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2015-06-15 City Council Agenda Packet
CITY OF PALO ALTO CITY COUNCIL June 15, 2015 Special Meeting Council Chambers 5:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday preceding the meeting. 1 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Special Orders of the Day 5:00-5:10 PM 1.Presentation of a Donation Check from the Palo Alto Library Foundation to the Palo Alto City Library Agenda Changes, Additions and Deletions City Manager Comments 5:10-5:20 PM Oral Communications 5:20-5:35 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Consent Calendar 5:35-5:40 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 2.Approve and Authorize the City Manager or Designee to Execute the Following Energy Efficiency Evaluation Support Contracts in a Combined Not to Exceed Amount of $250,000 per Year for a Three- REVISED 2 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Year Term With an Option to Extend Either or Both Contracts for an Additional Two Years: (A) TRC Engineers, Inc. in an Amount Not to Exceed $210,000 per Year; and (B) Energy & Resource Solutions, Inc. in an Amount Not to Exceed $40,000 per Year 3.Approval of Contract No. C15158881 for $270,000 With Palo Alto Housing Corporation for Provision of Below Market Rate (BMR) Administration Services Over a Two Year Period 4.Approval of Amendment No. 2 to Contract No. C09124501 With GreenWaste of Palo Alto That Would Increase Zero Waste Services, Increase Efficiencies, Increase the Annual Costs by Approximately $1,366,000 in FY2016, to Support Composting and Anaerobic Digestion Programs; and Extend the Contract Term for an Additional Four Years to End June 30, 2021; Adoption of Resolution to Revise Utility Rules and Regulations No. 2, 3, 11 and 24 to Reflect New Zero Waste Service Changes 5.Approval of a $9,500 Grant From Silicon Valley Creates, a $9,600 Grant From the National Endowment for the Arts, a $45,000 Contribution From the Friends of Palo Alto Children’s Theatre and Adoption of a Related Budget Amendment Ordinance to the General Fund in the Amount of $64,100 6.Approval of a Contract With Graham Contractors, Inc. in the Amount of $1,311,073 For The FY 2016 Preventive Maintenance Project, the First of Four Contracts in the FY 2016 Street Maintenance Program Project (CIP PE-86070) 7.Approval of a Three-Year Contract With an Option of Two, One-year Extensions With American Guard Services, Inc., to provide Crossing Guard Services, in the Amount Not to Exceed $321,215 Per Year for the First Two Years, and $328,624 for the Third Year and Authorization for Additional But Unforeseen Work Not to Exceed $32,121 Per Year for the First Two Years and $32,862 for the Third Year 8.Confirmation of Appointment of Edward Shikada as Assistant City Manager and Approval of Employment Agreement 9.Adoption of a Resolution Authorizing Public Works Department to Submit a Function Classification Request to Caltrans to Formally Add 3 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. the Streets Reclassified as Part of the 1998 Comprehensive Plan to the Caltrans System Map 10.Approval of Contract Amendment No. 1 to Contract No. S14152995 in the Amount of $14,949 with Balance Hydrologics, Inc. for the Design and Implementation of an Enhanced Flood Warning System for the San Francisquito Creek Watershed 11.Adoption of Fiscal Year 2016 Investment Policy 12.Finance Committee Recommendation that the City Council Adopt: 1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; 2) a Resolution Approving the Fiscal Year 2016 Wastewater Collection Utility Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices; 3) A Resolution Approving the Fiscal Year 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserve Management Practices; and 4) A Resolution Approving the Fiscal Year 2016 Gas Utility Financial Plan and Amending the Gas Utility Reserve Management Practices Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 5:40-7:40 PM 13.Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit Applicable to Downtown, the California Avenue Area, and the El Camino Corridor on an Interim Basis (Continued From June 1, 2015) 7:40-9:00 PM 14.PUBLIC HEARING AND PROPOSITION 218 HEARING: Adoption of Budget Amendment Ordinance for Fiscal Year 2016, Including Adoption of Operating and Capital Budgets and Municipal Fee Schedule; Adoption of Five Resolutions, Including: 1) Adopting a Dark Fiber Rate Increase of 2.7 Percent and Amending Utility Rate Schedules EDF-1 and EDF-2; 2) Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.7 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2016; 3) Adopting a Wastewater Collection Fee Increase of 9.0 Percent and Amending Utility Rate Schedules S-1, S-2, S-6, and S-7; 4) Adopting Residential Refuse Rate Increases Ranging Between 9.0 Percent and 19.0 Percent, and Amending Utility Rules and Regulations 2, 3, 11, and 24; 5) Amending the Salary Schedule Attached to the 2014-2016 Approval of a Three-year Contract With Municipal Resource Group (MRG) for Council Appointed Officers Evaluations for an Amount not toExceed $123,000 12A. At-Placed Memo 4 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Compensation Plan for Management and Professional Employees, as Amended by Resolution No. 9053 to Add One New Position and Change the Title of Two Positions; Amending the 2013-15 Memorandum of Agreement Service Employees International Union (SEIU), Adopted by Resolution No. 9398 to add One Position and Correct the Salary of One Position; and Amending the Terms for the Utility Management Professional Association, as Amended by Resolution Nos. 9492 & 9503 to Correct the Salary for One Position and Add Two New Positions; and Refer to the Finance Committee a Discussion of Changes to the Public Art Ordinance to Simplify the Calculation of the Public Art Fee and a Discussion of Usage and Replacement of Pool Vehicles (Continued From June 8, 2015) 9:00-9:15 PM 15.PUBLIC HEARING AND PROPOSITION 218 HEARING: Staff Recommendation that the City Council Adopt a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) to Increase Average Water Rates by 8 Percent (Continued From June 8, 2015) 9:15-9:25 PM 16.PUBLIC HEARING: Adoption of an Ordinance of the Council of the City of Palo Alto Extending for 22 Months and 15 Days Urgency Interim Ordinance 5325, Placing a Temporary Moratorium on the Conversion of Ground Floor Retail and “Retail Like” Uses to Other Uses Citywide; Exempt from the California Environmental Quality Act Under Section 15061 and 15308 9:25-11:00 PM 17.PUBLIC HEARING: Approval of a Mitigated Negative Declaration and a Site & Design Review and Design Enhancement Exception Application for a Three Story Mixed-Use Building on a 27,000 Square Foot Site Zoned Service Commercial (CS) At 441 Page Mill Road. The Project Has Been Revised to Contain 19,093 Square Feet of Commercial Space, 91 Off-Street Parking Spaces, and 16 Apartment Units, Including Five Below Market Rate Units, and Includes a Request for Three “Off Menu” Concessions Under Palo Alto Municipal Code Section 18.15 and the State Density Bonus Law and Based on a Revised Economic Analysis Environmental Assessment: A Mitigated Negative Declaration was Prepared 5 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 6 June 15, 2015 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Standing Committee Meetings Finance Committee Meeting June 16, 2015 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report City of Palo Alto's Energy Risk Management Report for the Second Quarter, Fiscal Year 2015 Update to Council Regarding City's Business Registry Public Letters to Council Set 1 City of Palo Alto (ID # 5841) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Presentation of Donation Check from the Palo Alto Library Foundation Title: Presentation of a Donation Check from the Palo Alto Library Foundation to the Palo Alto City Library From: City Manager Lead Department: Library Susie Thom, President of the Palo Alto Library Foundation (PALF), will present a check for at least $300,000 to the City to be dedicated to the City’s libraries. This will be the final gift before the Foundation ceases operation on June 30, 2015. PALF exceeded their $4 million goal for the Launch Our Libraries fundraising campaign to provide furnishings, fixtures, and equipment for the Measure N bond projects. Attachments: Attachment1.a: Attachment A: 03/17/2015 PALF Letter (PDF) City of Palo Alto (ID # 5802) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Utilities Department Energy Efficiency Evaluation Support Contracts Title: Approve and Authorize the City Manager or Designee to Execute the Following Energy Efficiency Evaluation Support Contracts in a Combined Not to Exceed Amount of $250,000 per Year for a Three-Year Term With an Option to Extend Either or Both Contracts for an Additional Two Years: (A) TRC Engineers, Inc. in an Amount Not to Exceed $210,000 per Year; and (B) Energy & Resource Solutions, Inc. in an Amount Not to Exceed $40,000 per Year From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager, or his designee, to execute the attached contracts in a total not-to-exceed amount of $250,000 per year for the initial three-year term through June 30, 2018 with the option, at the City’s sole discretion, to extend the contracts for an additional two years for up to a total term of five years: A. TRC Engineers, Inc. (TRC) Contract C16157872 in a not-to-exceed amount of $210,000 per year for Evaluation, Measurement & Verification (EM&V) services related to the City of Palo Alto Utilities’ (CPAU) energy efficiency (EE), demand response (DR), and emerging technologies pilot programs. The total not-to-exceed amount for this TRC Contract, if the term is extended for the maximum five years, is $1,050,000; and B. Energy & Resource Solutions, Inc. (ERS) Contract C16157873 in a not-to-exceed amount of $40,000 per year for technical advisory services related to energy efficiency programs. The total not-to-exceed amount for this ERS Contract, if the term is extended for the maximum five years, is $200,000. Executive Summary Since 2008, CPAU has contracted with consultants to provide independent evaluation, measurement and verification (EM&V) of energy and demand savings achieved through its EE and DR programs. As mandated by state law, annual EM&V results are included in CPAU’s City of Palo Alto Page 2 regulatory submittals to the California Energy Commission (CEC). The current EM&V contract with Cadmus Group will expire as of August 31, 2015. Also, since 2011, CPAU has contracted with ERS to provide technical advisory services, such as commercial energy audits and validation of energy savings calculations, on an as-needed basis. The current contract with ERS will expire as of June 30, 2015. To ensure ongoing EM&V and adequate technical support of CPAU’s EE and DR programs, in January 2015 staff issued a Request for Proposals (RFP) for EM&V services (Category 1) and Technical Advisory Services (Category 2). Staff received seven proposals in Category 1 and nine proposals in Category 2. After evaluating the proposals and conducting in-person interviews with the top three ranked responders in each category, staff recommends that the City enter into contract with TRC as the EM&V consultant and ERS as the Technical Advisory Services consultant with the term of each contract to extend through June 30, 2018, with the option, at the City’s discretion, to extend either contract or both for an additional two years for up to a total of five years. The recommended contract with TRC has an annual not-to-exceed amount of $210,000, and the recommended contract with ERS has an annual not-to-exceed amount of $40,000. Background State law (AB 2021; 2006) requires each publicly owned electric utility to submit on an annual basis the results of an independent evaluation that measures and verifies EE savings and reduction in energy demand achieved by its EE and DR programs. To meet this mandate, CPAU has contracted with consultants since 2008 to provide EM&V services. In addition to satisfying the regulatory requirement, CPAU’s goals for EM&V are to provide: Useful recommendations and feedback to improve CPAU’s EE programs; Assessment of EE program effectiveness; Assessment of the quality of the program data for impact evaluation purposes; and Increased level of confidence in program results. In addition to EE programs, CPAU engages in pilot projects with energy savings and demand reduction potential. CPAU launched the Program for Emerging Technologies (PET) in 2012 in order to partner with individuals and companies seeking to test and evaluate innovative emerging technology’s ease of deployment, cost effectiveness and user feedback. Pilot projects under PET are typically short-term projects (i.e. less than one year) and may or may not result in energy savings. Concurrently, CPAU is implementing an advanced meter pilot program for several hundred residential customers and will be evaluating this pilot program based on the change in the energy and water consumption of the participating pilot households, as well as customer satisfaction. Staff will seek EM&V support for these pilot projects on an as needed basis. Besides EM&V services, CPAU has, in the past four years, retained a Technical Advisory Services consultant to assist with reviewing energy savings estimates from third-party contractors and City of Palo Alto Page 3 custom rebate applications, and to provide technical advice to staff related to EE technologies and efficiency standards. The Technical Advisory Service consultant supplements staff resources on an as needed basis and also provides valuable input when staff is evaluating new EE technologies for inclusion in the CPAU’s EE program portfolio. Discussion In January 2015, staff issued an RFP to solicit services under two work categories—Category 1 for EE EM&V services and Category 2 for Technical Advisory Services. The RFP included instructions requiring RFP responders to submit a separate proposal for each category. Staff received seven proposals for Category 1 work and nine proposals for Category 2 work. Proposals received for the EM&V and Technical Advisory Services were evaluated based on multiple criteria: 1. Quality and completeness of proposal; 2. Quality, performance and effectiveness of the proposed solution, goods and/or services; 3. Proposer’s experience delivering similar programs; 4. Cost to the City; 5. Proposer’s financial stability; 6. Proposer’s location; 7. Proposer’s prior record of performance with City or others; and 8. Proposer’s exceptions taken to the City’s standard agreement for professional services. Based on staff’s evaluation of the submitted proposals, staff recommends contracting with TRC as the EM&V consultant, with a proposed annual not-to-exceed contract amount of $210,000, of which $140,000 is annually budgeted for the EM&V of CPAU’s EE programs. The remaining annually budgeted amount is for evaluation of pilot projects/programs and an optional scope of technical advisory services. The proposed contract term with TRC is three years through June 30, 2018, with an option to extend for an additional two years, at the City’s discretion. Furthermore, staff recommends contracting with ERS as the Technical Advisory Services consultant, with a proposed annual not-to-exceed contract amount of $40,000. The proposed contract term with ERS is three years through June 30, 2018, with an option to extend for an additional two years, at the City’s discretion. Resource Impact The funds to support these contracts are available within the Utilities Electric and Gas demand side management budgets, subject to the approval of the FY 2016 budget and subsequent year budgets. Policy Implications The proposed contracts support the achievement of the Council-approved Ten-year Energy Efficiency Goals for 2014 through 2023 (Staff Report # 3358). City of Palo Alto Page 4 Environmental Review The provision of these services does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under the California Environmental Quality Act is required. Attachments: Attachment A: TRC Engineering, Inc. - Contract C16157872 (PDF) Attachment B: Energy & Resource Solution, INC. - Contract C16157873 (PDF) Professional Services Rev Feb. 2014 1 CITY OF PALO ALTO CONTRACT NO. C16157872 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND TRC ENGINEERS, INC. FOR PROFESSIONAL SERVICES PREAMBLE This Professional Services Agreement No. C16157872 (“Agreement”) is entered into on the day of June, 2015 (“Effective Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation, with its primary business office located at 250 Hamilton Avenue, Palo Alto, CA 94301 (“CITY”), and TRC Engineers, Inc., a California corporation, with its primary business office located at 436 14th Street, Suite 1020, Oakland, CA 94612 ("CONSULTANT"). CONSULTANT and CITY are referred to in this Agreement individually as a “Party”, and (collectively as the “Parties or the “Parties to this Agreement”. RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to evaluate energy efficiency and demand response programs and emerging technologies pilot programs (“Project”) on an annual basis and desires to engage a consultant to provide independent evaluation, measurement, and verification services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and currently has, and will maintain, all required licenses and/or certifications to provide the Services during the Term of this Agreement. C. CITY in reliance on CONSULTANT’s representations, CITY desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree as follows: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be for a term of thirty-six (36) months beginning July 1, 2015 through June 30, 2018, (the “Term”) unless terminated earlier by either Party pursuant to Section 19 of this Agreement. The Parties further agree that CITY, at its sole discretion, has the option to extend the provisions of this Agreement for up to an additional twenty-four (24) months beyond the original Term to allow CONSULTANT to continue to provide the Services as fully described in Exhibit “A”. The authority to exercise the option to extend this Agreement beyond the initial three year Term is hereby delegated to the City DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 2 Manager and shall be confirmed by written notice delivered to CONSULTANT by the City Manager at least 30 days prior to the end of the initial Term of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance of the Services shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Two Hundred and Ten Thousand Dollars ($210,000) per year. No additional services are contemplated as part of this Agreement. SECTION 5. INVOICES. In order to request payment for Services provided, or reimbursable expenses incurred, CONSULTANT shall submit monthly invoices to the CITY describing the Services performed and the applicable charges (including an identification of personnel who performed the Services, hours worked, and hourly rates), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the CITY’s Project Manager at the address specified in Section 13 below. CITY will generally process and pay invoices within thirty (30) days of receipt of such invoice(s). SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s direct supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that such personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain, during the term of this Agreement, all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the Services to be furnished by CONSULTANT under this Agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all required permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 3 Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. (This section does not apply to this Agreement). SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement, CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor, and not be an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The Parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement, or the performance of any of CONSULTANT’s obligations under this Agreement, without the prior written consent of the City Manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the City Manager will be void. SECTION 12. SUBCONTRACTING. Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are as set forth in Exhibit “C-1”, attached and incorporated into to this Agreement. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the Project Manager. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Jennifer Barnes as the Principal Investigator to have supervisory responsibility for the performance, progress, and execution of the Services and Marian Goebes as Project Manager to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the consultant’s Principle Investigator, Project Manager, project coordinator, or any other key personnel for any reason, the appointment of a substitute Principle Investigator and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s Project Manager. CONSULTANT, at CITY’s request, shall promptly remove any personnel which CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely provide the Services, completion of the Project or a threat to the safety of persons or property. The CITY’s Project Manager is Christine Tam or her designee, Utilities Department, Marketing DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 4 Services Division, 250 Hamilton Ave, Palo Alto, CA 94303. The Project Manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate Project Manager from time to time and will inform CONSULTANT of any such change. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work products, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of CONSULTANT’s work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its subcontractors, if any, shall make any of such materials available to any individual or organization which is not a Party to this Agreement without the prior written approval of the City Manager or his/her designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney’s fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s Services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either Party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 5 SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, all of the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required under this Agreement shall be provided through insurance carriers with AM Best’s Key Rating Guide ratings of A-VII or higher and which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 6 19.3. Upon such suspension or termination, CONSULTANT shall immediately deliver to the City Manager any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its subcontractors, if any, or given to CONSULTANT or its subcontractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of the Services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the Project Director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of Services under this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 7 as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required, and agrees to file, the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at the CITY’s Purchasing Department and are hereby incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste, and third, recycling or composting waste. In particular, Consultant shall comply with the following zero waste requirements: 23.1 All printed materials provided by CONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks. 23.2 Goods purchased by Consultant on behalf of the CITY shall be purchased in accordance with the CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office. 23.3 Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the CITY, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the CITY of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 8 SECTION 25. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION 25.1. In its performance of Services under this Agreement, CONSULTANT and its representatives may acquire and otherwise gain access to Confidential Information, as defined in Exhibit “E”, which is exempt from public disclosure under the California Public Records Act, Cal. Gov. Code section 6250 et seq. CONSULTANT agrees to protect such Confidential Information from disclosure to any third parties, in accordance with the terms and conditions set forth in Exhibit “E” attached to this Agreement. SECTION 26. MISCELLANEOUS PROVISIONS. 26.1. This Agreement will be governed by the laws of the State of California. 26.2. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 26.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 26.4. This document represents the entire and integrated agreement between the Parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the Parties to this Agreement. 26.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the Parties. 26.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 26.7. All of the provisions of this Agreement, including but not limited to, the Preamble and Recitals set forth above, are fully incorporated into this Agreement and are binding on the Parties to this Agreement. Also, each of the exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 26.8 If, pursuant to this Agreement, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 9 procedures to protect that Personal Information, and shall inform CITY immediately upon learning that there has been a breach in such security procedures or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without CITY’s express written consent. 26.9 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 26.10 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement IN WITNESS WHEREOF, the Parties to this Agreement have, by their duly authorized representatives, executed this Agreement on the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: __________________________ Deputy City Attorney TRC ENGINEERS, INC. By:___________________________ Name:_________________________ Title: Vice President, Consulting Services Attachments, each of which is incorporated into this Agreement by this reference: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: HOURLY RATE SCHEDULE EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E”: CONFIDENTIALITY AGREEMENT EXHIBIT “F” IDENTITY INFORMATION PROTECTION DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Catherine A. Chappell Professional Services Rev Feb. 2014 10 EXHIBIT “A” SCOPE OF SERVICES During each fiscal year of the term of this Agreement, CONSULTANT will provide an annual independent evaluation, measurement and verification (EM&V) services for the City of Palo Alto Utilities (“CITY” or “CPAU”). All of the work described in this Exhibit A shall be considered to be the Services to be provided by CONSULTANT under this Agreement and shall include all of the following: Impact and process evaluation of select CITY customer’s energy efficiency (EE) and demand response (DR) programs; and Evaluation of CITY’s emerging technologies pilot programs or projects that deliver energy efficiency savings, on an as-needed basis. These pilots programs or projects shall include, but are not limited to, the projects under the Program for Emerging Technology, Customer Connect Advanced Meter Pilot Program, and the Viconics Building Management System Pilot Program. The following paragraphs provide an outline of the EM&V tasks for the impact and process evaluations of the EE programs referred to above. For EM&V of pilot programs or projects, CONSULTANT will work with the CPAU staff to determine the work tasks and deliverables prior to initiating the evaluation activities when requested by the CITY. Task 1: Annual Planning Meeting At CITY’s earliest convenience following the Effective Date of this Agreement, CONSULTANT will schedule a project kick-off (planning) meeting. After the first year, subsequent planning meetings will be scheduled annually at the CPAU Project Manager’s direction. The meetings will be held at CPAU offices in Palo Alto. Key CONSULTANT staff will attend the meetings in person; additional staff will join by teleconference, as needed. CONSULTANT will develop a draft agenda and slide deck (Planning Meeting Materials) for each meeting and submit it to the CPAU Project Manager for review and comment prior to the meeting. As part of each planning meeting, CONSULTANT and CPAU Project Manager (and other CPAU staff, as available) will conduct a prioritization exercise with the objective of allocating evaluation resources to areas to determine the EE program(s) where EM&V adds the most value while minimizing cost to CPAU. CONSULTANT and CPAU staff will discuss high priority areas, as such areas are defined by the CITY which need attention, evaluation tasks which could be streamlined, and review of new programs and available data. CONSULTANT will include factors such as program savings claims, risk and uncertainties surrounding savings parameters, past evaluation issues, etc. in the prioritization exercise. In addition, CONSULTANT and CPAU will discuss and determine which EE programs be selected for process evaluation for potential improvement. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 11 CONSULTANT will summarize the planning meeting discussions, agreements, and action items in a written memo (Planning Meeting Summary Memo) to be delivered to CITY. The memo will be delivered to the CPAU Project Manager within five days after each planning meeting for review, comment, and approval. Deliverables: Due Dates: 1.1 Planning Meeting Materials (agenda and slide deck) 1.2 Planning Meeting Summary Memo 1.1 Three days prior to each planning meeting (annually) 1.2 Within five days after each planning meeting Task 2: Design a Measurement and Evaluation Action Plan CONSULTANT will develop an action plan for completing the evaluations annually (M&V Action Plan). The M&V Action Plan will be informed by the planning meeting discussions and prioritization, and an initial review of program information. For impact evaluation, the M&V Action Plan will include, but not limited to, the following subtasks: • Program-specific evaluation objectives and key issues to be addressed; • Impact evaluation methodology; • Verification of measures implementation; • Data source and data collection plan; • Data analysis approach; • Review of program documents and interviews; • Billing analyses, engineering analysis and modeling; • Risk assessment and management plan; • Conduct customer surveys; and • Work plan schedules. For process evaluation, the M&V Action Plan will include, but not limited to, the following subtasks: • Identify desired goals and objectives of process evaluation for selected EE program(s); • Conduct interviews with CITY’s program staff to identify data resources and potential process improvements; • Conduct customer surveys; • Provide insights to EE program administrator; and • Recommend possible EE program(s) process enhancements. CONSULTANT will deliver the draft M&V Action Plan to the CPAU Program Manager for review and comment as set forth below. CONSULTANT will finalize the M&V Action Plan based on feedback from CPAU. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 12 Deliverables: Due Dates: 2.1 Draft M&V Action Plan 2.2 Final M&V Action Plan 2.1 Within three weeks of the planning meeting (annually) 2.2 Within five business days of receipt of the final comments from CPAU Task 3: Implement the M&V Action Plan CONSULTANT will execute the M&V Action Plan developed in Task 2 and approved by the CPAU Project Manager. CONSULTANT will prepare a written Sampling Memo describing the sampling plan for each evaluated program. CONSULTANT will design each program’s sampling plan to meet the desired level of precision as set out in the M&V Action Plan developed in Task 2. CONSULTANT will deliver a draft Sampling Memo three weeks prior to the start of data collection activities. CONSULTANT will finalize the draft Sampling Memo by incorporating the CPAU Program Manager’s comments. CONSULTANT will review each measure’s savings algorithm to verify the following: 1. Baseline efficiency levels are consistent with the prevailing building and appliance efficiency standards (Title 20 and Title 24) and/or industry standard practices; 2. Efficiency levels are consistent with program requirements; 3. Hours of use and run time values are consistent with ASHRAE or other established references; 4. Include appropriate adjustments for climate zone and interactivity; and 5. Standard engineering practices have been followed. 6. Industrial standard modeling software has been used with appropriate inputs and reasonable assumptions, if applicable. If required in the M&V Plan, CONSULTANT will develop interview and survey guides.. The guides will be delivered to the CPAU Project Manager at least three weeks prior to the scheduled start of the data collection activity. CONSULTANT will finalize each guide based on the CPAU Project Manager’s feedback. CONSULTANT will send notification letters (Advance Letters) to targeted participants prior to the start of each interview, survey, and site visit effort, as required in the M&V Action Plan. With the CPAU Project Manager’s approval, CONSULTANT will send the Advance Letters on CPAU letterhead with prior approval by the CPAU. Draft Advance Letters will be delivered to the CPAU Project Manager for review and approval at least three weeks prior to the start of the data collection activity. If computer-assisted interviews (CATI) are conducted, CONSULTANT will conduct survey pretests with five to ten respondents. Findings from each pretest, as well as recommendations for alternate question wording, will be delivered in a Pretest Memo for the CPAU Project Manager’s review and approval. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 13 As part of Task 3, CONSULTANT will: Summarize and verify the types of measures installed and savings contribution from each measure; Ensure complete and accurate data collection as defined in each program’s sampling plan and will identify any errors, gaps and inconsistency in data; Verify and calculate energy savings, realization rates and net to gross ratio as indicated in the M&V Action Plan; Ensure appropriate standard industrial practice and modeling software are used in engineering review and calculations; and Provide results of M&V of EE programs and recommendations for program enhancements. Deliverables: Due Dates: 3.1 Sampling memo(s) 3.2 Draft interview and/or survey guides, as applicable 3.3 Draft advance letters, as applicable 3.4 Survey pretest memo, as applicable 3.1 September 11, 2015 (and annually) 3.2 Three weeks prior to the scheduled start of data collection 3.3 Two weeks prior to the scheduled start of data collection 3.4 Within three days of survey pretests Task 4: Prepare EM&V Report CONSULTANT will prepare a report of the evaluation findings (EM&V Report) summarizing the findings of the evaluation and recommendations to enhance EE programs’ effectiveness and processes. Each annual EM&V Report will include the following sections: An executive summary will present an overview of the most relevant findings; A background and/or introduction that includes the evaluation objectives; A detailed methodology of the evaluation approaches used; Findings by program including: o A description of the program; o Gross and net evaluation results, as applicable; o An estimate of the lifecycle savings; o A table identifying evaluation results compared to program goals, budgets and expenditures; o A qualitative description of the program evaluation results, including achievements and challenges; Portfolio-level summary; Recommendations that are specific and actionable and tied directly to the evaluation findings; and Appendices that provide supporting details such as field data collection forms, survey and interview guides, and additional tables and graphics, if needed. CONSULTANT will ensure that each EM&V Report meets the reporting requirements in the CEC’s Framework of Evaluation Criteria. Each EM&V Report will include the CEC’s Example DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 14 Checklist for POU EM&V Reports to fully demonstration that it meets the criteria. CONSULTANT will deliver a draft EM&V Report to the CPAU Project Manager per the schedule established in each M&V Action Plan. Shortly after CONSULTANT delivers each draft EM&V Report, CONSULTANT will present the evaluation findings CPAU and implementation contractor staff; the attendees and schedule will be determined by the CPAU Project Manager. CONSULTANT will prepare a final EM&V Report by incorporating the comments received from the CPAU Project Manager. Deliverables: Due Dates: 4.1 Draft EM&V Report 4.2 Final EM&V Report 4.1 February 29, 2016 (and annually) 4.2 March 18, 2016 (and annually) OPTIONAL (Scope) Technical Advisory/Evaluation Services Contingency If requested by CPAU Project Manager, CONSULTANT will provide the following technical advisory services: Task 1: Energy Savings Calculation Review On an as requested basis by CPAU, CONSULTANT will review energy savings estimates submitted by program participants and 3rd party EE program vendors to make a determination as to whether the energy savings estimates are reasonable and credible. The review may cover one or more of the following supporting documentation: engineering calculations such as spreadsheet models and building energy simulation models, technical workpapers, past evaluation studies supporting the estimates, and project installation and verification reports. Based on this review, CONSULTANT will submit a memo that provides CONSULTANT’s assessment of the reasonableness of the calculation methodology and the uncertainties, if any, of the savings estimates. Where appropriate, CONSULTANT may provide recommendations for corrections and/or revised energy savings estimates. Deliverable Due Date Memo summarizing technical assessment and recommendations as determined in each Technical Services Work Scope As agreed to in each Technical Services Work Scope Task 2: Rebate Application Review On an as requested basis by CPAU, CONSULTANT will review custom rebate applications, including all supporting documentation, and will provide a memo to CPAU that details DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 15 CONSULTANT’s findings and recommendations. CONSULTANT may recommend that additional supporting documentation or data be provided that substantiates the energy savings estimates, savings persistence, and/or equipment eligibility. Where a custom measure’s estimated savings are dependent upon a few key operating parameters, CONSULTANT may recommend that the customer implement a measurement and verification (M&V) plan. Should a third-party M&V be warranted and/or required by CPAU, CONSULTANT may implement the M&V plan as an additionally assigned task. CONSULTANT will submit a written memo documenting Consultant’s assessment of the custom rebate application. The memo will also identify any potential technical or other project- related issues that should be addressed by the customer before the rebate is approved. Deliverable Due Date Memo summarizing the results of custom rebate application assessment and recommendations As agreed to in each Technical Services work scope Task 3: Business Energy Audit On an as requested basis by CPAU, CONSULTANT shall conduct energy audits for business customers. The audits will be performed according to ASHRAE’s definition of a level 1, 2, or 3 audit based on CPAU’s specifications on the rigor of the audit. For facility’s less than 50,000 square feet, CONSULTANT will provide an Energy Performance Report. Such report is equivalent to a hybrid ASHRAE level 1/level 2 audit and includes a benchmarking analysis that helps facility operators to better understand their operational performance and overall energy savings potential. CONSULTANT will provide an energy audit report that includes annual energy and cost savings potential as well as other non-energy benefits for each recommended energy conservation measure. Deliverable Due Date An energy audit report as specified by the ASHRAE’s audit level As agreed to in each Technical Services Work Scope Task 4: Technical Advice to CPAU Staff On an as requested basis by CPAU, CONSULTANT will provide Technical Advisory Services as directed by the CPAU Project Manager or designee. When technical services are requested by CPAU staff, before commencement of work, CONSULTANT will confirm the scope of the request in an email (Technical Services Work Scope) by providing: A description of the services to be provided DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 16 A description of the deliverable(s) The budget for the work A deliverable due date The team members who will work on the project Deliverable Due Date Memo summarizing technical assessment and recommendations as determined in each Technical Services Work Scope As agreed to in each Technical Services Work Scope DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 17 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the month specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the Term of this Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Below is our estimated schedule of performance: Task Activity/Deliverable Date Work commences July 1, 2015 Task 1: Annual Planning Meeting Conduct planning meeting July 10, 2015 Task 2: M&V Action Plan Deliver M&V Action Plan Draft: July 22, 2015 Final: August 14, 2015 Task 3: Implement M&V Action Plan Deliver sampling memo August 28, 2015 Conduct data collection September 4, 2015 to January 29, 2016 Data analysis February 1, 2016 to February 19, 2016 Task 4: Prepare EM&V Report Report development February 15, 2016 to February 26, 2016 Deliver EM&V Report Deliver draft report: February 29, 2016 CPAU comments back: March 11, 2016 Deliver final report: March 18, 2016 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 18 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for the Services performed in accordance with the terms and conditions of this Agreement, and as set forth in this Exhibit C. Compensation shall be calculated based on the hourly rate schedule attached as Exhibit C-1 up to the not-to-exceed budget amount for each task set forth below. The compensation to be paid to CONSULTANT under this Agreement for all Services described in Exhibit “A” (“Scope of Services”) and reimbursable expenses shall not exceed $210,000.00 per fiscal year (July 1 through June 30 the year after) over the 36-month contract period. CONSULTANT agrees to complete all Scope of Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. A detailed breakdown of CONSULTANT’s proposed budget, by Task, is provided below. ANNUAL CONSULTANT COMPENSATION BY TASK EM&V Task Cost (Not-To-Exceed) for energy efficiency (EE) and demand response (DR) Programs Task 1 – Project Kick-off or Annual Planning Meeting $8,604.00 Task 2 – M&V Action Plan for EE and DR Programs $12,978.00 Task 3 – Implement M&V Action Plan for EE and DR Programs $92,978.00 Task 4 – Final EM&V Report for all programs and projects $25,440.00 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 19 Sub-Total Annual Budget for EE and DR Evaluation $140,000 CONSULTANT built the proposed budget, shown above, using the all-inclusive hourly rates provided above. The table provides subtotal cost by task as well as the total cost. The costs in this table represent at not-to-exceed amounts, and CONSULTANT shall receive written approval in advance from the CITY’s Project Manager prior to moving funds between any of these tasks. EM&V Annual (Not-To-Exceed) Budget for Emerging Technologies Pilot Projects = $45,000. Optional (Scope): Technical Advisory/Evaluation Contingency Annual (Not-To-Exceed) Budget = $25,000. Annual combined (Not-To-Exceed) compensation for EE Evaluation, Technical Advisory Services and Emerging Technologies Pilot Project Evaluation = $210,000. Total Compensation NOT-TO-EXCEED AMOUNT for the initial three year Term of the Agreement = $630,000. If the CITY elects, at its sole discretion, to extend the Term of the Agreement for two additional years beyond the initial Term, the Total Compensation NOT-TO-EXCEED AMOUNT for the five year Term of the Agreement = $1,050,000. Labor Hours Task 1 Task 2 Task 3 Task 4 Labor Category Billing Rate Annual Planning Meeting M&V Action Plan Implement M&V Action Plan Final EM&V Report Total Hours Assigned Evaluation Staff Associate Vice President $215 8 16 60 24 108 Barnes Eningeering Director $200 6 12 35 53 Snaith Program/Engineering Manager $175 38 38 Roberts Associate Technical Director $164 24 32 110 40 206 Staller, Goebes Engineer IV $150 0 Engineer III $130 80 80 Green Project Manager III $143 40 20 60 Berkland Engineer II $120 80 80 McCabe, Rosado Project Manager I/Engineer I $121 8 70 60 138 Dawe Technical Analyst/Level II Technician $90 12 12 Assistant/Level 1 Technician $75 0 Klos Energy $105 6 18 125 24 173 Klos Total Hours/Task 52 78 638 180 948 Labor Costs (Dollars) Task 1 Task 2 Task 3 Task 4 Total $8,454 $12,978 $91,905 $25,440 $138,777 Other Direct Costs (Dollars) Task 1 Task 2 Task 3 Task 4 Total Travel $150 $873 $1,023 Equipment Lease Fee $200 $200 Other Direct Costs $0 $150 $0 $1,073 $0 $1,223 Total Costs (Dollars) Task 1 Task 2 Task 3 Task 4 Total $8,604.00 $12,978.00 $92,978.00 $25,440.00 $140,000.00 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 20 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included as a part of the compensation and the scope of payment for Services provided under this Agreement and are not to be included in reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel-related expenses, including transportation and meals, will be reimbursed at actual cost and shall be subject to, and limited by, the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. C. Equipment leasing costs are as specified in the table below. All requests for payment of expenses shall be accompanied by appropriate backup information and shall be consistent with the provisions of Section 5 INVOICES of this Agreement. Any expense anticipated to be more than $200 shall be approved in advance and in writing by the CITY’s Project Manager. Equipment Leasing Equipment Type Monthly Cost HOBO U12‐12 Data Logger Temp RH Light Ext. $8 HOBO UA‐002‐64 $4 HOBO U23 Pro v2 Ext. Logger + Solar Radiation Shield $15 HOBO Energy Logger H22‐001 $18 HOBO Contact Closure Smart Sensor S‐UCD‐M006 $4 HOBO Pendant Temp/Light Logger $3 HOBO Current Sensor CTV‐A$6 ELITEpro SP Power Logger $64 ELITEpro CT Clamp 50A CTSCS0050U $4 SMARTlogger TOU $5 CR1000 Data Logger $73 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 21 EXHIBIT “C-1” HOURLY RATE SCHEDULE CONSULTANT’s hourly compensation rates are based on staff title, roles and responsibilities rounded to the nearest whole dollar amount. Staff Title Roles/Responsibilities Hourly Rates Associate Vice President: Jennifer Barnes, Paul David, Catherine Chappell Project Director $215 Engineering Director: Colman Snaith, Engineering Director $200 Program/Engineering Managers: Theobald, Luedtke, Roberts, Mangalekar Project Manager, Process Evaluation, Interviews, and Surveys $175 Associate Technical Director: Staller, Goebes Process Evaluation, Interviews, Surveys, Building Simulation Modeling $164 Project Manager III: Berkland Interviews, Surveys, Data Synthesis and Analysis $143 Engineer III: Green, Schuyler, Ma Engineering Analysis and Field Data Collection $130 Engineer II: McCabe, Rosado, Jadhav, Maghdouri Engineering Analysis and Field Data Collection $120 Project Manager I/Engineer I: Dawe Process Evaluation, Field Data Collection $121 Technical Analyst/Level II Technician: Whitford, Flores Technical Support $90 Klos Energy Principal: Mary Klos (TRC Subcontractor) Demand Response Lead, Statistics, Sampling, and Net-to-Gross $105 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 22 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THIS AGREEMENT, OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY INSURANCE COMPANIES WITH AM BEST’S KEY RATING OF A- VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUI RED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURREN CE AGGREGAT E YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 23 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 24 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 25 CERTIFICATE OF LIABILITY INSURANCE DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 26 EXHIBIT “E” CONFIDENTIALITY AGREEMENT 1. PURPOSE 1.1 In its performance of Services under this Agreement, CONSULTANT and its directors, officers, partners, managers, members, employees, advisors, agents, sub-contractors and other representatives of CONSULTANT and their subsidiaries and affiliates, including, without limitation, attorneys, accountants, consultants, and financial advisors (collectively, the “Representatives”) may acquire and otherwise gain access to Confidential Information, as defined in Section 2 of this Exhibit “J”, which is exempt from public disclosure under the California Public Records Act, Cal. Gov. Code section 6250 et seq. 1.2 In accordance with the terms and conditions of this Agreement, CONSULTANT agrees to take reasonable precautions to ensure that Confidential Information of CITY, as defined in this Exhibit, is safeguarded against disclosure to unauthorized employees or third parties. 1.3 CITY would not share or disclose any Confidential Information to CONSULTANT but for the legal protections against unauthorized disclosures intended to be afforded by California law and this Agreement, and is relying on this Agreement in disclosing such Confidential Information to CONSULTANT. 2. CONFIDENTIAL INFORMATION, DEFINED 2.1 “Confidential Information” means any and all information which is of a non- public, proprietary or confidential nature, in any form or medium, written or oral, (whether prepared by the CITY, its employees, or agents, and irrespective of the form or means of communication and whether it is labeled or otherwise identified as confidential) that is furnished to CONSULTANT by the CITY, including, without limitation, individually identifiable utilities customer information and utility infrastructure data. 2.2 Exceptions. “Confidential Information” shall exclude (and the CONSULTANT shall not be under any obligation to maintain in confidence) any information (or any portion thereof) disclosed to CONSULTANT by CITY to the extent that such information: (a) is in the public domain at the time of disclosure; or (b) at the time of or following disclosure, becomes generally known or available through no act or omission on the part of CITY; or (c) is known, or becomes known, to CONSULTANT from a source other than CITY or its Representatives (as defined herein), provided that disclosure by such source is not in breach of a confidentiality agreement CITY; or DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 27 (d) is independently developed by CONSULTANT without violating any of its obligations under this Agreement or any other agreement between the Parties; or (e) is legally required to be disclosed by judicial or other governmental action; provided, however, that prompt notice of such judicial or other governmental action shall have been first given to CITY, which shall be afforded the opportunity to exhaust all reasonable legal remedies to maintain the Confidential Information in confidence; or (f) is permitted to be disclosed by a formal written agreement executed by and between the Parties. Specific information shall not fall within the exceptions of Sections (a) through (f) above merely because it is embraced by more general information falling within such exceptions. 3. CALIFORNIA PUBLIC RECORDS ACT 3.1 CONSULTANT acknowledges that CITY is a public agency subject to the requirements of the California Constitution, Article 1, Section 3 and California Public Records Act Cal. Gov. Code section 6250 et seq. CONSULTANT acknowledges that CITY may submit to or otherwise provide access to CONSULTANT Confidential Information that CITY or any utility customer of CITY considers to be protected from disclosure pursuant to exemptions granted by applicable California law. 3.2 Whether or not there is a request or demand of any third party not a Party to this Agreement (the “Requestor”) for the production, inspection and/or copying of information designated by CITY as Confidential Information, CONSULTANT shall be solely responsible for taking whatever legal steps CITY deems necessary to protect information deemed by it to be Confidential Information and to prevent release of information to the Requestor (including the release of such information by CONSULTANT). 3.3 Under no circumstances will CONSULTANT be permitted to comply with the Requestor’s demand for disclosure of such Confidential Information that CITY deems confidential and not intended for disclosure to the general public, or otherwise publicly disclose the Confidential Information to any person not authorized by law to receive such information. 4. CONFIDENTIAL INFORMATION DESIGNATION 4.1 As practicable, the Confidential Information shall be marked with the words “Confidential” or “Confidential Material” or with words of similar import. CITY shall instruct CONSULTANT that information of a financial, personal, or proprietary nature being conveyed orally and intended by CITY to be covered by DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 28 the terms of this Agreement, is deemed Confidential Information. To the extent possible, CITY shall endeavor to mark any electronic document intended to be covered by the terms of this Agreement with the words “Confidential” or similar words, or, if that is not possible or would be exceedingly difficult, CITY shall notify CONSULTANT (for example, by covering e-mail transmitting the electronic document) that the electronic document is Confidential Information. 4.2 CITY’s failure, for whatever reason, to mark any material at the time it is produced to CONSULTANT, or to notify it that oral or electronic material is Confidential Information at the time it is provided, shall not take the material out of the coverage of this Agreement for all time, and CONSULTANT shall treat the material as Confidential Information once CITY has notified it that the material is to be covered by this Agreement. 5. DUTY TO KEEP CONFIDENTIAL 5.1 CONSULTANT agrees to maintain as confidential, to the extent permitted or required by applicable law, all Confidential Information furnished or otherwise made available to the CONSULTANT, or its Representatives by CITY. CONSULTANT acknowledges that the Confidential Information is proprietary and a valuable asset of CITY and agrees that CONSULTANT shall take reasonable precautions to ensure that such Confidential Information is safeguarded against disclosure to unauthorized employees, Representatives or third parties. (a) CONSULTANT shall use the Confidential Information solely as permitted by this Agreement and shall not sell Confidential Information or otherwise disclose such Confidential Information under any circumstances and without the prior written consent of CITY. CONSULTANT shall not disclose the Confidential Information, or portions thereof, to any of its Representatives, except to those who need to know such information for the purpose of advising CITY and who agree to the terms of this Agreement. (b) CONSULTANT agrees that any of the Representatives to whom the Confidential Information is disclosed will be informed of the confidential or proprietary nature of such information and of CONSULTANT’s obligations under this Agreement. CONSULTANT is responsible for any use of Confidential Information by any of its Representatives. (c) CONSULTANT shall ensure that: (i) any Representatives with whom CONSULTANT shares such Confidential Information or who acquire knowledge of such Confidential Information from or through CONSULTANT regard and treat such Confidential Information of CITY as strictly confidential and wholly owned by CITY, and DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 29 (ii) CONSULTANT shall not (and CONSULTANT shall ensure that any Representatives with whom CONSULTANT shares such Confidential Information or who acquire knowledge of such Confidential Information from or through CONSULTANT do not) for any reason, in any fashion, either directly or indirectly, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, or otherwise communicate any such Confidential Information to any third party, or misappropriate, reproduce, copy or use any such Confidential Information, in either case, for any purpose other than in accordance with this Agreement. (d) If CONSULTANT or any of its Representatives are requested or required to disclose any Confidential Information by law, regulation, the applicable rules of any national securities exchange or other market or reporting system, oral questions, interrogatories, requests for information or other documents in legal proceedings, subpoena, civil investigative demand or any other similar process, CONSULTANT shall provide CITY with prompt written notice of any such request or requirement so that CITY has an opportunity to seek a protective order via writ of mandate or other appropriate remedy, or waive compliance with the provisions of this Agreement. (e) If CITY waives compliance with the provisions of this Agreement with respect to a specific request or requirement, CONSULTANT and its Representatives shall disclose only that portion of the Confidential Information that is expressly covered by such waiver and which is necessary to disclose in order to comply with such request or requirement. CONSULTANT and its Representatives shall cooperate in a reasonable manner with CITY in attempting to preserve the confidentiality of the Confidential Information. (f) If (in the absence of a waiver by CITY) CONSULTANT has not secured a protective order or other appropriate remedy despite attempting to do so, and CONSULTANT or one of its Representatives is nonetheless then legally compelled to disclose any Confidential Information, CONSULTANT or such Representative may, without liability hereunder, disclose only that portion of the Confidential Information that is necessary to be disclosed. In the event that disclosure is made in accordance with this subsection, CONSULTANT shall exercise, and cause its Representatives to exercise, reasonable efforts to preserve the confidentiality of the Confidential Information, including obtaining reliable assurance at the sole expense of CONSULTANT that confidential treatment shall be accorded any Confidential Information so furnished. 6. NO LIABILITY, RELEASE, OR OBLIGATION DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 30 Except as set forth in any formal written agreement executed by and between the parties, neither CONSULTANT nor any of its Representatives shall be entitled to rely on any statement, promise, agreement or understanding, whether written or oral, or any custom, usage of trade, course of dealing or conduct. In addition, each Party understands and acknowledges that neither CITY nor any of its representatives, employees or agents makes any representation or warranty, express or implied, as to the accuracy or completeness of any Confidential Information, and that neither CITY nor any of its representatives, employees or agents shall have any liability whatsoever to CONSULTANT or to any of its Representatives relating to or resulting from the Confidential Information or any errors therein or omissions therefrom. 7. REMEDIES In recognition that an irreparable injury may result to CITY, if any provision of this Exhibit J is violated, CONSULTANT agrees that upon any breach or threatened breach of any provision of this Exhibit J by CONSULTANT or any of its Representatives, that CITY shall be entitled to seek an injunction or specific performance prohibiting such conduct or any other relief as may be permitted by law. 8. RETURN OF CONFIDENTIAL INFORMATION 8.1 CONSULTANT shall have access to the Confidential Information provided by CITY only during the term of this Agreement, and shall return all Confidential Information provided under this Agreement upon its termination, or at any time upon request of CITY, as described in Section 8.2 of this Exhibit J. 8.2 CITY may at any time request that CONSULTANT promptly return to CITY or destroy any or all documents or other materials containing Confidential Information of CITY, and CONSULTANT shall immediately comply with any such request. Notwithstanding the return or destruction of the Confidential Information as contemplated by this Section 8 of this Exhibit J, the CONSULTANT and its Representatives will continue to be bound by the terms of this Agreement with respect thereto, including all obligations of confidentiality. 9. SURVIVAL CONSULTANT’s obligations of confidentiality and non-circumvention under this Exhibit J shall survive the termination of this Agreement. 10. OWNERSHIP RIGHTS NOT CREATED The transfer of Confidential Information hereunder shall not be construed as granting a license of any kind or any right of ownership in the Confidential Information to CONSULTANT. 11. NO OBLIGATION TO DISCLOSE Nothing in this Section shall obligate CITY to disclose specific Confidential Information to CONSULTANT. Such disclosures shall be at the CITY’s sole discretion. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 31 EXHIBIT “F” IDENTITY INFORMATION PROTECTION Identity Information Protection 1. During the term of this Agreement, the CONSULTANT shall not collect, process or store any Private Information (PI) and Personally Identifiable Information (PII), except the name and address of the customer. 2. During the term of this Agreement, the CONSULTANT shall comply with the CITY’s Information Privacy Policy and the CITY’s Software as a Service Security and Privacy Terms and Conditions. Personal information (PI) is defined as an individual's first name or first initial and last name in combination with any one or more of the following data elements, when either the name or the data elements are not encrypted: (1) Social security number. (2) Driver's license number or California Identification Card number. (3) Account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's financial account, "Personal information" does not include publicly available information that is lawfully made available to the general public from federal, state, or local government records. Personally Identifiable Information (PII), as used in information security, is information that can be used to uniquely identify, contact, or locate a single person or can be used with other sources to uniquely identify a single individual. DocuSign Envelope ID: DE5A1AD9-1ACF-452B-901A-B9FBF531578B Professional Services Rev Feb. 2014 1 CITY OF PALO ALTO CONTRACT NO. C16157873 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND ENERGY & RESOURCE SOLUTIONS, INC. FOR PROFESSIONAL SERVICES PREAMBLE This Professional Services Agreement No. C16157873 (“Agreement”) is entered into on the day of June, 2015 (“Effective Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation, with its primary business office located at 250 Hamilton Avenue, Palo Alto, CA 94301 (“CITY”), and ENERGY & RESOURCE SOLUTIONS, INC. a Massachusetts S corporation, with its primary business office located at 120 Water Street, Suite 350, North Andover, MA 01845 ("CONSULTANT"). CONSULTANT and CITY are referred to in this Agreement individually as a “Party”, and collectively as the “Parties” or the “Parties to this Agreement”. RECITALS The following recitals are a substantive portion of this Agreement. A. This Agreement will become effective on July 1, 2015 between the Parties. The provisions of this Agreement provide that CONSULTANT shall provide technical advisory and evaluation services, as fully described in Exhibit “A”, (the “Services”) in engineering review, technology assessment, energy modeling for buildings, calculation and analysis of third party energy consultants’ energy savings estimates and customer rebate applications submitted under the Commercial Advantage and Business New Construction Programs for commercial and industrial facilities within the CITY, for a term of thirty-six (36) months beginning July 1, 2015 through June 30, 2018. The Parties further agree that, at CITY’s sole discretion, CITY has the option to extend the terms of this Agreement for CONSULTANT to provide such Services for up to an additional twenty-four (24) months beyond the initial term of July 1, 2015 through June 30, 2018, to allow for Consultant to provide additional technical advisory and evaluation services in engineering review, calculations, engineering support and technical advisory services to assess the validity of energy savings estimates submitted by custom and third party energy consultants as such Services are more fully described in Exhibit “A”. B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and currently has, and will maintain, all required licenses and/or certifications to provide the Services during the Term of this Agreement. C. In reliance on CONSULTANT’S representations, CITY desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the Parties agree as follows: DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 2 AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be for thirty-six (36) months beginning July 1, 2015 through June 30, 2018, (the “Term”) unless terminated earlier by either Party pursuant to Section 19 of this Agreement. The Parties further agree that CITY, at its sole discretion, has the option to extend the provisions of this Agreement for up to an additional twenty-four (24) months beyond the original Term to allow CONSULTANT to continue to provide the Services as fully described in Exhibit “A”. The authority to exercise the option to extend this Agreement beyond the initial three year Term is hereby delegated to the City Manager and shall be confirmed by written notice delivered to CONSULTANT by the City Manager at least 30 days prior to the end of the initial Term of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the Term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the Term or the schedule for performance of the Services shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Forty Thousand Dollars ($40,000) per year. No additional services are contemplated as part of this Agreement. SECTION 5. INVOICES. In order to request payment for Services provided, or reimbursable expenses incurred, CONSULTANT shall submit monthly invoices to the CITY describing the Services performed and the applicable charges (including an identification of personnel who performed the Services, hours worked, and hourly rates), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the CITY’s Project Manager at the address specified in Section 13 below. CITY will generally process and pay invoices within thirty (30) days of receipt of such invoice(s). SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT, or under CONSULTANT’s direct supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that such personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 3 subconsultants, if permitted, have and shall maintain, during the term of this Agreement, all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the Services to be furnished by CONSULTANT under this Agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all required permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. (This section does not apply to this Agreement). SECTION 10. INDEPENDENT CONTRACTOR It is understood and agreed that in performing the Services under this Agreement, CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor, and not be an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The Parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement, or the performance of any of CONSULTANT’s obligations under this Agreement, without the prior written consent of the City Manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the City Manager will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the City Manager or his/her designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign David Reynolds DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 4 as the Project Supervisor to have supervisory responsibility for the performance, progress, and execution of the Services to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the Project Supervisor, , or any other key personnel for any reason, the appointment of a substitute Project Supervisor and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s Project Manager. CONSULTANT, at CITY’s request, shall promptly remove any personnel which CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Services or a threat to the safety of persons or property. The CITY’s Project Manager is Christine Tam or her designee, Utilities Department, Marketing Services Division, 250 Hamilton Ave, Palo Alto, CA 94303. The Project Manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate Project Manager from time to time and will inform CONSULTANT of any such change. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work products, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of CONSULTANT’s work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its subcontractors, if any, shall make any of such materials available to any individual or organization which is not a Party to this Agreement without the prior written approval of the City Manager or his/her designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney’s fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 5 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s Services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either Party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain, and maintain in full force and effect during the term of this Agreement, the all of the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required under this Agreement shall be provided through insurance carriers with AM Best’s Key Rating Guide ratings of A-VII or higher and which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated and responsible for the full and total amount of any damage, DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 6 injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall immediately deliver to the City Manager any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its subcontractors, if any, or given to CONSULTANT or its subcontractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of the Services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 7 To CONSULTANT: Attention of the Project Director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of Services under this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required, and agrees to file, the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies, which are available at the CITY’s Purchasing Department and are hereby incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste, and third, recycling or composting waste. In particular, Consultant shall comply with the following zero waste requirements: 23.1. All printed materials provided by CONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 8 23.2. Goods purchased by Consultant on behalf of the CITY shall be purchased in accordance with the CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office. 23.3. Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the CITY, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 25. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION 25.1. In its performance of Services under this Agreement, CONSULTANT and its representatives may acquire and otherwise gain access to Confidential Information, as defined in Exhibit “E”, which is exempt from public disclosure under the California Public Records Act, Cal. Gov. Code section 6250 et seq. CONSULTANT agrees to protect such Confidential Information from disclosure to any third parties, in accordance with the terms and conditions set forth in Exhibit “E” attached to this Agreement. SECTION 26. MISCELLANEOUS PROVISIONS. 26.1. This Agreement will be governed by the laws of the State of California. 26.2. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 26.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 26.4. This document represents the entire and integrated agreement between the Parties and supersedes all prior negotiations, representations, and contracts, either written or oral. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 9 This document may be amended only by a written instrument, which is signed by the Parties to this Agreement. 26.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the Parties. 26.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 26.7. All of the provisions of this Agreement, including but not limited to, the Preamble and Recitals set forth above, are fully incorporated into this Agreement and are binding on the Parties to this Agreement. Also, each of the exhibits referred to in this Agreement, and any addenda, appendices, attachments, and schedules to this Agreement are now, and which, from time to time may be referred to in any duly executed amendment hereto, are by such reference incorporated in this Agreement and will be, deemed to be a part of this Agreement. 26.8. If, pursuant to this Agreement, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform CITY immediately upon learning that there has been a breach in such security procedures or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without CITY’s express written consent. /// /// /// /// /// /// /// DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 10 26.9. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 26.10 This Agreement may be signed in multiple counterparts, which shall, when executed by all the Parties, constitute a single binding agreement IN WITNESS WHEREOF, the Parties to this Agreement have, by their duly authorized representatives, executed this Agreement on the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: __________________________ Deputy City Attorney ENERGY & RESOURCE SOLUTIONS INC. By:___________________________ Name:_________________________ Title:__________________________ Attachments, each of which is incorporated into this Agreement by this reference: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: HOURLY RATE SCHEDULE EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E”: CONFIDENTIALITY AGREEMENT EXHIBIT “F” IDENTITY INFORMATION PROTECTION DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Gary Epstein President Professional Services Rev Feb. 2014 11 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT will provide technical advisory services on an as needed basis, as requested by City of Palo Alto Utilities (“CITY“ or “CPAU”) to perform engineering review, evaluation, analysis, and validation of the energy savings estimates submitted by 3rd party contractors and/or customers in their energy efficiency (EE) rebate applications (the “Services”). These Services include, but are not limited to, the following: Task 1: Energy Savings Calculation Review Task 2: Rebate Application Review Task 3: Business Energy Audits Task 4: Technical Advice to CPAU staff The following paragraphs describe the Technical Advisory Services tasks which set forth the Services to be provided under this Agreement. CONSULTANT will work with CPAU to determine the work tasks and deliverables prior to initiating the review and evaluation activities. Task 1 – Energy Savings Calculation Review CONSULTANT will review energy savings estimates submitted by program participants and 3rd party EE program vendors to make a determination as to whether the energy savings estimates are reasonable and credible. The review may cover one or more of the following supporting documentation: engineering calculations such as spreadsheet models and building energy simulation models, technical workpapers, past evaluation studies supporting the estimates, and project installation and verification reports. Deliverable(s): Based on its review, CONSULTANT will submit a written memo to CITY that provides CONSULTANT’s assessment of the reasonableness of the calculation methodology and the uncertainties, if any, of the savings estimates. Where appropriate, CONSULTANT may provide recommendations for corrections and/or revised energy savings estimates. Task 2 – Rebate Application Review CONSULTANT will review custom rebate applications, including all supporting documentation, and will provide a written memo to CPAU that details CONSULTANT’s findings and recommendations. CONSULTANT may recommend that additional supporting documentation or data be provided that substantiates the energy savings estimates, savings persistence, and/or equipment eligibility. Where a custom measure’s estimated savings are dependent upon a few key operating parameters, CONSULTANT may recommend that the DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 12 customer implement a measurement and verification (M&V) plan. Should a third-party M&V be warranted and/or required by CPAU, CONSULTANT may implement the M&V plan as an additionally assigned task. Deliverable(s): CONSULTANT will submit a written memo documenting CONSULTANT’s assessment of the custom rebate application. The memo will also identify any potential technical or other project- related issues that should be addressed by the customer before the rebate is approved. Task 3 – Business Energy Audit On an as requested basis by CPAU, CONSULTANT shall conduct energy audits for business customers. Such audits will be performed according to ASHRAE’s definition of a level 1, 2, or 3 audit based on CPAU’s specifications on the rigor of the audit. For facility’s less than 50,000 square feet, CONSULTANT will provide an Energy Performance Report. The report is equivalent to a hybrid ASHRAE level 1/level 2 audit and includes a benchmarking analysis that helps facility operators to better understand their operational performance and overall energy savings potential. Deliverable(s): CONSULTANT will provide an energy audit report that includes annual energy and cost savings potential as well as other non-energy benefits for each recommended energy conservation measure. Task 4 – Technical Advice to CPAU Staff On an as-requested basis, CONSULTANT shall provide technical advice and recommendations to CPAU staff for all aspects of energy efficiency program implementation. This may include program cost-effectiveness, program eligibility rules, technology assessment, program net savings assessment, sampling and statistical analysis, and project/measure M&V assistance. CONSULTANT will also support CPAU with the assessment, development, and addition of new program measures. CONSULTANT will document new measures savings consistent with the methodologies prescribed in the California Municipal Utilities Association (CMUA)’s Technical Reference Manual (TRM). Deliverable(s): CONSULTANT will submit a written memo to CPAU summarizing the results of the technical assessment and recommendations. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 13 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each task with the number of days/weeks specified below. The time to complete each task may be increased or decreased by mutual written agreement of the Project Managers for CONSULTANT and the City of Palo Alto Utilities (CPAU) so long as all work is completed within the term of the Agreement. Task 0 – Project Kick-Off Meeting Within 45 days of Effective Date of this Agreement, CONSULTANT will attend a kick-off meeting at CPAU’s offices to discuss process and procedures for delivering services. After the kick-off meeting, CONSULTANT will provide status reports on a monthly basis or as agreed to with CPAU. The deliverable for the kick-off meeting is the establishment of procedures for CONSULTANT to provide technical evaluation and advisory services. Task 1 – Energy Savings Calculation Review CONSULTANT shall provide Task 1 services on an as-needed basis. Each task order assignment will be delivered per the procedures defined in the kick-off meeting and as specified in the task order. The deliverable for this task is a written memo to CPAU providing an assessment of the reasonableness of the calculation methodology and estimated savings. The memo will be delivered within the timeline specified in the task order. In general, savings calculation reviews will take no longer than 1 week to complete, if no site visit is required. Expedited reviews can be accomplished within a single day; however pre-coordination and agreement to expedite between CONSULTANT and CPAU is required. Task 2 – Rebate Application Review CONSULTANT shall provide Task 2 services on an as-needed basis. Each task order assignment will be delivered per the procedures defined in the kick-off meeting and as specified in the task order. The deliverable for this task is a memo providing an assessment of the rebate application package. The memo will be delivered within the timeline specified in the task order. In general, the application review will take no longer than 1 week to complete if no site inspection is required. Expedited reviews can be accomplished within a single day; however pre-coordination and agreement to expedite between CONSULTANT and CPAU is required. Task 3 – Business Energy Audit DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 14 CONSULTANT shall provide business energy audits on an as-needed basis. Each task order assignment will be delivered per the procedures defined in the kick-off meeting and as specified in the task order. The deliverable for this task is an energy audit report. The audit report will be delivered within the timeline specified in the task order. In general, an Energy Performance Report and ASHRAE level 1 report will be delivered within 2 weeks of the onsite survey. ASHRAE level 2 and level 3 reports will be delivered within 4-8 weeks of the onsite survey. Task 4 – Technical Advice to CPAU Staff CONSULTANT shall provide Task 4 services on an as-needed basis. Each task order assignment will be delivered per the procedures defined in the kick-off meeting and as specified in the task order. The deliverable for this task is a memo that summarizes CONSULTANT’s technical assessment and recommendations. The memo will be delivered within the timeline specified in the task order. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 15 EXHIBIT “C” COMPENSATION CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in this Exhibit C. Compensation shall be calculated based on the hourly rate schedule attached as Exhibit C-1 up to the not to exceed budget amount for each task set forth below. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Scope of Services”) and reimbursable expenses shall not exceed $40,000.00 per fiscal year (July 1 through June 30 the following year) over the 36-month Term of this Agreement. CONSULTANT agrees to complete all Scope of Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. A detailed breakdown of CONSULTANT’s proposed budget, by Task, is provided below. ANNUAL CONSULTANT COMPENSATION BY TASK Task Cost (Not to Exceed) Task 1 – Energy Savings Calculation Review $12,000.00 Task 2 – Rebate Application Review $7,000.00 Task 3 – Business Energy Audit $10,000.00 Task 4 – Technical Advice to CPAU Staff $11,000.00 Total Annual Budget (Not to Exceed) $40,000.00 CONSULTANT built the proposed budget, shown above, using the all-inclusive hourly rates provided below in Exhibit “C-1”, hourly rate schedules. The task costs above represent at not-to- exceed amounts, and CONSULTANT shall be approved in advance by the CITY’s Project Manager prior to moving funds between tasks. Total Compensation NOT TO EXCEED AMOUNT for the initial three year Term of the Agreement = $120,000 If the CITY elects, at its sole discretion, to extend the Term of the Agreement for two additional years beyond the initial Term, the Total Compensation NOT TO EXCEED AMOUNT for the five year Term of the Agreement = $200,000. REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 16 A. Travel-related expenses, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information and shall be consistent with the provisions of Section 5 INVOICES of this Agreement. Any expense anticipated to be more than $200.00 shall be approved in advance by the CITY’s Project Manager. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 17 EXHIBIT “C-1” HOURLY RATE SCHEDULE CONSULTANT’s hourly compensation rates are based on staff title, roles and responsibilities. The hourly rate schedules also include annual escalation rates of all CONSULTAN’S staff and rounded to the nearest whole dollar amount. ERS Hourly Rates Staff Title Roles Hourly Rate Through 6/30/16 Hourly Rate Through 6/30/17 Hourly Rate Through 6/30/18 Officer/Principal Consultant Corporate support and resources, planning $240 $245 $250 Director Project management, quality assurance, technical review $205 $210 $215 Senior Engineer/Consultant Engineering review $165 $170 $175 Project Engineer II, Project Consultant II Technical review, analysis, and research $150 $155 $165 Project Engineer I, Project Consultant I Technical review, analysis, and research $135 $140 $150 Energy Analyst Technical review, analysis, and research $120 $125 $135 Administrative Staff Editorial review, administrative support $90 $95 $100 DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 18 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL, FOR THE TERM OF THIS AGREEMENT, OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY INSURANCE COMPANIES WITH AM BEST’S KEY RATING OF A- VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD OF THIS AGREEMENT IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUI RED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURREN CE AGGREGAT E YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 19 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO, OR CONTRIBUTING WITH, ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 20 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT DMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 21 CERTIFICATE OF LIABILITY INSURANCE DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 22 DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 23 EXHIBIT “E” CONFIDENTIALITY AGREEMENT 1. PURPOSE 1.1 In its performance of Services under this Agreement, CONSULTANT and its directors, officers, partners, managers, members, employees, advisors, agents, sub-contractors and other representatives of CONSULTANT and their subsidiaries and affiliates, including, without limitation, attorneys, accountants, consultants, and financial advisors (collectively, the “Representatives”) may acquire and otherwise gain access to Confidential Information, as defined in Section 2 of this Exhibit “J”, which is exempt from public disclosure under the California Public Records Act, Cal. Gov. Code section 6250 et seq. 1.2 In accordance with the terms and conditions of this Agreement, CONSULTANT agrees to take reasonable precautions to ensure that Confidential Information of CITY, as defined in this Exhibit, is safeguarded against disclosure to unauthorized employees or third parties. 1.3 CITY would not share or disclose any Confidential Information to CONSULTANT but for the legal protections against unauthorized disclosures intended to be afforded by California law and this Agreement, and is relying on this Agreement in disclosing such Confidential Information to CONSULTANT. 2. CONFIDENTIAL INFORMATION, DEFINED 2.1 “Confidential Information” means any and all information which is of a non- public, proprietary or confidential nature, in any form or medium, written or oral, (whether prepared by the CITY, its employees, or agents, and irrespective of the form or means of communication and whether it is labeled or otherwise identified as confidential) that is furnished to CONSULTANT by the CITY, including, without limitation, individually identifiable utilities customer information and utility infrastructure data. 2.2 Exceptions. “Confidential Information” shall exclude (and the CONSULTANT shall not be under any obligation to maintain in confidence) any information (or any portion thereof) disclosed to CONSULTANT by CITY to the extent that such information: (a) is in the public domain at the time of disclosure; or (b) at the time of or following disclosure, becomes generally known or available through no act or omission on the part of CITY; or (c) is known, or becomes known, to CONSULTANT from a source other than DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 24 CITY or its Representatives (as defined herein), provided that disclosure by such source is not in breach of a confidentiality agreement CITY; or (d) is independently developed by CONSULTANT without violating any of its obligations under this Agreement or any other agreement between the Parties; or (e) is legally required to be disclosed by judicial or other governmental action; provided, however, that prompt notice of such judicial or other governmental action shall have been first given to CITY, which shall be afforded the opportunity to exhaust all reasonable legal remedies to maintain the Confidential Information in confidence; or (f) is permitted to be disclosed by a formal written agreement executed by and between the Parties. Specific information shall not fall within the exceptions of Sections (a) through (f) above merely because it is embraced by more general information falling within such exceptions. 3. CALIFORNIA PUBLIC RECORDS ACT 3.1 CONSULTANT acknowledges that CITY is a public agency subject to the requirements of the California Constitution, Article 1, Section 3 and California Public Records Act Cal. Gov. Code section 6250 et seq. CONSULTANT acknowledges that CITY may submit to or otherwise provide access to CONSULTANT Confidential Information that CITY or any utility customer of CITY considers to be protected from disclosure pursuant to exemptions granted by applicable California law. 3.2 Whether or not there is a request or demand of any third party not a Party to this Agreement (the “Requestor”) for the production, inspection and/or copying of information designated by CITY as Confidential Information, CONSULTANT shall be solely responsible for taking whatever legal steps CITY deems necessary to protect information deemed by it to be Confidential Information and to prevent release of information to the Requestor (including the release of such information by CONSULTANT). 3.3 Under no circumstances will CONSULTANT be permitted to comply with the Requestor’s demand for disclosure of such Confidential Information that CITY deems confidential and not intended for disclosure to the general public, or otherwise publicly disclose the Confidential Information to any person not authorized by law to receive such information. 4. CONFIDENTIAL INFORMATION DESIGNATION DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 25 4.1 As practicable, the Confidential Information shall be marked with the words “Confidential” or “Confidential Material” or with words of similar import. CITY shall instruct CONSULTANT that information of a financial, personal, or proprietary nature being conveyed orally and intended by CITY to be covered by the terms of this Agreement, is deemed Confidential Information. To the extent possible, CITY shall endeavor to mark any electronic document intended to be covered by the terms of this Agreement with the words “Confidential” or similar words, or, if that is not possible or would be exceedingly difficult, CITY shall notify CONSULTANT (for example, by covering e-mail transmitting the electronic document) that the electronic document is Confidential Information. 4.2 CITY’s failure, for whatever reason, to mark any material at the time it is produced to CONSULTANT, or to notify it that oral or electronic material is Confidential Information at the time it is provided, shall not take the material out of the coverage of this Agreement for all time, and CONSULTANT shall treat the material as Confidential Information once CITY has notified it that the material is to be covered by this Agreement. 5. DUTY TO KEEP CONFIDENTIAL 5.1 CONSULTANT agrees to maintain as confidential, to the extent permitted or required by applicable law, all Confidential Information furnished or otherwise made available to the CONSULTANT, or its Representatives by CITY. CONSULTANT acknowledges that the Confidential Information is proprietary and a valuable asset of CITY and agrees that CONSULTANT shall take reasonable precautions to ensure that such Confidential Information is safeguarded against disclosure to unauthorized employees, Representatives or third parties. (a) CONSULTANT shall use the Confidential Information solely as permitted by this Agreement and shall not sell Confidential Information or otherwise disclose such Confidential Information under any circumstances and without the prior written consent of CITY. CONSULTANT shall not disclose the Confidential Information, or portions thereof, to any of its Representatives, except to those who need to know such information for the purpose of advising CITY and who agree to the terms of this Agreement. (b) CONSULTANT agrees that any of the Representatives to whom the Confidential Information is disclosed will be informed of the confidential or proprietary nature of such information and of CONSULTANT’s obligations under this Agreement. CONSULTANT is responsible for any use of Confidential Information by any of its Representatives. (c) CONSULTANT shall ensure that: DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 26 (i) any Representatives with whom CONSULTANT shares such Confidential Information or who acquire knowledge of such Confidential Information from or through CONSULTANT regard and treat such Confidential Information of CITY as strictly confidential and wholly owned by CITY, and (ii) CONSULTANT shall not (and CONSULTANT shall ensure that any Representatives with whom CONSULTANT shares such Confidential Information or who acquire knowledge of such Confidential Information from or through CONSULTANT do not) for any reason, in any fashion, either directly or indirectly, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, or otherwise communicate any such Confidential Information to any third party, or misappropriate, reproduce, copy or use any such Confidential Information, in either case, for any purpose other than in accordance with this Agreement. (d) If CONSULTANT or any of its Representatives are requested or required to disclose any Confidential Information by law, regulation, the applicable rules of any national securities exchange or other market or reporting system, oral questions, interrogatories, requests for information or other documents in legal proceedings, subpoena, civil investigative demand or any other similar process, CONSULTANT shall provide CITY with prompt written notice of any such request or requirement so that CITY has an opportunity to seek a protective order via writ of mandate or other appropriate remedy, or waive compliance with the provisions of this Agreement. (e) If CITY waives compliance with the provisions of this Agreement with respect to a specific request or requirement, CONSULTANT and its Representatives shall disclose only that portion of the Confidential Information that is expressly covered by such waiver and which is necessary to disclose in order to comply with such request or requirement. CONSULTANT and its Representatives shall cooperate in a reasonable manner with CITY in attempting to preserve the confidentiality of the Confidential Information. (f) If (in the absence of a waiver by CITY) CONSULTANT has not secured a protective order or other appropriate remedy despite attempting to do so, and CONSULTANT or one of its Representatives is nonetheless then legally compelled to disclose any Confidential Information, CONSULTANT or such Representative may, without liability hereunder, disclose only that portion of the Confidential Information that is necessary to be disclosed. In the event that disclosure is made in accordance with this subsection, CONSULTANT shall exercise, and cause its DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 27 Representatives to exercise, reasonable efforts to preserve the confidentiality of the Confidential Information, including obtaining reliable assurance at the sole expense of CONSULTANT that confidential treatment shall be accorded any Confidential Information so furnished. 6. NO LIABILITY, RELEASE, OR OBLIGATION Except as set forth in any formal written agreement executed by and between the Parties, neither CONSULTANT nor any of its Representatives shall be entitled to rely on any statement, promise, agreement or understanding, whether written or oral, or any custom, usage of trade, course of dealing or conduct. In addition, each Party understands and acknowledges that neither CITY nor any of its representatives, employees or agents makes any representation or warranty, express or implied, as to the accuracy or completeness of any Confidential Information, and that neither CITY nor any of its representatives, employees or agents shall have any liability whatsoever to CONSULTANT or to any of its Representatives relating to or resulting from the Confidential Information or any errors therein or omissions therefrom. 7. REMEDIES In recognition that an irreparable injury may result to CITY, if any provision of this Exhibit J is violated, CONSULTANT agrees that upon any breach or threatened breach of any provision of this Exhibit J by CONSULTANT or any of its Representatives, that CITY shall be entitled to seek an injunction or specific performance prohibiting such conduct or any other relief as may be permitted by law. 8. RETURN OF CONFIDENTIAL INFORMATION 8.1 CONSULTANT shall have access to the Confidential Information provided by CITY only during the term of this Agreement, and shall return all Confidential Information provided under this Agreement upon its termination, or at any time upon request of CITY, as described in Section 8.2 of this Exhibit J. 8.2 CITY may at any time request that CONSULTANT promptly return to CITY or destroy any or all documents or other materials containing Confidential Information of CITY, and CONSULTANT shall immediately comply with any such request. Notwithstanding the return or destruction of the Confidential Information as contemplated by this Section 8 of this Exhibit J, the CONSULTANT and its Representatives will continue to be bound by the terms of this Agreement with respect thereto, including all obligations of confidentiality. 9. SURVIVAL CONSULTANT’s obligations of confidentiality and non-circumvention under this Exhibit J shall survive the termination of this Agreement. 10. OWNERSHIP RIGHTS NOT CREATED DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 28 The transfer of Confidential Information hereunder shall not be construed as granting a license of any kind or any right of ownership in the Confidential Information to CONSULTANT. 11. NO OBLIGATION TO DISCLOSE Nothing in this Section shall obligate CITY to disclose specific Confidential Information to CONSULTANT. Such disclosures shall be at the CITY’s sole discretion. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F Professional Services Rev Feb. 2014 29 EXHIBIT “F” IDENTITY INFORMATION PROTECTION Identity Information Protection 1. During the term of the contract the CONSULTANT shall not collect, process or store any Private Information (PI) and Personally Identifiable Information (PII), except the name and address of the customer. 2. During the term of the contract the CONSULTANT shall comply with the CITY’s Information Privacy Policy and the CITY’s Software as a Service Security and Privacy Terms and Conditions. Personal information (PI) is defined as an individual's first name or first initial and last name in combination with any one or more of the following data elements, when either the name or the data elements are not encrypted: (1) Social security number. (2) Driver's license number or California Identification Card number. (3) Account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's financial account, "Personal information" does not include publicly available information that is lawfully made available to the general public from federal, state, or local government records. Personally Identifiable Information (PII), as used in information security, is information that can be used to uniquely identify, contact, or locate a single person or can be used with other sources to uniquely identify a single individual. DocuSign Envelope ID: 87C6A216-09D1-4A30-9C78-6F09BDC26F0F City of Palo Alto (ID # 5812) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: BMR Administration Contract Award Title: Approval of Contract C15158881 for $270,000 With Palo Alto Housing Corporation for Provision of Below Market Rate (BMR) Administration Services over a Two Year Period From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council approve and authorize the City Manager or his designee to execute the attached contract C15158881 with PAHC Housing Services, LLC (PAHC) for administration and consulting services in the amount of $270,000 for administration of the City’s Below Market Rate (BMR) housing program for two years. Executive Summary The City of Palo Alto released a Request for Proposals (RFP) for administration of the City’s BMR housing program earlier this year and PAHC submitted the only proposal received. PAHC has been administering the City’s BMR housing program for over 40 years and under the terms of the proposed agreement would continue this role for another two years. Background Under contract to the City, the Palo Alto Housing Corporation (PAHC) has administered the BMR housing program since its inception in the mid-1970s. Examples of some of the services provided by PAHC include: administering the sale and re-sale of new and existing BMR owner units; maintaining the home purchase waiting list; monitoring occupancy of BMR rental units; providing advice and consultation to the City regarding negotiations of BMR agreements with developers; and addressing special issues related to the program as a whole. Most of PAHC’s workload is involved with the home ownership component of the BMR program. While PAHC performs most tasks required for the ongoing administration of the home ownership and rental components of the BMR program, City Planning staff also devotes considerable time to the BMR program, primarily on BMR negotiations and agreements and City of Palo Alto Page 2 program improvements. City Real Property staff handles maintenance evaluation and the determination of credits for capital improvements when units come up for resale. Discussion The term of the City’s current agreement with PAHC is coming to an end. As a result, the City released an RFP for BMR Administration on April 20, 2015. The only proposal received in response was from PAHC. PAHC proposes to continue their work on BMR Administration for the next two years at a cost not to exceed $270,000. As part of this work, PAHC has maintained and annually updated a waiting list of interested potential buyers of BMR units. There are currently 246 owner and 458 rental BMR units in the program. PAHC coordinates the sale of both newly built BMR units and the resale of existing units. Sales activities include: establishing the resale price; marketing units to the waiting list; scheduling open houses; qualifying and selecting the buyers; coordinating the transaction between the buyer, seller, lender and escrow; and explaining the requirements of the BMR deed restrictions. PAHC has maintained a database on all units and kept statistics on the number and characteristics of the households served by the program. The owner BMR units require periodic monitoring of occupancy and title, which PAHC handles in cooperation with Planning staff and the City Attorney’s Office. Monitoring activities include reviewing online assessor’s records to detect transfers in title or ownership and an annual self-certification letter to owners verifying owner occupancy and to remind them of program rules and to provide updates on procedural changes. When a violation of a deed restriction is discovered, PAHC undertakes initial attempts to remedy the situation. More complex enforcement matters are referred to Planning staff or to the City Attorney (if legal action is required). Information workshops for prospective buyers on the waiting list are conducted quarterly by PAHC together with housing counseling staff from Project Sentinel. These workshops focus on preparation for homeownership, understanding credit and mortgage financing and the rules of the BMR program. The workshops have been well received, with about 100 persons attending each year. PAHC collects and reviews applicants’ certification documentation to determine eligibility under the program rules. They also conduct recertification of existing tenants and monitor each complex’s waiting list and tenant selection process. Resource Impact The administration of the BMR program has historically been funded from the Residential Housing Fund, which is a special revenue fund created to support all types of affordable housing programs. The majority of the Residential Housing Fund was set aside in reserve for potential use for Buena Vista after considering expected uses of the fund over the next fiscal year. The amount for this contract was already budgeted in the Residential Housing Fund and City of Palo Alto Page 3 anticipated in Fiscal Year 2016. The Residential Housing Fund includes a budget sufficient to cover the cost $135,000 in Fiscal Year 2015 and the Proposed Budget for Fiscal Year 2016 includes adequate budget to cover the second year. No additional funding is needed for this action, nor does it diminish the Buena Vista reserve. Policy Implications The recommendation in this staff report does not represent any change to City policies. Implementation of this Agreement is consistent with the City’s Housing Element and various housing policies that support the provision of affordable housing and a variety of housing opportunities. Environmental The approval of an agreement for administrative and consulting services is not an action subject to environmental review under the California Environmental Quality Act. Attachments: Attachment A: Contract #C15158881 with Palo Alto Housing Corporation (PDF) Professional Services Rev. March 31, 2015 1 CITY OF PALO ALTO CONTRACT NO. C15158881 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND PAHC HOUSING SERVICES, LLCFOR PROFESSIONAL SERVICES This Agreement is entered into on this 15th day of June, 2015, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and PAHC HOUSING SERVICES, LLC, a California corporation, located at 725 Alma Street, Palo Alto, CA, 94301 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to provide administration for the City's Below Market Rate (BMR) housing program (“Project”) and desires to engage a consultant to provide administration services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through June 30, 2017 unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Attachment A Professional Services Rev. March 31, 2015 2 SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed One Hundred Thirty Five Thousand Dollars ($135,000.00) per year. Total shall not exceed Two Hundred Seventy Thousand Dollars ($270,000.00), plus any unused portion of the prior contract year. No additional Services are authorized as part of this contract. The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C- 1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 3 gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of CITY’s stated construction budget, CONSULTANT shall make recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Georgina Mascarenhas as the Property Director to have supervisory responsibility for the performance, progress, and execution of the Services and to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s project manager is Sherry Nikzat, Planning & Community Environment Department, DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 4 250 Hamilton Avenue, Palo Alto, CA 94303, Telephone: (650) 329-2359. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 5 SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 6 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 7 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: All printed materials provided by CCONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post- consumer material and printed with vegetable based inks. Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division’s office. Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 8 SECTION 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. 25.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9 All unchecked boxes do not apply to this agreement. 25.10 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 25.11 This Agreement may be signed in multiple counterparts, which shall, when DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 9 executed by all the parties, constitute a single binding agreement IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO APPROVED AS TO FORM: PAHC HOUSING SERVICES, LLC Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Executive Vice President Professional Services Rev. March 31, 2015 10 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT shall administer CITY's Below Market Rate (BMR) housing program in compliance with CITY policy, guidelines, the applicable deed restrictions, the BMR Program Procedures Manual and in a manner that increases affordable housing opportunities for low and moderate-income households. Specific Activities: I) Provide information and advice to interested persons and housing seekers about CITY’s BMR ownership and rental programs including maintaining and updating the BMR portion of the CONSULTANT'S website. 2) Maintain and, at least annually, update the BMR ownership waiting list. Conduct waiting list outreach activities to attract households with appropriate income levels, as needed. 3) Send an information letter to BMR owners once each year to keep owners informed of their responsibilities under the deed restrictions and distribute other informational materials to owners as appropriate or as directed by CITY. 4) Annually update the list of lenders willing to lend on BMR units; conduct outreach to lenders with branches in Palo Alto to encourage participation in the BMR program so that buyers have sufficient choice of lenders and loan products. Maintain liaison with available homebuyer assistance programs (such as mortgage credit certificates, Housing Trust of Santa Clara County, Cal-HFA, etc.) and provide buyers with current information about such financial assistance programs. 5) Administer the sales of newly constructed units and resale of existing units in the BMR ownership program, and the "discount" units at the Birch Court project with CITY deed restrictions, in accordance with CITY policies, guidelines, the applicable deed restrictions and with the Procedures Manual, prepared by CONSULTANT, as accepted by CITY. Conduct marketing of new BMR ownership units to help ensure a sufficient pool of qualified buyers, anticipated during this contract term are the 3 units at Monroe Place (formerly known as Palo Alto Bowl). 6) Pursue, in cooperation with CITY, the preservation of BMR units within the program and compliance and enforcement by BMR owners with the provisions of the recorded deed restrictions. 7) Provide assistance and counseling to BMR owners, in coordination with CITY staff, to help owners resolve financial, occupancy or title situations that can affect the preservation of BMR ownership units. 8) Annually coordinate and jointly conduct at least two homeownership educational workshops specifically designed for the Palo Alto BMR program for current BMR owners and/or households on the waiting list by subcontracting with an experienced and qualified organization. 9) Assessment Loan Program for BMR Owners: DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 11 a) Provide information regarding the assessment loan program to BMR owners, if available through the CITY to BMR owners, and condominium associations. b) Conduct pre-qualification screening of potential loan applicants. 10) BMR Rental Program Administration: a) For the BMR rental units at Southwood Apartments, Mayfield Apartments, 1100 Welch Road Apartments, Montage Apartments at 4020 EI Camino Real, Sunrise Assisted Living, Parker Palo Alto, College Terrace Centre at 2180 EI Camino Real and other BMR rental units that may be newly constructed during the term of this contract: 1) Certify tenants' income eligibility for initial occupancy and review the annual recertification of tenants as required by the applicable agreements between CITY and the project owners. 2) Monitor tenant selection, operation of waiting lists, and designation of BMR units as necessary. 3) Provide information and training on the BMR Rental Program to property managers. b) Stanford West Apartments BMR Units: 1) Continue to provide training and information to on-site management staff on BMR unit eligibility requirements, rents and procedures. 2) Conduct an annual sample file audit of tenant selections, eligibility and income certifications for ten percent (10%) of the BMR households to assure compliance with the BMR program. 3) If appropriate, make recommendations to CITY for more comprehensive monitoring. 11) Provide advice, consultation and assistance to CITY staff in negotiations of BMR agreements for new housing developments, 12) Coordinate the process of evaluation, negotiation and financing related to the acquisition and rehabilitation, if necessary, of off-site units or properties contributed under the BMR program. 13) Assist CITY staff with review, adoption and implementation of changes resulting from the evaluations of the BMR Study. 14) Provide assistance, review and advice regarding preparation and adoption of a revised BMR ordinance, revised Policies and Procedures Manual, revised ownership deed restrictions and enforcement documents and other new materials to implement the recommendations from the BMR Study. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 12 15) Maintain records and statistics as required by CITY, specifically; a) Annual statistics about the BMR ownership and rental units and the households served; and b) A permanent database and record of all ownership units placed in the program and statistics about current BMR owners and all households served over the life of the program, including maintenance of files on each BMR owner unit and retention of copies of the actual recorded deed restrictions for the ownership units; and c) Contact information for current BMR owners with mailing labels and, when available, telephone numbers and e-mail addresses. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 13 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. Milestones Completion No. of Days/Weeks From NTP 1. Tasks as specified per Exhibit “A” Scope of Services TBD DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 14 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement based on the hourly rate schedule attached as Exhibit C-1. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Services”) and reimbursable expenses shall not exceed $135,000 for the first contract year, July 1, 2015 through June 30, 2016 and $135,000 for the second contract year, July 1, 2016 through June 30, 2017, plus any unused portion of the prior contract year. Total Contract Not to Exceed is $270,000.00. CONSULTANT agrees to complete all Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Postage charges, BMR Refreshments and supplies are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $1000.00 shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 15 EXHIBIT “C-1” HOURLY RATE SCHEDULE (Rates below are estimated for one year of service) DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 16 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRE D TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 Professional Services Rev. March 31, 2015 17 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 DocuSign Envelope ID: 79317678-3FCF-4D66-A3E2-9146F44AA109 City of Palo Alto (ID # 5763) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Approval of GreenWaste of Palo Alto’s Contract Amendment Number Two Title: Approval Of Amendment No. 2 To Contract No. C09124501 With GreenWaste Of Palo Alto That Would Increase Zero Waste Services, Increase Efficiencies, Increase the Annual Costs By Approximately $1,366,000 in FY16, to Support Composting and Anaerobic Digestion Programs; and Extend The Contract Term For An Additional Four Years To End June 30, 2021. Adoption of Resolution to Revise Utility Rules And Regulations No. 2, 3, 11 And 24 To Reflect New Zero Waste Service Changes From: City Manager Lead Department: Public Works Recommendations 1)Staff recommends that Council Approve Amendment Number 2 to GreenWaste of Palo Alto’s Contract No. C09124501 (Attachment A)that would modify the scope of work (Attachment B), add services that support the City in meeting its zero waste goals,and increase compensation by $1,366,000 beginning in FY 2016.Amendment Number 2 would also extend GreenWaste of Palo Alto’s contract term for an additional four years to end on June 30, 2021; and 2)Staff recommends that Council adopt the attached resolution (Attachment C)to update Utilities Rules and Regulations Numbers 2 (Definitions and Abbreviations), 3 (Description of Utility Services), 11 (Billing, Adjustments, and Payments of Bills),and 24 (Special Refuse Service Regulations) (Attachment D) to reflect the service guidelines and requirements for the new zero waste services. City of Palo Alto Page 2 Executive Summary Staff has negotiated a contract amendment with GreenWaste of Palo Alto (GreenWaste)that includes an extension to the term of the agreement for an additional four years, from 2017 through June 2021,and service changes that support the City in its zero waste goals and sustainability leadership. GreenWaste’s amended scope of work will include implementing the following: 1) A new residential food scraps collection program; 2)Anaerobic digestion of all compostable materials at GreenWaste’s sister company Zero Waste Energy Development Facility (ZWED) producing both compost and renewable energy; 3) A proposed new commercial recycling and composting ordinance; 4) The purchasing of new automated collection vehicles to replace older collection vehicles; and 5) The management of billing for commercial refuse accounts. The contract amendment also includes several other minor modifications that would increase efficiencies and save costs. These zero waste services and connected actions have previously been presented to the Finance Committee. The annual cost increase of this new scope of work is approximately $1,366,000 beginning in FY 2016. There would also be a corresponding cost decrease of approximately $576,000 from redirecting residential yard trimmings and food scraps away from the Sunnyvale Material Recovery and Transfer Station (SMaRT Station)and the Kirby Canyon Landfill leaving a net cost impact (increase) of approximately $790,000 per year. Utilities Rules and Regulations Numbers 2 (Definitions and Abbreviations), 3 (Description of Utility Services), 11 (Billing, Adjustments, and Payments of Bills), and 24 (Special Refuse Service Regulations) (Attachment D) are also being updated to reflect the new changes in the service guidelines. Background The City’s contract with GreenWaste was fully implemented on July 1, 2009 and has an initial term of 8 years, through June 30, 2017,with options to extend the contract for a total of four additional years through June 30, 2021.The 2009 GreenWaste contract added several zero waste programs including a new commercial compost program,the expansion of commercial recycling services, and the recycling of all construction and demolition materials that boosted the City’s diversion of materials from landfills from 62% in 2008 to approximately 78% City of Palo Alto Page 3 in 2013 –one of the highest diversion rates in the state. While the City should feel positive about this accomplishment, the steady progress towards achieving the City’s zero waste goals by 2021 has stagnated over the past few years. Much of the material that remains in the garbage and is sent to the landfill is either compostable or recyclable. Staff, recognizing that new programs would be needed to capture these materials,began discussions with GreenWaste on new programs that would divert compostable materials from the landfill. The discussions evolved into extensive conversations about not only diversion from landfills but also methods to improve customer service. This new scope of work, described below, was consolidated into a proposed contract amendment. Finance Committee Discussion & Previous related Council Approvals On March 3, 2015, Staff presented to the Finance Committee comprehensive new zero waste programs to recover additional recyclable and compostable materials. At that time, Staff also presented a summary of proposed modifications to the GreenWaste contract and a new residential rate proposal to recover costs. As a city leading the charge towards sustainability, the following programs will help the City meet its zero waste goals and lead to a reduction in the City’s overall greenhouse gas emissions (SR #5546): 1)A new residential curbside collection and composting program of food scraps. This program was subsequently approved by Council on March 23, 2015 (SR #5558).The new residential curbside compostable collection program is scheduled to begin on July 1, 2015. With this collection program, residents will combine food scraps (bagged or loose) and food solid paper with yard trimmings in their green carts. 2)A preliminary plan to develop and implement a new refuse rate structure along with a three-year schedule to increase refuse rates charged to the residential sector. Staff’s recommendation to amend the refuse rates in the residential R-1 rate schedule was subsequently approved by the Finance Committee on April 7, 2015 (SR #5566). 3)A preliminary plan to adopt and implement a new City ordinance that would require businesses to subscribe to commercial compostable and recycling service and sort their wastes so that there will be less than 10% City of Palo Alto Page 4 contamination in any container. Staff is planning to return to Council with a resolution in the fall 2015. The Finance Committee approved the direction that Staff was headed in developing these programs. Therefore, the key elements are being brought to the full Council, beginning with the GreenWaste contract. Discussion Staff has been negotiating with GreenWaste for the last few months to determine a cost effective way to increase landfill diversion activities while at the same time considering GreenWaste’s request to extend the contract and replace some of GreenWaste’s older collection vehicles. Staff believes that the following contract changes will achieve the City’s and GreenWaste’s goals to recover more recyclable and compostable materials, reduce costs where possible, improve driver safety and enhance services, and lead to a reduction in the City’s overall greenhouse gas emissions. GreenWaste Contract Amendment Categories and Cost Impacts Summary Item Recommended Contract Changes Annual Cost Impacts 1 Extend contract term by 4 years to end on June 30, 2021. Retain the same pricing, terms and conditions unless modified in the items below. $0 2 Compostables Package ·New residential food scraps collection ·Process residential food/yard trimmings at ZWED* ·Implement the new recycling and composting ordinance in the commercial sector ·Increase commercial compostables incentives ·Direct commercial food to ZWED Subtotal $0 *$1,134,000 $0 $190,000 $22,000 $1,346,000 3 Manage billing for commercial accounts $150,000 City of Palo Alto Page 5 4 Variable costs reductions, change in method of payments (savings to the City)<$75,000> 5 New automated collection vehicles (savings to the City)<$55,000> 6 Minor administrative changes $0 Total annual cost increase to the GreenWaste Contract *$1,366,000 *There will also be a corresponding cost decrease of approximately $576,000 from redirecting residential yard trimmings and food scraps away from the SMaRT Station and the Kirby Canyon Landfill. GreenWaste Contract Amendment Categories and Cost Impacts 1)Contract Extension (No cost impact). Staff recommends providing GreenWaste an extension of the full four one-year terms allowed in the existing contract, which will extend the contract end date from June 30, 2017 to June 30, 2021. GreenWaste has met its collection and performance obligations since the beginning of the current contract term.Customer feedback is positive and the City has received minimal customer complaints regarding the services provided. A longer term would also allow the City to take advantage of the new collection vehicles expected useful life. In addition, the new term would synchronize with the City’s other major solid waste agreements, SMaRT Station and Kirby Canyon Landfill, which also expire on June 30, 2021. A future competitive selection process (i.e., a request for proposals process (RFP)) combining the City’s waste collection, processing, and landfill contracts at the same time may provide the City with additional cost-effective and integrated solutions. If the Council were to decide not to extend the term of the contract for the additional four years, then Staff would need to begin developing an RFP process in summer 2015. This would provide enough time for staff to gain consensus on the collection and processing scheme criteria, to select a successful proposer and enough lead time for the purchase and delivery of new collection equipment. 2)Compostables Package ($1,346,000 cost increase). Staff recommends adding provisions for the collection and processing of residential compostable materials to the GreenWaste contract that would increase the recovery of City of Palo Alto Page 6 food scraps and food soiled paper and use this material for compost and energy production. ·New residential food scraps collection (No cost impact). On March 23, 2015,Council approved the new residential food scraps collection to begin on July 1, 2015 (SR #5558). GreenWaste will collect the City’s residential food scraps commingled with yard trimmings and transport the material to a processing facility without additional costs. ·Process residential food scraps and yard trimmings at ZWED ($1,134,000 cost increase). At the March 23, 2015 Council meeting, staff reported that the new residential food scraps collection combined with the yard trimmings in the green carts could be processed at various locations. In this report, Staff is recommending GreenWaste’s proposal to anaerobically digest the combined residential compostable material, approximately 14,000 tons,at ZWED. ZWED is the closest processing facility to Palo Alto. Digesting the combined food scraps and yard trimmings at ZWED will result in lower greenhouse gas emissions than local options,will generate electricity,and produce compost for agricultural uses. Since this material will be collected by GreenWaste and transported directly to ZWED, it will not have to be processed at the SMaRT Station.There will be a corresponding annual cost decrease of approximately $576,000 from redirecting residential yard trimmings and food scraps away from the SMaRT Station and the Kirby Canyon Landfill. ·Implement a recycling and composting ordinance in the commercial sector (No cost impact). GreenWaste will utilize existing staff to monitor and enforce a compliance program for the proposed recycling and composting ordinance for the City’s commercial sector. Additional details on the proposed ordinance will be brought to Council in the fall 2015. ·Increase commercial compostables incentives ($190,000 cost increase). Staff recommends modifying the contract’s current incentive clause that pays GreenWaste for processing commercial food scraps at a price per ton based on the net tonnage (the overall tonnage collected minus the contamination percentage which can typically range from 10% to 25%). The incentive payment would change to the City paying GreenWaste City of Palo Alto Page 7 based on the gross tonnage collected, which will incentivize GreenWaste to collect and divert more compostable materials. GreenWaste can then focus its efforts to get all of the City’s commercial customers established with the compostables collection program and require customers to clean up their waste through the future recycling and composting ordinance compliance requirements. Staff estimates an annual diversion of over 12,000 tons of compostable material from the commercial sector. ·Direct commercial compostables to be permanently processed at ZWED ($22,000 cost increase). On February 26, 2015, GreenWaste began taking the commercial compostable material to ZWED as a pilot to test the material qualities. GreenWaste has provided positive feedback about the quality of material received at the processing facility. Staff recommends continuing to divert the commercial compostable material to the ZWED facility on a permanent basis in order to use the material to produce electricity in addition to compost. The marginal cost increase would be $22,000 per year. The ZWED processing cost per ton for FY 2016 would be $81 per ton, 2.1% higher than the expected rate of $79.27 per ton processed at Z-Best Composting Facility, where the material has been composted in previous years. Processing this material locally, (ZWED is located in north San Jose near Zanker Road and Hwy 237) would also yield the benefit of saving greenhouse gas emissions related to the shorter transportation of the material. 3)Commercial Billing ($150,000 cost increase). Staff recommends that GreenWaste provide and manage the billing services to the City’s commercial sector customers,as an option in lieu of the City hiring a full time staff to monitor and maintain the data. The residential refuse bill would remain on the consolidated City Utilities bill. In 2014, the City’s Auditor conducted an audit on the Refuse Fund and found discrepancies between the City’s SAP billing system and the GreenWaste collection database (RAMS), which resulted in billing errors. The errors are primarily due to the fact that the City’s billing system (SAP) was not designed for the complexities and specific requirements for Refuse service. Commercial customers with multiple locations and a wide variety of service types create the bulk of the database and billing challenges. City Staff and GreenWaste are continuously working together to anticipate, identify, and correct, database errors. However, City of Palo Alto Page 8 shifting the complex commercial billing to GreenWaste may provide the best opportunity to minimize billing errors at the lowest cost. GreenWaste currently successfully manages the billing of debris boxes services for Palo Alto customers without a Utility account (i.e., a contractor building a home or commercial building) and provides billing of commercial services for other jurisdictions so this would not be a new assignment. GreenWaste would provide commercial refuse billing services at a cost of approximately $150,000 per year, increasing the total cost of Refuse related billing services from $250,000 to $400,000. Some reduction in the Utilities billing allocated costs would also be expected. The Public Works Department will work with the Utilities and Administrative Services Departments to identify the resulting savings from this proposed change in the service delivery model. 4)Variable Costs ($70,000 net decrease).The variable cost-related amendments involve rolling itemized cost items such as the special events and hard–to-serve areas into the contract’s base compensation. Normally, these would be paid to GreenWaste through quarterly extra service compensation. The City will save about $70,000 per year. 5)New Collection Vehicles ($55,000 net decrease). GreenWaste will purchase new automated vehicles to replace the oldest trucks, which were purchased in 2005,to collect residential materials. These trucks are older than the rest of the GreenWaste fleet because GreenWaste purchased the trucks from the City’s previous contracted hauler, Palo Alto Sanitation Company (PASCO). The new, more fuel-efficient trucks will also run on compressed natural gas (CNG), which GreenWaste will obtain from the City’s CNG fueling station The new trucks will be fully-automated and will have loading “arms” to reach and pick up the waste containers from the street. These new automated trucks will allow for just one driver to service the residential routes instead of a driver plus a helper as is currently the case. This change in operations will result in the cost reduction of four fulltime GreenWaste positions. GreenWaste has assured Staff that they will make every effort to redeploy the workers affected by this cost reduction within one of GreenWaste’s sister or parent companies. Replacing the older trucks provides a net savings of $55,000 per year to the City due to the reduced operating and labor costs. City of Palo Alto Page 9 GreenWaste anticipates that the new trucks will take approximately three to five months to be manufactured and ready for operations. As part of a larger effort to increase the efficiency of GreenWaste operations with the implementation of automated collection trucks, there will be some minor changes to the residential collection.With automatic collection, the carts will need to be placed on the street so that the automated truck arms can reach the carts directly from the street as opposed to the current cart placement location on the curb or in the back of sidewalks.Residents still using their own 20-or 32-gallon can for garbage service will be issued a wheeled cart that can be serviced automatically from the street. Additionally, in order to increase GreenWaste’s collection efficiencies, backyard service of garbage will be restricted to only residents currently subscribed to the service.Residents with physical limitations will continue to receive backyard service and will be provided carts for their garbage. Lastly, GreenWaste may also need to make some minor route modifications that may result in changes of collection days for some residents. 6)Minor administrative changes –These changes involve less substantial items with no cost impacts but are needed for contract compliance and require an amendment to the contract. Some changes involve modifications to residue measurement criteria, the schedule to allow reconditioning of containers, and incorporating past letters of intent that have already been agreed between the City and GreenWaste.Additionally, moving forward, GreenWaste will also be responsible for the purchase of all replacement carts and will not obtain direct reimbursement from the City for each cart purchased. Utilities Rules and Regulations Numbers 2 (Definitions and Abbreviations), 3 (Description of Utility Services), 11 (Billing, Adjustments, and Payments of Bills) and 24 (Special Refuse Service Regulations) (Attachment D) are also being updated to reflect the new service guidelines. The Rules and Regulations have been updated to include new definitions, change in description of services, and the new set out requirements such as new cart placement guidelines and cart requirements for collection services. Schedule for Upcoming Zero Waste Changes City of Palo Alto Page 10 Task Schedule Council approval of GreenWaste Amendment No. 2 June 2015 Residential food scraps collection begins July 1, 2015 New commercial recycling and composting ordinance brought to Council for approval Fall 2015 GreenWaste begins commercial billing Spring 2016 New commercial recycling and composting ordinance begins April 1, 2016 Resource Impact The annual cost increase of $1,366,000 to the GreenWaste contract has been included in the Refuse Fund Operating Budget for Fiscal Year 2016 as well as the $576,000 savings to the SMaRT/Kirby Canyon agreements for redirecting material to the ZBEST Facility for a net cost increase of $790,000 if Amendment Number 2 is approved. The additional cost has also been included in the proposed residential rate increase presented to the Finance Committee on April 7, 2015 (SR #5566).The proposed annual budget for the GreenWaste contract for FY 2016 will be $15,779,523. Policy Implications The increased services provided through Amendment 2 and the extension to the GreenWaste contract will help the City achieve its zero waste goals and are in alignment with the Zero Waste Operational Plan, therefore there are no policy implications. Environmental Review GHG Savings Diverting and composting the expected recoverable amount of 10,000 tons of residential and commercial food scraps per year would save over 3,800 metric tons of CO2e emissions per year that contribute to global climate change. CEQA Collecting residential food scraps within the existing green carts and composting this material is consistent with the baseline three-cart collection services that was studied in the Initial Study-Mitigated Negative Declaration adopted by Council City of Palo Alto Page 11 with the GreenWaste Contract award in 2008 (SR #416:08). This new food scraps program is designed to reduce the impacts to the environment by reducing the amount of greenhouse gas generated and by maximizing the recovery of compostable materials generated within the City. There will be negligible transportation related impacts from modifications to existing compostable collection routes. Attachments: ·Attachment A -GreenWaste Agreement Amended and Restated (PDF) ·Attachment B -GreenWaste Agreement Attachments (PDF) ·Attachment C -Resolution (PDF) ·Attachment D -Revised Rules and Regulations 2, 3, 11 and 24 (PDF) Attachment A AGREEMENT FOR SOLID WASTE, RECYCLABLE · MATERIALS, AND COMPOSTABLE MATERIALS COLLECTION AND PROCESSING SERVICES BETWEEN THE CITY OF PALO ALTO AND GREENW ASTE OF PALO ALTO October 2008 As Amended and Restated as of June 2015 10852395.2 TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS .......................................................................................................... 4 ARTICLE2. TERM OF AGREEMENT ........................................................................................ 5 2.01 Effective Date ........................................................................................................... 5 2.02 Term .......................................................................................................................... 5 2.03 Option to Extend Term ............................................................................................. 5 2.04 Conditions to Effectiveness of Agreement ............................................................... 5 A. Accuracy of Representations ........................................................................ 6 B. Absence of Litigation .................................................................................... 6 C. Furnishing of Bond and Guaranty ................................................................. 6 D. Effectiveness of City's Approval .................................................................. 6 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF CONTRACTOR ...................... 7 3.01 3.02 3.03 3.04 3.05 3.06 3.07 ARTICLE4. 4.01 4.02 4.03 Corporate Status ........................................................................................................ 7 Corporate Authorization ........................................................................................... 7 Statements and Information in Proposal ................................................................... 7 No Conflict with Applicable Law or Other Documents ........................................... 7 No Litigation ............................................................................................................. 7 Financial Condition ......................................................................................... , ......... 8 Expertise ................................................................................................................... 8 COLLECTION OF SOLID WASTE, RECYCLABLE MATERIALS, COMPOSTABLEMATERIALS AND YARD TRIMMINGS ............................... 9 Scope of Work -General .......................................................................................... 9 Transition and Implementation Plan ......................................................................... 9 Grant of Exclusive and Non-Exclusive Rights ....................................................... 1 O A. Exclusive Rights ......................................................................................... 1 O B. Non-Exclusive Rights ................................................................................. 1 O 4.04 Collection of Solid Waste ....................................................................................... 10 A. Single Family Residential Premises ............................................................ IO B. Multiple Family Residential Premises ........................................................ 11 C. Commercial/Industrial Premises ................................................................. 11 D. City Facilities and City-Furnished Public Litter Receptacles ..................... 11 10852395.2 TABLE OF CONTENTS (continued) Page 4.05 Collection of Recyclable Materials and Compostable Materials ............................ I I A. Single Family Residential Premises ............................................................ 11 B. Multiple Family Residential Premises ........................................................ 12 C. Commercial/Industrial Premises ................................................................. 12 D. City Facilities and City-Furnished Recycling Receptacles ......................... 12 4.06 [Reserved] 4.07 Drop-Box Collection Services ................................................................................ 12 A. SolidWaste ................................................................................................. 12 B. Construction and Demolition Recycling ..................................................... 13 C. Single-Source Separated Recyclables ......................................................... 13 D. Yard Trimmings .......................................................................................... 13 4.08 Special Services ...................................................................................................... 13 4.09 Other Collection-Related Services .......................................................................... 13 A. General ........................................................................................................ 14 B. Cleaning of Public Receptacles .................................................................. 14 C. Building Plan Review ................................................................................. 14 D. Program Evaluation .................................................................................... 14 4.10 Hours of Collection ................................................................................................. 15 4.11 Collection Standards ............................................................................................... 15 A. Care of Private Property .............................................................................. 15 B. Noise ........................................................................................................... 15 C. Service Quality ............................................................................................ 16 4 .12 Litter Abatement ..................................................................................................... 16 A. Minimization of Spills ................................................................................ 16 B. Clean Up ..................................................................................................... 16 4.13 Hazardous Waste ..................................................................... : .............................. 16 A. General ........................................................................................................ 16 B. Notice to Customers .................................................................................... 17 C. Contractor to Segregate and Dispose .......................................................... 17 D. Operating Procedures and Employee Training ........................................... 17 -ii- 10852395.2 TABLE OF CONTENTS (continued) Page 4.14 Provision of Emergency Services ........................................................................... 17 4.15 Public/Customer Service and Accessibility ............................................................ 18 A. Office .......................................................................................................... 18 B. Office Hours ......................................................................................... , ...... 18 C. Staffing ........................................................................................................ 18 D. Telephone .................................................................................................... 19 E. Correspondence ........................................................................................... 19 F. Emergency Contact ..................................................................................... 19 G. Web Site ...................................................................................................... 20 H. Large Customers ......................................................................................... 20 4.16 Billing and Collecting For Regular and Specific Services ..................................... 20 ARTICLE 5. TRANSPORTATION OF MATERIALS ............................................................... 24 5.01 General .................................................................................................................... 24 5.02 Transportation of Solid Waste ................................................................................ 24 5.03 Transportation of Recyclable Materials ................................................................. ;24 5.04 Transportation of Residential Compostable Materials ........................................... 24 5.05 Transportation of Construction and Demolition Debris for Recycling .................. 25 5.06 Transportation of Commercial Cornpostable Materials .......................................... 25 ARTICLE 6. PROCESSING OF MATERIALS FOR RECOVERY AND REUSE ................... 26 6.01 General ..................................................................................................................... 26 6.02 Recyclable Material Processing .............................................................................. 26 A. Capacity and Priority Assurances ............................................................... 26 B. Processing ................................................................................................... 26 C. No Disposal/Residue Limit ......................................................................... 27 D. Marketing .................................................................................................... 27 E. Weighing ..................................................................................................... 27 F. Reporting ..................................................................................................... 27 G. Inspection .................................................................................................... 27 6.03 Construction and Demolition Debris Processing .................................................... 27 -iii- 10852395.2 TABLE OF CONTENTS (continued) Page A. Capacity and Priority Assurances ............................................................... 27 B. Processing ......... -.......................................................................................... 28 C. No Disposal/Residue Limit.. ....................................................................... 28 D. Marketing .................................................................................................... 28 E. Weighing ..................................................................................................... 28 F. Reporting ..................................................................................................... 29 G. Inspection .................................................................................................... 29 6.04 Compostable Materials Processing ......................................................................... 29 A. Capacity and Priority Assurances ............................................................... 29 B. Processing ...... .-............................................................................................ 29 C. No Disposal or Use as ADC ....................................................................... 29 D. Marketing .................................................................................................... 30 E. Weighing ..................................................................................................... 30 F. Reporting ..................................................................................................... 30 G. Inspection .................................................................................................... 30 ARTICLE 7. EQUIPMENT, PERSONNEL AND FACILITIES ................................................ 31 7.01 General .................................................................................................................... 31 7.02 Vehicles ................................................................................................................... 31 A. General ........................................................................................................ 31 B. Purchase of Vehicles ................................................................................... 31 C. Vehicle Identification .................................................................................. 32 D. Cleaning and Maintenance ........................................................ ~ ................. 32 E. Operation ..................................................................................................... 33 F. Sale .............................................................................................................. 34 7.03 Solid Waste, Recycling and Compostable Containers ............................................ 34 A. General ........................................................................................................ 34 B. Repair and Replacement ............................................................................. 34 C. Cleaning, Painting and Maintenance of Contractor-Furnished Containers ................................................................................................... 34 D. Other ........................................................................................................... 34 -IV- 10852395,2 TABLE OF CONTENTS (continued) Page 7.04 City Right to Purchase Equipment, Sales of Equipment ........................................ 35 7.05 Personnel ................................................................................................................. 36 A. General ........................................................................................................ 36 B. Driver Qualifications .................................................................................. 36 C. Uniforms ..................................................................................................... 36 D. Safety Training ............................................................................................ 36 E. No Gratuities ............................................................................................... 37 F. Employee Conduct and Courtesy ................................................................ 37 G. Provision of Recycling/Public Education Specialist ................................... 37 H. Ongoing Training and Testing .................................................................... 37 I. Sober and Drug-Free Workplace ................................................................ 38 J. City Role in Hiring of Key Management Employees ................................. 38 7.06 Use of Workers Not Employed by Contractor ........................................................ 38 7.07 Initial Hiring ............................................................................................................ 39 7.08 Wages and Benefits ................................................................................................. 40 7.09 Facilities .................................................................................................................. 41 ARTICLE 8. RECORD KEEPING, REPORTING AND INSPECTIONS ...................... : .......... .43 8.01 General .................................................................................................................... 43 8.02 Record Keeping; Audit ........................................................................................... 43 8.03 Data Management; Billing Support ....................................................................... .43 8.04 Reporting .................................................................................................................. 44 8.05 Right to Inspect Operations ................................................................................... .44 8.06 Compliance Reporting ............................................................................................ 44 8.07 Reports as Public Records ...................................................................................... 44 ARTICLE 9. Compensation ......................................................................................................... 46 9.01 GeneraL ................................................................................................................... 46 9.02 Total Compensation ................................................................................................ 47 9.03 Compensation for Rate Periods One and Two ....................................................... .47 A. Rate Period One .......................................................................................... 47 B. Rate Period Six and Seven .......................................................................... 48 -v- 10852395.2 TABLE OF CONTENTS (continued) Page 9.04 Compensation for Subsequent Rate Periods .......................................................... .48 9.05 Compensation for Extra Services ....... , .................................................................... 49 9.06 [Reserved] ............................................................................................................... 50 9.07 Compensation Adjustment Process ......................................................................... 50 A. Adjustment Calculations ............................................................................. 50 B. Contractor Review of Adjustments .................................. : .......................... 50 C. City Manager Action ................................................................................... 51 D. Resolution ofDisputes ................................................................................ 51 9.08 Monthly Payment of Contractor's Compensation .................................................. 51 A. Monthly Base Compensation ...................................................................... 51 B. Extra Service Compensation ....................................................................... 51 C. Total Monthly Payment .............................................................................. 51 9.09 Special Compensation Review ............................................................................... 52 A. Eligible Items .............................................................................................. 52 B. Ineligible Items ........................................................................................... 52 C. Submittal of Request ................................................................................... 53 D. ReviewofCosts .......................................................................................... 53 E. Burden of Justification ................................................................................ 53 F. Decision ...................................................................................................... 54 G. Review ........................................................................................................ 54 9.10 Compensation Adjustments for Changes in Service ............................................... 54 9.11 Rate-Setting Process ............................................................................................... 55 A. General ........................................................................................................ 55 B. Rate Structure .............................................................................................. 55 C. Rate Categories ........................................................................................... 55 9.12 City Payment of Fees for Solid Waste Disposal.. ................................................... 56 9.13 Compensation During Extended Term ................................................................... 56 9.14 Additional Financial incentives for Zero Waste Program Implementation ............ 56 A. General ........................................................................................................ 56 -vi- 10852395.2 TABLE OF CONTENTS (continued) Page B. Recycling .................................................................................................... 57 C. Commercial Compostable ........................................................................... 57 ARTICLE 10. INDEMNITY, INSURANCE, PERFORMANCE BOND, GUARANTY ............. 59 10.01 Indemnification ....................................................................................................... 59 10.02 Insurance ................................................................................................................. 59 A. Types and Amounts of Coverage ................................................................ 59 B. Acceptability of Insureds ............................................................................ 61 C. Required Endorsements .............................................................................. 61 D. Delivery of Proof of Coverage .................................................................... 63 E. Other Insurance Requirements .................................................................... 63 10.03 Faithful Performance Bond ...................................................... · ............................... 64 10.04 Alternative Security ................................................................................................ 65 10.05 Hazardous Waste Indemnification .......................................................................... 65 10.06 Integrated Waste Management Act Indemnification .............................................. 65 10.07 Guaranty .................................................................................................................. 66 ARTICLE 11. DEFAULT AND REMEDIES ................................................................................ 67 11.01 Contractor Default ................................................................................................... 67 11.02 Right to Suspend or Terminate Upon Default ........................................................ 68 11.03 Specific Performance .............................................................................................. 68 11.04 City's Right to Cure ............................................................................... : ................ 69 ·11.05 City's Right to Perform ........................................................................................... 69 11.06 City's Use of Property Upon Default ...................................................................... 69 11.07 Damages .................................................................................................................. 70 11.08 City's Remedies Cumulative .................................................................................. 70 11.09 Liquidated Damages ............................................................................................... 70 11.10 Force Majeure ......................................................................................................... 72 A. Excuse from Performance ........................................................................... 72 B. Obligation to Restore Ability to Perform .................................................... 72 C. Notice .......................................................................................................... 72 D. City's Rights in the Event. of Force Majeure .............................................. 72 -Vil- 10852395.2 TABLE OF CONTENTS (continued) Page I I . I I City Default ............................................................................................................. 73 I I . I 2 Assurance of Performance ...................................................................................... 73 ARTICLE I2. OTHER AGREEMENTS OF THE PARTIES ....................................................... 74 I 2.0 I Relationship of Parties ............................................................................................ 7 4 I2.02 Compliance with Law ............................................................................................. 74 I2.03 Property Damage .................................................................................................... 74 I2.04 Grants ......................................................................................... : ............................ 74 I2.05 Assignment ............................................................................................................. 75 A. City Consent Required ................................................................................ 75 B. Assignment Defined .................................................................................... 75 C. City Review of Requests tb Consent to a Proposed Assignment.. .............. 76 I2.06 Subcontracting ........................................................................................................ 77 I2.07 Binding on Successors ............................................................................................ 77 I2.08 Parties in Interest. ................................... , ................................................................ 77 I 2.09 Waiver ..................................................................................................................... 77 I2.IO Contractor's Investigation; No Warranties by City ................................................ 78 I 2. I I Condemnation ......................................................................................................... 78 I 2. I 2 Representatives of the Parties ................................................................................. 78 A. Representative of City ................................................................................. 78 B. Representative of Contractor ...................................................................... 78 I2.I3 Notice ................................. , .................................................................................... 78 I2.14 Duty of Contractor Not to Discriminate ................................................................. 80 I 2. I 5 City Environmental Policies ................................................................................... 80 I2.I6 Right of City to Make Changes .............................................................................. 80 I 2. I 7 Cooperation During Transition ............................................................................... 8 I I 2. I 8 Protection of Customer Privacy .............................................................................. 8 I I2.I9 Use of Recycled Materiais ...................................................................................... 82 A. Recycled Paper ............................................................................................ 82 B. Re-Refined Motor Oil ................................................................................. 82 -vm- 10852395.2 TABLE OF CONTENTS (continued) Page C. Recycled Plastic .......................................................................................... 82 12.20 Municipal Code ................. ~·····················································································82 12.21 No Damages for Invalidation of Agreement ........................................................... 82 12.22 Indemnity Regarding Challenge to Award of Contract.. ........................................ 83 12.23 Fiscal Provisions ....................................................... : ............................................. 83 12.24 Affiliated Entity ....... ~ .............................................................................................. 83 ARTICLE 13. MISCELLANEOUS AGREEMENTS ................................................................... 84 13.01 Attachments ............................................................................................................ 84 13.02 Entire Agreement .................................................................................................... 84 13.03 Section Headings .................................................................................................... 84 13. 04 Interpretation ........................................................................................................... 84 13.05 Amendment ............................................................................................................. 84 13. 06 Severability ............................................................................................................. 84 13.07 Governing Law ....................................................................................................... 84 13.08 Jurisdiction .............................................................................................................. 84 13.09 No Attorneys' Fees ................................................................................................. 85 13.10 References to Laws ................................................................................................. 85 -IX- 10852395.2 A B c D-1 D-2 E F G G-1 H J-1 J-2 K-1 K-2 L-1 L-2 M N-1 N-2 N-3 0 p Q R s LIST OF ATTACHMENTS Definitions Transition and Implementation Plan Collection Scope of Work City Facilities for Solid Waste and Recycling Services Public Waste Receptacles Processing Scope of Work Containers Furnished by City Vehicle Specifications and Quantities Automated Trucks Proposal Containers Furnished by Contractor Minimum Roster of Personnel Minimum Wage Scale Monetary Conversion of Benefits Required Reports Data Management Requirements Form of Performance Bond Form of Continuation Certificate Form of Guaranty Contractor's Base Compensation for Rate Periods One and Two and Six and Seven; Unit Prices for Extra Services Compensation Adjustment Methodology Cost Details by Service Liquidated Damages Schedule List of Contractor's Members Procedures for Arbitration Non-Discrimination Form List of Special Events x 10852395.2 AGREEMENT FOR SOLID WASTE, RECYCLABLE MATERIALS, AND COMPOSTABLE MATERIALS COLLECTION AND PROCESSING SERVICES THIS AGREEMENT is made as of this 20th day of October, 2008, as amended and restated as of June 2015, by and between the CITY OF PALO ALTO, a chartered California municipal corporation ("City'), and GREENWASTE OF PALO ALTO, a Californiajoint venture ("Contractor"). RECITALS This Agreement is entered into on the basis of the following facts, understandings and intentions of the parties: 1. The State of California has found and declared that the amount of solid waste generated in California,. coupled with diminishing landfill space and potential adverse environmental impacts from landfilling, have created an urgent need for State and local agencies to enact and implement an aggressive integrated waste management program. The State has, through enactment of the California Integrated Waste Management Act of 1989, now codified as Public Resources Code Section 40000, et seq. (the "Act"), directed the California Integrated Waste Management Board, and local agencies, to promote recycling and to maximize the use of feasible source reduction, recycling and composting options in order to reduce the amount of solid waste that must be disposed of in landfills. The City has already achieved a level of waste diversion from landfill disposal that exceeds the level required by the Act., 2. In October 2005, the City Council approved a Zero Waste Strategic Plan developed by a task force of City residents and businesses. The City has since then formulated a Zero Waste Operational Plan, whose purposes are to reduce significantly the amount of waste produced by residents, businesses and institutions within the City, to reduce the toxicity of the disposed waste stream, and to maximize diversion of recyclable and compostable materials generated within the City. 3. On February 29, 2008, the City issued a Request for Proposals ("RFP") seeking proposals from qualified companies to provide the collection of Solid Waste, 10852395.2 Recyclable Materials, Organic Materials and Yard Trimmings, the processing of Recyclable Materials for reuse, the delivery of Yard Trimmings and Organic Materials for composting, the marketing of such materials and the transport of non-recyclable waste materials for disposal. The RFP requested proposals for new and expanded recycling services intended to implement the goals of the Zero Waste Operational Plan in an aggressive, cost-effective manner. 4. The City has evaluated all proposals submitted and has determined that the Contractor has proposed to provide the required services in a manner and on terms that are in the best interests of the City, taking into account (a) the Contractor's qualifications and experience, (b) its commitment to recycling, (c) its understanding of the flexibility that will be required to accommodate the number of changes that will occur during the term of the Agreement due to closure of the City's landfill and associated facilities, as well as the introduction and evolution of new programs intended to implement the Zero Waste Operational Plan, and (d) the cost of providing such services. 5. The City and Contractor (collectively, the "Parties") entered in Amendment No. 1 to this Agreement December 8, 2008, to amend collection vehicle information in Attachments G and N-3. 6. The Parties entered into a Letter of Intent on July 1, 2009 to clarify certain issues related to back/ side yard collection services. 7. The Parties entered into a Letter of Intent on September 23, 2009 to clarify issues related to electronic access to the City's Utilities bill and privacy protection of this information. 8. In 2011, the Act was amended by AB 341 to establish a policy goal that at least 75 percent of generated solid waste be reduced, recycled, or composted by the year 2020 and included mandatory commercial recycling. In 2014, the Act was further amended by AB 1826 to require jurisdictions, on and after January 1, 2016, to implement an organic waste recycling program that is appropriate for that jurisdiction, designed specifically to divert organic waste from those entities that generate it and requires local jurisdictions to engage in education, outreach, and monitoring of 2 10852395.2 businesses. AB 1826 enacted Cal. Pub. Resources Code§ 42649.82 which requires organic waste recycling programs to inventory existing facilities and programs, potential opportunities for new organic waste recycling facilities, and barriers to new or expanded compostable materials handling operations. 9. In consideration of the past amendment and letters of intent, and in furtherance of the Act, as amended by recent legislative amendments, the Parties now wish to further amend and restate this Agreement to (a) refine terms to increase diversion and efficiencies, including expanding compostable diversion, (b) allow for billing and collection of Commercial/Industrial accounts by Contractor; and (c) extend the Term four years through June 30, 2021. NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions contained in this Agreement and for other good and valuable consideration the parties agree as follows: 3 10852395.2 ARTICLE 1. DEFINITIONS Unless the context otherwise requires, capitalized terms used in this Agreement will have the meanings specified in Attachment A. Other capitalized terms, not defined in Attachment A, will have the meanings set forth in the definitions in Section 5.20.010 of the Municipal Code, which are incorporated herein by this reference. If a term is neither defined in Attachment A nor in the Municipal Code, that term will have the same meaning as the definition of the term contained in the Act. 4 10852395.2 ARTICLE 2. TERM OF AGREEMENT 2.01 Effective Date. The effective date of this Agreement shall be November 24, 2008 ("Effective Date"). 2.02 Term. The initial Term of the Agreement shall commence on the Effective Date and shall end at midnight on June 30, 2017 ("Term"). Contractor's obligation to collect Solid Waste and Recyclable Materials and provide other services to customers as required by this Agreement shall commence July 1, 2009. The Term has been extended through June 30, 2021 as provided in Section 2.03. 2.03 Option to Extend Term. The City may extend the Term of this Agreement for one (1) or more periods of twelve (12) months, up to a maximum of four (4) years, on the same terms and conditions. If City wishes to extend the Term it shall deliver a written notice to Contractor at least six (6) months before the expiration of the Term (i.e. on or before December 31, 2016) specifying the number of additional months by which it wishes to extend the Term. If the City initially elects to extend the Term for less than four (4) years, it may subsequently elect to further extend the Term in increments of twelve (12) months, up to a total of four (4) years, i.e. until June 30, 2021. If the City wishes to further extend the term in this fashion it shall deliver a written notice to Contractor at least thirty (30) days prior to the expiration of the extended term. Pursuant to this Section and City Council action on June 15, 2015, the Parties agreed to extend Term four years through midnight on June 30, 2021. 2.04 Conditions to Effectiveness of Agreement. The obligation of the City to perform under this Agreement is subject to satisfaction, on or before the Effective Date, of each and all of the conditions set out below, which may be waived in whole or in part by City: A. Accuracy of Representations. The representations and warranties made by Contractor in Article 3 of this Agreement shall be true and correct on and as of the Effective Date, and a certification to that effect dated as of the Effective Date shall be delivered by Contractor to City on the Effective Date. 5 10852395.2 B. Absence of Litigation. There shall be no litigation pending on the Effective Date in any court challenging the execution of this Agreement or seeking to restrain or enjoin its performance. C. Furnishing of Bond and Guaranty. Contractor has furnished the Performance Bond required by Section 10.03, or alternative security described in Section 10.04 if approved by City, and the Guaranty required by Section 10.07. D. Effectiveness of City's Approval. The City's approval of this Agreement shall have become effective, pursuant to California law, on or before the Effective Date. In the event that any condition set forth in this Section 2.04 is not satisfied or waived by the Effective Date by the City, this Agreement shall be void and shall have no further force or effect. City may waive the satisfaction of conditions described in Section 2.04, allow this Agreement to become effective, and exercise its rights and remedies under this Agreement for Contractor's failure to deliver the Performance Bond, alternative security, or Guaranty. Each party is obligated to perform in good faith the actions, if any, which this Agreement requires it to perform before the Effective Date and to cooperate towards the satisfaction of the conditions set forth above. 6 10852395.2 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF CONTRACTOR 3.01 Corporate Status. Contractor is a general partnership duly organized, validly existing and in good standing under the laws of the State of California, and is qualified to do business in the State of California. It has the power to own its properties and to carry on its business as now owned and operated and as required by this Agreement. 3.02 Corporate Authorization. Contractor has the authority to enter into and perform its obligations under this Agreement. The board of directors, the shareholders, and general partner of the Contractor's two partners have taken all actions required by law, their articles of incorporation and bylaws, and their partnership agreements or otherwise to authorize the execution of this Agreement. The persons signing this Agreement on behalf 9f Contractor have authority to do so. 3.03 Statements and Information in Proposal. The Proposal and information submitted by Contractor to the City supplementary thereto, on which City has relied in entering into this Agreement does not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading. 3.04 No Conflict with Applicable Law or Other Documents. Neither the execution and delivery by Contractor of this Agreement, nor the performance by Contractor of its obligations hereunder (i) conflicts with, violates or will result in a violation of any existing applicable law; or (ii) conflicts with, violates or will result in a breach 'or default under any term or condition of any existing judgment, order or decree of any court, administrative agency or other governmental authority, or of any existing contract or instrument to which Contractor or its partners are· a party, or by which Contractor or its partners are bound. 3.05 No Litigation. There is no action, suit, proceeding, or investigation at law or in equity, before or by any court or governmental entity, pending or threatened against Contractor or its partners, or otherwise affecting Contractor or its partners, wherein an unfavorable decision, ruling, or finding, in any single case or in the aggregate, would materially adversely affect Contractor's performance hereunder, or 7 10852395.2 which, in any way, would adversely affect the validity or enforceability of this Agreement, or which would have a material adverse effect on the financial condition of Contractor or its partners. 3.06 Financial Condition. Contractor has made available to City information on its financial condition, and that of its partners. Contractor recognizes that City has relied on this information in evaluating the sufficiency of Contractor's financial resources to perform this Agreement and of its partners to guaranty such performance. To the best of Contractor's knowledge, this information is complete and accurate, does not contain any material misstatement of fact and does not omit any fact necessary to prevent the information provided from being materially misleading. 3.07 ·Expertise. Contractor has the expertise and professional and technical capability to perform all of its obligations under this Agreement and is ready, willing and able to so perform. 8 10852395.2 ARTICLE 4. COLLECTION OF SOLID WASTE, RECYCLABLE MATERIALS, AND COMPOSTABLE MATERIALS 4.01 Scope of Work -General. The work to be done by Contractor includes the furnishing of all labor, supervision, equipment, materials, supplies and all other items necessary to perform the services required by the Agreement in a thorough, workmanlike, cost-effective and efficient matter, so that residents, businesses and institutions within the City are provided reliable, courteous and high-quality services at all times. The enumeration of, and specification of requirements for, particular items of labor or equipment shall not relieve Contractor of the duty to furnish all others that may be required, whether enumerated or not. Contractor shall perform all work in accordance with Attachments C and E, all provisions of which are incorporated herein whether or not such provisions are specifically referred to in any other section of this Agreement. In addition, to the extent that Contractor's Proposal includes promises to perform services in addition to, or at a higher standard of service than those required by the Request for Proposals, those promises are incorporated into this Agreement and Contractor hereby ratifies its agreement to perform as promised. 4.02 Transition and Implementation Plan. The Parties recognize that substantial planning and preparation will be required to ensure a successful initiation of collection operations by Contractor on July 1, 2009. To that end, Contractor has prepared a detailed transition and implementation plan addressing the steps Contractor will take, and the schedule on which it will take them, to prepare for commencement of collection operations. The implementation plan covers, among other matters, Contractor's schedule for hiring and training of personnel, acquiring necessary collection vehicles and arranging for their registration and inspection, acquiring equipment including new containers (carts, bins and boxes), preparing customer information materials (including collection schedules, route maps, billing forms, complaint forms, service request forms and so forth), distributing new containers to customers as required, securing a local office and a vehicle and container storage facility, and developing a contingency plan, and is attached as Attachment B. 9 10852395.2 Contractor shall diligently adhere to the implementation plan and shall meet periodically, whenever City requests, to review progress. Failure to adhere to the implementation plan, including its schedule, shall constitute a breach of this Agreement which, if uncured, shall constitute a default under Section 11.01. The specific plans and other materials required to be submitted by the implementation plan are subject to City's review and approval. City will take actions, make decisions, and provide directions to Contractor in accordance with the schedule and time allowances set forth in Attachment B, so as not to delay Contractor's adherence to the implementation plan schedule. 4.03 Grant of Exclusive and Non-Exclusive Rights A. Exclusive Rights. Subject to the terms and conditions of this Agreement and State laws (including the right of State agencies and public schools to use a Solid Waste enterprise other than Contractor), and except as otherwise specifically provided herein, City grants to Contractor for the Term the exclusive authority, right and privilege to collect, transport and dispose of all Solid Waste generated by or accumulated on all Residential and Commercial/Industrial Premises in the City and to collect, transport and process mixed Recyclable Materials and collect and transport Compostable Materials from Residential Premises only. The City retains the right to direct how and where Compostable Materials are processed. This grant is also subject to the exceptions and exclusions provided in Section 5.20.110 of the Municipal Code. B. Non-Exclusive Rights. Subject to the terms and conditions of this Agreement and State laws, and except as otherwise specifically provided herein, City grants to Contractor for the Term the non-exclusive right to collect, transport and recycle Recyclable Materials, Compostable Materials and Yard Trimmings from Commercial/Industrial Premises. 4.04 Collection of Solid Waste A. Single Family Residential Premises. Contractor shall collect all Solid Waste generated at Single Family Residential Premises within the City and placed 10 10852395.2 for collection on the street next to the curb or at sideyard/backyard locations of Customers with physical limitations who subscribe for such collection or who are eligible for such collection under policies adopted by City from time to time. Solid Waste shall be collected at the frequencies and in the manner specified in Attachment C, Section l .A. B. Multiple Family Residential Premises. Contractor shall collect all Solid Waste generated at Multiple Family Residential Premises within the City and placed for collection. Solid Waste shall be collected at the frequencies and in the manner specified in Attachment C, Section l.B. C. Commercial/Industrial Premises. Contractor shall collect all Solid Waste generated at Commercial/Industrial Premises within the City and placed for collection. Solid Waste shall be collected at the frequencies and in the manner specified in Attachment C, Section l.C. D. City Facilities and City-Furnished Public Litter Receptacles. Contractor shall collect all Solid Waste generated at City Facilities and placed for collection. The current City Facilities to be served, the frequency of collection and the number and capacity of containers to be collected are listed on Attachment D-1. The number and location of City Facilities to be provided service may change during the Term, as may change the number and capacity of containers at each facility. Contractor shall also collect all Solid Waste deposited in City-owned receptacles, including those receptacles placed at bus stops. The approximate number of pubHc Solid Waste receptacles, their current locations and collection frequencies are shown on Attachment D-2, each of which may change during the Term. Public Solid Waste receptacles shall be provided service at the frequencies and in the manner specified in Attachment C, Section l.D, but will change during the Term. 4.05 Collection of Recyclable Materials and Compostable Materials. A. Single Family Residential Premises. Contractor shall collect Recyclable Materials and Compostable Materials from all Single Family Residential Premises within the City placed for collection on the street or at sideyard/backyard locations of Customers with physical limitations who are eligible for such collection 11 10852395.2 under policies adopted by the City from time to time. Recyclable Materials and Compostable Materials shall be collected at the frequencies and in the manner specified in Attachment C, Section 2.A and Section 3.A. B. Multiple Family Residential Premises. Contractor shall collect Recyclable Materials and Compostable Materials from all Multiple Family Residential Premises within the City placed for collection. Recyclable Materials and Compostable Materials shall be collected at the frequencies and in the manner specified in Attachment C, Section 2.B and Section 3.B. C. Commercial/Industrial Premises. Contractor shall collect Recyclable Materials from all participating Commercial/Industrial Premises that are placed for collection in Contractor-furnished containers. Contractor shall collect Compostable Materials from all participating Commercial/Industrial Premises that are placed for collection in approved containers. Contractor shall also collect cardboard from shared containers in the business districts and wooden pallets. Recyclable Materials and Compostable Materials shall be collected at the frequencies and in the manner specified in Attachment C, Section 2.C and Section 3.C, but will change during the Term. D. City Facilities and City-Furnished Recycling Receptacles. Contractor shall collect Recyclable Materials placed for collection at the City Facilities listed on Attachment D-1 and as specified in Attachment C, Section 2.D. Contractor shall collect Recyclable Materials and Compostable Materials deposited in City-owned Recycling and Composting Receptacles at City Hall and other locations in Palo Alto, the number and location of which are shown on Attachment D-1 and D-2, but will change during the Term. 4.06 [Reserved] 4.07 Drop-Box Collection Services. A. Solid Waste. Contractor shall collect Solid Waste deposited in Contractor-furnished drop boxes (7, 15, 20, 30 and 40 cubic yard capacities) on an on- 12 10852395.2 call basis and on a monthly scheduled service basis, as requested by Customer. The drop boxes shall be provided and collected as specified in Attachment C, Section 4. B. Construction and Demolition Recycling. Contractor shall collect Construction and Demolition Debris deposited in Contractor-furnished drop boxes (7, 15, 20, 30 and 40 cubic yard capacities) on an on-call basis. The drop boxes shall be provided and collected as specified in Attachment C, Section 4. C. Single-Source Separated Recyclables. Contractor shall collect Single-Source Separated Recyclables deposited in Contractor-furnished drop boxes (7, 15, 20, 30 and 40 cubic yard capacities) on an on-call and monthly scheduled service basis, as requested by Customer. The drop boxes shall be provided and collected as specified in Attachment C. Section 4. D. Yard Trimmings. Contractor shall collect Yard Trimmings deposited in Contractor-furnished drop boxes (15, 20, and 30 cubic yard capacities) on an on-call and on a monthly scheduled service basis, as requested by Customer. The drop boxes shall be provided and collected as specified in Attachment C, Section 4. 4.08 Special Services. Contractor shall provide the following special services as specified in Attachment C, Section 5. • Hard to ServiCe Areas • Solid Waste and Recyclables Collection at the Household Hazardous Waste Station • On-Call Recycling Cleanout Service • Annual Clean Up Days • Special Events • Physical Limitations Program 4.09 Other Collection-Related Services. Contractor shall provide the following services: A. General 13 10852395.2 • Performance Audits • Route Audits • Waste Generation/Characterization on Recyclable Materials • Waste Audits for Green Business Certifications • Program Evaluation Audits • Customer Public Opinion Surveys Details of each of the above are described in Attachment C, Section 5.G. B. Cleaning of Public Receptacles. All public receptacles listed on Attachments D-2, including lids and metal liners, shall be thoroughly power-washed (with high pressure water and a strong detergent) twice a year. The Contractor shall provide a list of dates for cleaning to the Director for approval thirty (30) days in advance of the first scheduled date. In addition, Contractor shall wipe the exteriors and lids of all public receptacles listed on Attachments D-2 with water and detergent every two weeks, on a schedule approved by the Director. Contractor shall clean the interiors of public receptacles whenever needed to avoid odors and shall collect any materials that have accumulated within or arou_nd the receptacles. C. Building Plan Review. Contractor shall provide assistance to City by reviewing and providing comments on applications for City permits to construct new buildings or to remodel existing buildings. Contractor shall review building plans for adequate space to accommodate the number and size of containers for Solid Waste, Recyclable Materials, and Compostable Materials for adequate collection vehicle access and turnaround. Contractor shall provide City, within five (5) Business Days of receiving the plans, its written evaluation of the plans and any recommendations to improve safety and assure sufficient storage space and convenient access. D. Program Evaluation. Contractor shall periodically conduct surveys of the Single-Family Residential, Multi-Family Residential, and Commercial Solid Waste, Recyclable Materials, and Compostable Materials Collection programs to assess one or more of the following performance indicators: average volume of Recyclable Materials per setout per customer, average volume of Compostable Materials 14 10852395.2 per setout per customer, participation level (i.e., number of Customers setting out Containers per week), contamination levels, etc. Contractor shall perform up to five (5) days of route surveys each rate period. The C_ity and Contractor shall meet and discuss the purpose of the survey and the method, scope, and data to be provided by the Contractor. 4.10 Hours of Collection. Collection of Solid Waste, Recyclable Materials, and Compostable Materials, may occur only within hours authorized by the City. The Municipal Code currently prohibits collection of Solid Waste, Recyclable Materials or Compostable Materials (1) earlier than 6:00 a.m. or later than 6:00 p.m. in residential districts and at schools, churches and commercial premises adjacent to residential districts, and (2) earlier than 4:00 a.m. or later than 9:00 p.m. in commercial districts subject to reasonable modification made by the Director. 4.11 Collection Standards. A. Care of Private Property. Contractor shall use due care when handling Solid Waste, Recyclable Materials, and.Compostable Materials Containers. Containers shall not be thrown from trucks, roughly handled, damaged or broken. Containers shall be returned to the collection point upright, with lids properly closed. Contractor shall ensure that its employees close all gates opened by them in making collections, unless otherwise directed by the Customer, and avoid crossing landscaped areas and climbing or jumping over hedges and fences. City will refer complaints about damage to private property, including common areas in common-area subdivisions, to Contractor. Contractor shall promptly repair, or arrange for the repair of, all damage to private property caused by its employees within ten (lO)days of the complaint being received. B. Noise. All collection operations shall be conducted as quietly as possible and shall conform to any federal, state, County and City noise level regulations. The noise level shall not exceed 95 decibels at a distance of 25 feet from the collection vehicle, as provided in Municipal Code Section 9.10.060(h). The City may conduct random checks of noise emission levels to ensure such compliance. 15 10852395.2 C. Service Quality. Contractor shall promptly (within ten (10) days) and courteously respond to, and satisfactorily resolve, Customer complaints relating to: missed pick-ups, spills and litter resulting from collection; collection schedule changes; broken or missing containers; improper set-outs; noise; obstruction of traffic or sidewalks during collection; and collection vehicle operation, including safety. 4.12 Litter Abatement. A. Minimization of Spills. Contractor shall use due care to prevent Solid Waste, Recyclable Materials, or Compostable Materials, from being spilled or scattered during the collection or transportation process. If any Solid Waste, Recyclable Materials, or Compostable Materials, is spilled, Contractor shall promptly notify the City and clean up all spilled materials, whether on private or public property. Each collection vehicle shall carry a broom and shovel at all times for this purpose. Contractor shall not transfer loads from one vehicle to another on any public street or private roadway, unless it is necessary to do so because of mechanical failure or damage to a collection vehicle which renders it inoperable. B. Clean Up. The Contractor shall clean up litter in the immediate vicinity of any Solid Waste, Recyclable Materials, or Compostable Materials, storage area (including the areas where collection containers or bins and debris boxes are placed for collection) whether or not Contractor has caused the litter. Contractor shall notify the Customer when such event occurs at a specific Premise. On the second or later occurrences, Contractor will collect the material, notify customer and assess a charge to the Customer for the additional services provided. City may require the Customer to accept and pay for increased service (i.e., a larger bin or more frequent collections). 4.13 Hazardous Waste A. General. Contractor shall be aware of, and comply with, all laws and regulations relating to the handling and transportation of Hazardous Waste and hazardous materials, including those regarding training and documentation. 16 10852395.2 B. Notice to Customers. Contractor shall notify all Customers at least once a year of (i) the prohibition against the disposal of Hazardous Waste in containers placed for collection by Contractor, (ii) the obligation of each Customer to provide for the proper handling and disposition of Hazardous Waste, and (iii) options available to C_ustomers for the collection and appropriate processing of Hazardous Waste. To the extent that Contractor has actual knowledge of the existence of such Hazardous Waste in a container placed for collection, Contractor shall not collect such container. Contractor shall, prior to leaving the location where such Hazardous Waste has been observed, leave a tag at least 3" x 6" which informs the customer why the collection was not made and lists the telephone number for the City of Palo Alto Household Hazardous Waste Management Program. C. Contractor to Segregate and Dispose. In the event Contractor inadvertently collects any Hazardous Waste and during the course of transportation and disposition becomes actually aware that it has collected such Hazardous Waste, Contractor shall segregate the Hazardous Waste, and shall arrange for its transport to a properly permitted recycling, treatment or disposal facility of Contractor's choosing. Contractor shall be solely responsible for the transport and appropriate disposition of all Hazardous Waste that is collected by the Contractor. Contractor shall cooperate with City attempts to locate and collect from the responsible Customer. D. Operating Procedures and Employee Training. Contractor shall establish, implement and maintain written operating procedures designed to ensure Contractor's utilization of techniques generally accepted in the waste hauling industry for cities of the size and demographic composition of the City of Palo Alto, to handle and dispose of Hazardous Waste and its compliance with the provisions of this Section 4.12. Contractor shall establish, implement and maintain an employee training program and shall ensure that employees responsible for the identification of Hazardous Waste are fully trained. Contractor shall maintain documentation which describes the training received by its employees. 4.14 Provision of Emergency Services. Contractor shall provide emergency services at the City's request in the event of major accidents, disruptions, or natural calamities. Emergency services may include, but are not limited to: assistance 17 10852395.2 handling, salvaging, processing, composting, or recycling materials; and disposing of Solid Waste. Contractor shall be capable of providing emergency services within twenty-four (24) hours of notification by the City or as soon thereafter as is reasonably practical in light of the circumstances. Emergency services which exceed the Contractor's obligations shall be compensated in accordance with Article 9. If Contractor cannot provide the requested emergency services, the City will have the right to take possession of the Contractor's equipment for the purposes of providing emergency services. Contractor shall submit to City ninety (90),days prior to commencement of collection services (i.e., on or before April 2, 2009), a written contingency plan demonstrating Contractor's arrangements to provide vehicles and personnel and to maintain uninterrupted service in case of natural disaster or other emergency, including the events described in this Section and Section 11.10. Contractor shall continue to update this emergency plan annually or as needed to identify changes in contact information, updated equipment, a new available processing site or additional availability of resources. 4.15 Public/Customer Service and Accessibility A. Office. Contractor shall establish and maintain an office at the Geng Road site. If the City determines the Geng Road site is needed for other purposes, Contractor shall relocate within 60 days of notice from City. New location shall have the capacity to provide the same level of service and shall be approved by the Director. B. Office Hours. Contractor's office shall be open to the public from 8 a.m. to 5 p.m. Monday through Friday. On those Saturdays on which collection services are performed, all phone calls and voicemails shall be fielded by the on-duty Contractor's Route Supervisor. If a customer needs assistance at the office, the on-duty Supervisor shall make himself available until all collection routes have been completed. The office may be closed on Sundays and holidays, as defined. C. Staffing. At least two (2) thoroughly trained and knowledgeable customer service representatives shall be present at the Contractor's office whenever it is open to communicate with the City, and assist members of the public with questions, 18 10852395.2 complaints about service, initiating and terminating service, paying bills, and other similar matters. Contractor's staff needing to access the City's network shall, prior to being issued access, have background checks using the City's fingerprinting resources. D. Telephone. Contractor's office shall be equipped with telephone equipment sufficient in number and capacity to allow calls received during office hours to be answered by an employee within five (5) rings. Any caller on hold for more than ninety (90) seconds shall have the option of remaining on hold or being switched to a message center where the caller may leave a message. Callers "on hold" shall be connected to a customer service representative within an additional ninety (90) seconds. All messages left shall be responded to within sixty (60) minutes. If these standards are not consistently met, or if an excessive number of callers are placed on hold, City may require Contractor to install additional telephone lines or provide additional staff coverage .. Calls received when the office is closed shall be recorded and answered before 12 noon on the following workday. Contractor shall arrange for its telephone number to be listed in all telephone directories generally distributed in the City, on all written materials distributed by Contractor, and on Contractor's web site . . Contractor shall be capable of responding to telephone calls in English, Spanish [and such other languages as City may require). Contractor shall use its best efforts to secure the same telephone number as the predecessor service provider. E. Correspondence. Contractor shall respond to all written correspondence, including those sent electronically ("email"), from City or Customers within three (3) business Days. F. Emergency Contact. Contractor shall provide the City with an emergency telephone number so that the City can reach a representative of Contractor, 19 10852395.2 authorized to act on Contractor's behalf outside of office hours. The emergency representative shall respond to any call from City within one (1) hour. G. Web Site. Contractor shall establish and maintain a web site specific to the City which will provide at least the following services and capabilities: (1) provide answers to frequently asked questions; (2) list the Contractor's office address, mailing address (if different), telephone and email contact information; (3) a current schedule of collection days and routes; (4) a schedule or link of the current City- approved rates and charges, (5) lists of materials that may (or should not) be placed in Solid Waste, Recyclable Materials and <;ompostable Materials containers; (6) allow Customers to schedule services and request changes in service, including cancellation, and to file complaints; and (7) contain a link to the City's web site. The information posted on Contractor's web side shall be consistent with City's web site information, unless otherwise approved by City. Information on web site shall be regularly maintained and updated. H. Large Customers. Contractor shall designate specific employee(s) to be responsible for large customers (the top 50 waste generators) in order to maintain a good working relationship with the Customer and resolve problems in a timely manner. Large customers shall be provided an itemized list of charges by address of each customer's facilities, within 24 hours of a request. 4.16 Billing and Collecting For Regular and Special Services Commercial/Industrial. A. General. If directed by the City, Contractor shall be responsible for billing and collecting fees for all Commercial/Industrial Customers for all services as well as for special services. Contractor will maintain accurate billing and payment records, establish billing and collection procedures, and periodically notify the City of delinquent accounts as described in more detail below. City will continue to bill and collect for all other Customers. B. Special Services. When Contractor is requested to provide special services (primarily on-call drop box service), it shall determine whether the Customer has a utility account in good standing with City. If so, Contractor will provide service 20 10852395.2 and bill the Customer. If the Customer does not have a utility account in good standing with the City, Contractor shall require payment prior to delivery of the service (i.e., before or when the drop box is delivered to the site). Payment will be accepted in cash, certified check payable to Contractor, or credit card. Contractor shall notify City of the service provided and the amount collected and shall remit all funds collected to City as provided in Attachment C. C. Regular Services. Should the City decide to have Contractor manage billing and collection of fees, the Contractor shall provide billing and collection for regular and additional services for Commercial/Industrial customers at the rates established by the City Council from time to time. Customers shall be billed once a month using a billing format subject to City approval. When Contractor is requested to provide regular services, it shall determine whether the Customer has a utility account in good standing with City. If so, Contractor will provide service and bill the customer. If the Customer does not have a utility account in good standing with the City, Contractor shall not set up the service and will contact the City for direction. The bill shall include the service levels for the customer (Solid Waste, Compost, and Recycling) as well as any special charges (push service, lock service, bin rental), and additional services (additional refuse pickups or debris box service). The Contractor shall provide the customers with the option of receiving an electronic bill in lieu of a paper bill if technology allows or becomes available. The Contractor shall provide for customers to make electronic payments from a website. Payment will be accepted in cash, check payable to Contractor, or credit card. All billing inquiries will be handled by the Contractor. The Contractor will process debits and credits to customer accounts. Any debits or credits that exceed $1,000 for a customer (either one time or cumulatively in a 12-month period) will require authorization from the City. Customer payments will be sent directly to a bank lockbox set up by the Contractor in partnership with the City with funds deposited daily into a City bank account. Contractor shall coordinate with the lockbox vendor on matching billings with payments received and identification of returned checks, miscued items and unreadable checks. The Contractor shall assign the received funds against the customer accounts and maintain an accounts receivable (A/R) database. 21 10852395.2 D. Delinquent Accounts. Contractor shall be responsible for collecting delinquent charges for services it renders to customers. The Contractor shall employ measures, consistent with federal and California laws regulating the collection of debts, to attempt to collect payment from past due accounts. Contractor shall not (1) assign delinquent accounts to a third party collection agency, or (2) initiate a Small Claims Court action without the prior written approval from the City Attorney. Should an account exceed ninety (90) days past due, the account will be transferred to the City for collection of funds. Contractor shall designate a representative to attend administrative or other hearings as scheduled by City to address delinquent charges for services rendered to any customer by Contractor and/ or legal proceedings initiated by the City to collect such charges. Contractor's representative shall provide the customer's account records to the City, together with a record of communications with the past due customer and any other documents requested by the City. The Contractor shall not be responsible for past due accounts. The City will manage all refuse service suspension whether due to suspension of business operations or failure of a customer to pay. E. Bill Inserts. The Contractor shall provide the ability to include monthly bill inserts with content provided by the City at no additional cost to the City. City will design, print and deliver bill inserts to Contractor for insertion into printed bill. F. Billing Records. Contractor shall keep records of all billing documents and customer account records including, but not limited to, invoices, customer payment coupons mailed with the invoice and collection notices, for a period of three (3) years after the date of receipt or issuance. Contractor may, at its option, maintain those records in computer or digital form, or in any other manner, provided that the records can be preserved and retrieved for inspection and verification in a timely manner. G. Billing Related Reports. On a monthly basis, Contractor shall provide the City with the reports listed in Attachment K-1. Should the City decide for 22 10852395.2 additional reporting data, Contractor will obtain necessary programing resources to provide the reporting data. H. City Access to Billing Information. Contractor shall provide City with prompt access to all current and up-to-date billing information necessary to allow the City to collect delinquent bills pursuant to the Municipal Code. In addition, Contractor will cooperate fully and actively with City staff to effectuate transfer of billing information from the City to Contractor. 23 10852395.2 ARTICLE 5. TRANSPORTATION OF MATERIALS 5.01 General . .Qontractor shall transport all Solid Waste, Recyclable Materials, including Construction and Demolition Debris to be Recycled, and Compostable Materials collected pursuant to this Agreement to the facilities identified in this Article 5. Contractor will deliver material collected in the City directly to each of the facilities described below and will not commingle any material collected from outside the City in the vehicles used to deliver City materials to these facilities. Contractor shall not deliver Solid Waste, Recyclable Materials, including qualifying loads of Construction and Demolition Debris, or Compostable Materials to facilities other than those identified in this Article without the prior written approval of City. 5.02 Transportation of Solid Waste. Contractor shall transport and deliver all Solid Waste collected pursuant to this Agreement to the Sunnyvale Materials Recovery and Transport Station ("SMART Station") in Sunnyvale. Contractor shall cooperate with the operators of the SMART Station with regard to operations therein including, by way of example, complying with directions from the operator to unload collection vehicles in designated areas, accommodating to maintenance operations and construction of new facilities, and cooperating with the operator's hazardous waste exclusion program and tonnage tracking system. 5.03 Transportation of Recyclable Materials. Contractor shall transport and deliver all Recyclable Materials collected pursuant to this Agreement to the GreenWaste Recovery Material Recovery Facility (GreenWaste MRF) located at 625 Charles Street, San Jose. 5.04 Transportation of Residential Compostable Materials. Contractor shall transport and deliver all Residential Compostable Materials collected pursuant to this Agreement to the SMART Station, the Green Waste Recovery Material Recovery Facility, the potential Palo Alto Compost Facility or the Zero Waste Energy Development Corporation Dry Anaerobic Digestion Facility (ZWED) in accordance with City direction, at no additional cost. If the City directs Contractor in writing to transport and deliver Residential Compostable Materials to another processing facility such as Newby Island Composting Facility, the additional documented cost would be paid by City. 24 10852395.2 5.05 Transportation of Construction and Demolition Debris for Recycling. Contractor shall transport and deliver all Construction and Demolition Debris collected pursuant to this Agreement to the Zanker Road Materials Processing Facility located at 675 Los Esteros Road, San Jose or to the Zanker Road Resource Recovery Operation and Landfill, located at 705 Los Esteros Road, San Jose for Recycling. 5.06 Transportation of Commercial/Industrial Compostable Materials. Contractor shall transport and deliver Compostable Materials collected from Commercial/Industrial Premises and Compostable Materials collected at special events to ZWED located at 685 Los Esteros Road, San Jose. 25 10852395.2 ARTICLE 6. PROCESSING OF MATERIALS FOR RECOVERY AND REUSE 6.01 General. Contractor recognizes that the City Council has adopted, as a matter of municipal policy, the goal of minimizing the amount of materials that are disposed of in landfills and that the activities described in this Article are essential components of achieving that goal. A major factor in. the City's decision to award and now amend and extend this Agreement with Contractor has been the Contractor's representations and assurances as to the levels of recovery and reuse that will be achieved by processing at the facilities identified in this Article. Contractor shall secure updated written assurances as described below within thirty (30) days of the City Council's action approving the term extension. 6.02 Recyclable Material Processing A. Capacity and Priority Assurances. Contractor shall secure by the Effective Date a written assurance from the owner/ operator of the Green Waste MRF that (1) it has the physical capacity to accept and effectively process all Recyclable Materials delivered to the facility from the City in addition to any Recyclable Material which it is currently contractually committed to accept and process; (2) its solid waste facility permit, and all other permits from governmental agencies necessary for it to operate, authorize it to accept and process the Recyclable Materials expected to be delivered from the City in addition to any Recyclable Material which it is currently contractually committed to accept and process; and (3) it has committed, or will commit, to assign Recyclable Materials collected in the City by Contractor and delivered to the facility higher priority in processing and marketing than all similar materials, other than those which are delivered under contracts which the facility owner/ operator entered into before the Effective Date. B. Processing. Contractor shall assure that all Recyclable Materials delivered to the GreenWaste MRF are processed (sorted, cleaned and baled) for Recycling and/ or reuse in accordance with the Processing Standards set forth in Attachment E. 26 10852395.2 C. No Disposal/Residue Limit. Contractor shall ensure that Recyclable Materials it delivers to the Green Waste MRF are not incinerated or disposed of at a landfill, except as provided in the following sentence. Unmarketable residue, not to exceed eight percent (8%) by weight of Recyclable Material delivered from City, measured as provided in Attachment E, may be disposed of at a permitted disposal site. D. Marketing. Contractor shall ensure that no less than ninety two percent (92%) by weight of the Recyclable Materials delivered to the Green Waste MRF is marketed for Recycling or reuse, such that those materials will qualify as having been diverted under California's Department of Resources Recycling and Recove:ry (CalRecycle) regulations. E. Weighing. Contractor shall ensure that the owner/ operator of the GreenWaste MRF operates scales at the facility that are registered with the County Department of Weights & Measures. The scales shall be regularly maintained to ensure their reliability and accuracy. Inspection reports and maintenance records shall be made available for review by City on request. All Recyclable Materials delivered to the Green Waste MRF will be weighed upon initial delive:ry. Gross, tare and net weights will be recorded, along with vehicle number, date and time of delive:ry. F. Reporting. Contractor will arrange for accurate, complete and timely reports on Tons of Recyclable Materials delivered to Green Waste MRF, Tons of Recycled Materials marketed and prices received, and Tons of residue disposed to be produced by the owner/ operator of the facility and furnished to City as provided in Attachment E. G. Inspection. Contractor shall arrange for City to have free access to inspect the GreenWaste MRF during business hours. 6.03 Construction and· Demolition Debris Processing A. Capacity and Priority Assurances. Contractor shall secure by the Effective Date a written assurance from the owner/ operator of the Zanker Materials Processing Facility (ZMPF) and the Zanker Road Resource Recove:ry Operation and Landfill (ZRRROL) that (1) each facility has the physical capacity to accept and 27 10852395.2 effectively process all C&D Debris delivered to the facility from the City in addition to any C&D Debris which they are currently contractually committed to accept and process; (2) the solid waste facility permits, and all other permits from governmental agencies necessary for each facility to operate, authorize them to accept and process the C&D Debris expected to be delivered from the City in addition to any C&D Debris which they are currently contractually committed to accept and process; and (3) it has committed, or will commit, to assign C&D Debris collected in the City by Contractor and delivered to either facility higher priority in processing and marketing than all similar materials, other than those which are delivered under contracts which the facility owner/ operator entered into before the Effective Date of this Agreement. B. Processing. Contractor shall assure that all C&D Debris delivered to the ZMPF or the ZRRROL is processed (sorted, cleaned and baled) for Recycling and/ or reuse in accordance with the Processing Standards set forth in Attachment E. C. No Disposal/Residue Limit. Contractor shall ensure that C&D Debris it delivers to the ZMPF or the ZRRROL is not disposed of at a landfill, except as provided in the following sentence. Unmarketable residue, not to exceed twenty five percent (25%) by weight of the total combined mixed and single source separated C&D Debris delivered from City to both facilities, measured as provided in Attachment E, may disposed of at a permitted Landfill. D. Marketing. Contractor shall ensure that no less than seventy five percent (75%) by weight of the total combined mixed and single source separated C&D Debris delivered from City to both facilities is marketed for Recycling or reuse, such that those materials will qualify as having been diverted under CalRecycle regulations. E. Weighing. Contractor shall ensure that the owner/ operator of the ZMPF and the ZRRROL operates scales at each facility that are registered with the County Department of Weights & Measures. The scales shall be regularly maintained to ensure their reliability and accuracy. Inspection reports and maintenance records shall be made available for review by City on request. All C&D Debris delivered to the ZMPF or the ZRRROL will be weighed upon initial delivery. Gross, tare and net weights will be recorded, along with vehicle number, date and time of delivery. 28 10852395.2 F. Reporting. Contractor will arrange for accurate, complete and timely reports on Tons of C&D Debris delivered to ZMPF or the ZRRROL, Tons of C&D Debris marketed and prices received, and Tons of residue disposed to be produced by the owner/ operator of the ZMPF and the ZRRROL and furnished to City as provided in Attachment E. G. Inspection. Contractor shall arrange for City to have free access to inspect the ZMPF and the ZRRROL during business hours. 6.04 Compostable Materials Processing A. Capacity and Priority Assurances. Contractor shall secure within 30 days of City action approving this Agreement a written assurance from the owner/operator of the ZWED Facility that (1) it has the physical capacity to accept and effectively process all Compostable Materials delivered to the facility from the City in addition to any Compostable Materials which it is currently contractually committed to accept and process; (2) its solid waste facility permit, and all other permits from governmental agencies necessary for it to operate, authorize it to accept and process the Compostable Materials expected to be delivered from the City in addition to any Compostable Materials which it is currently contractually committed to accept and process; and (3) it has committed, or will commit, to assign Compostable Materials collected in the City by Contractor and delivered to the facility higher priority in processing and marketing than all similar materials, other than those which are delivered under contracts which the facility owner/operator entered into before July 1, 2015. B. Processing. Contractor shall assure that all Compostable Materials delivered ZWED are processed for use as energy, compost, mulch, or soil amendment in accordance with the Processing Standards set forth in Attachment E. C. No Disposal or Use as ADC. Contractor shall ensure that the Compostable Materials it delivers to ZWED are not disposed of at a landfill or used as alternative daily cover (ADC) at a landfill. Inorganic contamination, not to exceed ten percent (10%) by weight of Compostable Materials delivered from City, measured as provided in Attachment E, may be disposed of at a permitted disposal site. 29 10852395.2 D. Marketing. Contractor shall ensure that no less than ninety percent (90%) by weight of the Compostable Materials collected in City and delivered to ZWED is processed for use as energy, compost, mulch, or soil amendment such that those materials will qualify as having been diverted under CalRecycle regulations. E. Weighing. All Compostable Materials delivered to ZWED shall be weighed upon initial delivery. F. Reportine:. Contractor will arrange for accurate, complete and timely reports on Tons of Compostable Materials delivered to ZWED, Tons of Compostable Materials marketed and prices received, and Tons of residue disposed to be produced by the owners/ operators of the ZWED, and furnished to City as provided in Attachment E. G. Inspection. Contractor shall arrange for City to have free access to inspect Z-BEST or ZWED during business hours. 30 10852395.2 ARTICLE 7. EQUIPMENT, PERSONNEL AND FACILITIES 7.01 General. Contractor shall furnish all equipment necessary to perform safely and efficiently the services required by this Agreement except for the Containers furnished by the City which are listed on Attachment F. 7.02 Vehicles. A. General. Contractor shall provide collection and auxiliary vehicles of the type, size and configuration, and in the quantities shown on Attachment G. All such vehicles shall be suitable in design and construction for arduous heavy-duty service. All vehicles shall comply with all laws and regulations including but not limited to the California Air Resources Board regulations for solid waste collection vehicles codified at 13 CCR Section 2020 et seq. B. Purchase of Vehicles. 1. Purchase of New Vehicles. All of the vehicles placed in service on July 1, 2009 shall be new and unused, other than those to be purchased from Palo Alto Sanitation Company (PASCO), the previous service provider, which are described in subsection 2. Use of newly acquired vehicles for weekend training of drivers to be employed by Contractor and dedicated to service in City shall not disqualify such vehicles from being "new and unused." 2. Purchase of PASCO Vehicles. Contractor has purchased six (6) collection vehicles powered by compressed natural gas (CNG) from PASCO, as well as three (3) other ancillary vehicles. All of these vehicles are separately identified in Attachment G, together with their initial purchase prices and depreciation schedules. The six CNG PASCO vehicles shall be replaced in fiscal year 2016, as updated in Attachment G. City will provide Contractor with CNG at no cost, at its fueling facility located at 3201 East Bayshore Road, Palo Alto. Concurrently with the approval of this Agreement by City, Contractor will be issued a fueling permit, as amended as of 2015, by City containing the terms and conditions of Contractor's use of that facility. 31 10852395.2 3. Purchase of Replacement Vehicles. Any vehicles purchased during the Term, as extended, shall be new and unused. If it becomes necessary, a used vehicle may be placed into service on a temporary basis (i.e., no more than 90 days), provided that it is safe, in good operating condition, equivalent in design and capacity to vehicles in regular service and approved by the City. C. Vehicle Identification. The name of City and Contractor, Contractor's local telephone number, and a unique vehicle identification number for each vehicle shall be prominently displayed on all vehicles. City shall approve all details, including size, color and location of text, I.D. numbers and logo. D. Cleaning and Maintenance. 1. General. Contractor shall maintain all of its equipment used in providing service under this Agreement in a safe, neat, clean and operable condition at all times. 2. Cleaning. The exterior and interior of vehicles used in the collection of Solid Waste, Recyclable Materials, and Compostable Materials shall be thoroughly washed by Contractor a minimum of twice per week and thoroughly steam cleaned at least once every week. City may inspect vehicles at any time to determine compliance with sanitation requirements and aesthetic conditions. Contractor shall make vehicles available to the City, the Santa Clara County Department of Environmental Management and the Local Enforcement Agency for inspection, at any frequency they request. 3. Painting. All vehicles used in collection of Solid Waste, Recyclable Materials, and Compostable Materials shall be repainted by Contractor at least once every five years, unless the City determines that repainting a specific vehicle at that frequency is not necessary because the vehicle's appearance is satisfactory or unless the City determines that repainting a specific vehicle earlier (due to graffiti damage, etc.) is necessary to ensure that the vehicle gives the appearance of having been repainted within the preceding twenty four (24) months. 32 10852395.2 4. Maintenance. Contractor shall (i) inspect each vehicle daily to ensure that the vehicle and all equipment is operating properly; and (ii) perform or cause to be performed all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. Vehicles which are not operating properly shall be taken out of service until they are repaired and do operate properly. Contractor shall keep accurate records of all vehicle maintenance, recorded according to vehicle or part l.D., date, and mileage, and shall make such records available to the City and the California Highway Patrol upon request. 5. Repairs. Contractor shall repair, or arrange for the repair of, all vehicles and equipment for which repairs are needed because of accident, breakdown or any other cause so as to maintain all vehicles and equipment in a safe and operable condition. If an item of repair is covered by a warranty, Contractor shall obtain warranty performance. Contractor shall maintain accurate records of repair, which shall include the vehicle or part l.D., date/mileage, nature of repair and the signature of a maintenance supervisor that the repair has been properly performed. 6. Storage. Contractor shall arrange to store all vehicles and other equipment in safe and secure location(s). Vehicles shall be stored at Contractor's corporation yard identified in Section 7.09 or at another location arranged by Contractor and approved, in advance and in writing, by City. Facilities used for storage or maintenance shall comply with all zoning and land use requirements applicable to the facility. City shall have access to the facilities at all times. Vehicles may not be stored (e.g., parked overnight) on City streets. E. Operation. Vehicles shall be operated in compliance with the California Vehicle Code and all applicable safety regulations and City ordinances. Vehicles shall be operated only by employees of Contractor who are appropriately licensed by the California Department of Motor Vehicles. Contractor shall not load vehicles in excess of the manufacturer's recommendations or limitations imposed by state or local weight restrictions on vehicles. Contractor shall be solely responsible for paying any fines imposed by the California Highway Patrol, or other regulatory agencies, for violation of these requirements. 33 10852395.2 · F. Sale. If Contractor sells a vehicle or other equipment during the Term, its remaining undepreciated value shall be removed from the calculation of Contractor's Compensation. If the equipment was fully depreciated before its sale, the revenue received by Contractor from its sale shall be reported to City and deducted from Contractor's Compensation. If such vehicle or equipment must be replaced by a similar vehicle or equipment, depreciation on the new vehicle and/ or equipment, based on the remaining Term, shall be included in Contractor's Compensation. 7.03 Solid Waste, Recycling and Compostable Containers. A. General. Contractor shall purchase, assemble, and deliver to Customers containers for storage of (i) Solid Waste, (ii) Recyclable Materials, (iii) Compostable Materials, (iv) Construction/Demolition Debris, (v) "Recycling Buddies" for Multi-Family Premises, the type, size .and initial quantities or minimum inventory of which are shown in Attachment H. City will purchase kitchen buckets to be distributed by Contractor to residential Customers with Compostable Materials collection. All such containers shall be new and unused. The type, size and number of containers provided to each Customer shall be sufficient to contain, with the lid closed, all Solid Waste, Recyclable Materials and Compostable Materials generated between collections. B. Repair and Replacement. Contractor shall repair or replace all containers damaged by collection operations or which do not meet vendors' warranties. Customers shall be provided with adequ::ite numbers of containers available for use during all times between scheduled collection days. C. Cleaning, Painting and Maintenance of Contractor-Furnished Containers. Contractor shall maintain all Contractor-furnished containers in a functional condition and so as to present a clean and attractive appearance in the opinion of the Director. Such containers shall be painted and repainted as requested by City. Contractor-furnished containers that have been marked with graffiti shall be cleaned, repainted or removed from the Premises by Contractor within twenty-four (24) hours of notification by the Customer or City. At the same time as such containers are removed, they shall be replaced by clean, like-sized containers furnished by Contractor. Contractor shall clean and maintain all Contractor-furnished containers in a safe and 34 10852395.2 sanitary condition and whenever the City, or another agency with jurisdiction as a regulator, determines that cleaning is required to abate a health concern or nuisance condition. D. Other. Additional requirements related to containers are included in Attachment C. 7.04 City Right to Purchase Equipment, Sales of Equipment. The City may purchase any or all eq"l!-ipment owned by Contractor at the expiration or earlier termination of this Agreement, at its net book value as shown on Contractor's financial statements, which shall be no greater than the purchase price less the accumulated depreciation allowed for such equipment in payments of Contractor's Compensation pursuant to Article 9. Contractor shall, prior to August 1, 2009, deliver to the City properly signed UCC-1 Financing Statements and all other documents necessary or appropriate for the City to secure its purchase options and shall file, or allow the City to file, such Statements and other documentation as provided 1n California Commercial Code. As new or replacement equipment is purchased, similar documentation covering it shall be provided by Contractor within thirty (30) days of purchase. If Contractor wishes to lease (rather than purchase) the equipment which it is to furnish, it shall request City's permission to do so and provide to City, for its approval, complete and accurate copies of all equipment leases which it proposes to enter into. The leases must provide that the lessor will, if requested, consent to their assignment to ' City without charge upon the expiration or earlier termination of this Agreement and must provide adequate mechanisms for the City to acquire title to equipment. Upon the City's exercise of its option to purchase, Contractor shall sign and deliver bills of sale or other documents reasonably requested by City to evidence the transfer of title to all equipment purchased. City has no obligation to acquire Contractor's vehicles, or any other Contractor equipment, at the end of the initial Term or as it may be extended, nor to pay the undepreciated value (net book value) of such vehicles or equipment then or upon the earlier termination of this Agreement. 35 10852395.2 7.05 Personnel. A. General. Contractor shall furnish competent and qualified drivers, mechanics, laborers, managerial, supervisory, clerical, and other personnel in sufficient numbers to provide the services required by this Agreement in a safe and efficient manner. The minimum complement of full time personnel which Contractor will provide for the scope of work described in this Agreement shall be as shown on Attachment I. Contractor may only make changes to the minimum complement of personnel with written Director approval. Contractor shall maintain a complete roster of employees providing service under this Agreement. The roster shall contain the name, home address, phone number, social security number, job classification, date of hire, driver's license number, and such other information as City may require. The City may inspect the roster, and make a copy thereof at Contractor's expense. B. Driver Qualifications. All drivers shall be trained and qualified in the operation of waste collection vehicles and must have in effect a valid license, of the appropriate class, issued by the California Department of Motor Vehicles. Each driver shall carry his/her license during work hours. Drivers must be proficient in the English language. C. Uniforms. Contractor shall require its drivers, and all other employees who come into contact with the public in the City during working hours, to wear standardized uniforms bearing the Contractor's name, and to carry an identification badge or other means of identifying the employee. The City will have the right to approve the style and color of the uniforms. Such uniforms shall present a freshly cleaned appearance. Employees shall be instructed to present employment identification cards to City staff, customers, security guards and law enforcement officers upon request, during work hours. D. Safety Training. Contractor shall provide, at least annually, comprehensive operational and safety training for all of its employees who utilize or operate vehicles or equipmen~ for collection or processing of Solid Waste, Recyclable Materials and Yard Trimmings, or who are otherwise directly involved in such collection 36 10852395.2 or proce'ssing. Contractor shall train its employees involved in collection to identify, and not collect, Hazardous Waste or Infectious Waste and shall make clear that any scavenging of loads is prohibited. Contractor shall provide the name of its safety officer, the frequency of its training, and a copy of its training policy and safety training program to City upon request. E. No Gratuities. Contractor shall not permit its employees to demand or solicit, directly or indirectly, any additional compensation or gratuity from members of the public for the collection of Solid Waste, Recyclable Materials and Compostable Materials. F. Employee Conduct and Courtesy. Contractor shall use its best efforts to assure that all employees present a neat appearance and conduct themselves in a courteous manner. Contractor shall regularly (at least annually) train its employees in customer courtesy, shall prohibit the use of loud or profane language and the removal of any materials from loads, and shall instruct collection crews to perform the work as quietly as possible. If any employee is found not to be courteous or not to be performing services in the manner required by this Agreement, Contractor shall take all necessa:ry corrective measures, including, but not limited to, transfer, discipline or ~ermination. If City has notified Contractor of a complaint related to discourteous behavior, Contractor shall, upon request of City, reassign the employee to duties not entailing contact with the public while the Contractor is pursuing its investigation, disciplinary, and retraining process. G. Provision of Recycling/Public Education Specialist. Contractor shall designate one qualified employee as specialist of recycling and public education activities. The specialist will devote all of his or her time to these activities, some of which are described in Attachment C. Contractor shall notify City, in writing, of the name of the specialist prior to commencing operations and whenever there is a change in the staffing of the position. H. Ongoing Training and Testing. Contractor shall provide safety training on an ongoing basis and shall conduct random drug and alcohol testing of employees in safety-sensitive positions in compliance with regulations issued by the 37 10852395,2 U.S. Department of Transportation. Contractor shall furnish City with a copy of its training manual and schedule of training of employees; City may require Contractor to include specific topics in such manual and training program. City may attend and observe any safety or operational training classes. I. Sober and Drug~Free Workplace. Contractor shall adopt policies and procedures consistent with State and federal law that ensure a sober and drug-free workplace. This includes strictly prohibiting unlawful manufacture, distribution, possession, or use of any controlled substance in the workplace, regardless'of whether the employee is on duty at the time. Further, the policies and procedures shall prohibit an employee from operating either City or Contractor equipment and vehicles (whether on or off duty) while under the influence of alcohol or drugs. The purpose of these policies and procedures is to ensure workplace safety, productivity, efficiency, and the q~ality of Contractor's service to Customers. J. City Role in Hiring of Key Management Employees. Before extending an offer of employment for the position of general manager, operations manager, or education/outreach manager, Contractor shall provide the City with proposed position descriptions and an opportunity to review information about the background and experience of the person(s) being considered, as well as an opportunity to meet with those persons. Contractor shall give thoughtful consideration to City's comments on the job descriptions and to its advice about each candidate, but shall have the ultimate right to make employment decisions in its best business judgment. This provision applies to the initial hiring for these three positions and to subsequent hirings during the Term if and when such position(s) become vacant. 7.06 Use of Workers Not Employed by Contractor. All drivers, mechanics, customer service representatives, supervisory and managerial workers shall be direct employees of Contractor. if Contractor engages any workers through an independent contractor, such as an employment agency, it shall ensure that such contractor or agency: 38 10852395.2 1. Provides all such workers compensation equal to that which Section 7 .08 would require Contractor to pay if the workers had been hired as its own employees. 2. Complies with the nondiscrimination requirements imposed on Contractor by Section 12.14. 3. Maintains comprehensive general liability, workers compensation and employer's liability insurance covering such workers in the amount required by Section 10.02 and with policies meeting the other requirements of Section 10.02. Contractor shall be responsible for providing qualified and competent workers, whether as direct employees or through workers furnished by an independent contractor. Contractor shall also be responsible for providing sufficient training to all workers so that they can perform the work in a safe and competent manner and are thoroughly familiar with the work which Contractor is required to perform and the standards it is required to meet by this Agreement. If workers provided by a particular independent contractor prove persistently unsatisfactory, City may require that Contractor either secure workers through a different independent contractor or hire qualified and competent employees directly. Contractor shall defend and indemnify City from and against any claim or suit filed by any independent contractor furnishing workers to Contractor. 7.07 Initial Hiring. A. Contractor shall fill the positions required to perform the work required by this Agreement, in the job classifications listed in subsection C below, by first offering employment to those employees of the predecessor contractor (Palo Alto Sanitation Company) (1) who have been working continuously from January 1, 2009 in one or more of the listed job classifications, (2) who are eligible for employment under federal and state law, (3) who meet the Contractor's minimum employment standards for new employees related to California Vehicle Code violations and driving safety, (4) who have not been convicted of a crime that is related to the job or job performance, 39 10852395.2 and (5) who do not present a demonstrable danger to customers, co-workers or City employees. B. If Contractor does not have enough positions available in the listed job classifications to offer employment to all of the predecessor contractor's employees who are eligible for employment under subsection A, Contractor shall maintain a list of the predecessor contractor's employees who were not offered employment. If any positions become available during the first six (6) months of operation (i.e., from July 1, 2009 through December 31, 2009), Contractor shall offer employment to persons on the list by seniority within each job classification. C. The job classifications covered by this section are drivers, mechanics, laborers, field supervisors, and customer service representatives. It does not apply to management, or other administrative or clerical employees. 7 .08 Wages and Benefits. A. Upon commencement of operations on July 1, 2009, Contractor shall pay employees wages and benefits no less than the total hourly wage shown on Attachment J-1, increased in each case by the same percentage that the Consumer Price Index, All Urban Consumers for the San Francisco-Oakland-San Jose Metropolitan Area ("Index") has increased between April 2008 (i.e., 222.074) and April 2009. The total hourly wage in each job classification shall be increased on July 1, 2010 and on July 1 of each year thereafter by an amount not less than the percentage that the Index has increased between April 2009 and April 2010, in the case of the adjustment to be made on July 1, 2010, and between the corresponding Aprils in succeeding years. B. Contractor must provide a health benefit program for employees in the job classifications listed in Section 7 .07 .C, substantially identical to the program described in its Proposal. C. The hourly cash equivalent of benefits such as sick leave, vacation/holiday, and health insurance will be determined as shown on Attachment J-2. Subject to the requirement in subsection B for a health insurance program, 40 10852395.2 Contractor may provide any combination of wages and benefits so long as the hourly cash equivalent of such combination equals the "total hourly wage" shown on AttachmentJ-1, as adjusted. D. Contractor will (1) recognize vacation accrual rates based on seniority earned by employees during their service with the current collector; and (2) allow employees who worked for the current collector and who had previously scheduled vacation during July through September 2009 to take up to ten (10) working days of that vacation as scheduled despite not having accrued sufficient vacation with Contractor, provided such employees agree that subsequent accruals of vacation will first be applied to offsetting the vacation advanced by Contractor. E. Contractor shall promptly furnish the City information that it requests, including certified payrolls, to verify Contractor's compliance with this section. 7.09 Facilities. Contractor shall provide all facilities necessary for vehicle parking and maintenance, container storage and maintenance, employee parking, administration and all other activities required to provide the services required by this Agreement. Contractor shall own or lease the facilities; secure all permits needed to conduct operations at the facilities and operate in compliance with such permits; design, finance and construct any site improvements; and maintain the facilities in good condition. The Contractor's corporation yard shall be located in Santa Clara County. No later than January 1, 2009, Contractor shall enter into a lease for the corporation yard and provide City a copy of the fully-executed lease. The lease term shall begin no later than July 1. 2009. Contractor shall comply with the terms of the lease for the corporation yard. Contractor shall not move its operations to a different site without prior notice to, and written approval of, City. Contractor will continue the lease with the City for use of an approximately 0.9 acre parcel of City-owned property at 2000 Geng Road. This property is to be used for administrative purposes (including route supervision and customer service functions) and for limited storage of containers such as wheeled carts and bins to be delivered to 41 10852395.2 customers. The initial monthly rental, commencing July 1, 2009 will be Twelve Thousand One Hundred Fifty Dollars ($12, 150). The rental payments have been included in Contractor's Compensation shown on Attachment N-1. In subsequent years, rent will be adjusted by reference to a specified index and thereafter modified to refled market rental rates. Rental payments are included in Contractor's Compensation as a pass through cost, as shown on Attachment N-1 and N-2 and will continue to be reimbursed on a pass through basis as they are adjusted or modified throughout the Term. If the County imposes a possessory interest tax on Contractor's leasehold interest, those tax payments will also be reimbursed as a pass through cost. Contractor shall comply with the terms of the lease for the Geng Road site. If the City elects to utilize the Geng Road property for an alternative use, the Contractor administrative offices shall be relocated with approval from Director. 42 10852395.2 ARTICLE 8. RECORD KEEPING,· REPORTING AND INSPECTIONS 8.01 General. Contractor recognizes that maintenance of complete, accurate, reliable and verifiable records of its operations and timely submission to City of accurate and complete reports is an essential aspect of the service to be provided by it under this Agreement. 8.02 Record Keeping; Audit. Contractor shall maintain accurate records of its operations in sufficient detail to allow for accurate determinations of all matters that require periodic determination under this Agreement. These records shall cover (i) personnel, (ii) equipment, (iii) collection operations, (iv) customer service (name, address, service level and changes, special collection details, etc.), (v) recycling operations, (vi) financial transactions, (vii) billings by Contractor for services provided and other matters, in such detail and format necessary to compile the reports required by this Agreement, including those identified in Attachment K-1. Cjty may review and make copies (at Contractor's expense), of all of Contractor's operational and business records related to this Agreement, including those described in this section. City may, at any reasonable time during the Term and for three (3) years thereafter, audit Contractor's records pertaining to matters covered by this Agreement. Contractor shall maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. Contractor shall maintain record security sufficient to preserve records from destruction or damage from reasonably foreseeable events including fire, earthquake and theft. Data maintained in an electronic medium shall be protected, and backed up, with a copy stored at a separate site from the original data. Contractor may utilize a record storage service to store at a secure off-site location those records to which immediate access is not needed, so long as those records can reliably be retrieved within 24 hours after a request by Contractor or City. 8.03 Data Management; Billing Support. Contractor shall provide a data management system capable of supporting City's delivery of accurate and timely bills to Customers. Should the City elect to have Contractor bill Commercial/Industrial Customers directly, the Contractor shall provide detailing A/Raging reports and service 43 10852395.2 level reports to the City. The specific capabilities of Contractor's data management system are described on Attachment K-2. 8.04 Reporting. Contractor shall compile and submit complete and accurate reports required by this Agreement, including those identified in Attachment K-1, in the format and at the frequencies specified. Reports identified on Attachment K-1 shall contain a statement, signed by the Contractor's representative designated pursuant to Section 12.12.B, that the report is complete and accurate to the representative's knowledge, after due inquiry. 8.05 Right to Inspect Operations. City will have the right, but not the obligation, to observe and inspect all of the Contractor's operations involved in providing service under this Agreement. Contractor shall cooperate fully with such inspections. In connection therewith, City will have the right to enter any facilities operated or used by Contractor during operating hours, speak to any of Contractor's employees (and those of any subcontractor) and receive accurate responses from such employees to any inquiries directed to such employees. In addition, upon reasonable notice and without interference with Contractor's operations, City may review and copy any of Contractor's operational and business records related to this Agreement. If City so requests, Contractor shall make specified personnel available to accompany City employees on inspections and shall provide electronic copies of records stored in electronic media. 8.06 Compliance Reporting. Contractor shall submit monthly, quarterly and annual reports to the City documenting the disposition of Solid Waste, Recyclable Materials, and Compostable Materials and shall format such reports so that they may be used by the City to demonstrate compliance with the reporting requirements of the Act or any other subsequently enacted federal or state laws or regulations governing integrated waste management. 8.07 Reports as Public Records. The reports, records and other information submitted (or required to be submitted) by Contractor to City are public records within the meaning of that term in the California Public Records Act, Government Code Section 6250 et seq. Unless a particular record is exempted from 44 10852395.2 disclosure by the California Public Records Act, it will be disclosed to the public by the City upon request. 45 10852395.2 ARTICLE 9. COMPENSATION 9.01 General. Contractor's Compensation provided for in this Article shall be the full, entire, and complete compensation due to Contractor pursuant to this Agreement for all labor, equipment, materials and supplies, cost of capital, payments to processors, payments to subcontractors, taxes, insurance, bonds, overhead, profit, and all other things necessary to perform all the services in the manner required by this Agreement. Base Compensation for the first two years of the Agreement (FY 2009/10 and FY 2010/11) is established based on Contractor's Proposal, as refined to reflect the final scope of services, which includes Zero Waste Services as well as Baseline Services. The costs associated with providing the services to be covered by Base Compensation for FY 2009 / 10 and FY 2010 / 11 are set out in Attachment N-1. In connection with the Term extension and amendment and restatement of this Agreement, Contractor has carefully reviewed the revised Attachment N-1 reflecting compensation for rate periods 6 and 7 immediately before executing this Agreement. Contractor is satisfied that those costs, and the net revenue from sales of Recyclable Materials, are accurate and acknowledges that the Base Compensation set out in Section 9.03, adjusted as provided in Section 9.-04 and supplemented as provided in Section 9.05, represents the entire compensation due Contractor. In subsequent years, Base Compensation will be adjusted annually, based on the application of specified indices produced by the U.S. Department of Labor, Bureau of Labor Statistics to specified cost pools and to the profit allowance, which together comprise Base Compensation. Both parties recognize that in some or all years Contractor's actual costs may increase or decrease at rates different from the rates at which the various indices change. If Contractor's actual costs are less than the costs adjusted by the specified indices, Contractor will be entitled to retain, the difference. Conversely, if Contractor's costs are greater than the costs as adjusted by the specified indices, Contractor will not be entitled to additional compensation to make up the difference. A fundamental principle underlying this Agreement is that Contractor is entitled to one hundred percent ( 100%) of the revenues it receives from the sale of Recyclable Materials and other materials that it collects from within the City, including CRV revenues. Contractor has estimated the amount of those revenues for the initial two 46 10852395.2 years of the Term and they are incorporated into the Base Compensation calculations for Rate Year One and Rate Year Two (Attachment N-1). Similar to the cost pools shown on Attachment N-1, the revenue from sales of Recyclable Materials shown on Attachment N-1 will be adjusted by the change in a specified index when calculating Contractor's Base Compensation for Rate Period Three and subsequent Rate Periods. As with costs, both Parties recognize that actual revenues from the sale of Recyclable Materials may exceed, or fall short of, the calculated amounts in Rate Period Three and thereafter. As with costs, if such revenues exceed the calculated amount, Contractor is entitled to retain them, while if they fall short, City is not obligated to offset the shortfall. The cost of providing certain services is difficult to forecast because the extent to which such services will be demanded by customers is uncertain. For that reason, they are excluded from Base Compensation and will be compensated on a unit price and/ or allowance basis as provided in Section 9.05. 9.02 Total Compensation. The Contractor's Total Annual Compensation shall equal the sum of the following: • Base Compensation (Sections 9.03 and 9.04), including calculated net revenues from the sale of Recyclable Materials (including CRV Revenues), Yard Trimmings, Construction and Demolition Materials, and any other materials Collected pursuant to this Agreement; and • Additional compensation for extra services provided which are compensated on a unit-price basis pursuant to Section 9.05 (Extra Service Compensation); and, • Adjustment (reduction) for revenues/fees collected by Contractor from on-call service provided to Customers. 9.03 Compensation for Rate Periods One, Six and Seven. A. Rate Period One. For illustration purposes for this amendment and restatement, Contractor's Base Compensation for Rate Period One, which is the 12- 47 10852395.2 month period commencing July 1, 2009 and ending on June 30, 2010, was Ten Million Three Hundred Sixty Seven Thousand Two Hundred Seventy Nine Dollars ($10,367,279.00} as detailed in Attachment N-1 showing the base compensation to the Agreement. Contractor's Total Annual Compensation for Rate Period One equaled the sum of (i) Base Compensation for Rate Period One, (ii} Extra Service Compensation, and (iii) City Landfill Adjustment, if any. B. Rate Period Six. In accordance with this amendment and restatement of the Agreement, Contractor's Base Compensation for Rate Period Six, which is the 12-month period following Rate Period Five (i.e., from July 1, 2014 to June 30, 2015) shall be Ten Million Nine Hundred Eighty Six Thousand Two Hundred and Four Dollars ($10,986,204.00), as detailed in revised Attachment N-1. Contractor's Total Annual Compensation for Rate Period Six shall equal the sum of (i) Base Compensation for Rate Period Six and (ii) Extra Service Compensation. C. Rate Period Seven. In accordance with this amendment and restatement of the Agreement, Contractor's Base Compensation for Rate Period Seven, which is the 12-month period following Rate Period Six (i.e., from July 1, 2015 to June 30, 2016} shall be Ten Million Six Hundred Twenty Five Thousand Nine Hundred Thirty Two Dollars ($10,625,932), as detailed in revised Attachment N-1. Contractor's Total Annual Compensation for Rate Period Seven shall equal the sum of (i} Base Compensation for Rate Period Seven and (ii) Extra Service Compensation. 9.04 Compensation for Subsequent Rate Periods. Contractor's Base Compensation for all Rate Periods following Rate Period Seven shall be determined using the index-based adjustment method presented in Attachment N-2. The method involves use of specified cost adjustment factors (the percentage change in various consumer price indices) to calculate changes in the Contractor's Base Compensation. The percentage change in the applicable indices is applied to the calculated cost pools 48 10852395.2 and calculated net revenues from sale of materials collected that comprise the Contractor's Base Compensation for the then-current Rate Period to determine the Contractor's Base Compensation for the coming Rate Period. For example, in January 2012 when calculating Contractor's Base Compensation for Rate Period Four (FY 2012/2013), the percentage change in cost indices will be applied to the calculated Rate Period Three cost pools to calculate Rate Period Four costs. The revised N-1 details this for Rate Periods Six and Seven. The Contractor's Total Annual Compensation for all Rate Periods following Rate Period S shall equal the sum of the following: • Base Compensation calculated using the formula presented in Attachment N-2; and • Extra Service Compensation for extra services performed during the Rate Period; and, • Adjustment (reduction) for revenues/fees collected by Contractor from on-call service provided to Customers. 9.05 Compensation for Extra Services. Contractor's Extra Service Compensation shall be the compensation provided to Contractor for services that are not included in the Base Compensation. These services include: A. Backyard/Sideyard Collection of Solid Waste from Single-Family Premises. B. Drop box service (scheduled and on-call). C. Residential and Commercial/Industrial Compostable Materials processed. The Contractor shall be compensated on a unit-price basis for each of the extra services performed. Following completion of each calendar quarter, the Extra Service Compensation shall be calculated by the City based on its billing records and billing reports submitted by the Contractor. The Extra Services Compensation shall equal the sum of each unit-price fee multiplied by the number of extra services performed by 49 10852395.2 Contractor during each month in the most-recently completed calendar quarter. The City will pay the Contractor on a quarterly basis in arrears for all extra service performed. The Contractor's unit-prices for Rate Periods One and Two are based on the Contractor's Proposal and are presented in Attachment N-1. These unit prices shall be adjusted annually to reflect changes in a specified cost index in accordance with the procedures described ih Attachment N-2. Revised N-1 shows the adjusted prices for Rate Periods Six and Seven. Contractor shall not be compensated for extra services other than those specified in this Section. The City may charge Customers additional fees for services such as collection of extra Bulky Items, but Contractor shall not receive extra compensation for these services. Contractor shall keep accurate and complete records of services billed by Contractor to allow City to verify the accuracy of Contractor's billing reports and to calculate compensation for extra services. 9.06 [Reserved] 9.07 Compensation Adjustment Process A. Adjustment Calculations. On or before January 31 of each year commencing with January 2011, the Director will calculate the annual percentage change in the indices specified in Attachment N-2; Contractor's Base Compensation for the coming Rate Period and adjusted unit prices for extra services.. The Director will submit electronically a copy of the City's calculated compensation adjustment and supporting documentation for the coming Rate Period to Contractor on or before January 31. For example, on or before January 31, 2016, the Director will submit to the Contractor an electronic copy of the City's calculated compensation adjustment to be effective for Rate Period Eight (July 1, 2016 through June 30, 2017). B. Contractor Review of Adjustments. The Contractor shall promptly review the City's calculated Base Compensation and unit price adjustments 50 10852395.2 and will provide written notice to the Director on or before February 28 of its acceptance of such calculations or of any objections. The Director and Contractor shall discuss Contractor's objections and may agree on changes to the City's calculations. C. City Manager Action. The City Manager will provide Contractor an opportunity to meet to present any objections to the adjustment calculated by the Director. The City Manager will take formal action to adjust Contractor's Base Compensation and unit prices for extra services before July 1 of each year commencing with July 2011. The decision of the City Manager will be final, subject to Contractor's rights referred to in subsection D. D. Resolution of Disputes. If Contractor believes the City has made an error in calculating any of the adjustments, it may seek review of the City's action through arbitration initiated in the manner and within the time prescribed in Attachment Q. 9.08 Monthly Payment of Contractor's Compensation. Within ten .business days or on the fifteenth day of each month, whichever is later commencing in August 2009, the City will remit to the Contractor a payment for Contractor's Compensation. The monthly payment will be calculated as follows. A. Monthly Base Compensation. Monthly Base Compensation will equal 1/ 12 of the Contractor's Base Compensation for the then-current Rate Period; plus B. Extra Service Compensation. Extra Service Compensation for extra services performed in the most-recently completed quarter will be calculated pursuant to Section 9.05 and will be included in the monthly compensation determined in January, April, July, and October; less C. Total Monthly Payment. The total monthly payment to Contractor will equal the sum of the monthly Base Compensation plus Extra Services Compensation (if applicable), minus revenues collected by Contractor from non-account Utility Customers. 51 10852395.2 9.09 Special Compensation Review A. Eligible Items. The Contractor may apply to the City for consideration of a special review of Contractor's Compensation, and the City may initiate such a review, if one or more of the following events occur: 1. Provision of emergency services pursuant to Section 4 .14. 2. Flood, earthquake, other acts of nature or other similar catastrophic events which are beyond the control of and not the fault of the Contractor. 3. Change in Law occurring after the Effective Date. In addition, City may initiate a special compensation review prior to any extension of the Term and may consider the results of such a review in its determination of whether to extend the Term and, if so, for what period. B. Ineligible Items. A special review of Contractor's Compensation may not be initiated for any of the following reasons: 1. Increases or decreases in the cost of Solid Waste, Recyclable Materials, Compostable Materials, or Construction and Demolition Materials Collection, transportation, or Processing in excess of the increases or decreases provided through the annual adjustment mechanism described in Attachment N-1, unless such cost increases or decreases are caused by eligible items listed in subsection A above. 2. Increases or decreases in the cost of Solid Waste, Recyclable Materials, Compostable Materials or Construction and Demolition Materials Collection, transportation, or Processing caused by change in the Recyclable Materials Processing Site, Composting Site, or Construction and Demolition Materials Processing Site or by changes in operating conditions at these sites, unless such change is initiated by or at the direction of the City. 3. Increases or decreases in revenues from the sale of Recyclable Materials (including CRV revenues), Compostable Materials, or Construction and Demolition Materials. 52 10852395.2 4. Increases or decreases in the number of Customers or their subscription levels, including any changes resulting from City's implementation of a mandatory customer recycling/ diversion ordinance. 5. Changes in the Tonnage or composition of Solid Waste, Recyclable Materials, Compostable Materials, or Construction and Demolition Materials. 6. Inability of Contractor to secure the right to use the property described in Section 7 .09 for its corporation yard. C. Submittal of Request. If the Contractor is requesting a special review of Contractor's Compensation, the Contractor must submit its request for a special review, and supporting cost and operational data, in a form and manner specified by the City. The financial and operational data that City is likely to require include, but are not limited to, audited financial statements, detailed customer account information, route data, tonnage reports, and other transactional data. If City is requesting a special compensation review, the City will notify the Contractor and the Contractor shall, within thirty (30) days, submit cost and operational data as requested by the City, in a form and manner specified by the City. D. Review of Costs. If the Contractor or the City requests a special review of Contractor's Compensation, the City will have the right to review any and all financial and operating records of Contractor and its Affiliates the City considers necessary to determine the cost impacts to Contractor's operations. Contractor shall ensure that such records are accurate, reliable and verifiable. E. Burden of Justification. Contractor shall bear the burden of justifying to the City by substantial evidence its entitlement to continuation of current, as well as any increases in, Contractor's Compensation. If the Director determines that the Contractor has not met its burden, he/she will notify the Contractor that he/she is prepared to deny Contractor's request for additional compensation or to proceed with a reduction in compensation. If the Contractor requests, the City will provide Contractor a hearing before the Director at which it may produce additional evidence. 53 10852395.2 F. Decision. Based on the evidence, including but not limited to that submitted by the Contractor, the Director may grant some, all, or none of the requested increase. The City Manager will provide Contractor an opportunity to meet to present any objections to the Director's decision. The City Manager's decision will be final; subject to Contractor's rights referred to in subsection G. G. Review. If Contractor is dissatisfied with the City Manager's decision, it may initiate arbitration as provided in Attachment Q. 9.10 Compensation Adjustments for Changes in Service. Within thirty (30) days of a request by City to initiate a change in service, Contractor shall submit a report containing projected operational and financial data sufficient for City to evaluate the cost-effectiveness of such a change and to calculate the adjustment to Contractor's Compensation associated with implementation of the change. The report shall contain the following types of information, to the extent applicable: 1. Collection and/ or processing methodology to be employed. 2. Equipment to be utilized (number of vehicles, types, capacity, etc.). 3. Labor requirements (number of employees by classification). 4. Number and capacity of containers to be used. 5. Public education/ outreach materials to be developed to implement program change. 6. Estimate of additional tonnage to be diverted, together with methodology used for estimating diversion. 7. End uses of diverted materials and revenues expected to be received by Contractor. 8. Projection of financial impact of changes (i.e., increase or decrease in Contractor's Compensation). 54 10852395.2 9. Other information requested by City. If City directs a change as provided in Section 12.16, an equitable adjustment in Contractor's Compensation will be made, effective with the commencement of the change, to reflect increases or decreases in Contractor's costs and other revenues. For purposes of adjusting the profit allowance, an operating ratio of eighty eight percent (88%) shall be applied to the increase or decrease in necessary and reasonable costs (exclusive of interest expense and direct and allocated lease costs) of the change. The data compiled in Attachment N-3 represent the Contractor's detailed cost and operational estimates underlying its compensation for the first two years of the Term. Those data may be consulted in determining an equitable adjustment in Contractor's Compensation for specific changes in service directed by City. 9.11 Rate-Setting Process A. General. The City will be solely responsible for establishing rates charged to Customers for services provided by Contractor. The City will also be solely responsible for billing Residential Customers and collecting rate revenues. City may elect to have Contractor be responsible for billing Commercial/Industrial customers. In such case, the City would continue setting rates, Contractor would collect fees from Commercial/Industrial customers as described in Section 4.16, Contractor would pay the City the entire fee amount, and the City would pay Contractor for billing services. The Contractor shall establish accounts and bill Customers who do not have utility accounts with the City, as described in Section 4.16. B. Rate Structure. The City will have the sole and exclusive right to change the relationship of individual rates in compari~on with other rates, as City deems appropriate. C. Rate Categories. If the Contractor determines the need for a rate category that does not appear on the City-approved rate schedule, Contractor shall notify the City and request establishment of such a rate category. For example, if a Customer requires Collection of a 15-cubic-yard Compactor 5 times per week and the 55 10852395.2 City-approved rate schedule does not include this level of service, the Contractor shall notify the City that a rate category for this level of service would be appropriate. 9.12 City Payment of Fees for Solid Waste Disposal. The City will pay charges assessed by Sunnyvale for delivery of Solid Waste, and Residential Compostable Materials to the SMART Station. This section does not apply to Residue from processing of Recyclable Materials, including Construction and Demolition Debris, or Compostable Materials processed at Z-Best, ZWED or materials collected from special events. 9.13 Compensation During Extended Term. As the City has elected to extend the Term pursuant to Section 2.03, the Contractor's Compensation will continue to be determined as provided in this Article, with the exception that, as provided in Attachment N-2, no depreciation on vehicles or equipment fully depreciated during the initial Term will be included in the calculation. If vehicles or other equipment must be replaced during the initial Term or at the end of the initial Term, depreciation on the new vehicles and/ or equipment shall be included in Contractor's Compensation for the remainder of the Term as extended. 9.14 Additional Financial Incentives for Zero Waste Program Implementation A. General. City has relied on Contractor's representations about its experience in, and commitment to, recycling and composting in awarding this Agreement to it. City will incur significant costs to implement the Zero Waste programs, primarily in payments to Contractor. If expected amounts of materials are not collected and subsequently diverted from landfill disposal through these programs, City will incur additional costs for those materials to be processed at the SMART Station and transferred to the Kirby Canyon landfill. In light of these considerations, the Parties have agreed to the following financial arrangements to provide additional incentives for Contractor to exert its full efforts in implementing two elements of the Zero Waste programs. 56 10852395.2 As amended and restated as of July 1, 2015, both the City and Contractor agree to annul the annual financial incentives and/ or penalties due for Recyclable Materials and Compostable Materials from Rate Period One through Rate Period Five (i.e., from July 1, 2009 through June 30, 2015). B. Recycling. The minimum amounts of Recyclable Materials which Contractor will collect, process and recycle will be 17,480 tons per year. The number of Tons which Contractor has collected, processed and recycled will be determined by multiplying the Tons of Recyclable Materials collected in the City and delivered to the Green Waste MRF (net weight at gate scale) by the percentage that reflects the average facility recovery rate during the year in question, based on the annual facility recovery rate data required by Attachment E, Section A.2.c. For example, the percentage to be used for Year Two will be based on the facility recovery rate achieved during FY 2010-11, as shown by the audit conducted during FY 2010-11. The percentage to be used for Year One (FY 2009-10) will be ninety two percent (92%). If the minimum amount of 17,480 tons per year is not achieved, Contractor shall pay City cost per ton, described below, multiplied by the difference between the 17,480 tons required to be collected and the tons actually collected, processed and recycled. The materials accepted to be included in the tonnage collected include those identified in Attachment C, Section 2, including Recyclable Materials collected annually through the Clean Up Day. The per Ton payment will be established by multiplying the per Ton payment in Year Three ($75.00) by the same percentage that the labor-related cost component of Contractor's Compensation is adjusted for that year per Attachment N-2. The per Ton payment will be adjusted annually thereafter by the same percentage applicable in each year. C. Commercial/Industrial Compostable Materials. The minimum amount of Compostable Materials to be collected from Commercial/Industrial customers and processed into compost is 12,000 Tons in fiscal year 2015-16, and 57 10852395.2 13,000 Torts in subsequent years. Tonnage amounts will be calculated based on total tonnage collected and delivered to composting facility. City will compensate Contractor quarterly for processing all gross tons collected using Fiscal Year 2015-16 payment of $81.00 per Ton for total tonnage collected. The per Ton payment will be adjusted annually thereafter by the by the same percentage that the labor-related cost component of Contractor's. Compensation is adjusted for that year per Attachment N-2. There shall be no penalty for not achieving the tonnage goals for FY 2015- 16 and subsequent years. Contractor shall aim to limit residuals in Compostable Materials to ten percent (10%). 58 10852395.2 ARTICLE 10. INDEMNITY, INSURANCE, PERFORMANCE BOND, GUARANTY 10.01 Indemnification. Contractor shall indemnify, defend and hold harmless City, its councilmembers, officers, employees and agents, (collectively the "Indemnitees") from and against any and all loss, liability, penalty, forfeiture, claim, demand, action, proceeding or suit, of any and every kind and description, whether judicial, quasi-judicial or administrative in nature including, but not limited to, injury to and death of any person and damage to property or for contribution or indemnity claimed by third parties (collectively, the "Claims"), arising out of or occasioned in any way by, directly or indirectly, Contractor's performance of, or its failure to perform, its obligations under this Agreement. Attorneys' fees, expert witness fees, court costs and disbursements incurred by City, or for which City may be liable, are included within the scope of the Contractor's indemnity obligation. The foregoing indemnity shall not apply to the extent that the Claim is caused solely by the negligence or intentional misconduct of the Indemnitees, but shall apply if the Claim is caused by the joint negligence of Contractor or other persons, including any of the Indemnitees. Upon the occurrence of any Claim, Contractor, at Contractor's sole cost and expense, shall defend (with attorneys reasonably acceptable to City) City, council members, its officers, employees, and agents. Contractor's duty to indemnify and defend shall survive the expiration or earlier termination of this Agreement. 10.02 Insurance. A. Types and Amounts of Coverage. Contractor shall procure from an insurance company or companies licensed to do business in the State of California and shall maintain in force at all times during the Term the following types and amounts of insurance: 1. Workers' Compensation and Employer's Liability. Contractor shall maintain workers' compensation insurance covering its employees in statutory amounts and otherwise in compliance with the laws of the State of California. Contractor shall maintain employer's liability insurance in an amount not less than One Million Dollars ($1,000,000) per accident or disease. Contractor shall not be obligated to carry workers compensation insurance if (i) it qualifies under California law and continuously complies with all statutory obligations to self-insure against such 59 10852395.2 risks; (ii) furnishes a certificate of Permission to Self-Insure issued by the Department of Industrial Relations; and (iii) furnishes updated certificates of Permission to Self- Insure periodically to evidence continuous self-insurance, at least ten (10) days before the expiration of the previous certificate. 2. General Liability (and Automobile Liability). Contractor shall maintain comprehensive general liability insurance with a combined single limit of not less than Two Million Dollars ($2,000,000) per occurrence and Five Million Dollars ($5,000,000) annual aggregate covering all claims and all legal liability for personal injury, bodily injury, death, and property damage, including the loss of use thereof, arising out of, or occasioned in any way by, directly or indirectly, Contractor's performance of, or its failure to perform, services under this Agreement. The insurance required by this subsection shall include: (i) Premises Operations (including use of owned and non-owned equipment); (ii) Products and Completed Operations (including protection against liability resulting from use of Recyclable Materials by another person); (iii) Personal Injury Liability with employment exclusion deleted; (iv) Broad Form Blanket Contractual with no exclusions for bodily injury, personal injury or property damage (including coverage for the indemnity obligations contained herein); (v) Owned, Non-Owned, and Hired Motor Vehicles; (vi) Broad Form Property Damage. The comprehensive general liability insurance shall be written on an "occurrence" basis (rather than a "claims made" basis) in a form at least as broad as the most current version of the Insurance Service Office commercial general liability occurrence policy form (CGOOOl). If occurrence coverage is not obtainable, Contractor must arrange for "tail coverage" on a claims made policy to protect City from claims filed within four years after the expiration or termination of this Agreement relating to incidents that occurred prior to such expiration or termination. Any excess·or umbrella policies shall be on a "following form" basis. 60 10852395.2 3. Pollution Liability. Contractor shall maintain pollution liability insurance with limits in an amount of not less than Five Million Dollars ($5,000,000) per occurrence and annual aggregate covering claims for on-site, under- site, or off-site bodily injury and property damage as a result of pollution conditions arising out of its operations under this Agreement. 4. Hazardous Materials Storage and Transport. Contractor shall maintain insurance coverage of not less than Two Million Dollars ($2,000,000) for personal injury, bodily injury and property damage arising out of the sudden and accidental release of any hazardous materials or wastes during storage at facilities operated by Contractor or transport of such materials by vehicles owned, operated or controlled by Contractor in the performance of the services required under this Agreement. 5. Physical Damage. Contractor shall maintain comprehensive (fire, theft and collision) physical damage insurance cove.ring the vehicles and equipment used in providing service to City under this Agreement, with a deductible or self-insured retention not greater than Fifty Thousand Dollars ($50,000). Notwithstanding the foregoing, Contractor shall be allowed to self-insure for physical damage to its vehicles provided Contractor provides adequate audited financial information to City and City is reasonably satisfied that Contractor has the financial net worth to cover any losses. B. Acceptability of Insureds. The insurance policies required by this section shall be issued by an insurance company or companies admitted to do business in the State of California, subject to the jurisdiction of the California Insurance Commissioner, and with a rating in the most recent edition of Best's Insurance Reports of size category VII or larger and a rating classification of A-1 or better. C. Required Endorsements. Without limiting the generality of Sections 10.02.A and B, the policies shall contain endorsements in substantially the following form: 61 10852395.2 Materials Policy. 1. Workers' Compensation and Employers' Liability Policy. "Thirty (30) days prior written notice shall be given to the City of Palo Alto in the event of cancellation or non-renewal of this policy. Such notice shall be sent to: City of Palo Alto Administrative Services Department P.O. Box 10250 Palo Alto, CA 94303 Attention: Purchasing Manager "Insurer waives all right of subrogation against City and its officers and employees for injuries or illnesses arising from work performed for City." 2. General Liability Policy; Pollution Liability Policy; Hazardous (i) "Thirty (30) days' prior written notice shall be given to the City of Palo Alto in the event of cancellation, reduction of coverage, or non-renewal of this policy. Such notice shall be sent to: City of Palo Alto Administrative Services Department P.O. Box 10250 Palo Alto, CA 94303 Attention: Purchasing Manager (ii) "The City of Palo Alto, its officers, employees, and agents, are additional insureds on this policy." (iii) "This policy shall be considered primary insurance as respects any other valid and collectible insurance maintained by the City of Palo Alto, including any self-insured retention or program of self-insurance, and any other such insurance shall be considered excess insurance only." (iv) "Inclusion of the City of Palo Alto as an insured shall not affect the City's rights as respects any claim, demand, suit or judgment brought or recovered against the Contractor. This policy shall protect Contractor and the City in the same manner as though a separate policy had been issued to each, but this shall not operate to increase the company's liability as set forth in the policy beyond the amount shown or to 62 10852395.2 . which the company would have been liable if only one party had been named as an insured." 3. Physical Damage Policy. (i) Notice of cancellation, reduction in coverage or non-renewal, as provided in Subsection C.2(a). (ii) Cross liability endorsement, as provided in Subsection C.2(d). (iii) Waiver of subrogation against City. D. Delivery of Proof of Coverage. No later than sixty (60) days before the commencement of operations (i.e., on or before May 1, 2009), Contractor shall furnish City one or more certificates of insurance on a standard ACORD form substantiating that each of the coverages required hereunder are in force, in form and substance satisfactory to City. Such certificates shall show the type and amount of coverage, effective dates and dates of expiration of policies and shall be accompanied by all required endorsements. If City requests, copies of each policy, together with all endorsements, shall also be promptly delivered to City. Contractor shall furnish renewal certificates to City prior to July 1 of each year to demonstrate maintenance of the required coverages continuously throughout the Term. E. Other Insurance Requirements 1. In the event performance of any services is delegated to a subcontractor, Contractor shall require such subcontractor to provide statutory workers' compensation insurance and employer's liability insurance for all of the subcontractor's employees engaged in the work. The liability insurance required by Subsection 10.02.A.2 shall cover all subcontractors or the subcontractor must furnish evidence of insurance provided by it meeting all of the requirements of this Section 10.02. 2. Contractor shall comply with all requirements of the insurers issuing policies. The carrying of insurance shall not relieve Contractor from any 63 10852395.2 obligation under this Agreement, including those imposed by Sections 10.01, 10.05, and 10.06. If any claim is made by any third person against Contractor or any subcontractor on account of any occurrence related to this Agreement, Contractor shall promptly report the facts in writing to the insurance carrier and to the City. 3. If Contractor fails to procure and maintain any insurance require~ by this Agreement, City may take out and maintain, at Contractor's expense, such insurance as it may deem proper and deduct the cost thereof from any monies due Contractor. Alternatively, the City may treat the failure as a Contractor Default under Section 11.01. 4. City is not responsible for payment of premiums for or deductibles under any required insurance coverages. 10.03 Faithful Performance Bond. Not later than ten (10) days before the Effective Date (i.e., on or before October 31, 2008), Contractor shall deliver to City a bond securing the Contractor's faithful performance of its obligations under this Agreement. The principal sum of the bond shall be Five Million Dollars ($5,000,000). The form of the bond shall be as set out in Attachment L-1. The bond shall be executed as surety by a corporation admitted to issue surety bonds in the State of California, regulated by the California Insurance Commissioner and with a financial condition and record of service satisfactory to City. The term of the bond shall be not less than twenty-four (24) months, or until June 30, 2010, whichever occurs first. The bond shall be extended, or replaced by a new bond in the same principal sum, for the same term (i.e., twenty-four (24) months) and in the same form, bi-annually thereafter, subject to the last paragraph of this section. Not less than ninety (90) days before the expiration of the initial bond, the Contractor shall furnish either a replacement bond or a continuation certificate substantially in the form attached as Attachment L-2, executed by the surety. It is the intention of this Section that there be in full force and effect at all times a bond securing the Contractor's faithful performance of the Agreement, throughout its Term, provided, however, that the surety shall not be liable to City for its non-renewal. of the bond or for Contractor's failure or inability to secure a replacement bond. 64 10852395.2 After Year Two, Contractor may request that the principal amount of the bond be reduced, together with a corresponding reduction in the premium for the bond. City will consider such a request in good faith, taking into account whether Contractor has performed to the satisfaction of City, but has no obligation to agree to a reduction in the bond amount. The principal amount of the bond may not be reduced below Two Million Dollars ($2,000,000) without approval of the City Council. 10.04 Alternative Security. City may, in its sole discretion, allow Contractor to provide alternative security in the amount set forth in Section 10.03, in the form of (a) a prepaid irrevocable standby letter of credit in form and substance satisfactory to City and approved by the City Attorney and City's Administrative Services Director and issued by a financial institution acceptable to City, or (b) a certificate of deposit in the name of the City with a term satisfactory to City and with a financial institution acceptable to City. 10.05 Hazardous Waste Indemnification. Contractor shall indemnify, defend with Counsel approved by the City, protect and hold harmless the Indemnitees against all claims, of any kind whatsoever paid, incurred or suffered by, or asserted against Indemnitees arising from or attributable to any repair, cleanup or detoxification, or preparation and implementation of any removal, remedial, response, closure or other plan (regardless of whether undertaken due to governmental action) concerning any Hazardous Wastes at any place where Contractor stores or disposes of Hazardous Wastes pursuant to this Agreement. The foregoing indemnity is intended to operate as an agreement pursuant to Section 107(e) of the Comprehensive Environmental Response, Compensation and Liability Act, ("CERCLA"), 42 U.S.C. Section 9607(e), and California Health and Safety Code Section 25364, to defend, protect, hold harmless and indemnify Indemnitees from liability. 10.06 Integrated Waste Management Act Indemnification. Contractor agrees to indemnify and hold harmless the Indemnitees against all fines and/ or penalties imposed by the CalRecycle or the Local Enforcement Agency (LEA): a) based on Contractor's failure to comply with laws, regulations or permits issued or enforced by the CalRecycle or the LEA; b) caused or contributed to by the Contractor's failure to perform obligations under this Agreement. This indemnity obligation is subject to the 65 10852395.2 limitations and conditions in Public Resource Code Section 40059.1 but is enforceable to the maximum extent allowable by that Section. 10.07 Guaranty. Not later than ten (10) days before the Effective Date (i.e., on or before October 31, 2008), Contractor shall deliver to City a Guaranty in the form attached as Attachment M, properly executed by the Guarantor(s). Contractor shall deliver an updated Guaranty in the form attached as Attachment M, reflecting the amendment and restatement of this Agreement, to City within 10 days of the City Council's action approving the Term extension. 66 10852395.2 ARTICLE 11. DEFAULT AND REMEDIES 11.01 Contractor Default. Each of the following shall constitute an event of default ("Contractor Default"): A. Contractor fails to perform any of its obligations under Article 4, 5 or 6 of this Agreement and its failure to perform is not cured within ten (10) days after written notice from City, provided that neither notice nor opportunity to cure applies to events described in subsection C. B. Contractor fails to perform any of its obligations under any other Article of this Agreement and its failure to perform is not cured within thirty (30) days after written notice from City, provided that if the nature of the breach is such that it will reasonably require more than thirty (30) days to cure, Contractor shall not be in default so long as it promptly commences the cure and diligently proceeds to completion of the cure within ninety (90) days after notice, and provided further that neither notice nor opportunity to cure applies to events described in subsections D through H. C. Contractor ceases to collect Solid Waste, Recyclable Materials, or Compostable Materials for a period of five (5) consecutive days (or on a total of five (5) days during any calendar year) on which collections are to be provided for any reason within the Contractor's control, including labor unrest such as strike, work stoppage or slowdown, sickout, picketing, or other concerted job action by Contractor's employees. D. Contractor files a voluntary petition for relief under any bankruptcy, insolvency or similar law. E. An involuntary petition is brought against Contractor under any bankruptcy, insolvency or similar law which remains undismissed or unstayed for ninety (90) days. F. Contractor fails to furnish a replacement bond or a continuation certificate of the existing bond not less than ninety (90) days before expiration of the performance bond, as required by Section 10.03 or fails to maintain all required insurance coverages in force. 67 10852395.2 G. Contractor fails to provide reasonable assurance of performance within ten (10) days of a request by City under Section 11.12. H. A representation or warranty contained in Article 3 proves to be false or misleading in a material respect as of the date such representation or warranty was made. I. A report submitted by Contractor under this Agreement proves to contain a material misstatement of fact, omission, or other inaccuracy. On the occurrence of a default by Contractor, City will have the right to any one or more of the remedies described in this Article, in addition to any remedies now or later available to City at law or in equity. 11.02 Right to Suspend or Terminate Upon Default. A. Upon any Contractor Default, City may terminate this Agreement or suspend it, in whole or in part. Such suspension or termination shall be effective thirty (30) days after City has given notice of suspension or termination to Contractor, except that such notice may be effective in a shorter period of time, or immediately, if the Contractor Default is one which in,the opinion of the City endangers the health, welfare or safety of the public, such as the failure to collect Solid Waste or Recyclable Materials and arrange for their prompt disposal or recycling. Contractor shall continue to perform the portions of the Agreement, if any, not suspended, in full conformity with its terms. B. City may also suspend or terminate this Agreement, upon the same notice provisions, if Contractor's ability to perform is prevented or materially interfered with by a cause which excuses nonperformance under Section 11.10, despite the fact that nonperformance in such a case is neither a breach nor a Contractor Default. 11.03 Specific Performance. By virtue of the nature of this Agreement, the urgency of timely, continuous and high-quality service and the lead time required to effect alternative service, the remedy of damages for a breach hereof by Contractor is inadequate and City shall be entitled to injunctive and other equitable relief. 68 10852395.2 11.04 City's Right to Cure. In the event that Contractor fails to perform any of its obligations under Articles 4, 5, or 6 and does not cure such failure within ten (10) days after notice from City, City may (but will not be obligated to) perform the required work, or engage a third party to do so. Contractor shall upon demand reimburse City for all costs thereof, including any payments to a third party, with interest after thirty (30) days at prime rate (as established by the Bank of America "reference rate") plus two percent (2%) but not in excess of the maximum interest rate allowed by law. If Contractor fails to make such reimbursement, City may deduct the amounts due from subsequent payments to Contractor under Article 9. 11.05 City's Right to Perform. If this Agreement is suspended or terminated due to a Contractor Default, City will have the right to perform and complete, by agreement or otherwise, the work herein or such part thereof as it may deem necessary and to procure labor, equipment, and materials and incur all other expenses necessary for completion of the work. If such expenses exceed the amounts which would have been payable to Contractor under this Agreement if it had been fully performed by Contractor, then Contractor shall pay the amount of such excess to City. 11.06 City's Use of Property Upon Default. In the event of Contractor's Default, the City will have the right to use any of Contractor's equipment, facilities and other property reasonably necessary for the provision of services hereunder and the billing and collection of fees for those services. The City may continue use of such property until other suitable arrangements can be made for the provision of such services, which may include the award of an agreement to another service provider. If the City continues use thereof after the period of time for which Contractor has already been paid, Contractor will be entitled to the reasonable rental value of such property, which shall be offset against the damages due the City as a result of Contractor's Default. Contractor shall fully cooperate with the City to effect the City's use of such property. The City may immediately engage all or any personnel necessary for the provision of services, including, if the City so desires, employees previously employed by Contractor. Contractor further agrees, if the City so requests, to assist the City in securing the services of any or all management or office personnel employed by Contractor whose skills are reasonably necessary for the continuation of services. The City agrees that it assumes responsibility for the proper, normal use of such equipment 69 10852395.2 and facilities while in its possession. Contractor agrees that the City's exercise of its rights under this section: (i) does not constitute a taking of private property for which compensation must be paid; (ii) will not create any liability on the part of the City to Contractor other than the payment of reasonable rental value as provided for in this subsection; (iii) does not exempt Contractor from the indemnity provisions of Article 10 which are meant to extend to circumstances arising under this Section. 11.07 Damages. Contractor shall be liable to City for all direct, indirect, special and consequential damages arising out of Contractor's Default. This section is intended to be declarative of existing California law. The City may offset such damages against such which would otherwise be due to Contractor. 11.08 City's Remedies Cumulative. City's rights to suspend or terminate the Agreement under Section 11.02, to obtain specific performance under Section 11.03, to cure under Section 11.04, and to perform under Section 11.05 are not exclusive, and City's exercise of one such right shall not constitute an election of remedies. Instead, they shall be in addition to any and all other legal and equitable rights and remedies that City may have, including a legal action for damages under Section 11.07 or imposition of liquidated damages under Section 11.09. 11.09 Liquidated Damages. The Parties acknowledge that efficient, consistent, and courteous collection of Solid Waste, Recyclable Materials, and Compostable Materials is of utmost importance and City has considered and relied on Contractor's representations as to its quality of service commitment in entering into this Agreement. The Parties further recognize that quantified standards of performance are necessary and appropriate to ensure consistent and reliable service. The Parties further recognize that if Contractor fails to achieve the performance standards, City will suffer damages and that i~ is and will be impracticable and extremely difficult to ascertain and determine the exact amount of those damages that City will suffer. Therefore, the Parties agree that the liquidated damage amounts listed on Attachment 0 represent a reasonable estimate of the amount of such damages considering all of the circumstances existing on the date of this Agreement, including the relationship of the sums to the range of harm to City that reasonably could be anticipated and anticipation that proof of actual damages would be costly or inconvenient. In placing their initials at the places provided, each party specifically confirms the accuracy of the statements 70 10852395.2 made above and the fact that each party had ample opportunity to consult with legal counsel and obtain an explanation of this liquidated damage provision at the time that this Agreement was made. Contractor Initial Here: __ _ City Initial Here: __ Contractor agrees to pay (as liquidated damages and not as a penalty) the amounts set forth on Attachment 0 and further agrees that these amounts may be deducted by City from payments to Contractor otherwise due. City may determine the occurrence of events giving rise to liquidated damages through the observation of its own employees, agents or representatives or through investigation of reports by third parties. Prior to assessing liquidated damages, City shall give Contractor notice of its intention to do so. The notice will include a brief description of the incident(s)/non-performance. Contractor may review (and make copies at its own expense) all non-confidential information in the possession of City relating to incident(s)/non-performance. Contractor may, within ten (10) days after receiving the notice, request a meeting with the Director or his or her designee. Contractor may present evidence in writing and through testimony of its employees and others relevant to the incident(s)/non-performance. The Director or his or her designee will provide Contractor with a written explanation of his or her determination on each incident(s)/non-performance prior to authorizing the assessment of liquidated damages. The decision of the Director or his or her designee shall be final. City may assess liquidated damages for each calendar day or event, as appropriate, that Contractor is determined to be liable in accordance with this Agreement. Contractor shall pay any liquidated damages assessed by City within ten (10) days after they are assessed. If payment is not received by that date, City may deduct the amount of liquidated damages from the next monthly payment of Contractor's Compensation. City's right to recover liquidated damages for Contractor's failure to meet the service performance standards shall not preclude City from obtaining equitable relief for persistent failures to meet such standards nor from terminating the Agreement for such persistent failures. 71 10852395.2 11.10 Force Majeure. A. Excuse from Performance. Neither party shall be in default of its obligations under this Agreement in the event, and for so long as, it is impossible or extremely impracticable for it to perform its obligations due to an "act of God" (including, but not limited to, flood, earthquake or other catastrophic events), civil disturbance, labor unrest of other than the party's employees (including strike, work stoppage, slowdown, sick out, picketing, or other concerted job action), or other similar cause affecting Santa Clara County, not the fault of, and beyond the reasonable control of, the party claiming excuse. A party claiming excuse under this Section must (1) have taken reasonable precautions, if possible, to avoid being affected by the cause and (2) notify the other party as required by subsection C. B. Obligation to Restore Ability to Perform. Any suspension of performance by a party pursuant to this Section shall be only to the extent, and for a period of no longer duration than, required by the nature of the event, and the party claiming excuse from obligation shall use its best efforts in an expeditious manner to remedy its inability to perform, and mitigate damages that may occur as result of the event. C. Notice. The party claiming excuse shall deliver to the other party a written notice of intent to claim excuse from performance under this Agreement by reason of an event of Force Majeure. Notice required by this Section shall be given promptly in light of the circumstances, but in any event not later than five (5) days after the occurrence of the event of Force Majeure. Such notice shall describe in detail the event of Force Majeure claimed, the services impacted by the claimed event of Force· Majeure, the expected length of time that the party expects to be prevented from performing, the steps which the party intends to take to restore its ability to perform, and such other information as the other party reasonably requests. D. City's Rights in the Event of Force Majeure. The partial or complete interruption or discontinuance of Contractor's services caused by an event of Force Majeure shall not constitute an event of default under this Agreement. Notwithstanding the foregoing, in the event of non-performance excused by Force Majeure: (i) the City shall have the right to make use of Contractor's facilities and 72 10852395.2 equipment in the same manner as described in Section 11.06 of this Agreement; (ii) if Contractor's excuse from performance by reason of Force Majeure continues for a period of thirty (30) days or more, the City shall have the right to terminate this Agreement; (iii) if Contractor's inability to collect Solid Waste, Recyclable Materials, and Compostable Materials continues for ten (10) days or more from the date by which Contractor gave or should have given notice under Subsection C, the City may terminate this Agreement. 11.11 City Default. City shall be in default under this Agreement ("City Default") in the event City commits a material breach of the Agreement and fails to cure such breach within thirty (30) days after receiving notice from the Contractor specifying the breach, provided that if the nature of the breach is such that it will reasonably require more than thirty (30) days to cure, City shall not be in default so long as City promptly commences the cure and diligently proceeds to completion of the cure. In the event of an asserted City Default, Contractor shall continue to perform all of its obligations hereunder until a court of competent jurisdiction has issued a final judgment declaring' that City is in Default. 11.12 Assurance of Performance. If Con tractor ( 1) persistently suffers the imposition of liquidated damages under Section 11.09; (2) is the subject of any labor unrest including work stoppage or slowdown, sickout, picketing or other concerted job action; (3) appears in the reasonable judgment of City to be unable to regularly pay its bills as they become due; (4) is the subject of a civil or criminal proceeding brought by a federal, state, regional or local agency for violation of laws (including the Environmental Laws), regulations or permits in the performance of this Agreement, or (5) performs in a manner that causes City to be uncertain about Contractor's ability and intention to comply with this Agreement, City may, at its option and in addition to all other remedies it may have, demand from Contractor reasonable assurances of timely and proper performance of this Agreement, in such form and substance as City may require. Contractor shall provide such assurances within ten (10) days of the City's request. 73 10852395.2 ARTICLE 12. OTHER AGREEMENTS OF THE PARTIES 12.01 Relationship of Parties. The parties intend that Contractor shall perform the services required by this Agreement as an independent contractor engaged by City and not as an officer or employee of City nor as a partner of or joint venturer with City. No employee or agent of Contractor shall be deemed to be an employee of City, nor an agent of City. Except as expressly provided herein, Contractor shall have the exclusive control over the manner and means of conducting the services performed under this Agreement, and all persons performing such services. Contractor shall be solely responsible for the acts and omissions of its officers, employees, subcontractors and agents. Neither Contractor nor its officers, employees, subcontractors and agents shall obtain any rights to retirement benefits, workers' compensation benefits, or any other benefits which accrue to City employees by virtue of their employment with City. 12.02 Compliance with Law. In providing the services required under this Agreement, Contractor shall at all times comply with all applicable laws of the United States, the State of California and City, and with all applicable regulations promulgated by federal, state, regional or local administrative and regulatory agencies, now in force and as they may be enacted, issued or amended during the Term and all permits affecting the services to be provided. Contractor shall procure all permits and licenses, pay all charges and fees, and give all notices required by law. 12.03 Property Damage. Normal wear and tear from general vehicular traffic excepted, Contractor shall be responsible for damage to all public and private property in the City, including but not limited to streets, roads and ways (whether or not paved), and trees resulting from the operation of Contractor's vehicles or the actions of Contractor's employees in providing collection services within City. Any physical damage caused by the intentionally wrongful or negligent acts or omissions of employees or agents of Contractor to public or private property in the City shall be immediately repaired or replaced by Contractor. 12.04 Grants. Contractor shall, upon request, assist City in the preparation of applications to federal, state, regional and other governmental agencies and private sector organizations for grants and loans associated with recycling and reuse programs and projects. Contractor shall compile accurate and complete data, information and 74 10852395.2 documents as requested by City to apply for such grants and loans, and shall comply with any requirements to which the City is required to adhere as a condition of receiving such grants and loans. Contractor shall not apply for grants directly, in its own name, without prior notice to and written approval by City. 12.05 Assignment. Contractor acknowledges that this Agreement involves rendering a vital service to the City's residents and businesses, and that the City has selected Contractor to perform the services specified herein based on (i) Contractor's experience, skill arid reputation for conducting its operations in a safe, effective and responsible fashion, and (ii) Contractor's financial resources to maintain the required equipment and to support its indemnity obligations to the City under this Agreement. The City has relied on each of these factors, among others, in choosing Contractor to perform the services to be provided by Contractor under this Agreement. A. City Consent Required. Contractor shall not assign all or any of its rights or delegate or otherwise transfer all or any of its obligations under this Agreement to any other Person without the prior express written consent of City. City may refuse to consent to a proposed assignment unless it is satisfied that the proposed assignee is ready, willing and able to provide services in a manner equal to or better than the Contractor. Any such assignment, delegation or transfer made without the prior express written consent of City shall be void and the attempted assignment shall constitute a material breach of this Agreement. B. Assignment Defined. For the purpose of this Section, "assignment" shall include, but not be limited to, (1) a documentary assignment of Contractor's interest in and obligations under this Agreement; (2) a sale, exchange or other transfer to a third party of substantially all of Contractor's assets dedicated to service under this Agreement or of any processing facilities identified in Article VI currently owned by Contractor's partners; (3) any reorganization, consolidation, merger, or other transaction to which Contractor or either of its partners are a party which results in a change of Control of Contractor (e.g., the inclusion of a new partner); (4) any combination of the foregoing, whether or not in related or contemporaneous transactions which results in a change of Control of Contractor. A merger of Greenwaste Recovery, Inc. and Zanker Road Resource Management, Ltd., shall not constitute an "assignment" requiring the City's approval. However, Contractor shall 75 10852395.2 provide City at least 90 days notice of such a proposed merger and the consolidated entity shall provide City a new Guaranty substantially in the form of Attachment M within two business days after the merger or consolidation. C. City Review of Requests to Consent to a Proposed Assignment. 1. City need not consider a request to consent to an assignment made while Contractor is in default of its obligations under this Agreement; 2. Contractor shall be required to pay the City's reasonable expenses, including attorneys' fees and consultants' costs, necessary to investigate the suitability of any proposed assignee and to review and finalize any documentation required as a condition of approving any such assignment; 3. Contractor shall furnish City with audited financial statements of the proposed assignee's operations for the three (3) immediately preceding operating years; 4. Contractor shall furnish City with satisfactory proof: (i) that the proposed assignee has at least ten (10) years of municipal solid waste/recycling management experience on a scale equal to or exceeding the scale of operations conducted by Contractor for the City; (ii) that in the last five (5) years, the proposed assignee has not been subject to any administrative or judicial proceedings initiated by any federal, state or local agency having jurisdiction over its municipal solid . waste/recycling operations due to any significant failure to comply with state, federal or local laws and that the Contractor has provided City with a complete list of such proceedings and their status; (iii) that the proposed assignee has at all times conducted its operations in an environmentally safe and conscientious fashion; (iv) that the proposed assignee conducts its municipal solid waste management operations in accordance with sound waste management practices in full compliance with all federal, state and local laws regulating the collection and disposal of waste, including all Environmental Laws; (v) of any other information required by City to ensure the proposed assignee can fulfill the terms of this Agreement in a timely, safe and effective manner; 76 10852395.2 5. Any permitted assignee must assume Contractor's responsibilities under this Agreement. 12.06 Subcontracting. Contractor shall not engage any subcontractors, for development of public information materials as described in Attachment C without the prior express written consent of City. Contractor shall notify the City at least thirty (30) days prior to the date on which it proposes to enter into a subcontract. City may approve or deny any such request in its sole discretion and may require the submission of the information described in Section 10.05.C and the payment of the City's expenses in evaluating the acceptability of the proposed subcontractor. Contractor may, in cases of emergency, engage subcontractors for up to seven (7) consecutive days. Contractor shall give prompt notice to City of any such emergency subcontracting and any such engagement must be approved by City in writing if it is to extend beyond seven (7) days. Contractor shall be responsible for directing the work of any subcontractors and for any compensation due to subcontractors. City assumes no responsibility whatsoever concerning compensation. Contractor shall be fully responsible to City for all acts and omissions of a subcontractor. 12.07 Binding on Successors. The provisions of this Agreement shall inure to the benefit of and be binding on the successors and permitted assigns of the parties. 12.08 Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights on any Persons other than the parties to it and their representatives, successors and permitted assigns. There are no third party beneficiaries of this Agreement. 12.09 Waiver. The waiver by either party of any breach or violation of any provisions of this Agreement shall not be deemed to be a waiver of any breach or violation of any other provision nor of any subsequent breach of violation of the same or any other provision. 12.10 Contractor's Investigation; No Warranties by City. Contractor has made an independent investigation (satisfactory to it) of the conditions and circumstances surrounding the Agreement and the work to be performed by it, including the nature and amount of the Solid Waste, Recyclable and Compostable 77 10852395.2 Materials generated within the City, the recycling and source reduction programs now in effect in or planned by the City, and the SMART Station. The Agreement accurately and fairly represents the intentions of Contractor, and Contractor enters into the Agreement on the basis of that independent investigation and analysis. Contractor has carefully reviewed the information in the Request for Proposals and Addenda, if any. While City believes that the information contained in the Request for Proposals is substantially correct, City makes no warranties in connection with this Agreement, including but not limited to the information contained in the. Request for · Proposals. The City expressly disclaims any warranties, either express or implied, as to the merchantability or fitness for any particular purpose of Recyclable Materials made available for collection by Contractor. 12.11 Condemnation. City reserves the rights to acquire the Contractor's property utilized in the performance of this Agreement through the exercise of the right of eminent domain. 12.12 Representatives of the Parties. A. Representative of City. Subject to the authority conferred on the City Manager by Section 5.20.080 of the Municipal Code, the representative of the City who is primarily responsible for the administration of this Agreement and to whom notices, demands and other formal communications shall be given is the Director of Public Works. B. Representative of Contractor. The representative of the Contractor who is primarily responsible for the administration of this Agreement, and to whom notices, demands and other formal communications shall be given is Frank Weigel, Chief Operating Officer. City may rely upon actions taken and decisions made by the Contractor's designated representative as actions and decisions of the Contractor unless they are outside the scope of the authority delegated to such representative, which limitations on authority have been previously communicated to City in writing. 12.13 Notice. Notices, demands and other formal communications shall be in writing and shall either be personally delivered to the designated representative of 78 10852395.2 the party or deposited in the United States mail, first class postage prepaid and sent certified mail return receipt requested, addressed as follows: If to City: With a copy to: If to Contractor: By Personal Delivery Director of Public Works City Hall 250 Hamilton Avenue Palo Alto, CA 94301 By U.S. Mail Director of Public Works P.O. Box 10250 Palo Alto, CA 94303 City Manager City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 By Personal Delivery Mr. Frank Weigel, Chief Operating Officer Green Waste of Palo Alto 1500 Berger Drive San Jose, CA 95112 By U.S. Mail Green Waste of Palo Alto 1500 Berger Drive San Jose, CA 95112 Attention: Mr. Frank Weigel, Chief Operating Officer Routine, day-to-day communications between the parties may be exchanged in a manner and between subordinate employees as the designated representatives of each party may agree. Notices, demands and other formal communications shall be deemed to have been given upon personal delivery or upon attempted delivery as shown on the U.S. Postal Service certified mail return receipt. If the name of the principal representative or others designated to receive the notices, demands and other formal communications or the address of such person changes, written notice shall be given to the other party by means of a notice given in accordance with this section. 79 10852395.2 12.14 Duty of Coil tractor .Not to Discriminate. Contractor shall not discriminate, nor permit any subcontractor to discriminate, in the employment of persons engaged in the performance of this Agreement or in the provision of service to customers on account of race, skin color, national origin, ancestry, sex, age, height, weight, disability, medical condition, sexual orientation, religion, marital status, familial status, or housing status in violation of any applicable federal or state law. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Municipal Code relating to non-discrimination requirements and the penalties for violation thereof and shall comply with all such requirements, including those contained in Attachment R. 12.15 City Environmental Policies. Contractor and any subcontractors shall comply with City's Environmental Purchasing Policies, as may be amended from time to time. 12.16 Right of City to Make Changes. City may, without amending this Agreement, direct Contractor to cease performing one or more types of service described in Articles 4, 5 and 6, may direct Contractor to modify the scope of one or more such services, may direct Contractor to add new services and initiate pilot programs, or may otherwise direct Contractor to modify its performance under any other section of this Agreement. All such directions shall be in writing, signed by the Director or City Manager. Contractor shall promptly and cooperatively comply with such direction. If such changes cause an increase or decrease in the cost of performing the services, an equitable adjustment in the Contractor's compensation shall be made. Contractor will continue to perform the new or changed service while the appropriate adjustment in the Contractor's compensation is being determined. If City has directed a change in the scope of work under this Section and either party believes that such change will increase or decrease the costs of providing service, the party which believes the Contractor's compensation should be adjusted shall within thirty (30) calendar days submit to the other party a proposed adjustment and the parties shall thereafter meet and discuss the matter. Contractor shall promptly provide all relevant schedules, supporting documentation and other financial information requested by City to evaluate the necessity for an adjustment and the amount thereof. 80 10852395.2 City's Director of Public Works will participate in key meetings regarding those adjustments. Within ninety (90) days of the submission of the proposed adjustment, City will determine the amount of the adjustment, if any, and will thereafter adjust the Contractor's compensation accordingly. Any adjustments will be made effective as of the date the change in service is implemented. If the Contractor is dissatisfied with the decision of the City, any dispute shall be referred to and resolved by arbitration conducted pursuant to the procedures set forth in Attachment Q. 12.17 Cooperation During Transition. At the expiration of the Term or earlier termination of the Agreement, or upon City's approval of a proposed assignment, Contractor shall cooperate fully with City to ensure an orderly transition to any and all new service providers. Contractor shall provide, within ten (10) days of a written request by City, then-current electronic customer database and route lists, which identify each Customer on the route, its service level and history (number of containers, container sizes, frequency of collection, scheduled collection day), any special collection details, and detailed then-current Customer account and billing information. Contractor shall, upon request by City, sell collection vehicles and containers to the next service provider at their net book value. Contractor shall, commencing one hundred eighty (180) days prior to the transition of services, attend meetings with the next service provider and with City staff and consultants to plan for the transition of customers database with all service and billing data, the recovery of Contractor's containers and placement of new containers. Contractor shall perform in accordance with such plan and direct route supervisors to provide "ride-alongs" so that the new service provider's employees may ride with drivers in Collection vehicles during collection operations. Contractor shall direct its customer service staff, managers, drivers and other employees to provide accurate information to the new provider about routing and Customers 12.18 Protection of Customer Privacy. Contractor shall strictly observe and protect the rights of privacy of Customers and shall not market or otherwise distribute mailing lists with the names and addresses of residential customers. If, pursuant to this Agreement with Contractor, City shares with Contractor personal 81 10852395.2 information as defined in California Civil Code section 1798.81.5(d) about a California resident or commercial owner ("Personal Information"), Contractor shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City imi;nediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. Contractor shall not use Personal Information for direct marketing purposes without City's express written consent. 12.19 Use of Recycled Materials. A. Recycled Paper. Contractor shall purchase and use recycled paper products with a minimum of thirty percent (30%) post-consumer recycled content for uncoated paper and ten percent (10%) post-consumer recycled content for coated paper for all services provided under this Agreement, including office administration, reports, and communications with customers. All materials prepared by Contractor for distribution to Customers shall state "Printed on Recycled Paper." B. Re-Refined Motor Oil. Contractor shall use its best effort to use re-refined motor oil for its vehicles. C. Recycled Plastic. Contractor shall purchase carts that contain the minimum post-consumer recycled content specified in Attachment H. Upon City's request, Contractor shall document its on-going compliance with these requirements. 12.20 Municipal Code. Contractor shall comply with all applicable provisions of the Municipal Code, including Chapter 5.20 and Chapter 9 .10, and with all rules and regulations adopted by the City Manager pursuant to Section 5.20.280 of the Municipal Code. Contractor acknowledges having received a copy of Chapters 5.20 and 9.10 of the Municipal Code. 12.21 No Damages for Invalidation of Agreement. If a final judgment of a court of competent jurisdiction determines that this Agreement is illegal or was unlawfully entered into by City, neither party shall have any claim against the other for damages of any kind (including but not limited to loss of profits) on any theory. 82 10852395.2 12.22 Indemnity Regarding Challenge to Award of Contract. Contractor shall indemnify, defend and hold harmless City and its officers, employees and agents (collectively, the "Indemnitees") from and against any and all liability, claim, demand, action, proceeding or suit of any and every kind and description brought by a third person challenging the process by which proposals were solicited and evaluated, or this Agreement was negotiated or awarded, including City's compliance with the California Environmental Quality Act in connection with the award of this Agreement, but only to the extent that such liability, claim, demand, action, proceeding or suit was caused by Contractor's failure to comply with applicable law or with the written instructions of any of the Indemnitees with respect to such matters. 12.23 Fiscal Provisions. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only apprppriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other term, condition, or provision of this Agreement. 12.24 Affiliated Entity. Contractor will not form or use any Affiliate to perform any of the services or activities which Contractor is required or allowed to perform under this Agreement, other than as a subcontractor approved by the City under Section 12.06. If Contractor enters into any financial transactions with an Affiliate for the provision of labor, equipment, supplies, services, or capital related to the furnishing of service under this Agreement, or for the purchase of Recyclable Materials, that relationship shall be disclosed to the City, and in the financial reports submitted to the City. In such event, the City's rights to inspect records and obtain financial data shall extent to such Affiliate. 83 10852395.2 ARTICLE 13. MISCELLANEOUS AGREEMENTS 13.01 Attachments. Each of the Attachments, identified as Attachments "A" through "S," is attached hereto and incorporated herein and made a part hereof by this reference. Any additional attachments, appendices, addenda and schedules which are attached to any duly executed amendment to this Agreement are similarly to be incorporated herein as a part of this Agreement. 13.02 Entire Agreement. This Agreement, including the Attachments, represents the full and entire Agreement between the parties with respect to the matters covered herein and supersedes all prior negotiations and agreements, either written or oral. 13.03 Section Headings. The article headings and section headings in this Agreement are for convenience of reference only and are not intended to be used in the construction of this Agreement nor to alter or affect any of its provisions. 13.04 Interpretation. Each party has participated in the preparation of this Agreement with the assistance of legal counsel to the extent desired. Accordingly, this Agreement shall be interpreted and construed reasonably and neither for nor against either party. 13.05 Amendment. This Agreement may not be modified or amended in any respect except by a writing signed by the parties. 13.06 Severability. If any non-material provision of this Agreement is for any reason deemed to be invalid and unenforceable, the invalidity or unenforceability of such provision shall not affect any of the remaining provisions of this Agreement, which shall be enforced as if such invalid or unenforceable provision had not been contained herein. 13.07 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California. 13.08 Jurisdiction. Any lawsuits between the parties arising out of this Agreement shall be brought and concluded in the courts of the State of California, which shall have exclusive jurisdiction over such lawsuits. With respect to venue, the 84 10852395.2 parties agree that this Agreement is made in and will be performed in Santa Clara County. 13.09 No Attorneys' Fees. The prevailing party in any action brought to enforce the terms of this Agreement or arising out of this Agreement may recover its reasonable costs expended in connection with such an action from the other party. Each party shall bear its own attorneys' fees. 13.10 References to Laws. All references in this Agreement to laws and regulations shall be understood to include such laws and regulations as they may be subsequently amended or recodified. In addition, references to specific governmental agencies shall be understood to include agencies that succeed to or assume the functions the named agencies are currently performing. Ill Ill '/II Ill Ill Ill 85 10852395.2 IN WITNESS WHEREOF, City and Contractor have executed this Agreement as of the day and year first above written. GREENWASTE OF PALO ALTO, a California joint venture By: GreenWaste Recovery, Inc., a California corporation Name: Richard A. Cristina Title: President Name: Frank Weigel Title: Secretary ·By: Zanker Road Resource Management, Ltd., a California limited partnership By: Zanker Road Resource Recovery, Inc., a California corporation, its General Partner · By:~~~~~~~~~ Name: Richard A. Cristina Title: President By:~~~~~~~~~ Name: Murray B. Hall Title: Secretary CITY OF PALO ALTO City Manager ATTEST: City Clerk APPROVED AS TO FORM City Attorney APPROVED: Director, Administrative Services APPROVED: Director, Public Works 86 10852395.2 SUPPLEMENTARY ASSURANCES BY ZANKER ROAD RESOURCE MANAGEMENT, LTD AND GREENWASTE RECOVERY, INC. Zanker Road Resource Management, Ltd, and GreenWaste Recovery, Inc., partners in Contractor, in order to induce City to enter into this Agreement with Contractor, hereby ratify the commitments made in Contractor's Proposal regarding processing at the facilities which they own, and agree to process materials collected in Palo Alto and delivered to those facilities as necessary for Contractor to fulfill its agreements in Article 6 of this Agreement. By: Zanker Road Resource Management, Ltd., a California limited partnership By: Zanker Road Resource Recovery, Inc., a California corporation, its General Partner By:~~~~~~~~~ Name: Title: Richard A. Cristina President By:~~~~~~~~~ Name: Title: Murray B. Hall Secretary ' By: GreenWaste Recovery, Inc., a California corporation By:~~~~~~~~~~~ Name: Richard A. Cristina Title: President By:~~~~~~~~~~~ Name: Frank Weigel Title: Secretary Date: __________ _ Date: __________ _ Date: ----------- 87 10852395.2 Attachment B ATTACHMENT A -DEFINITIONS Subject to Article 1, capitalized terms used in this Agreement will have the meanings specified in this Attachment. Act. "Act" means the California Integrated Waste Management Act of 1989 (AB 939) Public Resources Code, Section 40000 et seq. Affiliate. "Affiliate" means a Person which is related to Contractor by virtue of direct or indirect ownership interest or common management. An Affiliate includes a Person in which Contractor owns a direct or indirect ownership interest, a Person which has a direct or indirect ownership interest in Contractor and/ or a person which is also owned, controlled or managed by any Person or individual which has a direct or indirect ownership interest in Contractor. The partners which comprise Contractor are Affiliates. Agreement. "Agreement" means this Agreement, including the attachments. Applicable Law. "Applicable Law" means all federal, State, and local laws, regulations, rules, orders, judgments, decrees, permits, approvals, or other requirements of any governmental agency having jurisdiction over the Collection, transportation, processing, and disposal of Solid Waste, Recyclable Materials, Organic Materials, Yard Trimmings and other materials Collected pursuant to this Agreement that are in force on the Effective Date and as they may be enacted, issued or amended during the Term. Baseline Programs. "Baseline Programs" includes Solid Waste, Recyclable Materials, and Compostable Materials collection and processing programs conducted by the incumbent contractor as of the Effective Date and described in the Request for Proposals issued by City in February 2008. Staring on July 1, 2015, Baseline Programs will also include the collection services and placement of waste stations at all special events, the collection service in all hard to service areas, and the purchase of all Containers (except kitchen buckets for Residential customers), including wheeled carts for all materials collected. Bulky Items. "Bulky Items" means large discarded items including Major Appliances, furniture, tires, carpets, mattresses, and other oversize materials whose large size precludes or complicates their handling by normal Collection. Bulky Items do not include abandoned automobiles, large auto parts, or trees. Business Day. "Business Day'' means a day during which Contractor's office is required to be open to do business with the public. Also "Work Day." Can. "Can" means a metallic or plastic container with a close-fitting cover and handles and a capacity of not more than 32 gallons, provided by a Customer. Change in Law. "Change in Law" means the enactment of a statute introduced after the Effective Date, or the promulgation of a new regulation (or amendment to an existing regulation) proposed after the Effective Date but does not include any changes in the California Air Resources Board emissions regulations for vehicles or changes in 1415640.3 environmental regulations affecting the operation of the facilities at which Recyclable Materials, Organic Materials or Yard Trimmings collected in the City are processed. City. "City", when used in reference to a local government, means the City of Palo Alto. When used in reference to a geographic area in which Collection services are to be provided by Contractor, it means the area within the corporate boundaries of the City of Palo Alto together with areas owned by Stanford University and serviced by the Contractor's predecessor including Stanford Hospital, Stanford Research Park, Stanford Mall and apartments on Sand Hill Road, all as shown on maps maintained by the Director. Collect/Collection. "Collect" or "Collection" means to take physical possession, transport, and remove Solid Waste, Recyclable Materials, Organic Materials, Yard Trimmings, or other materials pursuant to this Agreement from within the City. Commencement Date. "Commencement Date" means the date specified in Section 2.02 when the Contractor is to begin providing Collection services required by this Agreement. Compactor. "Compactor" means a mechanical apparatus that compresses materials and/ or the Container that holds the compressed materials. Compactors include bin compactors of any size serviced by front-loading collection vehicles and drop box compactors of any size serviced by drop box collection vehicles. Compost or Compostable Material. "Compost" means the controlled biological decomposition of Organic Materials and Yard Trimmings and the product resulting from that process. Composting does not include Transformation. Composting Facility. "Composting Facility'' means the Z-Best Composting Facility in Gilroy, California, or the Zero Waste Energy Development Company (ZWED) Anaerobic Digestion (AD) Facility in San Jose, CA. Construction and Demolition Debris. "Construction and Demolition Debris" means materials resulting from the construction, remodeling, repair or demolition of a building, structure, pavement or other improvement, including building components, packaging, and rubble but excluding liquid wastes and hazardous wastes. Construction and Demolition Debris Recovery Facility. "Construction and Demolition Debris Recovery Facility'' means the Zanker Road Materials Processing Facility located at 675 Los Esteros Road in San Jose, California, or the Zanker Road Resource Recovery Operation and Landfill located at 705 Los Esteros Road in San Jose, California. Container. "Container'' means any receptacle used for storage of Solid Waste, Recyclable Materials, Compostable Materials, Yard Trimmings, Construction and Demolition Debris and other materials Collected pursuant to this Agreement including metal or plastic Cans, carts, bins, Compactors, kitchen buckets, recycling buddy, and drop boxes. Contractor. "Contractor" means Greenwaste of Palo Alto. The Contractor is a "Collector" for purposes of Municipal Code Section 5.20.010. Attachment A -Page 2 1415640.3 Contractor's Proposal. "Contractor's Proposal" means the proposal dated April 28, 2008, submitted by Contractor in response to the Request for Proposals issued by City in February 2008, certain'supplemental written materials submitted by Contractor between May 1 and July 7, 2008, and supplemental written and electronic proposed changes submitted by Contractor in 2014 and 2015. Control. "Control" means, for purposes of Article 12, the direct or indirect possession of the power to direct, or cause the direction of, the management and policies of a corporation, partnership, limited liability company, joint venture or other Person. County. "County" means the County of Santa Clara. CRV Revenues. "CRV Revenues" means the revenues received by the Contractor from the California Department of Conservation for returned beverage containers. Curbside. "Curbside" means the location designated for Collection, where Containers or loose materials are to be placed. Customer. "Customer'' means the Person to whom Contractor provides Collection services. The Customer may be the Occupant or Owner of the Premises. Day. "Day'' means calendar day unless otherwise specified. Director. Means the Director of Public Works for the City of Palo Alto or the Director's designee. Discarded. "Discarded" means Solid Waste, Recyclable Materials, Organic Materials and Yard Trimmings placed in a Container and/or at a location that is designated for Collection. Effective Date. "Effective Date" means the date identified in Section 2.01. Electronic Waste (or E-Waste). "Electronic Waste" or "E-Waste" means "Covered Electronic Wastes" as defined in Act (Section 42463 of Public Resources Code) including discarded electronic equipment such as, but not limited to, television sets, computer monitors, central processing units (CPUs), laptop computers, and peripherals (e.g., external computer hard drives, computer keyboards, computer mice, and computer printers). Environmental Laws. "Environmental Laws" means all federal and State statutes, County and City ordinances concerning public health, safety and the environment including, by way of example and not limitation, the Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC §9601 et seq.; the Resource Conservation and Recovery Act, 42 USC §6902 et seq.; the Federal Clean Water Act, 33 USC §1251 et seq.; the Toxic Substances Control Act, 15 USC §1601 et seq.; the Occupational Safety and Health Act, 29 USC §651 et seq.; the California Hazardous Waste Control Act, California Health and Safety Code §25100 et seq.; the California Toxic Substances Control Act, California Health and Safety Code §25300 et seq.; the Porter-Cologne Water Quality Control Act, California Water Code §13000 et seq.; the Safe Drinking Water and Toxic Enforcement Act, California Health Attachment A -Page 3 1415640.3 and Safety Code §25249.5 et seq.; as currently in force or as hereafter amended, and all rules and regulations promulgated thereunder. Facility/Facilities. "Facility/Facilities" means any plant or site, owned or leased and maintained, operated or used by Contractor for purposes of performing Contractor's obligations under this Agreement (e.g., facilities for parking and maintaining vehicles, administration offices, and customer service offices, etc.). Federal. "Federal" means pertaining to the national government of the United States. Fiscal Year. "Fiscal Year" has the same meaning as "Rate Period". Guarantors. "Guarantors" means Greenwaste Recovery, Inc. and Zanker Road Resource Recovery, Inc. Guaranty. "Guaranty'' means the agreement to be executed by the Guarantors in the form of Attachment M. Holidays. "Holidays" means New Year's Day, Thanksgiving Day, and Christmas Day. Holiday Schedule. "Holiday Schedule" means the modified service schedule for the days following a Holiday. If a Holiday falls on Monday, Tuesday, Wednesday, Thursday or Friday, the service is to be provided the immediately following day. If a Holiday falls on Saturday, the service is to be provided the following Monday. Holiday Trees. "Holiday Trees" means trees targeted for diversion that were used in celebration of Christmas and other holidays in December and January. Household Batteries. "Household Batteries" means disposable or rechargeable dry cells (e.g., A; AA, AAA, B, C, D, 9-volt, button-type) commonly used as power sources for household or consumer products including, but not limited to, nickel-cadmium, nickel metal hydride, alkaline, mercury, mercuric oxide, silver oxide, zinc oxide, nickel-zinc, nickel iron, lithium, lithium ion, magnesium, manganese, and carbon-zinc batteries, but excluding automotive lead acid batteries. Household Hazardous Waste. "Household Hazardous Waste" means Hazardous Waste generated at Residential Premises. Including. "Including'' means including but not limited to. Liquidated Damages. "Liquidated Damages" means the amounts owed by Contractor to the City for failure to meet specific standards of performance as described in Section 11.09. Major Appliances. "Major Appliances" means any device including washing machines, clothes dryer, hot water heaters, dehumidifiers, conventional ovens, microwave ovens, stoves, refrigerators, freezers, air-conditioners, trash compactors, and residential furnaces discarded by Residential Generators. Major Appliances are commonly referred to as White Goods. Attachment A -Page 4 1415640.3 Materials Recovery Facility. "Materials Recovery Facility" means a permitted facility where materials are cleaned, processed, sorted and baled for the purposes of recovering reusable or Recyclable Materials. Contractor will deliver Recyclable Materials collected in the City to the Green Waste Materials Recovery Facility (also referred to as Green Waste MRF) located at 625 Charles Street in San Jose, California, for processing. Multiple-Family Residential Premises. "Multiple-Family Residential Premises", also referred as Multi-family, means building(s) containing five (5) or more individual residential dwelling units. Such Premises normally have centralized Solid Waste, Recyclable Materials, and Compostable Materials Collection service for all units in the building(s) and are billed to one address (typically the Owner or property manager). Municipal Code. "Municipal Code" means the Palo Alto Municipal Code. Occupant. "Occupant" means a Person who occupies Premises. On-Call Services. "On-Call Services" means the collection service shall be provided as arranged or requested by Customers or City. Operating Ratio. "Operating Ratio" or "OR" means the relationship, expressed as a percentage, between Contractor's total annual cost of operations and the Contractor's total annual cost of operations plus profit. The OR for purposes of this Agreement is 88 percent. The formula by which profit is calculated is shown in Attachment N-2, Section 3.B. Compostable Materials. "Compostable Materials" means the material identified as "Compostables and/ or Organics" throughout the agreement and attachments, including Section 3 in Attachment C. Overage. "Overage" means the amount of Solid Waste, Recyclable Materials, Organic Materials and Yard Trimmings placed in or adjacent to a Collection Container that is in excess of the Container capacity. Owner. "Owner'' means the Person holding legal title to the real property constituting the Premises to which Solid Waste, Recyclable Materials, Organic Materials and/ or Yard Trimmings Collection service is provided. Party(ies). "Party(ies)" refers to the City and Contractor, individually or together. Pass-Through Cost. "Pass-Through Cost" means a cost to which no element of overhead, administrative expense, or profit is added. Person. "Person" means any individual, firm, company, association, organization, partnership, corporation, trust, joint venture, the United States, the State, the County, towns, cities, or special purpose districts. · Premises. "Premises" means any land or building where Solid Waste, Recyclable Materials, Organic Materials or Yard Trimmings are generated or accumulated. Rate Period. "Rate Period" means the twelve-month period, commencing July 1 of one year and concluding June 30 of the next year. Attachment A -Page 5 1415640.3 Recyclable Materials. "Recyclable Materials" means the materials identified in Attachment C, Section 2, as well as materials subsequently added to the foregoing list by regulation of the City Manager issued pursuant to Section 5.20.280 of the Municipal Code or by sixty (60) days written notice to Contractor by the Director. Single-Family Residential Premises. "Single-Family Residential Premises" means a Premises used as a residential dwelling other than a Multiple-Family Residential Premises and includes each unit of a duplex, triplex, fourplex or townhous~ condominium at which there are no more than four (4) dwelling units and where individual Solid Waste, Recyclable Materials, and Compostable Materials Collection is provided separately to each dwelling unit and each dwelling unit is billed separately. SMART Station. "SMART Station" means the Sunnyvale Materials Recovery and Transfer Station located at 301 Carl Road in Sunnyvale, California. Contractor will deliver Solid Waste and Yard Trimmings to the SMART Station unless otherwise directed by City. State. "State" means the State of California. Subcontractor. "Subcontractor" means a Person that has entered into a contract with the Contractor for the performance of work that is necessary for the Contractor's fulfillment of its obligations under this Agreement. Term. "Term" means the Term of this Agreement. Ton (or Tonnage). "Ton (or Tonnage)" means a unit of measure for weight equivalent to 2,000 pounds where each pound contains 16 ounces. Universal Waste (or U-Waste). "Universal Waste," or "U-Waste," means all wastes defined by Title 22, Subsections 66273. l through 66273.9 of the California Code of Regulations. These include, but are not limited to, batteries, fluorescent light bulbs, mercury switches, and Electronic Waste. Used Motor Oil. "Used Motor Oil" means used motor oil from automobiles and other light duty vehicles intended for personal use which is removed from cars at a Residential Premises and not as a part of a for-profit or other business activity. Used Motor Oil Filter. "Used Motor Oil Filter'' means a used motor oil filter from automobiles and other light duty vehicles intended for personal use which is removed from the vehicle at a Residential Premises and not as a part of a for-profit or other business activity. White Goods. "White Goods" means Major Appliances. Yard Trimmings. "Yard Trimmings" means the materials identified as Yard Trimmings in Attachment C, Section 3. Zero Waste Services. "Zero Waste Services" means the elements of the City's Zero Waste Operational Plan that are to be implemented through this Agreement, including (1) collection for composting of Organic Materials from Commercial/Industrial Customers, (2) expansion of the types of materials collected for recycling from all Attachment A -Page 6 1415640.3 categories of Customers, (3) expansion of the types and quantities of materials collected for reuse and recycling through the Annual On-Call Community Clean Up Program, (4) increasing the amount of Construction and Demolition Debris that is diverted from landfill disposal, (5) implementing mandatory participation in recycling programs if and when required by City Council action, and (6) public information and outreach efforts to encourage participation in all of the foregoing. Attachment A -Page 7 1415640.3 ATTACHMENT B TRANSITION AND IMPLEMENTATION PLAN 1. ADMINISTRATION Office and Storage Yard Lease(s): GWR must secure facilities for a local administrative office, our Palo Alto Customer Service Center and a yard large enough to store, maintain and wash vehicles and containers. GWR and the City anticipate GWR taking over the Geng Road site from PASCO/Waste Management to support the establishment of a local administrative office and provide enough local storage area for some containers for quick turnover of requests. The Geng Road site does not, however, include sufficient room to store, maintain and wash all the trucks and containers for the City. We are currently seeking alternative sites in Santa Clara that can accommodate the balance of our needs for Palo Alto operations. If the Geng Road site is available and a lease has been signed on or before December 31, 2008, GWR will use the Geng Road site to accommodate our administrative office space needs and the storage of limited containers. If the Geng Road site is not available and a lease has not been signed on or before December 31, 2008, GWR will make arrangements for an alternative site within the City or within two (2) miles of the City boundary to provide for a local administrative office. Regardless of the location(s) of our facilities, the process of setting up the office remains virtually the same. Office facilities will be set-up prior to or concurrent with the hire and training of the new Customer Service Representative team. Office furniture, supplies and additional resources needed to support staff will be ordered to accommodate the space and ensure the comfort and productivity of staff. The phone and computer systems will be set-up by our experienced IT Manager and tested for any inconsistencies in performance and use. It is the goal of GWR to retain the same customer service phone number as is currently being used by PASCO. The GWR office in San Jose will be used as a back-up location for customer service support and the Charles Street location will serve as a back-up and overflow location for the storage of trucks and containers. Customer Service and Call Center Activities: Three (3) Customer Service Representatives and one Supervisor will be hired. New CSRs will be trained by the existing CSR staff and each CSR's electronic operations will be set-up will be in coordination with our IT Manager. New CSR staff will be required to participate in a training course using proven techniques to support a smooth transition. We will be making offers of employment to displaced employees and remain hopeful that they will accept. Utilizing customer service staff from the previous hauler provides an additional advantage of reducing start-up costs associated with training staff; they are already familiar with the area, the routes and the customer service process for this sector. New cust<?mer service staff will need to be trained on the RAMS system and GWR customer service expectations. Page 1of13 The orientation and training process for Customer Service Representatives will be overseen by our Customer Service Manager and coordinated with our IT Manager. All CSRs new to GWR will be trained on the RAMS systems and its integration with the On-Route system in all the collection trucks. It will be imperative that CSRs are well versed in the use and troubleshooting of the RAMS system and the generation and tracking of work orders. We anticipate and are prepared to manage a high call volume during this transition. We will utilize our existing Customer Service Manager and Customer Service Supervisor to provide support to and take calls at the new call center. If call volume proves to be higher than anticipated or customer service requests are more complicated than we expect, we will pull from existing staff to answer calls, in order to relieve the new CS Rs and utilize existing Management and Supervisory staff to handle the more complicated service requests. Billing System Coordination with the City& PASCO It is critical that GWR and the City coordinate tracking and implementation processes and integrate the operational aspects of customer billing. The City utilizes a refuse module of the SAP system for tracking of services and billing customers. GWR utilizes a RAMS system to maintain customer data and track work orders. It is imperative that these two systems are compatible in order to provide seamless customer service, accurate and timely billing and prompt delivery of services. System integration and data synchronization will ensure that all services and items provided to Customers that are charged and for which GWR is compensated on a per unit basis, will be accurately tracked for the City to bill Customers and for GWR to submit requests to the City for payment. GWR has experience in the integration of our RAMS system with a SAP system, as demonstrated by the successful development, testing and implementation of our contract with the City of San Jose. GWR staff has been working internally to coordinate services and needs (technology, customer service, finances, operations) in anticipation of providing data in a format that allow the City to integrate service charges into the City billing system. The GWR Office Manager, IT Manager, Controller and Community Relations Manager are working with the City Utilities Billing SAP Team and the SAP Consultant Team from Axon to identify the parameters for integrating a system interface that is updated at frequent intervals throughout the day. This goal of a frequently-updated interface is to allow GWR to generate and complete customer work orders, export that data from RAMS, transmit an encrypted flat-file to the City via secure means and allow the City to convert the RAMS data into a format that is accepted by the City Refuse Module of the SAP system. This team has begun coordinating efforts and identifying a strategy for integration and will continue to work together to design, test and implement an integrated system. The City does not have a call center so all customer service calls will be routed directly to the GWRCustomer Service Center. Accordingly, there will be no City-generated work orders, which make the system integration much easier. Data first needs to be transferred in one direction, from GWR to the City. It is likely that a second data transfer needs to occur from the City to GWR for updated information, such as changes to account information and updated rates. The exact methods, schedule and costs associated with integrating the RAMS system and the SAP system have not been finalized. GWR will be responsible for developing an application that Page 2of13 will allow GWR to collect specific information on Palo Alto Customers and provide the information in a fixed flat-file length and transmit that flat-file to the City's system via secure means. The system may be designed for unidirectional or bidirectional data transmission. There are limited needs for bidirectional data specific to the addition of new premises and billing related inquiries. The portal currently under development by Axon will provide GWR with information on the addition of new premises. Sufficient access to customer billing information will need to be provided to GWR so CSRs have the ability to answer specific billing questions from customers and issue credits to customers. GWR CSRs may also perform some limited and infrequent manual entering of data into the City's SAP system. Beginning in October 2008, GWR staff will identify the specific data types to be transmitted to the City for tracking of contractual requirements. GWR will rely on the City's input throughout this process to confirm that the data needs are accurate and to add additional data types based on the integration needs with the SAP system. GWR staff will be available to the SAP Team throughout this process of defining and refining the data needs and parameters of the system interface. GWR has provided the City with details regarding the process of RAMS-SAP integration and the different components involved in the interface solution. The target date for the City's SAP implementation is February 2009. It is likely the City will not invest significant resources in the Refuse module and integration with a GWR application until after that date. GWR will need the assistance of the City SAP Team prior to February 2009 in order to sufficiently and accurately outline the parameters of the application that will be written to pull specific data from RAMS and to accept billing related data from SAP. It is also critical that GWR, the City and the current hauler (PASCO/Waste Management) coordinate to ensure the records and data of existing customers and services are accurate and complete when transferred to GWR to enable routes to be developed and finalized prior to the transition. The City is currently working with PASCO/Waste Management to reconcile the existing data set and ensure the highest degree of accuracy obtainable. Potential Obstacles & Contingencies: Administration • Depending on the ability of the City and GWR to sign a lease for the Geng Road site on or before December 31, 2008, GWR may need to identify and secure an alternative site for our local administrative office. Securing a local administrative office is a critical path for success. The potential downside of utilizing a different site for the GWR local administrative office is the comfort of customers familiar with the location of the Geng Road site, which would be addressed by integrating a change in facility location announcement into existing public education materials. • Ensuring our Customer Service Center has a facility that is up and running on the date of the transition is a critical path to our ability to provide exemplary customer service in this time of transition. The Geng Road site is currently occupied by the PASCO/Waste Management Customer Service Center. lf this site is secured for the Customer Service Center, it is unreasonable to expect they could transition out and GWR could set-up our operations in a single day without significant service disruption. Depending on the Page 3of13 location of the facility, there are a few appropriate and feasible mitigation measures to address this potential obstacle. o Jfthe Geng Road site is available and secured, the GWR Customer Service Center may be set-up at the Geng Road site while it is being operated by PASCO. This would prove complicated, however would allow for the GWR Customer Service Center to be fully operational prior to the transition date. The second is to initially set-up in the San Jose office and then transition into the office at the Geng Road site. o If the Geng Road site is not available and an alternative site must be secured, GWR will have adequate time to set-up the administrative office and Customer Service Center prior to the date of transition. • Customer Service Representatives with PASCO/Waste Management will be offered employment and their acceptance is a critical path to a smooth transition. If existing employees accept the Customer Service Representative positions, their training needs will be significantly reduced; if they do not, GWR will need to hire new employees and provide additional training in Customer Service methodology specific to GWR and the industry. An appropriate and feasible mitigation measure to address this potential obstacle is to conduct outreach and recruitment early enough to secure commitments and/or hire new employees and begin additional training. • Obtaining accurate and complete data from PASCO/Waste Management on routes, customers, services and employees is a critical path to a seamless transition. Based on past experience, incomplete and/or incorrect data can be the greatest threat to a seamless transition. o There are two feasible and appropriate mitigation measures we can employ to address the route/customer/services data portion of this potential obstacle. The first is to conduct route surveys and field audits as early as possible, to allow time to ground-truth the accuracy of the route maps and services provided. The second is to have Customer Service Representatives on hand and prepared to receive increased customer calls and expeditiously deploy work orders to the operations team. o There are two feasible and appropriate mitigation measures we can employ to address the employee data and recruitment portion of this potential obstacle. The first is to obtain information on existing employees as soon as it is made available to us and the second is to begin outreach efforts to employees at the storage yard as quickly as possible. 2. PERSONNEL (Hiring & Training) Management Team -Roles and Responsibilities GWR has assembled an experienced and hands-on Management Team unparalleled in the industry. The Management Team has extensive experience in all administrative, financial and operational aspects of collection, hauling, processing and disposal. In order to ensure a successful and smooth transition, the GWR Management Team recognizes the importance Page 4of13 dedicating resources to the transition and is committed to providing the resources needed and expertise necessary for the transition. Following the successful transition of GWR into Palo Alto, the Management Team will also provide continued support to ,staff and will manage the contract through completion. The Management Team includes: Richard Cristina, President Murray Hall, Vice-President Jesse Weigel, Secretary/Treasurer Frank Weigel, Chief Operating Officer Don Dean, Chief Financial Officer Transition Team -Roles and Responsibilities GWR has assembled an incredibly dynamic and experienced Transition Team that will train and provide ongoing support to new employees in their respective area of expertise. The Transition Team will be supported by the Management Team to ensure time dedicated to the transition does not negatively affect their ability to continue providing the high level of service and performance expected of GWR employees. The Transition Team will play a prominent role in orientation, training and support of new employees and is committed to and has the resources available tp dedicate the time, energy and expertise necessary to ensure a successful transition. We anticipate the Transition Team will dedicate 50%-100% of their time to the transition including intermittent direct support after collection service begins and the Zero Waste phased implementation is complete. Following the successful transition, the Transition Team will reduce their time dedicated to the Palo Alto contract and support the new employees hired. Tracy Adams, Controller Mr. Adams worked extensively on the Santa Cruz County transition and will provide assistance with the conversion of files and set-up of new customer accounts. Colin Beall, San Jose Operations Manager Mr. Beall has managed transitions in Tehama County, Red Bluff and San Jose Yardwaste and has provided assistance and support to many more. Mr. Beall will be responsible for training the Palo Alto General Manager and Operations Manager on GWR systems and procedures. He will also lead the driver training program and provide assistance during bin distribution Barry Christina, Human Resource Manager · Mr. Cristina has been involved in all phases of GWR's transitions from Petaluma to Santa Cruz County and contract compliance. Mr. Cristina will be responsible for coordinating the job offers to the current PASCO/Waste Management employees working on the Palo Alto contract. He will also provide support and assistance to Frank Weigel in other transition phases. Page 5of13 Jeff Cristina, Outreach Coordinator, Zanker Mr. Cristina will be responsible for the outreach for commercial recycling and the expanded organics/food waste as part of the "Zero Waste" program. He has been involved in marketing Zanker's recycling products to all types of commercial customers. Burton Crosby, IT Manager Mr. Crosby manages all aspects of the GWR Information Technology systems. He has been intimately involved in the contract turn-ups and system integrations in the past for GWR including transitions in the County of Santa Cruz and City of San Jose. Valarie Enyart, Office Manager Ms. Enyart leads GWR's Customer Service team and management of the San Jose office. Ms. Enyart has been a key asset in successful transitions, including the transfer of databases from prior haulers. Ms. Enyart will provide the necessary support for the Customer Service Representatives. Ms. Enyart will provide internal and outside resources and training opportunities to the new CSR's in GWR's exceptional approach to Customer Service and comprehensive use of the RAMS system. She will also coordinate with the IT Manager and Controller to ensure a smooth transition of data from the previous hauler. Emily Hanson, Community Relations Manager Ms. Hanson is the newest member of GWR team and has extensive experience in contract management, community and government relations and managing the development and implementation of successful public education and outreach programs. Ms. Hanson will provide support and assistance to Frank Weigel in other phases of the transition. Jose Ortiz, Operations Supervisor Mr. Ortiz is experienced in routing and the efficient delivery and pick-up of residential carts, has been involved in all operational phases of GWR's collection business and as back up for our operation managers and supervisors. Mr. Ortiz has managed cart distribution and route auditing and been involved in driver training and field customer service and has worked on transitions for San Jose Yardwaste, Petaluma, Burbank Sanitary District, Portola Valley, Santa Cruz County, Capitola, Scotts Valley and Lexington Hills. Mr. Ortiz will be in charge of cart and bin distribution and exchange for the City of Palo Alto Contract. Hiring and Training of Staff GWR is committed to giving priority hiring to displaced PASCO employees. It is the goal of GWR to hire outside the existing pool of displaced employees only if GWR has more positions to fill then the total number of interested people qualified for the position to which they are applying or if a displaced employee chooses to stay with Waste Management. GWR · Management has already met with the drivers to provide employment assurances and answer questions current employees have. While some discussions have already begun with other Page 6of13 positions, the formal and coordinated discussions will begin with the remainder of the positions (managers, supervisors, coordinators, CSRs, recycle center employees, etc ... ) over the next few months. Additional outreach will continue through the formal employment offer phase. GWR will obtain a list of current employees from PASCO and begin conducting outreach to provide assurances that employment opportunities will be offered to displaced employees. Approximately four (4) months before the transition date, GWR will offer employment to displaced employees for the jobs which they are qualified and will require acceptance on or before April I, 2009. This timeline will allow GWR to hire and train new employees without interfering with our ability to affect a smooth and seamless transition. Approximately two (2) months before the transition date, we will begin our "off-truck" and "on- truck training" for route personnel, including drivers and mechanics. Training will also commence for the use of the CNG fueling station by City staff. It is imperative that all displaced employees who have accepted positions with GWR are oriented on the GWR Drug & Alcohol Policy, Sexual Harassment Policy, Injury and Illness Prevention Program, Emergency Action Plan, Safety Rules and Discipline Program and Accident and Injury Reporting Program. Employees are also required to participate in and complete an intensive training program covering topics including, but not limited to commercial driver safe work practices, PPE, hazard communication, seat belt requirements, confined spaces, and lockout/tag out requirements and procedures. Prospective employees must pass this series with management approval to achieve permanent employment. To accommodate schedules, trainings will be held each Saturday leading up to the transition date and participants will be paid for their time spent participating in these trainings at their regular hourly rate. • Route Personnel -Dispatchers, Drivers & Mechanics In addition to the route personnel positions (drivers and mechanics) the following positions will also need to be filled. Priority will be given to displaced employees who meet the qualifications of the position being applied for, however if none of the positions are applied for or the applicants are not qualified, GWR will seek outside applicants. • Management: o General Manager (1) o Operations Manager (1) o Environmental Outreach Manager (1) • Supervisors: o Route Supervisors (3) o Maintenance Supervisor (I) o Customer Service Supervisor (1) • Customer Service Representatives (3) • Environmental Outreach Coordinators Page 7of13 • Recycle Center Employees (2) • Container Distribution (I) Potential Obstacles & Contingencies: Personnel • The only obstacle anticipated is an unforeseen delay in hiringfrom outside the pool of displaced employees. The most appropriate mitigations measure is to impose an acceptance date for displaced employees to provide GWR some level of assurance that we do not need to seek applicants for positions that have been accepted. 3. OPERATIONS (Equipment & Routes) Truck and Container Ordering and Delivery It is imperative that new trucks and additional vehicles needed for operations are available for use prior to the date of transition. Accordingly, GWR has already placed the order for vehicles that will be used for residential, multi-family and commercial Solid Waste, Recyclable Materials, Yard Trimmings and Organics collection. Prior to October 31, 2008 body color and additional trim details will be discussed with the City, finalized and submitted to the factory. Prior to November 30, 2008 the remaining details for the vehicles (logos, colors, placement, vehicle identification numbers and additional text) will be discussed with the City and finalized. The factory will begin building the chassis for all trucks (including the Recycle Center forklift -to be ordered in October 2008) and will phase the delivery for the body construction between the December I, 2008 and January 31, 2009. The construction of the bodies will occur as the chassis are received. All trucks will be completed and delivered between May I, 2009 and May 31, 2009, with complete delivery on or before June I, 2009. GWR has also agreed to purchase trucks from PASCO at the net book value as per the City's agreement with PASCO. The trucks must be provided to GWR in good condition and ready for service on or before July I, 2009. All drivers utilizing CNG vehicles will be trained on the use of the City fueling facility before operating the vehicles. GWR will be utilizing the existing carts for residential and some multi-family Solid Waste, Recyclable Materials, Yard Trimmings and Organics collection. The colors, sizes, logos, text and text placement and container identification numbers for residential carts will be discussed with the City and finalized on or before December 31, 2008. GWR will maintain an adequate inventory of extra containers to replace residential carts. On an as-needed basis, GWR will deliver additional or replacement carts to existing customers within seven (7) days of their request for a different cart capacity, additional cart(s) or replacement carts. Replacement carts will be delivered to customers within five (5) days of notification to GWR. When carts are delivered GWR will remove all carts that have been damaged or are no longer in use, as appropriate. As new premises are added or service levels change, GWR will provide customers with carts to reflect their level of requested service. GWR will be ordering new containers (bins & drop boxes) for commercial and multi-family Solid Waste and Recyclable Materials collection (including "recycling buddies") for Organics collection and also for the Recycle Center. The colors, sizes, logos, text and text placement and container identification numbers for containers will be discussed with the City and finalized on Page 8of13 or before December 31, 2008. On or before July I, 2009, GWR will begin to remove existing containers for solid waste collection and replace them with new containers as per the specifications of each Customer. Delivery of "recycling buddies" to multi-family customers will occur with the delivery of solid waste collection containers. On or before July I, 2009, GWR will begin delivery of new carts and bins to commercial Customers for expanded single stream recyclables and organics in support of the new Zero Waste program. Delivery routes will be planned to minimize vehicle travel and expedite the replacement of carts to customers. Drop boxes will be purchased to replace existing drop-boxes and delivery will occur as orders for services are placed. Discussions have already occurred with the manufacturer and following our receipt of data on existing commercial containers and anticipated needs, GWR will finalize the count and firm up the order the new containers, including colors and signage. GWR will maintain an inventory of extra commercial containers with varying capacities in the event initial demand is greater than anticipated. Excess inventory will be stored at our storage yard. The new carts and containers will be purchased before July I, 2009 and will meet the requirements in Attachment C. Payment from the City for these per-unit costs will occur after July I, 2009. All carts and containers will have logos indicating exclusive use in Palo Alto. Accompanying the payment request, GWR will provide the City with the purchase order and proof of receipt. Route Planning and Development GWR utilizes On-Route system technology on all trucks. On-Route is fully integrated and maintains a virtual real-time connection with RAMS software to ensure customer service requests and work orders generated through RAMS are provided to the drivers via On-Route. Full integration of these two systems also enables drivers to enter any additional services or alterations in service into On-Route, causing additional charges on their account as appropriate. GWR will request and arrange for the transfer of route maps and sequential route sheets from the City and PASCO/Waste Management for input into the RAMS system. GWR will then conduct route surveys and field audits to ground-truth the data obtained. Routes will be developed utilizing this data and dry runs will be conducted prior to finalizing the routes. Once the data has been proven accurate, routes will be finalized in the two (2) months preceding the transition. Minor calibration of the routes will be ongoing. Notification will be given to the City and Customers if more significant changes are made, including, but not limited to holiday schedules, regular service days or the addition of new premises. Potential Obstacles & Contingencies: Operations • Obtaining accurate data for existing route maps and sequential route sheets is a critical path to a smooth transition. See mitigation measure in Administration section above. 4. OUTREACH & EDUCATION GWR staff will begin developing a Public Education and Outreach Plan beginning October 2008. The Plan will identify the target audience for services provided, program objectives, individual tasks, public educational materials to be developed and timelines for Plan implementation. Input will be solicited from City and Plan implementation success will be measured by deadlines and Page 9of13 products developed. GWR staff will modify existing public educations to target and promote the use of services provided to residential, multi-family and commercial customers. Educational materials will include, but are not limited to notification of GWR as the new hauler, service verification requests, expanded and/or modified services, and notification and promotion of the expanded services provided under the City's zero waste program. Potential Obstacles & Contingencies: Outreach & Education • GWR does not anticipate any potential obstacles that would hinder GWR 's progress. As described in Attachment C, during the transition Contractor will place advertisements in local newspapers and use direct mailings to inform residents and businesses about the new solid waste, recyclable materials and organics collection programs. The introductory mailer will also include a return mail postcard requesting Customers to select their solid waste, recycling and organics cart/bin sizes (if necessary). Shortly thereafter, as a follow-up, Contractor will send a direct mail piece to each Customer which will: verify billing information and collection day and provide information on the holiday collection schedule, holiday tree collection, and Clean-Up Program (where applicable). In the few months prior to start-up and in accordance with the City's schedule, the Environmental Outreach Manager will attend community workshops and community events to educate Customers on the new collection programs and answer questions. The following public education and outreach materials will be produced for the start-up of collection services: • Newspaper advertisement explaining new programs -Mercury News and local paper (2 advertisements each) • Press Releases about the new program (3) • Press Release about the start of the program (I) • Press Release after first week of program (1) • Press Release after first month of program (1) • Initial (one time) direct mailing to inform Customers of the new program (approximately 26,000 pieces) • Second (one time) direct mailing informing Customers about holiday/clean up schedule (approximately 26,000 pieces) • Residential -Solid Waste, Recycling and Yard Trimmings "How To" Guide one time to all residents at beginning of start-up (approximately 35,000 pieces) • Commercial -Solid Waste, Recycling and Organics "How To" Guide one time to all businesses at beginning of start-up (approximately 1,500 pieces) • Clean Organics Program. Commercial (approximately 500 pieces) • Commercial & MFD -Laminated Recycling Posters (approximately 2,000 pieces) • Residential -Solid Waste, Recycling and Yard Trimmings "How To" Guide annually by request, at community events, presentations and other community activities (approximately 5,000 pieces) In addition, a training packet for commercial and industrial Customers will include how-to information for direct distribution to their employees, outreach materials suitable for bulletin- Page 10of13 board posting in common areas, and signage for internal collection points. EOCs will conduct on-site workshops upon request by a Customer or City. The following public education and outreach materials will be produced with City approval for the start-up of collection services, and will be repeated periodically, as needed or upon City request during the Term: • Description of annual Clean-Up Program, including options for reuse and recycling. Contractor shall provide separate outreach materials for single family and commercial customers. • Zanker I 0% off coupon • Press Releases • Company newsletter, Quarterly • Door hangers, Annually • Corrective Action Notice • Recyclable Materials Resource Guide 4. ZERO WASTE SERVICE (Phase-in) Expanded Organics Collection & Processing The expanded organics collection and processing for commercial customers will be phased in over a 90-day period beginning July I, 2009 and concluding September 30, 2009. Expanding Single-Stream Materials Expanded single-stream materials collection for residential customers will commence July I, 2009. Expanded single stream materials collection for commercial customers will be phased in over a 90-day period beginning July I, 2009 and concluding September 30, 2009. Expanding Clean-up Day Collection This service will commence July I, 2009. Outreach and educational materials will explain this expanded service to customers and will highlight this once per year service provided to customers including notification that the request must be received by the CSRs at the call center at least one week in advance. This advance notice allows the CSRs to input the request into the RAMS system and dispatch the appropriate vehicle on the day of the customer's regularly scheduled pick-up. Following the hire of Environmental Outreach Coordinators and as part of GWRs reuse and recycle program, corporate partnerships will be explored and developed with non-profit entities, such as Goodwill and the Salvation Army, that support and promote the reuse of materials in the areas served by GWR. EOCs will work with these entities to develop a process that is conducive to the highest level of reuse. GWR will only store items that have a high potential for reuse. Prior to July I, 2009, a specific area at the MRF will be set-aside for the collection of bulky items by type. Any items collected through the Expanded Clean-up Day Collection that may be desirable to reuse will be collected and brought to the Zanker Materials Recovery Facility before the close Page 11of13 of business on the day they are collected for regional non-profit entities and the general public to examine and take any items for reuse at no charge. Implementation of Mandatory Participation The Contractor shall implement a mandatory participation program that requires single family, multi-family, and commercial/industrial Customers to place Recyclable Materials, Yard Trimmings and Organics in the appropriate collection containers. • In the first year, commencing July 1, 2009, Contractor shall educate customers on how to comply with the new mandatory participation and phase-in schedule requirements; Phasing approach: 1. Development of Mandatory Ordinance Upon request by the City, the Contractor shall provide assistance m the development and implementation of the ordinance as needed. 2. First Year Contractor shall conduct an extensive outreach and educational program to educate customers on how to comply with the new mandatory participation program and phase-in schedule requirements. This phase shall include the following minimum requirements: a. Customers serviced in carts or cans for Solid Waste: -Outreach material attached to each Solid Waste cart or can in July 2009, January 2010 and June 2010 .. -Information included in the first mailings -Information shared at public events -Additional Outreach materials as needed (newspaper ads, brochures, newsletters, utility bills, posters, etc.). b. Customers serviced in bins for solid waste: -Outreach material attached to each Solid Waste container in July 2009, January 2010 and June 2010. -Site visits or contact to each customer for the purpose of informing customers of the new mandatory participation requirements. -Information included in pre-transition mailings. -Additional outreach materials as needed (newspaper ads, brochures, newsletters, utility bills, posters, etc.). Increasing C&D Debris Diversion C&D Debris Diversion will begin July 1, 2009. All roll-off boxes containing C&D debris, mixed debris, clean-up debris from homeowners and compactors that contain no putrescible organics will be transported to the Zanker MRF or the Zanker Landfill for processing and recycling. Enhancing Commercial Recycling Page 12of13 Enhancing Commercial Recycling will be phased in over a 90-day period beginning July 1, 2009 and concluding September 30, 2009. These expanded services will be provided for commercial, school and multi-family customers beginning with public outreach and education and waste audits beginning in May 2009. Page 13of13 ATTACHMENT C COLLECTION SCOPE OF WORK 1. SOLID WASTE A. Single Family Residential Premises. Contractor shall collect Solid Waste from Single Family Residential Premises at least once per week on the same day each week. Standard service is one 32-gallon capacity cart. Customers may also subscribe for minimum service (a 20-gallon capacity cart) or for additional capacity such as larger carts (64 and 96 gallon capacity). Solid Waste will not be collected on Saturday or Sundays without the prior permission of the Director. Standard collection location is curbside. Backyard service is provided to (i) existing Customers as of the end of fiscal year 2015, who subscribe to backyard service (and pay an additional charge if required by the City), and (ii) to Customers with physical limitations who qualify for backyard service (as · described in Section 5F). In both cases, Contractor shall collect Solid Waste in carts from an alternative service location (sideyard or backyard) as requested by the Customer, and which is accessible via a safe pathway. Contractor is not required to enter private garages or other buildings to collect containers. B. Multiple-Family Residential Premises. Contractor shall collect Solid Waste from Multi-Family Residential Premises a minimum of once per week and up to a maximum of five (5) days per week for cart Customers. Standard service is two 32-gallon capacity cart or a 64-gallon cart. Contractor shall also collect Solid Waste from Multi-Family Residential Premises in bins a minimum of once per week and a maximum of six (6) days per week on the same day(s) of each week. Solid Waste will not be collected on Sundays without the prior permission of the Director. Customers may subscribe for minimum service (32-gallon cart) or for additional capacity such as multiple or a variety of carts (32, 64 and 96 gallon capacities) and bins (1, 1.5, 2, 3, 4, 5, 6 and 8 cubic yard capacities) provided that no less than thirty two (32) gallons of capacity are provided for every occupied dwelling unit in the Multi-Family Residential complex. 1. Scheduled Service Drop Boxes and Compactors. Contractor shall allow Customer to use a Drop Box or Compactor for Solid Waste Collection to meet the Customer's disposal needs. In such case, Contractor shall provide Customer with a choice of container capacities ranging from seven (7) to forty ( 40) cubic yards. Contractor shall offer Customers the option to purchase or lease compactors through either the Contractor or an outside vendor. Regular maintenance of Compactors shall be provided by Customer (or outside vendor) as frequently as needed to keep the Compactors in good working order and functioning at high compaction levels. Page I of36 C. Commercial/Industrial Premises. Contractor shall collect Solid Waste from Commercial/and Industrial Customers a minimum of once per week and up to a maximum of six (6) days per week, on the same day(s) of each week. Solid Waste will not be collected on Sundays without the prior permission of the Director. Standard service is two 32-gallon capacity cart or a 64 gallon cart. Minimum service is one 32-gallon capacity or cart. For Commercial Customers with space constraints, Contractor shall provide an alternative collection container that is non-breakable, reusable, and weather resistant. Contractor shall work closely with each Customer to determine the best collection service solution that could include multiple pickups per day and in extreme cases going on premises, such as in a closet or back door to retrieve the materials. Contractor shall also offer Commercial/Industrial Customers the following service options: 1. Individual Cart or Bin Service. Contractor shall provide each Customer with a choice of one or more carts or bins in the same capacities specified in Section 1.B. above. 2. Centralized Cart or Bin Service. Contractor shall allow each Commercial Premises to use carts or bins (in the same capacities as specified in Section l.B. above) that are shared by the occupants of two or more adjacent Commercial/Industrial Premises. In such case, Contractor shall provide one or more carts or bins as requested by the Customer, provided that no less than one thirty two (32) gallons of container capacity are provided for each Commercial/Industrial Premises. 3. Scheduled Service Drop Boxes and Compactors. Contractor shall allow a Customer to use a Drop Box or Compactor for Solid Waste Collection to meet the Customer's disposal needs. In such case, Contractor shall provide Customer with a choice of container capacities ranging from seven (7) to forty ( 40) cubic yards. Contractor shall offer Customers the option to purchase or lease compactors through either the Contractor or an outside vendor. Regular maintenance of Compactors shall be provided by Customer (or outside vendor) as frequently as needed to keep the Compactors in good working order and functioning at high compaction levels. Contractor shall proactively and continually work to "right size" Solid Waste service for Commercial/Industrial Customers. As individual Customers increase recycling and/or add Compostable Materials collection, Contractor shall seek opportunities to decrease the container size and/or frequency of Customer's Solid Waste service in a manner that best meets Customer's needs and at the least cost to Customer. Page2 of36 D. City Facilities and City-Furnished Public Receptacles. Contractor shall collect Solid Waste from City facilities a minimum of once per week and up to a maximum of six (6) days per week, on the same day(s) of each week. The location of City facilities to be serviced; the type, number and capacity of Containers at each location; and the frequency of collection are listed on Attachment D-1, but may change throughout the Term of contract. Contractor shall collect Solid Waste from City-furnished public receptacles a minimum of once per week and up to a maximum of six (6) days per week, on the same day(s) of each week between 4 a.m. and 11 :30 a.m. If a receptacle is filled to overflowing, it must be collected more frequently or as requested by Director. Public receptacles to be serviced are listed on Attachment D-2, but may change throughout the Term of contract. City-furnished public receptacles may be collected as Compostable Material, upon approval by City, if Contractor determines by a periodic waste characterization study that the contents are a minimum of75% Compostable Materials. Contractor shall maintain the area· around each public receptacle by cleaning up and/or collecting any litter or overflowing materials around each receptacle. Contractor shall report any damaged receptacles to the Director immediately and shall identify any receptacle locations that were not serviced (and the reason) to the Director in Contractor's monthly report. Director will notify Contractor when receptacles are added, relocated or removed from service. Contractor shall complete a list of additions, relocations and removals and submit to the Director once every twelve (12) months to verify the current list of receptacles and their locations. 2. RECYCLABLE MATERIALS Contractor at a minimum shall collect the following Recyclable Materials: • Corrugated cardboard • Newsprint • Mixed paper (including magazines, catalogues, envelopes, junk mail, paperboard, shredded paper, non-metallic wrapping paper, Kraft brown bags and paper, paper egg cartons, office ledger paper, self stick notes, and telephone books) • Hard cover books • Glass containers • Aluminum beverage containers • Small scrap and cast aluminum (not exceeding forty ( 40) pounds in weight nor two feet in any dimension for any single item) • Steel including "tin" cans and small scrap (not exceeding forty ( 40) pounds in weight nor (2) two feet in any dimension for any single item) • Bimetal containers • Mixed plastics (including plastic bags, plastic film, plastic containers (#1-7) and bottles including containers made of HOPE, LDPE, PET, or PVC) Page 3 of36 • Milk and juice containers • Rigid plastics (kids toys, buckets, etc), • Electronic waste peripherals (including printers, key boards, lap tops and printer cartridges) In addition to Recyclable Materials placed in carts, Contractor shall also collect the following materials when they are set out adjacent to the recycling cart: • Used motor oil placed in a clear, one-gallon plastic container with a tight- fitting lid, • Used motor oil filters placed in tear-resistant bags, • Household batteries placed in a bag, • Scrap metal (toaster-size or smaller) placed in a box; and • Cell phones A. Single Family Residential Premises. Contractor shall collect Recyclable Materials from all Single Family Residential Premises once per week, on the same day that Solid Waste is collected. Standard service is one 64-gallon capacity cart. Standard collection location is curbside. Customers may request carts in other sizes including 32 gallon or 96 gallon cart capacities. Backyard service is provided to Customers with physical limitations who qualify for backyard service at standard rates (as described in Section 5F). Contractor shall collect additional Recyclable Materials placed by Customers in biodegradable containers (e.g., Kraft paper bag or cardboard box) next to the cart, provided such containers do not weigh more than 60 pounds each. B. Multiple-Family Residential Premises. Contractor shall collect Recyclable Materials from Multi-Family Residential Premises a minimum of once per week and up to a maximum of five (5) days per week for cart Customers on the same day of the week as Solid Waste is collected. Contractor shall also collect all Recyclable Materials and may collect source separated cardboard (as appropriate) from Multi-Family Residential Premises in bins a minimum of once per week and a maximum of six (6) days per week on the same day(s) of each week. Recyclable Materials and source separated cardboard will not be collected on Sundays without the prior permission of the Director. Standard service is one 96-gallon capacity cart. Customers may request a 64- gallon or 32-gallon capacity cart. Customers may also request additional carts or bins (I, 2, 3, 4, 5, 6 cubic yard capacities). Contractor shall purchase and distribute one 6-gallon "recycling buddy" container to each residential unit in Multi-Family Residential Premises by October 1, 2009. The purpose of the "recycling buddy" is to facilitate residents' storing of Recyclable Materials and transporting them to the centralized carts or bins for each building. The recycling buddy program is subject to City approval including Page4 of36 type of container, how it will be distributed and to whom, replacement requirements, and education material to be distributed with container. C. Commercial/Industrial Premises. Contractor shall collect all Recyclable Material (including wooden pallets), except used motor oil, used oil filters or batteries. Contractor may collect source separated cardboard (as appropriate) from Commercial/Industrial Premises a minimum of once per week and up to a maximum of six (6) days per week. Recyclable Materials and source separated cardboard will not be collected on Sundays without the prior permission of the Director Standard service for Recyclable Materials is one 96-gallon capacity cart. Customers may request up to five (5) carts (96 gallon capacity) or one four (4) cubic yard bin for no additional rate. Additional carts or bins (I, 2, 3, 4, 5, 6 cubic yard capacities) may be requested. For Commercial Customers with space constraints, Contractor shall provide an alternative collection container that is non-breakable, reusable, and weather resistant. Contractor shall work closely with each Customer to determine the best collection service solution that could include multiple collections per day and in extreme cases going on premises, such as in a closet or back door to retrieve the materials. For Commercial Customers that have a significant amount of cardboard and the space for an additional bin, Contractor will provide Customers with a bin for Recyclable Materials and a bin for source separated cardboard. Contractor will provide Customers recycling source separated cardboard with slotted bins in 4 cubic yard capacity with a Contractor provided auto-bar-lock system. Contractor shall also collect Recyclable Materials and cardboard from shared, slotted and locked bins used by multiple Commercial Customers. Pallets will be collected at least once per week Monday through Friday. The pallets will be loaded onto the truck and secured for delivery to the City approved processing facilities. D. City Facilities, City-Furnished Recycling Containers, and Parks. Contractor shall collect Recyclable Materials from City facilities a minimum of once per week and up to a maximum of six (6) days per week. The location of City facilities to be serviced, the type, number and capacity of Containers at each location, and the frequency of collection are listed on Attachment D-1, but may change throughout the Term. Contractor shall collect Recyclable Materials from public receptacles a minimum of once per week and up to five times per week Monday through Friday from all downtown and California A venue locations as listed in Attachment D-2. These locations, containers, and service needs may change throughout the Term. Page 5 of36 Contractor shall collect Recyclable Materials at City parks a minimum of once per week and up to five days per week, Monday through Friday. The location of City parks and current service is listed in Attachment D-1. These locations, containers, and service needs may change throughout the Term. 3. COMPOSTABLE MATERIALS Contractor at a minimum shall collect the following Yard Trimmings as Compostable Materials: • Grass clippings • Plant trimmings • Tree trimmings • Leaves • Shrubs and plants • Ivy • Succulents/ice plant • Flowers • Branches and stumps • Untreaded and unpainted lumber, wood chips and sawdust The following materials shall also be accepted: • Food scraps (meat, poultry, fish, shellfish, bones, eggs, dairy products, fruits, vegetables, bread, dough, pasta, grains, coffee grounds, filters, tea bags), • Compostable paper (kitchen paper towels, paper napkins, uncoated paper take-out containers, pizza delivery boxes, waxed cardboard and paper, uncoated used paper cups and plates, tissues, and other food contaminated paper such as ice cream cartons and frozen food boxes), • Compostable plastics, • Compostable plastic bags, • Plants, grass, leaves, plant trimmings, flowers, crates, landscape vegetation, sod, • Untreated wood, woocl chips, wood wastes, sawdust. The following materials will not be accepted as Compostable Materials: • Dirt, rocks, soil • Painted and treated wood • Plastic plates and utensils • Plastic bottles • Plastic wrap • Plastic bags • Coated containers • Glass bottles • Metal • Burlap Page 6 of36 • Corks • Wire • Rubber bands • Styrofoam • Latex gloves • Grease • Soda cans • Foil • Hazardous waste • Pet waste, manure • Trash, rubbish • Tan bark • Construction lumber • Branches over 6 inches diameter or 4 feet in length • Bamboo, pampas grass • Palm, yucca, flax • Cactus, poison oak A. Single Family Residential Premises. Contractor shall collect Compostable Materials from all Single Family Residential Premises once per week on the same day of the week that Solid Waste and Recyclable Materials are collected. Standard service is one 96-gallon capacity cart. Customers may request up to two (2) additional 96-gallon carts at no additional rate for a total of three carts. Customers with space constraints may request carts in other sizes (20-gallon, 32 gallon or 64 gallon, as available). Contractor shaH supply and service additional carts, beyond the standard three carts, and shall notify Director of such requests. Additional carts may be subject to a rental fee at City established rates. Contractor shall collect additional Yard Trimmings placed by Customers in cans, a tied bundle or biodegradable container (e.g., Kraft paper bag or cardboard box) next to the cart, provided such bundles/containers do not weigh more than 60 pounds each and do not exceed 2 feet by 4 feet by 4 feet (or equivalent). Contractor shall also collect Holiday trees that are placed curbside in or next to compostable cart up to four weeks after Christmas Day. Standard collection location is curbside. Backyard service is provided to Customers with physical limitations who qualify for backyard service (as described in Section SF). Contractor shall provide all new Customers to a Premise with a food scraps bucket for the purpose of interior storage of food scraps by Customer. Bucket shall be delivered to Customers upon requet. B. Multiple-Family Residential Premises. Contractor shall collect Compostable Materials from Multi-Family Residential Premises a minimum of once per week on the same day that Solid Waste and Recyclable Materials are collected up to a Page 7 of36 maximum of six (6) days per week. Standard service is one 96-gallon capacity cart. Compostable Materials are collected at the street or at the curb near the Recyclable Materials carts, depending on the configuration of the Multi-Family Residential complex. Contractor shall provide carts or bins in the same capacities specified in Section l .B. above. Customers with space constraints may request carts in other sizes (20-gallon, 32 gallon or 64 gallon), up to a total of three carts. Additional carts may be subject to a rental fee at City established rates. Contractor shall also collect Holiday trees placed for collection up to four weeks after Christmas Day. C. Commercial/Industrial Premises. Contractor shall collect Compostable Materials from Commercial/Industrial Premises a minimum of once per week up to a maximum of six (6) days per week. Standard service is one 96-gallon capacity cart. Contractor shall provide carts or bins in the same capacities specified in Section l .B. above. Customers may request carts in other sizes (32 gallon or 64 gallon) and carts may be subject to a rental fee at City established rates. For Commercial Customers with space constraints, Contractor shall provide alternative collection containers that are non-breakable, reusable, and weather resistant. D. City Facilities and City-furnished public receptacles. Contractor shall collect Compostable Materials from all City facilities a minimum of once per week up to a maximum of six (6) days per week. The facilities are identified in Attachment D-1, but may change throughout the Term of contract. The Director may adjust, by adding or deleting, the number of City facilities receiving services and the level and frequency of service. City-furnished public receptacles may be collected as Compostable Material, upon approval by City, if Contractor determines by a periodic waste characterization study that the contents are a minimum of 75% Compostable Materials. 4. DROP BOX SERVICE A. Unless otherwise directed by the Director, Contractor shall deliver all drop boxes within 24 hours of Customer's order, or on the same day if Customer calls before 11 :30 AM, and shall remove drop boxes within 24 hours of Customer's request for removal or on the same day if Customer calls before 11 :30 AM. If Customer calls in after 11 :30 AM on Saturday, then the box will be delivered by 11 :30 AM the following Monday. B. On-Call Solid Waste Drop Box Service. Contractor shall provide drop boxes on an on-call basis to Customers within the City in the following sizes: 7, 15, 20, 30 & 40 cubic yards. C. Scheduled Solid Waste Drop Box Service. Scheduled weekly service shall be one, two or three times per week in the following sizes: 15, 20 & 30 cubic yards. Page 8 of36 D. Single-Source Separated Recyclable Drop Box Service. Contractor shall provide drop boxes on a scheduled and on-call basis to Customers within the City in the following sizes: 7, 15, 20, 30 & 40 cubic yards. Single-source separated materials are Recyclable Materials that can be directly taken to a processing facility for the purpose of recycling or composting. E. Yard Trimmings Drop Box Service. Contractor shall provide drop boxes on a scheduled weekly service one, two or three times per week in the following sizes: 15, 20 & 30 cubic yards. F. Construction and Demolition Debris Recycling. Contractor shall provide drop boxes on an on-call basis to customers within the City in the following sizes: 7, 15, 20, 30 and 40 cubic yards for the purpose of recycling C&D materials. The 7 cubic yard container will be available for the collection of inert materials only. The Contractor shall differentiate the C&D Recycling drop boxes from the Solid Waste drop boxes with unique signage installed on the container identifying it as a C&D Recycling drop box. This unique signage shall be approved by the Director prior to being used by the Contractor. Contractor shall deliver all C&D boxes to the processing facility identified in Articles 5 and 6. Both facilities have exclusions for putrescible, hazardous and liquid wastes. Loads accepted by either facility shall be diverted to the Sunnyvale SMaR T Station for Disposal if the box contains more than twenty-five percent (25%) putrescible waste or materials that are not recovered at these facilities~ including pressure treated lumber, construction insulation or Styrofoam. If the C&D box is determined to contain more than twenty-five percent of Solid Waste or other non-recyclable materials such as insulation, the Contractor shall issue additional charge related to Customer requested C&D recycling in drop boxes. The cost for the C&D drop box service contamination will be based on the then current City established rates or rate determined by Council. For Customers without a City refuse account who will pay Contractor for collection service, Contractor shall issue the additional charge to the Customers within 7 days after the box has been delivered to and accepted by the processing facility. Contractor shall generate work orders for each drop box provided to Customers and provide to the City a monthly credit for all monies retained. Contractor shall submit to the City monthly reconciliations of proceeding month's rebates and actual monies retained. Contractor shall provide all customers who order C&D recycling boxes and whose boxes are accepted by the processing facility, whether or not they have refuse accounts with City, with a receipt showing the date the box was serviced, the size of the box, its weight, the address from which it was collected and verifying the box was accepted by the C&D processing facility. If the box was rejected by the C&D processing facility, no receipt is to be issued. Page 9 of36 G. C&D Discount Coupons. Contractor shall offer a discount coupon to City residential customers for disposal of materials at the Zanker Material Processing Facility (ZMPF) or at the Zanker Road Resource Recovery Operations and Landfill (ZRRROL). The Director approved coupon shall be issued annually to each City residential customer through the mail or within the Contractor's residential newsletter, providing a ten percent discount from the posted gate rate on all incoming materials. H. C&D Diversion Documentation. Contractor shall support building contractor's pursuit of Leadership in Energy and Environmental Design (LEED) certification. Upon request, Contractor will provide building contractors with documentation of the total diversion rate for ZMPF/ZRRROL mixed and source separated C&D drop boxes. As requested and as is feasible, Contractor will also provide supporting documentation to support the diversion rate by work order. 5. SPECIAL SERVICES A. Hard to Service Areas. When a Single-Family Residential Premises and Multiple- Family Residential Premises cannot be serviced by standard collection vehicles, it may be determined that the Premise is within a hard to service area to be serviced by the Contractor's smaller collection vehicles. These customers shall receive the same service as described in previous sections 1 through 3. A premise may be considered a "Hard to Service Area" if one or more of the following conditions occur on a routine basis: a) Limited access on private streets or alleys; b) Physical conditions such as narrow roadways make use of standard collection vehicles unsafe or create the potential for damage to property and equipment; c) Any public, private street or alley. As of 2015, the hard to service areas will become part of Baseline Services and Contractor's base compensation. B. Household Hazardous Waste (HHW) Station. Contractor shall provide two 4- cubic yard recycling bins and a Solid Waste 30-cubic yard capacity drop box to the HHW Station. The HHW Station is located at 2501 Embarcadero Way, at the entrance to the Wastewater Treatment Plant. These containers are subject to change as needed by City. The containers will be serviced at least weekly or as directed by the City and prior to the first Friday of each month. The collection service shall be within the time limits specified by Director. C. On-Call Recycling Cleanout Service. Contractor shall provide Commercial/Industrial Premises and public and private schools collection of excess Recyclable Materials on a scheduled on-call basis Monday through Saturday. Only Recyclable Materials are to be placed into the recycling bins. Contractor shall notify Customer if non-Recyclable Material in a bin exceeds ten percent (10%) by volume and may assess a City-established rate to Customer for contamination. Contractor shall supply a minimum of two recycling bins (2 cubic yard capacity each) for this program. Bins will be made available on a first-come, first-serve Page IO of36 basis or as requested by the City. Commercial businesses and school officials may call to reserve a date for the bins to be delivered and collected. Bins may be reserved for up to five (5) business days per calendar year, per Customer. Contractor shall empty the bins up to once per day, within 24 hours of notification that the bin is full. Bins are required to be delivered, serviced, and removed only on business days. Contractor shall provide locks on these bins and shall provide the Customer with a key. D. Annual On-Call Community Clean Up Program The following types of materials will be accepted for collection: • Up to four ( 4) Bulky Items per collection for reuse, recycling, or disposal. Additional Bulky Items may be collected at City-established rates. • Large amounts of Recyclable Materials, Yard Trimmings cardboard, furniture (such as a sofa, chair, desk, table, mattress, box springs, patio furniture); appliances (such as a stove, dishwasher, washer or dryer, water heater, microwave oven); toilets, sinks, other porcelain products, shipping crates, containers, bicycles, suitcases, barbeques, swing sets, tools, toys, bundled branches, Electronic Waste and other items the size or weight of which precludes collection during regularly scheduled collection services. • Tree trimmings and branches cannot exceed 4 inches in diameter, or be longer than 6 feet. No single item can weigh more than 200 pounds. Hazardous waste will not be accepted. • Excess Solid Waste accepted from only the Single Family Residential Premises. Contractor shall collect all recyclable and reusable items set out by Customers and transport the materials to the designated processing facility identified in Attachment E. Reusable materials will be maintained separately and clean. Contractor shall develop a community reuse and recycling area at the designated processing facility that will allow regional non-profit entities and the general public to take any items for reuse at no charge. Items will be stored for a period not to exceed 48 hours. Contractor will make every effort to promote the reuse of bulky items. Items that are not selected for reuse will be recycled as applicable. Items that cannot be recycled will be disposed. Contractor shall maintain records of materials collected, reused, donated, recycled or disposed and report to the Director on a monthly basis. Page 11 of36 I. Single Family Residential Premises. Contractor shall provide each Single Family Residential Premise Customer collection of excess Solid Waste, Recyclable Materials and Compostable Materials one time each calendar year upon request. These materials will be collected on a pre-scheduled basis on the same day that regular Solid Waste Collection is provided. All materials listed above in section 5D will be accepted for reuse or recycling in addition to excess Solid Waste. Customers must contact the Contractor's Customer Service Representative (CSR) at least one week in advance to schedule a collection. The CSR will ask the Customer a series of questions to determine the type and size of items to be placed out for collection. The appropriate collection vehicle will be scheduled to collect the materials. 2. Multiple Family Residential Premises. Contractor shall provide each Multi Family Residential Premises collection of excess Recyclable Materials and Yard Trimmings one time each calendar year upon request. These materials will be collected on a pre-scheduled basis. Customers must contact the Contractor's CSR a least one week in advance to schedule a collection. All materials listed above in section 5D will be accepted for reuse or recycling with the exception that excess Solid Waste shall not be collected as part of this program. 3. Commercial Premises. Contractor shall provide each Commercial Premise collection of excess Recyclable Materials one time each calendar year upon request. These materials will be collected on a pre-scheduled basis. Customers must contact the Contractor's CSR a least one week in advance to schedule a collection. All materials listed above in section 5D will be accepted for reuse or recycling with the exception that excess Solid Waste shall not be collected as part of this program. Contractor shall utilize outreach efforts as described in Section 9 below, to educate Customers about the Annual On-Call Community Clean Up Day Program. E. Special Events. Contractor shall provide waste stations with containers and signage for Solid Waste, Recyclable Materials, and Compostable Materials collection, including delivery and removal of signage, containers, carts, bins and drop boxes, for all special events. The number and size of containers shall be sufficient to allow convenient collection of Solid Waste, Compostable Materials, and Recyclable Materials for event participants. Signage shall be supplied for every waste station delivered. If the City's Event Coordinator determines that additional containers are necessary, Contractor shall promptly deliver the Page 12 of36 requested additional containers. Carts shall be consistent in appearance with curbside carts. Contents of containers from special events shall be delivered to the designated processing facility. The carts, bins and boxes shall be delivered on the business day or the morning of the event, whichever is prior to event, placed with direction from City's Event Coordinator, and removed by the end of the day of the event or on the next business day. Contractor is responsible for the coordination of all waste service, communication with the event coordinators through the planning and execution of each event, development, printing and delivery of outreach materials (including signs, posters, and fliers). Contractor will also develop and maintain reports with historical data on the special events including quantification of volume collected, unique service details about the event, attendance and other pertinent details as necessary. Past special events provided with waste stations by Contractor are listed in Attachment s. F. Physical Limitations Program. Contractor shall provide weekly backyard/side yard collection of Solid Waste, Recyclable Materials and Compostable Materials from Single Family Residential Premises whose occupants are physically limited. Contractor shall administer and coordinate the application and approval process. Participation in this program requires completion and approval of an application and submission of proof of physical incapacity by a physician or other licensed medical professional. Contractor shall issue (through mail, electronic mail or fax) City-approved application to Customers requesting to participate in the Physical Limitations Program. Contractor shall, if necessary, schedule an appointment for a Customer Service Representative (CSR) to meet with Customer to determine the appropriate size containers for Customer, the specific service location for the containers, and confirm Customer does not have assistance in moving containers to curbside for collection. City may review all applications that have been denied and the City may reverse Contractor's decision. Customers in the Physical Limitations Program will receive the standard size carts for both Recyclable Materials and Compostable Materials. Customers that have narrow gates or space limitation may have smaller sized carts. Service will be limited to one container each for Recyclable Materials and Compostable Materials. Solid Waste will be collected in 20 or 32 gallon carts. Contractor may renew the application process on an annual basis, by sending the renewal application to existing Physical Limitations Program Customers with a letter explaining the renewal process. G. Other Collection Related Services 1. Performance Audits. City may annually conduct performance audits to review Contractor's compliance with standards. Contractor shall assist and cooperate during this two-week audit period and shall provide City with requested records. Page 13 of36 2. Route Audits. City will have the right to perform route audits. Contractor shall ensure service records are correctly billed and reported to City. Contractor shall cooperate as needed with the City during route audits and correct all errors found within two (2) workdays. Contractor will perform route audits a minimum of twice per year to ensure there is less than a three percent error rate in service and billing errors. The audit procedures and locations shall be proposed to the City for approval. 3. Upon request or no more than every 2 years, Contractor may conduct a characterization of the City's Recycling Materials with the breakdown of materials listed in the first paragraph of Section 2. Contractor shall annually submit the processing facilities residue and recovery rate. Contractor shall allow City staff to observe processing, on request. City will have the ability to audit the Contractor's Materials Recovery Facility or Composting Facility upon request. 4. Waste audits for Green Business Certifications. Contractor shall conduct a minimum of 12 waste audits each calendar year to survey Commercial, Multi-Family Customers, City facilities and/or schools when requested by the City. Contractor shall conduct or assist City with Customer's on-site waste assessments consisting of basic waste characterization and evaluation (sorting waste by category) of Customer's Solid Waste, Recyclable Materials, and Compo stable Materials (as applicable) at Customer sites or City-designated facilities. Assessment consists of visually observing and documenting (photos, written summary and classification of materials) The audit consists of sending a Contractor's empty truck to collect the Solid Waste Container(s) from the selected business and delivering the Solid Waste to a location designated by the City. If the business has Solid Waste service 5 times per week, then Contractor shall provide the survey service daily for 5 days. 5. Program evaluation audits. Contractor shall periodically conduct audits of the Single-Family Residential, Multi-Family Residential, City facilities, and Commercial sectors to provide a breakdown of Solid Waste, Recyclable Materials, Yard Trimmings and Compostable Materials Collection programs by each Customer sector. Contractor shall perform up to five days of route auditing each calendar year. 6 Customer Public Opinion Surveys. The City may conduct public opinion surveys to assess Customers' satisfaction level with collection services being provided by Contractor. Contractor shall assist the City in developing such surveys. The Contractor shall respond to any Customer inquiries or complaints that arise from the survey. Page 14 of36 H. General Collection Requirements 1. Holidays. Regular collection schedules need not be maintained on the following holidays: January 1, the fourth Thursday of November, December 25, and any other holidays mutually agreed by the parties. In years when these holidays fall on a regular collection day, the collection schedule for subsequent days of the week shall be moved to the following day that is not a Sunday. Contractor shall notify Customers of holiday schedule changes by written notice two (2) weeks prior to the holidays and by placing public announcements in a newspaper of general circulation in the City one (1) week prior to holidays. 2. Change of Collection Days. Contractor shall obtain approval from Director prior to any change of collection day(s). Such approval shall not be unreasonably withheld by City provided; however, that collection day may be changed no more than once per year. In the event that Contractor requires a change in collection day(s), Contractor shall notify Customers affected by such change through a City-approved written notice and public announcement in a newspaper of general circulation in City. Contractor shall notify each affected Customer not less than thirty (30) days before Contractor changes any regularly scheduled collection day. Contractor shall send written notice of any such proposed change . to the Director thirty (30) days before the day on which the Customer is notified. In the event that City requires a change in collection day(s), City shall notify Customers in the same manner listed above 3. Contractor shall work with the City to create an opt-out process and form for Customers unable to participate in the recycling programs under special circumstances such as space limitations. 4. Contractor shall direct its employees to collect Solid Waste placed for collection in amounts that exceed the Customer's subscription level up to one (1) time per customer account. Contractor shall notify Customer each time that it has collected excess Solid Waste and shall maintain a record of the notices issued and make it available to the Director upon request. Customers who place excess Solid Waste for collection one (1) or more times may be billed an extra charge or required to subscribe for additional collection service. Contractor shall notify City of the third and subsequent incidents and retain (and provide upon request) documentation in the form of a photograph in order that City may issue the bill or require the Customer to change its subscription level. 5. If, within seven (7) days of notice from City that an unoccupied Multi- Family Residential, Commercial or Industrial Premises has been occupied, or that a change of ownership of an occupied premise has occurred, the Contractor has not received a request to initiate or continue Solid Waste collection service, Contractor shall provide written notice to the owner of Page 15 of36 the Premises that weekly collection of Solid Waste is required by City ordinance. Contractor shall, at the same time, send a copy of such notice to the City upon request. 6. Non-collection Tags. If Contractor does not collect Solid Waste, Recyclable Materials, or Compostable Material containers that are placed for collection, Contractor shall leave a waterproof tag(s) attached to the container or the uncollected item(s), clearly specifying the reason(s) for non-collection, e.g., Hazardous Waste, contamination (in Recyclable Materials and Yard Trimmings containers), excessive weight, etc. The tag shall be securely affixed to the container in a prominent location. Contractor shall also notify Commercial Customers of non-collection via telephone. The driver shall submit a record on the tags issued to Contractor's office. Contractor shall maintain a record of all incidents of non-collection to be submitted monthly to the Director. The record shall include: date, address, reason for non-collection, and disposition of uncollected material. The records shall be maintained for the Term and shall be made available for inspection by the Director on request. Tags are to be at least 3" x 6," printed on weather resistant plasticized paper with a cut out which allows them to be hung on the handle of the cart, or can. Each tag specifies the reason service was disallowed, or provides information for proper storage of carts as well as providing a contact phone number. The design, information, size, and color of tags must be authorized by the Director prior to Contractor ordering or purchasing. 7. If the Contractor encounters drop boxes from other private companies collecting Solid Waste within the City, Contractor shall take a picture of the box and its contents and shall post on the box a City-approved violation notice informing the owner of the box, and the company delivering it, of the Palo Alto Municipal Code's prohibition. Contractor shall also attempt to contact the violator by telephone to inform it that notice has been posted and that the box must be removed. Contractor shall report violations to Director within 24 hours after notice is posted on the box. Upon City request, the Contractor shall remove and impound violator's box. 6. [Reserved] If Contractor is sued by the owner of a box which the City has directed Contractor to impound, the City will reimburse Contractor for its 'attorneys fees and other out-of-pocket costs reasonably incurred in defending that suit. Contractor will be responsible for physical damage to a box or to third parties which occurs while Contractor is moving box. Page 16 of36 7. CONTAINER REQUIREMENTS A. Contractor shall provide all carts, bins, Compactors, and drop boxes with the following exceptions: I. The City purchased carts as needed to supply services prior to July I, 2009 as quantified in Attachment F. Those carts shall remain in service. The Contractor shall provide replacements for carts that need to be replaced during the Term, additional carts needed to meet Customer requests, or new or expanded programs requiring additional carts. 2. Customers will be allowed to purchase bins and Compactors as requested as long as they meet the requirements of the Contractor. Customers will be allowed to purchase carts at City-designated rates. 3. Contractor-provided Containers shall be designed and constructed to be watertight and prevent the leakage of liquids. All Containers shall be maintained in a safe, serviceable, and functional condition. B. Receiving and Delivery I. Contractor shall be responsible for the complete assembly of all carts. 2. Contractor shall be responsible for all labor related to cart deliveries from the cart manufacturer, unloading, storing, cleaning and repairing carts as needed. 3. Contractor shall provide the Director with monthly detailed inventory on the available quantity of carts. C. Exchange Policy I. Contractor shall prevent damage to carts by unnecessary rough treatment. Any cart damaged by Contractor shall be replaced by Contractor, within five (5) Business Days. 2. Each Customer shall be entitled to the replacement of one (I) lost, destroyed, or stolen cart per calendar year at no cost to the Customer or City. Upon notification to Contractor by the City or a Customer that the Customer's cart has been stolen or that it has been damaged beyond repair through no fault of Contractor, Contractor shall deliver a replacement cart to such Customer within five (5) Business Days of the date of notification. 3. Within seven (7) Business Days of notification to Contractor by the City or a Customer that a change in the size of a cart is required, Contractor shall deliver such cart to the Customer, and remove the cart that is being Page 17 of36 replaced. Each Customer shall be entitled to receive one (1) free cart exchange each calendar year. Contractor shall provide additional cart exchanges upon request of Customer for an additional fee at rates established by City. D. Cart Return Placement Requirement l. Carts are to be positioned on the street at the curb. 2. On rolled curbs, carts are to be placed on the street. If there is no space on the street due to parked cards, carts are to be placed on top of the curbside, on the planting strip or on the back portion of the sidewalk leaving a 36- inch minimum clearance on the sidewalk. 3. On regular curbs and in areas with planting strips, carts are to be placed on the street at the curb. 4. Contractor shall be consistent in the return placement of the carts on each route (i.e., always place containers either on the street at the curb or on the back section of the sidewalk so that pedestrians do not have an obstacle course to walk through). 6. ADA clearance supersedes anything else (i.e., when there is a wall, sidewalk and a planting strip with plants and there is no place for the carts except the gutter/street, then place on the street.). 7. Requests for exceptions to these placement requirements may be presented to the City for approval. E. Drop Box Placement Requirements Placement of drop boxes in the City right-of-way can cause negative impacts to the neighborhood, including visibility and safety hazards to the public. The preferred placement location is on private property, such as the driveway. If the placement of drop boxes must be in the City right-of-way (in the street next to the curb), Contractor shall notify the City prior to such placement with placement and removal dates. Placement Guidelines: 1. The drop box must be located in front of Customer's property. If the drop box cannot be located directly in front of Customer's property and needs to be located . in front of another property, a signed consent must be provided from the occupant of that property. A standard consent form is available from the City. 2. The placement of the drop box must maintain access for City for any work required to maintain public facilities located within or adjacent to the Customer's property. This includes, but is not limited to, utility facilities and City street trees. 3. In areas where no curb exists, the drop box must be placed completely off of the paved portion of the street. · 4. The drop box shall not be placed in the following areas: a. In a no-parking, handicap space, loading or other time-limited zone b. Within 6 feet from any driveway (including Customer's) Page 18 of36 F. c. In a location where visibility is impaired for either vehicular, bicycle or pedestrian traffic d. In a location that blocks a bike lane e. In a location that blocks a bus stop f. Within 15 feet from a crosswalk or crossing area, marked or unmarked g. Within 15 feet from a fire hydrant h. Where it obstructs regulatory signage i. In a location where it may cause damage to city street trees j. In any location that interferes with an adjacent property owner's ability to full and safe access to the public right-of-way k. On streets with two-way traffic and parking on both sides that are less than 36 feet wide, measured from curb face to curb face. This list is not all-inclusive and other factors or situations may be considered in denying a location for placement of the container. 5. The drop box may be placed on the street for up to two months. Locks 1. 2. 3. Contractor shall provide locks for carts, bins and/or drop boxes as requested by City or Customer, at a rental rate established· by City. Contractor shall keep an adequate supply of locks available at all times. Contractor shall purchase all new locks that have been approved by Director prior to July I, 2009. Contractor shall provide auto-bar-lock systems for bins, when requested by Customer. G. Cleaning Requirements. 1. Contractor shall be responsible for steam cleaning all Containers before delivery to Customers, when appropriate or when requested by City . to present a clean and an aesthetically pleasing appearance. Contractor shall meet the City's requirements for preventing discharge of liquids to the storm drain. 2. Contractor shall offer additional cleaning of Containers upon request by Customers in accordance with City-approved Rates. 3. Contractor shall be responsible for cleaning containers to ensure that nuisance or public health concerns associated with vectors are addressed within two (2) Business Days after receipt of notification of said condition. Customers to be charged at City-approved rates. 4. If any container is marked by graffiti, Contractor shall clean or repaint the affected areas within two (2) Business Days of being notified. 5. Public refuse and recycling containers in the business areas shall be thoroughly washed a minimum of twice per year. The vehicle operators will be required to collect any materials that have accumulated within or around the receptacles, wipe the exteriors and lids of all the receptacles with water and detergent a minimum of once every two weeks, and to Page 19 of36 assess odor concerns and report if a thorough cleaning is required. Vehicle operators will have cleanser available to them at all times and will clean the exterior and lids more frequently if necessary. Contractor shall present a schedule to the City for thorough washing of City receptacles. Upon approval of the schedule, Contractor shall commence power-washing of the public receptacles. A truck equipped with a water holding tank and power-washing equipment will follow the collection vehicle to ensure that the receptacle is completely empty prior to washing. H. Container Maintenance I. Contractor shall repair or replace all Containers damaged by Collection operations (e.g., vehicle apparatus interface) within three (3) Business Days of being notified by Customer or observing the damaged Container. If the repair or replacement cannot be completed within three (3) Business Days, the Contractor shall notify Customer and provide a Container of the same size or larger until the damaged Container can be replaced. 2. Contractor shall be responsible for the general repair and upkeep of all Containers. 3. Bins, drop boxes and Compactors shall be repainted a minimum of as needed to remain attractive and clean and kept in a serviceable condition at all times, or upon request by Director. 4. Contractor shall be responsible for all repairs of carts including, but not be limited to, hinged lids, lifting bars, wheels and axles. Within five (5) Business Days of notification by the City or a Customer of the need for such repairs, Contractor shall repair the cart or, if necessary, remove the cart for repairs and deliver a replacement cart to the Customer. 5. All returned carts shall be thoroughly cleaned, repaired if possible and distributed in the cart exchange program. Contractor shall ensure that all carts are thoroughly washed, cleaned and in good appearance before delivery to Customers. I. Container Inventory I. Contractor shall be responsible for ensuring that an adequate supply of Containers is maintained for distribution. "Adequate Supply" means that the Contractor has enough of the Containers, bags, or other items on hand to ensure delivery in a timely manner. This includes maintaining an up to date inventory of all Containers per Attachment H. 2. Contractor shall be responsible to store all Containers not in use. J. Ownership. 1. All carts, bins, Compactors, and drop boxes acquired by Contractor and put into service at Customers' Premises before July I, 2010 shall become the property of the City upon expiration or earlier termination of this Agreement. All carts, bins, Compactors, and drop boxes purchased and Page20 of36 put into service at Customers' Premises on or after July 1, 2010 that have not been fully depreciated shall be available to the City, at the City's option, at net book value. 2. At its sole discretion, the City may elect not to exercise its rights with regards to this Section J. In such case, the Containers shall remain the property of the Contractor upon the expiration or earlier termination of this Agreement and Contractor shall be responsible for removing all Containers in service from premises within ten (10) Business Days. K. Container Specifications. When the Contractor purchases Containers, the following minimum standards shall be maintained: 1. Carts a. Cart sizes shall be 10 or 12, 20, 32, 64 and 96 gallon. b. All carts shall be manufactured by injection or rotational molding methods and contain a minimum of 20% post-consumer content. c. Carts provided to Customers shall have a useful life of ten (10) years as evidenced by a manufacturer's warranty or other documentation acceptable to the City. d. Materials Identification and Decals Carts or their lids must be in approved by the Director colors to facilitate Customer's ready recognition of Solid Waste, Recyclable Materials, and Compostable Materials, subject to City's written approval as described in this Exhibit. Carts will have the approved City seal. e. Cart Handles The Cart handles and handle mounts may be an integrally molded part of the Cart body or molded as part of the lid. The Cart handles shall provide comfortable gripping area for pulling or pushing the Cart or lifting the lid. Pinch points are unacceptable. f. Cart Lid Each Cart shall be provided with a lid that continuously overlaps and comes in contact with the Cart body or otherwise causes an interface with the Cart body that simultaneously: Prevents the intrusion of rainwater, rodents, birds, and flies; Prevents the emission of odors; Enables the free and complete flow of material from the Cart during the dump cycle without interference with the material already deposited in the truck body or the truck body itself and its lifting mechanism; Permits users of the Cart to conveniently and easily open and shut the lid throughout the serviceable life of the Cart; The lid handle shall be an integrally molded part of the lid; The lid (and body) must be of such design and weight that would prevent an empty Cart from tilting backward when flipping the lid open; and, The lid shall be Page 21 of36 hinged to the Cart body in such a manner so as to enable the lid to be fully opened, free of tension, to a position whereby it may rest against the backside of the Cart body. g. Cart Colors The Solid Waste, Recyclable Materials, and Compostable Materials Carts shall be differentiated by color approved by the Director. The colors shall be colorfast and resistant to fading as a result of weathering or ultraviolet degradation. Color of lids and Cart bodies must be uniform for each Cart type (i.e., Solid Waste, Recyclable Materials, and Compostable Materials). Solid Waste Cart bodies and lids shall be black. Recyclable Materials Cart bodies and lids shall be blue. Compostable Materials Cart bodies shall be green. Contractor may propose other colors for Cart lids or Cart bodies, which are subject to written approval by the City. For all colors including those prescribed in this paragraph, the Contractor shall obtain written approval from the City for the Cart colors before Contractor's purchase of the Carts. h. Cart Load Capacity Maximum Load Capacity (Pounds) 200 1. Cart Durability Carts shall remain durable, and at a minimum, shall meet the following durability requirements to satisfy its intended use and performance, for the Term of this Agreement: Maintain its original shape and appearance; Be resistant to kicks and blows; Require minimal routine maintenance and essentially be maintenance free; Not warp, crack, rust, discolor, or otherwise deteriorate over time in a manner that shall interfere with its intended use; Resist degradation from ultraviolet radiation; Be incapable of penetration by biting or clawing of household pets (i.e., dogs and cats);The bottoms of Cart bodies must remain impervious to any damage, that would interfere with the Cart's intended use after repeated contact with gravel, concrete, asphalt, or any other rough and abrasive surface; All wheel and axle assemblies are to provide continuous maneuverability and mobility as originally designed and intended; and, resist degradation by other airborne gases or particulate matter currently present in the ambient air of the City. Carts shall resist damage from common household or Residential products and chemicals. Carts, also, shall resist damage from human and animal urine and feces. j. Stability and Maneuverability The Carts shall be stable and self-balancing in the upright position, when either empty or loaded to its maximum design capacity with an evenly distributed load, and with the lid in either a closed or an open position. The Carts shall be capable of maintaining its upright position in sustained or gusting winds of up to 25 miles per hour as applied from any direction. The Carts shall be capable of being easily moved Page 22 of36 and maneuvered, with an evenly distributed load equal in weight to its maximum design capacity on a level, sloped or stepped surface. All· carts shall be consistent and uniform in appearance design, shape and size. Contractor shall obtain approval from the Director before changing cart manufacturers/vendors or design and prior to ordering or purchasing carts from a new manufacturer. 2. Carts for Special Events Contractor shall provide carts for Special Events for the collection of Solid Waste, Compostable Materials, and Recyclable Materials as approved by the City. Contractor shall have all specifications for carts approved by the Director prior to ordering or purchasing. Carts shall be consistent in appearance with curbside carts 3. Bins. a. All new bins shall be purchased by the Contractor at the beginning of the Term of the Agreement. Colors, signs and specifications must be approved by the Director prior to purchase and use. b. Contractor shall provide bins for the purpose of collecting Solid Waste and Compostable Materials in the following sizes 1, 1.5, 2, 3, 4, 5, 6 and 8 cubic yard capacities. Colors, signs and specifications must be approved by the Director prior to purchase and use. c. Contractor shall provide bins for the purpose of collecting single stream Recyclable Materials at the request of Customer. The bins shall be available in the following sizes 2, 3, 4, 5, 6 cubic yard capacities. Colors, signs and specifications must be approved by the Director prior to purchase and use. 4 Drop boxes. a. All new drop boxes shall be purchased by the Contractor at the beginning of the Term of the Agreement. Colors, signs and specifications must be approved by the Director prior to purchase and use. b. Contractor shall provide drop boxes for the purpose ofcollecting Solid Waste in the following sizes: 7, 15, 20, 30 and 40 cubic yard capacities. c. Contractor shall provide drop boxes for the purpose of collecting C&D materials in the following sizes: 7, 15, 20, 30 and 40 cubic yard capacities. The C&D boxes must have a unique identifying sign showing that it is a C&D debris box. Design must be reviewed and approved by the Director prior to Contractor order placement, purchase or use. Page 23 of36 d. Contractor shall provide drop boxes for the purpose of collecting Single-source Separated Recyclables in the following sizes 7, 15, 20, 30 and 40 cubic yard capacities. e. Contractor shall provide drop boxes for the purpose of collecting Yard Trimmings in the following sizes: 15, 20 and 30 cubic yard capacities. f. The drop boxes must have a visible and legible serial number. g. The drop boxes must have reflectors at each outside comer. 5. Compactors a. Contractor shall provide Solid Waste and Compostable materials collection for Customer Compactors in the following sizes: 2, 3, 4, 12- 15, 20, 25, 30-36, and 40 cubic yard capacities. b. Contractor shall work with Customers purchasing new Compactors to determine appropriate size and type Compactor that is serviceable by Contractor. 6. Items Placed Next to Carts a. Motor oil containers. Contractor shall provide Customers with one gallon plastic containers with tight fitting lids. Specifications and signage to be approved by the Director prior to purchase. b. Oil filter bags. Contractor shall provide Customers with tear-resistant plastic bags that are watertight and prevent the leakage of liquids. Specifications and signage to be approved by the Director prior to purchase. c. Battery bags. Contractor shall provide Customers with tear-resistant plastic bags that are watertight and prevent the leakage of liquids. Specifications and signage to be approved by the Director prior to purchase. d. Cell phones in tear resistant bags. 8. IMPLEMENTATION OF RECYCLING AND COMPOSTING ORDINANCE A. General All Commercial Customers will be required to participate in recycling and composting. Contractor shall implement the City's Recycling and Composting ordinance that requires Commercial Customers, including multi-family, to place Recyclable Materials and Compostable Materials in the appropriate Containers. Contractor proviqed outreach and technical assistance to Customers to begin prior to ordinance implementation. Contractor shall also issue additional "fees" on the commercial utility bill when customers are not in compliance with ordinance requirements (as a result of additional collection, handling, and processing). The implementation program shall be phased over three years, as follows: • Phase la: April 1, 2016 -December 31, 2016. Initiate mandatory service with Food Service Establishments (FSEs). Food Service Establishments Page24 of36 include restaurants, markets, bakeries, bars, farmers' markets, hotels and catering facilities. All FSEs shall have compost and recycling service by December 31, 2016. • Phase lb: April 1, 2016 -December 31, 2016. Expand program to larger Commercial Customers with 8 cubic yard or more of garbage service. • Phase 2: January 1, 2017 -December 31, 2017. Roll out mandatory service to all Commercial Customers with 2 cubic yard or more of garbage service. • Phase 3: January 1, 2018 -December 31, 2018. Roll out mandatory service to all Commercial Customers. B. Implementation: 1. Planning In preparation for the mandatory service, the appropriate outreach, educational, and notification materials shall be produced. A tracking and documentation system shall also be established and provided to City identifying monthly and ongoing changes. The following collateral materials shall be included in mandatory service (in addition to standard outreach materials): • Cart/bin tags • Newspaper ads • Newsletter articles • Fliers/handouts with details on ordinance requirements • Other outreach materials as needed to educate customers about the ordinance requirements 2. Phase la: Food Service Establishments Contractor shall conduct an extensive outreach and educational program to educate FSE Customers on how to comply with the new mandatory participation requirements. Outreach will include developing with City staff the necessary collateral to educate customers about the ordinance requirements. This phase shall follow the implementation process described in the IMPLEMENTATION chart and as designated below: a. Preliminary detailed audits of all FSE Customers without compost and/or recycling containers to determine service change needs; b. Compost and Recycling service rollout and/or right sizing of existing services, c. Monitoring & Follow-Up: • EOC scheduled audits and tagging (see EOC Audits), • Driver reported contamination beginning April 1, 2016, • Implementation of fees beginning January 1, 2017. • Monthly reporting and quantifying of changes to City 3. Phase 1 b: Expanded to Commercial Customers with 8 cu yd or more of garbage service and review of FSE Mandatory Program Page 25 of36 a. Six months are provided for following the rollout of mandatory service to FSFs to allow for improvement of the plan. Contractor's outreach and operation staff shall draw on lessons learned to adjust rollout to larger Commercial sector, b. Ongoing assessment of fees assessed on FSEs for contamination shall also be included in this timeframe or as directed by City. 4. Phase 2: Commercial Customers with 2 cu yds or more of garbage service Contractor shall conduct an extensive outreach and educational program to educate Commercial Customers on how to comply with the new mandatory participation requirements. This phase shall largely follow the implementation process described in the IMPLEMENTATION chart and designated below, pending alterations deemed necessary from review in Phase lb: a. Preliminary audits of Commercial Customers without compostable and recycling service to determine service change needs, b. Compost and Recycling service rollout and/or right sizing of existing services, c. Monitoring & Follow-Up: • EOC scheduled audits at tagging (see EOC Audits), • Driver reported contamination beginning January I, 2017, • Implementation of fees beginning January I, 2018. 5. Phase 3: All Commercial Customers Contractor shall conduct an extensive outreach and educational program to educate the remaining Commercial Customers on how to comply with the new mandatory participation requirements. This phase shall largely follow the implementation process described in the IMPLEMENTATION chart and designated below, pending alterations deemed necessary from review in Phase I band 2: a. Preliminary audits of the remaining Commercial Customers to determine service changes, if needed b. Compost and Recycling service rollout and/or right sizing of existing services, c. Monitoring & Follow-Up: • EOC scheduled audits at tagging (see EOC Audits), • Driver reported contamination beginning January I, 2018, • Implementation of fines beginning January I, 2019. Page 26 of36 IMPLEMENTATION PROCESS FOR ALL COMMERCIAL CUSTOMERS: • Develop list of Customers and existing services, • Determine service change needs of Customers through detailed audits. Customers without Compost and/or Recycle Service OR Customers requiring service adjustments to become compliant • Inform Customers of the mandatory services they need to acquire through notifications and site visits, • Educate Customers regarding proper sorting, Begin new Compost and/or Recycle service Alter existing services to match waste commodity output Perform three waste audits (see EOC audits) at scheduled intervals following the service change. OR Customers needing no (or minimal) service adjustments Perform one waste audit (see EOC Audits) approximately one month following initial audit/customer contact • Contaminated containers shall not have extra fees applied until the full term of each Customer type's given phase is complete (see Eriforcement Fees), at which time the Drivers shall be empowered to perform visual audits to screen for contamination, • EOCs and/or Supervisors shall confirm a Driver-reported contaminated audit. EOCAUDITS: EOCs shall perform follow-up detailed audits to confirm compliance with the Mandatory ordinance. These complian~e assessments shall be audits (with material remaining in the service containers, opening bags as necessary). As needed, customers will be notified of these audit findings through personal visits by the EOCs and a customized print out of the audit findings and service changes needed to meet ordinance requirements. Compliance shall be judged as described in the following chart: Page27 of36 Audit Rank Tag Color Contamination Level Details Good Green Less than 10% • No issue with sorting . • Congratulate customer on efforts Acceptable Yellow 10-20% • No issue servicing as given (Only commodity applieable first • Improvement needed to match two years of 10% program goal program) Contaminated Red Greater than 20% • Load contaminated enough to qualify as garbage • GWPA to service as recoverable if clean enough to not be a processing issue Tags describing the violation shall be left on the Customer's service container. EOCs shall follow up with training and education to improve behavior. All tags shall be documented in the tracking system developed for this Mandatory program. PROCESSING AND HANDLING FEES: Material handling fees shall be applied for generators that contaminate any of the three streams (Recycle, Compos, Garbage). For the first two years of a sector's implementation of the Mandatory program, the fee shall be enforced at 20% or greater contamination of any stream. At year 3 of participation, the fee shall be enforced at 10% or greater contamination of any stream. REPORTING: Contractor will work with City staff to develop monthly reports that accurately detail the EOC interactions with customers, customer audit findings and service changes created. 9. PUBLIC EDUCATION & OUTREACH A. General Requirements The City places the utmost importance on effective public outreach and education in helping residents and businesses fully understand options for source reduction, reuse and recycling/composting. Contractor shall be responsible for ensuring that all Customers consistently receive a high level of service and responsiveness. As specified below, Contractor public education activities shall be performed in collaboration with the City. General provisions are as follows: 1. Contractor shall plan for public education programs, outreach and promotion for new and changed services that will be implemented for Single-Family, Multi-Family, schools, and Commercial customers. 2. Contractor shall submit an annual public education plan and meet with the City for review, modifications and approval of the plan. The City and Page 28 of36 Contractor shall meet a mm1mum of once every calendar quarter to discuss services, outreach and promotions. 3. Contractor shall have all press releases, reports, advertisements, letters or other documents prepared by Contractor for release to the public relating to this Agreement, reviewed and approved by Director prior to distribution. · 4. Contractor shall send a City-approved letter, outreach brochures, and current rate schedule to all new Customers identified by the City's utilities billing system or as requested by Director within seven (7) days of being notified. 5. Contractor shall distribute public education and promotion materials (developed by Contractor and City) during any roll-out of the new or expanded collection services. This will entail distributing program literature with delivery of new carts, bins and other Containers. 6. Contractor shall retain the services of an advertising/public relations company with experience in the waste management and recycling field and with skill and experience in developing multi-lingual materials. Contractor shall not engage a subcontractor without the Director's prior written approval. 7. Contractor shall prepare multi-lingual public education materials in English, Russian, Chinese, Japanese and Spanish and post the multi- lingual outreach materials on its website. 8. Contractor shall schedule and conduct presentations to service organizations, schools, business groups, civic associations, neighborhood and homeowner' s associations, workshops, other community organizations, etc. This shall be done annually and upon request by City, Customer or community organization. 9. Upon City's request, Contractor shall staff booths and distribute promotional and educational materials at events, parades, workshops, etc and shall provide tours of its processing sites. Contractor shall provide visual displays, educational materials and activities for children such as seed planting and spin art. Display components will be professionally created and will be completely interchangeable between standing booth backdrop and table-top display. Tables will be professionally dressed. Materials will include those pertaining to the appropriate programs and information on source reduction, reuse and recycling/composting. All age groups will be accommodated. I 0. Contractor shall annually develop and provide school recycling/composting outreach programs. 11. Contractor shall develop and maintain a system of keeping records of and following up with Customers who receive non-collection notices during collection of materials. Page 29 of36 12. Contractor will coordinate extensively with the City to meet the City's sustainability goals. B. Staffing Contractor shall dedicate a minimum of three and three-quarters (3.75) full time employee (FTE) equivalents or subcontractors to administer outreach and public education efforts for the City. Contractbr has very low attrition rates and will make every attempt to keep the positions filled throughout the Term. Staffing levels will be maintained throughout the Term with job duties and responsibilities changing in response to program development and the needs of the City. Following the completion of the transition, and periodically thereafter, the Contractor may evaluate the job duties and responsibilities of each member of the Outreach and Public Education Team. Contractor shall be allowed to modify the job duties and responsibilities of each EOC to further maximize outreach and public education efforts throughout the Term. • The Environmental Outreach Manager (EOM) will be responsible for managing all activities of the Environmental Outreach Coordinators (EOCs) as well as performing some of the same job duties as the EOCs. The EOM and the General Manager will meet with the City on public education and outreach related issues. The EOM will also be responsible for all media correspondence and issues relating to the services provided in the City. • The Environmental Outreach Coordinators (2.75 FTEs) will be responsible for generating and sustaining the highest possible level of diversion by Customers in the commercial, multi-family, schools, and City facility sectors. Environmental Outreach Coordinators (EOC) responsibilities include: • Identifying the waste disposal and recycling needs of every commercial/MFD/School/City facility. • Providing all Customers with appropriate educational information necessary to make informed, environmentally-forward decisions relative to waste reduction, reuse, and recycling activities. • Conducting site assessments and waste audits for all commercial/MFD/ School/City facilities. • Ensuring adequate enclosure sizing during City plan review process. • Reporting progress, challenges, and successes as per Company policy, including daily logs and sharing that information if requested by City. • Overseeing reporting functions and summarizing information for the City. • Developing and providing the school recycling programs. • Responding to customer needs immediately and completely. • Conducting on-site workshops, school group assemblies, civic and business group meetings and activities, and participating in community events. Page 30 of36 • Helping plan recycling and waste disposal needs for special events and large venues. • Providing tours to City staff, school groups and other community groups. • Creating and distributing reports as requested by City. No later than January 1, 2009, Contractor will begin EOC-recruitment and intensive training program. In hiring staff to serve as EOCs, the Contractor will ensure that EOCs are customer-oriented, personable and highly professional, able to satisfactorily perform each responsibility listed above, have a personal interest in recycling and waste prevention, have excellent communications skills (written and spoken), and ideally have a formal education in environmental studies. EOCs will receive continuing education riding routes with drivers at least once per quarter. EOC team members will be assigned to specific areas of the City as appropriate to fulfill their duties. EOCs will provide information to Contractor's webmaster to ensure the Palo Alto page of the Contractor's website is updated. Contractor agrees to update the Palo Alto portion of the Contractor's web site within two (2) weeks of receiving new or updated information from EOCs or the City, with applicability to Palo Alto customers. Details on the Baseline and Zero Waste Program shall be available to Customers. The website will also be used to post educational materials for download, highlight program successes and provide diversion statistics. C. Annual Budget In addition to staffing expense, Contractor shall spend for public education and outreach rio less than $60,000 prior to start-up and during the first year of the Agreement (FY 2009-10), and $55,000 in FY 2010-2011. Subsequently, this amount will be annually adjusted by the same percentage as total compensation, per Attachment N-2. Contractor shall submit to the City the list of outreach expenses as part of the required reports in Attachment K. D. Direct and Ongoing Customer Education and Outreach 1. Recycling Guides Contractor will produce two separate recycling guides, one directed towards Residential Customers and a second directed to Commercial customers for distribution prior to start-up and to new Customers throughout the Term. These guides will include information on collection methodologies, set out instructions, set out schedule, contact information, and acceptability and necessary preparation of materials for all three containers: Solid Waste, Recyclable Materials and Compostable Materials. A section of the guide will specifically address proper methods of handling and disposal of Hazardous Wastes. Page 31 of36 Single-family homes will receive the Recyclable Materials and Yard Trimmings recycling guides attached to their carts along with the other start-up items. For multi-family customers, the EOCs will work with building managers to distribute these guides to each of their residents. In cases where EOCs are unable to contact a building manager, they will deliver the guides door to door. Multi-family property managers and customers will receive a residential guide if using carts, or a commercial guide if using bins. Multi-family customers will also be provided with "Recycling Buddies" as part of the initial outreach effort. All multi-family complexes will be provided laminated Commercial Recycling posters. For Commercial Customers, the EOCs will work with business associations and business managers to distribute these guides to each member and/or business. Additionally, laminated Commercial recycling posters will also be supplied to businesses. Recycling guides will also be distributed at community events, recycling presentations and other outreach activities in which Contractor participates. 2. Identify Recycling and Waste Prevention Opportunities EOCs will conduct waste audits during two specific times during the Term. The waste audits will be conducted for Commercial, Multi-Family and City Facility customers. The first round of waste audits, a minimum of 12 waste audits per month, will occur during the three months prior to start-up. Following Contractor's receipt of the customer database, the EOCs will develop an audit schedule and route. EOCs will complete mini- audits for Commercial, Multi-family and City facilities Customers prior to July 1, 2009, utilizing these initial site-visits as an opportunity to make introductions, discuss service levels, promote expanded programs and opportunities for further diversion. The second round of waste audits, a minimum of 12 waste audits per month, will be conducted prior to the fifth year and combined with inspections by EOCs under the Mandatory Recycling Program. EOCs will conduct site-visits prior to collection, performing audits and tracking results. The audits will consist of a visual waste characterization and evaluation (sorting waste by categories) of Customer's Solid Waste, Recyclable Materials and Compostable Materials, and documentation (photos, written summary and classification of materials). EOCs will use these results to target Customers with increased opportunities for diversion. Results of audits shall be provided to the Director upon request. 3. Corrective Action Notices Page 32 of36 Contractor's corrective action notices shall double as non-collection and courtesy notices, and shall be utilized in clear instances of customer non- compliance. The driver or supervisor will be responsible for the completion of the corrective action notice, selecting the reason for non- collection, and completing the perforated bottom of the notice with the route number, date, time, address, driver initials and reason for non- collection. The corrective action notices will be submitted to a customer service representative (CSR) when the route is completed. A CSR enters the corrective action notice to a comment field in the customer account software. In some cases, the information may be transmitted to the CSR via On-Route GPS system. This information will be sent to the City as required by the Agreement. 4. Commercial Recycling and Compostable Programs Contractor will develop a marketing approach to promote the programs, for review and approval by the City. All new outreach will reflect the new programs. The new Commercial Recycling and Compostable program will be a key focus of the EOCs during the first year of operation. Both the City and Contractor recognize this is an entirely new program that requires a paradigm-shift for Customers. The first year will be focused on education and marketing to encourage and induce participation by large generators. The second step involves targeted education, providing resources to ensure success and ultimately facilitating the changing of habits. Contractor shall provide the City with regular updates on Customer participation, progress, successes and obstacles. In general: a. The approach will be to establish large "anchor" Customers and then add smaller Customers to form a viable, dense route for recycling and Compostable Materials collection. EOCs will focus first on the largest waste generators within the City with the most potential for diversion. b. EOCs will make initial contact with each Customer. EOCs will need to identify and contact the appropriate contact(s), receive replies to emails, phone calls and secure meetings. c. Contractor understands that large corporate organizations such as supermarkets, hotels, shopping malls, and restaurant chains have varied decision-making environments and require significant time to cultivate. d. To maximize the opportunity for initial and sustained program success, Contractor will seek to identify a "champion" (ideally a senior manager) at each business. Page 33 of36 e. EOCs will assemble a training packet for each Customer. The packet will contain Compostable Materials posters, cart and can stickers, and a question and answer section that addresses frequently asked questions. f. EOCs will work with Customer management staff to determine the type of Compostable Materials collection Containers, their location, and frequency of collection. g. Compostable Material posters will also be displayed wherever necessary to reduce confusion about the program. Commingled recycling options will also be presented, to improve diversion rates through diligent source separation and to reduce overall waste expense to the Customer. Follow-up site visits for program evaluation will be offered to new Customers. h. Timely feedback is important for success. Compostable Materials collection drivers will be trained to identify and remove small amounts of obvious contamination and notify the office/EOC at the end of the day so that the Customer can be made aware of a contamination issue. Drivers will be kept updated regarding any changes to the list of acceptable materials. i. Compostable Materials collection drivers will be instructed to report large volumes of contamination at commercial establishments to the collection supervisor who in tum will inspect the container. In most cases, the supervisor will contact the business manager as well as the EOCs regarding the contamination. In some cases, the EOCs will be directed to the business to conduct a more comprehensive investigation and educational process. 5. The following additional public education and outreach materials shall be produced with City approval upon City request during the term: a. Newspaper advertisement explaining new programs b. Press releases about new programs c. Description of Annual Clean-Up Program, including options for reuse and recycling. Contractor shall provide separate outreach materials for Residential and Commercial Customers d. Zanker 1 0% off coupon e. Company newsletters, quarterly f. Door hangers g. Corrective Action Notice E. School Programs For schools, Contractor shall: Page 34 of 36 I. Provide on-going technical assistance to schools and the City to improve existing school recycling and compostable programs, including supplying composting and compostable bins, posters, and other collateral materials in support of these activities. 2. Conduct school-wide composting, compostable and recycling in-class presentations and assemblies at local schools. Contractor shall develop a menu of dynamic presentations from which teachers/principals may select the program that best suits their student body needs. Topics will extend beyond the local recycling/composting program to other areas of environmental concern. 3. Promote, coordinate, and conduct educational field trips to the recycling and transfer station in San Jose. 4. Perform annual waste assessments, calculate diversion rates, and communicate the results to the Director. 5. Prepare and distribute an annual report that highlights the many educational services and activities Contractor offers to schools, with scheduling and contact information. I 0. Hard to Service Areas The following are the Hard to Service Areas as of April 2015, which account for approximately 739 customers. The geographical areas for Hard to Service locations and areas in the Palo Alto needing either hard to service collection or semi-automated collection may change during the Term. Monday: 1) Bryant Court 2) Everett Court 3) Downing Lane 4) Lane 56 (Channing House) 5) Lane 15 (E) 6) Lane (B) West 7) Lane (B) East 8) Lane (D) West 9) Lane (D) East I 0) Page Mill Road (between Hwy 35 and Hwy 280) 11) Alley Behind 200 Block of Everett 12) Private driveway/street at the corner of Channing and Waverley Page 35 of36 Tuesday: 1) East Meadow Circle (Newer housing development) 2) Quail and Paloma 3) Ellsworth 4) San Carlos 5) Old Ricky's site (Newer housing development on El Camino Real and Charleston Rd.) Wednesday: l) Lane (66) Between Fernando & Wilton 2) Jacobs Court 3) Madeline Court 4) Matadero & Roble Ridge Thursday: l) Community Lane (3 Blocks) 2) Alley between Harker & Parkinson (I 000 Block) 3) Alley between Greenwood & Channing (l 000 & 1100 Block) 4) Alley between Harker & Greenwood (1100 Block) 5) Alley between Harker & Parkinson (1300 Block) Other Locations The following are other locations needing hard-to-service collection or potentially semi- automated collection service: • Wisteria Lane • Driscoll Lane • East Meadow Circle (Newer housing development) • One-way streets such as Channing Avenue and Homer Avenue • St. Francis Drive (new housing development) Page 36 of36 City Facilities Services Attachment D-1 -City Facilities 30030901 l1003661PA IOpen Space-Foothills Park 13010 Madera Point 15-3cy garb & 36-32gl I 20-64gl lxwk M cans 18-2cy garb & 1-lcy 4cy bin 2xwk/ T F 30011091 I 410455PA I Parks -Mitchell Park 1600 E Meadow 3-64gl & 4-96gl carts garb 2xwk/T F 9-64gl & 8-96gl 2xwk /MF 30017768 I 1423825PA I Parks -Rinconada Park 1777 Embarcadero Rd 17 -2cy garb I (Embarcadero/Newe II) 4-64gl 2xwk / MTh l1061530PA lAnimal Services (Hopkins-Tennis Ct) 30033902 13281 E Bayshore Rd l3cy 2xwk I TF 3cy 2xwk/TF lcy lxwk/T 30006374 l1383706PA IArt Center 11313 Newell Rd l3cy lxwk/T lcy lxwk / F lcy lxwk/ F 30019110 l980846PA IBaylands Nature Preserve 2775 Embarcadero 1-32gl can lxwk IM ,, 30032616 212276PA Civic Center 250 Hamilton Ave 2cy 5xwk IT-Sa 3-2cy 3xwk I MWF 2cy 5xwk IT-Sa 30033746 1205036PA Cubberley Community Center 4000 Middlefield Rd 2-4cy 3xwk I MWF 4cy 3xwk / MWF 4cy lxwk/W 30020928 1411038PA City of Palo Alto 4000 Middlefield Rd 2cy lxwk/ W na na Development Center Scott St & Channing Ave 64 gallon 30039234 l1596092PA I Elwell Court 1005 Elwell Ct 4cy lxwki /T 4cy lxwki I T & 4-llcy lxwk/T 96gl carts 2xwk /TF 30007265 682367PA Elwell Court 1007 Elwell Ct 1-32gl can /T 30035389 240273PA Fire Station #1 301 Alma St 96gl lxwk/T 4cy 12xwk I MS lcy lxwk/T 30029003 968387PA Fire Station #2 2675 Hanover St 3cy lxwk/Th 2cy lxwk/ Th 2cy lxwk/T 30014915 555400PA Fire Station #3 799 Embarcadero Rd 96gl lxwk I Th 2-96gl lxwk I Th 96gl lxwk I Th 30012463 1131293PA Fire Station #4 3600 Middlefield Rd 96gl lxwk/T 3-96gl lxwk I W 96gl lxwk/T 30028409 410236PA Fire Station #5 & #8 600 Arastradero Rd 96gl lxwk/T 3-96gl lxwk I W 96gl lxwk I Th Fire Station #6 1711 Serra St, Stanford 3 yd I TF (PSSI) Fire Station #7 12575 Sand Hill Rd need to get from BFI I 30022570 l780464PA !Junior Museum 11451 Middlefield Rd l2cy Sxwk/ MTWThF 2cy & 96gl lxwk I F I 2cy lxwk I F 30031971 1401666PA Libraries -Children's 1276 Harriet St 3-32gl lxwk Th 96gl & 64gl 2xwk I l32gl lxwk/Th ThF 30005463 1449726PA Childcare Facility 2300 Wellesley St 50% 2cy lcwk /Th 1-96gl lxwk /Th ISO% 32gl lxwk/Th 30038803 225837PA Libraries -Downtown 270 Forest Ave lcy lxwk/T 2cy 12xwk / T F 196gl lxwk IT 1of5 City Facilities Services 30018069 l758208PA I Libraries -Main 11313 Newell Ave l3cy lxwk/T l2-96gl,2-64gl 4cy, 3cy lxwk/T 3cy lxwk/ F 30023295 l743433PA I COPA-Community Garden 11213 Newell Ave l96gl lxwk 96gl & 64gl lxwk I F 20cy Yardwaste lx month I 1st W 30016544 I 1165801PA/ll Libraries -Mitchell Park 13700 Middlefield Rd I shares garbage service with MP Community Center, combined with MP Comm Center 50% given with no basis in fact 30021832 l1305774PA IChildrens Library 11305 Middlefield Rd l2-3cy 2xwk /MF 15-96gl & 3cy lxwk I I 1 k / h F 96g lxw T 30021832 l1433078PA IChildrens Theater Event I 1305 Middlefield Rd l64gl 2xwk/ MF 1 4-64gl & 96gl 2xwk I MWTh 30018201 l757322PA I Lucie Stern -Theatre I 1307 Middlefield Rd 20cy lxwk/ M 30019844 12450746? I Mitchell Park Comm. Center 13800 Middlefield Rd 3 yd/ MWF 3cy lxwk /T (station 4cy & 3-32gl lxwk I 96gl lxwk/T 30033577 I 1355819PA I MSC -Building A 13201 E Bayshore Rd 14) & lcy lxwk IT T (Station 4) & 2cy (Station 4) (station?) lxwk IT (station 2) 30033577 ll412030PA IMSC-Building B 13201 E Bayshore Rd 1 2 -2cy lxwk IT 3cy lxwk/ T (station 32gl lxwk/T (station 1) 3) (station 1) 2-3cy (stations 6 & 7) 2-2cy( Stations 3 & 2-lcy (stations 5 &6) 5) 1-4cy 3-96gl (stations 1 2-3 cy(station 3 &8) lxwk(station 4) 3-6,8,7,3) 30033577 l1397040PA IMSC-Building C 13201 E Bayshore Rd 96gl (treecrew/sign 1-32gl (bldg C) 1-1.5cy(south side shop) station 7) lxwk/ T 1-32gl (tree lxwk/T crew/sign shop) lxwk/T 30033577 I 1906256PA I MSC -City Yard Utility Control 3201 E Bayshore Rd l I **used for on-call 30cy pallet box Open Space -Arastradero Arastradero Rd 2 cans/M Preserve 30022235 I 1332449PA I Parks -Baylands Athletic Ctr 1900 Geng Rd 2-3cylxwk/ F 1-2cy& 5-64gl cartsln/a 2xwk/TTh 30022237 I 1129863PA I Parks -Bol Park 13590 Laguna Ave 1 6-32gl cans 2xwk I 1WF n/a I 1-64gl lxwk /W 30023004 l300236PA I Parks -Boulware Park 1410 Fernando St l6-32gl cans cans I W 96gl recy cart lxwk /I I W n a 30005648 l1447741PA I Parks -Bowden Park 12300 High St 1 s-32gl cans 2xwk I 2-64gl carts lxwk/ MTh Th 2 of 5 City Facilities Services 30000233 l344098PA I Parks -Bowling Green Park 474 Embarcadero Rd 2-32gl cans lxwk I M l64gl cart lxwk/Th In/a 30035159 l414426PA I Parks -Briones Park 600 Arastradero Rd 32gl can lxwk / W 30017231 l1373342PA I Parks -Byxbee Park 12500 Embarcadero Rd l35-32gal cans 2xwk /I 1 I M F 3-64g carts lxwk T 30031593 l872723PA I Parks -Cameron Park 12101 Wellesley St 1 2-32gl cans lxwk / Th In/a In/a 30011990 l223415PA I Parks -Cogswell Park 1264 Lytton Ave 4-32gl cans lxwk I 1-96gl lxwk /F n/a M-S 30032510 l181857PA I Parks -El Camino Park 1201 El Camino Real 1-32gl can I W n/a n/a 30012009 l1548697PA I Eleanor Community Garden 1801 Center Dr I 1-96gl cart lxwk/ M 2-96gl cartslxwk / M 20cy Yardwaste lx month I 1st M :~~~~~;~ & 1711794PA I Parks -Greer Park 11098 Amarillo Ave 2cy 2xwk/ MF 4cy bin 2xwk/ T F I 18-32gl cans 2xwk / 9-64gl & 1-96gl carts In/a MF 2xwk/T F 30017363 I 1394836PA I Parks -Hoover Park 12901 Cowper St 6-32gl cans lxwk IT 4-96gl carts lxwk/ F In/a 30007213 I 1322968PA I Parks -Johnson Park 1251 Waverley St 5-32gl cans 3xwk ll-96gl lxwk/ M l4-96gl lxwk IM M/TH/S 30046818 13250172 I Parks -Lytton Plaza 200 University Ave 2-32gl cans lxwk I 30015431 l909198PA !College Terrace Library 2300 Wellesley St 50% 2cy lcwk /Th 1-96gl lxwk /Th 50% 32gl lxwk /Th 3 of 5 City Facilities Services 30021750 l1282076PA I Parks -Monroe Park 4305 Miller Ave 2-32gl cans lxwk /W n/a n/a 30029273 l1327486PA I Parks -Palo Alto Municipal Golf 1985 Embarcadero Rd 3cy 3xwk I M Th S 2-3cy 2xwk /T F n/a Course 1-2cy lxwk IT 30007710 842304PA Parks -Peers Park 1899 Park Blvd 1-2cy 2xwk IM Th 1-2cy lxwk I Th 1-64gl cart lxwk I Th In/a 30022095 556056PA Parks -Ramos Park 820 E Meadow Dr 5-32gl cans 2xwk IT 2-64gl lxwk IT 30037296 I 1232367PA I Parks -Robles Park 14116 Park Blvd 14-32gl cans lxwk / 2-64gl carts lxwk I In/a w w 30013980 l1449836PA I Parks -Scott Park 915 Scott St 4-32gl cans lxwk I 1-96gl ca rt /M In/a M 30001203 l101501PA I Parks -Seale Park 3100 Stockton Place 4-32gl cans lxwk IT 11-64gl cart /T In/a 2-32gl cans Sxwk I 30010436 I 1316029PA I Parks -Terman Park 1655 Arastradero Park lw OR 10-32gl cans l3-64gl carts lxwk/T lxwk?? Parks -Wallis Park Grant Ave & Ash St 30034177 l908324PA I Parks -Weisshaar Park 2300 Dartmouth St 2-32gl cans lxwk I I I 1-96gl lxwk I Th Th 30014774 I 871839PA I Parks -Weisshaar Park 2300 Dartmouth St 2-32gl cans lxwk I I 1-96gl lxwk I Th Th Parks -Werry Park 2100 Dartmouth St 196gl cart lxwk/ Th 3cy bin lxwk /T 2cy 3xwk/ MWF 30022919 l948224PA !Water Quality Control Plant 12501 Embarcadero Way I I 3-64gl carts & 2-l2-96gl lxwk IT 15cy Perm 2xwk M 96 1 1 k/T g carts xw Th 30015342 5064070 City of Palo Alto 2501 Embarcadero Way 96gl cart lxwk/ Th 30033996 2071038PA Parks-Mayfield Soccer Fields 2700 El Camino Real 2cy bin 3xwk/ MWF 6-64gl carts M n/a 30016963 11309526PA !City of Palo Alto 450 Bryant St 2cy bin 3xwk/ TThS 2cy bin & 3-64gl carts Sxwk / M-F 1-96gl & 1-64gl cart 30027979 ll311730PA City of Palo Alto 708 Melville Ave 32gl can lxwk/ M l1xwk/ M 30031980 2462094 City of Palo Alto 664 Palo Alto Ave 32gl can lxwk 30035494 2465628 City of Palo Alto 3351 Miranda Ave 32gl can lxwk 30031520 4073633 City of Palo Alto 528 High St 32gl can lxwk 30052096 3875236 City of Palo Alto 502 Thain Way 32gl can lxwk /W 30058337 5089089 City of Palo Alto 534 Emerson St 2cy lxwk/ F ISO% 2cy 6xwk I M-S 4 of 5 City Parks on Special Schedule 8-2cy 30011091 Mitchell Pa~k 600 E. Meadow 9 Garb & 1-2X MON & FRI lXMON lcy garb 30017768 Rinconada Park 777 Embarcadero 7 2cy Garb 2X MON & FRI lXMON 3cy Garb 30030901 Foothill Park 3010 Madera Point 5 & 36-32gl 2X MON & FRI lXMON cans Attachment D-2 Public Waste Receptacles in Business Districts A.ddress QTY Weekly Pickups 515Alma 1 2 5 30 Arastradero 0 0 BS 7 00 Arastradero 0 0 BS 2415 Ash 1 3 2300 Birch 1 1 2440 Birch 1 1 400 Bryant 0 0 1 00 California 3 2 200 California 4 2 300 California 6 6 400 California 4 6 500 California 0 0 200 Cambridge 4 6 275 Cambridge 1 2 300 Cambridge 2 2 400 Cambridre 4 3 100 Cambridge & Park 1 6 89 Churchill 1 1 700 Colorado 0 0 BS 500 Cowper 2 2 4200 E. Bayshore 0 0 400 E. Charleston 0 0 BS 3200 El Camino Real 0 0 BS 1119 El Camino Real 0 0 2325 El Camino Real 0 0 2335 El Camino Real 0 0 BS 4191 El Camino Real 0 0 BS 3000 El Camino Real 0 0 BS 3138 El Camino Real 0 0 3487 El Camino Real 1 1 3500 El Camino Real 0 0 BS 3720 El Camino Real 0 0 BS 3979 El Camino Real 1 1 4156 El Camino Real 0 0 BS 4216 El Camino Real 0 0 4345 El Camino Real 0 0 BS 51 Embarcadero 0 0 BS 51 Embarcadero 0 0 400 Emerson 2 6 500 Emerson 6 534 Emerson 6 89 Encina 1 1 400 Florence 2 2 100 Forest 1 1 200 Forest 1 2 600 Gilman 1 3 100 Hamilton 3 200 Hamilton 1 2 300 Hamilton 3 2 345 Hamilton 1 2 400 Hamilton 2 2 3000 Hanover 0 0 BS 900 Hansen 0 0 BS 2300 High 0 0 . 500 High (Park Lot P) 1 2 3300 Hillview 0 0 BS 400 Kipling 1 2 130 Lytton 1 2 300 Lytton 3 2 400 Lytton 4 3 200 Lytton Cogwell Pz 5 6 2605 Middlefield 1 2 2700 Middlefield 3 1 2800 Middlefield 0 0 3100 Middlefield 0 0 BS 3700 Middlefield 0 0 3895 Middlefield 0 0 BS 4160 Middlefield 0 0 BS 4000 Middlefield 0 0 1000 Page Mill 0 0 BS 1500 Page Mill 0 0 BS 900 Page Mill 0 0 BS 400 Ramona 2 2 500 Ramona 1 6 700 San Antonio 0 0 200 Sherman 0 0 400 Sherman 1 1 Terman/Arastradero 2 1 100 University 11 6 1900 University 1 1 1901 University 0 0 200 University 15 6 300 University 11 6 400 University 11 6 500 University 12 6 600 University 2 2 700 Urban 1 1 400 Waverley 1 3 500 Waverley 2 6 800 Waverley 0 0 BS 400 High 1 1 400Alma 1 1 200 Lytton 1 1 ECR & Stanford 4 1 TOTALS 155 648 2 Attachment E Materials Processing A. Recyclable Materials Processing I. General a. Facility All Contractor vehicles collecting Recyclable Materials from the City shall deliver directly to the GreenWaste Material Recovery Facility (Materials Recovery Facility or GreenWaste MRF in this exhibit) located at 625 Charles Street, San Jose, California. b. Facility Permits Contractor shall keep in force and be in full regulatory compliance with the terms of all permits and approvals from governmental authorities necessary for the use of the Green Waste MRF or any other approved alternative processing facility during the term of the Agreement for the processing of City Recyclable Materials. c. Prohibited Use of Materials Contractor shall ensure that Recyclable Materials are neither disposed of at a landfill nor utilized as alternative daily cover at a landfill without prior written consent from the Director. d. Tonnage Tracking and Reporting Contractor shall submit a report each month to the City on Recyclable Materials received during the immediately proceeding month from each collection vehicle. The reports shall include at a minimum: the source, method of delivery, truck number, time of delivery, tonnage delivered, vehicle license number, person receiving the delivery. Contractor shall also update vehicle tare weights twice per year, and provide that data to the City. e. Facility Contingency · Contractor shall arrange to process Recyclables Materials at no added cost to the City, should processing capacity at the Green Waste MRF, for whatever reason, be temporarily unavailable or inadequate. 2. Processing a. Processing Method:. Green Waste Recovery has installed a new material recovery system capable of processing a minimum of 20 tons per hour of single stream recyclable materials. The equipment is manufactured by Bulk Handling Systems (BHS). From time to time equipment will be modified or replaced to update the system but the following components will be the minimum. If processing changes, Contractor shall submit those changes. in writing to the City. Pre-Sort: The system includes ten pre-sorting stations. Sorters will remove contaminants, large items, metals, and injection-molded plastics prior to the material stream entering the mechanical portion of the facility. This will increase plant throughput, machinery efficiency separation and Page 1 of12 output products quality. Staffing level and location will be according to feedstock being processed on each feed line. Post-Sort: Quality control post-sort stations are included in the design to ensure optimum marketability of the recovered commodity. The system will operate with 2 to 8 post sorters at a time depending upon the quality of the material and the overall performance of the system. Trommel Screen: The trommel will separate materials into two distinct fractions being approximately Y4 minus, and over's for the purpose of separating glass and fiber. Cardboard Screen: All captured cardboard from both cardboard disc screens will pass over one quality control sort station where up to two sorters will clean the cardboard before directing it to the cardboard bunker conveyor for later baling. News Print Screen: This screen will separate newspaper from the rest of the stream. The newspaper will be sent to a post-sort clean up prior to being baled. Polishing Screen: This screen is used to separate mixed paper from the containers. Mixed paper will float on top as the containers drop through the bottom on to another conveyor. Optical Sorting: PET beverage containers will be optically sorted prior to final manual quality control (post-sort) before being stored in bunkers, prior to baling. Any cross contamination or trash can be sorted out and redirected to proper streams via conveyors. Eddy Current Separator: Non-ferrous metals (i.e. aluminum cans) will be separated utilizing an eddy current separator. All non-ferrous metals will be stored prior to baling. Direct Baling: Clean source-separated loads, such as cardboard and film plastics from commercial and City facilities, will be fed directly into the accessible baler feed conveyor which provides more than 45 feet of direct load capability. Electro-magnetic Separators: Ferrous metals will be separated using electro-magnetic separators. All ferrous metals will be stored in common storage silo for later baling. If the primary electromagnetic separator is out of service the secondary magnetic separation unit provides redundancy. Drum Separator: This mechanical separation utilizes a vacuum to separate 3D containers from the waste stream. b. Acceptable Materials Recyclable Materials listed in Attachment C, Section 2 shall be processed at the GreenWaste MRF. Additional types of Recyclable Materials which City directs Contractor to collect shall be processed at no additional charge. c. Residue Rate Requirements. Page2of12 Contractor guarantees to process mixed loads of Recyclable Materials with a minimum ninety two percent (92%) recovery rate; maximum eight percent (8%) residue annually at the processing facility. The Green Waste MRF shall measure and report to the City the annual Recyclables Materials processing line and facility residue rate, and reciprocal recovery rate, prior to August 1 of each year. This report will indicate actual Recyclable Material tonnage received at the Materials Recovery Facility, processed, marketed (by material type) and sent to the landfill. These annual recovery/residue rates shall be utilized to ensure that the Contractor has met tonnage and recovery goals for Recyclable Materials. Contractor shall allow City staff to observe processing, on request. 3. Marketing a. Marketing Plan Contractor shall submit to City on or before January 1 of each year, a plan for marketing Recyclable Materials for the coming year. The Marketing Plan shall include the following: 1. Quantities: estimated quantities of each Recyclable Material; 2. Prices: estimated unit market values 3. Marketing: end markets and uses, and 4. Quantities of materials marketed during the preceding year. b. Marketing Methods Contractor shall use, and build on its existing network of, vendors to sell commodities. In general, at the time of execution, materials markets are as follows: Plastic 1-7, Plastic Bags, Plastic Injection, Black Injection -Plastics are cleaned and sorted to produce new flake that will go into the production of many items. Currently plastics are sold through Berg Mills to both foreign and domestic processors. Mixed Paper, OCC -Materials will be recycled into new products such as newspaper and cardboard. Currently, fiber products are primarily sold through Berg Mills to domestic and foreign mills. Glass -Glass will be recycled into new glass and fiberglass products. Currently, glass is sold and processed locally to Strategic Materials Scrap Metal, Aluminum -Metals will be recycled into new ferrous and non-ferrous products. Currently, metals are sold to Standard Iron to be processed and shipped both domestic and foreign markets. E-Waste -E-Waste will be disassembled in Hayward at E-Recycling and shipped both domestically and internationally to other recyclers. c. Stockpiling of Materials Contractor shall provide storage of materials during extreme market fluctuations. Processed materials shall not be stockpiled for more than one year. Page3of12 d. Certificate of End Use Contractor shall submit to City on or before July I of each year a certification of end use from each purchasers establishing that the materials sold the prior fiscal year have been, in fact, recycled. B. Compostable Materials Processing I. General a. Facility All Contractor vehicles collecting Compostable Materials from the City shall deliver to the City's designated compost facility, including the following: ZBEST: Compostable Materials shall be delivered directly to the SMaRT Station or the GreenWaste MRF lo'cated at 625 Charles Street, San Jose, California. The City's Compostable Materials may be comingled with materials from other jurisdictions at the GreenWaste MRF. The Compostable Materials shall then be loaded into transfer vehicles for transportation to the Z- Best Composting Facility (Z-Best) located in Gilroy for processing and composting. ZWED: Compostable Materials shall be delivered directly to the ZWED Anaerobic Digestion Facility located at 685 Los Esteros Road, San Jose, California. The City's Compostable Materials may be comingled with materials from other jurisdictions at the ZWED. b. Facility Permits Contractor shall keep in force and be in full regulatory compliance with the terms of all permits and approvals from governmental authorities necessary for the Green Waste MRF, Z-Best facilities, ZWED facilities, and any other approved alternative processing facility during the term of the Agreement for the processing of City Compostable Materials. c. Prohibited Use of Materials Contractor shall ensure that Compostable Materials are neither disposed of at a landfill nor utilized as alternative daily cover at a landfill without prior written consent from the Director. d. Tonnage Tracking and Reporting Contractor shall submit a report each month to the City on Compostable Materials received during the immediately proceeding month at the Green Waste MRF or ZWED (or another facility designated and approved by Director) from each collection vehicle. The report shall include at a minimum: the source, method of delivery, truck number, time of delivery, tonnage delivered, vehicle license number, person receiving the delivery. Contractor shall also update vehicle tare weights twice per year, and provide that data to the City. e. Facility Contingency As a primary contingency is the Zanker Material Processing Facility (ZMPF) is in the process of designing and permitting the construction of a 200,000 square foot facility that will be capable of processing and transferring Compostable materials. Page4of12 2. Processing a. Processing Method ZBEST: After weigh-in, transfer vehicles will dump loads in the Processing Building. Z-Best's processing plant consists of several components, including a bag opener, magnet, manual sorting stations, and a shredder. The processing plant removes recyclables such as cardboard, glass, aluminum, metal, as well as large contaminants, before shredding the material to achieve optimum particle size for composting. From time to time methodology and/or equipment may be modified or replaced to update the system and/or increase efficiencies. Shredded food waste is composted in an enclosed bag with forced aeration called the CTI System. For the majority of the I4 week process, the bagged material reaches I50-I60 degrees, which is sufficient to kill all insects, pathogens and weed seeds. After the composting process, the material is sent though a primary screening process. The primary screen removes all inorganic contamination of I-inch size or greater. This residue is shipped to a landfill for disposal. Composted materials smaller than I-inch are placed in curing piles for several more weeks. After a suitable curing period, final screening takes place and the resulting compost is ready for market. ZWED: After weigh-in, transfer vehicles will dump loads in the Receiving Hall for pre-processing. Contamination will be removed and the remaining Compostable Materials will be moved to the staging area, where material is held until loaded into the digestion Tunnels. In the digestion tunnels, clean Compostable Materials are deprived of oxygen for approximately 2 I days. The resulting digestate is then moved to the decompaction area and structural material is added to increase porosity. This combined material is then moved to In-Vessel compost tunnels to complete the composting process in an aerobic environment. The compost is then moved outside and placed in windrows for final curing, screening and storage. b. Acceptable Materials Compostable Materials listed in Attachment C, Section 3 shall be composted at the processing facilities. The City may at no additional charge request Contractor to add additional materials as markets allow. c. Residue Rate Requirements Contractor will strive to achieve a minimum rate of ninety percent (90%); maximum ten percent (10%) residue rate for processing City specific materials into compost at the Z-Best or ZWED facility. Assessment of reaching this goal will be achieved by utilizing facility processing and recovery rates of designated Compost facility. These reports will indicate actual material tonnage received, processed, marketed, and sent to the landfill. City may observe processing at these Facilities upon notice. Page5of12 3. Marketing a. Marketing Plan Contractor shall submit to City on or before January 1 of each year, a plan for marketing Composted Compostable Materials for the coming year. The marketing plan shall include the following: 1. Estimated quantities; 2. Prices: estimated unit market values 3. Marketing: end markets and uses and 4. Quantities of materials marketed during the preceding year. b. Marketing Methods Compost produced from Compostable Materials is directed into commercial markets that include a diverse collection of potential customers, including landscapers, land developers, contractors, nurseries, greenhouses, golf courses and private recreational facilities. Z-Best and ZWED markets to the commercial sector through its large database of existing cus~omers, and places advertisements in the yellow pages of telephone directories, as well as in newspapers and trade publications. In an effort to expand its services to the commercial sector, Z-Best and ZWED provide delivery services for materials from its facility. The Compost' facilities use a full time sales person to seek new business through referrals and cold calls to potential end-users. Current users of this product include commercial landscape installers, topsoil producers, and nurseries. c. Stockpiling of Materials Contractor shall provide storage of materials during extreme market fluctuations. Processed materials shall not be stockpiled for more than two years. d. Certificate of End Use Contractor shall obtain from five of its largest customers a certification of end use, on or before July 1 of each year establishing that the materials sold the prior fiscal year have been, in fact, reused or recycled. The certifications of end use will be retained by Contractor and will be available for review by City. Contractor shall also submit to the City each month, Z-Best or ZWED monthly tonnages for materials being received and each material type being marketed. C. Construction and Demolition Debris Processing 1. General Commencing July 1, 2009, Contractor shall collect & transport all roll-off boxes and compactors, to the Zanker Materials Processing Facility (ZMPF) or the Zanker Road Resource Recovery Operations and Landfill (ZRRROL). a. Facilities Contractor shall collect & transport the roll-off boxes and compactor materials to the ZMPF located at 675 Los Esteros Road in San Jose or the Zanker Road Resource Recovery Operations and Landfill (ZRRROL) located at 705 Los Esteros Road in San Jose. Page 6of12 b. Facility Permits Contractor shall keep in force and be in full regulatory compliance with the terms of all permits and approvals from governmental authorities necessary for use of the ZMPF, ZRRROL or any other approved alternative processing facility during the term of the Agreement for the processing of Construction and Demolition Debris. c. Prohibited Use of Materials Contractor shall ensure that processed Construction and Demolition Debris is neither disposed of at a landfill nor utilized as alternative daily cover (other than described in subsection 3b) at a landfill without prior written consent from the Director. d. Tonnage Tracking and Recycling Contractor shall submit a report each month to the City on Construction and Demolition Debris received from each collection vehicle. The reports shall include at a minimum: the source, method of delivery, truck number, time of delivery, tonnage delivered, vehicle license number, person receiving the delivery. Contractor shall also update vehicle tare weights twice per year, ·and provide that data to the City. Tracking for all outbound and disposed tons shall be reported by an average monthly recycling percentage for each site. This information shall be formatted to report the 12-month recycling rate for the ZMPF and ZRRROL. This shall be posted on a web site at: www.z-best.com/recycling rate.html. e. Facility Contingency Contractor shall arrange to process Construction and Demolition Debris at no added cost to the City, should processing capacity at either ZMPF or the ZRRROL, for whatever reason, be temporarily unavailable or inadequate. 2. Processing a. Processing Method ZMPF: The following description of the processing method for Construction and Demolition Debris delivered in roll-off boxes and compactors focuses on the processes at the ZMPF, the primary facility for processing City materials and represents minimum standards that will be met. From time to time the processing methodology and/or equipment may be modified or replaced to update the system and/or increase efficiencies. Roll-off boxes and compactors loads enter the site and are weighed and recorded. The driver is directed to the mixed C&D unloading area for inspection and unloading. As the truck unloads, a load checker will inspect the load for hazardous materials. An active load-checking program shall be utilized to minimize the acceptance of any unacceptable materials. After the truck has unloaded, ZMPF employees will start to separate large pieces of metals and wood from the load. Wheel loaders will then push the remaining materials to a temporary stockpile before being conveyed to the C&D sorting conveyor system. An excavator removes Page7of12 larger items before loading the feed conveyor. This pre-sort operation removes larger pieces of wood, metal, concrete, and garbage. The sorting conveyor system, which includes elevated access platforms and workstations and electrically operated disc-screens, is located above large concrete storage bunkers. The excavator is used to load the walking floor feeder which in tum feeds the incline conveyor of the sort-line. The C&D Sorting System is designed to evenly distribute the material onto a sorting conveyor that passes a series of work stations where employees presort the larger items such as cardboard, wood, metal and film plastics before the material passes through a two stage disc screen to separate out small materials which is used on-site, or shipped to other landfills, for use as ADC. After passing through the final stages of the disc screen, the remaining items then pass another series of work stations where employees separate and pick-out smaller recyclable items and drop them directly into the storage bunkers below or place the items in 96-gallon carts adjacent to the work stations. When the bunker is full, the sorted materials are then routed for additional on-site processing, or loaded and hauled to approved recyclers. The unsorted material that falls off the end of the sorting conveyor system is routed to a landfill for disposal. ZRRROL: If materials are routed to the ZRRROL facility, employees will start to separate large pieces of metals, OCC, gypsum wallboard, concrete, rigid plastics and wood from the load. Wheel loaders will then push the remaining materials to a temporary stockpile before being loaded into a truck and weighed prior to disposal. b. Acceptable Materials The ZMPF and ZRRROL facilities shall accept mixed loads of Construction and Demolition Debris. Both facilities have exclusions for putrescible, hazardous and liquid wastes. Loads containing putrescible wastes or containing more than twenty-five percent (25%) of materials that are not recovered at these facilities (Such as pressure-treated lumber, construction insulation or Styrofoam) will be diverted to the Sunnyvale SMaRT Station for disposal. As currently permitted and operated, the facilities are primarily used for the recycling of construction and demolition (C&D) debris. Accordingly, all waste materials received at the facilities typically go through extensive screening and sorting processes to recover recyclable materials (i.e., wood, plastic, paper, cardboard, gypsum, metal, concrete, etc.). The City may at no additional charge request Contractor add additional materials as markets become available and materials are processed at the ZMPF or ZRRROL. c. Residue Rate Requirements Contractor guarantees that the two processing facilities (ZMPF and ZRRROL) shall achieve combined facility diversion rates of seventy-five percent (75%) for the following types of Construction and Demolition Debris loads: I. Source separated C&D loads average a ninety percent (90%) recovery with a reciprocal ten percent (I 0%) residue. Source separated loads are delivered to both facilities. Page 8of12 Source separated recyclables in this section is defined as a roll-off box or compactor which is dedicated to only one of the following materials: Wood waste, yard waste, metals (ferrous metals, copper, aluminum, brass) asphalt, sheetrock, cardboard, PETE-HDPE-glass-aluminum containers or cans, mixed paper or concrete. Source separated loads that contain in excess of ten percent (I 0%) of the non-source separated materials are processed as mixed loads. 2. Mixed C&D loads average a seventy percent (70%) recovery rate with a reciprocal thirty percent (30%) residue rate. Mixed loads are delivered to both facilities. The monthly recovery rate for each facility will be calculated and posted as described in subsection I .d above. Compliance with the minimum combined annual facility recovery rate of 75% (and the reciprocal maximum 25% residue rates) will be determined by the arithmetic average of the recovery rates at both facilities for the preceding 12-months period. 3. Marketing a. Marketing Plan Contractor shall submit to City on or before January I of each year, a plan for marketing Construction and Demolition Debris for the coming year. The marketing plan shall include the following: I. Quantities: estimated quantities .of each Recyclable Material; 2. Prices: estimated unit market values 3. Marketing: end markets and uses and 4. Quantities of materials marketed during the preceding year. Contractor shall provide to the City prior to each calendar year a proposed marketing plan for each material type for the processing facilities. The City will be allowed to review and suggest recommended changes to that plan. Contractor shall maintain long term relationships with materials brokers, shall continually monitor market condition, shall have the ability to anticipate and react to severe market demand and fluctuations in quantity, composition and pricing. Contractor shall use both domestic and foreign markets to maintain continued material movement and to obtain the highest market value. b. Marketing Methods Following are the commodities currently recovered at the ZMPF and ZRRROL from mixed C&D loads, with description of recovery methods and markets for the materials. Wood Waste: Large pieces of wood are separated at the tipping area utilizing hand labor, loaders or an excavator. Smaller pieces of wood are removed from the sorting line by using hand labor. Zanker has instructed and educated its employees as to the type of wood that is not accepted which includes pressure treated lumber, CCA treated lumber, creosote treated wood and lead painted lumber. These materials are placed in a separate container and properly disposed of. Wood waste is ground and marketed as organic soil amendments, decorative wood chips and co- generation fuel. Yard Waste: Relatively clean loads of yard trimmings are processed at the ZRRROL. Small amounts of yard trimmings found in loads from the City will be processed as wood waste. Z- Best Products will be the main vendor for this material. Page9 of12 Ferrous Metals: Ferrous metals, such as tin, shall be extracted from loads in the tipping area by laborers or removed from the sort-line. Large iron pieces will be removed and placed in a roll- off container or stockpiled until ample materials are available to warrant transportation. These materials will be recovered and transported off site to a metals recycler. Copper: Copper tubing and wire will be removed using hand labor. Most copper will be removed on the sorting line where sorters will have a better opportunity to capture the materials. Copper will be placed in roll-off containers. Depending on pricing, the copper materials may be baled and shipped to market or sold loose to local recyclers. Asphalt: In the case where large loads of asphalt enter the site, contaminants will be removed by hand or by using a loader or excavator. Loads will be cleaned in order to meet specifications. The cleaned materials will then be commingled with the clean concrete loads and processed into Class II Base Rock at the ZRRROL. Sheetrock: Clean gypsum (non-painted or not removed from demolition projects) shall be received at the tipping area. Large pieces of sheetrock will be recycled using hand labor and the loader. Most sheetrock will be removed on the sorting line where sorters will have a better opportunity to capture the materials. Sheetrock will be placed in roll-off containers and shipped to the ZRRROL for further processing and marketing. Aluminum: Aluminum will be removed at both the tipping area and from the sort-line. Scrap aluminum will be placed into a roll-off container for marketing to local recyclers or baled and marketed. Brass: Brass fixtures will be recovered from the sort-line by sorters who will have a better opportunity to capture the materials than their ground sorting counterparts. Brass will be placed in roll-off containers. Depending on pricing, the brass materials may be baled and shipped to market or sold loose to local recyclers. Tires: Passenger and truck tires found in incoming loads will be removed and stockpiled or stored in a separate roll-off container. When ample tires are available to warrant transportation, the tires are hauled to an end-user in Sacramento. Appliances/White Goods: Appliances will be stored until ample supply is reached to warrant transportation to a recycler., Hazardous Waste: Hazardous wastes that are dropped off at the tipping area and discovered by load checkers will be stored in an appropriate storage container near the tipping area for a maximum of 90 days or until an ample supply is reached to warrant disposal, whichever comes first. Hazardous wastes will be lab packed and disposed or recycled in accordance with state law. The facilities utilize the services of a certified hazardous waste disposal company for the proper disposal of hazardous wastes. ADC: ADC is only produced from the screens on the C&D sorting system. Materials pass these screens and the 3-inch minus in size fall into a concrete bunker. Loads of ADC are shipped off- site to other landfills or used on site. Currently, most ADC is being shipped to the Vasco Road Landfill in Alameda County, although some materials are used at the ZMPF or the ZRRROL sites. No fines are used as soil amendments or beneficial reuse because of the amount of organics and other materials like glass, gypsum etc. Soil from the demolition plants at both the ZMPF and Page10of12 ZRRROL are shipped to area landfills and used as cover, not as ADC, beneficial reuse or erosion control. Soil amendments are produced from grinding and screening wood waste and sold to area landscapers. Asphalt Roofing: Mixed loads of asphalt roofing will enter the tipping area and be directed to a specific area for asphalt roofing. Once deposited in this area, sorters will remove wood, metals and other residuals. The remaining asphalt roofing may be shipped off-site for use as a buttress fill at the Pacheco Pass Landfill, ADC, or to a local asphalt plant for reuse in asphalt roofing. Porcelain: Porcelain items such as toilets and sinks will be removed from the tipping area and placed in a stockpile with the asphalt and concrete to be processed at the ZRRROL. Cardboard: Larger pieces of cardboard (OCC) will be extracted from loads in the tipping area while the remaining OCC will be removed by sorters utilizing the C&D sorting system. The OCC will be baled as necessary and then stockpiled until enough materials have accumulated for a complete load. OCC is sold both domestically and for export. Mixed Paper: Mixed paper will be removed by personnel using the C&D sorting system and stored in bunkers until enough materials are generated for baling. The mixed paper will be baled, and sold both domestically and for export. PETE and HDPE Containers, Glass Bottles, Aluminum Cans: PETE containers as well as HDPE containers, glass bottles and aluminum cans will be sorted at stations on the C&D sorting system. Sorters will be instructed to remove these items. Employees have small containers directly behind their individual sorting stations to allow for these commodities. Once these containers are filled, employees will remove and empty each commodity into a specific container. Over time these containers will be filled, baled with the site's baler and marketed. Glass containers will not be baled; rather, they will be marketed as is to a local glass recycler. Concrete: Concrete removal will start in the tipping area where large amounts will be found. Materials will be removed by hand into the loader bucket. The loader will bring the concrete to an adjacent area where the material will be stockpiled before being transported to ZRRROL and processed into Class II Base Rock. Smaller pieces of concrete that are removed from the C&D sort-line will also be placed into a container and shipped to ZRRROL for further processing. E-Waste: When E-Waste is found in the tipping area or on the sort line, employees will remove the materials to a special container specifically for E-Waste. Materials such as TVs, computer monitors, computers, cell phones and printers will be recycled with a certified state recycler and will not be exported to over-seas markets. Stones & Bricks: Small amounts of stones and bricks are usually generated during renovation of landscape projects or small demolition projects. These items will be recovered using the sorting conveyor. Stones will be co-mingled with recycled concrete, whereas bricks will be placed into a separate container and co-mingled with roofing tiles. Materials will be processed at the ZRRROL into Class II Base Rock. Carpet Padding: Carpet padding is very common in renovation and demolition projects. The padding may be sorted using the C&D sorting system. This material will be placed into an enclosed storage box to prevent rain and water spray from being absorbed into the padding, and Page 11 of12 are marketed to a foam recycler. There is no steady market currently for carpet padding and it may be landfilled if no market exists. c. Stockpiling of Materials Contractor shall provide storage of materials during extreme market fluctuations. Processed materials shall not be stockpiled for more than two years. d. Certificate of End Use Contractor shall submit to City on or before July 1 of each year a certification of end use from 5 major vendors annually establishing that the materials sold have been, in fact, reused or recycled. D. Pallet Recycling Pallets that are collected by Contractor will be delivered to a pallet recycler in the area or brought to ZMPF and stockpiled. Zanker will contact pallet recyclers and allow them to inspect all pallets stockpiled at ZMPF. If pallets can be marketed to these recyclers at this time they will be sold or given away. If the pallet recycler is unwilling to take pallets, then they will be processed at ZMPF. Pallets will be delivered to the wood waste area on the site to be ground and marketed as mulch, fuel and soil amendments. Pallets will be allowed to remain onsite for two weeks prior to being recycled. E. Bulky Items 1. Bulky items Bulky items that are collected will be delivered to ZMPF and unloaded in a reuse area. Reuse vendors such as Goodwill, Salvation Army, and other approved vendors will be contacted and allowed to inspect all items. These items will be made available Monday -Friday 8am to 4pm. If these vendors are unwilling to accept any of the items they will be collected and processed at the appropriate ZMPF facility. No item will remain on site for longer than two weeks. a. Marketing Plan Contractor shall submit to City on or before January 1 of each year, a plan for partnering with local non-profit organizations to market reusable bulky items for the coming year. The marketing plan shall include the following: 1. Estimated quantities of reusable bulky items; 2. Potential end markets and uses and 4. Quantities of reusable bulky items marketed during the preceding year. F. Tours of all Facilities Upon seventy-two (72) hours notice from City, Contractor shall provide tours of the processing facilities. Such tours shall not unreasonably disrupt facilities operations. City shall not be charged for labor, overhead, overtime, or any other costs associated with such tours. As part of such tours, Contractor shall prepare (subject to City's approval of text and form) and shall distribute an educational brochure, printed on recycled paper, on conservation, recycling, and general solid waste management programs. Page12of12 Attachment F Containers Furnished by City & Customers I. Containers furnished by City 1. Carts purchased prior to February 1, 2008: Solid Waste (Black) 20 gallon inserts 32 gallon 64 gallon 96 gallon Recycling (Blue) 32 gallon 64 gallon 96 gallon Yard Trimmings 32 gallon 64 gallon 96 gallon Spares (replacement surplus) Solid Waste Recycling 20 gallon 32 gallon 64 gallon 96 gallon 805 4,320 1,410 310 728 15,110 4,700 580 5,861 14,150 320 20 40 90 32 gallon 147 64 gallon 1, 152 96 gallon 75 64-gallon used for Special Events 20 96-gallon used for Special Events 50 Yard Trimmings 32 gallon 95 64 gallon 229 96 gallon 850 2. Solid Waste Public Receptacles: Business Districts Parks Bus Stops Special Events 3. Others 211 78 20 70 Shared cardboard bins 20 Recycling bins 12 II. Customer Owned Containers Solid waste bins 55 Solid waste compactors ranging in 2 to 4 8 cubic yards in size Solid waste compactors ranging in 12 to 40 79 cubic yards in size 2 2015 d up ate: Snapshot of Monthly Serviced Containers: Total Cans Serviced 4,431 Total Carts Serviced: 79,670 Solid Waste 14,621 Recyclables 42,602 Compostables 388 Compostables (RES only) 22,059 Total Bins Serviced 2,331 Solid Waste 1,095 Recyclables 989 Compostables 247 3. 2015 Cart Inventory: Recycling RES -Yard Trimmings Size 32 64 96 32 64 96 Palo Alto Yard 1 3 3 2 185 2 Santa Clara Yard 155 2 200 210 40 214 TOTAL 156 5 203 212 225 216 Garbage Compostables Size 20 32 64 96 Inserts 32 64 96 Palo Alto Yard 15 2 125 127 10 0 5 1 Santa Clara Yard 200 225 15 215 0 25 25 5 TOTAL 215 227 140 342 10 25 30 6 2 Attachment G Vehicle Specifications and Quantities Contractor shall provide an adequate number of vehicles and equipment for the collection, disposal, transportation and processing services for which it is responsible under this agreement. Contractor shall have available sufficient back-up vehicles for each type of collection vehicle used (e.g., side loader, front loader, and roll-off vehicles) to respond to mechanical breakdowns, complaints, and emergencies. As of the Effective Date, all vehicles (Residential and Commercial collection vehicles and other vehicles such as roll-off trucks, support vehicles, and spare vehicles) shall be new with the exception of used vehicles listed in section C below. At no time during the Term of this Agreement shall any vehicle used to perform the services required under this Agreement exceed 8 years of age from the first date the vehicle was registered without the express written approval of the Director, with the exception of the used vehicles listed in section C below. A. Specifications. All equipment used by Contractor to perform work under this Agreement shall conform to the highest industry standards and shall be maintained in a clean and efficient condition. Collection trucks shall be uniformly painted in a color approved by City. The specifications for all vehicles shall be submitted to City for approval prior to their purchase, and City shall respond to such submittals in a timely manner. All motor vehicles used in implementing this Agreement shall comply with applicable provisions of the PAMC, and shall be operated in full compliance with the California Vehicle code and local ordinances. All certificates generated from California Highway patrol inspections of each vehicle shall be maintained and available for inspection by City during working hours throughout the term hereof. All vehicles used by Contractor for the collection and hauling shall be so constructed and maintained as to prevent leakage, spillage, or overflow. All vehicles shall be equipped with such safety devices and warning lights as shall be required by State law and the Director. Trucks shall not be loaded in excess of the manufacturer's recommendations. Contractor shall work with City to explore implementation of innovative technologies that would improve the Contractor's environmental impact on the community as it relates to Contractor's operation and equipment. a. All collection vehicles shall have cameras to monitor driving and loading activities including, at a minimum: (i) back-up cameras mounted at the rear and side of the vehicle; and, (ii) a hopper camera clearly displaying the contents of the hopper prior to compaction. b. Contractor shall be required to operate an adequate number of collection vehicles that shall be capable of servicing hard-to-service areas. c. All collection vehicles shall be capable of unloading materials in the Designated Transfer and Processing site buildings giving consideration for clearance heights. d. Inventory. Contractor shall furnish the City a written inventory of all vehicles used in providing service, and shall update the inventory annually. The inventory shall list all vehicles by manufacturer, asset number, identification number, date of acquisition, type, and capacity. B. Vehicle identification. Contractor's name, local telephone number, and a unique vehicle identification number designated by Contractor for each vehicle shall be prominently displayed on all four ( 4) sides of the vehicles, in letters and numbers with a maximum five (5) digit sequence, that are no less than two and one-half (2.5) inches in height. Contractor shall not place any other information or logo on contractor vehicles, unless approved in writing by City. Vehicles shall be clearly labeled to indicate the materials Collected by that vehicle, specifically; "Solid Waste,", "Recyclable," or "Compostable Materials," as directed by City. C. Cleaning and Maintenance. Contractor shall maintain all of its properties, facilities, and equipment used in providing service under this Agreement in a safe, neat, clean and operable condition at all times. a. Cleaning. Vehicles shall be thoroughly inspected, both inside and out, on a daily basis. Vehicles used in the Collection of Solid Waste, Recyclable Materials, and Compostable Materials shall be thoroughly washed, and thoroughly steam cleaned weekly so as to present a clean appearance. City may inspect vehicles at any time to determine compliance with this Agreement. Contractor shall also make vehicles available to the Santa Clara County health Department for inspection. b. Repainting or Refurbishing. Contractor shall repaint or refurbish to the satisfaction of the City all vehicles used in the Collection of Solid Waste,, Recyclable and Compostable Materials within (30) Business Days notice from City, if City determines that their appearance warrants painting. The cost for City directed repainting shall be incurred by Contractor. All collection vehicles shall be repainted at least once every five years to maintain a good appearance. c. Maintenance. Contractor shall inspect each vehicle daily to insure that all equipment is operating properly. Vehicles that are not operating properly shall be taken out of service until they are repaired and do operate properly. Contractor shall perform all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. Contractor shall keep accurate records of all vehicle maintenance, recorded according to date and mileage, and shall make such records available to the City upon request. d. Repairs. Contractor shall repair, or arrange for the repair of, all its vehicles and equipment for which repairs are needed because of accident, breakdown or any other cause so as to maintain all equipment in a safe and operable condition. e. Storage. Contractor shall not store any vehicle or equipment on any public street or other property in City, except for Contractor's Facility. Any storage of equipment other than as expressly authorized by this subsection requires 2 the prior express written authorization of the Director, and must occur at locations identified in the written authorization. C. Quantities. Residential Trucks for Solid Waste, Compostable Materials, Recyclable Materials & Hard to Serve Areas #of Units 7 ·2 1 #of Units 2 9 Chassis Body 2009 American LaFrance Condor Labrie Expert 2000 -29yd 2009 American LaFrance Condor Labrie Expert 2000 -19yd 2009 Freightliner M2 Amrep 12-14yd Chassis Body 2009 American LaFrance Condor Labrie Expert 2000 -29yd 2015 Peterbilt CNG New Way Sidewinder Commercial Solid Waste/Recycle and Compostable Trucks (Costs in Attachment G-1) #of Units 8 1 Chassis 2009 American Lafrance Condor 2009 American LaFrance Condor Body Wittke Starlight -28yd Labrie Expert 2000 -19yd 3 Description Drop frame side loader -single compartment Drop frame side loader -50150 Split-Body Side loader -50150 Split-Body Description Drop frame side loader -single compartment Fully automated drop frame side loader -single compartment Description Front Loader Drop frame side loader Roll-Off, Container and Fork Lift Vehicles #of Units 4 2 1 2 1 1 1 1 5 4 Chassis 2009 Freightliner M2 2006 Mack (used) 2003 Freightliner (used) 2009 Freightliner M2 -Hybrid 2009 Freightliner M2 -Hybrid 2009 Ford or Freightliner 2009 Ford or Freightliner 2009 TCM or Toyota 2009 Chevrolet, GMC, Ford, or Dodge 2009 Toyota, Ford or other Body Description Galbreath Hook Lift Roll-Off Amrep Hoist Roll-Off G&H Hoist Roll-Off 20 ft. flat bed Annual Clean Up /Container Distribution Container Lift Container Distribution Pressure Washing Unit Service Truck 6000 lbs. Fork Lift Pickup Trucks Energy Efficient Cars Energy Efficient 4 PASCO Equipment -~ Recycling CNG Units Description Asset ID# Unit# Vehicle ID# PASCO Date Purchase NBV Truck# Purchased Price 6/30/09 06MACK/ 630774-75 264230 011725 301 DEC'05 $294,179 $159,224 LEACHCNG 06MACK/ 630772-73 264231 011726 302 DEC'05 $294,179 $159,224 LEACHCNG 06MACK/ 603550-52 263994 10183 303 JAN'05 $300,618 $107,366 LEACHCNG 06MACK/ 603563-64 263995 10184 304 JAN'05 $300,618 $107,366 LEACHCNG 06MACK/ 603566-67 263996 10185 305 JAN'05 $300,618 $107,366 LEACHCNG 06MACK/ 603568-69 263997 10186 306 JAN'05 $300,618 $107,366 LEACHCNG Subtotal NBV for Recycling CNG Units: $747,912 Roll-Off Units Description Asset ID# Unit# Vehicle ID# PASCO Date Purchase NBV Truck# Purchased Price 6/30/09 06 MACK/AMREP 631735&37 411306 31645 531 DEC'05 $138,626 $75,030 RO 06 MACK/ AMREP 631733-34 411305 31644 532 DEC'05 $138;626 $75,030 RO FREIGHTLINER/ 512693 409943 96110 539 JUL'03 $109,349 $16,762 G&HROT Subtotal NBV for Roll-Off Units: $166,822 GRAND TOTAL: $914,734 1421158.1 Attachment G Vehicle Specifications and Quantities Contractor shall provide an adequate number of vehicles and equipment for the collection, disposal, transportation and processing services for which it is responsible under this agreement. Contractor shall have available sufficient back-up vehicles for each type of collection vehicle used (e.g., side loader, front loader, and roll-off vehicles) to respond to mechanical breakdowns, complaints, and emergencies. As of the Effective Date, all vehicles (Residential and Commercial collection vehicles and other vehicles such as roll-off trucks, support vehicles, and spare vehicles) shall be new with the exception of used vehicles listed in section C below. At no time during the Term of this Agreement shall any vehicle used to perform the services required under this Agreement exceed 8 years of age from the first date the vehicle was registered without the express written approval of the Director, with the exception of the used vehicles listed in section C below. A. Specifications. All equipment used by Contractor to perform work under this Agreement shall conform to the highest industry standards and shall be maintained in a clean and efficient condition. Collection trucks shall be uniformly painted in a color approved by City. The specifications for all vehicles shall be submitted to City for approval prior to their purchase, and City shall respond to such submittals in a timely manner. All motor vehicles used in implementing this Agreement shall comply with applicable provisions of the PAMC, and shall be operated in full compliance with the California Vehicle code and local ordinances. All certificates generated from California Highway patrol inspections of each vehicle shall be maintained and available for inspection by City during working hours throughout the term hereof. All vehicles used by Contractor for the collection and hauling shall be so constructed and maintained as to prevent leakage, spillage, or overflow. All vehicles shall be equipped with such safety devices and warning lights as shall be required by State law and the Director. Trucks shall not be loaded in excess of the manufacturer's recommendations. Contractor shall work with City to explore implementation of innovative technologies that would improve the Contractor's environmental impact on the community as it relates to Contractor's operation and equipment. a. All collection vehicles shall have cameras to monitor driving and loading activities including, at a minimum: (i) back-up cameras mounted at the rear and side of the vehicle; and, (ii) a hopper camera clearly displaying the contents of the hopper prior to compaction. b. Contractor shall be required to operate an adequate number of collection vehicles that shall be capable of servicing hard-to-service areas. c. All collection vehicles shall be capable of unloading materials in the Designated Transfer and Processing site buildings giving consideration for clearance heights. d. Inventory. Contractor shall furnish the City a written inventory of all vehicles used in providing service, and shall update the inventory annually. The inventory shall list all vehicles by manufacturer, asset number, identification number, date of acquisition, type, and capacity. B. Vehicle identification. Contractor's name, local telephone number, and a unique vehicle identification number designated by Contractor for each vehicle shall be prominently displayed on all four ( 4) sides of the vehicles, in letters and numbers with a maximum five (5) digit sequence, that are no less than two and one-half (2.5) inches in height. Contractor shall not place any other information or logo on contractor vehicles, unless approved in writing by City. Vehicles shall be clearly labeled to indicate the materials Collected by that vehicle, specifically; "Solid Waste,", "Recyclable," or "Compostable Materials," as directed by City. C. Cleaning and Maintenance. Contractor shall maintain all of its properties, facilities, and equipment used in providing service under this Agreement in a safe, neat, clean and operable condition at all times. a. Cleaning. Vehicles shall be thoroughly inspected, both inside and out, on a daily basis. Vehicles used in the Collection of Solid Waste, Recyclable Materials, and Compostable Materials shall be thoroughly washed, and thoroughly steam cleaned weekly so as to present a clean appearance. City may inspect vehicles at any time to determine compliance with this Agreement. Contractor shall also make vehicles available to the Santa Clara County health Department for inspection. b. Repainting or Refurbishing. Contractor shall repaint or refurbish to the satisfaction of the City all vehicles used in the Collection of Solid Waste,, Recyclable and Compostable Materials within (30) Business Days notice from City, if City determines that their appearance warrants painting. The cost for City directed repainting shall be incurred by Contractor. All collection vehicles shall be repainted at least once every five years to maintain a good appearance. c. Maintenance. Contractor shall inspect each vehicle daily to insure that all equipment is operating properly. Vehicles that are not operating properly shall be taken out of service until they are repaired and do operate properly. Contractor shall perform all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. Contractor shall keep accurate records of all vehicle maintenance, recorded according to date and mileage, and shall make such records available to the City upon request. d. Repairs. Contractor shall repair, or arrange for the repair of, all its vehicles and equipment for which repairs are needed because of accident, breakdown or any other cause so as to maintain all equipment in a safe and operable condition. e. Storage. Contractor shall not store any vehicle or equipment on any public street or other property in City, except for Contractor's Facility. Any storage of equipment other than as expressly authorized by this subsection requires 2 the prior express written authorization of the Director, and must occur at locations identified in the written authorization. C. Quantities. Residential Trucks for Solid Waste, Compostable Materials, Recyclable Materials & Hard to Serve Areas #of Units 7 2 I #of Units 2 9 Chassis 2009 American LaFrance Condor 2009 American LaFrance Condor 2009 Freightliner M2 Chassis 2009 American LaFrance Condor 2015 Peterbilt CNG Body Labrie Expert 2000 -29yd Labrie Expert 2000 -I 9yd Amrep 12-14yd Body Labrie Expert 2000 -29yd New Way Sidewinder Commercial Solid Waste/Recycle and Compostable Trucks (Costs in Attachment G-1) #of Units 8 I Chassis 2009 American LaFrance Condor 2009 American LaFrance Condor Body Wittke Starlight -28yd Labrie Expert 2000 - l 9yd 3 Description Drop frame side loader -single compartment Drop frame side loader -50150 Split-Body Side loader -50150 Split-Body Description Drop frame side loader -single compartment Fully automated drop frame side loader -single compartment Description Front Loader Drop frame side loader Roll-Off, Container and Fork Lift Vehicles #of Units 4 2 1 2 1 1 1 1 5 4 Chassis 2009 Freightliner M2 2006 Mack (used) 2003 Freightliner (used) 2009 Freightliner M2 -Hybrid 2009 Freightliner M2 -Hybrid 2009 Ford or Freightliner 2009 Ford or Freightliner 2009 TCM or Toyota 2009 Chevrolet, GMC, Ford, or Dodge 2009 Toyota, Ford or other Body Description Galbreath Hook Lift Roll-Off Amrep Hoist Roll-Off G&H Hoist Roll-Off 20 ft. flat bed Annual Clean Up /Container Distribution Container Lift Container Distribution Pressure Washing Unit Service Truck 6000 lbs. Fork Lift Pickup Trucks Energy Efficient Cars Energy Efficient 4 Attachment G-1-Automated Trucks Proposal GreenWaste Recovery, Inc. Palo Alto proposal analysis YW & Trash - 4 Year Extension, new trucks purchased 7 /1/15 Current Operation Contract Extension 7/1/15 7/1/16 7/1/17 7/1/18 7/1/19 7/1/20 6/30/16 6/30/17 6/30/18 6/30/2019 6/30/2020 6/30/2021 Current Trash & Yard Waste 6 routes with 12 Drivers/Collectors Labor -fully burdened $ 1,567,433 $ 1,567,433 $ 1,567,433 $ 1,567,433 $ 1,567,433 $ 1,567,433 Depreciation 140,096 140,096 140,096 140,096 140,096 140,096 Interest $ 1,707,529 $ 1,707,529 $ 1,707,529 $ 1,707,529 $ 1,707,529 $ 1,707,529 Contract Extension 7/1/15 7/1/16 7/1/17 7/1/18 7/1/19 7/1/20 6/30/16 6/30/17 6/30/18 6/30/2019 6/30/2020 6/30/2021 Fully Auto Trash & Yard Waste 4 Trash Routes and 4 YW routes with 8 drivers Labor -fully burdened $ 1,085,146 $ 1,085,146 $ 1,085,146 $ 1,085,146 $ 1,085,146 $ 1,085,146 Depreciation 590,096 590,096 450,000 450,000 450,000 450,000 Interest 67,005 67,005 67,005 67,005 67,005 67,005 $ 1,742,247 $ 1,742,247 $ 1,602,151 $ 1,602,151 $ 1,602,151 $ 1,602,151 Variance from current operation Annual Increase or Savings $ (34,718) $ (34,718) $ 105,378 $ 105,378 $ 105,378 $ 105,378 Annual Savings for Rate Smoothing 0 0 $ 25,000 $ 105,378 $ 105,378 $ 105,378 Annual Savings Equally over 6 years $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Attachment H Containers Furnished by Contractor Unless approved by the Director, Contractor shall maintain the following minimum quantities: I. Wheeled Carts Minimum Reserve Inventory: Solid Waste Recycling Compostables 20 gallon 32 gallon 64 gallon 96 gallon 32 gallon 64 gallon 96 gallon 20 gallon 32 gallon 64 gallon 96 gallon 150 240 240 140 50 150 100 40 40 100 180 2. Bins: Contractor shall maintain the following minimum quantities in the following sizes: 1 CY 1.5 CY 2CY 3 CY 4CY 5 CY 6CY 8CY 326 107 627 521 482 12 74 5 3. Drop Boxes: Contractor shall maintain the following minimum quantities, in the following sizes: 7 Cubic Yard 15 Cubic Yard 18 Cubic Yard 20 Cubic Yard 25 Cubic Yard 30 Cubic Yard Low 30 Cubic Yard Tall 40 Cubic Yard 5 49 1 46 1 53 39 12 4. Recycling Buddies: Contractor shall purchase and distribute the following minimum quantities of"recycling buddies" (interior recycling containers) to be provided to Multi-Family customers and commercial customers: Initial Recycling buddies On-going, annual recycling buddies 10,000 1,000 5. Additional Containers: Contractor shall purchase all new Containers that need to be replaced during the Term of the agreement. Contractor shall also purchase additional new Containers needed to meet all Customer requests and Containers required for new programs, such as Compostables collection and the expanded commercial recycling. 6. Food Scraps Buckets: The remaining food scraps buckets that are not distributed at the beginning of the 2015 new residential food scraps composting collection will be stored by Contractor. City will purchase buckets and deliver to Contractor for distribution. Contractor shall maintain an inventory and deliver the food buckets to new residents upon request. 2 ATTACHMENT I MINIMUM COMPLEMENT OF PERSONNEL Commercial Solid Waste 5.5 Commercial Rec clable Materials 2.5 Commercial Yard Trimmin sand Food Sera s from S ecial Events 0.3 Roll-off Box Solid Waste Roll-off Box Rec clin Roll-off Box C&D 3 Annual Clean U /Bui Item 2 Casual Pool 5 Subtotal 35.3 General Mana er 0 erations Mana er 0 erations/Route Su ervisor 3 Container Distribution Environmental Outreach Mana er Environmental Outreach Coordinator 2.75 Customer Service Su ervisor Customer Service Re resentatives 3 Maintenance Su ervisor Yard Personnel Maintenance Personnel 2 Subtotal 17.75 Total 53.05 1423001.1 Attachment J-1 Minimum Wage Scale GREENWASTE BENEFITS ROSTER Year of July 1st, 2014-June 30th, 2015 DAILY PAY Drop Box Driver I FL Commercial & Recycling Driver Residential & Recycling Driver Residential Helper Customer Service (Range $19.00 to $29.10) Mechanics (Range $28.72 -$34.25) Route Supervisors VACATION PAY 1 week of time & pay after 1 year. 2 weeks of time & pay after 2 years. PER HOUR $37.31 $37.31 $37.31 $35.85 $19.00 to $29.10 $28.72 -$34.25 $43.76 3 weeks of pay after 6 years, 4 after 11, 5 after 16, 6 after 21. PER DAY $298.48 $298.48 $298.48 $286.80 $152.00-232.80 $229.76 -274.00 $350.08 Two weeks time off guaranteed; see Policy Manual for vacation time off rules. HOLIDAY PAY A total of 12 holidays are paid annually. The Holidays are: New Years Day M. Luther King's B-Day President's 8-Day Columbus Day Good Friday Memorial Day July 4th Labor Day Cesar Chavez Veteran's Day Thanksgiving Day Christmas Employees working the holiday or its day of makeup are paid for the holiday and the day's work at time & a half (totaling 2.5) times a regular day's pay. Employees not working the holiday are paid for the holiday only. Employees that miss work on the holiday or its day of makeup or the day before or after the holiday will not receive pay (unless evidence of a proven emergency is furnished). SICK PAY Personnel with 12 months service on December 31st unable to work due to sickness will be paid the yearly maximum number of days that equal 2 weeks of the employee's regular work week. Unused sick time is paid to qualified employees using Dec. 31st as the year-end. MISCELLANEOUS BENEFIT ADJUSTMENT 2015 Preferred Vacation sign-ups are for the 1st 2-weeks of December 2014 and the last 2-weeks in December 2014. HEAL TH AND WELFARE BENEFITS Historically, GreenWaste has paid employees' health and welfare benefits. This is reviewed annually. Employees have the option of selecting various healthcare coverage, including HMO or PPO, dental, and vision. ATTACHMENT J-2 BENEFIT MONETIZATION PROCEDURE WORKSHEET Classification: Drivers Hourly wage straight-time: Hourly wage overtime, holiday pay Monthly Contributions: Medical and hospital care, prescription drugs, dental care, vision care, diagnostic services, and other health and welfare programs Life, accidental death and dismemberment, and disability or sickness and accident insurance Supplemental unemployment benefits Thrift, security savings, supplemental trust, and beneficial trust funds Other employer payment for benefits for employees, their families and dependents, and retirees as included as "per diem" in CCR Title 8, Article 1 Section 16000 Definitions Annual Contributions Vacations and holidays with pay (or cash payments in lieu thereof) Sick days with pay (or cash payments in lieu thereof) Other employer payment for benefits for employees, their families and dependents, and retirees as included as "per diem" in CCR Title 8, Article 1 Section 16000 Definitions Total hourly NOTE: Example Calculation Monthly rate 1623.84 6.74 431.68 Annual rate (hrs.) 256 80 Divided by hours 173.33 173.33 173.33 173.33 173.33 2080 2080 2080 Hourly rate 37.31 55.96 9.37 0.04 0.00 2.49 ·o.oo 4.59 1.44 0.00 55.24 1414537.1 ATTACHMENT K-1 REQUIRED REPORTS Contractor shall report accurate, reliable and verifiable data. Reporting requirements set out in this Attachment shall not be considered limiting or necessarily complete. This Attachment is intended to only highlight the general nature of reports and their minimum content. At the written direction of City, the reports to be provided by Contractor may be reasonably adjusted in number, format, content and/or frequency. A. Monthly Report Contractor is required to provide a monthly report electronically (through email), due by the last business day of the month following the end of the reporting period. The following information shall be reported in the following format: reporting month, prior month and year to date totals: I) Service Containers by Customer type a) Number of Carts serviced Separated by number of: Mini-Can/Cart, 1-32-gallon Can/Cart, 2-32-gallon Cans/Carts and 1-64-gallon cart, 3-32-gallon Cans/Carts and 1-96-gallon cart, 4-Can/Cart, 4+ Cans/Cart, total premises I) Solid Waste 2) Recyclable Materials 3) Compostable Materials b) Number of Bins serviced I) Solid Waste 2) Recyclable 3) Cardboard 4) Compostables 5) Yard trimmings only c) Number of carts exchanged by sizes d) Number of carts available (inventory) 1) 20-gallon cart 2) 32-gallon cart 3) 64-gallon cart 4) 96 gallon cart 2) Compensation for Extra Service a) Number of back/side yard from single family premises serviced (Shall be verified with City system) b) Number of drop boxes or compactors serviced (Driver tags to support numbers shall be submitted to City) 1) Solid waste 2) Yard trimmings 3)C&D 4) Source separated debris 1405014.1 3) Monthly Accomplishments by Customer type and Collection Route a) Solid Waste collected at the curb (tonnage) b) Recyclables collected at the curb I) Recyclable Materials (tonnage) 2) Compostable Materials (tonnage) 3) Motor oil (estimated gallons) 4) Oil filters (estimated number) 5) Household batteries (estimated tonnage) 6) Scrap metal (estimated tonnage) 7) Cell phones (estimated numbers) 8) Bulky items (number of requests for pickup) 9) Pallets (number of pickups) 4) C&D requested roll-off boxes (tonnage) 1) Mixed C&D 2) Single source separated materials 5) Customer Service Performance a) Number of calls b) Number of missed calls c) Average hold time d) Number of email messages that were not resolved within 24 hours. e) Number of compliments f) Number of complaints, with date, nature of complaint and resolution g) Number of reported missed collections 6) Public Education & Outreach Performance Indicators a) Outreach materials produced (type, quantity, etc) b) Number of new customers issued outreach materials c) Number of presentations conducted d) Number of waste audits conducted by Customer type e) Report on progress, challenges and successes f) Number of on-site workshops, school assemblies, civic and. business group meetings g) Number of tours provided h) Number of hits on the web site i) Number of building plans reviewed j) Other reports as needed by the City to quantify Contractor outreach staffs performance with service changes k) Outreach provided to customers related to the City's Composting and Recycling ordinance requirements, customer audit findings and service changes created as a result of the ordinance. 7) Special Services a) Number of On-Call Recycling Cleanout Services 2 1405014.1 b) Number of Annual Clean-Up Days requested by Customer type c) Number of Physical limitations premises serviced d) List of special events provided with waste stations, services provided at each event and estimated volume collected 8) Audits a) Number of performance audits b) Number of waste audits for Green Business Certifications c) Number of route audits 9) Processing Facilities a) Recyclable Materials processing 1) Tons received from the City at the Green Waste MRF per Attachment E: A. I, d. 2) Tons marketed from the Green Waste MRF for each material type 3) Tons disposed from the Green Waste MRF 4) Tons used as ADC by the facility b) Compostable Material processing 1) Tons received from the City by Customer type per Attachment E: B, 1, d. 2) Tons marketed by Compost Facility for each material type 3) Tons disposed by Compost Facility 4) Tons used as ADC by the facility c) Construction and Demolition debris processing 1) Tons received at the Facilities per Attachment E: C, l ,d. 2) Tons marketed from both Facilities for each material type 3) Tons disposed by each Facility 4) Tons used as ADC by the Facility 5) Number of coupons redeemed at processing Facility 10) SMaR T Station a) Submittal of all drivers tags, upon request by City b) Total tons delivered (sorted by day and vehicle number) c) Number of vehicles that exceeded a 15 minute tum-around time 11) Miscellaneous a) Liquidated damages broken down by each event listed in Attachment "O" and number of infractions. b) Number of vehicle accidents and actions taken c) Number of non-collection tags issued by type d) Number of route changes e) Personnel changes/promotions for Palo Alto 1) Names 2) Titles 3) Date of action f) Notices of violations received from regulatory/law enforcement agencies g) Information on customers that discontinued or opted out ofrecycling and/or . . orgamc services. 3 1405014.1 h) Accomplishments, challenges, and planned solutions during the month. i) Number of drop boxes found from other private companies and issued a violation notice j) Data on Customers not meeting the Recycling and Composting ordinance - Number and types of tags issued k) Revenues received by Green Waste for services each month l) Vehicle tare weights of each collection vehicle as required in Attachment E Commercial Billing Related Reports 12) a) Quantity of each Service Level, including number of accounts and number of pulls (with the difference between each month) b) Ad Hoc or special services, including number of accounts and number of pulls (with the difference between each month) c) Revenue Collections Statement consisting of the "Cash Receipts Journal" from Contractor's records providing a listing in date order of each payment recorded (including cash, credit card and electronic payments received and all payments reported by the lockbox), customer account number, customer service address and amount received during the prior month. This report shall be submitted to the City on or before the twentieth (20th) day of each month once the Contractor has begun issuing invoices. Report should also indicate the revenue difference between each month. d) Accounts Receivable Aging report consisting of a printout from Contractor's records providing a listing by account of the amounts billed and payment received during the prior month. This report shall be submitted to the City on or before the fifth (5th) day of the month once the Contractor has begun issuing invoices. e) Delinquent Accounts List which provides, in customer account order, the customer name, service address, account number and amount delinquent (i.e., not paid within thirty (30) days) during the prior month. This report shall be submitted to the City on or before the fifth (5th) day of each month once the Contractor has begun issuing invoices. ~ Quarterly summary with graphs quantifying changes in service and revenue received. B. Quarterly Report The quarterly report is due by the last business day of the month (October, January, April and July) following the close of the quarters-end. The report includes, at a minimum, the following: 1) Summary with graphs quantifying changes in commercial service and revenue received C. Annual Report 1) Calendar Year. 4 1405014.1 Calendar year annual reports are due by the last business day of the month (January) following the close of the calendar year. The report includes, at a minimum the following: a) Planned schedule to steam clean all public receptacles for the upcoming year and date when they were last cleaned. b) Processing Facilities Marketing Plans as described in attachment E: A, 3, a (Recyclables); B, 3, a (Organics); C, 3, a (C&D) & E, 1, a (Bulky Items) c) Total Recycling revenues for year completed d) Listing of grants and state revenues (e.g. CRV) received the prior year and planned to apply for in the upcoming year. e) Updated organizational chart for GWR of Palo Alto including number of employees f) Complete GWR of Palo Alto employee roster that includes a. Name b. Job title c. Date of hire d. Drivers license number g) Annual wages and benefits by job classification for GWR of Palo Alto employees. h) Inventory of all equipment including collection vehicles and containers i) Employee training plan for the upcoming year j) Innovative plans (example: reduce green house gases, reduce noise levels) k) Data on Customers not meeting AB 341 and/or AB 1826 requirements 2) Fiscal Year (July 1 to June 30). Flscal year reports are due within fifteen (15) business days from the end of June 30. The report includes, at a minimum the following: a) Renewal insurance certificates. b) Results from Program Evaluation audits by sector. Participation levels by user types (Single Family, Multi Family, Commercial) for Recyclable Materials, and Organics c) Annual facility reports for recyclable and compostable materials residue rate compliance as required in Attachment E. Report from each facility processing recyclable and compostable material tonnage received at each of the city, processed, marketed (by material type) and sent to the landfill. d) Certificate of End Use as described in Attachment E: A, 3, d (Recycling); B, 3, d (Compostables) & C, 3, d (C&D) e) Public education plan per Attachment C f) List of outreach expenses from previous fiscal year and planned outreach expenses for upcoming fiscal year 5 1405014.1 ATTACHMENT K-2 DATA MANAGEMENT REQUIREMENTS 1. Contractor shall provide a data management platform capable of interfacing with the City's Information Technology requirements for data coding, management, storage, extraction, reporting, and customer billing for multiple business data entities such as customers, products, services and organizations, and across multiple business functions such as sales, marketing, customer support, and compliance. This platform shall have the capability to be extended to accommodate unforeseen future data integration requirements of the City. 2. Contractor's data management platform shall be capable of modeling complex business-to- business (B2B) and business-to-consumer (B2C) hierarchies (multiple products and services for each customer), along with the definitions of those entities within the same platform. 3. Contractor shall rely on the accuracy and integrity of data provided by the previous hauler in order to establish a complete and up-to-date database. Contractor shall maintain accurate data. This shall include ongoing synchronization and data cleansing for customer name corrections, account numbers, contact information, customer address standardization, product and service identifications, pricing, and other customer attributes. 4. Contractor's system shall be able to create and transmit a data extract file, consistent with the City's requirements (including billing cycle, adjustments for discounts and rebates, and itemized services and costs), for use by the City in generating a monthly bill for single family. At the City's discretion, Contractor's system may generate monthly bill for multi- family, government, and commercial customers. Contractor shall work with the City to develop a two-way data synchronization interface. Contractor will be prepared for and capable of operating a fully functional and tested integration system, including direct Commercial customer billing as needed by City. Contractor relies on the City to do the same in order to meet this deadline. 5. In addition to the Contractor's own system, Contractor will be provided direct secure access to the City SAP billing system or a replacement system via a dedicated Utilities bill user profile for the express use of the refuse-only portion of the bill. Contractor is not to discuss or use any other Customer billing information, even with the Customer. Contractor will have the ability to designate individuals employed by Contractor to make refuse- related changes directly in the City SAP system when necessary. Direct access and knowledge of the City SAP system will be required when a Customer is to be credited for an erroneous charge or for a refund resulting from Contractor or City error. Contractor expects manual credits through the secure access to the City SAP billing system will be significant during the transition, but will taper off to less than a daily occurrence thereafter; as such, the cost associated with automatic synchronization between the Contractor's system and the City SAP system are not justified at this time. The City of Palo Alto will 1409405.1 provide training to Contractor's staff on how to use the SAP billing system to issue credit back to the customer. Customer Data Tracking Requirements that are targeted for automatic two-way synchronization include (i.e. this data will be kept on both the City and Contractor systems): • Customer profile: (standard information -billing address, email address, service address, collection route, contact telephone numbers & complete names, account numbers, account history) • Specific customer services describing customer types such as single family, multi- family, commercial, roll-off [temporary, permanent], and material types (solid waste, back-yard service, one-time charges, recycling, Compostable Materials, C&D, etc.) • Container information: o Number of containers at each location o Type of containers o Size of containers o Frequency of container collection • Itemized City-approved customer billing rates applicable to each service provided • Miscellaneous service requests that are associated with City-approved customer billing rates • Info about shared services (e.g., billed to "X address", but service actually located at "Y address" and shares with "addresses A & B") • Distinction between utility and non-utility account customers. • Utility account status (active, on hold, or shut-off due to non-payment on account). Customer Data Tracking Requirements that are not targeted for automatic synchronization include (this data will be kept only on the Contractor's system): • Collection day and route for each commodity • Container information: o Date of container delivery o Service history, including collection, non-collection and contamination, on-call service history, history of changes to service 2 1409405.1 o Serial number (bins, carts, boxes) by service location -especially in the public right-of-way and shared areas o Container inventory • Vehicle and route number providing specific collection • Non-utility customers (including customer profile, as described above, service provided or scheduled (material type, container size, delivery and collection data, applicable City rate, etc.) • Revenues received for services provided to non-utility customers • List of outstanding debt for non-utility customers that may be billed directly by Contractor • Work orders (to be queried multiple ways): such as missed collections; late collections; new services (e.g. extra container delivery or pickup); backyard service, hard to serve locations, on-call services for non-utility customers, mandatory participation tags, etc. • Credit card charges for Contractor-billed services such as on-call debris box services • Service tags unrelated to chargeable items -type of tag, date received, how issue was resolved and date ofresolution 3 1409405.1 Bond No. CS5926307 Premium: $100,000.00 GREAT AMERICAN INSURANCE COMPANY Renewable Performance and Payment Bond KNOW ALL MEN BY THESE PRESENTS: That Greenwaste of Palo Alto ~~~--~-~~~~----~~--~--~-~ 1500 Berger Drive., San Jose,, CA 95112 (hereinafter called the Principal), and GREAT AMERICAN INSURANCE COMPANY, 580 Walnut Street, Cincinnati, Ohio 45202 (hereinafter called the Surety). are held and finnly bound unto City of Palo Alto .......;...,._ ___ ~--------~~---~-~ 250 Hamilton Avenue., Palo Alto,, CA 94301 ' (hereinafter called the Obligee), in the full and just penal sum of._. -------'---------------- Five Million Dollars and 001100 ($ 5,000,000.00 ) dollars for the payment of which sum, well and truly lo be made, the said Principal and Surety bind themselves, and each of their heirs, administrators, executors, successors and assigns, jointly and severally, finnly by these presents. WHEREAS, the above bounden Principal has entered into a certain written contract with the above mentioned Obligee for Solid Wasle, Recyclable Materials, Organic Malorla!s • , And Yard Trlmmlogs Co)lectlonAnd Processing Setvlces (the "Contract'') which Contract 1s hereby referred to and made a part hereof as fully and to the same extent as if copied at length herein with annual renewal at Surety's discretion: and NOW, THEREFORE, THE CONDITION OF THE ABOVE OBLIGATION IS SUCH, that if the above bounden Principal shall well and truly keep, do and pcrfonn, each and every, all and singular, the matters and things in said Contract set forth and specified to be by the said Prlnclpal kept, done and performed, at the time and in the manner in said Contract specified during the te1m of this bond, and pay all persons who have furnished labor or material for use in and shall indenmify, and shall pay over, and make good and reimburse to the above named Obligee, all loss and damage which said Obligee !llay sustain by reason of failure or default on the part of Principal, then this obligation shall be void othenvise to be and remain in full force and effect. PROVIDED, however that this bond is subject to the followi1111: conditions and provisions: 1. This bond is for the tenns beginning June 30, 2.015 . and ending June 30, 2017 2. In the event of a default by the Principal in the perfonnance of the Contract during the tenns of this bond, the Surety shall be liable only for the loss to the Obligee due to actual excess costs of the Contract up to the termination of this bond. The Surety, after investigation, shall with reasonable promptness detennine the amount for which it may be liable to the Owner as soon as practicable after the amount is detennined, tender payment therefore to the Owner, or fmd an acceptable principal to complete the Contract. This does not provide coverage to any indirect loss or costs by the Obligee Including, but not limited to legal fees, court costs, expert fees or interest. 3. No claim, action, suit or proceeding, except as hereinafter set forth, shall be had or maintained against the Surety on this instmmenl unless same be brought or instituted and process seived upon the Surety within six months after the expiration of the stated tenns of this bond. 4. Neither non-renewal by the Surety, nor failure, nor inability of the Principal to file a replacement bond shall constitute loss to the Obligee recoverable under this bond, not withstanding any language ln the Contract to the contrary. 5. The bond may be extended for an additional year at tho option of the Surety, by Continuation Certificate executed by the Surety. 6. This shall not be cumulative. Under no circumstances shall the Surety's liability exceed the penal sum stated herein. 7. No right of action shall accnie on this bond to or for the use of any person, entity or corporation other than the Obligee named herein and this bond cannot be assigned to any other party without the written consent of the Surety. Signed and sealed this __ 2_3_rd ___ day of ____ A_pr_il _____ _ 2015 Greenwaste of Palo Alto GREAT AMERICAN INSURANCE COMPANY Principal BY: ~-""'==~""' --(Seal) BY: \.._,,/J/IM:; (Seal) &~Ju1yd A. cv; rbnc:p; ;vl@1d~ Name and Title ' N<!~!Jlie AJ:ln Horder, Atlorney-fn·Facl Attorney-in-Fact Surety Phone No. 650-570-6165 CALIFORNIA ALLaPURPOSE ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA } County of Sonoma ~---~--------~----~ On ___ A...._p_ri_I 2_3""'""", _20_1_5 __ before me, Catherine A. Pinney . Notary Public, Date Insert Name of Notary exactly as It appears on the official seal personally appeared Natalie Ann Harder Place Notary Seal Above Name(s) of Slgner{s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s}, or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. Witness my hand and official seal. . ~ Signature ·--------;:.:=;;;;:: .----···-.. Signature of Notary Public OPTIONAL----------- Though the information below is not required by la~1 it may prove valuable to persons relying on the document and could prevent fraudulent removal ana reattachment of the form to another document. Description of Attached Document Title or Type of Document: ~-------------------------~--- Document Date: ------------------Number of Pages:-------- Slgner(s) Other Than Named Above: ------------------------ Capacity(ies) Claimed by Signer(s) Signer's Name:------------- 0 Individual O Corporate Officer -Title(s): ------~-0 Partner D limited D General 0 Attorney In Fact O Trustee O Guardian or Conservator 0 Other.------- Signer is Representing: RIGHT THUMBPRINT OF SIGNER Top of thumb here Signer's Name: ------------- 0 Individual D Corporate Officer -Tille(s): _______ _ D Partner 0 Limited 0 General 0 Attorney In Fact D Trustee O Guardian or Conservator O Other:------- Signer is Representing: RIGHT Tl tUlviBPRINT OF SIGNER Top of thumb here GREAT AMERICAN INSURANCE COMPANY® Administrative Office: 301 E 4TH STREET • CINCINNATI, OHIO 45202 • 513-369-5000 9 FAX 513·723-2740 The number of persons authorized by this power of attorney is not more than SEVEN No. 0 14947 POWER OF A TIORNEY ICNOW ALLJ\IEN BYTHESE PRESENTS: That the GREAT AMERICAN INSURANCE COMPANY, a corporation oiganized and existing under and by virtue of the laws of the Slate of Ohio, does hereby nominate, constitute and appoint the person or persons uamcd belo1v. each individually if more than one is named, its trne and lawfitl attomcy-in-fact, for it and in its name, place and stead to execute on behnlfofthe said Company, as surely, any and all bonds, undertakings and contracts ofsurctyship, or other written obligations in the nature thereof; provided that the liability of the said Company on any such bond, undertaking or contract ofsurctyship executed under this authority shall not exceed the limit stated below. K. DIXON WRIGHT STACY M. CLINTON CATHERINE A. PINNEY NANCY L. WALLIS Niune MICHAEL LANDUCCI KANDACE L. REEVES NATALllE ANN HORDER Address ALL OF PETALUMA CALIFORNIA 111is Power of AUomey revokes all previous powers issued 011 behalf of the atton1ey(s)-i11-fact named above. Limit of Power ALL $100,000,000 JN WITNESS WHEREOF the GREATAMERICAN INSURANCE COMPANY has caused these presents to be signed and attested by its appropriate officers and its corporate seal hereunto affixed this 4TH day of MARCH · , 2015 Attest GREAT AMERICAN INSURANCE COMPANY ~ '-C . .!L . /ii . J /) /i.:/,1/. ~....... . . _ CV~.et-t.; /'1 ~ Asst.Wm/ St>cr>'tlll}' Dil'/slo11a/ Senior Vi<>' Pll'sitfe/11 STATE OF OHIO, COUNTY OF HAMILTON -ss: DAVIDC. KITCHIN (877·377-2405) On this 4TH day of MARCH , 2015 , before me personally appeared DAYlD C. KITCHIN, to me known, being.duly sworn, deposes and says that he resides in Cincinnati, Ohio, that he is n Divisional Senior Vice President of t11e Bond Division of Gren! American Insurance Company, the Company described in and which executed the above instnnncnt; that he knows the seal oftbe said Company; !hat the seal affixed to the said instnunent is such corporate seal; that it was so affixed by authority of bis ofllce under the By-Laws of said Compiuiy, and that he signed his uamc thereto by like authority. JENNIFER MARIE RIPPY Notary Public, State of Ohio MyCommlssfon ~ Jwle20,2019 This Power of Attorney is granted by authority of the following resolutions adopted by the Board of Directors of Great American Insurance Company by unanimous written consent dated June 9, 2008. RESOLVED: That the Dfrisional President, the se1•eral Dil'islonal Senior Jlice Preside/Jls, Divisional Vice Presiden/s and DMsona/ Assis/an/ Vice Preside111s, or any one of them, be a11d hereby is a111horizecf,fi·om time to lime, to appoint one or more Allomeys-il1-Fac1 to execute 011 behalf of the Compatl)\ as s11rev1 m1y and all bo11ds, 11ndertak/11gs and co111racts of s11retyship, or other wri/te11 obligations 111 the nature thereof; to prescribe their respective duties and the respec/il•e limils of their authority; and to rel'oke any such appointment at atl)' time. · RESOLVb'D FURTHER: Thal the Compml)' seal and the signature of any of the ciforesaid officers and any Secretm)' or Assistallt SecretmJ' of the Co111pm1J1 may be t{ffexed by facsimile to ml)' poll'er of af/omey or cert{/icate of either gil•enfor the execulion of ttll)' bond. 1111dertaki11g, co111rac1 of s11retyship, or ot/Jer written obligallon in the nature thereof. such sig11at1n·e and sea/ when so used being hereby adopted b)' the Company as the original signature of such o.fjicel' and t/ie original seal of the Comp(tll)', to he 1•alid and binding 11po11 tlte Co111pmo• wilh the smne force and effect as though manually qlfixed CERTIFICA'flON I, STEPHEN C. BERAHA, Assistant Secretary ofGrcatAmericanlns11rance Company, do hcrt.1by certify that the foregoing Power of Attorney and the Resolutions of the Board ofDin:ctors of June 9, 2008 have nol been revoked and are now in fall force and effect. Signed and sealed this 23rd day of April, 2015. S1029AE(01/15} ATTACHMENT M GUARANTY THIS GUARANTY (the "Guaranty") is given as of the __ day of ___ _ 2015, by GREENWASTE RECOVERY, INC., AND ZANKER ROAD RESOURCE NANAGEMENT, LTD (hereafter "Guarantors"), to THE CITY OF PALO ALTO, a chartered California municipal corporation (hereafter "the City"). THIS GUARANTY is made with reference to the following facts and circumstances: A. Green Waste of Palo Alto is a joint venture organized as a general partnership under the laws of the State of California ("Contractor"). B. GreenWaste Recovery, Inc. is a corporation, organized under the laws of the State of California. Zanker Road Resource Management, Ltd. is a limited partnership organized under the laws of the State of California. Green Waste Recovery, Inc. and Zanker Road Resource Management, Ltd. are the two members of the Contractor. C. The City contemplates entering into an "Agreement for Solid Waste, Recyclable Materials, and Yard Trimmings and Organic Materials Collection and Processing Services," under which Contractor is to provide specified services to the City. A copy of this Agreement is attached hereto and incorporated herein by this reference. D. It is a requirement of the Agreement, and a condition to the City's entering into the Agreement, that Guarantor guaranty Contractor's performance of the Agreement. E. Guarantors are providing this Guaranty to induce the City to enter into the Agreement. NOW, THEREFORE, in consideration of the foregoing, Guarantors agree, jointly and severally, as follows: 1. Guaranty of the Agreement. Guarantors hereby irrevocably and unconditionally guarantee to the City the complete and timely performance, satisfaction and observation by Contractor of each and every term and condition of the Agreement which Contractor is required to perform, satisfy or observe. In the event that Contractor fails to perform, satisfy or observe any of the terms or conditions of the Agreement, Guarantors will promptly and fully perform, satisfy or observe them in the place of the Contractor. Guarantors hereby guarantee payment to the City of any damages, costs or expenses which might become recoverable by the City from Contractor due to its breach of the Agreement. 2. Guarantor's Obligations Are Absolute. The obligations of the Guarantors hereunder are direct, immediate, absolute, continuing, unconditional and unlimited and, with respect to any payment obligation of Contractor under the Agreement, shall constitute a guarantee of payment and not of collection, and are not 1421811.2 conditional upon the genuineness, validity, regularity or enforceability of the Agreement. 3. Waivers. The Guarantors shall have no right to terminate this Guaranty or to be released, relieved, exonerated or discharged from their obligations under it for any reason whatsoever, including, without limitation: (1) the insolvency, bankruptcy, reorganization or cessation of existence of the Contractor; (2) any amendment, modification or waiver of any provision of the Agreement or the extension of its Term; (3) the actual or purported rejection by a trustee in bankruptcy of the Agreement, or any limitation on any claim in bankruptcy resulting from the actual or purported termination of the Agreement; (4) any waiver, extension, release or modification with respect to any of the obligations of the Agreement guaranteed hereunder or the impairment or suspension of any of the City's rights or remedies against Contractor; or (5) any merger or consolidation of the Contractor with any other corporation, or any sale, lease or transfer of any or all the assets of the Contractor. Without limiting the generality of the foregoing, Guarantors hereby waive the rights and benefits under California Civil Code Section 2819. The Guarantors hereby waive any and all benefits and defenses under California Civil Code Sections 2845, 2849 and 2850, including, without limitation, the right to require the City to (a) proceed against Contractor, (b) proceed against or exhaust any security or collateral the City may hold now or hereafter hold, or (c) pursue any other right or remedy for Guarantor's benefit, and agree that the City may proceed against Guarantors or either of them for the obligations guaranteed herein without taking any action against Contractor or any other guarantor or pledgor and without proceeding against or exhausting any security or collateral the City may hold now or hereafter hold. Guarantors agree that the City may unqualifiedly exercise in its sole discretion any or all rights and remedies available to it against Contractor or any other guarantor or pledgor without impairing the City's rights and remedies in enforcing this Guarantee. The Guarantors hereby waive and agree to waive at any future time at the request of the City, to the extent now or then permitted by applicable law, any and all rights which the Guarantors may have or which at any time hereafter may be conferred upon them, by statute, regulation or otherwise, to avoid any of their obligations under, or to terminate, cancel, quit or surrender this Guaranty. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not affect the liability of the Guarantors hereunder: (a) at any time or from time to time, without notice to the Guarantors, the time for Contractor's performance of or compliance with any of its obligations under the Agreement is extended, or such performance or compliance is waived;(b) the Agreement is modified or amended in any respect; (c) any other indemnification with respect to Contractor's obligations under the Agreement or any security therefor is released or exchanged in whole or in part or otherwise dealt with; or (d) any assignment of the Agreement is effected which does not require the City's approval. The Guarantors hereby expressly waives diligence, presentment, demand for payment or performance, protest and all notices whatsoever, including, but not limited to, notices of non-payment or non-performance, notices of protest, notices of any breach or default, and notices of acceptance of this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or performed, Guarantors' obligations hereunder shall continue and remain in full force and effect in the event that all or 2 1421811.2 any part of such payment or performance is avoided or recovered directly or indirectly from the City as a preference, fraudulent transfer or otherwise, irrespective of (a) any notice of revocation given by Guarantors or Contractor prior to such avoidance or recovery, and (b) payment in full of any obligations then outstanding. 4. Term. This Guaranty is not limited to any period of time, but shall continue in full force and effect until all of the terms and conditions of the Agreement have been fully performed by Contractor, and Guarantors shall remain rully responsible under this Guaranty without regard to the acceptance by the City of any performance bond or other collateral to assure the performance of Contractor's obligations under the Agreement. Guarantors shall not be released of their obligations hereunder so long as there is any claim by the City against Contractor arising out of the Agreement based on Contractor's failure to perform which has not been settled or discharged. 5. No Waivers by City. No delay on the part of the City in exercising any rights under this Guaranty or failure to exercise such rights shall operate as a waiver of such rights. No notice to or demand on Guarantor shall be a waiver of any obligation of Guarantors or right of the City to take other or further action without notice or demand. No modification or waiver by the City of any of the provisions of this Guaranty shall be effective unless it is in writing and signed by the City and by Guarantors, nor shall any waiver by the City be effective except in the specific instance or matter for which it is given. 6. Attorney's Fees. In addition to the amounts guaranteed under this Guaranty, Guarantors agree to pay actual attorney's fees and all other costs and expenses incurred by the City in enforcing this Guaranty, or in any action or proceeding arising out of or relating to this Guaranty, including any action instituted to determine the respective rights and obligations of the parties hereunder. 7. Governing Law; Jurisdiction. This Guaranty is and shall be deemed to be a contract entered into in and pursuant to the laws of the State of California and shall be governed and construed in accordance with the laws of California without regard to its conflicts of laws rules for all purposes, including, but not limited to, matters of construction, validity and performance. Guarantor agrees that any action brought by the City to enforce this Guaranty may be brought in any court of the State of California and Guarantors consent to personal jurisdiction over them by such courts. Guarantors appoint the following person as their agent for service of process in California: 8. Severability. If any portion of this Guaranty is held to be invalid or unenforceable, such invalidity shall have no effect upon the remaining portions of this · Guaranty, which shall be severable and continue in full force and effect. 9. Binding on Successors. This Guaranty shall inure to the benefit of the City and its successors and shall be binding upon Guarantors and their successors, including a successor entity formed by a merger or consolidation of the two 3 1421811.2 Guarantors and transferee(s) of substantially all of their assets used in performance of the Agreement. 10. Subordination. Any claims Guarantors may have against Contractor are hereby subordinated to any and all claims of the City against Contractor until such time as the obligations of Contractor to the City are fully satisfied and discharged. 11. Notices. Notice shall be given in writing, deposited ill the U.S. mail, registered or certified, first class postage prepaid, addressed as follows: To the City: Director of Public Works City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 With a copy to the Palo Alto City Attorney at the same address. To Guarantors: Attention: ________ _ The parties may change the address to which notice is to be sent by giving the other party notice of the change as provided in this Section. IN WITNESS WHEREOF, Guarantors have executed this Guaranty on the day and year first above written. GREENWASTE RECOVERY, INC. By: GreenWaste Recovery, Inc., A California corporation By: Name: Richard A. Cristina Title: President Name: Frank Weigel Title: Secretary 4 ZANKER ROAD RESOURCE MANAGEMENT, LTD. By: Zanker Road Resource Management, Ltd., a California limited partnership By: Zanker Road Resource Recovery, Inc., a California corporation, I ts General Partner By: By: Name: Richard A. Cristina Title: President Name: Murray B. Hall Title: Secretary 1421811.2 Attachment N-1 Contractor's Base Compensation Rate Period 1 Rate Period 2 ~~;% ~ .. ~iti:id7~ i'.'" ,,,,~ '"".'"'''"'''' """"""'•• Total Total Index Used -l~~~~~;;;:.'f'ticl1~~~- Labor-Related Costs (includes regular & pool personnel) 0.026 Regular Wages $2,353,386 $2,377,637 $ 2,529,680 1.026 $ 2,595,451 Overtime Wages $359,172 $369,948 $ 378,839 1.026 $ 388,688 Holiday Wages $110.566 $113.883 $ 121,326 1.026 $ 124,481 Vacation Wages $138,208 $142.354 $ 151,658 1.026 $ 155,601 Sick Leave Wages $110,566 $113,883 $ 121,326 1.026 $ 124,481 Workers Compensation Insurance & Claims $186.868 $192.244 CPl-W $ 203,782 1.026 $ 209,081 Employers Liability Insurance $ 1.026 $ Health & Welfare $568,502 $585,557 $ 612,192 1.026 $ 628, 109 Pension/ Retirement Benefits $88,201 $90,847 $ 94,979 1.026 $ 97,448 Payroll Taxes $250,707 $253,514 $ 268,359 1.026 $ 275,336 Other $0 $0 $ 1.026 $ Total Labor Related-Costs $4,166,175 $4,239,867 $ 4,482,141 $ 4,598,676 Vehicle-Related Cost 0.016 Tires & Tubes $71,161 $73,296 $ 77,324 1.016 $ 78,561 Parts $33,497 $34,501 $ 36,496 1.016 $ 37.080 Supplies (fluid, oil, etc.) $16.903 $17.410 Motor Vehicle $ 18,252 1.016 $ 18,544 Taxes & Licenses $137.642 $141,771 Maintenance & $ 152,257 1.016 $ 154,693 Fines & Penalties $0 $0 Repair Index $ 1.016 $ Radio Air time $24,600 $25,338 $ 27,212 1.016 $ 27,647 Outside Repairs $58,387 $60,139 $ 63,974 1.016 $ 64,998 Vehicle Insurance $116,255 $119.743 $ 128,173 1.016 $ 130,224 Total Vehicle-Related Costs $458,445 $472,199 $ 503,689 511,748 (0.015) Fuel Costs $606,870 $625.077 Motor Fuel Index $ 693,299 (0.015) $ 682,899 Net Processing Costs 0.028 Net Recyclables Processing Revenue ($1,269,400) ($1.276,654) $ (1,394,066) 1.028 $ (1,433,099) Net Organics Processing Cost $668.170 $687,696 CPl-U $ 750,942 1.028 $ 771,969 Total Net Processing Costs !$601.230) ($588,958) $ (643,123) (661, 130. 79) Other Costs 0.028 Liability & Property Damage Insurance $0 $0 $ $ Damage Claims $22,000 $22,585 $ 24,662 1.028 $ 25,353 Equipment Insurance $0 $0 $ $ Rent -------w--$0 $ $ Utilities $1,080 $1,113 $ $ Telephone $0 $0 $ $ Non-Vehicle Related Supplies $5,397 $5,559 CPl-U $ 6,070 1.028 $ 6,240 Non-Vehicle Related Taxes & Licenses $0 $0 $ $ Training & Safety Programs $5,397 $5.559 $ 6,070 1.028 $ 6,240 Initial Public Education & Outreach $5,000 $0 $ $ Continuing Public Education & Outreach $5,000 $5,000 $ 5,460 1.028 $ 5,613 Uniforms $15.992 $16,471 $ 17,028 1.028 $ 17,505 Other $3,783 $0 $ $ Total Other Costs $63,648 $56,287 $ 59,290 $ 60,950 Rate Period 1 Rate Period 2 ~ ·~•'p8iil)ii•7 ·, \): h ,_.'~, ',;:-;,/,./::;;~: .»'(f'.)<; ,, ;,,.J , Total Total Index Used -'?~~~~~'.~~~~: ... 'i=I201$21s,. Direct Depreciation Container Depreciation $226,525 $226,525 Not annually $ 223,219 $ 223.219 Route Vehicle Depreciation $1,033,083 $1,033,083 $ 1.033,083 Not annually $ 1,033,083 adjusted adjusted Other Depreciation $36,814 $36,814 $ 31,189 $ 31,189 Total Direct Depreciation $1,296,422 $1,296,422 $ 1,287,491 $ 1,287,491 Allocated Costs -Labor, Vehicle, Fuel & Other Costs 0.028 From General and Administrative ( 6K) $1,419,822 $1.402,967 $ 1,531,996 1.028 $ l574,891 From Vehicle Maintenance (6L) $433,626 $446,634 CPl-U $ 487,711 1.028 $ 501,366 From Container Maintenance (6M) $234,193 $241,219 $ 263,404 1.028 $ 270,779 Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs $2,087,641 $2,090,821 $ 2,283,110 $ 2,347,037 Allocated Costs -Depreciation and Start-Up Costs From General and Administrative ( 6K) $135,101 $134,110 Not annually $ 134,110 Not annually $ 134,110 From Vehicle Maintenance (6L) $34,966 $34,966 $ 34,966 $ 34,966 From Container Maintenance (6M) $46,382 $46,382 adjusted $ 46,382 adjusted $ 46,382 Total AUocated Costs -Depreciation and Start-Up Costs $216,449 $215,458 $ 215,458 $ 215,458 Total Annual Cost of Operations $8,294,421 $8,407.173 $ 8,881,353 $ 9,043,128 Profit $1,158,726 $1,174,137 Profit Calculation $ 1,211.094 $ 1,233,154 Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) n.a. n.a. Interest Expense $542,025 $496,429 Not annually adjus $ 492,780 Not annually adjuste $ 492,780 A11ocated Lease & Interest Costs From General and Administrative ( 6K) Facility Costs (Geng Road) $119,224 $122,872 CPl-U $ 134,172 1.028 $ 137,929 Lease Costs (San Jose Facility) $176,628 $182,033 CPl-U $ 198,774 1.028 $ 204,339 Interest Cost $46,455 $41,454 Not annually adjus $ 41,454 Not annually adjuste 41,454 From Vehicle Maintenance (6L) $!0,636 $9,486 Not annually adjus $ 9,486 Not annually adjuste 9,486 From Container Maintenance (6M) $19,164 $17,091 Not annually adjus $ 17,091 Not annually adjuste 17,091 Total Allocated Lease & Interest Costs $372,107 $372,936 $ 400,977 $ 410,300 Total Pass-Through Costs $914,132 $869,365 $ 893,757 $ 903,080 Rate Period 1 Rate Period 2 Total Total Index Used Supplemental base rompt'n!lufion dum~es beginning in .Fisnd Yt-ar 201S~l<> (.Rate PeriotJ 7) Rl.'siJenhal cmnpost11ble!:-collect1nn Rt>ducti•m ()flrnsehne commercml c<nnp.:1srnbles pr(,t·ess111g costs on '1,0(1t) h:ms (previ•rnslv im.·h1ded m b:1i::e C\Jmpens;1ti.m) Net (\)<;:f incnmsc ,)f Dcpreciaf!on on nme ~'1) nc-\>. residential automated collecti(m trucks an,i fobnr Cl>St reclu<.-iwn ,)f .:1. drivt!rs C;m p\ird1ascs Hard tn sen-il.·e 1:m.'1.1s S~it•cwl events Total supplenu·ntal cost \".lutn:?t.'S for Fiscal \'t.'ar 2016 Total Base Compensation $10,367,279 $10,450,674 $ 10,986,204 Total Bnse Compei1s1111on before June 2(115 Aillcndmcnt to be used in calculation for ;mmwl .idjm:tment 10 the \Tnit Prices, for FY 2016 Changes to the quarterly additional compensation beginning in FY2015-16 (Base Year 7) R~s1dent1:1l food S(J"Jps/yard tnmnungs pwces:.in~ and ana1.:•rnbic digt."s1ion Cornmerc1al compost.-thk•s pro1:essmg and :-inaernb1c digt•stion Cart Purchases 1-fard to servici;: areas Special events Remo'v:tl of lnl'l'ntivt~ pt'n:tlty on ..::orrnm'r(:ial i::rirnpo'itahl(~ rrwrerials Redocti~m of incenti\.e f1.1r re;•cylahl~ materials tons e;•u;;;h ye;•iu to 17 ASO each fiscal ye:i.r Changes 10 tht-mnnthl) (:Ompt>nsation ('()mmercrnl billing M()nthlv Cost 1f directed by th~ City timplementatton estimated for Spring 20l6J AdJ.asitn.entF<li:tor .:.S1ri9'eostinc1ic:eS ' .. .,.";·.::, °",';."·. "' $ u2016';1s fJ<: <. t'•:l•9e f~>J c.~11.,.c11.:>n c1! r<?5!d<?ni1::ir rcrx1 st,r:ws V\~th yard !rimming-;.. and d~~11very to ZWED Qr SM..:iRT NN\ pf ct1rnc:ted by ltie C1ty1 9,!JOO tans p'°'r Y'"-"ar af crm1mNc1;-ll fMK1 scraps© (713,430) ~:79.'.:? pm t~n (::i<:lj\;$t(:d 1..vi!h CP! , .. a(h vear.1 Smnr'Jtl1ed r;:ote :is pr0rr,se-d by Gr'!-"!nW•)st:;- (55, 000) thr;m9i1 ,.lune 30. 2!1:1 \":r1;;ir·g~s inct~rpor;;i!?.<l 1n10 !:1e tiasr:? CClmP€rlS~t1on 90,000 3$ ,,_n ;:inn~1,;if !ump ~urn Ch:;ir!Y'G 1ncorpcr::itt>d into the l:"-<:tse cvMpens21t1·'n 65.000 as;,, [11rnp s.um C'l1~1raeS 1ncore>oratt>cl 1nh::i the h;JSI? compensi'lf1on $ 60,000 :::is ;:i 1:;mp sum (553.430) $ 10,625,932 $ 11.179.362 Estimates Onlf $ $ $ $ $ $ Act~ml T o:i11n;.;ge T E:10@ $81 p>:>r ton 1f th~ City 1,134.000 directs th•? m-Jte-1al to ZWED Af.'t(1al Tonnr;ige T8D@ SS1 per ~n 1f th"-' City 972.000 din"cts th<? mate;1al to ?.VVED 2,106.000 12.478 Ch~rg~s 1nC'crpor;;il€"d into lhe base C(.'f11P~~ris::.i11·)rt Charges incmp;m;it(')d into th•'.': b~s.;, c1,mpr:-11-satlon Ct1arges 1ne<11·por·;ited 1r,to ~t1i:' bB:::-2 t·orni:i~'r1<::C':t1011 Extra Services Back/Side Yard Collection from Single-Family Residences Drop Box Services** Solid waste Yard trimmings C&D (including processing costs) Source separated debris (including processing costs) Attachment N-1 Unit Prices for Extra Services Quarterly Compensation Additional Financial Incentives for Zero Waste Program Implementation Recyclable Materials Commercial and Residential Compostable Materials processing at ZWED -cost per ton based on gross tonnage collected Commercial billing Monthly Cost (implementation estimated for Spring 2016) Rate Period One Unit Price ($) $3.25 $308.60 $308.60 $504.90 $308.60 $65.00 Rate Period Two Unit Price ($) Unit $3.35 /Residence /Month /per load taken to a $313.05 processing facility /Load taken to a $313.05 processing facility /Load taken to a $512.97 processing facility /Load taken to a $313.05 processing facility $70.00 Ton Ton Month .~f~~n&f .. 7:: .•. ;:1ri,~!~!&·i·· · .... 3.66 $ 336.24 $ 342.15 $ 336.24 $ 342.15 $ 550.96 $ 560.65 $ 336.24 $ 342.15 I$ 81 I $ 83 $ 81.00 $ 12,478 ATTACHMENT N-2 COMPENSATION ADJUSTMENT METHODOLOGY 1. · PURPOSE The purpose of this attachment is to describe and illustrate the method by which the City will calculate the annual adjustment in (1) Contractor's Base Compensation, (2) unit prices for extra services, and (3) City Landfill Disposal Credit, for all Rate Periods beginning with Rate Period Three (FY 2011-2012). 2. DEFINITIONS A. "CPl-U" means the Consumer Price Index, All Urban Consumers, San Francisco- Oakland-San Jose Metropolitan Area compiled and published by the U.S. Department of Labor, Bureau of Labor Statistics. As of June, 2008, the CPl-U was 225.181. B. "CPl-W' means the Consumer Price Index, Urban Wage Earners and Clerical Workers, San Francisco-Oakland-San Jose Metropolitan Area, compiled and published by the U.S. Department of Labor, Bureau of Labor Statistics. As of June, 2008, the CPl-W was 221.454. C. "Motor Fuel Index" means the Consumer Price Index, All Urban Consumers, Motor Fuel, San Francisco-Oakland-San Jose Metropolitan Area, compiled and published by the U.S. Department of Labor, Bureau of Labor Statistics. As of June, 2008, the Motor Fuel Index was 343.212. D. "Motor Vehicle Maintenance and Repair Index" means the Consumer Price Index, All Urban Consumers, Motor Vehicle Maintenance and Repair, U.S. city average, compiled and published by the U.S. Department of Labor, Bureau of Labor Statistics. As of June, 2008, the Motor Vehicle Maintenance and Repair Index was 233.162. E. "Annual Percentage Change" means (1) the annual percentage change in any of the indices defined above calculated as described in the following paragraph or (2) five percent (0.05), whichever is less. The Annual Percentage Change in an index is calculated by subtracting the Average Index Value for the 12 month period ending November of the most recently completed Rate Period from the Average Index Value for the 12 month period ending November of the then- current Rate Period and dividing the result by the Average Index Value for the 12 month period ending November of the most recently completed Rate Period. For example, if the City is calculating the Base Compensation in January 2011 to be effective for Rate Period Three (July 2011 through June 2012), the Annual Percentage Change for the CPl-U would be calculated as follows: · [ (Average CPl-U for December 2009 through November 2010) minus (Average CPl-U for December 2008 through November 2009) ] divided by (Average CPl-U for December 2008 through November 2009) The calculated Annual Percentage Charge shall be carried to three places to the right of the decimal and rounded to the nearest thousandths. For example, the June 2008 CPl-U is 225.181, which is rounded to the nearest thousandths. F. "Average Index Value" means the sum of the monthly index values during the 12 month period ending in November divided by 12 (in the case of indices published monthly) or the sum of the bi-monthly index values divided by 6 (in the case of indices published bi-monthly). G. "Net Recyclable Materials Processing Revenues" means gross revenue earned by Contractor from the sale of Recyclable Materials less processing costs. H. "Net Organic Materials Processing Cost" means cost of processing organic materials less revenues earned from sale of organic materials. Table 1, below, provides additional information about the four indices defined above. TABLE 1 CPI-ll CPI-W Motor Fuel Index Motor Vehicle Maintenance and Repair Description Consumer Price Consumer Price Consumer Price Consumer Price Index -All Urban Index -Urban Index -All Urban Index -All Urban Consumers Wage Earners and Consumers, Motor Consumers, Motor Clerical Workers Fuel Vehicle maintenance and repair Series ID CUURA422SAO CWURA422SAO CUURA422SETB cuurOOOOsetd Adjusted Not seasonally Not seasonally Not seasonally Not seasonally adjusted adjusted adjusted adjusted Group San Francisco-San Francisco-San Francisco-U.S. city average Oakland-San Jose Oakland-San Jose Oakland-San Jose Metropolitan Area Metropolitan Area Metropolitan Area Item All items All items Motor fuel Motor vehicle maintenance and repair Base Period 1982-84= 100 1982-84= 100 1982-84=100 1982-84=100 Periodicity Bi-monthly Bi-monthly Monthly Monthly 2 3. ADJUSTMENT OF CONTRACTOR'S BASE COMPENSATION The cost categories of the main components of Contractor's Base Compensation are presented in detail in Attachment N-1. Adjustments to these components shall be calculated as follows: A. Total Annual Cost of Operations (1) Labor-Related Costs. The Labor-Related Costs component of Base Compensation for the then-current Rate Period is multiplied by one plus the Annual Percentage Change in the CPl-W. For example, in Rate Period Two when calculating the Labor-Related Costs for Rate Period Three, the Labor-Related Costs of Rate Period Two will be multiplied by one plus the Annual Percentage change in the CPl-W. (2) Vehicle-Related Costs (excluding Fuel). The Vehicle-Related Costs component of Base Compensation for the then-current Rate Period is multiplied by one plus the Annual Percentage Change in the Motor Vehicle Maintenance and Repair Index. {3) Fuel Costs. The Fuel Cost component of Base Compensation for the then- current Rate Period is multiplied by one plus the Annual Percentage Change in the Motor Fuel Index. (4) Net Recyclable Materials Processing Revenues. The Net Recyclable Materials Processing Revenues component of Base Compensation for the then-current Rate Period is multiplied by one plus the Annual Percentage Change in the CPl-U. (5) Net Organic Materials Processing Costs. The Net Organic Materials Processing Cost component of Base Compensation for the then-current Rate Period is multiplied by one plus the Annual Percentage Change in the CPl-U. (6) Other Costs. The Other Costs component of the Base Compensation for the then-current Rate Period is multiplied by one plus the Annual Percentage Change in the GPl- U. (7) Direct Depreciation. Direct Depreciation is $1,296,422 per year for Rate Periods One through Eight, is not annually adjusted, and shall be zero in any subsequent Rate Periods except as provided in Section 9 .13 of the Agreement. (8) Allocated Costs (Labor, Vehicle and Other Costs). The Allocated Costs (Labor, Vehicle and Other) component for the then-current Rate Period will be multiplied by one plus the Annual Percentage Change in the CPl-U. (9) Allocated Costs (Depreciation and Start-Up). The Allocated Costs for Depreciation and Start-Up shall be $216,449 per year for Rate Period One and $215,458 for Rate Periods Two through Eight, are not annually adjusted, and shall be zero for all Rate Periods after Rate Period Eight. (10) Total Annual Cost of Operations. The Total Annual Cost of Operations for the coming Rate Period equals the sum of the costs calculated in Sections (1) through (9) above. 3 B. Profit. Profit for the coming Rate Period will be calculated by dividing the Total Annual Cost of Operations for the coming Rate Period [the value calculated in Section (A)(10)] by an operating ratio (0.88) and subtracting from the result the Total Annual Cost of Operations for the coming year. Profit= [ Total Annual Cost of Operationsj for Coming Rate Period - 0.88 Total Annual Cost of Operations for Coming Rate Period C. Pass-Through Costs (1) Interest Expense. Interest Expense is $542,025 in Rate Period One and $496,429 per year for Rate Periods Two through Eight, is not annually adjusted, and shall be zero in any subsequent Rate Period. (2) Allocated Lease and Interest Costs. a. Allocated Facility and Lease Costs (Geng Road and San Jose Facility). The Allocated Facility and Lease Costs for the Geng Road and San Jose Facility of the Base Compensation for the then- current Rate Period are multiplied by one plus the Annual Percentage Change in the CPl-U. b. Other Allocated Lease and Interest Costs. Other Allocated Lease and Interest Costs are $76,255 for Rate Period One (including interest costs for Allocated General and Administrative of $46,455, Allocated Vehicle Maintenance costs of $10,636, and Allocated Container Maintenance of $19, 164) and $68,031 for Rate Periods Two through Eight (including interest costs for Allocated General and Administrative of $41,454, Allocated Vehicle Maintenance costs of $9,486, and Allocated Container Maintenance of $17,091). (3) Total Pass-Through Costs. Total Pass-Through Costs for the coming Rate Period are the sum of the amounts in Sections (1) and (2) above. D. Base Compensation for Coming Rate Period. Contractor's Base Compensation for the coming Rate Period is the sum of the Total Annual Cost of Operations, Profit, and Total Pass-Through Costs for the coming Rate Period. 4. ADJUSTMENT OF UNIT PRICE FOR THE EXTRA SERVICES AND CITY LANDFILL DISPOSAL CREDIT Unit price fees for all operations-related services (i.e., back/side yard collection, hard-to- service collection, drop-box services, and City Landfill Disposal Credit) will be adjusted by multiplying the fees (and the credit) in effect for the then-current Rate Period by the Base Compensation for the coming Rate Period divided by the Base Compensation for the then-current Rate Period. 4 Unit price fees for Cart purchase will be adjusted by multiplying the fees in effect for the then-current Rate Period by one plus the Annual Percentage Change in the CPl-U. The adjustment to each fee shall be rounded to the nearest cent. 5. EXAMPLE The following example (Table 2) illustrates the index-based adjustment method for determining Contractor's Base Compensation for Rate Period Three. The dollar amounts shown are those fixed in the Agreement for Rate Period Two (July 1, 2010 -June 30, 2011) and the adjustment factors are based on assumed changes in the various indices between the average index values for the 12 months ending November 2009 and for the 12 months ending November 2010. Assumptions for Example Adjustment to Contractor's Compensation: Most-Recently Completed Rate Period = Rate Period One (July 1, 2009 through June 30, 2010) Then-current Rate Period =Rate Period Two (July 1, 2010 through June 30, 2011) Coming Rate Period= Rate Period Three (July 1, 2011 through June 30, 2012) TABLE 2 E I l c 1 l f f A IP ta Ch • -• -. P. I d' CPl-L CPl-W 1\1 otor l\lotor Fuel \'chicle Index l\laintenance and Repair Average index value for 12-Dec2009 226.2 223.2 255.8 239.2 month period ending November Jan 2010 263.5 239.8 of the then-current Rate Period Feb 2010 228.3 223.9 270.6 240.0 (e.g., Rate Period Two; therefore, Mar 2010 275.7 240.7 average index value for Apr 2010 229.5 224.9 269.1 241.2 December 2009 to November May 2010 265.5 241.9 2010) Jun 2010 230.9 225.5 260.8 242.2 July 2010 264.3 242.8 Aug 2010 232.1 226.3 275.8 243.l Sep 2010 275.2 243.6 Oct 2010 234.2 227.l 276.9 244.0 Nov 2010 270.3 244.5 Average 230.2 225.2 268.3 241.9 Average index value for 12-Dec 2008 218.3 219.1 240.2 231.1 month period ending November Jan 2009 245.8 231.5 of the most-recently completed Feb 2009 219.8 220.2 255.2 232.0 Rate Period (e.g., Rate Period Mar 2009 238.8 232.8 One; therefore, average index Apr 2009 220.8 221.6 242.8 234.2 value for December 2008 to May 2009 250.2 234.7 November 2009) Jun 2009 221.2 221.9 249.3 235.4 July 2009 253.8 235.9 Aug 2009 223.5 222.l 257.3 236.l Sep 2009 245.l 236.9 Oct 2009 224.8 222.8 243.7 237.8 Nov 2009 239.6 238.2 Average 221.4 221.3 246.8 234.7 Annual Percentage Change 0.040 0.018 0.087 0.031 Note: All values presented m this table are hypothet1cal and used for 11lustrat1ve purposes only. 5 TABLE 2 (cont.) Example Calculation of Base Compensation for Rate Period Three Then-Current Adjustment Coming Rate Rate Period Factor1' Period (Rate (Rate Period Period Three) Two) Annual Cost of Operations Labor-related costs $4,239,867 1.018 $4,316,185 Vehicle-related costs (excluding fuel) $472,199 1.031 $486,837 Fuel.costs $625,077 1.087 $679,459 Net Recyclable Materials Processing Revenue ($1,276,654) 1.040 ($1,327,720) Net Organic Materials Composting Costs $687,696 1.040 $715,204 Other Costs $56,287 1.040 $58,538 Direct Depreciation $1,296,422 1.0 $1,296,422 Allocated Costs (Labor, Vehicle1 & Other Costs) $2,090,821 1.040 $2,174,454 Allocated Costs (Depreciation and Start-Up Costs) $215,458 1.0 $215,458 Total Annual Cost of Operations $8,407,173 N.A. $8,614,837 Profit (based on operating ratio of0.88 for Rate Period · $1,174,137 Calculated with $1,174,750 Three) Operating Ratio Pass-Through Costs Interest expense $496,429 1.0 $496,429 Allocated facility and lease costs (Geng Road and $304,905 1.040 $317,101 San Jose Facilities) Allocated lease and interest costs $68,031 1.0 $68,031 Total Pass-Through Costs $869,365 N.A. $881,561 Base Compensation $10,450,675 N.A. $10,671,148 * Adjustment factors are calculated using assumed cost indices. ** Net Recyclable Materials Processing Revenue equals revenues from the sale of Recyclable Materials less Processing costs of Recyclable Materials. Example Calculation of Unit Price Fee for Back/Side Yard Collection for Rate Period Three: Then-current Back/Side Yard Collection fee= $3.35 per residence per month Back/Side Yard Collection fee for the Coming Rate Period = $3.35 x ($10,671,148 I $10,450,675) = $3.42 Example Calculation of Unit Price Fee for 20-gallon Cart Replacement for Rate Period Three: Then-current 20-gallon Cart replacement fee= $59.74 per replacement 20-gallon Cart replacement fee for the Coming Rate Period = $59.74 x (I + 0.040) = $62.13 1 Fuel costs included in allocated costs shall not be separately adjusted. 6. OTHER ·If an index described in Section 2 is discontinued, the successor index with which it is replaced will be used for subsequent calculations. If no successor index is identified by the Bureau of Labor Statistics, the index published by the Bureau which is most comparable will be used. 7 Attachment N-3 Form 1 General Information Baseline Services and Zero Waste Services 1. Residential solid waste Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body 2. Residential recyclable materials Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body 3. Residential yard trimmings Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body 4. Commercial solid waste Semi-Automated 5. Commercial recyclable materials Semi-Automated 6. Commercial yard trimmings and food scraps from Semi-Automated special events 1. Residential solid waste 2. Residential recyclable materials 3. Residential yard trimmings 4. Commercial solid waste 5. Commercial recyclable materials 6. Commercial yard trimmings and food scraps from special events 7. Roll-off 1. Residential solid waste 2. Residential recyclable materials 3. Residential yard trimmings 4. Commercial solid waste 5. Commercial recyclable materials 6. Commercial yard trimmings and food scraps from special events City of Palo Alto Collection Agreement 2008-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 2008-09 Freightliner M2 w/Amrep 12 d. 2 com artment semi-automated sideloader 2008-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 2008-09 Freightliner M2 w/Amrep 12yd. 2 compartment semi-automated sideloader; and six 2006 Mack/LEACH CNG vehicles (previously owned by PASCO, the City's prior collection contractor). 2008-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 2008-09 Freightliner M2 w/Amrep 12 d. 2 com artment semi-automated sideloader 2008-2009 American Lafrance Condor w/ New Way Mamoth Front Loader 28yd., 2008-2009 Freightliner M2 w/ 19yd. Labrie Semi-Automated Sideloader 2008-2009 American Lafrance Condor w/ New Way Mamoth Front Loader 28yd., 2008-2009 Freightliner M2 w/ 19yd. Labrie Semi-Automated Sideloader 2008-2009 American Lafrance Condor w/ New Way Mamoth Front Loader 28yd., 2008-2009 Freightliner M2 w/ 19yd. Labrie Semi-Automated Sideloader 2008-2009 Freightliner M2 w/ Galbreath Hook lift and three vehicles (previously owned by PASCO, the City's prior collection contractor) Toter 20G, 32G, 64G, 96G Toter 32G, 64G, 96G Toter 32G, 64G, 96G Consolidated Fabricators-lyd., I.Syd., 2yd., 3yd., 4yd., Syd., 6yd., 8yd. Consolidated Fabricators-lyd., I.Syd., 2yd., 3yd., 4yd., Syd., 6yd., 8yd. Consolidated Fabricators-1 yd., I .Syd., 2yd., 3yd., 4yd., Syd., 6yd., 8yd. Attachment N-3 Page 1 of 56 Attachment N-3 Form 1 General Information Baseline Services and Zero Waste Services 1. Name of processing site Green Waste Recovery, Inc 2. Owner's Name Green Waste Recovery, Inc 3. Operator's Name Green Waste Recovery, Inc 4. Address of processing site 625 Charles St. San Jose, CA 95l12 5. Hauling method (e.g. direct haul, transfer haul) Direct Haul 6. Address of transfer location NIA 7. Address of location for residual disposal Potrero Hills Landfill 1. Name of processing site Z-best 2. Owner's name Zanker Road Reosurce Mgmt., Ltd. 3. Operator's name Zanker Road Reosurce Mgmt., Ltd. 4. Address of processing site 980 State Hwy 25, Gilroy, CA 95020 5. Hauling method (e.g. direct haul, transfer haul) Transfer Haul 6. Address of transfer location Zanker Road Landfill, 705 Los Esteros Rd., San Jose, CA 7. Address of location for residual disposal Potrero Hills Landfill 1. Name of processing site Zanker Material Processing Facility 2. Owner's name Zanker Road Resource Mgmt., Ltd. 3. Operator's name Zanker Road Resource Mgmt., Ltd. 4. Address of processing site 675 Los Esteros Rd., San Jose, CA 95134 5. Hauling method (e.g. direct haul, transfer haul) Direct Haul 6. Address of transfer location NIA 7. Address of location for residual disposal Potrero Hills Landfill 1. Address of collection vehicle parking, maintenance, 625 & 565 Charles St., San Jose, CA 951l2 washin , and route staff arkin facilities 2. Address of administrative office 1500 Berger Dr., San Jose, CA 95112 3. Address of billing office 4. Address of customer service office City of Palo Alto Collection Agreement 1500 Berger Dr., San Jose, CA 95112 1500 Berger Dr., San Jose, CA 95112 Attachment N-3 Page 2 of 56 Attachment N-3 Fonn 2A Baseline Services Residential Commercial Commercial Yard Residential Solid Recyclable Residential Yard Commercial Recyclable Trimmings and Food Scraps Roll-off Box Roll-off Box Roll-off Box Annual Clean-up Waste Materials Trimmin s Solid Waste Materials from S ecial Events Solid Waste Re cl in C&D Pro ram I TOTAL A B c D E F G H I J Labor Information # of route personnel 12.5 6.5 I Included in I 5.5 I 2.5 I 0.3 I 1.0 I 1.0 I 3.0 I 1.0 I 33.30 Labor hours/day/person 9.00 9.00 Residential Solid 9.00 9.00 1.00 8.50 8.50 8.50 9.00 8.85 Total labor hours/year 29,250.00 15,210.00 Waste Route 12,870.00 5,850.00 78.00 2,210.00 2,210.00 6,630.00 2,340.00 76,648.00 Route Information #of routes per 4 Weekday 6.50 5.50 I 2.50 I 0.30 I 1.00 I 1.00 I 3.00 -26.30 5 Saturday 2.00 1.00 0.15 0.50 0.50 1.00 5.15 6 Sunda: #of persons/route per Weekday! 1.92 I 1.00 I I 1.00 I 1.00 I 0.30 I 1.00 I 1.00 I 3.00 .. 10.22 1.00 1.00 0.10 0.50 0.50 1.00 4.10 Sunday #of route hours/day/route per 10 Weekday! 8.00 I 8.00 I I 8.00 I 8.00 I 1.00 I 7.50 I 7.50 I 7.50 -55.50 II 8.00 8.00 1.00 4.00 4.00 8.00 33.00 Saturday 12 # of route hours/year per 13 I 13,520.00 I I 11,440.00 I 5,200.00 I 78.00 I 1,950.00 I 1,950.00 I 5,850.00 -53,508.00 14 832.00 416.00 8.01 104.00 104.00 416.00 1,880.01 15 16 Total 13,520.00 13,520.00 I I 12,272.00 I 5,616.00 I 86.01 I 2,054.00 "17 # of FTE routes 6.50 6.50 18 Total# of setouts/day for all routes 3,433.00 2,918 .. 00 19 # of setouts/day/FTE route 528.15 448.92 20 # of setouts/week 17,165.00 14,590.00 21 # of drive-bys/week 17,165.00 17,165.00 22 Set out rate(%) 23 #of lifts/week for all routes 24 #of lifts/year for all routes 25 # oflifts/route hour 26 # of pulls/week for all routes 27 # of pulls/year for all routes 1,664.00 I 2,080.00 I 2,444.00 28 #of pulls/route hour 0.81 1.01 0.39 Vehicle Information 29 #of regular collection vehicles 6.50 6.50 5.50 2.50 1.00 1.00 3.00 • 26.00 30 #of spare collection vehicles 2.00 2.00 0.67 0.33 Included in Commercial and 0.20 0.20 0.60 6.00 31 Total# of coilection vehicles 8.50 8.50 6.17 2.83 Residential Vehicles 1.20 1.20 3.60 32.00 Tonnage Information (annual) 32 Solid waste 9,000.00 21,103.00 6,917.00 143.00 37,163.00 33 Recyclable materials 10,488.00 8,420.00 2,042.00 153.00 21,103.00 34 Organic materials 12,870.00 247.00 475.00 13,592.00 35 C&D 5,542.00 340.00 5,882.00 36 Residue 130.00 912.00 732.00 13.00 252.00 978.00 77.00 3,094.00 37 Total 22,000.00 11,400.00 21,103.00 9.152.00 260.00 6,917.00 2,769.00 6,520.00 713.00 80,834.00 City of Palo Alto Attachment N-3 Collection Agreement Page 3 of56 Attachment N-3 Fonn 28 Zero Waste Services Mandatory Mandatory Mandatory Mandatory Expanding Expanding Expanding Expandi"ng Expanding Residential Residential Commercial Commercial Enhancing Residential Commercial Residential Commercial Clean-Up Reuse Recycling Organics Recycling Organics lncreasing C&D Commercial Onzanics Onzanics SinuJe Stream Sinule Stream and Recvclino: Particination Particination Particination Particioation Diversion Recvclirnz I TOTAL A B c D E F.l F.2 F.3 F.4 G H I Labor Information # of route personnel 6.50 3 II Labor hours/day/person 0.21 9.00 0.50 10 Total labor hours/year 354.90 2.340.00 390.00 26,508.30 Route Information #of routes per Weekday! I 5.50 I I I 1.00 I I I I I 3.00 I I 9.50 Saturday Sunday # of pei-sons/route per Weekday! I 1.00 I I I 1.00 I I I I I 1.00 I I 3.00 Saturday Sunday # of route hours/day/route per 10 Weekday! I 0.21 I I I 9.00 I I I I I 0.50 I I 9.71 11 Saturday 12 Sunday # of route hours/year per 13 Weekdayj I 300.30 I I I 2,340.00 I I I I I 390.00 I I 23.983 70 14 Saturday 15 Sunday 16 Total I I 300.30 I I I 2,340.00 I I I I I 390.00 I I 23,983.70· 17 # of FTE routes 0.14 1.13 0.19 11.53 18 Total #of setouts/day for all routes 19 # of setouts/day/FfE route 20 # of setouts/week 21 # of drive-bys/week 22 Set out rate (%) 23 # of lifts/week for all routes 24 #of lifts/year for all routes 25 #of lifts/route hour 26 # of pulls/week for all routes 27 # of pulls/year for all routes 28 # of pulls/route hour Vehicle Information 29 # of regular collection vehicles I I I I I 1.00 I I I I I I I 1.00 30 #of spare collection vehicles 31 Total# of collection vehicles I I I I I 1.00 I I I I I I I 1.00 Tonnage Information (annual) 32 Solid waste -4,500.00 -614.00 -1,804.00 -356.00 -614.00 -1,804.00 -4,500.00 -5,342.00 -19,534.00 33 Recyclable materials 564.00 1,660.00 156.00 565.00 1,660.00 4,605.00 34 Organic materials 4,050.00 4,050.00 8,100.00 35 C&D 170.00 4,541.00 4.711.00 36 Residue 450.00 50.00 144.00 30.00 49.00 144.00 450.00 801.00 2,118.00 37 Total -50.00 -144.00 I City of Palo Alto Collection Agreement Attachment N-3 Page 4 of56 Note for Forms 2A and 28 Attachment N-3 Fonn 28 Line 1 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 2 -Identify number of hours per day each regular route employee will work each day (including breaks, pre-and post-route checks, etc.). Line 3 -Should equal Line I * Line 2 * 260 days Lines 4, 5, and 6-Information is to be reported for collection routes only and does not include any support (e.g., container delivery routes, cleanup routes, missed pickup routes etc.) Line 7, 8, and 9 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A-6H. Lines 10, 11, and 12 -Identify number of hours per day each route will take to complete (including collection time and hauling time to transfer station, landfill, ~r processing site). Line 13 -Should equal Line 4 * Line I 0 * 260 days Line 14 -Should equal Line 5 * Line 11 * 52 weeks Line 15 -Should equal Line 6 * Line 12 * 52 weeks Line 16-Should equal Line 13 +Line 14 +Line 15 Line 17 -Should equal Line 16 I 2,080 hours Line 18 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 19 -Should equal Line 18 I Line 17 Line 20 -Should equal Line 18 * 5 days Line 21 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Fonns 6A -6H. Line 22 -Should equal Line 20 I Line 21 Line 23 -Data to be input by proposer and should equal Line 24 I 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 24 -Data to be input by proposer and should equal Line 23 * 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A-6H. Line 25 -Should equal Line 24 I Line 16 Line 26 -Data to be input by proposer and should equal Line 27 I 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 27 -Data to be input by proposer and should equal Line 26 * 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 28 -Should equal Line 27 I Line 16 Line 29 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 30 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 31 -Should equal Line 29 +Line 30 Line 32 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 33 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 34 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 35 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 36 -Should equal Line 32 + Line 33 + Line 34 + Line 35 Pulls = pull and return etc. Full Time Equivalent (FTE) = 40 hours per week, 2,080 hours per year City of Palo Alto Collection Agreement Baseline and Zero Waste Services Attachment N-3 Page 5 of56 Labor Requirements Residential Recyclable Materials Residential Yard Trimmings Materials Commercial Solid Waste Commercial Recyclable Materials Attachment N-3 Form 3 Baseline Services and Zero Waste Services 6.5 5.5 5.5 2.5 2.5 Commercial Yard Trimmings and Food Scraps from Special Events 0.3 0.3 Roll-off Box Solid Waste Roll-off Box Recycling I Roll-off Box C&D 3 3 Annual Clean Up/Bulky Item 2 Casual Pool 5 5 Subtotal 38.3 1 39.3 CEO/COO General Manager Controller Office Manager Operations Manager Operations/Route Supervisor 3 3 Dispatcher Container Distribution Operations Clerk Community Relations Manager Recycling/Public Ed. Coordinator 1.75 2.75 Customer Service Supervisor I Customer Service Representatives 3 3 Accounting Clerk Receptionist Safety Manager Maintenance Supervisor Shop Foreman Yard Personnel I Maintenance Personnel 2 2 Recycling Manager Recycling Center Personnel 2 2 Other Subtotal 18 1.75 19.75 ota 56.3 2.75 59.05 FTE = full-time equivalent City of Palo Alto Attachment N-3 Collection Agreement Page 6 of 56 Attachment N-3 Form 4A Capital Requirements Baseline Services Hard to Serve Residential Recyclable Materials* 8.5 Residential Yard Trimmings Materials Commercial Solid Waste 5.5 0.67 Commercial Recyclable Materials 2.5 0.33 Commercial Yard Trimmings and Food Scraps from Special Events Included above Roll-off Box Solid Waste 0.2 1.2 Roll-off Box Recycling -Hybrid 0.2 Roll-off Box C&D 0.6 Pickup Trucks Container Distribution -Hybrid 2 2 Pressure Washing Truck Mobile Service Truck Cars Annual Clean Up -Hybrid Residential cart service Replacements included in Container Maintenance Expenses 20-gallon 708 708 708 32-gallon 2880 2880 64-gallon 990 990 990 96-gallon 142 142 142 Commercial cart service 20-gallon 32-gallon 64-gallon 96-gallon 1500 1500 Commercial bin service I cubic yard 302 16 302 16 318 I .5 cubic yards 86 86 91 2 cubic yards 1055 56 56 Jill 3 cubic yards 522 28 522 28 550 4 cubic yards 477 25 477 25 502 5 cubic yards 6 6 6 cubic yards 81 4 81 4 85 8 cubic yard 2 2 Roll-off service T cubic yards JO JO IO I 0 cubic yards 20 20 20 I 5 cubic yards 36 36 36 20 cubic yards 45 45 45 30 cubic yards 52 52 52 40 cubic yards 30 30 30 13 13 13 Forklift Processing Site{s) Transfer Station Corporation Yard/Maintenance Container Storage Yard Shop Equipment On Route GPS System Computer and Office Equipment Start-up Capital Total 8,996 139 9,135 6 6 9,002 139 9,141 * Residential recycling vehicles include purchase of 6 used CNG vehicles previously owned by PASCO, the City's previous hauling company. City of Palo Alto Collection Agreement $208,700 $2,423,850 $1,503,23 I $689,488 $229,918 $274,918 $284,000 $125,000 $77,000 $105,000 $245,800 $36,788 $140,292 $49,297 $8,454 $84,975 $128,733 $43,057 $550,299 $298,013 $318,334 $4,465 $67,404 $1,957 $42,141 $90,576 $130,613 $174,753 $223,512 $154,848 $8,450 $45,000 $700,000 $150,000 $197,015 $46,000 $363,789 $13,592,277 Attachment N·3 Page 7 of 56 Capital Requirements Residential Added· Organics Commercial Added Organics Residential Added Single Stream Commercial Added Single Stream Bulky Item Reuse & Recycling Mandatory Residential Recycling Participation Mandatory Residential Organics Participation Mandatory Commercial Recycling Participation Mandatory Commercial Organics Participation Increasing C&D Diversion -Hybrid Enhancing Commercial Recycling Pickup Trucks Container Distribution Mobile Service Truck Outreach Vehicle Other Residential cart service 20-gallon 32-gallon 64-gallon 96-gallon Commercial cart service 20-gallon 32-gallon 64-gallon 96-gallon Commercial bin service I cubic yard 1.5 cubic yards 2 cubic yards 3 cubic yards 4 cubic yards 5 cubic yards 6 cubic yards 8 cubic yard Roll-off service 7 cubic yards IO cubic yards 15 cubic yards 20 cubic yards 30 cubic yards Offices Processing Site(s) Transfer Station Corporation Yard/Maintenance Container Storage Yard Shop Equipment Fueling Equipment Computer and Office Equipment Start-up Capital oa Attachment N-3 Form 48 500 500 40 542 542 500 40 542 *Used containers may only include the existing City-owned carts (including replacement inventory). All other containers shall be new. City of Palo Alto Collection Agreement Zero Waste Services 500 40 542 $245,800 $52,500 $28,325 $25,357 $351,982 Attachment N-3 Page 8 of 56 Summary of Contractor's Compensation Residential Residential Recyclable Solid Waste Materials Form 6A&6C Form 68 I Annual Cost of Operations Labor-Related Costs $1,605,334 $782,868 Vehicle-Related Costs $148,007 $131,557 Fuel Costs $214,427 $48,511 Net Recyclables Processing Revenue $0 ($570,000) Net Organics Processing Costs $0 0 Other Costs $16,498 $11,184 Direct Depreciation Expense $366,947 $376,052 Total Allocated Costs -Labor, Vehicle, Fuel & Other $695,880 $618,561 Total Allocated Costs -Depreciation & Start-Up $68 233 $60 652 Total Annual Cost of Operations $3,115,326 $1,459,383 Profit** $424,817 $214,108 Pass-Through Costs Disposal Cost (City to pay directly for disposal) n.a. n.a. Interest Expense (external or intra-company) $168,115 $117,301 Allocated Lease & Interest Costs $124 036 $1 IO 254 Total Pass-Through Costs $292,151 $227,555 Total Base Compensation I $3,832,294 I $1,901,046 I *Amounts tie to costs on Forms 6A -6F, 61, 6N, and 60 Attachment N-3 Form SA Residential Yard Commercial Trimmings Solid Waste Form 6A&6C Form 60 Included in A $702,590 $91,092 $182,197 $0 $0 $9,301 $279,434 $477,064 $46 778 $1,788,457 $243,881 n.a. $128,021 $85 033 $213,054 I $2,245,392 I Commercial Yard Commercial Trimmings and Recyclable Food Scraps from Materials Special Events Form 6E Form 6F $282,847 $10,657 $40,612 $143 $73,615 $1,258 ($457,600) $0 $0 $3,570 $4,786 $647 $190,335 $0 $218,816 $0 $21,456 fil $374,866 $16,275 $62,848 $2,219 n.a. n.a. $87,201 $0 $39 002 fil $126,203 $0 $563,917 I $18,494 I ** Profit is based on 0.88 operating ratio except for profit for Residential Recyclable Materials and Commercial Recyclables Materials. In these cases, increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement Annual Clean Recycle up Program Center FormJ FormN $121,938 $170,058 $17,548 $3,105 $34,915 $1,820 $0 $0 $17,300 $0 $3,365 $1,932 $30,725 $8,931 $77,320 $0 $7 581 fil $310,691 $185,846 $42,367 $25,343 n.a. n.a. $14,076 $4,092 $13 782 fil $27,858 $4,092 $380,916 I $215,280 I Baseline Services Two Additional Route Supervisors I TOTAL FormO $206,120 $3,882,412 $5,620 $437,683 $7,200 $563,943 $0 ($1,027,600) $0 $20,870 $852 $48,564 $0 $1,252,425 $0 $2,087,641 $11,750 $216 449 $231,542 $7,482,387 $31,574 $1,047,157 n.a. $0 $3,074 $521,880 fil $372 107 $3,074 $893,987 $266,190 I $9,423,530 Attachment N-3 Page 9 of 56 Attachment N-3 Form 58 Summary of Contractor's Compensation Expanding Mandatory Mandatory Mandatory Mandatory Expanding Expanding Expanding Expanding Clean-Up Residential Residential Commercial Commercial Increasing Residential Commercial Residential Commercial Reuse and Recycling Organics Recycling Organics C&D Organics* Organics Single Stream Single Stream Recycling Participation Participation Participation Participation Diversion ·Form 7A Form 7B Form 7C Form 70 Form 7E Form 7F.1 Form 7F.2 Form 7F.3 Form 7F.4 Form 7G I Annual Cost of Operations Labor-Related Costs $34,032 $117,63t $61,725 $20,575 Vehicle-Related Costs $704 $17,548 $1,883 $628 Fuel Costs $4,413 $34,915 $2.700 $900 Net Recycling Processing Revenue ($30,700) ($90,200) ($30,700) ($90.200) Net Organics Processing Costs $315,000 $17,300 $315,000 Other Costs $1,301 $5,000 Direct Depreciation Expense $6,710 $30,725 $4,922 $1,641 Total Allocated Costs -Labor, Vehicle, Fuel & Other Total Allocated Costs -Depreciation & Start-Up Total Annual Cost of Operations $360,859 ($30,700) ($90,200) $219,420 ($25,700) ($18,970) $338,743 Profit*** $49,208 ($3,349) ($12,300) $29,921 ($3,505) ($2,587) $46,192 Pass-Through Costs Disposal Cost (City to pay directly for disposal) I nal $3,0~:1 nal nal $14,0~:1 naj nal $2,2::1 $7::1 Interest Expense (external or intra-company) Direct Lease Costs Total Allocated Costs -Lease Total Pass-Through Costs $3,074 $14,076 $2,246 $749 Total Base Compensation $413,142 ($34,049) ($102,500) $263,417 ($29,205) ($19,311) $385,684 Estimated C&D Extra Services Compensation** $243,869 * City chose not to implement Expanded Residential Organics. ** Contractor compensated on a unit price basis at fees established in Attachment N-1. ***Profit is based on 0.88 operating ratio except for profit for Expanding Residential Single Stream Materials. In this case, increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement I Zero Waste Services Enhancing Commercial Recycling I TOTAL Form 7H $49,799 $283,763 $20,762 $42,928 ($241,800) $647,300 $8,783. $15.084 $43,998 $58,582 $812,034 $7,988 $111,569 nal n.a. $20,145 $66,571 I $20,145 $943,749 Attachment N·3 Page 10 of56 Attachment N-3 Form 1 General Information 1. Residential solid waste 2. Residential recyclable materials 3. Residential yard trimmings 4. Commercial solid waste 5. Commercial recyclable materials 6. Commercial yard trimmings and food scraps from special events 1. Residential solid waste 2. Residential recyclable materials 3. Residential yard trimmings 4. Commercial solid waste 5. Commercial recyclable materials 6. Commercial yard trimmings and food scraps from special events 7. Roll-off 1. Residential solid waste 2. Residential recyclable materials 3. Residential yard trimmings 4. Commercial solid waste 5. Commercial recyclable materials 6. Commercial yard trimmings and food scraps from special events City of Palo Alto Collection Agreement Baseline Services and Zero Waste Services Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body Semi Automated Single Compartment, Hard to serve -Semi Automated Split Body Semi-Automated Semi-Automated Semi-Automated 200S-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 200S-09 Freightliner M2 w/Amrep 12 d. 2 com artment semi-automated sideloader 200S-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 200S-09 Freightliner M2 w/Amrep 12yd. 2 compartment semi-automated sideloader; and six 2006 Mack/LEACH CNG vehicles (previously owned by PASCO, the City's prior collection contractor). 200S-2009 American Lafrance Condor w/ Labrie Expert 2000 29 yd.( semi-automated) and 200S-09 Freightliner M2 w/ Amrep 12 d. 2 com artment semi-automated sideloader 200S-2009 American Lafrance Condor w/New Way Mamoth Front Loader 2Syd., 200S-2009 Freightliner M2 w/ l 9yd. Labrie Semi-Automated Sideloader 200S-2009 American Lafrance Condor w/ New Way Mamoth Front Loader 2Syd., 200S-2009 Freightliner M2 w/ 19yd. Labrie Semi-Automated Sideloader 200S-2009 American Lafrance Condor w/ New Way Mamoth Front Loader 2Syd., 200S-2009 Freightliner M2 w/ 19yd. Labrie Semi-Automated Sideloader 200S-2009 Freightliner M2 w/ Galbreath Hook lift and three vehicles (previously owned by PASCO, the City's prior collection contractor) Toter 20G, 32G, 64G, 96G Toter 32G, 64G, 960 · Toter 32G, 64G, 960 Consolidated Fabricators-lyd., I .Syd., 2yd., 3yd., 4yd., Syd., 6yd., Syd. Consolidated Fabricators-lyd., 1.5yd., 2yd., 3yd., 4yd., Syd., 6yd., Syd. Consolidated Fabricators-lyd., I.Syd., 2yd., 3yd., 4yd., 5yd., 6yd., Syd. Attachment N-3 Page 1 of 56 Attachment N-3 Form 1 General Information 1. Name of processing site 2. Owner's Name 3. Operator's Name 4. Address of processing site 5. Hauling method (e.g. direct haul, transfer haul) 6. Address of transfer location 7. Address of location for residual disposal 1. Name of processing site 2. Owner's name 3. Operator's name 4. Address of processing site 5. Hauling method (e.g. direct haul, transfer haul) 6. Address of transfer location 7. Address of location for residual disposal 1. Name of processing site 2. Owner's name 3. Operator's name 4. Address of processing site 5. Hauling method (e.g. direct haul, transfer haul) 6. Address of transfer location 7. Ad.dress of location for residual disposal 1. Address of collection vehicle parking, maintenance, washin , and route staff arkin facilities 2. Address of administrative office 3. Address of billing office 4. Address of customer service office City of Palo Alto Collection Agreement Baseline Services and Zero Waste Services Green Waste Recovery, Inc Green Waste Recovery, Inc Green Waste Recovery, Inc 625 Charles St. San Jose, CA 95112 Direct Haul NIA Potrero Hills Landfill Zanker Road Reosurce Mgmt., Ltd. Zanker Road Reosurce Mgmt., Ltd. 980 State Hwy 25, Gilroy, CA 95020 Transfer Haul Zanker Road Landfill, 705 Los Esteros Rd., San Jose, CA Potrero Hills Landfill Zanker Material Processing Facility Zanker Road Resource Mgmt., Ltd. Zanker Road Resource Mgmt., Ltd. 675 Los Esteros Rd., San Jose, CA 95134 Direct Haul NIA Potrero Hills Landfill 1500 Berger Dr., San Jose, CA 95112 1500 Berger Dr., San Jose, CA 95112 1500 Berger Dr., San Jose, CA 95112 Attachment N-3 Page 2 of 56 Attachment N-3 Fonn 2A I ' Baseline Services Residential Commercial Commercial Yard Residential Solid Recyclable Residential Yard Commercial Recyclable Trimmings and Food Scraps! Roll-off Box \ Roll-off Box I Roll-off Box \Annual Clean-up Waste Materials Trimmimzs Solid Waste Materials from Snecial Events Solid Waste Re~clin2 C&D Pro2rarn I TOTAL A B c D E F l G I H I I I J I l Labor Information # of route personnel 12.5 6.5 Included in 5.5 I 2.5 I 0.3 I 1.0 I 1.0 I 3.0 I 1.0 I 33.30 Labor hours/day/person 9.00 9.00 Residential Solid 9.00 9.00 1.00 8.50 8.50 8.50 9.00 8.85 3 Total labor hours/year 29,250.00 15,210.00 Waste Route 12,870.00 5,850.00 78.00 2,210.00 2,210.00 6,630.00 2,340.00 76,648.00 Route Information # of routes per 4 Weekday 6.50 5.50 I 2.50 I 0.30 I 1.00 I 1.00 I 3.00 -26.30 5 Saturday 2.00 1.00 0.15 0.50 0.50 1.00 5.15 6 Sund # of persons/route per 7 Weekday! 1.92 1.00 I I 1.00 I 1.00 I 0.30 I 1.00 I 1.00 I 3.00 -10.22 8 Saturday 1.00 1.00 0.10 0.50 0.50 1.00 4.10 9 Sunda: #of route hours/day/route per 10 Weekday! 8.00 I 8.00 I I 8.00 I 8.00 I 1.00 I 7.50 I 7.50 I 7.50 -55.50 11 8.00 8.00 1.00 4.00 4.00 8.00 33.00 Saturday 12 # of route hours/year per 13 Weekday 13,520.00 13,520.00 11,440.00 I 5,200.00 I 78.00 I 1,950.00 I 1,950.00 I 5,850.00 -53,508.00 14 Saturday 832.00 416.00 8.01 104.00 104.00 416.00 1,880.01 15 16 Total 13,520.00 13,520.00 I I 12,272.00 I 5,616.00 I 86.01 I 2,054.00 17 # of FIB routes 6.50 6.50 18 Total# of setouts/day for all routes 3,433.00 2,918.00 19 #of setouts/day/FfE route 528.15 448.92 20 # of setouts/week 17,165.00 14,590.00 21 # of drive-bys/week 22 Set out rate(%) 23 #0;flifts/week for all routes 24 # oflifts/year for all routes 2S #of lifts/route hour 26 #of pulls/week for all routes 27 # of pulls/year for all routes 1,664.00 28 # of pulls/route hour 0.81 I 1.01 I 0.39 Vehicle Information 29 #of regular collection vehicles 6.50 6.50 5.50 2.50 1.00 1.00 3.00 --26.00 30 #of spare collection vehicles 2.00 2.00 0.67 0.33 Included in Commercial and 0.20 0.20 0.60 6.00 31 Total #of collection vehicles 8.50 8.50 6.17 2.83 Residential Vehicles 1.20 1.20 3.60 32.00 Tonnage Information (annual) 32 Solid waste 9,000.00 21,103.00 6.917.00 143.00 37,163.00 33 Recyclable materials 10,488.00 8,420.00 2,042.00 153.00 21,103.00 34 Organic materials 12,870.00 247.00 475.00 13,592.00 35 C&D 5,542.00 340.00 5,882.00 36 Residue 130.00 912.00 732.00 13.00 252.00 978.00 77.00 3,094.00 37 Total 22,000.00 11,400.00 21,103.00 9,152.00 260.00 6,917.00 2,769.00 6,520.00 713.00 80,834.00 City of Paro Alto Attachment N-3 Collection Agreement Page 3 of56 Attachment N-3 Fonn 28 Zero Waste Services Mandatory Mandatory Mandatory Mandatory Expanding Expanding Expanding Expanding Expanding Residential Residential Commercial Commercial Enh&ncing Residential Commercial Residential Commercial Clean-Up Reuse Recycling Organics Recycling Organics Increasing C&D Commercial Onzanics Oruanics Sim.de Stream Simde Stream and Recvclimz Particination Particination Particination Particioation Diversion Recvclimz. I TOTAL A B c D E F.l F.2 F.3 F.4 G H I Labor Information # of route personnel 6.50 I I I I I I I I 3 I I II 2 Labor hours/day/person 0.21 9.00 0.50 10 3 Total labor hours/year 354.90 2.340.00 390.00 26,508.30 Route Information # of routes per 4 Weekday! I 5.50 I I I 1.00 I I I I I 3.00 I I 9.50 Saturday Sunday # of persons/route per Weekday! I 1.00 I I I 1.00 I I I I I 1.00 I I 3.00 Saturday Sunday #of route hours/day/route per 10 Weekday! I 0.21 I I I 9.00 I I I I I 0.50 I I 9.71 11 Saturday 12 Sunday # of route hours/year per 13 Weekday! I 300.30 I I I 2,340.00 I I I I I 390.00 I I 23,983.70 14 Saturday 15 Sunday 16 Total I I 300.30 I I I 2,340.00 I I I I I 390.00 I I 23,983.70 17 # ofFTE routes 0.14 1.13 0.19 11.53 18 Total #of setouts/day for all routes 19 # of setouts/day!FfE route 20 'If-of setouts/week 21 # of drive-bys/week 22 Set out rate(%) 23 #of lifts/week for all routes 24 #of lifts/year for all routes 25 # of lifts/route hour 26 # of pulls/week for all routes 27 # of pulls/year for all routes 28 # of pulls/route hour Vehicle Information 29 #of regular collection vehicles I I I I I 1.00 I I I I I I I 1.00 30 #of spare co11ection vehicles 31 Total #of collection vehicles I I I I I 1.00 I I I I I I I 1.00 Tonnage Information (annual) 32 Solid waste -4,500.00 -614.00 -1,804.00 -356.00 -614.00 -1,804.00 -4,500.00 -5,342.00 -19,534.00 33 Recyclable materials 564.00 1,660.00 156.00 565.00 1,660.00 4,605.00 34 Organic materials 4,050.00 4,050.00 8,100.00 35 C&D 170.00 4,541.00 4,711.00 36 Residue 450.00 50.00 144.00 30.00 49.00 144.00 450.00 801.00 2,118.00 37 Total I -50.00 -144.00 City of Palo Alto Collection Agreement Attachment N-3 Page 4 of56 Note for Forms 2A and 2B Attachment N-3 Fonn 2B Line l -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 2 -Identify number of hours per day each regular route employee will work each day (including breaks, pre-and post-route checks, etc.). Line 3 -Should equal Line I * Line 2 * 260 days Lines 4, 5, and 6 -Information is to be reported for collection routes only and does not include any support (e.g., container delivery routes, cleanup routes, missed pickup routes etc.) Line 7, 8, and 9 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A-6H. Lines 10, 11, and 12 -Identify number of hours per day each route will take to complete (including collection time and hauling time to transfer station, landfill; or processing site). Line 13 -Should equal Line 4 * Line I 0 * 260 days Line 14 -Should equal Line 5 * Line 11 * 52 weeks Line 15 -Should equal Line 6 * Line 12 * 52 weeks Line 16 -Should equal Line 13 +Line 14 +Line 15 Line 17 -Should equal Line 16 I 2,080 hours Line 18-Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A-6H. Line 19 -Should equal Line 18 I Line 17 Line 20 -Should equal Line 18 * 5 days Line 21 -Data to be input by proposer. Data should reflect the assumptions used forthe basis of the costs proposed in Forms 6A -6H. Line 22 -Should equal Line 20 I Line 21 Line 23 -Data to be input by proposer and should equal Line 24 I 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 24 -Data to be input by proposer and should equal Line 23 * 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 25 -Should equal Line 24 I Line 16 Line 26 -Data to be input by proposer and should equal Line 27 I 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 27 -Data to be input by proposer and should equal Line 26 * 52 weeks. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 28 -Should equal Line 27 I Line 16 Line 29 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A-6H. Line 30 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 31 -Should equal Line 29 + Line 30 Line 32 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 33 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 34 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 35 -Data to be input by proposer. Data should reflect the assumptions used for the basis of the costs proposed in Forms 6A -6H. Line 36 -Should equal Line 32 +Line 33 +Line 34 +Line 35 Pulls = pull and return etc. Full Time Equivalent (FTE) = 40 hours per week, 2,080 hours per year . City of Palo Alto Collection Agreement Baseline and Zero Waste Services Attachment N-3 Page 5 of 56 Labor Requirements Residential Recyclable Materials Residential Yard Trimmings Materials Commercial Solid Waste Commercial Recyclable Materials Attachment N-3 Form 3 Baseline Services and Zero Waste Services 6.5 5.5 5.5 2.5 2.5 Commercial Yard Trimmings and Food Scraps from Special Events 0.3 0.3 Roll-off Box Solid Waste Roll-off Box Recycling Roll-off Box C&D 3 3 Annual Clean Up/Bulky Item I 2 Casual Pool 5 5 Subtotal 38.3 1 39.3 CEO/COO General Manager Controller Office Manager Operations Manager I Operations/Route Supervisor 3 3 Dispatcher Container Distribution Operations Clerk Community Relations Manager Recycling/Public Ed. Coordinator 1.75 2.75 Customer Service Supervisor I I Customer Service Representatives 3 3 Accounting Clerk Receptionist Safety Manager Maintenance Supervisor Shop Foreman Yard Personnel Maintenance Personnel 2 2 Recycling Manager Recycling Center Personnel 2 2 Other Subtotal 18 1.75 19.75 ota 56.3 2.75 59.05 FTE = full-time equivalent City of Palo Alto Attachment N-3 Collection Agreement Page 6 of 56 Capital Requirements Hard to Serve Residential Recyclable Materials* Residential Yard Trimmings Materials Commercial Solid Waste Commercial Recyclable Materials Attachment N-3 Form 4A Commercial Yard Trimmings and Food Scraps from Special Events Roll-off Box Solid Waste Container Distribution -Hybrid Pressure Washing Truck Mobile Service Truck Cars Annual Clean Up -Hybrid ,.'~ :~.~" Baseline Services $208,700 8.5 $2,423,850 $1,503,231 $689,488 1.2 $229,918 $274,918 2 $284,000 $125,000 $77,000 $105,000 Residential cart service Replacements included in Container Maintenance Expenses 20-gallon 708 708 32-gallon 2880 64-gallon 990 990 96-gallon 142 142 Commercial cart service 20-gallon 32-gallon 64-gallon 96-gallon 1500 Commercial bin service I cubic yard 302 16 302 16 1.5 cubic yards 86 86 2 cubic yards 1055 56 56 3 cubic yards 522 28 522 28 4 cubic yards 477 25 477 25 5 cubic yards 6 6 cubic yards 81 4 81 8 cubic yard 2 Roll-off service 7 cubic yards 10 10 I 0 cubic yards 20 20 15 cubic yards 36 36 20 cubic yards 45 45 30 cubic yards 52 52 40 cubic yards 30 30 Other: 4 cubic yard bins for Recycle Center 13 13 Other: debris boxes for Recycl"e Center Forklift Processing Site(s) Transfer Station Corporation Yard/Maintenance Container Storage Yard Shop Equipment On Route GPS System Computer and Office Equipment Start-up Capital Total 8,996 139 9,135 6 6 9,002 139 *Residential recycling vehicles include purchase of6 used CNG vehicles previously owned by PASCO, the City's previous hauling company. City of Palo Alto Collection Agreement 708 2880 990 142 1500 318 91 1111 550 502 85 2 IO 20 36 45 52 30 13 9,141 $36,788 $140,292 $49,297 $8,454 $84,975 $128,733 $43,057 $550,299 $298,013 $318,334 $4,465 $67,404 $1,957 $42,141 $90,576 $130,613 $174,753 $223,512 $154,848 $8,450 $45,000 $700,000 $150,000 $197,015 $46,000 $363,789 $13,592,277 Attachment N-3 Page 7 of 56 Capital Requirements Residential Added Organics Commercial Added Organics Residential Added Single Stream Commercial Added Single Stream Bulky Item Reuse & Recycling Mandatory Residential Recycling Participation Mandatory Residential Organics Participation Mandatory Commercial Recycling Participation Mandatory Commercial Organics Participation Increasing C&D Diversion -Hybrid Enhancing Commercial Recycling Pickup Trucks Container Distribution Mobile Service Truck Outreach Vehicle Other Residential cart service 20-gallon 32-gallon 64-gallon 96-gallon Commercial cart service 20-gallon 32-gallon 64-gallon 96-gallon Commercial bin service 1 cubic yard 1.5 cubic yards 2 cubic yards 3 cubic yards 4 cubic yards 5 cubic yards 6 cubic yards 8 cubic yard Roll-off service 7 cubic yards IO cubic yards 15 cubic yards 20 cubic yards 30 cubic yards Offices Processing Site(s) Transfer Station Corporation Yard/Maintenance Container Storage Yard Shop Equipment Fueling Equipment Computer and Office Equipment Start-up Capital oa Attachment N-3 Form4B 500 500 40 542 542 500 40 542 *Used containers may only include the existing City-owned carts (including replacement inventory). All other containers shall be new. City of Palo Alto Collection Agreement Zero Waste Services 500 40 542 $245,800 $52,500 $28,325 $25,357 $351,982 Attachment N-3 Page B of 56 Summary of Contractor's Compensation Residential Residential Recyclable Solid Waste Materials Form 6A&6C Form 6B I Annual Cost of Operations Labor-Related Costs $1,605,334 $782,868 Vehicle-Related Costs $148,007 $131,557 Fuel Costs $214,427 $48,511 Net Recyclables Processing Revenue $0 ($570,000) Net Organics Processing Costs $0 0 Other Costs $16,498 $11,184 Direct Depreciation Expense $366,947 $376,052 Total Allocated Costs -Labor, Vehicle, Fuel & Other $695,880 $618,561 Total Allocated Costs -Depreciation & Start-Up $68 233 $60,652 Total Annual Cost of Operations $3,115,326 $1,459,383 Profit** $424,817 $214,108 Pass-Through Costs Disposal Cost (City to pay directly for disposal) n.a. n.a. Interest Expense (external or intra-company) $168,115 $117,301 Allocated Lease & Interest Costs $124 036 $110 254 Total Pass-Through Costs $292,151 $227,555 Total Base Compensation $3,832,294 $1,901,046 *Amounts tie to costs on Forms 6A -6F, 61, 6N, and 60 Attachment N-3 Form SA Residential Yard Commercial Trimmings Solid Waste Form 6A&6C Form 6D I I Included in A $702,590 $91,092 $182,197 $0 $0 $9,301 $279,434 $477,064 $46 778 $1,788,457 $243,881 n.a. $128,021 $85 033 $213,054 $2,245,392 Commercial Yard Commercial Trimmings and Recyclable Food Scraps from Materials Special Events Form 6E I Form 6F I $282,847 $10,657 $40,612 $143 $73,615 $1,258 ($457,600) $0 $0 $3,570 $4,786 $647 $190,335 $0 $218,816 $0 $21 456 ill $374,866 $16,275 $62,848 $2,219 n.a. n.a. $87,201 $0 $39 002 ill $126,203 $0 $563,917 $18,494 ** Profit is based on 0.88 operating ratio except for profit for Residential Recyclable Materials and Commercial Recyclables Materials. In these cases, increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement Baseline Services Two Additional Annual Clean Recycle Route up Program Center Supervisors I TOTAL I FormJ I FormN I FormO I I I $121,938 $170,058 $206,120 $3,882,412 $17,548 $3,105 $5,620 $437,683 $34,915 $1,820 $7,200 $563,943 $0 $0 $0 ($1,027,600) $17,300 $0 $0 $20,870 $3,365 $1,932 $852 $48,564 $30,725 $8,931 $0 $1,252,425 $77,320 $0 $0 $2,087,641 $7 581 ill $11 750 $216 449 $310,691 $185,846 $231,542 $7,482,387 $42,367 $25,343 $31,574 $1,047,157 n.a. n.a. n.a. $0 $14,076 $4,092 $3,074 $521,880 $13 782 ill ill $372 107 $27,858 $4,092 $3,074 $893,987 $380,916 $215,280 $266,190 $9,423,530 Attachment N-3 Page 9 of 56 Attachment N-3 Form 58 Summary of Contractor's Compensation Expanding Mandatory Mandatory Mandatory Mandatory Expanding Expanding Expanding Expanding Clean-Up Residential Residential Commercial Commercial Increasing Residential Commercial Residential Commercial Reuse and Recycling Organics Recycling Organics C&D Organics* Organics Single Stream Single Stream Recycling Participation Participation Participation Participation Diversion Form 7A Form 7B Form 7C Form 70 Form 7E Form 7F.I Form 7F.2 Form 7F.3 Form 7F.4 Form 7G I Annual Cost of Operations Labor-Related Costs $34,032 $117,631 $61,725 $20,575 Vehicle-Related Costs $704 $17,548 $1,883 $628 Fuel Costs $4,413 $34,915 $2,700 $900 Net Recycling Processing Revenue ($30,700) ($90,200) ($30,700) ($90,200) Net Organics Processing Costs $315,000 $17,300 $315,000 Other Costs $1,301 $5,000 Direct Depreciation Expense $6,710 $30,725 $4,922 $1,641 Total Allocated Costs -Labor, Vehicle, Fuel & Other Total Allocated Costs -Depreciation & Start-Up Total Annual Cost of Operations $360,859 ($30,700) ($90,200) $219,420 ($25,700) ($18,970) $338,743 Profit*** $49,208 ($3,349) ($12,300) $29,921 ($3,505) ($2,587) $46,192 Pass-Through Costs Disposal Cost (City to pay directly for disposal) I nal $3,0~:1 nal nal $14.0~: I nal nal $2,2::1 $7::1 Interest Expense (external or intra-company) Direct Lease Costs Total Allocated Costs -Lease Total Pass-Through Costs $3,074 $14.076 $2,246 $749 Total Base Compensation $413,142 ($34,049) ($102,500) $263,417 ($29,205) ($19,311) $385,684 Estimated C&D Extra Services Compensation** $243,869 • City chose not to implement Expanded Residential Organics. •• Contractor compensated on a unit price basis at fees established in Attachment N-1. ••• Profit is based on 0.88 operating ratio except for profit for Expanding Residential Single Stream Materials. In this case, increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement I I Zero Waste Services Enhancing Commercial Recycling I TOTAL Form 7H $49,799 $283,763 $20,762 $42,928 ($241,800) $647,300 $8,783 $15,084 $43,998 $58,582 $812,034 $7.988 $111,569 nal n.a. $20,145 $66.571 I $20.145 $943,749 Attachment N-3 Page 10 of56 RESIDENTIAL SOLID WASTE & YARD TRIMMINGS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Forms 6A & 6C Cost for Rate Period I From July I, 2009 To June 30, 2010 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $900,997 :::::::::::::::::::::: ___ _1_~?,?iL 47,828 :::::::::::::::::::::: _____ ~?:;?_82_: 47,828 ________ 7~~ $1,605,334 $1,653,494 $22,722 -----------------11;;15T- ---------4,458 :::::::::::::::::::::::::::___~;_5__25-- 8,100 -------18)97 -----------------38J75-- $148,007 $214,427 _______________ !~~!~-°-~-- 11, 794 -------4,591- :::::::::::::::::::---45~840= $220,860 Baseline Services Total $1,775,751 ~:::::::::::::::::-_-=}~?:;§.:[ -------~4,26~ ______________ !!?,??_~_ . 94,264 ________ 1 ~Q,~~ $46,125 ---------------23~245-· ----------9,o4T ~==::::::::::::90,3~:: -----!~~ ---------------~?,1.:tL. 78,104 $ 300,454 $435,286 $0 ___________________ !,~~?__ _ ________________ _],?}_~------------------~2~~~- ----··---},~8~_ _ ______________ },!~_8_ -----___ _],~~~- _______ 6,12~ ------6,3q_z ______ _E,:t?-2_ $16,498 ----------------~!_92~~--329 ,069 ---------8,525 - ---------------$3K6;947- $16,993 ------ru:-49i···- $ 58,708 --------------658~138-- --------1-7,049 ------------$-733~895-- Attachment N-3 Page 11 of 56 :RESIDENTIAL SOLID WASTE & YARD TRIMMINGS .Allocated Costs -Labor, Vehicle, Fuel & Other Costi From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) 'Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs .Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) 'Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement Attachment N-3 Forms SA & SC Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $473,274 $144,542 $78,064 ········---··--·---$69-5-,880 $45,034 -------------------f739-- --------1S,46 l- ----------------$68}3'.i-- $3,115,326 88 % ____ ~$~42~4~,8~1~7- _____ _!!!.i,J_QL_ -------------------~2.'1~--6,388 -------$!24,036 $292,151 $3,832,294 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $467,656 $148,878 $80,406 ----$6%~946 _______________ 1'1~2QL_ 7,739 ---------15,461 ---------------$67~90:3-- $3,175,584 $433,034 $115,453 -------3,16T -----------------5,697-- ------$124,3JT $274,243 $3,882,861 Baseline Services Total $89,737 ---------------15,47T- ------30,921 ------------sff36,136-- $6,290,910 $857,851 ___ _J22~~2__ ________________ §.,?_D_~-- 12,085 ----$248,347 $566,393 $7,715,155 Attachment N-3 Page 12 of 56 RESIDENTIAL RECYCLABLE MATERIALS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 68 Cost for Rate Period I From July 1, 2009 To June 30, 2010 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 ____ $465,566 - -------------~}..§.~? __ ---~4,714_ ............. }2,~~ -----~4,714 - -------------~2,~~L ____________ U.Q,_2_~L. ____________ U}.2.~~-- 11, 105 _____ 17,61~_ ::=::::::::-:-_-=~tf,'_ffL?.. -----------~-~,_~!9"9-- $782,868 $22,318. -------IT,2ff --------------4,379"' ______ 39,560 _ 7,200 16,574 fio~no -----$131,557 $48,511 $806,354 $22,987 :::=:::::::::=n::-~:s.:~ .... 4,510 ______ i!l.2~2.- $49,966 Baseline Services Total $45,305 ----22,832 -----------------8;&88-- ______ 80:307 - 14,616 -----33,645 --····-------·--~ ---6·i~46_f __ T---26-~061- $98,477 ____________ J.?_,9_~Q__ _ ___________ J.?_J_~Q__ _ ______________ l_~,.1~9 __ ______ l_,2_~-----~~ _____ }.,_~ 1,500 1,545 -----3,045 - ===--1-~~£~ ______________ l!_~Z2__ ===-----~!_~~ ----$11,184 ___ ..;..$_11_,_,5_1_9 -----ffi;-703 · $368,474 · _________ 1~~-~,_±E_ -------------7,578-· 7,578 $316:052 $376:052 $0 736,949 ---------------i-5J55-- .. $"152, 164 . Attachment N-3 Page 13 of 56 RESIDENTIAL RECYCLABLE MATERIALS Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Attachment N-3 Form 68 Cost for Rate Period I From July I, 2009 To June 30, 20 I 0 $420,688 ------------128,482-- ------69,391 --$618,561 $1,459,383 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 ___________ J~-92~§ __ 6,879 -------13,743 ------------$60;358-- $1,489,256 Baseline Services Total $836,383 --------------260~8!8-- -----14()~863 --------$1;238~064- $2,948,639 Profit* 88 % $214,108 # $218,190 ____ $~1_,~~- Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation $101,424 --------3,15T" ---------------5,678" ------$ll0,254- $227,555 $1,901,046 $102,625 ======--~'~!I: 5,064 ------$110300 $227,800 $1,935,245 *Profit is not tied exactly to an 0.88 operating ratio_ The effective operating ratio is slightly different because increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues_ City of Palo Alto Collection Agreement $204,049 ====:::-_-=:=:_s:~~I= 10,742 -----$220,"754 $455,355 $3,836,292 Attachment N-3 Page 14 of 56 COMMERCIAL SOLID WASTE Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreci~tion City of Palo Alto Collection Agreement Attachment N-3 Form 60 Cost for Rate Period l From July 1, 2009 To June 30, 2010 _____________ ?? ... ~2Q __ 14,473 =:::::::::::::::: ____ ~1I~L $702,590 $ 11,990 =:::::::::::::::::::: ___ _2_.§:~:::: 3,_280 _____ 20.5!.!_ Cost for Rate Period 2 From July l, 2010 To June 30, 2011 $723,668 $12,350 ------2,920 --------------3.379-- _______ 3 l ,'!.?_~ _ ------5,722___ ....... 1~~Z~ .. _____ __2~~ $ 93,825 --~~~~--'$~0-$0 Baseline Services Total --------~±,34Q__ -----------------~,'}_~~--6,659 ______ ___§ i,937 11,273 -------27,546 ······-47;408" T----184-;917 $0 -------$0 --------------------$()-- ____________ J4_.9_00__ -------------~.± .. EQ__ _ ________________ 8..l_~Q __ -----1,304 ______ l,34~ ______ _l,~~ ______ _Q~_ -----1,34~-_______ 2,_~ ______________ _2_,§2~--______________ l.J..Z~-------------------~.±~? __ $9,301 $ . 85,(i86. ____________ !?.? ... 2_Q~-- 5,844. $279,434 ------$9380 -----$T8]81- $ _8~,686 ____________ !?.Z.,2_Q~- -~.8~4 $279,434 $171,372 · · 375,868" --------------·ff;6ff" . $558,868 Attachment N-3 Page 15 of 56 COMMERCIAL SOLID WASTE Allocated Costs -Labor, Vehicle, Fuel & Other Cost: From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance ( 6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement Attachment N-3 Form 60 88 % Cost for Rate Period 1 From July I, 2009 To June 30, 2010 $1,788,457 $243,881 $213,054 $2,245,392 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $1,818,513 $247,979 $79,149 ------2,168 --------------3;966-- ----$85--;223 $199,397 $2,265,889 Baseline Services Total $3,606,970 $491,860 $157,373 -----4,598 -----------------&)ff- ------$ i70}56- $412,451 $4,511,281 Attachment N-3 Page 16 of 56 COMMERCIAL RECYCLABLE MATERIALS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form GE Cost for Rate Period 1 From July 1, 2009 To June 30, 20 IO Cost for Rate Period 2 From July 1, 20!0 To June 30, 2011 Baseline Services Total _______ $173,l~L ______ $_12?,064 ______ 1~~_2,912 _ -------9,2~-11,536 -------9j~~_____________ 1.3.!.3-~L- ______ 2.,_505 - . .. ... ... __ _1_1,~82_ 9,505 ========I'l.-:z~r -------------~J.!.'.!Q~---------------~}_,_~?? __ 6,579 6,776 ======J!J.!i~= ==::::=::::::::::::12,_~~L= $282,847 $4,844 =::::::::==::::CI~ _ 1,325 _______ 13,994_ ________ -22_~_ 6,043 fojj2 -------$4ojiiT $73,615 ($457,600) ($457,600) $291,332 $75,824 ($457,600) ($457,600) $9,834 ---------2;:i26- ----------------2;69T- -------28,409 __ $149,439 ($915,200) $0 ($915,200) _____________ g?_qg__ _ ___________ J~,_5_??__ ----------------~'2_7? __ 531 547 ______ _J_,077 - 531 547 _______ _J_,077 - _______________ 1_,.21?__ _ ____________ )_,_~~]__ -----------------~.±~? __ _$101,469 -------------~..6.!_1-~_6 __ 2,681 $i9o,335 $4,929 $!01,469 -------------~-~'-~~_(; __ 2,681 fi9o535 $202,937 172,372 -----------------f36T- . $3so,67<i Attachment N-3 Page 17 of 56 COMMERCIAL RECYCLABLE MATERIALS Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit* Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation Attachment N-3 Form 6E 88 % Cost for Rate Period I From July I, 2009 To June 30, 2010 $148,819 ·-----~-~-~.-35-;~~-24,547 $2i8,816 $14,161 2,433 · · ··-·;cs·6·2 · .... $21:456 .. $374,866 $62,848 ·---·---~~5,8_?9 __ . .. -___ l,1_1.5_ 2,009 $39,002 126,203 $563,917 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 ... -$_1~2.Q~L 46,814 ---·-···--··--xs:2sf· $2i9j49 $14,057 2,433 ·-·--··(862- $2i;352 .. $387,151 $64,526 $36,304 ······-·-·-994 1,791 $39;°089 116,858 $568,536 *Profit is not tied exactly to an 0.88 operating ratio. The effective operating ratio is slightly different because increased recycling revenues were negotiated but profit was intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement Baseline Services Total $295,870 ... . .... 92',264 ..... ·---··;1'9;830- $437,965. ... $28,217 4,867 ···-··-9)23 .. $42-;s01· $762,017 $127,374 $72,182 :::·r@· 3,800 $78,092 243,062 $1,132,453 Attachment N-3 Page 18 of 56 Attachment N-3 Form SF (Note: Forms 60, 6H, and 61 were deleted) COMMERCIAL YARD TRIMMINGS AND FOOD SCRAPS FROM SPECIAL EVENTS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Cost for Rate Period I From July I, 2009 To June 30, 2010 _______ g~~- 391 ----------------332-- 415 332 258 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $2,686 ------$403 ---------------$342-- ------$428 --· .. -----$342- --------$266 5,089 $5,241 ----------------789----------------$813-- ---------442---------$456 $10,657 $80 --------19- 22 22 $143 $1,258 $0 $3,570 $3,570 $500 ---------------------- 147 ---------------------- $647 $10,977 $82 19 23 23 $147 $1,296 $515 151 Baseline Services Total -------~.?~~ ___________________ ?.~~-- -------671__ .... ····----··· . 843 ---------~!-------------------~~-- 10,330 ======J:&Q3--898 ----------------------- --------$21;635- _______ _$_!!i~- --------------------~~-44 45 $2,554 __________________ J_~~-- $b Attachment N-3 Page 19 of 56 Attachment N-3 Form 6F (Note: Forms 6G, 6H, and 6! were deleted) COMMERCIAL YARD TRIMMINGS AND FOOD SCRAPS FROM SPECIAL EVENTS Allocated Costs -Labor, Vehicle, Fuel & Other Cost• From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance ( 6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Direct Lease Costs Route Vehicles Other Total Direct Lease Costs Allocated Lease Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement 88 % Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $0 $0 $16,275 $2,219 n.a. $0 $0 $0 $18,494 Cost for Rate Period2 From July 1, 2010 To June 30, 2011 $0 $0 $16,763 Baseline Services Total $0 $0 $33,038 ___ _;$;:,:2,:;:,2..:.;86:_ ------$4,505 n.a. $0 ________ n~_ $0 $0 ------$0- --------------------$0-- ____ ....;.$0_ $0 ____ _::;;$0:_ $0 ====$=l:l9,=04=9= $37,544 Attachment N-3 Page 20 of 56 ANNUAL CLEAN-UP PROGRAM Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 FORM6J (Note: Fonns 60, 6H, and 61 were deleted) Cost for Rate Period I From July I, 2009 To June 30, 201 O· ______ J65,791_ ________________ }_~,}-~§ __ ---------3,492 4,366 ----·--·--· --· ... 3'·;492-- =======-22~? __ Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $67,765 :=:=:=:====--~?29E 3,597 ------~.1_9[ 3,597 :=:=:==:::== ___ ?IfX_ Baseline Services Total --------~!l~556 _ _ _______________ _?2,_0_1? __ ------7,090 _ . ... . ... _ --.-:_Is§?-.-: --------7,0~ ________________ }_!_,}_'!? __ ________________ }_~,~~?__ 17,471 ________________ }_'!_,1_~? __ 2,632 -----------------2~'ff6-_________ 22.~- ========--!~~@== =========---?~?.:[ ________________ }_'!.,_!?? __ $121,938 $3,290 ======--2_,~Q __ 1,518 ______ _i_,Q~- 300 $125,596 $3,389 :=:=:=:===:==::?A~I: 1,564 ________ j,__!l!_ _ 309 $247,534 ________ J>~i?2.... ________________ 2,~~~-- 3,082 ________ _§_l~- -------609 _ . IA~~ ___ __l_,7_14_ -·----·----...... 32~?8 4,275 4,403 8,678 ----------$17,548----------$J8Jj74 -------$35,622 $34,915 $35,962 $70,877 $0 ________ $Q_ _______ _J_g_ -----$17,300 $17,300 ________________ }_'!_,~qQ__ ---------------$17,300----------------$17~300-$34,600 _______________ J_?_,_?_qQ__ _ ________________ E,~O_O_ 188 193 188 193 490 505 $3,391 ------------~j}_q,2~~-~ _______________ !~Q,?.?2- $30,7i5 $30,725 _ ______________ _$_?_,Q_qQ __ -------2~- ·--------~ ___________________ .:?_~~-- ---------$6,756 -------------~§-~1.~Q __ $0 ---$6i,4so Attachment N-3 Page 21 of 56 Attachment N-3 FORM SJ (Note: Forms 60, 6H, and 61 were deleted) ANNUAL CLEAN-UP PROGRAM Allocated Costs -Labor, Vehicle, Fuel & Other Costl From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement 88 % Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 _______________ _j>~!.,~?-~ -----16,5.i_~ 8,934 . ... . ..... -$77,437- $5,004 $4,967 ·-------------------860---------------------860-· 1,718 1,718 ----------------$i;5ff------------------$7~54-S- $310,691 $316,030 $42,367 $43,095 n.a. n.a. ........... g~-~~. Baseline Services Total --------------~!Qi.?_~? __ ______ J2,6CE_ 17,608 ......... $15(757 _______________ J2.~?.!._ ______ __!_,720 ------------------~.±~? __ $15,126 $626,721 $85,462 _____ Jg678_ --------~_!1,82~ _______ $252_~_ ___________________ }.~~----------------------~?L _____________________ ?.~~-- 110 633 1,343 ------$13,782------$13~12 ------$27,594 $ 27,858 $ 26,366 $380,916 $385,491 $ 54,224 $766,408 Attachment N-3 Page 22 of 56 GENERAL AND ADMINISTRATIVE Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Customer Satisfaction Survey Corporate Overhead Performance Bond Total Other Costs Total Labor, Vehicle, Fuel, and Other Costs Depreciation (non-route specific) and Start-Up Costs Vehicle Depreciation Other Depreciation Start-up Costs Total Depreciation and Start-tip Costs City of Palo Alto Collection Agreement Attachment N-3 Form 6K $ ·cost for Rate Period 1 From July 1, 2009 To June 30, 2010 .... 493,545 Cost for "Rate Period 2 From July 1, 2010 To June 30, 2011 $508,646 Baseline Services Total $1,002,191 __________ _1_~699 -_______ _!.Z,~Q__ --------33,902__ 108,534 _______ I_l__!E2__ _ ________ J_?0,382.__ -----------f6,"839 -_________________ !.?-224:__ _ _______________ }_4:,~2.? __ ~::::~::=::::::::~::=::_"{a~s3I~ -------~1 m __ _ ________ 82,312_ $ 676,154 $ 696,843 $1,372,997 -~----------------!,~?.?__ -----------------~J,.?§.4:_ _ ______________ !~c4:2_!__ _________ h~ ________ £12__ _ _______ --1,_9~2.__ 1,431 1,475 2,906 _______ .?_36 758 . ----· ____ J,4:24:_ ________ 6,13l__ 6,321 ---------~.?L $ 10,998 _$ ____ ]1,335-$ 22,333 _L ___________ J_4:,~!2__ _ ______________ E.?,l.?.2__ _ _____________ J.?-2,~~~-- _!_ __ ~_-3_1~!-------~2872 __ _ _____ J76,59_1_ ________ __!QJ__l_L 22,754 :::::::::=::::=:J]>3{: -----------------~9,§2? __ ------40,886 ---------- . -----40,!~_ _ ___________ !0,219_ 697 718 10,733 --------------459:0iff- -----_-: ___ @oo= $ 717,950 $ 1,419,822 _L ___________ .?_~,~4:.? __ ------76,253 - 32,635 --------------rn-sJoT- _________________ !92?L 459,353 ------_-: ____ ~202__- $ 679,620 $ 1,402,967 __t _____________ ?.?21.?.Q __ 76,297 ----------------~2?24: __ $ 134,110 _____ ___12,_9~ --------------~'~}} __ _______ --2,_9_?!_ _ _______________ .?_!,~}§_ _____ 40,88~ -----_____ ?1,_'72§_ -------1,414 -______________ _?_1,4:?_1__ 918,440 _________ _!_?_?,_()Q"C[ $1,397,570 $2,822,789 _ _____________ J_?_QdQ.? __ _____ 152,~ ________________ _6_~,~~2 __ $268,143 Attachment N-3 Page 23 of 56 Attachment N-3 GENERAL AND ADMINISTRATIVE Lease & Interest Costs Facility Costs (see notes) Lease Costs (see notes) Interest Cost Total Lease & Interest Costs Total Costs to be Allocated Labor, Vehicle, Fuel, & Other Costs Allocated Ou To Residential Solid Waste (6A,C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (6!) To Annual Clean-Up Program (6J) Total Labor, Vehicle, Fuel & Other Costs Allocated Out Depreciation and Start-Up Costs Allocated Ou To Residential Solid Waste (6A,C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (6!) To Annual Clean-Up Program (6J) Total Depreciation and Start-Up Costs Allocated Out Lease & Interest Costs Allocated Om To Residential Solid Waste (6A,C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (6!) To Annual Clean-Up Program (6J) Total Lease & Interest Costs Allocated Out Total Allocated Out Please describe allocation method used (e.g. tonnage, routes, etc.) Allocation is based on number of collection vehicles. Form 6K Percentage 33.33% 29.63% 22.85% 10.48% 3.70% -100.00%- 33.33% 29.63% 22.85% 10.48% 3.70% ----100.00% 33.33% ----29.63% 22.85% ----10.48% ---- 0.00% 0.00% ----0.00% 3.70% 100.00% Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 _! _____ 119,224 - _______________ 1.z_~,~~~- _______ 4_~~.?_:_ $ 342,307 $1,897,230 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $122,872 :=:::::::::: _____ ~ggl~=: 41,454 _$ _______ 346,359 $1,883,436 Baseline Services Total $3,779,597 $473,274 $467,656 _____ _1940,932__ =====$420,68_!!_= :::::::::=::::1415,694-------~l~_l!l_ above above __________________ !!~~.!'.!:'._ --------------$324,455----------------$320,6oT 645,059 __________ _H_4_~~2--______ E47,Q5L _________ _195,~Q._ $52,586 $51,961 104,547 -----$!;419,822 ----$[402,%7-----$2,82fi89 $45,034 $44,703 -------$89,~2_ =======~4Q,_~~= :::::=::::=:::: $3~~]=: _______ ___]'}__,_?§_§__ above above __________________ abo_!l_f'__ ---------------$36~873------------------$3o~6ff 61,520 =======$14,161-=== $l~Q57-: =====--l8,217: 9,971 $269,211 $5,004 $4,967 -----$135])1 -----$134,IJO' $114,102 $115,453 ____ ___E~,555 ----$10[424-----$102,625' 204,049 above above above $78,223 $79,149 =--lS?_,373 = ====-$35,879: -----$36,304 --72,182 --------- ------------------------------ ------------_ -$12,828 -----------$12,678 25,506 $342,307 $346,359 $688;665- $1,897,230 $1,883,436 $3,780,666 Facility lease costs ($119,224 for Rate Period One) are for the Geng Road site owned by the City. Note that first year payment to City is $145,800, but some of the Geng Road lease cost will be recovered through drop box unit price revenues so only a portion of the $145,800 is included here. Lease cost in Rate Period One ($176,628) is for GreenWaste's facility in-San Jose. City of Palo Alto Collection Agreement Attachment N-3 Page 24 of 56 VEHICLE MAINTENANCE Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Customer Satisfaction Survey Computer software systems/programming Other Total Other Costs Total Labor, Vehicle, Fuel, and Other Costs Depreciation (non-route specific) and Start-Up Vehicle Depreciation Other Depreciation Start-up Costs Total Depreciation and Start-Up Costs City of Palo Alto Collection Agreement Attachment N-3 FORM SL Cost for Rate Period I From July 1, 2009 To June 30, 2010 $217,833. -------40,844_ 10,054 ---------------9,425-- -----B,378 -====~-t_?_,f~:__ $383,306 $2,862 ====-8;975= 31,730 -----------------450-- Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 . $~24,~68. -------42,~2.__ _____________ _1_q2~.s __ ______ --2,_~!- . -----~,§_3_(}_ _______ .!__~98 - 49,712 =====::::i:?I? __ ____ __23_,_~~- $394,805 -------------~-~~~? __ _____ _9,24±__ _____________ ?_~,~~? __ 464 245 253 . ·-· ..... ··--····-·-·-·- Baseline Services Total . $44?,200 -------~,913. _ ________________ ?Q,~9-9._ ________ 19, 13'!__ ············ .... J?,Q98_ ------36,26~- _____ 97,97}__ _________________ !.5,~L ________ _i!,!!Q.9 __ $778,110 -----------------~.5,?_l_Q_ __________ 18,2 _!? __ -------------64,412 ------9-1-,r 498 1,227 1,264 2,491 -----$45;490 -----$41(854 ------$92,344" _____________ E.2.~.5__ _ _________ _$1,Q~--________________ J.5,~-9.- $491 $506 -------------------~~i!J_ _____ ..!.2~-____ !.,_436 ------2,829 . ___ ___::;$.;.:l,.:.;88:..:5_ $1,941 $3,826 $433,626 $446,634 $880,260 ___________ J_~8?_5__ $7,875 ---------------~!.5,?_?_q _ ____ 1_5,341 ====-1-5~34T-______ 30,68?_ ___ ....::$=23::.!,2::.:1:...:6_ $23,216 $46,432 Attachment N-3 Page 25 of 56 VEHICLE MAINTENANCE Lease & Interest Costs Facility Interest Total Lease & Interest Costs Total Costs to be Allocated Labor, Vehicle, Fuel, & Other Costs Allocated Ou To Residential Solid Waste (6A&6C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Labor, Vehicle, Fuel & Other Costs Allocated Out Depreciation and Start-Up Costs Allocated Ou To Residential Solid Waste (6A&6C) To Residential Recyclable Materials ( 6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials ( 6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Depreciation and Start-Up Costs Allocated Out Lease & Interest Costs Allocated OU1 To Residential Solid Waste (6A&6C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials ( 6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Lease & Interest Costs Allocated Out Total Allocated Out Please describe allocation method used (e.g. tonnage, routes, etc.) Allocation is based on number of collection vehicles. City of Palo Alto Collection Agreement Attachment N-3 FORM6L Percentage 33.33% 29.63% 22.85% 10.48% 3.70% 100.00% 33.33% 29.63% 22.85% 10.48% 3.70% -------------· 100.00% 33.33% 29.63% 22.85% I0.48% 3.70% 100.00% Cost for Rate Period 1 From July I, 2009 To June 30, 20 IO Cost for Rate Period 2 From July I, 2010 To June 30, 2011 Baseline Services Total $10,636 $9,486 20,122 ------------$To,636---------------$9;486-----------------$2o~l2T. $467,478 $479,336 $144,542 $148,878 _____ G8,482 ______ _..!32,33~_ above above --~~-~-----------_____________ 2_9_,_()_~1__ _ ___________ 10_2LQ~~-- 45,450 -46,814 $946,814 $293,420_ _______ l60,81 ~ above ::::::::::::::=::::::::=Ig1,15_[ 92,264 16,060 16,542 32,602 ----$433,626-----$44~634-------$880)60 ______ _J;.Z.,2~ _______ !~~~-________ !!-5~2~. -----~!~-----6,87~_ ------13,758. ______ above_ ------~<.>."~ ________ _!lbovc:__ _______________ 5_,}.Q?__ _ _____________ -5.dQ?__ _ ________________ !Q,§J_!_ -----2,433 -------~433 -________ _j,86~. 860 860 __________________ 1,?]_Q __ -----------$ifi16--------------$2-3:ZiT $46,432 _______ _$1.2.'!?_ $3,162 ------3,151_ ----~- above ---~ ______ l,115_ 394 $10,636 $467,478 above 2,168 994 351 -----$9;486- $479,336 _______ $6,70~ 5,962 ------above. 4,598 -----2J09 745 $20,122 $946,814 Attachment N-3 Page 26 of 56 CONTAINER MAINTENANCE Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Customer Satisfaction Survey Computer software systems/programming Other Total Other Costs Total Labor, Vehicle, Fuel, and Other Costs Depreciation (non-route specific) and Start-Up Vehicle Depreciation Other Depreciation Start-up Costs Total Depreciation and Start-Up Costs City of Palo Alto Collection Agreement Attachment N-3 FORM SM Cost for Rate Period l From July 1, 2009 To June 30, 20 l 0 $8~,091 _______ 15,~~ _______________ 3,~3'! __ -------3,27l_ .. -------~,3.~________ 6,95 _!__ 24,132 =::::::::=::::=3;:?~.'C -------~12.2._ $155,495 Cost for Rate Period 2 From July 1, 2010 To June 30, 201 I _______ 24,8~_ 3,856 :::::::::::::==]~42~ $160,160 Baseline Services Total . $172,734 ______ ].3,388. _ ________________ ?,~'!!:._ ------6,644_ .... (j,(j_44 --------~~,!_!_IL_ -------48_,2§_~ _________________ ?,~()-~_ _ _____ _!_~,57'!.._ -------------$'.!15~654° $491 ----------------~~Q(j_ ------------------~~2-=======·-73~= -------758 __________ l~~ 1,145 1,18() 2,325 491 506 997 ·----~------------------~------·--· 2,561 2,638 5,199 ------$5,4ff -------$5,587 ------$11Ti2 $9,818 $10,113 $19,931 ········-··-····----··-·-·-----697 718 _____ l~,4_1.?_ ___ _;;_;$6;.;;.3,_.;,4.:...56;_ $65,360 ----'-$_23_4,_,1_93_ $241,219 $475,412 ____________ Ji~,~~Q_ -------------~i~,~~()_ _ _____________ !~~,~~_?)__ 4,553 4,553 9,105 -------------$4(382--------------$46~382--------------$92~764° Attachment N-3 Page 27 of 56 CONTAINER MAINTENANCE Lease & Interest Costs Facility Interest Total Lease & Interest Costs Total Costs to be Allocated Labor, Vehicle, Fuel & Other Costs Allocated Ou To Residential Solid Waste (6A&6C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Labor, Vehicle, Fuel & Other Costs Allocated Out Depreciation and Start-Up Costs Allocated Ou To Residential Solid Waste (6A&6C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Depreciation and Start-Up Costs Allocated Out Lease & Interest Costs Allocated Oui To Residential Solid Waste (6A&6C) To Residential Recyclable Materials (6B) To Residential Yard Trimmings (6A&6C) To Commercial Solid Waste (60) To Commercial Recyclable Materials (6E) To Commercial Yard Trimmigns & Food Scraps (6F) To Roll-off Box Solid Waste (6G) To Roll-off Box Recycling (6H) To Roll-off Box C&D (61) To Annual Clean-Up Program (6J) Total Lease & Interest Costs Allocated Out Total Allocated Out Please describe allocation method used (e.g. tonnage, routes, etc.) Allocation is based on number of collection vehicles. City of Palo Alto Collection Agreement Attachment N-3 FORM SM Percentage 33.33% 29.63% 22.85% I0.48% 3.70% -------I00.00% 33.33% -----29.63% 22.85% I0.48% 3.70% 100.00% 33.33% ----29.63% ---- 22.85% -----10.48% ---- ----- ----- -----3.70% 100.00%- Cost for Rate Peried I From July I, 2009 To June 30, 20!0 $299,739 Cost for Rate Period 2 From July I, 20 IO To June 30, 2011 $304,692 Baseline Services Total $604,431 ... $78,064 $80,406 $158,471 -----~_21_ ______ 71,42? ______ _)40,8§_ ·------------~~21.?__ -------------~~,!?.3__ _____________ _l_Q~,~~_1 __ , 24,547 25,283 49,830 _____ _!_~5,461_ ____ 1~.461_ , _____ __$],Q,921_ _______ 13,741._ ---13,7~ _______ ..?,?,~!~ _____________ J_Q,~??_. ______________ !Q,~?2._ ---------------~!,!?.ll._ ------4,86~_ -----~~-_______ 9,7'2]__ 1,718 1,718 3,436 -----------$46~382--------------$46)82-·-------------$92~76T -----$6,38!_ , _______ $5,62?_ _____ 5,67!_ _____ 5,064 ----4,37J,_ 3,906 2,009 ____ 1,22_1_ ---------------- --------------- -------·-------· 7!0 633 19,164 17,091 $299,739 $304,692 ----$12,0~ ___ -1.Q,742. 8,285 -----~Q_ -----~---1,343 ----$36,255 $604,432 Attachment N-3 Page 28 of 56 RECYCLE CENTER Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 FORM SN Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $ 81,120 ------25,623---------------3,744-- --------4,6B0- -------------3,744-- 7,224 ---------ro-- ---------------------- -----29,4~_ 4,576 -----9)i53 ---------w-_____________________ $ 170,058 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $83,554 ------$26,392--------------$3,856-- -----$4,8io -------------$3,856-- -$7,446 -------$0- ------------$3o,38o-- -------$4,713- , ----$16)48----------$0 -----------$175.Tiio-- _L __________ I_,_2_:5_~--___________ J_~._2.2? __ 504 519 403 415 554 571 385 397 3,105 3,198 Baseline Services Total 59,875 -------9,289- -------26,~Ql_'~ -------------$345,218-- $2,556 ~====~?::~ -------------------~!~-- _! ___ _!_,!?_<! ________ $1,87~_ --------$3,69~_ --~~~~~$0_ $0 $0 ----------------$0-- ------10 $ $0 ________ _!Q__ ______ _1_,080 _ ------~~ _____ _1,_12~ 852 877 _________ 1,?12__ -$ ············-----i)32 $1,990 $3,922 __ _ -~------------_3_,_3_Q~--_! ___________ }_J_~~--_______________ !_6_.i!~-- ----~25-====---2~6_~~-~ ------11)50 T--------8,931-$ 8,931 -------------$17--;-863-- Attachment N-3 Page 29 of 56 RECYCLE CENTER Allocated Costs -Labor, Vehicle, Fuel & Other Cost: From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance ( 6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation Attachment N-3 FORM SN 88 % Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 ....... $6 $0 $185,846 $25,343 n.a. $0 4,092 215,280 Note: The Recycle Center costs were added to the Contractor's Base Compensation after the other costs were Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 $0 $191,154 $26,066 n.a. .......... _}c6.49_ $0 3,649 220,870 # developed. Because these costs were added at a later date, allocated costs from general and administrative (Form 6K), vehicle maintenance (Form 6L), and container maintenance (Form 6M) were not reallocated to the Recycle Center costs. City of Palo Alto Collection Agreement Baseline Services Total $0 --------------------$0- -------10- ···············$ii- $0 --------------------$0-- --------10- --------------------$(>-- $377,000 $51,409 ------~ .... },!41. $0 --------10- -------------------$0- ---------$0 7,741 436,150 Attachment N-3 Page 30 of 56 TWO ADDITIONAL ROUTE SUPERVISORS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance. Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach . Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 FORM60 Cost for Rate Period 1 From July I, 2009 To June 30, 2010 $ 600 720 700 600 3,000 $ 5,620 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $154,500 ---------$0 ------------------$()" ---------$0- ------------------$0- $10,113 --------10· ------------$3o,379-- ----~il3-.. ------$12399 -------$0 ----------$212,364-- $618 ----------------------742 721 618 .. 3,Q90 5,789 --____ _..;.$.;._O $0 $ $0 852 878 $ 852 $878 $ $ _$ __________________ _ $ Baseline Services Total _______ _!~i,_?_QQ__ _________ _J.2,.fl I __ 59,873 -------9289 - ______ 2_±:_~[. ------------$4T8)1i4-- --------.h~ ______ 12!.§_ 6,090 $ I l,409 $0 --------------------$0-- -------$0 -----~ ______ l,'22_ ......... ----$1)36'' --------------------~9 __ $0 Attachment N-3 Page 31 of 56 TWO ADDITIONAL ROUTE SUPERVISORS Allocated Costs -Labor, Vehicle, Fuel & Other Cost: From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Attachment N-3 FORM SO 88 % Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 -----------------$0-- .... --I.L?~Q. $11,750 $231,542 $31,574 n.a. Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 ·•· _JJ,?5.Q_ -----Tu-;-750 $238,136 $32,473 n.a. Baseline Services Total $0 --------------------$0-- --------10 -------------------$0-- $469,678 $64,047 n.a. ----------Disposal Cost (City to directly pay for disposal cost) Interest Expense ______________ }.,~-?~--______________ }.,Q_?~------------------~-~~~-- Allocated Lease & Interest Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease & Interest Costs Total Pass-Through Costs Total Base Compensation $0 $0 3,074 3,074 266,190 273,683 # Note: The two additional route supervisors were added to the Contractor's Base Compensation after the other costs were developed. Because these costs were added at a later date, allocated costs from general and administrative (Form 6K), vehicle maintenance (Form 6L), and container maintenance (Form 6M) were not reallocated to the two additional route supervisors. City of Palo Alto Collection Agreement $0 _______ $Q_ ------··· .... JO $0 6,148 539,873 Attachment N-3 ·Page 32 of 56 Attachment N-3 FORM6P Baseline Services· RESIDENTIAL YARD TRIMMINGS (Incremental costs, in addition to costs shown on Form 6A&C, to deliver materials to SMaRT Station) .Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Other Total Vehicle-Related Costs Fuel Costs Net Yard Trimmings Processing Costs Organics Processing Costs Material Sales Revenue Total Net Yard Trimmings Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Other Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Cost for Cost for Rate Period I Rate Period 2 From July I, 2009 From July I, 2010 To June 30 2010 To June 30 2011 $17,019 $17,530 743 765 1,302 1,341 $19,064 $19,636 $247 $255 125 128 48 50 $420 $433 $2,332 $2,402 $0 $0 $0 $0 Total $34,549 1,508 2,643 $38,700 $502 253 98 $853 $4,735 $0 $0 $0 $0 $0 $0 Attachment N-3 Page 33 of 56 Attachment N-3 FORM6P Baseline Services RESIDENTIAL YARD TRIMMINGS (Incremental costs, in addition to costs shown on Form 6A&C, to deliver materials to SMaRT Station) Allocated Costs -Labor, Vehicle & Other Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Costs -Labor, Vehicle & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance ( 6M) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (6K) From Vehicle Maintenance (6L) From Container Maintenance (6M) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement 88 % Cost for Cost for Rate Period 1 Rate Period 2 From July 1, 2009 From July 1, 20IO To June 30, 20!0 To June 30, 20I 1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $21,816 $22,471 $2,975 $3,064 n.a. n.a. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $24,791 $25,535 Total $0 $0 $0 $0 $44,287 $6,039 n.a. $0 $0 $50,327 Attachment N-3 Page 34 of 56 EXPANDING RESIDENTIAL ORGANICS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Organics Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7A Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 201 I Total $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ------$0- --------------------$0-· -----------w-------------------$0 $0 ____________________ $_o __ --------------------~-~-- $0 $ $0 -----------------$0- ------$0 $0 $0 -------------------$0-· ---------w-------------------$0-· $0 ---------------$0-· --------------------$0-· ===--------~--$0 ------$0 -------------------$0-· $0 ----------$0" $0 ------------------$0-- ------$0- -------------------$0-· Attachment N-3 Page 35 of 56 EXPANDING RESIDENTIAL ORGANICS .Allocated Costs -Labor, Vehicle, Fuel & Other Cost: From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) 'Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs .Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) 'Total Allocated Costs -Depreciation and Start-Up Costs 'Total Annual Cost of Operations Profit (Enter% Operating Ratio; i.e. 95%): Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Direct Lease Costs Route Vehicles Other (Please List) Total Direct Lease Costs Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the residential solid waste collection costs shown on Form 6A of the Baseline Services cost proposal forms resulting from the implementation of the expanded residential organics program. City of Palo Alto Collection Agreement Attachment N-3 Form 7A $0 88 % •••••••• Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 Total $0 $0 $0 $0 $0 $0 $0 $0 n.a. n.a. -------~ -------w------~ $0 0% $0 Attachment N-3 Page 36 of 56 EXP ANDING COMMERCIAL ORGANICS Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Organics Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7B Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 Total ______ _1_2~~ _______ 1,365 _______ 2,69_!__ $468 ----------------------236 $482 ----------------------· 243 $950 -----------------479- ___ ___;$:..:7-=-04-'-. $725 $1;429 · ___ __;_$4-''-'-41;..;;.3_ $4,546 $8,959 $0 ____ _;:;_$0:.... ----------~$0 --------------~~,ZJ.Q_ -------------~~,ZJ.Q_ _ _______________ !~,~?L ------'-$6_.,7_1_0_ $6, 710 ------------$13~42T Attachment N-3 Page 37 of 56 EXPANDING COMMERCIAL ORGANICS Allocated Costs -Labor, Vehicle, Fuel & Other Cost' From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance ( 6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the commercial solid waste collection costs shown on Form 6F of the Baseline SeNices cost proposal forms resulting from the implementation of the expanded commercial organics program. City of Palo Alto Collection Agreement Attachment N-3 Form 7B 88 % Cost for Rate Period 1 From July I, 2009 To June 30, 2010 $0 $360,859 $49,208 $0 $3,074 $413,142 0% Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 $0 $371,484 $50,657 $0 $2,742 $424,883 0% Total -------$0 ·------·-·-----·----........... "$"0'" - $732,344 $99,865 $5,816 $838,025 Attachment N-3 Page 38 of 56 EXPANDING RESIDENTIAL SINGLE STREAM Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7C Zero Waste Services Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $0 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 --------'-$_0 $0 -------~------~o -------=$-=--o $0 Total $0 ------$0- ========::::1Q:= $0 --------10- -------------------$0" -------10--------------------$0" -------10 --------------------$0 --------~- _____ _!Q__ $0 -------------------$0- --------------------$0" ·----------$0 ·$0--------10- ----------------$0- $0 ----··-----------$0··· ---------$-0 - ------------------$0- ------10- --------------------$0" $0 $0 $6 -------------------$()- $() Attachment N-3 Page 39 of 56 EXP ANDING RESIDENTIAL SINGLE STREAM Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit* Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the residential recyclable materials collection costs shown on Form 6B of the Baseline Services cost proposal forms resulting from the implementation of the expanded residential single stream program. Attachment N-3 Form 7C Cost for Rate Period 1 From July I, 2009 To June 30, 2010 $0 ------------$0 ---------------------$6-----------w- $0 --------$0" ·--------------------$6-- ---------$0 ($30,700) 88 % ____ ->.::($"'"3,<::.34.:..;9_,_) n.a. $0 ----------- $0 ·---·----$() ----------$0" ·---------------------$6- $0 ($34,049) 0% Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 ---------$() ·--------------------$0- --------$0- Total __ __c$_0 $0 $0-------w----------------------ro--------------------$0- --------$0-------$0- ($31,621) ($3,450) n.a. $0 -------------- $0 ··-····-·---$0- ------10 ---------------------$()- $0 ($35,071) 0% ($62,321) ($6,799) n.a. ---------$0 _ $0 ($69,120) *Profit is not tied exactly to an 0.88 operating ratio. The effective operating ratio is slightly different because increased recycling revenues were negotiated but profit oos intentionally not reduced to reflect increased recycling revenues. City of Palo Alto Collection Agreement Attachment N-3 Page40 of 56 EXPANDING COMMERCIAL SINGLE STREAM Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 FORM7D Zero Waste Services Cost for Rate Period l From July I, 2009 To June 30, 2010 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 ------'-$0'-$0 $0 ---------w- ($90,200) ($92,906) $0 $0 Total $0 ---------w- ------------------$0-- --------$0- ------10· --------$0- ------------------$0-- $0 -------------------$0-- -------$0- ------------------$0-- ----------$0- $0 ---------$0- -------------------$0-- $0 -------$0- ··-··-······-·····---··-··-·-------······-·--·---· $0 -------$0- -· --···-----------$6 -------w- $0 ($183,106) --------w- ----------($183,T66Y $0 -----------------$0-- -------------------w- -----$0 ----------$6--------w- ---------------$0-- --------$0- --------$0 $0 -----------------$0--------w-------------------$0-- ------$0' $0 -$6 -------------------$0- --$6 Attachment N-3 Page 41 of 56 EXPANDING COMMERCIAL SINGLE STREAM Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the recyclable materials collection costs shown on Form 6E of the Baseline Services cost proposal forms resulting from the implementation of the expanded commercial single stream program. City of Palo Alto Collection Agreement Attachment N-3 FORM7D Cost for Rate Period l From July 1, 2009 To June 30, 20 l 0 $0 -------$0 -------------------$6-· --------$0" $0 --------$0 -------------------$6- --------$0" ($90,200) 88 % ----"($""'1~2,._30'-0_,_) n.a. $0 $0 $0 ------$0· ------------------fo-· $0 ($102,500) 0% Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 --------w- -------------------$6-· -------$0 $0 ----------$0" -------------------$6-· ----------$0. ($92,906) ($12,669) n.a. $0 $0 $6 -------w- ------------------$6-· $0 ($105,575) 0% Total $0 ---------$0 ·------------------$0- --------fo- $0 -----------$0 ·------------------$6-- ------fo-- ($183,106) ($24,969) n.a. $0 $0 ($208,075) Attachment N-3 Page 42 of 56 EXPANDING CLEAN-UP DAYS REUSE AND RECYCLING Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7E Zero Waste Services Cost for Rate Period l From July l, 2009 To June 30, 2010 $65,791 ________ 12,33_L ------------------~El_? __ -----------~2JL -___ },Q37_ ---------~~.Q__ Cost for Rate Period 2 From July I, 2010 To June 30, 2011 . $67,?65 . 12,706 ------------------~,l~L -------~'.IJ.Q__ ----·····---~"l?~. ______ _2,~_ 14,747 15,190 =====:::::::: __ ?ll"f ====:::: ____ ?,~.?_? __ _________ _?_,.!_!~--_______ _!_,~L $117,631 $121,160 -----------------~2?2_~_ ---------------~~~_8_2 __ 2,490 2,564 ======~~!= ====--::::::::::=:: __ J,~4___ 4,011 4,131 300 309 ············-------··---·······--________ l,664 -_______ .!2_1_4___ 4,275 4,403 ----""""'$'"'"1""1,""54....;8_ ·$i-s:o74 $34,915 $35,962 $5DO $515 ·------------------------- 188 193 188 193 .---'---------------~ 426 439 $1,301 $1,340 Total $6,679 -----------------5;o54-- ·------1:-0&2 ------------------(142-- 609 ··-··--·-----------··· 3,378---------S,678 ----rn:ii22- $70,877 -------------------~~L- 381 ------~------- 865 --------- ---------------$2:641-- $~0,725 ------------~~~-Q,?If_-----------------~~TJsq-- $30,725 $30,725 Attachment N-3 Page 43 of 56 EXP ANDING CLEAN-UP DAYS REUSE AND RECYCLING Allocated Costs -Labor, Vehicle, Fuel & Other Costi From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation City of Palo Alto Collection Agreement Attachment N-3 88 % Form 7E Cost for Rate Period I From July I, 2009 To June 30, 2010 $0 $0 $219,420 $29,921 n.a. ·--------------------------$ 14,076 $0 $ 14,076 $263,417 Zero Waste Se~ices Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $0 $0 $225,080 $30,693 n.a. $ _ 12,554 $0 $ 12,554 $268,327 Total $0 $0 $444,500 $60,614 ·--------$0- $ 26,630 $531,744 Attachment N-3 Page 44 of 56 MANDATORY RESIDENTIAL RECYCLING PARTICIPATION Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7F.1 Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $0 $0 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 $0 Zero Waste Services From July 1, 2011 To June 30, 2012 $0 ______________ [~~.Q,'.?_Q~)_ _ ____________ {~_!-~~.!)_ _____________ _(!~?,~_2-~l ------------------------~-$0 ($62,321) ($30,700) ($31,621) =-===~~,_q_QQ_ ====-----~~!_q~_ ~-------------!!21>.9--2_. $5,000 $5,000 $0 $0 -------------$10~000- $0 Attachment N-3 Page 45 of 56 Attachment N-3 Form 7F.1 MANDATORY RESIDENTIAL RECYCLING PARTICIPATION Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the residential recyclable materials collection costs shown on Form 6B of the Baseline Services cost proposal forms resulting from the implementation of the mandatory commercial collection program. City of Palo Alto Collection Agreement 88 % Cost for Rate Period I From July I, 2009 To June 30, 20 I 0 ----------------------$()-- $0 ($25,700) ($3,505) n.a. $0 ($29,205) 0% Zero Waste Services Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $0 $0 ($26,621) ($3,630) n.a. $0 $0 ($30,251) 0% From July I, 2011 To June 30, 2012 $0 $0 ($52,321) ($7,135) ---------------------ll"llo. ------$0 $0 ($59,456) 0% Attachment N-3 Page 46 of 56 MANDATORY RESIDENTIAL ORGANICS PARTICIPATION Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7F.2 Cost for Rate Period I From July I, 2009 To June 30, 20 IO $0 $0 $0 $0 $0 ------------------------- Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 ---------------------$(>-- $0 $0 From July I, 2011 To June 30, 2012 $0 $0 --------------------$6- $0 =---=--====-~9__ ~------------------~_Q_ ------'-$0'--$0 $0 ______ .o_$0'-$0 $0 Attachment N-3 Page 47 of 56 Attachment N-3 Form 7F.2 MANDATORY RESIDENTIAL ORGANICS PARTICIPATION Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the residential yard trimmings collection costs shown on Form 6C of the Baseline Services cost proposal forms resulting from the implementation of the mandatoiy commercial collection program. City of Palo Alto Collection Agreement 88 % Cost for Rate Period I From July I, 2009 To June 30, 20 I 0 $0 $0 $0 $0 n.a. $0 $0 $0 0% Zero Waste Services Cost for Rate Period 2 From July I, 2010 To June 30, 20 I I $0 $0 $0 n.a. From July I, 2011 To June 30, 2012 $0 $0 $0 $0 _____________________ !10~0. --------$() ------w- $0 $0 0% $0 $0 0% Attachment N-3 Page 48 of 56 MANDATORY COMMERCIAL RECYCLING PARTICIPATION Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7F.3 Zero Waste Services Cost for Rate Period 1 From July I, 2009 To June 30, 20 I 0 $45,000 223 ______ 11_,_0~.!.__ 1,716 _____ _}_21.§___ $61,725 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $46,350 229 11,392 -----1,767 _______ 3_,_~ From July I, 2011 To June 30, 2012 $91,350 --------452 . --------22,45-3 --------3,483 _______ 7 ,56_'!_ _________ $225_ $232 _________ 1457 ____________________ !_~~-:.:::.:::::::.:::.:::.::=:.::21:r ____________________ 548 263 270 _______ -2}_~ $2,700 $2,781 $5,481 ($90,200) _____ (92,906) ______ (183,!_06) -------$() $0 ----------($9o,2oo) _________________ C$92-:Cio6Y --------($Ts3:io6) $0 $0 $0 ------------------$4,9:ff ------------------$4,922------------------$9:844- -----~922 ------$4,9n------$9.844 Attachment N-3 Page49 of 56 Attachment N-3 Form 7F.3 MANDATORY COMMERCIAL RECYCLING PARTICIPATION Allocated Costs -Labor, Vehicle, Fuel & Other Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the commercial solid waste collection costs shown on Form 6E of the Baseline Services cost proposal forms resulting from the implementation of the mandatory commercial collection program City of Palo Alto Collection Agreement 88 % Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 $0 $0 ($18,970) ($2,587) $0 $2,246 ($19,3JJ) 0% Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 $0 $0 ($19,687) ($2,685) From July 1, 2011 To June 30, 2012 ($38,657) ($5,271) -------$0-------$0 $2,011 ($20,361) 0% $4,257 ($39,672) 0% Attachment N-3 Page 50 of 56 MANDATORY COMMERCIAL ORGANICS PARTICIPATION Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims · Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel and Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7F.4 Zero Waste Services Cost for Rate Period 1 From July I, 2009 To June 30, 2010 74 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 76 ________ _}_ii87 -3,797 572 --------589- _______ I,24?_ _______ 1,27~_ $20,575 $75 90 88 $21,192 $77 93 90 From July 1, 2011 To June 30, 2012 7,484 --------(16T =====-==;gT $41,767 $152 _________ 18_3_ ________ 17_!!_ 375 386 761 $628 $900 $0 $1,641 $1,641 -----$646 -------$074 $927 $0 $1,641 $1,641 $1,827 $0 $3,281 $3,281 Attachment N-3 Page 51of56 Attachment N-3 Form 7F.4 MANDATORY COMMERCIAL ORGANICS PARTICIPATION Allocated Costs -Labor, Vehicle, Fuel & Other Costi From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (6Ij From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the recyclable materials collection costs shown on Form 6E of the Baseline Services cost proposal forms resulting from the implementation of the mandatory commercial collection program. City of Palo Alto Collection Agreement 88 % Cost for Rate Period I From July 1, 2009 To June 30, 2010 $0 $0 $338,743 $46,192 $0 $749 $385,684 0% Zero Waste Services Cost for Rate Period 2 From July 1, 2010 To June 30, 201 I $0 $0 $348,856 From July 1, 2011 To June 30, 2012 $0 $0 $687,600 ____ _:$:...:4.;.,7•::..57:..:1_ -------$93,?§.±._ $0 $670 $397,098 0% $0 $1,419 $782,782 0% Attachment N-3 Page 52 of 56 Attachment N-3 Form 7G Zero Waste Services INCREASING C&D DIVERSION Estimated tons diverted per year Estimated tons per load Estimated trips per year (tons per year I tons per load) Extra service fee for C&D drop box trip (per Form 7 of Baseline Services) Extra service fee for Solid Waste drop box trip (per Form 7 of Baseline Services) Net increase to Contractor's Compensation* Estimated program cost Note: Tonnage presented here is hypothetical for purposes of providing an exam le. Actual costs will be based on actual loads of C&D collected. Cost for Rate Period 1 From July 1, 2009 To June 30, 2010 5,342 4.30 1,242 $504.90 $308.60 $196.30 $243,869 Cost for Rate Period 2 From July 1, 2010 To June 30, 2011 5,342 4.30 1,242 $512.97 $313.05 $199.92 $248,366 * Assumes that C&D materials was originally collected as solid waste and the increased C&D diversion resulted in shifting of that tonnage into C&D drop boxes. City of Palo Alto Collection Agreement Attachment N-3 Page 53 of 56 ENHANCING COMMERCIAL RECYCLING Labor-Related Costs (includes regular & pool personnel) Regular Wages Overtime Wages Holiday Wages Vacation Wages Sick Leave Wages Workers Compensation Insurance & Claims Employers Liability Insurance Health & Welfare Pension/ Retirement Benefits Payroll Taxes Other Total Labor Related-Costs Vehicle-Related Costs Tires & Tubes Parts Supplies (fluid, oil, etc.) Taxes & Licenses Fines & Penalties Radio Air time Outside Repairs Vehicle Insurance Total Vehicle-Related Costs Fuel Costs Net Recyclables Processing Costs Net Recyclables Processing Revenue Net Organics Processing Cost Total Net Recyclables Processing Costs Other Costs Liability & Property Damage Insurance Damage Claims Equipment Insurance Rent Utilities Telephone Non-vehicle Related Supplies Non-vehicle Related Taxes & Licenses Training & Safety Programs Initial Public Education & Outreach Continuing Public Education & Outreach Uniforms Travel abd Mileage Total Other Costs Direct Depreciation Container Depreciation Route Vehicle Depreciation Other Depreciation Total Direct Depreciation City of Palo Alto Collection Agreement Attachment N-3 Form 7H Cost for Rate Period I From July 1, 2009 To June 30, 2010 ______ $i~~QQ__ 223 -------------------~?_?? __ $0 $0 -----------------~~'~Q~-- $0 Zero Waste Services Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $0 $0 . $0 Total ------------------~~~-- ----------------~~-7_? __ $49,799 ________ _!Q__ $0 $0 --------------------~Q __ ----------------~,Q_~Q __ 3,783 $8,783 $0 $0 ------------------$6-- $0 Attachment N-3 Page 54 of 56 ENHANCING COMMERCIAL RECYCLING Allocated Costs -Labor, Vehicle, Fuel & Other Costi From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Labor, Vehicle, Fuel & Other Costs Allocated Costs -Depreciation and Start-Up Cost From General and Administrative (61) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Costs -Depreciation and Start-Up Costs Total Annual Cost of Operations Profit Pass-Through Costs Disposal Cost (City to directly pay for disposal cost) Interest Expense Allocated Lease and Procurement Costs From General and Administrative (6I) From Vehicle Maintenance (6J) From Container Maintenance (6K) Total Allocated Lease and Procurement Costs Total Pass-Through Costs Total Base Compensation Proposed reduction to the commercial recycling costs collection costs shown on Form 6E of the Baseline Services cost proposal forms resulting from the implementation of the expanded residential single stream program. City of Palo Alto Collection Agreement Attachment N-3 Form 7H Zero Waste Services Cost for Rate Period 1 From July I, 2009 To June 30, 2010 $0 $0 Cost for Rate Period 2 From July I, 2010 To June 30, 2011 $0 ---------$0 $0 $0 $58,582 $0 88 %~~~~~-$_7~,9_8~8 $0 n.a. n.a. $0 -·····-.. ·-~-·-·----- $0 ---------------------$6- $0 $0 $66,571 $0 0% 0% Total ---~--_!Q_ $0 ----------$0 _ $0 $58,582 7,988 n.a. _______ · _iii $0 $0 $0 $66,571 Attachment N-3 Page 55 of 56 Attachment N-3 Forms Processing Costs Baseline and Zero Waste Services Recyclable Materials* Organic Materials** C&D*** Base Fee ($51.02) $68.98 $39.46 Regulatory Fees & Taxes (list separately) LEA enforcement fee $1.02 $1.02 $1.02 AB939 fee $0.53 SW planning fee $0.08 State fee $0.21 San Jose disposal fee $1.95 Total Regulatory Fees $1.02 $1.02 $3.79 Total Processing Cost/Ton ($50.00) $70.00 $43.25 * Per-Ton Recyclables Materials Processing Costs is a Net Revenue; assumes direct haul to San Jose Charles Street Facility. ** Per-ton Organic Materials Processing Cost is "gate fee" at the San Jose Charles Street faciliy so it covers transfer, hauling to Z-Best, and Z-Best fees. *** Per-ton cost is "gate fee" at Zanker C&D processing facility. Drop boxes will be directly hauled to the facility: City of Palo Alto Collection Agreement Attachment N-3 Page 56 of 56 Attachment 0 Liquidated Damages The following table lists the events that constitute breaches of the Agreement's standard of performance warranting the imposition of liquidated damages; the acceptable performance level, and the amount of liquidated damages for failure to meet the contractually required standards of performance. Contractor shall submit a monthly report listing the number of events that occurred, and the number of complaints received, in each category during the preceding month and computing the amount (if any) of liquidated damages accrued. Upon City request, Contractor shall also provide a printout of the full records. Contractor shall report accurate, reliable and verifiable data. Acceptable Event of Non-Performance Performance Level Liquidated Damage (Allowed events per Amount Fiscal Year) Collection Reliabilitv Failure to notify City of reportable quantities of 0 $500 per event Hazardous Waste Failure to maintain the collection schedule on the 0 $1,000 per day per scheduled day route Failure to start new customer service, or initiate change 5 $300 per day in service, within 7 calendar days from the date the request was received Failure to provide services as required in Attachment C 0 $500 per day Collection Ouality Failure to clean up promptly materials spilled or leaked 5 $500 per event from collection containers during service or collection vehicles Spills of vehicle fluids from Contractor's vehicles on 0 $500 per event public streets Failure to replace containers in original position (or 10 $300 for every 10 alternate location if original position did not meet containers replaced guidelines in Attachment C) incorrectly per day and per route Not closing gates, crossing planted areas, or other 24 $500 per event damage to private property Failure to resolve property damage claims from 0 $300 per event customers within thirty (30) calendar days of the date of complaint/damage being reported Failure to comply with hours of operation as required in 5 $300 per incident Agreement (e.g. early start) Complaints about excessive noise complaints 12 $300 per complaint Failure to tag Containers not collected with notice of 12 $150 per container reason (e.g. excessive weight, hazardous waste, etc) Failure to clean public solid waste receptacles and their 5 $150 per container lids Failure to power wash public solid waste and recycling 0 $150 per container receptacles, lids and metal liners twice per year Failure to wipe the exteriors and lids of all public 0 $200 for every 10 receptacles every two weeks containers Failure to promptly repair, or arrange for the repair of, 0 $500 per event 2 Acceptable Event of Non-Performance Performance Level Liquidated Damage (Allowed events per Amount Fiscal Year) all damage to private property caused by Contractor employees, within ten (I 0) Business Days of the complaint being received Customer Resnonsiveness Discourteous behavior 0 $500 per complaint Failure to respond to and initiate a remedy for a 0 $300 per event complaint which is found to be justified by the Director within one Business Dav after notification by Director Failure to maintain office hours as required in 0 $300 per day Agreement Failure to answer the telephone during work hours or 0 $300 per event return messages left on answering machine within one Business Day Failure to respond to service request within one 0 $300 per event business day Failure to correct and report billing errors caused by 0 $250 per customer Green Waste account each month the account error remains uncorrected Failure to report accurate and verifiable records of non-0 $500 per event utility Customers receiving on-call services from Contractor Failure to report accurate and verifiable records of 0 $500 per event Commercial Customers receiving billing services from Contractor Failure to remit to City revenues received from non-0 $500 per event utility Customers and Commercial Customers for services performed by Contractor Failure to collect missed containers within one Business 0 $300 per event Day after receipt of notice Failure to deliver a replacement Cart to Customer 0 $150 per container within five (5) Business Days of notification of cart being lost, destroyed or stolen. Failure to deliver a replacement Cart to Customer 0 $150 per container within seven (7) Business Days of notification to Contractor by the City or a Customer that a change in the size of a wheeled cart is required. Failure to remove a Cart that is being replaced within 0 $150 per container 3 Acceptable Event of Non-Performance Performance Level Liquidated Damage (Allowed events per Amount Fiscal Year) seven (7) Business Days of notification to Contractor by the City or a Customer. Failure to remove graffiti from any container within two 0 $150 per container (2) Business Days of notification Failure to repair or replace Container damaged by 0 $150 per container Collection operations within three (3) Business Days of being notified by Customer or of observing the damaged Container. v Re[!orting Late Submittal of required Reports 0 $250 per day for each day report is overdue Submittal of inaccurate report and failure to submit 0 $250 per day for corrections to City. each day inaccurate information is not corrected by Contractor Errors in customer service records found during route 0 $200 for each ten audits. errors in excess of ten errors per route Processing Failure to submit Marketing Plans for Recyclable 0 $500 per material Materials, Compostable Materials, Construction and type, per day Demolition Debris, and bulky items. Failure to submit certification of end use for Recyclable 0 $500 per material Materials, Compostable Materials, and Construction type, per day and Demolition Debris. Stockpiling of processed materials beyond the time 0 $500 per material allowed in Attachment E. type, per day Recyclable Materials -one year Compostable Materials-two years Construction and Demolition Debris -two years Bulky items -two weeks Failure to recycle seventy-five percent (75%) of 0 $200 per box Construction and Demolition Debris per Attachment delivered to C&D E.C.2.c. processing facility during review year. 4 Acceptable Event of Non-Performance Performance Level Liquidated Damage (Allowed events per Amount Fiscal Year) Prohibited use of materials per Attachment E. 0 $10,000 per day Miscellaneous Disposal of Recyclable Materials, Compostable 0 $175 per Ton Materials, or Construction and Demolition Debris Disposed without written City approval or as permitted in Attachment E. Use of unauthorized facilities (Delivery of Recyclable 0 $175 per Ton Materials, Compostable Materials, or Construction and Delivered to Demolition Debris to a facility other than that unauthorized designated in Agreement or approved in writing by facilities City) 5 ATTACHMENT P LIST OF CONTRACTOR'S SHAREHOLDERS/OWNERS Greenwaste Recovery, Inc. Individuals owning outstanding shares of common stock as of January 2015: Richard A. Cristina, & Diane L. Cristina, Trustees Murray B. Hall, Trustee Antoinette Cristina, Trustee Eric A. Bracher & Vivian M. Bracher, Trustees Gene P. Carter & Patricia J. Carter, Trustees Gary V. Giannini & Susan M. Giannini, Trustees William H. Giannini & Linda D. Giannini, Trustees Gary P. Madden, Trustee Mary Jane Filice, Trustee Patricia L. Sheehan, Trustee Herbert Sweatt , Trustee Nancy R. Sweatt, Trustee Tara R. Sweatt Cole R. Sweatt Frank C. Weigel, Trustee Juan & Cindy Pena, Trustees Clayton A. Feldman & Sandra G. Feldman, Trustees Zanker Road Resource Management, Ltd. Number of Shares 475,000 415,000 40,000 205,000 100,000 100,000 115,000 50,000 50,000 100,000 100,000 60,000 20,000 20,000 250,000 250,000 50,000 Individuals owning a partnership as of January 2015: A. General Partners: Zanker Road Resource Recovery, Inc. H.L Sweatt, Inc. Ownership Interest 30% 10% % 19.79% 17.29% 1.67% 8.54% 4.17% 4.17% 4.79% 2.08% 2.08% 4.17% 4.17% 2.50% 0.83% 0.83% 10.42% 10.42% 2.08% 1596355.1 Zanker Road Resource Management, Ltd. (continued) B. Limited Partners Name Ownership Interest Gene P. Carter & Patricia JoAnn Carter, Co-Trustees of the 7.0588% Carter Family Trust, dated April 29, 1985 John D. Couch 9.0044% Diana L. Couch, trustee of the Diana L. Couch Trust, dated 9.0044% November 8, 2006 Marylou Couch, trustee of the James & Marylou Couch Family 0.5206% Trust Antoinette Cristina, Trustee of the Cristina Revocable Trust, 0.8824% dated February 7, 1991, as amended, fbo the Vernon Cristina Family Trust Richard A. Cristina & Diane L. Cristina, Trustees of the 1. 764 7% Richard A. Cristina & Diane L. Cristina Trust, dated December 20, 1995, as amended Teresa Shilling, Trustee of the Shilling Family Trust, dated 1.7647% October 4, 1985 William F. Neal & Kathleen A. Neal, Co-Trustees of the Neal 5.2941 % Family Revocable Trust, dated October 28, 1997 David Lazares, Trustee of the Lazares Family Trust, dated 1. 764 7% November 11, 1991 Sportsell, LP #4 10.5882% Sweatt, Herbert L. 0.8824% Sweatt, Nancy R. 0.8824% Juan Pena & Cindy Weigel-Pena, Co-trustees of the Juan & 1.323550% Cindy Pena Revocable Trust, dated May 6, 2010, as the sole & separate property of Cindy Pena Frank Weigel, Trustee of the Frank Weigel Revocable Trust, as 1.323550% amended & restated on March 22, 2012 Phyllis R. Wilks & David R. Wilks, Trustees of the Wilks Family 0.8824% Living Trust, dated May 24, 2010 Zerbe, Ken W. 7.0588% TOTAL 100.000% 1596355.1 ATTACHMENTQ ARBITRATION OF DISPUTES ARISING UNDER SECTIONS 9.07, 9.09, 9.10 OR 9.14 1. Demand for Arbitration If Contractor is dissatisfied with a decision of the City under Section 9.07, Section 9.09, Section 9.10, or Section 9.14, it shall serve a Demand for Arbitration on the City within sixty (60) days of that decision. The Demand for Arbitration shall describe the issues to be arbitrated and Contractor's contentions relating to those issues. The Demand shall be served on the City Manager with a copy delivered to the City Attorney. Arbitration shall be the exclusive remedy for Contractor under these sections and shall be final and binding. 2. Number and Qualifications of Arbitrators The arbitration shall be conducted by a panel of three (3) arbitrators. One arbitrator shall be appointed by Contractor, one arbitrator shall be appointed by the City, and the third arbitrator shall be appointed by the other two arbitrators. The third arbitrator of the arbitration panel shall be an attorney licensed to practice within the courts of the State of California (or a retired judge of a California or federal court) and shall be the "neutral arbitrator" referred to in California Code of Civil Procedure Section 1280( d). No member of the panel shall be an officer, employee, agent, or attorney of Contractor or the City, or an affiliate of Contractor. Alternatively, the parties may agree on a single arbitrator, in which case that arbitrator shall be the "neutral arbitrator". 3. Appointment Within thirty (30) days after a Demand for Arbitration has been served, each party shall personally serve the other with notice of the names of the arbitrators they have selected. The two arbitrators named by the parties shall select the third arbitrator within thirty (30) days. If they are unable to agree upon a third arbitrator, either party may request the Presiding Judge of the Superior Court in Santa Clara County to make the appointment. 4. Powers of Arbitrators; Conduct of Proceedings (a) Except as hereinafter provided, arbitrations shall be conducted under and be governed by the provisions of California Code of Civil Procedure, Sections 1282.2 through 1284.2 (hereinafter, collectively, "Code sections"), and arbitrators appointed hereunder shall have the powers and duties specified by the Code sections. (b) Unless waived in writing by the parties, the notice of hearing served by the neutral arbitrator shall not be less than 90 days. 1407274.2 (c) The lists of witnesses (including expert witnesses), and the lists of documents (including the reports of expert witnesses) referred to in Code of Civil Procedure Section 1282.2 shall be mutually exchanged, without necessity of demand therefor, no later than sixty (60) days prior to the date of the hearing, unless otherwise agreed in writing by the parties. (d) The time for making the award shall be no later than twelve (12) months after service of the initial Demand for Arbitration, provided that such time may be waived or extended as provided in Code of Civil Procedure Section 1283.8. ( e) The arbitrators shall not base their award on information not obtained at the hearing. (t) The provisions for discovery set forth in Code of Civil Procedure Section 1283 .05 are incorporated into and made part of this contract, except that (1) leave of the arbitration panel need not be obtained for the taking of depositions, including the depositions of expert witnesses; (2) the provisions of Code of Civil Procedure Section 203 7 et seq., relating to discovery of expert witnesses, shall also be applicable to arbitration proceedings arising under this contract, except that the time period set forth in Section 2037(a) shall be deemed to be not later than sixty (60) days prior to the date for the hearing; and (3) all reports, documents, and other materials prepared or reviewed by any expert designated to testify at the arbitration shall be discoverable. (g) The arbitration award shall be in writing and determined by a majority of the members of the arbitration panel. (h) The arbitration panel jurisdiction and authority are limited to a determination of the amount of compensation due to Contractor under this contract. The arbitration panel is not authorized, and does not have jurisdiction, to determine or award money damages against City, its officers, employees or agents. 5. Costs. Each party shall pay the compensation and expense of the arbitrator which it appoints, as well as its own costs and attorneys' fees, expert and witness fees, and other expenses incurred in preparing and presenting its case. The compensation and expenses of the neutral arbitrator, rental of the hearing room, costs of a stenographic reporter, and other costs of the arbitration shall be divided equally between and paid equally by Contractor and City. 1407274.2 ATTACHMENT R CERTIFICATION OF NONDISCRIMINATION Project: ~1'\D VJAs1e/Rs:t:YCU('..H1/YAi2-\\ \tlAJ\l\fl..l~Gs CoLtcLT\ ri~ ~ Bc:cx_e,·:::f_::,\ N (: Certification of Nondiscrimination: As suppliers of goods and/or services to the City of Palo Alto in excess 1 . of $5,000, the firm, contractor or individual(s) listed below certify that: they do not and in the performance of peir-.f:f /J\f:J'-:S.\ this contract they wi11 not discriminate in employment of any person because ot race, skin co1or, gender, age, 41" Co'1i2. wso\ religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, · weight or height of such person; and further certify that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment. DATE: -~/~D;;_,,,2"'--.. '"'-+)/_a_.$?'.,___ __ I I Attachment S -List of Special Events 2014 Special Events With Waste Stations # Date Event Service ordered Cart/Bin Usage Est. Material 1 2/22/2014 Company Picnic Compost :2-32 gal Compost: .32 CY Compost: .32 CY 2/22/2014 Juana Run NO SERVICE 2 3/8/2014 COPA Arbor Day Garbage: 2-32 gal Garbage: .08 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .16 CY Recycle: .16 CY Compost: 2-64 gal Compost: .16 CY Compost: .20 CY 3 3/29/2014 Soap Box Derby Garbage: 2-32 gal Garbage: .08 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .16 CY Recycle: .18 CY Compost :2-64 gal Compost: .16 CY Compost: .18 CY 4 4/3/2014 Hobbitcon Garbage: 9 CY Garbage: 9 CY Garbage: 4 CY Recycle: 3 CY Recycle: 3 CY Recycle: 5 CY Compost : 12 CY Compost: 12 CY Compost : 15 CY 4/19/2014 Run for Gorillas NO SERVICE 5 4/19/2014 Great Race for Water (COPA) Garbage: 4-32 gal Garbage: .20 CY Garbage: .20 CY Recycle: 4-64 gal Recycle: .43 CY Recycle: .43 CY Compost :4-64 gal Compost: .43 CY Compost: .43 CY 6 4/25/2014 Gamble Garden Recycle: 4-96 gal Recycle: 1.92 CY Recycle: 2.25 CY Compost :12-64 gal, 3 CY Compost: 6 CY Compost: 5.88 CY 7 5/4/2013 Aldersgate Spring Bazaar Garbage: 2-32 gal Garbage: .2 CY Garbage: .1 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: . 7 CY Compost :2-64 gal Compost: .28 CY Compost: .32 CY 8 5/5/2014 May Fete Fair Garbage: 5-32 gal Garbage: .8 CY Garbage: .2 CY Recycle: 5-64 gal Recycle: 7 Recycle: 7 + .2 Compost :5-64 gal Compost: .8 Compost: 1.2 9 5/5/2014 May Fete Parade Garbage: 2-32 gal Garbage: .20 CY Garbage: .1 CY Recycle: 2-64 gal Recycle: .43 CY Recycle: .43 CY Compost: 2-64 gal Compost: .43 CY Compost: .53 CY 5/9/2013 Bike to Work Day NO SERVICE 10 5/9/2014 JCC Farmer's Market Garbage: 5-32 gal Garbage: .26 CY Garbage: .06 CY Recycle: 5-64 gal Recycle: .8 CY Recycle: .9 Compost :5-64 gal Compost: .65 CY Compost: .75 11 5/16/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .2 CY Garbage: .OS CY Recycle: 3-64 gal Recycle: .6 CY Recycle: .65 CY Compost: 3-64 gal Compost: .5 CY Compost: .6 CY 12 5/17/2014 Soap Box Derby Garbage: 2-32 gal Garbage: .08 CY Garbage: .08 CY Recycle: 2-64 gal Recycle: .32 CY Recycle: .32 CY Compost: 2-64 gal Compost: .32 CY Compost: .32 CY 13 5/17/2014 Bike to Bay Garbage: 1-32 gal Garbage: .1 CY Garbage: .1 CY Recycle: 1-64 gal Recycle: .16 CY Recycle: .18 CY Compost: 1-64 gal Compost: .16 CY Compost: .2 CY 14 5/18/2014 Avenidas Garbage: 2-32 gal Garbage: .32 CY Garbage: .16 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: .72 CY Compost: 2-64 gal Compost: .32 CY Compost: .4 CY 15 5/18/2014 School of Rock Garbage: 3-32 gal Garbage: .16 CY Garbage: .1 CY Recycle: 3-64 gal Recycle: O CY Recycle: 0 CY Compost :3-64 gal Compost: .32 CY Compost: .38 CY 16 S/23/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .18 CY Garbage: .OS CY Recycle: 3-64 gal Recycle: .7 CY Recycle: . 7S CY Compost: 3-64 gal Compost: .52 CY Compost: .62 CY 17 5/30/2014 Key's Picnic Compost: 1-4 CY Compost: 1-4 CY Compost: 1-4 CY 18 S/30/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .16 CY Garbage: .12 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .8 CY Compost: 3-64 gal Compost: .4 CY Compost: .8 CY S/31/2014 COPA Reading Pawty NO SERVICE 19 S/31/2014 Dog Agility Show Garbage: 3-32 gal Garbage: .40 CY Garbage: .3 CY Recycle: 3-64 gal Recycle: .96 CY Recycle: 1 CY Compost: 3-64 gal Compost: .96 CY Compost: 1 CY 20 6/6/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .16 CY Garbage: .12 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .8 CY Compost: 3-64 gal Compost: .4 CY Compost: .8 CY 21 6/7/2014 Dog Agility Show Garbage: 3-32 gal Garbage: .48 CY Garbage: .48 CY Recycle: 3-64 gal Recycle: .96 CY Recycle: .96 CY Compost: 3-64 gal Compost: .96 CY Compost: .96 CY 22 6/7/2014 Splash into Summer Garbage: 4-32 gal Garbage: 0 CY Garbage: O CY Recycle: 4-64 gal Recycle: O CY Recycle: 0.04 CY Compost: 4-64 gal Compost: .32 CY Compost: .20 CY 6/7/2014 Kermesse NO SERVICE 23 6/8/2014 Tour de Cure Garbage:20-32 gal,1-3CY Garbage: S.4 CY Garbage: 2.4 CY Recycle:20-64 gal 2-4CY Recycle: 12.8 CY Recycle: 13.8 CY Compost:20-64gal,1-4CY Compost: S.8 CY Compost: 7.8 CY 24 6/13/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .16 CY Garbage: .12 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .8 CY Compost: 3-64 gal Compost: .4 CY Compost: .8 CY 25 6/lS/2014 World Music Garbage: 2-32 gal Garbage: .14 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .32 CY Recycle: .37 CY Compost: 2-64 gal Compost: .2 CY Compost: .2S CY 26 6/20/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .16 CY Garbage: .12 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .8 CY Compost: 3-64 gal Compost: .4 CY Compost: .8 CY 27 6/21/2014 College Terrace Picnic Garbage: 1-32gal Recycle: Garbage: .04 CY Garbage: .02 CY 1-64gal Compost: 1-64gal Recycle: .28 CY Recycle: .29CY Compost: .1 CY Compost: .11 CY 28 6/26/2014 Boost Merecedes Garbage: 1-32gal Recycle: Garbage: .OS CY Garbage: .03 CY 1-64gal Compost: 1-64gal Recycle: .lS CY Recycle: .16CY Compost: .2 CY Compost: .21 CY 29 6/26/2013 SVCLC Bocce Ball Garbage: 1-32gal Recycle: Garbage: .04 CY Garbage: .02 CY 1-64gal Compost: 1-64gal Recycle: .1 CY Recycle: .llCY Compost: .1 CY Compost: .11 CY 30 6/28/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .16 CY Garbage: .12 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .8 CY Compost: 3-64 gal Compost: .4 CY Compost: .8 CY 31 6/29/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: .OS CY Garbage: .03 CY Recycle: 2-64 gal Recycle: .1 CY Recycle: .11 CY Compost :2-64 gal Compost: .1 CY Compost: .11 CY 32 7/4/2014 Chili Cook Off Garbage: 12-32, 2-96 gal Garbage: 1.44 CY Garbage: .6 CY Recycle: 12-64 gal, 2-4Y Recycle: 9.92 CY Recycle: 10 CY Compost: 12-64 gal, 1-2Y Compost: 3.92 CY Compost: 4.68 CY 7/10/2014 Stanford Run NO SERVICE 33 7/11/2014 Dog Agility Show Garbage: 3-32 gal Garbage: .48 CY Garbage: .48 CY Recycle: 3-64 gal Recycle: .96 CY Recycle: .96 CY Compost: 3-64 gal Compost: .96 CY Compost: .96 CY 7/12/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: .08 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .1 CY Recycle: .11 CY Compost :2-64 gal Compost: 1 CY Compost: 11 CY Cogswell Concert Series NO SERVICE 34 7/12/2014 Clay and Glass Garbage: 12-32gal Garbage: 1.92 CY Garbage: .48 CY Recycle: 12-64gal Recycle: 3.84 CY Recycle: 3.84 CY Compost :12-64gal Compost: 1.92 CY Compost: 3.36 CY 35 7/15/2014 Accel Backyard Bash Compost: 1-64 gal Compost: 0.32 CY Compost: 0.32 CY 7/19/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: .1 CY Garbage: .03 CY Recycle: 2-64 gal Recycle: .13 CY Recycle: .15 CY Compost :2-64 gal Compost: .13 CY Compost: 17 CY 36 7/20/2014 PAMP Family Day Garbage: 3-32 gal Garbage: .4 CY Garbage: .2 CY Recycle: 3-64 gal Recycle: .8 CY Recycle: .9 CY Compost: 3-64 gal Compost: .7 CY Compost: .9 CY 37 7/25/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .12 CY Garbage: .08 CY Recycle: 3-64 gal Recycle: . 7 CY Recycle: .8 CY Compost: 3-64 gal Compost: .5 CY Compost: 1 CY 7/26/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: .12 CY Garbage: .05 CY Recycle: 2-64 gal Recycle: .2 CY Recycle: .22 CY Compost :2-64 gal Compost: .15 CY Compost: .19 CY 38 7/29/2014 Council BBQ Recycle: 1-96 gal Recycle: .48 CY Recycle: .48 CY Compost: 2-64 gal Compost: .6 CY Compost: .6 CY 39 8/1/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .14 CY Garbage: .08 CY Recycle: 3-64 gal Recycle: .7 CY Recycle: .9 CY Compost: 3-64 gal Compost: .4 CY Compost: .7 CY 8/2/2014 Health Tap NO SERVICE 40 8/2/2014 Obon Festival Garbage: 2-4 CY Recycle: 1-15 CY Compost: 1-15 CY, 2-4Y 8/2/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: 0.16 CY Recycle: 2-64 gal Recycle: 0.64 CY Compost :2-64 gal Compost: CY 41 8/8/2014 JCC Farmer's Market Garbage: 3-32 gal Garbage: .12 CY Garbage: .08 CY Recycle: 3-64 gal Recycle: .7 CY Recycle: .8 CY Compost: 3-64 gal Compost: .5 CY Compost: 1 CY 42 8/8/2014 Co-ed Soccer Tournament Garbage: 2-32 gal Garbage: .22 CY Garbage: .06 CY Recycle: 2-64 gal Recycle: .34 CY Recycle: .4 CY Compost :2-64 gal Compost: .16 CY Compost: .26 CY 43 8/14/2014 Accel Summer of Love Compost: 1-64 gal Compost: 0.32 CY Compost: 0.32 CY 44 8/15/2014 Cloudera Company Picnic Garbage: 2-32 gal Garbage: .32 CY Garbage: .1 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: .66 CY Compost :2-64 gal Compost: .64 CY Compost: .84 CY 8/16/2014 Twilight Concert Series Garbage: 2-32 gal Garbage: .16 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .16 CY Recycle: .18 CY Compost :2-64 gal Compost: .32 CY Compost: .42 CY 45 8/22/2014 Barron Park Movie Night Garbage: 2-32 gal Garbage: .16 CY Garbage: .04 CY Recycle: 2-64 gal Recycle: .32 CY Recycle: .36 CY Compost :2-64 gal Compost: .32 CY Compost: .4 CY 46 8/23/2014 Aldersgate Funeral Garbage: 2-32 gal Garbage: .32 CY Garbage: .12 CY Recycle: 2-64 gal Recycle: .54 CY Recycle: .6 CY Compost :2-64 gal Compost: .12 CY Compost: .24 CY 47 8/23/2014 Festival of the Arts Garb: 28-32 gal, 1-20Y Recy: 38-64 gal, 2-20Y Comp: 37-64 gal, 1-20Y 48 8/24/2014 Know Your Neighbor (El Carmelo) Garbage: 2-32 gal Garbage: .16 CY Garbage: .16 CY Recycle: 2-64 gal Recycle: .2 CY Recycle: .2 CY Compost :2-64 gal Compost: .2 CY Compost: .2 CY 49 8/28/2014 COPA Zip Car Garbage: 2-32 gal Garbage: .06 CY Garbage: .06 CY Recycle: 2-64 gal Recycle: .2 CY Recycle: .2 CY Compost :2-64 gal Compost: .12 CY Compost: .12 CY 50 9/4/2014 Karen Holman Event Garbage: 1-32 gal Garbage: .08 CY Garbage: .04 CY Recycle: 1-64 gal Recycle: .16 CY Recycle: .16 CY Compost: 1-64 gal Compost: .16 CY Compost: .2 CY 51 9/5/2014 Moonlight Run Garbage: 10-32 gal Garbage: .8 CY Garbage: .16 CY ~ecycle: 10-64 gal, 3-4Y Recycle: 12 CY Recycle: 12 CY Compost: 10-64 gal, 3Y Compost: 1 CY Compost: 1.6 CY 52 9/7/2014 ZWBLJoyce Garbage: 1-32 gal Garbage: .08 CY Garbage: .02 CY Recycle: 1-64 gal Recycle: .32 CY Recycle: .34 CY Compost : 1-64 gal Compost: .16 CY Compost: .2 CY 53 9/12/2014 Gunn 50th Garbage: 2-32 gal Garbage: .32 CY Garbage: .08 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: . 72 CY Compost :2-64 gal Compost: .32 CY Compost: .48 CY 54 9/14/2014 Moon Festival Garbage: 3-32 gal Garbage: .24 CY Garbage: .09 CY Recycle: 3-64 gal Recycle: .9 CY Recycle: 1 CY Compost: 3-64 gal Compost: .18 CY Compost: .24 CY 9/17/2014 SSIL Cross Country NO SERVICE 55 9/20/2014 Ventura Pizza Party Recycle: 1-96 gal Recycle: .43gal Recycle: .43gal Compost :2-64 gal Compost :.64 gal Compost :.64 gal 56 9/20/2014 ZWBL Garbage: 1-32 gal Garbage: .02 CY Garbage: .02 CY Recycle: 1-64 gal Recycle: .48 CY Recycle: .48 CY Compost: 1-64 gal Compost: .38 CY Compost: .38 CY 57 9/26/2014 Japan Festival Welcome Dinner Garbage: 1-32 gal Garbage: .16 CY Garbage: .08 CY Recycle: 1-64 gal Recycle: .64 CY Recycle: .64 CY Compost: 1-64 gal Compost: .32 CY Compost: .4 CY 58 9/27/2014 Aldsersgate Salmon Dinner Garbage: 2-32 gal Garbage: .32 CY Garbage: .24 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: .64 CY Compost: 2-64 gal Compost: .64 CY Compost: .72 CY 59 9/27/2014 College Terrace Picnic Garbage: 1-32 gal Garbage: .08 CY Garbage: .02 CY Recycle: 1-64 gal Recycle: .08 CY Recycle: .1 CY Compost: 1-64 gal Compost: .08 CY Compost: .12 CY 60 9/27/2014 Come Together Garbage: 7-32 gal Recycle: 7-64 gal Compost: 7-64 gal 61 9/27/2014 Friends Harvest Festival Garbage: 1-32 gal Garbage: .16 CY Garbage: .14 CY Recycle: 1-64 gal Recycle: .32 CY Recycle: .32 CY Compost: 1-64 gal Compost: .30 CY Compost: .32 CY 62 9/27/2014 Canary Challenge Garb: 8-32 gallon, 3-4Y Garbage: 6.5 CY Garbage: 3 CY Recy: 8-64 gallon, 2-6Y Recycle: 14.5 CY Recycle: 15 CY Comp: 8-64 gallon, 1-4Y Compost: 3.5 CY Compost: 6.5 CY 63 9/28/2014 Japan Tschiura Festival Garbage: 4-32 gal Garbage: .16 CY Garbage: .08 CY Recycle: 4-64 gal Recycle: 1.28 CY Recycle: 1.3 CY Compost: 4-64 gal Compost: .64 CY Compost: . 7 CY 64 9/28/2014 PA Airport Day Garbage: 12-32 gal Garbage: .96 CY Garbage: .18 CY Recycle: 12-64 gal Recycle: 1.92 CY Recycle: 1.92 CY Compost: 12-64 gal Compost: .38 CY Compost: 1.18 CY 65 10/4/2014 Feet for Freedom Garbage: 2-32 gal Gatbage: .16 CY Garbage: .1 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: .64 CY Compost :2-64 gal Compost: .32 CY Compost: .38 CY 66 10/4/2014 Kara Walk Garbage: 2-32 gal Recycle: 2-64 gal Compost :2-64 gal 67 10/8/2014 EV Week Garbage: 1-32 gal Recycle: 1-64 gal Compost: 1-64 gal 68 10/10/2014 PASC Garbage: 2-32 gal Garbage: .16 CY Garbage: .10 CY Recycle: 2-64 gal Recycle: .48 CY Recycle: .48 CY Compost :2-64 gal Cbmpost: .32 CY Compost: .38 CY 69 10/11/2014 Great Glass Pumpkin Garbage: 7-32 gal Garbage: .28 CY Garbage: .08 CY Recycle: 7-64 gal Recycle: 1.68 CY Recycle: 1.7 CY Compost: 7-64 gal Compost: .56 CY Compost: .74 CY 70 10/14/2014 Employee Recognition Garbage: 4-32 gal Recycle: 4-64 gal Compost: 4-64 gal 10/15/2014 White Cane NO SERVICE 10/16/2014 UNAFF NO SERVICE 71 10/25/2014 Dog-0-Ween Garbage: 1-32 gal Recycle: 1-64 gal Compost: 1-64 gal 72 10/25/2014 PBC Harvest Festival Garbage: 1-32 gal Garbage: O CY Garbage: O CY Recycle: 1-64 gal Recycle: .32 CY Recycle: .32 CY Compost: 1-64 gal Compost: .24 CY Compost: .24 CY 73 10/27/2014 Cal Ave Trick or Treat Garbage: 2-32 gal Garbage: .32 CY Garbage: .12 CY Recycle: 2-64 gal Recycle: .64 CY Recycle: .7 CY Compost :2-64 gal Compost: .32 CY Compost: .46 CY 74 11/14/2014 Light the Night Garbage: 8-32 gal Recycle: 8-64 gal Compost: 8-64 gal 11/29/2014 Tree Lighting Garbage: 1-32 gal Recycle: 1-64 gal Compost: 1-64 gal 75 12/6/2014 Mitchell Park Grand Opening Garbage: 10-32 gal Garbage: .4 CY Garbage: .2 CY Recycle: 10-64 gal Recycle: 1.6 CY Recycle: 1.6 CY Compost: 10-64 gal Compost: .8 CY Compost: 1 CY 76 12/31/2014 Senior Lunch Garbage: 1-32 gal Recycle: 1-64 gal Compost: 1-64 gal FUELING PERMIT NO. C09124501 ~~~~~~~~~~~ This Fueling Permit ("Permit") is issued by the CITY OF PALO ALTO, a California municipal. corporation ("City") to GREEN WASTE OF PALO ALTO, a joint venture ("Customer"). SECTION 1. The term of this Permit shall be 90 days ("Initial Term"), commencing on the date of its issuance by the City. The term shall be automatically renewed for successive three-month terms, commencing on the first day of the month immediately following the Initial Term, unless and until this Permit is terminated for convenience upon ninety (90) days' prior written notice or terminated for cause upon 24 hours' notice. For the purposes hereof, the City's city manager or its designee is expressly authorized to terminate this Permit on behalf of the City, and any default hereunder shall be a ground for termination for cause. SECTION 2. The City will furnish compressed natural gas CNG) fuel to the Customer, subject to its availability and priority of use by the City, at such times and dates, in such amounts, and in accordance with the terms and conditions of this permit and applicable statutes, laws, ordinances, resolutions, schedules, rates and regulations. The City will be responsible for paying the cost of all fuel dispensed into Customer vehicles, including applicable fuel taxes. If the City's fueling facility is closed for a period of more than 24 hours (excluding Sunday) requiring Customer to fuel its vehicles at another facility, the City shall reimburse Customer for the cost of all fuel dispensed into Customer vehicles at the alternate facility and any applicable fuel taxes, on a temporary basis at market rates, subject to receipt of invoices from the alternate facility. Nothing in this Permit shall be construed to require the City to furnish any available excess CNG fuel to any public, governmental, or non-governmental agency, and the City expressly reserves the right at any time to cease the provision of CNG fuel to any person. SECTION 3. The City grants to the Customer a non-exclusive, revocable permit and license to enter and re-enter the City Municipal Services Center ("MSC") premises located at 3201 East Bayshore Road, Palo Alto, County of Santa Clara, and operate its motor vehicles expressly identified as "Authorized Motor Vehicles" in Exhibit "A", for the sole purpose of fueling and refueling such motor vehicles at the City's CNG fueling facility ("Facility"f between the hours of 6:00 a.m. and 2:00 p.rn., Monday through Saturday, but excluding any day on which 081006 jb 0130375 permission to enter is temporarily suspended by the City's fleet manager. The City is not required to give advance notice to the Customer of the closure of the MSC. In the event the City suspends access to the MSC without providing at least three (3) days advance notice to the Customer and Customer cannot readily access a commercially reasonable alternative source of CNG, Customer shall not be liable for any resulting failure to perform or delay in performance under the Agreement for Solid Waste Recyclable Materials, and Compostable Materials Collection and Processing Services between the City of Palo Al to and GreenWaste of Palo Alto, commencing on July 1, 2009 ("Agreement") and such failure shall not constitute a default under the Agreement. SECTION 4. The Customer, acting by and through its employees-motor vehicle operators, shall fuel its motor vehicles in accordance with the City's written instructions for the fueling of CNG-fueled motor vehicles, as such instructions are set forth in Exhibit "B". NO PERSON SHALL BE PERMITTED BY THE CUSTOMER TO REMAIN IN THE MOTOR VEHICLE OF THE CUSTOMER DURING THE FUELING OF SUCH VEHICLE, AND A FAILURE TO COMPLY WITH THIS PROVISION SHALL CONSTITUTE A DEFAULT UNDER THIS PERMIT. Each employee-motor vehicle operator of the Customer shall execute a certification of instruction in the form of Exhibit B before a motor vehicle operated by such employee-motor vehicle operator may be fueled at the Facility. The initiation of CNG fueling of such motor vehicles shall be accomplished by the use of (1) card key ("key"), magnetic card ("card"), or wireless control device ("device") per motor vehicle, up to a maximum of 10 key, cards, or devices. The City will be responsible for paying the cost of the initial set of key, cards or devices. The Customer agrees to be responsible for the safe keeping of the keys, cards and devices and agrees to pay for the safe keeping of the keys, cards and devices and agrees to pay for the destruction, loss or theft of the keys, cards and devices and the cost of their replacements. Only those employee-motor vehicle operators who execute certifications of instructions shall be permitted by the Customer to use the keys, cards and devices and the Customer shall execute a Certification of Customer in the form of Exhibit C in accordance with this provision. A failure to comply with this provision shall constitute a default under this Permit. Notice of the destruction, loss or theft of any key, card or device shall be given by the Customer to the City's fleet manager as soon as reasonably possible following the discovery of the destruction, loss or theft by any reasonable means, including telephone, facsimile or electronic mail. A failure to 2 081006 jb 0130375 provide such notice shall constitute a default under this Permit. SECTION 5. The City's fleet manager or his designees will furnish CNG fueling training materials to the Customer's employee-motor vehicle operators at the MSC at such times and dates as may be established, in writing, by the City's fleet manager. Nothing contained in this Permit shall be construed to limit the right of the City's fleet manager to refuse to fuel a Customer vehicle if the employee-motor vehicle operator of the vehicle is not in possession of a valid certification of instruction or has not applied for a certification of instruction. SECTION 6. All notices, communications or transmittals required under this Permit (excepting the notice of destruction, loss or theft in section 4) shall be made, in writing, shall be delivered through the United States certified mail, return receipt requested, by documented personal delivery, by documented overnight courier service delivery or by receipted facsimile, and shall be addressed to the following addresses, or such other address as a party may designate, in writing, to the other party in like manner: To City: To Customer: Director of Public Works 250 Hamilton Avenue Palo Alto, CA 94301 Tel: ( 650) 329-2 325 Fax: (650) 329-2"299 Attention: General Manager GreenWaste of Palo Alto 1500 Berger Drive San Jose, CA 95112 Tel: (408) 283-4804 Fax : ( 4 0 8 ) 2 8 7 -3108 SECTION 7. This Permit is personal to the Customer and shall not be assigned or transferred by the Customer without the prior written consent of the City. SECTION 8. The Customer, at its sole cost and expense, shall obtain and maintain in full force during the term of this Permit the types of insurance coverage that may be. reasonably required by the City's risk manager, including, with out limitation, commercial general liability insurance and 3 081006 jb 0130375 automobile liability insurance, each in amounts of not less than $1, 000, 000. With the exception of workers' compensation and employer's liability, the insurance coverage and endorsements reflected in any certificate of insurance shall name the City as an additional insured concerning the Customer's fueling activities under this Permit. The certificates will contain an endorsement stating that the insurance is primary coverage and will not be canceled or altered by the insurer except after filing with the City's city clerk thirty (30) days' prior written notice of such cancellation or alteration, and shall be furnished to the City's fleet manager before CNG fueling of the Customer's motor vehicles may occur. All insurance coverage required hereunder will be provided through carriers with Best's Key Rating Guide rating of A: VII or higher which are admitted ,to transact insurance business in the State of California. Notwithstanding the policies of insurance, the Customer will be obligated for the full and total amount of any damage, injury, or loss caused by, directly or indirectly, or arising as a result of the Customer's fueling activity, including such damage, injury, or loss arising after the Permit is terminated or the term has expired. The City shall not be obligated to take out insurance on the Customer's personal property or the personal property of any person performing labor or services or supplying materials or equipment to the Customer. The Customer may provide and the City may accept proof of self-insurance retention by the Customer. SECTION 9. The Customer by executing this Permit certifies that it is aware of the provisions of the Labor Code of the State of California which require every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions of that Code, and certifies that it will comply with such provisions, as applicable, before commencing fueling activities under the authority of this Permit. SECTION 10. The Customer agrees to accept all risks, including risk of loss, related to the operation and CNG fueling of the Customer's motor vehicles at the Facility, agrees to pay for all costs of cleaning up, transporting, storing, and disposing of any hazardous materials or waste spilled at the Facility by the motor vehicle operations of the Customer's employees, and agrees to protect, indemnify, defend and hold harmless the City, its Council members, officers, employees and agents from any and all demands, claims, or liability of any nature, including death of or injury to any person, property damage or any other loss, caused by or arising out of the 4 081006 jb 0130375 Customer's or its officers', agents', subcontractors' or employees' negligent acts, errors, or omissions, or willful misconduct or conduct for which applicable law may impose strict liability on the Customer in the performance of or the failure to perform its obligations under this Permit, under the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Carpenter-Presley-Tanner Hazardous Substance Account Act, the Hazardous Waste Control Law, the Safe Drinking Water and Toxic Enforcement Act, and under any other local, state or federal law, statute, ordinance, rule or regulation, excepting only such damage, death or injury caused by the sole negligence of or willful misconduct by the City. SECTION 11. Nothing contained in this Permit, nor any act of the City, shall be interpreted or construed as creating the relationship of third party beneficiary, limited or general partnership, joint venture, employer or employee, or principal and agent between the City and the Customer or its agents, employees or contractors. The Customer shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which its employees-motor vehicle operators observe the agreements, covenants, terms and conditions imposed on it by this Permit. The Customer agrees to be solely responsible for its own acts and those of its officers, partners, employees, agents, contractors, subcontractors and representatives. SECTION 12. Neither the failure nor the delay on the part of the City to exercise any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise ot· any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. Any of the requirements of this Permit may be expressly waived by the City, in writing, but no waiver by the City of any requirement of this Permit shall, or shall be deemed to, extend to or affect any other provision of this Permit. SECTION 13. Any amendment to this Permit shall be binding upon the parties, provided such amendment is set forth in writing signed by the parties. The City's city manager or its designee is authorized to execute any amendments to this Permit, and confer any consents or approvals that may be provided by the City. 5 081006jb 0130375 SECTION 14. Any provision of this Permit which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. If any provision of this Permit shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. SECTION 15. This Permit shall be deemed a contract made under the laws of the State of California, and for the purposes hereof shall be governed and construed by and in accordance with the laws of the State of California. All exhibits referred to in this Permit and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Permit and shall be deemed to be part hereof. This Permit may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 16. In the event that suit is brought by either party, the parties agree that trial of such action shall be vested exclusively in the state court of California in the City of San Jose, County of Santa Clara, or in the United States District Court for the Northern District of California in the II II II II II II II II II II II 6 081006jb 0130375 City of San Jose. The prevailing party in any action brought to enforce the terms of this Permit or arising out of this Permit may recover its reasonable costs and attorneys' fees expended in connection with such an action from the other party. DATED: CITY OF PALO ALTO City Manager The terms and conditions of this Fueling Permit have been reviewed and understood by the Customer. I represent and warrant that, as the duly appointed representative of the Customer, I, on the behalf of the Customer, hereby signify full acceptance of the terms and conditions of this Fueling Permit. GREEN WASTE OF PALO ALTO By: Title: ATTACHMENTS: EXHIBIT "A": AUTHORIZED MOTOR VEHICLES EXHIBIT "B": CERTIFICATION OF INSTRUCTION EXHIBIT "C": CERTIFICATION OF CUSTOMER 7 081006 jb 0130375 EXHIBIT A I Authorized Motor Vehicles: Nine GreenWaste New Way Sidewinder collection vehicles. Contractor to provide Asset ID #, Unit # and Vehicle ID# once new vehicles are delivered and ready for collection service. R~ycllng CNG Units Description . Asset ID# Unit# Vehicle ID# 06MACK/ 630774-75 264230 011725 j LEAC'HCNG : ' 06MACKJ 630772-73 264231 011726 . LEACHCNG - ft --.. _. ----I ,,,,, _____ .... ..:.. ...... ---~---.. .. -.. --UO .tVlf\.v.lV O\:J.) .:>.) v-.)" ~O.J '7:7"'1 1 VI OJ LEACHCNG 06MACK/ 603563·64 263995 10184 LEACHCNG 06MACK/ 603566-67 263996 10185 LEACHCNG : 06MACK/ . 603568-69 263997 10186 LEACHCNG 8 081006 jb 0130375 EXHIBIT B CERTIFICATION OF INSTRUCTION A certification of instruction shall be completed by each individual who may fuel a compressed natural gas-powered motor vehicle of the Customer at the City of Palo Al to' s Municipal Services Center compressed natural gas fueling facility. Each individual will receive CNG fueling materials, including written materials, a video and a live demonstration about the proper use of the City's CNG fueling facility, and will sign and date this form to certify they have received and reviewed the materials. The City has no obligation to fuel a motor vehicle of the Customer until this Certification of Instruction is duly executed. HOW TO SAFELY FUEL COMPRESSED NATURAL GAS-POWERED VEHICLES 1. No person shall be permitted by the Customer to remain in the motor vehicle while such motor vehicle is being fueled. 2. No smoking or open flame shall be allowed within 50 feet of the fueling station. 3. Compressed natural gas cylinders, which are not in compliance with DOT or ANSI/AGA NGV2 requirements, shall not be fueled. 4. The motor vehicle must be shut off. 5. The hand brake or emergency brake of the motor vehicle must be set. 6 . Remove the protective cap on the vehicle fueling receptacle , if applic;:able. 7. Remove the fueling device from the dispenser. 8. Inspect the fueling hose and connector prior to making the connection. 9. Make connection and ensure the connector is locked in place. 10. Open the fueling valve on the fueling device. 11. Shut off the fueling valve on the fueling device after the fuel flow stops registering on the dispenser. 12 . Disconnect the fueling device and return to the dispenser holder. I HEREBY CERTIFY THAT I HAVE RECEIVED AND REVIEWED MATERIALS ABOUT PROPERLY FUELING COMPRESSED NATURAL GAS-POWERED VEHICLES AS OUTLINED ABOVE. Date of Instruction Operator's Signature Operator's Name (Print) 9 081006jb 0130375 EXHIBIT C CERTIFICATION OF CUSTOMER I HEREBY CERTIFY ON THE BEHALF OF THE CUSTOMER THAT THE CUSTOMER WILL NOT PERMIT ANY NONCERTIFIED INDIVIDUAL TO USE THE CITY'S CARD KEY (S) , MAGNETIC CARD (S) AND WIRELESS CONTROL DEVICE (S) FOR FUELING COMPRESSED NATURAL GAS-POWERED VEHICLES. Date Name of Customer Authorized Signature of Duly Appointed Representative of Customer 10 081006 jb 0130375 NOT YET APPROVED 1 Resolution No. XXXX Resolution of the Council of the City of Palo Alto Amending Utilities Rules and Regulations 2 (Definitions and Abbreviations), 3 (Description of Utility Services), 11 (Billing, Adjustments, and Payments of Bills), and 24 (Special Refuse Service Regulations) Governing the Provision of Utilities and Public Works Services A. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, the City Council may by resolution adopt rules and regulations governing utility services and the fees and charges therefor. B. The amendments to Rules and Regulations 2 (Definitions and Abbreviations), 3 (Description of Utility Services), 11 (Billing, Adjustments, and Payments of Bills), and 24 (Special Refuse Service Regulations) include new definitions, updates to the refuse service billing adjustments and revised service guidelines and requirements to reflect new zero waste services. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 2 (Definitions and Abbreviations) as amended, attached hereto and incorporated herein, is hereby approved and adopted. The foregoing Utilities Rule and Regulation, as amended, shall become effective on July 1, 2015. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 3 (Description of Utility Services) as amended, attached hereto and incorporated herein, is hereby approved and adopted. The foregoing Utilities Rule and Regulation, as amended, shall become effective on July 1, 2015. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 11 (Billing, Adjustments, and Payments of Bills) as amended, attached hereto and incorporated herein, is hereby approved and adopted. The foregoing Utilities Rule and Regulation, as amended, shall become effective on July 1, 2015. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 24 (Special Refuse Service Regulations) as amended, attached hereto and incorporated herein, is hereby approved and adopted. The foregoing Utilities Rule and Regulation, as amended, shall become effective on July 1, 2015. Attachment C NOT YET APPROVED 2 SECTION 5. Except as specifically amended by this resolution, all existing Utilities Rules and Regulations shall remain in full force and effect. SECTION 6. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s definition of a project, pursuant to California Public Resources Code section 21065, therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED __________________________ __________________________ City Clerk Mayor APPROVED AS TO FORM: __________________________ City Manager __________________________ __________________________ Senior Assistant City Attorney Director of Public Works DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 1 A. ABBREVIATIONS AMR - Automated Meter Reading AER - Advance Engineering Request Btu - British Thermal Unit ccf - Hundred Cubic Feet CEC - California Energy Commission CPAU - City of Palo Alto Utilities CPUC - California Public Utilities Commission. ERU - Equivalent Residential Unit FERC - Federal Energy Regulatory Commission kVar - Kilovar kVarh - Kilovar-hours kW - Kilowatt kWh - Kilowatt-hour MW - Megawatt MMBtu - One million Btus. NEC - National Electric Code, Latest Version NEM - Net Energy Metering NEMA - Net Energy Metering Aggregation NEMIA - Net Energy Metering Interconnection Agreement NRTL - Nationally Recognized Testing Laboratory PAMC - Palo Alto Municipal Code PSIG - Per square inch gauge PST - Pacific Standard Time RWQCP - Regional Water Quality Control Plant UUT - Utilities Users Tax B. GENERAL DEFINITIONS Account The identification number in CPAU’s billing system for Utility Services. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 2 Agency Any local, county, state or federal governmental body or quasi-governmental body, including, without limitation, the CPUC, the FERC and any joint powers agency, but excluding the City and any board, commission or council of the City. Aggregation Customer A Customer with a Renewable Electric Generating Facility wishing to install an eligible Renewable Electric Generating Facility that is sized to offset separately metered electric loads on adjacent or contiguous properties that are solely owned, leased, or rented by them, and who have signed the Net Energy Metering Interconnection Agreement for NEM Aggregation. Applicant An individual, corporation, partnership, Agency, or other legal entity or authorized agent of same, requesting CPAU to supply any or all of the following: 1. Electric Service 2. Water Service 3. Gas Service 4. Wastewater Collection 5. Refuse Service 6. Storm and Surface Water Drainage Service 7. Fiber Optics Service Or, an entity submitting an Application for Interconnection pursuant to Rule 27. Application (for Interconnection of Generating Facilities) An approved standard form (Load Sheet) submitted to CPAU for Interconnection of a Generating Facility. Beneficiary Account The Electric Service Meter(s) serviced by an Aggregation Customer’s Generating Facility, as listed on the Aggregation Customer’s NEMA-IA form. Bidweek Price Index The price reported in Natural Gas Intelligence “NGI’s Bidweek Survey”, California “PG&E Citygate” under the column “avg.” for the calendar month. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 3 Billing Period Also “service period” or “billing cycle”. The normal Billing Period for CPAU Customers is approximately 30 days, with variations occurring due to staff availability, holiday scheduling, field verification of Meter readings, or any other billing-related issues requiring additional investigation prior to issuance of the bill.. British Thermal Unit Also “Btu”. The standard sub-unit of measurement comprising a Therm of natural Gas. One (1) Therm equals 100,000 Btu. Business Day Any day, except a Saturday, Sunday, or any day observed as a legal holiday by the City. Certification Test A test pursuant to Rule 27 that verifies conformance of certain equipment with approved performance standards in order to be classified as Certified Equipment. Certification Tests are performed by NRTLs. Certification; Certified; Certificate The documented results of a successful Certification Test. Certified Equipment Equipment that has passed all required Certification Tests. Charge Any assessment, cost, fee, surcharge or levy for Utility Service other than a Tax, including metered and unmetered Utility Service, capacity, connections, construction, penalties, and mandated or required Customer financial obligations for Service. Charter The Charter of the City of Palo Alto. City Attorney The individual designated as the City Attorney of the City under Section 2.08.120 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code, and any Person who is designated the representative of the City Attorney. City’s Collector The Person(s) authorized under Section 5.20.040 of the Palo Alto Municipal Code to provide collection, DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 4 processing and disposal of solid waste, Compostable Materials and Recyclable Materials pursuant to one or more written contracts with the City. City Manager The individual designated as the City Manager of the City under Section 2.08.140 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code, and any Person who is designated the representative of the City Manager. City of Palo Alto, or City The government of the City of Palo Alto, a chartered City and a municipal corporation duly organized and validly existing under the Laws of the State of California, with a principal place of business located at 250 Hamilton Avenue, Palo Alto, County of Santa Clara. For the purposes of these Rules and Regulations, the term “City” may include services provided by both the City of Palo Alto Utilities Department and the City of Palo Alto Public Works Department. City of Palo Alto Public Works Department (Public Works) The City Department responsible for providing Refuse Service, Wastewater Treatment and Storm and Surface Water Drainage Utility Services. Other Utility Services such as Water, Gas, Electric, Wastewater Collection, and Fiber Optics are provided by the City of Palo Alto Utilities Department. City of Palo Alto Utilities Department (CPAU) The City Department responsible for providing Water, Gas, Electric, Wastewater Collection and Fiber Optic Utility Services. Other Utility Services such as Refuse Service, Wastewater Treatment and Storm and Surface Water Drainage are provided by the City of Palo Alto Public Works Department. Code The words "the Code" or "this Code" shall mean the Palo Alto Municipal Code. Commercial Service Commercial Utility Service is provided to businesses, non-profit organizations, public institutions, and industrial Customers. The term also applies to Utility Services through Master Meters serving multi- family Residential dwellings and common areas of multi-family facilities. Compostable Materials Organic materials designated by the City as acceptable for collection and processing. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 5 Container Any receptacle used for storage of solid waste, Recyclable Materials, Compostable Materials or other materials designated by the City to be collected by the City’s Collector. Examples of containers include carts, bins, compactors and drop boxes. Cubic Foot of Gas (cf) The quantity of Gas that, at a temperature of sixty (60) degrees Fahrenheit and a pressure of 14.73 pounds per square inch absolute, occupies one cubic foot. Curtailment The act of reducing or interrupting the delivery of natural Gas. Customer The Person, corporation, Agency, or entity that receives or is entitled to receive Utility Service(s) from the City of Palo Alto, or in whose name Service is rendered for a particular Account as evidenced by the signature on the Application, contract, or agreement for Service. In the absence of a signed instrument, a Customer shall be identified by the receipt of any payment of bills regularly issued in the name of the Person, corporation, or Agency regardless of the identity of the actual user of the Utility Service(s). Customer-Generator: An “eligible customer-generator,” as that term is defined by the California Public Utilities Code section2827, as the same may be amended from time to time. Dark Fiber A Fiber Optic cable provided to end-users or resellers by CPAU without any of the light transmitters, receivers, or electronics required for telecommunications over the Fiber. Infrastructure for Fiber Optic activation is provided by the reseller or end-user. Dark Fiber Infrastructure Components of the CPAU Fiber Optic Distribution System required to provide Service to Customers (licensees), that are attached, owned, controlled or used by the City, located overhead or underground within the Public Right-of-Way, the Public Utility Easements and Leased Service Properties. Dedicated Distribution Transformer A Distribution Transformer that is dedicated to serving a single premise. Demand The highest rate of delivery of Electric energy, measured in Kilowatts (kW) or kilovolt amperes (kVA) DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 6 occurring instantaneously or registered over a fixed time period (normally fifteen minutes unless otherwise specified within a monthly billing cycle). Demand Charge An electrical Charge or rate that is applied to a metered Demand reading expressed in Kilowatts to compute a Demand Charge component of a Customer’s Electric bill. Demarcation Point The Demarcation Point for a project shall be the Customer side of the panel onto which the CPAU Fiber terminates within the Customer Premises, unless otherwise specified in the Proposal for Dark Fiber Services. Distribution Services Includes, but is not limited to, Utility Service provided by the Distribution System and other Services such as billing, meter reading, administration, marketing, and Customer Services. Does not include Services directly related to the Interconnection of a Generating Facility as per Rule 27. Distribution System The infrastructure owned and operated by CPAU which is capable of transmitting electrical power, other than Interconnection Facilities, or transporting Water, Wastewater, or Gas within the City of Palo Alto. The Electric Distribution System transmits power from the City’s Interconnection with PG&E to CPAU’s Meter located on the Customer’s Premises. The Gas Distribution System transports Gas from PG&E receiving stations to CPAU’s Meter located on the Customer Premises. The Water Distribution System transports Water from the San Francisco Water Department receiving stations and CPAU wells to the meter located on the Customer Premises. The Wastewater Collection System transports sewage from the Customer’s Premises to the Water Quality Control Plant. Effluent Treated or untreated Wastewater flowing out of a Wastewater treatment facility, sewer, or industrial outfall. Electric, Electric Service Utility Service provided to residents and business owners in the City of Palo Alto consisting of generation, transmission, and distribution of electrical power for retail use. Electric Service is provided by the City of Palo Alto Utilities Department. Emergency An actual or imminent condition or situation, which jeopardizes CPAU’s Distribution System Integrity. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 7 Emergency Service Electric Service supplied to, or made available to, Load devices which are operated only in Emergency situations or in testing for same. Energy Services Energy commodity and any applicable ancillary Services used to generate and transport such commodity from its origin to the City’s Point of Receipt. May also mean the sale of value added Services associated or related to the Provision and/or usage of energy commodity. Equivalent Residential Unit (ERU) This is the basic unit for computing storm and surface water drainage fees. All single-family Residential properties are billed the number of ERU’s specified in the table contained in Utility Rate Schedule D-1, according to parcel size. All other properties have ERU's computed to the nearest 1/10 ERU using this formula: No. Of ERU = Impervious Area (sq. ft.) / 2,500 sq. ft. Fiber Optic, Fiber Optic Service A solid core of optical transmission material. Fiber Optic Service that is provided by the City of Palo Alto Utilities Department is referred to as Dark Fiber. Fiber Optic Backbone The high-density portion of the Dark Fiber Infrastructure installed and owned by the City. Force Majeure The occurrence of any event that has, had or may have an adverse effect on the design, construction, installation, management, operation, testing, use or enjoyment of the City’s Utility Services, which is beyond the reasonable control of the parties and which event includes, but is not limited to, an Act of God, an irresistible superhuman cause, an act of a superior governmental authority, an act of a public enemy, a labor dispute or strike or a boycott which could not be reasonably contemplated by the City or Customer affected thereby, a defect in manufactured equipment (including, but not limited to, the Dark Fibers), fire, floods, earthquakes, or any other similar cause. Function Some combination of hardware and software designed to provide specific features or capabilities. Its use, as in Protective Function, is intended to encompass a range of implementations from a single- purpose device to a section of software and specific pieces of hardware within a larger piece of equipment to a collection of devices and software. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 8 Gas Any combustible gas or vapor, or combustible mixture of gaseous constituents used to produce heat by burning. It shall include, but not be limited to, natural gas, gas manufactured from coal or oil, gas obtained from biomass or from landfill, or a mixture of any or all of the above. Gas, Gas Service Utility Service provided to residents and business owners in the City of Palo Alto consisting of procurement, transmission, and distribution of Gas for retail use. Gas Service is provided by the City of Palo Alto Utilities Department. Generating Facility All Generators, electrical wires, equipment, and other facilities owned or provided by Producer for the purpose of producing Electric power. This includes a solar or wind turbine Renewable Electric Generating Facility that is the subject of a Net Energy Metering and Interconnection Agreement and Rule and Regulation 29. Generator A device converting mechanical, chemical or solar energy into electrical energy, including all of its protective and control Functions and structural appurtenances. One or more Generators comprise a Generating Facility. Gross Nameplate Rating; Gross Nameplate Capacity The total gross generating capacity of a Generator or Generating Facility as designated by the manufacturer(s) of the Generator(s). Initial Review The review by CPAU, following receipt of an Application, to determine the following: (a) whether the Generating Facility qualifies for Simplified Interconnection; or (b) if the Generating Facility can be made to qualify for Interconnection with a Supplemental Review determining any additional requirements. Inspector The authorized Inspector, agent, or representative of CPAU. Interconnection; Interconnected The physical connection of a Generating Facility in accordance with the requirements of the City’s Utilities Rules and Regulations so that Parallel Operation with CPAU’s Distribution System can occur (has occurred). DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 9 Interconnection Agreement An agreement between CPAU and the Producer providing for the Interconnection of a Generating Facility that gives certain rights and obligations to effect or end Interconnection. For the purposes of the City’s Utilities Rules and Regulations, the Net Energy Metering and Interconnection Agreement (for NEM and NEM Aggregation Customers), and the Power Purchase Agreements authorized by the City Council may be considered as Interconnection Agreements for purposes of defining such term. Interconnection Facilities The electrical wires, switches and related equipment that are required in addition to the facilities required to provide Electric Distribution Service to a Customer to allow Interconnection. Interconnection Facilities may be located on either side of the Point of Common Coupling as appropriate to their purpose and design. Interconnection Facilities may be integral to a Generating Facility or provided separately. Interconnection Study A study to establish the requirements for Interconnection of a Generating Facility with CPAU’s Distribution System. Internet Exchange Any Internet data center for telecommunications equipment and computer equipment for the purposes of enabling traffic exchange and providing commercial-grade data center services. Island; Islanding A condition on CPAU’s Electric Distribution System in which one or more Generating Facilities deliver power to Customers using a portion of CPAU’s Distribution System that is electrically isolated from the remainder of CPAU’s Distribution System. Junction A location on the Dark Fiber Infrastructure where equipment is installed for the purpose of connecting communication cables. Junction Site The area within the Transmission Pathway at which a Junction is located. Kilovar (kVar) A unit of reactive power equal to 1,000 reactive volt-amperes. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 10 Kilovar-hours (kVarh) The amount of reactive flow in one hour, at a constant rate of Kilovar. Kilowatt (kW) A unit of power equal to 1,000 watts. Kilowatt-hour (kWh) The amount of energy delivered in one hour, when delivery is at a constant rate of one Kilowatt; a standard unit of billing for electrical energy. Law Any administrative or judicial act, decision, bill, Certificate, Charter, Code, constitution, opinion, order, ordinance, policy, procedure, Rate, Regulation, resolution, Rule, Schedule, specification, statute, tariff, or other requirement of any district, local, municipal, county, joint powers, state, or federal Agency, or any other Agency having joint or several jurisdiction over the City of Palo Alto or City of Palo Alto Utilities or Public Works Customers, including, without limitation, any regulation or order of an official or quasi-official entity or body. Licensed Fibers One or more fibers comprising a part of the Dark Fiber Infrastructure that are dedicated to the exclusive use of the Customer under the Provisions of the Dark Fiber License Agreement, Proposal to Dark Fiber Services Agreement and the Utilities Rules and Regulations. Licensed Fibers Route A defined path of Licensed Fibers that is identified by specific End Points. Load(s) The Electric power Demand (kW) of the Customer at its Service Address within a measured period of time, normally 15 minutes, or the quantity of Gas required by a Customer at its Service Address, measured in MMBtu per Day. Main Wastewater Line Any Wastewater line not including a building connection (Service) sewer. Master-metering Where CPAU installs one Service and Meter to supply more than one residence, apartment dwelling unit, mobile home space, store, or office. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 11 Maximum Generation For a customer with a non-utility generator located on the customer’s side of the Point of Common Coupling, the Maximum Generation for that non-utility generator during any billing period is the maximum average generation in kilowatts taken during any 15-minute interval in that billing period provided that in case the generator output is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. Meter The instrument owned and maintained by CPAU that is used for measuring either the Electricity, Gas or Water delivered to the Customer. Metering The measurement of electrical power flow in kW and/or energy in kWh, and, if necessary, reactive power in kVar at a point, and its display to CPAU as required by Rule 27. Metering Equipment All equipment, hardware, software including Meter cabinets, conduit, etc., that are necessary for Metering. Meter Read The recording of usage data from Metering Equipment. Minimum Charge The least amount for which Service will be rendered in accordance with the Rate Schedule. Momentary Parallel Operation The Interconnection of a Generating Facility to the Distribution System for one second (60 cycles) or less. Nationally Recognized Testing Laboratory (NRTL) A laboratory accredited to perform the Certification Testing requirements under Rule 27. Net Electricity Consumer A Customer-Generator whose Generating Facility produces less electricity than is supplied by CPAU during a particular period, as such definition may otherwise be modified or supplemented by any definition in California Public Utilities Code section 2827(h)(2), as the same may be amended from time to time. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 12 Net Energy Metering Net Energy Metering means measuring the difference between the electricity supplied through CPAU’s Electric utility Distribution System and the electricity generated by the customer-generator’s facility and delivered to CPAU’s Electric utility Distribution System over a specified twelve-month period. Net Generation Metering Metering of the net electrical power of energy output in kW or energy in kWh, from a given Generating Facility. This may also be the measurement of the difference between the total electrical energy produced by a Generator and the electrical energy consumed by the auxiliary equipment necessary to operate the Generator. Net Nameplate Rating The Gross Nameplate Rating minus the consumption of electrical power of a Generator or Generating Facility as designated by the manufacturer(s) of the Generator(s). Net Surplus Customer-Generator A Customer-Generator who’s Generating Facility produces more electricity than is supplied by CPAU, during a particular period, as such definition may otherwise be modified or supplemented by any definition in California Public Utilities Code section 2827(h)(3), as the same may be amended from time to time. Net Surplus Electricity Compensation A per kilowatthour rate offered by CPAU to the Net Surplus Customer-Generators (excluding Aggregation Customers) for net surplus electricity, as such definition may otherwise be modified or supplemented by any definition in California Public Utilities Code section 2827(b)(8), as the same may be amended from time to time. Non-Islanding Designed to detect and disconnect from an Unintended Island with matched Load and generation. Reliance solely on under/over voltage and frequency trip is not considered sufficient to qualify as Non- Islanding. Occupied Domestic Dwelling Any house, cottage, flat, or apartment unit having a kitchen, bath, and sleeping facilities, which is occupied by a Person or Persons. Parallel Operation The simultaneous operation of a Generator with power delivered or received by CPAU while DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 13 Interconnected. For the purpose of this Rule, Parallel Operation includes only those Generating Facilities that are Interconnected with CPAU’s Distribution System for more than 60 cycles (one second). Performance Test, Performance Tested After the completion of any Fiber Interconnection work, the City will conduct a Performance Test of each Fiber constituting a part of the proposed leased fibers to determine its compliance with the Performance Specifications. Performance Specifications These specifications will include, but not be limited to, criteria relating to end-to-end optical time domain reflectometer data plots that identify the light optical transmission losses in each direction along the leased fibers whenever the testing is possible, measured in decibels at a wavelength of 1310 or 1550 nanometers for singlemode Fiber, as a Function of distance, measured in kilometers. Person Any individual, for profit corporation, nonprofit corporation, limited liability company, partnership, limited liability partnership, joint venture, business, family or testamentary trust, sole proprietorship, or other form of business association. PG&E Citygate The PG&E Citygate is the point at which PG&E’s backbone transmission system connects to PG&E’s local transmission system. Point of Common Coupling (PCC) The transfer point for electricity between the electrical conductors of CPAU and the electrical conductors of the Producer. Point of Common Coupling Metering Metering located at the Point of Common Coupling. This is the same Metering as Net Generation Metering for Generating Facilities with no host load. Point of Delivery (POD) Unless otherwise specified, the following definitions apply: For Electric, that location where the Service lateral conductors connect to the Customer’s Service entrance equipment; for overhead Services, the POD is at the weather-head connection; for under-ground Services, the POD is located at the terminals ahead of or at the Meter; for multiple Meter arrangements with connections in a gutter, the POD is at the Meter terminals (supply-side); for multiple Meter arrangements in a switchboard, the POD is DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 14 typically at the connectors in the utility entrance section; for Natural Gas, the POD is the point(s) on the Distribution System where the City delivers natural Gas that it has transported to the Customer. Point of Interconnection The electrical transfer point between a Generating Facility and the Distribution System. This may or may not be coincident with the Point of Common Coupling. Point of Service (POS) Where CPAU connects the Electric Service lateral to its Distribution System. For Fiber Optics Service, this is where CPAU connects the Fiber Service to the backbone. This point is usually a box located in or near the street or sidewalk and can be in the Public Right-of-Way. This point is at a mutually agreed upon location established at the time of installation. Pole Line Overhead wires and overhead structures, including poles, towers, support wires, conductors, guys, studs, platforms, cross arms braces, transformers, insulators, cutouts, switches, communication circuits, appliances attachments, and appurtenances, located above ground and used or useful in supplying Electric, communication, or similar or associated Service. Power Factor The percent of total power delivery (kVA) which does useful work. For billing purposes, average Power Factor is calculated from a trigonometric function of the ratio of reactive kilovolt-ampere-hours to the Kilowatt-hours consumed during the billing month. Power Factor is a ratio that reflects the reactive power used by a Customer. CPAU maintains an overall system Power Factor above 95% to reduce distribution system losses caused by low Power Factor. Power Factor Adjustment CPAU must install additional equipment to correct for Customers that maintain a low Power Factor, and may make a Power Factor Adjustment to a Customer’s bill to account for those costs and the additional energy costs and losses incurred by CPAU due to the Customer’s low Power Factor. Premises All structures, apparatus, or portion thereof occupied or operated by an individual(s), a family, or a business enterprise, and situated on an integral parcel of land undivided by a public street, highway, or railway. Primary Service CPAU Electric distribution Service provided to a Customer’s Premises at a voltage level equal to or DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 15 greater than 1000 volts. Producer The entity that executes an Interconnection Agreement with CPAU. The Producer may or may not own or operate the Generating Facility, but is responsible for the rights and obligations related to the Interconnection Agreement. Proposal for Dark Fiber Services A project-specific Service agreement that acts as a supplemental document for the Dark Fiber License Agreement. This Service agreement shall include the proposed Interconnection fees, applicable Fiber licensing fees, term of the Service, and summary of licensed Fiber elements. Protective Function(s) The equipment, hardware and/or software in a Generating Facility (whether discrete or integrated with other Functions) whose purpose is to protect against Unsafe Operating Conditions. Provision Any agreement, circumstance, clause, condition, covenant, fact, objective, qualification, restriction, recital, reservation, representation, term, warranty, or other stipulation in a contract or in Law that defines or otherwise controls, establishes, or limits the performance required or permitted by any party. Prudent Utility Practices The methods, protocols, and procedures that are currently used or employed by utilities to design, engineer, select, construct, operate and maintain facilities in a dependable, reliable, safe, efficient and economic manner. Public Right-of-Way The areas owned, occupied or used by the City for the purposes of furnishing retail and/or wholesale Electricity, Gas, Water, Wastewater, Storm and Surface Water Drainage, Refuse Service or communications commodity and/or distribution Service, and the means of public transportation, to the general public, including but not limited to, the public alleys, avenues, boulevards, courts, curbs, gutters, lanes, places, roads, sidewalks, sidewalk planter areas, streets, and ways. Public Utility Easements The areas occupied or used by the City for the purpose of providing Utility Service to the general public, and all related Services offered by the City’s Utilities Department and/or Public Works Department, the rights of which were acquired by easements appurtenant or in gross, or are other interests or estates in real property, or are the highest use permitted to be granted by the nature of the City’s interest in and to DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 16 the affected real property. This term incorporates all public Service easements for Utility Services that have been recorded by the City with the Recorder of the County of Santa Clara, California. Public Works Department See City of Palo Alto Public Works Department. Rate Schedule One or more Council-adopted documents setting forth the Charges and conditions for a particular class or type of Utility Service. A Rate Schedule includes wording such as Schedule number, title, class of Service, applicability, territory, rates, conditions, and references to Rules. Recyclable Materials Materials designated by the City as acceptable for recycling collection and processing. Refuse Service Refuse Service includes weekly collection, processing and disposal of materials properly deposited in the City Collector’s provided Containers for solid waste, as well as weekly collection and processing of Recyclable Materials, weekly collection and processing of Compostable Materials, ongoing maintenance of the closed Palo Alto Landfill, zero waste programs, street sweeping service, the household hazardous waste program, and the annual Clean Up Day. Renewable Electric Generating Facility A Generating Facility eligible for NEM under California Public Utilities Code section 2827 et seq. as the same may be amended from time to time. Reserved Capacity For a customer with one or more non-utility generators located on the customer’s side of the Point of Common Coupling, the Reserved Capacity for each billing period is the lesser of 1) the sum of the Maximum Generation for that period for all non-utility generation sources; or 2) the maximum average customer demand in kilowatts taken during any 15-minute interval in the billing period provided that in case the load is intermittent or subject to violent fluctuations, the City may use a 5-minute interval. Residential Service Utility Service provided to separately metered single family or multi-family, domestic dwelling. Rules and Regulations See Utilities Rules and Regulations DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 17 Scheduling Coordinator An entity providing the coordination of power schedules and nominations to effect transportation and distribution of Gas, Electric power and energy. Secondary Service CPAU Electric distribution Service provided to a Customer’s Premises at a voltage level less than 1000 volts. Service(s) Utility Services offered by the City of Palo Alto include Electric, Fiber Optics, Gas, Water, Wastewater Collection services provided by the Utilities Department (CPAU); and Refuse Service, Wastewater Treatment, and Storm and Surface Water Drainage Services provided by the Public Works Department. Service Address The official physical address of the building or facility assigned by CPAU’s Planning Department, at which Customer receives Utility Services. Service Charge A fixed monthly Charge applicable on certain Rate Schedules that does not vary with consumption. The Charge is intended to recover a portion of certain fixed costs. Service Drop The overhead Electric Service conductors from the last pole or other aerial support to and including the splices, if any, connecting to the service entrance conductors at the building or other structure. Or, in the case of Fiber Optic Drops, the overhead Fiber Optics cable from the last pole or other aerial support to the building or other structure to and including the termination box. Services or Service Lines Facilities of CPAU, excluding transformers and Meters, between CPAU’s infrastructure and the Point of Delivery to the Customer. Service Territory The geographic boundaries within the City of Palo Alto limits served by the physical Distribution System of the CPAU. Short Circuit (Current) Contribution Ratio (SCCR) The ratio of the Generating Facility’s short circuit contribution to the short circuit contribution provided through CPAU’s Distribution System for a three-phase fault at the high voltage side of the distribution DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 18 transformer connecting the Generating Facility to CPAU’s system. Simplified Interconnection An Interconnection conforming to the minimum requirements as determined under Rule 27, Section I. Single Line Diagram; Single Line Drawing A schematic drawing, showing the major Electric switchgear, Protective Function devices, wires, Generators, transformers and other devices, providing sufficient detail to communicate to a qualified engineer the essential design and safety of the system being considered. Special Facilities See CPAU’s Rule and Regulation 20 governing Special Facilities. Splice A point where two separate sections of Fiber are physically connected. Standard Refuse Container A Standard Refuse Container shall have the meaning described in the Palo Alto Municipal Code. A Standard Container shall also include a wheeled container with a capacity of not to exceed 32 gallons. Standby Service Back-up Energy Services provided by CPAU. Storm and Surface Water Drainage Utility Service provided to residents and business owners in the City of Palo Alto. Storm and Surface Water Drainage Service is provided by the City of Palo Alto Public Works Department. Supplemental Review A process wherein CPAU further reviews an Application that fails one or more of the Initial Review Process screens. The Supplemental Review may result in one of the following: (a) approval of Interconnection; (b) approval of Interconnection with additional requirements; or (c) cost and schedule for an Interconnection Study. System Integrity The condition under which a Distribution System is deemed safe and can reliably perform its intended Functions in accordance with the safety and reliability rules of CPAU. DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 19 Tax Any assessment, Charge, imposition, license, or levy (including any Utility Users Tax) and imposed by any Agency, including the City. Telemetering The electrical or electronic transmittal of Metering data in real-time to CPAU. Temporary Service Service requested for limited period of time or of indeterminate duration such as, but not limited to, Service to provide power for construction, seasonal sales lots (Christmas trees), carnivals, rock crushers or paving plants. Temporary Service does not include Emergency, breakdown, or Standby Service. Therm A Therm is a unit of heat energy equal to 100,000 British Thermal Units (Btu). It is approximately the energy equivalent of burning 100 cubic feet (often referred to as 1 ccf) of natural Gas. Since Meters measure volume and not energy content, a Therm factor is used to convert the volume of Gas used to its heat equivalent, and thus calculate the actual energy use. The Therm factor is usually in the units therms/ccf. It will vary with the mix of hydrocarbons in the natural Gas. Natural Gas with a higher than average concentration of ethane, propane or butane will have a higher Therm factor. Impurities, such as carbon dioxide or nitrogen lower the Therm factor. Transfer Trip A Protective Function that trips a Generating Facility remotely by means of an automated communications link controlled by CPAU. Transmission Pathway Those areas of the Public Right-of-Way, the Public Utility Easements and the Leased Service Properties in which the Dark Fiber Infrastructure is located. Trap Any approved equipment or appliance for sealing an outlet from a house-connection sewer to prevent the escape of sewer Gas from a main line through a building connection (service) sewer. Underground Utility District An area in the City within which poles, overhead electric or telecommunication wires, and associated overhead structures are prohibited or as otherwise defined in Section 12.04.050 of the PAMC. Unintended Island DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 20 The creation of an Island, usually following a loss of a portion of CPAU’s Distribution System, without the approval of CPAU. Unsafe Operating Conditions Conditions that, if left uncorrected, could result in harm to personnel, damage to equipment, loss of System Integrity or operation outside pre-established parameters required by the Interconnection Agreement. Utilities Department See City of Palo Alto Utilities Department. Utilities Director The individual designated as the Director of Utilities Department under Section 2.08.200 of Chapter 2.08 of Title 2 of the Palo Alto Municipal Code, and any Person who is designated the representative of the director of utilities. Utility(ies) Rules and Regulations, Rules and Regulations The compendium of Utilities Rules and Regulations prepared by the City’s Utilities and Public Works Departments and adopted by ordinance or resolution of the Council pursuant to Chapter 12.20 of the Palo Alto Municipal Code, as amended from time to time. Utility(ies) Service(s), Service(s) Electric, Fiber optics, Water, Gas, Wastewater collection services provided by the City of Palo Alto Utilities Department (CPAU) and Refuse Service, Wastewater Treatment and Storm and Surface Water Drainage services provided by the City of Palo Alto Public Works Department. Utilities User Tax (UUT) City of Palo Alto Tax imposed on Utility Charges to a Water, Gas, and/or Electric Service user. This may include Charges made for Electricity, Gas, and Water and Charges for Service including Customer Charges, Service Charges, Standby Charges, Charges for Temporary Services, Demand Charges, and annual and monthly Charges, as described in Chapter 2.35 of the Palo Alto Municipal Code. Wastewater Utility Service provided to residents and business owners in the City of Palo Alto. Wastewater Utility Services include collection and treatment of Wastewater. Wastewater Collection Service is provided by the City of Palo Alto Utilities Department, and Wastewater Treatment Service is provided by the City of Palo Alto Public Works Department. Water DEFINITIONS AND ABBREVIATIONS RULE AND REGULATION 2 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 21 Utility Service provided to residents and business owners in the City of Palo Alto for retail use. Water Service is provided by the City of Palo Alto Utilities Department. Water Column (WC) Pressure unit based on the difference in inches between the heights of water columns as measured in a manometer. 6” WC = 0.217 psi; 7” WC = 0.25 psi. (END) DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 1 A. GENERAL Rule and Regulation 3 describes Services that are offered within the jurisdictional boundaries of the City of Palo Alto. For Rules specific to each type of Service, please refer to the following Rules and Regulations: Rule and Regulation 20 – Special Electric Utility Regulations Rule and Regulation 21 – Special Water Utility Regulations Rule and Regulation 22 – Special Gas Utility Regulations Rule and Regulation 23 – Special Wastewater Utility Regulations Rule and Regulation 24 – Special Refuse Service Regulations Rule and Regulation 25 – Special Storm and Surface Water Drainage Utility Regulations Rule and Regulation 26 – Special Fiber Optics Utility Regulations B. ELECTRIC SERVICE 1. BASIS OF SERVICE a. Unless otherwise provided in a Rate Schedule or contract, CPAU’s Electric rates are based upon the furnishing of Electric Service to Customer Premises at a single Point of Delivery at a single voltage and phase classification. Unless specified otherwise, each Point of Delivery shall be metered and billed separately under the appropriate Rate Schedule. Any additional Service supplied to the same Customer at other Points of Delivery or at a different voltage or phase classification shall be separately metered and billed. b. The type of distribution Service (voltage, Secondary, Primary) available at any particular location may be determined by inquiry to a CPAU Engineering representative. c. If the Customer, for his or her convenience, requests Secondary or Primary Services at an alternate Point of Delivery other than the normal Point of Delivery as determined by CPAU, the Customer is responsible for all cost of providing Secondary or Primary Services at such alternate location. d. CPAU assumes no duty or liability for inspecting, validating or approving the safe operating condition of the Customer’s Service, appliances, or equipment downstream of the Utility Meter. DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 2 e. See Rule and Regulation 20. "Special Electric Utility Regulations" regarding special Service requirements. 2. LOCATION OF POINT OF SERVICE a. SECONDARY SERVICE 1. OVERHEAD SERVICE AT SECONDARY VOLTAGES The Point of Service for Overhead Service at secondary voltages will normally be located at a power pole on the perimeter of the parcel to be served, which is, in CPAU’s judgment, most conveniently located and in compliance with CPAU standards and specifications and applicable building and electrical codes. 2. UNDERGROUND SERVICE AT SECONDARY VOLTAGE The Point of Service for Underground Service at secondary voltages will normally be located at the Secondary connectors of the transformer serving the Customer’s Load, or in the Secondary hand hole, if available. b. PRIMARY SERVICE The Point of Service for Primary Service will normally be at the point near the property line of the premises to be served which is, in CPAU’s judgment, most conveniently located with respect to CPAU’s transmission or distribution facilities. c. EXCEPTIONS If several buildings are occupied and used by one Customer in a single business or other activity, CPAU may, at its discretion, furnish Service for the entire group of buildings through one Service connection at one Point of Service. 3. EQUIPMENT REQUIREMENTS All new equipment in underground areas required to provide electric service to a Customer shall be pad-mounted. In addition, any three-Phase electric service connection DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 3 and any electric service connection rated at 400 Amps or greater which is located either in an underground or overhead area must be served from a pad-mounted transformer. The Utilities Director, or his/her designee, may authorize: 1) an exception to the above provisions when, in his/her opinion, a pad-mounted equipment installation in any particular instance would not be feasible or practical or 2) installation of electric service equipment in locations with limited access by utility equipment. Such installations will be considered “Special Facilities” as defined in Rule and Regulation 20, and the Applicant will be responsible for the costs described in that rule and outlined in the Service Contract as described in Rule and Regulation 5. If the Applicant wants a Point of Delivery other than at the location determined by CPAU, CPAU will work with the Applicant to assist in the selection of the alternate Point of Delivery location for the electric service equipment within the boundaries of the Applicant’s property. When the Applicant chooses a Point of Delivery location other than the location which has been determined by CPAU, the Applicant must acknowledge that such an alternate Point of Delivery location will cause CPAU personnel to incur delays when performing repairs or service restoration during emergencies. In addition to being responsible to pay for the initial cost of installation of such electric service equipment in an alternate location, the Applicant shall also be responsible to pay for any future additional labor, equipment, and material costs incurred by CPAU necessary to facilitate replacement, removal, or relocation of any electric service equipment which has been installed in an alternate Point of Delivery location at the Applicant’s request. Any installation intended to assist in “screening” of electric service equipment by landscaping or structures must be constructed in a manner which meets all of CPAU’s clearance standards. The plans for such screening must be approved by the City of Palo Alto and CPAU prior to beginning work on the screening installation. The Applicant shall provide a Public Utility Easement in recordable form for installation of such facilities within the boundaries of the property. All pad-mounted equipment will be subject to CPAU’s aesthetic guidelines. 4. EMERGENCY AND STANDBY SERVICES CPAU may provide back up Emergency, and other Standby Service to Customers as Special Facilities. See Rule and Regulation 20 "Special Electric Utility Regulations" regarding special Service requirements. DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 4 5. SERVICE DELIVERY VOLTAGE The following are the standard Service voltages normally available. Not all standard Service voltages are available at each Point of Delivery. These Service voltages are available in locations that already have this Service voltage and have sufficient capacity, as determined by CPAU, to serve the new Load. Any equipment installed on 120/240, 3 wire or 240/120, 4-wire Services shall have the capability of converting to a 120/208, 3 wire or 208 Y/120, 4-Wire Service. a. DISTRIBUTION OF VOLTAGE Alternating-current Service will be regularly supplied at a nominal frequency of approximately 60-Hertz (cycles per second). Single-Phase Three-Phase Three-Phase Secondary Secondary Primary 120/240, 3 -wire 240/120, 4-wire* 12,470, 3-wire 120/208, 3-wire 240, 3-wire* 208 Y/120, 4-wire 480 Y/277, 4-wire *Only available in special conditions as determined by the Electric Engineering Manager. b. All voltages referred to in this Rule and appearing in some Rate Schedules are nominal Service voltages at the Point of Delivery. CPAU’s facilities are designed and operated to provide sustained Service voltage at the Point of Delivery, but the voltage at a particular Point of Delivery will vary within satisfactory operating range limits. c. In areas where a certain standard Secondary voltage is being delivered to one or more Customers, CPAU may require an Applicant for new Service in such areas to receive the same standard voltage supplied to existing Customers. d. CPAU may change the voltage at which Service is delivered, including converting existing 4160 volt Primary Service to 12,470 volt Service. If CPAU notifies the DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 5 Customer that a Service voltage change is necessary, the Customer will be required to provide Service equipment capable of accepting the new voltage and meeting other CPAU requirements. Costs to provide suitable Customer’s Service entrance equipment and any other associated equipment to receive Service at the new voltage shall be borne by the Customer. 6. VOLTAGE AND FREQUENCY CONTROL a. Under normal Load conditions, CPAU’s distribution circuits will be operated so as to maintain Service voltage levels to Customers within plus or minus 5 percent of the nominal Service voltage at the Point of Delivery. Subject to the limitations above, CPAU will maintain the voltage balance between phases as close as practicable to 2.5% maximum deviation from the average voltage between the three phases. b. Voltages may be outside the limits specified above when the variations: 1. arise from Service interruptions; 2. arise from temporary separation of parts of the system from the main system; 3. are minor momentary fluctuations and transient voltage excursions of short duration which may occur in the normal operation of CPAU system; 4. are beyond CPAU’s control. c. Due to conditions beyond the control of CPAU, the Customer, or both, there will be infrequent and limited periods when voltages will occur outside of the nominal Service voltage ranges. Utilization equipment may not operate satisfactorily under these conditions, and protective devices in the equipment may operate to protect the equipment. d. Where the operation of the Customer’s equipment requires stable voltage regulation or other stringent voltage control beyond that supplied by CPAU in the normal operation of its system, the Customer, at its own expense, is responsible for installing, owning, operating, and maintaining any special or auxiliary equipment on the Load side of the Service delivery point as deemed necessary by the Customer. e. The Customer shall be responsible for designing and operating its Service DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 6 facilities between the Point of Delivery and the utilization equipment to maintain proper utilization voltage at the line terminals of the utilization equipment. f. The Customer shall not impose a Load on CPAU’s system that will cause the voltage limits in this section to be exceeded for an adjacent Service delivery point. g. When there is reasonable indication of a problem, CPAU shall test for excessive fluctuations at its own expense. Voltage checks requested by the Customer more than once in any twelve month period shall be paid by the Customer, unless CPAU determines that excessive voltage fluctuation exists. h. CPAU may institute measures to prevent the continuous operation of equipment detrimental to Service to other Customers or may discontinue Electric Service to the offending Customer. (See Rule and Regulation 20, Special Electric Utility Regulations). i. Customers are responsible for protecting their connected Loads, audio, video, and electronic equipment, including computers, from sudden voltage or frequency fluctuations outside nominal Service and frequency ranges. Such protection may include, but is not limited to, surge protectors. 7. GENERAL LOAD LIMITATIONS a. SINGLE-PHASE SERVICE 1. Single-phase Service normally will be 3-wire, 120/240 volts (or 3-wire, 120/208 volts at certain locations as now or hereafter established by CPAU) where the size of any single motor does not exceed 7-1/2 horsepower (10 horsepower at the option of CPAU). For any single-phase Service, the maximum Service size shall be 400 ampere. If the Load exceeds the capability of a 400 ampere single phase Service the Service shall be three-phase. 2. In locations where CPAU maintains a 120/208 volt secondary system, 3- wire single-phase Service normally shall be limited to that which can be supplied by a main switch or Service entrance rating of 200 amperes. Single-phase Loads in these locations in excess of that which can be supplied by a 200 ampere main switch or Service entrance rating normally DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 7 will be supplied with a 208Y/120 volt, three-phase, 4-wire Service. b. THREE-PHASE SERVICE (480 VOLTS OR LESS) Minimum Load Maximum Demand Normal Voltage Requirements Load Permitted 240/120 5 hp, 3-phase connected 400 Amperes 240 5 hp, 3-phase connected 400 Amperes 208Y/120 Demand Load 75 kVA 500 kVA 480Y/277 Demand Load 112 kVA 2,500 kVA (See Note 1) Note 1. Applicants or existing Customers with a planned or existing single or multiple building development having a maximum Demand in excess of 2500 kVA, as determined by CPAU, will be required to take delivery at the available primary voltage and are required to provide their own primary switchgear and transformer(s). Determination of maximum Demand and Service voltage will be made by CPAU and the decision of the Electric Engineering Manager will be final. 1. Where three-phase Service is supplied, CPAU reserves the right to use single-phase transformers, connected open-delta or closed-delta, or three- phase transformers. 2. Three-phase Service will be supplied on request for installations aggregating less than the minimum listed above, but not less than 3 horsepower (hp), three-phase Service, where existing transformer capacity is available. If three-phase Service is not readily available, or for Service to Loads less than 3 hp, Service shall be provided in accordance with CPAU’s applicable Rule 20 on Special Power Service requirements. 3. Residential customers requesting three-phase service shall be responsible for all labor and material costs required to provide service, including the cost of the transformer. These installations are not considered “Special Facilities” as described in Rule and Regulation 20. 4. An Applicant or existing Customer requiring Service with a maximum Demand in excess of 1000 kVA, as determined by CPAU, shall be served by a padmount transformer. No submersible or vault-installed transformers in excess of 1000 kVA will be installed by CPAU. Where an DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 8 existing underground Service must be upgraded beyond 1000 kVA, the Customer shall be required to provide adequate space for installation of the padmount transformer. In the event the Customer is unable to provide adequate space for the padmount transformer, then the Customer shall make arrangements at his or her expense to receive Service at primary voltage. c. THREE-PHASE SERVICE (OVER 2,000 VOLTS) The following three-phase primary voltage may be available as an isolated Service for a single Applicant; and where that Applicant’s Demand Load justifies such voltage. The determination will be made by CPAU. Minimum Demand Maximum Demand Normal Voltage Bank Installed Load Permitted 4,160 500 kVA 3,600 kVA 12,470 1,000 kVA 11,000 kVA Note: 4,160 volt Services will not be furnished for new Services. 8. TEMPORARY SERVICE Temporary Service is Electric Service which, in CPAU’s opinion, is of an indefinite duration at the same location, or for operations of a speculative character or of questionable permanency, or any other Service which is estimated to last less than one year. CPAU will furnish Temporary Service if the furnishing of such Service will not create undue hardship for CPAU, or its Customers, and the following conditions are met: a. The Applicant for such Temporary Service shall apply for Service on an Application form provided by CPAU Engineering and shall pay to CPAU in advance the cost of installing and removing any facilities necessary in connection with the furnishing of such Service by CPAU. b. Each Applicant for Temporary Service shall prepay a Temporary Service Fee in accordance with Electric Service Connection Fees Rate Schedule E-15. c. Nothing in this Rule and Regulation shall be construed as limiting or in any way affecting the right of CPAU to collect from the Customer an additional sum of money by reason of the Temporary Service furnished or to be furnished or DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 9 removed hereunder. d. If the Temporary Service connection time exceeds one-year, the Applicant shall apply for an extension of the Temporary Service. The Director of Utilities or his/her designee will determine if the Service should be reclassified as a permanent Service. 9. SERVICE DOWNSTREAM OF METER CPAU assumes no duty or liability for inspecting, validating or approving the safe operating condition of the Customer’s Service, appliances, or equipment downstream of the Utility Meter. C. FIBER OPTIC SERVICE Fiber Optic Service includes the custom construction and licensing of single mode Fiber routes between points within the City of Palo Alto. It is the Customer’s responsibility to establish all electronic devices and networks required to pass data over their licensed CPAU Dark Fiber routes. 1. LICENSING SERVICES All Dark Fiber routes are licensed in accordance with the currently approved Dark Fiber Rate Schedules, and in compliance with the Utilities Rules and Regulations. See Rule and Regulation 26, “Special Fiber Optic Utility Regulation,” regarding special Service requirements. All CPAU fibers terminate within the jurisdictional boundaries of the City of Palo Alto. 2. OTHER SERVICES CPAU offers custom Dark Fiber construction and ancillary Services such as Fiber Optic cable splicing, engineering feasibility studies, and when specifically requested by the Customer, multimode Fiber cable installations. 3. QUALITY Dark Fiber routes in the City of Palo Alto comprised of single mode Fiber comply with generally accepted industrial standards and specifications. All construction is done using DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 10 industry accepted techniques and procedures. All constructed routes are Performance Tested to assure the industry quality standards are met. D. WATER SERVICE 1. SOURCE OF SUPPLY CPAU’s primary source of Water is the Hetch Hetchy aqueduct system, managed by the San Francisco Public Utilities Commission (SFPUC). CPAU wells also provide Emergency supply. See Rule and Regulation 21, “Special Water Utility Regulation” regarding special Service requirements. 2. QUALITY Hardness generally varies between 1 and 4 grains per gallon depending on the source. An analysis of the mineral content of the Water is available upon request from CPAU Engineering. 3. PRESSURE Water pressure varies from 30 to 125 pounds per square inch. CPAU maintains an average of 50 pounds per square inch, with the maximum and minimum pressures being experienced at the lower and higher elevations of the Distribution System. CPAU assumes no responsibility for loss or damage due to lack of Water pressure but agrees to furnish such pressures as are available in its general Distribution System. If low Water pressure occurs due to additional on-site development, it shall be the responsibility of the property owner to replace the existing Water Service with a new Water Service designed for the current site. All costs of the required new Service upgrade shall be borne by the property owner. 4. TREATMENT CPAU currently does not treat Water supplied by the SFPUC. The pH of the Water supplied is adjusted by the SFPUC to reduce its corrosive action. 5. SERVICE DOWNSTREAM OF METER CPAU assumes no duty or liability for inspecting, validating or approving the safe operating condition of the Customer’s Service, appliances, or equipment downstream of the Utility Meter. DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 11 E. GAS 1. TYPES OF SERVICES CPAU provides Gas supply, transportation, and Distribution Services. 2. KIND AND HEATING VALUE CPAU purchases Gas from several/various Gas suppliers. The heating value of Gas supplied varies. The average monthly heating value in British Thermal Units (Btu)-dry basis per cubic foot of the Gas served may vary within the limits of 750 to 1150 Btu. This average heating value is converted to a Therm factor for use as one of the factors used in calculating a composite multiplier for billing purposes. The Therm factor will be based upon the heat factor used by CPAU’s supplier of Gas for the preceding month. Gas is supplied by CPAU either at standard “low pressure” or at “medium pressure”. Low pressure Service is available at all points where Gas is supplied. Where available from existing high pressure mains, at the option of CPAU, high pressure Service may be supplied. However, CPAU reserves the right to lower the pressure or to discontinue the delivery of Gas at high pressure. The standard pressure for low pressure is seven inches of Water Column (WC), which is approximately 1/4 pound per square inch (psi) above atmospheric pressure. In limited circumstances, increased pressure may be provided for domestic use at 14” Water Column. This increased pressure will only be provided for domestic use if the houseline size required is greater than 2” diameter, or CPAU determines, based upon satisfactory information from the manufacturer, provided by the Customer, that an appliance to be located in the residence requires increased pressure at the inlet that cannot be obtained by resizing or relocating the houseline. Increased pressure may be provided for commercial uses only if the use of the houseline size required is greater than 4” diameter, or evidence as described above establishes that equipment on the site requires increased pressure at the inlet that cannot be obtained by resizing or relocating the houseline. For commercial uses, the available pressures are 7” WC, 14” WC (approximately 1/2 psi), 1 psi, 2 psi and 5 psi. All increased pressure above 7”WC requires review and approval of the Engineering Manager, a plumbing permit and testing of the existing Gas piping with a building Inspector present in accordance with the latest adopted version of the California DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 12 Plumbing Code See Rule and Regulation 22, “Special Gas Utility Regulations” regarding special Service requirements. 3. DETERMINATION OF THERMS TO BE BILLED The unit of measure for billing is the Therm. Gas Meters measure volume of Gas in ccf at ambient temperature and pressure conditions. Therms are derived from the metered data by subtracting the Meter reading for the previous reading cycle from the current reading. The difference (uncorrected ccf) is multiplied by the pressure factor required to convert the measured consumption volume to a standard volume (at standard temperature and pressure conditions). This standard volume, in pressure-corrected ccf, is then multiplied by the Therm factor (a variable determined by periodic analysis of CPAU’s Gas supply) to produce the final number of Therms billed. The composite correction factor (the product of the Therm factor and the pressure correction factor) is shown on bills under the heading “multiplier.” 4. SERVICE DOWNSTREAM OF METER CPAU assumes no duty or liability for inspecting, validating or approving the safe operating condition of the Customer’s Service, appliances, or equipment downstream of the Utility Meter. F. WASTEWATER COLLECTION AND TREATMENT 1. COLLECTION CPAU operates and maintains a Wastewater Collection System separate from the storm and surface Water Collection System. A connection to the Wastewater Collection System is required for all water users where wastewater service is available. For the disposal of Wastewater from basements and floors below ground level, it will be necessary for the Customer to provide pumps or ejectors for satisfactory drainage, as approved by the Water-Gas-Wastewater Engineering Manager. If the elevation of the basement floor is above the rim elevation of the next upstream manhole, Applicant shall provide a survey by a licensed Civil Engineer indicating the elevations of the basement floor and the rim elevation of the next upstream manhole. Submission of this survey and DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 13 approval by the Engineering Manager is required for exemption from the pump/ejector requirement. 2. REGULATION Chapter 16.09 of the Municipal Code regulates the discharge into the Wastewater Collection System of substances other than domestic Wastewater. See Rule and Regulation 23, “Special Wastewater Utility Regulations” regarding special Service requirements. 3. TREATMENT The collection system transports the Wastewater to the Palo Alto Regional Water Quality Control Plant for treatment. At this tertiary treatment plant, the City of Palo Alto processes the Wastewater from Mountain View, Los Altos, Los Alto Hills, Stanford University, and East Palo Alto Sanitary District, as well as its own. The treatment is performed in accordance with the National Pollution Discharge Elimination Permit issued by the San Francisco Bay Area Regional Water Quality Control Board before the treated water is discharged into the San Francisco Bay Estuary. 4. LIMITATION OF SERVICE CPAU reserves the right to limit the size of connection and the quantity of wastes disposed and to prohibit the use of the sewer for disposal of toxic or hazardous wastes detrimental to the Wastewater system or treatment plant. G. REFUSE SERVICE 1. REGULATION All solid waste, Compostable Materials and Recyclable Materials are governed by Chapter 5.20 of the Palo Alto Municipal Code, regulations promulgated by the City Manager pursuant to Chapter 5.20, these Rules and Regulations and the contract between the City and the City’s Collector. See Rule and Regulation 24, “Special Refuse Services Regulations” regarding special service requirements. 2. REFUSE COLLECTION The City’s Collector provides collection of solid waste, Compostable Materials and Recyclable Materials. A minimum of one collection per week of solid waste is required of all Occupied Premises. Each Customer shall receive collection Services on a City specified day of each week. DESCRIPTION OF UTILITY SERVICES RULE AND REGULATION 3 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 14 Customers must use the City Collector’s provided Containers for service to ensure compatibility with the collection vehicles. The automatic solid waste Service level is one Standard Container for Residential Customers and two Standard Containers for Commercial Customers. The minimum Service for Residential Premises is one twenty gallon wheeled cart provided by the City’s Collector. Solid waste in excess of the Service level subscribed by the Customer will be removed by the City’s Collector for an additional Charge, upon Customer request or notification. Customers exceeding their subscribed Service level repeatedly are required to subscribe to additional collection Service at the City-established rates. H. STORM AND SURFACE WATER DRAINAGE 1. RESPONSIBILITY AND PURPOSE The City of Palo Alto Public Works Department is responsible for all Drainage Facilities in the street and public right of way that collect storm and surface Water and convey it to the major channels and creeks within the jurisdictional boundaries of the City of Palo Alto. Examples include curbs and gutters, catch basins, pipelines, culverts, street, channels and pumping stations. The purpose of the Storm and Surface Water control facilities is to improve the quality of control, or protect life or property from any storm, flood or surplus waters. See Rule and Regulation 25, “Special Storm and Surface Water Drainage Regulations,” regarding special Service requirements. 2. STORM DRAINAGE FEE A Storm Drainage fee shall be payable to the City monthly by the owner or occupier of each and every developed parcel in accordance with Rule and Regulation 25. (END) BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 1 A. BILLING UNITS All metered billing units used for billing purposes shall be determined to the nearest whole unit. Such units may include, kW, kWh, kVA, kVar, hp, Therms, and/or ccf. B. PAYMENT OF BILLS CPAU issues bills to its Customers on a regular interval. Bills shall be deemed received upon physical or electronic delivery to Customer, or three calendar days following the deposit of the bill in the United States Mail to the Customer’s billing address. Bills for CPAU Services are due and payable 20 calendar days following issuance of the bill statement. Bills unpaid after the 20 day period are considered delinquent (“past due”). If a Customer’s payment is not received by CPAU after 25 days of bill issuance, the outstanding balance will be assessed a late payment Charge. For the convenience of Customers there are a number of ways to pay CPAU bills: 1. By enclosing the bill stub and check and mailing to: CPAU, P.O. Box 10097, Palo Alto, CA 94303-0897. 2. By enrolling in the Utilities Bank Draft Program. Payments will be drafted from a Customer’s designated checking or saving account and automatically applied to the Customer’s Utility Account for each current Billing Period. 3. By paying in Person at the Civic Center, Revenue Collections, 1st Floor, 250 Hamilton Avenue, Palo Alto between the hours of 8:00 a.m. and 4:30 p.m. The City offices are closed on alternate Fridays. Customers should call 650-329-2317 to ensure the office is open. Credit card payments are accepted at Revenue Collections. Customers should call to see which credit cards are accepted. Customers can pay delinquent bills with a credit card by phone by calling the Utility Customer Service Center during business hours. 4. By depositing the payment in the walk-up Night Depository Box in the front of the City Hall building on the Civic Center Plaza, or at the drive-up Night Depository Box in the Civic Center Garage, on “A” Level. 5. By paying online through the “My Utilities Account” application, accessible from the Utilities’ website. Payment through the “My Utilities Account” may be made by credit card BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 2 or by bank draft. 6. By enrolling at a financial institution or service company that can provide electronic payments to CPAU on behalf of the Customer. 7. By Property Managers completing a “Revert to Owner (RTO) Agreement” in order to maintain utility service to units during the interim period between tenants. C. BUDGET BILLING PAYMENT PROGRAM The Budget Billing Payment Program establishes equalized monthly payments and is available to all Residential Customers who qualify as set forth below: 1. Customers may join the Budget Billing Payment Program at any time providing the Customer Account balance is zero and the Customer has not been previously removed from the Budget Billing Program for non-payment. 2. A Customer electing to utilize the program shall agree to make monthly payments based on CPAU’s forward estimate of the Customers’ Charges for the subsequent twelve-month period. 3. CPAU does not guarantee that the total actual Charges will not exceed, or be less than, its original estimate. Customers should review their Account on an ongoing basis and request changes to the budget billing amount in response to changes in their household usage. CPAU may require that Customers pay a revised monthly amount as a condition to continuing participation in the plan, if CPAU determines that substantial changes in Customer usage patterns or consumption has occurred. 4. CPAU will perform an annual true-up on Customer Budget Billing Accounts every twelve months. This will result in either a Customer credit for CPAU over-collection or an outstanding balance due from the Customer for under-collection by CPAU during the prior twelve months. D. DISCONTINUANCE OF BUDGET BILLING The Customer’s Budget Billing Payment Program shall remain in effect, subject to review of the monthly payment amount, and shall terminate when: BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 3 1. The Customer notifies CPAU to terminate participation in the Budget Billing Program; 2. CPAU notifies the Customer of the termination of its Budget Billing Payment Program: 3. The Customer no longer takes Service at the Premises; or 4. The Customer owes an amount of two or more monthly payments. However, if the Customer eliminates the delinquency, removal from the program will not occur. Upon termination of either Utility Service or participation in the Budget Billing Payment Program, any amount owed by the Customer for actual Charges shall immediately become due and payable or any amount due to the Customer shall be refunded or credited. E. INSUFFICIENT FUNDS FOR PAYMENT 1. A Service Charge will be made and collected by the City of Palo Alto for each check returned by a bank to CPAU for the reason of insufficient funds in accordance with Rate Schedule C-1. 2. Unsuccessful Bank Drafts due to insufficient funds will be subject to late payment fees in accordance with Rate Schedule C-1. F. PRORATION OF BILLS 1. Bills for Utility Services will be prepared for each Billing Period in accordance with the applicable Rate Schedules or CPAU contract applicable to the Premises served. 2. Proration is intended to produce a uniform average unit cost for the commodity regardless of the number of days in the Service period. Services will be prorated if the number of actual Service days differs from the number of days in the applicable Billing Period. Electric Demand (kW) and Electric Power Factor Charges will not be prorated. Proration will not occur for those Rate Schedules that contain Meter fees, connection fees, deposits, and other miscellaneous fees. 3. If Rate Schedules change during the Billing Period, Charges will be prorated on the basis of the number of days covered by the previous Rate Schedule and the number of days covered BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 4 by the new Rate Schedule. G. DELINQUENT BILLS AND LATE PAYMENT CHARGES 1. Utilities Charges incurred in the applicable Billing Period are due and payable by the “Due Date” indicated on the front of the bill statement. Bills unpaid by the due date are delinquent and a late payment Charge will be added to the outstanding balance as specified in Rate Schedule C-1. 2. Residential and commercial Accounts having unpaid balances older than 180 days shall be subject to collection action by the City. Collection action may result in notifications to credit reporting agencies. 3. Late payment Charges may be suspended by CPAU if the Customer is withholding full or partial payment pending final resolution of disputed bill. The late payment Charge may be waived by CPAU based upon the ultimate resolution of a disputed Charge. 4. Full or partial payments towards outstanding balances will be applied to the oldest outstanding Charges. Failure to pay outstanding balances will result in late fees and termination of Service for non-payment. 5. In the event that a Customer donating to the ProjectPLEDGE Program has a delinquent bill, the late Charge percentage will not be applied to the amount of the Customer’s pledge. However, the Customer’s participation in ProjectPLEDGE will be discontinued after three consecutive Billing Periods in which the Customer has not included their pledge amount in the bill. 6. Customers whose Utility bills include payments of principal and/or interest on loans from CPAU which are secured by deeds of trust on real property shall be charged a late payment Charge when any current Utility bill includes an unpaid installment on such loan from a prior bill. Nothing in this Rule and Regulation shall be construed to alter in any way the duty of the Customer to pay any installment on a loan from CPAU when due, or to alter the rights of CPAU to enforce the payment of such installments. H. DISPUTED BILLS If bill accuracy is questioned or disputed by the Customer, Customers shall request an explanation BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 5 from CPAU within the current Billing Period or as soon as reasonably possible. After reviewing the disputed bill, CPAU will: 1. Issue a corrected bill to the Customer or reflect the correction on the bill in a subsequent Billing Period. 2. Determine if an amortization period (“payment arrangement”) for the Charge-in-question shall be provided by CPAU. If a payment arrangement is offered by CPAU and agreed to by the Customer, Utility Services will not be discontinued for nonpayment while the Customer complies with the payment arrangement for the “past due” balance , and subsequent Utilities bills are paid on time during the payment arrangement period. 3. Advise the Customer that the bill is correct as presented. The Customer may choose, at the Customer’s option, to have the Meter removed for testing under the Provisions of Rule 15 “Metering” and payment of the applicable fee found in Rate Schedule C-1 “Exchange Meter for Accuracy Test”. I. METERED SERVICE BILLING ERRORS AND ADJUSTMENTS Where a Customer has been undercharged or overcharged for metered Service, the date and cause of which can be reliably established where a customer has been undercharged or overcharged, the retroactive billing adjustment (back bill or refund) shall not exceed three years. 1. When, as a result of either a CPAU or a Customer-initiated accuracy test, a Meter is found to register more than two percent (2%) fast, CPAU will refund the Customer the overcharge based upon the corrected Meter readings for the period the Meter was in use, or three years, whichever is less. Any applicable late payment will be waived. 2. When, as a result of a test, a Customer Meter is found not to register, or to register more than two percent (2%) slow, CPAU may bill the Customer for the undercharge base on an average bill. The bill will be computed based on an estimate of the Customer’s consumption during a prior month in the same season or on the consumption in the same period of the prior three years. J. UNMETERED SERVICE BILLING ERRORS AND ADJUSTMENTS Where a Customer has been undercharged or overcharged for unmetered Service, the date and cause BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 6 of which can be reliably established where a customer has been undercharged or overcharged, the retroactive billing adjustment (back bill or refund) shall not exceed three years. K. THEFT OF SERVICE Where there is evidence that theft of Utility Service has occurred, CPAU will retroactively bill, and collect any underpayment or nonpayment of Charges. The applicable period to assess Charges shall commence from the date it can be reasonably established the theft began to the date in which the underpayment was discovered and initially established. All underpayments or non-payments shall become immediately due and payable. Customers committing theft of Utility Service may be subject to legal action. L. WATER OR GAS LEAK CREDITS It is the Customer’s responsibility to maintain their lines and equipment in a reasonable condition such that leaks do not occur. CPAU shall not make billing adjustments for Water, Gas or Wastewater Charges resulting from leakage in a line on the Customer Premises beyond the CPAU Meter, unless CPAU determines that City staff were solely responsible for such leakage. M. REFUSE BILLING ERRORS, DISPUTES AND ADJUSTMENTS 1. Adjustments to the Refuse Service bill shall be requested to the City’s Collector. Customers with adjustments unresolved by the City’s Collector, may dispute their claim with the City’s Public Works Department, Environmental Services – Zero Waste section. Billing adjustments will be resolved by following the City’s Rules and Regulations, Chapter 5.20 of the Palo Alto Municipal Code and specific regulations promulgated by the City Manager pursuant to the authority established in Chapter 5.20. 2. When an error in billing has occurred, the date and cause of which can be reliably established where a Customer has been undercharged or overcharged, the retroactive billing adjustment shall not exceed three years. When an account discrepancy is identified, the City’s Collector and/or the Public Works Department staff reviews the account history for a period not to exceed 3 years and either generates a credit or a charge to the Customer. Residential, small Commercial Customers, or non-profit Customers that have been undercharged may be back billed for a shorter time period as appropriate, or not back billed if the Customer is not at fault. 3. Customers requesting Refuse Services to be suspended shall obtain from the City’s Public BILLING, ADJUSTMENTS AND PAYMENT OF BILLS RULE AND REGULATION 11 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No 7 Works Department a form requesting Refuse Service suspension. See Rule and Regulation 24, “Special Refuse Services Regulations” regarding requirements for Refuse Service suspension. (END) SPECIAL REFUSE SERVICE REGULATIONS RULE AND REGULATION 24 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No. 1 A. SPECIAL REFUSE Refuse Service includes weekly collection, processing and disposal of materials properly deposited in the City Collector’s provided containers for solid waste, as well as weekly collection and processing of Recyclable Materials, weekly collection and processing of Compostable Materials (yard trimmings, food scraps, and food soiled paper), ongoing maintenance of the closed Palo Alto Landfill, zero waste programs, street sweeping service, the household hazardous waste program, and the annual Clean Up Day. 1. GENERAL a. The City shall authorize, permit, regulate and control the collection and disposal of all solid waste within the City limits. b. Minimum collection service for solid waste is once a week. Each Customer shall receive Refuse Service collection on a City specified day of each week. c. The automatic solid waste service level is one Standard Container for Residential Customers and two Standard Containers for Commercial Customers unless an alternate level is requested. d. Containers to be serviced by the City’s Collector must not be packed so tightly that contents do not empty freely. Contents of wheeled containers shall not exceed a weight of 200 pounds. e. Customers must supply a safe and accessible pathway for all collection. The City’s Collector does not enter buildings or garages to empty solid waste, compostable or recycling containers. f. Customers must have all Containers ready and on the street for collection by 6:00 a.m. on collection day. g. Any occupied domestic dwelling which is receiving any two active utility services such Gas and Electric Service shall be charged at least a Minimum Charge for Refuse Services. If unusual circumstances exist such that no solid waste, Compostable Materials or Recyclable Materials are generated at the Premises, the SPECIAL REFUSE SERVICE REGULATIONS RULE AND REGULATION 24 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No. 2 Customer may apply for an exemption from this Rule. Customers with non-occupied Premises for a minimum of three months needing to have Refuse Services temporarily suspended shall obtain from the City’s Public Works Department a Refuse Service suspension form. Upon approval of the Refuse Service suspension, the City’s Collector will remove all Containers from the Customer’s Premises. Upon reoccupation of the Premises, it is the obligation of the Customer to reestablish Refuse Service to the address by contacting the City’s Utilities and City’s Collector. The Refuse Service bill shall be adjusted accordingly upon approval from the City. Residential Customers on extended absences from their Premises for a minimum of one month or more (i.e., long vacation), but less than three months may have their Refuse Services temporarily reduced by the City’s Collector to the lowest service levels available. h. The City’s Collector shall provide wheeled Containers for solid waste, Recyclable Materials, and Compostable Materials collection. Standard service for solid waste collection is one 32-gallon black cart, for Recyclable Materials it is one 64-gallon blue cart, and for Compostable Materials it is one 96-gallon green cart. Such Containers remain the property of the City and shall not be removed by Customers vacating Premises. If Containers are removed, the outgoing Customer may be Charged a fee to replace the Container based on either a published fee or actual replacement cost. i. Containers shall remain on private property and not in the Public Right-of-Way except as is necessary to accommodate the scheduled collection. Containers are permitted in the Public Right-of-Way only during the day preceding the day of scheduled collection and terminating the day following such collection. j. Bulky goods scheduled for collection by the City’s Collector are permitted in the Public Right-of-Way only during the day preceding the day of scheduled collection and terminating the day following such collection. Bulky goods means discarded furniture, mattresses, and household appliances. k. All Containers should have lids closed, and be placed with the front of the Containers facing the street with a minimum of 2 feet between Containers. SPECIAL REFUSE SERVICE REGULATIONS RULE AND REGULATION 24 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No. 3 2. RESIDENTIAL a. The standard collection location for all Containers is on the street at curbside. Back/side yard solid waste collection is available only to Customers with existing subscription service and existing associated monthly service fee at City established rates. b. Residential Customers may exchange City Collector provided Containers for a different size at no cost once per calendar year. Additional Container exchanges will be subject to a Charge per exchange. 3. COMMERCIAL a. Service location of Containers shall be determined by the Public Works Director or his/her designee. Commercial Service Customers may choose from a variety of service levels and frequency of collection. Containers in multiple sizes and collection frequencies are also available and provided by the City’s Collector. b. Commercial Service Customers may receive up to five (5) wheeled containers for the collection of solid waste instead of a bin if space constrains exist. All Containers for solid waste and Compostable Materials are subject to a rental fee at City established rates. Commercial Service Customers may also receive up to five (5) wheeled containers for the collection of Recyclable Materials at no charge. The sixth wheeled container for Recyclable Materials will be subject to a rental fee at City established rates. c. Commercial Service Customers with space constraints that are willing to share collection Containers with other adjacent Commercial Service Customers may do so and pay for a percentage of the service provided. B. COLLECTION AND OWNERSHIP OF MATERIALS SPECIAL REFUSE SERVICE REGULATIONS RULE AND REGULATION 24 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No. 4 1. RECYCLABLE MATERIALS a. Recyclable Materials from Residential Customers placed for collection in Containers provided by City’s Collector shall become the property of the City’s Collector at the time of container placement on the street or other designated location for collection. The City’s Collector shall be an authorized City contractor under PAMC Section 5.20.040 pursuant to written contract with the City, and shall have exclusive right to collect such Recyclable Materials. b. Commercial Service Customers shall place Recyclable Materials in bins, boxes, or containers provided by the City’s Collector. Such materials become the property of the City’s Collector. The City’s Collector shall have the exclusive right to collect Recyclable Materials from such bins, boxes, or containers. c. Commercial Service Customers can donate, sell, or pay to have Recyclable Materials collected by any recycler provided such materials are separated by material type. Glass, paper, plastics, and metal cans may be commingled for collection. Additional requirements related to exclusions to the City or its Collector having the exclusive right to Recyclable Materials are provided in PAMC Chapter 5.20. 2. COMPOSTABLE MATERIALS a. Residents may receive up to three (3) wheeled containers for Compostable Materials at no cost. Additional wheeled containers may be rented or purchased at City established rates. b. Temporary Containers for the rare occurrence of excess Compostable Materials may be used by the residents and may include 30 gallon Kraft paper bags, cardboard boxes, or yard/plant trimming bundles (no larger than 2’ x 4’). The containers and bundles used for the extra collection may not exceed 40 pounds will not be returned to the Customer. C. SCAVENGING OF SOLID WASTE AND/OR RECYCLABLE MATERIALS IS PROHIBITED SPECIAL REFUSE SERVICE REGULATIONS RULE AND REGULATION 24 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 7-1-2015 Sheet No. 5 1. No Person shall scavenge in any City-operated location or facility nor disturb nor remove any material therein, without permission from the Director of Public Works. 2. No Person shall scavenge from or deposit solid waste, Recyclable Materials, or Compostable Materials in any Container on the Premises of a Residential or Commercial Customer without the permission of the owner of the Premise. D. SPECIAL PROGRAMS 1. PHYSICAL LIMITATION PROGRAM COLLECTION On-premise (back/side yard) collection for solid waste, recyclable Materials, Compostable Materials and household hazardous waste collection is available at no additional Charge for residents who are physically limited. Program requires completion and approval of the City’s Collector form. (END) City of Palo Alto (ID # 5855) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Grants and Contribution to the Art Center and Children’s Theatre Title: Approval of a $9,500 Grant From Silicon Valley Creates, a $9,600 Grant From the National Endowment for the Arts, a $45,000 Contribution From the Friends of Palo Alto Children’s Theatre and Adoption of a Related Budget Amendment Ordinance to the General Fund in the Amount of $64,100 From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council Authorize 1. Approval of a $9,500 grant from Silicon Valley Creates towards the exhibition program of the Palo Alto Art Center. 2. Approval of a $9,600 grant from the National Endowment for the Arts towards The Big Read program of the Children’s Theatre. 3. Approval of a $45,000 contribution from the Friends of the Palo Alto Children’s Theatre towards performing arts education. 4. Adoption of a Budget Amendment Ordinance recognizing $64,100 in additional revenue and appropriating $64,100 in the Community Services Department General Fund budget. Executive Summary The Arts & Sciences Division of the Community Services Department has been awarded two grants and a cash contribution from three separate organizations. Silicon Valley Creates awarded the Palo Alto Art Center a $9,500 general grant which the Art Center is using for operation expenses of art exhibitions. The National Endowment for the Arts (NEA) awarded the Children’s Theatre a $9,600 grant for literary outreach through a Big Read program. In addition to the two grants, the Friends of Palo Alto Children’s Theatre (FOPACT) provided a $45,000 cash contribution to the City of Palo Alto to support performing arts education by funding contractors for teaching, directing, designing, and choreography. Background City of Palo Alto Page 2 The Community Services Department’s Arts & Sciences Division provides arts education through various programs including visual arts, performing arts, music, and dance. Both the Palo Alto Art Center and the Palo Alto Children’s Theatre have been past recipients of grants from Silicon Valley Creates and the NEA, respectively. In FY 2015, the two grants have once again been awarded from these organizations to further the mission of the Arts & Sciences Division. In addition to the grants, a cash contribution was made to the City of Palo Alto’s Children’s Theatre from its non-profit support organization, FOPACT. Discussion With the funding from Silicon Valley Creates, the NEA, and FOPACT, the Art Center and Children’s Theatre are applying the funds towards the following: For FY 2015, the $9,500 general grant from Silicon Valley Creates supports operating costs of art exhibitions at the Art Center. The grant funds are being used to purchase installation equipment and tool upgrades, for shipping expenses of artwork, and to purchase visitor barriers to ensure preservation of art pieces on loan to the City. The mission statement of Silicon Valley Creates reads, “Igniting investment and engagement in arts and creativity in Silicon Valley” and they have supported the Art Center for numerous consecutive years. With the $9,600 Big Read grant from the NEA, the Children’s Theatre will further its goals of encouraging reading among lapsed and reluctant audiences, invoking responses to literary content, and participation in book discussions. The novel selected for this year is When the Emperor was Devine by Julie Otsuka, a novel about a Japanese-American family incarcerated during World War II. The audiences for this Big Read are local high school students and community members participating in book discussions. This is the fourth time the Children’s Theatre has been a recipient of an NEA Big Read grant. The $45,000 cash contribution from FOPACT to the Children’s Theatre is being applied towards arts education through the hiring of contracted teaching artists, show directors, choreographers, and designers for theatre show productions. Annually, FOPACT has provided a cash contribution through their partnership with Children’s Theatre and the City. Resource Impact The Silicon Valley Creates grant is a general grant without a matching requirement and has no financial impact to the City. The NEA Big Read grant does require the City to match grant expenditures which is being met with existing staff time. The contribution from FOPACT is a supplement to City funds provided to the Children’s Theatre to continue offering quality arts education. As a contribution to augment the theatre budget, there is no financial impact to the City. Attachments: Attachment A - SVCreates FY 2015 - $9,500 Grant (PDF) Attachment B - NEA Big Read FY 2015 - $9,600 Grant (PDF) Attachment C - FOPACT FY 2015 - $45,000 Contribution (PDF) City of Palo Alto Page 3 Attachment D - BAO for CSD Grants and Contributions (DOCX) Grant Agreement FY15 - 244112 2908 Hennepin Avenue, #200 Minneapolis, MN 55408-1954 612.341.0755 www.artsmidwest.org This Agreement, dated April 15, 2014, by and between Arts Midwest on behalf of the National Endowment for the Arts and Palo Alto Children's Theatre 1305 Middlefield Road, 1321 Marshall St. Apt. 504 Palo Alto, CA 94301-3349 herein referred to as GRANTEE, outlines the following organizational and project terms that must be met in order to receive funding from Arts Midwest. The program The Big Read is a program of the National Endowment for the Arts in partnership with Arts Midwest designed to revitalize the role of literature in American culture and to encourage citizens to read for pleasure and enlightenment. The Big Read team at Arts Midwest will serve as your contacts for all questions regarding the program and this Grant Agreement. The team can be reached at 612.238.8010 or thebigread@artsmidwest.org. Grant award stipulations Grant award Support for GRANTEE from Arts Midwest, on behalf of the National Endowment for the Arts, is $9,600. This award must be used towards the expenses incurred as part of your Big Read programming. These expenses may include artist fees; book purchases; staff salaries and benefits; and other expenses. Unallowable expenses include meals, fundraising, hospitality activities, concessions, gifts for participants, or costs incurred prior to receipt of an executed copy of this Grant Agreement or after July 31, 2015. These funds derive from the National Endowment for the Arts: CFDA (Catalog of Federal Domestic Assistance) #45.024 distributed through Arts Midwest. This grant must be indicated as federal funds with GRANTEE’s records. In order to receive the full grant, GRANTEE's total expenses as shown on your final report budget must be at least $19,200 or greater. The award must be matched on a 1 to 1 basis with nonfederal funds. There can be no overlapping expenses between this grant and a grant received directly from the National Endowment for the Arts. GRANTEE is expected to carry out a project that is consistent with the proposal that was approved for funding by Arts Midwest and the National Endowment for the Arts. If major changes in the programming or more than a 20% adjustment in total project costs are believed to be necessary, GRANTEE must send a written request, with justification, to Arts Midwest prior to the expenditure of grant funds. Approval is not guaranteed. Page 1 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 Arts Midwest will disburse this grant in two installments by check to GRANTEE as follows: Initial payment of $7,680. will be sent to arrive on or about the date of the first event as indicated on GRANTEE's Event Listing (see Program event listing). Final payment of $1,920. will be sent four to six weeks following the receipt of a complete final report (see Reporting). Independent contractor It is understood that this Agreement does not constitute a partnership or joint venture between Arts Midwest and GRANTEE, and that GRANTEE’s status is solely that of an independent contractor. GRANTEE shall be solely responsible for the performance of its contracts including, without limitation, the payment of all costs, expenses, and damages that may arise from said contracts. Funding default “force majeure” This Agreement may be terminated by Arts Midwest in the event that funding from the National Endowment for the Arts is not forthcoming, or by reason of an Act of God, force majeure, or any unforeseen occurrence which renders the fulfillment of this agreement by either party impossible. Under such circumstances, neither party shall be liable to the other for payment of damages. Program requirements As a participant in The Big Read, GRANTEE agrees to conduct the following Big Read activities: Develop and produce a well-planned, well-attended, community-wide read with widespread involvement and participation. Your literary programming should feature innovative, diverse activities, and plans to connect to the chosen book or poet. The ideal Big Read lasts approximately one month and must occur between September 1, 2014 and June 30, 2015. A successful Big Read will be held in a variety of venues and, through effective partnerships, reach a broad audience. The number of activities planned should correlate with your community population. Activities should include: a kick-off event to launch the program locally; a minimum of 10 discussions on the book or poet in varied locations, including libraries, bookstores, and museums, that attract diverse audiences; at least one keynote session on the selected book or poet (e.g., lecture by key biographer, panel discussion, or author reading); and a minimum of two special events involving other forms of artistic programming (e.g., art exhibits related to the themes of the book or poet, music or dance events, film series including adaptations of the book, or theatrical readings). Partner with a library (if GRANTEE itself is not a library). Other collaborating organizations might include middle and/or high schools (working with teachers, curriculum specialists, or school librarians), bookstores, museums, arts organizations, local businesses, community service organizations, community centers, youth groups, senior centers, correctional institutions, community colleges, universities, social service organizations, and military installations. Generate media involvement through partnerships with local TV, radio, print, and electronic media, and through other public relations efforts. Use and distribute the digital educational and promotional materials. Host visiting representatives from The Big Read staff and/or sponsors. While not all organizations will be visited by The Big Read staff, we appreciate your willingness to share your activities. In addition, GRANTEE is strongly encouraged to participate in online orientation activities. Page 2 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 Crediting and publicity The National Endowment for the Arts, Arts Midwest, and participating community organizations will work together cohesively to ensure maximum positive promotion of The Big Read. As a participant in The Big Read, GRANTEE must comply with crediting requirements, including the usage of the credit line and logo in all print and digital materials as well as proper display of The Big Read banners and promotional items. GRANTEE will be required to include a sampling of printed materials and digital communications with your final report. Failure to meet these credit requirements will jeopardize GRANTEE’s future funding from Arts Midwest. Standards Manual Proper crediting of The Big Read is an essential part of your grant. All credit requirements are set forth in the Standards Manual, which is included and therefore made part of this Agreement. Please ensure proper crediting and visibility for the benefit of both GRANTEE and this national program. Website - www.neabigread.org Arts Midwest has developed a website that provides context on The Big Read program and enhances the public's knowledge and understanding of the program, the books and poetry, the authors, and the participating community organizations. The website is promoted by Arts Midwest and the National Endowment for the Arts. All documents needed to manage your award, including the Standards Manual and eGrant final report, are available in the Grantee Dashboard (www.neabigread.org/login) linked in the header of the website. Public relations and media embargo GRANTEE’s outreach efforts to local media, including print, television, and radio outlets, are very important to the success of The Big Read. The National Endowment for the Arts will issue a national news release on May 13, 2014 announcing the selected grantees. This will be distributed to the national wire services (e.g., Associated Press), statewide newspapers, and trade publications (e.g., Publisher’s Weekly). The National Endowment for the Arts created a sample news release for use in publicizing GRANTEE’s participation in The Big Read. This news release should be customized to accommodate your local organization and distributed to your local media. The news release can be downloaded from www.neabigread.org, in the Grantee Dashboard (see Website). You are encouraged to issue your own news release on or after May 13, 2014. The Organizer’s Guide contains a section on planning and executing your PR strategy. The NEA also created a PR toolkit, which is available online at www.neabigread.org in the Grantee Dashboard, Resources – Media and Public Relations tab. This toolkit contains sample press releases, talking points, frequently asked questions, and other public relations tools, along with tips on working with print, radio, and television media. Educational materials The Big Read educational materials are accessible on www.neabigread.org/books. Educational materials are not for re-sale under any circumstances. Note: The Big Read educational materials are not provided in print. Page 3 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 Audio Guides Teacher’s Guides Reader’s Guides Reader's Guides contain an introduction to the featured book or poet, historical context, background on the writer, information about related works, and discussion questions. Text content from The Big Read Reader's Guides by The Big Read is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. Note: For legal reasons photos used in the Reader’s Guides are prohibited from duplication without permission. Teacher's Guides contain lesson plans on the featured book or poet, and other teacher resources for high schools or middle schools that can be used in the classroom and/or by the school library media specialist. Text content from The Big Read Teacher’s Guides by The Big Read is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. Audio Guides (available to stream from www.neabigread.org and via iTunes) are 20 to 30-minute programs about the book or poet featuring interviews with and readings by notable literary and public figures. The Big Read Audio Guides are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. Note: For legal reasons, Audio Guides are prohibited from duplication without permission. The Audio Guides may be used for radio broadcast, classroom, and individual uses. Promotional materials Bookmarks Banners To widely promote The Big Read, GRANTEE will receive three 2.5’ x 6.5’ The Big Read banners (two horizontal banners and one vertical banner) featuring the initiative logo for on-site event promotion. GRANTEE shall hang these banners in visible locations of your choice before and during your community read activities. GRANTEE will receive 8.5'' x 1.125'' bookmarks featuring The Big Read logo and the website address. Optional promotional tools In addition to these materials, we also provide The Big Read logo block and credit line for GRANTEE’s use in creating your own promotional and marketing materials. The Big Read logo block and the credit line are available to be included on advertisements, posters, flyers, postcards, or other promotional items of your design. These materials are available for download in the Grantee Dashboard on the website. The following Big Read promotional materials are provided to GRANTEE. Reporting Program event listing GRANTEE's event listing is essential to providing Arts Midwest, the National Endowment for the Arts, and the public with detailed information concerning your project’s activities; to encourage participation at your activities; to promote The Big Read; and to report to the National Endowment for the Arts. GRANTEE shall use the Grantee Dashboard to manage their events as part of this program. Using the Submit for Review tab in the Grantee Dashboard, GRANTEE is required to submit their events to Arts Midwest according to the following schedule: Page 4 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 The final report enables us to compile and forward comprehensive information to the National Endowment for the Arts regarding The Big Read. GRANTEE is obligated to submit a final report to Arts Midwest within 30 days following the conclusion of your programming. Sample final report materials are available on The Big Read website in the Grantee Dashboard. Please review the final report requirements prior to beginning your Big Read activities so you can properly document them throughout the process. The final report consists of the following: Final report Within 30 days of the completion of your activities, submit a final event listing with complete attendance figures as described in the final report (see Final report). Your final grant payment will be generated after receipt of this submission along with your final report. 30 days prior to your first Big Read activity, submit an updated event listing. Indicate which events are confirmed and which, if any, are tentative. Your initial payment will be generated after receipt of this event listing by Arts Midwest. By July 11, 2014, submit a preliminary event listing. Indicate which events are confirmed and which are tentative. Only events marked as confirmed and public are displayed on www.neabigread.org. In the event that GRANTEE does not comply with this reporting requirement, GRANTEE may no longer be entitled to future support from Arts Midwest. eGrant component (submit online via http://artsmidwestbigread.egrant.net) Program summary data, partnerships data, final budget, and final narrative. Final event listing: Enter attendance figures from all your Big Read events. Grantee Dashboard component (submit online via http://www.NEABigRead.org/login) If GRANTEE's programming beginning or ending dates change, GRANTEE must notify Arts Midwest immediately via telephone or email so grant payments will not be delayed. Three examples of crediting/promotional materials, three examples of media materials, up to 10 images (highly recommended, not required). Compliances GRANTEE shall comply with all provisions of the Assurance of Compliance Addendum, which is included and therefore made a part of this Agreement. These compliances are required by Arts Midwest’s federal and state funding sources. An interactive version of the Assurance of Compliance with web links is also downloadable from the Grantee Dashboard at www.neabigread.org. Assurance of Compliance GRANTEE certifies that it is a duly constituted, registered, and qualified 501(c)(3) not-for-profit organization as designated by the Internal Revenue Service, or is an entity of federal, state, local, or tribal government. GRANTEE agrees to notify Arts Midwest immediately of any alteration of such status that may occur prior to the conclusion of the grant period. Non-profit Status DUNS and SAM.gov The DUNS number we have on file for GRANTEE is 050520782. GRANTEE has an active registration at http://www.SAM.gov. This registration will need to be renewed annually or more frequently as required. In some cases, you may need to update your organization's information with Dun and Bradstreet before completing the renewal with SAM.gov. Page 5 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 Binding Effect Admission to, as well as seating and participation in The Big Read programs shall be open to the general public and shall be without regard to race, color, natural origin, disability, religion, age, or gender as provided in Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the Age Discrimination Act of 1975, and Title IX of the Educational Amendments of 1972. GRANTEE shall provide, upon request from Arts Midwest, up to six complimentary admissions to all paid program activities without cost to Arts Midwest or the National Endowment for the Arts for VIPs, site visits, or promotional use. Arts Midwest will work with GRANTEE to ensure that proper procedures for admission are followed at all venues. Admission GRANTEE agrees that Arts Midwest shall not be liable for any loss, damage, or expense of any kind arising from acts or omissions of GRANTEE, its agents and its employees, including but not limited to: compensation for injury, property damage, the payment of any taxes, or the payment of court and reasonable attorney fees. Liability GRANTEE agrees to carry out this project in compliance with the terms listed in the Agreement. GRANTEE agrees to notify Arts Midwest in writing of any changes that may impact or require an amendment to this Agreement. Failure to comply with all terms of the Agreement and addenda may jeopardize future funding to GRANTEE by Arts Midwest. GRANTEE further understands and agrees that the grant received from Arts Midwest must be returned in full in the event that GRANTEE unilaterally cancels this Agreement. This Agreement shall be governed and interpreted in accordance with the laws of the State of Minnesota. All disputed claims or controversies arising out of or related to this Agreement shall be settled in the state or federal courts located in Hennepin County, Minnesota. GRANTEE expressly waives all jurisdictional rights and questions of proper venue. Instructions 1. Circulate copies of this Grant Agreement to appropriate members of your staff to review as necessary. 2. Please check the appropriate box under “A-133 Audit Report” below. 3. Sign the Grant Agreement by May 30, 2014. Once signed, the document will be countersigned by Arts Midwest and a PDF copy will be emailed to you. Please check the appropriate box. Did GRANTEE expend $750,000 or more in federal awards during your most recent completed fiscal year? NO YES If yes, GRANTEE must provide a copy of the Single Audit Report (OMB Circular A-133); Finding Section (if applicable); and Corrective Action Plans Section (if applicable). Please submit a PDF copy or link to this report to thebigread@artsmidwest.org. No funds will be distributed until Arts Midwest receives this Audit. A-133 Audit Report Page 6 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 X I have read and agree to comply to the terms and conditions within The Big Read Agreement and its attachments on behalf of GRANTEE. Palo Alto Children's Theatre Arts Midwest Authorized Signature Authorized Signature Name Date Title Date A fully-executed copy will be returned to GRANTEE once countersigned by Arts Midwest. Page 7 DocuSign Envelope ID: A7BAF358-24AF-4771-BC5C-0DB6243EAB89 5/30/2014 | 8:16:22 AM PT Grant Manager Lane Pianta 6/4/2014 | 6:49:27 AM PT Please make checks payable to: The Friends of the Palo Alto Children’s Theatre 1305 Middlefield Road, Palo Alto, CA 94301 www.fopact.org Tax ID#94-2801005 November 4, 2014 Judge Luckey Palo Alto Children’s Theatre 1305 Middlefield Road Palo Alto, CA 94301 Dear Judge, On behalf of the Friends of the Palo Alto Children’s Theatre, please accept this donation of $45,000 to support the vital programs provided to this community by the Palo Alto Children’s Theatre. This contribution is intended to support but not supplant current funds provided by the City of Palo Alto, in an attempt to close the gap between the City of Palo Alto’s support of the theatre and the cost required to run top-quality arts education programs which benefit more than 30,000 community members annually. Specifically, the funds are to be used to hire contractors who provide services such as teaching artists, directors, choreographers and designers. We remain incredibly proud of our partnership with the City of Palo Alto, and look forward to another season of exciting productions and classes at the Children’s Theatre. Yours sincerely, Ilanit Gal Nazy Attarzadeh Executive Board Members Co-Presidents Ilanit Gal Nazy Attarzadeh VP Finance Steve Manley VP Fundraising Cindy Roberts VP Marketing Ruchi Goel Treasurer Paula Collins Secretary Coreen Collins Members at Large Karen Ambrose-Hickey Alicia Gans Tim Hmelar Stephen Jaeger Ali Mouline Mary Lou Meeks Melissa Racz Kristina Vetter 1 Revised December 22, 2014 5855/mb Ordinance No. XXXX ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR FISCAL YEAR 2015 TO INCREASE REVENUE ESTIMATES FOR THE GRANTS AND CONTRIBUTIONS IN THE COMMUNITY SERVICES DEPARTMENT BY $64,100 WITH A CORRESPONDING INCREASE TO THE COMMUNITY SERVICES DEPARTMENT BUDGET IN THE AMOUNT OF $64,100. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 16, 2014 did adopt a budget for fiscal year 2015; and B. The City of Palo Alto Community Services Department has received a grant in the amount of $9,500 from Silicon Valley Creates for Art Center art exhibition expenses; and C. The City of Palo Alto Community Services Department has a received a grant in the amount $9,600 from the National Endowment for the Arts for the Big Read program; and D. The City of Palo Alto Community Services Department has received a contribution in the amount of $45,000 from the Friends of the Palo Alto Children’s Theatre to support performing arts education; and E. City Council authorization is needed to amend the 2015 budget as hereinafter set forth. SECTION 2. The revenue estimate from Grants and Contributions in the amount of Sixty-Four Thousand One Hundred Dollars ($64,100) is hereby increased in the Community Services Department General Fund Budget. SECTION 3. The Community Services Department budget for the Arts & Sciences Division is hereby increased by Sixty-Four Thousand One Hundred Dollars ($64,100). SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 5. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 6. The actions taken in this ordinance do not constitute a project requiring environmental review under the California Environmental Quality Act (CEQA). 2 Revised December 22, 2014 5855/mb INTRODUCED AND PASSED: Enter Date Here AYES: NOES: ABSENT: ABSTENTIONS: NOT PARTICIPATING: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Assistant City Attorney City Manager ____________________________ Director of Administrative Services ____________________________ Director of Community Services City of Palo Alto (ID # 5774) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Approval of a Contract for FY16 Preventive Maintenance Project Title: Approval of a Contract with Graham Contractors, Inc. In The Amount of $1,311,073 For The FY 2016 Preventive Maintenance Project, the 1st of 4 Contracts in the FY 2016 Street Maintenance Program Project (CIP PE-86070) From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve and authorize the City Manager or his designee to execute the attached contract with Graham Contractors, Inc. (Attachment A) in an amount not to exceed $1,311,073 for the FY 2016 Preventive Maintenance Project; and 2. Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Graham Contractors, Inc. for related, additional but unforeseen work which may develop during the project, the total value of which shall not exceed $131,107. Background The Public Works Engineering Services Division manages construction contracts for concrete repair, preventive maintenance, resurfacing and reconstruction of various city streets on an annual basis. The candidate streets are surveyed biannually by Public Works Engineering Services staff and then rated by a computerized pavement maintenance management system (PMMS). City of Palo Alto Page 2 Since 2003, the Public Works Engineering Services Division has implemented multi-phased resurfacing projects by bidding one phase for concrete repairs and preparation, a second phase for preventive maintenance and a third phase for asphalt concrete resurfacing. This method of phasing has proved to be more cost effective by avoiding the typical 15% markup that prime contractors place on work that is performed by their subcontractors. This typically includes all concrete and preventive maintenance work which had been included in the asphalt overlay contract. This contract is the preventive maintenance contract which includes roadway seals, base repairs and crack sealing. Discussion Project Description Staff is recommending approval of this contract, the first of four street resurfacing contracts to be approved for Fiscal Year 2016, as part of an enhanced program to improve the condition of Palo Alto’s streets. The work included in this project includes preventive maintenance of 31 lane miles of public streets (2,469,000 square feet). The contract will include 1,380 tons of asphalt road base repairs and 195,000 linear feet of crack sealing, including work on major streets such as East and West Bayshore Rd, and Ross Rd. This contract also includes thermoplastic striping work in coordination with the Public Works Public Services Division. The streets included in this contract are shown on the project maps (Attachment B). Additionally, this contract includes work on University Avenue Parking District Parking Lots N and T. Extensive public outreach will be conducted before and during the construction phase to inform the community step by step throughout the process, including flyers sent to adjacent residences and businesses, and notices posted on Nextdoor and the City’s website. In addition, staff will interface with the Palo Alto Downtown Business and Professional Association, neighborhood associations, and other organizations and businesses as appropriate. Bid Process On April 14, 2015, a notice inviting formal bids (IFB) for the FY 2016 Preventive Maintenance Project was posted at City Hall, and sent to 9 contractors and 13 builder’s exchanges. The bidding period was 21 calendar days. Bids were received from four qualified contractors on May 5, 2015 as listed on the attached Bid Summary (Attachment C). City of Palo Alto Page 3 Summary of Bid Process Bid Name/Number FY 16 Preventive Maintenance Project IFB #158974 Proposed Length of Project 70 calendar days Number of Bid Packages emailed to Contractors 9 Number of Bid Packages emailed to Builder’s Exchanges 13 Total Days to Respond to Bid 21 Pre-Bid Meeting? No Number of Bids Received: 4 Base Bid Price Range $1,210,691.92 to $1,687,687.00 Base bids ranged from a low of $1,210,691.92 to a high of $1,687,687.00, and from 1% to 29% above the engineer’s estimate. Staff has reviewed all bids submitted and recommends the Base Bid, Add Alternate 1 and Add Alternate 2, totaling $1,311,073 submitted by Graham Contractors, Inc. be accepted and Graham Contractors, Inc. be declared the lowest responsible bidder. The change order amount of $131,107, which equals 10 percent of the total contract, is requested for related, additional, but unforeseen work which may develop during the project. The lowest responsible bidder, Graham Contractors, Inc. has worked with the City on previous preventive maintenance projects. Staff investigated the references and found no significant complaints. Staff also checked with the Contractor's State License Board and found that the contractor has an active license on file. Resource Impact Funding for the FY 2016 Preventive Maintenance Project is available in the following Capital Improvement Program (CIP) projects: PE-86070 Street Maintenance Program, PO-11001 Thermoplastic Lane Marking and Striping, PL- 04010 Bicycle and Pedestrian Plan Implementation Project, and PF-14003 University Avenue Parking District Parking Improvements. Funding allocation breakdown for each of the CIPs is in the table below. City of Palo Alto Page 4 Funding Source Contract Contingency Total Funding 1 PE-86070 $1,136,699 $113,670 $1,250,369 2 PO-11001 $85,000 $8,500 $93,500 3 PL-04010 $61,500 $6,150 $67,650 4 PF-14003 $27,874 $2,787 $30,661 Totals $1,311,073 $131,107 $1,442,180 Policy Implications This project is in conformance with City of Palo Alto’s Comprehensive Plan and does not represent any changes to existing City policies. Environmental Review This proposed street resurfacing project is a minor alteration and repair to existing facilities and is categorically exempt from the California Environmental Quality Act (CEQA) section 15301c guidelines. Attachments: A - Construction Contract (PDF) B - Project Maps (PDF) C - Bid Summary (PDF) Invitation for Bid (IFB158974) Package 1 Rev. April 20, 2015 CONSTRUCTION CONTRACT ATTACHMENT A CONSTRUCTION CONTRACT Contract No. C16158974 City of Palo Alto FY16 PREVENTIVE MAINTENANCE Project Invitation for Bid (IFB158974) Package 2 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co‐operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON‐DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 Invitation for Bid (IFB158974) Package 3 Rev. April 20, 2015 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST RANSFERS………………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13 15.1 Remedies Upon Default……………………………………………………………………………………….13 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….15 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 Invitation for Bid (IFB158974) Package 4 Rev. April 20, 2015 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non‐Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON‐APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 30.1 Amendments of Laws…………………………………………………………………………………………..19 Invitation for Bid (IFB158974) Package 5 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 Invitation for Bid (IFB158974) Package 6 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on June 15, 2015 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and GRAHAM CONTRACTORS, INC. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a California Corporation duly organized and in good standing in the State of California, Contractor’s License Number315789. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On April 14, 2015, City issued an Invitation for Bids (IFB) to contractors for the Fy 16 Preventive Maintenance Project (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the FY16 PREVENTIVE MAINTENANCE Project, located at VARIOUS STREETS WITHIN, Palo Alto, CA. ("Project"). Invitation for Bid (IFB158974) Package 7 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non‐Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre‐Qualification Statements, Pre‐Qualification Statement, and Pre‐ Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. Invitation for Bid (IFB158974) Package 8 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co‐operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than . within Seventy calendar days (70) after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of Five Hundred dollars ($500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, Invitation for Bid (IFB158974) Package 9 Rev. April 20, 2015 CONSTRUCTION CONTRACT including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of One Million Three Hundred Eleven Thousand Seventy Two Dollars and fifty eight cents.($1,311,072.58). [This amount includes the Base Bid and Additive Alternates #1 and #2.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well‐supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. Invitation for Bid (IFB158974) Package 10 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third‐party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON‐DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB158974) Package 11 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co‐tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Holly Boyd AND [Include Construction Manager, If Applicable.] Invitation for Bid (IFB158974) Package 12 Rev. April 20, 2015 CONSTRUCTION CONTRACT City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Graham Contractors, Inc. 860 Lonus Street San Jose Ca 95126 Gerald R. Graham, Jr. 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB158974) Package 13 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally Invitation for Bid (IFB158974) Package 14 Rev. April 20, 2015 CONSTRUCTION CONTRACT liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. Invitation for Bid (IFB158974) Package 15 Rev. April 20, 2015 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty‐five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close‐out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close‐out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, Invitation for Bid (IFB158974) Package 16 Rev. April 20, 2015 CONSTRUCTION CONTRACT submittals of as‐built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non‐Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take‐offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. Invitation for Bid (IFB158974) Package 17 Rev. April 20, 2015 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non‐City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. Invitation for Bid (IFB158974) Package 18 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. Invitation for Bid (IFB158974) Package 19 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 26 NON‐APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self‐insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” Invitation for Bid (IFB158974) Package 20 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854‐compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records at the end of each week during the Project. Invitation for Bid (IFB158974) Package 21 Rev. April 20, 2015 CONSTRUCTION CONTRACT (iv) If the certified payroll records are not produced to the project manager within the 10‐day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ Purchasing Manager City Manager APPROVED AS TO FORM: ____________________________ Senior Asst. City Attorney APPROVED: ____________________________ Public Works Director CONTRACTOR By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ PUBLIC WORKS DEPARTMENT ENGINEERING SERVICES DIVISION (CIP: PE-86070) PROJECT TITLE: FY16 PREVENTIVE MAINTENANCE PROJECT PART 8 PROJECT MAPS 4000 600 4000 700 600 3700 3800 3900 3800 300 3100 3300 4000 600 500 500 4200 4200 200 500 4100 41004100 4000 400 4100 3600 0 4100 4300 400 4200 200 0 4000 4200 300 200 300 200 4100 3800 100 3700 3700 3900 300 300 500 400400 600 3000 300 4100 4000 3800 700 200 200 3500 100 3400 3300 300 500 3800 500 700 700 2700 400 3100 200 3000 2800 2900 2600 100 2500 500 3200 300 400 3000 3100 600 31003000 3200 2900 3300 35003400 700 3400 3800 3900 900 800 3600 900 4000 900 3600 3700 3800 800 700 3300 3100 3200 700 3200 3400 900 3600 3400 3500 1100 3700 1000 1000 2900 800 800 2800 700 2700 2800 2900 3000 900 700 800 2600 800 800 3100 900 3100 3300 3400 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22002200 800 2400 1900 1900 2100 900 900 1700 500 500 1900 1000 2500 700 2200 800 2200 2400 2300 900 25002400 2800 1000 27002600 2600 1000 3000 31002900 1000 1100 1100 1100 2000 1900 2000 300 700 900 700 0 600 800 800 600 500 400300200 100 100 200 100 400 300 300 200 700 300 600 200 100 600 200 100 500 500 300 500 400 300 300 400 200 400 500400 600 200 400 500 100 100 300 200 300 200100 300 1200 1300 200 1600 1700 1600 500 1800 2100 1400 100 1700 400 1700 1800 1500 1500 1400 600 2000 600 700 700 700 400 1000 1300 500 1500 400 100 1100 1100 200 14001300 400 1400 100 200 1200 1200 900 800 600 1000 300 900800 1000 900 800 700600 700 400 500 700 500 400 600 800 700700 500 900 400 1200 600 1100 400 1100 500 1000 700 600 900800 800 600 1000 800 1000 1000 1100 1000900 1000 1200 13001200 700 1100 800 900 1200 1200 1100 1000 1100 1500 1400 1300 1700 700 1900 600 1600 500 1600 2100 1700 600 1800 800 1300 1200 800 1200 1200 1400 1100 1100 600 700 1100 1300 1300 1800 0 500 800 1500 900 700 1400 1000 1300 1100 1200 800 900 800 1700 1600 1700 1800 500 700 1400 1500 1400 600 1500 1600 1600 500 500 1400 2000 2000 2100 1800 2000 400 35003400 3200 2200 2200 2500 28 00 1100 3200 3400 3700 3700 600 4100 2000 1900 600 2500 3900 300 400 3600 3600 27002600 3900 3200 1700 3300 2600 2700 2800 3100 3200 2200 2200 2000 2200 2000 2200 200 400 600 800 2900 2900 3700 800 3300 1200 2400 900 1000 1100 2600 1800 3800 700 600 2200 2000 400 3100 800 900 700 3000 1000 1500 400 2300 1000 1300 600 800 700 2700 3000 2800 3200 4100 2100 3400 3700 3100 37001000 10001100 400 4200 400 400 400 400 42004200 4200 1100 3100 31003200 3200 3100 31003200 3200 1100 1100 11001100 1100 800 800 1100 800 3300 3400 4300 400 400 400 35003400 CROSBY PL LOT N LOT T BOYCE AVE E CHARLESTON RD ANTON CT EL CAJON WY ALLANAH CT DOWNING LN E CHARLESTON RD HAMILTON AVE CHABOT WEST BAYSHORE RD DAVENPORT WYMACLANE ST EL CAMINO WY CESANO CT DINAH'S CT This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'2800' FY 1 6 P M MA S T E R M A P CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-10 16:15:32FY16 Prevent (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 600 600 500 400 300 200 200 400300 700 30 0 600 20 0 100 600 200 100 500 300 400 300 300200 400 500400200 700 400 700600 600 500 400 300 200 200 400300 700 300 600 200 100 600 200 100 500 300 400 300 300200 400 500400200 700 400 700 LOT N LOT T EMERSON STREET NASTREET RSONSTREET GH STREET EVERETT AVENUE EVERETT AVENUE HIGH STREET MASTREET ALMA STREET LYTTON AVENUE ELCAMINOREAL Y RO AD ALMASTREET EMERSON STREET RAMONA STREET LYTTON AVENUE UN I V E R S I T Y A V E N U E RAMONA STREET BRYANT STREET HIGHSTREET EMERSON STREET ALMASTREET EMERSONSTREET HIGH STREET HIGHSTREET HAMILTON AVENUE HAMILTON AVENUE EMERSON STREET HAMILTON AVENUE GILMAN STREET WAVERLEY STREET BRYANTSTREET FO R E S T A V E N U E FOREST AVENUE BRYANT STREET RAMONASTREET RAMONASTREET BRYANT STREET FLORENCE STREET KIPLING STREET LYTTONAVENUE WAVERLEYSTREETWAVERLEYSTREET EVERETT AVENUE EVERETT AVENUE TREET LEYSTREET RAMONA STREET BRYANT STREET LYTTON AVENUE UNIVERSITY AVENUE KIPLING STREET UNIVERSITY AVEN WAVERLEY STREET HAMILTONAVEN NGSTREET FOREST AVENUE WAVERLEYSTREET U N I V E R S I T Y C I R C L E LANE 7EASTLANE5EASTLANE6EAST LA NE 20 EA ST LAN E 30 LANE20WEST LANE 21 MITCHELL LANE NE15 EAST BRYANTCOURT PAULSEN LANE LANE12WEST LANE 11 WEST CENTENNIALWALK DOWNING LANE ELCAMINOREAL PENINSULA CORRIDORJOINT POWERSBOARD HIGH STREET ALMA STREET ALMA STREET FORESTAVENUE ELCAMINOREALELCAM WELLS AVENUE URBANLANE MEDICAL LANE7WEST This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'335' FY16 PM MAP 1 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 16:23:43 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 20 0 4000 4200 300 200 3900 300 300 500 400 400 3000 500 300 4100 20 0 4000 4200 300 200 3900 300 300 500 400 400 3000 500 300 4100 A WHITCLEMCT BENLOMONDDRIVE FE R N E A V E N U E FERNEAVENUE ALMA STREET BRIARWOODWAY PONCEDRIVE FAIRFIELD CT PARKBOULEVARD NEWBERRYCOURT EEAVENU E CREEKSIDEDRIVE TIOGACOURT TCL EMDRIV E ALMASTREETGREENMEADOWWAY ELYPLACE ALMASTREET PLACE GREENMEADOWWAY PARKSIDE DRIVE SCRIPPS AVENUE SCRIPPSCOURT BEN LOMOND DRIVE DIABLO COURT NELSONDRIVE SHASTA DRIVE MACKAYDRIVE FERNE AVENUE MACKAYDRIVE DAKE AVENUE SAN ANTONIO AVEN UE FERNEAVENUE SANANTONIOAVENUE PLACE PLACE DUNCANPLACE NELSONCOURT D U N C A N PL A C E NELSON DRIVE ADOBEPLACE CREEKSIDEDRIVE PARKSIDEDRIVE K CHARLESTONROAD NELSONDRIVE ELCAPITAN PLAC E ELYPLACE PARKSIDEDRIVE CREEKSIDE DRIVE REET ALMASTREET ALMASTREET SAN FERNECOURT MACKAYDRIVE CALCATERRA PLA C E BRIARWOODWAY HEMLOCK COURT CHR I STOPHER COURT DORJOINTPOWERS BOARD PENINSULACORRIDORJOINT POWERSBOARD PENINSULACORRIDORJOINT POWERS BOARD PENINSULAC This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'400' FY16 PM MAP 2 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 14:58:53 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 2700 2800 2900 500 400 3000 3100 600 310030002900 3100 700 800 2800 700 2700 2800 2900 3000 700 800 2600 800 2700 2800 2900 500 400 3000 3100 600 310030002900 3100 700 800 2800 700 2700 2800 2900 3000 700 800 2600 800 M LOMAVERDEAVENUE MIDDLEFIELD ROAD RYSONAVENUE COLO RADOAVEN UE BYRONSTREET COLORADOAVENUE COWPER STREET ELDORADOAVENUE KIPLING STREET COWPER STREET TO W L E W A Y GARYCOURT KIPL LOMAVERDEAVENUE MACKALLWAYWELLSBURY CT TOWLEWAY AVALONCOURT LOMA VERDEAVENUE MIDDLEFIELDROADMIDDLEFIELDROAD LAYNECOURT LOMA VERDEAVENUE MIDDLEFIELD ROAD SUTTERAVENUE STERNAVENUE PRICECOURT ELLSWORTH PLACE(PVT)CO LORA DOAVENUE SUTTERAVENUE ROSSROAD CLARA DRIVE CO LORA DOAVENUE MARSHA L LDRIVE ROSSROAD RANDERSCOURT ALLEN COURT ROSS ROAD MANCHESTERCOURT LOMAVERDE KIPLING STREET DRIVE BRUCED SYCAMOREDRIVE DAVIDAVENUE CLARADRIVE WINTERGREENWAY ROSS ROAD STELLING DRIVE MARTINSENCT COWPERSTREET MIDTOWN COURT SANCARLOS COURT TOWLE PLACE GASPAR COURT DY M ON D COU R T STELLINGCT LOMAVERDE PLACE FLOWERS LANE WELLSBURY WA Y SUTTER AV ENU E E L DAV I D AVENU S T E L LDa SEVYSONCT This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'400' FY16 PM MAP 3 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 15:10:52 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 500 3200 3300 35003400 700 3400 3600 3600 700 3300 3100 3200 700 3200 3400 36003500 800 800 3100 33003200 3400 500 3200 3300 35003400 700 3400 3600 3600 700 3300 3100 3200 700 3200 3400 36003500 800 800 3100 33003200 3400 RORKEWAY AMES AVENUE ROSSROAD AMESAVENUE ASHTONAVENUE STONELANE MIDDLEFIELDROAD MURDOCH DRIVE CHRISTINEDRIVE MIDDLEFIELDROAD EASTMEADOWDRIVE ALGERDRIVE ALGERDRIVE COWPERCOURT ASHTON A VE NUE MAUREENAVENUE KIPLINGSTREET COWPERSTREET STMICHAELDRIVE STMICHAELDRIVE STMICHAELCOURT ST CLAIREDRIVE MIDDLEFIELD ROAD TORREYACOURT TOYONPLACE MIDDLEFIELDROAD LOMAVERDEAVENUE ROSSROAD THOR NWOOD DRIVE ARBUTUSAVENUE EVERGREEN DRIVE TALISMANDRIVE ASPENWAY LUPINEAVENUE ROSSROAD CHRISTINE DRIVE GR MIDDLEFIE KIPLINGSTREET LWAY NUE COWPERSTREET LOMAVERD EAVENUE ROSS ROAD ROSSCOURT RICHARDSONCOURT AMESAVENUE AMESCOURT EVERGREENDRIVE LOUISROADLOUISROAD OAD HESTERCOURT LOMAVERDEAVENUE LOUISROADLOUISROAD LOMAV EASTMEADOWDRIVE EAST M EADOWDRIVE EASTM EADOWDRIVE ARBUTUS AVENUE OMAVERDEPLACE C OWP ER STREE T ASHTON COURT MURDOCH CT CORK OAK WAY AMES AVENUE HOLLY OAK DR I VE HOLLY O A K DRIVE MUR R A Y WA Y DAV I D AVENUE ST E L LING D R I V E DRI FTWOOD DRIVE TALISMAN COURT This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'450' FY16 PM MAP 4 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 15:45:29 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 4000 600 4000 700 600 3900 3800 3300 4000 600 500 500 4200 4200 200 500 4100 41004100 4000 400 4100 3600 4100 4300 400 4200 4000 4200 300 200 4100 38003700 390035003400 700 3700 1000 3800 800 4000 4000 3900 3800 700 800 900 4000 1000 600 600 700 3800 3900 500 500 600 4100 3900 4100 400 4200 400 400 400 400 4200 4200 4200 4300 400 400 400 4000 600 4000 700 600 3900 3800 3300 4000 600 500 500 4200 4200 200 500 4100 41004100 4000 400 4100 3600 4100 4300 400 4200 4000 4200 300 200 4100 38003700 390035003400 700 3700 1000 3800 800 4000 4000 39003800 700 800 900 4000 1000 600 600 700 3800 3900 500 500 600 4100 3900 4100 400 4200 400 400 400 400 4200 4200 4200 4300 400 400 400 CROSBY PL DINAH'S CT CESANO CT EL CAMINO WY MACLANE ST DAVENPORT WY This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'850' FY16 PM MAP 5 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-07 15:35:20FY16 Prevent (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 9 0 0 8 0 0 9 0 0 4000 900 8 0 0 9 0 0 8 0 0 9 0 0 4000 900 8 0 0 F A B I A n W a y C H A R L E ST O N R O A D A ltaire W alk S A N A N T O N I O A V E N U E SA N A NTONIO AV S A N A N T O N I O A V E N U E C O M M E R C I A L S T R E E T C O M M E R C I A L S T R E E T C H A R L E ST O N R O A D TRANSPORT STREET YSHOREFREEWAY I N D U S T R I A L A V E N U E OREROAD BAYSHOREFREEWAY This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'229' FY16 PM MAP 6 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 17:09:02 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 26002500 310030002900 35003400 700 3600 3600 3800 800 700 3300 3100 3200 700 3200 3400 900 3600 3400 3500 1100 3700 1000 1000 2900 800 800 2800 700 2700 2800 2900 3000 900 700 800 2600 800 800 3100 900 3100 3300 3400 3200 1000 1000 3200 3000 3300 24002300 600 800 2400 2500 700 800 2400 2300 900 25002400 2800 1000 27002600 2600 1000 3000 31002900 2400 1000 1100 1100 2300 700 2400 2500 2800 1100 3200 3400 3700 3700 3700 3300 2600 2700 3000 2800 3200 3400 3700 3700 1000 10001100 1100 3100 3100 3200 3200 3100 3100 3200 3200 1100 1100 11001100 1100 1100 26002500 310030002900 35003400 700 3600 3600 3800 800 700 3300 3100 3200 700 3200 3400 900 3600 3400 3500 1100 3700 1000 1000 2900 800 800 2800 700 2700 2800 2900 3000 900 700 800 2600 800 800 3100 900 3100 3300 3400 3200 1000 1000 3200 3000 3300 24002300 600 800 2400 2500 700 800 2400 2300 900 25002400 2800 1000 27002600 2600 1000 3000 31002900 2400 1000 1100 1100 2300 700 2400 2500 2800 1100 3200 3400 3700 3700 3700 3300 2600 2700 3000 2800 3200 3400 3700 3700 1000 10001100 1100 3100 3100 3200 3200 3100 3100 3200 3200 1100 1100 11001100 1100 1100 CHABOT WEST BAYSHORE RD This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'1000' FY 1 6 P M M A P 7 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 17:18:48 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) 700 300 600 600500 500 300 500 400 300 300 400 400 500400 300 200 300 1100 1200 1200 900 800 600 1000 300 900800 1000 900 800 700600 700 400 500 700 500 400 600 800 700 700 500 900 400 1200 1100 400 1100 1000 700 600 900800 800 600 1000 800 1000 1000 1100 1000 900 1000 1200 1200 700 1100 800 900 1200 1200 1100 1000 1100 800 1100 700 600 700 300 600 600500 500 300 500 400 300 300 400 400 500400 300 200 300 1100 1200 1200 900 800 600 1000 300 900800 1000 900 800 700600 700 400 500 700 500 400 600 800 700 700 500 900 400 1200 1100 400 1100 1000 700 600 900800 800 600 1000 800 1000 1000 1100 1000 900 1000 1200 1200 700 1100 800 900 1200 1200 1100 1000 1100 800 1100 700 600 DOWNING LN BOYCE AVE HAMILTON AVE LOT T This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'625' FY16 PM MAP 8 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rnguy, 2015-04-02 17:23:21 (\\cc-maps\gis$\gis\admin\Personal\rnguy.mdb) PE-86070 FY 16 PREVENTIVE MAINTENANCE PROJECT BID SUMMARY ATTACHMENT C # BID ITEM QNTY UNITS 1 Type I Slurry 206,164 SY 1.50$ 309,246.00$ 1.49$ 306,153.54$ 1.38$ 284,506.32$ 1.60$ 329,862.40$ 1.50$ 309,246.00$ 2 Type II Slurry 68,173 SY 1.65$ 112,485.45$ 1.77$ 120,666.21$ 1.50$ 102,259.50$ 1.75$ 119,302.75$ 2.00$ 136,346.00$ 3 AC Base Repair 1,380 TON 210.00$ 289,800.00$ 255.00$ 351,900.00$ 260.00$ 358,800.00$ 264.00$ 364,320.00$ 250.00$ 345,000.00$ 4 Crack Seal 195,623 LF 0.40$ 78,249.20$ 0.39$ 76,292.97$ 0.43$ 84,117.89$ 0.40$ 78,249.20$ 0.38$ 74,336.74$ 5 Inert Recycling 1,380 TON 10.00$ 13,800.00$ 9.00$ 12,420.00$ 5.25$ 7,245.00$ 9.00$ 12,420.00$ 5.00$ 6,900.00$ 6 Reset Valves 5 EA 600.00$ 3,000.00$ 500.00$ 2,500.00$ 630.00$ 3,150.00$ 265.00$ 1,325.00$ 600.00$ 3,000.00$ 7 Blue Markers 93 EA 25.00$ 2,325.00$ 30.00$ 2,790.00$ 27.00$ 2,511.00$ 25.00$ 2,325.00$ 25.00$ 2,325.00$ 8 Caltrans Det. 1 9,398 LF 0.55$ 5,168.90$ 0.55$ 5,168.90$ 0.58$ 5,450.84$ 0.55$ 5,168.90$ 0.55$ 5,168.90$ 9 Caltrans Det. 6 3,000 LF 0.65$ 1,950.00$ 0.65$ 1,950.00$ 0.68$ 2,040.00$ 0.65$ 1,950.00$ 0.65$ 1,950.00$ 10 Caltrans Det. 9 17100 LF 1.00$ 17,100.00$ 0.65$ 11,115.00$ 0.68$ 11,628.00$ 0.65$ 11,115.00$ 0.65$ 11,115.00$ 11 Caltrans Det. 10 7050 LF 1.00$ 7,050.00$ 0.55$ 3,877.50$ 0.58$ 4,089.00$ 0.55$ 3,877.50$ 0.55$ 3,877.50$ 12 Caltrans Det. 19 1000 LF 1.00$ 1,000.00$ 1.00$ 1,000.00$ 1.05$ 1,050.00$ 1.00$ 1,000.00$ 1.00$ 1,000.00$ 13 Caltrans Det. 20 19,826 LF 1.20$ 23,791.20$ 0.95$ 18,834.70$ 1.05$ 20,817.30$ 0.95$ 18,834.70$ 0.95$ 18,834.70$ 14 Caltrans Det. 21 9,390 LF 1.00$ 9,390.00$ 1.00$ 9,390.00$ 1.05$ 9,859.50$ 1.00$ 9,390.00$ 1.00$ 9,390.00$ 15 Caltrans Det. 22 8,400 LF 1.00$ 8,400.00$ 1.05$ 8,820.00$ 1.10$ 9,240.00$ 1.05$ 8,820.00$ 1.05$ 8,820.00$ 16 Caltrans Det. 23 11,320 LF 2.00$ 22,640.00$ 1.20$ 13,584.00$ 1.30$ 14,716.00$ 1.20$ 13,584.00$ 1.20$ 13,584.00$ 17 Caltrans Det. 25A 190 LF 0.70$ 133.00$ 0.60$ 114.00$ 1.00$ 190.00$ 0.60$ 114.00$ 0.60$ 114.00$ 18 Caltrans Det. 27B 122 LF 0.50$ 61.00$ 0.50$ 61.00$ 1.00$ 122.00$ 0.50$ 61.00$ 0.50$ 61.00$ 19 Caltrans Det. 29 590 LF 1.00$ 590.00$ 1.00$ 590.00$ 1.05$ 619.50$ 1.00$ 590.00$ 1.00$ 590.00$ 20 Caltrans Det. 33 300 LF 1.20$ 360.00$ 1.00$ 300.00$ 1.00$ 300.00$ 0.95$ 285.00$ 0.95$ 285.00$ 21 Caltrans Det. 37A 445 LF 1.00$ 445.00$ 1.00$ 445.00$ 1.00$ 445.00$ 0.95$ 422.75$ 0.95$ 422.75$ 22 Caltrans Det. 38 2348 LF 1.00$ 2,348.00$ 1.00$ 2,348.00$ 1.05$ 2,465.40$ 1.00$ 2,348.00$ 1.00$ 2,348.00$ 23 Caltrans Det. 38A 3,566 LF 1.20$ 4,279.20$ 1.00$ 3,566.00$ 1.00$ 3,566.00$ 0.95$ 3,387.70$ 0.95$ 3,387.70$ 24 Caltrans Det. 39/39A 22,658 LF 0.70$ 15,860.60$ 0.60$ 13,594.80$ 0.65$ 14,727.70$ 0.60$ 13,594.80$ 0.60$ 13,594.80$ 25 Themo 4" White 4,100 LF 1.20$ 4,920.00$ 1.20$ 4,920.00$ 1.26$ 5,166.00$ 1.20$ 4,920.00$ 1.20$ 4,920.00$ 26 12" Yellow Thermo 650 LF 4.00$ 2,600.00$ 3.45$ 2,242.50$ 3.62$ 2,353.00$ 3.45$ 2,242.50$ 3.45$ 2,242.50$ 27 12" White Thermo 11541 LF 4.00$ 46,164.00$ 3.45$ 39,816.45$ 3.63$ 41,893.83$ 3.45$ 39,816.45$ 3.45$ 39,816.45$ 28 Thermo Legends 891 EA 30.00$ 26,730.00$ 14.85$ 13,231.35$ 15.59$ 13,890.69$ 14.85$ 13,231.35$ 14.85$ 13,231.35$ 29 Green Back Sharrow 15 EA 650.00$ 9,750.00$ 700.00$ 10,500.00$ 720.00$ 10,800.00$ 685.00$ 10,275.00$ 685.00$ 10,275.00$ 30 Traffic Control 1 LS 125,000.00$ 125,000.00$ 125,000.00$ 125,000.00$ 134,225.00$ 134,225.00$ 115,000.00$ 115,000.00$ 595,004.61$ 595,004.61$ 31 Tree Trimming 1 LS 10,000.00$ 10,000.00$ 2,500.00$ 2,500.00$ 27,005.53$ 27,005.53$ 9,500.00$ 9,500.00$ 7,500.00$ 7,500.00$ 32 Pavement fabric dispo 500 TON 20.00$ 10,000.00$ 15.00$ 7,500.00$ 10.50$ 5,250.00$ 15.00$ 7,500.00$ 10.00$ 5,000.00$ 33 CMS Boards 10 EA 600.00$ 6,000.00$ 750.00$ 7,500.00$ 550.00$ 5,500.00$ 500.00$ 5,000.00$ 800.00$ 8,000.00$ 34 Trans Improvements 1 LS 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ 30,000.00$ BASE BID TOTAL:1,200,636.55$ 1,210,691.92$ 1,220,000.00$ 1,239,833.00$ 1,687,687.00$ # ADD BID ITEM QNTY UNITS 1 Black Aggregate 274,337 SY 0.15$ 41,150.55$ 0.18$ 49,380.66$ 0.10$ 27,433.70$ 0.30$ 82,301.10$ 0.09$ 24,690.33$ # ADD BID ITEM QNTY UNITS 2 Green back Bike Ln 5,100 SF 10.00$ 51,000.00$ 10.00$ 51,000.00$ 10.00$ 51,000.00$ 9.25$ 47,175.00$ 8.35$ 42,585.00$ INTERMOUNTAIN SLURRY ENGINEER'S ESTIMATE GRAHAM CONTRACTORS VSS INTERNATIONAL TELFER HIGHWAY ENGINEER'S ESTIMATE GRAHAM CONTRACTORS VALLEY SLURRY TELFER HIGHWAY INTERMOUNTAIN SLURRY INTERMOUNTAIN SLURRY ENGINEER'S ESTIMATE GRAHAM CONTRACTORS VALLEY SLURRY TELFER HIGHWAY City of Palo Alto (ID # 5658) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Council Priority: Community Collaboration for Youth Well-Being Summary Title: Crossing Guard Contract Title: Approval of a Three-Year Contract With an Option of Two, One-year extensions with American Guard Services, Inc. in the Amount Not to Exceed $321,215 Per Year for the First Two Years, and $328,624 for the Third Year and Authorization for Additional but Unforeseen Work Not to Exceed $32,121 Per Year for the First Two Years and $32,862 for the Third Year From: City Manager Lead Department: Police Recommendation Staff recommends that Council: 1. Approve and execute the attached three-year contract C15158284 with American Guard Services, Inc. effective June 15, 2015 in the amount not to exceed $321,215 per year for the first two years and $328,624 for the third year and Authorization for Additional but Unforeseen Work not to Exceed $32,121 Per Year for the First Two Years and $32,862 for the Third Year. 2. Authorize the City Manager or his designee to negotiate and execute the option for two, one- year extensions in the amount of not to exceed $328,624 for year four and $331,239 in year five and Authorization for Additional but Unforeseen Work not to Exceed $32,862 Per Year for Year Four and $33,124 for the Third Year. Background The City is dedicated to ensuring the safety of children traveling to and from school. Prior to 1999, the Police Department was responsible for the hiring, staffing, training, equipping and supervising the hourly crossing guards. Due to the increase in the number of locations where crossing guards are required and the amount of staff time required to handle all the associated responsibilities the management of the crossing guard program became increasingly time- consuming and labor-intensive for Police personnel. As a result, in August 1999 staff received Council approval to contract for adult crossing guard services. City of Palo Alto Page 2 Guidelines for school crossing guards were adopted and approved by Council in April 1993 (CMR:175:93). The assignment of adult crossing guard locations is considered by the City/School Traffic Safety Committee only for those intersections which meet minimum standards and approved by the City/School Traffic Safety Committee. These standards require at least 20 school-age pedestrians utilize the crosswalk location per hour, on the way to or from school. In addition, other traffic related factors are considered, such as crossing location, traffic volume, applicable CalTrain crossings, availability of bus service, and/or the number of traffic lanes involved. Currently, crossing guards operate at 29 designated school area crosswalks. Discussion On March 24, 2015 the City issued an RFP for crossing guard services for three years with the option of two one year extensions commencing on August 1, 2015 with proposals due by April 14, 2015. Through that process, the City received two (2) bids for these services. Staff reviewed, evaluated, and scored the bids and determined that American Guard Services, Inc. (AGS) was the lowest bidder over the contract term offering to provide crossing guard services at a rate of $14.74 an hour in years one and two, and $15.08 an hour in year three. For the first one year extension, the hourly rate would be $15.08 an hour and during the second one year extension, the hourly rate would be $15.20 per hour for a total not to exceed $321,215 per year for the first two years and $328,624 for the third and fourth year and $331,239 in year five. AGS has been providing crossing guard services to the community since 2011 and the Police Department has been satisfied with the services provided. Staff is also requesting authorization for additional but unforeseen work in the amount of 10% per year. These amounts are requested because over the course of the contract, the number of locations and the number of school days may change. This is particularly true in the case of summer school. Summer school instruction, locations, and total number of days can vary significantly from year to year. Resource Impact Sufficient funding for the crossing guard contract is included in the Police Department’s operating budget subject to annual appropriation of funds. Policy Implications The provision of adult crossing guards is consistent with existing City policy. Environmental Review This is not a project under the California Environmental Quality Act (CEQA). Attachments: ATTACHMENT A- C15158284 Final Contract 051915 (PDF) CITY OF PALO ALTO CONTRACT NO. C15158284 GENERAL SERVICES AGREEMENT THIS AGREEMENT made and entered into on the 15th day of June, 2015, by and between the CITY OF PALO ALTO, a California Chartered Municipal Corporation (“CITY”), and AMERICAN GUARD SERVICES, INC., a California corporation, located at 1299 E. Artesia Blvd., Suite 200, Carson, CA 90746, Telephone Number: 310-645-6200 (“CONTRACTOR”). In consideration of their mutual covenants, the parties hereto agree as follows: 1.SERVICES. CONTRACTOR shall provide or furnish the services (“Services”) described in the Scope of Services, attached as Exhibit A. 2.EXHIBITS. The following exhibits are attached to and made a part of this Agreement: “A” - Scope of Services “B” - Schedule of Performance “C” - Compensation “D” - Insurance Requirements “E” - Performance and/or Payment Bond “F” - Liquidated Damages CONTRACT IS NOT COMPLETE UNLESS ALL EXHIBITS ARE ATTACHED. 3.TERM. The term of this Agreement is from August 1, 2015 to July 31, 2018 inclusive, subject to the provisions of Sections Q and V of the General Terms and Conditions. 4.SCHEDULE OF PERFORMANCE. CONTRACTOR shall complete the Services within the term of this Agreement in a reasonably prompt and timely manner based upon the circumstances and direction communicated to CONTRACTOR, and if applicable, in accordance with the schedule set forth in the Schedule of Performance, attached as Exhibit B. Time is of the essence in this Agreement. 5.COMPENSATION FOR ORIGINAL TERM. CITY shall pay and CONTRACTOR agrees to accept as not to exceed compensation for the full performance of the Services and reimbursable expenses, if any: The total maximum lump sum compensation of dollars ($ ); OR The sum of dollars ($ ) per hour, not to exceed a total maximum compensation amount of dollars ($ ); OR X A sum calculated in accordance with the fee schedule set forth in Exhibit C, not to exceed a total maximum compensation amount of One Million Sixty Eight Thousand One Hundred Fifty Six dollars ($1,068,156.00). CONTRACTOR agrees that it can perform the Services for an amount not to exceed the total maximum compensation set forth above. Any hours worked or services performed by CONTRACTOR for which payment would result in a total exceeding the maximum amount of compensation set forth above for performance of the Services shall be at no cost to CITY. X The City has set aside the sum of Ninety Seven Thousand One Hundred Four dollars ($97,104.00) for Additional Services. CONTRACTOR shall provide Additional Services only by advanced, written authorization from the City Manager or designee. CONTRACTOR, at the CITY’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, 1 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 level of effort, and CONTRACTOR’s proposed maximum compensation, including reimbursable expense, for such services. Compensation shall be based on the hourly rates set forth above or in Exhibit C (whichever is applicable), or if such rates are not applicable, a negotiated lump sum. CITY shall not authorize and CONTRACTOR shall not perform any Additional Services for which payment would exceed the amount set forth above for Additional Services. Payment for Additional Services is subject to all requirements and restrictions in this Agreement. 6. COMPENSATION DURING ADDITIONAL TERMS. X CONTRACTOR’S compensation rates for each additional term shall be the same as listed in Exhibit C; OR CONTRACTOR’s compensation rates shall be adjusted effective on the commencement of each Additional Term. The lump sum compensation amount, hourly rates, or fees, whichever is applicable as set forth in section 5 above, shall be adjusted by a percentage equal to the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco- Oakland- San Jose area, published by the United States Department of Labor Statistics (CPI) which is published most immediately preceding the commencement of the applicable Additional Term, which shall be compared with the CPI published most immediately preceding the commencement date of the then expiring term. Notwithstanding the foregoing, in no event shall CONTRACTOR’s compensation rates be increased by an amount exceeding five percent of the rates effective during the immediately preceding term. Any adjustment to CONTRACTOR’s compensation rates shall be reflected in a written amendment to this Agreement. 7. INVOICING. Send all invoices to the CITY, Attention: Project Manager. The Project Manager is Lt. Ken Kratt, Dept.: Police, Telephone: (650)329-2508. Invoices shall be submitted in arrears for Services performed. Invoices shall not be submitted more frequently than monthly. Invoices shall provide a detailed statement of Services performed during the invoice period and are subject to verification by CITY. CITY shall pay the undisputed amount of invoices within 30 days of receipt. GENERAL TERMS AND CONDITIONS A. ACCEPTANCE. CONTRACTOR accepts and agrees to all terms and conditions of this Agreement. This Agreement includes and is limited to the terms and conditions set forth in sections 1 through 6 above, these general terms and conditions and the attached exhibits. B. QUALIFICATIONS. CONTRACTOR represents and warrants that it has the expertise and qualifications to complete the services described in Section 1 of this Agreement, entitled “SERVICES,” and that every individual charged with the performance of the services under this Agreement has sufficient skill and experience and is duly licensed or certified, to the extent such licensing or certification is required by law, to perform the Services. CITY expressly relies on CONTRACTOR’s representations regarding its skills, knowledge, and certifications. CONTRACTOR shall perform all work in accordance with generally accepted business practices and performance standards of the industry, including all federal, state, and local operation and safety regulations. C. INDEPENDENT CONTRACTOR. It is understood and agreed that in the performance of this Agreement, CONTRACTOR and any person employed by CONTRACTOR shall at all times be considered an independent CONTRACTOR and not an agent or employee of CITY. CONTRACTOR shall be responsible for employing or engaging all persons necessary to complete the work required under this Agreement. D. SUBCONTRACTORS. CONTRACTOR may not use subcontractors to perform any Services under this Agreement unless CONTRACTOR obtains prior written consent of CITY. CONTRACTOR shall be solely responsible for directing the work of approved subcontractors and for any compensation due to subcontractors. E. TAXES AND CHARGES. CONTRACTOR shall be responsible for payment of all taxes, fees, contributions or charges applicable to the conduct of CONTRACTOR’s business. 2 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 F. COMPLIANCE WITH LAWS. CONTRACTOR shall in the performance of the Services comply with all applicable federal, state and local laws, ordinances, regulations, and orders. G. DAMAGE TO PUBLIC OR PRIVATE PROPERTY. CONTRACTOR shall, at its sole expense, repair in kind, or as the City Manager or designee shall direct, any damage to public or private property that occurs in connection with CONTRACTOR’s performance of the Services. CITY may decline to approve and may withhold payment in whole or in part to such extent as may be necessary to protect CITY from loss because of defective work not remedied or other damage to the CITY occurring in connection with CONTRACTOR’s performance of the Services. CITY shall submit written documentation in support of such withholding upon CONTRACTOR’s request. When the grounds described above are removed, payment shall be made for amounts withheld because of them. H. WARRANTIES. CONTRACTOR expressly warrants that all services provided under this Agreement shall be performed in a professional and workmanlike manner in accordance with generally accepted business practices and performance standards of the industry and the requirements of this Agreement. CONTRACTOR expressly warrants that all materials, goods and equipment provided by CONTRACTOR under this Agreement shall be fit for the particular purpose intended, shall be free from defects, and shall conform to the requirements of this Agreement. CONTRACTOR agrees to promptly replace or correct any material or service not in compliance with these warranties, including incomplete, inaccurate, or defective material or service, at no further cost to CITY. The warranties set forth in this section shall be in effect for a period of one year from completion of the Services and shall survive the completion of the Services or termination of this Agreement. I. MONITORING OF SERVICES. CITY may monitor the Services performed under this Agreement to determine whether CONTRACTOR’s work is completed in a satisfactory manner and complies with the provisions of this Agreement. J. CITY’S PROPERTY. Any reports, information, data or other material (including copyright interests) developed, collected, assembled, prepared, or caused to be prepared under this Agreement will become the property of CITY without restriction or limitation upon their use and will not be made available to any individual or organization by CONTRACTOR or its subcontractors, if any, without the prior written approval of the City Manager. K. AUDITS. CONTRACTOR agrees to permit CITY and its authorized representatives to audit, at any reasonable time during the term of this Agreement and for three (3) years from the date of final payment, CONTRACTOR’s records pertaining to matters covered by this Agreement. CONTRACTOR agrees to maintain accurate books and records in accordance with generally accepted accounting principles for at least three (3) following the terms of this Agreement. L. NO IMPLIED WAIVER. No payment, partial payment, acceptance, or partial acceptance by CITY shall operate as a waiver on the part of CITY of any of its rights under this Agreement. M. INSURANCE. CONTRACTOR, at its sole cost, shall purchase and maintain in full force during the term of this Agreement, the insurance coverage described in Exhibit D. Insurance must be provided by companies with a Best’s Key rating of A-:VII or higher and which are otherwise acceptable to the City’s Risk Manager. The City’s Risk Manager must approve deductibles and self-insured retentions. In addition, all policies, endorsements, certificates and/or binders are subject to approval by the Risk Manager as to form and content. CONTRACTOR shall obtain a policy endorsement naming the City of Palo Alto as an additional insured under any general liability or automobile policy. CONTRACTOR shall obtain an endorsement stating that the insurance is primary coverage and will not be canceled or materially reduced in coverage or limits until after providing 30 days prior written notice of the cancellation or modification to the City’s Risk Manager. CONTRACTOR shall provide certificates of such policies or other evidence of coverage satisfactory to CITY’s Risk Manager, together with the required endorsements and evidence of payment of premiums, to CITY concurrently with the execution of this Agreement and shall throughout the term of this Agreement provide current certificates evidencing the required insurance coverages and endorsements to the CITY’s Risk Manager. CONTRACTOR shall include all subcontractors as insured under its policies or shall obtain and provide to CITY separate certificates and endorsements for each subcontractor that meet all the requirements of this section. The procuring of such required policies of 3 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 insurance shall not operate to limit CONTRACTOR’s liability or obligation to indemnify CITY under this Agreement. N. HOLD HARMLESS. To the fullest extent permitted by law and without limitation by the provisions of section M relating to insurance, CONTRACTOR shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents from and against any and all demands, claims, injuries, losses, or liabilities of any nature, including death or injury to any person, property damage or any other loss and including without limitation all damages, penalties, fines and judgments, associated investigation and administrative expenses and defense costs, including, but not limited to reasonable attorney’s fees, courts costs and costs of alternative dispute resolution), arising out of, or resulting in any way from or in connection with the performance of this Agreement. The CONTRACTOR’s obligations under this Section apply regardless of whether or not a liability is caused or contributed to by any negligent (passive or active) act or omission of CITY, except that the CONTRACTOR shall not be obligated to indemnify for liability arising from the sole negligence or willful misconduct of the CITY. The acceptance of the Services by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section survive the completion of the Services or termination of this Contract. O. NON-DISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONTRACTOR certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONTRACTOR acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. P. WORKERS' COMPENSATION. CONTRACTOR, by executing this Agreement, certifies that it is aware of the provisions of the Labor Code of the State of California which require every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions of that Code, and certifies that it will comply with such provisions, as applicable, before commencing and during the performance of the Services. Q. TERMINATION. The City Manager may terminate this Agreement without cause by giving ten (10) days’ prior written notice thereof to CONTRACTOR. If CONTRACTOR fails to perform any of its material obligations under this Agreement, in addition to all other remedies provided by law, the City Manager may terminate this Agreement immediately upon written notice of termination. Upon receipt of such notice of termination, CONTRACTOR shall immediately discontinue performance. CITY, CITY shall pay CONTRACTOR for services satisfactorily performed up to the effective date of termination. If the termination if for cause, CITY may deduct from such payment the amount of actual damage, if any, sustained by CITY due to Contractor’s failure to perform its material obligations under this Agreement. Upon termination, CONTRACTOR shall immediately deliver to the City Manager any and all copies of studies, sketches, drawings, computations, and other material or products, whether or not completed, prepared by CONTRACTOR or given to CONTRACTOR, in connection with this Agreement. Such materials shall become the property of CITY. R. ASSIGNMENTS/CHANGES. This Agreement binds the parties and their successors and assigns to all covenants of this Agreement. This Agreement shall not be assigned or transferred without the prior written consent of the CITY. No amendments, changes or variations of any kind are authorized without the written consent of the CITY. S. CONFLICT OF INTEREST. In accepting this Agreement, CONTRACTOR covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of this Contract. CONTRACTOR further covenants that, in the performance of this Contract, it will not employ any person having such an interest. CONTRACTOR certifies that no City Officer, employee, or authorized representative has any financial interest in the business of CONTRACTOR and that no person associated with contractor has any interest, direct or indirect, which could conflict with the faithful performance of this Contract. CONTRACTOR agrees to advise CITY if any conflict arises. 4 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 T. GOVERNING LAW. This contract shall be governed and interpreted by the laws of the State of California. U. ENTIRE AGREEMENT. This Agreement, including all exhibits, represents the entire agreement between the parties with respect to the services that may be the subject of this Agreement. Any variance in the exhibits does not affect the validity of the Agreement and the Agreement itself controls over any conflicting provisions in the exhibits. This Agreement supersedes all prior agreements, representations, statements, negotiations and undertakings whether oral or written. V. NON-APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Contract are no longer available. This Section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Contract. W. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONTRACTOR shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department which are incorporated by reference and may be amended from time to time. CONTRACTOR shall comply with waste reduction, reuse, recycling and disposal requirements of the City’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, Contractor shall comply with the following zero waste requirements: • All printed materials provided by Contractor to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the City’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks. • Goods purchased by Contractor on behalf of the City shall be purchased in accordance with the City’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office. • Reusable/returnable pallets shall be taken back by the Contractor, at no additional cost to the City, for reuse or recycling. Contractor shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. X. AUTHORITY. The individual(s) executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Y. CONTRACT TERMS: All unchecked boxes do not apply to this Contract. IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO AMERICAN GUARD SERVICES, INC. ______________________________________ By________________________________________ City Manager or Designee Name _____________________________________ Title_______________________________________ Approved as to form: _____________________________________ Asst. City Attorney 5 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 Regional Manager Adolfo Avendano EXHIBIT A SCOPE OF SERVICES Crossing Guard Services American Guard Services (AGS) Shall Provide/ Perform the following: •Provide crossing guard services at each location listed on Exhibit “B”- Project Schedule on specific days and during specific hours designated by the City •Coordinate and scheduling and any schedule changes directly with the City •Provide payroll and workers’ compensation coverage for all guards •Provide training to all new hires •Maintain sufficient numbers of alternate guards and guaranteeing crossing coverage for absent or sick guards •Supply all necessary equipment including signs, traffic vests, whistles and raincoats •Submit invoices to the City of Palo Alto on a monthly basis for the number of hours worked by crossing guards during the previous month •Maintain quarterly contact with the Police Department representative for quality assurance of the program Crossing Guard Locations, Days and Hours: Specifically, AGS shall be responsible for ensuring that crossing guard services are provided at the designated locations and at the designated hours on all days in which the designated schools in Palo Alto are in session. This includes summer school, however the summer school locations are somewhat itinerant. The City of Palo Alto (City) will notify the AGS in advance for summer school locations. The City reserves the right to add, delete or revise the schedules or locations at any time with a 30 day written notification. The Normal school year encompasses 180 days each year with crossing guard locations, days, and times for the normal school year schedule. Summer school sessions can vary. The specific locations vary from year to year. AGS Shall Maintain the Following Minimum Standards for Crossing Guards: •Must have a minimum of an eighth grade education •Be able to read, write and speak English •Be a minimum of 18 years old •Not have any felony convictions, misdemeanor convictions involving crimes against children, or convictions involving any violent crime •Not be a registered sex offender or narcotics offender •Have the ability to communicate clearly and concisely with motorists and pedestrians •Crossing Guards must at all times display visible picture identification showing they are an employee of AGS •Crossing Guards shall wear acceptable attire at all times which may be periodically subject to review by the City •Crossing Guards shall wear their traffic vests at all times while performing crossing duties DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 •Crossing Guards will not hold anything in their hands while working except for their issued crossing guard. An example of this would be the Crossing Guard’s cellphone. •Demonstrate the following abilities and characteristics o Minimum of average intelligence o Good physical condition, including sight and hearing o Mental alertness o Neat appearance o Good character o Dependability o Sense of responsibility for the safety of children o Good verbal communication skills o Familiarity with traffic rules and regulations AGS Supervisors Shall Perform the Following Duties: A local area supervisor shall be available at all times to see that guard activities are taking place at required locations and times. The supervisor shall assign schedules, monitor and supervise crossing guards when necessary and have a vehicle to travel to work sites. The supervisor shall visit each school site once a month. The supervisor must be available to the City returning phone calls as soon as possible but in all cases within 30 minutes. The supervisor must be available to respond to problems and/ or complaints. IN addition to the minimum standards set forth above, the supervisor must have a minimum of a high school education and a valid California driver’s license. 1. When alternate guards are needed due to illness or other vacancies, the area supervisor shall immediately notify he Traffic Supervisor if there will be any delay in providing intersection coverage. 2. The area supervisor will periodically and as requested provide the City with updated site matrixes covering all intersections. 3. As requested, the area supervisor will provide pedestrian and bike counts for intersections. Training and Orientation Training and orientation shall be provided prior to deploying any crossing guard or reserve crossing guard. All training and orientation procedures shall be subject to the approval of the City of Palo Alto. DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 Intersection New # Old # MON TUE WED THU FRI Duration (Min) A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:50 - 03:40 02:50 - 03:40 01:30 - 02:20 02:50 - 03:40 02:50 - 03:40 50 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:50 - 03:40 02:50 - 03:40 01:30 - 02:15 02:50 - 03:40 02:50 - 03:40 50 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 03:00 - 03:45 03:00 - 03:45 01:40 - 02:30 03:00 - 03:45 03:00 - 03:45 45 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:45 - 03:30 02:45 - 03:30 01:20 - 02:25 02:45 - 03:30 02:45 - 03:30 45 A.M. 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 50 P.M 02:40 - 03:30 02:40 - 03:30 01:20 - 02:10 02:40 - 03:30 02:40 - 03:30 50 A.M. 07:40 - 08:40 07:40 - 08:40 07:40 - 08:40 07:40 - 08:40 07:40 - 08:40 60 P.M 02:30 - 03:30 02:30 - 03:30 02:30 - 03:30 02:30 - 03:30 02:30 - 03:30 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:50 - 03:40 02:50 - 03:40 01:30 - 02:20 02:50 - 03:40 02:50 - 03:40 50 A.M. 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 50 P.M 02:40 - 03:40 02:40 - 03:40 01:30 - 02:20 02:40 - 03:40 02:40 - 03:40 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:30 - 03:25 02:30 - 03:25 01:25 - 02:15 02:30 - 03:25 02:30 - 03:25 55 A.M. 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 45 P.M 02:30 - 03:30 02:30 - 03:30 01:30 - 02:20 02:30 - 03:30 02:30 - 03:30 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:30 - 03:30 02:30 - 03:30 01:40 - 02:20 02:30 - 03:30 02:30 - 03:30 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:40 - 03:30 02:40 - 03:30 01:30 - 02:20 02:40 - 03:30 02:40 - 03:30 50 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:40 - 03:40 02:40 - 03:40 01:30 - 02:30 02:40 - 03:40 02:40 - 03:40 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:25 - 03:30 02:25 - 03:30 01:30 - 02:20 02:25 - 03:30 02:25 - 03:30 55 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:30 - 03:30 02:30 - 03:30 01:30 - 02:20 02:30 - 03:30 02:30 - 03:30 60 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:35 - 03:30 02:35 - 03:30 01:45 - 02:20 02:35 - 03:30 02:35 - 03:30 55 A.M. 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 07:30 - 08:30 60 P.M 02:35 - 03:35 02:35 - 03:35 01:30 - 02:30 02:35 - 03:35 02:35 - 03:35 60 A.M. 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 45 P.M 02:10 - 03:10 02:10 - 03:10 01:10 - 01:45 02:10 - 03:10 02:10 - 03:10 60 A.M. 07:45 - 08:35 07:45 - 08:35 07:45 - 08:35 07:45 - 08:35 07:45 - 08:35 50 P.M 02:30 - 03:15 02:30 - 03:15 01:15 - 02:00 02:30 - 03:15 02:30 - 03:15 45 A.M. 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 50 P.M 02:40 - 03:30 02:40 - 03:30 01:30 - 02:30 02:40 - 03:30 02:40 - 03:30 50 A.M. 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 50 P.M 02:50 - 03:40 02:50 - 03:40 01:30 - 02:15 02:50 - 03:40 02:50 - 03:40 50 A.M. 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 50 P.M 02:50 - 03:40 02:50 - 03:40 01:30 - 02:15 02:50 - 03:40 02:50 - 03:40 50 A.M. 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 07:30 - 08:20 50 P.M 02:25 - 03:10 02:25 - 03:10 12:55 - 01:40 02:25 - 03:10 02:25 - 03:10 45 A.M. 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 07:30 - 08:15 45 P.M 02:30 - 03:15 02:30 - 03:15 12:55 - 01:55 02:30 - 03:15 02:30 - 03:15 60 A.M. 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 07:40 - 08:30 50 P.M 02:30 - 03:15 02:30 - 03:15 01:15 - 02:00 02:30 - 03:15 02:30 - 03:15 45 A.M. 07:50 - 08:40 07:50 - 08:40 07:50 - 08:40 07:50 - 08:40 07:50 - 08:40 50 P.M 02:30 - 03:25 02:30 - 03:25 01:15 - 02:00 02:30 - 03:25 02:30 - 03:25 55 A.M. 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 45 P.M 02:30 - 03:15 02:30 - 03:15 01:15 - 02:00 02:30 - 03:15 02:30 - 03:15 45 A.M. 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 45 P.M 02:00 - 03:15 02:00 - 03:15 01:15 - 02:00 02:00 - 03:15 02:00 - 03:15 75 A.M. 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 07:45 - 08:30 45 P.M 02:00 - 03:15 02:00 - 03:15 01:15 - 01:50 02:00 - 03:15 02:00 - 03:15 75 All locations, days, and times are subject to change. Reduced summer school schedules change yearly. 19 27 28 29 18Louis / Loma Verde Ave 17 22 23 24 25 26 Louis / Greer Rd 16 17 18 19 20 21 5 6 7 8 9 15 Exhibit B El Camino / Los Altos Ave 1 Addison / Middlefield Rd 2 City of Palo Alto Updated Crossing Guard Locations and Times - February 2015 1 2 3 5 6 15 16 11 12 20 21 22 23 24 E. Meadow / Middlefield 9 10 10 11 12 13 14 13 14 7 3 El Camino / Maybell Ave Amarillo / Louis Rd Embarcadero / Newell Rd No. Cal Ave / Newell Rd No Cal Ave / Louis Rd Embarcadero / Middlefield 27 28 29 El Camino/Los Robles Ave 8 25 26 Arastradero/ Coulombe Dr 44 Bryant / El Carmelo Ave Barron / El Centro St Dana / Newell Rd E. Meadow / Waverley St Alester / Channing Ave El Camino / W.Charleston E.Charleston / Carlson Ct Arastradero/ Donald Dr El Camino / Margarita Ave Middlefield / Mayview Ave Middlefield / E.Charleston E. Charleston / Nelson Dr Coulombe / Maybell Ave El Camino / Stanford Ave Alma / Meadow Dr Charleston / Alma St DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 EXHIBIT C SCHEDULE OF FEES Compensation based upon deliverables City shall compensate CONTRACTORFOR PERFORMANCE OF THE Services according to the following schedule, with the maximum amount of compensation for all three years not to exceed One Million Sixty Eight Thousand One Hundred Fifty Five Dollars and Fifty Two Cents ($1,068,155.52): Year One- 8/1/2015 - 7/31/2016 - $321,214.08 Year Two- 8/1/2016 - 7/31/2017 - $321,214.08 Year Three- 8/1/2017 - 7/31/2018 - $328,623.36 Total: $971,051.52 Additional Services $97,104.00 $1,068,155.52 All Payments are based upon City’s acceptance of Contractor’s performance of the phase as evidenced by successful completion of the Deliverable for that Phase. City shall have no obligation to pay unless Contractor has successfully completed and City has approved the Project Phase for which payment is due. The maximum amount of compensation to be paid to Contractor, including both payments for services and additional services, shall not exceed One Million Sixty Eight Thousand One Hundred Fifty Five Dollars and Fifty Two Cents ($1,068,155.52). Any hours worked for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to City. RATE SCHEDULE Standard Hourly Rate – 1st year - $14.74 Standard Hourly Rate – 2nd year - $14.74 Standard Hourly Rate – 3rd year - $15.08 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 EXHIBIT D INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 CERTIFICATE HOLDER ©1988-2010 ACORD CORPORATION.All rights reserved.ACORD 25 (2010/05) AUTHORIZED REPRESENTATIVE CANCELLATION DATE (MM/DD/YYYY)CERTIFICATE OF LIABILITY INSURANCE LOCJECTPRO-POLICY GEN'L AGGREGATE LIMIT APPLIES PER: OCCURCLAIMS-MADE COMMERCIAL GENERAL LIABILITY GENERAL LIABILITY PREMISES (Ea occurrence)$DAMAGE TO RENTED EACHOCCURRENCE $ MED EXP(Any oneperson)$ PERSONAL&ADV INJURY $ GENERAL AGGREGATE $ PRODUCTS - COMP/OP AGG $ $RETENTIONDED CLAIMS-MADE OCCUR $ AGGREGATE $ EACHOCCURRENCE $UMBRELLA LIAB EXCESS LIAB DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (Attach ACORD 101, Additional Remarks Schedule, if more space is required) INSRLTR TYPE OF INSURANCE POLICY NUMBER POLICY EFF(MM/DD/YYYY)POLICY EXP(MM/DD/YYYY)LIMITS WC STATU-TORY LIMITS OTH-ER E.L.EACH ACCIDENT E.L. DISEASE - EA EMPLOYEE E.L. DISEASE - POLICY LIMIT $ $ $ ANY PROPRIETOR/PARTNER/EXECUTIVE If yes,describe underDESCRIPTION OF OPERATIONS below (Mandatory in NH)OFFICER/MEMBER EXCLUDED? WORKERS COMPENSATION AND EMPLOYERS' LIABILITY Y / N AUTOMOBILE LIABILITY ANY AUTO ALL OWNED SCHEDULED HIRED AUTOS NON-OWNEDAUTOSAUTOS AUTOS COMBINED SINGLE LIMIT BODILY INJURY (Per person) BODILY INJURY (Per accident) PROPERTY DAMAGE $ $ $ $ THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSRADDL WVDSUBR N / A $ $ (Ea accident) (Per accident) THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). The ACORD name and logo are registeredmarks of ACORD COVERAGES CERTIFICATE NUMBER:REVISION NUMBER: INSURED PHONE(A/C, No, Ext): PRODUCER ADDRESS:E-MAIL FAX(A/C, No): CONTACTNAME: NAIC # INSURER A : INSURER B : INSURER C : INSURER D : INSURER E : INSURER F : INSURER(S)AFFORDINGCOVERAGE SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. INS025(201005).01 5/5/2015 El Dorado Insurance Agency, Inc. El Dorado Sec Srvs Ins Agy PO Box 66571 Houston TX 77266 Betty Baldivia (805)557-1416 (800)700-0126 ebaldivia@eldoradoinsurance.com American Guard Services, Inc. 1299 E. Artesia Blvd. 200 Carson CA 90746 First Mercury Insurance Co.10657 Philadelphia Insurance Company 18058 New Hampshire Insurance Co.23841 Lloyds of London 49246 AMERICAN GUARD (12/14) A X X x ERRORS & OMISSIONS X SE-CGL-0000035623-02 11/21/2014 11/21/2015 1,000,000 100,000 10,000 1,000,000 3,000,000 Included B X X X PHPK1315497 3/31/2015 3/31/2016 1,000,000 A X X X 10,000 SE-UMB-0000018238-03 11/21/2014 11/21/2015 10,000,000 10,000,000 C SEE BELOW 1/1/2015 1/1/2016 X 1,000,000 1,000,000 1,000,000 D 1ST & 3RD PARTY CRIME B1921SR028800 10/15/14 10/15/2015 LIMIT $1,000,000 DEDUCTIBLE $10,000 Workers Comp Policy Numbers: Policy# WC038238329 (HI,LA,ME,MS,NV,OK,OR,TX); Policy# WC038238330 (CA); Policy# WC038238331 (FL); Policy# WC038238333 (AZ,GA,ND,OH,VA,WA,WY); Policy# WC 038238334 (IL,NH) The General Liability policy includes a blanket automatic additional insured endorsement that provides additional insured status to the certificate holder only when there is a written contract between the named insured and the certificate holder that requires such status. R.L. Ring, Jr./MICHEL City of Palo Alto Purchasing and Contract Administration 250 Hamilton Ave Palo Alto, CA 94301-0000 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 COMMENTS/REMARKS COPYRIGHT 2000, AMS SERVICES INC.OFREMARK The General Liability policy contains a special endorsement with "Primary and Noncontributory" wording. The policy includes an endorsement providing that 30 days' notice of cancellation will be furnished to the certificate holder. The General Liability policy includes a blanket automatic waiver of subrogation endorsement that provides this feature only when there is a written contract between the named insured and the certificate holder that requires it. DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 POLICY NUMBER: SE CGL 0000035623 02 COMMERCIAL GENERAL UAB1LITY CG 20 10 07 04 ADDITIONAL INSURED -OWNERS, LESSEES OR CONTRACTORS - SCHEDULE .D PERSON OR ORGANIZATION This endorsement modifies insurance provided under lhe following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Name Of Add·itionallnsured Person(s) Or Organization(s) ; l ocation(s} Of Covered Operat ions Any person or organization as required by written contract or agreement Various Information required to complete this Schedule. if not shown above. v.ill be shown in the Declarations. A. . Section II - Who Js An Insured is amended to include as an additional insumd the person(s) or organization(s) shown in the Schedule, but on.ly with respect to liabimy for "bodily injury", "property damage" or "personal and advertising injury" caused,in whole or in part.by: 1. Your acts or omissions ; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at the location(s) design ated above. B. With respect to the insurance afforded to these additional insureds, the followng addit ional exdusions apply : This insurance does not apply to "bodily injury" or "pro perty damage" occurring after. 1. All worn, including materials, parts or equipment furn ished in connection with such work, on the project (other than service, maintenance or repairs} to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or CG 20 10 07 04 ©ISO Properties, Inc.,2004 Page 1of 1 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 POLICY NUMBER: SE CGL 0000035623 02 COMMERCIAL GENERAL LIABILITY CG24041093 WAIVER OF TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO US This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART Name of Person or Organization: SCHEDULE Any Person or Organization for whom the Insured had, prior to a Claim, a written agreement or written contractual obligation, to waive such Rights (If no entry appears above , information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.) The TRANSFER OF RIGHTS OF RECOVERY AGAINST OTHERS TO US Condition (Section IV - COMMERCIAL GENERAL LIABILITY CONDITIONS) is amended by the addition of the following: We waive any right of recovery we may have against the person or organization shown in the Schedule above because of payments we make for injury or damage arising out of your ongoing operations or "your work" done under a contract with that person or organization and included in the "products-completed operations hazard". This waiver applies only to the person or organization shown in the Schedule above. CG 24 0410 93 Copyright, Insurance SeNices Office, Inc., 1992 Page 1 of 1 DocuSign Envelope ID: C30728B1-B43D-4460-9C65-43EFB26C24E9 City of Palo Alto (ID # 5833) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Appointment of Edward Shikada as Assistant City Manager Title: Confirmation of Appointment of Edward Shikada as Assistant City Manager and Approval of Employment Agreement From: City Manager Lead Department: Human Resources Recommendation The City Manager recommends that the City Council confirm the appointment of Edward Shikada as Assistant City Manager and approve his employment agreement. Executive Summary The Palo Alto Municipal Code requires that the Council approve the City Manager’s appointment of Assistant City Manager. The Council must also approve an employment agreement for salary or benefits for the Assistant City Manager that are not already included in the Compensation Plan for Management and Professional Personnel. Background The City Manager makes appointments to the position of Assistant City Manager with the approval of the City Council. (Municipal Code section 2.08.020.) The Assistant City Manager provides executive-level support and assistance to City Departments and may act on behalf of the City Manager at City Council meetings, with members of the public and in other venues. Filling the position at this time will promote effective operations of the City and provide strategic resources to advance Council priorities. Discussion The City Manager requests approval of the appointment of Edward Shikada to the position of Assistant City Manager. Mr. Shikada has been serving as an Interim Assistant City Manager since April 8, 2015. Two Assistant City Manager positions are budgeted. Suzanne Mason was appointed Assistant City Manager starting on May 5, 2015. Mr. Shikada has diverse experiences relevant to Palo Alto. He has served as the City City of Palo Alto Page 2 Manager of San Jose and prior to that served in San Jose as the Assistant City Manager, Sr. Deputy City Manager and Deputy City Manager. Mr. Shikada also held a variety of key positions in the City of Long Beach including Director of Public Works. He has a Bachelor of Science degree in Civil Engineering from University of Hawaii, a Master’s degree in Public Administration from the University of California, Los Angeles and he attended the Senior Executives in State and Local Government Program at Harvard University’s Kennedy School of Government. Resource Impact Mr. Shikada will be an “at will” employee, which means he will serve at the pleasure of the City Manager and can be terminated or asked to resign at any time. His annual salary will be $232,668, which is within the Council-approved range for the Assistant City Manager position. Mr. Shikada will be entitled to severance equivalent to three months salary and benefits if he is terminated or asked to resign, which is appropriate for an executive-level employee. Consistent with other lateral executive hires and in recognition of extensive prior public service, Shikada will accrue vacation at the longterm employee rate. All of the other benefits Mr. Shikada will receive are consistent with the Compensation Plan for Management and Professional Personnel. Once confirmed, Mr. Shikada will begin work as a regular – not interim – Assistant City Manager on June 15, 2015. Policy Implications This recommendation is consistent with existing City Policies. Attachments: Employment Agreement - Assistant City Manager-Shikada (DOCX) 1 EMPLOYMENT AGREEMENT BETWEEN CITY OF PALO ALTO AND EDWARD SHIKADA THIS AGREEMENT is between the City of Palo Alto, a municipal corporation and chartered city ("City") and Edward Shikada ("Shikada”). It is effective on the latest date next to the signatures on the last page. This Agreement is entered into on the basis of the following facts: A. City, acting by and through its City Manager, wishes to employ Shikada as its Assistant City Manager, subject to the terms and conditions set forth in this Agreement, the Palo Alto Municipal Code and the Charter of the City of Palo Alto (the "Charter"). B. Under the Charter, the Assistant City Manager is appointed by the City Manager with the approval of the City Council. Notwithstanding any provision of the City of Palo Alto Merit System Rules and Regulations, the Assistant City Manager serves on an at-will basis, with no expectation of continued employment, and with no right to pre-or post-separation due process or appeal. C. Shikada desires to be employed by the City as its Assistant City Manager, subject to the terms and conditions in this Agreement, the Palo Alto Municipal Code, the Charter, the Palo Alto Merit System Rules and Regulations, and all other applicable laws, resolutions, and policies. D. The City and Shikada wish to establish specific terms and conditions relating to compensation and benefits and related matters. BASED UPON THE FOREGOING, THE CITY AND SHIKADA AGREE AS FOLLOWS: 1. Employment. Shikada has been serving as an Interim Assistant City Manager since April 8, 2015. The City appoints Shikada as its Assistant City Manager for an indefinite term to begin on June 15, 2015 (“Employment Start Date”). Except as otherwise provided herein, Shikada’s employment with the City shall be governed by the City Council-adopted Compensation Plan for Management and Professional Personnel and Council Appointees, as it currently exists and may be changed from time to time. 2. Duties of the Assistant City Manager. Shikada will perform the duties established for the Assistant City Manager by the Palo Alto City Charter, by the Palo Alto Municipal Code, by direction given by the City Manager, and as otherwise provided by law, ordinance, or regulation. Shikada agrees to comply with all federal, state and local laws, ordinances, rules and regulations applicable to or associated with these duties. 2.1. Full Energy and Skill. Shikada will devote his full energy, skill, ability, and productive time to the performance of his duties. 2 2.2. No Conflict. Shikada will not engage in any employment, activity, consulting service, or other enterprise, for compensation or otherwise, which is actually or potentially in conflict with or which interferes with the performance of his duties. Shikada acknowledges that he is subject to the various conflict of interest requirements found in the California Government Code and state and local policies and regulations. 2.3 Permission Required For Outside Activities. Shikada will not engage in any employment, activity, consulting service, or other enterprise, for compensation or not, without written permission of the City Manager. 3. Salary. While performing the duties of Assistant City Manager, Shikada will receive a base salary within the range provided in the City Council-approved Compensation Plan for Management and Professional Personnel and Council Appointees, as it currently exists and may be changed from time to time. Shikada will receive an initial gross base annual salary of two hundred thirty-two thousand, six hundred sixty-eight dollars ($232,668), beginning on the Employment Start Date. This amount is subject to authorized or required deductions and withholding, prorated and paid on City's regular paydays. Shikada is an exempt employee under applicable wage and hour law and his base salary shall be compensation for all hours worked. The City agrees that the amount of Shikada's base annual salary will not decrease, except as part of a permanent decrease that is consistent with the Fair Labor Standards Act. 4. Benefits and Allowances. Shikada will be eligible for, and shall receive, all regular benefits (i.e., health insurance, PERS contributions to the extent paid by the City, etc.) and vacation, sick leave, and management leave, as are generally provided to management employees under the City Council- approved Compensation Plan for Management and Professional Personnel and Council Appointees, as it currently exists and may be changed from time to time. 5. Additional Benefits and Allowances. In addition to the benefits specified in section 4, Shikada will receive the following additional benefits and allowances: 5.1. Vacation Accrual. In recognition of his prior public service, Shikada will be credited with vacation leave at a rate of 200 hours annually, prorated and credited according to City's normal procedures. Effective at the start of Shikada's second year of service and thereafter, Shikada will be credited with vacation leave at the rate applicable to an employee with nineteen or more years of continuous service, currently a rate of 200 hours per year, prorated and credited according to City's normal procedures. The maximum vacation leave balance allowed for Shikada is six hundred (600) hours. 5.2. Severance. If Shikada is terminated or asked to resign he shall, upon execution of a release of all claims against the City, be eligible for a severance payment equivalent to twelve (12) weeks of salary and benefits. No severance shall be paid if Shikada is terminated for serious misconduct involving abuse of his office or position, including but not limited to waste, fraud, violation of the law under color of authority, misappropriation of public resources, violence, harassment or discrimination. If Shikada is later convicted of a crime involving such 3 abuse of his position he shall fully reimburse the City as set forth in Government Code section 53243.3. 6. Additional Expenses of Employment. The City shall pay the cost of any fidelity or other bonds required by law for the Assistant City Manager. 7. Duration of Employment. Shikada understands and agrees that he has no constitutionally protected property or other interest in his employment as Assistant City Manager. Shikada waives any and all rights, if any, under the Merit System Rules and Regulations, including without limitation, the right to pre-or post-disciplinary due process. Shikada understands and agrees that he works at the will and pleasure of the City Manager and that he may be terminated or asked to resign at any time, with or without cause. Shikada may terminate this agreement (terminating all employment) upon 30 days written notice to the City Manager. 8. Miscellaneous. 8.1. Notices. Notices given under this Agreement shall be in writing and shall be either: a) served personally; or b) sent by facsimile (provided a hard copy is mailed within one (1) business day); or c) delivered by first-class United States mail, certified, with postage prepaid and a return receipt requested; or d) sent by Federal Express, or some equivalent private mail delivery service. Notices shall be deemed received at the earlier of actual receipt or three (3) days following deposit in the United States mail, postage prepaid. Notices shall be directed to the addresses shown below, provided that a party may change such party's address for notice by giving written notice to the other party in accordance with this subsection. CITY: Attn: City Manager 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2226 Fax: (650) 328-3631 SHIKADA: Edward Shikada 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2146 Fax: (650) 328 -3631 8.2. Entire Agreement/ Amendment. This Agreement constitutes the entire understanding and agreement between the parties as to those matters contained in it, and supersedes any and all prior or contemporaneous agreements, representations and understandings of the parties. This Agreement may be amended at any time by mutual agreement of the parties, but any such amendment must be in writing, dated, and signed by the parties and attached hereto. 4 8.3. Applicable Law and Venue. This Agreement shall be interpreted according to the laws of the State of California. Venue of any action regarding this Agreement shall be in the proper court in Santa Clara County. 8.4. Severability. In the event any portion of this Agreement is declared void, such portion shall be severed from this Agreement and the remaining provisions shall remain in effect, unless the result of such severance would be to substantially alter this Agreement or the obligations of the parties, in which case this Agreement shall be immediately terminated. 8.5. Waiver. Any failure of a party to insist upon strict compliance with any term, undertaking, or condition of this Agreement shall not be deemed to be a waiver of such term, undertaking, or condition. To be effective, a waiver must be in writing, signed and dated by the parties. 8.6. Representation by Counsel. Shikada and the City acknowledge that they each did, or had the opportunity to, consult with legal counsel of their respective choices with respect to the matters that are the subject of this Agreement prior to executing it. 8.7. Section Headings. The headings on each of the sections and subsections of this Agreement are for the convenience of the parties only and do not limit or expand the contents of any such section or subsection. SHIKADA ___________________________ Edward Shikada Date: _____________ CITY OF PALO ALTO ___________________________ City Manager Date: _____________ APPROVED AS TO FORM: ___________________________ Deputy City Attorney City of Palo Alto (ID # 5817) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Resolution - Caltrans Functional Classification Change Title: Adoption of a Resolution Authorizing Public Works Department to Submit a Function Classification Request to Caltrans to Formally Add the Streets Reclassified as Part of the 1998 Comprehensive Plan to the Caltrans System Map From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council adopt the attached resolution (Attachment A) authorizing the City Manager or his designee to submit a functional classification change request to Caltrans to complete the formal reclassification of streets in the Caltrans Road System Map in alignment with the 1998 Comprehensive Plan. Background As part of the development of the City’s 1998 Comprehensive Plan, the Planning Department and Public Works Engineering Division proposed reclassifying some City streets to more accurately reflect their uses. These reclassifications were approved as part of the Comprehensive Plan and are shown in Map T8 (Attachment B). Although the 1998 Comprehensive Plan included the reclassifications, the formal steps needed to reclassify them with Caltrans were not completed. After a list of streets is selected by a local jurisdiction for reclassification, a two part process is needed to complete the reclassification. First, the jurisdiction must initiate a Highway Performance Monitoring System (HPMS) update. This step has been completed for the streets included in the reclassification process. The second and final step in the process is the Functional Classification Change through Caltrans. This requires a City resolution supporting the reclassification City of Palo Alto Page 2 (Attachment A), a concurrence letter from the Metropolitan Transportation Commission (MTC) (Attachment C), and finally a completed Functional Classification Change Request Form (Exhibit B) with a California Road System (CRS) Map showing the proposed changes (Exhibit A).The functional classification change form lists each street segment and its proposed change. At this time, completion of the reclassification is needed to allow grant funding to be finalized for Laguna Avenue, which is currently incorrectly classified as a “local road” in the Caltrans street inventory and therefore ineligible for grant funding. Discussion The Public Works Engineering Services Division manages the annual street maintenance program. The Valley Transportation Authority (VTA) released a call- for-projects for the One Bay Area Grant Program (OBAG) on November 5, 2012 with project proposals due March 5, 2013. The OBAG program has two elements, a Countywide Guaranteed Fund element and a Competitive Complete Streets element. The Street Resurfacing and Streetscape project was submitted in response to the Countywide Guaranteed Fund on March 5, 2013. Palo Alto’s share in the Countywide Guaranteed Fund is $956,000. The OBAG-guaranteed funding will be used in the FY 2016 Street Resurfacing Program. Streets planned for repaving using these OBAG funds are Arastradero Road, Hillview Avenue, and Laguna Avenue. OBAG funds are distributed by the MTC from Caltrans to give local jurisdictions periodic supplemental funds for road maintenance. The Federal Highway Administration (FHWA) distributes State Transportation Program (STP) Funds through Caltrans for the same purpose. However, both of these programs are limited to roads that are designated as arterials or collectors and exclude rural minor collectors and all local roads. Currently Laguna Avenue, included in the 2016 project, is classified by Caltrans as a local road. However, as included in the City of Palo Alto Comprehensive Plan and FHWA, Laguna Avenue is a collector road. As noted above, in order for it to be resurfaced using this grant funding it must be listed as either a collector or arterial street. This resolution will allow City staff to complete the process of reclassifying Laguna Avenue, along with other streets that are currently shown on Map T8 of the Comprehensive Plan as arterial and collector streets. City of Palo Alto Page 3 The City of Palo Alto uses five of the Caltrans Functional Classification Codes: Other Principal Arterial, Minor Arterial, Major Collector, Minor Collector and Local. The arterial street classification codes designate streets providing the highest level of service at the greatest speed for the longest uninterrupted distance, with some degree of access control. The collector street codes designate roadways that provide a less highly developed level of service at lower speeds and for shorter distances as compared to arterials. The main factor distinguishing collector streets from local streets is that collector streets “collect” from nearby local roads and connect them with arterials. Local streets consist of all roads not defined as arterials or collectors and primarily provide access to land with little or no through movement. There are no defined limits for traffic volume or posted speed for any of the road classifications. This functional road reclassification has no practical impacts on the use or functionality of the roads, but will allow Federal and State grant funding to be used on the roads. Completion of the reclassification process provides greater flexibility to direct funds to roads that are in most need of repair and enhances the coordination of street maintenance work with utilities and transportation projects. Resource Impact There is no immediate resource impact; however, completion of the reclassification process expands the list of streets that are eligible for state or federal grant funding. Policy Implications Federal funds require that the City comply with the Caltrans Local Assistance project delivery policies and procedures. The Public Works Department has implemented several projects in recent years using federal grant funds and staff is familiar with the procedures, schedule, timing and reporting requirements. Environmental Review Adoption of this resolution to seek a streets and roads classification change is not considered a project under the California Environmental Quality Act (CEQA), Public Resources Code section 21065, so no environmental review is required. Attachments: City of Palo Alto Page 4 A - Resolution (PDF) B - Comprehensive Plan Map T8 (PDF) C - MTC Letter (PDF) NOT YET APPROVED 1 150309 mf 00710565 Resolution No. ______ Resolution of the Council of the City of Palo Alto Approving the City’s Submittal of a Functional Classification Change for Local Streets to the State of California, Department of Transportation The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. California incorporated cities are responsible for initiating requests for changes to the functional classification of streets and roads under their jurisdictions. SECTION 2. The City of Palo Alto receives State and Federal road improvement and maintenance funding based on street and road designation. SECTION 3. The Functional Classification Change, as set forth in the attached Exhibits A and B, has been reviewed by the City staff and considered by the City Council. SECTION 4. The Council finds that it is in the City’s interest and the public’s interest in the health, safety and welfare of the community to seek a functional classification change for the streets set forth in Exhibits A and B. SECTION 5. The Council hereby authorizes the City Manager or his designee, the Director of Public Works, to complete and submit the Functional Classification Change request to the State of California, Department of Transportation. // // // 2 150309 mf 00710565 SECTION 6. The submission of the requested functional classification change for the local streets in Palo Alto does not constitute a “project” under the California Environmental Quality Act or the CEQA Guidelines; therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. 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Avenue Center Drive EastCrescen Arcadia Place Louisa Court Newell Pl Sharon Ct Erstwild Court Walter Hays Drive Walnut Drive Newell Road Parkinson AvenuePine Street Mark Twain Street Louis RoadBarbara Drive Primrose Way Iris Way Embarcadero RoadWalter Hays Drive Lois Lane Jordan Pl Lois Lane Heather Lane Bret Harte Street Stanley Way De Soto DriveDe Soto Drive Alester Avenue Walter Hays Drive Channing Avenue Iris Way tDrive Dana Avenue Hamilton AvenueNewell RoadKings Lane EdgewoodDrive Island Drive Jefferson Drive JacksonDrive Patricia LaneMadison Way EdgewoodDrive Ramona Street Addison AvenueChanning Avenue Waverley Street Tennyson Avenue Seale Avenue Middlefield Road Byron StreetWebster Street Marion Avenue Welch Road Sedro Lane Peral Lane McGregor Way Monroe Drive Silva Avenue Silva Court Miller Court Briarwood Way Driscoll Place Paulsen Ln Community Lane Lane 15 E Court Madeline Ct Arroyo Ct David Ct Alexis Drive Green Ct Oregon Expressway Oregon Expressway Sheridan Avenue Page Mill Road Page Mill Road Foothill Expressway Miranda Avenue Foothill Expressway Miranda Avenue Foothill Expressway Cerrito Way Emerson Street Miranda Avenue Lane 20 WLane 20 E Oregon ExpresswayUniversity Avenue Jacob's Ct CalTrain ROW CalTrain ROW CalTrain ROW CalTrain ROW Emerson Street Waverley Street Kipling Street Clark Way Durand Way Sand Hill Road Swain Way Clark Way Mosher Way Charles Marx Way Orchard Lane Vineyard Lane Oak Road Sand Hill Road Sand Hill Road Sand Hill Road Hillview Avenue Arastradero Road Lane 66 Bryant Street Ramona Street Blake Wilbur Drive West Charleston Road Bayshore Freeway Bayshore Freeway Bayshore Freeway West Bayshore Road East Bayshore Road East Bayshore Road East Bayshore Road West Bayshore Road East Bayshore Road Bayshore Freeway Bayshore Freeway Fabian Way Bayshore Freeway Bayshore Freeway Palo Road Shopping Center Way Shopping Center Way Shopping Center Way London Plane Way Plum Lane Sweet Olive Way Pear Lane Lane 66 La Selva Drive Grove Ct Miranda Court Stanford Avenue Lane 12 WLane 5 E Lasuen Street Serra Mall Escondido Road Olmsted Road Phillips Road Pistache Place Santa Ynez Street Lane B Lane C El Dorado Avenue Oak Creek Drive Clara Drive Bellview Dr Everett Avenue Homer Avenue La Calle SAN ANTONIO AVENUE Matadero Ave Colorado Pl Los Robles Avenue Timlott Ct Vista Villa PaloAltoAvenue Lane La Donna Avenue Cass Way Kenneth Drive Fabian Way Page Mill Road Middlefield RoadChristine Drive Louis Road Charleston Road Bayshore Freeway Bayshore Freeway Chimalus Drive Hanover Street Community Lane Greenwood Avenue Harker Avenue Parkinson Avenue Avenue Maplewood Pl Mackay Drive Santa Teresa Lane Byron Street Varian Way Las Trampas Valley Road Las Trampas Valley Road Vista Hill RoadMadera Point Road Arastradero Rd ALPINE RD Quail DrQuail Dr Paloma Dr Paloma Dr Trinity Ln Heron Wy Feather Ln Stanislaus LnTuolumne Ln Plover Ln Sandpiper Ln Curlew Ln Mallard LnEgret Ln Klamath Ln Deodar StAlder LnSpruce Ln Rickey's Ln Juniper Way Rickey's WyRickey's Wy Rickey's Wy Juniper Lane Tracy Ct Emerson Street Boronda Lane Tahoe Lane Lake Avenue Donner Lane Almanor LaneFallen Leaf Street Berryessa Street Cashel StNoble St Hettinger Ln Pratt Ln Emma Court Galvez Mall Federation Way Abrams Court Allardice Way Alta Road Alvarado Ct Alvarado Row Angell Court Arguello Way Arguello Way Avery Mall Ayrshire Farm Lane Barnes CourtBonair Siding Bowdoin Street Cabrillo Avenue Cabrillo Avenue Campus Drive Campus Drive Campus Drive Campus Drive Campus DriveCampus Drive Campus Drive Campus Drive Campus Drive Campus Drive Campus Drive Campus DriveCampus Drive Campus Drive Capistrano Way Casanueva Place Cathcart Way Cedro Way Cedro Way Churchill Mall Comstock Circle Aboretum Road Aboretum Road Blackwelder Court Campus Drive Cathcart Way Constanzo Street Cooksey Lane Coronado Avenue Cottrell Way Cottrell Way Cowell Ln Crothers Way Dolores Street Dolores Street Dudley Lane Duena StreetElectioneer Road Escondido Mall Escondido Mall Escondido Road Escondido Road Escondido Road Esplanada Way Estudillo Road Fremont Road Frenchmans Road Frenchmans Road Galvez Mall Alvarado Row Galvez Street Galvez Street Galvez Street Gerona Road Gerona Road El Escarpado Gerona Road Hoskins Court Hulme Court Jenkins Court Junipero Serra Boulevard Junipero Serra Boulevard Junipero Serra Boulevard Junipero Serra Boulevard Knight Way Lagunita Drive Lane L Lane W Lasuen Mall Lasuen Mall Lasuen Mall Lasuen Street Lathrop Drive Lathrop Drive Lathrop Place Lathrop Drive Links RoadLinks Road Lomita Drive Lomita Drive Lomita Drive Lomita Drive Lomita DriveLomita Court Lomita Mall Los Arboles Avenue Masters Mall Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue McFarland Court Mears Court Mears Court Memorial Way Mirada Avenue Mirada Avenue Museum Way N Service Road N Tolman Ln Nelson Mall Nelson Road North-South Axis Oberlin St Comstock Circle Escondido Mall Olmsted Road Olmsted Road Olmsted Road Olmsted Road Olmsted Road Palm Drive Palm Drive Pampas Lane Panama Mall Panama Mall Panama Street Panama Street Pearce Mitchell Pl Peter Coutts Circle Peter Coutts Road Peter Coutts Road Pine Hill Court Pine Hill Road Quarry Extension Quarry Road Quillen Ct Raimundo Way Raimundo Way Raimundo Way Roble Drive Rosse Lane Roth Way Roth Way Roth Way Running Farm Lane Ryan Court S Service Road S Tolman Ln Salvatierra Street Salvatierra St Salvatierra Walk Samuel Morris Wy San Francisco TerraceSan Francisco CourtSan Juan St San Juan St San Rafael Pl Santa Fe Avenue Santa Maria Avenue Santa Teresa Street Santa Teresa Street Santa Ynez Street Searsville Road Sequoia Wy Serra Mall Serra Street Serra Street Serra Street Sonoma Terrace Stanford Avenue Stanford Avenue Stock Farm Road Thoburn Court Tolman DriveValdez Place Valparaiso Street Vernier Place Via Ortega Via PalouVia Pueblo Mall Welch Road Wellesley St Wilbur Way Wing Place Yale St Alma Street Alma Street Alma Street Alma Street Alma Street Hawthorne Avenue Lytton Avenue oad Alpine Access Road Nathan Abbott Way Sam McDonald Road Sam McDonald Mall Vista Lane Bowdoin Lane Arguello Way Governors Avenue Governors Avenue Governors Avenue S Governors Lane Pasteur Drive Lagunita Drive Alma Village Lane Alma Village Circle Reservoir Road Reservoir Road Reservoir Road Ranch Road Page Mill Road Ryan Lane O'Connor Lane Gene CtBrassinga CtCole Ct Los Trancos Rd John Marthens Ln Arastradero Rd Arastradero Rd Laurel Glen Dr Birch Street Arboretum Road Welch RoadPasteur Drive Pasteur Drive Bandera Dr Country Club Ct This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Existing Collector - 5 Proposed Collector Existing Minor Arterial - 4 Proposed Minor Arterial Existing Principal Arterial - 3 Proposed Principal Arterial 0'4444' CRS MAP Proposed Modifications CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2015 City of Palo Alto mnicols, 2015-05-18 12:26:40 (\\cc-maps\gis$\gis\admin\Personal\Pavement.mdb) CR S M a p Nu m b e r Co o r d i n a t e CT D i s t r i c t Co u n t y Ju r i s d i c t i o n Change/ New/ Delete Road From To (From) Class (To) New Class Length (mi) Number of Through Lanes AADT 5M24 G2 4 SCL Palo Alto Change Laguna Avenue Matadero Avenue Los Robles Avenue 7 5 0.489 2 1500 5M14 C7 4 SCL Palo Alto Change Sandhill Road El Camino Real Arboretum Road 7 4 0.843 2 10461 5M14 E7 4 SCL Palo Alto Change Waverley Street Lytton Avenue Churchill Road 7 5 0.958 2 4527 5M14 E6 4 SCL Palo Alto Change Chaucer Street Menlo Park City Limit University Avenue 7 5 0.115 2 2968 5M14 G7 4 SCL Palo Alto Change Louis Road Embarcadero Road Oregon Expressway 7 5 0.430 2 3656 5M14 H8 4 SCL Palo Alto Change Louis Road Oregon Expressway Colorado Avenue 7 5 0.406 2 4875 5M14 J8 4 SCL Palo Alto Change Louis Road Colorado Avenue East Meadow Drive 7 5 1.022 2 3040 5M14 K9 4 SCL Palo Alto Change Louis Road East Meadow Drive East Charleston Avenue 7 5 0.464 2 3554 5M14 G8 4 SCL Palo Alto Change North California Avenue Alma Street Middlefield Road 7 5 0.630 2 1806 5M14 G7 4 SCL Palo Alto Change North California Avenue Middlefield Road Embarcadero Road 7 5 0.759 2 2356 5M14 E7 4 SCL Palo Alto Change High Street Lytton Avenue Channing Avenue 7 5 0.435 2 4190 5M14 E10 4 SCL Palo Alto Change Stanford Avenue El Camino Real Amherst Street 7 5 0.759 2 6000 5M24 C5 4 SCL Palo Alto Change Arastradero Road Portola Valley City limit Los Altos Hills City Limit 7 3 1.754 2 5000 5M24 H2 4 SCL Palo Alto Change Amaranta Avenue Los Robles Avenue Maybell Avenue 7 5 0.356 2 2032 5M24 G1 4 SCL Palo Alto Change Matadero Avenue El Camino Real Laguna Avenue 7 5 0.530 2 1669 5M24 G2 4 SCL Palo Alto Change Los Robles Avenue El Camino Real Laguna Avenue 7 5 0.653 2 5757 5M24 G3 4 SCL Palo Alto Change Manuela Avenue Arastradero Road Los Altos City Limit 7 5 0.592 2 1200 5M24 G3 4 SCL Palo Alto Change Miranda Avenue Arroyo Court Foothill Expressway 7 5 1.626 2 5000 5M14 E7 4 SCL Palo Alto Change Webster Avenue Lytton Avenue Hamilton Avenue 7 5 0.175 2 1000 5M14 H7 4 SCL Palo Alto Change Channing Avenue St Francis Avenue West Bayshore Road 7 5 0.115 2 5000 5M14 H7 4 SCL Palo Alto Change West Bayshore Road East Palo Alto City Limit Embarcadero Road 7 5 0.437 2 4000 5M14 K9 4 SCL Palo Alto Change Fabian Way Charleston Avenue San Antonio Road 7 5 0.163 2 2500 5M24 K2 4 SCL Palo Alto Change North San Antonio Road Alma Street Mackay Drive 7 5 0.140 2 2000 5M25 A1 4 SCL Palo Alto Change Leghorn Avenue San Antonio Road Mountain View City Limit 7 5 0.041 2 2500 5M24 H2 4 SCL Palo Alto Change Maybell Avenue Coulombe Avenue Amaranta Avenue 7 5 0.081 2 2900 5M24 H2 4 SCL Palo Alto Change Coulombe Avenue Maybell Avenue Arastradero Road 7 5 0.110 2 1700 Click on any column heading for instructions. Submitted by:City of Palo Alto Date: 5/18/15 Functional Classification Change Request Form LosAltos MountainView MenloPark East Palo Alto Redwood City Atherton Los AltosHills UnincorporatedSanta Clara County Land Portola Valley Unincorporated San MateoCounty Land d Arats rae or dR Apline dR Alamedade las Pulgas El Camino Real Santa Cruz Ave Bohannon Dr Marsh Rd Middlefield Rd Glenwood Ave Ravenswood Ave Bay Rd University Ave Sand Hill R d Quarry University Ave Palm Dr El C a mino Real Alma St Middlefield Rd E mbar cad er o R d Oregon Expwy California Ave Waverley St Louis Rd Old Middlefield Rd Rengstorff Ave Middlefield Rd Central Exprwy M offett Blvd Castro St Miramonte Ave Sa n A n t o n i o R d Arastradero Rd Hanover St Page Mill Expwy Rd E ast M e a d o w D r C h a rle ston R d Shoreline Blvd. Cam pus Dr East Dr supmaC E West Deer CreekRd Alpin e Rd Los RoblesAve Portola Rd FoothillExpwy S kyline Blvd JuniperoSerra Blvd AlexisDr SanAntonio Page Mill Rd Page Mill Rd AltamontRd Moody Rd R o u t e 8 5 Valparaiso Ave Westridge Dr WillowRd i l A p ne Rd Rd 101 101 280 280 BorondaLake San Francisco Bay M ayfie l d S l o ugh Charlest o n S l o ugh LakeLagunita ShorelineLake FeltLake ArastraderoLake AlpinePond HorseshoeLake FoothillsPark Los TrancosOpen SpacePreserve Monte Bello OpenSpace Preserve Upper StevensCreek CanyonCounty Park Skyline Ridge OpenSpace Preserve Long Ridge OpenSpace Preserve Russian RidgeOpen SpacePreserve Coal CreekOpen SpacePreserve JasperRidgeBiologicalPreserve Rancho San AntonioOpen Space Preserve RavenswoodOpen SpacePreserve Palo AltoBaylandsNaturePreserve Shoreline Park Mtn.View Munic.Golf Course PaloAltoMunic.GolfCourse FoothillOpen SpacePreserve ArastraderoPreserve Arterials Collectors Local streets RailroadTracks ResidentialArterials Palo Alto's streets are classified into various categories dependingon their purpose, design and amount of traffic they carry. Multi-modalTransit Station Expressways Freeways Park orOpen SpaceCommercialCenterEmploymentDistrictSchool T h e C i t y o f P a l o A l t o C O M P R E H E N S I V E P L A N 1 9 9 8 2 0 1 0 This document is a graphic representation only of best available sources. Map 0'4847'9694' Circulation Designations The City of Palo Alto assumes no responsibility for any errors ©1989 to 2007 City of Palo Altoghumble, 2007-04-30 14:46:24 CpColor T8 Circulation Designations2 (\\cc-maps\gis$\gis\admin\Personal\ghumble.mdb) February 20, 2015 Jean Finney Deputy District Director Caltrans District 4 Office of System and Regional Planning P.O. Box 23660 Oakland, CA 94623-0660 Attention: Dick Fahey RE: Functional Classification Change Request Dear Ms. Finney: This letter is in regards to the Functional Classification changes requested by the City of Palo Alto. MTC, as the regional MPO and RTPA, concurs with the changes of functional classification for the street segments as shown on the Functional Classification Change Request Form. If you have any questions regarding this matter, do not hesitate to contact me at (510) 817-5772 or by email at tromell@mtc.ca.gov. Theresa Romell Principal Regional Streets & Roads Program cc: Murdo Nicholson, City of Palo Alto S:\Project\Pavement Management\Projects\Functional Classifications\2015 FC\Palo Alto\ City of Palo Alto (ID # 5824) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Council Priority: Emergency Preparedness Summary Title: Amendment No. One to Flood Warning System Contract Title: Approval of Contract Amendment No. One to Contract No. S14152995 in the Amount of $14,949 with Balance Hydrologics, Inc. for the Design and Implementation of an Enhanced Flood Warning System for the San Francisquito Creek Watershed From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute Amendment No. One to Contract No. S14152995 with Balance Hydrologics, Inc. (Attachment A) in the amount of $14,949 increasing the total not-to-exceed compensation from $85,000 to $99,949 for design and implementation of an enhanced flood warning system for the San Francisquito Creek watershed. Background San Francisquito Creek poses the largest flooding threat to residents and businesses in Palo Alto. Since 1998, city staff has monitored a network of rainfall and stream flow gauges in the San Francisquito Creek watershed during winter storms in an effort to identify potential flood events and provide advance warning to the public. Some of the gauges are maintained by the city, while others are the responsibility of other agencies. Information from these gauges has been posted to the city’s Creek Monitor web page to inform the public of current conditions and is used by emergency managers to assess the likelihood of creek flooding. Historically, the ability to effectively predict creek flooding has been significantly hindered by the scarcity of rainfall and stream flow data from the upper City of Palo Alto Page 2 watershed. In response to this deficiency, staff from the city and the San Francisquito Creek Joint Powers Authority (JPA) worked cooperatively to secure a $120,000 grant from the California Department of Water Resources in 2013 that provides financial resources to help improve the rainfall and streamflow instrumentation in the San Francisquito Creek watershed. In January 2014, staff used the grant funds to retain Balance Hydrologics, Inc. to design and implement an enhanced flood warning system for the San Francisquito Creek watershed. The $85,000 contract (Attachment B) included the siting and selection of new rain and stream gauges and integration of these new stations with the existing stations into a web-based graphical interface that displays the rainfall and streamflow data for use by public works and emergency management staff at agencies within the watershed. Work completed to-date under the contract includes the following tasks: Installation of new rainfall gauges at Wunderlich County Park and Windy Hill Open Space Preserve in the upper watershed Equipment and software adaptations to enable data reception from existing rainfall gages operated by the JPA, Santa Clara Valley Water District, and Stanford University and from existing streamflow gauges operated by the City, Stanford University, and the United States Geological Survey Installation of a new antenna atop City Hall to receive data transmissions from the rainfall and streamflow gauges Creation of a new web site that displays the collected rainfall and streamflow data through a graphical interface, including current data, historical data, and trend graphs Local public works and emergency management staff used the information from the new gauges and web site to monitor and manage storm events during the 2014-15 winter season. The ability to view the wide range of rainfall and streamflow data from the upper watershed greatly enhanced staff’s ability to foresee potential flooding problems along the lower flood-prone reaches of San Francisquito Creek. The data was particularly useful during the significant storm event that occurred on December 11, 2014. Discussion City of Palo Alto Page 3 The original $85,000 contract with Balance Hydrologics, Inc. was approved by the City Manager through his designated contracting authority. Staff has asked the consultant to perform additional tasks to improve the flood warning system that will require additional compensation. Staff has negotiated the scope and terms of Amendment No. One with the consultant. Under the terms of the amendment, the consultant will perform the following additional tasks: Reconfigure the City Hall antenna for an improved network connection Identify, analyze, and implement back-up data transmission methods for the Stanford rainfall and streamflow stations Coordinate with the JPA and the Santa Clara Valley Water District on integration of soil moisture probes to measure saturation levels in the upper watershed Configure database for integration of the city streamflow sensors into the flood warning system Pay license fees for the web-based interface through June 2016 The increased contract amount of $14,949 included in Amendment No. One will be reimbursed through the State of California grant. Staff from the city and JPA will use the remaining $20,000 in grant funding to retain a separate consultant to design and implement a simpler, streamlined web interface that can be used by the general public to view the rainfall and streamflow data. The new interface will convey the significance of the data in a straightforward manner that does not require interpretation by members of the public. The simplified web interface will be implemented in advance of the 2015-16 winter storm season. Resource Impact Funds for this contract amendment are available in the existing Storm Drainage Fund operating budget and will be reimbursed through the State of California grant. Environmental Review The enhanced flood warning system is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) under Section 15303 of the CEQA Guidelines, and no further environmental review is necessary. Attachments: A - Amendment No. One to Contract S14152995 (PDF) City of Palo Alto Page 4 B - Original Contract S14152995 (PDF) 1 Revision April 28, 2014 AMENDMENT NO. ONE TO CONTRACT NO. S14152995 BETWEEN THE CITY OF PALO ALTO AND BALANCE HYDROLOGICS, INC. This Amendment No. One to Contract No. S14152995 (“Contract”) is entered into on this __ day of May 2015, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and BALANCE HYDROLOGICS, INC., a California corporation, located at 800 Bancroft Way, Suite 101, Berkeley, CA 94710 ("CONSULTANT"). R E C I T A L S A. The Contract was entered into between the parties for the provision of professional services to design and implement an enhanced flood warning system for the San Francisquito Creek watershed, including siting and selection of rain and stream gages and integration of these stations into OneRain’s Contrail system, which will receive and display the gage information online for use by the public and emergency managers. B. The parties wish to amend the Contract. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 1, SCOPE OF SERVICES, is hereby amended to read as follows: “CONSULTANT shall perform the Services described in the attached Exhibit “A-1” (“SCOPE OF SERVICES [REVISED]”) (which shall replace Exhibit “A” of the original Contract), in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY.” SECTION 2. Section 2, TERM, is hereby amended to read as follows: “The term of this Agreement shall be from the date of its full execution through October 1, 2015 (as outlined in Exhibit “B-1” (“SCHEDULE OF PERFORMANCE [REVISED]”) (which shall replace Exhibit “B” of the original Contract) unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 3. Section 4, NOT TO EXCEED COMPENSATION, is hereby amended to read as follows: “The compensation to be paid to CONSULTANT for performance of the Basic Services described in Exhibit “A-1”, including payment for professional services and reimbursable expenses, shall not exceed ninety-nine thousand, nine hundred forty-nine dollars ($99,949). The applicable rates and schedule of payment are set out in Exhibit “C-2” (“COMPENSATION [REVISED]”) (which replaces Exhibit “C” of the original Contract) and Exhibit “C”-1” (“HOURLY 28th DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 2 Revision April 28, 2014 RATE SCHEDULE”) of the original Contract, which are attached to and made a part of this Agreement.” SECTION 4. The following exhibit(s) to the Contract is/are hereby amended to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference: a. Exhibit “A-1” entitled “SCOPE OF SERVICES [AMENDED]”. b. Exhibit “B-1” entitled “SCHEDULE OF PERFORMANCE [AMENDED]”. c. Exhibit “C-2” entitled “COMPENSATION [AMENDED]”. SECTION 5. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment on the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: _____________________________ Senior Asst. City Attorney [BALANCE HYDROLOGICS, INC.] By:___________________________ Name:_________________________ Title:________________________ Attachments: EXHIBIT "A-1": SCOPE OF SERVICES [AMENDED] EXHIBIT "B-1": SCHEDULE OF PERFORMANCE [AMENDED] EXHIBIT “C-2”: COMPENSATION [AMENDED] DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 Vice-President Ed Ballman EXHIBIT “A-1” SCOPE OF SERVICES [AMENDED] TASK 1. PROJECT MANAGEMENT. This task includes management of day-to-day project operations, as well as managerial communication and coordination with the City of Palo Alto, SFCJPA, SCVWD, and sub-consultants in order to keep the project running smoothly. In addition, this task includes preparation of monthly invoices, project summaries, and budget updates. (Increase labor hours for this task for additional meetings, coordination, and project planning.) DELIVERABLES: Work summary descriptions included with monthly invoices. TASK 2. PROJECT INITIATION AND NETWORK/EQUIPMENT EVALUATION This task includes refinement of the project scope and evaluation of the existing equipment and network configurations to incorporate all pieces into the San Francisquito Flood Warning system. Subtasks include evaluation/assessment of: o SCADA system and equipment used to capture and report creek levels and tide level posted to the existing Palo Alto Creek Monitor web page, and options for incorporating into Contrail; o Equipment status and integration options for the Huddart Park ALERT station; o Equipment status and integration options for Stanford streamflow and rainfall monitoring stations; o Data access options for the Trappers Trail ALERT station (direct communication versus pulling data from the SCVWD system); o The San Francisquito USGS station and investigation of the potential to increase transmission rate o ALERT receiver equipment already owned by Palo Alto and/or SFC JPA; and o Location of ALERT receiver (tentatively planned for Palo Alto City Hall). DELIVERABLES: Integration plan that outlines the proposed process for incorporating various stations into the SFQ Contrail system. Refined equipment list with costs for full network integration. ASSUMPTIONS: Equipment costs for some tasks have been estimated based on our preliminary understanding of needs. Supplemental budget authorization may be required if specific equipment needs exceed estimates, or if existing equipment is not compatible with Contrail integration. TASK 3. INSTALL TWO NEW ALERT RAINFALL STATIONS The Balance team will install two new ALERT stations for data transfer to a new basestation at Palo Alto City Hall (see Task 5) and integration into Contrail (see Task 8). Subtasks for this work include: o Specific site determination based on general site locations suggested in the RFP. (Increase labor hours for this task for additional site visits required for coordination and planning of rain gauge locations.) o Signal path analysis to assess communication options to basestation. o Order equipment and supplies. o Install equipment at site and test communications. DELIVERABLES: Recommendation for specific location of new ALERT rain gauge(s) Two installed and operational ALERT rainfall stations DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 ASSUMPTIONS: Site access and permits for installation will be handled by SFC JPA and/or the City of Palo Alto TASK 4. UPGRADE ALERT STATION AT HUDDART PARK Based on assessment in Task 2, the Balance team will make the necessary changes or upgrades at the Huddart Park site and/or coordinate with appropriate agencies to allow transmission from that site to the Palo Alto basestation or use other means to integrate station data into the SFQ Contrail system. The following subtasks are included: o Coordinate data integration or communication protocols with San Mateo County OES and/or High Sierra. o Order equipment and supplies. o Set up, calibrate, and test equipment in-house (if necessary). o Install equipment at site (if necessary) and test communications. DELIVERABLES: Integration of Huddart Park data into SFQ Contrail system ASSUMPTIONS: Equipment budget has been estimated and may need to be revised based on equipment needs and level of effort outlined in the Integration Plan from Task 2. Signal path analysis (if required) will be conducted in conjunction with new ALERT stations in Task 3 TASK 5. INSTALL ALERT RECIEVER The Balance team will plan and install an ALERT collector at Palo Alto City Hall, or other appropriate location as outline and authorized in Task 2. Subtasks include: o Coordinate with the City of Palo Alto regarding specific location. o Order equipment and supplies (if needed). o Set up and install equipment at and test communications. o Reassign ALERT receiver to a new network connection (new task). DELIVERABLES: Installation of ALERT receiver ASSUMPTIONS: The City of Palo Alto will manage the necessary permits to install the receiver at City Hall, and provide access for the installation The City of Palo Alto will provide IT support for integration with the internet connection at City Hall. City maintenance staff may need to be available to assist with installation and/or to coordinate necessary wiring and internal communications. TASK 6. INTEGRATE STANFORD MONITORING STATIONS Based on recommendations outlined in Task 2, Balance will conduct necessary upgrades and coordinate data transfer from the appropriate Stanford stream and rainfall stations (Los Trancos Creek, Searsville Dam, and Bear Creek) to the SFQ Contrail system. Subtasks include: o Order, calibrate, and test equipment. o Add an ultrasonic sensor at each stream gage to provide reliability and durability during high-flow events. o Improve data transfer reliability for communication between Stanford stations and Contrail. DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 o Identify, analyze, and implement back-up data transmission methods for Stanford monitoring stations, including radio path analysis (new task). o Coordinate with Stanford regarding data access and establish the range of flows that will be posted to the SFQ Contrail system and the frequency of transmission. DELIVERABLES: Communication between Stanford stations and SFQ Contrail system for selected flow ranges ASSUMPTIONS: Equipment needs will be further specified as part of Task 2. Budget supplement may be required if specified equipment exceeds preliminary estimates contained herein. TASK 7. INTEGRATE PALO ALTO STAGE SENSORS Based on recommendations outlined in Task 2, Balance will conduct necessary upgrades and coordinate data transfer from the Palo Alto Creek Monitor sensors to the SFQ Contrail system, including the following subtasks: o Coordination with City staff as follow-up to Task 2. o Develop routine to transfer relevant data to Contrail. o Integration and management of the data. DELIVERABLES: Palo Alto Creek stage and tide stage sensor data integrated into the SFQ Contrail system ASSUMPTIONS: System can be integrated into the Contrail platform without significant reconfiguration or additional equipment. If not feasible, the existing web site may be maintained and linked to the Contrail web site, with the potential for full integration at a later date. TASK 8. DATA COLLECTION, INTEGRATION, AND DISPLAY SYSTEM The Balance team will set up a Contrail website for the SFQ watershed, integrate data transfer into the system, and provide up to six (6) “bookmarked views” within this platform for quickly viewing data. In addition to the stations listed in Tasks 3, 4, 6, and 7, we will also include data from nearby USGS stream gages, tide stations, and NWS rainfall stations in the area that are already available through common on-line databases. We will also set up a flood notification system (with input from SFCJPA, City of Palo Alto, and SCVWD). Subtasks for this work include: o Set up SFQ Contrail webpage, including basemaps and station locations. o Integrate data feeds from ALERT stations, Stanford stations, and Palo Alto creek and tide stage stations (if available) into SFQ Contrail system. o Integrate data feeds from other tidal, stream, and precipitation stations that are readily available through existing websites. o Coordinate with SFCJPA and SCVWD on integration of soil moisture probes (new task). o Configure database for integration of City SCADA sensors (new task). o Coordinate with SFCJPA regarding preliminary rainfall and streamflow thresholds to use for flood warnings. o Develop notification scheme based on rainfall and streamflow thresholds and enter into Contrail. o Payment of Contrail hosting fees through June 2016 (new task). DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 DELIVERABLES: Contrail database and website that collects and displays data from all relevant sources within the area; integrated alert thresholds for instant message warning system. ASSUMPTIONS: SFCJPA, City of Palo Alto, and SCVWD will provide assistance to Balance to define preliminary notification thresholds. Alternatively, Balance could provide this assessment in total under separate authorization. The “bookmarked views” can be readily developed from existing plots and features within Contrail with relatively little customization. Fully customized features could be developed under separate authorization, if desired, in coordination OneRain. TASK 9. COORDINATION FOR SET-UP OF A “PUBLIC” WEBSITE While the Contrail website provides a web-based interface for viewing data outputs and station status, the City and SFCJPA have expressed an interest in creating a simpler, more streamlined interface that can be used for quick viewing by the general public1. We understand that, at this time, this website could potentially be developed by a different contractor. The Balance team will coordinate with Palo Alto, SFCJPA, and/or other subcontractors to integrate Contrail outputs into this proposed simpler website. ASSUMPTIONS: We assume, without knowing the exact format, that the coordination effort will take up to 32 hours. For budgeting purposes, we assume the “public site” would not be hosted on OneRain servers, though hosting would be feasible if the City so wishes. Balance had initially proposed developing an interactive website that would allow the general public to upload photos and comments regarding stream conditions. Since we do not know what form the potential “public website” described above will take, we assume that the development of our proposed site will be delayed or superseded, and have not included this effort in our current scope. If the City wishes to pursue our proposed option, we will investigate the possibility of creating a separate interface, or integrate our proposal into an existing design once that effort has been completed. There is a mutual understanding between Balance and the City additional funds will likely be required to implement a “public website” that fully meets the objectives of the City and the SFCJPA. Those additional funds could either be applied to a contract amendment with Balance or a new contract with a separate contractor. 1 The Contrail system could serve as the public access point to the flood warning data, but the City and SFCJPA have expressed interested in having a separate site with a different look than what could be provided in the Contrail platform. DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 EXHIBIT “B-1” SCHEDULE OF PERFORMANCE [AMENDED] CONSULTANT shall perform the Services so as to complete each milestone by the date specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion Date 1. Project management (Task 1) 10/1/2015 2. Assessment of the existing network and equipment, Task completed development of an integrated plan, and ordering of necessary equipment (Task 2) 3. Basic set-up of data collection, integration, and display 10/1/2015 system (Contrail web site) (Task 8) 4. Installation of new ALERT stations and receiver Task completed (Tasks 3 & 5) 5. Integration of existing ALERT stations Task completed (Tasks 4 & 7) 6. Integration of Stanford gauges 10/1/2015 (Task 6) 7. Coordination for set-up of a “public” site 10/1/2015 (Task 9) Professional Services Rev. Nov. 1, 2011 1 H:\Personal\fema\Flood Warning System\Consultant Contract\Amendment No One\EXHIBIT B-1.docx DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 EXHIBIT “C-2” COMPENSATION [AMENDED] The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as Exhibit C-1 up to the not to exceed budget amount for each task set forth below. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A-1” (“Basic Services”) and reimbursable expenses shall not exceed $99,949. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s project manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, does not exceed $99,949. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $ 8,470.00 (Project Management) Task 2 $ 6,967.75 (Network/Equipment Evaluation) Task 3 $ 8,809.10 (Install Rainfall Gauges) Task 4 $ 2,796.50 (Upgrade Huddart Park Gauge) Task 5 $ 3,989.60 (Install ALERT Receiver) Task 6 $ 13,490.00 (Adapt Stanford Gauges) Task 7 $ 4,199.50 (Integrate Palo Alto SCADA Stations) Task 8 $ 11,604.65 (Contrail Web Site Set-Up & Integration) DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 Task 9 $ 4,020.00 (Coordination/Planning for Public Web Site) Sub-total Basic Services $ 64,347.10 Reimbursable Expenses $ 35,601.90 Total Basic Services and Reimbursable expenses $ 99,949.00 Additional Services (Not to Exceed) $ 0 Maximum Total Compensation $ 99,949 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. C. Mileage for project-related travel within the San Francisco Bay Area shall be reimbursed at a rate of $0.60 per mile. D. ALERT rainfall and stream flow gauges, related supplies and equipment, and web hosting fees are reimbursable at actual cost, plus 5%. All requests for payment of expenses shall be accompanied by appropriate backup information. DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 Project Budget Spreadsheet 3-10-15.xlsx, Table 1 (12-3-13), 5/13/2015 Table 1, pg. 1 of 1 ©2013 Balance Hydrologics, Inc. Task Number and Description Pr i n c i p a l Se n i o r P r o f e s s i o n a l Pr o j e c t P r o f e s s i o n a l Sr . S t a f f P r o f e s s i o n a l St a f f P r o f e s s i o n a l IT / G I S S p e c i a l i s t Sr . P r o j A d m i n Hy d r o l o g i c T e c h La b o r C o s t s F o r T a s k To t a l C o s t ( B a l a n c e Hy d r o l o g i c s ) Pr o j e c t M a n a g e r Le a d S of tw a r e Te c h n i c i a n Co s t ( O n e R a i n ) Sen i or A L E R T Te c h n i c i a n AL E R T T e c h n i c i a n Co st ( P C F ) To t a l s u b c o n t r a c t o r co s t + m a r k u p To t a l C o s t $165 $145 $120 $110 $110 $90 $75 $65 $135 $110 $100 $85 1.05 Task 1. Project management 16 34 12 $8,470 $100 postage $8,570 $8,570.00 Task 2. Network/equipment evaluation 2 24 10 $4,710 $86 $4,796 10 $1,350 8 $800 $2,258 $7,053.75 Task 3. Install 2 new ALERT rainfall gages 8 16 4 $4,000 $518 mileage $4,518 12 $12,960 ALERT rain gauge equipment $14,580 16 16 $368 mileage and supplies $3,328 $18,803 $23,321.50 Task 4. Upgrade ALERT station at Huddart Park 4 8 $1,820 $92 mileage $1,912 2 6 ALERT transmitter (cost estimated)$930 mileage $977 $2,888.50 Task 5 Install ALERT receiver 6 2 $1,050 $74 mileage $1,124 6 8 $5,904 Serial/IP; ALERT receiver/decoder; Cavity Filter; Antenna/feedline $7,594 6 6 $640 mileage and supplies $1,750 $9,811 $10,934.80 Task 6. Adapt Stanford stations for Contrail integration 12 42 28 36 $13,490 $4,580 Equipment; mileage; materials for installation $18,070 $18,070.00 Task 7. Integrate Palo Alto SCADA stage sensors 2 24 6 $4,200 $564 mileage and supplies $4,764 $4,763.50 Task 8. Contrail set-up and integration 17 38 12 4 $9,935 $9,935 2 12 $8,307 Contrail hosting fees $9,897 $10,392 $20,327.00 Task 9. Coordination and planning for enhanced "public interface" website 2 18 12 $4,020 $4,020 $4,020.00 Subtotal Hours 63 210 40 28 16 42 32 26 30 22 Total Hours Total Cost:$57,708 $34,351 $5,878 $42,241 $99,949 Di r e c t E x p e n s e s es t i m a t e ( m i l e a g e , eq u i p m e n t r e n t a l , e t c . ) Di r e c t e x p e n s e s Proposed project budget for labor, equipment, and expenses San Francisquito Creek Watershed Flood Early Warning System Balance Hydrologics OneRain Pacific Coast Forecasting Di r e c t e x p e n s e s DocuSign Envelope ID: F1BBB17E-BCD0-4C52-A491-352800A37533 Professional Services Rev Nov. 1, 2011 18 CITY OF PALO ALTO CONTRACT NO. S14152995 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND BALANCE HYDROLOGICS, INC. FOR PROFESSIONAL SERVICES (SAN FRANCISQUITO CREEK WATERSHED ENHANCED FLOOD WARNING SYSTEM) This Agreement is entered into on this 1st day of January, 2014, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and BALANCE HYDROLOGICS, INC., a California corporation, located at 800 Bancroft Way, Suite 101, Berkeley, CA 94710 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. City intends to establish an enhanced flood warning system for the San Francisquito Creek watershed (“Project”) and desires to engage a consultant to provide professional services to implement the system, including siting and selection of rain and stream gages, integration of these stations into the current (2014) version of OneRain’s Contrail system which will receive and display the gauge information in connection with the Project (“Services”). Services under this agreement include set-up of up to two ALERT rainfall stations, as well as integration of other existing rainfall and stream gages, as detailed in Exhibit “A”. The flood warning system will require on-going maintenance, management, and operation in order to maintain proper function, though these elements are not included in this agreement. Services include reporting and display of rainfall and streamflow conditions that are of high variability and can be difficult to reliably predict, especially during the high-magnitude events that are most important to this Project. The flood warning system is not intended to serve any flood control or flood protection purposes, nor do the Services include establishment of a flood response or action plan which would specifically outline procedures and/or action items that would limit property damage or loss of life. B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. Professional Services Rev. Nov. 1, 2011 2 Optional On-Call Provision (This provision only applies if checked and only applies to on-call agreements.) Services will be authorized by the City, as needed, with a Task Order assigned and approved by the City’s Project Manager. Each Task Order shall be in substantially the same form as Exhibit A-1. Each Task Order shall designate a City Project Manager and shall contain a specific scope of work, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement shall not exceed the amount of Compensation set forth in Section 4 of this Agreement. CONSULTANT shall only be compensated for work performed under an authorized Task Order and the City may elect, but is not required, to authorize work up to the maximum compensation amount set forth in Section 4. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through December 31, 2014 unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Eighty-Two Thousand Three Hundred Sixty-Seven Dollars ($82,367.00). In the event Additional Services are authorized, the total compensation for services and reimbursable expenses shall not exceed Eighty-five Thousand Dollars ($85,000). The applicable rates and schedule of payment are set out in Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described in Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of Professional Services Rev. Nov. 1, 2011 2 receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of the CITY’s stated construction budget, CONSULTANT shall make recommendations to the CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of the CITY. Professional Services Rev. Nov. 1, 2011 4 SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are: One Rain, Inc. Pacific Coast Forecasting CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Jonathan Owens as the project director to have supervisory responsibility for the performance, progress, and execution of the Services and Scott Brown as the project coordinator to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. The City’s project manager is Joe Teresi, Public Works Department, Engineering Services Division, P.O. Box 10250, Palo Alto, CA 94303, Telephone: (650) 329-2129. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. Professional Services Rev. Nov. 1, 2011 5 SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals pursuant to Civil Code Section 2782.8: architects; landscape architects; registered professional engineers and licensed professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. [Option B applies to any consultant who does not qualify as a design professional as defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. Professional Services Rev. Nov. 1, 2011 6 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. Professional Services Rev. Nov. 1, 2011 7 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, Professional Services Rev. Nov. 1, 2011 8 disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the City’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, Consultant shall comply with the following zero waste requirements: All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the City’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks. Goods purchased by Consultant on behalf of the City shall be purchased in accordance with the City’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office. Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the City, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. 25.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. Nothing in this section bars the parties from seeking to mediate any disputes before an action is brought by a party. A party can request, in writing, mediation within thirty (30) days after the parties determine that any dispute cannot be resolved without the assistance of a mediator. Professional Services Rev. Nov. 1, 2011 9 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, City shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9 All unchecked boxes do not apply to this agreement. / / / / / / / / / / / / / / Professional Services Rev. Nov. 1, 2011 11 EXHIBIT “A” SCOPE OF SERVICES TASK 1. PROJECT MANAGEMENT. This task includes management of day-to-day project operations, as well as managerial communication and coordination with the City of Palo Alto, SFCJPA, SCVWD, and sub-consultants in order to keep the project running smoothly. In addition, this task includes preparation of monthly invoices, project summaries, and budget updates. DELIVERABLES: Work summary descriptions included with monthly invoices. TASK 2. PROJECT INITIATION AND NETWORK/EQUIPMENT EVALUATION This task includes refinement of the project scope and evaluation of the existing equipment and network configurations to incorporate all pieces into the San Francisquito Flood Warning system. Subtasks include evaluation/assessment of: o SCADA system and equipment used to capture and report creek levels and tide level posted to the existing Palo Alto Creek Monitor web page, and options for incorporating into Contrail; o Equipment status and integration options for the Huddart Park ALERT station; o Equipment status and integration options for Stanford streamflow and rainfall monitoring stations; o Data access options for the Trappers Trail ALERT station (direct communication versus pulling data from the SCVWD system); o The San Francisquito USGS station and investigation of the potential to increase transmission rate o ALERT receiver equipment already owned by Palo Alto and/or SFC JPA; and o Location of ALERT receiver (tentatively planned for Palo Alto City Hall). DELIVERABLES: Integration plan that outlines the proposed process for incorporating various stations into the SFQ Contrail system. Refined equipment list with costs for full network integration. ASSUMPTIONS: Equipment costs for some tasks have been estimated based on our preliminary understanding of needs. Supplemental budget authorization may be required if specific equipment needs exceed estimates, or if existing equipment is not compatible with Contrail integration. TASK 3. INSTALL TWO NEW ALERT RAINFALL STATIONS The Balance team will install two new ALERT stations for data transfer to a new basestation at Palo Alto City Hall (see Task 5) and integration into Contrail (see Task 8). Subtasks for this work include: o Specific site determination based on general site locations suggested in the RFP. o Signal path analysis to assess communication options to basestation. o Order equipment and supplies. o Install equipment at site and test communications. DELIVERABLES: Recommendation for specific location of new ALERT rain gauge(s) Two installed and operational ALERT rainfall stations Professional Services Rev. Nov. 1, 2011 12 ASSUMPTIONS: Site access and permits for installation will be handled by SFC JPA and/or the City of Palo Alto TASK 4. UPGRADE ALERT STATION AT HUDDART PARK Based on assessment in Task 2, the Balance team will make the necessary changes or upgrades at the Huddart Park site and/or coordinate with appropriate agencies to allow transmission from that site to the Palo Alto basestation or use other means to integrate station data into the SFQ Contrail system. The following subtasks are included: o Coordinate data integration or communication protocols with San Mateo County OES and/or High Sierra. o Order equipment and supplies. o Set up, calibrate, and test equipment in-house (if necessary). o Install equipment at site (if necessary) and test communications. DELIVERABLES: Integration of Huddart Park data into SFQ Contrail system ASSUMPTIONS: Equipment budget has been estimated and may need to be revised based on equipment needs and level of effort outlined in the Integration Plan from Task 2. Signal path analysis (if required) will be conducted in conjunction with new ALERT stations in Task 3 TASK 5. INSTALL ALERT RECIEVER The Balance team will plan and install an ALERT collector at Palo Alto City Hall, or other appropriate location as outline and authorized in Task 2. Subtasks include: o Coordinate with the City of Palo Alto regarding specific location. o Order equipment and supplies (if needed). o Set up and install equipment at and test communications. DELIVERABLES: Installation of ALERT receiver ASSUMPTIONS: The City of Palo Alto will manage the necessary permits to install the receiver at City Hall, and provide access for the installation The City of Palo Alto will provide IT support for integration with the internet connection at City Hall. City maintenance staff may need to be available to assist with installation and/or to coordinate necessary wiring and internal communications. TASK 6. INTEGRATE STANFORD MONITORING STATIONS Based on recommendations outlined in Task 2, Balance will conduct necessary upgrades and coordinate data transfer from the appropriate Stanford stream and rainfall stations (Los Trancos Creek, Searsville Dam, and Bear Creek) to the SFQ Contrail system. Subtasks include: o Order, calibrate, and test equipment. o Add an ultrasonic sensor at each stream gage to provide reliability and durability during high-flow events. o Improve data transfer reliability for communication between Stanford stations and Contrail. Professional Services Rev. Nov. 1, 2011 13 o Coordinate with Stanford regarding data access and establish the range of flows that will be posted to the SFQ Contrail system and the frequency of transmission. DELIVERABLES: Communication between Stanford stations and SFQ Contrail system for selected flow ranges ASSUMPTIONS: Equipment needs will be further specified as part of Task 2. Budget supplement may be required if specified equipment exceeds preliminary estimates contained herein. TASK 7. INTEGRATE PALO ALTO STAGE SENSORS Based on recommendations outlined in Task 2, Balance will conduct necessary upgrades and coordinate data transfer from the Palo Alto Creek Monitor sensors to the SFQ Contrail system. Because of the uncertainties involved in this task, we have budgeted time only for the following subtasks: o Coordination with City staff as follow-up to Task 2. o Develop routine to transfer relevant data to Contrail. o Integration and management of the data. DELIVERABLES: Palo Alto Creek stage and tide stage sensor data integrated into the SFQ Contrail system ASSUMPTIONS: System can be integrated into the Contrail platform without significant reconfiguration or additional equipment. If not feasible, the existing web site may be maintained and linked to the Contrail web site, with the potential for full integration at a later date. TASK 8. DATA COLLECTION, INTEGRATION, AND DISPLAY SYSTEM The Balance team will set up a Contrail website for the SFQ watershed, integrate data transfer into the system, and provide up to six (6) “bookmarked views” within this platform for quickly viewing data. In addition to the stations listed in Tasks 3, 4, 6, and 7, we will also include data from nearby USGS stream gages, tide stations, and NWS rainfall stations in the area that are already available through common on-line databases. We will also set up a flood notification system (with input from SFCJPA, City of Palo Alto, and SCVWD). Subtasks for this work include: o Set up SFQ Contrail webpage, including basemaps and station locations. o Integrate data feeds from ALERT stations, Stanford stations, and Palo Alto creek and tide stage stations (if available) into SFQ Contrail system. o Integrate data feeds from other tidal, stream, and precipitation stations that are readily available through existing websites. o Coordinate with SFCJPA regarding preliminary rainfall and streamflow thresholds to use for flood warnings. o Develop notification scheme based on rainfall and streamflow thresholds and enter into Contrail. DELIVERABLES: Contrail database and website that collects and displays data from all relevant sources within the area; integrated alert thresholds for instant message warning system. ASSUMPTIONS: Professional Services Rev. Nov. 1, 2011 14 SFCJPA, City of Palo Alto, and SCVWD will provide assistance to Balance to define preliminary notification thresholds. Alternatively, Balance could provide this assessment in total under separate authorization. The “bookmarked views” can be readily developed from existing plots and features within Contrail with relatively little customization. Fully customized features could be developed under separate authorization, if desired, in coordination OneRain. TASK 9. COORDINATION FOR SET-UP OF A “PUBLIC” WEBSITE While the Contrail website provides a web-based interface for viewing data outputs and station status, the City and SFCJPA have expressed an interest in creating a simpler, more streamlined interface that can be used for quick viewing by the general public1. We understand that, at this time, this website could potentially be developed by a different contractor. The Balance team will coordinate with Palo Alto, SFCJPA, and/or other subcontractors to integrate Contrail outputs into this proposed simpler website. ASSUMPTIONS: We assume, without knowing the exact format, that the coordination effort will take up to 32 hours. For budgeting purposes, we assume the “public site” would not be hosted on OneRain servers, though hosting would be feasible if the City so wishes. Balance had initially proposed developing an interactive website that would allow the general public to upload photos and comments regarding stream conditions. Since we do not know what form the potential “public website” described above will take, we assume that the development of our proposed site will be delayed or superseded, and have not included this effort in our current scope. If the City wishes to pursue our proposed option, we will investigate the possibility of creating a separate interface, or integrate our proposal into an existing design once that effort has been completed. 1 The Contrail system could serve as the public access point to the flood warning data, but the City and SFCJPA have expressed interested in having a separate site with a different look than what could be provided in the Contrail platform. Professional Services Rev. Nov. 1, 2011 15 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion No. of Weeks From NTP 1. Project management (Task 1) 22 weeks 2. Assessment of the existing network and equipment, 6 weeks development of an integrated plan, and ordering of necessary equipment (Task 2) 3. Basic set-up of data collection, integration, and display 4 weeks system (Contrail web site) (Task 8) 4. Installation of new ALERT stations and receiver 10 weeks (Tasks 3 & 5) 5. Integration of Stanford & existing ALERT stations 20 weeks (Tasks 4, 6, & 7) 6. Coordination for set-up of a “public” site 20 weeks (Task 9) 7. Completion of Flood Warning System set-up 28 weeks Professional Services Rev. Nov. 1, 2011 14 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Basic Services”) and reimbursable expenses shall not exceed $82,367. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. In the event CITY authorizes any Additional Services, the maximum compensation shall not exceed $85,000. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s project manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, does not exceed $82,367 and the total compensation for Additional Services does not exceed $85,000. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $ 5,370 (Project Management) Task 2 $ 7,837 (Network/Equipment Evaluation) Task 3 $ 5,454 (Install Rainfall Gauges) Task 4 $ 3,341 (Upgrade Huddart Park Gauge) Task 5 $ 3,990 (Install ALERT Receiver) Task 6 $ 9,760 (Adapt Stanford Gauges) Task 7 $ 3,550 (Integrate Palo Alto SCADA Stations) Task 8 $ 7,240 Professional Services Rev. Nov. 1, 2011 15 (Contrail Web Site Set-Up & Integration) Task 9 $ 4,020 (Coordination/Planning for Public Web Site) Sub-total Basic Services $ 50,562 Reimbursable Expenses $ 31,805 Total Basic Services and Reimbursable expenses $ 82,367 Additional Services (Not to Exceed) $ 2,633 Maximum Total Compensation $ 85,000 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. C. Mileage for project-related travel within the San Francisco Bay Area shall be reimbursed at a rate of $0.60 per mile. D. ALERT rainfall and stream flow gauges, related supplies and equipment, and web hosting fees are reimbursable at actual cost, plus 5%. All requests for payment of expenses shall be accompanied by appropriate backup information. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including Professional Services Rev. Nov. 1, 2011 16 reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s project manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement Work required because the following conditions are not satisfied or are exceeded shall be considered as additional services: - Work on the design and code writing for a new public interface web site, beyond the coordination tasks described in Basic Services Task 9 needed to setup such a site - Unforeseen complications with capturing rainfall and stream flow gauge data from non-ALERT gauges, including the purchase of new and/or upgraded equipment Task Number and Description $165 $145 $110 $90 $75 $65 $135 $110 $100 $85 1.05 Task 1. Project management 6 24 12 $5,370 $5,370 $5,370 Task 2. Network/equipment evaluation 2 30 10 $5,580 $60 $5,640 10 $1,350 8 $800 $2,258 $7,898 Task 3. Install 2 new ALERT rainfall gages 10 4 $1,810 $240 mileage $2,050 12 $12,960 ALERT rain gauge equipment $14,580 10 10 $368 mileage and supplies $2,218 $17,638 $19,688 Task 4. Upgrade ALERT station at Huddart Park 4 $580 $580 2 15 $800 ALERT transmitter (cost estimated) $2,720 2 6 $84 mileage $794 $3,690 $4,270 Task 5 Install ALERT receiver 6 2 $1,050 $60 mileage $1,110 6 8 $5,904 Serial/IP; ALERT reciever/decoder; Cavity Filter; Antenna/feedline $7,594 6 6 $584 mileage and supplies $1,694 $9,752 $10,862 Task 6. Adapt Stanford stations for Contrail integration 36 20 36 $9,760 $5,310 Equipment (estimate); mileage; materials for installation (estimate)$15,070 $15,070 Task 7. Integrate Palo Alto SCADA stage sensors 20 10 $3,550 $620 mileage and supplies $4,170 $4,170 Task 8. Contrail set-up and integration 6 24 10 $5,570 $5,570 2 12 $3,600 Contrail hosting fee $5,190 $5,450 $11,020 Task 9. Coordination and planning for simple "public interface" website 2 18 12 $4,020 $4,020 $4,020 Subtotal Hours 16 172 30 28 12 46 32 35 26 22 Total Hours Total Cost:$43,580 $31,434 $5,506 $38,787 $82,367 Percent of work:53%38%7% Notes: mileage billed at $0.60 per mile detailed breakdown of estimated direct expenses and equipment costs available on request Table 1. Anticipated set-up costs including labor, equipment, and expenses 213199 San Francisquito Creek Flood Early Warning System Balance Hydrologics OneRain Pacific Coast Forecasting 213199 Revised budget_12-3-13, Table 1 (12-3-13), 12/13/2013 Table 1, pg. 1 of 1 ©2013 Balance Hydrologics, Inc. Professional Services Rev Nov. 1, 2011 18 EXHIBIT “C-1” HOURLY RATE SCHEDULE PROFESSIONAL FEE SCHEDULE, 2012 BALANCE HYDROLOGICS, INC. (Effective April 1, 2012) Scientific and Engineering Staff * Hourly Rate Senior Principal $195 Principal $165 Senior Specialist $155 Senior Professional $145 Project Professional $135 Senior Staff Professional $120 Staff Professional $110 Assistant Professional $95 Junior Professional $75 Support Staff GIS Senior Analyst $95 GIS/CADD Specialist $90 Graphics Specialist $75 Senior Project Administrator $75 Senior Report Specialist $75 Technical Typist $65 Hydrologic Technician $65 * Includes environmental scientists and engineers practicing in hydrology, geology, soil and watershed sciences, and civil and erosion-control engineering. Professional Services Rev Nov. 1, 2011 19 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. Professional Services Rev Nov. 1, 2011 20 B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 c INSR ADD'L LTR INSRD DATE (MM/DD/YYYY) PRODUCER INSURED POLICY EFFECTIVE POLICY EXPIRATIONPOLICY NUMBER LIMITSDATE (MM/DD/YY) DATE (MM/DD/YY)TYPE OF INSURANCE GENERAL LIABILITY AUTOMOBILE LIABILITY GARAGE LIABILITY EXCESS/UMBRELLA LIABILITY WORKERS COMPENSATION AND EMPLOYERS' LIABILITY OTHER DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES / EXCLUSIONS ADDED BY ENDORSEMENT / SPECIAL PROVISIONS SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICER/MEMBER EXCLUDED? INSURER A: INSURER B: INSURER C: INSURER D: INSURER E: EACH OCCURRENCE $ DAMAGE TO RENTEDCOMMERCIAL GENERAL LIABILITY $PREMISES (Ea occurrence) CLAIMS MADE OCCUR MED EXP (Any one person) $ PERSONAL & ADV INJURY $ GENERAL AGGREGATE $ GEN'L AGGREGATE LIMIT APPLIES PER:PRODUCTS - COMP/OP AGG $ PRO-POLICY LOCJECT COMBINED SINGLE LIMIT $(Ea accident)ANY AUTO ALL OWNED AUTOS BODILY INJURY $(Per person)SCHEDULED AUTOS HIRED AUTOS BODILY INJURY $(Per accident)NON-OWNED AUTOS PROPERTY DAMAGE $(Per accident) AUTO ONLY - EA ACCIDENT $ ANY AUTO EA ACC $OTHER THAN AUTO ONLY:AGG $ EACH OCCURRENCE $ OCCUR CLAIMS MADE AGGREGATE $ $ DEDUCTIBLE $ RETENTION $$ WC STATU- OTH-TORY LIMITS ER E.L. EACH ACCIDENT $ E.L. DISEASE - EA EMPLOYEE $ If yes, describe under E.L. DISEASE - POLICY LIMIT $SPECIAL PROVISIONS below O THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. INSURERS AFFORDING COVERAGE NAIC # COVERAGES CERTIFICATE HOLDER CANCELLATION ACORD 25 (2001/08)ACORD CORPORATION 1988 ACORDTM CERTIFICATE OF LIABILITY INSURANCE 12/11/2013 Dealey, Renton & Associates P. O. Box 12675 Oakland, CA 94604-2675 510 465-3090 Balance Hydrologics, Inc. 800 Bancroft Way, Suite 101 Berkeley, CA 94710-2227 6805459L40A 10/26/13 City of Palo Alto P.O. Box 10250 Purchasing and Contract Administration Attn: Joe Teresi SCHEDULE NAME OF ADDITIONAL INSURED PERSONS OR ORGANIZATIONS CONT: City of Palo Alto, its Council Members, Officers, Agents and Employees POLICY NUMBER: COMMERICAL GENERAL LIABILITY ISSUE DATE: THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED (ARCHITECTS, ENGINEERS AND SURVEYORS) This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE NAME OF PERSON(S) OR ORGANIZATION(S): PROJECT/LOCATION OF COVERED OPERATIONS: PROVISIONS A. The following is added to WHO IS AN INSURED (Section II): The person or organization shown in the Sched- ule above is an additional insured on this Cover- age Part, but only with respect to liability for "bod- ily injury", "property damage" or "personal injury" caused, in whole or in part, by your acts or omis- sions or the acts or omissions of those acting on your behalf: a. In the performance of your ongoing opera- tions; b. In connection with premises owned by or rented to you; or c. In connection with "your work" and included within the "products-completed operations hazard". Such person or organization does not qualify as an additional insured for "bodily injury", "property damage" or "personal injury" for which that per- son or organization has assumed liability in a con- tract or agreement. The insurance provided to such additional insured is limited as follows: d. This insurance does not apply to the render- ing of or failure to render any "professional services". e. The limits of insurance afforded to the addi- tional insured shall be the limits which you agreed in that "contract or agreement requir- ing insurance" to provide for that additional insured, or the limits shown in the Declara- tions for this Coverage Part, whichever are less. This endorsement does not increase the limits of insurance stated in the LIMITS OF INSURANCE (Section III) for this Coverage Part. B. The following is added to Paragraph a. of 4. Other Insurance in COMMERCIAL GENERAL LIABILITY CONDITIONS (Section IV): However, if you specifically agree in a "contract or agreement requiring insurance" that, for the addi- tional insured shown in the Schedule, the insur- ance provided to that additional insured under this CG 03820907 © 2007 The Travelers Companies, Inc. Page 1 of 2 Includes the copyrighted material of Insurance Services Office, Inc., with its permission COMMERICAL GENERAL LIABILITY Coverage Part must apply on a primary basis, or a primary and non-contributory basis, this insur- ance is primary to other insurance that is avail- able to such additional insured which covers such additional insured as a named insured, and we will not share with the other insurance, provided that: (1) The "bodily injury" or "property damage" for which coverage is sought occurs; and (2) The "personal injury" for which coverage is sought arises out of an offense committed; after you have entered into that "contract or agreement requiring insurance" for such addi- tional insured. But this insurance still is excess over valid and collectible other insurance, whether primary, excess, contingent or on any other basis, that is available to the additional in- sured when the additional insured is also an addi- tional insured under any other insurance. C. The following is added to Paragraph 8. Transfer Of Rights Of Recovery Against Others To Us in COMMERCIAL GENERAL LIABILITY CON- DITIONS (Section IV): We waive any rights of recovery we may have against the additional insured shown in the Schedule above because of payments we make for "bodily injury", "property damage" or "personal injury" arising out of "your work" on or for the pro- ject, or at the location, shown in the Schedule above, performed by you, or on your behalf, un- der a "contract or agreement requiring insurance" with that additional insured. We waive these rights only where you have agreed to do so as part of the "contract or agreement requiring insur- ance" with that additional insured entered into by you before, and in effect when, the "bodily injury" or "property damage" occurs, or the "personal in- jury" offense is committed. D. The following definition is added to DEFINITIONS (Section V): "Contract or agreement requiring insurance" means that part of any contract or agreement un- der which you are required to include the person or organization shown in the Schedule as an ad- ditional insured on this Coverage Part, provided that the "bodily injury" and "property damage" oc- curs, and the "personal injury" is caused by an of- fense committed: a. After you have entered into that contract or agreement; b. While that part of the contract or agreement is in effect; and c. Before the end of the policy period. Page 2 of 2 © 2007 The Travelers Companies, Inc. CG D3 82 09 07 Includes the copyrighted material of Insurance Services Office, Inc., with its permission EXCERPTS FROM CA 00001 (1001) HARTFORD BUSINESS AUTO COVERAGE Insured: Policy Number: Policy Effective Dates: Additional Insured: Additional Insured: SECTION II – LIABILITY COVERAGE 1. WHO IS AN INSURED: The following are “insureds” c. Anyone liable for the conduct of an “insured”…but only to the extent of that liability. Primary Insurance: SECTION IV – BUSINESS AUTO CONDITIONS B. General Conditions - 5. Other Insurance a. For any covered “auto” you own, this Coverage Form provides primary insurance. For any covered “auto” you don’t own, the insurance provide by this Coverage Form is excess over any other collectible insurance. c. Regardless of the provisions of paragraph a. above, this Coverage Form’s Liability Coverage is primary for any liability assumed under an “insured contract”. Cross Liability Clause: SECTION V – DEFINITIONS G. “Insured” means any person or organization qualifying as an insured in the Who is An Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or “suit” is brought. EXCERPTS FROM HA9916 (0302) HARTFORD COMMERCIAL AUTOMOBILE BROAD FORM ENDORSEMENT 15. WAIVER OF SUBROGATION – We waive any right of recovery we may have against any person or organization with whom you have a written contract that requires such waiver because of payments we make for damages under this Coverage Form. SCHEDULE NAME OF ADDITIONAL INSURED PERSONS OR ORGANIZATIONS CONT: City of Palo Alto, its Council Members, Officers, Agents and Employees Balance Hydrologics, Inc. 57UEGPV2266 10/26/13 CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YYYY) 12/11/2013 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER Aon Risk Services Northeast, Inc. New York NY Office 199 Water Street New York, NY 10038-3551 CONTACT NAME: Risk Management Department PHONE (A/C, No, Ext): (866) 443-8489 FAX (A/C, No): (800) 889-0021 E-MAIL ADDRESS: work.comp@trinet.com INSURER(S) AFFORDING COVERAGE NAIC # INSURED TriNet HR Corporation and all its affiliates and subsidiaries* Balance Hydrologics, Inc. (Endorsed as alternate employer) 9000 Town Center Parkway Bradenton, FL 34202 INSURER A: Commerce & Industry Ins Co INSURER B: Illinois National Ins Co INSURER C: Ins Co State of Penn INSURER D: Nat'l Union Fire Ins Co INSURER E: New Hampshire Ins Co 19410 23817 19429 19445 23841 INSURER F: COVERAGES CERTIFICATE NUMBER: REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. Limits shown are as requested INSR LTR TYPE OF INSURANCE ADDL INSR SUBR WVD POLICY NUMBER POLICY EFF (MM/DD/YYYY) POLICY EXP (MM/DD/YYYY)LIMITS GENERAL LIABILITY EACH OCCURRENCE $ COMMERCIAL GENERAL LIABILITY DAMAGE TO RENTED PREMISES (Ea occurrence) $ CLAIMS-MADE OCCUR MED EXP (Any one person) $ PERSONAL & ADV INJURY $ GENERAL AGGREGATE $ GEN'L AGGREGATE LIMIT APPLIES PER: PRODUCTS-COMP/OP AGG $ POLICY PROJECT LOC AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT (Each accident) $ ANY AUTO BODILY INJURY (Per person) $ ALL OWNED AUTOS SCHEDULED AUTOS BODILY INJURY (Per accident) $ HIRED AUTOS NON-OWNED AUTOS PROPERTY DAMAGE (Per accident) $ UMBRELLA LIAB OCCUR EACH OCCURRENCE $ EXCESS LIAB CLAIMS-MADE AGGREGATE $ DED RETENTION $ D 039401237 (DE) 07/01/2013 07/01/2014 WORKERS COMPENSATION AND EMPLOYERS' LIABILITY ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICER/MEMBER EXCLUDED?(Mandatory in NH) If yes, describe under DESCRIPTION OF OPERATIONS below Y / N N / A X X WC STATU- TORY LIMITS OTH- ER E.L. EACH ACCIDENT $2,000,000 $2,000,000 $2,000,000 E.L.DISEASE-EA EMPLOYEE E.L. DISEASE-POLICY LIMIT See attached Waiver of Subrogation in favor of certificate holder DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (Attach ACORD 101, Additional Remarks Schedule, if more space is required): 943B / 9TX * TriNet HR II, Inc. and TriNet HR V, Inc. CERTIFICATE HOLDER CANCELLATION City of Palo Alto Attn: Joe Teresi PO Box 10250 Palo Alto, CA 94303 SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. AUTHORIZED REPRESENTATIVE Aon Risk Services Northeast, Inc. ACORD 25 (2010/05) The ACORD name and logo are registered marks of ACORD © 1988-2010 ACORD CORPORATION. All rights reserved. CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YYYY) 12/11/2013 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER Aon Risk Services Northeast, Inc. New York NY Office 199 Water Street New York, NY 10038-3551 CONTACT NAME: Risk Management Department PHONE (A/C, No, Ext): (866) 443-8489 FAX (A/C, No): (800) 889-0021 E-MAIL ADDRESS: work.comp@trinet.com INSURER(S) AFFORDING COVERAGE NAIC # INSURED TriNet HR Corporation and all its affiliates and subsidiaries* Labor Contractor for Balance Hydrologics, Inc. 9000 Town Center Parkway Bradenton, FL 34202 INSURER A: Commerce & Industry Ins Co INSURER B: Illinois National Ins Co INSURER C: Ins Co State of Penn INSURER D: Nat'l Union Fire Ins Co INSURER E: New Hampshire Ins Co 19410 23817 19429 19445 23841 INSURER F: COVERAGES CERTIFICATE NUMBER: REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. Limits shown are as requested INSR LTR TYPE OF INSURANCE ADDL INSR SUBR WVD POLICY NUMBER POLICY EFF (MM/DD/YYYY) POLICY EXP (MM/DD/YYYY)LIMITS GENERAL LIABILITY EACH OCCURRENCE $ COMMERCIAL GENERAL LIABILITY DAMAGE TO RENTED PREMISES (Ea occurrence) $ CLAIMS-MADE OCCUR MED EXP (Any one person) $ PERSONAL & ADV INJURY $ GENERAL AGGREGATE $ GEN'L AGGREGATE LIMIT APPLIES PER: PRODUCTS-COMP/OP AGG $ POLICY PROJECT LOC AUTOMOBILE LIABILITY COMBINED SINGLE LIMIT (Each accident) $ ANY AUTO BODILY INJURY (Per person) $ ALL OWNED AUTOS SCHEDULED AUTOS BODILY INJURY (Per accident) $ HIRED AUTOS NON-OWNED AUTOS PROPERTY DAMAGE (Per accident) $ UMBRELLA LIAB OCCUR EACH OCCURRENCE $ EXCESS LIAB CLAIMS-MADE AGGREGATE $ DED RETENTION $ D 039402528 (CA) 07/01/2013 07/01/2014 WORKERS COMPENSATION AND EMPLOYERS' LIABILITY ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICER/MEMBER EXCLUDED?(Mandatory in NH) If yes, describe under DESCRIPTION OF OPERATIONS below Y / N N / A X X WC STATU- TORY LIMITS OTH- ER E.L. EACH ACCIDENT $2,000,000 $2,000,000 $2,000,000 E.L.DISEASE-EA EMPLOYEE E.L. DISEASE-POLICY LIMIT See attached Waiver of Subrogation in favor of certificate holder DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (Attach ACORD 101, Additional Remarks Schedule, if more space is required): 943B / 9TX * TriNet HR II, Inc. and TriNet HR V, Inc. CERTIFICATE HOLDER CANCELLATION City of Palo Alto Attn: Joe Teresi PO Box 10250 Palo Alto, CA 94303 SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. AUTHORIZED REPRESENTATIVE Aon Risk Services Northeast, Inc. ACORD 25 (2010/05) The ACORD name and logo are registered marks of ACORD © 1988-2010 ACORD CORPORATION. All rights reserved. BLANKET WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT - CALIFORNIA This endorsement changes the policy to which it is attached effective on the inception date of the policy unless a different date is indicated below. (The following" attaching clause" need be completed only when this endorsement is issued subsequent to preparation of the policy). This endorsement, effective See Accompanying Certificate 12:01 AM forms a part of Policy No. See Accompanying Certificate Issued to TriNet HR, Corp. and all its affiliates & subsidiaries* By See Accompanying Certificate We have a right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against any person or organization with whom you have a written contract that requires you to obtain this agreement from us, as regards any work you perform for such person or organization. The additional premium for this endorsement shall be --- % of the total estimated workers compensation premium for this policy. Schedule City of Palo Alto PO Box 10250 Palo Alto, CA 94303 TriNet Client Number: 943B / 9TX Client Name: Balance Hydrologics, Inc. WC 04 03 61 Countersigned by _______________________________________ (Ed.11-90)Authorized Representative 1983National Council on Compensation Insurance. WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY WC 00 03 13 (Ed. 4-84) WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization named in the Schedule. (This agreement applies only to the extent that you perform work under a written contract that requires you to obtain this agreement from us.) This agreement shall not operate directly or indirectly to benefit anyone not named in the Schedule. Schedule City of Palo Alto: PO Box 10250 Palo Alto CA 94303 TriNet Client Number: 943B / 9TX Client Name: Balance Hydrologics, Inc. This endorsement changes the policy to which it is attached and is effective on the date issued unless otherwise stated. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement Effective See Accompanying Certificate Policy No.Endorsement No. Insured: TriNet HR Corp.See Accompanying Certificate Premium $ and all its affiliates & subsidiaries Insurance Company:See Accompanying Certificate Counter Signed By _______________________________________ WC 00 03 13 (Ed.4-84) City of Palo Alto (ID # 5847) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Investment Policy Update Title: Adoption of Fiscal Year 2016 Investment Policy From: City Manager Lead Department: Administrative Services Recommendation Staff recommends that Council approve the City’s Investment Policy with the following change: Modify under Authorized Investments section (number 4) the title from “Bonds of State of California Local Government Agencies” to “California State, California Local Government Agencies, and other United States State Bonds.” Background During the annual budget process, staff submits the Investment Policy to Council for review and approval (Attachment A). State regulations mandate annual approval of the Investment Policy. Discussion For Fiscal Year 2016, staff is proposing a change in authorized investments. This change clarifies staff’s flexibility to invest in State of California and California local government agencies. California local government agencies include: any city, county, city and county, district, or other local governmental body or corporation, including the California State Universities (CSU) and University of California (UC) systems, K-12 schools and community colleges empowered to expend public funds. In addition, changes would allow City staff to purchase the notes and bonds of the remaining 49 states in the United States. This would permit investments in all state level registered treasury notes or bonds including the state and state departments, boards, agencies or authorities that demonstrate the capacity or revenue sources to repay their bonds. Investments in any of the non-state level jurisdictions of the other 49 states would not be permitted. All California state and municipal obligation investments as well as investments in the other 49 states will, at the time of purchase, require a minimum Double A (AA/AA2) rating as provided by a nationally recognized rating service (e.g. Moody’s, Standard and Poor’s, etc.). Total City of Palo Alto Page 2 investments in state and California local jurisdiction bonds will not exceed 10 percent of the par value of the portfolio. The rationale for detailing and expanding the scope of City investments, which are in alignment with the State of California code covering allowable investments, is to compensate for the current and future scarcity of U.S. agency investments. Agencies such as the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation are issuing fewer securities under Congressional scrutiny. In fact, there is movement toward shrinking these quasi-government agencies as a consequence of their financial losses during the Great Recession and to decouple them from the security umbrella offered by the federal government. By adding the obligations of the remaining 49 states to the City’s investment armamentarium, the City has more options in investing idle cash, maintaining a solid portfolio yield; and, most importantly, preserving City capital in secure investment instruments. Staff recommends Council approve the proposed changes to the Investment Policy to provide greater investment flexibility and diversification opportunities. Resource Impact There is no significant budget impact associated with this report. Policy Implications This recommendation contains a clarification to the City’s Investment Policy. Environmental Review The actions requested in this report do not constitute a project for the purposes of the California Environmental Quality Act (CEQA). Attachments: Attachment A: Draft Investment Policy 2015-16 (DOC) 1 ATTACHMENT A PROPOSED CITY OF PALO ALTO Investment Policy Fiscal Year 2015-16 With Changes INTRODUCTION The City of Palo Alto invests its pooled idle cash according to State of California law and the charter of the City of Palo Alto. In particular, the City follows “The Prudent Investor Standard” cited in the State Government Code (Section 53600.3). Under this standard, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. INVESTMENT PHILOSOPHY The basic principles underlying Palo Alto's investment philosophy is to ensure the safety of public funds; provide that sufficient money is always available to meet current expenditures; and achieve a reasonable rate of return on its investments. The City's preferred and chief practice is to buy securities and to hold them to their date of maturity rather than to trade or sell securities prior to maturity. The City may, however, elect to sell a security prior to its maturity should there be a significant financial need. If securities are purchased and held to their maturity date, then any changes in the market value of those securities during their life will have no effect on their principal value. Under a buy and hold philosophy, the City is able to protect its invested principal. The economy, the money markets, and various financial institutions (such as the Federal Reserve System) are monitored carefully to make prudent investments and to assess the condition of the City’s portfolio. 2 INVESTMENT OBJECTIVES The primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield: 1. Safety: Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. a) Credit risk is the risk that an obligation will not be paid and a loss will result. The City will seek to minimize this risk by: Limiting investment to the safest types of securities as listed in the “Authorized Investment” section. Diversifying its investments among the types of securities that are authorized under this investment policy. b) Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investor’s portfolio. For example, an investor with large holdings in long-term bonds has assumed significant interest rate risk because the value of the bonds will fall if interest rates rise. The City can minimize this risk by: Buying and holding its securities until maturity. Structuring the investment portfolio so that securities mature to meet cash flow requirements. To further achieve the objective of safety, the amount that can be invested in all investment categories, excluding obligations of the U.S. Government and its agencies, is limited either as a percentage of the portfolio or by a specific dollar amount. These limits are defined under the “Authorized Investments” section. 2. Liquidity: Liquidity is the second most important objective of the investment program. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by maintaining a portion of the portfolio in liquid money market mutual funds or local government investment pools. In addition, the City will maintain one month’s cash needs in short term investments and at least $50 million shall be maintained in securities maturing in less than two years. Since all possible cash demands cannot be anticipated, however, the portfolio will consist of securities with active secondary or resale markets should the need to sell a security prior to maturity arises. 3 3. Yield: Yield on the City’s portfolio is last in priority among investment objectives. The investment portfolio shall be designed to obtain a market rate of return that reflects the authorized investments, risk constraints, and liquidity needs outlined in the City’s investment policy. Compared to similar sized cities, the City of Palo Alto should be able to take advantage of its relatively large reserve balances to achieve higher yields through long-term investments. In addition, the City will strive to maintain the level of investment of idle funds as close to 100 percent as possible. SCOPE A. This investment policy shall apply to all financial assets of the City of Palo Alto as accounted for in the Comprehensive Annual Financial Report (CAFR), including but not limited to the following funds: 1. General Fund 2. Special Revenue Funds 3. Debt Service Funds 4. Capital Project Fund 5. Enterprise Funds 6. Internal Service Funds 7. Trust and Agency Funds B. The policy does not cover funds held by the Public Employees Retirement System or funds of the Deferred Compensation program. C. Investments of bond proceeds shall be governed by the provisions of the related bond indentures. GENERAL INVESTMENT GUIDELINES 1. The maximum stated final maturity of individual securities in the portfolio should be ten years. 2. A maximum of 30 percent of the par value of the portfolio shall be invested in securities with maturities beyond five years. 3. The City shall maintain a minimum of one month’s cash needs in short term investments. 4. At least $50 million shall be maintained in securities maturing in less than 2 years. 5. Should the ratio of the market value of the portfolio to the book value of the portfolio fall below 95 percent, the Administrative Services Department will report this fact to the City Council within a reasonable time frame and evaluate whether there is any risk of 4 holding any of the securities to maturity. 6. Commitments to purchase securities newly introduced on the market shall be made no more than three (3) working days before pricing. 7. Whenever possible, the City will obtain three or more quotations on the purchase or sale of comparable securities and take the higher yield on purchase or higher price on sale. This rule will not apply to new issues, which are purchased at market no more than three (3) working days before pricing, as well as to LAIF, City of Palo Alto bonds, money market accounts and mutual funds, all of which shall be evaluated separately. 8. Where the Investment Policy specifies a percentage limitation for a particular category of investment, that percentage is applicable only at the date of purchase. A later increase or decrease in a percentage resulting from a change in the portfolio’s assets or values shall not constitute a violation of that restriction. As soon as possible, percentage limitations will be restored as investments mature in each category. AUTHORIZED INVESTMENTS The California Government Code (Sections 53600 et seq.) governs investment of City funds. The following investments are authorized: 1. U.S. Government Securities (e.g. Treasury notes, bonds and bills) Securities that are backed by the full faith and credit of the United States a) There is no limit on purchase of these securities. b) Securities will not exceed 10 years maturity. c) All purchased securities must have an explicit or a de facto backing of the full faith and credit of the U.S. Government. 2. U.S. Government Agency Securities – Obligations issued by the Federal Government agencies (e.g. Federal National Mortgage Association). a) There is no limit on purchase of these securities except for: Callable and Multi-step-up securities provided that: - The potential call dates are known at the time of purchase; - the interest rates at which they “step-up” are known at the time of purchase; and - the entire face value of the security is redeemed at the call date. - No more than 25 percent of the par value of the portfolio. 5 b) Securities will not exceed 10 years maturity. 3. California State, California Local Government Agencies, and other United States State BondsBonds of State of California Local Government Agencies a) Having at time of investment a minimum Double A (AA/AA2) rating as provided by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). b) May not exceed 10 percent of the par value of the portfolio. c) Investments include: i) Registered state warrants or treasury notes or bonds of the State of California and bonds, notes, warrants, or other evidences of indebtedness of any local agency within California, including bonds payable solely out of the revenues from a revenue producing property owned, controlled, or operated by the state or local agency or by a department, board, agency, or authority of the state or local agency. ii) Registered treasury notes or bond of any of the 49 United States in addition to the State of California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency or authority of any of the other 49 United States, in addition to the State of California. 4. Certificates of Deposit (CD) - A debt instrument issued by a bank for a specified period of time at a specified rate of interest. a) May not exceed 20 percent of the par value of the portfolio. b) No more than 10 percent of the par value of the portfolio in collateralized CDs in any institution. c) Purchase collateralized deposits only from federally insured large banks that are rated by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). d) For non-rated banks, deposit should be limited to amounts federally insured (FDIC). – See Appendix C e) Rollovers are not permitted without specific instruction from authorized 6 City staff. 5. Banker's Acceptance Notes (BA) – Bills of exchange or time drafts drawn on and accepted by commercial banks. Purchase of banker’s acceptances are limited to: a) No more than 30 percent of the par value of the portfolio. b) Not to exceed 180 days maturity. c) No more than $5 million with any one institution. 6. Commercial Paper - Short-term unsecured obligations issued by banks, corporations, and other borrowers. Purchases of commercial paper are limited to: a) Having highest letter or numerical rating as provided for by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). b) No more than 15 percent of the par value of the portfolio. c) Not to exceed 270 days maturity. d) No more than $3 million or 10 percent of the outstanding commercial paper of any one institution, whichever is lesser. 7. Local Agency Investment Fund (LAIF) – A State of California managed investment pool may be used up to the maximum permitted by California State Law. 8. Short-Term Repurchase Agreements (REPO) – A contractual agreement between a seller and a buyer, usually of U.S. government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time. a) Not to exceed 1 year. b) Market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities. c) A Master Repurchase agreement must be signed with the bank or dealer. 9. Money Market Deposit Accounts – Liquid bank accounts which seek to maintain a net asset value of $1.00. 10. Mutual Funds which seek to maintain a net asset value of $1.00 and which are limited essentially to the above investments and further defined in note 9 of Appendix A 7 a) No more than 20 percent of the par value of the portfolio. b) No more than 10 percent of the par value with any one institution. 11. Negotiable Certificates of Deposit (NCD) issued by nationally or state chartered banks and state or federal savings institutions and further defined in note 11 of Appendix A. Purchases of negotiable certificates of deposit: a) May not exceed 10 percent of the par value of the portfolio. b) No more than $5 million in any one institution. 12. Medium-Term Corporate Notes – Issued by corporation organized and operating within the United States or by depository institutions licensed by the United States or any state and operating with the United States. a) Not to exceed 5 years maturity. b) Securities eligible for investment shall have a minimum rating of AA from a nationally recognized rating service (e.g. Moody’s and/or Standard & Poor’s). c) No more than 10 percent of the par value of the portfolio. d) No more than $5 million of the par value may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentality. e) If securities owned by the City are downgraded by either Moody’s or Standard & Poors to a level below AA, it shall be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. Appendix A provides a more detailed description of each investment vehicle and its security and liquidity features. Most of the City's short-term investments will be in securities which pay principal upon maturity, while long-term investments may be in securities that periodically repay principal, as well as interest. Most of the City's investments will be at a fixed rate. However, some of the investments may be at a variable rate, so long as that rate changes on specified dates in pre- determined increments. PROHIBITED INVESTMENTS: Includes all investments not specified above, and in particular: 8 1. Reverse repurchase agreements 2. Derivatives, as defined in Appendix B Appendix B provides a more detailed description of each investment, which is prohibited, for City investment. AUTHORIZED INVESTMENT PERSONNEL Idle cash management and investment transactions are the responsibility of the Administrative Services Department. The Administrative Services Department is under the control of the Director of Administrative Services (Director), as treasurer, who is subject to the direction and supervision of the City Manager. The Assistant Directors of Administrative Services, who reports to the Director, are authorized to make all investment transactions allowed by the Statement of Investment Policy. He or she may authorize the Senior Financial Analyst/Investments (Analyst) to enter into investments within clearly specified parameters. The Investment function is under the supervision of the Assistant Director of Administrative Services (Assistant). The Assistant is charged with the responsibility to manage the investment program (portfolio), which includes developing and monitoring the City's cash flow model and developing long-term revenue and financing strategies and forecasts. The Analyst is subject to the direction and supervision of the Assistant. The Analyst assists the Assistant, in the purchase and sale of securities. The Analyst also prepares the quarterly report, and records daily all investment transactions as to the type of investment, amount, yield, and maturity. Cash flow projections are prepared as needed. In all circumstances, approval from the Director of Administrative Services is required before selling securities from the City's portfolio. The Analyst may also transfer no more than a total of $8 million a day from the City's general account to any one financial institution, without the prior approval of the Assistant Director of Administrative Services. No other person has authority to make investment transactions without the written authority of the Assistant Director of Administrative Services. USE OF BROKERS AND DEALERS The Administrative Services Department maintains a list of acceptable dealers. A dealer acts as a principal in security transactions, selling securities from and buying securities for their own position. A dealer must have a) At least three years experience operating with California municipalities; b) Maintain an inventory of trading securities of at least $10 million; and 9 c) Be approved by the Assistant Administrative Services Director before being added to the City's list of approved dealers. In addition, individual traders or agents representing a dealer: A dealer will be removed from the list should there develop a history of problems to include: failure to deliver securities as promised, failure to honor transactions as quoted, or failure to provide accurate information. SAFEKEEPING AND CUSTODY All securities shall be delivered to the City's safekeeping custodian and held in the name of the City of Palo Alto, with the exception of the following investments: a) Certificates of deposit, which may be held by the City itself. b) City shares in pooled investment funds, under contract. c) Mutual funds d) Local Agency Investment Fund (LAIF) POLICY REVIEW AND REPORTING ON INVESTMENTS Monthly, the Administrative Services Department will review performance in relation to Council- adopted Policy. Quarterly, the Department will report to Council on: its performance in comparison to policy, explain any variances from policy, provide any recommendations for policy changes, and discuss overall compliance with the City’s Investment Policy. In addition, the Department will provide Council with: a) A detailed list of all securities, investments and monies held by the City, and b) Report on the City’s ability to meet expenditure requirements over the next six months. Annually, the Administrative Services Department will present a Proposed Statement of Investment Policy, to include the delegation of investment authority, to the City Council for review during the annual budget process. All proposed changes in policy must be approved by the Council prior to implementation. Adopted by City Council October 22, 1984 Amended by City Council January 26, 1998 Monthly reporting effective January 1985 Amended by City Council June 22, 1998 Amended and Adopted by City Council June 24, 1985 Amended by City Council June 28, 1999 Amended by City Council December 2, 1985 Amended by City Council June 19, 2000 Amended by City Council June 23, 1986 Amended by City Council June 11, 2001 Amended by City Council June 22, 1987 Amended by City Council June 17, 2002 Amended by City Council August 8, 1988 Amended by City Council June 17, 2003 Amended by City Council November 28, 1988 Amended by City Council June 28, 2004 Amended by City Council June 26, 1989 Amended by City Council June 20, 2005 Amended by City Council May 14, 1990 Amended by City Council June 12, 2006 Amended by City Council June 24, 1991 Amended by City Council June 11, 2007 10 Amended by City Council June 22, 1992 Amended by City Council June 09, 2008 Amended by City Council June 23, 1993 Amended by City Council June 15, 2009 Amended by City Council June 20, 1994 Amended by City Council June 28, 2010 Amended by City Council June 19, 1995 Amended by City Council June 20, 2011 Amended by City Council June 24, 1996 Amended by City Council June 18, 2012 Amended by City Council June 18, 2012 Amended by City Council June 03, 2013 Amended by City Council June 23, 1997 Amended by City Council June 16, 2014 11 APPENDIX A EXPLANATION OF PERMITTED INVESTMENTS 1. U.S. Government Securities – United States Treasury notes, bonds, bills, or certificates of indebtedness or those for which the faith and credit of the United States are pledged for the payment of principal and interest. 2. U.S. Government Agency Securities - U.S. Government Agency Obligations include the securities of the Federal National Mortgage Association (FNMA), Federal Land Banks (FLB), Federal Intermediate Credit Banks (FICB), banks for cooperatives, Federal Home Loan Banks (FHLB), Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Student Loan Marketing Association (SLMA), Small Business Administration (SBA), Federal Farm Credit (FFC), Federal Agricultural Mortgage Corporation (FAMC or FMAC), and Tennessee Valley Authority (TVA). Federal Agency securities are debt obligations that essentially result from lending programs of the Government. Federal agency securities differ from other types of securities, as well as among themselves. Their characteristics depend on the issuing agency. It is possible to distinguish three types of issues: (A) participation certificates (pooled securities), (B) Certificates of interest (pooled loans), (C) notes, bonds, and debentures. The securities of a few agencies are explicitly backed by the full faith and credit of the U.S. Government. All other issues purchased by the City have the de facto backing from the federal government, and it is highly unlikely that the government would let any agency default on its obligations. 3. Certificates of Deposit - A certificate of deposit (CDs) is a receipt for funds deposited in a bank, savings bank, or savings and loan association for a specified period of time at a specified rate of interest. Denominations are $250,000 and up. The first $250,000 of a certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC), if the deposit is with a bank or savings bank, or the Savings Association Insurance Fund (SAIF), if the deposit is with a savings and loan. CDs with a face value in excess of $250,000 can be collateralized by U.S. Government Agency and Treasury Department securities or first mortgage loans. Government securities must be at least 110 percent of the face value of the CD collateralized in excess of the first $250,000. The value of first mortgages must be at least 150 percent of the face value of the CD balance insured in excess of the first $250,000. Generally, CDs are issued for more than 30 days and the maturity can be selected by the purchaser. 4. Bankers' Acceptance - A Banker's acceptance (BA) is a negotiable time draft or bill of exchange drawn on and accepted by a commercial bank. Acceptance of the draft irrevocably obligates the bank to pay the bearer the face amount of the draft at maturity. BAs are usually created to finance the import and export of goods, the shipment of goods within the United States and storage of readily marketable staple commodities. In over 70 years of usage in the United States, there has been no known instance of principal loss to any investor in BAs. In addition to the guarantee by the accepting bank, the transaction is identified with a specific commodity. Warehouse receipts verify that the pledged commodities exist, and, by 12 definition, these commodities are readily marketable. The sale of the underlying goods generates the necessary funds to liquidate the indebtedness. BAs enjoy marketability since the Federal Reserve Bank is authorized to buy and sell prime BAs with maturities of up to nine months. The Federal Reserve Bank enters into repurchase agreements in the normal course of open market operations with BA dealers. As are sold at a discount from par. An acceptance is tied to a specific loan transaction; therefore, the amount and maturity of the acceptance is fixed. 5. Commercial Paper - Commercial paper notes are unsecured promissory notes of industrial corporations, utilities, and bank holding companies. Interest is discounted from par and calculated using actual number of days on a 360-day year. The notes are in bearer form, with maturities up to 270 days selected by the purchaser, and denominations generally start at $100,000. There is a small secondary market for commercial paper notes and an investor may sell a note prior to maturity. Commercial paper notes are backed by unused lines of credit from major banks. Some issuer's notes are insured, while some are backed by irrevocable letters of credit from major banks. State law limits a City to investments in United States corporations having assets in excess of five hundred million dollars with an "A" or higher rating by a nationally recognized rating service for the issuer's debentures. Cities may not invest more than 25 percent of idle cash in commercial paper. 6. Local Agency Investment Fund Demand Deposit - The Local Agency Investment Fund LAIF) was established by the State to enable treasurers to place funds in a pool for investments. The City is limited to an investment of the amount allowed by LAIF (currently $40 million). LAIF has been particularly beneficial to those jurisdictions with small portfolios. Palo Alto uses this fund for short-term investment, liquidity, and yield. 7. Repurchase Agreements - A Repurchase Agreement (REPOS) is not a security, but a contractual arrangement between a financial institution or dealer and an investor. The agreement normally can run for one or more days. The investor puts up funds for a certain number of days at a stated yield. In return, the investor takes title to a given block of securities as collateral. At maturity, the securities are repurchased and the funds repaid, plus interest. Usually, amounts are $500,000 or more, but some REPOS can be smaller. 8. Money Market Deposit Accounts - Money Market Deposit Accounts are market-sensitive bank accounts, which are available to depositors at any time, without penalty. The interest rate is generally comparable to rates on money market mutual funds, though any individual bank's rate may be higher or lower. These accounts are insured by the Federal Deposit Insurance Corporation or the Savings Association Insurance Fund. 13 9. Mutual Funds - Mutual funds are shares of beneficial interest issued by diversified management companies, as defined by section 23701 M of the Revenue and Taxation Code. To be eligible for investment, these funds must: a) Attain the highest ranking in the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services; or b) Have an investment advisor registered with the Securities and Exchange Commission with not less than five years experience investing in the securities and obligations, as authorized by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code, and with assets under management in excess of five hundred million dollars; and c) Invest solely in those securities and obligations authorized by Sections 53601 and 53635 of the California Government Code. Where the Investment Policy of the City of Palo Alto may be more restrictive than the State Code, the Policy authorizes investments in mutual funds that shall have minimal investment in securities otherwise restricted by the City's Policy. Minimal investment is defined as less than 5 percent of the mutual fund portfolio; and d) The purchase price of shares of beneficial interest purchased shall not include any commission that these companies may charge. e) Have a net asset value of $1.00. 10. Callable Securities and Multi-Step-ups: Callable securities are defined as fixed interest rate government agency securities that give the issuing agency the option of returning the invested funds at a specific point in time to the purchaser. Multi-step-ups are government agency securities in which the interest rate increases ("steps-up") at preset intervals, and which also have a callable option that allows the issuing agency to return the invested funds at a preset interval. Callable and multi-step-ups are permitted, provided that: the potential call dates are known at the time of purchase; the interest rates at which they “step-up” are known at the time of purchase; and the entire face value of the security is redeemed at the call date. 14 11. Negotiable Certificates of Deposit (NCD). NCDs are large-dollar-amount, short-term certificate of deposit. Such certificates are issued by large banks and bought mainly by corporations and institutional investors. They are payable either to the bearer or to the order of the depositor, and, being negotiable, they enjoy an active secondary market, where they trade in round lots of $5 million. Although they can be issued in any denomination from $100,000 up, the typical amount is $1 million. Also called a Jumbo Certificate of Deposit. State law prohibits the investment of local agency funds in negotiable certificates of deposit issued by a state or federal credit union if a member of the legislative body of the local agency, or any person with investment decision making authority in the administrative, manager’s, budget, auditor-controller’s, or treasurer’s offices of the local agency also serves on the board of directors, other credit committee or the supervisory committee of the state or federal credit union issuing the negotiable certificate of deposit. 12. Medium-Term Corporate Notes: Notes of a maximum of five years maturity issued by corporations organized and operating with the United States or by depository institutions licensed by the United States or any state and operating with the United States. According to California Code Section 53601, “Notes eligible for investment under this subdivision shall be rated in the rating category of “Double A” or its equivalent or better by a nationally recognized rating service. Purchase of medium-term notes may not exceed 30 percent of the agency’s surplus money which may be invested pursuant to this section.” 15 APPENDIX B EXPLANATION OF PROHIBITED INVESTMENTS 1. Reverse Repurchase Agreements: A Reverse Repurchase Agreement (Reverse REPO) is a contractual agreement by the investor (e.g. local agency) to post a security it owns as collateral, and a bank or dealer temporarily exchanges cash for this collateral, for a specific period of time, at an agreed-upon interest rate. During the period of the agreement, the local agency may use this cash for any purpose. At maturity, the securities are repurchased from the bank or dealer, plus interest. California law contains a number of restrictions on the use of Reverse REPOS by local agencies. 2. Derivatives: A derivative is a financial instrument created from, or whose value depends on (is derived from), the value of one or more underlying assets or indices. The term "derivative" refers to instruments or features, such as collateralized mortgage obligations, forwards, futures, currency and interest rate swaps, options, caps and floors. Except for those callable and multi-step-up securities as described under Permitted Investments, derivatives are prohibited. Certain derivative products have characteristics which could include high price volatility, liquid markets, products that are not market-tested, products that are highly leveraged, products requiring a high degree of sophistication to manage, and products that are difficult to value. According to California law, a local agency shall not invest any funds in inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages. 16 APPENDIX C GLOSSARY OF INVESTMENT TERMS AGENCIES: Federal agency and instrumentality securities. ASKED: The price at which securities are offered. BID: The price offered by a buyer of securities (when one sells securities, one asks for a bid). See “Offer”. BROKER: A broker brings buyers and sellers together so that he can earn a commission. COLLATERAL: Securities, evidence of deposit, or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMPREHENSIVE ANNUAL FINANCIAL REPORT (“CAFR”): The official annual report for the City of Palo Alto. It includes combined financial statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules that are necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: (1) delivery versus payment (DVP); and (2) delivery versus receipt (DVR). DVP is delivery of securities with an exchange of money for the securities. DVR is delivery of securities with an exchange of a signed receipt for the securities. DISCOUNT: The difference between the acquisition cost of a security and its value at maturity when quoted at lower than face value. A security that sells below original offering price shortly after sale, is also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a discount and that are redeemed at maturity for full face value (e.g., U.S. Treasury Bills). DIVERSIFICATION: Dividing investment funds among a variety of securities that offer 17 independent returns. FEDERAL AGRICULTURAL MORTGAGE CORPORATION (“FAMC” or “FMAC”): A federal agency established in 1988 to provide a secondary market for farm mortgage loans. Informally called Farmer Mac. FEDERAL CREDIT AGENCIES: Agencies of the Federal Government that were established to supply credit to various classes of institutions and individuals (e.g., S&Ls, small business firms, students, farmers, farm cooperatives, and exporters). FEDERAL DEPOSIT INSURANCE CORPORATION (“FDIC”): A federal agency that insures all types of deposits received at an insured bank, including deposits in a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA) or time deposit such as a certificate of deposit (CD). FDIC insurance covers depositors' accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank's closing, up to the insurance limit. The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments are purchased at an insured bank. The FDIC does not insure U.S. Treasury bills, bonds or notes, but these investments are backed by the full faith and credit of the United States government. The standard maximum deposit insurance amount is described as the “SMDIA” in FDIC regulations. The SMDIA is $250,000 per depositor, per insured bank. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. FEDERAL HOME LOAN BANKS (“FHLB”): Government-sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions, and insurance companies. The mission of the FHLBs is to liquefy the housing-related assets of its members, who must purchase stock in their District Bank. FEDERAL NATIONAL MORTGAGE ASSOCIATION (“FNMA”): FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL OPEN MARKET COMMITTEE (“FOMC”): The FOMC consists of seven 18 members of the Federal Reserve Board and five of the 12 Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of government securities in the open market, as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., 12 regional banks, and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (“GNMA” or “Ginnie Mae”): Securities that influence the volume of bank credit that is guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. A security holder is protected by the full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHM mortgages. The term “pass-throughs” is often used to describe Ginnie Maes. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow, and reasonable amount can be done at those quotes. LOCAL GOVERNMENT AGENCY: A local government agency is any city, county, city and county, district, or other local governmental body or corporation, including the California State Universities (CSU) and University of California (UC) systems, K-12 schools and community colleges empowered to expend public funds. LOCAL GOVERNMENT INVESTMENT FUND (“LAIF”): Monies from local governmental units may be remitted to the California State Treasurer for deposit in this special fund for the purpose of investment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer (lender) to liquidate the underlying securities in the event of default by the seller (borrower). MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which short-term debt instruments (e.g., bills, commercial paper, and bankers’ acceptances) are issued and traded. OFFER: The price asked by a seller of securities (when one buys securities, one asks for an offer). 19 See “Asked” and “Bid”. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank, as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary policy tool. PORTFOLIO: A collection of securities that an investor holds. PRIMARY DEALER: A group of government securities dealers that submit daily reports of market activity and positions, and monthly financial statements to the Federal Reserve Bank of New York, and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -- registered securities broker-dealers, banks, and a few unregulated firms. PRUDENT INVESTOR RULE: An investment standard cited in the California Government Code (CGC) Section 53600 et seq. Under this standard, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. QUALIFIED PUBLIC DEPOSITORIES: A financial institution that: (1) does not claim exemption from the payment of any sales, compensating use, or ad valorem taxes under the laws of this state; (2) has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability; and (3) has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank‘s vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES AND EXCHANGE COMMISSION: An agency created by Congress to administer securities legislation for the purpose of protecting investors in securities transactions. STRUCTURED NOTES: Notes issued by instrumentalities (e.g., FHLB, FNMA, SLMA) and by corporations, that have imbedded options (e.g., call features, step-up coupons, floating rate coupons, 20 derivative-based returns) in their debt structure. The market performance of structured notes is affected by fluctuating interest rates; the volatility of imbedded options; and shifts in the yield curve. TIME CERTIFICATE OF DEPOSIT: A non-negotiable certificate of deposit, which cannot be sold prior to maturity. TREASURY BILLS: A non-interest bearing discount security that is issued by the U.S. Treasury to finance the national debt. Most T-bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term, coupon-bearing U.S. Treasury securities that are issued as direct obligations of the U.S. Government, and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term, coupon-bearing U.S. Treasury securities that are issued as direct obligations of the U.S. Government, and having initial maturities of two to 10 years. YIELD: The rate of annual income return on an investment, expressed as a percentage. YIELD-TO-CALL (YTC): The rate of return an investor earns from a bond assuming the bond is redeemed (called) prior to its nominal maturity date. YIELD-TO-MATURITY: The current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity. ZERO-COUPON SECURITIES: Security that is issued at a discount and makes no periodic interest payments. The rate of return consists of a gradual accretion of the principal of the security and is payable at par upon maturity. City of Palo Alto (ID # 5881) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: 2016 Financial Plans and Reserve Management Policies Title: Finance Committee Recommendation that the City Council Adopt: (1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; (2) a Resolution Approving the Fiscal Year 2016 Wastewater Collection Utility Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices; (3) a Resolution Approving the Fiscal Year 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserve Management Practices; and (4) a Resolution Approving the Fiscal Year 2016 Gas Utility Financial Plan and Amending the Gas Utility Reserve Management Practices From: City Manager Lead Department: Utilities Recommendation Staff, the Utilities Advisory Commission and the Finance Committee recommend that Council adopt: 1. A Resolution (Attachment A) approving the Fiscal Year (FY) 2016 Electric Financial Plan and amending the Electric Utility Reserve Management Practices; 2. A Resolution (Attachment B) approving the FY 2016 Gas Financial Plan and amending the Gas Utility Reserve Management Practices; 3. A Resolution (Attachment C) approving the FY 2016 Wastewater Collection Financial Plan and amending the Wastewater Collection Utility Reserve Management Practices; and 4. A Resolution (Attachment D) approving the FY 2016 Water Financial Plan and amending the Water Utility Reserve Management Practices; Executive Summary Last year staff prepared the first long-term Financial Plans for the Electric, Gas, Wastewater Collection, and Water Utilities. These plans include a more comprehensive overview of the utility’s operations, both retrospective and prospective, than in past years’ financial forecasts. This year, the Financial Plans were updated with the latest information. The Financial Plans are City of Palo Alto Page 2 intended to be a reference for Utilities Advisory Commission (UAC) and Council members as they review the budget and staff’s rate adjustment recommendations. The Financial Plans keep rates for Electric and Gas unchanged for FY 2016 and recommend 9% and 12% rate increases for Wastewater Collection and Water, respectively. In addition, they include a set of Reserves Management Practices describing the financial reserves for each utility and the management practices for those reserves. The Reserves Management Practices for each utility were updated to reflect recent changes the Administrative Services Department made with respect to treatment of the capital reserves. Committee Review and Recommendations Both the UAC and the Finance Committee voted unanimously to recommend that the City Council approve the proposed Financial Plans and amended Reserve Management Practices. Electric On April 1, 2015, staff presented the FY 2016 Electric Financial Plan to the UAC. No rate increases were proposed for FY 2016. The UAC voted unanimously to recommend that Council adopt the proposed FY 2016 Electric Financial Plan and Reserve Management Practices. Staff presented the plan to the Finance Committee at its April 22, 2015 meeting. After some discussion regarding the impact of the drought on availability of hydroelectric supplies, the Finance Committee voted unanimously to recommend Council approve the FY 2016 Electric Financial Plan and Reserve Management Practices. The Finance Committee report (Staff Report 5681) is provided as Attachment E. Draft minutes from the Finance Committee’s April 22, 2015 meeting are included as Attachment J. Gas Staff presented the FY 2016 Gas Financial Plan to the UAC at its April 1, 2015 meeting. No rate increases were proposed by staff, but an alternative 3% increase for FY 2016 was presented for consideration. The UAC noted no need for an FY 2016 gas rate increase and voted unanimously to recommend that Council adopt the proposed FY 2016 Gas Financial Plan and Reserve Management Practices. Staff presented the plan to the Finance Committee at its April 22, 2015 meeting. The Finance Committee voted unanimously to recommend Council approve the FY 2016 Gas Financial Plan and Reserve Management Practices. The Finance Committee report (Staff Report 5682) is provided as Attachment F. Draft minutes from the Finance Committee’s April 22, 2015 meeting are included as Attachment J. Wastewater Collection Staff presented the FY 2016 Wastewater Collection Financial Plan to the UAC at its March 4, 2015 meeting. A 9% rate increase for FY 2016 is included in the plan. The UAC voted unanimously to recommend that Council adopt the proposed FY 2016 Wastewater Collection Financial Plan and Reserve Management Practices. On April 7, 2015, staff presented the plan to the Finance Committee. Finance Committee members had questions pertaining to wastewater treatment cost projections and the health of financial reserves, but were supportive of staff’s City of Palo Alto Page 3 proposal. The Finance Committee unanimously recommended Council approve the proposed Financial Plans and rates. The Finance Committee report (Staff Report 5591) is provided as Attachment G. Draft minutes from the Finance Committee’s April 7, 2015 meeting are included as Attachment I. Water Staff presented the FY 2016 Water Financial Plan to the UAC at its March 4, 2015 meeting, including a proposed 12% water rate increase for FY 2016. The UAC voted unanimously to recommend that Council adopt the proposed FY 2016 Water Financial Plan and Reserve Management Practices. On April 7, 2015, staff presented the plan to the Finance Committee. UAC Commissioner Melton spoke about the need for ongoing future water rate increases. Members of the Finance Committee were generally supportive of the rate increase proposed and were interested to see future proposals regarding rates and drought surcharges. The Finance Committee unanimously recommended Council approve the proposed Financial Plans and rates. The Finance Committee report (Staff Report 5598) is provided as Attachment H. Draft minutes from the Finance Committee’s April 7, 2015 meeting are provided as Attachment I. Policy Implications The proposed Financial Plans do not change existing City policy. The proposed changes to the Reserve Management Practices are necessary to reflect changes to the City’s accounting practices with respect to CIP costs. Environmental Review Council’s review and adoption of the attached Financial Plans and Reserve Practices does not meet the California Environmental Quality Act’s definition of a project under Public Resources Code Section 21065, thus, environmental review is not required. Attachments: Attachment A: Resolution Approving the FY 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserve Management Practices (PDF) Attachment B: Resolution Approving FY 2016 Gas Utility Financial Plan and Amending Gas Utility Reserve Management Practices (PDF) Attachment C: Resolution Approving the FY 2016 Wastewater Collection Utility Financial Plan and Amending Wastewater Collection Utility Reserve Management Practices (PDF) Attachment D: Resolution Approving FY 2016 Water Utility Financial Plan and Amending Water Utility Reserve Management Practices (PDF) Attachment E: Finance Committee Staff Report ID 5681 FY 2016 Electric Utility Financial Plan (PDF) Attachment F: Finance Committee Staff Report ID 5682 FY 2016 Gas Utility Financial Plan (PDF) Attachment G: Finance Committee Staff Report ID 5598 FY 2016 Wastewater Collection Utility Financial Plan (PDF) City of Palo Alto Page 4 Attachment H: Finance Committee Staff Report ID 5591 FY 2016 Water Utility Financial Plan (PDF) Attachment I: Draft Finance Committee Meeting Minutes of April 7, 2015 (PDF) Attachment J: Draft Finance Committee Meeting Minutes of April 22, 2015 (PDF) Attachment A * NOT YET APPROVED * 150316 sdl 6053271 Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans. C. The City intends to make changes to its Electric Utility Reserves Management Practices to amend the purpose and management practices of the Electric Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby approves the FY 2016 Electric Utility Financial Plan, including the amended Electric Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Electric Utility as part of the FY 2015 Electric Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $11 million in FY 2015 from the Hydro Stabilization Reserve to the Operations Reserve, the transfer of all funds released in FY 2015 from the Reappropriations Reserve to the CIP Reserve, and the transfer of $9.0 million in FY 2016 from the Rate Stabilization Reserve to the Operations Reserve, as described in the FY 2016 Electric Utility Financial Plan approved via this resolution. / / / / / / Attachment A * NOT YET APPROVED * 150316 sdl 6053271 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Attachment B *NOT YET APPROVED * 150319 sdl 6053275 Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Gas Utility Financial Plan and Amending the Gas Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made a part of the Financial Plans. C. The City intends to make changes to its Gas Utility Reserves Management Practices to amend the purpose and management practices of the Gas Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby approves the FY 2016 Gas Utility Financial Plan, including the amended Gas Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Gas Utility as part of the FY 2015 Gas Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $3.4 million in FY 2015 from the Rate Stabilization Reserve to the Operations Reserve, and the transfer of all funds released in FY 2015 from the Reappropriations Reserve to the CIP Reserve, as described in the FY 2016 Gas Utility Financial Plan approved via this resolution. / / // Attachment B *NOT YET APPROVED * 150319 sdl 6053275 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Attachment C *NOT YET APPROVED * 150223 mf 6053247 Resolution No. _____ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Wastewater Utility Financial Plan and Amending the Wastewater Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made a part of the Financial Plans. C. The City intends to make changes to its Wastewater Utility Reserves Management Practices to amend the purpose and management practices of the Wastewater Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. The Council hereby approves the FY 2016 Wastewater Utility Financial Plan, including the amended Wastewater Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Wastewater Utility as part of the FY 2015 Wastewater Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $2.164 million in FY 2015 from the Rate Stabilization Reserve to the Operations Reserve, the transfer of all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, and the exceedance of the maximum CIP Reserve guidelines through the end of FY 2017, as described in the FY 2016 Wastewater Utility Financial Plan approved via this resolution. // // // Attachment C *NOT YET APPROVED * 150223 mf 6053247 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Attachment D *NOT YET APPROVED * 150220 mf 6053256 1 Resolution No. ____ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Water Utility Financial Plan and Amending the Water Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans. C. The City intends to make changes to its Water Utility Reserves Management Practices to amend the purpose and management practices of the Water Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. The Council hereby approves FY 2016 Water Utility Financial Plan, including the amended Water Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Water Utility as part of the FY 2015 Water Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $2 million in FY 2015 from the CIP Reserve to the Operations Reserve, the transfer of all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, the transfer of $5.5 million from the Rate Stabilization Reserve to the Operations Reserve, and the exceedance of the maximum CIP Reserve guidelines through the end of FY 2017, as described in the FY 2016 Water Utility Financial Plan approved via this resolution. // // // Attachment D *NOT YET APPROVED * 150220 mf 6053256 2 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services City of Palo Alto (ID # 5681) Finance Committee Staff Report Report Type: Action Items Meeting Date: 4/22/2015 City of Palo Alto Page 1 Summary Title: Electric Utility Financial Plan Title: Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Approving the Fiscal Year 2016 Electric Financial Plan, Including no Rate Changes for July 1, 2015, and Amending the Electric Utility Reserve Management Practices From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that Council adopt a resolution (Attachment A) amending the Electric Utility Reserve Management Practices (Attachment B) and approving the fiscal year (FY) 2016 Electric Financial Plan (Attachment C). Executive Summary The FY 2016 Electric Utility Financial Plan includes projections of the utility’s costs and revenues through FY 2023. Costs are projected to rise substantially for the next several years due primarily to increasing costs for electric supply purchases as a result of new renewable energy projects coming online. Increases in transmission costs are also projected. No rate increases are proposed for FY 2016, but a 6% rate increase is projected for FY 2017 and another 6% increase for FY 2018. Staff is also proposing two reserves transfers to the Supply Operations Reserve: $11 million from the Hydro Stabilization Reserve in FY 2015, and $9 million from the Supply Rate Stabilization Reserve in FY 2016. The Hydro Stabilization Reserve is intended to be used during periods of low hydroelectric generation such as FY 2015, and the Supply Rate Stabilization Reserve is being drawn down to allow the City to complete a cost of service study before its next rate change. Even after the recommended transfers from reserves, reserve levels are, and will remain, adequate to manage contingencies. Staff also recommends a change to the Electric Utility Reserves Management Practices for the Capital Improvement Project (CIP) Reserve to accommodate a change in City budgeting practices for CIP projects. The UAC reviewed the FY 2016 Electric Financial Plan at its April 1, 2015 meeting and voted unanimously to recommend adoption of the plan and changes to Reserves Management ATTACHMENT E City of Palo Alto Page 2 Practices. Background Every year staff presents the Council with Financial Plans for its Electric, Gas, Water, and Wastewater Collection Utilities and recommends any rate adjustments required to maintain their financial health. These Financial Plans include a comprehensive overview of the utility’s operations, both retrospective and prospective, and are intended to be a reference for UAC and Council members as they review the budget and staff’s rate recommendations. Each Financial Plan also contains a set of Reserves Management Practices describing the reserves for each utility and the management practices for those reserves. Staff may propose amendments to these reserves as part of the Financial Plans. Discussion Proposed Actions for FY 2015 When Council adopted the FY 2015 Electric Utility Financial Plan, it approved several transfers between reserves. Funds were transferred out of the Emergency Plant Replacement and Rate Stabilization Reserve into the newly-created CIP and Operations Reserves. These transfers were mainly related to setting up the new reserves structure approved as part of that Financial Plan. Now, staff recommends an additional transfer for FY 2015, a transfer of $11 million from the Hydro Stabilization Reserve to the Operations Reserve, leaving it with $17 million remaining at the end of FY 2015 (an adequate level for insuring against contingencies). This is to fund additional commodity supply costs resulting from the drought. These additional costs were included in the mid-year budget adjustments for FY 2015. Generation from hydroelectric resources was low due to the drought forcing CPAU to buy additional power in the electricity markets to make up for the reduced hydroelectric generation. These purchases of additional power are projected to result in roughly $11 million in additional costs in FY 2015. Proposed Actions for FY 2016 This year’s Electric Utility Financial Plan includes the following proposed actions for FY 2016: 1.Amend the CIP Reserve to accommodate a change in the City’s capital budgeting practices. These amendments are summarized below, but for a more in-depth description of the reasons for these amendments, see Section 4C of the Financial Plan: a.Modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects by amending the Reserves Management Practices. b.At the end of FY 2015, transfer funds projected to be released from the Reappropriations Reserve (due to a change in City capital budgeting practices) to the CIP Reserve. 2.Transfer $9 million from the Supply Rate Stabilization Reserve to the Supply Operations Reserve. This transfer will enable staff to maintain Supply Operations Reserve levels City of Palo Alto Page 3 above the guideline levels until rates are changed in FY 2017. These proposed actions are described in more detail in the FY 2016 Electric Financial Plan (Attachment B). Staff is not proposing any rate changes for the Electric Utility in FY 2016, but is beginning an electric cost of service analysis (COSA) in preparation for proposing to change rates in FY 2017. Staff will have policy discussions with the UAC and Council to identify policy objectives for the study prior to beginning the COSA. Table 1 shows the projected rate adjustments included in the FY 2016 Electric Financial Plan and their impact on the median residential electric bill. Table 1: Projected Electric Rate Adjustments, FY 2016 to FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Forecasted Rate Changes 0% 6% 6% 1% 1% Estimated Bill Impact ($/mo)* $0.00 $2.69 $2.80 $0.38 $0.72 * estimated impact on median residential electric bill, which is $42.76 in FY 2015. Table 2 shows the proposed and projected rate adjustments in the context of the other proposed and projected utility rates. Table 2: Rate Adjustments, All Utilities, FY 2016 Proposed, FY 2017 to FY 2020 Projected FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Electric 0% 6% 6% 1% 1% Gas1 0% 7% 4% 4% 4% Wastewater 9% 9% 9% 9% 6% Water 12% 8% 8% 8% 3% Refuse2 9% 9% 8% 2% to 3% 2% to 3% Storm Drain3 2.7% 2% to 3% 2% to 3% 2% to 3% 2% to 3% Total Bill Change4 (%) 6% 8% 7% 5% 3% ($/mo) $14.73 $18.91 $18.53 $14.39 $9.55 (1) Gas rate changes are shown with commodity rates held constant. Actual gas commodity rates will vary monthly with wholesale market fluctuations (2) No forecast available past FY 2018, inflationary increases assumed. (3) Storm Drain Rates increase annually by CPI; existing rates sunset in June 2017 unless reauthorized by a majority vote of property owners. (4) Change in estimated median residential bill, $230.76 as of June 30, 2014 The main driver for the increase in the electric utility’s costs (and therefore rates) over the next several years is the cost of new renewable projects coming online. Electricity purchase costs began increasing starting in FY 2013 and will continue to increase through FY 2018 as new renewable projects come online to fulfill the City’s Council-approved environmental goals. The City of Palo Alto Page 4 remaining costs for the electric utility are not projected to increase as quickly. Operations costs are expected to increase at or below inflation through the forecast period. CIP costs are also expected to increase at only an inflationary rate, except for costs associated with installing smart grid technologies. The Electric Financial Plan assumes that those smart grid costs are funded from the Electric Special Projects Reserve, though this will require action by the City Council before such funding can occur. Changes from Preliminary Financial Forecast The Finance Committee reviewed preliminary financial forecasts for the Electric Utility at its March 4, 2015 meeting. Staff made minor adjustments to the pattern of electric rate increases for FY 2017 through FY 2020 based on revised assessments of reserve levels, but the cumulative increase to rates over that period is nearly identical to that presented in the preliminary financial forecast. Commission Review The UAC reviewed the attached Financial Plan and Reserves Management Practices at its April 1, 2015 meeting and, with little comment, unanimously recommended approval. One commissioner commented on the extended drought scenario discussed in the Financial Plan and in staff’s presentation, noting that although reserves decreased in that scenario, it was appropriate to use contingency reserves in case of an extended drought. Another commissioner recommended that staff consider amending the way that it presents the Electric Special Projects reserve in charts in the report to make it clear that it was not intended for use in routine utility financial operation, and only for special projects. Timeline After receiving the Finance Committee’s recommendation, the City Council will consider its adoption with the FY 2016 budget. Resource Impact Because no rate changes are proposed for FY 2016, there are no projected resource impacts for FY 2016 associated with this Financial Plan. Policy Implications The attached FY 2016 Electric Financial Plan includes amended Reserve Management Practices that will modify Council policy with respect to the structure of the financial reserves of the Electric Utility. These Reserve Management Practices replace the current Reserve Management Practices, which were last adopted by Council in June 2014 (Resolution 9423). Environmental Review The UAC’s review and recommendation to Council on the FY 2016 Electric Financial Plan does not meet the California Environmental Quality Act’s definition of a project, pursuant to Public Resources Code Section 21065, thus no environmental review is required. Attachments: City of Palo Alto Page 5 Attachment A: Resolution of the Council of the City of Palo Alto Approving the FY 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserves Management Practices (PDF) Attachment B: Proposed Amendments to Electric Utility Reserves Management Practices (PDF) Attachment C: Proposed FY 2016 Electric Utility Financial Plan (PDF) Attachment D: Excerpted UAC Minutes of April 1, 2015 (PDF) Attachment A * NOT YET APPROVED * Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Electric Utility Financial Plan and Amending the Electric Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans. C. The City intends to make changes to its Electric Utility Reserves Management Practices to amend the purpose and management practices of the Electric Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby approves the FY 2016 Electric Utility Financial Plan, including the amended Electric Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Electric Utility as part of the FY 2015 Electric Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $11 million in FY 2015 from the Hydro Stabilization Reserve to the Operations Reserve, the transfer of all funds released in FY 2015 from the Reappropriations Reserve to the CIP Reserve, and the transfer of $9.0 million in FY 2016 from the Rate Stabilization Reserve to the Operations Reserve, as described in the FY 2016 Electric Utility Financial Plan approved via this resolution. / / / / / / 150316 sdl 6053271 Attachment A * NOT YET APPROVED * SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services 150316 sdl 6053271 DRAFT Proposed Amendments to Electric Utility Reserves Management Practices APPENDIX C: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices are used when developing the Electric Utility Financial Plan: Section 1. Definitions a)“Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b)“Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c)“Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d)“Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Electric Supply Fund Balance is reserved for the following purposes: a)For existing contracts, as described in Section 4 (Reserve for Commitments) b)For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserve for Reappropriations) c)For special projects for the benefit of the Electric Utility ratepayers, as described in Section 6 (Electric Special Projects Reserve) d)For year to year balancing of costs associated with the Electric Utility’s hydroelectric resources, as described in Section 7 (Hydro Stabilization Reserve) e)For rate stabilization, as described in Section 11 (Rate Stabilization Reserves) f)For operating contingencies, as described in Section 12 (Operations Reserves) g)Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 13 (Unassigned Reserves). Section 3. Distribution Fund Reserves The Electric Distribution Fund Balance is reserved for the following purposes: a)For existing contracts, as described in Section 4 (Reserves for Commitments) b)For operating and capital budgets reappropriated from previous years, as described in Section 5 (Reserves for Reappropriations) c)As an offset to underground loan receivables, as described in Section 8 (Underground Loan Reserve) d)To hold Public Benefit Program funds collected but not yet spent, as described in Section 9 (Public Benefits Reserve) ATTACHMENT B DRAFT Proposed Amendments to Electric Utility Reserves Management Practices e) For cash flow management and contingencies related to the future year expenditure on the Electric Utility’s Capital Improvement Program (CIP), as described in Section 10 (CIP Reserve) f) For rate stabilization, as described in Section 11 (Rate Stabilization Reserves) g) For operating contingencies, as described in Section 12 (Operations Reserves) h) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 14 (Unassigned Reserves). Section 4. Reserves for Commitments At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Electric Supply Fund and Electric Distribution Fund, respectively, at that time. Section 5. Reserves for Reappropriations At the end of each fiscal year the Electric Supply Fund and Electric Distribution Fund Reserves for Reappropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets that will be reappropriated to the following fiscal year for each Fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. Electric Special Projects Reserve The Electric Special Projects Reserve (ESP Reserve) will be managed in accordance with the policies and timelines set forth in Resolution 9206 (Resolution of the Council of the City of Palo Alto Approving Renaming the Calaveras Reserve to the Electric Special Project Reserve and Adoption of Electric Special Project Reserve Guidelines). These policies and timelines are included from Resolution 9206 below as amended to refer to the reserves structure set forth in these Reserves Management Practices: a) The purpose of the ESP Reserve is to fund projects that benefit electric ratepayers; b) The ESP Reserve funds must be used for projects of significant impact; c) Projects proposed for funding must demonstrate a need and value to electric ratepayers. The projects must have verifiable value and must not be speculative, or high-risk in nature; d) Projects proposed for funding must be substantial in size, requiring funding of at least $1 million; e) The preferred projects to be funded by the ESP Reserve must be identified by end of FY 2015; f) Any uncommitted funds remaining at the end of FY 2020 will be transferred to the Electric Supply Operations Reserve and the ESP Reserve will be closed; and g) Funds may be used for analysis and pilot projects which would be the basis for planned large projects. Section 7. Hydro Stabilization Reserve DRAFT Proposed Amendments to Electric Utility Reserves Management Practices Supply cost savings and surplus energy sales revenue associated with higher than average generation from hydroelectric resources may be added to the Electric Supply Fund’s Hydro Stabilization Reserve by action of the City Council and held to offset higher commodity supply costs during years of lower than average generation. Withdrawal of funds from the Hydro Stabilization Reserve requires action by the City Council. Section 8. Underground Loan Reserve At the end of each fiscal year, the Underground Loan Reserve will be adjusted by the principal payments made against outstanding underground loans. Section 9. Public Benefits Reserve The Public Benefits Reserve will be increased by the amount of unspent Public Benefits Revenues remaining at the end of each fiscal year. Expenditure of these funds requires action by the City Council. Section 10. CIP Reserve The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 6 months of budgeted CIP expense Maximum Level 12 months of budgeted CIP expense b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. c) Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. DRAFT Proposed Amendments to Electric Utility Reserves Management Practices d)Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for a specific future purpose related to the CIP. Funds may be added to the Electric Distribution Fund CIP Reserve by action of the City Council and held for future year expenditure on the Electric Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires City Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 11. Rate Stabilization Reserves Funds may be added to the Electric Supply or Distribution Fund’s Rate Stabilization Reserves by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from either Rate Stabilization Reserve requires action by the City Council. If there are funds in either Rate Stabilization Reserve at the end of any fiscal year, any subsequent Electric Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 12. Operations Reserves The Electric Supply Fund and Electric Distribution Fund Operations Reserves are used to manage normal variations in the costs of providing electric service and as a reserve for contingencies. Any portion of the Electric Utility’s Fund Balance not included in the reserves described in Section 4 to Section 11 above will be included in the appropriate Operations Reserve unless the reserve has reached its maximum level as set forth in Section 12 (e) below. Staff will manage the Operations Reserves according to the following practices: a)The following guideline levels are set forth for the Electric Supply Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Supply Fund O&M and commodity expense Target Level 90 days of Supply Fund O&M and commodity expense Maximum Level 120 days of Supply Fund O&M and commodity expense DRAFT Proposed Amendments to Electric Utility Reserves Management Practices b) The following guideline levels are set forth for the Electric Distribution Fund Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of O&M and commodity expense commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of Distribution Fund O&M Expense Target Level 90 days of Distribution Fund O&M Expense Maximum Level 120 days of Distribution Fund O&M Expense c) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Supply Fund or Distribution Fund’s Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present an alternative plan that takes longer than one year to replenish the reserve. d) Target Level: If, at the end of any fiscal year, either Operations Reserve is higher or lower than the target level, any Financial Plan created for the Electric Utility shall be designed to return both Operations Reserves to their target levels by the end of the forecast period. e) Maximum Level: If, at any time, either Operations Reserve reaches its maximum level, no funds may be added to this Reserve. Any further increase in that fund’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 13, below. Section 13. Unassigned Reserves If the Operations Reserve in either the Electric Supply Fund or the Electric Distribution Fund reaches its maximum level, any further additions to that fund’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in either Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Electric Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2016, and the next Financial Planning Period is FY 2017 through FY 2021, the Financial Plan shall include a plan to return or assign the funds in the Unassigned Reserve by the end of FY 2017. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 14. Intra-Utility Transfers between Supply and Distribution Funds DRAFT Proposed Amendments to Electric Utility Reserves Management Practices Transfers between Electric Distribution Fund Reserves and Electric Supply Fund Reserves are permitted if consistent with the purposes of the two reserves involved in the transfer. Such transfers require action by the City Council. ELECTRIC UTILITY FINANCIAL PLAN FY 2016 TO FY 2023 CONTENTS Section 1: Definitions and Abbreviations................................................................................ 3 Section 2: Introduction .......................................................................................................... 4 Section 3: Executive Summary and Recommendations ........................................................... 4 Section 3A: Overview of Financial Position .................................................................................. 4 Section 3B: Summary of Proposed Actions .................................................................................. 5 Section 4: Detail of FY 2016 Rate and Reserves Proposals ....................................................... 5 Section 4A: Current Rates ............................................................................................................ 5 Section 4B: Reserves Management Practices, Proposed Change ................................................ 6 Section 4C: Proposed Reserve Transfers ...................................................................................... 7 Section 5: Utility Overview .................................................................................................... 8 Section 5A: Electric Utility History ............................................................................................... 8 Section 5B: Customer Base ........................................................................................................ 10 Section 5C: Distribution System ................................................................................................. 10 Section 5D: Cost Structure and Revenue Sources ...................................................................... 10 Section 5E: Reserves Structure ................................................................................................... 11 Section 5F: Competitiveness ...................................................................................................... 13 Section 6: Utility Financial Projections ................................................................................. 14 Section 6A: Load Forecast .......................................................................................................... 14 Section 6B: FY 2009 to FY 2014 Cost and Revenue Trends ........................................................ 16 Section 6C: FY 2014 Results ....................................................................................................... 16 Section 6D: FY 2015 Projections ................................................................................................ 17 ATTACHMENT C ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e Section 6E: FY 2016 – FY 2023 Projections ................................................................................ 18 Section 6F: Risk Assessment and Reserves Adequacy ............................................................... 20 Section 6G: Alternate Scenario .................................................................................................. 23 Section 6H: Long-Term Outlook ................................................................................................. 26 Section 7: Details and Assumptions ..................................................................................... 27 Section 7A: Electricity Purchases ............................................................................................... 27 Section 7B: Operations .............................................................................................................. 29 Section 7C: Capital Improvement Program (CIP) ....................................................................... 30 Section 7D: Debt Service ............................................................................................................ 31 Section 7E: Equity Transfer ........................................................................................................ 32 Section 7F: Wholesale Revenues and Other Revenues .............................................................. 32 Section 7G: Sales Revenues ....................................................................................................... 33 Section 8: Communications Plan .......................................................................................... 33 Appendices ......................................................................................................................... 34 Appendix A: Electric Utility Financial Forecast Detail ................................................................ 36 Appendix B: Electric Utility Capital Improvement Program (CIP) Detail ................................... 40 Appendix C: Electric Utility Reserves Management Practices ................................................... 36 Appendix D: Rate Design ........................................................................................................... 43 Appendix E: Electric Utility Debt Service Details ........................................................................ 44 Appendix F: Description of Electric Utility Operational Activities .............................................. 45 Appendix G: Samples of Recent Electric Utility Outreach Communications .............................. 46 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e SECTION 1: DEFINITIONS AND ABBREVIATIONS CAISO: California Independent System Operator CARB: California Air Resources Board CIP: Capital Improvement Program CPAU: City of Palo Alto Utilities Department CPUC: California Public Utilities Commission CVP: Central Valley Project GWh: a gigawatt-hour, equal to 1,000 MWh or 1,000,000 kWh. Commonly used for discussing total monthly or annual electric load for the entire city, or the monthly or annual output of an electric generator. kWh: a kilowatt-hour, the standard unit of measurement for electricity sales to customers. kW: a kilowatt, a unit of measurement used in reference a customer’s peak demand (the highest 15 minute average consumption level in a month), which is used for billing large and mid-size commercial customers. kV: a kilovolt, one thousand volts, a unit of measurement of the voltage at which a section of the distribution system operates. The transmission system operates at 115-500 kV, and this is lowered to 60 kV in the subtransmission section of the Electric Utility’s distribution section, then 12 kV or 4 kV in the rest of the distribution system, and finally 120, 240, or 480 volts at the electric outlet. MWh: a megawatt-hour, equal to 1,000 kWh. Commonly used for measuring wholesale electricity purchases. MW: a megawatt, equal to 1,000 kW. Commonly used when discussing maximum electricity demand for all customers in aggregate. PG&E: Pacific Gas and Electric REC: Renewable Energy Certificate RPS: Renewable Portfolio Standard Subtransmission System: The section of the Electric Utility’s distribution system that operates at 60 kV and which interfaces with PG&E’s transmission system. Transmission System: Sections of the electric grid that operate at high voltages, generally 115 kV or more. The voltage at the intersection of the Electric Utility’s distribution system and PG&E’s transmission system is 115 kV. The Electric Utility does not own or operate any transmission lines. UCC: Utility Control Center SCADA: Supervisory Control and Data Acquisition system, the system of sensors, communications, and monitoring stations that enables system operators to monitor and operate the system remotely. WAPA, or Western: Western Area Power Administration, the agency that markets power from CVP hydroelectric generators and other hydropower owned by the Bureau of Reclamation. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e SECTION 2: INTRODUCTION This document presents a Financial Plan for the City’s Electric Utility for the next eight years. This Financial Plan describes how revenues will cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. SECTION 3: EXECUTIVE SUMMARY AND RECOMMENDATIONS SECTION 3A: OVERVIEW OF FINANCIAL POSITION The Electric Utility’s costs will increase moderately over the next few years, as shown in Table 1. Most of the increases are related to electric supply costs, which are increasing due to increased transmission costs and the cost of new renewable energy projects coming online. There are also inflationary increases in Operations costs, and some additional capital investment costs. Table 1: Electric Utility Expenses for FY 2014 to FY 2023 Expenses ($000) FY 2014 (actual) FY 2015 (est.) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Elec. Supply Purchases 68,089 80,012 71,971 71,799 73,296 73,033 72,800 74,513 75,850 76,078 Operations 44,761 45,818 46,549 47,187 48,043 48,773 49,690 50,491 51,298 52,955 Capital Projects 13,016 12,711 11,442 13,584 14,771 15,675 16,129 16,596 17,076 17,570 TOTAL 125,867 138,541 129,962 132,570 136,110 137,482 138,619 141,600 144,225 146,603 To cover these increases in costs, revenues (and therefore rates) need to increase over the next several years to balance costs and revenues, as shown in Table 2. No increases are proposed for Fiscal Year (FY) 2016. Table 2: Projected Electric Rate Trajectory for FY 2016 to FY 2023 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 0% 6% 6% 1% 1% 0% 0% 2% This Financial Plan projects that the Rate Stabilization Reserves will be exhausted by the end of FY 2016. Table 3 shows the projected reserve transfers over the forecast period. Funds are projected to be transferred from the Electric Special Projects (ESP) Reserve to the Operations Reserve to fund smart grid projects included in the long term CIP budget. It should be noted that the smart grid costs included in the forecast are placeholders, as are the transfers from the ESP Reserve. Any transfers from the ESP Reserve require Council approval. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e Table 3: Reserves Transfers for FY 2016 to FY 2023 ($000) Reserve FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Electric Special Projects - (333) (333) (1,000) (1,000) (1,000) (1,000) (1,000) Supply Rate Stabilization (9,000) - - - - - - - Supply Operations (9,000) 333 333 1,000 1,000 1,000 1,000 1,000 SECTION 3B: SUMMARY OF PROPOSED ACTIONS Staff proposes the following action for the Electric Utility in FY 2015: 1. Transfer $11 million from the Hydro Stabilization Reserve to the Supply Operations Reserve in FY 2015 to offset costs associated with low hydroelectric generation. See Section 4C (Proposed Reserve Transfers) for more details. Staff proposes the following actions for the Electric Utility in FY 2016: 1. Transfer $9.0 million from the Supply Rate Stabilization Reserve to the Supply Operations Reserve in FY 2016. See Section 4C (Proposed Reserve Transfers) for more details. 2. Take the following measures with respect to the CIP Reserve (see Section 4B (Reserves Management Practices, Proposed Change) for more details): a. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects. b. Transfer all funds released from the Reappropriations Reserve at the beginning of FY 2016 to the CIP Reserve. SECTION 4: DETAIL OF FY 2016 RATE AND RESERVES PROPOSALS SECTION 4A: CURRENT RATES The current rates were adopted on July 1, 2009, when CPAU increased electric rates by 10%. Table 4, below, summarizes the current rates for the four largest customer classes. The Electric Utility also has specialty rates for smaller groups of customers. These include variations on its primary rates, such as time of use rates, the PaloAltoGreen rates, and solar net metering. Another specialty rate is the E-18 municipal electric rate. No changes are proposed to any of the electric rates for FY 2016. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 4: Current Electric Rates (Adopted July 1, 2009) Rate Component Units E-1 (Residential) E-2 (Small Commercial) E-4 (Med. Commercial) E-7 (Large Commercial) Demand (Summer) $/kW N/A N/A 20.54 18.97 Demand (Winter) $/kW N/A N/A 13.84 11.54 Energy (Summer) Tier 1 $/kWh 0.09524 0.14045 0.08171 0.07808 Tier 2 $/kWh 0.13020 N/A N/A N/A Tier 3 $/kWh 0.17399 N/A N/A N/A Energy (Winter) Tier 1 $/kWh Same as summer energy 0.12661 0.07318 0.07209 Tier 2 $/kWh N/A N/A N/A Tier 3 $/kWh N/A N/A N/A Tier amounts: Tier 1 kWh/day 0-10 N/A N/A N/A Tier 2 kWh/day 10-20 N/A N/A N/A Tier 3 kWh/day >20 N/A N/A N/A SECTION 4B: RESERVES MANAGEMENT PRACTICES, PROPOSED CHANGE Staff is proposing one change to the Electric Utility Reserves Management Practices (Appendix C) in this Financial Plan. Staff recommends changing the CIP Reserve definition and management practices so that it becomes a cash flow and contingency reserve for CIP projects. Currently these purposes are served by a combination of the Operations and Reappropriations Reserves, while the CIP Reserve acts as a sinking fund to accumulate funds for large one-time future CIP expenditures (which are rare). The City is changing its budgeting practices starting with FY 2016, and will no longer reappropriate CIP budgets each year. Instead, CIP budgets for long-term or ongoing projects will be renewed each year through the annual budget process. This means that the funds in the Reappropriations Reserve ($8.7 million as of June 30, 2014) will be released after June 30, 2015. These funds acted as a cash flow reserve for CIP projects, and some or all of it should be retained for that purpose. Staff proposes to retain these funds in the CIP reserve, and the proposed changes to the Reserves Management Practices will enable CPAU to do that. Staff proposes to initially set a minimum and maximum guideline for the CIP reserve that will enable it to hold similar amounts to what has typically been held in the Reappropriations Reserve. Staff then intends to review capital reserve management practices at other agencies and revisit these guideline levels. Initially, staff proposes a minimum guideline level of six months of CIP expenditures. CIP-related funds in the Commitments Reserve would be allowed to count toward that guideline. The CIP-related funds in the Commitments Reserve are equal to the total remaining balance of all CIP contracts currently in progress, and these funds should be taken into account when determining whether CIP cash flow and contingency reserves are adequate. The initial maximum guideline level would be twelve months of CIP expenditures, but the maximum guideline could be temporarily exceeded with Council approval. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e Figure 1 shows the Reappropriations Reserve level as of June 30, 2014, as well as the CIP portion of the Reserve for Commitments. The proposed minimum and maximum guidelines over the forecast period are also shown. Figure 1: Capital Reserve SECTION 4C: PROPOSED RESERVE TRANSFERS In the FY 2015 Electric Financial Plan several transfers between reserves were approved. Funds were transferred out of the Emergency Plant Replacement, Supply Rate Stabilization, Distribution Rate Stabilization Reserve, and Central Valley Project Reserves into the newly- created Hydro Stabilization Reserve and Supply and Distribution Operations Reserves. These transfers were mainly related to setting up the new reserves structure that was approved by Council in June 2014. Now, in addition to these previously approved transfers, staff recommends one additional transfer for FY 2015, a transfer of $11 million from the Hydro Stabilization Reserve, leaving it with $17 million remaining at the end of FY 2015. This is to fund additional commodity supply costs resulting from the drought. See Section 6D (FY 2015 Projections) for more information. For FY 2016, staff proposes a $9 million transfer from the Supply Rate Stabilization Reserve to the Supply Operations Reserve. This transfer will enable staff to maintain Supply Operations Reserve levels within guideline levels while completing a cost of service study in anticipation of ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e a 2016 rate increase. This will leave the Supply Rate Stabilization Reserve nearly empty. As mentioned in Section 5E (Reserves Structure), this reserve is intended to be empty unless it contains funds to be used in future years to spread large single-year rate increases across multiple years. In addition, staff is proposing transfers from the Reappropriations Reserve to the CIP Reserve as described in the previous section. The impact of these transfers on reserves levels can be seen in Figure 8 (for Supply Fund Reserves) and Figure 9 (for Distribution Fund Reserves), as well as in Appendix A (Electric Utility Financial Forecast Detail). SECTION 5: UTILITY OVERVIEW This section provides an overview of the utility and its operations. It is intended as general background information to help readers better understand the forecasts in Sections 6 and 7. SECTION 5A: ELECTRIC UTILITY HISTORY On January 16, 1900, Palo Alto began operating its own electric system. One of the earliest sources of Palo Alto's electricity was a steam engine, which was later replaced by a diesel engine in 1914 due to rising fuel oil costs. As the population and the demand for electricity continued to grow, CPAU connected to PG&E’s system in the early 1920s. Power from PG&E proved more economical than the diesel engines, and by the late 1920s CPAU was using its own diesel engines only during peak demand periods. At that time CPAU owned 45 miles of distribution lines and the City used 9.7 GWh annually, less than 1% of today’s annual consumption. The diesel engines remained in operation until 1948, when they were retired. From 1950 to 1970 electric consumption in Palo Alto grew dramatically, just as it did throughout the rest of the country. In 1970 total annual sales were 602 GWh, twenty times the sales in 1950 (30 GWh). Some of that growth was related to a development boom in Palo Alto, which doubled the number of customers. Some was related to the proliferation of electric appliances, as evidenced by the fact that residential customers were using three times more electricity in 1970 than they had been in 1950. But the most notable factor was the growth of industry in Palo Alto during that time. By 1970, commercial customers were using 20 times more electricity per customer than they had been in 1950. These decades also saw several other notable events, including: 1964: CPAU entered into a favorably priced 40-year contract with the Federal Bureau of Reclamation to purchase power from the Central Valley Project (CVP), a contract which later was managed by the Western Area Power Administration (WAPA) an office of the Department of Energy created in the 1970s to market power from various hydroelectric projects operated by the Federal Government, including the CVP. 1965: The City began a long-term program to underground its overhead utility lines (Ordinance 2231). 1968: Palo Alto joined several other small municipal utilities to form the Northern California Power Agency (NCPA), a joint action agency intended to make the group less vulnerable to actions by private utilities and to enable investment in energy supply projects. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e Palo Alto’s first new power plant investment in over 50 years came in the mid-80s. Palo Alto joined other NCPA members to invest in the construction and operation of the Calaveras Hydroelectric Project on the Stanislaus River in the Sierra-Nevada Mountains. The project commenced operation in 1990. The 1980s also saw an increased focus on infrastructure maintenance. In 1987 the UCC was built to house the terminals for a new SCADA system, which enabled utility staff to monitor the distribution system in real time, improving response time to outages. CPAU also commenced a preventative maintenance and planned replacement program for its underground system in the early 1990s. In the early 1990s the CPUC issued a ruling to deregulate the electric industry in California, and in 1996 the State legislature passed Assembly Bill 1890, which, among other things, created the California Independent System Operator (CAISO) to operate the transmission system and the Power Exchange to facilitate wholesale energy transactions. This restructuring was anticipated to bring lower costs to consumers, and while CPAU was not required to participate in the industry restructuring, in 1997 the Council approved a Direct Access Program for the Electric Utility1 that enabled CPAU to sell electricity outside its service territory and allowed customers within CPAU’s service territory to choose other providers. The utility unbundled its electric rates, creating separate supply and distribution components, which would enable customers to receive only distribution service while purchasing the electricity itself from another provider. The energy crisis in 2000 to 2001 led to the suspension of direct access by the CPUC in September 2001 as wholesale energy prices skyrocketed. The Electric Utility was less impacted than other utilities by the 2000 to 2001 energy crisis thanks to the Calaveras project and its contract with WAPA for CVP hydropower. In 2001 CPAU began planning for the impacts associated with the new terms of its contract with WAPA, set to take effect in 2005. The previous contract had provided 90% of Palo Alto’s power supply at favorable rates, and PG&E, as a party to the contract, had provided supplemental power to balance the monthly and annual variability of CVP generation. The new contract would provide only a third of Palo Alto’s requirement, and the monthly and annual variability in CVP generation would be passed directly to Palo Alto. As a result, electric supply costs would increase and CPAU needed to more actively managing its supply portfolio. CPAU began purchasing power from marketers and also investigated building a power plant in Palo Alto or partnering in the development of a gas-fired power plant elsewhere. Climate change was also becoming more of a concern to the community, and gradually CPAU shifted its focus to the procurement of renewable energy. In 2002 CPAU adopted a goal of achieving 20% of its energy supply from renewables by 2015. Subsequently CPAU signed its first contract for renewable power, a contract for energy from a wind generator commencing deliveries in 2005. In 2011 the renewable energy goal was increased to 33% by 2015, and in 2013 the City adopted a plan to make its electric supply 100% carbon neutral, which it achieves through the combination of its hydroelectric supplies, purchases of long-term renewable energy supplies, and short-term renewable energy purchases (RECs) to meet the balance of its needs. 1 Implementation of Direct Access for Electric Utility Customers, CMR:460:97, December 1, 1997 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e Figure 2: Cost Structure (FY 2014) SECTION 5B: CUSTOMER BASE The City of Palo Alto’s Electric Utility provides electric service to the residents, businesses, and other electric customers in Palo Alto. There are roughly 29,300 customers connected to the electric system, 26,400 (90%) of which are residential and 2900 (10%) of which are non- residential. Residential customers consumed 182 gigawatt-hours (GWh) in FY 2014, approximately 19% of the electricity sold, while non-residential customers consumed 81% or 768 GWh. Residential customers use electricity primarily for lighting, refrigeration, electronics, and air conditioning.2 Non-residential customers use the majority of their electricity for cooling, ventilation, lighting, office equipment (offices), cooking (restaurants), and refrigeration (grocery stores).3 Large customer loads represent a larger proportion of sales for the Electric Utility they do for the City’s other utilities. The largest customers (the 66 customers on the E-7 rate schedule) account for over 40% of CPAU’s sales. The next largest customer group (the 740 customers on the E-4 rate schedule) represents another 32% of sales. In total, that means that less than 3% of customers account for nearly three quarters of the electric load. SECTION 5C: DISTRIBUTION SYSTEM The Electric Utility receives electricity at a single connection point with PG&E’s transmission system. From there the electricity is delivered to customers through nearly 470 miles of distribution lines, of which 223 miles (48%) are overhead lines and 245 miles (52%) are underground. The Electric Utility also maintains six substations, roughly 2,000 overhead line transformers, 1,075 underground and substation transformers, and the associated electric services (which connect the distribution lines to the customers’ homes and businesses). These lines, substations, transformers, and services, along with their associated poles, meters, and other associated electric equipment, represent the vast majority of the infrastructure used to deliver electricity in Palo Alto. SECTION 5D: COST STRUCTURE AND REVENUE SOURCES As shown in Figure 2, electric commodity purchases accounted for roughly 52% of the Electric Utility’s costs in FY 2014. Operational costs represented roughly 34%, and capital investment was responsible for the remaining 10%. CPAU’s non-hydro long-term commodity supply is heavily dependent on long term contracts which have little variability in price. On 2 Source: Residential Appliance Saturation Survey, California Energy Commission, 2010 3 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e Figure 4: Revenue Structure (FY 2014) Figure 3: Hydro Variability (FY 2016) 0% 20% 40% 60% 80% 100% 120% 140% Low Hydro Average High Hydro Surplus Hydro (sales) Market Power/RECs Hydro Renewables Load average, these long-term contracts are not predicted to increase as quickly as operations and CIP costs, and will steadily become a smaller proportion of the Electric Utility’s costs. Commodity supply costs are projected to be roughly 47% of total costs in FY 2023. While average year purchase costs for the electric utility are predictable due to its long-term contracts, variability in hydroelectric generation can result in increased or decreased costs. This is by far the largest source of variability the utility faces. Figure 3 shows the difference in costs under high, average, and low hydroelectric generation scenarios. The most recent risk assessment estimates the additional cost associated with a very low generation scenario to be as much as $11 million (see Section 6F (Risk Assessment and Reserves Adequacy). The Electric Utility receives 85% of its revenue from sales of electricity and the remainder from connection fees, interest on reserves, cost recovery transfers from other funds for shared services provided by the electric utility, and other sources. Some revenue sources are primarily accounting entries that reflect things such as CPAU’s participation in a pre-funding program associated with its contract with WAPA, as well as accounting entries associated with occasional sales of surplus hydroelectric energy during wet years. Without these entries sales revenues represent roughly 93% of total revenues. Appendix A (Electric Utility Financial Forecast Detail) shows more detail on the utility’s cost and revenue structures. As discussed in Section 5B (Customer Base), nearly three quarters of the utility’s electricity sales are to the 800 largest customers, which provide a similar share of the utility’s revenue stream. The utility’s retail rate schedules have no fixed charges, although about 25% of the utility’s revenue comes from peak demand charges on large commercial customers. Due to moderate weather and the prevalence of natural gas heating, however, loads (and therefore revenues) are very stable for this utility, without the large seasonal air conditioning or winter heating loads seen at some other utilities. SECTION 5E: RESERVES STRUCTURE CPAU maintains several reserves for its Electric Utility to manage various types of contingencies. It also maintains two funds, the Supply Fund and the Distribution Fund, to ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e manage costs associated with electricity supply and electricity distribution, respectively. This separation of supply and distribution costs was established as the City prepared to allow its customers a choice of electricity providers (referred to as “Direct Access”) back in the late 1990s and early 2000s. Though the 2000/2001 energy crisis halted these plans, CPAU continues to maintain separate funds to facilitate separation of supply and distribution costs in the rates. This could be important in case California ever decides to reintroduce Direct Access, and may also be useful for rate design as the nature of utility services evolves in response to higher penetrations of distributed generation. The various reserves are summarized below, but see Appendix C (Electric Utility Reserves Management Practices) for more detailed definitions and guidelines for reserve management: Reserves for Commitments: Reserves equal to the utility’s outstanding contract liabilities for the current fiscal year. Most City funds, including the General Fund, have a Commitments Reserve. Reserves for Reappropriations: Reserves for funds dedicated to projects reappropriated by the City Council, nearly all of which are capital projects. Most City funds, including the General Fund, have a Reappropriations Reserve. This is currently an important reserve for all utility funds, but changes in budgeting practices will change that in future years, as described in Section 4B (Reserves Management Practices, Proposed Change). Electric Special Projects (ESP) Reserve: This reserve was formerly called the Calaveras Reserve, which was accumulated during deregulation of California’s electric system to fund the stranded costs associated primarily with the Calaveras hydroelectric resource and the California-Oregon Transmission Project. When that reserve was no longer needed for that purpose, the reserve was renamed and the purpose was changed to fund projects with significant impact that provide demonstrable value to electric ratepayers. Hydro Stabilization Reserve: This contingency reserve is used for managing additional costs due to below average hydroelectric generation, or to hold surpluses resulting from above average hydroelectric generation. Underground Loan Reserve: This reserve is an accounting tool used to offset receivables associated with loans made through the underground loan program. It is adjusted according to principal payments made on those loans. Public Benefits Reserve: CPAU’s electric rates include a separate charge called the “Public Benefits Charge” which generates revenue to be used for energy efficiency. Any funds not expended in the current year are added to the Public Benefits Reserve for use in future years. Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to accumulate funds for future expenditure on CIP projects and is anticipated to be empty unless a major one-time CIP expenditure is expected in future years. This Financial Plan proposes adding an additional purpose, making it a cash flow and contingency reserve for the CIP. This would change the way the reserve is managed, as described in Section 4B (Reserves Management Practices, Proposed Change). This type of reserve is used in other utility funds (Electric, Gas, and Wastewater Collection) as well. Supply and Distribution Rate Stabilization Reserves: These reserves are intended to be empty unless one or more large rate increases are anticipated in the forecast period. In ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e that case, funds can be accumulated to spread the impact of those future rate increases across multiple years. This type of reserve is used in other utility funds (Gas, Wastewater Collection, and Water) as well. Supply and Distribution Operations Reserves: These are the primary contingency reserves for the Electric Utility, and are used to manage yearly variances from budget for operational costs and electric supply costs (aside from variances related to hydroelectric generation). This type of reserve is used in other utility funds (Gas, Wastewater Collection, and Water) as well. Unassigned Reserves (Supply/Distribution): As in the other utility funds, these reserves are for any financial resources not assigned to the other reserves and are normally empty. Table 5 shows the projected balance of each of the Electric Utility reserves for the period covered by this Financial Plan. The projected balances are also provided in Appendix A: Electric Utility Financial Forecast Detail). Table 5: End of Fiscal Year Electric Utility Reserve Balances for FY 2015 to FY 2023 Ending Reserve Balance ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Reappropriations 0 0 0 0 0 0 0 0 0 Commitments 3,164 3,164 3,164 3,164 3,164 3,164 3,164 3,164 3,164 Underground Loan 734 734 734 734 734 734 734 734 734 Public Benefits 1,771 1,384 942 401 30 0 0 0 0 Special Projects 51,838 51,838 51,505 51,171 50,171 49,171 48,171 47,171 46,171 Hydro Stabilization 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 17,000 Capital 0 8,715 8,715 8,715 8,715 8,715 8,715 8,715 8,715 Rate Stabilization 9,000 0 0 0 0 0 0 0 0 Operations 29,098 28,148 24,392 24,819 28,324 32,764 34,749 35,087 36,043 Unassigned 0 0 0 0 0 0 0 0 0 TOTAL 112,605 110,982 106,452 106,005 108,139 111,548 112,533 111,872 111,827 SECTION 5F: COMPETITIVENESS For the median consumption level the annual residential electric bill for calendar year 2014 was $513.17 under current CPAU rates, 26% lower than the annual bill for a PG&E customer with the same consumption and 3% lower than the annual bill for a City of Santa Clara customer. The bill calculations for PG&E customers are based on PG&E Climate Zone X, which includes most surrounding comparison communities. Table 6 presents sample median residential bills for Palo Alto, PG&E, and the City of Santa Clara (Silicon Valley Power) for several usage levels. Rates used to calculate the monthly bills shown below were in effect as of January 1, 2015. Over the next several years low usage customers in PG&E territory are expected to see higher percentage rate increases than high usage customers as PG&E compresses its tiers from the highly exaggerated levels that have been in place since the energy crisis. This is likely to make the bill for the median Palo Alto consumer look even ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e more favorable compared to most PG&E customers. Even with the compressed tiers, bills for high usage Palo Alto consumers are likely to remain substantially lower than the bills for high usage PG&E customers. Table 6: Residential Monthly Electric Bill Comparison (Effective 1/1/15, $/mo) Season Usage (kwh) Palo Alto PG&E Santa Clara Winter (December) 300 28.57 48.51 33.49 (Median) 453 48.49 78.64 51.19 650 76.33 132.46 73.99 1200 172.03 315.49 137.63 Summer (July) 300 28.57 48.51 33.49 (Median) 365 37.04 60.46 41.01 650 76.33 138.42 73.99 1200 172.03 321.69 137.63 Table 7 shows the average monthly electric bill for commercial customers for various usage levels. Bills for small commercial customers in Palo Alto are 34% below what they would be in PG&E territory and 21% below what they would be in Santa Clara (Silicon Valley Power). For large commercial customers, rates are about 30% below PG&E’s and are 5% to 10% lower than Santa Clara’s. Table 7: Commercial Monthly Electric Bill Comparison (1/1/15, $/mo) Usage (kwh/mo) Palo Alto PG&E Santa Clara 1,000 134 203 168 160,000 18,364 26,722 19,488 500,000 43,319 64,772 48,565 2,000,000 216,594 304,320 236,295 SECTION 6: UTILITY FINANCIAL PROJECTIONS SECTION 6A: LOAD FORECAST Figure 5 shows a 40-year history of Palo Alto electricity consumption. Average electricity consumption grew from 1986 to 1998, then returned to 1986 levels by 2002. Since then electricity consumption has stayed flat as a result of a continuing focus on energy efficiency, as well as the adoption of more stringent appliance efficiency standards and energy standards in building codes. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e Figure 5: Historical Electricity Consumption Figure 6 shows the forecast of electricity consumption through FY 2023, as well as what electricity consumption would have been without energy efficiency rebates, appliance efficiency standards, stricter building codes, and rooftop photovoltaic (PV) generation. The forecast assumes that current trends continue and sales through the forecast period decline slightly. As of the end of December 2014, net metered PV installations in Palo Alto provided less than 1% of the total electricity consumed in the City. The Council-adopted Local Solar Plan’s goal is to increase the penetration of local PV generation to 4% of the City’s needs by 2023. Figure 6: Forecasted Electricity Consumption ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e SECTION 6B: FY 2009 TO FY 2014 COST AND REVENUE TRENDS The annual expenses for the Electric Utility declined between FY 2009 and FY 2012, as shown in Figure 7 and the tables in Appendix A (Electric Utility Financial Forecast Detail). These decreases were partly related to declines in electricity market prices due to the impact of shale gas and partly due to above average output from hydroelectric resources. These factors are discussed in more detail in Section 7A (Electricity Purchases). Since FY 2012, total expenses for the utility have been increasing as renewable resources come online, though some of the increase is associated with lower than average output from hydroelectric resources. Commodity costs are responsible for most of the changes in the utility’s expenses over the last six years. Operational costs and capital investment increased at or below inflation over that time. Figure 7: Electric Utility Expenses, Revenues, and Rate Changes: Actual Costs through FY 2014 and Projections through FY 2023 SECTION 6C: FY 2014 RESULTS In spring of 2013, staff forecasted a $2.2 million deficit for FY 2014. Results were better than forecasted, a $230,000 deficit, but there were several offsetting variances from the forecast. Low generation from the utility’s hydroelectric resources led to higher market purchase costs, ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e but these were partially offset by savings in renewable energy costs. This was due to the cancelation of two higher cost renewable contracts and a delay in the online date for a third. Sales revenue was $6.5 million lower than projected, but projections had been high due to overestimated load growth due to planned customer expansions. Actual sales volumes for FY 2014 ended up being similar to FY 2013. The unrealized sales revenue would have resulted in a deficit for the year, but it was offset by savings in a variety of areas. These included savings in transmission charges, savings in capital project budgets, and savings in operating budgets. Table 8 summarizes the variances from forecast. Table 8: FY 2014, Actual Results vs. 2013 Forecast Net Cost/(Benefit) Type of change Lower renewable energy costs due to project cancelations and delays (6,093,000) Cost savings Higher market purchase costs due to renewable project cancelations and low hydro 9,669,000 Cost increase Lower than projected transmission charges and higher transmission-related revenues (5,197,000) Cost savings Other commodity purchase cost savings (1,401,000) Cost savings Savings in capital investment budgets due to canceled projects (3,897,000) Cost savings Savings in operating budgets (2,042,000) Cost savings Sales revenue lower than projected 6,483,000 Revenue decrease Other variances, net 448,000 Various Net Cost / (Benefit) of Variances (2,030,000) SECTION 6D: FY 2015 PROJECTIONS In spring of 2014, staff forecasted a $5.8 million deficit for FY 2015. This was to be funded from reserves. Staff’s current forecast is for a deficit of $16.6 million. Most of the $10.8 million difference is associated with lower hydroelectric generation due the drought. The cost for the utility’s hydroelectric resources is mostly fixed, meaning they do not change much regardless of how much energy those resources generate. When they generate less electricity than average, CPAU must purchase additional electricity from marketers to make up the difference. When they generate more electricity than average, CPAU is able to save on its market electricity purchase costs. In FY 2015, the drought has caused much lower hydroelectric generation than average, leading to additional costs as CPAU makes more purchases in the electricity markets. In addition, CPAU and other CVP wholesale electric customers can incur additional costs during a drought under the terms of their contracts with the Federal government. When CVP revenues from water sales decrease, the difference may be collected from electric customers as happened in FY 2015. Table 9 summarizes the changes from last year’s forecast. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e Table 9: FY 2015 Change in Projected Results, 2014 Forecast vs 2015 Forecast Net Cost/(Benefit) Type of change Drought-related cost increases associated with CVP (Western) hydropower contract 2,765,000 Cost increase Drought-related increase in market purchase costs 8,499,000 Cost increase Decrease in projected sales 1,672,000 Revenue decrease Other revenue higher than projected (403,000) Revenue increase Renewables – one-time payment delayed from FY 2014 795,000 Cost increase Transmission cost savings (2,391,000) Cost savings Other variances, net ($137,000) Various Net Cost / (Benefit) of Variances 106,000 SECTION 6E: FY 2016 – FY 2023 PROJECTIONS As shown in Figure 7 above, costs for the Electric Utility are projected to increase through FY 2018, then level off in subsequent years. This is primarily related to electricity purchase costs, which have been increasing starting in FY 2013 and will continue to increase through FY 2018 as new renewable projects come online to fulfill the City’s environmental goals. Operations costs are expected to increase at or below the inflation rate through the forecast period. Capital investment costs are also expected to increase at only an inflationary rate, except for costs associated with installing smart grid technologies. This forecast assumes that smart grid costs are funded from the Electric Special Projects Reserves. Revenues will have to increase 6% in FY 2017 and another 6% in FY 2018 to keep up with these cost increases. Customers who reduce consumption over the forecast period will see their bills increase at a slower rate, and as more customers are added to the utility’s customer base, those customers will share in paying for the utility’s fixed costs. The combination of these factors means that the average residential bill is projected to increase at a slightly slower pace than the rates, assuming some growth in the customer base and decreases in the average amount of electricity each customer uses. Of course, results will differ for each individual customer depending on their energy use patterns. Reserves trends based on these revenue projections are shown in Figure 8 (for Supply Fund reserves) and Figure 9 (for Distribution Fund reserves), below. The Distribution Rate Stabilization Reserve will be empty as of the end of FY 2015. The Supply Rate Stabilization Reserve is projected to be empty by the end of FY 2016. Assuming the projected increases in revenue, the utility’s reserves will remain adequate through the forecast period. Both the Supply and Distribution Operations Reserve, the utility’s main contingency reserves, will remain comfortably above minimum levels and adequate to meet all identified risks, as discussed in Section 6F (Risk Assessment and Reserves Adequacy). With respect to the Hydro Stabilization Reserve, these projections assume average rainfall next winter, although hydro generation is still predicted to be below average since much of next year’s precipitation is expected to refill reservoirs that are low due to the current drought. Staff has also included a forecast in Section 6G (Alternate Scenario) that assumes adverse conditions for hydroelectric generation. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e Figure 8: Electric Utility Reserves (Supply Fund): Actual Reserve Levels through FY 2014 and Projections through FY 2023 Figure 9: Electric Utility Reserves (Distribution Fund): Actual Reserve Levels through FY 2014 and Projections through FY 2023 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e SECTION 6F: RISK ASSESSMENT AND RESERVES ADEQUACY The Electric Utility currently has two contingency reserves, the Supply Operations Reserve and the Distribution Operations Reserve. This Financial Plan maintains reserves in excess of the reserve minimum throughout the forecast period. Reserve levels also exceed the short term risk assessment for the utility. There are a variety of risks associated with the Supply Fund. These risks are shown below in Table 10. Because of the high range of uncertainty in energy price predictions more than three years in the future, this risk assessment is only performed for the first two fiscal years of the forecast period. It is important to note that the likelihood of all of these adverse scenarios occurring simultaneously and to the degree described in Table 10 is very low. Table 10: Electric Supply Fund Risk Assessment Categories of Electric Supply Cost Uncertainties Estimates of Adverse Outcomes (M$) Notes FY 2015 FY 2016 1. Load Net Revenue 0.7 0.5 Revenue loss from load decreases (net of reduction in energy purchases) 2. Production from Hydroelectric Resources: Western & Calaveras 9.1 11.6 Lower than forecasted hydro 3. Renewable Production: Landfill & Wind 0.7 0.4 Additional cost of renewable output that is higher than forecasted 4. Carbon Neutral Cost 0.3 0.3 Higher than forecasted market prices for RECs 5. Market Price (Energy) 0.8 0.6 Higher than forecasted market prices for energy 6. Local Capacity 0.4 0.4 Higher than forecasted market prices for local capacity 7. Transmission/CAISO 3.7 4.6 High-end transmission forecast scenario 8. Plant Outage 1.0 1.0 Uninsured losses from Calaveras plant outage 9. Western Cost 2.7 3.0 Risk of rate adjustments from Western 10. Regulatory and Legal - - Risk of adverse financial impacts from regulatory changes or legal action 11. Supplier Default - - Consequences of project failure and supplier default for below market renewables currently in operation Electric Supply Fund Risks $19.4 million $22.4 million Projected Supply Operations + Hydro Stabilization Reserve Levels $35.4 million $32.9 million Of the risks faced by the Electric Utility’s Supply Fund in FY 2016, the risk of a dry year with very low hydroelectric output is the largest, accounting for nearly half the total cost of all adverse outcomes. Since the utility’s costs for its hydroelectric resources are almost entirely fixed, costs do not decline when the output of those resources are low, but the utility needs to buy power to replace the lost output. The converse happens when hydroelectric output is higher than average. Risks associated with hydroelectric output account for $9.1 million (43%) of FY 2015 contingencies. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e Of the remaining risks for FY 2016, $3.7 million (19%) is related to the projected costs if transmission cost increases are higher than staff’s current forecast. Another $2.7 million (13%) is related to the possibility of drought-related changes to Western rates for CVP hydropower, and $1.5 million (7%) is related to fluctuations in market prices for capacity, energy, and RECs. As shown in Figure 10, the Supply Operations Reserve will stay within the reserve guidelines over the course of the forecast period. In addition, as shown in Figure 11, the combined hydro stabilization and supply operations reserves stay above the risk assessment level. Figure 10: Electric Supply Operations Reserve Adequacy ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e Figure 11: Adequacy of Supply Operations and Hydro Stabilization Reserves, Combined Table 11 summarizes the risk assessment calculation for the Distribution Operations Reserve through FY 2020. As shown in Figure 12, the Distribution Operations Reserve will stay within the reserve guidelines over the course of the forecast period. The risk assessment includes the revenue shortfall that could accrue due to: 1. Lower than forecasted sales revenue; and 2. An increase of 10% of planned system improvement CIP expenditures for the budget year. Table 11: Electric Distribution Fund Risk Assessment ($000) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total non-commodity revenue $41,776 $41,689 $42,397 $45,153 $46,508 Max. revenue variance, previous ten years 8% 8% 8% 8% 8% Risk of revenue loss $3,297 $3,290 $3,346 $3,564 $3,671 CIP Budget $12,711 $11,442 $13,584 $14,771 $15,675 CIP Contingency @10% $1,271 $1,144 $1,358 $1,477 $1,567 Total Risk Assessment value $4,568 $4,434 $4,705 $5,041 $5,238 This Financial Plan includes a proposal to make the CIP Reserve a contingency reserve as well. See Section 4B (Reserves Management Practices, Proposed Change) for more details. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e Figure 12: Electric Distribution Operations Reserve Adequacy SECTION 6G: ALTERNATE SCENARIO Extended drought is the most significant factor that can affect the Electric Utility’s financial position due to the large fraction of hydroelectric generation in its supply portfolio. This section describes the impact of a three-year drought on reserves and rates. Costs are projected to increase by $8 to $12 million per year in a three-year drought, which would result in the need for rate increases throughout the drought followed by a rate decrease at the end of the drought. The Hydro Stabilization Reserve would help, but would not be sufficient in such a scenario. Instead of adjusting the base rates, the City could put a “hydro rate adjuster” into place, which would adjust rates up or down in dry or wet years, respectively. Staff is working to develop such a rate adjuster and plans to discuss such a mechanism with the UAC and Council in FY 2016 with the goal of having a hydro rate adjuster in place by FY 2017. The following discussion assumes that a hydro rate adjuster with a maximum level of 1.3 cents/kWh would be in effect starting in FY 2017 and that FY 2016 through FY 2018 are drought years. As shown in Figure 13, below, the addition of a 0.65 to 1.3 cent per kWh hydro rate adjuster would, when combined with the Hydro Stabilization Reserve, recover adequate revenue to cover costs in a three-year drought. Once the hydro adder reached its maximum level (1.3 cent/kWh), the utility’s revenues would match its costs, a situation which could be sustained through a drought lasting even longer than three years. The hydro adder would likely still be ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e required in subsequent years to replenish the Hydro Stabilization Reserve, as shown in Figure 14, but a year with high precipitation and higher than average hydro generation, as has occurred after prior droughts, could replenish the reserves more quickly. Figure 15 illustrates that the Hydro Stabilization and Operations Reserves could temporarily drop below the risk assessment level in this scenario. But the City also has the ability to implement a mid-year rate change, if necessary to protect the financial health of the utility. Figure 13: Electric Rate Trajectory in a Three Year Drought ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e Figure 14: Electric Supply Reserve Changes in a Three Year Drought Figure 15: Electric Supply Reserve Adequacy during a Three Year Drought ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e SECTION 6H: LONG-TERM OUTLOOK This forecast covers the period from FY 2016 through FY 2023, but various long-term developments may create new costs for the utility over the next 5 to 35 years. While it is challenging to accurately forecast the impact these events will have on the utility’s costs, it is worth noting them as future milestones and keeping them in mind for long-term planning purposes. For the supply portfolio, the 2020s will see a number of notable events. The contract with Western for power from the CVP will expire in 2024. Determining the future relationship with Western after 2024 will be important in the years leading up to the contract expiration, especially because this resource represents nearly 40% of the electric portfolio, and represents the utility’s largest source of carbon-free electricity. The utility’s three earliest and lowest cost renewable contracts will also begin expiring around that time, with the first contract expiring in 2021 and the last in 2028. These three contracts, plus one more expiring in 2030, currently provide 17% to 18% of the energy for the utility’s supply portfolio at prices under $65 per megawatt-hour (MWh). It is difficult to know what renewable energy prices will be when those contracts expire. Although recent prices have been in that range, and costs may decrease in the future, current renewable projects also benefit from a wide range of tax and other incentives that may or may not be available in the 2020s and beyond. Staff is already working on a replacement renewable resource for the contract expiring in 2021. The costs of the Calaveras hydro project will also change in the 2020s, with debt service costs dropping by half in 2025 as some of the debt is paid off, and all debt retired by the end of 2032 (assuming no new debt is issued). The project will only be 40 years old at that time. Calaveras debt service represents roughly 70% of the annual costs of that project (and nearly 7% of the utility’s total costs), so when the debt is retired, the project could be a low-cost asset for the utility, providing carbon-free energy equal to 13% of the Electric Utility’s supply needs in an average year. Another factor that may affect the utility’s supply costs in the long run is carbon allowance revenue. Currently the Electric Utility receives $3 to 5 million per year in revenue from allocated carbon allowances under the State’s cap-and-trade program. It uses that revenue to pay for energy efficiency and to purchase renewable energy to support the utility’s Carbon Neutral Plan. That revenue source is expected to continue through 2020, but there is no provision for the continuation of these allocations past 2020. If the Electric Utility no longer received these allowances, it would have to fund these programs from sales revenues. Transmission costs are also continuing to rise. If the State continues to increase mandates or incentives for renewable energy development, integrating these new projects into the transmission grid will be an ever increasing challenge, some costs of which will be borne by Palo Alto. In addition to the costs of new transmission lines that will need to be built, flexible resources will be required to balance rapid changes in wind or solar output throughout the day. Palo Alto will likely bear some of the costs of these new lines and resources. CPAU is also currently investigating installing a second transmission interconnection for Palo Alto, which could be funded by the Electric Special Projects reserve. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e Over the next several years the Electric Utility will continue to execute its usual monitoring, repair, and replacement routine for the distribution system, but will also begin the rollout of various smart grid technologies. The utility will also start monitoring the growth of electric vehicle ownership and gas-to-electric fuel switching in Palo Alto. In the next 10 to 20 years, these factors may begin to create notable increases in electric consumption and have a variety of impacts on the distribution system. As housing stock is turned over, however, stricter building codes may help to counteract load growth, as may increasing numbers of rooftop solar installations. The utility has already started to take some of these factors into account in its long term planning processes, but will need to continue to incorporate them into its planning methodologies. Looking out toward 2050 and beyond, if the State were to adopt climate goals consistent with Executive Orders S-3-05 and B-16-2012 (with a goal of reducing GHG emissions to 80 percent below 1990 levels by 2050), or if similar local goals were adopted, it is conceivable that electricity could replace natural gas and petroleum almost entirely. Many, if not most, vehicles would use electricity, though hydrogen is another potential fuel source under development and other technologies might be developed. Initial analysis of these types of scenarios is being undertaken in the context of the Sustainability and Climate Action Plan (S/CAP) development process. These types of scenarios require careful planning for the associated load growth to make sure the distribution system did not end up overloaded, or conversely, to avoid overinvestment. SECTION 7: DETAILS AND ASSUMPTIONS SECTION 7A: ELECTRICITY PURCHASES As shown in Figure 16 the utility gets roughly 50% of its energy from hydroelectric projects in a normal year (FY 2014 has been dry). Contracts with renewable sources made up just over 20% of the portfolio in FY 2014, and are projected to rise to roughly 50% by FY 2017. The remainder comes from unspecified market sources. Under the City’s Carbon Neutral Plan, CPAU purchases RECs corresponding to the amount of market energy it purchases. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e Figure 16: Electricity Supply by Source Figure 17 shows the historical and projected costs for the electric supply portfolio,4 as well as average and actual hydroelectric generation.5 Electric supply costs decreased in FY 2010 and FY 2011 due to decreases in market prices related to shale gas. In addition, FY 2009 was a dry year with low hydroelectric production, so FY 2010 and FY 2011 looked better by comparison. Costs increased in FY 2013, FY 2014, and FY 2015 due to the drought, which reduced the amount of generation the utility received from its hydroelectric resources. Costs are projected to decrease slightly in FY 2016 if hydroelectric generation returns to normal, but will increase in subsequent years due to increases in renewable energy costs as various renewable projects come online to fulfill the City’s carbon neutral and RPS goals. Transmission charges are also projected to increase as new transmission lines are built throughout California to accommodate new renewable projects. In total, electric supply costs are projected to increase $7.5 million from FY 2014 levels by FY 2018, at which point all currently contracted renewable projects will be online. Costs are only projected to increase slightly in subsequent years. 4 Costs are shown net of wholesale revenues, and cannot be directly compared with the electric supply purchase figures shown in Appendix A (Electric Utility Financial Forecast Detail). 5 Average hydroelectric generation increased in January of 2015 due to an increase in the utility’s contractual share of the output of the CVP Federal hydropower project. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 29 | P a g e Figure 17: Electric Supply Portfolio Costs, Historical and Projected SECTION 7B: OPERATIONS CPAU’s Electric Utility operations include the following activities: Administration, including financial management of charges allocated to the Electric Utility for administrative services provided by the General Fund and for Utilities Department administration, as well as debt service and other transfers. Additional detail on Electric Utility debt service is provided in Section 7D (Debt Service) Customer Service Engineering work for maintenance activities (as opposed to capital activities) Operations and Maintenance of the distribution system; and Resource Management Appendix F (Description of Electric Utility Operational Activities) includes detailed descriptions of the work associated with each of these activities. From FY 2009 to FY 2014, Operations costs increased by $2.7 million, or roughly 1% per year on average. Excluding debt service and transfers, which stay relatively stable over time, costs increased roughly 3% per year over that time. In FY 2015 costs continued that trend, and these trends are projected to continue over the forecast period. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 30 | P a g e Figure 18: Historical and Projected Electric Utility Operational Costs SECTION 7C: CAPITAL IMPROVEMENT PROGRAM (CIP) The Electric Utility’s CIP is shown in Table 12, and consists of the following programs and budgets: System Capacity and Reliability: CPAU monitors the distribution system and identifies sections that need upgrades to increase reliability or to provide additional capacity to deliver power. This category includes activities such as upgrading and replacing transformers, replacing distribution lines to increase capacity, improving system protection schemes (fuses, switches, etc.), and upgrading substation equipment. Smart Grid and Advanced Metering: This project includes the cost of future upgrades to the distribution system and metering infrastructure to take advantage of advances in automation, sensing, and metering technologies. CPAU is currently operating pilot programs to determine the scope of the upgrades. 4/12 kilovolt (kV) Conversion: The distribution system currently has some sections that operate at 4 kV and some at 12 kV. CPAU is converting the 4 kV sections of the system to enable them to connect to the rest of the system more effectively, providing greater reliability. Operating the system at 12 kV also lowers energy losses. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 31 | P a g e Undergrounding: This category includes projects to move sections of the overhead system underground. These projects are generally funded in part by phone and cable companies, whose systems are undergrounded at the same time. Underground System Rebuilding: Underground sections of the distribution system require periodic replacement due to the wear on the system associated with exposure to soil and water. Software and Equipment: This category includes the costs of upgrades to the software, communications, and remote monitoring equipment used to monitor the system and plan upgrades. It includes the cost of upgrades to the SCADA system. Customer Connections: This represents the cost of installing new services or upgrades to existing services at a customer’s request in response to development or redevelopment. Because the Electric Utility charges a fee to these customers to cover the cost, these are considered to be “customer-funded” projects. One-time Projects: This category represents occasional large projects that do not fall into any other category. Excluding smart grid projects, CIP spending is expected to increase by 3% to 4% per year through the forecast period. Smart grid upgrades, particularly in later years, are projected to cost substantial amounts of money, but CPAU does not have precise cost estimates yet. This forecast assumes that smart grid projects are financed from the Electric Special Projects Reserve and with additional funding from the water and gas funds, but it would also be possible to use bond financing. Excluding smart grid updates, the CIP plan for FY 2016 to FY 2020 is primarily funded by utility rates, but other sources of funds include connection fees (for Customer Connections), phone and cable companies (primarily for undergrounding), and other funds (for smart grid). The details of the plan are shown in Appendix B (Electric Utility Capital Improvement Program (CIP) Detail). Table 12: Budgeted Electric Utility CIP Spending SECTION 7D: DEBT SERVICE The Electric Utility’s annual debt service is $100,000 per year. This is related to the 2007 Electric Utility Clean Renewable Energy Tax Credit Bonds, Series A, which will require payments through 2021. This $1.5 million issuance was to fund a portion of the construction costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive Center, and Cubberley Community Center. The total capacity of these projects was 250 kilowatt (kW). Project Category Current Budget* Spending, Curr. Yr Remain. Budget Committed FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 One-Time Projects 1,409 (314) 1,096 383 125 1,275 1,000 3,100 3,750 System Expansion 67 - 67 - - - - - - Reliability 1,143 (9) 1,134 180 25 1,250 750 - - Undergrounding 2,716 (57) 2,659 1,403 500 50 2,150 2,250 500 4/12 Kv Conversion 943 (353) 590 40 - 120 450 400 - Underground Rebuilding 4,242 (941) 3,301 542 1,050 1,100 800 400 850 Ongoing Projects 6,885 (1,625) 5,260 1,556 3,620 3,480 3,120 2,825 2,840 Customer Connections (Fee Funded)3,622 (730) 2,891 817 3,000 3,108 3,220 3,336 3,456 TOTAL 21,028 (4,029) 16,999 4,920 8,320 10,383 11,490 12,311 11,396 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 32 | P a g e The City is in compliance with all covenants on the bond. Additional detail is provided in Appendix E (Electric Utility Debt Service Details). SECTION 7E: EQUITY TRANSFER The City calculates the equity transfer from its Electric Utility based on a rate of return on the net book value of the utility’s capital assets6. The Council adopted this methodology in 2009 and it has remained unchanged since. Each year it is calculated according to the 2009 Council- adopted methodology, and does not require additional Council action. SECTION 7F: WHOLESALE REVENUES AND OTHER REVENUES The Electric Utility receives most of its revenues from sales of electricity, but about 15% comes from other sources. Of these other sources, roughly 30% represent wholesale “revenues” that are included solely for accounting purposes. These revenues have offsetting electric supply purchase costs, and do not normally affect the utility’s net position. Of the remaining revenues, the largest revenue sources are interest on reserves, connection fees for new or replacement electric services, and carbon allowance revenues associated with the State’s cap-and-trade program. In FY 2014 these sources represented roughly 40% of revenue from sources other than electricity sales. The remaining FY 2014 revenues consisted of a variety of one-time transfers. Revenues from connection fees have more than doubled since FY 2009. Revenue from these sources decreased slightly during the recession, but has increased substantially since then, peaking in FY 2014. Staff is forecasting slightly lower revenue from this source in subsequent years, but plans to review these fees as part of the electric cost of service study to see if they are recovering the appropriate amount of revenue. Carbon allowance revenues are projected to stay stable through the forecast period, as is interest income. However, both of these revenue sources are subject to some uncertainty. The State’s cap-and-trade program regulations only describe the program through 2020. This forecast assumes the program will remain in place with similar program design following 2020, but that may not be the case. CARB is in the process of establishing post-2020 rules. The forecast for interest income assumes current interest rates continue and there are no major reserve reductions aside from what is anticipated in this Financial Plan. If interest rates rise, interest income could increase, and if reserves decreased (due to drought or a withdrawal from the ESP reserve for a major project), interest income would decrease. 6 For more detail on the ordinance adopting the 2009 transfer methodology, see CMR 280:09, Budget Adoption Ordinance for Fiscal Years 2009 and 2010; and CMR 260:09, Finance Committee Report explaining proposed changes to equity transfer methodology. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 33 | P a g e SECTION 7G: SALES REVENUES Sales revenue projections are based on the load forecast in Section 6A (Load Forecast) and the projected rate changes shown in Figure 7. As discussed in Section 6A, sales revenues for this utility stay relatively stable due to the mild climate in Palo Alto. In addition, Palo Alto is a built out City, with incremental growth in population and relatively stable commercial customer loads. SECTION 8: COMMUNICATIONS PLAN The FY 2016 Electric Utility communications strategy covers four primary areas: efficiency, renewables, operations, infrastructure, safety and rates. CPAU has not had an electric rate increase since 2009 and does not expect one in the upcoming year, so there is no need for formal “rate change” communications at this time, but website and community education about rates is ongoing. CPAU has been and will continue to communicate about the March 2013 decision to only purchase carbon-neutral electric supplies, which includes apprising the public of major renewable energy purchase agreements. Electric use efficiency incentives are promoted year-round. Promotional methods include community outreach events, print ads in local publications, utility bill inserts, messaging on the bills and envelopes, website pages, email blasts, videos for the web and local Comcast channels, Home Energy Reports and the use of social media. To keep customers apprised of the status and accomplishments of capital improvement projects, a network of project web pages are maintained. Traffic is driven to the website via print and digital ads, social media and email blasts. Safety topics are emphasized year-round. CPAU will engage in several new campaigns and programs in FY 2016 to promote electric utility efficiency and renewables generation. The Georgetown University Energy Prize competition is a friendly, national campaign to encourage communities to reduce energy use. Energy savings from reduced electric and gas consumption qualify to help Palo Alto compete for a $5 million prize at the end of a two-year campaign. The Local Solar Plan includes three components for community solar options. Other new programs include home efficiency services and online tools to help customers manage their energy use. CPAU will continue to promote safety, infrastructure, operations, efficiency and rate adjustment messages through a variety of marketing and media channels. Staff talks with business customers at special facilities meetings, attends neighborhood safety and emergency preparedness fairs and offers presentations to school and community groups. A team of Electric Operations Technicians is available to provide educational demonstrations on electric utility safety to school groups, which the CPAU Communications team will support. While print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, social media, online videos and cable TV. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 34 | P a g e APPENDICES Appendix A: Electric Utility Financial Forecast Detail Appendix B: Electric Utility Capital Improvement Program (CIP) Detail Appendix C: Electric Utility Reserves Management Practices Appendix D: Rate Design Appendix E: Electric Utility Debt Service Details Appendix F: Description of Electric Utility Operational Activities Appendix G: Samples of Recent Electric Utility Outreach Communications ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 35 | P a g e J u n e 1 6 , 2 0 1 4 36 | P a g e APPENDIX A: ELECTRIC UTILITY FINANCIAL FORECAST DETAIL J u n e 1 6 , 2 0 1 4 37 | P a g e J u n e 1 6 , 2 0 1 4 38 | P a g e 1 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 2 3 ELECTRIC LOAD 4 Purchases (MWh)1,040,851 1,019,788 978,833 969,519 976,319 980,894 979,005 977,292 993,844 997,125 998,260 997,531 997,596 999,464 986,864 5 Sales (MWh)995,811 965,048 946,518 942,562 946,841 950,784 948,656 946,996 963,035 966,215 967,314 966,608 966,670 968,481 956,271 6 7 BILL AND RATE CHANGES 8 System Average Rate ($/kWh)0.1048$ 0.1155$ 0.1168$ 0.1156$ 0.1154$ 0.1164$ 0.1158$ 0.1158$ 0.1231$ 0.1307$ 0.1317$ 0.1336$ 0.1336$ 0.1336$ 0.1381$ 9 Change in System Average Rate 10%1%-1%0%1%0%0%6%6%1%1%0%0%3% 10 Change in Average Residential Bill 11%-5%-1%-4%-1%4%-1%4%6%1%1%0%0%2% 11 12 STARTING RESERVES 13 Reappropriations (Non-CIP)- - 2,760,000 343,000 1,886,000 305,000 - - - - - - - - - 14 Commitments (Non-CIP)2,241,000 1,916,000 1,463,000 1,593,000 2,737,000 3,528,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 15 Restricted for Debt Service - - - - - - - - - - - - - - - 16 Emergency Plant Replacement 3,057,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - - - - - 17 Central Valley Project Reserve 22,000 153,000 306,000 305,000 314,000 313,000 329,000 - - - - - - - - 18 Underground Loan Reserve 709,000 717,000 731,000 736,000 742,000 738,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 19 Public Benefits Reserves 2,109,000 4,280,000 3,750,000 3,139,000 1,149,000 2,197,000 2,064,000 1,770,570 1,383,579 942,269 401,037 30,329 - - - 20 Electric Special Projects Reserve 70,397,000 64,535,000 59,865,000 55,558,000 50,320,000 51,838,000 51,838,000 51,838,000 51,838,000 51,504,667 51,171,333 50,171,333 49,171,333 48,171,333 47,171,333 21 Hydro Stabilization Reserve - - - - - - - 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 22 Capital Reserves - - - - - - - - 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 23 Rate Stabilization Reserves 55,418,000 47,783,000 54,339,000 66,331,000 74,609,000 69,029,000 70,049,000 9,000,000 - - - - - - - 24 Operations Reserves - - - - - - - 29,098,101 28,147,709 24,392,071 24,819,428 28,324,454 32,764,040 34,748,754 35,087,237 25 Unassigned - - - - - - - - - (0) (0) - - - - 26 TOTAL STARTING RESERVES 133,953,000 120,384,000 124,214,000 129,005,000 132,757,000 128,948,000 129,178,000 112,604,671 110,982,289 106,452,006 106,004,797 108,139,116 111,548,373 112,533,087 111,871,570 27 28 REVENUES 29 Net Sales 105,312,712 113,129,269 111,948,267 109,309,318 109,974,337 110,301,711 109,858,447 109,644,507 118,519,206 126,244,211 127,381,868 129,182,750 129,191,140 129,433,106 132,015,572 30 Wholesale Revenues 10,618,388 7,903,940 8,443,016 7,189,218 6,635,790 6,010,409 8,361,193 9,762,754 16,127,681 17,899,396 18,193,077 18,520,428 18,457,947 17,183,269 17,608,371 31 Other Revenues and Transfers In 11,744,330 8,458,392 6,374,799 7,027,230 9,624,213 13,669,185 10,826,729 9,842,016 10,552,506 10,520,182 12,135,863 12,522,226 12,868,793 13,211,063 13,569,255 32 TOTAL REVENUES 127,675,429 129,491,602 126,766,082 123,525,766 126,234,340 129,981,305 129,046,369 129,249,277 145,199,394 154,663,790 157,710,808 160,225,405 160,517,880 159,827,438 163,193,198 33 34 EXPENSES 35 Electric Supply Purchases 82,348,075 68,714,475 61,247,248 58,724,136 61,313,637 68,785,977 81,704,930 76,259,040 84,697,114 87,985,432 87,652,519 87,403,918 88,750,130 88,323,133 88,823,060 36 Operating Expenses 37 Administration 38 Allocated Charges 3,585,068 2,667,704 2,807,991 3,416,423 4,399,674 4,139,837 3,809,450 3,904,868 4,002,906 4,103,416 4,206,436 4,312,048 4,420,046 4,530,589 4,643,908 39 Rent 3,428,294 3,963,377 3,721,542 3,839,201 3,875,836 4,051,044 4,225,064 4,351,816 4,482,370 4,616,842 4,755,347 4,898,007 5,044,947 5,196,296 5,352,185 40 Debt Service 8,185,819 7,919,136 7,343,352 8,902,751 9,265,736 9,020,651 9,128,150 9,139,768 8,953,886 8,955,164 8,808,619 8,818,349 8,783,507 8,792,388 9,624,493 41 Transfers and Other Adjustments 13,282,668 10,860,269 13,056,927 11,603,695 16,797,054 11,385,421 11,534,855 11,537,926 11,541,075 11,544,301 11,547,609 11,550,999 11,554,474 11,558,036 11,561,687 42 Subtotal, Administration 28,481,848 25,410,486 26,929,812 27,762,069 34,338,299 28,596,953 28,697,519 28,934,378 28,980,237 29,219,723 29,318,011 29,579,403 29,802,974 30,077,308 31,182,273 43 Resource Management 2,062,511 3,033,428 2,380,313 2,654,024 3,024,268 3,541,524 2,518,045 2,592,974 2,685,421 2,781,884 2,880,881 2,983,786 3,071,974 3,151,655 3,234,248 44 Demand Side Management 3,336,356 4,048,114 3,490,676 4,541,531 3,529,529 3,187,875 5,385,750 5,336,417 4,261,592 4,311,342 3,475,786 3,593,030 3,696,217 3,791,455 3,889,977 45 Operations and Mtc 8,975,462 8,892,002 9,339,340 9,288,490 9,601,481 9,488,627 11,307,989 11,631,635 12,016,747 12,417,061 12,827,544 13,252,906 13,630,189 13,980,676 14,343,027 46 Engineering (Operating)879,303 1,094,766 1,070,441 1,057,783 1,114,945 1,102,008 1,341,265 1,375,940 1,412,963 1,451,051 1,490,079 1,530,192 1,569,695 1,609,201 1,649,779 47 Customer Service 1,650,731 1,896,956 1,881,881 1,908,493 2,007,322 2,032,231 2,266,899 2,336,447 2,424,578 2,516,809 2,611,542 2,710,258 2,792,758 2,865,705 2,941,475 48 Allowance for Unspent Budget - - - - - - (313,702) (322,541) (332,900) (343,661) (354,701) (366,136) (376,419) (386,069) (396,037) 49 Subtotal, Operating Expenses 45,386,213 44,375,751 45,092,464 47,212,389 53,615,844 47,949,218 51,203,766 51,885,250 51,448,638 52,354,209 52,249,141 53,283,439 54,187,389 55,089,932 56,844,741 50 Capital Program Contribution 13,510,141 12,571,376 15,635,370 13,837,241 15,113,859 13,016,111 12,711,002 11,442,369 13,583,924 14,771,357 15,674,828 16,128,791 16,595,646 17,075,890 17,570,114 51 TOTAL EXPENSES 141,244,429 125,661,602 121,975,082 119,773,766 130,043,340 129,751,305 145,619,698 139,586,659 149,729,676 155,110,998 155,576,489 156,816,148 159,533,166 160,488,955 163,237,914 52 53 ENDING RESERVES 54 Reappropriations (Non-CIP)- 2,760,000 343,000 1,886,000 305,000 - - - - - - - - - - 55 Commitments (Non-CIP)1,916,000 1,463,000 1,593,000 2,737,000 3,528,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 3,164,000 56 Restricted for Debt Service - - - - - - - - - - - - - - - 57 Emergency Plant Replacement 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - - - - - - 58 Central Valley Project Reserve 153,000 306,000 305,000 314,000 313,000 329,000 - - - - - - - - - 59 Underground Loan Reserve 717,000 731,000 736,000 742,000 738,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 734,000 60 Public Benefits Reserves 4,280,000 3,750,000 3,139,000 1,149,000 2,197,000 2,064,000 1,770,570 1,383,579 942,269 401,037 30,329 - - - - 61 Electric Special Projects Reserve 64,535,000 59,865,000 55,558,000 50,320,000 51,838,000 51,838,000 51,838,000 51,838,000 51,504,667 51,171,333 50,171,333 49,171,333 48,171,333 47,171,333 46,171,333 62 Hydro Stabilization Reserve - - - - - - 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 17,000,000 58 Capital Reserve - - - - - - - 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 8,715,000 59 Rate Stabilization Reserve 47,783,000 54,339,000 66,331,000 74,609,000 69,029,000 70,049,000 9,000,000 - - - - - - - - 60 Operations Reserve - - - - - - 29,098,101 28,147,709 24,392,071 24,819,428 28,324,454 32,764,040 34,748,754 35,087,237 36,042,521 61 Unassigned - - - - - - - - (0) (0) - - - - - 62 TOTAL ENDING RESERVES 120,384,000 124,214,000 129,005,000 132,757,000 128,948,000 129,178,000 112,604,671 110,982,289 106,452,006 106,004,797 108,139,116 111,548,373 112,533,087 111,871,570 111,826,854 J u n e 1 6 , 2 0 1 4 39 | P a g e 1 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 2 3 REVENUES 4 Net Sales 82%87%88%88%87%85%85%85%82%82%81%81%80%81%81% 5 Other Revenues and Transfers In 18%13%12%12%13%15%15%15%18%18%19%19%20%19%19% 6 TOTAL REVENUES 100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% 7 8 EXPENSES 9 Commodity Purchases 56%54%46%46%46%52%55%52%48%47%47%46%47%47%47% 10 Operating Expenses 11 Administration 12 Allocated Charges 3%2%2%3%3%3%3%3%3%3%3%3%3%3%3% 13 Rent 2%3%3%3%3%3%3%3%3%3%3%3%3%3%3% 14 Debt Service 6%6%6%7%7%7%6%7%6%6%6%6%6%5%6% 15 Transfers and Other Adjustments 9%9%11%10%13%9%8%8%8%7%7%7%7%7%7% 16 Subtotal, Administration 20%20%22%23%26%22%20%21%19%19%19%19%19%19%19% 17 Resource Management 1%2%2%2%2%3%2%2%2%2%2%2%2%2%2% 18 Operations and Mtc 6%7%8%8%7%7%8%8%8%8%8%8%9%9%9% 19 Engineering (Operating)1%1%1%1%1%1%1%1%1%1%1%1%1%1%1% 20 Customer Service 1%2%2%2%2%2%2%2%2%2%2%2%2%2%2% 21 Allowance for Unspent Budget 0%0%0%0%0%0%0%0%0%0%0%0%0%0%0% 22 Subtotal, Operating Expenses 30%32%34%36%39%34%31%33%32%31%31%32%32%32%32% 23 Capital Program Contribution 10%10%13%12%12%10%9%8%9%10%10%10%10%11%11% 24 TOTAL EXPENSES 95%96%93%94%96%97%95%93%89%88%88%88%89%90%90% 25 26 RISK ASSESSMENT DETAIL (SUPPLY FUND) 27 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 28 1. Load Net Revenue 77,428 652,853 481,940 29 2. Hydro Production: Western & Calaveras 9,314,822 9,050,313 11,647,628 30 3. Renewable Production: Landfill & Wind & Solar 375,755 743,945 384,259 31 4. Carbon Neutral Cost 331,630 303,022 333,730 32 5. Market Price 909,196 775,584 574,924 33 6. Local Capacity 475,962 408,388 392,159 34 7. Transmission/CAISO 4,555,915 3,741,647 4,554,812 35 8. Plant Outage 1,000,000 1,000,000 1,000,000 36 9. Western Cost 3,130,000 2,704,738 3,011,315 37 10. Regulatory & Legal - - - 38 11. Supplier Default - - - 39 TOTAL 20,170,708 19,380,490 22,380,767 40 Supply Operations + Hydro Stabilization Reserves, % of Risk Assessment 229%233%185% 41 42 RISK ASSESSMENT DETAIL (DISTRIBUTION FUND) 43 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 44 Distribution Revenue Variance 3,297,180 3,290,258 3,346,192 3,580,425 3,669,936 3,816,734 3,816,981 3,824,131 3,938,855 45 10% CIP Program Contingency 1,271,100 1,144,237 1,358,392 1,477,136 1,567,483 1,612,879 1,659,565 1,707,589 1,757,011 46 Total Risk Asssessment Value 4,568,280 4,434,494 4,704,584 5,057,561 5,237,419 5,429,613 5,476,546 5,531,720 5,695,866 47 Projected Operations Reserve 29,098,101 28,147,709 24,392,071 24,819,428 28,324,454 32,764,040 34,748,754 35,087,237 36,042,521 48 Operations Reserve, % of Risk Value 637%635%518%491%541%603%635%634%633% 49 44 SUPPLY OPERATIONS RESERVE 45 Min (60 days of non-capital expenses)- - - - - - 7,496,015 7,665,425 7,682,906 7,891,487 7,959,709 8,190,870 8,411,799 8,628,401 8,834,955 46 Target (90 days of non-capital expenses)- - - - - - 9,721,021 9,936,953 9,923,896 10,196,495 10,257,551 10,561,974 10,850,141 11,130,830 11,395,334 47 Max (120 days of non-capital expenses)- - - - - - 11,946,027 12,208,481 12,164,887 12,501,504 12,555,393 12,933,077 13,288,484 13,633,260 13,955,714 48 49 DISTRIBUTION OPERATIONS RESERVE 50 Min (60 days of non-capital expenses)- - - - - - 22,997,867 22,290,538 23,683,885 24,453,306 24,463,321 24,676,558 25,132,327 25,298,341 25,759,036 51 Target (90 days of non-capital expenses)- - - - - - 32,973,799 31,874,623 33,925,365 35,039,224 35,012,969 35,290,505 35,930,934 36,135,741 36,781,456 52 Max (120 days of non-capital expenses)- - - - - - 42,949,731 41,458,708 44,166,846 45,625,143 45,562,617 45,904,452 46,729,540 46,973,140 47,803,877 53 Risk Assessment Value 4,568,280 4,434,494 4,704,584 5,057,561 5,237,419 5,429,613 5,476,546 5,531,720 5,695,866 54 55 DEBT SERVICE COVERAGE RATIO 56 Net Revenues (125% of Debt Service)1460%1328%1348%1090%1140%1194%1356%1302%1421%1467%1488%1495%1527%1531%1414% 57 Available Reserves (5x Debt Service)*14.5 15.2 17.3 14.4 13.5 14.0 12.0 11.8 11.5 11.5 11.9 12.3 12.5 12.4 11.3 58 *For the purposes of debt covenants, the unrestricted reserves of other utilities may be counted toward the available reserves for meeting this measure. A ratio below 5x means that this utility is relying on the reserves of other utilities to meet its debt covenants. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 40 | P a g e APPENDIX B: ELECTRIC UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserves Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 ONE-TIME PROJECTS EL-06001 230 kV Electric Intertie 63,515 50,000 - (40,986) 72,529 56,233 - - - - - EL-06003 Utility Control Center Upgrades - 75,000 - - 75,000 - - - - - - EL-10009 Street Light Sys Conversion Project 296,270 - - (219,544) 76,726 237,378 - - - - - EL-11014 Smart Grid Technology Installation 719,676 - - (45,325) 674,351 84,493 - 1,000,000 1,000,000 3,000,000 3,000,000 EL-10008 Advanced Metering Infrastructure 56,188 - - (7,887) 48,301 4,500 - - - - - EL-11016 Elec. Vehicle Charging Infrastructure - - - - - - - - - - - EL-13002 Quarry/Hopkins Substation 60kV Line - - - - - - - - - 100,000 750,000 EL-13008 Upgrade Electric Estimating System 148,650 - - - 148,650 - - - - - - EL-xxxxx Substation Security - - - - - - 50,000 - - - - EL-xxxxx Capacitor Bank Installation - - - - - - 75,000 275,000 - - - Subtotal, One-time Projects 1,284,299 125,000 - (313,742) 1,095,557 382,604 125,000 1,275,000 1,000,000 3,100,000 3,750,000 SYSTEM EXPANSION EL-11015 Reconductor 60kV Overhead Sys 67,090 - - - 67,090 - - - - - - EL-13005 Colorado 20/21-Xfrmr Replacement - - - - - - - - - - - Subtotal, System Expansion 67,090 - - - 67,090 - - - - - - RELIABILITY EL-12002 Hanover 22 - Xfrmr Replacement 6,680 - - - 6,680 - - - - - - EL-13004 Hansen Way/Hanover 12kV Ties - - - - - - - - - - - EL-13006 Sand Hill / Quarry 12 kV Tie 236,276 - - (3,084) 233,192 - - - - - - EL-14005 Reconfigure Quarry Feeders 49,951 400,000 - (5,429) 444,522 - - 500,000 - - - EL-15000 Colorado/Hopkins Sys. Improvement - 50,000 - - 50,000 - 25,000 750,000 750,000 - - EL-15001 Substation Battery Replacement - 400,000 - - 400,000 180,000 - - - - - Subtotal, Reliability 292,907 850,000 - (8,513) 1,134,394 180,000 25,000 1,250,000 750,000 - - UNDERGROUNDING EL-06002 UG District 45 134,271 - - - 134,271 - - - - - EL-08001 UG District 42 - - - - - - - 50,000 2,000,000 250,000 - EL-11009 UG District 43 - - - - - - - - 150,000 2,000,000 500,000 EL-11010 UG District 47 1,693,807 400,000 - (54,995) 2,038,812 1,402,500 300,000 - - - - EL-12001 UG District 46 88,346 400,000 - (2,459) 485,887 - 200,000 - - - - Subtotal, Undergrounding 1,916,424 800,000 - (57,454) 2,658,970 1,402,500 500,000 50,000 2,150,000 2,250,000 500,000 4/12 KV CONVERSION EL-08000 E. Charleston 4/12kV 413,586 - - (311,226) 102,360 40,216 - - - - - EL-09002 Middlefield/Colorado 4/12 kV - - - - - - - - - - - EL-09004 W. Charleston/Wilkie Way 4/12 kV 85,483 - - (701) 84,782 - - - - - - EL-12003 Hopkins Substation Rebuild - - - - - - - - - - - EL-13000 Edgewood/Wildwood 4/12 kV Tie - - - - - - - - 50,000 400,000 - EL-14000 Coleridge/Cowper/Tennyson 4/12 kV - - - - - - - 120,000 400,000 - - EL-14004 Maybell 1&2 4/12 kV Conversion 444,127 - - (41,082) 403,045 - - - - - - Subtotal, 4/12 kV Conversion 943,196 - - (353,009) 590,187 40,216 - 120,000 450,000 400,000 - ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 41 | P a g e Appendix B: Electric Utility Capital Improvement Program (CIP) Detail (Continued) Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserves Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 UNDERGROUND REBUILDING EL-04010 Foothills System Rebuild 82,129 - - - 82,129 - - - - - - EL-05000 El Camino Underground Rebuild 257,179 - - (57,389) 199,790 - - - - - - EL-09000 Middlefield Underground Rebuild 157,928 250,000 - - 407,928 - - - - - - EL-09003 Rebuild UG Dist 17 (Downtown)82,585 - - - 82,585 - - - - - - EL-10006 Rebuild UG Dist 24 741,587 850,000 - (194,771) 1,396,816 26,374 - - - - - EL-11001 Torreva Court Rebuild 7,195 - - - 7,195 - - - - - - EL-11003 Rebuild UG Dist 15 456,427 - - (1,487) 454,940 - - - - - - EL-11004 Hewlett Subdivision Rebuild 60,634 - - - 60,634 - - - - - - EL-11006 Rebuild UG Dist 18 442,955 75,000 - - 517,955 475,000 - - - - - EL-11007 Rebuild Greenhouse Condo Area 333,590 - - (267,236) 66,354 23,522 - - - - - EL-11008 Rebuild UG Dist 19 101,473 - - (2,602) 98,871 - - - - - - EL-12000 Rebuild UG Dist 12 343,219 - - (417,063) (73,844) 17,546 - - - - - EL-13003 Rebuild UG Dist 16 - - - - - - - 300,000 - - - EL-14002 Rebuild UG Dist 20 - - - - - - - 500,000 500,000 - - EL-16000 Rebuild UG Dist 26 - - - - - - 750,000 - - - - EL-xxxxx Revuild UG Dist 25 - - - - - - - - - 50,000 500,000 EL-xxxxx Underground System Rebuilding - - - - - - 300,000 300,000 300,000 350,000 350,000 Subtotal, Underground Rebuilding 3,066,901 1,175,000 - (940,548) 3,301,353 542,442 1,050,000 1,100,000 800,000 400,000 850,000 ONGOING PROJECTS EL-04012 Utility Site Security 55,274 250,000 - (27,428) 277,846 12,661 250,000 - - - - EL-13007 Underground Dist. System Security 299,172 - - (7,853) 291,319 - - 300,000 300,000 - - EL-02011 Electric Utility GIS 193,565 165,000 - (32,895) 325,670 52,168 165,000 165,000 165,000 165,000 165,000 EL-02010 SCADA System Upgrade 101,529 60,000 - (64,201) 97,328 10,965 65,000 270,000 60,000 65,000 65,000 EL-89031 Communications System 76,136 100,000 - (5,261) 170,875 - 100,000 100,000 100,000 100,000 100,000 EL-89038 Substation Protection Improvements 121,869 280,000 - (93,755) 308,114 230,060 450,000 450,000 300,000 300,000 310,000 EL-89044 Substation Facility Improvements 86,641 185,000 - (121,720) 149,921 20,000 190,000 195,000 195,000 195,000 200,000 EL-98003 Electric System Improvements 2,461,142 2,450,000 - (1,272,245) 3,638,897 1,229,852 2,400,000 2,000,000 2,000,000 2,000,000 2,000,000 Subtotal, Ongoing 3,395,329 3,490,000 - (1,625,358) 5,259,971 1,555,706 3,620,000 3,480,000 3,120,000 2,825,000 2,840,000 CUSTOMER CONNECTIONS (FEE FUNDED) EL-89028 Electric Customer Connections 321,745 3,300,000 - (730,274) 2,891,471 816,824 3,000,000 3,108,000 3,219,888 3,335,804 3,455,893 Subtotal, Customer Connections 321,745 3,300,000 - (730,274) 2,891,471 816,824 3,000,000 3,108,000 3,219,888 3,335,804 3,455,893 GRAND TOTAL 11,287,891 9,740,000 - (4,028,898) 16,998,993 4,920,292 8,320,000 10,383,000 11,489,888 12,310,804 11,395,893 Funding Sources Connection Fees 1,500,000 - 1,550,000 1,600,000 1,650,000 1,700,000 - Other Companies (Phone/CATV Co.)370,000 - 230,000 190,000 900,000 960,000 - Other Utility Funds (Smart Grid)- - - 666,667 666,667 2,000,000 2,000,000 Utility Rates 7,870,000 - 6,540,000 7,926,333 8,273,221 7,650,804 9,395,893 CIP-RELATED RESERVES DETAIL 6/30/2014 (Actual)12/31/2014 Reappropriations 8,714,891 12,078,701 Commitments 2,573,000 4,920,292 ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 42 | P a g e APPENDIX C: ELECTRIC UTILITY RESERVES MANAGEMENT PRACTICES (Amendments to this section are proposed. See the proposed adopting resolution for this Financial Plan. This section will be added to the Financial Plan following adoption of any amendments to this section.) ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 43 | P a g e APPENDIX D: RATE DESIGN The Electric Utility’s current rate structure and methodology are consistent with the cost of service analysis (COSA) update in 2007 by Boris Metrics. Staff plans to review and update this cost of service study in 2015. Before conducting this new cost of service study, staff will review current rates and the scope of the study with the UAC and Council to determine UAC and Council policy priorities. There are a variety of rate-related topics currently being discussed by investor- and publicly-owned utilities across California, including the pros and cons of tiered rate structures, the impact of customer-owned generation (like net-metered solar) on rates and revenues, and rate design for electric vehicles. With the Electric Utility’s carbon neutral electric supply, some customers may be interested in gas-to-electric fuel switching, and the impact of rate design on this decision also bears some discussion. ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 44 | P a g e APPENDIX E: ELECTRIC UTILITY DEBT SERVICE DETAILS The Electric Utility currently makes payment on one bond issuance, the 2007 Electric Utility Clean Renewable Energy Tax Credit Bonds, Series A. This $1.5 million bond issuance was to fund a portion of the construction costs of solar demonstration projects at the Municipal Services Center, Baylands Interpretive Center, and Cubberley Community Center. The capacity of these projects totaled 250 kW. In exchange for funding part of the construction costs Electric Utility receives the RECs from these projects. The bonds were Clean Renewable Energy Bonds (CREBs), meaning they are interest free (the investors receive a tax credit from the federal government). This bond issuance is secured by the net revenues of the Electric Utility. Debt service for this bond continues through 2021, and for the financial forecast period is as follows: Table 13: Electric Utility Debt Service ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 2007 Clean Renewable Energy Bonds 100 100 100 100 100 100 100 - The 2007 bonds include a covenant stating that the Electric Utility will maintain a debt coverage ratio of 125% of debt service. The current Financial Plan maintains compliance with these covenants throughout the forecast period, as shown in Appendix A (Electric Utility Financial Forecast Detail). The Electric Utility’s reserves and net revenue are also pledged as security for the bond issuances listed in Table 14, even though the Electric Utility is not responsible for the debt service payments. The Electric Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. Table 14: Other Issuances Secured by Electric Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Electric Utility’s: Net Revenues Reserves 1995 Utility Revenue Bonds, Series A Storm Drain $680 Yes No 1999 Utility Revenue Bonds, Series A Storm Drain Wastewater Collection Wastewater Treatment $1,207 No Yes 2009 Water Revenue Bonds (Build America Bonds) Water $1,977* No Yes 2011 Utility Revenue Refunding Bonds, Series A Gas Water $1,457 No Yes *Net of Federal interest subsidy ELECTRIC UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 45 | P a g e APPENDIX F: DESCRIPTION OF ELECTRIC UTILITY OPERATIONAL ACTIVITIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Electric Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their electric services. Resource Management: This category includes supply portfolio management, energy procurement, rate setting, and tracking of legislation and regulation related to the electric industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including: monitoring the substations and performing routine maintenance; performing preventative maintenance on the system; monitoring the system’s status from the UCC using SCADA; maintaining the SCADA system; investigating outages and other customer complaints and performing emergency repairs; clearing vegetation near overhead power lines; and testing and replacing meters to ensure accurate sales metering. Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services, Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering energy efficiency programs and the direct cost of rebates paid. Includes solar rebates. Engineering (Operating): The Electric Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. APPENDIX G: SAMPLES OF RECENT ELECTRIC UTILITY OUTREACH COMMUNICATIONS EXCERPTED DRAFT MINUTES OF THE APRIL 1, 2015 UTILITIES ADVISORY COMMISSION MEETING ITEM: 5: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the Fiscal year 2016 Electric Financial Plan, Including no Recommended Rate Changes for July 1, 2015, and Amending the Electric Utility Reserve Management Practices Senior Resource Planner Jon Abendschein summarized the Electric Financial Plan. No rate increase was proposed for July 1, 2016. He noted that staff was working on an Electric Cost of Service Analysis (COSA) prior to a rate change effective in July 1, 2016. Abendschein noted that the forecast assumed that the drought would end in the winter of 2016/2017. He then presented a three year drought scenario in which the drought continued until the winter of 2017/2018. He showed that electricity costs increased due to an increase in market power purchase costs as staff purchased more electricity as a result of the low hydroelectric generation. These increased costs could be covered with larger than expected rate increases, or with a rate adjustment mechanism that would be put in place to cover the increased costs due to the droughts. Costs (and rates) would have to be 10% to 12% higher during an extended drought. Reserves would be drawn down significantly, but not enough to present a danger to the utility’s financial position. Commissioner Eglash noted that it was appropriate to draw down reserves in the event of a major contingency like an extended drought. He asked if the cost of maintaining a carbon neutral supply portfolio would increase in a drought. Abendschein stated that the increased cost of buying Renewable Energy Credits to match increased market purchases was small and much lower than the limit of 0.15 cents/kWh. Assistant Director Jane Ratchye added that the City’s future cost of Renewable Energy Credits purchased to achieve carbon neutrality would be lower than it is currently due to new solar contracts coming online. Even in this drought, the cost was much lower than the carbon neutral spending limit. Commissioner Hall recommended that the chart showing the Supply Fund reserves not show the Electric Special Projects reserve. He said it makes it look like that reserve was available for operational spending. ATTACHMENT D Abendschein said he would take that comment under consideration, but explained that the presentation was intended to show all available unrestricted reserves to present a complete picture of the utility’s financial position. ACTION: Commissioner Cook made a motion to approve staff’s recommendation that the UAC recommend that the City Council adopt a resolution approving the FY 2016 Electric Financial Plan, including no rate changes for July 1, 2015, and amending the Electric Utility Reserve Management Practices. Commissioner Eglash seconded the motion. The motion carried unanimously (6-0 with Commissioners Cook, Eglash, Hall, Melton, Foster, and Waldfogel voting yes and Commissioner Chang absent). City of Palo Alto (ID # 5682) Finance Committee Staff Report Report Type: Action Items Meeting Date: 4/22/2015 City of Palo Alto Page 1 Summary Title: Gas Financial Plan Title: Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Approving the Fiscal Year 2016 Gas Financial Plan, Including no Rate Changes for July 1, 2015, and Amending the Gas Utility Reserve Management Practices From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that Council adopt a resolution (Attachment A) amending the Gas Utility Reserve Management Practices (Attachment B) and approving the fiscal year (FY) 2016 Gas Financial Plan (Attachment C). Executive Summary The FY 2016 Gas Utility Financial Plan includes projections of the utility’s costs and revenues through FY 2022. Costs are projected to rise moderately for the next several years due primarily to Capital Improvement Program (CIP) increases and costs related to transporting gas on PG&E’s pipelines. As reserves are adequate, staff proposes no rate increase for FY 2016, but the Financial Plan includes a projected rate increase of 7% for FY 2017 and 3% to 4% annual increases after FY 2017, to adequately recover the costs of providing gas service. Staff also recommends changes to the Gas Utility Reserves Management Practices to accommodate a change in City budgeting practices for CIP projects. Background Every year staff presents the Council with Financial Plans for its Electric, Gas, Water, and Wastewater Collection Utilities and recommends any rate adjustments required to maintain their financial health. These Financial Plans include a comprehensive overview of the utility’s operations, both retrospective and prospective, and are intended to be a reference for UAC and Council members as they review the budget and staff’s rate recommendations. ATTACHMENT F City of Palo Alto Page 2 Each Financial Plan also contains a set of Reserves Management Practices describing the reserves for each utility and the management practices for those reserves. Staff may propose amendments to these reserves as part of the Financial Plans. The UAC reviewed preliminary long-term financial forecasts for the Electric, Gas, Water, and Wastewater Collection Utilities at its February 4, 2015 meeting. The Finance Committee reviewed the preliminary long-term financial forecasts at its March 3, 2015 meeting. The UAC reviewed the FY 2016 Gas Financial Plan at its April 1, 2015 meeting and voted unanimously to approve Staff’s recommendation. Draft minutes of the UAC meeting are in Attachment D to this report. Discussion Proposed Actions for FY 2016 This year’s Gas Utility Financial Plan proposes the following actions for FY 2016: 1. No proposed rate changes for July 1, 2015; 2. Transfer $3.4 million from the Rate Stabilization Reserve to the Operations Reserve. See Section 3C of Attachment C for more details; and 3. Amend the CIP Reserve to accommodate a change in City capital budgeting practices. These amendments are summarized below, but for a more in-depth description of the reasons for these changes, see Section 3B of the Financial Plan: a. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects; and b. Transfer the funds that are projected to be released from the Re-appropriations Reserve at the end of FY 2015 to the CIP Reserve. This proposal is described in more detail in the FY 2016 Gas Financial Plan (Attachment C). Projected Rate Adjustments over the Financial Planning Period Table 1 shows the projected rate adjustments included in the Gas Utility Financial Plan and their impact on the median residential gas bill. Table 1: Projected Gas Rate Adjustments and Residential Bill Impact, FY 2016 to FY 2022 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Gas Utility 0% 7% 4% 4% 4% 4% 3% Estimated Bill Impact for Residential Customers ($/mo)* - $2.60 $1.77 $1.89 $2.01 $1.30 $1.24 * Bill impacts are presented holding commodity prices static, as these are a pass-through cost and change monthly based on market conditions. Median bills based on 18 therms in summer (April-October) and 54 therms winter (November-March). City of Palo Alto Page 3 Table 2 shows the proposed and projected rate adjustments in the context of the other proposed and projected utility rates. Table 2: Rate Adjustments for All Utilities, FY 2016 Proposed, FY 2017 to FY 2020 Projected FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Electric Utility 0% 6% 6% 1% 1% Gas Utility1 0% 7% 4% 4% 4% Wastewater 9% 9% 9% 9% 6% Water Utility 12% 8% 8% 8% 3% Refuse2 9% 9% 8% 2% to 3% 2% to 3% Storm Drain3 2.7% 2% to 3% 2% to 3% 2% to 3% 2% to 3% Total Bill Change4 (%) 6% 8% 7% 5% 3% ($/mo) $14.73 $18.91 $18.53 $14.39 $9.55 (1) Gas rate changes are shown with commodity rates held constant. Actual gas commodity rates will vary monthly with wholesale market fluctuations (2) No forecast available past FY 2018, inflationary increases assumed. (3) Storm Drain Rates increase annually by CPI; existing rates sunset in June 2017 unless reauthorized by a majority vote of property owners. (4) Change in estimated median residential bill, $230.76 as of June 30, 2014 Staff’s annual assessment of the financial position of the City’s utilities is completed to ensure adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system and other factors that could affect utility costs, and projecting rates that are adequate to recover these costs. The current rates are also based on the methodology from the April 2012 Gas Utility Cost of Service Study completed by Utility Financial Solutions (Staff Report 2812). Staff reviews this study annually and plans to update the cost of service analysis over the next two to three years. The main drivers for the increase in the Gas Utility’s costs (and therefore rates) over the next several years include: The cost for transmission on the PG&E system, which is projected to nearly double in FY 2016 and increase by roughly 3% thereafter; and Operating and CIP costs, which are projected to rise by roughly 2% to 4% annually. There is uncertainty related to CIP costs for the Gas Utility in coming years. Gas main replacement costs have risen substantially in recent years, and it is possible higher CIP expenditures will be required in the future. The FY 2016 Gas Financial Plan includes rate projections for a “High CIP Cost” scenario. Staff plans to complete an updated gas system master plan later in 2015 and expects better information about future main replacement costs when that plan to update the assessment of the system’s condition is completed. City of Palo Alto Page 4 Commission Review The UAC reviewed the attached Financial Plan and Reserves Management Practices at its April 1, 2015 meeting. In addition, Staff provided the February 2015 preliminary forecast changes of 3% in FY 2016 and 4% in FY 2017 as a possible alternative. Staff noted that reserves were adequate enough to delay an FY 2016 increase. In addition, PG&E’s Gas Transmission and Storage rate case would likely be resolved in FY 2016 and gas transmission costs to Palo Alto better determined. Finally, as rates for water and wastewater will be increasing, a delay would mitigate bill impacts to customers in the short term. The UAC noted the merits of both rate trajectories, but seeing no apparent need for an FY 2016 increase at this time, unanimously approved Staff’s proposal as outlined in the Financial Plan. Timeline After receiving the Finance Committee’s recommendation, the City Council will consider adoption of the FY 2016 Gas Financial Plan with the FY 2016 budget. Resource Impact Because no rate changes are proposed for FY 2016, there are no projected resource impacts associated with the FY 2016 Gas Financial Plan. Policy Implications The attached FY 2016 Gas Financial Plan includes amended Reserve Management Practices that will modify Council policy with respect to the structure of the financial reserves of the Gas Utility. These Reserve Management Practices replace the current Reserve Management Practices, which were last adopted by Council in June 2014 (Resolution 9423). Environmental Review The Finance Committee’s review and recommendation to Council on the FY 2016 Gas Financial Plan does not meet the California Environmental Quality Act’s definition of a project, pursuant to Public Resources Code Section 21065, thus no environmental review is required. Attachments: Attachment A: Resolution Approving the FY 2016 Gas Financial Plan (PDF) Attachment B: Proposed Amendments to the Gas Utility Reserves Management Practices (PDF) Attachment C: Proposed FY 2016 Gas Utility Financial Plan (PDF) Attachment D: Excerpted Draft UAC Minutes of April 1, 2015 (PDF) Attachment A * NOT YET APPROVED * 150319 sdl 6053275 Resolution No. _________ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Gas Utility Financial Plan and Amending the Gas Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made a part of the Financial Plans. C. The City intends to make changes to its Gas Utility Reserves Management Practices to amend the purpose and management practices of the Gas Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. The Council hereby approves the FY 2016 Gas Utility Financial Plan, including the amended Gas Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Gas Utility as part of the FY 2015 Gas Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $3.4 million in FY 2015 from the Rate Stabilization Reserve to the Operations Reserve, and the transfer of all funds released in FY 2015 from the Reappropriations Reserve to the CIP Reserve, as described in the FY 2016 Gas Utility Financial Plan approved via this resolution. / / // Attachment A * NOT YET APPROVED * 150319 sdl 6053275 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Proposed Amendments to Gas Utility Reserves Management Practices APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Gas Utility Financial Plan: Section 1. Definitions a)“Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b)“Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c)“Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d)“Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Supply Fund Reserves The Gas Utility’s Supply Fund Balance is reserved for the following purposes: a)For existing contracts, as described in Section 4 (Reserve for Commitments) b)For operating and capital budgets re-appropriated from previous years, as described in Section 5 (Reserve for Re-appropriations) Section 3. Distribution Fund Reserves a)For existing contracts, as described in Section 4 (Reserve for Commitments) b)For operating and capital budgets re-appropriated from previous years, as described in Section 5 (Reserve for Re-appropriations) c)For future year expenditure on the Gas Utility’s cash flow management and contingencies related to the Gas Utility’s Capital Improvement Program (CIP), as described in Section 6 (CIP Reserve) d)For rate stabilization, as described in Section 7 (Rate Stabilization Reserve) e)For operating contingencies, as described in Section 8 (Operations Reserve) f)Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 9 (Unassigned Reserves) Section 4. Reserve for Commitments At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Wastewater Collection Utility at that time. ATTACHMENT B Proposed Amendments to Gas Utility Reserves Management Practices Section 5. Reserve for Reappropriations At the end of each fiscal year the Gas Supply Fund and Gas Distribution Fund Reserve for Reappropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets, if any, that will be re-appropriated to the following fiscal year for each fund in accordance with Palo Alto Municipal Code Section 2.28.090. Section 6. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Gas Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 12 months of budgeted CIP expense Maximum Level 24 months of budgeted CIP expense b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments [BA1]as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. c) Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. a)d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek City Council approval Proposed Amendments to Gas Utility Reserves Management Practices to approve holding funds in this reserve in excess of the maximum level, if they are held for a specific future purpose related to the CIP. Section 7. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Gas Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 8. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Gas Utility’s Fund Balance not included in the reserves described in Section 4-Section 7 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 8 d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 90 days of O&M and commodity expense Maximum Level 120 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Gas Utility shall be designed to return the Operations Reserve to its target level by the end of the forecast period. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Gas Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 9, below. Proposed Amendments to Gas Utility Reserves Management Practices Section 9. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Gas Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Gas Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. Section 10. Intra-Utility Transfers Between Supply and Distribution Funds The Gas Utility records costs in two separate funds: the Gas Supply Fund and the Gas Distribution Fund. At the end of each fiscal year staff is authorized to transfer an amount equal to the difference between Gas Supply Fund costs and Gas Supply Fund Revenues from the Gas Distribution Fund Operations Reserve to the Gas Supply Fund, or vice versa. Such transfers shall be included in the ordinance closing the budget for the fiscal year. GAS UTILITY FINANCIAL PLAN FY 2016 TO FY 2022 TABLE OF CONTENTS Section 1: Definitions and Abbreviations................................................................................ 3 Section 2: Executive Summary and Recommendations ........................................................... 4 Section 2A: Executive Summary ................................................................................................... 4 Section 2B: Summary of Proposed Actions .................................................................................. 5 Section 3: Rate and Reserve Proposals ................................................................................... 5 Section 3A: Current and Proposed Rates ..................................................................................... 5 Section 3B. Reserves Management Practices, Proposed Change ................................................ 6 Section 3C. Proposed Reserve Transfers ...................................................................................... 7 Section 4: Current State of the Utility..................................................................................... 7 Section 4A. Utility Overview ........................................................................................................ 7 Section 4B. Current Rates and Competitiveness .......................................................................... 8 Section 4C. Current Utility Financial Status ................................................................................. 9 Section 4D. Status of Reserves ................................................................................................... 10 Section 4E. Debt Service ............................................................................................................. 11 Section 5. Looking Back ....................................................................................................... 11 Section 5A. Background ............................................................................................................. 11 Section 5B. Historical Gas Commodity Prices ........................................................................... 13 Section 5C. Historical Expenses and Revenues ......................................................................... 13 Section 6. Looking Forward .................................................................................................. 14 Section 6A. Seven Year Financial Forecast ................................................................................ 14 1.Overview ...................................................................................................................... 14 2.Commodity Supply Costs.............................................................................................. 15 3.Operations .................................................................................................................... 16 ATTACHMENT C GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e 4. Capital Improvement Program (CIP) ............................................................................ 17 5. Equity Transfer ............................................................................................................. 18 Section 6B. Revenue Requirement and Sources ........................................................................ 18 Section 6C. Risk Assessment and Reserve Adequacy ................................................................ 20 Section 6D. Alternate Scenarios ................................................................................................ 21 Section 6E. Historical and Projected Consumption ................................................................... 22 Section 6F. Long Term Outlook ................................................................................................. 23 Section 6G. Communications Plan ............................................................................................ 24 Appendices ......................................................................................................................... 26 Appendix A: Gas Utility Financial Forecast Detail ..................................................................... 27 Appendix B: Gas Utility Capital Improvement Program (CIP) Detail ......................................... 28 Appendix C: Gas Utility Reserves Management Practices ......................................................... 30 Appendix D: Gas Utility Debt Service Details ............................................................................. 31 Appendix E: Description of Gas Utility Cost Categories ............................................................. 33 Appendix F: Gas Utility Communications Samples .................................................................... 34 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e SECTION 1: DEFINITIONS AND ABBREVIATIONS ABS: Acrylonitirile butydene styrene, a plastic gas main material CARB: California Air Resources Board CIP: Capital Improvement Program CNG: Compressed Natural Gas CPAU: City of Palo Alto Utilities Department CPUC: California Public Utilities Commission Cross-bore: A cross-bore exists when one utility line has been drilled or “bored” through a portion of another line. Gas cross-bores can occur in sewer lines as a result of “horizontal boring” construction practices. Distribution: transportation of gas to customers. GMR Program: Gas Main Replacement Program Local Transportation: transportation of gas to Palo Alto across PG&E’s distribution system from PG&E City Gate. Malin: a delivery hub referred to in gas purchase contracts and located in Malin, Oregon, where the northern end of PG&E’s Redwood Transmission Pipeline is located. MMBtu: Millions of British thermal units, a unit of gas measurement equal to ten therms. Commonly used for high volume gas measurement. Wholesale purchases of gas from suppliers are typically measured in MMBtu. PE or HDPE: Polyethylene, a gas main material (more specifically, High-Density Polyethylene) PG&E: Pacific Gas and Electric PG&E City Gate, or City Gate: a delivery hub referred to in gas purchase contracts. Any gas delivered to PG&E’s distribution system (such as gas delivered at the southern end of PG&E’s Redwood Transmission Pipeline) is said to have been delivered at PG&E City Gate. PVC: Polyvinyl chloride, a plastic gas main material Therms: The standard unit of measurement for natural gas sales to customers, equal to 100,000 British thermal units. Therms measure the heating value of the gas, rather than its volume. Transmission: transportation of gas between major gas delivery hubs via a gas transmission pipeline, such as PG&E’s Redwood pipeline. UAC: Utilities Advisory Commission, an appointed body that advises the City Council on CPAU issues. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e SECTION 2: EXECUTIVE SUMMARY AND RECOMMENDATIONS SECTION 2A: EXECUTIVE SUMMARY This document presents a financial plan for the City of Palo Alto’s (CPAU’s) Gas Utility for the next seven years. The plan provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next seven fiscal years staff projects that the Gas Utility will see non-commodity costs rising at roughly 3 to 4% per year. In the short term, some of these costs are related to the cross-bore inspection program, as well as cap-and-trade allowance purchase costs. In addition, capital improvement program (CIP) costs have increased as the economy has improved, and CPAU is also planning for new gas main replacement projects after completing a large multi- year gas main replacement project. The Gas Utility expenses over the period of this financial plan are shown in Table 1 below. Table 1: Gas Utility Expenses for FY 2014 to FY 2022 Expenses ($000) FY 2014 (actual) FY 2015 (est.) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Commodity costs 14,325 12,438 13,429 14,962 16,294 16,999 17,364 17,680 18,127 Operations 17,869 19,479 21,581 22,486 23,297 23,285 24,386 25,359 26,313 Capital Projects 240 2341 5673 5214 5402 5550 5728 5728 5728 TOTAL 32,435 34,258 40,683 42,661 45,093 45,933 47,477 48,767 50,168 To ensure that revenues cover these rising costs, the financial plan includes the rate trajectory shown in Table 2. There is no planned rate increase for FY 2016, a result that is made possible due to accumulated rate stabilization reserves, which resulted when new gas main replacement projects were not added in FY 2014 and FY 2015 in order to complete a multi-year project to replace the last of the ABS plastic mains in Palo Alto. A 7% increase is projected for FY 2017, followed by 3% and 4% increases for FY 2018 through FY 2022. A 7% increase in FY 2017 would be equivalent to $2.60 per month for the median residential customer’s monthly gas bill, based on commodity prices as of February 2015. Table 2: Projected Gas Rate Trajectory for FY 2015 to FY 2022 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 0% 7% 4% 4% 4% 3% 3% This financial plan includes an updated to the Gas Utility Reserves Management Practices, amending the purpose of the CIP Reserve, as described below. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e SECTION 2B: SUMMARY OF PROPOSED ACTIONS Staff proposes the following actions for the Gas Utility in FY 2016: 1. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve, enabling it to act as a cash flow contingency reserve for capital investment projects as outlined in Section 3B. 2. Transfer all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, as outlined in Section 3B. 3. Transfer $3.4 million from the Rate Stabilization Reserve to the Operations Reserve. See Section 3C for more details. SECTION 3: RATE AND RESERVE PROPOSALS SECTION 3A: CURRENT AND PROPOSED RATES On July 1, 2012 CPAU restructured its rates so that the commodity component varied monthly to match changes in gas market prices1. In addition, monthly service charges were increased to recover the cost providing gas service to customers. In January 2015 the PaloAltoGreen Gas program was launched, which allowed customers to reduce or eliminate the greenhouse gas (GHG) emissions associated with their gas usage for an additional charge. The voluntary program is backed by high quality environmental offsets that CPAU will purchase on behalf of participants.2 Also in January 2015, the Council adopted a new rate component to collect the costs of purchasing allowances for the purpose of compliance with the State’s cap-and-trade program3. This component will change depending on the cost of allowances and gas demand. In addition, two bill components (Local transportation and Administration) were collapsed into the Distribution rate to streamline bill presentation. Table 3, below, summarizes the current rates for all customer classes. 1 Staff Report 2812, 5/17/2012: http://archive.cityofpaloalto.org/civica/filebank/blobdload.asp?BlobID=31395 2 Staff Report 4596, 4/21/2014: https://www.cityofpaloalto.org/civicax/filebank/documents/39983 3 Staff Report 5397, 1/26/2015: https://www.cityofpaloalto.org/civicax/filebank/documents/45537 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 3: Current Gas Rates Rate Component Units G-1 (Residential) G-2 (Small Commercial) G-3 (Large Commercial) G-10 (CNG) Last Changed Service Charge $/month 9.88 74.86 361.18 50.65 7/1/2012 Distribution (Tier 1) $/therm 0.4392 0.6147 0.6071 0.0509 2/1/2015 Distribution (Tier 2) $/therm 0.9546 N/A N/A N/A 2/1/2015 PaloAltoGreen Gas (optional) $/therm additional $0.12 $0.12 $0.12 $0.12 7/1/2014 (new rate) Commodity $/therm 0.3281 (Feb. 2015) 0.3281 (Feb. 2015) 0.3281 (Feb. 2015) 0.3281 (Feb. 2015) (varies monthly)4 Tier 1 amount (for G-1, residential customers): Winter Therms/day 2 N/A N/A N/A 7/1/2012 Summer Therms/day 0.667 N/A N/A N/A 7/1/2012 The Gas Utility’s current rates are based on the methodology from the April 2012 Gas Utility Cost of Service Study completed by Utility Financial Solutions.5 Staff tentatively plans to review this cost of service study in two to three years unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. Before any such update, staff will review current rates and the scope of the study with the UAC and Council to determine UAC and Council policy priorities. SECTION 3B. RESERVES MANAGEMENT PRACTICES, PROPOSED CHANGE Staff proposes one change to the Gas Utility Reserves Management Practices (Appendix C) in this Financial Plan. Staff recommends changing the CIP Reserve definition and management practices so that it becomes a cash flow and contingency reserve for CIP projects. Currently these purposes are served by a combination of the Operations and Reappropriations Reserves, while the CIP Reserve acts as a sinking fund to accumulate funds for large one-time future CIP expenditures (which are rare). The City is changing its budgeting practices starting with FY 2016, and will no longer reappropriate CIP budgets each year. Instead, CIP budgets for long-term or ongoing projects will be renewed each year through the annual budget process. This means that the funds in the Reappropriations Reserve ($1.5 million as of June 30, 2014) will be released after June 30, 2015. These funds acted as a cash flow reserve for CIP projects, and some or all of it should be retained for that purpose. Staff proposes to retain these funds in the CIP reserve, and the proposed changes to the Reserves Management Practices will enable CPAU to do that. Staff proposes to initially set a minimum and maximum guideline for the CIP reserve that will enable it to hold similar amounts to what has typically been held within the Reappropriations Reserve. Staff intends to review the capital management practices at other agencies and revisit these guideline levels, but initially, staff proposes a minimum guideline level of 12 to 24 months of CIP expenditure. CIP-related funds in the Commitments Reserve would be allowed to count toward that guideline. The CIP-related funds in the Commitments Reserve are equal to the total 4 For historic commodity rates, see: http://www.cityofpaloalto.org/civicax/filebank/documents/30399 5 Staff Report ID#2812, 5/17/ 2012 http://archive.cityofpaloalto.org/civica/filebank/blobdload.asp?BlobID=31395 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e remaining balance of all CIP contracts currently in progress, and these funds should be taken into account when determining whether CIP cash flow and contingency reserves are adequate. The initial maximum guideline level would be 24 months of CIP expenditures, but the maximum guideline could be exceeded with Council approval. Figure 1 shows the Reappropriations Reserve level as of June 30, 2014, as well as the CIP portion of the Reserve for Commitments. Figure 1: Gas Utility Capital Reserve SECTION 3C. PROPOSED RESERVE TRANSFERS For FY 2016, staff proposes a $3.4 million transfer from the Rate Stabilization Reserve. This transfer is included in the financial projections in this Financial Plan. It will enable CPAU to maintain adequate Operations Reserve levels while moderating the pace of increase in Gas rates. In addition, staff proposes transfers from the Reappropriations Reserve to the CIP Reserve as described in the previous section. The impact of these transfers on reserves levels can be seen in Appendix A. SECTION 4: CURRENT STATE OF THE UTILITY SECTION 4A. UTILITY OVERVIEW The CPAU’s Gas Utility provides natural gas service to the residents, businesses, and other gas customers in Palo Alto. Close to 23,500 customers are connected to the natural gas system, approximately 21,800 (93%) of which are residential and 1,700 (7%) of which are non- residential. Residential customers consume about 11 to 12 million therms of gas per year, roughly 45% of the gas sold, while non-residential customers consume 55% (about 15 million GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e therms). Residential customers use gas primarily for space heating (46% of gas consumed) and water heating (42%), with the remainder consumed for other purposes such as cooking, clothes drying, and heating pools and spas6. Non-residential customers use gas for space and water heating (73% of gas consumed), cooking (20%), and industrial processes (6%).7 The Gas Utility receives gas at the four receiving stations within Palo Alto where CPAU’s distribution system connects with Pacific Gas and Electric’s (PG&E’s) system. These receiving stations are jointly operated by CPAU and PG&E. CPAU purchases gas from a various natural gas marketers, with PG&E providing only local transportation service (transportation from the PG&E City Gate gas delivery hub to Palo Alto). CPAU also has transmission rights on PG&E’s transmission pipeline from Malin, Oregon to PG&E City Gate, allowing it to purchase lower priced gas at that location. CPAU does not produce or store any natural gas, and purchases gas in the monthly and daily spot markets. The cost of the purchased gas is passed through directly to customers through a rate adjuster that varies monthly with market prices. The cost of purchased gas and PG&E local transportation service accounts for roughly one third of the utility’s expenditures. To deliver gas from the receiving stations to its customers, the utility owns 210 miles of gas mains (which transport the gas to various parts of the city) and 23,500 gas services (which connect the gas mains to the customers’ gas lines). These mains and services, along with their associated valves, regulators, and meters, represent the vast majority of the infrastructure used to deliver gas in Palo Alto. CPAU has an ongoing CIP to repair and replace its infrastructure over time, the expense of which accounts for around 15 to 20% of the utility’s expenditures. Costs for main replacements have been going up, however, and those uncertainties are discussed in Section 6A(4) below. In addition to the CIP, the Gas Utility performs a variety of maintenance activities related to the system, such as monitoring the system for leaks, testing and replacing meters, monitoring the condition of steel pipe, and building and replacing gas services for buildings being built or redeveloped throughout the city. The utility also shares the costs of other system-wide operational activities (such as customer service, billing, meter reading, supply planning, energy efficiency, equipment maintenance, and street restoration) with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up roughly half of the utility’s expenses. In addition to these ongoing activities, CPAU has conducted a program to find and replace cross-bores over the last several years. SECTION 4B. CURRENT RATES AND COMPETITIVENESS Table 4 presents winter and summer residential bills for Palo Alto and PG&E for several usage levels for rates in effect as of and July 2014 (to illustrate a summer month bill) and January 2015 (to illustrate a winter month bill). The annual gas bill for the median residential customer for calendar year 2014 was $489.94, about 1% lower than the annual bill for a PG&E customer with 6 http://energyalmanac.ca.gov/naturalgas/overview.html 7 Source: Statewide Commercial End Use Study, California Energy Commission report, 2006. Statistics shown are for end users in PG&E Climate Zone 4 (the Peninsula) where Palo Alto is located. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e the same consumption. In January 2015, PG&E’s distribution rates for gas increased substantially to collect for needed system improvements for pipeline safety and maintenance, and their rates are expected to continue to increase in the future. The bill calculations for PG&E customers are based on PG&E Climate Zone X, an area which includes the surrounding communities. Table 4: Residential Monthly Natural Gas Bill Comparison ($/month) Season Usage (therms) Palo Alto PG&E Zone X % Difference Winter (Jan 2015) 30 33.82 40.29 -16% (Median) 54 52.97 72.52 -27% 80 84.03 116.15 -28% 150 175.97 2412 -27% Summer (Jul 2014) 10 19.55 12.36 58% (Median) 18 27.28 22.34 22% 30 44.04 41.01 7% 45 66.28 64.35 3% Table 5 shows the monthly gas bills for commercial customers for various usage levels for rates in effect as of January 1, 2015. Bills for CPAU customers at the usage levels shown are 5 to 6% lower for smaller commercial customers and 8 to 21% higher for larger commercial customers than for PG&E customers. This is a substantial improvement over the calendar year 2013 bill comparison, when commercial gas bills for CPAU customers were 27-44% higher than for PG&E customers. This is primarily attributable to PG&E’s increased distribution rates as the commodity rates for CPAU and PG&E are very similar, both being based on spot market gas prices. Table 5: Commercial Monthly Average Gas Bill Comparison (for Rates in Effect Jan. 1, 2015) Usage (therms/mo) Gas Bill ($/month) % Difference Palo Alto PG&E 500 562 600 -6% 5,000 4,942 5,205 -5% 10,000 10,020 9,284 8% 50,000 48,656 40,242 21% SECTION 4C. CURRENT UTILITY FINANCIAL STATUS In FY 2014, gas purchases represented 44% of Gas Utility’s costs, with CIP and Operations together representing another 22%. The remaining costs were for administration, overhead, and other costs (34%) as shown in Figure 3. The percentages for FY 2014 are skewed by the fact that CIP, which is normally about 20% of expenses, was reduced in FY 2014 to allow for a GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e backlog of projects to be completed. The utility’s revenue in FY 2014 came almost entirely from gas sales (95%), with the remainder coming from capacity and connection fees (2%), and other sources (3%), as shown in Figure 2. As shown in Table 6, for FY 2015, net revenues are expected to be $334,000, or $3.4 million lower than the $3.8 million in the adopted budget. Net sales are projected to be $4.8 million lower than the adopted budget, mainly due to an accounting error. Table 6: Projected Gas Utility Net Revenue, FY 2015 Gas - Operating Activity All figures in thousands $ (000’s) Adopted Budget FY 2015 Projected FY 2015 Activity Variance to Budget Net Sales * 37,343 32,586 (4,757) Other revenues 1,849 2,005 156 Purchase costs (13,732) (12,438) (1,294) Other expenses ** (21,686) (21,820) 124 Total 3,764 334 (3,430) * Includes misc. sales, adjustments, discounts, and bad debt ** Includes reserve transfers, salaries, allocated charges, other misc. expenses and encumbrances SECTION 4D. STATUS OF RESERVES Table 7 shows the projected balance of each of the Gas Utility reserves for the period covered by this Financial Plan. The projected balances are also provided in Appendix A. Total reserves at the end of FY 2015 (6/30/2015) are projected to be $28.6 million, with $8.9 million remaining in the Rate Stabilization Reserve for future years and $8.4 million in the Operations Reserve, which is at the Reserve Target level. As detailed in Appendix C (Gas Utility Reserves Figure 3: FY 2014 Costs by Activity Gas Purchases, 44% CIP, 1% Operations, 21% Admin/ Overhead, 34% Figure 2: FY 2014 Revenue Structure Sales of Gas, 95% Capacity/ Connection , 2% Other, 3% GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e Management Practices) and in Section 3B, this plan includes a change to the structure of the utility’s CIP Reserve to make it a cash flow and contingency reserve for CIP projects. Table 7: Projected End of Fiscal Year Gas Utility Reserve Balances for FY 2015 to FY 2022 Ending Reserve Balance ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Reappropriations and Commitments 9,817 9,817 9,817 9,817 9,817 9,817 9,817 9,817 Capital 1,488 1,488 1,488 1,488 1,488 1,488 1,488 1,488 Rate Stabilization 8,884 3,913 545 0 0 0 0 0 Operations 8,429 8,711 9,279 7,721 7,529 8,159 9,216 10,807 Unassigned 0 0 0 0 0 0 0 0 TOTAL 28,619 23,929 21,129 19,026 18,834 19,464 20,521 22,112 SECTION 4E. DEBT SERVICE The Gas Utility’s annual debt service is roughly $800,000 per year. This is related to one bond issuance that will require payments through 2026. This issuance, the 2011 Series A Utility Revenue Refunding Bonds, was a joint issuance between the Gas and Water Utilities refinancing the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The City is in compliance with all covenants on the bond. Additional detail is provided in Appendix D. SECTION 5. LOOKING BACK SECTION 5A. BACKGROUND On September 22, 1917, the City of Palo Alto issued a bond to purchase the property of Palo Alto Gas Company and continue it as a municipal enterprise. At the time, the system comprised 21 miles of mains, 1,900 meters, and was valued at $65,500. PG&E supplied the gas, which was synthesized from coal at its Potrero facility. Almost immediately the City faced challenges. Losses were at nearly 25% according to PG&E’s master meter, and PG&E had filed with the Railroad Commission (the forerunner to today’s Public Utilities Commission) to increase rates by nearly 72.5%. Despite these initial hurdles, Palo Alto’s system grew tremendously, and by 1924 revenues had exceeded those of the electric utility. Sales were such that the annual reports of the time noted gas usage “appears to be greater than that of any other city in the state, showing that gas is a very popular form of fuel in Palo Alto.” Just prior to the acquisition of the neighboring town of Mayfield’s gas system (centered around today’s California Avenue) in 1929, the miles of main in service and customers connections had doubled. Notable changes to the gas supply itself came in 1930, when PG&E ceased supplying purely manufactured (or coal) gas from its Potrero Hill facility in San Francisco and instead switched to natural gas. In 1935, a supplementary butane injection system (later retired) was purchased from Standard Oil to mitigate large wintertime peaks. Gas sales were at 248,658 million cubic feet (MCF) with 4,849 active services. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e Early gas mains in Palo Alto were made of steel, but in the 1950s, like many other utilities, CPAU switched to ABS plastic. CPAU switched to PVC plastic in the early 1970s, but over 45 miles of ABS mains had already been installed. A 1990 evaluation of the system found a steadily increasing rate of gas leaks associated with those mains, something that other gas utilities had also been experiencing. To reduce leaks, CPAU accelerated its main replacement program from 7,000 feet (1.3 miles) of replacements per year to 20,000 feet (3.8 miles) per year. This would enable the utility to replace all of its ABS and its most vulnerable steel and PVC mains with polyethylene (PE) mains over the course of the following 36 years.8 As of 2014 the Gas Utility had replaced approximately 99 miles of ABS, as well as some sections of steel where cathodic protection is not effective. Current main replacement projects will target the last ~800 feet of remaining ABS main as well as tackling PVC replacement. A PVC risk analysis to determine the footage of annual PVC replacement for future CIP projects is currently being conducted. This was an example of how local control of its Gas Utility has provided Palo Alto residents with substantial benefits. During the 1990s and 2000s, while CPAU was increasing its main replacement rate to ensure a robust gas distribution system, PG&E was underspending on safety-related infrastructure, according to a recent audit.9 In the 1990s, while grappling with the issues surrounding its distribution system, CPAU was also participating in major changes to the structure of the gas industry in California. Until 1988 CPAU had a formal policy of setting its rates equal to PG&E’s rates and successfully did so with the exception of one year in the mid-1970s. At times this led to inadequate revenue (1974 to 1981) as PG&E, the City’s only gas supplier, regularly filed requests with the CPUC to increase the wholesale gas supply rates charged to the Gas Utility. In the 1990s, as the CPUC began deregulating the natural gas industry in California, the Gas Utility began purchasing gas from suppliers other than PG&E. In 1997 the CPUC adopted the “Gas Accord,”10 which enabled the Gas Utility (along with other local transportation-only customers) to obtain transmission rights on PG&E’s Redwood transmission pipeline running from Malin, Oregon into California. In 2000/2001 the California energy crisis occurred, causing major disruptions to the Gas Utility’s supply costs. Wholesale gas prices rose over 500% between January 2000 and January 2001. The Council approved drawing down reserves to provide ratepayer relief and, for two years following the crisis, CPAU rates were above PG&E’s as reserves were replenished. In April 2001 the Council approved a hedging practice of buying fixed price gas one to three years into the future. After reaching a low point in October 2001, prices continued to rise, and as a result the CPAU hedging strategy frequently resulted in a wholesale supply cost advantage compared to PG&E until prices began to decline steeply in mid-2008. At that point the Gas Utility’s wholesale supply costs became higher than market gas prices due to fixed price contracts entered into prior to 2008. As a result the Gas Utility’s wholesale supply costs were higher than PG&E’s for several years. In 2012 Council approved a plan to formally cease the hedging strategy and purchase all gas on the short-term (“spot”) markets. As of July 1, 2012, the commodity portion of the gas rates changes every month based on the spot market gas price. 8 Staff Report CMR:183:90. Infrastructure Review and Update, March 1, 1990 9 Focused Financial Audit of The Pacific Gas & Electric Company’s Gas Distribution Operations, Overland Consulting, made available through a CPUC Administrative Law Judge’s ruling on A12-11-009/I13-03-007 on 5/31/2013 10 CPUC decision 97-08-055. Since then, the Gas Accord has been amended four times, with the most recent being Gas Accord V, application A.09-09-013 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e SECTION 5B. HISTORICAL GAS COMMODITY PRICES Gas commodity prices have suffered periods of very high volatility. As shown in Figure 4, gas commodity prices spiked up—and then plunged down—dramatically in the 2000/2001 California energy crisis. Prices also rose quickly from late 2007 to a peak in July 2008, followed by a steep fall as the gas extraction process of hydraulic fracturing (“fracking”) resulted in increased supplies. Gas prices, though still subject to volatility, have been moderate since 2009. Figure 4: Gas Market Prices at PG&E Citygate SECTION 5C. HISTORICAL EXPENSES AND REVENUES Table 8 shows the Gas Utility’s expenses and revenues for the past five years. Total costs for this utility have decreased 20% since 2010, primarily since commodity costs decreased 36% with reduced gas market prices. Distribution operations costs11 were 5% higher in 2014 than they were in 2010. Sales revenues decreased in FY 2013 as the utility began to pass through the monthly gas commodity prices to customers. FY 2013 sales volumes were also lower than normal due to warmer than average weather. Budgeted CIP expenses were notably low in FY 2014 because no new main replacement project was budgeted. This was to allow work to be 11 Administration, Demand Side Management, Engineering, O&M, and Resource Management categories. $0.00 $0.50 $1.00 $1.50 $2.00 Ja n - 9 5 Ja n - 9 6 Ja n - 9 7 Ja n - 9 8 Ja n - 9 9 Ja n - 0 0 Ja n - 0 1 Ja n - 0 2 Ja n - 0 3 Ja n - 0 4 Ja n - 0 5 Ja n - 0 6 Ja n - 0 7 Ja n - 0 8 Ja n - 0 9 Ja n - 1 0 Ja n - 1 1 Ja n - 1 2 Ja n - 1 3 Ja n - 1 4 Ja n - 1 5 Mo n t h l y G a s M a r k e t P r i c e ( $ / t h e r m ) GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e completed on a large multi-year main replacement project that commenced in a prior year. Budgeting for ongoing gas main replacements resumed in FY 2015. Table 8: Gas Utility Historical Expenses SECTION 6. LOOKING FORWARD SECTION 6A. SEVEN YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2022. As shown in Table 9 (and Appendix A), total costs for the Gas Utility are projected to rise steadily through FY 2022. Operations costs are projected to increase at 3% per year, though costs are projected to be temporarily higher in FY 2016 through FY 2018 while the cross-bore program is being completed (see Section 6A(3) below for more discussion). In addition, future ongoing CIP spending is assumed to increase with inflation. Some uncertainty exists in the projection for CIP costs due to high main replacement costs, as discussed in Section 6A(4). Although costs are increasing, lower CIP budgets in FY 2014 and FY 2015 have resulted in healthy reserves and only moderate non-commodity rate increases are needed in upcoming years. 2010 2011 2012 2013 2014 1 2 Utilities Retail Sales 43,244 42,855 41,034 33,759 34,843 3 Service Connection & Capacity Fees 451 516 592 731 654 4 Other Revenues & Transfers In 1,713 203 103 830 313 5 Interest plus Gain or Loss on Investment 1,342 821 1,119 (239)706 6 Total Sources of Funds 46,750 44,396 42,847 35,081 36,517 7 8 Purchases of Utilities: 9 Supply Commodity 21,846 20,732 15,356 12,461 12,992 10 Supply Transportation 620 706 879 994 1,333 11 Total Purchases 22,466 21,438 16,235 13,455 14,325 12 13 Administration (CIP + Operating)2,494 2,895 3,473 4,273 3,988 14 Customer Service 1,134 1,230 1,270 1,358 1,338 15 Demand Side Management 428 563 614 630 438 16 Engineering (Operating)266 280 333 340 352 17 Operations and Maintenance 3,942 3,297 5,032 4,940 4,119 18 Resource Management 696 1,039 729 506 516 19 Debt Service Payments 505 488 406 296 282 20 Rent 320 230 230 219 419 21 Transfers to General Fund 5,300 5,304 6,006 5,971 5,811 22 Other Transfers Out 407 614 170 207 606 23 Capital Improvement Programs 2,389 8,325 7,821 7,620 240 24 Total Uses of Funds 40,348 45,704 42,320 39,814 32,435 25 26 Into/ (Out of) Reserves 6,402 (1,308)528 (4,733)4,082 Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e Table 9: Seven Year Gas Financial Forecast Summary *The rate change line shows the combined effect of commodity and non-commodity rate changes for FY 2013. For current and future years, only non-commodity rate changes are shown. Commodity rates will vary monthly with market prices. 2. COMMODITY SUPPLY COSTS The Gas Utility purchases much of its gas for delivery at Malin, Oregon which is almost always cheaper than delivery at PG&E City Gate, even including the costs of transmission from Malin to City Gate. Gas is purchased on a month-ahead and day-ahead basis in the spot market. Commodity costs are expected to stay steady or decline slightly over the next several years. Figure 5 shows the projected gas prices used to generate this forecast. Projections for transmission costs associated with transporting gas over PG&E’s Redwood transmission pipeline are based on rates adopted in the most recent update to the Gas Accord. Local transportation costs decreased on January 1, 2015 due to the expiration of a temporary adder to PG&E’s local transportation rate,12 but in December 2014 PG&E applied to the CPUC to more than double local transportation costs. Staff is tracking PG&E’s application, and based on discussions to date, expects that nearly all of the proposed increase in local transportation costs will be approved. Staff projects these costs to escalate at 3% per year in subsequent years. As these charges are dictated by PG&E and are outside of Palo Alto’s control, staff may propose making these costs a pass-through charge, similar to the commodity charge, in FY 2016 or FY 2017. 12 California Public Utilities Commission Advice Letter 3430-G, effective January 1, 2014. Also see CPUC Decision 12-12-30 regarding the Pipeline Safety Enhancement Plan Adder. Actual Adopted Proj.Proj.Proj.Proj.Proj.Proj.Proj.Proj. 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 1 RATE CHANGE (%)*0%0%0%0%7%4%4%4%3%3% 2 SALES IN THOUSAND THERMS 28,117 28,881 27,895 28,939 28,995 29,060 29,110 29,160 29,200 29,243 3 4 Utilities Retail Sales 34,843 37,343 32,586 33,327 36,957 39,789 42,197 44,168 45,499 47,036 5 Service Connection & Capacity Fees 654 580 602 640 662 686 707 728 728 728 6 Other Revenues & Transfers In 313 554 1,022 1,620 1,919 2,255 2,623 2,999 3,355 3,689 7 Interest plus Gain or Loss on Investment 706 715 381 407 323 260 213 213 242 306 8 Total Sources of Funds 36,517 39,192 34,592 35,993 39,861 42,990 45,740 48,108 49,824 51,759 9 10 Purchases of Utilities: 11 Supply Commodity 12,992 12,484 10,385 10,723 11,980 13,108 13,778 14,139 14,436 14,848 12 Supply Transportation 1,333 1,248 2,053 2,706 2,982 3,186 3,221 3,225 3,245 3,279 13 Total Purchases 14,325 13,732 12,438 13,429 14,962 16,294 16,999 17,364 17,680 18,127 14 15 Administration (CIP + Operating)3,988 3,331 4,238 4,350 4,473 4,600 4,731 4,865 4,994 5,120 16 Customer Service 1,338 1,629 1,486 1,532 1,590 1,650 1,712 1,777 1,831 1,879 17 Demand Side Management 438 1,284 625 641 657 674 691 709 727 745 18 Engineering (Operating)352 450 367 378 392 406 421 436 449 461 19 Operations and Maintenance 4,119 4,250 4,366 5,497 5,686 5,884 5,086 5,272 5,430 5,571 20 Resource Management 516 976 947 1,276 1,464 1,678 1,914 2,146 2,369 2,586 21 Debt Service Payments 282 802 802 803 803 802 800 800 802 803 22 Rent 419 431 431 443 457 470 485 499 514 530 23 Transfers to General Fund 5,811 5,730 5,730 6,162 6,454 6,709 7,008 7,332 7,679 8,040 24 Other Transfers Out 606 472 486 499 511 524 537 550 564 578 25 Capital Improvement Programs 240 2,341 2,341 5,673 5,214 5,402 5,550 5,728 5,728 5,728 26 Total Uses of Funds 32,435 35,428 34,258 40,683 42,661 45,093 45,933 47,477 48,767 50,168 27 28 Into/ (Out of) Reserves 4,082 3,764 334 (4,690)(2,800)(2,102)(193)630 1,057 1,591 Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e Figure 5: Wholesale Gas Price Projections 3. OPERATIONS Operations costs include the Customer Service, Demand Side Management, Operations and Maintenance, Engineering, Resource Management, and Administration categories in Table 9, above. Debt service, rent, and transfers are also included in Operations costs (excluding the General Fund equity transfer). Appendix E includes detailed descriptions of the activities associated with these cost categories. Operations costs are projected to increase by 3 to 4% per year. Salary and benefits, inflation, and other assumptions match those used in the City’s long-range financial forecast. Operations costs for FY 2016 to FY 2018 include funding for the cross-bore program. In the 1970s CPAU, like many other utilities, adopted horizontal drilling as an alternative to trenching when installing new gas services. This created the possibility of cross-bores, which can happen when a gas service is bored through a sewer lateral. Though cross-bores are very rare, they can create a dangerous situation when a contractor attempts to clear a blocked sewer line, because if the cross-bored gas service is damaged during the line clearing it can result in a gas leak. CPAU has been inspecting new gas services since 2001, and in 2011 began video inspections of the sewer laterals at the location of horizontally-drilled gas services installed before 2001. This inspection program has cost roughly $1 million per year since FY 2012. While a majority of sewer laterals have been inspected, staff has come across several services which are not able to be scoped, either due to infiltration by roots or broken/collapsed pipe segments. Staff has GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e included $3 million in additional funding over the forecast period for this program, but the program will likely require additional funding in future years to complete. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Gas Utility’s CIP program consists of the following programs and budgets: The Gas Main Replacement Program, under which the Gas Utility replaces aging gas mains Customer Connections, which covers the cost when the Gas Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. The Gas Utility charges a fee to these customers to cover the cost of these projects. Ongoing Projects, which covers the cost of routine meter, regulator, and service replacement, minor projects to improve reliability or increase capacity, and other general improvements. Tools and Equipment, which covers the cost of capitalized equipment, such as directional boring equipment. One-time Projects, which represents occasional large projects that do not fall into any other category. Table 10 shows the current status of these project categories and future projected spending. Table 10: Budgeted Gas CIP Spending The Gas Main Replacement (GMR) Program is in the process of reaching a major milestone, the replacement of the last gas mains made from ABS plastic. The program to replace ABS and other low-performing materials in the system started in the 1990s (see Section 5a (Background) for more detail). CPAU has temporarily slowed down its new CIP appropriations in this category in order to finish the last major ABS main replacement project and to catch up on a backlog of projects that has accumulated due to staffing issues. With the replacement of all ABS mains with PE plastic, the material most at risk for failure is removed leaving only PVC plastic, steel (wrapped, with cathodic protection), and PE mains. The next focus of the GMR program will be PVC mains. CPAU plans to complete a Gas System Master Plan in 2015 to determine which areas of the system to prioritize. The plan will help CPAU determine whether the pace of main replacement (approximately three miles of main each year, or 1.5% of the system) needs to be increased, decreased, or whether it needs to remain the same. Project Category Current Budget* Spending, Curr. Yr Remain. Budget**Committed FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 One Time Projects 192 (30) 162 - - - - - - Gas Main Replacement 8,892 (3,099) 5,793 5,532 4,161 3,650 3,785 3,878 4,000 Tools And Equipment 407 (18) 389 64 100 100 100 100 100 Ongoing Projects 1,594 (205) 1,389 223 763 786 809 834 858 Customer Connections 752 (415) 337 3 950 979 1,008 1,038 1,069 TOTAL 11,837 (3,767) 8,070 5,822 5,974 5,514 5,702 5,850 6,028 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments). GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e The current budget for gas main replacement assumes the current pace of main replacement, but does not take into account the recent rise in costs for main replacement, which have increased from the levels seen during the recent recession. Several factors may be contributing to this. Economic recovery in the Bay Area, as well as a greater focus on infrastructure improvement by many municipal agencies and utilities could be creating high demand for contractors in these fields. Newer, more leak resistant pipe materials may have ongoing greater costs. CPAU has seen the replacement cost per linear foot increase by 25 to 50% over the last couple of years. Currently CPAU plans to complete as much main replacement as possible within its current budget, provided there are no safety concerns. However, if this trend of higher cost continues, the Gas Utility may require larger CIP budgets, and as a result, larger rate increases. Ongoing Projects, Tools and Equipment, and Customer Connections are projected to cost approximately $1.8 million in FY 2016 and increase by 3% per year through the end of the forecast period. In practice, these projects can fluctuate dramatically depending on system conditions and the pace of development and redevelopment in the city. It is worth noting that the Customer Connections program is paid for through fee revenue, so when costs go up, so does fee revenue. Aside from customer connections and some transfers from other funds, the CIP plan for FY 2016 to FY 2020 is funded by utility rates. The details of the plan are shown in Appendix B: Gas Utility Capital Improvement Program (CIP) Detail. 5. EQUITY TRANSFER The City calculates the equity transfer from its Gas Utility based on a rate of return on the net book value of the utility’s capital assets[1]. The Council adopted this methodology in 2009 and it has remained unchanged since. Each year it is calculated according to the 2009 Council- adopted methodology, and does not require additional Council action. SECTION 6B. REVENUE REQUIREMENT AND SOURCES The Gas Fund’s costs and revenues from FY 2010 through FY 2022 are shown in Figure 6 below. Rate changes in future years assume that the gas commodity prices remain at 2015 levels. This is done to better highlight those rate component changes which the utility controls rather than gas commodity costs, which are subject to market price variation and passed through directly to customers monthly based on market prices. Revenues are projected to be lower than expenses through FY 2018, with the utility drawing down the Rate Stabilization Reserve during that time. In general, rates will need to increase 3% to 4% per year to match revenues to costs and bring the Operations Reserve to Target levels by the end of the forecast period. [1] For more detail on the ordinance adopting the 2009 transfer methodology, see CMR 280:09, Budget Adoption Ordinance for Fiscal Years 2009 and 2010; and CMR 260:09, Finance Committee Report explaining proposed changes to equity transfer methodology. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e Reserves are adequate to avoid increasing gas rates until FY 2017, when a 7% increase is projected. A 7% increase is equivalent to an additional $1.75 to $3.88 per month (summer and winter) for the median residential customer’s monthly gas bill, based on commodity prices as of February 2015. Future increases would be roughly half of these levels. Figure 6: Gas Utility Revenue and Cost Projections The proposed rate trajectory draws the Rate Stabilization Reserve down to zero by FY 2018, as shown in Figure 7. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e Figure 7: Gas Utility Revenue and Cost Projections SECTION 6C. RISK ASSESSMENT AND RESERVE ADEQUACY Staff performs an annual assessment of financial risks for the Gas Utility. For this evaluation, staff estimates using the following criteria: 1. The maximum observed one-year distribution revenue variance over the past five years; and 2. An increase of 10% of planned system improvement CIP expenditures for the budget year. Commodity price risk is not included in the risk assessment because these costs are passed directly to customers each month. Table 11 summarizes the risk assessment calculation for the Gas Utility. The Operations Reserve is projected to be adequate to manage these levels of risk over the entire forecast period. Table 11: Gas Utility Risk Assessment ($000) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total Revenue 21,314 22,253 23,564 24,991 23,373 26,340 28,010 Max. Historical Revenue Variance 5% 5% 5% 5% 5% 5% 5% Budget-to-Actual Risk 1,079 1,127 1,193 1,107 1,266 1,334 1,418 System Rehabilitation CIP Budget 4,723 4,235 4,394 4,822 4,511 4,658 4,65 CIP Contingency @10% 472 424 439 482 451 466 466 Total Risk Assessment Value 1,552 1,550 1,633 1,589 1,717 1,800 1,884 Projected Operations Reserve Level 8,711 9,279 7,721 7,529 8,159 9,216 10,807 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e The Gas Utility currently has one contingency reserve (the Operations Reserve), and this Financial Plan maintains reserves within their approved guideline levels throughout the forecast period, as shown in Figure 8 below. Reserve levels also exceed the short-term risk assessment value for the utility. Figure 8: Operations Reserve Adequacy SECTION 6D. ALTERNATE SCENARIOS The forecast described in the previous sections assumes that gas main replacement costs are about the same as they were in previous years. There is substantial uncertainty about this assumption. Staff has created a separate CIP scenario in which main replacement budgets are 50% higher than the base forecast. As described in Section 6A (Seven Year Financial Forecast) prices for the most recent main replacement projects have been nearly 50% higher than previous projects. The current forecast assumes that these prices have been temporary spikes due to the economy picking up, but that may not be the case. The “High CIP Cost” scenario assumes that CPAU continues its current pace of main replacement and prices remain at these higher levels. Figure 9 shows the rate increases under the High CIP Cost scenario and the base case (inflationary increases in CIP budgets). If this scenario becomes reality, it may be possible to phase in the increase in CIP budgets over several years to defer the rate impact into later years. CPAU will be developing a Gas System Master Plan, planned for later in 2015 or 2016. It will give CPAU the information it needs to determine the feasibility of these types of strategies. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e Figure 9: Rate Increases for High CIP Scenario SECTION 6E. HISTORICAL AND PROJECTED CONSUMPTION Gas usage in Palo Alto is volatile, varying with both economic and weather conditions. As shown in Figure 10, in the early 1970’s, gas purchases reached over 45 million therms per year. Usage dropped dramatically in the 1976/1977 drought when customers saved significant amounts of (hot) water by upgrading to efficient showerheads. During the 1980s and 90s average gas usage was around 36 million therms per year. Usage dropped again in the early 2000’s. In FY 2001, gas prices escalated during the California energy crisis and Palo Alto’s rates increased by nearly 200%. From 2003 to 2011, usage decreased by 2.3% mainly as a result of continued customer investments in energy efficiency. Since 2011 usage has decreased by almost 3% annually, with generally increasing gas rates encouraging conservation and spurring energy efficiency investment. Gas usage was 28.8 million therms in FY 2014. Gas consumption is projected to recover somewhat and stay stable over the forecast period, with growth being offset by gas efficiency savings. Figure 10 presents the historical gas consumption levels (with and without the gas energy efficiency (EE) programs) from FY 1971 through FY 2014 and projections for FY 2015 through FY 2023. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e Figure 10: Historic and Projected Gas Consumption SECTION 6F. LONG TERM OUTLOOK In the longer term (5 to 35 years out) it is very difficult to predict the Gas Utility’s commodity costs. A variety of long-term trends could affect commodity costs either positively or negatively. Continuing improvement in gas extraction technology, such as fracking, could continue to create generous supplies of gas, but these technologies are also under greater scrutiny with respect to their environmental impacts. On the demand side, a continued shift from coal to natural gas for electricity generation or an increase in manufacturing in the U.S. might drive up natural gas prices, but other factors, such as generally more mild winters, might drive gas demand lower. It is also difficult to predict the magnitude of the additional cost impacts associated with the State’s cap-and-trade program over the long term. In the face of this uncertainty, CPAU is able to protect the financial position of the Gas Utility by continuing its current strategy of passing these costs directly to its customers via month-varying rate adjustment mechanisms. As discussed in Section 6A (Seven Year Financial Forecasts), the future CIP investment needs for the Gas Utility may be lower than in the past, although costs per foot for main replacement may increase substantially. The Gas Utility has replaced all of its ABS gas mains and its most problematic steel and PVC mains as well. The PE pipe being used now is expected to have at least a fifty-year lifetime, and there is growing evidence that it may last much longer than that. This would result in lower CIP investment over the long term. CPAU is performing a study in 2015 to develop its future main replacements priorities and strategy. Long-term state or local climate goals could also have a major impact on the Gas Utility. The Global Warming Solutions Act, Assembly Bill 32 (AB32), set a goal of reducing greenhouse gas 27 29 31 33 35 37 39 41 43 45 47 Th e r m s ( M i l l i o n s ) Purchases Purchases without EE Actual Forecast GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e (GHG) emissions to 1990 levels by 2020 and then maintaining those reductions. In its December 2007 Climate Protection Plan, the City set a goal of lowering emissions to 15% below 2005 levels by 2020. As a community Palo Alto achieved these goals in 2012 even with continued use of natural gas for heating, cooking, and industrial processes. If stricter goals are enacted at the state or local level, however, it could lead to “electrification”, or consumer switching from gas-using appliances to electric-using appliances for heating, cooking and processes. If significant amounts of electrification occurred, stranded investment and higher rates could be required as the costs of the distribution system are recovered over a lower sales base. One example of a stricter standard has been stated by the Governor—reducing GHG emissions to 80 percent below 1990 levels by 2050.13 This goal, or less ambitious interim state goals, would require legislation to implement. But it is instructional that, in the recent discussion draft of its scoping plan update, CARB says, to meet those goals, natural gas use would have to be “mostly phased out.”14 Staff anticipates legislation this year to address the Governor’s 2030 climate goals of 50% renewable generation, 50% reduction in transportation fuels, and a doubling of energy efficiency. A few bills have already been introduced on post- 2020 GHG emission reduction goals and the GHG cap-and-trade market. As stewards of the Gas Utility, the City should continue to stay aware of developments in state climate planning, participate as a stakeholder, and consider these types of impacts and ways to mitigate them when developing its own sustainability goals. SECTION 6G. COMMUNICATIONS PLAN The FY 2016 communications strategy covers four primary areas: operations, infrastructure, safety, efficiency, renewables and rates. CPAU has moved to market pricing for commodity rates. Changes to the commodity rates are posted monthly on the City’s website. This year, in light of the water and wastewater utility rate increases, CPAU is deferring any formal “rate change” to the gas utility at this time, but website and community education about rates is ongoing. Gas use efficiency incentives are promoted year-round, but most heavily during winter months to impact heating activities. Promotional methods include community outreach events, print ads in local publications, utility bill inserts, messaging on the bills and envelopes, website pages, email blasts, videos for the web and local Comcast channels, Home Energy Reports and the use of social media. To keep customers apprised of the status and accomplishments of capital improvement projects, a network of project web pages are maintained. Traffic is driven to the website via print and digital ads, social media and email blasts. Safety topics are emphasized year-round. CPAU is engaging in several new campaigns and programs in FY 2016 to promote gas utility efficiency and renewable energy. The Georgetown University Energy Prize competition is a friendly, national campaign to encourage communities to reduce energy use. Energy savings from reduced gas and electric consumption qualify to help Palo Alto compete for a $5 million prize at the end of a two-year campaign. Since adoption of a carbon neutral electric supply portfolio and retirement of the PaloAltoGreen program, CPAU launched a new voluntary 13 Executive Orders S-3-05 and B-16-2012. 14 Climate Change Scoping Plan, First Update, Discussion Draft for Public Review and Comment, California Air Resources Board, October 2013, pg 88. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e renewable natural gas carbon offsets program, PaloAltoGreen Gas. Much of our programmatic promotional activity will center around customer education and encouragement to sign up for participation in PaloAltoGreen Gas. Other new programs include home efficiency services and online tools to help customers manage their energy use. Stepping up efforts to promote gas safety education, staff is focusing outreach around youth, the importance of calling USA (811) before digging for anyone who may excavate in and around Palo Alto, such as plumbers and contractors, potential sewer and gas line crossbores, keeping fats, oils and greases out of drains, and ensuring clear access to meters. For younger “customers-to-be,” CPAU created a Home Safety Detective campaign that includes special tool kits to help them identify home safety problems. Staff provides safety kits to youth and adults at school presentations, neighborhood safety and emergency preparedness fairs and other community outreach events. Meter access awareness is highlighted through use of materials featuring photos of some unusual ways people obstruct access to their meters, including using them as bike racks and building storage sheds around them. CPAU will continue to promote safety, infrastructure, operations, efficiency and rate adjustment messages through a variety of marketing and media channels. Every year, CPAU publishes an updated gas safety awareness brochure which is mailed to all customers in Palo Alto, as well as plumbers, contractors and excavators that may work in and around the area. Staff talks with business customers at special facilities meetings, attends neighborhood safety and emergency preparedness fairs and offers presentations to school and community groups. While print materials and website pages still feature prominently, CPAU is turning the outreach emphasis to direct mail, newspaper inserts, social media, online videos and cable TV. Copies of all outreach materials and logs of activities are saved in the Gas Safety Public Awareness Plan that is reviewed at least once per year by the Department of Transportation. GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e APPENDICES Appendix A: Gas Utility Financial Forecast Detail Appendix B: Gas Utility Capital Improvement Program (CIP) Detail Appendix C: Gas Utility Reserves Management Practices Appendix D: Gas Utility Debt Service Details Appendix E: Description of Gas Utility Cost Categories Appendix F: Gas Utility Communications Samples GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e APPENDIX A: GAS UTILITY FINANCIAL FORECAST DETAIL Actual Adopted Proj.Proj.Proj.Proj.Proj.Proj.Proj.Proj. 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 1 RATE CHANGE (%)*0%0%0%0%7%4%4%4%3%3% 2 SALES IN THOUSAND THERMS 28,117 28,881 27,895 28,939 28,995 29,060 29,110 29,160 29,200 29,243 3 4 Utilities Retail Sales 34,843 37,343 32,586 33,327 36,957 39,789 42,197 44,168 45,499 47,036 5 Service Connection & Capacity Fees 654 580 602 640 662 686 707 728 728 728 6 Other Revenues & Transfers In 313 554 1,022 1,620 1,919 2,255 2,623 2,999 3,355 3,689 7 Interest plus Gain or Loss on Investment 706 715 381 407 323 260 213 213 242 306 8 Total Sources of Funds 36,517 39,192 34,592 35,993 39,861 42,990 45,740 48,108 49,824 51,759 9 10 Purchases of Utilities: 11 Supply Commodity 12,992 12,484 10,385 10,723 11,980 13,108 13,778 14,139 14,436 14,848 12 Supply Transportation 1,333 1,248 2,053 2,706 2,982 3,186 3,221 3,225 3,245 3,279 13 Total Purchases 14,325 13,732 12,438 13,429 14,962 16,294 16,999 17,364 17,680 18,127 14 15 Administration (CIP + Operating)3,988 3,331 4,238 4,350 4,473 4,600 4,731 4,865 4,994 5,120 16 Customer Service 1,338 1,629 1,486 1,532 1,590 1,650 1,712 1,777 1,831 1,879 17 Demand Side Management 438 1,284 625 641 657 674 691 709 727 745 18 Engineering (Operating)352 450 367 378 392 406 421 436 449 461 19 Operations and Maintenance 4,119 4,250 4,366 5,497 5,686 5,884 5,086 5,272 5,430 5,571 20 Resource Management 516 976 947 1,276 1,464 1,678 1,914 2,146 2,369 2,586 21 Debt Service Payments 282 802 802 803 803 802 800 800 802 803 22 Rent 419 431 431 443 457 470 485 499 514 530 23 Transfers to General Fund 5,811 5,730 5,730 6,162 6,454 6,709 7,008 7,332 7,679 8,040 24 Other Transfers Out 606 472 486 499 511 524 537 550 564 578 25 Capital Improvement Programs 240 2,341 2,341 5,673 5,214 5,402 5,550 5,728 5,728 5,728 26 Total Uses of Funds 32,435 35,428 34,258 40,683 42,661 45,093 45,933 47,477 48,767 50,168 27 28 Into/ (Out of) Reserves 4,082 3,764 334 (4,690)(2,800)(2,102)(193)630 1,057 1,591 29 30 Reappropriations + Commitments 11,194 11,305 9,817 9,817 9,817 9,817 9,817 9,817 9,817 9,817 31 Plant Replacement 0 0 0 0 0 0 0 0 0 0 32 CIP Reserve 0 0 1,488 1,488 1,488 1,488 1,488 1,488 1,488 1,488 33 Rate Stabilization 8,598 8,598 8,884 3,913 545 0 0 0 0 0 34 Operations Reserve 8,382 8,382 8,429 8,711 9,279 7,721 7,529 8,159 9,216 10,807 35 Unassigned 0 0 0 0 0 0 0 0 0 0 36 Total Reserves 28,174 28,285 28,619 23,929 21,129 19,026 18,834 19,464 20,521 22,112 37 (3,507)445 (4,690)(2,800)(2,102)(193)630 1,057 1,591 38 Short Term Risk Assessment Value 1,226 1,552 1,550 1,633 1,717 1,800 1,836 1,884 39 40 Operations Reserve Guidelines 41 Min (60 Days Commodity + O&M)5,588 5,620 5,620 5,807 6,186 6,529 6,613 6,810 6,994 7,196 42 Target (60 Days Commodity + O&M)8,382 8,429 8,429 8,711 9,279 9,793 9,920 10,214 10,490 10,794 43 Max (60 Days Commodity + O&M)11,176 11,239 11,239 11,614 12,372 13,057 13,227 13,619 13,987 14,392 44 Fiscal Year GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e APPENDIX B: GAS UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 ONE TIME PROJECTS GS-09000 Gas Station 1 Rebuild 6,630 - - - 6,630 - - - - - - GS-08000 Gas Station 2 Rebuild 10,023 - - - 10,023 - - - - - - GS-10000 Gas Station 3 Rebuild 8,489 - - (30,125) (21,636) - - - - - - GS-11001 Gas Station 4 Rebuild 16,898 - - - 16,898 - - - - - - GS-13003 COBUG emissions equipment - - - - - - - - - - - GS-15001 Security at Receiving Stations - 150,000 - - 150,000 - - - - - - Subtotal, One-time Projects 42,040 150,000 - (30,125) 161,915 - - - - - - GAS MAIN REPLACEMENT (GMR) PROGRAM GS-08011 GMR - Project 18 10,531 - - - 10,531 - - - - - - GS-09002 GMR - Project 19 1,683,181 - - (1,072,730) 610,451 1,135,565 - - - - - GS-10001 GMR - Project 20 4,280,658 - - (1,570,222) 2,710,436 2,956,030 - - - - - GS-11000 GMR - Project 21 2,314,845 - - (452,823) 1,862,022 1,396,378 - - - - - GS-12001 GMR - Project 22 - 603,000 - (3,579) 599,421 43,854 3,540,000 - - - - GS-13001 GMR - Project 23 - - - - - - 621,000 3,010,000 - - - GS-14003 GMR - Project 24 - - - - - - - 640,000 3,100,000 - - GS-15000 GMR - Project 25 - - - - - - - - 685,000 3,200,000 - GS-16000 GMR - Project 26 - - - - - - - - 678,000 3,300,000 GS-20000 GMR - Project 27 - - - - - - - - - 700,000 Subtotal, Gas Main Replacement Program 8,289,216 603,000 - (3,099,354) 5,792,862 5,531,827 4,161,000 3,650,000 3,785,000 3,878,000 4,000,000 TOOLS AND EQUIPMENT GS-13002 General Shop Equipment/Tools 48,062 100,000 - (13,957) 134,105 - 100,000 100,000 100,000 100,000 100,000 GS-01019 Global Positioning System 80,306 - - (3,887) 76,419 2,810 - - - - - GS-02013 Directional Boring Machine 413 - - - 413 - - - - - - GS-03007 Directional Boring Equipment 408 - - - 408 - - - - - - GS-03008 Polyethylene Fusion Equip.29,168 - - - 29,168 - - - - - - GS-14004 Gas Distribution System Model 148,608 - - - 148,608 60,918 - - - - - Subtotal, Tools and Equipment 306,965 100,000 - (17,844) 389,121 63,728 100,000 100,000 100,000 100,000 100,000 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 29 | P a g e Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 ONGOING PROJECTS GS-11002 Gas System Improvements 266,770 219,000 - (186,693) 299,077 222,990 225,000 232,000 239,000 246,000 253,417 GS-03009 System Ext. - Unreimbursed 150,595 183,500 - (17,971) 316,124 - 192,675 198,500 204,455 211,000 216,908 GS-80019 Gas Meters and Regulators 438,837 335,000 - - 773,837 - 345,000 355,000 366,000 377,000 387,952 Subtotal, Ongoing Projects 856,202 737,500 - (204,664) 1,389,038 222,990 762,675 785,500 809,455 834,000 858,277 CUSTOMER CONNECTIONS (FEE FUNDED) GS-80017 Gas System Extensions (127) 752,000 - (415,114) 336,759 3,000 950,000 978,500 1,007,855 1,038,091 1,069,234 Subtotal, Customer Connections (127) 752,000 - (415,114) 336,759 3,000 950,000 978,500 1,007,855 1,038,091 1,069,234 GRAND TOTAL 9,494,296 2,342,500 - (3,767,101) 8,069,695 5,821,545 5,973,675 5,514,000 5,702,310 5,850,091 6,027,511 Funding Sources Connection Fees 602,000 - 639,600 662,000 686,360 861,000 728,159 Utility Rates 893,200 - 5,334,075 5,334,075 5,334,075 5,334,075 5,334,075 CIP-RELATED RESERVES DETAIL 6/30/2014 (Actual)12/31/2014 Reappropriations 1,488,296 2,248,150 Commitments 8,006,000 5,821,545 GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 30 | P a g e APPENDIX C: GAS UTILITY RESERVES MANAGEMENT PRACTICES (Amendments to this section are proposed. See the proposed resolution adopting this Financial Plan. This section will be added to the Financial Plan following adoption of any amendments to this section.) GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 31 | P a g e APPENDIX D: GAS UTILITY DEBT SERVICE DETAILS The Gas Utility currently makes debt service payments on one bond issuance, the 2011 Series A Utility Revenue Refunding Bonds. This bond issuance was to refinance the $18 million principal remaining on the Utility Revenue Bonds, 2002 Series A issued for the Gas and Water Utilities to finance various improvements to the distribution systems. $9.4 million of this issuance was secured by the net revenues of the Gas Utility. Debt service for this bond for the financial forecast period is shown in Table 12. Debt service on this bond will continue through 2026. Table 12: Gas Utility Debt Service FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 2011 Utility Revenue Refunding Bonds, Series A 802 803 803 802 800 800 802 803 The 2011 bonds include two covenants stating that 1) the Gas Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the City will maintain “Available Reserves”15 equal to five times the annual debt service. The current financial plan complies with these covenants throughout the forecast period, as shown in Table 13 and Table 14. Table 13: Debt Service Coverage Ratio ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Revenues 34,592 35,993 39,861 42,990 45,740 48,108 49,824 51,759 Expenses (Excluding CIP and Debt Service) (31,114) (34,207) (36,645) (38,889) (39,584) (40,950) (42,237) (43,637) Net Revenues 3,478 1,786 3,216 4,101 6,156 7,158 7,587 8,122 Debt Service 802 803 803 802 800 800 802 803 Coverage Ratio 434% 222% 400% 511% 770% 895% 946% 1011% Table 14: Debt Service Minimum Reserves ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Gas Utilitya 18,802 14,112 11,312 9,209 9,017 9,647 10,704 12,295 Debt Serviceb 803 804 803 802 801 801 802 803 Reserves Ratioc 23x 18x 14x 11x 11x 12x 13x 15x a) CIP, Rate Stabilization, Operations, and Unassigned Reserves b) Gas Utility’s share of the debt service on the 2011 bonds. c) Calculated using only Gas Utility reserves. The actual reserves ratio for the 2011 bonds is calculated based on the combined Electric, Gas, and Water Utility reserves and debt service and is higher than shown here. 15 Available Reserves as defined in the 2011 bonds include the reserves for the Water, Electric, and Gas Utilities GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 32 | P a g e The Gas Utility’s reserves and net revenue are also pledged as security for the bond issuances listed in Table 15, even though the Gas Utility is not responsible for the debt service payments. The Gas Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. Table 15: Other Issuances Secured by Gas Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Gas Utility’s: Net Revenues Reserves 1995 Series A Utility Revenue Bonds Storm Drain $680 Yes No 1999 Utility Revenue Bonds, Series A Wastewater Collection Wastewater Treatment Storm Drain $1,207 No Yes 2009 Water Revenue Bonds (Build America Bonds) Water $1,977* No Yes *Net of Federal interest subsidy GAS UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 33 | P a g e APPENDIX E: DESCRIPTION OF GAS UTILITY COST CATEGORIES This appendix describes the activities associated with the various cost categories referred to in this Financial Plan. Customer Service: This category includes the Gas Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their gas services. Resource Management: This category includes gas procurement, contract management, rate setting, and tracking of legislation and regulation related to the gas industry. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including: surveying the gas system (50% of the system each year) and repairing any leaks found; investigating reports of damaged mains or services and perform emergency repairs; building and replacing gas services for new or redeveloped buildings; and testing and replacing meters to ensure accurate sales metering. This category also includes a variety of functions the utility shares with other City utilities, including: the Field Services team (which does field research of various customer service issues); the Cathodic Protection team (which monitors and maintains the systems that prevent corrosion in metal pipes and reservoirs); and the General Services team (which manages and maintains equipment, paves and restores streets after gas, water, or sewer main replacements, and provides welding services, including certified gas line welding services) Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services and Utilities Department administrative overhead and billing system maintenance costs. Demand Side Management: Includes the cost of administering gas efficiency programs and the direct cost of rebates paid. Engineering (Operating): The Gas Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. APPENDIX F: GAS UTILITY COMMUNICATIONS SAMPLES EXCERPTED DRAFT MINUTES OF THE APRIL 22, 2015 UTILITIES ADVISORY COMMISSION MEETING ITEM 4: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Approving the Fiscal Year 2016 Gas Financial Plan, Including no Recommended Rate Changes for July 1, 2015, and Amending the Gas Utility Reserve Management Practices Resource Planner Eric Keniston summarized the Gas Financial Plan, which recommends no rate change for July 1, 2016, but includes a projected 7% rate increase for July 1, 2017. Revenues were currently below costs, but reserves were high enough to enable delaying any rate increases by one year. He also presented an alternative plan with a 3% rate increase for July 1, 2016 followed by a 4% rate increase for July 1, 2017. He said that not having a gas increase provided some relief given the significant water and wastewater rate increases being proposed. Commissioner Melton reported that the UAC subcommittee, Commissioners Cook and himself, had reviewed the Gas Utility budget and financial plan. He said they had discussed the two alternative rate plans. The overall bill increase for all utilities was projected to be higher in FY 2017 than in FY 2017, and having no increase this year would exacerbate this. However, the subcommittee had decided that there was no right answer and that either alternative was acceptable. Senior Resource Planner Jon Abendschein noted that there may be a need for a drought surcharge on water rates in the current year, which would increase the total bill impact in FY 2016, a possibility that argues for no gas rate increase this year. He also noted that with either alternative, the change in the bill impact was fairly small, less than a percentage point. Commissioner Cook noted that while typically he prefers not putting off increases, in this case, there were not enough compelling reasons to have the rate increase in the current year. Vice Chair Waldfogel said there was enough information to project a significant increase in FY 2017, and indicated a slight preference for having a rate increase in the current year. However, he thought the staff recommendation was acceptable. Commissioner Hall agreed. ATTACHMENT D Commissioner Foster indicated a slight preference for no rate increase in the current year, but thought either alternative was acceptable. Commissioner Hall asked about the proposed Capital Improvement Program reserve changes. H asked why the utility needed capital reserves that appeared to be roughly twice the CIP spend rate. Abendschein stated that that the proposal was preliminary, and that the reserve levels were set to match the historic levels of CIP-related funds in the Reappopriation Reserve. He said that staff would likely return with adjustments to the proposal with the next year’s Financial Plan after discussions with the City's Office of Management and Budget (OMB). ACTION: Commissioner Melton made a motion to approve staff’s recommendation that the UAC recommend that the City Council adopt a resolution approving the FY 2016 Gas Financial Plan, including no rate changes for July 1, 2015, and amending the Gas Utility Reserve Management Practices. Chair Foster seconded the motion. The motion carried unanimously (6-0 with Commissioners Cook, Eglash, Hall, Melton, Foster, and Waldfogel voting yes and Commissioner Chang absent). City of Palo Alto (ID # 5598) Finance Committee Staff Report Report Type: Action Items Meeting Date: 4/7/2015 City of Palo Alto Page 1 Summary Title: Wastewater Collection Financial Plan and Rate Proposals Title: Utilities Advisory Committee Recommendation that the City Council Adopt: 1) a Resolution Approving the Fiscal Year 2016 Wastewater Collection Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices, and (2) a Resolution Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) to Increase Average Wastewater Collection Rates by 9% From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) request that the Finance Committee recommend that the City Council: 1.Adopt a resolution (Attachment A) approving the fiscal year (FY) 2016 Wastewater Collection Utility Financial Plan (Attachment C and amending the Wastewater Collection Utility Reserve Management Practices (Attachment B); and 2.Adopt a resolution (Attachment D) Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) (Attachment E). Executive Summary The FY 2016 Wastewater Collection Utility Financial Plan includes projections of the utility’s costs and revenues through FY 2020. Costs are projected to rise substantially for the next several years due primarily to increasing wastewater treatment costs. As a result, staff projects the need for 9% rate increases each year from FY 2016 through FY 2019. Rates for FY 2020 are projected to increase by 6%. ATTACHMENT G City of Palo Alto Page 2 Staff also recommends changes to the Wastewater Collection Utility Reserves Management Practices to accommodate a change in City budgeting practices for Capital Improvement Program (“CIP”) projects. The UAC reviewed the Wastewater Collection Financial Plan and Rate Projections at its meeting on March 4, 2015 and recommended approval of staff’s recommendations. Background Every year staff presents the Finance Committee with Financial Plans for its Electric, Gas, Water, and Wastewater Collection Utilities and recommends any rate adjustments required to maintain their financial health. These Financial Plans include a comprehensive overview of the utility’s operations, both retrospective and prospective, and are intended to be a reference for UAC, Finance Committee and Council members as they review the budget and staff’s rate recommendations. Each Financial Plan also contains a set of Reserves Management Practices describing the reserves for each utility and the management practices for those reserves. Staff may propose amendments to these reserves as part of the Financial Plans. The UAC reviewed this proposal at its March 4, 2015 meeting. The UAC and Finance Committee reviewed preliminary financial forecasts and rate projections at their February 4, 2015 and March 3, 2015 meetings, respectively. Discussion Proposed Actions for FY 2015 Council approved several transfers between reserves as part of the FY 2015 Financial Plan. Funds were transferred out of the Emergency Plant Replacement and Rate Stabilization Reserves into the newly-created Operations Reserve. These transfers were mainly related to setting up the new reserves structure approved as part of that Financial Plan. For FY 2015, staff proposes an additional transfer of $264,000 from the Rate Stabilization Reserve to the Operations Reserve over the original $1.9 million transfer as discussed in the FY 2015 Financial Plan, in order to cover additional expected expenses and to keep the Operations Reserve at the target level. Proposed Actions for FY 2016 This year’s Wastewater Collection Utility Financial Plan includes the following proposed actions for FY 2016: 1. Amend the CIP Reserve to accommodate a change in City capital budgeting practices. These amendments are summarized below, but for a more in-depth description of the reasons for these changes, see Section 4C of the Financial Plan: a. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects. City of Palo Alto Page 3 b. Transfer the funds that are projected to be released from the Reappropriations Reserve at the beginning of FY 2016 to the CIP Reserve. 2. Transfer $2 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2016. This transfer will enable staff to maintain Operations Reserve levels while spreading the required rate increases for the wastewater collection utility over several years. These proposed actions are described in more detail in the FY 2016 Wastewater Collection Financial Plan (Attachment B). Proposed Rate Adjustments Effective July 1, 2015 Staff proposes to adjust rates as shown in Table 1 below, effective July 1, 2015. The adjustments will increase the system average rate by roughly 9%. These rate changes are included in the amended rate schedules in Attachment E. Table 1: Current and Proposed (as of July 1, 2015) Wastewater Collection Charges Rate Schedule Customer Class Current Rates Proposed Rates Rate Change Monthly Charge (1) ($/month) Quantity Charge ($/ccf) Monthly Charge (1) ($/month) Quantity Charge ($/ccf) Monthly Charge (1) Quantity Charge $/mo % $/ccf % S-1 Residential 29.31 N/A 31.95 N/A 2.64 9% N/A N/A S-2 Commercial 29.31 5.65 31.95 6.16 2.64 9% 0.51 9% S-6 Restaurant 29.31 8.73 31.95 9.52 2.64 9% 0.79 9% S-7 Industrial Dischargers (2) N/A 2.60 N/A 2.83 N/A N/A 0.23 9% (1) Monthly charges for S-1 are fixed monthly charges, and those for S-2 and S-6 are minimum monthly charges. (2) Currently there are no customers on rate schedule S-7, however, CPAU continues to maintain it in case there is a need for the rate schedule in the future. Projected Rate Adjustments over the Forecast Period Table 2 shows the projected rate adjustments included in the Wastewater Collection Utility Financial Plan and their impact on the median residential wastewater bill. Table 2: Projected Rate Adjustments and Residential Bill Impact, FY 2016 to FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Wastewater Utility 9% 9% 9% 9% 6% Estimated Bill Impact for Residential Customers ($/mo) $2.64 $2.88 $3.13 $3.42 $2.48 Staff’s annual assessment of the financial position of the City’s utilities is completed to ensure adequate revenue to fund operations, in compliance with the cost of service requirements set forth in the California Constitution (Proposition 218). This includes making long-term City of Palo Alto Page 4 projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. The current rate proposals are also based on the methodology from the 2011 Wastewater Collection Utility cost of Service and Rate Study completed by Utility Financial Solutions (Staff Report 1399). The main drivers for the increase in the Wastewater Collection Utility’s costs (and therefore rates) over the next several years are the cost for treatment, which is projected to go up by 5% per year as the Regional Water Quality Control Plant makes several upgrades to their facilities, as well as CIP costs for the wastewater collection system. Operating and CIP costs are projected to rise roughly 2%-4% annually. There is uncertainty related to capital costs for the Wastewater Collection Utility in coming years. Wastewater main replacement and rehabilitation costs have risen substantially in recent years, and it is possible that higher CIP expenditures will be required in the future. The Financial Plan includes rate projections for a “High CIP Cost” scenario. Staff plans to perform an updated master plan for the wastewater collection system to gain better information about future main replacement costs. Staff expects this study to commence in 2016. Table 3 shows these projected wastewater rate adjustments along with the other proposed and projected utility rates. Table 3: Rate Adjustments, All Utilities, FY 2016 Proposed, FY 2017 to FY 2020 Projected FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Electric 0% 6% 6% 1% 1% Gas1 0% 7% 4% 4% 4% Wastewater 9% 9% 9% 9% 6% Water 12% 8% 8% 8% 3% Refuse2 9% 9% 8% 2% to 3% 2% to 3% Storm Drain3 2.7% 2% to 3% 2% to 3% 2% to 3% 2% to 3% Total Bill Change4 (%) 6% 8% 7% 5% 3% ($/mo) $14.73 $18.91 $18.53 $14.39 $9.55 (1) Gas rate changes are shown with commodity rates held constant. Actual gas commodity rates will vary monthly with wholesale market fluctuations (2) No forecast available past FY 2018, inflationary increases assumed. (3) Storm Drain Rates increase annually by CPI; existing rates sunset in June 2017 unless reauthorized by a majority vote of property owners. (4) Change in estimated median residential bill, $230.76 as of June 30, 2014 Commission Review and Recommendation At its February 4, 2015 meeting, the UAC requested a more in depth discussion of treatment costs as these are a major cost driver in the wastewater collection utility. Staff noted this and City of Palo Alto Page 5 invited Jamie Allen, Regional Water Quality Control Plant (RWQCP) Manager to discuss RWQCP related operations and CIP plans with the UAC at its March 4, 2015 meeting. This presentation occurred prior to discussion of the wastewater collection financial plan and rates. Mr. Allen summarized the RWQCP’s Long-Range Facilities Plan, which was prepared due to the RWQCP facilities, which are past their design life, needing upgrades to to keep up with treatment advances,. Rehabilitation costs related to biosolids processing and incinerator replacement were discussed, as well as possible new regulatory costs associated with nitrogen and phosphorus discharges. Staff clarified that debt service costs would be increasing as these projects progressed. Commissioners commented that providing recycled water with a total suspended solids (TDS) level acceptable for irrigation should be a high priority, and staff noted that the City had TDS goals and supported expanding recycled water. One Commissioner requested that additional detail on the operations, debt service and CIP costs for wastewater treatment be provided in the future as it would provide better guidance on wastewater collections. Mr. Allen stated he would work with utilities staff to provide that, with Director Fong noting that the costs would be informative only, not an item for action by the UAC. The UAC then reviewed the Wastewater Collection Financial Plan and Rates proposal, but having had any questions related to it addressed as part of the previous item, the UAC approved the proposal unanimously with no discussion. The draft minutes from the UAC’s March 4, 2015 meeting are provided as Attachment F. Timeline Assuming the Finance Committee supports staff’s recommendation, notification of the rate increases will be sent to customers as required under Article XIIID of the California Constitution (as added by Proposition 218). The Financial Plans and rate schedules will then go to the City Council with the FY 2016 budget for adoption, at which time a public hearing will be held. All residents and other interested persons may submit written or oral testimony at the hearing, and may also submit written protests to any or all of the proposed rate increases. Council may adopt the proposed rates unless written protests are filed by a majority of the affected customers. Resource Impact Normal year sales revenues for the Wastewater Collection Utility are projected to increase by roughly 9% ($1.35 million) as a result of these proposed rate increases. See the attached FY 2016 Wastewater Collection Utility Financial Plan for a more comprehensive overview of projected cost and revenue changes for the next five years. City of Palo Alto Page 6 Policy Implications The attached FY 2016 Wastewater Collection Utility Financial Plan includes amended Reserve Management Practices that will modify Council policy with respect to the structure of the Wastewater Collection Utility financial reserves. If approved, these Reserve Management Practices would replace the current Reserve Management Practices, which were last adopted by Council in June 2014 (Resolution 9423). Environmental Review The Finance Committee’s review and recommendation to Council on the proposed Financial Plan and rate adjustments do not meet the definition of a project, pursuant to Section 21065 of the California Environmental Quality Act, thus no environmental review is required. Attachments: Attachment A: Resolution Approving the FY 2016 Wastewater Collection Financial Plan and Amending the Wastewater Collection Utility Reserves Management Practices (PDF) Attachment B: Proposed Amendments to the Wastewater Collection Utility Reserves Management Practices (PDF) Attachment C: Proposed FY 2016 Wastewater Collection Financial Plan (PDF) Attachment D: Resolution of the Council of the City of Palo Alto Adopted a Wastewater Collection Rate Increase and Amending Rate Schedules S-1, S-2, S-6 and S-7 (PDF) Attachment E: Proposed Amendments to Rate Schedules S-1, S-2, S-6 and S-7, effective 7-1-2015 (PDF) Attachment F: Excerpted Draft UAC Minutes of March 4, 2015 (PDF) Attachment A * NOT YET APPROVED * 150223 mf 6053247 Resolution No. _____ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Wastewater Utility Financial Plan and Amending the Wastewater Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made a part of the Financial Plans. C. The City intends to make changes to its Wastewater Utility Reserves Management Practices to amend the purpose and management practices of the Wastewater Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. The Council hereby approves the FY 2016 Wastewater Utility Financial Plan, including the amended Wastewater Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Wastewater Utility as part of the FY 2015 Wastewater Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $2.164 million in FY 2015 from the Rate Stabilization Reserve to the Operations Reserve, the transfer of all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, and the exceedance of the maximum CIP Reserve guidelines through the end of FY 2017, as described in the FY 2016 Wastewater Utility Financial Plan approved via this resolution. // // // Attachment A * NOT YET APPROVED * 150223 mf 6053247 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services Proposed Amendments to Wastewater Collection Utility Reserves Management Practices 6053248 APPENDIX B: WASTEWATER COLLECTION UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Wastewater Collection Utility Financial Plan: Section 1. Definitions a)“Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, if the Financial Plan delivered in conjunction with the FY 2015 budget includes projections for FY 2015 to FY 2019, FY 2015 to FY 2019 would be the Financial Planning Period. b)“Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c)“Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d)“Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Reserves The Wastewater Collection Utility’s Fund Balance is reserved for the following purposes: a)For existing contracts, as described in Section 3 (Reserve for Commitments) b)For operating and capital budgets re-appropriated from previous years, as described in Section 4 (Reserve for Re-appropriations) c)For future year expenditure on the Wastewater Collection Utility’scash flow management and contingencies related to the Wastewater Collection Utility’s Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve) d)For rate stabilization, as described in Section 6 (Rate Stabilization Reserve) e)For operating contingencies, as described in Section 7 (Operations Reserve) f)Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves). Section 3. Reserve for Commitments At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Wastewater Collection Utility at that time. Section 4. Reserve for Re-appropriations At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets, if any, that will be re-appropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. ATTACHMENT B Proposed Amendments to Wastewater Collection Utility Reserves Management Practices 6053248 Section 5. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Wastewater Collection Utility’s CIP Program. Withdrawal of funds from the CIP Reserve requires Council action. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 12 months of budgeted CIP expense Maximum Level 24 months of budgeted CIP expense b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added or removed from to that reserve as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. c) Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for a specific future purpose related to the CIP. Proposed Amendments to Wastewater Collection Utility Reserves Management Practices 6053248 Section 6. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Wastewater Collection Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the Financial Planning Period. Section 7. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Wastewater Collection Utility’s Fund Balance not included in the reserves described in Section 3-Section 6 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 105 days of O&M and commodity expense Maximum Level 150 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Wastewater Collection Utility shall be designed to return the Operations Reserve to its target level within four years. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Wastewater Collection Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 8, below. Section 8. Unassigned Reserve Proposed Amendments to Wastewater Collection Utility Reserves Management Practices 6053248 If the Operations Reserve reaches its maximum level, any further additions to the Wastewater Collection Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them to the Wastewater Collection Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2020, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. WASTEWATER COLLECTIO N UTILITY FINANCIAL PLAN FY 2016 TO FY 2020 TABLE OF CONTENTS Section 1. Definitions and Abbreviations ................................................................................ 2 Section 2. Executive Summary and Recommendations ........................................................... 3 Section 2a. Executive Summary ................................................................................................... 3 Section 2b. Summary of Proposed Actions .................................................................................. 4 Section 3. Rate and Reserve Proposals ................................................................................... 4 Section 3a. Current and Proposed Rates ..................................................................................... 4 Section 3b. Reserves Management Practices, Proposed Change ................................................ 5 Section 3c. Proposed Reserve Transfers ...................................................................................... 6 Section 4. Current State of the Utility ..................................................................................... 7 Section 4a. Utility Overview ......................................................................................................... 7 Section 4b. Current Rates And Competitiveness .......................................................................... 7 Section 4c. Current Utility Financial Status .................................................................................. 9 Section 4d. Status of Reserves ................................................................................................... 10 Section 4e. Debt Service ............................................................................................................. 10 Section 5. Looking Back ....................................................................................................... 10 Section 5a. Background ............................................................................................................. 10 Section 5b. Historical Expenses and Revenues .......................................................................... 11 Section 6. Looking Forward .................................................................................................. 12 ATTACHMENT C WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e Section 6a. Five Year Financial Forecast .................................................................................... 12 1. Overview ...................................................................................................................... 12 2. Treatment Costs ........................................................................................................... 13 3. Operations .................................................................................................................... 14 4. Capital Improvement Program (CIP) ............................................................................ 14 Section 6b. Revenue Requirement and Sources ......................................................................... 16 Section 6c. Risk Assessment and Reserves Adequacy ................................................................ 17 Section 6d. Alternate Scenarios ................................................................................................. 19 Section 6e. Long Term Outlook .................................................................................................. 19 Section 6f. Communications Plan .............................................................................................. 20 Appendices ......................................................................................................................... 21 Appendix A: Wastewater Collection Financial Forecast Detail .................................................. 22 Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail .......... 23 Appendix C: Wastewater Collection Utility Reserves Management Practices .......................... 24 Appendix D: Wastewater Collection Debt Service Details ......................................................... 25 Appendix E: Sample of Wastewater Collection Outreach Materials ......................................... 27 SECTION 1. DEFINITIONS AND ABBREVIATIONS CCF The standard unit of measurement for water delivered to water customers, equal to one hundred cubic feet, or roughly 748 gallons. When water usage is used to assess wastewater charges for commercial customers, it is measured in CCF. CIP Capital Improvement Program CPAU City of Palo Alto Utilities Department FOG Fats, oils, and grease. When flushed into the sewer system, these materials accumulate in parts of the sewer system and create blockages. RWQCP Regional Water Quality Control Plant, the wastewater treatment plant owned and operated by the City of Palo Alto that serves Palo Alto and several surrounding communities. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e SECTION 2. EXECUTIVE SUMMARY AND RECOMMENDATIONS SECTION 2A. EXECUTIVE SUMMARY This document presents a Financial Plan for the City of Palo Alto’s Wastewater Collection Utility for the next five years. It provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. Over the next five fiscal years staff projects that the Wastewater Collection Utility will see wastewater treatment costs rising 5% per year and other costs rising at roughly 3% to 4% per year. In addition, capital improvement project costs have increased as the economy has improved. These costs are shown in Table 1 below. Table 1: Expenses for FY 2014 to FY 2020 Expenses ($000) FY 2014 (actual) FY 2015 (est.) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Treatment Costs 6,863 8,589 9,018 9,469 9,943 10,440 10,962 Operations, Rent, Debt, Other 5,959 5,981 6,161 6,375 6,596 6,824 7,062 Capital Projects 989 4,067 4,985 5,106 5,221 5,341 5,353 TOTAL 13,811 18,637 20,164 20,950 21,760 22,605 23,377 As shown in Table 1, overall costs are expected to rise by about 5% per year from FY 2015 to FY 2020. While expenses are currently larger than revenues, staff has been drawing down the Rate Stabilization Reserve in lieu of having rate increases. To ensure that revenues cover these rising costs, the financial plan includes the rate trajectory shown in Table 2. For FY 2016 to FY 2019 rates are projected to increase 9% per year followed by a 6% increase in FY 2020. Table 2: Projected Wastewater Collection Rate Trajectory for FY 2016 to FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 9% 9% 9% 9% 6% These projected rate increases result in an increase of $2.48 to $3.42 per month for a residential customer’s sewer bill. The Wastewater Collection Utility’s Rate Stabilization Reserves are being used to spread the projected cost increases over several years. This Financial Plan projects that these reserves will be exhausted by FY 2017. In addition, this Financial Plan includes updates to the Wastewater Collection Utility Reserves Management Practices to amend the purpose of the CIP Reserve, as described below. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e SECTION 2B. SUMMARY OF PROPOSED ACTIONS Staff proposes the following action for the Wastewater Collection Utility in FY 2015: 1. Transfer an additional $264,000 from the Rate Stabilization Reserve to the Operations Reserve. (Note that $1.9 million was already transferred from the Rate Stabilization Reserve for FY 2015 in the FY 2015 Financial Plan.) Staff proposes the following actions for the Wastewater Collection Utility in FY 2016: 1. Increase the Wastewater Collection rates as shown in Section 3A. The changes are projected to increase average system revenues by 9% effective July 1, 2015. 2. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve, enabling it to act as a cash flow contingency reserve for capital investment projects as outlined in Section 3B. 3. Transfer all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, as outlined in Section 3B. 4. Transfer $2 million from the Rate Stabilization Reserve to the Operations Reserve. See Section 3C for more details. SECTION 3. RATE AND RESERVE PROPOSALS SECTION 3A. CURRENT AND PROPOSED RATES The current rates were adopted July 1, 2012, when the City increased sewer rates by 5%. The rate change included a revenue-neutral change to the billing methodology for commercial customers. CPAU’s sewer rates for commercial customers are based on the previous winter’s water use. This closely approximates non-irrigation water consumption, which represents actual sewer use. CPAU has three sewer rate schedules: one for residents (S-1), one for commercial customers (S-2), and a special schedule for restaurants (S-6), which discharge higher than average amounts of grease and oil and, therefore, have a greater impact on the sewer system. CPAU also maintains a rate schedule for industrial dischargers (S-7), but there are currently no customers required to be on this rate schedule. Table 3, below, summarizes the current and proposed rates for all customer classes. Comparisons with neighboring communities are discussed later in Section 4B. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e Table 3: Sewer Rates (Current and Proposed) Current (7/1/2012) Proposed (7/1/2015) Change $/mo. % Monthly Service and Minimum Charges ($/month) S-1 (Residential) Service charge $29.31 $31.95 $2.64 9% S-2 (Commercial), S-6 (Restaurant) Minimum $29.31 $31.95 $2.64 9% Quantity Rates S-1 (Residential) $/CCF N/A N/A - - S-2 (Commercial) $/CCF 5.65 6.16 0.51 9% S-6 (Restaurant) $/CCF 8.73 9.52 0.79 9% S-7 (Industrial) $/CCF 2.60 2.83 0.23 9% The Wastewater Collection Utility’s rates are evaluated and implemented in compliance with the cost of service requirements and procedural rules set forth in the California Constitution (Proposition 218). Current rates were structured based on staff’s annual assessment of the wastewater utility’s financial position, as well as the methodology from the January 2011 Wastewater Collection Utility Cost of Service & Rate Study completed by Utility Financial Solutions1. Staff tentatively plans to review and update this cost of service study in 2 to 3 years, unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. Before conducting any new cost of service study, staff will review current rates and the scope of the study with the Utilities Advisory Commission (UAC) and Council to determine the City’s policy priorities. SECTION 3B. RESERVES MANAGEMENT PRACTICES, PROPOSED CHANGE Staff proposes one change to the Wastewater Collection Utility Reserves Management Practices (Appendix C) in this Financial Plan. Staff recommends changing the CIP Reserve definition and management practices so that it becomes a cash flow and contingency reserve for CIP projects. Currently these purposes are served by a combination of the Operations and Reappropriations Reserves, while the CIP Reserve acts as a sinking fund to accumulate funds for large one-time future CIP expenditures (which are rare). The City is changing its budgeting practices starting with FY 2016, and will no longer reappropriate CIP budgets each year. Instead, CIP budgets for long-term or ongoing projects will be renewed each year through the annual budget process. This means that the funds in the Reappropriations Reserve ($6.9 million as of June 30, 2014) will be released after June 30, 2015. These funds acted as a cash flow reserve for CIP projects, and some or all of it should be retained for that purpose. Staff proposes to retain these funds in the CIP reserve, and the proposed changes to the Reserves Management Practices will enable CPAU to do that. Staff proposes to initially set a minimum and maximum guideline for the CIP reserve that will enable it to hold similar amounts to what has typically been held within the Reappropriations 1 Staff Report 1399, Finance Committee, March 1, 2011 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Reserve. Staff intends to review the capital management practices at other agencies and revisit these guideline levels, but initially, staff proposes a minimum guideline level of 12 to 24 months of CIP expenditure. CIP-related funds in the Commitments Reserve would be allowed to count toward that guideline. The CIP-related funds in the Commitments Reserve are equal to the total remaining balance of all CIP contracts currently in progress, and these funds should be taken into account when determining whether CIP cash flow and contingency reserves are adequate. The initial maximum guideline level would be 24 months of CIP expenditures, but the maximum guideline could be exceeded with Council approval. Figure 1 shows the Reappropriations Reserve level as of June 30, 2014, as well as the CIP portion of the Reserve for Commitments. Figure 1: Capital Reserve SECTION 3C. PROPOSED RESERVE TRANSFERS In the FY 2015 Financial Plan several transfers between reserves were approved. Funds were transferred out of the Emergency Plant Replacement and Rate Stabilization Reserve into the newly-created Operations Reserve. These transfers were mainly related to setting up the new approved reserves structure, but a transfer from the Rate Stabilization Reserve to the Operations Reserve of $1.9 million was also approved. This was a planned drawdown so that a rate increase would not be necessary. As costs have changed in FY 2015, an additional transfer of $264,000 is proposed from the Rate Stabilization Reserve to the Operations Reserve. For FY 2016, staff proposes a $2 million transfer from the Rate Stabilization Reserve. This transfer is included in the financial projections in this Financial Plan. It will enable CPAU to maintain adequate Operations Reserve levels while moderating the pace of increase in Wastewater Collection rates. In addition, staff proposes transfers from the Reappropriations WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e Reserve to the CIP Reserve as described in the previous section. The impact of these transfers on reserves levels can be seen in Appendix A. SECTION 4. CURRENT STATE OF THE UTILITY SECTION 4A. UTILITY OVERVIEW The City of Palo Alto’s Wastewater Collection Utility provides sewer service to the residents and businesses of Palo Alto. It is distinct from the Wastewater Treatment Utility, which provides treatment services for surrounding communities in addition to Palo Alto. Nearly 23,300 customers are connected to the sewer system, approximately 21,450 (92%) of which are residential and 1,850 (8%) of which are non-residential. Residential customers pay a flat fee for service. Non-residential customers are billed for sewer service based on their metered winter water usage. There is little variability in revenues for this utility. The Wastewater Collection Utility delivers all the wastewater it collects to the Regional Water Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with several surrounding communities. Palo Alto is responsible for 37% to 40% of the wastewater sent to the RWQCP. The cost of running the RWQCP is contained in the Wastewater Treatment Utility and is not described in detail in this Financial Plan, but since these costs are a major driver of CPAU’s sewer rates, there is some discussion of future trends in treatment costs in Section 6A. Treatment costs make up nearly half of the Wastewater Collection Utility’s expenses as shown in Table 1 above. To collect wastewater from its customers and deliver it to the RWQCP, CPAU owns roughly 18,100 sewer laterals (which collect wastewater from customers’ plumbing systems) and 217 miles of sewer mains (which transport the waste to the treatment plant). These laterals and mains, along with the associated manholes and cleanouts, represent the vast majority of infrastructure used to collect wastewater in Palo Alto. CPAU conducts a sewer rehabilitation and replacement program to replace mains over time as they deteriorate or to increase capacity. For more discussion of this program, see Section 6A. CIP expense accounts for roughly a quarter of the utility’s expenditures. In addition to its CIP, CPAU performs various maintenance activities on the sewer system. These include inspecting and repairing sewer laterals, responding to sewer overflows, regularly cleaning sections of the system heavily impacted by fats, oils, and grease (FOG), and building and replacing sewer laterals for new or redeveloped buildings. The utility also shares the costs of other operational activities (such as customer service, billing, equipment maintenance, and street restoration) with the City’s other utilities. These maintenance and operations expenses, as well as associated administration, debt service, rent, and other costs, make up another quarter of the utility’s expenses. SECTION 4B. CURRENT RATES AND COMPETITIVENESS Table 3 shows the sewer bills for residential customers compared to what they would be under surrounding communities’ rate schedules. The annual sewer bill for a Palo Alto customer is WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e $351.72 under current rates, 34% lower than the average neighboring community. Palo Alto has the third lowest monthly rate of the group. Table 3: Residential Monthly Sewer Bill Comparison Palo Alto Neighboring Communities Neighboring Community Average Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward 29.31 74.42 68.77 27.15 33.95 34.65 28.09 44.51 Based on rates as of January 1, 2015 If the proposed rate change as discussed in Section 3A is adopted by Council, and assuming other agencies do not change their sewer rates, Palo Alto would be 28% lower than the average neighboring community and retain the third lowest bill. Table 4 compares the sewer bills for two classes of commercial customers to what they would be under surrounding communities’ rate schedules. Note that other communities often have specific rates for industrial customers that discharge high intensity wastewater, such as food processors or chemical or electronics manufacturers, but Palo Alto does not currently have any customers that require these special rates. The annual bill for the median Palo Alto commercial customer is $949, or 2% above the average neighboring community. For the average restaurant the annual bill is $5,867, or 1% above the average neighboring community. Table 4: Commercial Monthly Sewer Bill Comparison Palo Alto Neighboring Communities Neighboring Community Average Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward General Commercial $79.10 $131.68 $90.40 $56.80 $52.29 $56.45 $76.48 $77.35 Restaurant $488.88 $575.12 $767.20 $389.20 $209.16 $442.01 $514.64 $482.89 Based on rates as of January 1, 2015 If the proposed rate change as discussed in Section 3A is adopted by Council, and assuming other agencies do not change their sewer rates, bills for Palo Alto restaurants would be about 10% higher than the average neighboring community’s restaurants, and bills for other Palo Alto commercial customers would be about 11% higher than the average neighboring community’s commercial customers. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e SECTION 4C. CURRENT UTILITY FINANCIAL STATUS In FY 2014, treatment costs represented nearly half of the Wastewater Collection Utility’s costs, followed by administration, overhead, and other costs (22%) and Operations (21%). CIP costs were lower than usual (7% of costs) due to a temporary hold on new funding until existing projects were completed. These expenditures are shown in Figure 3. They are also displayed by category of expenditure in Figure 2. The utility’s revenue in FY 2014 came primarily from sewer charges (86%), with the remainder coming from capacity and connection fees (10%), and other sources (4%). Table 5 contains a summary of the Wastewater Collection Utility’s financial outlook for FY 2015. Sales are very stable since roughly 60% of sales are to residential customers, whose rate consists of fixed monthly service charges. A component of business sales revenues is based on winter water use levels, which are fairly stable as well. For FY 2015, no appreciable variances in sales revenues from budget are projected. Connection and capacity fees associated with new development and redevelopment continue to be higher than budget, increasing other revenues. Operations and maintenance costs are projected to be slightly higher, based on historical trends. Net withdrawals from reserves are projected to be $1.7 million, slightly lower than the budgeted $1.8 million. Table 5: Projected Net Revenue, FY 2015 Wastewater Collection - Operating Activity All figures in thousands ($000’s) Adopted Budget FY 2015 Projected FY 2015 Activity Variance to Budget Net Sales to date 15,010 15,010 - Other revenues to date 1,565 1,971 406 Treatment costs to date (8,589) (8,589) - Other expenses to date (9,823) (10,048) (587) Total (1,837) (1,656) 181 Figure 3: FY 2014 Costs by Activity Treatment, 50% CIP, 7% Operations, 21% Admin/ Overhead, 18% Other, 4% Figure 2: FY 2014 Costs by Category Treatment, 50% CIP, 7% Supplies/ Materials / Other, 6% Salaries/ Benefits, 21% Admin/ Overhead, 16% WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e SECTION 4D. STATUS OF RESERVES Appendix A shows the projected status of the Wastewater Collection Utility’s reserves at the end of FY 2015. Total reserves at year end (6/30/2015) are projected to be $14.9 million, with $2.3 million remaining in the Rate Stabilization Reserve for future years and $4.3 million in the Operations Reserve, which is at the Reserve Target level. As detailed in Appendix C: Wastewater Collection Utility Reserves Management Practices and in Section 3B, this plan includes a change to the structure of the utility’s CIP Reserve to make it a cash flow and contingency reserve for CIP projects . SECTION 4E. DEBT SERVICE The Wastewater Collection Utility’s annual debt service is roughly $128,000 per year. This is related to one bond issuance that will require payments through 2024. This issuance, the 1999 Utility Revenue Bonds, Series A, is a joint issuance between the Storm Drain, Wastewater Treatment, and Wastewater Collection Utilities refinancing several different earlier bond issuances. The City is in compliance with all covenants on that bond. Additional detail is provided in Appendix D. SECTION 5. LOOKING BACK SECTION 5A. BACKGROUND The Wastewater Utility commenced operation in 1899 to serve Palo Alto and Stanford. In its first three decades the system grew to 60 miles of sewers. Raw sewage was discharged into Mayfield Slough at the edge of the Bay. In the 1930s, at the behest of the State Department of Health, Palo Alto built the South Bay’s first wastewater treatment plant. At that time the sewer system served 20,500 Stanford and Palo Alto residents and a cannery. The plant was upgraded twice in the 1940s and 1950s to increase capacity.2 At the same time, the postwar population and industrial boom in the 1950s required rapid expansion of the sewer system. In the first half of the 1960s Palo Alto’s area doubled, as did wastewater flows, overwhelming the capacity of several of the utility’s “trunk lines,” which are the largest diameter main sewer lines carrying wastewater to the treatment plant. This prompted the City, in 1965, to perform the first of its sewer master plans to identify needed capacity improvements. At that point the Wastewater Utility’s system comprised more than 150 miles of sewer mains.3 In 1968 the City signed agreements with the Cities of Mountain View and Los Altos to build a new regional treatment plant, the RWQCP, which is still in operation today. Since 1940 the City had been providing treatment services to the East Palo Alto Sanitary District through an existing agreement, and was also serving Stanford University by transporting wastewater across the City’s sewer system to the treatment plant. Both of these organizations became partners in the RWQCP as well. At the same time the Town of Los Altos Hills became the sixth partner as it 2 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pp 2-1 through 2-2 3 Wastewater Collection and Storm Drainage, 1965, Brown and Caldwell Consulting Engineers, pp 4, 6-7, 143 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e signed an agreement with the City to connect the Town’s sewer system to the City’s sewer system to carry wastewater to the new RWQCP. The current agreements for the RWQCP extend through 2035.4 In the 1980s the City directed increased attention to the condition of its sewer system, performing a series of studies of groundwater inflow and infiltration into the system. The study found high rates of infiltration, estimating that as much as 40% of the water going to the RWQCP from Palo Alto’s system was groundwater and stormwater rather than wastewater.5 In some parts of Palo Alto the land surface had subsided due to groundwater pumping by the water utility, and though that practice had ceased many years earlier as the water utility switched to the Hetch Hetchy system, parts of the city had already subsided two to five feet. This subsidence had damaged several parts of the sewer collection system, leading to reduced slopes for sewer mains that caused reductions in capacity. In response to these studies the City commenced an accelerated sewer system rehabilitation program.6 At that point the sewer system comprised over 190 miles of mains.7 A Master Plan study in 1988 recommended a variety of capacity expansions, and in the 1990s the City completed about half of them. However, a 2004 Master Plan update found that the accelerated sewer rehabilitation plan started in the early 1990s had substantially reduced infiltration, easing the capacity problems that had led the to the recommended capacity increases in the 1988 study. Several of the outstanding projects were canceled and replaced with a different set of projects.8 At the same time the City updated its hydraulic model and developed greater capacity to do system planning in house. Today, with a system comprising 217 miles of sewer mains, the Wastewater Collection Utility continues to serve over 23,300 Palo Alto residences and businesses, and transports wastewater to the RWQCP for Stanford University and the Town of Los Altos Hills. SECTION 5B. HISTORICAL EXPENSES AND REVENUES Table 6 shows the Wastewater Collection Utility’s expenses and revenues for the past five years. Treatment charges made up 41% of total expenses in FY 2010 and have been increasing by 8% per year on average. FY 2014 treatment costs were lower than average due to a one time change in accounting for encumbrances. While FY 2014 treatment charges were 50% of total cost, this was mainly due to a one-year delay in new capital improvement budgeting for main replacements. Excluding treatment and CIP, costs for this utility have increased by about 8% on average since 2010. Sales revenues increased in FY 2013, primarily due to rate increases, but the largest item to note are the continued increases in connection and capacity fees from new construction. These have increased 38% since FY 2010. Also notable is the negative interest earned in FY 2013, 4 Long Range Facilities Plan for the Regional Water Quality Control Plant, August 2012, Carollo Engineers, pg 2-2 5 Wastewater Collection System Master Plan – Capacity Assessment, January 2004, MWH Americas, Inc., pg ES-2 6 CMR 183:90, Infrastructure Review and Update, March 1, 1990 7 Master Plan of the Wastewater Collection System, December 1988, Camp Dresser & McKee, Inc., pg 1-2 8 Wastewater Collection System Master Plan – Capacity Assessment, January 2004, MWH Americas, Inc., pg ES-3 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e which represents a decrease in the market value of the City’s investment portfolio that accounting rules require the City to recognize at the end of each fiscal year. Given that the City holds its investments to maturity these “mark to market” gains and losses do not impact the utility’s long term financial position. Table 6: Historical Expenses, Wastewater Collection Utility SECTION 6. LOOKING FORWARD SECTION 6A. FIVE YEAR FINANCIAL FORECAST 1. OVERVIEW Staff has prepared a forecast of costs and revenues through FY 2020. As shown in Table 7 (and Appendix A), the Wastewater Collection Utility’s total costs are projected to increase by 4.6% per year on average for FY 2016 through FY 2020. The utility’s sales revenue will need to increase by 8% annually, on average, through FY 2020 since revenues are currently below costs in a normal year. Over the last several years actual costs for operations, maintenance, and CIP have been relatively low. The cost of maintaining and replacing the distribution system in FY 2013 was almost the same as it was in FY 2009, and this has offset the rising cost of treatment. This was 2010 2011 2012 2013 2014 5 RETAIL SALES REVENUE 14,490 14,287 14,094 15,019 14,588 6 CONNECTION AND CAPACITY FEES 469 1,081 989 1,609 1,703 7 OTHER / TRANSFERS IN 278 307 264 545 361 8 INTEREST 674 454 494 (211) 339 9 TOTAL SOURCES OF FUNDS 15,910 16,129 15,841 16,963 16,991 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)6,519 7,414 8,895 8,314 6,863 12 ALLOCATED CHARGES (CIP&OPERATING)1,535 1,787 791 1,926 2,359 13 CUSTOMER SERVICE 239 281 72 1 133 14 DISTRIBUTION OPERATIONS 1,997 2,227 2,466 2,617 2,570 15 ENGINEERING (OPERATING)220 195 258 271 310 16 DEBT SERVICE 128 128 128 128 129 17 RENT 115 115 106 110 217 18 OTHER/ TRANSFERS OUT 168 267 88 147 241 19 CAPITAL IMPROVEMENT FUNDING 4,935 4,630 4,274 4,094 989 20 ALLOWANCE FOR UNSPENT CAPITAL FUNDS - 21 TOTAL USES OF FUNDS 15,856 17,044 17,079 17,610 13,811 22 23 INTO / (OUT OF) RESERVES 54 (914) (1,238) (647) 3,180 Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e likely due to the economic downturn, which led to lower costs for services and materials. Staff has seen indications that this trend has reversed. Prices are rising for contract services and materials, and this means that the utility is more likely to see rising costs in the future. If costs for operations, maintenance, and CIP increase more quickly than projected in this plan, either due to the improving economy or other factors, larger rate increases may be required. Table 7: Five Year Financial Forecast Summary 2. TREATMENT COSTS Treatment expenses represent the Wastewater Collection Utility’s share of the costs of operating the RWQCP. Per the partnership agreements between Palo Alto and its partner agencies, these charges are assessed based on a formula that takes into account the total amount of wastewater delivered, the amount of organic material in it, its ammonia content, and the total suspended solids it is carrying. The Wastewater Collection Utility’s assessed share of the RWQCP’s revenue requirement fluctuates in the 38% to 40% range. Mountain View is the other large agency served by the RWQCP (39% of the revenue requirement for FY 2014) with the smaller agencies (Stanford, Los Altos, East Palo Alto, and Los Altos Hills) making up the remainder of the flow to the treatment plant. In the next five years treatment costs are expected to rise by 5% per year, primarily due to increased CIP spending by the RWQCP. In the longer term, treatment costs are expected to continue to rise at that rate as major upgrade and replacement projects are undertaken at the plant. These costs are described in more detail in Section 6E. Actual Adopted Projected 2014 2015 2015 2016 2017 2018 2019 2020 1 2 % CHANGE IN RETAIL RATE 0.0%0.0%0.0%9.0%9.0%9.0%9.0%6.0% 3 PROJECTED CHANGE IN RETAIL SALES REVENUE - - 1,352 1,473 1,606 1,751 1,272 4 5 RETAIL SALES REVENUE 14,588 15,010 15,010 16,305 17,774 19,374 21,119 22,411 6 CONNECTION AND CAPACITY FEES 1,703 954 1,360 1,402 1,445 1,487 1,519 1,578 7 OTHER / TRANSFERS IN 361 302 302 302 302 302 302 302 8 INTEREST 339 309 309 309 309 309 309 309 9 TOTAL SOURCES OF FUNDS 16,991 16,575 16,981 18,319 19,830 21,473 23,249 24,600 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)6,863 8,589 8,589 9,018 9,469 9,943 10,440 10,962 12 ALLOCATED CHARGES (CIP&OPERATING)2,359 1,844 2,576 2,646 2,725 2,807 2,891 2,978 CUSTOMER SERVICE 133 268 147 155 166 177 188 200 13 DISTRIBUTION OPERATIONS 2,570 2,816 2,875 2,960 3,064 3,174 3,286 3,403 ENGINEERING (OPERATING)310 369 325 335 347 360 373 387 14 DEBT SERVICE 129 128 128 128 128 128 128 128 15 RENT 217 223 223 229 236 243 251 258 16 OTHER/ TRANSFERS OUT 241 108 108 108 108 108 108 108 17 CAPITAL IMPROVEMENT FUNDING 989 4,067 4,067 4,985 5,106 5,221 5,341 5,353 ALLOWANCE FOR UNSPENT CAPITAL FUNDS - - (400) (400) (400) (400) (400) (400) 18 TOTAL USES OF FUNDS 13,811 18,412 18,637 20,164 20,950 21,760 22,605 23,377 19 20 INTO / (OUT OF) RESERVES 3,180 (1,837) (1,656) (1,845) (1,120) (287) 644 1,223 Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e 3. OPERATIONS Operations costs include the Customer Service, Distribution Operations, Engineering, and Allocated Charges categories in Table 7, above. Debt service, rent, and transfers are also included in this category. Customer Service costs are primarily related to the call center and collections on delinquent accounts. The Distribution Operations category includes preventative and corrective maintenance on sewer mains and laterals, investigation of sewer overflows, regular cleaning of heavily impacted sections of the sewer system, and services shared with other utilities (such as street restoration and equipment maintenance). Allocated Charges include the costs of accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services and Utilities Department administrative overhead and billing system maintenance costs. Operations costs are projected to increase by 3% per year, on average, over the forecast period. Underlying these projections are salary and benefit, consumer price index, and other cost projections used in the City’s long-range financial forecast. 4. CAPITAL IMPROVEMENT PROGRAM (CIP) The Wastewater Collection Utility’s CIP consists of the following programs: The Sewer System Replacement/Rehabilitation Program, under which the Wastewater Collection Utility replaces aging sewer mains. Customer Connections, which covers the cost when the Wastewater Collection Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. CPAU charges a fee to these customers to cover the cost of these projects. Ongoing Projects, which covers the cost of replacing degraded manholes and sewer laterals, as well as the cost of capitalized tools and equipment. The Sewer System Replacement and Rehabilitation Program funds the replacement of deteriorating sewer mains and projects to increase capacity in various parts of the sewer system. The sewer system consists of over 217 miles of mains, and CPAU uses a variety of tools to establish which sections are in need of replacement. Maintenance statistics (such as records of the location and number of sewer overflows on the system) and videotape of sewer mains during regular cleaning can reveal areas with large amounts of deteriorating pipe. CPAU uses a scoring system to prioritize which mains to replace first, and coordinates with the Public Works street maintenance program to avoid cutting into newly repaved streets. A major goal of the program is to minimize groundwater and rainwater infiltration. As mains deteriorate they begin to allow groundwater and rainwater to infiltrate the system. Some level of infiltration is expected on any sewer system, but if there is too much, the combined flow of wastewater and groundwater/rainwater can overwhelm the capacity of various parts of the sewer system. Reducing infiltration can reduce the need to expand the system to accommodate increased flow. To achieve this goal, deteriorating mains are either repaired with a plastic lining or replaced. CPAU replaces or repairs approximately 25,000 feet of main per year, or 2.5% of the system. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e The CIP program also funds sewer capacity improvements. CPAU uses a hydraulic model, data from various flow meters on the system, and land use data to identify sections of the system that are being overloaded. When sewer mains are operating at or above their capacity on a regular basis it will increase the likelihood of sewer overflows. CPAU also does occasional comprehensive master planning studies to identify necessary capacity improvements. The most recent study, in 2004, identified eight projects, three of which have been completed. The remaining four projects are low priority projects and will be scheduled and planned as the need arises. Over the last few years, main replacement costs have been increasing, for Wastewater as well as the Gas and Water utilities. The replacement cost per linear foot has increased by between 25 and 50% in some cases. Several factors may be contributing to this. Economic recovery in the Bay Area, as well as a greater focus on infrastructure improvement by many municipal agencies and utilities could be creating high demand for contractors in this field. There may be ongoing greater costs for newer, more leak resistant pipe materials. Should these trends prove to be less than short-term phenomena, wastewater main replacement budgets may need to be increased by $1.5 to $1.7 million more per year to keep up the current pace of replacement. As the last master plan study was updated over a decade ago, and due to these escalating costs, staff is considering a new master plan study, tentatively planned for 2016, to evaluate the current state of the sewer system and determine the necessary rate of main replacement in future years. The process may reveal a need for a higher or lower replacement, or possibly target areas for more urgent focus. In the case that prices remain high and the updated plan shows a need for similar rates of replacement that CPAU had previously planned, CIP costs will rise. Staff analyzed this “High CIP Cost” scenario in Section 6D. Ongoing Projects and Customer Connections are projected to cost approximately $1.27 million in FY 2016 and increase by 2.8% each year through the end of the forecast period. Actual expenses for these projects fluctuate annually depending on how many defective laterals and manholes are discovered during routine maintenance, as well as how much development and redevelopment is going on that prompts the replacement or upgrade of sewer laterals. It is worth noting that property owners pay a fee for sewer lateral replacement or expansion during redevelopment, so when the number of projects increase, so does fee revenue. Projected CIP spending is displayed in Table 8 for the 5-year financial forecast period. Table 8: Projected CIP Spending Project Category Current Budget* Spending, Curr. Yr Remain. Budget**Committed FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Sewer Rehab/Augmentation 10,338 (334) 10,005 8,828 3,420 3,523 3,620 3,722 3,833 Ongoing Projects 1,510 (272) 1,238 860 882 907 932 958 985 Customer Connections 530 (89) 441 5 383 394 405 416 429 TOTAL 12,379 (695) 11,684 9,692 4,685 4,824 4,957 5,096 5,246 *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Equal to CIP Reserves (Reserve for Reappropriations + Reserve for Commitments). WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e Aside from customer connections, the CIP plan for FY 2016 to FY 2020 is funded by sewer rates and capacity fees. The details of the plan are shown in Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail. SECTION 6B. REVENUE REQUIREMENT AND SOURCES The revenue requirement is the total amount of revenue that must be collected from customers in order to meet the planned expenditures for the Wastewater Collection Utility. Costs for the Wastewater Collection Utility are projected to increase by nearly 5% per year through FY 2020. Without rate increases, by FY 2020 costs would exceed revenues by nearly $6.2 million per year. Matching costs to revenues by FY 2020 will require 9% increases in sales revenues each year for FY 2016 to FY 2019, as shown in Figure 4, below. There was no rate increase in FY 2015. Instead, there was a one-time cost savings since there was no new sewer main replacement project in FY 2014, and there was a one-time decrease in treatment costs related to a change in billing methodology by the RWQCP. The utility has seen substantial increases in connection and capacity fee revenues in recent years, offsetting the need for increased sales revenue, and these are assumed to continue, albeit slightly reduced from current levels. Each of the projected FY 2016 to FY 2019 rate increases will increase residential sewer bills by $2.64 to $3.42 per month. Figure 4: Wastewater Collection Fund Revenue and Cost Projections WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e Figure 5 shows the reserve reallocations that implement the current and proposed Reserves Management Practices. Figure 5: Wastewater Collection Reserves Projections SECTION 6C. RISK ASSESSMENT AND RESERVES ADEQUACY The Wastewater Collection Utility currently has one contingency reserve, the Operations Reserve, and this Financial Plan maintains reserves within their approved guideline levels throughout the forecast period, as shown in Figure 6 below. Reserve levels also exceed the short term risk assessment for the utility. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e Figure 6: Operations Reserve Adequacy Staff performs an annual assessment of risks for the Wastewater Collection Utility. For this evaluation, staff estimates the revenue shortfall due to: 1. the maximum observed budget-to-actual variance in one year during the past five years; 2. an increase of 10% in system improvement CIP expenditures for the year; and 3. an increase of 10% in treatment costs. Table 9 summarizes the risk assessment calculation for the Wastewater Collection Utility. The Operations Reserve is projected to be adequate to manage these levels of risk over the entire forecast period. Table 9: Wastewater Collection Risk Assessment FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total Revenue ($000) 15,020 16,315 17,784 19,384 21,129 Max. Historical Budget-to-Actual variance 10% 10% 10% 10% 10% Budget-to-Actual Risk ($000) 1,502 1,632 1,778 1,938 2,113 System Rehabilitation CIP Budget ($000) 3,695 4,602 4,712 4,816 4,925 CIP Contingency @10% ($000) 370 460 471 482 493 Treatment Budget ($000) 8,589 9,018 9,469 9,943 10,440 Treatment Cost Contingency @10% ($000) 859 902 947 994 1,044 Total risk assessment value ($000) 2,731 2,994 3,196 3,414 3,650 Projected Operations Reserve Level ($000) 4,482 3,663 3,376 4,019 5,242 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e SECTION 6D. ALTERNATE SCENARIOS The forecast described in the previous sections assumes that wastewater main replacement costs are about the same as they were in previous years. There is substantial uncertainty about this assumption. Staff has created a separate CIP scenario in which main replacement budgets are 50% higher than the base forecast. As described in Section 6A (Five Year Financial Forecast) prices for the most recent main replacement projects have been nearly 50% higher than previous projects. The current forecast assumes that these prices have been temporary spikes due to the economy picking up, but that may not be the case. The “High CIP Cost” scenario assumes that CPAU continues its current pace of main replacement and prices remain at these higher levels. Figure 7 shows the rate increases under the High CIP Cost scenario and the base case (inflationary increases in CIP budgets). If this scenario becomes reality, it may be possible to phase in the increase in CIP budgets over several years to defer the rate impact into later years. CPAU will be developing a Wastewater Collection System Master Plan, planned for 2016. It will give CPAU the information it needs to determine the feasibility of these types of strategies. Figure 7: Rate increases for High CIP Cost scenario SECTION 6E. LONG TERM OUTLOOK In the longer term (5 to 35 years) the primary factor that could lead to increased costs for the Wastewater Collection Utility are major upgrades at the RWQCP, a share of which will be WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e allocated to the utility as part of treatment costs. These upgrades includes replacement or rehabilitation of the parts of the facility that pump raw sewage to the main treatment works (the headworks), separate out primary sludge (the primary settling tank), process sludge (the bio-solids facility), and treat wastewater (the fixed film reactors). Upgrades to the laboratories and operational buildings are planned as well. In addition, the 72-inch regional trunk sewer line flowing into the plant needs to be evaluated and rehabilitated. Based on detailed project cost projections provided by RWQCP staff, treatment costs are likely to continue to increase by roughly 5% per year through at least 2030. Two of Palo Alto’s comparison cities, Mountain View and Los Altos, are partners in the RWQCP and will see similar increases, but other comparison agencies may not. SECTION 6F. COMMUNICATIONS PLAN The FY 2016 Wastewater Collection Utility communications strategy covers three primary areas: rates, operations and infrastructure, and safety. Communication about wastewater rate adjustments will highlight the important infrastructure and operations upgrades that are occurring at the Regional Water Quality Control Plant to improve wastewater collection utility services. To keep customers apprised of the status and accomplishments of CIP projects, a network of project web pages are maintained and updated as needed. Traffic is driven to the website via ads in publications, newspaper inserts, social media and email blasts. An important communications topic for the wastewater utility is avoiding sewer back-ups due to FOG (fats, oil and grease) and trash being dumped down drains and toilets. Safety topics are emphasized year-round. Staff continues its outreach goal of educating customers about the utility’s gas-sewer line cross-bore inspection program, including the importance of calling Utilities first when there is a sewer back-up. Staff ran a successful campaign featuring one of our primary sewer repair crewmen to highlight this issue. Promotional activity about wastewater utility maintenance and safety operations includes use of bill inserts, ads in local print publications, website pages, email blasts and social media. While print materials and website pages feature prominently, CPAU is increasing the outreach emphasis on use of direct mail, social media and digital advertising including videos and short commercials on the local television channels. Staff is also attending more community safety/emergency preparation events and neighborhood meetings. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e APPENDICES Appendix A: Wastewater Collection Financial Forecast Detail Appendix B: Wastewater Collection Utility Capital Improvement Program (CIP) Detail Appendix C: Wastewater Collection Utility Reserves Management Practices Appendix D: Wastewater Collection Debt Service Details Appendix E: Sample of Wastewater Collection Outreach Materials WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e APPENDIX A: WASTEWATER COLLECTION FINANCIAL FORECAST DETAIL Actual Adopted Projected 2014 2015 2015 2016 2017 2018 2019 2020 1 2 % CHANGE IN RETAIL RATE 0.0%0.0%0.0%9.0%9.0%9.0%9.0%6.0% 3 PROJECTED CHANGE IN RETAIL SALES REVENUE - - 1,352 1,473 1,606 1,751 1,272 4 5 RETAIL SALES REVENUE 14,588 15,010 15,010 16,305 17,774 19,374 21,119 22,411 6 CONNECTION AND CAPACITY FEES 1,703 954 1,360 1,402 1,445 1,487 1,519 1,578 7 OTHER / TRANSFERS IN 361 302 302 302 302 302 302 302 8 INTEREST 339 309 309 309 309 309 309 309 9 TOTAL SOURCES OF FUNDS 16,991 16,575 16,981 18,319 19,830 21,473 23,249 24,600 10 11 PURCHASES/CHARGES OF UTILITIES (TREATMENT)6,863 8,589 8,589 9,018 9,469 9,943 10,440 10,962 12 ALLOCATED CHARGES (CIP&OPERATING)2,359 1,844 2,576 2,646 2,725 2,807 2,891 2,978 CUSTOMER SERVICE 133 268 147 155 166 177 188 200 13 DISTRIBUTION OPERATIONS 2,570 2,816 2,875 2,960 3,064 3,174 3,286 3,403 ENGINEERING (OPERATING)310 369 325 335 347 360 373 387 14 DEBT SERVICE 129 128 128 128 128 128 128 128 15 RENT 217 223 223 229 236 243 251 258 16 OTHER/ TRANSFERS OUT 241 108 108 108 108 108 108 108 17 CAPITAL IMPROVEMENT FUNDING 989 4,067 4,067 4,985 5,106 5,221 5,341 5,353 ALLOWANCE FOR UNSPENT CAPITAL FUNDS - - (400) (400) (400) (400) (400) (400) 18 TOTAL USES OF FUNDS 13,811 18,412 18,637 20,164 20,950 21,760 22,605 23,377 19 20 INTO / (OUT OF) RESERVES 3,180 (1,837) (1,656) (1,845) (1,120) (287) 644 1,223 21 24 ENDING COMMITMENTS & REAPPROPRIATIONS 8,312 8,312 1,454 1,454 1,454 1,454 1,454 1,454 23 ENDING PLANT REPLACEMENT RESERVE - - - - - - - - ENDING CIP RESERVE - - 6,858 6,858 6,858 6,858 6,858 6,858 22 ENDING RATE STABILIZATION RESERVE 4,556 2,322 2,322 301 - - - - ENDING OPERATIONS RESERVE 3,728 4,127 4,306 4,482 3,663 3,376 4,019 5,242 25 UNASSIGNED RESERVES - - - - - - - - 26 RISK ASSESSMENT VALUE 2,230 2,722 2,722 2,876 3,043 3,221 3,409 3,598 27 28 OPERATIONS RESERVE GUIDELINES 29 MIN (60 DAYS TREATMENT/O&M EXP)1,915 2,358 2,461 2,561 2,670 2,785 2,904 3,029 TARGET (105 DAYS TREATMENT/O&M EXP)3,352 4,127 4,306 4,482 4,673 4,873 5,082 5,300 30 MAX (150 DAYS TREATMENT/O&M EXP)4,788 5,895 6,152 6,402 6,675 6,961 7,260 7,571 31 Fiscal Year WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e APPENDIX B: WASTEWATER COLLECTION UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 SEWER SYSTEM REHABILITATION AND AUGMENTATION (SSR/A) PROGRAM WC-07004 SSR/A - Project 20 39,293 - - - 39,293 - - - - - - WC-08012 SSR/A - Project 21 188,809 - - (23,087) 165,722 - - - - - - WC-09001 SSR/A - Project 22 (37,132) - - (43,777) (80,909) 6,087 - - - - - WC-10002 SSR/A - Project 23 1,187,290 - - (95,978) 1,091,312 1,160,999 - - - - - WC-11000 SSR/A - Project 24 2,512,435 - - (67,577) 2,444,858 2,282,801 - - - - - WC-12001 SSR/A - Project 25 2,854,977 - - (74,366) 2,780,611 2,296,851 - - - - - WC-13001 SSR/A - Project 26 272,550 3,000,000 - (28,745) 3,243,805 3,040,000 - - - - - WC-14001 SSR/A - Project 27 - 320,000 - - 320,000 40,950 3,090,000 - - - - WC-15001 SSR/A - Project 28 - - - - - - 330,000 3,183,000 - - - WC-16001 SSR/A - Project 29 - - - - - - - 340,000 3,270,000 - - WC-17001 SSR/A - Project 30 - - - - - - - - 350,000 3,362,000 - WC-19001 SSR/A - Project 31 - - - - - - - - - 360,000 3,462,500 WC-20000 SSR/A - Project 32 - - - - - - - - - - 370,000 Subtotal, Sewer Rehab./Augmentation 7,018,222 3,320,000 - (333,530) 10,004,692 8,827,688 3,420,000 3,523,000 3,620,000 3,722,000 3,832,500 ONGOING PROJECTS WC-13002 Fusion & Gen. Equip./Tools 28,132 50,000 - - 78,132 - 50,000 50,000 50,000 50,000 50,000 WC-15002 WW System Improvements 281,702 225,000 - (48,054) 458,648 75,653 232,000 239,000 246,000 253,000 260,000 WC-99013 Sewer / Manhole Rehab.825,516 100,000 - (224,261) 701,255 784,358 600,000 618,000 636,000 655,000 675,000 Subtotal, Ongoing Projects 1,135,350 375,000 - (272,315) 1,238,035 860,011 882,000 907,000 932,000 958,000 985,000 CUSTOMER CONNECTIONS (FEE FUNDED) WC-80020 Sewer System Extensions 158,227 372,000 - (89,334) 440,893 4,572 383,000 394,000 405,000 416,000 428,500 Subtotal, Customer Connections 158,227 372,000 - (89,334) 440,893 4,572 383,000 394,000 405,000 416,000 428,500 GRAND TOTAL 8,311,799 4,067,000 - (695,179) 11,683,620 9,692,271 4,685,000 4,824,000 4,957,000 5,096,000 5,246,000 Funding Sources Connection/Capacity Fees 750,000 - 871,000 894,000 917,000 940,000 986,534 Funded by Rates and Other Revenue 3,695,000 - 3,814,000 3,930,000 4,040,000 4,156,000 4,259,466 CIP-RELATED RESERVES DETAIL 6/30/2014 (Actual)12/31/2014 Reappropriations 6,858,799 1,991,349 Commitments 1,453,000 9,692,271 WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e APPENDIX C: WASTEWATER COLLECTION UTILITY RESERVES MANAGEMENT PRACTICES (Amendments to this section are proposed. See the proposed resolution adopting this Financial Plan. This section will be added to the Financial Plan following adoption of any amendments to this section.) WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e APPENDIX D: WASTEWATER COLLECTION DEBT SERVICE DETAILS The Wastewater Collection Utility currently makes payment on its share of one bond issuance, the 1999 Utility Revenue Bonds, Series A, which is due to be retired in 2024. This $17.7 million issuance refinanced various earlier Storm Drain, Wastewater Treatment, and Wastewater Collection Utility bond issuances. The Wastewater Collection Utility’s share of the issuance was roughly $1.9 million, which represented the second refinancing of the remaining principal of a 1990 bond issuance that itself was a refinancing of a 1985 issuance that financed a variety of improvements to the sewer system. The cost of debt service for the Wastewater Collection Utility’s share of this bond issuance for the financial forecast period is as follows: Table 100: Wastewater Collection Utility Debt Service ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 1999 Utility Revenue Bonds, Series A 128 128 128 128 128 128 The 1999 Utility Revenue Bonds include two covenants stating that 1) the Wastewater Collection Utility will maintain a debt coverage ratio of 125% of debt service, and 2) that the City will maintain “Available Reserves”9 equal to five times the annual debt service. The current financial plan maintains compliance with both covenants throughout the forecast period. Compliance with covenant one is shown below in Table 11, below. Due to the small size of the annual debt service payment for these bonds, the Wastewater Collection Utility’s Operations Reserve alone more than satisfies the second covenant at more than 30 times annual debt service throughout the forecast period. Table 111: Debt Service Coverage Ratio ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Revenues 16,981 18,319 19,830 21,473 23,249 24,600 Expenses (Excl. CIP and Debt Service) (14,842) (15,451) (16,115) (16,811) (17,537) (18,296) Net Revenues 2,139 2,868 3,715 4,662 5,712 6,304 Debt Service 128 128 128 128 128 128 Coverage Ratio 1671% 2241% 2902% 3642% 4463% 4925% The Wastewater Collection Utility’s reserves (but not its net revenues) are also considered security for the Storm Drain and Wastewater Treatment Utilities’ shares of the debt service on the 1999 bonds. Throughout the term of the bonds there remains a small risk that the Wastewater Collection Utility’s reserves could be called upon to make a debt service payment on behalf of one of those utilities if it cannot meet its debt service obligations. Staff does not foresee this occurring based on the current financial condition of those utilities. If the 9 Available Reserves as defined in the 1999 Utility Revenue Bonds included reserves for the Water, Wastewater Treatment, Wastewater Collection, Refuse, Storm Drain, Electric, and Gas Utilities WASTEWATER COLLECTION UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e Wastewater Collection Utility’s reserves were used this way, any amounts advanced would have to be repaid by the borrowing utility. One other bond series is secured by the net revenues (but not the reserves) of the Wastewater Collection Utility. The 1995 Series A Utility Revenue Bonds issued for the Storm Drain utility was secured by the net revenues of the City’s “Enterprise,” which was defined as the City’s water, gas, wastewater, storm drain, and electric utilities, and are senior to the 1999 bonds referenced above. Debt service payments of roughly $680,000 per year are made on the 1995 Series A bonds by the City’s Storm Drain Utility, and staff does not currently foresee any risk of that utility being unable to make payment. WASTEWATER COLLECTION UTILITY FINANCIAL PLAN APPENDIX E: SAMPLE OF WASTEWATER COLLECTION OUTREACH MATERIALS Attachment D * NOT YET APPROVED * 150223 mf 6053246 Resolution No. _____ Resolution of the Council of the City of Palo Alto Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) R E C I T A L S A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. B. Pursuant to Article XIIID Sec. 6 of the California Constitution, on ________, 2015, the City of Palo Alto held a public hearing to consider all protests against the proposed wastewater collection rate amendments. C. The total number of written protests presented by the close of the public hearing was less than fifty percent (50%) of the total number of customers and property owners subject to the proposed wastewater collection rate amendments. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-1 (Residential Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-1, as amended, shall become effective July 1, 2015. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-2 (Commercial Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-2, as amended, shall become effective July 1, 2015. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-6, as amended, shall become effective July 1, 2015. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-7, as amended, shall become effective July 1, 2015. Attachment D * NOT YET APPROVED * 150223 mf 6053246 SECTION 5. The Council finds that the revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 6. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. SECTION 7. The Council finds that the adoption of this resolution changing wastewater collection rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL UTILITY RATE SCHEDULE S-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No S-1-1 Effective 7-1-20125 dated 7-1-20112 Sheet No S-1-1 A. APPLICABILITY: This schedule applies to each occupied residential dwelling unit. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides wastewater service. C. RATES: Per Month Each domestic dwelling unit .................................................................................................. $29.3131.95 D. SPECIAL NOTES: 1. Any dwelling unit being individually served by a water, gas, or electric meter will be considered continuously occupied. 2. For two or more occupied dwelling units served by one water meter, the monthly wastewater charge will be calculated by multiplying the current wastewater rate by the number of dwelling units. 3. Each developed separate lot shall have a separate service lateral to a sanitary main or manhole. {End} ATTACHMENT E COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL UTILITY RATE SCHEDULE S-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No S-2-1 Effective 7-1-20125 dated 7-1-20112 Sheet No S-2-1 A. APPLICABILITY: This schedule applies to all commercial establishments other than those served under Utility Rate Schedule S-1 (Domestic Wastewater Collection and Disposal), Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) or Rate Schedule S-7 (Commercial Establishments Wastewater Disposal – Industrial Discharger). B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides wastewater services. C. RATES: 1. Minimum Charge per connection per month .............................................................$29.3131.95 2. Quantity Rates, per 100 cubic feet (See Section D.1) .............................................$5.656.16D. SPECIAL NOTES: 1. The monthly charge for the quantity rate set forth in Section C.2 of this rate schedule will be based upon the average water usage for the months of January, February and March, and applied in the following July. If a water meter is identified as exclusively serving irrigation landscaping, such meter will be exempted from wastewater charge calculations. Customers without an applicable usage history will be charged at the minimum monthly charge until such time as such usage may reasonably be established by the City of Palo Alto Utilities Department. 2. The City of Palo Alto Utilities Department may require wastewater metering facilities, in which case service will be governed by terms of a special agreement between the City and the Customer. {End} RESTAURANT WASTEWATER COLLECTION AND DISPOSAL UTILITY RATE SCHEDULE S-6 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No S-6-1 Effective 7-1-20125 dated 7-1-2012 Sheet No S-6-1 A. APPLICABILITY: This schedule applies to all restaurants. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides wastewater services. C. RATES: 1. Minimum charge per connection per month ......................................................... $29.3131.95 2. Quantity Rates, per 100 cubic feet of monthly metered water usage .........................$ 8.739.52 D. SPECIAL NOTES: 1. The City of Palo Alto Utilities Department may require wastewater metering facilities, in which case service will be governed by terms of a special agreement between the City and the Customer. {End} COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL –INDUSTRIAL DISCHARGER UTILITY RATE SCHEDULE S-7 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No S-7-1 Effective 7-1-20125 dated 7-1-2012 Sheet No S-7-1 A. APPLICABILITY: This schedule applies to any establishment requiring sampling of industrial discharges in excess of 25,000 gallons per day, or special discharge monitoring, as defined in Rule and Regulation 23, Section D. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides wastewater services. C. RATES: 1. Collection System Operation, Maintenance, and Infiltration Inflow: $2,077.54 per million gallons ($1.5578 per 100 cubic feet of metered water use). 2. Advanced Waste Treatment Operations and Maintenance Charge: $1,403.74 per million gallons ($1.05 per 100 cubic feet of metered water use 3. $ 247.56 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand) 4. $ 596.62 per 1000 lbs of SS (Suspended Solids) 5. $ 3,983.85 per 1000 lbs of NH3 (Ammonia) 6. $ 14,781.25 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver, and zinc) D. SPECIAL NOTES: 1. Water usage will be determined as defined in Rule and Regulation 23, Section D. If a water meter is identified as exclusively serving irrigation landscaping, such meter will be exempted from wastewater charge calculations. 2. The City of Palo Alto Utilities Department may require wastewater metering facilities, in which case service will be governed by terms of a special agreement between the City of Palo Alto and the Customer. 3. Charges for large discharges will be determined on the basis of sampling as outlined in Utilities Rule and Regulation 23, Section D. However, for purposes of arriving at an accurate flow estimate, discharge meters, if installed, can be utilized to measure outflow for billing purposes. Annual charges will be determined and allocated monthly for billing purposes. {End} EXCERPTED DRAFT MINUTES OF THE MARCH 4, 2015 UTILITIES ADVISORY COMMISSION MEETING ITEM: 5: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt: (1) a Resolution Approving the Fiscal year 2016 Wastewater Collection Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices, and (2) a Resolution amending State Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal –Industrial Discharger) Resource Planner Eric Keniston summarized the WWC financial projection, noting that rate increases of 9%/year for the next four years are required as presented in February when staff presented the preliminary financial forecasts. Costs are increasing at 3 to 5% per year, but revenues are currently below costs so rates must increase at a higher rate than costs. ACTION: Chair Foster made a motion to recommend that the City Council Adopt: (1) a Resolution Approving the Fiscal year 2016 Wastewater Collection Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices, and (2) a Resolution amending State Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger). Vice Chair Waldfogel seconded the motion. The motion carried unanimously (6-0 with Chair Foster, Commissioners Chang, Eglash, Hall, Melton and Vice Chair Waldfogel voting yes, Commissioner Cook absent). ATTACHMENT F City of Palo Alto (ID # 5591) Finance Committee Staff Report Report Type: Action Items Meeting Date: 4/7/2015 City of Palo Alto Page 1 Summary Title: Water Financial Plan and Rate Proposals Title: Utilities Advisory Committee Recommendation that the City Council Adopt: (1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; and (2) a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) to Increase Average Water Rates by 12% From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) request that the Finance Committee recommend that the Council: 1.Adopt a resolution (Attachment A) amending the Water Utility Reserve Management Practices (Attachment B) and approving the fiscal year (FY) 2016 Water Utility Financial Plan (Attachment C); and 2.Adopt a resolution (Attachment D) Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service). Executive Summary The FY 2016 Water Utility Financial Plan includes projections of the utility’s costs and revenues for FY 2016 through FY 2023. Costs are projected to rise substantially for the next several years due primarily to increasing water supply costs. As a result, staff projects the need for a 12% rate increase on July 1, 2015 and 8% rate increases afterward each year through FY 2019. Costs are increasing by 14% from FY 2015 to FY 2016, and are also projected to increase by another 15% by FY 2020. These cost increases are mostly due to water supply costs, which are ATTACHMENT H City of Palo Alto Page 2 increasing by 31% in FY 2016, 9% in FY 2019, and 9% in FY 2020. Staff proposes spreading the rate increases required to match these costs over several years. This is possible with two recommended reserves transfers to the Operations Reserve—$2 million from the CIP Reserve in FY 2015, and $5.5 million from the Rate Stabilization Reserve in FY 2016. This will reduce the Rate Stabilization Reserve to nearly zero by the end of FY 2016. Staff also recommends a change to the Water Utility Reserves Management Practices for the CIP Reserve to accommodate a change in City budgeting practices for CIP projects. The UAC reviewed the Water Financial Plan and Rate Projections at its meeting on March 4, 2015 and recommended approval of staff’s recommendation. Background Every year staff presents the Finance Committee with Financial Plans for its Electric, Gas, Water, and Wastewater Collection Utilities and recommends any rate adjustments required to maintain their financial health. These Financial Plans include a comprehensive overview of the utility’s operations, both retrospective and prospective, and are intended to be a reference for UAC and Council members as they review the budget and staff’s rate recommendations. Each Financial Plan also contains a set of Reserves Management Practices describing the reserves for each utility and the management practices for those reserves. Staff may propose amendments to these reserves as part of the Financial Plans. The Utilities Advisory Commission (UAC) reviewed this proposal at its March 4, 2015 meeting. Both the UAC and Finance Committee reviewed preliminary financial forecasts and rate projections for all utilities at their February 4 and March 3, 2015 meetings, respectively. Discussion Proposed Actions for FY 2015 When Council adopted the FY 2015 Water Utility Financial Plan, it approved several transfers between reserves. Funds were transferred out of the Emergency Plant Replacement and Rate Stabilization Reserve into the newly-created CIP and Operations Reserves. These transfers were mainly related to setting up the new reserves structure approved as part of that Financial Plan. Now, staff recommends an additional transfer for FY 2015. The final design for the seismic strengthening and recoating of some of the reservoirs identified some additional work that may need to be done at a cost of roughly $2 million. As a result, staff proposes a transfer of $2 million from the CIP Reserve to the Operations Reserve, so that it will have $4 million remaining at the end of FY 2015. City of Palo Alto Page 3 Proposed Actions for FY 2016 This year’s Water Utility Financial Plan includes the following proposed actions for FY 2016: 1. Amend the CIP Reserve to accommodate a change in the City’s capital budgeting practices. These amendments are summarized below, but for a more in-depth description of the reasons for these amendments, see Section 4C of the Financial Plan: a. Modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects by amending the Reserves Management Practices. b. Transfer funds projected to be released from the Reappropriations Reserve at the beginning of FY 2016 due to a change in City capital budgeting practices to the CIP Reserve. c. Exceed the proposed maximum CIP Reserve guidelines through the end of FY 2017. 2. Transfer $5.5 million from the Rate Stabilization Reserve to the Operations Reserve. This transfer will enable staff to maintain Operations Reserve levels while spreading the required rate increases for the water utility over several years. These proposed actions are described in more detail in the FY 2016 Water Financial Plan (Attachment B). In addition, staff proposes to adjust water rates to the levels shown in Tables 1-3, below, effective July 1, 2015. These changes are projected to increase the system average rate by roughly 12%. These rate changes are included in the proposed amended rate schedules in Attachment E. Staff’s annual assessment of the financial position of the City’s water utility is completed to ensure adequate revenue to fund operations, in compliance with the cost of service requirements set forth in the California Constitution (Proposition 218). This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. The current rate proposals are also based on the cost of service methodology from the 2012 Palo Alto Water Cost of Service & Rate Study by Raftelis Financial Consultants. City of Palo Alto Page 4 Table 1: Water Consumption Charges (Current and Proposed) Current Rates (7/1/13) Proposed Rates (7/1/15) Change $/CCF % W-1 (Residential) Volumetric Rates ($/CCF) Tier 1 Rates 4.99 5.70 $0.71 14% Tier 2 Rates 7.58 8.38 $0.80 11% W-2 (Construction) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.97 $0.82 13% W-4 (Commercial) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.97 $0.82 13% W-7 (Irrigation) Volumetric Rates ($/CCF) Uniform Rate 7.52 8.46 $0.94 13% Table 2: Current and Proposed Monthly Water Service Charge Meter Size Monthly Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 5/8” 14.67 $16.01 $1.34 9% 3/4” 19.51 $21.48 $1.97 10% 1” 29.18 $32.42 $3.24 11% 1 ½” 53.37 $59.77 $6.40 12% 2” 82.39 $92.60 $10.21 12% 3” 174.29 $196.54 $22.25 13% 4” 309.72 $349.71 $39.99 13% 6” 633.80 $716.24 $82.44 13% 8” 1,165.86 $1,318.01 $152.15 13% 10” 1,843.02 $2,083.89 $240.87 13% 12” 2,423.45 $2,740.37 $316.92 13% Table 3: Current and Proposed Monthly Fire Service Charges Meter Size Monthly Fire Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 2” $3.03 $3.43 $0.40 13% 4” $18.78 $21.21 $2.43 13% 6” $54.55 $61.60 $7.05 13% 8” $116.24 $131.28 $15.04 13% 10” $209.03 $236.09 $27.06 13% 12” $337.65 $381.35 $43.70 13% Bill Impact of Proposed Rate Changes City of Palo Alto Page 5 Table 4 shows the impact of the proposed July 1, 2015 rate changes on the median residential bill. This comparison assumes that customers do not decrease consumption. Historically, however, customers have looked for ways to conserve after their bills have increased, so not all customers will experience the same bill increase. The average increase is roughly 12%, but some customers with very low bills may see slightly higher increases due to slight changes in the composition of the utility’s costs, and how that affects the first tier and fixed charges under the cost of service methodology. Table 4: Impact of Proposed Water Rate Changes on Residential Bills Usage (CCF/month) Bill under Existing Rates Bill under Proposed Rates Change $/mo. % 4 34.63 38.81 4.18 12% (Winter median) 7 52.19 58.59 6.40 12% (Annual median) 9 67.35 75.35 8.00 12% (Summer median) 14 105.25 117.24 11.99 11% 25 188.63 209.40 20.77 11% Table 5 shows the impact of the proposed July 1, 2015 rate changes on various representative commercial customer bills. As with residents, this comparison assumes that customers do not decrease consumption. Table 5: Impact of Proposed Water Rate Changes on Commercial Bills Usage (CCF/month) Bill under Current Rates Bill under Proposed Rates Change $/mo. % Commercial (W-4) (5/8” meters) (Annual median) 12 88.47 99.65 11.18 13% (Annual average) 64 408.27 462.09 53.82 13% Irrigation (W-7) (1 ½” meters) (Winter median) 9 121 136 15 13% (Summer median) 37 332 373 41 12% (Winter average) 56 474 534 59 12% (Summer average) 199 1,550 1743 193 12% Financial Plan’s Projected Rate Adjustments for the Next Five Fiscal Years Table 6 shows the projected rate adjustments over the next five years and their impact on the median residential water bill. As discussed above, for FY 2016 staff is proposing to pass a large increase in the SFPUC wholesale rate through to customers, and also slightly increase water distribution rates. Staff projects the need for 8% rate increases through FY 2019, with increases at the rate of inflation afterward. City of Palo Alto Page 6 Table 6: Proposed/Projected Water Rate Adjustments, FY 2016 to FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Water Utility 12% 8% 8% 8% 3% Estimated Bill Impact ($/mo)* $8.15 $6.37 $6.79 $7.24 $2.88 * estimated impact on median residential water bill, which is currently $67.35. Table 7 shows the proposed and projected rate adjustments in the context of the other proposed and projected utility rates. Table 7: Rate Adjustments, All Utilities, FY 2016 Proposed, FY 2017 to FY 2020 Projected FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Electric 0% 6% 6% 1% 1% Gas1 0% 7% 4% 4% 4% Wastewater 9% 9% 9% 9% 6% Water 12% 8% 8% 8% 3% Refuse2 9% 9% 8% 2% to 3% 2% to 3% Storm Drain3 2.7% 2% to 3% 2% to 3% 2% to 3% 2% to 3% Total Bill Change4 (%) 6% 8% 7% 5% 3% ($/mo) $14.73 $18.91 $18.53 $14.39 $9.55 (1) Gas rate changes are shown with commodity rates held constant. Actual gas commodity rates will vary monthly with wholesale market fluctuations (2) No forecast available past FY 2018, inflationary increases assumed. (3) Storm Drain Rates increase annually by CPI; existing rates sunset in June 2017 unless reauthorized by a majority vote of property owners. (4) Change in estimated median residential bill, $230.76 as of June 30, 2014 The main driver for the increase in the water utility’s costs (and therefore rates) over the next several years is the cost of water. Wholesale water costs are projected to rise 30% in FY 2016 and 9% per year in FY 2019 and FY 2020 as the SFPUC issues debt to finance the SFPUC’s Water System Improvement Program (WSIP) (no substantial changes are projected in FY 2017 and FY 2018). The City will also see a $1 million increase in operating costs for a capital lease for emergency generators for wells and pump stations. Aside from that, the City’s operating and CIP costs are projected to rise roughly 2% to 4% annually over that time. The Water Utility Financial Plan assumes the current drought ends in early 2016, but includes projections for alternate scenarios under which the drought extends for an additional one or two years. Last year, staff discussed uncertainty in the forecasts of capital costs for the water utility in coming years. Water main replacement costs have risen substantially in recent years, and it is possible higher CIP expenditures will be required in the future. The Financial Plan includes rate projections for an alternate scenario in which higher CIP spending is required. Staff is in the process of completing a master plan for the water distribution system, and expects better City of Palo Alto Page 7 information about future main replacement costs when that plan is completed. It is currently expected to be completed in May 2015. Commission Review and Recommendation The UAC reviewed this proposal at its March 4, 2015 meeting. Staff noted at that meeting that the March 4, 2015 proposal incorporated comments made by the UAC at its February 4, 2015 meeting regarding customer consumption levels after the drought ends. Staff also noted that the rate projection had changed since the February 4, 2015 meeting as a result of updated wholesale water rate projections from the SFPUC. The UAC approved the proposal unanimously with minimal discussion. One Commissioner acknowledged the fact that staff had incorporated UAC comments, and another asked about rate design and the balance of fixed versus volumetric charges. Staff noted that the best time to discuss the appropriate level for fixed charges was at the next cost of service study. The draft minutes from the UAC’s March 4, 2015 meeting are provided as Attachment F. Timeline Assuming the Finance Committee supports staff’s recommendation, notification of the rate increases will be sent to customers as required by Article XIIID of the California Constitution (added by Proposition 218). The Financial Plans and rate schedules will then go to the City Council with the FY 2016 budget for adoption, at which time a public hearing will be held. All residents and other interested persons may submit written or oral testimony at the hearing, and may also submit written protests to any or all of the proposed rate increases. Council may adopt the proposed rates unless written protests are filed by a majority of the affected customers. Resource Impact Normal year sales revenues for the Water Utility are projected to increase by roughly 12% ($3.7 million) as a result of these rate increases. The entire revenue increase will be offset by a $4.4 million increase in wholesale water supply costs. See the attached Financial Plans for a more comprehensive overview of projected cost and revenue changes for the next five years. Policy Implications The attached Financial Plan includes amended Reserve Management Practices that will modify Council policy with respect to the structure of the financial reserves Water Utility. These Reserve Management Practices replace the current Reserve Management Practices, which were last updated by Council in June 2014 (Resolution 9423). Environmental Review The Finance Committee’s review and recommendation to Council on these Financial Plans and rate adjustments does not meet the California Environmental Quality Act’s definition of a project, pursuant to Public Resources Code Section 21065, thus no environmental review is required. City of Palo Alto Page 8 Attachments: Attachment A: Resolution Approving Water Financial Plan and Amending the Water Utility Reserves Management Practices (PDF) Attachment B: Proposed Amendments to Water Utility Reserves Management Practices (PDF) Attachment C: FY 2016 Water Utility Financial Plan (PDF) Attachment D: Resolution of the Council of the City of Palo Alto Adopting a Water Rate Increase and Amending Rate Schedules W-1, W-2, W-3, W-4, and W-7 (PDF) Attachment E: Proposed Amendments to Rate Schedules W-1, W-2, W-3, W-4, and W-7 (PDF) Attachment F: Excerpted Draft UAC Minutes of the March 4, 2015 (PDF) Attachment A * NOT YET APPROVED * 150220 mf 6053256 1 Resolution No. ____ Resolution of the Council of the City of Palo Alto Approving the FY 2016 Water Utility Financial Plan and Amending the Water Utility Reserves Management Practices R E C I T A L S A. Each year the City of Palo Alto (“City”) regularly assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. It does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize these projections. B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans. C. The City intends to make changes to its Water Utility Reserves Management Practices to amend the purpose and management practices of the Water Utility’s Capital Improvement Program (CIP) Reserve. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. The Council hereby approves FY 2016 Water Utility Financial Plan, including the amended Water Utility Reserves Management Practices. These Reserves Management Practices replace the Reserves Management Practices previously approved for the Water Utility as part of the FY 2015 Water Utility Financial Plan (Resolution 9423). SECTION 2. The Council hereby approves the transfer of $2 million in FY 2015 from the CIP Reserve to the Operations Reserve, the transfer of all funds released from the Reappropriations Reserve at the end of FY 2015 to the CIP Reserve, the transfer of $5.5 million from the Rate Stabilization Reserve to the Operations Reserve, and the exceedance of the maximum CIP Reserve guidelines through the end of FY 2017, as described in the FY 2016 Water Utility Financial Plan approved via this resolution. // // // Attachment A * NOT YET APPROVED * 150220 mf 6053256 2 SECTION 3. The Council finds that the adoption of this resolution does not meet the California Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code Section 21065, and therefore, no environmental assessment is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services DRAFT Proposed Amendments to Water Utility Reserves Management Practices APPENDIX AC: WATER UTILITY RESERVES MANAGEMENT PRACTICES The following reserves management practices shall be used when developing the Water Utility Financial Plan: Section 1. Definitions a)“Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the Financial Plan. For example, for the Water Utility Financial Plan delivered in conjunction with the FY 2015 budget, FY 2015 to FY 2021 is the Financial Planning Period. b)“Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s Unrestricted Net Assets. c)“Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference between its assets and liabilities. d)“Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related debt) or restricted for debt service or other restricted purposes. Section 2. Reserves The Water Utility’s Fund Balance is reserved for the following purposes: a)For existing contracts, as described in Section 3 (Reserve for Commitments) b)For operating and capital budgets re-appropriated from previous years, as described in Section 4 (Reserve for Re-appropriations) c)For future year expenditure on the Water Utility’scash flow management and contingencies related to the Water Utility’s Capital Improvement Program (CIP), as described in Section 5 (CIP Reserve) d)For rate stabilization, as described in Section 6 (Rate Stabilization Reserve) e)For operating contingencies, as described in Section 7 (Operations Reserve) f)Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves). Section 3. Reserve for Commitments At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining spending authority for all contracts in force for the Water Utility at that time. Section 4. Reserve for Re-appropriations At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount equal to the amount of all remaining capital and non-capital budgets, if any, that will be re- appropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090. ATTACHMENT B DRAFT Proposed Amendments to Water Utility Reserves Management Practices Section 5. CIP Reserve Funds may be added to or withdrawn from the CIP Reserve by action of the City Council and held for future year expenditure on the Water Utility’s CIP Program. If there are funds in the CIP Reserve at the end of any fiscal year, any subsequent Water Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial Planning Period. The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff will manage the CIP Reserve according to the following practices: a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of CIP expense budgeted for that year. Minimum Level 12 months of budgeted CIP expense Maximum Level 24 months of budgeted CIP expense b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for Commitments when funds are added to or removed from the Reserve for Commitments as a result of a change in contractual commitments related to CIP projects. Any other additions to or withdrawals from the CIP reserve require Council action. c) Minimum Level: i) Funds held in the Reserve for Commitments may be counted as part of the CIP Reserve for the purpose of determining compliance with the CIP Reserve minimum guideline level. ii) If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter period of time. d) Maximum Level: If, at any time, the CIP Reserve reaches its maximum level, no funds may be added to this reserve. If there are funds in this reserve in excess of the maximum level staff must propose to transfer these funds to another reserve or return them to ratepayers in the next Financial Plan. Staff may also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for a specific future purpose related to the CIP. DRAFT Proposed Amendments to Water Utility Reserves Management Practices Section 6. Rate Stabilization Reserve Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Water Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial Planning Period. Section 7. Operations Reserve The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion of the Water Utility’s Fund Balance not included in the reserves described in Section 3-Section 6 above will be included in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff will manage the Operations Reserve according to the following practices: a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and commodity expense forecasted for that year in the Financial Plan. Minimum Level 60 days of O&M and commodity expense Target Level 90 days of O&M and commodity expense Maximum Level 120 days of O&M and commodity expense b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan that takes longer than one year to replenish the reserve. c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any Financial Plan created for the Water Utility shall be designed to return the Operations Reserve to its target level within four years. d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this reserve. Any further increase in the Water Utility’s Fund Balance shall be automatically included in the Unassigned Reserve described in Section 8, below. Section 8. Unassigned Reserve If the Operations Reserve reaches its maximum level, any further additions to the Water Utility’s Fund Balance will be held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next Financial Plan presented to the DRAFT Proposed Amendments to Water Utility Reserves Management Practices City Council must include a plan to assign them to a specific purpose or return them to the Water Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016 through FY 2021, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of time. WATER UTILITY FINANCIAL PLAN FY 2016 TO FY 2023 CONTENTS Section 1: Definitions and Abbreviations ............................................................................................................... 2 Section 2: Introduction .......................................................................................................................................... 2 Section 3: Executive Summary and Recommendations .......................................................................................... 2 Section 3A: Overview of Financial Position ................................................................................................................ 2 Section 3B: Summary of Proposed Actions ................................................................................................................ 3 Section 4: Detail of FY 2016 Rate and Reserves Proposals ...................................................................................... 4 Section 4A: Current and Proposed Rates ................................................................................................................... 4 Section 4B: Bill Impact of Proposed Rate Changes .................................................................................................... 5 Section 4C: Reserves Management Practices, Proposed Change .............................................................................. 6 Section 4D: Proposed Reserve Transfers .................................................................................................................... 8 Section 5: Utility Overview .................................................................................................................................... 8 Section 5A: Water Utility History ............................................................................................................................... 8 Section 5B: Customer Base ........................................................................................................................................ 9 Section 5C: Distribution System ................................................................................................................................. 9 Section 5D: Cost Structure and Revenue Sources..................................................................................................... 10 Section 5E: Reserves Structure ................................................................................................................................. 10 Section 5F: Competitiveness .................................................................................................................................... 11 Section 6: Utility Financial Projections ................................................................................................................. 12 Section 6A: Load Forecast ........................................................................................................................................ 12 Section 6B: FY 2009 to FY 2014 Cost and Revenue Trends ....................................................................................... 14 Section 6C: FY 2014 Results ..................................................................................................................................... 15 Section 6D: FY 2015 Projections ............................................................................................................................... 16 Section 6E: FY 2016 – FY 2023 Projections ............................................................................................................... 16 Section 6F: Risk Assessment and Reserves Adequacy .............................................................................................. 18 Section 6G: Alternate Scenarios ............................................................................................................................... 19 Section 6H: Long-Term Outlook ............................................................................................................................... 20 Section 7: Details and Assumptions ..................................................................................................................... 21 Section 7A: Water Purchase Costs ........................................................................................................................... 21 Section 7B: Operations............................................................................................................................................. 22 Section 7C: Capital Improvement Program (CIP) ..................................................................................................... 24 Section 7D: Debt Service .......................................................................................................................................... 26 Section 7E: Other Revenues ..................................................................................................................................... 26 Section 7F: Sales Revenues ...................................................................................................................................... 27 Section 8: Communications Plan .......................................................................................................................... 27 Appendices .......................................................................................................................................................... 28 Appendix A: Water Utility Financial Forecast Detail ................................................................................................ 29 Appendix B: Water Utility Capital Improvement Program (CIP) Detail .................................................................... 33 Appendix C: Water Utility Reserves Management Practices ................................................................................... 35 Appendix D: Rate Design.......................................................................................................................................... 36 Appendix E: Water Utility Debt Service Details ........................................................................................................ 37 Appendix G: Description of Water Utility Operational Activities ............................................................................. 39 Appendix H: Sample of Water Utility Outreach Communications ........................................................................... 40 ATTACHMENT C WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 2 | P a g e SECTION 1: DEFINITIONS AND ABBREVIATIONS BAWSCA: Bay Area Water Supply and Conservation Agency CCF: one hundred cubic feet, the standard unit of measurement for water delivered to water customers. Equal to roughly 748 gallons. CIP: Capital Improvement Program CPAU: City of Palo Alto Utilities Department O&M: Operations and Maintenance SFPUC: San Francisco Public Utilities Commission SFWD: San Francisco Water Department WSIP: the SFPUC’s Water System Improvement Program to seismically strengthen the transmission lines of the Hetch Hetchy regional water system. SECTION 2: INTRODUCTION This document presents a Financial Plan for the City’s Water Utility for the next eight years. This Financial Plan provides revenues to cover the costs of operating the utility safely over that time while adequately investing for the future. It also addresses the financial risks facing the utility over the short term and long term, and includes measures to mitigate and manage those risks. SECTION 3: EXECUTIVE SUMMARY AND RECOMMENDATIONS SECTION 3A: OVERVIEW OF FINANCIAL POSITION By FY 2020, costs for the Water Utility will increase 30% over FY 2015 levels, as shown in Table 1. Most of increase from FY 2015 to FY 2020 is related to the cost of water supplied by the San Francisco Public Utilities Commission (SFPUC), which is rising 50% in that time due to the issuance of long term debt to finance major seismic improvements to the Hetch Hetchy transmission system. The cost of replacing the water mains in the City’s water distribution system has also increased substantially from the low costs seen during the recent recession. Staff projects only inflationary increases to most other costs over the forecast period. Table 1: Expenses for FY 2014 to FY 2023 Expenses ($000) FY 2014 (actual) FY 2015 (est.) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Water Purchases 15,705 16,013 20,451 20,498 20,225 22,764 24,080 22,922 23,013 24,123 Operations 15,730 16,386 17,279 17,727 18,199 18,677 19,174 19,630 20,062 20,508 Capital Projects 8,336 8,554 8,724 9,089 9,099 9,388 9,666 9,951 10,245 10,548 TOTAL 39,771 41,478 46,193 46,903 49,430 52,136 53,801 53,170 53,977 55,249 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 3 | P a g e To cover these increases in costs, revenues (and therefore rates) need to increase over the next several years to balance costs and revenues, as shown in Table 2. This rate trajectory assumes that the drought continues through 2015 and that consumption does not return to its pre- drought levels. Because of reductions in consumption, customers who conserve will see lower bill increases than what is shown in Table 2. Projected average residential bill increases are shown in Appendix A (Water Utility Financial Forecast Detail). Table 2: Projected Water Rate Trajectory for FY 2016 to FY 2023 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 12% 8% 8% 8% 3% 1% 2% 3% The Water Utility has Rate Stabilization Reserves that can be used to spread these increases over several years. This Financial Plan projects that these reserves will be exhausted by the end of FY 2020. The utility also has a Capital Improvement Program (CIP) Reserve that can be used to offset one-time unanticipated capital costs. This Financial Plan assumes that the CIP Reserve will be used for unanticipated capital expenses or returned to the Operations Reserve by the end of FY 2017. At that point the Emergency Water Supply and Storage Project and the Water System Master Plan will have been completed, so capital costs will be known with more certainty. Table 3 shows the projected reserve transfers over the forecast period. Table 3: Transfers To/(From) Reserves for FY 2016 to FY 2023 ($000) Reserve FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Capital Improvement - (4,000) - - - - - - Rate Stabilization (5,500) 0 (567) - (500) - - - Operations 5,500 4,000 567 - 500 - - - SECTION 3B: SUMMARY OF PROPOSED ACTIONS Staff proposes the following actions for the Water Utility in FY 2015: 1. Transfer $2 million from the CIP Reserve to the Operations Reserve in FY 2015 due to higher than projected expenses for the seismic strengthening of reservoirs and turnouts. See Section 4D (Proposed Reserve Transfers) for more details. Staff proposes the following actions for the Water Utility in FY 2016: 1. Increase rates as shown in Section 4A (Current and Proposed Rates). These changes are projected to increase the system average rate by roughly 12%. 2. Take the following measures with respect to the CIP Reserve (see Section 4C (Reserves Management Practices, Proposed Change) for more details): a. Amend the Reserves Management Practices to modify the purpose of the CIP Reserve to enable it to act as a cash flow and contingency reserve for capital investment projects. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 4 | P a g e b. Transfer all funds released from the Reappropriations Reserve at the beginning of FY 2016 to the CIP Reserve. c. Request Council approval to exceed the proposed maximum CIP Reserve guidelines through the end of FY 2017. 3. Transfer $5.5 million from the Rate Stabilization Reserve to the Operations Reserve. See Section 4D (Proposed Reserve Transfers) for more details. SECTION 4: DETAIL OF FY 2016 RATE AND RESERVES PROPOSALS SECTION 4A: CURRENT AND PROPOSED RATES The current rates were adopted July 1, 2013, when CPAU increased water rates by 7%. CPAU has five rate schedules: one for separately metered residents (W-1), one for commercial and master-metered multi-family residential customers (W-4), and specific schedules for irrigation- only services (W-7), services to fire sprinkler systems in buildings and private hydrants (W-3), and for service to fire hydrant rental meters used for construction (W-2). All customers pay a monthly service charge, based on the size of their inlet meter. This charge represents meter reading, billing, and other customer service costs, but also the cost of maintaining the capability to deliver a peak flow for that customer corresponding to their meter size. All customers are also charged for each CCF (one hundred cubic feet) of water used. Separately metered residential customers are charged on a tiered basis, with the first 0.2 CCF per day (6 CCF for a 30 day billing period) charged a base price per CCF, and all additional units charged a higher price per CCF. Commercial customers pay a uniform price for each CCF used, and a higher price for separately metered irrigation service. Table 4 shows the current and proposed monthly service charges for all rate schedules. Table 5 shows the consumption charges. The basis for calculating these charges is staff’s annual assessment of the water utility’s financial position, as well as the cost of service methodology from the 2012 Palo Alto Water Cost of Service & Rate Study by Raftelis Financial Consultants. Table 4: Current and Proposed Monthly Service Charge Meter Size Monthly Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 5/8” 14.67 $16.01 $1.34 9% 3/4” 19.51 $21.48 $1.97 10% 1” 29.18 $32.42 $3.24 11% 1 ½” 53.37 $59.77 $6.40 12% 2” 82.39 $92.60 $10.21 12% 3” 174.29 $196.54 $22.25 13% 4” 309.72 $349.71 $39.99 13% 6” 633.80 $716.24 $82.44 13% 8” 1,165.86 $1,318.01 $152.15 13% 10” 1,843.02 $2,083.89 $240.87 13% 12” 2,423.45 $2,740.37 $316.92 13% WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 5 | P a g e SECTION 4B: BILL IMPACT OF PROPOSED RATE CHANGES Table 7 shows the impact of the proposed July 1, 2015 rate changes on the median residential bill. This comparison assumes that customers do not decrease consumption. Historically, however, customers have looked for ways to conserve after their bills have increased, so not all customers will experience the same bill increase. The average increase is roughly 12%, but some customers with very low bills may see slightly higher increases due to slight changes in the composition of the utility’s costs and how that affects the first tier and fixed charges under the cost of service methodology. Table 6: Water Consumption Charges (Current and Proposed) Current Rates (7/1/13) Proposed Rates (7/1/15) Change $/CCF % W-1 (Residential) Volumetric Rates ($/CCF) Tier 1 Rates 4.99 5.70 $0.71 14% Tier 2 Rates 7.58 8.38 $0.80 11% W-2 (Construction) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.97 $0.82 13% W-4 (Commercial) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.97 $0.82 13% W-7 (Irrigation) Volumetric Rates ($/CCF) Uniform Rate 7.52 8.46 $0.94 13% Table 5: Current and Proposed Monthly Fire Service Charges Meter Size Monthly Fire Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 2” $3.03 $3.43 $0.40 13% 4” $18.78 $21.21 $2.43 13% 6” $54.55 $61.60 $7.05 13% 8” $116.24 $131.28 $15.04 13% 10” $209.03 $236.09 $27.06 13% 12” $337.65 $381.35 $43.70 13% WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 6 | P a g e Table 7: Impact of Proposed Water Rate Changes on Residential Bills Usage (CCF/month) Bill under Existing Rates Bill under Proposed Rates (7/1/15) Change $/mo. % 4 34.63 38.81 4.18 12% (Winter median) 7 52.19 58.59 6.40 12% (Annual median) 9 67.35 75.35 8.00 12% (Summer median) 14 105.25 117.24 11.99 11% 25 188.63 209.40 20.77 11% Table 8 shows the impact of the proposed July 1, 2015 rate changes on various representative commercial customer bills. As with residents, this comparison assumes that customers do not decrease consumption. Table 8: Impact of Proposed Water Rate Changes on Commercial Bills Usage (CCF/month) Bill under Current Rates Bill under Proposed Rates (7/1/15) Change $/mo. % Commercial (W-4) (5/8” meters) (Annual median) 12 88.47 99.65 11.18 13% (Annual average) 64 408.27 462.09 53.82 13% Irrigation (W-7) (1 ½” meters) (Winter median) 9 121 136 15 13% (Summer median) 37 332 373 41 12% (Winter average) 56 474 534 59 12% (Summer average) 199 1,550 1743 193 12% SECTION 4C: RESERVES MANAGEMENT PRACTICES, PROPOSED CHANGE Staff is proposing one change to the Water Utility Reserves Management Practices (Appendix C) in this Financial Plan. Staff recommends changing the CIP Reserve definition and management practices so that it becomes a cash flow and contingency reserve for CIP projects. Currently these purposes are served by a combination of the Operations and Reappropriations Reserves, while the CIP Reserve acts as a sinking fund to accumulate funds for large one-time future CIP expenditures (which are rare). The City is changing its budgeting practices starting with FY 2016, and will no longer reappropriate CIP budgets each year. Instead, CIP budgets for long-term or ongoing projects will be renewed each year through the annual budget process. This means that the funds in the Reappropriations Reserve ($10.4 million as of June 30, 2014) will be released after June 30, 2015. These funds acted as a cash flow reserve for CIP projects, and some or all of it should be retained for that purpose. Staff proposes to retain these funds in the CIP reserve, and the proposed changes to the Reserves Management Practices will enable CPAU to do that. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 7 | P a g e Staff proposes to initially set a minimum and maximum guideline for the CIP reserve that will enable it to hold similar amounts to what has typically been held in the Reappropriations Reserve. Staff then intends to review capital reserve management practices at other agencies and revisit these guideline levels. Initially, staff proposes a minimum guideline level of 12 months of CIP expenditures. CIP-related funds in the Commitments Reserve would be allowed to count toward that guideline. The CIP-related funds in the Commitments Reserve are equal to the total remaining balance of all CIP contracts currently in progress, and these funds should be taken into account when determining whether CIP cash flow and contingency reserves are adequate. The initial maximum guideline level would be 24 months of CIP expenditures, but the maximum guideline could be exceeded with Council approval. Figure 1 shows the Reappropriations Reserve level as of June 30, 2014, as well as the CIP portion of the Reserve for Commitments. The proposed minimum and maximum guidelines over the forecast period are also shown. The total funds held for CIP cash flow and contingencies exceed the maximum guidelines in the short term because of the $4 million already in the CIP reserve. Staff recommends holding that $4 million in the CIP Reserve until the end of FY 2017 for unanticipated CIP expenditures associated with seismic upgrades to various reservoirs. At that point, any funds remaining of that $4 million would be returned to the Operations Reserve. Figure 1: Capital Reserve WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 8 | P a g e SECTION 4D: PROPOSED RESERVE TRANSFERS In the FY 2015 Financial Plan several transfers between reserves were approved. Funds were transferred out of the Emergency Plant Replacement and Rate Stabilization Reserve into the newly-created CIP and Operations Reserves. These transfers were mainly related to setting up the new approved reserves structure. Now, in addition to these previously approved transfers, staff recommends an additional transfer for FY 2015. The final design for the seismic strengthening and recoating of some of the reservoirs identified some additional work that may need to be done at a cost of roughly $2 million. As a result, staff proposes a transfer of $2 million from the CIP Reserve, leaving it with $4 million remaining at the end of FY 2015. For FY 2016, staff proposes a $5.5 million transfer from the Rate Stabilization Reserve. This transfer is included in the financial projections in this Financial Plan. It will enable CPAU to maintain adequate Operations Reserve levels while moderating the pace of increase in water rates. In addition, staff is proposing transfers from the Reappropriations Reserve to the CIP Reserve as described in the previous section. The impact of these transfers on reserves levels can be seen in Figure 7 and Appendix A (Water Utility Financial Forecast Detail). SECTION 5: UTILITY OVERVIEW This section provides an overview of the utility and its operations. It is intended as general background information to help readers better understand the forecasts in Sections 6 and 7. SECTION 5A: WATER UTILITY HISTORY The Water Utility was established on May 9, 1896, two years after the city was incorporated. Voters of the 750 person community approved a $40,000 bond to buy local, private water companies who operated one or more shallow wells to serve the nearby residents. The city grew and the well system expanded until nine wells were in operation in 1932. Palo Alto began receiving water from the San Francisco Water Department (SFWD) in 1937 to supplement these sources. A 1950 engineering report noted, “the capricious alternation of well waters and the San Francisco Water Department water… has made satisfactory service to the average customer practically impossible”. By 1950, only eight wells were still in operation. Despite this, groundwater production increased in the 1950’s leading to lower groundwater tables and water quality concerns. In 1962, a survey of water softening costs to CPAU customers determined that CPAU should purchase 100% of its water supply needs from the SFWD. A 20-year contract was signed with San Francisco, and CPAU’s wells were placed in standby condition. The SFWD later became known as the SFPUC. Since 1962 (except for some very short periods) CPAU’s entire supply of potable water has come from the SFPUC. As the city grew, so did the number of mains in the water system. The system of mains expanded along with the town, while existing sections of the system continued to age. In the mid-1980s, the number of breaks in cast iron mains installed during the 1940s and earlier started to accelerate. In FY 1994, to combat deterioration of older sections of the system, an analysis of cost effective system improvements was performed and the rate of main WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 9 | P a g e replacement was increased from one mile per year to three. A plan to replace 75 miles of deficient mains within 25 years was begun. In 1999, a study of system reliability concluded that major upgrades were needed to the distribution system to provide adequate water supply during a natural disaster. This ultimately resulted in the $40 million Emergency Water Supply and Storage Project, still underway, which involved a new underground reservoir in El Camino Park, the siting and construction of several emergency supply wells, and the upgrade of several existing wells and the Mayfield pump station. At the same time that CPAU was evaluating the reliability of its own system, the SFPUC, in consultation with BAWSCA members, was evaluating the reliability of the Hetch Hetchy water system, which crosses two major fault lines between the Sierras and the Bay Area. That evaluation concluded that major upgrades to the system were required. This planning process culminated in the SFPUC’s $4.6 billion Water System Improvement Project (WSIP), which is ongoing. SECTION 5B: CUSTOMER BASE CPAU’s Water Utility provides water service to the residents and businesses of Palo Alto, plus a handful of residential customers not in Palo Alto (Los Altos Hills, primarily). Nearly 20,300 customers are connected to the water system, approximately 16,500 (81%) of which are separately metered residential customers and 3,800 (19%) of which are commercial, master- metered residential, irrigation and fire service customers. Customers use water for drinking, cooking, bathing, cleaning, irrigation, and other commercial use. Judging from seasonal consumption patterns, between 35% and 50% of Palo Alto’s water is used for irrigation, and that consumption is heavily weather dependent. It also varies significantly by season. As a result of these two factors, there is significant variability in the amount of water that is demanded from the system month to month and year to year. SECTION 5C: DISTRIBUTION SYSTEM To deliver water to its customers, the utility owns roughly 233 miles of mains (which transport the water from the SFPUC meters at the city’s borders to the customer’s service laterals and meters), eight wells (to be used in emergencies), five water storage reservoirs (also for emergency purposes) and several tanks used to moderate pressure and deal with peaks in flow and demand (due to fire suppression, heavy usage times, etc.). These represent the vast majority of the infrastructure used to distribute water in Palo Alto. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 10 | P a g e Figure 2: Cost Structure (FY 2014) Figure 3: Revenue Structure (FY 2014) SECTION 5D: COST STRUCTURE AND REVENUE SOURCES As shown in Figure 2, water purchase costs accounted for roughly 40% of the Water Utility’s costs in FY 2014. Operational costs also represented roughly 40%, and capital investment was responsible for the remaining 21%. Water purchase costs are projected to rise to roughly 46% of costs by FY 2020. The Water Utility receives 91% of its revenue from sales of water and the remainder from capacity and connection fees, interest on reserves, and other sources. As rates increase over the next several years, the percentage of revenue from sales of water is expected to increase as well. Appendix A (Water Utility Financial Forecast Detail) shows more detail on the utility’s cost and revenue structures. Roughly 15% of the utility’s revenues come from fixed service charges, though most of its costs are fixed. This is typical for California water utilities, and conforms to the Best Management Practices (BMPs) of the California Urban Water Conservation Council (CUWCC), a statewide conservation council of environmental groups, state agencies, and water utilities to which the City is a signatory. One of CUWCC’s BMPs is that a utility’s revenue from fixed service charges constitute at most 30% of the utility’s total revenue from all charges1. SECTION 5E: RESERVES STRUCTURE CPAU maintains six reserves for its Water Utility to manage various types of contingencies. These are summarized below, but see Appendix C (Water Utility Reserves Management Practices) for more detailed definitions and guidelines for reserve management: 1 See http://www.cuwcc.org/Resources/Memorandum-of-Understanding/Exhibit-1-BMP- Definitions-Schedules-and-Requirements/BMP-1-Utility-Operations-Programs WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 11 | P a g e Reserve for Commitments: A reserve equal to the utility’s outstanding contract liabilities for the current fiscal year. Most City funds, including the General Fund, have a Commitments Reserve. Reserve for Reappropriations: A reserve for funds dedicated to projects reappropriated by the City Council, nearly all of which are capital projects. Most City funds, including the General Fund, have a Reappropriations Reserve. This is currently an important reserve for all utility funds, but changes in budgeting practices will change that in future years, as described in Section 4C (Reserves Management Practices, Proposed Change). Capital Improvement Program (CIP) Reserve: The CIP reserve can be used to accumulate funds for future expenditure on CIP projects and is anticipated to be empty unless a major one-time CIP expenditure is expected in future years. This Financial Plan proposes adding an additional purpose, making it a contingency reserve for the CIP. This would change the way the reserve is managed, as described in Section 4C (Reserves Management Practices, Proposed Change). This type of reserve is used in other utility funds (Electric, Gas, and Wastewater Collection) as well. Rate Stabilization Reserve: This reserve is intended to be empty unless one or more large rate increases are anticipated in the forecast period. In that case, funds can be accumulated to spread the impact of those future rate increases across multiple years. This type of reserve is used in other utility funds (Electric, Gas, and Wastewater Collection) as well. Operations Reserve: This is the primary contingency reserve for the Water Utility, and is used to manage yearly variances from budget for operational water supply costs. This type of reserve is used in other utility funds (Electric, Gas, and Wastewater Collection) as well. Unassigned Reserve: This reserve is for any funds not assigned to the other reserves and is normally empty. SECTION 5F: COMPETITIVENESS Table 8 shows the current water bills for residential customers compared to what they would be under surrounding communities’ rate schedules. CPAU has the highest monthly bills of the group, although bills for smaller water users are less than in some surrounding communities. Table 9: Residential Monthly Water Bill Comparison Residential monthly bill comparison ($/month) * As of February 1, 2015 Usage (CCF/month) Palo Alto Menlo Park Mountain View Hayward Redwood City Santa Clara 4 34.63 35.38 27.56 24.65 40.10 15.20 (Winter median) 7 52.19 51.10 42.74 41.49 52.43 26.60 (Annual median) 9 67.35 61.58 52.86 52.71 61.27 34.20 (Summer median) 14 105.25 89.01 78.16 82.65 87.59 53.20 25 188.63 150.02 164.22 158.14 167.12 95.00 * All comparisons using 5/8” meter size WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 12 | P a g e Table 9 shows the annual average monthly water bill for commercial customers for various water usage levels. Redwood City is notable in that their irrigation rates are set on a budget basis, and as such each parcel has a unique baseline value. For purposes of this comparison, the budget was assumed to be equal to the usage amount. SECTION 6: UTILITY FINANCIAL PROJECTIONS SECTION 6A: LOAD FORECAST Figure 4 shows 40 years of water consumption history. Average water use has trended downward over time even as Palo Alto’s population has grown. Significant water use reductions over the 40-year history were in response to requests to reduce water use in the 1976-77 and 1988-92 drought periods. During these periods, customers invested in efficient equipment and modified behavior to achieve the water reduction goals. More recently, water sales decreased substantially after the 2007-2009 recession and have not increased since, despite the fact that economic activity in Palo Alto and the Bay Area has revived. The factors driving this are not clear, but may include an increased awareness of the need for water conservation since precipitation has been low for five of the seven years since 2007. Water use is down by similar amounts among both commercial and residential customers. Both summertime use, which includes irrigation, and wintertime use, which includes far less irrigation, have decreased for all customer classes. Table 10: Commercial Monthly Water Bill Comparison Commercial/Multi-Family and Irrigation bill comparison ($/month) As of February 1, 2015 Usage (CCF/month) Palo Alto Menlo Park Mountain View Hayward Redwood City Santa Clara Commercial (W-4) (5/8” meters) (Annual median) 12 88.47 83.34 71.82 72.00 81.82 45.60 (Annual average) 64 408.27 359.77 334.94 371.00 484.96 243.20 Irrigation (W-7) (1 ½” meters) (Winter median) 9 121 146 90 65 186 34 (Summer median) 37 332 294 232 226 391 141 (Winter average) 56 474 395 328 335 540 213 (Summer average) 199 1,550 1,156 1,051 1,158 1,666 756 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 13 | P a g e Figure 5 shows the forecast of water consumption through FY 2023. The forecast assumes that current trends continue and sales through the forecast period decline slightly. This represents a significant change from the prior year forecasts. Since the 2007-2009 recession, staff has forecasted that water sales would grow as economic activity picked up, but that has not occurred. Palo Alto is currently experiencing drought conditions with 10% voluntary water use restrictions in effect. The current forecast assumes current conditions continue through 2015, with the drought ending in spring of 2016. It also assumes consumption only returns to 50% of its pre- drought levels, which is consistent with patterns seen in prior droughts. It is highly unlikely the state will exit the drought in 2015 given precipitation to date, but for informational purposes Figure 5 shows the load forecast if the drought ends in 2015 and consumption returns to normal. Figure 4: Historical Water Consumption WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 14 | P a g e Figure 5: Forecasted Water Consumption SECTION 6B: FY 2009 TO FY 2014 COST AND REVENUE TRENDS The annual expenses for the water utility rose substantially between 2009 and 2014, though the increase is difficult to discern from Figure 6 and the tables in Appendix A (Water Utility Financial Forecast Detail) due a variety of major budget adjustments and transfers that took place during that time. These adjustments and transfers were mainly related to the Emergency Water Supply and Storage Project, a debt-financed project costing over $40 million. The project involved seismically strengthening reservoirs, rehabilitating the five existing wells, drilling three new wells, building a new reservoir at El Camino Park, and upgrading pumping stations. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 15 | P a g e Excluding adjustments and transfers, the normal annual expenses for FY 2009 would have been roughly $29 million. That includes $8.4 million for water purchases, $15 million for operational expenses and debt service, and $5.5 million for capital investment. In FY 2014 normal year annual expenses were $39 million. This was a 35% increase, or 6% per year on average from FY 2009 to FY 2014. The increases were primarily related to water purchases and capital investment. Water purchase costs increased from $8.4 million in FY 2009 to $15.7 million in FY 2014, an 87% increase. Average annual capital investment increased from $5.5 million to $7.5 million, primarily due to an increase in water main replacement costs. The reasons for both increases are discussed in more detail in Sections 7C (Capital Improvement Program) and 7A (Water Purchase Costs). SECTION 6C: FY 2014 RESULTS In spring of 2013, when proposing rate adjustments to be effective on July 1, 2013, staff forecasted an $810,000 deficit for FY 2014. Results were better than forecasted, a $3.3 million surplus. Sales revenues were higher than forecasted due to dry weather (Palo Altans were not asked to reduce consumption until February 2014, late in the fiscal year). In addition, the SFPUC wholesale water rate was 9% lower than forecasted, which resulted in savings despite the higher water consumption. Revenues from connection and capacity fees were high, and there were savings in operational budgets. These savings were partially offset by increased capital Figure 6: Water Utility Expenses, Revenues, and Rate Changes: Actual Costs through FY 2014 and Projections through FY 2023 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 16 | P a g e investment costs associated with water main replacement. Table 11 summarizes the variances from forecast. Table 11: FY 2014, Actual Results vs. 2013 Forecast Net Cost/ (Benefit) Type of change Savings in Operations budgets ($1,576,000) Cost savings Sales volumes were 5% higher than forecasted ($2,227,000) Revenue increase SFPUC rate was 9% lower than projected (partially offset by purchase volumes that were 5% higher) ($648,000) Cost savings Other revenues (interest income, capacity fees) were higher than forecasted ($1,590,000) Revenue increase Transfers out were lower than forecasted ($1,219,000) Cost savings Capital project costs higher than projected $3,135,000 Cost increase Net Cost / (Benefit) of Variances ($4,125,000) SECTION 6D: FY 2015 PROJECTIONS In spring of 2014, when preparing the financial forecast, staff forecasted a $3.1 million deficit for FY 2015. Staff’s current forecast is for a deficit of about $3.7 million. In 2014, staff projected lower revenues for FY 2015 due to the drought, but revenues are now projected to be even lower. In addition, the SFPUC wholesale water rate was 5% lower than forecasted, which resulted in additional savings. And although staff projected higher revenues from connection and capacity fees, these have been even higher than staff’s projections. Lastly, there were savings in operational budgets. These savings will be offset by increased capital investment costs associated with seismic strengthening and re-coating of the reservoirs. Table 12 summarizes the changes from last year’s forecast. Table 12: FY 2015 Change in Projected Results, 2014 Forecast vs 2015 Forecast Net Cost/ (Benefit) Type of change Savings in Operations budgets ($925,000) Cost savings SFPUC rate 5% lower than projected ($1,170,000) Cost savings Higher misc. revenues (interest income, fees) ($450,000) Revenue increase lower sales revenue $260,000 Revenue decrease Capital project costs higher than projected $2,406,000 Cost increase Other changes in costs/revenue $485,000 Various Net Cost / (Benefit) of Variances $606,000 SECTION 6E: FY 2016 – FY 2023 PROJECTIONS As can be seen in Figure 6 above, costs for the Water Utility are projected to increase by $5.5 million (14%) in FY 2016, then another $2-3 million (6%) in both FY 2019 and FY 2020, but at WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 17 | P a g e only 1-3% per year in subsequent years. As discussed earlier, water supply costs are the main reason for the cost increases. Water supply costs are projected to increase by 30% in FY 2016 and 9% per year on average in FY 2019 and FY 2020. Operations costs will increase by $1 million in FY 2016 for emergency generator leasing and maintenance, but will otherwise roughly match inflation through the forecast period. Capital investment costs are also expected to increase at only an inflationary rate, though there is still uncertainty with regard to the utility’s future costs for main replacement. See Section 7 (Details and Assumptions) for more detail on the costs that make up these projections, as well as the various assumptions underlying the projections. Revenues will have to increase at more than 8% per year on average through FY 2019 to keep up with these cost increases, even with the use of rate stabilization reserves to spread the increases over multiple years. Costs have already increased substantially over the last few years, and revenues have not kept pace. Sales revenues were adequate in FY 2014 due to lower than average CIP expenditures in that year, but starting in FY 2015 the utility will begin to see deficits. To close this gap, revenues need to increase by 12% in FY 2016, then 8% per year through FY 2019, then increase at a slower pace after that. To moderate the pace of increase in the water rates, the utility’s Rate Stabilization Reserve will be drawn down over that period, with most of it being used in FY 2016. Customers who reduce consumption over the forecast period will see their bills increase at a slower rate, and as more customers are added to the utility’s customer base, those customers will share in paying for the utility’s fixed costs. The combination of these factors means that the average residential bill is projected to increase at a slightly slower pace than the rates, or about 7% to 9% per year, assuming some growth in the customer base and decreases in the average amount of water each customer uses. Of course, results will differ for each individual customer depending on their water use patterns and whether they conserve. Reserves trends based on these revenue projections are shown in Figure 7, below. The Rate Stabilization Reserve is projected to be empty by the end of FY 2020, and the CIP Reserve is projected to decrease by $4 million by the end of FY 2017. Assuming these increases in revenue, the utility’s reserves will remain adequate through the forecast period. The Operations Reserve, the utility’s main contingency reserve, will remain comfortably above minimum levels and will be adequate to meet all identified risks, as discussed in Section 6F (Risk Assessment and Reserves Adequacy). These projections assume that drought restrictions end in early 2016, and that the request for water usage reductions remain at 10%. If the drought worsens or continues longer than projected, a drought surcharge may need to be developed and put in place. The forecast also assumes that water main replacement project costs do not increase faster than inflation. This is a major uncertainty, so staff has included a forecast in Section 6G (Alternate Scenario) involving an alternate scenario with higher main replacement costs. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 18 | P a g e SECTION 6F: RISK ASSESSMENT AND RESERVES ADEQUACY The Water Utility currently has one contingency reserve, the Operations Reserve, and this Financial Plan maintains reserves within the approved reserve maximum and minimum guidelines throughout the forecast period, as shown in Figure 8. Reserve levels also exceed the short term risk assessment for the utility. Table 13 summarizes the risk assessment calculation for the Water Utility through FY 2020. The same methodology is used for FY 2021 through FY 2023 as well. The risk assessment includes the revenue shortfall that could accrue due to: 1. Lower than forecasted sales revenue; and 2. An increase of 10% of planned system improvement CIP expenditures for the budget year. Figure 7: Water Utility Reserves: Actual Reserve Levels through FY 2014 and Projections through FY 2023 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 19 | P a g e Table 13: Water Risk Assessment ($000) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total non-commodity revenue $16,789 $20,131 $22,547 $22,998 $22,829 Max. revenue variance, previous ten years 13% 13% 13% 13% 13% Risk of revenue loss $1,659 $1,989 $2,228 $2,272 $2,256 CIP Budget $8,724 $9,089 $9,099 $9,388 $9,666 CIP Contingency @10% $872 $909 $910 $939 $967 Total Risk Assessment value $2,531 $2,898 $3,138 $3,211 $3,222 This Financial Plan includes a proposal to make the CIP Reserve a contingency reserve as well. See Section 4C (Reserves Management Practices, Proposed Change) for more details. SECTION 6G: ALTERNATE SCENARIO Staff created an additional scenario in which water main replacement budgets are 50% higher than the base forecast. As described in Section 7C (Capital Improvement Program), prices for the most recent water main replacement projects have been nearly 50% higher than previous projects. The current forecast assumes that these prices have been temporary spikes due to the Figure 8: Operations Reserve Adequacy WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 20 | P a g e economy picking up, but that may not be the case. The “High CIP” scenario assumes that CPAU continues its current pace of water main replacement and prices remain at these higher levels. Figure 9 shows the rate increases under the high CIP scenario as compared to the base case (inflationary increases in CIP budgets). The high CIP scenario has a greater impact on rates than an extended drought because it involves higher ongoing costs rather than a short-term revenue loss. If this scenario becomes reality, it may be possible to phase in the increase in CIP budgets over several years to defer the rate impact into later years. CPAU is developing a Water System Master Plan, which is expected to be completed in early 2015. It will give CPAU the information it needs to determine the feasibility of these types of strategies. See Section 7C (Capital Improvement Program) for more discussion of CIP costs. SECTION 6H: LONG-TERM OUTLOOK CPAU has put its Water Utility on strong footing by investing in its distribution system infrastructure and emergency water facilities over the last 20 years, so the next 20 to 40 years after FY 2020 may involve only inflationary cost increases for the utility. The Water System Master Plan, expected to be completed in May 2015, will give CPAU a better picture of the long-term outlook for its infrastructure and will result in a plan for an appropriate schedule for Figure 9: Rate Increases for High CIP Scenario WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 21 | P a g e infrastructure replacement and upgrades. In addition, CPAU’s water supplier, the SFPUC, has replaced and seismically strengthened its water transmission infrastructure, which will be a benefit to Palo Alto and all Hetch Hetchy customers over the long term. The opportunities for CPAU’s Water Utility over the long term may be in alternative water supplies such as recycled water, groundwater, and water from the Santa Clara Valley Water District. These alternatives have been analyzed in the past, and will be analyzed again in an upcoming update to the Water Integrated Resource Plan. Some of these alternatives may provide cost savings or increased drought protection. Climate change may begin to present challenges for the Water Utility over the next 20 to 40 years. Water consumption patterns may change. Consumption could increase due to drier weather or decrease as customers become even more focused on water conservation. Droughts may become more frequent. The risk of wildfire in the foothills could increase, possibly threatening utility infrastructure or placing greater demands on it. Sea level rise could result in greater exposure of utility infrastructure to saltwater intrusion or the need to protect infrastructure from inundation, possibly resulting in higher maintenance and replacement costs. It could also affect the groundwater aquifer that the utility relies on in emergencies. Any of these could result in increases to the costs of operating the Water Utility. As part of the Sustainability/Climate Action Plan, CPAU is currently working on a Climate Change Adaptation Roadmap that will begin to assess some of these risks. SECTION 7: DETAILS AND ASSUMPTIONS SECTION 7A: WATER PURCHASE COSTS CPAU purchases all of the potable water for its Water Utility from the SFPUC, which owns and operates the Hetch Hetchy system. CPAU is one of several agencies that purchase water from the SFPUC, all of whom are members of the Bay Area Water Supply and Conservation Agency (BAWSCA). Palo Altans use roughly 7% of the water delivered by the SFPUC to BAWSCA member agencies. The Hetch Hetchy system begins with a system of reservoirs and tunnels in the high Sierra in Yosemite County and is transported by a gravity-fed pipeline to the Bay Area. Currently, the SFPUC is in the midst of a $4.6 billion bond-financed capital improvement program (the Water System Improvement Program, or WSIP) to seismically retrofit the facilities that transport water to the Bay Area. This is resulting in large increases in the annual debt service costs assigned to wholesale customers like Palo Alto. The wholesale customer debt service share of the WSIP is increasing from $53 million in FY 2010 to over $200 million in FY 2020. As a result, the SFPUC’s wholesale water rate has already increased from $1.43 per CCF in FY 2009 to $2.93 per CCF in FY 2015, and is forecasted to increase to $4.50 per CCF by FY 2020. Figure 10 shows the SFPUC’s actual wholesale water rate since FY 2009 and a projection through FY 2023. The SFPUC’s water rate projections show rates flattening out in FY 2020 after all of the debt for the WSIP has been issued. Some other parts of SFPUC’s system not included in the WSIP also may need rehabilitation. Some of these projects are already included in the SFPUC’s rate projections, but the SFPUC is planning to do condition assessments of other “up-country” WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 22 | P a g e facilities, located in the Sierras in the coming years. If the these assessments identify other facilities that need replacement, it may result in additional rate increases beyond FY 2020 as new debt is issued to finance the projects. As shown in Figure 10, this year’s projection of SFPUC wholesale rates has increased from the previous year’s projection. The current projection assumes that drought restrictions continue through 2015, ending in the spring of 2016. The SFPUC needed to increase its rates more than anticipated due to lower consumption during 2014 and 2015 due to the drought, but wholesale rates are not projected to decrease much (if at all) after the drought ends. Instead, underlying costs will have increased enough by then that even if consumption increases after the drought, the rates are not likely to decrease much. The current wholesale water rate projection assumes higher rates in the long term than were assumed in last year’s projections. Consumption is unlikely to return to pre-drought levels even after the drought ends, and the SFPUC will likely adopt higher rates to recover its costs, which are mostly fixed. Figure 10: Historical and Projected SFPUC Wholesale Water Rate SECTION 7B: OPERATIONS CPAU’s Water Utility operations include the following activities: Administration, a category that includes charges allocated to the Water Utility for administrative services provided by the General Fund and for Utilities Department WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 23 | P a g e administration, as well as debt service and other transfers. Additional detail on Water Utility debt service is provided in Section 7D (Debt Service) Customer Service Engineering work for maintenance activities (as opposed to capital activities) Operations and Maintenance of the distribution system; and Resource Management Appendix F (Description of Water Utility Operational Activities) includes detailed descriptions of the work associated with each of these activities. From FY 2009 to FY 2014 Operations costs (excluding debt service, rent, and transfers) increased 5% per year on average (see Figure 11). The increases were driven by allocated charges, which increased by 8% per year on average and increases in other Operations costs, which increased by roughly 4% per year. Debt service costs increased by $2.4 million per year as a result of a bond issued to finance the Emergency Water Supply and Storage Project. Transfers have varied from year to year, but are expected to remain relatively low and stable through the forecast period. In FY 2016 Operations costs are projected to increase by $1 million for a capital lease of emergency generators for various wells and pump stations. This is a new ongoing cost. Aside from that, only inflationary increases are projected for Operations costs. Underlying these projections are assumptions for salary and benefit costs, consumer price index, and other cost projections that match the City’s long-range financial forecast. Figure 11: Historical and Projected Operational Costs WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 24 | P a g e SECTION 7C: CAPITAL IMPROVEMENT PROGRAM (CIP) The Water Utility’s CIP consists of the following types of projects: Customer connections, which represents the cost when the Water Utility installs new services or upgrades existing services at a customer’s request in response to development or redevelopment. CPAU charges a fee to these customers to cover the cost of these projects. Ongoing projects, which represent the cost of replacing aging and under-recording meters and degraded boxes and covers, minor replacements of various types of distribution system equipment, and the cost of capitalized tools and equipment. One time projects, or large, non-recurring replacement of system assets (such as reservoir rehabilitation) Water main replacement, which represents the ongoing replacement of aging water mains, and sometimes the services associated with those mains. Table 14 shows the FY 2015 adopted budget, with actual spending and remaining budget as of December 31, 2014. Also included is the five year CIP spending plan, although these figures are preliminary pending budget discussions starting in May. The ‘committed’ column represents funds committed to contracts for which work has not yet been completed or invoices paid. Table 14: Budgeted Water Utility CIP Spending ($000) *Includes unspent funds from previous years carried forward or reappropriated into the current fiscal year **Equal to Reserve for Reappropriations + Reserve for Commitments. The water main replacement program funds the replacement of deteriorating water mains. The water system consists of over 236 miles of mains, approximately 2000 fire hydrants, and over 20,000 metered service connections spanning 9 pressure zones over a 26 square mile service area. CPAU utilizes an asset management database in conjunction with hydraulic modeling software to prioritize capital improvements. Mains are selected by researching the maintenance history of the system and identifying those that are undersized, corroded, and subject to recurring breaks. CPAU uses a scoring system based on criticality in order to prioritize which mains to replace first, and coordinates with the Public Works street maintenance program to avoid cutting into newly repaved streets. CPAU replaces approximately 3 miles of main per year, or 1.3% of the system. Costs for the water main replacement program are increasing for a variety of reasons: WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 25 | P a g e Fire Code regulations now mandate fire sprinklers for new residential units. To accommodate increased fire flows, new main replacement projects require larger diameter pipe. CPAU has switched to high-density polyethylene (HDPE) for its mains. Installation costs for this material are slightly higher, though lifecycle costs are lower, and the material performs better. Joints in distribution mains are the most likely place for failure, and sections of HDPE pipe can be fused together rather than connected with fittings. In the long run, this will reduce losses and maintenance costs. To take full advantage of HDPE’s fusibility, CPAU is now replacing the services along with the water mains with new HDPE services. In the past, the existing services were reconnected, regardless of the material. This new practice costs more in the short run, but will provide long term benefits. Lastly, as the economy begins to recover, costs have begun to escalate. These factors have created some uncertainty in future water main replacement costs. If the cost of water main replacement continues at its current levels, water main replacement budgets will need to be increased by $1M to $2M per year to keep up the current pace of main replacement. However, CPAU is nearing the end of a long term water main replacement program initiated in 1993 to replace the oldest and most degraded parts of the system. Roughly 25% of the system has been replaced, and the rate of water leaks has decreased 50%. This makes it a good time to re-evaluate the program. CPAU initiated a master planning process in FY 2015 to evaluate the current state of the distribution system and determine the necessary rate of main replacement in future years. Currently the utility replaces about 1.3% of the system each year, which is an 80-year replacement cycle. The master planning process may reveal a need for a higher main replacement rate, or may reveal that pipes are currently in good condition and a lower rate of replacement is required. Results are expected in May 2015. If this study determines that a lower rate of main replacement is acceptable, increases to water main replacement project budgets may not be necessary. Likewise, if the per-mile costs of main replacement come down, that would also reduce or eliminate the need to increase main replacement budgets. A combination of reduced costs and a reduced rate of main replacement could even allow CPAU to reduce those budgets. However, if per-mile main replacement costs stay at their current levels and the study reveals the need to maintain the same rate of main replacement (or a higher rate), CPAU’s CIP costs would rise. The implications for ratepayers of that scenario are analyzed in Section 6G (Alternate Scenario). One project not included in this forecast is the seismic strengthening of a large water transmission line in the foothills. Staff has engaged a consultant to investigate alternatives for this project. The consultant is analyzing an alternative that involves installing a valve and hose system that could be used to bypass breaks in the line while they are repaired after an earthquake. This is a relatively low cost alternative that would not substantially affect the financial forecast. The study is not finalized yet, however, and if it is determined that the entire pipeline needs to be replaced, it could cost between $15 million and $20 million, which would likely require bond financing and would substantially affect the financial forecast. The final report with recommendations is expected to be available in May 2015. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 26 | P a g e Ongoing Projects and Customer Connections are projected to cost approximately $1.9 million in FY 2016 and increase by 3.5% per year through the end of the forecast period. Actual expenses for these projects fluctuate annually depending on how many defective meters are discovered and replaced during routine maintenance, as well as how much development and redevelopment is going on that prompts the replacement or upgrade of water services. It is worth noting that property owners pay a fee for water service replacement or expansion during redevelopment, so when the number of projects go up (meaning higher costs for this activity), so does fee revenue. Aside from customer connections, the CIP plan for FY 2015 to FY 2019 is funded by utility rates and capacity fees. The details of the plan are shown in Appendix B (Water Utility Capital Improvement Program (CIP) Detail). SECTION 7D: DEBT SERVICE The Water Utility’s annual debt service is roughly $3.2 million per year. This is related to two bond issuances, one requiring payments through 2026, the other through 2035. The first issuance, the 2011 Utility Revenue Refunding Bond, Series A, was a joint issuance between the Water and Gas Utilities refinancing the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The second, larger issuance is the 2009 Water Revenue Bond, Series A (Direct Payment Build America bond) used to finance construction of the Emergency Water Supply and Storage project (the El Camino Reservoir, new wells, rehabilitation of existing wells and tanks, etc.) CPAU is in compliance with all covenants on both bonds. Additional detail is provided in Appendix E (Water Utility Debt Service Details). SECTION 7E: OTHER REVENUES The Water Utility receives most of its revenues from sales of water, but about 9% comes from other sources. The largest revenue source is connection and capacity fees, which in FY 2014 represented 52% of revenue from sources other than water sales. The next largest revenue source in that category was interest on reserves (26%), followed by the interest subsidy from the Federal government related to the utility’s 2009 Build America Bond issuance (14%), with the remainder consisting of a variety of miscellaneous charges and transfers. Revenues from connection and capacity fees have more than doubled since FY 2009. Connection fees are charged to new developments that need new or replacement service connections, while capacity fees are charged to development that put additional demands on the water distribution system. Revenue from these sources decreased slightly during the recession, but has increased substantially since then. Staff is forecasting lower revenue from these sources in subsequent years, but has also proposed increases in connection fees that, if adopted in early 2015, are expected to offset these reductions to some extent. Other revenue sources are projected to stay stable through the forecast period, though interest income always fluctuates depending on changes in interest rates. Some uncertainty also exists related to the Federal government’s commitment to continuing to pay the interest subsidy on the Build America Bonds. See Appendix E (Water Utility Debt Service Details) for more information. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 27 | P a g e SECTION 7F: SALES REVENUES Sales revenue projections are based on the load forecast in Section 6A (Load Forecast) and the projected rate changes shown in Figure 6. Except where stated otherwise, these load forecasts are based on normal precipitation. Precipitation can vary substantially, however, even in non- drought years, and this can affect revenues substantially. In dry years customers use more water, increasing revenues, and in wet years they use less. These variations happen in the winter, since summers have virtually no local precipitation regardless of whether it is a dry or wet year. The variations are most likely related to winter irrigation demand. SECTION 8: COMMUNICATIONS PLAN In FY 2016, communications will focus on water utility rate increases, including the reasons why and how rates may change contingent upon continued drought conditions. Rates communications will include a substantial update to information on a webpage dedicated to Utilities rates, “breaking news” on the Utility home webpage, discussion in the Proposition 218 rate adjustment notice, bill inserts, print ads, videos for web and television, social media posts and frequent educational updates to internal and external stakeholders (customer service, marketing, City Manager’s Office, UAC, City Council, business and residential customers). Other communications vehicles will include financial plans, presentations to UAC, Finance Committee, City Council and any media coverage as a result of the rate increases. CPAU will continue its outreach about drought conditions and importance of water use efficiency, tying in the message that although rates are increasing, efficient usage should mean that a customer should not see a significant increase in water utility costs on their bills. Water conservation outreach will include bill inserts, web updates, email blasts, videos for the web and television, presentations to customer groups and the use of social media. To keep customers apprised of the status and accomplishments of CIP projects, a network of project web pages are maintained. Traffic is driven to the website via ads in publications, newspaper inserts, and through the comprehensive portfolio of outreach strategies as outlined above. Safety topics are also emphasized year-round. For all utility outreach, while print materials and website pages still feature prominently, CPAU is placing more emphasis on digital advertising content, direct mail, community safety/emergency preparation events and presentations. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 28 | P a g e APPENDICES Appendix A: Water Utility Financial Forecast Detail Appendix B: Water Utility Capital Improvement Program (CIP) Detail Appendix C: Water Utility Reserves Management Practices Appendix D: Rate Design Appendix E: Water Utility Debt Service Details Appendix F: Description of Water Utility Operational Activities Appendix G: Sample of Water Utility Outreach Communications APPENDIX A: WATER UTILITY FINANCIAL FORECAST DETAIL 1 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 2 3 WATER SUPPLY 4 Purchases 5,669,518 5,362,359 5,416,220 5,538,305 5,532,947 5,507,153 4,725,136 4,773,600 4,887,917 4,810,714 4,735,760 4,701,084 4,680,394 4,651,320 4,616,646 5 Sales 5,395,080 4,954,950 4,992,473 5,062,873 5,097,392 5,047,148 4,344,946 4,389,511 4,494,630 4,423,638 4,354,716 4,322,829 4,303,804 4,277,070 4,245,185 6 7 BILL AND RATE CHANGES 8 Variable Charge (Supply)15%38%11%-16%20%31%-2%0%16%7%-5%1%6% 9 Variable Charge (Distribution)-7%-12%17%30%-12%0%23%14%4%0%6%3%1% 10 Service Charge (Distribution)-3%72%75%9%0%0%0%12%2%0%4%2%0% 11 Change in System Average Rate 0%12%22%8%0%12%8%8%8%3%1%2%3% 12 Change in Average Residential Bill -1%12%21%7%-1%9%7%6%6%2%1%1%2% 13 14 STARTING RESERVES 15 Reappropriations (Non-CIP)- - 54,000 20,000 - - - - - - - - - - - 16 Commitments (Non-CIP)267,323 98,000 40,000 765,000 714,000 2,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 17 Restricted for Debt Service 780,000 780,000 3,348,000 3,348,000 3,225,000 3,225,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 18 Emergency Plant Replacement 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - - - - - 19 Capital Reserve - - - - - - - 4,000,000 14,847,000 10,847,000 10,847,000 10,847,000 10,847,000 10,847,000 10,847,000 20 Rate Stabilization Reserve 14,089,000 5,400,000 17,037,000 10,639,000 7,996,000 17,272,000 20,133,000 6,567,000 1,067,000 1,067,000 500,000 500,000 - - - 21 Operations Reserve - - - - - - - 6,825,996 7,388,745 9,587,610 10,996,799 11,491,182 11,522,648 11,904,886 12,374,300 22 Unassigned - - - - - - - - - - - - - - - 23 TOTAL STARTING RESERVES 16,136,323 7,278,000 21,479,000 15,772,000 12,935,000 21,499,000 24,811,000 21,070,996 26,980,745 25,179,610 26,021,799 26,516,182 26,047,648 26,429,886 26,899,300 24 25 REVENUES 26 Net Sales 26,640,717 25,839,375 26,133,998 30,673,882 36,647,924 39,008,671 34,066,218 38,321,464 42,263,580 45,061,690 47,965,975 49,037,955 49,414,313 50,256,219 51,432,726 27 Other Revenues and Transfers In 2,833,016 12,104,925 2,812,063 5,892,133 6,811,461 4,074,511 3,146,219 3,195,685 3,249,006 3,303,323 3,358,265 3,413,741 3,471,338 3,533,115 3,598,411 28 TOTAL REVENUES 29,473,733 37,944,300 28,946,061 36,566,015 43,459,385 43,083,182 37,212,437 41,517,150 45,512,586 48,365,013 51,324,240 52,451,696 52,885,651 53,789,333 55,031,137 29 30 EXPENSES 31 Water Purchases 8,443,057 9,061,245 10,677,914 14,889,399 16,605,351 15,705,288 16,012,748 20,450,988 20,497,789 20,224,895 22,764,353 24,080,279 22,921,818 23,012,781 24,123,189 32 Operating Expenses 33 Administration 34 Allocated Charges 1,629,800 1,580,604 1,798,630 2,003,116 2,422,880 2,374,411 2,082,585 2,134,799 2,188,511 2,243,583 2,300,029 2,357,900 2,417,009 2,477,469 2,539,450 35 Rent 1,919,052 2,107,405 2,122,405 2,156,887 1,911,963 2,192,454 2,249,457 2,316,941 2,386,449 2,458,042 2,531,784 2,607,737 2,685,969 2,766,548 2,849,545 36 Debt Service 776,059 1,950,625 3,341,781 3,385,986 3,219,165 3,220,208 3,218,869 3,222,606 3,219,316 3,222,669 3,220,858 3,220,638 3,222,843 3,223,563 3,224,553 37 Transfers and Other Adjustments 4,569,523 (2,551,533) 200,286 301,963 2,241,793 327,474 368,733 376,108 383,630 391,302 399,129 407,111 415,253 423,558 432,030 38 Subtotal, Administration 8,894,435 3,087,100 7,463,102 7,847,952 9,795,801 8,114,546 7,919,644 8,050,454 8,177,906 8,315,596 8,451,799 8,593,386 8,741,074 8,891,138 9,045,577 39 Resource Management 394,281 485,727 575,834 552,972 557,910 570,040 685,688 705,481 729,227 753,931 779,267 805,539 828,660 850,008 872,092 40 Operations and Mtc 4,039,649 4,257,240 4,885,428 4,900,606 4,944,064 4,986,274 6,184,549 6,365,432 6,585,118 6,813,962 7,048,720 7,292,410 7,504,387 7,698,282 7,899,029 41 Engineering (Operating)333,017 262,889 247,488 301,278 338,659 381,502 422,650 435,118 450,380 466,290 482,616 499,574 514,216 527,527 541,317 42 Customer Service 1,435,667 1,371,943 1,476,175 1,544,608 1,584,759 1,677,926 2,097,861 2,159,829 2,235,777 2,314,969 2,396,225 2,480,639 2,553,438 2,619,560 2,688,063 43 Allowance for Unspent Budget - - - - - - (924,743) (436,860) (451,237) (466,183) (481,514) (497,403) (511,532) (524,679) (538,269) 44 Subtotal, Operating Expenses 15,097,049 9,464,900 14,648,027 15,147,415 17,221,192 15,730,288 16,385,649 17,279,453 17,727,171 18,198,565 18,677,112 19,174,145 19,630,244 20,061,837 20,507,809 45 Capital Program Contribution 14,791,950 5,217,154 9,327,120 9,366,201 1,068,841 8,335,605 8,554,044 8,723,959 9,088,761 9,099,364 9,388,392 9,665,805 9,951,351 10,245,303 10,547,961 46 TOTAL EXPENSES 38,332,056 23,743,300 34,653,061 39,403,015 34,895,385 39,771,182 40,952,441 46,454,401 47,313,721 47,522,825 50,829,857 52,920,229 52,503,413 53,319,920 55,178,960 47 48 ENDING RESERVES 49 Reappropriations (Non-CIP)- 54,000 20,000 - - - - - - - - - - - - 50 Commitments (Non-CIP)98,000 40,000 765,000 714,000 2,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 347,000 51 Restricted for Debt Service 780,000 3,348,000 3,348,000 3,225,000 3,225,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 3,331,000 52 Emergency Plant Replacement 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - - - - - - - 53 Capital Reserve - - - - - - 4,000,000 14,847,000 10,847,000 10,847,000 10,847,000 10,847,000 10,847,000 10,847,000 10,847,000 54 Rate Stabilization Reserve 5,400,000 17,037,000 10,639,000 7,996,000 17,272,000 20,133,000 6,567,000 1,067,000 1,067,000 500,000 500,000 - - - - 55 Operations Reserve - - - - - - 6,825,996 7,388,745 9,587,610 10,996,799 11,491,182 11,522,648 11,904,886 12,374,300 12,226,477 56 Unassigned - - - - - - - - - - - - - - - 57 TOTAL ENDING RESERVES 7,278,000 21,479,000 15,772,000 12,935,000 21,499,000 24,811,000 21,070,996 26,980,745 25,179,610 26,021,799 26,516,182 26,047,648 26,429,886 26,899,300 26,751,477 58 1 FISCAL YEAR FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 2 3 REVENUES 4 Net Sales 90%68%90%84%84%91%92%92%93%93%93%93%93%93%93% 5 Other Revenues and Transfers In 10%32%10%16%16%9%8%8%7%7%7%7%7%7%7% 6 TOTAL REVENUES 100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% 7 8 EXPENSES 9 Water Purchases 22%38%31%38%48%39%39%44%43%43%45%46%44%43%44% 10 Operating Expenses 11 Administration 12 Allocated Charges 4%7%5%5%7%6%5%5%5%5%5%4%5%5%5% 13 Rent 5%9%6%5%5%6%5%5%5%5%5%5%5%5%5% 14 Debt Service 2%8%10%9%9%8%8%7%7%7%6%6%6%6%6% 15 Transfers and Other Adjustments 12%-11%1%1%6%1%1%1%1%1%1%1%1%1%1% 16 Subtotal, Administration 23%13%22%20%28%20%19%17%17%17%17%16%17%17%16% 17 Resource Management 1%2%2%1%2%1%2%2%2%2%2%2%2%2%2% 18 Operations and Mtc 11%18%14%12%14%13%15%14%14%14%14%14%14%14%14% 19 Engineering (Operating)1%1%1%1%1%1%1%1%1%1%1%1%1%1%1% 20 Customer Service 4%6%4%4%5%4%5%5%5%5%5%5%5%5%5% 21 Allowance for Unspent Budget 0%0%0%0%0%0%-2%-1%-1%-1%-1%-1%-1%-1%-1% 22 Subtotal, Operating Expenses 39%40%42%38%49%40%40%37%37%38%37%36%37%38%37% 23 Capital Program Contribution 39%22%27%24%3%21%21%19%19%19%18%18%19%19%19% 24 TOTAL EXPENSES 100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% 25 26 RISK ASSESSMENT DETAIL 27 Distribution Revenue Variance 1,691,676 1,658,926 1,989,201 2,227,905 2,272,463 2,255,824 2,374,042 2,433,393 2,445,560 28 10% CIP Program Contingency 855,404 872,396 908,876 909,936 938,839 966,581 995,135 1,024,530 1,054,796 29 Total Risk Asssessment Value 2,547,081 2,531,322 2,898,077 3,137,842 3,211,303 3,222,404 3,369,177 3,457,923 3,500,356 30 Projected Operations Reserve 6,825,996 7,388,745 9,587,610 10,996,799 11,491,182 11,522,648 11,904,886 12,374,300 12,226,477 31 Operations Reserve, % of Risk Value 268%292%331%350%358%358%353%358%349% 32 33 OPERATIONS RESERVE 34 Min (60 days of non-capital expenses)- - - - - - 5,633,883 6,516,546 6,604,123 6,643,164 7,145,814 7,450,505 7,341,852 7,434,691 7,697,613 35 Target (90 days of non-capital expenses)- - - - - - 9,681,864 9,805,203 9,939,273 10,000,649 10,757,546 11,217,620 11,057,753 11,200,219 11,597,933 36 Max (120 days of non-capital expenses)- - - - - - 13,729,844 13,093,861 13,274,424 13,358,135 14,369,279 14,984,734 14,773,654 14,965,747 15,498,253 37 Risk Assessment Value 2,547,081 2,531,322 2,898,077 3,137,842 3,211,303 3,222,404 3,369,177 3,457,923 3,500,356 38 39 DEBT SERVICE COVERAGE RATIO 40 Net Revenues (125% of Debt Service)2933%850%658%787%951%876%907%1071%1087%1092%1187%1243%1220%1236%1284% 41 Available Reserves (5x Debt Service)*8.2 9.2 3.5 2.7 5.7 6.6 5.4 7.2 6.7 6.9 7.1 6.9 7.1 7.2 7.2 42 *For the purposes of debt covenants, the unrestricted reserves of other utilities may be counted toward the available reserves for meeting this measure. A ratio below 5x means that this utility is relying on the reserves of other utilities to meet its debt covenants. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 33 | P a g e APPENDIX B: WATER UTILITY CAPITAL IMPROVEMENT PROGRAM (CIP) DETAIL Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2019 ONE TIME PROJECTS WS-07000 Regulation Station Imp.370,824 - - (15,406) 355,418 895,806 - - - - WS-07001 Water Recycling Facilities 388,421 - - (37,603) 350,818 106,224 - - - - WS-08001 Water Reservoir Coating 2,177,560 750,000 - (15,406) 2,912,154 4,376,620 - - - - WS-09000 Seismic Water System 4,284,420 2,230,000 - (40,620) 6,473,800 6,107,517 - - - - WS-11001 Vacuum Excavation Equip.- - - - - - - - - - WS-13003 GPS Equipment Upgrade 200,000 - - - 200,000 - - - - - WS-13004 Asset Mgmt. Mobile Sys.98,471 - - (3,467) 95,004 - - - - - WS-13006 Meter Shop Renovations 46,907 - - (10,001) 36,906 - - - - - WS-15004 Water System Master Plan - - 500,000 - 500,000 255,858 WS-08002 Emergency Water Supply 1,106,738 - - (296,577) 810,161 853,189 - - - - Subtotal, One-time Projects 8,673,341 2,980,000 500,000 (419,080) 11,734,261 12,595,214 - - - - - WATER MAIN REPLACEMENT PROGRAM WS-08017 WMR - Project 22 - - - - - - - - - - - WS-09001 WMR - Project 23 112,021 - - - 112,021 - - - - - - WS-10001 WMR-Project 24 208,305 - - - 208,305 - - - - - - WS-11000 WMR-Project 25 5,238,360 - (55,186) 5,183,174 4,414,466 - - - - - WS-12001 WMR- Project 26 461,065 - - (1,176) 459,889 - 5,515,195 - - - - WS-13001 WMR - Project 27 - - - - - - 568,065 5,680,651 - - - WS-13001 WMR - Project 28 - - - - - - - 585,107 5,851,070 - - WS-15002 WMR - Project 29 - - - - - - - - 602,600 6,026,602 - WS-16001 WMR - Project 30 - - - - - - - - - 620,740 6,207,400 WS-16001 WMR - Project 31 - - - - - - - - - - 608,512 Subtotal, Water Main Replacement Prog.6,019,751 - - (56,362) 5,963,389 4,414,466 6,083,260 6,265,758 6,453,670 6,647,342 6,815,912 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 34 | P a g e Appendix B: Water Utility Capital Improvement Program (CIP) Detail (Continued) Project #Project Name Reappropriated / Carried Forward from Previous Years Current Year Funding Budget Amendments Spending, Current Year Remaining in CIP Reserve Fund Commitments FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 ONGOING PROJECTS WS-80014 Services/Hydrants 176,771 236,000 - (82,315) 330,456 - 243,080 250,400 263,000 270,000 278,100 WS-80015 Water Meters 256,009 386,000 - (94,025) 547,984 175,669 393,080 400,372 407,000 415,000 427,450 WS-02014 W-G-W Utility GIS Data 130,984 303,000 - (98,684) 335,300 156,505 332,750 366,025 402,628 442,890 456,177 WS-13002 Equipment/Tools 28,132 50,000 - (6,674) 71,458 - 50,000 50,000 50,000 50,000 50,000 WS-11003 Dist. Sys. Improvements 201,515 225,000 - (675,186) (248,671) 35,556 232,000 239,000 247,000 254,000 261,620 WS-11004 Supply Sys. Improvements 157,622 225,000 - (123,401) 259,221 39,773 232,000 239,000 247,000 254,000 261,620 Subtotal, Ongoing Projects 951,033 1,425,000 - (1,080,285) 1,295,748 407,503 1,482,910 1,544,797 1,616,628 1,685,890 1,734,967 CUSTOMER CONNECTIONS (FEE FUNDED) WS-80013 Water System Extensions 2,553 450,000 - (265,623) 186,930 4,572 460,000 473,000 486,000 500,000 515,000 Subtotal, Customer Connections 2,553 450,000 - (265,623) 186,930 4,572 460,000 473,000 486,000 500,000 515,000 GRAND TOTAL 15,646,678 4,855,000 500,000 (1,821,350)19,180,328 17,421,755 8,026,170 8,283,555 8,556,298 8,833,232 9,065,879 Funding Sources Connection/Capacity Fees 450,000 - 460,000 473,000 486,000 500,000 Other Utility Funds (Asset Mgmt, GIS Systems)202,000 - 222,000 244,000 268,000 295,000 Utility Rates 4,855,000 500,000 8,026,170 8,283,555 8,556,298 8,833,232 9,065,879 CIP-RELATED RESERVES DETAIL 6/30/2014 (Actual)12/31/20114 Reappropriations (excl. Bond Funded)10,846,585 1,758,573 Commitments (excl. Bond Funded)4,800,093 17,421,755 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 35 | P a g e APPENDIX C: WATER UTILITY RESERVES MANAGEMENT PRACTICES (Amendments to this section are proposed. See the proposed adopting resolution for this Financial Plan. This section will be added to the Financial Plan following adoption of any amendments to this section.) WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 36 | P a g e APPENDIX D: RATE DESIGN The Water Utility’s rates are evaluated and implemented in compliance with the cost of service requirements and procedural rules set forth in the California Constitution under Article 13 (per Proposition 218). Current rates were structured based on the methodology from the March 2012 Palo Alto Water Cost of Service & Rate Study by Raftelis Financial Consultants, Inc 2. Staff plans to review and update this cost of service study in 2 to 3 years, unless any major changes occur to the utility’s operations or customer base that would necessitate an earlier study. Before conducting any new cost of service study, staff will review current rates and the scope of the study with the Utilities Advisory Commission (UAC) and Council to determine the City’s policy priorities. 2 Staff Report ID#2676, Finance Committee, April 18, 2012 WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 37 | P a g e APPENDIX E: WATER UTILITY DEBT SERVICE DETAILS The Water Utility currently makes payment on its share of two bond issuances. The first is the 2009 Water Revenue Bond, Series A, issued for $35 million, and to be retired by 2035. As part of the ‘Build America’ bond program, there is an interest payment subsidy from the Federal Government of 35%. There is always the possibility that the federal government will choose to stop payment on this subsidy. The automatic federal spending cuts under the Budget Control Act (BCA) of 2011 have already reduced the subsidy by $50,000 per year, and if planned cuts through 2021 proceed without amendment, staff estimates that the subsidy would be reduced by over $200,000 per year by 2021. The Bipartisan Budget Act of 2013, which relieved some of the discretionary spending cuts in the 2011 BCA, did not affect automatic cuts to the subsidy, and actually extended the automatic cuts through 2023. The second bond issuance is the 2011 Utility Revenue Refunding Bond, Series A, which is to be retired in 2026. This $17.2 million issuance refinanced an earlier Water and Gas Utility bond issuance, the 2002 Utility Revenue Bonds, Series A, which was issued to finance various capital improvements for both systems. The Water Utility’s share of the issuance was roughly $7.8 million. The cost of debt service for the Water Utility’s share of these bond issuances for the financial forecast period is as follows: Table 15: Water Utility Debt Service ($000) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 2009 Water Revenue Bonds, Series A (net of grants) 1,986 2,002 2,012 2,031 2,046 2,064 2,079 2,101 2011 Utility Revenue Bonds, Series A 656 657 657 656 654 656 657 657 Both the 2009 and 2011 Bonds include the following covenants: 1) net revenues plus Available Reserves shall at least equal 125% of the maximum annual debt service, and 2) Available Reserves shall be at least 5 times the maximum annual debt service. Note that “Available Reserves,” as defined for both bonds, include the reserves for the Gas and Electric systems, not just the Water system. The current Financial Plan maintains compliance with these covenants throughout the forecast period, as shown in Appendix A (Water Utility Financial Forecast Detail). The net revenues (but not the reserves) of the Water Utility are also pledged for one other bond as shown in Table 16 below, even though the Water Utility is not responsible for the debt service payments. The Water Utility’s reserves or net revenues would only be called upon if the responsible utilities are unable to make their debt service payments. Staff does not currently foresee this occurring. Requirements of the California Constitution require that any amounts advanced from one utility to pay debt service for another utility must be repaid by the borrowing fund. WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 38 | P a g e Table 16: Other Issuances Secured by the Water Utility’s Revenues or Reserves Bond Issuance Responsible Utilities Annual Debt Service ($000) Secured by Water Utility’s: Net Revenues Reserves 1995 Series A Utility Revenue Bonds Storm Drain $680 Yes No WATER UTILITY FINANCIAL PLAN J u n e 1 6 , 2 0 1 4 39 | P a g e APPENDIX F: DESCRIPTION OF WATER UTILITY OPERATIONAL ACTIVITIES This appendix describes the activities associated with the various operational activities referred to in Section 7B (Operations) of this Financial Plan. Administration: Accounting, purchasing, legal, and other administrative functions provided by the City’s General Fund staff, as well as shared communications services, CPAU administrative overhead, and billing system maintenance costs. This category also includes Water Utility debt service and rent paid to the General Fund for the land associated with reservoirs and various other facilities. Customer Service: This category includes the Water Utility’s share of the call center, meter reading, collections, and billing support functions. Billing support encompasses staff time associated with bill investigations and quality control on certain aspects of the billing process. It does not include maintenance of the billing system itself, which is included in Administration. This category also includes CPAU’s key account representatives, who work with large commercial customers who have more complex requirements for their water services. Engineering (Operating): The Water Utility’s engineers focus primarily on the CIP, but a small portion of their time is spent assisting with distribution system maintenance. Operations and Maintenance: This category includes the costs of a variety of distribution system maintenance activities, including: investigating reports of damaged mains or services and performing emergency repairs; testing and operating valves; monitoring water quality and reservoir levels; monitoring the status of the different pressure zones; flushing water at hydrants and other closed end points of the system; building and replacing water services for new or redeveloped buildings; and testing and replacing meters to ensure accurate sales metering. This category also includes a variety of functions the utility shares with other City utilities, including: the Field Services team (which does field research of various customer service issues); the Cathodic Protection team (which monitors and maintains the systems that prevent corrosion in metal tanks and reservoirs); and the General Services team (which manages and maintains equipment, paves and restores streets after gas, water, or sewer main replacements, and provides welding services) Resource Management: This category includes water procurement, contract management, water resource planning, interaction with BAWSCA, the SFPUC, and the SCVWD, and tracking of legislation and regulation related to the water industry. APPENDIX G: SAMPLE OF WATER UTILITY OUTREACH COMMUNICATIONS Attachment D * NOT YET APPROVED * 150220 mf 6053253 1 Resolution No. _____ Resolution of the Council of the City of Palo Alto Adopting a Water Rate Increase and Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) R E C I T A L S A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. B. Pursuant to Article XIIID Sec. 6 of the California Constitution, on ________, 2015, the City of Palo Alto held a public hearing to consider all protests against the proposed water rate amendments. C. The total number of written protests presented by the close of the public hearing was less than fifty percent (50%) of the total number of customers and property owners subject to the proposed water rate amendments. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2015. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2015. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-3 (Fire Service Connections) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-3, as amended, shall become effective July 1, 2015. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-4 (Residential Master-Metered and General Non-Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-4, as amended, shall become effective July 1, 2015. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-7, as amended, shall become effective July 1, 2015. Attachment D * NOT YET APPROVED * 150220 mf 6053253 2 SECTION 6. The Council finds that the revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 7. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. SECTION 8. The Council finds that the adoption of this resolution changing water rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services GENERAL RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-1-1 Effective 7-1-2013 dated 7-1-2012 Sheet No W-1-1 A. APPLICABILITY: This schedule applies to all separately metered single family residential water services. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides water services. C. RATES: Per Meter Monthly Service Charge: Per Month For 5/8-inch meter ..................................................................................................... $ 14.6716.01 For 3/4 inch meter ..................................................................................................... 19.5121.48 For 1 inch meter ........................................................................................................ 29.1832.42 For 1 1/2 inch meter .................................................................................................. 53.3759.77 For 2-inch meter ........................................................................................................ 82.3992.60 For 3-inch meter ........................................................................................................ 174.29196.54 For 4-inch meter ........................................................................................................ 309.72349.71 For 6-inch meter ........................................................................................................ 633.80716.24 For 8-inch meter ........................................................................................................1,165.861,318.01 For 10-inch meter ......................................................................................................1,843.022,083.89 For 12-inch meter .......................................................................................................2,423.452,740.37 Commodity Rate: (To be added to Service Charge and applicable to all pressure zones.) Per Hundred Cubic Feet (ccf) Per Month All Pressure Zones Tier 1 usage ........................................................................................................................$4.995.70 Tier 2 usage (All usage over 100% of Tier 1) ........................................................................7.588.38 Temporary unmetered service to residential subdivision developers, per connection ........................................................................ $6.00 ATTACHMENT E GENERAL RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-1-2 Effective 7-1-2013 dated 7-1-2012 Sheet No W-1-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. 2. Calculation of Usage Tiers Tier 1 water usage shall be calculated and billed based upon a level of 0.2 ccf per day rounded to the nearest whole ccf, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 0 through 6 ccf. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. {End} WATER SERVICE FROM FIRE HYDRANTS UTILITY RATE SCHEDULE W-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-2-1 Effective 7-1-2013 dated 7-1-2012 Sheet No W-2-1 A. APPLICABILITY: This schedule applies to all water taken from fire hydrants for construction, maintenance, and other uses in conformance with provisions of a Hydrant Meter Permit. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides water services. C. RATES: 1. Monthly Service Charge. METER SIZE 5/8 inch ........................................................................................................................... 50.00 3 inch ........................................................................................................................... 125.00 2. Commodity Rate: (per hundred cubic feet) ................................................................ $6.156.97 D. SPECIAL NOTES: 1. Monthly charges shall include the applicable monthly service charge in addition to usage billed at the commodity rate. 2. Any applicant using a hydrant without obtaining a Hydrant Meter Permit or any permittee using a hydrant without a Hydrant Meter Permit shall pay a fee of $50.00 for each day of such use in addition to all other costs and fees provided in this schedule. A hydrant permit may be denied or revoked for failure to pay such fee. 3. A meter deposit of $750.00 may be charged any applicant for a Hydrant Meter Permit as a prerequisite to the issuance of a permit and meter(s). A charge of $50.00 per day will be added for delinquent return of hydrant meters. A fee will be charged for any meter returned with missing or damaged parts. 4. Any person or company using a fire hydrant improperly or without a permit, or who draws water from a hydrant without a meter installed and properly recording usage shall, in addition to all other applicable charges be subject to criminal prosecution pursuant to the Palo Alto Municipal Code. {End} FIRE SERVICE CONNECTIONS UTILITY RATE SCHEDULE W-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-3-1 Effective 7-1-2013 dated 7-1-2012 Sheet No W-3-1 A. APPLICABILITY: This schedule applies to all public fire hydrants and private fire service connections. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides water services. C. RATES: 1. Monthly Service Charges Public Fire Hydrant .................................................................................................... $5.00 Private Fire Service: 2-inch connection .......................................................................................................$3.033.43 4-inch connection .......................................................................................................18.7821.21 6-inch connection ....................................................................................................... 54.5561.61 8-inch connection .......................................................................................................116.24131.29 10-inch connection .....................................................................................................209.03236.10 12-inch connection .....................................................................................................337.65381.36 2. Commodity (To be added to Service Charge unless water is used for fire extinguishing or testing purposes.) Per Hundred Cubic Feet All water usage........................................................................................................... $10.00 D. SPECIAL NOTES: 1. Service under this schedule may be discontinued if water is used for any purpose other than fire extinguishing or testing and repairing the fire extinguishing facilities. Using hydrants and fire services for other purposes is illegal and will be subject to the commodity charge as noted above, fines, and criminal prosecution pursuant to the Palo Alto Municipal Code. 2. For a combination water and fire service, the general water service schedule shall apply. FIRE SERVICE CONNECTIONS UTILITY RATE SCHEDULE W-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-3-2 Effective 7-1-2013 dated 7-1-2012 Sheet No W-3-2 3. Utilities Rule and Regulation No. 21 provides additional information on Automatic Fire Services. 4. Repairs and testing of fire extinguishing facilities are not considered unauthorized use of water if records and documentation are supplied by the customer. {End} RESIDENTIAL MASTER-METERED AND GENERAL NON-RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-4 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-4-1 Effective 7-1-2013 dated 7-1-2012 Sheet No W-4-1 A. APPLICABILITY: This schedule applies to non-residential water service in the City of Palo Alto and its distribution area. This schedule is also applicable to multi-family residential customers served through a master meter. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides water services. C. RATES: Per Meter Monthly Service Charge Per Month For 5/8-inch meter ....................................................................................$ 16.01$ 14.67 For 3/4-inch meter .................................................................................... 21.4819.51 For 1-inch meter .................................................................................... 32.42 29.18 For 1 ½-inch meter .................................................................................... 59.77 53.37 For 2-inch meter .................................................................................... 92.60 82.39 For 3-inch meter .................................................................................... 196.54174.29 For 4-inch meter .................................................................................... 349.71309.72 For 6-inch meter .................................................................................... 716.24633.80 For 8-inch meter ....................................................................................1,318.011,165.86 For 10-inch meter ....................................................................................2,083.891,843.02 For 12-inch meter ....................................................................................2,740.372,423.45 Commodity Rates: (to be added to Service Charge) Per Hundred Cubic Feet (ccf) Per Month All Pressure Zones Per ccf ............................................................................................................ $ 6.156.97 RESIDENTIAL MASTER-METERED AND GENERAL NON-RESIDENTIAL WATER SERVICE UTILITY RATE SCHEDULE W-4 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-4-2 Effective 7-1-2013 dated 7-1-2012 Sheet No W-4-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. {End} NON-RESIDENTIAL IRRIGATION WATER SERVICE UTILITY RATE SCHEDULE W-7 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-7-1 Effective 7-1-2013 dated 7-1-2012 Sheet No W-7-1 A. APPLICABILITY: This schedule applies to non-residential water service supplying dedicated irrigation meters in the City of Palo Alto and its distribution area. B. TERRITORY: This schedule applies everywhere the City of Palo Alto provides water services. C. RATES: Per Meter Monthly Service Charge Per Month For 5/8-inch meter .................................................................................... $ 16.0114.67 For 3/4-inch meter .................................................................................... 21.48 19.51 For 1-inch meter .................................................................................... 32.4229.18 For 1 1/2 inch meter .................................................................................... 59.77 53.37 For 2-inch meter .................................................................................... 92.60 82.39 For 3-inch meter .................................................................................... 196.54174.29 For 4-inch meter .................................................................................... 349.71309.72 For 6-inch meter .................................................................................... 716.24633.80 For 8-inch meter ....................................................................................1,318.011.165.86 For 10-inch meter ....................................................................................2,083.891.843.02 For 12-inch meter ....................................................................................2,740.372,423.45 Commodity Rates: (to be added to Service Charge) Per Hundred Cubic Feet (ccf) Per Month All Pressure Zones Per ccf ............................................................................................................ $ 7.528.46 NON-RESIDENTIAL IRRIGATION WATER SERVICE UTILITY RATE SCHEDULE W-7 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No W-7-2 Effective 7-1-2013 dated 7-1-2012 Sheet No W-7-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. {End} EXCERPTED DRAFT MINUTES OF THE MARCH 4, 2015 UTILITIES ADVISORY COMMISSION MEETING ITEM 6: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt: (1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; and (2) a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) Senior Resource Planner Jon Abendschein provided an update to the preliminary rate projections that were provided to the UAC at its February meeting. Abendschein stated that the San Francisco Public Utilities Commission (SFPUC) had previously projected that wholesale water rates would rise by 15%, but after the UAC's February meeting, the SFPUC advised the City that its wholesale water rate for FY 2016 is instead projected to increase by 30.7%, which would increase the City’s wholesale water costs by 14%. He stated that staff had changed its rate proposal for FY 2016 to a 12% increase instead of 7%, and would use rate stabilization reserves to spread any remaining cost increase across future years. Staff is working on a public communications strategy. The result of the change in SFPUC’s wholesale water rates is that the entire 12% proposed retail rate increase is due to the increased wholesale water cost. Abendschein showed that the SFPUC's debt service is rising due to the Water System Improvement Program (WSIP), the program to upgrade and repair the regional water system. The project had started in 2007 and was projected to end in 2019. Each year the SFPUC issues new debt to fund the next phase of the project. That meant that each year the annual debt service costs assigned to wholesale customers like Palo Alto increases, with a corresponding increase in wholesale water rates. The increases in debt service payments remain in effect until the debt service is paid off in several decades. Abendschein said staff incorporated feedback the UAC provided at its February meeting about post-drought consumption and whether it would return to pre-drought levels. In previous droughts consumption did not returned to pre-drought levels. Staff took that into account and changed the water consumption forecast for FY 2016 through FY 2023. This assumption primarily affected projected future rate increases rather than the proposed FY 2016 rate increase, and affected them by a percentage point or two. He also noted that the projections were rate changes, not bill changes, and customers who conserved would see lower bill increases. ATTACHMENT F Commissioner Eglash commended staff on incorporating the comments from the UAC in February and on responding to the unexpected change in the wholesale price of water. Commissioner Chang asked if the balance between fixed charges versus volumetric charges was appropriate, given the drought. She asked whether more revenue should be collected from volumetric charges if the goal was to encourage conservation. Abendschein noted that the last cost of service analysis (COSA) resulted in an allocation of fixed charges of about 15% of the total revenue, which was an increase from the level of fixed revenues collected prior to that COSA. It was in line with the California Urban Water Conservation Council’s best management practices. The time to recommend revisions to the level of fixed charges is at the next COSA. ACTION: Chair Foster made a motion to recommend that the City Council adopt: (1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; and (2) a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service). Commissioner Eglash seconded the motion. The motion carried unanimously (5-0 with Chair Foster, Commissioners Chang, Eglash, Hall, Melton and Vice Chair Waldfogel voting yes, and Commissioners Cook and Hall absent). FINANCE COMMITTEE MINUTES Page 1 of 31 Special Meeting Tuesday, April 7, 2015 Chairperson Schmid called the meeting to order at 5:38 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Kniss, Scharff, Schmid (Chair) Absent: Filseth Oral Communications None. Agenda Items 1.Utilities Advisory Committee Recommendation that the City Council Adopt: (1) a Resolution Approving the Fiscal Year 2016 Water Utility Financial Plan and Amending the Water Utility Reserve Management Practices; and (2) a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master- Metered and General Non-Residential Water Service), and W-7 (Non- Residential Irrigation Water Service) to Increase Average Water Rates by 12 Percent. Jon Abendschein, Senior Resource Planner explained Staff was proposing a 12 percent increase to the Water Rate, which was related to the proposed Wholesale Purchase Rate, which is going to be imposed by the San Francisco Public Utilities Commission (SFPUC) on July 1, 2015. There are projected increases of eight percent per year in subsequent years, which he was going to explain at a later time. The Wholesale Water Rate increase seen from the SFPUC was a little bit over a 30 percent increase to the existing Rate, resulting in a 14 percent increase in the City’s costs. Staff proposed to draw down Reserves and hold the rate increase to 12 percent. There was a public communications strategy implemented in the form of a web page, and Staff ATTACHMENT I DRAFT MINUTES Page 2 of 31 Finance Committee Special Meeting Minutes 4/7/2015 has been fielding calls as needed. Notices regarding Proposition 218, a Proposition that limits the methods in which governments can create or increase taxes without the taxpayers consent, were going to be ready to be mailed soon. These notices would carefully explain the reasons for this increase. As people were to become more aware of the proposal, Staff planned discussions on social media to help people become more aware of the reasons for this change. In addition to trying to hold down the increase, Staff proposed an alternative Gas Rate Trajectory that moderated the customer bill impact; this was reviewed by the Utilities Advisory Commission (UAC) the week of March 30, 2015. The UAC unanimously recommended approval and Staff planned on coming before the Finance Committee (Committee) on April 21, 2015. He noted the rate increase for this year did not include drought surcharges. Staff anticipated absorbing impacts for the drought for Fiscal Year (FY) 2016 from Reserves. Staff was working on drought surcharges that could be imposed if the drought extended beyond that time. Additionally, the Governor asked the State Water Resource Control Board to come up with new regulations; Staff was reviewing these regulations, such as what the City’s response would need to be; the City may need to impose drought surcharges at some point over the next year. He showed the historical rate increases and projections for the Water Utility and said the main driver for the increases were Water Commodity Purchase Costs; there was a seismic upgrade to the Hetch Hetchy system that caused these increases. As the SFPUC continues each year, they complete the next year of projects in the Project Plan and issue debt to fund those projects; this increases the annual debt service that wholesale and retail customers are responsible for paying. The increase in debt service since 2012 was going to continue through 2020. Looking back at 2009 when the Water System Improvement Project commenced, the debt service, operations and maintenance were lower; they were around the $100 million per year. These were significant increases and they translated into the Wholesale Water Rate. Last year, the original Wholesale Water Rate was projected at $3.42 per Centum Cubic-feet (CCF) and then Staff received the final information from the SFPUC in February, 2015; they said it was going to be a $3.83 per CCF wholesale water charge. The difference in price was related to lower consumption, which was related to the drought but Staff was not thinking about these figures as drought wholesale rates because they did not expect the rates to decrease next year. The SFPUC was going to issue more debt in the coming year and there was going to be a need to increase their rates. The rates were going to stay stable for the next couple years, most likely, but Staff did not expect the rates to come down. Given the severity and the length of the drought, Staff was not forecasting consumption to rebound to pre-drought levels. This is consistent with what has been seen in previous droughts, but there was uncertainty in that projection. For example, if there was additional consumption after the drought, that could DRAFT MINUTES Page 3 of 31 Finance Committee Special Meeting Minutes 4/7/2015 lower the rate increases by approximately one percentage point. He noted that if there was less rebound than what was projected, rates could be one percentage point higher in future years. Staff’s proposal keeps the Utility Operations Reserve healthy, but said the Reserve was going to be drained close to the minimum. Staff felt the Reserve was comfortably above the Risk Assessment Level and said this type of situation is why the City maintains Contingency Reserves; it was acceptable to run them low for a year or two. Valerie Fong, Utilities Director pointed out that a sub-committee to the UAC assisted with the forecast for all the utilities. John Melton, Utilities Advisory Commission, Commissioner spoke regarding the Water Rates and said there were some reserves that could be used. The City of San Francisco, California raised their rates to 14 percent; Palo Alto could modify that to 12 percent by using reserves, but this was a temporary thing. If the drought continued, people were going to see a long progression of Water Rate increases. Under existing conditions, people were going to use less water, and pay more for it. Lynn Chiapella recalled in the previous two droughts there was a tiered rate system, which had a large usage impact cost to people that were large residential users. After the droughts ended and water normalized, the rates were changed back. Having a two-tiered system with six or seven CCF as a first tier did not have a great impact on people that used a lot of water. The Committee should consider tiers, especially if there is a drought impact fee of some kind. The Committee needed to review what was done in previous droughts because she did not think there would be a huge response without a huge impact. Mr. Abendschein remarked that last fall the Council approved design guidelines for the drought Cost of Service Study that Staff was conducting. This included graduating the surcharges to add a third tier; Staff was considering this option. Council Member Kniss confirmed that the fees were examined as a surcharge and not a tier. She explained that the billing was not set up to hit a certain number and then charge a different rate. Mr. Abendschein said the third tier could be described as a surcharge or a tier, with the same outcome. Nothing was finalized and Staff planned on returning to the Committee with a proposal. DRAFT MINUTES Page 4 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Kniss said water for farms grew food, water for lawns grew nothing. She expressed surprise that people were complaining about the rate increases because the drought was in the paper every day, but delighted Palo Alto has sufficient water. She noted that the people of Sao Paulo, Brazil were going to run out of water by June 2015, which housed many people. This was not an impossible thing to have happen. She did not see the increases as too high and wanted to know if the surcharge was the same as the tier. Mr. Abendschein confirmed that the surcharges were the same thing as the tier, but were not included in the current proposal. Council Member Kniss supported the increase. She thought it was good to think of ways that people could conserve and felt that City Staff could take more of a lead for the City by talking about drought resistant landscape. She noted that there were few examples of drought resistant areas and lawns being promoted. She suggested a demonstration plot. Ms. Fong noted that there was a drought resistant plot outside City Hall that had drought resistant plants. Council Member Kniss wanted to know if it was labeled. Council Member Scharff remarked that there was a sign. Council Member Kniss suggested more publicity because if there were areas around town that the City was going to showcase drought resistant landscape, it made an incredible difference. Palo Alto needed to take more of a lead. Ms. Fong informed the Committee that Public Works Staff and Parks and Recreation Staff were working on this idea. Council Member Kniss talked about options for drought resistant landscape and noted that drought resistant materials were costly. Ms. Fong relayed that the City Manager charged Staff with coming up with these types of drought projects. DRAFT MINUTES Page 5 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Kniss felt that it was impossible for people to be unaware that California was in a drought and people were responsible for responding to this issue in a responsible way. Phil Bobel, Assistant Director of Public Works remarked that there were a number of examples of drought resistant areas, aside from the area in front of City Hall. He pointed out that there was a demonstration of low water use at the Lucie Stern Community Center, all of the landscaping at Mitchell Park Library was low water use, and the Palo Alto Golf Course was set up for recycled water. Chair Schmid agreed that publicizing this was a good idea. Mr. Bobel agreed and noted that there were some good examples. MOTION: Council Member Scharff moved, seconded by Council Member Kniss to recommend the City Council to: 1. Adopt a Resolution amending the Water Utility Reserve Management Practices and approval of the fiscal year 2016 Water Utility Financial Plan; and 2. Adopt a Resolution amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service). Council Member Scharff appreciated Mr. Melton and the work of the UAC; he felt the Committee should move forward. Council Member Kniss believed Staff should look at surcharges or tiers. She questioned the savings if a person was using a large amount of water and already cut back, she wanted to know where the person would observe savings. This same discussion involved farmers; were farmers getting more water because they were producing the food that everyone ate. She was concerned that the water was sufficiently addressed in a tiered manner. Chair Schmid recapped that the rate increase being discussed at this time was due to the SFPUC rate increase and the refurbishing of the Hetch Hetchy lines, which was due to earthquake preparedness. These increases did not DRAFT MINUTES Page 6 of 31 Finance Committee Special Meeting Minutes 4/7/2015 address the drought issue. He requested more information on the drought surcharge. Mr. Abendschein remarked that Staff was still finishing up their analysis. Last year Staff came before the Committee with a set of guidelines and said the drought surcharges needed to be designed to incorporate an additional tier. If feasible, there needed to be a greater reduction in outdoor usage, in comparison with indoor usage; the surcharge should take into account the economic impacts, like indoor-commercial use, as well as residential use, and it should consider trees and other high value landscaping. Chair Schmid wanted to know the relationship between drought surcharges and Proposition 218. Mr. Abendschein remarked that drought surcharges were subject to Proposition 218, like other surcharges. Chair Schmid recalled the Governor mentioning an override to Proposition 218. Mr. Abendschein did not hear about that. Ms. Fong did not recall anything about that. Molly Stump, City Attorney relayed that Staff would watch what was coming out of the Governor’s Office. Proposition 218 was a Constitutional provision; there was a limit to the amount of modification that could be made by executive action, or by the State Legislature. Chair Schmid wanted to know if the City could have an effective surcharge under Proposition 218 that would target people using more than the average amount of water. Mr. Abendschein answered that the fee had to be cost-based, which was the internal analysis that Staff was conducting, including discussions with their attorney’s and their rate consultants. Staff was aiming to return to the Committee in June 2015. Ms. Fong stated that the Executive Order issued by the Governor on April 1, 2015 imposed strong restrictions on water use and enclosed clear guidelines on enforcement; Staff was waiting to see what that was going to look like, in DRAFT MINUTES Page 7 of 31 Finance Committee Special Meeting Minutes 4/7/2015 terms of regulations. There were clear penalties that applied to agencies, like the City of Palo Alto. Staff had to weigh these things and what the cost basis was for passing these costs; after which there could be a higher surcharge proposed. Chair Schmid remarked that the increases between 8-12 percent could get people to think about water during a drought. He looked forward to a proposal that targeted people that were heavy users in the climate of Proposition 218. His other issue was in response to the SFPUC, regarding debt charges. The City has drawn on its Reserves in order to moderate the rate of increase, as opposed to imposing a 30 percent increase in rates; Palo Alto used its Reserves to level fees out over several years. There was very little flexibility to use Reserves during a drought and he wanted to know if that was a problem. Mr. Abendschein remarked that the impact of a drought was such that it was difficult to use the Reserves in a severe drought situation for long time frame. Generally, utilities relied on drought surcharges to maintain their revenue profile. Chair Schmid assumed that if people conserved, the flow of income would be reduced somewhat. The Reserves dropped from $20 million to $15 million before the impact of the drought. Mr. Abendschein clarified whether Chair Schmid was talking about something on Packet Page 23, or page 23 of the Financial Plan. Chair Schmid remarked, yes, Packet Page 23. Mr. Abendschein understood and said if someone wanted to look at the overall Reserves for the Utility, he recommended page 23 of the Water Financial Plan. The chart on Packet Page 23 only related to the Capital Reserves, which was ] separate. Changes in the Capital Reserves related to the change in budgeting for Capital Projects, which Staff was beginning this next Fiscal Year. Staff made a preliminary proposal to move some funds out of what was previously called the “Reappropriations Reserve” to the Capital Reserve. There were going to be discussions with the Budget Director determine a longer term proposal. Chair Schmid called attention to Figure Seven on Packet Page 18, which listed all Reserves. This chart showed a sharp decline from $37 million in 2014 to $25 million. DRAFT MINUTES Page 8 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Mr. Abendschein confirmed that Packet Page 34 was the better chart to be reviewing. There was a sharp decline, but drought surcharges were going to be used if the drought worsened. Chair Schmid confirmed that the need for Reserves during a period of time when the water usage was down was going to be adequately covered. Mr. Abendschein confirmed yes, through the use of drought surcharges. Chair Schmid inquired if there would be updated information by June 2015. Mr. Abendschein hoped for June 2015, but said updated information might be available later in the year, which depended on the regulations. Council Member Scharff requested follow up and said his impression was the Hetch Hetchy system was well managed and that people were not likely to run out of water any time soon. He stated that there have been four years of drought, and wanted to know if there was a fifth year, was the water going to run out at Hetch Hetchy. He requested a brief overview of the Hetch Hetchy system because some of the other water systems were in a dire situation. Ms. Fong noted that from a water supply perspective, the amount of water that was in the Hetch Hetchy reservoirs was managed well, and was managed for an eight year drought; there was probably three to four years of water left in the reservoirs. The issue was not so much the supply, as it was the State mandate to establish a reduction in water use to all agencies. She believed Palo Alto was going to be asked to reduce by 20 percent, which was Palo Alto’s assigned share of what the State was assigning all water utilities. Council Member Scharff felt that understanding the regulatory frame work was important so the City was able to understand what exactly was going to be required, how Palo Alto’s 20 percent reduction was going to be met, and how people were going to work within the regulatory frame work. Drought surcharges made sense in times of drought; the people that were using more water were the people that were more likely to cut back and could be the cause of the City not meeting their reduction amount. At the same time the City invested a lot of money, time, and effort into their canopy and people needed to water trees. Water efficiently was important. The questions were: how were people going to use water efficiently and how were cutbacks going to be made in a drought. The Governor was correct to DRAFT MINUTES Page 9 of 31 Finance Committee Special Meeting Minutes 4/7/2015 use precautionary measures because the drought could last another five years. Palo Alto was on the right track but he wanted to make sure that people watered their trees and that they took care of high value landscaping. Ms. Fong agreed and said they were going to come before the Committee on May 11, 2015 to discuss the implementation of an order issued by the State Water Resources Control Board that limited the amount of irrigation per week. Some examples of cutbacks were having restaurants put water out only upon request and hotels giving their patrons the option of not having their linens laundered every day. Staff was going to come back with the updated Cost of Service Study and Water Utility, along with the execution steps on the State Water Resources Control Board implementing the directives from the Executive Order from the Governor on April 1, 2015. Chair Schmid confirmed Staff was going to have a response to the April 1, 2015 issuance on May 11, 2015. Ms. Fong replied no because Staff did not have the orders yet and the State Water Resources Control Board had to adopt the orders to implement the Executive Order. Staff did have an earlier Executive Order, which was implemented by the Water Resources Control Board on March 27, 2015. The City had 45 days to implement orders. Council Member Kniss wanted to know when the Committee was going to hear more about gray water and the possibilities of using that. Mr. Bobel commented that Staff was not scheduled to come back to the Committee at a particular time but would coordinate with the Utilities Department to come back soon. Ms. Fong relayed that Staff was keeping an eye on announcements from the Governor’s Office to see if there was more money available related to infrastructure that was related to recycled water and cisterns. Council Member Kniss wanted the City to be “standing in line” when that was available. MOTION PASSED: 3-0 Filseth absent DRAFT MINUTES Page 10 of 31 Finance Committee Special Meeting Minutes 4/7/2015 2. Utilities Advisory Committee Recommendation that the City Council Adopt: 1) a Resolution Approving the Fiscal Year 2016 Wastewater Collection Financial Plan and Amending the Wastewater Collection Utility Reserve Management Practices, and (2) a Resolution Amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) to Increase Average Wastewater Collection Rates by 9 Percent. Jon Abendschein, Senior Resource Planner stated that when Staff came before the Finance Committee (Committee) in March 2015, they were projecting a nine percent increase for the next few years, and were still projecting those increases. The last increase was July 2012 for Fiscal Year (FY) 2013, and before that was in 2009 for FY 2010; both of those were five percent increases. The costs have increased during that time, included one- time savings and some Reserves that allowed Staff to avoid increases for several years. There were some main factors that drove the increases over the next few years: 1) Treatment costs were increasing by about five percent annually; 2) There were inflationary increases in operations and maintenance; 3) There was increased Capital Costs related to main replacement costs and the replacement of sewer laterals; and 4) Revenues were about 10 percent below cost. Revenues had to increase faster than costs in order to catch up. Some of the Rate Trajectory was driven by treatment costs. There were questions at the Utilities Advisory Commission (UAC) about what was driving the five percent per year treatment cost increase. The City ran their Regional Water Quality Control Plant and had several partners that shared in the cost of running the Plant; Palo Alto was responsible for 40 percent of the cost for running the plant. These costs were passed through to rate payers through sewer rates and Staff had agreements with their partners to have the cost of operating the plant be reimbursed, which included some level of capital investment. For the amount of rehabilitation that Staff was planning, there needed to be some issuance of debt in order to fund the improvements. He showed the projection for treatment plant costs, considering the costs for the Long Range Facilities Plan and the retirement of existing debt and explained that the increases were driven by debt services. The Operations Reserves stayed within the Reserve guidelines over the course of the forecast period. John Melton, Utilities Advisory Commission, Commissioner noted that there were multiple drivers related to cost and most of them were related to the Treatment Plant, which did not directly come under the UAC’s purview because it was a joint municipality operation. The people at the Treatment DRAFT MINUTES Page 11 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Plant were able to give the UAC an education about what their drivers were and what their long-term plans were. Some of the UAC Commissioner’s prepared a Memorandum that talked about how the Treatment Plant connected with the overall sewer rate, which was what was being considered here. Chair Schmid questioned whether the Memorandum produced by the UAC Members was available in the packet. Mr. Abendschein noted that Memorandum went out by e-mail and said they could get that to the Committee again. Mr. Melton thought that considering the rate, and how it was going to increase regularly over the next three to four years, the UAC was convinced that what the Treatment Plant was planning to do and what was being done on the collection side was going to cost more money for the next few years. The UAC added their recommendation to the Staff recommendation, explaining what it was going to take over the next few years to upgrade the Treatment Plant with regard to collection. Chair Schmid stated costs were going up, and one was the treatment cost increase of five percent per year. His understanding was the system was outdated and was being rebuilt to 21st century standards. He assumed the result would be a more efficient treatment process, with treatment costs going down. He questioned why costs were going up. Phil Bobel, Assistant Director of Public Works answered that there were two reasons: the five year projection that was spoken of by Mr. Melton and the second was a projection that went out to the year 2030. Looking to the year 2030, there were some large Treatment Plant and debt service costs. For the first few years the debt service was not that high, but it went up in the third year when Staff started to pay off the first major project. There was a second raise in the year 2022 when the City would start to pay off the second largest project, the Anaerobic Digesters. Council Member Scharff questioned if Staff was borrowing the money against bonds. Mr. Bobel replied that Staff was borrowing the bonds from the State. There was a fund called the State Revolving Fund for sewage treatment plants, which had an interest rate of about 1.5 percent. DRAFT MINUTES Page 12 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Chair Schmid was concerned more with the increase of 50 percent over a period of 15 years; he questioned why the rate was not going down. Jamie Allen, Manager, Water Quality Control Plant noted that most of the operating cost was related to salaries, and new projects were replacing aging facilities; Staff remained but the infrastructure was being replaced. There was still a need for the same number of mechanics to keep the facilities up-to-date and for corrective repairs. Five percent increases were the historical average over a 5-13 year period. Chair Schmid clarified whether the goal of the new plant was not to make it more efficient. Mr. Allen relayed that Staff would do the best they could to make improvements toward energy efficiency but a main goal was the Digester Project, which created electricity. Staff was evaluating the Capital Cost, and if they were able to bring down the Capital Cost of the Anaerobic Digesters, there might be more savings. Council Member Scharff inquired if less maintenance was required on a new facility than what was used now. Mr. Allen replied yes, there would be less maintenance initially, but older facilities were requiring more and more maintenance. He noted that the cost of maintenance has gone up over time because Staff has had to purchase older equipment and some parts were not made anymore. There was a need to replace more of the electrical equipment. Council Member Scharff responded by asking why Staff was not replacing more equipment. Mr. Allen said Staff was developing their Capital Improvement Program (CIP) to replace as much as they could. Council Member Scharff inquired about a comprehensive plan. Mr. Allen stated that Staff had a comprehensive plan called the Long Range Facilities Plan, which spanned a 50 year period. DRAFT MINUTES Page 13 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Scharff reiterated that after Staff received all the funds, there was still going to be high maintenance costs because there was old equipment; he asked again why the old equipment was not being replaced. Mr. Allen explained they would. Council Member Scharff questioned whether the problem was a timing issue. Mr. Allen answered that he did not foresee skipping corrective repairs. Council Member Scharff explained that if replacement was made there should be a period of time where corrective repairs were not needed, unless repairs were made over such a long period of time that the parts that needed to be replaced now become the new old parts. Mr. Allen commented that repairs were an ongoing capital project. Mr. Bobel relayed that it took a 30 year timeframe to get everything replaced, and by the time Staff was done, there were other parts that needed replacement that were now 30 years old. The Staff presentation did include all the projects, but the timeline included up to the year 2030. By the time Staff got to the year 2030, there were some parts that needed replacing. Staff was spending $2.5 million per year on CIP’s. Mr. Allen noted that the minor CIP Projects did not need partner approval. Mr. Bobel reiterated that the replacements were ongoing and said the five percent increase was for the next five years, which included CIP and Operating Budgets. After five years, Staff and the Committee had to discuss larger increases for the Treatment Plant because the bigger projects were going to start to take effect. Mr. Allen illustrated that this project was like having 20 automobiles for 20 people; as the cars got older, they needed more and more repairs. If the cars had to work every day, repairs would always be needed. Council Member Scharff replied that at some point, it was not cost effective to repair an old car. He suggested that instead of spending the $2.5 million per year with the CIP, was it possible to borrow all the money now at a 1.5 percent rate, and use that money for debt service. He questioned if the DRAFT MINUTES Page 14 of 31 Finance Committee Special Meeting Minutes 4/7/2015 system would be more modern and up-to-date this way, would the City be saving money, and if Staff had done this analysis. Mr. Bobel thought it might be difficult to do a real analysis. Council Member Scharff suggested a consultant. Mr. Bobel did not think a consultant would provide a satisfactory answer. The machines were in use at all times and repairs had to be scheduled. Staff was only able to make repairs to one machine at a time and when rebuilding a unit, machines had to be shut down sequentially. The plant was 45 years old and most of it was built in 1970. The design life on some of the parts were 20-30 years, and some of them were not being changed until now. Chair Schmid noted a discreet CIP that was initiated at the plant and wanted to know the cost. Mr. Allen relayed that in 1999 there was an increase of $1.9 million, which grew about three percent per year. Mr. Bobel clarified that Chair Schmid was inquiring about the Long Range Facilities Plan and what the estimated cost of that. Mr. Allen answered $200-300 million. Chair Schmid thought it was a discreet decision to stop just maintaining. Mr. Bobel said Staff started on the project right away, but the preliminary designs took longer than expected. Additionally there were some hold-ups regarding building a project on a Measure E site, a Measure that funded over $120 million in modernization and new construction projects. The Committee adopted the Organic’s Facilities Plan, which gave Staff clarity on four major projects; the first two of those projects were well into the preliminary design. Mr. Allen added that the first project was beginning design. Mr. Bobel reiterated that Staff was moving forward and they had the Long Range Facilities Plan, which was being executed. DRAFT MINUTES Page 15 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Chair Schmid noted that the Staff Report said Staff was drawing heavily on Reserves and over the next couple of years, the Reserves level dropped from $4.5 million to $3.3 million, which was barely above the total risk value. This indicated a risk in the short-run. He wanted to know if there was something the Committee should be concerned about. Mr. Abendschein said no. The Utility Revenues were mostly stable and mostly flat and there were flat monthly fees. As long as Staff were staying above the Risk Assessment Level, they were comfortable. Chair Schmid assumed that was the case but was worried when he heard revenues were 10 percent below costs. He wanted to know if things were that way for a while. Mr. Abendschein explained that Staff was able to maintain costs by the use of Reserves. There were still some Reserves left to spread rate increases over the next few years, including some one-time cost savings that happened occasionally over the years. Revenues were below costs and that needed to be fixed. Chair Schmid asked if it was Staff’s goal over the next few years to fix the revenues against the costs. Mr. Abendschein said yes. Chair Schmid relayed that Staff was using the Reserves over the next three years to balance the costs, but in 2018, when the Reserves were low was when the revenue was supposed to be equivalent to the costs. Mr. Abendschein agreed and said the Reserves were going to start being replenished and returned to the target level by 2020. Chair Schmid was shocked because most of the utilities were steady or low and now there were many facing substantial increases. Ms. Fong clarified that Water Rates had substantial increases over the past several years. Last year, because of the economic downturn, there was an election to hold all the rates to zero. Mr. Abendschein said a lot of the rate increases were a common theme throughout the Bay Area and the Country, which was due to infrastructure DRAFT MINUTES Page 16 of 31 Finance Committee Special Meeting Minutes 4/7/2015 replacement. This was not unique to Palo Alto; it was affecting the entire Bay Area. Many Bay Area treatment plants were nearing the end of their design life and there have been many reports lately on the situation of water infrastructure. Council Member Scharff quoted from the Staff Report and said there was a replacement increase that was between 25-50 percent, “which had to do with the booming economy.” A recession was the time to look closely at infrastructure because the contractors were idle and increases were due to the increase in costs. MOTION: Council Member Kniss moved, seconded by Council Member Scharff to recommend the City Council to: 1. Adopt a Resolution approving the fiscal year 2016 Wastewater Collection Utility Financial Plan and amend the Wastewater Collection Utility Reserve Management Practices; and 2. Adopt a Resolution amending Rate Schedules S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal), and S-7 (Commercial Wastewater Collection and Disposal - Industrial Discharger). Chair Schmid suggested that Staff write up a one page information sheet explaining the reasons behind the cost increase, the focus on infrastructure, the drought, earthquake safety, and the need to maintain an aging infrastructure. He wanted this information prepared for the public and the Council to show Staff’s materials by the time Staff came back to the Council. MOTION PASSED: 3-0 Filseth absent 3. Council Adoption of a Resolution Amending the R-1 Residential Refuse Rates for Fiscal Year 2016 to Cover a New Food Scrap Collection Program and Other Program Costs, and to Incorporate Structural Changes. Phil Bobel, Assistant Director of Public Works Department emphasized to the Finance Committee (Committee) the relationship between the rates and some of the new programs being developed. This item was previewed to the Committee on March 3, 2015, which then, only a piece of this item was brought to the full Council. It was approved by the full Council on March 23, DRAFT MINUTES Page 17 of 31 Finance Committee Special Meeting Minutes 4/7/2015 2015. Tonight Staff was going to discuss just the rates. A reason the rates were going up was because of the Residential Food Scrap Program, which contributed to about one third of the reason for the increase. Ron Arp, Solid Waste Manager discussed the proposed rate changes for 2016, what services were going to be covered by the fees, and the reasons the changes were needed. Staff presented the rate plan in early March, 2015, which has not changed significantly. Staff was recommending a nine percent increase on the 20 and 32 gallon garbage cans, which included about 85 percent of the residential customers. Staff was not recommending any commercial increases at this time and were only suggesting changes to the rates of approximately one third of the Refuse Fund. He said there had not been a rate increase in the residential sector for the last two years, and there had not been a commercial rate increase since 2010. The costs the residential fees covered were garbage, recycling and compost, landfill maintenance, household hazardous waste collection, and street sweeping; the costs were broken down by collection. The residential fees covered GreenWaste fees to collect garbage, recycling, and compostable materials. A second cost was the Material Recovery Facility (MRF), which was a big processing plant; the residential fees covered this as well. All of Palo Alto’s garbage went to the Sunnyvale, California MRF and all the recyclables went to the Charles Street GreenWaste MRF in north San Jose, California. Residential Refuse Fees also covered anaerobic digestion. Right now, yard trimmings were picked up by GreenWaste and taken to the Z-Best Composting Facility, which did not include any food scraps. There was going to be a Residential Food Scrap Program beginning July 1, 2015 and those materials were going to be delivered to the Zero Waste Energy Development Company (ZWED), GreenWaste facility, and the anaerobic digester. He noted some other items that were covered under the Refuse Fees: 1) Land use disposal, which was a long-term 30 year contract that was going to end in 2021; 2) The Zero Waste Programs; 3) Street Sweeping; 4) Household Hazardous Waste; and the 5) Palo Alto Landfill Maintenance Monitoring and Reporting Program. The residential rate increase was needed because the current rates only generated $8.7 million per year for the residential portion of the Refuse Fund; the entire Fund was for about $30 million. The amount needed for next year was $10.4 million and there was a revenue short-fall of about $1.7 million, which was attributed to two main reasons: 1) the Food Scraps Collection Program, which was about $500,000; and 2) $1.2 million due to a historical short-fall. He reminded the Committee about the Food Scraps Collection Program where compostable food scraps were taken like, food-soiled paper, compostable plastics and other things collected in the green cart, which were taken to the ZWED Facility. DRAFT MINUTES Page 18 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Scharff inquired how a person would know if plastic was compostable or non-compostable. Matt Krupp, Manager of Environmental Control Program clarified that on the bottom of a package there was a compostable listing, usually. If there was nothing listed, then the product should be put in the trash to avoid contamination. Mr. Arp noted that some of the compostable plastics did not break down as well as they should and a lot of those products were screened out at the end. Council Member Scharff corrected that when Mr. Krupp said “trash” he actually meant the blue cart (recyclables). Mr. Bobel said yes, recycling. Mr. Arp discussed the three year plan that began in March 2015 to balance the residential sector of revenues, versus expenses. Staff was not recommending approval of the Rate Plan and they planned on revisiting the plan one year at a time. An example was the 20 gallon service level and the three years of projected increases; by the time the rate increased in three years it would be $6.31, a 28 percent increase over three years. These increases paid for the new service of the Residential Food Scrap Program and balanced the revenues with the expenses in the residential sector. The projected revenue short-fall, if there were no rate increases, would be factors of inflation. If expenses continued to get larger, the budget was in danger if there were no increases. Regarding the projected three year plan, the revenue short-fall broke even by Fiscal Year (FY) 2018. The last time this item came before the Committee, Staff were asked to analyze alternatives to the three year plan, along with a four-year and five-year rate increase plan, and to have the amounts and increases needed for the three scenarios. Staff recommended the three year plan because shorter time periods were better to get budgets balanced. He noted the Staff recommendation and said there was a typo on the Utility Rate Schedule R-1; the Garbage cart sizes were a little bit off. Staff requested a change in the Motion for Utility Rate Schedule R-1 table. Mr. Bobel reiterated that if the Committee went along with the Staff recommendation, they requested that in addition to the Staff recommendation listed in the Staff Report, the Committee indicate that the Fiscal Year 2016 Residential Values on Table Three of the Staff Report be DRAFT MINUTES Page 19 of 31 Finance Committee Special Meeting Minutes 4/7/2015 substituted in the Resolution. The Staff Report had the correct numbers in Table Three but the Resolution was slightly off. Council Member Kniss relayed that the information was easily understood and thought it would be interesting to see how people did with their compost. Council Member Scharff was interested in Tables 10, 11, and 12 in the Staff Report and noted that by spreading the rate increases out they were not that much smaller and wanted to know what the increases were if they were made all at one time. Mr. Bobel answered that if the rates were increased all at once, it would be approximately what was raised in three years; for the mini can that was about a 24 percent increase. Staff did not feel comfortable doing that all at one time. Council Member Scharff recounted that 18 and 8 percent equaled 26 percent, but he did not think all the numbers added up the same way. Mr. Bobel was confident the figures were correct and agreed that he was surprised that when the numbers were broken up, there was not more of a break. MOTION: Council Member Scharff moved, seconded by Council Member Kniss to recommend the City Council to adopt the attached Resolution amending Utility Rate Schedule R-1 (Residential Refuse Rate) to implement a rate increase and remove the listing of Individual Program Chargers on the Refuse Bill. Chair Schmid was surprised to see the residential gap that was shown in the Staff Report. In 2014, Staff did a study which showed that the commercial rates were being substantially under charged. A year later, a consultant company was hired and reported that it was the opposite. Mr. Bobel corrected that the consultant did not say it was the opposite; the study reported that the commercial entity was actually being overcharged. The difference with the latest study was Staff found the commercial entity was not being overcharged as much as the earlier study showed. Much of that discovery was the work of Staff, where they better defined what could be allocated to the commercial sector, versus what could be allocated to the residential sector. The conclusion was the situation was not as bad as DRAFT MINUTES Page 20 of 31 Finance Committee Special Meeting Minutes 4/7/2015 previously thought and the commercial sector was not subsidizing the residential sector by as much as they originally thought. Chair Schmid stated that it was a big change, and with Proposition 218, a Proposition that limited the methods in which governments were able to create or increase taxes without the taxpayers consent, it was an important one. He thought there should be more information available on what the assumptions were then, and what they were now. Mr. Bobel suggested writing a one page information sheet, which would be understood by the common person. Chair Schmid agreed. Mr. Bobel promised to write up a one page information sheet. Chair Schmid relayed that there was a very important point in Proposition 218, which residential users might not understand. He noted that the old landfill looked like a truck factory, and he understood that the Refuse Fund was paying for capping, a barrier built of compacted soil that separated buried waste from rainwater and kept methane from escaping into the atmosphere, as part of their obligation under the contract. He wondered when that work was going to be done and whether it was going to have a big impact on financial flows. He also questioned when the capping was going to be done. Mr. Arp answered that the Public Works Department was paying for the cap. The last area, which was the largest area of the landfill called Phase 2C, was about three quarters of the way capped. Due to all the trucks needed to import all the soil, the project was a capital project. Staff hoped to have a savings in the Capital Improvement Program, which was going to come back to the Refuse Fund and to the Rate Stabilization Reserve. Staff planned on being done some time in 2015, but the project could go into early fall. Chair Schmid recalled $2-3 million was being spent. He questioned if those funds were going to go back into the Refuse Fund and wanted to know if this was going to have an impact on rates. Mr. Arp said yes. Staff was not sure how much they were going to save, but knew it would be between $1-2 million; this was going to raise the Rate Stabilization Reserve. DRAFT MINUTES Page 21 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Mr. Bobel clarified that Staff did not want this to effect the rates, but wanted to let this increase the Reserves. Staff was at negative Reserves at this time. Chair Schmid remarked that Reserves could be rebuilt. A second factor was the City was also paying rent, which was deferred. He questioned if the rent being deferred was going to run out at some point. Mr. Bobel thought the rent would run out in 2021. Mr. Arp clarified that if it was not 2020, it ran out in 2021. Chair Schmid reiterated that Staff’s first goal was to rebuild the Reserves. He noted that the Utilities Department was running down their Reserves. Mr. Bobel stated there were negative Reserves, but the good thing was Staff was building them up. For almost two years, the Revenues exceeded expenses by almost $1 million each year for the last two years, and Staff hoped to do that again in 2015. As part of the three year plan, Staff hoped they would increase the Reserves to 10 percent by the end of three years. Mr. Arp agreed and said by FY 2018, Staff was hoping to get within 10-20 percent of sales. Mr. Bobel relayed that the three year plan did three main things: 1) 1/3 of the increase was for the new programs, mostly the Residential Food Scrap Program; 2) 2/3 of funds were to have revenues equal expenses for the residential sector; and 3) Staff hoped to have Reserves up to 10 percent of sales. Chair Schmid suggested next year, when Staff came back to the Committee for another nine percent increase that they show their three, two, and one year progress. Mr. Bobel clarified that Chair Schmid was talking about the Reserves. Chair Schmid answered that he was talking about rates for the future. Mr. Bobel agreed. DRAFT MINUTES Page 22 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Kniss questioned how Staff was going to know what looked like success in the Composting Program, how was Staff going to know they were subsidizing compost. She was not sure what amount of compost was needed for the Program to break even because she had concerns about people composting. Mr. Krupp said Staff struggled with how to measure food and other food- soiled paper as being removed from the garbage and into the green carts. There were a few things that Staff was able to do: measure the actual weight of the garbage, which was consistent year over year, with the population. Staff was able to see if there was a downward trend with the garbage disposal by doing this. He suggested monitoring the green carts to see what was actually being put in those carts, which Staff would do, along with GreenWaste. If there were people that were not composting, Staff was able to send them some information and provide outreach. Council Member Kniss asked if there was going to be a food scrap monitor. Mr. Krupp said Staff was going to do significant outreach in the community so people would understand it was a major program. He reiterated that measuring the exact amount of compost was a challenge because the food was going to be mixed with the yard trimmings. Yard trimmings were very seasonal and depending on the amount of rain fall, the amount of yard trimmings was going to vary. Staff was not able to measure or weigh the green carts and know if they were getting more or less food. Mr. Bobel confirmed that the amount of compost collected needed to be measured against the amount of garbage collected. Mr. Arp suggested conducting spot audits. This involved taking a GreenWaste truck and sorting its content. This was one way to measure participation. Council Member Kniss inquired whether, in addition to the classic measures, if Staff was going to use anecdotal measures. Mr. Bobel remarked that Staff used the phrase “Waste Audits” when referring to “anecdotal measures.” Staff was going to be doing these Audits more than usual, as the Program was getting started. For the purposes of trying to make the estimates, Staff was going to be looking in the garbage cans, but clarified the Compost Program was not an enforceable Program for the residential customers. In the future, Staff was going to DRAFT MINUTES Page 23 of 31 Finance Committee Special Meeting Minutes 4/7/2015 suggest an enforceable Compost Recycling Program for the commercial sector. The proposal was going to have a soft start by issuing warnings and having discussion. He explained that the commercial sector included mostly food service establishments, which were generating most of the food waste. Council Member Kniss confirmed that the enforceable Program for the commercial sector was something for the future. Mr. Bobel remarked Staff was going to recommend this in the fall of 2015 for the commercial sector. Council Member Kniss stated that the City was making a financial commitment. Mr. Bobel said yes, the City was already accepting food scraps and composting. Staff saw they were not getting all of the food scraps and wanted to move toward a mandatory Program. Currently, the City was paying to have the commercial food scraps composted, and effective a few weeks ago, the food scraps were being anaerobically digested. Staff was recovering energy and producing compost from the commercial food scraps at this time but knew they were only getting 50 percent participation, which was why they wanted to move toward a mandatory Program. Council Member Kniss remarked that this was important because a big commitment was being made as a City, which included a financial commitment, and the equipment was available for compost. She thought it was good to do as planned, and consistently advertise to the public that the City was doing composting. Herb Borock inquired about the auditing of compost and mentioned people that composted at home; the garbage weight was not going to go down due to this. He questioned how Staff would handle measuring. Council Member Kniss asked Staff about measuring compost when people composted at home. Mr. Bobel reiterated that the Program was not enforceable for residents. From the standpoint of estimating compost and doing the random audits, the people that were already composting would not change, so there was still a change in the measurement. DRAFT MINUTES Page 24 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Kniss thought it was good to let the public know the City supports the use of private compost because there might be some misunderstandings. Mr. Bobel said they were going to do that because home composting done well was the first priority. Mr. Arp emphasized that for the past year there was an expanded Home Composting Campaign where Staff emphasized more training, they gave away free composting bins, and cooperated with the County, who was contracting to have trainings; home composting was a very important part of Staff’s Program. Mr. Krupp discussed “measures” and said Staff was anticipating, based on the performance of the pilot that they should get about 1,500 tons of compost out of the garbage. The first measure that was looked at was: has the overall amount of garbage gone down. As the Program continued for a few years, Staff thought they would get about 3,000 tons of compost. There was a total of about 5,000 tons in the garbage right now. If everyone was composting as they should, 5,000 tons was the amount they expected. INCORPORATION INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to substitute “Table 7” values on Packet Page 122 in the Staff Report entitled “Proposed FY 2016 Residential Rates (R-1 Refuse Rate Schedule)” into the recommended Resolution. MOTION AS AMENDED PASSED: 3-0 Filseth absent 4. Adoption of a Resolution Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) Reflecting a 2.7 Percent Consumer Price Index Rate Increase to $12.63 Per Month Per Equivalent Residential Unit for Fiscal Year 2016. Joe Teresi, Senior Engineer relayed that the Rate Structure for the Storm Drainage Fund was controlled by a Ballot Measure, which passed by property owners in 2005. At that time, a new Rate Schedule was established. As part of the Ballot Measure, a provision was passed that each year the City Council had the discretion to increase the rate according to the rate of inflation. This was done since 2005. At this time, Staff was recommending the inflationary increase for this year, which equaled an increase of 2.7 percent. For the average residential customer, that meant an increase of about 33 cents per month. The Storm Drainage Fund were largely DRAFT MINUTES Page 25 of 31 Finance Committee Special Meeting Minutes 4/7/2015 comprised of salaries and capital work; which both increased at a higher rate than 2.7 percent. He noted that the Ballot Measure limited the amount of increase. MOTION: Council Member Kniss moved, seconded by Council Member Scharff to recommend to the City Council to adopt the Resolution amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage), to implement a 2.7 percent rate increase consistent with the applicable Consumer Price Index - Urban Consumers, increasing the monthly charge per Equivalent Residential Unit by $0.33, from $12.30 to $12.63 for Fiscal Year 2016. Council Member Scharff noted that the Staff Report mentioned seven projects; he requested clarification on whether there were seven original projects or seven left to complete. Mr. Teresi clarified that at the time of the Ballot Measure there were seven projects and Staff have completed about 5.67 of those projects. One project had three phases and Staff completed the first two phases of that project; there was one more project left to complete beside that. The last phase of the sixth project was already funded. Council Member Scharff inquired what the sixth and seventh projects were. Mr. Teresi relayed that the sixth project was in the last phase of storm drain improvements, which was along Channing Avenue and Lincoln Avenue. The last phase was comprised of the stretch along Lincoln Avenue between Middlefield Road and Alma Street. The seventh project was the improvement to the Matadero Creek Storm Water Pump Station; this was a pump station that pumped the storm water from a 1,200 acre area into Matadero Creek. This pump was undersized and needed to be upgraded. Council Member Scharff asked if the fee was sunsetting in 2017. Mr. Teresi said yes. Council Member Scharff wanted to know if all seven projects were going to be complete by that time and if there was going to be enough money. Mr. Teresi said yes. DRAFT MINUTES Page 26 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Scharff wanted to know if these were the same seven projects that were on the Ballot Measure that Palo Alto said they would complete. Mr. Teresi said yes. Council Member Scharff confirmed that Palo Alto will have fulfilled their promises and done what they said they were going to do. Mr. Teresi said yes. Chair Schmid thought it would be helpful to share with the Council what the sixth task was and what was accomplished over time. The project was coming to an end and he assumed that Staff was not going to go back out for a new Bond issue. Mr. Teresi clarified that the funds were not a Bond issue; everything was paid for as “a pay as you go” basis. Staff intended to go back because they wanted to renew the current rates. Right now, if the Motion was approved and if Staff did nothing, the rate was going to be $12.63. If nothing was done in June of 2017, the rate would drop to $4.25, which would not cover operational expenses and there would not be any money for Capital Improvements. There were more Capital Improvements needed. Chair Schmid inquired whether Staff needed to have something on the Ballot for Capital Improvements because if the funds expired in 2017, then Staff needed to have something on the Ballot for 2016. Mr. Teresi relayed that Staff was planning to come before the Council in fall 2015 with a recommendation to form a Blue Ribbon Committee to assist Staff with the preparation of a Ballot Measure, which Staff would like to have take place in the fall of 2016. Chair Schmid noted that was why it was good to summarize what happened over the 12 year period, the neighborhoods that were affected, and how much was spent because people were able to recognize the differences. Phil Bobel, Assistant Director of Public Works remarked that Staff would write something. DRAFT MINUTES Page 27 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Chair Schmid declared that the last Ballot Measure had seven specific sites that were going to be worked on and he wanted to know if Staff was going to organize something similar. Mr. Teresi said yes, Staff was going to prepare something similar. The Storm Drain Master Plan was updated in 2015 to reinforce the areas where improvements were needed and there was going to be a list of projects, similar to the one that was completed in 2005. Council Member Scharff recalled that there was a neighborhood near Palo Alto High School where an innovative project was completed; he wanted to know about the end result. Mr. Teresi believed that it turned out well, it was functional, and he thought the neighborhood was happy with the results. Staff combined their work with the work done to resurface the streets. After the project was done, a second contractor came in and resurfaced half of the streets, but by the end of the summer in 2015, the entire neighborhood was going to be resurfaced and all the curbs will be fixed. Mr. Bobel noted this was a green infrastructure project. Council Member Kniss wanted to know where this storm drain that was being discussed was located. Mr. Teresi answered that it was in the South Gate neighborhood. MOTION PASSED: 3-0 Filseth absent Future Meetings and Agendas David Ramberg, Assistant Director of Administrative Services relayed that the next Finance Committee Meeting (Committee) was on April 22, 2015; the April 21, 2015 meeting was moved to April 22, 2015. Chair Schmid wanted to know if Council Member Scharff was going to be present at that meeting. Mr. Ramberg recalled that there was not going to be a quorum so the Mayor was going to sit in on the meeting on April 22, 2015. DRAFT MINUTES Page 28 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Scharff recalled he was not going to be at the April 22, 2015 meeting but wanted to know what was going to be discussed. Mr. Ramberg announced the Agenda Items: 1) Gas Financial Plan; 2) Electric Financial Plan; 3) the Human Resources Allocation Plan from Community Services Department; 4) the Animal Shelter Follow-up from the City Auditor. Jim Keene, City Manager emphasized there was an audit on Animal Services. Chair Schmid inquired about the following inserted Items: Long Range Financial Forecast and the Comprehensive Annual Financial Report (CAFR) Review. Mr. Ramberg replied that those items were still agendized. Chair Schmid added that there was also a Service Efforts and Accomplishments (SEA) Performance Report. The goal of inserting these items was for the Committee Members to identify critical assumptions from these reports that they might want to carry into the Budget Hearings. Council Member Scharff wanted to confirm with the Committee later about if he would attend the April 22, 2015 Committee meeting. Chair Schmid noted that if two Committee Members were not going to be at the next meeting, it did not make sense to have Committee Members share their assumptions at that time. Council Member Scharff requested clarification. Chair Schmid repeated that if two Council Members were not going to be at the next Committee meeting he thought Committee Members could share their assumptions at this meeting, which might not work. Council Member Kniss requested clarification. Chair Schmid remarked that the goal of the item. Council Member Scharff inquired which item Chair Schmid was discussing. Chair Schmid continued that he was talking about the Long Range Financial Forecast, the CAFR Review and the SEA Performance, which were all DRAFT MINUTES Page 29 of 31 Finance Committee Special Meeting Minutes 4/7/2015 preliminary discussion points to the Budget Hearings. This was a chance for the Committee Members to say what types of things they were looking for with specific Budget items. Council Member Kniss suggested this would be time consuming. Chair Schmid suggested a 20 minute period of time, five minutes for each Committee Member to share their assumptions about the Budget, so there were no surprises. He thought this would allow people to think in the same order. Council Member Kniss noted that three of the four Committee Members would be present. Mr. Keene suggested taking some time at the very start of the Budget process. Chair Schmid agreed and said the discussion was only to inform people about the Budget Hearings. When the Budget Hearings began, the Committee was ready to discuss the Budget, but before the Hearings was an opportunity to discuss the preparatory materials. Mr. Ramberg requested any questions be provided ahead of time because Staff did not anticipate providing a review presentation on the Long Range Financial Forecast or the CAFR. He inquired if the Committee expected Staff to be available for questions. Chair Schmid envisioned Committee Members sharing information that they thought was important and how it might show up in various department reviews; this was so Committee Members were able to hear each other’s assumptions. Council Member Scharff confirmed that he would be present at the next meeting. Council Member Kniss wanted to go over all the May 2015 Committee meetings. Mr. Ramberg explained there was a meeting on May 5, May 7, May 12, May 14, and May 19, 2015. DRAFT MINUTES Page 30 of 31 Finance Committee Special Meeting Minutes 4/7/2015 Council Member Kniss confirmed Staff hoped the Budget Hearings were completed by Tuesday, May 19, 2015. Chair Schmid reiterated that there were five meetings. Council Member Scharff thought he might have a schedule issue on May 14, 2015. Council Member Kniss thought she might have a schedule issue on May 19, 2015. Chair Schmid asked if there was a date set for June 2, 2015. Mr. Ramberg said yes. As of right now, the Budget adoption for the full Council was scheduled for June 15, 2015. Mr. Keene added that was the first of the two meetings, there was a second meeting added. Council Member Scharff relayed that he was not going to be present at the Thursday, May 14, 2015 Committee Meeting. Council Member Kniss was reasonably sure she was not going to make the meeting on May 19, 2015. Chair Schmid confirmed that Council Member Scharff was going to be present for the Committee Meeting on April 22, 2015. Council Member Scharff said yes. Council Member Kniss noted that the meeting on April 22, 2015 was on a Wednesday and she was not able to make that meeting. Mr. Ramberg confirmed that the Committee moved the May 2015 Budget meetings for 5:30 P.M. but they were going to revisit the start time for June, 2015 and beyond. Chair Schmid thought the start times worked out well. ADJOURNMENT: Meeting adjourned at 7:48 P.M. DRAFT MINUTES Page 31 of 31 Finance Committee Special Meeting Minutes 4/7/2015 FINANCE COMMITTEE DRAFT MINUTES Page 1 of 28 Special Meeting Wednesday, April 22, 2015 Chairperson Schmid called the meeting to order at 5:32 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth, Scharff, Schmid (Chair) Absent: Kniss Oral Communications Annette Glanckopf spoke regarding placing money for 25 Automated External Defibrillator’s (AED) in the 2015/2016 Budget. There were 22 cars that did not have an AED in Palo Alto, which included police vehicles and park locations. Having an AED available meant the difference between life and death. Stephanie Martinson said there were 52 AED’s in Palo Alto, which were used nine times. The statistics of survival for cardiac arrest was unchanged since the 1960’s; access to an AED put the survival rate up to 80-85 percent. Racing Hearts believed that the 25 AED’s brought the standard of care to be equal to Mountain View, California. All Mountain View police cars had an AED in them. Council Member Scharff noted that it was possible to view all locations of AED’s via a program called “Pulse Point”; he wanted to know if Palo Alto’s AED’s were located on that program, of if they had to be input manually. Ms. Martinson said Racing Hearts did a “Spot the Box” campaign where they located all the AED’s and entered the results into Pulse Point. Council Member Scharff wanted to know if AED’s were in the Budget. Lalo Perez, Chief Financial Officer and Director of Administrative Services explained that he did not have that information at this time but Staff would ATTACHMENT J Page 2 of 28 Finance Committee Special Meeting Minutes 4/22/2015 look into it. If this was not on the Agenda, the Committee had the flexibility to put it on the Agenda during the Budget Hearings. Chair Schmid did not think AED’s were in the Budget at this time. Council Member Scharff inquired if the Committee would look at AED’s in May. Mr. Perez responded yes. Chair Schmid explained that since it was not on the Agenda, it was not possible to discuss AED’s at this meeting. Agenda Items 1. Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Approving the Fiscal Year 2016 Gas Financial Plan, Including no Rate Changes for July 1, 2015, and Amending the Gas Utility Reserve Management Practices. Valerie Fong, Utilities Director introduced her Staff and said there was going to be an overview of the Gas Utility. Eric Keniston, Resource Planner, noted the Gas Financial Plan was brought before the Finance Committee (Committee) in March, 2015. There was no proposed rate change for Fiscal Year (FY) 2016; there might be a change in the rate of seven percent for FY 2017. Chair Schmid inquired about Packet Page 33 and noted that the Gas Utility had no rate increases for FY 2015 but there were projected substantial increases over the next three years. Figure seven showed the Rate Stabilization Reserve dropped and there was a decline in Operational Reserves between the years 2016-2018. With a zero rate increase, and knowing there was some discussion in the Utilities Advisory Commission (UAC) about whether that should be averaged out over the two years, or postponed for one year; the reserve decline might indicate some argument to have an earlier increase, was there a comment on that. Mr. Keniston agreed there was a slight drop to the Operations Reserve but Staff felt they were still within their target levels for Reserves; there was enough health in the overall reserve structure to continue. The Short Term Risk Assessment Level for the Gas Fund was low, so there were reserves to allow for incremental increases. Page 3 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Chair Schmid relayed the unknown side was how much the City was going to pay to the regional distributor for upgrades because upgrades were happening more and more. He wanted confirmation from Staff that the City was in good standing and there was not going to be any surprises. Mr. Keniston confirmed that Chair Schmid was referring to the Transportation Costs and said Transportation Costs were yet to be settled. There was a benefit to waiting because Staff knew Transportation Costs were going up, but the amount that it was going up to was yet to be known. Waiting one more year was going to give Staff time to track information coming from Pacific Gas and Electric (PG&E). Chair Schmid confirmed that Staff did not have details on what PG&E’s long term program was. Mr. Keniston said no. Staff had estimations but did not have final information. Chair Schmid wanted to know if Staff’s expectation was there were going to be substantial increases. Mr. Keniston said yes. Chair Schmid noted that Staff mentioned increases in all Utilities next year, which were substantial. MOTION: Council Member Scharff moved, seconded by Council Member Filseth to recommend the City Council adopt a Resolution amending the Gas Utility Reserve Management Practices and approve the Fiscal Year 2016 Gas Financial Plan. MOTION PASSED: 3-0 Kniss absent 2. Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution Approving the Fiscal Year 2016 Electric Financial Plan, Including no Rate Changes for July 1, 2015, and Amending the Electric Utility Reserve Management Practices. Jon Abendschein, Senior Resources Planner, said Staff was proposing no rate increase for the Electric Utility for 2015; the last rate change was in 2009. Staff was finishing a Cost of Service Study to propose a six percent increase for July 1, 2016 and six percent for July 1, 2017. There was concern regarding the impact of the drought on the Supply Costs because of the low Page 4 of 28 Finance Committee Special Meeting Minutes 4/22/2015 hydro-electric generation. Staff ran three year drought scenarios. The main driver for the increase was due to ongoing costs over the next few years related to increases in transmission costs and the costs of new renewable projects that were coming online to fulfill the City’s Carbon Neutral Plan. Council Member Scharff mentioned if the City has tiered rates and if the City was pushing for more electrification, it might be good to examine why the City had tiered rates and how that played into the City’s strategy of having people use electricity, especially if the City was trying to be carbon neutral. He suggested this be discussed in the future. Council Member Filseth wanted to know how sensitive the rate increase was in connection with how long the drought was going to last. Mr. Abendschein explained that each year the drought continued there could be significant costs added. If there was an extended drought, next year Staff would come to the Finance Committee (Committee) with a Hydro- electric Rate Adjuster, something temporary that would account for the extra costs. He said in Fiscal Year (FY) 2017, Staff would draw down Reserves and recover part of the additional costs through an adder, an automatic rate adjustment. If the drought continued for another year, Staff planned on increasing the adder. At that point, the Reserves were going to be drawn down and Staff would be able to sustain the City’s financial position indefinitely. Council Member Filseth understood that the numbers assumed wet years in the next few years, and if not, the rates would go up. Mr. Abendschein said yes. Chair Schmid noted that the attached financial sheet indicated there was a drop in Reserves in FY 2015 of about $16-17 million. He confirmed this was due to the extra cost of supply. Mr. Abendschein clarified that $5 million was a planned draw down of Reserves, but the remaining $11 million was related to the drought. There was a Hydro-electric Stabilization Reserve, also known as a Drought Reserve, of $28 million; by the end of FY 2015, the Drought Reserve was going to be at $17 million. If there was another season of drought, the Drought Reserve would drop significantly again. Page 5 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Chair Schmid stated FY 2016 started July 1, 2015 and he thought the worst impact of the drought was going to be felt within the first six months of FY 2016. Mr. Abendschein said Staff was not projecting hydro-electric output for the winter in 2015 because the reservoirs were so low; this was taken into account in the FY 2016 projections. He added that the projections were completed in January, 2015 when the process was started. He thought the projections for FY 2016 were most likely going to be worse than what Staff was presenting to the Committee at this time. Chair Schmid noted the drought cost $11 million in FY 2015, there was probably going to be an equal impact for FY 2016. Mr. Abendschein agreed but Staff was already compensating for some of the impact in their projections; he expected a $5-6 million cost, as opposed to an $11 million cost. Chair Schmid repeated that he was concerned about the drought like he was concerned about the gas rates because for FY 2016, the rates were all rising. Mr. Abendschein acknowledged Chair Schmid and said a challenge Staff had with the Electric Utility was they needed to finish the Cost of Services Study before they changed rates and Staff did not recommend changing the rates this year. Chair Schmid thought the court system was pushing off the date that a Cost of Service Study was able to be submitted. He was not hesitant about the rate increases or the explanation of the Reserves, but said the unknown risks that Palo Alto faced next year, combined with people knowing there was going to be a substantial rate increase with Water and Wastewater Utilities were evident. MOTION: Council Member Filseth moved, seconded by Council Member Scharff to recommend the City Council adopt a Resolution amending the Electric Utility Reserve Management Practices and approve the Fiscal Year 2016 Electric Financial Plan. Council Member Scharff inquired when the Cost of Service Study was likely to be done. Valerie Fong, Utilities Director, planned on bringing this item to the Utilities Advisory Commission (UAC) in June or July, 2015. Page 6 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Mr. Abendschein added that Staff was going to come to the Committee with a Policy Discussion at some point. Staff was going to the UAC in July, 2015 and then to the Committee in August or September, 2015. Council Member Scharff wanted to know if the Policy Discussion item was going to be about what the Committee wanted to see in the Cost of Service Study. Ms. Fong answered yes. Council Member Scharff questioned if the Cost of Service Study was going to come back to the Committee in September, 2015 and if it was going to take nine months to prepare. Mr. Abendschein said Staff wanted to complete the Cost of Service Study before the next Budget cycle, by about January, 2016. MOTION PASSED: 3-0 Kniss absent 3. Human Relations Committee FY2016 & FY2017 Human Services Resource Allocation Process (HSRAP) Funding Recommendation. Minka Van Der Zwaag, Manager of Human Services spoke about the Human Services Resource Allocation Process (HSRAP) and said Staff used the same priority of needs that were used in the last cycle of the funding allocation; the Human Relations Commission (HRC) completed a Human Services Needs Assessment for that. The last cycle included a Supplemental Needs Assessment and there was a review of the priority of needs. The HRC felt the needs that were reviewed were the needs they wanted included in the Request for Proposal (RFP). In addition to the current providers, Staff looked at their priority of needs and other community agencies, either in Palo Alto or providers that served Palo Alto. Staff sent RFP’s to 33 agencies and received 15 replies. The requests exceeded the available funds by $617,000 but $500,000 of that amount was from one agency. The applications were reviewed by a Sub-Committee that included three HRC Members, as well as Staff. The HRC recommended the distribution of $425,594. Lalo Perez, Chief Financial Officer and Director of Administrative Services, clarified that Staff was discussing Packet Page 117. Ms. Van Der Zwaag continued that after the HRC met and made the recommendation, the budget Staff added a recommendation for a 2.6 Page 7 of 28 Finance Committee Special Meeting Minutes 4/22/2015 percent Consumer Price Index (CPI) increase to HSRAP. She pointed out the recommendations in the Staff Report. Staff was presenting the HRC recommendation and the additional Staff recommendation. Since the HRC did not vote on the Staff recommendation, she was assuming the HRC were happy with a 2.6 percent increase, and given the opportunity to vote on it, they would have approved it. She mentioned that HRC Commissioner Greer Stone was on the Human Relations Allocation Committee, the Committee that studied all the applications and made the funding recommendations. Greer Stone, Human Relations Commission Commissioner explained that the Sub-Committee had a preference for continuing HSRAP funding recipients; the Sub-Committee was trying to keep with stability. The Sub-Committee wanted all returning HSRAP agencies to receive the same funding so they were able to continue the work they were already doing. The Sub- Committee ended up with a surplus of $4,000 after deciding on all of the funding. The reason for this was because the MayView Community Health Center was only requesting $25,000, which was about $4,000 less than they requested in the previous cycle. The Sub-Committee focused on the $4,000 surplus and there were two agencies that were recommended: 1) La Comida, which received extra funding of about $300 because they received most of their funding from Santa Clara County (County), but in order to continue receiving that funding, they needed to receive about 10 percent of their funding from a local agency; and 2) Adolescent Counseling Services (ACS) received $3,713 because of the issues in the community about youth mental health and teen suicides. He noted that ACS was assisting with these problems and in order to show support the HRC wanted to provide extra funding toward that cause. This was why only two agencies received increases and the rest of the applicants stayed at their same funding award, which was the same amount that was granted in the previous funding cycle for each agency. The Sub-Committee discussed the possibilities of the Council increasing the HSRAP Budget and which agencies they favored; they did not discuss the matter at the HRC meeting because they wanted wait for Council’s decisions. Ms. Van Der Zwaag relayed the HRC Chair, Jill O’Nan was going to discuss the initial study, which was in the Staff Report. This study was performed by an intern to assess Human Services funding and the needs in other communities. Jill O’Nan, Human Relations Commission Chair explained that HSRAP was a long-term community resource that dated back to the 1980’s, which received regular increases for many years. The increases stopped around the year 2003 and funding was either cut or became stagnant. This had a long-term impact on the non-profit’s ability to serve the community. Over Page 8 of 28 Finance Committee Special Meeting Minutes 4/22/2015 the past few years, the Council was very responsive and generous toward HSRAP. She noted that HSRAP funding was still not “caught up” because of the stop in funding. The HRC was asked by several Council Members about what other communities did and how they funded Human Services. The HRC found good news and challenging news. The good news was that Palo Alto was way ahead of the nearby cities; Palo Alto spent more on Human Services than any of the surrounding communities. Looking to communities that were comparable in income with Palo Alto, the HRC looked at Bellevue, Washington and Berkeley, California. The finding was, even though Bellevue’s per capita income was not as high as Palo Alto’s, Bellevue spent more on Human Services. The HRC looked at the funding more seriously and at the history of the HSRAP; the HRC wanted to bring out that HSRAP funding was not caught up to what it was 10 years ago. She suggested additional funding. The HRC occasionally had difficulty responding to a crisis in the community and were aware of the recent teen suicides. In the previous year, a very essential food program was in danger of being shut down, which served 100 needy people every day. She added that there was a crisis with the homeless encampments at the Cubberley Community Center. These problems added up when the non-profits were not funded adequately. The lack of funding caused the HRC to be reactive, which was really difficult. The HRC wanted to engage Council on how they could have more sustainable, more long-term footing because HSRAP was so important. The HRC wanted HSRAP to continue to be a vital program and to continue to serve the community. She noted that Human Services were not receiving even one percent of the General Fund. There were some aspirations that the HRC wanted to move forward with and hoped to have the Finance Committee’s (Committee) support. Barbara Sih Klausner said ‘Dream Catchers’ was a highly leveraged organization and provided 6,000 hours of free tutoring to low-income middle school aged students in Palo Alto. They were established for seven years; the program was a year-long commitment. They had Stanford University student volunteers, as well as local high school student volunteers. They offered parent meetings, which provided emotional support for their children; most parents were not able to provide the material and resource support needed. Dream Catchers was not offered by anyone else in the community, and HSRAP funding was critical. Jo Jaros was a social worker that saw visually impaired people. Clients came to her organization for comprehensive rehabilitative services to remain independent. She set up a plan with clients based on their individual needs. There was a clinic that provided low income optometry services. They provided transportation resources, educated clients about their eye conditions, taught assistive technology to enhance independence, there was Page 9 of 28 Finance Committee Special Meeting Minutes 4/22/2015 emotional support, and there was a branch at the library and a store that sold aids for the visually impaired. They worked with all ages of people, had a youth group, and a transition program for teens; they served people regardless of their ability to pay. Heiri Schuppisser was a homeless outreach specialist who engaged with the unhoused population. He assessed people on the streets, tried to find their needs, and directed them to the proper agency. He worked in the court house with a program called Palo Alto Review (PAR); they worked with Palo Alto, Mountain View,, Los Altos, and Sunnyvale, Police Departments. He worked with the Downtown Streets Team, Dads with Alcohol and Drug Services, and various other agencies, including working with people that had citations for drugs. He thanked the Council that he was able to continue his work. Georgia Bacil worked with Senior Adults Legal Assistance (SALA), which provided free legal services and targeted clients that were very low income. The HSRAP funding allowed SALA to expand their appointment sessions; SALA requested funding to continue services. Seniors were the fastest growing segment of the population and SALA was pleased that HSRAP funding included needs for seniors. Some problems they assisted with dealt with public benefits, seniors whose housing was in jeopardy, and victims of elder abuse. They assisted seniors with end of life processes. Council Member Scharff noted that the HRC came forward with their recommendations every year and he did not see any reason to change the recommendations; he fully supported the choices the HRC made. MOTION: Council Member Scharff moved, seconded by Council Member Filseth to recommend the City Council: 1. Approve funding for Fiscal Year 2016 that will be included in the Fiscal Year 2016 Office of Human Services Contract Budget; 2. Have the City Manager or his designee be authorized to execute year one contracts, with a renewal up to one additional year (Fiscal Year 2017); the City Manager or his designee is authorized to execute the Human Services Contract and any other necessary documents concerning the contracts; 3. Have a Consumer Price Index increase of 2.6 percent for Fiscal Year 2016 which will increase the total Human Services Resource Allocation Process funding and also the funding to Avenidas and the Palo Alto Page 10 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Children Center by $34,221, from $1,316,177 to $1,350,397 to be allocated proportionally to each funded agency; and 4. The 2017 increase in the Consumer Price Index for all Urban Consumers for the San Francisco, Oakland, San Jose Metropolitan Statistical area to be used to identify the Consumer Price Index to be used as part of the development of the Fiscal Year 2017 Human Services Resource Allocation Process Allocation and Budget. Council Member Filseth felt that Palo Alto could afford this program and supported the recommendation. Chair Schmid said that the Silicon Valley was lagging behind in dealing with the problem of homelessness. Santa Clara and San Francisco Counties were the leading 10 in the number of homelessness. In the share of people that were unsheltered, Santa Clara County came in first in the Country. This was a community where there was a lot of wealth. He understood that the City was not the responsible public agency but he thought it was important to do something. AMENDMENT: Chair Schmid moved, seconded by Council Member XX to: 1) add $100,000 to Human Services Resource Allocation Process Budget to target homeless; and 2) to have the Human Relations Commission come back to the Finance Committee in May, 2015 with a recommendation on how to most effectively use the funds, either to deal with some of the agencies that were helping with homelessness or to leverage the funds with the County of Santa Clara on a north County initiative. AMENDMENT FAILED DUE TO LACK OF A SECOND Council Member Scharff did not accept the Amendment and said the responsibility was with the County; this was appropriate because it was a County-wide issue. Regarding the Cubberley Community Center and homeless issues discussed in the past, he took issue with the comments that homelessness and the Cubberley Community Center were due to a lack of funds as the cause. In the past the Council decided to give $250,000 toward Human Services for two years. Ms. Van Der Zwaag confirmed that was correct. Council Member Scharff continued that Staff was going to use that money to help the homeless locally but were not able to come up with a way, nor were they able to gather the organizations together; the City ended up giving the Page 11 of 28 Finance Committee Special Meeting Minutes 4/22/2015 money to the County. He did not agree with allocating $100,000 in funds without identifying an issue and a plan. Budgeting off the cuff was not an effective way to Budget funds and it was not the way to run a City. He appreciated the hard work and thought 2.6 percent was a good number. He stated that the HSRAP funds were increased every year and wanted to know how much was added last year. Ms. Van Der Zwaag answered $100,000 was added last year, a 2.6 percent increase across the board. Council Member Scharff did not think there should be a big increase every year. It was a little incorrect to say that the Council has not been funding HSRAP because HSRAP received more money than they ever received. Increases depended on how the subject was discussed because the General Fund was going up, and pensions and benefits were the cause of that in a huge way. He compared HSRAP to what it was as one percent and noted the explosive growth in pensions and benefits, which was 65 percent of the Budget. Mr. Perez clarified the General Fund was about 64 percent for salary and benefits. Council Member Scharff reiterated that the way HSRAP funding was discussed was not appropriate. He was not declaring that HSRAP funding was at the right number or the wrong number but Staff and the HRC have not made a compelling case about why the funding should be increased. He understood that HSRAP was funded in a way that compared to the surrounding cities Palo Alto was third best. He commented on Bellevue, Washington and said our comparison to that State meant that Palo Alto was really doing a good job. He was concerned about going out of State to compare because California was structured in such a way that it was the County’s job to provide social services, which may or may not be true in the State of Washington. Regarding the comparison of Berkley to Palo Alto, he was glad Palo Alto was run differently; he did not want to model Palo Alto after the city of Berkley. Ms. O’Nan responded to Council Member Scharff and said there were significant service gaps in Palo Alto, in terms of serving the homeless. For example, there was no shelter that took in families in Santa Clara County. A homeless individual was able to be served, but a homeless family was not. As a result, the local service providers had to do a lot of work to find services in the adjoining San Mateo County, which was a situation that came up approximately every month. This meant children sleeping in their cars with their parents and she did not feel that in a community this abundant Page 12 of 28 Finance Committee Special Meeting Minutes 4/22/2015 that children should be put at risk in that way. This was a service gap made Countywide. If additional funds were made available for HSRAP, and targeted for homeless services, this was something the HRC would be working on with the InnVision Homeless Shelter Network. The funds could be used for emergency hotel vouchers or anything to get the families off the streets for long enough to give the service providers time to help find longer term housing opportunities. In addition, the City was struggling with the teen suicide crisis. There was a representative from ACS that spoke to the HRC recently. As of March 2015, ACS had already seen twice as many kids than they saw the whole of last year. The students were very grieved and stressed out about losing their friends; ACS needed to hire more people to serve more kids, but the Budgets were constrained. She underscored that if there was more funding, there was an ongoing crisis that would utilize those funds. MOTION PASSED: 2-1 Schmid no, Kniss absent 4. Police Department: Palo Alto Animal Services Audit. Harriet Richardson, City Auditor remarked that there were four audit objectives. This audit was included in the Fiscal Year (FY) 2015 Audit Work Plan because of the Animal Shelter’s ongoing financial deficit since the City lost its agreement with the City of Mountain View in November 2012 to provide animal control services. The audit was prioritized at the request of the City Manager, Jim Keene, to issue a report in time for the Finance Committee’s (Committee) discussion of the FY 2016 Budget. The audit objectives were to: 1) determine appropriate areas of focus for the City Council and management based on Palo Alto resident and animal shelter customer opinions regarding the overall adequacy of Palo Alto Animal Services, the demand to keep Animal Services local, and residents’ willingness to financially support operational and facility improvements for Animal Services; 2) opportunities to increase Animal Services’ revenues and decrease its expenditures to make it more financially sustainable; 3) whether Palo Alto effectively and efficiently planned and executed upgrades to the Animal Shelter to meet Animal Services’ goals and objectives; and 4) the appropriateness of Animal Services’ organizational structure. In addition to the standard review of relevant financial and operational information, and speaking with appropriate Staff regarding operations, it was important to get a broader perspective of what residents wanted regarding Animal Services. Staff contracted with the National Research Center to conduct a survey that focused only on Palo Alto Animal Services. The survey included three different groups: 1) 1,500 randomly selected Palo Alto households, 2) 678 households in Palo Alto with a record of having used Palo Alto Animal Services, and 3) 822 households outside of Palo Alto with a record of having Page 13 of 28 Finance Committee Special Meeting Minutes 4/22/2015 used Palo Alto Animal Services. Due to time constraints, Staff did not weight the survey responses prior to publishing the audit report, but Staff subsequently weighted the responses from the randomly selected Palo Alto households to more accurately represent the demographics of the population. There was an At Places Memo given to the Committee at this meeting that provided updates for selected survey results. Staff also wanted to understand what other well-functioning Animal Services organizations did to be operationally and financially successful. Staff toured other Animal Services organizations in the area and spoke with leadership at those organizations. The organizations visited were: 1) the Humane Society of Silicon Valley; 2) Peninsula Humane Society and Society for the Prevention of Cruelty to Animals (SPCA); 3) the Palo Alto Humane Society; and 4) the Silicon Valley Animal Control Authority (SVACA). Staff benchmarked various aspects of Palo Alto Animal Services against these organizations, as well as with the San Francisco SPCA, the City of San Jose and the City of Sunnyvale. Staff also compiled and reviewed prior reports that the City conducted over time regarding efforts to improve or rebuild the Animal Shelter. Houman Boussina, Senior Performance Auditor, noted that the audit report had one finding that discussed the challenges and opportunities facing Animal Services, as well as the need to make immediate changes and to develop a service model that was going to be financially sustainable over the long term. He discussed Animal Services’ dire financial situation and said there was a significant decline in revenues for FY 2014, with an unequal decline in total expenditures. Although Palo Alto’s General Fund subsidized Animal Services for the past 10 years, the subsidy from the General Fund increased significantly after Palo Alto lost the agreement with the City of Mountain View and the accompanying $400,000 in revenues. Further revenue decline was due to the loss of the Spay and Neuter Clinic in FY 2014 after the loss of Veterinary Technicians, which caused revenues to decline from about $190,000 annually to about $47,000. Police Department Staff told Audit Staff that they made significant efforts to retain the Mountain View contract, including attending Mountain View Council meetings, but were not successful. He noted that non-salary expenses remained stable during the 10-year period, while the data showed that the City implemented staffing reductions to address the budget deficit in FY 2014. Donations and contracts for services comprised the majority of revenue for other Animal Services organizations, but Palo Alto Animal Services had limited revenue in each of these areas in FY 2014. Palo Alto’s options for increasing revenue from these revenue sources were limited for two reasons. One reason was there was a limited market share for contracts with other jurisdictions; most of that market was captured by other Animal Services organizations. Although other jurisdictions discussed contracts with Palo Alto for Animal Control Services, they were not interested because Palo Alto could not save them money or because of the uncertainty of the future of Palo Alto Animal Page 14 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Services. The second reason was a City policy that restricted Animal Services’ ability to solicit donations. Even if the policy was changed, resources would need to be dedicated to fund raising efforts. Although Animal Services received donations from the Friends of the Palo Alto Animal Shelter (Friends), the City had not formalized its relationship with the Friends group. Other monetary donations, which were done through an online portal, were not significant. Other opportunities to increase revenue existed, but were not likely to be significant factors in cost recovery. These included: 1) increasing resident awareness of services provided; 2) adding evening and weekend shelter hours; 3) participating in community adoption events; and 4) providing animal licensing services to other jurisdictions. Having Animal Services provided locally was very important to Palo Alto residents and Animal Services’ customers. More than 80 percent of residents and customers who responded to the survey thought it was essential or very important for Palo Alto to provide key animal services. He noted that 83 percent of Palo Alto residents did not want to travel more than 10 miles to obtain animal services, and more than 90 percent of survey respondents rated services as excellent or good for animal control, dead animal pick-up, spay or neuter services, vaccinations, and licensing. The Animal Services survey showed that Palo Alto residents supported subsidizing Animal Services, particularly if they used the services during FY 2014. He said 77 percent of randomly selected Palo Alto residents who responded to the survey, and 94 percent of residents who used the shelter in the past 12 months thought the City’s General Fund should subsidize Animal Services to the extent necessary to ensure that the City manages and provides oversight of a City Animal Shelter in accordance with the best practices. These residents also favored developing public/private partnerships as an option. Neither the randomly selected residents nor the residents who used Animal Services favored making Animal Services 100 percent self-supporting or supported contracting out Animal Services. The Animal Shelter was built in 1972, has outlived its useful life, and did not meet modern standards of animal care, which was likely a reason that other jurisdictions did not want to enter into Animal Services agreements with Palo Alto. The Animal Shelter did not have sufficient space to meet the animals’ physical and behavioral needs, including separating incompatible animals. The kennels were cramped and some had sharp edges, the flooring could not be cleaned to recognized sanitation standards, there was not a separate receiving and intake room, and some types of small animals were housed in the Staff lunch room, which presented a health hazard to both the animals and the staff. The City has spent $1.7 million on Capital Improvement Projects (CIP) since 2003, but the improvements provided only critical repairs and did not upgrade the Shelter to meet modern standards of care. The City conducted a Master Plan Study of the Los Altos Treatment Plant site, which included a proposal to build a new shelter. There was no subsequent action to move forward with one of the proposed plans from that Page 15 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Study. Palo Alto residents supported facility improvement to improve the standard of animal care, as well as funding those improvements. Although residents who responded to the survey preferred refurbishing the facility, this was not a viable option because the Animal Shelter was beyond its useful life. There was positive support for building a new Animal Shelter, but it was much less favored than the refurbishment option. Residents who responded to the survey strongly favored fundraising and public/private partnerships as a way to pay for improvements; although they also supported General Fund subsidies, this was much less of a preferred option for residents who had not used the Animal Shelter. Issuing bonds to pay for the Animal Shelter improvements was not a well supported option. The audit report discussed proposals from the Palo Alto Humane Society, including financial and other support for a new or refurbished facility. The City has not acted on those proposals, but through discussions with the Palo Alto Humane Society, Staff learned that they were still committed to providing support to move Palo Alto Animal Services into the future. Animal Services faced other significant challenges, such as the Acting Superintendent’s plan to retire in December 2015. This was a position that would be essential to the City as it moves forward to act on the Council’s decisions regarding policies for Animal Services. Staff anticipated that hiring a qualified person was going to be challenging because the position required specialized skills and management experience, the salary for the position was not competitive with neighboring animal services facilities, and there was a significant gap between the Superintendent’s duties and responsibilities, and those of other positions in Animal Services, which limited the ability for other Animal Services employees to step into the position and be effective. There was uncertainty regarding the future of Animal Services, which may cause qualified individuals to hesitate to apply and to commit to the position. The Police Department’s hiring process took three to six months, and included a more detailed background check than was required for other City employees. This process resulted in disqualifying candidates in the past and could otherwise dissuade qualified candidates from applying for the position. Second, the Police Department considered Animal Services an ancillary operation that was mostly self-managed, with minimal coordination of activities and expertise, in comparison with the rest of the Police Department. While there was no ideal placement for the Animal Services function, the audit report described the pros and cons of various reporting structures for Animal Services that could help it overcome both its financial and organizational uncertainties. Ms. Richardson explained that Staff made eight recommendations in the audit report, which Staff expected would be implemented over a period of time, as well as prioritized; some recommendations needed to be implemented before others. The recommendations identified ways for the future success and financial viability of Animal Services; they included Page 16 of 28 Finance Committee Special Meeting Minutes 4/22/2015 assigning someone with management skills to work at Animal Services to guide it through the transition in the future. This was a critical first step that needed to be implemented quickly if Council wanted to keep an Animal Services function in Palo Alto. Staff recommended conducting a cost-benefit analysis of expanding Animal Services hours as a way to increase its revenues; increasing revenues through expanded hours was very unlikely to increase much more than a fraction of the revenues lost when Palo Alto lost the Mountain View contract. Staff recommended identifying a strategy to engage nonprofit or other Animal Services organizations in discussions for operating the Shelter. The City Manager, James Keene, started this process before the audit began and continued it while the audit was being conducted. Staff believed that using the results of the meetings, in conjunction with the information in the audit report was going to provide valuable information to the Council as they made their decision about the future of Palo Alto Animal Services. As part of that recommendation, Staff recommended assessing the feasibility of separating the Animal Control activities from the Animal Shelter activities, leaving the Animal Control portion with the Police Department, and separating the remaining functions of Animal Services. In addition, Staff recommended assessing the feasibility of increasing revenues through fundraising, public/private partnerships, General Fund subsidies, or a bond initiative to build a new animal shelter that met modern day standards for animal care and safety. These strategies were proven for other animal services organizations and were the most likely way to allow Animal Services to remain an active function in Palo Alto. The primary reason Staff prioritized completion of this audit was because implementation of the recommendations required financial resources that were not currently in the Animal Services Budget and presenting the audit now allowed the City Manager to propose the resources needed for FY 2016 during the upcoming budget hearings. The City Manager agreed with seven of the eight recommendations; he partially agreed with the recommendation to seek the opportunity to provide animal licensing services to San Mateo County when the current contract expired. The City Manager’s action plan to assess that opportunity was appropriate and Audit Staff did not recommend any changes to his response. Jim Keene, City Manager, said the work of the Auditor’s Office, the timing, and the alignment with the City’s own data was a good example of an internal consultant that was able to look deeper into matters and give their own independent analysis of a situation. The responses that were written in the audit were less passive than responses sometimes were; they were statements of agreement, an attempt to state Staff’s intentions, and they displayed the urgency of Staff to respond to the recommendations. There was a lot of agreement about the situation of Animal Services, the proposals that were made for going forward, and a need to revisit the challenges of the Animal Shelter operation over the past years to reflect on its financial Page 17 of 28 Finance Committee Special Meeting Minutes 4/22/2015 condition. There was a recollection of the losses in Animal Control and the significant financial challenges that were seen as a City, which led Staff to suggest that they needed to look at abandoning the Animal Shelter operation and pursue something similar to Mountain View. In the years 2010 or 2011 there was a lot of reaction in the community to do fundraising, as a reflection of the desire to keep the Animal Shelter. In FY 2015 there was a drop in net costs to $420,000. Staff’s intent was to stay on the course and to try to see a zero deficit. In looking at the data from subsequent years, Staff was going in the wrong direction; there was a loss of almost $900,000 in FY 2014 and there was an increase in FY 2015. These numbers were a reflection of an operation that clearly did not work. This was not just about the numbers, it had to do with the condition of the Animal Shelter and the ability to restructure the Shelter so it was more self- supporting; the conditions, the quality of care, and the appeal needed to be enhanced. The audit showed that municipal operations were not looking good and there was a need for the City to look at alternatives. Staff’s response to the audit was they agreed and they thought they should retain the Animal Control Officers. This was a service that was important to the two remaining partners of Los Altos and Los Altos Hills. He agreed that retaining the Animal Shelter in Palo Alto was good but a new model was needed. The challenge was the transition period between now and the ability to move toward a new model. This was complicated by the fact that during the transition, the director of the Shelter would be retiring. He wanted to keep the Shelter in operation and to focus on developing a transition plan. He showed a chart that had rough estimates of the Staffing support and he suggested consultants might be needed. The main point was that a year was needed before Staff was in a situation to pursue passing the Shelter to a new entity, so Staff had to backfill staffing at the Shelter to keep it in operation. He noted that the transitional costs were not included in the Operating Budget, which were going to be presented to the Council. Chair Schmid understood the recommendation was to accept the audit report as a whole and consider Item Number 1. Mr. Keene agreed that the audit as a whole should be considered but he thought the City Manager’s response to the audit was important. The Committee needed to direct Staff regarding the Budget Hearings. He thought it would be helpful to know if the Committee favored the City Manager’s recommendation in the audit or if the Committee wanted to go in another direction. Council Member Filseth felt the audit was a very clear and comprehensive assessment of Animal Services. He understood the Animal Control function was going to stay with the City. The City Manager’s suggestion was for the Page 18 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Animal Shelter to continue to be run for a limited period of time, while Staff looked toward transitioning the Shelter to some other partnership completely. Mr. Keene agreed about the Animal Shelter. Council Member Filseth inquired when the Animal Shelter was transitioned out completely, was the entire shelter going to be transitioned out. He explained that there were some short-term elements, for example, if a person turned in a stray dog, versus the protocol of some private shelters. He wanted to know whether people might actively support adoption and a pet fair program. If the Shelter activities were transitioned out, was there going to be a Shelter retained for lost animals, or would that be contracted out too. Mr. Keene noted that Staff’s thinking during the transition was to stick to how the Shelter was at this time, and not distract Staff from the task of moving to the new model. He explained that expanded hours and coming into contracts were good, but he did not want to dilute Staff’s attention. The Request for Proposals (RFP) were going to have specific options on how the Shelter was going to be configured. There might be an open-ended piece that allowed people to propose alternatives that they thought would work the best. These suggestions had the opportunity to be built into the response in the model. Council Member Scharff requested more background because the initial recommendation from the City Manager’s Office was to close the Animal Shelter; he did not recall if it was both the Shelter and the Animal Control Unit and whether Staff wanted to contract these out with a brand new Animal Shelter. Mr. Keene said that was correct. He did not recall being really focused on the Animal Control piece in the recommendation. The response to the proposal was significant. Council Member Scharff wanted to understand that when Staff said they were going to contract out the Shelter, how was that different from when the community had a lot of concerns with the Manager’s previous recommendation. Mr. Keene noted a main difference was Staff was talking about closing the Palo Alto Animal Shelter and moving it toward another external provider. This proposal involved keeping the Shelter within Palo Alto. He thought that Page 19 of 28 Finance Committee Special Meeting Minutes 4/22/2015 was why there was significant support in this recommendation because there was an opportunity to improve the Shelter. This was the kind of process that happened in the Palo Alto community where everyone’s perspective advanced in the discussions. People realized there was a financial challenge. More than anything, people saw this as improving and enhancing a service in the City. Council Member Scharff confirmed that the City had both Animal Control and the Animal Shelter but wanted to know what was different. Mr. Keene clarified that there was an Animal Shelter that received animals and provided many services. Additionally, Palo Alto had their own Animal Control operation that responded to requests in the Community, as well as in partner communities. Staff did not feel they had problems with the Animal Control function because it was a high-quality service and the customers thought it was a high-quality service; there was a strong partnership with existing Staff and he did not feel the need to change that model out. The Animal Shelter had problems. He likened the Animal Shelter to the Junior Museum and Zoo because there was difficulty finding a funding investment to expand and change the management to some extent. He said the Animal Shelter could go further than the Zoo and the City would contract out everything. Council Member Scharff confirmed the City was losing about $900,000 with the Animal Shelter. Mr. Keene confirmed yes and said the FY 2015 half-year cost was going to keep the City on a poorer performance. Council Member Scharff repeated that the City was losing about $1 million and Staff was requesting to put another $2,300,000 back into the Animal Shelter for transitional costs. Mr. Keene relayed that this was not something that he wanted to say to the Council, but the Shelter was continuing to lose more and more money. In order to fix the problem, there needed to be a loss of more money for a time. Council Member Scharff wanted to know what the transition costs were for. Mr. Keene said Staff needed in-house expertise that was able to help structure and manage the transition, including a more detailed analysis on Page 20 of 28 Finance Committee Special Meeting Minutes 4/22/2015 the scope of work, how to issue RFP’s, and to employ a person that had a level of expertise that Staff did not have at this time. Council Member Scharff questioned whether Staff was going to hire a consultant or was it going to be in-house personnel only. Mr. Keene remarked that there were two capacities that were needed during the transition: 1) some degree of expertise, as it related to the operation, which was best done by a consultant or a Staff person who had a lot of expertise; and 2) management capacity because the Animal Shelter Director was going to retire in six months. Staff agreed that those skills weighed more on a management skill side than they did on the technical operational skills side. There was a possibility that there could be a combination of recommendations about assigning Staff to do this job, rather than outsource the job. Working through the Committee and having Staff present a number of options to the Committee was his suggestion. He questioned whether there was real concern to minimize the additional cost increases during the transition period. Council Member Scharff clarified that Staff was looking for a plan and estimated that would take $2,300,000. He wanted to know how long the transition period was going to be because if the City was going to lose money, he wanted to know how long the money was going to be lost. Mr. Keene did not feel like Staff had a good answer and recognized that there was no way to complete all this work in less than one year. He understood that Council expected Staff to report on their progress because as the market place was surveyed, the options were understood, and the timing was considered, things could change; Staff would know the time frame by the middle of next year. He did not like the situation and did not like losing this amount of money, but at the same time, it was not just about money. The facility and the standards were not being met with the current operation; he was not applying this approach in other service areas and he knew this problem needed to be fixed. Council Member Scharff commented that when he joined the Council, the City Manager had been employed for one to two years and there was a beginning of an investment into infrastructure. This problem of the Animal Shelter was partly self-inflicted because if the effort and the money were spent, and if the Animal Shelter was upgraded, then Palo Alto would not have lost Mountain View’s contract; it was the dismal shape of the Animal Shelter that caused Palo Alto to lose the Mountain View contract. He said Palo Alto could lose Los Altos and Los Altos Hills if this was not taken care of correctly. Palo Alto was now investing in roads and utilities and that there Page 21 of 28 Finance Committee Special Meeting Minutes 4/22/2015 was an Infrastructure Plan, but every now and then things like this come before the Council. He remarked on the walkway at the Baylands and how it was not maintained, and since he was on the Council, he recalled a piece of artwork that had to be de-assessed because it was not maintained; the artwork had to be thrown away. He appreciated there being some kind of sense of what else was not being maintained so this kind of situation did not come up again. Mr. Keene shared the Committee’s concerns and said this kind of thing was happening all over the Country. Council Member Scharff interjected that it was possible to solve Palo Alto’s infrastructure problems; Palo Alto had the money available. Mr. Keene remarked that the infrastructure examples given did not happen overnight, they happened over a generation. Council Member Filseth wanted to know if there was a third option, one that was faster and more aggressive, one that worked toward an externalization model. The bottom line was: what was going to serve the residents of Palo Alto best. If Staff was going to end up at the same place in the next two years and were going to be spending another $2 million, he wanted to know if there was a shorter transition possibility. Mr. Keene remarked that Staff knew what the problem was and wanted to move as fast as possible. The problem was not a 100 percent management and Council decision because there were people in the community who were invested in the decisions made as well. These were not matters that were in Staff’s direct control, as was the state of the market place; there might be existing nonprofits that might have the capacity to take Palo Alto up on their offer. Staff’s intent was to make the transition as quickly as possible. Barry Hayes was disturbed by the characterization of losing money because the Animal Shelter was a Municipal Service, like fixing potholes. The Animal Shelter was a highly valued service. A second point was there was no magic way of making the Animal Shelter a non-City service, something that Palo Alto could not run; the quality of the service needed to be maintained, and increased. This was not a service that the government was unable to run. Beth Ward, Humane Society Silicon Valley, thanked the City Auditor for compiling this audit and thanked the people who helped make the recommendations. The audit allowed for a forum that enabled people to discuss the problem. The Humane Society supported the recommendations Page 22 of 28 Finance Committee Special Meeting Minutes 4/22/2015 of the audit report and looked forward to the next steps of a quick and effective solution that would help the animals and the people that were served by Animal Services. Carole Hyde, Palo Alto Humane Society, said modern shelters were community centers; they had information outreach and various programs. Their vision allowed for self-sustaining community programs and services. Enhanced space allowed Palo Alto Humane Society to offer these types of programs; they agreed with the Auditor’s report. The Humane Society submitted two proposals to Staff but was not able to fund an entire facility. They wanted to participate in creating a new facility that housed their programs and expanded the income generated to be able to spay and neuter. Scottie Zimmerman mentioned that the Friends of the Palo Alto Animal Shelter held meetings on how to approach the problems. They toured other shelters and discovered some other ways to earn money. There was a need to be more realistic to describe what the new Shelter was going to look like and to find money. The City of Berkeley replaced their shelter built in 1946. She wanted a better place in the community, money earning propositions, and for the animals to be happy. Chair Schmid commented that it was striking to see the loss of substantial money over a number of years and said the audit report identified a few factors that led to revenues being so low. He envisioned the transition period as getting Staff in the Shelter, but also making changes that ensured the Clinic was running well and that services were delivered with a sense of urgency. The Interim Manager needed to lower the deficit, which he wanted addressed when this item came back before the Council. The new Staff person needed to be someone that picked up ideas, saw how they worked, put them into practice, and given the Shelter’s condition, was able to see whether it could be run more effectively. He questioned when this item was coming back to the Committee. Lalo Perez, Chief Financial Officer and Director of Administrative Services, answered that the item was coming back May 7, 2015, the evening that the Police Budget was going to be discussed. Chair Schmid remarked that this meeting was going to be a busy one. Mr. Perez mentioned that the Council discussed knowing that the City was going to be at a $500,000 deficit. Discussing the Animal Services Audit was Page 23 of 28 Finance Committee Special Meeting Minutes 4/22/2015 in Staff’s plans; maybe there were situations or components that could be taken care of sooner. Chair Schmid remarked that part of the deficit was the Animal Control portion. Mr. Perez thought it was good to be clear and separate the two items because it was part of a function that the City needed to have. A lot of the functions were State mandated. Chair Schmid agreed; knowing if Staff was subsidizing, and by how much was important. He noted that there was no mention of reaching out to services and partnerships and there was no mention of the local interest. He was surprised that only 55 percent of the users of the Shelter were Palo Alto residents. Neighbors mentioned they had their own veterinarian, they went to stores for supplies and advice, and got their pets from other places. He suggested getting the whole animal community together: veterinarians; veterinarian hospitals; breeders; stores. These were all people who had an interest in healthy animal services in Palo Alto. He suggested forming partnerships, and having the animal community contribute to healthy Animal Services Center: what was their role and how did Staff get them involved. Another idea was, since Palo Alto was on the border of San Mateo County, and San Mateo County was providing services for their county; he wanted to know if there was a way Palo Alto could become a provider to San Mateo County. Maybe Menlo Park or East Palo Alto were able to get some of their services from Palo Alto. A striking point of the survey was that people did not want to go that far for animal services; he noted that Menlo Park and East Palo Alto were a few miles away and wondered why they were not Palo Alto’s partners. Critical questions were: what kind of interim arrangement was going to be made; could it be dynamic enough to where Staff could experiment and try new revenue generating situations, new partnerships; and who in the community might be an investor. If there were notions of design, he wanted to know: what would it look like, how big would it be, and who would be participants. These were necessary things to know in order to sell partnerships. Council Member Filseth felt that the City Auditor identified the major difficulties and said that finances were a big difficulty; the audit findings underscored the difficulties of running an Animal Shelter. There was a known working model for running an animal shelter and it was characterized by an executive team that spent a huge amount of time fundraising, had a relatively low cost-structure for everyone else, had huge numbers of volunteers, there was a lot of outreach done, there were aggressive adoption programs, pet fairs were organized, and organizations were barely able to Page 24 of 28 Finance Committee Special Meeting Minutes 4/22/2015 make their revenue. This was not a model that was commonly found in government. Having the right kind of management was going to be critical in making the program successful. He mentioned some personal association with a wildlife organization that was destroyed by management and said this was not something to be taken lightly. Ms. Richardson noted that the Motion was to “recommend” to the Council to accept the report. MOTION: Council Member Filseth moved, seconded by Council Member Scharff to recommend to the Council to accept the City Auditor’s report. Chair Schmid looked forward to May 7, 2015, where Staff would bring concrete budget proposals to discuss making the transition work. He wanted to know if Staff needed any other input from the Committee. Mr. Keene replied no but said it was too early to say, as Staff was looking at the decisions being made in the budget process and at the transition. He was a little worried about overstating Staff’s ability to lower the deficit. This was not because he did not have the intention, but the Auditor’s Office and the City Manager’s Office did some preliminary searches for different services and the cost-benefit analysis yielded benefits on a small scale in this time frame. Staff was not able to ignore the limitations that the existing operation placed on the Shelter. The condition of the Shelter and the amount of space were factors in Staff’s ability to make the Animal Shelter work. The real solution was embedded with a new Shelter coming into existence. The points about location were important, about them being an advantage and a disadvantage, and about having an improved facility. Some of the draw of the facility was convenience, but for others, it was a strong emotional attachment to having the Shelter in Palo Alto; people were able to work through the deficiencies that Palo Alto had. He suggested upgrading the facility and the ability to make it work. He did not want to leave any feeling that this was a profit motivation. There was no intent to run the Shelter as a profit center. Palo Alto provided many critical services that the City did not directly provide, or was not generally subsidized, such as: wastewater; refuse; and senior services. All of these were operated with the sense that there was a way to price things to make them work and to improve the service. Lastly, it was very clear that the ability to fundraise for capital and operations worked in the other model, and this was really difficult in a municipal model. To ignore the potential and suggest subsidizing this service by taking from other City services, when there was a model that worked better, was an idea that he wanted to bring out. He thought Staff was striking the right balance on how they could go forward in the future. Page 25 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Chair Schmid appreciated the audit report and hoped that Palo Alto could achieve some of its goals and targets. MOTION PASSED: 3-0 Kniss absent 5. Review of Fiscal Year 2014 Comprehensive Annual Financial Report and FY 2015-2025 Long Range Financial Forecast in Preparation for FY 2016 Budget Process. Chair Schmid noted that Staff was not going to have recommendations for this item, but this item was for the Finance Committee’s (Committee) review. The Budget process started with the Long Range Financial Forecast, the Financial Report, and Statement. These items were discussed with the Committee but none of the current Committee Members were present during those discussions. The Committee Members were going to have five minutes each to discuss subjects as the Budget items approached. Council Member Scharff questioned whether Staff was going to bring the Committee a “Zero Based Budget.” Walter Rossmann, Budget Director, explained that the Budget was partially Zero Based in the way that it was built on the personnel side. The Budget was not Zero Based in that Staff did not erase everything and re-justify all items on the Budget. Lalo Perez, Chief Financial Officer and Director of Administrative Services, promised that Staff was going to bring the Committee a balanced Budget. Chair Schmid mentioned the valuation of pension benefits. He noted when the Long Range Financial Forecast came out in December, 2014 it contained the actuaries view of the Pension Liabilities. The Committee was scheduled to discuss this in September, 2015. When looking at the 10-year Financial Forecast, the benefit rates grew twice as fast as the salaries. This was not a long-term, sustainable way of attracting the best young workers in City government. How that was valued and how the City made sure of paying the cost of current workers, even when they were retired was important as the Committee addressed each item on the Budget. He suggested this might affect how Staff thought about the size of each Department, as they were discussed. A second item he thought was important was Property Taxes because they made up 35 percent of the City’s Tax Revenue. They grew from 28-35 percent, made up for 80 percent of the School Budget, and accounted for 90 percent of Santa Clara County’s (County) Tax Revenue. How Palo Alto handled and generated Property Taxes was extremely Page 26 of 28 Finance Committee Special Meeting Minutes 4/22/2015 important. Over the last five years, as the office sector grew, the share of non-resident payment of property funds fell from 30 to 25 percent. This indicated that the utilization of the use of those taxes, where someone benefitted directly from these tax funds, was something that should be discussed when funding these “General Fund activities.” Council Member Filseth was interested in the time the City last ran a $6 million Operating Surplus and this year Palo Alto was projected to run a $1.5 million surplus. He was curious about the expected return of CalPers Pension Investments on the City’s Operating Surplus/Deficit. Mr. Rossmann agreed that the City projected a surplus of $5 million for Fiscal Year (FY) 2015, but this was a one-time surplus. Staff budgeted ongoing dollars with ongoing revenues. The surpluses seen in the Forecast were ongoing surpluses and deficits. The Forecast did assume the increase in benefit costs for CalPers. Staff had only five years of data for those projections, and Staff projected out the same incremental increase that CalPers gave the City for the following five years. Council Member Filseth explained that the projection of the impact of the Investment Returns on CalPers was complicated but he took a simple approach using CalPers’ numbers. CalPers tried to encapsulate all the potential variables, such as aging, demographics, and salary increases, and tried to put these figures into projections for contribution rates for various levels of investment returns. He tried to figure out what the ultimate impact of a change in the investment returns was and what the contribution rate for the City was going to be for the current year. He picked $6 million as the target and said it looked like if there was a seven percent return assumed this year, then the Contribution Rate for the Miscellaneous Employees and the Public Safety Employees was .32 and .493 percent. This was a simple interpretation between the two points that CalPers gave. As a result, the City was going to come up as having $6 million less. He clarified that the CalPers rate was assumed as a rate standing forever, not just for this current year. This wiped out the surplus from FY 2014. He tried to project the long-run because if the City lost $6 million this year, the loss was not going to change much in the next year. He wanted to know what that was going be over time and what the present value was. He concluded that the size of the surplus or deficit was very sensitive to the CalPers numbers. Little changes made a big difference. He thought Staff should be thinking about that. He clarified that his calculations only included Pension Benefits, not any other benefits. Page 27 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Council Member Scharff was not able to find the Revenues and Expenses in the Budget Books because he was flipping back and forth from one sheet to another. Mr. Rossmann noted that page three had all Revenues and Expenses together and the difference between the two. Council Member Scharff was interested in the detailed description. The Long Range Financial Forecast was a good process and he was intrigued by the Cost Drivers. He noted the Revenues and inquired if Staff felt confident in them for the next couple years. He then mentioned expenditures and noted that there was a big decline in the contracting out of services; there was a difference from $17 million to $14 million. He questioned which contracted services were cut and relayed that those figures did not make sense. There was no huge jump in salaries and he assumed that the City was not hiring that many people. Mr. Perez recalled many one-time items but wanted to give the details of what was added at a later time. Council Member Scharff stated that overall, he was pleased by the FY 2016 Budget and noted that the salaries were not going up by much more than $1 million. Mr. Rossmann clarified that there was one major change made with the Budget. In the past, Staff Budgeted the positions at Step Five, but realized that on average Staff brought people into the organization on Step Three. This brought vacant positions down to Step Three; Management Professionals were Budgeted at midpoint. He noted that the salary and benefits for the Fire Department went down for FY 2016 because there was going to be employment vacancies. There were a lot of entry-level positions filled and a lot of recruits were hired last year. Council Member Scharff wanted clarification on the reason for the lowered costs. He was surprised that Contract Services were down from FY 2015 to FY 2016 and that supplies and materials were down. Mr. Rossmann confirmed that there were a lot of one-time expenditures for FY 2015, which included a lot of Consulting Services; this was the reason for the reduction. Council Member Scharff reiterated that he was pleased to see the reductions, which was hard to believe. Page 28 of 28 Finance Committee Special Meeting Minutes 4/22/2015 Mr. Perez agreed because every year there was a multitude of Budget Amendments. Future Meetings and Agendas Chair Schmid confirmed the schedule was set for May 2015. ADJOURNMENT: Meeting adjourned at 7:51 P.M. City of Palo Alto (ID # 5897) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Approval of contract for CAO Evaluations Title: Approval of a Three-year Contract With Municipal Resource Group (MRG) for Council Appointed Officers Evaluations for an Amount not to Exceed $123,000 From: City Manager Lead Department: Human Resources Recommendation The Council Appointed Officers (CAO) Committee recommends that Council adopt a three-year contract for annual CAO performance evaluations with Municipal Resource Group (MRG) for $41,000 per year with a not to exceed amount of $123,000 for the term of the contract. Background The City Council has used the services of Sherry Lund Associates for CAO evaluations since 2008. The contract with Sherry Lund Associates ends on June 30, 2015. The CAO Committee requested that staff search for a new provider. The CAO Committee reviewed the response from MRG to the City’s informal solicitation and recommends that Council approve a contract with the firm. Discussion Performance evaluations are a critical tool for assessing employee performance and ensuring that staff is meeting City Council priorities and objectives. Given that a need exists for objectivity and facilitation as well as the time commitment in meeting with nine City Council members, the four CAO’s, and the CAO Committee, the use of an outside consultant will increase efficiency and save the City costs. Staff prepared a scope for consultation services to assist the Council with annual performance evaluations for the four CAOs. The scope was circulated to three firms on March 6, 2015. One firm, Municipal Resource Group, submitted a complete response to the solicitation. Staff contacted the other firms about why they did not respond. The firms reported that they did not have sufficient staff available to provide these services to Palo Alto. AGENDA ITEM # 12 a City of Palo Alto Page 2 On June 4, 2015, the CAO Committee reviewed MRG’s proposal for completing CAO evaluations for Fiscal Year 2016. MRG presented their proposed evaluation methodology and answered questions posed by the Committee. The Committee recommends that Council approve the attached contract with MRG. The scope of work includes the annual evaluation but does not include using the consultant to facilitate the mid-year check-in. If Council desires the consultant to facilitate the mid-year check-in then additional work would need to be be added in an amended contract. Resource Impact Funding for these services is available in the City Council department budget, subject to approve of the Fiscal Year 2016 budget. Attachments: C15159225 Municipal Resource Group Contract (PDF) Professional Services Rev. March 31, 2015 1 CITY OF PALO ALTO CONTRACT NO. C15159225 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND MUNICIPAL RESOURCE GROUP, LLC FOR PROFESSIONAL SERVICES This Agreement is entered into on this 15th day of June, 2015, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and MUNICIPAL RESOURCE GROUP, LLC, a California Limited Liability Company, located at 675 Hartz Avenue, Suite 300, Danville, California, 94526 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to development of a performance evaluation process and to conduct evaluations for four Council appointed officials (“Project”) and desires to engage a consultant to provide services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through June 14, 2018 unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 2 SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Forty One Thousand Dollars ($41,000.00) per year. Total Contract compensation shall not exceed One Hundred Twenty Three Thousand Dollars ($123,000.00). The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C- 1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 3 gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of CITY’s stated construction budget, CONSULTANT shall make recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Mary Egan as the Principal in Charge to have supervisory responsibility for the performance, progress, and execution of the Services and Debra Figone as the project manager to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s project manager is Kathryn Shen, Human Resources Department, 250 Hamilton Avenue, DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 4 Palo Alto, CA 94303, Telephone: (650)329-2124. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 5 SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 6 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 7 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: All printed materials provided by CCONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post- consumer material and printed with vegetable based inks. Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division’s office. Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 8 SECTION 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. 25.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 25.9 All unchecked boxes do not apply to this agreement. 25.10 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 25.11 This Agreement may be signed in multiple counterparts, which shall, when DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 9 executed by all the parties, constitute a single binding agreement IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO APPROVED AS TO FORM: MUNICIPAL RESOURCE GROUP, LLC Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Partner Professional Services Rev. March 31, 2015 10 EXHIBIT “A” SCOPE OF SERVICES Project Introduction: The City of Palo Alto is seeking to engage a consultant working directly for the City Council to facilitate the annual performance evaluations and compensation adjustment process for its four Council appointed officials (CAO’s), City Manager, City Attorney, City Clerk and City Auditor. Project Background: The City Manager, City Clerk, City Attorney and City Auditor are appointed directly by the City Council and, as such, are reviewed by the City Council on an annual basis in accordance with their individual employment agreements. Such review is necessary in order for Council members to ensure the efficiency of the appointed offices, to provide general feedback on their performance, to set goals for the coming year, and to identify areas of improvement. It is also necessary to review compensation to ensure that the positions are paid appropriately in comparison to the market and their performances. Scope of Work: A. Preparation of Questionnaire: Working with the Council CAO Committee (four members of the City Council) and the CAO’s, Consultant will prepare a questionnaire to be used for interviews. The questionnaires will be distributed to Council Members to fill out a week in advance of their scheduled interview/meeting with the Consultant. The questionnaires shall be designed to be a tool to summarize Council Members’ estimation of the CAO’s attainment of specific goals, as well as their performance in general areas such as communication; key relationships between the CAO and the Council, staff, public, CITY committees and commissions and other government agencies; as appropriate; specific work priorities such as budget, public relations, program management and employee relations; as well as general comment on the CAO’s performance of their duties. B. Conduct Interviews, Prepare Report, Facilitate Discussion, Prepare Summary: CONSULTANT will interview each of the (9) Council Members individually, using the interview questionnaire to gather input and evaluation of CAO performance. CONSULTANT will also interview each CAO to gather their estimation of their performance, achievements and ability to meet their established goals and performance objectives. CONSULTANT will consolidate information from all interviews and prepare a written evaluation/report, which will first be reviewed with the Council CAO Committee and then presented to the entire Council in closed session. After presentation of the evaluation/reports, CONSULTANT will facilitate Council discussion of the results of the interviews and input. CONSULTANT will then facilitate discussion of the evaluation report between each CAO and the Council. C. Review Options for Compensation: Prior to conducting the above performance evaluations, the CONSULTANT will research salary survey information and comparisons with salaries in surrounding agencies for each of the CAO positions and review survey results with the CITY’s Human Resource Director. The CONSULTANT will use this DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 11 information to work with the Council CAO Committee on compensation options to be proposed to the Council and CAO’s. After facilitating the performance evaluation meetings with the Council, CONSULTANT will meet with each CAO to de-brief on Council discussion, and to discuss compensation considerations. The Council CAO Committee will make its salary adjustment recommendations to the full Council. The CONSULTANT will be available as a resource at the meeting with the full Council. The CONSULTANT will also be available as a resource for the Council CAO Committee in its negotiations with individual CAO’s. The CONSULTANT will prepare a complete file for each of the evaluations, including compensation recommendations and actions, for the permanent CITY record. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 12 EXHIBIT “B” SCHEDULE OF PERFORMANCE Project Timeline – Estimate of Required Hours: The City Council desires to complete all the evaluations and compensation discussions by September 30 of each year. It is anticipated that the evaluation process will begin by June and be completed by the end of September. Timelines may be extended based upon City Council and CAO availability. Est. Hours Elements 5 Agreement on elements of evaluation and development of interview form 20 Council individual interviews (approx. 1 hour each) 1-2 weeks before meeting, write up report 5 CAO interviews (1-2 hours) 1-2 weeks before meeting; write up report 12 Prep for and conduct Closed sessions (approx. 2 hours per CAO) 4 Consultant draws up specific performance objectives for each CAO for the coming year. 4 Meet with CAO’s to debrief and discuss compensation issues. 10 Research and prepare salary survey information and review with the Human Resources Director. 2 Prep for and Meet with Council CAO Committee on compensation options. 4 Serve as resource for Council discussion/Council CAO Committee salary negotiations 2 Consultant prepares final record of review and compensation DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 13 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Basic Services”) and reimbursable expenses shall not exceed $40,000.00. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s project manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, does not exceed $40,000.00. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 (Year 1) $40,000.00 City Manager, City Clerk, City Auditor & City Attorney Performance Evaluation Task 2 (Year 2) $40,000.00 City Manager, City Clerk, City Auditor & City Attorney Performance Evaluation Task 3 (Year 3) $40,000.00 City Manager, City Clerk, City Auditor & City Attorney Performance Evaluation Sub-total Basic Services $120,000.00 Reimbursable Expenses $3,000.00 Total Basic Services and Reimbursable expenses $123,000.00 DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 14 Maximum Total Compensation $123,000.00 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $500.00 shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s project manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 15 EXHIBIT “C-1” RATE SCHEDULE This engagement will be performed at a rate of $10,000 per evaluation – fixed fee $40,000.00 per year, for the scope of work identified in Exhibit “A” Scope of work, to be performed by Debra Figone with the support of the CONSULTANT’s team. In addition, the project will include reimbursable expenses not to exceed $3,000. Additional tasks identified in process will be discussed as they occur and not initiated without prior written approval from the CITY. Additional work will be performed at a rate of $300 per hour. DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 16 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRE D TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Professional Services Rev. March 31, 2015 17 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303 DocuSign Envelope ID: 68E2D347-2CD5-42FB-A669-0BC6F258ADD6 Certificate of Completion Envelope Number: 68E2D3472CD542FBA6690BC6F258ADD6 Status: Completed Subject: Please DocuSign this document: C15159225 Municipal Resource Group Contract.pdf Source Envelope: Document Pages: 17 Signatures: 1 Envelope Originator: Certificate Pages: 4 Initials: 0 Chris Anastole AutoNav: Enabled EnvelopeId Stamping: Enabled 250 Hamilton Ave Palo Alto , CA 94301 chris.anastole@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 6/10/2015 11:45:55 AM PT Holder: Chris Anastole chris.anastole@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Mary Egan egan@municipalresourcegroup.com Partner Security Level: Email, Account Authentication (None)Using IP Address: 162.248.58.71 Sent: 6/10/2015 12:03:17 PM PT Viewed: 6/10/2015 4:06:02 PM PT Signed: 6/10/2015 4:07:31 PM PT Electronic Record and Signature Disclosure: Accepted: 6/10/2015 4:06:02 PM PT ID: 1d62e434-f9bb-4759-a8a7-13e499f165f4 In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Khashayar Alaee Khashayar.Alaee@CityofPaloAlto.org Security Level: Email, Account Authentication (None) Sent: 6/10/2015 4:07:32 PM PT Electronic Record and Signature Disclosure: Accepted: 4/27/2015 5:27:37 PM PT ID: c57fb61d-2490-446a-818d-480e80276027 Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 6/10/2015 4:07:32 PM PT Certified Delivered Security Checked 6/10/2015 4:07:32 PM PT Signing Complete Security Checked 6/10/2015 4:07:32 PM PT Completed Security Checked 6/10/2015 4:07:32 PM PT Electronic Record and Signature Disclosure CONSUMER DISCLOSURE From time to time, City of Palo Alto (we, us or Company) may be required by law to provide to you certain written notices or disclosures. 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City of Palo Alto (ID # 5877) City Council Staff Report Report Type: Action Items Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Establishment of an Office/R&D Annual Growth Limit Title: Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit Applicable to Downtown, the California Avenue Area, and the El Camino Corridor on an Interim Basis (continued from June 1, 2015) From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council provide direction to staff regarding parameters of an ordinance to limit the amount of new office and research & development (R&D) development that can occur in Downtown, the California Avenue Area, and the El Camino Corridor to 50,000 square feet per year until the Comprehensive Plan Update is adopted or for the next two years, whichever is longer. Direction is needed regarding (1) precise boundaries of the designated areas; (2) applicability of the limit to land uses as they are defined in the City’s zoning ordinance; (3) the process and criteria that shall be used to evaluate applications for compliance with the annual limit; and (4) effect of the limit on applications that are currently in the “pipeline.” Specific alternatives and recommendations in each of these areas are provided in the Discussion section below. Executive Summary The City’s Comprehensive Plan contains an overall cap on the amount of non-residential development that can occur in Downtown and in the City as a whole, but does not currently limit the pace of development. This issue was discussed at public workshops regarding the Comprehensive Plan Update in the summer of 2014, and the City Council took up the idea of limiting the pace of new office/R&D development on February 9, 2015, March 2, 2015, and March 23, 2015. (See CMR5565 ; CMR5621.) On March 23rd, the City Council adopted a series of motions directing staff to (among other things) prepare an interim ordinance to effectuate an annual limit on new office/R&D development in those areas of the City experiencing the most rapid change: Downtown, the City of Palo Alto Page 2 California Avenue Area, and the El Camino Corridor. The Council’s motions are included as Attachment A and also identified measures to be considered for adoption on a permanent basis as part of the City’s Comprehensive Plan Update. Both the interim and permanent measures were seen as a way to address the pace of change as well as parking intrusion into residential areas, traffic congestion within the commercial districts, and the quality or aesthetics of new buildings that are seen as changing the character of key sections of the City. The objective of this evening’s discussion is to flesh out the specific parameters of an interim ordinance so that staff can prepare the ordinance and bring it forward for the Council’s consideration and adoption. Most importantly, staff needs City Council direction on the specific boundaries of the area that would be affected by the interim ordinance, which types of office uses defined in the zoning ordinance would be subject to the limit, whether there would be any exemptions to the limit, what process and criteria would be used to evaluate applications, and the effect of the interim ordinance on applications that are currently in the “pipeline.” (For purposes of this discussion, “pipeline” projects are those for which an application for entitlement is currently pending with the City’s Department of Planning & Community Environment.) An “urgency” ordinance is a short term, emergency measure adopted to address an immediate need while a longer term strategy is being developed (California Government Code Section 65858). Urgency ordinances require specific findings and a super majority (eight out of nine votes) for adoption. They do not require Planning and Transportation Commission (PTC) review and do not require two readings before becoming effective. They can be effective for up to 45 days, and extended for just over 22 months.1 While the City Council has discussed adoption of an urgency ordinance in this instance, staff recommends the Council’s proposed “interim” annual limit be considered for adoption as a traditional zoning ordinance because it would not require eight votes and is not subject to a challenge based on the required findings of an urgency ordinance. A traditional ordinance can be adopted quickly as an “interim” strategy that will sunset when the Comprehensive Plan Update and associated zoning changes are adopted or in two years, whichever is less. The difference between the two procedures will be the time it takes to notice the traditional ordinance for a hearing and obtain a recommendation from the PTC, the time for two readings by the City Council, and 30 additional days for the ordinance to take effect. Background Palo Alto and the region have been experiencing job growth since the end of the great recession, as well as increasing housing costs and traffic congestion, and these trends are expected to continue. 1 Sometimes “urgency” ordinances are referred to as “interim” ordinances because urgency ordinances adopted under State law may only last for up to two years. “Interim” ordinances may also be adopted on a non-emergency basis in which case the statutory emergency findings need not be made and the State time periods do not apply. City of Palo Alto Page 3 Table 1. Recent Job Growth in the Region Source: Stephen Levy, CCSCE, January 2015 While a large percentage of the job growth in Palo Alto has been accommodated in existing buildings, there has been an uptick in non-residential development since the recession, and over a longer period, Palo Alto has experienced a substantial amount of non-residential development in the “monitored” and “non-monitored” areas referred to in Comprehensive Plan Policy L-8.2 For a variety of reasons explained in prior staff reports (See CMR #5565), the data associated with monitoring of Comprehensive Plan Policy L-8 is considered less intuitive and useful than data on development approvals that is submitted by the City to the Valley Transportation Authority (VTA) for use in the Congestion Management Plan (CMP). This CMP data provides a similar, though more refined picture of non-residential development in Palo Alto since it separates office uses from retail and from other non-residential uses. The one disadvantage is the CMP data’s use of the Fiscal Year, rather than the calendar year for reporting purposes. Also, the CMP data is only considered reliable as an estimate of square footage changes for the period from 2001 to the present. Table 2 below and Table 3 in Attachment C, present the CMP data for the years 2001 thru 2014 for geographic areas identified by the City Council’s motion on March 16, 2015 and are based 2 Policy L-8 established a cumulative “cap” of 3.25 million net new square feet of non-residential development in “monitored” areas of the City since 1989. By the end of 2014, the City had seen approximately 1.54 million square feet of development in those areas. A separate Downtown cap addresses non-residential development in Downtown since 1986 and current monitoring suggests that development is within about 75,000 square feet of the total of 350,000 net new square feet allowed. City of Palo Alto Page 4 on the boundaries shown in Attachment B. As explained further in the Discussion section, below, these suggested boundaries differ from the boundaries of the “Commercial Centers” identified in the Comprehensive Plan, and are based instead on zoning district boundaries. Table 2. Non-Residential Development Based on Congestion Management Plan (CMP) Classifications by District from FY2001 to the Present California Ave/Ventura Area Downtown Area ECR Corridor Stanford Research Park Other Totals Retail 57,062 -48,852 -24,153 0 -4,229 -20,172 Office / R & D 234,002 315,586 46,210 320,577 -570,053 346,322 Other -147,354 49,407 -14,193 22,331 845,506 755,697 Totals 143,710 316,141 7,864 342,908 271,224 1,081,847 Notes: CMP data is reported by the City to the Valley Transportation Agency (VTA) each fiscal year and can be sorted by geographic area. The numbers above represent the net change in each land use over the period from FY2001 to March 31, 2015 and is based on planning entitlements granted. These figures do not include the Stanford Medical Center (SUMC) or square footage gained/lost as a result of the Mayfield Development Agreement. “Retail” is broadly defined to include automotive services, commercial recreation, and other uses that do not fall into one of the other CMP categories. Source: Palo Alto Department of Planning & Community Environment, April 2015 The CMP data does not distinguish between general office, medical office, and other types of office uses, although it does distinguish between office and R&D. The City’s zoning ordinance contains relevant definitions of these uses as shown in Table 4. Table 4. Potentially Relevant Office and R&D Uses Defined in the Palo Alto Zoning Ordinance Land Use Code Section Definition City of Palo Alto Page 5 Land Use Code Section Definition Research & Development 18.04.030(123) "Research and development" means a use engaged in the study, testing, engineering, product design, analysis and development of devices, products, processes, or services related to current or new technologies. Research and development may include limited manufacturing, fabricating, processing, assembling or storage of prototypes, devices, compounds, products or materials, or similar related activities, where such activities are incidental to research, development or evaluation. Examples of "research and development" uses include, but are not limited to, computer software and hardware firms, computer peripherals and related products, electronic research firms, biotechnical and biomedical firms, instrument analysis, genomics, robotics and pharmaceutical research laboratories, and related educational development. Research and development may include the storage or use of hazardous materials in excess of the exempt quantities listed in Title 15 of the Municipal Code, or etiological (biological) agents up to and including Risk Group 3 or Bio Safety Level 3 classifications as defined by the National Institute of Health (NIH) or the Center for Disease Control (CDC). Higher classification levels of etiological (biological) agents are not allowed without express permission of the City Manager, Fire Chief, and Police Chief. Related administrative uses such as finance, legal, human resources, management, marketing, sales, accounting, purchasing, or corporate offices; provisions of services to others on or off-site; and related educational uses may also be included provided they remain primarily supportive of the primary uses of "research and development" and are part of the same research and development firm. Administrative Office Services 18.040.030(6) "Administrative office services" means offices and service facilities performing headquarters, regional, or other level management and administrative services for firms and institutions. General Business Office 18.040.030(61) "General business office" means a use principally providing services to individuals, firms, or other entities, including but not limited to real estate, insurance, property management, title companies, investment, personnel, travel, and similar services. Medical Office 18.04.030(95) "Medical office" means a use providing consultation, diagnosis, therapeutic, preventive, or corrective personal treatment services by doctors, dentists, medical and dental laboratories, and similar practitioners of medical and healing arts for humans, licensed for such practice by the state of California. Incidental medical and/or dental research within the office is considered part of the office use, where it supports the on-site patient services. Medical office use does not include the storage or use of hazardous materials in excess of the permit quantities as defined in Title 15 of the Municipal Code. Medical gas storage or use shall be allowed up to 1,008 cubic feet per gas type and flammable liquids storage and use shall be allowed up to 20 gallons total (including waste). Professional Office 18.04.030(116) "Professional office" means a use providing professional or consulting services in the fields of law, architecture and architectural design, engineering, accounting, and similar professions, including associated product testing and prototype development, but excluding product manufacturing or assembly and excluding the storage or use of hazardous materials in excess of permit quantities prescribed in Title 15 of the Municipal Code. City of Palo Alto Page 6 Land Use Code Section Definition Note: Adopting regulations that reference the above definitions would not apply to office uses within home occupations or office uses that are incidental or “accessory” to other permitted uses such as financial service uses, hotels, religious institutions, etc. Government office uses are not separately defined within the zoning ordinance and are also not included here, although they could be explicitly included or excluded from any future regulations. Source: Palo Alto Municipal Code, Title 18. April, 2015 Discussion On March 23, 2015, the City Council indicated their desire to establish an annual limit of 50,000 square feet of net new office/R&D development in Downtown, the California Avenue Area, and the El Camino Corridor combined. The concept of focusing the City’s growth management strategies on certain areas and not others is not new, as demonstrated by Comprehensive Plan Policy L-8, which established an overall citywide cap on non-residential development of “monitored” areas constituting a subset of the areas where non-residential development is permitted. The discussion below outlines some of the issues associated with this endeavor, and presents specific recommendations and alternatives regarding: (1) boundaries of the designated areas; (2) the definition of land uses to which the annual limit would apply; (3) the process and criteria for implementing the annual limit; and (4) the disposition of applications that are currently in the “pipeline.” In some instances alternatives are also presented. Boundaries The specific boundaries of the areas were not specified by the City Council and could be defined in a number of ways. Staff’s recommendation is to use the boundaries shown below in Figure 1 and in Attachment B and reflected in the CMP data summarized above. These boundaries generally encompass zoning districts where office/R&D uses are permitted, rather than following the boundaries of “commercial centers” defined in the Comprehensive Plan. This would mean that the annual limit would apply to more parcels in the California Avenue Area and the El Camino Corridor than if the Comprehensive Plan boundaries were used, and fewer in the Downtown. (While there would be somewhat fewer affected parcels in downtown, those non-affected parcels are not currently zoned for office/R&D, so the exclusion is not expected to substantively change the effectiveness of the proposed annual limit.) Recommendation: Apply the annual limit to zoning districts where office/R&D are permitted, generally within the boundaries shown in Figure 1 and Attachment B. If the Council would like to consider an alternative, they could consider the boundaries shown for California Avenue and the El Camino Corridor, but use the Comprehensive Plan boundaries for Downtown, which would include parcels along the fringe of the Downtown Commercial (CD) zoning district as well as the 27 University area between Alma Street and El Camino Real. City of Palo Alto Page 7 Figure 1: Map of Palo Alto showing areas where office and/or R&D uses are permitted or conditionally permitted and areas where an annual limit of 50,000 sq. ft. per year is proposed. Source: Palo Alto Department of Planning & Community Environment, April 2015 Land Uses & Exemptions The Council’s motion on March 23, 2015 requested that staff return with options for the uses that would be governed by the annual limit. The simplest option would be to include all of those uses listed and defined in Table 4 above, without exception. Recommendation: Apply the annual limit to all of the uses listed and defined in Table 4, above. Another option would be to include all of the above except for medical office, and a third would be to include all of the above, except when the office space is provided in the context of a mixed-use project where the number of dwelling units is such that the project would improve, rather than degrade, the ratio of jobs to employed residents in Palo Alto. (This would be an incentive for multifamily housing.) City of Palo Alto Page 8 Some may suggest a fourth alternative, which would exempt offices for non-profit organizations, however staff would caution against using zoning to distinguish between types of business entities rather than land uses. This is not just because monitoring and enforcement could become an issue, but also because once a building is constructed it is difficult to ensure a particular user would remain. Staff would also caution against an alternative that would apply to General Business Office, and not to Administrative Office and/or Professional Office, since it would be difficult to enforce the distinctions between these. Another issue that should be raised is the way gross floor area of office uses are calculated pursuant to Section 18.104.030(a)(65). This section of the code often requires interpretation, with the result that there can sometimes be debate as to whether a proposed project would add square footage or simply replace what already exists on the site. This lack of clarity argues for clarifying code amendments, but could also suggest that exempting small projects (e.g. those adding less than 1,000 or 2,000 gross square feet) may be warranted, at least on an interim basis. Recommendation: Consider exempting projects proposing to add less than 1,000 or 2,000 square feet of office/R&D until the definition of gross floor area can be reexamined. Process One of the biggest challenges involved with implementation of an annual limit is establishment of the process by which new applications will be reviewed and considered for an allocation. As indicated in prior staff reports, Walnut Creek has an annual limit but allocates the available square footage on a first come first served basis, rather than via a competitive process. San Francisco has used a competitive process to allocate available square footage in the past, but their annual allocations roll forward indefinitely if they are not used. As a result, the recession created a surplus of available square footage that is being used up on a first come first served basis and new procedures for some kind of prioritization or competitive process will probably not be developed until 2016. In other jurisdictions, like Mountain View, there are limited allocations for specific planning areas, and these can be “offered” much like a request for proposals, until they are used up. The State’s Permit Streamlining Act (PSA) adds another layer of complexity and is meant to ensure prompt processing of discretionary permits. There are two relevant points in the application process to consider: the date on which an application is deemed complete; and the date on which review pursuant to the California Environmental Quality Act (CEQA) is complete. Under the PSA, CEQA is expected to commence once the application is deemed complete. CEQA contemplates that negative declarations will be completed within six months and EIRs within one year. Under the PSA, the formal project approvals must be acted on once the CEQA is completed. The PSA requires a local agency to act on projects within 60 days of completion of a negative declaration or exemption and within 180 days of certification of an Environmental Impact Report. The City has also adopted the PSA time limits in Section 18.77.040. City of Palo Alto Page 9 One way to administer an annual limit would be to accept and process applications in the same way they are currently processed, except that no applications could be approved until late in the fiscal year (say March or April). If at that point, the sum total of the applications “ready” for action did not exceed the annual limit, all of the applications could be acted upon in the normal way. However, if at that point, the sum total of the applications “ready” for action exceeded the annual limit, the applications would be ranked based on scoring criteria, and provided to the City Council for a decision regarding which should be approved and which should be denied or deferred to the next year. Recommendation: Establish a procedure by which applications are accepted and processed as they are currently, except no applications would be approved until after March 31. At that point, if the square footage proposed by all applications combined would exceed the annual limit, completed applications that have been recommended for approval by an advisory body like the Architectural Review Board would be ranked based on scoring criteria and provided to the City Council for evaluation and action. If the square footage proposed by all applications combined would not exceed the annual limit, the completed applications that have been recommended for approval would be acted upon using the usual process. One drawback to this procedure would be the time and cost to applicants who wish to add even a small amount of new office space. It may be that some potential applicants would simply not make the investment, so that the City would see a very few, large applications within the designated areas, rather than many smaller ones. To comply with the PSA, applicants would either have to waive permit streamlining requirements or would have to incur the cost of environmental review without the assurance that their project would be selected to move forward. Another way to administer an annual limit would be to devise a process wherein applicants would be required to specifically apply for an office/R&D allocation. This application could be processed when CEQA review is complete and proceed concurrently with other necessary entitlements (e.g. design review, site and design). With this process, allocations could only be granted late in the fiscal year, when it was clear whether the annual limit was going to be exceeded. If the annual limit was not going to be exceeded, the allocation could be granted as part of the usual entitlement process. But if the annual limit was going to be exceeded, the City Council could consider the application for allocation concurrent with the other entitlement applications. The disadvantage of this alternative would be that the Council would not have the benefit of recommendations from the ARB and other recommending bodies. Another option would be to allow small applications or applications received early in the fiscal year to be considered for approval on a first come first served basis (based on the date of application completeness), and only institute a competition if/when the cumulative total reached 25,000 or 30,000 square feet. The disadvantage of this approach, is that the City of Palo Alto Page 10 evaluation criteria and competitive process would only apply to larger projects submitted later in the fiscal year. Criteria The City Council’s March 23, 2015 motion included proposed criteria for evaluating projects in a competitive process, and the interim ordinance could reiterate these criteria. Recommendation: Evaluate applications subject to the annual limit using the following criteria: (1) their intensity of use; (2) their ability to avoid or address potential impacts on traffic and parking; (3) the quality of their design, including their attention to human scale where the building(s) meet the street, their compatibility with surroundings, and their overall architectural quality; (4) their environmental quality; and (5) the monetary and/or non-monetary value of public benefits offered. As an alternative, or addition to these criteria, the City Council could indicate their intent to give priority to mixed use projects providing sufficient housing such that job increases would not worsen the City’s jobs/housing balance. “Pipeline” Projects The Department of Planning and Community Environment currently (as of March 31, 2015) has 13 pending applications for discretionary projects that would result in a net increase in office or R&D square footage, not counting applications for preliminary architectural review, since such applications do not result in a planning entitlement.3 The pending applications are listed in Attachment D and segregated into those within the recommended boundaries (10) and those outside those boundaries (three). As shown below, the sum total of pipeline projects within the recommended boundaries currently pending exceeds the proposed annual limit of 50,000 gross square feet by approximately 100,000 square feet. Individual projects include those that have been in process for over one year (for example, the mixed-use project at 441 Page Mill Road), and applications that have been filed quite recently (for example, the 901 High Street application filed in February 2015). The pending projects are also at different stages of “readiness,” based on their categorization as complete or incomplete, their status in terms of CEQA review, and their having been recommended (or not) for a final action. Also, before the end of the fiscal year, some of these applications could be approved (adding them to the FY2015 column in Table 4), and/or new 3 Note that there may be projects for which entitlements have been granted, but for which building permits have not been issued, and/or construction has not yet commenced. These projects have not legally “vested” but are so far along in the process that they have not been included in the definition of “pipeline” projects used here. Also, there may be a possibility that some property owners can add new office space without a discretionary application by obtaining a Use & Occupancy permit to convert an existing building from one permitted use to another. With the City Council’s adoption of an interim retail preservation ordinance, this possibility would be extremely limited. City of Palo Alto Page 11 applications could be received, particularly if projects that are currently the subject of preliminary architectural review applications materialize into applications for formal review. Generally property owners who file applications for planning entitlements with the City invest substantial time and money in preparing those applications and the materials that accompany them, which include architectural plans and technical studies. Applications are prepared based on the zoning rules in effect at the time and applicants invest time and money in revising/re- submitting materials to achieve application “completeness” and pay for environmental review consultants if/as needed. The Council may conclude that these investments -- as well as the time already involved in processing some of the pipeline projects -- weigh in favor of applying the new annual limit process to new applications or at least to applications that are “incomplete” at the start of the new program. Recommendation: Test the annual limit in Fiscal Year 2016 by applying the procedure described above to applications for office/R&D development within the designated areas that are on file and “incomplete” as of July 1, 2015 (or the effective date of the ordinance) and to new applications filed after that date. This approach would effectively exempt pending applications at 441 Page Mill Road, 2555 Park Blvd, 425/29 University, and 3877 El Camino Real, as well as any other “pipeline” (or new) project applications which are deemed “complete” by the end of the fiscal year or the effective date of the ordinance. If more than one or two of these applications are approved before the end of FY2015, then FY2015 would exceed the 50,000 square foot annual limit (since approximately 29,000 square feet have been approved already this fiscal year). Similarly, if these applications are ultimately approved in FY2016, they would total about 44,000 square feet, or close to that year’s annual limit. Alternatively, the City Council could apply the procedure described above to all pending applications on file as of July 1, 2015 (or the effective date of the ordinance) regardless of their status. This would be disadvantageous for those “pipeline” applications that are ready for consideration but don’t manage to secure an entitlement (whether because of scheduling, an appeal, or other issues) between now and July 1, 2015 or the effective date of the ordinance. In a sense, these applications that are “ready” would be forced to compete with new applications that are received and processed such that they reach a comparable state of readiness any time before March 31, 2016. Staff would welcome City Council input and suggestions regarding other approaches to the pipeline projects and their relationship to the initiation of the proposed interim annual limit. Timeline Establishment of an annual limit on development of net new office/R&D square footage, even on an interim basis, is a complex endeavor potentially affecting the value of property inside and outside the designated district. It also has the potential to substantially affect property owners City of Palo Alto Page 12 who have already invested in pending applications. For these reasons, staff anticipates significant interest and input from property owners and applicants, as well as interest groups and stakeholders on all sides of the issue. If the City Council wishes to proceed with development and consideration of an ordinance establishing procedures consistent with the recommendations or alternatives provided here, staff would prepare and review a draft ordinance with the Planning and Transportation Commission (PTC) during the City Council’s June/July summer break, and bring the ordinance to the Council with a recommendation from the PTC in August. (This could effectively mean beginning the FY16 trial as of an effective date in September 2015 rather than July 1, 2015.) Consistent with the Council’s direction on March 16, 2015, the proposed ordinance would make the annual limit effective for two years (FY16 and FY17), at which time it would cease, unless it were affirmatively continued or modified/replaced. (By separate action, the City Council could also choose to make adjustments, cease, or extend the program at any time before the end of two years.) Policy Implications The proposed program would seek to moderate the pace of development without changing the zoning regulations that affect land uses and densities. The annual limit program would be tested on a short term basis, and during that period would complement – and not replace – growth management strategies in the current Comprehensive Plan, which consist of a cumulative cap on non-residential Downtown and Citywide. In this way, the proposal would implement Comprehensive Plan Policy B-1 ”Use a variety of planning and regulatory tools, including growth limits, to ensure that business change is compatible with the needs of Palo Alto neighborhoods.” If the annual limit approach is adopted on a permanent basis after the two year trial, it would likely involve amendments to the policies and programs about growth management in the Comprehensive Plan, for example Program L-8 about the Downtown cap. Environmental Review Adoption of an ordinance implementing a short term (two year) limit on the amount of office space that can be entitled in a subsection of the City will have the effect of perpetuating the status quo if it discourages new applications for development or slows down the processing of pending applications. Also, while a longer-term annual limit might have the effect of directing office development to other areas of the City or stimulating alternative development (such as housing), these market shifts are unlikely to occur within the two year time frame. For these reasons, it can be seen with certainty that the proposed temporary annual limit would not have the potential to cause a significant effect on the environment and no review pursuant to the California Environmental Quality Act (CEQA) is required pursuant to CEQA Guidelines Section 15061(b)(3) and require review. City of Palo Alto Page 13 The program-level Environmental Impact Report (EIR) regarding the City’s Comprehensive Plan Update will evaluate the potential long-term impacts of the proposed annual limit on office/R&D development and will be used to inform a decision to extend the short term (interim) program at the end of two years if desired. Attachments: A: Excerpt Minutes of March 23 City Council Meeting (PDF) B: Map of Potential Office/R&D Cap Boundaries and 1989 Citywide Commercial Growth Monitoring Areas (PDF) C: Annual Non-Residential Growth in Subject Areas between FY 2001 and the Present Based on CMP Classifications (DOCX) D: “Pipeline” Projects (DOCX) CITY OF PALO ALTO CITY COUNCIL ACTION MINUTES Page 1 of 7 Special Meeting March 23, 2015 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:09 P.M. Present: Berman, Burt, DuBois arrived at 6:20 P.M., Filseth, Holman, Kniss, Scharff arrived at 6:46 P.M., Schmid, Wolbach Absent: Attachment A Action Items 9.Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit (Continued from March 2, 2015). MOTION: Council Member Burt moved, seconded by Council Member Scharff to direct Staff to return with discussion of elements of an interim Ordinance along the following lines, and that Staff will have discretion to provide certain alternatives under the following guidelines and other aspects that Staff recommends for consideration: 1)Cap would run until the adoption of the new Comprehensive Plan; and 2)Areas would cover University Avenue, California Avenue and El Camino Real districts; and 3)Limit of ~50,000 sq. ft. of new office/commercial development net gain per year; and 4)That it have a set of scoring standards to attempt to drive quality, including: A. Traffic impacts; and B. Parking impacts; and C. Design: Human scale of urban design, compatibility with surroundings, architectural quality; and D. Environmental quality of building; and E. Other potential public benefits. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to return with options of what uses to include in the Cap. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add “Potential intensity of use,” under Number 4. ACTION MINUTES AMENDMENT: Council Member Wolbach moved, seconded by Council Member Scharff, that the Cap would run until the adoption of the new Comprehensive Plan or two years, whichever is sooner. AMENDMENT PASSED: 5-4 Burt, DuBois, Filseth, Holman no INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to return with alternatives with types of development that might be excluded from the interim Ordinance. AMENDMENT: Mayor Holman moved, seconded by Council Member XX to exclude the Stanford Research Park only with a clear and definitive means of addressing: 1.Single occupancy vehicle trips; and 2.Looking at minimizing the conversion of R&D to Office. AMENDMENT FAILED DUE TO THE LACK OF A SECOND INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to include discussion of any additional zoning change measures. MOTION AS AMENDED PASSED: 9-0 MOTION: Council Member Berman moved, seconded by Council Member Scharff to direct Staff to include an alternative of no new net car trip increase in the Comprehensive Plan update. MOTION PASSED: 8-1 DuBois no MOTION: Vice Mayor Schmid moved, seconded by Council Member XX to direct Staff as part of the Comprehensive Plan update to investigate a 35,000 sq. ft. office development limit within the Congestion Management Plan. MOTION FAILED DUE TO THE LACK OF A SECOND MOTION: Council Member DuBois moved, seconded by Council Member Wolbach to direct Staff to further define and evaluate as part of the ACTION MINUTES Comprehensive Plan update ways to encourage mixed-use that are not predominately office space. MOTION PASSED: 9-0 MOTION: Council Member Wolbach moved, seconded by Vice Mayor Schmid to direct Staff to include consideration of an employee fee or tax in the context of the Comprehensive Plan discussion in regards to office and job growth. MOTION WITHDRAWN BY THE MAKER MOTION: Council Member Burt moved, seconded by Mayor Holman to direct Staff to consider under the Comprehensive Plan discussion of Stanford Research Park including comprehensive Traffic Demand Management, and a limitation of conversion of R&D to office in the Research Park. Council Member DuBois advised he would not participate in this Motion due to his wife working at Stanford. MOTION PASSED: 8-0 DuBois not participating Adjournment: The meeting was adjourned at 12:36 A.M. El Camino Real El Camino Real Alma Street Alma Street Alma St University Avenue University Ave S. 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Oregon Expressway Sheridan Avenue Page Mill Road Page Mill Road Foothill Expressway Miranda Avenue Foothill Expressway Cerrito Way Emerson Street Miranda Avenue Lane 20 WLane 20 E Oregon ExpresswayUniversity Avenue Jacob's Ct CalTrain ROW CalTrain ROW CalTrain ROW CalTrain ROW Emerson Street Waverley Street Kipling Street Clark Way Durand Way Sand Hill Road Swain Way Clark Way Mosher Way Charles Marx Way Orchard Lane Vineyard Lane Oak Road Sand Hill Road Sand Hill Road Sand HillRoad Lane 66 Bryant StreetRamona Street Blake Wilbur Drive West Charleston Road Bayshore Freeway Bayshore Freeway Bayshore Freeway West Bayshore Road East Bayshore Road East Bayshore Road East Bayshore Road West Bayshore Road East Bayshore Road Bayshore Freeway Bayshore Freeway Fabian Way Bayshore Freeway Bayshore Freeway Palo Road Shopping Center Way Shopping Center Way Shopping Center Way London Plane Way Plum Lane Sweet Olive Way Pear Lane Lane 66 La Selva Drive Grove Ct Stanford Avenue Lane 12 WLane 5 E Lasuen Street Serra Mall Escondido Road Olmsted Road Phillips Road Pistache Place Santa Ynez Street Lane B Lane C El Dorado Avenue Oak Creek Drive Clara Drive Bellview Dr Everett Avenue Homer Avenue La Calle SAN ANTONIO AVENUE Matadero Ave Colorado Pl Los Robles Avenue Timlott Ct Vista Villa PaloAltoAvenue Lane La Donna Avenue Cass Way Kenneth Drive Fabian Way Page Mill Road Middlefield RoadChristine Drive Louis Road Charleston Road Bayshore Freeway Bayshore Freeway Chimalus Drive Hanover Street Community Lane Greenwood Avenue Harker Avenue Parkinson Avenue Avenue Maplewood Pl Mackay Drive Santa Teresa Lane Byron Street Varian Way Quail DrQuail Dr Paloma Dr Paloma Dr Trinity Ln Heron Wy Feather Ln Stanislaus LnTuolumne Ln Plover Ln Sandpiper Ln Curlew Ln Mallard LnEgret Ln Klamath Ln Deodar StAlder LnSpruce Ln Rickey's Ln Juniper Way Rickey's Wy Rickey's Wy Rickey's Wy Juniper Lane Emerson Street Boronda Lane Tahoe Lane Lake Avenue Donner Lane Almanor Lane Fallen Leaf Street Berryessa Street Cashel StNoble St Hettinger Ln Pratt Ln Emma Court Galvez Mall Federation Way Abrams Court Allardice Way Alta Road Alvarado CtAlvarado Row Angell Court Arguello Way Arguello Way Avery Mall Ayrshire Farm Lane Barnes CourtBonair Siding Bowdoin Street Cabrillo Avenue Cabrillo Avenue Campus Drive Campus Drive Campus Drive Campus Drive Campus DriveCampus Drive Campus Drive Campus Drive Campus Drive Campus Drive Campus Drive Campus DriveCampus Drive Campus Drive Capistrano Way Casanueva Place Cathcart Way Cedro Way Cedro Way Churchill Mall Comstock Circle Aboretum Road Aboretum Road Blackwelder Court Campus Drive Cathcart Way Constanzo Street Cooksey Lane Coronado Avenue Cottrell Way Cottrell Way Cowell Ln Crothers Way Dolores Street Dolores Street Dudley Lane Duena Street Electioneer Road Escondido Mall Escondido Mall Escondido Road Escondido Road Escondido Road Esplanada Way Estudillo Road Fremont Road Frenchmans Road Frenchmans Road Galvez Mall Alvarado Row Galvez Street Galvez Street Galvez Street Gerona Road Gerona Road El Escarpado Gerona Road Hoskins Court Hulme Court JenkinsCourt Junipero Serra Boulevard Junipero Serra Boulevard Junipero Serra Boulevard Junipero Serra Boulevard Knight Way Lagunita Drive Lane L Lane W Lasuen Mall Lasuen Mall Lasuen Mall Lasuen Street Lathrop Drive Lathrop Drive Lathrop Place Lathrop Drive Links RoadLinks Road Lomita Drive Lomita Drive Lomita Drive Lomita Drive Lomita DriveLomitaCourt Lomita Mall Los Arboles Avenue Masters Mall Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue Mayfield Avenue McFarland Court Mears Court Mears Court Memorial Way Mirada Avenue Mirada Avenue Museum Way N Service Road N Tolman Ln Nelson Mall Nelson Road North-South Axis Oberlin St Comstock Circle Escondido Mall Olmsted Road Olmsted Road Olmsted Road Olmsted Road Olmsted Road Palm Drive Palm Drive Pampas Lane Panama Mall Panama Mall Panama Street Panama Street Pearce Mitchell Pl Peter Coutts Circle Peter Coutts Road Peter Coutts Road Pine Hill Court Pine Hill Road Quarry Extension Quarry Road Quillen Ct Raimundo Way Ra i mundo Way Raimundo Way Roble Drive Rosse Lane Roth Way Roth Way Roth Way Running Farm Lane Ryan Court S Service Road S Tolman Ln Salvatierra Street Salvatierra St Salvatierra Walk Samuel Morris Wy San Francisco Terrace San Francisco CourtSan Juan St San Juan St San Rafael Pl Santa Fe Avenue Santa Maria Avenue Santa Teresa Street Santa Teresa Street Santa Ynez Street Searsville Road Sequoia Wy Serra Mall Serra Street Serra Street Serra Street Sonoma Terrace Stanford Avenue Stanford Avenue Stock Farm Road Thoburn Court Tolman DriveValdez Place Valparaiso Street Vernier Place Via Ortega Via PalouVia Pueblo Mall Welch Road Wellesley St Wilbur Way Wing Place Yale St Alma Street Alma Street Alma Street Alma Street Alma Street Hawthorne Avenue Lytton Avenue Pep Ring Road Pep Ring Road Alpine Access Road Nathan Abbott Way Sam McDonald Road Sam McDonald Mall Vista Lane Bowdoin Lane Arguello WayGovernors Avenue Governors Avenue Governors Avenue S Governors Lane Pasteur Drive Lagunita Drive Alma Village Lane Alma Village Circle R e s er v o ir Ro a d Reservoir Road Reservoir Road Ranch Road Ryan Lane O'Connor Lane Gene CtBrassinga Ct Cole Ct Birch Street Arboretum Road Welch Road Pasteur Drive Pasteur Drive Karen HolmanCity Council Patrick BurtCity Council Greg SchmidCity Council Gregory ScharffCity Council Gregory ScharffCity Council Marc BermanCity Council Liz KnissCity Council Tom DuboisCity Council Eric FilsethCity Council Cory WolbachCity Council Liz KnissCity Council This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc 1989 9 Study Areas Commercial Growth Monitoring Possible Annual Office and R&D Cap Areas City Jurisdictional Limits 0'2200' Po t e n t i a l O f f i c e / R & D C a p B o u n d a r i e s an d 19 8 9 C i t y w i d e C o m m e r c i a l G r o w t h M o n i t o r i n g A r e a s CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2015 City of Palo Alto rrivera, 2015-04-13 17:25:16OfficeCAP 1989StudyAreas 0415 (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) Attachment B Table 3. Annual Non-Residential Growth in Subject Areas between FY 2001 and the Present Based on CMP Classifications* California Avenue Area FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015* Total Retail 1,377 -953 0 0 0 49,680 -2,000 0 -85 0 0 1,270 728 7,045 0 57,062 Office / R&D 5,828 4,490 0 0 26,320 1,860 60,703 0 1,754 0 0 58,473 0 45,406 29,168 234,002 Other 0 -4,740 0 0 -26,320 -12,600 -52,709 1,724 0 0 0 -52,709 0 0 0 -147,354 Total 7,205 -1,203 0 0 0 38,940 5,994 1,724 1,669 0 0 7,034 728 52,451 29,168 143,710 Downtown Area FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015* Total Retail 3,063 -5,040 -5,260 1,883 0 -16,006 -212 -6,636 13,421 -18,835 -11,009 1,507 0 -5,728 0 -48,852 Office / R&D 9,601 42,210 0 0 10,201 76,268 410 10,535 0 17,510 28,148 48,356 26,739 45,608 0 315,586 Other -1,800 8,155 0 23,868 -13,096 -5,000 27,185 0 0 0 -12,862 22,957 0 0 49,407 Total 10,864 45,325 -5,260 25,751 -2,895 55,262 27,383 3,899 13,421 -1,325 4,277 49,863 49,696 39,880 0 316,141 El Camino Real Corridor FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015* Total Retail 5,847 511 0 812 0 3,833 0 0 0 -34,406 4,342 -6,292 0 1,200 0 -24,153 Office / R&D 2,080 1,191 0 0 0 6,185 0 0 0 33,979 0 0 2,775 0 0 46,210 Other 1,370 0 0 0 0 -223,000 15,000 10,476 -19,454 95,730 0 105,685 0 0 0 -14,193 Total 9,297 1,702 0 812 0 -212,982 15,000 10,476 -19,454 95,303 4,342 99,393 2,775 1,200 0 7,864 Notes: 1. Shaded rows indicate those years where new office/R&D development in the three areas combined exceeded 50,000 square feet. 2. Non‐residential change in square feet excludes Stanford University Medical Center (SUMC) expansion; although it has planning entitlements/approvals, total build out and full occupancy is expected in the future. The SUMC expansion is expected to add 1.3 million net square feet. 3. Non‐residential net change in square feet based on Planning Entitlements from FY 2001 to the present day. Data excludes Mayfield Development Agreement Projects which demolishes approximately 323k of non‐residential square feet and replaces 300k of demolished square feet into Stanford Research Park. 4. Due to VTA's Congestion Management Program's (CMP) Land Use Classification System, "Retail" may include other uses such as Personal Service, Commercial Recreation, Automotive Services and other commercial uses that is not Office, Hotel/Motel, Manufacturing, R&D, and Industrial uses. * FY 2015 data are based on planning entitlements granted from 07/01/2014 - 03/31/15. Source: Palo Alto Department of Planning & Community Environment, April 2015 Attachment C Source: Palo Alto Department of Planning & Community Environment, April 2015 “Pipeline” Projects (Pending Planning Entitlement Applications Proposing a Net Increase in Office/R&D square footage as of March 31, 2015) Address Date of Application Application Status Net Sq Ft Cal Ave Net Sq Ft Downtown Net Sq Ft El Camino Net Sq Ft Other Areas 441 Page Mill 7/29/13 Application Complete, Council Requested Additional Analysis 16,006 2555 Park Blvd 9/17/13 Application Complete, EIR Under Review: Council Consideration Expected June 1, 2015 13,666 2747 Park Blvd 10/6/14 Application Incomplete 28,200 3045 Park Blvd1 10/6/14 Application Incomplete 29,120 2755 El Camino Real 11/4/14 On Hold – Planned Community Zoning Application 29,187 3225 El Camino Real2 1/5/15 Application Incomplete 3,437 425 University Ave 3 6/19/14 Tentatively Approved - Application Appealed 10,660 411-437 Lytton Ave 12/9/14 Application Resubmitted 03/17/15 - Notice of Incomplete Due on 04/16/15 6,096 901 High St 2/9/15 Application Incomplete (Notice 03/11/15) 9,950 3877 El Camino Real4 11/20/14 Application Complete, Conducting Initial Study 4,020 1050 Page Mill Rd5 3/3/14 Application Complete – EIR Preparation Underway 0 1450 Page Mill Rd6 1/12/15 Application Complete - Revised Plans Submitted 14,861 3170 Porter Dr6 3/23/15 New Application - Notice of Incomplete Due on 04/22/15 29,046 Totals by Area 119,616 26,706 4,020 43,907 Notes: 1. Project proposes 29,120 sq ft of office and demolishes the existing 17,956 sq ft of mostly automotive uses (some office use supporting the automotive uses is included in the existing 17,956 sq ft) 2. Project proposes 10,437 sq. ft. of commercial space, but is required to maintain 7,000 sq. ft. of retail (retain existing retail FAR). There is a potential for approximately 3,437 sq. ft. of office use 3. 10,660 sq ft = 12,860 - 2,200 sq ft; Existing office approximately 2,200 sq ft; proposed office = 12,472 + 388 = 12,860 sq ft; 388 sq ft = 775/2 ground floor utility spaces (stairwells, etc) split w/ retail use. 4. Project proposes 4,020 sq ft net gain of Office which includes shared lobby space with other retail square footage. There is no existing office on this site. 5. Project proposes to replace existing square footage with a like amount based on the current calculation of replacement square footage. 6. Projects are "Designated Sites and Projects" under the Mayfield Development Agreement • The list above only includes projects with a formal Architectural Review Board (ARB) application. It does not include projects in the Preliminary ARB process. • The net Office/R&D square footage are based on the applicant's project proposal and may be revised before the project receives a Planning Entitlement. • The list above only includes projects with a proposed net increase in Office or R&D square footage and is not a comprehensive list of all current pipeline projects. Attachment D Attachment E Public Comment City of Palo Alto | City Clerk's Office | 6/1/2015 1:57 PM Carnahan, David From:David Coale <david@evcl.com> Sent:Monday, June 01, 2015 1:52 PM To:Council, City Subject:Re cap on office space Dear City Council, In light of the last Saturday's Palo Alto 2030 Summit (which I thought was very good), I would like to suggest that a cap on office space is really an attempt at addressing traffic and parking problems and that the amount of office space is not really the problem. I would like to see the council and staff address the real problems that are facing us, traffic, congestion and parking, in a more direct way. Let's try putting a cap on car trips as has worked very well with Stanford. Or how about a more innovative approach such as a cap and trade on car trips in the areas of concern. This way the problems will get better over time and new and existing buildings can be included in the solution, instead of just being capped at the present level. If these approaches lead to essentially a cap on office space, than so be it. If we can find way to keep traffic and parking problems at reasonable levels and even reduce the problems, then we are probably all better off for addressing the true problems in a more direct way. Thanks for your consideration on this issue, David City of Palo Alto (ID # 5864) City Council Staff Report Report Type: Action Items Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: Fiscal Year 2016 Budget Adoption (continued from Jun 08, 2015) Title: PUBLIC HEARING AND PROPOSITION 218 HEARING: Adoption of Budget Amendment Ordinance for Fiscal Year 2016, Including Adoption of Operating and Capital Budgets and Municipal Fee Schedule; Adoption of Five Resolutions, including: 1) Adopting a Dark Fiber Rate Increase of 2.7 Percent and Amending Utility Rate Schedules EDF-1 and EDF-2; 2) Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.7 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2016; 3) Adopting a Wastewater Collection Fee Increase of 9.0 Percent and Amending Utility Rate Schedules S-1, S-2, S-6, and S-7; 4) Adopting Residential Refuse Rate Increases Ranging Between 9.0 Percent and 19.0 Percent, and Amending Utility Rules and Regulations 2, 3, 11, and 24; 5) Amending the Salary Schedule Attached to the 2014-2016 Compensation Plan for Management and Professional Employees, as Amended by Resolution No. 9053 to Add One New Position and Change the Title of Two Positions; Amending the 2013-15 Memorandum of Agreement Service Employees International Union (SEIU), Adopted by Resolution No 9398 to add One Position and Correct the Salary of One Position; and Amending the Terms for the Utility Management Professional Association, as Amended by Resolution Nos. 9492 & 9503 to Correct the Salary for One Position and add Two New Positions; and Refer to the Finance Committee a Discussion of Changes to the Public Art Ordinance to Simplify the Calculation of the Public Art Fee and a Discussion of Usage and Replacement of Pool Vehicles (CONTINUED FROM JUNE 8, 2015) From: City Manager Lead Department: Administrative Services Recommendation City of Palo Alto Page 2 Staff and the Finance Committee recommend that Council approve the following: A. Budget Amendment Ordinance which includes: 1. Exhibit 1: the City Manager’s Fiscal Year 2016 Proposed Operating and Capital Budget, previously distributed at the April 27th Council meeting 2. Exhibit 2: Amendments to the City Manager’s Fiscal Year 2016 Proposed Operating and Capital Budget 3. Exhibit 3: Revised City Table of Organization 4. Exhibit 4: Fiscal Year 2016 Proposed Municipal Fee Changes B. Resolution of the Council of the City of Palo Alto Adopting a Dark Fiber Rate Increase of 2.7 Percent and Amending Utility Rate Schedules EDF-1 and EDF-2 C. Resolution of the Council of the City of Palo Alto Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.7 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2016 D. Resolution of the Council of the City of Palo Alto Adopting a Wastewater Collection Rate Increase of 9.0 Percent and Amending Utility Rate Schedules S-1, S-2, S-6 and S-7 E. Resolution of the City Council of Palo Alto Adopting Residential Refuse Rate Increases Ranging Between 9.0 Percent and 19.0 Percent Amending Utility Rules and Regulations 2, 3, 11, and 24 F. Resolution of the Council of the City of Palo Alto Amending Salary Schedules for the Management, Professional, and Confidential Unit, the Utilities Managers of Palo Alto Professional Association, and the Service Employees International Union 1. Exhibit 1: Amended Salary Schedule for the Management, Professional, and Confidential Unit 2. Exhibit 2: Amended Salary Schedule for the Utilities Managers of Palo Alto Professional Association 3. Exhibit 3: Amended Salary Schedule for the Service Employees International Union G. Refer to the Finance Committee discussion of changes to the Public Art Ordinance to simplify the calculation of the Public Art Fee and a discussion of usage and replacement of pool vehicles. Executive Summary On June 8, 2015, the City Council will conduct the first budget hearing for the adoption of the Fiscal Year 2016 budget. To allow for additional discussion, this item will be continued from June 8, 2015 to June 15, 2015. Please refer to staff report ID #5813 for staff’s report for the Fiscal Year 2016 Budget Adoption and attachments listed in the recommendation language and the supplemental information in this report. Discussion This item continues the discussion and Finance Committee and staff’s recommendation to adopt the proposed operating budget, capital budget, and changes to the municipal fee schedule for Fiscal Year 2016. City of Palo Alto MEMORANDUM TO: City Council DATE: June 11, 2015 SUBJECT: Summary of the June 8 Fiscal Year 2016 City Council Budget Hearing Summary of Council, Finance Committee, and staff changes to the Fiscal Year 2016 Proposed Budget In the June 8, 2015 City Council meeting, as recommended by the Finance Committee and staff, staff presented the revised City Manager's Proposed Operating and Capital Budgets and Municipal Fee Schedule. After an extensive Council discussion and several motions to tentatively approve the Fiscal Year 2016 Proposed Budget as revised and various City Council referrals as detailed in this memorandum, the revised General Fund budget surplus is $390,000 as outlined in the table below. Date Dept Description Expenses Revenues Net S/S S/26 S/26 S/26 S/14 S/26 S/26 S/26 S/26 S/26 S/26 S/26 6/8 6/8 6/8 Proposed Budget -BSR Change Actions Proposed by Finance Committee cou Council meals for extra meetings CSD Additional special event funding SUS Office of Sustainability consultant funding PCE/DS 1.0 FTE Code Enforcement Lead elimination Subtotal -Actions Proposed by Finance Committee Actions Proposed by Staff PWD San Franscisquito Creek JPA POL/FIR Reallocate Police Chief from Fire -Stanford Revenue Impact PWD Urban Forest Study CMO Palo Alto Animal Services Transition Funding NON Additional Infrastructure transfer (alignment w/TOT revenue) NON Revised Property Tax projection Various FY 201S budget surplus to offset Council meals, Stanford revenue revenue impact, Urban Forest Study, & PAAS transition Subtotal -Actions Proposed by Staff Revised Proposed Fiscal Year 2016 Budg_et Sure_tus as Recommended Staff Proposed Items to be Presented on June 8 IT/Safety 1.0 Senior Technologist Elimination for Public Safety, POL PCE/DS FIRE fund with contractual dollars 1.0 Community Service Officer frozen Revised Proposed Fiscal Year 2016 Budget Surplus Proposed Changes During June 8 City Council Budget Hearing 1.0 Code Enforcement Lead Addition Automatic External Defibrilators Funding Tentatively Approved Fiscal Year 2016 Budg_et Surplus 1 $0 $0 $0 $S ($S) so (SO) {190) 190 {120) 120 ($255) $0 $255 $27 $27 $0 (SO) (SO) 122 (122) 2SO {2SO) 32S {32S) S2S S2S 427 427 $724 $929 $205 $469 $929 $460 0 0 ($100) $100 $369 $929 $560 $120 ($120) so (SO) $539 $929 $390 • MOTION PASSED: 8-0 Filseth absent 5. MOTION: Council Member Kniss moved, seconded by Council Member Burt to keep the Code Enforcement-Lead position in the Fiscal Year 2016 budget; and direct the City Manager to propose an alternate position be removed from the Fiscal Year 2016 budget if required to maintain a budget surplus (At this point a $390,000 surplus is remaining). • MOTION AS AMENDED PASSED: 8-0 Filseth absent 6. MOTION: Council Member Scharff moved, seconded by Council Member Kniss to tentatively approve the budget including $50,000 for Automated External Defibrillators (AED) and amendments as discussed: A. Budget Amendment Ordinance which includes: 1. City Manager's Fiscal Year 2016 Proposed Operating and Capital Budget; and 2. Amendments to the City Manager's Fiscal Year 2016 Proposed Operating and Capital Budget; and 3. Revised City Table of Organization; and 4. Fiscal Year 2016 Proposed Municipal Fee Changes; and B. Resolution Adopting a Dark Fiber Rate Increase of 2.7 Percent and Amending Utility Rate Schedules EDF-1 and EDF-2; and C. Resolution Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Drain Rates by 2.7 Percent Per Month Per Equivalent Residential Unit for Fiscal Year 2015; and D. Resolution Adopting a Wastewater Collection Rate Increase of 9.0 Percent and Amending Utility Rate Schedules S-1, S-2, S-6 and S-7; and E. Resolution Adopting a Refuse Rate Increase Ranging Between 9.0 Percent and 19.0 Percent and Amending Utility Rules and Regulations 2, 3, 11, and 24; and F. Resolution Amending Salary Schedules for the Management, Professional, and Confidential Unit, the Utilities Managers of Palo Alto Professional Association, and the Service Employees International Union; and G. Refer to the Finance Committee a discussion of changes to the Public Art Ordinance to simplify the calculation of the Public Art Fee and a discussion of usage and replacement of pool vehicles. • MOTION PASSED: 8-0 Filseth absent 7. MOTION: Council Member DuBois moved, seconded by Council Member Scharff to direct Staff and the Finance Committee to return in six months with an update on the Animal Shelter. • MOTION PASSED: 8-0 Filseth absent 8. MOTION: Council Member Scharff moved, seconded by Council Member Berman to direct Staff to investigate increasing Business Registry participation up to and including increasing late fees. • MOTION PASSED: 8-0 Filseth absent 3 DEPARTMENT HEAD: CITY MANAGER: 4 City of Palo Alto (ID # 5814) City Council Staff Report Report Type: Action Items Meeting Date: 6/8/2015 City of Palo Alto Page 1 Summary Title: Resolution Increasing Water Rates by 8% Title: PUBLIC HEARING: Staff Recommendation that the City Council Adopt a Resolution Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) to Increase Average Water Rates by 8 Percent From: City Manager Lead Department: Utilities Recommendation Staff requests Council adopt a resolution (Attachment B) Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) to increase average water rates by 8%. Executive Summary On April 7, 2015 the Finance Committee unanimously recommended approval of a 12% water rate increase. Subsequently, the California Court of Appeal published a decision providing additional guidance on constitutionally compliant water rate design. Staff asked Raftelis Financial Consultants, Inc. (RFC) to review the City’s water rate methodology and structure to ensure that each continued to equitably recover the City’s costs to provide water service. RFC examined and validated both the City’s methodology and rate structure, and recommended minor adjustments be made to the rates. The attached revised rate schedules incorporate those adjustments. In April, as required by the California Constitution, the City provided the public with notice of the originally proposed water rate increase prior to the June 8 public hearing at which Council will consider the rates. Increasing water rates by the 12% recommended by the Finance Committee, while also adjusting the residential tiers as recommended by the City’s consultant, would result in the Tier 1 residential rate exceeding the amount published in the public notices City of Palo Alto Page 2 sent in April. The Council may adopt rates equal to or lower than those in the published notice, but not higher. As a result, the revised rate schedules include an 8% water rate increase, rather than the 12% increase the Finance Committee recommended in April. Since an 8% rate increase is insufficient to recover costs, staff will return with a proposal for an additional 4% increase to become effective September 1, 2015. This second increase will require a separate, additional 45 day advance notification to customers prior to Council consideration. Background In the FY 2016 Water Utility Financial Plan staff projected the need for a 12% rate increase on July 1, 2015 and 8% rate increases each year through FY 2019. The primary driver for these increases is an increase in wholesale water rates. On April 7, 2015 the Finance Committee unanimously recommended approval of the FY 2016 Financial Plan and rate schedules to implement the 12% rate increase (Staff Report 5591). Staff mailed notices of the rate increase to all water utility customers, as required by Article XIIID of the California Constitution (added by Proposition 218 in 1996). In addition to requiring mailed notices of rate increases, Article XIII of the California Constitution also requires that water rates reflect the cost to serve customers. Since the City commissioned the 2012 water rate cost of service study, several California courts have issued published decisions providing additional guidance on constitutionally compliant water rate design. In light of this new jurisprudence and California’s ongoing drought, staff asked Raftelis Financial Consultants, Inc. (RFC) to review the City’s water rate methodology and structure to ensure that each continued to equitably recover the City’s costs to provide water service. Discussion The City’s current rates are based on the 2012 Palo Alto Water Cost of Service & Rate Study by RFC (Staff Report 2676). In designing the City’s water rate structure and the rate increase proposed for July 2015, the City has adhered to the overriding principle that all rates must be based on the cost to serve customers. After additional review, RFC concluded that the City’s rate setting methodology equitably reflected the cost to serve customers. Costs are allocated according to the cost of maintaining the distribution system capacity to serve each customer’s usage pattern. A certain amount of distribution capacity is required to serve year-round baseload customer consumption. Additional capacity is required to serve summer peak customer consumption, and the remaining capacity is required to provide emergency fire service during peak flow periods. Most of the cost of operating, maintaining, and replacing capacity associated with summer peak flows is allocated to customers whose usage patterns create the need for that capacity. Those customers are primarily residents with summer irrigation use, whose consumption falls into the second residential rate tier (rate schedule W-1, tier 2), as well as non-residential irrigation customers (rate schedule W-7). Customers with consumption in the first residential rate tier City of Palo Alto Page 3 (rate schedule W-1, tier 1) and other non-residential use (rate schedule W-4) do not contribute as much to the summer peak, and are therefore allocated less of the cost of operating and maintaining that additional capacity, though they are still allocated some of those costs. RFC examined and validated both the City’s methodology and rate structure, and recommended three adjustments be made to ensure continued equitable collection of the City’s costs to serve each customer class: First, RFC recommended updating the peaking factors for each customer group to reflect more recent (FY 2014) data. This resulted in a small shift in peaking costs away from the irrigation customer class. Second, RFC recommended that more peaking costs should be allocated to the Tier 1 residential rate based on its review of the most recent usage records available. When RFC analyzed Tier 1 annual consumption, they found that Tier 1 users contributed a small amount to the summer peak, and therefore the City should allocate a small portion of the peaking capacity to Tier 1. Third, RFC updated the model to more clearly show how peaking costs were allocated among customer classes and residential tiers based on supply, baseload delivery, and peak capacity components. These divisions were present in the original study, but not as clearly shown. RFC’s findings are detailed in a memo (Attachment A). Staff recommends incorporating RFC’s recommended cost of service-based adjustments into the July 1, 2015 rate change. As noted earlier, the City must provide notice to its customers before it adopts any rate changes. This is commonly referred to as a Prop 218 notice. The City may subsequently adopt rates lower those shown in the notice, but not higher. In April, prior to reviewing the cost of service methodology, the City provided notice of a rate increase of up to 12%. The proposed consumption charges included in the Prop 218 notice are shown in Column B of Table 1, below. To incorporate the recommended adjustment to the rate structure while still achieving a 12% increase in revenue, the City must increase the Tier 1 residential rate slightly and decrease the Tier 2 rate from the rates shown in the Prop 218 notice. This results in the Tier 1 residential rate exceeding the rate published in the notices, as shown in column C of Table 1. 8% is the maximum the Council may increase rates consistent with the cost of service methodology while keeping all rates within the limits published in the notice. As shown in Column D, an 8% increase (with the adjustments to the rate structure) results in a Tier 1 residential rate exactly equal to the Prop 218 notice, and all other rate schedules lower than the notice. City of Palo Alto Page 4 Table 1: Summary of Existing and Proposed Rates Rate Class Water Rates (A) (B) (C) (D) Existing Rates 12% Increase in Prop 218 Notice (without new cost of service alignment) 12% Increase with new cost of service alignment Recommended: 8% Increase with new cost of service alignment W-1 Res. (Tier 1) 4.99 5.70 5.93 5.70 W-1 Res. (Tier 2) 7.58 8.38 8.38 8.08 W-4 (Non-residential) 6.15 6.97 6.92 6.66 W-7 (Non-res Irrigation) 7.52 8.46 8.29 7.99 Staff recommends adopting an 8% increase effective July 1, 2015. An 8% increase will not adequately recover the water utility’s costs to provide service, so staff will return with a proposal for an additional 4% increase to become effective September 1, 2015. The City’s water rates are comprised of a commodity charge, based on a user’s consumption, and a monthly service charge. Tables 2 through 4 show the proposed rates and the percentage change in each rate component. While an 8% overall increase is proposed, individual rate components will change by different amounts. Most rate components are increasing by 8% to 9%, but because some additional peaking costs are being allocated to the first residential tier, the percentage increase for the first tier is higher than the increase for the second tier. Table 2: Water Commodity Charges (Current and Proposed) Current Rates (7/1/13) Proposed Rates (7/1/15) Change $/CCF % W-1 (Residential) Volumetric Rates ($/CCF) Tier 1 Rates 4.99 5.70 $0.71 14% Tier 2 Rates 7.58 8.08 $0.50 7% W-2 (Construction) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.66 $0.51 8% W-4 (Commercial) Volumetric Rates ($/CCF) Uniform Rate 6.15 6.66 $0.51 8% W-7 (Irrigation) Volumetric Rates ($/CCF) Uniform Rate 7.52 7.99 $0.47 6% City of Palo Alto Page 5 Table 3: Current and Proposed Monthly Water Service Charge Meter Size Monthly Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 5/8” 14.67 15.54 0.87 6% 3/4” 19.51 20.88 1.37 7% 1” 29.18 31.58 2.40 8% 1 ½” 53.37 58.32 4.95 9% 2” 82.39 90.40 8.01 10% 3” 174.29 192.01 17.72 10% 4” 309.72 341.74 32.02 10% 6” 633.80 700.04 66.24 10% 8” 1,165.86 1,288.28 122.42 11% 10” 1,843.02 2,036.96 193.94 11% 12” 2,423.45 2,678.68 255.23 11% Table 4: Current and Proposed Monthly Fire Service Charges Meter Size Monthly Fire Service Charge ($/month based on meter size) Change Current (7/1/13) Proposed (7/1/15) $/mo % 2” 3.03 3.38 0.35 12% 4” 18.78 20.94 2.16 12% 6” 54.55 60.82 6.27 11% 8” 116.24 129.61 13.37 12% 10” 209.03 233.09 24.06 12% 12” 337.65 376.51 38.86 12% Bill Impact of Proposed Rate Changes Table 5 shows the impact of the proposed July 1, 2015 rate changes on the median residential bill. This comparison assumes that customers do not reduce their consumption. Historically, however, customers have looked for ways to conserve after their bills have increased, so not all customers will experience the same bill increase. The average increase is roughly 8%, but residential customers with low bills will see higher increases due to the allocation of peaking costs to the first tier discussed earlier. City of Palo Alto Page 6 Table 5: Impact of Proposed Water Rate Changes on Residential Bills Usage (CCF/month) Bill under Existing Rates Bill under Proposed Rates Change $/mo. % 4 34.63 38.34 3.71 11% (Winter median) 7 52.19 57.82 5.63 11% (Annual median) 9 67.35 73.98 6.63 10% (Summer median) 14 105.25 114.38 9.13 9% 25 188.63 203.26 14.63 8% Table 6 shows the impact of the proposed July 1, 2015 rate changes on various representative commercial customer bills. As with residents, this comparison assumes that customers do not decrease consumption. Table 6: Impact of Proposed Water Rate Changes on Commercial Bills Usage (CCF/month) Bill under Current Rates Bill under Proposed Rates Change $/mo. % Commercial (W-4) (5/8” meters) (Annual median) 12 88.47 95.46 6.99 8% (Annual average) 64 408.27 441.78 33.51 8% Irrigation (W-7) (1 ½” meters) (Winter median) 9 121 130 9 8% (Summer median) 37 332 354 22 7% (Winter average) 56 474 506 32 7% (Summer average) 199 1,550 1,648 98 6% Timeline If Council adopts the attached rate schedules, they will become effective July 1, 2015. Staff will return to the Utilities Advisory Commission and the Finance Committee for recommendations for an additional 4% increase in June. At the same time, drought rates will be proposed for consideration. If the Finance Committee recommends approval, staff will mail notification of the additional proposed rate increase and potential drought rates to customers as required by Proposition 218. The rate schedules will then go to the City Council for adoption in August, at which time a public hearing will be held. All residents and other interested persons may submit written or oral testimony at the hearing, and may also submit written protests to any or all of the proposed rate increases. Council may adopt the proposed rates unless written protests are filed by a majority of the affected customers. The rate increase would become effective September 1, 2015. Any drought rates, if approved, would be imposed by Council when required. City of Palo Alto Page 7 Resource Impact Normal year sales revenues for the Water Utility are projected to increase by roughly 8% ($3 million) as a result of these rate increases. A second 4% increase (if approved by Council at a later date) would increase normal year sales revenue by another $1.5 million. If this second rate increase is not adopted it will result in a decrease in reserves by $1.5 million, resulting in higher rate increases in future years. As discussed above, staff anticipates taking this 4% increase to the UAC and Finance Committee in June, issuing a Prop 218 notice in July, and taking rates to Council for adoption in August, which will result in an September 1, 2015 effective date. If the June Finance meeting is canceled, it may delay the 4% increase to November 1, 2015 or later, resulting in $400,000-500,000 in lost revenue for the water utility. Actual revenue will be lower in the short term because sales volumes are expected to be lower due to drought restrictions. The entire revenue increase will be offset by an increase in wholesale water supply costs, as discussed in the FY 2016 Water Utility Financial Plan. The Fiscal Year 2016 Proposed revenue budget for the water fund was developed in March and early April and assumed a 12% rate increase. Based on the changes described in this report, staff now recommends an 8% rate increase and plans to bring forth a 4% rate increase in fall. Due to these various factors which impact the Fiscal Year 2016 Water Fund revenue budget, staff expects to bring forth adjustments to the budget for City Council consideration as part of the Fiscal Year 2016 Midyear budget review report. Policy Implications The proposed rate adjustments are intended to ensure the City’s water rates conform to the requirements of the California Constitution. Environmental Review The Council’s adoption of the proposed rate adjustments is categorically exempt from the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8). (adoption of rates to meet operating expenses, purchase supplies, meet reserve needs and obtain capital improvement funds), thus, no environmental review is required. Attachments: Attachment A: May 20, 2015 Memo from Raftelis Financial Consultants titled "Proposed Water Rates" (DOCX) Attachment B: Resolution Amending Rate Schedules W-1, W-2, W-3, W-4, and W-7 (PDF) Attachment C: Rate Schedules W-1, W-2, W-3, W-4, and W-7 (PDF) 201 S. Lake Avenue Suite 301 Pasadena, CA 91101 Phone 626 . 583 . 1894 Fax 626 . 583 . 1411 www.raftelis.com Raftelis Financial Consultants Memorandum TO: Jon Abendschein, Senior Resource Planner FROM: Sudhir Pardiwala/Hannah Phan DATE: May 20, 2015 SUBJECT: Proposed Water Rates The City of Palo Alto (City) engaged Raftelis Financial Consultants, Inc. (RFC) to review the cost of service methodology and water rate structure described in our 2012 rate study1 to ensure its continued compliance with Proposition 218. This memo summarizes the methodology and development of the proposed water rate methodology and tiered rate structure. Proposed Water Rates The following subsections detail the methodology and calculation related to the proposed water rates for fiscal year (FY) 2016. Cost of Service Analysis Adjustments At the City’ request, RFC reviewed the cost of service analysis methodology used in its 2012 rate study, to ensure its continued compliance with Proposition 218’s substantive requirements for water rates. The methodology and rate structure described in the 2012 cost of service study remains fundamentally sound. Upon review, we have refined our analysis and recommend that the following adjustments be made to ensure that the rates proposed continue to equitably recover the City’s costs of providing water service: 1.RFC updated the customer class peaking factors using FY 2014 data. Peaking costs are one of the elements used to differentiate rates amongst different classes of customers. Different customers impose different demands on the system, and the portion of the costs related to peaking are applied proportionally to the peaking factors. As discussed below, peaking factors for the customer classes have shifted since the last study, and the new peaking factors should be reflected in the proposed rates. 2.RFC analyzed the usage characteristics for residential Tiers 1 and 2 usage in order to update the peaking-related costs to be allocated to each tier. The boundary between Tier 1 and Tier 2 use, 6 CCF, represents the median winter monthly usage for residential customers (winter is consider January through March). Analyzing winter usage is a common way to calculate indoor, year- 1 Palo Alto Water Cost of Service and Rate Study Report dated March 2012 ATTACHMENT A City of Palo Alto May 20, 2015 Page 2 round, base load use. Usage above this level typically is related to irrigation. As a result, the 2012 cost of service study did not allocate any peaking factors to Tier 1, because the customers with usage solely in that tier were presumed not to have a usage peak. Upon further study, RFC has determined that Tier 1 customers do have a small peaking factor that occurs as a result of their slightly higher summer use. As a result, RFC recommends refining the 2012 cost of service analysis to allocate a small share of peaking factor costs to Tier 1. This change will more equitably recover system design and operational costs associated with Tier 1 customers’ peak demands upon the system. 3. RFC adjusted the model to more clearly delineate the difference between base (delivery), peaking, and the cost of purchased water from San Francisco Public Utilities Commission (SFPUC). While this does not necessarily affect the cost allocation between customer classes, it does more clearly show the costs being allocated among customer classes and residential tiers. The adjustments were made to the model used to calculate the City’s existing rates, which has been updated to reflect FY 2016 budget requirements. Adjustment 1: Peaking Factors for Customer Classes Table 1 shows the peaking factors by customer class, based on the maximum month factors calculated from each customer class’ water usage in FY 2014, compared to the peaking factors used in the 2012 study. These were calculated using the same methodology as in the 2012 cost of service study. The primary differentiator of rates amongst different customer classes is based on the demand that they put on the system. This demand is expressed in terms of the maximum day and maximum hour factors. These are the demands expressed as a ratio of the maximum demand to the average demand for each customer class. For example, if the maximum demand for a customer class were 10,000 CCF per day, and the average annual demand were 5,000 CCF per day, the peaking ratio would be 2.0. Residential customers generally have higher peaking factors than commercial customers, and irrigation customers have the highest peaking factors. The max day factor for each customer class is based on the maximum month demands. The ratio of the max hour and max day for the whole system is used to estimate the max hour factor for each customer class. Since usage in the Construction – W2 class is intermittent and varies based on the construction activity in the City, customers in the Construction – W2 class are considered to be the same as the Commercial – W4 class for the purpose of calculating variable charges. These two classes are differentiated only in the fact that temporary hydrant meters are used for construction customers, while commercial customers have permanent services. City of Palo Alto May 20, 2015 Page 3 Table 1 Revised Peaking Factors by Customer Class The change to the peaking factors by customer class shifts the capacity or peaking-related costs among the customer classes, to equitably reflect their demands on the system and recover the City’s cost of providing service. The peaking factors for the W-4 customer class has remained the same (when normalized).2 The peaking factor for the W-1 customer class as a whole has also remained the same, though the peaking factors for the residential tiers have been adjusted as discussed below. The W-7 customer class peaking factor has changed. Adjustment 2: Peaking Factors for Residential Rate Tiers In order to equitably allocate the peaking related costs to residential Tiers 1 and 2, RFC analyzed the water usage per month per account for FY 2014. Since the maximum month usage for residential customers occurs in August, the August usage in each tier was compared with the average usage in each tier to determine the relative peaking factor for each tier. Table 2 shows the calculation of the peaking factor for each tier, representing the amount of extra capacity needed on the system to serve customers in that tier. The peaking factor for Tier 1 is 1.06 (i.e., the peak is 1.06 times the average or 6 percent above the average Tier 1 usage.) Similarly, the peak for Tier 2 is 69 percent above the average for Tier 2 usage. The delivery cost, or average cost of providing service, is recovered from the average component, and the peak cost recovered from the peak component. Based on the analysis, Tier 2 requires approximately 12 times (0.69/0.06) more peaking capacity than Tier 1. Conversely, in the 2012 study, no peaking cost was allocated to Tier 1, thus putting 100 percent of the peaking costs on Tier 2. 2 Normalization is done so that W-1 equals 2.0. This normalization is performed to make it easier to see differences between customer class peaking factors and how those peaking factors change over time. Using the normalized peaking factors results in the same cost allocation as would result if the non-normalized peaking factors were used. Customer Specific Peaking Factors 2012 Max Day (MD) 2012 Max Hour (MH) 2014 Max Day (MD) 2014 Max Hour (MH) Residential - W1 1.49 2.34 1.45 2.27 Master MFR/Commercial - W4 1.30 2.04 1.27 1.99 Irrigation - W7 2.25 3.53 1.81 2.84 Construction - W2 1.30 2.04 1.27 1.99 Customer Specific Peaking Factors 2012 MD Normalized 2012 MH Normalized 2014 MD Normalized 2014 MH Normalized Residential - W1 2.00 3.14 2.00 3.14 Master MFR/Commercial - W4 1.75 2.75 1.75 2.75 Irrigation - W7 3.00 4.71 2.50 3.92 Construction - W2 1.75 2.75 1.75 2.75 City of Palo Alto May 20, 2015 Page 4 Table 2 Peaking Factors for Tiers 1 and 2 Adjustment 3: Presentation of Underlying Rate Components These changes discussed above result in the calculated rates shown in Table 3 for FY 2016, assuming a 12 percent revenue increase. Each rate has three components: supply rate, delivery rate, and peaking rate. The supply rate represents the cost of purchased water from the SFPUC, which is applied to all customer classes and tiers equally since the City only has one source of water. Note that the supply rate component includes the fixed meter costs (about 2 percent of total costs) and losses (about 8 percent of purchased water). The delivery rate represents the City’s fixed costs of operating the water system to serve year-round base load consumption, excluding any peaking related costs. This component is also applied to all customer classes and tiers equally. The peaking rate represents the capacity related costs of the system necessary to serve peak load, and it differs per customer class and tier based on the calculated peaking factors for each customer class and tier, as shown in Tables 1 and 2. Table 4 shows the existing rates and how they underlying rate components were previously displayed. Table 3 Proposed FY 2016 Commodity Rate Peaking Factor Analysis for W1 Customers Max Month Usage Bills in Tier Usage per Bill Average Usage Peaking Factor Tier 1 - 0-6 CCF 73,173 13,124 5.58 5.27 1.06 Tier 2 - over 6 CCF 154,329 11,739 13.15 7.78 1.69 Customer Class Tier (ccf)Supply Rate ($/ccf) Delivery Rate ($/ccf) Peaking Rate ($/ccf)Rate ($/ccf) Residential - W1 Tier 1 6 $4.61 $1.10 $0.22 $5.93 Tier 2 over 6 $4.61 $1.10 $2.67 $8.38 Average Rate $3.87 $7.36 Master MFR/Commercial - W4 $4.61 $1.10 $1.21 $6.92 Irrigation - W7 $4.61 $1.10 $2.58 $8.29 Construction - W2 $4.61 $1.10 $1.21 $6.92 City of Palo Alto May 20, 2015 Page 5 Table 4 Existing Commodity Rate Components The proposed rates are shown in Table 5 for both an 8 percent and a 12 percent revenue increase. The monthly meter service charge includes customer service, metering, and billing charges as well as the costs associated with the service connection and a portion of the distribution system capacity. Fire service meter charges include costs associated with maintaining system capacity to serve firefighting flows for private fire meters. Customer Class Tier (ccf)Supply Rate ($/ccf) Delivery Rate ($/ccf) Peaking Rate ($/ccf)Rate ($/ccf) Residential - W1 Tier 1 6 $3.41 $1.58 $0.00 $4.99 Tier 2 over 6 $3.41 $1.58 $2.59 $7.58 Average Rate $6.41 Master MFR/Commercial - W4 $3.41 $1.58 $1.16 $6.15 Irrigation - W7 $3.41 $1.58 $2.53 $7.52 Construction - W2 $3.41 $1.58 $1.16 $6.15 City of Palo Alto May 20, 2015 Page 6 Table 5 Proposed FY 2016 Water Rates General Monthly Meter Service Charge Meter Size Existing Rates Updated COS Rates (8.2%) Updated COS Rates (12.1%) 5/8"$14.67 $15.54 $16.03 3/4"$19.51 $20.88 $21.50 1"$29.18 $31.58 $32.45 1 1/2"$53.37 $58.32 $59.83 2"$82.39 $90.40 $92.67 3"$174.29 $192.01 $196.70 4"$309.72 $341.74 $350.00 6"$633.80 $700.04 $716.82 8"$1,165.86 $1,288.28 $1,319.07 10"$1,843.02 $2,036.96 $2,085.57 12"$2,423.45 $2,678.68 $2,742.56 Monthly Fire Meter Service Charge Meter Size Existing Rates Updated COS Rates (8.2%) Updated COS Rates (12.1%) 2"$3.03 $3.38 $3.43 4"$18.78 $20.94 $21.22 6"$54.55 $60.82 $61.63 8"$116.24 $129.61 $131.34 10"$209.03 $233.09 $236.20 12"$337.65 $376.51 $381.52 Commodity Rate ($/ccf) Existing Rates Updated COS Rates (8.2%) Updated COS Rates (12.1%) Residential - W1 Tier 1 0 - 6 ccf $4.99 $5.70 $5.93 Tier 2 over 6 ccf $7.58 $8.08 $8.38 Master MFR/Commercial - W4 $6.15 $6.66 $6.92 Irrigation - W7 $7.52 $7.99 $8.29 Construction - W2 $6.15 $6.66 $6.92 Attachment B *NOT YET APPROVED * 150220 mf 6053253 1 Resolution No. _____ Resolution of the Council of the City of Palo Alto Adopting a Water Rate Increase and Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) R E C I T A L S A. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. B. Pursuant to Article XIIID Sec. 6 of the California Constitution, on ________, 2015, the City of Palo Alto held a public hearing to consider all protests against the proposed water rate amendments. C. The total number of written protests presented by the close of the public hearing was less than fifty percent (50%) of the total number of customers and property owners subject to the proposed water rate amendments. The Council of the City of Palo Alto RESOLVES, as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2015. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2015. SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-3 (Fire Service Connections) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-3, as amended, shall become effective July 1, 2015. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-4 (Residential Master-Metered and General Non-Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-4, as amended, shall become effective July 1, 2015. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-7, as amended, shall become effective July 1, 2015. *NOT YET APPROVED * 150220 mf 6053253 2 SECTION 6. The Council finds that the revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 7. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. SECTION 8. The Council finds that the adoption of this resolution changing water rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services ATTACHMENT C CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY June 15, 2015 The Honorable City Council Palo Alto, California PUBLIC HEARING: Adoption of an Ordinance of the Council of the City of Palo Alto Extending for 22 Months and 15 Days Urgency Interim Ordinance 5325, Placing a Temporary Moratorium on the Conversion of Ground Floor Retail and “Retail Like” Uses to Other Uses Citywide; Exempt from the California Environmental Quality Act Under Section 15061 and 15308 Recommendation Staff recommends that the City Council conduct a public hearing and adopt the proposed ordinance (Attachment A) extending the urgency interim ordinance placing a moratorium on the conversion of ground floor retail and retail-like uses to other uses citywide (requires eight votes). Background On May 11, 2015 the City Council adopted Urgency Ordinance 5325 placing a moratorium on the conversion of any ground floor Retail use permitted or operating as of March 2, 2015 or thereafter to any other non-Retail use anywhere in the City (Attachment B). The ordinance was intended to address the Council’s desire to prevent existing retail and service uses from converting to office or other uses Citywide. Under the terms of the ordinance, the protections would apply to “retail services” as well as the following “retail-like” uses: Eating and drinking service as defined in Section 18.04 (47) Hotels as defined in Section 18.04 (73) Personal services as defined in Section 18.04.030 (115) Theaters Travel agencies Commercial recreation Commercial nurseries Auto dealerships defined in Section 18.040.030(a)(12.5) Day Care Centers defined in Section 18.040.030(a)(42) Service Stations Automotive Services If a use is included on the list, the existing ground floor space it inhabits could only be reused for another use on the list. Spaces occupied by other retail uses could also be reused for any other use on the list. Page 2 The interim ordinance allows a property owner to appeal to the City Council in the event of financial hardship. When a property is redeveloped, it would also prevent property owners from reducing the square footage of ground floor space devoted to retail (including accessory storage and administrative office uses) unless that reduction was the minimum needed to provide access to any new upper floors and/or lower level parking. The interim ordinance would not affect the ability to change from one of the protected existing uses to another (e.g. from retail to personal service), and would not alter requirements of site- specific Planned Community zoning ordinances or adopted conditions of approval. Discussion State law authorizes interim urgency ordinances prohibiting any uses that may be in conflict with a contemplated general plan, specific plan, or zoning proposal that the Council is or intends to study within a reasonable time. The City’s Municipal Code has a similar provision. State Law Moratorium Requirements State law contains a “safe harbor” process for adopting urgency ordinances. Under this process the Council must adopt the urgency ordinances in phases. The first phase is authorized to last for an initial 45 days and the extension phase may last for up to 22 months and 15 days. Thus the total amount of time that an urgency interim ordinance may apply is two years. This two year period is designed to give the City Council ample time to study the land use issues that generated the need for the moratorium. Before adopting or extending an urgency ordinance, the Council must make two required findings: (1) there is a current and immediate threat to the public health, safety, or welfare and (2) the approval of additional retail conversions would result in that threat to public health, safety, or welfare. An extension of an urgency ordinance beyond the first 45 days must contain a third finding that the urgency ordinance would not have a material effect on the development of projects with a significant component of multifamily housing. The attached ordinance extends the moratorium for an additional 22 months and 15 days to provide maximum flexibility to Council. If the Council is able to adopt permanent zoning regulations before that time, such permanent regulations will supersede. Multi-Family Finding The attached ordinance contains the necessary health and safety findings and carries forward the exception for multi-family projects so that the third finding – that the proposed interim ordinance would not have a material effect on the development of projects with a significant component of multifamily housing – can be made. This exception would allow mixed-use projects in commercial districts to proceed even if the size of an existing retail or retail-like use or space is reduced, provided the City Council approves a request for an exemption. Page 3 Timeline The extension ordinance would go into effect after the initial ordinance expires. Thus the interim regulations would be in effect for a maximum of 2 years. Staff is also preparing an interim backstop ordinance in the event the City’s urgency findings are legally challenged or in the event this ordinance does not receive the required eight votes. It is envisioned that this interim ordinance would apply for a short period of time to prevent continuing loss of retail during the time that a permanent ordinance is being developed. Permanent revisions to the City’s zoning ordinance will take considerably more time, involving City Council input and direction, discussions with residents, property owners, merchants, and other stakeholders. The City Council has prioritized the California Avenue Area, and then Downtown for particular attention. Resource Impact The proposed extension ordinance would effectively freeze in place existing conditions (i.e. ground floor retail and “retail-like” uses) for an additional 22 months and 15 days. While there may still be changes in tenants and ground floor vacancies while spaces are offered for lease, the ordinance would largely perpetuate the status quo and is not expected to noticeably affect tax revenues. Staff time will be needed to prepare an extension of the interim ordinace, if desired, as well as an identical “backstop” ordinance, and will also be needed to develop permanent adjustments to the City’s zoning regulations. These endeavors may reduce staff resources available for other priorities. Policy Implications The City’s Comprehensive Plan identifies the desirability of neighborhood serving retail (Policy L-16) and envisions inviting, pedestrian-scale “centers” with a mix of uses as focal points for neighbohroods (Goal L-4). Policy L-20 suggests that the City “encourage street frontages that contribute to retail vitality…” and Policy B-5 calls on the City to “maintain distinct business districts within Palo Alto as a means of retaining local services and diversifying the City’s economic base.” Environmental Review This ordinance falls under several exemptions found in the California Environmental Quality Act (CEQA). It is exempt under Title 14 California Code of Regulations Section 15061(b)(3) because it is designed to preserve the status quo and therefore does not have the potential to significantly impact the environment. It is also categorically exempt under CEQA Section 15308 as a regulatory action taken by the City pursuant to its police power and in accordance with Government Code Section 65858 to assure maintenance and protection of the environment pending the evaluation and adoption of potential local legislation, regulation, and policies. It is also categorically exempt from review under Section 15301 (Class One - Existing Facilities) CEQA Page 4 Guidelines since it will temporarily perpetuate existing environmental conditions. ATTACHMENTS: A: Ordinance Extending Retail Preservation Urgency Moratorium (PDF) B: Ordinance 5325 Urgency Moratorium on Retail Conversions Citywide (PDF) Department Head: Molly Stump, City Attorney Page 5 NOT YET APPROVED 1 150521 cs 0131344 June 21, 2015 Ordinance No. Ordinance of the Council of the City of Palo Alto Extending Urgency Interim Ordinance 5325 Adopting a Temporary Moratorium on the Conversion of Ground Floor Retail and “Retail Like” Uses to Other Uses Citywide FINDINGS A. The City of Palo Alto has long been considered the birth place of Silicon Valley. With its proximity to Stanford University, its international reputation, its deep ties to technology firms, its highly rated public school system and its ample public parks, open space and community centers, Palo Alto continues to serve as a hub for technology based business. B. Palo Alto is considered one of Silicon Valley's most desirable office markets. According to one study Class A office rates have climbed 49 percent since the start of 2010. The same study reported Class B office space increasing by 114.4 % since 2010. C. In particular, average commercial rental rates have gone up significantly from 2013 to 2015. In 2013 the average monthly rental rate citywide for office was $4.57 per square foot. That rate increased to $5.12 in 2015. While retail rents have also increased during this period, retail rents are considerably lower than office rents. The average monthly rental rate for retail in 2013 was $4.21 and in 2015 was $4.88. D. Price increases have been even more significant in the downtown area. In 2013 the average downtown monthly office rent was $6.37. In 2015 the rate increased to $7.33. E. At the end of 2014, Palo Alto’s downtown vacancy rate was a low 2.83 percent, according to a report prepared by Newmark Cornish & Carey. F. These record high monthly rental rates for office and low vacancy rates have created financial incentives to replace current retail use with office use where such conversions are permitted by the City’s zoning ordinance. These economic pressures are more severe in the downtown and California Avenue commercial areas but exist throughout the City. G. The data submitted by the City to support the Valley Transportation Authority’s Congestion Management Plan (CMP) each fiscal year suggests that there has been a loss of approximately 70,000 square feet of retail-type uses in the period from 2008 to the present. The CMP data is broad in the sense that it includes uses like automotive services in the “retail” category even though they are considered separate uses in the City’s zoning ordinance. However any overstatement of the trend towards less retail is likely to be offset by the data’s reliance on a list of discretionary applications processed by the City, since there have also been recent conversions of retail space to office space that did not require discretionary approvals and are not included in the 70,000 square foot number. Attachment A 2 150526 cs 0131444 May 21, 2015 H. City residents have seen this occurring in the City’s commercial districts as the City’s Architectural Review Board has considered projects like those affecting Spagos restaurant at 265 Lytton, Inhabiture at 240 Hamilton Ave, Palo Alto Bowl at 4301 El Camino Real, and Club Illusions Restaurant at 260 California Avenue. In addition, familiar retail businesses like the Zibibbo restaurant have closed and their spaces have been acquired and occupied by non- retailers. Likewise the old location for Fraiche Yogurt, which moved from Emerson Street to Hamilton Avenue, was immediately re-purposed as office space. I. Based on these trends, on March 2, 2015, the Palo Alto City Council asked staff to consider whether zoning-based protections for ground floor retail uses need to be strengthened where they currently exist and expanded to areas of the City where they do not. J. On April 6, 2015, the City Council discussed these issues in detail and directed staff to prepare an urgency ordinance that would preserve existing ground floor retail and retail-like uses until permanent zoning revisions can be prepared. K. This direction is consistent with the City’s existing Comprehensive Plan, which identifies the desirability of neighborhood serving retail (Policy L-16) and envisions inviting, pedestrian- scale “centers” with a mix of uses as focal points for neighborhoods (Goal L-4). Policy L-20 suggests that the City “encourage street frontages that contribute to retail vitality…” and Policy B-5 calls on the City to “maintain distinct business districts within Palo Alto as a means of retaining local services and diversifying the City’s economic base.” L. Palo Alto is in the process of updating its Comprehensive Plan, and it is expected that the updated Comprehensive Plan will contain additional policies and programs designed to preserve existing retail uses in the City. M. The public’s health, safety and welfare are currently and immediately detrimentally affected as neighborhood-serving retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors). These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions. N. Unless abated, the City’s actions to approve conversion of ground floor spaces from retail to other uses will exacerbate the reduction of retail and changes described above, resulting in the need for the proposed interim ordinance. O. The City Council desires on an interim basis to temporarily suspend conversions of retail and retail like uses to office throughout the City as such conversions may be in conflict with the City’s Comprehensive Plan and zoning proposal that the legislative body, planning commission or the planning department is considering or studying or intends to study within a 3 150526 cs 0131444 May 21, 2015 reasonable time. P. The possible extension of this interim ordinance beyond 45 days would not have a material effect on the development of projects with a significant component of multifamily housing because a specific exemption has been included to address this requirement of State law. Q. This urgency interim ordinance is adopted in accordance with the requirements of Government Code Section 65858 and Palo Alto Municipal Code Section 2.04.270 and is based on the need to protect the public safety, health and welfare as set forth in the above findings. A 4/5 vote is required for adoption. R. The City Council adopted Interim Ordinance No. 5325 on May 11, 2015, by a four-fifths vote after a public hearing pursuant to Government Code Section 65858 and Ordinance 5325 will expire on June 25, 2015. S. The Council desires to extend Interim Ordinance 5325 in accordance with the requirements of Government Code Section 65858 and Palo Alto Municipal Code Section 2.04.270 for an additional period of 22 months and 15 days. This extension is based on the need to protect the public safety, health and welfare as set forth in the above findings and a 4/5 vote is required for passage. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings. The findings listed above are hereby incorporated. SECTION 2. Written Report. Government Code Section 65858(d) states that "ten days prior to the expiration of an interim ordinance or any extension, the legislative body [the City Council] shall issue a written report describing the measures taken to alleviate the conditions which led to the adoption of the ordinance. Pursuant to this provision, the City Council hereby reports that much of the factors which gave rise to Urgency Interim Ordinance No. 5325 still apply, namely increasing commercial rental rates; low office vacancy rates; retail service uses being priced out of market and being replaced by office and other uses; and increased traffic congestion, vehicle miles traveled and greenhouse gas emissions resulting from these changing land use patterns. The City Council has undertaken a number of actions since the adoption of Ordinance Number 5325, including directing staff to bring to the Planning and Transportation Commission a “backstop” ordinance to retain retail and retail like uses as well as directing staff to more closely study retail protection initiatives together with a formula retail ban in the California Avenue commercial district. Staff has also begun detailed reviews of regulatory schemes from other jurisdictions. In order to have adequate time to fashion and propose appropriate regulations, and to ensure that the current and immediate threat to the public safety, health and welfare continues to be forestalled, adoption of this ordinance is necessary. . 4 150526 cs 0131444 May 21, 2015 SECTION 3. Moratorium. The City Council hereby extends Interim Urgency Ordinance No. 5325 establishing a moratorium on the conversion of any ground floor Retail use permitted or operating as of March 2, 2015 or thereafter to any other non-Retail use anywhere in the City. SECTION 4. Severability. If any provision, clause, sentence or paragraph of this ordinance, or the application to any person or circumstances, shall be held invalid, such invalidity shall not affect the other provisions of this Ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this Ordinance are hereby declared to be severable. SECTION 5. Effective Period. This extension ordinance shall take full force and effect immediately upon expiration of Interim Ordinance No.5325. In accordance with Government Code Section 65856, this ordinance shall be in full force and effect for an additional period of 22 months and 15 days following expiration of Interim Ordinance No. 5325. Thus the moratorium shall expire on April 30, 2017, unless this period is extended by the City Council as provided in Government Code Section 65858. SECTION 6. Supersedes Earlier Ordinances. During the time period that this Ordinance is effective, this Ordinance supersedes any provision of the Palo Alto Municipal Code inconsistent with the provisions of this Ordinance. SECTION 7. CEQA. The City Council finds that this ordinance falls under the California Environmental Quality Act (CEQA) exemption found in Title 14 California Code of Regulations Section 15061(b)(3) because it is designed to preserve the status quo and therefore does not have the potential to significantly impact the environment. This ordinance is also categorically exempt under CEQA Section 15308 as a regulatory action taken by the City pursuant to its police power and in accordance with Government Code Section 65858 to assure maintenance and protection of the environment pending the evaluation and adoption of potential local legislation, regulation, and policies. Adoption of the proposed interim ordinance is categorically exempt from review under Section 15301 (Class One - Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines since it will temporarily perpetuate existing environmental conditions. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: 5 150526 cs 0131444 May 21, 2015 ATTEST: APPROVED: ______________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: ____________________________ City Manager ______________________________ Senior Assistant City Attorney ____________________________ Director of Planning and Community Environment Attachment B City of Palo Alto (ID # 5832) City Council Staff Report Report Type: Action Items Meeting Date: 6/15/2015 City of Palo Alto Page 1 Summary Title: 441 Page Mill Road Title: PUBLIC HEARING: Approval of a Mitigated Negative Declaration and a Site & Design Review and Design Enhancement Exception Application for a Three Story Mixed-Use Building on a 27,000 Square Foot Site Zoned Service Commercial (CS) At 441 Page Mill Road. The Project has been Revised to Contain 19,093 Square Feet of Commercial Space, 91 Off-Street Parking Spaces, and 16 Apartment Units, Including Five Below Market Rate Units, and Includes a Request for Three “Off Menu” Concessions Under Palo Alto Municipal Code Section 18.15 and the State Density Bonus Law and Based on a Revised Economic Analysis Environmental Assessment: A Mitigated Negative Declaration was Prepared From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council approve the Mitigated Negative Declaration (MND) and Addendum (Attachment C) and Mitigation Monitoring and Reporting Plan (MMRP) (Attachment F), the revised Site and Design Review application, the two Design Enhancement Exceptions (DEEs) and the three density bonus concessions for the revised project at 441 Page Mill Road, based on Architectural Review (AR), Design Enhancement Exception (DEE), Context Based Design Criteria and Density Bonus Findings, and subject to the conditions in the draft Record of Land Use Action included as Attachment B. Executive Summary In 2013, the City Council approved a rezoning of the subject property at 441 Page Mill Road from Single Family Residential (R-1) to Service Commercial (CS)(D). At the time, both the Planning & Transportation Commission and the City Council recognized that commercial zoning, allowing for a mix of uses, would be more appropriate on this busy stretch of roadway than single family residential zoning. The CS zoning district permits up to 18 dwelling units on the site, along with up to 10,770 square feet of commercial space (i.e. a 0.4:1 floor area ratio or FAR). The (D) overlay requires a Site and Design Review process. City of Palo Alto Page 2 On January 26, 2015, the City Council considered the applicant’s proposal for a three story building containing 2,836 square feet (sf) for retail use, 18,704 sf of office use, and 13,979 sf (10 units) of residential use, and 91 off-street parking spaces. (See CMR #5284.) Three of the proposed units were below market rate (BMR) qualifying the project for three density bonus concessions pursuant to the State density bonus law and the implementing ordinance in Palo Alto Municipal Code Section 18.15. The concessions requested were for a 19% increase in lot coverage, an increase in commercial FAR, and an increase in overall FAR. Since the three requested concessions were not on the “menu” included in Municipal Code Section 18.15.050(c), they were supported by a pro forma and economic analysis. In its review of the proposal, the City Council expressed its displeasure in the use of the State Density Bonus Law for a project that would exacerbate rather than improve the City’s jobs- housing balance, requested revisions to the economic analysis, and posed a number of other questions and comments. (The Council’s Motion is included as Attachment A.) The project applicant has now revised the proposal to include less commercial space, more residential space, more residential units, and more BMR units as shown in Table 1, below. The revised proposal still requires the three concessions, however, and a revised economic analysis is provided as Attachment E. Pursuant to the State Density Bonus Law, the City must allow the requested concessions unless it can make one of three possible written findings, supported by substantial evidence. (See the Discussion section below.) In addition to the requested concessions under the State Density Bonus Law, the project is requesting two Design Enhancement Exceptions (DEEs), one of which would allow a 17 foot setback from Page Mill Road where the code requires a 14 foot setback. This would permit a wide sidewalk, street trees, and the County’s planned improvements to Page Mill Road at this location. The other (related) DEE would allow a three foot encroachment into the required 10 foot landscape buffer at the rear of the property because the building would be shifted towards the rear of the lot to achieve the greater front setback and the driveway ramp accessing below grade parking would intrude three feet into the 10 foot buffer. The proposed project would provide 91 off-street parking spaces, or 15 spaces less than the 106 spaces that could be required for a project with 16 dwelling units (some of them below market rate) and 19,093 sq. ft. of office/retail space. The 106 space requirement includes a reduction of six spaces provided for in the density bonus provisions of State Law and Municipal Code Section 18.15.050. The requested reduction of 15 additional spaces is based on Municipal Code Section 18.52.050, which allows the Director to approve a reduction where a mix of uses share the parking facility since the peak demand for parking associated with residential and commercial space happens at different times of the day/night. The Architectural Review Board (ARB) and the Planning and Transportation Commission (PTC) have both recommended approval of the project, which has been modified since their review City of Palo Alto Page 3 to include the programmatic revisions shown in Table 1 below, and minor modifications to the building exterior. Staff does not believe re-review by the ARB or the PTC is required unless the City Council desires additional input. Table 1: Programmatic Modifications to the Proposed Project at 441 Page Mill Road 2014 Proposed Project 2015 Proposed Project Site Size 26,926 sf (0.62 acres) 26,926 sf (0.62 acres) Gross Square Feet Residential 13,979 16,156 Office 18,704 15,843 Retail 2,836 3,250 Total 35,519 35,249 Residential Units Market Rate 7 11 BMR (low income) 3 5 Total 10 16 Average Unit Size 1,242 sf 900 sf Source: Stoecker & Northway Architects Inc., May 15, 2015 City of Palo Alto Page 4 Background The project site is comprised of four parcels identified as 423, 433, 441, and 451 Page Mill Road, shown on the location map below. The total site area is approximately 26,926 sf. The site currently supports four single-story, single-family residences, one on each parcel. Adjacent uses to the northeast include the Kelly Moore Paint Store at 411 Page Mill Road and the AOL office development at 395 Page Mill Road. Adjacent uses to the southwest include an animal hospital at 461 Page Mill Road, and the AT&T retail store on the corner at 2805 El Camino Real. To the southeast, or the rear of the site, are single family residences with the exception of a grandfathered art studio at 440 Pepper Avenue. Across Page Mill Road to the northwest are multifamily residential Planned Community (PC) developments. The site’s four single family homes appear to have been built between 1939 and 1948. At that time, Page Mill Road was not the expressway that it is today; it was a minor street that supported a mix of residential and commercial development. Arial photography records indicate that by 1965, the minor street had been transformed into the expressway. The residential properties became less desirable to live in, since they were located on a busy roadway, and deferred maintenance led to their decline. Location Map, January 2015 City of Palo Alto Page 5 Zone Change Approval On January 14, 2013 the City Council approved a rezoning of the four parcels, from Single Family Residential District (R-1) to Service Commercial (CS) with a Site and Design (D) Combining District. The Commission and Council recognized that commercial zoning, allowing for mixed uses, would be more appropriate on this busy stretch of roadway than the existing single-family residential zoning. The Council also approved a new Comprehensive Plan land use designation of Service Commercial in conjunction with the rezoning action. Preliminary ARB Review On March 21, 2013, the ARB reviewed the conceptual building design in a noticed Preliminary Review hearing. The ARB preliminary review staff report can be found on the City’s website at the following link: http://goo.gl/V7Ylz4 Commission Review On June 11, 2014 the PTC reviewed the Site and Design Review application and Mitigated Negative Declaration, and voted 4-2 to recommend project approval as recommended in the staff report. The Commission staff report can be found on the City’s website at the following link: http://goo.gl/EYNhi2. Much of the discussion focused on the density Bonus Concessions. The dissenting perspective was a concern that the concessions granted may provide the applicant with financial benefit beyond what is needed to fund the affordable units or beyond the financial benefit that could be gained under the CS zoning without affordable units. The dissenters suggested the consultant prepare an additional analysis scenario examining the value at completion of the project. Staff concurred that this additional analysis would better inform the Council’s decision and following the Commission’s review, staff requested the consultant to provide the supplemental value at completion analysis. This was provided as part of the City Council’s January 26, 2015 staff report, which can be found at https://www.cityofpaloalto.org/civicax/filebank/documents/45542. Formal ARB Review The project was reviewed by the ARB on three occasions (August 21, 2014 http://tinyurl.com/q26s4l3, October 2, 2014 (http://tinyurl.com/q6xc2dv) and October 30, 2014 (https://www.cityofpaloalto.org/civicax/filebank/documents/44443). On October 30, 2014, the ARB reviewed the Site and Design Review application for a third time and voted to recommend the project for approval on a vote of (4-0-1-0). Over the course of the review and approval period, the project was modified to address concerns over the originally proposed curved entry tower element and the general architectural styling of the building. The plan was modified to eliminate the curved entry tower to better relate to the horizontality of the rest of the building and to reduce the height and massing at the upper floor. Upper floor units were also pulled back from the building face to set the third floor further back from the street. The material pallet was adjusted to place the heavier stone tile material at the base and have the lighter stucco material higher up on the building. Verbatim minutes of the ARB City of Palo Alto Page 6 hearing were provided as part of the City Council’s January 26, 2015 staff report which can be found at https://www.cityofpaloalto.org/civicax/filebank/documents/45542. Project Description The project includes the merger of four parcels into one single parcel (under separate application) of 26,926 square feet (sf). The existing homes would be demolished to make way for a three-story, mixed use building with parking facilities for 91 automobiles located one level below grade and at the ground floor, where 106 automobile spaces are required by code (accounting for the six space reduction allowed based on the Density Bonus Law). Bicycle parking spaces totaling 46 spaces (26 long-term and 20 short-term spaces) would be provided on site, where 19 such spaces are required, and a Transportation Demand Management (TDM) program would be required. Zoning Compliance and Density Bonus Concessions The zoning table below indicates the project’s relationship to CS zone development standards and project modifications since the City Council’s January 26, 2015 review of the project. Table 2. Summary of Zoning & Project Revisions, 441 Page Mill Road Maximum Allowed under CS Zone Height 35’ Lot Coverage 50% (13,462 sf) Total FAR 1:1 (26,926 sf) Residential FAR 0.6:1 (16,156 sf) Commercial FAR 0.4:1 (10,770 sf) Min. Ground Floor Commercial 0.15:1 (4,039 sf) Project Revisions Total Residential FAR 13,979 sf 16,156 sf Total Residential units 10 16 BMR Units (30%) 3 (3,544 sf) 5 (4,128 sf) Total Commercial FAR 21,540 sf 19,093 sf Retail Tenant FAR 2,836 sf 3,259 sf Ground Floor FAR 3,999 sf 4,330 sf Office + Circulation FAR 18,704 sf 15,843 sf Office Tenant FAR 16,335 sf 12,654 sf Total Building FAR 35,519 sf 35,249 sf Residential Parking Required 18 26 Commercial Parking Required 89 80 Parking Total Required 107 106 Parking Provided 91 91 Shared Parking Reduction 16 (15%) 15 (14%) Density Bonus Concessions Required See Table 3 Below Source: Stoecker & Northway Architects Inc., May 15, 2015 City of Palo Alto Page 7 Currently, rental residential projects are not required to provide Below Market Rate (BMR) units and the current Housing Element relies heavily on the Density Bonus law to promote affordable housing units in connection with rentals.1 The applicant intends to provide 30% (five) of the residential units as BMR rental units. In doing so, per State law, the City must grant three development concessions or incentives for building the five BMR units unless the Council can make strict statutory findings showing these concessions are not necessary. The three concessions requested by the developer are lot coverage, commercial floor area ratio (FAR), and total FAR, as shown in Table 3, below. Table 3. Development Concessions Requested Pursuant to State Law, 441 Page Mill Road Standard Allowable Proposed Excess Lot coverage 50% (13,463 sf.) 69% (18,565 sf.) 19% (5,102 sf.) Commercial FAR 0.4:1=10,770 0.7:1= 19,093 sf. 0.3:1 (8,323 sf.) Total FAR 1:1=26,926 1.31:1=35,249 sf. 0.31:1 (8,323 sf.) Source: Palo Alto Planning & Community Environment, May 15, 2015 The discussion section below provides additional information about the requested concessions as they relate to the City’s density bonus ordinance and the findings that would be required (based on substantial evidence) to deny the requests. Public Art The project is subject to the City’s new Public Art ordinance. It has elected to provide the public art within the project in the form of large folded metal address numbers by artist Fletcher Benton. DISCUSSION The property is located within a Site and Design combining district and therefore Site and Design Review is required. The Site and Design Review combining district is intended to provide a process for review and approval of development in environmentally and ecologically sensitive areas. This includes established community areas that may be sensitive to negative aesthetic factors, excessive noise, increased traffic, or other disruptions. This requirement provides an opportunity to review the development and assess its compatibility with other uses in the general vicinity, environmental and ecological objectives, and adherence to the city’s Comprehensive Plan. The review process begins with review and recommendation by the Commission, followed by the ARB and finally, action by the City Council. Draft findings for the Site and Design Review 1 Recent case law has cast doubt on the City’s ability to impose BMR requirements on rental properties without an approved nexus study. As a result of this legal development, the City has temporarily suspended its rental BMR program and is preparing an affordable housing nexus study for Council’s review and approval. City of Palo Alto Page 8 and Context Based findings are included in the draft Record of Land Use Action included as Attachment B. State Density Bonus Project The subject application is not subject to the City’s below market rate housing program, which at this time, does not apply to rental housing projects. However, the applicant is proposing a project using provisions in State law and the City’s local density bonus program to take advantage of development concessions available to qualifying projects. The density bonus program is designed to encourage private sector development of affordable housing. The City’s density bonus program provides three distinct incentives for voluntarily providing affordable housing: (1) it allows the developer to provide additional housing units beyond the zoning maximum (note, the applicant is not seeking to provide additional units and in fact is providing fewer housing units than allowed by zoning); (2) reduced parking requirements for the housing units (the applicant’s parking requirement is reduced by six spaces under density bonus law); and (3) development concessions/waivers/incentives in order to make the project as a whole economically feasible. Threshold Findings Palo Alto Municipal Code Chapter 18.15.090 requires the Council to make the following threshold findings when approving density bonus concessions: (i) The Development is eligible for the Density Bonus and any Concessions, waivers, modifications, or revised parking standards requested. (ii) Any requested Concession or Incentive will result in identifiable, financially sufficient, and actual cost reductions based upon the financial analysis and documentation provided. (Because applicant’s request is “off menu” the City commissioned a Pro Forma analysis – see below discussion.) (iii) If the Concession or Incentive includes mixed-use development, a finding that all the requirements included in Government Code Section 65915(k)(2) have been met. (This State law requirement provides that the commercial/office use will reduce the cost of the housing development and that such commercial/office use is compatible with the housing project and the existing or planned development in the area.) Denial Findings If the Council is unable to make the threshold findings above, the Council may deny an “off menu” concession only if it can make one of the following written findings, supported by substantial evidence: (i) The concession, incentive, waiver or modification is not required to provide for affordable rents or affordable sales prices; or City of Palo Alto Page 9 (ii) The concession, incentive, waiver or modification would have a specific, adverse impact upon public health or safety or the physical environment or on real property listed in the California Register of Historic Resources, and there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact without rendering the development unaffordable to low and moderate income households. For the purpose of this subsection, “specific adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified, written public health or safety standards, policies, or conditions as they existed on the date that the application for the development was deemed complete; or (iii) The concession, incentive, waiver or modification is contrary to state or federal law. Concession Requests On January 13, 2014, the City Council approved a Density Bonus ordinance that established a menu of items that a developer may choose as incentives for providing affordable housing units. The hope was that by adopting an ordinance permitting certain concessions by right, the City would guide developers to locally preferred concessions, and away from others. The applicant’s original proposal was submitted and in the design review process before the City’s density bonus ordinance was adopted. While three of the applicant’s requested concessions appeared in earlier drafts of the City’s density bonus ordinance menu, the final version of the Council adopted ordinance removed them from the menu list. The applicant initially proposed to provide three out of 10 units (30%) as low income Below Market Rate units, allowing the applicant to request three concessions, or modifications to local development standards. Based on the City Council’s comments and input, the applicant has now proposed to provide 5 out of 16 units (still 30%) as Below Market Rate units, again allowing for three concessions. The requested concessions – which are modifications of development standards related to lot coverage, commercial FAR, and total FAR – are shown in Table 3, above. The requested deviation from commercial FAR and total FAR has been somewhat reduced, while the number of units (and Below Market Rate units) has been increased. Because the project includes “off-menu” concessions, the applicant was required to provide pro forma documentation to substantiate the need for the requested concessions. Pro Forma Analysis -- Revised As required by the City’s density bonus ordinance, the applicant prepared a pro forma to justify the off menu concession requests. The City hired an outside consultant, Keyser Marston Associates, to analyze the pro forma and determine if the requested off-menu concessions are necessary in order to provide the three BMR units originally proposed. The consultant’s original analysis was provided as an attachment to the January 26, 2015 staff report and generated several questions from City Councilmembers, such that the Council City of Palo Alto Page 10 ultimately requested a revised analysis incorporating additional methodologies and refinements in addition to the original “cost approach.” See Attachment E. As explained above, State Density Bonus Law provides that, as long as the proposed project satisfies other requirements of the law, the requested incentives and concessions shall be granted unless a written finding can be made “based upon substantial evidence” that the concession “is not required in order to provide for the affordable housing costs.” Regardless of the methodology used, the financial analysis must start by quantifying the cost of the BMR units and the value of the requested concessions. If the costs of including the BMR units exceed the value of the concessions, then the concessions are deemed necessary to offset the BMR housing cost. If the value of the concessions exceed the cost of the BMR units, one or more of the concessions are deemed unnecessary. Based on the Council’s direction and revisions to the project, Keyser Marston completed a revised and expanded analysis of the applicant’s pro forma using both the original “cost approach” (with updated costs and revenues), and using the “discounted cash flow approach” suggested by one of the Councilmembers. The analysis also calculated the value of concessions two ways – by comparing a zoning compliant project to the proposed project, and by capitalizing the annual income stream of the two alternatives (including the five BMR units in the proposed project) and then deducting the development costs. The second approach was also suggested by a Councilmember. As shown in Attachment E, the costs of including the BMR units exceed the value of the concessions in all cases, supporting the applicant’s request for concessions. Design Enhancement Exceptions The CS zoning has no front setback requirement other than the requirement to set the building back far enough to provide an effective eight to 12 foot wide sidewalk. The term “effective” sidewalk allows the inclusion of items such as the planter strip, street trees, benches for seating, etc. within this setback area. The width of the right of way from the curb to the property line is ten feet. The existing paved sidewalks are only four to five feet wide with a two foot six inch wide planter strip that separates the sidewalk from the street. This part of Page Mill Road does have a four foot special setback. The code also requires that 50 percent of the building frontage be built up to the setback line. At the required four foot setback, 50 percent of the building would be 14 feet back from the face of the curb. Through the Design Enhancement Exception, the applicant requests a 17 foot setback, as opposed to the code required 14 foot setback from Page Mill Road. The requested DEE conforms with the Council’s oft stated desire to expand setbacks where possible. The second DEE would allow the driveway ramp for the below grade parking garage to encroach three feet into the required 10 foot landscape buffer at the rea of the property. The three foot encroachment occurs in only a portion of the landscape buffer and occurs at and below grade so it will not result in a visual impact to the rear neighbors. The three foot City of Palo Alto Page 11 encroachment also allows ample room to accommodate the planting of new trees for a privacy screen for the residential neighbors. As proposed, the new building would be located 27 feet from the rear property line. Street Trees The DEE to permit a 17 foot setback allows the project to provide street trees. There are currently eight street trees planted along the roadway in front of the site. They are planted within a very narrow planter strip and are planted next to the street curb. The County of Santa Clara has jurisdiction over the roadway, as it is a County expressway. The County typically does not permit trees to be within seven feet of the roadway due to safety and road maintenance concerns. The City arborist found that the existing trees would not survive, given the type of tree, its limited growing environment, and the proposed improvements to the site. There are a multitude of utilities beneath the existing sidewalk that would be cost-prohibitive to relocate. The County tree placement restrictions, combined with the challenge of relocating the utility lines running in front of the property, impacts the ability to plant new trees further back from the curb in a planter strip between the street and the sidewalk. With an approval of the DEE to move the building back three additional feet, street trees would have adequate space to grow into maturity. The trees would be located behind the sidewalk, rather than being placed within a planter strip between the sidewalk and the street. City policies support having a line of street trees providing a buffer between the busy roadway and the building. The County has plans to extend the double south bound left hand turn lanes at Page Mill Road and El Camino Real. These plans include the removal of on-street parking on Page Mill Road and the widening of the street by 2 additional feet at the project frontage. This widening would result in the removal of the existing street trees. The current proposal would provide new street trees much further back from the curb such that the future street widening project will not impact the new trees or the width of the sidewalk. At the January 26, 2015 meeting, the Council asked whether landscaping, including possible a berm or other “safety measure” could be provided between the roadway and the sidewalk. The applicant consulted with the County further, and has not been able to get their agreement on additional safety measures. In addition, the County is currently promulgating their proposed design for Page Mill Road in the area, showing the elimination of parking spaces and expanded right of way to accommodate an improved dual turn lane. (The Council is scheduled to hear a presentation on the County’s proposed plan on June 22, 2015.) Soil Contamination The project site is located within the California Olive Emerson (COE) Study area, which is known to have contaminated ground water from offsite dumping of Volatile Organic Compounds (VOCs). Based on this location, measures will need to be implemented for the proposed development of the property to prevent vapor migration into the structure. The required measures include a vapor barrier, an active ventilation system and regular testing. These mitigations are identified in the MND and contained in conditions of approval. City of Palo Alto Page 12 Parking Reductions Based on the proposed number of dwelling units (including five BMR units) and commercial square footage proposed, 106 automobile parking spaces are required. The applicant has proposed to provide 91 vehicle parking spaces, a reduction of 15 spaces. The code allows for Director approved reductions in the amount of required parking for mixed use developments. The applicant has provided a Time of Use Parking Analysis to demonstrate that the proposed project, with its mix of land uses, would not need the code-prescribed parking spaces, because different uses within the project would have different demands for parking at different times of day. The analysis, which was provided as an attachment to the January 26, 2015 staff report (see link), has not been revised to reflect the programmatic changes because proposed increases in residential use (six more units) would generally be offset by the reduction in commercial office square footage (a reduction of about 3,000 sf) when compared to the original proposal. Also, all of the dwelling units would be smaller with the proposed revisions than originally proposed. Staff believes the shared parking reduction of 15 spaces is justified with the revised project. The shared parking analysis demonstrates that the peak demand would be less than the total number of spaces provided and City staff believes that 91 spaces would be adequate to serve the proposed uses without creating an off-site parking impact. The parking reduction requires that a Transportation Demand Management (TDM) plan be implemented. At a minimum, Go Passes must be provided to the building occupants (employees and residents). With such close proximity to the train station, this is likely to be a very effective measure. At the January 26, 2015 meeting, a member of the Council asked if staff had considered the impact of removing on-street parking along Page Mill Road in front of the project site. The project is proposing removal of curb-side parking in front of the building to allow for entrances/exits from the proposed garage. Curbside parking is generally not allowed on County expressways anyway (it was grandfathered in here) and the remainder of the on street parking spaces will be removed as part of the County’s expressway plans. However the project itself would have sufficient off-street spaces to meet the demand generated by residents, employees, and visitors to the site at peak times, and the City may be able to add four or five replacement spaces nearby on Ash Street at some time in the future by allowing parking on the east side of the street rather than the west side. Traffic Impacts At the January 26, 2015 Council meeting, a member of the Council requested that staff take another look at traffic volumes in the area and confirm that cumulative volumes were adequate to account for other projects that have been entitled or are being considered in the area. One of the Councilmembers also asserted that the August 2014 Existing Conditions Report showed a three percent per year increase in traffic at the intersection of Page Mill and El Camino Real between 1998 and 2014 rather than the one percent per year built into the model. City of Palo Alto Page 13 A supplemental memo regarding cumulative traffic volumes in the traffic forecast model and recent traffic volumes at the Page Mill/El Camino intersection is included as Attachment D. As explained, the traffic study for this project and others in the area uses a travel forecast model to predict future traffic volumes and inputs to that model involve regional projections of housing and employment that are manually adjusted to account for large projects in the area in addition to incorporating a range of 0.5% and 1.1% annual growth factor. This is a conservative approach since the projections themselves are intended to account for projected growth in housing and employment. Also, as shown in the memo, volumes at the intersection of Page Mill and El Camino have fluctuated somewhat between 2000 and 2014, with the highest volumes in the years 2013 and 2000-2002. Traffic volumes and congestion/delay are not always directly correlated, since increases on some portions of the intersection (i.e. one or more intersection movements) can have a disproportionate effect on delay. It appears that the August 2014 Existing Conditions Report shows increases in delay at this intersection between 1998 and 2014 (about 16 additional seconds), but not the increases in volumes referenced by the Councilmember. The increases in delay were not sufficient to degrade the level of service at the intersection, which generally fluctuates between level of service (LOS) E and F in the PM peak hour. Exterior Design Changes With the modified project, there would be several slight changes in the building exterior which do not rise to the level that staff believes would require re-review by the Architectural Review Board or the Planning and Transportation Commission. Specifically, the changes would include the introduction of a residential deck on the third floor in one side elevation, the addition of some second floor windows to accommodate a dwelling unit on the other side elevation, and changes to windows on the rear elevation to accommodate the additional dwelling units. There would be no change to the street elevation and the overall massing and appearance of the building -- which was complemented by some Councilmembers in January 2015 -- would remain unchanged. POLICY IMPLICATIONS The proposed project is the first test of the City’s density bonus ordinance and was well along in the design development process when the City’s ordinance was adopted with a menu of “by right” design concessions. As a result, the proposed project requests concessions under the State density bonus law that are not on the City’s menu, and the developer was required to submit a pro forma demonstrating that the concessions are needed for the project to include the affordable units. Under State law, the City does not have the ability to deny the requested concessions unless written finding can be made based upon substantial evidence that the concessions are not required in order “to provide for the affordable housing costs” (see specific findings above). Based on the pro forma and the peer review by the City’s economic consultant, Keyser Marston, staff does not believe the required findings can be made for rejection of the requested concessions. City of Palo Alto Page 14 Many of the Context-Based Design Criteria, and Comprehensive Plan policies are implemented by this proposal. Attachment B (RLUA) includes references to Comprehensive Plan policies and Design Criteria that are applicable to the project. The project consolidates smaller parcels to form a large enough parcel that is able to realize the elements of the various City Guidelines. Decaying single family homes would be replaced by new mixed use development that is better suited to the adjacency of the busy street. The building would provide a strong street edge along Page Mill Road, while providing an eight foot sidewalk, street trees, and various other pedestrian amenities. The building would have outdoor seating, storefront entries that face the street, and residential balconies. The building façade would be well articulated with ample fenestration, horizontal sunshades, and multiple transitions in building materials with numerous colors and textures. The project includes surface parking and underground parking facilities that would be hidden from public view. The use of the State Density Bonus Law concessions due to the provision of five affordable housing units results in the project’s deviation from certain City zoning standards. The added floor area and lot coverage also result in a proposal that is not consistent with all text and policies of the Comprehensive Plan. For example, the Comprehensive Plan (page L-11) provides for non-residential floor areas up to 0.4 to 1 in the Service Commercial land use designation, where the current proposal would have a non-residential FAR of 0.8 to 1. Also, Policy L-6 calls for the avoidance of abrupt changes in scale and density between residential and non- residential areas and the shallow commercially-zoned parcel limits the options for gradual transitions of scale and density between the proposed development and the single family neighbors behind it. The proposal does compensate for this with the implementation of strategies to make the transition as gradual as possible. The new building would be set back from the residential neighbors 17 feet further than required, the office windows would have night shades to eliminate any lighting impacts form the offices at night, the main living spaces at the third floor would be setback to avoid privacy impacts, and a line of evergreen trees would be planted across the back of the site to provide a privacy screen and buffer between the two uses. While State mandates such as the State Density Bonus Law can result in projects that are not wholly consistent with all local zoning standards and general plan policies, the proposed project has complied with the City’s density bonus procedures (which are also in the zoning ordinance) and is, on balance, consistent with the Comprehensive Plan as a whole based on the Plan’s many policies providing for mixed uses (Policy L-9 and Policy L-31) and affordable housing units (Policies H2.1, H2.2, and H3.1). Timeline Rezoning Approved by Council: January 2013 Development Application submittal: July 29, 2013 Mitigated Negative Declaration available for Public comment: November 8, 2013 Planning and Transportation Commission Review: June 11, 2014 Architectural Review Board Review: August 21, 2014 City of Palo Alto Page 15 Architectural Review Board Review, second hearing: October 2, 2014 Architectural Review Board Review, final hearing: October 30, 2014 City Council Request for Additional Analysis: January 26, 2015 City Council Consideration: June 15, 2015 Environmental Review An Initial Study and Mitigated Negative Declaration (MND) have been prepared for the project and the 30 day public review and comment period began on November 8, 2013 and ended on December 9, 2013. The environmental analysis notes there are a few potentially significant impacts that would require mitigation measures to reduce them to a less than significant level. These include mitigations for dust control during excavation, protection for nesting birds, building design for earthquake resistance, basement shoring, and measures to prevent VOC vapor intrusion into the project. These are provided in the conditions of approval within the RLUA (Attachment A) as well as the MND (Attachment C). The State CEQA Guidelines (Section 15073.5) require recirculation of a negative declaration prior to adoption if the document must be “substantially revised” to reflect new significant impacts or project revisions necessary to address those impacts. In the current instance, the applicant’s proposal has been modified in response to Council’s input to include slightly more residential space and slightly less office space. The overall building would be similar in appearance and the intensity of use – as reflected by standard trip generation rates – would be similar to the original project proposal.2 An addendum to the MND has been prepared to reflect this project revision. For these reasons, the MND has not been revised and does not require recirculation. The potential impacts the environmental document describes and the mitigation measures required as part of the project remain unchanged. Attachments: Attachment A: Council Excerpt Minutes of January 26, 2015 (PDF) Attachment B: Revised Draft Record of Land Use (DOCX) Attachment C: Mitigated Negative Declaration and Addendum (PDF) Attachment D: Cumulative Traffic Memo (DOCX) Attachment E: Revised KMA Economic Analysis Study (PDF) Attachment F: Mitigation Monitoring Reporting Program (late delivery) (PDF) Attachment G: Project Plans (Hardcopies to Council and Libraries Only (DOCX) 2 Based on standard trip generation rates, the additional dwelling units would add three trips in the AM and PM Peak Hours, and the additional retail space would add one trip in the PM Peak Hour. The reduced office space would subtract five trips in the AM and PM Peak Hours. CITY OF PALO ALTO CITY COUNCIL MINUTES Page 1 of 39 Special Meeting January 26, 2015 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:07 P.M. Present: Berman, Burt, DuBois, Filseth, Holman, Kniss, Scharff, Schmid, Wolbach Absent: Attachment A MINUTES Page 8 of 39 City Council Meeting Minutes: 1/26/2015 Action Items 6. PUBLIC HEARING: Approval of a Mitigated Negative Declaration and a Site & Design Review and Design Enhancement Exception Application for a Three Story Mixed-Use Building on a 27,000 Square Foot Site Zoned Service Commercial (CS) at 441 Page Mill Road. The Project Would Contain 21,540 Square Feet of Commercial Space, 91 Off-Street Parking Spaces, and Ten Apartment Units, Including Three Below Market Rate Units, and Includes a Request for Three “Off Menu” Concessions Under Palo Alto Municipal Code Section 18.15 and the State Density Bonus Law. Mayor Holman requested Council Member disclosures. Council Member Berman met with the Applicant, but did not learn any information not contained within the public record. Council Member Burt had a brief phone conversation with the Applicant's architect, but did not receive any information not contained within the public record. Council Member Kniss met with the Applicant, but did not learn any new information. Hillary Gitelman, Planning and Community Environment Director, noted that the State Density Bonus Law contained disadvantages for local agencies. Staff had to support significant concessions based on the fact that the project included three units of Below Market Rate (BMR) housing. A written public comment suggested the Municipal Code did not require concessions and Density Bonus Law concessions were optional. That was not the case. Russ Reich, Senior Planner, reported the site had been rezoned from single- family residential to Service Commercial (CS) with a Site and Design Overlay. The site was bounded by the Kelly-Moore Paint Store, a veterinary hospital, multifamily buildings, and single-family residences. In June 2014, the Planning and Transportation Commission (PTC) recommended Council approval of the project. PTC discussion focused on density bonus concessions. The PTC requested a value at completion analysis, which was done. The Architectural Review Board (ARB) held three hearings. The ARB maintained the zoning approval for height, but changed the front elevation. The building was moved three feet back from the build-to line in order to incorporate street trees. The Staff Arborist reported space was sufficient for the trees to achieve the desired privacy screening across the rear. MINUTES Page 9 of 39 City Council Meeting Minutes: 1/26/2015 Reed Kawahara, Kaiser Marston Associates, performed the economic analysis of the proposed project. Under the State Density Bonus Law, a density bonus was to be granted "by right" to developers who built a certain percentage of residential units in a project as affordable housing. In addition, the developer could request up to three incentives or concessions if additional affordable units were provided. The State Density Bonus Law stated that requested incentives or concessions shall be granted unless a finding in writing could be made based upon substantial evidence that the concession was not required in order to provide the affordable housing cost. The State Density Bonus Law was not precise in defining substantial evidence of affordable housing cost or requirements to demonstrate those concessions were not required. Nonetheless, Kaiser Marston's analysis was consistent with many other development review applications submitted throughout the state. The site was approximately 27,000 square feet or 0.6 acres in size. Under CS Zoning, up to 50 percent lot coverage and 0.6 Floor Area Ratio (FAR) for residential and 0.4 FAR for office/retail was allowed. The proposed project requested lot coverage of 68.8 percent, residential FAR of 0.53, and office and retail FAR of 0.8. The analysis defined two different project alternatives. The first project alternative was the proposed project. The second alternative was an alternative that could be built under CS Zoning but which would maximize the financial return of the project. Kaiser Marston first tested to determine whether the maximum building envelope permitted under CS Zoning would generate the maximum return. Kaiser Marston determined that a project slightly less than the maximum permitted FAR would be an economic improvement. A total FAR of 1.0 triggered a requirement for an underground parking garage, which was a very expensive element of the project, and triggered a requirement for soil remediation. Kaiser Marston concluded that the second alternative that maximized return to the project would be a total FAR of 0.78, 0.4 FAR for office/retail and 0.38 FAR for residential. Next, Kaiser Marston quantified the affordable housing cost. The proposed project contained ten residential units, three of which would be low-income. To estimate the cost of affordable housing, Kaiser Marston allocated to the affordable housing units the total cost of the project on a pro rata basis based on square footage of the project. Recognizing that the three affordable units would generate income, Kaiser Marston calculated a $380,000 value to those units as an offset to total cost. Deducting that value from the cost yielded a net affordable housing cost of $1.85 million. In order to estimate the incremental value of requested concessions, Kaiser Marston analyzed the development economics of the CS Zoning alternative compared with the proposed project. Income and development costs from the project were estimated, and the relationship between the two generated a return. Kaiser Marston compared the returns for the two projects to estimate the incremental value. MINUTES Page 10 of 39 City Council Meeting Minutes: 1/26/2015 The base case project offered a net operating income (NOI) of approximately $950,000 compared with the proposed project of about $1.5 million. That generated an increase in annual NOI of about $600,000. Development costs had increased from $15 million to approximately $24 million for an increased cost of approximately $8 million. When the net operating income was capitalized to realize a total project value, Kaiser Marston calculated an incremental value of approximately $9.5 million as compared to the incremental development cost of approximately $8 million. Kaiser Marston estimated the net project value was about $1.28 million. The affordable housing cost, according to the State Density Bonus Law, was $1.85 million. The incremental value from the three requested concessions was $1.28 million. Because the affordable housing cost exceeded the incremental value, Kaiser Marston concluded that the three requested off-menu concessions were required to offset the cost of affordable housing. If the affordable housing cost had been less than the incremental value, then Kaiser Marston would have concluded that one or more of the requested concessions might not be needed. Cara Silver, Senior Assistant City Attorney, advised that the City was restricted in certain aspects of the project. It was unusual for the State to impose restrictions in the land-use arena as Palo Alto was a Charter City; however, the State Density Bonus Law specifically applied to Charter Cities. Assuming findings could be made and the Applicant fell within its right to claim concessions, the State Density Law allowed projects that were inconsistent with local zoning and Comprehensive Plans. The Council could approve the project with the off-menu concessions as requested. If the Council wanted additional information or analysis, Staff requested the Council focus its requests on pro forma data supporting the off-menu concessions, Design Enhancement Exception (DEE) and parking reduction exception, and the series of findings contained in the Record of Land Use Action. Public Hearing opened at 8:09 P.M. Norman Schwab, Applicant, reported existing houses on the project site were in disrepair. He proposed a three-story, mixed-use building. Retail would be located on the first floor, office on the second floor, and ten residential units on the third floor. Parking would be contained onsite at- grade and below-grade and would be consistent with the current Zoning Code. Proposed residences had a common area as well as private, outdoor areas. MINUTES Page 11 of 39 City Council Meeting Minutes: 1/26/2015 John Northway, Applicant, remarked that the project suffered from many complexities in both jurisdictional rules and site constraints. Rules of three jurisdictions often conflicted. The site was constrained by a 30-foot height limit, rear setback lines, daylight plane, and polluted groundwater. The building was pushed forward on the site to keep it away from neighbors. The rear of the building was 27 feet from the back property line, with houses 42-77 feet from the rear property line. The building was set back 17 feet from the curb to provide room for trees and pedestrians. Because the County of Santa Clara (County) controlled Page Mill Road and did not allow street trees, the Applicant requested a DEE to set the building back from the curb 17 feet. The site was close to bus stops and the train station. Parking at the site conformed to regulations for mixed-use buildings. A parking demand management study showed that between 10:00 A.M. and 2:00 P.M., peak hours, demand was 79 cars. The City required a 10 percent safety factor, resulting in a demand of 87 cars. The project would provide space for 91 cars. Bike racks and lockers were provided to encourage alternative transportation. A Transportation Demand Management (TDM) Program would include transit passes and would be reviewed yearly. The Applicant attempted to address neighbors' concerns regarding parking and traffic by implementing a TDM Program and supporting the County's desire to eliminate street parking on Page Mill Road. Noise and light pollution were addressed through placing lighting on the roof or inside the building. Light from offices was addressed through the use of automatic shades that closed at night. Neighbors selected the trees for the planting screen. The Applicant believed the project conformed to Policy H-2 of the Housing Element. Leigh Prince, attorney for Applicant, advised that the State Density Bonus Law was implemented by the Palo Alto Municipal Code, which meant the Density Bonus Law controlled but the City set forth application procedures to request off-menu incentives. The three requested incentives contributed significantly to the economic feasibility of the low-income units, which was the stated intent of the State Density Bonus Law. Kaiser Marston Associates (KMA) concluded that requested incentives were required to make the affordable housing possible. A Mitigated Negative Declaration (MND), which the PTC recommended for adoption, concluded impacts were less than significant. The requested incentives were legal. Substantial evidence included facts, reasonable assumptions predicated on facts, and expert opinion supported by facts. KMA was an expert and tested all the data and assumptions in the pro forma. KMA concluded that incentives were needed to offset the cost of affordable housing. With the development return approach, KMA concluded that concessions were needed because returns were less. KMA completed a value at completion analysis and concluded that no adjustments to the original analysis were necessary. MINUTES Page 12 of 39 City Council Meeting Minutes: 1/26/2015 KMA and Staff agreed that the incentives were needed and the required findings for denial could not be made. The proposed project passed the stringent review process, and State law required the City to grant the requested incentives. Frank Ingle remarked that the proposed project was in a difficult location. He hoped the Council could find a way to deny the application. The Council should consider the effects of this project along with the effects of projects in the pipeline. Louis Luh commented that the trees in the rear screening were reported to grow only 30 feet tall, which would not be high enough to block the view from the second-floor of his home. A smoking area was located at the rear of the site close to his backyard where his children played. Judith Wasserman believed this project was the kind of project the City wanted. The project offered mixed use, did not exceed the height limit, and was close to services and transportation. She encouraged the Council to continue to obey the law. David Kleiman supported recommendations to approve the project. The design of the project was pleasing to the eye and compatible with the location. Daniel Garber supported PTC, ARB, and Staff recommendations to approve the project. The project provided ten residential units which were most welcome. The requested concessions were allowed "by right." He supported the Director's finding regarding 91 off-street parking spaces. Stephanie Munoz stated that the Council could not allow more buildings to be under-parked. Projects should provide parking rather than paying in-lieu fees. Bob Moss indicated the City had required BMR units in every development and did not offer incentives. The Council did not have to provide 100 percent of requested concessions. The project was under-parked and would create further traffic congestion. He suggested the Council reduce office space by at least 2,000 square feet and require 2,000 square feet of onsite parking. David Keller remarked that the property in its current state was an eyesore, and the project would be an improvement for the community. The project's location was ideal to attract rail and bike commuters. He fully supported the project and hoped the Council would as well. MINUTES Page 13 of 39 City Council Meeting Minutes: 1/26/2015 Ian Carroll supported the project. The City needed more affordable housing as well as BMR housing. The project location was not appropriate for single- family homes. Edie Keating supported the project and was happy the Density Bonus Law was being used. She did not support adding office space and was not inclined to argue against proposals that were within zoning. The transition from two-story to three-story buildings was acceptable. Martin Bernstein, speaking as an individual, indicated the project complied with local and state law. He supported approval of the project. Herb Borock recommended the Council reject the project or request additional environmental and economic review. There was no adequate cumulative analysis of traffic. There was no reason to reduce the amount of parking. The analysis was not a true pro forma statement. Lydia Kou provided a list of developments under construction or review. The total square footage of those projects exceeded 400,000 square feet. The Fry's site was slated for additional mixed use. Streets and neighborhoods could not handle this much growth. The Council had to consider the impacts of all development projects in the area. Joe Hirsch stated residents did not want projects similar to the proposed project. He had difficulty understanding that the incremental value of the three concessions was merely $1.28 million. According to his calculations, the affordable housing cost would be paid in three or four years. Ruth Lowy believed the increase in office space would result in more people and cars. A barrier was needed to prevent pedestrians from walking into the street. Rita Vrhel felt the project would create more problems than it would solve. She wanted to know the percentage of total residential space that would be allocated to BMR units. The State Density Bonus Law would be detrimental to the cities' interests. Neilson Buchanan suggested the Council create a Conditional Use Permit requiring all occupants to park in the building, implement permit parking, and consider the cumulative impact of parking and traffic. Vujay Varma was skeptical of any business plan that showed costs greater than revenue. That was a disingenuous analysis. MINUTES Page 14 of 39 City Council Meeting Minutes: 1/26/2015 Ranier Pitham indicated dynamic scoring was missing from the pro forma information. Pro forma information should be reviewed by a building superintendant of a large construction company. Matthew Harris advised that the project met all planning guidelines and was of high quality. If a project met all existing guidelines but was not approved, then that was irrational. David Schrom commented that predictions made in environmental impact statements, traffic projections, and parking need requirements were proved to be inaccurate time and again. He questioned whether Staff reviewed the reliability of consultants prior to hiring consultants to perform analyses. The Council should ensure data was more reliable for this and future projects than it had been in the past. Ms. Prince advised that inclusionary housing did not apply to rental housing, which these units were. BMR units were restricted for 55 years. A court case did not support the Council being able to reduce concessions. A cumulative traffic analysis was included in the MND. While the City hired consultants, the Applicant paid their fees. KMA was a respected firm who performed careful and thoughtful analyses. A one-bedroom, two-bedroom, and three bedroom unit would be BMR units. The building's setback and trees in the streetscape should address safety concerns. Mr. Northway would work with Mr. Luh to address his concerns. Public Hearing closed at 9:02 P.M. Ms. Gitelman reported that the California Environmental Quality Act (CEQA) explicitly provided for either a projections-based approach or a list of recent projects approach in the analysis of cumulative traffic. The analysis included a growth rate ample enough for all known projects, including the Jay Paul Project which had been withdrawn. Staff discharged their obligation to review the project's increment contribution to the cumulative picture. The project made use of a Code provision that allowed for a parking reduction of up to 20 percent for a mixed-use project. The Applicant did not receive a full 20 percent reduction. The Council had previously indicated its desire to rescind some parking exemptions; however, that had not been done. Mr. Buchanan's point that the benefits of the few dwelling units were far offset by job creation was valid. Mr. Kawahara clarified that the $1.284 million incremental value was the net incremental value after considering development costs. The estimate of the incremental gross value prior to considering development costs was about $9.6 million between the two alternatives. MINUTES Page 15 of 39 City Council Meeting Minutes: 1/26/2015 Consideration of costs for underground parking and environmental remediation resulted in a net value of $1.28 million. Mayor Holman asked how the Council could review the project with respect to the Density Bonus Law and the project as a whole. Ms. Gitelman noted the Council was constrained by the Density Bonus Law with regard to the project's request for concessions. The Council could differ with the Applicant's request for DEEs and parking exception. It would be difficult to separate the site and design of the project from the requested concessions. Mayor Holman noted the time of 9:07 P.M. and the fact that Agenda Item Number 7 was scheduled for 9:00 P.M. If the Council discussed Agenda Item Numbers 6 and 7 for an hour each, then the Closed Session could begin at 11:00 P.M. Because Agenda Item Number 7 was noticed for 9:00- 10:30, public comment would be taken in that time period. Agenda Item Number 7 would likely be considered over two separate meetings; therefore, the public would have another opportunity to speak to it. Council Member Kniss inquired about the potential outcome of the Council denying the project. Mayor Holman requested one round of Council Member questions prior to Council Member comments and Motions. Ms. Silver reported potential outcomes depended on the grounds used to deny the project. If the Council based it's denial on the Density Bonus Law, then it would have to make certain findings. A court would review the findings and determine whether they could be made. Specific findings were required to deny a concession. Council Member Kniss would offer a Motion in order to begin the discussion, unless the Mayor preferred a round of Council Member questions. Mayor Holman preferred to allow Council Member questions and comments prior to a motion being made. Council Member Berman asked if the law alluded to any maximum or minimum allowable increase in project net value and to what extent the Council could lower the square footage of the project to reach a net project increase of $0. MINUTES Page 16 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman explained that the Council was hampered by the lack of a definition of affordable housing cost. Staff only analyzed the two project alternatives, but it would be possible to analyze other hypothetical projects. Council Member Berman inquired whether an analysis that demonstrated a 1,000 square foot decrease in office space compensated the developer for the cost of affordable housing would be defensible or allowed. Ms. Silver indicated the Council would need substantial evidence in the record to support that. At this point, substantial evidence was not available. If the Council wished to have that analysis, it should request the consultant provide that analysis. Council Member DuBois asked if the analysis considered the on-menu concession option. Mr. Kawahara answered yes, he did analyze a scenario with the on-menu concessions only. The conclusion from that analysis was that the three incentives were needed. Council Member DuBois inquired whether the analysis included parking allowances. Mr. Kawahara believed it did, but could not recall exactly. Council Member DuBois inquired about the traffic report prepared by RKH and whether Park Boulevard was excluded from the traffic study. Ms. Gitelman could provide a copy of the traffic study if Council Members wished to have a copy. Council Member DuBois reiterated his query about the exclusion or inclusion of Park Boulevard. Ms. Gitelman explained that the traffic study reviewed the closest intersections to the site. The intersections in the study were the ones likely to be impacted by the project. The study was also available on the City's website. Council Member DuBois requested examples of projects where the Council approved the mixed-use parking exception and asked if predictions in those projects were accurate. Ms. Gitelman would research such development projects and provide examples. Parking exceptions were a common request and a common practice in traffic and parking analyses generally. MINUTES Page 17 of 39 City Council Meeting Minutes: 1/26/2015 Most jurisdictions provided some reduced parking requirements in a mix of uses that peaked at different times of day. Council Member DuBois was asking in reference to public comment regarding inaccurate predictions for the amount of sharing. Ms. Gitelman would provide information as time and resources permitted. Vice Mayor Schmid stated that the Santa Clara Valley Transportation Authority (VTA) and Palo Alto model for traffic analysis projected over 20 years a 1 percent growth per year in traffic at that intersection. The Existing Conditions Report clearly stated that the actual traffic increase between 1998 and 2014 averaged 3 percent growth per year at that intersection. He inquired whether the model should use the numbers from the Existing Conditions Report. Ms. Gitelman would reply once she had reviewed the Existing Conditions Report. Staff projected significant increases in traffic volume from the date of the analysis to 2035. Vice Mayor Schmid reiterated that the model had utilized 1 percent per year for ten years, while the ten-year actual data was closer to 3 percent. Ms. Gitelman explained that Staff did not use a straight 1 percent per year. Rather, Staff used volumes taken from the traffic model, which varied in different locations. In the two intersections analyzed, there were different percentage increases that were a direct result of consulting the regional model. Vice Mayor Schmid commented that the table in the one-page summary of parking analysis looked reasonable. At the top under commercial, the table indicated a peak rate of 3.03 for retail. The City Code indicated 4.0 should be used. He asked why Staff assumed they should be using a third less than the Code required. Ms. Gitelman clarified that those were demand figures taken from data sources that aligned with the Code section that provided the exception. The section of the Zoning Ordinance that provided the mixed-use exception outlined the methodology and the type of data sources that should be used to justify the exception. The analysis was directly in keeping with that section of the Zoning Ordinance. Parking demand was not only a factor of total trips generated, but also a percentage of trips that would not be made by automobile. There could be some adjustment there. She would need to review this more deeply and provide a more complete answer. The analysis was entirely in keeping with the City Code. MINUTES Page 18 of 39 City Council Meeting Minutes: 1/26/2015 Vice Mayor Schmid asked Ms. Gitelman if she meant there were two sections of the Code: the mandate for parking of 4 and an exception that allowed use of 3.03. Ms. Gitelman indicated that the section did not provide a ratio. It suggested a methodology for justifying the exception. Staff considered the methodology and felt it was warranted. Council Member Burt inquired whether Council Members could pose questions to the Applicant. Mayor Holman indicated that Council Member questions could be directed to Staff, the Applicant, or the public. Council Member Burt recalled the Applicant attorney mentioned case law stating that cities could not reduce proposed concessions. He inquired whether the City could reduce concessions if they were twice the amount the Applicant proposed. Ms. Prince clarified that the court had not determined specific details for reducing concessions. Generally, if incentives were necessary, State law required approval of those incentives unless findings based on substantial evidence could be made. Council Member Burt stated Ms. Prince asserted that the Council could not adjust concessions based on case law. He asked if she would make the same argument if the Applicant had requested concessions twice the proposed amount. Ms. Prince answered yes. Council Member Burt did not believe Staff would be able to answer Vice Mayor Schmid's question regarding growth of 3 percent per year versus 1 percent per year within the current discussion. That would be a substantial issue and would raise his concerns about whether the impact analysis was adequate. He inquired whether Staff would be able to provide an answer within the current meeting. Ms. Gitelman could not comment prior to referring to the Existing Conditions Report and other data about traffic volumes at that intersection over time. She would also need to confer with traffic experts. Council Member Burt wanted to know if Council Members could have a response in the current meeting. It sounded as though the answer was no. MINUTES Page 19 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman reiterated that she would have to provide a response at a later time. Council Member Wolbach inquired whether the Council could add a Conditional Use Permit to require occupants park onsite as suggested in public comment. Ms. Gitelman advised that the Council could adjust or add to the Conditions of Approval within reason. She cautioned the Council about adding a Condition of Approval that would be difficult to monitor or enforce. Council Member Scharff requested Ms. Gitelman relate her experience of whether sharing of parking was feasible. Ms. Gitelman reported that was a typical provision to reduce parking requirements in a mix of uses. In her experience, it was warranted and it did work. Those types of uses peaked at different times; therefore, she did not anticipate all parking spaces would be filled for both uses at the same time. Some modification or adjustment was typical and warranted. Council Member Scharff seemed to recall that use of parking exemptions began in the 1990s. He asked about the length of time that had been tested and tried. Ms. Gitelman did not recall. Mayor Holman inquired whether the proposed parking included spaces at the curb that were slated for removal. Ms. Gitelman did not believe so, but could not recall the number of spaces being removed. Mayor Holman noted the street trees were located by the building, rather than on the street side of the sidewalk. Placing the trees next to the building seemed to be unsafe and unappealing for pedestrians. She requested a rationale for placing the trees against the building. Mr. Reich reported Staff spent a great deal of time working with the Applicant to locate trees between the street and sidewalk. The location of existing utilities prevented that from occurring. Mr. Northway believed the number of parking spaces being removed was five and some driveways would be closed. He had assumed the existing trees would remain; however, the County would not allow trees in its easement. MINUTES Page 20 of 39 City Council Meeting Minutes: 1/26/2015 MOTION: Council Member Kniss moved, seconded by Council Member XX to approve the Mitigated Negative Declaration (MND), the Site and Design Review application, the two Design Enhancement Exceptions (DEEs) and the three density bonus concessions for the project at 441 Page Mill Road, based on Architectural Review (AR), Design Enhancement Exception (DEE), Context Based Design Criteria and Density Bonus Findings, and subject to the conditions in the draft Record of Land Use Action (RLUA, Attachment A). MOTION FAILED DUE TO THE LACK OF A SECOND Council Member Kniss felt this was a test case for the Density Bonus Law. There was a great deal of concern throughout the state regarding affordable housing. She inquired whether any cities other than Berkeley had experienced the same issues. Ms. Prince indicated communities across the state were struggling with the issues. There were a couple of other cases about different aspects of the Density Bonus Law. Council Member Kniss hoped the City was not headed to a lawsuit with this project, but would not be surprised if State law trumped local law. Vice Mayor Schmid noted this project was the first off-menu project the Council had reviewed under the State Density Bonus Law. A concession of 10,000 square feet of office space above zoning, at a value of $600,000- $700,000, for three BMR units, at a value of $400,000-$500,000, was astounding. The model used to justify it was mystifying. The original zoning had residential space for 13 units and office space. Economic assumptions should be logical. In order to provide three additional units which accounted for less than 10 percent of the total square footage in the building, the Applicant could impose over 30 percent of the cost of the garage. It baffled him how the Council could accept that pro forma. Council Member Filseth wished to understand the model. He asked if the income stream, total NOI, was the total annual rent from the project. Mr. Kawahara replied yes. Council Member Filseth stated that dividing that in the first alternative by 5.59 percent provided the gross value of the project. He inquired whether subtracting from that the upfront cost would provide the total net project value. Mr. Kawahara answered yes. He clarified that the 5.59 percent was a blended rate. It assumed a separate percentage for each land use. MINUTES Page 21 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Filseth understood the percentage was weighted by the land use. That provided a net present value of the off-menu project of $2.8 million or the value of the project. Mr. Kawahara concurred it was the net value. Council Member Filseth asked if the 5.59 percent was the capitalization rate. Mr. Kawahara responded correct. Council Member Filseth reported that was the formula for the net present value of a fixed annuity. The model used current rental rates. He inquired about Kaiser Marston's assumptions as to how those would change in the future and where that was in the model. Mr. Kawahara explained that the model did not make projections for future rents. Council Member Filseth asked if he assumed the income stream was fixed for the future. Mr. Kawahara responded no. The model did not make any assumptions with regard to the direction of rents in the future. Council Member Filseth disagreed. Depending on what was in the cap rate, the model generated the net present value of a fixed annuity, which meant it was $953,944 every year. Mr. Kawahara clarified that in real estate estimating an income stream allowed the application of a cap rate, which is what Kaiser Marston did. The cap rates were determined by the market, based on the price properties were bought and sold for. Cap rates changed over time. The cap rates Kaiser Marston assumed and resulted in the blended rate were intended to reflect the current market for those uses. Purchases of other properties reflected the amount other investors would project in terms of future growth of rents. Council Member Filseth asked if Kaiser Marston utilized comparables from the industry to obtain those. Mr. Kawahara replied correct. Council Member Filseth requested Mr. Kawahara explain what exactly went into the cap rate. The whole model was very sensitive to that number. A sizeable body of literature stated the cap rate was equal to the risk adjusted cost of capital minus the growth rate. MINUTES Page 22 of 39 City Council Meeting Minutes: 1/26/2015 That was where the growth and income projection was, inside the cap rate. That meant the cap rate was given by three components, because the risk adjusted rate of capital was calculated by taking the risk free rate of capital, adding a risk premium, and then subtracting the rate of growth of the rental income. An industry standard measure of the risk free rate was the ten-year Treasury Bill, which was currently just under 2 percent. The typical estimate of a risk premium for commercial real estate was a few percent. A report stated 3.5 percent for apartment properties in the third quarter of 2014. He inquired whether that was approximately correct. Mr. Kawahara indicated that varied by land use and location. It was difficult to answer that question with precision. Council Member Filseth explained that adding the 2 percent to the 3.5 percent resulted in a risk adjusted cost of capital between 5 and 6 percent. A current study for the Downtown Cap reported the average rental growth in office space was about 11 percent. In terms of the cap rate, there was no way to subtract 11 percent from 5.5 percent to obtain 5.59 percent. Assuming a 5 percent growth rate in rental income, there was no way to subtract 5 percent from 5.5 percent and obtain 5.59 percent. These models were shortcuts for a real discounted cash flow analysis. The simplified model did not work for this project. Industry comparables did not work in a high-growth, moderate-risk situation such as that in Palo Alto. He was curious about the result of a full analysis; therefore, he attempted one. He backed out a growth rate from the cap rate, so it became a true discount rate, a risk adjusted cost of capital. For the first pass he left it at 5.59 percent and 5.82 percent. Instead of using $953,944 as a fixed income stream, he used a formula for a net present value of an increasing annuity and assumed in the first case that rental rates would grow 5 percent per year. The value of the project, assuming 5 percent growth and mid-5 percent risk adjusted cost of capital, was not $2.8 million but $15.59 million. The value increment was not $1.284 million, but $6 million. He tried it with 7 percent instead of 5 percent. In that case, the valuation of the project changed from $2.18 million to $28.1 million. The value increment changed to $10.6 million. He attempted other discount rates. With the PPP corporate bond rate of 3.6 percent currently, the value of the project went from $15 and $28 million to $29 and $47 million. The value increment, depending on whether the growth rate of rental income was 5 or 7 percent, changed to $11 and $17 million. The model was not appropriate for the circumstances in Palo Alto. This was important, because those numbers were the basis for deciding whether the City was legally required to grant the off-menu concessions. The current model calculated the wrong answer, so the Council could not use it to make that judgment. The Council needed a discounted cash flow analysis that correctly accounted for rental growth. MINUTES Page 23 of 39 City Council Meeting Minutes: 1/26/2015 The analysis should split out the growth and use a local growth rate and discount it by a pure risk adjusted cost of capital. Staff's suggestion for the Council to request a pro forma that would support the off-menu concessions was a good idea. Such an analysis would find substantial evidence that the magnitude of area expansion, the off-menu concessions, would not be required in order to provide for the cost of the BMR units. Ms. Gitelman wanted to see the calculations and sources referenced by Council Member Filseth in the interest of transparency. She could review the information and provide a supplemental analysis. The Applicant paid the cost of Kaiser Marston's analysis. In this case it would be incumbent upon the City to pay the costs of a supplemental analysis. Staff could request a supplemental analysis and provide the results at a later date. MOTION: Council Member Filseth moved, seconded by Vice Mayor Schmid to request additional Pro Forma off-menu concession analysis and use a discounted cash flow approach applying local rental rate growth and reasonable risk adjusted cost of capital figures. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to review the rate of traffic growth assumed at the intersection of Page Mill Road and El Camino Real using the historic growth rate. Council Member Scharff requested a timeframe for the item to return to the Council and asked how many times the Council could request information. Ms. Silver reported the time to act upon an application began to run upon the approval of the environmental document. Apparently, the Council was not prepared to certify the environmental document; therefore, the Permit Streamlining Act had not been triggered. Generally, cities could take up to a year to prepare the environmental documentation. However, changes in circumstances could delay the timeframe. Council Member Scharff noted the Council had not discussed why it was not ready to approve the MND. He inquired whether the concessions implicated the MND. Ms. Silver replied no. Council Member Scharff inquired whether the further analysis of traffic would implicate approval of the MND. MINUTES Page 24 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman would compare the data Vice Mayor Schmid suggested to the assumptions in the existing analysis and comment on the variance between assumptions. Council Member Scharff asked if the comparison could change Staff's recommendation of the MND. Ms. Gitelman indicated if Staff identified a basis to question the assumptions in the study, it could affect Staff's recommendation for the MND. Council Member Scharff stated the Council was waiting to approve the MND in order to receive the further traffic analysis. The City hired an expert who performed three analyses. The Council was now requesting a fourth analysis. To request a fifth analysis would be inappropriate; therefore, he encouraged Council Members to request all information in the current meeting. He asked if it was fair to say the market determined cap rates. Mr. Kawahara answered yes. Council Member Scharff advised that cap rates were not determined in the manner Council Member Filseth utilized. Palo Alto had particular cap rates. He encouraged Kaiser Marston to review Palo Alto cap rates in the model. Council Members should raise parking issues in the current discussion. He was pleased the building was moved back from the sidewalk. He reviewed Palantir's parking analysis. Contrary to public comment, data indicated a ratio of 4:1,000 was correct for Palo Alto's credit tenants. He agreed with Ms. Gitelman regarding the effectiveness of mixed use parking. The building was not under-parked. Mayor Holman clarified that if the Motion passed, the project would be continued. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff in regards to cost, to use a model that does not assign the pro-rata cost of the entire building to the Below Market Rate (BMR) units, but instead looks at the incremental market rate and BMR revenue, and offsets that with a density bonus; a. Direct Staff to provide more detail on travel impact that takes into account actual traffic growth on nearby intersections, including the impacts of recent Stanford projects and Park Boulevard impacts; and MINUTES Page 25 of 39 City Council Meeting Minutes: 1/26/2015 b. Include a conditional use permit requiring occupants and users of the building to park in the garage. If occupants and users do not comply with the conditional use permit, the City will initiate a Residential Parking Permit program for the neighborhood. Council Member Filseth advised that the size of the building resulted in a very small incremental cost of the three units. He inquired whether the Council should review the incremental cost of the three units over the existing building as opposed to evenly allocating the costs of the whole building. Council Member DuBois replied yes. Council Member Filseth asked if State law contained any requirements for the method of calculation. Ms. Silver reported State law provided little guidance regarding methodology. She suggested Mr. Kawahara indicate whether he understood the request and whether it was possible. Molly Stump, City Attorney, advised that a court would consider the reasonableness of any methodology used. Consultants should have an opportunity to explore and comment on reasonableness. Council Member DuBois appreciated the Applicant's project and outreach to neighbors. The Council was being asked to review the MND, Site and Design Review, two Design Exceptions, and the request for off-menu concessions. He found issues in traffic, parking, and the economic model. The traffic report was three years old and did not consider multiple projects on Park Boulevard. With respect to parking, the City was using old numbers; therefore, more people than projected could use the building. He could not accept that the three concessions would not cover the cost of the BMR units. If the Council accepted the methodology, then zoning would have no meaning. The analysis utilized a pro rata approach for building cost and allocated the entire cost of the underground garage to the BMR units. The resulting construction cost was $630 per square foot which was utilized for the affordable housing. A local realty company suggested that cost was high. A five-story building in San Francisco with underground parking had a cost of $338 per square foot. A fine-grained approach was needed. He wanted a method that shielded the City from individual construction costs and the potential for loading the cost of luxury items onto BMR units. He believed the requested incentives exceeded requirements based on written and financial evidence. The Council should commission a model that did not assign the pro rata cost of the entire building to the BMR units. MINUTES Page 26 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman asked if Council Member DuBois was requesting Staff change the methodology to use a list-based approach even if growth rates aligned with historical figures, or requesting Staff review the methodology to ensure it adequately accounted for developments cited. Council Member DuBois responded the latter. He was specifically asking about Park Boulevard, where there were several developments. Ms. Gitelman inquired whether he was requesting an analysis of traffic conditions on Park Boulevard or whether the projects had been adequately included in the analysis. Council Member DuBois answered that he wished for the projects to be adequately included. Ms. Gitelman explained that the Council had adopted an Ordinance that set forth procedures for implementing a Residential Parking Permit (RPP) Program. She questioned whether the Council could require that as a Condition of Approval. She inquired whether Mr. Kawahara understood the request for a modified approach to the economic analysis. Mr. Kawahara understood a portion of the request, but needed time to think through the request and perhaps ask clarifying questions. Council Member DuBois requested Mr. Kawahara ask for clarification. Mr. Kawahara indicated the request had potential ramifications for other aspects of the analysis. He needed time to consider those ramifications before asking questions. Mayor Holman noted the time as 10:23 P.M., 1 1/2 hours past the time to begin Agenda Item Number 7. In addition, discussion of a Closed Session was on the Agenda. She recalled her previous statement that she would allow public comment regarding Agenda Item Number 7 between 9:00 and 10:30. She did not believe the Council could conclude Agenda Item Number 6 in 10 minutes. She asked the City Attorney if she could table Agenda Item Number 6 and allow public comment on Agenda Item Number 7. Ms. Stump reported the Brown Act did not prevent the Mayor from holding the item, moving to Agenda Item Number 7, and then returning to Agenda Item Number 6. If colleagues disagreed with that procedure, they could overrule the Mayor. Mayor Holman estimated discussion of Agenda Item Number 6 would continue to 11:00 P.M. MINUTES Page 27 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Kniss inquired whether Agenda Item Number 7 was scheduled for a second meeting. Mayor Holman indicated a continuation night was scheduled for Agenda Item Number 7; however, the public had remained at the meeting in order to speak. She requested Council Members proceed with Agenda Item Number 6 quickly and efficiently. MOTION: Council Member Burt moved, seconded by Council Member Scharff to continue Agenda Item Number 7 - Discussion and Direction to Staff Regarding Establishment of an Office/R&D Annual Growth Limit to February 9, 2015. Mayor Holman noted several members of the public had remained in order to speak to Agenda Item Number 7. She asked if the Motion included allowing public comment in the current meeting. Council Member Burt did not believe there would be sufficient time for public comment. James Keene, City Manager, advised Agenda Item Number 7 was scheduled for February 9, 2015. MOTION PASSED: 7-2 Filseth, Wolbach no Council Member Burt expressed concern that Staff would not be able to proceed as directed if the consultant had questions regarding the Motion; therefore, the consultant should ask his questions at the current time. Mr. Kawahara advised that Council Member DuBois requested a change to the methodology for estimating the affordable housing cost from a pro rata share of the total cost of the project to assessing that cost on the basis of the difference between a market rate apartment rent versus the BMR rent. That was an annual difference. He inquired whether Council Member DuBois would capitalize that annualized difference in order to recognize the affordable housing cost. Council Member DuBois responded yes. The difference was $10 per net square foot. Applying the market rate for the office space would result in an additional amount of office space that would cover that difference. Council Member Burt inquired whether the consultant had to understand the Council's request and concur that it was a reasonable approach. Ms. Stump remarked that that could require some analysis and thought from the consultant. MINUTES Page 28 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Burt asked if the City Attorney meant that the request in the proposed Motion was reasonable under the State Density Bonus Law requirements and the City Ordinance. Ms. Stump did not understand the question. She urged the Council not to constrain the consultant's response and analysis. As the experts considered the topics in which the Council was interested, they could see aspects that were not specifically articulated but appeared to answer the intent of the question such that the experts could wish to bring those forward. The Council should allow that. Council Member Burt inquired whether the Motion needed to provide more latitude. Ms. Gitelman reported Staff would follow the Council's direction to the best of their ability. If the inquiry led in a slightly different direction, Staff would pursue those additional questions. Council Member Burt asked if Staff needed additional clarity. Ms. Gitelman replied no. In the course of the analysis, Staff would consider whether additional methodologies were reasonable and defensible and attempt to advise the Council. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to ensure that the parking analysis captures the effect of the loss of parking on Page Mill Road. Council Member Burt believed the requirement to initiate an RPP Program had some problems. He was unsure whether there was a method of enforcement to require occupants to use the parking garage. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to restate paragraph 5 as “Staff will explore a Conditional Use Permit that requires the occupants and users of the building to park in the garage. If occupants and users do not comply with the conditional use permit, the City may initiate a Residential Parking Permit program for the neighborhood.” Council Member Burt noted RPP Programs were initiated by neighborhoods rather than the City. Council Member DuBois understood the Ordinance allowed the City to implement an RPP Program as well as neighborhoods. MINUTES Page 29 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Burt did not want to establish an RPP Program if neighbors did not want it. Ms. Stump advised that the Council went through a thoughtful process to set up a procedure that allowed neighborhoods to come forward when there was a problem and standards to measure and assess that. That could speak to the Council's interest in a process for neighborhood parking intrusion that the City could readily and promptly address. Council Member DuBois' intent was to avoid the year-long process to implement an RPP Program. Council Member Burt felt "may" did not prescribe an exact sequence of events. When the item returned, he could probably be persuaded that the parking could be adequately addressed onsite if it were not for the huge office bonus. The Council would have some discretionary judgment regarding what was permissible for parking below the standard. He did not understand the Applicant's statement that they were looking for as much residential as possible. There was a huge difference between the permitted number of residential units and the proposed number. He did not view it as approaching a net benefit. Depending on how it was calculated, the proposed project in comparison to one under existing CS Zoning was a huge imbalance between jobs created and housing units created. The project provided a net gain of six residential units to offset the creation of 86 jobs. Depending on the size of the units, a project built to existing CS Zoning would be closer to a balance between jobs created and residential units created. Mr. Schwab explained that the Applicant did not utilize the maximum for residential units. The busy street did not lend itself to a high residential density. Housing on the first or second floor would be too close to traffic and, therefore, it was more logical to use the lower levels for commercial space. The Applicant could have planned smaller units, but there was a need for family housing. The mix of units provided for different size families as well as individuals. Council Member Burt remarked that the design elements of the project were exceptional for the size of the project. Council Member Kniss indicated the Council was requesting a great deal of information. The Council simply was putting the request for approval of the MND on hold until it had additional information. She was willing to support the Motion. MINUTES Page 30 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Berman expressed concern that the Council was setting a precedent. When setting a precedent, the Council needed to be sure it had the appropriate analysis. When talking about parking, speakers were confusing employees per square foot with parking space per square foot. The Code stated 250 square feet of office space per parking space. Data indicated 100 percent of employees did not drive single-occupant vehicles. There was a lack of clarity as to whether the analysis proposed in the Motion would be reasonable and defensible. He wanted to ensure Staff and the consultant understood that if they were concerned that an analysis was not reasonable and defensible, then they were to present that analysis along with a reasonable and defensible analysis so the Council would have options. The City had lost control based on the State Density Bonus Law and had no clarity as to what it could control. He questioned the Council's ability to question the amount of the benefit for the developer from the concessions. AMENDMENT: Council Member Berman moved, seconded by Council Member XX to direct Staff to return with additional analysis and information detailing varying levels of benefits including at 100 percent of the concession economic benefit, 50 percent of the concession economic benefit and 25 percent of the concession economic benefit. Ms. Gitelman understood Council Member Berman was requesting a legal analysis of whether the City could limit the value of the concessions so they were more comparable. Council Member Berman indicated that was one element. If Staff's analysis determined the benefit was $10 million, the Council would want to know the size of the project that would generate a $2.5 million benefit or a $5 million benefit. He was concerned about the office space rather than the housing. Ms. Gitelman was unsure whether Staff could analyze an unlimited number of scenarios. Perhaps Council Member Berman had one hypothetical scenario he would like Staff to analyze. Council Member Berman requested analyses of 25 percent and 50 percent of the determined benefit. Council Member DuBois clarified that Council Member Berman wanted to know the amount of concession necessary rather than the amount of concession sufficient to fulfill the State Density Bonus Law. It would be an equation that stated this much of the concession provided this much benefit. Mr. Kawahara understood the analysis would be separated into two parts. The first part was merely an economic exercise, the financial analysis as modified. The second part was more complicated. If the concessions were MINUTES Page 31 of 39 City Council Meeting Minutes: 1/26/2015 more than needed, then the Council wanted to know how much could be removed from the project and what the project would look like. Council Member Berman concurred. Mr. Kawahara advised that as an economist he could not answer that question. The Council would need an architect to design the building. That became a more complicated question. Mr. Schwab commented that if the Council wanted a way to make it equal, then it should understand that the State wanted to incentivize BMR housing. Council Member Berman wanted to see an analysis of varying degrees of benefit. Mr. Schwab explained that the Applicant considered how to efficiently use the building envelope for commercial and residential use. Because the residential portion sat atop the office portion, reducing the commercial space would reduce the residential space. Residential units reduced the value of an office building when it stood alone. He would not choose to put BMR units in there because it affected market rates and rental rates. This was meant to be an incentive. The Applicant attempted to use the space in a way that would not negatively affect anybody. Cap rate calculated the increases for future years. If the increases were expected to be higher, then cap rates could be lower. The Applicant attempted to approach the project in the way the State wanted in order to provide BMR units. Council Member Berman noted the project provided three BMR units in exchange for doubling the office space. That set a precedent for the rest of Palo Alto. The Council had to analyze that precedent carefully before it voted. Council Member Filseth did not believe the language needed to be part of the Motion. Council Member Berman was concerned that when the item returned, the Council would want to discuss those issues and possibly delay the project further. AMENDMENT FAILED DUE TO THE LACK OF A SECOND Mr. Northway requested Council Members include a date certain in the Motion. Council Member Wolbach requested an estimate of the cost for the consultant's analysis as the City would be paying for it. MINUTES Page 32 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman would need time to consult with partners. Council Member Wolbach requested a range for the cost. Ms. Gitelman could not provide one. Mr. Kawahara estimated his current scope of work at $12,000; therefore, the analysis cost could be in that range. Council Member Wolbach indicated the City could institute a RPP Program in any neighborhood. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to eliminate paragraph 5, sentence 2 “If occupants and users do not comply with the conditional use permit, the City may initiate a Residential Parking Permit program for the neighborhood.” from the Motion. Council Member DuBois wanted to know how the City would enforce the Conditional Use Permit without that language. Ms. Gitelman requested clarification of the remaining sentence in that paragraph. It did not reflect Council Member Burt's request for Staff to explore a Condition of Approval for occupants to park in the garage. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to restate paragraph 5 as “Staff will explore a condition of approval that requires the occupants and users of the building to park in the garage.” Council Member Wolbach felt the major concern was the negative impact of the project on the jobs/housing imbalance. Mayor Holman stated that CS Zoning allowed a 1:1 FAR. The Staff Report indicated the commercial FAR was 10,770 feet, the total FAR was 26,926. CS Zoning required the housing component be 16,156 square feet. The project provided 13,979 square feet. The project lacked approximately 2,200 square feet of housing as required by the Code. That was important because the pro forma could be based on something that was not the base. The Applicant was not building three additional BMR units; it was converting existing residential units to affordable units. She inquired whether the pro forma utilized the correct basis. MINUTES Page 33 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman clarified that CS Zoning allowed a certain FAR of residential space but did not require a specific FAR. The proposed amount was less than the allowable residential FAR. The total cost of site development was built into the analysis. Mayor Holman believed the Council should require the total square footage of housing allowed under CS Zoning before allowing concessions for additional BMR units that converted the amount allowed under the Code. Mr. Kawahara reiterated that in the straight CS Zoning alternative, Kaiser Marston determined that the project that would yield the highest return for the Applicant, i.e., the project the Applicant would most likely build without concessions, would be something less than the maximum permitted under CS Zoning. In the analysis, Kaiser Marston concluded that the developer would build the most amount of office permitted, the 0.4 FAR, and would reduce the amount of residential to the point that it would not trigger underground parking. Kaiser Marston concluded that the base case project was the one the Applicant would most likely build. Mayor Holman wished to define the TDM Program as an enforceable program. Ms. Gitelman reported the TDM Program was presently included as a Condition of Approval, so it would be enforced through regular Code enforcement procedures. If it was not implemented, Staff would use Code enforcement Staff to encourage voluntary compliance and take steps if that was not successful. If the Council wanted to recast that Condition of Approval as an agreement between the parties, Staff could investigate that with the Applicant. Mayor Holman wanted something that indicated an enforcement mechanism. The City had several projects with TDM agreements that were not enforceable. Ms. Gitelman stated all programs were enforceable through the Code enforcement mechanism, which included the potential to levy fines if Conditions of Approval were not complied with. If the Council wanted something more, then she needed clarification. Mayor Holman expressed concern about the trees being on the inside of the sidewalk and asked if the Applicant could incorporate some type of design component to create a canopy or barrier between the street and the sidewalk. MINUTES Page 34 of 39 City Council Meeting Minutes: 1/26/2015 Mr. Northway felt something could be done, but he was not sure exactly what off the top of his head. The landscaping plan contained a planting strip alongside the curb. Mayor Holman indicated that was not a barrier. Mr. Northway would check with the County regarding a barrier in its right-of- way. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to ask the applicant to explore a barrier between Page Mill Road and the sidewalk. Ms. Gitelman was not aware of any area in Palo Alto where something like that existed. Mayor Holman could not think of an area where no trees were located on the outside of the sidewalk. Ms. Gitelman explained that Staff attempted to make a really busy intersection more hospitable from an urban design perspective. Mayor Holman suggested leaving the design of the barrier to the Applicant. The barrier should be transparent rather than opaque. Vice Mayor Schmid inquired whether that would involve the County and its requirements. Mayor Holman clarified that the Applicant would ask that question. Vice Mayor Schmid asked if a barrier would impose a substantial cost. Mayor Holman had no idea. She was simply asking the Applicant to explore it. She would not offer enforcement of the TDM Program as an Amendment, but would request Staff provide clarity for an enforcement mechanism and penalties. Council Member Scharff believed it was inappropriate for the Council to tell its consultant which methodology to use if that methodology was not reasonable and defensible. That should be part of the Motion because the Council was creating a record. He questioned whether the Council wanted the consultant to perform an analysis that he determined was unreasonable and indefensible. MINUTES Page 35 of 39 City Council Meeting Minutes: 1/26/2015 INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct the consultant that if the methodology suggested in the Motion is determined to not be reasonable and defensible and the Director of Planning and Community Environment concurs with this determination, the consultant will not perform the analysis but instead will report back to City Council on why the methodology is not reasonable and defensible. Council Member Filseth asked if the State mandate stated that in order to contest the requirement to implement off-menu concessions, the Council had to provide a written and justifiable argument of why the extra value of the concessions exceeded the cost of the BMR units. Ms. Silver added that in order to deny the concessions, the Council needed to provide a written document which would be the Record of Land Use supported by substantial evidence which would essentially be the consultant's report. The Council needed to make a finding that the incentive was not required to provide for affordable rents or affordable sales price. Council Member Filseth would not want to put the City in a position where a disagreement between the City and the consultant would prevent the City from pursuing a justification. Council Member Scharff clarified that if the methodology suggested in the Motion was determined to be not reasonable and defensible and the Planning Director concurred, then the consultant would not perform the analysis. Ms. Gitelman would be happy to consult with colleagues. Ms. Silver advised that Staff had run through various scenarios with KMA, and did not believe the expense would be considerable. If Staff did not believe the methodology was defensible, then they would provide the Council with a confidential memorandum. Ms. Stump understood the Council's intent was to be fiscally responsible. To the extent that issues were sometimes matters of judgment and relative risk, Staff would provide the Council with confidential advice for its judgment. Vice Mayor Schmid inquired whether the consultant was comfortable with the Motion. If the consultant did not wish to perform the work, then Staff had permission to perform the work themselves or find another consultant. The consultant did not need an agreement from the Planning Director not to go ahead. MINUTES Page 36 of 39 City Council Meeting Minutes: 1/26/2015 Ms. Gitelman understood the discussion would be a dialog. More likely the consultant would indicate the methodology suggested by the Council Member was not reasonable and would suggest a reasonable method. Staff could agree to purse the alternative. Vice Mayor Schmid concurred. Mr. Kawahara reported that the various methodologies used for the project were consistent with all the other ones he had seen. The Council's proposed methodology veered off the course of typical and went beyond what everyone else did. There was some discomfort that came with that. Ms. Prince requested the Applicant have the benefit of the consultant's analysis. If the consultant determined the proposed methodology was unreasonable and Staff chose another consultant, then it would be unfair for the Applicant not to receive a copy of the consultant's analysis. Council Member Scharff did not understand the direction for the parking analysis to capture the effect of the loss of parking on Page Mill Road. Caltrans required elimination of the parking. The Municipal Code stated the amount of required parking. Council Member Burt explained that calculating the amount of the parking exemption for a mixed-use project should include the impacts of the project on parking demand. Part of that consideration should be a loss in on-street parking, not just solely in isolation the onsite parking. The impact of the project would go into the evaluation of the amount of parking the Applicant needed to provide. Council Member Scharff inquired about the work Staff would have to perform for that analysis. Ms. Gitelman would disclose the loss of on-street parking and compare that to the calculated parking demand and notify the Council if they anticipated a spillover impact. Mayor Holman asked if the County required removal of those parking spaces. Mr. Reich explained that the County intended to eliminate those parking spaces in order to extend the left-hand turn lane westbound from Page Mill Road to southbound El Camino Real. MINUTES Page 37 of 39 City Council Meeting Minutes: 1/26/2015 Council Member Scharff was confused by the need for a barrier. The Comprehensive Plan provided the notion of pedestrian-friendly, walkable neighborhoods. A barrier was not friendly or walkable. Perhaps Mayor Holman meant something other than a barrier. Mayor Holman suggested a safety measure, attractive bollards, or something that provided safety. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to change “barrier” to “safety measure” in paragraph 7 of the Motion. Council Member Berman did not understand the purpose of a barrier or safety measure given the distance between trees whether on the inside or outside of the sidewalk. AMENDMENT: Council Member Berman moved, seconded by Council Member Scharff to remove “To ask applicant to explore a safety measure between Page Mill Road and the sidewalk.” from the Motion. Council Member Berman was worried that this would be required for other projects when it did not set the appropriate aesthetic value. It would be a waste of Applicant's time. Council Member Scharff agreed that the barrier or safety measure was unnecessary. AMENDMENT FAILED: 3-6 Berman, Scharff, Wolbach yes AMENDMENT: Council Member Wolbach moved, seconded by Council Member Scharff to remove “to direct Staff to ensure that the parking analysis captures the effect of the loss of parking on Page Mill Road.” Council Member Wolbach felt it was unnecessary and unfair to analyze an impact over which the Applicant had no control. Council Member Scharff believed analyzing an impact that was not part of the project was a bad approach. Council Member Burt reiterated that a variety of factors on the site and in the surroundings were considered in calculating the reduction in the parking requirement. Staff would consider in their best professional judgment the amount of parking that would be needed for a mixed-use project. If there was quite a bit of parking on the street, then Staff would probably require less onsite parking. It was a valid consideration for Staff to include in their appraisal of the amount of parking needed for a mixed-use project. MINUTES Page 38 of 39 City Council Meeting Minutes: 1/26/2015 Staff was allowed to waive up to 20 percent based on a variety of factors. He assumed this would be a factor. AMENDMENT FAILED: 4-5 Berman, Kniss, Scharff, Wolbach yes Council Member Kniss requested Staff provide an estimate of a date for return of the item. Mr. Keene would provide the Council and the Applicant with a date as soon as possible after discussing a timeline with Staff. Mr. Northway wanted to know a date certain and requested Staff provide one in the next few days. MOTION AS AMENDED PASSED: 9-0 1 ATTACHMENT B ACTION NO. 2015-01 RECORD OF THE COUNCIL OF THE CITY OF PALO ALTO LAND USE APPROVAL FOR 441 PAGE MILL ROAD: SITE AND DESIGN REVIEW, DENSITY BONUS CONCESSIONS, AND DESIGN ENHANCEMENT EXCEPTIONS (13PLN-0307) On June 15, 2015, the Council of the City of Palo Alto approved the Mitigated Negative Declaration, Site and Design Review Application and Design Enhancement Exceptions (DEE) for a mixed use building in the Service Commercial (CS(D)) zone district. SECTION 1. Background. The City Council of the City of Palo Alto (“City Council”) finds, determines, and declares as follows: A. Stoecker and Northway Architects, on behalf of Norm Schwab has requested the City’s adoption and approval for the following items: (1) A Mitigated Negative Declaration, prepared in accordance with the California Environmental Quality Act (CEQA); (2) Site and Design Review application for a new 35,249 s.f. mixed-use building on a 26,929 s.f. site to provide 16 residential apartment units, including five below market rate units, and office and retail uses, with structured parking facilities (at surface and underground) providing 91 parking spaces including Design Enhancement Exceptions, (1), to allow a three foot alleviation of the build-to-line, and (2) to allow a three foot encroachment into the 10 foot landscape buffer at the rear of the site located at 423, 433, 441, and 451 Page Mill Road. (3) A Lot Coverage concession in the amount of 5,102 s.f. under the state density bonus law; (4) An FAR concession in the total amount of 8,323 s.f. under the state density bonus law; (5) An FAR concession for commercial square footage in the amount of 8,323 s.f. under the state density bonus law. 2 (6) A Parcel Map to merge four parcels into one parcel of land. (This request is subject to a separate but related application.) These properties are designated on the Comprehensive Plan land use map as Service Commercial, and are located within the Service Commercial (CS(D)) zone district. B. The Planning and Transportation Commission (Commission) reviewed the request for Site and Design Review, density bonus concessions and Mitigated Negative Declaration on June 11, 2014, and recommended approval. C. The Architectural Review Board (ARB) reviewed the application for Site and Design Review and Design Enhancement Exceptions on August 21, 2014, and continued the item for further review. The ARB reviewed the application again on October 2, 2014 and continued the item for further review. The ARB reviewed the application for a third time on October 30, 2014 and reviewed the project for consistency with Architectural Review findings, Design Enhancement Exception findings, and Context Based Design Criteria, and recommended approval. SECTION 2. Environmental Review. The City, as the lead agency for the Project, has determined that a Mitigated Negative Declaration (MND) will be required for the project subject to the provisions of the California Environmental Quality Act (CEQA). The Public Notice period for the MND began on November 08, 2013 and concluded on December 09, 2013. The City Council hereby approves the MND for the project and adopts the related Mitigation and Monitoring and Reporting Plan. SECTION 3. Site and Design Review Findings 1. The use will be constructed and operated in a manner that will be orderly, harmonious, and compatible with existing or potential uses of adjoining or nearby sites. The proposed mixed use building would introduce compatible and harmonious uses in relation to adjacent and nearby uses in this diverse and eclectic neighborhood. The proposed building and uses would be sited such that they would not result in an impact on adjacent properties. Landscaping would be added at the rear to ensure privacy for the adjacent residential uses. The traffic and parking for the project have been reviewed and it has been determined that the use would be adequately parked and that the traffic volumes would not result in an impact to 3 local intersections or roadways. The proposal removes several existing curb cuts and widens the sidewalk on the Page Mill Road frontage, improving pedestrian safety. 2. The project is consistent with the goal of ensuring the desirability of investment, or the conduct of business, research, or educational activities, or other authorized occupations, in the same or adjacent areas. The approval of the project would maintain the desirability of investment by providing a project with a mix of uses that would assist in improving the neighborhood by making better use of a series of single family parcels that have long been neglected due to their undesirable location fronting the expressway. The proposal makes more appropriate use of the property adjacent to the busy roadway by placing office and retail uses adjacent to the roadway while placing new residential uses higher above and away from the roadway on the third floor. The proposal would be executed in a manner that has the potential to improve the aesthetic quality of the area. Construction of all improvements will be governed by the regulations of the current Zoning Ordinance, the Uniform Building Code, and other applicable codes to assure safety and a high quality of development. 3. Sound principles of environmental design and ecological balance are observed in the project. The proposal, as a mixed use infill project, is intended to benefit the environment by providing new housing within the city to reduce vehicle commute times. Efficient use of space and the use of Green building practices are employed within the project. 4. The use will be in accord with the Palo Alto Comprehensive Plan. The project is compliant with several comprehensive plan policies as noted in the Comprehensive Plan Compliance Table (“Table”) attached to the Staff Report as Attachment D and incorporated by this reference. SECTION 4. ARB Findings/Context Based Design Criteria Findings/Design Enhancement Exception Findings Architectural Review Findings 1) The design of the proposed mixed use development is consistent and compatible with applicable elements of the City's Comprehensive Plan in that the site is designated as Service 4 Commercial, which allows for mixed use development and compliance with applicable Comprehensive Plan policies is outlined in the Comprehensive Plan compliance table; 2) The design is compatible with the immediate environment of the site in that the proposed building is located within a commercial zone district where a mixture of uses is appropriate. The building would be located on a significant arterial roadway where larger commercial buildings are common. The site is well utilized by the building’s design. The building fills the site creating a buffer between the busy roadway and the single-family residences behind; 3) The design is appropriate to the function of the project in that the design appropriately accommodates the varied mix of proposed uses, elevating the residences up off the street and away from the busy roadway, improving pedestrian accessibility and safety by removing curb cuts, and addressing the street in such a way as to provide building mass close to the street while maintaining a wide sidewalk; 4) In areas considered by the board as having a unified design character or historical character, the design is compatible with such character. The scale of the new three story mixed use building is consistent with the larger residential buildings directly across the street; 5) The design promotes harmonious transitions in scale and character in areas between different designated land uses in that the proposal includes ample landscape screening providing privacy between the mixed use project and the adjacent single family houses to the rear. The mixture of both commercial and residential uses helps to provide a transition between the busy roadway and the quieter single family residences; 6) The design is compatible with approved improvements both on and off the site in that the proposed mixed use building would be compatible with the other uses in the area and the uses within the building are divided in a manner to ensure they would be compatible with each other; 7) The planning and siting of the various functions and buildings on the site create an internal sense of order and provide a desirable environment for occupants, visitors and the general community in that the proposed design places the driveway at the far end of the site such that one could see the project and slowdown in time to safely enter the parking garage. It would also have a central pedestrian entry tower providing access to each of the three floors and the various uses within the building; 5 8) The amount and arrangement of open space are appropriate to the design and the function of the structures in that ample open space is provided in the form of private patio areas for the residences and there would be a large central courtyard at the third floor that would provide access to each of the residential units; 9) Sufficient ancillary functions are provided to support the main functions of the project in that the proposal includes sufficient parking and areas to accommodate trash and recycling needs of the development; 10) Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles in that adequate parking areas are proposed both at the surface and below grade, bicycle parking provided at various locations throughout the site, and safe pedestrian access is provided through the project; 11) Natural features are appropriately preserved and integrated with the project in that the proposal will replace the street tree canopy back from the street edge to ensure their continued success after the proposed street widening; 12) The materials, textures, colors and details of construction and plant material are appropriate expressions of the design and function in that the building is proposed to have a multitude of exterior finish materials with different colors and textures providing a high level of detail and visual interest; 13) The landscape design concept for the site, as shown by the relationship of plant masses, open space, scale, plant forms and foliage textures and colors create a desirable and functional environment in that the proposal includes landscape material where possible considering that the project sits upon a below grade parking structure. Landscape planters would be placed at the third floor and street trees and privacy screen trees are provided at the front and rear of the project respectively; 14) Plant material is suitable and adaptable to the site, capable of being properly maintained on the site, and is of a variety, which would tend to be drought-resistant and to reduce consumption of water in its installation and maintenance in that appropriate plant materials have been selected that are drought tolerant and suitable for their proposed locations; 15) The project exhibits green building and sustainable design that is energy efficient, water conserving, durable and 6 nontoxic, with high quality spaces and high recycled content materials. The project would comply with the stricter CalGreen tier 2 requirements. The residential portion would comply with Build-it-Green requirements. 16) The design is consistent and compatible with the purpose of architectural review, which is to: a. Promote orderly and harmonious development in the city; b. Enhance the desirability of residence or investment in the city; c. Encourage the attainment of the most desirable use of land and improvements; d. Enhance the desirability of living conditions upon the immediate site or in adjacent areas; and e. Promote visual environments which are of high aesthetic quality and variety and which, at the same time, are considerate of each other. The project as designed, and as conditioned, would promote an environment that is of high design quality and variety. Context Based Design Criteria Findings Pursuant to PAMC 18.16.090 (a), the project shall be: (A) Responsible to its context and compatible with adjacent development, and shall promote the establishment of pedestrian oriented design. “Responsible to context” is not a desire to replicate surroundings, but provide appropriate transitions to surroundings, and (B) Compatible with adjacent development, when apparent scale and mass is consistent with the pattern of achieving a pedestrian oriented design and when new construction shares general characteristics and establishes design linkages with the overall pattern of buildings so the visual unity of the street is maintained. If there is any visual unity existing on the block now, it is the four dilapidated, single-story homes on the four lots plus one adjacent single story structure on the adjacent CN- zoned lot, in use as a veterinary office. With the recent rezoning of the site to CS, the commercial zoning of this block fronting Page Mill Road was completed. Buildings taller 7 than one story anchor the corners of this commercial block and two and three story buildings are allowed by the zoning. Pursuant to PAMC 18.16.090 (b), additional findings are applicable, related to (1) pedestrian and bicycle environment, (2) street building facades, (3) massing and setbacks, (4) low-density residential transitions, (5) project open space, (6) parking design, (7) multi-acre sites (not applicable), (8) sustainability and green building design. The findings below are draft form and would be modified during the ARB review process. 1) Pedestrian and Bicycle Environment. The design of new projects shall promote pedestrian walkability, a bicycle friendly environment, and connectivity through design elements. The proposed building provides landscaping, decorative paving at the entries, benches, a staircase from the street for residential tenant use, and a slightly deeper setback than allowed per build-to-line/front setback requirement, allowing greater sidewalk width to create an inviting and active pedestrian environment. The proposed effective sidewalk width would be 10 feet plus a two foot wide planter strip along Page Mill Road and an additional setback to the building. 2) Street Building Facades. Street facades shall be designed to provide a strong relationship with the sidewalk and the street (s), to create an environment that supports and encourages pedestrian activity through design elements. The building front wall contains two commercial doors to the retail space(s), and a pedestrian staircase leading to the residential units on the third floor. The glassy façade provides viewing opportunities, contributing to an active pedestrian oriented area. 3) Massing and Setbacks. Buildings shall be designed to minimize massing and conform to proper setbacks. The building front wall is generally similar in placement on the site as is the Kelly Moore paint store at 411 Page Mill Road. The glass wall treatment will minimize massing along Page Mill Road; the building is proposed to be set back farther than the build-to-line/front setback, for which a DEE is requested. The rear and side setbacks have proper setbacks (zoning table confirms these setbacks are in compliance with CS zoning code minimum setbacks). 8 4) Low Density Residential Transitions. Where new projects are built abutting existing lower scale residential development, care shall be taken to respect the scale and privacy of neighboring properties. Screen trees are proposed and an approval condition would require nighttime window shades to minimize light intrusion. 5) Project Open Space: Private and public open space shall be provided so that it is usable for the residents and visitors of the site. Public open space is the sidewalk area with landscaping and trees on private property offered to the public to enjoy. The usable private residential space (balconies) and common open space for the residential units is adequate 6) Parking Design: Parking shall be accommodated but shall not be allowed to overwhelm the character of the project or detract from the pedestrian environment. The project provides parking below grade and in the rear of the building, with one 20’ wide driveway - a reduction the number of driveways from four to one - to improve the pedestrian environment. 7) Large Multi-Acre Sites – not applicable 8) Sustainability and green building design: The project is designed to meet the City’s locally amended Cal Green standards (Tier 2 mandatory) for the commercial component, and green point rated for the residential component of the building. The ARB will discuss and evaluate the “green” features of the project. Design Enhancement Exception Findings: The requested Design Enhancement Exceptions (DEE) are consistent with the following findings as stated in PAMC 18.76.050 (c). Note: These draft DEE Findings are provided for ARB review. Exceptions are requested for alleviation of the build-to-line (three feet further from the front property line),and encroachment into the landscape buffer (three feet into the 10 foot landscape screen area). (1) There are exceptional or extraordinary circumstances or conditions applicable to the property or site improvements involved that do not apply generally to property in the same zone district. This Finding can be made in the affirmative. To accommodate the below grade parking the proposed building footprint would span the entire site, resulting in an expansive 9 roof capped at a restrictive 35 foot height limit as well as being subject to a zoning requirement to place 50% of the building up to the front setback line. Placing 50% of the building this close to the street in this location would not leave enough room to accommodate street trees in front of the project due to existing utility locations in the sidewalk and the future plans and regulations of Santa Clara County that has jurisdiction over Page Mill Road as a County expressway. They don’t allow street trees within seven feet of the roadway edge and they have future plans to widen the existing roadway by two feet, further reducing the sidewalk width. (2) The granting of the application will enhance the appearance of the site or structure, or improve the neighborhood character of the project and preserve an existing or proposed architectural style, in a manner which would not otherwise be accomplished through strict application of the minimum requirements of this title (Zoning) and the architectural review findings set forth in Section 18.76.020(d). This Finding can be made in the affirmative. The alleviation of the build to line and the encroachment into the landscape screen area would allow the building to be set back from the street three additional feet to provide a wider sidewalk and additional room for street trees while still maintaining appropriate room for privacy screening for the rear R-1 neighbors. (3) The exception is related to a minor architectural feature or site improvement that will not be detrimental or injurious to property or improvements in the vicinity and will not be detrimental to the public health, safety, general welfare or convenience. This Finding can be made in the affirmative in that the alleviation of the build to line and the encroachment into the landscape screen area would have the positive impact of providing wider sidewalks, pedestrian amenities, and additional room for street trees rather than any negative impact. SECTION 5. State Density Bonus Concession Findings (i) The Development is eligible for the Density Bonus and any Concessions, waivers, modifications, or revised parking standards requested. By providing three out of the 10 units as low income units the project is eligible for three concessions. The applicant has used the revised parking standards allowed by the state density bonus law resulting in a reduction of three parking spaces. 10 (ii) Any requested Concession or Incentive will result in identifiable, financially sufficient, and actual cost reductions based upon the financial analysis and documentation provided. The City finds that the Concessions and Incentives included in Section 18.50.050(c) will result in identifiable, financially sufficient, and actual cost reductions. The City’s consultant has done a fiscal analysis of the applicants pro forma and has found that the requested concessions are necessary in order to provide the three Below Market Rate dwelling units. (iii) If the Concession or Incentive includes mixed-use development, a finding that all the requirements included in Government Code Section 65915(k)(2) have been met. All the requirements of Government Code Section 65915(K)(2)have been met in that the commercial portions of the project are necessary to support the residential component and the commercial components are compatible with the residential uses and other surrounding uses. SECTION 6. Site and Design Review Approval and DEE Granted. Site and Design Review, and DEEs are granted by the City Council under Palo Alto Municipal Code Section 18.30(G).070, and Section 18.76.010 for application 13PLN-00307, subject to the conditions of approval in Section eight of the Record. SECTION 7. Plan Approval. The plans submitted for Building Permit shall be in substantial conformance with those plans prepared by Stoecker and Northway Architects, consisting of 35 pages, dated May 01, 2015, and received May 21, 2015, except as modified to incorporate the conditions of approval in Section Eight. A copy of these plans is on file in the Department of Planning and Community Environment. This document, including the conditions of approval in Section eight, shall be printed on the cover sheet of the plan set submitted with the Building Permit application. SECTION 8. Conditions of Approval. Department of Planning and Community Environment 1. The plans submitted for Building Permit shall be in substantial conformance with plans received on May 21, 2015, except as modified to incorporate the following conditions of approval and any additional conditions placed on the project by 11 the Planning Commission, Architectural Review Board, or City Council. The following conditions of approval shall be printed on the cover sheet of the plan set submitted with the Building Permit application. 2. All noise producing equipment shall not exceed the allowances specified in Section 9.10 Noise of the Palo Alto Municipal Code. 3. Any existing city street trees approved to remain shall be maintained and protected during construction per City of Palo Alto standard requirements. 4. All landscape material shall be well maintained for the life of the project and replaced if it fails . 5. Any exterior modifications to the building or property shall require Architectural Review. This includes any new signs. 6. Residents and employee occupants of the building are required to park in the building’s garage rather than on street. The City may request a status report on the effectiveness of this measure at any time. The City may also require adjustments to the TDM program to achieve desired results if needed. 7. An Affordable Rental Housing Agreement for the three units designated for Lower Income Households shall be executed and recorded prior to building permit issuance. Applicant will enter into a Regulatory Agreement restricting three units for lower income households consistent with the city’s Below Market Rate Housing Program guidelines.” 8. All of the on-site parking spaces shall remain unassigned such that no single space shall be encumbered by any individual or tenant. 9. A Parcel Map, to merge the four parcels into a single parcel, must be recorded with the County of Santa Clara prior to building permit issuance. 10. The applicant must notify the Public Art Office of their intent to fulfill the public art requirement by payment of the in-lieu fee instead of commissioning art on site. The applicant is required to submit the amount equal to 1% of the estimated construction valuation into the public art fund account prior to their application for a building permit and provide a copy of the receipt to the Public Art office. 12 According to the original Public Art application form, the estimated art budget is $160,000. At the time of their building permit application, the estimated construction valuation will be confirmed. If the estimated construction valuation has increased at that time, the applicant will have to submit 1% of the new estimated construction valuation prior to the issuance of a building permit. If the applicant chooses to implement the art on site, this condition to pay the in-lieu fee would no longer be valid. The plans submitted for building permit must include the proposed art installation if the on-site placement of art option is chosen. 11. Mitigation Measures C-1: The effects of construction activities would be increased dust fall and locally elevated levels of particulate matter downwind of construction activity. Construction dust has the potential for creating a nuisance at nearby properties. This impact is considered potentially significant but normally mitigated by implementing the following control measures: During demolition of existing structures: Water active demolition areas to control dust generation during demolition and pavement break-up. Cover all trucks hauling demolition debris from the site. Use dust-proof chutes to load debris into trucks whenever feasible. During all construction phases: Pave, apply water 3x/daily, or apply (non-toxic) soil stabilizers on all unpaved access roads, parking areas, and staging areas at construction sites. Hydro-seed or apply (non-toxic) soil stabilizers to inactive construction areas (previously graded areas inactive for ten days or more). Enclose, cover, water 2 times daily, or apply (non-toxic) soil binders to exposed stockpiles (dirt, sand, etc.). Limit traffic speeds on unpaved roads to 15 miles per hour. Install sandbags or other erosion control measures to prevent silt runoff to public roadways. 13 Replant vegetation in disturbed areas as quickly as possible. The above measures include feasible measures for construction emissions identified by the BAAQMD for large sites. According to the District threshold of significance for construction impacts, implementation of the measures would reduce construction impacts of the project to a less than significant level. 12. Mitigation Measures: See H-3 under Section VII, Hazards and Hazardous Materials 13. Mitigation Measures B-1: The applicant shall abide by all provisions of Sections 3503 and 3503.5 of the State Fish and Game Code and Migratory Bird Treaty Act of 1918 (MBTA) as published in the Federal Register (Vol. 70, No. 49; March 15, 2005). Although there is no vegetation on the project site that may contain nesting birds, there may be nesting birds in existing vegetation abutting the proposed project site. To protect any nesting birds, the proposed project may avoid construction during the nesting period. Alternatively, a qualified wildlife biologist (to be hired by the applicant) shall conduct a survey for nesting birds that are covered by the MBTA and/or Sections 3503 and 3503.5 of the State Fish and Game Code in the vicinity of the project site. This survey shall cover all areas that would be disturbed as a result of construction-related activities during the nesting period, and shall include a “buffer zone” (an area of potential sensitivity, beyond the bounds of the proposed project construction area) which shall be determined by the biologist based on his or her professional judgment and experience. This buffer zone may include off-site habitat. This biological survey shall be conducted no more than 14 days prior to the commencement of construction activities. The wildlife biologist shall provide a report to the City promptly detailing the findings of the survey. No construction shall be conducted until this report has been provided to the City and the City has authorized in writing the commencement of construction activities in accord with the biologist’s findings. 14. Mitigation Measures F-1: All earthwork and site drainage, including foundation and basement excavations, retaining wall backfill, preparation of the subgrade beneath hardscape, placement and compaction of engineered fill, and surface drainage should be performed in accordance with the 14 Geotechnical Report prepared by Cornerstone Earth Group dated May 2, 2013. 15. Mitigation Measures F-2: The design of all buildings shall be designed in accordance with current earthquake resistant standards, including the 2007 CBC guidelines and design recommendations regarding the potential for localized liquefaction presented in the Geotechnical Investigation provided by Cornerstone Earth Group. 16. Mitigation Measure F-3: Prior to building permit approval, the applicant shall submit a well-designed shoring system for the basement excavation to be designed by a licensed engineer subject to review and approval by Public Works Department. 17. Mitigation Measure F-4: The basement walls be designed for hydrostatic pressure (an additional 40pcf of fluid pressure) and waterproofed. 18. Mitigation Measure F-5: The garage/basement slab should be designed for an uplift pressure of 250 pounds per square foot, which is equivalent to approximately 4 feet of hydraulic lift. At a minimum a vapor retarder should be placed below the slab mat foundation. Due to the proximity of the slab to the ground water table, a waterproofing membrane should be in place. 19. Mitigation Measures H-1: Because the site is documented to be contaminated by VOCs, primarily trichloroethylene (TCE) a Health and Safety Plan (HASP) and a Site Mitigation Plan (SMP), shall be prepared prior to construction, and adhered to during construction and excavation activities. The SMP will provide recommended measures to mitigate the long-term environmental or health and safety risks caused by TCEs in the soil and groundwater. All workers on site should be read and understand the HASP and SMP, and copies should be maintained on site during construction and excavation at all times. The SMP shall be reviewed and approved by the Santa Clara County Department of Environmental Health, the San Francisco Bay Regional Water Quality Control Board or other appropriate agency addressing oversight to establish management practices for handling contaminated soil or other materials if encountered during demolition. The details of the SMP shall include the provision of a vapor barrier (refer to H-3) and details about ventilation systems for the garages and buildings, including air exchange rates and 15 operation schedules for the systems. The SMP will also contain contingency plans to be implemented during excavation activities if unanticipated hazardous materials are encountered. 20. Mitigation Measures H-2: A Remedial Risk Management Plan (RRMP) shall be developed and followed by current and future owners, tenants, and operators. The plan will include the implementation of the described remedies and engineering design. 21. Mitigation Measures H-3: A vapor barrier system beneath the garage slab and walls shall be installed to mitigate any issues with the potential presences of VOCs or (TCE). The membrane system should consist of a 60ml, spray applied, seamless, solvent free membrane. Specifications for the vapor barrier included in the SMP shall document proper installation, coupon samples of the membrane (to verify its thickness) and a smoke test would also need to be performed. 22. Mitigation Measure H-5: A properly designed and operating and Heating, Ventilation, Air Conditioning (HVAC) system for the building and below grade parking garage. An HVAC mechanical engineer shall be consulted to evaluate design options for a building ventilation system that helps limit potential vapor intrusion concerns. 23. Mitigation Measure H-6: A passive sub-slab depressurization system shall be designed for the project. The system inhibits soil gases from flowing into the building, reducing volatile chemical entry into the building. This design shall be reviewed by the Regional Water Quality Control Board prior to the issuance of a building permit. 24. Mitigation Measures T-1: The applicant shall provide clear sight lines for drivers exiting the site. Within the corner site triangle: o Shrubs, fencing, and signs no higher than three feet above the adjacent street surface. o Tree branches no lower than seven feet above the adjacent street surface. o No poles, trees and other tall object situated so that they would create a wall effect when viewed at an oblique angle. 25. The Development Impact Fees, approximated at $642,587.00, shall be paid prior to building permit issuance. 16 26. Automatic night shades shall be added to the office windows facing the single family parcels to the rear to ensure that lighting from the office uses does not disturb the residential neighbors. Public Works, Urban Forestry Division PRIOR TO DEMOLITION, BUILDING OR GRADING PERMIT ISSUANCE 26. Page Mill Road Frontage. Nine existing Shumard oak trees that would not survive construction are approved for removal. Five new trees shall be planted in the right-of-way planters to function as a consistent link to the overall Urban Forest theme for this section of Page Mill Road (from El Camino Real to Park Avenue). A sixth tree, planted behind the City property adjacent to the parking garage ingress/egress, should be a different species to help differentiate the entry from the vehicular perspective. 27. ROW species (5 trees) shall be changed to Quercus shumardii (Shumard Oak). Garage planter (6th tree) shall be Chitalpa tashkentensis (Chitalpa), a flowering accent tree for native garden settings (or approved equivalent). 28. Performance standards for all trees shall conform to the following: Size: 36” box. Planting Stock, Materials and Quality meeting Tree Technical Manual Standards, Section 3.35, planted per PW Detail #603a for Structural Soil. Irrigation: each tree shall be provided with three bubblers per PW Detail #513. 29. Engineered Soil Mix (ESM). Civil plans and landscape plans shall provide for optimum root growth under sidewalk and hardscape areas. Show clearly all areas designated for ESM adjacent to tree planter areas out to curb, 24” depth minimum (or as limited by utility vault sections of various origins). Specification and Detail sheets shall show listed Engineered Soil Mix (Structural Soil), PW Specification Section 30 (all sheets) and PW Detail #603a, printing all on stamped job copy and building permit copy plan sets. 30. Canary Island Date Palm-Special Care Program. The site plan notes shall show the existing tree provision, “Protect Canary Island Date Palm using modified Type III protection (see attached handout) and chain link fencing 6’ from trunk until final landscaping and irrigation is installed. Tree shall be fertilized and sprayed for pink rot disease control. Mandatory pruning by an ISA certified tree worker shall establish an aesthetic ‘pineapple bowl’ section for maintaining a maximum 45- 17 degreee green frond retention (60-degree pruning is detrimental and prohibited). Brown trunk shall be skinned from the bowl to the ground. Trimming equipment shall be sanitized with BMP recommended process. 31. SITE PLAN REQUIREMENTS. The Site Plans must show Type I & Type III fencing (see above) around the existing Date Palm a bold dashed line enclosing the Tree Protection Zone as shown on Detail #605, Sheet T-1, and the City Tree Technical Manual, Section 6.35-Site Plans. DURING CONSTRUCTION 32. SHEET T-1. The building permit plan set must include the city-provided, Sheet T-1 (Tree Protection-it's Part of the Plan!) Applicant shall complete and sign the sheet Tree Disclosure Statement. Inspection #1 applies to this project. 33. TREE PROTECTION VERIFICATION. Prior to demolition, grading or building permit issuance, a written verification from the contractor that the required protective fencing is in place shall be submitted to the Building Inspections Division. The fencing shall contain required warning sign and remain in place until final inspection of the project. Tree fencing shall be adjusted after demolition if necessary to increase the tree protection zone as required by the project arborist. 34. TREE DAMAGE. The applicant shall be responsible for the repair or replacement of any publicly owned or protected trees that are damaged during the course of construction, pursuant to Title 8 of the Palo Alto Municipal Code, and city Tree Technical Manual, Section 2.25. 35. GENERAL. The following general tree preservation measures apply to all trees to be retained: No storage of material, topsoil, vehicles or equipment shall be permitted within the tree enclosure area. The ground under and around the tree canopy area shall not be altered. Trees to be retained shall be irrigated, aerated and maintained as necessary to ensure survival. Environmental Services Division 36. PAMC 16.09.180(b)(9) Covered Parking: Drain plumbing for interior parking garage floor drains must be connected to an oil/water separator with a minimum capacity of 100 gallons, and to the sanitary sewer system. It is recommended that the stormwater pump area in the garage be labeled: no dumping flows to Bay or similar language. 18 37. PAMC 16.09.055 Unpolluted Water: Unpolluted water shall not be discharged through direct or indirect connection to the sanitary sewer system. The uncovered ramp to the garage must be connected to the storm drain system. 37. PAMC 16.09.180(b)(14) Architectural Copper: on and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper granule containing asphalt shingles shall not be permitted for use on any residential, commercial or industrial building for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt, provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current edition of the Palo Alto Historical and Architectural Resources Report and Inventory. 38. PAMC 16.09.180(b)(5) Condensate from HVAC: Condensate lines shall not be connected or allowed to drain to the storm drain system. 39. 16.09.215 Silver Processing: Facilities conducting silver processing (photographic or X-ray films) shall either submit a treatment application or waste hauler certification for all spent silver bearing solutions. 650-329-2421. 40. PAMC 16.09.180(b)(b) Copper Piping: Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where alternate materials are not practical. The plans must specify that copper piping will not be used for wastewater plumbing. 41. PAMC 16.09.220(c)(1) Dental Facilities That Remove or Place Amalgam Fillings: An ISO 11143 certified amalgam separator device shall be installed for each dental vacuum suction system. The installed device must be ISO 11143 certified as capable of removing a minimum of 95 percent of amalgam. The amalgam separator system shall be certified at flow rates comparable to the flow rate of the actual vacuum suction system operation. Neither the separator device nor the related plumbing shall include an automatic flow bypass. For facilities that require an amalgam separator that exceeds the practical capacity of ISO 11143 test methodology, a non-certified separator will be 19 accepted, provided that smaller units from the same manufacturer and of the same technology are ISO-certified. 42. PAMC 16.09.205(a) Cooling Systems, Pools, Spas, Fountains, Boilers and Heat Exchangers: It shall be unlawful to discharge water from cooling systems, pools, spas, fountains boilers and heat exchangers to the storm drain system. 43. PAMC 16.09.165(h) Storm Drain Labeling: Storm drain inlets shall be clearly marked with the words "No dumping - Flows to Bay," or equivalent. Undesignated Retail Space: 44. PAMC 16.09 Newly constructed or improved buildings with all or a portion of the space with undesignated tenants or future use will need to meet all requirements that would have been applicable during design and construction. If such undesignated retail space becomes a food service facility the following requirements must be met: Public Works Department Engineering Division 45. SIDEWALK, CURB & GUTTER: As part of this project, the applicant must replace those portions of the existing sidewalks, curbs, gutters or driveway approaches in the public right-of-way along the frontage(s) of the property that are broken, badly cracked, displaced, or non-standard, and must remove any unpermitted pavement in the planter strip. Contact Public Works’ inspector at 650-496-6929 to arrange a site visit so the inspector can determine the extent of replacement work. The site plan submitted with the building permit plan set must show the extent of the replacement work or include a note that Public Works’ inspector has determined no work is required. The plan must note that any work in the right-of-way must be done per Public Works’ standards by a licensed contractor who must first obtain a Street Work Permit from Public Works at the Development Center. 46. STREET TREES: The applicant may be required to replace existing and/or add new street trees in the public right-of-way along the property’s frontage(s). Call the Public Works’ arborist at 650-496-5953 to arrange a site visit so he can determine what street tree work, if any, will be required for this project. The site plan submitted with the building permit plan set must show the street tree work that the arborist has determined, including the tree species, size, location, staking and irrigation requirements, or include a note that Public Works’ arborist has determined no street tree work is 20 required. The plan must note that in order to do street tree work, the applicant must first obtain a Permit for Street Tree Work in the Public Right-of-Way from Public Works’ arborist (650-496-5953). 47. PEDESTRIAN & STREETSCAPE IMPROVEMENTS: Additional streetscape design elements and amenities such as bike racks and decorative street lights will be considered pending future discussions with the Santa Clara County Department of Roads and Airports, Architectural Review Board, and other city departments. The following comments are provided to assist the applicant at the building permit phase. You can obtain various plan set details, forms and guidelines from Public Works at the City's Development Center (285 Hamilton Avenue) or on Public Works’ website: http://www.cityofpaloalto.org/gov/depts/pwd/default.asp. Include in plans submitted for a building permit: 48. LOT MERGER: A Certificate of Compliance application for lot line removal/merger must be submitted to Public Works, approved by pertinent city departments, and recorded by the Santa Clara County Clerk-Recorder’s office prior to building permit issuance. Public Works processes and routes lot line removal/merger applications and routes documents to city departments for review and comment. A $3000 Certificate of Compliance plan check fee will be collected when the lot line removal/merger application is submitted to Public Works officials. The application form, soils report waiver, and checklist are available at the Development Center at 285 Hamilton Avenue or on the city’s website. 49. BASEMENT DRAINAGE: Due to high groundwater throughout much of the City and Public Works prohibiting the pumping and discharging of groundwater, perforated pipe drainage systems at the exterior of the basement walls or under the slab are not allowed for this site. A drainage system is, however, required for all exterior basement-level spaces, such as lightwells, patios or stairwells. This system consists of a sump, a sump pump, a backflow preventer, and a closed pipe from the pump to a dissipation device onsite at least 10 feet from the property line, such as a bubbler box in a landscaped area, so that water can percolate into the soil and/or sheet flow across the site. The device must not allow stagnant water that could become mosquito habitat. Additionally, the plans must show that exterior basement-level spaces are at least 7-3/4” below any adjacent windowsills or doorsills to minimize the potential for 21 flooding the basement. Public Works recommends a waterproofing consultant be retained to design and inspect the vapor barrier and waterproofing systems for the basement. 50. BASEMENT SHORING: Shoring for the basement excavation, including tiebacks, must not extend onto adjacent private property or into the City right-of-way without having first obtained written permission from the private property owners and/or an encroachment permit from Public Works. 51. DEWATERING: Basement excavations may require dewatering during construction. Public Works only allows groundwater drawdown well dewatering. Open pit groundwater dewatering is disallowed. Dewatering is only allowed from April through October due to inadequate capacity in our storm drain system. The geotechnical report for this site must list the highest anticipated groundwater level. We recommend a piezometer to be installed in the soil boring. The contractor must determine the depth to groundwater immediately prior to excavation by using the piezometer or by drilling an exploratory hole if the deepest excavation will be within 3 feet of the highest anticipated groundwater level. If groundwater is found within 2 feet of the deepest excavation, a drawdown well dewatering system must be used, or alternatively, the contractor can excavate for the basement and hope not to hit groundwater, but if he does, he must immediately stop all work and install a drawdown well system before he continues to excavate. Public Works may require the water to be tested for contaminants prior to initial discharge and at intervals during dewatering. If testing is required, the contractor must retain an independent testing firm to test the discharge water for the contaminants Public Works specifies and submit the results to Public Works. 52. Public Works reviews and approves dewatering plans as part of a Street Work Permit. The applicant can include a dewatering plan in the building permit plan set in order to obtain approval of the plan during the building permit review, but the contractor will still be required to obtain a street work permit prior to dewatering. Alternatively, the applicant must include the above dewatering requirements in a note on the site plan. Public Works has a sample dewatering plan sheet and dewatering guidelines available at the Development Center and on our website. 53. GRADING & DRAINAGE PLAN: The plan set must include a grading & drainage plan prepared by a licensed professional that includes existing and proposed spot elevations and drainage flow arrows to demonstrate proper drainage of the site. Adjacent grades must slope away from the house a minimum of 2%. 22 Downspouts and splashblocks should be shown on this plan, as well as any site drainage features such as swales. Grading will not be allowed that increases drainage onto, or blocks existing drainage from, neighboring properties. Public Works generally does not allow rainwater to be collected and discharged into the street gutter, but encourages the developer to keep rainwater onsite as much as feasible by directing runoff to landscaped and other pervious areas of the site. See the Grading & Drainage Plan Guidelines for Residential Developments on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2717 54. GRADING & EXCAVATION PERMIT: An application for a grading & excavation permit must be submitted to Public Works when applying for a building permit. The site plan must include a table providing the cubic yardage of dirt being cut and filled outside of the building footprint. The application and guidelines are available at the Development Center and on our website. 55. STORM WATER POLLUTION PREVENTION: The City's full- sized Pollution Prevention - It's Part of the Plan sheet must be included in the plan set. Copies are available from Public Works at the Development Center or on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2732 56. STREET TREES: Show all existing street trees in the public right-of-way. Any removal, relocation or planting of street trees; or excavation, trenching or pavement within 10 feet of street trees must be approved by Public Works' arborist (phone: 650-496-5953). This approval shall appear on the plans. Show construction protection of the trees per City requirements. 57. WORK IN THE RIGHT-OF-WAY: The plans must clearly indicate any work that is proposed in the public right-of-way, such as sidewalk replacement, driveway approach, or utility laterals. The plans must include notes that the work must be done per City standards and that the contractor performing this work must first obtain a Street Work Permit from Public Works at the Development Center. If a new driveway is in a different location than the existing driveway, then the sidewalk associated with the new driveway must be replaced with a thickened (6” thick instead of the standard 4” thick) section. Additionally, curb cuts and driveway approaches for abandoned driveways must be replaced with new curb, gutter and planter strip. 58. IMPERVIOUS SURFACE AREA: The project will be creating or replacing 500 square feet or more of impervious surface. Accordingly, the applicant shall provide calculations of the 23 existing and proposed impervious surface areas with the building permit application. The Impervious Area Worksheet for Land Developments form and instructions are available at the Development Center or on our website: http://www.cityofpaloalto.org/civicax/filebank/documents/2718 59. STORM WATER TREATMENT: This project must meet the latest State Regional Water Quality Control Board’s (SRWQCB) C.3 provisions. The applicant is required to satisfy all current storm water discharge regulations and shall provide calculations and documents to verify compliance. All projects that are required to treat stormwater will need to treat the permit- specified amount of storm water runoff with the following low impact development methods: rainwater harvesting and reuse, infiltration, evapotranspiration, or bio-treatment. However, bio-treatment (filtering storm-water through vegetation and soils before discharging to the storm drain system) will be allowed only where harvesting and reuse, infiltration and evapotranspiration are infeasible at the project site. Vault- based treatment will not be allowed as a stand-alone treatment measure. Where stormwater harvesting and reuse, infiltration, or evapotranspiration are infeasible, vault-based treatment measures may be used in series with bio-treatment, for example, to remove trash or other large solids. Reference: Palo Alto Municipal Code Section 16.11.030(c) 60. The applicant must incorporate permanent storm water pollution prevention measures that treat storm water runoff that are site specific. The prevention measures shall be reviewed by a qualified third-party reviewer who needs to certify that it complies with the Palo Alto Municipal Code requirements. This is required prior to the issuance of a building permit. The third-party reviewer shall be acquired by the applicant and needs to be on the Santa Clara Valley Urban Runoff Pollution Prevention Program’s (Program) list of qualified consultants. (http://www.scvurpppw2k.com/consultants2012.htm?zoom_highlight=c onsultants) Any consultant or contractor hired to design/and/or construct a storm water treatment system for the project cannot certify the project as a third-party reviewer. 61. Within 45 days of the installation of the required storm water treatment measures and prior to the issuance of an occupancy permit for the building, third-party reviewer shall also submit to the City a certification for approval that the project’s permanent measures were constructed and installed in accordance to the approved permit drawings. The project must also enter into a maintenance agreement with the City to guarantee the ongoing maintenance of the permanent C.3 storm 24 water discharge compliance measures. The maintenance agreement shall be executed prior to permit issuance. 62. The applicant is required to paint the “No Dumping/Flows to Matadero Creek” logo in blue color on a white background, adjacent to all storm drain inlets. Stencils of the logo are available from the Public Works Environmental Compliance Division, which may be contacted at (650) 329-2598. A deposit may be required to secure the return of the stencil. Include the instruction to paint the logos on the construction grading and drainage plan. Include maintenance of these logos in the Hazardous Materials Management Plan, if such a plan is part of this project. 63. BEST MANAGEMENT PRACTICES (BMP’s): The applicant is required to submit a conceptual site grading and drainage plan. In order to address potential storm water quality impacts, the plan shall identify BMP’s to be incorporated into the Storm Water Pollution Prevention Plan (SWPPP) that will be required for the project. The SWPPP shall include permanent BMP’s to be incorporated into the project to protect storm water quality. (Resources and handouts are available from PWE. Specific reference is made to Palo Alto’s companion document to “Start at the Source”, entitled “Planning Your Land Development Project”). The elements of the PWE-approved conceptual grading and drainage plan shall be incorporated into the building permit plans. 64. The developer shall require the contractor to incorporate BMP's for storm water pollution prevention in all construction operations, in conformance with the SWPPP prepared for the project. It is unlawful to discharge any construction debris (soil, asphalt, sawcut slurry, paint, chemicals, etc.) or other waste materials into gutters or storm drains. (PAMC Chapter 16.09). 65. PARKING STRUCTURE DRAINS: Drains within the covered floors of the parking structures shall be connected to oil-water separators and sanitary sewer lines. Stormwater runoff from any exposed surface or roof parking areas without canopies need to be treated per C.3 requirements. 66. GREASE/OIL REMOVAL DEVICE: If there will be a kitchen and food serving area in the new building, any drains in the food service facilities shall be connected to a grease removal device and located on private property. 67. LOADING DOCK: Any loading dock areas shall be covered and graded so that no storm water enters and flows through the space. Any runoff from the loading dock area shall be kept isolated from the storm drainage system. If the loading 25 area/dock contains a drain, it shall be connected to the sanitary sewer through a manually operated fail-safe valve. 68. LOGISTICS PLAN: The contractor must submit a logistics plan to the Public Works Department prior to commencing work that addresses all impacts to the City’s right- of-way, including, but not limited to: pedestrian control, traffic control, truck routes, material deliveries, contractor’s parking, concrete pours, crane lifts, work hours, noise control, dust control, storm water pollution prevention, contractor’s contact, noticing of affected businesses, and schedule of work. The plan will be attached to a street work permit. 69. SANTA CLARA COUNTY DEPARTMENT OF ROADS AND AIRPORTS: The Page Mill Road right of way is subject to permitting and review from the Santa Clara County Department of Roads and Airports. County right-of-way across Page Mill Road extends from property line to property line. Please include a record of county approval on the planset submitted for a building permit. 70. FINALIZATION OF BUILDING PERMIT: The Public Works Inspector shall sign off the building permit prior to the finalization of this permit. All off-site improvements shall be finished prior to this sign-off. Similarly, all as-builts, on- site grading, drainage and post-developments BMP’s shall be completed prior to sign-off Public Works, Water Quality 71. PAMC 16.09.170, 16.09.040 Discharge of Groundwater. The project is located in an area of suspected or known groundwater contamination with Volatile Organic Compounds (VOCs). If groundwater is encountered then the plans must include the following procedure for construction dewatering: Prior to discharge of any water from construction dewatering, the water shall be tested for volatile organic compounds (VOCs) using EPA Method 601/602 or Method 624. The analytical results of the VOC testing shall be transmitted to the Regional Water Quality Control Plant (RWQCP) 650-329-2598. Contaminated ground water that exceeds state or federal requirements for discharge to navigable waters may not be discharged to the storm drain system or creeks. If the concentrations of pollutants exceed the applicable limits for discharge to the storm drain system then an Exceptional Discharge Permit must be obtained from the RWQCP prior to discharge to the sanitary sewer system. If the VOC concentrations exceed the toxic organics discharge limits contained in the Palo Alto Municipal Code (16.09.040(m)) a 26 treatment system for removal of VOCs will also be required prior to discharge to the sanitary sewer. Additionally, any water discharged to the sanitary sewer system or storm drain system must be free of sediment 72. PAMC 16.09.180(b)(9) Covered Parking Drain plumbing for parking garage floor drains must be connected to an oil/water separator with a minimum capacity of 100 gallons, and to the sanitary sewer system. 73.PAMC 16.09.180(b)(10) Dumpsters for New and Remodeled Facilities New buildings and residential developments providing centralized solid waste collection, except for single-family and duplex residences, shall provide a covered area for a dumpster. The area shall be adequately sized for all waste streams and designed with grading or a berm system to prevent water runon and runoff from the area. 74. PAMC 16.09.180(b)(14) Architectural Copper On and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper granule containing asphalt shingles shall not be permitted for use on any residential, commercial or industrial building for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt, provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current edition of the Palo Alto Historical and Architectural Resources Report and Inventory. 75. PAMC 16.09.175(k) (2) Loading Docks (i) Loading dock drains to the storm drain system may be allowed if equipped with a fail-safe valve or equivalent device that is kept closed during the non-rainy season and during periods of loading dock operation. (ii) Where chemicals, hazardous materials, grease, oil, or waste products are handled or used within the loading dock area, a drain to the storm drain system shall not be allowed. A drain to the sanitary sewer system may be allowed if equipped with a fail-safe valve or equivalent device that is kept closed during the non-rainy season and during periods of loading dock 27 operation. The area in which the drain is located shall be covered or protected from rainwater run-on by berms and/or grading. Appropriate wastewater treatment approved by the Superintendent shall be provided for all rainwater contacting the loading dock site. 76. PAMC 16.09.180(b)(5) Condensate from HVAC Condensate lines shall not be connected or allowed to drain to the storm drain system. 77. 16.09.215 Silver Processing Facilities conducting silver processing (photographic or X-ray films) shall either submit a treatment application or waste hauler certification for all spent silver bearing solutions. 650-329-2421. 78. PAMC 16.09.205 Cooling Towers No person shall discharge or add to the sanitary sewer system or storm drain system, or add to a cooling system, pool, spa, fountain, boiler or heat exchanger, any substance that contains any of the following: (1) Copper in excess of 2.0 mg/liter; (2) Any tri-butyl tin compound in excess of 0.10 mg/liter; (3) Chromium in excess of 2.0 mg/liter. (4) Zinc in excess of 2.0 mg/liter; or (5) Molybdenum in excess of 2.0 mg/liter. 79. The above limits shall apply to any of the above- listed substances prior to dilution with the cooling system, pool, spa or fountain water. 80. A flow meter shall be installed to measure the volume of blow-down water from the new cooling tower. Cooling systems discharging greater than 2,000 gallons per day are required to meet a copper discharge limit of 0.25 milligrams per liter. 81. PAMC 16.09.180(b)(b) Copper Piping Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where alternate 28 materials are not practical. The plans must specify that copper piping will not be used for wastewater plumbing. 82. PAMC 16.09.220(c)(1) Dental Facilities That Remove or Place Amalgam Fillings An ISO 11143 certified amalgam separator device shall be installed for each dental vacuum suction system. The installed device must be ISO 11143 certified as capable of removing a minimum of 95 percent of amalgam. The amalgam separator system shall be certified at flow rates comparable to the flow rate of the actual vacuum suction system operation. Neither the separator device nor the related plumbing shall include an automatic flow bypass. For facilities that require an amalgam separator that exceeds the practical capacity of ISO 11143 test methodology, a non-certified separator will be accepted, provided that smaller units from the same manufacturer and of the same technology are ISO-certified. 83. PAMC 16.09.175(a) Floor Drains Interior (indoor) floor drains to the sanitary sewer system may not be placed in areas where hazardous materials, hazardous wastes, industrial wastes, industrial process water, lubricating fluids, vehicle fluids or vehicle equipment cleaning wastewater are used or stored, unless secondary containment is provided for all such materials and equipment 84. 16.09.180(12) Mercury Switches Mercury switches shall not be installed in sewer or storm drain sumps. 85. PAMC 16.09.205(a) Cooling Systems, Pools, Spas, Fountains, Boilers and Heat Exchangers It shall be unlawful to discharge water from cooling systems, pools, spas, fountains boilers and heat exchangers to the storm drain system. 86. PAMC 16.09.165(h) Storm Drain Labeling Storm drain inlets shall be clearly marked with the words "No dumping - Flows to Bay," or equivalent. Undesignated Retail Space: 87. PAMC 16.09 Newly constructed or improved buildings with all or a portion of the space with undesignated tenants or future use will need to 29 meet all requirements that would have been applicable during design and construction. If such undesignated retail space becomes a food service facility the following requirements must be met: Designated Food Service Establishment (FSE) Project: 88. A. Grease Control Device (GCD) Requirements, PAMC Section 16.09.075 & cited Bldg/Plumbing Codes 89. The plans shall specify the manufacturer details and installation details of all proposed GCDs. (CBC 1009.2) 90. GCD(s) shall be sized in accordance with the 2007 California Plumbing Code. 91. GCD(s) shall be installed with a minimum capacity of 500 gallons. 92. GCD sizing calculations shall be included on the plans. See a sizing calculation example below. 93. The size of all GCDs installed shall be equal to or larger than what is specified on the plans. 94. GCDs larger than 50 gallons (100 pounds) shall not be installed in food preparation and storage areas. Santa Clara County Department of Environmental Health prefers GCDs to be installed outside. GCDs shall be installed such that all access points or manholes are readily accessible for inspection, cleaning and removal of all contents. GCDs located outdoors shall be installed in such a manner so as to exclude the entrance of surface and stormwater. (CPC 1009.5) 95. All large, in-ground interceptors shall have a minimum of three manholes to allow visibility of each inlet piping, baffle (divider) wall, baffle piping and outlet piping. The plans shall clearly indicate the number of proposed manholes on the GCD. The Environmental Compliance Division of Public Works Department may authorize variances which allow GCDs with less than three manholes due to manufacture available options or adequate visibility. 96. Sample boxes shall be installed downstream of all GCDs. 97. All GCDs shall be fitted with relief vent(s). (CPC 1002.2 & 1004) 98. GCD(s) installed in vehicle traffic areas shall be rated and indicated on plans. 30 99. B. Drainage Fixture Requirements, PAMC Section 16.09.075 & cited Bldg/Plumbing Codes 100. To ensure all FSE drainage fixtures are connected to the correct drain lines, each drainage fixture shall be clearly labeled on the plans. A list of all fixtures and their discharge connection, i.e. sanitary sewer or grease waste line, shall be included on the plans. 101. A list indicating all connections to each proposed GCD shall be included on the plans. This can be incorporated into the sizing calculation. 102. All grease generating drainage fixtures shall connect to a GCD. These include but are not limited to: Pre-rinse (scullery) sinks Three compartment sinks (pot sinks) Drainage fixtures in dishwashing room except for dishwashers shall connect to a GCD Examples: trough drains (small drains prior to entering a dishwasher), small drains on busing counters adjacent to pre-rinse sinks or silverware soaking sinks Floor drains in dishwashing area and kitchens Prep sinks Mop (janitor) sinks Outside areas designated for equipment washing shall be covered and any drains contained therein shall connect to a GCD. Drains in trash/recycling enclosures Wok stoves, rotisserie ovens/broilers or other grease generating cooking equipment with drip lines Kettles and tilt/braising pans and associated floor drains/sinks 103. The connection of any high temperature discharge lines and non-grease generating drainage fixtures to a GCD is prohibited. The following shall not be connected to a GCD: Dishwashers Steamers Pasta cookers Hot lines from buffet counters and kitchens Hand sinks Ice machine drip lines Soda machine drip lines 31 Drainage lines in bar areas 104. No garbage disposers (grinders) shall be installed in a FSE. (PAMC 16.09.075(d)). 105. Plumbing lines shall not be installed above any cooking, food preparation and storage areas. 106. Each drainage fixture discharging into a GCD shall be individually trapped and vented. (CPC 1014.5) 107. C. Covered Dumpsters, Recycling and Tallow Bin Areas PAMC, 16.09.075(q)(2) Newly constructed and remodeled FSEs shall include a covered area for all dumpsters, bins, carts or container used for the collection of trash, recycling, food scraps and waste cooking fats, oils and grease (FOG) or tallow. 108. The area shall be designed and shown on plans to prevent water run-on to the area and runoff from the area. 109. Drains that are installed within the enclosure for recycle and waste bins, dumpsters and tallow bins serving FSEs are optional. Any such drain installed shall be connected to a GCD. 110. If tallow is to be stored outside then an adequately sized, segregated space for a tallow bin shall be included in the covered area. 111. These requirements shall apply to remodeled or converted facilities to the extent that the portion of the facility being remodeled is related to the subject of the requirement. 112. D. Large Item Cleaning Sink, PAMC 16.09.075(m)(2)(B) FSEs shall have a sink or other area drain which is connected to a GCD and large enough for cleaning the largest kitchen equipment such as floor mats, containers, carts, etc. Recommendation: Generally, sinks or cleaning areas larger than a typical mop/janitor sink are more useful. Utilities Department, Water Gas Wastewater Utilities Division 113. Prior to demolition, the applicant shall submit the existing water/wastewater fixture unit loads (and building as-built plans to verify the existing loads) to determine the capacity fee credit for the existing load. If the 32 applicant does not submit loads and plans they may not receive credit for the existing water/wastewater fixtures. 114. Prior to demolition, the applicant shall submit a request to disconnect all utility services and/or meters including a signed affidavit of vacancy. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit will be issued by the building inspection division after all utility services and/or meters have been disconnected and removed. 115. The applicant shall submit a completed water-gas- wastewater service connection application - load sheet(s) (one load sheet required for each unit or place of business for City of Palo Alto Utilities. The applicant must provide all the information requested for utility service demands (water in fixture units/g.p.m., gas in b.t.u.p.h, and sewer in fixture units/g.p.d.). The applicant shall provide the existing (prior) loads, the new loads, and the combined/total loads (the new loads plus any existing loads to remain). 116. The applicant shall submit improvement plans for utility construction. The plans must show the size and location of all underground utilities within the development and the public right of way including meters, backflow preventers, fire service requirements, sewer mains, sewer cleanouts, sewer lift stations and any other required utilities. 117. The applicant must show on the site plan the existence of any auxiliary water supply, (i.e. water well, gray water, recycled water, rain catchment, water storage tank, etc.). 118. The applicant shall be responsible for installing and upgrading the existing utility mains and/or services as necessary to handle anticipated peak loads. This responsibility includes all costs associated with the design and construction for the installation/upgrade of the utility mains and/or services. 119. The applicant's engineer shall submit flow calculations and system capacity study showing that the on- site and off-site water and sanitary sewer mains and services will provide the domestic, irrigation, fire flows, and wastewater capacity needed to service the development and adjacent properties during anticipated peak flow demands. Field testing may be required to determined current flows and water pressures on existing water main. 33 Calculations must be signed and stamped by a registered civil engineer. The applicant is required to perform, at his/her expense, a flow monitoring study of the existing sewer main to determine the remaining capacity. The report must include existing peak flows or depth of flow based on a minimum monitoring period of seven continuous days or as determined by the senior wastewater engineer. The study shall meet the requirements and the approval of the WGW engineering section. No downstream overloading of existing sewer main will be permitted. 120. For contractor installed water and wastewater mains or services, the applicant shall submit to the WGW engineering section of the Utilities Department four copies of the installation of water and wastewater utilities off-site improvement plans in accordance with the utilities department design criteria. All utility work within the public right-of-way shall be clearly shown on the plans that are prepared, signed and stamped by a registered civil engineer. The contractor shall also submit a complete schedule of work, method of construction and the manufacture's literature on the materials to be used for approval by the utilities engineering section. The applicant's contractor will not be allowed to begin work until the improvement plan and other submittals have been approved by the water, gas and wastewater engineering section. After the work is complete but prior to sign off, the applicant shall provide record drawings (as-builts) of the contractor installed water and wastewater mains and services per City of Palo Alto Utilities record drawing procedures. For contractor installed services the contractor shall install 3M marker balls at each water or wastewater service tap to the main and at the City clean out for wastewater laterals. 121. An approved reduced pressure principle assembly (RPPA backflow preventer device) is required for all existing and new water connections from Palo Alto Utilities to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive. The RPPA shall be installed on the owner's property and directly behind the water meter within 5 feet of the property line. RPPA’s for domestic service shall be lead free. Show the location of the RPPA on the plans. 122. An approved reduced pressure detector assembly is required for the existing or new water connection for the fire system to comply with requirements of California administrative code, title 17, sections 7583 through 7605 34 inclusive (a double detector assembly may be allowed for existing fire sprinkler systems upon the CPAU’s approval). Reduced pressure detector assemblies shall be installed on the owner's property adjacent to the property line, within 5’ of the property line. Show the location of the reduced pressure detector assembly on the plans. 123. All backflow preventer devices shall be approved by the WGW engineering division. Inspection by the utilities cross connection inspector is required for the supply pipe between the meter and ++the assembly. 124. Existing wastewater laterals that are not plastic (ABS, PVC, or PE) must be abandoned per WGW Utilities standards. 125. The applicant shall pay the capacity fees and connection fees associated with new utility service/s or added demand on existing services. The approved relocation of services, meters, hydrants, or other facilities will be performed at the cost of the person/entity requesting the relocation. 126. Each unit or place of business shall have its own water and gas meter shown on the plans. Each parcel shall have its own water service, gas service and sewer lateral connection shown on the plans. 127. A separate water meter and backflow preventer is required to irrigate the approved landscape plan. Show the location of the irrigation meter on the plans. This meter shall be designated as an irrigation account an no other water service will be billed on the account. The irrigation and landscape plans submitted with the application for a grading or building permit shall conform to the City of Palo Alto water efficiency standards. 128. A new gas service line installation is required. Show the new gas meter location on the plans. The gas meter location must conform with utilities standard details. 129. All existing water and wastewater services that will not be reused shall be abandoned at the main per WGW utilities procedures. 130. Utility vaults, transformers, utility cabinets, concrete bases, or other structures cannot be placed over existing water, gas or wastewater mains/services. Maintain 1’ horizontal clear separation from the vault/cabinet/concrete base to existing utilities as found 35 in the field. If there is a conflict with existing utilities, Cabinets/vaults/bases shall be relocated from the plan location as needed to meet field conditions. Trees may not be planted within 10 feet of existing water, gas or wastewater mains/services or meters. New water, gas or wastewater services/meters may not be installed within 10’ or existing trees. Maintain 10’ between new trees and new water, gas and wastewater services/mains/meters. 131. To install new gas service by directional boring, the applicant is required to have a sewer cleanout at the front of the building for each lateral exiting the building. This cleanout is required so the sewer lateral can be videoed for verification of no damage after the gas service is installed by directional boring. 132. All utility installations shall be in accordance with the City of Palo Alto utility standards for water, gas & wastewater. 133. The applicant shall obtain an encroachment permit from Caltrans for all utility work in the El Camino Real right- of-way. The applicant must provide a copy of the permit to the WGW engineering section. Fire Department 134. The last 30 feet of curb space on both ends of Page Mill Road frontage shall be posted NO PARKING - FIRE LANE. 135. Sprinkler main drain must be coordinated with plumbing design so that the 200 gpm can be flowed for annual main drain testing for 90 seconds without overflowing the collection sump, and the Utilities Department approved ejector pumps will be the maximum flow rate to sanitary sewer. 136. Low-E glass can interfere with portable radios used by emergency responders. Please provide an RF Engineering analysis to determine if additional devices or equipment will be needed to maintain operability of emergency responder portable radios throughout 97% of the building in accordance with the Fire Code Appendix J as adopted by the City of Palo Alto. Transportation Division 137. The project must have approved TDM plan that is 36 required by the director for any parking reductions allowed. TDM requirements at a minimum would include Caltrain Go Passes and an annual monitoring and reporting plan that includes a review of parking and traffic generation. Building Department (August 20, 2013 conditions will be updated for ARB review based on current plans): 138. Sheet A7 (dated 7-29-2013): All bedrooms from units 3 through 7 and interior bedrooms from units 2, 8, 9 and 10 are in violation of Section 1029.1 of CBC. This section, in part, states: “Basements and sleeping rooms below the fourth story above grade plane shall have at least one exterior emergency escape and rescue opening in accordance with this section. Such openings shall open directly into a public way or to a yard or court that opens to a public way.” 139. Sheet A4 (dated 7-29-2013): The space between west wall and the property line (serving Stair # 3) constitutes an egress court. The width is required to be minimum 44”. All openings into this egress court are required to be rated per Section 1027.5 or Section 705.8, whichever is more restrictive. 140. Sheet A4 (dated 7-29-2013): Stair # 3 is required to have a door from 1st floor to the basement. 141. Sheet A4 (dated 7-29-2013): Openings along the East wall and the property line are required to be addressed per Section 705.8. 142. Sheet A7 (dated 7-29-2013): Openings along the East wall seem to be excessive. Comply with Section 705.8. 143. Sheet A6 (dated 7-29-2013): Openings along the West wall seem to be excessive (at stair #3 and rear deck). Comply with Section 705.8. 144. Check Rear wall (South) for opening limitations/protections per Section 705.8. 145. The 8’-2” parking clearance is required to be maintained throughout the parking garage levels. Utilities Department, Electrical Division 37 The Utilities Electrical Division conditions shall be inserted prior to the ARB review. Santa Clara County Roads & Airports 146. A Tree Removal Encroachment Permit is required prior to any tree removed, replaced, or relocated within the County Maintained Road Right of Way, which measures over 37.7 inches in circumference at 4.5 feet above ground or which exceeds 20 feet in height. Provide plans that clearly identify species, size, and height of all existing trees and proposed trees to be removed as necessary along the project's work limits within the existing County road right-of-way. The Process for obtaining a Tree Removal Encroachment Permit involves but is not limited to completing and submitting an application to the Roads and Airport Department and review by the Board of Supervisors. Please submit a tree removal application a minimum of 60 days prior to the planned removal. Tree Removal Encroachment Permit may be processed in advance of completing plans for other permits. Please contact permits at (408) 573-2475 for complete application package and process. 147. Preliminary plans dated July 29, 2013 prepared by Stoecker and Northway Architects incorporated and the Draft Traffic Impact Analysis dated July 25, 2013 prepared by RKH Civil and Transportation Engineering indicate the existing Page Mill Road on-street parking along the property frontage be removed. Removal of on-street parking requires County Board of Supervisors Resolution. County Roads and Airports Staff supports the removal of the on-street parking along Page Mill Road and will take the necessary steps to request County Board of Supervisors’ approval of a parking prohibition resolution at the appropriate time. Please contact Dawn Cameron, (408) 573 - 2465 or by email at Dawn.Cameron@rda.sccgov.org for complete application process and timeline. 148. Preliminary plans dated July 29, 2013 prepared by Stoecker and Northway Architects incorporated and the Draft Traffic Impact Analysis dated July 25, 2013 prepared by RKH Civil and Transportation Engineering propose to construct a 25-ft commercial loading zone as shown. It appears that the location of the loading zone would be within the line of sight distance. Roads and Airports requests that the applicant pursue one of the following actions: (1) Contact neighboring property owners about possibly using their existing parking facilities for deliveries or (2) The owner’s engineer shall demonstrate through the final version of the Traffic Impact Analysis, to be reviewed and 38 approved by Roads and Airports, that there are no site impacts or that impacts can be mitigated and owner/ applicant shall comply with the recommended mitigations. Designating a loading zone requires County Board of Supervisors Resolution. Please contact Dawn Cameron, (408) 573 -2465 or by email at Dawn.Cameron@rda.sccgov.org for complete application process and timeline. 149. A Santa Clara County Roads and Airports Encroachment Permit is required prior to any work performed in the County Maintained Road Right of Way. The process for obtaining an Encroachment Permit involves but is not limited to submitting a minimum of three full size copies, one half size copy of the signed engineered final improvement plans, drainage calculations, erosion control plans, traffic control plan, and Certificate of Worker's Compensation Insurance to County Permitting Office in conjunction with an encroachment application. Please contact Permits, (408) 573 -2475 or by email at Permits@rda.sccgov.org for complete application process and timeline. 150. All structures, including but not limited to street furniture, bike racks, planter boxes, etc. shall be located outside of the County Road Right of Way. Tree replacement shall provide a minimum of 7 feet of clearance from existing face of curb to face of mature tree trunk or a minimum 5 feet of clearance from future face of curb to face of mature tree trunk. 151. Provide drainage plans and hydraulic calculations prepared by a registered civil engineer in accordance with criteria as designated in the County’s Drainage Manual that demonstrate one of the following: A. The post development runoff onto the County maintained roadway/ right of way is equal or less than the pre-development runoff; or B. The storm water runoff generated from the proposed development can safely be conveyed and contained within the existing storm drainage system, does not create and/or contribute to downstream or upstream flooding conditions, and maintains a minimum 1 foot of freeboard in the existing storm drainage system for the entire watershed. If this cannot be demonstrated, provide a detention/retention system pursuant to the Design Guidelines in the 2007 Santa Clara County Drainage Manual to be located outside the County Maintained Road Right of Way. 152. Submit final improvement plans prepared by a registered civil engineer for review and approval. Include plan, profile, typical sections, contour grading and drainage for all 39 construction improvements located within the County Maintained Road Right of Way (ROW). All the following standards shall be consistent with the September 1997 Standard Details Manual, County of Santa Clara, Roads and Airports Department. Final Improvement Plans Shall include the following: A. Driveway Approach per County Standard B8. B. Abandoned Driveway Approaches per County Standard B9. C. Traffic Control Plan during construction D. Street striping and pavement markings in accordance with the California Manual on Uniform Traffic Control Devices and August 2003 County Expressway Bicycle Accommodations Guidelines. E. All existing features located within the County Road ROW, including but not limited to, edge of pavement, existing face of curb/ future face of curb ROW, ROW dedication, above and below ground utility lines, easements, etc. F. Provide an Erosion and Sediment Control Plan that outlines seasonally appropriate erosion and sediment controls during the construction period in accordance with Sections C12-568 through C12-571 of the Grading Ordinance and Municipal Regional Permit. Erosion and Sediment Control Plan Sheets may include, but are not limited to, the following information as needed: (1) Erosion and Sediment Control: soil binders, geotextiles, mats, creek and hillside stabilization, hydroseeding, silt fence, sediment basin, check dams, fiber rolls, gravel bags, drainage inlet protection, construction entrance/ exit, street sweeping requirements, perimeter controls, etc. (2) Good Site Management: containment, spill prevention, material storage/ protection, sanitary waste management, etc. (3) Non Stormwater Management, dewatering operations, paving operations, concrete washouts, vehicle and equipment storage and refueling, etc. G. Include the following Notes on the Erosion and Sediment Control Plan: (1) “The Owner/ Owner’s contractor, agent, and/or engineer shall install and maintain throughout the duration of construction and until the establishment of permanent stabilization and sediment control within the Santa Clara County maintained ROW and any portion of the site where storm water run-off is directly flowing into the Santa Clara County maintained road ROW Best Management Practices (BMPs) to prevent construction materials, excavated materials, waste materials, and sediment caused by erosion from construction activities entering the storm drain system, waterways, and roadway infrastructure. BMPs shall include, but not be limited to, the following practices applicable to the public road and expressway facilities: (a) Reduction of pollutants in storm water discharges from the construction site and the contractor’s material and equipment 40 laydown/staging areas (b) Prevention of tracking of mud, dirt and construction materials onto public road right of way. (c) Prevention of discharge of water runoff during dry and wet weather conditions onto public road ROW. H. Indicate on the improvement plans all existing and proposed utilities, mains and services within the County Maintained Road ROW. I. All relocations, temporary facilities, and new facilities shall be included in the improvement plans. Indicate which ones are to be underground and overhead. 153. Construct all of the aforementioned improvements. Construction staking is required and shall be the responsibility of the developer. SECTION 9. Term of Approval. Site and Design Approval. In the event actual construction of the project is not commenced within two years of the date of council approval, the approval shall expire and be of no further force or effect, pursuant to Palo Alto Municipal Code Section 18.30(G).080. SECTION 10. Standard Conditions A. Except as expressly specified herein, the site plan, floor plans, building elevations and any additional information or representations, submitted by the Applicant during the Staff review and public hearing process leading to the approval of this entitlement, whether oral or written, which indicated the proposed structure or manner of operation, are deemed conditions of approval. B. The approved use and/or construction are subject to, and shall comply with, all applicable City ordinances and laws and regulations of other governmental agencies. C. California Government Code Section 66020 provides that a project applicant who desires to protest the fees, dedications, reservations, or other exactions imposed on a development project must initiate the protest at the time the development project is approved or conditionally approved or within ninety (90) days after the date that fees, dedications, reservations or exactions are imposed on the Project. Additionally, procedural requirements for protesting 41 these development fees, dedications, reservations and exactions are set forth in Government Code Section 66020. IF YOU FAIL TO INITIATE A PROTEST WITHIN THE 90-DAY PERIOD OR FOLLOW THE PROTEST PROCEDURES DESCRIBED IN GOVERNMENT CODE SECTION 66020, YOU WILL BE BARRED FROM CHALLENGING THE VALIDITY OR REASONABLENESS OF THE FEES, DEDICATIONS, RESERVATIONS, AND EXACTIONS. D. This matter is subject to the California Code of Civil Procedures (CCP) Section 1094.5; the time by which judicial review must be sought is governed by CCP Section 1094.6. E. To the extent permitted by law, the Applicant shall indemnify and hold harmless the City, its City Council, its officers, employees and agents (the “indemnified parties”) from and against any claim, action, or proceeding brought by a third party against the indemnified parties and the applicant to attack, set aside or void, any permit or approval authorized hereby for the Project, including (without limitation) reimbursing the City for its actual attorneys’ fees and costs incurred in defense of the litigation. The City may, in its sole discretion, elect to defend any such action with attorneys of its own choice. PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: _________________________ ____________________________ City Clerk Director of Planning and Community Environment APPROVED AS TO FORM: ___________________________ Senior Asst. City Attorney 42 PLANS AND DRAWINGS REFERENCED: 1. Those plans prepared by Stoecker and Northway Architects entitled “441 Page Mill Road”, consisting of 35 pages, dated May 01, 2015, and received on May 21, 2015. ATTACHMENT C City of Palo Alto ADDENDUM INITIAL STUDY AND NEGATIVE DECLARATION 441 Page Mill Road Updated Project Description The project applicant has revised the project to include less commercial space, more residential space, more residential units, and more BMR units as shown in Table 1, below. The project includes the merger of four parcels into one single parcel (under separate application) of 26,926 square feet (sf). The existing homes would be demolished to make way for a three-story, mixed use building with parking facilities for 91 automobiles located one level below grade and at the ground floor, where 106 automobile spaces are required by code (accounting for the six space reduction allowed based on the Density Bonus Law). Bicycle parking spaces totaling 46 spaces (26 long-term and 20 short-term spaces) would be provided on site, where 19 such spaces are required, and a Transportation Demand Management (TDM) program would be required. Table 1: Programmatic Modifications to the Proposed Project at 441 Page Mill Road 2014 Proposed Project 2015 Proposed Project Site Size 26,926 sf (0.62 acres) 26,926 sf (0.62 acres) Gross Square Feet Residential 13,979 16,156 Office 18,704 15,843 Retail 2,836 3,250 Total 35,519 35,249 Residential Units Market Rate 7 11 BMR (low income) 3 5 Total 10 16 Average Unit Size 1,242 sf 900 sf Source: Stoecker & Northway Architects Inc., May 15, 2015 1 In addition to the requested concessions under the State Density Bonus Law, the project is requesting two Design Enhancement Exceptions (DEEs), one of which would allow a 17 foot setback from Page Mill Road where the code requires a 14 foot setback. This would permit a wide sidewalk, street trees, and the County’s planned improvements to Page Mill Road at this location. The other (related) DEE would allow a three foot encroachment into the required 10 foot landscape buffer at the rear of the property because the building would be shifted towards the rear of the lot to achieve the greater front setback and the driveway ramp accessing below grade parking would intrude three feet into the 10 foot buffer. The proposed project would provide 91 off-street parking spaces, or 15 spaces less than the 106 spaces that could be required for a project with 16 dwelling units (some of them below market rate) and 19,093 sq. ft. of office/retail space. The 106 space requirement includes a reduction of six spaces provided for in the density bonus provisions of State Law and Municipal Code Section 18.15.050. The requested reduction of 15 additional spaces is based on Municipal Code Section 18.52.050, which allows the Director to approve a reduction where a mix of uses share the parking facility since the peak demand for parking associated with residential and commercial space happens at different times of the day/night. Zoning Compliance and Density Bonus Concessions The zoning table below indicates the project’s relationship to CS zone development standards and project modifications since the City Council’s January 26, 2015 review of the project. Table 2. Summary of Zoning & Project Revisions, 441 Page Mill Road Maximum Allowed under CS Zone Height 35’ Lot Coverage 50% (13,462 sf) Total FAR 1:1 (26,926 sf) Residential FAR 0.6:1 (16,156 sf) Commercial FAR 0.4:1 (10,770 sf) Min. Ground Floor Commercial 0.15:1 (4,039 sf) Project Revisions Total Residential FAR 13,979 sf 16,156 sf Total Residential units 10 16 BMR Units (30%) 3 (3,544 sf) 5 (4,128 sf) Total Commercial FAR 21,540 sf 19,093 sf Retail Tenant FAR 2,836 sf 3,259 sf Ground Floor FAR 3,999 sf 4,330 sf Office + Circulation FAR 18,704 sf 15,843 sf Office Tenant FAR 16,335 sf 12,654 sf Total Building FAR 35,519 sf 35,249 sf Residential Parking Required 18 26 Commercial Parking Required 89 80 2 Parking Total Required 107 106 Parking Provided 91 91 Shared Parking Reduction 16 (15%) 15 (14%) Density Bonus Concessions Required See Table 3 Below Source: Stoecker & Northway Architects Inc., May 15, 2015 Environmental Review An Initial Study and Mitigated Negative Declaration (MND) have been prepared for the project and the 30 day public review and comment period began on November 8, 2013 and ended on December 9, 2013. The environmental analysis notes there are a few potentially significant impacts that would require mitigation measures to reduce them to a less than significant level. These include mitigations for dust control during excavation, protection for nesting birds, building design for earthquake resistance, basement shoring, and measures to prevent VOC vapor intrusion into the project. These are provided in the conditions of approval within the RLUA (Attachment A) as well as the MND (Attachment C) attached to the June 15, 2015 Staff Report. The State CEQA Guidelines (Section 15073.5) require recirculation of a negative declaration prior to adoption if the document must be “substantially revised” to reflect new significant impacts or project revisions necessary to address those impacts. In the current instance, the applicant’s proposal has been modified in response to Council’s input to include slightly more residential space and slightly less office space as described in this Addendum. The overall building would be similar in appearance and the intensity of use – as reflected by standard trip generation rates – would be similar to the original project proposal.1 For these reasons, the MND has not been substantively revised and does not require recirculation. This addendum has been prepared to reflect the revised project description. The potential impacts the environmental document describes and the mitigation measures required as part of the project remain unchanged. 1 Based on standard trip generation rates, the additional dwelling units would add three trips in the AM and PM Peak Hours, and the additional retail space would add one trip in the PM Peak Hour. The reduced office space would subtract five trips in the AM and PM Peak Hours. 3 TO: Hillary Gitelman, Director, P&CE Department SUBJECT: Cumulative Traffic Analysis for 441 Page Mill Road Project DATE: May 26, 2015 Planning & Community Environment Department Below is a description of the analysis methodologies and assumptions that were used in developing the future year traffic conditions to analyze the cumulative conditions scenarios. Also included below is a summary of the traffic counts at the intersection of El Camino Real and Page Mill Road Cumulative Traffic Analysis for 441 Page Mill Road The Cumulative traffic analysis was conducted for year 2035, and traffic growth rates were based on the most current traffic model update at the time of analysis (July 2013). The annual percentage of growth for the study intersections varied for the AM and PM peak periods and ranged between 0.5% and 1.1% annually, and are specifically intended to account for increases in employment related square footage and residential units from projects that may be developed over the next 20 years. The growth rates were obtained from the City-wide traffic model which incorporated Association of Bay Area Governments (ABAG) projections of employment in Palo Alto for the year 2035, and increases in residential use based on historic Palo Alto growth trends. The model incorporates increases in employment square footages at specific locations where growth is expected based on approved or anticipated land use changes. Most noticeably, these locations of anticipated employment growth specifically include areas such as in the vicinity of 395 Page Mill Road and 2775 El Camino Real. In addition, employment growth was also estimated for other areas where commercial or office uses are currently zoned such as the California Avenue Business District and within the Stanford Research Park. The estimated growth rates are established to account for both known projects as well as small projects that may not be known at the time of the model update, but are consistent with regional growth projection patterns. The city-wide traffic model is typically updated every five to ten years. The Palo Alto Citywide traffic model is required to be consistent with, and was developed directly from the regional transportation demand model. The regional traffic model was created, and is maintained by the regional congestion management agency (CMA) which is the Valley Transportation Authority (VTA) for Santa Clara County. VTA develops a regional traffic model that accounts for growth within Santa Clara County as well as neighboring counties such as San Mateo, Monterey, and Alameda counties to ensure that traffic which travels into or out of the area is also accounted for. The VTA’s traffic model generally includes major roadways such as freeways, major arterials, and some heavily travelled routes. The Citywide model includes more detail on the local roadway network as well as employment and residential zones to provide a more detailed traffic projection local to Palo Alto. Attachment D TO: Hillary Gitelman, Director, P&CE Department SUBJECT: Cumulative Traffic Analysis for 441 Page Mill Road Project DATE: May 26, 2015 Planning & Community Environment Department Model projections are just projections and traffic engineers who use them must also use professional judgment in determining if they are reasonable based on concept. In the case of the analysis for the 441 Page Mill Road development project, the author of the traffic study, RKH Consulting, and City Staff deemed the model output to be reasonable based on regional projections and on recent and anticipated development in the vicinity. Historic Traffic Volumes at El Camino Real and Page Mill Road The VTA conducts bi-annual monitoring of traffic conditions at select intersections as part of the Congestion Management Program (CMP). The intersection of El Camino Real and Page Mill Road is one of eight CMP intersections within Palo Alto. Table 1 below presents the total number of vehicles that travelled through the intersection of El Camino Real and Page Mill Road during the PM peak hour. As shown in the table, traffic counts in 2014 show a slight reduction from previous years. Between 2008 and 2012, there were small increases in growth of approximately 0.5% annually, which was consistent with growth patterns in the area. Table 1. PM Peak Hour traffic volumes through El Camino Real/Page Mill Road Year Total PM Peak Hour Traffic Count 2014 6,543 a 2013 6,994 b 2012 6,769 2010 6,701 2008 6,645 2006 6,704 2004 6,223 2002 7,185 2000 7,112 Source: Santa Clara Valley Transportation Authority CMP Monitoring Analyses. a – 2014 counts to be verified by VTA b – Data collected as part of 395 Page Mill Development Analysis TO: Hillary Gitelman, Director, P&CE Department SUBJECT: Cumulative Traffic Analysis for 441 Page Mill Road Project DATE: May 26, 2015 Planning & Community Environment Department Over the past 15 years, operating conditions at intersections such as El Camino Real and Page Mill Road have experienced both decreases and increases in peak hour traffic volumes and average vehicle delay. It should be noted that the level of change in delay does not necessarily correlate directly with the change in total volume. Increases in volume for some movements may have a much larger effect to average delays, while adding traffic volumes to other movements may have minimal or even reductions in average delays. For example, from the previous traffic model update, the traffic volumes at El Camino Real and Page Mill are estimated to increase by approximately 20 percent by 2035, however the projected traffic patterns are estimated to increase the average delay by approximately 30 percent. 160 Pacific Avenue, SUITE 204 San Francisco, CALIFORNIA 94111 PHONE: 415 398 3050 FAX: 415 397 5065 441 Page Mill Memo 5.28.15.docx; WWW.KEYSERMARSTON.COM ClientID ADVISORS IN: REAL ESTATE REDEVELOPMENT AFFORDABLE HOUSING ECONOMIC DEVELOPMENT SAN FRANCISCO A. JERRY KEYSER TIMOTHY C. KELLY KATE EARLE FUNK DEBBIE M. KERN REED T. KAWAHARA DAVID DOEZEMA LOS ANGELES KATHLEEN H. HEAD JAMES A. RABE GREGORY D. SOO-HOO KEVIN E. ENGSTROM JULIE L. ROMEY SAN DIEGO PAUL C. MARRA MEMORANDUM To: Russ Reich, Cara Silver City of Palo Alto From: Reed Kawahara Date: May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis I. Introduction & Summary Conclusion In accordance with your request, Keyser Marston Associates, Inc. (KMA) has undertaken an additional analysis related to the proposed mixed-use development at 441 Page Mill Road as it relates to the request by the project’s applicant to utilize the State Density Bonus Law. The analysis described in this memorandum is both an update of the analysis that KMA performed for the City last spring and summer, as well as new elements of the analysis as requested by the City Council at its January 26, 2015 meeting1. Since the time of the City Council meeting in January, the Applicant has revised the proposed project to include approximately 16% less office square footage, 15% more residential square footage, and 15% more retail square footage. The overall building size is roughly the same (see the following comparison table)2. In terms of the residential program, the project is now proposed to include 16 residential units rather than the 10 previously proposed, which is made possible through a combination of the added residential building area and smaller unit sizes. Of the 16 units, five (30% of the total) will be affordable to Low Income households, which meets the requirements of the State 1 The work that KMA performed last year is documented in memoranda dated May 7, 2014 and July 24, 2014 2 Note: the 2014 project square footage is slightly different (about 0.5%) than that included in KMA’s 2014 memos due to a correction that was made by the project’s architect. This change is so minor as to have no bearing on KMA’s fundamental conclusions from last year. Attachment E To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 2 441 Page Mill Memo 5.28.15.docx; ClientID Density Bonus Law to permit the three off-menu concessions being requested by the Applicant. 2014 Project 2015 Project Change Site Size 26,926 sf 26,926 sf 0 sf 0% 0.62 acres 0.62 acres 0.00 acres 0% Gross Sq. Ft. Residential 13,979 sf 16,156 sf 2,177 sf 16% Office 18,704 sf 15,843 sf (2,861) sf -15% Retail 2,836 sf 3,250 sf 414 sf 15% Total 35,519 sf 35,249 sf (270) sf -1% Residential Units Market Rate 7 units 11 units 4 units 57% BMR (Low Income) 3 units 5 units 2 units 67% Total 10 units 16 units 6 units 60% Average Unit Size 1,242 sf 900 sf (341) sf -27% In summary and as further described in this memorandum, KMA concludes that the cost of including the five Low Income units in the proposed project exceeds the value gained from the three requested concessions. Therefore, it is our conclusion that the project satisfies the requirement of the State Density Bonus Law that the concessions are required “in order to provide for affordable housing costs” and also satisfies the city’s requirement that they result in “identifiable, financially sufficient, and actual cost reductions” that “allows the applicant to provide affordable rents or affordable sale prices”. II. Background: State Density Bonus Law & City’s Ordinance As summarized in KMA’s memoranda from last year, the State Density Bonus Law allows a development to increase its residential density and request up to three development concessions. From an economic standpoint, the State Density Bonus Law specifies that the project is entitled to the requested concessions unless a written finding can be made, based upon substantial evidence, that the concessions are not required in order to provide for affordable housing costs. Furthermore, the city’s ordinance states that the requested concessions must “result in identifiable, financially sufficient, and actual cost reductions” that “allows the applicant to provide affordable rents or affordable sale prices”. KMA’s assignment is to assess whether the proposed project satisfies this criteria. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 3 441 Page Mill Memo 5.28.15.docx; ClientID III. Project Background & Requested Concessions As noted, the Applicant has modified the development program to include more residential and retail space and less office space. The project will continue to be a three story building with subterranean parking. As was the case last year, the Applicant is requesting three concessions: (1) additional lot coverage, (2) additional commercial FAR, and (3) additional total FAR (floor area ratio). CS Zoning Maximum With On-Menu Concessions With Proposed Off-Menu Concessions Concession 1: Lot Coverage Coverage SF Coverage SF Coverage SF 50.0% 13,462 65.3% 17,590 68.9% 18,565 Concessions 2 & 3: FAR FAR SF FAR SF FAR SF a) Residential 0.60 16,156 0.75 20,195 0.60 16,156 b) Commercial 0.40 10,770 0.40 10,770 0.71 19,093 Total FAR 1.00 26,926 1.15 30,965 1.31 35,249 It is noted that the actual State Density Bonus is not needed for the proposed project, as the 16 proposed units equates to 26 units per acre compared to 30 units per acre permitted by the existing CS zoning. IV. Financial Analysis As called for in the State Density Bonus Law and the City’s implementing ordinance, in order to be eligible for the concessions, the requested concessions must be needed to in order to address the costs of the BMR housing units. In order to analyze this issue, it is necessary to undertake the following: Quantify the cost of including the five BMR housing units in the proposed project; Quantify the value benefit to the project of the requested concessions. If the cost of including the BMR housing units exceeds the value benefit of the concessions, it is concluded that the concessions are needed to offset the BMR housing cost. If the value of the concessions exceed the cost of the BMR housing units, one or more of the concessions may not be required. a) Cost of BMR Housing Units In KMA’s analysis last year, the cost of the BMR units was estimated by prorating the development costs of the overall project to the BMR units (excluding the land cost) and then netting out the capitalized value of the BMR units. At the January City Council To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 4 441 Page Mill Memo 5.28.15.docx; ClientID meeting, the City Council requested that an alternative approach be considered – to estimate the cost of the BMR units by comparing the rental income that would be generated by the BMR units to the income generated by the market rate units. The following summarizes the estimate of BMR housing cost utilizing these two different approaches. Approach #1: Development Cost Approach (KMA Approach) The cost of the BMR units under this approach is estimated on a pro rata basis based on the total costs and square footage of the project. Excluding land costs, this equates to $290 per gross square foot of building area (including parking area), or about $2.15 million for the five BMR units3. The supported investment of the BMR units is then netted out to arrive at a net cost. The monthly Low-Income rents, net of tenant-paid utilities, are estimated at $1,229 and $1,373 for the 1- and 2-bedroom units respectively. After taking into account a vacancy factor, operating expenses and taxes, the BMR units’ net operating income (NOI) is estimated at approximately $39,700 (see the following table). From the project’s NOI, the amount of supported private investment can be calculated. For the BMR units, the supported private investment is based on the amount of private debt that theoretically could be supported by the project’s net income4. It is noted that, because the growth potential of BMR rents is severely limited, it would not be appropriate to utilize a market rate cap rate to estimate the value of the BMR units in isolation. On this basis, it is estimated that the total supported private investment of the five BMR units is $647,000. Deducting this amount from the $2,156,000 gross cost yields a net cost of the BMR units of $1,509,000. Cost of BMR Units - Development Cost Approach 1-Bedroom (Low Income) 2 units $1,229 /month $29,496 2-Bedroom (Low Income) 3 units $1,373 /month $49,428 Total Gross Rents 5 units $1,315 /month $78,924 (Less) Vacancy 5.0% ($3,946) (Less) Operating Expenses & Taxes ($35,250) NOI $39,728 Supported Investment 6.1% $647,000 (Less) Construction Costs $290 ($2,156,000) Net Cost of BMR Units ($1,509,000) 3 Note: in KMA’s analysis last year, the pro rata cost allocation was based on a cost per net rentable square foot. In this analysis, the cost is allocated based on gross building area including the area needed for residential parking. 4 Debt calculation assumes 4.5% interest, 30-year amortization. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 5 441 Page Mill Memo 5.28.15.docx; ClientID Approach #2 – Rent Differential Approach (City Council Request) At the request of the City Council, a second approach to estimating the BMR housing cost has been utilized. Under this “rent differential approach”, the rental income from the proposed project with five Low Income units is compared to a theoretical all-market rate project. The difference in rental income between the two scenarios represents the BMR cost. As shown in the following table, the difference between market rate rents and Low Income rents in the project is quite significant (note: the average market rate unit size is larger in the proposed project than the all-market rate scenario because the BMR units are planned to be somewhat smaller than the market rate units; therefore the market rate rents need to be adjusted accordingly). As shown, the difference in net operating income (NOI) between the proposed project and the all-market rate scenario is approximately $146,600/year. When capitalized, the resulting value differential is estimated at $3.26 million under this approach. Because BMR rents are based on regional household incomes, not on real estate market factors, under this approach the BMR housing cost becomes quite substantial in places where market rate rents are very high, such as Palo Alto. Cost of BMR Units - Rent Differential Approach All Market Rate Proposed Project Cost of Low Income Units Avg Market Rate Unit Size 900 sf 934 sf Units Rent Annual Units Rent Annual Market Rate Units 16 $4,240 $814,080 11 $4,400 $580,800 ($233,280) Low Income Units 0 $1,315 $0 5 $1,315 $78,924 $78,924 Total Gross Rents 16 $4,240 $814,080 16 $3,436 $659,724 ($154,356) (Less) Vacancy ($40,704) ($32,986) $7,718 (Less) Op. Expenses ($84,000) ($84,000) $0 (Less) Property Taxes ($71,000) ($71,000) $0 NOI $618,376 $471,738 ($146,638) Cap Rate 4.50% 4.50% Capitalized Value $13,742,000 $10,483,000 ($3,259,000) It is noted that a third potential approach to estimating the BMR cost was mentioned at the January 26th City Council meeting, which would estimate the BMR cost based on a regional average cost of BMR units rather than on the estimated costs of this specific project. KMA has elected to not analyze the cost in this manner because our interpretation of the State Density Bonus Law is that it is intended to reflect the cost of the BMR units in the specific proposed project. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 6 441 Page Mill Memo 5.28.15.docx; ClientID b) Development Program Comparison As noted previously, the proposed project is a mixed use building comprised of residential, office, and ground floor retail uses (see the following table). In order to test whether the requested concessions are needed to offset the BMR housing cost, it is necessary to estimate the value increment that can be realized from the concessions over an alternative case without those concessions. Since, as was described previously, the density bonus itself is not needed to build the 16 BMR units, the proposed project is instead compared against a project that could be built with straight CS zoning. For the CS zoning alternative, KMA’s analysis indicates that the project that maximizes value is actually less than the maximum building permitted. Our analysis indicates that the maximum value project is a 0.4 office FAR combined with approximately nine residential units (assuming a similar unit size as the proposed project), for an overall FAR of roughly 0.78. The reason why this lower density program is financially superior to the maximum 1.0 FAR is that the 0.78 FAR building can be built with all the parking in an at-grade garage, thus relieving the project of significant excavation and underground parking costs as well as environmental remediation costs. The resulting cost savings more than offsets the fact that the fixed land acquisition costs are higher on a per- building square foot basis5. Alternative under CS Zoning With Proposed Off-Menu Concessions Increase Site Size 26,926 sf 26,926 sf 0 sf 0.62 acres 0.62 acres 0 acres Net Rentable SF (NSF) Residential 8,874 sf 14,404 sf 5,530 sf Office 9,693 sf 12,654 sf 2,961 sf Retail 0 sf 3,250 sf 3,250 sf Total 18,567 sf 30,308 sf 11,741 sf Gross Sq. Ft. FAR FAR Residential 10,200 sf 0.38 16,156 sf 0.60 5,956 sf Office 10,770 sf 0.40 15,843 sf 0.59 5,073 sf Retail 0 sf 0.00 3,250 sf 0.12 3,250 sf Total 20,970 sf 0.78 35,249 sf 1.31 14,279 sf Residential Units Market Rate 9 units 11 units 2 units BMR (Low Income) 0 units 5 units 5 units Total 9 units 16 units 7 units 5 Under the CS Zoning alternative, KMA assumes that a variance could be utilized to build the project without the otherwise required ground floor retail space. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 7 441 Page Mill Memo 5.28.15.docx; ClientID c) Value of Concessions The value of the requested concessions is quantified by comparing the development economics of the base case (CS zoning) project with the proposed project with the concessions. The economics of the two projects in their entirety are analyzed because the three requested concessions (lot coverage, commercial FAR, and total FAR) are of benefit to the entire project and not to the residential alone. As shown in the following summary table, the base case project yields an overall development return of 6.41% as compared with 6.26% return for the proposed project with the concessions. However, since the proposed project is larger than the CS zoning alternative, the total dollar returns would be higher for the proposed project (to illustrate, in the discussion below of Approach #1 the net project value of the proposed project is higher than that of the CS zoning alternative). To reiterate a fundamental point from KMA’s analysis last year, the reason why the returns for the larger proposed project are not significantly higher than the CS zoning alternative is that the proposed project requires an expensive subterranean garage and associated environmental remediation costs, which is not required in the CS zoning alternative. Once the need for the subterranean garage is triggered, there must be sufficient building value added to offset those costs. Alternative under CS Zoning With Proposed Off-Menu Concessions Increase $/NSF Total $/NSF Total Net Operating Income (NOI) Residential $42 $374,513 $33 $471,738 $97,225 Office $69 $668,551 $69 $872,746 $204,195 Retail $0 $0 $60 $194,513 $194,513 Total NOI $56 $1,043,064 $51 $1,538,997 $495,933 Development Costs Acquisition, Carry, Environmental $252 $4,683,000 $178 $5,381,000 $698,000 Direct Construction $474 $8,804,000 $495 $14,996,000 $6,192,000 Indirects $113 $2,093,000 $104 $3,159,000 $1,066,000 Financing $37 $690,000 $34 $1,040,000 $350,000 Total Costs $876 $16,270,000 $811 $24,576,000 $8,306,000 Return on Cost (ROC) 6.41% 6.26% -0.15% Note: See Appendix I for a discussion of the assumptions behind the income and cost estimates. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 8 441 Page Mill Memo 5.28.15.docx; ClientID Approach #1: Capitalized Value Approach (KMA Approach) Under KMA’s approach, the value increment of the proposed project over the base case alternative is quantified in dollar terms by capitalizing the annual income stream generated by the two alternatives and then deducting the development costs. On this basis, it is estimated that the three concessions add $560,000 in value to the proposed project. It is noted that the cap rates utilized in this analysis have been adjusted since our analysis from last year to reflect improved market conditions. The value increment is lower than it was in the 2014 project due to the fact that the high value office space has been reduced in size. It is reminded also that the reason for the comparatively small value increment from the larger proposed project is attributable to the high cost of the subterranean parking and remediation costs, which are not applicable to the CS zoning alternative. Alternative under CS Zoning With Proposed Off- Menu Concessions Value Increment Capitalized Value Approach Residential 4.50% $8,323,000 4.50% $10,483,000 $2,160,000 Office 5.50% $12,155,000 5.50% $15,868,000 $3,713,000 Retail 6.50% $0 6.50% $2,993,000 $2,993,000 Gross Project Value 5.09% $20,478,000 5.24% $29,344,000 $8,866,000 (Less) Development Costs ($16,270,000) ($24,576,000) ($8,306,000) Net Project Value $4,208,000 $4,768,000 $560,000 Also, as was done as part of KMA’s work last year, we cross checked the reasonableness of the capitalized value assumptions shown in the above table with actual residential, office, and retail building sales (“comps”) in Palo Alto and surrounding communities6. The updated building sale data is included in Appendix III of this memorandum. The building sale comps indicate that the capitalized value estimates shown in the table above are in line with the upper end of values being achieved in the local market. Approach #2: Discounted Cash Flow Approach (City Council Request) At the City Council’s request, KMA has undertaken a second approach to analyzing the value increment under the State Density Bonus Law – a discounted cash flow (DCF) analysis. What differentiates the DCF approach from the capitalized value approach is that the DCF approach includes a long term cash flow projection of the project, which 6 KMA’s prior analysis of building sale values was contained in our memorandum dated July 24, 2014. To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 9 441 Page Mill Memo 5.28.15.docx; ClientID takes into consideration explicit assumptions on income escalations over time7. In order to compare the long-term cash flow projection between the base case CS zoning alternative and the proposed project, the future cash flow is then calculated on a net present value (NPV) basis, which expresses future dollars in current dollar terms. The DCF analysis is included in the table on the following pages. As shown on the second page of the table, the net present value of the long-term cash flow is estimated at $20.6 million for the CS zoning alternative and $30.14 million for the proposed project. Therefore, the gross value increment of the proposed project is $9.54 million. After deducting the development costs of each project alternative, the net value increment attributable to the three requested off-menu concessions is estimated at $1,239,000. Note: Appendix I contains further discussion of the DCF analysis and the basis for key assumptions. The summary of the DCF analysis is as follows. The detailed cash flow table is included in the following pages. Alternative under CS Zoning With Proposed Off-Menu Concessions Value Increment Discounted Cash Flow Approach Gross Project Value $20,597,000 $30,142,000 $9,545,000 (Less) Development Costs ($16,270,000) ($24,576,000) ($8,306,000) Net Project Value $4,327,000 $5,566,000 $1,239,000 Note: The DCF analysis shown in the table on the following pages is based on a 99-year cash flow. KMA ran a sensitivity analysis to test the outcomes if the cash flow was instead run for 60 years and 30 years (since the BMR restrictions must remain in place for 30 years, the highest reversionary value can be achieved after the 30-year restriction expires). In both cases, the value increment is actually less than the 99-year scenario owing in part to the fact that the 99-year scenario has more years in which to capture the higher rental income from all market rate residential units. 7 It is noted that the capitalized value approach also takes rent escalation into account, but the assumptions are implicit in the cap rates rather than explicitly stated separately. Project Value Increment Discounted Cash Flow (DCF) Approach Increment Resid. EGI Taxes OpEx Resid. NOI Office NOI(2)Retail NOI(3)Leasing(4)Total Resid. EGI Taxes OpEx Resid. NOI Office NOI(2)Retail NOI(3)Leasing(4)Total Escalation (1)1.030 1.020 1.030 1.030 1.030 1.028 1.020 1.030 1.030 1.030 2012 0 0 0 0 0 0 0 (4,000,000)00 0 0 0 0 0(4,000,000)0 2013 0 0 0 0 0 0 0 (240,000)00 0 0 0 0 0(240,000)020140000000(240,000)00 0 0 0 0 0(240,000)020150000000(240,000)00 0 0 0 0 0(240,000)020160000000(4,620,000)00 0 0 0 0 0(7,942,400)(3,322,400)2017 0 0 0 0 0 0 0 (6,930,000)00 0 0 0 0 0(11,913,600)(4,983,600)1 2018 504,512 (42,382)(51,631)410,499 730,544 0 (338,070)1,141,042 680,979 (75,346)(91,789)513,844 953,674 212,549 (624,831)1,680,066 539,0242 2019 519,647 (43,230)(53,180)423,237 730,544 0 0 1,153,781 700,120 (76,853)(94,543)528,725 953,674 212,549 0 1,694,947 541,1663 2020 535,237 (44,094)(54,776)436,367 730,544 0 0 1,166,911 719,818 (78,390)(97,379)544,050 953,674 212,549 0 1,710,272 543,3624 2021 551,294 (44,976)(56,419)449,899 730,544 0 0 1,180,443 740,090 (79,958)(100,300)559,832 953,674 212,549 0 1,726,055 545,6125 2022 567,833 (45,876)(58,112)463,846 730,544 0 0 1,194,389 760,952 (81,557)(103,309)576,086 953,674 212,549 0 1,742,308 547,919 6 2023 584,868 (46,793)(59,855)478,220 730,544 0 0 1,208,763 782,422 (83,188)(106,409)592,825 953,674 246,403 (56,651)1,792,901 584,138 7 2024 602,414 (47,729)(61,651)493,034 730,544 0 0 1,223,578 804,517 (84,852)(109,601)610,064 953,674 246,403 0 1,810,141 586,563 8 2025 620,486 (48,684)(63,500)508,303 730,544 0 0 1,238,846 827,257 (86,549)(112,889)627,819 953,674 246,403 0 1,827,895 589,049 9 2026 639,101 (49,657)(65,405)524,038 730,544 0 0 1,254,582 850,660 (88,280)(116,276)646,104 953,674 246,403 0 1,846,181 591,59810 2027 658,274 (50,650)(67,367)540,256 730,544 0 0 1,270,800 874,746 (90,045)(119,764)664,937 953,674 246,403 0 1,865,013 594,21311 2028 678,022 (51,663)(69,388)556,970 981,790 0 (454,337)1,538,760 899,535 (91,846)(123,357)684,332 1,281,657 285,648 (839,721)2,251,638 712,87812 2029 698,363 (52,697)(71,470)574,196 981,790 0 0 1,555,986 925,048 (93,683)(127,058)704,308 1,281,657 285,648 0 2,271,613 715,62813 2030 719,314 (53,751)(73,614)591,949 981,790 0 0 1,573,739 951,307 (95,557)(130,869)724,881 1,281,657 285,648 0 2,292,187 718,44814 2031 740,893 (54,826)(75,822)610,245 981,790 0 0 1,592,035 978,334 (97,468)(134,795)746,070 1,281,657 285,648 0 2,313,376 721,34115 2032 763,120 (55,922)(78,097)629,101 981,790 0 0 1,610,890 1,006,150 (99,417)(138,839)767,894 1,281,657 285,648 0 2,335,200 724,30916 2033 786,013 (57,041)(80,440)648,533 981,790 0 0 1,630,323 1,034,781 (101,405)(143,004)790,371 1,281,657 331,145 (76,134)2,403,173 772,85117 2034 809,594 (58,181)(82,853)668,559 981,790 0 0 1,650,349 1,064,250 (103,434)(147,295)813,521 1,281,657 331,145 0 2,426,323 775,975 18 2035 833,882 (59,345)(85,339)689,198 981,790 0 0 1,670,988 1,094,581 (105,502)(151,713)837,365 1,281,657 331,145 0 2,450,167 779,180 19 2036 858,898 (60,532)(87,899)710,467 981,790 0 0 1,692,257 1,125,801 (107,612)(156,265)861,924 1,281,657 331,145 0 2,474,726 782,469 20 2037 884,665 (61,743)(90,536)732,386 981,790 0 0 1,714,176 1,157,935 (109,765)(160,953)887,218 1,281,657 331,145 0 2,500,020 785,844 21 2038 911,205 (62,977)(93,252)754,976 1,319,443 0 (610,591)2,074,419 1,191,012 (111,960)(165,781)913,270 1,722,440 383,887 (1,128,515)3,019,598 945,17922 2039 938,541 (64,237)(96,050)778,255 1,319,443 0 0 2,097,698 1,225,058 (114,199)(170,755)940,104 1,722,440 383,887 0 3,046,432 948,73423 2040 966,697 (65,522)(98,931)802,245 1,319,443 0 0 2,121,688 1,260,103 (116,483)(175,877)967,742 1,722,440 383,887 0 3,074,070 952,38224 2041 995,698 (66,832)(101,899)826,967 1,319,443 0 0 2,146,410 1,296,176 (118,813)(181,154)996,210 1,722,440 383,887 0 3,102,537 956,12725 2042 1,025,569 (68,169)(104,956)852,444 1,319,443 0 0 2,171,888 1,333,308 (121,189)(186,588)1,025,531 1,722,440 383,887 0 3,131,859 959,97126 2043 1,056,336 (69,532)(108,105)878,699 1,319,443 0 0 2,198,143 1,371,530 (123,613)(192,186)1,055,732 1,722,440 445,031 (102,318)3,223,203 1,025,06027 2044 1,088,026 (70,923)(111,348)905,756 1,319,443 0 0 2,225,199 1,410,875 (126,085)(197,952)1,086,839 1,722,440 445,031 0 3,254,310 1,029,11128 2045 1,120,667 (72,341)(114,688)933,638 1,319,443 0 0 2,253,081 1,451,377 (128,607)(203,890)1,118,880 1,722,440 445,031 0 3,286,351 1,033,27029 2046 1,154,287 (73,788)(118,129)962,370 1,319,443 0 0 2,281,814 1,493,068 (131,179)(210,007)1,151,883 1,722,440 445,031 0 3,319,354 1,037,54030 2047 1,188,916 (75,264)(121,673)991,979 1,319,443 0 0 2,311,423 1,535,985 (133,802)(216,307)1,185,876 1,722,440 445,031 0 3,353,347 1,041,924 31 2048 1,224,583 (76,769)(125,323)1,022,491 1,773,221 0 (820,584)2,795,713 2,051,252 (136,478)(222,796)1,691,978 2,314,816 515,912 (1,516,630)4,522,706 1,726,993 32 2049 1,261,321 (78,304)(129,083)1,053,934 1,773,221 0 0 2,827,155 2,112,790 (139,208)(229,480)1,744,102 2,314,816 515,912 0 4,574,830 1,747,675 33 2050 1,299,160 (79,871)(132,955)1,086,335 1,773,221 0 0 2,859,556 2,176,174 (141,992)(236,364)1,797,817 2,314,816 515,912 0 4,628,545 1,768,989 34 2051 1,338,135 (81,468)(136,944)1,119,723 1,773,221 0 0 2,892,945 2,241,459 (144,832)(243,455)1,853,172 2,314,816 515,912 0 4,683,900 1,790,95535 2052 1,378,279 (83,097)(141,052)1,154,130 1,773,221 0 0 2,927,351 2,308,703 (147,729)(250,759)1,910,215 2,314,816 515,912 0 4,740,943 1,813,59236 2053 1,419,628 (84,759)(145,284)1,189,585 1,773,221 0 0 2,962,806 2,377,964 (150,683)(258,282)1,968,999 2,314,816 598,084 (137,507)4,881,899 1,919,09237 2054 1,462,216 (86,454)(149,642)1,226,120 1,773,221 0 0 2,999,341 2,449,303 (153,697)(266,030)2,029,576 2,314,816 598,084 0 4,942,475 1,943,13438 2055 1,506,083 (88,184)(154,131)1,263,768 1,773,221 0 0 3,036,989 2,522,782 (156,771)(274,011)2,092,000 2,314,816 598,084 0 5,004,900 1,967,91039 2056 1,551,265 (89,947)(158,755)1,302,563 1,773,221 0 0 3,075,784 2,598,465 (159,906)(282,232)2,156,327 2,314,816 598,084 0 5,069,227 1,993,44340 2057 1,597,803 (91,746)(163,518)1,342,539 1,773,221 0 0 3,115,761 2,676,419 (163,104)(290,698)2,222,616 2,314,816 598,084 0 5,135,516 2,019,75541 2058 1,645,737 (93,581)(168,423)1,383,733 2,383,061 0 (1,102,796)3,766,794 2,756,712 (166,366)(299,419)2,290,926 3,110,919 693,343 (2,038,224)6,095,188 2,328,39442 2059 1,695,110 (95,453)(173,476)1,426,181 2,383,061 0 0 3,809,242 2,839,413 (169,694)(308,402)2,361,317 3,110,919 693,343 0 6,165,579 2,356,337 43 2060 1,745,963 (97,362)(178,680)1,469,921 2,383,061 0 0 3,852,982 2,924,595 (173,088)(317,654)2,433,854 3,110,919 693,343 0 6,238,116 2,385,134 44 2061 1,798,342 (99,309)(184,041)1,514,992 2,383,061 0 0 3,898,053 3,012,333 (176,549)(327,184)2,508,600 3,110,919 693,343 0 6,312,862 2,414,809 45 2062 1,852,292 (101,295)(189,562)1,561,435 2,383,061 0 0 3,944,496 3,102,703 (180,080)(336,999)2,585,624 3,110,919 693,343 0 6,389,886 2,445,390 46 2063 1,907,861 (103,321)(195,249)1,609,291 2,383,061 0 0 3,992,352 3,195,784 (183,682)(347,109)2,664,993 3,110,919 803,775 (184,798)6,579,687 2,587,33547 2064 1,965,097 (105,388)(201,106)1,658,603 2,383,061 0 0 4,041,664 3,291,658 (187,356)(357,522)2,746,780 3,110,919 803,775 0 6,661,474 2,619,81048 2065 2,024,049 (107,495)(207,140)1,709,415 2,383,061 0 0 4,092,476 3,390,408 (191,103)(368,248)2,831,057 3,110,919 803,775 0 6,745,751 2,653,27549 2066 2,084,771 (109,645)(213,354)1,761,772 2,383,061 0 0 4,144,833 3,492,120 (194,925)(379,296)2,917,900 3,110,919 803,775 0 6,832,593 2,687,76050 2067 2,147,314 (111,838)(219,754)1,815,722 2,383,061 0 0 4,198,783 3,596,884 (198,823)(390,674)3,007,386 3,110,919 803,775 0 6,922,080 2,723,29751 2068 2,211,733 (114,075)(226,347)1,871,312 3,202,635 0 (1,482,066)5,073,947 3,704,790 (202,800)(402,395)3,099,596 4,180,815 931,795 (2,739,202)8,212,206 3,138,25952 2069 2,278,085 (116,356)(233,137)1,928,592 3,202,635 0 0 5,131,227 3,815,934 (206,856)(414,466)3,194,611 4,180,815 931,795 0 8,307,222 3,175,99553 2070 2,346,428 (118,683)(240,132)1,987,613 3,202,635 0 0 5,190,248 3,930,412 (210,993)(426,900)3,292,518 4,180,815 931,795 0 8,405,129 3,214,88054 2071 2,416,821 (121,057)(247,335)2,048,428 3,202,635 0 0 5,251,063 4,048,324 (215,213)(439,707)3,393,404 4,180,815 931,795 0 8,506,014 3,254,95155 2072 2,489,325 (123,478)(254,756)2,111,092 3,202,635 0 0 5,313,727 4,169,774 (219,517)(452,899)3,497,358 4,180,815 931,795 0 8,609,968 3,296,241 56 2073 2,564,005 (125,948)(262,398)2,175,659 3,202,635 0 0 5,378,294 4,294,867 (223,907)(466,486)3,604,474 4,180,815 1,080,206 (248,354)8,865,495 3,487,201 CS Zoning Alternative Proposed Project _________________________________________________________Prepared by: Keyser Marston AssociatesFilename: Pro forma 5.13.15.xlsx; Cash Flow Increment Resid. EGI Taxes OpEx Resid. NOI Office NOI(2)Retail NOI(3)Leasing(4)Total Resid. EGI Taxes OpEx Resid. NOI Office NOI(2)Retail NOI(3)Leasing(4)Total Escalation (1)1.030 1.020 1.030 1.030 1.030 1.028 1.020 1.030 1.030 1.030 CS Zoning Alternative Proposed Project 57 2074 2,640,925 (128,467)(270,270)2,242,188 3,202,635 0 0 5,444,824 4,423,713 (228,385)(480,480)3,714,847 4,180,815 1,080,206 0 8,975,868 3,531,04558 2075 2,720,153 (131,036)(278,378)2,310,739 3,202,635 0 0 5,513,374 4,556,424 (232,953)(494,895)3,828,577 4,180,815 1,080,206 0 9,089,598 3,576,224 59 2076 2,801,758 (133,657)(286,730)2,381,371 3,202,635 0 0 5,584,006 4,693,117 (237,612)(509,742)3,945,763 4,180,815 1,080,206 0 9,206,784 3,622,778 60 2077 2,885,810 (136,330)(295,331)2,454,149 3,202,635 0 0 5,656,784 4,833,911 (242,364)(525,034)4,066,512 4,180,815 1,080,206 0 9,327,534 3,670,749 61 2078 2,972,385 (139,057)(304,191)2,529,137 4,304,074 0 (1,991,772)6,833,211 4,978,928 (247,212)(540,785)4,190,931 5,618,666 1,252,255 (3,681,258)11,061,852 4,228,641 62 2079 3,061,556 (141,838)(313,317)2,606,401 4,304,074 0 0 6,910,475 5,128,296 (252,156)(557,008)4,319,132 5,618,666 1,252,255 0 11,190,052 4,279,57763 2080 3,153,403 (144,675)(322,717)2,686,012 4,304,074 0 0 6,990,086 5,282,145 (257,199)(573,719)4,451,227 5,618,666 1,252,255 0 11,322,148 4,332,06264 2081 3,248,005 (147,568)(332,398)2,768,039 4,304,074 0 0 7,072,113 5,440,609 (262,343)(590,930)4,587,336 5,618,666 1,252,255 0 11,458,256 4,386,14465 2082 3,345,445 (150,519)(342,370)2,852,556 4,304,074 0 0 7,156,630 5,603,827 (267,590)(608,658)4,727,579 5,618,666 1,252,255 0 11,598,500 4,441,87066 2083 3,445,809 (153,530)(352,641)2,939,638 4,304,074 0 0 7,243,712 5,771,942 (272,942)(626,918)4,872,083 5,618,666 1,451,706 (333,766)11,942,455 4,698,74367 2084 3,549,183 (156,600)(363,220)3,029,362 4,304,074 0 0 7,333,436 5,945,100 (278,401)(645,725)5,020,975 5,618,666 1,451,706 0 12,091,347 4,757,91168 2085 3,655,658 (159,732)(374,117)3,121,809 4,304,074 0 0 7,425,883 6,123,453 (283,969)(665,097)5,174,388 5,618,666 1,451,706 0 12,244,760 4,818,87769 2086 3,765,328 (162,927)(385,341)3,217,061 4,304,074 0 0 7,521,134 6,307,157 (289,648)(685,050)5,332,459 5,618,666 1,451,706 0 12,402,831 4,881,69770 2087 3,878,288 (166,186)(396,901)3,315,202 4,304,074 0 0 7,619,276 6,496,372 (295,441)(705,601)5,495,329 5,618,666 1,451,706 0 12,565,702 4,946,42671 2088 3,994,637 (169,509)(408,808)3,416,320 5,784,315 0 (2,676,775)9,200,635 6,691,263 (301,350)(726,769)5,663,144 7,551,017 1,682,926 (4,947,304)14,897,086 5,696,451 72 2089 4,114,476 (172,899)(421,072)3,520,504 5,784,315 0 0 9,304,820 6,892,001 (307,377)(748,573)5,836,051 7,551,017 1,682,926 0 15,069,994 5,765,175 73 2090 4,237,910 (176,357)(433,704)3,627,848 5,784,315 0 0 9,412,164 7,098,761 (313,524)(771,030)6,014,207 7,551,017 1,682,926 0 15,248,150 5,835,986 74 2091 4,365,047 (179,885)(446,715)3,738,447 5,784,315 0 0 9,522,763 7,311,724 (319,795)(794,161)6,197,768 7,551,017 1,682,926 0 15,431,711 5,908,948 75 2092 4,495,999 (183,482)(460,117)3,852,400 5,784,315 0 0 9,636,715 7,531,075 (326,191)(817,985)6,386,899 7,551,017 1,682,926 0 15,620,842 5,984,12776 2093 4,630,879 (187,152)(473,920)3,969,806 5,784,315 0 0 9,754,122 7,757,008 (332,715)(842,525)6,581,768 7,551,017 1,950,972 (448,554)16,083,757 6,329,63577 2094 4,769,805 (190,895)(488,138)4,090,772 5,784,315 0 0 9,875,088 7,989,718 (339,369)(867,801)6,782,548 7,551,017 1,950,972 0 16,284,537 6,409,45078 2095 4,912,899 (194,713)(502,782)4,215,404 5,784,315 0 0 9,999,720 8,229,409 (346,156)(893,835)6,989,418 7,551,017 1,950,972 0 16,491,408 6,491,68879 2096 5,060,286 (198,607)(517,866)4,343,813 5,784,315 0 0 10,128,129 8,476,292 (353,079)(920,650)7,202,563 7,551,017 1,950,972 0 16,704,552 6,576,42380 2097 5,212,095 (202,579)(533,402)4,476,114 5,784,315 0 0 10,260,429 8,730,580 (360,141)(948,269)7,422,170 7,551,017 1,950,972 0 16,924,159 6,663,73081 2098 5,368,458 (206,631)(549,404)4,612,423 7,773,636 0 (3,597,362)12,386,060 8,992,498 (367,344)(976,717)7,648,437 10,147,936 2,261,711 (6,648,762)20,058,084 7,672,02482 2099 5,529,511 (210,763)(565,886)4,752,862 7,773,636 0 0 12,526,499 9,262,273 (374,691)(1,006,019)7,881,563 10,147,936 2,261,711 0 20,291,210 7,764,71283 2100 5,695,397 (214,979)(582,862)4,897,556 7,773,636 0 0 12,671,192 9,540,141 (382,184)(1,036,200)8,121,757 10,147,936 2,261,711 0 20,531,404 7,860,212 84 2101 5,866,259 (219,278)(600,348)5,046,632 7,773,636 0 0 12,820,268 9,826,345 (389,828)(1,067,286)8,369,232 10,147,936 2,261,711 0 20,778,879 7,958,610 85 2102 6,042,246 (223,664)(618,359)5,200,224 7,773,636 0 0 12,973,860 10,121,136 (397,625)(1,099,304)8,624,207 10,147,936 2,261,711 0 21,033,854 8,059,994 86 2103 6,223,514 (228,137)(636,909)5,358,467 7,773,636 0 0 13,132,104 10,424,770 (405,577)(1,132,283)8,886,909 10,147,936 2,621,943 (602,819)21,656,788 8,524,685 87 2104 6,410,219 (232,700)(656,017)5,521,503 7,773,636 0 0 13,295,139 10,737,513 (413,689)(1,166,252)9,157,572 10,147,936 2,621,943 0 21,927,451 8,632,31288 2105 6,602,526 (237,354)(675,697)5,689,475 7,773,636 0 0 13,463,111 11,059,638 (421,962)(1,201,239)9,436,436 10,147,936 2,621,943 0 22,206,315 8,743,20489 2106 6,800,601 (242,101)(695,968)5,862,532 7,773,636 0 0 13,636,169 11,391,427 (430,402)(1,237,276)9,723,749 10,147,936 2,621,943 0 22,493,628 8,857,45990 2107 7,004,619 (246,943)(716,847)6,040,829 7,773,636 0 0 13,814,466 11,733,170 (439,010)(1,274,395)10,019,766 10,147,936 2,621,943 0 22,789,645 8,975,17991 2108 7,214,758 (251,882)(738,352)6,224,524 10,447,117 0 (4,834,554)16,671,641 12,085,165 (447,790)(1,312,627)10,324,749 13,637,977 3,039,551 (8,935,380)27,002,276 10,330,63692 2109 7,431,201 (256,919)(760,503)6,413,778 10,447,117 0 0 16,860,896 12,447,720 (456,746)(1,352,005)10,638,969 13,637,977 3,039,551 0 27,316,497 10,455,60193 2110 7,654,137 (262,058)(783,318)6,608,761 10,447,117 0 0 17,055,878 12,821,152 (465,881)(1,392,566)10,962,706 13,637,977 3,039,551 0 27,640,233 10,584,35594 2111 7,883,761 (267,299)(806,818)6,809,644 10,447,117 0 0 17,256,761 13,205,786 (475,198)(1,434,342)11,296,245 13,637,977 3,039,551 0 27,973,773 10,717,01295 2112 8,120,274 (272,645)(831,022)7,016,607 10,447,117 0 0 17,463,724 13,601,960 (484,702)(1,477,373)11,639,885 13,637,977 3,039,551 0 28,317,413 10,853,68996 2113 8,363,882 (278,098)(855,953)7,229,831 10,447,117 0 0 17,676,948 14,010,019 (494,396)(1,521,694)11,993,928 13,637,977 3,523,672 (810,139)29,155,578 11,478,629 97 2114 8,614,798 (283,660)(881,631)7,449,507 10,447,117 0 0 17,896,624 14,430,319 (504,284)(1,567,345)12,358,690 13,637,977 3,523,672 0 29,520,340 11,623,715 98 2115 8,873,242 (289,333)(908,080)7,675,829 10,447,117 0 0 18,122,946 14,863,229 (514,370)(1,614,365)12,734,494 13,637,977 3,523,672 0 29,896,143 11,773,197 99 2116 9,139,440 (295,120)(935,323)7,908,997 10,447,117 0 0 18,356,114 15,309,126 (524,657)(1,662,796)13,121,672 13,637,977 3,523,672 0 30,283,322 11,927,207 100 2117 136,362,020 155,927,122 0 0 292,289,142 226,235,729 203,551,896 44,045,906 0 473,833,531 181,544,388 Discount Rate(5)6.75% 7.75% 8.50% 7.3%6.8% 7.8% 8.5% 7.4%Project Value (2015$)9,690,353 11,708,792 0 (802,025)20,597,119 13,301,716 15,285,004 3,099,279 (1,544,056)30,141,943 9,544,823 IRR 8.6%8.8% (1) Annnual escalation factors based on historic market averages. See Appendix I for further discussion.(2) Office rents assume 10-year lease terms.(3) Retail rents assume 5-year lease terms.(4) Leasing costs include leasing commissions and tenant improvement costs. (5) Annual discount rates estimated by KMA based in part on RERC Valuation Rates and Metrics and PwC Real Estate Investor Survey as of 1st Quarter 2015. _________________________________________________________Prepared by: Keyser Marston AssociatesFilename: Pro forma 5.13.15.xlsx; Cash Flow To: Russ Reich, Cara Silver May 28, 2015 Subject: 441 Page Mill Road: State Density Bonus Analysis Page 12 441 Page Mill Memo 5.28.15.docx; ClientID d) Conclusion As summarized in Section IV(a), The net cost of delivering the five BMR housing units in the proposed project is estimated at $1,509,000 and $3,259,000 for the Development Cost Approach and Rent Differential Approach respectively. As summarized in Section IV(c), the net value increment of the three concessions is estimated at $560,000 and $1,239,000 for the Capitalized Value Approach and Discounted Cash Flow Approach respectively. Since the cost of delivering the BMR units exceeds the value increment in each case, and since each of the three concessions independently contributes to the value increment, it is concluded that all three of the requested concessions are needed to address the BMR housing costs in the proposed project. Comparison of BMR Housing Cost to Value Increment Low High Net Cost of BMR Housing Units $1,509,000 * $3,259,000 ** Net Value Increment from Concessions $560,000 * $1,239,000 ** *KMA approaches **City Council requested approaches 1 APPENDIX I Summary of Pro forma Assumptions 441 Page Mill Road: State Density Bonus Analysis Development Costs Acquisition, Carry, Environmental. Land acquisition costs were based on the July 2012 purchase price for the site, adjusted for the Pepper Avenue parcel subsequently sold. Land carry costs include taxes and interest carry from the July 2012 purchase to today. Environmental mitigation costs related to the HP plume estimated at $664,000 based on a third party general contractor estimate plus one year of cost inflation. Direct Construction Costs. Direct construction costs were estimated by KMA based on a review of three general contractor estimates provided for the Applicant, on third party data sources such as RS Means, on pro formas for other recent mixed-use projects in the Bay Area, and on construction cost inflation in the past year. Indirect & Financing Costs. Indirect costs include all architecture and engineering costs, governmental fees and permits, taxes, insurance, legal, leasing/marketing, and overhead/administration costs. Fees and permits costs were estimated by the Applicant based on the city’s fee worksheets and were reviewed relative to other projects in Palo Alto. Other indirect costs were estimated by KMA based on industry standards and other mixed use developments in the Bay Area. Financing costs based on an assumed 65% loan to cost and a 24-month construction/lease-up period. Operating Income Residential Income. Market rate residential rents estimated at $4.71/sq. ft./month (up 15% from KMA’s 2014 analysis)1, or about $4,400/unit/month, based on a review of asking rents for apartments in Palo Alto, Menlo Park, and a survey of newer apartment developments in Mountain View and Sunnyvale (see Appendix II). BMR rents were based on 2015 Area Median Income (AMI) for Santa Clara County, adjusted for household size and net of estimated tenant-paid utility allowances. Operating expenses for apartments were based on current pro formas for other Bay Area apartments at similar densities. Taxes were based on the land purchase price plus apartment unit values from recently built projects in Santa Clara County. Office Income. Office rents estimated at $6.05/sq. ft./month on a triple net (NNN) basis (up 10% from KMA’s 2014 analysis) based on rent comps for Class A office space in Palo Alto as well as third party market data from commercial brokers. For reference, 4th Quarter 2014 1 A portion of the increase in rent per square foot is attributable to the smaller unit size in the current program due to the fact that per square foot rents are typically higher for smaller units. 2 office rents in Palo Alto (including downtown) averaged $5.52 per sq. ft. on a triple net basis according to Newmark Cornish & Carey. Retail Income. Retail rents estimated at $5.25/sq. ft./month on a triple net basis (up 5% from KMA’s 2014 analysis) based on recent retail listings in strong retail locations in Palo Alto (downtown and along high traffic corridors). For reference, 4th Quarter 2014 average asking retail rents in the Palo Alto/Mountain View/Los Altos submarket was $31.21/sq. ft./year ($2.60/month) according to Terranomics/DTZ. Discounted Cash Flow (DCF) The key inputs into the discounted cash flow (DCF) model involve the out-year escalations in rents, operating expenses, leasing costs, and the terminal-year reversion value. The purpose of the DCF model is to project the long-term cash flow generated by the project on the assumption that the investment will be held over an extended time period. The DCF is a companion analysis that is often performed in addition to other means of analysis, including the capitalized value at completion approach (KMA approach). From the DCF model, the internal rate of return (IRR) can be calculated as well as the net present value (NPV) of the future cash flow. These metrics are utilized to assess whether the proposed project will generate sufficient returns to justify investment and, in short, whether the project is financially feasible. Long-term escalations in market rents in particular are difficult to predict with certainty given unknown timing of real estate cycles and the unpredictability of change from year to year. It is KMA’s experience that over an extended time period, most developers and real estate investors look toward long-term historic averages in order to inform future conditions. Developers and investors know that there will be periods of strong rent growth, such as being experienced in Palo Alto today, as well as periods of significant rent declines, such as that which occurred during the Great Recession and other recessionary periods in the past. In order to inform the out-year escalation assumptions used in this analysis, KMA researched a range of historic market and economic factors, all of which are routinely utilized by real estate market participants to judge future market demand and rental rate growth: Local and regional population and job growth Unemployment rates Building permit activity and pipeline projects Interest rates Inflation rates Real estate capitalization rates Historic rental rates and occupancy rates This historic data research is summarized in a series of charts and graphs appended to this section. What is notable is that, while Palo Alto has experienced very strong rental rate growth in the last several years, there have been periods of severe decline as well. To illustrate the point, Palo Alto office rents have increased by upwards of 10% to 20% annually between 2000 and 2014. However, 3 Palo Alto also experienced declines of 10% to 20% between 2001 and 2003 (the “dot bomb”) as well as between 2008 and 2009 (the Great Recession). These numbers are shown in Figures 17 and 18. From 2000 to 2014, the compounded annual growth rate in office rents was 2.5%. Similar up cycles and down cycles were experienced in Palo Alto apartment rents and retail rents as well (see Figures 20-23). Rents for the Low Income BMR units are based on the area median income (AMI) for Santa Clara County adjusted for household size and net of tenant-paid utilities. In order to project the future escalation of BMR rents KMA pulled Santa Clara County AMI data going back to 2000. Between 2000 and 2015, Low Income household incomes grew by 1.35% on a compounded annual basis. It is also noted that the DCF analysis assumes the BMR restrictions are lifted after the 30-year regulatory period required by the State Density Bonus Law, meaning the five BMR units in the proposed project revert to market rate from year 31 forward. On the basis of the historic Palo Alto market data and other economic metrics, KMA has made the following annual escalation assumptions in the DCF model: Apartment Rents – Market Rate 3.0% annually Apartment Rents – BMR 1.35% annually (BMRs in place for 30 years) Apartment Rents – Blended Average 2.8% annually (Years 1-30) Apartment Property Taxes 2.0% annually Apartment Operating Expenses 3.0% annually Office Rents 3.0% annually Retail Rents 3.0% annually Another set of assumptions involves the annual discount rate to apply to future cash flows. Because future dollars are worth less than current dollars, real estate investors utilize discount rates to determine whether the projected return of future dollars is worth investing in the near term. Like most real estate variables, discount rates vary over time based on a wide range of factors including costs of capital, local and regional market cycles, and returns from alternative investments. For purposes of this analysis, KMA largely utilized discount rates as reported by Real Estate Research Corporation (RERC) and PwC Investor Survey, both of which are recognized third party sources of real estate market data (see Figure 13). On this basis, the following discount rates were assumed: Apartment Cash Flow Discount Rate 6.75% annually Office Cash Flow Discount Rate 7.75% annually Retail Cash Flow Discount Rate 8.50% annually APPENDIX I 0 20,000 40,000 60,000 80,000 100,000 Figure 1. Population ProjectionCity of Palo AltoABAG 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 Figure 3. Total Jobs ProjectionCity of Palo AltoABAG Compounded Annual Growth Rate = 0.91% Compounded Annual Growth Rate = 0.96% 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Figure 2. Population ProjectionSanta Clara CountyABAG Compounded Annual Growth Rate = 1.03% 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 Figure 4. Total Jobs ProjectionSanta Clara CountyABAG Compounded Annual Growth Rate = 0.95% _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; ABAG APPENDIX I 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Figure 5. Unemployment Rate - Santa Clara County Real Estate Research Council Unemployment Rate Average 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Figure 6. 10-Year Treasury Yield - Annual Average U.S. Treasury 10-Year Treasury Yield Average -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Figure 7. Consumer Price IndexU.S. City Average, All Urban ConsumersU.S. Bureau of Labor Statistics Annual Change Average Average 2.6% _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Interest Rates APPENDIX I 0 2,000 4,000 6,000 8,000 10,000 Figure 8. Multi-family Building PermitsSanta Clara County Real Estate Research Council Building Permits Average 0 200 400 600 800 1,000 1,200 Figure 9. Office Building PermitsSanta Clara County Real Estate Research Council Building Permits Average _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Permits APPENDIX I 8. 7 % 9. 2 % 8. 5 % 8. 2 % 7. 5 % 7. 2 % 7. 3 % 9. 2 % 9. 7 % 8. 9 % 8. 5 % 8. 5 % 7. 8 % 7. 5 % 9. 6 %10 . 2 % 9. 6 % 9. 3 % 8. 7 % 8. 4 % 8. 2 % 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Figure 10. Pre-Tax Yield RERC Investment Survey - San Francisco First Tier Properties Apartments CBD Office Community Retail 6. 7 % 7. 2 % 6. 5 % 5. 8 % 5. 3 % 5. 2 % 5. 0 % 7. 5 % 8. 3 % 7. 9 % 6. 7 % 7. 3 % 7. 0 % 6. 4 % 7. 4 % 8. 3 % 7. 7 % 7. 2 % 7. 0 % 6. 9 % 6. 4 % 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Figure 11. Going-In Cap Rates RERC Investment Survey - San Francisco First Tier Properties Apartments CBD Office Community Retail 7. 3 % 7. 7 % 7. 1 % 6. 7 % 5. 9 % 6. 0 % 5. 8 % 8. 2 %8. 8 % 8. 5 % 8. 1 % 7. 8 % 7. 6 % 7. 1 % 8. 3 % 8. 7 % 8. 5 % 8. 0 % 7. 5 % 7. 7 % 7. 2 % 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Figure 12. Terminal Cap Rates RERC Investment Survey - San Francisco First Tier Properties Apartments CBD Office Community Retail _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Cap Rates APPENDIX I Figure 13. Market Investment Criteria - 1st Quarter 2015 Pre-Tax Yield / Discount Rate Going-In Cap Rate Terminal Cap Rate Apartments - San Francisco Region (1)6.90% 4.90% 5.70% Apartments - Pacific Region (2)7.42% 4.81% 7.10% Office (CBD) - San Francisco Region (1)8.00% 5.90% 6.70% Office (Suburban) - San Francisco Region (1)8.40% 6.50% 7.20% Office - San Francisco Region (2)7.36% 5.92% 6.46% Neighborhood Retail - San Francisco Region (1)8.20% 6.40% 7.20% (1) RERC Investment Survey; first-tier investment properties (2) PwC Real Estate Investor Survey _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; IRR APPENDIX I Figure 14. Silicon Valley Office Research & Forecast Report - Q4 2014 Total Inventory (sq. ft.) Vacancy Rate FS Rents (avg) Net Absorption (YTD) Under Construction Palo Alto 9,784,044 6.1% $6.54 373,331 231,388 Mountain View 4,418,135 4.6% $5.93 185,739 831,837 Los Altos 1,130,425 7.2% $4.89 14,293 21,199 Sunnyvale 10,478,517 7.0% $4.63 488,568 1,804,811 Santa Clara 11,763,373 15.3% $3.50 1,138,079 1,147,124 Campbell / Los Gatos 3,601,811 6.7% $3.33 (3,531) 289,313 Cupertino / Saratoga 3,841,413 1.5% $4.55 1,888 3,080,820 San Jose 25,979,851 15.2% $2.61 (255,101) 680,000 Fremont / Milpitas 3,082,557 15.3% $1.85 31,805 0 Gilroy / Morgan Hill 1,056,354 17.8% $1.82 45,994 0 Total 75,136,480 11.1% $3.52 2,021,065 8,086,492 Colliers Figure 15. South Peninsula Office Market Report - Q4 2014 Total Inventory (sq. ft.) Vacancy Rate NNN Rents (avg) Palo Alto 8,221,623 6.35% $5.52 Menlo Park 5,010,416 7.14% $5.92 Mountain View 6,598,530 2.40% $4.59 Los Altos 1,167,469 5.46% $3.53 Redwood City 4,903,777 6.74% $3.69 Redwood Shores 4,238,361 7.09% $3.11 Total 30,140,176 5.75% $4.56 Newmark Cornish & Carey Figure 16. Silicon Valley Office Snapshot - Q4 2014 Total Inventory (sq. ft.) Vacancy Rate FS Rents (avg) Net Absorption (YTD) Under Construction Palo Alto 9,273,631 5.9% $6.70 (103,335) 43,874 Menlo Park 3,797,890 5.6% $7.16 374,511 568,862 Mountain View 3,653,472 4.7% $5.35 127,206 725,000 Los Altos 1,091,024 6.9% $4.97 24,355 0 Cupertino 4,101,466 1.1% $3.39 1,828 3,100,616 Campbell 2,327,849 9.3% $3.12 46,592 0 Los Gatos/Saratoga 2,000,186 5.4% $3.06 51,115 0 West San Jose 3,777,382 4.5% $2.48 89,898 232,340 Sunnyvale 7,572,523 4.6% $4.11 278,422 1,182,293 Santa Clara 7,633,730 13.3% $3.44 817,279 408,062 San Jose Airport 3,730,710 14.1% $2.65 124,565 0 North San Jose 3,844,041 26.9% $2.74 (27,389) 650,000 Alameda/Civic Center 2,249,215 7.2% $2.06 64,329 0 South San Jose 1,588,218 20.3% $1.89 (18,292)0 Downtown San Jose 8,451,057 17.7% $2.61 123,215 0 Milpitas 955,137 6.4% $1.93 41,537 0 Fremont 2,504,718 10.1% $1.98 (2,501)0 Total 68,552,249 9.9% $3.35 2,013,335 6,911,047 DTZ/Cassidy Turley _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Brokers APPENDIX I $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 Figure 17. Historic Palo Alto Office Rents (Full Service) CoStar, DTZ/Cassidy Turley -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Figure 18. Historic Palo Alto Office Rents - Annual ChangeCoStar, DTZ/Cassidy Turley Annual Change Compounded Annual Growth Rate (CAGR) 2 down-cycles 2 up-cycles CAGR = 2.5% _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Office Rents APPENDIX I Figure 19. Santa Clara County Apartment Rents Average Rent Occupancy Rate Palo Alto $2,977 94.5% Los Gatos $2,836 94.9% Cupertino $2,823 92.3% Mountain View $2,586 95.9% Santa Clara $2,411 95.6% Sunnyvale $2,385 96.1% Milpitas $2,291 96.4% San Jose $2,227 95.8% Campbell $2,043 96.9% Gilroy $1,829 95.8% RealFacts (as of Q4 2014) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Figure 20. Historic Palo Alto Apartment Rents - Avg AnnualRealFacts 2 down-cycles 2 up-cycles -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% Figure 21. Historic Palo Alto Apartment Rents - Annual ChangeRealFacts Annual Change Compounded Annual Growth Rate (CAGR) CAGR = 2.4% _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Apartment Rents APPENDIX I $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 Figure 22. Historic Retail Asking Rents Loopnet Santa Clara County Metro -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Figure 23. Historic Retail Asking Rents - Annual ChangeLoopnet Santa Clara County Metro Compounded Annual Growth RateCounty = -0.7%Metro = -0.9% _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Historic Data Charts 4.27.15.xlsx; Retail APPENDIX II Apartment Asking Rents - Palo Alto & Menlo Park Projects 441 Page Mill Road: State Density Bonus Analysis City of Palo Alto Sorted by Unit Size Address BR BA Sq. Ft. Rent $/SF I. Palo Alto Comps 535 Everett Ave. Studio 1 443 $2,500 $5.64 818 Cowper St.1 1 450 $2,050 $4.56 3375 Alma St.Studio 1 590 $2,095 $3.55 535 Everett Ave.1 1 606 $2,850 $4.70 3375 Alma St.1 1 610 $2,175 $3.57 573 Lytton Ave. #A 1 1 650 $2,700 $4.15 501 Forest Ave.1 1 675 $3,485 $5.16 2850 Middlefield Rd. 1 1 750 $2,794 $3.73 3375 Alma St.1 1 780 $2,400 $3.08 934 Emerson St.1 1 800 $3,400 $4.25 501 Forest Ave.2 2 945 $4,700 $4.97 2060 Cornell St.2 1 950 $4,750 $5.00 3375 Alma St.2 2 1,000 $3,175 $3.18 867 La Para Ave.2 1 1,044 $6,000 $5.75 3375 Alma St.2 2 1,050 $3,365 $3.20 2557 Park Blvd.2 2 1,292 $6,050 $4.68 155 California Ave. 2 1 1,310 $3,900 $2.98 663 Waverly St.3 2 1,612 $5,800 $3.60 Average 864 $3,566 $4.13 II. Menlo Park Comps 350 Sharon Park Ave. 1 1 810 $3,014 $3.72 350 Sharon Park Ave. 1 1 990 $3,225 $3.26 350 Sharon Park Ave. 2 2 1,111 $3,974 $3.58 350 Sharon Park Ave. 2 2 1,154 $4,090 $3.54 350 Sharon Park Ave. 3 2 1,466 $5,017 $3.42 1360 N. Lemon Ave. 2 2 1,510 $4,000 $2.65 Average 1,174 $3,887 $3.31 Note: Address duplicates represent multi-unit properties with more than one unit listing. Source: Zumper.com, April 2015 (excludes listings with no unit size). _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Apartment Rents 4.22.15.xlsx; Palo Alto APPENDIX II Apartment Asking Rents - Newer Built Projects 441 Page Mill Road: State Density Bonus Analysis City of Palo Alto BR BA Sq. Ft.Notes Low High Low High Carmel The Village 555 San Antonio Rd, Mountain View Studio 1 537 $2,925 $2,925 $5.45 $5.45 Built in 2013 Studio 1 638 $2,925 $2,925 $4.58 $4.58 330 Units Studio 1 547 $3,315 $3,315 $6.06 $6.06 Developer: Carmel Partners 1 1 566 $3,655 $3,655 $6.46 $6.46 1 1 678 $3,655 $3,655 $5.39 $5.39 1 1 693 $3,630 $3,745 $5.24 $5.40 1 1 1,004 $4,235 $4,235 $4.22 $4.22 1 1 1,141 $4,235 $4,235 $3.71 $3.71 2 2 1,054 $4,190 $4,190 $3.98 $3.98 2 2 1,098 $4,265 $4,265 $3.88 $3.88 2 2 1,437 $5,600 $5,600 $3.90 $3.90 Average 854 $3,875 $3,886 $4.54 $4.55 Lawrence Station Apartments 1271 Lawrence Station Rd, Sunnyvale 1 1 604 $2,449 $2,808 $4.05 $4.65 Built in 2012 1 1 751 $2,565 $3,081 $3.42 $4.10 336 Units 1 1 848 $2,749 $3,109 $3.24 $3.67 Developer: BRE Properties 2 2 1,035 $3,647 $4,225 $3.52 $4.08 2 2 987 $3,653 $4,466 $3.70 $4.52 Average 845 $3,013 $3,538 $3.57 $4.19 Solstice 299 W. Washington Avenue, Sunnyvale Studio 1 442 $2,696 $2,696 $6.10 $6.10 Built in 2013 1 1 690 $3,110 $3,775 $4.51 $5.47 280 Units 1 1 786 $3,193 $3,193 $4.06 $4.06 Developer: BRE Properties 1 1 814 $4,143 $4,143 $5.09 $5.09 2 2 1,085 $4,344 $4,329 $4.00 $3.99 Average 763 $3,497 $3,627 $4.58 $4.75 Via 621 Tasman Drive, Sunnyvale 1 1 916 $2,860 $2,886 $3.12 $3.15 Built in 2011 1 1 922 $2,865 $2,998 $3.11 $3.25 284 Units 2 2 1,043 $3,884 $3,945 $3.72 $3.78 Developer: Essex Property Trust 2 2 1,225 $4,180 $4,180 $3.41 $3.41 Average 1,027 $3,447 $3,502 $3.36 $3.41 Source: Property websites, Apartmentguide.com (April 2015) Rent $/SF _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Apartment Rents 4.22.15.xlsx; Newer Projects APPENDIX III Table 1. Building Sale Comparables Multi-family Apartment Buildings in Palo Alto (Sales from 2013 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Units Rentable SF Avg Size Sale Price $/Unit $/SF 1 360 Hawthorne Ave Palo Alto 3/14/2014 1922 4 2,940 735 $3,500,000 $875,000 $1,190 2 260 College Ave Palo Alto 12/4/2013 1963 6 5,069 845 $4,500,000 $750,000 $888 3 235 Emerson St Palo Alto 2/7/2014 1905 8 3,246 406 $2,810,000 $351,250 $866 4 535 Everett Ave Palo Alto 7/2/2014 1964 90 67,700 752 $36,500,000 $405,556 $539 5 695-696 Towle Way Palo Alto 10/16/2013 1965 42 43,932 1,046 $17,800,000 $423,810 $405 6 438 Ventura Ave Palo Alto 10/1/2013 1960 10 8,278 828 $2,839,500 $283,950 $343 7 432 College Ave Palo Alto 12/23/2014 6 4,800 800 $1,275,000 $212,500 $266 8 168 Waverly St Palo Alto 9/25/2014 1964 10 12,936 1,294 $2,884,000 $288,400 $223 Averages 1949 22 18,613 846 $9,013,563 $409,707 $484 441 Page Mill Analysis (w/ 30% BMR units)16 14,404 900 $10,483,000 $655,188 $728 441 Page Mill Analysis (assuming all market rate)16 14,404 900 $13,742,000 $858,875 $954 Source: CoStar (March 2015); excludes non-arms length transactions. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; PA Apartments APPENDIX III Table 2. Building Sale Comparables Office Buildings in Palo Alto (Sales from 2014 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Rentable SF Sale Price $/SF 1 524 Hamilton Ave Palo Alto 1/29/2015 2012 7,300 $17,300,000 $2,370 2 3303 Hillview Ave Palo Alto 3/11/2015 292,013 $330,000,000 $1,130 3 385-399 Sherman Ave Palo Alto 1/17/2014 1974 21,600 $18,876,000 $874 4 1117 California Ave Palo Alto 1/23/2014 1956 75,875 $65,000,000 $857 5 2401-2417 Park Blvd Palo Alto 10/31/2014 1982 1,422 $1,200,000 $844 6 1032 Elwell Ct Palo Alto 1/17/2014 43,188 $25,200,000 $583 7 1870 Embarcadero Rd Palo Alto 2/11/2015 1983 30,752 $17,375,000 $565 8 1870 Embarcadero Rd Palo Alto 1/3/2014 1983 30,752 $14,000,000 $455 9 744 San Antonio Rd Palo Alto 12/5/2014 1985 20,775 $7,300,000 $351 Averages 1982 58,186 $55,139,000 $948 441 Page Mill Analysis - Office Component 12,654 $15,868,000 $1,254 Source: CoStar (March 2015); excludes properties labeled "Class C" and non-arms length transactions. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; PA Office APPENDIX III Table 3. Building Sale Comparables Retail Buildings in Palo Alto (Sales from 2014 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Rentable SF Sale Price $/SF 1 101-161 S. California Ave, Unit D201 Palo Alto 5/8/2014 1984 1,531 $1,390,000 $908 2 101-161 S. California Ave, Unit D200 Palo Alto 2/13/2014 1984 1,351 $1,216,350 $900 3 431-433 Waverly St Palo Alto 3/28/2014 1955 15,599 $11,500,000 $737 4 392 California Ave Palo Alto 1/7/2014 1949 5,460 $3,400,000 $623 5 3960 El Camino Real Palo Alto 3/20/2014 1947 3,529 $1,350,000 $383 6 341-347 California Ave Palo Alto 1/7/2014 1955 9,568 $3,250,000 $340 Averages 1962 6,173 $3,684,392 $597 441 Page Mill Analysis - Retail Component 3,250 $2,993,000 $921 Source: CoStar (March 2015); excludes non-arms length transactions. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; PA Retail APPENDIX III Table 4. Building Sale Comparables Multi-family Apartment Buildings in Menlo Park, Mountain View, Los Altos (Sales from 2014 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Units Rentable SF Avg Size Sale Price $/Unit $/SF 1 222-234 Escuala Ave Mountain View 1/9/2015 1969 187 98,791 528 $86,000,000 $459,893 $871 2 564 University Dr Menlo Park 5/16/2014 1955 6 4,551 759 $3,805,062 $634,177 $836 3 537 Mariposa Ave Mountain View 9/9/2014 1952 12 3,650 304 $2,944,000 $245,333 $807 4 225 Waverly St Menlo Park 7/3/2014 1957 4 4,020 1,005 $2,500,000 $625,000 $622 5 735 Roble Ave Menlo Park 12/23/2014 1956 4 4,340 1,085 $2,550,000 $637,500 $588 6 1129 Willow Rd Menlo Park 11/24/2014 1951 5 3,250 650 $1,798,000 $359,600 $553 7 1911 San Ramon Ave Mountain View 4/15/2014 1962 5 4,355 871 $2,400,000 $480,000 $551 8 2645 Fayette Dr Mountain View 10/10/2014 1948 10 4,497 450 $2,400,000 $240,000 $534 9 12 Coleman Pl Menlo Park 10/9/2014 1962 8 6,700 838 $3,500,000 $437,500 $522 10 960 Roble Ave Menlo Park 6/11/2014 1959 4 5,444 1,361 $2,825,000 $706,250 $519 11 662 Mariposa Ave Mountain View 1/9/2014 1959 9 4,918 546 $2,535,000 $281,667 $515 12 2010 California St Mountain View 2/10/2015 1960 22 15,571 708 $7,930,000 $360,455 $509 13 279 Bush St Mountain View 9/30/2014 1957 8 6,218 777 $3,136,000 $392,000 $504 14 1839 Latham St Mountain View 1/15/2014 1950 4 3,776 944 $1,825,000 $456,250 $483 15 448 Mariposa Ave Mountain View 8/15/2014 1963 7 6,500 929 $3,125,000 $446,429 $481 16 850 Williams Way Mountain View 2/18/2015 1964 13 3,759 289 $1,739,000 $133,769 $463 17 1935 Rock St Mountain View 7/30/2014 1964 4 4,290 1,073 $1,950,000 $487,500 $455 18 55 Evandale Ave Mountain View 3/6/2014 1956 33 16,406 497 $7,220,000 $218,788 $440 19 2275 Sharon Rd Menlo Park 5/30/2014 1962 40 47,601 1,190 $19,950,000 $498,750 $419 20 37 Sherland Ave Mountain View 9/12/2014 1962 6 5,106 851 $1,950,000 $325,000 $382 21 465 Stierlin Rd Mountain View 9/30/2014 1963 48 26,496 552 $10,000,000 $208,333 $377 22 775 Menlo Ave Menlo Park 11/21/2014 1955 6 8,794 1,466 $3,100,000 $516,667 $353 23 655 Mariposa Ave Mountain View 10/22/2014 1961 9 10,878 1,209 $3,330,000 $370,000 $306 24 1973 San Luis Ave Mountain View 10/10/2014 1978 16 15,038 940 $4,370,000 $273,125 $291 25 2483-2491 Whitney Dr Mountain View 9/16/2014 1960 40 47,176 1,179 $11,700,000 $292,500 $248 26 31 Church St Mountain View 1/5/2015 18 21,150 1,175 $4,450,000 $247,222 $210 27 836 Pierce Rd Menlo Park 5/12/2014 1964 5 6,640 1,328 $1,250,000 $250,000 $188 Averages 1960 20 14,441 732 $7,417,854 $375,764 $514 441 Page Mill Analysis (w/ 30% BMR units)16 14,404 900 $10,483,000 $655,188 $728 441 Page Mill Analysis (assuming all market rate)16 14,404 900 $13,742,000 $858,875 $954 Source: CoStar (March 2015); excludes non-arms length transactions. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; Other Apartments APPENDIX III Table 5. Building Sale Comparables Office Buildings in Menlo Park, Mountain View, Los Altos (Sales from 2014 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Rentable SF Sale Price $/SF 1 141 1st St Los Altos 1/9/2014 1952 1,825 $2,350,000 $1,288 2 1906 El Camino Real Menlo Park 12/1/2014 2010 11,855 $14,300,000 $1,206 3 200 Middlefield Rd Menlo Park 5/21/2014 1967 41,933 $50,025,000 $1,193 4 303 Bryant St Mountain View 10/2/2014 2002 55,956 $64,400,000 $1,151 5 80 Willow Rd Menlo Park 12/24/2014 77,089 $75,000,000 $973 6 209-223 Castro St Mountain View 12/12/2014 1989 24,187 $19,000,000 $786 7 4085 Campbell Ave Menlo Park 5/30/2014 2013 58,963 $46,057,000 $781 8 925 N San Antonio Rd Los Altos 12/9/2014 1961 1,302 $1,000,000 $768 9 2882 Sand Hill Rd Menlo Park 1/8/2015 155,288 $117,600,000 $757 10 331 E Evelyn Ave Mountain View 6/13/2014 268,034 $155,000,000 $578 11 166 Main St Los Altos 6/2/2014 1964 4,320 $2,150,000 $498 12 303 Ravendale Dr Mountain View 7/10/2014 1978 67,000 $32,400,000 $484 13 440-450 Clyde Ave Mountain View 2/25/2014 79,401 $35,000,000 $441 14 5150 El Camino Real Los Altos 2/4/2014 76,525 $25,000,000 $327 15 405 Clyde Ave Mountain View 5/18/2014 1990 14,256 $4,650,000 $326 16 891 Maude Ave Mountain View 6/26/2014 1981 9,570 $3,015,000 $315 17 465 Fairchild Dr Mountain View 9/9/2014 62,500 $19,100,000 $306 18 827 Independence Ave Mountain View 11/14/2014 6,411 $1,550,000 $242 Averages 1982 56,468 $37,088,722 $657 441 Page Mill Analysis - Office Component 12,654 $15,868,000 $1,254 Source: CoStar (March 2015); excludes properties labeled "Class C" and non-arms length transactions. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; Other Office APPENDIX III Table 6. Building Sale Comparables Retail Buildings in Menlo Park, Mountain View, Los Altos (Sales from 2014 to 2015 YTD) Sorted by $/SF Date of Sale Year Built Rentable SF Sale Price $/SF 1 260 Moffett Blvd Mountain View 9/15/2014 2014 2,740 $3,850,000 $1,405 2 548 Glenwood Ave Menlo Park 7/31/2014 1,596 $1,350,000 $846 3 1283-1285 El Camino Real Menlo Park 2/19/2014 1,900 $1,595,000 $839 4 274-278 Castro St Mountain View 1/13/2015 2001 28,800 $23,200,000 $806 5 357 W El Camino Real Mountain View 9/30/2014 1960 4,748 $3,300,000 $695 6 1158-1168 Chestnut St Menlo Park 7/29/2014 1965 9,854 $6,200,000 $629 7 205-209 State St Los Altos 8/8/2014 1951 4,082 $2,500,000 $612 8 1032-1044 Castro St Mountain View 7/1/2014 7,692 $4,455,000 $579 9 852-860 Villa St Mountain View 12/19/2014 1950 6,404 $3,675,000 $574 10 706-716 Santa Cruz Ave Menlo Park 1/30/2014 1950 13,300 $7,600,000 $571 11 274-278 Casto St Mountain View 5/22/2014 2001 28,821 $16,000,000 $555 12 377-381 1st St Los Altos 10/20/2014 1955 3,101 $1,700,000 $548 13 1149-1151 Chestnut St Menlo Park 10/21/2014 1970 8,250 $4,500,000 $545 14 1100 W El Camino Real Mountain View 7/25/2014 1956 4,213 $2,100,000 $498 15 1495 W El Camino Real Mountain View 12/23/2014 1948 7,934 $3,888,500 $490 16 228 Castro St Mountain View 2/28/2014 1928 9,600 $4,200,000 $438 17 1923-1929 Menalto Rd Menlo Park 6/9/2014 1946 4,400 $1,387,000 $315 18 1347 W El Camino Blvd Mountain View 8/18/2014 7,850 $2,350,000 $299 19 826 N Rengstorff Ave Mountain View 2/19/2015 1962 3,314 $925,000 $279 20 1251 El Camino Real Menlo Park 6/18/2014 2,395 $350,000 $146 Averages 1964 8,050 $4,756,275 $591 441 Page Mill Analysis - Retail Component 3,250 $2,993,000 $921 Source: CoStar (March 2015); excludes non-arms length transactions, service stations, and properties sold for land value. _________________________________________________________ Prepared by: Keyser Marston Associates Filename: Building Sale Comps 3.17.15.xlsx; Other Retail PLACEHOLDER ATTACHMENT G PROJECT PLANS FOR 441 PAGE MILL ROAD (Hardcopies to City Council and Libraries only) Can be viewed at: http://www.cityofpaloalto.org/news/displaynews.asp?NewsID=2539&TargetID=319