio. Pricing the actual cash flows at current market rates would have the same effect as a rebalance. A large liability plan is defined as one that would cause a 50 percent reduction of the existing TAP surplus as of the latest annual valuation. Quotes would be retrieved from securities necessary to immunize the additional liability. The termination discount rate is determined using the methodology above with the calculation being based on the yields of the quoted securities as opposed to the entire TAP portfolio. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1220 0.1160 0.1020 1 0.0990 0.0940 0.0830 2 0.0860 0.0810 0.0710 3 0.0770 0.0720 0.0630 4 0.0700 0.0650 0.0570 5 0.0640 0.0600 0.0520 10 0.0460 0.0430 0.0390 15 0.0420 0.0400 0.0360 20 0.0390 0.0380 0.0340 25 0.0370 0.0360 0.0330 30 0.0350 0.0340 0.0320 Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.2000 0.1980 0.1680 1 0.1490 0.1460 0.1250 2 0.1200 0.1160 0.0990 3 0.0980 0.0940 0.0810 4 0.0820 0.0780 0.0670 5 0.0690 0.0640 0.0550 10 0.0470 0.0460 0.0420 15 0.0440 0.0420 0.0390 20 0.0420 0.0390 0.0360 25 0.0400 0.0370 0.0340 30 0.0380 0.0360 0.0340 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1500 0.1470 0.1310 1 0.1160 0.1120 0.1010 2 0.0950 0.0920 0.0830 3 0.0810 0.0780 0.0700 4 0.0700 0.0670 0.0600 5 0.0610 0.0580 0.0520 10 0.0450 0.0430 0.0370 15 0.0450 0.0430 0.0370 20 0.0450 0.0430 0.0370 25 0.0450 0.0430 0.0370 30 0.0450 0.0430 0.0370 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Salary Growth (continued) Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1770 0.1670 0.1500 1 0.1340 0.1260 0.1140 2 0.1080 0.1030 0.0940 3 0.0900 0.0860 0.0790 4 0.0760 0.0730 0.0670 5 0.0650 0.0620 0.0580 10 0.0470 0.0450 0.0410 15 0.0460 0.0450 0.0390 20 0.0460 0.0450 0.0380 25 0.0460 0.0450 0.0380 30 0.0460 0.0440 0.0380 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0900 0.0880 0.0820 1 0.0780 0.0750 0.0700 2 0.0700 0.0680 0.0630 3 0.0650 0.0630 0.0580 4 0.0610 0.0590 0.0540 5 0.0580 0.0560 0.0510 10 0.0460 0.0450 0.0410 15 0.0420 0.0410 0.0380 20 0.0390 0.0380 0.0350 25 0.0370 0.0350 0.0330 30 0.0350 0.0330 0.0310  The Miscellaneous salary scale is used for Local Prosecutors.  The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. Conversion of Employer Paid Member Contributions (EPMC) CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates are used for Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00031 0.00020 0.00003 25 0.00040 0.00023 0.00007 30 0.00049 0.00025 0.00010 35 0.00057 0.00035 0.00012 40 0.00075 0.00050 0.00013 45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015 55 0.00228 0.00138 0.00016 60 0.00308 0.00182 0.00017 65 0.00400 0.00257 0.00018 70 0.00524 0.00367 0.00019 75 0.00713 0.00526 0.00020 80 0.00990 0.00814 0.00021 Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will become the Industrial Death rate. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Post-Retirement Mortality Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466 55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416 60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518 65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319 80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910 85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251 90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887 95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489 100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017 105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The post-retirement mortality rates above include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor Miscellaneous Load Factor Safety 50 190% 310% 51 110% 190% 52 110% 105% 53 through 54 100% 105% 55 100% 140% 56 and above 100% (no change) 100% (no change) Termination with Refund CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 Termination with Vested Benefits Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000  When a member is eligible to retire, the termination with vested benefits probability is set to zero.  After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54.  The Police Termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety Plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003 25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002 35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004 40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010 45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019 50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024 55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021 60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014  The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors.  The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police. Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0001 0.0000 0.0004 25 0.0003 0.0017 0.0013 30 0.0007 0.0048 0.0025 35 0.0016 0.0079 0.0037 40 0.0030 0.0110 0.0051 45 0.0053 0.0141 0.0067 50 0.0277 0.0185 0.0092 55 0.0409 0.0479 0.0151 60 0.0583 0.0602 0.0174  The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.  Fifty Percent of the Police Industrial Disability rates are used for School Police.  One Percent of the Police Industrial Disability rates are used for Local Prosecutors.  Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the Non-Industrial Disability rate and 50 percent will become the Industrial Disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.010 0.013 0.015 0.018 0.019 0.021 51 0.009 0.011 0.014 0.016 0.017 0.019 52 0.011 0.014 0.017 0.020 0.022 0.024 53 0.010 0.012 0.015 0.017 0.020 0.021 54 0.015 0.019 0.023 0.025 0.029 0.031 55 0.022 0.029 0.035 0.040 0.045 0.049 56 0.018 0.024 0.028 0.033 0.036 0.040 57 0.024 0.032 0.038 0.043 0.049 0.053 58 0.027 0.036 0.043 0.049 0.055 0.061 59 0.033 0.044 0.054 0.061 0.068 0.076 60 0.056 0.077 0.092 0.105 0.117 0.130 61 0.071 0.097 0.118 0.134 0.149 0.166 62 0.117 0.164 0.198 0.224 0.250 0.280 63 0.122 0.171 0.207 0.234 0.261 0.292 64 0.114 0.159 0.193 0.218 0.244 0.271 65 0.150 0.209 0.255 0.287 0.321 0.358 66 0.114 0.158 0.192 0.217 0.243 0.270 67 0.141 0.196 0.238 0.270 0.301 0.337 68 0.103 0.143 0.174 0.196 0.219 0.245 69 0.109 0.153 0.185 0.209 0.234 0.261 70 0.117 0.162 0.197 0.222 0.248 0.277 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.018 0.021 0.025 0.027 0.031 51 0.012 0.014 0.017 0.020 0.021 0.025 52 0.013 0.017 0.019 0.023 0.025 0.028 53 0.015 0.020 0.023 0.027 0.030 0.034 54 0.026 0.033 0.038 0.045 0.051 0.059 55 0.048 0.061 0.074 0.088 0.100 0.117 56 0.042 0.053 0.063 0.075 0.085 0.100 57 0.044 0.056 0.067 0.081 0.091 0.107 58 0.049 0.062 0.074 0.089 0.100 0.118 59 0.057 0.072 0.086 0.103 0.118 0.138 60 0.067 0.086 0.103 0.123 0.139 0.164 61 0.081 0.103 0.124 0.148 0.168 0.199 62 0.116 0.147 0.178 0.214 0.243 0.288 63 0.114 0.144 0.174 0.208 0.237 0.281 64 0.108 0.138 0.166 0.199 0.227 0.268 65 0.155 0.197 0.238 0.285 0.325 0.386 66 0.132 0.168 0.203 0.243 0.276 0.328 67 0.122 0.155 0.189 0.225 0.256 0.304 68 0.111 0.141 0.170 0.204 0.232 0.274 69 0.114 0.144 0.174 0.209 0.238 0.282 70 0.130 0.165 0.200 0.240 0.272 0.323 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.019 0.029 0.049 0.094 51 0.004 0.009 0.019 0.029 0.049 0.094 52 0.004 0.009 0.020 0.030 0.050 0.095 53 0.008 0.014 0.025 0.036 0.058 0.104 54 0.024 0.034 0.050 0.066 0.091 0.142 55 0.066 0.088 0.115 0.142 0.179 0.241 56 0.042 0.057 0.078 0.098 0.128 0.184 57 0.041 0.057 0.077 0.097 0.128 0.183 58 0.045 0.061 0.083 0.104 0.136 0.192 59 0.055 0.074 0.098 0.123 0.157 0.216 60 0.066 0.088 0.115 0.142 0.179 0.241 61 0.072 0.095 0.124 0.153 0.191 0.255 62 0.099 0.130 0.166 0.202 0.248 0.319 63 0.092 0.121 0.155 0.189 0.233 0.302 64 0.091 0.119 0.153 0.187 0.231 0.299 65 0.122 0.160 0.202 0.245 0.297 0.374 66 0.138 0.179 0.226 0.272 0.329 0.411 67 0.114 0.149 0.189 0.229 0.279 0.354 68 0.100 0.131 0.168 0.204 0.250 0.322 69 0.114 0.149 0.189 0.229 0.279 0.354 70 0.127 0.165 0.209 0.253 0.306 0.385 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.014 0.035 0.055 0.095 51 0.002 0.006 0.011 0.030 0.050 0.090 52 0.006 0.012 0.017 0.038 0.059 0.099 53 0.010 0.017 0.024 0.046 0.068 0.110 54 0.032 0.044 0.057 0.085 0.113 0.160 55 0.076 0.101 0.125 0.165 0.205 0.265 56 0.055 0.074 0.093 0.127 0.160 0.214 57 0.050 0.068 0.086 0.118 0.151 0.204 58 0.055 0.074 0.093 0.127 0.161 0.215 59 0.061 0.082 0.102 0.138 0.174 0.229 60 0.069 0.093 0.116 0.154 0.192 0.250 61 0.086 0.113 0.141 0.183 0.225 0.288 62 0.105 0.138 0.171 0.218 0.266 0.334 63 0.103 0.135 0.167 0.215 0.262 0.329 64 0.109 0.143 0.177 0.226 0.275 0.344 65 0.134 0.174 0.215 0.270 0.326 0.401 66 0.147 0.191 0.235 0.294 0.354 0.433 67 0.121 0.158 0.196 0.248 0.300 0.372 68 0.113 0.147 0.182 0.232 0.282 0.352 69 0.117 0.153 0.189 0.240 0.291 0.362 70 0.141 0.183 0.226 0.283 0.341 0.418 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.018 0.024 0.039 0.040 0.091 51 0.009 0.014 0.019 0.034 0.034 0.084 52 0.014 0.020 0.026 0.043 0.044 0.096 53 0.016 0.023 0.031 0.048 0.050 0.102 54 0.026 0.036 0.045 0.065 0.070 0.125 55 0.043 0.057 0.072 0.096 0.105 0.165 56 0.042 0.056 0.070 0.094 0.103 0.162 57 0.049 0.065 0.082 0.108 0.119 0.180 58 0.057 0.076 0.094 0.122 0.136 0.199 59 0.076 0.100 0.123 0.157 0.175 0.244 60 0.114 0.148 0.182 0.226 0.255 0.334 61 0.095 0.123 0.152 0.190 0.214 0.288 62 0.133 0.172 0.211 0.260 0.294 0.378 63 0.129 0.166 0.204 0.252 0.285 0.368 64 0.143 0.185 0.226 0.278 0.315 0.401 65 0.202 0.260 0.318 0.386 0.439 0.542 66 0.177 0.228 0.279 0.340 0.386 0.482 67 0.151 0.194 0.238 0.292 0.331 0.420 68 0.139 0.179 0.220 0.270 0.306 0.391 69 0.190 0.245 0.299 0.364 0.414 0.513 70 0.140 0.182 0.223 0.274 0.310 0.396 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000 51 0.000 0.000 0.000 0.000 0.000 0.000 52 0.010 0.013 0.016 0.019 0.022 0.024 53 0.013 0.017 0.020 0.024 0.027 0.031 54 0.021 0.027 0.033 0.039 0.045 0.050 55 0.044 0.056 0.068 0.080 0.092 0.104 56 0.030 0.039 0.047 0.055 0.063 0.072 57 0.036 0.046 0.056 0.066 0.076 0.086 58 0.046 0.059 0.072 0.085 0.097 0.110 59 0.058 0.074 0.089 0.105 0.121 0.137 60 0.062 0.078 0.095 0.112 0.129 0.146 61 0.062 0.079 0.096 0.113 0.129 0.146 62 0.097 0.123 0.150 0.176 0.202 0.229 63 0.089 0.113 0.137 0.162 0.186 0.210 64 0.094 0.120 0.145 0.171 0.197 0.222 65 0.129 0.164 0.199 0.234 0.269 0.304 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0159 0.0000 0.0344 0.0199 0.0413 0.0751 Age 56 57 58 59 60 Rate 0.1108 0.0000 0.0950 0.0441 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0255 0.0000 0.0164 0.0272 0.0095 0.1667 Age 56 57 58 59 60 Rate 0.0692 0.0511 0.0724 0.0704 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.017 0.089 51 0.005 0.005 0.005 0.005 0.017 0.087 52 0.018 0.018 0.018 0.018 0.042 0.132 53 0.044 0.044 0.044 0.044 0.090 0.217 54 0.065 0.065 0.065 0.065 0.126 0.283 55 0.086 0.086 0.086 0.086 0.166 0.354 56 0.067 0.067 0.067 0.067 0.130 0.289 57 0.066 0.066 0.066 0.066 0.129 0.288 58 0.066 0.066 0.066 0.066 0.129 0.288 59 0.139 0.139 0.139 0.139 0.176 0.312 60 0.123 0.123 0.123 0.123 0.153 0.278 61 0.110 0.110 0.110 0.110 0.138 0.256 62 0.130 0.130 0.130 0.130 0.162 0.291 63 0.130 0.130 0.130 0.130 0.162 0.291 64 0.130 0.130 0.130 0.130 0.162 0.291 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.009 0.009 0.009 0.009 0.013 0.020 51 0.013 0.013 0.013 0.013 0.020 0.029 52 0.018 0.018 0.018 0.018 0.028 0.042 53 0.052 0.052 0.052 0.052 0.079 0.119 54 0.067 0.067 0.067 0.067 0.103 0.154 55 0.089 0.089 0.089 0.089 0.136 0.204 56 0.083 0.083 0.083 0.083 0.127 0.190 57 0.082 0.082 0.082 0.082 0.126 0.189 58 0.088 0.088 0.088 0.088 0.136 0.204 59 0.074 0.074 0.074 0.074 0.113 0.170 60 0.100 0.100 0.100 0.100 0.154 0.230 61 0.072 0.072 0.072 0.072 0.110 0.165 62 0.099 0.099 0.099 0.099 0.152 0.228 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.004 0.004 0.004 0.015 0.086 51 0.014 0.014 0.014 0.014 0.034 0.114 52 0.026 0.026 0.026 0.026 0.060 0.154 53 0.038 0.038 0.038 0.038 0.083 0.188 54 0.071 0.071 0.071 0.071 0.151 0.292 55 0.061 0.061 0.061 0.061 0.131 0.261 56 0.072 0.072 0.072 0.072 0.153 0.295 57 0.065 0.065 0.065 0.065 0.140 0.273 58 0.066 0.066 0.066 0.066 0.142 0.277 59 0.118 0.118 0.118 0.118 0.247 0.437 60 0.065 0.065 0.065 0.065 0.138 0.272 61 0.084 0.084 0.084 0.084 0.178 0.332 62 0.108 0.108 0.108 0.108 0.226 0.405 63 0.084 0.084 0.084 0.084 0.178 0.332 64 0.084 0.084 0.084 0.084 0.178 0.332 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.001 0.001 0.001 0.006 0.016 0.069 51 0.002 0.002 0.002 0.006 0.018 0.071 52 0.012 0.012 0.012 0.021 0.040 0.098 53 0.032 0.032 0.032 0.049 0.085 0.149 54 0.057 0.057 0.057 0.087 0.144 0.217 55 0.073 0.073 0.073 0.109 0.179 0.259 56 0.064 0.064 0.064 0.097 0.161 0.238 57 0.063 0.063 0.063 0.095 0.157 0.233 58 0.065 0.065 0.065 0.099 0.163 0.241 59 0.088 0.088 0.088 0.131 0.213 0.299 60 0.105 0.105 0.105 0.155 0.251 0.344 61 0.118 0.118 0.118 0.175 0.282 0.380 62 0.087 0.087 0.087 0.128 0.210 0.295 63 0.067 0.067 0.067 0.100 0.165 0.243 64 0.067 0.067 0.067 0.100 0.165 0.243 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.099 0.240 0.314 51 0.034 0.034 0.034 0.072 0.198 0.260 52 0.033 0.033 0.033 0.071 0.198 0.259 53 0.039 0.039 0.039 0.080 0.212 0.277 54 0.045 0.045 0.045 0.092 0.229 0.300 55 0.052 0.052 0.052 0.105 0.248 0.323 56 0.042 0.042 0.042 0.087 0.221 0.289 57 0.043 0.043 0.043 0.088 0.223 0.292 58 0.054 0.054 0.054 0.109 0.255 0.333 59 0.054 0.054 0.054 0.108 0.253 0.330 60 0.060 0.060 0.060 0.121 0.272 0.355 61 0.048 0.048 0.048 0.098 0.238 0.311 62 0.061 0.061 0.061 0.122 0.274 0.357 63 0.057 0.057 0.057 0.115 0.263 0.343 64 0.069 0.069 0.069 0.137 0.296 0.385 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.020 0.020 0.020 0.040 0.130 0.192 51 0.008 0.008 0.008 0.023 0.107 0.164 52 0.023 0.023 0.023 0.043 0.136 0.198 53 0.023 0.023 0.023 0.043 0.135 0.198 54 0.027 0.027 0.027 0.048 0.143 0.207 55 0.043 0.043 0.043 0.070 0.174 0.244 56 0.053 0.053 0.053 0.085 0.196 0.269 57 0.054 0.054 0.054 0.086 0.197 0.271 58 0.052 0.052 0.052 0.084 0.193 0.268 59 0.075 0.075 0.075 0.116 0.239 0.321 60 0.065 0.065 0.065 0.102 0.219 0.298 61 0.076 0.076 0.076 0.117 0.241 0.324 62 0.068 0.068 0.068 0.106 0.224 0.304 63 0.027 0.027 0.027 0.049 0.143 0.208 64 0.094 0.094 0.094 0.143 0.277 0.366 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.011 0.011 0.011 0.020 0.036 51 0.009 0.009 0.009 0.009 0.016 0.028 52 0.018 0.018 0.018 0.018 0.034 0.060 53 0.037 0.037 0.037 0.037 0.067 0.119 54 0.049 0.049 0.049 0.049 0.089 0.159 55 0.063 0.063 0.063 0.063 0.115 0.205 56 0.045 0.045 0.045 0.045 0.082 0.146 57 0.064 0.064 0.064 0.064 0.117 0.209 58 0.047 0.047 0.047 0.047 0.086 0.154 59 0.105 0.105 0.105 0.105 0.130 0.191 60 0.105 0.105 0.105 0.105 0.129 0.188 61 0.105 0.105 0.105 0.105 0.129 0.188 62 0.105 0.105 0.105 0.105 0.129 0.188 63 0.105 0.105 0.105 0.105 0.129 0.188 64 0.105 0.105 0.105 0.105 0.129 0.188 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012 51 0.006 0.006 0.006 0.006 0.009 0.013 52 0.012 0.012 0.012 0.012 0.019 0.028 53 0.033 0.033 0.033 0.033 0.050 0.075 54 0.045 0.045 0.045 0.045 0.069 0.103 55 0.061 0.061 0.061 0.061 0.094 0.140 56 0.055 0.055 0.055 0.055 0.084 0.126 57 0.081 0.081 0.081 0.081 0.125 0.187 58 0.059 0.059 0.059 0.059 0.091 0.137 59 0.055 0.055 0.055 0.055 0.084 0.126 60 0.085 0.085 0.085 0.085 0.131 0.196 61 0.085 0.085 0.085 0.085 0.131 0.196 62 0.085 0.085 0.085 0.085 0.131 0.196 63 0.085 0.085 0.085 0.085 0.131 0.196 64 0.085 0.085 0.085 0.085 0.131 0.196 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.021 0.038 52 0.025 0.025 0.025 0.025 0.046 0.081 53 0.047 0.047 0.047 0.047 0.086 0.154 54 0.063 0.063 0.063 0.063 0.115 0.205 55 0.076 0.076 0.076 0.076 0.140 0.249 56 0.054 0.054 0.054 0.054 0.099 0.177 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.057 0.057 0.057 0.057 0.103 0.184 59 0.126 0.126 0.126 0.126 0.156 0.229 60 0.126 0.126 0.126 0.126 0.155 0.226 61 0.126 0.126 0.126 0.126 0.155 0.226 62 0.126 0.126 0.126 0.126 0.155 0.226 63 0.126 0.126 0.126 0.126 0.155 0.226 64 0.126 0.126 0.126 0.126 0.155 0.226 65 1.000 1.000 1.000 1.000 1.000 1.000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.012 0.018 52 0.016 0.016 0.016 0.016 0.025 0.038 53 0.042 0.042 0.042 0.042 0.064 0.096 54 0.057 0.057 0.057 0.057 0.088 0.132 55 0.074 0.074 0.074 0.074 0.114 0.170 56 0.066 0.066 0.066 0.066 0.102 0.153 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.071 0.071 0.071 0.071 0.110 0.164 59 0.066 0.066 0.066 0.066 0.101 0.151 60 0.102 0.102 0.102 0.102 0.157 0.235 61 0.102 0.102 0.102 0.102 0.157 0.236 62 0.102 0.102 0.102 0.102 0.157 0.236 63 0.102 0.102 0.102 0.102 0.157 0.236 64 0.102 0.102 0.102 0.102 0.157 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000  These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Superfunded Status Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to pay its employees’ normal member contributions. However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be less than the total normal cost rate…” This means that not only must employers pay their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions. Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-22 Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. PEPRA Assumptions The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled plans, these new members were first reflected in the June 30, 2013 non-pooled plan valuations. New members in pooled plans were first reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30, 2013 valuation. Assumptions for PEPRA members are disclosed in Appendix A tables. APPENDIX B PRINCIPAL PLAN PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself governs in all situations. For a full listing of all optional benefits refer to the PERS-CON-40 available on CalPERS website by choosing Employer Information > Retirement Benefit Programs & Contracting Services > Retirement Benefits Program > Contract Information > Optional Benefits Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for Service Retirement upon attainment of age 52 with at least 5 years of service. Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation.  The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-2 Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700%  The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.  The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security Contribution and Benefit Base. For employees that participate in Social Security this cap is $115,064 for 2014 and for those employees that do not participate in social security the cap for 2014 is $138,077, the equivalent of 120 percent of the 2013 Contribution and Benefit Base. Adjustments to the caps are permitted annually based on changes to the CPI for All Urban Consumers.  Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-3 applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.  The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and Safety PEPRA members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:  Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or  Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of Final Compensation. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial Disability Retirement benefit, the member may choose to receive the larger benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-5 Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post Retirement Survivor Allowance) Employers have the option to contract for the post retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-6 Eligibility An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Basic Death benefit. Benefit The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled. The total amount paid will be at least equal to the Basic Death benefit. Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for Classic and Safety PEPRA members and age 52 for Miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-7 Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The Special Death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal the Basic Death Benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:  if 1 eligible child: 12.5 percent of final compensation  if 2 eligible children: 20.0 percent of final compensation  if 3 or more eligible children: 25.0 percent of final compensation Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-8 Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2 percent (when inflation is high after several years of low inflation). Improved Benefit Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-9 Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited annually with 6 percent interest. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-10 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. APPENDIX C PARTICIPANT DATA  SUMMARY OF VALUATION DATA  ACTIVE MEMBERS  TRANSFERRED AND TERMINATED MEMBERS  RETIRED MEMBERS AND BENEFICIARIES CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2013 June 30, 2014 1. Active Members a) Counts 789 802 b) Average Attained Age 46.31 46.15 c) Average Entry Age to Rate Plan 35.30 35.01 d) Average Years of Service 11.01 11.14 e) Average Annual Covered Pay $ 81,673 $ 84,542 f) Annual Covered Payroll 64,439,680 67,802,942 g) Projected Annual Payroll for Contribution Year 70,414,978 74,090,105 h) Present Value of Future Payroll 504,789,216 520,997,982 2. Transferred Members a) Counts 295 328 b) Average Attained Age 45.76 46.00 c) Average Years of Service 3.48 3.55 d) Average Annual Covered Pay $ 106,639 $ 109,195 3. Terminated Members a) Counts 334 335 b) Average Attained Age 47.27 47.91 c) Average Years of Service 3.43 3.27 d) Average Annual Covered Pay $ 61,875 $ 63,122 4. Retired Members and Beneficiaries a) Counts 989 1,011 b) Average Attained Age 68.56 68.88 c) Average Annual Benefits $ 30,968 $ 31,739 5. Active to Retired Ratio [(1a) / (4a)] 0.80 0.79 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 11 0 0 0 0 0 11 25-29 45 3 0 0 0 0 48 30-34 52 27 10 1 0 0 90 35-39 38 27 30 9 2 0 106 40-44 35 18 26 12 7 0 98 45-49 35 15 26 23 16 4 119 50-54 22 27 31 24 33 22 159 55-59 16 25 9 18 12 14 94 60-64 8 7 8 11 13 5 52 65 and over 3 2 8 1 7 4 25 All Ages 265 151 148 99 90 49 802 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $53,712 $0 $0 $0 $0 $0 $53,712 25-29 65,965 86,333 0 0 0 0 67,238 30-34 74,152 79,949 78,184 65,334 0 0 76,241 35-39 71,718 79,714 86,111 84,875 82,346 0 79,146 40-44 84,169 89,610 92,622 101,859 103,526 0 90,960 45-49 83,991 80,406 82,569 88,380 105,795 86,086 87,079 50-54 80,021 91,220 84,699 87,185 88,889 105,336 89,259 55-59 105,258 83,272 83,941 86,152 103,048 104,245 93,278 60-64 67,402 99,436 83,204 97,933 80,209 100,908 87,028 65 and over 68,119 7,200 70,804 73,106 100,518 102,353 78,853 All Ages $76,280 $83,736 $84,685 $89,675 $94,426 $102,757 $84,542 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 3 0 0 0 0 0 3 $73,898 25-29 9 0 0 0 0 0 9 89,689 30-34 35 3 1 0 0 0 39 97,700 35-39 42 7 0 0 0 0 49 103,457 40-44 41 7 0 3 0 0 51 101,864 45-49 39 15 2 1 1 0 58 111,615 50-54 39 10 3 1 1 0 54 120,727 55-59 24 7 5 1 1 0 38 130,146 60-64 12 7 1 1 0 0 21 103,556 65 and over 3 2 1 0 0 0 6 99,882 All Ages 247 58 13 7 3 0 328 109,195 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 2 0 0 0 0 0 2 $68,008 25-29 7 1 0 0 0 0 8 70,020 30-34 32 4 0 0 0 0 36 58,633 35-39 38 2 0 0 0 0 40 61,099 40-44 30 9 0 0 1 0 40 62,256 45-49 44 15 2 1 0 0 62 66,758 50-54 46 11 7 2 1 0 67 66,865 55-59 31 7 3 1 0 0 42 66,546 60-64 17 3 1 2 0 0 23 55,225 65 and over 11 2 2 0 0 0 15 48,034 All Ages 258 54 15 6 2 0 335 63,122 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 3 3 30-34 0 0 1 0 0 1 2 35-39 0 0 1 0 0 0 1 40-44 0 1 2 0 0 0 3 45-49 0 4 0 0 0 0 4 50-54 30 11 4 0 0 2 47 55-59 108 10 1 0 0 5 124 60-64 169 8 1 0 0 12 190 65-69 187 12 2 0 0 10 211 70-74 153 7 2 0 0 17 179 75-79 84 6 0 0 0 8 98 80-84 50 5 1 0 0 14 70 85 and Over 51 1 0 0 0 27 79 All Ages 832 65 15 0 0 99 1,011 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $12,296 $12,296 30-34 0 0 245 0 0 11,121 5,683 35-39 0 0 225 0 0 0 225 40-44 0 8,776 260 0 0 0 3,098 45-49 0 12,754 0 0 0 0 12,754 50-54 30,176 11,601 766 0 0 21,487 22,956 55-59 40,075 14,067 11,112 0 0 11,420 36,588 60-64 42,579 18,188 2,071 0 0 34,022 40,798 65-69 35,696 16,072 9,086 0 0 16,908 33,437 70-74 30,277 18,754 1,794 0 0 23,158 28,832 75-79 31,661 13,655 0 0 0 26,735 30,157 80-84 26,508 17,978 4,095 0 0 19,068 24,091 85 and Over 22,605 19,094 0 0 0 21,568 22,206 All Ages $34,705 $15,210 $2,873 $0 $0 $22,043 $31,739 CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 251 6 6 0 0 31 294 5-9 249 15 3 0 0 28 295 10-14 149 9 2 0 0 13 173 15-19 77 13 4 0 0 12 106 20-24 66 16 0 0 0 9 91 25-29 23 2 0 0 0 4 29 30 and Over 17 4 0 0 0 2 23 All Years 832 65 15 0 0 99 1,011 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $40,522 $10,695 $256 $0 $0 $28,919 $37,868 5-9 40,783 15,550 9,758 0 0 18,970 37,114 10-14 30,230 17,811 1,646 0 0 20,917 28,554 15-19 26,545 20,155 2,247 0 0 18,883 23,977 20-24 18,761 12,729 0 0 0 16,669 17,493 25-29 17,954 11,291 0 0 0 19,848 17,755 30 and Over 20,521 10,669 0 0 0 13,358 18,185 All Years $34,705 $15,210 $2,873 $0 $0 $22,043 $31,739 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA D-1 DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2014. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. The PEPRA total normal cost for your plan is calculated assuming the entire active population, including classic members, were subject to the adopted PEPRA formula and applicable compensation limits. Should the total normal cost of your plan change by one percent or more from the original total normal cost established for your plan this change in normal cost shall be equally shared between employer and member. Basis for Current Rate Rates Effective July 1, 2016 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 26004 Miscellaneous PEPRA 12.500% 6.250% 11.785% 0.715% No 6.250% APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets. Actuarial Valuation The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) CALPERS ACTUARIAL VALUATION – June 30, 2014 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-2 Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The prior accounting standard governing a state or local governmental employer’s accounting for pensions. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Rolling Amortization Period An amortization period that remains the same each year, rather than declining. Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability (UAL) When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. Influence the Future of Your Community APPLICATION DEADLINE: OCTOBER 20, 2020 at 4:30 P.M. Applica�ons available online at http://bit.ly/bcapplications QUESTIONS? Contact the City Clerk’s Office at 650.329.2571 or email Jessica.Brettle@CityofPaloAlto.org Currently Recruiting For: BOARD AND COMMISSIONS CITY OF PALO ALTOOPEN RECRUITMENTS Architectural Review Board 2 Positions with terms ending December 15, 2023 Parks and Recreation Commission 1 Unexpired Position with a term ending December 15, 2022 Planning and Transportation Commission 2 Positions with terms ending December 15, 2024 Historic Resources Board 4 Positions with terms ending December 15, 2023