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2016-04-04 City Council Agenda Packet
City Council 1 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. April 4, 2016 Regular Meeting Council Chambers 6:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday 10 days preceding the meeting. 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 Special Orders of the Day 6:00-6:15 PM 1.Selection of Applicants to Interview on April 28, 2016 for the Human Relations Commission, the Library Advisory Commission, and the Utilities Advisory Commission 2.Acknowledgement of Recipients of Mayor's “Green Business Leader Award" Study Session 6:15-7:15 PM 3.Open Data Presentation 7:15-8:30 PM 4.Prescreening of a Proposed Hotel Development at 3200 El Camino Real That Requires a Variance or Ordinance Amendment to Modify or Eliminate the 50'-0" Special Setback Along Hansen Way REVISED 2 April 4, 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. Agenda Changes, Additions and Deletions City Manager Comments 8:30-8:40 PM Oral Communications 8:40-8:55 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Minutes Approval 8:55-9:00 PM 5.Approval of Action Minutes for the March 21, 2016 Council Meeting Consent Calendar 9:00-9:05 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 6.Approval of Change Order Number 9 in the Amount of $267,607 to Contract Number C15156474 With MP Nexlevel of California, Inc. for Additional Trenching and Installation Work on Utilities Underground District Number 47; and Approval of a Budget Amendment in the Electric Fund in Fiscal Year 2016, Offset by a Reduction of $96,000 From the Electric Fund Distribution Reserve to Complete the Installation of Underground Substructures for Underground Utility District Number 47 7.Approval of a Wastewater Treatment Fund Contract With PSCIndustrial Outsourcing, Inc. in a Total Amount Not-to-Exceed $483,703.56 for a Three-Year Term to Transport and Dispose of Ash and Sludge for the Regional Water Quality Control Plant 8.Approval of an Amendment (Addendum No. 1) to the First Amended and Restated Contract Number C059999 Between the Cities of Palo Alto and Mountain View for Recycled Water Supplies- STAFF REQUESTS THIS ITEM BE MOVED TO ACTION 9.Approval of the Stanford University Medical Center Annual Report and Compliance With the Development Agreement 10.Approval of a Contract With Macias Gini & O'Connell LLP (MGO) in an Amount Not-to-Exceed $875,569 (Including 10 Percent Contingency Fee) for External Financial Audit Services for Fiscal Years Ending June 30, 2016 Through June 30, 2020 11.Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of December 31, 2015 3 April 4, 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. Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 9:45-11:00 PM 12.Fiscal Years 2017 to 2026 General Fund Long Range Financial Forecast (Continued From March 14, 2016) 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. 11A.Discussion of the City of Palo Alto's Recycled Water Programs and Approval of an Amendment (Addendum No. 1) to the First Amended and Restated Contract Number C059999 Between the Cities of Palo Alto and Mountain View for Recycled Water Supplies 9:05-9:45 PM Additional Recycled Water Information CITY OF PALO ALTO OFFICE OF THE CITY CLERK April 4, 2016 The Honorable City Council Palo Alto, California Selection of Applicants to Interview on April 28, 2016 for the Human Relations Commission, the Library Advisory Commission, and the Utilities Advisory Commission Staff is requesting the City Council select the candidates to be interviewed for two terms (O’Nan and Stone), on the Human Relations Commission, two terms (Chin and Moss) on the Library Advisory Commission, three terms (Eglash, Foster, and Schwartz) on the Utilities Advisory Commission, ending on May 31, 2019 and one unexpired term (Hall) on the Utilities Advisory Commission, ending on May 31, 2017. Interviews are scheduled for Thursday, April 28, 2016 at 6:00 P.M. Each Council Member will receive a selection sheet to use in determining who will be interviewed. Copies of all applications are attached. Some applications may be redacted at the request of the applicant. A full set of non-redacted applications will be emailed to Council Members directly. Recommendation The requested action is for each Council Member to fill out the selection sheet indicating which of the candidates they wish to interview. The City Clerk will announce who will be interviewed at the same meeting. Candidates who receive five or more votes will be scheduled for an interview. Background On February 22, 2016, the City Clerk’s Office received notice of Garth Hall’s resignation effective May 31, 2016. Applicants Human Relations Commission (Two Terms) 1. Jill O’Nan (Incumbent) 2. Tony Putulin 3. Greer Stone (Incumbent) Library Advisory Commission (Three Terms) 1. Alan Betten 2. Sheena Chin (Incumbent) 3. Natasha Kachenko 4. Bob Moss (Incumbent) Utilities Advisory Commission (Three Full Terms/One Unexpired Term) 1. Chris DiBona 2. Lisa Forssell Page 2 3. A.C. Johnston 4. Henrik Morkner 5. William Ross 6. Judith Schwartz (Incumbent) 7. Terry Trumbull ATTACHMENTS: Attachment A: HRC - Stone, Greer (PDF) Attachment B: HRC - O'Nan, Jill (PDF) Attachment C: HRC - Putulin, Tony (PDF) Attachment D: LAC - Betten, Alan (PDF) Attachment E: LAC - Chin, Sheena (PDF) Attachment F: LAC - Kachenko, Natasha (PDF) Attachment G: LAC - Moss, Bob (PDF) Attachment H: UAC - DiBona, Chris (PDF) Attachment I: UAC - Forssell, Lisa (PDF) Attachment J: UAC - Johnston, AC (PDF) Attachment K: UAC - Morkner, Henrik (PDF) Attachment L: UAC - Ross, William (PDF) Attachment M: UAC - Schwartz, Judith (PDF) Attachment N: UAC - Terry Trumbull (PDF) Department Head: Beth Minor, City Clerk Page 3 Employment Present or Last Employer: Occupation: Describe your involvement in community activities, volunteer and civic organizations: 1. What is it about the Human Relations Commission that is compatible with your experience and of specific interest to you, and why? Page 2 Human Relations Commission Self-employed Writer and editor For the past six years I have served as a volunteer human relations commissioner. During that time, I have led a number of key projects, including a citywide human needs assessment requested by Council, an RFP process to allocate incremental HSRAP funds, a senior summit to identify service gaps impacting elders, and a new series of community forums sponsored by the HRC. In addition, I have had the pleasure of participating in many of the City's community outreach events. These include the annual May Day parade, the July 4th chili cook-off, World Music Day, and the Our Palo Alto series of community dialogs. Finally I have participated in a number of events hosted or sponsored by local nonprofit agencies, including YCS, PAHC, and DreamCatchers. Two recent highlights for me were serving as a judge for a student film contest sponsored by Digital Leaders, a PAHC youth program, and giving the keynote to a group of YCS campers who had just finished learning about environmental impacts in the Bay Area. As a long-time Palo Alto resident, I have deep roots in this community and I care greatly about its future. For many years I rented an apartment in the Ventura neighborhood and witnessed firsthand the struggles that many of our less affluent residents face. Even after purchasing a small condo in a "better" neighborhood with much wealthier neighbors, I continue to be struck by how many Palo Alto residents struggle with issues such as transportation, nutrition, loneliness, and depression. The HRC plays a major role in working with local agencies that help people of all ages, cultures and income levels overcome these barriers. The HRC also plays a major role in bringing community needs to the attention of Council--and then working with Council and City staff to fill in service gaps where possible. The ability to have this kind of positive impact on Palo Alto residents is what drew me to serve on the HRC in the first place, and it continues to draw me today. 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. 3. If appointed, what specific goals would you like to see the Human Relations Commission achieve, and why? How would you suggest accomplishing this? Page 3 Human Relations Commission Recently the HRC launched a new learning series called "The Immigrant Experience." As part of this series, immigrants from other countries are invited to share their experience of moving to Palo Alto with the HRC. Two guest speakers from China spoke very poignantly about how isolated they feel in Palo Alto, despite the fact that both speak very good English. Although they have not experienced overt racism, they do not feel welcome outside the Chinese community. Hearing about their experiences made me realize how important it is to reach out to new residents and help them engage with the wider community, not just their own cultural or ethnic group. Two of my colleagues on the HRC, Valerie Stinger and Theresa Chen, are now working with City staff and a representative from Joe Simitian's office to develop a "welcome packet" for new Palo Alto residents. The HRC is also exploring the possibility of sponsoring a diversity day celebration that will bring residents from various backgrounds together so they can share their cultural traditions and learn about other traditions as well. The HRC has a broad charter to ensure all residents have access to the City's many amenities. Within that charter, here are some specific goals I would like the HRC to achieve: Sponsor 3 to 4 community forums a years to provide a safe place where residents can learn about and discuss sensitive topics such as: mental illness, elder abuse, and drug addiction. These events will be organized by teams of commissioners in concert with the Community Services Department. Facilitate collaboration among our local social service providers to address service gaps affecting seniors, the unhoused, low-income youth, and other sometimes marginalized groups. This can be done informally by connecting service providers with complementary interests, or formally by hosting a conference or "summit"-type event. Partner with City staff and other commissions to help plan and implement better services for residents, such as improved shuttle routes and service. This will involve assigning a liaison or forming a subcommittee to work with these outside groups. Continue to support and advocate for agencies that receive HSRAP funding. The HRC can best do that by conducting regular site visits, carefully reviewing agency proposals, working with the City Manager's office to recommend budget increases when appropriate, and alerting Council when urgent needs in the community arise. Employment Present or Last Employer: Occupation: Describe your involvement in community activities, volunteer and civic organizations: 1. What is it about the Library Advisory Commission that is compatible with your experience and of specific interest to you, and why? Page 2 Library Advisory Commission DocuSign Envelope ID: 21689B17-CB61-44F2-9ACB-CBF72574B677 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here:LINK. 3. If appointed, what specific goals would you like to see the Library Advisory Commission achieve, and why? How would you suggest accomplishing this? Page 3 Library Advisory Commission DocuSign Envelope ID: 21689B17-CB61-44F2-9ACB-CBF72574B677 DocuSgn Enveope 10: F47625B6 52F6 4CAB 8564 D01265BA2583 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: JEL I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. ~) ~r:quest that the City of Palo Alto redact my home address, phone numbers, and email address l ~ from the attached Board and Commission Application prior to posting to the City's website. I am providing the following alternate information and request that they use the following contact information instead. Address: 1050 N California Ave, Palo Alto, Ca 94303 Cell Phone: 0 Home /Ootfice Phone: E-mail: chris@dibona.com Date: 2/23/2016 2/24/2016 Page 4 Personal Information Name: Address: Cell Phone: __Home / __Office Phone: E-mail: Are you a Palo Alto Resident? __ Yes __ No Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Commissioners or Board Members? __ Yes __ No Are you available and committed to complete the term applied for?__ Yes __ No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? __ Yes __ No Excluding your principal residence, do you own real property in Palo Alto?__ Yes __ No How did you Learn about the vacancy on the Utilities Advisory Commission? __ Community Group __ Email from City Clerk __ Palo Alto Weekly __ Daily Post __ City Website __ Flyer Other: ______________________________________________________________________________ List relevant education, training, experience, certificates of training, licenses, or professional registration: Page 1 Utility Advisory Commission DocuSign Envelope ID: B5130B6F-5E60-4AF5-B6B7-4E2F678E5EE3 Employment Present or Last Employer: Occupation: Describe your involvement in community activities, volunteer and civic organizations: 1. What is it about the Utilities Advisory Commission that is compatible with your experience and of specific interest to you, and why? Page 2 Utility Advisory Commission DocuSign Envelope ID: B5130B6F-5E60-4AF5-B6B7-4E2F678E5EE3 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here:LINK. 3. If appointed, what specific goals would you like to see the Utilities Advisory Commission achieve, and why? How would you suggest accomplishing this? Page 3 Utility Advisory Commission DocuSign Envelope ID: B5130B6F-5E60-4AF5-B6B7-4E2F678E5EE3 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, “No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual.” The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City’s website. The full code can be read here: LINK Read the code, and check only ONE option below: I give permission for the City of Palo Alto to post to the City’s website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City’s website. I am providing the following alternate information and request that they use the following contact information instead. Address: Cell Phone: __Home / __Office Phone: E-mail: Signature: ________________________________________________________ Date: _____________ Page 4 Utility Advisory Commission DocuSign Envelope ID: B5130B6F-5E60-4AF5-B6B7-4E2F678E5EE3 Personal Information Name: A.C. Johnston Address: 325 Channing Ave. Apt 301, Palo Alto, CA 94301 Cell Phone: 650.823.5561 Home /_x_ Office Phone: 650.813.5610 E-mail: acjohnston@mofo. com Are you a Palo Alto Resident? _x_ Yes _ No Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Commissioners or Board Members?_ Yes _x_ No Are you available and committed to complete the term applied for? _x_ Yes_ No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? _x_ Yes_ No (I believe my 401-K plan holds minor amounts of shares in a number of technology companies including AT&T and Google) Excluding your principal residence, do you own real property in Palo Alto? _Yes _x_ No How did you Learn about the vacancy on the Utilities Advisory Commission? _ Community Group _ Email from City Clerk _ Palo Alto Weekly _Daily Post _x_ City Website _Flyer Other: City Council Meetin;:,_ ________ _ List relevant education, training, experience, certificates of training, licenses, or professional registration: I graduated from Yale College in 1968 with a B.A. I graduated from Harvard Law School in 1975 with a JD. From 1969-1972, I served in the U.S. Navy as an officer aboard a diesel-electric submarine. I served variously as the Communications Officer, Sonar Officer, Operations Officer, and Engineer becoming very familiar with the electronic, electrical and mechanical systems on board. I also qualified as Officer of the Deck and was awarded the Navy Achievement Medal for the work of the Engineering department during a 4 month deployment. From 1975 to the present, I was an associate and later a partner with the law firm of Morrison & Foerster LLP. I was the founder and served as managing partner of the firm's Washington DC and Palo Alto offices and served as co-head of the firm's Intellectual Property Litigation group. My practice has been largely focused on complex commercial litigation, particularly patent infringement and trade secret litigation, for electronics, laser diode, and semiconductor companies. I have also represented alternative energy producers, particularly co-generation facilities and wind farms, in negotiating power purchase agreements with utilities and in regulatory proceedings before the California PUC. Page 1 Utility Advisory Commission Employment Present or Last Employer: Morrison & Foerster LLP Occupation: Lawyer Describe your involvement in community activities, volunteer and civic organizations: I am currently serving on the Sustainability/Ciimate Action Plan advisory board working on the draft S/CAP for the City of Palo Alto. I was on the initial board of directors of the Silicon Valley Campaign for Legal Services which was started in the mid-1990s to raise the level of contributions to legal services organizations in Santa Clara and San Mateo counties. Since the mid-1990s I have served as a volunteer mediator in Santa Clara County Superior Court mediating commercial disputes. I am currently on the board of directors of the homeowners' association of the condominium in which we live in Palo Alto. I have served as Vice President and Treasurer. 1. What is it about the Utilities Advisory Commission that is compatible with your experience and of specific interest to you, and why? From my experience representing alternative energy producers, negotiating Power Purchase Agreements, and working on the S/CAP, I am very interested in and familiar with the issues around the City of Palo Alto Utilities' role in helping to reduce the City's carbon footprint and with integrating alternative energy production, including locally produced renewable energy, into the City's energy supply resources. I am also very interested in the proposals being considered for bringing fiber-to-the-premises in Palo Alto. From my experience representing electronics and laser diode companies in IP litigation, I am somewhat familiar with fiber optic technologies and very familiar with negotiating and analyzing complex commercial contracts between technology companies. Page2 Utility Advisory Commission 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. As noted above, I am very interested in exploring how, in practical terms, CPAU can contribute to the City's S/CAP goals. Improving energy efficiency, electrification of water and space heating and adoption of electric vehicles are three major suggestions for reduction of the City's carbon footprint. These are important steps toward and important goal. I am interested in working to accomplish those steps in cost- effective ways recognizing that CPAU also has a major investment in natural gas delivery infrastructure. 3. If appointed, what specific goals would you like to see the Utilities Advisory Commission achieve, and why? How would you suggest accomplishing this? As noted, one goal would be for the CPAU to effectively contribute to the City's overall S/CAP goals. think reducing greenhouse gases contributing to climate change is highly important and that Palo Alto should be a leader in this field. The UAC should work with CPAU staff to think creatively about practical and effective ways to decrease reliance on non-renewable energy in Palo Alto. This could include, for example, providing more information to CPAU customers for replacing natural gas heating with cost- effective electric heating systems, including specific recommendations for replacement systems. This information must be readily available to customers so that, when a water heater goes out, a customer already knows what alternative systems are available and who can install them. The CPAU should also look at the effectiveness of incentives to encourage replacement of non-electric heating systems even before the end of their natural lives. Another goal would be for Palo Alto to reach an agreement with a third party broadband provider that will make fiber to the premises available to residents and small businesses and also provide the option for CPAU to expand its dark fiber services in the future. Higher speed internet capabilities provide many benefits including increased productivity for users and potentially allowing more citizens to work from home reducing car trips through the city. The UAC should work with Staff and the Citizens Advisory Committee to promptly evaluate and refine proposals and thus to speed recommendation to the City Council of the best alternative so that the project can be completed as expeditiously as possible. Page3 Utility Advisory Commission 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK I do not have past experience with these documents. Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual.u The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: _x_ I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. I am providing the following alternate information and request that they use the following contact information instead. Address: Cell Phone: Home I Office Phone: E-mail: lnDocuSigned by: Signature: L~c~~o~~st~V\-Date: March 23, 2016 Page4 Utility Advisory Commission /,c' •:t ~/'! Personal Information Name: Henrik Morkner Address: 2710 Emerson St., Palo Alto, CA 94306 Cell Phone: 650-380-8525 18) Home J00ffice Phone: E-mail: fastgaas@yahoo.com Are you a Palo AltoResident?I8]Yes0No ~ ·ef!f::¥ ;Gf f'ALO ALTO. CA CITYtlERK'SOFflCE t'6MAR '5 AH g: 27 Do you have any relatives or members of your household who are employed by the City QL.Iialo ~. who are currently serving on the City Council, or who are Commissioners or Board Members?UYeslQlNo Are you available and committed to complete the term applied for?I8]Yes0No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for?OYesiE)No Excluding your principal residence, do you own real property in Palo Alto?0Yesi8JNo How did you Learn about the vacancy on the Utilities Advisory Commission? Dcommunity Group [ll Email from City Clerk D Palo Alto Weekly 0Daily Post Deity Website · 0Fiyer Other: ______ _...:... _____________ ========== List relevant education, training, experience, certificates of training, licenses, or professional registration: Relevant professional experience: -B.S. in Electrical Engineering, SJSU 1984 -M.S. in Electrical Engineering, SJSU 1989 -Agilent management training program, 1998 -Various classes at Stanford, Mission College, Foothill College on History, Social Science, Political Science -Named on 1 0 US Patents, 6 of which I am prime or sole author -Published over 30 articles in various IEEE and trade Electronics publications -Served on Board of Directors, Technica USA (approximately $20 million in annual revenue) -Served on IEEE review boards and committees I worked for over 30 years in the microwave communication business as .an engineer and manager. I have dealt with large budgets through economic diversity and understand the compromises that must be made. I understand modern electric and communication systems and can add greatly to integrating Palo Alto to achieve an Utopian future. Page 1 Utility Advisory Commission "-o-/ ~~~ ~P; .~r: ;" ...; j•· .. Emplciy'lke·~,;.t"• : ·,:.,;: ~; ''} .,.:-i·.~ :!"' 11 ,,. ·"YO"· I • , . .,, PresEili.\oti}..~~EnBJfo~M1'fOM Technology Solutions Occupation: Director of Engineering -----~ Describe your involvement in community activities, volunteer and civic organizations: I am a long time Palo Alto resident (resident since 1991) and have monitored committee meetings in person and on-line over the years. I have participated in the local Palo Alto community (schools, libraries, activities), but never in an active or elected role. I served a Vice-President of the Student Union in college and was very active in state and local politics (aided a good friend in his bid for state senate). I still have several friends in state and federal government. Once I started work in the professional world I served on various IEEE committees over the years. I am well versed in Roberts Rules of Order and the hierarchal decision making system prevalent in both community and corporate. 1. What is it about the Utilities Advisory Commission that is compatible with your experience and of specific interest to you, and why? I have recently retired (at age 54) from full time workafter aiding two companies through successful public offerings. Now that my financial needs are met, I wish to give back to the community that has served me well over the years. I feel that my experience is directly relevant to the UAC because: -I have a strong technical understanding of communication and engineering systems -I have managed large budgets, bids, contracts, and services -I have strong leadership and communication skill. -I was successful in large company politics and can be diplomatic and listen My motivation to serve with the UAC is to help the Palo Alto community. I feel we face challenging times with resources and budgets in the future. With no disrespect to present member, utilities have become a complex and technical process. I think the UAC can use more people with a strong technical background to aid in complex decisions. I feel I can help Palo Alto UAC with that and have the time to do so. Page 2 Utility Advisory Commission , /' ~ 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. I have had a long time interest in the UAC, but the latest meeting intrigued me. I followed in detail the discussion to raise both sewer and water rates. I am not opposed to higher rates, I felt that the increases requested were modest. However, I was very impressed by the discussion and the detailed questions and analysis that followed. In particular was the simplistic analysis with the recommendation presented of an average 10% increase per year for several years. I could see flaws in this approach, as did other committee members. I wanted then and there to add my expertise in future growth and spending analysis that served me with successful companies. At that point I decided I would apply to the UAC and try to help Palo Alto to navigate the upcoming years I am a firm believer that it is the details that define a community, not the broad concepts. This discussion was good and I feel I can contribute to this and other similar discussions. The results I seek are to better the community through smart and clever Palo Alto UAC decisions. 3. If appointed, what specific goals would you like to see the Utilities Advisory Commission achieve, and why? How would you suggest accomplishing this? My main goal for the UAC is that they make the best "smart" decisions and recommendations. Too many times I watched companies and communities make complacent or poorly formed decisions that impact people and their life style. For companies, a good decision was vital to good corporate health and profit. I was fortunate to be part of many successful companies that made good decisions. For the community, the decision making process is more esoteric. Bad decisions often do not result in failure, but a degradation of quality and community. I love Palo Alto and raised 3 children here, I wish to see it continue to thrive and perform. Specific goals include: -Achieving rates and budgets commensurate to the communities ability to pay -Make sure Palo Alto utilities are being smart and up-to-date in their approach -Incorporate environmentally responsible decisions balanced with fiscal realities -Help usher in a new era of water, power, communication, and waste management I want to accomplish this by attending meetings and reviewing all material diligently. I wish to actively participate in the discussions, asking questions and listening intently. I want to serve on sub-comities that bring new ways and methods to Utilities. This way I can help make informed and educated decisions and recommendations for Palo Alto. Page 3 Utility Advisory Commission ~ ~' 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK I have read through the documents and understand their content Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: _m I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR .0 I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. 1 am providing the following alternate information and request that they use the following contact information instead. Address: Cell Phone: 0Home 10office Phone: E-mail: Signature: Date: _____ _ Page4 Utility Advisory Commission ~ " DocuSign Envelope ID: 81A8275D-2A21-4A45-AE C2C4BFC7679 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK I have read through the documents and understand their content Consent to Publish Personal Information on the Citv of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: J8l I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR D. I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. I am providing the following alternate information and request that they use the following contact information instead. Address: Cell Phone: 0 Home tO Office Phone: E-mail: ruDocuSigned by: Signature:~~~~ Date· 3/15/2016 Page4 Utility Advisory Commission .~ Certificate Of Completion Envelope ld: 81A8275D2A214A45AE425C2C4BFC7679 Subject: Please DocuSign this document: Henrick-UAC 2015 application.pdf Source Envelope: Document Pages: 6 Certificate Pages: 1 AutoNav: Enabled Envelopeld Stamping: Enabled Signatures: 1 Initials: 0 Time Zone: (UTC-08:00) Pacific Time (US & Canada) Record Tracking Status: Original 3/15/2016 9:25:40 AM Signer Events Henrik Morkner fastgaas@yahoo.com Security Level: Email, Account Authentication (None) Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: In Person· Signer Events Editor Delivery Events Agent Delivery Events Intermediary Delivery Events Certified· Delivery Events Carbon Copy Events Notary Events Envelope Summary Events Envelope Sent Certified Delivered Signing Complete Completed Holder: Kim Lunt kimberly.lunt@cityofpaloalto.org Signature r-;j DocuSigned by: ~:,.~~ Using IP Address: 76.21.6.216 Signature Status Status Status Status Status Status Hashed/Encrypted Security Checked Security Checked Security Checked ~ Docu~ jjjj S5C:URiilD Status: Completed Envelope Originator: Kim Lunt 250 Hamilton Ave Palo Alto , CA 94301 kimberly.lunt@cityofpaloalto.org IP Address: 199.33.32.254 Location: DocuSign Timestamp Sent: 3/15/2016 9:27:52 AM Viewed: 3/15/2016 9:29:05 AM Signed: 3/15/2016 9:30:41 AM Timestamp Timestamp Timestamp Timestamp Timestamp Timestamp Timestamp Timestamps 3/15/2016 9:27:52 AM 3/15/2016 9:29:05 AM 3/15/2016 9:30:41 AM 3/15/2016 9:30:41 AM Page 1 Utility Advisory Commission Personal Information Name: William Dale Ross Address: 2103 Amherst Street, Palo Alto, California 94306 Cell Phone: (415) 2694569 __ Home / X Office Phone: (650) 843-8080 E-mail: wross@lawross.com Are you a Palo Alto Resident? X Yes __ No Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Commissioners or Board Members? __ Yes X No Are you available and committed to complete the term applied for? X Yes __ No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for? __ Yes X No Excluding your principal residence, do you own real property in Palo Alto? __ Yes X No How did you Learn about the vacancy on the Utilities Advisory Commission? __ Community Group __ Email from City Clerk __ Palo Alto Weekly __ Daily Post __ City Website __ Flyer Other: Other City residents______________________________________________________________ List relevant education, training, experience, certificates of training, licenses, or professional registration: I would incorporate by reference the information contained in my August 15, 2016 application for the Planning and Transportation Commission. Relelated to the UAC I have engaged in the following actions: Drafted and achieved implementation of a Zero Water Footprint program applicable to industrial, commercial, residential and institutional uses in a 14 square mile area including incorporated area; participated in the negotiation and drafting water acquisition and transmission contracts; participation on behalf of local governments before the State Energy Commission on Alternative Energy Projects; participation in proceedings before the State Public Utilities Commission dealing with location and compliance with maintenance standards of the Commission for natural gas pipelines of P G & E; acquisition of mutual water systems; Water Commission(s) on acquisition of opposition to riparian and groundwater applications; negotiation and drafting of emergency water transmission agreements, and the environmental analysis, if not exempt, of the foregoing actions under CEQA. Formulation in conjunction with consultants of Urban Water Management Plans. DocuSign Envelope ID: 937B1B45-8C91-4A17-9DA0-31DEF432E0F6 16 Mar 23 | 5:29 pm Page 2 Utility Advisory Commission Employment Present or Last Employer: Law Offices of William Ross Occupation: Attorney Describe your involvement in community activities, volunteer and civic organizations: Please see information contained in the previously referenced application for the PTC. 1. What is it about the Utilities Advisory Commission that is compatible with your experience and of specific interest to you, and why? Please see my previous reference describing involvement in utility regulation practice. The UAC would provide a forum for the application of that experience and knowledge for the benefit of Palo Alto residents and property owners. DocuSign Envelope ID: 937B1B45-8C91-4A17-9DA0-31DEF432E0F6 Page 3 Utility Advisory Commission 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. I think there is a continuum of issues before the UAC in rate setting and recommendations for compliance with State regulations on energy and water efficiency that relate directly to stated policies on what is now Also I believe oversight of the required update of the Urban Water Management Plan to incorporate the latest water practices approved by the Department of Water Resources are incorporated into new development approvals. 3. If appointed, what specific goals would you like to see the Utilities Advisory Commission achieve, and why? How would you suggest accomplishing this? a regulatory matrix that could be accomplished now demonstrating City commitment to, and implementation of sustainability policies. This could be accomplished by Council direction or be initiation by the UAC on its DocuSign Envelope ID: 937B1B45-8C91-4A17-9DA0-31DEF432E0F6 Page 4 Utility Advisory Commission own initiative. 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK I have experience in my professional capacity with each of the documents described although referenced or described differently. Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 No state or local agency shall post the DocuSign Envelope ID: 937B1B45-8C91-4A17-9DA0-31DEF432E0F6 Page 5 Utility Advisory Commission home address or telephone number of any elected or appointed official on the Internet without first The full code can be read here: LINK Read the code, and check only ONE option below: X Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application pproviding the following alternate information and request that they use the following contact information instead. Address: 2103 Amherst Street, Palo Alto, California 94306 Cell Phone: (415) 269-4569 __ Home / X Office Phone: (650) 843-8080 E-mail: wross@lawross.com Signature: ________________________________________________________ Date: March 23, 2016 DocuSign Envelope ID: 937B1B45-8C91-4A17-9DA0-31DEF432E0F6 Planning and Transportation Commission Personal Information Name: William Dale Ross Address: 2103 Amherst Street, Palo Alto, California 94306 Cell Phone: (415) 269-4569 0 Home I @:>ffice Phone: (650) 843-8080 E-mail: wross@lawross.com Are you a Palo Alto Resident? {8]ves QNo Do you have any relatives or members of your household who are employed by the City of �lo Al�ho are currently serving on the City Council, or who are Commissioners or Board Members? LJYes e9No Are you available and committed to complete the term applied for? [8] Yes 0 No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest (Form 700). Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to: 1) engage in business with the City; 2) provide products or services for City projects; or 3) be affected by decisions of the board or commission you are applying for? Des {8] No Excluding your principal residence, do you own real property in Palo Alto? Oves (8] No How did you Learn about the vacancy on the Planning and Transportation Commission? Ocommunity Group D Email from City Clerk D Palo Alto Weekly Other: Other City residents OoailyPost Deity Website 0Flyer List relevant education, training, experience, certificates of training, licenses, or professional registration: Practicing attorney representing local governments and developers on issues of land use and environmental compliance. Have served as legal counsel to County Planning Commissions, City Planning Commissions. Have served as City Attorney for American Canyon since 1992 and advised and represented the cities of Gilroy, Los Altos, Soledad, San Gabriel, Monterey Park and Burbank on land use and CEQA matters as Special Counsel. I also served as a member of the City of Pasadena Planning Commission from 1991-1998 and its Chairman from 1986-1988. During that time several critical planning issues were formulated by the Commission and adopted by the City Council including a Master Development Plan for the California Institute of Technology. I have participated in numerous conferences by the California State Association of Counties, California Special Districts Association and various CLE extension courses concerning issues of land use and compliance with CEQA, the Brown Act and conflict of interest issues. Served on San Francisco Bay Conservation and Development Commission, 2000-2005. Page 1 Planning & Transportation Commission Employment Present or Last Employer: Occupation: Describe your involvement in community activities, volunteer and civic organizations: I was a original and continuing member of the 2180 Task Force which made recommendations to the City Planning Director concerning the development of the JJ&F Parcel; I have continuously advised the College Terrace Residents Association on legal issues associated with land use, environmental review and have consulted with residents and business owners in the City with respect to issues of City governance and planning policies and decisions. I have supported the intercollegiate athletic program at Stanford through, among other things the formation and administration of non-profit public benefit corporations consistent with NCAA and Conference rules. Page2 Planning & Transportation Commission 1. What is it about the Planning and Transportation Commission that is compatible with your experience and of specific interest to you, and why? My background in land use and environmental review as well as conducting fair hearings in several local government settings can be focused on issues that come before the Planning Commission recognizing its limited jurisdiction and its advisory role to the City Council. I believe that I can contribute to the efficiency of Commission decisions no matter what those decisions are or how they are perceived as being representative of the several views of residents and businesses within the City that exist. 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it If you have never been to a Commission meeting you can view an archive here: LINK. There are continual issues that come before the Planning Commission that concern and interest me. 2555 Park Boulevard would be a recent example as during that hearing the Commission had to be reminded about compliance with its own procedures by individual residents and individual business owners concerning the Project. The case is an example of where uniform hearing procedures where all are treated equally would be a benefit to reaching sound Commission decisions. Page 3 Planning & Transportation Commission 3. If appointed, what specific goals would you like to see the Planning and Transportation Commission achieve, and why? How would you suggest accomplishing this? I would personally work for, and facilitate, further compliance with all aspects of planning and land use law, including fair hearing procedures, and within the defined role of a planning commission. I would also work to facilitate timely response to City Council directives as well as to ensure timely Commission review of both adjudicatory and legislative permits. I believe my past and current experience with public hearings and land use and environmental issues can realistically and practically achieve this goal. 4. Planning and Transportation Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. Palo Alto Comprehensive Plan LINK Zoning Code LINK City Charter LINK California Environmental Quality Act LINK El Camino Real Design Guidelines LINK El Camino Real Master Plan Study LINK and Appendices LINK Area Plans such as the South of Forest Avenue (SOFA) I and II Plans LINK Baylands Master Plan LINK I have experience with the City Comprehensive Plan, Zoning and the California Environmental Quality Act, in the situations that I have described-with respect to the 2180 Task Force involvement with the CTRA and past litigation against the City and for several other local governments and development entities thorough the State. This experience is ongoing and has also involved the drafting of significant State legislation particularly in the Subdivision Map Act area to clarify procedures for local government. Page 4 Planning & Transportation Commission Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: 18] I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR 0 I request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. I am providing the following alternate information and request that they use the following contact information instead. Address: 2103 Amherst Street, Palo Alto, California 94306 Cell Phone: (415) 269-4569 0 Home I lg) Office Phone: ( 650) 843-8080 E-mail: wross@lawross.com a a a a I J .IJA' � ��� August31,2015 Signature: ___ f'V __ A�-----·-/_vv _'Z---____________ Date: ------ Page 5 Planning & Transportation Commission Personal Information Name: Terry A Trumbull Address: Cell Phone: (81Home t00ffice Phone: 6 E-mail: Are you a Palo Alto Resident?~YesONo r.CI['t>OtPALO ALTO. CA J~lTtf· tlfE!RK~,s.··oFFICE J6 HAR 18 PH 2: I 0 Do you have any relatives or members of your household who are employed by the City QL.Ei>alo ~. who are currently serving on the City Council, or who are Commissioners or Board Members?UYes~No Are you available and committed to complete the term applied for?I8]Yes0No California state law requires appointed board and commission members to file a detailed disclosure of their financial interests, Fair Political Practices Commission, Conflict of Interest, Form 700. Do you have an investment in, or do you serve as an officer or director of, a company doing business in Palo Alto which you believe is likely to; 1) engage in business with the City, 2) provide products or services for City projects, or 3) be affected by decisions of the board or commission you are applying for?0Yes~No Excluding your principal residence, do you own real property in Palo Alto?0Yesf81No How did you Learn about the vacancy on the Utilities Advisory Commission? Dcommunity Group 0 Email from City Clerk D Palo Alto Weekly Other: City Clerk website 0Daily Post 0city Website DFiyer List relevant education, training, experience, certificates of training, licenses, or professional registration: Since 2002, I have served as Chairman and member of the Hearing Board of the Bay Area Air Quality Management District All of our issues have been energy related. My background includes 46 years of professional work on energy, environmental, resource, planning, and legal issues. It includes work for the Department of Interior and EPA in Washington, D.C. At EPA, I was executive director of the first federal agency study of the nation's energy problems during 1972-73. I am an environmental, energy and land use attorney and after working in energy regulation for General Electric during 1973-78, my legal clients have included both the private sector and I have represented more than 200 local governments in California. Frequently, my local government work included regulation of a public utility, and the refuse collection and recycling contracts of each city. For the past 19 years, I have been teaching 4-8 classes per year at San Jose State, Santa Clara, Menlo, and UC Santa Cruz in energy policy, water policy, environmental and advanced environmental law, politics and the environment, and resource management For 13 years I have served on the oversight committee for $600 million of water projects for the Santa Clara Valley Water District Please review my attached resume for a comprehensive view of my experience. Page 1 Utility Advisory Commission Employment Present or Last Employer: Santa Clara University Environmental Law; San Jose State University Environmental StudiED Occupation: Professor; Please see attached resume. Describe your involvement in community activities, volunteer and civic organizations: Since returning to Northern California in 1973, I have been a Palo Alto resident and active in community affairs. I served on the City's Planning Commission in 1973, managed precinct walking in 1975 for the Association for a Balanced Community (ABC), and served as ABC's chairman. I served as chair of the City's plastics and CFC's committee in 1988-1991 and served as chair of the Crescent Park Neighborhood Association in 2001-2003. As land use chair for the Lorna Prieta Chapter of the Sierra Club, I worked on issues in Santa Clara and San Mateo Counties. Most notably in Palo Alto we opposed the Willow Freeway proposed to service the Stanford Shopping Center. From 1979 to 1984 I was the only full time member of theCA Waste Management Board. As its Chair I funded the start up of curbside recycling and com posting in Palo Alto. Our annual Great California Resources Rally drew 600,000 people to about 1000 events each year throughout the state, including Palo Alto. I have been appointed to the County Planning Commission by Supervisors Steinberg, McKenna, Kniss, and Gage. When my work there conflicted with my BAAQMD obligations, I was appointed to LAFCo, where I have served for the past 13 years. As the county planning commissioner for our area I was successful in stopping urban sprawl in the South County and attended more than 200 meetings to develop the first land use plan for the Stanford campus during my 1996-2002 service. From 1985-2003 I was the volunteer Government Affairs Chair of the Peninsula Industrial and Business Association based in Palo Alto. Each month I hosted a luncheon featuring elected officials and agency heads. My daughters attended public schools and I served on numerous roles; either at Ohlone School or district wide. Because of this work and my environmental work the Rosicrucian Society named me Humanitarian of the Year in 1999. I suspect anymore is unnecessary, but I am happy to answer any questions you may have. 1. What is it about the Utilities Advisory Commission that is compatible with your experience and of specific interest to you, and why? I grew up with water issues because my father was Chief Engineer for the Central Regional Water Quality Control Board. Starting with a water law internship in 1970 with the Department of Interior in D.C., I have worked on energy, water, and utility issues for my entire professional career. For my energy and water policy classes, each class has a guest expert speak to the class. They have encouraged me to put my background to use in areas besides the academic. Having given up the SCVWD oversight committee in 2013, and being termed out as Chair of the BAAQMD Hearing Board in March, 2017, I feel that I have the time to serve effectively on the UAC. Page2 Utility Advisory Commission 2. Please describe an issue that recently came before the Commission that is of particular interest to you and describe why you are interested in it. If you have never been to a Commission meeting you can view an archive here: LINK. In January, the UAC examined the City's existing policies on undergrounding utilities. This is an area of interest to me because of my service on the County Planning Commission. As a Commissioner, I attempted to get all subdivisions in unincorporated territory to be built with undergrounded utilities. In 1978, we were successful in limiting development in the County to agriculture and open space. The vast majority of subdivision development disappeared. However, the County does have a cluster ordinance that allows very large parcels (hundreds of acres) to develop, contingent on about 85% of the land to be preserved as permanent open space. In these developments, I was able to get the utilities undergrounded. 3. If appointed, what specific goals would you like to see the Utilities Advisory Commission achieve, and why? How would you suggest accomplishing this? During my 43 years in the City, Palo Alto has been a leader on environmental and energy issues. I hope to help the City continue that leadership in areas, such as climate change, energy and water conservation, developing alternative energy sources, and water recycling. In my experience, the Utilities staff has done an excellent job of analyzing issues. It is my hope to assist this expertise with a broad based public policy background and knowledge of how government works. From 1984-1998, I was a problem solver for cities throughout the state. I hope to bring those skills to encourage workable solutions for the City. Finally, the first ten years that I did the Breathe California TV show, I was the sidekick to David Bonasera, who was very technically adept, but used a lot of esoteric language. Just as I did on the show, I hope to able to get utility programs to described in a way that is more understandable for the community. Page 3 Utility Advisory Commission 4. Utilities Advisory Commission Members work with the documents listed below. If you have experience with any of these documents, please describe that experience. Experience with these documents is not required for selection. The Utilities Strategic Plan LINK The Long Term Electric Acquisition Plan LINK The Gas Utility Long-term Plan LINK Urban Water Management Plan LINK Ten-Year Electric Energy Efficiency Plan and Ten-Year Natural Gas Energy Efficiency Plan LINK Utilities Quarterly Update for the most recently reported quarter LINK I have very closely read and reviewed the Utilities Strategic Plan and the Urban Water Management Plan. I am very familiar with Utilities' work on the ten year electric energy efficiency plan due to my participation in cost effective demand side management programs over the past two decad:es'. Consent to Publish Personal Information on the City of Palo Alto Website California Government Code Section 6254.21 states, in part, "No state or local agency shall post the home address or telephone number of any elected or appointed official on the Internet without first obtaining the written permission of that individual." The full code is attached. This consent form will not be redacted and will be attached to the Application and posted to the City's website. The full code can be read here: LINK Read the code, and check only ONE option below: 0 I give permission for the City of Palo Alto to post to the City's website the attached Board and Commission Application intact. I have read and understand my rights under Government Code Section 6254.21. I may revoke this permission at any time by providing written notice to the Palo Alto City Clerk. OR . JEI.. 1 request that the City of Palo Alto redact my home address, phone numbers, and email address from the attached Board and Commission Application prior to posting to the City's website. I am providing the following alternate information and request that they use the following contact information instead. Address: Cell Phone: 0Home/00ffice Phone: E-mail: terryt1 011 @aol.com Page4 Utility Advisory Commission Terry A. Trumbull Education Legal: Georgetown University, J.D., 1971 George Washington University, LL.M .. 1973 Thesis: Intergovernmental Relations in Environmental Protection Undergraduate: University of California at Davis, Economics, 1967 Employment Current positions: I. San Jose State University, 1998-present. Environmental Studies Dept.. Teach 5-6 courses/ year from Environmental Law, Advanced Environmental Law, U.S. Environmental Policy, Transportation and the Environment, Water Policy, Politics and the Environment, U.S. Environmental Policy, and Energy Policy. 2. Santa Clara University. Environmental Studies Dept., 2005-present. Teach environmental law 1-2 times year. 3. Chairman, and Judge, Hearing Board, Bay Area Air Qpality Management District, San Francisco. Final decision maker on permits, enforcement actions and fines, variances, and other judicial matters. 2002-2017 (termed out). 3. Santa Clara County Local Formation Comnrision (LAFCo). Alternate Public member, 2003-present. Regulate city annexations, as well as evaluate performance of county's 27 special districts (issues such as parks, fire, cemet((ries, hospitals, :flood protection, water supply, and land use). Employment History: Lecturer, Environmental Law and Policy. Energy Policy, UC Santa Cruz, 2009-2012. Transportation & the Environment, M.S. program, Mineta Transportation Institute, SJSU, 2002-4, and Environmental Resource Management, Menlo College MBA program, 2002-03. 1992-2007 The Trumbull Law Firm, Palo Alto and San Jose. 1989-1992 Richards, Watson & Gershon, San Francisco and Los Angeles. 1988-1989 Low, BaD and Lynch, Menlo Park. 1984-1988 Law Offices of Terry A. Trumbull, Palo Alto. Environmental, energy, land use, and governmental law and consulting practice for 200 California local governments, as well as private sector clients. Projects have included all aspects of land use and environmental law, including permitting, regulations development and interpretation, communications, and enforcement. Terry A. Trumbull-Page Two Specific projects have included power plant approval, waste disposal (sewage sludge, municipal solid waste, and toxic waste), Proposition 65, refineries, toxic spills, cement plants, federal and state facilities, closure plans, and stormwater management. Other areas included monitoring California and federal legislative and regulatory activity, as well as representation before legislative and regulatory bodies. CEQA and NEP A have been involved in most cases upon which I have worked, and I have been active in interjurisdictional negotiation. 1996-1997 General Counsel, Bumb Family Businesses, San Jose. General Counsel to 25 privately held companies doing $150 million per year in business. Responsible for managing legislative and regulatory programs, OSHA, and community relations. Responsible for development of over 1,000 acres ofland and private school client. 1993-1995 Lecturer, Environmental Ethics, Univ. of California at Santa Cruz Extension. 1979-1984 Chairman, California Waste Management Board, Sacramento. Served as only full time member of nine person environmental board which directed solid waste management planning, permitting, and enforcement in California. Part time board member, 1984-85. Member, 1982-84, of California Haiardous Waste Management Council, a legislative body which developed the state's hazardous waste management facility siting requirements. Managed staff of 110 employees and budget of$22 million. Chaired advisory committee to D.S. EPA on development of their landftll regulations. Selected Board accomplishments include: 1. The number oflandftlls out of compliance with state requirements dropped from 97% to 3%; 2. Curbside recycling was initiated for 3 million Californians; virtually no programs existed in the state prior to this demonstration funding. In 1980, 3% of Californians thought recycling should be part of their lifestyle; in 1984, it was 82%. 3. All twenty-three bills proposed by the Board were enacted into law. 1978-1979 Partner, Atkinson, Farasyn, Smith, Sherer & Trumbull, Mountain View. Land use, energy, and environmental law. Deputy Town Attorney (handled Planning Commission), Woodside. Developed Mountain View's general plan housing element and ordinances. 1973-1978 Regulatory and Projects Counsel, General Electric Nuclear Energy Divisions, San Jose.' Represented the company in front oflocal, state, and federal regulatory bodies, as well as interpreting their regulations. Handled all contract and procurement issues for construction of nuclear power plants for utility purchasers. 1972-1973 Legal Adviser to Deputy Assistant Administrator for Planning and Evaluation, U.S. Environmental Protection Agency, Washington, D.C. Managed development of the nation's original water and air polluti()n control laws. Executive Director of first federal study of nation's energy issues. Terry A. Trumbull-Page Three 1970-1971 Staff Attorney, Institute ofPublic Administration, Washington, D.C. Attorney member of team proposing solutions to environmental pr()blems for U.S. EPA. 1970 Intern, Office of Solicitor-Water Pollution Control. Selected Community Activities Santa Clara County Planning Commission, 1976-80 and 1996-2002; Chairman, 1979-80 and 1998-99. Developed County's present general plan. Represented the County on ten local area planning bodies, as well as five countywide committees (Joint Transportation Policy Committee; Policy Planning Committee; ABAG Environmental Task Force; County Energy Committee; County General Plan Committee). Completed first land use plan for unincorporated area of Stanford University, 2000. Named outstanding commissioner in California, 1999. Founding Chairman, California Planning Roundtable, 1980-81. Established for public-private cooperation on planning and infrastructure issues. Directed statewide infrastructure study. California State Bar, Environmental Committee, 1977-80. Reviewed environmental legislation. Developed model local government solar rights ordinance. Chairman, City of Palo Alto Chlorofluorocarbon and Plastics Committee, 1988-91. Bay Area Air Quality Management District -Advisory Council, 2001-2002. Chairman, Planning Committee,2002. Pacific Industrial and Business Association. Chair, Government Affairs Committee, 1986-2003. Given 1994 Award as Outstanding Contributor to Bay Area business. Put on monthly luncheon with speaker. Breathe California of the Bay Area (formerly known as the American Lung Association) -Director, 1992-2012. Chair, Environmental Health Committee, 1992-present. President, 2002-2004, when we were named the outstanding chapter in the state. State Legislative and Public Affairs Committee, 2004-2008. Given outstanding individual Clean Air Award for Bay Area in 2002 and outstanding education program award in 2005. Environmental Concerns/Breathe California, Producer and host, 1996-present. Public access TV show on environmental issues shown weekly on San Jose/Campbell cable system with 261,000 subscribers. Received 2005 Clean Air Award for Outstanding Education program. Sierra Club-miscellaneous activities. Lorna Prieta chapter, Executive Committee, 1975-79, 2008-2009; Land Use Chair and Legal Committee Chair, 1973-79; Membership Chair, 1975-79. Given lifetime achievement award in 1999, and Outstanding Political Contributor award in 2012. Chairman and member, Northern California Endorsements Committee, 2010-present. Terry A. Trumbull-Page Four California League of Conservation Voters of Santa Clara County, 1992-present. Founding Director, Vice Chair, and Endorsement Committee Chair. Interview every local govermD.ent candidate in the county, take positions on ballot measures, and prepare independent campaign mailings. Select outstanding environmentalists in .county for awards and put on annual fund-raising event. Oversight Committee on $600 million of water projects for Santa Clara Valley Water District. 2001-20 13. Publications and Presentations Author of monographs on stationary source and mobile source air pollution, mass transit, methods for reducing plastics in the ocean, intergovernmental cooperation on hazardous waste, and impact of environmental regulation on the economy. Author of three chapters on solid waste management and recycling law, totaling 300 pages in California Environmental Law and Land Use Practice, and more than 200 other articles. Editorial committee for State Bar Environmental Section and Continuing Education for the Bar (CEB)'s Land Use and Environmental Forum, 1992-96. Personal Married to U.S. Magistrate Judge Patricia Trumbull (1987-2010) since 1968 Contact information: Palo Alto, CA 94301-3046 USA Telephone: ; e-mail: City of Palo Alto (ID # 5981) City Council Staff Report Report Type: Study Session Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: Open Data and City Apps Presentation Title: Open Data Presentation From: City Manager Lead Department: IT Department Recommendation: Staff recommends that Council receive an update on the City’s open data and online digital services and offer comments and questions. Executive Summary: The City of Palo Alto open data portal—an award winning community service-- has helped make City data sets publicly available since it was launched in 2012. It has enabled the City to proclaim itself “Open Data by Default” in early 2014. The City also have a large number of other online digital services that help citizens interact and do business with the City virtually either via a website or through an app. This presentation will provide some background and overview information on our open data portal and a selection of our online digital services. Background: Open Data is public data that is freely used and available for citizens, developers, and other community members to analyze, build, and use to build useful solutions. In February of 2014, City Council issued the open data proclamation, ensuring open data was the default moving forward. Since then, the City has won multiple awards for its data efforts and spans three solutions: one for budget, one for map and location based data, and one for other structured data. Currently, the open data platform contains data such as local business information; 311 requests; water usage; salary information; the current budget; and tree data. This data can provide benefits such as an alternate to California Public Records Act (CPRA) requests; transparency in City operations; and data for stakeholders to analyze and build their own solutions. City of Palo Alto Page 2 Our diverse and popular digital services provide the ability for citizens to interact with the City online to report broken sidewalks; pay parking tickets; pay their Utility bill; use online library services; view creek levels; register for classes, and so much more. Discussion: The City of Palo Alto has published 68 data sets and deployed over 50 digital services. These services are frequently recognized nationally and often globally for their quality and capability particularly for a city the size of Palo Alto. For this study session, the IT department will present highlights of the Open Data platform, our web and mobile applications, and their benefits to the community. Quick Reference: Open Data Platform: http://data.cityofpaloalto.org Online Services: http://www.cityofpaloalto.org/services/online.asp City of Palo Alto (ID # 6724) City Council Staff Report Report Type: Study Session Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: PreScreening for Proposed Hotel at 3200 El Camino Real Title: Prescreening of a Proposed Hotel Development at 3200 El Camino Real That Requires a Variance or Ordinance Amendment to Modify or Eliminate the 50'-0" Special Setback Along Hansen Way From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council conduct a prescreening review of the applicant’s proposed hotel development as it relates to a 50’-0” special setback at 3200 El Camino Real and provide comments. Pre-screenings are akin to Study Sessions, and while City Council comments are requested, no formal action will be taken. Executive Summary The applicant has submitted an application for review of a hotel project by the Architectural Review Board (ARB). The proposal would also require approval of either a variance or a legislative change to the special setback along Hansen Way, and the applicant is seeking to gauge the City Council’s support for the proposal. The subject property is located at the southwest corner of Hansen Way and El Camino Real, fronting on El Camino Real. There is an existing, low scale hotel on the site that currently intrudes into the 50 foot special setback along Hansen Way. Under the proposal, the existing hotel would be removed and replaced with a larger hotel that would also be designed to encroach into a 50 foot special setback. The 50 foot special setback extends the full length of the property adjacent to Hansen Way and along all of the other properties fronting on Hansen Way; it dates from the establishment of the Stanford Research Park and its annexation to the City. The property immediately adjacent to the subject site includes buildings that intrude into the special setback by about 14 feet, which may provide a rationale for the hotel proposal to do the same, either via approval of a variance or via a legislative change to the City’s zoning map to adjust the setback at this location. City of Palo Alto Page 2 Because this project raises policy considerations and may involve a legislative change, it is being presented to the City Council for general comments. It is anticipated project design modifications would occur following the Council’s discussion. No formal action is requested of the City Council. Background The subject property contains an existing two-story 16,943 square foot hotel with 36- guestrooms, which would be replaced with a four-story, 50’-0” tall hotel and 93 guestrooms with a two-level basement parking garage. In order to implement the project, or some variation of the project, the applicant seeks the removal or reduction of the special setback along Hansen Way and is considering a variance application or ordinance (zoning map change) to modify/eliminate the setback requirement. The applicant has requested preliminary review by the City Council to gauge the City’s interest in the proposed hotel. The preliminary ARB concept plans are available; however, the applicant may seek a different site plan and building design based on comments received from the prescreening discussion. These initial concept plans demonstrate the constraints of the site. (See http://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BlobID=42946 for the plans and attachments for application and supporting material.) The project site (site) consists of a 28,878 square foot parcel (0.62 acres), located at the southwestern corner of the Hansen Way and El Camino Real intersection (see location map, Attachment A). The site is within the Commercial Service (CS) zoning designation. Presently, the site includes a two-story, 16,943 square foot hotel with 36-guestrooms constructed in 1947, with a surface parking lot. The site includes a 50’-0” special setback along Hansen Way that was established in 1959 after the construction of the hotel, rendering the hotel a “non-complying facility” subject to Palo Alto Municipal Code (PAMC) Section 18.70. Properties to the east along El Camino Real and directly across Hansen Way are zoned Research Park (RP) and include surface parking facilities to support research and development offices at 607 Hansen Way. Properties to the west of the site, zoned CS, include the Fish Market and McDonalds restaurants. To the north of the site, across El Camino Real, properties that are also zoned CS include Footlocker, and personal services uses. To the south of the site (rear) are research and development uses as part of the Stanford Research Park, zoned RP. The CS zoning district was established to create and maintain areas accommodating citywide and regional services that may be inappropriate in neighborhood or pedestrian oriented shopping areas, and which generally require automotive access for customer convenience, servicing of vehicles or equipment, loading or unloading, or parking of commercial service vehicles. The PAMC allows for a maximum of 0.4:1 for development with the exception of 2.0:1 for hotel development. City of Palo Alto Page 3 Through the preliminary ARB process, the applicant proposed to demolish the existing building and site improvements. In its place, the applicant proposed the construction of a four-story, 50’-0” tall 52,449 square foot hotel with 93 guestrooms. The conceptual project includes an encroachment into the 50’-0’ Hansen Way setback, which is effectively half the width of the site. The applicant seeks relief from the setback in the form of a Variance pursuant to PAMC 18.76.030 or a Zoning Amendment to the City’s Setback Map (established by Ordinance 1896 in 1959) to amend the setback pursuant to PAMC 18.80. The application of the special setback limits the use of the site to approximately 50’-0” in width both above ground and below ground. Surface parking can be situated within the special setback area. Origins of the Setback & Existing Intrusions The original purpose of the 50’-0” special setback is not known for sure. It may have been established to accommodate future street widening in the Stanford Research Park, or to provide for landscape screening (and privacy) of Research Park buildings and uses. While there is no capital improvement plan to implement street widening of Hansen Way at this time, the legislated setbacks here and throughout the Research Park effectively constitute a “reserve” for possible future improvements (which could theoretically involve roads, bicycle and pedestrian facilities, landscaping, utilities, etc.). The adjacent office complex at 600 Hansen Way was constructed in 1983 and does not conform with the special setback. The complex has its closest building setback approximately 36’-0” from the property line along Hansen Way. This represents an encroachment into the special setback. There is no justification stated in the project file for this deviation and staff is unable to uncover a reason as to why this occurred. Nonetheless, this condition may constitute a rationale for a similar encroachment into the special setback by the hotel proposed at 3200 El Camino Real. El Camino Real Design Guidelines and South El Camino Real Guidelines The project is subject to the El Camino Real Design Guidelines and the South El Camino Real Guidelines. The Guidelines consider the site a part of the California Avenue Corridor Area. According to the Guidelines, new buildings should front El Camino Real with prominent facades. Entries should face El Camino Real, or be clearly visible and easily accessible to pedestrians. Auto-oriented development should include pedestrian-friendly design elements to accommodate those arriving by foot or transit. The project includes what appears to be a secondary entry from El Camino Real. The policies within the Guidelines support having new buildings situated closer to the street and furthermore when considering corner properties, such as the subject site, the building should define the corner. Discussion City of Palo Alto Page 4 If there is a desire to address the special setback there are two courses of action that could be taken. The first is a variance to the special setback based on a rationale having to do with the adjacent building’s intrusion into the setback. The second is a zoning amendment to eliminate or reduce the special setback from the setback map over the site. The two methods are described below. Variance PAMC Section 18.76.030 provides the procedures for applying a Variance. The purpose of a variance is to: (1) Provide a way for a site with special physical constraints, resulting from natural or built features, to be used in ways similar to other sites in the same vicinity and zoning district; and (2) Provide a way to grant relief when strict application of the zoning regulations would subject development of a site to substantial hardships, constraints, or practical difficulties that do not normally arise on other sites in the same vicinity and zoning district. In order to grant a variance, all of the following findings for a variance need to be made by the Director of Planning: (1) Because of special circumstances applicable to the subject property, including (but not limited to) size, shape, topography, location, or surroundings, the strict application of the requirements and regulations prescribed in this title substantially deprives such property of privileges enjoyed by other property in the vicinity and in the same zoning district as the subject property. Special circumstances that are expressly excluded from consideration are: A. The personal circumstances of the property owner, and B. Any changes in the size or shape of the subject property made by the property owner or his predecessors in interest while the property was subject to the same zoning designation. (2) The granting of the application shall not affect substantial compliance with the regulations or constitute a grant of special privileges inconsistent with the limitations upon other properties in the vicinity and in the same zoning district as the subject property, and (3) The granting of the application is consistent with the Palo Alto Comprehensive Plan and the purposes of this title (Zoning), and (4) The granting of the application will not be detrimental or injurious to property or improvements in the vicinity, will not be detrimental to the public health, safety, general welfare, or convenience. Zoning Amendment City of Palo Alto Page 5 PAMC Section 18.80 provides the procedures for amending the zoning code, maps and districts. This is a legislative action that would require adoption of an ordinance following receipt of a recommendation from the Planning & Transportation Commission. Next Steps While the applicant has filed for ARB review, the applicant is also considering different design options that will be informed by the City Council’s discussion. It is anticipated the applicant would make some project modifications and submit revised plans to the ARB. Environmental Review This preliminary review is a study session in which Councilmembers may provide comment, but no formal action will be taken. Thus, no CEQA review is required at this time. Attachments: Attachment A: Location Map (PDF) Attachment B: Applicant Request (PDF) Attachment C: Site Plan Exhibits (PDF) 50 50 RM- 637 CS CS CS RP 611 52 3225 3239 3255 3295 455 3305 3337 3339 592 572582 3150 3170 3200 3300 607 60 550 447 3 429 451 441 431 3159 411 435 3250425 435 3200 455 460 3201 450 430 400 3263251 0 3802862450 456 470 71 299929512905 461 3000 30173001 3128 3127 850 700 600 3398 3111 473 3225 440 620 630 429 660 3215 3275 3327 3399 3333 3201 3051 3101 3160 3260 2 3265 LA M BERT AVENUE EL CA MINO REAL HANSEN W AY EL CA MINO REAL HANSEN W AY W AY ACACIA AVENUE PORTAGE AVENUE OLIVE APE EL CA MINO REAL L CA MIN O REAL EL CA MIN O REAL EL CA MINO REAL This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Special Setback Frontages Zone Districts abc Zone District Labels 3200 El Camino Real (Project Site) 0'200' 3200 El Camino Real Area Mapwith Zoning Districts CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2015 City of Palo Alto rrivera, 2015-08-10 12:07:543200ECR zone (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) Attachment A Randolph B. Popp, AIA A R C H I T E C T 2 1 2 H i g h S t r e e t P a l o A l t o , C A 9 4 3 0 1 6 5 0 . 4 2 7 . 0 0 2 6 i n f o @ r p - a r c h . c o m P a g e | 1 of 1 1 March 2016 Mr. Jonathan Lait City of Palo Alto P&CE Department 250 Hamilton Avenue Palo Alto, CA 94301 (transmitted by email) Mr. Lait, The Hotel Parmani is seeking City Council input with respect to the possible removal or reduction of the special setback requirement along Hansen Way, for its parcel only, in the form of a zoning amendment or a variance. The special setback of 50 feet presents a unique condition not present at virtually any other CS zoned parcel in Palo Alto. The special setback disproportionately impacts our site as compared to other parcels along Hansen Way in that it constrains our buildable area to only 50% of the lot. Typical CS zoning allows and even encourages development up to the property line. We wish to engage in a conversation regarding the removal of this unusual constraint on our site and will propose a few project options to illustrate the range of what is possible on this prominent corner at the base of Stanford Research Park. For purposes of a pre-screen, we do not intend on discussing FAR as we understand that to be related to the outcome of the setback discussion. Please let us know the earliest we can be placed on City Council's agenda. Sincerely, Randy Popp, AIA Principal Randolph Popp, ARCHITECT CC: Sheldon Ah Sing – M-Group (email) Attachment B Attachment C CITY OF PALO ALTO OFFICE OF THE CITY CLERK April 4, 2016 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the March 21, 2016 Council Meeting Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: Attachment5.a: Attachment A: 03-21-16 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 Regular Meeting March 21, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:10 P.M. Present: Berman, Burt, DuBois arrived at 6:40 P.M., Filseth, Holman, Kniss, Scharff, Schmid, Wolbach arrived at 6:35 P.M. Absent: Study Session 1. Presentation From Stanford University Representatives Regarding a Project Filed With the County of Santa Clara to Reallocate and add New Housing Units. Special Orders of the Day 2. Community Partner Presentation: Palo Alto Players at the Lucie Stern Community Theatre. 3. Awarding of Certified Fire Chief Designation to Fire Chief Eric Nickel by the California State Fire Marshall Tonya Hoover. Agenda Changes, Additions and Deletions None. Consent Calendar MOTION: Council Member DuBois moved, seconded by Council Member Berman, third by Council Member Holman to pull Agenda Item Number 5- Finance Committee Recommendation to Adopt a Resolution Continuing the Palo Alto Clean Local Energy Accessible Now (CLEAN)… to be heard on March 28, 2016. DRAFT ACTION MINUTES Page 2 of 6 City Council Meeting Draft Action Minutes: 3/21/16 MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to approve Agenda Item Numbers 4, 6-10. 4. Resolution 9578 Entitled, “Resolution of the Council of the City of Palo Alto Approving a Power Purchase Agreement With Hecate Energy Palo Alto LLC for up to 75,000 Megawatt-hours per Year of Energy Over a Maximum of 40 Years for a Total Not-to-Exceed Amount of $101 Million.” 5. Finance Committee Recommendation to Adopt a Resolution Continuing the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program and Decreasing the Contract Rate: (1) for Solar Resources to 8.9c/kWh to 9.0c/kWh, and (2) for Non-Solar Renewable Energy Resources to 8.1c/kWh to 8.2c/kWh; and Amending Associated Program Eligibility Rules and Power Purchase Agreement Accordingly. 6. Approval of Amendment One to Contract Number C15157200 With Walker Parking Consultants to add $29,330 for Design of Automatic Parking Guidance Systems (APGS) and Parking Access and Revenue Controls (PARCs); Approval of a Transfer of $29,330 From the University Avenue Parking Permit Fund to PL-15002 and Approval of Budget Amendments for PL-15002 in the Capital Fund and the University Avenue Parking Permit Fund. 7. Recommendation Regarding the use of the Remaining Library Bond Funds and De-commissioning the Library Bond Oversight Committee. 8. Approval of Amendment One to Contract Number S16155217, Utilities Underground Locating Contract With MDR Utility Locating Specialists, Inc. to Increase the Not-to-Exceed Amount by $75,000 Annually to $160,000 per Year, for a Total Not-to-Exceed Amount of $480,000 Over Three Years to Provide Utility Locating Services With the Underground Service Alert of Northern/Central California for Identifying and Marking the City of Palo Alto’s Underground Facilities. 9. Approval and Authorization for the City Manager to Execute a Contract With Public Safety Innovations in an Amount Not-to-Exceed $250,000 to Perform Work Across a Facet of Network, Computer, Data, Radio, and Other Telecommunications Systems That Reside in Vehicles, Portable Platforms, or in Fixed Locations in Support of the Palo Alto Public Safety Team for a Term Through June 30, 2021. DRAFT ACTION MINUTES Page 3 of 6 City Council Meeting Draft Action Minutes: 3/21/16 10. Ordinance 5381 Entitled, “Ordinance of the Council of the City of Palo Alto 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 (FIRST READING: February 28, 2016 PASSED: 9-0);” Ordinance 5382 Entitled, “Ordinance of the Council of the City of Palo Alto Regarding Amortization of Nonconforming Uses at Communications & Power Industries LLC (CPI) Located at 607- 811 Hansen Way (FIRST READING: February 28, 2016 PASSED: 9-0);” and Approval of Related Terms of Agreement Between the City and CPI. MOTION FOR AGENDA ITEM NUMBERS 4, 6-10 PASSED: 9-0 Action Items 13. Discussion of Reallocation and Increase of Housing Units at Stanford University for Graduate Students and Possible Direction to Prepare a Comment Letter Regarding the Project to Santa Clara County. Council Member DuBois advised he would not participate in this Agenda Item due to a source of income from Stanford University. Council Member DuBois left the meeting at 8:05 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to direct Staff to prepare a comment letter to Santa Clara County, for signature by the Mayor, supporting the Stanford housing project. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “incorporating the following language, ‘construction of higher density infill housing near transit centers and jobs is precisely the type of project the Governor’s Office has determined will reduce vehicle miles traveled, and associated greenhouse gas emissions.’” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “and include, ‘as project plans are developed, attention be paid to continuing the tree screening and ongoing Heating, Ventilation, and Air Conditioning (HVAC) impacts mitigated at whichever threshold is more restrictive, those of the City of Palo Alto or the County of Santa Clara.’” DRAFT ACTION MINUTES Page 4 of 6 City Council Meeting Draft Action Minutes: 3/21/16 MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member Kniss to direct Staff to prepare a comment letter to Santa Clara County, for signature by the Mayor, supporting the Stanford housing project, incorporating the following language, “construction of higher density infill housing near transit centers and jobs is precisely the type of project the Governor’s office has determined will reduce vehicle miles traveled, and associated greenhouse gas emissions.” And include, “as project plans are developed, attention be paid to continuing the tree screening and ongoing Heating, Ventilation, and Air Conditioning (HVAC) impacts mitigated at whichever threshold is more restrictive, those of the City of Palo Alto or the County of Santa Clara.” MOTION AS AMENDED PASSED: 8-0 DuBois not participating 12. Comprehensive Plan Update: Housing Sites and Programs. Council Member DuBois returned to the meeting at 8:29 P.M. At this time Council heard Agenda Item Number 11. 11. PUBLIC HEARING: Adoption of a Mitigated Negative Declaration and Approval of a Site and Design Review Application for a new Two-Story, 7,500 Square Foot, 50-Foot Tall Building Designed to Handle Sludge De-watering and Truck Load-outs, With Adjacent Stand-by Generator, and a new Outdoor Equipment Area Next to the Existing Incinerator, to be Placed Centrally on the Regional Water Quality Control Plant Site at 2501 Embarcadero Way. Public Hearing opened at 10:17 P.M. Staff requested Agenda Item Number 11 be continued to March 28, 2016. At this time Council returned to Agenda Item Number 12. 12. Comprehensive Plan Update: Housing Sites and Programs. MOTION: Vice Mayor Scharff moved, seconded by Council Member XX to direct Staff to: DRAFT ACTION MINUTES Page 5 of 6 City Council Meeting Draft Action Minutes: 3/21/16 A. Return with options to provide affordable housing for moderate income government employees including funding options and any barriers to creation of such housing; and B. Return with a program for micro-units Downtown, including decoupled parking, not selling parking permits, lease restrictions with minimum impacts, and how many units to include in a pilot; and C. Return with a plan for more bike storage Downtown; and D. Move housing sites from San Antonio Road to California Avenue and Downtown. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “evaluate feasibility of these changes in the near term” after “direct Staff to.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add at the end of the Motion Part B, “reevaluate the definition of mixed use retail and residential in select locations.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “return with options for ensuring existing housing is used for housing and not other uses or unused.” (New Part E) MOTION PART D SEPARATED FROM THE MOTION FOR THE PURPOSE OF VOTING “move housing sites from San Antonio to California Avenue and Downtown.” (New Part F) INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to separate from the Motion Part B, “to reevaluate a new mixed use definition of residential and retail in select locations.” (New Part C) MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member DuBois to direct Staff to evaluate feasibility of these changes in the near term: DRAFT ACTION MINUTES Page 6 of 6 City Council Meeting Draft Action Minutes: 3/21/16 A. Return with options to provide affordable housing for moderate income government employees including funding options and any barriers to creation of such housing; and B. Return with a program for micro-units Downtown, including decoupled parking, not selling parking permits, lease restrictions with minimum impacts, how many units to include in a pilot; and C. Reevaluate the definition of mixed use retail and residential in select locations; and D. Return with a plan for more bike storage Downtown; and E. Return with options for ensuring existing housing is used for housing and not other uses or unused. F. Move housing sites from San Antonio Road to California Avenue and Downtown. MOTION PARTS A-E PASSED: 8-1 Schmid no MOTION PART F PASSED: 5-4 Berman, Filseth, Holman, Kniss no Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements None. Adjournment: The meeting was adjourned at 11:55 P.M. City of Palo Alto (ID # 6631) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: Change Order Number 9 for MP Nexlevel Contract No. C15156474 Title: Approval of Change Order Number 9 in the Amount of $267,607 to Contract Number C15156474 With MP Nexlevel of California, Inc. for Additional Trenching and Installation Work on Utilities Underground District No. 47; And Approval of a Budget Amendment in the Electric Fund in Fiscal Year 2016, Offset by a Reduction of $96,000 From the Electric Fund Distribution Reserve to Complete the Installation of Underground Substructures for Underground Utility District Number 47 From: City Manager Lead Department: Utilities Recommendation Staff recommends that the City Council approve and authorize the City Manager or his designee to: 1. Execute Change Order Number 9 (Attachment A) in the amount of $267,607 to Contract C15156474 with MP Nexlevel of California, Inc. for trenching and installation of utility substructures changed or missed during the design of capital improvement project EL- 11010 - Underground District 47 – Middlefield, Homer, Webster and Addison (UUD 47). 2. Utilize savings in non-contingency contract funds of $48,308, the remainder of the existing $170,000 in contingency amounts not already allocated to Change Orders 1-8 ($124,218 remaining) and the additional funding approved in this staff report to pay for Change Order Number 9. 3. Amend the Fiscal Year 2016 Budget Appropriation Ordinance for the Electric Fund by: (i) Increasing the Underground District 47 (EL-11010) project budget in the amount of $96,000; and (ii) Decreasing the Electric Fund Rate Distribution Reserve in the amount of $96,000. Background City of Palo Alto Page 2 Underground Utility District No. 47 (“UUD 47”) involves converting the overhead utility lines to underground in the Area of Middlefield Road, Homer Avenue, Webster Street, and Addison Avenue. On March 2, 2015, the City Council approved and authorized the City Manager to execute an Electric Enterprise Fund construction contract with MP Nexlevel of California, Inc. (“MP Nexlevel”), in the amount of $1,697,836, with a contingency amount of $170,000, for trenching and installation of utility substructures and an Addendum to the Agreement for Joint Participation in the Installation of the Underground Facilities System Between the City of Palo Alto, AT&T, and Comcast Corporation of California IX, Inc. (Staff Report 5469). Discussion MP Nexlevel was the lowest responsible bidder for the project, whose scope of work consisted of excavation and placement of conduits, vaults, boxes and pads in the public right-of-way and in public utility easements for the future installation of City of Palo Alto Utilities (Utilities), AT&T, and Comcast cables and equipment. During construction there were several change orders initiated by Utilities, Public Works Department, AT&T, and Comcast which increased the estimated cost by $313,389 above the contract amount. These changes included: 1. Repairing deteriorated sidewalks and curbs at a few locations within the undergrounding district. This work was unanticipated and was not included in the original scope of work. Public Works considered this a public safety hazard and requested that Utilities allow MP Nexlevel to perform repairs. 2. Repairing damaged storm drain lines at the intersection of Homer Avenue and Webster Street. This section of the line is considered a critical public infrastructure. In anticipation of the “El Nino” winter storm and to avoid any further damages to the existing line, Public Works requested that Utilities allow MP Nexlevel to make repairs to the storm drain line since it was in the work area of the project. 3. Installing additional vaults and boxes for AT&T and grounding rods for Comcast which will be fully reimbursed by the telecommunication companies. Items 1-3 above were covered by Change Orders 1-8. The City has already paid MP Nexlevel for Change Orders 1-8. 4. Correcting installed quantity numbers for certain materials. Some of the quantities for conduit installation for the City’s and Comcast’s systems exceeded the estimated bid quantities due to an oversight during development of the IFB and associated bid quantities. These items are primarily 2’’ & 4” primary, secondary, communication and Comcast communication conduits. Item 4 is addressed by Change Order 4, which staff recommends Council approve. City of Palo Alto Page 3 The bid item quantities in the contract are estimates, based on the engineering design, whereas the contractor’s invoices are based on actual work completed. The total amount billed for the project is $1,649,528 out of a total contract amount of $1,697,836. As a result, there is $48,308 (contract amount minus billed amount) remaining in the contract. Change orders associated with Items 1 through 4 above totaled $313,389. The change orders exceed the approved contingency amount of $170,000 by $143,389. Staff recommends that Council approve the use the remaining balance of the contract amount of $48,308 to offset a portion of the overage in the contingency and add $96,000 to the contract contingency to fund the remaining balance of the change orders. In addition, a budget amendment in the amount of $96,000, from Electric Fund Reserves, is needed to fund the change orders and increase the total CIP EL-11010 budget to $2,294,525 for FY 2016. The overage in the contingency account occurred due to a contract oversight. There was an error in the contract management spreadsheet. An internal process and system review has been conducted and new controls have been added to prevent this from recurring in the future. Item Description Amount A Contract Amount (C15156474) $1,697,836 B Total Amount Billed $1,649,528 C Remaining amount in contract (A - B) $48,308 D Contract Contingency $170,000 E Items 1 through 3 above (Change Orders 1 to 8) $45,782 F Item 4 above (Change Order 9) $267,607 G Total of all Change Orders (E + F) $313,389 H Remaining amount in Contingency (D - G) - $143,389 I Remaining Authorized Amount (C-H) - $95,081 J Contract and Budget Amendment Ordinance Request $96,000 Resource Impact A budget amendment in the Electric Fund of $96,000, offset with a reduction to the Electric Fund Distribution Reserve is recommended to fund the contract change orders for capital improvement project EL-11010 (Underground District 47 – Middlefield, Homer, Webster, and Addison). Policy Implications This project supports CPAU Key Strategy number 7 – Implement programs that improve the quality of the environment and Supporting Objective number 2 – Invest in utility infrastructure to deliver reliable service. City of Palo Alto Page 4 Timeline Substructure installation work pertaining to Undergrounding District No. 47 (UUD47) has been completed. Adding money to the existing Contract C15156474 will not impact the timeline of the project. Environmental Review This project is categorically exempt from the California Environmental Quality Act under Section 15302(d) of the California Code of Regulations, Title 14, Chapter 3 (conversion of overhead electric utility facilities to underground). Attachments: Attachment A: Underground 47 - Change Order #9 (PDF) Contract Change Order City of Palo Alto Department: Electric Engineering Contract Number: C15156474 APPENDIX B – CONTRACT CHANGE ORDER PAGE 1 OF 6 Appendix B: Contract Change Order See next page for Form and Instructions: DocuSign Envelope ID: 3CE5F23B-CEC7-4D32-BA56-0090FB5F4D31 PAGE 2 OF 6 APPENDIX B –CONTRACT CHANGE ORDER Contract Change Order Form Project Title: Underground District No. 47 Project Number: 40012979 Contract Number: C15156474 Date: 12/21/2015 Contractor: MP Nexlevel of California, Inc. Change Order Number: 9 Description of Change Order Additional trenching, conduit & box installation Background Information: Additional trenching, conduits and boxes were installed in order to comply with undergrounding requirements for the district. Change Order Justification: In order to convert the overhead utility lines to underground, additional trenching, conduit, and boxes were needed. This work was overlooked during the design/bid process, but is necessary for the conversion to proceed. Description of Work to be Performed: MP Nexlevel did additional trenching work and installed conduits and boxes for CPAU, AT&T and Comcast. These items were not included in the original contract. Incorporates Field Order Number(s): Cost Time This change order will: Not change cost X Increase cost by $267,607.20______ Decrease cost by $_______________ This change order will: X Not change time Increase time by _________ days Decrease time by _________ days The date of completion as of this change order is ___________________________. Note G/L account number (s) here (see G/L #’s below): Basis for change in cost: Unit price(s) X Lump sum Cost plus ______% Other:_______________ Performing the work will not change the completion date of the project. Bid Item #1 $22,517.00 ----------CPA, AT&T, Comcast Bid Item #3 $104,225.00--------CPA, AT&T, Comcast Bid Item #4 $31,107.45-----------CPA Bid Item #12 $13,650.00----------CPA Bid Item #14 & 17 $33, 050.00----------CPA Bid Item #29, 30 & 31 $45,131.25------CPA Bid Item #36 & 37 $17,926.50-------- Comcast Total ------------------------$267,607.20 DocuSign Envelope ID: 3CE5F23B-CEC7-4D32-BA56-0090FB5F4D31 Contract Change Order City of Palo Alto Department: Electric Engineering Contract Number: C15156474 APPENDIX B – CONTRACT CHANGE ORDER PAGE 3 OF 6 Contract Change Order Form - continued The undersigned Contractor approves this Change Order as to the changes, if any, in the contract price specified for each Line Item and as to the extension of time allowed, if any, for completion of the entire work on account of each Line Item, and agrees to furnish all labor and materials and perform all work necessary to complete any additional work specified therein, for the consideration stated therein. It is understood that the time and cost adjustments set forth in this Change Order include full compensation for any impacts or delays associated with the Line Items addressed in this Change Order. Accepted for Contractor: Accepted for City of Palo Alto: By: By: Title: Title: Date: Date: DocuSign Envelope ID: 3CE5F23B-CEC7-4D32-BA56-0090FB5F4D31 Project Manager 3/21/2016 3/21/2016 City of Palo Alto (ID # 6696) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: Transportation and Disposal of Ash and Sludge Title: Approval of a Wastewater Treatment Fund Contract With PSC Industrial Outsourcing, Inc. in a Total Amount Not- to-Exceed $483,703.56 for a Three- Year Term to Transport and Dispose of Ash and Sludge for the Regional Water Quality Control Plant From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached contract with PSC Industrial Outsourcing, LP (PSC) for a period of three years not to exceed amount of $483,703.56 for transportation and disposal of ash and sludge for the Regional Water Quality Control Plant (Attachment A). Background The Regional Water Quality Control Plant (RWQCP) produces approximately two tons per day of ash from its sewage sludge incinerators. Ash pickups are weekly and average 11 to 15 tons per pickup. In recent years, annual ash transport and disposal service has been between 605 to 723 tons. Engineering design of a Sludge Dewatering and Loadout Facility (Staff Report ID #5295) is nearly complete with construction of the facility scheduled for completion in summer 2019. This will allow for the retirement of the incinerators after 47 years of service. The ash has been managed as a state hazardous waste and placed in a hazardous waste landfill instead of a standard landfill since 2007. Staff has investigated the origin of the soluble copper that violates the state (but not federal) hazardous waste criteria. Staff has not been able to determine the cause of the soluble copper or any practical treatment modifications. The soluble copper forming in City of Palo Alto Page 2 the ash during sludge incineration has not impacted the plant’s air or water discharges. If the soluble copper level drops below state thresholds for hazardous waste or hazardous waste stabilization during the contract term, the ash will be directed to an approved landfill at lower cost. During the contract term, it is expected that soluble copper levels will remain above 40 parts per million and require disposal as hazardous waste requiring stabilization. The existing ash hauler is Clean Harbors Environmental Services, Inc. (Clean Harbors). Clean Harbors has hauled the ash from 2013 to present. Veolia hauled the plant ash from 2010 to the 2013. PSC hauled and disposed of the plant’s ash from 2007 to 2010. PSC provided satisfactory service between 2007 and 2010. Discussion PSC will dedicate two sealed bins for ash hauling service. PSC will pick up a full bin of ash once a week and replace it with an empty bin. PSC will transport the ash to a state hazardous waste treatment facility operated by Waste Management. The facility is fully permitted to receive hazardous waste. The facility is located west of I-5 near the unincorporated area of Kettleman City, approximately 186 miles from the Plant. The City’s two sewage sludge incinerators have been operating reliably since 1972, without any serious disruption to the incineration process. However, it is possible that extended incinerator downtime would leave the City without readily available sludge treatment and disposal alternatives. As a backup to ash disposal, PSC will provide emergency sludge transport and disposal in the event the plant’s two sewage sludge incinerators are both inoperative for a period of more than approximately four days. Like the ash, PSC has proposed disposal of the raw sludge at the Waste Management Kettleman Hills Facility. East Bay Municipal Utilities District (EBMUD) in Oakland, California is an alternate sludge disposal location during emergency situations. EBMUD has the necessary permits as well as the experience treating raw sludge from other wastewater treatment agencies. It can treat sludge on a short-term basis during emergencies and digester maintenance (e.g., for Richmond, California, Central Marin Sanitation Agency, and others). Summary of Bid Process City of Palo Alto Page 3 A request for quotation for the project was posted on the City’s procurement site and sent to 91 bidders. The bidding period was 31 days. Bids were received from two qualified contractors on February 23, 2016 as listed on the attached bid summary (Attachment B). Staff has reviewed all bids submitted. Bids ranged from a high of $253,336.80 (Clean Harbors) to a low bid of $156,492.79 (PSC). Staff recommends that the bid of $156,492.79 submitted by PSC be accepted and that PSC be declared the lowest responsible bidder. PSC provided the lowest bid for both one-year, two-year and three-year contract terms. Staff checked references supplied by the contractor for previous work performed and found no significant complaints. Staff also checked the Contractor's State License Board and found the contractor has an active license on file. Bid Name/Number Transportation and Disposal of Ash and Sludge / RFQ 161852 Proposed Length of Project 1 year with option to extend two additional years Number of Bids Mailed to Contractors 91 notified through PlanetBids Number of Bids Mailed to Builder’s Exchanges 0 Number of downloads 7 prospective bidders, (2 of 7 are Builder’s exchanges) Total Days to Respond to Bid 31 Pre-Bid Meeting? Yes Number of Company Attendees at Pre-Bid Meeting? 2 Number of Bids Received: 2* Bid Price Range From a low of $156,492.79 to a high of $253,336.80 – 1st contract year From a low of $483,703.56 to a high of $783,011.45 – all 3 contract years *Bid summary provided in Attachment B. Resource Impact Funds for the first year of the contract have been appropriated in the FY 2016 Wastewater Treatment Enterprise Fund operating budget. Fund for years two and City of Palo Alto Page 4 three are contingent upon Council approval of the budget for each subsequent year. Policy Implications This recommendation does not represent any change to existing City policies. Environmental Review The recommended action is exempt from review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), which exempts negligible expansion of an existing use including operation of publicly- owned sewerage services, structures, facilities, mechanical equipment, or topographical features. Attachments: Attachment A: Contract C16161852 (PDF) Attachment B: RFQ 161852 Bid Results Summary (PDF) Attachment A DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D CITY OF PALO ALTO CONTRACT NO. C16161852 GENERAL SERVICES AGREEMENT THIS AGREEMENT made and entered into on the 2nd day of March, 2016, by and between the CITY OF PALO ALTO, a California chartered municipal corporation {"CITY"), and PSC INDUSTRIAL OUTSOURCING, LP, a Delaware Limited Liability Partnership, located at 5151 San Felipe, Ste 1.601:P~ Houston, TX 77056, Telephone Number: 925-244-1803 ("CONTRACTOR"). In consideration of their mutual covenants, the parties hereto agree as follows: 1. SERVICES. CONTRACTOR shall provide or furnish the services (the "Services") described in the Scope of Services, attached at Exhibit A. 2. EXHIBITS. The following exhibits are attached to and made a part of this Agreement: t8J "A" -Scope of Services t8J "A-1" -Lab Data t8J "A-2" -Ash Bin Cover Diagram t8J "B" -Schedule of Performance t8J "C" -Schedule of Fees t8J "D" -Insurance Requirements CONTRACT IS NOT COMPLETE UNLESS ALL IND/CA TED EXHIBITS ARE ATTACHED. 3. TERM. The term of this Agreement is from April 4, 2016 to April 3, 2019 inclusive, subject to the provisions of Sections Q and V of the General Terms and Conditions. 4. SCHEDULE OF PERFORMANCE. CONTRACTOR shall complete the Services within the term of this Agreement in a reasonably prompt and timely manner based upon the circumstances and direction communicated to CONTRACTOR, and if applicable, in accordance with the schedule set forth in the Schedule of Performance, attached at Exhibit B. Time is of the essence in this Agreement. 5. COMPENSATION FOR ORIGINAL TERM. CITY shall pay and CONTRACTOR agrees to accept as not-to-exceed compensation for the full performance of the Services and reimbursable expenses, if any: Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D r The total maximum lu mp sum compensation-of OR dollars($ ); The sum of dollars ($ per hour, not to exceed a total maximum compensation amount of dollars ($ ); OR P: A sum calculated in accordance with the fee schedule set forth at Exhibit C, not to exceed a total maximum compensation amount of four hundred eighty three thousand seven hundred three dollars and fifty six cents ($483, 703.56). CONTRACTOR agrees that it can perform the Services for an amount not to exceed the total maximum compensation set forth above. Any hours worked or services performed by CONTRACTOR for which payment would result in a total exceeding the maximum amount of compensation set forth above for performance of the Services shall be at no cost to CITY. r CITY has set aside the sum of dollars ($ ) for Additional Services. CONTRACTOR shall provide Additional Services only by advanced, written authorization from the City Manager or designee. CONTRACTOR, at the CITY's request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONTRACTOR's proposed maximum compensation, including reimbursable expense, for such services. Compensation shall be based on the hourly rates set forth above or in Exhibit C (whichever is applicable), or if such rates are not applicable, a negotiated lump sum. CITY shall not authorize and CONTRACTOR shall not perform any Additional Services for which payment would exceed the amount set forth above for Additional Services. Payment for Additional Services is subject to all requirements and restrictions in this Agreement. 6. COMPENSATION DURING ADDITIONAL TERMS. r CONTRACTOR'S compensation rates for each additional term shall be the same as the original term; OR r CONTRACTOR's compensation rates shall be adjusted effective on the commencement of each Additional Term. The lump sum compensation amount, hourly rates, or fees, whichever is applicable as set forth in section 5 above, shall be adjusted by a percentage equal to the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco-Oakland-San Jose area, published by the United States Department of Labor Statistics (CPI) which is published most immediately preceding the commencement of the applicable Additional Rev. February 22, 2016 DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E43347D Term, wnich shall be comparedwith fhe CPI published most immediately preceding the commencement date of the then expiring term. Notwithstanding the foregoing, in no event shall CONTRACTOR's compensation rates be increased by an amount exceeding five percent of the rates effective during the immediately preceding term. Any adjustment to CONTRACTOR's compensation rates shall be reflected in a written amendment to this Agreement. 7. INVOICING. Send all invoices to CITY, Attention: Project Manager. The Project Manager is: James Allen, Dept.: Water Quality Control Plant, Telephone: (650) 329-2243. Invoices shall be submitted in arrears for Services performed. Invoices shall not be submitted more frequently than monthly. Invoices shall provide a detailed statement of Services performed during the invoice period and are subject to verification by CITY. CITY shall pay the undisputed amount of invoices within 30 days of receipt. GENERAL TERMS AND CONDITIONS A. ACCEPTANCE. CONTRACTOR accepts and agrees to all terms and conditions of this Agreement. This Agreement includes and is limited to the terms and conditions set forth in sections 1 through 6 above, these general terms and conditions and the attached exhibits. B. QUALIFICATIONS. CONTRACTOR represents and warrants that it has the expertise and qualifications to complete the services described in Section 1 of this Agreement, entitled "SERVICES," and that every individual charged with the performance of the services under this Agreement has sufficient skill and experience and is duly licensed or certified, to the extent such licensing or certification is required by law, to perform the Services. CITY expressly relies on CONTRACTOR's representations regarding its skills, knowledge, and certifications. CONTRACTOR shall perform all work in accordance with generally accepted business practices and performance standards of the industry, including all federal, state, and local operation and safety regulations. C. INDEPENDENT CONTRACTOR. It is understood and agreed that in the performance of this Agreement, CONTRACTOR and any person employed by CONTRACTOR shall at all times be considered an independent CONTRACTOR and not an agent or employee of CITY. CONTRACTOR shall be responsible for employing or engaging all persons necessary to complete the work required under this Agreement. D. SUBCONTRACTORS. CONTRACTOR may not use subcontractors to perform any Services under this Agreement unless CONTRACTOR obtains prior written Rev. February 22, 2016 DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E43347D consent of CITY. CONTRACTOR shall be solely responsible for directing the work of approved subcontractors and for any compensation due to subcontractors. E. TAXES AND CHARGES. CONTRACTOR shall be responsible for payment of all taxes, fees, contributions or charges applicable to the conduct of CONTRACTOR's business. F. COMPLIANCE WITH LAWS. CONTRACTOR shall in the performance of the Services comply with all applicable federal, state and local laws, ordinances, regulations, and orders. G. PALO ALTO MINIMUM WAGE ORDINANCE. CONTRACTOR shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, CONTRACTOR shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONTRACTOR shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. H. DAMAGE TO PUBLIC OR PRIVATE PROPERTY. CONTRACTOR shall, at its sole expense, repair in kind, or as the City Manager or designee shall direct, any damage to public or private property that occurs in connection with CONTRACTOR's performance of the Services. CITY may decline to approve and may withhold payment in whole or in part to such extent as may be necessary to protect CITY from loss because of defective work not remedied or other damage to the CITY occurring in connection with CONTRACTOR's performance of the Services. CITY shall submit written documentation in support of such withholding upon CONTRACTOR's request. When the grounds described above are removed, payment shall be made for amounts withheld because of them. I. WARRANTIES. CONTRACTOR expressly warrants that all services provided under this Agreement shall be performed in a professional and workmanlike manner in accordance with generally accepted business practices and performance standards of the industry and the requirements of this Agreement. CONTRACTOR expressly warrants that all materials, goods and equipment provided by CONTRACTOR under this Agreement shall be fit for the particular purpose intended, shall be free from defects, and shall conform to the requirements of this Agreement. CONTRACTOR agrees to promptly replace or correct any material or service not in compliance with these warranties, including incomplete, inaccurate, or defective material or service, at no further cost to CITY. The warranties set forth in this section shall be in effect for a period Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D of one year from completion of tile Services and-shalf survive the completion of the Services or termination of this Agreement. J. MONITORING OF SERVICES. CITY may monitor the Services performed under this Agreement to determine whether CONTRACTOR's work is completed in a satisfactory manner and complies with the provisions of this Agreement. K. CITY'S PROPERTY. Any reports, information, data or other material (including copyright interests) developed, collected, assembled, prepared, or caused to be prepared under this Agreement will become the property of CITY without restriction or limitation upon their use and will not be made available to any individual or organization by CONTRACTOR or its subcontractors, if any, without the prior written approval of the City Manager. L. AUDITS. CONTRACTOR agrees to permit CITY and its authorized representatives to audit, at any reasonable time during the term of this Agreement and for three (3) years from the date of final payment, CONTRACTOR's records pertaining to matters covered by this Agreement. CONTRACTOR agrees to maintain accurate books and records in accordance with generally accepted accounting principles for at least three (3) following the terms of this Agreement. M. NO IMPLIED WAIVER. No payment, partial payment, acceptance, or partial acceptance by CITY shall operate as a waiver on the part of CITY of any of its rights under this Agreement. N. INSURANCE. CONTRACTOR, at its sole cost, shall purchase and maintain in full force during the term of this Agreement, the insurance coverage described at Exhibit D. Insurance must be provided by companies with a Best's Key Rating of A-:VII or higher and which are otherwise acceptable to CITY's Risk Manager. The Risk Manager must approve deductibles and self-insured retentions. In addition, all policies, endorsements, certificates and/or binders are subject to approval by the Risk Manager as to form and content. CONTRACTOR shall obtain a policy endorsement naming the City of Palo Alto as an additional insured under any general liability or automobile policy. CONTRACTOR shall obtain an endorsement stating that the insurance is primary coverage and will not be canceled or materially reduced in coverage or limits until after providing 30 days prior written notice of the cancellation or modification to the Risk Manager. CONTRACTOR shall provide certificates of such policies or other evidence of coverage satisfactory to the Risk Manager, together with the required endorsements and evidence of payment of premiums, to CITY concurrently with the execution of this Agreement and shall throughout the term of this Agreement provide current certificates evidencing the required insurance coverages and endorsements to the Risk Manager. CONTRACTOR shall include all subcontractors as insured under its policies or shall obtain and provide to CITY Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D separate certificates and endorsements for each subcontractor that meet an the requirements of this section. The procuring of such required policies of insurance shall not operate to limit CONTRACTOR's liability or obligation to indemnify CITY under this Agreement. 0. HOLD HARMLESS. To the fullest extent permitted by law and without limitation by the provisions of section M relating to insurance, CONTRACTOR shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents from and against any and all demands, claims, injuries, losses, or liabilities of any nature, including death or injury to any person, property damage or any other loss and including without limitation all damages, penalties, fines and judgments, associated investigation and administrative expenses and defense costs, including, but not limited to reasonable attorney's fees, courts costs and costs of alternative dispute resolution), arising out of, or resulting in any way from or in connection with the performance of this Agreement. CONTRACTOR's obligations under this Section apply regardless of whether or not a liability is caused or contributed to by any negligent (passive or active) act or omission of CITY, except that CONTRACTOR shall not be obligated to indemnify for liability arising from the sole negligence or willful misconduct of CITY. The acceptance of the Services by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section survive the completion of the Services or termination of this Agreement. P. NON-DISCRIMINATION. 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 agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. Q. WORKERS' COMPENSATION. CONTRACTOR, by executing this Agreement, certifies that it is aware of the provisions of the Labor Code of the State of California 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 certifies that it will comply with such provisions, as applicable, before commencing and during the performance of the Services. R. TERMINATION. The City Manager may terminate this Agreement without cause by giving ten (10) days' prior written notice thereof to CONTRACTOR. If CONTRACTOR fails to perform any of its material obligations under this Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D Agreement, in addition to all other remedies provided by law, the City Manager may terminate this Agreement immediately upon written notice of termination. Upon receipt of such notice of termination, CONTRACTOR shall immediately discontinue performance. CITY shall pay CONTRACTOR for services satisfactorily performed up to the effective date of termination. If the termination if for cause, CITY may deduct from such payment the amount of actual damage, if any, sustained by CITY due to CONTRACTOR's failure to perform its material obligations under this Agreement. Upon termination, CONTRACTOR shall immediately deliver to the City Manager any and all copies of studies, sketches, drawings, computations, and other material or products, whether or not completed, prepared by CONTRACTOR or given to CONTRACTOR, in connection with this Agreement. Such materials shall become the property of CITY. S. ASSIGNMENTS/CHANGES. This Agreement binds the parties and their successors and assigns to all covenants of this Agreement. This Agreement shall not be assigned or transferred without the prior written consent of CITY. No amendments, changes or variations of any kind are authorized without the written consent of CITY. T. CONFLICT OF INTEREST. In accepting this Agreement, CONTRACTOR 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 this Contract. CONTRACTOR further covenants that, in the performance of this Contract, it will not employ any person having such an interest. CONTRACTOR certifies that no CITY Officer, employee, or authorized representative has any financial interest in the business of CONTRACTOR and that no person associated with CONTRACTOR has any interest, direct or indirect, which could conflict with the faithful performance of this Contract. CONTRACTOR agrees to advise CITY if any conflict arises. U. GOVERNING LAW. This contract shall be governed and interpreted by the laws of the State of California. V. ENTIRE AGREEMENT. This Agreement, including all exhibits, represents the entire agreement between the parties with respect to the services that may be the subject of this Agreement. Any variance in the exhibits does not affect the validity of the Agreement and the Agreement itself controls over any conflicting provisions in the exhibits. This Agreement supersedes all prior agreements, representations, statements, negotiations and undertakings whether oral or written. W. NON-APPROPRIATION. 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 Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D thee-vent t hat-fffriosare nor appro·priated for the f6lloWin·g fisca l year, or {orat 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 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 Contract. X. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONTRACTOR shall comply with CITY's Environmentally Preferred Purchasing policies which are available at CITY's Purchasing Division, which are incorporated by reference and may be amended from time to time. CONTRACTOR 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, CONTRACTOR shall comply with the following zero waste requirements: • All printed materials provided by CONTRACTOR 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. • Goods purchased by Contractor 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 Division's office. • Reusable/returnable pallets shall be taken back by CONTRCATOR, at no additional cost to CITY, for reuse or recycling. CONTRACTOR shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. V. AUTHORITY. The individual(s) executing this Agreement on behalf of the parties represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Z. CONTRACT TERMS: All unchecked boxes do not apply to this Agreement. In the case of any conflict between the terms of this Agreement and the exhibits hereto or CONTRACTOR's proposal (if any), the Agreement shall control. In the case of any conflict between the exhibits hereto and CONTRACTOR's proposal, the exhibits shall control. Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D -AA.DIR REGISTRATION. In regard to any public work construction, alteration, demolition, repair or maintenance work, CITY will not accept a bid proposal from or enter into this Agreement 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. City requires CONTRACTOR and its listed subcontractors to comply with the requirements of SB 854. CITY provides notice to CONTRACTOR of the requirements of California Labor Code section 1771.l{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 contractor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded." CITY gives notice to CONTRACTOR and its listed subcontractors that CONTRCATOR 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. CITY requires CONTRACTOR and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: 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. 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. 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. Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D -r --CITY requests CONTRACTOR and its listed subcontractors to submit the certified payroll records to the project manager at the end of each week during the Project. 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. 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 hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO AL TO City Manager or Designee (Required on contracts $85,000 and over) Title CFO & Treasurer Telephone: 713-985-5409 Approved as to form: Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D 1.1 BACKGROUND EXHIBIT A SCOPE OF SERVICES A. The Palo Alto Regional Water Quality Control Plant (RWQCP) operates a sewage sludge incinerator, which creates a dry ash in the bottom of the furnace. The sludge is thermally transformed into ash containing inorganic oxides. B. CONTRACTOR will dispose of the ash at the Waste Management Kettleman Hills Facility (KHF). C. Vendor has visually observed the bin drop off and pickup site and verified that the hauler's equipment can safely operate at owner's site. D. This is a contract for the combined services of hauling and disposal of sludge and ash. CONTRACTOR is a qualified, licensed hauler with the appropriate contract with a Class 1-nonRCRA sanitary landfill. 1.2 PURPOSE A. This contract is for hauling and disposal of ash. The contractor is to maintain qualifications and licenses to haul the ash to a Class 1-nonRCRA sanitary landfill. B. The contractor shall transport and dispose of the ash in accordance with the terms and conditions of this contract. The Contractor shall be expressly designated by the Parties hereto as the transporter of, and the arranger for the disposal of all wastes to be transported, managed and disposed of under this contract. C. The sewage sludge incinerators have been operating since 1972 and producing ash. Though the incinerators have never failed, the potential exists for incinerator nonoperation and loss of all surplus sludge storage capacity. In this case, a backup transportation and disposal contract is needed to handle dewatered, untreated sludge and disposal at a sanitary landfill or at another sewage treatment plant. 1.3 CHARACTERISTICS OF ASH AND SLUDGE Ash pickups are weekly and average 10 to 13 tons per pickup. A larger load (e.g., 20 tons) is not frequent and typically occurs after very large storms when the plant is processing a higher solids loading. In most years, there are 53 ash pickups (historically, they are always on Tuesday mornings). Pickups are occasionally (once or twice per year) more often than once a week and the CONTRACTOR will respond to calls for special pickups. Once a year, an industrial cleaning company (not part of this contract) cleans out one of the plant's incinerators of its ash for special inspection; an extra bin will be requested from the CONTRACTOR at least once a year for this purpose and drop off shall be within 48 hours. The special pickup shall not involve one of the two bins used for regular service. Previous year data is shown below, in tons. DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E43347D Ye_a_r No. of Loads Totar Minimum 25%ile 50%ile 75%ile Maximum 2010 53 713 11.9 13.1 13.7 14.2 17.9 2011 54 723 10.0 12.6 13.4 14.0 18.0 2012 53 638 7.4 11.2 12.4 13.1 20.2 2013 55 628 2.9 10.7 11.2 12.5 16.8 2014 53 605 5.1 10.3 11.3 12.5 18.8 2015 51 631 6.2 11.3 12.3 14.5 15.7 A. Ash Copper Levels I. Since about 2007, the plant's ash has been hauled and disposed of as a state hazardous waste because the soluble copper level exceeded state limits (not federal limits). If the soluble copper level drops below 25 ppm per state regulations during the contract term, the ash shall be directed to an approved municipal landfill. 2. Since mid-2011, the soluble copper level in the ash has been over 40 ppm. When the soluble copper level in the ash is greater than 40 ppm, final disposal will require that the ash be disposed of in a Class 1 non-RCRA hazardous waste landfill and stabilized prior to disposal, if required by the jurisdiction of the landfill. If the copper level drops per state requirements below 40 ppm during the contract term and remains over 25 ppm, the ash shall be direct landfilled at a Class 1 non-RCRA hazardous waste landfill. 3. Unless notified otherwise, the CONTRACTOR shall assume that the soluble copper level remains greater than 40 ppm during the contract term. B. In previous years, offloading ash for stabilization, solidification, and disposal was delayed due to dust control and landfill equipment reliability issues. CONTRACTOR is aware that the material to be disposed of can easily become airborne and produce dust during treatment and/or offloading; CONTRACTOR has coordinated with KHF regarding these issues. C. Wet sludge production is estimated to be 75 tons per day of 28% dry sludge cake (undigested and untreated). D. For waste characterization, ash sample lab analysis is included in Exhibit A-1. 1.4 ASH PACKAGING AND TRANSPORTATION A. The City will load the ash into a bin owned by the contractor and left at the plant site. The contractor shall provide two watertight, open-top, tarped bins for ash. One bin shall remain at the RWQCP and the other shall be used by the contractor for exchanges. The contractor shall deliver the bin to the RWQCP for the temporary storage of the ash. The City will place the ash into the bin and will notify the contractor for exchange of bin and disposal of the ash when the bin is sufficiently full and ready for disposal. The bin, each approximately 40 cubic yards, shall be water tight, lined, tarped, and suitable for transportation of the ash. B. The City will notify the contractor two calendar days before the required disposal of the ash and bin exchange. Typical pickups are on Tuesdays. For City holidays falling upon a Tuesday or for other special coordination, the CONTRACTOR is to work with plant staff to determine an alternate pickup day. Upon notice, the contractor shall at its expense, remove, transport, and dispose of the ash at an approved, class 1-nonRCRA sanitary landfill site suitable for proper disposal of ash. Removal and exchange of the bins shall be between the hours of 6:05 a.m. and 5:30 p.m., upon City notification. Transportation shall be by licensed, registered hauler who complies with all local, state, and federal laws. DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D C. The City owns and maintains an ash bin cover with a screw to move ash throughout the bin for even distribution. The waste hauler shall only provide bins compatible with the existing cover. A diagram and dimensions of the City's ash bin cover is included in Exbibit A-2. The City will remove the ash bin cover prior to bin pickup. 1.5 EMERGENCY SLUDGE PACKAGING AND TRANSPORTATION A. The City will load the sludge into a bin owned by the contractor and left at the plant site after notification of need for this service. The contractor shall provide multiple watertight bins for sludge. One bin shall remain at the RWQCP and the others shall be used by the contractor for exchanges. The contractor shall deliver the bin to the RWQCP for the temporary storage of the sludge. The City will place the sludge into the bin and will notify the contractor for exchange of bin and disposal of the sludge when the bin is sufficiently full and ready for disposal. The bin, each approximately 20 cubic yards, shall be water tight, lined, and suitable for transportation of untreated sludge. B. If the emergency sludge disposal is needed, the hauler will need to mobilize to provide service within 24 hours. The plant will need the change out of five or more CONTRACTOR-supplied 20-cubic yard drop-off bins per day, 24 hours per day, seven days per week. The hauling and transport of sewage sludge will continue until the sewage sludge incinerators are repaired. The CONTRACTOR will need to have made arrangements in advance for this service should it be required. C. The City will notify the contractor in the event of an emergency need to use their services for sludge hauling. The contractor shall provide a 24-hour emergency dispatch number. Upon notice, the contractor shall at its expense, remove, transport, and dispose of the sludge at an approved sanitary landfill site suitable for proper disposal of untreated sewage sludge. Removal and exchange of the bins shall be at all hours of plant operation. Temporary storage of sludge bins is available onsite when landfills are closed. Transportation shall be by licensed, registered hauler who complies with all local, state, and federal laws. 1.6 WEIGHTS AND ASSAYS A. The City will keep a record of the estimated weight or volume of each truck load of waste. At its expense, the contractor shall weigh each truckload of waste received at its disposal site and submit the weight tags to the RWQCP. 1.7 DOCUMENTATION, PERMITS AND INSURANCE A. The contractor shall maintain permits and insurance required during the term of this contract. B. Contractor shall provide all appropriate documentation, certifications and records for the transportation, management and disposal of Class 1 wastes and all applicable federal, state and local laws and regulations, including, but not limited to: 1. bills of lading or non-hazardous waste manifests 2. Class I waste manifests and continuation sheets 3. labpack inventory sheets 4. land disposal restriction notifications 5. Class I waste profiles 6. certificates of destruction, decontamination, disposal and/or recycling Appropriate copies of the documentation listed above as well as any other documents required by the City's Project Manager shall be furnished to the City's Project Manager at the time of waste shipment. C. Closed originals of all uniform hazardous (and non-hazardous) waste manifests signed by a duly authorized representative of the receiving Treatment/Storage/Disposal Facility (TSDF) shall be DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D furnished to the City's Project Manager within thirfy (30) calendar days of waste shipment. This requirement shall survive the expiration and/or termination of the Agreement. D. Certificates of destruction, decontamination, disposal and/or recycling signed by a duly authorized representative of the receiving TSDF shall be furnished by the Contractor to the City's Project Manager for all wastes to be managed under this contract within one hundred and eighty (180) calendar days of waste shipment. This requirement shall survive the expiration and/or termination of the Agreement. E. The Contractor shall, at all times during the transportation, storage, and disposal of wastes to be managed under this contract, know the location, condition and status of each item being managed. The Contractor shall make such information available in written progress reports to the City's Project Manager upon request. The progress reports shall include a listing of items removed, referenced by an appropriate identification number and uniform Class I waste manifest number and a description of the location and status of wastes on date of the written progress report. 1.8 PICKUP ADDRESS A. Palo Alto Regional Water Quality Control Plant Attn: Operations Shift Supervisor or Senior Operator 2501 Embarcadero Way Palo Alto, CA 94303 650-329-2598 -phone 1.9 BILLING ADDRESS B. Palo Alto Regional Water Quality Control Plant Attn: Mary Sekator 2501 Embarcadero Way Palo Alto, CA 94303 650-329-2396 -phone 650-494-8395 -fax 1.10 PRICING CONDITIONS AND ANNUAL INCREASES A. ADDITIONAL PRICING CONDITIONS 1. Demurrage will not be charged for pickup of waste up to and including 90 minutes of loading and unloading time. After 90 minutes, the demurrage charge of $95/hour applies will apply if the City causes the delay. 2. Demurrage will not be charged for delays caused by the hauler not having proper paperwork at the time of arrival at the plant site. 3. Unloading demurrage will not be charged for wastes being delivered unless the City of Palo Alto creates a condition such as an improperly identified waste or nonconforming waste. 4. A minimum volume of 10 tons (or yards, whichever is greater) will be billed for all waste received in a roll-off container, intermodal, or dump trailer delivered to hauler's waste disposal facility. 5. Haulers' owned or leased roll-off containers or other equipment that are damaged by City of Palo Alto may be repaired by contractor and invoice City at a quoted hourly rate for labor and parts invoiced at no more than cost plus 30%. 6. Roll-off washout charges are to be included in the pricing. 7. In the event sludge can be hauled to East Bay Municipal Utilities District, the pncmg for emergency sludge disposal shall be cost plus 10%. For the base contract, the prices in Section B above shall apply. 8. In case of price increase due to new regulatory fees, waste hauler must notify the City of Palo Alto DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D ic,-wd[ing before any aclaitional fees will be allowed. B. ANNUAL INCREASES 1. The price increase for the second and third 12-month periods of this contract is to be determined in the Base Bid Schedules. 2. In the case of a price increase due to new regulatory fees, the contractor must notify the City of Palo Alto in writing before any additional fees will be allowed. 1.11 MISCELLANEOUS CONDITIONS A The waste hauler will have free and easy access to the pickup site. B. The waste hauler will maintain containers in DOT shippable condition. C. Composition of Waste i. If CITY'S waste materials do not conform to the descriptions and specifications in the corresponding Profile Sheet, CONTRACTOR and CITY shall, in good faith, attempt to amend the Profile Sheet and any other pertinent documents and/or correct any improper containerization, marking or labeling to enable CONTRACTOR to accept such non-conforming waste materials at a Facility. If the parties cannot, within a reasonable time after CONTRACTOR notifies CITY the waste materials are non-conforming, resolve the same as set forth above, CITY shall make prompt arrangements for the removal of such non-conforming waste materials from the Facility at which they are located to another lawful place of storage or disposal. CITY agrees to pay CONTRACTOR its reasonable expenses and charges incurred with respect to CITY'S' non- conforming waste materials. ii. CONTRACTOR ADDITIONAL WARRANTIES CONTRACTOR represents and warrants to CITY that: a. CONTRACTOR is engaged in the business of performing Services with respect to waste materials and has developed the requisite expertise to perform the Services agreed to by CITY and CONTRACTOR hereunder; b. all CONTRACTOR vehicles and each Facility utilized to perform Services hereunder shall have all permits, licenses, certificates or approvals required under applicable laws and regulations for such Services; and c. CONTRACTOR will perform Services for CITY in a safe and workmanlike manner, and in compliance with all statutes, ordinances, laws, orders, rules and regulations applicable to the Services. iii. CITY'S WARRANTIES CITY represents and warrants to CONTRACTOR that: a. the description of and specifications pertaining to its waste materials in the Profile Sheet is and at all times will be true and correct in all material respects, and waste materials tendered to CONTRACTOR will at all times, including, without limitation, at the time ofrecertification of the waste materials, conform to the description and specifications contained in the Profile Sheet; b. CITY has made available all information it has regarding the waste materials, and if CITY receives information that the waste materials described in a Profile Sheet present, or may present, a hazard or risk to persons or the environment not reasonably disclosed in the Profile Sheet, CITY will promptly report such information to CONTRACTOR; c. if CITY is not the Generator of the waste materials (as defined in 40 CFR 260.10), CITY has all necessary authority to enter into this Agreement with respect to the waste materials; d. CITY is under no legal restraint which prohibits the transfer of possession of such waste materials to CONTRACTOR; e. CITY shall comply with all applicable statutes, ordinances, laws, orders, rules and regulations, and shall provide CONTRACTOR a safe work environment for Services performed on any premises owned or controlled by CITY; and f. if CONTRACTOR requests that work areas be secured, CITY will be solely responsible for securing such work areas and for preventing anyone other than CONTRACTOR personnel from entering the designated work areas. D. TRANSFER OF TITLE CONTRACTOR shall take title to CITY's waste materials which conform to DocuSign Envelope ID: 448F9D83-A76E-4EF1 -9A95-3F616E43347D lhc descriptions a11d specifications stated in the Profi le Sheet upon cofr1pletio-n of loadfng info CONTRACTOR's transportation vehicles, or if transported by CITY, upon acceptance at the Facility. E. CONTRACTOR acknowledges that a major construction project to construct a sludge dewatering building will occur in the field south of the ash bin during the contract term. The field south of the bin will not be available during much of the contract term for maneuvering the hauler's truck. The construction contractor may move the ash hauler's bin during the construction contract for logistical purposes. The CONTRACTOR is required to have a reciprocal agreement with the city's construction contractor allowing free movement of the hauler's bin at no cost to the city or the construction contractor. The agreement shall cover necessary coordination requirements (e.g., liability for bin damage). The construction contractor has not been selected. The city's project manager will notify PSC when the construction contractor has been selected. F. The City does not expressly or by implication agree that the actual amount of work shall correspond to approximately weekly pickups in the range of 605 to 723 dry tons/year of ash mentioned in the bid, but reserves the right to increase, decrease or modify the amount of any class or portion of the work or to omit portions of the work as may be deemed necessary or expedient by the City's Project Manager. END OF SECTION DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ~ Caltest CA-ELAP Certification 1664 'ANAl\"ll('AI I \llt>ltAlllll\' Thursday, June 18, 2015 Samantha Bialorucki City of Palo Alto 2501 Embarcadero Way Palo Alto, CA 94303 Re Lab Order: 0050123 ENVIRO NMENT -,. A ' Project ID: NP DES QUARTERLY MAY 2015 Dear Samantha Bialorucki: I, ' S EXHIBIT A-1 Lab Data Collected By: WQCP LAB AND OPS PO/Contract#: 4615000068 Enclosed are the analytical results for sample(s) received by the laboratory on Tuesday, May 05, 2015. Results reported herein conform to the most current NELAC standards, where applicable, unless otherwise narrated in the body of the report. If you have any questions concerning this report, please feel free to contact me. Enclosures Project Manager: Melinda F. Kelley 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 1 of 27 This report shall not be reproduced, except In full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ~~~ Caltest ~-~ -~~~~ • t(~i .\N/\1 \ l lC\I. I \II< Ill\ I OH\ SAMPLE SUMMARY Lab Order: Q050123 Project ID: NPDES QUARTERLY MAY 2015 Lab ID Sample ID Matrix Q050123001 E000764-01 ASH A Q050123002 E000763-01 ASH A Q050123003 E000765-01 ASH A Q050123004 E000766·01 BARSCREEN RAGS Solid Solid Solid Solid Solid Q050123005 E000767-01 GRIT 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except In full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 CA-ELAP Certification 1664 011 Date Collected Date Received 05/04/2015 10:00 05/05/2015 13:40 05/04/2015 10:00 05/05/2015 13:40 05/04/2015 10:00 05/05/2015 13:40 05/04/2015 09:33 05/05/2015 13:40 05/04/2015 09:35 05/05/2015 13:40 Page 2 of 27 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E433470 NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 II REVLSED II NARRATIVE Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 General Quallflers and Notes Caltest authorizes this report to be reproduced only in its entirety. Results are specific to the sample(s) as submitted and only to the parameter(s) reported. Caltest certifies that all test results for wastewater and hazardous waste analyses meet all applicable NELAC requirements; all microbiology and drinking water testing meet applicable ELAP requirements, unless stated otherwise. All analyses performed by EPA Methods or Standard Methods (SM) 20th Edition except where noted (SMOL=online edition). Caltest collects samples in compliance with 40 CFR, EPA Methods, Cal. Title 22, and Standard Methods. Dilution Factors (OF) reported greater than '1' have been used to adjust the result, Reporting Limit (RL), and Method Detection Limit (MDL). All Solid, sludge, and/or biosolids data is reported in Wet Weight, unless otherwise specified. Filtrations performed at Caltest for dissolved metals (excluding mercury) and/or pH analysis are not performed within the 15 minute holding time as specified by 40CFR 136.3 table II. Results Qualifiers: Report fields may contain codes and non-numeric data correlating to one or more of the following definitions: ND -Non Detect -indicates analytical result has not been detected. RL -Reporting Limit Is the quantitation limit at which the laboratory Is able to detect an analyte. An analyte not detected at or above the RL is reported as ND unless otherwise noted or qualified. For analyses pertaining to the State Implementation Plan of the California Toxics Rule, the Caltest Reporting Limit (RL) is equivalent to the Minimum Level (ML). A standard is always run at or below the ML. Where Reporting Limits are elevated due to dilution, the ML calibration criteria has been met. J -reflects estimated analytical result value detected below the Reporting Limit (RL) and above the Method Detection Limit (MDL). The 'J' flag is equivalent to the ONO Estimated Concentration flag. E -indicates an estimated analytical result value. B -indicates the analyte has been detected in the blank associated with the sample. NC -means not able to be calculated for RPO or Spike Recoveries. SS -compound is a Surrogate Spike used per laboratory quality assurance manual. NOTE: This document represents a complete Analytical Report for the samples referenced herein and should be retained as a permanent record thereof. Workorder Notes Report revised to reflect current MDLs for 60108 (Leachate) Qualifiers and Compound Notes 2 3 4 5 6 6/18/2015 16:12 Analyte(s) reported as 'ND' means not detected at or above the listed Method Detection Limits (MDL). The Reporting Limit (R.L.) was raised due to background interference noted in the sample. Sample diluted due to a high concentration of non-target analyte(s), resulting in increased reporting limits. Initial sample amount reduced in prep in an effort to reduce matrix effects resulting in higher reporting limit(s). Sample diluted to bring concentration of target analyte(s) within the working range of the instrument, resulting in increased reporting limits. Sample prepared using methanolic extraction method resulting In higher reporting limit(s). REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com Page 3 of 27 ATTACHMENT A DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ;,r~ '~ Caltest ' ,\N,\IYl'l<'/\1. L\IIDIIATOIIV CA-ELAP Certification 1664 ENVIRONMENTAL ANALYSES ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123001 Date Collected 5/4/2015 10:00 Matrix Solid Sample ID E000764-01 ASH A Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Mercury Analysis Prep Method: SW846 7471A Prep by: UK Analytical Method: SW846 7471A Analyzed by: LM Mercury J0.0009 mg/kg 0.020 0.00080 1 05/06/15 00:00 MPR 13565 05/07/15 13:12 MHG 4963 Metals Analysls by ICP Prep Method: SW846 30508 Prep by: UK Analytical Method: SW846 60108 Analyzed by: LM Antimony 3.5 mg/kg 2.0 1.5 1 05/06/15 00:00 MPR 13563 05/18/15 00:00 MIC4479 Arsenic 4.6 mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Barium 830 mg/kg 1.0 0.70 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Beryllium ND mg/kg 5.0 0.15 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 2,1 Cadmium 0.36 mg/kg 0.20 0.050 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Chromium 70 mg/kg 1.0 0.20 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Cobalt 19 mg/kg 0.4 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Copper 1900 mg/kg 4.0 0.40 2 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC4479 Lead 55 mg/kg 1.0 0.50 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Molybdenum 29 mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Nickel 81 mg/kg 1.0 0.30 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Selenium 7.9 mg/kg 2.0 0.80 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Silver 14 mg/kg 1.0 0.15 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Thallium 2.6 mg/kg 2.0 0.70 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Vanadium 77 mg/kg 0.40 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Zinc 2000 mg/kg 8.0 2.0 2 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC 4479 Cyanide, Total Analysls Analytical Method: SW846 9012A Analyzed by: BCP Cyanide 0.69 mg/kg 0.080 0.080 05/09/15 17:05 wco 10778 Percent Sollds Analysls Analytlcal Method: SM20-2540 G Analyzed by: JDC Solids, Percent 100 % 0.1 0.1 05/07/15 17:04 WGR5763 Lab ID Q050123002 Date Collected 5/4/2015 10:00 Matrix Solid Sample ID E000763-01 ASH A Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Mercury Analysis, STLC Prep Method: SW846 7470A Prep by: UK Analytlcal Method: SW846 7470A Analyzed by: LM Mercury ND ug/L 0.50 0.30 105/12/1500:00 MPR 13577 05/13/15 13:51 MHG 4968 Metals Analysis by ICP, STLC Prep Method: SW846 3010 Prep by: UK Analytical Method: SW846 60108 (Leachate) Analyzed by: LM Barium 16 mg/L 0.15 0.070 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Copper 40 mg/L 0.10 0.030 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Lead 0.19 mg/L 0.10 0.040 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Silver ND mg/L 0.030 0.0060 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 4 of 27 This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ·,~, Caltest ,·~ ,\~AlnlC.\I I \l!tll:\IOHY CA-ELAP Certification 1664 II REVISED II ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123003 Date Collected 5/4/2015 10:00 Matrix Solid Sample ID E000765-01 ASH A Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qual ~~~~~-~~~~~-~~~~~~~~~ Asbestos Analysis -Solid Analytical Method: (per attached report) Asbestos Analysis· Solld Analysis performed by EMSL Analytical, CA-ELAP Certification 1620. Refer to attached for original certificate of analysis. Lab ID Q050123004 Date Collected 5/4/2015 09:33 Matrix Solid Sample ID E000766-01 BARSCREEN Date Received 5/5/2015 13:40 Results are expressed as wet weight values RAGS Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Mercury Analysis, STLC, Low Level Prep Method: SW846 7 4 70A Low Level Prep by: UK Analytical Method: SW846 7 4 70A Low Level Analyzed by: LM Mercury ND ug/L 0.50 0.30 1 05/12/15 00:00 MPR 13577 05/13/15 13:54 MHG 4968 Mercury Analysis Prep Method: SW846 7471A Prep by: UK Analytical Method: SW846 7471A Analyzed by: LM Mercury 0.032 mg/kg 0.020 0.00079 1 05/06/15 00:00 MPR 13565 05/07 /15 13:44 MHG 4963 Metals Analysis by ICP, STLC Prep Method: SW846 3010 Prep by: UK Analytical Method: SW846 60108 (Leachate) Analyzed by: LM Antimony ND mg/L 0.10 0.040 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Arsenic 0.34 mg/L 0.10 0.050 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Barium 0.45 mg/L 0.15 0.070 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC4481 Beryllium ND mg/L 0.010 0.0050 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Cadmium ND mg/L 0.010 0.0040 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Chromium ND mg/L 0.10 0.050 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Cobalt ND mg/L 0.050 0.020 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Copper ND mg/L 0.10 0.030 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Lead ND mg/L 0.10 0.040 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Molybdenum ND mg/L 0.50 0.20 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Nickel J0.042 mg/L 0.05 0.020 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Selenium ND mg/L 0.50 0.20 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Silver ND mg/L 0.030 0.0060 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Thallium ND mg/L 0.10 0.040 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Vanadium 0.034 mg/L 0.02 0.0050 1 05/11115 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Zinc 3.5 mg/L 0.20 0.10 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Metals Analysis by ICP Prep Method: SW846 30508 Prep by: UK Analytical Method: SW846 60108 Analyzed by: LM Antimony ND mg/kg 2.0 1.5 1 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC4479 Arsenic ND mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Barium 6.6 mg/kg 1.0 0.71 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Beryllium ND mg/kg 0.20 0.15 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Cadmium J0.06 mg/kg 0.20 0.050 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Chromium J0.9 mg/kg 1.0 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Cobalt ND mg/kg 0.4 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Copper 14 mg/kg 2.0 0.20 1 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC 4479 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 5 of 27 This report shall not be reproduced, except In full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 9455 8 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ' lr n.!test CA-ELAP Certification 1664 .. >...,,a.s.:. ~ \ N " , ,.,l "'\f 1 .,nnu '-·• 01n· ll ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123004 Date Collected 5/4/2015 09:33 Matrix Solid Sample ID E000766-01 BARSCREEN RAGS Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Lead ND mg/kg 1.0 0.50 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Molybdenum ND mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Nickel J0.93 mg/kg 1.0 0.30 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Selenium J1.5 mg/kg 2.0 0.81 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Silver J0.2 mg/kg 1.0 0.15 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Thallium ND mg/kg 2.0 0.71 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC 4479 Vanadium 0.87 mg/kg 0.40 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Zinc 60 mg/kg 4.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Asbestos Analysis -Solid Analytical Method: (per attached report) Asbestos Analysis -Solid Analysis performed by EMSL Analytical, CA-ELAP Certification 1620. Refer to attached for original certificate of analysis. Total Extractable Petroleum Prep Method: SW846 3541 Prep by: MDT Hydrocarbon Analytical Method: SW846 8015(MOD) Analyzed by: MDT Diesel Fuel ND mg/kg 120 75 10 05/12/15 00:00 SPR6946 05/27/15 19:31 SFL 1703 5 TPH quantitated as Diesel 2830 mg/kg 120 75 10 05/12/15 00:00 SPR6946 05/27/15 19:31 SFL 1703 Fuel o-Terphenyl (SS) 108 % 40-139 10 05/12/15 00:00 SPR 6946 05/27/15 19:31 SFL 1703 Semivolatile Organic Analysis Prep Method: SW846 3540 Prep by: MDT Analytical Method: SW846 8270C Analyzed by: MDT Acenaphthene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01:34 SMS 3755 3,4 Acenaphthylene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Aniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Anthracene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Benzidine ND mg/kg 10 7.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Benzo(a)anthracene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Benzo(a)pyrene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzo(b )fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzo(g,h,i)perylene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzo(k)fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzoic acid ND mg/kg 30 30 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzyl alcohol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Benzyl butyl phthalate ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 4-Bromophenyl phenyl ether ND mg/kg 5.0 3.0 5 05/07 /15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Carbazole ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 4-Chloroaniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 bis(2-Chloroethoxy) ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 methane bis(2-Chloroethyl) ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 bis(2-Chloroisopropyl) ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 4-Chloro-3-methylphenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2-Chloronaphthalene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2-Chlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 4-Chlorophenyl phenyl ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 6 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY ,@·1-~,~ 1885 North Kelly Road• Napa, California 94558 ~z") :1r~. •• ~nelac\, (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com ,., DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 'l_ Caltest CA-ELAP Certification 1664 ',\N/\1\'lll"·\I I IIIOIIAIOH\' EVISEDII ENVIRONMENTAL ANALYSES ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123004 Date Collected 5/4/2015 09:33 Matrix Solid Sample ID E000766-01 BARSCREEN RAGS Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Chrysene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Total Cresci J9.7 mg/kg 10 9.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Dibenzo(a,h)anthracene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Dibenzofuran ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 1,2-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 1,3-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 1,4-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07 /15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 3,3'-Dichlorobenzidine ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,4-Dichlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Diethylphthalate ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2,4-Dimethylphenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Dimethylphthalate ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Di-n-butylphthalate ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,4-Dinitrophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,4-Dinitrotoluene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,6-Dinitrotoluene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Di-n-octylphthalate ND mg/kg 5.0 1.5 5 05/07 /15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 1,2-Diphenylhydrazine I ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Azobenzene bis(2-Ethylhexyl) phthalate ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Fluorene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Hexachlorobenzene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Hexachlorobutadiene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Hexachlorocyclo pentadiene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Hexachloroethane ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 lndeno(1,2,3-cd)pyrene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 lsophorone ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2-Methyl-4,6-dinitrophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2-Methylnaphthalene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2-Methylphenol (o-Cresol) ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 3 & 4-Methylphenol(m&p 9.7 mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Cresci) Naphthalene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2-Nitroaniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 3-Nitroaniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 4-Nitroaniline ND mg/kg 5.0 1.5 5 05/07 /15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Nitrobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2-Nitrophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 4-Nitrophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 N-Nitrosodimethylamine ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 N-Nitroso-di-n-propylamine ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 N-Nitrosodiphenylamine ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Pentachlorophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Phenanthrene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 7 of 27 This report shall not be reproduced, except In full, without the written consent of CALTEST ANALYTICAL LABORATORY ",~oc~ 1885 North Kelly Road• Napa, California 94558 lt1elc~~ n (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com '-., DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F61 6E43347D NELAP/ORELAP Certification 4036 ~-.:r. \-i··-~-Caltest CA-ELAP Certification 1664 ·~~-1. --~ ~ti .\r,,,:.\I \"lf(",\I l \111>1: \IUH\ N lll0NMHN1'AI; ANAI.Y ·es ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123004 Date Collected 5/4/2015 09:33 Matrix Solid Sample ID E000766-01 BARSCREEN RAGS Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Phenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Pyrene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 Pyridine ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 1,2,4-Trichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,4,5-Trichlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2,4,6-Trichlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 01 :34 SMS 3755 2-Fluorobiphenyl (SS) 81 % 10-149 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2-Fluorophenol (SS) 50% 47-105 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Nitrobenzene-d5 (SS) 70% 57-108 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Phenol-d6 (SS) 75% 58-97 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Terphenyl-d14 (SS) 82% 32-120 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 2,4,6-Tribromophenol (SS) 130 % 26-143 5 05/07/15 00:00 SPR 6939 06/05/15 01 :34 SMS 3755 Volatile Organic Analysis Analytical Method: SW846 50308/82608 Analyzed by: AN Benzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 4 Bromobenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Bromochloromethane ND mg/kg 0.025 0.015 05/07/15 18:57 VMS 3245 Bromodichloromethane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS3245 Bromoform ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 Bromomethane (Methyl ND mg/kg 0.10 0.020 05/07/15 18:57 VMS 3245 Bromide) n-Butylbenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 sec-Butylbenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 tert-Butylbenzene ND mg/kg 0.025 0.010 05/07/1518:57 VMS 3245 Carbon tetrachloride ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Chlorobenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Chloroethane (Ethyl ND mg/kg 0.10 0.015 05/07 /15 18:57 VMS 3245 Chloride) Chloroform ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Chloromethane(Methyl ND mg/kg 0.10 0.010 05/07/1518:57 VMS 3245 Chloride) 2-Chlorotoluene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 4-Chlorotoluene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 Dibromochloromethane ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 1,2-Dibromo-3-ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 chloropropane 1,2-Dibromoethane (EDB) ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 Dibromomethane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1,2-Dichlorobenzene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 1,3-Dichlorobenzene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 1,4-Dichlorobenzene ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 Dichlorodifluoromethane (F-ND mg/kg 0.050 0.010 05/07/15 18:57 VMS 3245 12) 1, 1-Dlchloroethane ND mg/kg 0.025 0.010 05/07/1518:57 VMS 3245 1,2-Dichloroethane (EDC) ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 1, 1-Dichloroethene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 cis-1,2-Dichloroethene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 8 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY ~h 1885 North Kelly Road• Napa, California 94558 .#' :l's n I I' . ,., fneac~ (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ~rt .. Caltest '\,·11'" ">t;'l \N,\I \"11(',\I I \1101< \l(ltO CA-ELAP Certification 1664 VISED!I ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123004 Date Collected 5/4/2015 09:33 Matrix Solid Sample ID E000766-01 BARSCREEN RAGS Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL OF Prepared Batch Analyzed Batch Qua I trans-1,2-Dichloroethene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1,2-Dichloropropane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1,3-Dlchloropropane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 2,2-Dichloropropane ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 1, 1-Dichloropropene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 Dichlorotrifluoroethane ND mg/kg 0.025 0.0050 05/07 /15 18:57 VMS 3245 (F123) Ethyl benzene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 Hexachlorobutadiene NO mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 4-lsopropyltoluene ND mg/kg 0.025 0.010 05/07/1518:57 VMS 3245 Methyl tert-butyl ether ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 (MTBE) Methylene chloride ND mg/kg 0.15 0.0050 05/07/1518:57 VMS 3245 Naphthalene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 n-Propylbenzene ND mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 Styrene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1, 1, 1,2-Tetrachloroethane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1, 1,2,2-Tetrachloroethane NO mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Tetrachloroethene (PCE) NO mg/kg 0.025 0.010 05/07/1518:57 VMS 3245 Toluene ND mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 1,2,3-Trichlorobenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1,2.4-Trichlorobenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1, 1,2-Trichloroethane NO mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 1, 1, 1-Trichloroethane (TCA) ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Trichloroethane (TCE) NO mg/kg 0.025 0.010 05/07 /15 18:57 VMS 3245 Trichlorofluoromethane (F-ND mg/kg 0.025 0.020 05/07/15 18:57 VMS 3245 11) 1,2,3-Trlchloropropane ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Trichlorotrifluorethane ND mg/kg 0.050 0.010 05/07/1518:57 VMS 3245 (F113) 1,2.4-Trimethylbenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 1,3,5-Trlmethylbenzene ND mg/kg 0.025 0.010 05/07/15 18:57 VMS 3245 Vinyl chloride ND mg/kg 0.025 0.015 05/07 /15 18:57 VMS 3245 Xylenes, total NO mg/kg 0.025 0.0050 05/07/15 18:57 VMS 3245 4-Bromofluorobenzene (SS) 92% 74-130 05/07/15 18:57 VMS 3245 Dibromofluoromethane (SS) 111 % 69-129 05/07/15 18:57 VMS 3245 1,2-Dichloroethane-d4 (SS) 116 % 61-133 05/07/15 18:57 VMS 3245 Toluene-dB (SS) 103% 71-135 05/07/1518:57 VMS 3245 Cyanide, Total Analysis Analytical Method: SW846 9012A Analyzed by: BCP Cyanide 0.094 mg/kg 0.080 0.080 05/09/15 17:05 wco 10778 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 9 of 27 This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ~t .. Caltest ,r. . CA-ELAP Certification 1664 ·~: ,'•"I··~ ... "'~"itli \S.\l YflC.\I I \HOH \'I I Ht\" E N Ill N ;t ··NT.-\l. NA LY!rnS II REVISED II ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123005 Date Collected 5/4/2015 09:35 Matrix Solid Sample ID E000767·01 GRIT Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL OF Prepared Batch Analyzed Batch Qua I Mercury Analysis, STLC, Low Level Prep Method: SW846 7470ALow Level Prep by: UK Analytical Method: SW846 7 4 70A Low Level Analyzed by: LM Mercury ND ug/L 0.50 0.30 1 05/12/15 00:00 MPR 13577 05/13/15 13:56 MHG 4968 Mercury Analysis Prep Method: SW846 7471A Prep by: UK Analytical Method: SW846 7471A Analyzed by: LM Mercury 0.099 mg/kg 0.020 0.00079 1 05/06/15 00:00 MPR 13565 05/07/15 13:52 MHG4963 Metals Analysis by ICP, STLC Prep Method: SW846 3010 Prep by: UK Analytical Method: SW846 60108 (Leachate) Analyzed by: LM Antimony ND mg/L 0.10 0.040 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Arsenic J0.055 mg/L 0.10 0.050 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Barium 1.4 mg/L 0.15 0.070 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Beryllium ND mg/L 0.010 0.0050 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC4481 Cadmium J0.0043 mg/L 0.010 0.0040 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Chromium 0.11 mg/L 0.10 0.050 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Cobalt ND mg/L 0.050 0.020 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Copper ND mg/L 0.10 0.030 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Lead ND mg/L 0.10 0.040 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Molybdenum ND mg/L 0.50 0.20 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC4481 Nickel 0.13 mg/L 0.05 0.020 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Selenium ND mg/L 0.50 0.20 1 05/11 /15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Sliver ND mg/L 0.030 0.0060 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Thallium ND mg/L 0.10 0.040 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Vanadium 0.066 mg/L 0.02 0.0050 105/11/1500:00 MPR 13573 05/14/15 00:00 MIC 4481 Zinc 2.9 mg/L 0.20 0.10 1 05/11/15 00:00 MPR 13573 05/14/15 00:00 MIC 4481 Metals Analysis by ICP Prep Method: SW846 30508 Prep by: UK Analytical Method: SW846 60108 Analyzed by: LM Antimony ND mg/kg 2.0 1.5 1 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC4479 Arsenic ND mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Barium 20 mg/kg 1.0 0.70 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Beryllium ND mg/kg 0.20 0.15 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Cadmium J0.09 mg/kg 0.20 0.050 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Chromium 3.0 mg/kg 1.0 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Cobalt 0.6 mg/kg 0.4 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Copper 40 mg/kg 2.0 0.20 1 05/06/15 00:00 MPR 13563 05/14/15 00:00 MIC 4479 Lead 6.4 mg/kg 1.0 0.50 1 05/06/15 00:00 MPR 13563 05/11 /15 00:00 MIC4479 Molybdenum ND mg/kg 2.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Nickel 3.4 mg/kg 1.0 0.30 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Selenium ND mg/kg 2.0 0.80 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Silver J0.5 mg/kg 1.0 0.15 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Thallium ND mg/kg 2.0 0.70 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Vanadium 2.6 mg/kg 0.40 0.20 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC4479 Zinc 96 mg/kg 4.0 1.0 1 05/06/15 00:00 MPR 13563 05/11/15 00:00 MIC 4479 Asbestos Analysis • Solid Analytical Method: (per attached report) Asbestos Analysis • Solid 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 10 of 27 This report shall not be reproduced, except In full, without the written consent of CAL TEST ANALYTICAL LABORATORY ~"!~ 1885 North Kelly Road• Napa, California 94558 ~)VI kh.'-i) i nelac~ (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 tr~ Caltest -:J11=.-···"!~ .r\1';,\l.\l"f(,\I I \UOll\'IOU\ CA-ELAP Ce1iification 1664 011 ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123005 Date Collected 5/4/2015 09:35 Matrix Solid Sample ID E000767-01 GRIT Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R.L. MDL OF Prepared Batch Analyzed Batch Qua I Analysis performed by EMSL Analytical, CA-ELAP Certification 1620. Refer to attached for original certificate of analysis. Total Extractable Petroleum Prep Method: SW846 3541 Prep by: MDT Hydrocarbon Analytical Method: SW846 8015(MOD) Analyzed by: MDT Diesel Fuel ND mg/kg 60 38 5 05/12/15 00:00 SPR 6946 05/27 /15 20: 17 SFL 1703 5 TPH quantitated as Diesel 1720 mg/kg 60 38 5 05/12/15 00:00 SPR6946 05/27/15 20:17 SFL 1703 Fuel o-Terphenyl (SS) 102 % 40-139 5 05/12/15 00:00 SPR6946 05/27/15 20:17 SFL 1703 Semlvolatile Organic Analysis Prep Method: SW846 3540 Prep by: MDT Analytical Method: SW846 8270C Analyzed by: MDT Acenaphthene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 4,3 Acenaphthylene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02: 12 SMS 3755 Aniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Anthracene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Benzidine ND mg/kg 10 7.5 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 Benzo(a)anthracene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Benzo(a)pyrene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Benzo(b )fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Benzo(g,h,i)perylene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Benzo(k)fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Benzoic acid ND mg/kg 30 30 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Benzyl alcohol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 Benzyl butyl phthalate ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 4-Bromophenyl phenyl ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Carbazole ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 4-Chloroaniline ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02: 12 SMS 3755 bis(2-Chloroethoxy) ND mg/kg 5.0 3.0 5 05/07 /15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 methane bis(2-Chloroethyl) ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 bis(2-Chloroisopropyl) ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02: 12 SMS 3755 4-Chloro-3-methylphenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02: 12 SMS 3755 2-Chloronaphthalene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 2-Chlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 4-Chlorophenyl phenyl ether ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02: 12 SMS 3755 Chrysene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 Total Cresol ND mg/kg 10 9.0 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 Dibenzo(a,h)anthracene ND mg/kg 5.0 1.5 5 05/07 /15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Dibenzofuran ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 1,2-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 1,3-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 1,4-Dichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 3,3'-Dichlorobenzidine ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 2,4-Dichlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Diethylphthalate ND mg/kg 5.0 3.0 5 05/07 /15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 11 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY ~~· • .'~<)~ 1885 North Kelly Road• Napa, California 94558 ey_~.-:· y,~ ... "'' I I ~ ' \ii Hine act (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ~~ Caltest ' \' ~~:~) ,\N.\I \"l "'"' L\111111,\ rrnl\' CA-ELAP Certification 1664 -irl'Jvrncri'J MT.'f,I' ;\L ANA ~ - ANALYTICAL RESULTS Lab Order: 0050123 Project JD: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123005 Date Collected 5/4/2015 09:35 Matrix Solid Sample ID E000767-01 GRIT Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL OF Prepared Batch Analyzed Batch Qua I 2.4-Dimethylphenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Dimethylphthalate ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Di-n-butylphthalate ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 2,4-Dinitrophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 2.4-Dinitrotoluene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 2,6-Dinitrotoluene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Di-n-octylphthalate ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 1,2-Diphenylhydrazine I ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Azobenzene bis(2-Ethylhexyl) phthalate ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Fluoranthene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 Fluorene ND mg/kg 5.0 3.0 5 05107 /15 00:00 SPR6939 06105/15 02:12 SMS 3755 Hexachlorobenzene ND mg/kg 5.0 1.5 5 05107/15 00:00 SPR6939 06/05115 02:12 SMS 3755 Hexachlorobutadiene ND mg/kg 5.0 3.0 5 05107/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Hexachlorocyclo pentadiene ND mg/kg 5.0 1.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Hexachloroethane ND mg/kg 5.0 3.0 5 05107115 00:00 SPR6939 06105115 02:12 SMS 3755 lndeno(1,2,3-cd)pyrene ND mg/kg 5.0 1.5 5 05/07115 00:00 SPR6939 06105/15 02: 12 SMS 3755 lsophorone ND mg/kg 5.0 3.0 5 05107/15 00:00 SPR 6939 06/05115 02:12 SMS 3755 2-Methyl-4,6-dinitrophenol ND mg/kg 5.0 3.0 5 05107/15 00:00 SPR 6939 06105/15 02: 12 SMS 3755 2-Methylnaphthalene ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR6939 06/05115 02:12 SMS 3755 2-Methylphenol (o-Cresol) ND mg/kg 5.0 4.5 5 05/07115 00:00 SPR6939 06/05115 02:12 SMS 3755 3 & 4-Methylphenol(m&p 7.7 mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Cresol) Naphthalene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 2-Nitroaniline ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR6939 06105/15 02: 12 SMS 3755 3-Nitroaniline ND mg/kg 5.0 3.0 5 05107/15 00:00 SPR 6939 06105/15 02: 12 SMS 3755 4-Nitroaniline ND mg/kg 5.0 1.5 5 05/07115 00:00 SPR 6939 06/05115 02:12 SMS 3755 Nitrobenzene ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR6939 06/05115 02:12 SMS 3755 2-Nitrophenol ND mg/kg 5.0 4.5 5 05107/15 00:00 SPR6939 06/05/15 02: 12 SMS 3755 4-Nitrophenol ND mg/kg 5.0 3.0 5 05107/15 00:00 SPR 6939 06105/15 02:12 SMS 3755 N-Nitrosodimethylamine ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR 6939 06/05115 02:12 SMS 3755 N-Nitroso-di-n-propylamine ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05/15 02:12 SMS 3755 N-Nitrosodiphenylamine ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR6939 06/05115 02: 12 SMS 3755 Pentachlorophenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR6939 06/05115 02:12 SMS 3755 Phenanthrene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06105/15 02: 12 SMS 3755 Phenol ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06105/15 02:12 SMS 3755 Pyrene J2.0 mg/kg 5.0 1.5 5 05107115 00:00 SPR6939 06105115 02:12 SMS 3755 Pyridine ND mg/kg 5.0 3.0 5 05/07115 00:00 SPR6939 06105/15 02:12 SMS 3755 1,2,4-Trichlorobenzene ND mg/kg 5.0 3.0 5 05/07/15 00:00 SPR 6939 06105/15 02: 12 SMS 3755 2.4,5-Trichlorophenol ND mg/kg 5.0 4.5 5 05/07/15 00:00 SPR 6939 06105/15 02:12 SMS 3755 2,4,6-Trichlorophenol ND mg/kg 5.0 4.5 5 05/07115 00:00 SPR6939 06/05115 02:12 SMS 3755 2-Fluorobiphenyl (SS) 75% 10-149 5 05/07115 00:00 SPR6939 06105115 02:12 SMS 3755 2-Fluorophenol (SS) 54% 47-105 5 05107/15 00:00 SPR 6939 06105/15 02: 12 SMS 3755 Nitrobenzene-d5 (SS) 61 % 57-108 5 05107115 00:00 SPR 6939 06/05/15 02:12 SMS 3755 Phenol-dB (SS) 65% 58-97 5 05/07115 00:00 SPR6939 06/05/15 02:12 SMS 3755 Terphenyl-d14 (SS) 94% 32-120 5 05/07/15 00:00 SPR 6939 06/05115 02:12 SMS 3755 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 12 of 27 This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY ""~ li!, ,, ... ~ 1885 North Kelly Road• Napa, California 94558 •'" shellc:·t (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com ~, DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E433470 NELAP/ORELAP Certification 4036 t.l'J ":~~~-Caltest ~ A"-AI, rlCAI I ,\ll<llUIOll' CA-ELAP Certification 1664 II REVISED I! ANALYTICAL RESULTS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. Lab ID Q050123005 Date Collected 5/4/2015 09:35 Matrix Solid Sample ID E000767-01 GRIT Date Received 5/5/2015 13:40 Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I 2,4,6-Tribromophenol (SS) Volatile Organic Analysis Benzene Bromobenzene Bromochloromethane Bromodichloromethane Bromoform Bromomethane (Methyl Bromide) n-Butylbenzene sec-Butylbenzene tert-Butylbenzene Carbon tetrachloride Chlorobenzene Chloroethane (Ethyl Chloride) Chloroform Chloromethane(Methyl Chloride) 2-Chlorotoluene 4-Chlorotoluene Dibromochloromethane 1,2-Dibromo-3- chloropropane 1,2-Dibromoethane (EDB) Dibromomethane 1,2-Dichlorobenzene 1,3-Dichlorobenzene 1,4-Dichlorobenzene Dichlorodifluoromethane (F- 12) 1, 1-Dichloroethane 1,2-Dichloroethane (EDC) 1, 1-Dichloroethene cis-1,2-Dichloroethene trans-1,2-Dichloroethene 1,2-Dichloropropane 1,3-Dichloropropane 2,2-Dichloropropane 1, 1-Dichloropropene Dichlorotrifluoroethane (F123) Ethylbenzene Hexachlorobutadiene 4-lsopropyltoluene Methyl tert-butyl ether (MTBE) 6/18/2015 16:12 122 % 26-143 5 05/07/15 00:00 SPR6939 Analytical Method: SW846 50308/82608 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.015 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.10 0.020 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.10 0.015 ND mg/kg 0.025 0.010 ND mg/kg 0.10 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.050 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.0050 ND mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 0.16 mg/kg 0.025 0.010 ND mg/kg 0.025 0.010 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road • Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com 06/05/15 02:12 SMS 3755 Analyzed by: AN 05/07 /15 20: 10 VMS 3245 4 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07 /15 20: 10 VMS 3245 05/07/15 20:10 VMS 3245 05/07 /15 20: 10 VMS 3245 Page 13 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Solid results are reported on a wet weight basis. tii ...... Caltest ~II··, 'lot:~ ·1 "·'t}>J .\II. II YI l<",\I I \!!lilt\ 1 lllt\ ENVIRONMENTAL ANAL IL ANALYTICAL RESULTS Lab ID Q050123005 Date Collected 5/4/2015 09:35 Sample ID E000767-01 GRIT Date Received 5/5/2015 13:40 CA-ELAP Certification 1664 IIREVJ Matrix Solid Results are expressed as wet weight values Parameters Result Units R. L. MDL DF Prepared Batch Analyzed Batch Qua I Methylene chloride ND mg/kg 0.15 0.0050 05/07 /15 20: 10 VMS 3245 Naphthalene ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 n-Propylbenzene ND mg/kg 0.025 0.010 05/07 /15 20: 10 VMS 3245 Styrene ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 1, 1, 1,2-Tetrachloroethane ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 1, 1,2,2-Tetrachloroethane ND mg/kg 0.025 0.010 05/07 /15 20: 10 VMS 3245 Tetrachloroethene (PCE) ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 Toluene 4.2 mg/kg 0.005 0.0010 05/12/15 20:00 VMS 3245 6 1,2,3-Trichlorobenzene ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 1,2,4-Trichlorobenzene ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 1, 1,2-Trichloroethane ND mg/kg 0.025 0.0050 05/07/15 20:10 VMS 3245 1, 1, 1-Trichloroethane (TCA) ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 Trichloroethane (TCE) ND mg/kg 0.025 0.010 05/07 /15 20: 10 VMS 3245 Trichlorofluoromethane (F-ND mg/kg 0.025 0.020 05/07 /15 20: 10 VMS 3245 11) 1,2,3-Trichloropropane ND mg/kg 0.025 0.010 05/07 /15 20: 10 VMS 3245 Trichlorotrinuorethane ND mg/kg 0.050 0.010 05/07 /15 20: 10 VMS 3245 (F113) 1,2,4-Trimethylbenzene ND mg/kg 0.025 0.010 05/07/15 20:10 VMS 3245 1,3,5-Trimethylbenzene ND mg/kg 0.025 0.010 05/07 /15 20: 10 VMS 3245 Vinyl chloride ND mg/kg 0.025 0.015 05/07/15 20:10 VMS 3245 Xylenes, total ND mg/kg 0.025 0.0050 05/07/15 20:10 VMS 3245 4-Bromofluorobenzene (SS) 93% 74-130 05/07 /15 20: 10 VMS 3245 Dibromofluoromethane (SS) 103 % 69-129 05/07/15 20:10 VMS 3245 1,2-Dichloroethane-d4 (SS) 95% 61-133 05/07/15 20:10 VMS 3245 Toluene-dB (SS) 93% 71-135 05/07/15 20:10 VMS 3245 Cyanide, Total Analysis Analytical Method: SW846 9012A Analyzed by: BCP Cyanide 0.25 mg/kg 0.080 0.080 05/09/15 17:05 wco 10778 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 14 of 27 This report shall not be reproduced, except In full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-100 l • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1 -9A95-3F616E43347D NELAP/ORELAP Certification 4036 .. ~-~ .. \, Caltest CA-ELAP Certification 1664 Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Analysis Method: METHOD BLANK: Parameter Mercury Mercury Analysis SW846 7471A 638756 Blank Result ND LABORATORY CONTROL SAMPLE: 638757 Parameter Units Mercury mg/kg ~ • J I ... ·.:. .... i'; ~ ~ !~ \"\\1)11('\f I \l,lll:\IOH'! ENVIRONMENTAL ANALYSES QUALITY CONTROL DATA Reporting Limit MDL 0.020 0.0008 Spike Cone. 0.1 LCS Result 0.12 QC Batch: QC Batch Method: Units Qualifiers mg/kg LCS %Rec 110 %REC MPR/13565 SW846 7471A Limits Qualifier 75-125 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 638759 638760 Q050123001 Spike MS MSD MS MSD % Rec Parameter Units Result Cone. Result Result % Rec % Rec Limit RPD Mercury Analysis Description: Analysis Method: METHOD BLANK: Parameter Antimony Copper METHOD BLANK: Parameter Arsenic Barium Beryllium Cadmium Chromium Cobalt Lead Molybdenum Nickel Selenium Silver Thallium Vanad ium Zinc 6/18/2015 16:12 mg/kg 0.0009 0.11 0.115 0.115 108 108 75-125 Metals Analysis by ICP QC Batch: SW846 60108 QC Batch Method: 638744 Blank Reporting Result Limit MDL Units Qualifiers ND 2.0 1.5 mg/kg ND 2.0 0.2 mg/kg 638744 Blank Reporting Result Limit MDL Units Qualifiers ND 2.0 1.0 mg/kg ND 1.0 0.7 mg/kg ND 5.0 0.15 mg/kg ND 0.20 0.05 mg/kg ND 1.0 0.2 mg/kg ND 0.4 0.2 mg/kg ND 1.0 0.5 mg/kg ND 2.0 1.0 mg/kg ND 1.0 0.30 mg/kg ND 2.0 0.8 mg/kg ND 1.0 0.2 mg/kg ND 2.0 0.7 mg/kg ND 0.40 0.20 mg/kg ND 4.0 1.0 mg/kg REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road • Napa, California 94558 MPR/13563 SW846 30508 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com 0 Max RPD Qualifiers 35 Page 15 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Metals Analysis by ICP Analysls Method: SW846 60108 QC Batch: QC Batch Method: MPR/13563 SW846 30508 LABORATORY CONTROL SAMPLE: 638745 Spike LCS LCS %REC Parameter Units Cone. Result %Rec Limits Qualifier Antimony mg/kg 20 17 84 75-125 Arsenic mg/kg 20 17 86 75-125 Barium mg/kg 99 90 91 75-125 Beryllium mg/kg 20 19 95 75-125 Cadmium mg/kg 9.9 9.1 92 75-125 Chromium mg/kg 20 18 91 75-125 Cobalt mg/kg 20 17 85 75-125 Copper mg/kg 20 17 88 75-125 Lead mg/kg 99 91 92 75-125 Molybdenum mg/kg 20 16 80 75-125 Nickel mg/kg 20 19 94 75-125 Selenium mg/kg 20 15 77 75-125 Sliver mg/kg 20 19 95 75-125 Thallium mg/kg 99 88 89 75-125 Vanadium mg/kg 20 17 87 75-125 Zinc mg/kg 99 87 88 75-125 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 638747 638748 Q040B96001 Spike MS MSD MS MSD %Rec Parameter Units Result Cone. Result Result %Rec %Rec Limit RPD Antimony mg/kg 0 20 15.5 15.4 78 78 75-125 0.6 Arsenic mg/kg 0 20 18.5 18.4 93 93 75-125 0.5 Barium mg/kg 85 100 177 176 92 92 75-125 0.6 Beryllium mg/kg 0 20 18.3 18.1 92 91 75-125 1.1 Cadmium mg/kg 0.43 10 9.31 9.18 89 88 75-125 1.4 Chromium mg/kg 7.3 20 25.2 25.2 90 90 75-125 0 Cobalt mg/kg 0.9 20 17.3 17.2 82 82 75-125 0.6 Copper mg/kg 110 20 121 121 RNC RNC 75-125 0 Lead mg/kg 6 100 95.7 94.5 90 89 75-125 1.3 Molybdenum mg/kg 0 20 17.1 17.3 86 87 75-125 1.2 Nickel mg/kg 6.9 20 25.4 25.3 93 93 75-125 0.4 Selenium mg/kg 1.9 20 16.7 17.4 74 78 75-125 4.1 Silver mg/kg 1.3 20 20.5 20 96 94 75-125 2.5 Thallium mg/kg 0 100 86.5 85.8 87 86 75-125 0.8 Vanadium mg/kg 2 20 19.3 19.1 87 86 75-125 Zinc mg/kg 420 100 509 514 89 95 75-125 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com Max RPD Qualifiers 35 35 35 35 35 35 35 35 7 35 35 35 35 8 35 35 35 35 Page 16 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 N \I I RON 'I P. TA t NA LY s irs- QUALITY CONTROL DATA Lab Order: Q050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Metals Analysis by ICP, STLC Analysls Method: SW846 60108 (Leachate) LEACHATE BLANK: 638765 Blank Parameter Result Antimony ND Arsenic ND Barium ND Beryllium ND Cadmium ND Chromium ND Cobalt ND Copper ND Lead ND Molybdenum ND Nickel ND Selenium ND Silver ND Thallium ND Vanadium ND Zinc ND Reporting Limit 0.10 0.10 0.15 0.010 0.010 0.10 0.050 0.10 0.10 0.50 0.05 0.50 0.030 0.10 0.02 0.20 MDL 0.040 0.050 0.070 0.0050 0.0040 0.050 0.020 0.030 0.040 0.20 0.02 0.20 0.006 0.040 0.005 0.10 QC Batch: QC Batch Method: Units Qualifiers mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg/L mg IL mg/L MPR/13573 SW846 3010 LABORATORY CONTROL SAMPLE: 639463 Spike LCS LCS %REC Parameter Units Cone. Result %Rec Limits Qualifier Antimony mg IL 10 8.9 89 80-120 Arsenic mg/L 2 1.9 94 80-120 Barium mg/L 10 9.6 96 80-120 Beryllium mg/L 2 2 100 80-120 Cadmium mg/L 1 0.96 96 80-120 Chromium mg/L 2 1.9 97 80-120 Cobalt mg IL 2 1.9 95 80-120 Copper mg/L 2 2 99 80-120 Lead mg/L 10 9.7 97 80-120 Molybdenum mg/L 2 1.9 94 80-120 Nickel mg IL 2 2 98 80-120 Selenium mg/L 2 1.6 83 80-120 Silver mg IL 10 9.8 98 80-120 Thallium mg/L 10 9.4 94 80-120 Vanadium mg/L 2 1.9 95 80-120 Zinc mg/L 10 9.1 91 80-120 6/1812015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com Page 17 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1 -9A95-3F61 6E43347D NELAP/ORELAP Certification 4036 KNV I RD"N MENTAL _A_N_A LY SES QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Metals Analysis by ICP, STLC QC Batch: Analysis Method: SW846 60108 (Leachate) QC Batch Method: MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 639465 639466 Parameter Antimony Arsenic Barium Beryllium Cadmium Chromium Cobalt Copper Lead Molybdenum Nickel Selenium Silver Thallium Vanadium Zinc Analysis Description: Analysis Method: LEACHATE BLANK: Parameter Mercury Analysis Description: Analysis Method: LEACHATE BLANK: Parameter Mercury 6/18/2015 16:12 Q050123002 Spike MS Units Result Cone. Result mg/L 0.33 10 9.16 mg/L 0.34 2 2.26 mg/L 16 10 25.7 mg/L 0 2 1.89 mg/L 0.014 0.935 mg/L 0.24 2 2.11 mg/L 0.24 2 2.08 mg/L 40 2 42.2 mg/L 0.19 10 9.65 mg/L 2.4 2 4.31 mg/L 0.68 2 2.47 mg/L 0.2 2 1.97 mg/L 0 10 9.72 mg/L 0.074 10 9.51 mg/L 2.8 2 4.63 mg/L 31 10 39.9 Mercury Analysis, STLC, Low Level SW846 7470A Low Level 638765 Blank Result ND Mercury Analysis, STLC SW846 7470A 638765 Blank Result ND Reporting Limit MDL 0.50 0.30 Reporting Limit MDL 0.50 0.30 MSD MS MSD Result %Rec %Rec 9.29 88 90 2.33 96 100 25.9 97 99 1.91 95 96 0.941 92 93 2.11 94 94 2.1 92 93 42.6 110 RNC 9.71 95 95 4.36 96 98 2.5 90 91 2.01 89 91 10 97 100 9.65 94 96 4.66 92 93 39.9 89 89 QC Batch: QC Batch Method: Units Qualifiers ug/L QC Batch: QC Batch Method: Units Qualifiers ug/L REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full. without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road • Napa, California 94558 CA-ELAP Certification 1664 MPR/13573 SW846 3010 %Rec Max Limit RPD RPO Qualifiers 80-120 1.4 20 80-120 3.1 20 80-120 0.8 20 80-120 1.1 20 80-120 0.6 20 80-120 0 20 80-120 1 20 80-120 0.9 20 7 80-120 0.6 20 80-120 1.2 20 80-120 1.2 20 80-120 2 20 80-120 2.8 20 80-120 1.5 20 80-120 0.6 20 80-120 0 20 MPR/13577 SW846 7470A Low Level MPR/13577 SW846 7470A Page 18 of 27 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Analysts Method: Semivolatile Organic Analysis SW846 8270C METHOD BLANK: Parameter Acenaphthene Acenaphthylene Aniline Anthracene Benzidine Benzo(a)anthracene Benzo(a)pyrene Benzo(b )fluoranthene Benzo(g,h,i)perylene Benzo(k)fluoranthene Benzoic acid Benzyl alcohol Benzyl butyl phthalate 4-Bromophenyl phenyl ether Carbazole 4-Chloroaniline bis(2-Chloroethoxy) methane bis(2-Chloroethyl) ether bis(2-Chloroisopropyl) ether 4-Chloro-3-methylphenol 2-Chloronaphthalene 2-Chlorophenol 4-Chlorophenyl phenyl ether Chrysene Total Cresol Dibenzo(a,h)anthracene Dibenzofuran 1,2-Dichlorobenzene 1,3-Dichlorobenzene 1,4-Dichlorobenzene 3,3'-Dichlorobenzidine 2,4-Dichlorophenol Dlethylphthalate 2,4-Dimethylphenol Dimethylphthalate Di-n-butylphthalate 2,4-Dinitrophenol 2,4-Dinitrotoluene 2,6-Dinitrotoluene Di-n-octylphthalate 1,2Diphenylhydrazine/Azobenzen bis(2-Ethylhexyl) phthalate Fluoranthene Fluorene Hexachlorobenzene 638878 Blank Result ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND fE\'j 'lf' , I ,I• c <··· '~-i··. ··~s ,,['-, ,, ~ '}), ,.; ~1i '.":r ~ 1.,c... !.< ·1-•· V,;!t,.,,·. ,g, .,,_,, ti., --,J .. , ., I ~ _,. •• IJ \\,'\I \'11( , I I \[',! )I, \ 11 II,~ ... ENVJRONM~NTAi. A·N ,\LV RS QUALITY CONTROL DATA QC Batch: QC Batch Method: Reporting Limit MDL Units Qualifiers 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.67 0.50 mg/kg 0.33 0.10 mg/kg 0.33 0.10 mg/kg 0.33 0.10 mg/kg 0.33 0.10 mg/kg 0.33 0.10 mg/kg 2.0 2.0 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.30 mg/kg 0.33 0.20 mg/kg 0.33 0.30 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.67 0.60 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.30 mg/kg 0.33 0.30 mg/kg 0.33 0.20 mg/kg 0.33 0.30 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.30 mg/kg 0.33 0.10 mg/kg 0.33 0.20 mg/kg 0.33 0.10 mg/kg 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 CA-ELAP Certification 1664 SPR/6939 SW846 3540 EVlSEDII Page 19 of 27 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysis Description: Analysis Method: Semivolatile Organic Analysis SWB46 8270C QUALITY CONTROL DATA QC Batch: QC Batch Method: Blank Reporting Parameter Result Limit MDL Units Qualifiers Hexachlorobutadiene ND 0.33 0.20 mg/kg Hexachlorocyclo pentadiene ND 0.33 0.10 mg/kg Hexachloroethane ND 0.33 0.20 mg/kg lndeno(1,2,3-cd)pyrene ND 0.33 0.10 mg/kg lsophorone ND 0.33 0.20 mg/kg 2-Methyl-4,6-dlnitrophenol ND 0.33 0.20 mg/kg 2-Methylnaphthalene ND 0.33 0.20 mg/kg 2-Methylphenol (o-Cresol) ND 0.33 0.30 mg/kg 3 & 4-Methylphenol(m&p Cresol) ND 0.33 0.30 mg/kg Naphthalene ND 0.33 0.20 mg/kg 2-Nitroaniline ND 0.33 0.20 mg/kg 3-Nitroaniline ND 0.33 0.20 mg/kg 4-Nitroaniline ND 0.33 0.10 mg/kg Nitrobenzene ND 0.33 0.20 mg/kg 2-Nitrophenol ND 0.33 0.30 mg/kg 4-Nitrophenol ND 0.33 0.20 mg/kg N-Nitrosodimethylamine ND 0.33 0.20 mg/kg N-Nitroso-di-n-propylamine ND 0.33 0.20 mg/kg N-Nitrosodiphenylamine ND 0.33 0.20 mg/kg Pentachlorophenol ND 0.33 0.20 mg/kg Phenanthrene ND 0.33 0.20 mg/kg Phenol ND 0.33 0.20 mg/kg Pyrene ND 0.33 0.10 mg/kg Pyridine ND 0.33 0.20 mg/kg 1,2,4-Trichlorobenzene ND 0.33 0.20 mg/kg 2,4,5-Trichlorophenol ND 0.33 0.30 mg/kg 2,4,6-Trichlorophenol ND 0.33 0.30 mg/kg 2-Fluorobiphenyl (SS) 98 10-149 % 2-Fluorophenol (SS) 93 47-105 % Nitrobenzene-d5 (SS) 83 57-108 % Phenol-d6 (SS) 95 58-97 % Terphenyl-d14 (SS) 110 32-120 % 2,4,6-Tribromophenol (SS) 135 26-143 % LABORATORY CONTROL SAMPLE & LCSO: 638879 638880 Spike LCS LCSO LCS LCSD Parameter Units Cone. Result Result %Rec %Rec Acenaphthene mg/kg 3.3 3.46 3.2 104 96 4-Chloro-3-methylphenol mg/kg 6.7 6.36 6.25 95 94 2-Chlorophenol mg/kg 6.7 5.9 5.66 89 85 1,4-Dichlorobenzene mg/kg 3.3 3.22 2.91 97 87 2,4-Dinitrotoluene mg/kg 3.3 3.38 3.15 101 95 4-Nitrophenol mg/kg 6.7 7.18 6.78 108 102 N-Nitroso-di-n-propylamine mg/kg 3.3 2.86 2.62 86 79 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, SPR/6939 SW846 3540 %REC Limits RPO 67-108 7.8 45-98 1.7 62-106 4.2 55-112 10 56-140 7 67-127 5.7 20-120 8.8 without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-100 l • e-mail: info@caltestlabs.com SEO Max RPO Qualifier 68 74 50 50 71 52 50 Page 20 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 ,~~, C I \)__ a t est CA-ELAP Ce11ification 1664 , ·~ .-~·.: '"" \!'\\I) II~ \I I \llt1B\IOH) 1l.'. ENVIRONMENTAL ANALYSES QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysis Description: Semivolalile Organic Analysis QC Batch: SPR/6939 Analysis Method: SW846 8270C QC Batch Method: SW846 3540 LABORATORY CONTROL SAMPLE & LCSD: 638879 638880 Spike LCS LCSD LCS LCSD %REC Max Parameter Units Cone. Result Result % Rec % Rec Limits RPD RPD Qualifier Pentachlorophenol mg/kg 6.7 9.29 8.74 139 131 53-119 6.1 78 9 Phenol mg/kg 6.7 5.63 5.34 84 80 48-95 5.3 50 Pyrene mg/kg 3.3 3.52 3.35 106 101 53-122 4.9 101 1,2,4-Trichlorobenzene mg/kg 3.3 3.45 3.21 104 96 69-110 7.2 80 2-Fluorobiphenyl (SS) % 102 95 10-149 7.9 2-Fluorophenol (SS) % 90 89 47-105 0.5 Nitrobenzene-d5 (SS) % 95 101 57-108 6.1 Phenol-d6 (SS) % 96 95 58-97 1.6 Terphenyl-d14 (SS) % 118 111 32-120 6.6 2,4,6-Tribromophenol (SS) % 133 137 26-143 3.1 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 638881 638882 Q040896001 Spike MS MSD MS MSD %Rec Max Parameter Units Result Cone. Result Result %Rec %Rec Limit RPD RPD Qualifiers Acenaphthene mg/kg 0 10 10.9 11 109 110 67-108 0.9 68 11 4-Chloro-3-methylphenol mg/kg 0 20 22.9 23.9 115 120 45-98 4.3 74 11 2-Chlorophenol mg/kg 0 20 18.4 18.6 92 93 62-106 1.1 50 1,4-Dichlorobenzene mg/kg 0 10 8.82 8.7 88 87 55-112 1.4 50 2,4-Dinitrotoluene mg/kg 0 10 11 11 110 110 56-140 0 71 4-Nitrophenol mg/kg 0 20 24.7 27.3 124 137 67-127 10 52 11 N-Nitroso-di-n-propylamine mg/kg 0 10 10.8 11 .6 108 116 20-120 7.1 50 Pentachlorophenol mg/kg 0 20 29.5 27.8 148 139 53-119 5.9 78 12 Phenol mg/kg 41 20 63.5 69.8 113 144 48-95 9.5 50 11 Pyrene mg/kg 0 10 24.1 27.7 241 277 53-122 14 101 11 1,2,4-Trichlorobenzene mg/kg 0 10 10.2 9.64 102 96 69-110 5.6 80 2-Fluorobiphenyl (SS) % 113 110 10-149 2.3 2-Fluorophenol (SS) % 81 104 47-105 25 Nitrobenzene-d5 (SS) % 92 94 57-108 1.8 Phenol-d6 (SS) % 109 116 58-97 5.9 10 Terphenyl-d14 (SS) % 201 241 32-120 18 10 2,4,6-Tribromophenol (SS) % 143 143 26-143 0.1 Analysis Description: Total Extractable Petroleum Hydrocarbon QC Batch: SPR/6946 Analysis Method: SW846 8015(MOD) QC Batch Method: SW846 3541 METHOD BLANK: 639585 Blank Reporting Parameter Result Limit MDL Units Qualifiers Diesel Fuel ND 4 2 mg/kg TPH quantitated as Diesel Fuel ND 4 2 mg/kg 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 21 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road • Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 (' ';, ~;(f .. ) CaJtest CA-ELAP Ce1iification 1664 Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: ' • I ''t • ,:·~'t,.~-\ ·1 : .. •JJ \:-.,; \I )"I I{' \I I \I;( )I{\ I (lit\ ENVIRONMENTAL ANALYSES QUALITY CONTROL DATA QC Batch: Analysis Method: Total Extractable Petroleum Hydrocarbon SW846 8015(MOD) QC Batch Method: SPR/6946 SW846 3541 Parameter o-Terphenyl (SS) LABORATORY CONTROL SAMPLE: Parameter Diesel Fuel o-Terphenyi (SS) Blank Result 92 639586 Units mg/kg % Reporting Limit MDL 40-139 Spike Cone. 67 LCS Result 57 Units Qualifiers % LCS % Rec 85 89 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 639588 639589 Q050228001 Spike MS MSD MS %REC Limits Qualifier 36-120 40-139 MSD %Rec Parameter Units Result Cone. Result Result %Rec %Rec Limit RPD TPH quantitated as Diesel Fuel mg/kg 1170 200 1820 1620 RNC RNC 28-156 12 o-Terphenyi (SS) % 123 112 40-139 9.4 Analysis Description: Volatile Organic Analysis QC Batch: VMS/3245 Analysis Method: SW846 50308/82608 QC Batch Method: SW846 50308/82608 METHOD BLANK: 638856 Blank Reporting Parameter Result Limit MDL Units Qualifiers Benzene ND 0.005 0.002 mg/kg Bromobenzene ND 0.005 0.002 mg/kg Bromochloromethane ND 0.005 0.003 mg/kg Bromodichloromethane ND 0.005 0.002 mg/kg Bromoform ND 0.005 0.001 mg/kg Bromomethane (Methyl Bromide) ND 0.020 0.004 mg/kg n-Butylbenzene ND 0.005 0.002 mg/kg sec-Butylbenzene ND 0.005 0.002 mg/kg tert-Butylbenzene ND 0.005 0.002 mg/kg Carbon tetrachloride ND 0.005 0.002 mg/kg Chlorobenzene ND 0.005 0.002 mg/kg Chloroethane (Ethyl Chloride) ND 0.020 0.003 mg/kg Chloroform ND 0.005 0.002 mg/kg Chloromethane(Methyl Chloride) ND 0.020 0.002 mg/kg 2-Chlorotoluene ND 0.005 0.002 mg/kg 4-Chlorotoluene ND 0.005 0.002 mg/kg Dibromochloromethane ND 0.005 0.001 mg/kg 1,2-Dibromo-3-chloropropane ND 0.005 0.002 mg/kg 1,2-Dibromoethane (EDB) ND 0.005 0.001 mg/kg Dibromomethane ND 0.005 0.002 mg/kg 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANALYTICAL LABORATORY 1885 North Kelly Road • Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com Max RPD Qualifiers 40 7 Page 22 of 27 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 ·N ur -Nl'if ,N l\fAL g. QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysis Description: Volatile Organic Analysis QC Batch: VMS/3245 Analysis Method: SW846 50308/82608 QC Batch Method: SW846 50308/82608 Blank Reporting Parameter Result Limit MDL Units Qualifiers 1,2-Dichlorobenzene ND 0.005 0.002 mg/kg 1,3-Dichlorobenzene ND 0.005 0.002 mg/kg 1,4-Dichlorobenzene ND 0.005 0.001 mg/kg Dichlorodifiuoromethane (F-12) ND 0.010 0.002 mg/kg 1, 1-Dichloroethane ND 0.005 0.002 mg/kg 1,2-Dichloroethane (EDC) ND 0.005 0.001 mg/kg 1, 1-Dichloroethene ND 0.005 0.002 mg/kg cis-1,2-Dichloroethene ND 0.005 0.002 mg/kg trans-1,2-Dichloroethene ND 0.005 0.002 mg/kg 1,2-Dichloropropane ND 0.005 0.002 mg/kg 1,3-Dichloropropane ND 0.005 0.002 mg/kg 2,2-Dichloropropane ND 0.005 0.002 mg/kg 1, 1-Dichloropropene ND 0.005 0.002 mg/kg Dichlorotrifluoroethane (F123) ND 0.005 0.001 mg/kg Ethylbenzene ND 0.005 0.002 mg/kg Hexachlorobutadiene ND 0.005 0.002 mg/kg 4-lsopropyltoluene ND 0.005 0.002 mg/kg Methyl tert-butyl ether (MT8E) ND 0.005 0.002 mg/kg Methylene chloride ND 0.030 0.001 mg/kg Naphthalene ND 0.005 0.002 mg/kg n-Propylbenzene ND 0.005 0.002 mg/kg Styrene ND 0.005 0.002 mg/kg 1, 1, 1,2-Tetrachloroethane ND 0.005 0.002 mg/kg 1, 1,2,2-Tetrachloroethane ND 0.005 0.002 mg/kg Tetrachloroethene (PCE) ND 0.005 0.002 mg/kg Toluene ND 0.005 0.001 mg/kg 1,2,3-Trichlorobenzene ND 0.005 0.002 mg/kg 1,2,4-Trichlorobenzene ND 0.005 0.002 mg/kg 1, 1,2-Trichloroethane ND 0.005 0.001 mg/kg 1, 1, 1-Trichloroethane (TCA) ND 0.005 0.002 mg/kg Trichloroethane (TCE) ND 0.005 0.002 mg/kg Trichlorofluoromethane (F-11) ND 0.005 0.004 mg/kg 1,2,3-Trichloropropane ND 0.005 0.002 mg/kg Trichlorotrifiuorethane (F113) ND 0.010 0.002 mg/kg 1,2,4-Trimethylbenzene ND 0.005 0.002 mg/kg 1,3,5-Trimethylbenzene ND 0.005 0.002 mg/kg Vinyl chloride ND 0.005 0.003 mg/kg Xylenes, total ND 0.005 0.001 mg/kg 4-8romofiuorobenzene (SS) 89 74-130 % Dibromofluoromethane (SS) 101 69-129 % 1,2-Dichloroethane-d4 (SS) 90 61-133 % Toluene-dB (SS) 101 71-135 % 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 23 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Ce1iification 1664 EN \I I fl ON M £ N 'I' AL AN A LY SES IIREVlSEDII QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysis Description: Volatile Organic Analysis QC Batch: VMS/3245 Analysis Method: SW846 50308/82608 QC Batch Method: SW846 50308/82608 LABORATORY CONTROL SAMPLE & LCSD: 638857 638858 Spike LCS LCSD LCS LCSD %REC Max Parameter Units Cone. Result Result %Rec %Rec Limits RPO RPO Qualifier Benzene mg/kg 0.04 0.0443 0.0366 111 92 50-150 19 50 Bromochloromethane mg/kg 0.04 0.043 0.0365 108 91 50-150 16 50 Bromodichloromethane mg/kg 0.04 0.0452 0.0385 113 96 50-150 16 50 Chlorobenzene mg/kg 0.04 0.0418 0.0343 105 86 50-150 20 50 1, 1-Dichloroethene mg/kg 0.04 0.0444 0.0358 111 90 50-150 21 50 Methyl tert-butyl ether (MTBE) mg/kg 0.04 0.0488 0.0421 122 105 50-150 15 50 Toluene mg/kg 0.04 0.0413 0.0339 103 85 50-150 20 50 Trichloroethane (TCE) mg/kg 0.04 0.0442 0.0371 111 93 50-150 17 50 4-Bromofluorobenzene (SS) % 94 91 74-130 3.2 Dibromofluoromethane (SS) % 100 100 69-129 0 1,2-Dichloroethane-d4 (SS) % 101 98 61-133 3.3 Toluene-dB (SS) % 100 101 71-135 1.2 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 639382 639383 Q050214001 Spike MS MSD MS MSD %Rec Max Parameter Units Result Cone. Result Result %Rec %Rec Limit RPO RPO Qualifiers Benzene mg/kg 0 0.2 0.142 0.154 71 77 50-150 8.1 50 Bromochloromethane mg/kg 0 0.2 0.137 0.146 69 73 50-150 6.4 50 Bromodichloromethane mg/kg 0 0.2 0.104 0.0867 52 43 50-150 18 50 13 Chlorobenzene mg/kg 0 0.2 0.111 0.109 56 55 50-150 1.8 50 1, 1-Dichloroethene mg/kg 0 0.2 0.148 0.173 74 87 50-150 16 50 Methyl tart-butyl ether (MTBE) mg/kg 0 0.2 0.163 0.167 82 84 50-150 2.4 50 Toluene mg/kg 0.082 0.2 0.218 0.234 68 76 50-150 7.1 50 Trichloroethene (TCE) mg/kg 0 0.2 0.129 0.135 65 68 50-150 4.5 50 4-8romofluorobenzene (SS) % 92 91 74-130 1.3 Dibromofluoromethane (SS) % 100 109 69-129 8.2 1,2-Dichloroethane-d4 (SS) % 105 112 61-133 6.2 Toluene-dB (SS) % 102 97 71-135 5.5 Analysis Description: Cyanide, Total Analysis QC Batch: WC0/10778 Analysis Method: SW846 9012A QC Batch Method: SW8469012A METHOD BLANK: 639384 Blank Reporting Parameter Result Limit MDL Units Qualifiers Cyanide ND 0.080 0.080 mg/kg 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 24 of 27 This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Cettification 1664 EN V JR ON MENTAL AN ALY SES QUALITY CONTROL DATA Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Analysls Description: Analysis Method: Cyanide, Total Analysis SW846 9012A QC Batch: QC Batch Method: WC0/10778 SW846 9012A LABORATORY CONTROL SAMPLE: 639385 Parameter Cyanide Units mg/kg Spike Cone. 0.3 LCS Result 0.3 LCS %Rec 101 %REC Limits Qualifier 80-120 MATRIX SPIKE & MATRIX SPIKE DUPLICATE: 639386 639387 Parameter Cyanide Analysis Description: Analysis Method: METHOD BLANK: Parameter Solids, Percent SAMPLE DUPLICATE: Parameter Solids, Percent 6/18/2015 16:12 Q050123001 Units Result mg/kg 0.69 Spike MS MSD MS MSD % Rec Cone. Result Result % Rec % Rec Limit 0.6 1.08 1.12 65 72 70-130 RPD 3.6 Percent Solids Analysis SM20-2540 G QC Batch: QC Batch Method: WGR/5763 SM20-2540 G 639023 Blank Result ND 639038 Reporting Limit MDL Units Qualifiers 0.1 0.1 % Max Units Q050089001 Result DUP Result RPD RPD Qualifiers % 17.8 17.7 0.6 20 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CAL TEST ANAL YT/CAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com Max RPD Qualifiers 30 8 Page 25 of 27 DocuSign Envelope ID: 446F9D63-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 i"iJ C I ~-\r~:·. a test CA-ELAP Certification 1664 ·H·bir, '· "W._} \:'\l'\l,tll"\I L\HOllAIOH\' II QUALITY CONTROL DATA QUALIFIERS Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 QUALITY CONTROL PARAMETER QUALIFIERS Results Qualifiers: Report fields may contain codes and non-numeric data correlating to one or more of the following definitions: NS -means not spiked and will not have recoveries reported for Analyte Spike Amounts QC Codes Keys: These descriptors are used to help identify the specific QC samples and clarify the report. MB -Method Blank Method Blanks are reported to the same Method Detection Limits (MDLs) or Reporting Limits (RLs) as the analytical samples in the corresponding QC batch. LCS/LCSD -Laboratory Control Spike I Laboratory Control Spike Duplicate DUP -Duplicate of Original Sample Matrix MS/MSD -Matrix Spike I Matrix Spike Duplicate RPD -Relative Percent Difference %Recovery -Spike Recovery stated as a percentage 3 Sample diluted due to a high concentration of non-target analyte(s), resulting in increased reporting limits. 7 RNC = Recovery Not Calculated. Matrix Spike/Matrix Spike Duplicate (MS/MSD) recoveries were not calculated due to the high native concentration in the sample selected for MS/MSD versus the laboratory spike concentration. 6 Low Matrix Spike recovery(ies) due to possible matrix interferences in the QC sample. QC batch accepted based on LCS and RPD results. 9 Spike recovery for this compound was high, outside Caltest acceptance criteria. A sample result of 'ND' for this compound should be considered valld, otherwise any other value reported should be considered estimated. 10 Due to matrix interferences present in the sample, surrogate recoveries failed to meet the QA/QC acceptance criteria. 11 Matrix Spike recovery(ies) outside control limits: LCS(LCSD) recoveries and RPD are in control. Possible Matrix interference in QC sample. 12 Matrix Spike recovery(ies) outside control limits, RPD recovery is in control. Possible Matrix interference in QC sample. 13 Matrix Spike recovery(ies) outside of control limits. Sample result accepted based on LCS, RPD and Method Blank. 6/16/2015 16:12 REPORT OF LABORATORY ANALYSIS This report shall not be reproduced, except in full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-l001 • e-mail: info@caltestlabs.com Page 26 of 27 DocuSign Envelope ID: 44BF9D83-A76E-4EF1-9A95-3F616E43347D NELAP/ORELAP Certification 4036 CA-ELAP Certification 1664 --Nvnrrn~r;;nn·.r'FJ;-1:---x-J\l· L ;S- QUALITY CONTROL DATA CROSS REFERENCE TABLE Lab Order: 0050123 Project ID: NPDES QUARTERLY MAY 2015 Lab ID Sample ID QC Batch Method QC Batch Analytical Method Analytical Batch Q050123001 E000764-01 ASH A SW846 7471A MPR/13565 SW846 7471A MHG/4963 Q050123004 E000766·01 BARSCREEN SW846 7471A MPR/13565 SW846 7471A MHG/4963 Q050123005 E000767-01 GRIT SW846 7471A MPR/13565 SW846 7471A MHG/4963 Q050123002 E000763·01 ASH A SWB46 7470A MPR/13577 SW846 7470A MHG/4968 Q050123004 E000766-01 BARSCREEN SW846 7470A Low Level MPR/13577 SW846 7470A Low MHG/4968 Q050123005 E000767-01 GRIT SW846 7470A Low Level MPR/13577 SW846 7470A Low MHG/4968 Q050123001 E000764-01 ASH A SW846 30508 MPR/13563 SW846 60108 MIC/4479 Q050123004 E000766·01 BARSCREEN SW846 30508 MPR/13563 SW846 60108 MIC/4479 Q050123005 E000767-01 GRIT SW846 30508 MPR/13563 SWB46 60108 MIC/4479 Q050123002 E000763-01 ASH A SW846 3010 MPR/13573 SWB46 60108 MIC/4481 Q050123004 E000766·01 BARSCREEN SW846 3010 MPR/13573 SW846 60108 MIC/4481 Q050123005 E000767-01 GRIT SW846 3010 MPR/13573 SW846 60108 MIC/4481 Q050123003 E000765·01 ASH A (per attached report) REF/2065 Q050123004 E000766-01 BARSCREEN (per attached report) REF/2065 Q050123005 E000767-01 GRIT (per attached report) REF/2065 Q050123004 E000766-01 BARSCREEN SW846 3541 SPR/6946 SW846 8015(MOD) SFU1703 Q050123005 E000767-01 GRIT SWB46 3541 SPR/6946 SW846 8015(MOD) SFU1703 Q050123004 E000766-01 BARSCREEN SW846 3540 SPR/6939 SWB46 8270C SMS/3755 Q050123005 E000767-01 GRIT SW846 3540 SPR/6939 SW846 8270C SMS/3755 Q050123004 E000766-01 BARSCREEN SW846 50308/82608 VMS/3245 Q050123005 E000767-01 GRIT SW846 50308/82608 VMS/3245 Q050123001 E000764-01 ASH A SW846 9012A WC0/10778 Q050123004 E000766·01 BARSCREEN SW846 9012A WC0/10778 Q050123005 E000767-01 GRIT SW846 9012A WC0/10778 Q050123001 E000764·01 ASH A SM20-2540 G WGR/5763 6/18/2015 16:12 REPORT OF LABORATORY ANALYSIS Page 27 of 27 This report shall not be reproduced, except In full, without the written consent of CALTEST ANALYTICAL LABORATORY 1885 North Kelly Road• Napa, California 94558 (707) 258-4000 • Fax (707) 226-1001 • e-mail: info@caltestlabs.com DocuSign Envelope ID: 448F9D83·A76E-4EF1 ·9A95·3F616E43347D 464 McCormick Streot, San Loandro, CA 94577 Phonelfa,c (510) 895,3675 I (510) 895-3680 . EMSL Order: CustomerlD: CustomerPO: 091506686 CALT50 0050123 • EMSL Analytical, Inc http://www.EMSl.com santeandrotab@emsl.com ProjectlD: Attn: Client Services Caltest Analytical Laboratories, Inc. 1885 North Kelly Road NAPA, CA 94558 Proiect: 0050123 Phone: (707) 258-4000 Fax: (707) 226-1001 Received: 05/08/15 10:00 AM Analysis Date: 5/21/2015 Collected: 5/8/2015 Test Report: PLM Analysis of Bulk Samples for Asbestos via EPA 600/R-93/116 Method with CARB 435 Prep (Milling) Level A for 0.25% Target Analytical Sensitivity Sample Description 0050123003 E000765-01 ASH A 091506686-0001 0050123004 E000766-01 091506686-0002 BARSCREEN RAGS 0050123005 E00076-01 GRIT 091506686-0003 Analyst(s) Matthew Batongbacal (3) Appearance Brown Non-Fibrous Hom eneous Brown Fibrous Hom eneous Black Non-Fibrous Homogeneous % Fibrous 100.00% Cellulose Non-Asbestos % Non-Fibrous 100.00% Non-fibrous (other) 100.00% Non-fibrous (other) Asbestos % Type None Detected None Detected None Detected Chris Dojlidko, Laboratory Manager or other approved signatory This report relates only to the samples listed above and may not be reproduced except In full, without EMSL's wrltten approval. This report must not be used by the client to claim product certification, approval, or endorsemenl by NVLAP, NIST, or any agency of the federal government. EMSL Is not responsible for sample collection activities or method limitations. Some samples may contain asbestos fibers below the resolution limit of PLM. EMSL recommends that samples reported as none detected or less than the limit of detection undergo additional analysis via TEM.Samples recelwd In good condition unless otherwise noted. Samples analyzed by EMSL Analy1lcal, Inc San Leandro, CA Initial report from 05/21/2015 14:14:17 Test Report PLMPTC-7.25.0 Printed: 5/21/2015 2:14:17 PM THIS IS THE LAST PAGE OF THE REPORT. D ,... v C') C') v w (0 (0 IL C') ,b 0, <( ~ U:: w v w (0 ,... <( th ~ I 1885 "· KELLY ROAD NA!' A, CA 94558 (707) 258-4000 FAX (707) 226-100! Ca test SAMPLE CHAIN oF cusToov 1;ROJECT NAr.lE I PR<JJbCT NU .. BER: '•"· NY••-~ ANALYTICALlABORATORY NPDES Quarterlv May 2016 4615000068 CLIENT: rEPOl<T A TIN: City of Palo 1Ali:o Samantha Bialorucki ANALYSES REQUESTED MAILING At>w~S.~ STATE: rw i5 2501 Embari:adero Way, Palo Alto CA 94303 ., ::; "' 1 .. WNG ADORE= ATIN: Cl .s:, :,: a.. -(Please p~ovide data in CWIQS format zip file and PD F's) ., I E. ..,. I-~ z ;,; .r, .;; i' ~ FliONE NUMBER: rA.l( PHONE NUMBER: SAMPLER (PiUNT & SIGN NAi,IE): ~ a.. Jg E ti :,: w ... 650-329-233!4 WQCP Lab and OPS " .... ,, I-., U) 650-494-8395 ,, 0 ::c 0 -;;; :ii: <( c: .... :; ::.;; II) -a 0 0 a.. .. 0 .; w >, <( .; ti 0 .J 0 0 u 0 "' .. ,... al m .,, "' 0 u I-ti .. .J .; <( .. > I-<( <( ;;;: SAMPLE I-u ~ -CALTEST DATE CONTAINER CU ENT COMP. or .. TIME SAMPLED PRESERVATIVE SAMPLE IDENTIFICATION I SITE ...I 0 2 LAB# SAMPI..ED MATRIX" lYPE/ AJIOU~ LAB# GRAB ,... II) 0 .J I-I- 511(2015 10:00 SL Soz/SJ None E000764--01 ASH A COMP x x x 5/412015 10:00 SL Soz/SJ None E000763-01 ASH A COMP x 5/412015 10:00 SL 8oz/SJ None E000770-01 ASH 1.-.Jf. A COMP x ¥-51412015 7:00 SL Soz/SJ None E000770·01 Sludge Cake A COMP x x 5/4/2015 9:33 SL 1USJ None E000766-01 Barscreen Rags A GRAB x x x x 5/4/2015 9:35 SL 1USJ None E000767 -01 Grit A GRAB x x· x x I I . I I I ;;, N .. <( a.. w 0 0 ::,. :!E w "' I x x PAGE 2 OF 1 LABORD~R" I Qoso ia'3l TURN-AROUND TIME ITISTANDARD DRUSH DUE DATE: REMARKS TTLC; Quarterly Composite STLC (mg/L) Report Dry Wt in mg/Kg to 3 sig figs. :;: w i,i ; ,._ 8 !,: iil u j ! 'l' .: ,._ ~ 8 :i g ,._ 8 ffi il I ! ~ i ~~====================================::::::======::::::==================:;=====~===========;:==============:::;:==================~==========~============:!-----------------_J 11 Sampras..: wq: MICRO 610 M 5V VOA pH? YIN TE.MP: 3 I'\;, SEALED: YIN iN" •M.4Tl:UY· AO=· A~11:in1t!1:. Nnn,;rin\nnn \,V:,,f~ nll'li111ot.F"M -IMBlalS: ,.t: = LOW. l'(.l-1:i, Aqueous NC;mcmn~1ng VV3(trr, V(C AA Di;ested Mata!•; ow : Drtnlong Water, SL = Sna __ __ __ Sludg", Soiid ; FP = Free Product --• sv VOA ··cONTAINER TYPES: Al =Amberllir. AHL= soo -----ml Amber, PT= Pini (f'l;lstlc); OT= Quart (Pla3fio); HG FT QT VOA = Half Gallon (Pli1Stlc); SJ = Soi Jar, !14 = 4= BACT; ~· ----__ __ 8T=~sTube;VOA=40mLVOA,OTC -OlJ'lerT)'!>e UJ· --_ !"..t\nt,:unM c C> -Ot ~ u5 ~ R PR 1.1 F 0 D 0 r--v (') C') v w CD co LL C') J, "' <( ~ u::: w v UJ co r--<( d, co 0 "' LL co v v 0 Q) a. 0 <ii > c: w c c, u.i :::, g 0 ~A c altest \l"\:il ANALYJJC\L L\BOllATOmr· Sending Laboratory Caltest Analytical Laboratory ENVIRONMENTAL ANALYSES 1885 N. Kelly Rd. Napa, CA 94558 Phone: (707) 258-4000 Fax: (707) 226-1001 Report To: Client Services Email: pmgr@caltestlabs.com SUBCONTRACT CHAIN OF CUSTODY PROJECT ID I PO NUMBER -Q050123 Receiving Laboratory EMSL Analytical, Inc. 464 Mc Mormick St. San Leandro, CA 94577 Phone: (510) 895-3675 Fax: (510) 895-3680 Page 1 of 1 PMReview: ~ Due Date: 0.5/22/15 (contact if due date cannot be met) 0050123004 E000766-01 BARSCREEN RAGS 0050123005 E000767-01 GRIT ~~ Relinquished By I Rennqulshed By Thursday, May 07 2015 12:11PM . ~··~-:~-":-· ... ~~ ---c~n~Jfl.e! . :!"~ ~~-~ ~ -~;._ .. ::' -t -~~ :.:-.~~rs~~~-::_ i~J;;f.[;:-: Ma;fri~~SaJ?Jple:l!>~te·· .._._~"TYP!t~. 1;'..l'J!}f~v~tT~e· Rtci.u,~eg_~l]_~lY.~~ ·:.,; _.l . SL 05/04/2015 10:00 '518c;. Nme:-Asbestos Analysis -PLM CarbA SL 05/04/2015 09:33 Asbestos Analysis -PLM Carb A SL 05/04/2015 09:35 L ___k_ Asbestos Analysis -PLM Carb A 5}7hS-;530 ~ Date/Time Received By Date/Time Date /Time Received By Date I Time Matrix: AQ -Aqueous OW -Drinking Woter SL -Solid DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D --DAVI LABORATORIES, ENVIRONMENTAL ASSOCIATES 730 Alfred Nobel Dr. * Hercules, CA 94547 (510) 724-9450 ANALYTICAL RES UL TS REPORTS Company: City of Palo Alto WQCP Address: 2501 Embarcadero Way Palo Alto, CA 94303 Contact: Samantha Bialorucki Project Manager Date: August 27, 2015 Project Number: NPDES & Non-NPDES, WQCP TABLE I Sample ID Sample Matrix EPA Analyses Results + Date Method pCi/gram E000766 05-04-15 Solid BAR SCREEN RAGS (09:33) Analyses completed on: 8/25/15 900.0 Gross Alpha 0.07 ± 8/25/15 900.0 Gross Beta 0.06 ± 8/11/15 901.1 K-40 ND 8/11/15 901.1 1-131 ND 8/11/15 901.1 Mn-54 ND . 8/11/15 901.1 Co-58 ND 8/11/15 901.1 Co-60 ND 8/11/15 901.1 Cs-137 ND 8/11/15 901.1 Eu-152 ND 8/11/15 901.1 Eu-154 ND 8/11/15 901.1 Eu-155 ND 8/11/15 901.1 lr-192 ND 8/11/15 901.1 Tl-208 ND 8/11/15 901.1 Pb-210 0.02 ± 8/11/15 901.1 Bi-212 ND 8/11/15 901.1 Pb-212 ND 8/11/15 901.1 Bi-214 ND 8/11/15 901.1 Pb-214 ND 8/11/15 901.1 Ra-226 ND 8/11/15 901.1 Ac-228 ND 8/11/15 901.1 Th-228 ND 8/11/15 901.1 Th-230 ND 8/11/15 901.1 Th-232 ND 8/11/15 901.1 Th-234 0.03 ± 8/11/15 901.1 Pa-234m ND 8/11/15 901.1 U-233/234 ND 8/11/15 901.1 U-235 ND 8/11/15 901.1 U-238 ND 2 sigma MDA Error 0.03 0.01 0.03 0.05 0.02 0.25 0.01 0.30 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.01 0.01 0.04 0.02 0.02 0.03 0.08 0.01 0.01 0.01 0.02 0.01 0.02 0.01 0.03 0.01 0.03 0.01 0.03 0.01 0.20 0.01 0.02 0.01 0.03 0.01 0.01 0.01 0.02 0.01 0.01 0.01 0.02 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D TABLE I (cont'd) Sample-ID Sample· MatFiX-EPA-Analyses Re-suits +-2-sigma MDA Date Method ~Ci/gram Error E000767 05-04-15 Solid GRIT (09:35) Analyses completed on: 8/25/15 900.0 Gross Alpha 1.62 ± 1.30 0.62 8/25/15 900.0 Gross Beta ND 2.70 3.78 8/12/15 901.1 K-40 0.33 ± 0.04 0.20 8/12/15 901.1 I-131 ND 0.01 0.10 8/12/15 901.1 Mn-54 ND 0.01 0.01 8/12/15 901.1 Co-58 ND 0.01 0.01 8/12/15 901.1 Co-60 ND 0.01 0.01 8/12/15 901.1 Cs-137 ND 0.01 0.01 8/12/15 901.1 Eu-152 ND 0.01 0.01 8/12/15 901.1 Eu-154 ND 0.01 0.02 8/12/15 901.1 Eu-155 ND 0.01 0.01 8/12/15 901.1 Ir-192 ND 0.01 0.01 8/12/15 901.1 Tl-208 ND 0.01 0.04 8/12/15 901.1 Pb-210 0.06 ± 0.01 0.01 8/12/15 901.1 Bi-212 ND 0.01 0.07 8/12/15 901.1 Pb-212 ND 0.01 0.01 8/12/15 901.1 Bi-214 ND 0.01 0.12 8/12/15 901.1 Pb-214 ND 0.01 0.02 8/12/15 901.1 Ra-226 0.01 ± 0.01 0.01 8/12/15 901.1 Ac-228 ND 0.01 0.03 8/12/15 901.1 Th-228 ND 0.01 0.04 8/12/15 901.1 Th-230 ND 0.01 0.02 8/12/15 901.1 Th-232 0.02 ± 0.01 0.01 8/12/15 901.1 Th-234 0.05 ± 0.01 0.02 8/12/15 901.1 Pa-234m ND 0.02 0.07 8/12/15 901.1 U-233/234 0.15 ± 0.03 0.01 8/12/15 901.1 U-235 ND 0.01 0.01 8/12/15 901.1 U-238 0.06 ± 0.01 0.01 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D TABLE I (cont'd) -Sample rn -Sample Matrix EPA Analy-ses Results + 2-sigma MDA Date Method pCi/gram Error E000770 05-14-15 Solid SLUDGE CAKE (07:00) Analyses completed on: 8/25/15 900.0 Gross Alpha 1.48 ± 0.37 0.08 8/25/15 900.0 Gross Beta 1.35 ± 0.32 0.38 6/08/14 901.1 K-40 0.79 ± 0.03 0.27 8/13/15 901.1 I-131 ND 0.05 0.70 8/13/15 901.1 Mn-54 ND 0.01 0.01 8/13/15 901.1 Co-58 ND 0.01 0.01 8/13/15 901.1 Co-60 ND 0.01 0.01 8/13/15 901.1 Cs-137 ND 0.01 0.01 8/13/15 901.1 Eu-152 ND 0.01 0.02 8/13/15 901.1 Eu-154 ND 0.01 0.02 8/13/15 901.1 Eu-155 ND 0.01 0.01 8/13/15 901.1 Ir-192 ND 0.01 0.01 8/13/15 901.1 Tl-208 ND 0.01 0.01 8/13/15 901.1 Pb-210 ND 0.01 0.02 8/13/15 901.1 Bi-212 ND 0.01 0.17 8/13/15 901.1 Pb-212 ND 0.01 0.01 8/13/15 901.1 Bi-214 ND 0.01 0.16 8/13/15 901.1 Pb-214 ND 0.01 0.29 8/13/15 901.1 Ra-226 ND 0.01 0.02 8/13/15 901.1 Ac-228 ND 0.01 0.03 8/13/15 901.1 Th-228 ND 0.02 0.05 8/13/15 901.1 Th-230 ND 0.02 0.14 8/13/15 901.1 Th-232 ND 0.01 0.03 8/13/15 901.1 Th-234 0.10 ± 0.01 0.03 8/13/15 901.1 Pa-234m ND 0.01 0.10 8/13/15 901.1 U-233/234 0.02 ± 0.01 0.02 8/13/15 901.1 U-235 ND 0.01 0.01 8/13/15 901.1 U-238 0.01 ± 0.01 0.01 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D Sample ID Sample Matrix EPA Analyses Results ± 2 Sigma MDA Date Method pCi/gram Error E000765-01B 04-27-15 Solid ASH (00:00) Analyses completed on: 8/25/15 900.0 Gross Alpha 70.74 ± 11.97 1.67 8/25/15 900.0 Gross Beta 56.58 ± 6.79 6.46 8/14/15 901.1 K-40 3.89 ± 0.21 1.64 8/14/15 901.1 Mn-54 ND 0.01 0.07 8/14/15 901.1 Co-58 ND 0.01 0.07 8/14/15 901.1 Co-60 ND 0.01 0.06 8/14/15 901.1 Cs-137 0.15 ± 0.02 0.06 8/14/15 901.1 Eu-152 ND 0.01 0.01 8/14/15 901.1 Eu-154 ND 0.01 0.03 8/14/15 901.1 Eu-155 ND 0.02 0.02 8/14/15 901.1 lr-192 ND 0.01 0.02 8/14/15 901.1 Tl-208 0.01 ± 0.01 0.01 8/14/15 901.1 Pb-210 0.42 ± 0.02 0.10 8/14/15 901.1 Bi-212 2.20 ± 0.19 1.01 8/14/15 901.1 Pb-212 2.44 ± 0.24 0.98 8/14/15 901.1 Bi-214 0.44 ± 0.03 0.11 8/14/15 901.1 Pb-214 0.30 ± 0.02 0.14 8/14/15 901.1 Ra-226 0.43 ± 0.03 0.11 8/14/15 901.1 Ac-228 1.29 ± 0.12 0.69 8/14/15 901.1 Th-228 1.01 ± 0.05 0.32 8/14/15 901.1 Th-230 1.44 ± 0.03 0.16 8/14/15 901.1 Th-232 0.56 ± 0.03 0.09 8/14/15 901.1 Th-234 10.24 ± 0.12 0.18 8/14/15 901.1 Pa-234m 11.57 ± 0.47 0.98 8/14/15 901.1 U-233/234 9.65 ± 0.19 0.25 8/14/15 901.1 U-235 0.37 ± 0.01 0.05 8/14/15 901.1 U-238 10.89 ± 0.12 0.13 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D TABLE II QC RESULTS Sample ID Nuclide Laboratory Control Sample LCS Blank :Patricia :tJrn Patricia Davi QA/QC Manager Davi Laboratories Gross Alpha Gross Beta Co-60 Cs-137 Ra-226 U-233/234 U-235 U-238 Gross Alpha Gross Beta K-40 Mn-54 Co-58 Co-60 Cs-137 Eu-152 Eu-154 Eu-155 Pb-210 Ra-226 Th-230 Th-232 Pa-234m Bi-212 Pb-212 Bi-214 Pb-214 U-233/234 U-235 U-238 Results ± pCi/Sample 352.61 ± 587.71 ± 8131.74 ± 5328.58 ± 1131.25 ± 6517.11 ± 316.32 ± 6329.29 ± ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND ND 2 Sigma MDA Amount Evaluation Error added % Recovery Ci 3.63 0.75 386.65 91.17 6.17 0.05 604.45 97.23 48.11 0.09 8936.48 90.99 41.62 0.05 5513.26 96.65 9.86 0.07 1243.55 90.97 19.06 5.62 6800.06 95.84 3.10 2.11 340.00 93.03 32.41 16.47 6800.06 93.07 0.09 0.12 NA 0.42 0.91 NA 0.26 1.18 NA 0.01 0.02 NA 0.01 0.02 NA 0.01 0.02 NA 0.01 0.03 NA 0.01 0.02 NA 0.01 0.03 NA 0.01 0.02 NA 0.01 0.06 NA 0.01 0.09 NA 0.03 0.10 NA 0.01 0.10 NA 0.01 0.15 NA 0.01 0.02 NA 0.01 0.09 NA 0.01 0.20 NA 0.02 0.06 NA 0.02 0.07 NA 0.03 0.05 NA 0.01 0.12 NA DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D PALO AL TO REGIONAL WATER QUALITY CONTROL PLANT INCINERATOR ASH REPORT FOR WET SEASON 2015 Sludge dewatering method: Belt filter presses followed by incineration FEB 2015 INCINERATOR QUARTERLY ASH REPORT .. ~ ,,.. VrJ TTL:C STLC -... ... ,· l' -· --; . "" .. ,. , ._, . ·-· ,,·, Sample Collection Dates: 11/2014-1/2015; Composited 2/2/2015 !Extraction Date: II 2/6-1 0/2015 I Extraction Dates: 2/13-17/2015 Analytes IAnal}'.sis Date: II 2/11-18/2015 IIAnal}'.sis Date: I 2/18/2015 TTLC Max. mg/kg I Method I RL/MDL Limit (mg/kg) (Wet (mg/kg) Weight) Antimony 500 2.0 / 1.5 5.4 A Arsenic 500 2.0 I .99 7.6 A Barium 10000 1.0 I .69 820 A Beryllium 75 4.0 I .15 ND A Cadmium 100 0.20 I .050 1.3 A Chromium 2500 1.0 I .20 63 A Cobalt 8000 0.40/ .20 17 A Copper 2500 4.0 I 0.40 1900 A Lead 1000 1.0 I 0.50 67 A Mercury 20 .020 I .00080 DNQ D (.0014) Molybdenum 3500 2.0 I .99 34 A Nickel 2000 1.0 / .30 78 A Selenium 100 2.0 I 0.79 8.2 A Silver 500 1.0/0.15 18 A Thallium 700 2.0 I 0.69 2.3 A Vanadium 2400 0.40 I .20 70 A Zinc 5000 16/ 4.0 2200 A Cyanide --0.08/0.08 0.73 E T.91~t&ciJJcl~:;J!1.-Asb ', ,' METHOD II Analysis Date ,;,._,;, ·,; 100.0% F I 2/9/2015 ND = Not detected at or above the detection limit. DNQ = Data not quantified, result between MDL and RL NOTE = All data in the table are based on Quarterly composites made up of ash from Nov, Dec and Jan. STLC Max. Limit (mg/L) 15 5 100 0.75 1 560 80 25 5 0.2 350 20 1 5 7 24 250 - B RLIMDL (mg/L) Method .050 I .010 20 B 0.10 I 0.030 44 B .050 I .020 0.21 B .0005/.0003 ND c 0.03 / .006 ND B [Methods A-El Caltest Analytical [Method F] Palo Alto RWQCP A= SW846 -30508/601 osl B= SW846 -3010/60108 C= SW846 -7470A D =SW846 7471A E= SW846 9012 A F= SM 2540G 1 of 1 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D PALO AL TO REGIONAL WATER QUALITY CONTROL PLANT INCINE-RATOR ASH REPORT FO~DRY SEASOt-J 2~1 5 Sludge dewatering method: Belt filter presses followed by incineration MAY 2015 INCINERATOR QUARTERLY ASH REPORT •"• . IT.LC r STLC ·. ·:.:~ . ""· ~= --.•: '-' --~-• Sample Collection Dates: 2/2015-4/2015; Composited 5/4/2015 !Extraction Date: II 5/6/2015 I Extraction Dates: 5/11-12/2015 Analytes IAnal}:'.sis Date: II 5/07-18/2015 l!Anal}:'.sis Date: I 5/13-14/2015 TTLC Max. n. B STLC RUMDL mg 9 Max Limit (mg/kg) (Wet Method LI 't (mg/kg) Weight) (m;,~) Antimony 500 2.0 / 1.5 3.5 A 15 Arsenic 500 2.0 I 1.0 4.6 A 5 Barium 10000 1.0 I .70 830 A 100 Beryllium 75 5.0 I .15 ND A 0.75 Cadmium 100 0.20 I .050 0.36 A 1 Chromium 2500 1.0 I .20 70 A 560 Cobalt 8000 0.40/ .20 19 A 80 Copper 2500 4.0 I 0.40 1900 A 25 Lead 1000 1.0 I 0.50 55 A 5 Mercury 20 .020 I .00060 DNQ D 0.2 0.0009 Molybdenum 3500 2.0 I 1.0 29 A 350 Nickel 2000 1.0 I .30 81 A 20 Selenium 100 2.0 I 0.60 7.9 A 1 Silver 500 1.0 I 0.15 14 A 5 Thallium 700 2.0 I 0.70 2.6 A 7 Vanadium 2400 0.40 I .20 77 A 24 Zinc 5000 8.0/ 2.0 2000 A 250 Cyanide -0.08/0.08 0.69 E --- TQ.J~I $ol!d~cin))J;J;I.:: ): METHOD Analysis Date 100.0o/o F 5/7/2015 ND= Not detected at or above the detection limit. DNQ = Data not quantified, result between MDL and RL NOTE = All data in the table are based on Quarterly composites made up of ash from Feb, March, April. [:] RLIMDL (mg/L) Method .070 I .015 16 B 0.10/0.030 40 B .10 I .040 0.19 B .0005/.0003 ND c 0.030 I .0060 ND B [Methods A-E] Caltest Analytical [Method F] Palo Alto RWQCP A= SW846 -30508/601 osl B= SW846 -3010/601 OB C= SW846 -7 4 70A D =SW846 7471A E= SW846 9012 A F= SM 2540G 1 of 1 DocuSign Envelope ID : 448F9D83-A76E-4EF1-9A95-3F616E43347D PALO AL TO REGIONAL WATER QUALITY CONTROL PLANT INCINERATOR ASH REPORTFOR DRY SEASON2 015 Sludge dewatering method: Belt filter presses followed by incineration AUG 2015 INCINERATOR QUARTERLY ASH REPORT ., TTLC· ' STLC r.r. • -·-· ~ Sample Collection Dates: 5/2015-7/201 5; Composited 8/3/2015 !Extraction Date: II 8/07-13/2015 I Extraction Dates: 8/13/2015 Analytes Analysis Date: 8/11-14/2015 IAnall sis Date: I 8/14-17/2015 TTLC Max. mg/kg STLC [:]Method RL/MDL Max. RL/MDL Limit (mg/kg) (Wet Method Limit (mg/L) (mg/kg) Weight) (mg/L) Antimony 500 2.0 I 1.5 3.9 A Arsenic 500 2.0 I 0.99 5.0 A Barium 10000 1.0 I .69 800 A Beryllium 75 4.0 I .15 ND A Cadmium 100 0.20 I .050 2.4 A Chromium 2500 1.0 I .20 70 A Cobalt 8000 0.40/ .20 20 A Copper 2500 4.0 I 0.40 1960 A Lead 1000 1.0 I 0.50 64 A Mercury 20 .020 I .00081 0.041 D Molybdenum 3500 2.0 I 0.99 56 A Nickel 2000 1.0 I .30 84 A Selenium 100 2.0 I 0.99 6.3 A Silver 500 1.0 I 0.15 16 A Thallium 700 2.0 I 0.69 DNQ 1.6 A Vanadium 2400 0.40 I .20 63 A Zinc 5000 16/ 4.0 2800 A Cyanide ---0.080/0.080 0.44 E Total Sqlicli·irl:'A:sh , · ,:, METHOD Analysis Date 100.0% F 8/6/2015 ND = Not detected at or above the detection limit. DNQ = Data not quantified, result between MDL and RL NOTE = All data in the table are based on Quarterly composites made up of ash from May, June, and July. 15 5 100 0.75 1 560 80 25 5 0.2 350 20 1 5 7 24 250 --- .15 I .070 19 B 0.10 I 0.030 41 B .10/ .040 0.27 B .0005/.0003 ND c 0.03 I .006 ND B [Methods A-E] Caltest Analytical [Method F] Palo Alto RWQCP A= SW846 -30508/601081 B= SW846 -3010/601 OB C= SW846 -7 4 70A D =SW846 7471A E= SW846 9012 A F= SM 25408 1 of 1 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D PALO AL TO REGIONAL WATER QUALITY CONTROL PLANT -----------INC IN ERA TOR ASH REPORT FOR WET SEASON 2015 Sludge dewaterlng method: Belt filter presses followed by incineration NOV 2015 INCINERATOR QUARTERLY ASH REPORT IO · . ~.'f;lLO I STLC Sample Collection Dates: 8/2015-10/2015; Composited 10/26/2015 IPreeare Date: II 11 /17-24/2015 I Prepare Dates: 11/17-19/2015 Analytes IAnallsis Date: II 11 /10-25/2015 IIAnallsis Date: I 11/18-19/2015 ITLC Max. mg/kg STLC B RUMDL Max. RUMDL Limit (mg/kg) (Wet Method Limit (mg/L) Method (mg/kg) Weight) Antimony 500 2.0 I 1.5 4.0 A Arsenic 500 2.0 I 1.0 5.8 A Barium 10000 1.0 I .69 730 A Beryllium 75 4.0 I .15 ND A Cadmium 100 0.20 I .050 0.47 A Chromium 2500 1.0 I .20 60.4 A Cobalt 8000 0.40/ .20 17 A Copper 2500 7.9 I 0.79 2000 A Lead 1000 1.0 I 0.50 59 A Mercury 20 .020 I .00080 0.043 D Molybdenum 3500 2.0 I 0.99 300 A Nickel 2000 1.0 I .30 77 A Selenium 100 2.0 I 0.99 4.5 A Silver 500 1.0 I 0.15 16 A Thallium 700 2.0 I 0.69 DNQ 0.7 A Vanadium 2400 0.40 I .20 56 A Zinc 5000 16/ 4.0 2500 A Cyanide ---0.080/0.080 0.72 E Total;.Sollits J11:·.A'sh ~-, . METHOD Analysis Date 100.0% F 11/6/2015 ND = Not detected at or above the detection limit. DNQ = Data not quantified, result between MDL and RL NOTE = All data in the table are based on Quarterly composites made up of ash from August, September, and October. (mg/L) 15 5 100 0.75 1 560 80 25 5 0.2 350 20 1 5 7 24 250 --- .15 / .070 12 B 0.10 I 0.030 46 B .05/ .040 0.07 B .0005/0.0003 ND c 0.03 I .006 ND B [Methods A-E] Caltest Anal ytical [Method F] Palo Alto RWQCP A= SW846 -30508/601081 B= SW846 -3010/60108 C= SW846 -7470A D =SW846 7471A E= SW846 9012 A F= SM 2540G ()oQj$' n Envol ID: 448F9D93·A76E-4El't·9A95· 816E4334 D 1• •. I .· '· EXHIBIT A-2 Ash Bin Cover [ 1 .. ' ,., ll l I . I I I ij 1 " ,')' ,, -· DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D EXHIBITS SCHEDULE OF PERFORMANCE CONTRACTOR shall perform the Services according to the following schedule: Ongoing services for a period of three(3) years. Rev. February 22, 2016 DocuSign Envelope ID: 448F9083-A76E-4EF1-9A95-3F616E43347D EXHIBITC SCHEDULE OF FEES CITY shall pay CONTRACTOR according to the following rate schedule. The maximum amount of compensation to be paid to CONTRACTOR, including both payment for services and reimbursable expenses, shall not exceed the amounts set forth in Sections 5 and 6 of the Agreement. Any services provided or hours worked for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to CITY. Bid PSC1 Unit PSC1 Lin'e Item Bid Schedule Section Description UOM Qty Price Total I A-1 A: ash hauling & disposal Disposal cost of ash TON 723 $65.00 $46,995.00 A-2 A: ash hauling & disposal Transportation cost of ash: LOAD 53 $1,200.00 $63,600.00 A-3 A: ash hauling & disposal Liner installation fee for ash -per load LOAD 53 $50.00 $2,650.qo A-4 A: ash hauling & disposal Bin Rental for ash DAYS 365 $9.00 $3,285.00 A-5 A: ash hauling & disposal CA Non-RCRA taxes for ash; based on the most current CA BOE schedule TON 723 $23.23 $16,795.29 A-6 A: ash hauling & disposal Local taxes for ash, as necessary, per ton TON 723 $6.50 $4,699.50 A-7 A: ash hauling & disposal Surcharges/fees for ash, lump sum LS 1 $0.00 $0.00 Subtotal $138,024.79 8-1 B: sludge hauling & disposal Disposal cost of sludge TON 150 $22.00 $3,300.00 I 8-2 B: sludge hauling & disposal Transportation cost for sludge LOAD 12 $600.00 $7,200.00 8-3 B: sludge hauling & disposal Liner installation fee for sludge -per load LOAD 12 $50.00 $600.00 8-4 B: sludge hauling & disposal Bin Rental DAYS 12 $9.00 $108.00 8-5 B: sludge hauling & disposal Local taxes, as necessary, per ton TON 150 $0.00 $0.00 8-6 B: sludge hauling & disposal Surcharges/fees for sludge, lump sum LS 1 $0.00 $0.00 8-7 B: sludge hauling & disposal Roll-off bin mobilization during backup sludge hauling service EA 6 $450.00 $2,700.00 Onsite truck and truck driver to move empty and full bins in and out of 8-8 B: sludge hauling & disposal incinerator building during backup sludge handling service HR 481 $95.00 $4,560.<ilO Subtotal $18,468.00 Contract Year 1, Total for Bid Schedules A and B Subtotal $156,4921.79 Price Increases price increase -Year 2 % 1 3.00% $4,694.78 Price Increases price increase -Year 3 % 1 3.00% $4,835.63 Contract Year 1, Total for Bid Schedules A and B $156,492.79 Contract Year 2, Total for Bid Schedules A and B $161,18~.57 Contract Year 3, Total for Bid Schedules A and B $166,023.20 1 PSC Industrial Outsourcing, LP I 3yTotal I $483,703.56 UOM = unit of measurement; Qty= quantity; LS= lump sum; EA= each; HR= hour DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D EXHIBITl> INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO AL TO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST'S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AW ARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: MINIMUM LIMITS REQUIRED TYPE OF COVERAGE REQUIREMENT EACH YES YES YES YES NO YES OCCURRENCE AGGREGATE WORKER'S COMPENSATION STATUTORY EMPLOYER'S LIABILITY STATUTORY BODILY INJURY $1,000,000 $1 ,000,000 GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE $1,000,000 $1,000,000 PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL BODILY INJURY & PROPERTY $1,000,000 $1,000,000 LIABILITY DAMAGE COMBINED. BODILY INJURY $1,000,000 $1,000,000 -EACH PERSON $1,000,000 $1,000,000 AUTOMOBILE LIABILITY, -EACH OCCURRENCE $1,000,000 $1,000,000 INCLUDING ALL OWNED, HIRED, PROPERTY DAMAGE $1,000,000 $1,000,000 NON-OWNED BODILY INJURY AND PROPERTY $1,000,000 $1,000,000 DAMAGE, COMBINED PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THlRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR'S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY'S PRIOR APPROVAL. II. CONT ACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO "ADDITIONAL INSUREDS" Rev. February 22, 2016 DocuSign Envelope ID: 448F9D83-A76E-4EF1-9A95-3F616E43347D /1.. PRIMARY-OVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. OTICE OF CA CELLATlON I. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DA TE OF CANCELLATION. NOTICES SHALL BE EMAILED TO: lnsuraneeCerts@CityofPaloAlto.org PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO AL TO, CA 94303 Rev. February 22, 2016 Attachment B: Bid Result Summary RFQ 161852: Transportation and Disposal of Ash and Sludge Bid Item Bid Schedule Section Description UOM Qty PSC1 Unit Price PSC1 Line Total CH2 Unit Price CH2 Line Total A‐1A: ash hauling & disposal Disposal cost of ash TON 723 $65.00 $46,995.00 $68.00 $49,164.00 A‐2A: ash hauling & disposal Transportation cost of ash: LOAD 53 $1,200.00 $63,600.00 $3,200.00 $169,600.00 A‐3A: ash hauling & disposal Liner installation fee for ash ‐ per load LOAD 53 $50.00 $2,650.00 $57.00 $3,021.00 A‐4A: ash hauling & disposal Bin Rental for ash DAYS 365 $9.00 $3,285.00 $10.00 $3,650.00 A‐5A: ash hauling & disposal CA Non‐RCRA taxes for ash; based on the most current CA BOE schedule TON 723 $23.23 $16,795.29 $0.00 $0.00 A‐6A: ash hauling & disposal Local taxes for ash, as necessary, per ton TON 723 $6.50 $4,699.50 $0.00 $0.00 A‐7A: ash hauling & disposal Surcharges/fees for ash, lump sum LS 1 $0.00 $0.00 $0.00 $0.00 Subtotal $138,024.79 Subtotal $225,435.00 B‐1B: sludge hauling & disposal Disposal cost of sludge TON 150 $22.00 $3,300.00 $71.50 $10,725.00 B‐2B: sludge hauling & disposal Transportation cost for sludge LOAD 12 $600.00 $7,200.00 $710.80 $8,529.60 B‐3B: sludge hauling & disposal Liner installation fee for sludge ‐ per load LOAD 12 $50.00 $600.00 $31.83 $381.96 B‐4B: sludge hauling & disposal Bin Rental DAYS 12 $9.00 $108.00 $10.61 $127.32 B‐5B: sludge hauling & disposal Local taxes, as necessary, per ton TON 150 $0.00 $0.00 $0.00 $0.00 B‐6B: sludge hauling & disposal Surcharges/fees for sludge, lump sum LS 1 $0.00 $0.00 $300.00 $300.00 B‐7B: sludge hauling & disposal Roll‐off bin mobilization during backup sludge hauling service EA 6 $450.00 $2,700.00 $500.00 $3,000.00 B‐8B: sludge hauling & disposal Onsite truck and truck driver to move empty and full bins in and out of incinerator building during backup sludge handling service HR 48 $95.00 $4,560.00 $100.79 $4,837.92 Subtotal $18,468.00 Subtotal $27,901.80 Contract Year 1, Total for Bid Schedules A and B Subtotal $156,492.79 Subtotal $253,336.80 Price Increases Estimated price increase ‐ Year 2 (see note 3) % 1 3.00% $4,694.78 3.00% $7,591.10 Price Increases Estimated price increase ‐ Year 3 (see note 3) % 1 3.00% $4,835.63 3.00% $7,818.84 Contract Year 1, Total for Bid Schedules A and B $156,492.79 $253,336.80 Contract Year 2, Total for Bid Schedules A and B $161,187.57 $260,927.90 Contract Year 3, Total for Bid Schedules A and B $166,023.20 $268,746.74 1 PSC Industrial Outsourcing, LP 3y Total $483,703.56 3y Total $783,011.45 2 Clean Harbors Environmental Services, Inc. 3 Clean Harbors Environmental Services, Inc.; 2nd and 3rd year contract price increases on items A‐1, 2, 3, and 4, and B‐1, 2, 3, 4, 7, and 8 only UOM = unit of measurement; Qty = quantity; LS = lump sum; EA = each; HR = hour 1 of 1; 2/25/20162:28 PM • CITY OF PALO ALTO TO: FROM: CITY OF PALO AL TO MEMORANDUM HONORABLE CITY COUNCIL James Keene , City Manager AGENDA DATE: April 4, 2016 SUBJECT: CONSENT ITEM NUMBER 8-APPROVAL OF AN AMENDMENT (ADDENDUM NO. 1) TO THE FIRST AMENDED AND RESTATED CONTRACT NUMBER C059999 BETWEEN THE CITIES OF PALO ALTO AND MOUNTAIN VIEW FOR RECYCLED WATER SUPPLIES Staff is requesting the above Consent item be moved to Action for tonight, April 4, 2016. In addition we are revising the agenda title to allow expanded discussion regarding the City of Palo Alto's Recycled Water Program. The revised and expanded title is, "Discussion of the City of Palo Alto's Recycled Water Program and Approval of an Amendment (Addendum No. 1) to the First Amended and Restated Contract, Number C059999, Between the Cities of Palo Alto and Mountain View for Recycled Water Supplies". This item will be heard as the first Action Item, as is our general practice. City of Palo Alto (ID # 6358) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: SUMC Annual Report Title: Stanford University Medical Center Annual Report and Compliance with the Development Agreement From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council: 1. Find that the Stanford University Medical Center (SUMC) Parties (Stanford Hospitals & Clinics, Lucile Packard Children’s Hospital, and Stanford University) have complied in good faith with the terms and conditions of the Development Agreement for the 2014- 2015 reporting period; and 2. Find that the SUMC Parties are not in default with the terms and conditions of the Agreement. 3. Accept the City of Palo Alto’s (City) Annual Accounting Report regarding the funds received by the SUMC Parties as required under Section 12(d) of the Development Agreement. (Attachment C.) Executive Summary The City Council is required to review the Development Agreement between the SUMC Parties and the City of Palo Alto on an annual basis to ascertain compliance with the terms of the agreement. The SUMC Parties have submitted the annual report for the 2014-2015 period summarizing construction activities and other actions taken to fulfill the obligations of the Agreement. Of particular note, the SUMC has achieved a 36.3% alternative transportation mode split which exceeds the Alternative Mode Share target of 35.1% for 2025. Also, as described in the supplement to the annual report, the SUMC Parties have paid approximately $32.5 million in public benefit fees to the City since June 6, 2011, although there were no required payments from Stanford during this reporting period. During the 2013-2014 monitoring period, the City Council reviewed and approved the revised Infrastructure project funding proposal allocating future use of the SUMC Infrastructure and Sustainability funds to a prioritized list of projects. City of Palo Alto Page 2 Background On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital, construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and the City and was deemed effective on June 6, 2011 and continues for thirty (30) years from the effective date. The Agreement requires annual City Council review of the SUMC Parties compliance. This report covers the SUMC Parties activities during 2014-2015, the fourth year of the Agreement. Discussion As described in Section 12, “Periodic Review of Compliance,” the City Council is to review the Agreement annually to ascertain the SUMC Parties’ compliance with the terms of the Agreement. Section 12 also includes the reporting requirement for the SUMC Parties and the City to demonstrate good faith compliance with the Agreement. The attached 2014-15 Annual Report (Annual Report) dated July 6, 2015 (Attachment A) from SUMC describes the SUMC Parties’ activities related to implementation of the Agreement. Construction Activities Construction activities in past periods included: Hoover Pavilion Renovation- Site work and renovation of the exterior and interior features of the building have been completed and in December 2012, Hoover Pavilion re-opened, providing a modern medical office and clinics to the SUMC community. The renovation project is considered to be complete. Hoover Pavilion Parking Garage- Site work and construction for the new 1,084-stall parking garage was completed in the Fall of 2013. It is now open for use by patients and staff. Welch Road Utilities Project- This project involves the replacement and installation of utilities to support the New Stanford Hospital and the Lucille Packard Children’s Hospital expansion. The project was considered to be complete in 2013. Two-way automobile traffic currently operates on Welch Road. Construction activities during this period included: Hoover Medical Office Building “Neuroscience Health Center” - Construction is nearing completion for the new medical building, located adjacent to Quarry Road, and the City of Palo Alto electrical sub-station. Grading and excavation permits were issued in March 2014, followed by the core and shell building permit in May 2014. The new Neuroscience Health Center is targeted for completion in the Fall of 2015. City of Palo Alto Page 3 Lucile Packard Children’s Hospital- Construction of the hospital expansion is underway and significant construction progress has been made including completion of deck placement, installation of precast concrete panels on the building exterior and construction of a tunnel connector from the new Hospital to the existing Hospital is almost complete. New Stanford Hospital (NSH) - Substantial project progress has been made since the 2013 issuance of the Office of Statewide Health Planning & Development (OSHPD) foundation permit and core and shell permit for the NSH and the City’s issuance of the building permit for the New Stanford Hospital Garage. The steel superstructure for the hospital is now in place, mechanical, electrical and plumbing work is now underway, and construction of the exterior building enclosure has begun. The adjacent New Stanford Hospital Garage exterior façade installation is underway and a temporary Certificate of Occupancy was issued to allow for contractor parking during construction. School of Medicine Building- This project involves the replacement of the Stanford University School of Medicine building with new state-of-the-art facilities. The School of Medicine development is not yet underway. No new square footage has been constructed during this reporting period. Approximately 133,731 square feet of floor area has been demolished on the main and children’s hospital sites, as well as the Hoover Pavilion site. Compliance with Development Agreement Obligations In addition to the construction summary and the summary of net new square footage added within the past year, the Annual Report also summarizes the SUMC Parties’ progress in meeting the terms described in Section 5 of the Agreement, “SUMC Parties’ Promises.” This section of the Annual Report describes the SUMC Parties’ obligations with respect to the following items: Health Care Benefits; Fiscal Benefits; Traffic Mitigation and Reduced Vehicle Trips; Pedestrian, Bicycle and Automobile Linkages; Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing, and Climate Change. The Annual Report summarizes the activities within the reporting year. The obligations are further summarized in Table 1: Development Agreement, Section 5 – SUMC Parties’ Promises (Attachment B). City staff has reviewed the information within the Annual Report and has determined that it is complete and correct. Traffic Mitigation and Reduced Vehicle Trips The SUMC Parties have made substantial progress in meeting the traffic and alternative transportation obligations of the Agreement. Specifically, they have accomplished the following: City of Palo Alto Page 4 Purchased CalTrain Go Passes annually for all eligible employees as of January 1, 2012, three years ahead of the September 1, 2015 requirement as stated in the Agreement. Annual passes were purchased again for all eligible existing and new employees for 2015; Purchased additional shuttle buses for the Marguerite Shuttle service which now includes five renewable diesel-electric hybrid buses and three all-electric buses, along with plans to add up to 20 additional all electric buses over the next two years; Hired a Transportation Demand Management (TDM) coordinator on March 13, 2012, three years ahead of the September 1, 2015 requirement as stated in the Agreement, and Achieved a 36.3% alternative transportation mode split during this reporting year for the hospital employees, meaning 36.3% of employees are using alternative modes to get to work rather than driving alone. This figure increased and employs the new calculation methodology implemented in the last monitoring period. The new weighted survey analysis methodology is more accurate and intended to be more representative of the general Hospital employee population. The past year’s mode split were recalculated using the new methodology and is shown in the table below. Year Past Methodology New Methodology 2012 39% 32.5% 2013 40.9% 33.4% 2014 N/A 34.4% 2015 N/A 36.3% The 36.3% mode split exceeds the Alternative mode share targets for 2018, 2021, and 2025. The SUMC Parties and City staff will continue to monitor the TDM program throughout the term of the Agreement and will report annually to the Council. Supplement to the Annual Report In addition to the SUMC Parties’ submittal of the Annual Report, City staff is to prepare a supplement to the Annual Report (the “Supplement”), as described in Section 12(d) of the Agreement. The supplement is to include an accounting of the funds received from the SUMC Parties to satisfy the obligation outlined in Section 5 of the Agreement, a description of the account balances, and a summary and description of expenditures from the funds. The Supplement is contained in Attachment C. In summary, the SUMC Parties have contributed $32,533,666 in public benefit funds as of June 30, 2015. Interest income during the reporting period was $566,862. The SUMC Parties will pay an additional $11.7M upon issuance of the first hospital occupancy permit, expected in early 2018. During the reporting period, the City has committed funds for the following: City of Palo Alto Page 5 $392,798 under the “Community Health & Safety” cost center for the Project Safety Net Program. Project Safety Net Program is specifically identified in the Agreement as a community health program that would be an appropriate program for the use of this fund. Funds spent during the reporting period were allocated to salaries/benefits for Project Safety Net staff and other expenses relating to the operation of the program. $1.2 million was reported committed during the last monitoring period under the “Expansion Cost Mitigation” cost center for City Capital Projects, specifically the implementation of the Bicycle & Pedestrian Transportation Plan which is included on the approved prioritized list of infrastructure projects. These funds were supposed to be under the “Climate Change and Sustainability cost center and both the “Expansion Cost Mitigation” and the Climate Change and Sustainability cost centers were adjusted accordingly for this monitoring period. General Fund Sales and Use Tax revenues in calendar year 2014 resulting from construction- related activities totaled approximately $568,755 based on the City Auditor’s review of the Construction Sales & Use Tax Monitoring Report submitted by SUMC on June 30, 2015. The City Auditor submitted a letter to SUMC (Attachment D) noting a discrepancy of $36,295 in the Construction Sales & Use Tax Monitoring report, meaning SUMC reported $605,050 General Fund Sales and Tax revenues in calendar year 2014 resulting from construction related activities. The discrepancy mainly stems from taxes from calendar year 2013 reported in calendar year 2014 and jurisdiction coding issues. The City will be working with SUMC to resolve the discrepancy. Total General Fund Sales and Use Tax revenues from 2011 to 2014 now total $1,054,192. Future Use of Development Agreement Funds On June 9, 2014 (ID#4889), Council reviewed and approved the revised Infrastructure project funding proposal allocating future use of the SUMC Infrastructure and Sustainability funds to a prioritized list of projects including, but are not limited to, implementation of the Bicycle/Pedestrian Transportation Plan, construction of the Public Safety Building, construction of additional parking garages in the University Ave/Downtown and Cal Ave areas, Fire Stations and Parks improvements. In addition to funds being appropriated from the Stanford Sustainability account for the Bicycle and Pedestrian Bicycle Plan, funds have been and will be requested for the design of a fire station replacement and for preliminary design for a new Public Safety Building. These drawdowns from the Stanford Infrastructure Funds are reflected in the City’s FY 2016 Adopted Capital Budget. During FY2015, use of Health and Safety Funds allocated to Project Safety Net has been primarily focused on means restriction efforts along the rail corridor, including track security, vegetation removal and the installation of higher fencing along the eastern side of the corridor. In January, 2016, a new Executive Director for Project Safety Net collaborative was hired. Her primary focus in the near term will be working with the Center for Disease Control on the Epi Aid investigation into the teen suicide cluster in Palo Alto and working with collaborative leadership to set up the needed infrastructure to implement a collective impact approach to addressing suicide prevention and youth wellbeing City of Palo Alto Page 6 efforts in Palo Alto. Resource Impact There are no negative impacts from the Agreement that affect the City’s General Fund. As summarized above, the City has received approximately $35.1M in public benefit payments, interest and unrealized gains and approximately $1,054,192 in construction sales taxes since the start of the project based on the City Auditor’s review of the Construction Sales & Use Tax Monitoring Report submitted by SUMC on June 30, 2015. Policy Implications This report does not represent any changes to existing City policies. Environmental Review Finding Stanford University’s compliance with the Terms of the Agreement is not a project under the California Environmental Quality Act, and no environmental assessment for the annual compliance review is required. An environmental impact report for the entire SUMC project was prepared and certified by the City Council prior to approval of the Development Agreement. Attachments: Attachment A: 2014-15 SUMC Annual Report (PDF) Attachment B: Table 1 - Development Agreement, Section 5 (PDF) Attachment C: SUMC Annual Report Supplement FY2015 (PDF) ( ( { ( l ( { ( ( ( ( ( ( t ( { ( ( ( ( ( ( ( ( ~ l 2014-15 ANNUAL REPORT PREPARED FOR THE CITY OF PALO ALTO I JULY 6, 2015 Received JUL 0 6 2015 Department of Planning & Community Environment ATTACHMENT A ( ( ( ( ( c l ( ' ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( { ( ( ( ( ( ( (- ( ( ( { CONTENTS EXECUTIVE SUMMARY BACKGROUND AND PURPOSE 2 2014-2015 SUMMARY OF PROGRESS 3 HOOVER PAVILION SITE 3 LUCILE PACKARD CHILDREN'S HOSPITAL 4 NEW STANFORD HOSPITAL 5 ( SCHOOL OF MEDICINE 6 ( NET NEW SQUARE FOOTAGE 6 ( COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7 HEALTH CARE BENEFITS 7 ( SECTION 5(a)(ii). FUND FOR HEALTHCARE SERVICES 7 SECTION 5(a)(iii). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7 ( ( PALO ALTO FISCAL BENEFITS 8 SECTIONS 5(b)(i) AND 5(b)(ii). PAYMENT OF SALES AND USE TAXES 8 ( SECTION 5(b)(iii). FUNDING OF OPERATING DEFICIT 9 ( SECTION 5(b)(iv). PAYMENT OF UTILITY USER TAX 9 SECTION 5(b)(v). SCHOOL FEES 9 l TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 10 ( SECTION 5(c)(ii). MENLO PARK TRAFFIC MITIGATION 10 SECTION 5(c)(iii). EAST PALO ALTO VOLUNTARY MITIGATION 10 ( SECTION 5(c)(iv). CONTRIBUTIONS TO AC TRANSIT 10 ( SECTION 5(c)(v). OPTICOM PAYMENTS 11 SECTION 5(c)(vi). CALTRAIN GO PASSES 11 { SECTION 5(c)(vii). MARGUERITE SHUTTLE SERVICE 11 ( SECTION 5(c)(viii). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11 SECTION 5(c)(ix). MONITORING OFTDM PROGRAMS 12 ( { LINKAGES 13 ( SECTION 5(d)(i). INTERMODAL TRANSIT FUND 13 SECTION 5(d)(ii). QUARRY ROAD FUND 13 ( SECTION 5(d)(iii). STANFORD BARN CONNECTION 13 ( INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOOD S AND COMMUNITIES, AND AFFORDABLE HOUSING 14 ( SECTION 5(e). 14 ( CLIMATE CHANGE 14 ( SECTION 5(f). CLIMATE CHANGE FUND 14 ( ( SATISFACTION OF COND ITIONS OF APPROVAL 14 ( CONCLUSION 15 ( ( ( ( l ( I ( I ( I i I ( ( ( -( ~ . ( ( . ( ( ( (' ( ( ( I ( I ( I ( . ( l ( . ( ( ( ( ( ( ( ( ( ( ( I ( t - ~ ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( t ( ( ( ( ( ( l EXECUTIVE SUMMARY On June 6, 2011 , the Stanford University Medical Center-comprised of Stanford Hospital and Clinics, Lucile Packard Children's Hospital, and Stanford University-entered into a Development Agreement with the City of Palo Alto, committing to provide a range of community benefits in exchange for vested development rights to develop and use the SUMC Project facilities in accordance with the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals. The SUMC Renewal and Replacement Project ("Renewal Project")-driven by a growing demand for healthcare services, state-mandated seismic safety req uirements, and the need to rep lace outmoded facilities with modern , technologically advanced spaces-holds the potential to transform the way that healthcare is delivered and research is condu cted. Today, four years after the execution of the Development Agreement, SUMC Renewal Project activities are well underway. The New Stanford Hospital and the Lucile Packard Children's Hospital expansion are beginning to take shape, with steel erection complete and exterior cladding installation underway on both structures. Meanwhile, on the Hoover Pavilion site, construction of a new Neuroscience Health Center is nearing completion, adjacent to the new parking structure and renovated Pavilion. Against this backdrop, SUMC submits its Annual Report in compliance with Section 12(c) of the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in advancing the goals of both the Stanford University Medical Center and the broader community ANNUAL REPORT 2014-15 BACKGROUND AND PURPOSE The Palo Alto City Council's unanimous approval of the entitlements for the Stanford University Medical Center Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new and replacement facilities at SUMC. The project approvals-including new zoning for the Project sites, a conditional use permit, architectural review approval, and the execution of a Development Agreement-allows for the construction of approximately 1.3 million net new square feet of hospital facilities, clinics, medical offices, and medical research spaces, and will enable the hospitals to optimize the delivery of healthcare services to patients, and maintain their position as leading providers of world- class healthcare. In order to facilitate this important replacement and expansion work, SUMC entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive package of community benefits and voluntary mitigation measures. In exchange for these benefits, the City has vested for a period of 30 years SUMC's rights to develop and use the property in accordance with the project approvals, and will streamline the process for obtaining subsequent approvals The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance, and require that SUMC submit an Annual Report to the City of Palo Alto's Director of Planning and Community Environment each year within 30 days of the anniversary of th e agreement effective date (June 6, 2011 ). The Annual Report is to summarize the progress on the Renewal Project, including a list of net new square footage for which a certificate of occupancy has been received , and a description of the steps that SUMC has taken to comply with the obligations listed in the Development Agreement. With this report, SUMC fulfi lls these requ irements. Within 45 days of receipt of this Annual Report, the City wi ll prepare a Supplement to the Annual Report, to provide an accounting of the City's expenditures from each of the City Funds and how they were used. 2 ANNUAl REPORT 2014-15 ( ( ( ( ( ( ( ( ( ( ( ( ( ( { ( ( ( ( ( ( ( ( ( ( ( ( { ( ( { (:- ~ { l ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ~ ( ( ( ( 2014-2015 SU MMARY OF PRO GRESS The Renewal Project continues to progress , with construction activities for both Hospitals now well underway. In the section to fo llow, SUMC provides an overview of central goals for the project elements that presently are under construction or nearing construction, a synopsis of progress to date, as well as a preview of near-term upcoming activities. HOOVER PAVILION SITE One of the first phases of the Renewal Project was the renovation of Hoover Pavilion to accommodate modern medical offices and clinics. Renovation of the 1931 building-including structural improvements, mechanical and plumbing upgrades, and restoration of historic architectural details-began in Summer 2011 , and completed in Fa ll 2012. Subsequently, construction of the Hoover Garage (PS-9) completed in Fall 2013, and the garage is now open and serving patients, visitors, and staff. And finally, the landscaping at the Hoover Medical Campus was transformed to include varied landscaped spaces, including a lawn parterre, Redwood grove, and Oak grove The groves feature mature trees which have been transplanted from other locations on the Hoover site, many of which had been boxed and stored offsite during construction. Currently, construction of a new Neuroscience Health Center is nearing completion on the Hoover site, on Quarry Road immed iately west of the Hoover Pavilion , and northwest of the parking garage. When complete, the Neuroscience Health Center will provide specialized outpatient services for people with Alzheimer's, Parkinson's disease, brain tumors, multiple sclerosis, stroke and other neurological disorders. Construction has progressed swiftly over the past year-the exterior envelope is now nearly complete, and interior finishes are underway. Site work is in progress as well-and when complete will feature new landscaped spaces, including a wildflower knoll. The new Neuroscience Health Center is targeted for completion in Fall 2015. ANNUAl REPORT 2014-15 3 2014-2015 SUMMARY OF PROGRESS LUCILE PACKARD CHILDREN'S HOSPITAL In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard Children's Hospital is opening an expanded facility. The new hospital, to be located adjacent to the current Packard Children 's Hospital, will provide patients and doctors with the most modern clinical advancements and technology, while also creating a more patient-and family-centered environment of care, with additional single-patient rooms and more spaces for families to be with their child during treatment and recovery. The Packard Chi ldren's expansion will feature a new entrance lobby, public concourse with dining, three floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural li ght and views , and the exterior grounds-more than 3.5 acres of outdoor areas and gardens-will provide a park-like setting for patients, families, and visitors. In the past year, significant construction progress has been made on the LPCH expansion project-steel erection and deck placement are now complete, and interior rough-ins are underway, along with the installation of precast concrete panels on the building exterior. Meanwhile, site utilities work and the construction of a tunnel connector from the new Hospital to the existing Hospital have been in progress and are now nearing completion . 4 ANNUAl REPORT 2014-15 ( ( ( ( ( ( ( ( ( ( ( ( t ( ( ( { ( ( t ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( I ( ( { ( ( ( ( ( ( \ ( ( ( ( { ( ( ( ( ( ( l (_ ( ( { ( 2014-2015 SUMMARY OF PROGRESS NEW STANFORD HOSPITAL Stanford Hospital and Clinics is constructing new and replacement hospital facilities that will usher in a new era of advanced patient ca re. Growth in patient volumes and rapidly changing medical technology have rendered much of the existing midcentury hospital infrastructure inadequate, whi le new seismic safety requirements have accelerated the need to construct rep lacement facilities. The New Stanford Hospital will substantially increase capacity, and will also address a rapidly advancin g medical landscape. High-tech spaces such as Surgery, Radiology, and Intensive Care wi ll be replaced to accommodate the latest advances in medical technology, while still retaining the flexibility to adapt to fu tu re innovations. Facilities wil l feature new patient rooms, an enlarged Level-1 trauma center and Emergency Department, and new surgical, diagnostic, and treatment rooms. And foremost, the new facility will create a healing environment res ponsive to the needs of patients, visitors, and staff. Upper-level pavilions wi ll feature light-filled patient rooms, and a mid -level garden floor will offer dining, conference, and educational facilities, as well as social and spiritual support spaces. Substantial progress has been made on the New Stanford Hospital project over the past year. The steel superstructure for the Hospital is now in place; mechanical, electrical and plumbing rough -ins are underway; and preparation for the exterior building enclosure has begun. Meanwhile, at the adjacent New Stanford Hospital Garage, exterior fac;:ade installation is underway and a temporary Certificate of Occupancy has been issued to allow for contractor parking while construction continues. ANNUAL REPORT 2014-15 5 2014-2015 SUMMARY OF PROGRESS SCHOOL OF MEDICINE The Stanford University School of Medicine will replace its outmoded research buildings with new state-of-the-art facilities designed to support contemporary translational research. The new facilities will accommodate 21st century medical advancements and enable the development of new medical innovations. The new buildings will feature integrated laboratory suites, with easier access between labs and support facilities, enabling transparency, flexibility, and collaboration. The new facilities will be surrounded by landscaped areas and tree-l ined walkways. The School of Medicine development is not yet underway. In the interim, part of the site that will ultimately be developed is currently in use as a temporary va let parking area for Hospital patients and visitors. NET NEW SQUARE FOOTAGE The following table summarizes the net new square footage for which a certificate of occupancy has been issued. PROJECT COMPONENT GROSS SQUARE FOOTAGE NEW STANFORD HOSPITAL 1101 Welch demolished (40, 1 00) Total (40, 1 00) LUCILE PACKARD CHILDREN'S HOSPITAL EXPANSION 701 Welch demolished (56,300) 703 Welch demolished (23,500) Total (79,800) SCHOOL OF MEDICINE None 0 HOOVER PAVILION Misc. shops and storage demolished (13,831 ) Total (13,831) 6 ANNUAL REPORT 2014-15 ( ( ( ( ( ( ( ( { ( ( { ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( t t , ( l ( ' ( \ ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( \ ( ( ( l ( ( ( ( ( ( l COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS This section of the Annual Report summarizes the steps that SUMC has taken to comply with their obligations in Section 5 of the Development Agreement. HEALTH CARE BENEFITS SUMC provides certain intrinsic benefits to the community, as both a global leader in medical care and research, and as a community healthcare services provider. The Renewal Project enables SUMC to continue its important work, and the addition of more beds for adults and ch ildren will help to alleviate overcrowding. Additionally, the new hospital facilities will provide critical emergency preparedness and response resources for the community in the event of an earthquake, pandemic, or other major disaster. Section 5(a)(ii). Fund for Healthcare Services The Hospitals have designated the amount of $3 million for Healthcare Services which will increase to $5.6 million by December 31 , 2025. No further action is required until 2026. This amount wi ll be reconciled with the construction tax use payments as described in Development Agreement Section 5(b) (ii)(C). Section 5(a)(iii). Fund for Community Health and Safety Programs SUMC has contributed a single lump-sum payment of $4 million to establish a Community Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected community health programs that benefit residents of the City, including the Project Safety Net Program, a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be established to evaluate proposals regarding the other specific programs to receive funding, composed of two representatives selected by the SUMC Parties and two representatives selected by the City; this committee shall make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council shall use its reasonable discretion to decide whether to accept, reject, or modify the joint committee recommendations. SUMC provided the entire required contribution to the Community Health and Safety Program Fund on August 25, 2011 . No further action is required by the SUMC to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. ANNUAL REPORT 2014-15 7 COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS PALO ALTO FISCAL BENEFITS The SUMC Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The project is expected to generate at least $8 .1 million in sales and use tax revenues for the City, and multiple mecha- nisms have been put into place to ensure that this target is met The Development Agreement also provides for further fiscal benefits to the City, including a payment by SUMC to fund the City 's operating deficit, and the payment of utility user taxes and school fees. Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes As required by the Development Agreement, the SUMC submitted its annual Construction Sales and Use Tax monitoring report to the City on June 30 , 2015. The SUMC parties will continue to submit such a report annually during the construction period for the Renewal Project so that the City can determine the share of construction use taxes that it has received as a result of the Renewal Project Each year, within 60 days of receiving the monitoring report, the City will provide its determination of the amount of construction use taxes that it has received as a result of the Renewal Project during the preceding calendar year. In August 2026, the SUMC and the City will conduct a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes as a result of the Project, as further described in Development Agreement Section 5(b)(ii). To date, SUMC has taken the fo llowing steps to maximize the City's allocation of sa les and use taxes associated with Project construction and operation. Documentation of each of these items is included in the 2014 construction use tax monitoring report already submitted. 8 ·The SUMC Parties have obtained all permits and licenses necessary to maximize the City's allocation of construction use taxes derived from the project, including California Seller's Permits and Use Tax Direct Pay Permits. Copies of permits and licenses are attached to the 2014 monitoring report. • SUMC has designated and required all contractors and subcontractors to designate the project site as the place of sale of all fixtures furnished or installed as part of the project • SUMC has designated and required all contractors and subcontractors to designate the project site as the place of use of all materials used in the co nstruction of the project • SUMC has required all contractors and subcontractors to allocate the loca l sales and use taxes derived from their contracts directly to the city. SUMC has used best efforts to require contractors and subcontractors to complete and file any forms required by the State Board of Equalization to effect these designations. • Both Hospitals have obtained use tax direct pay permits from the State of California for their existing facilities in order to increase the City tax allocation for the Hospitals' purchases. The Hospitals will maintain the use tax direct pay permit for the life of the project • Finally, SUMC has assisted the City in establishing and administering a Retail Sales and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation, allocation, reporting and payment of sales and use taxes derived from the Project ANNUAL REPORT 2014-15 ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( { ( ( ( ( l ( ( ( ( ( l ( t ( ( l \ ( l ( t ( ( ( ( ( ( ( ~ ( ( \ ( ( ( ( ( ( ( ( ( ( COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS Section 5(b)(iii). Funding of Operating Deficit In order to assure that City costs associated with the Renewal Project do not exceed revenues to the City resulting from construction and operation of the project, SUMC has provided to the City a single lump sum payment in the amount of $2,4 17,000. This payment was made on August 25, 2011 . No further action is required by the SUMC to comply with this Development Agreement provision . Section 5(b)(iv). Payment of Utility User Tax SUMC will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas, and water charges allocable to new construction completed as part of the project for the life of the project This rate may be increased by the City as provided by Section 2.35 .1 OO(b) of the Municipal Code. The 5 percent utility user tax is currently being paid by SUMC. Section 5(b)(v). School Fees SUMC will pay to the City-who is then to forward to the Palo Alto Unified School District-school fees upon issuance of each building permit from the City or OSHPD, in the amount that is generally applicable to non-residential development at the time of payment based upon net new square footage, as defined in the Development Ag reement School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802, respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional payment of school fees in the amount of $16,119 was made to account for the incremental square footage associated with the Hoover Medical Office Building, beyond the 60 ,000 square feet originally planned. ANNUAL REPORT 2014-15 9 COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS SUMC has taken a number of steps to mitigate the potential traffic impacts projected at full project buildout Already, SUMC provides a robust transportation demand management program, offering a variety of incentives for employees to forego driving alone to work. As the Renewal Project moves forward, SUMC wi ll take the following actions outlined below. Section 5(c)(ii). Menlo Park Traffic Mitigation SUMC has agreed to contribute to the City of Menlo Park a total of $3 ,699,000 for use in connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable neighborhoods and communities and affordable housing. This contribution is to be made in three equal payments; the first payment of $1 ,233,000 was made on August 19, 2011 . The second payment of $1 ,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit The final payment will be made within 30 days from issuance of the first Hospital occupancy permit Section 5(c)(iii). East Palo Alto Voluntary Mitigation SUMC has contributed a single lump sum payment of $200,000 to East Palo Alto to be used for roadway and traffic signal improvements on University Avenue. This payment was made on August 19, 2011 . No further action is req uired by the SUMC to comply with this Development Agreement provision. In the event that the SUMC does not meet alternative transportation mode goals specified in the Development Agreement by 2025 and is assessed a $4 million payment under Development Agreement section 5(c)(ix) (B), the City will be required to remit $150,000 of such payment to the City of East Palo Alto. Section 5(c)(iv). Contributions to AC Transit The Hospitals have committed to offering the following contributions to AC Transit within 30 days from issuance of the first Hospital occupancy permit ·The Hospitals will contribute a one-time payment of $250,000 to AC Transit to be used for capital improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). • The Hospitals will offer to make annual payments to AC Transit in a reasonable amount, not to exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus service to SUMC of less than 1 (Section 5(c)(iv)(B). • In order to encourage Hospital employees living in the East Bay to use public transit for their commute, the Hospitals have committed to using best efforts to lease 75 parking spaces at the Ardenwood Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)(iv)(C)). No action is required at this time; however, as of May 2014, a 1 00-space park- and-ride facility on Kaiser Drive at Campus Drive in Fremont (0.9 mile from Ardenwood Park & Ride) has been under lease for the use of Stanford University and Hospital commuters. These offers have not yet been made to AC Transit because the first Hospital occupancy permit has not yet been issued. 10 ANNUAl REPORT 2014-15 ( ( ( ( - ( ( ( ( ( ( ( ( ( \ ( ( ( ( ( ( ( ( ( ( ( ( ( ~ ( ( ( ( ( ( ( ( ( ( ( ~ ( COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS Section 5(c){v). Opticom Payments Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals will pay $11 ,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the following seven intersections El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road ; Junipero Serra/Campus Drive West; Galvez/Arboretum; and the Alpine/280 Northbound ramp. This payment has yet not been made because the first Hospital occupancy permit has not yet been issued. Section 5(c){vi). Caltrain GO Passes The Development Agreement requires that the hospitals purchase annual Ca ltrain GO Passes for all existing and new Hospital employees who work more than 20 hours per week at a cost of up to $1 .8 million per year, beginning on September 1, 2015. This obligation is to continue for a period of 51 years. Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and began providing free GO Passes to emp loyees commencing on January 1, 2012 . Further details regarding the GO Pass purchase can be found in the SUMC Alternative Mode Share report, which was submitted to the City on May 29 , 2015. Section 5(c){vii). Marguerite Shuttle Service The Hospitals will fund the reasonable costs , in an approximate amount of $2 million for the purchase of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased demand for shuttle service between the project sites and the Palo Alto lntermodal Transit Station. In addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of two additional shuttles to meet this increased demand. Section 5(c){viii). Transportation Demand Management Coordinator The Development Agreement requires that the Hospitals employ an on site qualified Transportation Demand Management (TOM) Coordinator for SUMC, commencing on September 1, 2015, and continuing through the life of the Renewal Project Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated the hiring of the TOM Coordinator. This position was fi lled in March 2012, and the TOM Coordinator has been working to raise awareness among SUMC commuters about alternative transportation options and commute incentive programs. This individual is also responsible for providing alternative commute planning assistance and responses to customer inquiries, writing and editing electronic and print communications, and coordinating and staffing outreach events, such as free transit pass distributions and employee fairs; and providing alternative transportation information at new employee orientations when requested. ANNUAL REPORT 2014-15 11 COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS Section S(c)(ix). Monitoring of TOM Programs The Hospitals are required to submit annual monitoring reports showing the current number of employees employed over 20 hours per week; the number of employees using an alternative transportation mode as documented by a study or survey to be completed by the Hospitals using a method mutually agreeable to the City, and the efforts used by the Hospitals to attempt to achieve the Alternative Mode Targets identified in the Development Agreement The Development Agreement specifies payments to be made in the event that such targets are not met during particular time periods. SUMC submitted its 2015 Alternative Mode Share Report to the City on May 29, 2015; this report shows an alternative mode split of 36.3% for the Hospitals. This mode split exceeds the Alternative Mode Share targets for 2018, 2021 , and 2025. 12 ANNUAL REPORT 2014-15 ( ( ( ( ( ( ( ( ( ~ ( { ( ( ( ( t ( ( \ ( ( ( { ( \ l ( t ( ( ( { ( ( ( ( ( ( ( ( ( ( ( ( ( { ( ( ( ( ( ( COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS LINKAGES To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of pedestrian and bicycle connections between SUMC and Palo Alto, SUMC has funded or will fund the following specific infrastructure improvements Section 5(d)(i). lntermodal Transit Fund SUMC has provided to the City one lump sum payment of $2.25 million for improvements to enhance the pedestrian and bicycle connection from the Palo Alto lntermodal Transit Center to the existing intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by the City for the development of an attractive, landscaped passive park/green space with a clearly marked and lighted pedestrian pathway, benches, and flower borders. SUMC paid the entire required amount for the lntermodal Transit Fund on August 25, 2011. No further action is required by the SUMC to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expend itures from this fund, and the purposes for which the expenditures were used. The City is required to construct the improvements prior to issuance of the first Hospital Occupancy Permit, currently anticipated to be issued in Summer 2017 . Section S(d)(ii). Quarry Road Fund SUMC has provided to the City one lump sum payment of $400,000 for improvements to and within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El Camino Rea l to Welch Road along Quarry Road, including urban design elements and way finding, wider bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and prominent bicycle facilities. SUMC paid the entire required amount for the Quarry Road Fund on August 25, 2011 . No further action is required by the SUMC to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City wi ll provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditu res from this fund, and the purposes for which the expenditures were used. The City is required to construct the improvements prior to issuance of the first Hospital Occupancy Permit, currently anticipated to be issued in Summer 2017. Section 5(d)(iii). Stanford Barn Connection SUMC will construct up to $700,000 of improvements to enhance the pedestrian connection between SUMC and the Stanford Shopping Center from Welch Road to Vineyard Lane, in the area adjacent to the Stanford Barn. The SUMC is req uired to construct these improvements prior to issuance of the first Hospital Occupancy permit, currently anticipated to be issued in Summer 201 7. SUMC has developed a design for the pedestrian connection improvements, is incorporating preliminary City staff comments, and plans to submit to the City for minor architectural review in late 2015. ANNUAL REPORT 2014-15 13 COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing SUMC will contribute a total amount of $23.2 million toward City of Palo Alto infrastructure, sustainable neighborhoods and communities, and affordable housing. The Development Agreement requires this amount to be contributed in three equal payments. The first payment, in the amount of $7 ,733,333 , was made on August 25, 2011 ; the second payment of $7,733,333 was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment is to be made within 30 days from issuance of the first Hospital occupancy permit As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. The City will use $1,720,488 of these funds in the same manner as funds collected under the City 's housing fee ordinance. CLIMATE CHANGE Section 5(f). Climate Change Fund SUMC wil l contribute a total amount of $12 million toward City projects and programs for a sustainable community, including programs identified in the City's Climate Action Plan, carbon credits, and investments in renewable energy and energy conservation . The Development Agreement requires this amount to be contributed in three equal payments. The first payment, in the amount of $4 million, was made on August 25, 2011 ; the second payment of $4 million was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment is to be made within 30 days from issuance of the first Hospital occupancy permit As required by Development Agreement Section 12(d), the City wil l provide yearly Supplements to the Annual Report to provide an accounting of the City's expenditures from this fund, and the purposes for which the expenditures were used. SATISFACTION OF CONDITIONS OF APPROVAL SUMC will satisfy all Conditions of Approval by the dates and within the time periods required by the project approvals, and has taken several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval encompass conditions imposed by the Architectural Review Board , mitigation measures enumerated in the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit In order to implement, monitor, and report on the implementation of this diverse array of conditions, SUMC , with input from City planning staff, has created two Excel spreadsheet tracking and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring information and documentation , and are updated by the SUMC project teams on a regular basis , and reviewed by the City. 14 ANNUAL REPORT 2014-15 ( ( ( ( ( ( ( ( ( ( ( ( ~ ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( c· ( -' \. ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( { ( ( ( ( . ( ( ( ( ( ( ( ( t ( ( ( ( l ( .( ( ( ( ~ CONCLUSION As the Renewal Project completes its fourth year, SUMC looks forward to continued engagement with the City of Palo Alto as the project continues to forge ahead. ANNUAL REPORT 2014-15 15 (''' I •, (' ( ' (1 ( ,; c:: ( . (, ( ( (_. ( ', / ~ .' ( ' ' c ( ( I ( ( c) (~ (I ( .. {_l ( Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω υ SUMC Development Agreement Compliance: 2014‐2015 DA Section Description Summary Activity Complies? Health Care Benefits 5(a)(ii) Fund for Healthcare Services Financial assistance for Palo Alto residents Establishment of $3M SUMC fund Yes 5(a)(iii) Fund for Community Health and Safety Programs $4M fund for selected community health programs for Palo Alto residents Payment of $4M on 8/25/11 to establish City fund Yes Fiscal Benefits 5(b)(i), (ii) Payment of Sales and Use Taxes Activities to maximize sales and use taxes paid to the City General Fund sales and use tax revenues in calendar year 2013 resulting from construction related activities were approximately $413,713 based on the 2014 City Auditor’s review of the Construction Sales & Use Tax Monitoring Report submitted by SUMC on June 30, 2014. Ongoing ATTACHMENT B Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω φ SUMC Development Agreement Compliance: 2014‐2015 DA Section Description Summary Activity Complies? 5(b)(iii) Funding of Operating Deficit $2.417M fund to address long‐ term deficits Payment of $2.417M on 8/25/11 to establish fund. (B11) Yes 5(b)(iv) Payment of Utility Users Tax 5% tax on all electricity, gas and water charges on new construction. No new construction completed; tax is not applicable at this time. NA 5(b)(v) School Fees Payment of PAUSD fees for net new square footage $342,617 fee paid for LPCH and NSH expansion in 2012. $7,051 fee paid for NSH and NSH Garage expansion in July 2013. $16,119 fee paid for Hoover Medical Office Building expansion in May 2014. Yes Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω χ SUMC Development Agreement Compliance: 2014‐2015 Traffic Mitigation and Reduced Vehicle Trips DA Section Description Summary Activity Complies? 5(c)(ii) Menlo Park Traffic Mitigation $3.7M payment for traffic mitigation, infrastructure, sustainable neighborhoods, affordable housing First of three $1.23M payments made on 8/19/11. Second payment of $1.23M made on 12/5/12. Final Payment to be made within 30 days from issuance of the first Hospital Occupancy Permit. Yes 5(c)(iii) East Palo Alto Voluntary Mitigation $200K for Roadway and single improvements on University Ave. $200K payment made on August 19, 2011. Yes 5(c)(iv) Contributions to AC Transit U‐line capital improvements, low load factor ratios, parking spaces at Ardenwood Park & Ride No activity. Payment to be made within 30 days from issuance of the first Hospital Occupancy Permit. NA Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω ψ SUMC Development Agreement Compliance: 2014‐2015 DA Section Description Summary Activity Complies? 5(c)(v) Opticom Payments $11,200 payment for Opticom traffic control system at 7 intersections No activity. Payment to be made within 30 days from issuance of the first Hospital Occupancy Permit. NA 5(c)(vi) CalTrain Go Passes SUMC purchase of passes for all hospital employees working >20hrs/week Go Passes have been purchased per DA. (January 1, 2012) Yes 5(c)(vii) Marguerite Shuttle Service Purchase of additional shuttles to meet demand Purchased additional shuttle buses for the Marguerite Shuttle service which now includes five renewable diesel‐electric hybrid buses and three all‐electric buses. Plans to add up to 20 additional all electric buses over the next two years. Yes Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω ω SUMC Development Agreement Compliance: 2014‐2015 DA Section Description Summary Activity Complies? 5(c)(viii) SUMC Transportation Demand Management (TDM) Coordinator SUMC hires coordinator to promote alternative transportation options TDM Coordinator has been hired. (March 2012) Yes 5(c)(ix) Monitoring of TDM Programs Yearly report regarding alternative transit mode use 2015 Alternative Mode Share Report submitted on May 29, 2015 indicates 36.3% of SUMC employees using alt modes. Yes Linkages 5(d)(i) Intermodal Transit Fund $2.25M payment to improve pedestrian linkages to PA Intermodal Transit Center Payment of $2.25M on 8/25/11 to establish City fund. (C11) Yes 5(d)(ii) Quarry Road Fund $400K payment to improve pedestrian linkages along Quarry Road Payment of $400K on 8/25/11 to establish City fund. (D11) Yes Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω ϊ SUMC Development Agreement Compliance: 2014‐2015 DA Section Description Summary Activity Complies? 5(d)(iii) Stanford Barn Connection SUMC budgets up to $700K for pedestrian connections in the vicinity of barn SUMC has developed a design for the pedestrian connection improvements, is incorporating preliminary City staff comments, and plans to submit to the City for minor architectural review in late 2015. SUMC is required to construct these improvements prior to issuance of the first Hospital Occupancy permit NA Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing 5(e) Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund $23.2M payment for these uses First of three $7.3M payments made on 8/19/11. (E11) Second payment of $7.3M made on 12/5/12. (E13) Final Payment to be made within 30 days from issuance of the first Hospital Occupancy Permit. Yes Table 1: Development Agreement, Section 5 ‐ SUMC Parties’ Promises φτυψ‐υω ϋ SUMC Development Agreement Compliance: 2014‐2015 Climate Change (F11, F13) DA Section Description Summary Activity Complies? 5(f) Climate Change Fund $12M payment for climate change‐related projects and programs First of three $4M payments made on 8/19/11. (F11) Second payment of $4M made on 12/5/12. (F13) Final Payment to be made within 30 days from issuance of the first Hospital Occupancy Permit. Yes 2014‐15 Annual Report Supplement Prepared by the City of Palo Alto March 1, 2016 Background and Purpose On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital, construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date. The Agreement requires an annual report, prepared by SUMC that outlines the activities of the preceding year and the efforts to fulfill the obligations of the Agreement. Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a supplement to the annual report that contains an accounting of the funds described in the Section 5 of the Agreement (“SUMC Parties’ Promises”) including the fund balances and expenditures and the purposes for which the expenditures were used. This annual report supplement covers the period during the fourth year of the Agreement: June 6, 2015 through June 6, 2015. Accounting for the funds outlined in the attachment extends through the end of the City’s Fiscal Year 2015, June 30, 2015. Public Benefit Fund Accounting Attachment A to this report contains a spreadsheet of the funds received and the use of those funds pursuant to the Agreement as of June 30, 2015. In summary, SUMC have paid approximately $32.5 million in public benefit fees to the city. The first payment of $20,800,333 on August 11, 2011 was for the following funds: Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)); Fund for SUMC Project Operating Deficit (Section 5(b)(iii)); ATTACHMENT C Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino Real/Quarry Road Intersection (Section 5(d)(i)); Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on Quarry Road (Section 5(d)(ii)); Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)), and Fund for Sustainable Programs Benefit (Section 5(f)(i)) An additional $11,733,333 payment was made on December 5, 2012 for the following funds: •Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)), and •Fund for Sustainable Programs Benefit (Section 5(f)(i)) The specific funding amounts as shown on the spreadsheet are consistent with Section 5 of the Agreement. These funds have been assigned a unique cost center number for accounting purposes. The spreadsheet also contains the investment earnings and the earnings allocation to the various cost centers. Public Benefit Fund Expenditures Expenditures during FY 15 through June 30, 2015, as shown on the spreadsheet, were made from the following funds: Fund for Community Health and Safety, Project Safety Net: $392,798.21 was utilized for the Project Safety Net program which is specifically identified in the Agreement as a community health program that would be an appropriate program for the use of this fund. Funds spent during the reporting period were mainly allocated to salaries/benefits for Project Safety Net staff and restriction efforts along the rail corridor, including track security, vegetation removal and the installation of higher fencing along the eastern side of the corridor. Fund for Expansion Cost Mitigation and Climate Change & Sustainability: The FY2014 Annual Report Supplement indicated that $1.2 million was committed for the implementation of the Bicycle & Pedestrian Transportation Plan under the “Expansion Cost Mitigation” cost center for City Capital Projects. Upon further review, the $1.2 million committed should be under the “Climate Change & Sustainability” cost center. The necessary adjustments were made to rectify the accounting of the funds as shown on the attached spreadsheet. No other expenditures were made during the reporting period from the other funds as part of the Agreement. ATTACHMENT A City of Palo Alto Stanford Medical Center Development Agreement (Fund 260) Jul 2014 ‐ June 2015, Final Balances Expansion Cost Intermodal Transit Quarry Road Infrastructure & Climate Change Community Total FY 2015 FY 2015 Mitigation Improvements Afford Housing & Sustainability Health & Safety Actuals Budget cost centers 26000000 60260010 60260020 60260030 60260040 80260010 Beginning Balance 07/01/14 1,402,434.35 2,048,283.44 435,721.64 14,419,214.33 8,447,373.28 4,030,455.70 30,783,482.75 Revenues: Revenues From Stanford ‐‐‐‐‐‐‐ Transfer from HIL‐Residential ‐‐‐ Interdepartment Service ‐‐‐ Investment Earnings 566,862.00 566,862.00 646,200.00 Allocate to categories (566,862.00) (566,862.00) Allocated Investment Earnings 3,931.13 39,776.18 8,461.40 280,010.72 164,041.88 70,640.68 566,862.00 ‐ Total Revenues 3,931.13 39,776.18 8,461.40 280,010.72 164,041.88 70,640.68 566,862.00 646,200.00 Expenditures: Temp Salaries/Benefits (25,806.43) (25,806.43) (29,395.70) Contract Services (356,910.01) (356,910.01) (392,373.12) Other expenses (10,081.77) (10,081.77) (15,000.00) Transfer to Capital Projects (1,200,000.00) (1,200,000.00) (1,200,000.00) Total Expenditures (1,200,000.00) ‐‐‐‐(392,798.21) (1,592,798.21) (1,636,768.82) FY 2015 Revenues less Exp (1,196,068.87) 39,776.18 8,461.40 280,010.72 164,041.88 (322,157.53) (1,025,936.21) (990,568.82) Net total 6/30/2015, as previously reported 206,365.48 2,088,059.62 444,183.04 14,699,225.06 8,611,415.17 3,708,298.17 29,757,546.54 Adjustments made in FY 2016 Allocated Investment Earnings 77,603.48 (5.49) (1.17) (38.62) (77,629.86) 71.65 ‐ Operating Transfers in FY 2014 1,200,000.00 (1,200,000.00) ‐ Operating Transfers in FY 2015 1,200,000.00 (1,200,000.00) ‐ Adjusted Net total 6/30/2015, as restated 2,683,968.96 2,088,054.14 444,181.87 14,699,186.44 6,133,785.31 3,708,369.82 29,757,546.54 Less: Unrealized Gain/Loss, 6/30/15 (16,055.53) (12,490.76) (2,657.10) (87,930.71) (36,692.38) (22,183.51) (178,010.00) Reserve for Encumbrances, 6/30/2015 ‐‐‐‐‐(31,090.00) (31,090.00) Interest Receivable, 6/30/15 (11,788.97) (9,171.50) (1,951.01) (64,564.19) (26,941.82) (16,288.51) (130,706.00) Net total available 6/30/2015, as restated 2,656,124.45 2,066,391.88 439,573.76 14,546,691.54 6,070,151.11 3,638,807.79 29,417,740.54 Future Revenues from Stanford: Estimated January 2018‐1st hospital 7,733,333.00 4,000,000.00 occupancy permit CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR April 4, 2016 The Honorable City Council Palo Alto, California Approval of a Contract with Macias Gini & O'Connell LLP (MGO) in an Amount Not-to-Exceed $875,569 (Including 10 Percent Contingency fee) for External Financial Audit Services for Fiscal Years Ending June 30, 2016, through June 30, 2020 RECOMMENDATION The City Auditor recommends approval of an agreement with the accounting firm of Macias, Gini & O’Connell LLP (MGO), for external financial audit services for the five fiscal years ending on June 30, 2016, through June 30, 2020. The cost of the agreement is $795,972, plus a 10 percent contingency of $79,597, for a total not to exceed amount of $875,569. DISCUSSION The City Charter requires the City Council, through the City Auditor, to engage an independent certified public accounting firm to conduct the annual external audit, and report the results of the audit, in writing, to the City Council. The City’s previous contract with MGO expired on January 31, 2016. Accordingly, the City initiated a formal Request for Proposal (RFP) and conducted a competitive procurement process to select a certified public accounting firm to conduct the annual financial audit for the next five years. The evaluation panel, which included staff from the City Auditor’s Office and the Administrative Services Department (ASD), evaluated proposals from the following firms: Badawi & Associates, Maze & Associates, MGO, and Vavrinek, Trine, Day & Co. The panel selected the firm of Macias, Gini & O’Connell LLP (MGO) to recommend to the City Council. MGO is the principal auditor for 7 of the 10 largest California cities, as well as Santa Clara County, San Mateo County, the Contra Costa Water District, and the Santa Clara Valley Water District. The cost of the five-year agreement is $795,972, plus a 10 percent contingency of $79,597, for a total not to exceed amount of $875,569. Page 2 RESOURCE IMPACT The total five-year cost of $875,569 will be absorbed in the City Auditor’s Office operating non- salary funds in the General Fund beginning in Fiscal Year 2016 through the life of the contract. The payment per year for professional services and reimbursable expenses shall not exceed: 2016 – 2017 $149,925.00 2017 – 2018 $154,423.00 2018 – 2019 $159,055.00 2019 – 2020 $163,827.00 2020 – 2021 $168,742.00 POLICY IMPLICATIONS The recommendations in this report do not represent a change in City policies. ENVIRONMENTAL REVIEW The recommendation in this report does not constitute a project requiring review under the California Environmental Quality Act (CEQA). Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS: Attachment A: Request for Proposal for External Auditing Services (PDF) Attachment B: Contract C16161769 Macias Gini & O'Connell (PDF) Department Head: Harriet Richardson, City Auditor Page 3 Office of the City Auditor Request for Proposal (RFP) Number 161769 for Professional Services External Auditing Services RFP submittal deadline: 3:00 p.m. Tuesday, December 15, 2015 Contract Administrator: Chris Anastole (Email address) chris.anastole@cityofpaloalto.org CITY OF PALO ALTO PURCHASING/CONTRACT ADMINISTRATION 250 HAMILTON AVENUE PALO ALTO, CA 94301 (650) 329-2271 Attachment A 1 REQUEST FOR PROPOSAL (RFP) NO. 161769 FOR PROFESSIONAL SERVICES TITLE: EXTERNAL AUDITING SERVICES 1. INTRODUCTION The City of Palo Alto is seeking proposals from qualified firms to provide professional services for the provision of external audit services for the audit of certain City financial statements and the preparation of certain tax returns The required services and performance conditions are described in the Scope of Work (or Services). 2. ATTACHMENTS The attachments below are included with this Request for Proposals (RFP) for your review and submittal (see asterisk): Attachment A – Proposer’s Information Form* Attachment B – Scope of Work/Services Attachment C – Sample Agreement for Professional Services Attachment D – Sample Table, Qualifications of Firm Relative to City’s Needs Attachment E – Cost Proposal Format Attachment F – Insurance Requirement The items identified with an asterisk (*) shall be filled out, signed by the appropriate representative of the company and returned with submittal. 3. INSTRUCTIONS TO PROPOSERS 3.1 Pre-proposal Conference (Not Applicable) 3.2 Examination of Proposal Documents The submission of a proposal shall be deemed a representation and certification by the Proposer that they: 3.2.1 Have carefully read and fully understand the information that was provided by the City to serve as the basis for submission of this proposal. 3.2.2 Have the capability to successfully undertake and complete the responsibilities and obligations of the proposal being submitted. 3.2.3 Represent that all information contained in the proposal is true and correct. Attachment A 2 3.2.4 Did not, in any way, collude, conspire to agree, directly or indirectly, with any person, firm, corporation or other Proposer in regard to the amount, terms or conditions of this proposal. 3.2.5 Acknowledge that the City has the right to make any inquiry it deems appropriate to substantiate or supplement information supplied by Proposer, and Proposer hereby grants the City permission to make these inquiries, and to provide any and all related documentation in a timely manner. No request for modification of the proposal shall be considered after its submission on grounds that Proposer was not fully informed to any fact or condition. 3.3 Addenda/Clarifications Should discrepancies or omissions be found in this RFP or should there be a need to clarify this RFP, questions or comments regarding this RFP must be put in writing and received by the City no later than 1:00 p.m., Wednesday, December 2, 2015. Correspondence shall be sent through the City’s e-procurement system. Responses from the City will be communicated in writing to all recipients of this RFP through the e- procurement system. Responses from the City will be communicated through the City’s e-procurement system to all recipients of this RFP via bid addendum. Inquiries received after the date and time stated may not be accepted. All addenda shall become a part of this RFP and shall be acknowledged on the Proposer’s submittal. The City shall not be responsible for nor be bound by any oral instructions, interpretations or explanations issued by the City or its representatives. 3.4 Submission of Proposals In order to submit bids/proposals to the City of Palo Alto you must comply with the following: All proposals shall be submitted through the City’s e-procurement system Proposals must be received no later than 3:00 p.m. on the day and date specified. The e-procurement system will not accept any proposals after the specified close time. 3.5 Withdrawal of Proposals A Proposer may withdraw its proposal at any time before the expiration of the time for submission of proposals as provided in the RFP by delivering a written request for withdrawal signed by, or on behalf of, the Proposer. Attachment A 3 3.6 Rights of the City of Palo Alto This RFP does not commit the City to enter into a contract, nor does it obligate the City to pay for any costs incurred in preparation and submission of proposals or in anticipation of a contract. The City reserves the right to: Make the selection based on its sole discretion; Reject any and all proposals; Issue subsequent Requests for Proposals; Postpone opening for its own convenience; Remedy technical errors in the Request for Proposals process; Approve or disapprove the use of particular subconsultants; Negotiate with any, all or none of the Proposers; Accept other than the lowest offer; Waive informalities and irregularities in the Proposals and/or Enter into an agreement with another Proposer in the event the originally selected Proposer defaults or fails to execute an agreement with the City. An agreement shall not be binding or valid with the City unless and until it is executed by authorized representatives of the City and of the Proposer. 4.PROPOSED TENTATIVE TIMELINE The tentative RFP timeline is as follows: RFP Issued November 23, 2015 Deadline for questions, clarifications 1:00 p.m., Wednesday, December 2, 2015 Proposals Due 3:00 p.m., Tuesday, December 15, 2015 Finalist Identified Week of December 21, 2015 Consultant Interviews (If applicable) Week of January 4, 2015 Consultant selection and contract preparation Week of January 11, 2015 Contract awarded 1st Quarter 2016 Work commences 1st Quarter 2016 5.INFORMATION TO BE SUBMITTED (to be submitted in this order only) These instructions outline the guidelines governing the format and content of the proposal and the approach to be used in its development and presentation. The intent of the RFP is to encourage responses that clearly communicate the Proposer’s understanding of the City’s requirements and its approach to successfully provide the products and/or services on time and within budget. Only that information which is essential to an understanding and evaluation of the proposal should be submitted. Items not specifically and explicitly related to the Attachment A 4 RFP and proposal, e.g. brochures, marketing material, etc. will not be considered in the evaluation. All proposals shall address the following items in the order listed below and shall be numbered 1 through 8 in the proposal document. 5.1 Chapter 1 – Proposal Summary This Chapter shall discuss the highlights, key features and distinguishing points of the Proposal. A separate sheet shall include a list of individuals and contacts for this Proposal and how to communicate with them. Limit this Chapter to a total of three (3) pages including the separate sheet. 5.2 Chapter 2 – Profile on the Proposing Firm(s) This Chapter shall include a brief description of the Prime Proposer’s firm size as well as the proposed local organization structure. Include a discussion of the Prime Proposer firm’s financial stability, capacity and resources. Include all other firms participating in the Proposal, including similar information about the firms. Additionally, this section shall include a listing of any lawsuit or litigation and the result of that action resulting form (a) any public project undertaken by the Proposer or by its subcontractors where litigation is still pending or has occurred within the last five years or (b) any type of project where claims or settlements were paid by the consultant or its insurers within the last five years. 5.3 Chapter 3 – Qualifications of the Firm This Chapter shall include a brief description of the Proposer’s and sub- Proposer’s qualifications and previous experience on similar or related projects. Provide in a table format (see Sample Table, Attachment D) descriptions of pertinent project experience with other public municipalities and private sector that includes a summary of the work performed, the total project cost, the percentage of work the firm was responsible for, the period over which the work was completed, and the name, title, and phone number of client’s to be contacted for references. Give a brief statement of the firm’s adherence to the schedule and budget for the project. This chapter shall include information regarding any relationships with firms and/or individuals who may submit proposals in response to the RFPs being developed. 5.4 Chapter 4 – Work Plan or Proposal Attachment A 5 This Chapter shall present a well-conceived service plan. Include a full description of major tasks and subtasks. This section of the proposal shall establish that the Proposer understands the City’s objectives and work requirements and Proposer’s ability to satisfy those objectives and requirements. Succinctly describe the proposed approach for addressing the required services and the firm’s ability to meet the City’s schedule, outlining the approach that would be undertaken in providing the requested services. 5.5 Chapter 5 – Proposed Innovations (Optional) The Proposer may also suggest technical or procedural innovations that have been used successfully on other engagements and which may provide the City with better service delivery. In this Chapter discuss any ideas, innovative approaches, or specific new concepts included in the Proposal that would provide benefit to the City. 5.6 Chapter 6 – Project Staffing This Chapter shall discuss how the Proposer would propose to staff this project. Key project team members shall be identified by name, title and specific responsibilities on the project. An organizational chart for the project team and resumes for key Proposer personnel shall be included. Key personnel will be an important factor considered by the review committee. Changes in key personnel may be cause for rejection of the proposal. 5.7 Chapter 7 – Proposal Exceptions This Chapter shall discuss any exceptions or requested changes that Proposer has to the City’s RFP conditions, requirements and sample contract. If there are no exceptions noted, it is assumed the Proposer will accept all conditions and requirements identified in the Attachment C – “Sample Agreement for Services.” Items not excepted will not be open to later negotiation. 5.8 Chapter 8 – Proposal Costs Sheet and Rates (Optional to provide in separate sealed envelope) The fee information is relevant to a determination of whether the fee is fair and reasonable in light of the services to be provided. Provision of this information assists the City in determining the firm’s understanding of the project, and provides staff with tools to negotiate the cost, provide in a table (See Table, Attachment E). Consultant shall provide the following information Direct labor rates for proposed staff; Attachment A 6 Overhead rate and breakdown of overhead elements; Subconsultant billing rates and mark-up percentage for ODC’s (other direct costs); and identify all reimbursable expenses. This Chapter shall include the proposed costs to provide the services desired. Include any other cost and price information, plus a not-to-exceed amount, that would be contained in a potential agreement with the City. The hourly rates may be used for pricing the cost of additional services outlined in the Scope of Work. PLEASE NOTE: The City of Palo Alto does not pay for services before it receives them. Therefore, do not propose contract terms that call for upfront payments or deposits. 6. CONTRACT TYPE AND METHOD OF PAYMENT It is anticipated that the agreement resulting from this solicitation, if awarded, will be a not-to-exceed budget per task form of contract. A Sample Agreement of Services is provided as Attachment C. The method of payment to the successful Proposer shall be on per task basis with a maximum “not to exceed” fee as set by the Proposer in the proposal or as negotiated between the Proposer and the City as being the maximum cost to perform all work. This figure shall include direct costs and overhead, such as, but limited to, transportation, communications, subsistence and materials and any subcontracted items of work. Progress payments will be based on a percentage of project completed. Proposers shall be prepared to accept the terms and conditions of the Agreement, including Insurance Requirements in Attachment F. If a Proposer desires to take exception to the Agreement, Proposer shall provide the following information in Chapter 7 of their submittal package. Please include the following: Proposer shall clearly identify each proposed change to the Agreement, including all relevant Attachments. Proposer shall furnish the reasons for, as well as specific recommendations, for alternative language. The above factors will be taken into account in evaluating proposals. Proposals that take substantial exceptions to the proposed Agreement may be determined by the City, at its sole discretion, to be unacceptable and no longer considered for award. Insurance Requirements The selected Proposer(s), at Proposer’s sole cost and expense and for the full term of the Agreement or any extension thereof, shall obtain and maintain, at a minimum, all of the insurance requirements outlined in Attachment F. Attachment A 7 All policies, endorsements, certificates and/or binders shall be subject to the approval of the Risk Manager of the City of Palo Alto as to form and content. These requirements are subject to amendment or waiver if so approved in writing by the Risk Manager. The selected Proposer agrees to provide the City with a copy of said policies, certificates and/or endorsement upon award of contract. 7. REVIEW AND SELECTION PROCESS City staff will evaluate the proposals provided based on the following criteria: 7.1 Overall quality and completeness of proposal, including a demonstrated understanding of the project’s objectives and scope. 7.2 Proposer’s experience in conducting financial audits in a local government environment comparable to the City of Palo Alto, including experience auditing utility funds, information systems, and retiree medical plans; conducting compliance audits; and assessing control risk. 7.3 Proposer’s specific experience, including the experience of staff to be assigned to the project, especially the proposed project manager, with engagements of similar scope and complexity. 7.4 Proposer’s past performance on similar projects in comparable jurisdictions with respect to quality of services performed, adherence to schedules, on-time delivery, and completion of tasks. 7.5 Planned hours and cost to the City and reasonableness of the fee requested to complete this work within the approved schedule. 7.6 Proposer’s financial stability, length of time in business, and size of company to demonstrate the availability of resources to complete the project. 7.7 Cost The selection committee will make a recommendation to the awarding authority. The acceptance of the proposal will be evidenced by written Notice of Award from the City’s Purchasing/Contract Administration Division to the successful Proposer. 8. ORAL INTERVIEWS Proposers may be required to participate in an oral interview. The oral interview will be a panel comprised of members of the selection committee. Attachment A 8 Proposers may only ask questions that are intended to clarify the questions that they are being asked to respond. Each Proposer’s time slot for oral interviews will be determined randomly. Proposers who are selected shall make every effort to attend. If representatives of the City experience difficulty on the part of any Proposer in scheduling a time for the oral interview, it may result in disqualification from further consideration. 9. PUBLIC NATURE OF MATERIALS Responses to this RFP become the exclusive property of the City of Palo Alto. At such time as the Administrative Services Department recommends to form to the City Manager or to the City Council, as applicable, all proposals received in response to this RFP becomes a matter of public record and shall be regarded as public records, with the exception of those elements in each proposal which are defined by the Proposer as business or trade secrets and plainly marked as “Confidential,” “Trade Secret,” or “Proprietary”. The City shall not in any way be liable or responsible for the disclosure of any such proposal or portions thereof, if they are not plainly marked as “Confidential,” “Trade Secret,” or “Proprietary” or if disclosure is required under the Public Records Act. Any proposal which contains language purporting to render all or significant portions of the proposal “Confidential,” “Trade Secret,” or “Proprietary” shall be regarded as non-responsive. Although the California Public Records Act recognizes that certain confidential trade secret information may be protected from disclosure, the City of Palo Alto may not accept or approve that the information that a Proposer submits is a trade secret. If a request is made for information marked “Confidential,” “Trade Secret,” or “Proprietary,” the City shall provide the Proposer who submitted the information with reasonable notice to allow the Proposer to seek protection from disclosure by a court of competent jurisdiction. 10. COLLUSION By submitting a proposal, each Proposer represents and warrants that its proposal is genuine and not a sham or collusive or made in the interest of or on behalf of any person not named therein; that the Proposer has not directly induced or solicited any other person to submit a sham proposal or any other person to refrain from submitting a proposal; and that the Proposer has not in any manner sought collusion to secure any improper advantage over any other person submitting a proposal. 11. DISQUALIFICATION Factors such as, but not limited to, any of the following may be considered just cause to disqualify a proposal without further consideration: Attachment A 9 11.1 Evidence of collusion, directly or indirectly, among Proposers in regard to the amount, terms or conditions of this proposal; 11.2 Any attempt to improperly influence any member of the evaluation team; 11.3 Existence of any lawsuit, unresolved contractual claim or dispute between Proposer and the City; 11.4 Evidence of incorrect information submitted as part of the proposal; 11.5 Evidence of Proposer’s inability to successfully complete the responsibilities and obligation of the proposal; and 11.6 Proposer’s default under any previous agreement with the City, which results in termination of the Agreement. 12. NON-CONFORMING PROPOSAL A proposal shall be prepared and submitted in accordance with the provisions of these RFP instructions and specifications. Any alteration, omission, addition, variance, or limitation of, from or to a proposal may be sufficient grounds for non- acceptance of the proposal, at the sole discretion of the City. 13. GRATUITIES No person shall offer, give or agree to give any City employee any gratuity, discount or offer of employment in connection with the award of contract by the city. No city employee shall solicit, demand, accept or agree to accept from any other person a gratuity, discount or offer of employment in connection with a city contract. 14. FIRMS OR PERSONS NOT ELIGIBLE TO SUBMIT A PROPOSAL In order to avoid any conflict of interest or perception of a conflict or interest, Proposer(s) selected to provide professional services under this RFP will be subject to the following requirements: 14.1 The Proposer(s) who works on the procurement will be precluded from submitting proposals or bids as a prime contractor or subcontractor in the ultimate procurement. 14.2 The Proposer(s) may not have interest in any potential Proposer for the ultimate procurement. ~ End of Section ~ Attachment A City of Palo Alto – RFP______ 1 Attachment A Proposer’s Information Form PROPOSER (please print): Name: __________________________________________________________ Address: __________________________________________________________ __________________________________________________________ Telephone: _______________________ Email: ______________________________ Contact person, title, email, and telephone: __________________________ ______________________________________________________________________ ______________________________________________________________________ Proposer, if selected, intends to carry on the business as (check one): Individual Joint Venture Partnership Corporation When incorporated? ______________ In what state? _______________ When authorized to do business in California? _______ Other (explain):____________________________________________________ ADDENDA To assure that all Proposers have received each addendum, check the appropriate box(es) below. Failure to acknowledge receipt of an addendum/addenda may be considered an irregularity in the Proposal: Addendum number(s) received: 1; 2; 3; 4; 5; 6; Or, _____ _____No Addendum/Addenda Were Received (check and initial). PROPOSER’S SIGNATURE No proposal shall be accepted which has not been signed in ink in the appropriate space below: By signing below, the submission of a proposal shall be deemed a representation and certification by the Proposer that they have investigated all aspects of the RFP, that they are aware of the applicable facts pertaining to the RFP process, its procedures and requirements, and they have read and understand the RFP. No request for modification of the proposal shall be considered after its submission on the grounds that the Proposer was not fully informed as to any fact or condition. Attachment A City of Palo Alto – RFP______ 2 Attachment A – Proposer Information continued… 1. If Proposer is INDIVIDUAL, sign here Date:______________ _____________________________________ Proposer’s Signature _____________________________________ Proposer’s typed name and title 2. If Proposer is PARTNERSHIP or JOINT VENTURE; at least two (2) Partners shall sign here: ________________________________________________ Partnership or Joint Venture Name (type or print) Date:______________ _____________________________________ Member of the Partnership or Joint Venture signature Date:______________ _____________________________________ Member of the Partnership or Joint Venture signature 3. If Proposer is a CORPORATION, the duly authorized officer shall sign as follows: The undersigned certify that he/she is respectively: _________________________________ and ___________________________ Signature Title Of the corporation named below; that they are designated to sign the Proposal Cost Form by resolution (attach a certified copy, with corporate seal, if applicable, notarized as to its authenticity or Secretary’s certificate of authorization) for and on behalf of the below named CORPORATION, and that they are authorized to execute same for and on behalf of said CORPORATION. ______________________________________ Corporation Name (type or print) By:______________________________________ Date: _________________ Title:__________________________________________ Attachment A ATTACHEMNT B – SCOPE OF WORK Project Description The City of Palo Alto requests proposals for the provision of external audit services for the audit of certain City financial statements and the preparation of certain tax returns as described below. GENERAL INFORMATION ABOUT THE CITY Background The City of Palo Alto is a chartered city with a population of approximately 66,000. An elected nine-member City Council governs the City. The City Council appoints the City Manager, who is responsible for overall management of the City. The City Manager oversees nine departments, with approximately 1,000 full-time equivalent employees. The City Council also appoints the City Attorney, City Auditor, and City Clerk, who report directly to the City Council. The City provides a full range of municipal services including police and fire protection, street maintenance, recreational activities, and cultural events. The City maintains municipal utilities, including electric, gas, water, refuse and landfill operations, storm drainage, wastewater collection, and wastewater treatment. In August 2014, the City assumed responsibility from Santa Clara County for Palo Alto Airport operations. Description of Systems, Records, and Procedures The City maintains its financial records through an integrated software system developed by SAP, Inc. This system operates on the City’s computer hardware and processes online inquiry and entry of financial transactions. SAP encompasses all general ledger accounting, including subsidiary ledgers, issuing payments, cost accounting, payroll, and budgetary accounting. Other SAP components used include human resources, procurement and inventory, work/service orders, and project management. The City also has separate software packages to handle issuing permits, cash receipts, class and facilities registration, public safety records management, computer-aided dispatch, library management, meter reading, geographic information (GIS), and utility billing information. These systems allow online inquiry and entry of transactions. Where required, the City uses interface programs to transfer transactions from these packages into SAP. The City’s Information Technology Department plans to select a consulting firm in fiscal year 2016 to assist with the request for proposal process for a new integrated government-oriented enterprise resource planning system and utilities billing system. Attachment A Additional information about the City, including the financial statements and budget, fund structure, federal and state financial assistance, pension plan, and joint ventures is included in the Comprehensive Annual Financial Report (CAFR) at http://www.cityofpaloalto.org/civicax/filebank/documents/44860. Office of the City Auditor The City’s Office of the City Auditor conducts performance audits and reviews of City departments, programs, and services, and revenue monitoring. By ordinance, the City Auditor selects and recommends to the City Council for approval an independent certified public accounting firm to conduct the city's annual external financial audit and coordinates the annual external financial audit with the approved firm. Reports from Prior Years Audit reports and management letters from prior years issued by the external auditors and the City Auditor are available at http://www.cityofpaloalto.org/gov/depts/aud/reports/default.asp. PROJECT SPECIFICATIONS Unless otherwise noted, all audit services cover the City's fiscal years ending on June 30, 2016, through June 30, 2020. The audit services are to be performed in accordance with generally accepted auditing standards; the standards for financial audits set forth in the United States Government Accountability Office's Government Auditing Standards (2011 revision); the provisions of the federal Single Audit Act of 1984, as amended in 1996; and the United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Basic Audit Services Required and Related Deliverables The auditor shall audit the City's financial statements and prepare the City's federal and state tax returns for the Palo Alto Public Improvement Corporation for the fiscal years ending on June 30, 2016, through June 30, 2020. In providing these services, the auditor shall:1 A. Prior to year-end, and preferably during March and April, the auditor shall perform interim work to test the internal controls of accounting processes. Deliverables: 1) No later than the last working day in May of each year, provide the City Auditor and the Director of Administrative Services with a draft management letter of the issues identified. 2) Within three weeks after receiving the City’s response to any issues in the draft management letter (the Accounting Division in the Administrative 1 Please note that all dates cited will be confirmed each year during the entrance conference. Attachment A Services Department will respond in a written memo), provide written comments to the response to the City Auditor and the Director of Administrative Services. B. Use the City’s worksheet and template to prepare the CAFR, including the entity- wide statements. The CAFR should be prepared in the format recommended by the Government Finance Officers Association, in accordance with City standards, and with website-compatibility. NOTE: The City of Palo Alto may transition during the contract period to preparing the CAFR itself. If it does, this item would no longer be a required service. Deliverables: 1) No later than the fifteenth (15th) day of November of each year, provide the electronic data used to prepare the CAFR to the Administrative Services Department. C. Audit the basic financial statements and supplementary entity-wide combining and individual fund financial statements included in the City's CAFR, including all funds under the jurisdiction and control of the City, and render a professional opinion thereon. Deliverables: 1) No later than the 15th day in November of each year, provide a complete electronic version of the Comprehensive Annual Financial Report, including the opinion letter and the Single Audit Report, in a website-compatible format, to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide fifteen (15) color and ten (10) black and white bound copies of the Comprehensive Annual Financial Report, including the opinion letter and the Single Audit Report, to the City Auditor. D. Audit the City's federal financial assistance program and issue reports thereon in accordance with the provisions of the Single Audit Act of 1984, including 1996 amendments to the Single Audit Act, and any other amendments which become effective during the term of this contract. Deliverables: 1) See deliverables under Item C above. E. Prepare a management letter to the City Council that includes observations and recommendations identified during the audit. This may include: issues regarding internal control structure (e.g., information systems, functions, and procedures) items concerning compliance with laws, rules, and regulations opportunities for economies and efficiencies inherent in the accounting functions or reporting activities of the City other matters of interest to the City Council and management Attachment A Deliverables: 1) One week after completing field work each year, provide a draft management letter for completed field work to the City Auditor and the Director of Administrative Services 2) No later than the fifteenth (15th) day of November of each year, provide the final comprehensive management letter to the City Auditor and the Director of Administrative Services. F. Audit the financial statements of the Regional Water Quality Control (RWQC) Plant and issue a report thereon in accordance with the requirements in the "Basic Agreement between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction, and Maintenance of a Joint Sewer System," and all addenda thereto. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft RWQC report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the final RWQC report to the City Auditor and the Director of Administrative Services. G. Audit and issue a report on the financial statements of the Palo Alto Public Improvement Corporation, which the City has created to finance construction of specific facilities and prepare their applicable federal and state informational and tax returns. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft Public Improvement Corporation report to the City Auditor and the Director of Administrative Services. 2) No later than the last working day of November of each year, provide an electronic copy of the final Public Improvement Corporation report to the City Auditor and the Director of Administrative Services. 3) No later than the fifteenth (15th) day of February of each year, provide an electronic copy of the federal and state tax returns to the City Auditor and the Director of Administrative Services. H. Audit the City's state financial assistance program (Transportation Development Act) and issue reports thereon in accordance with applicable state requirements. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft financial assistance program report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the final financial assistance program report to the City Auditor and the Director of Administrative Services. Attachment A I. Perform agreed-upon procedures on the Gann Limit calculation and prepare a letter certifying compliance, as required. Deliverables: 1) No later than the last working day in May of each year, provide an electronic copy of the Gann Limit letter to the City Auditor and the Director of Administrative Services. J. Audit the statements of, and issue a report thereon, cable television franchise receipts and disbursements, for the current period, relating to the Joint Operating Agreement signed on October 13, 1988, by and among the City of Palo Alto, Town of Atherton, City of Menlo Park, City of East Palo Alto, County of San Mateo, and County of Santa Clara. Deliverables: 1) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the cable report to the City Auditor and the Director of Administrative Services. K. Prepare the Annual Financial Transactions Report and Annual Street Report in accordance with instructions from the California State Controller’s Office. NOTE: The City of Palo Alto may transition during the contract period to preparing these reports itself. If it does, this item would no longer be a required service. Deliverables: 1) No later than the second Friday in September of each year, provide an electronic copy of the Annual Street Report to the Director of Administrative Services for signature and mailing, with a courtesy copy to the City Auditor. 2) No later than the fifteenth (15th) day of October of each year, provide an electronic copy of the Annual Financial Transactions Report to the Director of Administrative Services for signature and mailing, with a courtesy copy to the City Auditor. L. Audit and issue a report on the financial statements of the Palo Alto Library Bond Fund, and perform agreed-upon procedures on the Library Bond Fund and issue a report of compliance as required. NOTE: We are anticipating that activity in this fund will cease at some point during the contract period. If it does, this item would no longer be a required service. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the library bond report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the library bond report of compliance to the City Auditor and the Director of Administrative Services. Attachment A M. The auditor is required to attend the following meetings, at no additional cost, during each audit engagement period: Entrance Conference – Prior to conducting interim work, the auditor shall meet with the City Auditor and the Director of Administrative Services or their designees, to establish timelines for completing required tasks. The auditor shall meet regularly with the City Auditor and the Assistant Director of Administrative Services or their designees to report on the progress of the auditor's examinations and on the preliminary audit findings and recommendations. The auditor shall meet with the City Auditor or designee independently to review internal control issues identified during the audit. This will include reportable conditions, if applicable, reflected in the draft management letter. The auditor shall hold an exit conference with the City Auditor, Director of Administrative Services, and appropriate staff upon completion of the audit. The auditor will present the financial statements and draft management letter at this meeting. The auditor shall attend a Council Finance Committee meeting to present and discuss the audit results and the management letter. N. Provide training for City staff, at no additional cost, regarding important industry developments and technical matters: Proactive guidance on complying with any GASB pronouncements and/or other requirements that may significantly impact the City’s financial reporting over the next several years. Provide formal training regarding industry developments and new accounting regulations. O. Assist the City in the transition to comply with any new Governmental Accounting Standards Board (GASB) pronouncements. To the extent possible, this assistance should be provided during the interim work, and may include reviewing reports, transactions, and Management Discussion and Analysis. P. The auditor will provide to the City Auditor and Director of Administrative Services or designee, at no additional cost, any publications produced by the auditor, the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the GASB, the Government Finance Officers Association (GFOA), and the United States Government Accountability Office (GAO). Examples of these publications include: AICPA Professional Standards AICPA State and Local Governments – Audit and Accounting Guide FASB Accounting Standards GASB Codifications of Governmental Accounting and Financial Reporting Standards Attachment A GFOA publications related to governmental accounting, auditing and financial reporting GAO’s Government Auditing Standards ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION Administrative Services Department (ASD) and Clerical Assistance ASD staff and responsible management will be available during the audit to assist the firm by providing information, documentation and explanations. ASD staff will prepare statements and schedules for the auditor as requested. Report editing and compilation shall be the responsibility of the auditor. ASD staff will print copies, as needed, of the electronic reports provided by the auditor. Work Area, Photocopying, and Parking The City will provide the auditor with reasonable workspace and access to a copying machine/scanner and parking for the auditor’s staff. WORKING PAPER RETENTION AND ACCESS TO WORKING PAPERS The auditor shall maintain its audit workpapers and reports, at the auditor’s expense, for at least seven years after final payment under the agreement is made, unless the firm is notified in writing by the City of Palo Alto of the need to extend the retention period. Upon request and after reasonable notice, the auditor may be required to make workpapers available to the City of Palo Alto or other organizations designated by the City of Palo Alto, during the auditor’s normal business hours. There will be no charge for any such reviews or inspections. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review workpapers relating to matters of continuing accounting significance. STATEMENTS OF QUALIFICATION Specific Items to be Addressed 1. Describe the firm's past experience in conducting local government audits. Specifically, include experience in auditing enterprise funds including electrical, gas and water utilities. Highlight experience with audits, including compliance audits, in local government comparable to the City of Palo Alto. Provide the contact information of client officials responsible for five of the audits listed. Attachment A 2. Discuss the firm's process or approach in conducting the audit, including a conceptual timeline for completing the audit. 3. Identify and describe the client base of the firm's office that would be responsible for the City of Palo Alto audit. 4. Provide an overview and detailed resumes of staff the firm has tentatively identified as the reviewing partner, the partner in charge, the engagement manager, and the seniors on the City of Palo Alto audit. Highlight their experience, skills, continuing professional education, and training in governmental accounting and auditing. 5. Provide a detailed schedule by audit segment as outlined in Basic Audit Services Required and Related Deliverables. Each schedule should show (1) the hourly rate by partner, manager, senior, staff, and any other level considered necessary, (2) the number of hours to be worked per level, (3) the dollar amount per level, and (4) a grand total. A summary page should be attached to the detailed schedules showing the total fee, which shall be all-inclusive, including all out-of-pocket expenses. It is optional for the firm to provide alternate pricing based on the staffing of the audit by different audit teams. 6. Describe the firm's approach to assessing control risk in a local government. 7. Describe the firm's approach to auditing information systems. 8. Describe the firm’s experience auditing retiree medical plans for a local government. 9. Describe the firm's policy on staff and management rotation or continuity, both during and between audits. 10. List and briefly describe books, periodicals, newsletters, training courses, computer software, or other forms of assistance that could be made available, along with any costs for such items, other than those required under Item N in Basic Audit Services Required and Related Deliverables. 11. Submit a copy of the report on the firm's most recent external quality control review, with a statement on the number of government engagements that were included in the review. 12. Provide information on the results of any federal or state desk reviews or field reviews of the firm’s audits during the past three years. 13. Provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three years with state regulatory bodies or professional organizations. Attachment A 14. Describe the firm's approach to containing the costs of financial statement audits of local governments. 15. Describe the firm's approach for implementing new GASB pronouncements. 16. Provide affirmation that the firm meets the requirements of the Government Auditing Standards, (2011 Revision), published by the United States Government Accountability Office, including the standard of independence. Specifically, in all matters relating to the audit work, the firm should be free both in fact and appearance from personal, external, and organizational impairments to independence. 17. Provide verification that the firm is properly licensed for public practice as a certified public accountant in the State of California and that the firm and any employees to be assigned to this audit do not have a record of substandard work or unsatisfactory performance pending with the State Board of Accountancy. TIME REQUIREMENTS Audit schedule (exact dates to be confirmed at the entrance conference each year): Interim Work Completed and May 31 – for subsequent years, it is anticipated that draft management letter interim work be completed in March and April Field Work Completed October 15 Initial Draft Report November 1 Final Report November 15 Presentation of Audit Results to Third Tuesday in November Finance Committee Attachment A Professional Services Rev. Feb. 2014 1 SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE CITY OF PALO ALTO CONTRACT NO. XXXXXXXXX AGREEMENT BETWEEN THE CITY OF PALO ALTO AND FOR PROFESSIONAL SERVICES This Agreement is entered into on this day of , , (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and , a , located at ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to (“Project”) and desires to engage a consultant to in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. Optional On-Call Provision (This provision only applies if checked and only applies to on- call agreements.) Services will be authorized by the City, as needed, with a Task Order assigned and approved by the City’s Project Manager. Each Task Order shall be in substantially the same form as Exhibit A-1. Each Task Order shall designate a City Project Manager and shall contain a specific scope of work, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement shall not exceed the amount of Compensation set forth in Section 4 of this Agreement. CONSULTANT shall only be compensated for work performed under an authorized Task Order and the City may elect, but is not required, to authorize work up to the maximum compensation amount set forth in Section 4. Attachment A Professional Services Rev. Feb. 2014 2 SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through unless terminated earlier pursuant to Section 19 of this Agreement. OR The term of this Agreement shall be from the date of its full execution through completion of the services in accordance with the Schedule of Performance attached as Exhibit “B” unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Dollars ($ ). In the event Additional Services are authorized, the total compensation for Services, Additional Services and reimbursable expenses shall not exceed Dollars ($ ). The applicable rates and schedule of payment are set out in Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described in Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C- 1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Attachment A Professional Services Rev. Feb. 2014 3 Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of the CITY’s stated construction budget, CONSULTANT shall make recommendations to the CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work Attachment A Professional Services Rev. Feb. 2014 4 to be performed under this Agreement without the prior written authorization of the city manager or designee. Option B: Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are: CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign as the to have supervisory responsibility for the performance, progress, and execution of the Services and as the project to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. The City’s project manager is , Department, Division, Palo Alto, CA 94303, Telephone: . The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. Attachment A Professional Services Rev. Feb. 2014 5 SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals pursuant to Civil Code Section 2782.8: architects; landscape architects; registered professional engineers and licensed professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. [Option B applies to any consultant who does not qualify as a design professional as defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. Attachment A Professional Services Rev. Feb. 2014 6 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or Attachment A Professional Services Rev. Feb. 2014 7 given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT 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. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT 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. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, Attachment A Professional Services Rev. Feb. 2014 8 CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT 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. CONSULTANT 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. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the 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, Consultant shall comply with the following zero waste requirements: All printed materials provided by Consultant 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 the 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. Goods purchased by Consultant on behalf of the City shall be purchased in accordance with the 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 Office. Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the City, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. 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 funds are not appropriated for the following fiscal year, 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 Agreement 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 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. Attachment A Professional Services Rev. Feb. 2014 9 25.2. 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 in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, City shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9 All unchecked boxes do not apply to this agreement. / / / / / / / / / / Attachment A Professional Services Rev. Feb. 2014 10 25.10 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. 25.11 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO _______ SAMPLE________________ City Manager (Required on contracts over $85,000) Purchasing Manager (Required on contracts over $25,000) Contracts Administrator (Required on contracts under $25,000) APPROVED AS TO FORM: _______ SAMPLE ________________ Senior Asst. City Attorney (Required on Contracts over $25,000) CONSULTANT By:____SAMPLE___________ Name:____________________ Title:_____________________ Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “A-1” ON CALL TASK ORDER (Optional) EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS Attachment A City of Palo Alto Attachment D SAMPLE TABLE FORMAT QUALIFICATIONS OF FIRM RELATIVE TO CITY’S NEEDS Project Name Client Description of work performed Total Project Cost Percentage of work firm as responsible for Period work was completed Client contact information* Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: *Include name, title and phone number. Attachment A Attachment E SAMPLE COST PROPOSAL FORMAT – RFP (The City is looking for a submittal in this format – content should match cost for scope of services required) Scope Labor Categories (e.g., Consultant, Sr. Consultant, etc.) Est. Hours Hourly Rate Extended Rate Task 1 $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 1 $ $ Task 2 $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 2 $ $ Task 3 $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 3 $ $ TOTAL NOT TO EXCEED (TASKS 1 – 3) $ $ Attachment A Attachment “F” INSURANCE REQUIREMENTS Rev. 11/07 CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Attachment A Attachment “F” INSURANCE REQUIREMENTS Rev. 11/07 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. Attachment A Professional Services Rev. March 31, 2015 CITY OF PALO ALTO CONTRACT NO. C16161769 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND MACIAS GINI & O’CONNELL LLP FOR PROFESSIONAL SERVICES This Agreement is entered into on this 11th day of April 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and MACIAS GINI & O’CONNELL LLP, a Limited Liability Partnership, located at 2121 N. California Blvd., Suite 750, Walnut Creek, California, 94596 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to use an external auditing service (“Project”) and desires to engage a consultant to provide auditing services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY, in reliance on these representations, desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A,” attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through January 21, 2021, unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B,” attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A,” including both payment for professional services and reimbursable expenses, shall not exceed per year as follows: 2016 – 2017 $149,925.00 2017 – 2018 $154,423.00 2018 – 2019 $159,055.00 2019 – 2020 $163,827.00 2020 – 2021 $168,742.00 Total compensation for services and reimbursable expenses shall not exceed Seven Hundred Ninety Five Thousand Nine Hundred Seventy Two Dollars ($795,972.00). In the event Additional Services are authorized, the total compensation for Services, Additional Services, and reimbursable expenses shall not exceed Eight Hundred Seventy Five Thousand Five Hundred Sixty Nine Dollars ($875,569.00). The applicable rates and schedule of payment are set out at Exhibit “C-1,” entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C.” CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A.” SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. (NOT APPLICABLE) SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city auditor. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city auditor will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city auditor or designee. However, if CITY authorizes use of subconsultants, CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign David Bullock as the Project Manager to have supervisory responsibility for the performance, progress, and execution of the Services and to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project manager, project coordinator, or any other key personnel for any reason, the appointment of a substitute project manager and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 CITY’s project manager is Harriet Richardson, City Auditor, Office of the City Auditor, 250 Hamilton Avenue, Palo Alto, CA 94301, Telephone: (650) 329-2667 The CITY’s project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. All programs, working papers, files, and other materials of the CONSULTANT made pursuant to this Agreement shall remain the property of the CONSULTANT. The City will have access to this material during normal business hours. The CONSULTANT shall not disclose to any third party the contents of the programs, working papers, files, or any other material without prior written approval of the CITY. Reports issued by the CONSULTANT shall become the property of the City. SECTION 15. AUDITS AND RECORDS RETENTION. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for seven (7) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least seven (7) years after the expiration or earlier termination of this Agreement, whichever is later, unless CITY notifies CONSULTANT in writing of the need to extend the retention period. Upon request and after reasonable notice, CONSULTANT may be required to make workpapers available to CITY or other organizations designated by CITY during CONSULTANT’s normal business hours. In addition, CONSULTANT shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review workpapers relating to matters of continuing audit and accounting significance. There will be no charge for any such reviews or inspections. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D." CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher that are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrent- ly with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Chief Procurement Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Auditor may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the CITY immediately any and all copies of data given to the CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Auditor acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Auditor City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT 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. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT 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. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT 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. CONSULTANT 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. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference, and may be amended from time to time. CONSULTANT 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, CONSULTANT shall comply with the following zero waste requirements: All printed materials provided by CCONSULTANT 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. Goods purchased by CONSULTANT 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 Division’s office. Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NONAPPROPRIATION 24.1. 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 funds are not appropriated for the following fiscal year, 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 Agreement 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 25. MISCELLANEOUS PROVISIONS. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 25.1. This Agreement will be governed by the laws of the State of California. 25.2. 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 in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8. If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9. All unchecked boxes do not apply to this agreement (Not applicable). 25.10. 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. 25.11. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO APPROVED AS TO FORM: MACIAS GINI & O’CONNELL LLP Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Partner Professional Services Rev. March 31, 2015 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT to provide Auditing Services per the following: PROJECT SPECIFICATIONS Unless otherwise noted, all audit services cover the City's fiscal years ending on June 30, 2016, through June 30, 2020. The audit services are to be performed in accordance with generally accepted auditing standards; the standards for financial audits set forth in the United States Government Accountability Office's Government Auditing Standards (2011 revision, or subsequent revisions); the provisions of the federal Single Audit Act of 1984, as amended in 1996; and the United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Generally accepted accounting principles provide for certain required supplementary information, such as Management's Discussion and Analysis to accompany the City's basic financial statements. CONSULTANT shall apply certain limited procedures consisting principally of inquiries of management regarding the methods of measurement and presentation, which the City shall affirm to the CONSULTANT in the City's Management Letter. Please note that all dates cited will be confirmed each year during the entrance conference. Basic Audit Services Required CONSULTANT shall audit the City's financial statements and prepare the City's federal and state tax returns for the Palo Alto Public Improvement Corporation for the fiscal years ending on June 30, 2016, through June 30, 2020. In providing these services, CONSULTANT shall: A. Prior to year-end, and preferably during March and April, the CONSULTANT shall perform interim work to test the internal controls of accounting processes. Deliverables: 1) No later than the last working day in May of each year, provide the City Auditor and the Director of Administrative Services with a draft management letter of the issues identified. 2) Within three weeks after receiving the City’s response to any issues in the draft management letter (the Accounting Division in the Administrative Services Department will respond in a written memo), provide written comments to the response to the City Auditor and the Director of Administrative Services. B. Use the City’s worksheet and template to prepare the Comprehensive Annual Financial Report (CAFR), including the entity wide statements. CAFR should be prepared in the format recommended by the Government Finance Officers Association, in accordance with City standards, and with website-compatibility. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 NOTE: The City of Palo Alto may transition during the contract period to preparing the CAFR itself. If it does, this item would no longer be a required service, and the contract price would be adjusted accordingly. Deliverables: 1) No later than the fifteenth (15th) day of November of each year, provide the electronic data used to prepare the CAFR to the Administrative Services Department. C. Audit the basic financial statements and supplementary entity-wide combining and individual fund financial statements included in the City's CAFR, including all funds under the jurisdiction and control of the City, and render a professional opinion thereon. Deliverables: 1) No later than the 15th day in November of each year, provide a complete electronic version of the Comprehensive Annual Financial Report, including the opinion letter and the Single Audit Report, in a website-compatible format, to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide fifteen (15) color and ten (10) black and white bound copies of the Comprehensive Annual Financial Report, including the opinion letter and the Single Audit Report, to the City Auditor. D. Audit the City's federal financial assistance program and issue reports thereon in accordance with the provisions of the Single Audit Act of 1984, including the 1996 amendments to the Single Audit Act, and any other amendments which become effective during the term of this contract. Deliverables: 1) See deliverables under Item C above. E. Prepare a management letter to the City Council that includes observations and recommendations identified during the audit. This may include: issues regarding internal control structure (e.g., information systems, functions, and procedures) items concerning compliance with laws, rules, and regulations opportunities for economies and efficiencies inherent in the accounting functions or reporting activities of the City other matters of interest to the City Council and management Deliverables: 1) One week after completing field work each year, provide a draft management letter for completed field work to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide the final comprehensive management letter to the City Auditor and the Director of Administrative Services. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 F. Audit the financial statements of the Regional Water Quality Control (RWQC) Plant and issue a report thereon in accordance with the requirements in the "Basic Agreement between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction, and Maintenance of a Joint Sewer System," and all addenda thereto. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft RWQC report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the final RWQC report to the City Auditor and the Director of Administrative Services. G. Audit and issue a report on the financial statements of the Palo Alto Public Improvement Corporation, which the City has created to finance construction of specific facilities and prepare their applicable federal and state informational and tax returns. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft Public Improvement Corporation report to the City Auditor and the Director of Administrative Services. 2) No later than the last working day of November of each year, provide an electronic copy of the final Public Improvement Corporation report to the City Auditor and the Director of Administrative Services. 3) No later than the fifteenth (15th) day of February of each year, provide an electronic copy of the federal and state tax returns to the City Auditor and the Director of Administrative Services. H. Audit the City's state financial assistance program (Transportation Development Act) and issue reports thereon in accordance with applicable state requirements. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the draft financial assistance program report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the final financial assistance program report to the City Auditor and the Director of Administrative Services. I. Perform agreed-upon procedures on the Gann Limit calculation and prepare a letter certifying compliance, as required. Deliverables: 1) No later than the last working day in May of each year, provide an electronic copy of the Gann Limit letter to the City Auditor and the Director of Administrative Services. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 J. Audit the statements of, and issue a report thereon, cable television franchise receipts and disbursements, for the current period, relating to the Joint Operating Agreement signed on October 13, 1988, by and among the City of Palo Alto, Town of Atherton, City of Menlo Park, City of East Palo Alto, County of San Mateo, and County of Santa Clara. Deliverables: 1) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the cable report to the City Auditor and the Director of Administrative Services. K. Prepare the Annual Financial Transactions Report and Annual Street Report in accordance with instructions from the California State Controller’s Office. NOTE: The City of Palo Alto may transition during the contract period to preparing these reports itself. If it does, this item would no longer be a required service, and the contract price would be adjusted accordingly. Deliverables: 1) No later than the second Friday in September of each year, provide an electronic copy of the Annual Street Report to the Director of Administrative Services for signature and mailing, with a courtesy copy to the City Auditor. 2) No later than the fifteenth (15th) day of October of each year, provide an electronic copy of the Annual Financial Transactions Report to the Director of Administrative Services for signature and mailing, with a courtesy copy to the City Auditor. L. Audit and issue a report on the financial statements of the Palo Alto Library Bond Fund, and perform agreed-upon procedures on the Library Bond Fund and issue a report of compliance as required. NOTE: We are anticipating that activity in this fund will cease at some point during the contract period. If it does, this item would no longer be a required service, and the contract price will be adjusted accordingly. Deliverables: 1) No later than the last working day in October of each year, provide an electronic copy of the library bond report to the City Auditor and the Director of Administrative Services. 2) No later than the fifteenth (15th) day of November of each year, provide an electronic copy of the library bond report of compliance to the City Auditor and the Director of Administrative Services. M. CONSULTANT is required to attend the following meetings, at no additional cost, during each audit engagement period: Entrance Conference – Prior to conducting interim work, CONSULTANT shall meet with the City Auditor and the Director of Administrative Services or their designees, to establish timelines for completing required tasks. CONSULTANT shall meet regularly with the City Auditor and the Assistant Director of Administrative Services or their designees to report on the progress of CONSULTANT’S examinations and on the preliminary audit findings and recommendations. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 CONSULTANT shall meet with the City Auditor or designee independently to review internal control issues identified during the audit. This will include reportable conditions, if applicable, reflected in the draft management letter. CONSULTANT shall hold an exit conference with the City Auditor, Director of Administrative Services, and appropriate staff upon completion of the audit. CONSULTANT will present the financial statements and draft management letter at this meeting. CONSULTANT shall attend a Council Finance Committee meeting to present and discuss the audit results and the management letter. N. Provide training for City staff, at no additional cost, regarding important industry developments and technical matters: Proactive guidance on complying with any GASB pronouncements and/or other requirements that may significantly impact the City’s financial reporting over the next several years. Provide formal training regarding industry developments and new accounting regulations. O. Assist the City in the transition to comply with any new Governmental Accounting Standards Board (GASB) pronouncements. To the extent possible, this assistance should be provided during the interim work, and may include reviewing reports, transactions, and Management Discussion and Analysis. P. CONSULTANT will provide to the City Auditor and Director of Administrative Services or designee, at no additional cost, any publications produced by CONSULTANT, the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the GASB, the Government Finance Officers Association (GFOA), and the United States Government Accountability Office (GAO). Examples of these publications include: AICPA Professional Standards AICPA State and Local Governments – Audit and Accounting Guide FASB Accounting Standards GASB Codifications of Governmental Accounting and Financial Reporting Standards GFOA publications related to governmental accounting, auditing and financial reporting GAO’s Government Auditing Standards ASSISTANCE TO BE PROVIDED TO CONSULTANT AND REPORT PREPARATION Administrative Services Department (ASD) and Clerical Assistance ASD staff and responsible management will be available during the audit to assist the firm by providing information, documentation and explanations. ASD staff will prepare statements and schedules for CONSULTANT as requested. Report editing and compilation shall be the responsibility of CONSULTANT. ASD staff will print copies, as needed, of the electronic reports provided by CONSULTANT. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 Work Area, Photocopying, and Parking The City will provide CONSULTANT with reasonable workspace and access to a copying machine/scanner and parking for CONSULTANT’S staff. TIME REQUIREMENTS Audit schedule (exact dates to be confirmed at the entrance conference each year): Interim Work Completed: May 31 – for subsequent years, it is anticipated that draft management letter interim work be completed in March and April Field Work Completed: October 15 Initial Draft Report: November 1 Final Report: November 15 Presentation of Audit Results: Third Tuesday in November to Finance Committee DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone by the dates specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. Milestone Date DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement based on the hourly rate schedule attached as Exhibit C-1. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Services”) and reimbursable expenses shall not exceed $795,972.00. CONSULTANT agrees to complete all Services, including reimbursable expenses, within this amount. In the event CITY authorizes any Additional Services, the maximum compensation shall not exceed $875,569.00. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance, and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: None However, if CITY authorizes reimbursable expenses, all requests for payment of expenses shall be accompanied by appropriate backup information. Any expense shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 EXHIBIT “C-1” (HOURLY RATE SCHEDULE) Task Description of Deliverables Labor Category Hourly Rate Estimated Hours Extended Cost by Labor Category Total Cost per Task Partners 300$ 60 18,000$ Senior Manager 210$ 90 18,900$ IT Consultants 240$ 15 3,600$ Senior Auditors 140$ 180 25,200$ Staff Auditors 110$ 290 31,900$ Support staff 75$ 15 1,125$ Partners 300$ 5 1,500$ Senior Manager 210$ 5 1,050$ Senior Auditors 140$ 4 560$ Support staff 75$ 1 75$ Partners 300$ 8 2,400$ Senior Manager 210$ 11 2,310$ Senior Auditors 140$ 17 2,380$ Staff Auditors 110$ 28 3,080$ Support staff 75$ 1 75$ Partners 300$ 4 1,200$ Senior Manager 210$ 5 1,050$ Senior Auditors 140$ 11 1,540$ Staff Auditors 110$ 19 2,090$ Support staff 75$ 1 75$ Partners 300$ 5 1,500$ Senior Manager 210$ 6 1,260$ Senior Auditors 140$ 22 3,080$ Staff Auditors 110$ 30 3,300$ Support staff 75$ 2 150$ Partners 300$ 1 300$ Senior Manager 210$ 2 420$ Senior Auditors 140$ 4 560$ Staff Auditors 110$ 7 770$ Support staff 75$ 1 75$ Partners 300$ 1 300$ Senior Auditors 140$ 2 280$ Staff Auditors 110$ 6 660$ Support staff 75$ 1 75$ Partners 300$ 3 900$ Senior Manager 210$ 3 630$ Senior Auditors 140$ 8 1,120$ Staff Auditors 110$ 15 1,650$ Support staff 75$ 1 75$ Senior Manager 210$ 8 1,680$ Senior Auditors 140$ 16 2,240$ Staff Auditors 110$ 55 6,050$ Support staff 75$ 1 75$ Partners 300$ 3 900$ Senior Manager 210$ 5 1,050$ Senior Auditors 140$ 11 1,540$ Staff Auditors 110$ 10 1,100$ Support staff 75$ 1 75$ 9,290$ 2,125$ 1,315$ 4,375$ 10,045$ I Preparation of the Annual Financial Transactions Report and the Annual Street Report J Palo Alto Library Bond Fund financial statements and agreed-upon procedures on compliance 4,665$ F Transportation Development Act Program financial statements G Gann Appropriations Limit agreed-upon procedures H Cable Television Franchise Statement of Franchise Revenues and Expenditures A City's Comprehesive Annual Financial Report, including basic financial statements, required supplementary information, and other supplementary information. 98,725$ 5,955$ TOTAL (Initial Year)149,925$ B Management letter and required communications to the City Council that includes observations and recommendations identified during the audit. 3,185$ C Regional Water Quality Control Plant financial statements 10,245$ D Palo Alto Public Improvement Corporation financial statements, including the federal and state tax returns E Single Audit (one major program) DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 Fees for subsequent years shall be adjusted to reflect increases in the consumer price index, up to a maximum of 3% per year. After the initial year, the maximum annual fee amount, if a 3% increase is granted, shall be: 2017 – 2018 $154,423.00 2018 – 2019 $159,055.00 2019 – 2020 $163,827.00 2020 – 2021 $168,742.00 DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 EXHIBIT “D” INSURANCE REQUIREMENTS CONSULTANT TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL, FOR THE TERM OF THE CONTRACT, OBTAIN AND MAINTAIN INSURANCE IN THE COVERAGE AMOUNTS SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONSULTANT AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONSULTANT MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD Professional Services Rev. March 31, 2015 C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE EMAILED TO: InsuranceCerts@CityofPaloAlto.org DocuSign Envelope ID: 221DF66F-53DC-44C5-A1A2-569858AC0AFD CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR April 4, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of December 31, 2015 The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report as of December 31, 2015. At its meeting on February 9, 2015, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS: Attachment A: Auditor's Office Quarterly Report as of December 31, 2015 (PDF) Attachment B: Policy and Services Committee Meeting Minutes Excerpt (February 9, 2016) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR February 9, 2016 The Honorable City Council Attention: Policy & Services Committee Palo Alto, California Auditor's Office Quarterly Report as of December 31, 2015 RECOMMENDATION The City Auditor’s Office recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Auditor’s Office Quarterly Report as of December 31, 2015. SUMMARY OF RESULTS In accordance with the Municipal Code, the City Auditor prepares an annual work plan and issues quarterly reports to the City Council describing the status and progress towards completion of the work plan. This report provides the City Council with an update on the second quarter for FY 2016. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS: Attachment A: Auditor's Office Quarterly Report as of December 31, 2015 (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 2 Attachment A O “P Office Promoting ho account Quart e of th onest, efficien table and tra terly R he City nt, effective, nsparent city Repor y Aud economical, y government rt as o itor and fully t." of Deccembeer 31,2015 Attachment A 2 Fiscal Year (FY) 2016 Second Quarter Update (October – December 2015) Overview The audit function is essential to the City of Palo Alto’s public accountability. The mission of the Office of the City Auditor, as mandated by the City Charter and Municipal Code, is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. We conduct performance audits and reviews to provide the City Council and City management with information and evaluations regarding how effectively and efficiently resources are used; the adequacy of internal control systems; and compliance with policies, procedures, and regulatory requirements. Taking appropriate action on our audit recommendations helps the City reduce risks and protect its good reputation. Highlights of Activities During the Quarter We published and presented the Audit of Parking Funds, which presented two findings and eight recommendations related to the City’s parking in‐lieu and parking permit fees. We presented the City’s financial statements and reports, prepared by Macias Gini & O’Connell LLP, the City’s external financial auditor, to the Finance Committee and for recommendation to accept. We initiated the Request for Proposal process and evaluated proposals received for the City’s external financial auditor for fiscal years 2016 through 2020. Senior Performance Auditor Mimi Nguyen was asked to give a presentation at the Association of Local Government Auditor’s annual conference in May 2016 on the Office of the City Auditor’s use of SharePoint as a low‐cost alternative to traditional, commercial audit management software. City Auditor Harriet Richardson was invited by the Comptroller General of the United States to sit on the Government Auditing Standards Advisory Council. Below is a summary of our audit work for the second quarter of FY 2016 (as of December 31, 2015): Title Objective(s) Start Date End Date Status Results/Comments Franchise Fee Audit Determine if 1) the City accurately accounted for and oversaw the Media Center’s use of public, education, and government (PEG) fees, 2) the City established and defined roles and responsibilities to administer its cable communications program and state franchises awarded to Comcast and AT&T, and 3) Comcast and AT&T collected and promptly remitted the appropriate amount of franchise and PEG fees. 02/14 03/16 In Process We have completed planning and field work and have drafted the report. A consultant conducted field work for the third objective and provided us with a draft of the results, which we have incorporated into the draft audit report. However, we are still clarifying issues that the consultant raised and will continue working with the City Attorney to resolve those issues. The City Attorney will review the draft report before we present it to the departments for review and comments. We expect to present the report to the Policy and Services Committee in April. Attachment A 3 Title Objective(s) Start Date End Date Status Results/Comments Parking Funds Audit Determine if the City’s parking funds are properly calculated, collected, accounted for, and used in compliance with applicable laws, regulations, policies, and governing documents. The audit focuses on the Parking in‐Lieu Fund and the University and California Avenues and Residential Parking Permit Funds. 05/14 12/15 Completed We issued and presented the report, which included two findings and eight recommendations, to the Policy and Services Committee in December. Fee Schedules Audit Evaluate City processes for establishing fees to determine if the fees cover the cost of services provided when expected. The specific fees to be reviewed will be narrowed down during the planning phase of the audit. 06/15 06/16 In Process The audit is in the planning phase. Estimated date of draft report is June 2016, and estimated date of final report is August 2016. Disability Rates and Workers’ Compensation Audit Assess the effectiveness of activities to manage and minimize disability retirements and workers’ compensation claims. Review of processes to ensure employee safety, tracking and reporting activities, contract administration, and efficiency of claim processing. 06/15 06/16 In Process The audit is in the planning phase. Estimated date of draft report is April 2016, and estimated date of final report is June 2016. Utilities Customer Service: Rate and Billing Accuracy Audit Evaluate whether the Utilities Department properly implements rates and accurately bills customers. 06/15 06/16 In Process The audit is in the planning phase. Estimated date of draft report is April 2016, and estimated date of final report is June 2016. Citywide Analytic Development and Continuous Monitoring: Procure‐to‐Pay Develop and implement a continuous monitoring system to increase audit efficiency and coverage through the use of read‐only access to City data. The project will involve developing data analytics to identify high‐risk areas and improvement opportunities in the City’s core processes. The focus of this project is accounts payable. 06/15 04/16 In Process The project is in the planning phase. Estimated date of draft report is March 2016, and estimated date of final report is May 2016. Attachment A 4 Title Objective(s) Start Date End Date Status Results/Comments Citywide Analytic Development and Continuous Monitoring: Overtime Develop and implement a continuous monitoring system to increase audit efficiency and coverage through the use of read‐only access to City data. The project will involve developing data analytics to identify high‐risk areas and improvement opportunities in the City’s core processes. The focus of this project is use of overtime. 06/15 05/16 In Process The project is in the planning phase. Estimated date of draft report is June 2016, and estimated date of final report is August 2016. National Citizen Survey™ Obtain resident opinions about the community and services provided by the City of Palo Alto and benchmark our results against other jurisdictions that participate in the survey. 07/15 01/16 In process The National Research Center (NRC) completed data collection and provided a draft report on December 4. After providing feedback, the NRC provided an updated report. We will present the results to Council at the annual retreat on January 30. Other Monitoring and Administrative Assignments Below is a summary of other assignments as of December 31, 2015: Title Objective(s) Status Results/Comments Sales and Use Tax Allocation Reviews 1) Identify businesses that do business in Palo Alto that may have misallocated or underreported their sales and use tax and submit inquiries to the state for review and tax reallocation. 2) Monitor sales taxes received from the Stanford University Medical Center Project and notify Stanford of any differences between their reported taxes and state sales tax information, in accordance with the development agreement. 3) Provide Quarterly Status Updates and Sales Tax Digest Summaries for Council review. Ongoing 1) Total sales and use tax recoveries for the second quarter were $15,404 from our inquiries and none from vendor inquiries, for a total of $16,912 year‐to‐date: $15,404 from our office and $1,508 from the vendor. Due to processing delays at the State Board of Equalization, there are 52 potential misallocations waiting to be researched and processed: 15 from our office and 37 from the vendor. 2) We receive calendar‐year sales tax information for the Stanford project about six months after the end of the calendar year. We will report the sales tax information for this project in our June 2016 quarterly report. 3) Quarterly sales tax reports are published on the Office of the City Auditor website at www.cityofpaloalto.org/gov/depts/aud/reports/default.asp. Attachment A 5 Title Objective(s) Status Results/Comments City Auditor Advisory Roles Provide guidance and advice to key governance committees within the City. Ongoing The City Auditor continues to serve as an advisor to various boards and committees: Utilities Risk Oversight Committee, the Library Bond Oversight Committee, the Information Technology Governance Review Board, and the Information Security Steering Committee. Status of Audit Recommendations Below is a summary of audit recommendations as of December 31, 2015: Audit Title Date Issued Total Recommendations # Implemented During Quarter # In Progress/Open Employee Ethics Policies 01‐23‐08 7 3 0 Fleet Utilization and Replacement 04‐14‐10 22 0 4 Citywide Cash Handling and Travel Expense 09‐15‐10 11 1 2 SAP Security 10‐18‐11 21 1 0 Contract Oversight: Trenching and Installation of Electrical Substructure 11‐05‐13 6 0 2 Inventory Management 02‐18‐14 14 0 14 Solid Waste Program 06‐03‐14 16 16 0 Utility Meter Audit: Procurement, Inventory, and Retirement 03‐10‐15 15 0 15 Police Department: Palo Alto Animal Services 04‐22‐15 8 0 8 65 45 21 0 20 40 60 80 100 120 # Recommendations Open # Recommendations Implemented FY 2016 Number of Open and Implemented Recommendations Jul ‐ Sep 2015 Oct ‐ Dec 2015 Attachment A 6 Fraud, Waste, and Abuse Hotline Administration The hotline review committee, composed of the City Auditor, the City Attorney, and the City Manager, or their designees, meets as needed to review hotline‐related activities. We received 3 hotline complaints during the second quarter of FY 2016, which were all various forms of four other complaints related to the same issue and were already under investigation. External investigators were hired to investigate nine of the open complaints, and an internal investigation was done on the tenth complaint. The investigations for all ten complaints received to date during this fiscal year were closed during this quarter. Three of the allegations were within the scope of fraud, waste, or abuse as defined in the hotline protocols, but the investigations did not identify evidence to support the allegations. The remaining issues were determined to be outside the scope of the hotline protocols. The chart below summarizes the status of complaints received in each fiscal year since the hotline was implemented. Source: City of Palo Alto hotline case management system as of December 31, 2015 7 3 2 10 0 2 4 6 8 10 12 FY 2013 FY 2014 FY 2015 FY 2016 Status of Complaints Received by Fiscal Year Closed Complaints Open Complaints Attachment A Chairpe Commu Present Absent Agenda 2. A Harriet Auditor of Dece publish findings parking method in a tim bonds defeasidiffusin Financi the Ci recomm financia Auditor (RFP) financia process Consen same f present confere ShareP manage Leaders POL TRA erson Du unity Meet t: Berm : a Items Auditor's O Richards r, here to ember 31, ed and p s and eig g permit dology to t mely man used to c ng a porng a porti al Statem ty's exte mendation al audit w r Contract process a al Auditor sing that nt Item on firm. Seni tation at ence in M oint as a ement so ship Team LICY A ANSCR Bois calle ting Room man, DuBo Office Qua son, City present t , 2015. S presented ht recom fees. 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We d to the expecting n was ask ment Aud City Aud commerc ion to EL t we're u TTEE Page gular Meet uary 9, 20 P.M. in lifornia. , Scharff 5 hardson, erly Repor e quarter. presented n-lieu and needed be ng in lieu overdraw They wi ment) wilted the C nd O’Con ommittee d, so that rnal Finan t for prop ity's exte are curre Council a to retain ked to giv ditor's an itor's use cial audit LT (Execu using it. 1 of 12 ting 016 the City rt as We two the etter fees the ll be l be City's nell, for t the ncial posal ernal ently as a the ve a nual e of and utive By Attachment B FINAL MINUTES Page 2 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 implementing SharePoint in our office, we were able to save $12,000 a year by discontinuing the use of “TeamMate,” which is a commercial audit management software package. I was invited by the Comptroller General of the United States to sit on the Government Auditing Standards Advisory Council. In the world of auditors, that is probably the most prestigious appointment you can get, so I’m happy to announce that I'll be serving on that Council. Chair DuBois: Congratulations. Ms. Richardson: Thank you. So moving on to the audits that we're doing, the active audits. The franchise fee audit--this has been a very complex audit. It seems like every time we turn around, there's a new issue coming up. We've been working very closely with the City Attorney on this audit. I’m wrapping up some issues on that this week and we should be able to move forward with that shortly. We do have it tentatively schedule to present to the Policy and Services Committee (Committee) in April. I already mentioned that we wrapped up the Parking Funds Audit. We have three audits that are currently in field work phase. They were in the planning phase at the end of the quarter. That's the Disability Rates and Worker's Compensation Audit, the Utilities Customer Service Billing and Rate Accuracy Audit and the Citywide Analytical Group Development and Continuous Monitoring audit of procure-to-pay, which is really focusing on accounts payable, regarding duplicate payments and duplicate master records for vendors. So all of those that auditors have been actively discussing issues that they have been identifying as the audits progress. We're also doing a Fees Schedules Audit that has not progressed passed the planning phase while the auditor working on that is focused on the procure- to-pay Continuous Monitoring Audit. And then we're also doing another Continuous Monitoring Audit on overtime. That one was in planning at the end of the quarter, the Auditor has done some field work on that, but has been primarily been focusing on Worker's Comp. (Compensation) audit. That one scheduled to be presented in August. As of the end of the quarter, we're in the process of finishing up the National Citizen Survey and the Performance Report. Both of those were scheduled to be presented to the Council at the annual retreat on January 30 and that did happen, but they were in progress at the end of the quarter. On an annual basis, we have one Auditor who works with a consultant and also has worked on her own to identify businesses that may have under recorded their Sales and Use Tax. To date this year, we've collected $16,912 that included $15,404 for this quarter. We are on the low side for the year. I did go back and look at previous years and we are actually lower than each of the last four fiscal years (FY), so I will be monitoring that. You may want to look at whether that is work that we should continue doing, whether it's cost effective to Attachment B FINAL MINUTES Page 3 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 continue doing that work in our office. We've continued doing our City Auditor Advisory Roles serving on the Utilities Oversight Committee, the Library Bond Oversight Committee and the IT (Information Technology) Governance Review Board and the Information Security Steering Committee. We are expecting the Library Bond Oversight Committee to wrap up pretty soon, and so that role will go away when that happens. New in this year, in this quarterly report, we started to put the status of audit recommendations as just a summary here because the departments are now reporting directly to you on the status of those recommendations. So during this quarter, the departments implemented forty five recommendations that allowed us to close out three audits; the Employee Ethics Policies Audit, the System Application and Data Processing (SAP Security Audit and the Solid Waste Program Audit. We still have two audits that are more than five years old. Those are in progress; Fleet Utilization and Replacement. I know that we will be closing that one out in our next quarterly report and the Citywide Cash Handling and Travel Expense Audit. The other audits are newer audits, but they still need some work to get those closed out. The last item on the report is the Fraud, Waste, and Abuse Hotline. So during fiscal year 2016, we received ten complaints, seven of those were variations of the same issue. For all of these complaints, for nine of the complaints, we used an external investigator to investigate them for one we used internal Staff investigated them. We did close out all of those audits as the unsubstantiated, and so moving forward, we currently have no open investigations. That concludes my report and I'll answer any questions. Council Member Berman: Thank you very much Harriet for the presentation and congratulations on being an advisor to serve on the Government Standards Advisory Council, very cool. A follow up question that I had, mainly about the last page of the report, the Status Audit and recommendations. So the first is just kind of a point. I was confused at first and I just figured out the confusion. The graph at the bottom, it seemed like it should be broken out into three different--what it looked like was that the number of recommendations open was a 110. Ms. Richardson: Right. So the 65 should have actually have been 66. Council Member Berman: Oh, no, but is also should be a separate bar because what that is that is recommendation that were opened July to September and the 45 on top is essentially, the 45 same recommendations showing that … Ms. Richardson: The 45 of the 66, correct, okay. Council Member Berman: But it shows--yeah, you kind of see where I'm-- Attachment B FINAL MINUTES Page 4 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Ms. Richardson: Yes, yes. Council Member Berman: So that would just make it a little easier to follow. This might be a question for Jim, but on the Inventory Management, the Utility Meter Audit and the Police Department Program and Services Audit-- Well, I guess, it shows those are in progress, so is it that--Harriet, do you feel that Staff is moving forward on things or things just totally been dropped and aren't being acted upon or--are we in progress or are we--why are we (Crosstalk) James Keene, City Manager: I'll let Harriet speak to it, but also when we're in annual, you'll see on the March 22, 2016, Policy and Service Committee, we actually have an audit update on Animal Services and Inventory before Policy and Services, so we'll have the Staff here to give that … Council Member Berman: More in details. Perfect. Ms. Richardson: So Animal Services, I know that they're some work being done on that. I know that they went up for an RFP and that there's some work being done on that. Utility Meter Audit, I have not received any update. The Fleet Management, I have reviewed up to the end of this quarter. I have since reviewed the Status Report and know that will be closing that one. Inventory Management Audit, we did receive a draft of the Status Report and I talked to the Auditor today on that one who is reviewing it and there are some issues we're going to have to go back on so I'm not sure how many of those were actually end up being closed or will remain in progress at this point. Council Member Berman: Okay. Sorry, you said that the Utility Meter auditing, you have not gotten an update on? Ms. Richardson: Correct. Council Member Berman: So Jim, is there any plans to … Mr. Keene: That one has been on a slower track schedule for the April 12, 2016 Policy and Services Committee meeting, so … Council Member Berman: Okay. Mr. Keene: That will explain it then. Council Member Berman: Okay. I know there's been changes, etcetera. So a question on the Fraud Waste Abuse Hotline (Hotline), so you mentioned that seven were determined not good fit within the parameters of the Hotline … Attachment B FINAL MINUTES Page 5 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Ms. Richardson: Actually several of them. The seven referred to variations of the same issue. Council Member Berman: Okay. So hypothetically speaking, maybe not necessarily with that specific example then, but if something is reported that doesn't fit necessarily within the confines of Fraud Waste and Abuse, what happens then? Is there something that gets investigated or does it just get dropped completely because it doesn't fit this purpose? Ms. Richardson: Most of the ones we did determine did not fit within the protocols that we set for the Hotline, which was that they would be Fraud Waste and Abuse topics, but they still did get investigated. Council Member Berman: Okay, and acted upon if warranted? Ms. Richardson: Yes. Council Member Berman: Okay, great. And Fraud, Waste, and Abuse, Abuse meaning abuse of City finds that kind of thing, or abuse meaning, my boss yelled at me and I'm mad at them about it? Ms. Richardson: It does not mean that. It does mean more like the first, abuse of resources, City resources. My boss yelled at me, would be treated more like a personnel type of action. Council Member Berman: Handed over to Human Resources (HR) then? Ms. Richardson: Correct. However, it is the type of thing you could look at and say, is it abuse of authority, but we aren't currently looking at it that way. Mr. Keene: Many things we get ended up involving HR, they can involve the City Attorney and this predates I think your being on the Council when we were discussing this, but it's pretty clear that the definitions of Fraud, Waste, and Abuse get fuzzier the further away you get away from fraud, for example. And the truth is, it's sort of like, beauty is in the eye of the beholder. People can still make complaints based on their perception of saying, you know, I think this is some kind of an issue and it can be that the initial investigation would say, well, that really doesn't meet that test or it does or potentially or it is something else, but sometimes we'll sort of say maybe, who knows, maybe a relationship, just a problem between two people and then we can refer them to that. And often still addressed that and deal with that even though it doesn't (Inaudible.) Council Member Berman: Right. Thanks. Attachment B FINAL MINUTES Page 6 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Chair DuBois: Liz? Council Member Kniss: So Harriet, would you go into some more details into the Sales and Use Tax and with the fact that there are 52 potential misallocations and so forth. Ms. Richardson: So we fill out a form when we identify a business that has potentially underpaid its taxes. We fill out a form that's called short form Council Member Kniss: Did they purposely do it? Is that the question? Ms. Richardson: We don't know because we don't actually do the audit. So we fill out a form called the Short Form. We send it to the State Board of Equalization and they do the investigation. Usually it's been where they allocated their tax for example to a different City accidently. It's not usually intentional that they don't pay. It's usually misallocated to another City. We also contract with MuniServices who does similar work. The 52, we do rely on the State to do the audit work on that and send us back and tell us yes, they identified it as a misallocation and they're transferring the funds back to the City. The auditor in my office who works on that told me that they have a backlog at the State due to some Staff shortages. That's why you see so many that are pending at the State. 52 is a pretty large number of short forms to be waiting to be reviewed. Council Member Kniss: Not a huge amount of money, right? Ms. Richardson: We don't know until we actually get it. So I went back and look at previous quarters, and the range that we get in any one quarter, we had two quarters in the past five years where we didn't get anything and then we had one quarter where we only got a $6,200. Then we had a quarter where we got $93,000. And so it really kind of depends on the business and how the money was misallocated. Council Member Kniss: Okay. Thanks on that, that was my question. Vice Mayor Scharff: On the Parking Funds just so I understood it, we gave money back. Ms. Richardson: We're going to. It hasn't been done yet. Vice Mayor Scharff: Who do we give the money back to? Ms. Richardson: What they're actually--their intent is to defease a portion of the bonds, which means they'll call in some of the bonds. Vice Mayor Scharff: Oh, so we pay off the bonds? Attachment B FINAL MINUTES Page 7 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Ms. Richardson: A portion of them. Vice Mayor Scharff: We pay off a portion of the bonds. Okay. Ms. Richardson: I believe that they are going to do that when they do the-- once they get approval on the mid-year Budget adjustments. Vice Mayor Scharff: So it's been a little while since I thought about this. So we have--these are the open audits on the page, right? And you said that the Fleet Utilization and Replacement Audit is likely to be closed pretty soon? Ms. Richardson: It will. I already reviewed the Status Reports. Vice Mayor Scharff: So that's the four recommendations would have been completed? Ms. Richardson: Yes. Vice Mayor Scharff: So on each of these, there are very few recommendations left to be completed with the exception of the inventory management one, right? And the Utility Meter Audit one? Ms. Richardson: Correct. The Utility Meters and the Animal Services were just released last year, so … Vice Mayor Scharff: Why does it take too long to get the audit recommendations done? Mr. Keene: Well, I don't know that it's always years. Vice Mayor Scharff: Okay. 2008, we have gone finally completed on the employee ethics. 2010, we have four left … Mr. Keene: Well … Vice Mayor Scharff: I'm just asking. At least I'll know why it takes years. Mr. Keene: I'd say it takes--let's see, how long is it taking us to assess and make changes on our enterprise system that isn't subject to an audit or an ERP (Enterprise Resource Planning)? Six, seven years we've been working on it. A lot of these things are change efforts. In this case, the auditor identifies deficiency or changes and in truth, they're sometimes about--even working through whether or not--what does it take to actually implement the change, which is sometimes more difficult than identifying the change in whether or not it really has a good payoff for us and there's back and forth, that sort of thing, so. Attachment B FINAL MINUTES Page 8 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Ms. Richardson: Well, I'd also like to add, on the Animal Services audit, that was really the first audit where I was completely involved after I arrived here. And I made bigger effort than I think had been done in the past to work with the City Manager's office and Staff involved in the audit to make sure that the recommendations would be feasible. I know that for that particular one, there was--there's sometimes a progression that you can't do some things until you've done other things, so on that particular one, that's definitely the case, but I think us moving forward, we are trying to make more of an effort to make sure the recommendations make sense, that they're feasible and that it can be implemented although it doesn't necessarily always mean they can be implemented quickly. One of the other things I've asked my Staff to do, because of the ERP project, to start making note of weaknesses that are the result of the current SAP system and rather than focusing on making changes to that when we're going to be changing from SAP to something new, which might still be SAP, but a newer version of it, to make recommendations to hold off on those that we will make a list that we can make sure that we're addressing those types of issues when the new ERP system is implemented. Vice Mayor Scharff: So the next time we see these reports, the ones that have zeros will no longer be on here. Is that correct? Ms. Richardson: Correct. And so as we issue new audits, you'll start seeing those added and as audits gets closed they’ll fall off the list. Vice Mayor Scharff: When we complete an audit, right? When there's a bunch of recommendations--I remember you come in and present the audit and the department head is usually here. That was the last time I remembered it. And then there's sometimes discussions about whether or not we think that we should implement the recommendations and we have that discussion. Should, would it be also helpful, and maybe it's not easy to do, but to set expectations at least for Council Members and the public who (Inaudible), well these are the 14 recommendations, we agree they can be done, but you know, we need to do this one first, so we expect it. This will be done over a two-year period or we expect it will--I mean, is there any of that, that sort of--cause it's really hard to oversize a Council Member when-- you know, you see this on an infrequent basis, you know, the other recommendations hanging around maybe for a real good reason. I'm not saying they're don't, but it's really hard to do any sort of oversight and figure that out. Ms. Richardson: When we issue an audit now, when we ask for the audit response from the departments, which basically comes from, through the City Manager, we give them a template that has the audit recommendation, Attachment B FINAL MINUTES Page 9 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 what was the audit recommendation, and then we ask them to write their implementation plan and in estimated completion date. And the Status Reports that you will start seeing as the new Committee, those take that template and they update that status. And so you'll see the original estimated completion date and then you'll see how that changes over time if the recommendation did not get implemented by that date. Vice Mayor Scharff: And on the Fraud, Waste, Abuse and Hotline, have we ever had a complaint that turned out to be legitimate? Ms. Richardson: The only one that turned out to be legitimate was the one that our office investigated by doing an audit and that was the contract oversight trenching and installation of electrical substructure. Vice Mayor Scharff: And that originally came in …? Mr. Keene: Last year or something. Ms. Richardson: That was 2013. Vice Mayor Scharff: So that was around the seven in 2013, and that we then launched an audit? Ms. Richardson: Yes. Mr. Keene: I can assure you we have other complaints that don't come through the Hotline that are valid. (Inaudible) Vice Mayor Scharff: No, I understand. Just wondering, you know, I mean, it's nice to have a Fraud, Waste, and Abuse Hotline I suppose, but I'm really curious as to--to some extent how effective it's being and you know, whether or not it takes a lot of Staff time and you know, maybe it doesn't take much Staff time at all and whether or not it's being useful. It may be, I'm just curious as to, you know, we've had one--so we've had one out of, you know, out of 22. Vice Mayor Scharff: I do want metrics on things. I actually disagree. I actually think that part of our role is to be, not necessarily be political, and that if … Council Member Kniss: I can see they have it on there. Vice Mayor Scharff: That's fine, I can see that too. I understand the need for it. I'd say if we had--I'm not ready on 22, but I would say that, you know, if we go five years and we have one legitimate complaint, you told me Attachment B FINAL MINUTES Page 10 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 it takes a 100 Staff hours a year, I think that's a waste of Staff time. And I would at that point suggest we get rid of it. Ms. Richardson: I would say, right now it's not taking a lot of our Staff time based on the number of hours, but I will say that it is costly to do an investigation, particularly if we're hiring outside investigators. Mr. Keene: I just want to say one thing really quick. I think as it relates to the schedule, I think it's important to remember that there is specific process for audits and the back and forth and I want to say that it is kind of like lawyers exchanging, you know, briefs and--but there is an aspect of that. There's a timeframe and a gap and so let's just take the Employee Ethics Policies, that is done as far as I'm concerned. Not only have we adopted two years ago the Ethics Policy, we are training every single employee through the Institute of Local Government. The only City in all of California to train every employee in our--half day, in our ethics program and in our Ethics Policy. And yet because of the way we sequence this, and there five years' worth tough languishing before Harriet got here, you know what I mean, to actually close something out. We just haven't gotten to that yet. Chair DuBois: Well, since this is your work plan for the quarter, I guess what happens after June 16, 2016? You're not starting any audits that are further out? Ms. Richardson: If someone finishes an audit, they will get started on a new audit that's currently on our work plan, our adopted work plan. Chair DuBois: Right now, nobody's working on anything else beyond June, etcetera? Ms. Richardson: Correct. Chair DuBois: Okay. So come June, you'll typically have other people freeing up? Ms. Richardson: I’ll be coming forward with a new audit plan for next year. In the past, they presented the audit plan usually at the first Policy and Services Committee after the summer break. Last year, I did it early so it would be in effect by the time the fiscal year starts and that's my plan to try to have it presented at the June Policy and Services Committee, so we'll always have it at the beginning of the fiscal year. Attachment B FINAL MINUTES Page 11 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Chair DuBois: Okay, good. And then on the Status Table, is it true that the difference between open and total are the closed ones or is there any other status? Ms. Richardson: Yes, that is true. Chair DuBois: Is it worth showing the status column of not just open, but maybe items in contention? Is there such a category? The ones that are going to be implemented and they have a work plan. There may be others that are remained opened within their work plan. Ms. Richardson: Right. And I would say for the older ones where I wasn't here, I can give you an example on the Travel Expense Audit where there was an old recommendation that didn't necessarily makes sense. I've been trying to work through those with the departments (Crosstalk.) Chair DuBois: Did you dispose of them yourself …? Ms. Richardson: Well, as an example for the Travel Expense one, there was a recommendation that we should be making sure that we have the receipt for every meal when employees travel. And that's sort of a very administratively costly way to manage your travel expenses. Per diem is more common, is accepted by the IRS (Internal Revenue Service), it's the way the Federal Government does it. There's a study that the Federal Government did where they went back and revisited, and so when I met with ASD (Administrative Services Department), we worked through that and said no, I don't think that recommendation is a reasonable recommendation and they've revised the travel policy based on me saying, no you don't have to get receipts. So I'm trying to work through some of those to make them not be contentious moving forward. Chair DuBois: And the last question, just on the hotline. We had talked at one point about maybe you putting together some materials, or maybe the new HR Director, want me to go ahead and do that or? Ms. Richardson: Correct. Well, one of the things I want to do is to go back and talk to some other cities that have hotlines and see how they're doing it. I do have policies and procedures from the City of Toronto, which is considered kind of the model for how hotlines are handled. I don't have any from other cities yet, but I plan to get those and just kind of look though and see are we doing it the right way or should we be doing it differently. Chair DuBois: Can I get a Motion to accept the Auditor's Report? Council Member Berman: So moved. Attachment B FINAL MINUTES Page 12 of 12 Policy and Services Committee Special Meeting Transcript 2/09/16 Council Member Kniss: Second. MOTION: Council Member Berman moved, seconded by Council Member Kniss to recommend the City Council accept the Auditor’s Office Quarterly Report as of December 31, 2015. MOTION PASSED: 4-0 Attachment B City of Palo Alto (ID # 6691) City Council Staff Report Report Type: Consent Calendar Meeting Date: 4/4/2016 City of Palo Alto Page 1 Summary Title: Approve Amendment to Recycled Water Supply Agreement Between Cities of Palo Alto and Mountain View Title: Approval of an Amendment (Addendum No. 1) to the First Amended and Restated Contract Number C059999 Between the Cities of Palo Alto and Mountain View for Recycled Water Supplies From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve an amendment, Addendum No. 1 (Attachment A), to the Recycled Water Supply Agreement between the Cities of Palo Alto and Mountain View. Background The Regional Water Quality Control Plant (Plant) produces and supplies recycled water through the terms of the First Amended and Restated Contract C059999 between the City of Palo Alto and the City of Mountain View (Recycled Water Supply Agreement or RWSA). RWSA provided Mountain View a maximum of 3 million gallons per day (MGD) at no cost and expires in 2035, concurrent with the expiration of the existing Basic Agreement. Mountain View unanimously approved Addendum 1 as a new business item on October 13, 2015 (Attachment B). Discussion Although the agreement will not expire for 19 years, Mountain View is interested in securing a long-term recycled water supply as a critical component of expanding their recycled water distribution system to other areas of their city. Recommended components of the Addendum include: City of Palo Alto Page 2 1. Extending the term of the RWSA to December 31, 2060, concurrent with Mountain View’s commitment to a term extension for operating expenses and debt payments for capital improvements to the facilities covered by the Basic Agreement between the cities of Mountain View, Palo Alto, and Los Altos. 2. Authorizing payment of incremental costs of producing recycled water (e.g., additional treatment, chemical costs, costs of new regulatory requirements, etc.). Palo Alto and Mountain View will establish a cost per unit of recycled water through a separate action which will be brought before Council for approval; the rate would be effective July 1, 2020, and adjusted as necessary. Based on current costs, staff estimates charges for recycled water would be less than $0.20 per hundred cubic feet (approximately 748 gallons, or “unit”). By comparison, Palo Alto pays approximately $ 4.50 per unit of treated water from the San Francisco Public Utilities Commission (i.e., the Hetch-Hetchy system). 3. The existing supply agreement does not include language specifying financial responsibility for replacing recycled water production equipment. Effective July 1, 2035, Palo Alto and Mountain View (and any other customers using recycled water) will fund the cost of recycled water production capital equipment replacement in proportion to the supply available to each agency. 4. Palo Alto and Mountain View are reviewing opportunities to increase the reliability of the recycled water system, including water storage, back-up pumping facilities, and emergency power capabilities. The recommended amendment provides that Palo Alto and Mountain View (and any other customers using recycled water) will agree on and fund improvements in proportion to the supply available to each agency. 5. If additional recycled water is needed, the cost to increase recycled water production capacity will be absorbed by the requesting agency (who will own the rights to the additional water), or shared by agencies needing additional supply. 6. Palo Alto and Mountain View agree to continue salinity reduction efforts. Environmental Review The Addendum involves no expansion of existing facilities and is categorically exempt from environmental review under Section 15301 of the California Environmental Quality Act (CEQA). City of Palo Alto Page 3 Attachments: Attachment A: C059999 Addendum 1 (PDF) Attachment B: C059999 Addendum 1 CMV Staff Report (PDF) AMENDMENT No. 1 TO THE FIRST AMENDED AND RESTATED CONTRACT NO. C059999 BETWEEN THE CITY OF PALO ALTO AND THE CITY OF MOUNTAIN VIEW This Amendment No. 1 to the FIRST AMENDED AND RESTATED CONTRACT NO. C059999 BETWEEN THE CITY OF PALO ALTO AND THE CITY OF MOUNTAIN VIEW, is entered into as of ________________, 2015, by and between the CITY OF PALO ALTO, a chartered city and a municipal corporation of the State of California (“PALO ALTO”), and the CITY OF MOUNTAIN VIEW, a chartered city and a municipal corporation of the State of California (“MOUNTAIN VIEW”). RECITALS: Whereas, on January 11, 2005, PALO ALTO and MOUNTAIN VIEW entered into an agreement (AGREEMENT) defining the cost sharing of recycled water system design and construction expenses, the allocation of grant revenues, and the repayment of loans, and; Whereas, on June 18, 2007, PALO ALTO and MOUNTAIN VIEW amended and restated the entire AGREEMENT, and; Whereas, PALO ALTO and MOUNTAIN VIEW wish to extend the AGREEMENT and add language defining each party’s responsibility for the costs of maintaining and improving the system; AGREEMENT: NOW, THEREFORE, in consideration of the recitals and mutual promises of the parties contained herein, PALO ALTO and MOUNTAIN VIEW agree to the below-referenced amendments to AGREEMENT as follows: SECTION 1: The following sections of AGREEMENT are replaced in their entirety: 1.4 Term and Renewal of Agreement Attachment A Unless earlier terminated as provided in section 9.3 or according to the terms set forth in section 1.41, the obligations and responsibilities of the parties commence on January 11, 2005 and shall expire on December 31, 2060. 4.1 Cost to PALO ALTO and MOUNTAIN VIEW The RWQCP is required to, and does treat the wastewater to a standard suitable for reuse, and encourages the use of recycled water. In addition, the RWQCP discharge permit requires the operation of a recycled water program. PALO ALTO, as the operator of the RWQCP, has agreed to provide recycled water in the quantities set forth in Section 8.2 and in the quantities and uses set forth in Section 8.3 to MOUNTAIN VIEW and PALO ALTO with no charge for the commodity. 8.3 Usage (b) For RWQCP operating and planning purposes, MOUNTAIN VIEW and PALO ALTO will cooperate to provide the RWQCP with customer estimated monthly delivery demand for recycled water for the ensuing year and such other information that MOUNTAIN VIEW and PALO ALTO may have available to assist the RWQCP in determining projected annual deliveries for the ensuing 5 years. SECTION 2: The following sections are added to the AGREEMENT: 1.41 Dependency on Basic Agreement On October 10, 1968, the parties executed the Basic Agreement Between the City of Palo Alto, the City of Mountain View and the City of Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System (Basic Agreement). The Basic Agreement initial term was 50 years. Addendum 8 (executed October 2015) to the Basic Agreement extended the term through December 31, 2060. The Basic Agreement is the foundation for operation of the RWQCP. If the Basic Agreement expires at any time prior to the term stated in section 1.4 (December 31, 2060), this AGREEMENT shall automatically expire concurrent with the expiration of the Basic Agreement. 4.1.1 Incremental Recycled Water Costs MOUNTAIN VIEW and PALO ALTO will continue to receive recycled water, with no water commodity charge, through the term of the AGREEMENT (December 31, 2060). MOUNTAIN VIEW and PALO ALTO acknowledge the RWQCP incurs incremental costs to produce recycled water, including chemicals, energy use, increased consumption, dedicated recycled water program staffing, new regulatory requirements and unforeseen circumstances or events. MOUNTAIN VIEW and PALO ALTO shall work cooperatively and in good faith to enter into an agreement to establish a recycled water wholesale rate to cover these incremental costs, to be effective on July 1, 2020, that continues to encourage the use of recycled water and ensures the remaining RWQCP partners incur no incremental cost impact from the production of recycled water. Thereafter, MOUNTAIN VIEW and PALO ALTO will annually review the recycled water incremental wholesale rate components, and will by April 1 agree upon a rate adjustment that will be effective the following July 1. 4.1.2 Capital Replacement MOUNTAIN VIEW and PALO ALTO acknowledge that portions of the RWQCP recycled water supply infrastructure may need to be replaced during the term of the AGREEMENT to maintain the system in working order. MOUNTAIN VIEW and PALO ALTO agree to review recommended replacements, and parties will not unreasonably withhold approval of necessary replacements. After 2035, the cost of the replacements will be funded based on the proportions of recycled water contractually available to each party at the time of replacement, including MOUNTAIN VIEW and PALO ALTO and other agencies purchasing water from the RWQCP. If the amount of recycled water available is increased by the capital replacement, all parties with contractual rights to recycled water will fund the cost of capital replacements in proportion to their supply. 4.1.3 Capital Replacement and Capacity Right Revision Should either MOUNTAIN VIEW and PALO ALTO decide that capital repairs after 2035 are cost prohibitive, capacity rights may be modified until a mutually agreeable share is determined. 5.3 System Reliability MOUNTAIN VIEW and PALO ALTO acknowledge it is necessary to develop and maintain a reliable system and the RWQCP may incur capital design and construction costs to enhance reliability needs based on the nature and types of use set forth in Exhibit L of the Agreement. MOUNTAIN VIEW and PALO ALTO will monitor the system, and as needs are identified, work cooperatively to incorporate improvements, including but not limited to water storage, backup pumping and emergency power supply equipment. If either party requests specific improvements to the recycled water system, the RWQCP will review and determine if the request is above and beyond the needs for the type of use set forth in the Facility Plan. The RWQCP will determine the cost share for improvements beyond the needs for the type of use set forth in the Facility Plan. The RWQCP, MOUNTAIN VIEW and PALO ALTO will not unreasonably withhold approval of and contribute funding for improvements that will increase system reliability and expand long-term use of recycled water. After 2035, the cost of the replacements will be funded based on the proportions of recycled water contractually available to each party at the time of replacement, including MOUNTAIN VIEW, PALO ALTO and other agencies purchasing water from the RWQCP. If the amount of recycled water available is increased by the improvements, all parties with contractual rights to recycled water will fund the cost of the improvements in proportion to their supply. 5.4 Recycled Water Capacity Expansion If MOUNTAIN VIEW or PALO ALTO wish to increase their contractually available supply, the agency requesting the increase will contact the other to discuss the need. If no other purchaser of recycled water has available capacity from their allocation, PALO ALTO will review existing RWQCP capacity and determine any equipment installations or upgrades necessary to produce the additional water requested. The cost of the improvements will be funded by the agency requesting the additional supply. If the improvements increase the RWQCP capacity beyond the additional supply requested, the excess supply can be allocated to another party, who will be responsible for a proportionate share of the improvement expense. If no other agency is interested in purchasing additional capacity, the total costs of the improvements will be paid by the agency requesting additional supply; the requesting agency will then own rights to the new supply being produced. Either party may use the transmission line, without additional cost, to accept delivery of higher amounts of recycled water than stated in Sections 8.2 and 8.3 so long as the other party’s ability to obtain their guaranteed recycled water supply is not impacted. If the second party cannot obtain their guaranteed supply, the first party must reduce incremental deliveries until the second party can secure their guaranteed supply. 8.3 Usage (c) MOUNTAIN VIEW and PALO ALTO may request additional quantities and additional types of use of the reclaimed water, such as dual plumbing. The RWQCP will review its permit, operational capability, the conditions and capacities of its facilities, and determine if such request can be accommodated. The RWQCP has the right to deny such request in favor of the safe and proper operation of wastewater treatment priorities to meet regulatory requirements. If the RWQCP determines to accommodate such request, the RWQCP will review the operations and the type of upgrades needed and assess the requesting party costs for the upgrades and related operational and maintenance costs. (d) The RWQCP existing reclaimed water permit from the RWQCB permits the RWQCP to produce and deliver recycled water to reuse sites for irrigation. The landscape irrigation reuse sites were documented in the Facility Plan. Both the RWQCP reclaimed water permit and the Facility Plan acknowledge potential additional types of reuse, such as dual plumbing, in the future. MOUNTAIN VIEW requests addition of dual plumbing as part of their reuse. The total quantity, schedule, and rate of deliver of recycled water to MOUNTAIN VIEW shall remain unchanged. The RWQCP determines that it would include dual plumbing as the type of reuse of the recycled water from the plant as long as MOUNTAIN VIEW and PALO ALTO pay for any improvements needed for such purpose. MOUNTAIN VIEW and PALO ALTO agree to enforce any and all regulatory requirements for dual plumbing as well as landscape irrigation within each party’s jurisdiction. (e) When either MOUNTAIN VIEW or PALO ALTO use recycled water for dual plumbing systems, the respective agency’s building development requirements will include a requirement for an onsite, automatically activated potable water backup that will activate should the recycled water service be disrupted, be shutdown, or be otherwise unavailable. 8.6 Level of Service (d) MOUNTAIN VIEW and PALO ALTO acknowledge their mutual goal of continuing to reduce the salinity, or total dissolved solids (TDS), sodium, and chloride levels in the RWQCP’s recycled water over time. To that end, in 2010, MOUNTAIN VIEW and PALO ALTO each adopted a Recycled Water Salinity Reduction Policy to identify and pursue all cost effective measures to reduce the salinity of the recycled water delivered from the RWQCP. These efforts resulted in declines in the salinity levels at the RWQCP. To continue this progress, MOUNTAIN VIEW and PALO ALTO agree to maintain their ongoing salinity level monitoring and reduction efforts for the term of the Basic Agreement, or until both parties mutually determine that such efforts are no longer needed. In recognition of salinity reduction efforts already undertaken, each party reserves the right to prioritize its capital improvement projects as it sees fit, in its sole discretion. Salinity reduction efforts may include, but are not limited to: (a) targeted public and private sewer system rehabilitation and/or repair, (b) targeted investigation of saline water infiltration, (c) targeted investigation and monitoring of saline water dischargers, outreach to dischargers with higher than permitted TDS, sodium, and chloride constituents, and enforcement of each agency’s sewer use ordinance, (d) consideration of total sodium, chloride, and TDS load as criteria for prioritizing sewer rehabilitation as contemplated in each agency’s sewer master plan updates, and (e) other necessary controls to reduce salinity to mutually acceptable and achievable levels. SECTION 3: All other sections of the AGREEMENT remain in full force and effect. This Amendment No. 1, made and entered into this _______ day of __________, 2015, by and between: “PALO ALTO” “MOUNTAIN VIEW” CITY OF PALO ALTO CITY OF MOUNTAIN VIEW ________________________________ ________________________________ City Manager City Manager APPROVED AS TO FORM APPROVED AS TO FORM ________________________________ ________________________________ City Attorney City Attorney FINANCIAL APPROVAL _______________________ Finance and Administrative Services Director DATE:October 13, 2015 CATEGORY:New Business DEPT.:Public Works TITLE:Approve Amendments to Regional Water Quality Control Plant Basic Agreement and Recycled Water Supply Agreement RECOMMENDATION 1.Authorize the City Manager to execute Addendum No. 8 to the Basic Agreement between the cities of Palo Alto, Mountain View, and Los Altos to approve the following projects at the Regional Water Quality Control Plant in Palo Alto: a.Construction of the sludge dewatering and truck load-out facility. b.Planning/design of the primary sedimentation tank rehabilitation, fixed film reactor rehabilitation, and the laboratory/environmental services building. 2.Authorize the City Manager to approve an amendment to the Recycled Water Supply Agreement between the cities of Palo Alto and Mountain View. BACKGROUND In 1968, the cities of Mountain View and Los Altos agreed to retire their wastewater treatment plants and approved a contract with the City of Palo Alto (Basic Agreement, also referred to as the Partners Agreement) for the acquisition, construction,and maintenance of a joint treatment plant; the plant began operating in 1972. The Basic Agreement expires in 2035. The Palo Alto Regional Water Quality Control Plant (Treatment Plant) provides wastewater treatment services for the cities of Palo Alto, Mountain View,and Los Altos; the Town of Los Altos Hills;Stanford University;and the East Palo Alto Sanitary District. The Treatment Plant is an advanced treatment facility that uses a multi-stage process to remove organic materials and toxins from the approximately 19 million gallons a day of wastewater generated within the service area; at the conclusion of the treatment process, the dewatered solids are incinerated. The treated effluent is predominantly discharged to the San Francisco Bay and meets the stringent discharge Attachment B Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 2 of 9 requirements of the California Regional Water Quality Control Board as well as the requirements for reuse in recycled water applications. Per the Basic Agreement, Palo Alto owns and operates the Treatment Plant s wastewater treatment and disposal facilities and is responsible for managing capital improvements to the plant. Partner cities must amend the Basic Agreement to implement and fund major capital projects for the replacement of obsolete or worn-out equipment. The Basic Agreement has been amended seven times to date.Most revisions have been related to plant improvements, new wastewater treatment programs,and financing considerations. The most recent amendment was approved in 2009 to approve implementation and funding of an ultraviolet light effluent disinfection process. In 2012, Treatment Plant staff conducted a Long Range Facilities Plan (LRFP) to review existing and future (50-year time frame) capacity needs, plant condition and deficiencies, the impacts of potential regulatory changes, alternatives to the existing solids incineration and liquid treatment processes, site layouts for plant improvements and potential expansion, and a tentative financial plan for implementation. The LRFP is the first comprehensive long-range plan since 1966 and incorporated feedback from the public, plant partners,and Stanford professors to update the Treatment Plant long-term goals, review emerging technologies, review solid and liquid treatment options, and review financial impacts. The major recommendation of the LRFP was to rehabilitate and replace existing facilities nearing the end of their useful life. The highest-priority projects will be implemented over a 10-year period to smooth the impact of rate increases; loans obtained for construction of large projects will be repaid over a period of 30 years. The Basic Agreement includes an inflation-adjusted maximum amount Palo Alto may spend on capital replacement and improvement projects, which is approximately $2.99 million for Fiscal Year 2015-16. Because the costs of the projects exceed the maximum, the City must approve the expenses through an amendment to the Basic Agreement. Recycled Water Supply Agreement The Treatment Plant also produces and supplies the City s recycled water through the terms of the First Amended and Restated Contract No. C059999 between the City of Palo Alto and the City of Mountain View (Recycled Water Supply Agreement or RWSA). The RWSA provides to the City a maximum of 3 million gallons per day (MGD) at no cost and expires in 2035, concurrent with the expiration of the existing Basic Agreement. Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 3 of 9 ANALYSIS The City of Palo Alto is requesting the Treatment Plant partners amend the Basic Agreement to approve equipment rehabilitation, project planning, and associated financing mechanisms. The eighth amendment would authorize: Implementation and cost-sharing of a sludge dewatering and truck load-out facility; Funding for planning/design for the rehabilitation of the primary sedimentation tank; Funding for planning/design of the fixed film reactor rehabilitation;and Funding for planning/design for the Treatment Plant laboratory/environmental services building. The addendum also extends the term of the agreement from July 1, 2035 to December 31, 2060 to cover the anticipated life of the loan for the projects in the LRFP. Details regarding these projects are provided below. Sludge Dewatering and Truck Load-Out Facility The wastewater treatment process produces sludge that must be dried and cleaned prior to disposal. The Treatment Plant is one of two agencies in California still using an incinerator to process sludge. The incinerators are at the end of their useful life and cannot be easily converted to a renewable solid treatment facility that would recover energy from the sludge. Operation of the incinerators produces a hazardous waste ash with high levels of soluble copper and is the largest source of greenhouse gas emissions from the Treatment Plant. The incinerators will also not always meet increasingly stringent air quality regulations. In 2012,the Palo Alto City Council directed staff to decommission the sewage sludge incinerators as soon as practicable. The Treatment Plant staff prepared a Biosolids Facility Plan (BFP) to evaluate short-and long-term replacement options for sludge treatment and disposal. Numerous anaerobic digestion, thermal treatment, and off-site treatment options were evaluated by the Treatment Plant.An integral component of any disposal option is a dewatering and truck load-out facility. Design of the facility is substantially complete and the facility is ready to be constructed. Upon successful startup of the sludge dewatering and truck Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 4 of 9 load-out facility, the incinerator will be decommissioned. During evaluation of longer- term sludge treatment options, the dewatered sludge will be loaded onto trucks for off- site disposal. The new dewatering and load-out equipment will be used for any future sludge treatment options. Treatment Plant staff are reviewing the benefits and costs of a thermal treatment/anaerobic digester for sludge treatment as a long-term option. City staff will monitor analysis of long-term treatment options and provide updates as appropriate. Primary Sedimentation Tanks Rehabilitation Primary sedimentation is used to remove most of the settleable and floatable solids in the wastewater stream, reducing the organic load before later treatment processes. The Treatment Plant s four primary sedimentation tanks were constructed in 1972, and during LRFP inspections were found to have numerous deficiencies, including loss of the original protective coating,significant cracks in the concrete tanks,and exposed rebar. Because the tanks are a critical component of the treatment process, tank rehabilitation was recommended as a high priority. Fixed Film Reactor Rehabilitation The fixed film reactors are used in the secondary wastewater treatment process to improve the quality of the treatment plant effluent. The reactor media is made of plastic and has seen 35 years of service. It is at the end of its service life and needs replacement. The reactors were found to be leaking and showing signs of corrosion, and were recommended as a high-priority rehabilitation. Laboratory and Environmental Services Building The Operations Building was originally constructed in 1972 and houses laboratory testing stations and equipment, offices, a large lunchroom,and locker rooms. The LRFP included findings that the building s foundation is inadequate to resist seismic loading and a structural retrofit is required, and the current laboratory facility is inadequate given current testing space requirements and number of laboratory staff. The Administration Building was originally constructed in 1975 as a recycled water process and pumping facility with two deep,open-top rectangular tanks and one open- top rectangular equipment pit. During the three remodeling projects (in 1992, 1995, and 1998),administrative offices were constructed over the open-top equipment pit. The recycled water pumps are still in the basement of the building, creating a noisy working environment.The LRFP found visible deterioration and potential structural deficiencies Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 5 of 9 in the building. Additionally, the administration building is inadequate for the number of people, and the facility lacks conference rooms, offices, and parking and meeting areas for public access/tour groups. Palo Alto staff anticipates reviewing replacement of the Administration Building, Operations Building,and plant water quality laboratory,and combining the three operations into a new laboratory and environmental services facility. Project Schedules The preliminary schedule for the construction and planning projects is shown below: Sludge Dewatering and Truck Load-Out Facility SWRCB SRF Construction Loan Commitment May 2016 SRF Approval to Award Construction Contract June 2016 Palo Alto Council Approval and Award Construction Contract July 2016 Construction Start August 2016 Construction Completion August 2018 Planning Projects SWRCB SRF Planning Loan Commitment December 2015 Palo Alto Council Award of Planning Contracts January 2016 Planning Projects Start February 2016 Planning Projects Completion February 2018 Palo Alto completed a CEQA review for the dewatering and truck load-out facilities, and will complete reviews for all future projects. Mountain View staff will participate in the process to review design and construction proposals, review construction plans and cost estimates, and assist with the selection of consultants and contractors. PROJECT FINANCING As the lead agency, Palo Alto will budget and spend all funds, and will apply for a State Revolving Fund (SRF) construction loan for the sludge dewatering and truck load-out facility. The first SRF loan repayment will occur one year after completion of construction and the loan (principal and interest) will be repaid based on an amortization period of 30 years. SRF loans have historically been a very low-cost option Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 6 of 9 for funding construction projects. As of September 2015, the SRF interest rate is 1.6 percent. The estimated maximum cost of the sludge dewatering and truck load-out facility is $28 million, and based on the capacity rights of the treatment plant,Mountain View s share of the loan payments is 37.89 percent. Assuming an interest rate of 1.8 percent (to allow for possible rate increases) and a maximum loan amount of $28 million, Mountain View s loan payments will be approximately $458,000 per year beginning in 2019, with a final payment in 2048. Palo Alto will also apply for a planning loan for the planning/design of the primary sedimentation tank rehabilitation, fixed film reactor rehabilitation,and the laboratory/ environmental services building. The total maximum planning loan amount is estimated to be $6.75 million as shown below. The loan will be repaid based on an amortization period of 10 years, with the first SRF payment occurring one year after completion of the planning/design (estimated 2018) and the final payment due in 2027. If Palo Alto opts to use an SRF loan for construction, the planning/design loan could be refinanced into a construction loan with a 30-year repayment term. Based on an assumed 1.8 percent interest rate on the maximum planning loan amount of $6.75 million, Mountain View s loan payments will be approximately $282,000 per year beginning in 2019. Staff will seek Council approval for loan repayments if Palo Alto chooses to use an SRF loan. Estimated planning/design costs Primary Sedimentation Tank Rehab $0.731 million Fixed Film Reactor Rehab $2.290 million Laboratory and Environmental Services Building $3.580 million Miscellaneous $0.149 million Total Planning/Design Loan Amount $6.750 million Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 7 of 9 Recycled Water Supply Agreement Staff is also recommending an amendment to the Recycled Water Supply Agreement. The agreement expires in January 2035 and provides the City a maximum of 3 million gallons per day (MGD) at no cost. Although the agreement will not expire for approximately 20 years, staff believes securing a long-term recycled water supply is a critical component of expanding the recycled water distribution to other areas of the City. Recommended components of an amendment include: Extending the term of the agreement to December 31, 2060, concurrent with the term extension of the Basic Agreement. Authorizing payment of incremental costs of producing recycled water (e.g., additional water treatment, chemical costs, costs of new regulatory requirements, etc.). Palo Alto and Mountain View will establish a cost per unit of recycled water through a separate action which will be brought to Council for approval; the rate would be effective July 1, 2020,and adjusted as necessary. Based on current costs, staff estimates charges for recycled water would be less than $0.20 per hundred cubic feet (approximately 750 gallons). By comparison, the City currently pays $3.75 per unit of treated water from the San Francisco Public Utilities Commission (Hetch Hetchy system). The existing supply agreement does not include language specifying financial responsibility for replacing recycled water production equipment. Effective July 1, 2035, Palo Alto and Mountain View (and any other customers using recycled water) will fund the cost of recycled water production capital equipment replacements in proportion to the supply available to each agency. Palo Alto and Mountain View are reviewing opportunities to increase the reliability of the recycled water system, including installing water storage, back-up pumping facilities,and emergency power capabilities. The recommended amendment provides that Palo Alto and Mountain View (and any other customers using recycled water) will agree on and fund improvements in proportion to the supply available to each agency. If additional recycled water is needed, the cost to increase recycled water production capacity will be absorbed by the requesting agency (who will own the rights to the additional water), or shared by agencies needing additional supply. Palo Alto and Mountain View agree to continue salinity reduction efforts. Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 8 of 9 FISCAL IMPACT The costs to repay loans for Treatment Plant improvements covered in the recommended amendment will begin in Fiscal Year 2019-20, and are estimated at approximately $740,000 annually. In addition to the projects included in the Basic Agreement amendment, the LRFP recommended numerous projects through the 50- year term of the plan to replace and rehabilitate equipment and meet future regulatory requirements. Estimated annual expenses for additional projects identified in the LRFP will increase to a maximum of $3.8 million in Fiscal Year 2023-24 and decline to approximately $3.5 million annually through Fiscal Year 2047-48 until funding is paid off in Fiscal Year 2051-52. Staff will seek Council approval of major projects through additional amendments to the Basic Agreement. Information regarding anticipated future projects is included as Attachment 1. To account for the anticipated increases, Council approved a recommended 2.0 percent wastewater rate increase in Fiscal Year 2015-16, the second of 10 annual 2.0 percent increases. The cumulative rate increase of 20.0 percent will allow for a gradual phase-in of rate increases necessary to fund these long-term capital costs to the rate payers who will be receiving the benefits of the improvements. CONCLUSION The Palo Alto Treatment Plant provides wastewater treatment and supplies recycled water to Mountain View through separate agreements. Staff is recommending approval of an addendum to the wastewater treatment agreement that will fund construction of a sludge dewatering and truck load-out facility, planning/design of the primary sedimentation tank rehabilitation, fixed film reactor rehabilitation, and the laboratory/environmental services building and extend the agreement through 2060. Staff is also recommending approval of an amendment to the recycled water supply agreement that authorizes payment of incremental recycled water production costs, establishes terms for funding recycled water system capital replacements and system reliability improvements,and extends the term of the agreement to December 31, 2060, concurrent with the term extension of the wastewater treatment agreement. ALTERNATIVES 1.Do not approve the amendment to the Basic Agreement. Staff will work with City of Palo Alto staff to identify alternative funding mechanisms. Approve Amendments to RWQCP Basic Agreement and Recycled Water Supply Agreement October 13, 2015 Page 9 of 9 2.Do not approve the amendment to the recycled water supply agreement. Staff will not extend the agreement or develop different financial terms per Council direction. PUBLIC NOTICING Agenda posting. Prepared by: Gregg A. Hosfeldt Assistant Public Works Director Approved by: Michael A. Fuller Public Works Director Daniel H. Rich City Manager GAH/7/CAM 761-10-13-15CR-E Attachment:1.Anticipated Future Projects City of Palo Alto (ID # 6700) City Council Staff Report Report Type: Informational Report Meeting Date: 4/11/2016 City of Palo Alto Page 1 Summary Title: Update on Recycled Water Planning Efforts and Groundwater Studies Title: Update on Recycled Water Planning Efforts and Groundwater Studies in partnership with Santa Clara Valley Water District From: City Manager Lead Department: Public Works Recommendation: This report is provided for information only and requires no Council action. Executive Summary The purpose of this report is to provide Council an overview of the advances being made to develop alternative water supplies, both regionally and in Palo Alto. Alternative water supplies include: Recycled Water from wastewater plants like Palo Alto’s; Purified Water from reverse osmosis plants like San Jose’s; Increased groundwater use coupled with groundwater recharge; Local rainwater/storm drain system harvesting; Sub-regional wastewater “scalping” plants for small communities/districts; and Individual building use of graywater and treated blackwater. Palo Alto is working through a variety of groups and committees to conduct planning for alternative water supplies. Key collaborators include Palo Alto’s five Partners in its Regional Water Quality Control Plant (RWQCP), the other recipients of San Francisco PUC (Hetch-Hetchy) water, and other agencies in Santa Clara and San Mateo Counties. An important next step is the execution of several contracts to explore the potential use of key alternative supplies. City of Palo Alto Page 2 The first such contract is a feasibility study on the installation of an advanced water purification system, such as reverse osmosis, at the RWQCP. The second would update the 1992 Recycled Water Master Plan by studying groundwater recharge potential for indirect potable reuse, further utilization of recycled water by more RWQCP Partners, connections with the Sunnyvale distribution system, and other potential recycled water activities. The Santa Clara Valley Water District would provide much of the funding for this work and help manage the various tasks. Background The RWQCP produces high quality recycled water which is a drought-proof, locally controlled, non-potable water supply. Recycled water will help reduce Palo Alto’s reliance on imported water supplies. The RWQCP currently produces recycled water in excess of the current demand; therefore staff is working to expand the recycled water demand and distribution system. As such, the City of Palo Alto certified an Environmental Impact Report on September 28, 2015, to expand recycled water through South Palo Alto to Stanford Research Park (CMR# 5962). This proposed expansion project is phase III of the 1992 Recycled Water Master Plan. Additionally, the Santa Clara Valley Water District is seeking alternative water supplies from local wastewater treatment plants. There are three wastewater treatment plants that discharge into San Francisco Bay within Santa Clara County: (1) San Jose/Santa Clara Regional Wastewater Facility (San Jose RWF), (2) City of Sunnyvale and (3) the RWQCP. The Water District already has partner agreements with San Jose RWF and the City of Sunnyvale. Recently the Water District approved a partner arrangement with the City of Palo Alto to fund eighty percent of the Advanced Water Purification System Feasibility Study Contract. The Feasibility Study will evaluate alternatives including treatment to reduce improve recycled water quality. As part of the effort to expand uses of recycled water, the City and Water District are developing a further understanding of the northwest county groundwater system to identify opportunities for enhanced groundwater recharge. Discussion For the past year staff have been working with the Santa Clara Valley Water District and the RWQCP partner agencies to research expanding recycled water use opportunities in Northwest Santa Clara County. The City is working on City of Palo Alto Page 3 updating the Recycled Water Master Plan to produce a strategic plan that will include the following information: Advanced Water Purification System Feasibility Study White paper on initial description of all water sources White paper on satellite and onsite treatment and reuse of black water, grey water, and stormwater Ongoing Palo Alto Potable Water Supply Resource Planning Mountain View Recycled Water Distribution Expansion and potential Sunnyvale Tie-In Palo Alto Recycled Water Phase III Expansion Project business plan development, preliminary design, and securing of outside funding Northwest Santa Clara County Groundwater Study for Indirect Potable Reuse (IPR) Potential Palo Alto RWQCP Partner Agencies Recycled Water Expansion In addition to the upcoming Recycled Water Strategic Plan, staff has been working on the following Recycled Water planning projects. Advanced Water Purification System Feasibility Study (contract in process) To expand the use of recycled water to include cooling towers and the irrigation of salt-sensitive landscaping, staff is working to reduce the total dissolved solids (TDS) concentration. Consequently, the City has partnered with the City of Mountain View and the Santa Clara Valley Water District to jointly fund a feasibility study for installation of an advanced water purification system (AWPS) at the RWQCP (CMR #6458). The AWPS would produce virtually TDS-free water which could be blended with the current recycled water to achieve a TDS concentration of 450 ± 50 parts per million (ppm). White Paper on Initial Description of all Water Sources At the 2015 Council Meeting approving of the Environmental Impact Report (EIR) for the Phase III Recycled Water Expansion, Council requested further information on water sources as they pertain to the City of Palo Alto. Attached is an initial description of all water sources (potable and non-potable) potentially available to the City of Palo Alto (Attachment A). Potable water refers to water that meets drinking water standards and is considered safe to drink; while non-potable water refers to water that does not meet drinking water standards and is considered City of Palo Alto Page 4 unsafe to drink. White Paper on Satellite and Onsite Treatment and Reuse City staff has been tracking satellite and onsite treatment systems and reuse. Staff will be collecting information on similar efforts regionally and nationally, including the development of standardized design criteria and regulations. Currently, in the RWQCP service area, there are a few facilities that have reused gray water and stormwater for irrigation purposes. Stanford is currently researching an onsite treatment system. Ongoing Palo Alto Potable Water Supply Resource Planning City staff is currently working on the Water Integrated Resources Plan (WIRP) that will discuss the variety of potable water supply resources and planning. The WIRP will include an assessment of alternative potable water supplies including the City’s current water supply source from the San Francisco Public Utilities Commission’s Region Water Supply System, groundwater, and treated water from the Santa Clara Valley Water District as well as demand-side management. Recycled water will be assessed both as a tool to reduce potable water demand and as a potential potable water supply through IPR and Direct Potable Reuse (DPR). The results of the groundwater study discussed below will be an important part of this analysis. All of these resources will be evaluated based on availability, cost, water quality, environmental impact and robustness in water emergencies and with respect to potential state regulations. Mountain View Recycled Water Distribution Expansion and Sunnyvale Tie-in Mountain View currently receives the majority of the recycled water produced at the RWQCP. Mountain View has hired a consultant to research expanding the recycled water distribution system within its city limits and is working with Sunnyvale for a potential recycled water intertie. The City of Sunnyvale is rebuilding their wastewater treatment plant and plans on treating the majority of their flow to purified water for future IPR. Therefore, their existing recycled water customers will need a new source of recycled water which will potentially be provided by the RWQCP via the Mountain View—Sunnyvale intertie. Palo Alto Recycled Water Phase III Expansion (RFP in process) The City is seeking a consultant to develop a business plan, preliminary design, and aid in securing funding for the Phase III Expansion project. This evaluation City of Palo Alto Page 5 will help Council decide on pursuing Phase III Expansion of the recycled water pipeline. The City has drafted interim Recycled Water Guidelines to help facilitate new recycled water customers who are on the existing recycled water line near the RWQCP. Northwest Santa Clara County Groundwater Study for Potential Indirect Potable Reuse (RFP in process) The purpose of the groundwater study is to compile baseline information on the current condition of aquifers in northwestern Santa Clara County and adjacent areas, including sources and quantities of recharge, groundwater pumping, and water quality. This information will be used to evaluate the feasibility of IPR of advanced treated recycled water and identify opportunities for increased groundwater utilization of recycled water. This study will also evaluate impacts to groundwater resources from potential pumping or recharge projects to ensure continued sustainable groundwater management. Palo Alto RWQCP Partner Agencies Recycled Water Expansion (RFP in process) City staff is seeking opportunities to expand recycled water within the RWQCP service area: East Palo Alto, Los Altos, Los Altos Hills, Mountain View, Stanford, and Palo Alto. The RWQCP’s NPDES permit requires the treatment plant to have a recycled water program. Current recycled water demands and distribution systems were identified in the Recycled Water Master Plan that was completed in 1992. Since 1992, prolonged drought and increased economic activity has opened up new potential demand for recycled water in partner cities, including potential groundwater recharge opportunities. Consequently, staff is pursuing a consultant to re-evaluate the current and projected recycled water demand in the RWQCP service area. Timeline Below is a tentative timeline for the recycled water projects: Cost sharing agreements with the Santa Clara Valley Water District and City of Mountain View for the Advanced Water Purification System Feasibility Study – April 2016 Recycled waterpipeline expansion within East Palo Alto, Palo Alto and Mountain View – Construction expected to begin in 2016 Advanced Water Purification System Feasibility Study expected to be City of Palo Alto Page 6 completed by end of 2016 Recycled Water Strategic Planning and Groundwater Assessment contract expected to be approved in summer 2016; the following deliverables will be completed by December 2018: o Phase III Recycled Water Expansion Business Plan, Preliminary Design & Secured Funding Effort Report o IPR Feasibility Evaluation o Conceptual Groundwater Model o Northwest Santa Clara County Groundwater Study for Potential IPR Report o Recycled Water Strategic Plan Report o Funding Identification & Application(s) o Public Outreach Resource Impact The current recycled water program consists of five hard-piped City facilities and more than 60 permitted users of the recycled water truck fill station. The RWQCP is the wholesaler of recycled water within its service area. The City is currently negotiating private hard-piped recycled water customers along the existing distribution line,expanding recycled water into East Palo Alto and in South Palo Alto including Stanford Research Park.. City staff anticipate construction of the East Palo Alto recycled water expansion to commence in 2016; therefore, staff is needed to help manage future contractors. As mentioned previously the City is planning on managing larger recycled water planning contracts to improve the water quality, update recycled water strategic plan, and investigate the possibilty of indirect potable reuse to recharge groundwater. The City is currently negotiating with the Santa Clara Valley Water District that they will fund eighty percent of the Advanced Water Feasibilty Contract and the City is still negotiating how much the SCVWD will fund of the second contract that will update the recycled water strategic plan. The City currently does not have a dedicated staff person who works on recycled water. In order to expand the City’s Recycled Water Program, a new Senior Engineer is required for future tasks including: Initiate and manage recycled water and water re-use consultant contracts Prepare a new Strategic Recycled Water Plan to complement the 1992 Recycled Water Master Plan City of Palo Alto Page 7 Determine the need and timing for appropriate groundwater recharge and storage of purified water, based on modelling of the San Francisquito Creek cone Determine best method of brine disposal and management to allow for the addition of advanced recycled water treatment processes to the RWQCP’s current treatment plant Develop RWQCP regulations and guidelines for the use and management of recycled water and purified water Serve as the principal point-of-contact for Partner Agencies to secure new or modified Recyled Water Service and determine amounts and timing of needs Serve as Public Health and Water Board Compliance Officer for water re- use programs, including inspection programs and cross-connection prevention programs Develop and manage Infrastrucutre Management System (IMS) for the Recycled Water wholesale water treatment and distribution system; track and manage system repairs and upgrades Develop Nutrient Credits and Offsets for Recycled Water Program Coordinate expanded water use and water quality reporting and monitoring with regulatory agencies, partner agencies, users, site supervisors, and customers. Manage expanded recycled water system maintenance and utility locating services.The new Senior Engineer position would be funded partially by the partner agences to the RWQCP, since it is a requirement in our discharge permit to have a recycled water program. Therefore Palo Alto will only fund one third of the Senior Engineer Position which costs approximately $220,000. The projects that the Senior Engineer will manage will also be funded through cost-sharing agreements with the SCVWD, grants and state revolving funds. Policy Implications Continuing the exploration of expanding recycled water is consistent with Council policy. The Recycled Water Program is consistent with the Council-adopted Water Integrated Resource Plan Guideline 3: “Actively participate in development of cost effective regional recycled water plans.” The project is consistent with Council direction to reduce imported water supplies and limit or reduce diversions from the Tuolomne River. City of Palo Alto Page 8 Council’s Sustainability Policy supports the development of recycled water, specifically in the Policy’s statement to “reduce resource use and pollution in a cost-effective manner while striving to protect and enhance the quality of the air, water, land and other natural resources.” The City’s Comprehensive Plan contains Natural Environment Goal N-4: Water resources are prudently managed to sustain plant and animal life, support urban activities and protect public health and safety. Specifically, Program N-26 addresses the use of recycled water: implement incentives for the use of drought- tolerant landscaping and recycled water for landscape irrigation. Environmental Review Environmental Impact Report for Phase III of the recycled water pipeline project was approved in September 2015. Future Environmental Review will be required if the expanded recycled water pipeline is constructed. City of Palo Alto (ID # 6471) City Council Staff Report Report Type: Action Items Meeting Date: 4/4/2016 City of Palo Alto Page 1 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 (Continued from March 14, 2016) From: City Manager Lead Department: Administrative Services Recommendation Staff recommends that the Council review, comment, and accept the Fiscal Year 2017 to 2026 General Fund Long Range Financial Forecast. Executive Summary The base Forecast and alternate scenarios provided below differ from those delivered to the Finance Committee (FC) on December 15, 2015 (Attachment A). This is a consequence of several factors: updated salary and benefit projections reflecting current estimates of negotiated compensation and benefit packages alternative assumption changes requested by the Finance Committee such as using a 3 percent cost increase for salaries in “out” years instead of 2 percent revised revenue projections based on updated and currently tracked levels most recent retirement assumptions provided by CalPERS current valuation numbers provided by the City’s Actuary and prior forecast numbers modified by staff These modifications are explained in the relevant sections of the report. The revised, base Fiscal Year (FY) 2017 to 2026 General Fund Long Range Financial Forecast (Forecast) projects a General Fund (GF) deficit of $0.64 million in FY 2017, a $0.20 million deficit in FY 2018, and a $0.08 million surplus in FY 2020. This contrasts with the December 5 Forecast which showed a GF surplus of $0.09 million in FY 2017, a shortfall of $0.63 million in FY 2018, City of Palo Alto Page 2 and a surplus of $0.9 million in FY 2020. The updated projection shows a financial shift downward as the City embarks on the FY 2017 budget process. The methodology utilized in December remains the same. Revenues have been updated to reflect actual activity in FY 2016 and then are grown by the Compound Annual Growth Rates (CAGR) recommended by the Finance Committee. Base expenditures reflect FY 2016 costs changed for one-time items, midyear adjustments, and through any other actions taken by Council this FY. Out year expenditures are modified according to the assumptions outlined in this report. The Forecast does not include: New staffing and program requests that will be considered in the FY 2017 Proposed Budget process One-time expenditures of $3.0 million approved in the FY 2016 Adopted Budget Cost implications that may arise in the FY 2017 Proposed Budget process such as: a shortfall in reimbursement from Stanford University for Fire services; support for the Parks Master Plan; and loans to the Palo Alto airport A shift of $2.4 to $2.7 million in annual streetlight and traffic signal costs from the Electric to General Fund as a consequence of State propositions Since the new base Forecast reveals a projected deficit of $0.6 million in FY 2017, the addition of costs without offsets to expenditures or new revenues will intensify the shortfall in FY 2017 and affect out year results. In addition, there are a number of longer-term financial challenges the GF still confronts. These include, for example: Rising pension and health care costs Funding long-term pension and retiree healthcare liabilities estimated at $439 million city-wide, of which $293 million is the General Fund share Funding Infrastructure Plan projects whose costs are rising above the original $126 million projection Solid tax revenues and a strong local economy show a rebounding from the Great Recession. The GF has experienced a series of year-end surpluses (primarily due to one-time events) and is projected to end FY 2016 with a $3.1 million surplus. While these results are welcome, rising benefit and other costs diminish a more positive outlook over the next 10 years. Since the December forecast, which cited upbeat economic indicators, several clouds have been hovering over the local, state, national and world economies making less clear the City of Palo Alto Page 3 direction they will take. These include: a severe drop in world stock markets, a stronger dollar weakening U.S. exports, further evidence of a slowing Chinese economy, sharply declining oil prices, and increased uncertainty about global growth. Economists appear to be evenly divided over the course of the economy with some citing strong employment data and rising wages while others are concerned about weaker corporate profits, lower exports, and looming interest rate hikes. Worried about the economy faltering, the Federal Reserve recently postponed two expected rate increases in 2016. Staff has added two scenarios requested by the FC to the LRFF that have adverse impacts on the GF’s bottom line (see table below). These include: 1) a poorly performing PERS pension portfolio which Bartel and Associates defines as returns of between 0.2% and 4.1%; and 2) a scenario with 3 percent salary increases for out years. Compared to the base forecast, the PERS scenario shows significant deficits in FYs 2020-22 and declining surpluses thereafter. By using a 3 percent inflator for salaries, and as expected, more and higher deficits occur compared to the base year. The higher salary increase, however, is less onerous than the pension and recession outcomes (see below). Comparison of Bottom Lines for Poor PERS Performance, 3 Percent Salary, and Recession Scenarios for Fiscal Year 2017-2026 LRFF Net One-Time Surplus/(Shortfall) Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CalPERS Poor Investment Return 0 (642) 15 (668) (1,883) (2,051) (1,595) (46) 2,573 3,638 7,916 Cumulative Net Operating Margin 7,256 3 Percent Salary Growth 0 (642) (199) (118) (1,016) (732) 397 2,935 5,539 6,620 10,966 Cumulative Net Operating Margin 23,750 Base Forecast - 90 (632) 880 508 1,335 2,836 5,591 8,157 9,739 12,681 Cumulative Net Operating Margin 41,185 Staff does understand the difficulty of forecasting a recession, but historical trends show that a downturn will occur during the term of this Forecast, especially since the country is nearly seven years into a recovery. By virtue of a recession’s unpredictability, local jurisdictions tend to react late to a downturn, so fiscal discipline and a focus on priorities is a recommended, pro- active strategy. For brevity purposes, staff has omitted much of the detailed background information that can found in the December 5 report (Attachment A). Focus is placed, instead, on the changes recommended by the Finance Committee, revised revenue and expense projections based on recent data, key assumptions, alternate scenarios to the base Forecast, and the financial challenges that lie ahead. City of Palo Alto Page 4 Forecast Discussion As shown in the table below, the revised, base Fiscal Year (FY) 2017 to 2026 GF Long Range Financial Forecast (Forecast) projects a deficit of $0.64 million in FY 2017, a shortfall of $ 0.20 million in FY 2018, and surpluses ranging from $0.24 to $12.1 million in the remaining years of the Forecast (with a small exception in FY 2020). The bottom line results through 2021 could easily move downward if additional expenses are added to the base or if revenues underperform. As we move out from FY 2022, surpluses are more significant but are of less predictive value. Over the term of this updated Forecast, a $31.7 million cumulative surplus is projected. This forecast does assume that the General Fund Budget Stabilization Reserve (BSR) is fully funded at the City Council approved target level of 18.5 percent. Fiscal Year 2017-2026 Long Range Financial Base Forecast Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Revenue $185,672 $193,953 $202,919 $211,814 $218,393 $225,361 $232,916 $241,044 $249,421 $256,757 $265,564 4.5%14.7%9.2%7.6%6.4%6.7%7.0%7.1%6.5%6.5% Total Expenditures $185,672 $194,594 $203,116 $211,035 $218,469 $225,124 $231,522 $237,091 $242,852 $249,079 $253,506 4.8%4.4%3.9%3.5%3.0%2.8%2.4%2.4%2.6%1.8% Net One-Time Surplus/(Shortfall)$0 ($641)($198)$779 ($76)$238 $1,395 $3,953 $6,569 $7,678 $12,058 Cumulative Net Operating Margin (One-Time)$31,755 Net Operating Margin $0 ($198)$779 ($854)$313 $1,157 $2,558 $2,616 $1,109 $4,381 Cumulative Net Operating Margin $11,861 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. The table above includes a calculation for the net operating margin which reflects the year over year change of surpluses and shortfalls. With the net operating margin, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears, and that each surplus is completely expended with ongoing expenditures. Based on these assumptions, the cumulative net operating margin, or ongoing surplus, during the forecast period is approximately $11.9 million, with the majority of these ongoing surpluses generated in the last five years of the Forecast. Consistent with the prior year’s forecast, the methodology for calculating changes from FY 2017 to FY 2026 are based on historical trends or using a Compounded Annual Growth Rate (CAGR). This methodology is adjusted somewhat based on staff’s knowledge of known one-time events. By using the historical average growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g. dot com bust and Great Recession) have been factored into the CAGR used to forecast future revenue streams. The CAGR approach tends to promote a positive forecast outlook since revenues are growing at a steady pace. For this reason, staff has generated a recession scenario (discussed below) beginning in the first half of Fiscal Year 2019. City of Palo Alto Page 5 For the past several years, the City has generated healthy surpluses which mainly consist of one-time items. In fact, staff is projecting a $3.1 million GF budget surplus for FY 2016. This surplus incorporates City Council authorized budget amendments to date and includes higher tax revenue estimates which are reflected in the 10 year Forecast. In addition, it contains all known expense increases such as pension rates from PERS and salary and benefit increases that have been authorized by Council for current negotiations with the City’s major bargaining units. What the Forecast does not include, however, are the following potential impacts, which can decrease or increase projected bottom line numbers in FY 2017 and beyond. They are: 1. Potential costs in excess of the Council approved $126 million Infrastructure Plan after full design; prevailing wage requirements; construction costs; and operating budget impacts from new facilities. The Public Safety Building and California Avenue Parking Garage are expected to exceed original estimates by up to $30 million 2. Potential acquisition of the downtown Palo Alto Post Office with associated operating expenses 3. Parks Master Plan expenditures to be determined in FY 2016 4. Operating and capital costs related to a new Junior Museum and Zoo facility 5. Capital costs related to City assets managed by non-profits such as Avenidas Senior Center, the Palo Alto History Museum, and the Ventura Child Care Center 6. Cubberley Community Center Master Plan expenses in excess of the dedicated Cubberley infrastructure funding as agreed to between the School District and the City 7. Construction and operating expenditure loans for the Palo Alto Airport 8. Potential loss in revenue from Stanford University for Fire services if there are no offsetting cost reductions. In FY 2016, a one year extension of the contract was approved at $6.5 million which reflected a $675,000 reduction in revenues as outline in CMR # 6502. 9. The Cadillac Healthcare Federal Excise Tax which was delayed with an expected to impact in calendar year 2020 10. Future changes to pension plan assumptions by CalPERS 11. CalPERS City contribution increases. This Forecast assumes CalPERS will meet its annual investment return goal of 7.5%. An alternative Forecast which assumes a poor investment return for the next ten years is provided below at the request of the FC 12. Higher Transient Occupancy revenues related to two new hotels opening on San Antonio Road 13. Tax revenue alignment with updated Comprehensive Plan 14. Ongoing labor negotiation changes 15. Golf Course construction and operating cost updates (previous estimate was based on 2012 costs) City of Palo Alto Page 6 16. Updated retiree medical annual payment and Unfunded liability (Bartel currently updating) Since the Great Recession, the City Council has approved various strategies to mitigate the rising cost of salaries and benefits. These include: 1. Employees paying their own CalPERS contribution (between 6 percent to 9 percent of salary) except for the members of the Fire Chiefs’ Association 2. Sharing future health plan cost increases 3. Creating a second pension tier that was followed by State implementation of a third tier effective January 1, 2013 4. Reducing professional development expenses 5. Freezing cost of living freezes for four years 6. Terminating the Variable Management Compensation Plan With the above actions, Council has reduced base costs and curbed the growth trajectory of future costs related to pensions and medical care. The same, proactive stewardship may be needed as the City deals with the potential costs cited above and a recession. A potential solution is to have labor groups share in the cost of the City's or employer pension contribution. Council has directed staff to explore options in the current labor negotiations. The following sections present analysis and assumptions for the major revenue and expenditure categories in the forecast. Based on new revenue data and input from the FC, staff has revised several projections. Revenues City of Palo Alto tax revenues continue to parallel a strong local economy. Robust residential and commercial property values, business driven transient occupancy and daily rates, and the emergence of new hotels have propelled key revenue sources upward since Fiscal Year 2013. Economic drivers such as low unemployment, strong incomes, vibrant business activity, and demand for Palo Alto property should continue to buttress revenue in the near future. The tables below highlight annual revenue projections and year over year percentage increase assumptions in the Forecast. Compared to FY 2016 Adopted Budget total sources of revenue are expected to increase by 4.1 percent or $7.8 million in FY 2017. Principal contributors to this growth come from property and transient occupancy taxes. City of Palo Alto Page 7 Fiscal Year 2017-2026 Long Range Revenue Forecast Revenue & Other Sources Adopted 2016 Projected 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CAGR 10 Years Sales Taxes $27,630 27,850 $28,668 $29,396 $29,912 $30,667 $31,448 $32,234 $33,062 $33,932 $34,851 $35,820 2.5% Property Taxes 35,067 35,074 37,853 40,343 42,970 45,655 48,375 51,064 53,837 56,680 59,582 62,583 6.0% Transient Occupancy Tax- General Purpose 13,766 15,317 15,137 15,648 16,190 16,761 17,363 17,979 18,607 19,249 19,909 20,582 3.0% Transient Occupancy Tax- Infrastructure 5,025 9,232 7,997 8,266 8,553 8,854 9,173 9,498 9,829 10,169 10,518 10,874 1.7% Documentary Transfer Tax 6,852 7,050 7,532 7,971 8,452 8,995 9,580 10,135 10,706 11,296 11,902 12,503 5.9% Utility Users Tax 11,189 10,495 11,209 11,811 12,147 12,423 12,581 12,782 13,097 13,531 13,986 14,393 3.2% Other Taxes and Fines 2,180 2,180 2,022 2,122 2,181 2,242 2,304 2,367 2,433 2,500 2,568 2,639 1.9% Subtotal: Taxes 101,709 107,198 110,418 115,557 120,405 125,597 130,824 136,059 141,571 147,357 153,316 159,394 4.0% Charges for Services 17,576 17,576 16,714 18,220 20,496 21,130 21,785 22,460 23,159 23,881 24,627 25,403 3.8% Stanford Fire & Dispatch Services 7,823 6,893 8,981 9,425 9,766 10,119 10,483 10,860 11,250 11,654 12,072 12,501 6.1% Permits and Licenses 8,211 8,211 8,670 8,896 9,128 9,365 9,609 9,859 10,116 10,379 10,649 10,926 2.9% Return on Investments 824 824 840 857 876 896 917 940 964 990 1,019 1,050 2.5% Rental Income 15,296 15,296 15,015 15,631 15,895 15,033 14,510 14,879 15,257 15,646 14,721 15,095 -0.1% From Other Agencies 373 373 333 337 341 345 349 354 358 363 367 372 0.0% Charges to Other Funds 11,930 11,930 11,550 12,123 12,593 13,153 13,686 13,863 14,282 14,618 15,001 15,388 2.6% Other Revenue 1,609 1,609 1,344 1,382 1,420 1,456 1,494 1,532 1,571 1,611 1,652 1,694 0.5% Total Non-Tax Revenue 63,642 62,712 63,447 66,870 70,514 71,497 72,833 74,747 76,957 79,140 80,109 82,430 2.8% Operating Transfers-In 18,589 18,589 20,088 20,491 20,895 21,299 21,704 22,110 22,517 22,924 23,332 23,740 2.5% BSR Contribution (One-Time)1,732 1,732 Golf Operating Loss Reserve Liquidation Total Source of Funds $185,672 $190,231 $193,953 $202,919 $211,814 $218,393 $225,361 $232,916 $241,044 $249,421 $256,757 $265,564 Revenue & Other Sources Adopted 2016 Projected 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Sales Taxes 0.8%2.9%2.5%1.8%2.5%2.5%2.5%2.6%2.6%2.7%2.8% Property Taxes 0.0%7.9%6.6%6.5%6.2%6.0%5.6%5.4%5.3%5.1%5.0% Transient Occupancy Tax- General Purpose 11.3%-1.2%3.4%3.5%3.5%3.6%3.5%3.5%3.5%3.4%3.4% Transient Occupancy Tax- Infrastructure 83.7%-13.4%3.4%3.5%3.5%3.6%3.5%3.5%3.5%3.4%3.4% Documentary Transfer Tax 2.9%6.8%5.8%6.0%6.4%6.5%5.8%5.6%5.5%5.4%5.0% Utility Users Tax -6.2%6.8%5.4%2.8%2.3%1.3%1.6%2.5%3.3%3.4%2.9% Other Taxes and Fines 0.0%-7.2%4.9%2.8%2.8%2.8%2.8%2.8%2.8%2.7%2.7% Subtotal: Taxes 5.4%3.0%4.7%4.2%4.3%4.2%4.0%4.1%4.1%4.0%4.0% Charges for Services 0.0%-4.9%9.0%12.5%3.1%3.1%3.1%3.1%3.1%3.1%3.2% Stanford Fire & Dispatch Services -11.9%30.3%4.9%3.6%3.6%3.6%3.6%3.6%3.6%3.6%3.6% Permits and Licenses 0.0%5.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6% Return on Investments 0.0%1.9%2.0%2.2%2.3%2.3%2.5%2.6%2.7%2.9%3.0% Rental Income 0.0%-1.8%4.1%1.7%-5.4%-3.5%2.5%2.5%2.5%-5.9%2.5% From Other Agencies 0.0%-10.8%1.2%1.2%1.2%1.3%1.3%1.3%1.3%1.3%1.3% Charges to Other Funds 0.0%-3.2%5.0%3.9%4.4%4.1%1.3%3.0%2.4%2.6%2.6% Other Revenue 0.0%-16.4%2.8%2.8%2.6%2.6%2.6%2.6%2.6%2.6%2.6% Total Non-Tax Revenue -1.5%1.2%5.4%5.4%1.4%1.9%2.6%3.0%2.8%1.2%2.9% Operating Transfers-In 0.0%0.9%2.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6% BSR Contribution (One-Time)0.0%-100.0% Golf Operating Loss Reserve Liquidation Total Source of Funds 2.5%2.0%4.6%4.4%3.1%3.2%3.4%3.5%3.5%2.9%3.4% City of Palo Alto Page 8 The graph below depicts historical performance and base model projections for the five major General Fund tax revenues. It includes 10 years of actual revenue history; projections for FY 2016 based on actual year-to-date data; and projections for FY 2017 through FY 2026. Per 2013 Finance Committee discussions and recommendations, staff has used historical, CAGR data to forecast revenues. The rates utilized are shown at end of table above and discussed in the tax revenue categories. In addition, analysis of other major revenue sources is presented. Sales Tax Sales taxes have risen from a low of $17.9 million in FY 2010 to a projected level of $28.4 million in FY 2016. Staff has factored into the forecast weakening receipts over the past several years from a few key generators as well as a drop-off in one-time use tax receipts from the Stanford Hospital construction projects. The latter change was discussed during the December 5 Finance Committee meeting. Staff remains concerned about the ongoing movement of tangible good purchases from brick and mortar stores to online vendors. This poses an important long-term threat. Evidence of this erosion was reported in a December 1, CNBC article, “According to the Adobe's Digital Index, total online sales on Cyber Monday rose 16 percent compared to last year, to $3.07 billion.” The article goes on to say that in-store data “showed sales were down an estimated 10.4 percent over Black Friday weekend” compared to the prior year. As reported to Council, there was a one-time tax windfall from one vendor in FY 2014 and a Government Accounting Standards Board tax accrual adjustment in FY 2015. In each year, sales City of Palo Alto Page 9 tax was reported at $29 million. As shown below, the FY 2016 and FY 2017 projections return to a more realistic level in 2017. Restaurant and auto sales are trending higher, while department store and electronic firm sales are trending lower. The State will terminate its “triple flip” program this Fiscal Year so the City will receive more timely payments. TABLE 1: SALES TAX REVENUE BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $22.0 $25.6 $29.4 $29.7 $28.4 $28.7 The CAGR applied to the period FY 2016 through FY 2025 is 2.5 percent which is in line with historical growth rates. Property Tax As the table below shows, since FY 2012 property taxes have risen substantially. Staff projects this source to grow at a 6.0 growth rate next ten years which is in line with historical trends. Recent and large purchases along Page Mill Road and in the Stanford Research Park as well as an acquisition of Epiphany Hotel ($71.6 million) evidence a compelling commercial real estate market. Other contributing factors include: single family home sales that have exceeded asking prices and the unleashing of latent property values from the sale of long held homes that were “shielded” from assessed value appreciation by Proposition 13. TABLE 2: PROPERTY TAX REVENUE BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $26.5 $28.7 $30.6 $34.1 $36.0 $37.9 The City’s property tax estimate for FY 2016 is based on quarterly information from the Santa Clara County Assessor’s Office. Projections beyond FY 2016 are based on a 5.7 percent growth rate consistent with the CAGR derived from historical data. Of note are the recent one-time payments of excess ERAF funds to the City amounting to some $0.9 million in FY 2015 and an estimated $0.9 million FY 2016. These are anticipated to end when property value increases are less heated. In FY 2015, the Administrative Services Department contracted with a firm to produce detailed reports on property taxes. The consultant’s reports have provided key insights into Palo Alto’s real estate market that supports property taxes growing at around 5-6 percent per year, including: Transient Occupancy Tax (TOT) Transient Occupancy Taxes continue to perform exceptionally well. Average daily room rates and occupancy levels continue to demonstrate considerable strength since FY 2011. Generally, occupancy levels between 80 and 85 percent indicate full occupancy. Current, average room City of Palo Alto Page 10 rates have reached an elevated level. A vibrant business environment has led to a surge in hotel bookings from San Francisco down through the Peninsula to San Jose. TABLE 3: TRANSIENT OCCUPANCY TAX BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016* 2017 General Purpose Revenue $9.7 $10.8 $12.3 $13.4 $14.3 $15.1 Infrastructure Revenue N/A N/A N/A $3.3 $7.7** $8.0** TOTAL $9.7 $10.8 $12.3 $16.7 $22.0 $23.1 Average Daily Room Rate $165 $182 $208 $208 $250 N/A Average Occupancy (percent) 79% 80% 79% 79% 75% N/A * Projected revenue based on trend and FY 2016 year-to date-data. Average Daily Room and Occupancy rates are year-to-date through January 2016. **These revenue figures are lower than in the December 5 Forecast due to a miscalculation. The new and lower numbers are reflected in the Forecast. This forecast includes estimated revenues for the Epiphany, the two new Hilton hotels, and the Westin Annex expected to open sometime this Fiscal Year. Revenues from the two new hotels planned for San Antonio Road are not incorporated. Receipts from the 2.0 percent TOT increase and from new hotels dedicated to infrastructure are shown as a combined line item in the table above. The CAGR applied to the period FY 2016 through FY 2026 is 3.0 percent which is lower than the 4.5 percent used in prior forecast. Staff believes that the current, elevated occupancy and room rates have resulted in a revenue base that will be difficult to grow by 4.5 percent in out years. Documentary Transfer Tax (DTT) After two solid years of unusually strong performance, the Documentary Transfer Tax will likely regress toward more normal levels in FY 2016. Although mid-January 2016 receipts are running 8.1 percent above the prior year, it is unlikely remaining revenue streams will equal the sizable, one-time transactions in the second half of last FY. During that period, there were $1.4 and $3.6 million receipts, primarily due to Hudson Pacific purchases of office space along the Page Mill corridor. Such acquisitions are unlikely to be duplicated in FY 2016. Based on current activity, staff expects $7.1 million in FY 2016 with a mild uptick in FY 2017 to $7.5 million. TABLE 4: DOCUMENTARY TRANSFER TAX BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $4.8 $6.8 $8.1 $10.1 $7.1 $7.5 City of Palo Alto Page 11 The CAGR applied to the period FY 2016 through FY 2026 is 5.9 percent, again, in line with prior year CAGR trends. Utility Users Tax (UUT) The Utility Users Tax forecast includes a 5 percent tax on water, gas and electric usage and a 4.75 percent tax on telephone activity. In FY 2015, the step down tax for large users of utilities was eliminated. Receipts anticipated from the UUT are based on the Utilities’ five-year revenue and rate projections. These estimates can change as the department presents its proposed rate plan to the Finance Committee and City Council during the budget process. With the drought and heightened water conservation efforts as well as lower gas prices and consumption, the utilities UUT is expected to decline from FY 2015 to FY 2016. Revenues in FY 2015 registered at $7.6 million and these are expected to drop to $7.1 million in FY 2016. Upward movement in revenues to $7.8 million is anticipated in FY 2017 with proposed rate increases. Telephone receipts have been increasing marginally since FY 2014 and are expected to continue the same trend despite the drop of 0.25 percent in the telephone UUT. Starting January 1, 2016, the City will be collecting new UUT revenue on pre-paid wireless cards and phone plans. This effort is being implemented via a State program. With no actual data, a modest revenue guesstimate has been included in the Forecast. Telephone revenue is expected at $3.4 million in FY 2016 and to move slightly higher in 2017. Total UUT revenues are projected at $10.5 and $11.2 million in FY 2016 and FY 2017, respectively. Other Taxes & Fines Based upon a review of historical collection patterns, budgeted revenue estimates will need to be reduced as part of the FY 2017 Proposed Operating Budget. As such, this forecast assumes a reduction of 7.2 percent, primarily attributable to lower parking violations and library fines. In the remaining years of the forecast, revenues are anticipated to increase between 2.7 and 4.9 percent. Charges for Services For FY 2017, total revenues in this category (excluding Stanford Fire & Dispatch Services) will decrease by 4.9 percent or $0.9 million compared to the FY 2016 Adopted Budget of $17.6 million. Factored into the revenue projection are one-time adjustments approved as part of the FY 2016 Adopted Budget. In addition, major components of this category are Golf Course receipts, Development Services fees, and outlined below are payments from Stanford University for fire and dispatch services of which a number of these areas present financial issues. City of Palo Alto Page 12 Golf Course revenues are decreased by approximately $0.6 million from the FY 2016 Adopted budget due to an anticipated closure for renovation beginning in FY2017 and returning to full operational status by FY2019. This significant change from a reduction in revenues to sizeable increases is a direct reflection of the anticipated opening of the golf course with growth of 9.0 percent in FY2018 and 12.5 percent in FY2019. These declines and subsequent increases in revenues are offset by changes in contract services expenses associated with operating the Golf Course. Since the State Water Board has not issued a required permit, it is unknown when construction on the course will begin, however, at the time of the printing of this report it is anticipated July 2016. As more information is refined, the anticipated revenue and expenditure implications will be factored into the development of the FY 2017 Proposed Operating Budget. Additional significant changes from the FY 2016 Adopted Budget reflect the technical correction of removing $0.3 million in estimated revenue for Fire Department plan check permits. As part of the FY 2015 Budget when the Development Services Department was created, these revenues were inadvertently budgeted both as part of the Development Services Department as well as the Fire Department. This change to eliminate the double budgeting of these revenues was also reflected in the FY 2016 Mid-Year Budget Review. Stanford Fire and Dispatch Service Charges On October 8, 2013, the City received a Notice of Termination letter from Stanford with the intention to terminate the contract with the City no sooner than one year and no later than two years from the date of the notice. During the termination period as well as in the past few months, the City continued to negotiate with Stanford to settle on a service level and cost. As outlined in CMR #6505 Stanford Fire Agreement 3rd Amendment, the Third Amendment provides for continuation of fire services for one year at a fixed fee of $6.5 million, while allowing the time needed to facilitate negotiation of financial terms for a new long term agreement. This Forecast assumes a Stanford payment at $8.3 million for Office of Emergency Services and fire services (excluding both Capital and vehicle reimbursements) and $0.7 million for Public Safety Dispatch Services a net reimbursement of $9.0 million. The $8.3 million reimbursement assumes the previous contract calculation, of 30.3% of the operating budget. Stanford and the City are in a mediation process to determine appropriate reimbursement for City fire services. Depending on the outcome of mediation significant adjustments to the assumed reimbursement level of fire services in the General Fund may be necessary. Permits and Licenses Revenue from permits and licenses has experienced consistent growth over the past several years. This results from increased development activity in the City. Based on year-to-date estimates, FY 2016 revenues are projected to reach the Adopted Budget revenue estimate of $8.2 million. In FY 2017, revenues in this category are expected to increase 5.6 percent. This is consistent with projected increases in salary and benefits which are a major component of the fees and cost recovery. Remaining years in the forecast assume 2.6 percent cost growth annually, consistent with the modeled growth in personnel costs. As stated in the FY 2016 Adopted Budget, the Planning and Community Environment and Development Services City of Palo Alto Page 13 departments are reviewing their cost recovery levels. Upon completion of this analysis, staff will evaluate changes in fees and then recommend adjustments to Council. Rental Income The largest source of rental income comes from the City’s Enterprise Funds and the Cubberley Community Center. Compared to the FY 2016 Adopted Budget, rental income will decrease from $15.3 million to 15.0 million in FY 2017. The decrease includes a projected loss of $500,000 in rental income due to Foothill College’s departure from Cubberley, however, at the time of the printing of this report, it is anticipated that the departure timeline will be slightly accelerated compared to these assumptions. Staff will pursue and recommend replacement tenants to offset this significant loss. The Forecast does assume that by Fiscal Year 2018 Cubberley will have new, paying tenants that increase income by $200,000. The Forecast’s out years assume 2.6 percent growth for all rental properties except for Refuse Fund rent which has been set by Council until FY 2021 to cover closing costs. Charges to Other Funds Approximately 86 percent of this category is General Fund administrative cost plan charges to the Enterprise and Internal Service Funds. Internal support departments such as ASD, HR, and Council Appointees provide services to these funds. The charges for Fiscal Year 2017 are determined based on actual services provided in Fiscal Year 2015. The FY 2017 projected amount is $11.5 million, a decrease of 3.2 percent, from the FY 2016 Adopted Budget. This is attributable to internal support departments providing more support to General Fund departments in Fiscal Year 2015. The forecast includes increases ranging between 2.6 to 4.9 percent each year based primarily on assumed increases in salary and benefit costs. Operating Transfers In Operating Transfers principally consist of equity transfers from the Electric and Gas funds. In accordance with a methodology approved by Council in June 2009, the equity transfer is calculated by applying a rate of return to the capital asset base of the Electric and Gas funds. Using the Utility Department’s projections from the Electric and Gas Five Year Financial Forecasts, the equity transfer from the Electric and Gas funds are projected to increase from $17.3 million in FY 2016 to $18.8 million in FY 2017 (8.4 percent); and then increase annually by 2.3 percent over the forecast period. The higher increase in FY 2017 reflects updated Gas Fund capital asset data while the subsequent years reflect the average annual adjustment in the equity transfer since 2009. Overall Operating Transfers are estimated to increase to $20.1 million in FY 2017, an increase of $1.5 million from the 2016 Adopted Budget level of $18.6 million. Expenditures In developing the FY 2017 Forecast expenditure budget, expenditure categories have been adjusted by removing FY 2016 Adopted Budget one-time expenditures and updating major cost elements such as salary and benefits costs. The tables below display the General Fund expense City of Palo Alto Page 14 forecast. Compared to FY 2016 Adopted Budget, FY 2017 expenditures are estimated to increase by $8.4 million or 4.5 percent. This is due to increased salary and benefits, an increased transfer to infrastructure, and allocated charges costs from Enterprise Funds and Internal Service Funds. Fiscal Year 2017-2026 Long Range Expenditure Forecast Expenditures & Other Uses Adopted 2016 Projected 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CAGR 10 Years Salary 56,015$ 55,677$ 70,971$ 73,686$ 75,903$ 78,034$ 80,056$ 81,876$ 83,711$ 85,559$ 87,429$ 89,321$ 4.8% Benefits 56,633 56,296 48,550 51,273 54,844 58,517 61,026 63,427 65,188 66,806 68,808 68,927 2.0% Subtotal: Salary & Benefits 112,648 111,973 119,521 124,959 130,747 136,551 141,082 145,303 148,899 152,365 156,237 158,248 3.5% Contract Services 17,362 17,362 14,474 15,739 16,252 16,653 17,069 17,497 17,937 18,387 18,850 19,324 1.1% Supplies & Material 3,664 3,664 3,595 3,698 3,814 3,913 4,014 4,118 4,225 4,335 4,447 4,562 2.2% General Expense 4,725 4,725 4,718 4,835 4,957 5,083 5,211 5,343 5,478 5,616 5,759 5,905 2.3% Cubberley Lease 5,584 5,584 5,751 5,924 6,101 6,284 6,473 6,667 6,867 7,073 7,285 7,504 3.0% Debt Service 431 431 432 432 431 0 0 0 0 0 0 0 -100.0% Rents & Leases 1,493 1,493 1,531 1,571 1,611 1,653 1,696 1,739 1,784 1,830 1,878 1,927 2.6% Facilities & Equipment 622 622 497 511 524 538 552 566 581 596 612 628 0.1% Allocated Charges 16,433 16,433 18,028 18,526 18,997 19,489 19,993 20,511 21,012 21,557 22,115 22,689 3.3% Total Non Sal/Ben Before Transfers 50,314 50,314 49,027 51,236 52,689 53,613 55,009 56,442 57,884 59,395 60,946 62,538 2.2% Operating Transfers-Out 1,834 1,834 1,834 2,094 2,129 2,169 2,204 2,239 2,045 2,085 2,126 2,168 1.7% Transfer to Infrastructure - Base 15,852 15,852 16,216 16,563 16,918 17,283 17,657 18,041 18,435 18,839 19,254 19,679 2.2% Transfer to Infrastructure - TOT 5,025 9,232 7,997 8,266 8,553 8,854 9,173 9,498 9,829 10,169 10,518 10,874 1.7% Total Use of Funds $185,672 $189,204 $194,594 $203,116 $211,035 $218,469 $225,124 $231,522 $237,091 $242,852 $249,079 $253,506 3.0% Expenditures & Other Uses Adopted 2016 Projected 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Salary N/A -0.6%27.5%3.8%3.0%2.8%2.6%2.3%2.2%2.2%2.2%2.2% Benefits N/A -0.6%-13.8%5.6%7.0%6.7%4.3%3.9%2.8%2.5%3.0%0.2% Subtotal: Salary & Benefits N/A -0.2%3.6%4.8%4.1%3.9%3.9%3.8%3.8%3.8%3.8%3.8% Contract Services N/A 0.0%-16.6%8.7%3.3%2.5%2.5%2.5%2.5%2.5%2.5%2.5% Supplies & Material N/A 0.0%-1.9%2.9%3.1%2.6%2.6%2.6%2.6%2.6%2.6%2.6% General Expense N/A 0.0%-0.2%2.5%2.5%2.5%2.5%2.5%2.5%2.5%2.5%2.5% Cubberley Lease N/A 0.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0% Debt Service N/A 0.0%0.3%0.0%-0.3%-100.0%N/A N/A N/A N/A N/A N/A Rents & Leases N/A 0.0%2.5%2.6%2.6%2.6%2.6%2.5%2.6%2.6%2.6%2.6% Facilities & Equipment N/A 0.0%-20.1%2.8%2.6%2.6%2.6%2.6%2.6%2.6%2.6%2.6% Allocated Charges N/A 0.0%9.7%2.8%2.5%2.6%2.6%2.6%2.4%2.6%2.6%2.6% Total Non Sal/Ben Before Transfers N/A 3.1%-7.6%3.9%2.4%2.6%1.7%2.6%2.6%2.6%2.6%2.6% Operating Transfers-Out N/A 0.0%0.0%14.2%1.7%1.9%1.6%1.6%-8.7%1.9%2.0%2.0% Transfer to Infrastructure - Base N/A 0.0%2.3%2.1%2.1%2.2%2.2%2.2%2.2%2.2%2.2%2.2% Transfer to Infrastructure - TOT N/A 83.7%-13.4%3.4%3.5%3.5%3.6%3.5%3.5%3.5%3.4%3.4% Total Use of Funds N/A 1.9%2.8%4.4%3.9%3.5%3.0%2.8%2.4%2.4%2.6%1.8% Salary and Benefits The table above depicts the salaries and benefits costs for the next ten years. Over the Forecast period, the salaries and benefits cost gradually increase as a percentage of the total expenditure budget. In FY 2017, salaries and benefits costs represent 61.3 percent of the total use of funds budget while in FY 2026, the same costs represent 62.4 percent of the budget. During the same period, benefit costs as a percentage of total salaries and benefits costs increase from 40.4 percent in FY 2017 to 43.6 percent in FY 2026. This is compared to the FY2016 Adopted Budget which reflects benefits of 50.3 percent of total salaries and benefits. Over the Forecast period (from FY2017 to FY2026), salaries and benefits are projected to grow approximately an average of 3.5 percent annually. This compounded growth is less than that estimated in the prior year Forecast due to lower estimated City pension contributions in the out-years of the Forecast. The reason for this change is discussed in more detail below. The following sections describe the assumed increases in salary and benefits costs and depict the reasons for the faster increasing benefits versus salaries costs. City of Palo Alto Page 15 Salary The City is currently in negotiations with all of its major labor units. The base Forecast includes projected costs for salary and benefits increases reflecting the current status of negotiations and by 2 percent in the out years. The Forecast also assumes step increases consistent with applicable MOUs and merit increases for Management and Professional employees. AS requested by the Finance Committee a scenario with 3 percent growth in the out years can be found later in this report. Benefits Pension The Forecast includes pension rates from CalPERS as of the June 30, 2014 valuation for the City’s Miscellaneous and Safety plan and as updated by Bartel Associates (Bartel), the City’s actuary. Staff asked Bartel to update the pension rates based on the latest available information from CalPERS based on the actuarial valuations as of June 30, 2014 which became available at the start of the year. CalPERS releases the latest valuation, staff updated the pension costs for the Fiscal Year 2017 through FY 2022 budget and in the out years of the forecast period used Bartels assumed rate of growth on CalPERS rates. In the December 2015 Forecast, staff relied on the figures from Bartel based on the latest information at that time. Once As shown in the table below, the FY 2017 pension contribution rates for the Miscellaneous and Safety plans, increased from the current year. For the Miscellaneous Plan, the projected pension contribution rate increase is 1.2 percentage points from the FY 2016 rate of 27.7 percent to a FY 2017 rate of 28.9 percent reflecting growth of approximately 4%. For the Safety Plan, the projected pension contribution rate increase is 3.5 percentage points, from the FY 2016 rate of 41.9 percent to a FY 2017 rate of 45.4 percent. The table below shows the pension contribution rates from FY 2018 through FY 2026. TABLE 5: PENSION RATES BY PLAN (FISCAL YEAR) Pension Plans 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Miscellaneous 27.7% 28.9% 31.0% 33.1% 35.2% 35.9% 36.4% 36.2% 36.0% 35.8% 32.6% Safety 41.9% 45.4% 48.8% 52.1% 55.5% 56.4% 57.3% 56.9% 56.5% 56.0% 55.7% The City pension contribution rates assumed in this Forecast are substantially lower for the last few years of the Forecast period than assumed in the prior year Forecast due to a change in methodology for projecting the rates. Last year, staff used a linear extrapolation of rate increases provided by CalPERS during the first four years (CalPERS only provides rates for five fiscal years). This year, staff asked Bartel and Associates to provide a projection of the City Contribution rates as presented to the Finance Committee in November. To illustrate the impact of this change in methodology, the last Forecast assumed for FY 2025 a 42.6% City contribution rate for Miscellaneous employees and a 64.3 % City contribution rate for Safety City of Palo Alto Page 16 employees. The lower City contribution rates for this Forecast resulted in lower overall projected benefits costs. The CalPERS Board recently approved a “de-risking” policy of its investment portfolio in order to reduce the assumed investment return of 7.5 percent to 6.5 percent over a 20 year period. With this policy, CalPERS will only reduce the investment return assumption in years with investment returns higher than 11.5 percent in intervals and with annual caps. The Board, however, is scheduled to revisit this policy in February 2018. Whenever the assumed investment return is lowered, it typically results in higher City contribution rates and costs. Retiree Healthcare This Forecast includes the Annual Required Contribution (ARC) per the May 2014 actuarial valuation based on information as of June 30, 2013, (accepted by the City Council on June 9, 2014) for the City’s retiree healthcare plan and as updated by Bartel. Bartel’s update to the last actuarial valuation assumes the latest CalPERS mortality rate assumptions, incorporates the investment gain for the Retiree Healthcare Trust Fund as of June 30, 2015, and assumes a lowering of the assumed investment return assumption from 7.61% to 7.25%. Currently, Bartel is preparing the Retiree Healthcare valuation as of June 30, 2015. Staff will incorporate the findings of the valuation as part of the FY 2017 Proposed Budget as appropriate. The table below details Bartel’s estimate for the City’s annual Retiree Healthcare contribution by the General Fund and all other funds for the next ten years. TABLE 6: RETIREE HEALTHCARE ANNUAL REQUIRED CONTRIBUTION (IN MILLIONS BY FISCAL YEAR) Fund 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 General Fund $10.0 $10.9 $11.2 $11.6 $12.0 $12.4 $12.8 $13.2 $13.6 $14.0 $14.5 Non-General Funds $4.8 $5.2 $5.4 $5.6 $5.8 $5.9 $6.1 $6.3 $6.6 $6.8 $7.0 TOTAL $14.8 $16.1 $16.6 $17.2 $17.8 $18.3 $18.9 $19.5 $20.2 $20.8 $21.5 On June 9, 2014, City Council accepted the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013 and approved full funding of the Annual Required Contribution (ARC) for Retiree Healthcare for FY 2015 and FY 2016. As documented in the report (CMR #4891), which recommended approval of full payment of the ARC, the primary reason for the increased ARC was the inclusion of a new actuarial standard regarding the implied subsidy of healthcare premiums of active employees in relationship to healthcare premiums for retirees. The implied subsidy for FY 2015 was $1.9 million for all funds. In preparing the FY 2015 CAFR, staff worked closely with the City’s actuary, the managers of the City’s trust fund for Retiree Healthcare, and the City’s external auditor concerning the implied subsidy in the Retiree Healthcare Fund. After many discussions, staff realized that the implied subsidy budgeted in the Retiree Healthcare Fund should have been budgeted as a contribution from the City’s healthcare premiums for active employees. However, the FY 2015 budget had fully funded the City’s healthcare premiums of approximately $17.4 million for active City of Palo Alto Page 17 employees. Therefore, the cost of healthcare premiums related to the implied subsidy in the amount of $1.9 million was inadvertently budgeted in two places. For FY 2015, the savings of healthcare premiums related to the implicit subsidy remained in the General Benefits Fund for future use. For FY 2016, staff brought forward recommendations in the FY 2016 Midyear Budget Review report to correct departmental budgets regarding the implied subsidy. Starting with this Forecast and the FY 2017 Budget, staff correctly budgeted for the implied subsidy for active employees healthcare premiums. Healthcare Consistent with the previous Forecast and as a result of the last labor agreement between the City and the Service Employees International Union (SEIU), the City’s contribution amount towards medical costs for SEIU employees is based on a flat contribution from the City with the employee contributing towards the remaining medical plan premium. This flat contribution towards medical costs also is used for the Management and Professional employees. All other labor groups eligible for medical benefits will remain on the 90/10 contribution structure until new agreements are reached. This Forecast assumes an annual health care cost inflator of 8 percent for the labor groups on the 90/10 medical benefit structure, and a 4 percent annual health care cost inflator for the labor groups on the flat rate contribution structure. Consistent with the previous Forecast and with historical trends, the 2017-2026 LRFF assumes a 4 percent increase for dental and vision costs for the out-years. Contract Services The FY 2016 Adopted Budget included $17.4 million to fund contract services of which approximately $2.4 million was for one-time items. These items include: $0.3 million for trash receptacles on University Avenue; $0.3 million for the Fry’s Master Plan; and $0.3 million for the continuation of services at the Palo Alto Animal Shelter as well as the Shelter’s transitioning its operations to a non-profit. In addition, the FY 2016 Adopted Budget assumed the Golf Course would be closed during the second half of the fiscal year. Due to continued delays, however, in securing the required permits to begin the Golf Course Reconfiguration Project (detailed in CMR #6335), this Forecast assumes the project will begin in early FY 2017. As a result, contractual expenses related to the Golf Course are anticipated to be reduced by approximately $0.5 million from the FY 2016 Adopted Budget level. This reduction in Golf Course expenses is offset by a reduction in Charges for Services of approximately $0.6 million. In FY 2018, upon the assumed completion of the Golf Course Project, contractual expenses will increase by approximately $0.9 million along with estimated revenues. As noted in the discussion of General Fund revenues, staff is currently undergoing an revised analysis of the impacts of the July 2016 anticipated closure date and will provide updated adjustments as appropriate as part of the FY 2017 Proposed Budget process. City of Palo Alto Page 18 As discussed with the Finance Committee in October, staff continues to look for implementing alternative service delivery models such as partnering with a non-profit agency to provide animal services or identifying a partner for the City’s swim program. For the FY 2017 Forecast Budget year, $0.1 million has been added for the maintenance of the Magical Bridge playground and parkland maintenance. In the out-years of the Forecast, a 2.6 percent growth factor for contract services is assumed. This is aligned to the 20 year historical average of the San Francisco Metropolitan Statistical Area Consumer Price Index – All Urban Consumers of 2.6 General Expense This category includes costs for travel and meetings, telephone and non-City utilities, contingency accounts, subsidies and grants provided through the Human Services Resource Allocation Process (HSRAP), and bank card service charges. These costs remain flat over the near future at 4.7 million. Except for the Cubberley lease, annual increases of between 2.5 and 2.6 percent. On January 1, 2015, the City and Palo Alto Unified School District (PAUSD) agreed to an extension of the Cubberley Lease for five years. As part of the lease agreement, the City Council approved creation of a fund for Cubberley infrastructure improvements. The lease called for $1.9 million to be transferred to the Cubberley Property Infrastructure Fund. Therefore, the $1.9 million is classified as an Operating Transfer Out (discussed below). The FY 2017 Forecast Budget includes $5.8 million for Cubberley Lease payments. In accordance with the lease agreement, a 3.0 percent annual CPI increase for the lease payments to the PAUSD is projected. Although the lease agreement is five years, for planning purposes this Forecast assumes the agreement will continue through FY 2026. Rents & Leases Rent and Lease expenses for FY 2017 are estimated to increase by $38,000 from the FY 2016 adopted level of $1.5 million. The largest expense in this category is $1.1 million for the Development Services Center (DSC). From FY 2018 forwards, this expense is expected to increase by 2.6 percent per year. The continued availability of the current space for the DSC will be revisited in the next year and, depending upon the potential acquisition of the downtown post office, the lease cost could change. Facilities & Equipment Facilities and Equipment expenses for FY 2017 are projected to decrease by 20.1 percent, or $0.1 million, as compared to the FY 2016 Adopted Budget, due to the elimination of one-time funding. One-time items funded during FY 2016 include the purchase of 30 AEDs ($50,000), community center furniture replacement ($25,000), and the build out of office space at the Development Center ($20,000). After eliminating one-time items, projected expenses in this category will remain fairly consistent at $0.5 million in FY 2018 and beyond. Consistent with City of Palo Alto Page 19 the 20-year CPI for the San Francisco San Jose Metropolitan Statistical Area, the forecast assumes a 2.6 percent annual increase starting in FY 2018. Allocated Charges Allocated Charges represent expense allocations by the City’s enterprise and internal services funds for services provided to General Fund departments. For FY 2017, these charges are estimated at $18.1 million including utilities usage (24.2 percent or $4.4 million), liability insurance (7.5 percent or $1.4 million), technology costs (33.9 percent, or $6.1 million), vehicle equipment and replacement costs (27.7 percent or $5.0 million), and other costs (6.7 percent, or $1.2 million). The FY 2017 charges of the forecast updates the revenue and expense for these cost plans based on the most current cost data available at the time of Forecast development. Growth of 2.6 percent is anticipated in the out-years. Operating Transfers Out Operating Transfers Out includes transfers from the General Fund to the Debt Service Fund, Technology Fund, and Airport Fund. Fiscal Year 2016 year-end projected transfers out total $1.8 million, and are expected to remain at that level for FY 2017. In FY 2018, the transfer level is anticipated to increase by approximately $0.3 million which is attributable to debt service payments for the Golf Course Reconfiguration project estimated at $0.5 million annually. This is offset by elimination of a one-time transfer to the Airport Fund of $0.3 million. Once Golf Course construction and net operation costs are updated these numbers will change. Based on the most current information, it is anticipated that as part of the FY17 Budget, a one-time recommendation to increase the General Fund loan to the Airport Fund will be recommended. Transfer for Capital and Infrastructure Plan Projects In FY 2016, the adopted General Fund transfer to the Capital Improvement Fund is $19.0 million. This includes a GF base transfer of $14.0 million and an estimated $7.7 million transfer resulting from TOT revenues generated by the two percentage point TOT increase (started January 1, 2015) and revenue from new hotels. This transfer is consistent with City Council direction to dedicate these TOT revenues to the City’s $126 million Infrastructure Plan. In the out-years of the forecast, the TOT-associated transfer is anticipated to increase at a CAGR of 3.6 percent. These additional increases will help to somewhat to offset rising costs of Infrastructure Plan projects. In addition, the base transfer to the Capital Improvement Fund is anticipated to increase by 2.6 percent each year. Finally, this category includes the $1.9 million transfer to the Cubberley Property Infrastructure Fund. This transfer remains flat in all out- years of this Forecast. As in past years, the chief contributors to increased expense are salaries and benefits. In addition, higher costs are a consequence of transfers out related to the Infrastructure Plan which are, in turn, supported by newer TOT revenues. City of Palo Alto Page 20 Alternative Fiscal Year 2017-2026 Long Range Financial Forecast Scenarios At the request of the Finance Committee, staff has generated a Forecast scenario with a poor CalPERS pension investment return and a scenario with salary growth of 3 percent in the out years of the forecast. In addition, staff is providing the third scenario with a projected recession beginning in FY 2019. The likelihood of a recession during the next ten years is strong. Scenario 1: CalPERS Poor Investment Return As discussed with the City Council in September 2015 and the Finance Committee in November 2015 and December 2015, the actuarial firm, Bartel Associates, provided the City with a continuous, poor CalPERS investment performance scenario. Weak portfolio performance, which Bartel defines as returns between 0.2% and 4.1%, results in significantly higher employer contribution rates. The table below shows the Bartel projected City pension contribution rates by plan based on modest returns of 7.0%. TABLE 7: PENSION RATES BY PLAN (FISCAL YEAR) WITH POOR INVESTMENT RETURNS Pension Plans 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Miscellaneous 27.7% 28.9% 30.7% 34.8% 37.3% 38.3% 39.5% 40.3% 40.0% 39.7% 36.7% Safety 41.9% 45.4% 48.4% 55.2% 59.2% 61.3% 63.5% 64.9% 64.4% 63.9% 63.4% These higher annual pension rates would increase expenditures by a total of $24.5 million over the Forecast period compared to the base model. General Fund deficits and surpluses would move in a more negative direction. For example, in FY 2019 a $0.8 million surplus would transform into a deficit of $0.7 million, a $1.5 million negative swing. Fiscal Year 2017-2026 Long Range Revenue Forecast – CalPERS Poor Investment Return Alternate Model Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Revenue $185,672 $193,953 $202,919 $211,814 $218,393 $225,361 $232,916 $241,044 $249,421 $256,757 $265,564 Total Expenditures $185,672 $194,595 $202,904 $212,482 $220,276 $227,413 $234,512 $241,089 $246,848 $253,119 $257,648 Net One-Time Surplus/(Shortfall)$0 ($642)$15 ($668)($1,883)($2,051)($1,595)($46)$2,573 $3,638 $7,916 Cumulative Net Operating Margin (One-Time)$7,256 Net Operating Margin $0 $15 ($683)($1,215)($168)$456 $1,550 $2,619 $1,065 $4,278 Cumulative Net Operating Margin $7,916 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. During the Forecast period, the net operating margin fluctuates between positive $4.3 million and negative $1.2 million. This scenario keeps base model revenues constant since they reflect staff’s best estimates and Finance Committee direction on growth trends. City of Palo Alto Page 21 Scenario 2: 3% Salary Growth Alternate Forecast At the December 2015 Finance Committee, staff was asked to model 3 percent increases in salary growth beginning in FY 2019 compared to the 2 percent base case. This 1 percent increase results in additional costs of $8.0 million. Pension rates from the base Forecast were applied against salaries inflated by 3 percent. Fiscal Year 2017-2026 Long Range Revenue Forecast – 3 Percent salary growth Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Revenue $185,672 $193,953 $202,919 $211,814 $218,393 $225,361 $232,916 $241,044 $249,421 $256,757 $265,564 Total Expenditures $185,672 $194,595 $203,117 $211,931 $219,409 $226,094 $232,519 $238,109 $243,882 $250,137 $254,568 Net One-Time Surplus/(Shortfall)$0 ($642)($199)($118)($1,016)($732)$397 $2,935 $5,539 $6,620 $10,996 Cumulative Net Operating Margin (One-Time)$23,780 Net Operating Margin $0 ($199)$81 ($898)$284 $1,130 $2,538 $2,604 $1,080 $4,376 Cumulative Net Operating Margin $10,996 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. In this scenario, deficits occur through FY2021 with much lower surpluses beginning in FY 2022. As with Alternative Scenario 1, this model holds base model revenues constant. Fiscal Year 2019 Recession Alternate Forecast As described previously, the assumptions included in this Forecast are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments based on knowledge of one-time and future events. The adjusted CAGR model factors in the impact of prior recessions, but does not make assumptions about when a recession may occur. Typically, the average business cycle lasts six years and the period between the last two recessions was about ten years. Below, an alternative Forecast model is presented which assumes a recession beginning in FY 2019 and shows its impacts. This model adjusts projected tax revenues and decreases the rate of growth for certain non-salary expenditures which would be expected when the next downturn occurs. The model is presented for information purposes and does not purport to accurately forecast a recession. Assuming onset of a recession in FY 2019 (see table below), a significant annual deficit of $10.2 million would occur in FY 2019. This scenario only demonstrates the decline in revenues with no actions to reduce expenditures. Naturally, the Council and City management would take action, as in the past, to address a recession’s impacts. City of Palo Alto Page 22 Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Revenue $185,672 $193,113 $200,975 $199,246 $199,565 $202,219 $211,028 $220,604 $230,564 $239,760 $250,867 Total Expenditures $185,672 $195,241 $204,677 $212,420 $220,836 $227,292 $233,636 $239,351 $245,544 $251,718 $257,997 Net One-Time Surplus/(Shortfall)$0 $91 ($3,702)($10,179)($21,271)($25,072)($22,607)($18,747)($10,557)($11,958)($1,766) Cumulative Net Operating Margin (One-Time)-$125,769 Net Operating Margin $0 ($3,702)($6,477)($11,092)($3,802)$2,465 $3,860 $8,190 ($1,401)$10,192 Cumulative Net Operating Margin -$1,766 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. The recessionary model assumes a reduction in major tax revenues although they are anticipated to decline at a lower rate than those in the Dot.Com bubble and Great Recession. Conclusion For ease of comparison the Table below shows the bottom line results for the two scenarios requested by the FC and staff’s base scenario (modified based on FC input). Comparison of Bottom Lines for Base, Poor PERS Performance and 3 Percent Salary Scenarios for Fiscal Year 2017-2026 LRFF Net One-Time Surplus/(Shortfall) Adopted 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CalPERS Poor Investment Return 0 (642) 15 (668) (1,883) (2,051) (1,595) (46) 2,573 3,638 7,916 Cumulative Net Operating Margin 7,256 3 Percent Salary Growth 0 (642) (199) (118) (1,016) (732) 397 2,935 5,539 6,620 10,966 Cumulative Net Operating Margin 23,750 Base Forecast - 90 (632) 880 508 1,335 2,836 5,591 8,157 9,739 12,681 Cumulative Net Operating Margin 41,185 The base Long Range Forecast, which includes a 2 percent increase in salaries in out years, projects a GF deficit of $0.64 million in FY 2017 and a tiny deficit of $0.20 million in FY 2018 and again in FY 2020 of $0.1 million. Otherwise, there are positive bottom lines through FY 2026, albeit with rather marginal surpluses in Fiscal Years 2019 and FY 2021. Staff recommends pre- empting the FY 2017 shortfalls during the FY 2017 budget process with one-time solutions and while it works on options and recommendations that will mitigate any ongoing deficits. The Alternative Forecast Models demonstrate the City’s acute vulnerability to poor pension portfolio performance by CalPERS and to a lesser extent with 3 percent salary increases in out years. Having healthy reserves, a separate pension trust plan, and exerting fiscal discipline in the FY 2017 Budget process would help to offset some of the negative impacts revealed in the table above. Moreover, they would allow the City flexibility and time to plan for further, potential budget adjustments. To address the anticipated higher pension costs, staff will bring forth a recommendation as part of the Fiscal Year 2017 budget to establish a 115 Supplemental Pension Trust Fund with one- City of Palo Alto Page 23 time sources. The funds in the pension trust fund can be used in the future to alleviate rising pension costs for one or more fiscal years. Although revenue receipts have improved considerably since the Great Recession, the City continues to face numerous funding challenges such as: Infrastructure rehabilitation costs exceeding original estimates Rising benefits costs; and unfunded long-term pension and retiree healthcare liabilities Funding a plethora of initiatives related to potential acquisition of the downtown Palo Alto Post Office; non-profits such as the History Museum/Roth Building and Avenidas Senior Center; the Cubberley Community Master Plan; and the Parks Master Plan retaining and attracting a talented workforce that is responsive to the City Council priorities and community expectations Staff will explore options to reduce the unfunded liabilities with ongoing contributions once funding gaps are addressed in the General Fund. As the City addresses the short and long-term issues in this report, it needs to continue reviewing its operations and service delivery options. Over the last few years, the City has outsourced services to the private sector and has entered into negotiations with the non-profit sector for public-private partnerships. Staff is engaged in finding a partner to effectively and efficiently operate Animal Services and is exploring different service delivery options for the City’s aquatic operations. City staff will review cost recovery levels for services provided to the residents and businesses. During 2016, staff will continue to bring forward recommendations to increase fees for the Planning and Community Environment Departments as well as other departments to align the fees with the cost recovery goals set by the City Council approved User Fee Cost Recovery Level Policy. Based on a recent analysis of incoming 2 percent and new hotel revenue levels and their growth trends, staff believes that by FY 2019 the City can expect $8.5 million in receipts. At this level, and compared to the original Infrastructure Plan analysis, there will be sufficient revenues to cover up to $30 million in extra COPs for the Public Safety Building and the California Avenue Garage. Should other Infrastructure Plan projects face higher costs, the picture becomes less clear and likely will require constraining other expenses or pushing projects further into the future. Should one or both of the alternative forecast scenarios occur, the City will face weighty challenges which counsel further disciplined spending and advanced planning. Palo Alto has demonstrated over the years being fiscally responsible in addressing deficits with permanent solutions which it is prudent to continue. During the next two months, staff will continue to monitor revenue sources as well as update revenues and expenditures based on newly available information. This updated information will be reflected in the FY 2017 Proposed Budget released to the City Council in late April 2016. City of Palo Alto (ID # 6428) Finance Committee Staff Report Report Type: Action Items Meeting Date: 12/15/2015 City of Palo Alto Page 1 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 Recommendation Staff recommends that the Finance Committee review, comment, and accept the Fiscal Year 2017 to 2026 General Fund Long Range Financial Forecast and forward the Forecast to the City Council for acceptance. Executive Summary The Fiscal Year (FY) 2017 to 2026 General Fund Long Range Financial Forecast (LRFF), which marks the beginning of the FY 2017 budget planning process, projects a slight General Fund surplus of $0.1 million in FY 2017, a shortfall of $0.6 million in FY 2018, and surpluses in the remaining years of the Forecast. Although economic indicators and rebounding tax revenues reveal that the City of Palo Alto has reached a turning point from the Great Recession, this Forecast reflects financial obligations and rising benefits costs that diminish the positive outlook over the next 10 years. Despite improving revenue receipts as projected forward, the City continues to face challenges related to the funding of infrastructure, the desire to retain and attract a talented workforce to be responsive to the City Council and the community, rising benefits costs, and unfunded long-term pension and retiree healthcare liabilities in the amount of $439 million. Additionally, as an alternative Forecast Model shows, the City needs to prepare for the next recession. While the base model captures the past 20 years of compounded revenue annual growth rates, which includes economic booms and recessions, staff included the alternative model for further discussion. While recessions are difficult to predict, history shows that one will be experienced during the term of this Forecast. In June 2014, the City Council approved the Infrastructure Plan in the amount of $125.8 million. Since approval of the plan, the City was able to dedicate additional funding to close the initial funding gap of $7.5 million and fund the related public art expenditure of $1.1 million, and a small Infrastructure Plan Reserve of $0.8 million. However, as discussed during the Council Infrastructure Plan Study Session on December 9, the projects identified in the Infrastructure ITEM #12, ATTACHMENT A City of Palo Alto Page 2 Plan are estimated to cost substantially more due to updated designs, rising construction costs, and the State imposed requirement to pay prevailing wages. Some of these higher costs will be funded through higher than previously estimated Transient Occupancy Tax receipts dedicated to the Infrastructure Plan. Over the ten years of the Forecast, the additional funding for Infrastructure is estimated at $68 million. Since the Great Recession, the City Council has approved various strategies to mitigate the rising cost of salaries and benefits. These strategies include: (1) employees paying their own CalPERS contribution (between 6 percent to 9 percent of salary) except for the members of the Fire Chiefs’ Association; (2) sharing future health plan cost increases; (3) creating a second pension tier (and the state implemented a third tier effective January 1, 2013); (4) reducing professional development expenses; (5) cost of living freezes for four years; and (6) terminating the Variable Management Compensation Plan. Continuing with previous actions to curtail the growth of benefits costs, in 2014, as part of approving the agreement with SEIU and the compensation plan for Management and Professional employees, the City Council approved the cost sharing of future health plan costs. Currently, the City is in negotiation with all of its bargaining groups. It is the City’s desire to retain and attract a talented workforce. Therefore, this Forecast includes salary and benefits adjustments based upon projected cost of living increases and market changes. This Forecast provides a long-term view of the City’s General Fund to provide a strategic focus for addressing future funding needs in the FY 2017 Proposed Budget and beyond. This Forecast assumes FY 2016 service level remain the same. As in past years, the Forecast has been updated based on current information compiled from various sources, in addition to utilizing available tools to project revenues and expenditures. This document facilitates City Council members’ and staff’s understanding of the long-term impacts of past decisions and identifies issues that must be addressed in the near and long- term. The Forecast is not a prediction or a commitment of resources; rather, it is a reasonable snapshot of the City’s future financial condition based on various assumptions and currently available data. A continuously improving economic climate is noted by the majority of national, state, regional, and local economic indicators. This Forecast assumes a continued, gradual growth of the national economy with positive impacts to the local economy, which is reflective in the estimates of economically sensitive revenue estimates. It is important to note that consistent with previous forecasts, the methodology for calculating changes for out-years of the Forecast (FY 2017 to FY 2026) are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for known items. By using the historical average growth rate that incorporates the up and down cycles over the past 10 or 20 years, there is no single year in which a downturn is depicted. Instead, past downturns (e.g. dot com bust and Great Recession) have been factored into the compound growth rate used to forecast future revenue streams. Staff performed a reasonableness test of the results and made appropriate changes to the CAGR analysis. ITEM #12, ATTACHMENT A City of Palo Alto Page 3 As shown in the table below, the FY 2017 Forecast Budget anticipates a slight General Fund surplus of approximately $0.1 million for FY 2017, a shortfall of $0.6 million in FY 2018, and surpluses in the remaining years of the Forecast. During the forecast period, surpluses range between $0.1 million and $12.6 million with an approximate cumulative one-time surplus of $41.0 million. Assuming that the General Fund Budget Stabilization Reserve (BSR) is fully funded at the City Council approved target level of 18.5 percent of General Fund operating expenditures, $13.1 million would have to be set aside to maintain the target level. With these funds set aside, the one-time resources projected in this Forecast would decrease by $13.1 million from $41.0 million to $27.9 million. It is important to note that the majority of these surpluses are predicted in the last five years of the Forecast. The further we look into the future, the less reliable these predictions are. Fiscal Year 2017-2026 Long Range Financial Forecast The table includes a calculation for the net operating margin which reflects the year over year change of surpluses and shortfalls. With the net operating margin, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears, and that each surplus is completely expended with ongoing expenditures. Based on these assumptions, the cumulative net operating margin, or ongoing surplus, during the forecast period is approximately $12.0 million, with the majority of these ongoing surpluses generated in the last five years of the Forecast. Although this Forecast presents overall a positive fiscal outlook for the City’s General Fund, it is important to note that it does not include the following potential impacts, which can increase or decrease the projected annual surpluses to the FY 2017 Projected Budget and the out-years of the Forecast: (1) ongoing labor negotiations; (2) funding of the Council approved Infrastructure Plan after completion of full design, increased construction costs, and prevailing wage requirements; (3) operating budget impact of Infrastructure Plan projects; (4) cost impact related to the Parks Master Plan; (5) additional costs related to the future Junior Museum and Zoo facility; (6) potential acquisition of the downtown Palo Alto Post Office; (7) one-time costs related to City assets managed by non-profits such as Avenidas Senior Center, the Palo Alto History Museum, the Ventura Child Care Center, the Junior Museum and Zoo, or the Scout Building; (8) Cubberley Community Center Master Plan; (9) construction loans for the Palo Alto Airport; (10) potential termination of the Fire Services Contract with Stanford University; (11) Cadillac Healthcare Federal Excise Tax expected to impact in calendar year 2018; (12) future changes to pension plan assumptions by CalPERS; (13) Transient Occupancy Tax increases ITEM #12, ATTACHMENT A City of Palo Alto Page 4 related to two new hotels on San Antonio Road; (14) Tax revenue alignment with updated Comprehensive Plan; and (15) changes in the local, regional, and national economy. At this time, staff projects a $6.5 million General Fund budget surplus for FY 2016. This surplus assumes City Council authorized budget amendments to date and includes higher tax revenue estimates as indicated in this Forecast ($5.5 million) and expenditure savings related to the Retiree Healthcare Implied Subsidy ($1.0 million) as discussed further in the Salary and Benefits section of this report. The majority of the excess revenue is related to the Transient Occupancy Tax of which $4.2 million will be recommended for transfer to the Capital Improvement Fund for the Infrastructure Plan as part of the Fiscal Year 2016 Midyear Budget Review report. This amount does not assume any other recommendations to adjust revenues and expenditure that staff intends to bring forward for City Council consideration as part of the FY 2016 Midyear Budget Review. During the next few months, staff will continue to monitor revenues and expenditures based on available information and include these updates in the FY 2017 Proposed Budget scheduled for release late April 2016. Officially, the Great Recession ended in June 2009. According to the National Bureau of Economic Research, the average duration of a business cycle from 1945 to 2009 lasted about six years and the period between the last two recessions was about ten years. Therefore, staff has provided an alternative Forecast model which assumes a recession in the first half of Fiscal Year 2019. As can be seen from this model, the City needs to start preparing for the next recession. As discussed this fall with the City Council and Finance Committee, during a recessionary period, the City is expected to receive less revenue and pension cost expenses increase. The Budget Stabilization Reserve has been used in the past in small parts to buffer revenue decreases. To address the anticipated higher pension costs, staff will bring forth a recommendation as part of the Fiscal Year 2017 budget to establish a 115 Supplemental Pension Trust Fund with one-time sources. The funds in the pension trust fund can be used in the future to mitigate rising pension costs for one or more fiscal years. Economic Outlook In preparing the FY 2017 to 2026 General Fund Long Range Financial Forecast, key economic indicators and measures available through various publications and reports were reviewed. Overall, the economic outlook for 2017 calls for continued measured optimism even as global economic conditions continue to produce uneven economic growth across regions and sectors. International As a world renowned hub of technological innovation, and at the heart of the Silicon Valley, Palo Alto is connected to the global economy in immeasurable ways. According to the October 2015 World Economic Outlook (WEO), “global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook Update.”i ITEM #12, ATTACHMENT A City of Palo Alto Page 5 Slower global activity is taming inflation in 2015. The continued moderate growth is a combination of advanced economies anticipating continued grow contrasted with anticipated declines in emerging markets for the fifth year. With declining commodity prices, depreciating emerging market currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging markets and developing economies. Modest increases are anticipated in advanced economies as a result of the strengthening of the euro and a return of positive growth in Japan assisted by declining oil process and monetary policies.ii Looking forward, “Global activity is projected to gather some pace in 2016. In advanced economies, the modest recovery that started in 2014 is projected to strengthen further. In emerging market and developing economies, the outlook is projected to improve: in particular, growth in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), while remaining weak or negative, is projected to be higher next year, more than offsetting the expected gradual slowdown in China.”iii United States In November 2015, the Bureau of Economic Analysis revised their Q3 2015 Gross Domestic Product (GDP) second estimate to 2.1% compared to the 3.9% increase during Q2. The increase in Q3 is primarily reflective of “positive contribution from personal consumption expenditures, nonresidential fixed investment, state and local government spending, residential fixed investment, and exports that were partially offset by a negative contribution from private inventory investment.”iv Overall, Q1 2014 continues to be the worst first quarter showing since Q1 2009, amidst the Great Recession period, which has been attributed the sharp decline in output and productivity to unusually cold weather in much of the US in early 2014. According to the UCLA Anderson Forecast, the federal funds rate is forecasted to be about 1.5 percent by the end of 2016 and approximately 3.25 percent at the end of 2017. This combined with the continued job growth and anticipated wage growth will drive consumption levels upward in 2016 leading to the first year of greater than 3.0% in real GDP since 2005.v The chart below provides a quarterly view of GDP growth from 2009 to present. ITEM #12, ATTACHMENT A City of Palo Alto Page 6 As noted briefly above, the UCLA Anderson Forecast cites several factors attributing to their favorable outlook for 2016. As of December, UCLA Anderson Senior Economist David Shulman cites, that “employment remains healthy, with the economy generating jobs at a 200,000-a-month clip that will bring it further declines in the unemployment rate to 4.6 percent.”vi As a result of the continuing decline in unemployment, reaching nearly full employment levels, and the continued upward pressure on wage increases, it is anticipated that the likelihood of inflation reaching its 2.0 percent target will be achieved. National Unemployment levels continue to decline, and are holding steady at October 2015 levels of 5.0 percent in November 2015. This is 13.8 percent below November 2014 levels of 5.8 percent.vii With the higher wages and a slight rebound in oil prices and housing costs resulting in inflation reaching 2.0 percent, UCLA Anderson Forecast anticipated that the Fed will begin to normalize the Federal Funds rate and gradually begin to tighten.viii California California’s economy continues to be a bright spot in the nation’s economic outlook with job growth continuing to outpace national levels. According to the Bureau of Labor Statistics (BLS), California’s unemployment rate dropped from 7.2 percent in October 2014 to a preliminary estimate of 5.8 percent in October 2015, a 19.4 percent decline.ix The current UCLA Forecast echoes this and forecasts continued steady gains in employment through 2017 with an unemployment rate of 4.9 percent by the end of the forecast period. In addition, UCLA Anderson Forecast senior economist Jerry Nickelsburg reviewed economic indicators that differentiate the state of California from the U.S. average forecast such as trade through California’s ports, travel through international airports, state government finances, and residential construction and employment. Overall, continued steady growth through 2017 is anticipated in these sectors with some notable historical highs in port activity in September ITEM #12, ATTACHMENT A City of Palo Alto Page 7 2015 as well as record levels of travel, continued residential construction, and steady growth in employment of 2.6 percent for 2016 and 1.4 percent for 2017. California’s payroll will grow more, at about the same rate and personal income growth is estimated to be 4.3 percent in 2015 and forecast to be 3.4 percent in 2016 and 3.2 percent in 2017.x According to the Zillow Home Value Index, the median home value in California for October 2015 is $449,500. California home values have gone up 5.8 percent over the past year (October 2014 to October 2015) and Zillow predicts they will rise 2.8 percent within the next year. The median price of homes sold is $418.250. xi Palo Alto and the Bay Area Palo Alto’s traditional economic indicators of growth and prosperity, which are highlighted below, continue to be strong. The unemployment rate in the San Jose, Sunnyvale, Santa Clara Metropolitan Statistical Area (MSA), ticked up slightly in the preliminary October 2015 estimate to 4.0 percent, up from 3.7 percent in September 2015, but down from the October 2014 rate of 5.0 percent.xii The employment picture, though returning to normalcy nationally, is showing different influential factors. Of particular focus in the UCLA Anderson Forecast and significant to the Silicon Valley in particular is the office-using employment which includes the three leadings sectors – information, financial services, and professional and businesses services. These positions are significant as they have the highest average annual salaries for their employees ranging from $70,070 to $105,000 annually. This is compared to other employment sectors such as manufacturing, education and health, trades, and leisure and hospitality which range from $34,490 to $61,000 annually. Therefore, growth in these lucrative sectors is critical to the prosperity of cities as they bring significant purchasing power. Finally, home values in Palo Alto continue to reach new highs. According to the Zillow Palo Alto Real Estate Market Summary, the average price per square foot for Palo Alto was $1,468, an increase of 12.6 percent compared to the same period last year. The median sales price for homes for August 2015 to November 2015 was $2.5 million, a 22.5 percent increase from the same period a year ago. Over the last five years, sales have appreciated a staggering 154.2 percent in Palo Alto. The number of sales has increased 1.2 percent and the average list price for homes was $3.1 million, according to Trulia.xiii Fiscal Year 2017-2026 General Fund Long Range Financial Forecast The FY 2017-2026 General Fund LRFF projects a slight General Fund surplus of $0.1 million for FY 2017, a shortfall of $0.6 million in FY 2018, and surpluses in the remaining years of the Forecast. During the forecast period, surpluses range between $0.1 million and $12.6 million with an approximate cumulative one-time surplus of $41.0 million. Assuming that the General Fund Budget Stabilization Reserve (BSR) is fully funded at the City Council approved target level of 18.5 percent of General Fund operating expenditures, $13.1 million would have to be set aside to maintain the target level. With these funds set aside, the one-time resources projected ITEM #12, ATTACHMENT A City of Palo Alto Page 8 in this Forecast would decrease by $13.1 million from $41.0 million to $27.9 million. It is important to note that the majority of these surpluses are predicted in the last five years of the Forecast. The further we look into the future, the less reliable these predictions are. The operating margin reflects the variance between the projected General Fund revenues and expenditures for each year of the forecast or the annual surplus or deficit. With the operating margin, the year over year change in surpluses and deficits, it is assumed that each shortfall is addressed completely with ongoing solutions in the year it appears and that each surplus is completely expended with ongoing expenditures. During the Forecast period, the net operating margin fluctuates between negative $0.6 million and positive $2.9 million. Although this Forecast projects healthy revenue growth, the revenue growth is barely keeping pace with the projected expenditure growth during the first five years of the Forecast. In the second half of the Forecast, revenues substantially outpace expenditures resulting in significant surpluses ranging from $2 to $12 million annually. This is primarily due to tapering off of City pension rate increases as discussed further in the salary and benefits section of this report. Fiscal Year 2017-2026 Base Long Range Financial Forecast The graph below provides a representation of the operating and net operating margin of the base model as described above. ITEM #12, ATTACHMENT A City of Palo Alto Page 9 It should be noted that this Forecast, as outlined in the following sections of this report, does not include the following potential impacts to the FY 2017 Projected Budget and the out-years of the Forecast: (1) Labor negotiations: The City is currently in negotiations with the Palo Alto Police Officers Association (PAPOA), the International Fire Fighters Association (IAFF), the Service Employees International Union, the Police Management Association, and the Fire Chiefs Association. Any agreements reached between the City’s bargaining units and approved for the Management and Professional Personnel Compensation Plan and the City will be incorporated into future budgets and forecasts, as applicable. (2) Infrastructure Plan capital budget impacts: In June 2014, the Infrastructure Plan was approved by the City Council and contains $125.8 million in projects recommended by the Infrastructure Committee; however, the Plan’s construction and design costs were based on data from 2012. As construction costs have increased and the City is required to pay prevailing wages, the Plan is not sufficiently funded. However, the higher than anticipated revenues for Transient Occupancy Taxes related to new hotels and the 2% voter approved tax increase will partially offset the higher construction costs. (3) Infrastructure Plan operating budget impacts: In June 2014, the City Council approved the Infrastructure Plan which includes $125.8 million in projects recommended by the Infrastructure Committee. This Forecast does not assume ongoing operating impacts as a result of the Infrastructure Plan, but future forecasts will include operating cost impacts as the specific projects are designed. ITEM #12, ATTACHMENT A City of Palo Alto Page 10 (4) Parks Master Plan: the Parks Master Plan will be finalized in 2016 and future forecasts will include associated cost impacts as necessary. (5) Junior Museum and Zoo: In November 2014, the City Council directed staff to negotiate a capital lease with the Friends of the Junior Museum and Zoo for the reconstruction of the Junior Museum and Zoo. This Forecast does not assume any additional operating costs related to the renovated building. (6) Acquisition of the downtown Palo Alto Post Office: The City may acquire the downtown Palo Alto Post Office with the plan to relocate staff from leased facilities. The acquisition would be financed through issuance of debt with the annual debt service paid through lease cost savings. If the Palo Alto Post Office is acquired, it would require substantial improvements while the City pays the annual debt service, and during that time the City will also have to continue paying for leasing existing facilities. Staff is reviewing potential strategies, which would reduce the impact to the General Fund in the short-term. (7) City owned assets operated by non-profit organizations: This Forecast does not include any additional capital investments for the Avenidas Senior Center, the Palo Alto History Museum, the Ventura Child Care Center, the Junior Museum and Zoo, or the Scout Building. (8) Cubberley Community Center Master Plan: The FY 2016 Adopted Capital Budget included funding for the Cubberley Community Center Master Plan. Costs in excess of the dedicated Cubberley infrastructure funding as agreed to between the Palo Alto Unified School District and the City are not assumed in this Forecast. (9) Loans to the Airport Fund for capital improvement projects: Staff intends to apply for Federal Aviation Administration (FAA) reimbursable grants during the Forecast period. If approved, the FAA reimburses 90% of capital improvement costs. Since some of these capital improvements may bridge fiscal years, the General Fund may have to provide loans crossing fiscal years until the Airport Fund receives the FAA reimbursements. (10) Fire Services Contract with Stanford University: On October 8, 2013, the City received a Notice of Termination letter from Stanford with the intent to terminate the contract with the City no sooner than one year and no later than two years from the date of the notice. During the termination period as well as the last two months, the City continued to negotiate with Stanford to settle on a service level and cost. This Forecast assumes the continuation of the contract for $6.5 million. ITEM #12, ATTACHMENT A City of Palo Alto Page 11 (11) Cadillac Healthcare Federal Excise Tax: Beginning 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits that exceed a certain threshold. CalPERS may be able to design healthcare premiums to stay below the threshold and discussions are in the preliminary stage. Congress is also discussing possibly delaying or modifying this tax. If the tax is applicable, the City may have to pay the tax. (12) CalPERS City contribution increases: Currently, CalPERS assumes an annual investment return of 7.5%. This Forecast assumes that CalPERS will meet the annual investment return. However, staff provided an alternative Forecast which assumes a poor investment return for the next ten years. Further, the CalPERS Board approved a gradual de-risking strategy, which is intended to reduce the assumed investment return to 6.5% over the next 20 years in the years when CalPERS earns an investment on its portfolio in excess of 11.5%. In the event that the de-risking strategy does not result in a reduction of the expected rate of return, the CalPERS board will revisit this assumption as part of their process starting in November 2017 with formal action to take place in February 2018. (13) Transient Occupancy Tax increases related to two hotels on San Antonio Road: The City is in the process of reviewing plans for two Mariott hotels with a potential location at San Antonio Road. This Forecast does not assume any potential Transient Occupancy Tax increases from these two hotels. (14) Tax revenue alignment with updated Comprehensive Plan: The City is currently in the process of updating its Comprehensive Plan including the potential fiscal impact of various land use scenarios. The fiscal impact of various land use scenarios will be brought forward for City Council discussion in 2016. (15) Changes in the local, regional, and national economy: This Forecast assumes a steadily growing local economy. Any changes may have positive or negative impacts on economically sensitive revenues such as Sales Tax and the Transient Occupancy Tax. At this time, staff projects a $6.5 million General Fund budget surplus for FY 2016. This surplus assumes City Council authorized budget amendments to date and includes higher tax revenue estimates as indicated in this Forecast ($5.5 million) and expenditure savings related to the Retiree Healthcare Implied Subsidy ($1.0) as discussed further in the Salary and Benefits section of this report. The majority of the excess revenue is related to the Transient Occupancy Tax of which $4.2 million will be recommended for transfer to the Capital Improvement Fund for the Infrastructure Plan as part of the Fiscal Year 2016 Midyear Budget Review report. This amount does not assume any other recommendations to adjust revenues and expenditure that staff intends to bring forward for City Council consideration as part of the FY 2016 Midyear Budget Review. ITEM #12, ATTACHMENT A City of Palo Alto Page 12 Since the Great Recession, the City Council has approved various strategies to reduce the costs of salaries and benefits. These strategies include: (1) employees paying their own CalPERS contribution (between 6 percent to 9 percent of salary) except for the members of the Fire Chiefs’ Association; (2) sharing the cost of health plan costs at 90/10; (3) creating a second pension tier (and the state implemented a third tier effective January 1, 2013); (4) reducing professional development expenses; (5) cost of living freezes for four years; and (6) terminating the Variable Management Compensation Plan. Continuing with previous actions to curtail the growth of benefits costs, in 2014, as part of approving the agreement with SEIU and the compensation plan for Management and Professional employees, the City Council approved the cost sharing of future health plan costs. However, in comparison to market studies to comparable agencies, the salaries of our employees, primarily safety employees, have fallen behind. Currently, the City is in negotiation with all of its bargaining groups. It is the City’s desire to retain and attract a talented workforce. Therefore, this Forecast includes salary and benefits increases to adjust employees’ salaries to the average of the market over the next few years. Due to these adjustments, for Fiscal Year 2018 only, revenue growth is outpaced by a salary and benefits growth resulting in a shortfall of about $0.6 million. Looking forward to the next fiscal year, in Fiscal Year 2019, this Forecast predicts a surplus of $0.9 million. Therefore, the projected Fiscal Year 2018 shortfall can be bridged with one-time funding. The next section of the report discusses the analysis and assumptions of major revenue and expenditure categories. Consistent with the 2016-2025 LRFF, the methodology for calculating changes for out-years of the Forecast (FY 2018 to FY 2026) are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for known items. Staff performed a reasonableness test of the results. Typically, the average business cycle lasts six years and the period between the last two recessions was about ten years. Therefore, this report includes an alternative Forecast model with a recession assumed in Fiscal Year 2019. Revenues City of Palo Alto tax revenues continue to parallel the strong local economy. Robust residential and commercial property values, business driven transient occupancy and daily rates, and the emergence of new hotels have propelled key revenue sources upward since Fiscal Year 2013. The fundamental economic drivers of low unemployment, strong incomes in Silicon Valley, vibrant business activity, and the demand for Palo Alto property will continue to buttress revenue in the near future. ITEM #12, ATTACHMENT A City of Palo Alto Page 13 Fiscal Year 2017-2026 Long Range Revenue Forecast The tables above (also available in Attachment A) highlight the annual revenue estimates and year over year increases for this Forecast. Compared to FY 2016 projected, FY 2017 revenues are estimated to increase by $5.0 million, or approximately 2.6 percent. Based on the economic analysis presented in the previous section of this report, revenue estimates, which are primarily linked to the performance of the regional and local economy, are reflective of increased consumer spending, continued rise in home prices, and the opening of hotels. The upward trend of the City’s tax revenues is expected to continue over the next 10 years. These tax revenues have significantly improved since the beginning of the Great Recession. The table above illustrates the steady growth projected for the General Fund’s revenue streams, by percentage, from FY 2017 through FY 2026. During the 2013 Finance Committee discussions, it was recommended that staff consider use of a historical annual growth rate derived for each tax revenue source to project future revenue streams. This methodology was used in the final forecast presented for FY 2015 to 2025 and ITEM #12, ATTACHMENT A City of Palo Alto Page 14 has been used in this forecast as well. The Compound Annual Growth Rates (CAGR) utilized in this Forecast is cited in each revenue section and reflected in the revenue section table. The graph above depicts a historical and the base model projected view of the five major General Fund tax revenues. It includes 10 years of actual revenue history; the projections for FY 2016 based on actual data available for the first five months of the fiscal year; as well as the projections for FY 2017 and the subsequent years of the Forecast. Revenue forecasts are based on current data and application of the Compound Annual Growth Rate (CAGR) methodology. The following section is a detailed discussion of General Fund Tax revenue and other major revenue sources by category. Sales Tax Sales taxes have risen from a low of $17.9 million in FY 2010 to a projected level of $27.9 million in FY 2016. They are expected to grow by a compound annual growth rate of around 2.6 percent through FY 2026. Staff has factored into the forecast weakening receipts over the past several years from a few key generators. In addition, the ongoing movement of tangible good purchases from brick and mortar stores to online vendors continues and poses a long-term threat. Evidence of this was reported in a December 1, CNBC article, “According to the Adobe's Digital Index, total online sales on Cyber Monday rose 16 percent compared to last year, to $3.07 billion.” The article goes on to say that in-store data “showed sales were down an estimated 10.4 percent over Black Friday weekend” compared to the prior year. As reported to Council, there was a one-time tax windfall from one vendor in FY 2014 and a Government Accounting Standards Board tax accrual adjustment in FY 2015. In each year, sales tax was reported at $29 million. As shown below, the FY 2016 and FY 2017 projections return to a more realistic level in 2017. ITEM #12, ATTACHMENT A City of Palo Alto Page 15 TABLE 1: SALES TAX REVENUE BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $22.1 $25.6 $29.4 $29.7 $27.9 $28.5 Restaurant and auto sales are trending higher, while department store and electronic firm sales are trending lower. The State will terminate its “triple flip” program this January so the City will receive more timely payments and slightly higher interest earnings due to better cash flow. The CAGR applied to the period FY 2016 through FY 2025 is 2.6 percent which is in line with historical growth rates. Property Tax As the table below indicates, since FY 2012 property taxes have risen substantially. Staff projects this source to grow at 5.9 percent over the next ten years which is in line with historical trends. The recent purchases of the Tibco Site in the Stanford Research Park ($330 million) and the Epiphany Hotel ($71.6 million) evidence a compelling commercial real estate market. Other contributing factors include: single family home sales that have exceeded asking prices and the unleashing of latent property values from the sale of long held homes that were “shielded” from assessed value appreciation by Proposition 13. TABLE 2: PROPERTY TAX REVENUE BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $26.5 $28.7 $30.6 $34.1 $35.1 $37.5 The City’s property tax estimate for FY 2016 is based on information received from quarterly meetings with the Santa Clara County Assessor’s Office. The estimate includes appeals on record with the Assessor’s Office, additions to the roll, and movements in assessed values. Projections beyond FY 2016 are based on historical growth rates. The CAGR used in this 10 year forecast equals 5.9 percent, slightly higher than the 5.4 percent in last year’s forecast. This higher growth rate is justified by the factors cited above. As requested by the City Council, staff contacts the Palo Alto Unified School District (PAUSD) regarding their assumptions in property tax growth. Typically, the initial growth assumptions used by PAUSD in developing their budget are lower than the City’s. As the budget year progresses, however, PAUSD will align their property tax revenue with actual increases that tend to be closer to the City’s projections. PAUSD’s growth rate assumption for FY 2016 was 5.34 percent. In FY 2015, the Administrative Services Department contracted with a firm to produce detailed reports on property taxes. The consultant’s reports have provided key insights into Palo Alto’s real estate market that supports property taxes growing at around 6 percent per year, including: ITEM #12, ATTACHMENT A City of Palo Alto Page 16 There are 8,010 residential properties in Palo Alto under $600,000 in Assessed Value (AV). These properties, over a seven year period ending in FY 2015, turned over at an average rate of 582 annually. On average, 3.1 percent of the above residential parcels annually changed ownership and the average AV increased by 171 percent. For example, a property with an AV of $1,000,000 is expected to sell in today’s market at $1,710,000 which is somewhat conservative given current sale prices. Per the 2015-2016 Assessor’s Roll, average Assessed Value of residential properties in Palo Alto equal $1,080,000. Transient Occupancy Tax (TOT) As the table below shows, Transient Occupancy Taxes continue to perform exceptionally well. As summarized in the table below, average daily room rates and occupancy levels continue to demonstrate considerable strength since FY 2011. Generally, occupancy levels between 80 and 85 percent indicate full occupancy. Demand for Palo Alto rooms is strong, leading to construction and planned construction of five new hotels. A vibrant business and tourist environment has led to a surge in hotel bookings from San Francisco down through the Peninsula to San Jose. TABLE 3: TRANSIENT OCCUPANCY TAX BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016* 2017 General Purpose Revenue (millions) $9.7 $10.8 $12.3 $13.4 $15.3 $16.1 Infrastructure Revenue (millions) N/A N/A N/A $3.3* $9.2 $9.7 TOTAL $9.7 $10.8 $12.3 $16.7 $24.5 $25.8 Average Daily Room Rate $165 $182 $208 $208 $253 N/A Average Occupancy (percent) 79% 80% 79% 79% 80% N/A * This $3.3 million is currently retained in the Budget Stabilization Reserve to support Infrastructure Plan projects, as recommended for approval by the Finance Committee as part of closing the Fiscal Year 2015 budget. ** Projected revenue based on trend and Fiscal Year 2016 year to date data. Average Daily Room Rate and Occupancy are year-to-date through October 2015. This forecast includes estimated revenues for all of the new hotels that have come on-line, the Epiphany and the two new Hilton hotels as well as the Westin Annex which is expected to open this year. Plans for a hotel on the Ming’s restaurant site have been terminated. The new hotels planned for San Antonio Road are not included in the LRFF. Revenues from the 2.0 percent TOT increase effective January 1, 2015 and from the new hotels that are dedicated to infrastructure are isolated in the LRFF. The CAGR applied to the period FY 2016 through FY 2026 is 4.8 percent which is in line with historical growth rates. ITEM #12, ATTACHMENT A City of Palo Alto Page 17 Documentary Transfer Tax (DTT) After two solid years of unusually strong performance, the Documentary Transfer Tax will likely approach more normal levels in FY 2016. Through November 2015, transactions and receipts are down 24 percent and 35 percent, respectively, compared to the same prior year period. As mentioned above, there were sizable, one-time transactions (Hudson Pacific purchases of office space) along the Page Mill corridor last FY that are unlikely to be duplicated in FY 2016. Based on current activity, staff expects $7.1 million in FY 2016 with a mild uptick in FY 2017 to $7.4 million. TABLE 4: DOCUMENTARY TRANSFER TAX BY FISCAL YEAR (MILLIONS) Fiscal Year 2012 2013 2014 2015 2016 2017 Revenue $4.8 $6.8 $8.1 $10.1 $7.1 $7.4 The CAGR applied to the period FY 2016 through FY 2026 is 5.8 percent, again, in line with prior year CAGR trends. Utility Users Tax (UUT) The Utility Users Tax forecast includes a 5 percent tax on water, gas and electric usage and a 4.75 percent tax on telephone activity. In FY 2015, the step down tax for large users of utilities was eliminated. Receipts anticipated from the UUT are based on the Utilities Department’s five-year revenue and rate projections. These estimates could change as the department discusses its proposed rate plan with the Utilities Advisory Commission and the City Council during the annual budget process. With the drought and heightened water conservation efforts as well as lower gas prices and consumption, the utilities UUT is expected to decline from FY 2015 to FY 2016. Revenues in FY 2015 registered at $7.6 million and these are expected to drop to $7.1 million in FY 2016. Upward movement in revenues is anticipated in FY 2017 with increasing rates. Telephone receipts have been increasing marginally since FY 2014 and are expected to do so despite the drop of 0.25 percent in the UUT rate for this category. Other Taxes & Fines Based upon a review of historical collection patterns, it is anticipated that the budgeted revenue estimate for this category will need to be reduced as part of the FY 2017 Proposed Operating Budget. As such, this forecast assumes a reduction of 7.2 percent, primarily attributable to lower parking violations and library fines. In the remaining years of the forecast, revenues are anticipated to increase between 2.7 and 4.9 percent. Charges for Services For FY 2017, total revenues in this category will increase 1.7 percent or $296,000 from the FY 2016 Adopted Budget. Revenues collected primarily reflect the costs to provide services to the community and therefore, are significantly impacted by personal service costs. The slight increase reflects an increase in estimated receipts to maintain cost recovery levels in FY 2017 ITEM #12, ATTACHMENT A City of Palo Alto Page 18 partially offset by any one-time revenue adjustments approved as part of the FY 2016 Adopted Budget and adjustments reflective of the Golf Course closure in Fiscal Year 2017. The golf course revenues are decreased by $542,000 from the FY 2016 Adopted budget due to the anticipated closure. This decline in revenues is partially offset by a reduction in contract services associated with operating the Golf Course. As discussed in City Manager Report (CMR) #6335, to be heard by the City Council on December 14th, 2015, the Golf Course is now anticipated to remain open through the end of FY 2016 and construction is now anticipated to begin in the summer of 2016 and continue through FY 2018. Ongoing, this Forecast assumes an increase in charges for services revenue by approximately 3.1 percent to account for general salary and benefit increase included in the Forecast. These figures do not include Charges for Services revenue for Stanford Fire & Dispatch which is explained in further detail below. Stanford Fire & Dispatch Services The City has two separate agreements with Stanford University to provide fire response services and emergency dispatch services. As part of these agreements, Stanford is charged 30.3 percent of the Fire Department’s net cost and 16 percent of the Police Department’s Communication and Dispatch Division to reimburse the City for Stanford’s proportional share of these services. The term of the fire response service contract between the City and Stanford is through September 30, 2026; however, at Stanford’s request, the two parties have been in negotiations over the past two years to restructure the contract. On October 8, 2013, the City received a Notice of Termination letter from Stanford with the intention to terminate the contract with the City no sooner than one year and no later than two years from the date of the notice. During the termination period as well as the last two months, the City continued to negotiate with Stanford to settle on a service level and cost. Based on outcome of these negotiations, this Forecast assumes the continuation of the Fire Services contract for $6.5 million and dispatch contract for $741,000 with Stanford University escalated by the increased salary and benefits costs. Permits and Licenses Revenue from permits and licenses has experienced consistent growth over the past several years, primarily due to increased development activity around Palo Alto. Based on year-to-date estimates, FY 2016 revenues are projected to reach the Adopted Budget revenue estimate of $8.2 million. Revenues collected primarily reflect the costs to provide services to the community and therefore, are significantly impacted by personal service costs. In FY 2017, revenues in this category are expected to increase 5.6 percent, consistent with the projected increased personal service costs. From the FY 2016 projected level with ongoing annual increases of 2.6 percent through the forecast. As discussed in the FY 2016 Adopted Budget, the Planning and Community Environment and Development Services departments are reviewing the cost recovery model for these departments. Upon completion of this analysis, the staff will evaluate changes in planning and development fees and bring forward recommended adjustments as appropriate as part of the annual budget process. ITEM #12, ATTACHMENT A City of Palo Alto Page 19 Return on Investment Interest earnings continue to be depressed as a consequence of the Federal Reserve’s loose monetary and interest policies. Expectations for earnings from investments are around $0.9 million which is a 1.9 percent increase from FY 2015 yearend projections. Rental Income The largest source of rental income comes from the City’s Enterprise Funds and the Cubberley Community Center. Compared to the FY 2016 Adopted Budget, rental income will decrease from $15.3 million to 15.0 million. The decrease includes a projected loss of $500,000 in rental income at Cubberley due to Foothill College moving out. As part of the development of the Fiscal Year 2017 budget, staff will pursue replacement tenants to offset the rental loss figure related to Foothill College. The forecast does assume that by Fiscal Year 2018, Cubberley will have new tenants on board resulting in a rental income revenue increase of $200,000. The forecast out years also assume a 2.6 percent growth for all rental properties, except for the Refuse Fund rent which is assumed until FY 2021 as approved by the City Council to account for the closing costs related to the Middlefield Well landfill site. Revenue from Other Agencies Included in this category is funding from Community Services Outreach theatre programs, reimbursements from the Palo Alto Unified School District (PAUSD) for School Resource Officers, and state and federal grants, if received. Many of these revenue streams are difficult to predict and are dedicated often to specific purposes. In this category revenues over the past five fiscal years have remained well below $0.5 million. This forecast assumes $0.4 million for FY 2017 with a growth rate of approximately 1.3 percent in subsequent years due to the unpredictability of this funding source. Charges to Other Funds Approximately 86 percent of this category is General Fund administrative cost plan charges to the Enterprise and Internal Service Funds. Internal support departments such as ASD, HR, and Council Appointees provide services to enterprise and internal service funds. The costs for these services are recuperated through the administrative cost plan charges. The charges for Fiscal Year 2017 are determined based on actual services provided in Fiscal Year 2015. The FY 2017 projected amount is $11.5 million, a decrease of 3.2 percent, from the FY 2016 Adopted Budget. The decrease in cost plan charges to the Enterprise and Internal Service funds is attributable to internal support departments providing more support to General Fund departments in Fiscal Year 2015. The forecast includes increases ranging between 2.6 to 4.9 percent each year based primarily on assumed increases in salary and benefit costs. In addition to the General Fund administrative cost plan, this revenue category includes several other allocations, most notably Public Works administration charged to Public Works Enterprise Funds and public safety communication services provided to the Utility Department. ITEM #12, ATTACHMENT A City of Palo Alto Page 20 Other Revenues Major revenue sources in this category are reimbursements for the Shuttle program (e.g. City of East Palo Alto), Animal Services charges to Los Altos and Los Altos Hills, reimbursements from PAUSD for its share of Cubberley and athletic field maintenance, donations from non-profits to City libraries, and miscellaneous revenues. Revenues for this category are estimated to decline by 16.4 percent in FY 2017, mostly due to the elimination of $0.3 million in one-time revenue in approved in the FY 2016 Adopted Budget. The FY 2017 projected revenue for this category is $1.3 million, with a 2.6 percent to 2.8 percent annual increase forecasted for through FY 2026. Operating Transfers In Operating Transfers include the equity transfer from the Electric and Gas funds as well as transfers from the University Ave Parking Permit Fund. In accordance with a methodology approved by Council in June 2009, the equity transfer is calculated by applying a rate of return to the capital asset base of the Electric and Gas funds. This rate of return is based on PG&E's rate of return on equity as approved by the California Public Utilities Commission (CPUC). Using the Utility Department’s projections from the Electric and Gas Five Year Financial Forecasts, as approved by the City Council in spring 2015, the equity transfer from the Electric and Gas funds are projected to increase from $17.3 million in FY 2016 to $18.8 million in FY 2017 (8.4 percent), and then increase annually by 2.3 percent over the rest of the forecast period. The higher increase in FY 2017 reflects updated Gas Fund capital asset data while the subsequent years reflect the average annual adjustment in the equity transfer since 2009. Overall Operating Transfers are estimated to increase to $20.1 million in FY 2017, an increase of $1.5 million from the 2016 Adopted Budget level of $18.6 million. Expenditures As part of developing the FY 2017 Forecast expenditure budget, the General Fund expenditure categories have been adjusted by removing FY 2016 Adopted Budget one-time expenditures and updating major cost elements such as salary and benefits costs. The tables below display the General Fund expense forecast. Compared to FY 2016 Adopted Budget, FY 2017 expenditures are estimated to increase by $9.7 million, or 5.2 percent primarily due to increased salary and benefits, an increased transfer to infrastructure, and allocated charges costs from Enterprise Funds and Internal Service Funds. ITEM #12, ATTACHMENT A City of Palo Alto Page 21 Fiscal Year 2017-2026 Long Range Expenditure Forecast Salary and Benefits The table above (also available as an attachment) depicts the salaries and benefits costs for the next ten years. Over the Forecast period, the salaries and benefits cost gradually increase in comparison to the total expenditure budget. In FY 2017, salaries and benefits costs represent 60.6 percent of the expenditure budget; in FY 2026, the salaries and benefits cost represent 61.8 percent of the budget. In the same period, though, the benefits cost as a percentage of total salaries and benefits costs increase from 50.6 percent in FY 2017 to 53.7 percent in FY 2026. Over the Forecast period, salaries compounded growth is 28.0 percent versus a compounded growth in benefits costs of 42.4 percent. This compounded growth is less than estimated in the previous Forecast primarily due to lower estimated City pension contributions in the out-years of the Forecast as described in more detail below. The following sections describe the assumed increases in salary and benefits costs and depict the reasons for the faster increasing benefits versus salaries costs. Salary Consistent with the City’s change in salary budget methodology that was implemented as of recent budgets, positions are budgeted at actual rate of pay including benefits as of fall 2015. Then, by position, salary costs are updated in accordance with applicable Memoranda of Understanding (MOU) between the City and its labor groups and the Management and Professional Personnel and Council Appointees Compensation Plan. It is important to note that the City is currently in negotiations with the Palo Alto Police Officers Association (PAPOA), the ITEM #12, ATTACHMENT A City of Palo Alto Page 22 International Fire Fighters Association (IAFF), the Service Employees International Union, the Police Management Association, and the Fire Chiefs Association. This Forecast includes salary and benefits increases based on projected increases in the cost of living and market based adjustments. The Forecast also assumes step increases consistent with applicable MOUs and merit increases for Management and Professional employees. Benefits Pension The forecast includes the pension rates from CalPERS as of the June 30, 2013 valuation for the City’s Miscellaneous and Safety plans, as updated by Bartel Associates (Bartel), the City’s actuary. Staff asked Bartel to update the pension rates based on the latest available information from CalPERS since CalPERS advised cities that the actuarial valuations as of June 30, 2014 will become available in December and project the rate for the ten-year period of the Forecast. In the last Forecast, staff relied on the CalPERS projections and extended those for the out years of the Forecast. Once CalPERS releases the latest valuation, staff will update the pension costs for the Fiscal Year 2017 budget as necessary. As shown in the table below, the FY 2017 pension contribution rates for the Miscellaneous and Safety plans, as calculated by Bartel increased from the current year. For the Miscellaneous Plan, the projected pension contribution rate increase is 1.8 percentage points from the FY 2016 rate of 27.7 percent to a FY 2017 rate of 29.5 percent. For the Safety Plan, the projected pension contribution rate increase is 2.7 percentage points, from the FY 2016 rate of 41.9 percent to a FY 2017 rate of 44.6 percent. The table below shows the pension contribution rates from FY 2018 through FY 2026. TABLE 5: PENSION RATES BY PLAN (FISCAL YEAR) Pension Plans 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Miscellaneous 27.7% 29.5% 31.3% 33.1% 34.9% 35.3% 35.6% 35.4% 35.2% 35.0% 31.9% Safety 41.9% 44.6% 47.9% 50.8% 53.6% 54.1% 54.6% 54.1% 53.7% 53.2% 52.8% The City pension contribution rates assumed in this Forecast are substantially lower for the last few years of the Forecast period than assumed in the last Forecast due to a change in methodology for projecting the rates. Last year, staff used a linear extrapolation of rate increases provided by CalPERS during the first four years (CalPERS only provides rates for five fiscal years). This year, staff asked Bartel and Associates to provide projection of the City Contribution rates as presented to the Finance Committee in November. To exemplify the impact of this change in methodology, the last Forecast assumed for FY 2025 a 42.6% City contribution rate for Miscellaneous employees and a 64.3 % City contribution rate for Safety employees. The lower City contribution rates for this Forecast resulted in lower overall benefits costs. It is important to note, however, that the CalPERS Board approved a de-risking policy of its investment portfolio in order to reduce the assumed investment return of 7.5% to 6.5% over a ITEM #12, ATTACHMENT A City of Palo Alto Page 23 20 year period. With this policy CalPERS will only reduce the investment return assumption in years with investment returns higher than 11.5%. However, the Board is scheduled to revisit this policy in February 2018. If the Board decides to reduce the assumed investment return regardless of the actual earnings at this time, the City’s contribution rate would most likely increase for FY 2021. Retiree Healthcare This Forecast includes the Annual Required Contribution (ARC) per the May 2014 actuarial valuation based on information as of June 30, 2013, (accepted by the City Council on June 9, 2014) for the City’s retiree healthcare plan as updated by Bartel. Bartel’s update to the last actuarial valuation assumes the latest CalPERS mortality rate assumptions, incorporates the investment gain for the Retiree Healthcare Trust Fund as of June 30, 2015, and assumes a lowering of the assumed investment return assumption from 7.61% to 7.25%. Currently, Bartel is preparing the Retiree Healthcare valuation as of June 30, 2015. Staff will incorporate the findings of the valuation as part of the FY 2017 budget. As this Forecast predicts surpluses in the out-years, staff intends to revisit the investment earning assumptions for further reductions in coming years. The table below details Bartel’s estimate for the City’s annual Retiree Healthcare contribution by the General Fund, non-general funds, and all funds for the next ten years. TABLE 6: RETIREE HEALTHCARE ANNUAL REQUIRED CONTRIBUTION (IN MILLIONS BY FISCAL YEAR) Fund 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 General Fund $10.0 $10.9 $11.2 $11.6 $12.0 $12.4 $12.8 $13.2 $13.6 $14.0 $14.5 Non-General Funds $4.8 $5.2 $5.4 $5.6 $5.8 $5.9 $6.1 $6.3 $6.6 $6.8 $7.0 TOTAL $14.8 $16.1 $16.6 $17.2 $17.8 $18.3 $18.9 $19.5 $20.2 $20.8 $21.5 On June 9, 2014, City Council accepted the Retiree Healthcare Plan GASB 45 Actuarial Valuation as of June 30, 2013 and approved full funding of the Annual Required Contribution (ARC) for Retiree Healthcare for FY 2015 and FY 2016. As documented in the report (CMR #4891) which recommended approval of full payment of the ARC, the primary reason for the increased ARC for Retiree Healthcare was the inclusion of a new actuarial standard regarding the implied subsidy of healthcare premiums of active employees in relationship to healthcare premiums for retirees. CalPERS blends active employees with pre-Medicare retirees and charges them the same medical premium; however, younger employees on average consume less healthcare services and therefore are subsidizing older employees and retirees. The implied subsidy is the difference between average retiree claims and retiree premiums charged by CalPERS. Consistent with City Council direction, as recommended by staff, the City budgeted for full payment of the ARC for FY 2015 and FY 2016, including the implied subsidy. The implied subsidy for FY 2015 was $1.9 million for all funds. As part of preparing for the FY 2015 CAFR, staff worked closely with the City’s actuary, the managers of the City’s trust fund for Retiree ITEM #12, ATTACHMENT A City of Palo Alto Page 24 Healthcare, and the City’s external auditor about the implied subsidy in the Retiree Healthcare Fund. After many discussions, staff realized that the implied subsidy budgeted in the Retiree Healthcare Fund should have been budgeted as a contribution from the City’s healthcare premiums for active employees. However, the FY 2015 budget had fully funded the City’s healthcare premiums of approximately $17.4 million for active employees. Therefore, the cost of healthcare premiums related to the implied subsidy in the amount of $1.9 million was budgeted twice. For FY 2015, the savings of healthcare premiums related to the implicit subsidy remained in the General Benefits Fund for future use. For FY 2016, staff will bring forward recommendations as part of the FY 2016 Midyear Budget Review report to correct departmental budgets regarding the implied subsidy. Starting with this Forecast and the FY 2017 Budget, staff correctly budgeted for the implied subsidy for active employees healthcare premiums. This means that for all funds approximately $2.2 million of the active employees healthcare premiums are included in the Retiree Healthcare ARC. Healthcare Consistent with the previous Forecast and as a result of the most recent labor agreement between the City and the Service Employees International Union (SEIU), the City’s contribution amount towards medical costs for SEIU employees is based on a flat contribution from the City with the employee contributing towards the remaining medical plan premium. This flat contribution towards medical costs is also used for the Management and Professional employees. All other labor groups eligible for medical benefits will remain on the 90/10 contribution structure until new labor agreements are reached with the City and the affected bargaining groups. This Forecast assumes an annual health care cost inflator of 8 percent for the labor groups on the 90/10 medical benefit structure, and a 4 percent annual health care cost inflator for the labor groups on the flat rate contribution structure. Consistent with the previous Forecast and with historical trends, the 2017-2026 LRFF assumes a 4 percent increase for dental and vision costs for the out-years. Contract Services The FY 2016 Adopted Budget included $17.4 million to fund contract services of which approximately $2.4 million was for one-time items that include $0.3 million for trash receptacles on University Avenue, $0.3 million for the Fry’s Master Plan, and $0.3 million for the continuation of services at the Palo Alto Animal Shelter and transition operations to a non- profit. This $2.4 million has been removed from the forecast for FY 2017 and beyond. In addition, the FY 2016 Adopted Budget assumed that the Golf Course would be closed during the second half of the fiscal year; however, due to continued delays in securing the required permits to begin the Golf Course Reconfiguration Project, as detailed in CMR #6335 to be heard by City Council on December 14, 2015, this Forecast assumes that the project will begin in early FY 2017. As a result, contractual expenses related to the Golf Course are anticipated to be reduced by approximately $0.6 million from the FY 2016 Adopted Budget level. This reduction in Golf Course expenses is partially offset by a reduction in revenue collections in Charges for Services. In FY 2018, upon the assumed completion of the Golf Course Project, contractual expenses will increase by approximately $0.9 million. ITEM #12, ATTACHMENT A City of Palo Alto Page 25 As discussed with the Finance Committee in October, staff continues to look for implementing alternative service delivery models such as partnering with a non-profit agency to provide animal services or identifying a partner for the City’s swim program. For the FY 2017 Forecast Budget year, $0.1 million has been added for the maintenance of the Magical Bridge playground and parkland maintenance. In the out-years of the Forecast, a 2.6 percent growth factor for contract services is assumed. This is aligned to the 20 year historical average of the San Francisco Metropolitan Statistical Area Consumer Price Index – All Urban Consumers of 2.6 percent. Supplies & Materials The category for Supplies and Materials decreases from $3.7 million in FY 2016 to $3.6 million in FY 2017 due to the elimination of one-time items funded in the FY 2016 Adopted Budget. For the out-years of the Forecast, it is assumed that costs will increase based on the 2.6 percent annual CPI increase. General Expense This category includes costs for travel and meetings, telephone and non-city utilities, contingency accounts, subsidies and grants provided through the Human Services Resource Allocation Process (HSRAP), and bank card service charges. The FY 2017 Forecast for this category remains flat as compared to FY 2016 at $4.7 million. For the remaining years of the forecast, this category assumes annual increases between 2.5 and 2.6 percent. These figures do not include General Expenses for the Cubberley Lease which is explained in further detail below. Cubberley Lease In Fiscal Year 2015, the City and Palo Alto Unified School District (PAUSD) agreed to an extension of the Cubberley Lease by five years starting January 1, 2015. As part of the lease agreement, the City Council approved creation of a fund for Cubberley infrastructure improvements. Based on the new lease, $1.9 million will be transferred to the Cubberley Property Infrastructure Fund for future infrastructure improvements. Therefore, the $1.9 million is classified as an Operating Transfer Out which is discussed in further detail below. With the Cubberley infrastructure funds set aside, the FY 2017 Forecast Budget includes $5.8 million for Cubberley Lease payments. In accordance with the lease agreement, the Forecast assumes a 3.0 percent annual CPI increase for the lease payments to the Palo Alto Unified School District (PAUSD) for the Cubberley facility. Also, the lease agreement period is five years; however, for planning purposes in this Forecast, it is assumed that the agreement will continue during the entire Forecast period. Rents & Leases Rent and Lease expenses for FY 2017 are estimated to increase by $38,000 from the FY 2016 adopted level of $1.5 million. The largest expense in this category is $1.1 million for the ITEM #12, ATTACHMENT A City of Palo Alto Page 26 Development Services Center. From FY 2018 forwards, this expense is expected to increase by 2.6 percent per year. Facilities & Equipment Facilities and Equipment expenses for FY 2017 are projected to decrease by 20.1 percent, or $0.1 million, as compared to the FY 2016 Adopted Budget, due to the elimination of one-time funding included in FY 2016. One-time items funded during FY 2016 include the purchase of 30 AEDs ($50,000), community center furniture replacement ($25,000), and the build out of office space at the Development Center ($20,000). After the elimination of one-time funding, projected expenses in this category of $0.5 million will remain fairly consistent in FY 2018 and beyond. Consistent with the 20-year CPI for the San Francisco San Jose Metropolitan Statistical Area, the forecast assumes a 2.6 percent annual increase starting in FY 2018. Allocated Charges Allocated Charges represent expense allocations by the City’s enterprise and internal services funds for services and products they provide to General Fund departments. In FY 2017, these charges are estimated at $18.1 million including utilities usage (24.2 percent or $4.4 million), liability insurance (7.5 percent or $1.4 million), technology costs (33.9 percent, or $6.1 million), vehicle equipment and replacement costs (27.7 percent or $5.0 million), and other costs (6.7 percent, or $1.2 million). The FY 2017 charges of the forecast updates the revenue and expense for these cost plans based on the most current information available at the time of Forecast development. Growth of 2.6 percent is anticipated in the out-years, which is based on the average annual expense growth over the forecast period. Operating Transfers Out Operating Transfers Out includes transfers from the General Fund to the Debt Service Fund, Technology Fund, and Airport Fund. Fiscal Year 2016 year-end projected transfers out total $1.8 million, and are expected to remain at that level for FY 2017. In FY 2018, the transfer level is anticipated to increase by approximately $0.3 million, primarily attributable to debt service payments for the Golf Course Reconfiguration project ($0.5 million), partially offset by the elimination of a transfer to the Airport Fund ($0.3 million) Transfer to Infrastructure In FY 2016, the adopted General Fund transfer to the Capital Improvement Fund is $19.0 million, which includes the base transfer of $14.0 million and $5.0 million from additional Transient Occupancy Tax (TOT) proceeds generated through a two percentage point TOT increase as well as through the addition of new hotels. Incremental TOT increases from the rate increase and new hotels are dedicated to the Capital Improvement Fund to support the Infrastructure Plan, consistent with City Council direction. The transfers to the Capital Improvement Fund are anticipated to increase significantly as compared to the FY 2016 Adopted Budget, as the revenue generated from these new sources has outpaced initial ITEM #12, ATTACHMENT A City of Palo Alto Page 27 projections. In FY 2016, an additional $4.2 million is anticipated to be transferred to the Capital Improvement Fund. In the out-years of the forecast, the TOT-associated transfer is anticipated to increase between 4.1 and 5.2 percent annually. These additional increases will help in offsetting the rising costs of Infrastructure Plan projects and ensuring the projects in the plan will remain fully funded. Additionally, the base transfer to the Capital Improvement Fund is anticipated to increase by 2.6 percent each year. Finally, this category includes the $1.9 million transfer to the Cubberley Property Infrastructure Fund, described earlier in this document. This transfer remains flat in all out-years of this Forecast. Alternative Fiscal Year 2017-2026 Long Range Financial Forecast In order to provide potential alternative perspectives, staff analyzed two other long range alternatives including one with a low pension investment return and another with a projected recession beginning in FY 2019. CalPERS Poor Investment Return As discussed with the City Council in September 2015 and the Finance Committee in November 2015, Bartel Associates provided the City with a continuous poor CalPERS investment performance scenario. A continuous poor CalPERS investment scenario which Bartel defines as investment returns between 0.2% and 4.1% will result in exceedingly high pension rates. The table below shows the Bartel projected City pension contribution rates by plan based on continuous poor investment results. TABLE 7: PENSION RATES BY PLAN (FISCAL YEAR) WITH FOR POOR INVESTMENT RETURNS Pension Plans 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Miscellaneous 27.7% 29.5% 31.3% 33.8% 36.9% 39.1% 41.6% 43.8% 45.6% 47.0% 45.4% Safety 41.9% 44.6% 47.9% 52.0% 57.0% 60.3% 64.1% 67.6% 70.2% 72.2% 73.9% Based on these higher annual pension rates, pension costs would increase by a total of $34.0 million over the Forecast period, compared to the base model. The General Fund annual surplus in FY 2018, the first year impacted by the higher rates, would be reduced from $1.1 million in the base model to $0.7 million, a 36 percent reduction. This trend would continue through FY 2026 as the projected General Fund surplus of $3.4 million in FY 2026 would become a General Fund deficit of $5.4 million. During the Forecast period, the net operating margin fluctuates between positive $0.6 million and negative $5.4 million. This model does not project any additional revenue growth compared to the base model, which is the main reason expenditures begin to outpace revenue in FY 2021 and this gap continues to grow through FY 2026. ITEM #12, ATTACHMENT A City of Palo Alto Page 28 Fiscal Year 2017-2026 Long Range Revenue Forecast – CalPERS Poor Investment Return Alternate Model Fiscal Year 2019 Recession Alternate Forecast As described previously, the assumptions included in this Forecast, consistent with previous forecasts, are based on a historical analysis of increases using the Compounded Annual Growth Rate (CAGR) with adjustments factored in for reasonableness. The adjusted CAGR model factors in the impact of prior recessions but does not make assumptions about when a recession may occur. Typically, the average business cycle lasts six years and the period between the last two recessions was about ten years. Below, an alternative Forecast model is presented for informational purposes showing the projected impact of a recession beginning in FY 2019. This recessionary model adjusts the projected tax revenues and decreases the rate of growth for certain non-salary expenditures, which would be expected when the next downturn occurs. Assuming an onset of a recession at the beginning of FY 2019, as can be seen in the table below, a significant annual deficit of $9.7 million would exist in FY 2019. Assuming the FY 2019 deficit is not solved with ongoing expenditure reductions the annual deficit would grow to between $10.6 and $21.7 between FYs 2020 and 2024. However, as shortfalls are addressed primarily due to expenditure reductions, the subsequent ongoing deficits are reduced as shown in the net operating margin analysis. By addressing the net operating margin shortfalls over three years, the City will return to surpluses starting with FY 2022. The recessionary model assumes a reduction in major tax revenues, though they are anticipated to decline at a lower rate than those in the Dot.Com bubble and Great Recession. The economically sensitive revenue sources follow somewhat different patterns in reacting to a recession. Acting like a harbinger, historical data indicates that Documentary Transfer Taxes decline just prior to the onset of a downturn. ITEM #12, ATTACHMENT A City of Palo Alto Page 29 Sales Tax and TOT decline dramatically, as was the case during the Dot.Com bubble and Great Recession, in the year a recession is declared. A recession’s impact on Property Taxes, however, lags behind the other categories by approximately 2 years as it takes considerable time for the County Assessor to reflect residential and commercially assessed valuations downward. Staff’s assumptions for economically sensitive revenues in this alternative scenario are as follows: Documentary Transfer Tax: declines by 8.5% or $0.6 million in FY 2018 followed by another decline of 22.4% or $1.5 million in FY 2019. Sales Tax: declines 11.8% or $3.5 million in FY 2019 and by another 5.0% or $1.3 million in FY 2020. Transient Occupancy Tax: declines by 11.5% or $3.1 million in FY 2019 and dips further in FY 2020 by 4.6% or $1.1 million Property Tax: Palo Alto has been fortunate in past recessions with property taxes plateauing rather than declining. Beginning in FY 2019, staff expects revenues to level off at $43.0 million and stay at this level through FY 2021. Conclusion The Long Range Forecast projects a slight General Fund surplus of $0.1 million for FY 2017 and, except for a budget shortfall in FY 2018, reflects a generally positive outlook over the next 10 years. Economic indicators demonstrate that the local business environment is rebounding; however, substantial financial obligations and added uncertainties may diminish the General Fund surplus over the next 10 years. Despite improving revenue receipts as projected forward, the City continues to face challenges related to the funding of infrastructure, the desire to retain and attract a talented workforce, being responsive to the City Council priorities and the community expectations, rising benefits costs, and unfunded long-term pension and retiree healthcare liabilities in the amount of $439 million. Additionally, as an Alternative Forecast Model shows, the City needs to be prepared for the next recession. Having healthy reserves and a potential separate pension trust plan to offset a recession impact will be critical in order to have a future budget that allows staff and the City Council at least a year to plan for permanent budget adjustments. While the City is addressing these short and long-term issues, the City needs to continue reviewing its operations and service delivery options. Over the last few years, the City has outsourced services to the private sector and entered into negotiations with the non-profit sector for public-private partnerships. Staff is engaged in finding a partner to effectively and efficiently operate Animal Services and is exploring different service delivery options for the City’s aquatic operations While the City further explores alternative service delivery models with the goal to reduce staff levels and related benefit costs, the City will also review cost recovery levels of services currently provided to the community. In early 2016, staff will bring forward recommendations to increase fees for the Planning and Community Environment Departments as well as other departments to align the fees with the cost recovery goals set by the City Council approved User Fee Cost Recovery Level Policy. ITEM #12, ATTACHMENT A City of Palo Alto Page 30 This 10-year Forecast assumes an additional $68 million to be dedicated towards the completion of infrastructure needs. Although these additional funds are substantial, they may not be sufficient to build the projects due to escalating construction costs or within existing timelines. Therefore, as prior infrastructure plans have not completely materialized to completion, it will be important to focus on maintaining the current plan as a top priority and not be tempted to increase ongoing operational expenses that surface unless they are deemed absolutely necessary in order to complete the plan. The City is currently updating its Comprehensive Plan. Staff is in the final stages of assessing the fiscal impacts of the various planning scenarios that will be used to analyze policy choices that will have to be made as part of the Comprehensive Plan Update. Once the City Council approves the Comprehensive Plan update with its inherent policy choices, revenue assumptions for future Forecasts will be aligned with the new Comprehensive Plan. During the next two months, staff will continue to monitor revenue sources as well as update revenues and expenditures, as applicable, based on newly available information. This updated information will be reflected in the FY 2017 Proposed Budget, which is scheduled to be released to the City Council late April 2016. While facing some significant unfunded financial challenges, the City is in a good position to plan accordingly and based on the diversified revenue sources it can continue to address the necessary infrastructure needs, but decisions must be prioritized and focused. Attachments: Attachment A: Revenues (PDF) Attachment B Expenditures (PDF) Endotes i International Monetary Fund (IMF), World Economic Outlook: Executive Summary, October 2015, Page XV ii International Monetary Fund (IMF), World Economic Outlook: Executive Summary, October 2015 iii International Monetary Fund (IMF), World Economic Outlook: Chapter 1 Recent Developments and Prospects, October 2015, Page 1 iv U.S. Department of Commerce Bureau of Economic Analysis (BEA), “National Income and Product Accounts Gross Domestic Product: Third Quarter 2015 (Second Estimate),” November 24, 2015. v UCLA Anderson Forecast, December 2015 vi UCLA Anderson Forecast, December 2015 vii Bureau of Economic Analysis (BEA), Labor Force Statistics from the Current Population Survey, December 2015 viii UCLA Anderson Forecast, December 2015 ix Bureau of Economic Analysis (BEA), Local Area Unemployment Statistics, December 2015 x UCLA Anderson Forecast, Job growth, wage increases to push real GDP growth past 3% for first time since ’05, December 2, 2015. ITEM #12, ATTACHMENT A City of Palo Alto Page 31 xi Zillow, California Home Prices & Values, Zillow Home Value Index, Accessed December 2015 xii United States Bureau of Labor Statistics (BLS), Local Area Unemployment Statistics: San Jose- Sunnyvale-Santa Clara, CA MSA, Accessed December 2015 xiii Zillow, Palo Alto Real-Estate Market Overview, Zillow Real Estate Data for Palo Alto, Accessed December 2015 ITEM #12, ATTACHMENT A Attachment A Fiscal Year 2017-2026 Base Long Range Financial Forecast - Revenues ITEM #12, ATTACHMENT A Attachment B Fiscal Year 2017-2026 Base Long Range Financial Forecast – Expenditures ITEM #12, ATTACHMENT A FINANCE COMMITTEE DRAFT TRANSCRIPT Page 1 of 76 Special Meeting December 15, 2015 Chairperson Schmid called the meeting to order at 6:10 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth, Kniss arrived at 6:17 P.M., Scharff, Schmid (Chair) Absent: 3.Fiscal Years 2017 to 2026 General Fund Long Range Financial Forecast. Chair Schmid: Look at numbers, why don't we turn to Item Number 3, General Fund Long Range Financial Forecast. Lalo Perez, Administrative Services Department Director and Chief financial Officer: Thank you Vice Mayor Schmid. We have staff from our (Inaudible) office and (Inaudible) office that's going to make a presentation and after we conclude our presentation from staff, we want to have Mr. Bartel do a presentation on a potential methodology of funding on (Inaudible) liability through the establishment of the 115 Trust we've been discussing. So with that, let me turn it over to Kiely Nose to start the presentation. Kiely Nose, Budget Manager: Hi, I'm Kiely Nose, I'm the Project Manager. So the Long Range Forecast is really the kickoff of the 2017 fiscal year budget process and today, we're going to discuss what the short term and long term financial outlooks for the next 10 years primarily focusing on the major revenue and its expenditure reduction. So How are we doing? So before I start, you know, we talked about historically the picture perfect and that's with a--what the city can afford all of our service levels. We have the same amount of library hours, police services, you know, (Inaudible) staffing, able to be funded and generally a slight ongoing surplus, would be ideal. So that's How are we doing. The graph before you, is showing then surpluses and deficit as projected during the next 10 years. So for fiscal year '17, at this time, we're projecting very slight surplus of approximately 100k and then the fiscal year '18, we're primarily due to expend ITEM #12 ATTACHMENT B TRANSCRIPT Page 2 of 76 Finance Committee Special Meeting Transcript 12/15/2015 expenditures growing at a more rapid pace than our revenues. The models projecting a slight short of all profits of at least 600k. Thereafter, we projecting annual surpluses somewhere between 500k and 12.7 million over the course of the remaining years. So as I said, the blue depicts the annual surpluses and shortfalls, however, typically as part of the annual budget process, the city spends the surpluses in respond to new service needs and solves those deficits hopefully on a long going basis. These new service needs have an ongoing budget impact, however. So for example, the blue line dipping in this fiscal year 2020 and starts to rise again in fiscal year 2021. Therefore, if we just focus on the blue line, it's not representing the entire picture, so we need to look and analyze year over year change of the annual surpluses as they're spend in deficit as they're resolved and that's what the red line is showing you. So the red line shows the year over year change of the annual surpluses and deficits. So for example, if we again take the fiscal year 2020 as the annual surplus after the fiscal year '19 starts to decrease, the red line is going to dip in 2020. This chart is just the Forecast Model in numerical format and it includes the percentage increases year over year. Most notably you'll see in fiscal year '18, that the expenses are growing faster at 5.4 percent and revenue is at 5.1 and this primarily due to salary and benefit adjustments based on projected cost of living increases and market changes. As the community is quite aware, with every model, there's a significant number of unknowns. So this slide is identifying all the unknowns noted in the report before you. The major ones you guys have probably seen before are things like the Fire Services contract to Stanford, obviously our pension, retiree, healthcare, trust, the unfunded liability. At this time, I'll turn it over to Tarun who's going to discuss the revenue sections in further detail. Mr. Narayan: Good evening, my name is Tarun Narayan. I'm the manager of Treasury, Debt and Investment and I will spend about five minutes approximately in the next two slides going over in dept. into the five major revenue sources. To begin with, overall the city's revenue continues to see strong revenue recovery since the "Great Recession." In addition, sales, property and documentary taxes had in the last two years significant one time receipts that resulted in above normal revenues while transient occupancy tax had a rate increase, the 2 percent and new hotels. Utility User tax was the exception. Its performance was mediocre. Now, I'll be discussing the details of these in a moment. So the bullet point two in this particular slide, as in the past two years, per the council direction, the compound growth rate, known as the CAGR, is used to forecast the 2017 through 2026 projections. Imbedded in the CAGR are things like past recessions, however, reasonable and informed adjustments are made such TRANSCRIPT Page 3 of 76 Finance Committee Special Meeting Transcript 12/15/2015 as the Tier 1 rate change, the new hotels, changes in major tax generation and one-time events. So if you go to slide number 8, the following graph shows 22 years of major tax revenues. The five major tax revenues; 11 years of actuals— Chair Schmid: Could I just ask a question. Tarun Narayan, Manager of Treasury and Debt Investment: Yes. Chair Schmid: The compound annual growth rate comes from the past, is it 2005 to 2015 or is it the 20 year? How far is that— Mr. Narayan We look at both the 20 year, 10 years, and 5 years typically. We used 10 years as the guideline, but we do also look at the shorter duration to just kind of get a reasonable [test]. Mr. Perez: Vice Mayor Schmid, just to remind the committee cause some of you were not part of the committee. That was based on directions from a prior finance committee that staff to use those compounded annual growth rates, focusing on the 20 years. Mr. Narayan So as I was saying, this chart has 11 years of actuals and 11 years of projection. Property tax, the redline in the graph is the biggest receipt of the major five revenues. As indicated in the report, property tax has risen substantially in the last few years and are projected to have CAGR of 5.9 percent over time over the next 10 years. A slightly higher than last year's CAGR, which was around 5.4. City property tax estimate for fiscal year 2016 is based on information received from the quarterly meetings with the Santa Clara County Assessing office. Projections beyond 2016 are based on historical growth rate as well as the information provided by a consultant. Property tax receipt for fiscal year 2017 estimated at $37.5 million. At this point, I'd like to share a few statistical highlights about our property tax in the past, the council has shown interest in. We have approximately 8,000 or 43 percent of our residential properties have 600,000 in assessed evaluation. Of these, on average, a little over 3 percent— Council Member Kniss: Would you repeat it once more? Mr. Narayan About 8,000 or 43 percent of all residential properties in Palo Alto have a value of under 600,000, assessed value. TRANSCRIPT Page 4 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: You mean houses; you're not talking about apartments at all? Mr. Narayan No. Council Member Kniss: Just— Mr. Narayan Well, residential does include not only single homes, apartments, multi condo units. Council Member Kniss: Okay. So it's all of our residential are included in this— Mr. Narayan Exactly, all residential, correct. Of these, a little over 3 percent annually change ownership resulting in today's sale price of nearly about 2.7 times above the assessed value. At this time, I like to bring your attention to an error on the top of page 16 of the (Long Range) Financial Report. It states the property tax within the assessed value of 1.0 million would sale for 1.7 million today. It actually would sale for 2.7 million. The 1.7 million really only represents a growth in assessment. Council Member Scharff: Those on page 17 of the staff report. Mr. Narayan: Actually on the top of 16 I believe, unless (Inaudible) have changed. Council Member Scharff: Okay, got it. Mr. Narayan: The top section, second bullet. So on average, 1 percent of all resident properties could change hands and the 7.1 percent includes all properties including the 600,000 that I just cited. However, this can vary greatly in a given year. So just give you a example. In 2010, only 1.7 percent of residential properties changed hands, while in 2012, 10.3 percent did. While in last year 2015, 6.4 percent did. So the 7.1 percent average, can be misleading when you get to any given year. On the other hand, on average, 1.2 percent commercial properties annually change hands. Similarly, they do fluctuate, but it's a small fluctuation. For example, in 2010, only 0.4 percent of property change hands. Council Member Scharff: Do you know what it was this year, change hands? TRANSCRIPT Page 5 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan This last one was--hold on one second, I do. In 2015, it was like 1.9 percent. Chair Schmid: What is that a share of 1.9 of what? Mr. Narayan 1.9 percent represents just the commercial properties, so overall we have about 1800 commercial properties and we have 18,000 residential properties. Chair Schmid: And what's the ratio on average of turnover? Mr. Narayan So the average is 1.2 percent, but similar to residential properties it can fluctuate like in 2010, it was 0.4 percent and in 2015, it was 1.9 percent. So it can fluctuate in any given year. 1.2 percent is average for about 7-year period. Mr. Perez: What this doesn't tell us is how is it turning over and what shape does it re-assess or not, depending on the way the ownership is transferring. Chair Schmid: Right. It reassesses no matter how the ownership is transferred. Mr. Perez: Not in commercial. Chair Schmid: No, in commercial, it does. Chair Schmid: Tell me how you would structure it so it doesn't. I mean, it does. Mr. Perez: My understanding is depending on the percentage. In LLC, if you stay under 50 percent, it does not and this example— Council Member Scharff: Right, if you stay under 50 percent. Mr. Perez: Yes. Council Member Scharff: But then you're not having an ownership change. If you sell less than 50 percent. TRANSCRIPT Page 6 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: It somehow do it Craig all the time. Same as Macy's case in 1986 when they challenge prop--13. Mr. Perez: This property in Beverly Hills, so there's several examples. It's a process, it's not a single transaction. Council Member Scharff: But you can come in under the assessment and look at as a step transaction and collapse if it's over a certain number of years. Mr. Perez: It gets more complicated, but yes. I mean, I'm not an expert— Council Member Scharff: Basically, if it's over 50 percent ownership change in an LLC, then you get reassessed. Mr. Perez: That's my understanding. So I'm not insinuating all of these are not change in assessed evaluation, but my understanding is there are cases- -and I've been in situations— Council Member Scharff: I think they're really rare. I think they're really rare you're actually selling the property. I mean, there are ownership changes where someone comes in and says; I want, you know, I'm going to buy a portion or I'm going to buy a partner out. That's it. It's not really an ownership change in terms of what we think, you know, you still have the majority of ownership in when we actually sell these properties, but we have notice, right, I mean, the reason this comes in is because we always ask ourselves why is the share of property taxes continually pay more by residential and by commercial and that's--over time, that gap is widen. Before Prop 13, I forgot, I think it was actually more by commercial and less by residential and over time, it shifted into where residential was paying the bulk of it. And I think you hit on the reason for that, which seemed really clear, which is that the velocity of turnover in commercial is much, much lower. Mr. Perez: Correct. Council Member Scharff: And also we have many more residential properties and our residential properties are really expensive. I mean, they're, you know--and so, I think that's what's driving it and I think when we talk about the minor cases, which I believe to be minor cases--you know, when a partner buys another partner out, it doesn't get the 50 percent, that's not really the main case. I don't think you really have the situation TRANSCRIPT Page 7 of 76 Finance Committee Special Meeting Transcript 12/15/2015 where every time someone does a commercial transaction, it's structured in a way that can't be turned over. I think that's really rare. It's really hard to do. You know, if you have a corporation for instance, if 50 percent of the stocks sells right? And those transactions are really hard to sale cause there's really negative tax consequences for selling real estate in a corporate form. So I think it's really rare frankly. Mr. Perez: I think you're right on the residential and obviously we're seeing that there's a high number of properties held with assessed evaluation of 600,000 or less. It shows that a lot of our residence held their properties or a lot of the owners held the property for a long time and don't see the shift in changes. Council Member Kniss: But one of the things--I met with the realtors last week about something else and they say that Palo Alto's turnover half as fast as most of the other cities on the Peninsula, which means that your property tax--that we need to look at that in light of the property tax. So it's one of the things that you might check on because the faster your houses turnover, the more your property tax goes up obviously. Mr. Narayan One of the distinction of more so trend that I see, I've been looking at this for the last 15 years in Palo Alto, and a lot more of the residential properties are being put in trust, so you know, when the next generation typically would turn over by then on most of us be retired and probably not here anymore, that definitely will probably impact down the road in terms of future growth rates. But we're probably looking at maybe 20, 30 years down the road. Council Member Kniss: Meaning that when they're put into trust, that the tax basically stays the same. Mr. Narayan: Right. I mean, typically--I'm not an expert in trust, but typically if they put it in a family trust and gave it to the children for example, they wouldn't really be a change of ownership as far as the county is concern and they wouldn't shake our reassessment to the market values. Chair Schmid: Now in maturing of the city, property tax would be a decline in the share of homes that would have been owned for 40 years and are still near--at, or near 1979 limit. They're fewer those involved and there's more of those who are moving into trust, so you're undermining the most dynamic part of the property taxes and the question is, as you do a long term TRANSCRIPT Page 8 of 76 Finance Committee Special Meeting Transcript 12/15/2015 forecast, wouldn't that employ the property tax would begin to level off, if there isn't a new dynamic entry. Mr. Narayan: Yeah, that would be the implication that several decades down the road when typically, would have changed hands because a new generation would be coming in. That would definitely the growth would plateau. Chair Schmid: Yeah. So your forecast does not contain that. You think as you say still 20 years to go? Mr. Narayan: Yeah. I think it's along in the horizon because what I see is, you know, families in the last 10, 5 years etcetera, if you--and this is just my guestimate, if you take maybe probably a 30-year-old comes in, stays here and maybe, you know, 20, 30 years on average before they passed it one. Do it’s still beyond, I think, our 10 year forecast, so eventually, it would have impact but not in the horizon we are looking at. Council Member Scharff: So I don't actually understand the family trust thing either. So you know how it works? I mean, what you're suggesting is that I can take my property, put it in irrevocable family trust, which would not trigger reassessment at that point? Mr. Narayan: I believe you have to change the ownership to do it, so if you had an existing property— Council Member Scharff: But at the time you change the ownership, you're then get reassessed at that point. Mr. Narayan: Yeah, yeah. Council Member Scharff: Right? So I mean, for instance--so yes, so I think you might be able to do that, but are we saying people are actually--you know, if you have a 1970's assessment— Mr. Narayan: Yeah. Council Member Scharff: Take Greg Schmid, you know, pay no property taxes, right, have a 1970's -- you buy the house in the '70. the '80s? Chair Schmid: '70's. TRANSCRIPT Page 9 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: In the '70s, right? If he put his property into a family trust for your kids, you would now have today's assessment. That's what would happen. Mr. Narayan: That's correct. Council Member Scharff: So if you did that— Chair Schmid: Mr. Narayan, what were you say? Mr. Narayan: I'm not an expert, but my general understanding, how my understanding was, is you had to change ownership, the trust would affect the change of ownership, but I'm not an expert on the legal, whether you could do it without triggering a reassessment market evaluation. Cause on of the thing that county does is, regardless of what the sales price of a property is, the county will review what the market evaluation is relative to the sales price— Council Member Scharff: They never say it’s less. Mr. Narayan: Yeah, so it it's— Ms. Nose: Sometimes they do. Mr. Narayan: If it's significantly of, they will use the market value. Chair Schmid: If it's within a family, is it treated as a reassessment ownership? Council Member Kniss: No, no. The kids can (Inauidble0 it, which is the best deal going. Suzanne Mason, Assistant City Manager: But in a trust, when a person dies, who owns the trust, I’m going through this now, then the value gets set and then when you go to sell that property, the growth that you're going to pay the capital gains on-- Council Member Scharff: That's capital gain. Ms. Mason: Right. But then that growth, that assessed value at that point, became a tax base and so... TRANSCRIPT Page 10 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: See, I don't think we understand this. I think we make these statements without actually understanding. Council Member Kniss: Why don't you invite the assessor to come to these (meeting.) Council Member Scharff: Actually that might be a good idea because— Council Member Kniss: Yeah or David, you know, David (Gainsburg) who works for him, very, very informative. Council Member Scharff: Cause I mean, we have to— Chair Schmid: Do you have an idea--you said you've been tracking this for a number of years. How many family trust? Mr. Narayan: I haven't quantified because there's no easy way to kind of quantify without just looking at the name and see which ones has trust associated with it, but just of the top of my head, I see at least--initially I see these are a quarter, they're now by half, a little over half of that was-- Council Member Scharff: But you understand that a revocable trust has no impact on property taxes? No impact on anything? It's just in a state planning (Inaudible). So you'll see stuff in so and so family trust and so and so revocable trust, that is not what we're talking about here. That is no impact on it. Mr. Narayan: Unfortunately the documents i see does not really tell me what type of trust they are. Mr. Perez: So why don't we put a pen on that and invite the county assessor? Council Member Scharff: I agree, but I just think that they're, I just think that they're this, there's this--the sense that we say this in the community and we make these statements, I don't think they're true. And I think we see on the thing that it says "Trust," but we don't understand that a revocable trust is not that kind of a trust which allows you to keep your 1970s assessment. Chair Schmid: You were just finishing up property tax. TRANSCRIPT Page 11 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: Right. So moving on to sales tax, which is the blue line on the graph, as indicated, this is the second highest of the revenue sources. The city does employ consultant to help us analyze the forecast data for this revenue. Sales tax in the last two years had one-time event that resulted in higher revenues than normal. In fiscal year 2014, there was a lot of exceptional receipt from a single vendor and then in fiscal year 2015, there was an accounting one-time accrual adjustment was made that resulted in 14 months of sales tax being recognized in a month most of the typical 12 months, so those two events kind of elevated the sales tax beyond what the normal levels are. So the fiscal year 2016 and '17 projection, then returned the receipt levels to a more representative level of about 27.9 million for the '16 and 28.5 million. The sales tax has a CAGR of about 2.6 percent over the next 10 years, so very modest. Factor into the forecast, our weekly receipts over the past several years is from a few key generators. Areas of concerns, we have in this area is mostly of the online sales tax, which has been a concern for numerous years. So for example, the total online sales as was reported in the report for Cyber Monday rose about 16 percent compared to last year. Our consultant (Inaudible) Services tells us that annually it estimated that one percent of Palo Alto's retail sales moved to online sales. The (Inaudible) is in 2017, we estimating a Mercedes Benz dealership opening up in the last quarter of fiscal year 2017— Council Member Scharff: Can I just ask a question? Are we going to make more money on the Mercedes dealership or the hotel? Which would have done it better for the city? I'm just curious. Mr. Narayan: It's probably about comparable, I think between the two. Mr. Perez: Those are some assumptions obviously on the room rate and the average occupancy. We were making a different assumption given the location. Mr. Narayan: It's all on average--our consultant tells us a dealership like that can generate anywhere from 800,000 to maybe 1.1 million. A combination of car sales versus the operations side of it. The hotel is probably a little bit higher than probably that, but then the Mercedes could be a concern in this area. Who knows, could have a higher sale beyond the average, so. The negative of sales taxes is in the potential loss of the prior (Inaudible). The receipts have been declining for the last several years. The other concern we have, the HB Split, we do get some potential revenues from them and we just don't know what the potential impact may have on us. That concludes the sales tax item so if you— TRANSCRIPT Page 12 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: Let's see, let me ask a couple of questions on the sales tax. I know in our comprehensive annual financial report, it has 10 years of data and very striking increase in the last three years in the non-retail, All Other it's called. Now, you mentioned the Tesla Special K's— Mr. Narayan: In 14 years. Chair Schmid: And then the 14-month year, we had— Mr. Narayan: In the 15th. Chair Schmid: But my understanding is also part of the Stanford Development agreement is that they would make all purchases on site. That's recording for Palo Alto and I'm wondering if there's a significant source of sales tax is coming out of that construction related purchases. Do you know anything about that? Mr. Narayan: Unfortunately, I can look into it, but I don't have a break down on that. So no. Chair Schmid: I'm concerned that it wasn't just two things that are happening, but it's this Stanford. You know, if you see the chart that you have there, the increase is not just the about, but it's actually a four or five- year increase, which coincides with the Stanford Development project. So I'm concerned that the sales tax might end up taking a bit of a hit once that's completed, what 2018. Mr. Perez: Yeah, we can definitely get those numbers and look at it and the other concern is the shifting to more online sales as well. Chair Schmid: Yeah, that's another question. I thought that online sales were being taxed and they were going to be redistributed through the county back to the city. Is that right? Mr. Perez: With the exception of specific agreement such as Amazon. There were cut out agreements that wherever the warehouse distribution was, that's where the sales tax would go to, that particular agency. That was a deal with the state agree upon to keep Amazon and warehouses— Chair Schmid: So we're not likely replace the retail sales, not likely all of them. Maybe some of them, but not all of them. TRANSCRIPT Page 13 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: For these carved out agreements, correct. Chair Schmid: I've noticed that our retail sector, put it together is about where were in 2006. There's no increase taking place. Mr. Perez: Retail has been flat. Chair Schmid: Yeah. I guess it's hard when you keep trying to put in grocery stores, they don't work. There might be a reason. Mr. Perez: Probably. Mr. Narayan: That'd be the questions? Chair Schmid: Yeah. Mr. Narayan: So will move on to transit occupancy tab. This is now represented by two line in the graph. The blue is the general fund portion while the brown color is the infrastructure receipts. So we broke it down to two so you can see what the general fund and the infrastructure portion are. So the hotel occupancy in daily room rates have risen substantially even with additional three hotels, we with the fourth expected to open up soon. I talked to the folks at Clemente they originally expected to open up in November, but they had problems with the contractors, so they're hoping to now either mid-January or February. As I said, they have all this staffs trained and waiting so they really, really want to open up as quickly as possible, but they have to get the construction out of the way. Council Member Kniss: How big is--how many rooms are there? It looks small from the street. Mr. Perez: It is. It's going to be mostly high end suits. You have 1.— Mr. Narayan: There are 23 rooms. Mr. Perez: Clemente was talking about— Council Member Kniss: So you'll have the Sheridan at 112, and then you'll have the Western that's next— Mr. Perez: Yes. TRANSCRIPT Page 14 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: And now you have the Clemente, which is your high- end— Mr. Perez: Yes. Council Member Kniss: Suites? Council Member Scharff: And a boutique. Mr. Perez: Yeah. Council Member Kniss: Yeah, yeah. Mr. Perez: He was--I don't know where's he's going to end up, but he was trying to do an all-inclusive suites concept in the range of $800 a night. Council Member Scharff: That's cheaper than the (Inaudible). Council Member Kniss: They should give us tours— Mr. Perez: That's what he said. With the inclusive, it's even a better deal (Inaudible). Council Member Scharff: Can we annex that? Council Member Kniss: So just 23 rooms. That's ridiculous. Mr. Narayan: To continue on, in 2010, the occupancy rate was about 66 percent while in 2015, it's 80 percent so that's represent about 21 percent increase while room rates while 140 back in 2010 is by 242 in fiscal year 2015. So that's a 71 percent increase. I looked at the last few months of 2016, it has a similar occupancy, slightly below in a given month like 77, 78 percent, but the average room rates are higher at $253. In some months, it's high as 266, so a day. Council Member Scharff: It averages all the cheaper hotels in (Inaudible)— Mr. Narayan: Yes, yes. Council Member Scharff: Right? Like the glass slipper and— TRANSCRIPT Page 15 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: Yes. It's an average of all of them. Council Member Kniss: It think those are less than 260 a day. Chair Schmid: The increases are hard on taxes. Council Member Scharff: I don't know. They might not be. Mr. Narayan: So to kind of give you an idea on rooms on average can be like 275--oh, there's one at 434 in a particular given month, while the lower ends can be in the 70, 80, 90 dollars’ range. So there's quite a range, you know, from 450 to under a 100 dollars. So on the (Inaudible), let's focus on the TOT for the infrastructure. This includes estimated revenues for all of the new hotels build and about to open, so that's about four, Clemente is the fourth one, that's not opened yet, but does not include those in planning stages. In fiscal year 2016 and '17, we had a 9.2 million and a 9.7 million that are forecasted for infrastructure TOT. The shock increase TOT from 2015 of 3.3 million to 2016 of 9.2 million as a tri-burial to the following; the two Hilton hotels, they were opened four months in 2015. That means we have an additional eight months of new revenue in the 2016, so that's a substantial increase. As I mentioned, the Clemente is expected to open in the next month or two, so those will be new additional revenues as well as the 2 percent TOT increase. You know, we applied half the year in 2015, so when you analyze the rate, it adds another six months of new revenue. So that's where you see the 2015 spiking up tremendously to 2016. As for the--so what did happen, not included in the TOT forecast? As you know the (Inaudible) hotel has been cancelled this time and now is being planned for the Mercedes Benz dealership. The two Marriott hotels in the planning stages, those hasn't been included in this particular forecast. Chair Schmid: Included or decided where to include it? Mr. Narayan: No, no, it hasn’t been included in the long range forecast. The two Marriott’s that are planning. Chair Schmid: I guess the question is they are opened as to how that revenue is treated. That correct? Mr. Narayan: Yeah, that's--. TRANSCRIPT Page 16 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: In terms of where they go for infrastructure or the general? You know, we believe, but you know, obviously, this is a policy area for you as a committee for you to consider. We discussed what we knew at the time and again, I don't recall us talking about any future hotels should be included, I think you kind of left it open for yourselves to make those calls as you went. Chair Schmid: Okay. Thank you. Mr. Narayan: Okay. ON the general fund TOTs representing by the green line in the graph, the CAGR growth rate for the next 10 years is by 4.3 percent. That does include a new source of revenue, which is that Air B and B revenue source is included in the general fund portion. Council Member Scharff: How much are we getting from that? Council Member Kniss: Yeah, that's like a (Crosstalk.) Mr. Perez: We have to give you a range because we can't speaks to a specifics. Council Member Filseth: Do you have a range you could give us? Mr. Narayan: Yeah. It's around, you know, 500,000 to about 800,000. Chair Schmid: That's a big number. Mr. Narayan: Yeah, it's a big amount. Council Member Kniss: And we're getting? Mr. Perez: Yes. Council Member Kniss: It's gone up a lot. Mr. Narayan: In 2015, we got six months’ worth and so the annualized number is you know, in the 5 to 800,000 range. Council Member Filseth: This is an old number, but in August, there were over 7,000 listings for the Peninsula South Bay for Super Bowl week and TRANSCRIPT Page 17 of 76 Finance Committee Special Meeting Transcript 12/15/2015 there's an expectation that there's going to be huge numbers, so if you want to list your homes— Council Member Scharff: I know; I was just talking my wife into it— Council Member Kniss: The same. I tried to talk my husband into it—So, would you explain though on Air B and B, is the tax collecting from the parent company? Mr. Narayan: Yeah. The one thing about Air— Council Member Kniss: It's not individually, I presumed? Mr. Narayan: Yes. We do receive it from the parent company, not individuals. In the prior years, we used to receive a handful from individuals, but now with the new agreement, it comes from the parent. The things they don't provide us is some statistics like the number of rooms are being rented, what the average is. Unlike our normal hotels where they do provide statistics about averages or things we can deduced based on what they do know what the averages are. Air B and B is kind of an exception. They send us a monthly total. That's pretty much it. Council Member Kniss: Can we demand more than that or is that the agreement that cities have with the parent company? Mr. Perez: They've taken an interesting approach that they gone into negotiations with almost agency by agency, which is kind of different. Council Member Kniss: Kind of. Mr. Perez: But we can tell you is that we were one of the early implementers beyond--in the area and others are following suit. We were up there with some of the major cities like San Francisco, New York in terms of early on, so you know, should acknowledge Joe and Karen, Molly and her staff for working on this and getting us ahead of the curb. Council Member Scharff: It's a good question on this topic too (Inaudible), now it's delay I guess. So we're projecting that transit and occupancy taxes are going to grow at five percent compound over the next 10 years. TRANSCRIPT Page 18 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: Yeah, about four or five percent, the CAGR by 4.3 in terms of the general fund or are you talking about the infrastructure? Council Member Scharff: You know; I was looking at both. Mr. Narayan: Okay. They have about a similar growth pattern beyond the first one or two years. Council Member Filseth: So that's about twice code. So why is that? Is it going to be a question of we think that hotel rates are going to continue to grow on sustain basis faster than the rate of growth of other costing barrier or we're expecting demand is going to increase faster than--cause we're adding--we're going to have supplies, but if there's no more people, it just going to (Inaudible). So why is that? What's the assumption? Mr. Narayan: The data would suggest to do that. I mean, we do see the occupancy slightly declining, which is typical, but typically when that happens, the room rate would decline correspondingly, but it's actually going the other direction. The room rates, so the hotels are able to basically demand a higher price for what they got. Council Member Filseth: Because there's no--because they get bigger, because there's more desire. Mr. Narayan: Yeah. Council Member Filseth: So we just put a growth limit on our offices through the city. Is that going to impact that at all? Mr. Narayan: That's a tough one. Mr. Perez: It's not something we're studying, it probably more appropriate for the fiscal study on the (complex) instead of--the planning and permit has hired an expert, an outside financial--It looks like that's --We are looking at long term study, 10 years’ horizon. Council Member Filseth: But we do know its not just Palo Alto that is a destination. I was thinking we're a big destinations point, don’t get me wrong, especially this is Stanford-- Mr. Perez: You Google expansion. TRANSCRIPT Page 19 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: Exactly and you know, they love to have more hotels. Santa Fe is expending; Santa Clara is expending in terms of hotel growth. There's a huge demand, that growth is there. The concern we have, if we have another experience like we did with the dot.com bust, in two years, we lost about 50 percent. Council Member Scharff: So I'd like to jump in on that since you mentioned (my name). I actually think it you'll have no impact whatsoever and the reason I know you'll have no impact is you're going to have continued Facebook expansion on one side and you’re going to have the (Inaudible), and you're having--I think the bigger risk frankly is that they build a lot more hotels in Redwood City, right, which is also a huge expansion. Huge office space growth and that starts to capture-- Mr. Perez: Of course. Council Member Filseth: If anybody looks out there and say wait a second, this thing is going to grow at five percent a year compounded, right? You know, from now until next century. They're going to do the same as we're doing. Chair Schmid: Well, there're two plans in Menlo Park. There are two plans in Redwood City and there's the big one in Santa Clara. Council Member Filseth: But we're talking about in 10 years. There'll be more. Right? Chair Schmid: Yeah. Council Member Scharff: So I actually don't think we're going to get the five percent growth because every city wants a hotel also. If anything, we're probably the most anti-hotel of all the cities. Council Member Kniss: We are, absolutely. Council Member Scharff: Everybody else bends over backwards to get a hotel and so my sense is they will build to the market. Right. At which point, occupancy will start to fall and they'll start to take ours, and so I don't see the five percent compounded growth rate. Chair Schmid: I think I agree with you. I think that's right. TRANSCRIPT Page 20 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: The (Inaudible0 has been our concern based on the information we have. You're probably right. As the surroundings areas, including maybe two Marriott’s. At some point, they will be at an impact. But based on what we have today, that's we have forecasted on. Council Member Scharff: So the other thing I like to say on that is I think, since I went through it on the Finance Committee, I think if we think back to the way we were thinking in 2009, 2010, you know, very different attitude, very different occupancy rates, hotels were --you could see that, where it was dipping. Right? And if you look back at the financial forecast from 2011, 2012, they're so much more conservative. The revenues are $30 million less in the (outfields), 40 million dollars in the outfields, makes a huge difference. So I actually think, you know, in business cycle, we like at the peak right now. Right? We're on peak. That means, we're going to go down, one way to go. Council Member Filseth: I know. This time it's different. Mr. Perez: You know, that's a good observation cause you're actually right at that point, but my recollection and that's where Joe and I were very concerned was that we heard the economy just about, you know, we can't generalize what you hear, what's having doubts of us recovering really quick. We were very concerned about that and that's--we looked at our numbers then and obviously it didn’t' turn out to be that way. We came out much, much faster than the rest of the nation in our period. Council Member Scharff: Joe has never been a consensus of year out economist we're going to have a recession, evert. Mr. Perez: There is--you know, most of them agree that if you look at it in a 10 year forecast, you're going to have--I think a statistical number around the area a year, so. Council Member Kniss: You put that in every report, so. Chair Schmid: We're going to thank you for doing that by the way. Council Member Filseth: So yeah, I'm with you. I think actually the conditions sustain five percent a year. I don't see it. TRANSCRIPT Page 21 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: I think we should build a new office and build another 30 new hotels. Council Member Filseth: But no parking. Chair Schmid: Can we move ahead? Mr. Narayan: The next big item is the document transfer tax, which is the purple line, the graph. This revenue source is somewhat unpredictable given the volume of the mix of promotional and residential transactions can vary significantly from year to year. The prior two years, document transfer tax receipts, the '14 and '15 fiscal years, have record setting years; $8 million in '14 and $10 million in '15. The fiscal year '14 has numerous commercial and high volume residential home sales while fiscal year 2015 had a $1 Billion in commercial sales by a single entity involving seven major properties that netted the city $3.3 million. So that $10 million dollars we received, 3.3 of them was from this transaction. This kind of transaction is like a once a decade event. Council Member Filseth: That's the Hudson properties. Mr. Narayan: Yeah, yeah. The sales price went by $1 billion of that, which was substantial. Council Member Filseth: Another one-time event. Mr. Narayan: You're not likely to see that for a while. Chair Schmid: It's not a one-time event because that's a change of ownership of property. Mr. Narayan: That's true. Chair Schmid: Why doesn't it show up in the property tax? If you look at the property tax during that year, the share pays by non-residents. Mr. Narayan: Yeah. We would actually see the full impact of that in 2017. We were just talk with the county, so there's transactions occurred around the April timeframe. So the way the county has it is, in the first fiscal year, it went to the supplemental property tax and the supplemental property tax TRANSCRIPT Page 22 of 76 Finance Committee Special Meeting Transcript 12/15/2015 is shared by everybody in the county. We get a piece of San Jose’s; they get a piece of ours. Because it occurred after January 1st, the second year, which is the 2016 will also went up in supplement, will summarily share. Actually, I calculated around 450 to 500,000 in terms of secure property taxes. We won’t really see that back until the '17 fiscal year, so it's going to be a little bit delayed as what you would think of where it would hit immediately. Chair Schmid: But we can anticipate then in '17 that there will be some recognition of what's happening in document transfer tax? Mr. Narayan: Yes. Council Member Scharff: So you think it's about 500,000 more? Mr. Narayan: Yeah. So if you had about, you know--we looked at what the old AV was, compared it to what the new AV would be based on the sale-- assuming the sale price, it does assume that they didn't exorbitantly overpaid because as the county said, they looked at all the transactions, look at the market valuation relative to the sale prices and if there's a big differential, they'll re-evaluate. Council Member Scharff: So which transactions was this? Mr. Narayan: These were, like I said 7 major series. You had a lot of -- Mr. Perez: Camino (Peach) property. Council Member Scharff: So it's Palo Alto Square Mr. Perez: There were four other properties; four or five total. Mr. Narayan: Yes, so these cover like the hotel research center, the Palo Alto Square, there was the 3400 of the Hillview area, the Page Mill Center, the Clock Tower Square, the 3176 Quarter Drive and the Marketeer Place. Each of them have--some of them have multiple address location, multiple buildings. Chair Schmid: A lot of those are on the Sanford property, so it did not include property? TRANSCRIPT Page 23 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: These were--the ones we counted for were all within the city's jurisdiction, therefore subject to-- Chair Schmid: But when you get to Porter and other places, the land is owned by Stanford, inside the city. Mr. Narayan: Yeah. If it's inside the city, it would be subject to our property taxes. Council Member Scharff: The fact that its own by Standard, it's long term grounding, so long term grounding changes-- Mr. Narayan: As long as its-yeah Council Member Scharff: Assessment based on ownership of the long term grounding. Mr. Perez: 50 years for long-- Mr. Narayan: As long as it is not within the Stanford boundary, it would be subject, yeah. So to continue on, the fiscal year 2016 is early projection of 7.1 million and 7.4 returns the receipts to levels more representative. As I indicated, the last two years, we think was exceptionally high and we have are not anticipating that levels will continue on. So that's for the documentary. I'll take a moment if there's any additional questions for that. Chair Schmid: Are you going to add them up? Mr. Narayan: Yes, they are. Chair Schmid: I guess the bottom line, you have total source of funds run between 3.5 and 4 percent per year. Is that correct? Mr. Narayan: I did not add--I mean, I do not have to add those specifics-- but hold on one second. Chair Schmid: Yeah, so bottom line. Mr. Perez: You're asking about the growth rate? TRANSCRIPT Page 24 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: Yeah. Mr. Perez: It’s 3.8 percent. Chair Schmid: Okay. But that includes the two years of-- Mr. Perez: 3.58 percent. Chair Schmid: Okay. Yeah. Council Member Filseth: Actually go back to the projected. They used the inserting point as planned, adopted? If you go back to projected, that's the number you get, 3.58 percent. Chair Schmid: So that's your best interpretation over the next decade. Mr. Narayan: Yes. Chair Schmid: What we might anticipate our revenue probably be. Mr. Narayan: Correct. Chair Schmid: 3.5, 3.6. Mr. Narayan: Yes. Mr. Perez: It derived from finance committee directions to use a 20 year CAGR. Chair Schmid: Right, but when we talk about sustainable budget, I guess want to be thinking in those terms. It's a very important number for us. Mr. Narayan: I mean, we do analysis also with the recession model, which is represented to kind of reflect. Council Member Scharff: We'd like you to do that and we'll get that corrected. Mr. Narayan: Yeah, okay. TRANSCRIPT Page 25 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: I think this is all intriguing, it's fascinating. But once I go out 10 years, what's that really doing for me? Mr. Perez: That's a good question. you know, sometimes there's discussion among our group of finance officers that maybe 10 is too long, other agencies use 5. Steven Levy, who we have reviewed this for us as a courtesy, tells us, the best couple of years, that's the best that I can help you. Beyond that, you know, it’s a guess. Council Member Kniss: I agree with him. I don't know how you can make predictions. We can make guesses-- Chair Schmid: When we approve infrastructure investment, we're doing it for the long term. Council Member Kniss: Of course we're doing it for the long term, but-- Chair Schmid: When we sign an employment contract, that's for the long term. Council Member Kniss: I don't disagree at all. What I'm saying is 10 years out is pretty far and most economist that I've talked to said that's too far to project their income. Chair Schmid: But we have to project revenue stream just as we are projecting expenditures. Mr. Perez: When we talk about the city's long term, that's a 30 process. I'm not trying-- Council Member Kniss: That's true, if we're talking liabilities, but I think the projection for revenue is a tough one. Mr. Perez: One of the reason that we want to do it as an organization beyond our planning is to demonstrate to the rating agencies that we're looking and we're planning and we're trying to adjust for the unforeseen. And that helps us when we go to the rating agency presentation. For example, when we bid the general obligation funds for the library, a lot the records that we have on place where--we had a deficit, we covered. We maintained our reserve levels and we projected what our long term expenses were and we showed them those documentations and that's what TRANSCRIPT Page 26 of 76 Finance Committee Special Meeting Transcript 12/15/2015 led us to getting a triple A rating. So that's another reason why we want to do it beyond our typical plan. Chair Schmid: I think when we look at number (Inaudible), is a critical number in what is available to have. Mr. Perez: I think actually -- to answer your question, I think the list is fairly short, but it's very important. Right? One is anything relating to infrastructure, okay, is a long term kind of thing. Anything in this town that's going to inquire land, okay, is a very long term kind of thing because it's very, very expensive, okay. Anything related to our long term liability, that's a long term kind of thing. So I mean, if the alternative is, you know, we plan on a one-year basis. Right? Or a two-year basis, that just basically mean anything we get, we spend it. Right, you know. We have stuff that we have to deal with. So I agree with you, right, I think our ability to predict exactly what our revenues are going to be, you know, one year, two years from now. I think we did pretty good actually. As you point out, it's throw darts, but you have to understand the directions because small changes of this stuff, although long periods of time, make an enormous difference, so you have to project— Council Member Scharff: That's the (inaudible) is what you just said; that it allows us to prove the point that if we change the pensions just a little bit, we change, you know, the healthcare just a little bit, we get the extra hotel, it's just a little bit. I mean, it's those small changes make huge difference and that's what this shows. Council Member Filseth: We also go another one, it's not really our business, but it is our business, okay. We're just, you know-- Chair Schmid: Well, it’s the small change that (crosstalk) not a-- Council Member Filseth: To build another high school, it cost $500 million dollars. Chair Schmid: Not a leap thing, but something that flows. Council Member Filseth: So there's an element of this that's a great concern to all of us, the PAST's business cause its (Inaudible) school capacity. That's a long term thing. TRANSCRIPT Page 27 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: So Mr. Narayan? Mr. Narayan: Um-umm. Chair Schmid: The bottom line is very important for us. Mr. Narayan: Right. So the last item is, just to finish it off is our utility user tax, which is in the turquoise color. This resource has a 10 year CAGR of 3.2 percent. The utility user tax for 2016 beyond forecast equal points the two changes by the voters in 2014, that was the telephone UTT was reduced by (Inaudible) of 75 percent and the logic to use discounts was eliminated. The receipts anticipated from the UTT for electric, gas and water is basically (inaudible) plus 5-year revenue. A rate projection, and this is important because these estimates could change as the department discusses the proposed rate plan with the Utility Advisory Commission, the Finance Committee, as well as the City Counsel and based on decisions that are made will correspondingly change the forecast accordingly. The forecast assumed for '16 and '17 about 10.5, 11.2 million in UTT receipts. So overall, for the last couple of years, as you can see based on the forecast, we our projecting very healthy revenue increases with exception of UTT, which is more in the line of, you know, a slight increase, but mostly being on the flat side. Chair Schmid: Great. Ms. Nose: So turning to expenses, salaries and benefits comprised about 61 percent of our annual expenditures. Positions are budgeted at actual rate of pay including benefits as of fall 2015. The city's currently in negotiations with various bargaining groups, so our forecast includes salary assumptions, benefits increases based on projection increases and the cost of leaving and market (base services). Council Member Scharff: So you're saying two and a half percent? What are you saying? Ms. Mason: We're using CPI based figures and market based assumptions going forward and I'm not sure that they're absolutely flat. Ms. Nose: No. Especially giving the current negotiations. Mr. Perez: These are based on the data that's been compiled. TRANSCRIPT Page 28 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: So we must be using the number in our assumptions. Chair Schmid: Walter, you must know about this. Mr. Rossmann: What we do is--we obviously--as we're progressing from labor negotiations, we get updates from the authority we get from the council. That's included in that forecast. Once we go beyond the terms of the contracts, we range down to two percent salary increase, so it’s (hourly) years of the forecast, and thereafter, with the corresponding benefits increases. Council Member Scharff: So the hourly years, we're looking at two percent increase? Mr. Rossmann: That's correct. That's tradition what we've done in the last few years. Council Member Scharff: I know, do we capture, you know, there's the salary increase and then there's the, you know, general staff increases, and merit increases that occur. Mr. Rossmann: That's correct. Council Member Scharff: And the two different basic organizations, and so I understand why the two percent’s' in there, but--do we ever go back and look historically what the number is and use that number? Wouldn’t' that make more sense? I mean, we're not saying we're giving that--but historically, it's gone up three percent on average over the last 10 years or four percent or five, I don't know what it is. Mr. Perez: So, there's been discussion about that and there's been different viewpoints from the council. Some feel that if you imbed something like that into this document, then it becomes the promise for future increases. We've gone back and forth over time, so what we basically said is well, instead of going one way or another, why don't we pick up a number that we take is a base for assumption purposes and use that knowing that the numbers could be different in some cases-- Council Member Scharff: Higher. TRANSCRIPT Page 29 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: You know, we had several years where we didn't have any (inaudible). And so-- Chair Schmid: The way we kept back salary and benefit down though is recession only laid off 40, 50 people. Council Member Scharff: Right. Almost 70 positions. Chair Schmid: So it doesn't reflect what people are actually earning. Council Member Scharff: Even in the recession, there's no cost of living increase? Like I know there were staff increases and I know there were merit increases. Mr. Perez: Yes, there were. Council Member Scharff: So you average that over the employees, I bet it's at least one and a half percent increase or something, I don't know, maybe one percent. Mr. Rossmann: You see council member, if you look at the hourlies of the forecast, the last page of your CMR, that's on the board, if you take the tables of expenditure, we're showing you dollars as well as increases. So you see that (Inaudible) in there, it's the only staff increases which apply. What we do is we take a payroll snapshot. If somebody's in staff one, this would be in 2015, the second one in '16--actually, starting in '16, '17 staff two, etcetera, etcetera, until we reach the max. You see in the salaries, starting with 2019, 20, it drives down to about 2.2 average 2.2 average increase in salaries. Benefits goes down between 3.5 and the (Inaudible) below 2.5 percent. The reason--Cali will talk about it in a second, but I am going to preview it for you, the reason why benefits are actually decreasing, is health benefits are the same, but if we look to the Bartel presentation, we saw--in the finance committee in November, the Bartel--John is actually projecting pension rate increasing forward, he sees a flapping of the pension rate increase at the very last of the part of the 10 year forecast and we use those numbers. It’s a (Inaudible) benefits actually decreasing per year. The rate of increase is decreasing. Ms. Nose: So as Walter mentioned, he does assume things as staff increases consistent with (inaudible) raise as well as merit increases as well. The remaining expense options are outlined on this slide. Things like 80 TRANSCRIPT Page 30 of 76 Finance Committee Special Meeting Transcript 12/15/2015 percent of annual growth for 2010. Health benefits and other expenses are growing by the CPI. Chair Schmid: A couple of questions before you leave salary and benefits. Are you assuming the same number of workers in the city now and 10 years from now? Ms. Nose: Correct. Chair Schmid: Yeah, that's a big assumption. Ms. Nose: Yeah, big assumptions. Chair Schmid: Because we're making changes or growth. Council Member Filseth: You're assuming a head count in growth in 10 years? Ms. Nose: Correct. It assumed the current level service, which is the current headcount of the organization. So if we wanted to increase services, you know, we would add positions and build expenses at that point. Chair Schmid: So that's a big assumption. Second, big assumption on benefits. Now, I thought we had quite a dynamic meeting in November about the pensions and there were two big issues coming up in the future. One, under Estimate of (CalPERS) on mortality, length of life--healthy life and so on, I thought they had said they were going to start to adjust from that two years from now. That they are currently understanding that they might have done that and there will be a rate adjustment in two or three years. But I think there were some issue around that. The second issue with (Inaudible), which they just passed, instead of using 2013 as the baseline, we now had two years of very slow and investment returns and there will be some adjustment. What they would like to do would be to lower their risk profile by raising the rate and they have a way of doing that, they're just not going to (Inaudible) rate increase, but they have all sorts of slip it in. Those are two fundamental forces I thought we talked about and so I was surprised to see, but you actually have the benefit about percentage point lower than it was last year. Mr. Perez: Why don't we talk to the pension and the assumption on those rates and then I'll cover the others. TRANSCRIPT Page 31 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Rossmann: So you're correct Vice Mayor. The comparison to last year's forecast, the pension benefits is lower than we actually see in this year's forecast. And with primarily (Inaudible) a lack of understanding the factual science, but we did last years, we look at the four to five years CalPERS has provided us and we literally extrapolated that. Talking to John Bartel, we actually realized that's not how Capers would have done it, that's not they actually do it therefore we adjusted that downwards. We see those changes in the tables under the pension section of the forecast. The second thing is you talk about there's— Chair Schmid: The pension forecast tables though were based upon a rate of return which CalPERS has since acknowledged is too high. Mr. Rossmann: That is correct. What CalPERS adopt is the risking strategy would say if indeed the rate of return is excess of 11 and a half percent, the assumed point of seven and a half percent points, then at that time, they will bring down the cost--they'll bring down a reduced investment term assumption with no cost to the city. That's what they're trying to do. Chair Schmid: Which means an increase to the rate of the city. Mr. Rossmann: Not necessarily an increase. They only like to do this once an investment is at 11.5 percent or higher in that years. Chair Schmid: In that year. Mr. Rossmann: In that year. That's when they're going to reduce it down. That's what they're saying today, it may change in the future. Mr. Perez: What they said also is if through this process, it doesn't materialize, they will revisit those assumptions so you listed a little earlier in your comment, in February 2018, with discussion in the fall of 2017. In other words, if nothing changes, the rate still where it is, they would update that discussion and then the demographics, the image. Chair Schmid: Yeah, I guess I'm concerned that the city is buying into their key assumptions that everything is okay and are taken care of and they show in the past they have not been very good at-- Mr. Perez: So that's a good point. Within our report, we're also talking about having a discussion with you about going forward with the Section 115 TRANSCRIPT Page 32 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Trust because if that doesn't materialize, as you're stating, then we want to have the ability to cover all that and Section 115 Trust we believe it’s appropriate to help us with that-- Chair Schmid: But you’re sort of undermine that case by accepting the CAGR's assumption that everything is okay. Mr. Perez: Well, you know, I think you have to have a base. Right? And the base is it got to be in the report. Now, from there, I think we can do our own scenario. We kind of gave you our own scenario. Maybe that's too drastic-- Council Member Filseth: I actually think we should have a conversation about that tonight, which is what's the base scenario. Mr. Perez: Sure. Chair Schmid: Yeah. Mr. Perez: And, you know-- Council Member Filseth: (Inaudible) cause right now or later, but-- Mr. Perez: What we've given you is from the direction we've been given from prior finance committees. Council Member Filseth: Yeah. This is the base now. I think we should have discussion about this. Ms. Nose: And then a little short later, we do have the alternative as well that has the lower risk investment. Council Member Filseth: Yes. Ms. Nose: So kind of looking at salary and benefits a little bit more at a (Inaudible) level, benefits cost is a percentage of our total salaries and benefits, increased from 15.6 percent in fiscal year 2017 to 53.7 in 2026. So over forecast period, salaries have compounded growth at 28 percent versus a compounded growth of benefit cost of 42.4 percent. So this compound growth is estimated as you guys noted, then the previous TRANSCRIPT Page 33 of 76 Finance Committee Special Meeting Transcript 12/15/2015 forecast, primarily due to that lower city pension contributions in those app years. Council Member Scharff: Can you go back to the previous slide for just one second? Ms. Nose: Yeah, of course. Council Member Scharff: Just want to observe that 3.9 percent annual growth salaries and benefits. I don't know that salaries and benefits, but historically, the general fund expenses are within 4.9 percent a year. Right? Council Member Filseth: So it's much actually, a little higher than that. Okay. We just sort of concluded that with a projected increase in revenues is going to be 3.58 percent, so that's actually below the growth and salary benefit expenses. Ms. Nose: Correct. Council Member Filseth: Okay. Go ahead. Mr. Rossmann: Recognizes that the budgets, salary budgets are only 61 percent of the total budget. Council Member Filseth: Sure. Mr. Rossmann: Right. Council Member Filseth: Total budget historically have increased 4.9 percent a year. So that means that other 39 percent has a decreased. Mr. Rossmann: That's correct. Not increases-- Council Member Filseth: Not increase (Inaudible). Mr. Perez: Council Member Filseth, just so we understand when your crunch your numbers. Are you including transfers into now in your calculations? Council Member Filseth: You know; I'm trying really hard to use the same numbers that you guys did. TRANSCRIPT Page 34 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: My only concern is, for example, we've been more aggressive on infrastructure. We've increased our funding for infrastructure, which is in the transfers out, so-- Council Member Filseth: It’s actually the same thing cause at some point, I like, you know, I don't know this, I'm not saying I did the same analysis with the citywide revenues and expenses and those gross were actually higher. Mr. Perez: That's even a bigger variable because the commodities being involved. Right? So that's why it's important for us to figure out how we set up a view and comparison from other years because of these significant variables that we can have in different policy settings in one year to another. Ms. Nose: So I think we've gotten to everyone's looking forward to, which is our alternative forecast model. Chair Schmid: Oh, wait a minute. Ms. Nose: Sure. Chair Schmid: I guess in the other expenses--big item is Contract Services get a huge hit in Contract Services in 2017, 2018. What's taking place there? I thought there was a movement to try and find opportunism to bring in sufficient services. Is that possible? Mr. Rossmann: Sure. So what you see is what happens every year as part of the budget. You might recall when you went through review of the 2016 budget, we asked for allotted one time additions, one time contractual services. These are taking out, so that's the change you'll see from '17. $4 million dollars in '16 down to 14.5 million dollars in '17. Then if we escalated the fact, which is an average CPI of the last 20 years in San Francisco Bay area of 2.6 percent. That's what the city has factored in the forecast. That does not minimize the point that we continuously try to seek opportunities to outsource--to change our alternative source LTTR models. You saw this in Fire Finance Committee in October with aquatic services as the next step. So staff still explore this, maybe not as systematically as we would like ourselves, but we still continue across departments to figure out how we can do things differently. Chair Schmid: Just as an example, I mean we have substantially increased our spending on infrastructure and 80 percent of that is going to be based on contracting. TRANSCRIPT Page 35 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Rossmann: That is correct. Chair Schmid: So shouldn't that show up as an increase in contracting? Mr. Rossmann: No, it would not show up. It was going to happen in the Capital Improvement fund. We transferred the dollars from the Channel Fund to Capital Improvement fund and that's where you see the expense for contracting services. This is only channel funds pictures, not city wide all fund pictures. Chair Schmid: Okay. Council Member Scharff: So I have a question. You know, it's really hard for council member. We transfer money all over the place, we do different things. So I always look for simple measures if we're on track and I think one of the simple measures I like to see is what percentage over time is salaries and benefits versus other expenditures. You told us like 60, 61, right? So is there a chart that shows us, you know, over the last years, it stayed--if it stayed constant, then I think everything sort of going up together. Mr. Perez: That is right. I've looked-- Council Member Scharff: And it has stayed constant. Mr. Perez: I looked at 2000, it was 60 point something percent. Council Member Filseth: You got to figure out what to do. Maybe you got to put half right? You got to figure out how to deal with capital expenditures in that mix to cause you're really looking at sort of-- Council Member Kniss: Apples and oranges. Mr. Perez: It is apples and oranges, and that's what I was saying, It’s kind of hard--because depends on how we were structure them, you know, we may change in that year on how we created (inauidble0 services for IT for example, when we positioned that, we put them in a service fund. So there's all sorts at play that makes it really complicated to have a constant comparison over a long period of time. Chair Schmid: Okay, you were going to move on. TRANSCRIPT Page 36 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Ms. Nose: Okay. So as we discussed, in order to provide some potential alternatives, we analyzed to other long range options. One is the low pension budget return and the other is the projected recession beginning in the fiscal year 2018. The first one is the CalPERS Poor Investment Return Model. So this scenario reflects continuous poor CalPERS investment performance resulting in exceeding high pension rates. Our rates of return are between 0.2 and 4.1 percent and you can notice what happens to our bottom line. You'll see our operating budget surpluses reduced in fiscal year 19 and then in fiscal year 2020, we actually flip to a deficit in comparison to that base model. Council Member Scharff: So in 10 years, it's about 50 million dollars in differences is what it looks like. Correct? Mr. Perez: it goes from a surplus of 40 to a loss of 11. Ms. Nose: Oh, I see what you're saying. Yeah. So then, the second model that we have presented is the 2000- an estimated 2019 Recession and this recession model assumes a reduction in our major tax revenues and they are anticipated to cline, but they are declining at a lower rate than those we saw in both the dot com bubble and the great recession. Council Member Scharff: So, if I see that one right, you basically dig about a $100 million hold. Right? Ms. Nose: Yeah. Council Member Scharff: So it's about to a 140 short of the normal plan. Now I noticed on there, you used the normal expenditure train, not the low CalPERS expenditure train. Because of the big recession, you know, how realistic is it you'll have the normal CalPERS expenditures. It seemed like you'd have to add on cause if you added that on as well, you'd have another 100, another fixed rate, another 15 grand. Right? So you're $200 million dollar short over the 10 years. Now, that's probably not real, I mean I think 0.2 to 0.4 percent is probably pretty conservative right? Mr. Perez: Very conservative. Council Member Scharff: Pretty conservative, yeah. And in a recession, we'd only be a few years right, but I think it's going to be south of there right. Probably not a good assumption at seven and a half percent return compounded through the 10 years of big recession. TRANSCRIPT Page 37 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Ms. Nose: Definitely. Council Member Scharff: Wonder if we did like, you know, six percent? You said before 6.5 percent or something like that. Right? That's what they got. Mr. Narayan: We--I could--probably not off the top of my head right now, but that's a (calculated) ball number. I just don't think I have it right now. Council Member Filseth: That actually was going to going to be--if we're going to sort of talking about this, it seems to me that the base planning case that the (Inaudible) use, you know, as good conservative folks shouldn't, you know, the CalPERS, I think we ought to look at--you think 6.5 percent is--? Mr. Narayan: As long as you're asking me-- Council Member Filseth: Yeah. Mr. Narayan: I think--what you would hear me say is the--ignoring for a moment the CalPERS risk mitigation strategy. So do me a favor set that aside. Council Member Filseth: We set that aside a long time ago. Mr. Narayan: I think that green line is what I would refer to as 50 percent confidence level number and what you may want to look at, is something that would be a little higher, maybe a 60 percent confidence level number. That probably comes closer to the seven rather than 6.5. Council Member Filseth: I sort of think 6.5 might be a good number. I think if you took-- Council Member Scharff: So what kind of confidence you think 6.5? Mr. Narayan: These are all of the top of my head, but I think that probably get closer to a 70 percent confidence level. When we're talking about the volatility, that's a very high confidence level with the volatility we have. Council Member Filseth: We're a municipal kind of thing, you know. We're not like--we're not--it's not a Vegas road trip here. TRANSCRIPT Page 38 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Narayan: Yeah, think that's-- Council Member Scharff: Think it's too conservative. What about 6.75? Mr. Narayan: Well, so you asked me before. Council Member Scharff: You said seven. Mr. Narayan: I did. So it doesn't mean that you couldn’t' use something other than that, but that's a-- Chair Schmid: Let me put the issue in a slightly different way, we're talking about long term (Inaudible). And you can have an average of seven percent return and if the last two years dipped down a little bit, your sum at the end, ends up being what your--close to what your projections are. But if those two years of dipping, where maybe the market is only four percent happen early on, it creates a whole in the deficit. Mr. Narayan: It does. Chair Schmid: Which is not recovered. Now the question is, you know, are we in such a situation now because if people ask you to get together with the first half of this year to raise the return fairly low, or if the market is overvalued and is going to go through a readjustment at point, we could see a substantial hole even if over 10 or 15 years, you've reached the seven percent. Mr. Narayan: So how do I say this? It's almost as if you knew what my slides were. We kind of have a couple of sample investment return projection and our projecting annual rates based on those investment return and so I think we can get to and answer that help you with that question. Council Member Filseth: So I was going to suggest that I think we should do that. Right? And the other factor I think we should put into this mix is if you go back to the slide about--go back about three slides, 3.9 percent of annual growth rate of salaries cause the annual growth rate of salaries, okay, also impacts this curve. So I think we ought to pick a number that' not two percent or whatever it is somewhere. I realize they're sort of like a bunch of things associated, but I think we ought to pick, you know, a number we feel more appropriate, put that next and that ought to be our base case. Cause, you know, everybody knows this, but I'll throw it around anyway, this chart, TRANSCRIPT Page 39 of 76 Finance Committee Special Meeting Transcript 12/15/2015 you know, assumes that this is going to happen. Right? This doesn't happen, this doesn't happen, so I think we need to be a little more careful with the (Inaudible) here. I think we should be a little more conservative. Mr. Perez: Why don't we switch on over to the presentation Mr. Bartel. John Bartel is here from Bartel and Associates. I won't have the presentation for you on paper, Mr. Bartel arrived this evening. I can provide that to you later electronically and make it available in the documentation. Council Member Scharff: Is this Walter's last meeting with us. Mr. Perez: It is unless you make him come back tomorrow. John Bartel, Bartel and Associates: Mr. Bartel: Let me go through some of this information relatively quickly. You all have seen it before and I'm going to --if you want me to slow down, please tell me to, but my goal is to get towards the end where we look at supplemental pension trust. So I am only going to spend time on the very last score bullet there, the CalPERS Risk Mitigation Strategy. I do want to take a couple of seconds and talk about that. Everybody should understand that is not cost neutral. Everybody should also understand we have not yet factored it into our contribution projections. Here is really what CalPERS is doing. I'm going to start this out with, you know, there's a lot of great actuarial jokes. I'm going to limit it to this one. You all may have heard this before. Two actuarial are at the actuary range. One shoot misses the target 10 feet to the left. The other one takes the bull and arrow and go I can do better than that, misses the target 10 feet to the right. They turn to each other, shake each other's hands and go great. And then the guy watching goes, what the heck, are you doing? You didn't even hit the target. And they go, no, but on average, we got a bullseye. That really is sort of the natural of actuarial projection. What's going on here with CalPERS is they are moving one of those arrows a little bit. So what that means is, the two actuaries, if you move the arrows, don't get a bullseye. So what CalPERS is doing is taking off a portion of the expected investment return, the positive return and what that really means is that the average return will be less than the expected return. So the risk Mitigation Strategy will not--will almost certainly not be cost neutral, will increase rates over time. There's not really much doubt about that. You should expect that to be the case. That increase by the way, will be the last then if the increase happened all at once today. TRANSCRIPT Page 40 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: And that's an important point. Mr. Bartel: No, it's very important. That's right. Slide two, Historical CalPERS Investment Return. What you're really seeing is that volatility. So if you think about this a little bit, we haven't done this graph, we almost certainly will, but if historically CalPERS has had their risk engagement, what would have happened is the lower returns would remain, but the upper returns would really drop because you're really pulling a large portion of those gains off the table. Council Member Kniss: Would you go back to that other slide? Because what you've got written way at the bottom there, can't really see from here, it's pretty significant. Mr. Bartel: No. They--well--$1. Council Member Kniss: Cause that's taking you last, basically, 20 years. Mr. Bartel- Yeah, that's right. Chair Schmid: If I could just point out on that chart, in 20 years, the first has--first business cycle has six years of pro-rate of return. Mr. Bartel: That's right. Chair Schmid: The second one has four, third one has two, the fourth one has (Inaudible). Mr. Bartel: That's right. I don't pretend to know what a good investment cycle is, but I will tell you is, the end of the '90s was particularly good. No questions about that. Council Member Kniss: And the beginning of 2000’s, was particularly bad. Mr. Bartel: That's absolutely right. There's really two periods there. There's the early 2000s that were particularly bad, and then of course the recession. That's absolutely right. You all have seen these graphs before. This is the contribution projection for miscellaneous. So this is the short term and this is the longer term. I'll just say this one thing. There's a change by CalPERS in terms of paying unfunded liability off before we've done these projections, before that change, you would not see the city's rate TRANSCRIPT Page 41 of 76 Finance Committee Special Meeting Transcript 12/15/2015 dropping to the normal cost rate. You would see the rate getting to a slightly lower amount, but remaining quite high for a long period of time. So change--see the safety graph look somewhat similar. What I really want to spend a little bit of time on is the irrevocable supplemental pension trust. I am--the more we look at these trust, the more I'm convinced they a modestly good job of helping bring the unfunded liability down, but where their value really is, is really as a rate stabilization fund. You kind of see this in the next couple of slides, but there really are three variables here. Variable Number 1 is how much additional receipt money would you want to put into the trust could be a single sum amount right up front. Could be a constant amount over a period of time, so that's Variable Number 1. Variable Number 2 is what do you want to your contribution rate to be. What do you want your table contribution are to be and then option number three, or questions number three is, how long do you want the trust be viable? How long do you want the trust to exist and essentially not run out of money? The idea really is that you put your supplemental contributions to the trust and then you compare your CalPERS actual rate to whatever your budgeted or to our target rate is and then if CalPERS rate is below that, you keep your budgeted rate and you put that difference into the trust and that's the CalPERS rate is higher than your budgeted rate, you pull money out of the trust to pay for it. So again, you keep your budgeted rate. So what we're going to do is look at two investment return scenarios. Investment return scenario A--both of these have some sort of investment return cycle to them, if you will. Investment Return A starts out with a 1516 and 1617 returns, quite bad and then you end up with three good years, two bad years, two good years and scenario B is two good, very good investment return; three bad, two good, two bad. And what you really see--we're going to show you the--we'll look at the miscellaneous plan is investment return scenario A, which starts out with those two very bad investment returns, gets to much higher contribution rate. If we were to extend this projection out a little bit, those two lines would actually cross. Green line, the scenario A line might come down a little bit. Purple or blue line for scenario B, might go up a little bit, but we're projecting out through 2024 and so what we're doing is for the purposes of our miscellaneous trust, we are assuming the city takes a -- we can certainly use different numbers, but we're assuming the city sets up a trust, puts an additional $1 million a year into the trust as additional contribution and sets the CalPERS contribution at 35 percent. So the buzzard in the mount is 35 percent, so if your CalPERS is below that, you put that additional amount into the trust, if it's higher than that, you pull it out of the trust. So what we did is we put those two scenarios, set the budgeted rate at 35 percent, so you can see early on for scenario A, what you're doing is, you're pulling, you're taking that delta and putting the additional amount into the trust and later on under scenario A, you pull that out--what is fascinating to me about this is, this particular scenario, we do TRANSCRIPT Page 42 of 76 Finance Committee Special Meeting Transcript 12/15/2015 have an interactive model we could bring that up and kind of play it a little bit, but what you see here with this scenario is at June 30, '25, you have not exhausted your trust. And by the way, one thing--on assumption I did not put here, is the assumption is--the money in the supplemental trust is invested more conservatively. It's assumed to be a five percent rate of return rather--an expected five percent rate of return rather than a 7.5 return. In this scenario, at June 30, 2025, even though you're pulling a lot of money out late in the period, that additional million dollars here plus the additional contributions means that June 30, '25, you still have a positive balance in the trust. In the interest of full disclosure, you don't have a large--in this scenario, you do not have a large deposited balance, but you have not run out of money in the trust. And then you go to scenario B and scenario B, your contribution is consistently below your 35 percent budgeted amount. That is absolutely tied to that early--those early good returns, which drive the rate down and if we do the same projection with safety, but instead of 35 percent for safety, we use 51 percent contribution rate. If you go to compare the 51 to what we projected again under scenario A, you still end up with a positive balance; same scenario, a million dollars. So if you were to do one for both miscellaneous and safety, that would be a combined two million, so a million dollars into the safety account, again early on under scenario A, you would be feeding the trust and later on under scenario A you start withdrawing from the trust. You could come up with different contribution patterns, you could say, well, maybe we don't want to start out with a 51 percent budget for '16, '17, you could gradually build up to a number. My guest would be then if you gradually build up from the 51 percent, you probably have to--you probably have to end up at a slightly higher than a 51 percent in order to keep the trust solvent. This idea, the use of the trust for something like that is--I think allows you a lot more certainty in terms of budget. It has the added advantage, although I don't think this is a significant advantage, but it has the added advantage that anything you put into the trust, reduces your (Inaudible) 68 net pension liability. My expectation would be that it would be probably very positively received by the rate agencies. One thing that relatively quickly, happy to go back and answer any questions. Council Member Kniss: And you'll make this available for us? Mr. Bartel: Yes, yes. Council Member Kniss: Great. Chair Schmid: You mentioned concrete numbers, million dollars for each. Was that taken from our numbers or is it just a (crosstalk). TRANSCRIPT Page 43 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Bartel: No, it's a--it is a number that was discussed with staff as a--as something that might be achievable. But just to be clear, it's not--this is not a recommended approach by any stretch of the imagination. This is-- Chair Schmid: Just trying to carry that through, you know, at five percent interest over three, four years. You don't have a huge amount, so your ability to subsidize rate is limited. Mr. Bartel: That's right. We wanted though to use a--so the five is going to vary a little bit because it does have some equity exposure, if you will. So we build it to be a--not as volatile as the CalPERS return, but if the idea is that its rate mitigation, I think of rate of mitigation as being more valuable when rates go up then when rates go down. And so the idea is that it accesses a little bit of an edge against the rates going down. So that's really why I would--I don't find--it's not really a recommendation, it’s just kind of an example. Chair Schmid: I guess my recollection of investment return is you earn 65 percent in the last three years of a 20-year investment and this seems like it'd be very active in and out over the business cycle. Mr. Bartel: That's right. Chair Schmid: It never gets big rates of return. Mr. Bartel: I think that's right. The other comment I will make on this is, this process is not design to have a lot of money in it. It is designed so that if you--if you start to see it having a lot of money in it, you want to consider revisiting in, you know, if the trust ends up a lot of money, you ought to revisit every couple of years, your 51 percent or whatever your target rate is. So if you have a lot of money in the trust, maybe you bring the 51 down to 49 to be some advantage. Chair Schmid: So it's more to help you over this cycle-- Mr. Bartel: It's exactly right. Chair Schmid: That have been via the retirement fund. Mr. Bartel: That's exactly what it--that's what I absolutely think the value when this (Inaudible), used to do exactly that. TRANSCRIPT Page 44 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: As opposed to paying down the UL early for example. Mr. Bartel: That's right, that's right. I would not-- Council Member Filseth: If you wanted to pay on the UL early, what would you do? Mr. Bartel: For me--let me give you my caveats cause the caveats is if I were--if I were on the city council, I would want very badly to pay that Unfunded Liability down as soon as possible. I will tell you, in normal environments, I think paying any Unfunded Liability sooner rather than later is absolutely the way to go. The challenge though is under the CalPERS model. If you pay the Unfunded Liability down very quickly, you end up with a high degree of likelihood that--much of that money you put in the trust is not--would not be useable. Meaning that your CalPERS contribution rate can't drop below the normal cost, so if you end up being more than a 100 percent funded, it would be the (Inaudible) equivalent of having a reserve in your city investment funds that you could not use for anything. If I were-- for me, that's bad. And so I want to pay the Unfunded Liability down, but i want to do it cautiously so that I have access to that money. So that is an advantage to these trust. We think-- Council Member Filseth: Its part of the rational to keep the amount in the low so you don't have that much risk. Mr. Bartel: That's right. Council Member Filseth: Could you use this in combination with some other mechanism to pay down the Unfunded Liability quicker? Mr. Bartel: The--just to be overly simplistic. If you wanted to pay Unfunded Liability down so bad, you couldn't resist that urge, I actually think you could move it into the Supplemental Trust. That reduces your Unfunded Liability, but it does not give that money to CalPERS quite as quickly, which I think mitigate your volatility and so it gets your Unfunded Liability. The downside to that is, the information coming from CalPERS still shows the higher Unfunded Liability, but it allows you to use that money to pay--to set a budget number that might actually be lower than the normal cost. Council Member Filseth: I think we kind of rely CalPERS for our--I mean; I think you said it beautifully earlier this evening. You said "we got a liability TRANSCRIPT Page 45 of 76 Finance Committee Special Meeting Transcript 12/15/2015 and we got an asset," and right now, we ask CalPERS to tell you what the value of our asset is. That's just too creepy. I think we need to know. Council Member Kniss: I just want to ask, what (Inaudible) Mr. Bartel-- Mr. Bartel: Call me John, please. I know people call me Mr. Bartel, that was my father's name. Council Member Kniss: I can remember John far better. Mr. Bartel: I respond to John better, just so you know. Council Member Kniss: Jim and I was just talking on the side. He did say you are the California expert on this. Mr. Bartel: That's way too nice. In the interest of full disclosure, I like low expectations. Council Member Kniss: Then so you cannot be disappointed. Mr. Bartel: There you go, there you go. Council Member Kniss: So as we look at something like this, tell us what other municipalities have done that is similar or dissimilar and who has come out ahead and who hasn't and you know, looking--one of the things about PERS that always bothers me is that their widely volatile in their returns. And we'll get all excited and they'll say no, that was 13 percent return year and next year, they go down two. So it's--I know what their portfolio looks like, but it just always seems--it always just seems kind of screwy to me. Mr. Bartel: let me give you kind of a couple of-- Council Member Kniss: That's a technical term. Mr. Bartel: A couple--yeah, no, I think you're absolutely right that volatility in the investment return--you should get used to it. It's going to be there and you should recognize that particularly in today's communication environment where newspapers are incredibly good at short articular, 30 second sound bites on TV, it's--you can't--it is veritably impossible to communicate other than short term volatility in the numbers. But you should absolutely understand that volatility is going to be there for a long TRANSCRIPT Page 46 of 76 Finance Committee Special Meeting Transcript 12/15/2015 time. That's number one. Number two, that volatility will translate into contribution rate and budget volatility. There's no question about that. What I'm suggesting about a supplemental trust is a relatively new concept. A little over a year ago, Irvine Range Water District establish the first--it certainly was the first in the State, may very well be the first in the Nation. I'm told not, but I can't attach an agency mean to whoever else did it. It was a relatively new concept at the time and if you want examples of how these trusts have worked, we're brand new. Meaning, this is--sometimes for public agencies closer to the bleeding edge--they don't want to be on the bleeding edge, they're nervous about the leading edge, this is leading edge and that makes agencies nervous. We think--I've not talk with folks who really are setting these trusts up, but we think they're probably year to date, less than 20 agencies have actually set these up so far. Council Member Kniss: So there's not much precedence here for predictability. Mr. Bartel: There is not, there is not. Council Member Kniss: Let me ask something else. Do you remember the (inaudible) scheme that went on here quite a while? We waited at the county three years to do it and then we absolutely, you know, (Inaudible). I remember thinking at the time, it was hard to believe this was real, but they sold it, sold it, and sold it, finally, the fourth year we brought it; went right down. And this sounds so appealing, but again it's that same, where will the--it's hard to remember what happened in '08, so with this, I think uh, it looks terrific. What happens when hit 2019 and the predicted recession happens? Mr. Bartel: We can--just so you know, we can certainly model that. What I will tell you is-- Council Member Kniss: I would love to see that model. Mr. Bartel: What I will tell you is what makes this work is not magic. You're not getting something for nothing. What you're getting, the reason you can have in this particular example 51 percent contribution rate is that there's nothing magic about that. The reason you get there is because of the discipline of two things and that discipline is the additional million dollars a year going in, okay. Council Member Kniss: It's substantial. TRANSCRIPT Page 47 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Bartel: It is substantial. And the discipline for in this '16, 17 years, right here, having CalPERS sends you a report that says 44.6 and you pay that difference into the trust. So let's be clear here, there is no magic about this. It is all about having the discipline to put those additional monies in. So when we talk with our clients about this, we think this works better at an agency that number one is fiscally conservative; number one, and number two is has that discipline to put that additional money aside. If you don't have that discipline, there's--let's be clear, the money that's going into the supplemental trust is not, you know, we're not talking about leverage real estate here, we're not talking about slots, we're not talking about alternative investments, I'm suggesting it should be more conservative, not less. Council Member Filseth: The thing you're talking about, the swap (Inaudible), is actually a swap for financial instrument. Is that what you're talking about? Mr. Bartel: Yeah. Council Member Kniss: Yeah, a very tempting financial instrument. This is putting aside a 13th mortgage payment on your house. Mr. Bartel: Yeah! Council Member Filseth: It's not, it's not-- Council Member Kniss: It's a good way of putting it, but it-- Council Member Filseth: It's not a full swap or something like that. Mr. Bartel: That's a much better analogy-- Council Member Kniss: But what I'm hearing John say though is that the discipline factor is very interesting. We already said, if we hit a recession and your budget is really tight and you're going to say, sorry employees you're don't get that raise this year because we're putting a million in this-- Council Member Filseth: We're considering-- Mr. Bartel: Well let's be clear-- Council Member Filseth: We're considering two things. TRANSCRIPT Page 48 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Bartel: --That's exactly why it's there. Council Member Filseth: We're considering two things. Right? CalPERS going to get hit by the same recession, okay. Mr. Bartel: Right. Council Member Filseth: They're going to get hit worst cause they're leverage. Mr. Bartel: That's right. Council Member Filseth: The second is, consider the alternative. The alternative is you spend it now. You foot the bill for future generations and they pay for it. Council Member Kniss: Eric, I totally agree with you, but I've been in those situations where all of a sudden the income is just going down like this and you're saying, I just don't want to put that million in, and that means that-- Council Member Filseth: Well the alternative is you run it up on the credit card and you foot the bill to future generations. Council Member Kniss: I guess you could do that, but-- Council Member Filseth: That is what you'll have to do. Council Member Kniss: But what happens also is that we're not all sitting here in five years or 10 years or whatever that may--you got to practically swear in blood that whomever else comes along sticks that million aside and I think that's where the rub may come on this is can you get that long term commitment of a million every year for essentially forever. Mr. Bartel: Let me go back and re-emphasize something that is said. Council Member Kniss: I'm from New England, you know, we-- Mr. Bartel: I know. It--I don't think this is right for all of our clients. Let's be clear. Because you have to have some confidence that this discipline is going to be there, but let's be clear, if it's not, the money is still in the TRANSCRIPT Page 49 of 76 Finance Committee Special Meeting Transcript 12/15/2015 irrevocable trust. You've access to it; not to fix sidewalks, not to fix infrastructure, but to supplement your contribution to CalPERS' Council Member Kniss: It's a very tempting kind of thing to do. Pretty sophisticated and can be somewhat hard to explain especially when you have 1000 employees. Chair Schmid: Jim? Mr. Keene: Thank you. This may be a completely off the wall question, but sometimes I think when we're really talking long term, we're concerned about not only the volatility, but the stability of CalPERS. I know we talked about our behavior working relationship to not only how CalPERS invest money, but how other participants in the CalPERS system managed their responsibilities and reliabilities. To me it's not only just like a comparison of running up a credit card, it’s also like you have your money invested in a bank that a bunch of other people have their money invested in the same bank. I mean, it ultimately, at some point in time, I think we have to be thinking about how much of our money we got in a bank that if the whole thing starts to have problems, we're not necessarily protected from the weakness in other sectors within the collective. And I don't know how we get to that when you start thinking out the long term and maybe I'm sort of over estimating. I mean, that's the very dark sort of look at this, but you know-- Chair Schmid: Let me give a contrary point of view. You know CalPERS got us in the late '90s, during a period of boon stocks and--will take care. But they got us permanently, we're in. The long term financial forecast is kind of in four ways to help us deal with some fundamental problems like we're in a situation now where our long term forecast said we can get two percent salary increases, and much more in the benefit package, but people need money in their pockets to live. This doesn't help us deal with the issue of how can we put more in the pockets? Can we hire workers; can we do infrastructure? It just helps us through the business cycle to say, okay, we'll keep doing it in a (steady way). So you know, it doesn't build up a fund that could substitute for CalPERS, it only says we can keep our rates up. Mr. Bartel: I think I absolutely agree with everything you said, but maybe with one minor modification. Do me a favor and look at slide 19. So slide 19 is really crummy investment return early on, which drives up those rates later on. So for me, and I know this is not always the easiest conversation to have, but when you're talking with employees about pay raises, look at TRANSCRIPT Page 50 of 76 Finance Committee Special Meeting Transcript 12/15/2015 this area right here. To the extent that you don't have the discipline to put the million dollars in, to the extent that you don't have the discipline in this scenario to put the 51 rather than the 44.6 in, you're going to be hit with those higher rates which will make it harder for you to give those pay raises. Chair Schmid: Yeah, if this was true, but what you have here is you put in $3 million over three years. Now you have 10 years where you're putting in $40 million dollars and it doesn't add up. Mr. Bartel: Well, what you're doing in this--so this is safety, right? And so what you're doing is you're taking your--the million dollars is really going in over that 10-year period. So you're really putting in 10 million bucks. Chair Schmid: Oh, I see. That's a three-year period. Mr. Bartel: Pardon me? Chair Schmid: Isn't it a three-year period? Mr. Bartel: No, the million, the presumption is they're two pieces to the additional contribution in this scenario and the two pieces are a million dollars every year annually. In addition to the million, you're putting in-- your budget is 51 percent, so in the first three years, you're putting in 51 minus the CalPERS, but in off hand, you're putting in a million. And so what we're saying is, in this scenario, that buys you the ability to have a lower budgeted rate over that period of time, but kind of two things are really going on here-- Chair Schmid: But only if you've had 10 years of years of where you could build that up. Here you only have two years to build it up-- Mr. Bartel: No, just to be clear. This analysis is based on that scenario. So in other words-- Chair Schmid: Doesn't it say in 2019, you start paying--? Mr. Bartel: In 2019, in the '18, '19 fiscal year, that's the first year you start drawing money from the trust. You're drawing from the trust, but you still putting money in because the presumption is, you can continue to put your million dollars in. TRANSCRIPT Page 51 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: But just the space you have when you accumulate and when you de-accumulate is way out of line. Mr. Bartel: What we didn't show here, we could show you the trust balances so that could see it. Now, everybody should be clear here. In this scenario, at June 30, '25, there is not very much money left in the trust, but it's still positive. It's a small positive--I'm sorry, I don't remember, but I bet it's less than a million and a half or something--it's a small number. But this does get you to that positive, that positive-- Council Member Kniss: So is this your--what Eric was saying here, you're making the 13th mortgage payment, and at the end of 10 years, you come out ahead because you put the money aside. Mr. Bartel: Yeah, that's right. Council Member Kniss: Yeah, no, I-- Mr. Bartel: That's really what's going-- Council Member Kniss: As I said, it's very tempting. Council Member Scharff: So I think what the issue is you get to is the discipline. I think Liz raised the right issue. So actually, I don't think it's an employee issue. I'm thinking about in 2009, 2010, you know, we basically decided that we weren't going to cut services and instead we didn't give raises. A lot of cities gave raises and cut services, that's your two choices. We in Palo Alto, didn't cut services. Council Member Kniss: You do one or the other. Council Member Scharff: Right. Do one or the other. And you know, and what is it? One percent, one percent increase at CIU is a million dollars, right? Roughly, right? and then it's an ongoing --than ratchet it up, so you're at that extra million. So that's where all the money is. I mean, if we're talking a million dollars a year, that actually I think we can keep the discipline to do that. If it gets more than that, I think it could be a problem because what you're going to be tempted to do, is you're going to say, you know, we don't have no money to pay crossing guards and are we going to cut the crossing guards or we're going to cut this, we're going to cut this. I TRANSCRIPT Page 52 of 76 Finance Committee Special Meeting Transcript 12/15/2015 mean, that's my sense of where that goes when you have 300 angry people show up, so-- Council Member Kniss: Or as we one-time try to raise the price according to the children's theatre. That's one of my favorites; don't do it. Mr. Bartel: I understand the bigger context. Mr. Perez: I'm going to clarify something. Please go ahead. James Keene, City Manager: Maybe you've said this before. Supposed John, if we were to take what the cost is under that model, under the green line including the $10 million contribution or whatever and you're sort of explaining where we're going to be. If we didn't make that contribution or we adjust again the total up what our cost would be each year on the green line, what would be the delta between the expense over that period of time? Mr. Bartel: I can't answer that question of the top of my head, but that's a very reasonable question. Council Member Kniss: Probably the same. Mr. Keene: Okay. I mean, if it's pretty close to the same-- Council Member Kniss: We're just stretching it out. Mr. Bartel: It's the same. The question, under this scenario, is the saving. Mr. Keene: Okay. Mr. Bartel: But the reason it's a savings, is because you're putting more in sooner. That's the reason it's a saving. Council Member Kniss: You're earning sooner. Chair Schmid: A little bit, yeah. Council Member Scharff: I do want to say it’s a benefit to the employees to do this. I think we should because they know that we're actually going to pay the pensions. I mean, that's really what it is. TRANSCRIPT Page 53 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: That's the bigger picture. Mr. Keene: Can I put another thing in here I think it's a really, really important point, it's been--it's very difficult to get this across the labor and our employees is that--in one sense tries to stabilize our situation so we don't get in a situation where we're sort of over committing on in agreement and giving a bigger pay raise because in the short term, it looks like we're doing better that we really are and there's this pressure to do this, and then suddenly we get in a few years down the road in the future, we got another contract and suddenly it's way worst and we're down and yet it's way more erratic behavior. Council Member Filseth: I mean, doing this is what enables us to make it secure for (SCU) in the future, right? By getting control of this stuff. Now there's a temptation, tricky road we want to go down, you know, well gee, that's somebody's else’s problem, I don't think we should do that. Right? This is--doing this, getting our house in order, you know, is good for everybody. Right? Cause it enables us to protect people, not just this year, but well into the future. Mr. Perez: Yeah, to that point, I do believe-- Council Member Filseth: I don't think we're going to be (Inaudible) anytime soon, but the principle is the same. Mr. Perez: Yes, and you know, I think, you know, there's a couple of things that from a staff's perspective that--we want some kind of stability and when we can figure out where the comfort level is on the contribution. We learned from the last recession, the pain you talked about earlier, reduced about 70 positions, we were fortunate to be able to freeze positions and not lay off but a handful. But that cost a lot of issues to the organization and to the staff and to the community because different services were impacted temporarily because of the vacancies. So if you have a mechanism where you can draw money from this trust, it allows you to have time to make those informed decisions as a whole and that's a huge benefit to the community and to the organization because then you're not freezing critical positions because you have to because of the (Inaudible) commitments that you have. So that's one thing that's attractive about this for us from an operational standpoint. The other piece to make sure that we're all clear, John, let me repeat it and please correct me. So what we're talking about here, this safety, so in miscellaneous, keep in mind that it includes the Enterprise Funds so it's not a million dollars, it's you know, 550,000— TRANSCRIPT Page 54 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Kniss: You mean to the General Fund. Mr. Perez: To the General Fund contribution. So it's a little less, obviously it's still a number, but the other number is the difference to the delta between the 39.5 and the 51 percent. How much is that? Council Member Scharff: I was going to ask that question. Mr. Perez: I don't know if you have the chart that shows the dollar figure of that. Mr. Bartel: I did not bring those. Sorry. Mr. Perez: So what my point is trying to be is, you have a lot--we have a lot of obligations and commitments that we have. So we've been focusing tremendously on infrastructure. Right? And so we're going to have that as a priority. If we were to make some commitment to this, this would part of that equation and that we need to tie in to our thinking of how we go forward. We may not feel that we can be as aggressive, I'll say--I don't know what word to use right now, I'm trying to illustrate the point. We may not be as comfortable with that number. Let's just say for the sake of discussion that it's another $4 million plus the $1 million--half a million, so it's $4.5 that you would have to put in. That competes with everything else we have. Council Member Scharff: That I'm concern about. I was going to say that. Mr. Perez: Right. It's something that we can work towards. There's various ways to do it and we've had this discussion and obviously the lesser amount you put in, the harder it is. The illustration I can give you of how it works and you've had really good physical policies from my perspective that you adopted, is over a five-year period of time, we've contributed over $30 million to the infrastructure we (Inaudible). Setting that aside ahead of time and it was based on the research policy and the budget that was issued and sort of said anything above an 18.5 will go to infrastructure. So there's ways that you can think about it. You can say if there is a such a experience in the future year, and I'm just throwing out number--illustrations just so you can grasps some policy concept, we can say 2/3s of it go to infrastructure and 1/3 goes to Unfunded Liability or whatever. TRANSCRIPT Page 55 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: So I want to jump in. This is actually my whole concern in doing this. Is we have an infrastructure plan, construction cost rep from say again, 30--40 percent. What I'm really interested right now is finishing our infrastructure plan. And after we finished our infrastructure plan, then I think we can focus on this. And actually a little concern that we're going to need every penny that we can scrunch up to get our infrastructure plan done. I mean, I'd be fine if we took a look at the infrastructure plan and said, okay, where's all the money coming from? How are we going to do it? What are we going to fund it and then we look at doing this? But I don't really think that we can take out 3 or $4.0 million a year. i actually thought we could probably squeeze a $1.0 million a year for this, but it's the delta between the rest, I don't know, 51 percent and you know, I mean, I might not even be opposed to just saying let's just put a million aside starting now and then with the promise that after we finish infrastructure, we then do the 51 percent, but we start out having a fund already in there because we put a million aside every year. Something along like that. When we start the precedent, we start thinking--we do it, but we know we aren't there yet. Mr. Perez: My sense is that, that's where you're going to be? So, you know, there's some one time dollars that we can identify in the tune of $3 million from various sources so we can go into--that we can seed funds. I think it's important to seed funds, not trust funds. We may not, you know, you may not be comfortable already for the whole amount, but what I would want us to consider as an organization and you know, discuss it with Jim, we're concerned about that recession that's blooming. Right? So we want to have that-- Council Member Scharff: Probably about six months long. Council Member Filseth: Probably got one day, one day. Mr. Keene: All those projections actually identify the recession occurring the year after he retire. Pointed that out to him. Mr. Perez: And so it'd be great to have that trust fund so that because we want to have that flexibility of having that time to make informed decisions. Good job (cross talk). Mr. Bartel: You mind if--yeah--so everybody should understand though that you delay putting in the additional amount in, what that means is your 51 target is not going to be a 51 target. It's going to be a 52-- TRANSCRIPT Page 56 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: Or more. Mr. Bartel: Fifty-two so don't kid yourself about that. I'm not trying to tell you; you should do this instead of-- Mr. Keene: I think Greg's point is really good and going back to that, the benefits of this lies in the discipline. The problem we have and this is budget Terry challenge always is that there's tradeoffs, we have a number of long term goals that require discipline; the funding of the infrastructure plan requires discipline over any number of years. Actually trying to keep our pay rates competitive enough in the marketplace requires discipline over the years, the same thing with this. I would say on the other hand though, Greg brought up a really good point is, I think we need to--I don't think we can just rest on our morals about growing revenues, on the other hand when we have some of these demands, we need to be opened to thinking about the fact that new revenues streams or increases in revenues allow us to maintain this discipline on the cost side of stuff too. I'm not advocating one way from the other, but it's like, you know, there's a hydraulics here between these different choices we have. Think of an equalizer on your stereo or something, I mean how you're going to adjust of these different beavers. Mr. Perez: There's another factor to Joe just reminded me off, that's where- -and John pointed out earlier, that's where disclose more of our numbers and moving them into our financials. The rating agencies are also going to look to see what we're doing. Right? And so it's good that we put $70 million aside in our retirement/medical and if we have something, even a modest start, they will look at it in a positive way because we're going to issue more debt and we want to be-- Council Member Filseth: That's the only place (Inaudible), painless interest. Chair Schmid: You know, I guess I'm concerned to make a once and for all contribution to get it started. But to get an annual payment, a guaranteed annual payment without a revenue base building on, you know, what the numbers tell us here, is that we have salaries growing at two percent per year and benefits are four percent per year and you want to exacerbate that deferential. Is that a benefit to the workers? That's my question. Council Member Kniss: I think that's rhetorical, isn't it? TRANSCRIPT Page 57 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: So are we going to talk about approving a long range financial cause I actually have issues with approving a long range financial forecast. Council Member Filseth: I got a whole list here too. Council Member Scharff: Well, I'm just thinking that it's 9:40 and--were you planning us to vote to recommend one of these trusts? Where are we in terms of action and-- Chair Schmid: Yeah, what do we need to do? Mr. Perez: You know from a setting up the trust, that we have time. It's not--if you're not ready tonight-- Council Member Scharff: No, I'm ready, I'm ready to make a motion on it. Mr. Perez: Okay. Council Member Scharff: I like to actually make a motion on it. Chair Schmid: Why don't we first go back to the long range financial forecast before we decide on it. Council Member Scharff: Why don't we finish this? Mr. Perez: Yeah, let's finish this. Council Member Scharff: Let's finish this because this is a different issue. Chair Schmid: Do you want to make a motion? Council Member Scharff: Yeah. Before I make a motion though, I think I just want to--so what we would need to--what would the motion look like? It would look like go direct staff to recommend to the council that we set up a trust. Right? Cause that's what we would be doing. Council Member Kniss: Don't you want to evaluate before you recommend it? TRANSCRIPT Page 58 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: Well, we have evaluated it. That's what we've been doing here tonight? Council Member Kniss: Well, in for what? For 45 minutes? Mr. Bartel: The one--what I think you should--there are more than one provider for these trusts. Council Member Scharff: Okay. Mr. Bartel: So I think if you direct staff to look at the providers and come back with a recommendation-- Council Member Scharff: And Liz is right. So it'd be to evaluate--there you go, use the words. Mr. Perez: Yes, so that--we want to go through a competitive process, so request for proposal so maybe the staff (Inaudible) a request for proposal for the establishment of a trust and come back with additional information and options I would say because you would want to have options on how to fund such trust. Council Member Scharff: Absolutely. Council Member Kniss: And you may have to spend some time with the five council members who are here and--no, I think they probably would want a good deal of input on this. Mr. Perez: Excellent point. Something to consider. Council Member Filseth: You could refer to the next finance committee to vetted it out and then go to council. It's fine too. Council Member Scharff: So but when would you get the request for proposal? You need council authorization to do that. You could do that with--So I mean, I think the best, the best of all possible worlds would be, do we ask you to evaluate, go get request for proposals, come up with options, come back to finance committee and finance committee then makes a recommendation based on having all that information and we had some full item and, you know, we talk about exactly how much money we want to put in with the different options, and then we go to council with a specific TRANSCRIPT Page 59 of 76 Finance Committee Special Meeting Transcript 12/15/2015 recommendation that's been vetted by, you know, four people who either agree or disagree or come out cause this is a complicated stuff and I think this is exactly what a committee can do to make it easier on council. Chair Schmid: One key thing that John brought up is to not just make a single payment to establish it, but rather to try and get it as (Crosstalk). Mr. Perez: So whatever John is showing you, the different options, the model that John shows with the numbers-- Chair Schmid: Right. Mr. Perez: I think that's key. Council Member Scharff: Absolutely. Mr. Perez: An alternative model would show me that a million or some number and then one-time funding as we went--off the top of my head, those three could be likely scenarios we could present you. Council Member Scharff: Okay. So I'll make a motion that we--that staff go forth to request for proposals, evaluate it, come up with information and come back to Finance Committee with options. Council Member Kniss: Whomever they may. Remember, it will be a new finance committee, but I think that's a good idea actually. Council Member Scharff: Right, then there'll be more council members getting vetted on it. Chair Schmid: Do you want to be more specific on what proposed, what the proposal is? Council Member Scharff: Well, do I need to be? I mean a request for proposal to--of setting up one of these--what do we call them? Council Member Kniss: 115 Trust. Council Member Scharff: 115 Trust. An irrevocable 115 Trust. TRANSCRIPT Page 60 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: Right now we know of two financial institutions that provide such services and so we'll see what else is out there. Chair Schmid: Okay-- Council Member Kniss: Second. Chair Schmid: There's a second, good. Do you want to speak? You want to speak? MOTION: Council Member Scharff moved, seconded by Council Member Kniss to direct Staff to conduct a Request for Qualifications (RFQ), evaluate it and return with information to the Finance Committee with the options. Council Member Scharff: I think this is definitely worth exploring. As I said, I think that I probably have issues putting the Delta in, but I think if we set this up and start the process--I understand that, you know, that we might be at 52 percent, but I do think, looking at these competing dollars, I do think we need to (Inaudible) our infrastructure and we may be fine. No one is actually vetted where we are on the infrastructure in terms of how much money we need and that's the big competing dollar amount. And there are other things that are interesting like we haven't looked at the issue that when the police move--the public safety group move out of their public safety building, there's all that space here. We might actually be able to move the people out of the development center into that space or rent the space out and cover a substantial amount of money that we can then use for the rest of the infrastructure projects. So I mean, I think there's lots of different--I do hope staff thinking of a financing plan, you know, based on new construction cost numbers cause that's going to come up fairly quickly. As we go to council on every item and you say-- Chair Schmid: It's not in your proposal at all. Council Member Scharff: No, no, no, it's not, but I mean, I do think these are related in terms of different cost issues and what we're going to spend money on. Chair Schmid: Liz, do you want to speak to your second? Council Member Kniss: Only that I think this is still needs to be an exploration and that's what I hear us getting into. And then to remember TRANSCRIPT Page 61 of 76 Finance Committee Special Meeting Transcript 12/15/2015 that this should not be taking lightly. This is a really major step and I support it, now I'd be interested in hearing what else you find out as you call around and go with an RFP and so forth and see what other entities have already tried it. Chair Schmid: No other comments, then what I have here is where asking staff to evaluate proposals for irrevocable 115 Trust and come back to the Finance Committee with information and options. Council Member Scharff: Well, to get our--who option? Mr. Perez: We would. Chair Schmid: Okay. All in favor: Chair Schmid: That passes anonymously. Council Member Kniss: And thank you John for coming. Council Member Kniss: Aye Council Member Scharff: Aye Chair Schmid: Aye Council Member Scharff: Aye INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND THE SECONDER to add to the Motion, “to return with an Irrevocable 115 Trust proposal.” MOTION RESTATED: Council Member Scharff moved, seconded by Council Member Kniss to direct Staff to: A. Prepare and issue a Request for Qualifications (RFQ) to the creation of an Irrevocable 115 Trust; and B. Return to the Finance Committee with options and analysis based on responses to the RFQ. TRANSCRIPT Page 62 of 76 Finance Committee Special Meeting Transcript 12/15/2015 MOTION AS AMENDED PASSED: 4-0 Chair Schmid: Okay. What are the steps we need to do with the long term financial forecast? Mr. Perez: So to get to the point, we want to hear from your feedback on--it sounds like you had some ideas on what you think our base model should be, so we're open for that discussion. Chair Schmid: Okay. First, suggestions, comments? Council Member Kniss: So may I ask the outstanding question. How about how long you all want to stay late on this? I mean, are we talking about 11 again tonight? Chair Schmid: We're trying to drive to a resolution of lung range financial forecast, so if you want to make a motion, suggestions--? Council Member Scharff: I have some suggestions. Chair Schmid: Yeah. Council Member Scharff: I think the first thing is that--I think that we should go with Mr. Bartel's seven percent in here. I think the seven and a half is too long. Council Member Filseth: Think six and half is too conservative? Council Member Scharff: I think six and half is too conservative. I think we went with seven. I still think these--I still think we're way too optimistic about how much revenues--I think we're going to have a recession. So I think if we re-did this with the seven, I think we're getting a lot closer and you know, I'm open to the thought of wage growth at a higher level at the moment. You know, where you talked about three percent or whatever? Council Member Kniss: You mean factoring it in at higher level. Council Member Scharff: Factoring in at a higher-- Council Member Kniss: Instead of two and a half? TRANSCRIPT Page 63 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: Instead of two percent. And I tell you, I don't think that's a--I think it's sort of a promise. I mean, I would actually--but on that issue, I would defer to Susan and (Laurel) really and then if you guys told us that you thought that would cause problems in bargaining, then we'll just leave it alone, and if you do, I mean, I could go either way on that. I do think, I do think that we could easily go--I easily think we're going to go negative on this stuff fairly quickly, which is fine. I think going negative on this stuff is just fine cause that's where I actually think we are. If we don’t' get new revenue sources, and the only reason we didn't go negative on this time is if you took out the TOT increase, right, we're going negative. Council Member Filseth: The Hudson property is TOT. Council Member Scharff: Right. I mean, so you took out (tasler) sales tax, one little bump for that, then the Hudson deal, then the, right? So I don't think all that stuff is sustainable except of in the top of the boom, which is where we are. Ms. Mason: So all I want to say is I do think that going forward in the long term, we do need to look at a 115 Trust. We need to look at prudent measures that addressed the long term liability. We need to look towards our employees to be partners in this, that this is not just about the city's contribution, this is about us partnering and that's what I've heard council share, that they're looking for increased partnership on sharing the benefits. We're doing that with our health benefits, so I guess one of my concerns about going forward is I think it's important to start investing in the trust and maybe building a line item for that and then having a fair balance salary line. I just think that we need to think in both on a balance measure that employees are our partner in this and so maybe there is a higher salary amount down the road, but employees are also contributing to the cost of their pension and the cost of their health insurance. So I guess in the long term, I hope we have a balanced approach. Council Member Scharff: Well that was one of the things I was saying is that we could actually start--you know, we start seeing this trust to get some in it, and then we actually have as part of the negotiations. Maybe there's an employee contribution to trust overtime. Council Member Filseth: That's an interesting idea. Council Member Kniss: I'd say that's a thought. TRANSCRIPT Page 64 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: You know, I don't think it's that far off. They contribute to other things and-- Ms. Mason: And if employees start contributing to the employer share and that possess the ability to create a more stable environment and jobs are protected. Chair Schmid: Let's try and focus-- Ms. Mason: It's a partnership. Chair Schmid: Let's try and focus on the recommendation we're making for this financial quarter. Council Member Filseth: We're all in the same bucket. The fact is city has spent $500 million dollars we didn't have. Okay. We're all in the same boat, so how do we get out of it? If we could do it together, that's great. Chair Schmid: Any other concrete changes recommended? Mr. Perez: In terms of the concern about the use of the higher number, we do state in our tax over and over and in our staff report that these are for projections and not to be taking as a promise. So if you’re comfortable with that language-- Council Member Scharff: Well, I'm comfortable. The only thing I want to run by is whoever does these, what do they call that, they're not mediations, they're fact finding, whether or not the fact finder will use it against us. If the fact finders will use it against us, then I don't want to do it. Ms. Mason: So-- Council Member Scharff: I don't know, I'm just--cause one of the factors in fact finders is whether or not you have the money and whether or not you think about-- Ms. Mason: We do not, you know, we have many needs. Our infrastructure is a critical need and so, we negotiate based on fair place in the market and the cost of living. We do not negotiate based on our ability to pay because there are many needs in this community that need to be addressed. So the TRANSCRIPT Page 65 of 76 Finance Committee Special Meeting Transcript 12/15/2015 fact finders could look at the long range forecast and say yes, you set aside that expense. And I'm not saying-- Council Member Scharff: So it's not a set aside right? What it is, is simply-- I think we go negative. Do we go negative; you think if we do the seven percent on the forecast? Mr. Perez: Yeah, most likely it will. Council Member Scharff: I think we go negative. Mr. Perez: In the out years, may not. Council Member Scharff: But in the short term, we go negative? Mr. Rossmann: If you bring in the best return on assumption to seven percent, that may not hit us in '17, it's probably will start hitting us in '18 or '19. If CalPERS faces some changes. Mr. Perez: One option is for you to consider is leave the base model with the two percent, direct us to do an alternative model with higher salary, so it's an alternative, it's an option. Council Member Kniss: So what don't you leave it at the two for now-- Council Member Scharff: Why don't we leave at the two and we'll do an alternative. Council Member Kniss: The two and the four-- Council Member Scharff: And then we'll do an alternative. I do think we should change it to the seven. Mr. Perez: We're fine with that. It's--your budget decisions aren't going to be driven by the year that's in front of you. Right? Chair Schmid: We've got three discussions on valuating the pension fund and I think each time we come--I would make another suggestion that the sales tax revenue be a little lower. You can take a look at the Stanford impact on it, but I think that's a big plus. TRANSCRIPT Page 66 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: Sales tax or hotel tax? Council Member Scharff: Sales tax. I also think maybe the hotel goes up or it doesn't. I don't know. Maybe I think we're overly optimistic. I guess that's my--remember I showed you that in 2010, we thought we'd have a 167 million and 182,000 in 2016 and we'd have expenditures of 182,767, that was probably--and we went to revenue of 170,498 and expenditures of only 172, so we started and now we're at what? 190, 189 expenditures. So it's really tough to tell in the recession, we were really conservative on our revenues. Now we're in the peak boom, I think we're overly thinking our revenues (Inaudible) and they're much higher than I think they were then. Council Member Filseth: Further on this path, I have another one, which is property tax growth is at 5.9 percent, but city rental growth is at 2.6 percent. Why? Why should rental income track property values? Mr. Perez: So what we do there is we have an appraiser come every two years and help us do a general appraisal update of our properties and then we increase it by CPI. We've had that, that's an internal practice or policy for some time. We do not update on a yearly basis. Council Member Filseth: So it's driven (Inaudible) not market? Mr. Perez: In between prices. Council Member Filseth: Correct. Chair Schmid: Should we change that? Mr. Perez: You have the ability to direct us to do that. Council Member Scharff: I like to direct you to look at changing it. Evaluate changing it. Mr. Perez: Okay. So we'll take that as a separate discussion from the long range if that's okay. Chair Schmid: That's fine. Mr. Perez: Then we can move forward with this and have that discussion. So I'll make a note to future finance meeting discussion. TRANSCRIPT Page 67 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: I have a second concrete question. The retiree healthcare fund. We're talking about 7.6 percent. We assumed 7.6 percent RY now, maybe going to 7 in the quarter. Why wouldn't that go to the same percent we were talking about here for the CalPERS, for the-- Mr. Perez: There's three rate assumption options and Walter did one of the scenarios and if my memory is correct, it's about a $2 million difference. Mr. Rossmann: So what we planned in the forecast is 7.25 investment return. That is still pending for final evaluation for hotel, which we'll get in February. We'll come back to the finance committee, usually during the budget season and the city council would have to approve the evaluation. We believe it’s prudent to go to 7.25 at this time, 7.61 percent. Council Member Filseth: Is there--why would we not go to 7 percent if we're talking about seven percent in (Inaudible). Why are they different? Mr. Perez: Let me pull up the percentage real quick. 7 percent itself is not an option. Let me tell you what they are. So they're going to revise the numbers, they're telling us to 7.28 for strategy one. 6.73 for option two and 6.12 for option three. Council Member Filseth: So CalPERS is at 7.5 and they're at 6.12? Mr. Perez: Keep in mind that-- Ms. Mason: They give you the option. Mr. Perez: In this trust, you have options and the risk tolerance and they don't invest in the same manner as the pension trust. Mr. Rossmann: So we did ask Mr. Bartel to let us know how much the difference in cost would be. So at 7.25, it will cost us, all funds, not just general funds, $16.1 million. If we go to 6.75, it jumps up from $1.6 million to $70.7, so we felt that it was too much of a jump in one year, so we brought it down to 7.25, but our goal is definitely long term to come down to 6.5 percent investment turn option, which is what best practice has tell us. We bring it down every several years. Council Member Scharff: And this is in the long range forecast? TRANSCRIPT Page 68 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Rossmann: The long range forecast, we assume 7.25 this time. Council Member Scharff: So why not just assume the 6.5 in the long range forecast because it doesn't affect budget, it would just-- Mr. Perez: Well, we should probably use one of the numbers in their buckets right. Council Member Scharff: yeah, we use their bucket, right, but I mean, why use the 6.73 or--in the long range forecast, why not use the number--in the budget, you might want to use separate number because you might want to break it down less, but-- Mr. Rossmann: Sure. I think the hesitancy often times to model this is every time we do this, we meet with Mr. John Mr. Bartel and we ask him to provide this for a fee, so if the Finance Committee is interested in seeing that, we'll be happy to go him. I'm sure he'll be happy to provide the information for a check. But we don't have to explain-- Council Member Filseth: How big of an account are we with John Mr. Bartel. I mean, I like the guy, right, so. How big of an account are we in? Mr. Perez: How big--I'm sorry Council Member Scharff: What are we talking about in cost? Mr. Rossmann: His fees probably 200, $300 in hour. Council Member Kniss: Say that again? Mr. Rossmann: I think it's (Inaudible). Council Member Scharff: Cheap for a law firm. Council Member Kniss: That sounds way too low. Mr. Rossmann: He said about 400, staff is (crosstalk). Council Member Kniss: If you could find someone at 200, that is amazing. TRANSCRIPT Page 69 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Filseth: So a year we're paying him 10, 20, $30,000 or something like that? Chair Schmid: Okay. Why don't we focus on what we want staff to do? Council Member Filseth: That's my list. I'm done. Mr. Perez: You've seen the 7 percent rate of return assumption for CalPERS. Salary increase have a separate assumption with the historical growth. Is that what you'd like to see on the salary? Council Member Filseth: Yeah. Mr. Perez: Sales tax lowered, one potential bench marking is taking out the Stanford dollars so we can identify? Council Member Filseth: Yeah. Mr. Perez: Would be one likely scenario. Council Member Filseth: Hotel, gas, you think five percent is aggressive? Council Member Scharff: Is that what we're doing right now, five percent increase? Council Member Filseth: Five percent on the forecast. Council Member Scharff: I actually probably think it's more like thee. Council Member Filseth: You think. Council Member Scharff: I mean, you know, I hate to just like pull something out of the air. Mr. Perez: Yeah. Let us work on something there. Keep in mind we only use 70 percent of the projected income or the infrastructure. Chair Schmid: Yeah, that's conservative. Pere: We feel that we did an adjustment. TRANSCRIPT Page 70 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: Yeah. Mr. Perez: And then--I got side tracked and I didn't quite finish capturing the property tax request. I'm sorry. Council Member Filseth: Oh, I think you guys were going to look at the possibility on the tax. Council Member Kniss: Talked about lowering it. Ms. Mason: Lowering the property tax. Council Member Kniss: I think evaluate it maybe-- Chair Schmid: Yeah, evaluate might be good. Council Member Scharff: So the property tax is the one I feel the most comfortable with actually. Council Member Filseth: I think we were talking about increasing the rental. Look at Kendal Rentals (Crosstalk). Mr. Perez: I think; I feel the same way for quite some time. Especially with the high number of under 600,000. Council Member Filseth. Right. Mr. Perez: Okay, so nothing on property tax. That's all I had. Chair Schmid: Okay, so we have a motion with a list of recommendations. Is that what you need to go ahead? Mr. Perez: Yeah. Our second recommendation or part of that recommendation is our question to you. Assuming we made these changes, we feel comfortable in sending our report to council if you do. Chair Schmid: Yeah. I think it's important that council get involved. So it's time to get it to council. Council Member Filseth: Shouldn't it combine back here first? TRANSCRIPT Page 71 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: It's a different finance committee, I'd say yes. Council Member Kniss: It will be, yes. Council Member Scharff: Except for that if different finance committee, will have the whole thing over again. If they have to do the whole thing over again, I'd probably take pity on them and just send it to council. Mr. Perez: Thank you. Council Member Kniss: Let's do that. Chair Schmid: It's important to start the budget process. This document is helpful to get that underway. Council Member Kniss: The budget process starts in January anyway. Council Member Filseth: By the way, you're going where again, Sunnyvale? I'd send it to Sunnyvale. Mr. Perez: They actually do a 20 year forecast. Council Member Kniss: What? Council Member Filseth: They do a 20 year forecast. Chair Schmid: Are we ready for a vote to move to finance financial report? No other suggestions? Council Member Filseth: What exactly are we voting on? Chair Schmid: We're recommending-- Mr. Perez: To make those changes and then we would-- Council Member Scharff: Why don't you run through all of them again so we're (Inaudible). TRANSCRIPT Page 72 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: Change the rate of return assumption on CalPERS to seven percent. Look at the salary increases historical and create a separate scenario maintaining the base model that the current staff recommendation. Council Member Kniss: We're keeping the two and fourth? Mr. Perez: Correct. And then revisit the sales tax and lowering with potentially the Stanford expansion dollars and then revisit the hotel tax scenario and separately, we're committed to review the rent increases separately. Council Member Filseth: I know what I want to say. I want to make sure I understood this. I think you said it earlier is that the forecast that exist today, assumes no change in headcount for the next 10 years. Is that right? Mr. Perez: Correct. Council Member Filseth: There ought to be a big asterisk on that so everybody understands that. Mr. Perez: We'll highlight it. It's been consistent with-- Council Member Kniss: That's been pretty stable. Council Member Scharff: Well, the headcount hasn't been stable. It moved along (Crosstalk.) Mr. Perez: No, the modeling sorry. Council Member Scharff: Yeah, the modeling been stable, but the headcount changed dramatically. Council Member Kniss: Well since when? Council Member Scharff: Oh, in 2009, we cut back 30 or 40 positions. Council Member Kniss: Since seven, eight years ago. I think the last three years been pretty stable. Council Member Scharff: No, no, now it's going up. TRANSCRIPT Page 73 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Mr. Perez: Going up. Council Member Scharff: Now it's going up at-- Mr. Perez: For some of the (crosstalk.) Council Member Kniss: Well how much? Didn't we do 13 last year? Council Member Scharff: 15 or something like that. Ms. Mason: But there's a net reduction too. It wasn't a total (crosstalk.) Council Member Kniss: Yeah, and we lost some others, and-- Mr. Perez: The net is about that. Council Member Filseth: Net 15 over 10 years is a 150. Mr. Perez: Because we had some reductions contracting out with some additions. Council Member Kniss: I thought--didn't Greg insist on two extra positions going out? I think you did. Council Member Filseth: Um, umm. Chair Schmid: Okay. If there's no recommendation on staffing, we have a motion. All in favor. Council Member Kniss: Aye. Council Member Filseth: Aye. Chair Schmid: Aye. Council Member Scharff: Aye. Chair Schmid: That passes unanimously. TRANSCRIPT Page 74 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Council Member Scharff: If it's unanimous, this doesn't go in council, right. Council Member Filseth: It does. Council Member Kniss: It shouldn't. Mr. Perez: Unless you want something different. Council Member Filseth: It should go for discuss. Council Member Scharff: You'll make the changes first, then you'll go to council and then we should have a discussion with council on long range. Mr. Perez: Okay. Council Member Filseth: I think we're going to want to look at it again. Chair Schmid: It is important-- Council Member Filseth: In some way, shape or form, we're going to look at it again before we just say-- Chair Schmid: It is important thought that I’d be available at the council retreat. So if it’s hard to find in an agenda spot, maybe we could have unconsent available for the retreat and can be used. Council Member Filseth: Well, consent means the council approves it. I don't think--I mean, I don't know what I'm approving. Mr. Rossmann: Vice Mayor Schmid, I think it'll be difficult for staff to get this done by the council retreat. The first engagement is to meet with Mr. Bartel, get his numbers. We have all of this in between, where the majority of our staff is not in the office. So this may not be a possibility. Chair Schmid: Well I can see the motion on the benefit funds might not be available, but could there be a paper copy of the financial forecast revenues and expenditures? Mr. Rossmann: I think (Inaudible) Carl and Marly (Inaudible) in front of you or an update one. TRANSCRIPT Page 75 of 76 Finance Committee Special Meeting Transcript 12/15/2015 Chair Schmid: An updated one. Mr. Perez: So the concern is can we get--cause Mr. Bartel has a lot of customers and usually that's why we-- Chair Schmid: Do you need him for the--? Mr. Perez: For the seven percent assumption because we didn't have him do that. Chair Schmid: Okay. Yeah, I mean it is beneficial to have this as the council begins to think long term. Mr. Perez: So let us work, let us work with the timeline starting with Mr. Mr. Bartel and then we'll slide it into an action item. Council Member Kniss: Yeah. I rather come out right and be available for budget, you know, that-- Chair Schmid: Yeah. I guess the CAC is also getting into discussions of the DEIR and the scenarios and again, that would be an important element both for the council and the CAC to have available, so when it's available. Mr. Perez: Okay. MOTION: Council Member Scharff moved, seconded by Council Member Kniss to recommend the City Council accept the Fiscal Year 2017 to 2026 General Fund Long Range Financial Forecast and forward the Forecast to the City Council for acceptance with the following changes: A. Use a seven percent rate of return assumption for CalPERS pension; and B. Revisit Sales Tax revenues and lower by some factor, such as Stanford Expansion Sales Tax Revenue; and C. Revisit Transient Occupancy Tax projections; and D. Produce an Alternative Scenario reflecting a three percent salary expense for projection purposes. TRANSCRIPT Page 76 of 76 Finance Committee Special Meeting Transcript 12/15/2015 MOTION PASSED: 4-0 ADJOURNMENT: The meeting was adjourned at 10:34 P.M.