HomeMy WebLinkAbout2021-08-10 Policy & Services Committee Agenda PacketPolicy and Services Committee
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Call to Order
Oral Communications
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Action Items
1.Review and Discuss Proposed Amendments to the Tree Protection
Ordinance (Title 8 of Palo Alto Municipal Code) and Recommendation
to Council on Potential Amendments to the Ordinance
2.Office of the City Auditor Presentation of the Asset Capitalization Audit
Activity Report
Future Meetings and Agendas
Adjournment
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Presentation
Presentation
Public Comment
2 August 10, 2021
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Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 8/10/2021
City of Palo Alto Page 1
Summary Title: Amendments to Tree Protection Ordinance (PAMC Title 8)
Title: Review and Discuss Proposed Amendments to the Tree Protection
Ordinance (Title 8 of Palo Alto Municipal Code) and Recommendation to
Council on Potential Amendments to the Ordinance
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that the Policy and Services Committee:
1. Review and provide initial input to staff on the draft updated Tree Protection Ordinance
to include potential updates to Title 8 of Palo Alto Municipal Code related to trees and
vegetation, and potential updates to policies within the Tree Technical Manual; and
2. Recommend that City Council direct staff to conduct additional interdepartmental
coordination and community engagement, make appropriate revisions to the draft
Ordinance, and return to Policy and Services Committee.
Executive Summary
Title 8 of Palo Alto Municipal Code (PAMC) contains regulations governing street trees, shrubs
and plants (Chapter 8.04), weed abatement (Chapter 8.08), and tree preservation and
management (Chapter 8.10).
Proposed code updates include changes prompted by State law, specifically EXECUTIVE ORDER
B-29-15, e.g. the Model Water Efficient Landscape Ordinance. Other proposed changes include
updating authorized officers, clarifying allowances for tree removal, and expanding the types of
protected trees. Additional changes are related to recent code updates for Accessory Dwelling
Units (ADUs), other development-related code modifications, and enhancements for code
enforcement. Other related documents include the Sustainability/Climate Action Plan (Natural
Environment Element), 2030 Comprehensive Plan (Natural Environment Chapter), Urban Forest
Master Plan and the Tree Technical Manual.
Background
In 2015, the City adopted the Urban Forest Master Plan (UFMP). This plan contains many goals
and policies that work to sustain and enhance Palo Alto’s Urban Forest. Many of the policies
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and goals listed in the UFMP are also tied to sustainability efforts contained in the 2030
Comprehensive plan and the Sustainability/Climate Action plan. The current Title 8 of PAMC
pre-dates these documents by many years. UFMP policy 6.C directs staff to review the City’s
Tree Protection Ordinance to ensure that it is aligned with the goals of the UFMP.
A study session (CMR 9478) was conducted at the Planning and Transportation Commission
(PTC) meeting on September 12, 2018 to solicit feedback. The changes proposed in the report
included an expansion of protected trees to include all Palo Alto locally native tree species with
a trunk diameter size greater than 11.5 inches and all other tree species with trunk diameter
size greater than 36 inches. Currently, Redwoods 18 inches in diameter or larger and Oaks
(Valley Oak and Coast Live Oak) with trunks of 11.5 inches in diameter or larger are protected
under PAMC.
Discussion
Proposed Updates:
The following is a summary of the content-related updates that were presented to the PTC as a
study session on September 12, 2018. Edits or additions from that discussion are noted as
recommendations for further edits or discussion. Proposed changes to formatting or “Clean-
Up” type changes are present in the proposed draft but are generally not discussed here.
Chapter 8.04.020 Permit required for certain work.
Authorized officers have changed since Title 8 chapters were last amended or adopted. New
officers have been created, notably the position of Urban Forester who is primarily responsible
for the administration of Title 8. Staff recommends further edits in this section to include
removal of the phrase “project managers in the urban forestry section” and the addition of
“Urban Forester or their designee”.
8.08 WEED ABATEMENT.
Fire prevention is one impetus for the weed abatement requirements defined in Chapter 8.08.
More intense fires have prompted new regulations for vegetation management from the State
of California. Hence, expanded authority is recommended for Palo Alto’s authorized officers.
Weed abatement and management regulations are also designed to combat the introduction
and spread of invasive plants which may increase fire intensity or detract from native habitat.
Proposed changes in this section allow for more authority by the Fire Marshal and Urban
Forester to address weed abatement.
8.08.010 Weeds as public nuisance.
Proposed changes to this section include:
• Addition of parkland to the list of public places
• Expansion to the definition of “weeds” to include:
o “(3) Plants, shrubs, and trees determined by the Fire Marshal to constitute a fire
menace due to their species, proximity to ignition sources, and high potential to
endanger nearby buildings;”
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o “(5) Exotic and invasive plants having high potential to invade adjacent
properties and high ecological impacts in the region as defined by the California
Invasive Plant Council;”
8.08.030 Form and publication of notice.
8.08.050 Order to abate nuisance.
8.08.060 Account and report of cost.
8.08.070 Notice of report.
8.08.080 Hearing on cost assessment.
Additional proposed revisions to these sections of Chapter 8.08 specify the positions of “Fire
Marshall” and “Urban Forester” as authorized officers in terms of this chapter.
8.10 TREE PRESERVATION AND MANAGEMENT REGULATIONS
Proposed changes to this chapter include changes related to ongoing sustainability efforts,
changes concerning vegetation during development and an expansion of the types of protected
trees covered by this ordinance.
Sustainability-related Updates:
8.10.020 Definitions: Addition of “Any tree designated for carbon sequestration and storage
and/or environmental mitigation purposes as identified in an agreement between the property
owner and a responsible government agency or recorded as a deed restriction;” to the
definition list of “Protected”. Future carbon sequestration/management projects may
contribute to achieving sustainability/climate action goals. City operated or sponsored projects
that offer locally sourced certified offsets require assurance of “permanence” as well as
methods to correct for unintended reversals, hence those trees included must be “protected”
by ordinance. Protocols for carbon credits or offsets establish the legal mechanisms to qualify,
though future sustainability goals of the City may include self-imposed quantified additions
above a specific baseline. Development review could prioritize large stature trees to be
retained or planted to add to the carbon storage bank. Electronic plan submission with
geographic information and associated attribute data will allow carbon baseline and additional
calculations to be associated with individual projects or aggregated for development projects
within a specified area or time.
8.10.030 Tree Technical Manual: The California Model Water Efficient Landscape Ordinance
(MWELO) prompted the creation of a Tree and Landscape Technical Manual to replace the
existing Tree Technical Manual. This new policy document will function in a similar fashion with
the addition of landscape technical requirements so that newly installed landscape meets
sustainability, water conservation, and other goals. The purposes of the manual are to provide
developers clear guidelines about required submissions to obtain permits, describe design and
construction principles that meet City policies, and reference best practices. The new Tree and
Landscape Technical Manual will be finalized once the substantive changes to Title 8 are agreed
upon.
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Development-related Updates:
8.10.020 Definitions: The current draft expands the list of protected trees from the existing
three native protected species (Valley Oak, Coast Live Oak & Coast Redwood) to all species
considered native to Palo Alto as listed in the Urban Forest Master Plan. In addition, all trees
over 36” in diameter at breast/standard height (DBH) would now be protected excluding
invasive species as defined by the California Invasive Plant Council (Cal-IPC), and high water
users as defined by the Department of Water Resources (DWR) Water Use Classification of
Landscape Species (WULCOS) list.
Expanding the types of protected trees as defined in Section 8.10.020 will assist the City in
achieving goals and benchmarks contained in the Sustainability/Climate Action Plan (Natural
Environment Element), 2030 Comprehensive Plan (Natural Environment Chapter), and the
Urban Forest Master Plan.
Expansion of protected trees may also increase the approval time required for staff to review
and inspect various types of planning applications and development permits. Enforcement may
become more complex or time consuming with the addition of species and individual trees that
are protected. Additional staff officers would allow enforcement response time and resolution
to remain unchanged. This change also has the potential to restrict or complicate development
throughout the City. Overall, the most significant influence is likely to be on landscape and
features outside the primary building footprint, particularly with features that interact with
adjoining properties.
8.10.040 Disclosure of information regarding existing trees: Proposed changes clarify what trees
must be disclosed when seeking development approval. With regards to non-protected tree
disclosure the draft includes the phrase “within thirty feet”. Staff recommends clarifying that
statement by changing the language to “within thirty feet of proposed building footprint”. This
clarification is included in the attached draft ordinance.
8.10.050 Prohibited acts.: No net loss of canopy is one of the most important policy statements
of the Urban Forest Master Plan that is also echoed in the Comprehensive Plan and the
Sustainability and Climate Action Plan. This policy will not prevent development but may limit
design options for certain aspects of projects. For example, when trees are approved for
removal, the policy may require replacements with desirable attributes such as native species,
or large canopy at maturity as well as site appropriate soil volume, and water use so that
canopy replacement will occur within fifteen years. Soil volume may need to serve multiple
purposes including water collection and treatment to reduce pollutant discharge. Current
protected status oaks and redwoods may prompt adjustments such as a shift in the building
footprint, low impact construction techniques, or compatible landscape. Additional protected
tree requirements may increase the complexity of achieving full utilization of a property;
however, the appeals process is intended to balance policy with property rights. Numerous
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projects in the past have been constructed where significant trees were retained, resulting in a
higher value and a more useful site. Policies for tree protection contributed to a net gain in
overall tree canopy cover in Palo Alto from 32.8 percent in 1982 to 37.6 percent in 2010.
Property values have also increased at greater rates than many nearby communities.
The proposed changes in this section are intended to clarify under what circumstances a
protected tree may be removed and what mitigation measures (if any) will apply to each
situation type. Although changes to 8.10.050(b) are intended to be non-substantive, they
reflect staff's understanding of the current ordinance as it relates to protected trees within the
"buildable area" of a single-family lot. This was the topic of some discussion in recent hearings
regarding Castilleja school. The Policy and Services Committee may wish to review this section
as well. One potential modification could be to change the reference to "development on a
single-family lot" to "development of a single family use.”
Items Requiring Further Study:
Staff recommends additional analysis, outreach and/or discussion on the following portions of
the ordinance.
• 8.10.020 Definitions: Updates to protected trees. Staff would like to see additional
discussion focused on this item.
o The current draft refers to a list of Palo Alto locally native species included in the
UFMP. Consider listing specific species in the ordinance for clarity.
o Exemptions based on external lists (Cal-IPC and WULCOS) are used. Should
exempted species also be specifically listed in the ordinance, or is listing in the
Tree and Landscape Technical Manual adequate?
o Other neighboring municipalities have updated their tree ordinances since this
code was last adopted/amended. Several of these ordinances also have lower
size thresholds for tree protection based on DBH. Consider lowering the size
trigger for tree protection from the current 36” DBH contained in the draft.
▪ Menlo Park’s ordinance protects (removal or major pruning require a
permit, replacement required) oaks over 10” DBH and all other tree
species over 15” DBH.
▪ The ordinances of Redwood City and Sunnyvale protect (removal requires
a permit, replacement required) any trees over 12” DBH.
▪ East Palo Alto’s ordinance protects (removal requires a permit,
replacement required) all trees over 24” BDH.
o As noted elsewhere in the report, expanding the definition of protected trees
may restrict or complicate development projects, and the impact on staff time
for review of development applications requires assessment.
• 8.04.020 to 8.04.040 Public Tree Permits: These sections cover situations where
residents may request permission to perform private tree work on public trees. Current
language is not very clear on the process. Consider revising these sections for increased
clarity in ordinance.
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• 8.04.050 Public nuisances: Vegetation management requirements are likely to become
more stringent for utility line clearance, thus expanding the application of public
nuisance declaration as defined in Chapter 8.04. Review and confirm that the current
section language is adequate to address this potential need.
• 8.10.140 Appeals: Updates to the appeals process are not included in the draft
Ordinance. Appeal options are available for neighbors of entitlement applications such
as Individual Review for a new two-story home, however these appeal rights do not
extend to most other application types. For example, an application to remove a
protected tree, apart from development, may only be appealed by the property owner
who is denied a permit (Title 8.10.140). Some residents have suggested that the
Ordinance should allow them to appeal when a permit is issued for removal of a
protected tree that is not part of a development project.
• 8.10.050 Prohibited acts:
o Consider adding additional restrictions for initiating planning or development
review after an approved protected tree removal in the absence of
development.
o Revise proposed (e)(2) language to strive for no net loss of canopy in all
situations in which a protected tree is removed. Consider creating three different
levels of re-planting requirements based on category of removal. For example;
▪ If a protected tree is approved for removal as part of a planning review or
building permit, the removed tree must be replaced per the Tree and
Landscape Technical Manual (see (e)(1) in draft).
▪ If a protected tree is approved for removal in the absence of
development due to crowding of an adjacent protected tree or impact to
the foundation/eves of a primary residence, the removed tree must be
replaced per the Tree and Landscape Technical Manual.
▪ If a protected tree is removed in the absence of development because it
is dead, hazardous or constitutes a nuisance under section 8.04.050(2) it
should be replaced by a native or climate adapted species of similar
canopy stature.
Stakeholder Engagement
Significant stakeholder engagement was associated with individuals and groups who were
involved in the development of the Urban Forest Master Plan and/or Tree and Landscape
Technical Manual. A presentation was provided to the Planning and Transportation Commission
on September 12, 2018. Staff recommends additional outreach to receive input from other
stakeholders such as architects, homeowners, and the real estate community. Review by the
Architectural Review Board is also recommended.
Timeline
Staff proposes the following steps for completing revisions to Title 8 and the Tree and
Landscape Technical Manual:
• August 2021: Policy and Services Committee review of existing Title 8 draft
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• September 2021: Council approval of Committee recommendation
• October-December 2021: Conduct additional outreach and Architectural Review Board
study session; analyze workload impact of protected tree species expansion
• February 2022: Policy and Services Committee review of updated Title 8 draft and
Council recommendation
• April 2022: Council approval of updated Title 8 and City Manager approval of Tree and
Landscape Technical Manual
Resource Impact
No budget amendments are required as a result of these recommendations. However, budget
alignments may be needed in order to implement any future recommendations that may follow
this report and will be evaluated at that time. Staff resources needed to review, inspect, and
enforce requirements for planning applications or permits for development projects will
increase with expansion of the ordinance. Increases in demands on staff will be reflected in
corresponding increases in budgets and fees as well as administrative responsibilities. Code
enforcement actions and permit applications to remove protected trees may likewise increase
in frequency. As the Committee and Council work through this timeline and updates to Title 8,
resource impacts will be included in analysis for consideration.
Predicting the extent of impact on staff an expansion of protected trees will have is difficult as
no tree inventory of private properties currently exists. If we use the street tree population as a
representative sample, all Palo Alto locally native species combined constitute 10.04 percent of
total trees. Those currently regulated are 4.48 percent Coast Live Oak, 2.32 percent Redwood,
and 1.32 percent Valley Oak. Therefore, regulating all other native species adds 1.92 percent
more trees, which is a 24 percent increase in the number of protected trees by species. Tree
species other than Palo Alto locally native species with a diameter equal to or larger than thirty-
six inches account for 2.01 percent of the street tree population. In total, the proposed increase
in protected trees (by both species and size) would add 3.93 percent more protected trees
which is a 48.4 percent increase over current numbers.
Staff recommends analyzing tree data from past planning and development applications to gain
better insight into the impact on staff time an increase in protected trees will have. Using the
street tree population as a representative sample is helpful to illustrate potential impacts, but
an accurate sample of private trees would be more useful.
Policy Implications
Title 8 ordinance changes will assist with meeting the following goals and objectives from these
related policy documents.
Sustainability/Climate Action Plan (Natural Environment Element)
• GOALS
o Restore and enhance resilience and biodiversity of our natural environment
o Increase tree canopy to 40% city-wide coverage by 2030
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• KEY ACTIONS
o 1. Explore programs and policies that use Palo Alto’s public and private natural
capital (e.g., canopy, soils, watersheds) to provide carbon sequestration and
other environmental benefits
o 2. Evaluate and modify plant palette selection in project plans to maximize
biodiversity and soil health to adapt to the changing climate, and incorporate
buffers for existing natural ecosystems
o 3. Coordinate implementation of the Urban Forest Master Plan, Parks Master
Plan, and other city-wide functions through interdepartmental collaboration of
the City’s internal Sustainability Leadership Team
o 4. Expand the requirements of the Water Efficient Landscape Ordinance (WELO)
to increase native and drought-tolerant species composition.
o 6. Ensure No Net Tree Canopy Loss for all projects
2030 Comprehensive Plan (Natural Environment Chapter)
• Policy N-1.2 Maintain a network of parks and urban forest from the urban center to the
foothills and Baylands that provide ecological benefits and access to nature for all
residents.
• Policy N-1.3 Program N1.3.2 Provide information and support programs that encourage
residents to enhance their private yards with native plant species and low impact
landscaping.
• Policy N-2.2 Use the UFMP, as periodically amended, to guide City decisions related to
all elements of Palo Alto’s urban forest, from its understory habitat to canopy cover.
o Program N2.2.1 Periodically update the UFMP and Tree Protection Ordinance to
ensure policies and regulations set leading standards for tree health practices.
• Policy N-2.3 Enhance the ecological resilience of the urban forest by increasing and
diversifying native species in the public right-of-way, protecting the health of soils and
understory vegetation, encouraging property owners to do the same and discouraging
the planting of invasive species.
• Policy N-2.6 Improve the overall distribution of citywide canopy cover, so that
neighborhoods in all areas of Palo Alto enjoy the benefits of a healthy urban canopy.
• Policy N-2.9 Minimize removal of, and damage to, trees due to construction-related
activities such as trenching, excavation, soil compacting and release of toxins.
o Program N2.9.1 Increase awareness, severity and enforcement of penalties for
tree damage.
• Policy N-2.10 Preserve and protect Regulated Trees, such as native oaks and other
significant trees, on public and private property, including landscape trees approved as
part of a development review process and consider strategies for expanding tree
protection in Palo Alto.
o Program N2.10.1 Continue to require replacement of trees, including street trees
lost to new development.
o Program N2.10.2 As part of the update of the Tree and Landscape Technical
Manual, consider expanding tree protections to include additional mature trees
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and provide criteria for making site-specific determinations of trees that should
be protected.
o Program N2.10.3 Consider revisions to the permit process to increase
transparency regarding tree removals and expanded opportunities for
community members to appeal the removal of trees.
Urban Forest Master Plan
• Policy 1.A. Strive for:
o A greater percentage of native, drought-tolerant, and fruit tree species.
o No loss of benefits—as defined in iTree eco analysis (or other peer-reviewed
benefits-estimation model.)
o Increased habitat, health, and social benefits.
• Policy 2.A. Conserve and grow native and introduced climate adaptive tree population
to regenerate and recover native woodland ecosystem on a landscape scale.
• Policy 6.C. Strive for no net loss /increase in canopy cover.
o Program 6.C.i. Continue to enforce the City’s Tree Protection Ordinance but also
review it to ensure that it reflects state water efficiency standards as well as this
master plan’s goals for regeneration of native woodland landscape.
• Policy 6.H. Minimize the negative effect on the urban forest from development and
infrastructure maintenance
Environmental Review
The proposed code amendments have been assessed in accordance with the authority and
criteria contained in the California Environmental Quality Act (CEQA), the State CEQA
Guidelines, and the environmental regulations of the City. Specifically, the proposed
amendments have been determined to be exempt from further environmental review pursuant
to CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no
possibility that the activity in question may have a significant effect on the environment. In the
event Section 15061(b)(3) is found not to apply, the ordinance is also exempt under Section
15308 because it involves regulatory action for the protection of the environment.
Attachments:
• Attachment A: Ordinance Repealing and Restating Ch 8.04, 8.08, and 8.10 of Title 8 of
PAMC
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*NOT YET APPROVED*
Ordinance No.____
Ordinance of the Council of the City of Palo Alto Repealing and Restating Chapter
8.04 (Street Trees, Shrubs, and Plants); Repealing and Restating Chapter 8.08
(Weed Abatement); and Repealing Chapter 8.10 (Tree Preservation and
Management Regulations) and Restating it as Chapter 8.10 (Landscape and Tree
Management Regulations) of Title 8 (Trees and Vegetation) of the Palo Alto
Municipal Code.
The Council of the City of Palo Alto ORDAINS as follows:
SECTION 1. Findings and Declarations. The City Council finds and declares as follows:
SECTION 2. Chapter 8.04 (Street Trees, Shrubs, and Plants) of Title 8 (Trees and
Vegetation) of the Palo Alto Municipal Code is hereby amended by repealing in its entirety
Chapter 8.04 and adopting a new Chapter 8.04 to read as follows:
Chapter 8.04
Street Trees, Shrubs, and Plants
Sections:
8.04.010 Definitions.
8.04.015 Authority of city.
8.04.020 Violations – Penalty - Enforcement.
8.04.030 Application for permit.
8.04.040 Issuance of permit.
8.04.050 Public nuisances.
8.04.060 Abatement of public nuisances.
8.04.070 Damage to public trees.
8.04.080 Interference with enforcement.
8.04.090 Adoption of regulations.
8.04.10 Definitions.
(a) For the purposes of this chapter the following words shall have the meaning
ascribed to them in this section:
(1) "Person" means individuals, firms, associations and corporations, and
agents, employees or representatives thereof.
(2) "City" means the city of Palo Alto acting by and through its
authorized representatives.
(3) "Street" means and includes all land lying between the boundaries of
property abutting on all public streets, boulevards, alleys and walks.
(4) "Parks" means and includes all parks to which names have been given by action
of the city council.
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*NOT YET APPROVED*
(5) "Public places" means and includes all grounds, other than streets or parks,
owned by or leased to and under the control of the city of Palo Alto.
(6) "Street tree" means and includes any woody perennial plant having a single
main axis or stem commonly achieving ten feet in height and capable of being
shaped and pruned to develop a branch-free trunk at least nine feet in height.
(7) "Shrub" means and includes any woody perennial plant, normally low, several-
stemmed, and capable of being shaped and pruned without injury, within the
area planted.
(8) "Hedge" means and includes any plant material, shrub or plant, when planted
in a dense, continuous line or area, as to form a thicket or barrier.
(9) "Plant" means and includes all other plant material, non-woody,
annual, or perennial in nature, not necessarily hardy.
(10) "Street trees, shrubs, or plants" means and includes any tree, shrub, or
plant in any street, park or public place in the city of Palo Alto.
8.04.015 Authority of city.
The City of Palo Alto shall have control of all street trees, shrubs and plants now or hereafter in
any street, park or public place within the City limits, and shall have the power to plant, care
for, and maintain such trees, shrubs and plants.
8.04.20 Violations- Penalty- Enforcement.
(a) Unless authorized by permit, no person shall:
(1) Plant, remove, top, or in any way damage, destroy, injure or mutilate a street
tree.
(2) Fasten any sign, wire, or injurious material to any street tree.
(3) Excavate any ditch or tunnel; or place concrete or other pavement within a
distance of ten feet of the center of the trunk of any street tree.
(b) Violation of this section is a misdemeanor, punishable as provided in this code.
Each day of violation constitutes a separate offense and may be separately
punished.
(c) Persons employed in the following designated employee positions are authorized to
exercise the authority provided in Penal Code Section 836.5 and are authorized to
issue citations for violations of this chapter: deputy assistant director of public
works operations public services division, managing urban forester or designee,
arborist, planning arboristproject managers in the urban forestry section, landscape
architect, and code enforcement officer.
8.04.030 Application for permit.
Any person desiring to do any of the work described in Section 8.04.020 may apply for a permit
so to do. The applicant shall state the nature of the work and the location where it will be done.
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8.04.40 Issuance of permit.
(a) A permit shall be issued authorizing so much of the work as:
(1) Will not create, continue or aggravate any hazardous condition, or public
nuisance;
(2) Will not prevent or interfere with the growth; location or planting of
approved street trees;
(3) Is consistent with the planting plan being followed by the city.
8.04.50 Public nuisances*.
(a) The following are, for the purposes hereof, defined to be public nuisances:
(1) Any dead, diseased, infested, or dying tree in any street; or on any private
property so near to any street tree as to constitute a danger to street trees, or
streets, or portions thereof or members of the public property.
(2) Any tree or shrub on any private property or in any street, of a type or species
apt to destroy, impair or otherwise interfere with any street improvements,
sidewalks, curbs, approved street trees, gutters, sewers, other public
improvements, including utility mains or services.
(3) Any tree limb, shrub, hedge, or plant reaching a height more than three feet
above the curb grade adjacent thereto, except tree trunks having no limbs
lower than nine feet above curb grade, within the thirty-five foot triangle of
public or private property, measured from the projected curb lines, at the
intersections of any street improved for vehicular traffic where either traffic
signals, stop signs, or yield signs are not installed, or at any intersections which
are determined by the chief transportation official to contain tree limbs,
shrubs, hedges, or plants that obscure and impair the view of passing
motorists, cyclists or pedestrians so as to create a safety hazard.
(4) Vines or climbing plants growing into or over any street tree; or any public
hydrant, pole or electrolier.
(5) Existence of any tree within the city limits that is infested, infected or in
danger of becoming infested or infected with objectionable insects, scale,
fungus or growth injurious to trees.
(6) The existence of any branches or foliage which interfere with visibility on, or
free use of, or access to, obstruct public vehicular or pedestrian travel on any
portion of any street improved for vehicular or pedestrian travel.
(7) Hedges or dense thorny shrubs and plants on any street or part thereof.
(8) Shrubs and plants more then than two feet in height in any street,
measured above top of curb grade.
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8.04.060 Abatement of public nuisances
When any public nuisance as defined herein exists, a notice may be sent by ordinary United States
mail to the owner or tenant involved. Such notice shall describe the condition, state the work
necessary to remedy the condition, and shall specify the time within which the work must be
performed. If, at the end of the time specified, such work has not been performed, the city may
perform such work, and the cost thereof shall constitute a charge against such owner or tenant,
and such charge shall be a lien on such property.
8.04.070 Damage to street public trees.
Damages to any street, park, or other publicly- owned tree, caused by any act or omission by any
person, whenever such act or omission is prohibited by or not authorized pursuant to this
chapter, shall be charged to such person or persons.
8.04.080 Interference with enforcement.
No person shall interfere with or delay the authorized representatives of the city from the
execution and enforcement of this chapter, except as provided by law.
8.04.090 Adoption of regulations.
The city may adopt regulations prescribing standards of landscaping and planting of streets, parks
and public places, therein. A copy of such regulations shall be available for public inspection upon
request, and all work performed in streets, parks or public places shall be performed in
accordance therewith.
SECTION 3. Chapter 8.08 (Weed Abatement) of Title 8 (Trees and Vegetation) of the
Palo Alto Municipal Code is hereby amended by repealing in its entirety Chapter 8.08 and
adopting a new Chapter 8.08 to read as follows:
Chapter 8.08
Weed Abatement
Sections:
8.08.010
Weeds as public nuisance.
8.08.020 Resolution declaring nuisance.
8.08.030 Form and publication of notice.
8.08.040 Hearing - Power of council.
8.08.050 Order to abate nuisance.
8.08.060 Account and report of cost.
8.08.070 Notice of report.
8.08.080 Hearing on cost assessment.
8.08.090 Collection on tax roll.
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8.08.10 Weeds as public nuisance.
(a) No owner, agent, lessee or other person occupying or having charge or control of
any building, lot or premises within the city shall permit weeds to remain upon
the premises, or public sidewalks, or encroach into any parkland (including any
weeds encroaching over fences), or streets, or alleys between the premises and
the center line of any public street or alley.
(b) The word "weeds" as used in this chapter, means all weeds growing upon
streets, alleys, sidewalks, or private property in the city and includes any of
the following:
(1) Weeds which bear or may bear seeds of a downy or wingy nature;
(2) Weeds and indigenous grasses which may attain such large growth as to
become, when dry, a fire menace to adjacent improved property;
(3) Plants, shrubs, and trees determined by the Fire Marshall to constitute a fire
menace due to their species, proximity to ignition sources, and high
potential to endanger nearby buildings;
(34) Weeds which are otherwise noxious or dangerous;
(5) Exotic and invasive plants having high potential to invade adjacent properties and
high ecological impacts in the region as defined by the California Invasive Plant
Council;
(46) Poison oak and poison ivy when the conditions of growth are such as to
constitute a menace to the public health;
(57) Accumulations of garden refuse, cuttings and other combustible trash.
(c) Every property owner shall remove or destroy such weeds from his property, and in
the abutting half of any street or alley between the lot lines as extended.
8.08.020 Resolution declaring nuisance.
Whenever any such weeds are growing upon any private property or properties or in any street
or alley within the city, the council shall pass a resolution declaring the same to be a public
nuisance and order the fire chief to give notice of the passage of such resolution as herein
provided, and stating therein that, unless such nuisance is abated without delay by the
destruction or removal of such weeds, the work of abating such nuisance will be done by the city
authorities, and the expense thereof assessed upon the lots and lands from which, and/or in the
front and rear of which, such weeds shall have been destroyed or removed. Such resolution shall
fix the time and place for hearing any objections to the proposed destruction or removal of such
weeds.
8.08.30 Form and publication of notice.
(a) Such The Fire Chief or Urban Forester shall cause to be published a public notice
shall bein substantially in the following form:
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NOTICE TO DESTROY WEEDS
NOTICE IS HEREBY GIVEN that on , 20__ , pursuant to the provisions of
Section 8.08.020 of the Palo Alto Municipal Code, the City Council passed a resolution declaring
that all weeds growing upon any private property or in any public street or alley, as defined in
Section 8.08.010 of the Palo Alto Municipal Code, constitute a public nuisance, which nuisance
must be abated by the destruction or removal thereof.
NOTICE IS FURTHER GIVEN that property owners shall without delay remove all such
weeds from their property, and the abutting half of the street in front and alleys, if any, behind
such property, and between the lot lines thereof as extended, or such weeds will be destroyed
or moved and such nuisance abated by the city authorities, in which case the cost of such
destruction or removal will be assessed upon the lots and lands from which, or from the front
or rear of which, such weeds shall have been destroyed or removed; and such cost will
constitute a lien upon such lots or lands until paid, and will be collected upon the next tax roll
upon which general municipal taxes are collected. All property owners having any objections to
the proposed destruction or removal of such weeds are hereby notified to attend a meeting of
the Council of said city, to be held in the Council Chamber of the City Hall in said city on __, 20 ,
at seven p.m., when and where their objections will be heard and given due consideration.
Date , 1920
Fire Chief or Urban Forester
City of Palo Alto
(b) Such notice shall be published at least twice in a newspaper published and
circulated in said city, the first publication of which shall be at least ten days prior to
the time fixed by the council for hearing objections.
8.08.040 Hearing - Power of council.
At the time stated in the notice, the council shall hear and consider any and all objections to the proposed destruction or removal of such weeds, and may continue the hearing from time to time. The council, by motion or resolution, shall allow or overrule any or all objections, if any, after which the council shall thereupon be deemed to have acquired jurisdiction to proceed and perform the work of destruction and removal of such weeds.
8.08.050 Order to abate nuisance.
The council shall by resolution order the fire chief or urban forester to abate such nuisance, or
cause the same to be abated, by having the weeds referred to destroyed or removed, and the
fire chief or urban forester and his deputies, assistants, employees, contracting agents or other
representatives are hereby expressly authorized to enter upon private property for that purpose.
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Any property owner shall have the right to destroy or remove such weeds himself, or have the
same destroyed or removed at his own expense; provided that such weeds shall have been
removed prior to the arrival of the fire chief or urban forester or his authorized representatives
to remove them.
8.08.060 Account and report of cost.
The fire chief or urban forester shall keep an account of the cost of abating such nuisance and
embody such account in a report and assessment list to the city council, which shall be filed with
the clerk. Such report shall refer to each separate lot or parcel of land by description sufficient to
identify such lot or parcel, together with the expense proposed to be assessed against each
separate lot or parcel of land.
8.08.070 Notice of report.
The city clerk shall post a copy of such report and assessment list on the bulletin board near the
entrance door at the City Hall, together with a notice of the filing thereof and of the time and
place when and where it will be submitted to the city council for hearing and confirmation,
notifying property owners that they may appear at such time and place, and object to any
matter contained therein. A like notice shall also be published twice in a newspaper of general
circulation, published and circulated within the city. The posting and first publication of said
notice shall be made and completed at least ten days before the time such report shall have
been submitted to the city council. Such notice, as so posted and published, shall be
substantially in the following form:
NOTICE OF HEARING ON REPORT AND ASSESSMENT FOR WEED ABATEMENT
NOTICE IS HEREBY GIVEN that on , 20 __, the Fire Chief or Urban Forester of
the City of Palo Alto filed with the City Clerk of said city a report and assessment on abatement
of weeds within said city, a copy of which is posted on the bulletin board at the entrance to the
City Hall.
NOTICE IS FURTHER GIVEN that on , 20__ , at the hour of seven p.m., in the
Council Chambers of said City Hall, said report and assessment list will be presented to the City
Council of said City for consideration and confirmation, and that any and all persons interested,
having any objections to said report and assessment list, or to any matter or thing contained
therein, may appear at said time and place and be heard.
Date , 20
City Clerk of the City of Palo Alto
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8.08.80 Hearing on cost assessment.
(a) At the time and place fixed for receiving and considering such report the city council
shall hear the same together with any objections which may be raised by any of the
property owners liable to be assessed for the work of abating such nuisance, and
the fire chief or urban forester shall attend such meeting with his record thereof,
and upon such hearing, the council may make such modifications in the proposed
assessments therefor as it may deem necessary, after which such report and
assessment list shall be confirmed by resolution.
(b) The amount of the cost of abating such nuisance upon, or in the front or rear of, the
various lots or parcels of land respectively referred to in such report, shall constitute
special assessments against such respective lots or parcels of land, and after thus
made and confirmed, shall constitute a lien on such property for the amount of such
assessments, until paid.
8.08.090 Collection on tax roll.
On or before the first day of September of each year, the amounts of such assessments against
the respective parcels of land shall be entered on the next tax roll which general city taxes are
to be collected. Thereafter, such amounts shall be collected at the same time, and in the same
manner, as general city taxes are collected, and shall be subject to the same interest and
penalties, and the same procedure and sale in case of delinquencies. All laws applicable to the
levy, collection and enforcement of city taxes are hereby made applicable to such assessments.
SECTION 4. Chapter 8.10 (Tree Preservation and Management Regulations) of Title
8 (Trees and Vegetation) of the Palo Alto Municipal Code hereby amended by repealing in its
entirety Chapter 8.10 and adopting a new Chapter 8.10 to read as follows:
Chapter 8.10
Landscape and Tree Preservation and Management
Regulations
Sections: 8.10.010 Purpose. 8.10.020 Definitions.
8.10.030 Tree Technical ManualL Tree and landscape and tree
technical manual. 8.10.040 Disclosure of information regarding existing trees.
8.10.050 Prohibited acts.
8.10.060 No limitation of authority under Titles 16 and 18.
8.10.070 Care of protected trees.
8.10.080 Development conditions.
8.10.090 Designation of heritage trees.
8.10.095 Tree removal in HD Zone.
8.10.100 Responsibility for enforcement.
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8.10.110 Enforcement - Remedies for Violation. 8.10.120 Fees. 8.10.130 Severability. 8.10.140 Appeals.
8.10.010 Purpose.
The purpose of this chapter is to promote the health, safety, welfare, and quality of life of the
residents of the city through the protection of specified trees located on private property
within the city, and the establishment of standards for removal, maintenance, and planting of
landscaping and trees and landscaping. In establishing these procedures and standards, it is the
city's intent to encourage the preservation of trees.
8.10.20 Definitions.
For the purposes of this chapter, the following definitions shall apply:
(a) "Basal flare" means that portion of a tree where there is a rapid increase in
diameter at the confluence of the trunk and rootcrown.
(b) "Building area" means that area of a parcel:
(1) Upon which, under applicable zoning regulations, a structure may be built
without a variance, design enhancement exception, or home improvement
exception; or
(2) Necessary for construction of primary access to structures located on or to
be constructed on the parcel, where there exists no feasible means of access
which would avoid protected trees. On single-family residential parcels, the
portion of the parcel deemed to be the building area under this paragraph
(b)(2) shall not exceed ten feet in width.
(c) "Building footprint" means the two-dimensional configuration of an existing
building's perimeter boundaries as measured on a horizontal plane at ground
level.
(d) "Hazardous" means an imminent hazard which constitutes a or high or extreme
threat to the safety of persons or property as defined by American National
Standards Institute A300, Part 9.
(e) Development" means any work upon any property in the city which requires a
subdivision, planned community zone, variance, use permit, building permit,
demolition permit, or other city approval or which involves excavation,
landscaping or construction within the dripline area of a protected tree or is
subject to requirements of the California Water Efficient Landscape Ordinance.
(f) "Director" means the director of planning and community environment public
works or his or her designee.
(g) "Discretionary development approval" means planned community zone,
subdivision, use permit, variance, home improvement exception, design
enhancement exception, or architectural review board approval.
(h) "Dripline area" means the outer edge of the canopy or area within X distance from
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the perimeter of the trunk of the tree at four and one-half feet (fifty-four inches)
above natural grade where X equals a distance a circle with a radius ten times the
diameter of the trunk as measured four and one-half feet (fifty-four inches) above natural
grade, whichever is greater.
(i) "Excessive pruning means removal of more than one-fourth of the functioning leaf
and stem area of a tree in any twelvethirty six-month period, or removal of foliage
so as to cause a significant decline in health or increase to the risk of failure, or the
unbalancing of a tree.
(j) "Protected” tree means:
(1) Any locally native tree of the a species as listed in the Urban Forest Master
Plan Quercus agrifolia (Coast Live Oak) or Quercus lobata (Valley Oak)
which is
eleven and one-half inches in diameter (thirty-six inches in circumference) or
more when measured four and one-half feet (fifty-four inches) above natural
grade, except Redwood; and
(2) Any Redwood tree (species Sequoia sempervirens) that is eighteen inches in
diameter (fifty-seven inches in circumference) or more when measured four
and one-half feet (fifty-four inches) above natural grade; and
(3) Any tree larger than thirty six inches in diameter of any species except those
exotic and invasive species described as weeds in 8.08.010 and those species
classified as high water users by the water use classification of landscape
species list approved by the California Department of Water Resources; and
(4) Any tree designated for protection during review and approval of a
development project; and
(5) Any tree designated for carbon sequestration and storage and/or
environmental mitigation purposes as identified in an agreement between
the property owner and a responsible government agency or recorded as a
deed restriction; and
(36) A heritage tree designated by the city council in accordance with the provisions
of this chapter.
(k) "Remove" means any of the following:
(1) Complete removal, such as cutting to the ground or extraction, of a tree.
(2) Taking any action foreseeably leading to the death of a tree or permanent
damage to its health; including but not limited to excessive pruning, cutting,
girdling, poisoning, overwatering, reduced watering due to a landscape change,
unauthorized relocation or transportation of a tree, or trenching, excavating,
altering the grade, or paving within the dripline area of a tree.
(l) "Tree" means any woody plant which has a trunk four inches or more in diameter
at four and one-half feet above natural grade level capable of achieving a height
of ten feet or more, and a species that typically has a single stem.
(m) "Tree report" means a report prepared by an arborist certified by the
International Society of Arboriculture or another nationally recognized tree
research, care, and preservation organization.
(n) "Tree Technical ManualL Tree and landscape and tree technical manual" means
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the regulations issued by the city manager to implement this chapter.
8.10.30 Landscape and Tree and Landscape Technical Manual.
The city manager, through the departments of public works, and planning and community
environment, shall issue regulations necessary for implementation of this chapter, which shall
be known as the Landscape and Tree and Landscape Technical Manual. The Landscape and Tree
and Landscape Technical Manual will be made readily available to the public and shall include,
but need not be limited to, standards and specifications regarding:
(a) Protection of trees during construction;
(b) Replacement of trees allowed to be removed pursuant to this chapter;
(c) Maintenance of protected trees (including but not limited to pruning, irrigation,
and protection from disease);
(d) The format and content of tree reports required to be submitted to the city
pursuant to this chapter;
(e) The criteria for determining whether a tree is dangerous hazardous within the
meaning of this chapter.
(f) Landscape design, irrigation, and installation standards consistent with the City’s
water efficient landscape regulations;
8.10.40 Disclosure of information regarding existing trees.
(a) Any application for discretionary development approval, or for a building or
demolition permit where no discretionary development approval is required, shall
be accompanied by a statement by the property owner or authorized agent which
discloses whether any protected trees exist on the property which is the subject of
the application, and describing each such tree, its species, size, dripline area, and
location. This requirement shall be met by including the information on plans
submitted in connection with the application.
(b) In addition, the location of all other trees on the site and in the adjacent public
right of way which are within thirty feet of the area proposed for development,
and trees located on adjacent property within thirty feet of the proposed building
footprint or with canopies overhanging the project site, shall be shown on the
plans, identified by species.
(c) The director may require submittal of such other information as is necessary to
further the purposes of this chapter including but not limited to photographs.
(d) Disclosure of information pursuant to this section shall not be required when the
development for which the approval or permit is sought does not involve any
change in building footprint nor any grading or paving, nor change in landscaping
which could alter water availability to established plants or trees.
(e) Knowingly or negligently providing false or misleading information in response to
this disclosure requirement shall constitute a violation of this chapter.
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8.10.50 Prohibited acts.
It shall be a violation of this chapter for anyone to remove or cause to be removed a protected
tree, except as allowed in this section:
(a) In the absence of development, protected trees shall not be removed unless
determined by the director of planning and community environment public works or
urban forester, on the basis of a tree report prepared by a certified arborist for the
applicant and other relevant information, that the tree should be removed because
it is dead, is hazardous, is a detriment to or crowding an adjacent protected tree, is
impacting the foundation or eaves of a primary residence, or constitutes a nuisance
under Section 8.04.050(2) of this code; and that treatments or corrective practices
are not reasonable.
(b) In the case of development on a single-family residential lot, other than in
connection with a subdivision, protected trees shall not be removed unless
determined by the director of Public Works or Urban Forester that:
(1) Protected trees shall not be removed unless the trunk or basal flare of the
protected tree is touching or within the building footprint, or the director of
planning and community environment has determined, on the basis of a tree
report prepared by a certified arborist for the applicant and other relevant
information, that the tree should be removed because it is dead, is hazardous,
is a detriment to or crowding an adjacent protected tree, or constitutes a
nuisance under Section 8.04.050(2) of this code.
(2) the tree is within the buildable area and that the proposed construction would
result in the death of the tree, or
(3) the tree should be removed pursuant to subdivision (a).
(2) If no building footprint exists, protected trees shall not be removed unless the
trunk of the tree is located in the building area, or the director of planning and
community environment has determined, on the basis of a tree report prepared
by a certified arborist for the applicant and other relevant information, that the
tree should be removed because it is dead, is hazardous, is a detriment to or
crowding an adjacent protected tree, or constitutes a nuisance under Section
8.04.050(2) of this code.
(3) If removal is allowed because the tree trunk is located in the building
footprint, or the trunk or basal flare is in the building area, or because the
director of planning and community environment has determined that the
tree is so close to the building area that construction would result in the death
of the tree, the tree removed shall be replaced in accordance with the
standards in the Tree Technical Manual.
(c) In connection with In the case of development involving a proposed subdivision of
land into two or more parcels, no protected tree shall be removed unless
determined by the director of Public Works or Urban Forester that:
(1) removal is unavoidable due to restricted access to the property or
deemed necessary to repair a geologic hazard (landslide, repairs, etc.),
or.
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(2) the tree should be removed pursuant to subdivision (a).The tree removed shall
be replaced in accordance with the standards in the Tree Technical Manual.
Tree preservation and protection measures for any lot that is created by a
proposed subdivision of land shall comply with the regulations of this chapter.
(d) In the case of development requiring a project approval under Chapter 18.76
(Permits and Approvals), removal of a protected tree may be permitted if retention of the
tree would result in reduction of the otherwise-permissible building area of the lot by more
than twenty-five percent, except that no protected tree shall be removed solely to
accommodate an accessory structure or accessory dwelling unit.
(e) Tree replacement.
(1) In the event a protected tree is removed pursuant to subdivisions (b), (c), or
(d), the tree removed shall be replaced in accordance with the standards in the
Landscape and Tree and Landscape Technical Manual and such replacements
shall result in no net loss or increase of tree canopy within 15 years.
(2) In the event a protected tree is removed pursuant to subdivision (a), except in
the cases of crowding an adjacent protected tree or impacting the foundation
or eaves of a primary residence, the dripline area of the removed tree, or an
equivalent area on the site, shall be preserved from development of any
structure unless removal would have been permitted under subdivisions (b),
(c), or (d), and tree replacement is required.
In all circumstances other than those described in paragraphs (a), (b) and (c) of this
section, protected trees shall not be removed unless one of the following
applies:
(1) The director of planning and community environment has determined, on the
basis of a tree report prepared by a certified arborist for the applicant and
other relevant information, that the tree should be removed because it is
dead, dangerous or constitutes a nuisance under Section 8.04.050(2). In such
cases, the dripline area of the removed tree, or an equivalent area on the site,
shall be preserved from development of any structure unless removal would
have been permitted under paragraph (2), and tree replacement in
accordance with the standards in the Tree Technical Manual shall be required.
(2) Removal is permitted as part of project approval under Chapter 18.76 (Permits
and Approvals) of this code, because retention of the tree would result in
reduction of the otherwise-permissible building area by more than twenty-five
percent. In such a case, the approval shall be conditioned upon replacement in
accordance with the standards in the Tree Technical Manual.
8.10.060 No limitation of authority under Titles 16 and 18.
Nothing in this chapter limits or modifies the existing authority of the city under Title 18 (Zoning Ordinance) to require trees and other plants not covered by this chapter to be identified, retained, protected, and/or planted as conditions of the approval of development. In the event of conflict between provisions of this chapter and conditions of any permit or other approval granted pursuant to Title 16 or Title 18, the more protective requirements shall prevail.
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8.10.70 Care of protected trees.
(a) All owners of property containing protected trees shall follow the maintenance
standards in the Landscape and Tree and Landscape Technical Manual.
(b) The standards for protection of trees during construction contained in the
Landscape and Tree and Landscape Technical Manual shall be followed during any
development on property containing protected trees.
8.10.80 Development conditions.
(a) Discretionary development approvals for property containing protected,
regulated/ publicly- owned, or designated trees will include appropriate
conditions providing for the protection of such trees during construction and for
maintenance of the trees thereafter. Trees may be designated for protection that
are significant visually or historically, provide screening between properties, or
are a native species that is healthy and important to the nearby ecosystem.
(b) It shall be a violation of this chapter for any property owner or agent of the owner
to fail to comply with any development approval or building permit condition
concerning preservation, protection, and maintenance of any tree, including but
not limited to protected trees.
8.10.90 Designation of heritage trees
(a) Upon nomination by any person and with the written consent of the property
owner(s), the city council may designate a tree or trees as a heritage tree.
(b) A tree may be designated as a heritage tree upon a finding that it is unique
and of importance to the community due to any of the following factors:
(1) It is an outstanding specimen of a desirable species;
(2) It is one of the largest or oldest trees in Palo Alto;
(3) It possesses distinctive form, size, age, location, and/or historical significance.
(c) After council approval of a heritage tree designation, the city clerk shall notify the
property owner(s) in writing. A listing of trees so designated, including the
specific locations thereof, shall be kept by the departments of public works and
planning and community environment.
(d) Once designated, a heritage tree shall be considered protected and subject to the
provisions of this chapter unless removed from the list of heritage trees by action of
the city council. The city council may remove a tree from the list upon its own
motion or upon written request by the property owner. Request for such action
must originate in the same manner as nomination for heritage tree designation.
8.10.095 Tree removal in HD Zone.
Tree removal and relocation in the HD shall be subject to the provisions in Section 18.36.070.
To the extent Section 18.36.070 is inconsistent with this chapter, Section 18.36.070 shall
control.
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8.10.100 Responsibility for enforcement
The following designated employee positions may enforce the provisions of this chapter by the
issuance of citations: urban forester, landscape architect, project managers in the urban
forestry section, chief building official, assistant building official, and code enforcement officer,
planning arborist.
Section 8.10.110 Enforcement - Remedies for Violation
In addition to all other remedies set forth in this code or otherwise provided by law, the
following remedies shall be available to the city for violation of this chapter:
(a) Stop Work - Temporary Moratorium.
(1) If a violation occurs during development, the city may issue a stop work order
suspending and prohibiting further activity on the property pursuant to the
grading, demolition, and/or building permit(s) (including construction,
inspection, and issuance of certificates of occupancy) until a mitigation plan
has been filed with and approved by the director, agreed to in writing by the
property owner(s), and either implemented or guaranteed by the posting of
adequate security. The mitigation plan shall include measures for protection
or repair of any remaining trees on the property, and shall provide for
replacement of each tree removed on the property or at locations approved
by the director of planning and community and by the director of public
works, if replacement is to occur on public property. The replacement ratio
shall be in accordance with the standards set forth in the Landscape and Tree
and Landscape Technical Manual, and shall be at a greater ratio (at least twice
prescribed) than that required where tree removal is permitted pursuant to
the provisions of this chapter.
(2) If a violation occurs in the absence of development, or while an application for
a building permit or discretionary development approval for the lot upon
which the tree is located is pending, the director may issue a temporary
moratorium on development of the subject property, not to exceed eighteen
five years months from the date the violation occurred. The purpose of the
moratorium is to provide the city an opportunity to study and determine
appropriate mitigation measures for the tree removal, and to ensure measures
are incorporated into any future development approvals for the property.
Mitigation measures as determined by the director shall be imposed as a
condition of any subsequent permits for development on the subject property.
(b) Civil Penalties.
(1) As part of a civil action brought by the city, a court may assess against any
person who commits, allows, or maintains a violation of any provision of this
chapter a civil penalty in an amount not to exceed five thousand dollars per
violation.
(c) Where the violation has resulted in removal of a tree, the civil penalty shall
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be in an amount not to exceed five thousand dollars per tree unlawfully
removed, or the replacement value of each such tree, whichever amount is
higher. Such amount shall be payable to the city. Replacement value for the
purposes of this section shall be determined utilizing the most recent edition
of the Guide for Plant Appraisal, published by the Council of Tree and
Landscape Appraisers. Damage to a tree protected or regulated by this
chapter shall also constitute a violation with the same civil penalties except
that repair value shall be used. Injunctive Relief. A civil action may be
commenced to abate, enjoin, or otherwise compel the cessation of such
violation.
(d) Costs. In any civil action brought pursuant to this chapter in which the city prevails,
the court shall award to the city all costs of investigation and preparation for trial,
the costs of trial, reasonable expenses including overhead and administrative costs
incurred in prosecuting the action, and reasonable attorney fees.
8.10.120 Fees.
Tree reports required to be submitted to the city for review and evaluation pursuant to this
chapter shall be accompanied by the fee prescribed therefor in the municipal fee schedule.
8.10.130 Severability.
If any provision of this chapter or the application thereof to any person or circumstance is held
to be invalid by a court of competent jurisdiction, such invalidity shall not affect any other
provision of this chapter which can be given effect without the invalid provision or application,
and to this end the provisions of this chapter are declared to be severable.
8.10.140 Appeals.
Any person seeking the director's approval to remove a protected tree pursuant to the ordinance
codified in this chapter who is aggrieved by a decision of the director may appeal such decision
in accordance with the procedures set forth in Chapter 18.78 (Appeals).
SECTION 5. If any section, subsection, clause or phrase of this Ordinance is for any
reason held to be invalid, such decision shall not affect the validity of the remaining portion or
sections of the Ordinance. The Council hereby declares that it should have adopted the
Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the
fact that any one or more sections, subsections, sentences, clauses or phrases be declared
invalid.
SECTION 6. The Council finds that this ordinance is exempt from the provisions of
the California Environmental Quality Act (“CEQA”), pursuant to Section 15061 of the CEQA
Guidelines, because it can be seen with certainty that there is no possibility that the ordinance
will have a significant effect on the environment. Alternatively, the ordinance is also exempt
under CEQA Guidelines Section 15308 because it involves regulatory action for the protection of
the environment.
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SECTION 7. This ordinance shall be effective on the thirty-first day after the date of
its adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Public Works
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City of Palo Alto (ID # 13461)
Policy and Services Committee Staff Report
Report Type: Action Items Meeting Date: 8/10/2021
City of Palo Alto Page 1
Summary Title: Asset Capitalization Audit Activity Report
Title: Office of the City Auditor Presentation of the Asset Capitalization Audit
Activity Report
From: City Manager
Lead Department: City Auditor
Recommendation
The City Auditor recommends that the Policy & Services Committee consider the
following actions:
1) Accept the Asset Capitalization Review report and corresponding
recommendations for improvement; and
2) Forward the Asset Capitalization Review report to City Council for consent.
Executive Summary
Baker Tilly, in its capacity serving as the Office of the City Auditor, performed a review
of asset capitalization practices focusing on construction in progress in accordance with
the FY2021 Audit Plan approved by City Council.
Through the audit activity, the Office of the City Auditor identified four (4)
recommendations. The Administrative Services Department concurred with each
finding and has drafted action plans for each item.
The Office of City Auditor will perform periodic follow up procedures to validate that
corrective actions have been implemented.
Background
In FY2020, the City of Palo Alto recorded a $12.6M adjustment to the $142.1M
construction in progress balance (out of $596.3M capital assets as of 6/30/2020) for
governmental activities to correct improperly capitalized expenses in the construction in
progress account. The adjustment was made to write off the expenses that should have
2
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City of Palo Alto Page 2
been reported as part of Public Works functional expenses in the year the costs were
incurred but instead reported as capital assets in prior years. This adjustment was
identified by staff and discussed during the Finance Committee meeting on December
1, 2020.
The Office of the City Auditor included an audit activity related to the adjustment in the
FY2021 Audit Plan approved by City Council. The objectives of this review were to:
1) Identify the cause of the $12.6M capital asset adjustment made during FY2020 by
evaluating the process to record and report the costs associated with CIP.
2) Determine whether adequate controls are in place to ensure that costs associated
with CIP are properly categorized and recorded in accordance with the accounting
policy and relevant accounting standards.
Discussion
The attached report summarizes the analysis, audit findings, and recommendations.
Timeline, Resource Impact, Policy Implications
The timeline for implementation of corrective action plans is identified within the
attached report. All corrective actions are scheduled to be implemented by FY 2023
Stakeholder Engagement
The Office of the City Auditor worked primarily with the Administrative Services
Department, and engaged with additional stakeholders, including the City Managers
Office and Office of the City Attorney, as necessary.
Environmental Review
Environmental review is not applicable to this activity.
Attachments:
• Attachment A: Asset Capitalization Audit Report (FINAL DRAFT)
• Attachment B: City Manager Response to Asset Capitalization Audit
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1
City of Palo Alto
City Auditor’s Office
Asset Capitalization Review –
Construction In Progress
July 30, 2021
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Executive Summary
Purpose of the Audit
Baker Tilly, in its capacity serving as the Office of the City Auditor, performed a review of asset capitalization
focusing on construction in progress (CIP) in accordance with the FY2021 Audit Plan approved by City
Council. The objectives of this review were to:
1) Identify the cause of the $12.6M capital asset adjustment made during FY2020 by evaluating the process
to record and report the costs associated with CIP
2) Determine whether adequate controls are in place to ensure that costs associated with CIP are properly
categorized and recorded in accordance with the accounting policy and relevant accounting standards
Report Highlights
Finding: Description of Finding
(Page 9) The cause of the $12.6M adjustment, initiated by City staff, made to the CIP account in
FY2020, which was to remove improperly capitalized costs, was due to staff’s
incomplete execution of a periodic review and correction of the costs in the CIP
account, a key internal control, in previous years.
The following current CPI processing practices cause difficulties in executing a
periodic review of the costs effectively:
Capital projects are set up using work breakdown structure (WBS) elements to
track Design and Construction tasks, not to track capitalizable and non-
capitalizable costs separately.
All costs are settled to the CIP account on a monthly basis whether or not
costs are capitalizable. Some projects are described as recurring maintenance
and repair projects for which all costs are expenses and should be settled to
cost centers (expense), not to the CIP account (capitalizable costs).
The Fixed Asset Policy is outdated and does not provide a robust CIP policies
and procedures including the criteria for categorizing project costs and the
required actions by various responsible parties for initiating and tracking the
project costs for proper capitalization in the SAP system.
Key Recommendations
Create capital projects in the SAP system in a manner that WBS elements are
set up to keep track of capitalizable and non-capitalizable costs separately. Non-
capitalizable costs should be settled to cost centers.
Formalize a periodic review of the CIP account by establishing and following a
review schedule, documenting a review, and requiring a supervisory review
and approval.
Implement a mechanism to receive the status of the project completion and
assets placed in service from the responsible departments in a timely manner.
Periodically review the fixed asset policies and enhance the CIP section in the
policies to provide guidance regarding the CIP process to the accounting team
and the responsible parties such as the Office of Management and Budget,
Business Analysts, and project managers.
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Table of Contents
Executive Summary ........................................................................................................................................................... 2
Purpose of the Audit ..................................................................................................................................................... 2
Report Highlights ........................................................................................................................................................... 2
Introduction ......................................................................................................................................................................... 4
Objective........................................................................................................................................................................... 4
Background ..................................................................................................................................................................... 4
Process Overview .......................................................................................................................................................... 5
Scope................................................................................................................................................................................. 6
Methodology .................................................................................................................................................................... 6
Compliance Statement.................................................................................................................................................. 6
FY2020 $12.6M Adjustment ......................................................................................................................................... 7
Audit Results ....................................................................................................................................................................... 9
Finding .............................................................................................................................................................................. 9
Recommendation ......................................................................................................................................................... 10
Appendix ............................................................................................................................................................................ 11
Appendix A: Page 72 of FY2020 Comprehensive Annual Financial Report ................................................. 11
Appendix B: CIP processes for Governmental Fund/Internal Service Fund and Enterprise Fund ........ 12
Appendix C: Management Response ..................................................................................................................... 14
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Introduction
Objective The purpose of this review was to:
1) Identify the cause of the $12.6M capital asset adjustment made during
FY2020 by evaluating the process to record and report the costs associated
with construction in progress (CIP)
2) Determine whether adequate controls are in place to ensure that costs
associated with CIP are properly categorized and recorded in accordance
with the accounting policy and relevant accounting standards
Background Approximately 110 projects had activities during FY2020 and/or had balances as
of the end of FY2020 in the CIP account for governmental activities. These
projects are included in the current or prior years’ Adopted Capital Budget that
provides the details such as project descriptions and completion schedules.
In FY2020, City of Palo Alto (the City) recorded a $12.6M adjustment to the
$142.1M CIP balance (out of $596.3M capital assets as of 6/30/2020) (Appendix
A) for governmental activities to correct the improperly capitalized expenses in
the CIP account. The adjustment was made to write off the expenses that should
have been reported as part of Public Works functional expenses in the year the
costs were incurred but instead reported as capital assets in prior years. This
adjustment was discussed during the Finance Committee meeting on December
1, 2020.
The CIP account consists of the costs of construction projects undertaken but
not yet completed. It is reported as nondepreciable capital assets and includes
costs such as direct labor costs, overhead allocations, materials, and other costs
incurred in placing an asset in service. Once an asset is in service, the
associated CIP costs are reclassified to the appropriate assets such as buildings,
and then the costs of an asset are expensed over the life of an asset through
depreciation. On the other hand, the costs for maintenance and repair projects to
retain the current condition and value rather than adding value or extending the
useful life of assets are expensed as incurred.
As shown in the Table 1, the CIP account balances have been increasing over
the years, especially from 2018 to 2019.
Excerpts from City of Palo Alto Fixed Asset Policy
Construction-in-Progress
Construction-in-Progress (CIP) consists of construction projects subject to
capitalization.
Maintenance
Maintenance expenses keep assets in normal operating condition and do not
extend the life of the asset beyond the expected useful life determined at
acquisition. Therefore, maintenance costs are expensed and not capitalized.
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Table 1: CIP Balances – Governmental Fund / Internal Service Fund
As of 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020
Balance $ 39,333K $ 46,527K $ 62,661K $ 69,343K $ 104,465K $ 139,365K
Source: City of Palo Alto Comprehensive Annual Financial Report
Process Overview The accounting team is responsible for processing capital asset transactions in
the SAP system while Office of Management Budget is responsible for initially
setting up a project in the SAP system based on the annual adopted budget.
In the SAP system, the City tracks projects costs using work breakdown
structure (WBS) elements. Each project can have multiple WBS elements to
allow project tasks to be organized into a hierarchy to track capitalizable and
non-capitalizable costs separately (Figure 1). The costs on a WBS element can
be allocated (or “settled”) periodically to either cost centers (for non-capitalizable
costs) or the CIP account (for capitalizable costs) using a Settlement Rule.
The flowchart in Appendix B shows the current CIP process for Governmental
Fund and Internal Service Fund. The City currently uses WBS elements to track
the costs for Design and Construction tasks separately. Costs (timecards and
invoices) are entered in the SAP Financial Accounting module with a WBS
number and then posted in the SAP Project System module. On a monthly basis,
a Sr. accountant runs a settlement rule to settle costs to the CIP account in the
SAP Asset Accounting module.
The key controls in tracking and recording the project costs in the CIP account
are:
Periodically reviewing the costs recorded in the CIP cost centers (SAP
Financial module) to ensure that a project identifier (i.e. WBS) is recorded for
each cost
Periodically reviewing the costs recorded for the CIP projects (SAP Project
module) to ensure that (1) non-capitalizable costs are removed from the CIP
account and settled to appropriate cost centers no later than the end of the
fiscal year and (2) capitalizable costs are reclassified to fixed assets as soon
as assets are placed in service
A mechanism to identify the completed projects and assets placed in service
Figure 1: Project WBS Structure (Example)
Capital
Project
WBS
Level 1
WBS
Level 2
WBS
Level 3
WBS
Level 3
WBS
Level 2
WBS
Level 3
Settle to Cost Center
(Non-capitalizable)
Settle to CIP (Capitalizable)
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1 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the Palo
Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract from October 2020 through
June 2022 with Baker Tilly US, LLP (Baker Tilly) and appointed Kyle O’Rourke, Senior Consulting Manager in Baker Tilly's Public Sector
practice, as City Auditor. Given the transition in the City Audit office, a peer review was not conducted in 2020 and will be conducted
in the second year of Baker Tilly’s contract.
Scope The Baker Tilly team focused on the processes and controls encompassing
costs recorded in the CIP account for governmental activities. We reviewed the
details of the CIP costs and projects adjusted in FY2020. We also interviewed
the accountants, Office of Management and Budget personnel, and
Departmental and Software Business Analysts.
Methodology The Baker Tilly team performed the following procedures to understand the
nature of the adjusted costs and projects and the circumstance of the
adjustment:
Reviewed the FY2020 $12.6M CIP adjustment worksheet listing project
names, cost details, and adjustments
Reviewed the project information in FY2016 – FY2021 Adopted Capital
Budget documents
Interviewed the accountants who identified and processed the adjustments
We also performed the following procedures to assess the process and internal
controls in place to track and record the cost associated with CIP:
Reviewed the fixed asset policies
Interviewed the accountants to discuss the process and internal controls in
place
Reviewed the documents evidencing the key controls in place
Interviewed an SAP Function Business Analyst to learn the basic SAP system
configuration
Interviewed the Office of Management Budget personnel to understand the
project setup in the SAP system
Reviewed the best practices by discussing with the subject matter expert at
Baker Tilly and by researching various fixed asset policies
Compliance
Statement
This audit activity was conducted from March 2021 to May 2021 in accordance
with generally accepted government auditing standards, except for the
requirement of an external peer review1. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
The Office of the City Auditor greatly appreciates the support of the Administrative
Services Department in conducting this audit activity.
Thank you!
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Detailed Analysis
FY2020 $12.6M
Adjustment
The Baker Tilly team reviewed the costs and projects adjusted in the CIP account in
FY2020 and interviewed the accountants who identified and processed the
adjustments to understand the nature and circumstances of the adjustments.
The FY2020 CIP adjustment was part of the concentrated effort of CIP account
review that started in FY2019. The accountants made some adjustments in FY2019
($2.5M) and continued their efforts in FY2020, which resulted in the $12.6M
adjustment. They expect their CIP account review to be up to date in FY2021.
Summarized in the table on the next page is the information obtained from the
FY2020 CIP worksheet and schedule, Adopted Capital Budget documents, and the
fixed asset accountants. We learned that:
The adjustments were made for 21 projects.
All costs remaining in the CIP account were written off by the FY2020
adjustment for 17 projects, as those costs were non-capitalizable (Column F). It
was noted that many project names indicate repair and maintenance for which
costs are to be expensed (i.e. non-capitalizable costs).
Out of 21 projects, 13 projects were recurring projects (Column D) for which the
types of costs (capitalizable and non-capitalizable) can be predictable to
determine how the costs should be settled.
The older expenses included in the FY2020 CIP balances were incurred in
FY2010 through FY2018 (Column E) and totaled approximately $8.3M.
The capitalizable costs totaling $473K for four (4) projects were reclassified to
fixed assets in FY2020 (Column F), but some of them were completed or
purchased in FY2012, FY2013, or FY2014.
o The identified fixed assets included:
Public Art
Software, machine, and installation service that improved parking
Newly installed streetlights
Building automation
o The costs that were written off included:
Temporary public art
Consultant
Study/Survey
Design
Payroll
Miscellaneous costs
Supplies and materials related to repairs and maintenance
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Table 2: Summary of $12.6M Adjustment by Project
A
Project
Number
B
Description
C
Prior year expenses
written off in FY2020
D
Scheduled Project End
Date
E
Costs recorded in CIP in:
F
Nature of Adjustments
AC-14001 Baylands Facility & Exhibit Improvements (53,738) FY2019 FY2017 - FY2019 Removed all costs recorded in CIP
AC-86017 Art In Public Places (82,589) Recurring FY2019 In addition to the written-off costs, there were
FY2019 costs moved to fixed assets
OS-00001 Open Space Trails & Amenities (286,674) Recurring FY2019 & FY2020 Removed all costs recorded in CIP
OS-09001 Off-Road Pathway Resurfacing and Repair (493,062) Recurring FY2010 - FY2020 Removed all costs recorded in CIP
PE-09003 City Facility Parking Lot Maintenance (1,066,648) Recurring FY2014 - FY2019 Removed all costs recorded in CIP
PE-15020 Civic Center Waterproofing Study (54,493) Spring 2021 FY2016 - FY2019 Removed all costs recorded in CIP
PE-15028 Baylands Levee Improvements (503,097) Fall 2017 FY2015, 2016, 2019 Removed all costs recorded in CIP
PE-17002 CIP City Hall Floor 3 Remodel (22,355) Fall 2018 FY2019 Removed all costs recorded in CIP
PE-17006 Baylands Flood Protection Levee Improvement (266,666) Fall 2021 FY2018 & FY2019 Removed all costs recorded in CIP
PE-17008 CIP City Hall Floor 4 Remodel (533,727) Winter 2018 FY2017 - FY2020 Removed all costs recorded in CIP
PE-17009 CIP City Hall Floor 5 Remodel (562,410) Fall 2017 FY2017 - FY2020 Removed all costs recorded in CIP
PE-18002 High St Parking Garage Waterproofing & Repairs (31,728) Spring 2021 FY2018 - FY2020 Removed all costs recorded in CIP
PF-00006 Roofing Replacement (996,598) Recurring FY2018 - FY2020 Removed all costs recorded in CIP
PF-02022 Interior Finishes Construction (75,238) Recurring FY2019 & FY2020 Removed all costs recorded in CIP
PF-15005 Emergency Facility Improvements (146,408) Recurring FY2015 - FY2017 Removed all costs recorded in CIP
PG-09002 Parks & Open Space Emergency Repairs (812,793) Recurring FY2012 - FY2020 Removed all costs recorded in CIP
PL-12000 Transportation and Parking Improvements (2,405,358) Recurring FY2012 - FY2020 In addition to the written-off costs, there were
FY2012-18 costs moved to fixed assets
PO-05054 Street Lights Improvements (534,469) Recurring FY2012 - FY2020 In addition to the written-off costs, there were
FY2017 costs moved to fixed assets
PO-12001 Curb & Gutter Repairs (1,561,525) Recurring FY2012 - FY2020 Removed all costs recorded in CIP
CB-16002 Cubberley Roof Replacments (1,794,232) Recurring FY2017 - FY2020 Removed all costs recorded in CIP
CB-17001 Cubberley Repairs (327,830) Recurring FY2018 - FY2020 In addition to the written-off costs, there were
FY2018 costs moved to fixed assets
TOTAL ADJUSTMENTS (12,611,640)
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Audit Results
Finding The cause of the $12.6M adjustment made to the CIP account in FY2020 to remove
improperly capitalized costs was incomplete execution of a key internal control, a
periodic review and correction of the costs in the CIP account, in previous years.
The accountants initiated a detailed review of the costs in the CIP account in
FY2019 when they noticed the increase in the CIP account balance and continued
their concentrated efforts in FY2020. Their review identified that the costs recorded
in previous years (FY2010 through FY2019) had to be written off ($12.6M) or were
supposed to be reclassified to the appropriate assets in previous years ($473K).
This demonstrates that a periodic review of costs for CIP projects (a key internal
control) to mitigate a risk of improperly reporting capital assets in the City’s
government-wide financial statements was not performed. Otherwise, these costs
would have been properly reported as expenses in the year the costs were incurred
or as other capital asset items when an asset was placed in service. Additionally,
the assets could not be depreciated until they were reclassified from the CIP
account.
According to the City’s Fixed Asset Policy, the costs in the CIP account should be
reclassified to the appropriate assets upon the earlier occurrence of substantial
completion, occupancy, or when the asset is placed into service, and maintenance
costs are expensed and not capitalized. The Governmental Accounting Standards
Board (GASB) Statement 34 requires that capital assets be depreciated over their
estimated useful lives.
The following current practices appear to cause difficulties in executing a periodic
review of the costs in the CIP account effectively:
The Office of Management Budget sets up Capital projects using WBS elements
to track Design and Construction tasks for a budgeting and departmental
planning purposes, not to track capitalizable and non-capitalizable costs
separately for an accounting purposes. As a result, both types of costs are
included in one WBS element. This process requires more efforts to review
costs to ensure proper classification. It was noted that Enterprise Fund uses a
work order system in which operation work orders are settled to cost centers
and expensed and capital service orders are used for capitalizable costs and
settled to the CIP account.
All costs are settled to the CIP account on a monthly basis whether or not costs
are capitalizable. Some projects are described as recurring maintenance and
repair projects for which all costs are expenses (unless a repair project evolves
into a project requiring capitalization), and therefore, they should be settled to
cost centers, not to the CIP account. As a result, there are more costs to be
reviewed and removed in the CIP account than necessary.
Fixed Asset Policies have not been reviewed and updated since 2012. There
are two Fixed Asset Policies: Fixed Asset Policy for General Fund and Internal
Service Fund is dated March 2012; Enterprise Fixed Asset Policy is dated March
2014. The Fixed Asset Policy for General Fund and Internal Service Fund
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includes only a paragraph for CIP regarding the requirements for a periodic
review and timely recording of fixed assets. It does not provide a robust CIP
policies and procedures including the criteria for categorizing project costs and
the required actions by various responsible parties for initiating and tracking the
project costs for proper capitalization in the SAP system. It was noted that only
the Enterprise Fixed Asset Policy requires periodic submission of a capitalization
and retirement form from the departments.
Recommendation The City should strengthen the internal controls over CIP to ensure that capital
project costs are properly recorded and reported by implementing the following:
1. Capital projects should be created in the SAP system in a manner that WBS
elements are set up to keep track of capitalizable and non-capitalizable costs
separately. Non-capitalizable costs should be settled to cost centers. The
accounting team should work with the Office of Management and Budget
personnel and Business Analysts to define the criteria and procedures and to
maximize the use of the SAP functionality to improve the efficiency and
effectiveness of the process. As the City is planning to improve the SAP
functionality in FY2022, the accounting team should take this opportunity to
ensure the SAP system will be configured to meet their needs.
2. The costs recorded in the CIP account should be reviewed periodically to
ensure expenses are removed and costs for the completed assets are
reclassified in a timely manner. To ensure that this key control works effectively
after the concentrated efforts end in FY2021, the accounting team should
formalize the process by establishing and following a review schedule,
documenting a review, and requiring a supervisory review and approval.
3. The accounting team should implement a mechanism to receive the status of
the project completion and assets placed in service from the responsible
departments in a timely manner. Although a fixed asset accountant reviews the
annual and mid-year budget documents and occasionally reach out to the
departments, this internal control should be formalized and performed more
effectively to ensure that the costs are reclassified to assets and start
depreciation (if applicable) in a timely manner.
4. The accounting management should enhance the CIP section in the policies to
provide guidance regarding the CIP process to the accounting team and the
responsible parties such as the Office of Management and Budget, Business
Analysts, and project managers. The CIP policies and procedures should
include the requirement for project setup, a periodic review of project costs,
monitoring and reporting the project completion status, and so on. Additionally,
the accounting management should evaluate and update the fixed asset policies
periodically to ensure that requirements are appropriate for the current process,
system used, and accounting standards. According to Government Finance
Officers Association, this should be done no less than once every three years
based on a predetermined schedule.
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Appendix
Appendix A: Page 72 of FY2020 Comprehensive Annual Financial Report
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Appendix B: CIP processes for Governmental Fund/Internal Service Fund and Enterprise Fund
Construction in Progress - Governmental Fund/Internal Service Funds
Of
f
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o
f
M
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m
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a
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d
B
u
d
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e
t
Fi
x
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d
A
s
s
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t
A
c
c
o
u
n
t
a
n
t
(Go
v
e
r
n
m
e
n
t
a
l
&
In
t
e
r
n
a
l
S
e
r
v
i
c
e
F
u
n
d
s
)
Fi
x
e
d
A
s
s
e
t
Ac
c
o
u
n
t
i
n
g
S
u
p
e
r
v
i
s
o
r
Pa
y
r
o
l
l
&
AP SAP FI
Capital Project Fund 471/472
- Capital outlay
- CIP CC #
- Exp AC #
SAP PS
Data with WBS #
in SAP-FI gets
posted
Run Settlement
Rules
Adopted Capital
Budget
Questica
New project
with dummy
project code
Timecards
- WBS #
Invoice or JE
- WBS #
- CIP CC #
- Exp AC #
SAP PS
Create new project
- system-generated project
code
- WBS #
- Cost Center
SAP FI-AA
Capital Project Fund 471/472
- Construction in Progress
Costs to be
expensed?
SAP FI-AA
Create Fixed Asset and
then retire the asset
immediately
Yes
Run ZPSR01
Detail report
Populate
spreadsheet
CIP471 N-5
RollForward
Quarterly
Review all costs
posted in each
CIP#
Project
Completed?
Month-end
Define
Settlement Rules
Month-end
Run GD13 (CIP
Cost Center)
Report
Review CIP
projects with CIP
cost centers for
missing WBS#
Note corrective
actions, if any, in
the spreadsheet
Review the
spreadsheet
Process
transactions for
correction
No
SAP FI-AA
- Create new Fixed Asset #
- Move CIP to Fixed Assets
Yes
Approve the
corrective
actions
No Action
Necessary
Year-end
labor costs allocation
process (True-up)
Adjustment
needed?
Yes
No
SAP-FI
Initiate a journal
entry
SAP-FI
Review and post a
journal entry
Monthly
CAT 7 – payroll costs
are processed 8th
week after the end of
each month
Year-end
Reconciliation of
Fixed Assets and
Capital Outlay
External
Auditor
Budgeting
process
Fixed Asset
Policy
March/April
Mid-year Budget
Review Report
Occasionally
Check with
departments for
completed projects
Run ZPSR01
Budget vs
Actual Report
End of posting
process
Review the
spreadsheet
Schedule
N-10
No Action
Necessary No
Run ZFIR43
Profit & Loss
Report
SAP-PS
Project
System
SAP-FI
Financial
Accounting
SAP-FI-AA
Asset
Accounting
Key Control Need
Improvement
WBS elements are not set up to separate
capitalizable costs and non-capitalizable costs
Capitalizable costs and non-capitalizable costs are
mixed in a WBS element
Therefore, all costs are settled to CIP So many to be reviewed
by one accountant
Manual approval – signature on hard copies, e-
mail, comments in spreadsheet, meetings
Current year s non-capitalizable costs are not settled
to Cost Center
[But, this is the way to correct prior year costs]
Dated March 2012
Has not been reviewed/updated
2.a
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Construction in Progress - Enterprise Funds
OM
B
Fi
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Fi
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g
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AP
Ut
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y
D
e
p
a
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t
m
e
n
t
SAP FI
Funds 522,523,524,527,533
- Capital outlay
- CIP CC #
- Exp AC #
SAP PS
Data with ORD# in
SAP-FI gets posted
Month-end
Run Settlement
Rules
Adopted Capital
Budget
Questica
New project
with dummy
project code
Timecards
- ORD #
Invoice or JE
- ORD #
- CIP CC #
- Exp AC #
SAP PS
- system-generated project
code
- WBS# or ORD#
- Cost Center
SAP FI-AA
Utility Funds
- Construction in Progress
(Acct 56030)
Run ZPSR01
Detail report
Populate
RollForard
spreadsheet
called Resume
Quarterly
Reconcile G/L and
FA Module
Project
Completed?
Create
Settlement Rules
Review the
spreadsheet and
reports
SAP FI-AA
- Create new Fixed Asset #
- Move CIP to Fixed Assets
Yes
No Action
Necessary
No
Bi-weekly
Charge
Payroll to
ORD
Work Order
# 5xxxxxxx
Service Order
# 4xxxxxxx
Run GD13 report
for Construction In
Progress (Acct 56030)
Enterprise
Summary Input
Sheet Form
Reach out to the
department for
clarification
Enterprise Fixed
Asset
Capitalization &
Retirement Form
Quarterly
Funds
522,524,527
Utility Project
Coordinator
completes a form
Quarterly
Funds 523,533
Electrical Engineer
completes a form
Budgeting
process
Create new
project in SAP
Create Orders
in SAP
Enterprise Fixed
Asset Policy
Monthly
JE
processing
Weekly
Invoice
processing
Monthly
Review CIP
projects with CIP
cost centers for
missing WBS# &
ORD#
Adjustment
needed?Yes
SAP-FI
Initiate a journal
entry
SAP-FI
Review and post a
journal entry
No Action
Necessary
No
Utility
Construction in
Progress
Account Report
End of posting
process
Enterprise Fixed
Asset
Capitalization &
Retirement Form
Annually
Funds
525,526,528
Fund Manager
completes a form
As needed
Funds 530
Fund Manager
completes a form
Enterprise
Summary Input
Sheet Form
Occasionally
Check with Fund
Manager via e-mail
for completed
projects
SAP-PS
Project
System
SAP-FI
Financial
Accounting
SAP-FI-AA
Asset
Accounting
Key Control Need
Improvement
Public Works Funds (525,526,528,530) use only WBS
Utility Funds (522,523,524,527,533) use both WBS and Orders
Documents are maintained in the shared drive.
Supervisor may ask questions but does not
document approval
Will settle to cost
center = Exepense
Will settle to
Construction in
Progress = Asset
Dated March 2014
Has not been reviewed/updated
2.a
Packet Pg. 43
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Appendix C: Management Response
Recommendation Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree and
Target Date and Corrective Action Plan
To be completed 6 months after Council acceptance and
every 6 months thereafter until all recommendations
are implemented
Current Status Implementation Update and
Expected Completion Date
Finding: The costs in the CIP account were not reviewed and corrected in a timely manner in previous years
1. Capital projects should be created in the
SAP system in a manner that WBS elements
are set up to keep track of capitalizable and
non-capitalizable costs separately. Non-
capitalizable costs should be settled to cost
centers. The Accounting team should work
with the Office of Management and Budget
personnel and Department and System
Analysts to define the criteria and procedures
and to maximize the use of the SAP
functionality to improve the efficiency and
effectiveness of the process. As the City is
planning to improve the SAP functionality in
FY2022, the accounting team should take this
opportunity to ensure the SAP system will be
configured to meet their needs.
Administrative
Services
Concurrence: The administration concurs
with this recommendation.
Target Date: FY 2023
Action Plan:
With the Administrative Services
Department as the lead, staff will work
across the stakeholders including
accounting, budget, engineering, and
departmental teams on the recommended
changes to clearly identify capitalizable and
noncapitalizable costs. Staff implemented a
new structure for WBS codes within the past
five years to apply additional clarity in use,
which has taught the organization that
changes such as these are both multi-system
changes and business practice changes.
Therefore, the core stakeholder group will
evaluate what is feasible to streamline the
process and to fully maximize functionality.
Accounting guidelines will serve as the
authoritative source for when a project is
capitalizable or non-capitalizable which will
be included in the fixed policies and
procedures.
2.a
Packet Pg. 44
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Recommendation Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree and
Target Date and Corrective Action Plan
To be completed 6 months after Council acceptance and
every 6 months thereafter until all recommendations
are implemented
Current Status Implementation Update and
Expected Completion Date
2. The costs recorded in the CIP account
should be reviewed periodically to ensure
expenses are removed and costs for the
completed assets are reclassified in a timely
manner. To ensure that this key control
works effectively after the concentrated
efforts end in FY2021, the accounting team
should formalize the process by establishing
and following a review schedule,
documenting a review, and requiring a
supervisory review and approval.
Administrative
Services
Concurrence: The administration concurs
with this recommendation.
Target Date: FY 2022 Q2
Action Plan:
As noted in the audit, staff completed a
concentrated effort of cleanups and reviews
in FY 2019 and FY 2020 and has identified
projects of which the nature of expenses are
recurring maintenance and repair projects.
In FY 2021, staff has already implemented a
second and final historical review and clean-
up effort with a process moving forward of
review quarterly at minimum. In FY 2022,
these projects will be directly settled into
cost centers.
In the absence of a software system change
as discussed in recommendation 1, the at
minimum quarterly manual review by the
accounting team will review the CIP projects
including a supervisory approval.
In Progress Staff has already
implemented a monthly
manual review process in FY
2022, and will ensure full
supervisory review as part of
the first Q1 financial close
scheduled to end September
30, 2021, and completion by
December 31, 2021.
3. The fixed asset accounting team should
implement a mechanism to receive the
status of the project completion and assets
placed in service from the responsible
departments in a timely manner. Although a
fixed asset accountant reviews the annual
and mid-year budget documents and
Administrative
Services
Concurrence: The administration concurs
with this recommendation.
Target Date: FY 2022 Q3
Action Plan:
The Accounting Team will establish a
business process for departments to follow
including a standardized form, instructions,
2.a
Packet Pg. 45
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occasionally reach out to the departments,
this internal control should be formalized
and performed more effectively to ensure
that the costs are reclassified to assets and
start depreciation (if applicable) in a timely
manner.
and training for departments to utilize to
ensure timely reporting of project
completion status.
4. The accounting management should
enhance the CIP section in the policies to
provide guidance regarding the CIP process
to the accounting team and the responsible
parties such as the Office of Management
and Budget, Business Analysts, and project
managers. The CIP policies and procedures
should include the requirement for project
setup, a periodic review of project costs,
monitoring and reporting the project
completion status, and so on. Additionally,
the accounting management should
evaluate and update the fixed asset policies
periodically to ensure that requirements are
appropriate for the current process, system
used, and accounting standards. According
to Government Finance Officers Association,
this should be done no less than once every
three years based on a predetermined
schedule.
Administrative
Services
Concurrence: The administration concurs
with this recommendation.
Target Date: FY 2022 Q3/Q4
Action Plan:
The Accounting team will review and update
the CIP policies and procedures to the
extent necessary and practical to clarify and
implement these standards. It is expected
that this update will include documentation
of several the other action plans outlined in
this audit as well. The City attempts to
routinely update internal policies and
procedures, though due to limited resources
and competing priorities this is not always
completely in a timely manner. As part of
annual operating procedures, staff will work
to complete this review more routinely as
resources allow.
2.a
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Memorandum
DATE: August 5, 2021
TO: Kyle O’Rourke, City Auditor
FROM: Kiely Nose, Administrative Services Director/Chief Financial Officer
CC: Ed Shikada, City Manager
SUBJECT: City Manager Response to Asset Capitalization Audit Report
The City of Palo Alto Administrative Services Department appreciates the City Auditor’s work in
preparation of this audit and acknowledges that the audit has identified recommendations which are
addressed in the appendix. In FY 2020, staff identified a gap in accounting internal practices in how
capital expenses were categorized and capitalized or not in financial reporting. A historical review was
undertaken with the largest correction brought forward as part of the FY 2020 Annual Comprehensive
Financial Report (ACFR) with continued work to finish review in FY 2021. This review was coordinated
with the City’s independent auditors, Macias, Gini, and O’Connell (MGO) throughout this review process
and year end reporting.
Baker Tilly reviewed the process that staff had identified for correction and improvement and has
assisted staff in providing a basis for ongoing correction of the gap in the future. Workflow
documentation included in this audit will ensure the continuity of operations despite challenges in staff
resources including loss of capacity and institutional knowledge. The appendix states the action steps for
each recommendation and staff expect to work on these during the coming fiscal year within existing
resources. Progress on implementation will be routinely reported after the City Council accepts the
audit report until all recommendations are addressed.
2.b
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