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HomeMy WebLinkAbout2026-05-15 Climate Action and Sustainability Committee Summary MinutesCLIMATE ACTION & SUSTAINABILITY COMMITTEE SUMMARY MINUTES Page 1 of 6 Special Meeting May 15, 2026 The Climate Action and Sustainability Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 2:01 p.m. Present In-Person: Veenker (Chair), Councilmember Lu, Councilmember Burt Absent: None Call to Order The call to order was not captured by the recording. Public Comment There were no requests to speak. Verbal Report A. Staff Comments Brad Eggelston, Director of Public Works, announced that the City of Palo Alto is now accepting applications for the 2026 through 2027 term of the Youth Climate Advisory Board. Applications are due on June 14. B. Committee Member Comments and Announcements Mayor Veenker asked if there was anything to report and it was confirmed that there was not. She mentioned that the County Recycling and Waste Reduction Commission held a workshop regarding budget and fee issues and rethinking financial aspects of programs. Agenda Items 1. Residential Electrification Status Update and Proposed Principles for Electrification Programs to Assist with Air District Regulation Compliance; CEQA Status - Not a Project Jonathan Abendschein, Assistant Director of Climate Action, gave a slide presentation including Residential Programs, Residential Regulations, Key Program Statistics, 2026-2027 Residential Work Plan Priorities, Upcoming Air District Regulations, Estimated Residential Impacts of 2027 Air District Regulations, Proposed Principles for Electrification Assistance, Working Group Feedback, and Questions for Committee Consideration. Mayor Veenker talked about where they are, what they did, and what they are going to be doing. The Air District has been regulating nitrogen oxide emissions for a long time and had low NOx regulations on SUMMARY MINUTES Page 2 of 6 (Sp.) Climate Action and Sustainability Committee Meeting Summary Minutes: 05/15/2026 the books, which were amended to zero NOx. They built in off-ramps and processes for reevaluating. On Wednesday, they discussed Staff's recommended amendments to the rules, which included 3 categories of exemptions. Mayor Veenker presented a regulatory overview document and went over certified exemptions for water heaters based on project constraints, including space, electrical, and income exemptions. Because the exemptions would require certification, they would need to build out a website. Before they can hire people for that, the board has to vote. On Wednesday, the Board (by majority) liked the amendments and asked staff to bring them back. Mayor Veenker noted she expects amendments along these lines to come back for a formal vote in the fall. Staff thinks the date they need would be October 1, 2027. Councilmember Burt expressed his concern about the change in the Cap-and-Invest program. Fewer dollars would be available for most programs. He asked what is being assumed in terms of a change in Cap-and-Invest dollars. Assistant Director of Climate Action Abendschein talked about developing the 2027 budget, taking into account declines in Cap-and-Invest, noting it had an impact on their projections. They are updating their assumptions and working on actionable policy options for consideration later this year. Councilmember Burt recalled a consensus around a medium aggressive approach. Assistant Director of Climate Action Abendschein discussed feedback on the 80 by 30 goal, noting the cost of an incentive-only approach is beyond the City's available resources. Councilmember Burt recalled discussing a future balance between incentives and mandates. They would probably need to revise the 2030 goal to a date that would still be aggressive but reflect where they are. On the question of aligning with the region or leading on their own, he thought it was a hybrid. He was glad to hear about greater engagement with CCAs over the last year or two. He asked about creating a working group of municipal and utilities and CCAs. Assistant Director of Climate Action Abendschein said he got connected with the working group for CCAs on their incentives, and he thinks bringing in other publicly owned utilities would be valuable as well. Councilmember Burt thought there should be a working group that is a combination of publicly-owned utilities and CCAs, and it should be as strong as possible. Assistant Director of Climate Action Abendschein noted that one complexity is that if there are behind- the-scenes discussions of financial positions, sometimes CCAs want to have those on their own. On incentives, Councilmember Burt noted that his inclination was foremost on low income. He described his reasoning. He asked what Assistant Director of Climate Action Abendschein was referring to on what sort of repayments would be incentives. Assistant Director of Climate Action Abendschein described 2 models that could be used for financing. One would be providing capital out of the City's funding sources. An alternative would be to provide funding out of a third-party program and subsidize the repayment. It is also possible to provide capital from the City's funding sources and then seek repayment at a slower pace, which is effectively a repayment subsidy. SUMMARY MINUTES Page 3 of 6 (Sp.) Climate Action and Sustainability Committee Meeting Summary Minutes: 05/15/2026 Councilmember Burt asked if there would be modeling done on how much it would take from their "green funds" to be able to subsidize the cost of financing through the GoGreen Program. Assistant Director of Climate Action Abendschein said they have done some modeling, but feedback they get today will help them create some preliminary assistance models. Councilmember Burt noted that the definition of housing burden applies to low and high incomes alike, and there can be a drastic difference between actual burdens. If that sort of reference is incorporated, he would want to have that focused on moderate and lower-income housing burden more predominately. He asked Mayor Veenker if there was discussion at the Air Board about a concern that deadlines will incentivize people to change out gas to gas. Mayor Veenker answered affirmatively. They have realized that, as you move toward a deadline, there will be people who race out to get a new gas water heater. She welcomed suggestions to avoid that. Councilmember Burt said the only thing that comes to mind is to look at manufacturers and contractors and whether it would be legal to prohibit them from promoting that. Mayor Veenker said there are ways to not comply, but they are trying to move it forward as best they can within their jurisdiction. She agreed with Councilmember Burt and said that that is interesting to think about. Councilmember Lu said proposed principles make sense in terms of starting with moderate incentives. He agreed with Councilmember Burt that the area to lead on is those exceptions. He had a similar note about focusing on lower and middle income in terms of financial assistance and potentially finding a way to give technical assistance to more complex physical constraints, and also a way to properly consider what low or moderate income incentives look like in a multifamily context-to have a consistent unified incentive that applies across a complex. Regarding the budget, he thought it would be nice to have an outline of what they think the potential total level of residential electrification funding might look like going out over several years with those projections. He also thought it would be useful to see where they have already committed other funding. A table of all the numbers would be useful before making a final call. Brad Eggelston, Director of Public Works, said there may be a limit on what they can discuss in terms of budget. He said earlier they talked about looking at different policy objectives for community-wide electrification and how they might meet the 80 percent reduction goal and modeling those. He mentioned the topic they are planning for next month's meeting is "status update on analysis of community-wide electrification and draft policy options." It is meant to be a discussion to go deeper on alternatives before making bigger decisions, which ties into what Councilmember Lu asked about, like the cost of taking different approaches in the residential sector over many years. He added that it would be productive to have this as a joint meeting of the Climate Action and Sustainability Committee and the Utilities Advisory Commission, which talks about some of the same types of issues and the interplay between how funds are used, affordability, and rates, so they are trying to organize that as a joint meeting. Assistant Director of Climate Action Abendschein noted that these analyses will talk about what they can do over the long-term, which will help inform their decisions over the short term. The $5.3M number encompasses all the different programs, not just the heat pump water heater program, so any modeling SUMMARY MINUTES Page 4 of 6 (Sp.) Climate Action and Sustainability Committee Meeting Summary Minutes: 05/15/2026 they do on a plan will have to take into account potential impacts on other programs. The venue for those discussions is complicated but something they need to figure out. Councilmember Lu said the math gets tight. Assistant Director of Climate Action Abendschein said feedback helps to refine the modeling. Councilmember Lu talked about making incentives defensive against noncompliance or malicious compliance. He said incentives may look like permit rebates or even a little bit more than a permit rebate. He talked about messaging. He is not sure what other incentives they can apply to the permitting process beyond the kinds of incentives they have already explored in the past. In his mind, that is the most tractable way to design incentives that can be marketed in a way that encourage compliance. Assistant Director of Climate Action Abendschein noted that you have to comply with permits to get incentives. They take costs of permitting into account when they design incentives. They look for a total cost to make the project work, including permitting and installation costs. Councilmember Lu asked if there were disincentives that they could consider or enforcements or other things to encourage compliance. Assistant Director of Climate Action Abendschein said they have had preliminary discussions with the Planning and Development Services Department. He said that making sure people are aware what their permit requirements are is an important piece while simultaneously making permitting options as streamlined as possible. Mayor Veenker said she looks forward to more modeling but understands they need narrowing of what to model. She talked about incentives versus financing. She is hoping that voluntary uptake will increase. She wondered if they could model out decreasing incentives and picking up the balance with financing for individuals. Assistant Director of Climate Action Abendschein said they could model that. Mayor Veenker brought up the question of whether to focus on low income and middle income people. At the Air District, it is low income. She said AMI varies drastically county to county, but it could be an option here. They do not have to follow same categories because the Air District category was aimed at low income and she thinks they want to go up to middle income. Assistant Director of Climate Action Abendschein said the feedback was helpful. He thought an interesting thing to note was that income qualification is a complicated and expensive process, so the extent they can rely on Air District exemptions could be helpful. Mayor Veenker said the point of this extra year is to figure out how to do the income exemption well and what documents people have to provide, etc. If the City gets into its own version of that, they would have to do all of that, but the Air District is not aimed at middle income, so they would have to figure out a way to do that. Assistant Director of Climate Action Abendschein proposed tracking the housing burden conversation, because that may be a proxy for middle income. He can imagine a strategy where the Air District staff sets an absolute cap on home value when calculating housing burden. Mayor Veenker said it has not been discussed, but it might work here for that purpose, whereas it does not include middle income so much elsewhere. SUMMARY MINUTES Page 5 of 6 (Sp.) Climate Action and Sustainability Committee Meeting Summary Minutes: 05/15/2026 Assistant Director of Climate Action Abendschein said middle income is a new frontier and overhead is expensive, so the more they can rely on the Air District the better, but they can think about other options. Mayor Veenker said she would like to know what it would cost if they did everybody at some sort of decreasing level. She noted that they are fortunate, as their electric rates are lower than in other places, and they should be able to get a good adoption curve. Regarding whether to align with the rest of the region, she said they are circumstantially different. She would like to see other regions follow their lead to the extent they can, but they are often in very different circumstances. She thinks options should be modeled to see what would work for the community. Councilmember Burt wanted to follow up on a point Councilmember Lu made on permitting. If they subsidize the cost of permitting with different funds, that comes right out of general fund subsidies, so it is an expensive way to go. They could redirect some of the green funds to permitting reductions instead of rebates. In the cases where they are getting bad compliance on permitting, they could fulfil 2 purposes. It would be the same dollar amount of subsidy, but it would incentivize people to seek a permit. He recalled that compliance on EV charger permitting is bad and changeout on hot water heaters is bad, but he did not know on furnaces and things like that. Assistant Director of Climate Action Abendschein said changeouts on single appliance replacements for residential and commercial are pretty low. Councilmember Burt said he would be interested in exploring a combination of subsidies and redirecting some of the same dollars that they would use toward subsidies toward reducing permitting costs and simultaneously increasing the penalties for not obtaining permits, so they would make the permits cheap and noncompliance expensive. On Cap-and-Invest, he said wildfire and housing and some other areas are potentially going to get nothing. High speed rail gets the first billion. If there is a second billion, it goes to the legislature and the governor. Only thereafter, at tiers 3 and 4, do other things have funds, so they may get zero. Alan Kurotori, Director of Utilities, said they are tracking this very closely. There was an initial proposal in January where they would see significant reduction, but they do not think that is the case now. They are hoping to receive an amount similar to what they had before, maybe additional. Councilmember Burt thought the biggest variable was what they were going to do in the Cap-and-Invest program on dealing with refineries. Director of Utilities Alan Kurotori said there are different allocations associated with electric utilities and their supply portfolio and what year that they are using. He reiterated they are tracking it, but he wanted to assure the S/CAP Committee that it was not going to be zero. It would be more aligned to what they have currently in the budget, and will not bring forth any changes. Councilmember Burt talked about transit funding coming out of the same budget. He would like to get a better understanding offline. Assistant Director of Climate Action Abendschein summarized key pieces of feedback he received. He heard interest in 2 scenarios being modeled. One would be where assistance is focused primarily on low-income, maybe on those exempt for complexity of their projects, and some openness to middle SUMMARY MINUTES Page 6 of 6 (Sp.) Climate Action and Sustainability Committee Meeting Summary Minutes: 05/15/2026 income if the administrative issues can be worked out. The second piece of modeling he heard interest in was to understand what it would look like if they were to provide assistance and incentives to everybody with a gradual shift toward financing over years to reduce complexity and drive adoption. Councilmember Burt asked about incentives continuing past the Air District deadline. Assistant Director of Climate Action Abendschein said the first version of the principles said for a year past the effective date, but there is a more flexible version for modeling. Councilmember Burt wants to conserve subsidy dollars. Item 1 Public Comment 1. Stephen Rosenblum (Zoom) expressed his appreciation to the Council and Staff for their forward-looking policies on electrification and phasing out gas service. He thinks Palo Alto is among the leaders in California in attempting to do this. He brought up the Harvest Thermal system. He talked about 2 bills being worked on in the state legislature and expressed support for them. MOTION: No Action Taken Future Meetings and Agendas Brad Eggleston, Director of Public Works, said the next meeting topic is a status update on the analysis of community-wide electrification and draft policy options for Staff's analysis. There is a regular meeting of the Committee scheduled for the regular time on June 12. The Clerk's office is polling to see what time may work for a joint meeting of the Committee and Utilities Advisory Commission, which might be at the same time or might be at a different time. Mayor Veenker asked if it was possible they could have 2 meetings in June. Director of Public Works Brad Eggleston said that was possible. He clarified that they are trying to find a joint meeting day in June but if they cannot, it is unlikely to happen until September. The Climate Action and Sustainability Committee is out in July and the Utilities Advisory Commission is out in August. Councilmember Burt asked about the Council liaison to the UAC not being able to attend. Director of Public Works Brad Eggleston said that may be the case, and they will confirm. Adjournment: The meeting was adjourned at 3:22 p.m.