HomeMy WebLinkAboutStaff Report 2504-4487CITY OF PALO ALTO
CITY COUNCIL
Tuesday, June 17, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
4.Adopt a Resolution Declaring Surface Parking Lot T (APN: 120-15-100) Exempt Surplus
Land and Approve an Exclusive Negotiation Agreement with Alta Housing for
Development of 100% Affordable Housing on City-Owned Property Located at the Corner
of Kipling Street and Lytton Avenue in Downtown Palo Alto; CEQA Status – Not a Project.
Public Comment
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: June 17, 2025
Report #:2504-4487
TITLE
Adopt a Resolution Declaring Surface Parking Lot T (APN: 120-15-100) Exempt Surplus Land and
Approve an Exclusive Negotiation Agreement with Alta Housing for Development of 100%
Affordable Housing on City-Owned Property Located at the Corner of Kipling Street and Lytton
Avenue in Downtown Palo Alto; CEQA Status – Not a Project.
RECOMMENDATION
Staff recommends that the City Council:
1. Adopt a Resolution (Attachment A) declaring the City-owned property located at the
corner of Kipling Street and Lytton Avenue ("Lot T") as Exempt Surplus Land pursuant to
Government Code Section 54221(f)(1)(A) and 54221(f)(1)(B); and
2. Approve and authorize the City Manager or their designee to execute an Exclusive
Negotiation Agreement (ENA) with Alta Housing (Attachment B) to develop 100%
affordable housing on Lot T.
BACKGROUND
Implementation Program 1.4 of the City’s 2023–2031 Housing Element identifies
redevelopment of City-owned surface parking lots for 100% affordable housing projects,
prioritizing opportunities to incorporate replacement public parking and housing serving
households earning up to 80% of Area Median Income (AMI) or designated workforce housing
for City and school district employees.
In 2022 and 2023, the City conducted a Request for Information (RFI) process identifying Lot T
as a preferred site for implementation of Program 1.4. In 2024, the City Council adopted
Priority ED&T 8, which directed staff to pursue refined proposals for Lot T. Following a Request
for Refined Proposals issued in September 2024, the Council on January 21, 2025, directed staff
to prepare an ENA with Alta Housing for Council action to advance predevelopment work.
ANALYSIS
Surplus Land Act Compliance
Before a local government agency may sell or enter into a long-term lease of land for
development, the Surplus Land Act (California Government Code Sections 54220–54234)
requires agencies to follow certain notice procedures to make the land available for the
development of affordable housing. Under certain circumstances, an agency may declare the
land "exempt surplus" in which case the notice procedures do not apply. Two such
circumstances exist for Lot T.
First, and perhaps most obvious, under Government Code 54221(f)(1)(A), surplus land may be
declared exempt if it will be transferred for the purpose of developing affordable housing.
Under the proposed Exclusive Negotiating Agreement, Alta will design, and submit for the City’s
planning approval, a proposal to develop Lot with 100% affordable housing, which will be deed
restricted to preserve affordability to extremely low, very low, and low-income households, for
a term no shorter than 30 years. Therefore Lot T qualifies for an exemption on this basis.
Second, under Government Code 54221(f)(1)(B), surplus land may be declared exempt if it is
smaller than one-half acre (21,780 square feet) in area, and is not adjacent to publicly-owned
land used for open space or affordability housing purposes. According to City records, Lot T is
approximately 19,236 square feet in area and the adjacent properties are privately owned and
used for commercial purposes. Therefore, Lot T separately qualifies for an exemption on this
basis.
These findings are included in the Resolution (Attachment A). City staff received technical
assistance from HCD in preparing the Resolution, and once adopted, the Resolution will be
transmitted to the California Department of Housing and Community Development (HCD) as
required by Government Code Section 54222.3.
Exclusive Negotiation Agreement with Alta Housing
The ENA formalizes the City’s partnership with Alta Housing and outlines the framework for
negotiating a long-term ground lease, project financing terms, regulatory agreements, and
other documents necessary to support project development. The ENA:
•Does not entitle or approve a specific development project;
•Requires good faith negotiations toward a Disposition and Development Agreement
(DDA) for a project that satisfies the affordability requirements of the Surplus Land Act
and other direction that may be provided by the Council during the term of the ENA;
•Sets a timeline and terms for predevelopment due diligence and community
engagement;
•Establishes roles, responsibilities, and deliverables during the ENA term;
•Allows Alta Housing to request reimbursement of actual costs incurred, not to exceed
$200,000, if the City does not proceed with the Lot T project.
The ENA was prepared by the City Attorney’s Office and negotiated with Alta Housing and
reflects typical provisions used in similar public-private affordable housing projects.
FISCAL/RESOURCE IMPACT
Approval of the ENA and declaration of exempt surplus status do not have a fiscal impact as
work associated with these efforts is already accounted for in department budgets. Should the
City cancel the project, staff will return to Council at a future date to request the necessary
appropriation from the Housing In Lieu Residential Fund to reimburse Alta Housing. Future
agreements, including the DDA and potential funding commitments for the ultimate
development of the parcel, will have fiscal implications and will be presented to Council for
review and approval.
STAKEHOLDER ENGAGEMENT
The proposed ENA and exemption resolution were publicly noticed as part of the June 16, 2025
City Council agenda. Prior engagement activities included:
•Issuance of a Request for Refined Proposals in 2024;
•Council review of refined proposals and direction to staff to prepare the subject ENA in
January 2025;
•Housing Element community meetings and discussions identifying Lot T as a City-owned
site suitable for affordable housing.
Additional engagement is anticipated during the ENA term and future project review process.
ENVIRONMENTAL REVIEW
Approval of the ENA and exemption resolution is not a project subject to environmental review
under the California Environmental Quality Act (CEQA) per CEQA Guidelines Section
15378(b)(2). Any future development of Lot T will require CEQA review prior to entitlement.
ATTACHMENTS
Attachment A: Draft Resolution Declaring Lot T as Exempt Surplus Land
Attachment B: Exclusive Negotiation Agreement with Alta Housing
APPROVED BY:
Jonathan Lait, Planning and Development Services Director
Resolution No. _______
Resolution of the Council of the City of Palo Alto Declaring Property Known as Lot T (APN 120-15-100)
Exempt Surplus Land under the Surplus Land Act (Government Code 54220 et. seq)
RECITALS
The City of Palo Alto (“City”) is the owner in fee simple of that certain real property approximately
19,236 square feet in size and situated at the corner of Lytton Avenue and Kipling Street in Palo Alto, CA
(“Lot T Property”), APN 120-15-100.
The parcels adjacent to the Lot T Property are privately-owned and are not currently used as open
space, or for low- or moderate-income housing purposes.
The Lot T property was acquired through City of Palo Alto Parking Assessment District Project 75-63,
which proceedings were conducted through the Special Assessment Investigation, Limitation, and
Majority Protest Act of 1931 and Sections 13.12.040 and 13.12.050 of Title 13 of the Palo Alto Municipal
Code.
Since being acquired by the City, the Lot T property has been constructed and used as a surface parking
lot with approximately 52 parking spaces.
Subdivision (g) of Section 13.12.050 of the Palo Alto Municipal Code provides that the Council may lease
one or more parking spaces and facilities, when, its opinion, the public interest and economy will be
served thereby.
Cities across California are facing a severe housing shortage. The housing shortage is particularly acute in
the San Francisco Bay Area region, where the demand for housing—specifically affordable housing—
vastly exceeds the available supply.
The City’s 2023-2031 Housing Element seeks to develop significant additional housing in the City’s
downtown area to meet its Regional Housing Needs Allocation targets.
Program 1.4 of the City’s 2023-2031 Housing Element contemplates increasing the City’s affordable
housing stock through redevelopment of City-owned surface parking lots with a stated objective of
providing replacement public parking and 100% affordable housing units serving households earning up
to 80% of the Area Median Income or for workforce housing for City employees and Palo Alto Unified
School District employees.
In furtherance of Housing Element Program 1.4, the City has identified the Lot T Property for
redevelopment with affordable housing.
In January 2023, City staff issued a Request for Information seeking development concepts for
affordable housing and public parking structures on one or more of the City’s twelve surface parking lots
in the downtown and received submittals from two firms, Alta Housing and MidPen Housing.
In December 2023, the Council directed City staff to solicit refined proposals that focused on
redeveloping the Lot T Property with 100% affordable housing.
In September 2024, City staff issued a Request for Refined Proposals for an affordable housing
development on the Lot T Property from Alta Housing and MidPen Housing.
On December 2, 2024, the Council approved a contract for design, environmental review, and
construction administration services for a new downtown parking garage on a City-owned surface
parking lot situated at the corner of Hamilton Avenue and Waverley Street (Lot D Garage Project). The
Lot D Garage Project is intended to provide the replacement public parking contemplated by, and in
furtherance of, Housing Element Program 1.4.
On January 21, 2025 the Council selected Alta Housing as its preferred development partner and
provided preliminary direction on key project components, including the provision of parking, maximum
building height, and the number, composition, and affordability levels of the housing units.
On April 14, 2025, the Council reviewed design options for the Lot D Garage Project and directed City
staff to proceed with design on a six-level structure that would provide approximately 274 parking
spaces.
On June 16, 2025, the City and Alta Housing entered into an exclusive negotiating agreement to provide
Alta Housing the exclusive right to, for a limited term, to design and submit a planning application for an
affordable housing development on the Lot T that meets the requirements Housing Element Program
1.4 and the development and affordability requirements of Government Code 54221(f)(1)(A).
The Surplus Land Act, Government Code sections 54220 et seq., imposes certain procedural
requirements when a local agency “disposes” of “surplus land,” as those terms are defined in
Government Code section 54221, to promote affordable housing development on unused or
underutilized public land throughout the State to respond to the affordable housing crisis.
The Surplus Land Act requires public agencies, including charter cities, to follow certain procedures to
dispose of “surplus land” or declare land to be “exempt surplus land” at a public hearing prior to
disposition.
NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The recitals above are true and correct and are incorporated by this reference as findings of
fact by the Council.
SECTION 2. Consistent with subdivision (g) of Section 13.12.050 of the Palo Alto Municipal code, the
Council finds that the public interest and economy will be served by entering into a long-term ground
lease of the Lot T Property. Such lease will facilitate the development of the Lot T property with
affordable housing and provide below market rate housing opportunities for individuals and families in a
desirable area of the city, consistent with Program 1.4 of the City’s 2023-2031 Housing Element. The
Council further finds that new residential development in downtown will increase the number of
potential employees and customers to work in and patronize the shops, services, and restaurants. The
Council further finds that the construction of the Lot D Garage Project will adequately replace the public
parking currently provided on the Lot T property.
SECTION 3. The Council finds and declares the Lot T property is exempt surplus land as defined by
Government Code section 54221(f)(1)(B) in that the Lot T property is less than one-half acre in area, and
is not contiguous to land owned by a state or local agency that is used for open-space or low- and
moderate-income housing purposes.
SECTION 3. Alternatively, the Council finds and declares the Lot T property is also exempt surplus land as
defined by Government Code section 54221(f)(1)(A) because the Lot T property will be developed to
provide 100% affordable housing; and the housing units will be deed-restricted to remain continually
affordable for the time required, and at the affordability levels, required by Government Code section
37364.
SECTION 4. The Council finds and declares that its determination that the Lot T property is exempt
surplus land is not a “project” as defined by the California Environmental Quality Act (CEQA) because
this determination does not authorize any disposition or entitle development of the property and is
therefore an administrative activity that will not result in direct or indirect physical changes in the
environment. CEQA Guidelines Section 15378(b)(4).
INTRODUCED AND PASSED: June ___, 2025
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Chief Assistant City Attorney
EXCLUSIVE NEGOTIATION AGREEMENT FOR THE
DEVELOPMENT OF AFFORDABLE HOUSING ON LOT T
PROPERTY BY AND BETWEEN THE CITY OF PALO ALTO
AND ALTA HOUSING CORPORATION
This EXCLUSIVE NEGOTIATION AGREEMENT (ENA) is entered into by and between the City OF PALO
ALTO, a chartered municipal corporation (City) and ALTA HOUSING, a California nonprofit public benefit
corporation (Developer) under the terms and conditions set forth below. The City and Developer shall
collectively be referred to herein as the “Parties” and individually as “Party.”
RECITALS
Cities across California are facing a severe housing shortage. The housing shortage is particularly acute in
the San Francisco Bay Area region, where the demand for housing—specifically affordable housing—
vastly exceeds the available supply.
The City’s 2023-2031 Housing Element seeks to develop significant additional housing in the City’s
downtown area to meet its Regional Housing Needs Allocation targets.
Program 1.4 of the City’s 2023-2031 Housing Element contemplates increasing the City’s affordable
housing stock through redevelopment of City-owned surface parking lots with a stated objective of
providing replacement public parking and 100% affordable housing units serving households earning up
to 80% of the Area Median Income or for workforce housing for City employees and Palo Alto Unified
School District employees.
The City is the fee title owner of a surface parking lot, APN 120-15-100, situated at the corner of Lytton
Avenue and Kipling Street in Palo Alto, CA (Lot T Property).
In furtherance of Housing Element Program 1.4, the City has identified the Lot T Property for
redevelopment with affordable housing.
In January 2023, the City issued a Request for Information seeking development concepts for affordable
housing and public parking structures on one or more of the City’s twelve surface parking lots in the
downtown and received submittals from two firms, Alta Housing and MidPen Housing.
In December 2023, the City directed City staff to solicit refined proposals that focused on redeveloping
the Lot T Property with 100% affordable housing.
In September 2024, the City issued a Request for Refined Proposals for an affordable housing
development (Project) on the Lot T Property from Alta Housing and MidPen Housing.
On December 2, 2024, the City Council approved a contract for design, environmental review, and
construction administration services for a new downtown parking garage on a City-owned surface
parking lot situated at the corner of Hamilton Avenue and Waverley Street (Lot D Garage). The Lot D
Garage is intended to provide replacement public parking in furtherance of Housing Element Program
1.4.
On January 21, 2025 the Palo Alto City Council directed City staff to enter into an exclusive negotiating
agreement with Alta Housing and provided preliminary direction on key project components, namely
parking, building height, and the number and composition of housing units.
The City and Developer wish to negotiate and reach agreement on the terms and conditions for the
ground lease of the Lot T Property and a project to design, construct, operate, and maintain an
affordable housing development, all in furtherance of Housing Element Program 1.4.
The purpose of this ENA is to establish the procedures and desired outcomes for the Parties’ negotiation
of a ground lease, project agreement, project financing, regulatory agreements, and any ancillary
agreements necessary to design, construct, and operate the affordable housing development on the Lot
T Property.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and
promises contained herein and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the City and Developer mutually agree as follows:
ARTICLE 1. Negotiations
A. Agreement Term.
This agreement shall commence on the date on which the agreement is executed by the Parties
(“Effective Date”). If the agreement is executed in counterparts, the Effective Date shall be the later of
the dates indicated on either counterpart. Unless earlier terminated in accordance with Article 3,
Section D, the Parties shall exclusively negotiate with one another in good faith regarding the items set
forth in Article 2 for a period of One Year (“Term”), commencing on the Effective Date, or as such Term
may be extended pursuant to Article 1, Section D below. The Term of this agreement shall be tolled
during any period of time in which either Party’s is enjoined from performing its obligations by order of
a court with competent jurisdiction.
B. Good Faith Negotiations
During the Term, the Parties shall negotiate a proposed Disposition and Development Agreement
(“DDA”) for the Project. The DDA shall incorporate provisions from the Term Sheet attached hereto and
incorporated herein as “Exhibit A” (the “Term Sheet”), which will be subject to modification, the
addition of greater details regarding the proposed Project, and such other matters as the Parties shall
mutually agree, as set forth in Article 2 below. The Term Sheet is not intended to be binding on either
Party, but rather to a starting point for the negotiations anticipated herein.
The parties shall meet and confer with one another as is reasonably necessary to discharge their
respective obligations under this ENA.
C. Scope of Exclusivity
During the Term, the City shall not: (1) solicit, receive, entertain, negotiate with, or consider any offers
or solicitations from any person or entity other than from Developer, to acquire or lease all or any
portion of the Lot T Property; (2) propose or process any legislative or administrative actions,
authorizations, or entitlements for any change of use of the Lot T Property from its present use other
than pursuant to this ENA; (3) conduct any public hearing to consider approve, or conditionally approve
any development of the Lot T Property other than pursuant to this ENA.
D. Extension of ENA Term by City
If this ENA has not been terminated in accordance with Article 3 Section D and Developer, as
determined by the Palo Alto City Manager (“City Manager”) in the exercise of his/her reasonable and
good faith discretion, is in substantial compliance with this ENA, and the Parties’ negotiation of the
items set forth in Article 2 have not been completed, the City Manager may approve an extension for up
to twelve (12) months.
E. Extension of ENA Term by Mutual Agreement of the Parties
If this ENA has not been terminated in accordance with Article 3 Section D and completion of the
Negotiation Tasks set forth in Article 2 is delayed, through no action or omission of Developer, then
Developer and the City Manager may mutually agree to an extension for a period no longer than twelve
(12) months. The Parties may agree to an extend this ENA under this Section separately from, or in
addition to, an extension granted by the City under Article 1 Section D above.
ARTICLE 2. Negotiation Tasks
A. Drafting of Disposition and Development Agreement (DDA)
The Parties will prepare a mutually acceptable DDA Term Sheet addressing and expanding upon each of
the issues identified in Term Sheet, including but not limited to the description, uses, configuration,
design, and timeline of a mutually acceptable Project.
The Parties shall agree upon a definition and timeline of key pre-development and development
milestones (e.g., design development drawings, entitlement submissions, etc.) that will form the basis of
Project progress in the DDA.
The Parties shall prepare a mutually acceptable DDA setting forth the terms and conditions upon which
Develop will lease the Lot T Property from the City consistent with the agreed upon DDA Term Sheet.
The Parties shall prepare mutually acceptable terms for property management and resident/supportive
services to be provided in connection with the Project.
B. Community Outreach and Engagement Plan
City and Developer will confer and jointly prepare a plan for community outreach and engagement
regarding the proposed Project.
C. Developer’s Obligations in Connection with Negotiation Tasks
Developer shall, at its sole cost and expense consistent with the proposed Project and the Term Sheet:
1. Retain such architects, engineers, market analysts, financial Developers, attorneys and
environmental consultant as are necessary to assist Developer in the discharge of its
responsibilities under this ENA.
2. During the Term, the Developer will prepare and submit the following to the City for
the DDA:
a.A proposed draft DDA Term Sheet, which builds from the Term Sheet at
Exhibit A;
b.A market feasibility study for all aspects of the Project;
c.A proposed draft DDA based upon and consistent with the DDA Term Sheet;
d.A detailed pro forma showing the financial feasibility for all aspects of the
Project consistent with the proposed draft DDA; and
e.Such additional analysis, information, documents and reports for the City’s
review, processing, and approval as are requested by the City to enable the
City to comply with its obligations.
C. City’s Obligations in Connection with Negotiation Tasks
1.Comply with the City’s lead agency responsibilities, as applicable, under the California
Environmental Quality Act (“CEQA”), subject to reimbursement for any necessary
environmental review documents.
2.The City shall retain such architects, engineers, market analysts, financial Developers,
attorneys and environmental and planning Developers as are necessary to assist the
City in the discharge of its obligations under this ENA.
D. Due diligence
1.Due Diligence. Developer shall conduct, at its sole cost and expense, all due diligence
investigation in connection with its potential lease of the Lot T Property and its
suitability for development of the Project as Developer deems appropriate and
necessary in its absolute and sole discretion.
2.Within thirty (30) business days after the Effective Date, the City will provide copies of
all leases, agreements, covenants, tests, surveys, maps, plans, records, studies,
reports, operating statements, rent rolls, property records, documents, permits and
entitlements and materials, soils and hazardous materials reports and other relevant
documents pertaining to the Lot T Property, that are in City’s possession or reasonable
control. City will reasonably cooperate with Developer as required in connection with
all of Developer’s due diligence investigations, at Developer’s sole cost and expense,
and will timely provide Developer with all additional documents and other materials in
City’s possession or control reasonably requested by Developer.
3.During the term of this ENA, Developer and its representatives may, during normal
business hours and upon not less than one (1) business day prior notice (which may be
oral notice) to City, enter upon the Lot T Property to conduct such inspections,
investigations and tests of the Lot T Property (including, but not limited to geologic,
soil and water testing) as Developer deems appropriate in its sole and absolute
discretion. Prior to entering upon the the Lot T Property to conduct any invasive or
potentially destructive testing, including without limitation a Phase II environmental
survey or any testing or investigation that might disrupt or materially interfere with
City’s normal use of the Lot T Property or cause physical disturbance or damage to the
Lot T Property or any buildings or infrastructure thereon, Developer shall obtain City’s
written approval of a written scope of work and protocol prepared by Developer for
conducting such invasive or potentially destructive testing. Developer shall conduct its
invasive or potentially destructive testing only in accordance with such approved
protocol. Upon the conclusion of Developer’s inspections, investigations and tests,
Developer shall promptly restore the Lot T Property to substantially the same
condition as it was in prior to such inspections, investigations and tests at Developer’s
sole cost and expense. Developer shall cause Developer’s inspections, investigations
and tests to be conducted (i) in a safe and professional manner, (ii) so as not to create
any dangerous or hazardous condition on or the Lot T Property, and (iii) in compliance
with all applicable laws and only after obtaining all permits required to be obtained
with respect to such activities. Developer shall have no obligation to repair any
problems or defects disclosed by Developer’s inspections, investigations and tests.
Upon City’s request thereof, Developer shall provide copies of all tests and reports
generated in connection with Developer’s investigation activities on the Lot T
Property, at no cost to City. Developer shall indemnify, hold harmless, and defend City,
its officers, employees and agents from and against any and all claims, demands, suits,
liabilities, losses, damages and payments, including reasonable attorney fees and court
costs, claimed or made against City, its officers, employees or agents resulting from or
arising out of Developer’s inspection activities on the Lot T Property, except to the
extent caused by City’s gross negligence or willful misconduct. Developer and
Developer’s contractors performing any work or conducting any investigations on the
Lot T Property, if any, shall obtain and maintain in full force and effect during the
Term, insurance consistent with the requirements in Attachment One to this ENA
which is incorporated herein by this reference.
E. Planning Approvals
The Parties acknowledges that the proposed Project will require the City’s approval of certain land use
or other discretionary approvals and/or other entitlements and permits (collectively, “Entitlements”).
Developer will be required to obtain any and all discretionary approvals and Entitlements for the
proposed Project.
Developer shall be responsible for submitting all planning applications and required information
required for Entitlements, including, but not limited to site plans, preliminary designs, building plans and
specifications for the proposed Project.
The Parties acknowledge and agree that: (1) nothing in this ENA shall obligate the City to approve any
Entitlement, approve the DDA, or sell or convey all or any part of the Property to Developer; (2) nothing
in this ENA shall obligate Developer to enter into the DDA, acquire, or lease all or any part of the
Property from the City, or develop all or any part of the Project.
ARTICLE 3. General Terms and Conditions
A. Notices
Formal notices, demands and communications between the City and Developer shall be sufficiently
given if, and shall not be deemed given unless, dispatched by certified mail, postage prepaid, return
receipt requested, or sent by express delivery or overnight courier service, to the office of the Parties
shown as follows, or such other address as the Parties may designate in writing from time to time:
To City:
City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Ed Shikada, City Manager
With a Copy to:
Jonathan Lait, Director of Planning and Development Services
To Developer:
Alta Housing
3460 West Bayshore Road, Suite 104
Palo Alto, CA 94303
Attn: Randy Tsuda, President and CEO
Such formal notices, demands and communications shall be effective on the date shown on the delivery
receipt as the date delivered or the date on which delivery was refused. For purposes of obligations to
be performed by the City or of calculation of noticing under this Agreement, a business day on which the
City is closed will not constitute a business day under this Agreement.
B. Limited Right of Entry to Property
During the Term of this Agreement, Developer shall have the right to enter upon the Property for
purposes of fulfilling the terms, conditions, and obligations of this Agreement, including but not limited
to Developer’s due diligence tasks described in Article 2.
C. Defaults and Remedies
1. Default. If a Party defaults with regard to any of the provisions of this Agreement, then the non-
defaulting Party shall give formal notice of a default to the defaulting Party, specifying the
nature of the default and the required action to cure the default. If a default remains uncured
thirty (30) calendar days after receipt by the defaulting Party of such formal notice, the non-
defaulting Party may immediately exercise the remedies set forth in Paragraph 2, below. If such
default cannot reasonably be satisfactorily cured in such thirty-day (30-day) period, then,
provided Developer has and continues to diligently pursue the cure, Developer shall have up to
such additional time as is reasonably necessary to cure, but in no event more than ninety (90)
days to cure, satisfactorily, the failure or material breach, as long as Developer has initiated the
cure of the same within such thirty-day (30-day) period and thereafter diligently prosecutes
such cure to completion.
2. Remedies. Neither Party would have agreed to any part of this ENA if it were to be liable to the
other Party for any amount of monetary damages. Accordingly, except for a default or breach of
Developer with respect to Developer’s indemnification, defense and hold harmless obligations
set forth in this ENA or any amendment thereto, for which the City shall have all remedies
available at law or in equity, the non-defaulting Party’s sole and exclusive remedy in the event of
an uncured default by the City or Developer shall be to terminate this Agreement or seek
specific performance of this ENA, as applicable. Following such termination, no Party shall have
any further duties, obligations, rights, or liabilities under this Agreement, except that
Developer’s indemnification, defense and hold harmless obligations set forth in this Agreement
shall survive such termination and be enforceable against Developer. The prevailing Party in any
action brought pursuant to this subsection shall also be entitled to an award of actually incurred
and reasonable attorney’s fees and costs.
3. No Liability. Except as expressly provided in Paragraphs 1 and 2, above, no Party shall have any
liability to any other Party for damages or otherwise for any default or breach, nor shall any
Party have any other claims with respect to performance under this Agreement. Each Party
specifically waives and releases any such rights or claims it may otherwise have at law or in
equity.
D. Termination
1. Failure of Good Faith Negotiations. Either Party may terminate this ENA at any time by formal
notice given in accordance with Section A above to the other Party in the event that the
terminating Party is in compliance with its obligations under the ENA and the Parties, after good
faith negotiations in accordance with this ENA, have been unable to agree on a mutually
acceptable Project and proposed DDA for processing by the City.
2. Termination after City Council Consideration. In the event this ENA is not otherwise terminated
pursuant to the provisions of this Section D, this ENA shall automatically be terminated at the
end of the Term, unless extended as otherwise provided herein, whether or not the parties
were able to successfully negotiate a proposed DDA for the Project. This ENA shall automatically
terminate after the City Council’s consideration and final actions regarding the proposed DDA
and the City’s Discretionary Actions, in which case this ENA shall be superseded by the City
Council’s final actions regarding the DDA and the City’s Discretionary Actions, whether approved
or denied by the City Council.
3. Developer’s Breach. In the event Developer materially breaches any of its obligations under this
ENA, then, provided the City is not in material breach of its obligations, the City Manager may
terminate this ENA provided the City has given Developer formal notice of the failure or material
breach and Developer has failed to cure such failure or material breach in the allowable period.
4. Termination as a Result of Litigation. If the Parties mutually determine, in their reasonable
discretion, that City’s performance of its obligations under this ENA will be made impossible or
impracticable as a result of litigation initiated by a third party then either or both Parties may
terminate this Agreement upon 30 days' written notice. Such termination will be effective on
the date stated in the notice. Notwithstanding any provision in this ENA to the contrary,
Developer shall be entitled to reimbursement of its actual costs to the date of such termination
incurred in connection with its performance of its obligations under this ENA, which
reimbursement shall not exceed Two Hundred Thousand Dollars ($200,000.00). As used in this
paragraph, the phrase actual costs shall mean costs, including Developer staff time, and
expenses incurred and paid by Developer to third party architects, consultants, and engineers
hired by Developer for the performance of Negotiation Tasks from the effective date of this ENA
through the effective date of termination. Developer shall request reimbursement in writing and
provide an accounting of actual costs, along with any other supporting documentation
reasonably request by City. City shall use reasonable efforts to provide reimbursement in a
prompt manner, not to exceed ninety (90) days from the date of receipt of the reimbursement
request and supporting documentation. All of Developer’s work product, including but not
limited to designs, drawings, analyses, and applications for funding assistance, shall become the
sole property of City, and Developer agrees to execute all necessary documents to assign all
rights, title, and interest in such work product to City.
E. Assignment
Developer understands the City is entering into this Agreement based on the experience and
qualifications of Developer and of the key individuals representing or employed by Developer as of the
date of this Agreement. Therefore, Developer will not assign, sell, or otherwise transfer any or all of its
rights under this Agreement, or interest herein, without the prior written approval of the City, which
approval may be withheld in the City’s sole and absolute discretion. Further, no voluntary or involuntary
successor in interest of Developer will acquire any rights or powers under this Agreement except as
expressly set forth herein. For the reasons cited herein, Developer represents and agrees for itself and
any successor in interest that prior to the expiration of the Term, and without the prior written approval
of the City (which approval may be withheld in the City’s sole and absolute discretion), there will be no
significant change in the management or control of Developer. Developer will promptly notify the City of
all changes whatsoever in the identity of the parties in control of or exercising the management of
Developer, or the degree of control or management, of which it or any of its officers have been notified
or otherwise have knowledge or information. This Agreement may be terminated by the City if there is
any significant change (voluntary or involuntary) in membership, management or control, of Developer.
For purposes of this paragraph, a significant change will mean any change in the identity of the CEO,
President, or similar person or persons having ultimate control over the day to day management of
Developer, or the appointment of a receiver or trustee to operate or exercise direct or indirect control
over Developer). Periodic, routine changes in membership that cumulatively affect less than 50% of the
membership of the Developer’s board of directors will not be considered a “significant change”.
F. No Third-Party Beneficiaries.
This Agreement is made and entered into solely for the benefit of the City and Developer and no other
person shall have any right or cause of action under or by reason of this Agreement.
G. Governing law; venue.
This Agreement and the legal relations between the Parties will be governed by and enforced in
accordance with the Palo Alto Municipal Code and the laws of the State of California without reference
to the rules governing the conflict of laws. This Agreement is made and entered into in the County of
Santa Clara, California, and any legal actions or proceedings arising from or related to this Agreement
will be brought in the Superior Court of California, County of Santa Clara.
H. Time is of Essence
Time is of the essence of every portion of this Agreement in which time is a material part.
I. Headings/Captions
The headings and captions of the various sections and paragraphs of this Agreement have been inserted
only for the purpose of convenience and are not a part of this Agreement and will not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this Agreement.
J. Severability
Every provision of this Agreement is intended to be severable. If any provision of this Agreement or the
application of any provision hereof to any Party or circumstance is declared to be illegal, invalid or
unenforceable for any reason whatsoever by statute or a court of competent jurisdiction, such invalidity
will not affect the other terms and provisions hereof or the application of the provision in question to
any other Party or circumstance, all of which will continue in full force and effect.
K. Waivers/Amendments
All waivers of the provisions of this Agreement must be in writing and signed by the appropriate
authorities of the Party to be charged, and all amendments and modifications hereto must be in writing
and signed by the appropriate authorities of the Parties. Except as otherwise expressly provided in this
Agreement, any failure or delay by any Party in asserting any of its rights or remedies as to any default
will not operate as a waiver of said default or of any rights or remedies in connection therewith or of any
subsequent default or any rights or remedies in connection therewith, or deprive such Party of its right
to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or
enforce any such rights or remedies.
L. Independent Contractor
Developer acknowledges and agrees that Developer and any agent or employee of Developer will act as
and shall be deemed at all times to be an independent contractor and shall be wholly responsible for the
manner in which Developer performs the Services requested by City under this Agreement. Developer
and any agent or employee of Developer will not have employee status with City, nor be entitled to
participate in any plans, arrangements, or distributions by City pertaining to or in connection with any
retirement, health or other benefits that City may offer its employees. Developer will be responsible for
all obligations and payments, whether imposed by federal, state or local law, including, but not limited
to, FICA, income tax withholdings, workers’ compensation, unemployment compensation, insurance,
and other similar responsibilities related to Developer’s performance of the Services, or any agent or
employee of Developer providing same. Nothing in this Agreement shall be construed as creating an
employment or agency relationship between City and Developer or any agent or employee of
Developer. Any terms in this Agreement referring to direction from City shall be construed as providing
for direction as to policy and the result of Developer’s provision of the Services only, and not as to the
means by which such a result is obtained.
M. Conflicts of Interest
In executing this Agreement, Developer covenants that it presently has no interest, and will not acquire
any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with
the performance of the Services.
Developer further covenants that, in the performance of this Agreement, it will not employ
subcontractors or other persons or parties having such an interest. Developer certifies that no person
who has or will have any financial interest under this Agreement is an officer or employee of City; this
provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal
Code and the Government Code of the State of California, as amended from time to time. Developer
agrees to notify City if any conflict arises.
If the Developer meets the definition of a “Consultant” as defined by the Regulations of the Fair Political
Practices Commission, Developer will file the appropriate financial disclosure documents required by the
Palo Alto Municipal Code and the Political Reform Act of 1974, as amended from time to time.
N. Nondiscrimination; Compliance with the Americans with Disabilities Act
As set forth in Palo Alto Municipal Code Section 2.30.510, as amended from time to time, Developer
certifies that in the performance of this Agreement, it shall not discriminate in the employment of any
person due to that person’s race, skin color, gender, gender identity, age, religion, disability, national
origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital
status, familial status, weight or height of such person. Developer 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 agrees to meet all
requirements of Section 2.30.510 pertaining to nondiscrimination in employment.
Developer understands and agrees that pursuant to the Americans with Disabilities Act (“ADA”),
programs, services and other activities provided by a public entity to the public, whether directly or
through a contractor or subcontractor, are required to be accessible to the disabled public. Developer
will provide the Services specified in this Agreement in a manner that complies with the ADA and any
other applicable federal, state and local disability rights laws and regulations, as amended from time to
time. Developer will not discriminate against persons with disabilities in the provision of services,
benefits or activities provided under this Agreement.
O. Environmentally Preferred Purchasing and Zero Waste Requirements
Developer shall comply with the City’s Environmentally Preferred Purchasing policies which are available
at City’s Purchasing Department, hereby incorporated by reference and as amended from time to time.
Developer shall comply with waste reduction, reuse, recycling and disposal requirements of City’s Zero
Waste Program. Zero Waste best practices include, first, minimizing and reducing waste; second,
reusing waste; and, third, recycling or composting waste. In particular, Developer shall comply with the
following Zero Waste requirements:
1. All printed materials provided by Developer to City generated from a personal computer and
printer including but not limited to, proposals, quotes, invoices, reports, and public
education materials, shall be double-sided and printed on a minimum of 30% or greater
post-consumer content paper, unless otherwise approved by City’s Project Manager. Any
submitted materials printed by a professional printing company shall be a minimum of 30%
or greater post-consumer material and printed with vegetable-based inks.
2. Goods purchased by Developer on behalf of City shall be purchased in accordance with
City’s Environmental Purchasing Policy including but not limited to Extended Producer
Responsibility requirements for products and packaging. A copy of this policy is on file at the
Purchasing Department’s office.
3. Reusable/returnable pallets shall be taken back by Developer, at no additional cost to City,
for reuse or recycling. Developer shall provide documentation from the facility accepting the
pallets to verify that pallets are not being disposed.
P. Counterparts.
This Agreement may be executed in counterparts, each of which when so executed will be deemed an
original, and all of which, when taken together, will constitute but one and the same instrument.
Q. Entire Agreement.
This Agreement represents the entire agreement of the Parties hereto and integrates all of the terms
and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous
agreements, oral or written, between the Parties with respect to acquisition and development of the
Property or the proposed Project.
For Alta Housing: For City of Palo Alto:
____________________
____________________
Name: Ed Shikada
Title: City Manager
Date:_______________ Date:_______________
Approved as to form
_________________
Caio Arellano
Chief Assistant City Attorney
City of Palo Alto - Lot T Affordable Housin
Scenario A - 54 Units Updated 6/4/202
UNIT MI
Unit Size No. Units % AMI RRH Units Family PB Base Rent Subsid Income
1 BR 10 30% 10 114,960 114,960
2 BR 8 30% 2 6 109,248 135,936 245,184
3 BR 9 30% 2 7 140,616 216,216 356,832
3 BR 3 50% 3 81,396 58,140 139,536
1 BR 13 60% 311,220 311,220
2 BR 6 60% 171,504 171,504
3 BR 4 60% 131,520 131,520
2 BR 1 Mgr Unit 0
TOTAL 54 44.2% 14 16 1,060,464 410,292 1,470,756
PERMANENT SOURCES
Amoun Per Unit Interest Term-Yrs DCR
Permanent Loan 7,373,950 136,555 7.14% 35 1.15
CA HCD MHP 13,500,000 250,000 3% 55
City of Palo Alto 4,140,000 76,667 3% 55
Gap (County, Regional, FHLB) 2,034,314 37,672
Equity from LIHTC (Federal & State) 30,802,206 570,411
Total Sources 57,850,470 1,071,305
CONSTRUCTION SOURCES
Amoun Per Unit Interest Term-Mos
Tax Exempt Construction Loan 29,090,000 538,704 7.16% 28
Taxable Construction Loan 18,921,454 350,397 7.26% 28
City of Palo Alto 4,140,000 76,667 3% 28
Costs Deferred until Perm Closing 2,618,795 48,496
Equity from LIHTC 3,080,222 57,041
Total Sources 57,850,470 1,071,305
USES
Amoun Per Unit
Hard Costs 41,345,415 765,656
Design & Engineering 2,139,801 39,626
Development Impact & Permit Fees 986,205 18,263
Insurance During Construction 1,364,399 25,267
Developer Fee 2,500,000 46,296
Other Soft Costs 2,134,717 39,532
Financing Costs 7,379,932 136,665
Total Development Cost 57,850,469 1,071,305
CASH FLOW ANALYSI
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Gross Potential Income
Gross TCAC Rent 1,060,464 1,086,976 1,114,150 1,142,004 1,170,554 1,199,818 1,229,813 1,260,558
Section 8 Incremental Income 410,292 420,549 431,063 441,840 452,886 464,208 475,813 487,708
Miscellaneous Income 6,750 6,919 7,092 7,269 7,451 7,637 7,828 8,024
Less Vacancy/Loss - TCAC Rents (53,023) (54,349) (55,707) (57,100) (58,528) (59,991) (61,491) (63,028)
Less Vacancy/Loss - Sec 8 Incr (20,515) (21,027) (21,553) (22,092) (22,644) (23,210) (23,791) (24,385)
Effective Gross Income 1,403,968 1,439,067 1,475,044 1,511,920 1,549,718 1,588,461 1,628,173 1,668,877
Less Operating Expenses (648,000) (670,680) (694,154) (718,449) (743,595) (769,621) (796,557) (824,437)
Less Replacement Reserve (27,000) (27,000) (27,000) (27,000) (27,000) (27,000) (27,000) (27,000)
Less HCD Annual Fee 0.42%(56,700) (56,700) (56,700) (56,700) (56,700) (56,700) (56,700) (56,700)
Less City Annual Fee 125 (12,150) (12,150) (12,150) (12,150) (12,150) (12,150) (12,150) (12,150)
Net Operating Income 660,118 672,537 685,040 697,621 710,273 722,990 735,765 748,590
Less Debt Service (574,016) (574,016) (574,016) (574,016) (574,016) (574,016) (574,016) (574,016)
Less Issuer Fee 4,000 (4,000) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000)
Net Cash Flow, First Cut 82,102 94,522 107,024 119,605 132,257 144,975 157,749 170,574
Debt Coverage Ratio 1.15 1.17 1.19 1.22 1.24 1.26 1.28 1.30
Less Ptrship Mgmt Fee - LP 7,500 (7,500) (7,725) (7,957) (8,195) (8,441) (8,695) (8,955) (9,224)
Less Ptrship Mgmt Fee - GP 19,500 (19,500) (20,085) (20,688) (21,308) (21,947) (22,606) (23,284) (23,983)
Net Cash Flow, 2nd Cut 55,102 66,712 78,380 90,102 101,869 113,674 125,510 137,368
Deferred Fee/Incentive Mgmt Fee 33%(18,349) (22,215) (26,101) (30,004) (33,922) (37,854) (41,795) (45,743)
Cash Distribution
CA HCD 13,500,000 69.1%(25,400) (30,751) (36,130) (41,533) (46,957) (52,399) (57,855) (63,321)
Gap Source 2,034,314 10.4%(3,828) (4,634) (5,444) (6,259) (7,076) (7,896) (8,718) (9,542)
Cit 4,000,000 20.5%(7,526) (9,111) (10,705) (12,306) (13,913) (15,526) (17,142) (18,762)
19,534,314 100.0%
Remaining Cash Flow 0 0 (0) (0)0 (0)0 0
Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15
Gross Potential Income
Gross TCAC Rent 1,292,072 1,324,374 1,357,484 1,391,421 1,426,206 1,461,861 1,498,408
Section 8 Incremental Income 499,901 512,398 525,208 538,339 551,797 565,592 579,732
Miscellaneous Income 8,224 8,430 8,641 8,857 9,078 9,305 9,538
Less Vacancy/Loss - TCAC Rents (64,604) (66,219) (67,874) (69,571) (71,310) (73,093) (74,920)
Less Vacancy/Loss - Sec 8 Incr (24,995) (25,620) (26,260) (26,917) (27,590) (28,280) (28,987)
Effective Gross Income 1,710,599 1,753,364 1,797,198 1,842,128 1,888,181 1,935,386 1,983,770
Less Operating Expenses (853,292) (883,157) (914,068) (946,060) (979,172) (1,013,444) (1,048,914)
Less Replacement Reserve (27,000) (27,000) (27,000) (27,000) (27,000) (27,000) (27,000)
Less HCD Annual Fee 0.42%(56,700) (56,700) (56,700) (56,700) (56,700) (56,700) (56,700)
Less City Annual Fee 125 (12,150) (12,150) (12,150) (12,150) (12,150) (12,150) (12,150)
Net Operating Income 761,457 774,356 787,280 800,218 813,159 826,092 839,006
Less Debt Service (574,016) (574,016) (574,016) (574,016) (574,016) (574,016) (574,016)
Less Issuer Fee 4,000 (4,000) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000)
Net Cash Flow, First Cut 183,441 196,341 209,264 222,202 235,143 248,076 260,990
Debt Coverage Ratio 1.33 1.35 1.37 1.39 1.42 1.44 1.46
Less Ptrship Mgmt Fee - LP 7,500 (9,501) (9,786) (10,079) (10,382) (10,693) (11,014) (11,344)
Less Ptrship Mgmt Fee - GP 19,500 (24,702) (25,443) (26,206) (26,993) (27,802) (28,636) (29,495)
Net Cash Flow, 2nd Cut 149,238 161,112 172,978 184,827 196,647 208,426 220,151
Deferred Fee/Incentive Mgmt Fee 33%(49,696) (53,650) (57,602) (61,548) (65,484) (69,406) (73,310)
Cash Distribution
CA HCD 13,500,000 69.1%(68,792) (74,266) (79,736) (85,198) (90,646) (96,076) (101,480)
Gap Source 2,034,314 10.4%(10,366) (11,191) (12,015) (12,838) (13,659) (14,478) (15,292)
Cit 4,000,000 20.5%(20,383) (22,005) (23,625) (25,244) (26,858) (28,467) (30,068)
19,534,314 100.0%
Remaining Cash Flow (0) (0) (0) (0)0 0 (0)
Exhibit A
From:Leif Erickson
To:Council, City
Cc:Leif Erickson
Subject:Letter in support of Alta Housing for meeting of June 17 - Agenda items 4. and 10.
Date:Monday, June 16, 2025 5:21:42 PM
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Dear Palo Alto City Council Members,
I'm writing to support the selection of Alta Housing on June 17 for agenda items 4. and 10.
#4. is the approval of Alta Housing to develop the surface parking lot at Kipling and Lytton
for Affordable Housing.
I respect the housing expertise of Alta Housing and encourage you to move forward with this
initiative to convert this surface parking lot into affordable housing, relying on the leadership
of Alta Housing for management of this initiative.
#10. In addition, I encourage you to approve the Professional Contract with Alta Housing
BMR Services for Administration and Consulting Services for the City's below market rate
housing program. I look forward to seeing the good things that develop from this important
initiative. I have great respect for the expertise of Alta Housing and their director Randy Tsuda
and encourage you to select this respected community leader in housing solution analysis and
project development to make real progress for our community.
Thank you for your leadership in this important area.
Leif Erickson
--
Leif Erickson
4075 Laguna Way
Palo Alto CA 94306
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From:Patty Irish
To:Council, City
Subject:Request Action for Tuesday, June 17, Council meeting
Date:Monday, June 16, 2025 1:44:43 PM
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Dear Mayor Lauing and Council Members,
I ask you to approve an exclusive negotiating agreement with Alta
Housing to develop the parking lot at the corner of Kipling Street
and Lytton Avenue into affordable housing.
Alta Housing has a very successful housing record with Palo Alto
and will select some families with a history of homelessness to
occupy some units.
Alta Housing has excellent screening and support services to offer
residents.
Please enable them to get started now in putting together the
steps needed to bring this to a reality.
Thank you for your consideration of this valued development.
Patty Irish
850 Webster St. #628
Palo Alto, CA 94301
--
Patty Irish
850 Webster St. #628
Palo Alto, CA 94301
650-324-7407
650-245-3906 cell
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