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Home My WebLink About2015-09-28 City Council Agenda PacketCITY OF PALO ALTO CITY COUNCIL September 28, 2015 Special Meeting Council Chambers 5:30 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday 11 days preceding the meeting. 1 September 28, 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 5:30-6:00 PM 1. Presentation of Cyber Security Proclamation for Participating in the National Cyber Security Awareness Campaign, in October 2015, Which is Designated by the President of the United States as National Cyber Security Awareness Month to Guide the Nation to a Higher Level of Internet Safety and Security 2. Proclamation Celebrating the 80th Anniversary of the Palo Alto Airport 3. Proclamation of Appreciation for Ralph Britton 2 September 28, 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. Agenda Changes, Additions and Deletions City Manager Comments 6:00-6:10 PM Oral Communications 6:10-6:25 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 6:25-6:30 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 4. Adoption of an Ordinance of the City Council of the City of Palo Alto Adding Section 16.63 to the Municipal Code Relating to Expedited Permitting Procedures for Small Residential Rooftop Solar Systems 5. Approval of Amendment Number 3 to Contract Number S12145610 with Wells Fargo Insurance Services for Benefit Consulting and Broker Services, Increasing the Contract by $68,500 for a Total Not to Exceed Amount of $304,000 Through June 30, 2016 With an Option to Renew for One Additional Year to June 30, 2017 6. Vote to Endorse the Slate of Candidates for the Division’s Executive Committee for 2015-16 and Direct the City Clerk to Forward to Jessica Stanfill Mullin, the Regional Public Affairs Manager for the Peninsula Division, League of California Cities the Completed Ballot for the City of Palo Alto Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 6:30-7:30 PM 7. Utilities Advisory Commission Recommendation That Council Adopt: 1) Resolution to Certify the Final Environmental Impact Report for the Proposed Recycled Water Distribution Project; 2) Resolution Approving the Recycled Water Distribution Project; and 3) Direct Staff to Proceed With Filing Funding Applications for the Project Consistent With the Project Description 7:30-8:30 PM 8. Discussion of Fiber-to-the-Premises Master Plan and Direction to Staff on Next Steps for Fiber and City Wireless Services 8:30-10:30 PM 9. Approval of the Preferred Concept Plan Line for the Charleston Arastradero Corridor Project 3 September 28, 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. 4 September 28, 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 Additional Council Meeting Sp. City Council Meeting September 29, 2015 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Update on the City of Palo Alto Utilities’ Program for Emerging Technologies Public Letters to Council Set 1 City of Palo Alto (ID # 6076) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Cyber Security Proclamation Title: Presentation of Cyber Security Proclamation for Participating in the National Cyber Security Awareness Campaign, in October 2015, Which is Designated by the President of the United States as National Cyber Security Awareness to Guide the Nation to a Higher Level of Internet Safety and Security From: City Manager Lead Department: City Clerk Attachments:  Attachment A: Proclamation Recognizing October as Cyber Security Month (DOC) CITY OF PALO ALTO PROCLAMATION Cybersecurity Awareness Month October 2015 WHEREAS, the City of Palo Alto recognizes that it has a vital role in identifying, protecting, and responding to cyber threats that may have a significant impact to our individual security and privacy; and WHEREAS, critical infrastructure sectors are increasingly reliant on information systems to support financial services, energy, telecommunications, utilities, health care, and emergency response systems; and WHEREAS, the “Stop.Think.Connect.” campaign is a national public awareness campaign, implemented through a coalition of private companies, nonprofit and government organizations, and academic institutions aimed at increasing the understanding of cyber threats and empowering the American public to be safer and more secure online; and WHEREAS, in support of the Cybersecurity Framework and to better assist business and government entities in addressing cyber threats, the Center for Internet Security/Multi-State (ISAC), the Council on CyberSecurity, the Governors Homeland Security Advisors Council, and public and private sector entities have developed an effort to promote good cyber hygiene through actionable guidance for governments and businesses, to promote innovation, to strengthen cybersecurity investment, and to enhance resilience across all sectors; and WHEREAS, maintaining the security of cyberspace is a shared responsibility in which each of us has a critical role to play, and awareness of computer security essentials will improve the security of the City of Palo Alto’s information infrastructure and economy; and WHEREAS, the President of the United States of America, the United States Department of Homeland Security (www.dhs.gov/cyber) and the National Cybersecurity Alliance (www.staysafeonline.org) have declared October as National Cybersecurity Awareness Month, and all citizens are encouraged to visit the “Stop.Think.Connect.” campaign website at: www.dhs.gov/stopthinkconnect or www.stopthinkconnect.org, and to put that knowledge into practice in their homes, schools, workplaces and places of businesses. NOW, THEREFORE, I, Karen Holman, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim that the City of Palo Alto supports National Cybersecurity Awareness Month and the National Public Awareness Campaign Stop.Think.Connect. Presented: September 2015 ______________________________ Karen Holman Mayor City of Palo Alto (ID # 6147) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Palo Alto Airport 80th Anniversary Proclamation Title: Proclamation Celebrating the 80th Anniversary of the Palo Alto Airport From: City Manager Lead Department: City Clerk Attachments:  Attachment A: Palo Alto Airport 80th Anniversary (DOC) CITY OF PALO ALTO PROCLAMATION 80th Anniversary of Palo Alto Airport WHEREAS, the Palo Alto Airport opened and began operating at the Baylands in the City of Palo Alto in 1935; and WHEREAS, the Palo Alto Airport and other general aviation and community airports provide an important mode of transportation and play a vital role in the lives of our citizens, as well as in the operation of our businesses and agriculture; and WHEREAS, the Palo Alto Airport is key to the region’s aviation sector and serves thousands each year in the San Francisco Bay Area; WHEREAS, the Palo Alto Airport and general aviation improves overall quality of life by supporting emergency medical and healthcare services, law-enforcement, firefighting and disaster relief, and by transporting business travelers to their destinations quickly and safely; and WHEREAS, each year, the Palo Alto Airport Association hosts Palo Alto Airport Day as an open house to showcase the Airport to the community and to visitors. NOW, THEREFORE, I, Karen Holman, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim September 27, 2015 as Palo Alto Airport Day and encourage members of the community to join in this day of celebration marking the 80th Anniversary of the Palo Alto Airport. Presented: September 28, 2015 ______________________________ Karen Holman Mayor City of Palo Alto (ID # 6148) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Ralph Britton Proclamation Title: Proclamation of Appreciation for Ralph Britton From: City Manager Lead Department: City Clerk Attachments:  Attachemnet A: Ralph Britton (DOC) CITY OF PALO ALTO PROCLAMATION Ralph H. Britton WHEREAS, Ralph Britton has supported and enhanced awareness of the Palo Alto Airport and the Palo Alto Airport Association for many years; and WHEREAS, Ralph Britton has unfailingly donated his time and effort to the City of Palo Alto and the community through his role as President of the Palo Alto Airport Association for 15 years; and WHEREAS, Ralph Britton served as a member of the Infrastructure Blue Ribbon Commission, the Palo Alto Airport Working Group, the Santa Clara County Airport Land Use Commission, and President of the Palo Alto Historical Association and Palo Alto-Stanford Heritage; and WHEREAS, Ralph Britton continues to organize and chair monthly meetings of the Palo Alto Airport Association and advocates for, and supports the Palo Alto Airport by organizing and hosting meetings on behalf of the Palo Alto Airport; and WHEREAS, Ralph Britton and the Palo Alto Airport Association joined the City of Palo Alto in providing increased public awareness for the transfer of the Palo Alto Airport from Santa Clara County to the City of Palo Alto; and WHEREAS, Ralph Britton continues to support the Palo Alto Airport Association by promoting and advertising Palo Alto Airport Day, which this year, celebrates the 80th anniversary of the Palo Alto Airport. NOW, THEREFORE, I, Karen Holman, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim appreciation for the outstanding volunteer service provided by Ralph Britton and record its appreciation, as well as the appreciation of the citizens of Palo Alto and the patrons of the Palo Alto Airport for his volunteer service and contributions rendered. Presented: September 28, 2015 ______________________________ Karen Holman Mayor City of Palo Alto (ID # 6127) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Expedited Permitting Procedures for Small Residential Rooftop Solar Systems (Response to AB 2188) Title: Adoption of an Ordinance of the City Council of the City Of Palo Alto Adding Section 16.63 to the Municipal Code Relating to Expedited Permitting Procedures for Small Residential Rooftop Solar Systems From: City Manager Lead Department: Development Services Department Recommendation Staff recommends that City Council adopt the proposed ordinance (Attachment A), which outlines an expedited and streamlined permitting process for small residential rooftop solar energy systems that complies with the Solar Rights Act and Assembly Bill 2188 (Chapter 521, Statute 2014). The ordinance implements AB 2188 by directing the City’s Building Official to develop a checklist of all requirements for small residential rooftop solar energy systems to be eligible for expedited review, and authorizing the Building Official to administratively approve such applications. Background Section 65850.5 of the California Government Code provides that it is the policy of the State to promote and encourage the installation and use of solar energy systems by limiting obstacles to their use and by minimizing the permitting costs of such systems. In furtherance of that objective, Section 65850.5 of the California Government Code also requires that, on or before September 30, 2015, every city, county, or city/county combined must adopt an ordinance that creates an expedited and streamlined permitting process for small residential rooftop solar energy systems. Discussion The City currently expedites the review of residential photovoltaic systems by conducting over- the-counter reviews utilizing the current Building Division plan review staff. The current model for project submission and inspection activities is based off the City of Palo Alto Expedited Permit Process for Small-Scale PV Systems. This model was implemented in April 2013 and based on the Solar Board for Codes and Standards Report. As a result, projects requiring 4-6 weeks are now reviewed and issued over-the-counter or within a few days. City of Palo Alto Page 2 As indicated above, the State is requiring that we create and provide an expedited process for small residential rooftop solar energy systems that substantially conforms to submittal packages and checklists contained in the most recent version of the California Solar Permitting Guidebook created by the Governor’s Office of Planning and Research (Spring 2015 Second Edition). We will be replacing our current photovoltaic expedited process with a new model that is based on the State recommendation, incorporating a solar hot water component. Small residential rooftop solar energy system (Government Code Section 65850.5(j)(3)(1)(A-D)) are defined as the following: 1. A solar energy system that is no larger than 10 kilowatts alternating current nameplate rating or 30 kilowatt-thermal. 2. A solar energy system that conforms to all applicable state fire, structural, electrical, and other building codes as adopted or amended by the City and paragraph (iii) of subdivision (c) of Section 714 of the Civil Code, as such section or subdivision may be amended, renumbered, or redesignated from time to time. 3. A solar energy system that is installed on a single or duplex family dwelling. 4. A solar panel or module array that does not exceed the maximum legal building height as defined by the authority having jurisdiction. The Building Official has created the following submittal packages and checklists as directed in the ordinance that can be utilized to facilitate the expedited review and inspection process on small rooftop solar energy systems that qualify per the eligibility lists. These guidelines are based on the California Solar Permitting Guidebook and incorporate specific Palo Alto requirements from both City of Palo Alto Utilities and Fire Department. These items were also shared with several of the larger solar installers for their input. Photovoltaic Systems  Photovoltaic (PV) Eligibility Checklist for Expedited Review  Photovoltaic (PV) Submittal Package for Simplified Central/String Inverter Systems  Photovoltaic (PV) Submittal Package for Simplified Microinverter and AC Modules  Photovoltaic (PV) Summary Inspection Checklist  Photovoltaic (PV) Detailed Inspection Checklist Solar Water Heating Systems  Solar Water Heating Eligibility and Inspection Checklist for Domestic Systems  Solar Water Heating Submittal Package for Domestic Systems  Solar Water Heating Eligibility and Inspection Checklist for Pool Systems  Solar Water Heating Submittal Package for Pool Systems City of Palo Alto Page 3 During peak times of residential photovoltaic systems submissions, such as when solar rebate initiatives are offered, the volume of PV submissions can delay and affect plan review activities in the background and at the counter. This fluctuation in activity is illustrated in the graph below: 0 5 10 15 20 25 30 35 40 45 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Nu m b e r o f P e r m i t s Photolvotaic Permitting Activities Standard Review and Resubmittals Same Day Approval Over the Counter In addition to the possible decrease in plan review production, an increase in residential photovoltaic permits would also affect customer service activities such as increased wait times at the development center front counter. Quite often a photovoltaic contractor will submit multiple projects during a single visit to the Development Center. This results in longer turn- around time and requires extended review time compared to a single photovoltaic project. These adverse effects may be offset by the further implementation of online and electronic permitting. This would reduce the overall number of customers that need to visit the Development Center and reduce the load on administrative staff. Through the use of monitoring and tracking tools, we can determine the adequate staffing levels of the department, supplementing with contract staff if necessary. Staff is now in the process of developing an online application process for all residential photovoltaic, solar hot water, and electric vehicle charging systems, to be in place by December 31, 2015. The ultimate goal is to be in position to perform electronic plan review on these types of applications by July, 1 2016. Resource Impact City of Palo Alto Page 4 Adoption of this ordinance will result in the need for additional staffing resources during peak periods to accommodate workloads and to update the City website and guidebooks. Additional hardware and software will be necessary to support the review process, where a contracted technologist will be required to assist with development and implementation of electronic plan reviews and online applications submittals. Environmental Review Adoption of this ordinance is exempt from environmental review under the California Environmental Quality Act (CEQA) per CEQA Guidelines sections 15061(b)(3) and 15308, because it can be seen with certainty that the proposed ordinance will have no significant negative impact on the environment and because the proposed ordinance represents creates procedures to assure the maintenance, restoration, enhancement, and/or protection of the environment. Attachments:  Attachment A: 0016087 - 2015-09-08 (Dev Services) AB 2188 Ordinance ay final (PDF)  Attachment B PV Expedited Eligibility Checklist (DOCX)  Attachment C PV Submittal Package _Central Inverterdocx (DOCX)  Attachment D PV Submittal Package_Microinverter and ACM (DOCX)  Attachment E PV Inspection Summary Checklist (DOCX)  Attachment F PV Inspection Detailed Checklist (DOCX)  Attachment G SWH Eligibilty and Inspection Checklist for Domestic Systems (DOCX)  Attachment H SWH Submittal Package for Pool Systems (DOCX)  Attachment I SWH Eligibility and Inspection Checklist for Pool Systems (DOCX)  Attachment J SWH Submittal Package for Domestic Systems (DOCX) NOT YET APPROVED 20150908 jjs 0016087 1 Ordinance No. ___________ An Ordinance of the City of Palo Alto Adding Section 16.63 to the Municipal Code Relating to Expedited Permitting Procedures for Small Residential Rooftop Solar Systems RECITALS 1. Subsection (a) of Section 65850.5 of the California Government Code provides that it is the policy of the State to promote and encourage the installation and use of solar energy systems by limiting obstacles to their use and by minimizing the permitting costs of such systems. 2. Subdivision (g)(1) of Section 65850.5 of the California Government Code provides that, on or before September 30, 2015, every city, county, or city and county shall adopt an ordinance, consistent with the goals and intent of subdivision (a) of Section 65850.5, that creates an expedited, streamlined permitting process for small residential rooftop solar energy systems. 3. Section 65850.5 of the California Government Code provides that in developing an expedited permitting process, the City shall adopt an eligibility checklist of all requirements and a standard plan with which small rooftop solar energy systems shall comply to be eligible for expedited review. 4. The City of Palo Alto wishes to advance the use of solar energy by all of its citizens, businesses, and industries. 5. The City of Palo Alto seeks to meet the climate action goals set by the City of Palo Alto and the State. 6. Solar energy creates local jobs and economic opportunity. 7. The City of Palo Alto recognizes that rooftop solar energy provides reliable energy and pricing for its residents and businesses. 8. It is in the interest of the health, welfare, and safety of the people of the City of Palo Alto to provide an expedited permitting process to assure the effective deployment of solar technology. // // NOT YET APPROVED 20150908 jjs 0016087 2 The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Chapter 16.63 of the Palo Alto Municipal Code is hereby created to read as follows: 16.63.010 Purpose. The purpose of the Ordinance is to adopt an expedited, streamlined solar permitting process that complies with the Solar Rights Act and AB 2188 (Chapter 521, Statutes 2014) to achieve timely and cost-effective installations of small residential rooftop solar energy systems. The Ordinance encourages the use of solar systems by removing unreasonable barriers, minimizing costs to property owners and the City of Palo Alto, and expanding the ability of property owners to install solar energy systems. The Ordinance allows the City of Palo Alto to achieve these goals while protecting the public health and safety. 16.63.020 Application. This chapter shall apply to small residential rooftop solar energy systems including, but not limited to, all additions, alterations, modifications, repairs, and improvements that require a building permit. Small residential rooftop solar energy systems legally established or permitted prior to the effective date of this Ordinance are not subject to the requirements of this Ordinance unless physical modifications or alterations are undertaken that materially change the size, type, or components of a small rooftop energy system in such a way as to require new permitting. 16.63.030 Definitions The words and phrases in this ordinance are defined as provided in California Civil Code section 714 and Government Code section 65850.5, except that the following words and phrases as used in this section are defined as follows: (a) “Association” means a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development. (b) “Common Interest Development” means any of the following: 1. A community apartment project. 2. A condominium project. 3. A planned development. 4. A stock cooperative. // NOT YET APPROVED 20150908 jjs 0016087 3 (c) “Electronic submittal” means the utilization of one or more of the following: 1. E-mail, 2. The Internet, 3. Facsimile. (d) “Small residential rooftop solar energy system” means all of the following: 1. A solar energy system that is no larger than 10 kilowatts alternating current nameplate rating or 30 kilowatt-thermal. 2. A solar energy system that conforms to all applicable state fire, structural, electrical, and other building codes as adopted or amended by the City and paragraph (iii) of subdivision (c) of Section 714 of the Civil Code, as such section or subdivision may be amended, renumbered, or redesignated from time to time. 3. A solar energy system that is installed on a single or duplex family dwelling. 4. A solar panel or module array that does not exceed the maximum legal building height as defined by the authority having jurisdiction. (e) “Solar energy system” has the same meaning set forth in paragraphs (1) and (2) of subdivision (a) of Section 801.5 of the Civil Code, as such section or subdivision may be amended, renumbered, or redesignated from time to time. (f) “Specific, Adverse Impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified, and written public health or safety standards, policies, or conditions as they existed on the date the application was deemed complete. (g) “Reasonable Restrictions” on a solar energy system are those restrictions that do not significantly increase the cost of the system or significantly decrease its efficiency or specified performance, or that allow for an alternative system of comparable cost, efficiency, and energy conservation benefits. As provided in Civil Code section 714, subdivision (d)(1), reasonable restrictions may include, but are not limited to: 1. For Water Heater Systems or Solar Swimming Pool Heating Systems: an amount exceeding 10 percent of the cost of the system, but in no case more than one thousand dollars ($1,000), or decreasing the efficiency of the solar energy system by an amount exceeding 10 percent, as originally specified and proposed. 2. For Photovoltaic Systems: an amount not to exceed one thousand dollars ($1,000) over the system cost as originally specified and proposed, or a decrease in system efficiency of an amount exceeding 10 percent as originally specified and proposed. // NOT YET APPROVED 20150908 jjs 0016087 4 16.63.040 Solar Energy System Requirements. All solar energy systems shall meet applicable health and safety standards and requirements imposed by the State of California and the City of Palo Alto Development Services, City of Palo Alto Fire Department and City of Palo Alto Utilities Department. Solar energy systems for heating water in single-family residences and for heating water in commercial or swimming pool applications shall be certified by an accredited listing agency as defined by the California Plumbing and Mechanical Code. Solar energy systems for producing electricity shall meet all applicable safety and performance standards established by the California Electrical Code, the Institute of Electrical and Electronics Engineers, and accredited testing laboratories such as Underwriters Laboratories and, where applicable, rules of the Public Utilities Commission regarding safety and reliability. Prior to submitting an application, the applicant shall: 1. Verify to the applicant’s reasonable satisfaction through the use of standard engineering evaluation techniques that the support structure for the small residential rooftop solar energy system is stable and adequate to transfer all wind, seismic, and dead and live loads associated with the system to the building foundation; and 2. At the applicant’s cost, verify to the applicant’s reasonable satisfaction using standard electrical inspection techniques that the existing electrical system including existing line, load, ground and bonding wiring as well as main panel and subpanel sizes are adequately sized, based on the existing electrical system’s current use, to carry all new photovoltaic electrical loads. 16.63.050 Duties of Development Services and Building Official. The building official shall develop and adopt an eligibility checklist and standard plan. All documents required for the submission of an expedited solar energy system application shall be made available on the publicly accessible City of Palo Alto Website. The small residential rooftop solar system permit process, standard plan(s), and checklist(s) shall substantially conform to recommendations for expedited permitting, including the checklist and standard plans contained in the most current version of the California Solar Permitting Guidebook adopted by the Governor’s Office of Planning and Research. The applicant may submit the permit application and associated documentation to the City’s Development Services by personal, mailed, or electronic submittal together with any required permit processing and inspection fees. In the case of electronic submittal, the electronic signature of the applicant on all forms, applications and other documentation may be used in lieu of a wet signature. NOT YET APPROVED 20150908 jjs 0016087 5 16.63.060 Plan Review and Inspection Requirements. An application that satisfies the information requirements in the eligibility checklist and standard plan, as determined by the building official, shall be deemed complete. Upon receipt of an incomplete application, the building official shall issue a written correction notice detailing all deficiencies in the application and any additional information required to be eligible for expedited permit issuance. The building official may require an applicant to apply for a use permit if the official makes written findings, based on substantial evidence, that the solar energy system could have a specific, adverse impact upon the public health and safety. The building official’s findings may be appealed to the Planning and Transportation Commission under section 18.78.030 of this Code. Any condition imposed on an application shall be designed to mitigate the specific, adverse impact upon health and safety at the lowest possible cost. “A feasible method to satisfactorily mitigate or avoid the specific, adverse impact” includes, but is not limited to, any cost-effective method, condition, or mitigation imposed by the City on another similarly situated application in a prior successful application for a permit. The City shall use its best efforts to ensure that the selected method, condition, or mitigation meets the conditions of subparagraphs (A) and (B) of paragraph (1) of subdivision (d) of Section 714 of the California Civil Code defining restrictions that do not significantly increase the cost of the system or decrease its efficiency or specified performance. The City shall not condition the approval of an application on the approval of an association, as defined in Section 4080 of the California Civil Code. Issuance of the permit does not authorize an applicant to connect the small residential rooftop energy system to City of Palo Alto Utilities’ electricity grid. The applicant is responsible for obtaining such approval or permission from City of Palo Alto Utilities before requesting a building inspection. For a small residential rooftop solar energy system eligible for expedited review, only one consolidated inspection shall be required, which shall be done in a timely manner. This inspection shall encompass all applicable local, state, and federal health and safety regulations including fire department regulations. If a small residential rooftop solar energy system fails inspection, a subsequent inspection is authorized; however the subsequent inspection need not conform to the requirements of this section. SECTION 2. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the NOT YET APPROVED 20150908 jjs 0016087 6 fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. SECTION 3. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act (“CEQA”), pursuant to Section 15061 of the CEQA Guidelines, because it can be seen with certainty that there is no possibility that the amendments herein adopted will have a significant negative effect on the environment. SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption. SECTION 5. This ordinance shall be published in accordance with the provisions of Government Code Section 36933. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Deputy City Attorney City Manager ____________________________ Director of Development Services ____________________________ Director of Administrative Services PHOTOVOLTAIC (PV) Eligibility Checklist for Expedited Review Revision Date 08/25/2015 Requirements/Checklist for: Residential PV Systems under 10kW Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) GENERAL REQUIREMENTS A. System size is 10 kW AC CEC rating or less Y N B. The solar array is roof-mounted on existing one- or two-family dwelling or accessory structure Y N C. The solar panel/module arrays will not exceed the maximum legal building height Y N D. Solar system is utility interactive and without battery storage Y N E. Permit application and Utility Load sheet is completed and attached Y N ELECTRICAL REQUIREMENTS No more than four photovoltaic module strings are connected to each Maximum PowerPoint Tracking (MPPT) input where source circuit fusing is included in the inverter Y N 1) No more than two strings per MPPT input where source circuit fusing is not included Y N 2) Fuses (if needed) are rated to the series fuse rating of the PV module Y N 3) No more than one non inverter-integrated DC combiner is utilized per inverter Y N A. For central inverter systems: No more than two inverters are utilized Y N B. The PV system is interconnected to a single-phase AC service panel of nominal 120/240 Vac with a bus bar rating of 225 A or less Y N C. The PV system is connected to the load side of the utility distribution equipment Y N D. A Solar PV Standard Plan and supporting documentation is completed and attached Y N STRUCTURAL REQUIREMENTS A. A completed Structural Criteria and supporting documentation is attached (if required) Y N FIRE REQUIREMENTS A. Required clearances provided Y N B. Fire classification solar system is provided Y N C. All required markings and labels are provided Y N D. A diagram of the roof layout of all panels, modules, clear access pathways and approximate locations of electrical disconnecting means and roof access points is completed and attached Y N Notes: 1. These criteria are intended for expedited solar permitting process. 2. If any items are checked NO, revise design to fit within Eligibility Checklist, otherwise permit application may go through standard process. PV TOOLKIT DOCUMENT #3 PHOTOVOLTAIC (PV) Submittal Package for Simplified Central/String Inverter Systems Revision Date 08/25/2015 Requirements for: Residential PV Systems under 10kW Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) SCOPE: Use this plan ONLY for utility-interactive central/string inverter systems not exceeding a system AC inverter output rating of 10kW on the roof of a one- or two-family dwelling or accessory structure. The photovoltaic system must interconnect to the load side of a single-phase AC service panel of nominal 120/240Vac with a bus bar rating of 225A or less. This plan is not intended for bipolar systems, hybrid systems or systems that utilize storage batteries, charge controllers, trackers, more than two inverters or more than one DC combiner (non-inverter-integrated) per inverter. Systems must be in compliance with current California Building Standards Codes. Other Articles of the California Electrical Code (CEC) shall apply as specified in 690.3. Required Documents to be submitted in addition to this form:  Site Plan showing the location of the PV array and all associated equipment  Roof Layout Plan showing the required fire clearances  Completed CPAU Photovoltaic Load Sheet (www.cityofpaloalto.org/civicax/filebank/documents/8070/)  MANUFACTURER’S SPECIFICATION SHEETS MUST BE PROVIDED for proposed inverters, modules, combiner/junction boxes and racking systems. Installation instructions for bonding and grounding equipment. Job Address: ___ Permit #: __________________________________ Contractor/Engineer Name: License # and Class: _________________ Signature: Date: Phone Number: Total # of Inverters installed: (If more than one inverter, complete and attach the “Supplemental Calculation Sheets” and the “Load Center Calculations” if a new load center is to be used.) Inverter 1 AC Output Power Rating: Watts Inverter 2 AC Output Power Rating (if applicable): Watts Combined Inverter Output Power Rating: ≤ 10,000 Watts Location Ambient Temperatures (Check box next to which lowest expected temperature is used): 1) Lowest expected ambient temperature for the location (TL ) = Between -1° to -5° C Lowest expected ambient temperature for the location (TL ) = Between -6° to -10° C Average ambient high temperature (TH) = 47° C Note: For a lower TL or a higher TH, use the Comprehensive Standard Plan DC Information: Module Manufacturer: _________________________________ Model: _____________________ 2) Module Voc (from module nameplate): ____Volts 3) Module Isc (from module nameplate): ___Amps 4) Module DC output power under standard test conditions (STC) = ________ Watts (STC) Table 1. Maximum Number of PV Modules in Series Based on Module Rated VOC for 600 Vdc Rated Equipment (CEC 690.7) Max. Rated Module VOC (*1.12) (Volts) 29.76 31.51 33.48 35.71 38.27 41.21 44.64 48.70 53.57 59.52 66.96 76.53 89.29 Max. Rated Module VOC (*1.14) (Volts) 29.24 30.96 32.89 35.09 37.59 40.49 43.86 47.85 52.63 58.48 65.79 75.19 87.72 Max # of Modules for 600 Vdc 18 17 16 15 14 13 12 11 10 9 8 7 6 Table 2. Largest Module VOC for Single-Module DC/DC Converter Configurations (with 80 V AFCI Cap) (CEC 690.7 and 690.11) Max. Rated Module VOC (*1.12) (Volts) 30.4 33.0 35.7 38.4 41.1 43.8 46.4 49.1 51.8 54.5 57.1 59.8 62.5 65.2 67.9 70.5 Max. Rated Module VOC (*1.14) (Volts) 29.8 32.5 35.1 37.7 40.4 43.0 45.6 48.2 50.9 53.5 56.1 58.8 61.4 64.0 66.7 69.3 DC/DC Converter Max DC Input (Step #6) (Volts) 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 5) DC Module Layout Identify each source circuit (string) for inverter 1 shown on the roof plan with a Tag (e.g. A,B,C,…) Number of modules per source circuit for inverter 1 Identify, by tag, which source circuits on the roof are to be paralleled (if none, put N/A) Combiner 1: Combiner 2: Total number of source circuits for inverter 1: 6) Are DC/DC Converters used? Yes No If No, skip to Step 7. If Yes enter info below. DC/DC Converter Model #: Max DC Output Current: Amps Max # of DC/DC Converters in an Input Circuit: DC/DC Converter Max DC Input Voltage: Volts Max DC Output Current: Volts DC/DC Converter Max DC Input Power: Watts 7) Maximum System DC Voltage — Use A1 or A2 for systems without DC/DC converters, and B1 or B2 with DC/DC Converters. A1. Module VOC (STEP 2) = x # in series (STEP 5) x 1.12 (If -1 ≤ TL ≤ -5°C, STEP 1) = V A2. Module VOC (STEP 2) = x # in series (STEP 5) x 1.14 (If -6 ≤ TL ≤ -10°C, STEP 1) = V Use for DC/DC converters. The value calculated below must be less than DC/DC converter max DC input voltage (STEP 6). B1. Module VOC (STEP 2) = x # of modules per converter (STEP 6) x 1.12 (If -1 ≤ TL ≤ -5°C, STEP 1) = V B2. Module VOC (STEP 2) = x # of modules per converter (STEP 6) x 1.14 (If -6 ≤ TL ≤ -10°C, STEP 1) = V 8) Maximum System DC Voltage from DC/DC Converters to Inverter — Only required if Yes in Step 6 Maximum System DC Voltage = Volts 9) Maximum Source Circuit Current Is Module ISC below 9.6 Amps (Step 3)? Yes No (If No, use Comprehensive Standard Plan) 10) Sizing Source Circuit Conductors Source Circuit Conductor Size = Min. #10 AWG copper conductor, 90° C wet (USE-2, PV Wire, XHHW-2, THWN-2, RHW-2) For up to 8 conductors in roof-mounted conduit exposed to sunlight at least ½” from the roof covering (CEC 310) Note: For over 8 conductors in the conduit or mounting height of lower than ½” from the roof, use Comprehensive Plan. 11) Are PV source circuits combined prior to the inverter? Yes No If No, use Single Line Diagram 1 and proceed to Step 13. If Yes, use Single Line Diagram 2 with Single Line Diagram 4 and proceed to Step 12. Is source circuit OCPD required? Yes No Source circuit OCPD size (if needed): 12) Sizing PV Output Circuit Conductors — If a combiner box will NOT be used (Step 11), Output Circuit Conductor Size = Min. #6 AWG copper conductor 13) Inverter DC Disconnect Does the inverter have an integrated DC disconnect? Yes No If Yes, proceed to step 14. If No, the external DC disconnect to be installed is rated for Amps (DC) and Volts (DC) 14) Inverter Information Manufacturer: Model: Max. Continuous AC Output Current Rating: Amps Integrated DC Arc-Fault Circuit Protection? Yes No (If No is selected, Comprehensive Standard Plan) Grounded or Ungrounded System? Grounded Ungrounded AC Information: 15) Sizing Inverter Output Circuit Conductors and OCPD Inverter Output OCPD rating = Amps (Table 3) Inverter Output Circuit Conductor Size = AWG (Table 3) Table 3. Minimum Inverter Output OCPD and Circuit Conductor Size Inverter Continuous Output Current Rating (Amps) (Step 14) 12 16 20 24 28 32 36 40 48 Minimum OCPD Size (Amps) 15 20 25 30 35 40 45 50 60 Minimum Conductor Size (AWG, 75° C, Copper) 14 12 10 10 8 8 6 6 6 16) Point of Connection to Utility Only load side connections are permitted with this plan. Otherwise, use Comprehensive Standard Plan. Is the PV OCPD positioned at the opposite end from input feeder location or main OCPD location? Yes No If Yes, circle the Max Combined PV System OCPD(s) at 120% value as determined from Step 15 (or Step S20), bus bar Rating, and Main OCPD as shown in Table 4. If No, circle the Max Combined PV System OCPD(s) at 100% value as determined from Step 15 (or Step S20), bus bar Rating, and Main OCPD as shown in Table 4. Per 705.12(D)(2): [Inverter output OCPD size [Step #15 or S20] + Main OCPD Size] ≤ [bus size x (100% or 120%)] Table 4. Maximum Combined Supply OCPDs Based on Bus Bar Rating (Amps) per CEC 705.12(D)(2) Bus Bar Rating 100 125 125 200 200 200 225 225 225 Main OCPD 100 100 125 150 175 200 175 200 225 Max Combined PV System OCPD(s) at 120% of Bus Bar Rating 20 50 25 60* 60* 40 60* 60* 45 Max Combined PV System OCPD(s) at 100% Bus Bar Rating 0 25 0 50 25 0 50 25 0 *This value has been lowered to 60 A from the calculated value to reflect 10 kW AC size maximum. Reduction of the main breaker is not permitted with this plan. Otherwise, use Comprehensive Standard Plan. 17 & 18 & 19) Labels and Grounding and Bonding This content is covered by the labels on the next page and the Single Line Diagram(s). For background information, refer to the Comprehensive Standard Plan. Solar PV Standard Plan – Simplified Central/String Inverter Systems for One- and Two-Family Dwellings Markings CEC Articles 690 and 705 and CRC Section R331 require the following labels or markings be installed at these components of the photovoltaic system: WARNING ELECTRIC SHOCK HAZARD. THE DC CONDUCTORS OF THIS PHOTOVOLTAIC SYSTEM ARE UNGROUNDED AND MAY BE ENERGIZED WARNING INVERTER OUTPUT CONNECTION; DO NOT RELOCATE THIS OVERCURRENT DEVICE CRC R331.2 and CFC 605.11.1 [Marked on junction/combiner boxes and conduit every 10’] WARNING: PHOTOVOLTAIC POWER SOURCE J/Box PV SYSTEM AC DISCONNECT RATED AC OUTPUT CURRENT - ____AMPS AC NORMAL OPERATING VOLTAGE ___VOLTS M A C INVERTER D C WARNING DUAL POWER SOURCES SECOND SOURCE IS PHOTOVOLTAIC SYSTEM RATED AC OUTPUT CURRENT- ____AMPS AC NORMAL OPERATING VOLTAGE ___VOLTS WARNING ELECTRIC SHOCK HAZARD DO NOT TOUCH TERMINALS TERMINALS ON BOTH LINE AND LOAD SIDES MAY BE ENERGIZED IN THE OPEN POSITION PV SYSTEM DC DISCONNECT RATED MAX POWER-POINT CURRENT- ___ADC RATED MAX POWER-POINT VOLTAGE- ___VDC SHORT CIRCUIT CURRENT- ___ADC MAXIMUM SYSTEM VOLTAGE- ___VDC CEC 705.12(D)(7) [Not required if panelboard is rated not less than sum of ampere ratings of all overcurrent devices supplying it] CEC 690.35(F) [Only required for ungrounded systems] CEC 690.54 CEC 690.53 CEC 690.17 CEC 690.54 & CEC 705.12(D)(4) WARNING ELECTRIC SHOCK HAZARD IF A GROUND FAULT IS INDICATED, NORMALLY GROUNDED CONDUCTORS MAY BE UNGROUNDED AND ENERGIZED CEC 690.5(C) [Normally already present on listed inverters] Code Abbreviations: California Electrical Code (CEC) California Residential Code (CRC) California Fire Code (CFC) Informational note: ANSI Z535.4 provides guidelines for the design of safety signs and labels for application to products. A phenolic plaque with contrasting colors between the text and background would meet the intent of the code for permanency. No type size is specified, but 20 point (3/8”) should be considered the minimum. CEC 705.12 requires a permanent plaque or directory denoting all electric power sources on or in the premises. Solar PV Standard Plan – Simplified Central/String Inverter System for One- and Two-Family Dwellings DESCRIPTION SOLAR PV MODULE / STRINGDC/DC CONVERTERS INSTALLED? YES / NO (IF YES, STEPS 6 & 8 REQUIRED)SOURCE CIRCUIT JUNCTION BOX INSTALLED?: YES / NOSEPARATE DC DISCONNECT INSTALLED?: YES / NOINTERNAL INVERTER DC DISCONNECT: YES / NOCENTRAL INVERTERLOAD CENTER INSTALLED?: YES / NO PV PRODUCTION METER INSTALLED?: YES / NO *SEPARATE AC DISCONNECT INSTALLED?: YES / NOCONNECT TO INVERTER #2 (USE LINE DIAGRAM 2) TAG 1 2 3 4 5 6 7 8 9 10 AC DC G MAIN SERVICE PANEL675 CB 1CB 1 CB 2CB 2 31 10 MAIN OCPD G 9 PV OCPD M 4 ___ MODULES ___ MODULES ___ MODULES ___ MODULES A DB C TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A USE-2 □ OR PV-WIRE □ EGC/GEC: B EGC/GEC: C EGC/GEC: D EGC/GEC: CONDUCTOR/CONDUIT SCHEDULE M 8 CHECK A BOX FOR WHETHER SYSTEM IS GROUNDED OR UNGROUNDED: GROUNDED (INCLUDE GEC) UNGROUNDED ENTER “N/A” WHERE SUITABLE FOR WHEN NOT USING CONDUIT OR CABLE AS PERMITTED BY CODE 2 IF DC/DC CONVERTERS ARE USED, CHECK THE BOX BELOW THE CORRESPONDING CONFIGURATION PARALLEL DC/DC CONVERTERS ON ONE SOURCE CIRCUIT (FIXED UNIT VOLTAGE DC/DC CONVERTERS) DC/DC CONVERTERS ARE ALL RUN IN SERIES (FIXED SOURCE CIRCUIT VOLTAGE DC/DC CONVERTERS) + + - - + + - - INVERTER DC / D C CO N V E R T E R S DC / D C CO N V E R T E R S FOR UNGROUNDED SYSTEMS: - DC OCPD MUST DISCONNECT BOTH CONDUCTORS OF EACH SOURCE CIRCUIT - UNGROUNDED CONDUCTORS MUST BE IDENTIFIED PER 210.5(C). WHITE-FINISHED CONDUCTORS ARE NOT PERMITTED. + - + - INVERTER SINGLE-LINE DIAGRAM #1 – NO STRINGS COMBINED PRIOR TO INVERTER * Consult with your local AHJ and /or Utility REQUIRED by CPAU Solar PV Standard Plan – Simplified Central/String Inverter System for One- and Two-Family Dwellings DESCRIPTION SOLAR PV MODULE / STRING DC/DC CONVERTERS INSTALLED? YES / NO (IF YES, STEPS 6 & 8 REQUIRED)SOURCE CIRCUIT JUNCTION BOX INSTALLED?: YES / NOCOMBINER BOX (STEPS 11 & 12 REQUIRED)SEPARATE DC DISCONNECT INSTALLED?: YES / NOINTERNAL INVERTER DC DISCONNECT: YES / NOCENTRAL INVERTERLOAD CENTER INSTALLED?: YES / NO PV PRODUCTION METER INSTALLED?: YES / NO *SEPARATE AC DISCONNECT INSTALLED?: YES / NOCONNECT TO INVERTER #2 (USE LINE DIAGRAM 4) TAG 1 2 3 4 5 6 7 8 9 10 11 AC DC G MAIN SERVICE PANEL 7 86 CB 1CB 1 CB 2CB 2 31 11 MAIN OCPD G 10 PV OCPD M 5 ___ MODULES ___ MODULES ___ MODULES ___ MODULES ED TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A1 USE-2 □ OR PV-WIRE □ EGC/GEC: B1 EGC/GEC: C EGC/GEC: D EGC/GEC: E EGC/GEC: COMBINER CONDUCTOR/CONDUIT SCHEDULE M 9 CHECK A BOX FOR WHETHER SYSTEM IS GROUNDED OR UNGROUNDED: GROUNDED (INCLUDE GEC) UNGROUNDED ENTER “N/A” WHERE SUITABLE FOR WHEN NOT USING CONDUIT OR CABLE AS PERMITTED BY CODE 2 IF DC/DC CONVERTERS ARE USED, THEY ARE RUN IN SERIES (FIXED SOURCE CIRCUIT VOLTAGE DC/DC CONVERTERS) + + - - INVERTER DC / D C CO N V E R T E R S FOR UNGROUNDED SYSTEMS: - DC OCPD MUST DISCONNECT BOTH CONDUCTORS OF EACH SOURCE CIRCUIT - UNGROUNDED CONDUCTORS MUST BE IDENTIFIED PER 210.5(C). WHITE-FINISHED CONDUCTORS ARE NOT PERMITTED. + - 4 B1 CA1 SINGLE-LINE DIAGRAM #2 – COMBINING STRINGS PRIOR TO INVERTER ___ MODULES ___ MODULES B2A2 TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A2 USE-2 □ OR PV-WIRE □ EGC/GEC: B2 EGC/GEC: NON-COMBINED STRINGS CONDUCTOR/CONDUIT SCHEDULE (IF APPLICABLE) * Consult with your local AHJ and /or Utility REQUIRED by CPAU Supplemental Calculation Sheets for Inverter #2 (Only include if second inverter is used) DC Information: Module Manufacturer: Model: S2) Module Voc (from module nameplate): Volts S3) Module Isc (from module nameplate): Amps S4) Module DC output power under standard test conditions (STC) = Watts (STC) S5) DC Module Layout Identify each source circuit (string) for inverter 1 shown on the roof plan with a Tag (e.g. A,B,C,…) Number of modules per source circuit for inverter 1 Identify, by tag, which source circuits on the roof are to be paralleled (if none, put N/A) Combiner 1: Combiner 2: Total number of source circuits for inverter 1: S6) Are DC/DC Converters used? Yes No If No, skip to Step S7. If Yes, enter info below. DC/DC Converter Model #: Max DC Output Current: Amps Max # of DC/DC Converters in an Input Circuit: DC/DC Converter Max DC Input Voltage: Volts Max DC Output Current: Volts DC/DC Converter Max DC Input Power: Watts Table 1. Maximum Number of PV Modules in Series Based on Module Rated VOC for 600 Vdc Rated Equipment (CEC 690.7) Max. Rated Module VOC (*1.12) (Volts) 29.76 31.51 33.48 35.71 38.27 41.21 44.64 48.70 53.57 59.52 66.96 76.53 89.29 Max. Rated Module VOC (*1.14) (Volts) 29.24 30.96 32.89 35.09 37.59 40.49 43.86 47.85 52.63 58.48 65.79 75.19 87.72 Max # of Modules for 600 Vdc 18 17 16 15 14 13 12 11 10 9 8 7 6 Table 2. Largest Module VOC for Single-Module DC/DC Converter Configurations (with 80 V AFCI Cap) (CEC 690.7 and 690.11) Max. Rated Module VOC (*1.12) (Volts) 30.4 33.0 35.7 38.4 41.1 43.8 46.4 49.1 51.8 54.5 57.1 59.8 62.5 65.2 67.9 70.5 Max. Rated Module VOC (*1.14) (Volts) 29.8 32.5 35.1 37.7 40.4 43.0 45.6 48.2 50.9 53.5 56.1 58.8 61.4 64.0 66.7 69.3 DC/DC Converter Max DC Input (Step 6) (Volts) 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 S7) Maximum System DC Voltage — Use A1 or A2 for systems without DC/DC converters, and B1 or B2 with DC/DC Converters. A1. Module VOC (STEP S2) = x # in series (STEP S5) x 1.12 (If -1 ≤ TL ≤ -5°C, STEP S1) = V A2. Module VOC (STEP S2) = x # in series (STEP S5) x 1.14 (If -6 ≤ TL ≤ -10°C, STEP S1) = V Use for DC/DC converters. The value calculated below must be less than DC/DC converter max DC input voltage (STEP S6). B1. Module VOC (STEP S2) = x # of modules per converter (STEP S6) x 1.12 (If -1 ≤ TL ≤ -5°C, STEP S1) = V B2. Module VOC (STEP S2) = x # of modules per converter (STEP S6) x 1.14 (If -6 ≤ TL ≤ -10°C, STEP S1) = V S8) Maximum System DC Voltage from DC/DC Converters to Inverter — Only required if Yes in Step S6 Maximum System DC Voltage = Volts S9) Maximum Source Circuit Current Is Module ISC below 9.6 Amps (Step S3)? Yes No (If No, use Comprehensive Standard Plan) S10) Sizing Source Circuit Conductors Source Circuit Conductor Size = Min. #10 AWG copper conductor, 90° C wet (USE-2, PV Wire, XHHW-2, THWN-2, RHW-2) For up to 8 conductors in roof-mounted conduit exposed to sunlight at least ½” from the roof covering (CEC 310) Note: For over 8 conductors in the conduit or mounting height of lower than ½” from the roof, use Comprehensive Plan. S11) Are PV source circuits combined prior to the inverter? Yes No If No, use Single Line Diagram 1 and proceed to Step S13. If Yes, use Single Line Diagram 2 with Single Line Diagram 4 and proceed to Step S12. Is source circuit OCPD required? Yes No Source circuit OCPD size (if needed): 15 Amps S12) Sizing PV Output Circuit Conductors — If a combiner box will NOT be used (Step S11), Output Circuit Conductor Size = Min. #6 AWG copper conductor S13) Inverter DC Disconnect Does the inverter have an integrated DC disconnect? Yes No If Yes, proceed to Step S14. If No, the external DC disconnect to be installed is rated for Amps (DC) and Volts (DC) S14) Inverter Information Manufacturer: Max. Continuous AC Output Current Rating: Amps Model: Integrated DC Arc-Fault Circuit Protection? Yes No (If No is selected, Comprehensive Standard Plan) Grounded or Ungrounded System? Grounded Ungrounded AC Information: S15) Sizing Inverter Output Circuit Conductors and OCPD Inverter Output OCPD rating = Amps (Table 3) Inverter Output Circuit Conductor Size = AWG (Table 3) Table 3. Minimum Inverter Output OCPD and Circuit Conductor Size Inverter Continuous Output Current Rating (Amps) (Step 14) 12 16 20 24 28 32 36 40 48 Minimum OCPD Size (Amps) 15 20 25 30 35 40 45 50 60 Minimum Conductor Size (AWG, 75° C, Copper) 14 12 10 10 8 8 6 6 6 Load Center Calculations (Omit if a load center will not be installed for PV OCPDs) S20) Load Center Output: Calculate the sum of the maximum AC outputs from each inverter. Inverter #1 Max Continuous AC Output Current Rating [STEP S14] × 1.25 = Amps Inverter #2 Max Continuous AC Output Current Rating [STEP S14] × 1.25 = Amps Total inverter currents connected to load center (sum of above) = Amps Conductor Size: AWG Overcurrent Protection Device: Amps Load center bus bar rating: Amps The sum of the ampere ratings of overcurrent devices in circuits supplying power to a bus bar or conductor shall not exceed 120 percent of the rating of the bus bar or conductor. Solar PV Standard Plan – Simplified Central/String Inverter System for One- and Two-Family Dwellings DESCRIPTION SOLAR PV MODULE / STRINGDC/DC CONVERTERS INSTALLED? YES / NO (IF YES, STEPS 6 & 8 REQUIRED) SOURCE CIRCUIT JUNCTION BOX INSTALLED?: YES / NOSEPARATE DC DISCONNECT INSTALLED?: YES / NO INTERNAL INVERTER DC DISCONNECT: YES / NOCENTRAL INVERTER *SEPARATE AC DISCONNECT INSTALLED?: YES / NOTO LOAD CENTER ON LINE DIAGRAM 1 TAG 1 2 3 4 5 6 7 8 AC DC 65314 ___ MODULES ___ MODULES ___ MODULES ___ MODULES A B C TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A USE-2 □ OR PV-WIRE □ EGC/GEC: B EGC/GEC: C EGC/GEC: CONDUCTOR/CONDUIT SCHEDULE CHECK A BOX FOR WHETHER SYSTEM IS GROUNDED OR UNGROUNDED: GROUNDED (INCLUDE GEC) UNGROUNDED ENTER “N/A” WHERE SUITABLE FOR WHEN NOT USING CONDUIT OR CABLE AS PERMITTED BY CODE 2 IF DC/DC CONVERTERS ARE USED, CHECK THE BOX BELOW THE CORRESPONDING CONFIGURATION PARALLEL DC/DC CONVERTERS ON ONE SOURCE CIRCUIT (FIXED UNIT VOLTAGE DC/DC CONVERTERS) DC/DC CONVERTERS ARE ALL RUN IN SERIES (FIXED SOURCE CIRCUIT VOLTAGE DC/DC CONVERTERS) + + - - + + - - INVERTER DC / D C CO N V E R T E R S DC / D C CO N V E R T E R S FOR UNGROUNDED SYSTEMS: - DC OCPD MUST DISCONNECT BOTH CONDUCTORS OF EACH SOURCE CIRCUIT - UNGROUNDED CONDUCTORS MUST BE IDENTIFIED PER 210.5(C). WHITE-FINISHED CONDUCTORS ARE NOT PERMITTED. + - + - INVERTER 7 8 SINGLE-LINE DIAGRAM #3 – ADDITIONAL INVERTER FOR DIAGRAM #1 INVERTER # 2 * Consult with your local AHJ and /or Utility Solar PV Standard Plan – Simplified Central/String Inverter System for One- and Two-Family Dwellings DESCRIPTION SOLAR PV MODULE / STRINGDC/DC CONVERTERS INSTALLED? YES / NO (IF YES, STEPS 6 & 8 REQUIRED) SOURCE CIRCUIT JUNCTION BOX INSTALLED?: YES / NOCOMBINER BOX (STEPS 11 & 12 REQUIRED)SEPARATE DC DISCONNECT INSTALLED?: YES / NO INTERNAL INVERTER DC DISCONNECT: YES / NOCENTRAL INVERTER *SEPARATE AC DISCONNECT INSTALLED?: YES / NO TO LOAD CENTER ON LINE DIAGRAM 3 TAG 1 2 3 4 5 6 7 8 9 AC DC 76315 ___ MODULES ___ MODULES ___ MODULES ___ MODULES D TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A1 USE-2 □ OR PV-WIRE □ EGC/GEC: B1 EGC/GEC: C EGC/GEC: D EGC/GEC: COMBINER CONDUCTOR/CONDUIT SCHEDULE CHECK A BOX FOR WHETHER SYSTEM IS GROUNDED OR UNGROUNDED: GROUNDED (INCLUDE GEC) UNGROUNDED ENTER “N/A” WHERE SUITABLE FOR WHEN NOT USING CONDUIT OR CABLE AS PERMITTED BY CODE 2 IF DC/DC CONVERTERS ARE USED, THEY ARE RUN IN SERIES (FIXED SOURCE CIRCUIT VOLTAGE DC/DC CONVERTERS) + + - - INVERTER DC / D C CO N V E R T E R S FOR UNGROUNDED SYSTEMS: - DC OCPD MUST DISCONNECT BOTH CONDUCTORS OF EACH SOURCE CIRCUIT - UNGROUNDED CONDUCTORS MUST BE IDENTIFIED PER 210.5(C). WHITE-FINISHED CONDUCTORS ARE NOT PERMITTED. + - 4 B1 CA1 8 9 SINGLE-LINE DIAGRAM #4 – ADDITIONAL INVERTER FOR DIAGRAM #2 INVERTER # 2 TAG DESCRIPTION AND CONDUCTOR TYPE CONDUCTOR SIZE NUMBER OF CONDUCTORS CONDUIT/CABLE TYPE CONDUIT SIZE A2 USE-2 □ OR PV-WIRE □ EGC/GEC: B2 EGC/GEC: NON-COMBINED STRINGS CONDUCTOR/CONDUIT SCHEDULE (IF APPLICABLE) ___ MODULES ___ MODULES B2 A2 * Consult with your local AHJ and /or Utility STRUCTURAL CRITERIA FOR RESIDENTIAL FLUSH-MOUNTED SOLAR ARRAYS 1. ROOF CHECKS A. Visual Review/Contractor’s Site Audit of Existing Conditions: 1) Is the roof a single roof without a reroof overlay? Y N 2) Does the roof structure appear structurally sound, without signs of alterations or significant structural deterioration or sagging? Y N B. Roof Structure Data: 1) Measured roof slope (e.g. 6:12): 2) Measured rafter spacing (center-to-center): :12 inch 3) Type of roof framing (rafter or manufactured truss): Rafter Truss 2. SOLAR ARRAY CHECKS A. Flush-mounted Solar Array: 1) Is the plane of the modules (panels) parallel to the plane of the roof? Y N 2) Is there a 2” to 10” gap between underside of module and the roof surface? Y N 3) Modules do not overhang any roof edges (ridges, hips, gable ends, eaves)? Y N B. Do the modules plus support components weigh no more than: 4 psf for photovoltaic arrays or 5 psf for solar thermal arrays? Y N C. Does the array cover no more than half of the total roof area (all roof planes)? Y N D. Is a roof plan of the module and anchor layout attached? Y N E. Downward Load Check (Anchor Layout Check): 1) Proposed anchor horizontal spacing: 2) Horizontal anchor spacing per Table 1: ’ - ”ft-in ’ - ”ft-in 3) Is proposed anchor horizontal spacing equal to or less than Table 1 spacing? Y N F. Wind Uplift Check (Anchor Fastener Check): 1) Anchor fastener data (see Figure 3): a. Diameter of lag screw, hanger bolt or self-drilling screw: b. Embedment depth of rafter: c. Number of screws per anchor (typically one): d. Are 5/16” diameter lag screws with 2.5” embedment into the rafter inch inch used, OR does the anchor fastener meet the manufacturer’s guidelines? Y N 3. SUMMARY A. All items above are checked YES. No additional calculations are required. B. One or more items are checked NO. Attach project-specific drawings and calculations stamped and signed by a California-licensed civil or structural engineer. Job Address: ___________________________________________ Permit #: ________________________ Contractor/Installer: _____________________________________ License # & Class: _________________ Signature: ____________________________ Date: ____________ Phone #: ____________________ Table 1. Maximum Horizontal Anchor Spacing Roof Slope Rafter Spacing 16” o.c. 24” o.c. 32” o.c. Photovoltaic Arrays (4 psf max) Flat to 6:12 0° to 26° 5’-4” 6’-0” 5’-4” 7:12 to 12:12 27° to 45° 1’-4” 2’-0” 2’-8” 13:12 to 24:12 46° to 63° 1’-4” 2’-0” 2’-8” PHOTOVOLTAIC (PV) Submittal Package for Simplified Microinverter and AC Modules Revision Date 08/25/2015 Requirements for: Residential PV Systems under 10kW Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) SCOPE: Use this plan ONLY for microinverter systems not exceeding a system AC inverter output rating of 10kW on the roof of a one- or two-family dwelling or accessory structure. The photovoltaic system must interconnect to the load side of a single-phase AC service panel of nominal 120/240Vac with a bus bar rating of 225A or less. This plan is not intended for bipolar systems, hybrid systems or systems that utilize storage batteries, charge controllers, trackers, more than two inverters or more than one DC combiner (non-inverter-integrated) per inverter. Systems must be in compliance with current California Building Standards Codes. Other Articles of the California Electrical Code (CEC) shall apply as specified in 690.3. Required Documents to be submitted in addition to this form:  Site Plan showing the location of the PV array and all associated equipment  Roof Layout Plan showing the required fire clearances  Completed CPAU Photovoltaic Load Sheet www.cityofpaloalto.org/civicax/filebank/documents/8070/  MANUFACTURER’S SPECIFICATION SHEETS MUST BE PROVIDED for proposed inverters, modules, combiner/junction boxes and racking systems. Installation instructions for bonding and grounding equipment. Applicant and Site Information Job Address: ___ Permit #: __________________________________ Contractor/Engineer Name: License # and Class: _________________ Signature: Date: Phone Number: 1. General Requirements and System Information Microinverter AC Module (ACM) Number of PV modules installed: Number of Microinverters installed: Number of ACMs installed: Note: Listed Alternating-Current Module (ACM) is defined in CEC 690.2 and installed per CEC 690 1.1 Number of Branch Circuits, 1, 2 or 3: 1.2 Actual number of Microinverters or ACMs per branch circuit: 1 2. 3. 1.3 Total AC system power rating = (Total Number of Microinverters or ACMs) * (AC inverter power output) = Watts 1.4 Lowest expected ambient temperature for this plan in Table 1: For -1° to -5° C use 1.12 or for -6° to -10° C use 1.14 correction factors. 1.5 Average ambient high temperature for this plan: = +47° C Note: For lower expected ambient or higher average ambient high temperatures, use Comprehensive Standard Plan. 2. Microinverter or ACM Information and Ratings Microinverters with ungrounded DC inputs shall be installed in accordance with CEC 690.35. Microinverter or ACM Manufacturer: Model 2.1 Rated (continuous) AC output power: Watts 2.2 Nominal AC voltage rating: Volts 2.3 Rated (continuous) AC output current: Amps If installing ACMs, skip [STEPS 2.4] 2.4 Maximum DC input voltage rating: Volts (limited to 79 V, otherwise use the Comprehensive Standard Plan) 2.5 Maximum AC output overcurrent protection device (OCPD) Amps 2.6 Maximum number of microinverters or ACMs per branch circuit: 3. PV Module Information (If installing ACMs, skip to [STEP 4]) PV Module Manufacturer: _______________________________________________ Model: _______________________________________________________________ Module DC output power under standard test conditions (STC) = __________ Watts 3.1 Module VOC at STC (from module nameplate): Volts 3.2 Module ISC at STC (from module nameplate): Amps 3.3 Adjusted PV Module DC voltage at minimum temperature = [Table 1] [cannot exceed Step 2.4] Table 1. Module VOC at STC Based on Inverter Maximum DC Input Voltage Derived from CEC 690.7 Microinverter Max. DC Input [STEP 2.4] (Volts) 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 Max. Module VOC @ STC, 1.12 (-1° to -5° C) Correction Factor (Volts) 30.4 33.0 35.7 38.4 41.1 43.8 46.4 49.1 51.8 54.5 57.1 59.8 62.5 65.2 67.9 70.5 Max. Module VOC @ STC, 1.14 (-6° to -10° C) Correction Factor (Volts) 29.8 32.5 35.1 37.7 40.4 43.0 45.6 48.2 50.9 53.5 56.1 58.8 61.4 64.0 66.7 69.3 4. Branch Circuit Output Information Fill in [Table 3] to describe the branch circuit inverter output conductor and OCPD size. Use [Table 2] for determining the OCPD and Minimum Conductor size. Table 2. Branch Circuit OCPD and Minimum Conductor Size* Circuit Current (Amps) Circuit Power (Watts) OCPD (Amps) Minimum Conductor Size (AWG) Minimum Metal Conduit Size for 6 Current Carrying Conductors 12 2880 15 12 ¾” 16 3840 20 10 ¾” 20 4800 25 8 1” 24 5760 30 8 1” *CEC 690.8 and 210.19 (A)(1) factored in Table 2, conductors are copper, insulation must be 90° C wet-rated. Table 2 values are based on maximum ambient temperature of 69° C, which includes 22° C adder, exposed to direct sunlight, mounted > 0.5 inches above rooftop, ≤ 6 current carrying conductors (3 circuits) in a circular raceway. Otherwise use Comprehensive Standard Plan. Table 3. PV Array Configuration Summary Branch 1 Branch 2 Branch 3 Number of Microinverters or ACMs [Step 1] Selected Conductor Size [Table 2] (AWG) Selected Branch and Inverter Output OCPD [Table 2] 5. Solar Load Center (if used) 5.1 Solar Load Center is to have a bus bar rating not less than 100 Amps. Otherwise use Comprehensive Standard Plan. 5.2 Circuit Power see [STEP 1] = Watts 5.3 Circuit Current = (Circuit Power) / (AC voltage) = Amps Table 4. Solar Load Center and Total Inverter Output OCPD and Conductor Size** Circuit Current (Amps) Circuit Power (Watts) OCPD (Amps) Minimum Conductor Size (AWG) Minimum Metal Conduit Size 24 5760 30 10 ½” 28 6720 35 8 ¾” 32 7680 40 8 ¾” 36 8640 45 8 ¾” 40 9600 50 8 ¾” 41.6 ≤ 10000 60 6 ¾” **CEC 690.8 and 210.19 (A)(1) factored in Table 4, conductors are copper, insulation must be 90° C wet-rated. Table 4 values are based on maximum ambient temperature of 47° C (no rooftop temperature adder in this calculation), ≤ 3 current carrying conductors in a circular raceway. Otherwise use Comprehensive Standard Plan. 6. Point of Connection to Utility: 6.1 Load Side Connection only! Otherwise use the Comprehensive Standard Plan. 6.2 Utility AC disconnect required 6.3 Is the PV OCPD positioned at the opposite end from input feeder location or main OCPD location? Yes No (If No, then use 100% row in Table 5) 6.4 Per 705.12(D)(2): (Combined inverter output OCPD size + Main OCPD size) ≤ [bus bar size × (100% or 120%)] Table 5. Maximum Combined Inverter Output CIrcuit OCPD Bus Bar Size (Amps) 100 125 125 200 200 200 225 225 225 Main OCPD (Amps) 100 100 125 150 175 200 175 200 225 Maximum Combined Inverter OCPD with 120% of bus bar rating (Amps) 20 50 25 60† 60† 40 60† 60† 45 Maximum Combined Inverter OCPD with 100% of bus bar rating (Amps) 0 25 0 50 25 0 50 25 0 †This plan limits the maximum system size to less than 10 kW, therefore the OCPD size is limited to 60 A. Reduction of Main Breaker is not permitted with this plan. 7. Grounding and Bonding Check one of the boxes for whether system is grounded or ungrounded: Grounded Ungrounded For Microinverters with a grounded DC input, systems must follow the requirements of GEC (CEC 690.47) and EGC (CEC 690.43). For ACM systems and Microinverters with ungrounded a DC input follow the EGC requirements of (CEC 690.43). 8. Markings Informational note: ANSI Z535.4 provides guidelines for the design of safety signs and labels for application to products. A phenolic plaque with contrasting colors between the text and background would meet the intent of the code for permanency. No type size is specified, but 20 point (3/8”) should be considered the minimum. M NOTE: CEC 705.10 requires a permanent plaque or directory denoting all electric power sources on or in the premesis. CEC 690.54 CEC 690.54 & CEC 705.12(D)(4) WARNINGDUAL POWER SOURCESSECOND SOURCE IS PHOTOVOLTAIC SYSTEM RATED AC OUTPUT CURRENT ______ AMPS AC NORMAL OPERATING VOLTAGE ______ VOLTS WARNINGINVERTER OUTPUT CONNECTIONDO NOT RELOCATE THISOVERCURRENT DEVICE AC DC PV AC DC PV AC DC PV AC DC PV Optional AC Disconnect per AHJ PV SYSTEM AC DISCONNECT SECOND SOURCE IS PHOTOVOLTAIC SYSTEMRATED AC OUTPUT CURRENT ______ AMPS ACNORMAL OPERATING VOLTAGE ______ VOLTS Optional Solar Load Center AC DC PV AC DC PV AC DC PV AC DC PV AC .. . CEC 705.12 (D)(7) Equipment Schedule TAG DESCRIPTION: (Provide model # if provided) 1 Solar PV Module or ACM: 2 Microinverter (if not ACM): 3 Junction Box (es): 4 Solar Load Center, Yes / No: 5 Performance Meter Yes / No: 6 *Utility External Disconnect Switch Yes / No: 7 Main Electrical Service Panel Solar PV Standard Plan — Simplified Central/String Inverter Systems for One- and Two-Family Dwellings 9. Single-Inverter Line Diagram Single-Line Diagram for Microinverters or ACMs Check a box for dc system grounding: □ Grounded, □ Ungrounded For ungrounded dc power systems, EGC is required For grounded dc power systems, GEC & EGC are required Refer to CEC 250.120 for EGC installation & Table 250.122 for sizing 1 2 3 * Consult with your local AHJ and /or Utility M 4 5 6 7 PV DC -> AC M PV DC -> AC G PV DC -> AC DC GEC, Branch Circuit OCPDs (Table 3) Branch 1 OCPD size Branch 2 OCPD size B Main Service Panel OCPDs When Required A Branch 3 OCPD size Solar Load Center Busbar(Section 5) Main OCPD size: (table 5) Combined Inverter Output OCPD: (Table 4) Main Service Panel Busbar: (Table 5) Conductor, Cable and Conduit Schedule TAG Description and Conductor Type: (Table 3) mmb Conductor Size Number of Conductors Conduit/ Conductor/ Cable Type Conduit Size Current-Carrying Conductors: (for each branch circuit) A EGC: GEC (when required): Current-Carrying Conductors: B EGC: GEC (when required): STRUCTURAL CRITERIA FOR RESIDENTIAL FLUSH-MOUNTED SOLAR ARRAYS 1. ROOF CHECKS A. Visual Review/Contractor’s Site Audit of Existing Conditions: 1) Is the roof a single roof without a reroof overlay? Y N 2) Does the roof structure appear structurally sound, without signs of alterations or significant structural deterioration or sagging? Y N B. Roof Structure Data: 1) Measured roof slope (e.g. 6:12): 2) Measured rafter spacing (center-to-center): :12 inch 3) Type of roof framing (rafter or manufactured truss): Rafter Truss 2. SOLAR ARRAY CHECKS A. Flush-mounted Solar Array: 1) Is the plane of the modules (panels) parallel to the plane of the roof? Y N 2) Is there a 2” to 10” gap between underside of module and the roof surface? Y N 3) Modules do not overhang any roof edges (ridges, hips, gable ends, eaves)? Y N B. Do the modules plus support components weigh no more than: 4 psf for photovoltaic arrays or 5 psf for solar thermal arrays? Y N C. Does the array cover no more than half of the total roof area (all roof planes)? Y N D. Is a roof plan of the module and anchor layout attached? Y N E. Downward Load Check (Anchor Layout Check): 1) Proposed anchor horizontal spacing: 2) Horizontal anchor spacing per Table 1: ’ - ”ft-in ’ - ”ft-in 3) Is proposed anchor horizontal spacing equal to or less than Table 1 spacing? Y N F. Wind Uplift Check (Anchor Fastener Check): 1) Anchor fastener data (see Figure 3): a. Diameter of lag screw, hanger bolt or self-drilling screw: b. Embedment depth of rafter: c. Number of screws per anchor (typically one): d. Are 5/16” diameter lag screws with 2.5” embedment into the rafter inch inch used, OR does the anchor fastener meet the manufacturer’s guidelines? Y N 3. SUMMARY A. All items above are checked YES. No additional calculations are required. B. One or more items are checked NO. Attach project-specific drawings and calculations stamped and signed by a California-licensed civil or structural engineer. Job Address: ___________________________________________ Permit #: ________________________ Contractor/Installer: _____________________________________ License # & Class: _________________ Signature: ____________________________ Date: ____________ Phone #: ________________________ Table 1. Maximum Horizontal Anchor Spacing Roof Slope Rafter Spacing 16” o.c. 24” o.c. 32” o.c. Photovoltaic Arrays (4 psf max) Flat to 6:12 0° to 26° 5’-4” 6’-0” 5’-4” 7:12 to 12:12 27° to 45° 1’-4” 2’-0” 2’-8” 13:12 to 24:12 46° to 63° 1’-4” 2’-0” 2’-8” PHOTOVOLTAIC (PV) Summary Inspection Checklist Revision Date 08/25/2015 Requirements for: Residential PV Systems under 10kW Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) Field Inspection Guide for Rooftop Photovoltaic (PV) Systems Standard Plan Make sure all PV system AC/DC disconnects and circuit breakers are in the open position and verify the following. 1. All work done in a neat and workmanlike manner (CEC 110.12). 2. PV module model number, quantity and location according to the approved plan. 3. Array mounting system and structural connections according to the approved plan. 4. Roof penetrations flashed/sealed according to the approved plan. 5. Array exposed conductors are properly secured, supported and routed to prevent physical damage. 6. Conduit installation according to CRC R331.3 and CEC 690.4(F). 7. Firefighter access according to approved plan. 8. Roof-mounted PV systems have the required fire classification (CBC 1505.9 or CRC R902.4). 9. Grounding/bonding of rack and modules according to the manufacturer’s installation instructions that are approved and listed. 10. Equipment installed, listed and labeled according to the approved plan (e.g., PV modules, DC/DC converters, combiners, inverters, disconnects, load centers and electrical service equipment). 11. For grid-connected systems, inverter is marked “utility interactive.” 12. For ungrounded inverters, installation complies with CEC 690.35 requirements. 13. Conductors, cables and conduit types, sizes and markings according to the approved plan. 14. Overcurrent devices are the type and size according to the approved plan. 15. Disconnects according to the approved plan and properly located as required by the CEC and City of Palo Alto Utilities 16. Inverter output circuit breaker is located at opposite end of bus from utility supply at load center and/or service panelboard (not required if the sum of the inverter and utility supply circuit breakers is less than or equal to the panelboard bus rating). 17. Labels shall be phenolic where exposed to sunlight. Labels required on conduit shall be permanent, weather resistant and suitable for the environment. Labels shall be red background w/white lettering. 18. Connection of the PV system to the grounding electrode system according to the approved plan. 19. Access and working space for operation and maintenance of PV equipment such as inverters, disconnecting means and panelboards (not required for PV modules) (CEC 110.26). Palo Alto Utility Requirements A. Prior to Building Department Final approval, an inspection by the City of Palo Alto meter shop is required. Call 650-496-6987 to request an inspection with the meter shop. A green sticker will be applied once the meter shop inspection has passed. B. If electrical equipment is located near a gas meter, verify required clearances are met. See gas meter standard drawing #std-gd-02 for clearance requirements. C. Per City of Palo Alto Utilities, the AC disconnect shall be located within sight and within 10’ of the main electrical service. The AC disconnect shall be readily accessible with visible-blades and lockable. Table: Signage Requirements for PV systems Code Section Location of Label Text CEC 690.5(C) Utility-interactive inverter & battery enclosure WARNING ELECTRIC SHOCK HAZARD IF A GROUND FAULT IS INDICATED, NORMALLY GROUNDED CONDUCTORS MAY BE UNGROUNDED AND ENERGIZED. CEC 690.35(F) All enclosures with ungrounded circuits or devices which are energized and may be exposed during service WARNING ELECTRIC SHOCK HAZARD. THE DC CONDUCTORS OF THIS PHOTOVOLTAIC SYSTEM ARE UNGROUNDED AND MAY BE ENERGIZED. CEC 690.14(C)(1) On the main service when dc wiring is run through the building and the dc disconnect is located other than at the main service DC DISCONNECT IS LOCATED…. CEC 690.14(C)(2) On the ac and dc disconnects PHOTOVOLTAIC SYSTEM DISCONNECT CEC 690.53 On the dc disconnects OPERATING CURRENT ___ OPERATING VOLTAGE ___ MAXIMUM SYSTEM VOLTAGE___ SHORT CIRCUIT CURRENT ___ CEC 690.54 At interactive points of interconnection, usually the main service RATED AC OUTPUT CURRENT ___ AMPS NORMAL OPERATING AC VOLTAGE ___ VOLTS CEC 690.56(B)/ 690.14(D)(4), 705.10 2011 CEC 690.4(H) At the electrical service and at the PV inverter if not at the same location A directory providing the location of the service disconnecting means and the photovoltaic system disconnecting means CEC 690.17 On the dc disconnect and on any equipment that stays energized in the off position from the PV supply WARNING ELECTRIC SHOCK HAZARD. DO NOTTOUCH TERMINALS. TERMINALS ON BOTH THE LINE AND LOAD SIDES MAY BE ENERGIZED IN THE OPEN POSITION. CEC 705.12 (D)(7) Inverter output OCPD WARNING INVERTER OUTPUT CONNECTION. DO NOT RELOCATE THIS OVERCURRENT DEVICE. CFC 605.11.1.4, CEC 690.31(E)(3), 690.31(E)(4), CRC R331.2.4 On conduit, raceways, and enclosures, mark every 10 feet, at turns, above/below penetrations WARNING: PHOTOVOLTAIC POWER SOURCE *Labels have a red background with white lettering * PHOTOVOLTAIC (PV) Detailed Inspection Checklist Revision Date 08/25/2015 Requirements for: Residential PV Systems under 10kW Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) All California Electrical Code (CEC), California Residential Code (CRC), California Building Code (CBC) and California Fire Code (CFC) references are to the 2013 versions unless otherwise noted. California amendments to the IRC are noted as CRC. Palo Alto Utility Requirements A. Prior to Building Department Final approval, an inspection by the City of Palo Alto meter shop is required. Call 650-496-6987 to request an inspection with the meter shop. A green sticker will be applied once the meter shop inspection has passed. B. If electrical equipment is located near a gas meter, verify required clearances are met. See gas meter standard drawing #std-gd-02 for clearance requirements. C. Per City of Palo Alto Utilities, the AC disconnect shall be located within sight and within 10’ of the main electrical service. The AC disconnect shall be readily accessible with visible-blades and lockable. PART I: GENERAL A. Module manufacturer, make, model, and number of modules match the approved plans. (CBC 107.4) B. DC PV modules are listed to UL 1703. Ac modules are listed to UL 1703 and UL 1741. (CEC 110.3, 690.4 & CBC 1509.7.4 & CRC R908.1.5) C. Modules are attached to the mounting structure according to the manufacturer’s instructions and the approved plans. (CEC 110.3(B), CBC 107.4 & CRC R908.1.4) D. Roof penetrations/attachments are properly flashed. (CBC Chapter 15 & 2012 CRC Chapter 9) E. Rooftop systems are designed in accordance with the CBC. (CBC 1509.7 & CRC R908.1) F. Roof access points, paths and clearances need to comply with the CFC. (CFC 605.11.3.1 - 605.11.3.3.3, CRC R331.4.1 through R331.4.2.4) G. PV installation shall comply with requirements of the standard plan. H. PV system operating at 80 volts or greater shall be protected by a listed dc arc fault protection. (CEC 690.11) I. All work done in a neat and workmanlike manner. (CEC 110.12) PART II: ELECTRICAL REQUIREMENTS Section 1: PV Array Configuration A. DC modules are properly marked and labeled. (CEC 110.3, 690.4(D) & 690.51) B. AC modules are properly marked and labeled. (CEC 110.3, 690.4(D) & 690.52) C. PV modules are in good condition (i.e., no broken glass or cells, no discoloration, frames not damaged, etc.). (CEC 110.12(B)) D. Residential one and two family dwelling limited to maximum PV system voltage of 600 volts. (CEC 690.7) Section 2: Bonding and grounding A. A complete grounding electrode system is installed. (CEC 690.47(A) & (B)) B. Modules are bonded and grounded in accordance with the manufacturer’s installation instructions, that are listed and approved, using the supplied hardware or listed equipment specified in the instructions and identified for the environment. (CEC 690.43 & 110.3(B)) C. Racking systems are bonded and grounded in accordance with the manufacturer’s installation instructions, that are listed and approved, using the supplied hardware or listed equipment specified in the instructions and identified for the environment. (CEC 690.43 & 110.3(B)) D. Properly sized equipment grounding conductor is routed with the circuit conductors. (CEC 690.45, 250.134(B) & 300.3(B)) E. AC and DC grounding electrode conductors are properly connected as required by code. Separate electrodes, if used, are bonded together. (CEC 690.47, 250.50 & 250.58) F. Bonding fittings are used on concentric/eccentric knockouts with metal conduits for circuits over 250 volts. (CEC 250.97) (see also exceptions 1 through 4) G. Bonding fittings are used for ferrous metal conduits enclosing grounding electrode conductors. (CEC 250.64(E)) Section 3: PV Source/output Circuit Conductor Management A. Cables are secured by staples, cable ties, straps, hangers or similar fittings at intervals that do not exceed 4.5 feet. (CEC 334.30 & 338.12(A)(3)) B. Cables are secured within 12 inches of each box, cabinet, conduit body or other termination. (CEC 334.30 & 338.12(A)(3)) C. Cable closely follows the surface of the building finish or of the running boards. (CEC 690.4(F) & CFC 605.11.2 & CRC R331.3) NOTE: see Section 12 below for additional requirements on routing of conductors for fire fighter safety concerns. D. Exposed single conductors, where subject to physical damage, are protected. (CEC 230.50(B) & 300.5(D)) E. Exposed single conductors used for ungrounded systems are listed and identified as "PV wire." (CEC 690.35(D)(3)) For other conductor requirements for ungrounded systems see CEC 690.35(D). Section 4: Conductors A. Exposed single conductor wiring is a 90oC, wet rated and sunlight resistant type USE-2 or approved/listed PV wire. (CEC 690.31(B) & 110.2) If the wiring is in a conduit, it is 90oC, wet rated type RHW-2, THWN-2, or XHHW-2. (CEC 310.15) B. Conductor insulation is rated at 90oC to allow for operation at 70oC+ near modules. (CEC 310.15) C. Grounded conductor is identified white or grey. (CEC 200.6) D. Open conductors are supported, secured and protected. (CEC 338.12(A)(3) & 334.30) E. Conductors are not in contact with the roof surface. (CEC 334.30) F. DC conductors inside a building are in a metal raceway or MC metal-clad cable that complies with 250.118(10), or metal enclosures. (CEC 690.31(E)) G. DC wiring methods shall not be installed within 25cm (10”) of the roof decking or sheathing except where directly below the roof surface covered by the PV modules and associated equipment. (CEC 690.31(E)(1)) H. If more than one nominal voltage system conductor is installed in the raceway, permanent identification and labeling is required. (CEC 200.6(D) & 210.5(C)) I. For underground conductor installations, the burial depth is appropriate and warning tape is in place. (CEC 300.5(D)(3) & Table 300.5) J. Aluminum is not placed in direct contact with concrete. (CEC 250.120(B) & 110.11) K. PV circuit and premises wiring is separated. (CEC 690.4(B)) L. PV system conductors shall be grouped and identified. (CEC 690.4(B)) Section 5: Overcurrent Protection A. Overcurrent protection devices (OCPD) in the dc circuits are listed for dc operation. (CEC 110.3(A), (B) & 690.9(D)) B. Overcurrent protection devices shall be provided per the approved plans. (CEC 690.9(A)) C. Combiner box is listed to UL 1741. D. PV output OCPD is located at the opposite end of the bus from the feeder connection, unless otherwise approved. (CEC 705.12(D)(7)) Section 6: Electrical Connections A. Crimp terminals are listed and installed using a listed tool specified for use in crimping those specific crimps. (CEC 110.3(B) & 110.14) B. Pressure terminals are listed for the environment and tightened to manufacturer recommended torque specifications. (CEC 110.11, 110.3(B) & 110.14) C. Connectors are listed for the voltage of the system and have appropriate temperature and ampere ratings. (CEC 110.3(B) & 110.14) D. Twist-on wire connectors are listed for the environment (i.e. wet, damp, direct burial, etc.) and installed per manufacturer’s instructions. (CEC 110.11, 110.3(B), 110.14 & 300.5(B)) E. Power distribution blocks are listed. (CEC 690.4 & 2011 NEC 314.28(E)) F. Terminals containing more than one conductor are listed for multiple conductors. (CEC 110.14(A) & 110.3(B)) G. Connectors and terminals used other than class B and C stranded conductors (fine stranded conductors) are listed and identified for use with specific conductor class or classes.. (CEC 110.14(A) & 110.3(B)) H. Connectors that are readily accessible and operating at over 30 volts require a tool for opening. (CEC 690.33(C)) I. All connectors are fully engaged, tight and secure. (CEC 110.3(B) & 110.12) J. Wiring and connections of inverters, PV source circuits, etc., and all interconnections are performed by qualified personnel. (CEC 690.4(E)) Section 7: Disconnects A. Disconnects used in dc circuits are listed for dc operation and located as allowed by the AHJ. (CEC 110.3) B. Disconnects are installed for all current carrying conductors of the PV source. (CEC 690.13 - 690.14 & 690.35) C. Disconnects are installed for the PV equipment. NOTE: For inverters and other equipment that are energized from more than one source, the disconnecting means must be grouped and identified per AHJ’s requirements. (CEC 690.15) D. Disconnects and overcurrent protection are installed for all ungrounded conductors in ungrounded PV power systems. (CEC 240.15 & 690.35) E. Where connectors are used as disconnecting means, they shall be used in accordance with CEC 690.33.E (CEC 690.33.E & 690.17) Section 8: Inverters A. Inverters are listed to UL 1741. (CEC 690.4(D)) NOTE: grid-tied system inverters need to be identified for use in interactive power systems. B. Point of connection is at a dedicated breaker or disconnect. (CEC 705.12(D)(1)) C. Where a back-fed breaker is used as a utility interconnection means, the breaker is not marked “line and load.” (CEC 110.3(B), 705.12(D)(5)) D. Listed ac and dc disconnects and overcurrent protection are grouped and identified. (CEC 690.15) E. No multi-wire branch circuits are installed where single 120-volt inverters are connected to 120/240-volt load centers. (CEC 690.10(C)) F. The barrier is re-installed between the ac, dc wiring and communication wires. (CEC 110.3(B) & 110.27) Section 9: Signs and Labels A. All interior and exterior dc conduit, enclosures, raceways, cable assemblies, junction boxes, combiner boxes, and disconnects are marked. (CFC 605.11.1, CEC 690.31(E)(3), CEC 690.31(E)(4), 690.17 & 690.53 & CRC R331.2) B. The markings on the conduits, raceways and cable assemblies are every 10 feet, within one foot of all turns or bends and within one foot above and below all penetrations of roof/ceiling assemblies, walls and barriers. (CFC 605.11.1.4, CRC R331.2.4, CEC 690.31(E)(3) & CEC 690.31(E)(4)) C. Marking is placed adjacent to the main service disconnect in a location clearly visible from where the disconnect is operated. (CFC 605.11.1.3 & CRC R331.2.3) D. The markings say “WARNING: PHOTOVOLTAIC POWER SOURCE” and have 3/8 inch (9.5 mm) minimum-sized white letters on a red background. The signs are made of reflective weather resistant material. (CFC 605.11.1.1, 605.11.1.2& CRC R331.2.1 - R331.2.2 & CEC 690.31(E)(3) & 690.31(E)(4)) E. Where PV circuits are embedded in built-up, laminate, or membrane roofing materials in roof areas not covered by PV modules and associated equipment, the location of circuits shall be clearly marked. (CEC 690.4(F)) F. Require labels shall be phenolic where exposed to sunlight. Labels required on conduit shall be permanent, weather resistant and suitable for the environment. Labels shall be red background w/white lettering. The following labels are required as applicable: Table: Signage Requirements for PV systems Code Section Location of Label Text CEC 690.5(C) Utility-interactive inverter & battery enclosure WARNING ELECTRIC SHOCK HAZARD IF A GROUND FAULT IS INDICATED, NORMALLY GROUNDED CONDUCTORS MAY BE UNGROUNDED AND ENERGIZED. CEC 690.35(F) All enclosures with ungrounded circuits or devices which are energized and may be exposed during service WARNING ELECTRIC SHOCK HAZARD. THE DC CONDUCTORS OF THIS PHOTOVOLTAIC SYSTEM ARE UNGROUNDED AND MAY BE ENERGIZED. CEC 690.14(C)(1) On the main service when dc wiring is run through the building and the dc disconnect is located other than at the main service DC DISCONNECT IS LOCATED…. CEC 690.14(C)(2) On the ac and dc disconnects PHOTOVOLTAIC SYSTEM DISCONNECT CEC 690.53 On the dc disconnects OPERATING CURRENT ___ OPERATING VOLTAGE ___ MAXIMUM SYSTEM VOLTAGE___ SHORT CIRCUIT CURRENT ___ CEC 690.54 At interactive points of interconnection, usually the main service RATED AC OUTPUT CURRENT ___ AMPS NORMAL OPERATING AC VOLTAGE ___ VOLTS CEC 690.56(B)/ 690.14(D)(4), 705.10 2011 CEC 690.4(H) At the electrical service and at the PV inverter if not at the same location A directory providing the location of the service disconnecting means and the photovoltaic system disconnecting means CEC 690.17 On the dc disconnect and on any equipment that stays energized WARNING ELECTRIC SHOCK HAZARD. in the off position from the PV supply DO NOTTOUCH TERMINALS. TERMINALS ON BOTH THE LINE AND LOAD SIDES MAY BE ENERGIZED IN THE OPEN POSITION. CEC 705.12 (D)(7) Inverter output OCPD WARNING INVERTER OUTPUT CONNECTION. DO NOT RELOCATE THIS OVERCURRENT DEVICE. CFC 605.11.1.4, CEC 690.31(E)(3), 690.31(E)(4), CRC R331.2.4 On conduit, raceways, and enclosures, mark every 10 feet, at turns, above/below penetrations WARNING: PHOTOVOLTAIC POWER SOURCE PART III: FIRE SAFETY REQUIREMENTS Section 10: Fire Safety A. Rooftop mounted PV panels and modules have the proper fire classification rating. (CBC 1509.7.2 & CRC R908.1.2) B. Rooftop PV Conduits are located as close as possible to the ridge or hip or valley and from the hip or valley as directly as possible to an outside wall to reduce trip hazards and maximize ventilation opportunities. (CFC 605.11.2 & CRC R331.3) C. Conduit runs between sub arrays and to DC combiner boxes are installed in a manner that minimizes total amount of conduit on the roof by taking the shortest path from the array to the DC combiner box. (CFC 605.11.2 & CRC R331.3) D. DC Combiner Boxes are located so that conduit runs are minimized in the pathways between arrays. (CFC 605.11.2 & CRC 331.3) E. DC wiring in enclosed spaces in buildings is installed in metallic conduit or raceways. Conduit runs along the bottom of load bearing members. (CFC 605.11.2 & CEC 690.4(F) & CRC R331.3) F. All roofs have an access point that does not place ground ladders over openings such as windows or doors, are located at strong points of building construction, and in locations where the access point does not conflict with overhead obstructions such as tree limbs, wires, or signs. (CFC 605.11.3.1 & CRC R331.3) G. Roofs with slopes greater than 2:12 have solar panel layouts that meet the following criteria: (some exceptions apply, see diagrams in CFC) 1. Hip Roofs: Panels/modules are located so that there is a 3-foot wide clear access pathway from the eave to the ridge on each roof slope where panels/modules are located. ( CFC 605.11.3.2.1 & CRC R331.4.2.1) 2. Hips and Valleys: If panels/modules are placed on both sides of a hip or valley they are located no closer than 18 inches to a hip or valley. If the panels are located on only one side of a hip or valley that is of equal length, then the panels can be placed directly adjacent to the hip or valley. (CFC 605.11.3.2.3 & CRC R 331.4.2.3) 3. Single Ridges: Panels/modules are located so that there are two 3-foot wide access pathways from the eave to the ridge on each roof slope where there are panels/modules installed. (CFC 605.11.3.2.2 & CRC R331.4.2.2) 4. Ridges: Panels/modules are located no higher than 3 feet from the top of the ridge in order to allow for fire department smoke ventilation operations. (CFC605.11.3.2.4 & CRC R331.4.2.4) 5. Access pathways are located at a structurally sound location capable of supporting the load of fire fighters accessing the roof. (CFC 605.11.3.2.1 & CRC R331.4.2.1) SWH TO OLKI SOLAR DOMESTIC WATER HEATING SYSTEM ELIGIBILITY SYS TE M Criteria Yes 1. Major components installed match those of certified system? SOLAR DOMESTIC WATER HEATING INSPECTION GUIDE Guideline Source of Guideline Yes ROO F I. Roof penetrations/attachments are properly flashed CBC Chap. 15, CRC Chap. 9 SO L A R LOO P PI P I N G I. Piping must be properly supported, hung and anchored per code CPC 313.1 II. Solar piping properly insulated See local ordinance. III. Dissimilar materials isolated, as required CPC 310.6 IV. Penetrations through structural members as per code CPC 312.2 V. Penetrations through fire-resistant assemblies installed per code CPC 1505.2 VI. System has adequate freeze protection CPC 312.6 VII. System overheat protection CPC 505.2 VIII. Expansion tank sized correctly (indirect system) according to need for operation or overheat protection? CMC 1005.3, 1005.4 IX. Pressure relief/temperature relief valve(s) installed per design (if applicable) CPC 608.4 & 608.5 X. Piping labels show type of fluid and direction of flow CPC 601.2 XI. Drain and fill valves capped and labeled CPC 601.2 S T O R A G E T A N K I. Tank labeled with pressure rating for pressurized storage CPC 505.4 II. Relief drain installed properly for pressurized storage CPC 504.6, CMC 1006.1 III. Heat exchanger must protect potable water system from being contaminated by the heat transfer medium CPC 603.5.4 Solar Water Heating Eligibility and Inspection Checklist for Domestic Systems Revision Date 08/25/2015 Requirements for: Residential SDWH Systems 30kWth or less Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) IV. Tank installed in garage meets code requirements CPC 507.13 V. Pan installed under tank (as required) CPC 507.4 VI. Tank installed on level surface CPC 508.4.3 VII. Tank supported for seismic loads CPC 507.2 VIII. All valves, fittings and solders are rated for potable systems and meeting CA lead law requirements CPC 604.1 IX. Unions installed within 12” of tank connections for all piping to and from tank and heat exchangers CPC 609.5 Solar Water Heating Systems Submittal Package for Pool Systems Revision Date 08/25/2015 Requirements for: Residential SPH Systems 30kWth or less Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) SWH TOOLKIT DOC SCOPE: Use this plan ONLY for solar pool water heating systems not exceeding a thermal output rating of 30 kWth on the roof of a one- or two-family dwelling or accessory structure and used for domestic water heating. Systems must be in compliance with current California Building Standards Code, Title 24. Other articles of the California Plumbing Code (CPC) or California Mechanical Code (CMC) or other California health and safety codes shall apply. Required Documents to be submitted in addition to this form:  Site Plan showing the location of the SPH array and all associated equipment  Roof Layout Plan showing attachment details  MANUFACTURER’S SPECIFICATION SHEETS MUST BE PROVIDED for proposed collector, controller, pump, storage tank/heat exchanger/ heat transfer fluid (if applicable) and mounting systems. Equipment intended for use with SPH system shall be identified and listed for the application. Job Address: ___ ________ _____ Permit #: __ Contractor/Engineer Name: __ __ License # and Class: _ Signature: Date: Phone Number: _ __ Email: Total # of Collectors Installed Total Area of Collectors Collector Certification Number (include certifying agency) Max Height Above Roof Height Above Ground Major Components (for SPH systems) Solar Tank Make/Model Gallons Insulation R- Pressurized? Heat Exchanger Make/Model Number of Walls Heat Exchange Fluid Solar Control Make/Model Solar Pump/Circulator Make/Model Expansion Tank Make/Model Appropriately Sized for Use? Mounting Hardware Make/Model or Type Do all the above data match substantially the data used for certification? STRUCTURAL CRITERIA FOR RESIDENTIAL FLUSH-MOUNTED ARRAYS 1. ROOF CHECKS A. Visual Review/Contractor’s Site Audit of Existing Conditions: 1) Is the roof a single roof without a reroof overlay? Y N 2) Does the roof structure appear structurally sound, without signs of alterations or significant structural deterioration or sagging? Y N B. Roof Structure Data: 1) Measured roof slope (e.g. 6:12): 2) Measured rafter spacing (center-to-center): :12 inch 3) Type of roof framing (rafter or manufactured truss): Rafter Truss 2. SOLAR ARRAY CHECKS A. Flush-mounted Solar Array: 1) Is the plane of the modules (panels) parallel to the plane of the roof? Y N 2) Is there a 2” to 10” gap between underside of module and the roof surface? Y N 3) Modules do not overhang any roof edges (ridges, hips, gable ends, eaves)? Y N B. Do the modules plus support components weigh no more than: 4 psf for photovoltaic arrays or 5 psf for solar thermal arrays? Y N C. Does the array cover no more than half of the total roof area (all roof planes)? Y N D. Is a roof plan of the module and anchor layout attached? Y N E. Downward Load Check (Anchor Layout Check): 1) Proposed anchor horizontal spacing: 2) Horizontal anchor spacing per Table 1: ’ - ”ft-in ’ - ”ft-in 3) Is proposed anchor horizontal spacing equal to or less than Table 1 spacing? Y N F. Wind Uplift Check (Anchor Fastener Check): 1) Anchor fastener data: a. Diameter of lag screw, hanger bolt or self-drilling screw: b. Embedment depth of rafter: c. Number of screws per anchor (typically one): d. Are 5/16” diameter lag screws with 2.5” embedment into the rafter inch inch used, OR does the anchor fastener meet the manufacturer’s guidelines? Y N 3. SUMMARY A. All items above are checked YES. No additional calculations are required. B. One or more items are checked NO. Attach project-specific drawings and calculations stamped and signed by a California-licensed civil or structural engineer. Job Address: ___________________________________________ Permit #: ________________________ Contractor/Installer: _____________________________________ License # & Class: ________________ Signature: ____________________________ Date: ____________ Phone #: ____________________ Table 1. Maximum Horizontal Anchor Spacing Roof Slope Rafter Spacing 16” o.c. 24” o.c. 32” o.c. Solar Thermal Arrays (5 psf max) Flat to 6:12 0° to 26° 4’-0” 4’-0” 5’-4” 7:12 to 12:12 27° to 45° 1’-4” 2’-0” 2’-8” 13:12 to 24:12 46° to 63° Calc. Req’d Calc. Req’d Calc. Req’d SWH TO OLKIT DOCUMENT #5 SOLAR POOL HEATING SYSTEM ELIGIBILITY SYS TE M Criteria Yes 1. Major components installed match those of proposed system? SOLAR POOL HEATING INSPECTION GUIDE Guideline Source of Guideline Yes ROO F I. Roof penetrations/attachments are properly flashed CBC Chap. 15, CRC Chap. 9 SO L A R LOO P PI P I N G I. Piping properly supported CPC 313.1 II. Vacuum relief valve installed (if required by manufacturer) See local ordinance. III. Drain valves installed if the system is not self-draining CPC 312.6 IV. Penetrations through structural members as per code CPC 312.2 V. Penetrations through fire-resistant assemblies installed per code CPC 1505.2 VI. System has adequate freeze protection CPC 312.6 CON T ROL S I. Control and pump properly installed and bolted to pad CEC 430 (IX), 690.17 II. Conductors between control and power source properly installed CEC 430 (II) III. Conductors between control and pump properly installed CEC 430 (II), 690 (IV) IV. Solar collector sensors protected from sun and weather CEC 310.8 B, D(1), D(2) V. Control relay rated higher than load for each output CEC 430.83 Solar Water Heating Eligibility and Inspection Checklist for Pool Systems Revision Date 08/25/2015 Requirements for: Residential SPH Systems 30kWth or less Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) Solar Water Heating Submittal Package for Domestic Systems Revision Date 08/25/2015 Requirements for: Residential SDWH Systems 30kWth or less Codes Enforced:  2013 California Codes of Regulations Title 24  Palo Alto Municipal Code (PAMC) SWH TOOLKIT DOC SCOPE: Use this plan ONLY for solar domestic water heating systems not exceeding a thermal output rating of 30 kWth on the roof of a one- or two-family dwelling or accessory structure and used for domestic water heating. Systems must be in compliance with current California Building Standards Code, Title 24. Other articles of the California Plumbing Code (CPC) or California Mechanical Code (CMC) or other California health and safety codes shall apply. Required Documents to be submitted in addition to this form:  Site Plan showing the location of the SHW array and all associated equipment  Roof Layout Plan showing attachment details  MANUFACTURER’S SPECIFICATION SHEETS MUST BE PROVIDED for proposed collector, controller, pump, storage tank/heat exchanger/ heat transfer fluid (if applicable) and mounting systems. Equipment intended for use with SDHW system shall be identified and listed for the application. Job Address: ___ ________ _____ Permit #: __ Contractor/Engineer Name: __ __ License # and Class: _ Signature: Date: Phone Number: _ __ Email: Total # of Collectors Installed Total Area of Collectors Collector Certification Number (include certifying agency) Max Height Above Roof Height Above Ground Major Components (for SDWH systems) Solar Tank Make/Model Gallons Insulation R- Pressurized? Heat Exchanger Make/Model Number of Walls Heat Exchange Fluid Solar Control Make/Model Solar Pump/Circulator Make/Model Expansion Tank Make/Model Appropriately Sized for Use? Mounting Hardware Make/Model or Type Do all the above data match substantially the data used for certification? STRUCTURAL CRITERIA FOR RESIDENTIAL FLUSH-MOUNTED ARRAYS 1. ROOF CHECKS A. Visual Review/Contractor’s Site Audit of Existing Conditions: 1) Is the roof a single roof without a reroof overlay? Y N 2) Does the roof structure appear structurally sound, without signs of alterations or significant structural deterioration or sagging? Y N B. Roof Structure Data: 1) Measured roof slope (e.g. 6:12): 2) Measured rafter spacing (center-to-center): :12 inch 3) Type of roof framing (rafter or manufactured truss): Rafter Truss 2. SOLAR ARRAY CHECKS A. Flush-mounted Solar Array: 1) Is the plane of the modules (panels) parallel to the plane of the roof? Y N 2) Is there a 2” to 10” gap between underside of module and the roof surface? Y N 3) Modules do not overhang any roof edges (ridges, hips, gable ends, eaves)? Y N B. Do the modules plus support components weigh no more than: 4 psf for photovoltaic arrays or 5 psf for solar thermal arrays? Y N C. Does the array cover no more than half of the total roof area (all roof planes)? Y N D. Is a roof plan of the module and anchor layout attached? Y N E. Downward Load Check (Anchor Layout Check): 1) Proposed anchor horizontal spacing: 2) Horizontal anchor spacing per Table 1: ’ - ”ft-in ’ - ”ft-in 3) Is proposed anchor horizontal spacing equal to or less than Table 1 spacing? Y N F. Wind Uplift Check (Anchor Fastener Check): 1) Anchor fastener data: a. Diameter of lag screw, hanger bolt or self-drilling screw: b. Embedment depth of rafter: c. Number of screws per anchor (typically one): d. Are 5/16” diameter lag screws with 2.5” embedment into the rafter inch inch used, OR does the anchor fastener meet the manufacturer’s guidelines? Y N 3. SUMMARY A. All items above are checked YES. No additional calculations are required. B. One or more items are checked NO. Attach project-specific drawings and calculations stamped and signed by a California-licensed civil or structural engineer. Job Address: ___________________________________________ Permit #: ________________________ Contractor/Installer: _____________________________________ License # & Class: ________________ Signature: ____________________________ Date: ____________ Phone #: ____________________ Table 1. Maximum Horizontal Anchor Spacing Roof Slope Rafter Spacing 16” o.c. 24” o.c. 32” o.c. Solar Thermal Arrays (5 psf max) Flat to 6:12 0° to 26° 4’-0” 4’-0” 5’-4” 7:12 to 12:12 27° to 45° 1’-4” 2’-0” 2’-8” 13:12 to 24:12 46° to 63° Calc. Req’d Calc. Req’d Calc. Req’d City of Palo Alto (ID # 6103) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Amendment No. 3 to Contract with Wells Fargo Insurance Services Title: Approval of Amendment Number 3 to Contract Number S12145610 with Wells Fargo Insurance Services for Benefit Consulting and Broker Services, Increasing the Contract by $68,500 for a Total not to Exceed Amount of $304,000 through June 30, 2016 With an Option to Renew for one Additional Year to June 30, 2017 From: City Manager Lead Department: Human Resources Recommendation Staff recommends that the City Council approve and authorize the City Manager to execute Amendment No. 3 to Contract S12145610 with Wells Fargo Insurance Services to increase contract authority by $68,500 for a total not to exceed of $304,000 through June 30, 2016. Staff also recommends that Council authorize the City Manager to exercise an option to extend the contract through June 30, 2017 for an additional $75,000 with a total not to exceed of $379,000. Background The City of Palo Alto uses Wells Fargo Insurance Services serves as a broker and advisor for employee benefits services. Wells Fargo Insurance Services is among the nation’s leading insurance brokerage, risk management, and employee benefits consulting firms. It is supported by one of the world’s largest financial services firms, Wells Fargo & Company. As a wholly owned subsidiary of Wells Fargo & Company, Wells Fargo Insurance Services (WFIS) has the strong financial backing and technological capabilities of their parent company. WFIS provides the City with annual strategy setting, compliance review, renewal and negotiation services, vendor analysis and market review, enrollment and communication assistance and year-end analysis. The City’s relationship with WFIS began in 2005 when the City conducted a competitive solicitation for employee benefits brokerage and consultation services. In 2009 and 2012 the City also conducted competitive solicitation processes. In each case, WFIS was selected as the City of Palo Alto Page 2 firm which best matched the City’s requirements. Contract S12145610 (the most recent contract) was originally established for $68,500 per year for the duration of three years with a total not to exceed of $205,500. In year two of the contract a $15,000 annual amendment was added for the remaining two years. This amendment was for services related to retiree health care and brought the total not to exceed to $235,500. Discussion By approving this staff report, Council will increase the contract authority by $68,500 for a total not to exceed of $304,000 through June 30, 2016. Additionally, if needed, it will allow staff the ability to exercise an option to extend the contract through June 30, 2017, for an additional $75,000 with a total not to exceed $379,000. This action is being requested as the current contract ended on June 30, 2015. The department was unable to complete a solicitation process in FY15 due to vacancies and workload circumstances beyond staff control. Staff intends to conduct a competitive solicitation process within FY16. However, at this stage, interrupting services until a solicitation process is completed would interfere with required city operations. Additionally, WFIS is willing to continue the existing rate of $68,500 through June 30, 2016. Staff believes this rate is competitive as it has not increased since 2012. Furthermore, the City is working on a critical project with WFIS to outsource recordkeeping requirements of the Affordable Care Act (ACA). In January 2016, the City is required to file information to the Internal Revenue Services (IRS) documenting all employee work hours, pay rate, health plan enrollment and term of employment to be in compliance with the law. IRS forms 1094 and 1095 will also need to be mailed to each employee for their tax filing. Within the existing contract, WFIS began a solicitation on behalf of the City to outsource the tracking and filing documentation requirements. Vendor selection must be completed in September 2015 so that the department can begin to transmit data to the selected third-party vendor, in order to meet the federal deadline. Any disruptions to the services with WFIS would impact the City’s ability to meet the ACA requirements. During the FY16 budget process $15,000 was added to the department budget for ACA reporting. Resource Impact Funds for these services were budgeted within the FY16 General Benefits Fund. Future funding will be appropriated as part of the FY17 budget process. Attachments:  Attachment: Attachment A: Contract Number S12145610 Amendment No 3 - Wells Fargo Insurance Services (PDF) 1 Revision April 28, 2014 AMENDMENT NO. 3 TO CONTRACT NO. S12145610 BETWEEN THE CITY OF PALO ALTO AND WELLS FARGO INSURANCE SERVICES USA, INC. This Amendment No. 3 to Contract No. S12145610 (“Contract”) is entered into the 21st day of September, 2015 by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and WELLS FARGO INSURANCE SERVICES USA, INC., a North Carolina corporation authorized to do business in the state of California, located at 959 skyway Road, 2nd Floor, San Carlos, California, 94070, (“CONSULTANT”). R E C I T A L S A. The Contract was entered into between the parties for the provision of Employee Benefit Broker Service for CITY benefit program; and B. WHEREAS, CITY intends to extend the contract term to June 30, 2016 and increase the compensation by $68,500.00 from $235,500.00 to $304,000.00 for continuation of services as per EXHIBIT “A” Scope of Services; and C. WHERAS, CITY intends to create an option to extend the contract term to June 30, 2017 and increase the compensation by an additional $75,000 for a total compensation of $379,000.00 for continuation of services as per EXHIBT “A” Scope of Services; and D. WHEREAS, 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 2 TERM is hereby amended to read as follows: “SECTION 2. TERM. The term of this Agreement shall be from July 1, 2012 through June 30, 2016, unless terminated earlier pursuant to Section 19 of this Agreement. CITY, by providing written notice from its City Manager or designee, may exercise an option to extend this Agreement from July 1, 2016 through June 30, 2017, unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 2. Section 4 COMPENSATION is hereby amended to read as follows: “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 Three Hundred Seventy Nine Thousand Dollars ($379,000.00). 1st Year (07/01/2012 through 06/29/2013) $68,500.00 2nd Year (07/01/2013 through 06/29/2014) $83,500.00 DocuSign Envelope ID: FF66DF87-3413-4B65-9DC2-F0705DC004AB 2 Revision April 28, 2014 3rd Year (07/01/2014 through 06/29/2015) $83,500.00 4th Year (07/01/2015 through 06/29/2016) $68,500.00 5th Year, if applicable (07/01/2016 through 06/29/2017) $75,000.00 The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”. ” SECTION 3. 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” entitled “SCOPE OF SERVICES”. b. Exhibit “B” entitled “COMPENSATION”. SECTION 4. 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 APPROVED AS TO FORM: WELLS FARGO INSURANCE SERVICES USA, INC. Attachments: EXHIBIT "A": SCOPE OF SERVICES EXHIBIT "C": COMPENSATION DocuSign Envelope ID: FF66DF87-3413-4B65-9DC2-F0705DC004AB Senior Vice President Gary L. Delaney 3 Revision April 28, 2014 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT shall provide Employee Benefit Broker Services for CITY benefit program per the following: A. Representation in all negotiations with benefit providers on issues related to premiums, service, benefit levels, plan design, special terms and conditions, etc. B. Annual review and reports of employee benefits programs for quality and adequacy of benefits provided, strengths, shortcomings, cost-effectiveness, competitiveness, plan administration, and recommendations concerning any changes in terms, conditions and limits, and future cost reduction strategies and goals. C. When coordinating or assisting with request for proposal (RFP) process, CONSULTANT shall work directly with City's Human Resource and Purchasing Divisions to ensure that RFP's meet all City requirements and shall issue RFP's only upon receipt of written direction from City. D. Prepare action plan on calendar year basis to manage City’s account including renewal, plan implementation, new program/services identification, assessment of needs and problems, long-mid- short range planning of tasks and activities. E. Annual evaluation of self-funded dental and vision plan costs and revenues with recommendation for future premium based on current plan design, and estimated premium based on changes to plan design (i.e. higher annual maximum benefit). F. Website technologies (“Website”) that may be edited and updated by City to support an employee educational module to assist employees in self-management of benefits, that are accessible via the internet as well as the City’s intranet. G. Review and resolution of issues concerning insurance policies, certificates of insurance and other documents related to employee benefits programs. H. Claims experience reports and special studies as requested by City. I. Assistance in the development of long-range goals and strategies for the City’s employee benefits programs such as union partnerships and employee education programs. J. Monitoring of ongoing contracts, including provider plan administration, tracking of performance standards, provider compliance with contracts and incurred claims. K. Estimates of renewal rates and cost trends and assistance to City staff in preparation of budget figures. DocuSign Envelope ID: FF66DF87-3413-4B65-9DC2-F0705DC004AB 4 Revision April 28, 2014 L. Information, consultation, and recommendations on employee benefit issues, trends and existing, proposed, or new legislation including but not limited to Healthcare Reform, COBRA, HIPAA, Medicare, FMLA, CFRA, ADA, and IRS rules. M. Identification and analysis of cost containment and efficiency measures such as employer partnerships, electronic benefits administrations, etc. N. Attendance, upon request, at meetings with City and bargaining units; develop models to incentivize employees to seek lower cost plans. O. Assistance with employee communications, including design and delivery of employee health benefits brochures and information and web page. P. Upon request of City, and potentially upon short notice, produce probable cost of actual or hypothetical changes in the insurance programs. Q. Provide bi-weekly calls with Human Resources to track ongoing employee benefit action items. R. Assist City in coordinating City required contract requirements; document with vendors. S. Review of and assistance with resolving disputes regarding coverage, billing questions and service delivery. T. Provide educational support of Human Resource staff members to enhance knowledge of benefit issues, legislation, and compliance requirements. U. Assist Human Resources staff members with coordination of annual Benefits Fair and Open Enrollment period. V. Keep City informed of new and emerging trends in health care with regular (i.e. personal site meetings by account management team to discuss City benefit program issues and concerns). W. Consultant shall provide prompt services and accurate information as required, and shall designate a backup individual to the CONSULTANT’s Project Manager who will be available at all times. DocuSign Envelope ID: FF66DF87-3413-4B65-9DC2-F0705DC004AB 5 Revision April 28, 2014 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 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 $379,000.00. 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: NONE All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. DocuSign Envelope ID: FF66DF87-3413-4B65-9DC2-F0705DC004AB CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 28, 2015 The Honorable City Council Palo Alto, California Vote to Endorse the Slate of Candidates for the Division’s Executive Committee for 2015-16 and Direct the City Clerk to Forward to Jessica Stanfill Mullin, the Regional Public Affairs Manager for the Peninsula Division, League of California Cities the Completed Ballot for the City of Palo Alto RECOMMENDATION: The City Council should formally vote to endorse the slate of candidates for the Division’s Executive Committee for 2015-16 and direct the City Clerk to forward to Jessica Stanfill Mullin, the Regional Public Affairs Manager for the Peninsula Division, League of California Cities the completed ballot for the City of Palo Alto. BACKGROUND: The Peninsula Division Nominating Committee - Division President and Menlo Park Council Member Kirsten Keith, Past President and South San Francisco Mayor Rich Garbarino, and Past President of the League Board of Directors and Mountain View Council Member Mike Kasperzak submit the following candidates for the Peninsula Division’s Executive Committee for 2014-15: President: Liz Kniss, Council Member, City of Palo Alto Vice President: Alicia Aguirre, Council Member, City of Redwood City Secretary-Treasurer: Marilyn Librers, Council Member, City of Morgan Hill Board of Director (Two Year Term) Kirsten Keith, Council Member, City of Menlo Park At-Large – VOTE FOR ONE CANDIDATE FOR EACH COUNTY Santa Clara County Jim Davis, Council Member, City of Sunnyvale Page 2 San Mateo County Larry Moody, Council Member, City of East Palo Alto The ballots will be opened and tabulated at the Annual Breakfast on Friday, October 2, 2015 in San Jose, California. The new officers will be introduced at the breakfast meeting. Each city is entitled to one vote for each office. Attached please find the biographies submitted for these candidates. ATTACHMENTS:  Attachment: Attachment A: League Directors Ballot (PDF) Department Head: Beth Minor, City Clerk Page 3 City of Palo Alto (ID # 5962) City Council Staff Report Report Type: Action Items Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Certification of the Final Environmental Impact Report for the Proposed Recycled Water Distribut Title: Utilities Advisory Commission Recommendation That Council Adopt: 1) Resolution to Certify the Final Environmental Impact Report for the Proposed Recycled Water Distribution Project, 2) Resolution Approving the Recycled Water Distribution Project, and 3) Direct Staff to Proceed With Filing Funding Applications for the Project Consistent With the Project Description From: City Manager Lead Department: Public Works Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that Council: 1.Adopt a resolution (Attachment A) that certifies the Final Environmental Impact Report for the proposed Recycled Water Distribution Project; 2.Adopt a resolution (Attachment B) accepting a Modification to the City’s Long Range Facilities Plan for the Regional Wastewater Quality Control Plant which includes the Recycled Water Project; and 3.Direct staff to proceed with filing funding applications for the project consistent with the project description. Executive Summary The City of Palo Alto’s Regional Water Quality Control Plant (RWQCP) produces high quality recycled water on a daily basis. Recycled water is a sustainable non-potable water supply that will help reduce Palo Alto’s reliance on imported water supplies. The RWQCP produces a drought-proof, locally controlled supply of recycled water in excess of the current demand; therefore staff is working to expand the recycled water distribution system.In order to expand recycled water use, the City must first complete the required environmental review.Staff has finalized the Environmental Impact Report (EIR) and recommends that Council certify the Final EIR for the project to expand the recycled water distribution system to serve non-potable uses in Palo Alto, including the Stanford Research Park. City of Palo Alto Page 2 Completion of this major milestone makes the project eligible for outside funding for the project. If directed by Council, staff will seek funding for the project, prepare a business case, and return to the UAC and Council with a recommendation on whether to move forward with engineering design and construction of the project. The UAC reviewed the recommended action at its meeting on September 2, 2015 and voted unanimously (with two commissioners recusing themselves) to recommend that the City Council certify the EIR, adopt the resolution modifying the City’s Long Range Facilities Plan and direct staff to proceed with filing funding applications for the project.. Background The City of Palo Alto’s Recycled Water Program began in the early 1980s. Phase 1 of the recycled water delivery system provided recycled water to Shoreline Golf Links in Mountain View and was later expanded to serve other uses including: irrigation at the Palo Alto Municipal Golf Course, Greer Park, and around the RWQCP; certain processes at the RWQCP; maintenance of the duck pond; and enhancement of Emily Renzel Marsh. All of these uses are at City-owned facilities. The City of Palo Alto Utilities (CPAU) and the partners/owners of the RWQCP examined the feasibility of expanding the use of recycled water to serve additional City and commercial customers in the RWQCP service area in 1991 and 1992. This examination concluded with the publication of the April 1992 report, “Water Reclamation Master Plan for the Regional Water Quality Control Plant” (Master Plan). In April 1995, the Council certified the Program EIR for the projects identified in the Master Plan (CMR:217:95). At that time, the Council decided not to go forward with the new projects as they were not cost-effective. Council directed staff to re-evaluate the projects in case of changed conditions such as: 1) changes in the RWQCP discharge permit requirements; 2) increased mass loading to the RWQCP; 3) requests by partner agencies of other local agencies; 4) availability of federal or other funds; and 5) supply-side issues, which may lead to increases in the value of recycled water from a water supply perspective, such as water supply cost, water supply availability, regulatory and legislative initiatives and advanced treatment for potable reuse. Since that time, Phase 2, an extension of the RWQCP’s recycled water system to Mountain View, has been completed. In addition,the wholesale costs of water from the San Francisco Public Utilities Commission (SFPUC), the City’s primary water supplier, have increased dramatically as projects are completed to upgrade SFPUC’s regional water system. In response to these changed circumstances, in July 2006, the City completed a Recycled Water Market Survey (RWMS) to update the 1992 Master Plan and re-examine the feasibility of Phase 3, an extension of the recycled water system to end-users in Palo Alto. The 2006 RWMS identified a total potential demand of about 1,700 acre-feet per year (AFY) in Palo Alto and identified a project to serve about 840 AFY of recycled water demand. City of Palo Alto Page 3 The 2006 RWMS also determined that the estimated cost of the recycled water from the project is higher than the expected future cost of water from the SFPUC. Therefore, the project did not appear to be cost-effective for Palo Alto unless outside funding could be secured and Palo Alto’s cost was significantly lowered. Before the project can be considered for state and federal funding, additional planning and design work was required. Specifically, state grant funds require the completion of a Recycled Water Facility Plan. Therefore, staff solicited proposals from qualified consultants to complete such a plan and submitted an application for a planning grant from the State Water Resources Control Board to cover part of the cost of the plan. On November 20, 2006, the Council approved proceeding with the preparation of a facility plan and the development of environmental documentation for expanding the recycled water distribution system in Palo Alto. At that time, the Council authorized the City to file a Water Recycling Facilities Planning Grant application in the amount of $75,000 with the State Water Resources Control Board (SWRCB) (CMR:415:06). The City’s application for this planning grant was approved by the State. On April 16, 2007, Council approved the execution of a contract with RMC Water & Environment, Inc. for completion of a Recycled Water Facilities Plan and preparation of environmental documents (CMR:191:07). The project generally consisted of analyses of all of the essential components of a potential expanded recycled water system to serve additional users in Palo Alto. The tasks included site investigations, analysis of project alternatives, preparation of a financial plan, environmental documentation, public outreach, development of user agreements or use ordinances, and the preparation of the facility plan reports. A Recycled Water Facility Plan was completed in December 2008. The Recycled Water Facility Plan identified a “target area” that had sufficient recycled water use potential to justify the extension of the development of a project. The target area is the Stanford Research Park, where the largest concentration of customers with irrigation needs exist within the City. The plan also developed a recommended project to deliver water to the target area. The project included a pipeline that would connect to the Phase 2 pipeline to Mountain View along East Bayshore Road and run through south Palo Alto, ultimately to serve customers in the Stanford Research Park. According to the December 2008 Facility Plan, the total estimated cost for the project (in 2008 dollars) was $33.5 million in capital costs and $200,000 per year in operations and maintenance (O&M) costs. The projected recycled water usage at the identified customer sites along the pipeline alignment and in the target area was about 900 acre-feet (AF) per year. According to the plan, if the capital costs could be financed at an interest rate of 5.5% per year for 30 years, the annual cost, including O&M costs, is about $2.5 million. Therefore, the unit cost of the City of Palo Alto Page 4 recommended recycled water project was estimated at $2,700/AF. This cost was significantly higher than the then current cost of high quality potable water from the SFPUC of $623/AF.1 Since the project was not cost effective at that time from the perspective of the City of Palo Alto, staff determined that it could not justify proceeding with the project without securing outside funding to improve the cost-effectiveness for Palo Alto. Potential sources of outside funding include grants from the State and Federal governments and low-or no-interest loans from the State Revolving Loan Fund. However, in order to pursue grants or loans for the project, the environmental documents must be completed. As part of California Environmental Quality Act (CEQA) requirements, an Initial Study and Draft Mitigated Negative Declaration was issued in March 2009. This document contained a checklist evaluating impacts on the environment associated with construction and operation of the project. Comments were received during the 30-day public comment period. The City completed a Response to Comments document in May 2009. Due to public concerns regarding the irrigation of redwood trees and sensitive species with recycled water, the City decided to undertake an EIR focused on the water quality issues associated with the RWQCP’s recycled water. On January 25, 2010, Council approved the Recycled Water Salinity Reduction Policy (Staff Report 111:10, Resolution 9035), including a goal of reducing the Total Dissolved Solids (TDS) of the recycled water to 600 milligrams per liter (mg/l). Since that time, the RWQCP’s partner agencies have taken steps to reduce salinity. Finally, the current severe statewide drought conditions have made consideration of the project urgent. Discussion The primary objectives of extending the recycled water pipeline are: 1.To allow the City to maximize recycled water as a supplemental water source, thereby improving potable water supply reliability by conserving drinking water, which is currently used for irrigation and other non-potable uses; 2.To provide a dependable, drought-proof locally controlled non-potable water source; 3.To increase recycled water use from the RWQCP and reduce discharge to San Francisco Bay; 4.To reduce reliance on imported water. The proposed project would help the RWQCP and its Partners further preserve San Francisco Bay by reducing the discharge of nutrients to the Bay and provide long-term environmental and economic benefits to the community. The attached EIR complies with CEQA, as well as additional CEQA requirements (“CEQA Plus”) required because the City is applying for a low-cost loan from the State Revolving Fund. Because of potential Federal grant funding opportunities, this EIR has been prepared in compliance with National Environmental Policy Act (NEPA) requirements. The United States 1 Note that the cost of SFPUC water in FY 2016 is $1,809/AF and SFPUC’s wholesale water costs are projected to reach $2,400/AF by FY 2025. City of Palo Alto Page 5 Bureau of Reclamation, as a Lead Agency for NEPA compliance, would be able to use this EIR and other NEPA-required supporting documents, as a basis for decision making for potentially providing grant money for the proposed project. Because the project was previously evaluated in an Initial Study/Mitigated Negative Declaration (IS/MND) that was publicly circulated, this EIR focuses on those issues of primary concern identified during the 30-day public comment period for the Draft IS/MND and in the 30-day scoping comment period for the Draft EIR. Thus, three primary issue areas have been identified: ·Effects of recycled water use for irrigation of landscaped areas ·Effects of recycled water use on the groundwater basin ·Effects of recycled water use on the urban forest Staff held three stakeholder meetings throughout the public comment review period, specifically with Stanford Land Management and Canopy. Staff modified the mitigation section of the Final EIR; and staff believes that all stakeholders can now support the project. A major change from the Draft EIR is that the City will implement at least one of three mitigation measures if the City is unable to meet the commenter’s goal for a TDS of 650 mg/l by project start-up. The three mitigation measures are the City may utilize its existing Recycled Water Ordinance exemption process to exempt redwood trees and/or other salt sensitive species from the use of recycled water; the City may blend recycled water and other lower salinity water prior to application and/or the City may treat recycled water to reduce TDS prior to application, or shortly thereafter. A second major change is that the City stated that is initiating a feasibility analysis to treat and blend recycled water prior to delivery.The feasibility analysis is also supported by the City of Mountain View, a RWQCP partner agency, since it already uses the recycled water and has an interest in improving the water quality of the recycled water it delivers. Santa Clara Valley Water District’s Plans for Recycled Water The Santa Clara Valley Water District (SCVWD) strongly supports expanding the use of recycled water use in the county. SCVWD’s long-term plans include both the use of “non-potable reuse” (NPR) and using advanced treatment systems to purify treated wastewater to potable water standards. The Silicon Valley Advanced Water Purification Center was operational in 2014 and the current drought and concern about dwindling imported water supplies and groundwater levels has encouraged SCVWD to evaluate expanding the use of purified water. Initially, SCVWD is pursuing “indirect potable reuse” (IPR), in which purified water is used to supplement SCVWD’s groundwater recharge operations from existing sources (imported and local stored water). In the future, SCVWD envisions projects that provide “direct potable reuse” (DPR), in which highly purified water could be blended with other untreated water for treatment at the District’s conventional water treatment plants prior to distribution to retailers as potable water. Staff has had early discussions with the City of Mountain View, City of Sunnyvale and the SCVWD regarding opportunities for recycled water project development.The City of Sunnyvale City of Palo Alto Page 6 is currently upgrading its wastewater treatment plant and plans to reuse all of its treated effluent for IPR, but wants so ensure that its current NPR water customers will continue to receive recycled water. Staff has discussed the possibility of interconnecting the RWQCP recycled water system through the City of Mountain View to serve NPR water to Sunnyvale’s recycled water customers. Staff is exploring other potential uses of recycled water along the proposed pipeline with the SCVWD, including the possibility of groundwater recharge or other non-potable water uses. Project Alternatives There are several alternatives to the proposed project to build a pipeline to serve areas along the pipeline route to the Stanford Research Park: 1.Convert landscaping to drought tolerant plantings to reduce the need for recycled water. 2.Construct distributed treatment systems at the end user sites to produce recycled water on-site. 3.Wait and build an advanced purification facility that would provide potable water, obviating the need for a separate non-potable water distribution system. Staff believes that the proposed project is justified despite these potential alternatives. If all landscaping was converted to drought tolerant plantings, there remain other needs for non- potable water such as for cooling towers, the flushing of toilets and urinals and other processes. Small treatment systems could be constructed at the users’ sites, but these are expected to cost more than the cost for the pipeline to distribute recycled water to all the users. Distributed treatment systems may make sense when a wastewater treatment system is reaching its capacity, but the RWQCP is not near its capacity. If the proposed pipeline was built, it could be used in the future to deliver IPR water to spreading basins or percolation facilities to recharge the groundwater. The proposed pipeline would provide optionality in the future and is not expected to become a stranded asset. Staff has had early discussions with the City of Mountain View, City of Sunnyvale and the Santa Clara Valley Water District on other opportunities for recycled water. The City of Mountain View, a partner to the wastewater agency, has expressed interest in a feasibility analysis of treating and blending the recycled water to improve the water quality. The City of Sunnyvale wants to ensure that their current recycled water customers will have recycled water in the future since Sunnyvale is currently upgrading their wastewater treatment plant for future indirect potable reuse. The City of Sunnyvale plans on reusing all of their treated effluent for indirect potable reuse but they want to ensure that their existing customers will have recycled water. Staff has discussed potentially interconnecting the RWQCP recycled water through the City of Mountain View to City of Sunnyvale’s recycled water customers. City of Palo Alto Page 7 Staff is exploring other potential uses of recycled water along the proposed pipeline with the Santa Clara Valley Water District including the possibility of groundwater recharge or other non-potable water uses. Project Timeline Task Estimated Completion Facility Plan (Includes preliminary research and project feasibility)Completed in 2008 Draft EIR Released April 20, 2015 Public Review of Draft EIR April 20-June 4, 2015 Final EIR and Response to Comments Released Summer 2015 EIR Certified and Project Approved by Palo Alto’s City Council Fall 2015 Project Funding Pursued 2015-2016 Preparation of financing/business plan and Council approval of recommendation to proceed with project 2015-2016 Design 2016-2017 Construction 2018 Commission Review and Recommendation The UAC considered the recommendation at its September 2, 2015 meeting. The UAC heard from representatives of the Santa Clara Valley Water District regarding the utility of the project and its relationship to the District’s broader plans. The UAC also acknowledged that while the project on its face extended to a narrow area of the city, there were citywide benefits that flowed from the overall expansion of the recycled water program and the reduced reliance on potable water supply. Ultimateley the UAC unanimously voted (with two recusals) to recommend that the City Council certify the EIR and adopt the resolution amending the Long Range Facilities Plan. The draft minutes from the UAC’s September 2, 2015 UAC meeting are provided as Attachment D. Resource Impact The resource impact of the three recommended actions is negligible. Certification of the Final EIR for the project is the first step to pursue State and Federal funding for the project. If directed, staff will pursue all available funding for the project, and will return to Council with a recommendation on whether to proceed with the project. This recommendation will be accompanied with a full economic analysis based on the funding that can be secured. Policy Implications This project is consistent with the Council-adopted Water Integrated Resource Plan Guideline 3: “Actively participate in development of cost effective regional recycled water plans.” The project is consistent with the Council direction to reduce imported water supplies and limit or reduce diversions from the Tuolomne River. City of Palo Alto Page 8 Environmental Review The EIR complies with Federal and State environmental requirements.The EIR consists of the Draft EIR, for which a link is provided (EIR) due to its length, and the Response to Comments to the draft EIR, which is provided as Attachment C. Attachments: ·Attachment A: Resolution Certifiying EIR (PDF) ·Attachment B -Resolution Approving Amendment to Facilities Plan (PDF) ·Attachment C: Final Environmental Impact Report and Response to Comments (DOC) ·Attachment D. Excerpted DRAFT Minutes of the September 2 2015 UAC Meeting (PDF) 150819 jb 0131480 1 Resolution No XXXX Resolution of the Council of the City of Palo Alto Certifying the Adequacy of the Final Environmental Impact Report for the Recycled Water Project Pursuant to the California Environmental Quality Act and Adopting the Mitigation Monitoring and Reporting Program The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. Introduction and Certification (a) The City Council of the City of Palo Alto (“City Council”), in the exercise of its independent judgment, makes and adopts the following findings to comply with the requirements of the California Environmental Quality Act (“CEQA”; Pub. Resources Code, §§ 21000 et seq.), and Sections 15091, 15092, and 15093 of the CEQA Guidelines (14 Cal. Code Regs., § 15000 et seq.). All statements set forth in this Resolution constitute formal findings of the City Council, including the statements set forth in this paragraph. These findings are made relative to the conclusions of the City of Palo Alto Recycled Water Project Final Environmental Impact Report (State Clearinghouse No. 2011062037) (the “Final EIR”), which consists of the Draft Environmental Impact Report (“Draft EIR”) and the Response to Comments (“RTC”). The Final EIR addresses the environmental impacts of the implementation of the Recycled Water Project (the “Project”, as further defined in Section 2(b) below) and is incorporated herein by reference. These findings are based upon the entire record of proceedings for the Project. (b) Mitigation measures associated with the potentially significant impacts of the Project will be implemented through the Mitigation Monitoring and Reporting Program described below, which is the responsibility of the City. (c) The City of Palo Alto is the Lead Agency pursuant to Public Resources Code section 21067 as it has the principal responsibility to approve and regulate the Project. (d) The City exercised its independent judgment in accordance with Public Resources Code section 20182.1(c), in retaining the independent consulting firm RMC Water and Environment (“RMC”) to prepare the Final EIR, and RMC prepared the Final EIR under the supervision and at the direction of the Public Works Department’s Watershed Protection Manager. (e) The City, through RMC, prepared the Draft EIR and circulated it for review by responsible and trustee agencies and the public and submitted it to the State Clearinghouse for review and comment by state agencies, for a comment period which ran from April 20, 2015 through June 4, 2015. Two public meetings were held during the 45-day public comment period, on May 19, 2015 and May 21, 2015. (f) Public comments were received during public comment period, including nine letters. RMC prepared a Response to Comments document which responded to the comments 150819 jb 0131480 2 received on the Draft EIR. (f) The City’s Public Works Department has reviewed the Final EIR and a draft of these findings and has provided its recommendations to the City Council regarding certification of the Final EIR. The City Council has independently reviewed the Final EIR and has considered the Public Works Department’s recommendations in making these findings. (g) Based upon review and consideration of the information contained therein, the City Council hereby certifies that the Final EIR was completed in compliance with CEQA, and reflects the City of Palo Alto’s independent judgment and analysis. The City Council has considered evidence and arguments presented during consideration of the Project and the Final EIR. In determining whether the Project may have a significant impact on the environment, and in adopting the findings set forth below, the City Council certifies that it has complied with Public Resources Code sections 21081, 21081.5, and 21082.2. (h) Chapter 7 in the Responses to Comments document (of the Final EIR) shows all revisions that the Final EIR made to the Draft EIR. All references to the Draft EIR in these findings include references to all revisions to the Draft EIR made in the Final EIR. Having reviewed this section and the Final EIR as a whole, the City Council hereby finds, determines, and declares that no significant new information has been added to the Final EIR so as to warrant recirculation of all or a portion of the Draft EIR. Likewise, the City Council has considered all public comments and other information submitted into the record since publication of the Final EIR, and further finds that none of that additional information constitutes significant new information requiring recirculation of the Final EIR. SECTION 2. Project Information The following Project information is supplied to provide context for the discussion and findings that follow, but is intended as a summary and not a replacement for the information contained in the Draft EIR, Final EIR, or Project approvals. (a) Project Objectives The Project Objectives are set forth in Section 1.4.2 of the Draft EIR, which is incorporated herein by reference. (b) Project Description The proposed Project is the expansion of Palo Alto Regional Water Quality Control Plant (RWQCP)'s regional recycled water system to serve areas in the City. The Water Reuse Program currently serves parts of the City of Palo Alto and Mountain View. This expansion would serve recycled water throughout the RWQCP's service area. Initially, the project would deliver approximately 900 acre feet per year of recycled water primarily to the Stanford Research Park Area and other South Palo Alto areas including Alta Mesa Memorial Park. The primary use of 150819 jb 0131480 3 recycled water for this project would be landscape irrigation. The proposed project would involve installation and operation of approximately 10 miles of backbone and lateral pipelines, two pump stations (one at the RWQCP and one along the pipeline), and 0.3 miles of connection pipelines to connect to the RWQCP and the existing Mountain View recycled water pipeline. An aerial view of the proposed pipeline corridor and the proposed pump stations is shown in Figure 2-1. A breakdown of the proposed backbone pipeline alignment is shown in Table 2-1. The proposed booster pump station site at Mayfield Soccer Fields is shown in Figure 2-5 while the proposed pump station site at the RWQCP is shown in Figure 2-6. (All references to figures and table are to those appearing in the Draft EIR) A complete description of the Project as proposed by the Project applicant is set forth in Section 2.3 of the Draft EIR, as modified in the Final EIR. (c) Required Approvals The approvals required by the City as lead agency for implementation of the Project include: A. Modification of the City’s Long Range Facilities Plan for the Regional Wastewater Control Plant B. Architectural Review C. Site and Design Review D. Conditional use permit E. Tree Removal Permits F. Encroachment and Street Work Permit G. Exceptional waste discharge permit H. Recycled Water Permit for Customers SECTION 3. Record of Proceedings (a) For purposes of CEQA, CEQA Guidelines section 15091(e), and these findings, the Record of Proceedings for the Project includes, but is not limited to, the following documents: (1) The Final EIR, which consists of the Recycled Water Project Draft EIR, published and circulated for public review and comment by the City from April 20 through June 4, 2015, the Response to Comments document, and all appendices, reports, documents, studies, memoranda, maps, testimony, and other materials related 150819 jb 0131480 4 thereto; (2) All public notices issued by the City in connection with the Project and the preparation of the Draft EIR and the Final EIR, including but not limited to public notices for all public meetings held to seek public comments and input on the Project and the Notice of Preparation, Notice of Completion, and Notice of Availability; (3) All written and oral communications submitted by agencies or interested members of the general public during the public review period for the Draft EIR, including oral communications made at public hearings or meetings held on the Project approvals; (4) The Mitigation Monitoring and Reporting Program; (5) All findings and resolutions adopted by the City Council in connection with the Project, and all documents cited or referred to therein; (6) All final reports, studies, memoranda, maps, staff reports, or other planning documents relating to the Project prepared by the City of Palo Alto and consultants with respect to the City of Palo Alto’s compliance with the requirements of CEQA, and with respect to the City of Palo Alto’s actions on the Project, including all staff reports and attachments to all staff reports for all public meetings held by the City; (7) Minutes and/or verbatim transcripts of all public meetings and/or public hearings held by the City of Palo Alto in connection with the Project; (8) Matters of common knowledge to the City of Palo Alto, including, but not limited to, federal, state, and local laws and regulations; (9) Any documents expressly cited in these findings, in addition to those cited above; and (10) Any other materials required to be in the record of proceedings by Public Resources Code section 21167.6(e). (b) The custodian of the documents comprising the record of proceedings is the Director of Planning and Community Environment, 250 Hamilton Avenue, 5th Floor, Palo Alto, California, 94301. (c) Copies of all of the above-referenced documents, which constitute the record of proceedings upon which the City of Palo Alto’s decision on the Project is based, are and have been available upon request at the City of Palo Alto offices at 250 Hamilton Avenue, 5th Floor, 150819 jb 0131480 5 Palo Alto, California, 94301, and online on the Project’s website at http://www.cityofpaloalto.org/gov/depts/utl/residents/resources/ water_resources/recycled_water.asp. (d) The City of Palo Alto has relied upon all of the documents, materials, and evidence listed above in reaching its decision on the Project. (e) The City Council hereby finds, determines and declares that the above- referenced documents, materials, and evidence constitute substantial evidence (as that term is defined by section 15384 of the CEQA Guidelines) to support each of the findings contained herein. SECTION 4. Mitigation Monitoring and Reporting Program (a) CEQA requires the lead agency approving a project to adopt a Mitigation Monitoring and Reporting Program (MMRP) for the changes made to the project that it has adopted in order to mitigate or avoid significant effects on the environment. An MMRP has been prepared and is recommended for adoption by the City Council concurrently with the adoption of these findings to ensure compliance with standard project requirements incorporated as part of the project and mitigation measures during Project implementation. As required by Public Resources Code section 21081.6, the MMRP designates responsibility and anticipated timing for the implementation of the mitigation measures recommended in the Final EIR. The MMRP will remain available for public review during the compliance period. (b) The City Council hereby adopts the MMRP for the Project attached hereto as Exhibit A and incorporated by reference, and finds, determines, and declares that the adoption of the MMRP will ensure enforcement and continued imposition of the mitigation measures recommended in the Final EIR, and set forth in the MMRP, in order to mitigate or avoid significant impacts on the environment. SECTION 5. Significant Impacts Reduced to Less than Significant The Draft EIR and the Final EIR identified a number of significant and potentially significant environmental impacts that the Project will cause or contribute to. All of these significant effects can be fully addressed and reduced to less than significant through the adoption and implementation of standard project requirements incorporated as part of the Project and feasible mitigation measures. Those impacts, along with the standard project requirements and mitigation measures to reduce them to less than significant, are listed below as referenced in the Final EIR. 3.1 Hydrology and Water Quality Impact HYD-1: Potential violation of water quality standards and/or waste discharge requirements or otherwise substantially degrade water quality. Less than significant with 150819 jb 0131480 6 Standard Project Requirements and Mitigation. a) Potential Impact. The impact identified above is described and discussed in Section 3.1.3 of the Draft EIR. b) Mitigation Measures. No mitigation measures are required. The following standard project requirements will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirements Best Management Practices – Storm Water Quality: The City shall require contractors to file a Notice of Intent with the Regional Water Quality Control Board (RWQCB) indicating compliance with the National Pollutant Discharge Elimination System (NPDES) General Permit for Discharges of Storm Water Runoff Associated with Construction Activity (General Permit) and to prepare and implement a Stormwater Pollution Prevention Plan (SWPPP) outlining BMPs for construction/post-construction activities as specified by the City of Palo Alto’s Pollution Prevention plan sheet, the California Stormwater Best Management Practices Handbook and/or the Association of Bay Area Governments’ Manual of Standards for Erosion and Sediment Control Measures. The BMPs include measures guiding the management and operation of construction sites to control and minimize the potential contribution of pollutants to stormwater runoff from these areas. These measures address procedures for controlling erosion and sedimentation, and managing all aspects of the construction process to ensure control of potential water pollution sources. Erosion and sedimentation control practices typically include: • Installation of silt fencing and/or straw wattle; • Soil stabilization; • Revegetation of graded and fill areas with a standard erosion control mix (approved by a native habitat restorationist); • Runoff control to limit increases in sediment in stormwater runoff (e.g., straw bales, silt fences, drainage swales, geofabrics, check dams, and sand bag dikes); • Performing equipment maintenance at least 100 feet from all water bodies and wetlands, with measures in place to contain spills of diesel fuel, gasoline, or other petroleum products. • Directing drainage from all work sites away from any water bodies or wetlands where feasible; • Preventing erosion of uplands and sedimentation of creeks, tributaries, and ponds; • Minimizing creek bank instability; • Preventing flooding; and 150819 jb 0131480 7 • Returning grades to preconstruction contours. A SWPPP that complies with the statewide General Permit shall be developed and implemented to protect water quality of the creeks that lie in the study area. Appropriate erosion and sediment control and non-sediment pollution control (i.e., sources of pollution generated by construction equipment and material) BMPs shall be prescribed in the SWPPP, and erosion and sediment control material included in the SWPPP shall be certified as weed free. Dewatering operations are covered under the General Construction Permit as an authorized non-stormwater discharge. The discharge from dewatering operations would be evaluated and made part of the Project SWPPP. In addition, the Project shall comply with RWQCB regulations and standards to maintain and improve the quality of both surface water and groundwater resources. Frac-Out Plan: Prior to constructing underground crossings of creeks or channels, a Frac-out Contingency Plan shall be developed. At minimum, the plan shall prescribe the measures to ensure protection of water quality and related biological resources (e.g., aquatic resources, and special-status plants and wildlife) including: • Procedures to minimize the potential for a frac-out associated with horizontal directional drilling; • Procedures for timely detection of frac-outs; • Procedures for timely response and remediation in the event a frac- out; and • Monitoring of drilling and frac-out response activities by a qualified biologist. Discharge of Exceptional Wastewater: Hydrostatic test water and water collected from dewatering activities (including contaminated water) are discharged to the sanitary sewer with an Exceptional Waste Discharge Permit from RWQCP. The permit requires chemical constituents to be sampled and identifies limits for these constituents. To minimize impacts to water quality, the City shall obtain an Exceptional Wastewater Permit prior to discharge of such waters into the sanitary sewer. c) Finding. Impacts to water quality during construction would be potentially significant, but with implementation of standard project requirements, including the development and implementation of a SWPPP and best management practices, a frac-out plan for trenchless construction across creeks, and compliance with an Exceptional Waste Discharge Permit, potential impacts would be reduced to less than significant. d) Remaining Impact. Standard project requirements specified above would reduce all potential impacts to less than significant. No residual impacts would remain. 150819 jb 0131480 8 Impact HYD-2: Potential to substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site. Less than Significant with Standard Project Requirements and Mitigation. a) Potential Impact. The impact identified above is described and discussed in Section 3.1.3 of the Draft EIR. b) Mitigation Measures. No mitigation measures are required. The standard project requirements specified under Impact HYD-1 will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings. c) Finding. Construction-related erosion and siltation could generate potentially significant, but with implementation of standard project requirements specified for HYD-1 above, including the development and implementation of a SWPPP and best management practices, a frac-out plan for trenchless construction across creeks, and compliance with an Exceptional Waste Discharge Permit, potential impacts would be reduced to less than significant. d) Remaining Impact. Standard project requirements specified above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact HYD-3: Potential to result in the substantial decline in health of the redwood trees and other salt-sensitive plant species. Less than Significant with Mitigation Measures. a) Potential Impact. The impact identified above is described and discussed in Section 3.1.3 of the Draft EIR. b) Mitigation Measures. The following mitigation measures will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: HYD-3a Source Control of Saline Groundwater: The City shall continue to line and repair existing sewers to minimize saline groundwater infiltration. HYD-3b Monitoring: The City shall immediately begin monthly monitoring of the salinity (and related constituents) of the recycled water and shall report the rolling 12-month average for comparison to the Palo Alto City Council goal of 600 mg/l TDS. Monthly electronic reporting to those requesting it will be performed for two years, and then the frequency will be re-evaluated. The City shall monitor soil salinity and SAR through semi-annual soil analyses, preferably taken early and late in the irrigation season (approximately April 150819 jb 0131480 9 and October). HYD-3c Site Management: If at a particular site receiving recycled water, monitoring identifies an increase in soil salinity and SAR over historical levels, the City in cooperation with the owner of that site shall conduct a site-specific evaluation. That evaluation would consider (1) the extent to which the site contains protected trees (including redwood trees and oaks) that might be impacted by soil salinity, (2) the extent to which the elevated salinity is at a level that poses a threat to such protected trees, and (3) the extent to which the elevated salinity is the result of the use of the City's recycled water. If a threat is found, the City shall work cooperatively with the site owner to develop a site-specific mitigation plan, including the site owner's implementation of best management practices which are described below: • To avoid plant damage to salt sensitive landscape plants, site owners can implement a leaching program to maintain soil salinity within the root zone below 2.0 dS/m1 and SAR below 6.0. For moderately salt- tolerant plants, maintain soil salinity below 4.0 dS/m. Where subsoils do not drain adequately, installation of subsurface drainage systems may be needed. Rainfall will satisfy a portion of the leaching requirement, depending on the rate, volume, and distribution through the season. The frequency with which leaching applications should be made depends on several variables, and is typically triggered by approaching soil salinity thresholds defined above. • Site owners can apply gypsum prior to leaching when indicated by soil analysis. Gypsum is a soil amendment that, when combined with leaching, helps lower soil sodium concentrations. Gypsum application can be considered when soil analyses reveal one or more of the following conditions: SAR exceeds 6.0, SAR increases 2 units or more (e.g., 2.3 to 4.3), and/or sodium concentration exceeds 5 meq/l (115 mg/L). The amount of gypsum needed and the frequency of application depend on site-specific soil and water characteristics, and can be determined by laboratory analysis. HYD-3d Other Options to Protect Salt-Sensitive Plants. In the event that monitoring results (see Mitigation Measure HYD-3b) show that optimal concentrations of TDS and related parameters will not be achieved prior to operation of the Project (i.e., recycled water application), the City will evaluate and implement one or more of the following actions to reduce TDS levels: 1 ds/m is decisiemen/meter. A dS/m is a measure of electrical conductivity, and approximates to 640 mg/L TDS. 150819 jb 0131480 10 • Utilize its existing Recycled Water Ordinance exemption process (Palo Alto Municipal Code 16.12.050) to exempt redwood trees (and/or other salt sensitive species) from the use of recycled water; • Blend Recycled Water and other lower salinity water prior to application; and/or • Treat recycled water to reduce TDS prior to application, or shortly thereafter (the City is initiating an investigation of the feasibility of Reverse or Forward Osmosis treatment of its recycled water, combined with blending of appropriate water). c) Finding. As described in the Draft EIR, these measures are part of a larger vision to ensure that salinity hazard is eliminated and recycled water quality is safely used on landscapes. The measures involve the City continuing to line and repair existing sewers to minimize saline groundwater infiltration, concurrent monitoring by the City to track success, concurrent best management practices by site owners as needed, and if deemed necessary (in the event the salinity hazard has not been eliminated), other actions to be implemented by the City. Mitigation Measures HYD-3b, HYD-3c, and HYD-3d have been revised in the Final EIR for clarification purposes. Specifically, Mitigation Measure HYD-3b has been revised to increase the initial frequency of salinity monitoring and to provide for reevaluation of the monitoring schedule after two years of monitoring. Mitigation Measure HYD-3c has been revised to identify timing of when a site-specific evaluation would be needed. Mitigation Measure HYD-3c has been revised to clarify the procedures that would be implemented if salinity reduction does not achieve optimal recycled water quality before the start of project operations. The implementation of HYD-3a, HYD-3b, HYD-3c, and/or HYD-3d would ensure that the project would not result in the substantial decline in health of redwood trees and other salt-sensitive plant species and would mitigate potential impacts to a less-than-significant. d) Remaining Impact. Mitigation Measures HYD-3a, HYD-3b, HYD-3c, and HYD-3d would reduce all potential impacts to less than significant. No residual impacts would remain. 3.2 Aesthetics Impact AES-1: The Proposed Project could result in substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor. Less than significant with Standard Project Requirements and Mitigation Measures. a) Potential Impact. The impact identified above is described and discussed in Section 3.2.3 of the Draft EIR. b) Mitigation Measures. The standard project requirements and mitigation measures will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings. Standard Project Requirement 150819 jb 0131480 11 Compliance with the Tree Technical Manual: The City of Palo Alto Tree Technical Manual (Dockter 2001) is a separately published document issued by the City Manager, through the Departments of Planning and Community Environment and Public Works to establish specific technical regulations, standards and specifications necessary to implement the Tree Ordinance (Chapter 8.10, Tree Preservation and Management Regulations), and to achieve the City’s tree preservation goals and natural resource conservation goals. Section 2.00 specifically addresses the protection of trees during construction; its objective is to reduce the negative impacts of construction on trees to a less than significant level. Construction projects within the tree protection zone (TPZ) of Regulated Trees are required to implement protective practices prior to and during construction. The City would be required to retain a certified arborist to prepare a Tree Protection and Preservation Plan if any activity is within the dripline of a Protected or Designated Tree. The Plan must include an assessment of impacts to trees, recommended mitigation to reduce impacts to a less than significant level, and identification of construction guidelines to be followed through all phases of a construction project. Section 3.00 of the Tree Technical Manual outlines requirements associated with the removal and replacement of regulated trees. The standards and specifications for replacements of trees are dependent on the location where a Protected or Designated Tree would be replaced. If a tree is to be replaced on site, the replacement tree must be the same species unless the Director determines that another species would be more suitable for the location. The location of the replacement tree on site must be approved by the Director. If it is not possible to replace the tree on site, funding for the replacement of trees is calculated using a Tree Value Replacement Standard. The funding is then applied for planting of trees elsewhere. AES-1 Restoration to Pre-construction Conditions: The City shall require its contractors to restore disturbed areas to their pre-construction conditions, to the extent consistent with pipeline operations, so that short-term construction disturbance does not result in long-term visual impacts. HYD-3a See above under Impact HYD-3 HYD-3b See above under Impact HYD-3 HYD-3c See above under Impact HYD-3 HYD-3d See above under Impact HYD-3 c) Finding. Compliance with standard project requirements (Tree Technical 150819 jb 0131480 12 Manual) would ensure that protected trees would remain on the Project site and any designated trees removed would be replaced according to the Tree Canopy Replacement Formula, Tree Technical Manual, Section 3.30, to ensure minimal effects on the visual quality of affected site. The implementation of Mitigation Measure AES-1 would ensure that project sites are restored to preconstruction conditions or re-vegetated upon completion of work activities to ensure that short-term construction-related impacts would not become long-term aesthetic problems. Implementation of HYD-3a, HYD-3b, HYD-3c, and/or HYD-3d would ensure that the project would not result in the substantial decline in health of redwood trees and other salt- sensitive plant species, and as such substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor would not occur. Thus, with implementation of both the standard project requirement and mitigation measures, the project would mitigate potential aesthetic impacts to a less-than-significant. d) Remaining Impact. Standard project requirement and mitigation measures specified above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.3 Air Quality Impact b: Violate air quality standards or contribute substantially to an existing or projected air quality violation indicated by the following: • Direct and/or indirect operational emissions that exceed the Bay Area Air Quality Management District (BAAQMD) criteria air pollutants • Contribute to carbon monoxide (CO) concentrations exceeding the State Ambient Air Quality Standard. Impact c: Result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors). a) Potential Impact. The impacts identified above are described and discussed in Section E.2 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirement and mitigation measure will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirement BAAQMD Dust Control Measures: The following basic construction measures are identified by BAAQMD and shall be incorporated into contract specifications and implemented by the contractor: • All exposed surfaces (e.g., parking areas, staging areas, soil piles, graded areas, and unpaved access roads) shall be watered two times per day; 150819 jb 0131480 13 • All haul trucks transporting soils, sand, or other loose material off-site shall be covered; • All visible mud or dirt track-out onto adjacent public roads shall be removed using wet power vacuum street sweepers at least once per day. The use of dry power sweeping is prohibited; • All vehicle speeds on unpaved roads shall be limited to 15 mph; • All roadways, driveways, and sidewalks to be paved shall be completed as soon as possible. Building pads shall be laid as soon as possible after grading unless seeding or soil binders are used; • Idling times shall be minimized either by shutting equipment off when not in use or reducing the maximum idling time to 5 minutes (as required by the California airborne toxics control measure Title 13, Section 2485 of California Code of Regulations). Clear signage shall be provided for construction workers at all access points; • All construction equipment shall be maintained and properly tuned in accordance with manufacturer’s specifications. All equipment shall be checked by a certified visible emissions evaluator; and • Post a publicly visible sign with telephone number and person to contact at the lead agency regarding dust complaints. This person shall respond and take corrective action within 48 hours. The Air District’s phone number shall also be visible to ensure compliance with applicable regulations. The following additional construction mitigation measures identified by BAAQMD shall be incorporated into contract specifications and implemented by the contractor, to supplement the proposed standard project requirement. • All exposed surfaces shall be watered at a frequency adequate to maintain minimum soil moisture of 12 percent. Moisture content can be verified by lab samples or moisture probe. • All excavation, grading, and/or demolition activities shall be suspended when average wind speeds exceed 20 mph. • Wind breaks (e.g., trees, fences) shall be installed on the windward side(s) of actively disturbed areas of construction. Wind breaks should have at maximum 50 percent air porosity. • Vegetative ground cover (e.g., fast-germinating native grass seed) shall be planted in disturbed areas as soon as possible and watered appropriately until vegetation is established. • The simultaneous occurrence of excavation, grading, and ground-disturbing construction activities on the same area at any one time shall be limited. Activities shall be phased to reduce the amount of disturbed surfaces at any one time. • All trucks and equipment, including their tires, shall be washed off prior to leaving the site. 150819 jb 0131480 14 • Site accesses to a distance of 100 feet from the paved road shall be treated with a 6 to 12 inch compacted layer of wood chips, mulch or gravel. • Sandbags or other erosion control measures shall be installed to prevent silt runoff to public roadways from sites with a slope greater than one percent. • Idling time of diesel powered construction equipment shall be minimized to two minutes. • The project shall develop a plan demonstrating that off-road equipment (more than 50 horsepower) to be used in the construction project (i.e., owned, leased, and subcontractor vehicles) would achieve a project wide fleet-average 20 percent NOx reduction and 45 percent PM reduction compared to the most recent ARB fleet average. Acceptable options for reducing emissions include the use of late model engines, low-emission diesel products, alternative fuels, engine retrofit technology, after- treatment products, add-on devices such as particulate filters, and/or other options as such become available. • Use low VOC (i.e., ROG) coatings beyond the local requirements (i.e., Regulation 8, Rule 3: Architectural Coatings). • All construction equipment, diesel trucks and generators shall be equipped with Best Available Control Technology for emission reductions of NOx and PM. • All contractors shall use equipment that meets CARB’s most recent certification standard for off-road heavy duty diesel engines. AIR-1 Two Crew Construction of Proposed Pipeline (using open trench construction technique) and Pump Station Restrictions: To ensure NOx emissions do not exceed the BAAQMD threshold, the City shall either: • Incorporate into contract specifications the requirement for contractors to limit open trench construction of the proposed pipeline to one crew (rather than two crews) and sequence the pump station construction so that it would be constructed one at a time, not concurrent with any other activity; or • Upon refinement of the construction details and assumptions for equipment use, dimensions of the trenches, rate of construction, backfill volume, the City shall rerun the air quality model analysis to confirm whether simultaneous construction of the proposed pipeline or pump stations would result in exceedance of BAAAMD NOx emissions thresholds. If NOx thresholds is exceeded, then the City shall implemented item 1 above. If NOx thresholds is not exceeded, then the City would be able to proceed with concurrent construction of two pipelines (using open trench construction) / two pump stations accordingly. c) Finding. Standard project requirement (dust control) has been incorporated into the project to substantially lessen the dust generated by the Project. Mitigation Measure AIR-1 150819 jb 0131480 15 will ensure that NOx emissions do not exceed the BAAQMD threshold either by refining the design and rerunning the air quality modeling to confirm that concurrent construction by two crews would not result in an exceedance of BAAQMD threshold for NOx or by limiting construction to one crew at a time. The standard project requirement and mitigation measure would mitigate the impact to less than significant. d) Remaining Impact. The standard project requirement and mitigation measure specified above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.4 Biological Resources Impact a: Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service. Impact d: Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10). a) Potential Impact. The impacts identified above are described and discussed in Section E.3 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirements and mitigation measures will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirements Health and Safety and Hazardous Materials Management and Spill Prevention Control Plans: The City shall require the contractor to prepare a Health and Safety Plan and Hazardous Materials Management and Spill Prevention and Control Plan prior to commencement of construction that includes a project-specific contingency plan for hazardous materials and waste operations. The Health and Safety Plan shall be applicable to all construction activities, and shall establish policies and procedures according to federal and California Occupational Safety and Health Administration (OSHA) regulations for hazardous materials Health and Safety Plans, and the City of Palo Alto’s Pollution Prevention plan sheet. Elements of the plan shall include, but not be limited to, the following: • Discussion of hazardous materials management, including delineation 150819 jb 0131480 16 of hazardous material storage areas, access and egress routes, waterways, emergency assembly areas, and temporary hazardous waste storage areas; • Notification and documentation of procedures; and • Spill control and countermeasures, including employee spill prevention/response training. Best Management Practices – Stormwater Quality (see Impact HYD-1 above) Compliance with the Tree Technical Manual (see Impact AES-1 above) BIO-1 Protection of Sensitive Habitats and Jurisdictional Features: The Proposed Project has been designed to avoid impacts to sensitive habitats, including jurisdictional wetlands and waters. However, indirect impacts to jurisdictional waters could occur as a result of the Proposed Project. The following general measures will be implemented during the construction and operation of the Proposed Project to minimize indirect impacts to sensitive habitats and jurisdictional features: • All construction equipment will use identified staging areas and access roads located in upland areas. When accessing work sites, travel and parking of vehicles and equipment will be limited to pavement, existing roads, and previously disturbed areas (except where overland travel is required). Construction workers will not be allowed to enter sensitive areas that have been fenced or staked. • Ground disturbance and vegetation removal will not exceed the minimum amount necessary to complete work at the site. • The following BMPs shall be incorporated into the SWPPP as protective measures to address wind- or water-related erosion: o No discharge of pollutants from vehicle and equipment cleaning will be allowed into storm drains, wetlands, or water courses. o No vehicles may be refueled within 100 feet of wetlands, streams, or other waterways. Vehicles operating adjacent to wetlands and waterways must be inspected and maintained daily to prevent leaks. o Waste facilities will be maintained. Waste facilities include concrete wash-out facilities, portable toilets, and hydraulic fluid containers. Waste will be removed to a proper disposal site. • After construction is completed, a final cleanup will include removal of all stakes, temporary fencing, flagging, and other refuse generated by construction. 150819 jb 0131480 17 BIO-2 Protection of CRLF: Construction activities associated with the creek crossing (Matadero Creek near Deer Creek Road) will be limited to the dry season (generally April 15 to October 15) to the extent feasible. BIO-3 Employee Education Program (required for CRLF, BUOW, and CCR if preconstruction surveys determined they are present). An employee education program will be conducted by a qualified biologist, consisting of a brief presentation to explain special-status species concerns to contractors, their employees, and any other personnel involved in the project. The program will include the following: a description of relevant special-status species and their habitat needs as they pertain to the project; a report of the occurrence of these species in the project vicinity, as applicable; an explanation of the status of these species and their protection under the MBTA, California Fish and Game Code, and other statutes; and, a list of measures being taken to reduce potential impacts to natural resources during project construction and implementation. A fact sheet conveying this information will be prepared for distribution to the above-mentioned people and anyone else who may enter the project area. Upon completion of training, employees will sign a form stating that they attended the training and understand all of the conservation and protection measures. Construction crews will be informed during the education program meeting that, to the extent possible, travel within the marked project area will be restricted to established roadbeds. BIO-4 Monitoring During Construction. A qualified biologist will be retained to monitor construction activities associated with the creek crossing (Matadero Creek near Deer Creek Road). The biologist will have expertise with CRLF biology and ecology. The biologist will have the authority to halt work if a special-status species is observed. BIO-5 General Measures to Reduce Impacts to Wildlife Species. The following shall be relevant to the following species: California red-legged frog, burrowing owl, and the California Clapper Rail. • All excavations left open overnight will either be covered to prevent wildlife from becoming entrapped or will include escape ramps. In addition, excavations must be inspected for wildlife at the start of each workday and prior to back filling. The USFWS and/or CDFW will be contacted prior to removing or relocating any special-status wildlife within the excavation. • Food items may attract wildlife into construction areas, which would expose them to construction-related hazards. The construction areas will be maintained in a clean condition. All trash (e.g., food scraps, cans, bottles, containers, wrappers, cigarette butts, and other 150819 jb 0131480 18 discarded items) will be placed in closed containers and properly disposed of. • If an animal is found at a work site and is believed to be a protected species, work must be halted until the animal leaves of its own accord or the USFWS and/or CDFW is consulted to relocate the species. Care shall be taken not to harm the species. No wildlife or plant species will be handled and/or removed from the site by anyone except approved biologists. BIO-6 Burrowing Owl Pre-Construction Surveys. Pre-construction BUOW surveys will be conducted in suitable habitat for BUOW (i.e., in pastureland habitat between Deer Creek Road and Hillview Avenue and in the vicinity of the RWQCP) in accordance with the recommendations and guidelines provided in the Staff Report on Burrowing Owl Mitigation (Department of Fish and Game, March 2012). If no BUOW or BUOW sign is observed no further action will be required. If BUOW or BUOW sign is observed then no disturbance will occur within 160 feet of occupied burrows during the non-breeding season (September 1 through January 31) or within 250 feet during the breeding season (February 1 through August 31). A qualified biologist will be present in these locations to monitor construction and ensure the BUOW is not disturbed. BIO-7 Buffer for California Clapper Rail or Survey. Construction activities within 500 feet of the marshland habitat surrounding the RWQCP will be conducted outside the breeding season for CCR (i.e., September 1 through January 31). If this is not feasible, a qualified biologist will conduct protocol-level surveys for CCR in accordance with the California Clapper Rail Draft Survey Protocol (USFWS 2000). A qualified biologist is an individual who has experience conducting protocol-level surveys for CCR. Prior to commencement of the surveys, the biologist will prepare a brief letter report describing the survey design and submit it to the USFWS and the CDFW for review and approval. Upon the completion of the surveys, results will be submitted to the USFWS and CDFW for a final decision on the possibility of doing work during the breeding season for CCR. BIO-8 Measure to Protect Nesting Birds. If equipment staging, site preparation, grading, excavation, or other project-related construction activities are scheduled to occur during the avian nesting season (generally February 1 to September 1), a focused survey for active nests will be conducted by a qualified biologists within 15 days prior to the beginning of project-related activities. Surveys will be conducted in all suitable habitat located at project work sites, and in staging or storage areas. Surveys will be conducted at the appropriate times of day (e.g., dawn or dusk), and during the appropriate nesting times and will concentrate on areas of suitable habitat. If a lapse in 150819 jb 0131480 19 project-related activities of 15 days or longer occurs, another focused survey will be conducted. If no active nests are found, then no further mitigation is required. If an active nest is found within the surveyed areas, an appropriate exclusion buffer will be established by a qualified biologist and the exclusion buffer will be maintained until the young have fledged or will no longer be impacted by the project. A qualified biologist will be present to monitor construction activities in the vicinity of the nest and ensure the nesting species is not disturbed. If a species appears disturbed by construction activities (as determined by a qualified biologist) work will be halted and the USFWS and/or CDFW will be consulted. Project activities will not resume without approval from the USFWS and/or CDFW. BIO-9 Bat Preconstruction Surveys. Preconstruction day and night-roost surveys will be conducted to avoid impacts to bats. The survey will be conducted by a qualified bat biologist following the protocol in the Bats and Bridges Technical Bulletin (Erickson et al. 2003) to determine if bats are using the bridges as a roost site. If a roost is observed, the CDFW and/or USFWS will be consulted and additional mitigation measures will be implemented. Example measures include working during the daytime if night roosts are present, no clearing or grubbing adjacent to the roost, no work within 100 feet of the roost, no lighting near the roost where it could shine on the roost structure. BIO-10 Bat Breeding Season Surveys. Construction activities near the Adobe Creek crossing near Middlefield Road, the Barron Creek crossing near Cowper Street, and the Matadero Creek crossing near Cowper Street will be scheduled to avoid the bat breeding season (April through August) to the extent feasible. If work in these locations is required in the breeding season, a survey for bats will be conducted. The survey will be conducted by a qualified bat biologist following the protocol in the Bats and Bridges Technical Bulletin (Erickson et al. 2003) to determine if bats are using the bridges as a roost site. If a roost is observed, the CDFW and/or USFWS will be consulted and additional mitigation measures will be implemented. Example measures include excluding bats from directly affected work areas or replacing the roost location. c) Finding. Mitigation Measure BIO-1 mandates that general measures be implemented to protect sensitive habitats and jurisdictional features. Mitigation Measure BIO-2 limits creek crossing construction to the dry season. Mitigation Measure BIO-3 mandates an employee education program to discuss protection measures. Mitigation Measure BIO-4 includes retaining a qualified biologist who will have authority to halt work to monitor construction activities associated with creek crossing. Mitigation Measure BIO-5 includes general measures to reduce impacts to the California red-legged frog, burrowing owl, and the California Clapper Rail. Mitigation Measure BIO-6 includes conducting pre-construction surveys 150819 jb 0131480 20 for Burrowing Owls and, if signs are present, limiting disturbance and retaining a biologist to be present to ensure Burrowing Owls are not disturbed. Mitigation Measure BIO-7 includes measures to protect the California Clapper Rail and its habitat. Mitigation Measure BIO-8 includes measures to protect nesting birds, including conducting nesting surveys prior to construction and retaining a biologist to monitor activities and ensure nesting species are not disturbed. Mitigation Measure BIO-9 includes measures to protect bats including conducting roosting surveys prior to construction and working with the CDFW and/or USFWS to determine additional mitigation measures if roosts are found. Mitigation Measure BIO-10 includes measures to protect bats during breeding season, including conducting surveys near specific locations if work in these locations is required during breeding season and working with the CDFW and/or USFWS to determine additional mitigation measures if roosts are found. Combined, the standard project requirements and the mitigation measures reduce impacts to biological resources to less than significant. d) Remaining Impact. Standard project requirements and mitigation measures specified above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact b: The Proposed Project could have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, including federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means. a) Potential Impact. The impact identified above is described and discussed in Section E.3 of the Draft EIR (Appendix E). b) Mitigation Measures. The following mitigation measure will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: BIO-1 See above under Impact a. c) Finding. Mitigation Measure BIO-1 mandates that general measures be implemented to protect sensitive habitats and jurisdictional features, thus reducing the impact on any riparian habitat or other sensitive natural community to less than significant. d) Remaining Impact. Mitigation Measure BIO-1 specified above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.5 Cultural Resources Impact a: The Proposed Project could directly or indirectly destroy a local cultural resource that is recognized by the City Council resolution. 150819 jb 0131480 21 Impact b: The Proposed Project could cause a substantial adverse change in the significance of an archeological resource pursuant to 15064.5. Impact d: The Proposed Project could disturb human remains, including those interred outside of formal ceremonies. Impact e: The Proposed Project could adversely affect a historic resource listed or eligible for listing on the National and/or California Register, or listed on the City’s Historic Inventory. Impact f: The Proposed Project could eliminate important examples of major periods of California history or prehistory. a) Potential Impact. The impacts identified above are described and discussed in Section E.4 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirement and mitigation measure will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirement Protection of Cultural Resources: Should any previously undiscovered historic or prehistoric archaeological deposits be discovered during construction, work shall stop within 50 feet of the discovery, until such time that the discovery can be evaluated by a qualified archaeologist and appropriate mitigative action taken as determined necessary in consultation with the lead Federal agency for NHPA Section 106 compliance, in accordance with 36 CFR Part 800.13, and the City. Measures might include preserving in situ the archaeological resource or an archaeological monitoring or data recovery program. Prehistoric archaeological site indicators include chipped chert and obsidian tools, and tool manufacturing waste flakes, grinding implements such as mortars and pestles, and darkened soil that contains dietary debris such as bone fragments and shellfish remains. Historic site indicators include, but are not limited to, ceramics, glass, wood, bone, and metal remains. Section 7050.5(b) of the California Health and Safety code will be implemented in the event that human remains, or possible human remains, are located during Project-related construction excavation. Section 7050.5(b) states: In the event of discovery or recognition of any human remains in any location other than a dedicated cemetery, there shall be no further excavation or disturbance of the site or any nearby area reasonably 150819 jb 0131480 22 suspected to overlie adjacent remains until the coroner of the county in which the human remains are discovered has determined, in accordance with Chapter 10 (commencing with Section 27460) of Part 3 of Division 2 of Title 3 of the Government Code, that the remains are not subject to the provisions of Section 27492 of the Government Code or any other related provisions of law concerning investigation of the circumstances, manner and cause of death, and the recommendations concerning treatment and disposition of the human remains have been made to the person responsible for the excavation, or to his or her authorized representative, in the manner provided in Section 5097.98 of the Public Resources Code. The County Coroner, upon recognizing the remains as being of Native American origin, is responsible for contacting the Native American Heritage Commission (NAHC) within 24 hours. The Commission has various powers and duties to provide for the ultimate disposition of any Native American remains, as does the assigned Most Likely Descendant. Sections 5097.98 and 5097.99 of the Public Resources Code also call for protection from inadvertent destruction. To achieve this goal, the construction personnel on the Project would be instructed as to the potential for discovery of cultural or human remains, the need for proper and timely reporting of such finds, and the consequences of failure thereof. CR-1 Subsurface Testing. A program of sub-surface testing shall be conducted to determine whether buried resources are present within the areas of high or high to moderate archaeological sensitivity that will be impacted by Project construction. Only those locations where design confirms that the proposed pipeline would be buried at archaeologically sensitive locations will require subsurface testing. A testing program will be developed to determine the best approach for each location, considering the physical constraints of the urban setting (e.g., structures, traffic). The testing program could consist of multiple core extractions at individual sites; the locations and depths of the bore holes would be determined on the basis of projected depths of excavation at the individual work areas. A qualified archaeologist would monitor the testing efforts, and inspect the cores for prehistoric archaeological site indicators (e.g., chipped chert and obsidian tools, and tool manufacturing waste flakes, grinding implements such as mortars and pestles, and darkened soil that contains dietary debris such as bone fragments and shellfish remains) and historic site indicators (e.g., ceramics, glass, wood, bone, and metal remains). If the findings of the subsurface testing are negative, then no further actions (e.g., further testing or archaeological monitoring) would be recommended as necessary for NHPA Section 106 compliance, although consultation with SHPO would still be needed to formally complete the Section 106 process. If the findings of the 150819 jb 0131480 23 subsurface testing are positive (and avoidance of the archaeological site is not feasible or practicable through project redesign), then a qualified archaeologist will develop an archeological data recovery plan (ADRP) in consultation with the City, the lead Federal agency, the SHPO and other appropriate consulting parties, as applicable, in accordance with the requirements of 36 CFR Part 800. The ADRP shall identify how the proposed data recovery program will used to evaluate and preserve the significant information the archaeological resource is expected to contain. That is, the ADRP will identify what scientific/historical research questions are applicable to the expected resource, what data classes the resource is expected to possess, and how the expected data classes would address the applicable research questions. Implementation of the ADRP through the development and execution of an appropriate agreement document by the lead Federal agency, the SHPO, the City, and any other identified signatories, would satisfy the requirements of NHPA Section 106 as outlined at 36 CFR § 800.6. Whether the results of subsurface testing are negative or positive, if Federal funding for the Project is approved, full compliance with Section 106 of the NHPA as determined by the lead Federal agency will be required prior to Project construction. c) Finding. Standard project requirement (Protection of Cultural Resources) would ensure the protection of unrecorded cultural resources and human remains. Mitigation Measure CR-1 requires subsurface testing to determine the presence of cultural resources and actions that must be taken in the event cultural resources are present. Thus, impacts to cultural resources would reduce to less than significant. d) Remaining Impact. The standard project requirement (Protection of cultural resources) and Mitigation Measure CR-1 specified above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact c: Directly or indirectly destroy a unique paleontological resource or site or unique geologic feature. a) Potential Impact. The impact identified above is described and discussed in Section E.4 of the Draft EIR (Appendix E). b) Mitigation Measures. No mitigation measures are required. The following standard project requirement will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirement Protection of Paleontological Resources: If paleontological resources are discovered during earthmoving activities, the construction crew would immediately cease work near the find. In accordance with Society of 150819 jb 0131480 24 Vertebrate Paleontology guidelines (Society of Vertebrate Paleontology 2010), a qualified paleontologist would assess the nature and importance of the find and recommend appropriate salvage, treatment, and future monitoring and mitigation. c) Finding. The standard project requirement (Protection of Paleontological Resources) would ensure the protection of unrecorded paleontological resources. Thus, impacts to paleontological resources would be reduced to less than significant. d) Remaining Impact. The standard project requirement (protection of Paleontological Resource) above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.6 Geology, Soils and Seismicity Impact a: Expose people or structures to potential substantial adverse effects, including the risk of loss, injury, or death, involving: iii. Seismic-related ground failure, including liquefaction? Impact d: Be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse? Impact e: Be located on expansive soil, as defined in Table 18-1-B of the Uniform Building Code (1994), creating substantial risks to life or property. a) Potential Impact. The impacts identified above are described and discussed in Section E.5 of the Draft EIR (Appendix E). b) Mitigation Measures. No mitigation measures are required. The following standard project requirements will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirement Geologic Report for Potentially Affected Facilities: During the design phase for the Project, the City shall require preparation of a Geologic Report by a geologist registered in the State of California for facilities that could be affected by seismic-related hazards or unstable soils (e.g., liquefaction and expansive soils). The Geologic Report shall include an engineering analysis of liquefaction and the potential for expansive soils at the pump stations. This assessment shall include a liquefaction assessment study in accordance with the California Geological Survey Special Publication 117 Guidelines. If this report finds 150819 jb 0131480 25 unstable soils would present potential risks associated with liquefaction, engineering recommendations for surface and subsurface drainage specifications and detailed design for fill placement and excavation shall be provided. c) Finding. The standard project requirement (Geologic Report) would ensure that seismicity and unstable soils would be addressed and the risk of loss, injury, or death would reduce to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact b: Result in substantial soil erosion or the loss of topsoil. Impact c: Result in substantial siltation. a) Potential Impact. The impacts identified above are described and discussed in Section E.5 of the Draft EIR (Appendix E). b) Mitigation Measures. No mitigation measures are required. The following standard project requirement will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings. Standard Project Requirement Best Management Practices – Storm Water Quality (see Impact HYD-1 above) c) Finding. The standard project requirement (best management practices - stormwater water quality) would ensure that the project would not result in substantial erosion or siltation. Thus, impacts would be reduce to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.7 Hazardous Materials Impact a: Create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials. Impact b: Create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment. Impact c: Emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school. 150819 jb 0131480 26 Impact e: Be located on a site which is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would it create a significant hazard to the public or the environment? a) Potential Impact. The impacts identified above are described and discussed in Section E.7 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirements will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirements Storage, Handling, and Use of Hazardous Materials in Accordance with Applicable Laws: The City shall ensure that all construction-related hazardous materials and hazardous wastes are stored, handled, and used in a manner consistent with applicable federal, state, and local laws, and the City of Palo Alto’s Pollution Prevention plan sheet. In addition, construction- related hazardous materials and hazardous wastes shall be staged and stored away from stream channels and steep banks to keep these materials a safe distance from near-by residents and prevent them from entering surface waters in the event of an accidental release. Proper Disposal of Contaminated Soil and/or Groundwater: If contaminated soil and/or groundwater is encountered or if suspected contamination is encountered during Project construction, work shall be halted in the area, and the type and extent of the contamination shall be identified. A contingency plan to dispose of any contaminated soil or groundwater would be developed through consultation with appropriate regulatory agencies and consistent with the requirements of the City of Palo Alto’s Pollution Prevention plan sheet and RWQCP’s permit requirements for discharge of exceptional wastewater to the sanitary sewer. Health and Safety and Hazardous Materials Management and Spill Prevention Control Plans (see Impact a in Section 3.4, Biological Resources above) c) Finding. The standard project requirements (use and handling of hazardous materials, proper disposal of contaminated materials, health and safety plan, hazardous materials management plan, and spill prevention control plan) would ensure that the project would not result in substantial hazards. Thus, impacts would be reduce to less than significant. d) Remaining Impact. The standard project requirements above would reduce all potential impacts to less than significant. No residual impacts would remain. 150819 jb 0131480 27 Impact h: Impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan a) Potential Impact. The impact identified above is described and discussed in Section E.7 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirement will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirement Traffic Control Plan: The City’s Transportation Section would require the contractor to have a full traffic control plan prepared by a registered traffic engineer. The traffic control plan shall be in accordance with the City’s Traffic Control Requirements and would show specific methods for maintaining traffic flows to minimize construction impacts on traffic and parking. There are several schools in the vicinity of the Project. These areas would be evaluated more closely to determine whether the traffic control plan is appropriate or if additional measures are needed specific to school areas. Examples of traffic control measures to be considered include: • Identify all roadway locations where special construction techniques (e.g., directional drilling) would be used to minimize impacts to traffic flow; • Develop circulation and detour plans to minimize impacts to local street circulation. This may include the use of signing and flagging to guide vehicles through and/or around the construction zone; • Schedule truck trips outside of peak morning and evening commute hours; • Prohibit construction on collector and arterial streets during morning commute period before 9 a.m. and in the afternoon commute period after 4 p.m.; • Use haul routes, minimizing truck traffic on local roadways to the extent possible; • Consider detours for bicycles and pedestrians in all areas potentially affected by Project construction. Pedestrian and bicycle detours should not be required unless deemed necessary for safety reasons; • Use flagmen to maintain alternating one-way traffic while working on one- half of the street; • Use advance construction signs and other public notices to alert drivers of activity in the area; • Use “positive guidance” detour signing on alternate access streets to minimize inconvenience to the driving public; 150819 jb 0131480 28 • Install traffic control devices as specified in the California Department of Transportation Manual of Traffic Controls for Construction and Maintenance Work Zones; • Develop and implement access plans for highly sensitive land uses such as police and fire stations, transit stations, hospitals and schools. The access plans would be developed with the facility owner or administrator. To minimize disruption of emergency vehicle access, ask affected jurisdictions to identify detours, which would then be posted by the contractor. Notify in advance the facility owner or operator of the timing, location, and duration of construction activities and the locations of lane closures; • Store construction materials only in designated areas; and • Coordinate with local transit agencies for temporary relocation of routes or bus stops in work zones, as necessary. • Establish methods for minimizing for construction effects on parking (e.g., identifying designated areas for construction worker parking at staging areas). c) Finding. The standard project requirement (traffic control plan) would ensure that the project would not result in traffic hazards. Thus, impacts would be reduce to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.8 Noise Impact a: The Proposed Project could expose persons to or generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies. Impact c: The Proposed Project could create a substantial permanent increase in ambient noise in the project vicinity above levels existing without the project. Impact d: The Proposed Project could create a substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project. Impact g: The Proposed Project could cause the average 24 hour noise level (Ldn) to increase by 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB. Impact h: The Proposed Project could cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB. Impact i: The Proposed Project could cause an increase of 3.0 dB or more in an existing 150819 jb 0131480 29 residential area where the Ldn currently exceeds 60 dB. Impact j: The Proposed Project could result in indoor noise levels for residential development to exceed an Ldn of 45 dB. Impact k: The Proposed Project could result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater. Impact l: The Proposed Project could generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more. a) Potential Impact. The impacts identified above are described and discussed in Section E.10 of the Draft EIR (Appendix E). b) Mitigation Measures. The following standard project requirements and mitigation measures will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirements Compliance with Local Noise Ordinance: According to the City of Palo Alto’s Noise Ordinance (Palo Alto Municipal Code Chapter 9.10), for residential and non-residential property, construction, alteration and repair activities which are authorized by a valid city building permit shall be prohibited on Sundays and holidays and shall be prohibited except between the hours of 8:00 a.m. and 6:00 p.m. Monday through Friday, and 9:00 a.m. and 6:00 p.m. on Saturday, provided that the construction, demolition or repair activities during those hours meet the following standards: • No individual piece of equipment shall produce a noise level exceeding 110 dBA at a distance of 25 feet. If the device is housed within a structure on the property, the measurement shall be made outside the structure at a distance as close to 25 feet from the equipment as possible. • The noise level at any point outside of the property plane of the Project shall not exceed 110 dBA. • The holder of a valid construction permit for a construction project in a non-residential zone shall post a sign at all entrances to the construction site upon commencement of construction, for the purpose of informing all contractors and subcontractors, their employees, agents, materialmen and all other persons at the construction site, of the basic requirements of this measure . o The sign(s) shall be posted at least five feet above ground level, and shall be of a white background, with black lettering, 150819 jb 0131480 30 which lettering shall be a minimum of one and one-half inches in height. o The sign shall read as follows: CONSTRUCTION HOURS FOR RESIDENTIAL (OR NON-RESIDENTIAL) PROPERTY (Includes Any and All Deliveries) MONDAY - FRIDAY........8:00 a.m. to 6:00 p.m. SATURDAY.........9:00 a.m. to 6:00 p.m. SUNDAY/HOLIDAYS........Construction prohibited. Pump Station Design/Noise: For the pump station at the Mayfield Soccer Fields, a detailed analysis of the buildings’ sound isolation would be conducted by a qualified acoustical consultant during the engineering design phase of the project. A post-construction field sound measurement shall be conducted by an acoustical consultant to verify that the project operational noise standards are in compliance with relevant City noise standards. NOI-1 Noise Control Measures to Reduce Construction Noise: Noise Control Measures to Reduce Construction Noise. The City shall incorporate into contract specifications all of the following measures: • Impact equipment (e.g., jack hammers, pavement breakers, and rock drills) used for project construction will be hydraulically or electrically powered whenever possible to avoid noise associated with compressed air exhaust from pneumatically powered tools. However, where use of pneumatically powered tools is unavoidable, an exhaust muffler on the compressed air exhaust would be used. This muffler can lower noise levels from the exhaust by up to 10 dBA. External jackets on the tools themselves would be used where feasible, and this could achieve a reduction of 5 dBA. Quieter procedures will be used such as drilling rather than impact equipment whenever feasible. • Wherever possible, sonic or vibratory pile drivers will be used instead of impact pile drivers. If sonic or vibratory pile drivers are not feasible, acoustical enclosures will be provided as necessary to reduce noise levels. Engine and pneumatic exhaust controls on pile drivers will be required as necessary to ensure that exhaust noise from pile driver engines are minimized to the extent feasible. Where feasible, pile holes will be pre-drilled to reduce potential noise and vibration impacts. • All equipment and trucks used for project construction shall use the best available noise control techniques (including mufflers, use of 150819 jb 0131480 31 intake silencers, ducts, engine enclosures and acoustically attenuating shields or shrouds) and be maintained in good operating condition to minimize construction noise impacts. All internal combustion engine- drive equipment shall be fitted with intake and exhaust mufflers which are in good condition. • Unnecessary idling of internal combustion engines shall be prohibited. In practice, this would mean turning off equipment if it would not be used for five or more minutes. • Stationary noise-generating construction equipment, such as air compressors and generators, shall be located as far as possible from homes and businesses. • Staging areas shall be located as far as feasibly possible from sensitive receptors. NOI-2 Pre-Construction Notification: Prior to construction, written notification to residents within 500 feet of the proposed facilities undergoing construction shall be provided, identifying the type, duration, and frequency of construction activities. Notification materials shall also identify a mechanism for residents to register complaints with the City if construction related noise impacts should occur. NOI-3 Design of the Pump Station to Reduce Noise: To ensure the proposed pump station complies with the City’s noise standards, structure openings, including air ventilation would employ acoustical rated louvers, silencers, or other noise-reduction devices, as appropriate, to reduce noise propagation to the outside of the building. c) Finding. The standard project requirements (compliance with local noise ordinance and pump station design/noise) would ensure that construction is conducted during appropriate hours and that operational noise standards are in compliance with relevant City noise standards. Mitigation Measure NOI-1 requires specific noise control measures to be included in contract specifications; Mitigation Measure NOI-2 requires that residents near the project site be notified of the construction and provided with a mechanism for registering complaints about construction-related noise; Mitigation Measure NOI-3 requires that the pump station be designed and constructed to incorporate noise reduction devices. Combined, these standard project requirement and mitigation measures would reduce noise related impacts to less than significant. d) Remaining Impact. The standard project requirement and mitigation measures above would reduce all potential impacts to less than significant. No residual impacts would remain. 3.8 Transportation and Traffic 150819 jb 0131480 32 Impact a: The Proposed Project could exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designed in a general plan, policy, ordinance, etc.), taking into account all relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit. Impact b: The Proposed Project could conflict with an applicable congestion management program, including but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways. a) Potential Impact. The impacts identified above are described and discussed in Section E.14 of the Draft EIR. b) Mitigation Measures. The following mitigation measures will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: TRA-1 CMP Facilities: The City shall work with VTA to determine when peak hour traffic starts on Page Mill Road, a CMP facility. If peak hour traffic starts around 3 p.m. on this road, then the City shall prohibit construction on this roadway after 3 p.m. c) Finding. Mitigation Measure TRA-1 requires that construction be limited to the hours outside of determined peak hour traffic, thus reducing traffic related impacts to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact d: Substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment) Impact e: Result in inadequate emergency access. Impact g: Conflict with adopted policies, plans, or programs supporting alternative transportation (e.g., pedestrian, transit & bicycle facilities) Impact n: Impede the development or function of planned pedestrian or bicycle facilities Impact o: Impede the operation of a transit system as a result of congestion a) Potential Impact. The impacts identified above are described and discussed in 150819 jb 0131480 33 Section E.14 of the Draft EIR (Appendix E). b) Mitigation Measures. No mitigation measures are required. The following standard project requirement will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: Standard Project Requirements See Traffic Control Plan See Impact b, c e, and h above (Section 3.7 above). c) Finding. Standard project requirement (traffic control plan) requires measures to maintain traffic flows and emergency access and ensure coordination with transit agencies, thus reducing traffic related impacts to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. Impact f: Result in inadequate parking capacity that impacts traffic circulation and air quality a) Potential Impact. The impact identified above is described and discussed in Section E.14 of the Draft EIR (Appendix E). b) Mitigation Measures. The following mitigation measure will be adopted and will be implemented as provided in the MMRP, and as further described in the remainder of these findings: TRA-2 Coordinate Construction with Businesses: To reduce the disruption of business from the temporary reduction of parking, the City shall coordinate with individual businesses on the timing of construction. c) Finding. Mitigation Measure TRA-2 requires that local businesses be notified of the timing of construction and that the City coordinate with those businesses as it relates to the temporary reduction in parking, thus reducing traffic related impacts to less than significant. d) Remaining Impact. The standard project requirement above would reduce all potential impacts to less than significant. No residual impacts would remain. SECTION 6. Findings Regarding Project Alternatives Public Resources Code section 21002 prohibits a public agency from approving a project if there are feasible alternatives or feasible mitigation measures available which would substantially lessen the significant environmental effects of the project. When a lead agency 150819 jb 0131480 34 finds, even after the adoption of all feasible mitigation measures, that a project will still cause one or more significant environmental effects that cannot be substantially lessened or avoided, it must, prior to approving the project as mitigated, first determine whether there are any project alternatives that are feasible and that would substantially lessen or avoid the project's significant impacts. Because all of the Project’s impacts are being mitigated through the adoption of mitigation measures described above, and because the Project will thus not result in any significant environmental effects, the City Council finds that there is no need to further consider the feasibility of any of the alternatives identified in the Final EIR. SECTION 7. Statement of Overriding Considerations The City Council is not required to adopt a Statement of Overriding Considerations pursuant to Public Resources Code Section 21081 and Section 15093 of the CEQA Guidelines as all identified environmental impacts associated with the proposed Project can be mitigated to less than significant levels as discussed above and the Final EIR. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Senior Assistant City Attorney City Manager _____________________________ Director of Planning and Community Environment 150819 jb 0131480 35 EXHIBIT A MITIGATION MONITORING AND REPORTING PROGRAM RECYCLED WATER PROJECT ENVIRONMENTAL IMPACT REPORT State Clearinghouse No. 2011062037 CITY OF PALO ALTO JULY 2015 150819 jb 0131480 36 P R E F A C E Section 21081 of the California Environmental Quality Act (CEQA) requires a Lead Agency to adopt a Mitigation Monitoring or Reporting Program whenever it approves a project for which measures have been required to mitigate or avoid significant effects on the environment. The purpose of the monitoring or reporting program is to ensure compliance with the mitigation measures during project implementation. The Environmental Impact Report concluded that that all identified environmental impacts associated with the proposed Project can be mitigated to less than significant levels, either with the implementation of standard project requirements proposed as part of the Project and/or mitigation measures identified in the analysis, and that no significant unavoidable impacts would occur from proposed Project implementation. This Mitigation Monitoring or Reporting Program addresses the required measures in terms of how and when they will be implemented. 150819 jb 0131480 37 2 Any cells marked “--” indicates a standard project requirement, which has no mitigation measure number. City of Palo Alto Recycled Water Project MITIGATION MONITORING AND REPORTING PLAN Item Number Impact Summary Mitigation No.2 Standard Project Requirement/Mitigation Measure (Exact Text) Monitoring and Reporting Plan Implementation and Reporting Monitoring and Reporting Actions Implementation Schedule Verification: Status/ Date Completed/ Initials Re s p o n s i b l e Pa r t y Re v i e w & Ap p r o v a l HYDROLOGY HYD-1 Have the potential violation of water quality standards and/or waste discharge requirements or otherwise substantially degrade water quality? -- Best Management Practices – Storm Water Quality The City shall require contractors to file a Notice of Intent with the Regional Water Quality Control Board (RWQCB) indicating compliance with the National Pollutant Discharge Elimination System (NPDES) General Permit for Discharges of Storm Water Runoff Associated with Construction Activity (General Permit) and to prepare and implement a Stormwater Pollution Prevention Plan (SWPPP) outlining BMPs for construction/post- construction activities as specified by the City of Palo Alto’s Pollution Prevention plan sheet, the California Stormwater Best Management Practices Handbook and/or the Association of Bay Area Governments’ Manual of Standards for Erosion and Sediment Control Measures. The BMPs include measures guiding the management and operation of construction sites to control and minimize the potential contribution of pollutants to stormwater runoff from these areas. These measures address City of Palo Alto and its contractors City of Palo Alto 1. Include in plans and specifications. 2. Document contractor compliance with plans and specifications. 1. Pre-construction 2. Construction 1.________ 2.________ 150819 jb 0131480 38 procedures for controlling erosion and sedimentation, and managing all aspects of the construction process to ensure control of potential water pollution sources. Erosion and sedimentation control practices typically include: • Performing equipment maintenance at least 100 feet from all water bodies and wetlands, with measures in place to contain spills of diesel fuel, gasoline, or other petroleum products. • Directing drainage from all work sites away from any water bodies or wetlands where feasible; • Preventing erosion of uplands and sedimentation of creeks, tributaries, and ponds; • Minimizing creek bank instability; • Preventing flooding; and • Returning grades to preconstruction contours. • Installation of silt fencing and/or straw wattle; • Soil stabilization; • Revegetation of graded and fill areas with a standard erosion control mix (approved by a native habitat restorationist); • Runoff control to limit increases in sediment in stormwater runoff (e.g., straw bales, silt fences, drainage swales, geofabrics, check dams, and sand bag dikes); A SWPPP that complies with the statewide General Permit shall be developed and implemented to protect water quality of the creeks that lie in the study area. Appropriate 150819 jb 0131480 39 erosion and sediment control and non-sediment pollution control (i.e., sources of pollution generated by construction equipment and material) BMPs shall be prescribed in the SWPPP, and erosion and sediment control material included in the SWPPP shall be certified as weed free. Dewatering operations are covered under the General Construction Permit as an authorized non-stormwater discharge. The discharge from dewatering operations would be evaluated and made part of the Project SWPPP. In addition, the Project shall comply with RWQCB regulations and standards to maintain and improve the quality of both surface water and groundwater resources. HYD-1 Have the potential violation of water quality standards and/or waste discharge requirements or otherwise substantially degrade water quality? -- Frac-Out Plan • Prior to constructing underground crossings of creeks or channels, a Frac-out Contingency Plan shall be developed. At minimum, the plan shall prescribe the measures to ensure protection of water quality and related biological resources (e.g., aquatic resources, and special-status plants and wildlife) including: • Procedures to minimize the potential for a frac-out associated with horizontal directional drilling; • Procedures for timely detection of frac- outs; • Procedures for timely response and remediation in the event a frac-out; and • Monitoring of drilling and frac-out response activities by a qualified biologist. City of Palo Alto and its contractors City of Palo Alto 1. Verify that Frac- Out Contingency Plan is developed and that measures are outlined in the plans and specifications. 2. Monitor construction activities to verify that measures are implemented during construction. 1. Pre-construction 2. Construction 1.________ 2.________ HYD-1 Have the potential violation of water quality standards and/or waste -- Discharge of Exceptional Wastewater Hydrostatic test water and water collected from dewatering activities (including contaminated water) are discharged to the sanitary sewer with City of Palo Alto City of Palo Alto 1. Verify that permit is obtained. 2. Confirm that 1. Pre-construction 2. Construction 1.________ 2.________ 150819 jb 0131480 40 discharge requirements or otherwise substantially degrade water quality? an Exceptional Waste Discharge Permit from RWQCB. The permit requires chemical constituents to be sampled and identifies limits for these constituents. To minimize impacts to water quality, the City shall obtain an Exceptional Wastewater Permit prior to discharge of such waters into the sanitary sewer. and its contra ctors water is discharged appropriately. HYD-2 Have the potential to substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site? -- See above for HYD-1 information. HYD-3 Have the potential to result in the substantial decline in health of redwood trees and other salt- sensitive plant species? HYD-3a Mitigation Measure HYD-3a: Source Control of Saline Groundwater. The City shall continue to line and repair existing sewers to minimize saline groundwater infiltration. City of Palo Alto City of Palo Alto 1. For anticipated lining/repair projects identified in the EIR initiated by the City and any other future City projects that would minimize saline infiltration, confirm funding available for the work. 2. Retain the as- built drawings of the project in the project file. 1. Ongoing (throughout the life of this project) 2. Ongoing 1.________ 2.________ HYD-3 Have the potential to HYD-3b Mitigation Measure HYD-3b: Monitoring: City City 1. Monitor salinity 1. Monthly, for two 1.________ 150819 jb 0131480 41 result in the substantial decline in health of redwood trees and other salt-sensitive plant species? The City shall immediately begin monthly monitoring of the salinity (and related constituents) of the recycled water and shall report the rolling 12-month average for comparison to the Palo Alto City Council goal of 600 mg/l TDS. Monthly electronic reporting to those requesting it will be performed for two years, and then the frequency will be re-evaluated. The City shall monitor soil salinity and SAR through semi-annual soil analyses, preferably taken early and late in the irrigation season (approximately April and October). of Palo Alto of Palo Alto (and related constituents) monthly. 2. Retain transmittal of results to those requesting this information. 3. Document salinity monitoring and reporting and retain in the project file. years (recycled water). The frequency will be reevaluated thereafter. 2. Ongoing 3. Semiannually for two years. The frequency will be reevaluated thereafter. Retaining information will be ongoing. 2.________ 3.________ HYD-3 Have the potential to result in the substantial decline in health of redwood trees and other salt- sensitive plant species? HYD-3c Mitigation Measure HYD-3b: Site Management: If at a particular site receiving recycled water, monitoring identifies an increase in soil salinity and SAR over historical levels, the City in cooperation with the owner of that site shall conduct a site-specific evaluation. That evaluation would consider (1) the extent to which the site contains protected trees (including redwood trees and oaks) that might be impacted by soil salinity, (2) the extent to which the elevated salinity is at a level that poses a threat to such protected trees, and (3) the extent to which the elevated salinity is the result of the use of the City's recycled water. If a threat is found, the City shall work cooperatively with the site owner to develop a site-specific mitigation plan, including the site owner's implementation of best management practices which are described below: • To avoid plant damage to salt sensitive landscape plants, site owners can implement a leaching program to maintain soil salinity within the root zone below 2.0 dS/m and SAR below 6.0. For moderately salt-tolerant plants, Site owner s City of Palo Alto 1. Include requirements in use agreements for recycled water. 2. Confirm site owners implement BMPs if deemed necessary by the site owners in inspection reports. 3. Retain inspection reports in the project file. 1. Ongoing 2. Ongoing 3. Ongoing 1.________ 2.________ 3.________ 150819 jb 0131480 42 maintain soil salinity below 4.0 dS/m. Where subsoils do not drain adequately, installation of subsurface drainage systems may be needed. Rainfall will satisfy a portion of the leaching requirement, depending on the rate, volume, and distribution through the season. The frequency with which leaching applications should be made depends on several variables, and is typically triggered by approaching soil salinity thresholds defined above. • Site owners can apply gypsum prior to leaching when indicated by soil analysis. Gypsum is a soil amendment that, when combined with leaching, helps lower soil sodium concentrations. Gypsum application can be considered when soil analyses reveal one or more of the following conditions: SAR exceeds 6.0, SAR increases 2 units or more (e.g., 2.3 to 4.3), and/or sodium concentration exceeds 5 meq/l (115 mg/L). The amount of gypsum needed and the frequency of application depend on site-specific soil and water characteristics, and can be determined by laboratory analysis. HYD-3 Have the potential to result in the substantial decline in health of redwood trees and other salt-sensitive plant species? HYD-3d Mitigation Measure HYD-3d: Other Options to Protect Salt-Sensitive Plants. In the event that monitoring results (see Mitigation Measure HYD-3b) show that optimal concentrations of TDS and related parameters will not be achieved prior to operation of the Project (i.e., recycled water application), the City will evaluate and implement one or more of the following actions to reduce TDS levels: • Utilize its existing Recycled Water City of Palo Alto City of Palo Alto 1. Initiate the investigation of the feasibility of Reverse and Forward Osmosis treatment of its recycled water, combined with blending of 1. Upon certification of the EIR and approval of the Project 2. Upon completion of the investigation, prior to construction. 3. Prior to and 1.________ 150819 jb 0131480 43 Ordinance exemption process (Palo Alto Municipal Code 16.12.050) to exempt redwood trees (and/or other salt sensitive species) from the use of recycled water; • Blend Recycled Water and other lower salinity water prior to application; and/or • Treat recycled water to reduce TDS prior to application, or shortly thereafter (the City is initiating an investigation of the feasibility of Reverse or Forward Osmosis treatment of its recycled water, combined with blending of appropriate water). appropriate. 2. Retain final technical document in project file. 3. If the Project proceeds and TDS and optimal concentrations of TDS and related parameters are not achieved, document implementation of selected option. during operation (if necessary) 2.________ 3.________ ASETHETICS AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? -- Compliance with the Tree Technical Manual The City of Palo Alto Tree Technical Manual (Dockter 2001) is a separately published document issued by the City Manager, through the Departments of Planning and Community Environment and Public Works to establish specific technical regulations, standards and specifications necessary to implement the Tree Ordinance (Chapter 8.10, Tree Preservation and Management Regulations), and to achieve the City’s tree preservation goals and natural resource conservation goals. Section 2.00 specifically addresses the protection of trees during construction; its objective is to reduce the negative impacts of construction on trees to a less than significant level. Construction projects within the tree protection zone (TPZ) of Regulated Trees are required to City of Palo Alto and its contractors City of Palo Alto 1. Document completion of Tree Protection and Preservation Plan. 2. Document compliance with requirements of 2.00 and 3.00 of the City of Palo Alto Tree Technical Manual. 1. Pre-construction 2. Pre-construction/ Construction 1.________ 2.________ 150819 jb 0131480 44 implement protective practices prior to and during construction. The City would be required to retain a certified arborist to prepare a Tree Protection and Preservation Plan if any activity is within the dripline of a Protected or Designated Tree. The Plan must include an assessment of impacts to trees, recommended mitigation to reduce impacts to a less than significant level, and identification of construction guidelines to be followed through all phases of a construction project. Section 3.00 of the Tree Technical Manual outlines requirements associated with the removal and replacement of regulated trees. The standards and specifications for replacements of trees are dependent on the location where a Protected or Designated Tree would be replaced. If a tree is to be replaced on site, the replacement tree must be the same species unless the Director determines that another species would be more suitable for the location. The location of the replacement tree on site must be approved by the Director. If it is not possible to replace the tree on site, funding for the replacement of trees is calculated using a Tree Value Replacement Standard. The funding is then applied for planting of trees elsewhere. AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? -- Architectural Review and Site and Design Review Architectural Review and/or Site and Design review will be required for all exterior modifications, including hanging pipes, pump stations, and landscaping. The individual components will require approval by the City’s Architectural Review Board (ARB) for architectural review, and by the planning commission, ARB, and City Council for site and design review prior to project implementation. City of Palo Alto and its contra ctors City of Palo Alto 1. Document completion of Architectural Review and/or Site and Design review. 1. Pre-construction 1.________ 150819 jb 0131480 45 AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? HYD-3a See above for HYD-3a information. AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? HYD-3b See above for HYD-3b information. AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? HYD-3c See above for HYD-3c information. AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? HYD-3d See above for HYD-3d information. 150819 jb 0131480 46 AES-1 Have a substantial degradation of the existing visual character or quality of the site and its surroundings or on a public view or view corridor? AES-1 Mitigation Measure AES-1: Restoration to Pre-construction Conditions. The City shall require its contractors to restore disturbed areas to their pre-construction conditions, to the extent consistent with pipeline operations, so that short-term construction disturbance does not result in long-term visual impacts. City of Palo Alto or its contra ctor City of Palo Alto 1. Include in plans and specifications. 2. Document contractor has complied with plans and specifications. 1. Design 2. Post-Construction 1.________ 2._________ AIR QUALITY Item b Violate any air quality standard or contribute substantially to an existing or projected air quality violation? -- Bay Area Air Quality Management District (BAAQMD) Dust Control Measures The following basic construction measures are identified by BAAQMD and shall be incorporated into contract specifications and implemented by the contractor. • All exposed surfaces (e.g., parking areas, staging areas, soil piles, graded areas, and unpaved access roads) shall be watered two times per day; • All haul trucks transporting soils, sand, or other loose material off-site shall be covered; • All visible mud or dirt track-out onto adjacent public roads shall be removed using wet power vacuum street sweepers at least once per day. The use of dry power sweeping is prohibited; • All vehicle speeds on unpaved roads shall be limited to 15 mph • All roadways, driveways, and sidewalks to be paved shall be completed as soon as possible. Building pads shall be laid as soon as possible after grading unless seeding or soil binders are used; • Idling times shall be minimized either City of Palo Alto and its contra ctors City of Palo Alto 1. Include in plans and specifications. 2. Document contractor has complied with plans and specifications. 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 47 by shutting equipment off when not in use or reducing the maximum idling time to 5 minutes (as required by the California airborne toxics control measure Title 13, Section 2485 of California Code of Regulations). Clear signage shall be provided for construction workers at all access points. • All construction equipment shall be maintained and properly tuned in accordance with manufacturer’s specifications. All equipment shall be checked by a certified visible emissions evaluator. • Post a publicly visible sign with telephone number and person to contact at the lead agency regarding dust complaints. This person shall respond and take corrective action within 48 hours. The Air District’s phone number shall also be visible to ensure compliance with applicable regulations. The following additional construction mitigation measures identified by BAAQMD shall be incorporated into contract specifications and implemented by the contractor, to supplement the proposed standard project requirement. • All exposed surfaces shall be watered at a frequency adequate to maintain minimum soil moisture of 12 percent. Moisture content can be verified by lab samples or moisture probe. • All excavation, grading, and/or demolition activities shall be suspended when average wind speeds exceed 20 mph. 150819 jb 0131480 48 • Wind breaks (e.g., trees, fences) shall be installed on the windward side(s) of actively disturbed areas of construction. Wind breaks should have at maximum50 percent air porosity. • Vegetative ground cover (e.g., fast-germinating native grass seed) shall be planted in disturbed areas as soon as possible and watered appropriately until vegetation is established. • The simultaneous occurrence of excavation, grading, and ground-disturbing construction activities on the same area at any one time shall be limited. Activities shall be phased to reduce the amount of disturbed surfaces at any one time. • All trucks and equipment, including their tires, shall be washed off prior to leaving the site. • Site accesses to a distance of 100 feet from the paved road shall be treated with a 6 to 12 inch compacted layer of wood chips, mulch or gravel. • Sandbags or other erosion control measures shall be installed to prevent silt runoff to public roadways from sites with a slope greater than one percent. • Idling time of diesel powered construction equipment shall be minimized to two minutes. • The project shall develop a plan demonstrating that off-road equipment (more than 50 horsepower) to be used in the construction project (i.e., owned, leased, and subcontractor vehicles) would achieve a project wide fleet- 150819 jb 0131480 49 average 20 percent NOx reduction and 45 percent PM reduction compared to the most recent ARB fleet average. Acceptable options for reducing emissions include the use of late model engines, low-emission diesel products, alternative fuels, engine retrofit technology, after-treatment products, add-on devices such as particulate filters, and/or other options as such become available. • Use low VOC (i.e., ROG) coatings beyond the local requirements (i.e., Regulation 8, Rule 3: Architectural Coatings). • All construction equipment, diesel trucks and generators shall be equipped with Best Available Control Technology for emission reductions of NOx and PM. • All contractors shall use equipment that meets CARB’s most recent certification standard for off-road heavy duty diesel engines. Item c Have the potential to result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non- attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative -- See Item b above for Bay Area Air Quality Management District (BAAQMD) Dust Control Measures 150819 jb 0131480 50 thresholds for ozone precursors)? Item d Have the potential to expose sensitive receptors to substantial levels of toxic air contaminants? -- See Item b above for Bay Area Air Quality Management District (BAAQMD) Dust Control Measures Items b, c, d Violate any air quality standard or contribute substantially to an existing or projected air quality violation? Have the potential to result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors)? Have the potential to expose sensitive receptors to substantial levels of toxic air AIR-1 Mitigation Measure AIR-1. Two Crew Construction of Proposed Pipeline (using open trench construction technique) and Pump Station Restrictions. To ensure NOx emissions do not exceed the BAAQMD threshold, the City shall either: 1. Incorporate into contract specifications the requirement for contractors to limit open trench construction of the proposed pipeline to one crew (rather than two crews) and sequence the pump station construction so that it would be constructed one at a time, not concurrent with any other activity; or 2. Upon refinement of the construction details and assumptions for equipment use, dimensions of the trenches, rate of construction, backfill volume, the City shall rerun the air quality model analysis to confirm whether simultaneous construction of the proposed pipeline or pump stations would result in exceedance of BAAAMD NOx emissions threshold. If NOx threshold is exceeded, then the City shall implemented item 1 above. If NOx threshold is not exceeded, then the City would be able to proceed with concurrent construction of two pipelines (using open trench construction) / two pump stations City of Palo Alto and its contractor City of Palo Alto 1. Document construction method to be used. 2. Confirm that appropriate limitations have been included in plans and specifications. 3. Include in plans and specifications the appropriate method for sequencing / limiting construction, as needed. If thresholds are not exceeded, the City may proceed with construction using two crews. If thresholds are exceeded, sequence / limit construction such that NOx 1. Facility Planning / Design 2. Design 3. Construction 1.________ 2.________ 3._________ 150819 jb 0131480 51 contaminants? accordingly. emissions thresholds are not exceeded. 4. Document contractor has complied with plans and specifications. 4.________ BIOLOGICAL RESOURCES Item a Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? -- Health and Safety and Hazardous Materials Management and Spill Prevention Control Plans The City shall require the contractor to prepare a Health and Safety Plan and Hazardous Materials Management and Spill Prevention and Control Plan prior to commencement of construction that includes a project-specific contingency plan for hazardous materials and waste operations. The Health and Safety Plan shall be applicable to all construction activities, and shall establish policies and procedures according to federal and California Occupational Safety and Health Administration (OSHA) regulations for hazardous materials Health and Safety Plans, and the City of Palo Alto’s Pollution Prevention plan sheet. Elements of the plan shall include, but not be limited to, the following: • Discussion of hazardous materials management, including delineation of hazardous material storage areas, access and egress routes, waterways, emergency assembly areas, and temporary hazardous waste storage City of Palo Alto and its contra ctors City of Palo Alto 1. Document that requirement is included in plans and specifications. 2. Document contractor has complied with the plans and specifications. 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 52 areas; • Notification and documentation of procedures; and • Spill control and countermeasures, including employee spill prevention/response training. Item a Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? -- See HYD-1 for Best Management Practices – Stormwater Quality Item b Have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, including federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through -- See Biological Resources, Item a above 150819 jb 0131480 53 direct removal, filling, hydrological interruption, or other means? Item d Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? -- See Biological Resources, Item a above See AES-1 above for Compliance with the Tree Technical Manual Items a, b, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Have a substantial adverse effect on any riparian habitat or other sensitive natural community BIO-1 Mitigation Measure BIO-1: Protection of Sensitive Habitats and Jurisdictional Features. The proposed project has been designed to avoid impacts to sensitive habitats, including jurisdictional wetlands and waters. However, indirect impacts to jurisdictional waters could occur as a result of the proposed project. The following general measures will be implemented during the construction and operation of the proposed project to minimize indirect impacts to sensitive habitats and jurisdictional features: • All construction equipment will use identified staging areas and access roads located in upland areas. When accessing work sites, travel and parking of vehicles and equipment will be limited to pavement, existing roads, and previously disturbed areas (except where overland travel is required). Construction workers will not be allowed to enter sensitive areas that 1, 2. City of Palo Alto or its contractor 2. Contractor 3, 4. City of Palo Alto City of Palo Alto 1. Document that requirements are included in plans and specifications. Confirm measures are implemented. 2. Inspect construction sites to confirm plans and specifications implemented during construction. 3. Inspect construction sites to confirm plans and specifications implemented after 1. Design 2. Construction 3. Post- Construction, before operation. 1.________ 2.________ 3.________ 150819 jb 0131480 54 identified in local or regional plans, policies, regulations, including federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? have been fenced or staked. • Ground disturbance and vegetation removal will not exceed the minimum amount necessary to complete work at the site. • The following BMPs shall be incorporated into the SWPPP as protective measures to address wind- or water-related erosion: o No discharge of pollutants from vehicle and equipment cleaning will be allowed into storm drains, wetlands, or water courses. o No vehicles may be refueled within 100 feet of wetlands, streams, or other waterways. Vehicles operating adjacent to wetlands and waterways must be inspected and maintained daily to prevent leaks. o Waste facilities will be maintained. Waste facilities include concrete wash-out facilities, portable toilets, and hydraulic fluid containers. Waste will be removed to a proper disposal site. • After construction is completed, a final cleanup will include removal of all stakes, temporary fencing, flagging, and other refuse generated by construction. construction is completed. Items a, d Have a substantial adverse effect, either directly or through habitat modifications, BIO-2 Mitigation Measure BIO-2: Protection of CRLF. Construction activities associated with the creek crossing (Matadero Creek near Deer City of Palo Alto City of Palo 1. Confirm requirement is included in plans and 1. Design 2. Construction 1.________ 150819 jb 0131480 55 on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? Creek Road) will be limited to the dry season (generally April 15 to October 15) to the extent feasible. or its contra ctor Alto specifications. 2. Confirm construction occurs in compliance with plans and specifications. 2.________ Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California BIO-3 Mitigation Measure BIO-3: Employee Education Program (required for CRLF, BUOW, and CCR if preconstruction surveys determine they are present). An employee education program will be conducted by a qualified biologist, consisting of a brief presentation to explain special-status species concerns to contractors, their employees, and any other personnel involved in the project. The program will include the following: a description of relevant special-status species and their habitat needs as they 1. City of Palo Alto or its contractor 2. Contr actors City of Palo Alto 1. Confirm requirement is included in plans and specifications the need to conduct an employee-education program as described in Mitigation Measure BIO-3. 1. Design 2. Pre-construction 1.________ 150819 jb 0131480 56 Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? pertain to the project; a report of the occurrence of these species in the project vicinity, as applicable; an explanation of the status of these species and their protection under the MBTA, California Fish and Game Code, and other statutes; and, a list of measures being taken to reduce potential impacts to natural resources during project construction and implementation. A fact sheet conveying this information will be prepared for distribution to the above- mentioned people and anyone else who may enter the project area. Upon completion of training, employees will sign a form stating that they attended the training and understand all of the conservation and protection measures. Construction crews will be informed during the education program meeting that, to the extent possible, travel within the marked project area will be restricted to established roadbeds. 2. Upon completion of training, have Contractor employees sign a form stating they have attended training and understand conservation and protection measures. 2.________ Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? BIO-4 Mitigation Measure BIO-4: Monitoring During Construction. A qualified biologist will be retained to monitor construction activities associated with the creek crossing (Matadero Creek near Deer Creek Road). The biologist will have expertise with CRLF biology and ecology. The biologist will have the authority to halt work if a special-status species is observed. 1. City of Palo Alto or its contra ctors City of Palo Alto 1. Confirm requirement is included in plans and specifications the need for monitoring at Matadero Creek during construction. 2. Retain biologist to monitor creek crossing activities. 3. Confirm monitoring at creek crossing. 1. Design 2. Prior to/during construction 3. Construction 1.________ 2.________ 3.________ 150819 jb 0131480 57 Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree BIO-5 Mitigation Measure BIO-5: General Measures to Reduce Impacts to Wildlife Species. The following shall be relevant to the following species: California red-legged frog, burrowing owl, and the California Clapper Rail. • All excavations left open overnight will either be covered to prevent wildlife from becoming entrapped or will include escape ramps. In addition, excavations must be inspected for wildlife at the start of each workday and prior to back filling. The USFWS and/or CDFW will be contacted prior to removing or relocating any special- status wildlife within the excavation. • Food items may attract wildlife into construction areas, which would expose them to construction-related hazards. The construction areas will be maintained in a clean condition. All trash (e.g., food scraps, cans, bottles, containers, wrappers, cigarette butts, and other discarded items) will be placed in closed containers and properly disposed of. City of Palo Alto’s contractor City of Palo Alto 1. Confirm requirement is included in plans and specifications the conditions in BIO-5. 2. If special-status wildlife found in excavations, halt work and resume after it leaves or consult with USFWS and/or CDFW prior to removing or relocating species. 3. Confirm compliance with plans and specifications. 1. Design 2. Construction 3. Construction 1.________ 2.________ 3.________ 150819 jb 0131480 58 Preservation Ordinance (Municipal Code Section 8.10)? If an animal is found at a work site and is believed to be a protected species, work must be halted until the animal leaves of its own accord or the USFWS and/or CDFW is consulted to relocate the species. Care shall be taken not to harm the species. No wildlife or plant species will be handled and/or removed from the site by anyone except approved biologists. Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? BIO-6 Mitigation Measure BIO-6: Burrowing Owl Pre-Construction Surveys. Pre-construction BUOW surveys will be conducted in suitable habitat for BUOW (i.e., in pastureland habitat between Deer Creek Road and Hillview Avenue and in the vicinity of the RWQCP) in accordance with the recommendations and guidelines provided in the Staff Report on Burrowing Owl Mitigation (Department of Fish and Game, March 2012). If no BUOW or BUOW sign is observed no further action will be required. If BUOW or BUOW sign is observed then no disturbance will occur within 160 feet of occupied burrows during the non- breeding season (September 1 through January 31) or within 250 feet during the breeding season (February 1 through August 31). A qualified biologist will be present in these locations to monitor construction and ensure the BUOW is not disturbed. City of Palo Alto or its contractors City of Palo Alto 1. Confirm requirement is included in plans and specifications the conditions in BIO-6. 2. Confirm pre-construction Burrowing Owl surveys are conducted to determine presence / absence. If no BUOW / BUOW sign is observed, no further action is required. 3. If signs of Burrowing Owls are observed, ensure no disturbance within the identified buffer and have a biologist 1. Design 2. Pre-construction 3. Construction 4. Pre-construction/ Construction 1.________ 2.________ 3.________ 150819 jb 0131480 59 present to monitor construction 4. Document contractor has complied with plans and specifications. 4.________ Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? BIO-7 Mitigation Measure BIO-7: Buffer for California Clapper Rail or Survey. Construction activities within 500 feet of the marshland habitat surrounding the RWQCP will be conducted outside the breeding season for CCR (i.e., September 1 through January 31). If this is not feasible, a qualified biologist will conduct protocol-level surveys for CCR in accordance with the California Clapper Rail Draft Survey Protocol (USFWS 2000). A qualified biologist is an individual who has experience conducting protocol-level surveys for CCR. Prior to commencement of the surveys, the biologist will prepare a brief letter report describing the survey design and submit it to the USFWS and the CDFW for review and approval. Upon the completion of the surveys, results will be submitted to the USFWS and CDFW for a final decision on the possibility of doing work during the breeding season for CCR. City of Palo Alto or its contractors City of Palo Alto 1. Confirm requirement is included in plans and specifications the conditions that if construction occurs within 500 feet of the marshland habitat during CCR’s breeding season, retain qualified biologist to conduct survey. 2. Have biologist prepare a brief letter report describing survey and submit to USFWS and CDFW (if survey needed). 3. Confirm biologist conducts protocol-level surveys and 1. Design 2. Pre-construction 3. Pre-construction 4. Construction 1.________ 2.________ 3.________ 150819 jb 0131480 60 submits results to USFWS and CDFW. 4. Confirm implementation of final decision from USFWS and CDFW. 4.________ Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? BIO-8 Mitigation Measure BIO-8: Measure to Protect Nesting Birds. If equipment staging, site preparation, grading, excavation, or other project-related construction activities are scheduled to occur during the avian nesting season (generally February 1 to September 1), a focused survey for active nests will be conducted by a qualified biologists within 15 days prior to the beginning of project-related activities. Surveys will be conducted in all suitable habitat located at project work sites, and in staging or storage areas. Surveys will be conducted at the appropriate times of day (e.g., dawn or dusk), and during the appropriate nesting times and will concentrate on areas of suitable habitat. If a lapse in project-related activities of 15 days or longer occurs, another focused survey will be conducted. If no active nests are found, then no further mitigation is required. If an active nest is found within the surveyed areas, an appropriate exclusion buffer will be established by a qualified biologist and the exclusion buffer will be maintained until the young have fledged or will no longer be impacted by the project. A qualified biologist will be present to monitor construction activities in the vicinity of the nest and ensure the nesting species is not disturbed. If a species appears disturbed by construction activities (as determined by a qualified biologist) work will be halted and the USFWS and/or CDFW will be City of Palo Alto or its contra ctors City of Palo Alto 1. Confirm requirement is included in plans and specifications. 2. Confirm any necessary surveys are conducted. 3. If active nests are found during the survey, verify installation of buffer and completion of monitoring. 4. Verify coordination with USFWS and/or CDFW if needed. 5. Document contractor has complied with plans and specifications. 1. Design 2. Pre-construction 3. Pre-construction 4. Construction 5. Pre-construction/ Construction 1.________ 2.________ 3.________ 4.________ 5.________ 150819 jb 0131480 61 consulted. Project activities will not resume without approval from the USFWS and/or CDFW. Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? BIO-9 Mitigation Measure BIO-9: Bat Preconstruction Surveys. Preconstruction day and night-roost surveys will be conducted to avoid impacts to bats. The survey will be conducted by a qualified bat biologist following the protocol in the Bats and Bridges Technical Bulletin (Erickson et al. 2003) to determine if bats are using the bridges as a roost site. If a roost is observed, the CDFW and/or USFWS will be consulted and additional mitigation measures will be implemented. Example measures include working during the daytime if night roosts are present, no clearing or grubbing adjacent to the roost, no work within 100 feet of the roost, no lighting near the roost where it could shine on the roost structure. City of Palo Alto and its contra ctors City of Palo Alto 1. Confirm requirement is included in plans and specifications. 2. For bridge crossings, confirm pre-construction bat roost surveys are conducted. 3. If a roost is observed document consultation with CDFW and/or USFWS. 4. Verify implementation of any measures specified by CDFW and USFWS. 5. Document contractor has complied with plans and specifications. 1. Design 2. Pre-construction 3. Construction 4. Construction 5. Pre-construction/ Construction 1.________ 2.________ 3.________ 4.________ 5.________ Items a, d Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a BIO-10 Mitigation Measure BIO-10: Bats Breeding Season Surveys. Construction activities near Adobe Creek crossing near Middlefield Road, the Barron Creek crossing near Cowper Street, and the Matadero Creek crossing near Cowper City of Palo Alto and its City of Palo Alto 1. Confirm requirement is included in plans and specifications. 1. Design 2. Pre-construction 3. Pre-construction 4. Construction 5. Pre-construction/ 1.________ 150819 jb 0131480 62 candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or as defined by the City of Palo Alto’s Tree Preservation Ordinance (Municipal Code Section 8.10)? Street will be scheduled to avoid the bat breeding season (April through August) to the extent feasible. If work in these locations is required in the breeding season, a survey for bats will be conducted. The survey will be conducted by a qualified bat biologist following the protocol in the Bats and Bridges Technical Bulletin (Erickson et al. 2003) to determine if bats are using the bridges as a roost site. If a roost is observed, the CDFW and/or USFWS will be consulted and additional mitigation measures will be implemented. Example measures include excluding bats from directly affected work areas or replacing the roost location. contractors 2. If construction occurs during the bat breeding season, confirm pre-construction survey are conducted. 3. If a roost is observed, document consultation with CDFW and/or USFWS. 4. If needed, document implementation of the measures specified by CDFW and USFWS. 5. Document contractor has complied with plans and specifications. Construction 2.________ 3.________ 4.________ 5.________ CULTURAL RESOURCES Item a Have the potential to directly or indirectly destroy a local cultural resource that is recognized by City Council resolution? -- Protection of Cultural Resources Should any previously undiscovered historic or prehistoric archaeological deposits be discovered during construction, work shall stop within 50 feet of the discovery, until such time that the discovery can be evaluated by a qualified archaeologist and appropriate mitigative action taken as determined necessary in consultation with the lead Federal agency for NHPA Section 106 compliance, in accordance with 36 CFR Part 800.13, and the City. Measures might include preserving in situ the City of Palo Alto and its contra ctors City of Palo Alto 1. Confirm requirement is included in plans and specifications. 2. Document contractor has complied with plans and specifications. 3. If archeological deposits are 1. Design 2. Construction 3. Construction 4. Construction 1.________ 2.________ 3.________ 150819 jb 0131480 63 archaeological resource or an archaeological monitoring or data recovery program. Prehistoric archaeological site indicators include chipped chert and obsidian tools, and tool manufacturing waste flakes, grinding implements such as mortars and pestles, and darkened soil that contains dietary debris such as bone fragments and shellfish remains. Historic site indicators include, but are not limited to, ceramics, glass, wood, bone, and metal remains. Section 7050.5(b) of the California Health and Safety code will be implemented in the event that human remains, or possible human remains, are located during Project-related construction excavation. Section 7050.5(b) states: In the event of discovery or recognition of any human remains in any location other than a dedicated cemetery, there shall be no further excavation or disturbance of the site or any nearby area reasonably suspected to overlie adjacent remains until the coroner of the county in which the human remains are discovered has determined, in accordance with Chapter 10 (commencing with Section 27460) of Part 3 of Division 2 of Title 3 of the Government Code, that the remains are not subject to the provisions of Section 27492 of the Government Code or any other related provisions of law concerning investigation of the circumstances, manner and cause of death, and the recommendations concerning treatment and disposition of the human remains have been made to the person responsible for the excavation, or to discovered during construction, document that appropriate action is taken. 4. If human remains, or possible remains are located, confirm implementation of California Health and Safety code section 7050.5(b). 4.________ 150819 jb 0131480 64 his or her authorized representative, in the manner provided in Section 5097.98 of the Public Resources Code. The County Coroner, upon recognizing the remains as being of Native American origin, is responsible for contacting the Native American Heritage Commission (NAHC) within 24 hours. The Commission has various powers and duties to provide for the ultimate disposition of any Native American remains, as does the assigned Most Likely Descendant. Sections 5097.98 and 5097.99 of the Public Resources Code also call for protection from inadvertent destruction. To achieve this goal, the construction personnel on the Project would be instructed as to the potential for discovery of cultural or human remains, the need for proper and timely reporting of such finds, and the consequences of failure thereof. Item b Cause a substantial adverse change in the significance of an archaeological resource pursuant to 15064.5? -- See Cultural Resources Item a above Item c Have the potential to directly or indirectly destroy a unique paleontological resource or site or unique geologic feature? -- Protection of Paleontological Resources If paleontological resources are discovered during earthmoving activities, the construction crew would immediately cease work near the find. In accordance with Society of Vertebrate Paleontology guidelines (Society of Vertebrate Paleontology 2010), a qualified paleontologist would assess the nature and importance of the find and recommend appropriate salvage, treatment, and future monitoring and mitigation. City of Palo Alto and its contractors City of Palo Alto 1. Confirm requirement is included in plans and specifications. 2. If paleontological resources are discovered, document appropriate treatment. 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 65 Item d Have the potential to disturb any human remains, including those interred outside of formal cemeteries? -- See Cultural Resources Item a above Item e Have the potential to adversely affect a historic resource listed or eligible for listing on the National and/or California Register, or listed on the City’s Historic Inventory? -- See Cultural Resources Item a above Item f Have the potential to eliminate important examples of major periods of California history or prehistory? -- See Cultural Resources Item a above Items a, b, d, e, f Have the potential to directly or indirectly destroy a local cultural resource that is recognized by City Council resolution? Cause a substantial adverse change in the significance of an archaeological resource pursuant to 15064.5? Have the potential to disturb any human remains, including those interred outside of formal cemeteries? CR-1 Mitigation Measure CR-1: Subsurface Testing. A program of sub-surface testing shall be conducted to determine whether buried resources are present within the areas of high or high to moderate archaeological sensitivity that will be impacted by Project construction. Only those locations where design confirms that the proposed pipeline would be buried at archaeologically sensitive locations will require subsurface testing. A testing program will be developed to determine the best approach for each location, considering the physical constraints of the urban setting (e.g., structures, traffic). The testing program could consist of multiple core extractions at individual sites; the locations and depths of the bore holes would be determined on the basis of projected depths of excavation at the individual work areas. A qualified archaeologist would monitor the testing efforts, and inspect the cores for City of Palo Alto and its contractors City of Palo Alto 1. Document completion of sub-surface testing. 2. If resources are present and avoidance is not feasible, document completion of ARDP. If findings are positive, confirm an ADRP is developed in consultation with relevant agencies which identify 1. Design, upon selection of the construction methods. 2. Pre-construction 3. Pre-construction/ Construction 1.________ 2.________ 150819 jb 0131480 66 Have the potential to adversely affect a historic resource listed or eligible for listing on the National and/or California Register, or listed on the City’s Historic Inventory? Have the potential to eliminate important examples of major periods of California history or prehistory? prehistoric archaeological site indicators (e.g., chipped chert and obsidian tools, and tool manufacturing waste flakes, grinding implements such as mortars and pestles, and darkened soil that contains dietary debris such as bone fragments and shellfish remains) and historic site indicators (e.g., ceramics, glass, wood, bone, and metal remains). If the findings of the subsurface testing are negative, then no further actions (e.g., further testing or archaeological monitoring) would be recommended as necessary for NHPA Section 106 compliance, although consultation with SHPO would still be needed to formally complete the Section 106 process. If the findings of the subsurface testing are positive (and avoidance of the archaeological site is not feasible or practicable through project redesign), then a qualified archaeologist will develop an archeological data recovery plan (ADRP) in consultation with the City, the lead Federal agency, the SHPO and other appropriate consulting parties, as applicable, in accordance with the requirements of 36 CFR Part 800. The ADRP shall identify how the proposed data recovery program will used to evaluate and preserve the significant information the archaeological resource is expected to contain. That is, the ADRP will identify what scientific/historical research questions are applicable to the expected resource, what data classes the resource is expected to possess, and how the expected data classes would address the applicable research questions. Implementation of the ADRP through the development and execution of an appropriate agreement document by the appropriate measures. 3. Confirm implementation of the measures identified in the ADRP. 3.________ 150819 jb 0131480 67 lead Federal agency, the SHPO, the City, and any other identified signatories, would satisfy the requirements of NHPA Section 106 as outlined at 36 CFR § 800.6. Whether the results of subsurface testing are negative or positive, if Federal funding for the Project is approved, full compliance with Section 106 of the NHPA as determined by the lead Federal agency will be required prior to Project construction. GEOLOGY, SOILS, and SEISMICITY Item a Have the potential to expose people or structures to potential substantial adverse effects, including the risk of loss, injury, or death involving rupture of a known earthquake fault, groundshaking, liquefaction or landslides? -- Geologic Report for Potentially Affected Facilities During the design phase for the Project, the City shall require preparation of a Geologic Report by a geologist registered in the State of California for facilities that could be affected by seismic-related hazards or unstable soils (e.g., liquefaction and expansive soils). • The Geologic Report shall include an engineering analysis of liquefaction and the potential for expansive soils at the pump stations. This assessment shall include a liquefaction assessment study in accordance with the California Geological Survey Special Publication 117 Guidelines. If this report finds unstable soils would present potential risks associated with liquefaction, engineering recommendations for surface and subsurface drainage specifications and detailed design for fill placement and excavation shall be provided. City of Palo Alto and its contractors City of Palo Alto 1. Document preparation of Geologic Report. 2. Document incorporation of recommendations in plans and specifications. . 1. Design 2. Design 1.________ 2.________ Item b Result in substantial soil erosion or the loss of topsoil -- See HYD-1 for Best Management Practices – Stormwater Quality Item c Result in substantial siltation. -- See HYD-1 for Best Management Practices – Stormwater Quality 150819 jb 0131480 68 Item d Be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse. -- See Geology and Soils Item a above. Item e Be located on expansive soil, as defined in Table 18- 1-B of the Uniform Building Code (1994), creating substantial risks to life or property. -- See Geology and Soils Item a above. GREENHOUSE GAS EMISSIONS Item a Have the potential to generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment? AIR-1 See above for AIR-1 information. See Air Quality Item a above. Item b Have the potential to conflict with any applicable plan, policy or regulation of an agency adopted for the purpose of reducing the emissions of greenhouse gases? AIR-1 See above for AIR-1 information. See Air Quality Item a above. 150819 jb 0131480 69 HAZARDS and HAZARDOUS MATERIALS Item a Have the potential to create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials. -- See Biological Resources Item a for Health and Safety and Hazardous Materials Management and Spill Prevention Control Plans See HYD-1 for Discharge of Exceptional Wastewater Item a Have the potential to create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials. -- Storage, Handling, and Use of Hazardous Materials in Accordance with Applicable Laws The City shall ensure that all construction-related hazardous materials and hazardous wastes are stored, handled, and used in a manner consistent with applicable federal, state, and local laws, and the City of Palo Alto’s Pollution Prevention plan sheet. In addition, construction-related hazardous materials and hazardous wastes shall be staged and stored away from stream channels and steep banks to keep these materials a safe distance from near-by residents and prevent them from entering surface waters in the event of an accidental release. City of Palo Alto and its contractors City of Palo Alto 1. Confirm requirements are included in plans and specifications. 2. Confirm measures are implemented during construction. 1. Design 2. Construction 1.________ 2.________ Item a Have the potential to create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials. -- Proper Disposal of Contaminated Soil and/or Groundwater If contaminated soil and/or groundwater is encountered or if suspected contamination is encountered during Project construction, work shall be halted in the area, and the type and extent of the contamination shall be identified. A contingency plan to dispose of any contaminated soil or groundwater would be developed through consultation with appropriate regulatory agencies and consistent with the requirements of the City of Palo Alto’s Pollution Prevention plan sheet and RWQCP’s permit requirements for discharge of exceptional City of Palo Alto and its contra ctors City of Palo Alto 1. Confirm requirements are included in plans and specifications. 2. Confirm measures are implemented during construction. 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 70 wastewater to the sanitary sewer Item b Have the potential to create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment? -- See Hazards and Hazardous Materials Item a above Item c Have the potential to emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school? -- See Hazards and Hazardous Materials Item a above Item e Located on a site which is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would create a significant hazard to the public or the environment? -- See Hazards and Hazardous Materials Item a above Item h Have the potential to impair implementation of or physically interfere with an adopted emergency response plan or emergency -- Traffic Control Plan The City’s Transportation Section would require the contractor to have a full traffic control plan prepared by a registered traffic engineer. The traffic control plan shall be in accordance with the City’s Traffic Control Requirements and would show specific methods for maintaining City of Palo Alto and its contra City of Palo Alto 1. Confirm requirements are included in plans and specifications. 2. Confirm measures are 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 71 evacuation plan? traffic flows to minimize construction impacts on traffic and parking. There are several schools in the vicinity of the Project. These areas would be evaluated more closely to determine whether the traffic control plan is appropriate or if additional measures are needed specific to school areas. Examples of traffic control measures to be considered include: • Identify all roadway locations where special construction techniques (e.g., directional drilling) would be used to minimize impacts to traffic flow; • Develop circulation and detour plans to minimize impacts to local street circulation. This may include the use of signing and flagging to guide vehicles through and/or around the construction zone; • Schedule truck trips outside of peak morning and evening commute hours; • Prohibit construction on collector and arterial streets during morning commute period before 9 a.m. and in the afternoon commute period after 4 p.m.; • Use haul routes, minimizing truck traffic on local roadways to the extent possible; • Consider detours for bicycles and pedestrians in all areas potentially affected by Project construction. Pedestrian and bicycle detours should not be required unless deemed necessary for safety reasons; • Use flagmen to maintain alternating one-way traffic while working on one-half of the street; • Use advance construction signs and ctors implemented during construction. 150819 jb 0131480 72 other public notices to alert drivers of activity in the area; • Use “positive guidance” detour signing on alternate access streets to minimize inconvenience to the driving public; • Install traffic control devices as specified in the California Department of Transportation Manual of Traffic Controls for Construction and Maintenance Work Zones; • Develop and implement access plans for highly sensitive land uses such as police and fire stations, transit stations, hospitals and schools. The access plans would be developed with the facility owner or administrator. To minimize disruption of emergency vehicle access, ask affected jurisdictions to identify detours, which would then be posted by the contractor. Notify in advance the facility owner or operator of the timing, location, and duration of construction activities and the locations of lane closures; • Store construction materials only in designated areas; and • Coordinate with local transit agencies for temporary relocation of routes or bus stops in work zones, as necessary. • Establish methods for minimizing for construction effects on parking (e.g., identifying designated areas for construction worker parking at staging areas). NOISE Item a Have the potential to expose persons to or -- Compliance with Local Noise Ordinance According to the City of Palo Alto’s Noise City of City of 1. Confirm requirements 1. Design 2. Construction 1.________ 150819 jb 0131480 73 generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? Ordinance (Palo Alto Municipal Code Chapter 9.10), for residential and non-residential property, construction, alteration and repair activities which are authorized by a valid city building permit shall be prohibited on Sundays and holidays and shall be prohibited except between the hours of 8:00 a.m. and 6:00 p.m. Monday through Friday, and 9:00 a.m. and 6:00 p.m. on Saturday, provided that the construction, demolition or repair activities during those hours meet the following standards: • No individual piece of equipment shall produce a noise level exceeding 110 dBA at a distance of 25 feet. If the device is housed within a structure on the property, the measurement shall be made outside the structure at a distance as close to 25 feet from the equipment as possible. • The noise level at any point outside of the property plane of the Project shall not exceed 110 dBA. • The holder of a valid construction permit for a construction project in a non-residential zone shall post a sign at all entrances to the construction site upon commencement of construction, for the purpose of informing all contractors and subcontractors, their employees, agents, materialmen and all other persons at the construction site, of the basic requirements of this measure. o The sign(s) shall be posted at least five feet above ground level, and shall be of a white background, with black lettering, which lettering shall be a minimum of one and one-half inches in height. Palo Alto and its contractors Palo Alto are included in plans and specifications. 2. Confirm measures are implemented during construction. 2.________ 150819 jb 0131480 74 o The sign shall read as follows: • CONSTRUCTION HOURS FOR RESIDENTIAL (OR NON- RESIDENTIAL) PROPERTY (Includes Any and All Deliveries) MONDAY - FRIDAY........8:00 a.m. to 6:00 p.m. SATURDAY.........9:00 a.m. to 6:00 p.m. SUNDAY/HOLIDAYS........Construction prohibited. Item a Have the potential to expose persons to or generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? -- Pump Station Design/Noise For the pump station at the Mayfield Soccer Fields, a detailed analysis of the buildings’ sound isolation would be conducted by a qualified acoustical consultant during the engineering design phase of the project. A post- construction field sound measurement shall be conducted by an acoustical consultant to verify that the project operational noise standards are in compliance with relevant City noise standards. City of Palo Alto and its contractors City of Palo Alto 1. Document completion of acoustical analysis and incorporation of measures in design. 2. Verify that operational noise levels are in compliance with City noise standards. 1. Design 2. Post-Construction 1.________ 2.________ Item c Have the potential to create a substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? -- See Noise Item a above Item d Have the potential to create a substantial temporary or periodic increase in ambient noise levels in the -- See Noise Item a above 150819 jb 0131480 75 project vicinity above levels existing without the project? Item g Have the potential to cause the average 24 hour noise level (Ldn) to increase by 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB? -- See Noise Item a above Item h Have the potential to cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? -- See Noise Item a above Item i Have the potential to cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? -- See Noise Item a above Item j Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? -- See Noise Item a above Item k Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an -- See Noise Item a above 150819 jb 0131480 76 exterior Ldn of 60 dB or greater? Item l Generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? -- See Noise Item a above Items a, c, d, g, h, i, j, k, l Have the potential to expose persons to or generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? Have the potential to create a substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to create a substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to cause the average 24 hour noise level NOI-2 Mitigation Measure NOI-1: Noise Control Measures to Reduce Construction Noise. The City shall incorporate into contract specifications all of the following measures: • Impact equipment (e.g., jack hammers, pavement breakers, and rock drills) used for project construction will be hydraulically or electrically powered whenever possible to avoid noise associated with compressed air exhaust from pneumatically powered tools. However, where use of pneumatically powered tools is unavoidable, an exhaust muffler on the compressed air exhaust would be used. This muffler can lower noise levels from the exhaust by up to 10 dBA. External jackets on the tools themselves would be used where feasible, and this could achieve a reduction of 5 dBA. Quieter procedures will be used such as drilling rather than impact equipment whenever feasible. • Wherever possible, sonic or vibratory pile drivers will be used instead of impact pile drivers. If sonic or vibratory pile drivers are not feasible, acoustical enclosures will be provided as necessary to reduce noise levels. Engine and pneumatic exhaust controls on pile drivers will be required as City of Palo Alto and its contractors City of Palo Alto 1. Confirm requirement is included in plans and specifications. 2. Document contractor has complied with plans and specifications. 1. Design. 2. Construction 1.________ 2.________ 150819 jb 0131480 77 (Ldn) to increase by 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB? Have the potential to cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? Have the potential to cause an increase of 3.0 dB or more in an existing residential area where the Ldn currently exceeds 60 dB? Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater? necessary to ensure that exhaust noise from pile driver engines are minimized to the extent feasible. Where feasible, pile holes will be pre-drilled to reduce potential noise and vibration impacts. • All equipment and trucks used for project construction shall use the best available noise control techniques (including mufflers, use of intake silencers, ducts, engine enclosures and acoustically attenuating shields or shrouds) and be maintained in good operating condition to minimize construction noise impacts. All internal combustion engine-drive equipment shall be fitted with intake and exhaust mufflers which are in good condition. • Unnecessary idling of internal combustion engines shall be prohibited. In practice, this would mean turning off equipment if it would not be used for five or more minutes. • Stationary noise-generating construction equipment, such as air compressors and generators, shall be located as far as possible from homes and businesses. • Staging areas shall be located as far as feasibly possible from sensitive receptors. 150819 jb 0131480 78 Generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? Items a, c, d, g, h, i, j, k, l Have the potential to expose persons to or generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? Have the potential to create a substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to create a substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to cause the average 24 hour noise level (Ldn) to increase by NOI-3 Mitigation Measure NOI-2: Pre-Construction Notification. Prior to construction, written notification to residents within 500 feet of the proposed facilities undergoing construction shall be provided, identifying the type, duration, and frequency of construction activities. Notification materials shall also identify a mechanism for residents to register complaints with the City if construction related noise impacts should occur. City of Palo Alto City of Palo Alto 1. Confirm written notifications are sent to residents within 500 feet of the construction area. 1. Pre-construction 1.________ 150819 jb 0131480 79 5.0 decibels (dB) or more in an existing residential area, even if the Ldn would remain below 60 dB? Have the potential to cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? Have the potential to cause an increase of 3.0 dB or more in an existing residential area where the Ldn currently exceeds 60 dB? Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater? 150819 jb 0131480 80 Generate construction noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? Items a, c, d, g, h, i, j, k, l Have the potential to expose persons to or generate noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? Have the potential to create a substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to create a substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? Have the potential to cause the average 24 hour noise level (Ldn) to increase by 5.0 decibels (dB) or NOI-3 Mitigation Measure NOI-3: Design of the Pump Station to Reduce Noise. To ensure the proposed pump station complies with the City’s noise standards, structure openings, including air ventilation would employ acoustical rated louvers, silencers, or other noise-reduction devices, as appropriate, to reduce noise propagation to the outside of the building. City of Palo Alto and its contra ctors City of Palo Alto 1. Confirm requirements are included in plans and specifications. 2. Confirm construction complies with design requirements. 1. Design 2. Construction 1.________ 2.________ 150819 jb 0131480 81 more in an existing residential area, even if the Ldn would remain below 60 dB? Have the potential to cause the Ldn to increase by 3.0 dB or more in an existing residential area, thereby causing the Ldn in the area to exceed 60 dB? Have the potential to cause an increase of 3.0 dB or more in an existing residential area where the Ldn currently exceeds 60 dB? Result in indoor noise levels for residential development to exceed an Ldn of 45 dB? Result in instantaneous noise levels of greater than 50 dB in bedrooms or 55 dB in other rooms in areas with an exterior Ldn of 60 dB or greater? Generate construction 150819 jb 0131480 82 noise exceeding the daytime background Leq at sensitive receptors by 10 dBA or more? TRANSPORTATION AND TRAFFIC Item a Have the potential to exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designated in a general plan policy, ordinance, etc.), taking into account all relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item a Have the potential to exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designated in a general plan policy, ordinance, etc.), taking into account all relevant -- Restoration of Roads to Pre-construction Condition Following construction, the City shall ensure that road surfaces, bicycle routes, and bus stop facilities that are damaged during construction are returned to their pre-construction condition or better. City of Palo Alto and its contra ctors City of Palo Alto 1. Confirm requirements are included in plans and specifications. 2. Confirm completion of road restoration. 1. Design 2. Post-construction 1.________ 2.________ 150819 jb 0131480 83 components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? Item b Conflict with an applicable congestion management program, including but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan and Transportation and Traffic Item a Items a, b Have the potential to exceed the capacity of the existing circulation system, based on an applicable measure of effectiveness (as designated in a general plan policy, ordinance, etc.), taking into account all relevant components of the circulation system, including but not limited to intersections, streets, TRA-2 Mitigation Measure TRA-1: CMP Facilities. The City shall work with VTA to determine when peak hour traffic starts on Page Mill Road, a CMP facility. If peak hour traffic starts around 3 p.m. on this road, then the City shall prohibit construction on this roadway after 3 p.m. City of Palo Alto and its contra ctors City of Palo Alto 1. Document consultation with VTA. 2. Confirm appropriate requirement is included in plans and specifications. 3. Document contractor has complied with plans and specifications. 1. Design 2. Design 3. Construction 1.________ 2.________ 3.________ 150819 jb 0131480 84 highways and freeways, pedestrian and bicycle paths, and mass transit? Conflict with an applicable congestion management program, including but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? Item d Substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment)? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item e Result in inadequate emergency access? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item f Have the potential to result in inadequate parking capacity that impacts traffic circulation and air quality? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item f Have the potential to result in inadequate TRA-2 Mitigation Measure TRA-2: Coordinate construction with Businesses. To reduce the City of City of 1. Document coordination 1. Pre-construction 1.________ 150819 jb 0131480 85 parking capacity that impacts traffic circulation and air quality? disruption of business from the temporary reduction of parking, the City shall coordinate with individual businesses on the timing of construction. Palo Alto Palo Alto with businesses. Item g Conflict with adopted policies, plans, or programs supporting alternative transportation (e.g., pedestrian, transit & bicycle facilities)? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item n Impede the development or function of planned pedestrian or bicycle facilities? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Item o Impede the operation of a transit system as a result of congestion? -- See Hazards and Hazardous Materials Item h above for Traffic Control Plan Not Yet Approved 150807 jb 0131478 Resolution No. ______ Resolution of the Council of the City of Palo Alto Accepting a Modification to the City’s Long Range Facilities Plan for the Regional Wastewater Quality Control Plan which includes the Recycled Water Project and Authorizing the City Manager or his Designee to Initiate Preliminary Design and Prepare a Funding Plan for the Project R E C I T A L S A. Potable water is one of our most precious natural resources and is becoming increasingly scarce in the semiarid State of California. B. The use of treated, nonpotable water for construction, toilet and urinal flushing and irrigation will increase the amount of potable water available for other uses in the City. C. Extending the Recycled Water Distribution System will allow the City to maximize recycled water as a supplemental water source, thereby improving potable water supply reliability by conserving drinking water, which is currently use for irrigation and other non‐ potable uses. D. Recycled water provides a dependable, drought‐proof, locally controlled non‐ potable water source. E. Increasing recycled water use from the Regional Water Quality Control Plant will reduce discharge to the San Francisco Bay. F. Increasing recycled water use will reduce reliance on imported water. G. Council certified the Program Environmental Impact Report for the projects identified in the 1992 Water Reclamation Master Plan for the Regional Water Quality Control Plant (CMR: 217:95); the current project is Phase 3 of the Water Reclamation Master Plan. H. In 2006 Council approved proceeding with preparation of a Recycled Water Facility Plan and the development of environmental documentation for expanding the recycled water distribution system in Palo Alto (CMR: 415:06). I. Council approved the Long Range Facilities plan for the Regional Water Quality Control Plant (CMR: 2914: 12). J. The Council has certified the Final Environmental Impact Report for the Proposed Recycled Water Distribution Project (Resolution XX) NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: Not Yet Approved 150807 jb 0131478 SECTION 1. The Council approves a modification to the Long Range Facilities Plan for the Regional Wastewater Quality Control Plant, which was previously accepted by the City Council on July 2, 2012, and modified in October 2012. That Plan shall now include the City’s planned improvements described in detail in the City of Palo Alto Recycled Water Project Final Environmental Impact Report (State Clearinghouse No. 2011062037) (“the Final EIR”). The Final EIR is now part of the Long Range Facilities Plan. The Council hereby directs the City Manager and City staff to proceed with development of the Recycled Water Project. SECTION 2. The Council hereby authorizes the City Manager or his designee on behalf of the City to initiate preliminary design and to seek funding for the Recycled Water Project. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Assistant City Attorney City Manager ___________________________ Director of Public Works ___________________________ Director of Administrative Services Not Yet Approved 150807 jb 0131478 City of Palo Alto Recycled Water Project Final Environmental Impact Report Response to Comments Document State Clearinghouse No. 2011062037 Prepared by: July 2015 Palo Alto Recycled Water Project Page i Response to Comments Document TABLE OF CONTENTS Chapter 6 Introduction ...................................................................................................1 6.1 Purpose of the Final Environmental Impact Report..................................................1 6.2 Environmental Review Process.................................................................................1 6.3 Report Organization ..................................................................................................2 Chapter 7 Response to Comments .................................................................................5 7.1 Master Response (Recycled Water Quality and Trees)........................................5 7.2 Individual Comments and Responses.................................................................11 Comment Letter 1 –State Water Resources Control Board (SWRCB)........................16 Comment Letter 2 -California Department of Transportation (Caltrans).....................23 Comment Letter 4 –Stanford University......................................................................29 Comment Letter 5 -Canopy..........................................................................................31 Comment Letter 6 -Santa Clara Valley Transportation Authority...............................33 Comment Letter 7 –California Native Plant Society (CNPS)......................................35 Comment Letter 8 –Governor’s Office of Research and Planning, State Clearinghouse and Planning Unit..........................................................................................................38 Comment Letter 9 –Santa Clara Valley Audubon Society...........................................40 Chapter 8 EIR Revisions..............................................................................................41 Staff-Initiated Changes and Changes in Response to Public Comments ......................41 City of Palo Alto Recycled Water Project Introduction Final EIR Responses to Comments Palo Alto Recycled Water Project Page 1 Response to Comments Document Chapter 6 Introduction 6.1 Purpose of the Final Environmental Impact Report This report has been prepared to accompany the Public Draft Environmental Impact Report (EIR) for the Palo Alto Recycled Water Project. The Public Draft EIR identified the impacts / environmental consequences associated with construction and operation of the proposed Project and recommended mitigation measures to reduce potentially significant impacts. This document (Response to Comments) responds to the comments on the Public Draft EIR and makes revisions to the Public Draft EIR,as necessary, in response to these comments. Together with the Public Draft EIR, this document constitutes the Final EIR for the proposed project.A Mitigation Monitoring and Reporting Program (MMRP)for the proposed project is included in this document as Appendix A. The Final EIR consists of the following: (a) The Public Draft EIR; and (b) Response to Comments document containing the following: ·Comments received on the Public Draft IS/MND. ·A list of persons, organizations, and public agencies commenting on the Public Draft EIR. ·The response of the lead agency to significant environmental points raised in the review and consultation process. ·Staff-initiated text changes added by the lead agency to clarify information presented in the Public Draft EIR. 6.2 Environmental Review Process The Palo Alto Regional Water Quality Control Plant (RWQCP)is owned and operated by the City of Palo Alto for the communities of Los Altos, Los Altos Hills, Mountain View, Palo Alto, Stanford University and the East Palo Alto Sanitary District. The City and the RWQCP member agencies prepared the Water Reclamation (now referred to as Recycled Water) Master Plan (Master Plan) for the Palo Alto RWQCP in 1992 and the accompanying Final Program Environmental Impact Report (EIR) in 1995 (CH2MHill, 1995). The Master Plan included a phased approach to the expansion of treatment, distribution, storage, and use of recycled water and evaluated, at a program-level, development of a regional water reuse system that could ultimately provide service to the entire RWQCP service area including the cities of Palo Alto, Mountain View, Los Altos, East Palo Alto, Los Altos Hills, part of Menlo Park, as well as Stanford University. The proposed Project is Phase 3 of the RWQCP recycled water system. On April 20, 2015, the City of Palo Alto (lead agency) released the Palo Alto Recycled Water Project Public Draft EIR for public review (State Clearinghouse No. 2011062037). The Public Draft EIR evaluates project-specific impacts of the Palo Alto Recycled Water Project, which is the next phase of the Recycled Water Master Plan. The public review and comment period on the Public Draft EIR began on April 20, 2015 and closed on June 4, 2015. The public review period was extended to June 8 at the request of the Santa Clara Valley Audubon Society. The City of Palo Alto City Council is scheduled to consider certifying the Final EIR (a finding that the EIR complies with the requirements of CEQA) at a regularly scheduled Council meeting in October 2015. Following Final EIR certification, the City Council may proceed with consideration of project approval actions. City of Palo Alto Recycled Water Project Introduction Final EIR Responses to Comments Palo Alto Recycled Water Project Page 2 Response to Comments Document In accordance with CEQA Guidelines Section 15087, the City provided a Notice of Availability (NOA) notifying the public of the publication of the Public Draft EIR. The notice was sent via regular mail and email. Copies of the Public Draft EIR were sent to responsible agencies as well as the State Clearinghouse. Additional notification was provided through the publication of a legal notice in the Palo Alto Weekly on April 24, 20151. During the 49-day public comment period, two public meetings were held on May 19, 2015 and May 21, 2015 at the Mitchell Park Community Center in the City of Palo Alto to discuss the proposed project and receive comments on the Public Draft EIR. The date, time, and place of the meeting were identified in the NOA, the Palo Alto Weekly on April 24, 2015, as well as the City’s website.Public meeting sign-in sheets were passed around at the meeting and are included in this document as Appendix B.Two public citizens attended the meeting on May 19 and four public citizens attended the meeting on May 212. No verbal or written comments were made at the first meeting, and verbal comments from the second meeting were provided in letter format subsequent to the meeting. In addition, the City met with Stanford University separately on May 18 to discuss comments on the Public Draft EIR. 6.3 Report Organization Chapter 7 of this Response to Comments document contains copies of comment letters received during the comment period followed by the City’s responses to those comments. Each comment is numerically coded in the margin of the comment letter, based on the number assigned for each letter (see Table 6-1 below) and the order of the comments. For example, the first comment in the letter from the State Water Resources Control Board (SWRCB) is 1-1. Because many of the comments concerned the issue of recycled water quality and effects on redwood trees/urban forest, a master response regarding this topic has been prepared and is presented up front, before the responses to the individual comments. Revisions to the Public Draft EIR are made as a staff-initiated change or in response to comments, and are shown in Chapter 8, EIR Revisions. Text revisions are formatted in revision fashion: strikeouts indicate removed text and underlines indicate new text. The Public Draft EIR is not reprinted with the revisions included. Rather, as discussed above, the Public Draft EIR, along with the Responses to Comments document, together constitute the Final EIR. Table 6-1 lists all persons and organizations that submitted comments on the Public Draft EIR during the comment period, the date of the letters, and the numbers used to identify each letter. Each communication is identified below by number, comment author and date. 1 http://www.paloaltoonline.com/morguepdf/2015/2015_04_24.paw.section1.pdf2More than two individuals attended the meeting on May 19 and included representatives of the City. One of the private citizens attending the meeting on May 19 elected not to be included on the sign-in sheet. City of Palo Alto Recycled Water Project Introduction Final EIR Responses to Comments Palo Alto Recycled Water Project Page 3 Response to Comments Document Table 6-1: Comment Letters Comment Letter Number Comment Author, Title and Affiliation Comment Letter Date 1 Ahmad Kashkoli, Senior Environmental Scientist, State Water Resources Control Board May 13, 2015 2 Patricia Maurice, District Branch Chief, Local Government –Intergovernmental Review, California Department of Transportation June 3, 2015 3 Dawn S. Cameron, County Transportation Planner, County of Santa Clara Roads and Airports Department June 4, 2015 4 Jim Inglis, Director of Design & Construction, and Jean McCown, Assistant Vice- President, Stanford University Real Estate Office. June 4, 2015 5 Catherine Martineau, Executive Director, Canopy June 4, 2015 6 Roy Molseed, Senior Environmental Planner, Santa Clara Valley Transportation Authority June 4, 2015 7 Linda Ruthruff, Chair, Conservation Committee, California Native Plant Society, Santa Clara Valley Chapter June 4, 2015 8 Scott Morgan, Director, State Clearinghouse June 4, 2015 9 Shani Kleinhaus, Ph.D., Environmental Advocate, Santa Clara Valley Audubon Society June 8, 2015 City of Palo Alto Recycled Water Project Introduction Final EIR Responses to Comments Palo Alto Recycled Water Project Page 4 Response to Comments Document This page intentionally left blank City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 5 Response to Comments Document Chapter 7 Response to Comments 7.1 Master Response (Recycled Water Quality and Trees) A number of individuals commented on the issue of recycled water quality and its effects on salt- sensitive trees. For that reason, a master response has been developed to provide a discussion of this issue in one location. This master response addresses comments made by the following (please see individual comment letters for verbatim comments): ·Stanford University (Comment 4-1) ·Canopy (Comments 5-1, 5-2, and 5-3) ·California Native Plant Society (Comment 7-1) ·Santa Clara Valley Audubon Society (Comment 9-1) The commenters expressed both support and concerns about the use of recycled water for irrigation and the effects of recycled water on the City’s urban forest/redwood trees. The City recognizes the value of the urban forest and street trees and thus has prepared an Urban Forest Master Plan (UFMP)and Tree Technical Manual, and has a Tree Ordinance in place to address these resources. The UFMP, summarized in Section 1.6.3 (on p. 1-13 in Chapter 1, Introduction and Project Background,of the Public Draft EIR) establishes long-term management goals and strategies to foster a sustainable urban forest in Palo Alto. The UFMP identifies alternative water sources for landscape irrigation, including recycled water. The City has been aware of public concerns regarding the local use of recycled water for irrigation prior to 2009,and thus has proactively addressed this issue by adopting the City’s Salinity Reduction Policy (2010), promoting commitment by the Regional Water Quality Control Plant (RWQCP) Partners to adopt their own salinity reduction policies (2010-2011) and implement projects that would reduce saline infiltration in sewers, implementing and identifying projects within the City to reduce the infiltration of saline groundwater into its sewers, engaging with stakeholders (e.g., Stanford University and Canopy),and preparing an EIR that focuses on this matter. The Public Draft EIR provides an analysis of project effects of using RWQCP- produced recycled water for irrigation of salt-sensitive trees, and outlines the comprehensive strategy that the City has already initiated to reduce salinity in recycled water. Specifically, Section 2.4, Recycled Water Quality (starting on p. 2-11 in Chapter 2, Project Description of the Public Draft EIR) describes recycled water quality produced at the RWQCP and the actions that the City has already initiated and will continue to take to reduce the levels of total dissolved solids (TDS) and related parameters in recycled water. The recycled water that would be provided to landscape customers would be Title 22 disinfected, tertiary recycled water. This level of water is permitted for general use in landscape irrigation and restricted use in recreational impoundments. Recycled water, in general, but also that produced at the RWQCP, has historically had higher salinity compared to the existing potable water supply (Hetch Hetchy water from SFPUC). Because of the City’s recently completed and ongoing projects to address saline infiltration, water quality has improved substantially, as shown in Figure 2-7 of the Public Draft EIR. While the drought has increased TDS levels in the last couple of years, this is anticipated to be a short-term effect that would tend to be reversed over time. As discussed in Section 2.4, the City will continue to strive to meet the goals of the City of Palo Alto Salinity Reduction Policy, which has established a goal of lowering TDS levels for recycled water (see a discussion of this Policy on p. 1-12 in Section 1.5.4 of the Public Draft EIR).The City expects that TDS would cumulatively reduce to below 650 mg/L, which is the impact level for salt-sensitive trees suggested by Stanford University (based on studies conducted by City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 6 Response to Comments Document HortScience)and is the value when the salinity hazard is eliminated. The City’s approach to addressing salinity would also involve monitoring of water quality and the implementation of other actions as needed to reduce salinity. Impact HYD-3 in Chapter 3 of the Public Draft EIR analyzes the effects on health of salt- sensitive trees of using recycled water to irrigate landscapes. HYD-3d lays out the variety of factors that affect the response of landscapes to recycled water (e.g., water quality of irrigation water, soil characteristics, salt-tolerance of landscape plants) and references the HortScience study that describes the constituents of concern in recycled water that could affect landscapes as well as the impacts that elevated TDS (in the range of 870 to 1,000 mg/L) could have on certain types of landscapes. As stated on page 3-23 of the Draft EIR: “The study also indicated that the salinity hazard would be eliminated if TDS levels were maintained below 650 mg/L, Ecw below 1,000 µmoh/cm, chloride below 100 mg/L, sodium below 70 mg/L, and specific ranges for the combination of SAR and ECw (HortScience, 2011). This high level of water quality (Category 1 water as defined by HortScience), is appropriate for use for all soil types and salt-sensitive plants3. Because TDS of the RWQCP recycled water would improve toward, and is projected to reach, the 600 mg/L goal by the time the Project is implemented in 2019, it is expected that the salinity hazard from recycled water would be eliminated and it could be used for landscape irrigation without any substantial issues.” Impact HYD-3 also recognizes that the health of trees could decline based on unfavorable circumstances that may not be related to the quality of the water supply. These conditions, including a soil regime that is not suitable for the tree species it supports; pre-existing, suboptimal health of trees; hydrological and climatic conditions (e.g., drought); and diseases, are all factors outside of the City’s control. These conditions, coupled with poor site management, could affect tree health even if the salinity hazard in recycled water is eliminated. Page 3-24 of the Draft EIR notes that: “Despite the potential for a combination of unfavorable conditions where some trees may decline in health and/or appearance, or die (which could occur even if other water sources are used), it is not expected that such fate would occur en masse for substantial numbers of landscaped trees, including protected trees.” The EIR also conservatively analyzes the unlikely possibility that the salinity hazard is not eliminated by the time the Project is operated. Because the City is sensitive to concerns of landowners whose properties are dominated by salt-sensitive tree species, it has identified other actions that would mitigate the potential for damage to those trees. The City has identified a comprehensive mitigation strategy to address potential significant impacts of using recycled water for irrigation on redwood trees and other salt-sensitive species. While recycled water is routinely used for landscapes throughout the state, including in the San Francisco Bay Area, and recycled water with TDS greater than 650 mg/L could be safely used on many landscaped areas, the City has identified a set of mitigation measures that would address the proposed Project’s potential effects on salt-sensitive species, including redwood trees. These measures, specified as Mitigation Measures HYD-3a, HYD-3b, HYD-3c and HYD-3d, have been clarified since publication of the Public Draft EIR as a result of the City’s discussions with Stanford University. The revised mitigation measures, shown with underline for new text and strike-out for deleted text, are included below. 3 HortScience prepared Recycled Water Guidelines for Stanford University which included a discussion of four categories of water quality based on the tolerance of the plant materials to salts in the water source and degree to which soil is expected to become degraded. Category 1 is defined as good water quality with no restrictions on site use. The TDS, chloride and sodium concentrations for a Category 1 source water are <650 mg/L, 100 mg/L and 70 mg/L, respectively, and specific ranges for the combination of SAR and ECware met, similar to the recommendation provided in the 2011 HortScience report (see Appendix C for the HortScience Guidelines include in the Stanford comment letter). City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 7 Response to Comments Document Mitigation Measure HYD-3a. Source Control of Saline Groundwater. The City shall continue to line and repair existing sewers to minimize saline groundwater Infiltration. Mitigation Measure HYD-3b. Monitoring. The City shall immediately begin quarterly monthly monitoring of the salinity (and related constituents) of the recycled water and shall report the rolling 12-month average for comparison to the Palo Alto City Council goal of 600 mg/l TDS. Monthly electronic reporting to those requesting it will be performed for two years, and then the frequency will be re-evaluated.The City shall monitor soil salinity and SAR through semi- annual soil analyses, preferably taken early and late in the irrigation season (approximately April and October). Mitigation Measure HYD-3c: Site Management.As a condition of recycled water use, the City shall require the site owners to: 1) Continue to irrigate with recycled water, even during droughts, (because recycled water is a drought-proof supply), to meet the water demand of the subject plants and trees; and 2) conduct appropriate best management practices/management actions specified below in the event that protected, low-salt-tolerant trees irrigated with recycled water show signs of decline. If at a particular site receiving recycled water, monitoring identifies an increase in soil salinity and SAR over historical levels, the City in cooperation with the owner of that site shall conduct a site-specific evaluation. That evaluation would consider (1) the extent to which the site contains protected trees (including redwood trees and oaks) that might be impacted by soil salinity, (2) the extent to which the elevated salinity is at a level that poses a threat to such protected trees, and (3) the extent to which the elevated salinity is the result of the use of the City's recycled water.If a threat is found, the City shall work cooperatively with the site owner to develop a site-specific mitigation plan, including the site owner's implementation of best management practices which are described below: o To avoid plant damage to salt sensitive landscape plants, site owners can implement a leaching program to maintain soil salinity within the root zone below 2.0 dS/m4 and SAR below 6.0. For moderately salt-tolerant plants, maintain soil salinity below 4.0 dS/m.Where subsoils do not drain adequately, installation of subsurface drainage systems may be needed recommended.Rainfall will satisfy a portion of the leaching requirement, depending on the rate, volume, and distribution through the season. The frequency with which leaching applications should be made depends on several variables, and is typically triggered by approaching soil salinity thresholds defined above. o Site owners can aApply gypsum prior to leaching when indicated by soil analysis. Gypsum is a soil amendment that, when combined with leaching, helps lower soil sodium concentrations. Gypsum application can shall be considered when soil analyses reveal one or more of the following conditions: SAR exceeds 6.0, SAR increases 2 units or more (e.g., 2.3 to 4.3), and/or sodium concentration exceeds 5 meq/l (115 mg/L). The amount of gypsum needed and the frequency of application depend on site-specific soil and water characteristics, and can shall be determined by laboratory analysis. 4 ds/m is decisiemen/meter. A dS/m is a measure of electrical conductivity, and 1.0 dS/m approximates to 640 mg/L TDS. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 8 Response to Comments Document Mitigation Measure HYD-3d: Other Options to Protect Salt-Sensitive Plants. In the event that monitoring results (see Mitigation Measure HYD- 3b) show that optimal concentrations of TDS and related parameters will not be achieved prior to operation of the Project (i.e., recycled water application), the City will consider evaluate and implement one or more of the following other actions to reduce improve TDS levels, as follows: o The City shall amend Utilize its existing Recycled Water Ordinance exemption process (Palo Alto Municipal Code 16.12.050)to include an exemption for to exempt redwood trees (and/or other salt sensitive species) from the use of recycled water and allow for the use of dual systems so the exempted trees could be irrigated separately using potable water, if desired by individual landowners; o The City shall bBlend recycled water and other lower salinity potable water prior to application; and/or o The City shall tTreat recycled water to reduced TDS prior to application, or shortly thereafter (the City is initiating an investigation of the feasibility of Reverse or Forward Osmosis treatment of its recycled water, combined with blending of appropriate water). These measures are not intended to be standalone measures. That is, they are part of a larger vision to ensure that salinity hazard is eliminated and recycled water is safely used on landscapes. The measures involve the City continuing to line and repair existing sewers to minimize saline groundwater infiltration, concurrent monitoring by the City to track success, concurrent best management practices by site owners as needed, and if deemed necessary (in the event the salinity hazard has not been eliminated), other actions to be implemented by the City. With respect to the changes shown above, the first bullet under HYD-3d has been revised because the City will not need to amend its existing Recycled Water Ordinance for the exemption process. Section 16.12.050 of the Ordinance already provides for an exemption from the use of recycled water if recycled water has an adverse effect on an applicant’s landscaping (see Section 1.5.3, City of Palo Alto Recycled Water Ordinance on p. 1-12 in Chapter 1, Introduction and Project Background,of the Public Draft EIR). The last bullet in Mitigation Measure HYD-3d has been revised to include the text “or shortly thereafter” to clarify that if additional treatment is not ready immediately when the recycled water system is ready, it would be ready shortly thereafter. This text is consistent with the discussion on p. 3-24 of the EIR that discusses the unlikely event that TDS and other related parameters in recycled water are not achieved by the time of Project operation. Another change in this bullet is mention of the fact that the City is initiating an investigation of the feasibility of Reverse and Forward Osmosis treatment of its recycled water, combined with blending of appropriate water, because upfront planning is needed in the event that additional treatment is deemed necessary to address recycled water quality. The City is committed to implementing one or a combination of the measures described above and ensuring that impacts to salt-sensitive tree species are less than significant. As part of the CEQA process, these measures will be included in the MMRP as a condition of approval for the proposed Project. It should be noted that despite the changes shown above, the analysis provided in the EIR is adequate, the conclusions remain the same, and the mitigation measures identified are appropriate. The revisions to the mitigation measure were not made in response to an increase in severity of impact as presented in the EIR or any new finding of significant impact. The implementation of these mitigation measures will ensure that impacts would be less than significant. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 9 Response to Comments Document The EIR also addresses the effects of using recycled water to irrigate landscapes on visual quality (see Impact AES-1 on pp. 3-31 and 3-32 in Chapter 3), and on habitat and special-status wildlife (see checklist item a in Section E.3, Biological Resources, on p. E-20 in Appendix E [Volume 2 of the Pubic Draft EIR). The objectives of the Project are listed in Section 1.4.2, Project Objectives (on p. 1-10 to 1-11 of Chapter 1, Introduction and Project Background in the Public Draft EIR). These include the following: ·Improve potable water supply reliability by conserving drinking water, currently used for irrigation and other non-potable uses, for potable purposes; ·Provide a dependable, locally controlled non-potable water source; ·Increase recycled water use from the Regional Water Quality Control Plant; ·Secure a non-potable water source that will be available even in droughts to serve irrigation and other non-potable uses;and ·Reduce reliance on imported water. As discussed under the No Project Alternative in Chapter 4, Other CEQA and NEPA Considerations (starting on page 4-15 of the Public Draft EIR):“imported water from SFPUC could diminish over time because of droughts, climate change effects, or regulatory actions, which could reduce potable supply for the City in the long term. In the short-term, emergencies such as an earthquake damaging the SFPUC water system could also affect the availability of water supplies for the City. The effects of a diminished supply would be more severe rationing during droughts, and an inability to accommodate future demands associated with approved growth.” The current drought has resulted in mandatory conservation across the state, imposed by the Governor, enacted by the SWRCB, and implemented by local municipalities and public agencies (see p. 4-30 of the Public Draft EIR for a discussion of the actions by the Governor and the SWRCB). Because of this drought, and anticipated droughts in the future, it is critical for the City to find alternative, sustainable water supplies to offset potable water use. Otherwise, during droughts, there would be rationing (in accordance to the stages of actions identified in the Urban Water Management Plan) that could increase in severity depending on the length and duration of the shortage. Under the worst-case situation when there is insufficient potable supply to meet demand, the City could adopt regulations that restrict the use of potable water for landscape irrigation and other non-potable uses for commercial and industrial users entirely (see the No Potable Water Supply for Landscape Irrigation or Other Non-Potable Uses Alternative discussion in Chapter 4 of the Public Draft EIR, starting on page 4-30). With reduced or no potable water for outdoor uses during droughts, there could be substantial impacts on the health and quality of the urban forest due to the reduction or absence of any water for irrigation of the landscape. In such a case, the availability of water (in the form of recycled water) would be critical to maintain landscapes and preserve the urban forest. In response to Comment 5-2, it is not the intent of the City to imply that high quality potable water is wasteful in the landscape; rather, given the reality that droughts are inevitable and could result in insufficient demand to meet potable water needs, it is important to conserve potable water for drinking water uses, and to find alternative, sustainable supplies for non-potable uses, in keeping with the objectives of the project. In addition, the proposed Project would ensure “a reliable supply of water for landscape irrigation” which is “of paramount importance for the function of the urban forest as a whole over the long-term” (p. 3-25 in Chapter 3 of the Public Draft EIR). In response to Comment 9-1, as described above, there would be insufficient water supply to meet the needs of outdoor use if rationing were imposed. It is the intent of the proposed Project to provide a sustainable, alternative water supply that could be used even during droughts, in keeping with the Project objectives, and for the benefit of the urban forest. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 10 Response to Comments Document This page intentionally left blank City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 11 Response to Comments Document 7.2 Individual Comments and Responses City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 12 Response to Comments Document INSERT LETTER 1 (4 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 13 Response to Comments Document INSERT LETTER 1 (4 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 14 Response to Comments Document INSERT LETTER 1 (4 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 15 Response to Comments Document INSERT LETTER 1 (4 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 16 Response to Comments Document Comment Letter 1 –State Water Resources Control Board (SWRCB) Response to Comment 1-1 Because the City intends to apply for the Clean Water State Revolving Fund (CWSRF)funding, the City has prepared an EIR to meet CEQA-Plus requirements, as specified in the Executive Summary chapter in the Public Draft EIR (see p. ES-5).It should be noted that because the City is also seeking funding from the United States Bureau of Reclamation (Reclamation) through the Title XVI Program, it is also meeting NEPA requirements, which fulfills the CEQA-Plus requirements. Based on a kick-off meeting with Reclamation and SWRCB on August 12, 2010, staff from both agencies agreed that Reclamation would take the lead on United States Fish and Wildlife Service (USFWS) informal consultation and Section 106 consultation. Based on the results of the Biological Resources Assessment, Reclamation has already requested concurrence from USFWS that the proposed Project may affect, but is not likely to adversely affect, federally- listed species (May 19, 2015). The Section 106 process is not yet complete, and subsurface testing may be needed depending on the method that the City will ultimately select for construction of the proposed pipelines. Once complete, Reclamation Staff will complete the Section 106 process and sign off on the Finding of No Significant Impact, to complete the NEPA process. Please refer to Appendix E of the Public Draft EIR for discussions of air quality conformity, biological resources and cultural resources effects associated with the proposed Project. Section 4.5.4 (starting on p. 4-33 of Chapter 4, Other CEQA and NEPA Considerations in Volume 1 of the Public Draft EIR), discusses compliance with relevant federal laws, executive orders, and policies, in keeping with CEQA-Plus requirements. Response to Comment 1-2 A map of FEMA-designated flood zones is provided in Chapter 8 of this document, EIR Revisions. The section on flooding in Chapter 3 (p. 3-1 of the Public Draft EIR) has been updated to include a reference to the figure and minor staff-initiated changes to the text to clarify the description of flood zones. The analysis of potential flood risks does not change. The significance determination remains the same and no changes are warranted to the conclusions presented in the Public Draft EIR. Response to Comment 1-3 Appendix I (Volume 2 of the Public Draft EIR) includes the results of air quality modeling conducted for the project. In the table “Maximum Daily Construction Emission (lbs/day) on p. 1 of the appendix, it shows that NOx for the 2-crew scenario (for the pipeline) is 85.0 lbs/day and for the 1-crew scenario is 51.1 lbs/day. The subsequent tables in Appendix I that show results for mitigated / unmitigated construction are for the pump station; the CalEEMOD results automatically identify both scenarios, even though there is no difference because the City did not include any mitigation in the analysis.The results of the air quality modeling for pipeline construction assuming both 2-and 1-crew scenarios are shown in the section of results titled “Road Construction Emissions Model, Version 7.1.5.1”. The 1-crew scenario is the scenario described in Mitigation Measure AIR-1. Dust control mitigation using watering trucks is assumed in the model runs for pipeline construction under all pipeline construction scenarios. It should be noted that those tables erroneously show “Pasadena RW”in the “Emission Estimates for”field. They should state “City of Palo Alto RW.” These changes have been addressed in Chapter 8, EIR Revisions below, and do not affect the analysis or conclusions in the Public Draft EIR. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 17 Response to Comments Document Response to Comment 1-3 Because the SRF application materials will require database searches that are less than one year old, the City will provide the requested information (USFWS, CDFW Natural Diversity Database, and CNPS species list), when it submits the SRF application. Response to Comment 1-5 The City notes the need to conduct a cultural resources record search that extends ½ mile beyond the Project APE. As indicated in Section E.4, Cultural Resources (p. E-28 in Appendix E, Volume 2 of the Public Draft EIR), the latest records search of the proposed Project area, which extends ¼ mile beyond the Project APE,was conducted on October 23, 2014. Because the SRF application materials will require a record search that is less than one year old, the City will conduct a new record search when it submits the SRF application. It should be noted that the current search is adequate for the evaluation of impacts in the Public Draft EIR because the ¼ mile area covers all potential resources within the APE that could be affected. Thus, the analysis and conclusions for cultural resources in the Public Draft EIR are adequate and do not need to be revised. In addition to the City providing an updated cultural resource records search at the time of SRF application submittal, the City will provide the correspondence with NAHC requesting information on sacred lands and Native American contacts, as well as follow-up documentation to the Native American contacts.The absence / inclusion of this material does not affect the analysis or conclusions in the Public Draft EIR. Response to Comment 1-6 The City will provide the requested information when it submits the SRF application. The City will also notify SWRCB regarding any hearings/meetings held regarding environmental review for this Project. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 18 Response to Comments Document INSERT LETTER 2 (5 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 19 Response to Comments Document INSERT LETTER 2 (5 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 20 Response to Comments Document INSERT LETTER 2 (5 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 21 Response to Comments Document INSERT LETTER 2 (5 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 22 Response to Comments Document INSERT LETTER 2 (5 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 23 Response to Comments Document Comment Letter 2 -California Department of Transportation (Caltrans) Response to Comment 2-1 Caltrans’ April 8, 2009 comment letter to the Palo Alto Recycled Water Project Initial Study/Mitigated Negative Declaration (IS/MND) (March 2009) is included above following the June 3, 2015 letter. Caltrans’ July 18, 2011 comment letter on the Palo Alto Recycled Water Project Notice of Preparation (NOP) is included in Appendix C of the Public Draft EIR (see Volume 2 of the Public Draft EIR). Because the comments in the April 8, 2009 letter are very similar to those specified in Caltrans’June 3, 2015 letter, and the Public Draft EIR was prepared in consideration of NOP comments, no additional responses to the July 2011 letter are warranted (and the April 2009 letter is not bracketed). As indicated above, the City considered comments on the NOP in preparing the Public Draft EIR. The need for a Traffic Impact Study was considered and described in Response to Comment 2-2 below. Response to Comment 2-2 The City is responsible for all project mitigation.All standard project requirements and mitigation measures identified in the Public Draft EIR will be incorporated into the MMRP, and implementation of the MMRP will be a condition of approval for the proposed Project. Chapter 2 of the Public Draft EIR discusses the proposed Project, and identifies the potential for the Project to cross under US 101 and for construction to occur along El Camino Real or State Route (SR) 82 (between Page Mill Road and Hanson Way). Figure 2-2 illustrates the options to cross US-101. The proposed alignment would cross under US 101 using trenchless construction (i.e., bore and jack, microtunneling, or horizontal directional drilling [HDD]) within the area defined by the polygon in Figure 2-2; Option 1 is to cross under US 101 by hanging from the pedestrian bridge along the south side of Adobe Creek. As described on page 2-20 of the EIR, the precise option and locations would be determined during design. The Project proposes to cross SR 82 using trenchless construction techniques, as shown in Table 2-1 (see p. 2-8)and discussed in Section E.4 (p. E-65) of the Public Draft EIR. Option 2 would include installation of the pipeline alignment on El Camino Real between Page Mill Road and Hanson Way via open-cut construction or HDD. Open-cut construction would likely require a minimum one-lane of traffic and the adjacent shoulder,resulting in a construction corridor of approximately 20 to 30 feet wide. As specified in the Public Draft EIR, under the proposed Project, the precise location and method of construction will be determined by the City during design. Caltrans has indicated in the June 2015 comment letter that “work within State ROW at State Route (SR 82 (El Camino Real) and U.S. Highway (U.S.) 101 should be done using the ‘jack and bore’ method, which is preferred over the open-cut trench method. Neither open-cut trenching in a lane of a State facility nor hanging or attaching a utility such as a pipeline to a bridge or overpass structure will be permitted”(see Comment 1-5).It should be noted that the Public Draft EIR specifies that the pipeline crossing US-101 could be hung from the bridge along Adobe Creek. Existing pipelines are currently hung from the bridge. The City will discuss the crossing design with Caltrans to confirm whether this is acceptable given that current, existing use of the bridge. The Draft EIR has been clarified to show that hanging from the bridge is allowed only with approval from Caltrans.Because the proposed Project would cross State facilities using trenchless construction, City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 24 Response to Comments Document no direct impacts to traffic along US 101 or SR 82 would occur5. In addition, the City proposes implementation of a Traffic Control Plan as part of the proposed Project (see Chapter 2, Project Description). The avoidance of State facilities and implementation of the Traffic Control Plan would ensure that any potential traffic-related effects would be less than significant. The City previously assessed the need to prepare a Traffic Impact Analysis (TIA) based on Caltrans comments received during the NOP period and determined that the threshold for preparing a TIA was not triggered. As described in the Caltrans Guide for the Preparation of Traffic Impact Studies (December 2002), a TIS is needed if a project generates over 50 or more peak hour trips assigned to a State highway facility or if a project generates 1 to 49 peak hour trips with specific conditions met (e.g., affected State highway facilities experiencing significant delay, the potential risk for a traffic accident is significantly increased, or change in local circulation networks that impact a State highway facility). Based on the criteria above, and the fact that the proposed alignment would not directly affect State highway facilities, the City did not prepare a TIA. The City acknowledges Caltrans comment that a Transportation Management Plan (TMP) or construction TIA may be required if it is determined that the traffic restrictions and detours are needed. The City has clarified in Chapter 8, EIR Revisions below,that Option 2 would utilize trenchless construction methods, and would not be conducted using open-cut construction. Because the Public Draft EIR evaluates both open-cut construction and trenchless construction for pipeline construction, all anticipated impacts have been evaluated and no additional modification of the Public Draft EIR is needed. Response to Comment 2-3 A Cultural Resources Assessment Report was conducted for the proposed Project and is included as Appendix K of the Public Draft EIR (see Volume 2). As described in the report and summarized in Section E.4 (Cultural Resources) of Appendix E, a records search was conducted at the Northwest Information Center at Sonoma State University and Native American Consultation was conducted in October 2014. The report describes the effects of the proposed Project on cultural resources along the proposed pipelines, including areas in and around Caltrans facilities as describe in Response to Comment 2-2 above. Standard project requirements to protect cultural resources, including human remains, and paleontological resources have been incorporated as part of the Project to ensure potential impacts are reduced to less than significant. These measures are intended to be implemented during construction, in the event that previously unrecorded or unknown cultural resources are discovered. The Public Draft EIR did not find areas of high archaeological sensitivity in the areas around Caltrans facilities and thus no additional mitigation measures apply to these specific areas. This information would support the City’s application for an encroachment permit. Response to Comment 2-4 The City acknowledges the need for a transportation permit from Caltrans for the movement of oversized or excessive load vehicles on State roadways, and, if needed,will submit an application accordingly prior to construction. Response to Comment 2-5 The City acknowledges the need for an encroachment permit prior to construction and Caltrans’ preference for bore and jack construction on State ROW. The City will submit the appropriate application forms for this process prior to construction. 5 Construction of Option 2, which is not part of the proposed Project, had previously been identified as open-cut. Based on CalTrans’ comments, Table 2-1 in Chapter 2, Project Description, has been revised to shown trenchless construction. Please see Chapter 3, EIR Revisions, for the change. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 25 Response to Comments Document INSERT LETTER 3 (1 PAGE) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 26 Response to Comments Document Comment Letter 3 –County of Santa Clara Roads and Airports Department Response to Comment 3-1 The County of Santa Clara Roads and Airports Department has specified that the construction method for all expressway alignments and crossings is not open-cut trenching but rather using a trenchless technique. The City will revise the EIR to show that Page Mill Road from Alma Street to Hanover Street would be conducted using trenchless methods. Because the Public Draft EIR evaluates both open-cut and trenchless construction of its pipeline alignments, all anticipated impacts have been evaluated and no additional modification of the Public Draft EIR is needed. Response to Comment 3-2 The Roads and Airports Department specified that the City should include the Department as a listed agency for which encroachment permits and approvals are required. This change has been made as shown in Chapter 8, EIR Revisions below. The City will design its facilities within the County’s jurisdiction in accordance with the Department’s standards and submit the appropriate applications and supplemental information to the Department as part of the encroachment permit process. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 27 Response to Comments Document INSERT LETTER 4 (2 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 28 Response to Comments Document INSERT LETTER 4 (2 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 29 Response to Comments Document Comment Letter 4 –Stanford University Response to Comment 4-1 The City acknowledges Stanford University’s support of the proposed Project. The revisions to the mitigation measures (HYD-3b, HYD-3c, and HYD-3d) referenced in this comment are shown in Chapter 8, EIR Revisions below.Please refer to the Master Response,Recycled Water Quality and Trees,above for more information regarding changes to the mitigation measures. Response to Comment 4-2 The City acknowledges Stanford University’s suggestion regarding the need for the City to revisit the project demand data and financial assumptions. As part of the Facility Planning phase for this Project, the City will determine the demands of the end users to confirm the sizing of the proposed facilities. Response to Comment 4-3 Please refer to the Master Response above (and Section 1.5.3, City of Palo Alto Recycled Water Ordinance, on p. 1-12 in Chapter 1, Introduction and Project Background of the Public Draft EIR) for a summary of the exemption process to opt out of using recycled water. While the Recycled Water Ordinance does not specifically address opting out of recycled water use in cases where the landowner has available treated, non-potable groundwater associated with remediation efforts, the City would be amendable to granting the exemption if other non-potable water is available for irrigation. Response to Comment 4-4 The City has been actively engaging Stanford University regarding the proposed Project and will continue to do so. The EIR includes standard project requirements and mitigation measures that will be included in the MMRP to reduce potential impacts,including on archaeological resources and related to hazardous materials, to less than significant (see Appendix E, Environmental Checklist in Volume 2 of the Public Draft EIR). Implementation of the MMRP is a condition of approval for the proposed Project, and thus would ensure that impacts would be less than significant. Response to Comment 4-5 As discussed in E.3, Biological Resources (Volume 2 of the Public Draft EIR), the use of recycled water would not affect habitat or special-status species due to the strict prohibitions of the City’s existing Permit (Order No. 93-160) that would be imposed to ensure that recycled water is applied during dry weather and that recycled water is not allowed to escape to areas outside the designated use areas (p. E-20). As part of the City’s recycled water permitting process, site supervisors would be required to participate in training on the safe uses of recycled water. Compliance by site supervisors with the City’s requirements would ensure that use of recycled water would not result in any operational impacts on biological resources in areas covered by the Habitat Conservation Plan. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 30 Response to Comments Document INSERT LETTER 5 (1 PAGE) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 31 Response to Comments Document Comment Letter 5 -Canopy Response to Comment 5-1 The Public Draft EIR evaluates more than the impact of the construction of the pipeline but also includes a discussion of effects of the using recycled water on salt-sensitive tree species. Please see the Master Response on Recycled Water Quality and Trees. Response to Comment 5-2 Please refer to the Master Response on Recycled Water Quality and Trees. The Master Response also addresses the City’s need to manage its water supply sustainably, particularly in light of the current drought. Response to Comment 5-3 The City acknowledges Canopy’s support of the proposed Project based on the conditions specified in its subsequent comment. Response to Comment 5-4 Please refer to the Master Response on Recycled Water Quality and Trees for a discussion of the City’s approach to addressing salinity in recycled water, and the clarifications to the mitigation measures HYD-3a through HYD-3d,which would ensure that impacts to salt-sensitive tree species would be less than significant. The City is exploring alternative uses of recycled water with the Santa Clara Valley Water District. Response to Comment 5-5 The City acknowledges the ecosystem value of trees. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 32 Response to Comments Document INSERT LETTER 6 (1 PAGE) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 33 Response to Comments Document Comment Letter 6 -Santa Clara Valley Transportation Authority Response to Comment 6-1 The City will provide a final Traffic Control Plan for VTA’s review prior to construction. Response to Comment 6-2 If the City were to hang the proposed pipeline from the Adobe pedestrian bridge, then the City would require temporary closure of the Adobe Creek pedestrian trail during construction. While the impact to this resource would be considered less than significant and no mitigation measures would be required, the City would provide appropriate, advanced notice of its closure to users of the trail. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 34 Response to Comments Document INSERT LETTER 7 (1 PAGE) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 35 Response to Comments Document Comment Letter 7 –California Native Plant Society (CNPS) Response to Comment 7-1 The City acknowledges the concerns expressed by CNPS. Please see the Master Response on Recycled Water Quality and Trees regarding the City’s approach to ensure that impacts are less than significant, as well as the availability of an exemption by landowners from the use of recycled water for irrigation of redwood trees.It should be noted that HortScience, on behalf of both the City and Stanford University, had identified that salinity hazards would be eliminated if TDS were to be less than 650 mg/L, and other water quality parameters were to meet the Category 1 standards specified in HortScience’s 2011 study (see p. 3-23 in Chapter 3 of the Public Draft EIR, as well as Appendix G for the original HortScience Study). Thus, there is scientific information to support the analysis presented in the Public Draft EIR. City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 36 Response to Comments Document INSERT LETTER 8 (2 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 37 Response to Comments Document INSERT LETTER 8 (2 PAGES) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 38 Response to Comments Document Comment Letter 8 –Governor’s Office of Research and Planning, State Clearinghouse and Planning Unit Response to Comment 8-1 The City acknowledges the comment. The comment letters attached to the State Clearinghouse letter are separated in this document, as Comment Letter 1 (SWRCB) and Comment Letter 2 (Caltrans). City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 39 Response to Comments Document INSERT LETTER 9 (1 PAGE) City of Palo Alto Recycled Water Project Response to Comments Final EIR Responses to Comments Palo Alto Recycled Water Project Page 40 Response to Comments Document Comment Letter 9 –Santa Clara Valley Audubon Society Response to Comment 9-1 The City acknowledges the Santa Clara Valley Audubon Society’s concerns. Please refer to the Master Response on Recycled Water Quality and Trees summarizing the evaluation of using recycled water for irrigation and its effects on trees and the visual environment. The area of potential effects associated with the use of recycled water is only those areas that would be irrigated using recycled water. The project has the potential to impact oaks and sycamores, but implementation of Mitigation Measures HYD-3a through HYD-3d will mitigate any such impact to a level of less-than-significant.Oaks and sycamores are more tolerant of salinity than sensitive species like redwoods.As explained in the Draft EIR, tree species with moderate salt tolerance could experience some impacts with recycled water at higher salinity levels, but such impacts could be managed even at those levels.Furthermore, those impacts would not occur if salinity levels are brought below 650 mg/l TDS.The recycled water used in the project is expected to have TDS concentrations below this level, and the mitigation measures mandate soil testing, plant health monitoring, and salinity monitoring in the recycled water to ensure that optimal concentrations of TDS and related parameters will be achieved, as well as implementation of a range of additional feasible mitigation measures if these levels are not achieved (including exemption of salt sensitive species from use of recycled water, blending, and/or further treatment of recycled water to further reduce TDS).The proposed Project would not affect other areas within the City or neighboring cities. There is a movement in California to replace existing landscapes with landscapes that are drought tolerant. Such changes are based on the decisions of individual landowners and are not the responsibility of the City. The Master Response describes Mitigation Measure HYD-3c (site management actions that would be implemented by site owners as needed) as part of a comprehensive mitigation strategy that would ensure that potential impacts would be reduced to less than significant;it should be noted that the master response does make significant modification to this measure;contrary to the commenter’s suggestion, Mitigation Measure HYD-3c, which involves monitoring soil salinity, implementation of a leaching program, and use of gypsum prior to leaching, would not generate additional impacts on the environment that would warrant evaluation in the EIR; the analysis presented in the Public Draft EIR is adequate, and Mitigation Measure HYD-3c is appropriate and does not need to be removed. Response to Comment 9-2 It should be noted Canopy is in support of the proposed Project with the conditions specified in its letter (see Comment Letter 5 above). Response to Comment 9-3 The City will include the Santa Clara Valley Audubon Society on future correspondence related to this Project. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 41 Response to Comments Document Chapter 8 EIR Revisions This section addresses changes to the EIR that are either staff-initiated or made in response to public comments on the Public Draft EIR. These changes are primarily for clarification. They would not result in any change to the analyses provided in the EIR; specifically, they do not include significant new information that would warrant recirculation of the EIR pursuant to Section 15088.5 of the CEQA Guidelines (Recirculation of an EIR Prior to Certification).The changes do not result in an increase in the severity of impacts already identified in the Public Draft EIR and do not result in a new finding of significant impact. For that reason, the analyses and conclusions drawn in the EIR are adequate and applicable to the proposed Project as described, and recirculation of the EIR is not needed. Staff-Initiated Changes and Changes in Response to Public Comments The following addition has been made to the end of Section 2.6 Potential Permits and Approvals Required on page 2-30 in Chapter 2, Project Description (Volume 1 of the Public Draft EIR) in response to the comment letter from the County of Santa Clara Roads and Airports Department. ·County of Santa Clara Roads and Airports Department –encroachment permit. The following note has been made in response to Caltrans comment letter regarding its preference for construction across highway crossings. Figure 2-2: Proposed Work Area in the Vicinity of US 101a a The City will work with CalTrans to confirm whether hanging from the bridge is acceptable for Option 1, as existing pipelines are already hung from the bridge. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 42 Response to Comments Document Table 2-1 in Chapter 2, Project Description (p. 2-8 in Volume 1 of the Public Draft EIR) has been revised in response to comment letters from Caltrans and the County of Santa Clara Roads and Airports Department. Table 2-1: Proposed Backbone Pipeline Alignment Alignment Location Starting Cross Street Ending Cross Street Proposed Construction Method at Crossings Proposed Backbone Pipeline Alignment Under US 101 E. Bayshore Rd. at Corporation Way Fabian Way Trenchless under 101 Fabian Way West Bayshore Road East Meadow Drive Open-Cut1 East Meadow Drive Fabian Way Cowper Street Open-Cut; Potential trenchless2 section across Adobe Creek Bridge Cowper Street East Meadow Drive El Dorado Avenue Open-Cut; Potential trenchless sections across Barron Creek Bridge and Matadero Creek Bridge El Dorado Avenue Cowper Street Alma Street Open-Cut Alma Street El Dorado Avenue Page Mill Road Open-Cut Page Mill Road Alma Street Hanover Street Trenchless Open-Cut; Trenchless section under railroad crossing; Potential trenchless section under El Camino Real Hanover Street Page Mill Road Hillview Avenue Open-Cut Hillview Avenue Hanover Street Arastradero Road Open-Cut; Potential trenchless section across SFPUC Easement; trenchless under and Foothill Expressway Proposed Pipeline Alignment Option 1 Adobe Creek US 101 West Bayshore Road Potential trenchless3 (hang from the bridge) West Bayshore Road Adobe Creek Fabian Way Open-Cut Pipeline Alignment Option 2 El Camino Real Page Mill Road Hanson Way Trenchless Open-Cut Palo Alto Square Parking Hanson Way Hanover Street Open-Cut 1 The open-cut construction method involves long, narrow excavations in the ground to accommodate the placement of the pipelines. An alternate construction method to open-trench is Horizontal Directional Drilling. Both types of construction methods are described in Section 2.5 below.2 All of the bridge crossings would be trenchless (constructed with the pipe attached to the side of the bridge or installed underneath the bridge). The construction method has not been finalized. Neither method would require work to be done in the creeks.3 The City will work with CalTrans to confirm whether hanging from the bridge is acceptable at this location, as existing pipelines are already hung from the bridge. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 43 Response to Comments Document The last paragraph in Section 2.4 (at the bottom of p. 2-13 extending to the top of 2-14) has been revised as both a staff-initiated change and response to Stanford comments to clarify that an exemption is already allowed under the Recycled Water Ordinance (No. 5002) and to modify the text to reflect the changes in Mitigation Measure HYD-3b discussed further below. Salinity reductions due to the planned projects are expected to result in a cumulative reduction to below 650 mg/L within the next several years, before the Project is completed. Ongoing monitoring and surveillance would confirm reductions, track success and identify other potential sources. Key projects are due for completion in the next several years, in advance of the operation of the proposed recycled water delivery system (2019). Therefore, it is estimated that TDS levels would be below the commenter’s indicated TDS impact level (650 mg/L) by the time this Project is completed and water is delivered. TDS levels in the RWQCP-effluent and recycled water will be reported to interested parties initially monthly quarterly, using a rolling 12-month average to compare to the City’s 600 mg/L goal. In the unlikely event that TDS levels do not drop below 650 mg/L by the time the Project is implemented (recycled water is delivered)or shortly thereafter, the City shall consider other actions, including utilizing its existing Recycled Water Ordinance exemption process inclusion of a blanket exemption in the City’s Recycled Water Permit for salt-sensitive species (including redwood trees)from the use of recycled water, blending of recycled water with potable water, or other additional treatment of recycled water prior to application or shortly thereafter (the City is initiating an investigation of the feasibility of Reverse and Forward Osmosis treatment of its recycled water, combined with blending of appropriate water). The following change has been made in response to Caltrans comment letter regarding its preference for construction across highway crossings. Three creeks would be crossed by the proposed alignment, alignment options, and laterals: Adobe Creek, Barron Creek, and Matadero Creek. The creek crossings would be constructed as follows: ·Adobe Creek.There are three proposed Adobe Creek crossings. The first crossing is associated with the proposed alignment on East Meadow Drive, west of US 101. The pipeline would be attached to the existing East Meadow Drive Bridge on the south side of the bridge or installed in the roadway on the bridge. The second crossing is associated with the Option 1 alignment, where the existing Adobe Creek crosses under US 101. The pipeline may, with approval from Caltrans,would be hung on the south side of the existing bridge. The third crossing is associated with a lateral pipeline on Middlefield Rd, which would require crossing Adobe Creek using trenchless techniques at the Middlefield Road bridge. The following change has been made in response to Caltrans comment letter regarding its preference for highway crossings. A footnote has been added to the section on US 101 on p. 2-20 (in Chapter 2 of the Public Draft EIR), as shown below. To reduce the change in numbering of footnotes, the footnote will be designated “9b’. US 101 Crossing9b As described above, the two options to cross underneath US 101 are using a trenchless construction technique under the proposed alignment and hanging from an existing bridge. The precise option and the locations would be determined during design. If trenchless construction is employed, the pits could be located within any open area shown in the polygon shown on Figure City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 44 Response to Comments Document 2-2 (e.g., on existing parking lots). Depending on the location, landscaped trees may be trimmed and/or removed to accommodate the pits and other activities in the work area. Existing parking spaces would be temporarily eliminated. Construction would require the City to work with the land owner to accommodate temporary loss of parking and disruption. If the pipeline is hung from the existing bridge on the south side of Adobe Creek, then construction would likely occur during the non-rainy season (April 15 through October 15), when the Adobe Creek Pedestrian Path is open. However, installation of the proposed pipeline would require temporary closure of the existing path for several days to a week. Text to footnote 9b: 9b The City would work with CalTrans to confirm whether hanging from the bridge is acceptable at this location, as existing pipelines are already hung from the bridge. The section on flooding in Chapter 3 (p. 3-1 of the Public Draft EIR)has been updated to include a figure showing 100-year flood plain and the text revised to reflect the figure, as a response to SWRCB comments and as a staff-initiated change for clarity of the flood zones. Flooding The proposed pipeline alignment lies within two different flood zones as defined by the Federal Emergency Management Agency (FEMA). These zones are described below and shown in Figure 3-0. ·Zone AE. (Base Flood Elevations determined). Zone AE is the 100-year flood zone. The elevation of the base flood (i.e., 100-year flood level) has been determined by FEMA to be 8 feet above mean sea level. ·Zone X. Zone X is described as an area of moderate risk of flooding (roughly speaking, outside the 100-year flood but inside the 500-year flood limits). While some risk of flooding exists, structures within Zone X areas are not considered to be at substantial risk of flooding. Most of the Project area is located within Zone X. The northeast part of the Project area between Middlefield Road and US 101 (as well as area further east to the Bay), including and the proposed pump station site at the RWQCP,are located in Zone AE. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 45 Response to Comments Document Figure 3-0: FEMA-Designated Flood Zones within the Project Area Page 3-24 of Chapter 3 has been revised to clarify that the existing Recycled Water Ordinance already allows for an exemption from use of recycled water. While TDS and other related parameters in recycled water are expected to achieve the desired concentrations by the time the Project is operated, in the unlikely event that they are not achieved by the time of Project operation, there is potentially a greater risk that certain salt-sensitive plants could be adversely affected by recycled water use. While TDS greater than 650 mg/L can be safely used on many landscaped areas, some salt-sensitive trees, such as redwood trees, could be affected, particularly under the combination of factors that are independent of recycled water quality. The City is sensitive to concerns of landowners whose properties may be dominated by salt-sensitive tree species, and thus has identified actions that would mitigate the potential for damage to those trees. Specifically, the City would consider other options prior to Project operation if anticipated recycled water quality is not achieved by the time of Project operation, and would select the best strategy moving forward. These actions would include an amendment utilizing to the City’s existing Recycled Water Ordinance to allow for an exemption from use of recycled water on redwood trees (and other salt-sensitive trees) such that an individual site would have dual plumbing to allow potable water to be used on salt-sensitive species (if desired by the individual landowner), blending of the recycled water, or additional treatment of recycled water, based on available technology at the time City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 46 Response to Comments Document (see Mitigation Measure HYD-3d). The City’s initiation of an investigation of the feasibility of Reverse or Forward Osmosis treatment of its recycled water, combined with blending of appropriate water, has also been included in Mitigation Measure HYD-3d to show the City’s commitment to this measure. However, there may be a limited period at the beginning of Project operations when recycled water quality is not at the optimal level. In such an event, there is a potential for adverse effects similar to those described above for the use of any source water, particularly for salt-sensitive species. Given the expected short duration of recycled water use with less optimal recycled water quality, any effects on vegetation would occur for a limited time, and long-term damage to salt-sensitive species is not expected. Recycled water with higher TDS levels can be used on certain landscapes with minimal effect, and with proper site management (as required in Mitigation Measure HYD-3c), and the implementation of options to reduce TDS (Mitigation Measure HYD-3d), impacts would be less than significant. The following revisions have been made to Mitigation Measures HYD-3a through HYD-3c (in Table ES-1 on page ES-11 in the Executive Summary (Volume 1 of the EIR) and pages 3-25 and 3-26 in Chapter 3, Environmental Setting, Impacts and Mitigation Measures (also Volume 1 of the EIR) to clarify the entities responsible for the actions, clarify that the City has in place an existing exemption process from use of recycled water for salt-sensitive trees,and the City’s commitment to implement other actions. This change is a voluntary change by the District based on discussions with Stanford University. The analysis provided in the EIR is adequate and the level of mitigation proposed is appropriate. The revisions in the mitigation measure is not in response to an increase in severity of impact or any new finding of significant impact, is not required by CEQA, and does not create new significant environmental impacts. Similar to the original mitigation measures, the revisions would ensure that impacts would be less than significant. Mitigation Measure HYD-3a. Source Control of Saline Groundwater. The City shall continue to line and repair existing sewers to minimize saline groundwater Infiltration. Mitigation Measure HYD-3b. Monitoring. The City shall immediately begin quarterly monthly monitoring of the salinity (and related constituents) of the recycled water and shall report the rolling 12-month average for comparison to the Palo Alto City Council goal of 600 mg/l TDS. Monthly electronic reporting to those requesting it will be performed for two years, and then the frequency will be re-evaluated.The City shall monitor soil salinity and SAR through semi- annual soil analyses, preferably taken early and late in the irrigation season (approximately April and October). Mitigation Measure HYD-3c: Site Management. As a condition of recycled water use, the City shall require the site owners to: 1) Continue to irrigate with recycled water, even during droughts, (because recycled water is a drought-proof supply), to meet the water demand of the subject plants and trees; and 2) conduct appropriate best management practices/management actions specified below in the event that protected, low-salt-tolerant trees irrigated with recycled water show signs of decline. If at a particular site receiving recycled water, monitoring identifies an increase in soil salinity and SAR over historical levels, the City in cooperation with the owner of that site shall conduct a site-specific evaluation. That evaluation would consider (1) the extent to which the site contains protected trees (including redwood trees and oaks) that might be impacted by soil salinity, (2) the extent to which the elevated salinity is at a level that poses a threat to such City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 47 Response to Comments Document protected trees, and (3) the extent to which the elevated salinity is the result of the use of the City's recycled water.If a threat is found, the City shall work cooperatively with the site owner to develop a site-specific mitigation plan, including the site owner's implementation of best management practices which are described below: o To avoid plant damage to salt sensitive landscape plants, site owners can implement a leaching program to maintain soil salinity within the root zone below 2.0 dS/m6 and SAR below 6.0. For moderately salt-tolerant plants, maintain soil salinity below 4.0 dS/m. Where subsoils do not drain adequately, installation of subsurface drainage systems may be needed recommended.Rainfall will satisfy a portion of the leaching requirement, depending on the rate, volume, and distribution through the season. The frequency with which leaching applications should be made depends on several variables, and is typically triggered by approaching soil salinity thresholds defined above. o Site owners can aApply gypsum prior to leaching when indicated by soil analysis. Gypsum is a soil amendment that, when combined with leaching, helps lower soil sodium concentrations. Gypsum application can shall be considered when soil analyses reveal one or more of the following conditions: SAR exceeds 6.0, SAR increases 2 units or more (e.g., 2.3 to 4.3), and/or sodium concentration exceeds 5 meq/l (115 mg/L). The amount of gypsum needed and the frequency of application depend on site-specific soil and water characteristics, and can shall be determined by laboratory analysis. Mitigation Measure HYD-3d: Other Options to Protect Salt-Sensitive Plants. In the event that monitoring results (see Mitigation Measure HYD- 3b) show that optimal concentrations of TDS and related parameters will not be achieved prior to operation of the Project (i.e., recycled water application), the City will consider evaluate and implement one or more of the following other actions to reduce improve TDS levels, as follows: o The City shall amend Utilize its existing Recycled Water Ordinance exemption process (Palo Alto Municipal Code 16.12.050)to include an exemption for to exempt redwood trees (and/or other salt sensitive species) from the use of recycled water and allow for the use of dual systems so the exempted trees could be irrigated separately using potable water, if desired by individual landowners; o The City shall bBlend recycled water and other lower salinity potable water prior to application;and/or o The City shall tTreat recycled water to reduced TDS prior to application, or shortly thereafter (the City is initiating an investigation of the feasibility of Reverse or Forward Osmosis treatment of its recycled water, combined with blending of appropriate water). 6 ds/m is decisiemen/meter. A dS/m is a measure of electrical conductivity, and 1.0 dS/m approximates to 640 mg/L TDS. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 48 Response to Comments Document The text in Impact AES-1 has been revised by staff to reflect changes in Mitigation Measure HYD-3d (last paragraph, 3rd line in Chapter 3 of the Public Draft EIR), as shown below: In the event that the combination of factors described in Impact HYD-3 occur or in the unlikely event that recycled water quality does not achieve the desired concentrations by the time the Project is implemented (by the time of Project operation or shortly thereafter)additional actions are executed as specified in Mitigation Measures HYD-3d), some salt-sensitive plants could react poorly to recycled water (e.g., some salt-sensitive plants may show browning of leaves). Under this circumstance, the Project is not anticipated to result in a substantial change in the visual quality of the Project area from declines in the health of redwood trees and other salt-sensitive species. Any visual changes would likely occur gradually, over time, and with the site management actions described in Mitigation Measure HYD-3c, site managers would be able to monitor the appearance of trees and the quality of the soil and make necessary adjustments to maintain the health of its landscaped areas. Also, damage, if any, would unlikely occur in multiple locations simultaneously, due to the variations in site specific conditions of the tree, soil, and site management regime. Potential exposure of salt-sensitive plants to less optimal recycled water quality would be expected to be temporary. Also, recycled water with higher TDS levels could be used on a variety of landscapes with minimal effect, and with proper site management (as required in Mitigation Measure HYD-3c), even if some plants were to be affected, such visible effects would be scattered and unlikely to occur en masse. Because options (Mitigation Measure HYD-3d) are available to improve irrigation water quality, impacts to the visual environment would be less than significant. As discussed in the City’s Draft UFMP, the future composition of Palo Alto’s urban forest will be influenced by an emphasis on drought tolerant and recycled water tolerant species.Thus, any alterations in the visual environment associated with the conversion of the existing landscape to that containing more drought-tolerant regime should not be attributed to potential effects by the proposed Project. The choice to convert is an independent decision by each landowner. Headings in three tables in Appendix I (Volume 2) have been revised to reflect the proposed Project name. The air quality modeling was not rerun and the results of the air quality modeling remain the same. City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 49 Response to Comments Document [Insert Revised pdf pages from Appendix I-3 PAGES] City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 50 Response to Comments Document [Insert Revised pdf pages from Appendix I-3 PAGES] City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 51 Response to Comments Document [Insert Revised pdf pages from Appendix I-3 PAGES] City of Palo Alto Recycled Water Project EIR Revisions Final EIR Responses to Comments Palo Alto Recycled Water Project Page 52 Response to Comments Document This page intentionally left blank Appendix A -Mitigation Monitoring and Reporting Program Appendix B –Public Meeting Sign-In Sheet EXCERPUTILITIE UNFINISH ITEM 1: that the the Prop Modifica Control P the Proje As an em himself f As an e discussio Karin No made the the UAC North su Control P Stanford receives North sa for an ex stated th reduce r because that exp discharge North sa groundw identifies total diss PTED DRAFES ADVISO HED BUSINE ACTION: S City Council posed Recy tion to the Plant which ect (CONTIN mployee of t rom the disc employee of on. orth, Waters e staff prese recommend ummarized t Plant treats , Mountain the majority id that the l xpansion of t he project o eliance on i the drought anding the es to the bay id the main water basin, s blending o solved solids FT MINUTEORY COMM ESS Staff Recomm (1) Adopt a ycled Water e City’s Long Includes the UED FROM A the Santa Cl cussion. f Stanford shed Protect entation. No d that Coun the history o wastewate View and p y of the recy large custom the recycled bjective is t mported wa t highlights t use of recy y. n issue addr and urban or further wa s are not me ES OF THE ISSION ME mendation t Resolution t r Distributio g Range Fa e Recycled W AUGUST 5 U ara Valley W University, tion Manage orth remind ncil certify th of recycled w r from a nu part of East ycled water r mers in the S water syste o improve t ater. North the shortage cled water ressed in the forest. The ater treatme t. SEPTEMBEETING that the Uti to Certify th on Project, cilities Plan Water Projec UAC MEETING Water Distric Commissio er and Phil ed the comm he Environm water in Pal umber of cit t Palo Alto. right. Stanford res em because the potable pointed out e of potable also helps t e EIR is salin e EIR provid ent as optio ER 2, 2015 lities Adviso he Final Envi 2) Adopt n for the Re t; and 3) Dir G) ct (SCVWD), ner Eglash Bobel, Assis mission that mental Impa lo Alto. She ties includin Currently search park large landsc water supp t that the ti e water duri the Water Q nity and the des exempti ons if the sa 5 ory Commiss ronmental I a Resolutio egional Was rect Staff to , Commissio recused h stant Direct t staff is only act Report (E said that th ng Los Altos the City of are most fe caped areas ly reliability iming of this ng some pe Quality Cont e impact on ons for red linity reduct sion Recomm mpact Repo on to Acce stewater Qu Seek Fundin oner Hall rec imself from or Public W y requesting EIR) at this he Water Qu s, Los Altos f Mountain asible custo are present y for the City s project is riods. She a trol Plant re n landscapes dwood trees tion goals o mend ort for ept a uality ng for cused m the Works, g that time. uality Hills, View omers . She y and good added educe s, the s and f 600 Although North did not focus on the financial aspects of the project, she said the project is estimated to cost $35M. North said San Francisco Public Utility Commission wholesale water rates are going up, so the City’s potable water supply is becoming more expensive. She reminded the Commission that the EIR is needed for the City to apply for grant funding. North described the potential risks to the project including stranding the asset due to other graywater or groundwater uses for landscaping and/or reduced demand for irrigation due to landscape conversions. She assured the Commission that other options exist in the future to make the project valuable in the future. Then North summarized staff’s request. Gary Kremen, Chair of the SCVWD Board of Directors, made comments thanking Palo Alto for its water conservation efforts and said he is excited about Palo Alto’s dedication to recycled water. He stressed the need to secure Proposition 1 funds. Chair Kremen pointed out that two Palo Alto City Council members are working with the SCVWD and other agencies on recycled water issues through a new committee. Oral Communications Hossein Ashktorab from the SCVWD made public comments supporting the recycled water project. He said the project will help the District achieve county‐wide goals. He said recycled water is a drought‐proof and locally‐controlled resource and the new joint committee represents a new era for recycled water. Commissioner Danaher asked whether this project is just for Stanford’s benefit. Bobel said it was not and cited the reduction in effluents to the bay which is a benefit to all of the City’s partners. Bobel pointed out that Stanford was the most vocal opponent of the project and reminded the Commissioner that the buildings in the project area are largely not occupied by Stanford. Utilities Director Valerie Fong said there may be a benefit to the customers receiving the water during a drought, but the rates and cost to the City for the project are currently unknown before seeking funding. Bobel said we will work out finances later. He said the project will make more potable water available for someone else. Bobel projected that, in the future, many types of water will likely be produced to match the right water with the right need. Bobel added that growth and the need for water will increase, so recycled water will benefit all. Chair Foster asked why staff does not propose going straight to purified water. Bobel said the asset will be used in the future for some purpose, possibly for some form of purified water. Commissioner Ballantine pointed out the purified water is much more expensive and more energy intensive. Commissioner Schwartz commented that the trucking water businesses could indicate where there is a need for recycled water. North responded that 4 companies currently deliver the City’s recycled water to residents and that the City is collaborating with those very entrepreneurial businesses. Schwartz complemented staff for taking that approach. North added that water is heavy and it generally makes more sense to move by pipeline. Vice Chair Cook reminded the other commissioners that staff is asking for approval of the EIR and said he would not ask all his questions about the technical and financial issues surrounding this project. Councilmember Scharff questioned staff about water use going down over time even though growth in population has grown. Bobel agreed. Commissioner Ballantine asked about blending. Bobel said blending is our least favorite solution, but it still saves potable water overall. ACTION: Vice Chair Cook moved and Commissioner Schwartz seconded staff’s recommendation. The motion passes unanimously (5‐0) with Commissioners Cook, Ballantine, Danaher and Schwartz voting yes and Commissioners Hall and Eglash recused. Commissioners Hall and Eglash returned to the meeting at 7:10 pm. City of Palo Alto (ID # 6104) City Council Staff Report Report Type: Action Items Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Discussion of Fiber-to-the-Premises and Direction on Next Steps for Fiber and City Wireless Services Title: Discussion of Fiber-to-the-Premises Master Plan and Direction to Staff on Next Steps for Fiber and City Wireless Services From: City Manager Lead Department: IT Department Staff Recommendation To meet the strategic goals of the Council priority for the Technology and the Connected City initiative to facilitate citywide fiber-to-the-premises internet access and new wireless capabilities, staff recommends that City Council receive the attached Fiber to the Premises Master Plan and Wireless Network Plan, and direct staff to: 1. Defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide fiber-to-the-premises (FTTP) network. The intervening time between now and the end of the year should enable emerging gigabit broadband services from the private sector to be settled. During this time staff will further evaluate strengths and weaknesses of public utility options. 2. Issue Request for Proposal(s) (RFP) to add dedicated wireless facilities to improve communications for Public Safety and Utilities departments; with an option for expanding Wi-Fi coverage at City facilities and public areas. UAC Recommendation The Utilities Advisory Commission recommends that Council receive the attached Fiber to the Premises Master Plan and Wireless Network Plan, and direct staff to: 1. Defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide Fiber-to-the-Premises (FTTP) network. The intervening time between now and the end of City of Palo Alto Page 2 the year should enable emerging gigabit broadband services from the private sector to be settled. During the time between now and end of year, direct staff to evaluate the option of offering a city-owned FTTP network to all Palo Alto households and businesses as a public benefit. 2. Issue Request for Proposal(s) (RFP) to add dedicated wireless facilities to improve communications for Public Safety and Utilities departments; with an option for expanding Wi-Fi coverage at City facilities and public areas. At the September 2, 2015 Utilities Advisory Commission (UAC) meeting, staff provided a report and two recommendations regarding the FTTP Master Plan and Wireless Network Plan. By a vote of 4 to 3, the UAC commissioners amended staff’s first recommendation, by requesting staff to evaluate a city-owned FTTP network to all Palo Alto households and businesses as a publicly-funded public benefit. Instead, staff recommends an evaluation of strengths and weaknesses of public utility options rather than only a public benefit option. Staff and the UAC are in agreement on Recommendation #2. This report also provides an update on the City’s ongoing discussions with Google Fiber to build a fiber-optic network in Palo Alto, in addition to AT&T’s plan to deploy its gigabit-speed Internet service called “GigaPower” in Palo Alto. Executive Summary On February 2, 2015, the Council approved and authorized the City Manager to execute two Professional Services contracts in amounts not-to-exceed $144,944 and $131,650 to Columbia Telecommunications, dba CTC Technology & Energy (CTC), for a FTTP Master Plan and a complementary Wireless Network Plan respectively (Reference CMR ID # 5443). The FTTP Master Plan evaluated the following:  Maintaining the viability of the existing dark fiber network offerings;  Evaluation of potential uses of the existing dark fiber network to support citywide FTTP deployment;  Information for City staff, City Council, Utilities Advisory Commission, Citizen Advisory Committee, and other stakeholders on benefits, risks, and challenges of a network deployment in a competitive business and residential telecommunications market dominated by two large incumbent service providers;  Outline of the incumbent service providers’ likely reactions to a municipal FTTP overbuild;  Anticipating the influence of public and private FTTP offerings on market structure, including potential business models that may include a public-private partnership;  Consideration of the use of existing City and Utilities assets to encourage FTTP deployment;  Outline of the impact FTTP might have on the usability of City and Utilities assets;  Based on a high-level engineering study, a realistic estimate of the cost to deploy and operate a citywide FTTP network. City of Palo Alto Page 3 The complementary Wireless Network Plan evaluated the following:  Deployment of public Wi-Fi and secure City enterprise network access at City buildings and other facilities not already served;  Deployment of a point-to-multipoint network for secure City enterprise access for first responders and Utilities;  Deployment of a citywide mobile data network for public safety users. The key recommendations from CTC in the FTTP Master Plan and Wireless Network Plan are as follows: FTTP Master Plan 1. Recommends the City not directly pursue provision of retail services through FTTP; 2. Recommends exploring a partnership model where the City builds, owns and maintains fiber with services provided by one or more private sector Internet Service Providers (ISPs); 3. Recommends issuing a Request for Information (RFI) to explore private sector interest in a viable partnership and develop a framework and documentation for FTTP deployment and a subsequent competitive solicitation. Wireless Network Plan 1. Recommends expanding the City’s existing Wi-Fi coverage to additional City facilities and adjoining public areas such as parks; 2. Recommends installing dedicated wireless facilities to address the needs of the City’s first responders and Utilities; 3. Recommends considering a citywide broadband wireless network for use by the general public. In its reports, CTC notes the importance of recognizing that wireless technology is not a competitor to FTTP technology in a market such as Palo Alto; rather, they work together and complement each other. Wireless provides a mobility component to the City’s fiber-optic backbone. Fiber-optics, in turn, provides the high capacity backhaul1 extension needed to create a robust, high-capacity, low-latency wireless broadband network. Background At the February 2, 2013 City Council retreat, the Council chose “Technology and the Connected City” as one of its three top priorities for 2013. A Council Committee was formed for this initiative and on June 24, 2013, the Council approved a Council Committee recommendation to develop a work plan to evaluate the feasibility of building a citywide FTTP network and requested the City Manager to appoint a Citizen Advisory Committee (Advisory Committee) to assist in the evaluation (Reference CMR ID #3914). On October 28, 2013, the Council approved the Council Committee recommendation (Reference CMR ID #4203) to develop a FTTP Master Plan to build out the City’s dark fiber backbone system to provide Fiber-to-the-Premises and 1 “Backhaul” is a term used in communications to define the medium used (i.e. fiber optics, copper and coaxial cable and microwave) to transmit voice, video and data traffic to a network backbone and then back to a remote or central site. City of Palo Alto Page 4 develop a complementary Wireless Network Plan with a near-term focus on Wi-Fi, and a long- term consideration of other wireless technologies. In February of 2014, the City Manager appointed nine (9) Palo Alto residents to the Advisory Committee. The committee has met nine times since the committee was established and meets approximately every two months. At this time, there are six active members remaining on the committee. The committee members are: Richard Brand, Bob Harrington, Andrew Kau, Donn Lee, Christine Moe and Andy Poggio. The most recent Advisory Committee meeting occurred on August 20, 2015. At this meeting, the committee members had an opportunity to review and discuss the FTTP Master Plan and Wireless Network Plan with staff and CTC representatives and provide feedback. The Advisory Committee concurred with staff’s recommendation to postpone issuing an RFI for FTTP to enable emerging gigabit broadband services from the private sector to be settled. The City’s Chief Information Officer (CIO) is responsible for directing staff activities for the Technology and the Connected City initiative. Under the direction of the CIO, staff developed request for proposals (RFPs) to retain consulting services for the FTTP Master Plan and Wireless Network. Approximately 1.75 FTEs are assigned from the Information Technology and Utilities Departments to develop the plans. Development of the RFP for each plan was assisted by the Advisory Committee. RFPs were issued in July of 2014. Through a competitive bidding process, four vendors were interviewed by City staff and one member of the Advisory Committee in September 2014. The interview panel selected CTC Technology & Energy to recommend to the Council to provide professional consulting services for the FTTP Master Plan and Wireless Network Plan. CTC is an independent communications and IT engineering consulting firm with more than twenty five years of experience. CTC has provided the City with professional telecommunications consulting services since 2000. CTC’s customer base includes federal, state and local government agencies and the firm has been a leader in developing “gigabit-facilitation strategies.”2 2 CTC is not affiliated with equipment manufacturers or cable operators and has no relationships with firms or individuals who may submit proposals in response to future RFPs that may be developed through this engagement. CTC’s responses to the FTTP and Wireless RFPs states that “we can provide independent guidance; we have, as a policy, no financial stake in the strategies you choose and will not bid on any resulting construction work.” City of Palo Alto Page 5 At the June 3, 2015 UAC meeting, Chair Foster appointed Commissioners Danaher and Schwartz to the UAC’s Fiber-to-the-Premises committee. Staff met with Chair Foster and Commissioners Danaher and Schwartz on July 8, 2015, to provide background for Utilities’ commercial dark fiber enterprise, the FTTP Master Plan and Wireless Network Plan and timetable to complete these plans, and also provide an update on Google Fiber and AT&T GigaPower. Staff and CTC representatives met with the committee on August 21, 2015, to review the draft plans. The UAC also concurred with staff’s recommendation to postpone issuing an RFI to enable emerging gigabit broadband services from the private sector to be settled. Discussion Fiber-to-the-Premises Master Plan The FTTP Master Plan report prepared by CTC focuses on helping key stakeholders to understand the potential challenges and difficulties of operating a “for-choice” retail broadband service, an open access network model,3 or other variations of these models. The report also assesses the likely reaction from incumbent telecommunication service providers if the City built a citywide FTTP network. CTC does not recommend offering conventional cable television or landline telephony services. This is due to continuing consumer migration away from traditional cable offerings in favor of “over-the-top” (OTT)4 video content (e.g. Netflix, Hulu, Amazon Instant Video, YouTube, Sling TV and iTunes). Another important trend is the estimated 40-50% of U.S. households now without a landline telephone service, relying instead exclusively on cellular phones and other OTT telephony services such as Voice over Internet Protocol (VoIP). These trends will continue as more non-traditional video content and voice services emerge and greater programming variety becomes available via OTT. This trend is commonly known as consumer “cord-cutting” which appears to be happening at a more accelerated pace than most telecom industry analysts anticipated.5 The FTTP Master Plan report presents an assessment of existing City infrastructure and assets, evaluation of recommended technologies, detailed financial modeling and cost projections, and additional considerations for the City. The report includes financial considerations, including market variables that may affect market share, cash flow, and other fundamental aspects that might affect the FTTP offering and its long-term financial sustainability. The following outlines the highlights of the key findings and recommendations in the report: 1. Obtaining market share and acquiring new customers is necessary to the FTTP offering’s sustainability, as long as this does not interfere with the established revenue stream and 3 An open access network model has historically been defined as one network infrastructure over which multiple, separate providers can offer service. 4 OTT refers to delivery of audio, video and other media over the Internet without the involvement of multi- channel pay-TV providers such as cable TV and direct broadcast satellite companies in the control or distribution of the content. 5 Reuters, August 7, 2015: U.S. pay TV cord-cutting accelerates in second quarter - analysts http://www.reuters.com/article/2015/08/08/television-cable-idUSL1N10J00P20150808 City of Palo Alto Page 6 customer base for the commercial dark fiber enterprise. Maintaining the viability of the existing dark fiber offering is important to Utilities to avoid erosion of the customer base and existing revenues (approximately $2 million in net revenues each year). Note, however, that the dark fiber enterprise will likely see competition from planned services from AT&T, Comcast and other providers.6 2. Cost and Financial Analysis for FTTP Deployment: Section 8 of the report provides the anticipated costs and financial analysis associated with an FTTP deployment. All assumed costs used in this analysis were vetted with City staff for accuracy. This analysis is a snapshot projection based on certain assumptions, and represents a range of potential outcomes, which depend on a variety of factors. CTC’s analysis shows that, assuming the network achieves the take rate7 required to cash flow the enterprise, the City will require an estimated overall capital investment of approximately $77.6 million8 to build the network over a three year period (take rate projections for this report are explained in item #8 below). The components of this capital investment include network equipment, outside plant and facilities, last mile and customer premises equipment and miscellaneous implementation costs. This cost and the anticipated startup costs associated with initial network deployment are subject to change based on real-world variables. 3. Inventory and Assessment: In Section 3 of the report, CTC conducted preliminary research into the City’s existing infrastructure and assets as an initial step toward planning how best to deploy FTTP infrastructure. CTC notes that existing infrastructure is not always an asset in the pursuit of FTTP; for example, if barriers to the infrastructure are too many or the cost to “ready it” for FTTP is too great. CTC also considered the existing dark fiber optic backbone system, and what role it might have in an FTTP network, if any. Utility poles and conduit were also evaluated. One obstacle to leveraging an asset is getting it “cleaned up” to the point of being usable in the course of a citywide FTTP network build.9 A primary example of this is the “make-ready” process that must occur for a utility pole that does not have enough space for the attachment of new facilities for FTTP. In some cases utility poles may need to be replaced entirely if there is not enough space. 4. Comparison of FTTP Technology: Section 4 of the report describes the primary types of FTTP technology deployed today. From a purely technical standpoint - independent of a given network’s design or goals - each of these technologies has strengths and weaknesses. CTC recommends using Gigabit-capable Passive Optical Network (GPON) technology, which is the most commonly provisioned FTTP technology due to its inherent economies as 6 Comcast Ethernet V. Dark Fiber - The Dark Side of Dark Fiber http://business.comcast.com/docs/default-source/white-papers/cb_ethernetvsdarkfiber_whitepaper_3- 14.pdf?sfvrsn=0 7 Take rate is the percentage of subscribers who purchase services from an enterprise - and is an important driver in the success of an FTTP retail model. If the required take rate is not met, the enterprise will not be able to sustain itself and its operational costs will have to be offset through an alternative source. 8 See FTTP Master Plan Report Table 10, page 133, “Capital Additions.” 9 The existing fiber infrastructure is approximately 54 percent overhead and 46 percent underground. The majority of the underground infrastructure is placed in commercial areas - only approximately 15 percent of it is underground in residential areas. The majority of new fiber for the FTTP network will be placed in residential areas and will likely follow aerial routes. City of Palo Alto Page 7 compared with other technologies evaluated in the report. The network design and GPON technology proposed by CTC represents the current state of the art within the framework of financial feasibility. 5. The term “overbuild” refers to deploying a network where incumbent telecommunication service providers already serve customers. A new FTTP network competes directly with existing local cable, DSL, and other incumbent ISPs to offer services to customers. Fiber overbuilds generally do not offer a high rate of return, which is why there are not many private sector providers seeking to build fiber networks where customers are already served. Private and public sector entities that opt to overbuild usually consider alternative reasons and benefits for deploying a network and focus on other value drivers that make business sense. Examples of these drivers are communities seeking to enhance economic development by providing access to ultra-high speed Internet to serve businesses and research parks. An example of a private sector overbuilder is Google Fiber, which has the financial resources to disrupt the market and push the other providers to improve their data offerings to remain competitive. 6. The potential reaction from large incumbent telecommunication and ISPs to competition from a municipal FTTP network should not be overlooked. CTC encourages the City to come to internal agreement on its public messaging. Incumbents in Palo Alto would likely respond to the City’s market entry by running pricing promotions and other specials to target consumers and attempt to lock them into long contracts. They may also launch politically slanted campaigns fraught with scare tactics, claiming that the City is already well-served with broadband and has no reason to develop a municipal offering. 7. An alternative to traditional overbuilding is to “cherry pick”, or build to areas of a community where the provider is most likely to obtain a high number of subscribers willing to pay for service with a resulting high rate of return on capital investment. This approach is similar to Google’s “fiberhood” strategy where they only build if a certain percentage of residents sign up. Nevertheless, this approach is often not feasible for a public entity due to the political pressure to provide fiber access to all premises in the community irrespective of future rate of return on capital investment. 8. If the City built and operated a FTTP network and provided for-choice retail services there are inherent challenges that the City would face. These challenges include high costs compared to other metropolitan areas for labor and materials. Moreover, the cost of outside plant (OSP)10 and drop cables11 will be greater than other metropolitan areas because Bay Area costs, particularly labor and overhead for employees, tend to be higher.12 9. As a result of these high build and staffing costs, the required take rate is 72 percent, which is significantly higher than private and public overbuilders have been able to obtain. In 10 OSP is physical assets like overhead and underground fiber, accompanying ducts and splice cases, and other network components. 11 Drop cables connect the fiber optic backbone to the customer premises. 12 Labor will be more costly than in other metropolitan areas because salaries in the Bay Area tend to be higher on average, and overhead for City employees is calculated at an extremely high 65 percent. As a comparison, CTC has usually calculated this rate at approximately 35 percent in other recent studies CTC conducted. The model assumes that all debt service and network replenishments would be covered, which factors into the necessary take rate. City of Palo Alto Page 8 comparison, CTC’s recent analyses conducted for other municipalities have shown a required take rate in the mid 40 percent range in order to maintain positive cash flow.” 10. CTC evaluated using initial funding that does not need to be paid back, such as using the Fiber Optic Fund Rate Stabilization Reserve13 to help cover implementation costs to reduce the required take rate. In Section 8.3.2 of the report, Figure 30 shows the impact of funding amounts to $20 million in $5 million increments. For each $5 million in funding, there is approximately a 3.8 percentage point drop in required take rates.14 Nonetheless, the possibility that an overbuilder can obtain a 57 percent take rate as shown in the graph in Section 8 of the report (Cost and Financial Analysis for FTTP Deployment/page 142/Figure 30) in a competitive telecommunications market with two dominant providers (AT&T and Comcast) and several smaller providers is unlikely. 11. In light of the high cost to build and the extremely high take rate required, it may seem that there is little incentive for any public or private overbuilder to pursue a FTTP deployment in Palo Alto; however, the public and private sectors have unique advantages that may impact their ability to undertake a standalone overbuild. A private and public entity could complement one another by developing a partnership that can take advantage of each entity’s strengths, and may significantly reduce risk. 12. Many private providers have certain cost advantages that a public entity simply cannot replicate, like buying power with vendors for decreased electronics costs and the potential to reduce or entirely avoid maintenance fees for electronics. Large private providers will often maintain their own inventory of core electronics and share use of electronics over deployments in multiple markets. This is a cost savings and an advantage with which the City is unable to compete. 13. Many private providers already possess internal technical capabilities, and they may share staffing with other deployments. Technical support, sales, customer service, and other personnel may simply be reallocated to support deployment in a new market, with little to no impact on overhead costs and no need to hire additional staff. As an example, a large provider like Comcast does not necessarily have to hire additional staff to support an influx of 20,000 new customers. It can leverage its existing staff pool, which is already supported by its customer base in other markets. 14. The private sector can also avoid some of the staffing challenges the City faces by locating staff in other regions. As noted, Bay Area salaries are high, and the overhead for City employees is especially costly. If the City wanted to directly provide retail service, it could potentially reduce overhead costs by outsourcing to local firms, but for political reasons it will likely not be in the City’s best interest to contract with entities outside Palo Alto. The private sector is at an advantage because it does not have to manage the same political considerations as the City. The operational costs that the City can expect to face are thus greater and more complex than what an established, private-sector entity with economies of scale might incur. 13 The Projected Ending Reserve for FY 2016 is $22.4 million. 14 Note the individual data points in Figure 30 will vary from the 3.8 percent average since the resulting cash flow balances and projected Internal Rate of Return (IRR) vary from case to case. City of Palo Alto Page 9 15. Absent a private entity building and operating an FTTP network with unfettered data access, CTC recommends that the City consider pursuing a public-private partnership that leverages each party’s strengths, shares financial risks, and provides unfettered data access to the community. CTC’s report evaluates the numerous advantages and disadvantages of the various public-private partnership models in its report. 16. In light of the high costs the City will face for labor and overhead and the high necessary take rate, CTC does not recommend that the City directly pursue an FTTP model in which it provides retail services. The City simply does not have the same buying power as the private sector, and it is not particularly skilled at operating a for-choice competitive business. However, it may make sense for the City to deploy, own, and maintain the fiber infrastructure, and to engage a private provider to manage the FTTP enterprise’s operations. This would allow the City to focus on the long-term fiber investment and to leverage a private partner’s operational efficiencies to potentially create a strong enterprise and reduce the take rate necessary to make the enterprise cash flow. 17. As a next step in FTTP planning, CTC recommends the City develop and distribute a Request for Information (RFI): a potential key step toward exploring the interest of the private sector in developing viable partnerships is to develop a framework and documentation for a request for information (RFI) process. This will help the City clearly articulate its goals and inform the private sector of the City’s existing assets (e.g. rights-of-way, utility poles, conduit and fiber) and its desire to deploy FTTP. CTC recommends that the City undertake this process to help inform its own needs, and to clearly break down its expectations for itself and a potential partner. a. Note: Staff agrees with CTC’s recommendation to issue an RFI, but recommends postponing the issuance until after emerging gigabit broadband services from the private sector are settled. Wireless Network Plan The Wireless Network Plan prepared by CTC included a comprehensive analysis of the long- term needs for municipal wireless services within Palo Alto. CTC examined a wide range of applications that could potentially be addressed through the implementation of one or more commercial wireless technologies. CTC also examined various deployment scenarios such as blanket citywide coverage through Wi-Fi technology, expanded targeting of Wi-Fi access at and around City facilities, and dedicated projects focusing on providing priority, high-reliability services to the City’s critical infrastructure operated by Utilities and public safety agencies. The process to gather information for this analysis involved a “user needs assessment” which involved in-depth interviews with staff in several City departments (City Manager, Information Technology, Planning/Transportation Division, Office of Emergency Services, Public Works and Utilities). In addition to the above-noted staff interviews, a community survey was also conducted on Palo Alto Open City Hall to determine the interest in public Wi-Fi potentially provided by the City. The summary for the outcome of the survey shows the following results for 275 respondents: City of Palo Alto Page 10  Over 85 percent of respondents identified ultra-high speed Wi-Fi Internet access in Palo Alto as important;  Almost 65 percent of respondents indicated a willingness to pay for the service;  46 percent of respondents believe city government should provide Wi-Fi services to the public. The results of the survey are found here: https://www.cityofpaloalto.org/civicax/filebank/documents/48722 Based on CTC’s staff interviews and analysis, the Wireless Network Plan presents an assessment of existing City infrastructure and assets, evaluation of recommended technologies, detailed financial modeling and cost projections, and additional considerations for the City. The report also includes examples of other municipalities that built Wi-Fi and wireless networks for a variety of communication needs and applications, including public access to these networks. The report includes “lessons learned” for each example. The following provides background for the recommendations noted above and the various factors the City should consider for municipal wireless implementation scenarios that address specific communications needs within the City and the community: 1. Expand the deployment of Wi-Fi coverage to City facilities and adjoining public areas. The City successfully deployed Wi-Fi to thirty (30) City facilities for public and internal City use; CTC recommends that the City continue to deploy Wi-Fi at other City facilities, smaller City buildings, and park and recreational areas. 2. Install dedicated wireless facilities to address the needs of the City’s public safety responders and Utilities. To address the City’s high-priority internal needs, CTC recommends that the City consider deploying wireless infrastructure to support enterprise applications. For Utilities, these would include real-time monitoring and control of facilities that are not connected to the existing fiber-optic network (e.g., pump stations, electrical line monitoring).15 For public safety agencies, the wireless infrastructure would support mobile and portable communications for command and patrol vehicles, as well as incident command networks in the areas where existing commercial wireless services are often saturated due to a high concentration of public users (e.g., major events at Stanford University). 3. Consider a citywide broadband wireless network for use by the general public. A citywide public Wi-Fi deployment is technically feasible, however, only in concert with the deployment of a citywide FTTP network. The existing fiber-optic infrastructure operated by Utilities has neither the capacity nor the coverage area to support a citywide wireless deployment without a major expansion. If, on the other hand, a citywide fiber-optic network were in place, it would provide a mechanism for backhauling traffic from the individual wireless access points with transmission speeds measured in gigabits. This type of 15 Monitoring of electrical lines for voltage amplitude and phase shift. Monitoring provides a means to measure power in real time and adjust the system to achieve higher efficiency. City of Palo Alto Page 11 system would have the capability and coverage area to provide service competitive with existing 4G and future 5G commercial wireless networks. Based on the above-noted recommendations, CTC has recommended four independent scenarios, which can be implemented singularly or in combination to address a mix of public and internal City services (including municipal operations and public safety applications): Scenario 1 Deploy Public Wi-Fi and Secure City Enterprise Network Access at City Buildings: In this scenario, the City would deploy Wi-Fi at all City buildings not currently served, and support both free public access and secure enterprise network access for City employees. This option is basically an expansion of the City’s original deployment (thirty City locations are currently being served) to include all City buildings, parks, and recreational areas. The capital amount required for deployment at additional City sites will depend on the number of sites, and will presumably be comparable to the City’s costs for its previous deployments at major City buildings. These City buildings, parks and recreational areas are identified and prioritized in Section 7.2.2 of the Wireless Network Plan report. Scenario 2 Deploy Public Wi-Fi and Secure City Enterprise Network Access Citywide: Scenario 2 would deploy “blanket” wireless coverage for public and City users. CTC envisions a two-phase deployment approach: Phase A: Leveraging existing fiber, provide public Wi-Fi to core City business and residential areas.16 CTC estimates the capital cost to construct the infrastructure for this deployment to be approximately $4.7 million, and the yearly operating expenses to be $600,000 (assuming operation on a subscription basis at $20 per month, with a minimum of 2,550 customers). Phase B: Contingent on the City upgrading fiber as part of a Utilities upgrade or FTTP deployment provide public Wi-Fi to core business and residential areas.17 CTC estimates the capital cost to construct the infrastructure for this deployment to be approximately $3.3 million, and the yearly operating expenses to be $433,000 (assuming operation on a subscription basis at $20 per month, with a minimum of 1,880 customers). Residents and visitors would be able to access the network with any consumer-grade smartphone, tablet, or computer. The network would deliver Gigabit service at each access point, and would be IEEE 802.11/b/g/n/ac compatible.18 Nationally, many communities have deployed citywide Wi-Fi either under municipal funding or in partnership with a commercial provider. These services are generally well-received by the public, but CTC states it has been 16 Phase A: 100 Mbps shared among all users, 400+ wireless access points, light pole mounted, wireless mesh technology. 17 Phase B: 1 Gbps shared among all users, 600+ wireless access points, light pole mounted, fiber connected to each wireless access point, three to five years after Phase A completion. 18 IEEE 802.11 is a set of media access control (MAC) and physical layer (PHY) specifications for implementing wireless local area network (WLAN) computer communication in the 2.4, 3.6, 5, and 60 GHz frequency bands. City of Palo Alto Page 12 unable to find any municipal implementation projects that represent an economically viable standalone business opportunity. The public will clearly use available free Wi-Fi; however, when asked to pay for the service in a public space, many consumers have little interest. Consumers often will pay for such services in confined/restricted facilities such as an airplane, at an airport, or in a hotel. In contrast, blanket coverage often referred to as “amenity communication services” are generally expected to be provided free of charge. Scenario 3 Deploy a Point-to-Multipoint Network for Secure City Enterprise Access: In this scenario, the City would deploy a citywide high-reliability, dedicated, critical- infrastructure broadband wireless network to support public safety, Utilities, Public Works, and Traffic Engineering needs. As in the Police Department’s Mobile Emergency Operations Center (MEOC) incident deployment, City Hall would serve as the core site for a point-to-multipoint deployment.19 CTC estimates the capital cost to construct the infrastructure for this deployment to be approximately $370,000. It is anticipated that the annual operational cost to support this scenario will be low. Staffing will be supported by Public Safety and Utilities as a minor add-on to their current operation of radio, fiber-optic, and other communications equipment. Hardware maintenance will likely be outsourced to equipment manufacturers/vendors. For this scenario CTC estimates a maximum annual expenditure of $10,000. Scenario 4 Deploy a Citywide Mobile Data Network for Public Safety Users: In this scenario, the City would create hot spots for public safety mobile data network access to augment existing wireless operations at key facilities and routes (schools, stadiums, business areas). The hot spots would provide radial coverage to first responders and other authorized users. The City would equip its public safety vehicles with exterior mounted antennas and mobile routers capable of acting as access points. As an initial step, access points could be deployed at Utilities’ nine substations to provide coverage to a significant portion of the City. The City has more than 130 locations (including 101 fiber-connected traffic signals) that are suitable access points, so this scenario has great potential for phased deployment. CTC estimates the capital cost to construct the infrastructure for this deployment to be approximately $337,600. It is anticipated that the annual operational cost to support this scenario will be low. Staffing will be supported primarily by Public Safety as an addition to its operation of land mobile radio and other existing communications equipment. Hardware maintenance will likely be outsourced to equipment manufacturers/vendors. For this scenario CTC estimates a maximum annual expenditure of $30,000. Google Fiber and AT&T GigaPower Update 19 Sites to be served include: mobile public safety command vehicles, all Police/Fire radio sites, Utilities substations, Utilities facilities not connected to fiber-optic network, selected traffic engineering sites, and portable Public Works camera sites. City of Palo Alto Page 13 In January, 2015, Google selected Atlanta, Charlotte, Raleigh/Durham, and Nashville as the next markets that will receive Google Fiber deployments. In March, 2015, Google announced it would be expanding Google Fiber into Salt Lake City and in early August 2015, Google announced they will also build a fiber optic network in San Antonio, Texas. Google is still evaluating expansion plans in Phoenix, Portland and the San Jose Metro area, which includes the cities of Palo Alto, Mountain View, Santa Clara, Sunnyvale and San Jose. Google has already deployed fiber optics in the Kansas City metro area and construction of a Google fiber optic network is underway in Austin, Texas. In 2013, Google bought an existing municipal fiber optic network in Provo, Utah. City staff continues to meet with Google representatives on a regular basis. These meetings with Google representatives include discussions about the California Environmental Quality Act (CEQA) requirements, permitting processes for use of the public rights-of-way, utility pole attachments, conduit usage and dark fiber licensing. Staff anticipates that Google will make a final decision to build a fiber optic network in the San Jose metro area this fall. In April 2014, AT&T announced their plan to bring fiber to the Silicon Valley area. Subsequently, in May 2015, AT&T approached the City with intentions to bring its gigabit Internet service to Palo Alto. This service, called “GigaPower”, is an upgrade to AT&T’s existing U-verse services (Project Lightspeed) and will be deployed to residents via the installation of twenty seven (27) new cabinets that will be placed next to existing U-verse cabinets. Initially, AT&T will select neighborhoods with high potential for adoption and will use consumer demand levels to determine further deployments in the city. AT&T plans to begin construction in the last quarter of 2015 and begin providing service in 2016. To begin the process with the City, AT&T has provided a sample permit application to the Department of Public Works for review. Once agreement is reached on the submittal of permit applications and the process for moving the permits through the appropriate City departments, AT&T will submit the required applications for all 27 cabinets. Resource Impact Approximately 1.75 FTEs are assigned from the Information Technology and Utilities Departments to work with CTC to complete the FTTP Master Plan and Wireless Network Plan. Future fiscal impacts will be addressed with the Council once the findings and recommendations from the FTTP Master Plan and the Wireless Network Plan are evaluated by the Council and further direction is provided on the City’s level of involvement in the implementation of the plans. Policy Implications Development of the Fiber-to-the-Premises Master Plan and Wireless Network Plan is consistent with the Telecommunications Policy adopted by the Council in 1997, to facilitate advanced telecommunications services in Palo Alto in an environmentally sound manner (Reference CMR: 369:97- Proposed Telecommunications Policy Statements). City of Palo Alto Page 14 Environmental Review The development of a FTTP Master Plan and Wireless Network Plan are not projects under the California Environmental Quality Act (CEQA) as feasibility and planning studies are exempt under CEQA Guidelines Section 15262. Attachments:  Attachment: Attachment A: Palo Alto FTTP Master Plan - Final - 20150910 (DOCX)  Attachment: Attachment B: Appendix A - Palo Alto Existing Market Assessment - Rev 4 - Final - 20150910 (DOCX)  Attachment: Attachment C: Appendix B - Palo Alto FTTP Financial Models Rev 13 20150715 (PDF)  Attachment: Attachment D: Palo Alto - Wireless Network Plan - Rev 8a - Final - 20150910 (DOC)  Attachment: Attachment E: Appendix B - Palo Alto Wireless Option A Financial Rev 1 20150607 (PDF)  Attachment: Attachment F: Appendix C - Palo Alto Wireless Option B Financial Rev 1 20150607 (PDF)  Attachment: Attachment G: Excerpted Draft Minutes of the September 2, 2015 UAC Meeting (DOCX) City of Palo Alto Fiber-to-the Premises Master Plan Prepared for City of Palo Alto September 2015 CTC Report | City of Palo Alto | September 2015 ii Contents 1 Executive Summary ................................................................................................................. 1 1.1 Background and Objectives .............................................................................................. 1 1.2 Fiber Is an Important Community Asset and Differentiator ............................................ 5 1.3 FTTP Overbuild Challenges ............................................................................................... 6 1.4 Financial and Other Considerations and Challenges for FTTP in Palo Alto ...................... 6 1.5 Breakdown of How Capital and Operations Funds Are Allocated ................................... 9 1.5.1 Infrastructure Costs ................................................................................................ 10 1.5.2 Operating Costs ....................................................................................................... 10 1.5.3 Public and Private Entity Cost Advantages and Disadvantages .............................. 13 1.6 Recommendations ......................................................................................................... 13 1.6.1 Establish a Realistic Timeline .................................................................................. 13 1.6.2 Explore a Partnership Model Where the City Builds, Owns, and Maintains Fiber . 14 1.6.3 Develop and Distribute a Request for Information ................................................ 15 2 FTTP Network Requirements ................................................................................................ 18 2.1 User Applications and Services ...................................................................................... 18 2.1.1 Internet Access........................................................................................................ 19 2.1.2 IP Telephony (VoIP) and Video Conferencing ......................................................... 19 2.1.3 Streaming Video ...................................................................................................... 20 2.1.4 Cloud Access ........................................................................................................... 20 2.2 User Groups .................................................................................................................... 21 2.2.1 Passings ................................................................................................................... 22 2.2.2 Residents ................................................................................................................. 22 2.2.3 Small Businesses and Enterprise Users ................................................................... 23 2.2.4 Public Safety ............................................................................................................ 24 2.2.5 Electric Utility .......................................................................................................... 25 2.2.6 Health Care ............................................................................................................. 25 2.3 Network Design Requirements ...................................................................................... 25 2.3.1 Why Fiber Optics ..................................................................................................... 27 2.3.2 Fiber Routes and Network Topology ...................................................................... 27 CTC Report | City of Palo Alto | September 2015 iii 2.3.3 Passive Optical Network—Specifications and Technology Roadmap .................... 28 2.3.4 Managing Network Demand ................................................................................... 29 2.3.5 Internet Protocol (IP) Based Applications ............................................................... 32 2.3.6 Migration from IPv4 to IPv6 Protocol ..................................................................... 32 2.3.7 Multicasting—IP Transport of Video Channels ....................................................... 33 2.3.8 Over-the-Top (OTT) Programming .......................................................................... 35 2.4 Integration of Wireless Communications ...................................................................... 36 2.4.1 Mobile Backhaul...................................................................................................... 37 2.4.2 Partnerships with Wireless Carriers ........................................................................ 39 2.4.3 Potential Wireless Services by City FTTP Network ................................................. 39 2.4.4 Residential Wireless Services—Wi-Fi and New Technologies ................................ 39 2.4.5 Roaming Wi-Fi Networks ........................................................................................ 41 3 Inventory and Assessment .................................................................................................... 43 3.1 Existing Dark Fiber Optic Backbone Network ................................................................ 43 3.2 Utility Poles .................................................................................................................... 46 3.3 Existing Conduit .............................................................................................................. 47 3.4 Permitting Process ......................................................................................................... 48 3.5 Review of Existing Agreements ...................................................................................... 48 3.5.1 Master License Agreement ..................................................................................... 48 3.5.2 Joint Pole Agreements ............................................................................................ 49 4 Comparison of FTTP Technologies ........................................................................................ 50 4.1 Types of FTTP Technologies ........................................................................................... 50 4.2 Assessment of Recommended FTTP Technologies ........................................................ 54 4.2.1 Network Design Trade-Offs .................................................................................... 54 4.2.2 Electronics ............................................................................................................... 55 4.2.3 Facilities................................................................................................................... 56 4.2.4 Customer Premises ................................................................................................. 56 5 FTTP Design and Cost Estimates ........................................................................................... 58 5.1 Issues Related to Aerial Construction ............................................................................ 60 CTC Report | City of Palo Alto | September 2015 iv 5.2 Cost Estimates ................................................................................................................ 62 5.3 Methodology for Developing OSP Route Assumptions ................................................. 65 5.4 Backbone Routes ............................................................................................................ 67 5.5 Network Architecture and Electronics ........................................................................... 67 5.5.1 Core Network Sites ................................................................................................. 71 5.5.2 Distribution and Access Network Design ................................................................ 74 5.6 Operations and Maintenance Cost Estimates ................................................................ 82 5.6.1 Subscriber Provisioning ........................................................................................... 83 5.6.2 Maintenance ........................................................................................................... 83 6 FTTP Business Models and Municipal Objectives ................................................................. 84 6.1 Defining Broadband ....................................................................................................... 84 6.1.1 Broadband Speed .................................................................................................... 84 6.1.2 Relationship of Service and Infrastructure ............................................................. 85 6.2 Business Models ............................................................................................................. 87 6.2.1 Retail Services ......................................................................................................... 87 6.2.2 Wholesale Services ................................................................................................. 87 6.2.3 Infrastructure Participation and Public–Private Partnerships ................................ 88 6.3 Redefining Open Access ................................................................................................. 90 6.3.1 Open Access Goals .................................................................................................. 91 6.3.2 Evolving Over-the-Top Providers ............................................................................ 92 6.4 FTTP Objectives .............................................................................................................. 96 6.4.1 Community Broadband Objectives ......................................................................... 96 6.4.2 Ubiquity ................................................................................................................... 98 6.4.3 Consumer Choice .................................................................................................. 102 6.4.4 Competition in Market .......................................................................................... 103 6.4.5 Ownership and Control of Assets ......................................................................... 104 6.4.6 Performance ......................................................................................................... 105 6.4.7 Affordability .......................................................................................................... 106 6.4.8 Risk Aversion ......................................................................................................... 107 CTC Report | City of Palo Alto | September 2015 v 6.4.9 Cash Flow .............................................................................................................. 109 7 Potential for Public–Private Partnership ............................................................................ 111 7.1 Broadband Public–Private Partnership Framework ..................................................... 112 7.1.1 Risk ........................................................................................................................ 113 7.1.2 Benefit ................................................................................................................... 114 7.1.3 Control .................................................................................................................. 114 7.2 Model 1 – Public Investment with Private Partners .................................................... 115 7.3 Model 2 – Public Sector Incenting Private Investment ................................................ 117 7.4 Model 3 – Shared Investment and Risk ....................................................................... 120 7.4.1 Case Study: Champaign–Urbana, Illinois .............................................................. 120 7.4.2 Case Study: Garret County, Maryland .................................................................. 121 7.4.3 Case Study: Westminster, Maryland .................................................................... 122 7.5 Define the City’s Objectives ......................................................................................... 123 7.6 City and Partner Responsibilities ................................................................................. 124 7.7 Develop a Request for Information.............................................................................. 125 7.8 Additional Considerations for Public–Private Partnerships ......................................... 125 8 Cost and Financial Analysis for FTTP Deployment .............................................................. 128 8.1 Financing Costs and Operating Expenses ..................................................................... 129 8.2 Operating and Maintenance Expenses ........................................................................ 133 8.3 Summary of Operating and Maintenance Assumptions .............................................. 135 8.4 Sensitivity Scenarios ..................................................................................................... 136 8.4.1 Labor, Vendor Maintenance Fees, and DIA .......................................................... 136 8.4.2 Initial Funding ....................................................................................................... 141 8.4.3 Impact of Take Rate on Cash Flow ........................................................................ 144 8.4.4 Impact of Service Fees on Cash Flow .................................................................... 147 Appendix A – Existing Palo Alto Market Assessment ................................................................. 151 Appendix B – Financial and Cost Analysis ................................................................................... 152 CTC Report | City of Palo Alto | September 2015 vi Figures Figure 1: Breakdown of How Funds Are Used in Year 7 ................................................................. 9 Figure 2: Infrastructure Costs in Year 7 ........................................................................................ 10 Figure 3: Operating Expenses in Year 7 ........................................................................................ 11 Figure 4: Breakdown of Operating Expenses in Year 7 ................................................................. 12 Figure 5: Unicast IP Network Carries Multiple Copies of Single Video Channel ........................... 34 Figure 6: Multicast IP Network Carries Single Copy of Single Video Channel .............................. 34 Figure 7: Cable Operator Providing Fiber Backhaul to Cell Sites and Micro/Nanocells ............... 38 Figure 8: Comcast Wi-Fi Hotspots in Palo Alto ............................................................................. 41 Figure 9: Examples of Pole Zones ................................................................................................. 45 Figure 10: Aerial and Underground Utilities in Palo Alto ............................................................. 59 Figure 11: Examples of Pole Lines Requiring Tree Trimming........................................................ 60 Figure 12: OSP Crew Replacing a Pole .......................................................................................... 62 Figure 13: Sample FTTP Network Design to Determine Quantities per Street Mile .................... 66 Figure 14: Backbone Design .......................................................................................................... 68 Figure 15: High-Level FTTP Architecture ....................................................................................... 69 Figure 16: Sample Floorplan for Core Location ............................................................................ 73 Figure 17: Sample List of Materials for Core Location .................................................................. 73 Figure 18: BNG Facility .................................................................................................................. 76 Figure 19: List of Materials for BNG .............................................................................................. 76 Figure 20: Example Small Outdoor FDC Housing PON Splitters ................................................... 77 Figure 21: Example Large Outdoor FDC Housing an OLT .............................................................. 78 Figure 22: List of Materials for High-Density OLT Site (Up to 2,000 Subscribers) ........................ 78 Figure 23: Example Indoor FDC Option for OLTs .......................................................................... 78 Figure 24: CPE Kits......................................................................................................................... 81 Figure 25: Wholesale Lit Services ................................................................................................. 88 Figure 26: Infrastructure Participation Role in Partnerships and Turnkey Vendor Relationship . 89 Figure 27: Interactions between Objectives ................................................................................. 98 Figure 28: Ubiquity Alignments, Conflicts, and Potential Outcomes ......................................... 102 Figure 29: Risk and Reward Matrix ............................................................................................. 108 Figure 30: Impact of Initial Funding on Required Take Rate ...................................................... 142 CTC Report | City of Palo Alto | September 2015 vii Tables Table 1: PON Standards ................................................................................................................ 29 Table 2: Poles and Heights ............................................................................................................ 47 Table 3: Comparison of FTTP Technologies .................................................................................. 50 Table 4: Estimated OSP Costs for FTTP (Assuming a 35 Percent Take Rate) ................................ 64 Table 5: Estimated Electronics Costs for FTTP (Assuming a 35 Percent Take Rate) ..................... 64 Table 6: Common Goal Alignment ................................................................................................ 97 Table 7: Operating Expenses in Years 1, 5, 10, 15, and 20 ......................................................... 130 Table 8: Income Statement ......................................................................................................... 131 Table 9: Cash Flow Statement .................................................................................................... 132 Table 10: Capital Additions ......................................................................................................... 133 Table 11: Labor Expenses ............................................................................................................ 135 Table 12: Base Case Scenario – Residential Service $70 per Month, Small Commercial Service $80 per Month, Medium Commercial Service $220 per Month ................................. 137 Table 13: Decrease Overhead to 27 Percent of Salaries (from 65 percent), Financing Reduced by $5 Million, and Take Rate Decreased to 62.1 Percent ................................................ 137 Table 14: Eliminate Vendor Maintenance Contracts and Reduce Take Rate to 62.1 Percent ... 138 Table 15: Reduce Labor Expenses by 40 Percent and Reduce Take Rate to 57.6 Percent ......... 139 Table 16: Eliminate Vendor Maintenance Contracts, Reduce Labor Expenses by 40 Percent, and Reduce Take Rate to 51.3 Percent ............................................................................... 139 Table 17: DIA Monthly Price (per Mbps) Increases by $0.50 ..................................................... 140 Table 18: DIA Monthly Price (per Mbps) Decreases by $0.50 .................................................... 140 Table 19: Eliminate Vendor Maintenance Contracts, Reduce Labor Expenses by 50 Percent, Reduce DIA by 67 Percent, and Reduce Take Rate to 45 Percent ............................... 141 Table 20: Use $5 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 65.7 Percent .................................................................................................... 142 Table 21: Use $10 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 63 Percent ....................................................................................................... 143 Table 22: Use $15 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 60.3 Percent .................................................................................................... 143 Table 23: Use $20 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 56.7 Percent .................................................................................................... 144 CTC Report | City of Palo Alto | September 2015 viii Table 24: Residential Market Share Increase by 5 Percentage Points (4.5 Percentage Point Take Rate Increase) .............................................................................................................. 144 Table 25: Residential Market Share Increase by 10 Percentage Points (9 Percentage Point Take Rate Increase) .............................................................................................................. 145 Table 26: Residential Market Share Decrease by 5 Percentage Points (4.5 Percentage Point Take Rate Decrease) ............................................................................................................. 145 Table 27: Residential Market Share Decrease by 10 Percentage Points (9 Percentage Point Take Rate Decrease) ............................................................................................................. 146 Table 28: Commercial Market Share Increase by 10 Percentage Points (9 Percentage Point Take Rate Increase) .............................................................................................................. 146 Table 29: Commercial Market Share Decrease by 10 Percentage Points (9 Percentage Point Take Rate Decrease) ............................................................................................................. 147 Table 30: Residential Monthly Service Prices Increase by $5 ..................................................... 147 Table 31: Residential Monthly Service Prices Increase by $10 ................................................... 148 Table 32: Residential Monthly Service Prices Decrease by $5 ................................................... 148 Table 33: Residential Monthly Service Prices Decrease by $10 ................................................. 149 Table 34: Small Commercial Monthly Service Prices Increase by $10 ....................................... 149 Table 35: Small Commercial Monthly Service Prices Decrease by $10 ...................................... 150 CTC Report | City of Palo Alto | September 2015 1 1 Executive Summary This analysis was prepared by CTC Technology & Energy (CTC) to provide strategic recommendations for the City of Palo Alto in its effort to ensure that its residents and businesses have competitive, available, and affordable access to fiber-based state-of-the-art connectivity services.1 This report presents an assessment of existing City infrastructure and assets, an evaluation of recommended technologies, detailed financial modeling and cost projections, and additional considerations for the City. 1.1 Background and Objectives Located in northern Santa Clara County, California, and nestled in the San Francisco Bay Area, the City of Palo Alto has a resident population of approximately 66,000,2 and a daytime population of more than 125,000.3 The City is situated in “Silicon Valley”4 and boasts educational levels and income rates well above the national average.5 City of Palo Alto Utilities (CPAU) has successfully operated a dark fiber network for almost two decades.6 It serves a range of City and other customers with more than 200 dark fiber service connections to commercial users. In light of CPAU’s success with its dark fiber network, and to keep pace with the increasing need for robust connectivity services, the City is exploring the possibility of a municipally owned fiber-to-the-premises (FTTP) network, adding residential customers to the mix. This would not replace the dark fiber network, but would complement it by serving customers that the City is not currently able to reach. To uphold the City’s primary objective of ensuring that residents and businesses have access to competitively priced and well-managed broadband services, this report prioritizes the following City goals:  Foster local competition in the telecommunications industry  Maintain the viability of the existing dark fiber network offerings 1 The demand for higher-performing services will continue to increase. Given this, it is important for the delivery platform to not just support 1 Gigabit per second (Gbps) service, but also to be able to scale to 10 Gbps and beyond as applications and needs expand. 2 http://quickfacts.census.gov/qfd/states/06/0655282.html, accessed June 2015. 3 Daytime population estimate is based on input from City and CPAU staff, and City of Palo Alto Fire Department data. http://www.cityofpaloalto.org/gov/depts/fir/overview/default.asp, accessed August 2015. 4 A colloquial term for the northern portion of the San Francisco Bay Area, where the silicon transistor chip was invented. http://www.investopedia.com/terms/s/siliconvalley.asp, accessed May 2015. 5 The City’s per capita income was estimated by the 2013 census at $121,465 while the national average was estimated at approximately $52,250. In 2014, the national average of those who had obtained a bachelor’s degree or higher was 34 percent, while in Palo Alto that number was 79.8 percent at the 2013 census. 6 http://www.cityofpaloalto.org/gov/depts/utl/about/history.asp, accessed June 2015. CTC Report | City of Palo Alto | September 2015 2  Evaluate potential uses of the dark fiber network to support FTTP deployment  Inform City staff, City Council, Utilities Advisory Commission, Citizen Advisory Committee, and other stakeholders on benefits, risks, and challenges of a network deployment in a competitive business and residential telecommunications market dominated by two large incumbent service providers  Outline the incumbent service providers’ likely reactions to a municipal FTTP overbuild7  Anticipate the influence of public and private FTTP offerings on market structure, including potential business models that may include a public–private partnership  Consider use of existing City and CPAU assets to encourage FTTP deployment  Outline the impact FTTP might have on the usability of City and CPAU assets  Based on a high-level engineering study, provide a realistic estimate of the cost for the City to deploy and operate a citywide FTTP network Obtaining viable market share and acquiring new customers is necessary to sustain a City FTTP offering. Maintaining the viability of the existing dark fiber offering is important to CPAU to avoid erosion of the customer base and existing revenues (approximately $2 million in net revenues per year). We note, however, that the dark fiber enterprise will likely see competition from planned services from Comcast and AT&T. These services and their threats are discussed below. We aim to help the City and other key stakeholders understand the potential challenges and difficulties of operating a for-choice competitive retail service, an open access fiber network model,8 or other variations of these models to help prepare for anticipated responses from potential competitors and community stakeholders. Our financial analysis seeks to understand and present potential variables that may affect market share, cash flow, and other fundamental aspects of operating a City FTTP offering. It is also important to understand the presence of incumbent providers in the region, and the potential for additional competitors to enter the market. Google Fiber announced in early 2014 that the City is on its short list of communities where the company may expand its FTTP business. (Google Fiber is also considering other California communities, including San Jose, Santa Clara, Sunnyvale, and Mountain View.)9 In addition, 7 See Section 1.3 for a definition of overbuilding. 8 An open access network model has historically been defined as one network infrastructure over which multiple, separate providers can offer service. 9 http://www.multichannel.com/news/technology/google-fiber-sets-18-city-expansion/387338, accessed July 2015. CTC Report | City of Palo Alto | September 2015 3 AT&T announced in April 2014 that it, too, would bring fiber to Silicon Valley.10 Although these providers have not currently deployed in the City, they are aware of a market opportunity in a high-profile region. The potential reaction from large incumbent telecommunications and Internet service providers should not be overlooked, and we encourage the City to come to internal agreement on its public messaging. Incumbents in Palo Alto would likely respond to the City’s market entry by running pricing promotions and other specials to target consumers and attempt to lock them in to long contracts. They may also launch politically slanted campaigns fraught with scare tactics, claiming that the City is already well-served with broadband and has no reason to develop a municipal offering. In essence, these providers may temporarily act like competitors to try to obtain a larger market share, and to deter consumers from buying service from the City. However, the incumbent providers’ prices are often high, and their core systems will usually remain unchanged—meaning they will typically provide service over outdated legacy copper infrastructure. This technology often requires significant over-subscription and limits the number of subscribers these providers can support. Comcast’s announcement in spring 2015 that it will roll out 2 gigabit per second (Gbps) symmetrical service in select markets (including Palo Alto) is an indication of potential incumbent reaction to a new competitive provider entering the market. The Comcast 2 Gbps service, “Gigabit Pro,” is priced at $300 per month with combined installation and activation fees of up to $1,000; the service also requires lengthy contracts with hefty penalties for early cancellation.11 With such high prices, the service is not a significant threat in the residential market. However, it could seriously disrupt the business market by providing a mid-range offering that was not previously available. In May 2015, AT&T indicated to the City that it is interested in bringing its gigabit Internet service to Palo Alto. This service, called “GigaPower,” is an upgrade to AT&T’s existing LightSpeed service and can provide up to 1 Gbps of Internet speed to users. Initially, AT&T will select neighborhoods with high potential for adoption and will use consumer demand levels to determine further deployments in the City. It plans to begin providing service as soon as 2016. It is important to note that the pricing AT&T offers in a market depends on what existing competition looks like—particularly whether Google Fiber also offers services there. In Kansas 10 http://about.att.com/story/att_eyes_100_u_s_cities_and_municipalities_for_its_ultra_fast_fiber_network.html, accessed July 2015. 11 “Experience fast like never before,” Comcast website, http://www.xfinity.com/multi-gig-offers.html, accessed September 2015. CTC Report | City of Palo Alto | September 2015 4 City, Kansas and Austin, Texas—where it competes directly with Google Fiber—AT&T seems to match Google Fiber’s $70 per month price. In markets where it does not have to compete with Google Fiber (such as Cupertino, where it launched GigaPower in March 2015),12 AT&T charges $110 per month for its GigaPower service—$40 per month higher than in Google Fiber markets. Moreover, in July 2015, AT&T completed its $49 billion acquisition of satellite television provider DirecTV after the Federal Communications Commission (FCC) ratified the merger deal.13 The ratification outlined conditions placed on AT&T in order to achieve the FCC’s approval. AT&T agreed to expand its high-speed gigabit fiber optic broadband access to 12.5 million customers. This target is approximately 10 times the size of AT&T’s present gigabit fiber deployment; it would increase the entire nation’s residential fiber build by more than 40 percent, and would more than triple the number of metropolitan areas that AT&T has announced plans to serve. In communities where Google has entered the market, the disruption has been more widespread and profound. Google’s price point of $70 per month for 1 Gbps service is substantially lower than Comcast or AT&T’s pricing, and its deployments are more aggressive— thus, more neighborhoods have access to its services. Offerings from AT&T, Comcast, and Google may also impact the City’s existing dark fiber service by enticing some business customers to the new lower-cost services. As new services are introduced, it will become more critical for the City and the value-added resellers (VARs) that license its dark fiber to distinguish differences in a range of performance factors beyond cost and speed.14 Customer service may be one example. It is also important to establish a clear understanding early-on of potential legal liabilities and any recourse the City may have in the event of aggressive opposition by incumbent providers. This report provides guidance and advice within CTC’s purview,15 and we encourage the Office of the City Attorney to work with qualified outside legal counsel trained in the nuances of 12 http://www.cnet.com/news/at-t-gigapower-aims-to-bring-blazing-fast-internet-to-cupertino/, accessed July 2015. 13 http://fortune.com/2015/07/24/att-directv-merger-conditions/, accessed July 2015. 14 Speed is just one performance attribute. Performance attributes such as symmetry, oversubscription, committed transport rates, capacity constraints, latency, and business practices also influence users’ experience with the service. 15 CTC staff is not able to provide legal advice or guidance. CTC Report | City of Palo Alto | September 2015 5 telecommunications law.16 Being prepared at the outset with legal resources can save time, money, and stress as FTTP planning and deployment occurs. 1.2 Fiber Is an Important Community Asset and Differentiator Palo Alto is a unique hub for technological and business innovation, and is widely known as a premier startup center. Many tech giants got their start in the City—Facebook, Google, Hewlett Packard, and Palantir,17 to name just a few. Even Yahoo! was started as a project by two Stanford University graduate students.18 The City is home to a wide variety of research, innovation, and technologically-oriented enterprises and entities. These range from large public institutions like the Stanford Research Park to branches of private companies dedicated to research and development, such as the Ford Motor Research and Innovation Center. Further, the City has been ranked numerous times as one of the best cities in which to live in America—it was number one in 201419 and landed at number five in 2015.20 Although “quality of life” is subjective and difficult to quantify, one of the reasons the City retained its high ranking in 2015 was that it is an especially great place to live for “those blazing the digital frontier,” due to the City’s dark fiber network.21 The City is likely to feel competitive pressure from other communities that recognize that affordable and widely available broadband connectivity can help attract and retain tech startups and heavy hitters. Standing out from other communities by offering access to robust connectivity can have enormous economic development benefits,22 and can tremendously impact a community’s livability.23 The City may discover that it has to make greater efforts than ever before to retain its status as one of the leading technological communities in the U.S. The City is already well ahead of most other communities in the U.S.—those its own size, and even much larger cities—in a number of ways. Broadband, and specifically ultra-high speed broadband that can be supported only by fiber optic networks, is fast becoming a differentiating asset for communities, especially as cultural 16 In anticipation of this, our financial projections allocate funds for legal fees starting in year one. 17 http://www.lifewithfive.com/20-tech-companies-with-roots-in-palo-alto/, accessed July 2015. 18 http://www.fundinguniverse.com/company-histories/yahoo-inc-history/, accessed August 2015. 19 http://livability.com/best-places/top-100-best-places-to-live/2014, accessed July 2015. 20 http://livability.com/best-places/top-100-best-places-to-live/2015, accessed July 2015. 21 http://livability.com/best-places/top-100-best-places-to-live/2015, accessed July 2015. 22 http://www.nytimes.com/2014/02/04/technology/fast-internet-service-speeds-business-development-in- chattanooga.html?_r=0, accessed July 2015. 23 http://www.tennessean.com/story/money/tech/2015/02/01/kansas-city-google-fiber-changed-workers- lives/22601915/, accessed July 2015. CTC Report | City of Palo Alto | September 2015 6 awareness about municipal fiber options increases.24 The City may find that making an investment in broadband assets now will pay significant dividends over decades to come. 1.3 FTTP Overbuild Challenges The term “overbuild” refers to deploying a network in a market where incumbent providers already serve customers. A new City FTTP network would compete directly with existing local cable, DSL, and other incumbent Internet service providers (ISPs) to offer services to customers. Generally, fiber overbuilds do not offer a high rate of return, which is why there are not many private sector providers clamoring to build fiber networks in markets where customers are already served. Instead, private and public sector entities that opt to overbuild usually consider alternative reasons and benefits for deploying a new network. These entities focus on other value and drivers that make a business case for overbuilding. For example, a municipality may choose to enter the market as an overbuilder for economic development purposes, like serving anchor tenant businesses, school districts, and research parks. Alternatively, a private entity may opt to overbuild and offer services to supplement other parts of its business. Google Fiber is an example of this: By disrupting the market and incenting other providers to step up their data offerings, Google’s other business branches (e.g., search, AdWords, Chrome, Gmail, Maps, YouTube, and mobile application development) can potentially thrive. That is, consumers in an environment with greater choice and access to high-speed offerings are more likely to take advantage of Google’s various other services and products that rely on a robust data connection. An alternative to traditional overbuilding is to “cherry pick,” or build only to areas in a community where the provider is most likely to obtain a high number of subscribers willing to pay for service (and thus where the provider can expect a high return on capital investment). However, this approach is often not practicable for a public entity due to pressure it is likely to receive from citizens—it is not politically palatable for a municipality to deny portions of the community access to a service. Ubiquity is a common municipal goal.25 1.4 Financial and Other Considerations and Challenges for FTTP in Palo Alto Section 8 details the anticipated costs and financial analysis associated with an FTTP deployment. (All assumed costs used in this analysis were vetted with City staff for accuracy.) 24 http://www.nydailynews.com/news/politics/obama-municipalities-provide-internet-speed-push-article- 1.2078146, accessed July 2015. 25 Ubiquity is based on the FCC’S definition of “universal service” in the Communications Act of 1934, and the Telecommunications Act of 1996: “all Americans should have access to communications services.” https://www.fcc.gov/encyclopedia/universal-service, accessed August 2015. CTC Report | City of Palo Alto | September 2015 7 These projections are a snapshot based on certain assumptions; they represent a range of potential outcomes, which depend on a variety of factors. This analysis shows that, assuming the network achieves the 72 percent take rate required to positively cash flow the enterprise, 26 the City will require an estimated overall capital investment of approximately $77.6 million (see Table 10) to build the network. (This cost and the anticipated startup costs associated with initial network deployment are subject to change based on real-world variables.) Certain challenges inherent to FTTP deployment are especially pronounced in the City of Palo Alto. The City’s primary challenge in its pursuit of an FTTP buildout is that its costs will be high compared to other metropolitan areas for labor and materials. The cost of outside plant (OSP)27 and drop cables28 will be greater than in other metropolitan areas because Bay Area costs tend to be higher, many of the easements where the City must build are privately owned, and every drop cable must be placed in conduit. Labor will be more costly than in other metropolitan areas because salaries in the Bay Area tend to be higher on average, and overhead for City employees is calculated at an extremely high 65 percent. (As a comparison, we have usually calculated this rate at approximately 35 percent in other recent studies we have conducted.) The model assumes that all debt service and network replenishments would be covered, which factors into the necessary take rate. The high construction, borrowing, and staffing costs result in a higher necessary take rate for the City’s FTTP enterprise to obtain and maintain positive cash flow. Based on the financial projections (and the underlying assumptions), a 72 percent take rate is required to make the enterprise cash flow positive. This is not only much higher than overbuilders have been able to achieve in other communities, but also higher than the required take rates for other potential municipal fiber enterprises. As a comparison, other recent analyses we have conducted for municipalities have shown a required take rate in the mid-40 percent range in order to maintain positive cash flow. In light of the high cost to build and the extremely high required take rate, it may seem that there is little incentive for any provider (public or private) to pursue an FTTP deployment in Palo 26 Take rate is the percentage of subscribers who purchase services from an enterprise—and is an important driver in the success of an FTTP retail model. If the required take rate is not met, the enterprise will not be able to sustain itself and its operational costs will have to be offset through an alternative source. 27 OSP is physical assets like overhead and underground fiber, accompanying ducts and splice cases, and other network components. 28 Drop cables connect the fiber optic backbone to the customer premises. See Section Error! Reference source ot found.. CTC Report | City of Palo Alto | September 2015 8 Alto. However, the public and private sectors each have unique advantages and disadvantages that may impact their ability to undertake a standalone overbuild. A private entity and a public entity could complement one another by developing a partnership that can take advantage of each entity’s strengths, and may significantly reduce cost and risk. For example, a large private provider has certain cost advantages that a public entity simply cannot replicate, like buying power with experienced vendors to lower installation labor costs, to reduce electronics costs, and the potential to reduce or entirely avoid maintenance fees for electronics. Large private providers will often maintain their own inventory of core electronics and share use of electronics over deployments in multiple markets. This is a cost savings and an advantage with which the City is unable to compete. Some private sector investors may have such strong balance sheets that their investments can be made from cash on hand, eliminating borrowing costs and lender restrictions. Moreover, when a municipality borrows money to invest in a fiber-based venture, the debt and its servicing costs are public. Any shortfall in meeting project projections can quickly become difficult to manage in a municipal environment. Additionally, many private providers already possess internal technical capabilities, and they may share staffing with other deployments. Technical support, sales, customer service, and other personnel may simply be reallocated to support deployment in a new market, with little to no impact on overhead costs and no need to hire additional staff. As an example, a large provider like Comcast does not necessarily have to hire additional staff to support an influx of 20,000 new customers. It can leverage its existing staff pool, which is already supported by its customer base in other markets. The private sector can also avoid some of the staffing challenges the City faces by locating staff in other regions. As we noted, Bay Area salaries are high, and the overhead for City employees is especially costly. If the City wanted to directly provide retail service, it could potentially reduce overhead costs by outsourcing to local firms, but for political reasons it will likely not be in the City’s best interest to contract with entities outside Palo Alto. The private sector is at an advantage because it does not have to manage the same political considerations as the City. The operational costs that the City can expect to face are thus greater and more complex than what an established, private-sector entity with economies of scale might incur. Section 8.4 provides an analysis of the sensitivities of key assumptions on projected cash flow and required take rates. This analysis offers additional insights on how to leverage the City’s and potential private partners’ strengths and weaknesses. CTC Report | City of Palo Alto | September 2015 9 Absent a private entity building and operating an FTTP network with unfettered data access, we recommend that the City consider pursuing a public–private partnership that leverages each party’s strengths, shares financial risks, and provides unfettered data access to the community. These recommendations are discussed further in Section 1.6 below. 1.5 Breakdown of How Capital and Operations Funds Are Allocated To further illustrate potential City FTTP costs, we created a breakdown to show how funds are used. The analysis develops a snapshot of how funds are used in year seven because this is the point at which the business model has stabilized—for example, the required take rate has been met, the FTTP buildout is complete, and the depreciation reserve fund has started. Some expenses follow take rates, some are fixed, and some are step functions. The examples below assume a 72 percent take rate. Figure 1 shows that 53 percent of the funds in year seven go toward infrastructure: debt service for the capital investment (fiber, startup funds, and electronics) and asset replenishment (the depreciation reserve fund, which is used to pay for network upgrades and replacements). Figure 1: Breakdown of How Funds Are Used in Year 7 Of the remaining uses of funds, 32 percent is estimated for operating the business and 15 percent is estimated for network maintenance (fiber and electronics). Infrastructure - Debt Service & Replacements, $9,516,150 , 53% Operating Expense - Network O&M, $2,593,890 , 15% Operating Expense - Business Operations, $5,697,270 , 32% Uses of Funds - Year 7 CTC Report | City of Palo Alto | September 2015 10 1.5.1 Infrastructure Costs Figure 2 shows that debt service, or principal and interest (P&I) payments, account for 66 percent of infrastructure costs (which, as shown in the chart above, represents 53 percent of the total uses of funds). The depreciation reserve fund, which is used to pay for the cost of replacing infrastructure and equipment, accounts for 34 percent of infrastructure costs. That is, 66 percent of 53 percent (or 35 percent) of the total uses of funds goes toward debt service or P&I payments for the cost of infrastructure. The remaining 34 percent of 53 percent (18 percent) of the total uses of funds goes toward the depreciation reserve fund, which covers the cost of network replenishments and electronics replacements. The public sector has an advantage over the private sector in terms of infrastructure costs because fiber is a long-term investment that is typically best suited for the public sector. Although the private sector has some buying power advantages, the private sector also has to show a 10 percent or higher rate of return on the investment over 20 to 30 years—whereas a public entity simply needs to break even. Figure 2: Infrastructure Costs in Year 7 1.5.2 Operating Costs Figure 1 shows that 47 percent of the uses of funds (32 percent and 15 percent) are allocated for operating the business and for network maintenance (fiber and electronics). Figure 3 shows that 31 percent of the operating expenses are for network operations and maintenance (O&M), while 69 percent are for business operations. Please note that of the estimated $2.59 million in network O&M expenses, $1.37 million is for vendor maintenance contracts alone. Debt Service (P&I Payment), $6,276,600 , 66% Depreciation Reserve Fund (Replacements), $3,239,550 , 34% Infrastructure Costs - Year 7 CTC Report | City of Palo Alto | September 2015 11 Figure 3: Operating Expenses in Year 7 Figure 4 further breaks down the estimated operating expenses. Labor costs for business operations expenses account for 51 percent of all operating expenses, which reflects the high cost of labor in the City. As we noted, private providers are at an advantage because they can generally leverage existing resources and spread their costs over deployments in multiple markets. The public sector will likely need to hire some additional in-house staff and contract out some of its needs, and the City does not have prior experience with this particular type of specialized staffing. Operating Expense - Network O&M, $2,593,890 , 31% Operating Expense - Business Operations, $5,697,270 , 69% Operating Expenses - Year 7 CTC Report | City of Palo Alto | September 2015 12 Figure 4: Breakdown of Operating Expenses in Year 7 Similarly, network operations labor accounts for 8 percent of operating expenses, and the City will likely have to hire new staff and potentially contract out some of these tasks. CPAU has experience with some functions (e.g., locates, ticket processing, and OSP fiber maintenance) and may be able to train additional staff for less cost than hiring new staff for other labor functions. Still, the cost of additional City staff is significant, and there may be some network operations functions with which the City is unfamiliar. Vendor maintenance contracts account for 17 percent of operating costs, and this is an area where the private sector has an advantage. As with other areas, private entities can potentially leverage their own existing resources and disperse costs over multiple deployments—and if the private entity is large enough, it may be able to completely eliminate some of these costs. Direct Internet Access (DIA)29 accounts for 9 percent of operating costs, and it is calculated at $0.75 per Megabit per second (Mbps)30 per month. This is a reasonable cost for DIA, and somewhat reduces the potential advantage private providers have based on cost alone. However, larger providers are able to avoid more costs with on-net servers from peering 29 The enterprise must purchase DIA to provide Internet service to its customers. 30 This assumption was made based on input from City and CPAU staff. Internet (DIA), 9% Labor Costs - Business Operations, 51% Labor Costs - Network O&M, 8% Support Services Insurance Utilities Office Expenses Locates & Ticket Processing Contingency Billing Maintenance Contract Fiber & Network Maintenance Vendor Maintenance Contracts, 17% Legal and Lobby Fees Consulting Marketing Education and Training Customer Handholding Customer Billing (Unit) Allowance for Bad Debts Churn (acquisition costs) Pole Attachment Expense CTC Report | City of Palo Alto | September 2015 13 partners like Netflix. Further, costs tend to be minimal for private providers (almost nonexistent for some) due to the high volume of DIA that they purchase. 1.5.3 Public and Private Entity Cost Advantages and Disadvantages Private entities have cost advantages with 85 percent of operating costs (40 percent of uses of funds) and 17 percent of vendor maintenance contracts, such as core network equipment. The public sector has an advantage over the long-term investment—35 percent of the uses of funds (or 66 percent of 53 percent). That is, the private sector has the many advantages we enumerated above that have to do with operational costs for which private entities are typically staffed and prepared. The City has the advantage of being able to make a longer-term investment than most private providers because it does not have to demonstrate a high rate of return. 1.6 Recommendations In light of the high costs the City will face for labor and overhead and the high necessary take rate, we do not recommend that the City directly pursue an FTTP model in which it provides retail services. The City simply does not have the same buying power and experience as the private sector, and it is not particularly skilled at operating a for-choice competitive business. However, it may make sense for the City to deploy, own, and maintain the fiber infrastructure, and to engage a private provider to manage the FTTP enterprise’s operations. This would allow the City to focus on the long-term fiber investment and to leverage a private partner’s operational efficiencies to potentially create a strong enterprise and reduce the take rate necessary to make the enterprise cash flow positive. 1.6.1 Establish a Realistic Timeline We discuss below the potential of exploring a public–private partnership, and the possibility of issuing a request for information (RFI) to facilitate such a relationship. Note that these steps depend heavily on potential, impending changes in the Palo Alto market in the final months of 2015. Although an RFI process and seeking a partnership may ultimately make sense, we believe it is prudent to take a conservative wait-and-see approach through the end of the year. As we noted, incumbent providers often react to the threat of competition in the market by aggressively marketing and improving customer service. It may be that the simple possibility of Google Fiber entering the market spurs AT&T to more quickly begin upgrading its infrastructure to fiber in the City. One of FCC Chairman Wheeler’s recommendations to fellow commissioners CTC Report | City of Palo Alto | September 2015 14 for stipulating approval of AT&T’s acquisition of DirecTV was that AT&T increase its fiber build- out.31 Further, Comcast has a history of competing based on real and threatened competition in the market, and the notion of both Google and AT&T bringing competition to the City may increase the likelihood that it, too, improves its customer service and widens its offering. Palo Alto is currently an interesting market, and it may be worth the City waiting to take definitive action until it has a sense of whether it is necessary for the City to directly fill any service gaps with a public–private partnership. That is, if existing private sector providers begin to compete in earnest in the City, there may be few, if any, service gaps to fill. 1.6.2 Explore a Partnership Model Where the City Builds, Owns, and Maintains Fiber The City could potentially develop a partnership in which the private provider(s) agree to certain service terms and pay fees on a per-passing and/or per-subscriber basis. Meanwhile, the private provider(s) could own and operate the network’s electronics layer and manage the relationship with retail customers. This is similar to the model that the City of Westminster, Maryland is currently deploying with its partner, Ting Internet.32 Section 7.4.3 discusses the Ting partnership model in more detail. A partnership could focus on providing ultra-high-speed 1 Gbps33 service to consumers at competitive prices—say, $70 per month for residential and $80 per month for small business users. This type of arrangement could balance each party’s risk, address service gaps in Palo Alto, and meet the City’s connectivity goals. We outline here the reasons we believe the City may benefit most from pursuing a partnership in which it retains ownership of the fiber assets and engages a partner to deploy electronics, manage retail relationships, and provide a positive user experience. The City has an advantage over the private sector in terms of deploying, paying for, and owning fiber assets. Network deployment tends to be capital intensive, and the return on investment often takes much longer than the private sector can sustain without other incentives for building fiber. The financial analysis (see Section 8) considers what it would look like financially if the City were to deploy the network on its own and offer retail services. 31 http://arstechnica.com/business/2015/07/att-reportedly-wins-fcc-chairmans-support-for-directv-merger/, accessed August 2015. 32 https://ting.com/blog/next-ting-town-westminster-md/, accessed July 2015. 33 This service could be scalable to 10 Gbps through electronics upgrades, and the partnership could serve certain users on a case-by-case basis with this higher offering. The 1 Gbps service offering is meant to be the FTTP enterprise’s baseline service, or the target for most of its users. CTC Report | City of Palo Alto | September 2015 15 Another important consideration is the evolution of open access and how it may impact the City’s offering. Historically, open access has meant one network infrastructure over which multiple providers can offer service. Often the infrastructure was publicly owned and ISPs entered into an agreement to enable them to provide service over the public, open infrastructure. If instead an unfettered data product were available over the FTTP enterprise’s infrastructure, the City and a private partner might be able to take on responsibilities that play to their strengths while mitigating their risks and avoiding tasks for which they may be ill-equipped. The private entity could potentially avoid making a large capital investment while the City could avoid the unknowns and variability of providing retail service. Such a partnership may foster new ways to achieve the choice that open access has traditionally supported—through applications and services that can be delivered through an unrestricted data offering. The City may find it beneficial to contract with one provider at the outset for partnership. That partner could operate the City-owned FTTP network, and after a certain number of years, the City may opt to make the network truly open access so that any provider that wishes to offer service over the infrastructure has the option to do so. Such an arrangement could significantly reduce the City’s costs—most of which are related to labor. Further, the partnership model could allow the City to leverage a private entity’s buying power for electronics, reduced DIA costs, and other uses of funds. This could result in a much lower take rate necessary to make the enterprise cash-flow positive. For example, if the City could reduce salary expenses by 50 percent, eliminate costly vendor maintenance contracts (by allowing the private partner to manage these relationships), and reduce DIA costs by 67 percent, the necessary take rate could be reduced to 45 percent of passings (i.e., potential users). This take rate could potentially be lowered even further by pursuing a strategic deployment approach that requires a neighborhood to reach a certain take rate threshold before the City builds fiber there. The enormous cost that the City is likely to incur for labor alone makes a municipal retail FTTP offering challenging. The City will likely see tremendous benefit from working with the private sector to reduce costs and leverage strengths. If it is willing and able to make a long-term investment in fiber infrastructure, it then also has the advantage of a greater degree of control by retaining ownership of the FTTP network. 1.6.3 Develop and Distribute a Request for Information One potential key step toward exploring the interest of the private sector in developing viable partnerships is to develop a framework and documentation for an RFI process. This will help the CTC Report | City of Palo Alto | September 2015 16 City clearly articulate its goals and inform the private sector of the City’s existing assets and its desire to deploy FTTP. We recommend that the City undertake this process to help inform its own needs, and to clearly break down its expectations for itself and a potential partner. An RFI can help a public entity to evaluate potential vendors or partners with which the City may want to develop a relationship. An RFI also allows the City to gather information to potentially inform an eventual contract negotiation process. The RFI documents should clearly articulate the City’s needs and desires, and invite private companies to respond and outline their unique approaches to solving the City’s connectivity needs. Because the documents will lay the foundation for informing the contractual relationship between the City and its partner(s), the operational functions of each party should be clearly articulated. One useful aspect of developing RFI documentation is that it may help the City to flesh out some areas where its own goals are unclear. Further, the RFI could identify to what degree the City may need to be prepared to invest in infrastructure. The RFI does not have to create strict parameters about how the City expects its objectives to best be met or identify the business plan the City intends to pursue—instead, the RFI can clearly lay out the City’s goals and any non-negotiable items (e.g., CPAU must retain ownership of existing fiber, and will own and maintain newly constructed infrastructure in the power space)34 but leave room for a private partner to respond creatively. Indeed, it may be prudent to use caution in the degree to which the City specifies its requirements of a private partner. An overly detailed RFI may scare off potential respondents that do not believe they possess all the staff, qualifications, or resources to meet a strict list of demands outlined by the City. In contrast, a strategically developed RFI can elicit interest from providers that may not have been aware that the City is considering FTTP deployment and that the City may be willing to make its infrastructure available for use by the private sector. The RFI process can also help the City understand more clearly the real costs associated with its goals. The City may be able to obtain clear industry pricing for various support services like network operations and maintenance that a private provider may offer. An important consideration for an RFI process is that not all potential partner companies will respond in writing to the request. This should not discourage the City from developing an RFI— such a document is extremely valuable not only for evaluating the written responses, but also for outlining the City’s goals and sparking conversation. If the RFI process does not immediately 34 The “power space” refers to the area on a utility pole reserved for infrastructure for the electric utility. There is also a separate “communications space,” which contains infrastructure that belongs to phone, cable, and Internet providers. Please see Section 3.1.1 for a more detailed description, specific to City of Palo Alto Utilities (CPAU). CTC Report | City of Palo Alto | September 2015 17 elicit a partner, or if for some reason negotiations with a potential partner do not pan out, the City will likely find that the RFI remains useful for attracting and communicating with private companies. It becomes a document that the City can rely on to clearly articulate its objectives— and if an additional means of procurement is ultimately necessary, the RFI can serve as a basis for that process. Finally, it is important to be realistic about what a partnership may entail on behalf of both parties.35 The City must develop and clearly identify its own desires, goals, and requirements for a network. Once it has defined what it hopes to achieve, it can summarize this in an RFI to allow potential private partners to respond based on their own abilities and willingness to help meet the City’s needs. 35 Jon Brodkin, “Skeptics Say LA’s Free Fiber Plan As Plausible As Finding a Unicorn,” Ars Technica, November 8, 2013, http://arstechnica.com/information-technology/2013/11/skeptics-say-las-free-fiber-plan-as-plausible-as- finding-a-unicorn/ (Accessed May 2015). CTC Report | City of Palo Alto | September 2015 18 2 FTTP Network Requirements The City recognizes the importance of robust, scalable infrastructure when designing and deploying an FTTP network. It requires the ability to support a wide range of applications and services, and service delivery to both the community as a whole and specific user groups. Ultimately, this network will promote long-term economic development and community interests. This section describes many of the City’s required applications and services; the user groups the City aims to serve; and the general requirements of FTTP network design that would support identified and emerging applications and services. We present the proposed design in Section 5. 2.1 User Applications and Services The City’s FTTP network must be able to support “triple play” services—high-quality data, video, and voice—that residential customers have grown accustomed to having in their homes, although this does not necessarily mean that the City must be the entity that directly provides telephone or cable television services. As Internet technology has improved and network speeds have increased, voice and video services have become available as applications delivered by hundreds of providers over an Internet Protocol (IP) data network connection—so the City can enable these services by building a robust IP network. The City can enable residential and small business customers to purchase voice, video, and other over-the-top (OTT)36 services by providing them with unfettered,37 reliable, high-speed Internet access with connections at a minimum of 1 Gbps.38 In other words, the City would become an IP data network provider, either directly or through partnership(s), and would enable its citizens to purchase services—without the City taking a gatekeeper role. Additionally, the City could at some point open the network on a wholesale basis to any qualified provider to offer a data service bundled with Voice-over-Internet Protocol (VoIP),39 cloud storage, or other services. The fiber connection will also support customer-selected 36 “Over-the-top” (OTT) content is delivered over the Internet by a third-party application or service. The ISP does not provide the content (typically video and voice) but provides the Internet connection over which the content is delivered. 37 Meaning that access to websites offering OTT services is not blocked, restricted, or rate-limited. 38 Rate is a best-effort basis, not a guaranteed speed. Further, it is important to note that with the proposed architecture the City would provide a 1 Gbps baseline service and 10 Gbps and beyond on a case-by-case basis. The baseline can be increased to 10 Gbps and beyond by upgrading the network electronics 39 Telephony (voice) service delivered over an IP data network CTC Report | City of Palo Alto | September 2015 19 applications such as telemedicine, VoIP, the Internet of Things (IoT), video streaming, home security monitoring, and cloud services. 2.1.1 Internet Access Internet access is the fundamental service that most residents and small business owners will expect from a fiber connection, and is the prerequisite service for all of the applications described below. The City’s FTTP network will also include one or more peering connections with upstream ISPs, reducing wholesale Internet costs and improving service delivery. As described in detail below, the FTTP network will support a baseline service level (e.g., 1 Gbps) suitable for residential and small business customers. It will also be capable of supporting higher residential speeds—10 Gbps and beyond—and a range of business and enterprise services.40 2.1.2 IP Telephony (VoIP) and Video Conferencing As noted above, VoIP is a voice telephony service delivered over an IP data network.41 In the context of an FTTP access network, VoIP generally refers to an IP-based alternative to Plain Old Telephone Service (POTS) over dedicated copper wiring from a Local Exchange Carrier (LEC). With VoIP, both the live audio (voice) and the call control (signaling) portions of the call are provided through the IP network. Numerous third parties offer this type of full-service VoIP, which includes a transparent gateway to and from the Public Switched Telephone Network (PSTN). Because VoIP runs over a shared IP network instead of a dedicated pair of copper wires from the LEC, extra design and engineering are necessary to ensure consistent performance. This is how the VoIP services delivered by Comcast (which provides Quality of Service or QoS on its network underneath the VoIP services) typically have the same sound and feel as traditional wireline voice calls. In contrast, VoIP services without QoS (such as Skype) will have varied performance, depending on the consistency of the Internet connection. For voice and other real-time services such as video conferencing, network QoS essentially guarantees the perceivable quality of the audio or video transmission. From a networking perspective, IP-based video conferencing services are fundamentally similar to VoIP. While IP video conferencing is currently less common as a residential application, small and medium-sized businesses in the FTTP domain can be assured that QoS for IP-video conferencing can also be supported, as with VoIP. 40 Network can support faster connection speeds and other guaranteed service levels to some portion of end users. 41 In this context, voice services are delivered over a data connection. CTC Report | City of Palo Alto | September 2015 20 2.1.3 Streaming Video The variety of streaming online video through applications like YouTube, Netflix, Hulu, HBO Go, and others continues to attract users and challenge cable providers’ traditional business models. These are all examples of OTT42 video available over the Internet to users at home or on mobile devices like a smartphone or tablet.43 Section 6.3.2 discusses OTT in greater detail. Traditional cable television providers (also known as multi-channel video services) can also deliver content over a fiber connection rather than through a separate coaxial cable connection to users’ homes. All of these video services can be supported by the City’s FTTP network—as will be locally produced content from the Media Center and public service videos or documentaries filmed by high school students, which can be streamed to residents directly from a school, library, or government building that is on the network (“on net”). The avenues through which consumers can access content are broadening while the process becomes simpler. Because of the migration of video to IP format, we do not see a need for the FTTP network to support the Radio Frequency (RF) based video cable television service, an earlier technology used by some providers to carry traditional analog and digital television in native form on a fiber system. Early municipal providers like Lafayette Utilities System (LUS) and Chattanooga’s Electric Power Board (EPB) found that a data product alone was not strong enough to obtain the necessary market share to make the endeavor viable. Even when Google Fiber entered the Kansas City market in 2011, it found that if it wanted to get people to switch providers, it had to offer cable, deviating from its original plan and introducing more cost and complexity than the simple data service it had anticipated. If an OTT cable offering were available when early municipal providers began offering service and when Google entered the Kansas City market, it may have found that offering traditional cable television was unnecessary. 2.1.4 Cloud Access “Cloud services” refers to information technology services, such as software, virtualized computing environments, and storage, available “in the cloud” over a user’s Internet connection. Enterprise and residential customers alike increasingly use cloud services. With the continually rising popularity of mobile devices like smartphones and tablets, consumers want access to their photos, videos, and music from anywhere. And businesses want employees to 42 OTT refers to voice, video, and other services provided over the Internet rather than with a service provider’s own dedicated network. 43 OTT content is delivered over the Internet by a third-party application or service. OTT is also known as “value added” services. CTC Report | City of Palo Alto | September 2015 21 have access to important information to keep operations running smoothly, even when they are away from the office. The business drivers behind cloud computing are ease of use and, in theory, lower operating costs. For example, if you are a business owner, the “cloud” theoretically allows you to use large-scale information services and technologies—without needing to have hardware or staff of your own to support it. Cloud services eliminate the need to maintain local server infrastructure and software, and instead allow the user to log into a subscription-based cloud service through a Web browser or software client. The cloud is essentially a shift of workload from local computers in the network to servers managed by a provider (and that essentially make up the cloud). This, in turn, decreases the end user’s administrative burden for IT services. Typically, cable modem and DSL services are not symmetrical—thus incumbent network transfer rates to upload to the cloud are significantly slower than download rates. This can cause significant delays uploading to cloud services. There are also numerous other cloud services that customers frequently use for non-business purposes. These include photo storage services like Flickr and Shutterfly, e-mail services like Gmail and Hotmail, social media sites like Facebook and Twitter, and music storage services like iTunes and Amazon Prime. By enabling ISPs to reliably serve residents and small businesses with high-speed services, the City’s FTTP network will increase their options to use the cloud. Improving on less robust connections (e.g., cellular broadband or cable modem services), the City’s network will also enable telecommuters and home-based knowledge workers in Palo Alto to access cloud-based development environments, interact with application developers (both local and remote), and access content distribution network (CDN) development and distribution channels.44 2.2 User Groups The City has identified categories of users for the network:  Residents  Small businesses and enterprise users  Public safety  Municipal services, such as Electric Utilities  Healthcare 44 See, for example: “Amazon CloudFront,” http://aws.amazon.com/cloudfront/ CTC Report | City of Palo Alto | September 2015 22 2.2.1 Passings Here we explain the possible number of “passings”—homes and businesses the fiber could potentially pass—that this analysis estimated. We estimate there are 22,709 households to pass in the City of Palo Alto. Of these, 17,308 are in single-family residential homes. There are 1,794 residential households in structures with 2 to 4 units,45 known as multi-dwelling units (MDUs). There are 3,536 households in residential buildings that contain 5 to 19 units. And there are 71 residential mobile homes. Thus, we assume 22,709 residential passings. We did not include in the assumed residential passings the 5,226 households that are in buildings with 20 or more units. Typically, large MDUs with 20 or more units are served by existing long-term contracts between building owners and incumbent ISPs. Each of these buildings must be considered on a case-by-case basis. We estimate that there are 3,926 businesses in Palo Alto, and 734 of these are in a large office complex. Therefore, we assume a total of 3,192 potential businesses. The estimated 22,709 residential passings and 3,192 business passings results in 25,901 total residential and business passings. In short, this analysis does not consider the 5,226 households or 734 businesses that are in residential or business buildings with many units. These must be considered on a case-by-case basis. 2.2.2 Residents The City’s primary focus—and the largest potential user group for a citywide FTTP network—is the residential market. There are approximately 17,308 households in single-family homes, 10,556 households in multi-dwelling units (MDU),46 and 71 households in mobile homes or RVs.47 As we noted in Section 2.2.1, there are 5,226 households in MDUs with 20 or more units, and these will not be part of the City’s focus. The City’s residents will require a diverse range of speeds and capabilities—from simple, reliable connectivity at low cost, to extremely high speed, symmetrical services that can support hosting and research and development applications. The fiber network will provide the capability to offer a range of services through the same physical medium, requiring only an 45 We assume that each unit in a building holds a unique household. 46 Of the 10,556 households in MDUs, 5,226 are in structures with 20 or more households in each building. These buildings are often served under a long-term contract with one of the incumbent providers or a specialty ISP. 47 2015 Official City Data Set for Use by City Staff in Reports and Other City Materials, based on ACS Demographic and Housing Estimates 2011-2013 American Community Survey (ACS) 3-Year Estimates, supplemented with additional data from ACS 3-year estimates. CTC Report | City of Palo Alto | September 2015 23 upgrade of electronics or software at the user premises, and not customized physical connections. 2.2.3 Small Businesses and Enterprise Users There are approximately 4,000 businesses in Palo Alto, of which more than 3,200 have fewer than 10 employees.48, 49 In terms of their broadband needs, these small businesses are often more similar to high- capacity residential users than to large enterprise customers. They may need more than just a basic connection, but do not typically require the speeds, capacity, or guaranteed service levels that a large organization or high-end data user needs. The City’s FTTP network will support small businesses and will be capable of supporting select institutions and enterprise users. It is important to emphasize that the suggested network design will have enough fiber capacity to provide either Active Ethernet service or Passive Optical Network (PON) service to any business or resident. With that fiber in place, the City or an ISP can then sell customized service to enterprise customers on a case-by-case basis. The operational plan will also need to address many enterprise users’ needs for static IP addresses,50 and how the network operations can support this. The FTTP network will support basic service levels up to services just short of the highest-speed connections required by large enterprise users (a function that has been successfully addressed through the City’s dark fiber leasing program, which serves a different market segment). The FTTP network is meant to complement the City’s dark fiber licensing program. That is, the FTTP offering will serve users whose connectivity needs are not significant enough to warrant executing a dark fiber agreement. Similarly, the dark fiber licensing program successfully provides service to users whose connectivity needs would likely not be sufficiently met by an FTTP offering. However as noted in Section 1.1, some dark fiber users may find that the FTTP offering, Comcast’s Gigabit Pro, or AT&T’s GigaPower more appropriately meets their needs. The City currently licenses dark fiber service connections to approximately 100 commercial customers. There are 230 total active dark fiber service connections serving commercial customers (some customers have multiple connections).51 Commercial customers generate 91 48 Information obtained from www.infoUSA.com using specified business size ranges as search parameters. 49 Estimate 3,926 businesses with less than 99 employees. Further estimate that 734 of these businesses are in office complexes and treated on a case-by-cases basis in the FTTP model. The remaining 3,192 businesses are treated as a stand-alone facility in the FTTP design. 50 Some residential users will require static IP addresses. These can be offered as an option for a premium service. 51 These connections are typically provided by value-added resellers that “light the fiber” by bundling the necessary electronics and bandwidth with the City’s dark fiber, thus creating a turnkey customer solution. CTC Report | City of Palo Alto | September 2015 24 percent of the dark fiber licensing revenues—more than 40 percent of these revenues come from value-added resellers. The fiber network also serves the following City accounts:52  IT Infrastructure Services  Utilities Substations  Utilities Engineering  Public Works  Water Quality Control Plant  Community Services (Art Center) The FTTP offering and the dark fiber offering complement each other in that they each provide a specific service to unique user groups. The average community user likely has not been able to directly use the City’s dark fiber leasing program to meet their connectivity needs. The FTTP offering could fill gaps in the community not currently met by the dark fiber licensing program. 2.2.4 Public Safety Public safety users have more stringent requirements for reliability than most other users because of their role as first responders during emergency situations. Given these requirements and potential liabilities, we recommend directly assigning fiber strands to public safety users as opposed to serving them through use of the FTTP electronics that will serve residential and small business customers. With this approach, the FTTP network for delivering residential services will not be encumbered by the public safety users’ more stringent QoS and reliability requirements. The key to serving the public safety departments’ needs is to design the fiber routes to meet path diversity requirements and with sufficient fiber strands to dedicate to public safety. The routes should also have sufficient range and reach to ensure that fiber connections are available wherever the public safety agencies might need it. To that end, we recommend that the City’s network design reserve up to 12 strands of fiber to each public safety facility, and 12 strands at each fiber distribution cabinet (FDC) for future use by City and public safety applications such as traffic devices, wireless devices, and CCTV.53 The fiber could support connectivity to mobile command centers and connectivity of portable devices to a dedicated public safety network. The public safety agencies will need to install any electronics and backup power that may be necessary to provide the level of secure service 52 As of the end of fiscal year 2015, the fiber optic fund has a reserve of approximately $20.0 million. There is a separate $1.0 million Emergency Plant Replacement fund. According to the proposed fiscal year 2016 Budget, the fiber reserve is projected to increase by approximately $2.3 million. 53 Network can be designed so an FDC serves 128 to 254 premises–see design section for additional details. CTC Report | City of Palo Alto | September 2015 25 capacity, resilience, and prioritization they need for critical communications and lifeline services. 2.2.5 Electric Utility We have reserved fiber in the network design for the electric utility to implement a “Smart Grid” program for stakeholders and customers. This is a digital technology that allows for two- way communication between the utility and its customers as well as sensing within the utility system. The electric utility could deploy advanced metering infrastructure (AMI) to support its operations and maximize efficiency—for example, it might opt to install smart meters and implement advanced meter reading (AMR). 2.2.6 Health Care Health care providers have a role similar to public safety users in critical situations and often need guaranteed reliability, prioritization, and dedicated capacity. As long as the fiber network is designed to connect the City’s healthcare facilities, the network will have the capacity to serve the health care sector’s many needs—from enabling a health information exchange with secure media access54 to interconnecting facilities to create a community healthcare services network. Depending on the needs of a particular health care site, it is possible to provide the site with a range of services from dark fiber to GPON-based FTTP services. A medical center may be a candidate for dark fiber or Metro Ethernet. A doctor’s office or small clinic might use the GPON FTTP service to connect to other medical resources—enabling the office to download large files and quickly access research and reference materials, both local and cloud-based. Telemedicine, which is recognized as one of the broadband applications with the greatest potential to improve citizens’ quality of life, requires end-to-end high-speed access and data transmission between medical facilities. In some cases, this can be a connection between a provider’s facility and a patient’s home, or even a provider’s home. To the extent that the network design connects the necessary facilities, the City’s FTTP network will have the capacity to support telemedicine applications. 2.3 Network Design Requirements This section provides a high-level overview of the network requirements used to prepare the conceptual FTTP design and cost estimate. It also presents the technical details of an FTTP 54 The FTTP network operator does not provide HIPAA security or encryption. These are enabled by the FTTP network, but have to be the responsibility of the subscriber / application owner to implement over the FTTP network. CTC Report | City of Palo Alto | September 2015 26 network in terms of performance, reliability, and consumer perceptions based on providers’ marketing. Google changed the industry discussions and customer perceptions of data access when it introduced its plans to deploy an FTTP network and offer a 1 Gbps data connection for $70 per month in Kansas City.55 Until Google entered the FTTP market, cable operators such as Comcast questioned the need for 1 Gbps speeds and typically indicated that 10 Megabits per second (Mbps) is sufficient for residential and small business users. (Gigabit speeds were available in a few localities, such as Chattanooga, Tennessee, but Google’s brand name meant that Google Fiber had a bigger impact on national awareness around this type of connection.) Since Google’s entry, Comcast and other providers have slowly increased their data offering speeds— moving to 25 Mbps, 50 Mbps, and finally gigabit fiber services in selected markets. Comcast announced plans to offer 250 Mbps and 2 Gbps services in selected areas,56 including to several California cities and the Bay Area. It indicated that it would begin offering services in June 2015, but has experienced some delays.57 It released pricing for the service in July 2015,58 though monthly and installation fees are high and wait time for installation can be as long as two months. Additionally, AT&T announced in August 2014 that it would introduce its fiber-based “GigaPower” gigabit Internet service to select customers in certain areas of Cupertino, California.59 The 1 Gbps service is available for $110 per month, while customers can also opt for a 300 Mbps service for $80 per month.60 It is important to note that Internet access speed represents only one portion of the overall Internet experience, and measuring a network’s overall performance on one metric is incomplete. Further, “advertised speed” for residential services is a best-effort commitment, not a guarantee, and does not necessarily reflect actual performance. For example, the advertised speed does not delineate a minimum speed or a guarantee that any given application, such as Netflix, will work all the time. 55 https://fiber.google.com/cities/kansascity/plans/, accessed May 2015. 56 Sean Buckley, “Comcast shakes up California's broadband market with 2 Gig, 250 Mbps broadband plans,” Fierce Telecom, April 20, 2015. http://www.fiercetelecom.com/story/comcast-shakes-californias-broadband-market-2-gig-250-mbps-broadband- plans/2015-04-20?utm_medium=nl&utm_source=internal 57 http://arstechnica.com/business/2015/06/comcast-2gbps-fiber-to-launch-in-a-bunch-of-markets-this-month/, accessed June 2015. 58 http://time.com/money/3957600/comcasts-gigabit-internet-price/, accessed July 2015. 59 http://www.pcmag.com/article2/0,2817,2463576,00.asp, accessed May 2015. 60 http://www.cnet.com/news/at-t-gigapower-aims-to-bring-blazing-fast-internet-to-cupertino/, accessed May 2015. CTC Report | City of Palo Alto | September 2015 27 2.3.1 Why Fiber Optics For several decades, fiber optic networks have consistently outpaced and outperformed other commercially available physical layer technologies, including countless variants of copper cabling and wireless technologies. The range of current topologies and technologies all have a place and play important roles in modern internetworking.61 The evolution of Passive Optical Network (PON) technology has made FTTP architecture extremely cost-effective for dense (and, more recently, even lower and medium-density) population areas. The specifications and the performance metrics for FTTP networks continue to improve and outperform competing access technologies. In fact, from the access layer up through all segments of the network (the distribution layer and the core, packet-, and circuit-switched transports, and even into the data center), and for almost all wireless “backhaul” communications, optical networking is the standard wireline technology. Compared to other topologies, fiber-based optical networks will continue to provide the greatest overall capacity, speed, reliability, and resiliency. Fiber optics are not subject to outside signal interference, can carry signals for longer distances, and do not require amplifiers to boost signals in a metropolitan area broadband network.62 If an ISP were to build new with no constraints based on existing infrastructure, it would likely begin with an FTTP access model for delivery of all current services; compared to other infrastructure, an FTTP investment provides the highest level of risk protection against unforeseen future capacity demands. In cases where a provider does not deploy fiber for a new route, the decision is often due to the provider’s long-term investment in copper OSP infrastructure, which is expensive to replace and may be needed to support legacy technologies. 2.3.2 Fiber Routes and Network Topology FTTP architecture must be able to support a phased approach to service deployment. Phased deployments can help support strategic or tactical business decisions of where to deploy first, second, or even last. Phasing also allows for well-coordinated marketing campaigns to specific geographic areas or market segments, which is often a significant factor in driving initial acceptance rates and deeper penetration. This is the “fiberhood” approach used by Google and others. A fiber backbone brings the fiber near each neighborhood, and fiber can be extended as service areas are added in later phases of deployment. This allows for the fiber in individual 61 An internetwork is a network of interconnected networks. 62 Maximum distances depend on specific electronics—10 to 40 km is typical for fiber optic access networks. CTC Report | City of Palo Alto | September 2015 28 neighborhoods to be lit incrementally,63 with each new neighborhood generating incremental revenue. The proposed GPON FTTP architecture supports this capability once the core network electronics are deployed and network interconnections are made. The GPON architecture is discussed further in the design report and in Section 2.3.3 below. 2.3.3 Passive Optical Network—Specifications and Technology Roadmap The first Passive Optical Network (PON) specification to enjoy major commercial success in the U.S. is Gigabit-capable Passive Optical Network (GPON). This is the standard commonly deployed in today’s commercial FTTP networks and it is inherently asymmetrical. Providers from Google Fiber to Chattanooga’s EPB offer 1 Gbps asymmetrical GPON service with high oversubscription rates. Our suggested network design allows for provision of symmetrical services on a case-by-case basis. The GPON standard (defined by ITU-T G.984.1) was first established and released in 2004, and while it has since been updated, the functional specification has remained unchanged. There are network speed variants within the specification, but the one embraced by equipment manufacturers and now widely deployed in the U.S. provides asymmetrical network speeds of 1.24 Gbps upstream and 2.48 Gbps downstream. Since the release of the ITU-T G.984.1 GPON specification, research and testing toward faster PON technologies has continued. The first significant standard after GPON is known by several names: XG-PON, 10GPON, or NG-PON1. The NG-PON1 specification offers a four-fold performance increase over the older GPON standard. Although NG-PON1 has been available since 2009, it was not adopted by equipment manufacturers and has not been deployed in provider networks. We expect the next version under development, NG-PON2, to evolve as the de facto next-generation PON standard. (Many industry sources indicate or anticipate fielding that standard by late 2015.) These new standards can be implemented through hardware or software (electronics) upgrades, and are “backward compatible” with the current generation, so all variants can continue to operate on the same network. The optical layer of the NG-PON2 standard is quite different from GPON. The specification uses a hybrid system of new optical techniques, time division multiplexing (TDM) / wave division multiplexing (WDM) PON (TWDM-PON), that basically multiplexes four 10 Gbps PONs onto one 63 As the name implies, “lit fiber” is no longer dark—it is in use on a network, transmitting data. CTC Report | City of Palo Alto | September 2015 29 fiber, to provide 40 Gbps downstream. This is a 16-fold performance increase over the current GPON standard. At minimum, the upgrade pathway for existing GPON deployments will require new enhanced small form-factor pluggable (SFP+) modules on the OLT side at the hub building or cabinet, and a new optical network terminal (ONT) device at the customer premises, with software and firmware upgrades on the FTTP electronics. Final details are yet to be announced and will vary by manufacturer, but the NG-PON2 specification requires a migration path and backward compatibility with GPON. FTTP equipment manufacturers are believed to be testing upgrade steps and strategies for migrating from GPON to NG-PON2. Table 1: PON Standards 1994 pi-PON. 50 Mb/s, 1310nm bidirectional, circuit switched 1999 A/B-PON. 622/155 Mb/s, 1550nm down, 1310nm up, ATM-based 2004 G-PON. 2.4/1/2Gb/s, 1490nm down, 1310nm up, packet-based G-PON (2.5) 2009 NG-PON1. 10/2.5Gb/s, 1577nm down, 1270nm up, packet-based XG-PON (10) 2014 NG-PON2. 40G+ capacity XLG-PON (40) 2.3.4 Managing Network Demand Perhaps the most fundamental problem solved by IP packet data networking is how to cost- effectively design, build, and operate a network to manage unpredictable demands and bursts of network traffic. The earliest transport networks (and many of the major Internet backbone segments today) are circuit switched. This means that each network leg is a fixed circuit, running at a fixed speed all the time. Fixed-circuit networks are less flexible and scalable; they must be precisely designed and planned in advance, because there are fewer mechanisms to deal with unplanned traffic surges or unexpected growth in demand. “Dial-up” modems provide an example of circuit-switched technology. Copper POTS lines were in huge demand as residential and business customers purchased fax machines and accessed the Internet over modems. Because the POTS technologies could not support all of these uses at the same time, and were limited to slower speeds, phone companies were only able to serve that demand by installing more copper lines. The packet-switched DSL, cable modem, fiber, and wireless technologies that replaced POTS addressed the limitations of fixed-circuit technologies because the flow of network traffic is determined on a per packet basis, and the network provides robust mechanisms for dealing CTC Report | City of Palo Alto | September 2015 30 with unexpected bursts of traffic. The trade-off for flexibility, resiliency, and ease of use is that network speed will vary, depending mainly on the amount of traffic congestion. 2.3.4.1 Oversubscription An important balancing act in packet networks is between network performance (speed) and network utilization (efficiency). The primary method of achieving this balance is oversubscription. Because the vast majority of network users are not actually transmitting data at any given moment, the network can be designed to deliver a certain level of performance based on assumptions around actual use. Oversubscription is necessary in all packet-switched network environments and is generally beneficial—by enabling the network operator to build only as much capacity as necessary for most scenarios. By way of comparison, the electric industry uses a demand factor to estimate generation requirements. Similarly, a road that has enough capacity to keep most traffic moving at the speed limit most of the time will get congested during peak travel times—but building a road large enough to handle all of the traffic at peak times would be too expensive. Most drivers most of the time have enough room to go the speed limit, but when a lot of users want to be on the road at the same time, everyone has to slow down. The City will need to evaluate and manage its subscription levels to deliver the optimal balance of performance and efficiency. Although the goal of providing symmetrical dedicated64 1 Gbps data to all Palo Alto subscribers is admirable and technically possible, it may not be very practical or affordable. By comparison, Google’s 1 Gbps offering is technically neither symmetrical nor dedicated. And while Comcast’s 2 Gbps offering might be symmetrical, it is not dedicated. Services may be burstable, meaning that users may experience the advertised data rates at times, but the average speed will vary greatly based on the traffic being generated over the provider’s distribution network. Performance parameters on a burstable service are rarely publicized or realized. Often a network operator cannot change this parameter without changing the network’s physical connections. When looking at FTTP requirements, it is important to understand that the speeds and performance stated in marketing material for consumer services are not the same as a network’s actual technical specifications. Actual speeds and performance will depend on the activity of other users on the network. Generally, all residential and small business Internet services are delivered on a best-effort basis and have oversubscription both on the network and in the network’s connection to the Internet (Direct Internet Access). 64 As its name implies, service is “dedicated” when the link runs directly from the ISP to the user. CTC Report | City of Palo Alto | September 2015 31 First, let’s look at network oversubscription. Today’s GPON standard supports FTTP network speeds of up to 2.4 Gbps downstream (to the consumers) and 1.2 Gbps upstream (from the consumers) from a given FDC. The FDC is typically configured to support up to 32 premises.65 That is, up to 32 users will share the 2.4 Gbps downstream and 1.2 Gbps upstream.66 Given that not all users will demand capacity at the same time and that very few applications today actually use 1 Gbps, a provider can reasonably advertise delivery of a symmetrical 1 Gbps service on a best-effort basis and most consumers will have a positive experience. NG-PON2 (described above) will likely enable support of 40 Gbps downstream. In four or so years, the NG-PON2 platform should become standard, and although it will initially be somewhat more expensive, pricing will likely quickly match levels similar to today’s 2.4 Gbps platform. Even with today’s 2.4 Gbps GPON platform, the network can be designed to support 10 Gbps, 100 Gbps, or other symmetrical speeds. This can be accomplished with a hybrid approach using active Ethernet (AE) and GPON, or by deploying a full AE network, which would require placing active electronics at the FDC. The next level of oversubscription is with the network’s access to the Internet. Again, since not all users demand capacity at the same time, there is no need to supply dedicated Internet bandwidth to each residential or small business customer. In fact, it would be cost prohibitive to do so: Assuming a DIA cost of $0.50 per Mbps per month, the network operator would pay $500 per month for 1 Gbps of DIA. But an operator with a residential and small business 1 Gbps service could easily use an oversubscription of 500 to 1,000 on DIA today. Then, as users require more bandwidth, the operator simply subscribes to more bandwidth. The preferential approach is to reduce the traffic over the Internet, which is accomplished by peering to other networks, placing servers (such as Netflix) on the City’s FTTP network (referred to as on-net), and caching.67 All of the applications that the City has identified are possible with 32:1 GPON architecture and a reasonable oversubscription. If a bottleneck occurs at the Internet access point, the City can simply increase the amount of commodity bandwidth (DIA) it is purchasing or bring servers such as Netflix on-net. Customers looking for greater than 1 Gbps or who require Committed Interface Rates (CIR) can be served via a higher priced Ethernet service rather than the GPON- based 1 Gbps service. 65 Can be deployed in 8 to 1, 16 to 1, and 32 to 1 configurations. Lower ration’s reduce the number of subscribers sharing the capacity, but increases the number of FDC’s and fiber strands. 66 In an HFC network as used by Comcast, the network capacity is shared among 250 to 500 users. 67 Network server or service that saves Web pages or other Internet content locally. CTC Report | City of Palo Alto | September 2015 32 2.3.4.2 Rate Limiting In some networks, unexpected bursts of network traffic slow things down to unacceptable speeds for everyone using the network. Thus there needs to be a mechanism in place to manage these events for the greater good of everyone sharing the network. One technique for controlling this is called rate-limiting. It can be implemented in many different ways, but the net result is that it prevents over-congestion on a network during the busiest usage times. Most consumer Internet services today provide subscribers with a “soft” rate for their data connections. This may allow for some extra speed and capacity during times when the network is uncongested, but it may also mean that the “soft” rate may not be achievable during times when the network is the most congested. Providers need to have this flexibility to cost effectively manage the networks overall performance and efficiency and they do this with subscription levels and rate limiting. 2.3.5 Internet Protocol (IP) Based Applications The FTTP design will be an all-IP platform that provides a scalable and cost-effective network in the long run. This will allow the City to minimize ongoing costs; increase economies of scale with other network, communications, and media industries; and operate a uniform and scalable network. For example, with an IP-based data network, there would not need to be a separate set of video transport equipment in the headend or hubs, nor a set of dedicated video channels. The transport equipment and the spectrum would become uniform and converge to a single IP platform. Thereafter, network upgrades could be carried out solely based on the evolution of high-speed networking architecture, independent of video processing capabilities often inherent in incumbent provider networks. 2.3.6 Migration from IPv4 to IPv6 Protocol The Internet is in the process of migrating from the IPv4 to the IPv6 protocol. This upgrade will include several improvements in the operation of the Internet. One of the most notable is the increase in available device addresses, from approximately four billion to 3x1038 addresses. IPv6 also incorporates other enhancements to IP networking, such as better support for mobility, multicasting, security, and greater network efficiency; it is being adopted across all elements of the Internet, such as equipment vendors, ISPs, and websites. Support of IPv6 is not unique to the proposed City FTTP network. Comcast has begun migrating all of its services to IPv6. Customers with access to IPv6 can connect IPv6-aware devices and applications through their data connection and no longer need to use network address translation (NAT) software and CTC Report | City of Palo Alto | September 2015 33 hardware to share the single IP address from the ISP among multiple devices and applications. Each device can have its own address, be fully connected, and (if desired) be visible to outside networks. One way to think of removing NAT is that it is the IP equivalent of moving from a world of cumbersome telephone systems with a main number and switchboard extension (e.g., 650-555- 0000 extension 4422) to one where each individual has a unique direct number (e.g., 650-555- 4422). Devices and applications that will particularly benefit from IPv6 include interactive video, gaming, and home automation, because NAT (and other IPv4 workarounds to share limited address space) makes connecting multiple devices and users more complex to configure, and IPv6 will eliminate that complexity and improve performance. With IPv6, each device and user can potentially be easily found, similar to how a phone is reached by dialing its phone number from anywhere in the world. 2.3.7 Multicasting—IP Transport of Video Channels Traditional Internet video can waste capacity, especially in a “channel” video environment, because it sets up a new stream from the source to each viewer. Even if many people are watching the same program at the same time, a separate copy is streamed all the way from the server (or source) to the user. Multicasting is a method of transmitting data to multiple destinations by a single transmission operation in an IP network. Using multicasting, a cable operator (leveraging the proposed FTTP network) can send a program to multiple viewers in a more efficient way. A multicast-aware network sends only a single copy of the program (known as a multicast stream) from the server or source through the various network routers through the network. When a viewer selects the program, the viewer’s device (set-top converter or computer) connects to the multicast stream. The stream exists only once on the network, so even if the viewer and many neighbors are viewing the same stream, only one copy is being sent through the network (see Figure 5 and Figure 6). CTC Report | City of Palo Alto | September 2015 34 Figure 5: Unicast IP Network Carries Multiple Copies of Single Video Channel Figure 6: Multicast IP Network Carries Single Copy of Single Video Channel CTC Report | City of Palo Alto | September 2015 35 Multicast is a feature that was optional in IPv4 but standard (and better executed) in IPv6. As multicast-capable and multicast-aware routers and set-top converters become standard, a cable operator leveraging the City FTTP could consider an all-IP video programming offering, and not just video-on-demand (VoD), as multicast provides a means to carry traditional channels over IP without wasting the backbone capacity. 2.3.8 Over-the-Top (OTT) Programming As we noted, OTT programming typically refers to streaming content delivered via a consumer’s Internet connection on a compatible device. Consumers’ ubiquitous access to broadband networks and their increasing use of multiple Internet-connected devices has led to OTT being considered a disruptive technology for video-based entertainment. The OTT market, which includes providers like Netflix, Hulu, Amazon Instant Video, and iTunes, is expected to grow from about $3 billion in 2011 to $15 billion, by 2016.68 In order to provision content, OTT services obtain the rights to distribute TV and movie content, and then transform it into IP data packets that are transmitted over the Internet to a display platform such as a TV, tablet, or smartphone. Consumers view the content through a Web- based portal (i.e., a browser) or an IP streaming device (e.g., Google Chromecast, Roku, Apple TV, Xbox 360, or Internet-enabled TV/Smart TV). One potential difference in the delivery of OTT video content to consumers compared to other data traffic is OTT video’s high QoS requirement. QoS prioritizes the delivery of video packets over other data where uninterrupted delivery is not as critical, which ultimately translates to a high quality viewing experience for customers. Content buffering and caching for streamed content reduces the need for QoS. Network QoS is designed for and driven by the need to support real-time services such as VoIP and video conferencing. OTT providers typically have to use the operators’ IP bandwidth to reach many of their end users. At the same time, they are a major threat to cable television programming, often provided by the very same cable operators, due to their low-cost video offerings. As a result, many cable operators have introduced their own OTT video services to reach beyond the constraints of their TV-oriented platforms and to facilitate multi-screen delivery.69 68 “Over-the-Top-Video – “First to Scale Wins,” Arthur D Little, 2012 http://www.adlittle.com/downloads/tx_adlreports/TIME_2012_OTT_Video_v2.pdf 69 “Cable operators embrace over the top,” FierceCable, July 2, 2013, http://www.fiercecable.com/special- reports/cable-operators-embrace-over-top-video-studios-thwart-netflix-hulu-options CTC Report | City of Palo Alto | September 2015 36 Even Comcast seemed to embrace OTT by launching its “Streampix” in 2012,70 though that service was less than successful and was ultimately removed as a standalone offering. In 2015, Comcast announced another attempt at providing OTT content in the form of its “Stream” package,71 however subscribers must also sign up for Xfinity Internet in order to access “Stream” content. While the nature of OTT video lends itself nicely to VoD, time-shifted programming, and sleek user interfaces, OTT providers have limited control over the IP transport of content to users, which can cause strains on network bandwidth due to the unpredictable nature of video demand. Cable operators have experimented with rate limiting and bandwidth caps,72 which would reduce subscribers’ ability to access streaming video content. It is also technically possible for cable operators to prioritize their own traffic over OTT video streams, dial down capacity used by OTT on the system, or stop individual OTT streams or downloads. Some cable operators have attempted to manage OTT on their networks by incorporating the caching of OTT video content from third-party providers (e.g., Netflix) in their data centers in order to improve QoS and reduce congestion on the cable provider’s backbone network. This serves as a means for improving the quality of OTT video for video hosted in the data center. 2.4 Integration of Wireless Communications With the improvement of the quality and speed of wireless communications, the public has become accustomed to accessing Internet services over wireless technologies, either on a communications link managed by a wireless service provider (i.e., a cellular data plan), on local infrastructure typically managed at a home or business (i.e., a Wi-Fi hotspot), or through a mixture of those two approaches (e.g., a hotspot operated by a service provider, municipality, landlord, or homeowners association). The ability to deliver TV content to consumer devices anywhere at any time is highly dependent on the evolution of wireless technologies. Cellular service providers nationwide operate a mixture of third-generation (3G) and emerging fourth-generation (4G) wireless technologies.73 70 http://www.geekwire.com/2012/comcast-unveils-499-month-streampix-service-aim-netflix-hulu/, accessed May 2015. 71 http://www.forbes.com/fdc/welcome_mjx.shtml, accessed July 2015. 72“Comcast tests new usage based internet tier in Fresno,” Multichannel News, August 1, 2013 http://www.multichannel.com/distribution/comcast-test-new-usage-based-internet-tier-fresno/144718 73 The strict definition of 4G from the International Telecommunications Union (ITU) was originally limited to networks capable of peak speeds of 100 Mbps to 1+ Gbps depending on the user environment; according to that definition, 4G technologies are not yet deployed. In practice, a number of existing technologies (e.g., LTE Revision 8, WiMAX) are called 4G by the carriers that provide them and represent a speed increase over 3G technologies as well as a difference of architecture—more like a data cloud than a cellular telephone network overlaid with data services. Furthermore, a transition technology called HSPA+, an outgrowth of 3G GSM technology (previously CTC Report | City of Palo Alto | September 2015 37 As of today, the latest 4G Long Term Evolution (LTE) technologies have been rolled out by every major U.S carrier, creating an environment for better access to streaming video. In the near term, the challenges for wireless carriers are for greater capacity, extending network coverage, and efficiently utilizing the limited amount of wireless spectrum. FTTP and cable operators are well positioned to mitigate some of these issues with now available Wi-Fi capabilities in premises electronics. As described in the following section, FTTP and cable operators have pursued synergies with wireless carriers by exploring ways to use and extend each other’s communication networks. 2.4.1 Mobile Backhaul One area for greater collaboration between cable, FTTP, and wireless carrier networks is the provision of backhaul from cell sites to core network locations. In a carrier wireless network, cell towers are typically connected (backhauled) to the wired telecommunication network through low-bandwidth circuits. Given the fact that cable and FTTP operators have infrastructure that is spread out in a pattern that can easily reach cell towers, a relatively small investment in upgrading the fiber portion of cable operator networks for robust Metro Ethernet services will equip them with capabilities for mobile backhaul.74 The need and demand to access fiber for backhaul will continue to increase as we move toward fifth-generation (5G)75 wireless technologies. As cell coverage continues to evolve the coaxial portion of the cable system (as well as customer premises) and FTTP drops may be suitable for small “picocell” devices—miniature cell sites resembling Wi-Fi hotspots that can connect a handful of wireless users to a carrier, typically for indoor locations with poor wireless coverage. The trend towards ever decreasing coverage areas of individual mobile broadband base stations, or “cell site” radios, is driven by the need to increase aggregate capacity of the network by reusing the same wireless spectrum to serve smaller groups of customers. Each cell site is generally hardwired or connected via licensed microwave links to the provider’s backbone network—so as the coverage area of each decreases, the requirements for this backhaul connectivity increase. More numerous, smaller cell sites offer reduced technical complexity and have less demanding physical requirements, including mounting structures and electrical power. considered a 3G or 3.5G technology, with less capability than LTE or WiMAX), has been marketed as “4G” by certain carriers—so the definition of 4G is now fairly diluted. The ITU and other expert groups have more or less accepted this. 74 “Mobile backhaul opportunity knocks for cable operators,” CED Magazine, Feb 28, 2011, http://www.cedmagazine.com/articles/2011/02/mobile-backhaul%3A-opportunity-knocks-for-cable-operators 75 We anticipate that 5G rollouts will begin in the 2020 timeframe. It features greater capacity, smaller cells, and better traffic prioritization. CTC Report | City of Palo Alto | September 2015 38 Figure 7: Cable Operator Providing Fiber Backhaul to Cell Sites and Micro/Nanocells A “standard” cell site in a suburban or urban area is likely to have a coverage radius of a few miles, but can extend to more than 20 miles in some cases, with antenna arrays mounted to a large tower or atop a tall building. The radio equipment is likely to be housed in a large weather-proof enclosure or small shelter equipped with climate control systems and backup power generators. Typical electrical power requirements are in the 1 – 4 kilowatt (kW) range per carrier. Due to the cost and physical space requirements, collocation of multiple carriers is common at cell sites. Although the terminology is not always used consistently, a microcell generally refers to a compact base station targeting a coverage range of less than a mile or two within a specific area of particularly high density usage and/or to fill coverage gaps. Large hotels, airports, and sports venues are often served by one or more microcell to offload capacity demand from adjacent cell sites. As with a standard cell site, microcells are also operated and managed by the wireless provider. The limited coverage area of a microcell does not necessarily require antennas to be located on tall towers, and can often be supported by utility poles, street lights, and rooftops. Microcell equipment can generally be supported in small outdoor equipment enclosures that can be mounted to a utility pole. CTC Report | City of Palo Alto | September 2015 39 As cell sites get even smaller, their terminology and typical configuration become less consistent. Picocells and femtocells represent a breed of based station targeting very small coverage areas of a few hundred feet or less. These base stations may resemble a home Wi-Fi router, and may not be operated or installed by the wireless provider. Femtocells are typically installed indoors by an individual customer, allowing their own Internet connection to provide backhaul for the wireless services. 2.4.2 Partnerships with Wireless Carriers In addition to the greater speeds available on the latest LTE networks, wireless carriers can also promote the usage of video streaming on mobile devices (such as smartphones and tablets) by implementing functionalities that optimize the broadcast of premium TV content on the wireless network. A technique called Evolved Multimedia Broadcast Multicast Service (eMBMS) along with the implementation of new adaptive streaming protocols (in place of buffering) and High Efficiency Video Coding (HEVC) enable wireless carriers to use the spectrum more efficiently for the provision of TV content and to improve quality.76 Some cable companies such as Comcast are also offering customers a “Quad Play” of Internet, voice, cable, and wireless services (by reselling wireless phone services). This strategy also provides another portal for extending the reach of cable television and associated services. 2.4.3 Potential Wireless Services by City FTTP Network Wi-Fi enables the delivery of content to multiple TVs, tablets, PCs, and smartphones without the limits of cabling and without needing to have licensed wireless spectrum. Cable providers have been offering wireless Internet services for several years through Wi-Fi routers connected to DOCSIS-based cable modems.77 Comcast and other video content providers are now increasingly pursuing ways to offer wireless transmission of video content on home networks as well as on large-scale roaming networks. The CPEs proposed with the City FTTP network have the option of supporting Wi-Fi at a nominal cost. Theoretically, Wi-Fi may also enable a provider to offer some of its services from its cable plant to a home or business without installing a cable into the premises. 2.4.4 Residential Wireless Services—Wi-Fi and New Technologies Wi-Fi or Wireless Local Area Network (WLAN) technology is based on the IEEE 802.11 standard. WLANs have been able to provide greater bandwidth over the course of their evolution and may potentially create a completely wire-free future for connectivity within the home. 76 “Verizon’s McAdam Sees Broadcast Video over LTE in 2014,”Multichannel News, Jan. 8, 2013, http://www.multichannel.com/telco-tv/ces-verizons-mcadam-sees-broadcast-video-over-lte-2014/141109. See also: http://www.engadget.com/2015/01/14/att-lte-broadcast/. 77 DOCSIS, or “Data Over Cable Service Interface Specifications,” is the standard that enables cable operators to transport data over existing cable architecture. CTC Report | City of Palo Alto | September 2015 40 One of the latest versions of the 802.11 standard, 802.11ac, is now becoming available, and positions WLANs to target the wireless market growth expected over the next few years by offering speeds of up to 1.3 Gbps78—doubling that of the current 802.11n standard. The new standard (operating only in the 5 GHz band as opposed to both the 5 GHz and 2.4 GHz bands) has various design enhancements, including:  Increase in channel sizes up to 160 MHz from a maximum of 40 MHz in 802.11n  Use of higher modulation and coding schemes such as 256 QAM (an improvement over 64 QAM)  Greater number of multiple input, multiple output (MIMO) antenna streams (i.e., eight antenna streams instead of four) separated spatially in a manner that improves data rates and performance  Use of multi-user MIMO, which supports simultaneous transmission to multiple clients, thus more effectively utilizing channel bandwidth The Wi-Fi Alliance, a trade association that ensures the interoperability of equipment from different vendors, approved 802.11ac technology on various new devices in 2013. The relatively faster adoption of this new technology had become a necessary step in order to support the pervasive bandwidth demanded by mobile applications and the increasing number of devices per user. Backward-compatibility to older standards and 2.4 GHz equipment is a feature that will be present on most devices for the foreseeable future. Another standard—802.11ad—which will offer functionalities closer to peer-to-peer (P2P) applications has been in development by Samsung and others and uses the 60 GHz band of radio spectrum. It has the capability to transfer up to 7 Gbps.79 This technology is more suited for high capacity, line-of-sight links (such as in-room wireless connection) and has the potential to be a highly effective way to communicate between content delivery mediums and user screens—similar to how an HDMI cable or docking station would work, but at greater distances. 78 “802.11ac:The fifth Generation of Wi-Fi Technical White Paper,” Technical White Paper, Cisco Systems, August 2012 79 “Amendments in IEEE 802.11ad enable Multi-gigabit throughput and groundbreaking capacity,” IEEE Standards Association, January 8, 2013, http://standards.ieee.org/news/2013/802.11ad.html, and “Samsung Develops 802.11 AD Wi-Fi, But Will it be Sunk by Poor Penetration?” DailyTech, October 14, 2014, http://www.dailytech.com/Samsung+Develops+80211+AD+WiFi+But+Will+it+be+Sunk+by+Poor+Penetration/artic le36707.htm#sthash.9sEhr0rN.dpufhttp://www.dailytech.com/Samsung+Develops+80211+AD+WiFi+But+Will+it+b e+Sunk+by+Poor+Penetration/article36707.htm CTC Report | City of Palo Alto | September 2015 41 2.4.5 Roaming Wi-Fi Networks This option is difficult for the City to support due to service area (not technical) limitations. Cable providers have been able to broaden their wireless service footprints by creating a nationwide roaming Wi-Fi network. Comcast has expanded its Wi-Fi hotspot network, “Xfinity WiFi,” to several densely populated areas within its service region to provide wireless Internet access to both subscribers (at no additional charge) and non-subscribers (at a pay-per-time- block rate). See Figure 8 below. Figure 8: Comcast Wi-Fi Hotspots in Palo Alto Comcast and four other cable companies—Time Warner Cable, Cox Communications, Cablevision, and Bright House Networks—collaborated to create a Wi-Fi roaming network across the United States, named “CableWiFi.” This network allows cable subscribers to access the Internet within the coverage of 300,000 hotspots belonging to any of the cable providers in more than a dozen major cities.80 80 http://www.timewarnercable.com/en/support/faqs/faqs-internet/twcwifihot/cablewifi/what-is-cablewifi.html, accessed April 2015. CTC Report | City of Palo Alto | September 2015 42 In June 2013, Comcast launched a “homespot” network81 that sets up an additional sub- network on the Wi-Fi gateways deployed in individual customer premises that is accessible to all Comcast subscribers. This model has already been demonstrated in Europe and has the potential to provide millions of hotspots across Comcast’s service footprint, enabling roaming access to video and data content. The expansion of roaming Wi-Fi networks either collaboratively (e.g., CableWiFi) or by individual cable providers (e.g., Comcast’s homespot) does not appear to create bandwidth bottlenecks on cable operator networks at the moment. Rather, the networks create benefit to cellular wireless carriers, which have a new avenue to relieve their network congestion by offloading their data services to cable operator’s public Wi-Fi networks. At the same time, wireless subscribers can also direct their traffic to Wi-Fi networks whenever possible to avoid the data caps set by cellular providers. In both cases, multiple-system operators (MSOs) benefit by 1) obtaining a greater penetration in the wireless broadband market and 2) the creation of a smooth transition in the TV viewing experience outside of their coverage area. 81 “Comcast unveils plans for millions of Xfinity WiFi Hotspots,” press release, Comcast Corp., June 10, 2013, http://corporate.comcast.com/news-information/news-feed/comcast-unveils-plans-for-millions-of-xfinity-wifi- hotspots-through-its-home-based-neighborhood-hotspot-initiative-2 CTC Report | City of Palo Alto | September 2015 43 3 Inventory and Assessment CTC conducted preliminary research into the City’s existing infrastructure and assets as an initial step toward planning how best to deploy FTTP infrastructure. This section outlines the framework of our understanding. We note that existing infrastructure is not always an asset in the pursuit of FTTP—for example, if barriers to the infrastructure are too many or the cost to ready it for FTTP is too great. Here we consider the infrastructure and what role it might have in an FTTP network, if any. One obstacle to leveraging an asset is getting it cleaned up to the point of being usable in the course of a citywide FTTP network build. It is our understanding that the existing fiber infrastructure is approximately 54 percent overhead and 46 percent underground.82 The majority of the underground infrastructure is placed in commercial areas—only approximately 15 percent83 of it is underground in residential areas. The majority of new fiber for the FTTP network will be placed in residential areas and will likely follow aerial routes.84 3.1 Existing Dark Fiber Optic Backbone Network The City’s existing dark fiber optic backbone network consists of a combination of underground and overhead (aerial) construction. It primarily serves businesses and rarely extends into residential areas except for routing purposes. Dark fiber is unused fiber strands within a cable bundle through which no light is transmitted, or strands not carrying a signal. CPAU’s basic business model is to provide dark fiber connectivity to users requiring access to large amounts of bandwidth. Customers are responsible for providing and maintaining the equipment to “light-up” or provision licensed fiber strands. Dark fiber is licensed to a variety of commercial firms, the Palo Alto Unified School District, and other organizations without transmission service. The City also uses the network for its own communication requirements. In contrast, traditional telecommunication service providers only make available certain products within their service options that may not adequately meet the requirements of the specific applications. The CPAU dark fiber network has high market share and brand awareness among commercial enterprises and other organizations that need the quantity and quality of bandwidth provided by direct fiber optic connections. 82 The overhead lines for approximately 14,050 homes remain to be undergrounded and the current program undergrounds facilities for approximately 150 to 200 homes per Underground District. 83 CPAU Engineering confirmed percentages on April 3, 2015. 84 CPAU has scheduled overhead to underground conversion districts in residential areas. CTC Report | City of Palo Alto | September 2015 44 The first phase of the fiber backbone construction occurred in 1996 and 1997. The initial portions of the network were constructed in a backbone ring architecture in existing utility rights-of-way (ROW). The fiber backbone was routed to pass and provide access to key City facilities and offices. The majority of the City’s business parks (e.g., Stanford Research Park) and commercial properties mostly in the downtown area are also passed by the fiber backbone. The original fiber backbone consisted of 33 route miles with 144 or more strands of single- mode fiber along most routes. The fiber backbone has been expanded to approximately 49 route miles of mostly 144-count or 288-count single-mode fiber.85 A budget has been approved to develop a network capital improvement and strategic plan to address congestion in several high fiber-use areas by adding more fiber in anticipation of future customer needs. It is important to note that in addition to the backbone there is a considerable presence of fiber optic lateral connections, or “drop cables.” Drop cables connect the backbone to the customer premises. Often the drop cables provide additional access to customers as they may provide at least supplemental conduit or aerial paths. For example, a drop cable may be installed extending several blocks from the backbone, thereby providing a less expensive, expedited connection for other customers along that path. There are also plans to use the fiber capital improvement budget to establish a central connection point in multi-tenant commercial buildings in anticipation of acquiring new dark fiber customers. The City’s overhead fiber is placed in a designated area in the communications space on the utility poles allocated specifically for the City to place its infrastructure. Although this is not the “power space” in the traditional sense, it is referred to as power space or “safety clearance zone” by City and Utility staff. The space on the pole below the power zone and the safety clearance zone is called the “communication zone,” which is the space on the pole occupied by AT&T, Comcast and other “attachers” (see Figure 9). As a practice, no communications infrastructure may be placed in the actual power zone or safety clearance zone, which means that as the City considers its FTTP enterprise, it will be necessary to make use of the designated City space in the communications zone (i.e., space in the communication zone not owned by AT&T). If there is no space readily available, it will require either adjusting the position of existing attachments or replacing the pole with a taller one (see Figure 9). 85 Results in a total of 5,610 “fiber miles.” CTC Report | City of Palo Alto | September 2015 45 Figure 9: Examples of Pole Zones There is already fiber in the City’s designated space and some86 of the fiber cable has already been overlashed.87 In these cases, there is no possibility of additional overlash. This is the dark fiber infrastructure, an important endeavor and revenue stream for the City. Although there is extensive existing fiber on the dark fiber network, most of it is already allocated for use—thus it may not be an asset in the context of the FTTP network. This infrastructure may be best retained for delivering dark fiber services. The FTTP build may cost slightly more because the 86 CPUC is reviewing to determine percent of the fiber cable routes that are overlashed. 87 Overlashing is the act of attaching the new fiber cable to the existing fiber cable. CTC Report | City of Palo Alto | September 2015 46 limited ability to leverage the existing fiber infrastructure. Please note even if existing fiber strands were available, the cost reduction impact would be minimal to the overall FTTP deployment cost. The existing backbone routes are a small percentage of the required FTTP routes. The key City assets include the ownership of the utility poles and existing conduit. 3.2 Utility Poles One of the most valuable assets the City has is the ownership of utility poles.88 The City jointly owns with AT&T the majority of the existing poles and controls the access. This simplifies the make-ready process because the City does not have to deal with the complication of an outside private entity.89 However, though the make-ready will be less complex on City-owned poles, a fair amount of work is necessary to be able to attach additional cable to most poles and make- ready costs are still likely to be significant. Additionally, issues like private easement installations mean that not all poles will be readily accessible to the City. For example, an estimated 25 percent of existing poles are located in Public Utility Easements on private property behind homes and businesses.90 This can render some of these poles impractical for FTTP purposes while others may require expensive pole replacement with an overhead crane. Table 2 shows a breakdown of utility pole heights throughout the City, but some will need to be replaced entirely. For example, 35-foot poles will likely have to be replaced simply because there will not be enough space to sustain additional fiber infrastructure necessary for the FTTP build.91 The poles and pole heights are summarized in Table 2 below. 88 City and AT&T jointly own approximately 5,400 of the 6,000 or so utility poles in Palo Alto. See the 100+ year plus agreement, which is included in the Google Fiber Checklist response. The joint ownership can impact the make-ready process. 89 Pole replacement or significant make-ready does require coordination with Comcast and other “attachers.” 90 Information based on email of March 27, 2015 from City representatives. 91 See CPUC GO-95 for details on overhead construction standards. CTC Report | City of Palo Alto | September 2015 47 Table 2: Poles and Heights Height (feet) Count 15 - 20 - 25 8 30 107 35 544 40 1,194 45 2,030 50 1,333 55 295 60 248 65 112 70 45 75 3 80 2 Unknown 10 Total Poles 5,931 3.3 Existing Conduit There is existing conduit throughout the City and even spare conduit in many areas, but not all of it is accessible or usable at this point without considerable cost, time, and effort to prepare it. It is unclear to what degree supposedly spare conduit is actually free and available for the City’s use in the FTTP build, even though it is City-owned conduit.92 It is possible that in some locations (especially the downtown areas) other entities have placed their infrastructure in City conduit. The process of moving another entity’s infrastructure from the City’s conduit is likely to be time consuming and expensive, and may potentially involve litigation. In some cases, it may be more cost and time effective to simply place new conduit to facilitate the FTTP network build; an exception to this might be in areas where there is little remaining underground space to install additional conduit. A thorough evaluation of City documentation (and perhaps physical assessment of areas where empty conduit is expected to be) is necessary to determine the usability of the existing conduit.93 As we noted above, approximately 15 percent of residential areas have underground infrastructure. In these areas, there are three separate conduits that run into each house:  Power  Cable television 92 The Google Fiber Checklist response includes a list of “available spare conduit.” 93 The City anticipates performing a fiber audit in the near future. CTC Report | City of Palo Alto | September 2015 48  Telephone services Although the City’s pilot project allowed communications cable to be pulled into the same conduit as power cable, this will not be an ongoing practice; fiber drops will not be allowed in the existing electric conduit. The City’s attorneys are currently investigating whether customers could opt to have cable television or telephone lines removed from existing conduit on their premises to allow fiber to be run in its place.94 In light of this possibility, conduit from the curb to the customer premises may be an asset, but it will take time to understand the nuances of this.95 3.4 Permitting Process The City’s permitting processes are well defined and methodical, and we expect that this will not be a significant obstacle in the pursuit of FTTP. Further, permits are likely to be mostly unnecessary for the FTTP enterprise. Only powered devices in the right-of-way (ROW) require permitting and our expectation is that most of the FTTP enterprise’s infrastructure will be non- powered pedestals. 3.5 Review of Existing Agreements Per the City’s request, CTC reviewed existing agreements to assess the potential impact of current agreements on a citywide FTTP build. 3.5.1 Master License Agreement The City has developed a Master License Agreement for installation of wireless facilities in Palo Alto and future attachments by third parties. We reviewed the agreement and found that in general it is an acceptable framework for an FTTP license agreement. There are areas where timelines and application rate can be improved, to increase the speed of deployment and reduce the cost and potential risk to a network builder. If necessary, the City should augment its workforce to accommodate a larger scale of pole use applications and make-ready work,96 and have a means of being compensated by the network builder to do so:  Section 5.1 provides timelines for City review and pole work. Subsection A gives the City 20 days to determine whether and where attachments or conduit occupancy are feasible, and to process the request form; Subsection D gives the City 30 days to provide an estimate for costs, including make-ready. While these timetables are appropriate for smaller projects, such as wireless or short fiber runs, or for processing material at the 94 CTC cannot provide legal advice or guidance. 95 See CPUC GO-128 for underground construction standards. 96 “Make ready” refers to the process of readying utility poles for the attachment of additional infrastructure. This can include moving existing utilities or potentially replacing poles entirely if space is severely limited and existing poles cannot accommodate additional infrastructure. CTC Report | City of Palo Alto | September 2015 49 beginning of a large project, it should be possible in a larger project to reduce this period.97  Subsection F provides the City 105 days to complete make ready work—again, in a larger scale project, the City should be able to establish processes to reduce this period or make it possible for a City-approved contractor to perform the work  Section 5.1.1 limits the application size to 15 poles, effectively one-half mile of pole line (or another number specified by the Utility Director). An FTTP project will require a significantly larger scale of poles—again this should be feasible in a large-scale project.  Exhibit G requires the use of inner duct and, at the direction of the Utility, “divide a duct,” which is a good practice to make effective use of limited conduit space. 3.5.2 Joint Pole Agreements We reviewed the joint use and pole attachment agreements with PG&E and Pacific Telephone and Telegraph (now AT&T). These agreements delineate the roles of pole owners jointly using poles. We did not find requirements that would have a technical impact on a new FTTP network operator. Sections (l) and (m) address third-party use of poles, and (n) appears to deny the City the right to operate a telephone or telegraph service on the poles. We recommend the City’s legal counsel review these agreements; we do not provide legal advice, and the agreements are now 97 years old, so it is not clear which portions apply today or have been modified by other laws or agreements. 97 The overall approval process for a large-scale project may be longer, but often there are pre-set processes and established protocol for larger projects, which enables expedited timelines for providing estimates. CTC Report | City of Palo Alto | September 2015 50 4 Comparison of FTTP Technologies As we have explained in detail in Section 2, fiber optics are the state-of-the-art network medium in terms of capacity, speed, reliability, and resiliency. But fiber as a medium is only part of the equation when it comes to designing a network. That fiber must be connected to electronics and deployed in a certain configuration to achieve the network operator’s goals. In this section, we identify a range of current FTTP technologies and discuss the pros and cons of each one—particularly in light of the City’s goal of providing symmetrical gigabit service.98 With that background established, we then explore the FTTP technologies underpinning our proposed network design and discuss the benefits, limitations, and tradeoffs that make those technologies the best fit for Palo Alto. 4.1 Types of FTTP Technologies The primary types of FTTP technology being deployed today are Active Ethernet, Passive Optical Networking (PON), Gigabit-capable Passive Optical Networking (GPON), and Wave-Division Multiplexing (WDM) PON (WDM/PON). From a purely technical standpoint—independent of a given network’s design or goals—each of these technologies has strengths and weaknesses. We summarize those in the table below. Table 3: Comparison of FTTP Technologies Factor Technology Active Ethernet (AE) Passive Optical Networking (PON) GPON 10G-PON WDM-PON Residential service Not cost- effective to build for most residential customers; fastest potential symmetrical speeds Single fiber split among 32 customers; no guaranteed symmetrical speed (upload is generally slower) Faster potential download and upload speeds than GPON, but symmetrical speeds still not guaranteed Next-generation architecture (not yet standardized) enables dedicated wavelengths and symmetrical speeds for each 98 As we explain below, the City’s stated goal of “symmetrical gigabit service” reflects an admirable and forward- looking commitment to providing state-of-the-art service to local residents and businesses—but the realities of both FTTP network design and network economics mean that the City’s network will, like all FTTP deployments, enable service up to gigabit speeds for the majority of consumers most of the time. The network design we propose for the City represents the current state of the art within the framework of financial feasibility. CTC Report | City of Palo Alto | September 2015 51 Factor Technology Active Ethernet (AE) Passive Optical Networking (PON) GPON 10G-PON WDM-PON customer Business/institutional service Dedicated physical fiber connection (no splitting) to enable symmetrical connections up to 100 Gigabits per second (Gbps) (though still entails oversubscription from the Ethernet switches in the access layer) Generally only practical for small business customers at connections below 1 Gbps Can support small and medium sized businesses; symmetrical connections of 1 Gbps and higher possible Potential to support to large businesses Active infrastructure May require electronics in the field; speeds only limited by electronics installed No electronics required in the field; more efficient use of fiber plant; speeds limited by the technology to 2.4 Gbps downstream and 1.2 Gbps upstream No electronics required in the field; more efficient use of fiber plant; speeds limited by the technology to 10 Gbps downstream and 2.5 Gbps upstream; electronics more expensive than GPON No electronics required in the field; more efficient use of fiber plant; potentially unlimited bandwidth using dedicated wavelengths per customer CTC Report | City of Palo Alto | September 2015 52 Factor Technology Active Ethernet (AE) Passive Optical Networking (PON) GPON 10G-PON WDM-PON Passive infrastructure Requires either electronics placed in the field or more fiber back to the hubs Optical splitters in cabinets near customers. No electronics in the field Optical splitters in cabinets near customers. No electronics in the field; uses same splitters as GPON Optical splitters in cabinets near customers. No electronics in the field. Requires specialized DWDM99 splitters/filters Maintenance requirements Requires more maintenance than PON because AE has either more fiber or electronics in the field Requires less maintenance than AE because of centralized electronics in hubs Requires less maintenance than AE because of centralized electronics in hubs More complex provisioning and stricter fiber performance metrics than other PON technologies As we mention in Section 5, “FTTP Design and Cost Estimates,” PON technology has made FTTP architecture extremely cost-effective for densely populated areas such as Palo Alto, and even for lower and medium-density population areas. Fiber optic equipment generally has a range of 12 miles with standard PON electronics100 and almost 50 miles with higher-powered electronics.101 The range reduces or eliminates the need for electronics or powering in the middle of the network, reducing the network’s required staffing and maintenance and improving availability during storms or mass power outages.102 99 Dense Wavelength Division Multiplexing, an optical technology used to increase bandwidth over an existing fiber optic backbone. 100 ITU-T Recommendation G.984.2 Gigabit-capable Passive Optical Networks (GPON): Physical Media Dependent (PMD) layer spec., p. 10, Table 2a, http://www.itu.int/rec/T-REC-G.984.2-200303-I/en. 101 Cisco Small Form-Factor Pluggable Modules for Gigabit Ethernet, http://www.cisco.com/en/US/prod/collateral/modules/ps5455/ps6577/product_data_sheet0900aecd8033f885.p df. 102 Powering is required at the central office facility (usually equipped with long-running generators) and at the user premises (requiring the user to have backup power, such as a battery or a home generator). In contrast, CTC Report | City of Palo Alto | September 2015 53 Service levels can be continuously upgraded simply by replacing or upgrading the network electronics at the ends. That said, PON architecture—which is the standard for residential and small business FTTP design—employs passive optical splitters in the field (i.e., in FDCs, installed near customer premises); the splitters reduce the size and cost of the “feeder” cables that need to be installed from the network core to the FDCs. And because there are fewer feeder cables, the network requires fewer expensive electronics at the core. But saving money on electronics and fiber requires a tradeoff: Splitting the fiber at the FDC (typically serving 32 residential customers per strand, or “32:1”) limits the potential bandwidth available for each customer. In contrast, an Active Ethernet design (also known as “homerun” fiber architecture), deploys one fiber strand from the core or hub all the way to a customer’s premises—meaning that the full capacity of that strand is reserved for that one customer. This architecture is typically reserved for business customers that have greater needs than the average residential customer; a fully Active Ethernet network deployment offers greater scalability to meet the long-term needs of large enterprise users, and is consistent with best practices for an open access network model that might potentially be required to support dedicated connections to certain customers. At the same time, Active Ethernet design requires more core electronics, larger strand counts from the core to the network hubs, and larger (and significantly more expensive) hub facilities capable of terminating a greater quantity of fiber strands.103 GPON is currently the most commonly provisioned FTTP technology, due to inherent economies when compared with technologies delivered over home-run fiber104 such as Active Ethernet. The cost to construct an entire network using GPON is approximately 40 percent to 50 percent less than Active Ethernet.105 GPON is used to provide services up to 1 Gbps per subscriber and is part an evolution path to higher-speed technologies that use higher-speed optics and wave- division multiplexing. Most GPON networks will support an open access network deployment that supports multiple ISPs But there is a middle ground in selecting a technology: A hybrid approach. A network architecture organized primarily around GPON technology can also include sufficient fiber and hybrid fiber–coaxial networks have power supplies in each neighborhood with a few hours of battery backup. Once the batteries are depleted, the cable operator must place a generator at each power supply location. 103 Open access was not originally supported over GPON architecture, but GPON standards and vendor features have evolved. Today GPON can support open access—so open access requirements do not drive a decision as to whether an Active Ethernet or GPON is more appropriate. 104 Home run fiber is a fiber optic architecture where individual fiber strands are extended from the distribution sites to the premises. Home run fiber does not use any intermediary aggregation points in the field. 105 “Enhanced Communications in San Francisco: Phase II Feasibility Study,” CTC report, October 2009, at p. 205. CTC Report | City of Palo Alto | September 2015 54 electronics to support Active Ethernet connections to a predetermined percentage of customer passings.106 This is the approach represented by our recommended FTTP design for Palo Alto, which we describe in the following sections. 4.2 Assessment of Recommended FTTP Technologies Our proposed FTTP design is a hybrid GPON and Active Ethernet network. As with any citywide network, the architecture represents a balancing act between performance and cost (among other variables). We first describe that balancing act, then delve into the specific network design criteria and expected performance parameters for these technologies. 4.2.1 Network Design Trade-Offs At a high level, city streets offer an apt analogy to the challenges of designing an FTTP network. A local road has enough capacity for a certain amount of traffic. If fewer drivers are on the road, they can each move more quickly (up to the posted speed limit). If more drivers are on the road, such as during rush hour, everyone slows down. The planners who designed and built that road considered a number of factors in determining how many lanes to construct (and what materials to use in that construction). They looked at how much space they had in which to build, how much traffic they expected to travel on the road at given times, and how expensive it would be to build and maintain the road. If the City wanted every resident to be able to drive the speed limit at all times, it could conceivably build an enormous street. Traffic would never slow down. But there are problems with that approach. For starters, the street would cost a lot more to construct and maintain. It would also take up valuable land and might be considered unsightly. And it would be mostly empty for a majority of each day—so all that extra capacity would only be useful during certain peak times. And what if we were talking instead about a toll road, with electronic toll readers mounted above each lane? All those electronics would not only add to the cost of constructing and maintaining the network—they would also need to be replaced in a number of years (another huge expense) to keep the network up to date. Now consider an FTTP network. Instead of lanes, think of fiber strands. Instead of toll readers, think of network electronics. Instead of speed limits, think of symmetrical 1 Gbps network speeds. 106 Or, to fine-tune the balance between cost and capacity even further, the FDCs could house 16:1 or 64:1 splitters rather than 32:1 splitters. CTC Report | City of Palo Alto | September 2015 55 Although fiber as a medium offers tremendous capacity, an FTTP network design includes only a finite number of fiber strands—and those strands are lit with a specified type of electronic equipment, installed at key locations around the City to create an “information highway” with enough capacity for a certain amount of traffic to move at a certain maximum speed. Could the City build a network that guarantees symmetrical 1 Gbps connectivity to every resident and business? Yes—with an Active Ethernet architecture. But the network would still employ some level of oversubscription to the Internet.107 The alternative to oversubscription— purchasing 1 gigabit of dedicated Internet access for each subscriber—would cost the network $750 per subscriber per month, assuming a typical cost of 75 cents per Mbps. This illustrates why FTTP networks for residential and small business customers are designed with a primarily GPON architecture (and the electronics, fiber count, oversubscription, and other parameters that follow from that approach) to deliver “up to” a certain performance level.108 As the old joke about engineers goes, the glass is neither half full nor half empty—it is simply twice as big as it needs to be to meet the project’s goal.109 A hybrid GPON/Active Ethernet network will cost-effectively deliver a level of service that meets most customers’ expectations most of the time. We note, too, that Google Fiber advertises “a connection that’s up to 1,000 megabits per second”110 but does not commit to symmetrical connections (i.e., same upload and download speeds) and does not guarantee 1 Gbps service. Google Fiber deployments are GPON networks—so Google is providing “up to” speeds, just as the Palo Alto network would, and counts on oversubscription to make the network financially viable. 4.2.2 Electronics FTTP networks include core electronics (routers, aggregation switches, optical line terminals) and user premises electronics (ONT/Ethernet switch/router). We describe each of these in detail in the Task 2 report. The electronics specified in our proposed network design illustrate the balance between the proposed network’s fiber count, service levels, and cost. For example, we have designed a 107 In addition, that guaranteed 1 Gbps would only be on a transport level, not from an Internet connection standpoint; the network traffic would still be aggregated at the hub or core electronics. 108 For large business customers or other users with high-level or specialized needs, the network is typically designed with higher potential capacity (Active Ethernet). 109 See, for example: Malcolm Gladwell, “The Engineer’s Lament,” The New Yorker, May 4, 2015. http://www.newyorker.com/magazine/2015/05/04/the-engineers-lament 110 Google Fiber, https://fiber.google.com/about/ CTC Report | City of Palo Alto | September 2015 56 GPON network that enables up to 5 percent of passings to receive Active Ethernet service— reducing the need for costly electronics and limiting the fiber count overall, while still ensuring that the network can meet the anticipated service level needs of local businesses. Similarly, we chose a 1:32 split at the FDCs, rather than a 1:64 split, to balance the maximum potential service speeds at each residence and cost.111 (On the flip side, we did not choose a 1:16 split because that would have dramatically increased the network cost without dramatically improving customers’ perceptions of their service performance.) 4.2.3 Facilities The network headend and distribution hubs located throughout the service area must provide space for network electronics, servers to support a range of network management and service provisioning functions, and collocation space for potential third-party providers. The estimated space requirement for the headend—as well as the cost of the equipment—is largely dependent on the size of the network. It is not uncommon for relatively large deployments to consist of hub sites serving 10,000 to 20,000 subscribers, with cabinets located throughout the service area to house passive and/or electronic equipment for every few hundred passings. Hub sites are necessary to aggregate fiber connections and to house FTTP transport electronics. The number and size of hub facilities depends on the size and physical distribution of the system and the electronics selected (e.g., Active Ethernet, PON). Hub facilities can be co-located with existing provider facilities, and can also be located in large outdoor cabinets or small prefabricated buildings. The size can range from a cabinet costing approximately $25,000 to serve as many as about 10,000 subscribers (PON only), to an equipment shelter capable of serving about the same number of Active Ethernet subscribers costing upwards of $500,000. Task 2 provides further details on the design for Palo Alto. Generally one or two (redundant) headends will house central networking and application hardware necessary for the operator to maintain and operate an FTTP system. The headend and hubs may also include space for other service providers to collocate their equipment. We describe the facilities in our proposed design section. 4.2.4 Customer Premises Each customer needs to be physically connected to the system, and most operators construct a fiber drop and install customer premises equipment (CPE) only to residents who subscribe to the service. Cost depends on a range of factors including the distance of the premises from the right-of-way, and whether the drop is aerial or underground. Installation costs can soar if the 111 For reference, Google typically designs for a 16 to 1 split. CTC Report | City of Palo Alto | September 2015 57 house or business is extremely far from the road or requires construction under roads or driveways. As we detail in the financial analysis, we recommend appropriate CPE for a variety of customer types (e.g., single-family home, multi-dwelling units). CTC Report | City of Palo Alto | September 2015 58 5 FTTP Design and Cost Estimates In this section we describe a recommended FTTP network design, organized by network layers, that reflects current construction practices. We also estimate the cost of materials and anticipated labor expenses. We begin our discussion with the physical layer (layer 1, also referred to as OSP). The physical layer is both the most expensive part of the network and the longest lasting. The architecture of the physical plant determines the network’s scalability for future uses and how the plant will need to be operated and maintained; the architecture is also the main determinant of the total cost of the initiative. To develop the inputs and insights necessary to create this network design, we drew on our experience with a wide range of fiber initiatives; held discussions with City staff; completed an extensive desk survey of the City using the City’s GIS mapping and comprehensive street-level views available in Google Earth; and reviewed the analysis we developed during our previous engagements with the City.112 We note that the City’s primary focus—and the largest potential user group for a citywide FTTP network—is the residential market, which is comprised of 22,709 residential households (17,308 in single-family; 5,330 in multi-dwelling units,113 ,114 and 71 in mobile homes).115 Adding the City’s 3,192 businesses,116 we estimate that Palo Alto has a total of 25,901 residential and business premises passings (potential users). The majority of the City has aerial utilities and therefore aerial plant is a key part a citywide fiber network. Aerial plant is typically less expensive to build than underground plant, and in Palo Alto this is especially the case.117 The City has the exclusive right to place fiber in a designated area in the communications space allocated specifically for the City. (Although this is not the “power space” in the traditional sense,118 it is referred to as power space by City and 112 CTC’s previous engagements with the City of Palo Alto have included providing strategic guidance and advice on expanding the City’s dark fiber network to create opportunities for enhanced municipal and commercial services. 113 Of the 10,556 households in MDUs, 5,226 are in structures with 20 or more households. These buildings are often served under a long-term contract with one of the incumbent providers or a specialty ISP. 114 256 in duplexes; 1,538 in building with 3 to 4 households; 1,598 in building with 5 to 9 households; 1,938 in buildings with 10 to 19 households 115 http://factfinder.census.gov/bkmk/table/1.0/en/ACS/13_3YR/DP04/1600000US0655282, accessed May 2015. 116 Number of businesses is based on data from Infousa.com. We included the total estimated 3,926 businesses with fewer than 100 employees, less the estimated 734 businesses in larger office complexes. The large office complexes, like large residential MDUs, are typically served under a long-term contract. 117 The citywide ratio in Palo Alto is 54 percent overhead and 46 percent underground. 118 A common interpretation of “power space” is the space restricted to high-voltage qualified personnel approved by the power utility. In this case, the “power space” is in the communications space, below the high-voltage CTC Report | City of Palo Alto | September 2015 59 CPAU staff.) Having this exclusive space reduces make-ready costs and pole replacement costs, as the City generally does not need to find space for fiber placement. In the event an FTTP buildout is done by an entity without access to this space, make-ready costs will be higher. Figure 10: Aerial and Underground Utilities in Palo Alto restricted space, but reserved for use by the power utility. In the Palo Alto power space, construction and maintenance crews will not need to be certified in high-voltage construction. Cables can be any type, whereas construction in the high-voltage space needs to be non-metallic dielectric cable, which is more expensive to buy and install. CTC Report | City of Palo Alto | September 2015 60 5.1 Issues Related to Aerial Construction There are some barriers to the use of City poles. First, there are trees along the pole lines that need to be trimmed in order to place fiber (Figure 11). We estimate the cost of tree trimming to be approximately $3.84 per foot based on costs for similar projects, and that tree trimming will be needed for approximately 40 percent of the aerial fiber plant.119 Figure 11: Examples of Pole Lines Requiring Tree Trimming 119 There are a variety of potential environmental threats to aerial fiber (e.g., squirrels). CTC Report | City of Palo Alto | September 2015 61 Second, approximately 25 percent of the poles are located in Public Utility Easements on private property behind homes and businesses.120 The need to access and work on these poles may create delays, complexity, and higher cost in construction. Finally, the City has already built a 49-mile fiber backbone on the utility poles. We assessed the impact on the City’s existing fiber system and commercial dark fiber customer base if an FTTP network builder licenses dark fiber from the City. Based on our review, the existing City fiber is already in use or reserved for dark fiber license and is likely not available for FTTP. In certain cases, the existing dark fiber network may be available for use based on the required fiber strand count and make ready for a given location. To determine the best use of existing dark fiber, we recommend a full inventory of these assets to include the percentage of fiber currently in use, areas of extreme congestion, and locations where some excess capacity may be available.121 In some cases, the City can increase capacity on aerial fiber infrastructure by “overlashing” a new cable to an existing cable. This strategy is commonly used by telecommunications and cable companies; a significant fraction of Verizon’s FiOS FTTP system, for example, is overlashed to copper telephone cables. Cable operators typically expand fiber in their networks by overlashing it to their coaxial cables. Overlash is significantly less costly than creating a new attachment on the poles; it also does not typically require make ready, so it requires significantly less time and coordination with the pole owner. This may be especially attractive in situations where a network operator is using another utility’s poles. However, in many cases, the City fiber is already overlashed with additional fiber. As a result, the City needs to add an additional attachment for FTTP over routes where fiber is already in place. Our cost estimate reflects that need. Even with the allocation of pole space to the City, when other cables occupy the communications space, they must be moved to allow space for the placement of the new attachment in compliance with National Electric Safety Code and State of California Rules for Overhead Line Construction, General Order No. 95 (GO95) requirements for clearance between power and communication cables, and between communication cables and ground levels. Make ready tasks include moving existing utilities and installing extension arms. We estimate a need for make ready on 20 percent of poles, but do not expect this work to be extensive. 120 Information based on email of March 27, 2015 from City representatives. 121 CPAU will be issuing an RFP to select a consulting firm to perform a fiber audit. CTC Report | City of Palo Alto | September 2015 62 When poles cannot be made ready for an additional attachment simply by moving cables on the existing pole and keeping all clearances from the ground and power space, it may become necessary to place a taller pole that would allow the new attachment with adequate clearances (Figure 12). (The same issue arises for poles that are too old and worn-out to support a new attachment.) All utilities currently on the pole would need to be transferred from the old pole to the new pole. We expect, based on our analysis, that pole replacement will be required in 3 percent of cases. In addition, we understand that 544 (8 percent) of the poles are 35 feet high, which is relatively short and may create issues with clearance with existing utilities. We recommend budgeting for replacement of these poles, as well, for a total replacement of 11 percent of poles. We estimate a cost of $12,000 per pole replacement. Figure 12: OSP Crew Replacing a Pole 5.2 Cost Estimates FTTP construction in Palo Alto will entail costs in two basic categories:  OSP labor and materials  Network electronics CTC Report | City of Palo Alto | September 2015 63 Our model assumes a mix of aerial and underground fiber construction, based on the prevailing mix of utilities in the City, and a 35 percent take rate. 122 Please note this take rate is only used as a placeholder for discussion in this section; as seen in the full financial analysis in Section 8, which shows the impact of take rate on construction cost, cash flow, and net income, a much higher take rate is required to cash flow the enterprise. In terms of OSP, the estimated cost to construct the proposed FTTP network is approximately $47 million—which corresponds to a cost of slightly higher than $1,800 per passing123 including drop cable installation,124 or $1,357 per passing excluding drop installation. Table 4 summarizes the OSP costs. The OSP cost estimate, excluding drop installation to homes and businesses, is approximately 10 percent higher than the cost previously estimated by Axia NetMedia (a member of the consortium that prepared the City’s 2007 Ultra-High-Speed Broadband System Business Plan).125 The drop estimate is approximately three times that estimated by Axia, on a per drop basis. The OSP and drop estimates are in line with comparable density builds, and builds with the same aerial/underground mix. The availability of dedicated pole space for the City reduces the amount of make ready needed, so the estimate is in line with a build where only moderate make ready is needed. 122 Take rate is the percentage of subscribers who purchase services from an enterprise, and is a crucial driver in the success of an FTTP retail model. If the take rate is not met, the enterprise will not be able to sustain itself and its operational costs will have to be offset through some funding source to avoid allowing the enterprise to fail. 123 The model counts each potential residential or business customer as a passing, so single-unit buildings count as one passing, while each unit in a multi-dwelling or multi-business building is treated as a single passing. 124 Assumes take rate of 35 percent, with only connected homes and businesses receiving drops. 125 “Fiber to the Premise for the City of Palo Alto,” June 16, 2008. http://www.cityofpaloalto.org/civicax/filebank/documents/12789 CTC Report | City of Palo Alto | September 2015 64 Table 4: Estimated OSP Costs for FTTP (Assuming a 35 Percent Take Rate) Cost Component Total Estimated Cost OSP Engineering $3,572,100 Quality Control/Quality Assurance 924,400 General OSP Construction Cost 25,526,800 Special Crossings 145,400 Backbone and Distribution Plant Splicing 762,700 Backbone Hub, Termination, and Testing 4,206,300 FTTP Service Drop and Lateral Installations 11,690,300 Total Estimated Cost: $46,828,000 Total Estimated Passings: 25,901 Assuming a 35 percent take rate, the required electronics will cost approximately $13.6 million. Table 5 summarizes the electronics costs. Please note that the costs in the table are inclusive of an estimated $1.5 million in core network integration and set-up fees. The total price will vary with different take rates, because of different economies of scale and equipment configurations. We can assume that CPE cost will scale linearly, for example, so a 25 percent take rate would reduce the CPE cost by approximately 28.6 percent or $1.3 million. The core and aggregation electronics will not scale linearly—primarily because less OLT equipment is needed—so a 25 percent take rate would mean a smaller percentage reduction of approximately 16.8 percent or $1.3 million in those costs. Table 5: Estimated Electronics Costs for FTTP (Assuming a 35 Percent Take Rate) Core Routers 1,794,820$ Core Network Servers 310,000 Base Aggregation Switches 2,143,610 Base OLT 186,060 Residential CPEs 4,021,320 Business CPEs 514,240 Aggregation Switches 1,716,590 OLTs 2,937,960 13,624,600$ CTC Report | City of Palo Alto | September 2015 65 Relative to the Axia estimate, the electronics estimate is similar for non-CPE electronics, and approximately 50 percent higher, per user, for CPE electronics. We estimated costs for aerial and underground placement using available cost data for materials. The material costs were generally known with the exception of unknown economies of scale and inflation rates, and barring any sort of phenomenon restricting material availability and costs. We estimated labor costs for placing, pulling, and boring fiber based on similar construction projects in comparable markets. For purposes of design and cost estimates, we identified the small and mid-sized MDU buildings across the City. Based on Census data, we estimate there are 288 MDU buildings126 in Palo Alto that comprise five to 19 units (see Section 2.2.1) We estimate that the average drop from the closest existing fiber to these buildings is about 475 feet. (Buildings that have 20 or more units will generally need to be dealt with on a case-by-case basis because those larger buildings may already have bulk provider contracts).127 Section 2.2.1 explains estimated numbers. In the sections below, we describe our methodology and provide more detail on the estimated OSP and CPE costs.128 We also discuss assumptions about the average amount of required pole replacements, make ready, and guy and anchor replacements. The percentage of poles meeting each criterion were averaged out to a per-mile cost. 5.3 Methodology for Developing OSP Route Assumptions We reviewed available green space and evaluated the amount of necessary make ready on poles, pole replacement, and guy replacement. A CTC OSP Engineer performed a preliminary survey via Google Earth Street View to develop estimates of underground versus aerial percentages, per mile cost for aerial construction in the power space and communications space, per mile costs for underground (where poles are not available), and cost estimates for fiber drops to customer premises. The aerial placement of fiber was also determined through surveying in Google Earth Street View. 126 The Census data indicate the number of households in structures with a range of units. For calculating the number of households, we assumed that a structure with 5 to 9 units has an average of 8 units, a structure with 10 to 19 units has an average of 16 units, and a structure with 20 or more units has an average of 96 units. For households in duplexes and in structures with 3 to 4 units, we treated each household as a single-family unit. 127 Some large MDUs have existing, long-term contracts with providers to offer services to all the units in a single building. Often, in such cases, the provider has brought service to the building and performed all the in-building wiring to serve each unit. 128 See Section 8 for a discussion and presentation of the total cost of ownership. CTC Report | City of Palo Alto | September 2015 66 CTC engineers then developed an FTTP design in a representative sample area of the City. The engineering was completed to the level of individual drop cables. Figure 13 provides a detail from the sample design. Figure 13: Sample FTTP Network Design to Determine Quantities per Street Mile Based on the engineered FTTP sample, we developed labor and materials costs per Palo Alto street mile. We used ESRI’s ArcGIS129 suite to calculate the total number of street miles and then extrapolated to determine the required materials and the labor associated with the construction. 129 Geographic information system (GIS) software enables users to create, analyze, and manipulate complex map data. ESRI’s ArcGIS suite is one such collection of software, and the tool CTC used to create map-based projections for this project. CTC Report | City of Palo Alto | September 2015 67 5.4 Backbone Routes CTC engineers designed backbone routes to be as equidistant as possible to the entire City while also accounting for higher density areas (which will demand more fibers to serve the high number of possible subscribers). The backbone is distinct from the existing CPAU fiber backbone and is composed of 18 miles of aerial and 10 miles of underground fiber (288-count). The backbone construction and the FTTP build would use the same aerial and underground infrastructure so they would share the same aerial attachments, and no overbuild would take place in the underground portion. Figure 14 below shows the backbone design, with colors indicating the density of homes and businesses. 5.5 Network Architecture and Electronics Figure 15 below shows a logical representation of the recommended FTTP network. It illustrates the primary functional components in the FTTP network, their relative position to one another, and the flexible nature of the architecture to support multiple subscriber models and classes of service. CTC Report | City of Palo Alto | September 2015 68 Figure 14: Backbone Design CTC Report | City of Palo Alto | September 2015 69 Figure 15: High-Level FTTP Architecture CTC Report | City of Palo Alto | September 2015 70 The recommended FTTP network (Figure 15) is a hierarchical data network that provides critical scalability and flexibility, both in terms of initial network deployment and capability to accommodate the increased demands of future applications and technologies. The characteristics of this hierarchical FTTP data network are:  Capacity – ability to provide efficient transport for subscriber data, even at peak levels  Availability – high levels of redundancy, reliability, and resiliency to quickly detect faults and re-route traffic  Diversity – physical path diversity to minimize operational impact resulting from fiber or equipment failure  Efficiency – no traffic bottlenecks or poor use of resources  Scalability – ability to grow in terms of physical service area and increased data capacity, and to integrate newer technologies  Manageability – simplified provisioning and management of subscribers and services  Flexibility – ability to provide different levels and classes of service to different customer environments. Can support an open access network or a single-provider network. Separation between service providers can be provided on the physical layer (separate fibers) or logical layer.  Security – controlled physical access to all equipment and facilities, plus network access control to devices In order to deliver these characteristics, the fiber count was selected to provide a dedicated fiber from each premises to the FDC, and 48 fibers from each FDC to the broadband network gateway (BNG). This results in a range of fiber counts, but generally six or eight 288-count cables leave each BNG, four 288-count cables leave each FDC, and the count decreases from the FDC toward the premises. The backbone ring covers the same route as the BNG-to-FDC communications, so even though only a few dozen fibers are needed for core-to-BNG or BNG- to-BNG communications, at least 288-count of new fiber will be needed along most of the backbone route. In the backbone ring routes, almost all of the fiber in the cables are in use, either as part of the Dense Wavelength Division Multiplexing (DWDM)130 network or as part of the connectivity from the BNG to the FDCs, with the exception of spare count set aside for future needs or for repairs. 130 DWDM is an optical technology used to increase bandwidth over an existing fiber optic backbone. CTC Report | City of Palo Alto | September 2015 71 In the routes to the FDCs, the fibers are again mostly in use with the exception of a spare count. The routes from the FDCs to the passings are less heavily utilized. Because each passing has a dedicated fiber from an FDC, passings that do not subscribe to the service are connected via fibers that are not in use. The following sections provide an overview of requirements and recommendations for the network’s core and distribution layers. 5.5.1 Core Network Sites The core sites are the bridges that link the FTTP network to the public Internet (via a network access point, or NAP) and deliver all services to end users. The proposed network design includes two core locations, based on the network’s projected capacity requirements and the need for geographical redundancy (i.e., if one core site were to fail, the second core site would continue to operate the network). The location of core network facilities also provides physical path diversity for subscribers and all upstream service and content providers. For our design and cost estimates, we assume that the Palo Alto core sites will be housed in secure locations with diverse connectivity to Internet network access points such as the Equinix Data Center at 529 Bryant Street (formerly known as “PAIX”) and to Equinix at 11 Great Oaks Boulevard in San Jose.131 Few cities have robust network access points, as Palo Alto does with Equinix located downtown. It is the communications hub of everything Internet. Interconnecting at Equinix, coupled with the unique makeup of businesses in Palo Alto, is a reason the City’s 49-mile open dark fiber network has become successful in the past two decades. The core locations in this plan house Operational Support Systems (OSS) such as provisioning platforms, fault and performance management systems, and remote access.132 The core locations are also where any business partner or content/service providers will gain access to the subscriber network with their own points-of-presence. This may be via remote connection, but collocation is recommended. The core locations are typically run in a High Availability (HA) configuration, with fully meshed and redundant uplinks to the public Internet and/or all other content and service providers. It is 131 Equinix, Inc. is a U.S. public corporation that provides carrier-neutral data centers and Internet exchanges. Equinix provides network-neutral data centers (IBX or “International Business Exchange”) and interconnection services. The company offers colocation, traffic exchange and outsourced IT infrastructure solutions to enterprises, content companies, systems integrators and over 950 network service providers worldwide. Equinix currently operates 101 data centers across 32 major metropolitan areas in 15 countries globally. 132 OSS were not included as part of the network electronics cost estimate. Network service operators may already have these systems in place on their existing networks. These cost are included in the financial analysis when appropriate. CTC Report | City of Palo Alto | September 2015 72 imperative that core network locations are physically secure and allow unencumbered access 24x7x365 to authorized engineering and operational staff. For Palo Alto, there is a wide range of options for core locations. One possibility is the use of outdoor enclosures. In a high-cost urban/suburban environment like Palo Alto, however, it may be more cost-effective and secure to use an existing building. Options might include using a secure location in the City Hall building, CPAU central or substation facilities, or other similar City-owned facilities with robust physical security, diverse fiber entry, and reliable backup power. The operational environment of the core network locations is similar to that of a data center environment. This includes clean power sources, UPS batteries, and diesel power generation for survival through sustained commercial outages. The facility must provide strong physical and seismic security, limited/controlled access, and environmental controls for humidity and temperature. Fire suppression is highly recommended. We estimate the floor space requirements for each core facility to be approximately 75 square feet. Figure 16 below illustrates a sample floorplan; Figure 17 provides a sample list of materials. CTC Report | City of Palo Alto | September 2015 73 Figure 16: Sample Floorplan for Core Location Figure 17: Sample List of Materials for Core Location 4 19-inch Cabinets 1 Core Router 2 Fiber Panels / Cross Connects 4 Cable Ladders and Cable Management 1 Element Management System Core Network Servers Service Operator’s and Partner’s OSS Equipment is to be mounted securely in racks and cabinets, in compliance with all national, state, and local electrical and seismic codes. Equipment power requirements and specification may include -48 volt DC and/or 120/240 volts AC. All equipment is to be connected to conditioned/protected clean power with uninterrupted cutover to battery and generation. CTC Report | City of Palo Alto | September 2015 74 The FTTP architecture includes an integrated Element Management System (EMS) at the core sites. The EMS provides fault, performance, and configuration management for the FTTP electronics, and provides a unified platform for all subscriber and FTTP equipment provisioning activities. The EMS also provides essential data for engineering and operational purposes, including equipment inventory, resource utilization and performance data, Quality-of-Service (QoS) metrics for Service Level Agreements (SLA), and numerous other performance threshold alarms. The EMS platform for FTTP electronics is integrated with a higher-level fault and performance management platform that supports the entire network from edge to edge. This provides a single top-level platform for all devices in the architecture to be monitored and managed on a 24x7x365 basis. The top-level fault and performance management platform would be designed to poll various devices and resources at regular intervals, and to record values for performance attributes that are critical to the operational health of each resource. This includes monitoring key resources such as link utilization, interface performance statistics, and so on. In addition, network devices are configured to send asynchronous (event-driven) notifications to the management platform in the event of hardware failure or an unexpected condition such as the loss of a connection to a neighboring device. Such fault and threshold alarms are sent to operational personnel for immediate evaluation and response. Other important core network services include essential applications such as Domain Name Services (DNS), Network Time Protocol (NTP), and Dynamic Host Configuration Protocol (DHCP), which will be handled by servers and appliances at the core of the network. 5.5.2 Distribution and Access Network Design The distribution network is the layer between the core locations and the last-mile subscriber connections. The key characteristics and capabilities in the distribution network are capacity, availability, resiliency, and reliability. The distribution network carries heavily aggregated traffic closer to the core, and extends over long distances to end users. Fiber cuts and equipment failures have progressively greater operational impact as they happen in closer proximity to the network core. For this reason, it is critical to build in redundancies and physical path diversities, to seamlessly re-route traffic when necessary. Gigabit-Capable Passive Optical Network (GPON) technology uses a completely passive (i.e., without powered electronics) optical fiber distribution network to connect the provider to the customer premises. In a PON FTTP deployment, devices requiring electrical power only exist at CTC Report | City of Palo Alto | September 2015 75 the customer premises and the hub or cabinet location. PON uses a shared optical fiber path consisting of optical splitters. Active Ethernet access is based on widely deployed and standardized Ethernet technologies, and requires powered Ethernet switching equipment at one or more intermediate points within the fiber distribution network to aggregate network traffic among subscribers. 5.5.2.1 Rings The simplest way to achieve the design objectives of the City’s distribution network is with a 100 Gbps Ethernet ring, which would provide an extremely high level of service availability. The ring in our proposed design cross-connects at multiple points to protect against physical cuts in underground applications, and pole/line damage in aerial applications. Additional rings can be added in the future for more capacity using more fiber strands or DWDM. The ring connects directly to both core network locations, and the ring is designed to provide service to all parts of the City’s expected coverage area. 5.5.2.2 Broadband Network Gateway Routers As illustrated in Figure 15 above, the 100 Gigabit Ethernet ring interconnects the core locations to the two broadband network gateway (BNG) routers. The primary function of the BNG nodes is to distribute/aggregate traffic to/from multiple 10 Gbps ports on the access equipment, which are located in the hubs with the BNGs. In our model, the two BNG nodes each serve up-to approximately 14,000 passings. This passing count is consistent with Google Fiber deployment and other FTTP architectures. It can be reduced by choosing to deploy more BNG nodes in the City. BNG nodes require a controlled operational environment similar to core network locations, but they generally contain many more ports in order to aggregate traffic from the access equipment. The BNG is an aggregation point for Ethernet switches and PON electronics. It corresponds to the “hut” in the Google Fiber architecture. For the two BNG nodes in our model, we recommend outdoor shelters. BNG sites must provide clean power, HVAC, UPS batteries, and diesel power generation for sustained outages. We expect the BNG shelter building footprint to be approximately 12’ x 10’ (Figure 18). CTC Report | City of Palo Alto | September 2015 76 Figure 18: BNG Facility As illustrated in Figure 15, the BNG facility also contains the optical line terminals (OLT). The OLTs in the BNG provide flexibility in terms of supporting varying subscriber densities and subscriber services. The choice of an optical interface (small form-factor pluggable, or SFP) installed in the OLT allows the network to provide 2.4 Gbps to 16 subscribers in a GPON architecture, or 1 Gbps or 10 Gbps symmetrical Active Ethernet access (for one subscriber). Furthermore, OLT chassis are typically stackable, which enables multiple OLT chassis to share a backplane (stack ring) with a common uplink to the BNG router. In the recommended design, the uplinks to the BNG routers are 10 Gbps. The sample list of materials for a BNG location is provided in Figure 19. Please note that the materials needed at the BNG locations varies greatly with the take rate and number of open access providers. Figure 19: List of Materials for BNG 1 BNG Router 19-inch Racks Fiber panels / cross connects Cable Ladders and Cable Management GPON and AE Access Equipment / OLTs 5.5.2.3 Fiber Distribution Cabinets (FDCs) In our model, the FDCs house optical splitters, which connect the fiber from the access equipment or OLTs at the BNGs to the fiber that goes to the customer premises. Optical splitters are relatively inexpensive and are not powered, which reduces the size of the FDCs and the complexity of placing FDCs in the community. Our recommended design limits each FDC to a service area of 1,500 passings, or less. The FDCs can be placed in the public right-of-way, on City property, or on private property where CTC Report | City of Palo Alto | September 2015 77 appropriate to serve MDUs. FDCs can range in configuration from small pedestals or cabinets having a physical footprint of less than 1 foot by 1 foot (Figure 20), containing fiber terminations and optical splitters to serve fewer than 100 subscribers, to large cabinets with a footprint of 4 feet by 8 feet and supporting network electronics, fiber terminations, and splitters for more than 2,000 subscribers. Our proposed architecture is based on the use of larger FDCs (Figure 21) capable of supporting more widespread use of Active Ethernet and/or GPON OLT hardware deployed in the field. FDCs of this type will have larger physical size as compared to traditional telephone cabinets and cable TV pedestals (Figure 21), and locations would need to be selected to both minimize visual impact in residential areas and ensure that power can be provided to the FDC. (Smaller indoor FDCs are also an option; see Figure 23). A key advantage of using multiple distributed FDCs rather than a more centralized design is the flexibility to place aggregation points at ideal geographic locations to minimize the quantity and length of fiber laterals, and thereby provide ringed fiber paths with increased network availability and greater overall redundancy of the service. Compared to other models, this approach potentially allows the full citywide FTTP deployment to occur at lower cost (supporting short- to mid-term requirements), with an option to potentially place electronics in the FDC and serve all passings with Active Ethernet. Figure 20: Example Small Outdoor FDC Housing PON Splitters CTC Report | City of Palo Alto | September 2015 78 Figure 21: Example Large Outdoor FDC Housing an OLT133 Figure 22: List of Materials for High-Density OLT Site (Up to 2,000 Subscribers) Figure 23: Example Indoor FDC Option for OLTs 133 The large ODC would be used in an all-Active Ethernet model. The proposed model would use smaller ODCs that do not require power. QTY Name Description - OLT; non-hardened 20-Blade AC/DC Chassis 20-Slot Indoor chassis, high cap 20 line cards, multi-terabit backplane 15 OLT; Hardened 2-Blade AC Chassis Hardened OLT chassis, 2 slots, 2x10Gb Uplink SFPs, stackable 19 OLT; GPON line card, 8-port 8 GPON ports and 2 10GE Ports, needs SFPs - OLT; GPON line card, 4-port GPON, 2-port AE 4 GPON ports and 2 GE ports, needs SFPs 11 OLT; AE line card, 24-port provides 24 AE ports, needs CSFPs 242 OLT; AE SFP, 2-port (duplex)AE GE duplex SFP for 12-port line cards 30 OLT; Uplink 10GE SFP+ 300M multimode For 10GE uplinks to local ASR - OLT; Uplink 10GE SFP+ 10km 1310nm For 10GE uplink to remote ASR 152 OLT; GPON OIM, single port Supports 32x and 64x 152 1x16 Splitter Optical Slitter and Fiber Patches 15 OLT; Stack ring Cable, 10GE, 1m Stack Ring Cables - modular - fixed RJ45 ends CTC Report | City of Palo Alto | September 2015 79 GPON is currently the most commonly provisioned FTTP technology, due to inherent economies when compared with technologies delivered over home-run fiber134 such as Active Ethernet. The cost to construct an entire network using GPON is approximately 40 percent to 50 percent less than Active Ethernet.135 GPON is used to provide services up to 1 Gbps per subscriber and is part an evolution path to higher-speed technologies that use higher-speed optics and wave- division multiplexing. This model provides many options for scaling capacity, which can be done separately or in parallel: 1. Reducing the number of premises in a PON segment by modifying the splitter assignment and adding optics. For example, by reducing the split from 16:1 to 4:1, the per-user capacity in the access portion of the network is quadrupled. 2. Adding higher speed PON protocols can be accomplished by adding electronics at the FDC locations. Since these use different frequencies than the GPON electronics, none of the other CPE would need to be replaced. 3. Adding WDM-PON electronics, as they become widely available. This will enable each user to have the same capacity as an entire PON. Again, these use different frequencies than GPON and are not expected to require replacement of legacy CPE equipment. 4. Option 1 could be taken to the maximum, and PON replaced by a 1:1 connection to electronics—an Active Ethernet configuration. All of these upgrades would also require upgrades in the backbone and distribution Ethernet electronics and in the upstream Internet connections and peering, but would not require increased fiber construction. 5.5.2.4 Open Access Considerations Open access is the ability of a network platform to enable multiple service providers to serve customers over a single architecture. Open access can be achieved at layer 1 (separate fibers for separate providers), layer 2 (separate Ethernet capacity for separate providers), and layer 3 (separate virtual networks for separate providers). Open access is commonly available on fiber networks in Europe and in the Asia-Pacific region, where it is required by regulators. It is also provided in networks in the State of Washington, where public utility districts (PUDs) are restricted in their ability to offer retail voice, video, and 134 Home run fiber is a fiber optic architecture where individual fiber strands are extended from the distribution sites to the premises. Home run fiber does not use any intermediary aggregation points in the field. 135 “Enhanced Communications in San Francisco: Phase II Feasibility Study,” CTC report, October 2009, at p. 205. CTC Report | City of Palo Alto | September 2015 80 data services. There have been some open access networks deployed in the U.S., including UTOPIA and the iProvo deployments in Utah. Both of these deployments have had difficulty in obtaining subscribers. The 2004 iProvo deployment was acquired by Google Fiber in 2013 and UTOPIA is seeking an operational partner. (UTOPIA is further discussed in Section 7.2.) Different networks have provided open access in different ways. A layer 1 model exists in the Netherlands. Citynet, operated by the City of Amsterdam, operates the fiber, and provides fiber to service providers, which operate all electronics and have the relationship with the customer. In Sweden, the municipal power company owns and operates the physical fiber and contracts with a company that both operates the electronics and provides capacity to the service providers, which in turn have the relationship with the customer. In Singapore, the model is similar to Sweden but regulated and managed by the national government. In New Zealand, the municipal power company owns the fiber and operates the electronics; various service providers purchase Ethernet capacity on the network and have the relationship with the customer. The architecture proposed here is physically capable of any of these models. The proposed GPON electronics enable the City to offer open access at layers 2 and 3 by apportioning capacity to the different service providers and enabling the providers to connect to the network at core locations or other points, as is done in Singapore, Sweden, and New Zealand. A choice of Active Ethernet or GPON has no impact on open access per se, it simply means that the open access will be on an Active Ethernet or GPON platform. If the City wishes to offer open access at layer 1, as is done in Amsterdam, enabling separate service providers to have separate fibers, it can allocate fiber to those providers and offer space in the BNG and FDC facilities. Those providers could offer either Active Ethernet or GPON service over that fiber, depending on what electronics they use and where they place it. As discussed, the architecture places dedicated fiber from each premises to the FDC, and does not lock the City into either type of electronics. 5.5.2.5 Passive Optical Splitters GPON uses passive optical splitting, which is performed inside FDCs, to connect fiber from the OLTs to the customer premises. In this model, the splitters are located in the ODC cabinets. The FDCs house multiple optical splitters that each split the fiber link to the OLT between 16 customers (in the case of GPON service); for subscribers receiving Active Ethernet service, a single dedicated fiber goes directly to the subscriber premises with no splitting. FDCs can sit on a curb, be mounted on a pole, or reside in a building. Our model recommends installing sufficient FDCs to support higher than anticipated levels of subscriber penetration. This approach will accommodate future subscriber growth with minimal re-engineering. Passive CTC Report | City of Palo Alto | September 2015 81 optical splitters are modular and can be added to an existing FDC as required to support subscriber growth, or to accommodate unanticipated changes to the fiber distribution network with potential future technologies. Our FTTP design also includes the placement of indoor FDCs and splitters to support MDUs. This would require obtaining the right to access the equipment for repairs and installation in whatever timeframe is required by the service agreements with the customers. Lack of access would potentially limit the ability to perform repairs after normal business hours, which could be problematic for both commercial and residential services. 5.5.2.6 Customer Premises Equipment (CPE) and Services In the final segment of the FTTP network, fiber runs from the FDC to customers’ homes, apartments, and office buildings, where it terminates at the subscriber tap—a fiber optic housing located in the right-of-way closest to the premises. The service installer uses a pre- connectorized drop cable to connect the tap to the subscriber premises without the need for fiber optic splicing. The drop cable extends from the subscriber tap (either on the pole or underground) to the building, enters the building, and connects CPEs. We have specified three CPE kits to offer various features and capabilities and to meet subscriber budgets. Figure 24 lists the basic and premium kits for single-family unit (SFU) and multi-dwelling unit (MDU) subscribers, as well as the quantity of each estimated in our model. The primary distinction between the two subscriber classes is the cost of inside plant cabling. The basic CPE kit provides simple Ethernet on the subscriber LAN, whereas the premium CPE includes the fastest Wi-Fi available today (802.11ac). Figure 24: CPE Kits We recommend indoor CPE devices, which generally do not need to be configured or maintained by the operator after they are installed. Placing CPE devices outdoors unnecessarily increases cost by requiring hardened equipment. In the financial model we will discuss the mix of CPE kits and present the sensitivities of the CPE and take-rate assumptions. Name Description Each ONT Kit - Residential SFU - Basic ONT, Enclosure, NID, 8hr UPS, Ethernet 395$ ONT Kit - Residential SFU - Premium ONT, Enclosure, NID, 8hr UPS, Ethernet, Advanced Wi-Fi 455$ ONT Kit - Residential SFU - AE Access ONT, Enclosure, NID, 8hr UPS, Ethernet, Advanced Wi-Fi, AE Access 555$ ONT Kit - Residential MDU - Basic ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet 766$ ONT Kit - Residential MDU - Premium ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet, Advanced Wi-Fi 826$ ONT Kit - Residential MDU - AE Access ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet, Advanced Wi-Fi, AE Access 926$ ONT Kit - Business (SFU) - Basic ONT, Enclosure, NID, 8hr UPS, Ethernet 366$ ONT Kit - Business (SFU) - Premium ONT, Enclosure, NID, 8hr UPS, Ethernet, Advanced Wi-Fi 426$ ONT Kit - Business (SFU) - AE Access ONT, Enclosure, NID, 8hr UPS, Ethernet, Advanced Wi-Fi, AE Access 526$ ONT Kit - Business (MDU) - Basic ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet 766$ ONT Kit - Business (MDU) - Premium ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet, Advanced Wi-Fi 826$ ONT Kit - Business (MDU) - AE Access ONT, Enclosure, NID, Indoor Cabling, 8hr UPS, Ethernet, Advanced Wi-Fi, AE Access 926$ CTC Report | City of Palo Alto | September 2015 82 In this model we assume the use of GPON electronics for the majority of subscribers and Active Ethernet for a small percentage of subscribers (typically business customers) that request a premium service. GPON is the most commonly provisioned FTTP service—used, for example, by Verizon (in its FiOS systems), Google Fiber, and Chattanooga EPB. Furthermore, providers of gigabit services typically provide these services on GPON platforms. Even though the GPON platform is limited to 1.2 Gbps upstream and 2.4 Gbps downstream for the subscribers connected to a single PON, operators have found that the variations in actual subscriber usage generally means that all subscribers can obtain 1 Gbps on demand (without provisioned rate-limiting), even if the capacity is aggregated at the PON. Furthermore, many GPON manufacturers have a development roadmap to 10 Gbps and faster speeds as user demand increases. GPON supports high-speed broadband data, and is easily leveraged by triple-play carriers for voice, video, and data services. The GPON OLT uses single-fiber (bi-directional) SFP modules to support multiple (in this model, 16) subscribers. Active Ethernet (AE) provides a symmetrical (up/down) service that is commonly referred to as Symmetrical Gigabit Ethernet. AE can be provisioned to run at sub-gigabit speeds, and easily supports legacy voice (GR-303 and TR-008) and Next Gen Voice over IP (SIP and MGCP). AE also supports Video. Service distance (from the OLT) can extend as far as 75 Km (about 46 miles). Because AE requires dedicated fiber (home run) from the OLT to the CPE, and because each subscriber uses a dedicated SFP on the OLT, there is significant cost differential in provisioning an AE subscriber versus a GPON subscriber. This hardware cost differential is partially reflected in the CPE kit pricing for an AE subscriber, which includes the dedicated SFP module on the OLT. The GPON CPE ($455) costs less than half the CPE for Active Ethernet service ($926). Our fiber plant is designed to provide Active Ethernet service or PON service to all passings. The network operator selects electronics based on the mix of services it plans to offer and can modify or upgrade electronics to change the mix of services. 5.6 Operations and Maintenance Cost Estimates This section provides a brief overview of operations and maintenance (O&M) costs from a technical perspective. An expanded discussion of O&M, including sales, marketing, administration, customer support, and other costs, is included in Section 8. CTC Report | City of Palo Alto | September 2015 83 5.6.1 Subscriber Provisioning The recommended subscriber provisioning platform will generally be purchased from the selected vendor for FTTP electronics.136 The platform facilitates additions, moves, changes, and deletions of subscribers on the system, and tracks all activities. The provisioning platform is accessed by system administrators and customer service representatives in direct support of end subscribers. 5.6.2 Maintenance 5.6.2.1 Sparing The City will need to manage spare equipment inventory for lower-cost quick-fix items such as line cards, interface modules, and power supplies. 5.6.2.2 Electronic Equipment Support and Maintenance Network equipment is covered by each vendor’s maintenance program, which typically includes extended warranty support, repair and replacement services, remote technical support, on-site technical support, and SLAs for response times to various types of reported issues. Annual support services often vary significantly between vendors; a common level of annual support often falls into the range of 15 percent of initial equipment cost. 5.6.2.3 Fiber Maintenance Fiber optic cable is resilient compared to copper telephone lines and cable TV coaxial cable. The fiber itself does not corrode, and fiber cable installed more than 20 years ago is still in good condition. However, fiber can be vulnerable to accidental cuts by other construction, traffic accidents, and severe weather. The City would need to augment its current fiber staff or contractors with the necessary expertise and equipment available to maintain a citywide FTTP network. Conservatively speaking, typical maintenance costs can range from 1 percent to 5 percent of the total construction cost, per year. As Section 8.3 shows, our analysis assumes fiber network maintenance costs are calculated at $10,000 per year plus 0.25 percent of the total construction cost, per year. This is estimated based on a typical rate of occurrence in an urban environment, and the cost of individual repairs. 136 The owner of the electronics is typically responsible for the provisioning platform. CTC Report | City of Palo Alto | September 2015 84 6 FTTP Business Models and Municipal Objectives As the City of Palo Alto evaluates how best to obtain FTTP based services in the community, there are several potential avenues it might pursue. Not all municipal FTTP networks have been deployed using the same model. The core business models that the City might consider include:  Retail – the City builds and operates the FTTP network and directly offers services  Wholesale – the City builds and retains ownership of the network and enables multiple ISPs access to the infrastructure  Infrastructure Participation – the City enables various degrees of participation from providers by making available for use assets like City-owned dark fiber, utility poles, and other properties  “Turnkey” or Public–Private Partnership – the City enables a private sector partner or a “turnkey vendor” to design, build, and operate the FTTP network Each approach accomplishes the City’s end goal of offering retail services over an FTTP network slightly differently, and each has potential advantages and drawbacks. As we discuss in Section 6.4, there are numerous objectives that the City may prioritize as it determines what it deems most important in this pursuit. Further, these models can be mixed to best meet the unique objectives the City may pursue. In this analysis, we consider the various objectives that the City may prioritize in its pursuit of an FTTP network, and how those may impact the City’s choice of business model. For example, the retail model is inherently high risk and may not be the City’s best option if it wants to prioritize risk aversion as a key objective. In the same vein, some turnkey solutions may minimize the City’s control of newly constructed FTTP infrastructure, which could conflict with a City expectation about ownership and control of assets. It is important for the City to have a clear vision of its own priorities and eventual goals for the FTTP network so that it can determine to what degree it will be involved at every level of network design and deployment. 6.1 Defining Broadband To adequately consider business models and potential City objectives, we must first briefly define “broadband” and explain the elements of broadband service delivery. 6.1.1 Broadband Speed The Federal Communications Commission’s (FCC) definition has evolved, and continues to change. The core definition that remains unchanged is that broadband is high-speed Internet access that is always on. It is faster than traditional dial-up access, and was defined in 2000 as CTC Report | City of Palo Alto | September 2015 85 being at least 200 Kbps in at least one direction. What this means is that when a user sends (uploads) or receives (downloads) data, the speed in either the download or upload direction must be at least 200 Kbps. In 2010, that definition was upgraded to require at least 4 Mbps download and 1 Mbps upload speeds for a connection to be classified broadband. The FCC again updated its standard in 2015 to 25 Mbps download speed and 3 Mbps upload speed.137 It made this change to keep pace with a rapidly expanding need for high-capacity connections. The proposed definition would require that any connection defined as broadband offer at least 25 Mbps download and 3 Mbps upload speeds. It is important to note, however, that the FCC’s stance on what constitutes “broadband” does not necessarily reflect the industry’s definition. In stark contrast to the most recent definition of 25 Mbps download and 3 Mbps upload, the industry benchmark is 1 Gbps. Further, symmetry between upload and download speeds sets networks apart. Traditionally, download speeds are emphasized when selling services to consumers, as download speeds typically exceed upload speeds. A symmetrical service offers upload speeds that match or are very close to download speeds. Broadband speed is only one component of its definition, however—especially as it relates to the consumer. We sought to define what broadband means to businesses, residents, and to the Palo Alto community, keeping in mind that the needs of users vary greatly across residential and business connections. Perhaps most important in defining and understanding broadband is to acknowledge that the definition is constantly evolving. As we noted, the industry benchmark is increasingly accepted as at least 1 Gbps—indeed, not to be outdone by competitors, Comcast announced earlier this year its rollout of a 2 Gbps service in select markets.138 Further, there is an expectation of unfettered access and no caps or restrictions. However, the Comcast rollout has been delayed, and speculations pointed to an uncertainty about how to price the service,139 though it announced pricing in July 2015.140 6.1.2 Relationship of Service and Infrastructure The FCC definition of broadband does not address competition or market structure. To fully understand broadband, it is helpful to distinguish between service and infrastructure. Public 137 https://www.fcc.gov/document/fcc-finds-us-broadband-deployment-not-keeping-pace, accessed May 2015. 138 http://www.pcmag.com/article2/0,2817,2479953,00.asp, accessed May 2015. 139 http://www.fiercetelecom.com/story/comcast-pushes-back-heralded-2-gbps-fiber-home-rollout/2015-06-02, accessed June 2015. 140 http://arstechnica.com/business/2015/07/comcasts-2gbps-internet-costs-300-a-month-with-1000-startup- fees/, accessed July 2015. CTC Report | City of Palo Alto | September 2015 86 roads offer an apt comparison to the broadband environment, as this analogy helps illustrate what the competitive environment looks like. Consider public roadways in the context of package delivery. Companies like FedEx, UPS, the U.S. Postal Service, and many small businesses compete in the package-delivery market using public roads. Use of the roadways is a critical part of the business model for all package-delivery services, but none of them actually owns the roads. This fosters competition. With broadband, the “roads” and the “delivery service” are controlled by the same entity. Imagine if each package delivery service was forced to build its own roadway in order to deliver packages. This would likely eliminate, or at least severely hinder, competition. Only the wealthiest companies that were able to finance large capital costs toward roadway construction would be able to sustain their expensive package-delivery businesses. The roads would be tailored to businesses that are willing and able to pay the price, and would exclude others. Small businesses would not stand a chance at competing, and consumer choice would be severely limited. Users would be able to choose only from a handful of large businesses to meet their package-delivery needs. In this kind of environment, there is no incentive for package delivery services to keep prices low or to provide quality customer service—because the consumer has no alternative. High customer satisfaction is an important goal in the telecommunications industry. While Internet access speeds get the headlines, user-friendly customer service within a pricing structure the average consumer can easily understand and work with is what consumers most desire. Palo Alto is no exception. A ubiquitous open-access communications infrastructure would be a platform for enabling competitive commerce. But, to refer back to the package-delivery comparison, the “packages” would be “packets” of the virtual variety, arriving at computers and other devices rather than curbside mailboxes. The City may find that its best option is to build the “roads” over which service is delivered and act as the deliverer itself (the retail model). Alternatively, it may find that it should build and maintain the service delivery infrastructure while enabling various providers to deliver service (the wholesale model). Or, it may find that building the “roads” is too costly and risky, and it will instead find ways to smoothly enable one or more private entities to do this—such as promoting ease of access to rights-of-way to facilitate construction (infrastructure participation). Finally, the City may find CTC Report | City of Palo Alto | September 2015 87 that it is best to entice a private entity to invest in infrastructure and deliver service (“turnkey” model or public–private partnership). 6.2 Business Models As we noted, there are four main business models that the City may opt to pursue for the FTTP network. It is also possible to pursue some combination of these, or to pull attractive elements from each to create the best potential chance for success. The overarching goal is to maximize reward and minimize risk. 6.2.1 Retail Services In the retail model, the City would build the infrastructure and act as the sole ISP delivering services. This model carries the greatest risk to the City because it includes operational costs, including sales and marketing. Further, the City has minimal experience operating a for-choice business, including expensive marketing and advertising efforts, and time-consuming customer service requirements. Although the City does offer a range of standard municipal services, it is unfamiliar with the nuances and difficulties of administering a for-choice always-on service like an FTTP network. Because of its inherently round-the-clock nature, network management can be exceptionally challenging. The City has experience maintaining a fiber network that serves dark fiber customers, but retail subscribers are a much different group. The time and money spent on customer “hand-holding” alone are significant, and the technical support and customer service staff necessary to manage retail subscribers is much greater than administering dark fiber agreements. Often there is a steep learning curve for municipalities that enter the retail market because they must learn to navigate a unique business world that bears little resemblance to a typical government environment. We anticipate the City will struggle with adjusting to market conditions and remaining responsive. The details of providing service at any level are many, and can be especially tedious during startup. 6.2.2 Wholesale Services A wholesale or open access model separates the “infrastructure” from the “retail” services. In a perfect market, consumers would have access to any service provider they desire. Separating the infrastructure from the service is a step in that direction. In the City’s case, licensing fiber to wholesale providers, who in turn would light the fiber and sell wholesale lit services,141 will have the added benefit of achieving the City’s policy goals (i.e., promoting economic development and competition) without requiring the City to take on the burden of operations and management. 141 Lambdas can also fit into this model. CTC Report | City of Palo Alto | September 2015 88 Figure 25 below illustrates a wholesale lit service scenario, in which the wholesale provider lights the fiber and the ISPs deliver retail service over the City’s fiber to consumers. Wholesale- lit services can be priced in various ways—and the provider, not the City, will determine actual pricing. Figure 25: Wholesale Lit Services As we noted, an in-depth evaluation of the City’s fiber is necessary to determine to what degree (if any) existing assets are valuable and able to be used for the FTTP endeavor. 6.2.3 Infrastructure Participation and Public–Private Partnerships Although the City identified “infrastructure participation” as a standalone model, this could be incorporated with the possibility of attracting a “turnkey” vendor or entering into a public– private partnership (see Figure 26). A partnership could essentially encompass infrastructure participation, and both represent the varying degrees to which the City may choose to become involved in service delivery over the FTTP network. CTC Report | City of Palo Alto | September 2015 89 Figure 26: Infrastructure Participation Role in Partnerships and Turnkey Vendor Relationship The subtle distinction between a turnkey vendor and partner is the City’s level of involvement in the relationship. A turnkey vendor would design, build, and operate the FTTP network using its own capital, taking on most or all of the risk, and reaping most or all of the reward. The City could make itself attractive to a partner like this by removing barriers to access like challenging and costly permitting processes. It may be able to allow access to its utility poles at a discounted rate, or could license dark fiber strands. Again, this illustrates an overlap of infrastructure participation and attraction of a turnkey vendor. As its name implies, a public–private partnership is a joint relationship in which the City has at least some degree of involvement and investment in the design, deployment, and operation of the FTTP network. In general, we believe that a partnership model is more likely to be successful than attempting to attract a turnkey private vendor. Though it can be difficult for most cities to incite significant private investment without having their own skin in the game, Palo Alto’s unique characteristics may allow it to attract a viable partner with minimal public investment.142 City-owned infrastructure and processes are key components in attracting a turnkey vendor or developing a public–private partnership. Most communities that decide to pursue some form of network implementation prefer to retain ownership and control of the physical assets. This usually includes at least the fiber in the ground or on poles, and all accompanying ducts, splice cases, and other network components, or the OSP. It often also entails ownership of network electronics such as routers and other equipment at the network core or central office (CO). 142 The degree to which the City is involved will be based on factors like the City’s desired level of involvement, a private partner’s experience and expertise, and ultimately the negotiated terms of a partnership. Turnkey Vendor Infrastructure Participation Public–Private Partnership CTC Report | City of Palo Alto | September 2015 90 This is important to mitigate the City’s risk; retaining ownership of the assets is a critical way for communities to retain some control of the network. This includes a public–private partnership scenario—a good way to balance risk and reward is for the City to maintain ownership and control of the assets while it assigns operational responsibilities to its private partner(s). This enables both parties to perform functions that highlight their strengths while not having to expend resources and energy attempting to carry out tasks for which they are ill-equipped. The City may want to determine ahead of time whether it wants to retain ownership of assets and to what degree. It may want complete control, including responsibility for maintaining all the fiber and electronics. In Palo Alto, the City has experience operating and maintaining a fiber network, which gives it an advantage in this area. But the details of maintaining a network change when transitioning from primarily dark-fiber agreements to providing retail service, and the City should take this into consideration as it pursues an FTTP network. On the other hand, the City may want to retain control only through ownership with no hands- on role of its own. This would shift all the responsibility for network maintenance and repair as well as electronics replenishments and network upgrades to the private partner(s). This would reduce the City’s required staffing, but will likely also come with some sort of price tag. Alternatively, the City may decide that in its pursuit of a public–private partnership, it will allow potential partners’ level of experience to drive what degree of ownership the City retains. That is, one potential private partner may be prepared to take over total responsibility for the network while a different potential partner may have no experience with this and might ask that the City continue in this role.143 Perhaps the single most important issue to keep in mind regarding ownership of assets to any degree is that the City will likely be responsible for funding network construction and deployment, particularly if it wishes to retain ownership of the assets. Potential partners may be willing to make capital investment, but will likely then retain ownership and control of the infrastructure they build. 6.3 Redefining Open Access “Open access” traditionally means one network infrastructure over which multiple providers are able to offer service. In an open access municipal network, the locality typically owns the fiber optic network and enters into wholesale transport, dark fiber license, or indefeasible right of use (IRU) agreements with third party providers to offer retail data, video, and voice services over the network. 143 If the City is tasked with this in a potential public–private partnership, it may be able to contract out tasks for which it is not equipped. CTC Report | City of Palo Alto | September 2015 91 Often the municipality allows third party providers access to lit services instead of dark fiber to achieve their service goals. Whatever the means (dark or lit services), open access has historically meant that multiple providers offer services over one central infrastructure, which is usually publicly owned. In the case of Palo Alto, the wholesale model is most closely aligned with the traditional definition of open access, but we outline in this section how the goals of open access may be met in new ways. We previously noted that the City’s network must be able to support “triple play” services— high quality data, video, and voice—that residential users have grown accustomed to having in their homes. But what it means to support triple play services has evolved, and the means through which this is accomplished has changed as technologies have improved and network speeds have increased. Similarly, the definition of open access has shifted recently, just as the broadband landscape has evolved in recent years. While it has traditionally meant that network owners must provide access to their infrastructure, some communities are finding that they can achieve their broadband goals without a traditionally open-access network. Instead of multiple ISPs and other private entities providing service over one network, open access is achievable through multiple OTT providers offering various services. This is especially effective if the network is provisioned for affordable unfettered 1 Gbps data service—ultra-high speed fiber optic broadband networks offering top tier speeds possess the capacity to provide a variety of different OTT applications to meet consumers’ needs. Thus, the City’s network can support triple play by enabling OTT applications that effectively provide all these services—while at the same time simplifying the consumer’s experience and potentially lowering their overall cost. As awareness and access increase and prices decrease, consumers are likely to continue pursuing alternatives to conventional voice and video services. A new era of OTT content via 1 Gbps data services is emerging—and with it comes an updated definition of open access, and alternative paths for communities to attain their broadband goals. 6.3.1 Open Access Goals Localities have traditionally sought to develop open access networks in their pursuit of other community goals. Key among these is competition. The purpose of open access networks is to enable as many providers as possible to deliver service over the network, to give consumers greater choice and flexibility in picking a provider, and ultimately to broaden availability. Communities are recognizing that competition is key, and that providing a competitive marketplace for consumers may not look like what has traditionally been considered open access. Providing a competitive environment with numerous applications and offerings that CTC Report | City of Palo Alto | September 2015 92 enable consumer choice meets customer needs in a new way—and a data connection enables cloud-based applications and services. A public or public-regulated offering that provides a robust retail data service and competitively priced wholesale transport access brings open- access objectives to the market. If the City’s FTTP network delivers an unfettered data offering that does not impose caps or usage limits on one use of data over another (i.e., does not limit streaming), it has created an open access network on the applications side. All application providers (data, voice, video, cloud services) are equally able to provide their services, and the consumer’s access to advanced data opens up the marketplace. The City or its partner as a premium data-only provider fosters access in the near-term to create an open network. This is a building block toward potentially opening the network further in the future as the FTTP enterprise evolves, if this form of open access remains an ongoing goal for the City. Getting to traditional open access where multiple ISPs offer service has been slow and problematic in the United States. Focusing on other forms of open access provides a viable and attractive substitute in the meantime, and may ultimately eliminate the need for traditional open access. One of the most important elements to successfully redefine open access is the emergence and evolution of OTT providers and next generation applications to support consumers’ needs. 6.3.2 Evolving Over-the-Top Providers OTT or “value added” services have evolved more quickly in the voice market than in video, though it is not a new concept in either. Recent announcements of expanded OTT video offerings suggest that consumers are seeking alternatives to traditional video services, and the market is responding. Consider important changes in the landline telephone market over the past decade to illustrate what is likely to happen with video content. Ten years ago, home telephones were still nearly ubiquitous, even in households where all members subscribed to wireless phone service. Yet data from a December, 2013 National Institutes of Health (NIH) report showed that more than a quarter of households in Santa Clara County were wireless only, with no landline telephone.144 National usage has continued to decline—January through June 2014 was the first six-month period during which a majority of U.S. children lived in households with wireless-only telephone 144 National Institutes of Health. (2014). Wireless Substitution: State-level Estimates from the National Health Interview Survey, 2012 (Report No. 1250). Retrieved from http://www.cdc.gov/nchs/data/nhsr/nhsr070.pdf. CTC Report | City of Palo Alto | September 2015 93 service.145 This decline was possible due to increasingly accessible and affordable cellular and wireless service along with other alternatives to landline—programs like Skype and Google Voice, services like Vonage and Lingo, and technology like magicJack and Ooma. The cable industry may be poised to see a similar shift toward nontraditional technologies, applications, and services that allow consumers greater flexibility and choice. An increased desire for OTT offerings could have a significant industry impact,146 though this will likely be more gradual than changes to the voice industry because of cable content owners’ great degree of control. Major industry shifts have been predicted,147 but major industry changes have been slower to materialize than in the voice industry. To understand why the shift may be gradual, consider Google Fiber’s entry into the Kansas City market just a few years ago as an example of the firmly rooted power of cable. Google Fiber found that a data product alone was not strong enough to obtain the necessary market share to make its endeavor viable. If it wanted to get people to switch providers, Google Fiber had to offer cable, deviating from its original plan and introducing more cost and complexity than the simple data service it intended to offer. Google Fiber may have found that offering traditional cable television was unnecessary if OTT cable options with a broad range of content were widely available when it entered the Kansas City market. In 2011, Google Fiber was forced to set a precedent offering traditional cable services when entering the Kansas City market, and has necessarily continued these offerings in subsequent markets. It will likely eventually phase out its traditional cable offering as more OTT content becomes available and consumers seek other, less costly alternatives to traditional cable. Smart mobile devices, where content can come from cellular networks or WiFi networks, add network choice to the consumer list. As more non-traditional content providers emerge, greater programming variety becomes available via OTT, network choice grows, and network operators offer a wider variety of pricing plans, the demand for alternative access to content may increase. Consumer demand and expectation is another potentially key driving factor that may facilitate change in the industry. Due to the always-on and at-your-fingertips nature of applications and services that are supported by access to the Internet, consumers have come to expect “on- 145 National Institutes of Health. (2014). Wireless Substitution: Early Release of Estimates from the National Health Interview Survey, January-June 2014. Retrieved from http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201412.pdf. 146 This change is not without other risks to the City. Unless legislation changes in accordance with the industry, this market transition to OTT services could have serious adverse consequences to City cable franchise fee and utility tax revenue. 147 http://www.businessinsider.com/cord-cutters-and-the-death-of-tv-2013-11, accessed June 2015. CTC Report | City of Palo Alto | September 2015 94 demand” services and control over their choices in ways that have not previously existed.148 Consumers who are used to having Internet access—especially digital natives 149 —are accustomed to quickly and easily receiving the goods and services they desire. There is an increasing expectation among consumers in the U.S. that services will be readily available on- demand with minimal effort. By simply engaging an App on a smartphone or clicking a mouse on a laptop, consumers expect instant access to goods, services, and content. Further, in part because of the growth of cloud services, there is an increased consumer desire for simplicity and integration among services and content. And because of technological advancements and “cheap computing power,”150 the costs associated with what would have been luxuries for the rich only a few years ago are now attainable for the average household. Since the start of this year, the market has begun to shift more dramatically with the emergence of additional OTT content. Dish Network launched an OTT service in early 2015 that offers sports programming on channels such as ESPN as well as other programming and popular TV channels without a cable subscription. The service, called Sling TV, is streamed over the Internet.151 It does not require any additional hardware and is enabled by installing an application on a device such as a smartphone, tablet, laptop, or Internet-connected television. Sling TV currently is priced at $20 per month with no time commitments, but it is complex and fraught with limitations and restrictions.152 Traditional cable content providers’ attempts at OTT have seen varying degrees of success, but it is significant in the industry for these providers to even acknowledge the need for these services.153 In addition to recent entrants to the OTT market, there are numerous established services and applications that will likely continue to promote change in the cable industry and drive an increase in consumers’ desire for greater choice and control over how they access content. Standalone media-streaming boxes like Apple TV and Roku have enabled consumers to stream content with applications such as YouTube, Netflix, and Hulu without a cable subscription since 2008. These “cord-cutters” cancel their cable subscriptions in favor of accessing their favorite content via applications and services streamed over the Internet. An ever-increasing percentage of consumers are getting these services using mobile devices. 148 http://www.businessinsider.com/the-on-demand-economy-2014-7, accessed May 2015 149 http://www.cnn.com/2012/12/04/business/digital-native-prensky/, accessed May 2015 150 http://www.economist.com/news/leaders/21637393-rise-demand-economy-poses-difficult-questions-workers- companies-and, accessed May 2015. 151 https://www.sling.com/, accessed April 2015 152 http://www.pcworld.com/article/2909572/sling-tv-channel-guide-all-the-programming-and-all-the-restrictions- all-in-one-chart.html, accessed May 2015. 153 As we noted in Section 2.3.8, Comcast is poised this year to make its second attempt at an OTT offering. CTC Report | City of Palo Alto | September 2015 95 Since the debut of Apple TV and Roku, similar devices like the Chromecast, Google Nexus, and Amazon Fire TV have entered the market, allowing consumers greater choice. Further, consumers can now purchase smart TVs, which come with preinstalled platforms that support streaming applications. These devices require no additional hardware—with only an Internet connection, consumers can stream music, TV shows, movies, and even play games. While Comcast’s own attempt at OTT content through its “Streampix” offering was not a huge success,154 that pursuit illustrates the cable giant’s understanding of streaming as the future of content delivery. The fact that its broadband subscriptions surpassed its cable subscribers this year further puts to rest the notion that the video industry can move forward without embracing new and innovative content delivery mechanisms. Further, Comcast has announced that it will begin offering a new streaming service,155 and it is reportedly in talks with “nontraditional” content and media providers.156 Although the video industry has been slow to change, traditional content providers have begun efforts in recent years to provide OTT content to keep up with consumer demand for greater flexibility, and to compete with companies like Netflix and Hulu. Comcast’s own recent developments show that this understanding is beginning to resonate with even the largest providers. Verizon FiOS announced earlier this year its own “a la carte” offering called Custom TV, which allows consumers to choose from bundled packages that more appropriately reflect their programming desires and include less unwanted channels.157 While this is not a true OTT application, it demonstrates the recognition within the incumbent market that consumers are dissatisfied with traditional content delivery and are seeking alternate choices. Further, HBO announced plans last year to offer its own OTT service;158 it began offering HBO NOW on a variety of platforms and devices in mid-2015.159 Access to premium programming like sports and HBO has been a stubborn barrier to customers who want to eliminate their cable subscriptions (and to competitors that want to disrupt the market). Often, consumers would happily give up enormous cable bills in favor of more streamlined, inexpensive services— but they do not take the leap because they want specific programming that is only available 154 http://www.lightreading.com/video/ott/comcast-turns-off-streampix/d/d-id/711098, accessed May 2015. 155 http://corporate.comcast.com/comcast-voices/a-new-streaming-tv-service-from-comcast, accessed July 2015. 156 http://blogs.wsj.com/cmo/2015/07/24/this-chart-shows-why-comcast-would-be-interested-in-vice-media-and- buzzfeed/, accessed July 2015. 157 http://arstechnica.com/business/2015/04/verizons-new-custom-tv-is-small-step-toward-a-la-carte-pricing/, accessed May 2015. 158 HBO to Launch Standalone Over-the-Top Service in U.S. Next Year. 2014 October 15. http://variety.com/2014/tv/news/hbo-to-launch-over-the-top-service-in-u-s-next-year-1201330592/, accessed March 2015. 159 https://order.hbonow.com/, accessed June 2015. CTC Report | City of Palo Alto | September 2015 96 over cable. It is significant when a content powerhouse like HBO acknowledges the importance of change in the industry. Companies that hope to compete in the video market will likely find that they must adjust their business models, marketing strategies, and understanding of consumer demands and desires. Perhaps one of the most significant illustrations of this is that, for the first time ever, Comcast’s broadband subscribers outnumbered its cable subscribers—an unprecedented and major shift in the industry.160 In light of the high costs associated with providing traditional cable service, the City will likely benefit most from focusing on a data-only offering as it goes through startup. If a data-only offering does not prove to be viable, the City can then readjust its approach and potentially partner with a private provider that can offer IP-based cable. One important goal is for the City to drive the market by showing consumers that a high-capacity data product is sufficient to meet all their content needs, and can lead to overall telecommunications savings. 6.4 FTTP Objectives As part of our analysis of business models the City might want to pursue, we evaluated certain common broadband objectives that many communities prioritize, and how these may affect the City’s decision-making process. Choosing which goals to prioritize can be challenging, and we sought to provide the City with information to empower decisions about its connectivity needs that will have ongoing positive outcomes. 6.4.1 Community Broadband Objectives Competition and consumer choice are only two of several objectives that may drive a community’s pursuit of a publicly owned fiber optic network. Many public entities share certain objectives when it comes to considering investment in a community broadband network:  Affordability  Cash Flow  Competition in Market  Consumer Choice  Ownership and Control of Assets  Performance  Risk Aversion  Ubiquity 160 http://www.nytimes.com/2015/05/05/business/media/comcasts-earnings-rise-10-driven-by-high-speed- internet.html?_r=0, accessed May 2015. CTC Report | City of Palo Alto | September 2015 97 Each of these is understandable in the context of what is best for a community, though they do not necessarily all align with one another. In fact, some common objectives that communities prioritize when planning their networks actually conflict with one another. In light of this, communities benefit from careful consideration of which objectives they deem most important to adequately meet their needs. As an example, risk aversion is top priority for some communities—it may be politically challenging to build a network, and the only way to complete it is to assure key stakeholders and the public that there is minimal risk involved. As we explain below, risk aversion is in direct conflict with building the network throughout an entire community, and ubiquity may be the most important objective for another community. Each community must find the balance that is most appropriate to its needs so that it can achieve its goals without sacrificing important objectives. Our analysis does not advise the City on which objective(s) it should prioritize; rather, we describe common objectives and their role in communities, how they interact with each other, and potential advantages and disadvantages of each. We illustrate in Table 6 below the intersection of common objectives and in the sections that follow we explain these in greater detail as well as how they align and differ. As the key at the top of the following table shows, objectives may have no impact, they may be in alignment, they might conflict, or they may be inapplicable. Table 6: Common Goal Alignment A: Align C: Conflict NI: No Impact NA: Not Applicable Ubiquity Choice Competition Ownership Performance Affordability Risk Aversion Cash Flow Ubiquity NA A A A NI C C C Choice A NA A A A A C NI Competition A A NA A A A C NI Ownership A A A NA A A A C Performance NI A A A NA NI A A Affordability C A A A NI NA C C Risk Aversion C C C A A C NA A Cash Flow C NI NI C A C A NA In the sections below, we further explain this table and how the objectives listed here interact with one another. We detail below the interaction between objectives, and how prioritizing one objective may impact another. Figure 27 below shows a visualization of Table 6 to illustrate the relationship between objectives. CTC Report | City of Palo Alto | September 2015 98 Figure 27: Interactions between Objectives There are numerous possible outcomes associated with different objectives, and the City has to determine what it believes will best serve its unique needs and have the greatest impact on its community. This analysis does not seek to urge the City in any particular direction, but we do make recommendations about some of the objectives that may well serve any public network. For example, performance is an objective that either interacts favorably or not at all with other objectives, and prioritizing performance can have a significant positive impact on the FTTP network’s viability by setting it apart from incumbent providers. Thus, there are no real disadvantages to making performance a top priority for the FTTP network because doing so does not have to be at the exclusion of any other objectives. Further, some objectives can and should be pursued in parallel. 6.4.2 Ubiquity For most communities that opt to build and operate a network to any degree, ubiquity—which refers to designing and building the network so that it connects every structure in the community—is a key objective. From Connecticut to Minnesota to Oregon, communities (and Ubiquity Affordability Ownership Competition Choice Risk Aversion Cash Flow Performance CTC Report | City of Palo Alto | September 2015 99 community organizations) large and small prioritize ubiquity as a primary goal in their broadband pursuit.161 This is a respectable objective for any community, and it makes sense that leaders want to bring service to the entire community, but immediate, community wide build-out often entails significant risk and cost. The financial risk alone is significant and in order to make the model sustainable, the service may have to be priced out some consumers’ reach. Overall risk aversion conflicts directly with the notion of a full-scale community build-out, as the City will likely face stringent construction deadlines and much higher capital costs than it would if it were to undergo a phased build-out. The need for outside funding is likely also higher with a ubiquitous network build, which greatly increases the City’s risk. Because the City will likely need to procure financing from an outside source, and due to high capital investment for large-scale construction, it is likely that the City will be forced to raise monthly service fees. This reduces the affordability of the City’s FTTP network and to some degree defeats the purpose of ubiquitous build-out. If the service reaches the entire community but it is priced too high for many residents and businesses to afford it, this fails to meet the City’s goal of providing access to its citizens—it is essentially inaccessible.162 Cash flow is another objective that conflicts with ubiquity. The City likely will not expect to make a profit on the FTTP network, but it is important for the entity to become able to financially sustain itself, including operating costs and any debt service payments. This is often referred to as “cash flow” or “breakeven.” The higher cost of building out to every structure in the City means that the point at which the FTTP network is able to cash flow will come much later than if the City slowly built out and began generating subscriber revenue earlier on in the process. 6.4.2.1 Impact on Business Model A key consideration for network implementation is how to fund both capital construction costs and ongoing operational expenses. The importance of factoring in the ongoing cost of operations cannot be overstated—these expenses fluctuate based on the success of the enterprise, and can vary considerably each year, and even month to month. The capital and operating costs associated with a full-scale communitywide build-out will be significant, and the 161 http://www.cnet.com/news/connecticut-communities-join-together-for-gigabit-broadband/, accessed April 2015. http://broadband.blandinfoundation.org/_uls/resources/Vision_Statement_FINAL_0228.pdf, accessed April 2015. https://www.portlandoregon.gov/revenue/article/394185, accessed April 2015. 162 The City conducted a study in 2012 that sought to understand the possibility of “user financing” in Palo Alto. The results of the study can be found at: http://www.cityofpaloalto.org/civicax/filebank/documents/30112, accessed June 2015. CTC Report | City of Palo Alto | September 2015 100 City will likely have to seek outside funding to support construction and the FTTP network’s startup costs. It is also possible that outside funding or some internal subsidy will be necessary to support ongoing operations—everything from network equipment license fees to direct customer support. The City may be able to go out for bond (i.e., borrow funds) to enable construction of an FTTP network. There are two types of bonds that municipalities typically rely on for capital projects. General obligation (GO) bonds are directly tied to the City’s credit rating and ability to tax its citizens. This type of bond is not related to any direct revenues from specific projects, but is connected instead to citywide taxes and revenues that can be used to repay this debt. GO bonds can be politically challenging because they may require public approval, which can be hard won. Because of the politically polarizing nature of GO bonds, they are generally issued for projects that will clearly serve the needs of the entire community, such as roadway improvements. It is challenging in many communities to make the case for a fiber enterprise serving the public to such a degree that GO bonds are warranted. Revenue bonds are directly tied to a specific revenue source to secure the bond and guarantee repayment of the debt. The revenue stream from a municipality’s electric, natural gas, or water utility may be used to secure a revenue bond.163 In fact, in theory, any municipal service that generates some sort of revenue that could be used to pay back the debt might potentially be used to secure a revenue bond—municipally owned public transportation or hospitals, for example. Given this, it stands to reason that the FTTP network’s revenues could be used to guarantee a revenue bond, but this is typically not an accepted practice within the bonding community, particularly with FTTP endeavors. Instead, the City would likely need to consider other revenue sources it could tie the enterprise to if it aims to seek revenue bonds.164 Seeking bonds increases the City’s overall risk and it is much more likely to require outside funding if it intends to pursue a ubiquitous build-out. At the same time, the City may find that a clearly stated goal of ubiquity eases the process of GO bond approval, which could be beneficial. If the City anticipates a need for outside funding for any construction and expects that it may be politically complex to seek bonding, ubiquity may be a reasonable conduit through which to achieve that goal. 163 Revenue bonds are not a consideration for Palo Alto, given that the City attorney has previously advised that using utility electric, gas and water revenues to back a revenue bond is prohibited. In light of the City attorney’s legal opinion, the City will need to consider alternative revenue sources. 164 Revenue bonds are not a consideration for Palo Alto. It is possible that the Fiber Optic Fund Reserve (~$20M) or annual revenues (~$3M) from the commercial licensing of dark fiber can be used to secure a revenue bond, though this will require internal City discussion and approval from the City’s legal counsel. CTC Report | City of Palo Alto | September 2015 101 Bonding aside, the City’s FTTP network is harder to oppose if ubiquity is a primary objective. The City could make a strong case in favor of FTTP implementation by being clear that it would not “cherry pick” or build only to economically desirable neighborhoods where it expects a return on investment. There are few, if any, traditionally low-income areas in the City, but there are still potentially areas in the City where demand is low enough that private providers are unlikely to build there. Income disparity is not the only reason a private provider may cherry pick—these providers typically build based on where they determine they are most likely to recover their cost to build. The City likely will not have to assist a large number of low-income residents with reduced service fees, but it still may benefit from choosing to invest in infrastructure throughout the community. The FTTP network could serve areas that have been historically underserved, including parts of the community where perhaps no infrastructure previously existed. This would not only bring the FTTP network’s offering to those parts of the community, but could also enable local ISPs to provide service over the network’s infrastructure and gain market share in areas that had previously been too costly to serve. The City may determine that it will be best served by not partnering with multiple ISPs but seeking one partner to manage and operate the network. Whether the City pays for network construction will determine whether a ubiquitous network is attractive to a private partner. If the City requires ubiquity but is not prepared to fund significant portions of the network, it will likely find that private entities have little desire to partner. Conversely, if the City funds significant portions of construction of a ubiquitous network that a private partner can then expand and operate,165 it may find that it is an attractive community for private investment.166 Figure 28 shows conflicts, alignments, and potential outcomes associated with prioritizing ubiquity. 165 For example, the existing fiber optic backbone may be sufficient to attract partnership, or the City may opt to fund network expansion to key economically desirable areas to entice private investment to build to the remainder of the community. 166 The City has some funds for system capacity improvement allocated in its Fiber Optic System Rebuild project (FO-16000), which will install new aerial duct or substructures (conduit and boxes) and additional fiber backbone cable to increase capacity for sections of the dark fiber ring that are at or near capacity and allows CPAU to meet commercial customer requests for service. However, this reinvestment does not increase the attractiveness of the fiber to encourage a partner to build FTTP. The commercial dark fiber reach is a relatively small portion of the total FTTP investment, and the FTTP endeavor will likely benefit little from commercial dark fiber expansion. The City anticipates the rebuild will be completed with the budget funds requested for Fiscal Year 2016 ($1.15 million) and Fiscal Year 2017 ($1.25 million) for a project total of $2.4 million over two years. The remainder of the $4.9 million project cost originally shown on the City's budget represents a placeholder for future fiber expansion. The City should prioritize internal discussions regarding which funds are allocated for dark fiber vs FTTP, and what impact they may have on overall cost to deploy FTTP. CTC Report | City of Palo Alto | September 2015 102 Figure 28: Ubiquity Alignments, Conflicts, and Potential Outcomes 6.4.3 Consumer Choice As we noted, localities often pursue open access as a means to increase consumer choice, and this is an important consideration and a high priority for many communities. Incumbent cable and Internet providers may have little economic incentive to expand to areas of the community where they believe they will not recover significant portions of their cost. An overarching goal of developing an open access network is to level the provider playing field to reduce monopolistic and oligopolistic practices by incumbents, and to give consumers greater choice in service providers. Most other objectives that a community decides to pursue will interact favorably with consumer choice. A ubiquitous network that fosters open access, boosts competition, and reaches all parts of the community enhances consumer choice on a number of levels. In addition to gaining access to residential services that may have previously been unavailable, consumers often end up with greater flexibility to access services at various community locations. Ubiquity and competition enable enhanced services at community centers, religious institutions, educational facilities, and other locations that benefit residents. Affordability of services is an important component in access that ties directly with competition and consumer choice—being able to pay for services is often a major barrier for consumers. Ubiquity Conflicts Alignments Affordability Cash Flow Risk Aversion Choice Competition Ownership Potential Outcomes (+) Service to underserved areas (+) Greater consumer choice (+) Attractiveness for private investment (–) Need for municipal bonds/loans CTC Report | City of Palo Alto | September 2015 103 Having affordable access to services with competitive speeds can significantly improve quality of life, make residential areas more desirable, and spur business growth. Access to premium residential services at affordable prices can also incite home-based businesses, support continued education, and enable better access to basic human services like healthcare and education. Risk aversion could negatively impact consumer choice. If the City decides that it will slowly and organically build out its network and does not take steps to prioritize particularly vulnerable areas, it is possible that only the consumers who have traditionally enjoyed provider choice will be positively affected. The City may find that it can balance risk mitigation with community benefit by deliberately funding service to portions of the community that may be undesirable for a private entity. If the City chooses to seek partnership, this could be negotiated.167 6.4.4 Competition in Market Fostering competition in the market is generally the second component of an open access pursuit. That is, communities often seek to develop an open access infrastructure to enable multiple providers to offer service over the network and enhance competition. Like consumer choice, this is generally a major reason communities attempt to pursue a traditional open access infrastructure. Similar to consumer choice, competition in the market can be achieved through open access in the traditional sense as well as through other means. The key for most objectives is to determine whether they are primary, how they may conflict with others, and how best to pursue whatever a community deems is its most important goal(s). We believe that competition both upholds and is upheld by all other potential primary objectives—it aligns with, does not impact, or is not impacted by other common community objectives. Choice and competition go hand in hand, and seeking ways to encourage competition will likely only result in greater consumer choice in communities. Similarly, a ubiquitous network build will probably result in greater competition among local providers. This is not only through providers potentially offering services over the City’s network, but also in the form of incumbent providers lowering prices and enhancing services in response to improved services by other providers.168 This also speaks to competition vis-à-vis affordability and network performance: the greater the market competition, the greater the likelihood that other providers will seek to improve their services and lower their prices. 167 The Urbana-Champaign Big Broadband (UC2B) public network negotiated a similar partnership with a private entity. 168 http://www.cnet.com/news/googles-fiber-effect-fuel-for-a-broadband-explosion/, accessed April 2015. CTC Report | City of Palo Alto | September 2015 104 Competition in the market and consumer choice can be prioritized simultaneously with other objectives without negative consequences, and localities often find that focusing on the overall well-being of their communities and citizens has numerous advantages. It is important to note, however, that there may be some risk involved with creating competition in the market. The service provider industry can be inhospitable, particularly to a public provider. A major challenge faced by networks built and operated by public institutions is opposition from existing, private-sector providers, as we previously noted. There are a number of reasons for this, some of which are related to perception while others relate to the market itself. Criticisms will range from allegations of cross-subsidization of expenses, using general or other funds for debt service coverage, to questioning the need or demand for public based connectivity services. An important risk that the City should keep in mind is the potential for litigation from objectors ranging from incumbent providers to watchdog groups. Lafayette’s LUS was sued by incumbent providers the same year it proposed creation of a separate utility for fiber-to-the-home-and- business,169 and the Tennessee Cable Telecommunications Association filed a lawsuit against EPB.170 These are only two examples of the litigation that public sector entrants to the market have faced from incumbent providers and others. 6.4.5 Ownership and Control of Assets Retaining ownership of OSP assets is important to mitigate risk; owning assets is an important way for communities to retain some control of the network. This includes a scenario wherein a community pursues partnership with a private provider—a good way to balance risk and reward is for the City to maintain ownership and control of the assets while it assigns operational responsibilities to a private partner. This enables both parties to perform functions that highlight their strengths while not having to expend resources and energy attempting to carry out tasks for which they are ill-equipped. Cash flow could potentially conflict with ownership and control of assets, depending on to what degree the City chooses to exert control. Maintaining a fiber optic network can be costly, particularly if the City opts to be the retail provider for the service. Operational expenses are a sizable and often unpredictable portion of overall network cost, and it can be difficult to get the take rate necessary to reach cash flow. Other objectives either interact favorably or not at all with ownership and control of the assets. If the City retains complete control of the assets, it can make determinations about which 169 http://lusfiber.com/index.php/about-lus-fiber/historical-timeline, accessed June 2015. 170 http://www.chattanoogan.com/2007/9/21/113785/Cable-Group-Files-Suit-To-Try-To-Block.aspx, accessed June 2015. CTC Report | City of Palo Alto | September 2015 105 provider(s), if any, can offer services over the network. It can regulate which service providers offer services and to what degree, thus allowing for considerable quality control. For example, if a locality offers dark fiber agreements to multiple ISPs, it can determine specific metrics that guide the providers’ service. Similarly, the City may choose to oversee and maintain the network—a function with which it is already well accustomed and for which it is already staffed to some degree —and rely on a private partner to deliver retail services. The City may also be able to govern price points to support consumer affordability and service speeds to enhance performance. And because the City owns the network itself, it is in control of performance at that level. 6.4.6 Performance Network performance can be a powerful differentiator for a community broadband endeavor. Many communities are already served to some degree by incumbent providers—whether by large national cable or telephone companies or small local ISPs. Prioritizing performance in a municipal retail offering is not only advantageous, we believe it is necessary to make the offering stand out among existing broadband providers. Market entry is generally a major challenge for municipal retail providers, and even a public–private partnership will likely benefit from focusing on one or two highly specialized offerings to allow it to thrive among incumbents. The City’s FTTP enterprise will likely struggle and has a greater potential for failure if it attempts to compete with incumbent providers by offering services similar to existing packages. Instead, it is important to recognize gaps in the existing broadband market and seek to fill those with a unique service offering that incumbents are not currently able to provide. Our analysis suggests that a 1 Gbps niche service may enable the City to directly serve customers with an exceptional offering, or will enable a private partnership to enter the market and avoid competing with “me too” services. A 1 Gbps service that is expandable to 10 Gbps and beyond may be the differentiator that the City needs to stand out. By focusing on an extremely powerful data-only offering and communicating with users about the potential advantages of a high-performance, unfettered data product, the City may spark the shift in the market it needs to be successful. The goal is to focus on unbundling, and effectively encouraging consumers to leverage the data service to its fullest capacity—by not emulating traditional providers and focusing on television lineup as a selling feature.171 171 It may be challenging to attract users who are accustomed to triple play services, but it will be a far greater challenge to compete with incumbent providers by offering the same packages, or “me too” services. CTC Report | City of Palo Alto | September 2015 106 Performance interacts favorably or not at all with other objectives, which is shown in the visual breakdown in Figure 28. There are no disadvantages to prioritizing performance as a key objective in a community build, and we believe that this should be a main focus of any fiber enterprise. As we noted, a 1 Gbps service offering can significantly disrupt the market by enabling OTT content and enabling consumers to make more flexible choices about the services they subscribe to, and the providers they select. This enables choice and competition in the market.172 As we noted, if the City retains ownership of its assets, it also has better control over performance. The City—whether acting as the retail provider or overseeing a private entity who is serving end user customers—can command the performance that it deems appropriate to best serve the community’s needs. Risk aversion and cash flow both interact well with performance. We believe that the City minimizes its risk by entering the market with a premium 1 Gbps high performance network. The City can set itself apart from other providers by offering a high-speed data product that incumbents cannot.173 Further, it can differentiate itself by having an always-on extremely reliable service that customers can use in new and beneficial ways—like to operate a home- based business or telecommute to their job or pursue an advanced degree. 6.4.7 Affordability Affordability is important even in communities that are fortunate to have few low-income areas—like Palo Alto. While this objective is certainly more important for vulnerable portions of the community, still affordability is often a necessary objective for localities. For example, the City may prioritize affordability in an effort to ensure that its entrepreneurs and tech startups can afford the robust connectivity necessary to support their business endeavors. The City of Palo Alto is uniquely positioned with exceptional economic health, and few—if any—traditionally low-income areas. This is not to say, however, that there are not areas in the City where demand is low enough that private providers are unlikely to build there. Even without income disparity as a driving force behind cherry picking, private providers typically cherry pick based on where they determine they are most likely to recover their cost to build. 172 Note that this analysis recommends an initial offering of 1 Gbps service. Over time, incumbents may work to challenge the City’s FTTP offering, and the City will have to respond by evaluating its offering and potential changes it should make at that time. 173 It is important to note that products like AT&T’s GigaPower and Comcast’s Gigabit Pro do not set their advertised 1 Gbps and 2 Gbps service as a baseline, which is what we have suggested to the City. Rather, these products offer a 10 Mbps to 100 Mbps baseline with the potential to offer 1 Gbps to 2 Gbps service as occasional exceptions. The City, on the other hand, may be able to provide service up to 10 Gbps and beyond with 1 Gbps as its baseline. CTC Report | City of Palo Alto | September 2015 107 While the City is fortunate that it may not be faced with the choice to potentially offset service costs for a large number of low-income residents, still it may benefit from choosing to invest in infrastructure throughout the community. Providing affordable service to the entire community would likely create benefit for the City in forms like enhanced quality of life and economic benefit. Further, the City could work with other local government agencies—for example, the Association of Bay Area Governments (ABAG)174—to fully leverage benefits that are not monetarily quantifiable. These “benefits beyond the balance sheet” cannot be measured on a financial statement, but their impact communitywide is often profound. Bringing ultra-high speed affordable access to portions of the community that may have previously had little to no access to any connectivity may significantly enhance the quality of life, thus often raising a community’s overall desirability. As we previously noted, prioritizing ubiquity may come at the exclusion of affordability for some consumers unless the City is able to offset costs in some other way. It could negotiate an agreement with one or more private partners that includes sensitivity to the need for affordable, accessible services in all parts of the community. Similarly, the City may decide that it is politically palatable to subsidize services for certain portions of the community. Choice, competition, and ownership all interact favorably with affordability. If the City is able to reduce pricing to a level that is attainable to all of its residents, the expansion of choice and the likelihood of increased competition will be notable. And if the City retains ownership of its assets, it can make choices about affordability similar to the control it can exert over performance. If the City decides to subsidize services, it may find that it becomes more difficult to prioritize risk aversion and cash flow. The more debt and responsibility the City takes on, the higher its risk and the longer it will take for the FTTP network to be cash-flow positive. Similarly, even if the City does not directly subsidize services, prioritizing affordability may mean pricing the product low enough that it is challenging to also prioritize risk aversion and cash flow. It will be important for the City to determine its priorities, and to strike a balance so that one objective is not achieved entirely at the exclusion of another. 6.4.8 Risk Aversion Risk aversion is important and it is equally important to balance risk and reward. It may take considerably longer to design, build, and deploy a network if risk aversion is the City’s top objective. The “slow and steady” approach is not without merits, but it also does not necessarily give a community a competitive edge. Decreased speed to market—or building out slowly—gives competitors too much time to respond to the City’s approach. 174 http://www.abag.ca.gov/, accessed August 2015. CTC Report | City of Palo Alto | September 2015 108 Figure 29 shows a risk and reward matrix that highlights the City’s most likely low-risk-low- reward, low-risk-high-reward, high-risk-high-reward, and high-risk-low-reward outcomes. The lowest risk with the highest potential reward lies in building the network in a phased approach, specifically based on the Google build-to-demand model.175 This approach signs up a community by neighborhood (known as “fiberhoods” in the Google Fiber model) and once a neighborhood has reached a certain threshold, fiber will be built there. Figure 29: Risk and Reward Matrix Risk High Low Re w a r d High o Deploy a ubiquitous communitywide FTTP build, partner with a private provider to operate the retail component, City maintains ownership and control of assets o Prioritize risk aversion to avoid bonding, slowly expand network in a phased approach and engage private partnership for operation and retail services Low o City attempts to compete with tiered services similar to incumbents – a “me- too” offering. o Maintain current network and do not pursue expansion of services If the City chooses this approach, it must recognize that it necessarily sacrifices certain other objectives like affordability and consumer choice. Risk aversion will generally come at the expense of objectives like these, and is especially in conflict with a ubiquitous build-out. These objectives do not have to be mutually exclusive; instead, the City has to decide to what degree it wants to prioritize which objective, and be prepared for possible conflicts and how to mitigate those. For example, if the City chooses a phased approach, it may opt to first expand service to a location that can demonstrate the power of the network. This will support marketing, and can potentially help convince consumers to sign up for service, thereby achieving ubiquity in a lower risk fashion. 175 http://www.wsj.com/articles/google-fuels-internet-access-plus-debate-1408731700, accessed April 2015. CTC Report | City of Palo Alto | September 2015 109 Risk aversion conflicts with ubiquity, choice, competition, and affordability. As we previously noted, it will be challenging to obtain a ubiquitous build-out at all, and especially not within a few years if the City prioritizes risk aversion as its key objective. Because the network is unlikely to be built out quickly in this case, it also reduces the likelihood of increased competition and choice. As we previously noted, the City’s speed to market is critical to secure its potential competitive edge and take full advantage of its unique niche service offering. Further, affordability becomes more difficult to achieve because the City must align service fees to support self-sustaining operations. This means the monthly service will be priced higher to avoid City subsidy. If the community chooses to prioritize risk aversion, it will align with ownership, cash flow, and performance. Ownership of the assets usually means lower risk for the City because it has greater control and flexibility. 6.4.9 Cash Flow Becoming cash flow positive is a common important goal for any business or entity, and it is also a bit complex to define. Net income is often referred to as “cash flow,” though this is technically incorrect because depreciation is a non-cash expense. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is the difference between operating revenues and operating expenses; it is a key metric in designing a viable financial model, along with net income. In a capital intensive business such as an FTTP enterprise, EBIDTA must become positive quickly to keep the enterprise afloat. When EBITDA becomes positive, the business can be said to be cash flow positive. Net income then deducts interest, taxes, and depreciation. Revenues are tied to an enterprise’s ability to be sustainable or cash flow positive. Collecting revenues to pay off debt and support business operations bolsters the net income and increases the likelihood that it will become positive. Several objectives may conflict with cash flow, like affordability, ownership, and ubiquity. As we noted, revenue collection directly impacts cash flow so higher revenues mean a greater likelihood of being cash flow positive. If the service is priced affordably, this may mean lower monthly service fees and a longer path to the enterprise becoming cash flow positive, or self- sustaining. Ownership may also impact cash flow, especially if the City elects to retain ownership of all network electronics, including CPEs. Depreciation costs are significant, and it is important to reserve funds for equipment and infrastructure replacement. Typically, last mile and CPEs are replaced after approximately five years, core network equipment is replaced after seven years, CTC Report | City of Palo Alto | September 2015 110 and outside fiber and facilities are replaced after 20 to 30 years. Because the useful life of fiber is considered to be 20 years or more, our financial analyses do not account for its replacement. Another element of ownership in the context of cash flow is the need for network maintenance and locating costs. Because the City already owns a fiber network and has experience with locating, these additional costs will likely be incremental and less significant than a startup enterprise. Yet increased costs associated with serving an increased volume of end users may be significant in terms of both locating and replacing equipment at customer homes and businesses. CTC Report | City of Palo Alto | September 2015 111 7 Potential for Public–Private Partnership As Section 6 discussed, vendor categories can and should be expanded to explore the potential for public–private partnership, where the City and a private entity work together to achieve mutual goals for the FTTP network. While this model is newly emerging, we believe that engaging a private partner may enable the City to take advantage of opportunities to mitigate risk and maximize opportunity. Section 6 noted that bringing a fiber connection to every home and business in the community (ubiquitous FTTP deployment) is a primary objective for many localities—this is one of the City’s chief goals. Designing and deploying a network that reaches every area176 of the community accomplishes this common objective, but at a cost. To achieve this and other goals, the public sector is in the early stages of exploring partnerships with private providers to reduce the risk of deploying and operating next-generation broadband networks. This may prove to be an especially useful way to more quickly deploy the network and increase a municipal provider’s speed to market—thus reducing the time competitors have to react negatively. Broadband networks support 1 Gbps speeds and beyond, setting them apart from the legacy copper networks favored by incumbent providers. Fiber also supports symmetrical speeds—a key differentiator for Internet service from Google Fiber and other innovators compared to incumbent telephone and cable companies where upload speeds lag far behind download speeds.177 Many communities and localities are likely aware of Google Fiber and municipal fiber success stories178 such as Chattanooga, Tennessee’s EPB and Lafayette, Louisiana’s LUS. Yet these are only the highest profile examples of successful FTTP deployment. Many other communities may be unable to allocate other resources or funds to the fiber enterprise, or they may lack the population to attract Google Fiber,179 or the capital and expertise to deploy and operate a network on their own. Because of these and other factors, many communities are turning to unique public–private partnership models. 176 Given the scope of construction, the network will be deployed in stages, and some neighborhoods will necessarily be served before others. 177 As we previously noted, GPON technology is inherently asymmetrical. See our previous discussion of this and oversubscription to the Internet. 178 In many cases, the FTTP network implementation was funded with reserves or other sources, and the operation of the FTTP network is supported with subscriber revenues. 179 Please note that all of the City’s objectives might not be reached in partnership. For example, with Google Fiber the ubiquity goal is not necessarily achieved. It is important for the City to determine which objectives are its priority. CTC Report | City of Palo Alto | September 2015 112 These partnerships are often tailored to the communities that develop them and entail specific parameters that directly benefit both the community and the chosen private partner. Some examples are traditional public–private partnerships that resemble highway and toll-road construction projects. In other cases, public entities may encourage new investment through economic development incentives and other measures to reduce costs for infrastructure deployment. Finally, there are hybrid models where a locality and private entity share the capital costs, operation, and maintenance of a broadband network.180 Here we provide an overview of three models for public–private partnerships, including examples of some that have been recently developed. We further offer a framework for the City to consider as it evaluates potential models and attempts to determine which—if any—are best suited to its needs. A successful partnership must consider tradeoffs in risk, benefit, and control to help maximize benefits for the public and private partners. 7.1 Broadband Public–Private Partnership Framework As the City evaluates broadband public–private partnership models, it should focus on opportunities and potential pitfalls, and consider the following key factors:  Risk  Benefit  Control These factors are important considerations for both the City and its potential service provider and/or vendor partner(s). A successful partnership must consider tradeoffs in risk-benefit- control to help maximize benefits for public and private partners, and there will inevitably be some tradeoff within this framework for each model. For example, the higher the public investment, the higher the City’s risk. Aside from fortunate communities that win the "Google lottery" or attract another private partner willing to invest its own capital, most public–private partnerships will require some public investment, which involves risk for a community. But as public funding increases, so does public control over the project itself, including the ability to focus on specific outcomes. Contrast this with a private investment model where the public sector may be focused solely on engagement and planning. Such a model entails lower public cost and reduced public risk, but it also means the City’s benefits are more modest and the private sector partner(s) completely control infrastructure deployment. 180 CTC's 2011 report to Palo Alto proposed potentially using the Fiber Fund Reserve to build hub sites and neighborhood nodes as an incentive for a private firm to build out the last mile. The staff memorandum containing that report can be found at http://www.cityofpaloalto.org/civicax/filebank/documents/27421, accessed June 2015. CTC Report | City of Palo Alto | September 2015 113 Finally, a model designed around shared investment and risk can yield opportunity and benefits both for the City and its partner(s). In such a model, each side of the public–private partnership focuses on its unique strengths while relinquishing other responsibilities and duties to the other partner. For example, the City may opt to fund the construction and deployment of the physical network and preliminary messaging to the public while the partner(s) is tasked with actual deployment and eventual operation overseeing the relationship with end users. It is important to note that we have only a handful of data points on different models for broadband public–private partnerships. Google has, through its pilot deployments, alerted other companies that there is a business opportunity in community broadband and an increasing number are emerging as potential investors and partners. As a result, there is a range of opportunities for the public sector, but no clear-cut strategy. This is new territory and any community that opts to proceed is necessarily taking on some risk. However, the potential benefits are considerable and the opportunity for public sector innovation and creativity has never been higher. 7.1.1 Risk There is simply no way to altogether avoid risk if the City chooses to proceed with some level of municipal involvement in deploying a broadband network. But calculated risk can and often does yield benefits that would otherwise have been unattainable. One of the most enticing components of a public–private partnership is that it can considerably reduce a locality’s risk while helping achieve a community’s broadband goals. Public funding to support the partnership will likely be one of the City’s greatest risks. It will likely entail some risk for the City to retain a level of ownership and control of the assets because it will likely require public funding—either through municipal bonds or leveraging tax or other funds. The City may enter into an agreement that requires it to directly seek bonding for capital investment, or it may find a partner that is willing to use its own capital, such as in a concessionaire model (see Section 7.2). It is important to note that even if the City does not directly seek bonds, some partnership models may impact the City’s credit rating and bonding ability, depending on how the private partner secures financing.181 Operations tend to be unpredictable and costly and often represent a great risk for municipal fiber networks. Cities that try to enter the retail market directly are often targeted by hostile 181 This potential is highest in the concessionaire model. CTC Report | City of Palo Alto | September 2015 114 incumbent providers that make it challenging for the municipality to compete.182 This can include difficulties as serious as costly litigation. Part of the attraction to the public–private partnership model is that private entities tend to be equipped to understand the retail business and react to market conditions quicker. This expertise helps the City mitigate its operation risk, though there is no guarantee that either party in a partnership can avoid risk altogether. 7.1.2 Benefit As the City considers this endeavor, it should continually weigh the benefits it might expect to receive as part of a public–private partnership against its potential risk. One positive component of emerging partnerships nationwide is that there is potential for a great degree of flexibility. That is, the City is in a position to consider its priorities and pursue those benefits on the frontend of a partnership arrangement. Conversely, although public–private partnership models are relatively new and evolving all the time, there are several recent examples that the City can look to as guidance on how it might want to proceed. Not enough time has elapsed to fully map what long-term benefits of partnership might look like, but there are some lessons that can be picked up from some communities that have sought various degrees of partnership. Although benefits cannot be adequately calculated at this stage, the City can potentially look to other communities to get a sense of the goals other partnerships prioritized for the public entity’s benefit. This may help the City determine how to balance its risks, and which areas to focus on in its pursuit of a partner. 7.1.3 Control Because this is the start of the City’s endeavor, it can choose in the negotiation process its desired level of involvement in infrastructure deployment, network maintenance, and operations. That is, the City can essentially determine from the outset what level of involvement it would like to have at every stage and in every arena of the public–private partnership process. There are numerous ways that the City can retain some control within the public–private partnership, and perhaps the most important is through retaining ownership of the physical assets. Again, there is a balance to be struck with risk—it is likely that the City will be required to fund at least part of the capital investment in assets if it hopes to retain control of these. The flip side of this is the more ownership the City has, the greater degree of control it can maintain. This enables the City to make decisions about placement of the assets, rate of 182 While this analysis cannot cover the exhaustive range of all potential threats to the municipal retail offering, a municipality that enters the retail market may be subject to a variety of legal and other threats, and may need to develop contingencies. We encourage the City to consult closely with qualified industry legal counsel. CTC Report | City of Palo Alto | September 2015 115 deployment, and the network’s overall footprint. Further, it ensures that if the partnership does not succeed, the City still has a physical asset that it can use to deliver services directly or to negotiate a new partnership. Ownership of assets is an important way the City can retain control. There are also other potential mechanisms that enable the City to retain some control over the network and enterprise, and to ensure that the partnership consistently works in its favor. For example, the City may negotiate certain contractual provisions that provide it with some amount of control.183 7.2 Model 1 – Public Investment with Private Partners One public–private partnership model involves substantial public investment. It is a variation on the traditional municipal ownership model for broadband infrastructure, in which a public entity takes on all the risk, but also has full control of the project. The emerging innovation makes use of the traditional public–private partnership structure used in Europe and increasingly in the U.S. for infrastructure projects such as highways, toll roads, and bridges, where a private partner takes responsibility for design, construction, financing, operations, and maintenance.184 The model seeks to leverage the strengths of the private sector to deliver turnkey services and solutions over an extended time of 20 to 40 years. For example, the state of Maryland is pursuing private companies to design, build, operate, and help pay for a light-rail project to serve the Washington metro area suburbs.185 Under the proposed public–private partnership, Maryland and private partners would split the construction costs for the project and the state would later reimburse the private construction costs over five years. The private sector would assume the financial risks of any construction delays or cost overruns. The state would then pay the private partners a concessionaire to operate and maintain the line for 30 to 35 years. We are now seeing the public–private partnership model applied to broadband in the U.S. market. Though, we have seen it in other construction projects, broadband is new because unlike transportation infrastructure, broadband is to a certain extent a competitive marketplace. Thus, applying it to broadband is new and innovative, but also creates a political 183 The City’s legal counsel can determine the best contractual mechanisms to consider in the context of a public– private partnership; CTC cannot provide legal guidance. 184 “Financial Structuring of Public–Private Partnerships (P3s),” U.S. Department of Transportation, 2013, http://www.fhwa.dot.gov/ipd/pdfs/p3/factsheet_04_financialstructuring.pdf (Accessed April, 2015). 185 Katherine Shave, “Maryland gets approval to seek public–private partnership to build, operate Purple Line,” Washington Post, Nov. 6, 2013, http://www.washingtonpost.com/local/trafficandcommuting/maryland- transportation-officials-get-approval-to-pursue-private-partners-for-purple-line-deal/2013/11/06/93c1546a-470b- 11e3-bf0c-cebf37c6f484_story.html (Accessed April, 2015). CTC Report | City of Palo Alto | September 2015 116 and financial risk for the public sector, given that public–private partnerships often provide a guaranteed revenue stream to a private partner. If the broadband network is unsuccessful at generating revenues the public sector remains on the hook for those payments. Despite these risks, the model offers considerable benefits to the public sector by removing significant financial and logistical barriers to large-scale public broadband projects. Macquarie Capital and partner companies have pioneered the model in the U.S. Macquarie is an Australian investment firm that provides advisory and capital raising services to corporate and government clients in areas such as infrastructure, utilities, telecommunications, media, entertainment and technology.186 They are currently in the midst of a complex process with localities that are members of the UTOPIA Network, an FTTP network in Utah that is owned by 15 member communities.187 Following a 6–5 split among the 11 member cities, the UTOPIA board voted in 2014 to turn over operation and management of the network to Macquarie.188 The private company will finish construction of the network and provide Internet service to all residents for 30 years in exchange for a monthly utility fee paid by the residents of the member communities. The proposal is attractive given the turnkey private financing, deployment, operations, and revenue-sharing solutions that Macquarie can deliver. However, the requirement of guaranteed public funding in the form of a utility fee to all residents is not politically viable for some communities. As a result, a small handful of UTOPIA member communities have dropped out of the proposal. The City may find that because of the strong libertarian presence, it could struggle to gain public approval of any additional utility fees or taxes, and this may make the Macquarie model especially challenging to pursue. Macquarie is also working with the Commonwealth of Kentucky on a private–public partnership to build an open-access, middle-mile broadband network across the state.189 Under the partnership, the Commonwealth will own the network and contribute some funding for construction. Macquarie will finance the bulk of construction and have a 30-year contract to 186 http://www.macquarie.com/us/about/company/macquarie-capital# (accessed April 2015). 187 http://www.utopianet.org/about-utopia/ (accessed Apr. 24, 2015). 188 Benjamin Wood, “UTOPIA board votes to move forward with Macquarie deal,” Desert News, June 30, 2014, http://www.deseretnews.com/article/865606086/UTOPIA-board-votes-to-move-forward-with-Macquarie- deal.html?pg=all (accessed April 2015). 189 Rachel Aretakis, “Partnership to build high-speed broadband network in Kentucky,” Louisville Business First, Dec. 23, 2014, http://www.bizjournals.com/louisville/news/2014/12/23/artnership-to-build-high-speed-broadband- network.html?page=all (accessed April 2015). CTC Report | City of Palo Alto | September 2015 117 operate and maintain the network. Revenues generated by leasing the network to Internet providers will be split between the Commonwealth and Macquarie. The public sector is not dependent solely on private parties like Macquarie to develop similar projects. There are likely other entities that would engage in this type of arrangement that leverages private sectors strengths while recognizing that some public funding is necessary to enable next generation connectivity. Public investment and public–private partnership models that leverage private partners with turnkey solutions are attractive because they remove significant challenges from public sector, but also require a community to take on some risk. As a result, the model will appeal to some communities, but not to others. 7.3 Model 2 – Public Sector Incenting Private Investment In another model of public–private partnership, the cost to the public sector is significantly reduced. The model focuses on more modest measures by the public sector to enable or encourage greater private sector investment. The most prominent example of the model is Google Fiber, including its deployments in Kansas City and Austin. The model is seen as the ideal for many communities given that public cost is minimized and Google’s requirements have largely focused on engagement with the company and making local government processes more efficient. In return, communities fortunate enough to attract Google’s investment not only benefit from the company’s own deployment of FTTP infrastructure, but also upgrades from the incumbent cable and telephone companies. The model relies on the private companies to make the investment, while partner communities take certain steps to enable them come into the market to build in an expeditious, efficient, low-cost manner. Though Google Fiber is the most prominent example, there is significant interest by smaller companies as well who may not be able to deploy FTTP but deliver next-generation broadband to businesses and intuitions on a more targeted basis. Even as the cost/risk for public sector is largely reduced compared to other models, there is a potential public relations risk. Public expectations can get very high with the announcement of new fiber deployment. If the community is strongly identified as a partner, when something goes wrong with private sector business plan or deployment, the public sector may held accountable for the private sector failure. There are a number of strategies localities can take to encourage new private investment and reduce some of the costs and time for private sector entities to deploy advanced broadband services. They can take the form of specific economic development incentives such as tax benefits to encourage providers to build new infrastructure. For example, MetroNet, a small Midwest Internet provider, developed a partnership with the City of Crawfordsville, Indiana to CTC Report | City of Palo Alto | September 2015 118 purchase the municipal utility’s fiber network. The city is assisting MetroNet with financing the purchase and expanding the footprint of the fiber network.190 MetroNet has entered other communities where they did not purchase existing infrastructure, but where the municipality has provided other tax benefits, and modified permitting process to allow for ease of access. Again, a major consideration for a partner like this is the high likelihood that the private entity will not build to all areas of the community. If a private company is not beholden to the City via a clearly articulate partner relationship, it is unlikely that the private company will build to areas of the community where it does not anticipate easily recovering its costs. Another key strategy is to develop and strengthen the local infrastructure assets that enable the deployment of broadband.191 These include public assets such as fiber, conduit, and real estate. For example, new network deployments can benefit enormously from access to existing government fiber strands, underground communications conduit in which fiber is placed, or real estate where equipment or exterior huts can be located. The City’s existing fiber network and infrastructure may be usable to some degree to incent private investment—for example, a private entity may need access to only a small amount of dark fiber to serve certain areas.192 Communities can further facilitate the underground construction of conduit and fiber by implementing a “dig-once” policy for all road and related transportation projects, and facilitating in-building access for new providers through construction specifications for new buildings. These policies are generally implemented through revisions to existing municipal codes or by developing new ordinances. Building and expanding your broadband assets over time is a low-cost, low-risk strategy that will have real impact and expand options down the road. For example, Mesa, Arizona began a dig-once initiative in the early 2000s to install its own rings of conduit during private sector construction projects, and then to sell access back to the private sector. Anytime the city was required to open up a street, such as to install water or sewer utilities, it also put in conduit.193 In some instances, the City also added fiber to empty conduit for city purposes or to potentially lease out to private providers. In total, the city installed 150 to 200 miles of conduit. The City in 190 “MetroNet plans to expand current fiber optic system,” “The Paper of Montgomery County Online, Mar. 18, 2014, http://thepaper24-7.com/Content/News/Local-News/Article/MetroNet-plans-to-expand-current-fiber-optic- system/23/22/44447 (Accessed May 2015). 191 “Gigabit Communities: Technical Strategies for Facilitating Public or Private Broadband Construction in Your Community,” CTC Technology & Energy, Inc., Jan. 2014, p. 6 – 12, http://www.ctcnet.us/wp- content/uploads/2014/01/GigabitCommunities.pdf (Accessed May 2015). 192 As we previously noted, the City’s existing dark fiber infrastructure must be fully evaluated to determine what, if any, portion of it is usable for the FTTP network. 193 “Transcript: Community Broadband Bits Episode 139,” Institute for Local Self-Reliance, Feb. 26. 2015, http://muninetworks.org/content/transcript-community-broadband-bits-episode-139 (Accessed April, 2015). CTC Report | City of Palo Alto | September 2015 119 particular targeted four economic development areas, including developing redundant conduit, fiber, and electric infrastructure. Among those areas was land around the Phoenix-Mesa Gateway Airport, where Apple recently announced that it would invest $2 billion to build a data center for the company’s global networks investment.194 A second important strategy is to improve access to information—an asset that communities might not have considered. Sharing information demonstrates a willingness to engage with the private sector to spur investment. Communities should seek to make data available wherever possible both for public and private uses. GIS or similar databases that hold such information as street centerlines, home, and business locations, demographics, existing utilities, locality infrastructure, rights-of-way, and available easements can be extremely helpful for a locality’s own broadband planning, potential public– private partnerships, or a network service provider that is evaluating the deployment of new infrastructure into a community. Access to this information may attract and speed new construction by private partners, while enabling the community to meet its goals for new, better broadband networks—and potentially to realize revenues for use of the assets. Finally, localities can take steps to make government processes around permitting, rights-of- way access, and inspections more efficient and smooth to help with broadband construction. These actions can signal to private partners that there is an investment opportunity in the jurisdiction and that the locality will not be a bottleneck or create additional costs. These steps should take into consideration the needs of the community, balance public interest and public safety, and account for local resources and capacity. For example, localities should be fully transparent about the range of permitting and rights-of-way processes, including timelines, to enable the communication industry to expeditiously plan and deploy networks. The above strategies (including assets, data and efficient processes) can make a difference in the economics of build out for a private partner. However, they will not dramatically change the underlying economics of broadband networks construction and service. In a best-case scenario, the public sector can potentially reduce the construction of a broadband network in a way that can be substantial but not transformative for developing next-generation broadband infrastructure. Indeed, many incumbent providers overstate the extent to which communities and regulation are the problem. If a community is offering the equivalent of economic development or other 194 http://azgovernor.gov/governor/news/governor-doug-ducey-announces-major-apple-expansion-arizona (Accessed April, 2015). CTC Report | City of Palo Alto | September 2015 120 benefits to a company to entice them to invest in next generation infrastructure that is different than the business relationship a community already has with existing providers and incumbents. Communities can and should offer those benefits to incumbents if they will also invest in the same kind of next-generation infrastructure. Communities should be wary of private sector entities seeking benefits without offering concrete investment proposals. From a business standpoint, incumbents do not need additional benefits to keep maintaining their existing broadband networks and services. The City of Palo Alto participated in responding to the Google Fiber City Checklist process in 2014. 7.4 Model 3 – Shared Investment and Risk A public–private partnership model based upon shared investment and risk plays to the strengths of both the public and private sector partners. Any locality thinking about an FTTP deployment is not doing so because it is a moneymaker or a good strategy for bringing in new revenues. Rather, it is a powerful strategy for education, healthcare, and economic development. Thus in a shared investment model, from the standpoint of a locality, the risk is shared but the community still receives 100 percent of indirect benefits, even if they all do not all appear on the project’s financial statements. For the private partner, it means less upfront investment and capital (risk), with an opportunity for future revenues. This model offers an extraordinary opportunity for innovation. However, we are in the early stages of what it looks like—and the model is in no way a sure thing for communities. In 10 years, we may be able to look back and have the data points to develop the best practices necessary for success. At the moment though, early actors are developing new and exciting partnerships to bring next-generation broadband to their communities. In the following case studies, we briefly describe some of those projects. 7.4.1 Case Study: Champaign–Urbana, Illinois The University of Illinois and the two cities of Champaign and Urbana, Illinois have worked together over the past number of years to expand broadband infrastructure and connectivity across the area. Those efforts included the development of the Urbana-Champaign Big Broadband (UC2B) network, which is now owned and operated by a not-for-profit (NFP) corporation.195 Through a range of different strategies and by leveraging local private capital, state funds, and federal funds, UC2B built fiber rings specifically engineered to enable FTTP deployment in the most cost-effective manner. It also built FTTP in select parts of the community with lowest adoption rates on theory that those parts of the community would be the last place private sector would deploy; so the public sector went there first. 195 http://uc2b.net/about/ (Accessed April, 2015). CTC Report | City of Palo Alto | September 2015 121 U2CB leveraged its existing investment to attract a private partner, iTV-3, an Illinois company with FTTP experience. The two partners, entered into an agreement that gives iTV-3 access to U2CB fiber through an indefeasible right of use (IRU) at no cost in return for meeting community's goals of deploying additional FTTP with the following requirements:196 1. Gigabit service speeds 2. Wholesale access on the network to competing companies 3. No cherry picking – all neighborhoods have equal opportunity to get services if presales reach 50 percent of residents Under this model, Champaign–Urbana receives 100 percent of economic development and other benefits in return for taking on approximately 30 percent of the (cost) risk. It also means the community can now focus on driving demand and adoption, while relying on an experienced private partner to handle customer service, marketing, and operations. 7.4.2 Case Study: Garret County, Maryland Garret County, in far western Maryland, is a relatively remote community in Appalachia surrounded on two sides by West Virginia, on one side by Pennsylvania. The County has struggled to get broadband in a number of remote parts of the community. Where broadband is available, it is inadequate DSL service that does not meet the FCC’s minimum definition for broadband, let alone the requirements for home-based businesses. The incumbent provider has not made any plans to expand or upgrade service offerings. Though mobile broadband is available, bandwidth caps mean that it is not viable for economic or educational activities. For example, parents who home-school their children can run through their bandwidth cap in one day of downloading educational videos. Beyond these challenges for residents, the county has struggled to attract and retain businesses. In response, the County has gradually and incrementally built out fiber in some areas, with a focus on connecting specific institutions. It is now in negotiations with a viable private partner to leverage some of that fiber and additional public funding to support the deployment a fixed wireless broadband network that will serve up to 3,000 homes in the most remote parts of the county. The private partner will also put its own capital toward the construction of the network, along with its technical and operational capabilities to manage the network. The partnership may involve significant cost to the County, but also massive benefit for residents and business in the newly served areas. 196 http://uc2b.net/wordpress/wp-content/uploads/2014/05/UC2B-iTV3-Press-Packet.pdf (Accessed April, 2015). CTC Report | City of Palo Alto | September 2015 122 7.4.3 Case Study: Westminster, Maryland Westminster is a bedroom community of both Baltimore and Washington, D.C., where currently 60 percent of the working population leaves in the morning to commute to work elsewhere. The area has no major highways and thus, from an economic development perspective, has limited options for creating new jobs. Incumbents have also traditionally underserved the area with broadband. The City began an initiative 12 years ago to bring better fiber connectivity to community anchor institutions through a middle-mile fiber network. In 2010, the State of Maryland received a large award from the federal government to deploy a regional fiber network called the Inter- County Broadband Network (ICBN) that included infrastructure in Westminster. Westminster saw an opportunity to finish the goal of the network by expanding the last-mile of the network. At the time, though, it did not have any clear paths to accomplish the goal. City leaders looked around at other communities and realized quickly that they would have to do something unique. Unlike FTTP success stories such as Chattanooga, Tennessee they did not have a municipal electric utility to tackle the challenge. They also did not have the resources, expertise, or political will to develop from scratch, a municipal fiber service provider to compete with the incumbents. As a result, they needed to find a hybrid model. As the community evaluated its options, it became clear that the fiber infrastructure itself was the City’s most durable asset. All local governments spend money on durable assets with long lifespans, such as roads, water, and sewer lines, and other infrastructure that is used for the public good. The leaders asked, why not think of fiber in the same way? The challenge then was to determine the breakdown of the network: What part would the private sector partner handle and what part could the City take responsibility for? The hybrid model that made the most sense required the city to build, own, and maintain the dark fiber197, and to look to partners who would light the fiber and handle the customer service relationship with residents and businesses. The model would keep the city out of operational aspects where a considerable amount of the risk lies in terms of managing the technological and customer service aspects of a network. The City solicited responses from potential private partners through a request for proposal (RFP). Its goal was to determine who was interested in the project, and who shared the City’s vision. 197 Fiber configured to support a GPON architecture. CTC Report | City of Palo Alto | September 2015 123 It was challenging to find partners who were willing to share infrastructure and operations. Eventually the City selected an upstart ISP called Ting, with a strong track record of customer service as a mobile operator. Ting shared Westminster’s vision of a true public–private partnership and of maintaining an open access network. Under the terms of the partnership, the City is building and financing all of the fiber (including drops to customer premises) through a bond offering and tax dollars from the property tax base. Ting is leasing fiber with a two-tiered lease payment. One fee is based upon the number of premises the fiber passes (as the network grows both in size and customers there is an upside for the community) and the second fee is based on number of subscribers they enroll. As the network grows, Ting will help fund the network capital expenditures, which will lessen the financial burden on Westminster. In the future, additional operators may become partners on the network as well, opening the door to additional services for the community and revenues for the city. 7.5 Define the City’s Objectives As the City considers its roles and responsibilities in a public–private partnership, it is important for its key goals or objectives to be clearly defined. This will help City officials and staff articulate priorities in advance of a potential partnership negotiation, which should in turn help the City manage its potential risks by identifying strengths and vulnerabilities ahead of time. Ubiquity is often a top priority for public entities, and one that officials and staff can easily identify—bringing fiber to every resident and business in a community is can significantly increase quality of life and economic development opportunities. It is also politically palatable and can help incite the public to support a locality’s FTTP project. This is one of the City’s stated goals: it will not cherry pick, but will prioritize building to every area of the community. Another important objective that may be more difficult to identify and especially challenging to define in the context of a public–private partnership is ownership and control of assets. Precisely what it means to own and control assets may vary from one community to another, and it is important for each locality to determine where on the spectrum its priorities lie. The City of Palo Alto has experience maintaining an existing dark fiber network and may be comfortable retaining full ownership and control of the physical assets, including routine and emergency fiber maintenance. It is at an advantage over communities that are building fiber for the very first time and may find that responsibility daunting, and could even discourage pursuit of an FTTP deployment. For the City, retaining ownership of OSP is likely a minimum priority—it may be more complex to determine whether owning and maintaining network electronics is attractive. CTC Report | City of Palo Alto | September 2015 124 7.6 City and Partner Responsibilities The City should determine what role it expects to take on in design, deployment, and operation of the FTTP network before it moves forward with any type of relationship with the private sector. While this can and should be flexible, the City should have some sense of what it is absolutely not willing or able to do, and what functions it must retain in-house. For example, the City may be unable to turn over some aspects of fiber maintenance to a private provider. Various partners bring different skillsets and experience to the potential relationship, and the City should remain open to all the potential functions a partner can perform. For example, the City may initially expect that it will perform all network maintenance on the new FTTP network, but ultimately finds that a partner wishes to take on some or all of these duties. The City can expect that each potential partner or vendor will possess its own unique approach to FTTP deployment and operation, and there may be minimal flexibility on some aspects of a partner’s business model. Ultimately, whether it opts to pursue a true partnership where it takes on certain roles, or to engage a vendor where the City turns over all responsibility to a private entity, the City is pursuing a relationship, and its parameters should be clearly defined. The City could consider retaining ownership and control of the fiber assets and engage a private partner to manage the wholesale and retail components of the FTTP network. Because the City has experience maintaining and overseeing a dark fiber network, costs to continue this and add responsibilities for the new FTTP network should be incremental. Further, the City then retains control of the fiber to ensure that it functions to the City’s standards. Even if the FTTP network is separate from the existing dark fiber network (e.g., the existing network does not contain enough spare capacity to support an FTTP expansion), the City may want to retain control of the new asset to ensure its functionality is comparable to the existing network. Further, this ownership allows the City to reclaim the fiber if the partnership does not work out—and it then has a physical asset that it can operate itself, or that it can use to attract new investment and/or partnership. Effective customer acquisition, marketing, and sales campaigns are generally expensive and require a skill set that public entities may not possess without hiring additional staff and/or contracting services with a third party. Because the City does not have experience with marketing and advertising an FTTP network or a similar undertaking, it may be prudent to consider leaving this task to the private partner. A partnership should allow for both the public and the private entity to capitalize on their strengths and shift other responsibilities to the other partner. CTC Report | City of Palo Alto | September 2015 125 7.7 Develop a Request for Information Implementing policies that are friendly to the private sector are a good way to indicate that the City wants to incent private investment there, and a more direct way to engage the private sector is to issue a request for information (RFI). Such a document would clearly articulate the City’s needs and desires and invite private companies to respond and outline their unique approach to solving the City’s connectivity needs. An RFI process can be a great for localities to garner information from the private sector about companies that may be interested in partnering with the City to some degree. An RFI does not have to stringently outline all of the City’s goals or create strict parameters about how its objectives will best be met. Rather, an RFI can express a City’s desires and lay out any non- negotiable items (such as no cherry picking) but leave room for a private partner to respond creatively. Indeed, we encourage any locality that considers issuing an RFI to exercise caution in the degree to which it specifies its requirements of a public partner. An overly detailed RFI may scare off potential respondents who do not believe they possess all the staff or qualifications to meet a strict list of demands outlined by the locality. One final consideration in the potential for going through an RFI process is that not all potential partner companies will directly respond. This should not discourage the City from issuing an RFI—such a document is extremely valuable not only for getting a sense of who responds, but also for outlining the City’s goals. For example, if the time period to respond to the RFI ends and no viable partner has emerged, or if for some reason negotiations with a chosen partner do not pan out, the City will likely find that the RFI remains useful for attracting and communicating with private companies. Finally, it is important to be realistic about what a partnership for an FTTP network may entail on behalf of both parties.198 Again, the City must develop its own understanding of its desires, goals, and requirements for an FTTP network. Once it has clearly defined what it hopes to achieve through pursuing FTTP deployment, it can summarize this in an RFI to allow potential private partners to respond based on their own ability and willingness to help meet the City’s needs. 7.8 Additional Considerations for Public–Private Partnerships It is important to approach various models and proposals for public–private partnership with common sense and skepticism as public sector entities of all sizes and capacities evaluate them. 198 Jon Brodkin, “Skeptics Say LA’s Free Fiber Plan As Plausible As Finding a Unicorn,” Ars Technica, November 8, 2013, http://arstechnica.com/information-technology/2013/11/skeptics-say-las-free-fiber-plan-as-plausible-as- finding-a-unicorn/ (Accessed May 2015). CTC Report | City of Palo Alto | September 2015 126 Next-generation fiber deployment, particularly on a large scale to reach all residents and businesses in a community, is a valuable and potentially future–proof investment. But it will not be cheap or easy. The City should ask any private provider that claims otherwise or asserts that it will deliver enormous benefits or revenues at no cost should for examples of projects where it has accomplished what it is promising. If it were easy, there would be enormous private investment in FTTP across the country. Unfortunately, there will always be entities trying to sell snake oil with unrealistic business plans. Communities should be wary of rosy projections. There are several examples of municipal or public fiber endeavors that may have started strong but have struggled to stay afloat, or have even had to sell assets or otherwise enter into agreements in which they are forced to relinquish a great deal of control. Tacoma Click! is one example of a public network that consistently struggled to become viable, and ultimately entered into discussions with two separate private entities to essentially “take over” network operations.199 Further, some supposed success stories leave out special circumstances that enabled the enterprise to prosper. For example, a municipal provider that enters a market where there is little or no competition has an advantage that often cannot be replicated. Other fiber endeavors may have been heavily subsidized through funding sources that are not available in all communities. For example the Chattanooga Electric Plant Board (EPB) received federal grants to assist in its FTTP deployment. It is also critical for the City to seek private sector partners that are interested in developing meaningful partnerships to deploy next-generation infrastructure. For example, a significant risk around economic development incentives and other measures to facilitate private investment is that companies will request that localities take on certain costs; for example, a private partner might ask the local government to hire dedicated inspectors and provide free access to real estate—and provide in return only tacit commitments for new services or technological upgrades. If a company is a true partner, it will be willing to make firm commitments in return for the actions the locality takes to lower infrastructure deployment costs. The goal of these partnerships is not simply to shift private sector costs to the public sector. In addition, partners and partnerships will differ in different parts of company, and with the size of community. A primary challenge for localities seeking to build to every residence and business is that the larger the community, the more difficult it may be for a private partner to deploy its service universally.200 By taking on the risk of fiber construction and finding a partner 199 http://www.thenewstribune.com/2015/04/22/3754054/tacomas-rainier-connect-makes.html, accessed June 2015. 200 Sonic.net is an example of this. CTC Report | City of Palo Alto | September 2015 127 to light the network and provide service, a locality can increase the potential for ubiquitous build-out to every location. Finally, do not underestimate the importance of the political element in tackling these challenges. Political concerns will play a huge role in finding solutions, regardless of the size of the community. Community and political leaders must jointly decide to pursue a project of this scope, to solve the problems that may arise along the way, and to bring fiber and its benefits to the community. CTC Report | City of Palo Alto | September 2015 128 8 Cost and Financial Analysis for FTTP Deployment The financial analysis in this section assumes the City owns, operates, and provides retail services to residents and businesses in the community. This financial analysis is based on a number of assumptions (outlined in Section 8.3 below, and further detailed in Appendix B), and these have been vetted with City staff. Note that this analysis uses a flat model, using a base assumption that revenues will increase over time to offset increased expenses. The model assumes that subscribership will ramp up over years one through three, and then remain steady. The purpose of the flat financial model is to avoid introducing inflation adders that may incorrectly represent—and overstate—the projections. See Appendix B for the detailed financial and cost analysis. The financial model is designed to be cash flow positive in year one—this is accomplished through bond and loan financing. Given the cost to construct, maintain, and operate the FTTP network a 72 percent take rate of households and businesses passed is required to maintain positive cash flow. In the analysis we assume three services are offered:  A 1 Gbps residential service at $70 per month,  A 1 Gbps small commercial service at $80 per month, and  A 1 Gbps medium commercial service at $220 per month (has some service level agreements with service) A 1 Gbps high-speed data offering for $70 per month for residential customers and $80 per month for small business users is a good benchmark for the City to pursue. This is Google’s price point, and is lower than some other providers. For example, Ting Internet recently announced that it will be serving Charlottesville, Virginia with a 1 Gbps offering for $89 per month.201 For businesses we assume that 40 percent will obtain the higher-level service. Please note this analysis does not indicate or review whether that obtaining this required take- rate is realistic. The model does show the breakdown of expenses by function and provides insights on how a public–private partnership might seek to reduce operating expenses to improve the viability of a FTTP deployment in Palo Alto. The complete model is provided in Appendix B. 201 http://www.reuters.com/article/2015/06/15/idUSnGNX1v7Cv8+1c4+GNW20150615, accessed June 2015. CTC Report | City of Palo Alto | September 2015 129 Please note that we used a “flat-model” in the analysis. With a “flat-model”, inflation and salary cost increases are not used in the analysis because it is assumed that operating cost increases will be offset and passed on to subscribers in the form of increased prices. Models that add an inflation factor to both revenues and expenses can greatly overstate net revenues in the out- years since net revenues would then also increase by the same inflation factor. 8.1 Financing Costs and Operating Expenses This financial analysis assumes a combination of bonds and loans will be necessary. We expect that the City will seek a 20-year bond and a 10-year loan. Principal repayment on the 20-year bond and on the 10-year loan will start in year four. We project that the bond issuance costs will be equal to 1.0 percent of the principal borrowed. For the bond, a debt service reserve account is maintained at 5.0 percent of the total issuance amount. An interest reserve account equal to years one and two interest expense is maintained for the first two years. The model assumes a straight-line depreciation of assets, and that the outside plant and materials will have a 20-year life span while network equipment will need to be replaced after 10 years. Last mile and CPEs as well as other miscellaneous implementation costs will need to be accounted for after five years. Network equipment will be replaced or upgraded at 80 percent of its original cost, miscellaneous implementation costs will be at 75 percent, and last mile and CPEs will be at 40 percent.202 The model plans for a depreciation reserve account starting in year four—this funds future electronics replacements and upgrades. Our analysis estimates total financing requirements to be $50 million in bonds and a $25.3 million loan.203  We assume a 20-year bond in a total amount of $50 million to be issued in full in year one.  This bond is issued a 4.0 percent finance rate and principal payments start in year four.  Loans totaling $25.3 are issued in the amounts of: o $4.3 million in year one o $17 million in year two o $4 million in year three  Loans are issued at 5.0 percent and principal payments start in year four. 202 In addition, we assume an annual cost of 1 percent of the total accrued CPE value for miscellaneous replacements and upgrades. 203 The scope of work for this report does not include a review of the City’s bonding capability or review of local or state bonding restrictions. A more detailed review and opinion from the City’s accountants of bonding capability and restrictions is recommended, if bonding is pursued. CTC Report | City of Palo Alto | September 2015 130 Table 7 shows operating expenses for years one, five, 10, 15, and 20. As seen, some expenses will remain constant while others will increase as the network matures and the customer base increases. Table 7: Operating Expenses in Years 1, 5, 10, 15, and 20 Operating Expenses Year 1 Year 5 Year 10 Year 15 Year 20 Support Services $57,020 $55,950 $55,950 $55,950 $55,950 Insurance 100,000 150,000 150,000 150,000 150,000 Utilities 25,000 50,000 50,000 50,000 50,000 Office Expenses 36,000 50,000 50,000 50,000 50,000 Locates & Ticket Processing 19,000 75,000 75,000 75,000 75,000 Contingency 25,000 50,000 50,000 50,000 50,000 Billing Maintenance Contract 15,000 25,000 25,000 25,000 25,000 Fiber & Network Maintenance 89,920 109,900 109,900 109,900 109,900 Vendor Maintenance Contracts - 1,369,600 1,369,600 1,369,600 1,369,600 Legal and Lobby Fees 150,000 50,000 50,000 50,000 50,000 Consulting 100,000 25,000 25,000 25,000 25,000 Marketing 500,000 250,000 250,000 250,000 250,000 Education and Training 28,200 97,650 97,650 97,650 97,650 Customer Handholding 2,810 22,380 22,380 22,380 22,380 Customer Billing (Unit) 1,400 11,190 11,190 11,190 11,190 Allowance for Bad Debts 12,730 87,440 87,440 87,440 87,440 Churn (acquisition costs) 10,530 83,930 83,930 83,930 83,930 Pole Attachment Expense 134,340 134,340 134,340 134,340 134,340 Internet 89,230 711,430 711,430 711,430 711,430 Sub-Total $1,396,180 $3,408,810 $3,408,810 $3,408,810 $3,408,810 Labor Expenses $1,409,930 $4,882,350 $4,882,350 $4,882,350 $4,882,350 Sub-Total $1,409,930 $4,882,350 $4,882,350 $4,882,350 $4,882,350 Total Expenses $2,806,110 $8,291,160 $8,291,160 $8,291,160 $8,291,160 Principal and Interest $2,215,000 $6,276,610 $6,276,610 $6,276,610 $6,276,600 Facility Taxes - - - - - Sub-Total $2,215,000 $6,276,610 $6,276,610 $6,276,610 $6,276,600 Total Expenses, P&I, and Taxes $5,021,110 $14,567,770 $14,567,770 $14,567,770 $14,567,760 Table 8 shows the income statement for years one, five, 10, 15, and 20. CTC Report | City of Palo Alto | September 2015 131 Table 8: Income Statement Year 1 Year 5 Year 10 Year 15 Year 20 Revenues Internet - Residential $1,722,000 $13,735,680 $13,735,680 $13,735,680 $13,735,680 Internet - Business 472,320 3,752,640 3,752,640 3,752,640 3,752,640 Enterprise - - - - - Connection Fee (net) 350,850 - - - - Provider Fee - - - - - Assessments - - - - - Ancillary Revenues - - - - - Total $2,545,170 $17,488,320 $17,488,320 $17,488,320 $17,488,320 Content Fees Internet $89,230 $711,430 $711,430 $711,430 $711,430 Total $89,230 $711,430 $711,430 $711,430 $711,430 Operating Costs Operation Costs $1,306,950 $2,697,380 $2,697,380 $2,697,380 $2,697,380 Labor Costs 1,409,930 4,882,350 4,882,350 4,882,350 4,882,350 Total $2,716,880 $7,579,730 $7,579,730 $7,579,730 $7,579,730 EBITDA $(260,940) $9,197,160 $9,197,160 $9,197,160 $9,197,160 Depreciation 3,434,290 8,270,820 5,562,930 5,292,010 5,292,010 Operating Income (EBITDA less Depreciation) $(3,695,230) $926,340 $3,634,230 $3,905,150 $3,905,150 Non-Operating Income Interest Income $ - $30,000 $30,000 $4,710 $6,470 Interest Expense (10 Year Bond) - - - - - Interest Expense (20 Year Bond) (2,000,000) (1,440,200) (1,440,200) (861,790) (158,070) Interest Expense (Loan) (215,000) (958,350) (958,350) (624,510) (198,430) Total $(2,215,000) $(2,368,550) $(2,368,550) $(1,481,590) $(350,030) Net Income (before taxes) $(5,910,230) $(2,187,610) $1,265,680 $2,423,560 $3,555,120 Facility Taxes $ - $ - $ - $ - $ - Net Income $(5,910,230) $(2,187,610) $1,265,680 $2,423,560 $3,555,120 Table 9 shows the cash flow statement for years one, five, 10, 15, and 20. The unrestricted cash balance is approximately $44,000 in year one and $459,000 in year 10. By year 15, the unrestricted cash balance is approximately $3.3 million and it is $6.2 million by year 20. CTC Report | City of Palo Alto | September 2015 132 Table 9: Cash Flow Statement Year 1 Year 5 Year 10 Year 15 Year 20 Net Income $(5,910,230) $(2,187,610) $1,265,680 $2,423,560 $3,555,120 Cash Flow $43,660 $(366,210) $280,340 $385,100 $386,870 Year 1 Year 5 Year 10 Year 15 Year 20 Principal Payments $- $3,141,090 $3,878,060 $4,790,310 $5,920,100 Interest Payments 2,215,000 3,135,520 2,398,550 1,486,300 356,500 Total Debt Service $2,215,000 $6,276,610 $6,276,610 $6,276,610 $6,276,600 Year 1 Year 5 Year 10 Year 15 Year 20 Unrestricted Cash Balance $43,660 $161,700 $459,140 $3,316,690 $6,227,400 Funded Depreciation - 6,128,590 9,500,450 (614,170) 86,170 Restricted Cash Balance (Interest Reserve) 2,000,000 - - - - Restricted Cash Balance (Debt Service Reserve) 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,543,660 $8,790,290 $12,459,590 5,202,520 $8,813,570 Significant network expenses—known as “capital additions”—are incurred in the first few years during the construction phase of the network. These represent the equipment and labor expenses associated with building, implementing, and lighting a fiber network. Table 10 shows the capital additions costs in years one, two, and three, and the total for years one through three, assumes a 72 percent take rate, or about 18,650 subscribers. This analysis projects that capital additions in year one will total approximately $46.8 million. These costs will total approximately $20.6 million in year two, and $10.3 million in year three. This totals just under $77.7 million for total capital additions costs for years one through three, assumes a 72 percent take rate, or about 18,650 subscribers. CTC Report | City of Palo Alto | September 2015 133 Table 10: Capital Additions Capital Additions Year 1 Year 2 Year 3 Total Years 1 to 3 Network Equipment Core & Base Equipment $4,434,490 $ - $ - $4,434,490 Incremental (Switches & OLTs) 6,833,660 2,277,890 - 9,111,550 Total $11,268,150 $2,277,890 $ - $13,546,040 Outside Plant and Facilities Total Backbone and FTTP $31,966,480 $7,991,620 $ - $39,958,100 Additional Annual Capital - - - - Total $31,966,480 $7,991,620 $ - $39,958,100 Last Mile and Customer Premises Equipment CPE Gbps (medium commercial) $61,020 $210,930 $211,980 CPE Residential & Small Commercial $1,108,790 $3,866,040 $3,869,040 $8,843,870 Enterprise CPE and Drop - - - - Average Drop Cost 1,772,960 6,179,220 6,185,280 14,137,460 Total $2,942,770 $10,256,190 $10,266,300 $23,465,260 Miscellaneous Implementation Costs Splicing $ - $ - $ - Vehicles 150,000 - - Emergency Restoration Kit 50,000 - - Work Station, Computers, and Software $18,000 $32,000 $22,000 $72,000 Fiber OTDR and Other Tools $85,000 - - 85,000 Generators & UPS - - - - OSS (Operations Support System) 300,000 - - 300,000 Total $603,000 $32,000 $22,000 $657,000 Total Capital Additions $46,780,400 $20,557,700 $10,288,300 $77,626,400 8.2 Operating and Maintenance Expenses The cost to deploy an FTTP network goes far beyond fiber implementation. Network deployment requires additional staffing for sales and marketing, network operations, and other functions new to the City. The addition of new staff and inventory requirements will require office and warehousing space:  Expand office facilities for management, technical and clerical staff  Expand retail “storefront” to facilitate customer contact and enhance their experience doing business with the FTTP enterprise  Provide warehousing for receipt and storage of cable and hardware for the installation and on-going maintenance of the broadband infrastructure  Establish location to house servers, switches, routers, and other core-network equipment CTC Report | City of Palo Alto | September 2015 134 Training new and existing staff is important to fully realize the economies of starting the FTTP network. The training will be particularly important in the short-term as the new enterprise establishes itself as a unique entity providing services distinct from the dark fiber services provided by CPAU today. CPAU already has billing software and capabilities, and the enterprise might save money by using these, if possible. The estimated incremental cost of billing for the new FTTP enterprise is five cents per bill. In addition, we have included a $50,000 set-up fee and $.25 per bill for support services. Marketing and Sales is critical, and is a new activity for the City and the Utility. It is important to be proactive in setting customer expectations, addressing security concerns, and educating the customers on how to initiate services. Staffing with skills in the following disciplines are required:  Sales/Promotion  Finance  Internet and related technologies  Vendor Negotiations  Staff Management  Networking (addressing, segmentation)  Strategic Planning  Marketing The expanded business and increased responsibilities will require the addition of new staff. The initial additional positions, staffing levels and base salaries are shown in Table 11. These numbers assume that two shifts of customer service representative support is provided and one and one-half shifts of customer technicians are available. Changing to full 24x7 will increase staffing costs. Changing the support to 7am to 8pm (or other reduced hours) will decrease the required number of staff. Note that Table 11 lists only new employees—the model assumes no existing staff will be allocated to the enterprise. CTC Report | City of Palo Alto | September 2015 135 Table 11: Labor Expenses Service Position Total Year 1 Year 2 Year 3 Year 4 Year 5+ Year 1 Salary Business Manager 0.50 1.00 1.00 1.00 1.00 $150,000 Market & Sales Manager 1.00 1.00 1.00 1.00 1.00 $126,000 Broadband Service Engineer 1.00 1.00 1.00 1.00 1.00 $124,000 Internet Technician (staff in field tech support) 0.50 1.00 1.00 1.00 1.00 $83,000 Customer Service Representative 2.00 10.00 16.00 16.00 16.00 $65,000 Service Technicians/Installers & IT Support 2.00 7.00 12.00 12.00 12.00 $90,000 Sales and Marketing Representative 1.00 2.00 2.00 2.00 2.00 $83,000 Fiber Plant O&M Technicians 1.00 2.00 2.00 2.00 2.00 $95,000 Total 9.00 25.00 36.00 36.00 36.00 Total Customers 2,339 10,491 18,651 18,651 18,651 Customers per Employee 260 420 518 518 518 Total Salaries $854,500 $2,119,000 $2,959,000 Total Salaries (with overhead $1,409,930 $3,496,350 $4,882,350 8.3 Summary of Operating and Maintenance Assumptions The model assumes direct Internet access costs at $0.75 per Mbps per month. Additional key operating and maintenance assumptions include:  Salaries and benefits are based on estimated market wages. See Table 11 for a list of staffing requirements. Benefits are estimated at 65 percent of base salary.  Insurance is estimated to be $100,000 in year one and $150,000 from year two on.  Utilities are estimated to be $25,000 in year one and $50,000 from year two on.  Office expenses are estimated to be $36,000 in year one and $50,000 from year two on.  Facility lease fees are expected to be $0—these are accounted for in estimated office expenses.  Locates and ticket processing are estimated to start in year one at $19,000, increase to $38,000 in year two, and increase to $75,000 from year three on.  Contingency is estimated to be $25,000 in year one and $50,000 from year two on.  Billing and maintenance contract fees are estimated at $15,000 in year one, and $25,000 from year two on.  Legal fees are estimated to be $150,000 in year one, $75,000 in year two, and $50,000 from year three on.  Consulting fees are estimated at $100,000 in year one, $50,000 in year and two, and $25,000 from year three on. CTC Report | City of Palo Alto | September 2015 136  Marketing and promotional expenses are estimated to be $500,000 in year one, and $250,000 from year two on. Vendor maintenance contract fees are expected to start at $1.37 million in year two and remain steady from year two on. Annual variable and operating expenses not including direct Internet access include:  Education and training are calculated as 2 percent of direct payroll expense.  Customer handholding is estimated to be 10¢ per subscriber per month.  Customer billing (incremental) is estimated to be 5¢ per bill per month.  Support services are estimated to be $.25 per bill per month.  Allowance for bad debts is computed as 0.5 percent of revenues.  Churn is anticipated to be 1.5 percent annually. Fiber network maintenance costs are calculated at $10,000 per year plus 0.25 percent of the total construction cost, per year. This is estimated based on a typical rate of occurrence in an urban environment, and the cost of individual repairs. This is in addition to staffing costs to maintain fiber. The Palo Alto Utility User Tax (UUT) is only charged on telephone service (landline, cell & VoIP). The UUT is not assessed on video or Internet services. 8.4 Sensitivity Scenarios This section shows the large impact that small fluctuations in take rate, subscriber fees, and other key assumptions can have on financial modeling. Note that many of these scenarios may not be realistically attainable. They are meant to demonstrate the sensitivity of these assumptions to the financial projections. We specifically examine the impact of the three largest operating expense items (staffing, vendor maintenance contracts, and Internet access). 8.4.1 Labor, Vendor Maintenance Fees, and DIA As we previously noted, the base case shows that a 72 percent take rate is required to maintain cash flow. Table 12 below shows the base case income and cash flow statements. In this section, we demonstrate how fluctuations in staffing costs, vendor maintenance costs, and DIA can affect the required take rate. These effects are important to understand and consider when reviewing partnership opportunities. It is important that a partner be able to offer savings in these categories as compared to the base case assumptions used in the analysis. CTC Report | City of Palo Alto | September 2015 137 Table 12: Base Case Scenario – Residential Service $70 per Month, Small Commercial Service $80 per Month, Medium Commercial Service $220 per Month Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $17,488,320 $17,488,320 $17,488,320 $17,488,320 Total Cash Expenses (2,806,110) (8,291,160) (8,291,160) (8,291,160) (8,291,160) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,030) Taxes _________- _________- _________- _________- _________- Net Income $(5,910,230) $(2,187,610) $1,265,680 $2,423,560 $3,555,120 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $43,660 $161,700 $459,140 $3,316,690 $6,227,400 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,543,660 $8,790,290 $12,459,590 $5,202,520 $8,813,570 Investment Metric Internal Rate of Return (IRR) – 20 year 0.47% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($23,140,050) Discount Rate 4.00% The impact of salary overhead is one of the important assumptions that we changed to demonstrate the sensitivity to the financial projections. The base case scenario assumed that overhead for personnel will be 65 percent of the base salary. Decreasing overhead to 27 percent allows borrowing to be reduced by $5 million and required take rate to be reduced by 10 percentage points to maintain cash flow. Table 13: Decrease Overhead to 27 Percent of Salaries (from 65 percent), Financing Reduced by $5 Million, and Take Rate Decreased to 62.1 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $15,081,480 $15,081,480 $15,081,480 $15,081,480 Total Cash Expenses (2,474,900) (6,489,030) (6,489,030) (6,489,030) (6,489,030) Depreciation (3,344,360) (7,491,010) (5,151,390) (4,904,450) (4,904,450) Interest Expense (2,165,000) (2,874,100) (2,178,890) (1,352,810) (302,450) Taxes - - - - - Net Income $(5,439,090) $(1,772,660) $1,262,170 $2,335,190 $3,385,550 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $324,190 $(258,860) $331,870 $3,111,930 $5,947,450 Depreciation Reserve - 5,571,860 9,207,260 701,540 2,054,370 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,824,190 $7,813,000 $12,039,130 $6,313,470 $10,501,820 Investment Metric Internal Rate of Return (IRR) 0.52% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($21,532,230) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 138 To demonstrate the power that a large incumbent provider may have, we show that eliminating vendor maintenance contracts can, in itself, reduce required take rate by 10 percentage points. This sensitivity is an example of the distinct operating advantage held by large providers like Comcast, which can eliminate or greatly reduce the costs associated with maintenance contracts. Table 14: Eliminate Vendor Maintenance Contracts and Reduce Take Rate to 62.1 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $15,081,480 $15,081,480 $15,081,480 $15,081,480 Total Cash Expenses (2,806,110) (6,281,090) (6,281,090) (6,281,090) (6,281,090) Depreciation (3,344,360) (7,491,010) (5,151,390) (4,904,450) (4,904,450) Interest Expense (2,215,000) (3,115,340) (2,369,280) (1,478,300) (345,115) Taxes - - - - - Net Income $(5,820,300) $(1,805,960) $1,279,720 $2,417,640 $3,550,825 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $942,980 $4,231,820 $3,735,840 $5,429,180 $7,177,980 Depreciation Reserve - 5,571,860 9,207,260 701,540 2,054,380 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $5,442,980 $12,303,680 $15,443,100 $8,630,720 $11,732,360 Investment Metric Internal Rate of Return (IRR) – 20 year 0.60% Net Present Value (NPV) at a 4 percent discount rate – 20 year $(21,211,620) Discount Rate 4.00% Reducing labor costs (salaries and overhead) by 40 percent would enable the FTTP enterprise to cash flow with a greater than 14 percentage point drop in take rate. Providers that are able to leverage existing resources or avoid the higher Bay Area labor costs can realize a portion of this impact. CTC Report | City of Palo Alto | September 2015 139 Table 15: Reduce Labor Expenses by 40 Percent and Reduce Take Rate to 57.6 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $13,989,960 $13,989,960 $13,989,960 $13,989,960 Total Cash Expenses (2,242,138) (5,410,930) (5,410,930) (5,410,930) (5,410,930) Depreciation (3,291,320) (7,119,830) (4,947,740) (4,714,950) (4,714,950) Interest Expense (2,215,000) (3,116,010) (2,369,740) (1,476,680) (342,835) Taxes - - - - - Net Income $(5,203,288) $(1,656,810) $1,261,550 $2,387,400 $3,521,245 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $2,037,350 $6,007,850 $4,984,420 $5,976,420 $7,024,270 Depreciation Reserve - 5,305,430 9,023,780 1,348,740 2,968,180 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $6,537,350 $13,813,280 $16,508,200 $9,825,160 $12,492,450 Investment Metric Internal Rate of Return (IRR) – 20 year 0.60% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($20,682,070) Discount Rate 4.00% Table 16 shows the combination of eliminating vendor maintenance contracts and labor expenses. Table 16: Eliminate Vendor Maintenance Contracts, Reduce Labor Expenses by 40 Percent, and Reduce Take Rate to 51.3 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $12,458,760 $12,458,760 $12,458,760 $12,458,760 Total Cash Expenses (2,242,140) (4,069,800) (4,069,800) (4,069,800) (4,069,800) Depreciation (3,253,180) (6,649,990) (4,711,920) (4,489,300) (4,489,300) Interest Expense (2,215,000) (3,116,840) (2,370,010) (1,474,780) (339,775) Taxes - - - - - Net Income $(5,165,150) $(1,377,870) $1,307,030 $2,424,880 $3,559,885 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $2,418,870 $8,661,930 $7,385,660 $7,897,200 $8,467,130 Depreciation Reserve - 4,972,220 8,915,860 2,108,700 4,190,250 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $6,918,870 $16,134,150 $18,801,520 $12,505,900 $15,157,380 Investment Metric Internal Rate of Return (IRR) – 20 year 0.79% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($18,943,390) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 140 The cost of DIA is estimated at $0.75 per Mbps per month. Table 17 shows that increasing DIA by $0.50 quickly drives cash flow negative. Decreasing this cost by $0.50 per month increases the overall cash by $10 million. Table 17: DIA Monthly Price (per Mbps) Increases by $0.50 Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $17,488,320 $17,488,320 $17,488,320 $17,488,320 Total Cash Expenses (2,865,600) (8,765,450) (8,765,450) (8,765,450) (8,765,450) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,969,720) $(2,661,900) $791,390 $1,949,270 $3,080,825 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(15,830) $(1,587,440) $(3,661,450) $(3,175,350) $(2,636,110) Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,484,170 $7,041,150 $8,339,000 $(1,289,520) $(49,940) Investment Metric Internal Rate of Return (IRR) – 20 year (0.52%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($28,995,110) Discount Rate 4.00% Table 18: DIA Monthly Price (per Mbps) Decreases by $0.50 Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $17,488,320 $17,488,320 $17,488,320 $17,488,320 Total Cash Expenses (2,746,620) (7,816,870) (7,816,870) (7,816,870) (7,816,870) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,850,740) $(1,713,320) $1,739,970 $2,897,850 $4,029,405 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $103,150 $1,910,840 $4,579,730 $9,808,730 $15,090,870 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,603,150 $10,539,430 $16,580,180 $11,694,560 $17,677,040 Investment Metric Internal Rate of Return (IRR) – 20 year 1.41% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($17,285,000) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 141 By reducing the costs of vendor maintenance contracts, labor expenses, and DIA, the required take rate can be dramatically reduced. In Table 19 we show an example that reduces the required take rate to 45 percent. Table 19: Eliminate Vendor Maintenance Contracts, Reduce Labor Expenses by 50 Percent, Reduce DIA by 67 Percent, and Reduce Take Rate to 45 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $10,930,320 $10,930,320 $10,930,320 $10,930,320 Total Cash Expenses (2,041,655) (3,113,615) (3,113,615) (3,113,615) (3,113,615) Depreciation (3,187,340) (6,142,130) (4,438,430) (4,233,370) (4,233,370) Interest Expense (2,215,000) (3,117,750) (2,370,570) (1,472,600) (336,615) Taxes - - - - - Net Income $(4,898,825) $(1,443,175) $1,007,705 $2,110,735 $3,246,720 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $3,277,645 $10,107,325 $6,753,840 $4,948,700 $3,202,930 Depreciation Reserve - 4,608,650 8,693,850 2,980,380 5,455,570 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $7,777,645 $17,215,975 $17,947,690 $10,429,080 $11,158,500 Investment Metric Internal Rate of Return (IRR) – 20 year 0.15% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($21,576,050) Discount Rate 4.00% 8.4.2 Initial Funding Using funds that do not need to be paid back to help cover implementation costs can reduce the required take rate. In Figure 30 we show the impact of funding amounts to $20 million in $5 million increments. For each $5 million in funding, we see approximately a 3.8 percentage point drop in required take rates. (Please note the individual data points in Figure 30 below will vary from the 3.8 percent average since the resulting cash flow balances and projected IRR vary from case to case.) CTC Report | City of Palo Alto | September 2015 142 Figure 30: Impact of Initial Funding on Required Take Rate In Table 20 to Table 23, we show the resulting income and cash flow statements for each $5 million funding increment. Table 20: Use $5 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 65.7 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $15,956,280 $15,956,280 $15,956,280 $15,956,280 Total Cash Expenses (2,806,110) (7,748,000) (7,748,000) (7,748,000) (7,748,000) Depreciation (3,368,480) (7,763,050) (5,289,500) (5,036,130) (5,036,130) Interest Expense (2,015,000) (2,923,920) (2,225,710) (1,393,850) (331,700) Taxes - - - - - Net Income $(5,644,420) $(2,478,690) $693,070 $1,778,300 $2,840,450 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $1,401,880 $1,747,590 $(63,470) $446,080 $1,009,740 Depreciation Reserve - 5,765,070 9,278,290 257,190 1,351,020 Interest Reserve 1,800,000 - - - - Debt Service Reserve 2,250,000 2,250,000 2,250,000 2,250,000 2,250,000 Total Cash Balance $5,451,880 $9,762,660 $11,464,820 $2,953,270 $4,610,760 Investment Metric Internal Rate of Return (IRR) (0.12%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($23,931,230) Discount Rate 4.00% 72.0% 65.7% 63.0% 60.3% 56.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% $- $5 $10 $15 $20 Re q u i r e d T a k e R a t e Funding (millions) CTC Report | City of Palo Alto | September 2015 143 Table 21: Use $10 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 63 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $15,300,000 $15,300,000 $15,300,000 $15,300,000 Total Cash Expenses (2,806,110) (7,536,760) (7,536,760) (7,536,760) (7,536,760) Depreciation (3,350,950) (7,559,850) (5,186,670) (4,937,980) (4,937,980) Interest Expense (1,815,000) (2,733,350) (2,082,440) (1,307,470) (315,205) Taxes - - - - - Net Income $(5,426,890) $(2,529,960) $494,130 $1,517,790 $2,510,055 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $2,277,120 $3,018,010 $1,336,620 $1,877,640 $2,473,800 Depreciation Reserve - 5,620,790 9,227,370 588,270 1,877,750 Interest Reserve 1,600,000 - - - - Debt Service Reserve 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Total Cash Balance $5,877,120 $10,638,800 $12,563,990 $4,465,910 $6,351,550 Investment Metric Internal Rate of Return (IRR) 0.06% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($20,863,300) Discount Rate 4.00% Table 22: Use $15 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 60.3 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $14,645,400 $14,645,400 $14,645,400 $14,645,400 Total Cash Expenses (2,806,100) (7,476,960) (7,476,960) (7,476,960) (7,476,960) Depreciation (3,333,490) (7,356,980) (5,084,140) (4,840,110) (4,840,110) Interest Expense (1,615,000) (2,542,770) (1,939,170) (1,221,090) (298,705) Taxes - - - - - Net Income $(5,209,420) $(2,731,310) $145,130 $1,107,240 $2,029,625 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $3,151,820 $3,837,550 $1,536,380 $1,359,490 $1,238,780 Depreciation Reserve - 5,476,820 9,176,280 918,090 2,402,640 Interest Reserve 1,400,000 - - - - Debt Service Reserve 1,750,000 1,750,000 1,750,000 1,750,000 1,750,000 Total Cash Balance $6,301,820 $11,064,370 $12,462,660 $4,027,580 $5,391,420 Investment Metric Internal Rate of Return (IRR) (0.12%) Net Present Value (NPV) at a 4 percent discount rate - 20 year ($19,550,760) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 144 Table 23: Use $20 Million in Start-Up Funds (Decrease Amount Bonded by Same), Reduce Take Rate to 56.7 Percent Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $13,770,600 $13,770,600 $13,770,600 $13,770,600 Total Cash Expenses (2,806,110) (6,996,600) (6,996,600) (6,996,600) (6,996,600) Depreciation (3,287,370) (7,054,760) (4,916,100) (4,684,350) (4,684,350) Interest Expense (1,415,000) (2,352,380) (1,796,180) (1,134,210) (281,675) Taxes - - - - - Net Income $(4,963,310) $(2,633,140) $61,720 $955,440 $1,807,975 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $4,312,860 $5,917,320 $4,171,030 $4,408,330 $4,701,900 Depreciation Reserve - 5,259,460 9,014,570 1,451,250 3,140,430 Interest Reserve 1,200,000 - - - - Debt Service Reserve 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total Cash Balance $7,012,860 $12,676,780 $14,685,600 $7,359,580 $9,342,330 Investment Metric Internal Rate of Return (IRR) 0.46% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($15,015,170) Discount Rate 4.00% 8.4.3 Impact of Take Rate on Cash Flow Realized take rates will have a high impact on the projections. A 4.5 percentage point take rate increase adds approximately $11 million to the year 20 cash balance. A 9 percentage point increase adds almost $14 million. Note that the results are not linear because financing was not increased in the model, and a take rate increase drives a higher capital expenditure. Table 24: Residential Market Share Increase by 5 Percentage Points (4.5 Percentage Point Take Rate Increase) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $18,346,800 $18,346,800 $18,346,800 $18,346,800 Total Cash Expenses (2,806,110) (8,371,660) (8,371,660) (8,371,660) (8,371,660) Depreciation (3,456,900) (8,564,250) (5,709,100) (5,432,200) (5,432,200) Interest Expense (2,215,000) (3,113,430) (2,368,400) (1,482,760) (351,955) Taxes - - - - - Net Income $(5,932,840) $(1,702,540) $1,897,640 $3,060,180 $4,190,985 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(181,550) $1,198,420 $4,952,000 $11,408,190 $17,915,810 Depreciation Reserve - 6,336,450 9,561,960 (1,085,680) (679,770) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,318,450 $10,034,870 $17,013,960 $12,822,510 $19,736,040 Investment Metric Internal Rate of Return (IRR) – 20 year 1.68% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($15,842,870) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 145 Table 25: Residential Market Share Increase by 10 Percentage Points (9 Percentage Point Take Rate Increase) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $19,205,280 $19,205,280 $19,205,280 $19,205,280 Total Cash Expenses (2,806,110) (8,858,920) (8,858,920) (8,858,920) (8,858,920) Depreciation (3,506,830) (8,895,330) (5,892,620) (5,602,450) (5,602,450) Interest Expense (2,215,000) (3,112,830) (2,367,960) (1,484,220) (353,975) Taxes - - - - - Net Income $(5,982,770) $(1,661,800) $2,085,780 $3,259,690 $4,389,935 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(680,060) $577,830 $5,667,810 $13,614,740 $21,612,920 Depreciation Reserve - 6,574,440 9,736,030 (1,668,160) (1,489,470) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $3,819,940 $9,652,270 $17,903,840 $14,446,580 $22,623,450 Investment Metric Internal Rate of Return (IRR) – 20 year 2.01% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($13,861,120) Discount Rate 4.00% As expected, take rate decreases lead to a similar decline in cash balances. Table 26 and Table 27 show this impact. Table 26: Residential Market Share Decrease by 5 Percentage Points (4.5 Percentage Point Take Rate Decrease) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $16,629,840 $16,629,840 $16,629,840 $16,629,840 Total Cash Expenses (2,806,110) (8,055,610) (8,055,610) (8,055,610) (8,055,610) Depreciation (3,409,000) (7,973,430) (5,412,910) (5,148,680) (5,148,680) Interest Expense (2,215,000) (3,114,480) (2,368,730) (1,480,380) (348,105) Taxes - - - - - Net Income $(5,884,940) $(2,513,680) $792,590 $1,945,170 $3,077,445 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $295,620 $4,670 $(2,369,970) $(2,328,170) $(2,231,680) Depreciation Reserve - 5,917,550 9,428,390 (130,750) 858,160 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,795,620 $8,422,220 $9,558,420 $41,080 $1,126,480 Investment Metric Internal Rate of Return (IRR) – 20 year (0.49%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($28,223,660) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 146 Table 27: Residential Market Share Decrease by 10 Percentage Points (9 Percentage Point Take Rate Decrease) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $15,771,360 $15,771,360 $15,771,360 $15,771,360 Total Cash Expenses (2,806,110) (7,568,460) (7,568,460) (7,568,460) (7,568,460) Depreciation (3,359,040) (7,642,460) (5,229,450) (4,978,490) (4,978,490) Interest Expense (2,215,000) (3,115,070) (2,369,160) (1,478,920) (346,085) Taxes - - - - - Net Income $(5,834,980) $(2,554,630) $604,290 $1,745,490 $2,878,325 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $794,170 $624,090 $(3,087,690) $(4,537,280) $(5,932,050) Depreciation Reserve - 5,679,620 9,254,390 451,510 1,667,590 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $5,294,170 $8,803,710 $8,666,700 $(1,585,770) $(1,764,460) Investment Metric Internal Rate of Return (IRR) – 20 year (0.94%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($30,207,740) Discount Rate 4.00% Increases and decreases in small commercial take rates do have an impact, but not as significant as changes in the residential. This is due to the overall number of business passings compared to residential passings. Table 28 and Table 29 show the impact on income and cash flow statements related to changing take rates for businesses (small and medium). Table 28: Commercial Market Share Increase by 10 Percentage Points (9 Percentage Point Take Rate Increase) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $17,954,400 $17,954,400 $17,954,400 $17,954,400 Total Cash Expenses (2,806,110) (8,322,740) (8,322,740) (8,322,740) (8,322,740) Depreciation (3,442,390) (8,353,390) (5,605,660) (5,332,480) (5,332,480) Interest Expense (2,215,000) (3,113,800) (2,368,480) (1,481,930) (350,565) Taxes - - - - - Net Income $(5,918,330) $(1,835,530) $1,657,520 $2,817,250 $3,948,615 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(39,100) $1,194,490 $3,539,680 $8,484,630 $13,482,390 Depreciation Reserve - 6,187,360 9,527,110 (750,990) (124,220) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,460,900 $9,881,850 $15,566,790 $10,233,640 $15,858,170 Investment Metric Internal Rate of Return (IRR) – 20 year 1.24% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($18,482,510) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 147 Table 29: Commercial Market Share Decrease by 10 Percentage Points (9 Percentage Point Take Rate Decrease) Income Statement 1 5 10 15 20 Total Revenues $2,545,170 $17,016,960 $17,016,960 $17,016,960 $17,016,960 Total Cash Expenses (2,806,110) (8,255,870) (8,255,870) (8,255,870) (8,255,870) Depreciation (3,423,500) (8,184,650) (5,516,600) (5,248,660) (5,248,660) Interest Expense (2,215,000) (3,114,100) (2,368,640) (1,481,220) (349,505) Taxes - - - - - Net Income $(5,899,440) $(2,537,660) $875,850 $2,031,210 $3,162,925 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $153,460 $(830,600) $(2,580,400) $(1,810,950) $(988,220) Depreciation Reserve - 6,066,900 9,462,380 (466,910) 300,060 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,653,460 $7,736,300 $9,381,980 $222,140 $1,811,840 Investment Metric Internal Rate of Return (IRR) – 20 year (0.34%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($27,759,630) Discount Rate 4.00% 8.4.4 Impact of Service Fees on Cash Flow Service fees can have a large impact on the projections. Assuming no change to take rates, a $5 per month service fee increase adds approximately $19 million to the year 20 cash balance. A $10 increase adds almost $38 million. Please note, however, there is a correlation between take rates to fee increases. Table 30: Residential Monthly Service Prices Increase by $5 Income Statement 1 5 10 15 20 Total Revenues $2,668,170 $18,469,440 $18,469,440 $18,469,440 $18,469,440 Total Cash Expenses (2,806,720) (8,296,070) (8,296,070) (8,296,070) (8,296,070) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,787,840) $(1,211,400) $2,241,890 $3,399,770 $4,531,325 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $166,050 $3,761,840 $8,940,330 $16,678,930 $24,470,670 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,666,050 $12,390,430 $20,940,780 $18,564,760 $27,056,840 Investment Metric Internal Rate of Return (IRR) – 20 year 2.37% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($11,088,890) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 148 Table 31: Residential Monthly Service Prices Increase by $10 Income Statement 1 5 10 15 20 Total Revenues $2,791,170 $19,450,560 $19,450,560 $19,450,560 $19,450,560 Total Cash Expenses (2,807,340) (8,300,970) (8,300,970) (8,300,970) (8,300,970) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,665,460) $(235,180) $3,218,110 $4,375,990 $5,507,545 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $288,430 $7,362,000 $17,421,590 $30,041,290 $42,714,130 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,788,430 $15,990,590 $29,422,040 $31,927,120 $45,300,300 Investment Metric Internal Rate of Return (IRR) – 20 year 4.14% Net Present Value (NPV) at a 4 percent discount rate – 20 year $962,380 Discount Rate 4.00% As expected, monthly service fee decreases produce a similar decline in cash balances. This impact is shown in Table 32 and Table 33. Table 32: Residential Monthly Service Prices Decrease by $5 Income Statement 1 5 10 15 20 Total Revenues $2,422,170 $16,507,200 $16,507,200 $16,507,200 $16,507,200 Total Cash Expenses (2,805,490) (8,286,260) (8,286,260) (8,286,260) (8,286,260) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(6,032,610) $(3,163,830) $289,460 $1,447,340 $2,578,895 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(78,720) $(3,438,470) $(8,022,130) $(10,045,690) $(12,016,090) Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,421,280 $5,190,120 $3,978,320 $(8,159,860) $(9,429,920) Investment Metric Internal Rate of Return (IRR) – 20 year (1.63%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($35,191,340) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 149 Table 33: Residential Monthly Service Prices Decrease by $10 Income Statement 1 5 10 15 20 Total Revenues $2,299,170 $15,526,080 $15,526,080 $15,526,080 $15,526,080 Total Cash Expenses (2,804,880) (8,281,350) (8,281,350) (8,281,350) (8,281,350) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(6,155,000) $(4,140,040) $(686,750) $471,130 $1,602,685 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $(201,110) $(7,038,610) $(16,503,320) $(23,407,930) $8,080 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,298,890 $1,589,980 $(4,502,870) $(21,522,100) $2,594,250 Investment Metric Internal Rate of Return (IRR) – 20 year (3.99%) Net Present Value (NPV) at a 4 percent discount rate – 20 year ($47,242,500) Discount Rate 4.00% Increases and decreases in small commercial prices do have an impact, but not as significant as changes in the residential. This is due to the overall number of business passings compared to residential passings. Table 34 and Table 35 show the impact on the income and cash flow statements caused by changing fees for small businesses. Table 34: Small Commercial Monthly Service Prices Increase by $10 Income Statement 1 5 10 15 20 Total Revenues $2,565,930 $17,653,800 $17,653,800 $17,653,800 $17,653,800 Total Cash Expenses (2,806,210) (8,291,990) (8,291,990) (8,291,990) (8,291,990) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,889,570) $(2,022,960) $1,430,330 $2,588,210 $3,719,765 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $64,320 $768,960 $1,889,650 $5,570,450 $9,304,390 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,564,320 $9,397,550 $13,890,100 $7,456,280 $11,890,560 Investment Metric Internal Rate of Return (IRR) – 20 year 0.80% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($21,107,430) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 150 Table 35: Small Commercial Monthly Service Prices Decrease by $10 Income Statement 1 5 10 15 20 Total Revenues $2,524,410 $17,322,840 $17,322,840 $17,322,840 $17,322,840 Total Cash Expenses (2,806,000) (8,290,330) (8,290,330) (8,290,330) (8,290,330) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income $(5,930,880) $(2,352,260) $1,101,030 $2,258,910 $3,390,465 Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance $23,010 $(445,560) $(971,370) $1,062,930 $3,150,370 Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance $4,523,010 $8,183,030 $11,029,080 $2,948,760 $5,736,540 Investment Metric Internal Rate of Return (IRR) – 20 year 0.13% Net Present Value (NPV) at a 4 percent discount rate – 20 year ($25,172,680) Discount Rate 4.00% CTC Report | City of Palo Alto | September 2015 151 Appendix A – Existing Palo Alto Market Assessment CTC Report | City of Palo Alto | September 2015 152 Appendix B – Financial and Cost Analysis Appendix A: Existing Market Assessment Final Prepared for City of Palo Alto July 2015 CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 i Contents 1 Existing Market Assessment ................................................................................................... 1 2 Enterprise Market ................................................................................................................... 1 1.1 Dark Fiber Services ........................................................................................................... 1 1.1.1 Integra Telecom ........................................................................................................ 1 1.1.2 Level(3) ...................................................................................................................... 2 1.1.3 Zayo ........................................................................................................................... 3 1.2 Ethernet Services.............................................................................................................. 4 1.2.1 AT&T .......................................................................................................................... 4 1.2.2 CenturyLink ............................................................................................................... 5 1.2.3 Cogent Communications ........................................................................................... 5 1.2.4 Comcast ..................................................................................................................... 5 1.2.5 Level(3) ...................................................................................................................... 6 1.2.6 Megapath .................................................................................................................. 6 1.2.7 Integra Telecom ........................................................................................................ 6 1.2.8 Verizon ...................................................................................................................... 6 1.2.9 Windstream Communications .................................................................................. 7 1.2.10 XO Communications ................................................................................................. 7 1.2.11 Zayo ........................................................................................................................... 7 2 Residential and Small Business Services ................................................................................. 8 2.1 Cable ................................................................................................................................. 8 2.2 DSL .................................................................................................................................... 9 2.2.1 AT&T .......................................................................................................................... 9 2.2.2 EarthLink ................................................................................................................. 10 2.2.3 MegaPath ................................................................................................................ 10 2.2.4 Sonic ........................................................................................................................ 10 2.3 Satellite ........................................................................................................................... 10 2.3.1 HughesNet .............................................................................................................. 10 CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 ii 2.3.2 Exede ....................................................................................................................... 11 2.3.3 DishNET ................................................................................................................... 11 2.4 Wireless .......................................................................................................................... 11 2.4.1 Verizon .................................................................................................................... 11 2.4.2 Sprint ....................................................................................................................... 12 2.4.3 AT&T ........................................................................................................................ 12 2.4.4 Cricket Wireless ...................................................................................................... 12 2.4.5 T-Mobile .................................................................................................................. 12 2.4.6 Etheric Networks ..................................................................................................... 13 Figures Figure 1: Integra Telecom Network Map ........................................................................................ 2 Figure 2: Level(3) Dark Fiber Routes ............................................................................................... 3 Figure 3: Zayo Fiber Map ................................................................................................................ 4 Tables Table 1: Overview of Residential and Small Business Data Services in Palo Alto ........................... 8 Table 2: Comcast Residential Internet – Internet Only .................................................................. 9 Table 3: Comcast Small Business Internet – Internet Only ............................................................. 9 Table 4: AT&T Residential Internet – Internet Only ..................................................................... 10 Table 5: Etheric Networks Internet Services................................................................................. 13 CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 1 1 Existing Market Assessment This existing market assessment provides an overview of providers that currently offer services with which the City’s potential new fiber-to-the-premises (FTTP) enterprise might compete. The information provided here is based on what was publicly available—providers often do not publish extensive information about their networks (e.g., capacity and other specific details). 2 Enterprise Market This section summarizes competitors for dark fiber and Ethernet services with respect to the enterprise customers within the City of Palo Alto. During the course of our research, we identified 11 service providers in the Palo Alto area that offer a range of services from dark fiber connectivity to data transport services, with speeds that range from 1 Megabit per second (Mbps) to 100 Gigabits per second (Gbps). Individual providers tailor these services to a customer’s requirements, such as speed and class of service. Greater proximity to the provider’s existing network infrastructure results in lower service pricing. Providers prefer to offer transport services between locations on their network (On- Net) and provision Multiprotocol Label Switching (MPLS) based services for connecting locations that are Off-Net. A trend that we expect to continue is the consolidation of competitors through mergers and acquisitions. Competitors are discussed in detail in the following sections. 1.1 Dark Fiber Services In addition to the City of Palo Alto Utilities (CPAU) dark fiber offering,1 our analysis found that three service providers in the City offer dark fiber services2: Integra Telecom, Level (3) and Zayo.3 There may be other providers that offer dark fiber (e.g., on a case-by-case basis), but this analysis yielded information only about the three discussed here. 1.1.1 Integra Telecom Integra Telecom offers dark fiber services within the city. They provide flexible options in securing dark fiber through bundles, lease, and indefeasible rights of use (IRU). The dark fiber routes are depicted in Figure 1.4,5 Dark fiber pricing varies individually, based on distance from 1 CPAU is engaged in capital improvements for added capacity and to provide additional dark fiber routes. 2 An assessment of the potential impact of alternative dark fiber provider offerings to City of Palo Alto’s existing dark fiber enterprise is beyond the scope of this analysis. 3 While this analysis yielded only these three, there may be other providers offering dark fiber—for example, on a case-by-case basis. 4 http://www.integratelecom.com/pages/network-map.aspx, accessed March 2015. 5 As we noted, carriers typically do not publish details such as whether they directly own the routes depicted on their publicly-available maps. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 2 the provider’s fiber ring. A difference in a few tenths of a mile can lead to significant differences in the price of dark fiber connectivity due to additional construction costs. Figure 1: Integra Telecom Network Map 1.1.2 Level(3) Level(3) has multiple dark fiber routes in Palo Alto as depicted in Figure 2.6 Services are offered only to select customers based on their application requirements. 6 As we noted, carriers typically do not publish details such as whether they directly own the routes depicted on their publicly-available maps. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 3 Figure 2: Level(3) Dark Fiber Routes7 1.1.3 Zayo Zayo provides dark fiber connectivity over its national network of metro and intercity fiber.8 The company claims to have proven expertise in deploying major new dark fiber networks and offers multiple financing options including lease or Indefeasible Rights of Use (IRU). Pricing varies significantly depending on whether the building is On-Net or not; if the location is Off- Net, construction and splicing costs would apply.9 7 http://maps.level3.com/default/, accessed May 2015. 8 Zayo is also a CPAU Value Added Reseller (VAR), based on conversations with CPAU staff. 9 http://zayofibersolutions.com/why-dark-fiber, accessed May 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 4 Figure 3: Zayo Fiber Map10 1.2 Ethernet Services Most existing service providers offer enterprise-grade Ethernet based services. These are typically classified under two categories: point-to-point connectivity and access services, such as Dedicated Internet Access (DIA) and IP Virtual Private Networks (IP-VPN). Bandwidths range from 1 Mbps to 100 Gbps. Providers prefer to offer MPLS based IP-VPN services when the service locations are Off-Net to avoid construction and installation costs. MPLS based networks provide high performance for real-time applications like voice and video, and are typically priced higher. The carriers who provide these services in the Palo Alto region are AT&T, CenturyLink, Cogent Communications, Comcast,11 Integra Telecom, Level (3), Megapath, Verizon, Windstream Communications, XO Communications and Zayo. Prices depend on the bandwidth, location, and network configuration, whether the service is protected or unprotected, and whether the service has a switched or mesh structure. 1.2.1 AT&T AT&T has four different types of Ethernet products—GigaMAN, DecaMAN, Opt-E-MAN, and Metro Ethernet. GigaMAN provides a native-rate interconnection of 1 Gbps between customer end points. It is a dedicated point-to-point fiber optic based service between customer 10 http://www.zayo.com/network/interactive-map, accessed March 2015. 11 It appears Comcast may be pursuing the enterprise market more aggressively through means like going into wireless backhaul. http://www.fiercetelecom.com/offer/gc_backhaul?sourceform=Organic-GC-Backhaul- FierceTelecom, accessed July 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 5 locations which includes the supply of the GigE Network Terminating Equipment (NTE) at the customer premises. DecaMAN connects the end points at 10 Gbps and is transmitted in native Ethernet format similar to GigaMAN, only 10 times faster. Opt-E-MAN service provides a switched Ethernet service within a metropolitan area. It supports bandwidths ranging from 1 Mbps to 1,000 Mbps, and configurations such as point-to-point, point-to-multipoint, and multipoint-to-multipoint. Metro Ethernet service provides various transport capabilities ranging from 2 Mbps through 1 Gbps while meeting IEEE 802.3 standards.12 1.2.2 CenturyLink CenturyLink provides point-to-point inter-city and intra-city configurations for full-duplex data transmission.13 The company offers speeds of 100 Mbps to 10 Gbps.14 1.2.3 Cogent Communications Cogent Communications’ Ethernet services are available at speeds of 1.5 Mbps to 10 Gbps.15 The company provides middle mile services with the last mile service provisioned through local exchange carriers (LEC).16 Often, more competitive pricing and better customer support is available through Cogent even though the company utilizes the LECs’ last-mile services. Cogent has two on-net locations (data centers) in the City. 1.2.4 Comcast Comcast provides Ethernet Private Line (EPL) services. EPL service enables customers to connect their Customer premises equipment (CPE) using a lower cost Ethernet interface, as well as using any Virtual Local Area Networks (VLAN) or Ethernet control protocol across the service without coordination with Comcast. EPL service is offered with 10Mbps, 100Mbps, 1 Gbps or 10 Gbps Ethernet User-to-Network Interfaces (UNI) and is available in speed increments from 1 Mbps to 10 Gbps.17 It is important to note that Comcast began offering “Gigabit Pro” service in 2015, a 2 Gbps service priced at $300 per month with installation fees of up to $1,000.18 Given the installation and monthly fees, this service is priced out of most residential users’ reach. Further, the service 12 http://www.business.att.com/service_overview.jsp?repoid=Product&repoitem=w_ethernet&serv=w_ethernet&se rv_port=w_data&serv_fam=w_local_data&state=California&segment=whole, accessed March 2015. 13 CenturyLink is also a CPAU VAR and typically uses ring configuration for redundancy, based on conversations with CPAU staff. 14 http://www.centurylink.com/business/products/products-and-services/data-networking/private.html, accessed May 2015. 15 http://www.cogentco.com/en/products-and-services, accessed May 2015. 16 Cogent is also a CPAU VAR, based on conversations with CPAU staff. 17 http://business.comcast.com/ethernet/products/ethernet-private-line-technical-specifications, accessed April 2015. 18 http://www.theverge.com/2015/7/13/8949207/comcast-gigabit-pro-price-300, accessed July 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 6 does not have the bells and whistles that traditional Metro Ethernet has—such as committed interface rates. However, if Gigabit Pro is successful, it could disrupt the Metro Ethernet market by filling a mid-range gap with service and pricing that has not previously existed. 1.2.5 Level(3) Level (3)’s Metro Ethernet dedicated service is available in bandwidth options of 3 Mbps to 1 Gbps and its Ethernet Virtual Private Line (VPL) offers in speeds ranging from 3 Mbps to 10 Gbps.19 It is an end-to-end Layer 2 switched Ethernet service delivered via a Multi-protocol Label Switched (MPLS) backbone. Internet services are available in a range of 14 speeds up to 10 Gbps.20 1.2.6 Megapath Megapath offers business Ethernet services in the Palo Alto area with advertised speeds up to 45 Mbps. Higher speeds are available on a case- by-case basis.21 1.2.7 Integra Telecom Integra Telecom offers Ethernet services from 1.5 Mbps to 10 Gbps. The point-to-point E-Line and multipoint -to -multipoint E-LAN configurations are available.22 1.2.8 Verizon Verizon offers Ethernet services under three different product categories—Ethernet Local Area Network (LAN), EPL, and EVPL. The Ethernet LAN is a multipoint-to-multipoint bridging service at native LAN speeds. It is configured by connecting customer User-to- Network Interfaces (UNIs) to one multipoint-to-multipoint Ethernet Virtual Connection or Virtual LAN (VLAN), and provides two Class of Service options—standard and real time. The Ethernet Private Line is a managed, point-to-point transport service for Ethernet frames. It is provisioned as Ethernet over SONET (EoS) and speeds of 10 Mbps to 10 Gbps are available. The EVPL is an all-fiber optic network service that connects subscriber locations at native LAN speeds; EVPL uses point-to- point Ethernet virtual connections (EVCs) to define site-to-site connections. It can be configured to support multiple EVCs to enable a hub and spoke configuration and supports bandwidths from 1 Mbps to 10 Gbps.23 19 http://www.level3.com/en/products-and-services/data-and-internet/vpn-virtual-private-network/evpl/, accessed March 2015. 20 http://www.level3.com/~/media/files/factsheets/en_ethernet_fs_ethernetmatrix.pdf, accessed April 2015. 21 http://www.megapath.com/data/ethernet/, accessed May 2015. 22 http://www.integratelecom.com/enterprise/products/pages/carrier-ethernet-services.aspx, accessed May 2015. 23 http://www.verizonenterprise.com/products/networking/ethernet/, accessed April 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 7 1.2.9 Windstream Communications Windstream Communications has a nationwide presence serving major metropolitan areas, including the City, with private line and MPLS VPN services with speeds up to 10 Gbps.24, 25 1.2.10 XO Communications XO Communications offers carrier Ethernet services at multiple bandwidth options from 3 Mbps to 100 Gbps over their Tier 1 IP network.26, 27 1.2.11 Zayo Zayo delivers Ethernet in three service types with bandwidth ranging from 100 Mbps to 10 Gbps and options like quality of service (QoS) guarantees and route protection based on customer needs. The different types of services offered are: Ethernet-Line, which provides point-to-point and point-to-multipoint configurations with reserved bandwidth availability; Ethernet-LAN, with multipoint configurations having a guaranteed service level; and Ethernet Private Dedicated Network (E-PDN) with a completely private, managed network operated by Zayo with dedicated fiber and equipment.28 As an example of pricing, Zayo charges a monthly recurring cost of $1,613 to $2,090 (depending on contract term) for 1 Gbps point-to-point Ethernet service between On-Net sites in the Los Angeles region that are three miles apart. 24 http://carrier.windstreambusiness.com/wordpress/wp-content/uploads/2014/10/Carrier-Ethernet-Ordering- Guide-10.8.14.pdf, accessed April 2015. 25 http://www.windstreambusiness.com/shop/products/ca/palo-alto, accessed May 2015. 26 http://www.xo.com/carrier/transport/ethernet/, accessed May 2015. 27 http://www.xo.com/network-services/internet-access/ip-transit/100G/, accessed May 2015. 28 http://www.zayo.com/ethernet, accessed April 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 8 2 Residential and Small Business Services Residential and small business customers in the Palo Alto region have access to a range of services, though individual service options are dependent on location. Table 1 lists the service providers and minimum price for each type of service that is available in at least some part of the City. Table 1: Overview of Residential and Small Business Data Services in Palo Alto Service Type Provider Minimum Price (per month) Cable Comcast $29.99 DSL AT&T $29.95 Earthlink $80 MegaPath $45 Sonic $40 Satellite DishNET $49.99 Exede $49.99 HughesNet $49.99 3G/4G/ WISP AT&T $50 Cricket $35 Sprint $35 Verizon $60 T-Mobile $20 Etheric Networks $85 2.1 Cable Comcast offers internet service from 3 Mbps to 150 Mbps download speeds starting at $29.99 per month in the City as illustrated in Table 2. Promotional rates are available for the first year after which the rates increase. Discounted prices are available if bundled with another service like voice or TV.29 On the small business side, multiple options are available starting at 16 Mbps download speeds up to 150 Mbps download speeds as illustrated in Table 3.30 Bundling with voice introduces a savings of $30-$40. 29 http://www.comcast.com/internet-service.html, accessed March 2015. 30 http://business.comcast.com/internet/business-internet/plans-pricing, accessed May 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 9 Table 2: Comcast Residential Internet – Internet Only PACKAGE INTERNET SPEED REGULAR PRICE PROMO RATE Economy Up to 3 Mbps download $39.95/mo - Performance Starter Up to 6 Mbps download $49.95/mo $29.99/mo Performance Up to 25 Mbps download $61.95/mo $39.99/mo Blast! Blast! Internet - up to 105 Mbps download $78.95/mo - Extreme up to 150 Mbps download $114.95/mo - Table 3: Comcast Small Business Internet – Internet Only PACKAGE INTERNET SPEED PRICE Starter 16 Mbps download/3 Mbps upload $69.95/mo Deluxe 50 50 Mbps download/ 10 Mbps upload $109.95/mo Deluxe 75 75 Mbps download/15 Mbps upload $149.95/mo Deluxe 100 100 Mbps download/20 Mbps upload $199.95/mo Deluxe 150 150 Mbps download/20 Mbps upload $249.95/mo 2.2 DSL Four providers offer DSL services in Palo Alto: AT&T, EarthLink, MegaPath, and Sonic. 2.2.1 AT&T AT&T offers DSL service for residential customers in Palo Alto starting at as $29.95 per month for unbundled or standalone DSL service at 3 Mbps with a 12-month commitment. Additional options up to 45 Mbps are available as indicated in Table 4. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 10 Table 4: AT&T Residential Internet – Internet Only INTERNET SPEED REGULAR PRICE PROMO RATE Up to 3 Mbps download $42/mo $29.95/mo Up to 6 Mbps download $52/mo $34.95/mo Up to 18 Mbps download $62/mo $44.95/mo up to 45 Mbps download $82/mo $44.95/mo 2.2.2 EarthLink EarthLink provides DSL based business services in the region starting at $80 per month and offering speeds up to 6 Mbps with 99.9% network availability.31 2.2.3 MegaPath MegaPath is an Internet service provider that offers speeds of up to 20 Mbps download and 1 Mbps upload for business customers in certain parts of Palo Alto.32 The lowest plan offered by them is for 1.5 Mbps download speeds at $45 per month. 2.2.4 Sonic Sonic offers residential internet services at 20 Mbps and 40 Mbps at a rate of $40 per month and $60 per month respectively in Palo Alto. The service also includes a phone connection. The provider is promoting the development of gigabit fiber connectivity on a neighborhood by neighborhood basis depending on the interest shown by consumers.33 Sonic also offers business internet and phone service in some locations in Palo Alto for $89.95 per month for speeds of 40 Mbps. 2.3 Satellite Satellite Internet access is available in the area as well and three providers offer the service: HughesNet, Exede, and DishNET. 2.3.1 HughesNet HughesNet has four packages available for residential users: 1) Connect Satellite with speeds up to 5 Mbps download/1 Mbps upload, a monthly data cap of 5 GB, and 5 GB of “bonus” data (10 GB total) for $49.99 per month2) HughesNet Power with speeds up to 10 Mbps download/1 31 http://www.earthlinkbusiness.com/DSL/, accessed March 2015. 32 http://www.megapath.com/services/, accessed May 2015. 33 https://www.sonic.com/availability ,accessed May 2015. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 11 Mbps upload, a 10 GB monthly data cap, and 10 GB of bonus data (20 GB total) for $59.99 per month; and 3) HughesNet Power Pro with speeds up to 10 Mbps/2 Mbps, a monthly data cap of 15 GB, and 15 GB bonus bytes (30 GB total) for $79.99 per month; and 4) HughesNet Power Max with speeds up to 15 Mbps/2 Mbps, a monthly data cap of 20 GB, and 20 GB of bonus data (40 GB total) for $129.99 per month. HughesNet offers two packages for Internet services to small businesses. The Business 50 package provides speeds of up to 5 Mbps download and 1 Mbps upload for $69.99 per month with a 5 GB per month anytime allowance and 10 GB bonus bytes from 2am to 10 am for a total monthly data allowance of 15 GB. This package requires a two year agreement and only supports up to five users. The Business 100 package provides the same download and upload speeds of the Business 50 package, but offers a higher data allowance threshold of 10 GB per month anytime and 15 GB bonus bytes from 2 am to 10 am for a monthly data allowance of 25 GB. This package also requires a two year agreement and is best for 5 to just over 10 users. 2.3.2 Exede Exede offers three Internet packages in the region each with up to 12 Mbps download and 3 Mbps upload speeds. These packages are: 1) Evolution 5 with a monthly 5 GB data cap (excluding emails and web pages) for $49.99 per month 2) Evolution 20 with a 20 GB monthly data cap for $69.99 per month and 3) Freedom with unlimited access for $99.99 per month. 2.3.3 DishNET DishNET offers three residential Internet packages in the region. These packages are: 1) Up to 5 Mbps download speed with a monthly 5 GB data cap and 5 GB of bonus data for $49.99 per month with a 24-month commitment; 2) download speeds up to 10 Mbps with a 10 GB monthly data cap and 10 GB of bonus data for $59.99 per month with a 24-month commitment; and 3) up to 10 Mbps download speed with a 15 GB monthly data cap and 15 GB of bonus data for $79.99 per month with a 24-month commitment. 2.4 Wireless There are six providers that offer wireless Internet services in Palo Alto: Verizon, Sprint, AT&T, Cricket Wireless, T-Mobile, and Etheric Networks. 2.4.1 Verizon Verizon offers two 4G LTE data packages with multiple choices for data allowances and pricing depending on the desired mobility and equipment chosen. The HomeFusion Broadband Package is a data-only 4G LTE service with WiFi connectivity and wired Ethernet for up to four devices. There are download speeds of 5 Mbps to 12 Mbps and upload speeds of 2 Mbps to 5 Mbps. Monthly prices range from $60 for a 10 GB data allowance to $120 for a 30 GB data cap. Overages are charged at $10 per additional GB. A two-year contract is required with a $350 CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 12 early termination fee. Verizon offers a $10 monthly deduction for every month completed in the contract. The Ellipsis JetPack provides a mobile solution with download speeds of 5 Mbps to 12 Mbps and upload speeds of 2 Mbps to 5 Mbps. Prices for the 12 options of data allowances range from $30 per month for a 4 GB data allowance to $335 per month for 50 GB of data, in addition to a monthly line access charge of $20.The device is $0.99 with a two-year contract. There is a $35 activation fee. 2.4.2 Sprint Sprint offers 4G LTE wireless data in Palo Alto. The three data packages offered range from 100 MB per month data allowance for $15 per month to 6 GB per month data allowance for $50 per month to 12 GB per month data allowance for $80 per month. Each MB over the limits is billed at a cost of $.05. A two-year contract is required as well as an activation fee of $36, and equipment charges for three different types of devices. There is also an early termination fee of $200. 2.4.3 AT&T AT&T also provides 4G LTE wireless data service in the area, but only offers one package type with a 5 GB per month download allowance for $50 per month. There is an overage fee of $10 per 1 GB over the limit. There are also equipment charges with or without a contract and an activation fee. 2.4.4 Cricket Wireless Cricket Wireless, which recently became a subsidiary of AT&T, offers 4G LTE wireless service in Palo Alto with a download speed of up to 8 Mbps with three options for data allowance packages. Starting at $35 per month for 1 GB of data allowed there are also options for data allowances of 3 GB ($45) and 10 GB ($55).Data used beyond allowances are at reduced speeds. There is a $79.99 modem fee for an additional device. There is a $15 activation fee, but no contract or early termination fees. 2.4.5 T-Mobile Of the cellular wireless providers in the area, the least expensive wireless data option offered is from T-Mobile for $20 per month with a limit of 1 GB per month. T-Mobile offers additional capabilities and increasing data limits at incremental costs in a total of six packages up to $70 per month for up to 11 GB of data. Depending upon current promotions, the $35 activation fee may be waived. CTC Report | City of Palo Alto – Appendix A: Existing Market Assessment | July 2015 13 2.4.6 Etheric Networks Etheric Networks is a wireless internet service provider (WISP) that provides services in Palo Alto for speeds up to 30 Mbps.34 The range of speeds and pricing available are indicated in Table 5. A radio and antenna fee of $299 is also charged during setup and installation. Table 5: Etheric Networks Internet Services PACKAGE INTERNET SPEED PRICE Bronze Up to 5 Mbps download $85/mo Silver Up to 10 Mbps download $99/mo Gold Up to 20 Mbps download $139/mo Platinum up to 25Mbps download $179/mo Diamond up to 30 Mbps download $229/mo 34 http://ethericnetworks.com/residential/. accessed May 2015. DR A F T First is to ensure that all assumptions are clearly understood and their impact to the projected results. Second is to present a plausible outcome of the proposed broadband business. Third is to provide a guide to judge the progress of the broadband business as it unfolds. CTC does not warrant the analysis, the assumptions, or the success of the broadband business. CTC only offers this tool as a means of providing consultative advice. There will usually be differences between the projected and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. City of Palo Alto FTTP Network July 15, 2015 Appendix B - Retail Data Services - Rev 13 Palo Alto, California CTC Technology & Energy 1 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Financial Statements Page Income Statement 3Cash Flow Statement 5 Capital Additions 7 Financial Summary Tables 9 Scenarios 13 Expense Charts 21 FTTP Cost Summary OSP Cost Estimate Summary 25 Network Electronics Summary 26 Other Project Assumptions 27 CTC Technology & Energy 2 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13 July 15, 2015 Income Statement Year 1 2 3 4 5 6 7 8 9 10 a. RevenuesInternet - Residential 1,722,000$ 7,726,320$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ Internet - Business 472,320 2,109,840 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 Enterprise - - - - - - - - - - Connection Fee (net)350,850 1,222,800 1,224,000 - - - - - - - Provider Fee - - - - - - - - - - Ancillary Revenues - - - - - - - - - - Total 2,545,170$ 11,058,960$ 18,712,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ b. Content FeesInternet 89,230$ 400,170$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ Enterprise - - - - - - - - - - Total 89,230$ 400,170$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ c. Operating CostsLabor Costs 1,409,930$ 3,496,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ Support Services 57,020 31,470 55,950 55,950 55,950 55,950 55,950 55,950 55,950 55,950 Insurance 100,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Utilities 25,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Office Expenses 36,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Facility Lease - - - - - - - - - - Locates & Ticket Processing 19,000 38,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Contingency 25,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Billing Maintenance Contract 15,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Fiber & Network Maintenance 89,920 109,900 109,900 109,900 109,900 109,900 109,900 109,900 109,900 109,900 Vendor Maintenance Contracts - 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 Legal and Lobby Fees 150,000 75,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Consulting 100,000 50,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Marketing 500,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 Education and Training 28,200 69,930 97,650 97,650 97,650 97,650 97,650 97,650 97,650 97,650 Customer Handholding 2,810 12,590 22,380 22,380 22,380 22,380 22,380 22,380 22,380 22,380 Customer Billing (Unit)1,400 6,290 11,190 11,190 11,190 11,190 11,190 11,190 11,190 11,190 Allowance for Bad Debts 12,730 55,290 93,560 87,440 87,440 87,440 87,440 87,440 87,440 87,440 Churn (acquisition costs)10,530 47,210 83,930 83,930 83,930 83,930 83,930 83,930 83,930 83,930 Pole Attachment Expense 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 Total 2,716,880$ 6,070,970$ 7,585,850$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ d. EBITDA (260,940)$ 4,587,820$ 10,415,040$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ e. Depreciation 3,434,290$ 6,119,300$ 8,176,960$ 8,223,890$ 8,270,820$ 7,934,470$ 6,749,060$ 5,562,930$ 5,562,930$ 5,562,930$ f. Operating Income (EBITDA less depreciation (3,695,230)$ (1,531,480)$ 2,238,080$ 973,270$ 926,340$ 1,262,690$ 2,448,100$ 3,634,230$ 3,634,230$ 3,634,230$ g. Non-Operating IncomeInterest Income -$ 6,250$ 6,250$ 13,890$ 21,570$ 24,850$ 22,040$ 17,820$ 23,910$ 30,000$ Interest Expense (10 Year Bond)- - - - - - - - - - Interest Expense (20 Year Bond)(2,000,000) (2,000,000) (2,000,000) (2,000,000) (1,915,600) (1,827,830) (1,736,550) (1,641,610) (1,542,880) (1,440,200) Interest Expense (Loan)(215,000) (1,065,000) (1,265,000) (1,265,000) (1,219,920) (1,172,580) (1,122,870) (1,070,680) (1,015,880) (958,350) Total (2,215,000)$ (3,058,750)$ (3,258,750)$ (3,251,110)$ (3,113,950)$ (2,975,560)$ (2,837,380)$ (2,694,470)$ (2,534,850)$ (2,368,550)$ h. Net Income (before taxes)(5,910,230)$ (4,590,230)$ (1,020,670)$ (2,277,840)$ (2,187,610)$ (1,712,870)$ (389,280)$ 939,760$ 1,099,380$ 1,265,680$ i. Facility Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ j. Net Income (5,910,230)$ (4,590,230)$ (1,020,670)$ (2,277,840)$ (2,187,610)$ (1,712,870)$ (389,280)$ 939,760$ 1,099,380$ 1,265,680$ CTC Technology & Energy 3 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13 July 15, 2015 Income Statement Year 11 12 13 14 15 16 17 18 19 20 a. RevenuesInternet - Residential 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ Internet - Business 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 3,752,640 Enterprise - - - - - - - - - - Provider Fee - - - - - - - - - - Ancillary Revenues - - - - - - - - - - Total 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ b. Content FeesInternet 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ Enterprise - - - - - - - - - - Total 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ 711,430$ c. Operating CostsLabor Costs 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ Support Services 55,950 55,950 55,950 55,950 55,950 55,950 55,950 55,950 55,950 55,950 Insurance 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 Utilities 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Office Expenses 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Facility Lease - - - - - - - - - - Locates & Ticket Processing 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Contingency 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Billing Maintenance Contract 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Fiber & Network Maintenance 109,900 109,900 109,900 109,900 109,900 109,900 109,900 109,900 109,900 109,900 Vendor Maintenance Contracts 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 1,369,600 Legal and Lobby Fees 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Consulting 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Marketing 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 Education and Training 97,650 97,650 97,650 97,650 97,650 97,650 97,650 97,650 97,650 97,650 Customer Handholding 22,380 22,380 22,380 22,380 22,380 22,380 22,380 22,380 22,380 22,380 Customer Billing (Unit)11,190 11,190 11,190 11,190 11,190 11,190 11,190 11,190 11,190 11,190 Allowance for Bad Debts 87,440 87,440 87,440 87,440 87,440 87,440 87,440 87,440 87,440 87,440 Churn (acquisition costs)83,930 83,930 83,930 83,930 83,930 83,930 83,930 83,930 83,930 83,930 Pole Attachment Expense 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 134,340 Total 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ d. EBITDA 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ e. Depreciation 5,011,700$ 4,466,710$ 4,467,410$ 5,292,010$ 5,292,010$ 5,292,010$ 4,966,140$ 4,466,710$ 4,467,410$ 5,292,010$ f. Operating Income (EBITDA less depreciation 4,185,460$ 4,730,450$ 4,729,750$ 3,905,150$ 3,905,150$ 3,905,150$ 4,231,020$ 4,730,450$ 4,729,750$ 3,905,150$ g. Non-Operating Income Interest Income 12,890$ 9,040$ 3,490$ (1,050)$ 4,710$ 10,480$ 15,850$ 16,550$ 11,010$ 6,470$ Interest Expense (10 Year Bond)- - - - - - - - - - Interest Expense (20 Year Bond)(1,333,410) (1,222,350) (1,106,840) (986,720) (861,790) (731,870) (596,740) (456,220) (310,070) (158,070) Interest Expense (Loan)(897,930) (834,490) (767,880) (697,940) (624,510) (547,400) (466,430) (381,420) (292,160) (198,430) Total (2,218,450)$ (2,047,800)$ (1,871,230)$ (1,685,710)$ (1,481,590)$ (1,268,790)$ (1,047,320)$ (821,090)$ (591,220)$ (350,030)$ h. Net Income (before taxes)1,967,010$ 2,682,650$ 2,858,520$ 2,219,440$ 2,423,560$ 2,636,360$ 3,183,700$ 3,909,360$ 4,138,530$ 3,555,120$ i. Facility Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ j. Net Income 1,967,010$ 2,682,650$ 2,858,520$ 2,219,440$ 2,423,560$ 2,636,360$ 3,183,700$ 3,909,360$ 4,138,530$ 3,555,120$ CTC Technology & Energy 4 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13July 15, 2015 Cash Flow Statement 1 2 3 4 5 6 7 8 9 10a. Net Income (5,910,230)$ (4,590,230)$ (1,020,670)$ (2,277,840)$ (2,187,610)$ (1,712,870)$ (389,280)$ 939,760$ 1,099,380$ 1,265,680$ b. Cash OutflowsDebt Service Reserve (2,500,000)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest Reserve (4,000,000) - - - - - - - - - Depreciation Reserve - - - (3,289,560) (3,308,330) (3,173,790) (3,239,550) (2,670,210) (2,670,210) (2,670,210) Financing (500,000) - - - - - - - - - Capital Expenditures (46,780,400) (20,557,700) (10,288,300) (234,650) (234,650) (1,864,010) (4,361,130) (4,357,670) (234,650) (234,650) Total (53,780,400)$ (20,557,700)$ (10,288,300)$ (3,524,210)$ (3,542,980)$ (5,037,800)$ (7,600,680)$ (7,027,880)$ (2,904,860)$ (2,904,860)$ c. Cash InflowsInterest Reserve 2,000,000$ 2,000,000$ -$ -$ -$ -$ -$ -$ -$ -$ Depreciation Reserve - - - 234,650 234,650 1,864,010 4,361,130 4,357,670 234,650 234,650 Investment Capital - - - - - - - - - - Start Up Funds - - - - - - - - - - Grants (infrastructure)- - - - - - - - - - Grants (customer premises)- - - - - - - - - - 10-Year Bond/Loan Proceeds - - - - - - - - - - 20-Year Bond Proceeds 50,000,000 - - - - - - - - - Loan Proceeds 4,300,000 17,000,000 4,000,000 - - - - - - - Total 56,300,000$ 19,000,000$ 4,000,000$ 234,650$ 234,650$ 1,864,010$ 4,361,130$ 4,357,670$ 234,650$ 234,650$ d. Total Cash Outflows and Inflows 2,519,600$ (1,557,700)$ (6,288,300)$ (3,289,560)$ (3,308,330)$ (3,173,790)$ (3,239,550)$ (2,670,210)$ (2,670,210)$ (2,670,210)$ e. Non-Cash Expenses - Depreciation 3,434,290$ 6,119,300$ 8,176,960$ 8,223,890$ 8,270,820$ 7,934,470$ 6,749,060$ 5,562,930$ 5,562,930$ 5,562,930$ f. Adjustments Proceeds from Additional Cash Flows (10 Year Bond)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Proceeds from Additional Cash Flows (20 Year Bond)(50,000,000)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Proceeds from Additional Cash Flows (Loan)(4,300,000)$ (17,000,000)$ (4,000,000)$ -$ -$ -$ -$ -$ -$ -$ g. Adjusted Available Net Revenue (54,256,340)$ (17,028,630)$ (3,132,010)$ 2,656,490$ 2,774,880$ 3,047,810$ 3,120,230$ 3,832,480$ 3,992,100$ 4,158,400$ h. Principal Payments on Debt 10 Year Bond Principal -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 20 Year Bond Principal - - - 2,109,930 2,194,330 2,282,100 2,373,380 2,468,320 2,567,050 2,669,730 Loan Principal - - - 901,670 946,760 994,090 1,043,800 1,095,990 1,150,790 1,208,330 Total -$ -$ -$ 3,011,600$ 3,141,090$ 3,276,190$ 3,417,180$ 3,564,310$ 3,717,840$ 3,878,060$ i. Net Cash 43,660$ (28,630)$ 867,990$ (355,110)$ (366,210)$ (228,380)$ (296,950)$ 268,170$ 274,260$ 280,340$ j. Cash BalanceUnrestricted Cash Balance 43,660$ 15,030$ 883,020$ 527,910$ 161,700$ (66,680)$ (363,630)$ (95,460)$ 178,800$ 459,140$ Depreciation Reserve - - - 3,054,910 6,128,590 7,438,370 6,316,790 4,629,330 7,064,890 9,500,450 Interest Reserve 2,000,000 - - - - - - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,543,660$ 2,515,030$ 3,383,020$ 6,082,820$ 8,790,290$ 9,871,690$ 8,453,160$ 7,033,870$ 9,743,690$ 12,459,590$ Un-depreciated Value of Capital Assets 43,346,110$ 57,784,510$ 59,895,850$ 51,906,600$ 43,870,430$ 37,799,970$ 35,412,050$ 34,206,790$ 28,878,510$ 23,550,220$ Debt Service Balance (10 Year Bond)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Debt Service Balance (20 Year Bond)50,000,000$ 50,000,000$ 50,000,000$ 50,000,000$ 47,890,070$ 45,695,740$ 43,413,640$ 41,040,260$ 38,571,940$ 36,004,890$ Debt Service Balance (Internal Loan)4,300,000$ 17,000,000$ 4,000,000$ (901,670)$ (946,760)$ (994,090)$ (1,043,800)$ (1,095,990)$ (1,150,790)$ (1,208,330)$ Debt Service (P&I)2,215,000$ 3,065,000$ 3,265,000$ 6,276,600$ 6,276,610$ 6,276,600$ 6,276,600$ 6,276,600$ 6,276,600$ 6,276,610$ Debt Coverage Ratio - - - 1.97 1.88 1.85 1.75 1.84 1.76 1.69 Debt Service Coverage Ratio - - - 0.88 0.88 0.93 0.91 1.08 1.07 1.07 CTC Technology & Energy 5 DR A F T City of Palo Alto FTTP Network July 15, 2015 Cash Flow Statement 11 12 13 14 15 16 17 18 19 20a. Net Income 1,967,010$ 2,682,650$ 2,858,520$ 2,219,440$ 2,423,560$ 2,636,360$ 3,183,700$ 3,909,360$ 4,138,530$ 3,555,120$ b. Cash OutflowsDebt Service Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest Reserve - - - - - - - - - - Depreciation Reserve (2,405,620) (2,144,020) (2,144,360) (2,540,160) (2,540,160) (2,540,160) (2,383,750) (2,144,020) (2,144,360) (2,540,160) Financing - - - - - - - - - - Capital Expenditures (9,249,170) (3,686,320) (4,361,130) (4,357,670) (234,650) (234,650) (234,650) (1,864,010) (4,361,130) (4,357,670) Total (11,654,790)$ (5,830,340)$ (6,505,490)$ (6,897,830)$ (2,774,810)$ (2,774,810)$ (2,618,400)$ (4,008,030)$ (6,505,490)$ (6,897,830)$ c. Cash InflowsInterest Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Depreciation Reserve 9,249,170 3,686,320 4,361,130 4,357,670 234,650 234,650 234,650 1,864,010 4,361,130 4,357,670 Investment Capital - - - - - - - - - - Start Up Funds - - - - - - - - - - Grants (infrastructure)- - - - - - - - - - Grants (customer premises)- - - - - - - - - - 10-Year Bond/Loan Proceeds - - - - - - - - - - 20-Year Bond Proceeds - - - - - - - - - - Loan Proceeds - - - - - - - - - - Total 9,249,170$ 3,686,320$ 4,361,130$ 4,357,670$ 234,650$ 234,650$ 234,650$ 1,864,010$ 4,361,130$ 4,357,670$ d. Total Cash Outflows and Inflows (2,405,620)$ (2,144,020)$ (2,144,360)$ (2,540,160)$ (2,540,160)$ (2,540,160)$ (2,383,750)$ (2,144,020)$ (2,144,360)$ (2,540,160)$ e. Non-Cash Expenses - Depreciation 5,011,700$ 4,466,710$ 4,467,410$ 5,292,010$ 5,292,010$ 5,292,010$ 4,966,140$ 4,466,710$ 4,467,410$ 5,292,010$ f. AdjustmentsProceeds from Additional Cash Flows (10 Year Bond)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Proceeds from Additional Cash Flows (20 Year Bond)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Proceeds from Additional Cash Flows (Loan)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ g. Adjusted Available Net Revenue 4,573,090$ 5,005,340$ 5,181,570$ 4,971,290$ 5,175,410$ 5,388,210$ 5,766,090$ 6,232,050$ 6,461,580$ 6,306,970$ h. Principal Payments on Debt 10 Year Bond Principal -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 20 Year Bond Principal 2,776,520 2,887,580 3,003,090 3,123,210 3,248,140 3,378,060 3,513,190 3,653,710 3,799,860 3,951,860 Loan Principal 1,268,740 1,332,180 1,398,790 1,468,730 1,542,170 1,619,270 1,700,240 1,785,250 1,874,510 1,968,240 Total 4,045,260$ 4,219,760$ 4,401,880$ 4,591,940$ 4,790,310$ 4,997,330$ 5,213,430$ 5,438,960$ 5,674,370$ 5,920,100$ i. Net Cash 527,830$ 785,580$ 779,690$ 379,350$ 385,100$ 390,880$ 552,660$ 793,090$ 787,210$ 386,870$ j. Cash Balance Unrestricted Cash Balance 986,970$ 1,772,550$ 2,552,240$ 2,931,590$ 3,316,690$ 3,707,570$ 4,260,230$ 5,053,320$ 5,840,530$ 6,227,400$ Depreciation Reserve 2,656,900 1,114,600 (1,102,170) (2,919,680) (614,170) 1,691,340 3,840,440 4,120,450 1,903,680 86,170 Interest Reserve - - - - - - - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 6,143,870$ 5,387,150$ 3,950,070$ 2,511,910$ 5,202,520$ 7,898,910$ 10,600,670$ 11,673,770$ 10,244,210$ 8,813,570$ Un-depreciated Value of Capital Assets 27,787,700$ 27,007,300$ 26,901,030$ 25,966,690$ 20,909,330$ 15,851,970$ 11,120,480$ 8,517,780$ 8,411,500$ 7,477,160$ Debt Service Balance (10 Year Bond)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Debt Service Balance (20 Year Bond)33,228,370$ 30,340,790$ 27,337,700$ 24,214,490$ 20,966,350$ 17,588,290$ 14,075,100$ 10,421,390$ 6,621,530$ 2,669,670$ Debt Service Balance (Internal Loan)(2,477,070)$ (3,809,250)$ (5,208,040)$ (6,676,770)$ (8,218,940)$ (9,838,210)$ (11,538,450)$ (13,323,700)$ (15,198,210)$ -$ Debt Service (P&I)6,276,600$ 6,276,600$ 6,276,600$ 6,276,600$ 6,276,610$ 6,276,600$ 6,276,600$ 6,276,600$ 6,276,600$ 6,276,600$ Debt Coverage Ratio 1.68 1.67 1.60 1.45 1.39 1.33 1.31 - - Debt Service Coverage Ratio 1.13 1.19 1.18 1.08 1.08 1.08 1.11 - - CTC Technology & Energy 6 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13July 15, 2015 Capital Additions 1 2 3 4 5 6 7 8 9 10Network EquipmentCore & Base Equipment 4,434,490$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Incremental (Switches & OLTs)6,833,660 2,277,890 - - - - - - - - Additional Annual Capital - - - - - - - - - - Total 11,268,150$ 2,277,890$ -$ -$ -$ -$ -$ -$ -$ -$ Outside Plant and FacilitiesTotal Backbone and FTTP 31,966,480$ 7,991,620$ -$ -$ -$ -$ -$ -$ -$ -$ Additional Annual Capital - - - - - - - - - - Total 31,966,480$ 7,991,620$ -$ -$ -$ -$ -$ -$ -$ -$ Last Mile and Customer Premises Equipment CPE Gbps (medium commercial)61,020$ 210,930$ 211,980$ -$ -$ -$ -$ -$ -$ -$ CPE Residential & Small Commercial 1,108,790 3,866,040 3,869,040 - - - - - - - Enterprise CPE and Drop - - - - - - - - - - Average Drop Cost 1,772,960 6,179,220 6,185,280 - - - - - - - Additional Annual Replacement Capital - - - 234,650 234,650 234,650 234,650 234,650 234,650 234,650 Total 2,942,770$ 10,256,190$ 10,266,300$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ Miscellaneous Implementation Costs Splicing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Vehicles 150,000 - - - - - - - - - Emergency Restoration Kit 50,000 - - - - - - - - - Work Station, Computers, and Software 18,000 32,000 22,000 - - - - - - - Fiber OTDR and Other Tools 85,000 - - - - - - - - - Generators & UPS - - - - - - - - - - OSS 300,000 - - - - Additional Annual Capital - - - - - - - - - - Total 603,000$ 32,000$ 22,000$ -$ -$ -$ -$ -$ -$ -$ Replacement Costs for DepreciationNetwork Equipment -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Last Mile and Customer Premises Equipment - - - - - 1,177,110 4,102,480 4,106,520 - - Miscellaneous Implementation Costs - - - - - 452,250 24,000 16,500 - - Total -$ -$ -$ -$ -$ 1,629,360$ 4,126,480$ 4,123,020$ -$ -$ Total Capital Additions 46,780,400$ 20,557,700$ 10,288,300$ 234,650$ 234,650$ 1,864,010$ 4,361,130$ 4,357,670$ 234,650$ 234,650$ 77,626,400$ Depreciation Reserve Contribution -$ -$ -$ 3,289,560$ 3,308,330$ 3,173,790$ 3,239,550$ 2,670,210$ 2,670,210$ 2,670,210$ Draws from Depreciation Reserve - - - (234,650) (234,650) (1,864,010) (4,361,130) (4,357,670) (234,650) (234,650) Net Depreciation Reserve Balance -$ -$ -$ 3,054,910$ 6,128,590$ 7,438,370$ 6,316,790$ 4,629,330$ 7,064,890$ 9,500,450$ CTC Technology & Energy 7 DR A F T City of Palo AltoFTTP NetworkJuly 15, 2015 Capital Additions 11 12 13 14 15 16 17 18 19 20Network EquipmentCore & Base Equipment -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Incremental (Switches & OLTs)- - - - - - - - - - TBD - - - - - - - - - - TBD - - - - - - - - - - Additional Annual Capital - - - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Outside Plant and FacilitiesTotal Backbone and FTTP -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Additional Annual Capital - - - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Last Mile and Customer Premises EquipmentCPE Gbps (medium commercial)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ CPE Residential & Small Commercial - - - - - - - - - - Average Drop Cost - - - - - - - - - - Additional Annual Replacement Capital 234,650 234,650 234,650 234,650 234,650 234,650 234,650 234,650 234,650 234,650 Total 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ 234,650$ Miscellaneous Implementation Costs Splicing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Vehicles - - - - - - - - - - Emergency Restoration Kit - - - - - - - - - - Work Station, Computers, and Software - - - - - - - - - - Fiber OTDR and Other Tools - - - - - - - - - - Generators & UPS - - - - - - - - - - Additional Annual Capital - - - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Replacement Costs for DepreciationNetwork Equipment 9,014,520$ 1,822,310$ -$ -$ -$ -$ -$ -$ -$ -$ Last Mile and Customer Premises Equipment - 1,177,110 4,102,480 4,106,520 - - - 1,177,110 4,102,480 4,106,520 Miscellaneous Implementation Costs - 452,250 24,000 16,500 - - - 452,250 24,000 16,500 Total 9,014,520$ 3,451,670$ 4,126,480$ 4,123,020$ -$ -$ -$ 1,629,360$ 4,126,480$ 4,123,020$ Total Capital Additions 9,249,170$ 3,686,320$ 4,361,130$ 4,357,670$ 234,650$ 234,650$ 234,650$ 1,864,010$ 4,361,130$ 4,357,670$ CTC Technology & Energy 8 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Financial Summary Tables Year 1 Year 5 Year 10 Year 15 Year 20 Operating Expenses Support Services 57,020$ 55,950$ 55,950$ 55,950$ 55,950$ Insurance 100,000 150,000 150,000 150,000 150,000 Utilities 25,000 50,000 50,000 50,000 50,000 Office Expenses 36,000 50,000 50,000 50,000 50,000 Locates & Ticket Processing 19,000 75,000 75,000 75,000 75,000 Contingency 25,000 50,000 50,000 50,000 50,000 Billing Maintenance Contract 15,000 25,000 25,000 25,000 25,000 Fiber & Network Maintenance 89,920 109,900 109,900 109,900 109,900 Vendor Maintenance Contracts - 1,369,600 1,369,600 1,369,600 1,369,600 Legal and Lobby Fees 150,000 50,000 50,000 50,000 50,000 Consulting 100,000 25,000 25,000 25,000 25,000 Marketing 500,000 250,000 250,000 250,000 250,000 Education and Training 28,200 97,650 97,650 97,650 97,650 Customer Handholding 2,810 22,380 22,380 22,380 22,380 Customer Billing (Unit)1,400 11,190 11,190 11,190 11,190 Allowance for Bad Debts 12,730 87,440 87,440 87,440 87,440 Churn (acquisition costs)10,530 83,930 83,930 83,930 83,930 Pole Attachment Expense 134,340 134,340 134,340 134,340 134,340 Internet 89,230 711,430 711,430 711,430 711,430 Sub-Total 1,396,180$ 3,408,810$ 3,408,810$ 3,408,810$ 3,408,810$ Labor Expenses 1,409,930$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ Sub-Total 1,409,930$ 4,882,350$ 4,882,350$ 4,882,350$ 4,882,350$ Total Expenses 2,806,110$ 8,291,160$ 8,291,160$ 8,291,160$ 8,291,160$ Principal and Interest 2,215,000$ 6,276,610$ 6,276,610$ 6,276,610$ 6,276,600$ Facility Taxes - - - - - Sub-Total 2,215,000$ 6,276,610$ 6,276,610$ 6,276,610$ 6,276,600$ Total Expenses, P&I, and Taxes 5,021,110$ 14,567,770$ 14,567,770$ 14,567,770$ 14,567,760$ CTC Technology & Energy 9 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Financial Summary Tables Year 1 Year 5 Year 10 Year 15 Year 20 a. Revenues Internet - Residential 1,722,000$ 13,735,680$ 13,735,680$ 13,735,680$ 13,735,680$ Internet - Business 472,320 3,752,640 3,752,640 3,752,640 3,752,640 Enterprise - - - - - Connection Fee (net)350,850 - - - - Provider Fee - - - - - Assessments - - - - - Ancillary Revenues - - - - - Total 2,545,170$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ b. Content Fees Internet 89,230$ 711,430$ 711,430$ 711,430$ 711,430$ Total 89,230$ 711,430$ 711,430$ 711,430$ 711,430$ c. Operating Costs Operation Costs 1,306,950$ 2,697,380$ 2,697,380$ 2,697,380$ 2,697,380$ Labor Costs 1,409,930 4,882,350 4,882,350 4,882,350 4,882,350 Total 2,716,880$ 7,579,730$ 7,579,730$ 7,579,730$ 7,579,730$ d. EBITDA (260,940)$ 9,197,160$ 9,197,160$ 9,197,160$ 9,197,160$ e. Depreciation 3,434,290 8,270,820 5,562,930 5,292,010 5,292,010 f. Operating Income (EBITDA less Depreciation)(3,695,230)$ 926,340$ 3,634,230$ 3,905,150$ 3,905,150$ g. Non-Operating Income Interest Income -$ 30,000$ 30,000$ 4,710$ 6,470$ Interest Expense (10 Year Bond)- - - - - Interest Expense (20 Year Bond)(2,000,000) (1,440,200) (1,440,200) (861,790) (158,070) Interest Expense (Loan)(215,000) (958,350) (958,350) (624,510) (198,430) Total (2,215,000)$ (2,368,550)$ (2,368,550)$ (1,481,590)$ (350,030)$ h. Net Income (before taxes)(5,910,230)$ (2,187,610)$ 1,265,680$ 2,423,560$ 3,555,120$ i. Facility Taxes -$ -$ -$ -$ -$ j. Net Income (5,910,230)$ (2,187,610)$ 1,265,680$ 2,423,560$ 3,555,120$ CTC Technology & Energy 10 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Financial Summary Tables Year 1 Year 5 Year 10 Year 15 Year 20 Net Income (5,910,230)$ (2,187,610)$ 1,265,680$ 2,423,560$ 3,555,120$ Cash Flow 43,660$ (366,210)$ 280,340$ 385,100$ 386,870$ Year 1 Year 5 Year 10 Year 15 Year 20 Principle Payments $ - $ 3,141,090 $ 3,878,060 $ 4,790,310 $ 5,920,100 Interest Payments 2,215,000 3,135,520 2,398,550 1,486,300 356,500 Total Debt Service $ 2,215,000 $ 6,276,610 $ 6,276,610 $ 6,276,610 $ 6,276,600 Year 1 Year 5 Year 10 Year 15 Year 20 Unrestricted Cash Balance 43,660$ 161,700$ 459,140$ 3,316,690$ 6,227,400$ Funded Depreciation - 6,128,590 9,500,450 (614,170) 86,170 Restricted Cash Balance (Interest Reserve)2,000,000 - - - - Restricted Cash Balance (Debt Service Reserve)2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,543,660$ 8,790,290$ 12,459,590$ 5,202,520 8,813,570$ CTC Technology & Energy 11 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Financial Summary Tables Capital Additions Year 1 Year 2 Year 3 Total Years 1 to 3 Network Equipment Core & Base Equipment 4,434,490$ -$ -$ 4,434,490$ Incremental (Switches & OLTs)6,833,660 2,277,890 - 9,111,550 TBD - - - - TBD - - - - Additional Annual Capital - - - - Total 11,268,150$ 2,277,890$ -$ 13,546,040$ Outside Plant and Facilities Total Backbone and FTTP 31,966,480$ 7,991,620$ -$ 39,958,100$ Additional Annual Capital - - - - Total 31,966,480$ 7,991,620$ -$ 39,958,100$ Last Mile and Customer Premises Equipment CPE Gbps (medium commercial)61,020$ 210,930$ 211,980$ CPE Residential & Small Commercial 1,108,790$ 3,866,040$ 3,869,040$ 8,843,870$ Enterprise CPE and Drop - - - - Average Drop Cost 1,772,960 6,179,220 6,185,280 14,137,460 Total 2,942,770$ 10,256,190$ 10,266,300$ 23,465,260$ Miscellaneous Implementation Costs Splicing -$ -$ -$ Vehicles 150,000 - - Emergency Restoration Kit 50,000 - - Work Station, Computers, and Software 18,000$ 32,000$ 22,000$ 72,000$ Fiber OTDR and Other Tools 85,000 - - 85,000 Generators & UPS - - - - OSS 300,000 - - 300,000 Additional Annual Capital - - - - Total 603,000$ 32,000$ 22,000$ 657,000$ Total Capital Additions 46,780,400$ 20,557,700$ 10,288,300$ 77,626,400$ CTC Technology & Energy 12 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ Total Cash Expenses (2,806,110) (8,291,160) (8,291,160) (8,291,160) (8,291,160) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,030) Taxes - - - - - Net Income (5,910,230)$ (2,187,610)$ 1,265,680$ 2,423,560$ 3,555,120$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 43,660$ 161,700$ 459,140$ 3,316,690$ 6,227,400$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,543,660$ 8,790,290$ 12,459,590$ 5,202,520$ 8,813,570$ Investment Metric Internal Rate of Return (IRR) - 20 year 0.47% Net Present Value (NPV) at a 4 percent discount rate - 20 year (23,140,050)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 15,081,480$ 15,081,480$ 15,081,480$ 15,081,480$ Total Cash Expenses (2,474,900) (6,489,030) (6,489,030) (6,489,030) (6,489,030) Depreciation (3,344,360) (7,491,010) (5,151,390) (4,904,450) (4,904,450) Interest Expense (2,165,000) (2,874,100) (2,178,890) (1,352,810) (302,450) Taxes - - - - - Net Income (5,439,090)$ (1,772,660)$ 1,262,170$ 2,335,190$ 3,385,550$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 324,190$ (258,860)$ 331,870$ 3,111,930$ 5,947,450$ Depreciation Reserve - 5,571,860 9,207,260 701,540 2,054,370 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,824,190$ 7,813,000$ 12,039,130$ 6,313,470$ 10,501,820$ Investment Metric Internal Rate of Return (IRR)0.52% Net Present Value (NPV) at a 4 percent discount rate - 20 year (21,532,230)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 15,956,280$ 15,956,280$ 15,956,280$ 15,956,280$ Total Cash Expenses (2,806,110) (7,748,000) (7,748,000) (7,748,000) (7,748,000) Depreciation (3,368,480) (7,763,050) (5,289,500) (5,036,130) (5,036,130) Interest Expense (2,015,000) (2,923,920) (2,225,710) (1,393,850) (331,700) Taxes - - - - - Net Income (5,644,420)$ (2,478,690)$ 693,070$ 1,778,300$ 2,840,450$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 1,401,880$ 1,747,590$ (63,470)$ 446,080$ 1,009,740$ Depreciation Reserve - 5,765,070 9,278,290 257,190 1,351,020 Interest Reserve 1,800,000 - - - - Debt Service Reserve 2,250,000 2,250,000 2,250,000 2,250,000 2,250,000 Total Cash Balance 5,451,880$ 9,762,660$ 11,464,820$ 2,953,270$ 4,610,760$ Investment Metric Internal Rate of Return (IRR)-0.12% Net Present Value (NPV) at a 4 percent discount rate - 20 year (23,931,230)$ Discount Rate 4.00% Base Case 1. Decrease Overhead to 27 Percent of Salaries (from 65 percent), Financing Reduced by $5 Million, and Take Rate Decreased to 62.1 Percent 2. Use $5 Million in Start-Up Funds (decrease amount bonded by same), Reduce Take Rate to 65.7 Percent CTC Technology & Energy 13 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 15,300,000$ 15,300,000$ 15,300,000$ 15,300,000$ Total Cash Expenses (2,806,110) (7,536,760) (7,536,760) (7,536,760) (7,536,760) Depreciation (3,350,950) (7,559,850) (5,186,670) (4,937,980) (4,937,980) Interest Expense (1,815,000) (2,733,350) (2,082,440) (1,307,470) (315,205) Taxes - - - - - Net Income (5,426,890)$ (2,529,960)$ 494,130$ 1,517,790$ 2,510,055$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 2,277,120$ 3,018,010$ 1,336,620$ 1,877,640$ 2,473,800$ Depreciation Reserve - 5,620,790 9,227,370 588,270 1,877,750 Interest Reserve 1,600,000 - - - - Debt Service Reserve 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Total Cash Balance 5,877,120$ 10,638,800$ 12,563,990$ 4,465,910$ 6,351,550$ Investment MetricInternal Rate of Return (IRR)0.06%Net Present Value (NPV) at a 4 percent discount rate - 20 year (20,863,300)$ Discount Rate 4.00% Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 14,645,400$ 14,645,400$ 14,645,400$ 14,645,400$ Total Cash Expenses (2,806,100) (7,476,960) (7,476,960) (7,476,960) (7,476,960) Depreciation (3,333,490) (7,356,980) (5,084,140) (4,840,110) (4,840,110) Interest Expense (1,615,000) (2,542,770) (1,939,170) (1,221,090) (298,705) Taxes - - - - - Net Income (5,209,420)$ (2,731,310)$ 145,130$ 1,107,240$ 2,029,625$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 3,151,820$ 3,837,550$ 1,536,380$ 1,359,490$ 1,238,780$ Depreciation Reserve - 5,476,820 9,176,280 918,090 2,402,640 Interest Reserve 1,400,000 - - - - Debt Service Reserve 1,750,000 1,750,000 1,750,000 1,750,000 1,750,000 Total Cash Balance 6,301,820$ 11,064,370$ 12,462,660$ 4,027,580$ 5,391,420$ Investment MetricInternal Rate of Return (IRR)-0.12%Net Present Value (NPV) at a 4 percent discount rate - 20 year (19,550,760)$ Discount Rate 4.00% Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 13,770,600$ 13,770,600$ 13,770,600$ 13,770,600$ Total Cash Expenses (2,806,110) (6,996,600) (6,996,600) (6,996,600) (6,996,600) Depreciation (3,287,370) (7,054,760) (4,916,100) (4,684,350) (4,684,350) Interest Expense (1,415,000) (2,352,380) (1,796,180) (1,134,210) (281,675) Taxes - - - - - Net Income (4,963,310)$ (2,633,140)$ 61,720$ 955,440$ 1,807,975$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 4,312,860$ 5,917,320$ 4,171,030$ 4,408,330$ 4,701,900$ Depreciation Reserve - 5,259,460 9,014,570 1,451,250 3,140,430 Interest Reserve 1,200,000 - - - - Debt Service Reserve 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Total Cash Balance 7,012,860$ 12,676,780$ 14,685,600$ 7,359,580$ 9,342,330$ Investment MetricInternal Rate of Return (IRR)0.46%Net Present Value (NPV) at a 4 percent discount rate - 20 year (15,015,170)$ Discount Rate 4.00% 5. Use $20 Million in Start-Up Funds (decrease amount bonded by same), Reduce Take Rate to 56.7 Percent 4. Use $15 Million in Start-Up Funds (decrease amount bonded by same), Reduce Take Rate to 60.3 Percent 3. Use $10 Million in Start-Up Funds (decrease amount bonded by same), Reduce Take Rate to 63 Percent CTC Technology & Energy 14 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 15,081,480$ 15,081,480$ 15,081,480$ 15,081,480$ Total Cash Expenses (2,806,110) (6,281,090) (6,281,090) (6,281,090) (6,281,090) Depreciation (3,344,360) (7,491,010) (5,151,390) (4,904,450) (4,904,450) Interest Expense (2,215,000) (3,115,340) (2,369,280) (1,478,300) (345,115) Taxes - - - - - Net Income (5,820,300)$ (1,805,960)$ 1,279,720$ 2,417,640$ 3,550,825$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 942,980$ 4,231,820$ 3,735,840$ 5,429,180$ 7,177,980$ Depreciation Reserve - 5,571,860 9,207,260 701,540 2,054,380 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 5,442,980$ 12,303,680$ 15,443,100$ 8,630,720$ 11,732,360$ Investment MetricInternal Rate of Return (IRR) - 20 year 0.60%Net Present Value (NPV) at a 4 percent discount rate - 20 year (21,211,620)$ Discount Rate 4.00% Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 13,989,960$ 13,989,960$ 13,989,960$ 13,989,960$ Total Cash Expenses (2,242,140) (5,410,930) (5,410,930) (5,410,930) (5,410,930) Depreciation (3,291,320) (7,119,830) (4,947,740) (4,714,950) (4,714,950) Interest Expense (2,215,000) (3,116,010) (2,369,740) (1,476,680) (342,835) Taxes - - - - - Net Income (5,203,290)$ (1,656,810)$ 1,261,550$ 2,387,400$ 3,521,245$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 2,037,350$ 6,007,850$ 4,984,420$ 5,976,420$ 7,024,270$ Depreciation Reserve - 5,305,430 9,023,780 1,348,740 2,968,180 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 6,537,350$ 13,813,280$ 16,508,200$ 9,825,160$ 12,492,450$ Investment MetricInternal Rate of Return (IRR) - 20 year 0.60%Net Present Value (NPV) at a 4 percent discount rate - 20 year (20,682,070)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 12,458,760$ 12,458,760$ 12,458,760$ 12,458,760$ Total Cash Expenses (2,242,140) (4,069,800) (4,069,800) (4,069,800) (4,069,800) Depreciation (3,253,180) (6,649,990) (4,711,920) (4,489,300) (4,489,300) Interest Expense (2,215,000) (3,116,840) (2,370,010) (1,474,780) (339,775) Taxes - - - - - Net Income (5,165,150)$ (1,377,870)$ 1,307,030$ 2,424,880$ 3,559,885$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 2,418,870$ 8,661,930$ 7,385,660$ 7,897,200$ 8,467,130$ Depreciation Reserve - 4,972,220 8,915,860 2,108,700 4,190,250 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 6,918,870$ 16,134,150$ 18,801,520$ 12,505,900$ 15,157,380$ Investment MetricInternal Rate of Return (IRR) - 20 year 0.79%Net Present Value (NPV) at a 4 percent discount rate - 20 year (18,943,390)$ Discount Rate 4.00% 6. Eliminate Vendor Maintenance Contracts and Reduce Take Rate to 62.1 Percent 7. Reduce Salary Expenses by 40 Percent and Reduce Take Rate to 57.6 Percent 8. Eliminate Vendor Maintenance Contracts, Reduce Salary Expenses by 40 Percent, and Reduce Take Rate to 51.3 Percent CTC Technology & Energy 15 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 18,346,800$ 18,346,800$ 18,346,800$ 18,346,800$ Total Cash Expenses (2,806,110) (8,371,660) (8,371,660) (8,371,660) (8,371,660) Depreciation (3,456,900) (8,564,250) (5,709,100) (5,432,200) (5,432,200) Interest Expense (2,215,000) (3,113,430) (2,368,400) (1,482,760) (351,955) Taxes - - - - - Net Income (5,932,840)$ (1,702,540)$ 1,897,640$ 3,060,180$ 4,190,985$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance (181,550)$ 1,198,420$ 4,952,000$ 11,408,190$ 17,915,810$ Depreciation Reserve - 6,336,450 9,561,960 (1,085,680) (679,770) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,318,450$ 10,034,870$ 17,013,960$ 12,822,510$ 19,736,040$ Investment MetricInternal Rate of Return (IRR) - 20 year 1.68%Net Present Value (NPV) at a 4 percent discount rate - 20 year (15,842,870)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 19,205,280$ 19,205,280$ 19,205,280$ 19,205,280$ Total Cash Expenses (2,806,110) (8,858,920) (8,858,920) (8,858,920) (8,858,920) Depreciation (3,506,830) (8,895,330) (5,892,620) (5,602,450) (5,602,450) Interest Expense (2,215,000) (3,112,830) (2,367,960) (1,484,220) (353,975) Taxes - - - - - Net Income (5,982,770)$ (1,661,800)$ 2,085,780$ 3,259,690$ 4,389,935$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance (680,060)$ 577,830$ 5,667,810$ 13,614,740$ 21,612,920$ Depreciation Reserve - 6,574,440 9,736,030 (1,668,160) (1,489,470) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 3,819,940$ 9,652,270$ 17,903,840$ 14,446,580$ 22,623,450$ Investment MetricInternal Rate of Return (IRR) - 20 year 2.01%Net Present Value (NPV) at a 4 percent discount rate - 20 year (13,861,120)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 16,629,840$ 16,629,840$ 16,629,840$ 16,629,840$ Total Cash Expenses (2,806,110) (8,055,610) (8,055,610) (8,055,610) (8,055,610) Depreciation (3,409,000) (7,973,430) (5,412,910) (5,148,680) (5,148,680) Interest Expense (2,215,000) (3,114,480) (2,368,730) (1,480,380) (348,105) Taxes - - - - - Net Income (5,884,940)$ (2,513,680)$ 792,590$ 1,945,170$ 3,077,445$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 295,620$ 4,670$ (2,369,970)$ (2,328,170)$ (2,231,680)$ Depreciation Reserve - 5,917,550 9,428,390 (130,750) 858,160 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,795,620$ 8,422,220$ 9,558,420$ 41,080$ 1,126,480$ Investment Metric Internal Rate of Return (IRR) - 20 year -0.49% Net Present Value (NPV) at a 4 percent discount rate - 20 year (28,223,660)$ Discount Rate 4.00% 9. Residential Market Share Increase by 5 Percent (4.5 percent take rate increase) 10. Residential Market Share Increase by 10 Percent (9 percent take rate increase) 11. Residential Market Share Decrease by 5 Percent (4.5 percent take rate decrease) CTC Technology & Energy 16 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 15,771,360$ 15,771,360$ 15,771,360$ 15,771,360$ Total Cash Expenses (2,806,110) (7,568,460) (7,568,460) (7,568,460) (7,568,460) Depreciation (3,359,040) (7,642,460) (5,229,450) (4,978,490) (4,978,490) Interest Expense (2,215,000) (3,115,070) (2,369,160) (1,478,920) (346,085) Taxes - - - - - Net Income (5,834,980)$ (2,554,630)$ 604,290$ 1,745,490$ 2,878,325$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 794,170$ 624,090$ (3,087,690)$ (4,537,280)$ (5,932,050)$ Depreciation Reserve - 5,679,620 9,254,390 451,510 1,667,590 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 5,294,170$ 8,803,710$ 8,666,700$ (1,585,770)$ (1,764,460)$ Investment MetricInternal Rate of Return (IRR) - 20 year -0.94%Net Present Value (NPV) at a 4 percent discount rate - 20 year (30,207,740)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 17,954,400$ 17,954,400$ 17,954,400$ 17,954,400$ Total Cash Expenses (2,806,110) (8,322,740) (8,322,740) (8,322,740) (8,322,740) Depreciation (3,442,390) (8,353,390) (5,605,660) (5,332,480) (5,332,480) Interest Expense (2,215,000) (3,113,800) (2,368,480) (1,481,930) (350,565) Taxes - - - - - Net Income (5,918,330)$ (1,835,530)$ 1,657,520$ 2,817,250$ 3,948,615$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance (39,100)$ 1,194,490$ 3,539,680$ 8,484,630$ 13,482,390$ Depreciation Reserve - 6,187,360 9,527,110 (750,990) (124,220) Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,460,900$ 9,881,850$ 15,566,790$ 10,233,640$ 15,858,170$ Investment MetricInternal Rate of Return (IRR) - 20 year 1.24%Net Present Value (NPV) at a 4 percent discount rate - 20 year (18,482,510)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,545,170$ 17,016,960$ 17,016,960$ 17,016,960$ 17,016,960$ Total Cash Expenses (2,806,110) (8,255,870) (8,255,870) (8,255,870) (8,255,870) Depreciation (3,423,500) (8,184,650) (5,516,600) (5,248,660) (5,248,660) Interest Expense (2,215,000) (3,114,100) (2,368,640) (1,481,220) (349,505) Taxes - - - - - Net Income (5,899,440)$ (2,537,660)$ 875,850$ 2,031,210$ 3,162,925$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 153,460$ (830,600)$ (2,580,400)$ (1,810,950)$ (988,220)$ Depreciation Reserve - 6,066,900 9,462,380 (466,910) 300,060 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,653,460$ 7,736,300$ 9,381,980$ 222,140$ 1,811,840$ Investment Metric Internal Rate of Return (IRR) - 20 year -0.34% Net Present Value (NPV) at a 4 percent discount rate - 20 year (27,759,630)$ Discount Rate 4.00% 14. Commercial Market Share Decrease by 10 Percent (9 percent take rate decrease) 12. Residential Market Share Decrease by 10 Percent (9 percent take rate decrease) 13. Commercial Market Share Increase by 10 Percent (9 percent take rate increase) CTC Technology & Energy 17 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,668,170$ 18,469,440$ 18,469,440$ 18,469,440$ 18,469,440$ Total Cash Expenses (2,806,720) (8,296,070) (8,296,070) (8,296,070) (8,296,070) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,787,840)$ (1,211,400)$ 2,241,890$ 3,399,770$ 4,531,325$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 166,050$ 3,761,840$ 8,940,330$ 16,678,930$ 24,470,670$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,666,050$ 12,390,430$ 20,940,780$ 18,564,760$ 27,056,840$ Investment MetricInternal Rate of Return (IRR) - 20 year 2.37%Net Present Value (NPV) at a 4 percent discount rate - 20 year (11,088,890)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,791,170$ 19,450,560$ 19,450,560$ 19,450,560$ 19,450,560$ Total Cash Expenses (2,807,340) (8,300,970) (8,300,970) (8,300,970) (8,300,970) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,665,460)$ (235,180)$ 3,218,110$ 4,375,990$ 5,507,545$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 288,430$ 7,362,000$ 17,421,590$ 30,041,290$ 42,714,130$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,788,430$ 15,990,590$ 29,422,040$ 31,927,120$ 45,300,300$ Investment MetricInternal Rate of Return (IRR) - 20 year 4.14%Net Present Value (NPV) at a 4 percent discount rate - 20 year 962,380$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,422,170$ 16,507,200$ 16,507,200$ 16,507,200$ 16,507,200$ Total Cash Expenses (2,805,490) (8,286,260) (8,286,260) (8,286,260) (8,286,260) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (6,032,610)$ (3,163,830)$ 289,460$ 1,447,340$ 2,578,895$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance (78,720)$ (3,438,470)$ (8,022,130)$ (10,045,690)$ (12,016,090)$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,421,280$ 5,190,120$ 3,978,320$ (8,159,860)$ (9,429,920)$ Investment Metric Internal Rate of Return (IRR) - 20 year -1.63% Net Present Value (NPV) at a 4 percent discount rate - 20 year (35,191,340)$ Discount Rate 4.00% 15. Residential Monthly Service Prices Increase by $5 16. Residential Monthly Service Prices Increase by $10 17. Residential Monthly Service Prices Decrease by $5 CTC Technology & Energy 18 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,299,170$ 15,526,080$ 15,526,080$ 15,526,080$ 15,526,080$ Total Cash Expenses (2,804,880) (8,281,350) (8,281,350) (8,281,350) (8,281,350) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (6,155,000)$ (4,140,040)$ (686,750)$ 471,130$ 1,602,685$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance (201,110)$ (7,038,610)$ (16,503,320)$ (23,407,930)$ 8,080$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,298,890$ 1,589,980$ (4,502,870)$ (21,522,100)$ 2,594,250$ Investment MetricInternal Rate of Return (IRR) - 20 year -3.99%Net Present Value (NPV) at a 4 percent discount rate - 20 year (47,242,500)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,565,930$ 17,653,800$ 17,653,800$ 17,653,800$ 17,653,800$ Total Cash Expenses (2,806,210) (8,291,990) (8,291,990) (8,291,990) (8,291,990) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,889,570)$ (2,022,960)$ 1,430,330$ 2,588,210$ 3,719,765$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 64,320$ 768,960$ 1,889,650$ 5,570,450$ 9,304,390$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,564,320$ 9,397,550$ 13,890,100$ 7,456,280$ 11,890,560$ Investment MetricInternal Rate of Return (IRR) - 20 year 0.80%Net Present Value (NPV) at a 4 percent discount rate - 20 year (21,107,430)$ Discount Rate 4.00% Income Statement 1 5 10 15 20Total Revenues 2,524,410$ 17,322,840$ 17,322,840$ 17,322,840$ 17,322,840$ Total Cash Expenses (2,806,000) (8,290,330) (8,290,330) (8,290,330) (8,290,330) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,930,880)$ (2,352,260)$ 1,101,030$ 2,258,910$ 3,390,465$ Cash Flow Statement 1 5 10 15 20 Unrestricted Cash Balance 23,010$ (445,560)$ (971,370)$ 1,062,930$ 3,150,370$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,523,010$ 8,183,030$ 11,029,080$ 2,948,760$ 5,736,540$ Investment MetricInternal Rate of Return (IRR) - 20 year 0.13%Net Present Value (NPV) at a 4 percent discount rate - 20 year (25,172,680)$ Discount Rate 4.00% 19. Small Commercial Monthly Service Prices Increase by $10 20. Small Commercial Monthly Service Prices Decrease by $10 18. Residential Monthly Service Prices Decrease by $10 CTC Technology & Energy 19 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Scenarios Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ Total Cash Expenses (2,865,600) (8,765,450) (8,765,450) (8,765,450) (8,765,450) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,969,720)$ (2,661,900)$ 791,390$ 1,949,270$ 3,080,825$ Cash Flow Statement 1 5 10 15 20Unrestricted Cash Balance (15,830)$ (1,587,440)$ (3,661,450)$ (3,175,350)$ (2,636,110)$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,484,170$ 7,041,150$ 8,339,000$ (1,289,520)$ (49,940)$ Investment Metric Internal Rate of Return (IRR) - 20 year -0.52% Net Present Value (NPV) at a 4 percent discount rate - 20 year (28,995,110)$ Discount Rate 4.00% Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 17,488,320$ 17,488,320$ 17,488,320$ 17,488,320$ Total Cash Expenses (2,746,620) (7,816,870) (7,816,870) (7,816,870) (7,816,870) Depreciation (3,434,290) (8,270,820) (5,562,930) (5,292,010) (5,292,010) Interest Expense (2,215,000) (3,113,950) (2,368,550) (1,481,590) (350,035) Taxes - - - - - Net Income (5,850,740)$ (1,713,320)$ 1,739,970$ 2,897,850$ 4,029,405$ Cash Flow Statement 1 5 10 15 20Unrestricted Cash Balance 103,150$ 1,910,840$ 4,579,730$ 9,808,730$ 15,090,870$ Depreciation Reserve - 6,128,590 9,500,450 (614,170) 86,170 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 4,603,150$ 10,539,430$ 16,580,180$ 11,694,560$ 17,677,040$ Investment Metric Internal Rate of Return (IRR) - 20 year 1.41% Net Present Value (NPV) at a 4 percent discount rate - 20 year (17,285,000)$ Discount Rate 4.00% Income Statement 1 5 10 15 20 Total Revenues 2,545,170$ 10,930,320$ 10,930,320$ 10,930,320$ 10,930,320$ Total Cash Expenses (2,041,655) (3,113,615) (3,113,615) (3,113,615) (3,113,615) Depreciation (3,187,340) (6,142,130) (4,438,430) (4,233,370) (4,233,370) Interest Expense (2,215,000) (3,117,750) (2,370,570) (1,472,600) (336,615) Taxes - - - - - Net Income (4,898,825)$ (1,443,175)$ 1,007,705$ 2,110,735$ 3,246,720$ Cash Flow Statement 1 5 10 15 20Unrestricted Cash Balance 3,277,645$ 10,107,325$ 6,753,840$ 4,948,700$ 3,202,930$ Depreciation Reserve - 4,608,650 8,693,850 2,980,380 5,455,570 Interest Reserve 2,000,000 - - - - Debt Service Reserve 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Total Cash Balance 7,777,645$ 17,215,975$ 17,947,690$ 10,429,080$ 11,158,500$ Investment Metric Internal Rate of Return (IRR) - 20 year 0.15% Net Present Value (NPV) at a 4 percent discount rate - 20 year (21,576,050)$ Discount Rate 4.00% 23. Eliminate Vendor Maintenance Contracts, Reduce Salary Expenses by 50 Percent, Reduce DIA by 67%, and Reduce Take Rate 21. DIA Monthly Price (per Mbps) Increases by $0.50 22. DIA Monthly Price (per Mbps) Decreases by $0.50 CTC Technology & Energy 20 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13July 15, 2015 Expense Charts Infrastructure -Debt Service & Replacements, $9,516,150 , 53% Operating Expense -Network O&M, $2,593,890 , 15% Operating Expense -Business Operations, $5,697,270 , 32% Uses of Funds -Year 7 CTC Technology & Energy 21 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13July 15, 2015 Expense Charts Operating Expense -Network O&M, $2,593,890 , 31% Operating Expense -Business Operations, $5,697,270 , 69% Operating Expenses -Year 7 CTC Technology & Energy 22 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13July 15, 2015 Expense Charts Debt Service (P&I Payment), $6,276,600 , 66% Depreciation Reserve Fund (Replacements), $3,239,550 , 34% Infrastructure Costs -Year 7 CTC Technology & Energy 23 DR A F T City of Palo AltoFTTP NetworkAppendix B - Retail Data Services - Rev 13July 15, 2015 Expense Charts Internet (DIA)9% Labor Costs -Business Operations51% Labor Costs -Network O&M8% Support Services1% Insurance2% Utilities1% Office Expenses1% Locates & Ticket Processing 1% Contingency1% Billing Maintenance Contract0% Fiber & Network Maintenance1% Vendor Maintenance Contracts17% Legal and Lobby Fees1% Consulting0% Marketing3% Education and Training1% Customer Handholding0% Customer Billing (Unit)0% Allowance for Bad Debts1% Churn (acquisition costs)1% Pole Attachment Expense2%Operating Expenses Year 7 CTC Technology & Energy 24 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 OSP Cost Estimate Summary Item Cost OSP Engineering 3,572,100$ Quality Control/Quality Assurance 924,400 General OSP Construction Cost 25,526,800 Special Crossings 145,400 Backbone and Distribution Plant Splicing 762,700 Backbone Hub, Termination, and Testing 4,206,300 FTTP Service Drop and Lateral Installations (see note below 4,820,400 Total Estimated OSP Cost $39,958,100 Please not the above estimate does not include the drop costs to individual residences and small buinesses. These drop costs are included in the per subscriber costs. CTC Technology & Energy 25 DR A F T City of Palo Alto FTTP Network Appendix B - Retail Data Services - Rev 13 July 15, 2015 Network Electronics Summary Item Cost Core Routers 1,794,820$ Core Network Servers 310,000 Base Aggregation Switches 2,143,610 Base OLT 186,060 CPE Gbps (medium commercial)483,930 CPE Residential & Small Commerci 8,843,870 Aggregation Switches 3,105,910 OLTs 6,005,640 Total 22,873,840$ Item Cost Core & Base Equipment 4,434,490$ CPEs 9,327,800 one-to-one relationship with take rate Incremental (Switches & OLTs)9,111,550 step function with take rate Total 22,873,840$ CTC Technology & Energy 26 DR A F T Page Title InformationOrganization Palo Alto, CaliforniaPlan Name Date July 15, 2015 Financial Assumptions10 Year Bond or LoanFinance Rate 4.00%Period (Years)10Principal Repayment Period Start 4Bond Issuance Cost 1.00%of issue 0.15 1000 150Debt Service Reserve 0.00%Interest Reserve yes 20 Year BondFinance Rate 4.00%Period (Years)20Principal Repayment Period Start 4Bond Issuance Cost 1.00%of issueDebt Service Reserve 5.00%Interest Reserve yes Loan 1 2 3 4 5Finance Rate 5.00%5.00%5.00%6.00%6.00%Period (Years)20 20 20 3 3Principal Repayment Start 4 3 2 1 1 OtherInterest Earned on Available Cash 0.25%only applied to reserve funds in calculation Source of Funds Amount Issued YearCash flow w/o investment funds and w/startup funds (54,256,340)$ (17,028,630)$ (3,132,010)$ 2,656,490$ 2,774,880$ 3,047,810$ 3,120,230$ 3,832,480$ 3,992,100$ 4,158,400$ Cash flow after investment funds (54,256,340)$ (17,028,630)$ (3,132,010)$ 2,656,490$ 2,774,880$ 3,047,810$ 3,120,230$ 3,832,480$ 3,992,100$ 4,158,400$ Unrestricted cash balance (years 1 to 10)43,660$ 15,030$ 883,020$ 527,910$ 161,700$ (66,680)$ (363,630)$ (95,460)$ 178,800$ 459,140$ Total cash balance 4,543,660$ 2,515,030$ 3,383,020$ 6,082,820$ 8,790,290$ 9,871,690$ 8,453,160$ 7,033,870$ 9,743,690$ 12,459,590$ Unrestricted cash balance (years 11 to 20)986,970$ 1,772,550$ 2,552,240$ 2,931,590$ 3,316,690$ 3,707,570$ 4,260,230$ 5,053,320$ 5,840,530$ 6,227,400$ 1 2 3 4 5Use Investment Capital no no noInvestment Capital -$ -$ -$ -$ -$ -$ IRR 0.47%Calculated from cash flow w/start-up capitalStart Up Funds -$ -$ -$ -$ -$ NPV (23,140,050)$ Grants (infrastructure)-$ -$ -$ -$ -$ -$ Discount Rate 4.0%Grants (customer premises)-$ -$ -$ -$ -$ -$ 0.00%0.00%0.00%0.00%0.00%Weighted rate87.64%87.68%87.67%100.00%100.00%Percent Residential12.36%12.32%12.33%0.00%0.00%Percent Commercial10-Year Bond/Loan Proceeds -$ -$ -$ -$ -$ -$ 20-Year Bond Proceeds 50,000,000$ 50,000,000$ -$ -$ -$ -$ Loan Proceeds 25,300,000$ 4,300,000$ 17,000,000$ 4,000,000$ -$ -$ Sub-total 75,300,000$ Total 75,300,000$ 4,300,000$ 17,000,000$ 4,000,000$ Base case 25,300,000$ 25,300,000$ Depreciation (Straight Line)Years Annual Rate Outside Plant and Facilities 20 5.00%Sheet D1 If years changed, need to change CA sheet (when replenishments occur)Network Equipment 10 10.00%Sheet D2 If years changed, need to change CA sheet (when replenishments occur)10Miscellaneous Implementation Costs 5 20.00%Sheet D3 If years changed, need to change CA sheet (when replenishments occur)Last Mile and Customer Premises Equipment 5 20.00%Sheet D4 If years changed, need to change CA sheet (when replenishments occur) Depreciation Reserve (years 1 to 10)- - - 3,054,910 6,128,590 7,438,370 6,316,790 4,629,330 7,064,890 9,500,450 Depreciation Reserve (years 11 to 20)2,656,900 1,114,600 (1,102,170) (2,919,680) (614,170) 1,691,340 3,840,440 4,120,450 1,903,680 86,170 1 2 3 4 5 6 7 8 9 10Funded Depreciation 0%0%0%40%40%40%48%48%48%48%Replacement/Upgrade Costs (Percent of Total Costs)ReplacementNetwork Equipment 80%Miscellaneous Implementation Costs 75%Last Mile and Customer Premises Equipment 40% FTTP Network Project Assumptions Appendix B - Retail Data Services - Rev 13 Year City of Palo Alto CTC Technology & Energy 27 DR A F T Project Assumptions Revenues Internet Services Monthly Retail PriceR 30 Mbps -$ -$ -$ 100.00%30R 50 Mbps -$ -$ -$ 100.00%30R 100 Mbps -$ -$ -$ 100.00%30 0.47%R 250 Mbps -$ -$ -$ 100.00%30R 1 Gbps 70.00$ -$ 70.00$ 100.00%250 Allcatel & others repor 0.5 to 0.8 Mbps per user at peak demandB 100 Mbps -$ -$ -$ 100.00%250 2000 1250B 250 Mbps -$ -$ -$ 100.00%250 oversubscription oversubscriptionB 1 Gbps (small commercial)80.00$ -$ 80.00$ 100.00%250B 1 Gbps (medium commercial)220.00$ -$ 220.00$ 100.00%7510 Gbps -$ only used with enterprise customer 1 3 5 7 9 Unrestricted Cash Balance (yr. 1 to yr. 10)43,660$ 15,030$ 883,020$ 527,910$ 161,700$ (66,680)$ (363,630)$ (95,460)$ 178,800$ 459,140$ Unrestricted Cash Balance (yr. 11 to yr. 20)986,970$ 1,772,550$ 2,552,240$ 2,931,590$ 3,316,690$ 3,707,570$ 4,260,230$ 5,053,320$ 5,840,530$ 6,227,400$ CTC Technology & Energy 28 DR A F T Project Assumptions Operation and Maintenance ExpensesAnnual Fixed Operating Expense Year 1 Year 2 Year 3 Year 4 Year 5 plusInsurance100,000$ 150,000$ 150,000$ 150,000$ 150,000$ Utilities 25,000$ 50,000$ 50,000$ 50,000$ 50,000$ Office Expenses 36,000$ 50,000$ 50,000$ 50,000$ 50,000$ Locates & Ticket Processing 19,000$ 38,000$ 75,000$ 75,000$ 75,000$ 3,750$ per month per 50 miles 25.00%50.00%Contingency 25,000$ 50,000$ 50,000$ 50,000$ 50,000$ Billing Maintenance Contract 15,000$ 25,000$ 25,000$ 25,000$ 25,000$ Fiber & Network Maintenance 10,000$ Annual +0.250%Fiber Implementation CostVendor Maintenance Contracts -$ 1,369,600$ 1,369,600$ 1,369,600$ 1,369,600$ 10.00%Output to "Electronics Totals" Year 1 Year 2 Year 3 Year 4 Year 5 plusLegal and Lobby Fees 150,000$ 75,000$ 50,000$ 50,000$ 50,000$ Consulting 100,000$ 50,000$ 25,000$ 25,000$ 25,000$ Marketing 500,000$ 250,000$ 250,000$ 250,000$ 250,000$ Annual Variable Operating Expense (not including DIA)Education and Training 2%percent of direct payrollCustomer Handholding 0.10$ per subscriber per monthCustomer Billing (Unit)0.05$ per billAllowance for Bad Debts 0.50%percentage of revenuesCustomer Churn (annual)1.50%Customer Promotions/Acquisition 300$ Year 1 Year 2 Year 3 Year 4 Year 5+Internet Connection Fee 89,230$ 400,170$ 711,430$ 711,430$ 711,430$ 0.75$ per Mbps per month 0.47%Minimum Bandwidth 2,000 Mbps 1,500$ per month 0.75$ per Mbps per month Pole Attachment ExpenseAttachment Fees 4,478 poles at 30.00$ per year 783,552 feet 175 feet per span Taxes Overhead 148.40 63.99%City and State Tax (Utility Fee)0.0000%percent of revenue State 0.0000%City 0.0000%231.90 Utility Fees Assumed to be a Pass Through to Customer CTC Technology & Energy 29 DR A F T Project Assumptions Labor ExpenseLabor (Direct) New Employees Year 1 Year 2 Year 3 Year 4 Year 5+Labor CostBusiness Manager 0.50 1.00 1.00 1.00 1.00 150,000 247,500 Market & Sales Manager 1.00 1.00 1.00 1.00 1.00 126,000 Broadband Service Engineer 1.00 1.00 1.00 1.00 1.00 124,000 Internet Technician (staff in field tech support)0.50 1.00 1.00 1.00 1.00 83,000 Customer Service Representative 2.00 10.00 16.00 16.00 16.00 65,000 2,500 2 Number of Customers per CSR-Number of ShBased on Wilson Service Technicians/Installers & IT Support 2.00 7.00 12.00 12.00 12.00 90,000 2,500 1.5 Number of Customers per Tech Number of ShBased on Wilson 4 Sales and Marketing Representative 1.00 2.00 2.00 2.00 2.00 83,000 with commissionsCall Center Support (24x7)- - - - - 65,000 - 1 Ratio for 24x7 Based on Wilson Wilson 750 Fiber Plant O&M Technicians 1.00 2.00 2.00 2.00 2.00 95,000 200 Miles of line pertechnician In power space- lineperson requiredTBD- - - - - - 232 Miles of line 3 for 350 miles (Wilson) Total New Staff 9 25 36 36 36 50.00%In Year 1 have other maintenance Existing Employees Year 1 Year 2 Year 3+Labor CostBroadband Service Manager - - - 65,000$ Broadband Technician - - - 90,000$ Switch Technician - - - 83,000$ internet 250 calls per monthCustomer Service Representative - - - 65,000$ call customers monthService Technicians - - - 95,000$ dedicated 24X7 10 staffSales and Marketing Representative - - - -$ 7500Total Existing Staff - - - -$ 750 customersTotal Existing Staff - - - Service Position Total Year 1 Year 2 Year 3 Year 4 Year 5+Year 1 SalaryBusiness Manager 0.50 1.00 1.00 1.00 1.00 150,000$ 150,000$ Business OperationsMarket & Sales Manager 1.00 1.00 1.00 1.00 1.00 126,000$ 126,000$ Business OperationsBroadband Service Engineer 1.00 1.00 1.00 1.00 1.00 124,000$ 124,000$ Network O&MInternet Technician (staff in field tech support)0.50 1.00 1.00 1.00 1.00 83,000$ 83,000$ Network O&MCustomer Service Representative 2.00 10.00 16.00 16.00 16.00 65,000$ 1,040,000$ Business OperationsService Technicians/Installers & IT Support 2.00 7.00 12.00 12.00 12.00 90,000$ 1,080,000$ Business OperationsSales and Marketing Representative 1.00 2.00 2.00 2.00 2.00 83,000$ 166,000$ Business OperationsCall Center Support (24x7)- - - - - 65,000$ -$ Fiber Plant O&M Technicians 1.00 2.00 2.00 2.00 2.00 95,000$ 190,000$ Network O&MTBD- - - - - -$ -$ Total Existing Staff - - - - - -$ -$ Total 9.00 25.00 36.00 36.00 36.00 2,959,000$ Total Customers 2,339 10,491 18,651 18,651 18,651 Customers per Employee 259.89 419.64 518.08 518.08 518.08 Business Operations 2,562,000$ 86.58%Network O&M 397,000$ 13.42% Total Salaries 854,500$ 2,119,000$ 2,959,000$ 2,959,000$ Benefits 65%of base salary 65Total Direct Labor Cost 1,409,930$ 3,496,350$ 4,882,350$ Not including multiplier (multiplier applied on sheet E1)Salary Multiplier 0.00%annual multiplier (i.e. salaries increase by x percent faster than ability to increase fees) Operation Support ServicesBilling & CSR Support Services $50,000 set-up fee +$0.25 per customer per month CTC Technology & Energy 30 DR A F T Project Assumptions Unrestricted cash balance (years 1 to 10)43,660.00$ 15,030.00$ 883,020.00$ 527,910.00$ 161,700.00$ (66,680.00)$ (363,630.00)$ (95,460.00)$ 178,800.00$ 459,140.00$ Market SizeResidential 80 CPE Funding Number of Potential Subscribers 22,709 City of Palo Alto 22,709 80.00%MS Ceiling 0.00% Potential Multi-Housing 0 tbd - 40.00%MS Ceiling 0.00% Subscriber Growth Rate 0.00%tbd - 40.00%MS Ceiling 0.00% 22,709 80.00%MS Weighted 0.00% Commercial CPE FundingNumber of Potential Subscribers 3,192 City of Palo Alto 3,192 80.00%MS Ceiling 0.00%Subscriber Growth Rate 0.00%tbd - 0.00%MS Ceiling 0.00% tbd - 0.00%MS Ceiling 0.00% Penetration Rates - DataResidential Internet ServicesExisting Dial-up Customers 0Number of Potential New Subscribers 22,709 Input to Network Cost Estimate 72.00%Take Rate of all households/businesses passedInitial Data Users 96%Occupancy Rate 94%Residential 72.0%22,709 16,351 Output to "ElectronBusiness72.0%3,192 2,299 Output to "Electron Year 1 Year 2 Year 3 Year 4 Year 5 25,901 18,650 Projected Market Size 90%90%90%90%90%18,651 Year 6 Year 7 Year 8 Year 9 Year 10+(1) Check Sum90%90%90%90%90%0.567Year 1 Year 2 Year 3 Year 4 Year 5 yr. 1 yr. 2 yr. 3 15.3%Market Share 10%45%80%80%80%1.00 10%45%80%20Percentage of Market 9.0%40.5%72.0%72.0%72.0%0.00765Year 6 Year 7 Year 8 Year 9 Year 10+72.0%80.000%5Market Share 80%80%80%80%80%0.03825Percentage of Market 72.00%72.00%72.00%72.00%72.00% Package Take Rate Year 1 Year 2 Year 3 Year 4 Year 5R 30 Mbps 0%0%0%0%0%R 50 Mbps 0%0%0%0%0%R 100 Mbps 0%0%0%0%0%R 250 Mbps 0%0%0%0%0%R 1 Gbps 100%100%100%100%100% Applies to All Services Applies to All Services Market share multiplier for sensitivity analysis CTC Technology & Energy 31 DR A F T Project Assumptions Commercial Internet ServicesNumber of Potential Subscribers 3,192 Initial Data Users 96%Estimate 92%Occupancy Rate 94%Estimate Year 1 Year 2 Year 3 Year 4 Year 5Projected Market Size 90%90%90%90%90%Year 6 Year 7 Year 8 Year 9 Year 10+90%90%90%90%90% Year 1 Year 2 Year 3 Year 4 Year 5 yr. 1 yr. 2 yr. 3Market Share 10%45%80%80%80%1.00 10%45%80%0.47%Percentage of Market 9.0%40.5%72.0%72.0%72.0%72.00%80.000%Year 6 Year 7 Year 8 Year 9 Year 10+Market Share 80%80%80%80%80%Percentage of Market 72.00%72.00%72.00%72.00%72.00% Package Take Rate Year 1 Year 2 Year 3 Year 4 Year 5B 100 Mbps 0.00%0%0%0%0%B 250 Mbps 0.00%0%0%0%0%B 1 Gbps (small commercial)59.98%60%60%60%60%B 1 Gbps (medium commercial)40.00%40%40%40%40%linked to businesses with AE CPE10 Gbps 0.02%0%0%0%0% CTC Technology & Energy 32 DR A F T Project Assumptions Capital AdditionsNetwork Equipment see sheet "Electronics Summary"1 2 3 4 5 1 2 3 4 5Core & Base Equipment 4,434,490$ -$ -$ -$ -$ 4,434,490$ 100.00%0.00%0.00%0.00%0.00%Incremental (Switches & OLTs)6,833,660$ 2,277,890$ -$ -$ -$ 9,111,550$ 75.00%25.00%0.00%0.00%0.00%Additional Annual Capital 0%(% of turn-key cost)Starts in year 4 Outside Plant and Facilities see sheet "OSP Summary"1 2 3 4 5 1 2 3 4 5Total Estimated OSP Cost 31,966,480$ 7,991,620$ -$ -$ -$ 39,958,100$ 80.00%20.00%0.00%0.00%0.00%- - - - - -$ 50.00%50.00%0.00%0.00%0.00%- - - - - -$ 100.00%0.00%0.00%0.00%0.00% Total Backbone and FTTP 31,966,480$ 7,991,620$ -$ -$ -$ 31,966,480$ 39,958,100$ 39,958,100$ 39,958,100$ 39,958,100$ 53,504,140$ Additional Annual Capital 0%(% of turn-key cost)Starts in year 4 Last Mile and Customer Premises Equipment 1 2 3 4 5CPE Gbps (medium commercial)61,020$ 210,930$ 211,980$ -$ -$ 483,930.00 CPE Residential & Small Commercial 499$ per new subscriber (average)CPE Gbps (medium commercial)526$ per new subscriber (average)2,541$ 107,492,210$ Average Drop Cost 758$ per new residential subscriber 758$ overhead 63.99%758.00$ overhead 63.99%Average Drop Cost 758$ per new commercial subscriber 758$ underground 36.01%758.00$ underground 36.01% Additional Annual Replacement Capital 1.00%(% of CPE's in service2)Starts in year 4 107,492,210$ Must be 4 or greaterMiscellaneous Implementation Costs 1 2 3 4 5Splicing-$ -$ -$ -$ -$ Vehicles 150,000$ -$ -$ -$ -$ Emergency Restoration Kit 50,000$ -$ -$ -$ -$ Work Station, Computers, and Software 2,000$ per employeeFiber OTDR and Other Tools 85,000$ -$ -$ -$ -$ Generators & UPS -$ -$ -$ -$ -$ OSS 300,000$ -$ -$ -$ -$ ONT Kit - Residential SFU - Basic 20%395$ Additional Annual Capital 0%(% of Year 1)Starts in year 4 ONT Kit - Residential SFU - Premium 75%455$ ONT Kit - Residential SFU - AE Access 5%555$ ONT Kit - Residential MDU - Basic 20%766$ ONT Kit - Residential MDU - Premium 75%826$ ONT Kit - Business (SFU) - Basic 10%366$ ONT Kit - Business (SFU) - Premium 50%426$ ONT Kit - Business (SFU) - AE Access 40%526$ ONT Kit - Business (MDU) - Basic 10%766$ ONT Kit - Business (MDU) - Premium 50%826$ ONT Kit - Business (MDU) - AE Access 40%926$ 2Approximate required additional annual capital to account for damages and early replacements. CTC Technology & Energy 33 Findings and Recommendations for Wireless Network Plan Final – Revision 8a Prepared for City of Palo Alto August 2015 City of Palo Alto – Wireless | August 2015 ii Contents 1 Summary of Recommendations ............................................................................................. 1 2 Executive Summary ................................................................................................................. 3 3 A Review of the Municipal Wireless Landscape ..................................................................... 5 3.1 Town of Brookline, MA..................................................................................................... 5 3.1.1 System Description ................................................................................................... 5 3.1.2 Lessons Learned ........................................................................................................ 6 3.2 Lompoc, CA ....................................................................................................................... 6 3.2.1 System Description ................................................................................................... 6 3.2.2 Lessons Learned ........................................................................................................ 7 3.3 Port Angeles, WA ............................................................................................................. 7 3.3.1 System Description ................................................................................................... 8 3.3.2 Network Operations ............................................................................................... 14 3.3.3 Lessons Learned ...................................................................................................... 17 3.4 Ripon, California ............................................................................................................. 18 3.4.1 System Description ................................................................................................. 18 3.4.2 Lessons Learned ...................................................................................................... 18 3.5 San José, CA .................................................................................................................... 18 3.5.1 System Description ................................................................................................. 19 3.5.2 Lessons Learned ...................................................................................................... 19 3.6 Santa Clara, CA ............................................................................................................... 19 3.6.1 System Description ................................................................................................. 19 3.6.2 Lessons Learned ...................................................................................................... 20 3.7 Implications to Consider for Palo Alto Wireless Deployment ........................................ 21 4 Wireless Network Architecture ............................................................................................ 23 4.1 Point-to-Point Communications Links ............................................................................ 23 4.2 Point-to-Multipoint Communications Links ................................................................... 24 4.3 Blanket Coverage ........................................................................................................... 25 5 Wi-Fi Technology .................................................................................................................. 27 City of Palo Alto – Wireless | August 2015 iii 5.1 Transmission Evolution .................................................................................................. 27 5.1.1 802.11a ................................................................................................................... 27 5.1.2 802.11b ................................................................................................................... 28 5.1.3 802.11g ................................................................................................................... 28 5.1.4 802.11n ................................................................................................................... 28 5.1.5 802.11ac .................................................................................................................. 29 5.2 Achievable Network Data Throughput Rates ................................................................. 30 5.3 Network Security ............................................................................................................ 32 5.4 Signal Propagation and Interference Rejection ............................................................. 32 6 City Resources to Support Wireless Deployment ................................................................. 33 6.1 Fiber-Optic Backbone Requirements ............................................................................. 33 6.2 Installation Options for Wireless Access Devices........................................................... 36 7 Palo Alto Requirements Analysis and Stakeholder Input ..................................................... 38 7.1 The Need for Wireless Broadband ................................................................................. 38 7.2 Stakeholder Input ........................................................................................................... 40 7.2.1 Information Technology.......................................................................................... 40 7.2.2 Community Services................................................................................................ 43 7.2.3 City of Palo Alto Utilities ......................................................................................... 45 7.2.4 Planning and Community Environment Department – Transportation Division ... 46 7.2.5 Public Works Department – Engineering Services Division .................................... 47 7.2.6 Public Safety Departments: Police Department, Office of Emergency Services, Fire Department ........................................................................................................................... 47 8 Potential Palo Alto Wireless Deployment Options ............................................................... 52 8.1 Scenario 1: Deploy Public Wi-Fi and Secure City Enterprise Network Access at City Buildings .................................................................................................................................... 52 8.2 Scenario 2: Deploy Public Wi-Fi and Secure City Enterprise Network Access ............... 53 8.3 Scenario 3: Deploy a Point-to-Multipoint Network for Secure City Enterprise Access . 58 8.4 Scenario 4: Deploy a Citywide Mobile Data Network for Public Safety Users............... 58 9 System-Level Design and Cost Estimates for Wireless Deployment Scenarios .................... 61 9.1 Scenario 1 ....................................................................................................................... 61 City of Palo Alto – Wireless | August 2015 iv 9.2 Scenario 2, Phase A ........................................................................................................ 61 9.2.1 Basic Assumptions .................................................................................................. 62 9.2.2 Financial Summary .................................................................................................. 62 9.3 Scenario 2, Phase B ........................................................................................................ 63 9.3.1 Basic Assumptions .................................................................................................. 63 9.3.2 Financial Summary .................................................................................................. 64 9.4 Scenario 3 ....................................................................................................................... 64 9.4.1 Basic Assumptions .................................................................................................. 65 9.4.2 Financial Summary .................................................................................................. 66 9.5 Scenario 4 ....................................................................................................................... 66 9.5.1 Basic Assumptions .................................................................................................. 66 9.5.2 Financial Summary .................................................................................................. 67 10 Business Case for Citywide Wireless ..................................................................................... 69 10.1 City-Owned Wholesale Model .................................................................................... 69 10.2 Privately Owned Managed-Services Model ............................................................... 69 10.3 Hybrid Model (Public–Private Partnership) ................................................................ 70 11 Future Wireless Technology Innovations ............................................................................. 71 11.1 Future 5G Technology Deployment ........................................................................... 71 11.2 Integrating Wi-Fi and Cellular ..................................................................................... 72 Appendix A: Summary of Potential Stakeholder Needs ............................................................... 74 Appendix B: Financial Projections for Scenario 2, Phase A .......................................................... 75 Appendix C: Financial Projections for Scenario 2, Phase B ........................................................... 76 Figures Figure 1: Port Angeles, Washington – BTOP-Funded Wireless Network Project ........................... 8 Figure 2: Network Overview of Port Angeles Wireless Network Infrastructure .......................... 10 Figure 3: Wireless Access Point Mounted on Street Light ............................................................ 11 Figure 4: Wireless Access Point (Detail) ........................................................................................ 11 Figure 5: Locations of Wireless Access Points in Port Angeles ..................................................... 12 Figure 6: Backhaul for Wireless Access Points in Port Angeles .................................................... 13 Figure 7: Functional Diagram of the VLAN Infrastructure ............................................................ 14 City of Palo Alto – Wireless | August 2015 v Figure 8: Exterior-Mounted Customer Premises Equipment (CPE) Unit ...................................... 15 Figure 9: Illustration of Public Safety Mobile Router Function .................................................... 17 Figure 10: SVP MeterConnect Coverage Area .............................................................................. 20 Figure 11: Sample Point-to-Point Link Analysis ............................................................................ 24 Figure 12: Point-to-Multipoint Example ....................................................................................... 25 Figure 13: Conceptual Approach to Providing Downtown Palo Alto Coverage ........................... 26 Figure 14: Sample Directly Connected Wireless Network ............................................................ 34 Figure 15: Sample Wireless Mesh Network .................................................................................. 35 Figure 16: Typical Wireless Access Point Installation for Mesh System ....................................... 37 Figure 17: OverAir Wi-Fi Hotspot .................................................................................................. 40 Figure 18: Wi-Fi Access Unit in Palo Alto ...................................................................................... 41 Figure 19: Private Point-to-Multipoint Wireless ........................................................................... 49 Figure 20: Command Vehicle as Mobile Access Point .................................................................. 51 Figure 21: Wi-Fi Access in City Buildings – RF Radiation Map ...................................................... 52 Figure 22: Illustration of Targeted Wi-Fi Deployment in Downtown Palo Alto ............................ 55 Figure 23: Local Businesses Offering Wi-Fi ................................................................................... 56 Figure 24: Comcast Wi-Fi Locations .............................................................................................. 56 Figure 25: AT&T Wi-Fi Locations ................................................................................................... 57 Figure 26: Illustration of Public Safety Mobile Network Deployment .......................................... 59 Figure 27: Candidate Access Points for Public Safety Mobile Data Network ............................... 60 Figure 28: Point-to-Point Links (Scenario 3) ................................................................................. 65 Figure 29: Map of Locations for Scenario 4 Deployment ............................................................. 67 Tables Table 1: 802.11 Version Summary ................................................................................................ 31 Table 2: City Sites with Facility-Wide Wi-Fi .................................................................................. 42 Table 3: First-Priority Community Services Sites .......................................................................... 43 Table 4: Second-Priority Community Services Sites ..................................................................... 43 Table 5: Third-Priority Community Services Sites ......................................................................... 44 Table 6: Scenario 2-A Financial Summary (Capital Costs) ............................................................. 63 Table 7: Scenario 2-B Financial Summary (Capital Costs) ............................................................. 64 Table 8: Scenario 3 Financial Summary (Capital Costs) ................................................................ 66 Table 9: Scenario 4 Financial Summary (Capital Costs) ................................................................ 68 City of Palo Alto – Wireless | August 2015 1 1 Summary of Recommendations Working in partnership with City of Palo Alto (City) staff, CTC Technology & Energy (CTC) conducted a comprehensive analysis of the long-term needs for municipal wireless services within Palo Alto. We examined a wide range of applications that could potentially be addressed through the implementation of one or more commercial wireless technologies. We also examined various deployment scenarios, such as blanket citywide coverage through Wi-Fi technology; expanded targeting of Wi-Fi access at and around City facilities; and dedicated projects focusing on providing priority, high-reliability services to the City’s critical infrastructure operated by the City’s utilities (CPAU) and public safety agencies. We recommend that the City consider focusing on municipal wireless implementation scenarios that address specific communications needs:  Expand the deployment of Wi-Fi coverage to City facilities and adjoining public areas. The City’s Information Technology Department successfully deployed Wi-Fi to 30 City facilities for public and internal City use; we recommend that the City continue to deploy Wi-Fi at other City facilities including those operated by the Community Services Department, smaller City buildings, and park and recreational areas.  Install dedicated wireless facilities to address the needs of the City’s first responders and CPAU. To address the City’s high-priority internal needs, we recommend that the City consider deploying wireless infrastructure to support enterprise applications. For CPAU, these would include real-time monitoring and control of facilities that are not part of the existing fiber-optic network (e.g., pump stations, end of line monitoring). For public safety agencies, the wireless infrastructure would support mobile and portable communications for command and patrol vehicles, as well as incident command networks in the areas where existing commercial wireless services are often saturated due to a high concentration of public users (e.g., during sporting events).  Consider a citywide broadband wireless network for use by the general public. A citywide public Wi-Fi deployment is technically feasible, but only in concert with the deployment of a citywide fiber-to-the-premises (FTTP) network. The existing fiber-optic infrastructure operated by CPAU has neither the capacity nor the coverage area to support a citywide wireless deployment without a major expansion. If, on the other hand, a citywide fiber-optic network were in place, it would provide a mechanism for backhauling traffic from the individual wireless access points with transmission speeds measured in gigabits. This type of system would have the capability and coverage area to provide service competitive with existing 4G and future 5G commercial wireless networks. City of Palo Alto – Wireless | August 2015 2 It is difficult to predict what technical standards will be employed by consumer devices for wireless communications in the future. The Institute of Electrical and Electronics Engineers (IEEE) Standards organizations continue to move forward on Wi-Fi platforms to support tablets and laptops. Commercial wireless smart devices will be adhering to other standards groups in the definition of the new 5G technology. And efforts are underway to merge, or at least bond, these two initiatives. What is clear is that whatever technologies are deployed for wireless access at the hardware/equipment level will have a relatively short life for each cycle of implementation (based on history, typically from five to seven years maximum). On the other hand, investment in core wireless infrastructure—which includes mounting locations (poles, towers), electric power, and high-capacity backhaul links for access devices—will provide a foundation for much greater longevity for supporting the continual migration of wireless technology standards for access devices. That is, access device level technology evolves so rapidly that the City can likely expect that whatever technologies it deploys will become obsolete within a few years; the long- term investment is in core wireless infrastructure. Wireless technology is not a competitor to FTTP technology in a market such as Palo Alto; rather, they work together in partnership. Wireless provides a mobility component to the fiber- optic backbone. Fiber-optic, in turn, provides the high-capacity backhaul extension needed to create a robust, high-capacity, low-latency wireless broadband network. City of Palo Alto – Wireless | August 2015 3 2 Executive Summary This report identifies near-term, low-risk opportunities for the City to implement wireless broadband infrastructure to provide enhanced broadband services to its citizens and to support the City’s internal (enterprise) communications needs. Working closely with City staff, CTC Technology & Energy (CTC) examined existing municipal infrastructure and resources in detail—including fiber-optic backbone network connectivity, suitable mounting locations for wireless devices, and requisite powering. We also evaluated the City’s maintenance support processes and staffing. This report complements the “Fiber-to-the- Premises Master Plan” report prepared by CTC. Through our discussions with representatives of various City departments we produced a list of potential applications that might be addressed through wireless technology. Based on this assessment process, our experience in similar markets nationwide, and our knowledge of wireless broadband technologies, we prepared four viable scenarios for the City’s consideration and potential implementation. These independent scenarios—which can be implemented singularly or in combination—address a mix of public and internal City services (including municipal operations and public safety applications): Scenario 1: Deploy Public Wi-Fi and Secure City Enterprise Network Access at City Buildings In this scenario, the City would deploy Wi-Fi at all City buildings, and support free public access and secure enterprise network access for City employees. This option is basically an expansion of the Information Technology Department’s original deployment (30 City locations are currently being served) to include all City buildings, the airport, parks, and recreational areas. Scenario 2: Deploy Public Wi-Fi and Secure City Enterprise Network Access Citywide In this scenario, the City would deploy “blanket” wireless coverage for public and City users. We envision a two-phase deployment. Phase A: Provide public Wi-Fi to core City business and residential areas o 100 Mbps shared among all users o 400+ wireless access points o Light pole mounted o Leverage existing fiber o Wireless mesh technology City of Palo Alto – Wireless | August 2015 4 Phase B: Provide public Wi-Fi to core City business and residential areas o 1 Gbps shared among all users o 600+ wireless access points o Light pole mounted o Fiber connected to each wireless access point o Contingent on City upgrading fiber as part of a CPAU upgrade or FTTP deployment o Three to five years after Phase A completion Scenario 3: Deploy a Point-to-Multipoint Network for Secure City Enterprise Access In this scenario, the City would deploy a citywide high-reliability, dedicated, critical- infrastructure broadband wireless network to support public safety, CPAU, Department of Public Works, and Traffic Engineering needs. As in the Police Department’s Mobile Emergency Operations Center (MEOC) incident deployment, City Hall would serve as the core site for a point-to-multipoint deployment. Public access would continue to be delivered by local businesses and incumbent service providers. Scenario 4: Deploy a Citywide Mobile Data Network for Public Safety Users In this scenario, the City would create hot spots for public safety mobile data network access to augment existing wireless operations at key facilities and routes (schools, stadiums, business areas). The hot spots would provide radial coverage to first responders and other authorized users. The City would equip its public safety vehicles with exterior mounted antennas and mobile routers capable of acting as access points. As an initial step, access points could be deployed at CPAU’s nine utilities facilities to provide coverage to a significant portion of the City. The City has more than 130 locations (including traffic signals) that are suitable access points, so this scenario has great potential for phased deployment. To create a framework for understanding the pros and cons of these four scenarios, we provide background on municipal wireless projects nationwide (Section 3), an overview of wireless network architectures (Section 4), and a discussion of Wi-Fi technology and network operations (Section 5). We then discuss the City resources available to support a wireless network deployment (Section 6) and present a summary of the high-level needs assessment we developed with City representatives (Section 7). Next, we describe the scenarios in detail (Section 8) and include cost estimates to construct and operate each (Section 9) using currently available equipment, based on preliminary system engineering. (Scenarios selected for implementation will require additional engineering studies and contractual documents in order to proceed to implementation.) In the final section of the report, we offer insight into future wireless innovations (Section 11). City of Palo Alto – Wireless | August 2015 5 3 A Review of the Municipal Wireless Landscape This section examines a representative sampling of wireless initiatives that have been undertaken by selected municipal governments over the past decade. In each of these case studies, the municipality has deployed wireless technology to address the public’s broadband communications needs and to meet municipal telecommunications requirements. We selected these examples to illustrate a wide range of relevant implementation strategies and approaches to charting a citywide plan for deploying wireless services.1 The following wireless deployments were examined:  Brookline, MA – Citywide wireless network for public access and public safety  Lompoc, CA – Subscriber-based municipal citywide Wi-Fi network  Port Angeles, WA – Citywide wireless network for public access and public safety  Ripon, CA – Citywide mobile public safety network  San José, CA – Limited area deployment for public access with a separate traffic equipment control network  Santa Clara, CA – Citywide wireless network for public access and city utility 3.1 Town of Brookline, MA The Town of Brookline, Massachusetts has a population of approximately 57,700 in a land area of approximately 6.8 square miles. The Town is served by a commercial wireless provider, Galaxy Internet Systems. Under a public/private partnership agreement negotiated with Galaxy, the company built and operated a citywide wireless system to serve the dual function of providing paid Internet subscriber service as well as an independent network to support public safety. 3.1.1 System Description The Brookline network, installed in 2007, consists of a total of 330 wireless access points and employs mesh connecting network technology. Subscriber access is provided on the 2.4 Gigahertz (GHz) unlicensed wireless band. The backhaul2 mesh operates in the 5.8 GHz wireless band. The 4.9 GHz licensed Public Safety spectrum is used by both police and fire. The police have a total of 25 vehicles and the fire department has 12. Each public safety vehicle has mobile routing used to toggle between the 4.9 GHz network and the Verizon commercial wireless network. 1 Note that CTC's analysis included a national review of municipal subscriber-financed citywide Wi-Fi coverage networks, and did not yield any examples of systems that were fully financed through subscriber revenues. 2 Backhaul is the connection between a network end point and a core site. City of Palo Alto – Wireless | August 2015 6 Wireless access equipment is manufactured by Strix Systems.3 The 330 network access units are mounted on utility poles and other similar Town-owned structures. The mounting leases are a part of the community’s contribution to the partnership with Galaxy. 3.1.2 Lessons Learned Over the approximately five years that this project has been operational the Town’s public safety team has been satisfied with the performance. For over a year the system has been operating without necessary maintenance support due to the fact that the system owner (Galaxy) is in the process of closing down its operations. All indications are that the system is working to the technical standards of performance that were anticipated as a part of the design and implementation. Unfortunately, limitations in network throughput performance based on the now obsolete IEEE 802.11a/b technologies preclude subscriber support at a level currently desired by most of the subscriber base. This is an example of a scenario in which the technology functions to its design expectation, yet fails to address rapidly increasing customer expectations. Rather than invest in an upgrade of the technology, the system owner has chosen to abandon the operation and pursue other more lucrative opportunities. 3.2 Lompoc, CA The City of Lompoc has a population of approximately 42,000 in a land area of approximately 7.2 square miles. The city constructed its wireless system in 2006 at a capital cost of nearly $4 million. The primary purpose for constructing the system was to provide fee-based Wi-Fi services to city residents. The system also supports public safety mobile data service and utility smart meter applications. 3.2.1 System Description The Lompoc network (Lompocnet)4 consists of a total of 215 wireless access points and employs mesh technology. Subscriber access is provided on the 2.4 GHz unlicensed wireless band. The backhaul mesh operates in the 5 GHz wireless band. Within the mesh, an additional point-to- point backhaul network provides dedicated links interconnecting core mesh access sites. Data speeds vary based on location in the network and signal strength; speeds are typically in the 700 Kbps to 3 Mbps range. The subscriber base is approximately 1,500 users, with about 80 percent paying $15 per month and the remainder paying an hourly access fee.5 3 See press release at http://www.strixsystems.com/pr2006massachusetts.aspx 4 http://www.cityoflompoc.com/lompocnet/Information.htm 5 http://www.MuniWireless.com/2009/02/05/up-date-on-Lompoc Network/ City of Palo Alto – Wireless | August 2015 7 3.2.2 Lessons Learned The City has moved many of its internal telecommunications services from commercial carriers to the wireless network, and uses the wireless network wherever possible. Also, new services such as video surveillance are being considered. In evaluating performance it was noted that within certain building structures the attenuation of signals from the Wi-Fi access units degraded signal performance, encouraging subscribers to install external receiving/repeater devices with the assistance of system staff. A subscriber-financed wireless network faces heavy competition from commercial cellular carriers and fixed fiber/wire/cable television providers. The commercial carriers deliver higher- speed services over a much greater area. Finally, the rapid changes in technology dictate the need for a proactive program to update technology to address customer needs and expectations. Historically, municipal infrastructure projects have been associated with services such as water, power and gas utilities. Telecommunications is an entirely different ball game. 3.3 Port Angeles, WA The City of Port Angeles is located approximately 100 miles northwest of Seattle. The City is a harbor border crossing with Canada on San Juan Straights, south of Victoria, BC. The population of the city is 20,100. The City of Port Angeles, like Palo Alto, operates its own electrical utility and has a backbone fiber-optic network. In May of 2013, Port Angeles completed a citywide broadband wireless network funded in part by a grant under the American Recovery and Reinvestment Act of 2009 (ARRA) Broadband Technology Opportunities Program (BTOP). The City received $2.6 million as a sub-grantee of the Northwest Open Access Network (NoaNet),6 which received a total grant of $54.4 million.7 6 NoaNet is a statewide broadband fiber optic service provider that provide whole state-wide networking services. NoaNet is owned jointing by participation municipal utilities. 7 CTC assisted the city in developing the BTOP grant, prepared the system-level RFP to purchase the system, and provided technical oversight throughout the construction process. City of Palo Alto – Wireless | August 2015 8 Figure 1: Port Angeles, Washington – BTOP-Funded Wireless Network Project The primary goal of the Port Angeles project was to provide high capacity, dedicated broadband wireless coverage to the City’s public safety staff. A secondary objective was to provide lower- cost citywide Wi-Fi to the public, selected anchor facilities defined under the ARRA grant, and underserved Native American communities. In developing the business plan for the network, the city chose to make the Wi-Fi service available to the public on a subscription basis indirectly through the services of a third-party ISP for marketing, customer support, and Internet access. The City’s wireless network was designed for the purpose of providing mobile coverage to public safety patrol vehicles over approximately 80 percent of the City’s 10.7-square-mile land area. The network provides client (user) access through two independent wireless networks employing both the 4.9 GHz (licensed) and 2.4 GHz (unlicensed, public) wireless bands. The 4.9 GHz spectrum has been reserved by the FCC for the exclusive use of the local public safety entities and other associated agencies with a public safety focus, such as utility infrastructure. In order to establish reliable network coverage to users throughout the City, the initial network deployment was comprised of 239 wireless access points installed at locations to maximize wireless coverage to targeted areas. Each of the access points is interconnected to the core backbone network either through direct connection to the City’s broadband fiber-optic network or through a wireless mesh link. 3.3.1 System Description The following paragraphs describe the major components used in the City’s network. City of Palo Alto – Wireless | August 2015 9 3.3.1.1 Wireless Access Points All users access the Port Angeles network through one of its 239 wireless access points. Wireless links in UHF8 and SHF9 spectrum are used to provide a digital communications path between the user (client) and the access point. This network supports fixed and mobile users. Dedicated radio frequency spectrum is provided in three separate bands: 1. The 4.9 GHz public safety band supports communications between public safety vehicles (e.g., police cars, fire trucks) and fixed network locations. 2. Access to the public network is in the unlicensed 2.4 GHz wireless band, which is used universally to support both business and home users through commonly available IEEE10 802.11n equipment. Nearly all consumer laptop computers, tablet devices and smart phones contain internal hardware and system software to operate in this band. 3. The wireless access points form a wireless mesh using the 5.8 GHz wires band, which serves as backhaul both between access points, and from the access points to the City’s fiber-optic network. Figure 2 graphically illustrates the network operation and functionality. 8 Ultra High Frequency (300 MHz – 3GHz) 9 Super High Frequency (3 GHz – 30 GHz) 10 Institute of Electronic and Electrical Engineers, Inc. is the international professional organization which has spearhead network standardization among manufacturers for more than four decades. City of Palo Alto – Wireless | August 2015 10 Figure 2: Network Overview of Port Angeles Wireless Network Infrastructure Low-power wireless equipment available for 4.9 GHz and 2.4 GHz for this type of network deployment exhibit limited range primarily due to radio signal absorption created by structures and foliage that attenuate the direct line-of-sight radiation between network components. In general, the range of most applications is limited to the direct optical line of sight of not more than 250 to 300 feet from the access point. In addition to the wireless links between the users and the access devices, there is an independent backhaul wireless link between the individual wireless access points and the fiber- optic network. Figure 3 is a photograph of one of the Port Angeles wireless access points mounted on a streetlight. The majority of the access units are mounted on either streetlights or utility poles. The power to operate the unit is obtained either from the streetlight wiring or an added circuit on the utility pole. The devices are typically mounted at a nominal height of 20 feet above ground. Based on field testing, this mounting position appeared to provide the best compromise between distance coverage and providing sufficient signal in the immediate vicinity of the mounting structure. Placing access points at a higher elevation created additional interference at adjacent sites. City of Palo Alto – Wireless | August 2015 11 Figure 3: Wireless Access Point Mounted on Street Light Figure 4 below illustrates a typical Port Angeles wireless access point. The electronic component box, on the extreme right, houses the wireless radio transmission electronics for each of the wireless bands. The vertical elements above and below the housing are antennas used to communicate with public safety vehicles and fixed commercial users. The units employ 802.11n multiple access antennas—referred to in the industry as multiple input, multiple output (MIMO) technology that continuously selects the best transmission path between the user and the access unit. The panel antennas located between the access unit and the pole are directional antennas used to communicate with adjacent access points through the 5.8 GHz wireless mesh. Figure 4: Wireless Access Point (Detail) City of Palo Alto – Wireless | August 2015 12 Depending on the access point’s physical location within the mesh network, the access unit may be connected directly to the backbone fiber-optic network. For mesh-only connected units, the physical length between hops and the number of hops varies throughout the system based on the placement of the access point and the location of existing fiber-optic interconnection points. The City’s long-term strategy to enhance network performance includes adding access points to expand the coverage area and adding fiber access points to decrease the number of hops within the network to the nearest fiber access point. The current implementation was developed as a balance to minimize construction costs and maximize service area within a constrained capital budget. Figure 5 below is a City map illustrating the location of the wireless access points. The blue circles indicate the location of the wireless access points; the sites with the outer red circles are fiber network interconnection points. Figure 5: Locations of Wireless Access Points in Port Angeles The map in Figure 6 illustrates the backhaul connecting the wireless access points. It should be noted that wireless backhaul mesh is a dynamic, computer-managed infrastructure. Path City of Palo Alto – Wireless | August 2015 13 routing changes in real time to maximize throughput, so Figure 6 illustrates the backhaul routing taken at a particular moment in time. Figure 6: Backhaul for Wireless Access Points in Port Angeles 3.3.1.2 Virtual LANs and Interconnection The individual Port Angeles wireless access points are connected to the network control center through a fiber-optic network owned and operated by the local system integrator, Capacity Provisioning Inc. (CPI). Traffic from each of the devices travels back to the facility through virtual local area network pathways, called VLANs or virtual LANs. These individual segments separate traffic between the various applications, such as public safety, public subscriber service, and network monitoring and control. This permits both the segmentation and separation of services and at the same time provides the necessary security between the individual networks. The VLAN capability will permit the public access network to provide “open access" to multiple Internet service providers (ISPs)—a requirement of the BTOP funding. Figure 7 illustrates the VLAN concept and how it is used in the Port Angeles network. As can be seen in the figure, the green lines represent the transmission of public safety data, the red line City of Palo Alto – Wireless | August 2015 14 indicates the commercial network, the yellow line identifies network management, and the blue line shows dedicated City services within the existing CPI fiber-optic network. The virtual LAN concept provides a mechanism for clearly separating individual services while multiplexing or combining on a common transmission line. Figure 7: Functional Diagram of the VLAN Infrastructure The CPI monitor software oversight of the instantaneous performance of any wireless system varies due to changes in path loss, traffic loading within any particular segment, and interference from other RF-emitting devices. A real-time performance tool created by the City’s contractor provides a valuable oversight mechanism for weeding out specific network problems associated with one or more of the access points; it provides network managers with the tools to tune and align components to maximize network performance. It also provides network planners with quantitative measurement for determining which locations need to be addressed with direct fiber access points as the network expands. 3.3.2 Network Operations The public safety network is managed jointly by the City and its vendor, CPI. The public 2.4 GHz network is operated as a commercial venture with network support from CPI. The network as designed and built has the capability to support additional ISPs. City of Palo Alto – Wireless | August 2015 15 3.3.2.1 Public Access Network Specifics The Port Angeles public network is designed to provide efficient low-cost services to the general public and commercial users. It is intended primarily as a service for home and small business applications, and is targeted toward the general public on the move. At the time the network project was completed, only one Internet service provider, OlyPen, had entered into an agreement with the City to provide public Internet access over the network. OlyPen is an established local ISP that has provided other forms of Internet access on the Olympic Peninsula since 1996. OlyPen’s Metro-Net Mobile Service uses the network’s 239 wireless access points; it is a Wi-Fi service over most of the City that is similar to the wireless hotspots available to the public in many airports, coffee shops, restaurants, and hotels. OlyPen’s Metro-Net Fixed-Point Internet service is similar to cable, DSL, and other forms of fixed broadband Internet services, in that a device commonly referred to as customer premises equipment (CPE)—in this case, an externally mounted wireless transceiver—is installed by the company at the customer's residence or business. (See Figure 8.) There is no need for a cable TV connection or telephone line to obtain a service. Figure 8: Exterior-Mounted Customer Premises Equipment (CPE) Unit 3.3.2.2 Public Safety Network Specifics The public safety network is focused on providing high-speed, low-cost network services to vehicles. While the wireless network provides services throughout most of the pertinent areas in Port Angeles, the high priority and on-demand service requirements of the public safety community require additional facilities to augment the wireless service. City of Palo Alto – Wireless | August 2015 16 Installed in each of the City’s public safety vehicles is a mobile routing device that continuously examines signal quality from both the City’s wireless network and the available commercial wireless services. The router dynamically provides the most cost-effective and reliable service by switching between the City network and the pay-as-you-go commercial network as needed.11 (See Figure 9.) The mobile router is an important component in the network because public safety vehicles are regularly operated outside of the City of Port Angeles. Public safety service obligations to the public do not stop at the City line—and, in fact, many of the staff are constantly traversing City boundaries. Further, there are also areas within the City where wireless coverage is not always reliable. The long-term goal for the project is to isolate and reduce the dead spot areas, through repositioning the access points or adding access points as funding permits. Commercial 4G services are available to all public safety vehicles, patrol vehicles have a very high probability of accessing either or both the commercial services and the City wireless network. Ongoing work is focused on refining and expanding this network to improve coverage in critical areas, while the network management team’s ongoing adjustment and tweaking of the internal vehicular routers aims to provide more or less continuous wireless coverage with the 4.9 GHz service to minimize access to pay-as-you-go services within the City limits. Public safety vehicles are also equipped with a mobile router device that provides connectivity back into the Port Angeles network. The router ensures that all data between the public safety vehicle and the Port Angeles network is transmitted securely via built-in VPN. 11 Typically wireless users on commercial networks pay a fixed fee for a defined amount of data service. Beyond that point services are paid for on a metered basis. City of Palo Alto – Wireless | August 2015 17 Figure 9: Illustration of Public Safety Mobile Router Function Within the public safety vehicle and 100 to 200 feet from the vehicle, a secure 2.4 GHz hotspot provides connectivity to other Wi-Fi enabled devices. This hotspot can provide connectivity for mobile data terminals, laptops, in-vehicle cameras, and other network-connectable devices. 3.3.3 Lessons Learned The Port Angeles network performance has clearly addressed the public safety users’ requirements. Patrol officers routinely use the in-vehicle real-time video surveillance capability to assist officers on patrol. The City’s Information Technology department was not an active participant in the wireless project. Staff concluded that because of the manner in which the system was configured to support the public Wi-Fi implementation, the network did not provide adequate security to support critical City applications. This precludes the use of the network to support any City enterprise network and Utility SCADA requirements. Finally, the revenues received from retail Wi-Fi users have fallen short of expectations.12 There is a daily “free” offering that is popular and draws users. Experience to date is that the third- party commercial ISP did not aggressively pursue the retail market for consumer services. This Wi-Fi service directly competes with DSL services provided by the ISP. 12 A specific dollar amount is not publicly available. City of Palo Alto – Wireless | August 2015 18 3.4 Ripon, California The City of Ripon, California has a population of approximately 14,200 over a land area of approximately 5.5 square miles. 3.4.1 System Description This Ripon system was installed to support public safety applications within the city. It was constructed in 2005 and operates in the 2.4 GHz unlicensed band. It employs proprietary Motorola Mesh electronics (a product that has been discontinued). There are a total of 52 wireless access points providing coverage over most of the city. There are a total of 81 client devices comprising a mix of mobile vehicles, video cameras, and SCADA devices. The system has been in operation for approximately 10 years.13 The Ripon Police Department’s IT department operates the system and can support the limited maintenance that it requires. It has proved to be a valuable tool to support day-to-day public safety applications. The system relies totally on the mesh infrastructure to interconnect all the wireless access points. 3.4.2 Lessons Learned This Ripon system was designed to serve a specific application and is maintained and operated by the user group. Public safety staff seems to be very satisfied with the overall operation. They are proposing to upgrade the system to new technology since the original system hardware vendor Motorola no longer supports this product. The 10-year lifespan goes well beyond expectations in wireless technology. This particular product represented a good mix for a relatively small community focusing on specific requirements and goals. This an example of a successful, standalone wireless project targeted to a single user group (public safety) that is managed and operated by the user group. The equipment selected appears to have met all the design performance requirements of the users. As in many technology-based projects, simple is good. 3.5 San José, CA The City of San José has two interesting, ongoing wireless initiatives. Recent deployment of public wireless has been installed in limited areas of the city’s downtown business center for both public access and enhancements to parking.14 Public access is also available at the convention center and the airport. This installation uses high-performance 802.11n technology 13 Information provided by Ripon PD IT department staff 14 Joint press release City of San José, Lenka Wright & Mark Riscaro Ruckus Wireless June 4, 2014 City expands service to SJC Airport and convention center. City of Palo Alto – Wireless | August 2015 19 A separate system is being installed for communications and control purposes with the city traffic signals.15 This is a standalone telemetry system independent of the public access network. 3.5.1 System Description The San Jose Wi-Fi system provides free Wi-Fi public services in limited multi-block areas in the downtown core business areas. The vendor has installed and maintains equipment serving the targeted outdoor areas, the city convention center, and the airport. The equipment used for traffic signal control is independent of the wireless network and is operated and maintained by the City’s traffic engineering organization. 3.5.2 Lessons Learned As a part of this recent downtown San Jose wireless network deployment, high-capacity IEEE 802.11n technology was installed to increase throughput performance up to 200 Mbps and expanded coverage. Wireless is a rapidly developing technology; typically new generations of equipment have a practical maximum useful life of five to seven years. This is particularly true for the access point hardware which is installed in the field. Other elements of the system such as broadband backhaul to interconnect to control centers and the physical mounting structures used for the access points have practical lives of 20 to 30 years. As has been demonstrated by the cellular industry, there is a constant need to redeploy new in-field electronic equipment to capitalize on ever-expanding throughput capacity requirements for users and address changes in communications technologies (e.g., enhanced signaling and encoding) and expanded spectrum resources resulting from FCC efforts to reclaim SHF spectrum. Deploying separate wireless networks for public wireless access and for the traffic signal application has merit. The design for each network can be tailored to meet the specific operating requirements and performance specifications for each of these services. A single universal wireless network generally may not cost-effectively address all of the specific requirements of various user groups within the municipality. A generic area-wide backbone wireless network may have merit for certain deployments. In many cases, it unfortunately may not address all users adequately. 3.6 Santa Clara, CA 3.6.1 System Description The Santa Clara system is a general-purpose citywide system that provides free Wi-Fi coverage to citizens and supports control monitoring functions for the city’s utility. The system operated by Silicon Valley Power (SVP MeterConnect) provides coverage within the city limits over approximately 19 square miles. There are a total of 600 access points in a mesh network to 15 Public release, Proxim wireless, Reducing congestion on the streets of San José with Wireless Traffic Control City of Palo Alto – Wireless | August 2015 20 extend the coverage of existing fiber-optic deployment. Figure 10 is a map posted on the City website showing the areas of coverage.16 Portions of the infrastructure of the system were purchased through a distressed sale of installed assets by the city utility from a defunct commercial provider for approximately $200,000. It was upgraded and expanded in 2013 at a cost of approximately $2 million. Separate SSID accesses are available to the public, government, and public institutions. The City estimates there are approximately 5,000 unique public users. Public access is provided up to 3 Mbps. Figure 10: SVP MeterConnect Coverage Area 3.6.2 Lessons Learned As noted in so many systems, the public will use free Wi-Fi service on a regular basis. Santa Clara does not have a fee-based service; all public access is free. Traffic depends on a variety of factors which include speed, reliability, and other available services. The network is operated by the City municipal utility. Estimated annual operating costs, in addition to the capital cost, are approximately $200,000 per year. A substantial portion of this is mesh radio software licenses and maintenance. For the longer term, future upgrading of the system to support newer, higher-capacity services will require a substantial investment in fiber-optic transmission plant. 16 Santaclarafreewifi.com City of Palo Alto – Wireless | August 2015 21 3.7 Implications to Consider for Palo Alto Wireless Deployment Our review of the selected municipal wireless projects provides some insight on deployment issues that might be addressed in formulating a Palo Alto wireless plan. In this review of municipal projects we focused on projects targeted to support public safety, cities with an existing fiber-optic infrastructure, and in some cases cities that operate their own electrical utility. We note that, in the projects described above, there are several recurring findings—specifically a set of common findings within the municipal wireless community. Our industry review, while clearly limited in scope, reveals that there is a core thread that supports some rather practical, common-sense guidelines for wireless deployment:  None of the municipal or commercial projects that we examined were able to develop a sufficient revenue stream to make the undertaking a viable business proposition. The public appears to appreciate the availability of free high-speed Wi-Fi; if you build it and give it visibility, the public will use it. For example, logins in Port Angeles increase substantially during periodic free periods. On the other hand, when the public is asked to pay for service on an ongoing or subscription basis, there appears to be a very small customer base. Should the City elect to move forward on deploying a subscriber-financed citywide Wi-Fi coverage model, we strongly recommend that the City first undertake a systematic consumer demand study to determine the interest in a Wi-Fi product, the performance parameters anticipated by users, and the subscription rates that users are willing to pay for the service. (We note that the City invited residents to participate in an online survey about wireless service options in July 2015.) In our nationwide review of municipal subscriber-financed citywide Wi-Fi coverage networks, we did not find any systems that were fully financed through subscriber revenues.  The practical deployment of Wi-Fi services requires a high-capacity connection between the access points through an expansive, dedicated high-capacity broadband backhaul network.17 This backhaul network can use either wireless or fiber-optic technologies (and in many cases, a mix of both technologies). In Palo Alto, the existing CPAU fiber- optic infrastructure does not have sufficient citywide points of presence or the requisite capacity to support citywide implementation of a public Wi-Fi network.  Should the City choose to move forward on implementing citywide Wi-Fi coverage, the most cost-effective and efficient manner for deployment would be to do so in concert 17 Backhaul networks connect wireless access points to the core network management system. City of Palo Alto – Wireless | August 2015 22 with an aggressive citywide fiber-optic expansion project, as set out in the city’s FTTP deployment study.18  Finally, a word of caution: Consumer-targeted wireless technology continues to evolve rapidly; wireless electronic equipment generally incorporates significant performance upgrades in three to five year intervals. It is difficult to predict what technical standards will be employed by consumer devices for wireless communications in the future. Any practical deployment for wireless technologies associated with consumer devices needs to take this into account. That said, investment in core wireless infrastructure—which includes mounting locations (poles, towers), electric power, and high-capacity backhaul links for access devices—will provide a foundation for much greater longevity for supporting the continual migration of wireless technology standards for consumer access devices. For each wireless deployment scenario, a comprehensive business plan needs to be developed for upgrading access equipment at regular intervals. In contrast, much of the core infrastructure such as the mounting structures (e.g., utility poles and streetlight poles) for the access devices, power equipment, and backhaul networks, typically will be operational for 20 to 30 years. 18 This would entail with an estimated capital investment of approximately $77.6 million. City of Palo Alto – Wireless | August 2015 23 4 Wireless Network Architecture Three general types of wireless topology are commonly employed in the system-level architecture of network design: (1) point-to-point communications, (2) point-to-multipoint communications, and (3) blanket (area-wide) coverage. Generally each of these technologies is used to construct wide-area municipal networks. This section examines the fundamentals of each topology and how they are implemented in practical networks. 4.1 Point-to-Point Communications Links The point-to-point topology supports a communication link between two points. Typically this is bidirectional and is configured to support data rates, availability, and security levels required for the specific application. For wireless communications, equipment is mounted at an elevation such that there is a line-of-sight path between the two points in the network. The height of the emitting and receiving antennas needs to be at a level above ground and generally clear of trees, buildings, and other objects that might absorb or reflect radio signals along the path. Lower frequency systems operating in the 700 Megahertz (MHz) UHF range not only provide a direct signal but also can support reliable extended coverage beyond clear line of sight. New technologies such as MIMO supporting multiple antennas permit extended range through the use of multiple input and output antennas. A wide variety of point-to-point products available from various manufacturers operate in both licensed and unlicensed spectrum in the 2.4 GHz to 5 GHz range; these products can support bidirectional point-to-point IP-based links and data rates in excess of 100 Mbps. These devices support full error detection and data encryption algorithms. Typically the devices include an integrated radio and antenna as a single package for mounting on buildings and towers. Many are small and can be comfortably mounted on existing urban hardware such as traffic signals, utility poles, and streetlights. In order to support a reliable, point-to-point wireless link it is common to mount devices at elevations of 20 to 75 feet19 above ground, positioned to avoid nearby obstructions. Depending on terrain, foliage, and other obstructions, point-to-point infrastructure will provide reliable communications links at distances up to 2.5 miles operating in spectrum from 2.4 GHz to 5 GHz. Figure 1 illustrates a simple point-to-point link connecting one fixed antenna located 70 feet above ground to a second site 20 feet above ground. This terrain profile analysis does not include amounts for clearance of buildings and vegetation; rather, it represents a starting point for an infield walkout evaluation to determine the existence of site-specific path coverage issues. 19 Subject to local zoning ordinances containing restrictions and requirements on heights and mounting structures. City of Palo Alto – Wireless | August 2015 24 Figure 11: Sample Point-to-Point Link Analysis 4.2 Point-to-Multipoint Communications Links Point-to-multipoint deployments build on the point-to-point topology by adding additional sites to the network. One or more sites serve as the core site. The core or hub site is located in a position where it is able to communicate with all of the sites within the point-to-point network. All of the individual service points must be able to support a reliable point-to-point link between the hub site and the service point. This generally requires a detailed investigation to determine the most suitable location for the core hub site. Generally this is located in an elevated area, typically an existing tower, building, or other such structure that provides for the highest suitable height above the average terrain of the area encompassing all of the individual service points. Since the hub site represents a single point of failure for the entire network, it generally includes hot standby backup core communications equipment that automatically switches an operation in the event of failure of the primary equipment. Individual site equipment installations may or may not be backed up based on network priorities. Figure 12 illustrates a typical point-to-multipoint network. Here, practical applications include communications to a parked public safety command van, links for temporary work sites or offices, and Utility SCADA sites. The point-to-multipoint network is generally the basis for wide-area deployment. For example, if the point-to-point range between any two devices is two miles or less, the area served by a hub site would be limited to a radius of two miles from the hub site. In order to expand coverage, in areas where there exists a robust fiber-optic network infrastructure, wireless hub sites are interconnected by fiber. In Palo Alto given the existing fiber-optic infrastructure, direct fiber-optic interconnection would be the preferred option. City of Palo Alto – Wireless | August 2015 25 In situations where fiber-optic interconnection is not available the options include extended point-to-point wireless links utilizing narrow beam antennas at higher elevations or so-called mesh technologies that repeat and forward data traffic between hub sites. Figure 12: Point-to-Multipoint Example 4.3 Blanket Coverage Blanket coverage addresses the requirement to provide a minimum level of interference-free wireless service throughout a defined coverage area. This coverage is typical of the type of service being provided by commercial wireless carriers such as Verizon, AT&T, Sprint, and T- Mobile. The service providers place base station facilities that communicate directly with user devices (often handheld or mobile devices, in locations that vary with the time of day). In order to provide this coverage, the commercial carriers have invested large sums of money in acquiring spectrum resources from the FCC, building towers, and developing an extensive backhaul system to integrate each of the transmission tower facilities into an area-wide network. Generally the towers are shared by the various commercial cellular providers and distributed antenna system (DAS) operators, and are often leased from companies that focus on tower facilities as revenue-producing investments. There are alternatives to the traditional commercial wireless carriers for providing localized blanket wireless coverage. Blanket coverage networks can be installed in targeted areas and provide services within the specified areas that can rival traditional carrier 4G services in both cost and performance. This type of implementation would no doubt focus on short-range high- capacity wireless access devices located within the target service area. Most consumer devices City of Palo Alto – Wireless | August 2015 26 such as tablets, smartphones, and PCs include Wi-Fi capability. Newer devices support both 2.4 GHz and 5 GHz technologies. They support data transmission rates in excess of 50 Mbps. The range of modern Wi-Fi wireless access points is typically 200 to 300 feet. Figure 13 illustrates a conceptual approach to providing coverage within a defined area of Palo Alto’s central business district. As can be seen in the figure, access devices located at intersections might be mounted either on traffic signals or on utility or light poles in the area.20 Each access point serves a limited area and provides sufficient signal intensity to communicate with low-power mobile devices such as tablets and smartphones. Different colors for the coverage areas for each of the access points indicate differing channels for communication to minimize interference between adjacent sites and to enhance the overall capacity of the system. In this illustration, the wireless access point provides point to multipoint infrastructure to communicate with the subscriber unit. Backhaul of information from the wireless access point would be provided via individual point-to-point fiber-optic links to a core management center. To minimize fiber deployment, optical multiplexing technologies21 might be employed to permit the integration of the backhaul link onto individual shared fiber lines with each site utilizing differing optical wavelength. Figure 13: Conceptual Approach to Providing Downtown Palo Alto Coverage 20 It should be noted that while on the surface it might be a simple matter to add equipment to the traffic signal infrastructure, there are numerous, unique challenges associated with each potential access site. Planning will need to be coordinated with traffic engineers and in some cases specific locations may prove to be unusable. 21 For this type of application, optical splitters are used to separate individual optical channels much like the travel lanes on a highway. By employing optical multiplexing the same fiber can carry the backhaul of a dozen or more sites. City of Palo Alto – Wireless | August 2015 27 5 Wi-Fi Technology 5.1 Transmission Evolution Since its introduction in 1997, Wi-Fi technology has become synonymous with wireless Internet. The technology is based on protocols and techniques from the IEEE 802.11 standard. Standards- based technology ensures the interoperability of equipment from different vendors. The introduction of various improvements or versions of the 802.11 standard has resulted in the improvement of speeds from 2 Mbps to the 100 Mbps+ speeds that are available today in Palo Alto. The two main unlicensed frequency bands used for municipal wireless applications are the 2.4 GHz and 5 GHz bands permitted under §15 of the FCC rules. The 5 GHz band contains three separate sub-bands (5.1 GHz, 5.3 GHz, and 5.8 GHz). There is also a separate 50 MHz allocation in the 4.9 GHz band which is reserved for licensed public safety applications. The 2.4 GHz frequency band is the most widely used, and is therefore most susceptible to interference from other devices that use the same frequency—such as Bluetooth, microwave ovens, and cordless phones. The 5 GHz band generally can support transmission rates of greater than twice as fast as 2.4 GHz, primarily due to additional spectrum bandwidth and lower interference levels employing 802.11 based network equipment. However, as distance increases, signal strength falls off more rapidly at 5 GHz than 2.4 GHz. The original version of the 802.11 standard (802.11-1997) is now obsolete. The versions of the standard that are still in use (listed in order of evolution) include 802.11a, 802.11b, 802.11g, 802.11n, and, most recently, 802.11ac. Wi-Fi devices are certified by the Wi-Fi Alliance to operate according to one or more of these versions. Individual manufacturers often support products that in general adhere to 802.11 standards and also have proprietary aspects. The following is a summary of the 801.11 versions used in open architecture deployment. 5.1.1 802.11a The 802.11a version of Wi-Fi operates in the 5 GHz spectrum with a channel size (bandwidth) of 20 MHz. It was first defined in 1999 and later redefined in 2012. It uses a technique called the Orthogonal Frequency Division Multiplexing (OFDM)22 scheme, which is also used by other technologies such as digital subscriber line (DSL), long-term evolution (LTE), and Data over Cable Service Interface Specifications (DOCSIS). It has physical layer data rates of up to 54 Mbps 22 The OFDM scheme spreads aggregated IP traffic over a number of much smaller “channels,” or subcarriers, these small channels are “orthogonal” to each other in the sense that they can be efficiently placed into much larger spectrum blocks without interfering with each other in spite of less guard spacing between them. City of Palo Alto – Wireless | August 2015 28 utilizing modulation23 techniques such as 16 QAM24 and Forward Error Correction (FEC) coding.25 5.1.2 802.11b This version operates in the 2.4 GHz spectrum and was introduced in 2000. It uses Direct Sequence Spread Spectrum (DSSS) techniques that were previously deployed in 802.11-1997. It has a signaling data rate of up to 11 Mbps using different modulation schemes. The Complementary Code Keying (CCK) modulation is used for the 11 Mbps data rates. In the 2.4 GHz spectrum in North America there are only three standard 20 MHz channels that do not overlap with one another. 5.1.3 802.11g Introduced in 2003, this version operates in the 2.4 GHz spectrum using OFDM, which results in higher physical layer data signaling rates of up to 54 Mbps (with 16 QAM). It uses 20 MHz channel allocation. The 802.11g standard is dynamically compatible with 802.11b. In a mixed standard environment where an 802.11b/g access point serves a client device with only 802.11b capabilities, creating compatibility could effectively lower the speed of the 802.11g network to that of the 802.11b. 5.1.4 802.11n The 802.11n version, which was approved in 2009, operates in both the 5 GHz and 2.4 GHz bands and is able to obtain much higher data rates due to multiple factors:  Increased channel sizes by bonding two 20 MHz channels, which nearly double the data (bps) available  Implementing higher-order data encoding rates to 64 QAM  Advanced antenna techniques such as multiple input, multiple output (MIMO) and beamforming. MIMO involves the splitting of data into multiples spatial streams that are 23 A modulation scheme spreads data on a carrier signal by using different combinations of the amplitude and/or phase of the carrier signal. 24 The number “X” in the X-QAM modulation refers to the number of possible combinations in the modulation scheme—the combinations of distinct types of changes in amplitude and/or phase in a signal. More speed requires higher-order modulation schemes, but higher-order schemes are more sophisticated to design and build and more sensitive to noise and imperfections in the signal. In a 256-QAM, there are 256 combinations changes in amplitude or phase. 256 is also 2^8, and 256 combinations can be depicted mathematically in the full range of combinations of eight digits of “0” or “1.” In a 256-QAM (2^8-QAM) channel of a given bandwidth, the theoretical capacity is [channel width in bps] x 8. 25 A coding scheme determines the number of data bits versus error correction bits being transmitted within a packet. City of Palo Alto – Wireless | August 2015 29 transmitted from multiple antennas at the same time on the same frequency channel (up to four streams in the case of 802.11n).26  Use of packet aggregation to improve the efficiency of the MAC layer packet transmission  Better error correction techniques such as Low Density Parity Check (LDPC), which in turn make data transmission more spectrally efficient—that is, allows more data (bps) within the limited amount of spectrum (Hz)  Shorter guard interval resulting in a 10 percent speed improvement In the 5 GHz band implementation, there are nine standard 20 MHz channels in North America. 802.11n is downward compatible with other versions of the 802.11 standard and is generally the level of network implementation found in existing commercial and government enterprise networks. 5.1.5 802.11ac The 802.11ac version was published in December 2013. It operates only in the 5 GHz spectrum band, which has greater spectrum availability (and therefore a greater number of channels) and is less susceptible to RF noise than 2.4 GHz. Physical layer data rates of up to 1.3 Gbps are possible through 802.11ac. This throughput is achieved through the following methods, which build on 802.11n:  Larger channel sizes by greater channel bonding up to 80 or even 160 MHz 27  Denser encoding schemes such as 256 QAM up from 64QAM in 802.11n  Implementation of higher-order MIMO antennas with the availability of up to eight spatial streams  Enhanced low-density parity check (LDPC) error-correcting codes  Implementation of Multiuser MIMO (MU-MIMO) where a Wi-Fi access point is able to use its antennas to transmit multiple frames to different client devices, at the same time and over the same frequency channels. In contrast, 802.11n only had Single User MIMO (SU-MIMO) 26 The MIMO streams travel to the receiving antennas following multiple paths. Multiple copies of the signals arrive at each antenna with slightly different timing which can be used to reinforce each other. This improves the signal to noise ratio, reliability and range. 27 The use of 160 MHz in the United States is still under review. City of Palo Alto – Wireless | August 2015 30  Optionally, shorter guard interval (for a 10 percent increase in speed)  Optionally, enhanced beamforming techniques Theoretically, a 1,300 Gbps physical layer data rate can be achieved by employing an 80 MHz bandwidth data transmission stream using 256 QAM encoding and three spatial streams at 5/6 coding. 802.11ac devices are now being introduced into the market. These are compatible with existing 802.11a/n deployments. For the 2.4 GHz band, 802.11n will continue to provide the maximum throughput. 5.2 Achievable Network Data Throughput Rates While the standard addresses the physical layer (Layer 1) data rates for each of the versions of the 802.11 standard, the actual, practical data transmission are substantially lower than the bit transfer rates. A major part of the modifications in each version affected the physical layer while the same Media Access Control or MAC layer (Layer 2) protocol, called Carrier Sense Multiple Access with Collision Avoidance (CSMA/CA), was in place. The MAC also uses messages called request-to-send/clear-to-send (RTS/CTS) to help avoid collisions with clients connecting with the same access point. Because of these types of overheads and the error correction required, the efficiency of the MAC layer ranges between 60 percent and 70 percent. The actual throughput available on each of these technologies is therefore 70 percent or less than of the physical layer (Layer1) data signaling rate. As with many radio-based technologies, the external conditions (such as the line of sight and interference) greatly affect the operation of wireless devices. The effective data rates available on a wireless network are also a function of many other factors such as:  Signal strength over noise (S/N) at the receiver or the network interface device28  Signal to interference (signals in the pass-band over the internal receiver noise)29  Availability of multiple channels or channel bandwidth for channel bonding Increasing the channel bandwidth results in a reduction of the range of the system as the same transmission power is split across a larger number of subcarriers. Also, in high noise environments, a 40 MHz channel bandwidth adapts to use 20 MHz bandwidth. Higher-order modulations and coding schemes are dependent on greater signal strength for operation. This 28 Devices employing adaptive modulation technology may operate with low S/N levels of 10 dB but to achieve full advantage of 256 QAM encoding throughput requires an additional 22 dB of signal for a 32 dB S/N (over 100 times the receiver signal level to obtain full data rate throughput). 29 Interference from other RF energy devices (e.g., wireless access units, radar, microwaves and consumer devices). City of Palo Alto – Wireless | August 2015 31 means that the highest data rates are usually available only at close proximity to the access point where signal strength is the highest. This is considered to be adaptive modulation and coding to ensure that most optimum mode of transmission is used. The improvement of data speeds due to MIMO is directly proportional to the number of spatial streams. But, more spatial streams require more antennas and consume additional power. Therefore, it may not be possible to implement this fully on mobile devices with limitations on hardware and power. For instance, an 802.11n radio provider may advertise 300 Mbps speed. When we examine this:  The channel size has to be 40 MHz  This is the data rate at the highest modulation rate; with a MAC efficiency of 60 percent of the actual throughput, the data rate will be 170 Mbps  MIMO operation is required Table 1 provides a simplified overview of pertinent operational parameters associated with the evolution of the 802.11 equipment used in the deployment of municipal wireless technology. The 802.11 standards are the product of more than a decade of planning, drafting, and negotiation among network architects, equipment designers, manufacturers, and government radio frequency regulators. Table 1: 802.11 Version Summary30 Version Frequency Max Modulation Rates (Mbps) Typical Data Rates (Mbps)31 Modulation 802.11a 5 GHz 54 20 OFDM 16QAM 802.11b 2.4 GHz 11 5 DSSS CCK 802.11g 2.4 GHz 54 20 DSSS, OFDM 16QAM 802.11n 5 or 2.4 GHz 600 170 OFDM 64QAM 802.11ac 5 GHz 1300 TBD OFDM 256QAM 30 IEEE Std 802.11 for wireless local area networks (WLANS) as well as enhancements to the existing medium access control (MAC) and physical layer (PHY) functions. IEEE Standards 2008-2011. 31 Half duplex transmission rates, typical only one device is transmitting at a time using a common spectrum. City of Palo Alto – Wireless | August 2015 32 5.3 Network Security Security is an integral component of any networking technology, including Wi-Fi. The oldest security protocol for Wi-Fi is the Wired Equivalent Privacy or WEP. It is no longer considered sufficient, but 64 bit and 128 bit WEP are still in use. The WPA protocol was introduced in 2003 with an encryption technique called TKIP. Currently, the latest version of WPA (called WPA2) is the recommended technique for Wi-Fi security along with an encryption technique called Advanced Encryption Standard (AES). There are other methods that can be used to improve Wi- Fi security such as MAC Filtering and Wireless Intrusion Protection Systems (WIPS). 5.4 Signal Propagation and Interference Rejection The physics of radio frequency propagation results in unavoidable wireless propagation loss that is a function of distance. This ultimately results in lower speeds at the edge of an access point’s coverage area due to the reduction in signal strength. For example, 2.4 GHz UHF and particularly 5 GHz SHF networks have very limited ability to penetrate the walls of buildings and other dense objects like tree limbs, and even dense leaves. In the case of an outdoor deployment, certain types of construction such as stucco and high- efficiency windows, in particular, block signal penetration into and out of buildings. The performance of outdoor networks is impacted by vegetation, hills, buildings, building materials, and other obstructions because the UHF and SHF devices require close to line-of-sight transmission for optimum operation. A technically savvy user will tend to use and install devices in locations that minimize loss, have lower interference levels, and have multipath signals. For the casual user, reliability issues can be frustrating. (This is one good reason that a citywide Wi- Fi deployment would not be a substitute for wired Internet service in most residents’ homes.) With the ubiquity of unlicensed RF-emitting devices in homes and businesses, the environmental RF interference levels in 2.4 GHz and 5.8 GHz bands is very high. Unfortunately, the common technique used to improve the performance is increasing the number of access units, which only exacerbate the problem by increasing interference. In the planning phase of any wireless network for a controlled area, RF spectrum analysis equipment enables the designer to discover the sources of existing interference. Interference mitigation techniques (including channel planning allocation and smart access devices that support on-the-fly, dynamic channel assignment) can be utilized to improve performance. The current 802.11n standard supports advanced techniques of mitigating interference such as antenna arrays with beamforming which enable wireless device with advanced technology to automatically detect and steer transmissions to the clearest signal path. City of Palo Alto – Wireless | August 2015 33 6 City Resources to Support Wireless Deployment As a part of this study, we examined key elements of the existing City infrastructure to determine the feasibility of using existing City assets in whole or in part to construct wireless infrastructure. As an example, the City has more than 100 traffic signals that are connected by fiber-optics; these have the potential to form a practical foundation for mounting, powering, and interconnecting wireless access points to create a targeted blanket network in the core central business area. In this section we examine the City’s existing resources and the suitability to support wireless deployment. Resources examined include:  Fiber-optic infrastructure  Suitable municipal building mounts  Street lights and traffic signal mounts  Utility facilities (substations, towers, and similar structures) As with any infrastructure deployment, mounting access points would require an evaluation of the impacts on City infrastructure and an awareness of potential public concerns. This includes security of facilities like electric substations; potential complications related to mounting on traffic signals; and the visual impact of new equipment on street lights and municipal buildings. It would also require sensitivity to consumers’ apprehension about issues such as radiofrequency (RF) radiation in public spaces like parks. 6.1 Fiber-Optic Backbone Requirements In order to implement a citywide open access Wi-Fi network, the City’s wireless system will require an extensive backbone network to interconnect each of the individual access points to a central control and distribution center. Assuming that the client or user devices are typical smartphones, tablets, and laptops, the consumer access units will need to communicate with the user devices in either the 2.4 GHz or 5 GHz bands. A practical network will need to support the IEEE 802.11 standards, which encompass several iterations of changes in security, throughput, and coverage. A typical consumer expects that a device will interconnect to the network with a minimal amount of changes in the configuration of the user device. The technology employed in Wi-Fi generally supports coverage in an outdoor environment of up to 300 feet from the wireless access point. This distance can be reduced based on a variety of factors such as foliage, interference, number of users, and the overall sensitivity and power level of the user device. City of Palo Alto – Wireless | August 2015 34 This limitation in coverage creates the need for a large number of wireless access points to cover a relatively small area. For example, a rule of thumb might be a requirement for 40 to 50 access points per square mile. Palo Alto’s core residential area and commercial business zone— the area in which the majority of residents would be served—is approximately 11.5 square miles. (This excludes industrial parks and the larger Foothills preserve areas.) Each of the wireless access points requires connectivity back to the control or management center. There are generally two alternatives to support this so-called backhaul link. The first is to directly connect each of the hundreds of access points directly back to the center through an extensive fiber-optic network. Figure 14 illustrates a directly connected wireless network. Figure 14: Sample Directly Connected Wireless Network Alternatively, a hybrid connection can be developed using a mix of a limited number of fiber- optic links interconnecting a so-called mesh network that provides a wireless link between adjacent access points (Figure 15). This approach requires fewer fiber-optic links and reduces the overall capacity of the network, because the total wireless capacity is divided between City of Palo Alto – Wireless | August 2015 35 services provided to the end-user and supporting the backhaul link to the control management center. Figure 15: Sample Wireless Mesh Network In addition, each backhaul link, often referred to as a “hop,” introduces a delay in transmitting the signal from one point on the network to another. The delay, referred to as latency in the industry, reduces the overall suitability of the network to support certain key functions such as voice over IP (VoIP) and video. One other factor to consider is the fact that the equipment employing mesh technology is generally proprietary in nature, which means that the user or service provider is limited to one source for hardware and software support. We examined the fiber backbone in the existing Palo Alto network and determined that the existing fiber infrastructure is suitable to support the deployment of the citywide fiber-optic network using mesh technology. Our review of the existing fiber infrastructure confirms that there is sufficient fiber in place that, with the addition of short fiber extensions for existing splice points, the existing fiber could enable rapid deployment of sufficient fiber-connected nodes to support mesh technology requirements established by equipment vendors. The fiber City of Palo Alto – Wireless | August 2015 36 strand count is nominal and should not affect existing capacity within the fiber network to impact the Utility’s dark fiber leasing business. Our review of the fiber-optic maps indicates that in general, within one mile of any location in the City south of the Foothill Expressway, there is a fiber-optic cable suitable for interconnecting the access points with the mesh technology. Naturally, practical design would focus on strategically locating the fiber-connected nodes or access points to existing fiber-optic splice locations. For example, there is a significant availability of fiber-optic cabling along Middlefield Road that could be used to interconnect access points along this road and also to extend fiber from Middlefield Road to other parallel streets. The capacity of wireless technology will continue to grow as more sophisticated encoding technology is brought into the open 802.11 standards or, potentially, into future standards for commercial user equipment. The FCC continues to work with the industry to expand available spectrum in both the 4 GHz and 5 GHz bands. This increase in spectrum and enhanced technology will continue to enable higher-capacity services to end-users—and in turn will necessitate construction of high-capacity fiber-optic backhaul networks to provide capacity between wireless access points and the core management system. Should the City move forward with the FTTP initiative, consideration should be given to integrating the backhaul requirements for a modern high-capacity wireless network into the design and construction of the FTTP network. The cost to install drop connections to a wireless access point will be far lower than for the City to construct a dedicated fiber-optic backhaul network for the purposes of supporting a high-capacity wireless network. 6.2 Installation Options for Wireless Access Devices The reliable coverage area for wireless access points operating in the unlicensed 2.4 GHz and 5 GHz bands is limited to distances of less than 300 feet when communicating with consumer- grade electronics in devices such as smartphones, tablets, and laptops. The attenuation32 caused by buildings, trees, foliage, and weather conditions further limits service areas. There is, however, a beneficial aspect of the small service footprint. Because fewer users occupy a given service area, the access points can provide a generally high level of throughput to each user. In fact, a growing trend in the commercial wireless industry is to reduce the service size for each antenna site, because the carriers are restricted to a specific amount of RF spectrum at the user location. In Palo Alto there is a ready supply of mounting structures suitable for mounting wireless access points. The most obvious are streetlights and traffic signals. These locations fall within the public right-of-way, generally are substantial enough to mount the small radio transceivers that communicate with the user, and have a primary power source with uninterruptable power 32 Attenuation is a reduction of signal strength. City of Palo Alto – Wireless | August 2015 37 supply (UPS) backup for the access point equipment (usually 25 W or less). Typically, wireless access devices are mounted at an elevation of 18 to 20 feet above ground, to provide a good compromise between the users located near the device and those at the periphery (typically 300 feet from the device). The current generation of outside wireless access units that would be used to provide blanket City coverage include integrated, weather- and environmentally protected housings and are intended to be bolted or banded to a wide range of light poles, traffic signals, and building exteriors with minimal visual clutter. Access units designed to be used for fiber backhaul applications typically have integrated antennas and are available in a form factor less than 9×9×10 inches. The weight for the entire package is less than five pounds. Access units for mesh deployment are larger due to the additional radios within each housing. These devices have a somewhat larger form factor—typically in the 12×8×5-inch range without antennas—and weigh less than 20 pounds. Figure 16 is a photograph illustrating a typical wireless access point installation for a mesh system. (As with any installation on a pole, the City would need to calculate the acceptable load for each pole prior to installing an access point.) Figure 16: Typical Wireless Access Point Installation for Mesh System City of Palo Alto – Wireless | August 2015 38 7 Palo Alto Requirements Analysis and Stakeholder Input The following sections of this report analyzes and presents recommendations on the City’s requirements and options for deploying wireless technology to support specific broadband communications needs identified by the project team. This analysis represents a continuation of the City’s commitment to providing services to citizens and local businesses, and enhancing the communications resources supporting first responders and other City employees. 7.1 The Need for Wireless Broadband This requirements study for wireless broadband within Palo Alto not only addresses the needs of residents, businesses, and government employees, but also examines the ever-expanding communications systems requirements of our modern society. In general, most people are familiar with wireless networks; they connect our devices to the Internet service within our residences, and connect our voice calls to the public telephone network. In addition to these very basic functional networking services, there are an ever- expanding variety of electronic devices that require so-called machine-to-machine communications links33 to control centers and to other equipment associated with the devices. City of Palo Alto Utilities (CPAU) is very familiar with this technology—the department long ago installed fiber-optic cabling to interconnect its command and control centers to devices that monitor and control external facilities such as power substations and water treatment plants (i.e., supervisory control and data acquisition, or “SCADA”). Typically, machine-to-machine links interconnect distributed equipment that monitor status such as temperature, water level, intrusion, or possibly fire. Alarms are detected either locally or at a core facility; supervisory personnel are alerted to the malfunction via the network. Often, the machine-to-machine links will provide sufficient information that the problem or issue can be addressed or at least mediated remotely. This saves time, staff resources, and the potential expense of dealing with major repairs caused by an inability to sense or detect abnormal operation. As part of the requirements analysis, we examined the City’s potential needs to expand wireless infrastructure—or the utilization of existing wireless communications resources—for the purpose of providing additional services to citizens, delivering public services in a more cost- effective manner, and leveraging the City’s existing broadband assets. To do this, we met with representatives of departments and divisions that provide a wide range of services to City residents, including the City Manager's Office, the City's Public Safety departments (Police Department, Office of Emergency Services, and Fire Department), the Transportation Division, 33 Often referred to as the “Internet of things.” City of Palo Alto – Wireless | August 2015 39 and the Community Services, Information Technology, Utilities, Planning and Community Environment, and Public Works departments. We also examined opportunities for providing enhanced consumer wireless services to the general public, both citywide and within targeted areas. We note that the City’s Information Technology department has already taken the initiative to install modern high-capacity wireless networks within most of the City’s major buildings. Modern wireless networks provide secure, user-friendly communications links to support a wide variety of smartphones, tablets, laptops, and computer peripheral devices.34 Technologies deployed by the City’s Information Technology department provide users with network transmission speeds in excess of 100 fold over earlier wireless networks. Our findings and recommendations cover a wide range of applications and services that will advance the deployment of technology, particularly to enhance citizen services and to support the City’s first responders. In light of the City’s complementary ongoing study of FTTP network deployment options, we note that the wireless broadband technology we explore in this report does not compete with fiber-optic broadband networks in complex urban environments such as Palo Alto. Rather, wireless technology supplements the City’s backbone fiber assets and the services delivered over that fiber. Should the City elect to move forward on citywide deployment of a high capacity Wi-Fi service, a mandatory requirement will be that a citywide FTTP network be in place to provide backhaul links from hundreds of wireless access points to a network management and control center with eventual linking to the Internet. By its nature, fiber-optics requires rigid or physically fixed points of attachment to a network— and transports information point-to-point. In contrast, wireless technology enables mobile networking. Mobility might involve communications with devices in motion (such as for public safety applications) or devices that need to be moved to different locations within a defined area (such as in business, or in a home where residents are using tablets or laptops). We are increasingly becoming a mobile society when it comes to communications. Early communications systems such as the telegraph and telephone were confined to fixed points of access and termination. It is hard to believe that it has only been a few decades since consumers first had the ability to take their communications systems on the move. No doubt the traditional landline will eventually disappear from the home or office and be replaced by personal communications equipment. 34 Consumer equipment interfaces with the City’s wireless network over 2.4 GHz and 5 GHz unlicensed spectrum using the international standard IEEE 802.11 protocols. These protocols have been developed over the past two decades and continue to provide upward mobility in terms of performance, security, and overall reliability. City of Palo Alto – Wireless | August 2015 40 The requirement for portability and ability to access network resources from any location in the City is the driving force for implementing broadband wireless services. Indeed, while most Palo Alto residents acquire broadband services to their home through a physical cable (e.g., from a cable modem or fiber-optic provider), they also generally employ wireless networking technology within their premises to link all of their individual devices to the network. The same requirements noted in the consumer electronics world are also quite prevalent in both business and government work environments. 7.2 Stakeholder Input As previously noted, we gathered insight and input from a wide range of City departments and divisions. The following sections detail the City’s current uses of wireless technology and its short- and long-term needs for additional wireless infrastructure and applications. These needs (which are listed in Appendix A) inform the deployment options described in Section 8 below. 7.2.1 Information Technology The City’s Information Technology Department has completed the installation of enhanced wireless networking access equipment in 30 of the major City buildings that provides public access to citizens; the wireless access is generally available in the adjoining property areas, as well. This network supports both public access and access for authorized City staff to the City’s enterprise network. Table 2 provides a list of City sites that currently have facility-wide Wi-Fi service. A total of $180,000 has been invested in constructing the 30 buildings’ networks. The yearly operating cost for the service is approximately $13,500. The buildings that currently have service display the “OverAir Wi-Fi Hotspot” emblem throughout the facility (see Figure 17). The equipment used to provide this service is consistent with the current level of technology for providing high-capacity, secure, and reliable services. Figure 17: OverAir Wi-Fi Hotspot City of Palo Alto – Wireless | August 2015 41 As is the case with much of the equipment associated with Information Technology, there is a relatively short user technology timeframe for this wireless equipment. In other words, while the equipment may still be operational and fully functional over possibly a decade, the combination of the movement of technology to new generations of hardware, the development of new software, and the lack of cost-effective long-term support from equipment manufacturers requires fairly frequent equipment replacement cycles—typically at five- to seven-year intervals. Fortunately, this type of upgrade generally only involves the wireless access devices—hardware that is typically located in the false ceilings of buildings or other locations that are accessible to the technical support team. The Information Technology Department also provides public Wi-Fi service on community properties associated with the City. For example, Figure 18 is a photograph of an access point located in the City Hall Plaza area. An outdoor access point device typically provides service to an area several hundred feet in diameter from the unit. Distances vary based on the equipment used, the number of other access units in the vicinity, and the end-users’ devices. (Consumers’ smartphones, tablets, and laptops are generally restricted in power and overall sensitivity, and hence tend to be the limiting factor with regard to overall service area associated with wireless access points.) Figure 18: Wi-Fi Access Unit in Palo Alto City of Palo Alto – Wireless | August 2015 42 Table 2: City Sites with Facility-Wide Wi-Fi Site Name Address Cogswell Plaza ( outdoor) 264 Lytton Av City Hall 250 Hamilton Av Fire Station 1 301 Alma St Fire Station 2 2675 Hanover St Fire Station 3 799 Embarcadero Rd Fire Station 4 3600 Middlefield Rd Fire Station 5 600 Arastradero Rd Fire Station 6 711 Serra St (Stanford) Children’s Theater 1305 Middlefield Art Center 1313 Newell Rd Lucie Stern Community Center 1305 Middlefield Junior Museum & Zoo 1451 Middlefield Cubberley Comm Center (partial) 4000 Middlefield Baylands Interpretive Center 2775 Embarcadero Rd Children's Library 1275 Harriet St Municipal Service Center - Bldg. A 3201 East Bayshore Rd City Hall - King Plaza (outdoor) 250 Hamilton Av Municipal Service Center - Bldg. B 3201 East Bayshore Rd Development Center 285 Hamilton Av Downtown Library 270 Forest Av College Terrace Library 2300 Wellesley St Municipal Service Center – Bldg. C 3201 East Bayshore Rd Utilities 3241 E. Bayshore Foothill Interpretive Center 3300 Page Mill Rd Utilities 1005 Elwell Ct Utilities 1007 Elwell Ct Water Quality Control Plant 2501 Embarcadero Way City of Palo Alto – Wireless | August 2015 43 Site Name Address Animal Services 3281 East Bayshore Rd Mitchell Park Library and Community Center 3800 Middlefield Rd Main Library 1213 Newell Rd 7.2.2 Community Services Palo Alto’s Department of Community Services operates the City’s community centers, parks, sports fields, and numerous specialized centers citywide. Not all of the facilities operated by Community Services have modern high-capacity wireless services like the sites listed in Table 2, which have service provided by the Information Technology Department. The Community Services staff have requested that free, open public access be installed at all of the facilities operated by the department to provide the level of services that citizens expect from Community Services. Many of the Community Services facilities are on or near the City’s existing fiber-optic network and therefore could be connected to equipment similar to that deployed in City Hall. The department staff requested that a multi-year capital program be established for implementing broadband services at all department facilities. The tables below identify the department staff’s priorities for implementation. Table 3: First-Priority Community Services Sites Facility Ownership Address Rinconada Pool City 777 Embarcadero Road Pearson-Arastradero Interpretive Center City 1530 Arastradero Road Cubberley Fields City & PAUSD35 4000 Middlefield Road, T-2 Table 4: Second-Priority Community Services Sites Facility Ownership Address Municipal Golf Course City 1875 Embarcadero Road Baylands Athletic Center City 1900 Geng Road, off Embarcadero El Camino Park City 1 El Camino Real Greer Park City 1098 Amarillo Street Lytton Plaza City 202 University Avenue Mitchell Park City 6 East Meadow Avenue Rinconada Park City 777 Embarcadero Road 35 Joint shared use with Palo Alto Unified School District (PAUSD) City of Palo Alto – Wireless | August 2015 44 Facility Ownership Address Stanford – Palo Alto Playing Fields Stanford University El Camino at Page Mill Road Ventura Community Center City 3990 Ventura Court Baylands Nature Preserve (incl. Byxbee) City 2775 Embarcadero Road Esther Clark Preserve City Old Trace Road Foothills Park City 33 Page Mill Road Pearson-Arastradero Preserve City Arastradero Road at Page Mill Road Table 5: Third-Priority Community Services Sites Facility Ownership Address Bol Park City Laguna between Barron and Matadero avenues Boulware Park City 39 Fernando Avenue Bowden Park City Alma Street at California Avenue Bowling Green Park City 474 Embarcadero Road (Juana) Briones Park City Arastradero at Clemo Street Cameron Park City 211 Wellesley Street Eleanor Pardee Park City 851 Center Drive El Palo Alto Park City El Camino Real at Alma Street Heritage Park City Homer at Waverley Hoover Park City 2901 Cowper Street Hopkins Creekside City Palo Alto Avenue from Emerson to Marlowe streets Johnson Park City Everett and Waverley Kellogg Park City Waverly at Embarcadero Road Mayfield Park City 23 Wellesley Street Monroe Park City Monroe and Miller Avenue Peers Park City 1899 Park Boulevard Ramos Park City 8 East Meadow Avenue Robles Park City 4116 Park Boulevard Scott Park City Scott Street at Channing Avenue Seale Park City 31 Stockton Terman Park City & PAUSD36 655 Arastradero Road Wallis Park City Grant Avenue at Ash Street Weisshaar Park City 2298 Dartmouth Street Werry Park City 23 Dartmouth Street 36 Joint shared use with PAUSD City of Palo Alto – Wireless | August 2015 45 7.2.3 City of Palo Alto Utilities Palo Alto operates its own utilities, including electric, gas, water, wastewater, and fiber-optic services. City of Palo Alto Utilities (CPAU) has been a nationally recognized leader providing quality utility services to citizens and businesses since 1896. With regard to telecommunications, the utility-deployed fiber-optic technology is a backbone transmission medium used to control and monitor critical utility infrastructure on a citywide basis. Wireless technology enables the utility to expand the reach of its fiber footprint to support a wide range of monitoring devices citywide. Wireless technology can be installed more rapidly and at a lower cost than fiber-optic technology, particularly for applications to address temporary locations or sites that are currently being supported by underperforming technology such as leased copper lines and antiquated point-to-point radio systems. It can also be used to support emerging customer monitoring and control systems associated with smart grid technology. CPAU previously commissioned EnerNex Corporation to conduct a study of requirements for the utility to capitalize on emerging smart grid technologies.37 One of the areas of analysis in that report focused on the need for backhaul communications capability to monitor and control field devices. Wireless technology is one of the options for backhauling information from customer premises equipment in real time to determine and control operation. In addition, in applications where the utility chooses to install equipment supporting open telecommunications architecture, a broadband wireless system might prove to be an attractive alternative. Future planning for both wireless and fiber-optic deployment should be performed in concert because they are dependent on each other. To be effective, wireless access points need cost- effective connection points to the fiber-optic backhaul. Fiber technology can leverage the quick, low-cost deployment attributes of wireless to provide seamless network connections to support many City and commercial applications. The utility is currently piloting several projects associated with smart grid deployment. Our review of the pilot projects indicates that the existing implementations employ proprietary telecommunications technology developed by the vendors and integrated as a part of the service packages. The systems currently under evaluation link to the pilot test area through commercial wireless services. With regard to near-term requirements, CPAU needs to upgrade certain existing links from 37 “Assessment of Smart Grid Applications in Palo Alto and Two-Year Smart Grid Related Work Plan for 2012 and 2013,” City Council Staff Report, City of Palo Alto, Feb. 13, 2012. http://www.cityofpaloalto.org/civicax/filebank/documents/41569 City of Palo Alto – Wireless | August 2015 46 legacy radio equipment and dial-up (telephone line) monitor and control equipment. The links in question include:  Existing radio links (Foothills sites) o Power line monitor/closure control o Water utility facilities  Four existing dial-up lines to water storage/control sites outside of fiber coverage footprint  New SCADA telemetry monitoring and control for electrical distribution equipment (monitor end-of-line voltages, open/closure control) o College Avenue o Emerson Street o Other applications for future deployment include remote cameras to monitor construction areas, water levels, and general security requirements at key facilities 7.2.4 Planning and Community Environment Department – Transportation Division The City’s Transportation Division “enhances safety and mobility in Palo Alto’s transportation system while protecting environmental resources and preserving the community’s quality of life.”38 The Transportation Division’s responsibilities range from traffic operations and parking management to public transit services and regional transportation activities. Our discussion with Transportation Division staff indicated the need for communications network facilities beyond the areas served through fiber to connect monitoring devices associated with the deployment of new services targeted toward monitoring traffic flow, enhancing bicycle safety, and improving central city parking. Specifically, the division needs an ability to transfer information in real time from selected sites for both bicycle traffic and parking status. The communications infrastructure should enable communications from sensors located along bike paths and within designated parking areas such as city parking lots and buildings. The division’s overall goals are to provide citizens with real-time information on parking status and to gather long-term data focused on enhancements to both bike paths and parking areas. Other applications for the network are to expand the locations where traditional automobile traffic monitoring equipment can be cost-effectively installed outside the footprint of the 38 “Transportation,” City of Palo Alto website, http://www.cityofpaloalto.org/gov/depts/pln/transit/ City of Palo Alto – Wireless | August 2015 47 existing fiber-optic network. These devices support the real-time monitoring of traffic counting and turning-vehicle backups, and measuring travel times and vehicle densities on given routes. 7.2.5 Public Works Department – Engineering Services Division Public Works oversees diverse responsibilities that range from construction and maintenance of public facilities, streets, sidewalks, and storm drains to the oversight of construction work done within the City. To assist the department and this work, the ability to place video cameras for remote construction observation can facilitate oversight of both construction and project status. Strategically placed monitoring equipment will improve the efficiency of the department’s inspection staff by enabling real-time status monitoring and enabling inspection staff to deal with issues as they developed. The goal here is to improve the overall efficiency of construction oversight and minimize disruption. 7.2.6 Public Safety Departments: Police Department, Office of Emergency Services, Fire Department The City’s public safety departments have requirements for citywide and adjacent jurisdictional voice and data communications services. For example, the Police Department operates the Public Safety Answering Point (PSAP) for law enforcement, Fire/ambulance, Public Works, Utilities, and Stanford University. By the very nature of public safety communications, these systems must have a high degree of availability, have a defined quality of service, be highly reliable, and function independently of commercial service demands. In addition to traditional voice radio systems, there is an ever-growing demand (in Palo Alto and nationwide) for data communications to support first responders. This is a key driver of any wireless deployment in the City. The use of commercial cellular providers has greatly improved public safety operations for day-to-day operation. Unfortunately, during critical demand periods, the availability of such networks and overall throughput becomes limited. While existing commercial services continue to provide new capabilities, commercial providers are not able to simultaneously meet first responder and public user demand during emergencies. When too many users (first responders and citizens) are attempting to use the same commercial communications services, those networks can become overloaded. This can also happen as a result of sheer overloading by the high density of users in a given geographical area, such as during a major sporting event or public demonstration. (During an interview, City staff provided examples of the network overload phenomena often associated with Stanford University activities.) Congress has taken action to address public safety’s unique mobile communications needs nationwide. The federal First Responder Network Authority (FirstNet), which was created by the Middle Class Tax Relief and Job Creation Act in 2012, is working with state and local City of Palo Alto – Wireless | August 2015 48 governments to develop a national network to “build, operate and maintain the first high- speed, nationwide wireless broadband network dedicated to public safety.”39 We note that FirstNet is a long-term solution that will complement the City’s efforts, but not replace the need to meet its own local communications requirements. Palo Alto’s first responders have taken positive steps to address deficiencies within the departments’ data communications network. The Police Department is taking steps to improve overall services through the implementation of two separate initiatives. 7.2.6.1 Wireless Point-to-Multipoint Prototype The first initiative involves the use of the public safety Mobile Emergency Operations Center (MEOC), a state-of-the-art standalone command vehicle, and several other command vehicles that are linked by a high-capacity broadband wireless network for mobile command post operation. This prototype system maintains a base station (access facility) on the City Hall rooftop, which communicates through a point-to-multipoint link to the remote vehicles within a defined arc of the city. The system, which has now been validated through field testing in operational deployment, will need to be expanded to provide 360-degree citywide coverage. This same service can be expanded to address the point-to-multi-point requirements presented in the preceding paragraphs for CPAU, the Planning and Community Environment Department– Transportation Division, and the Public Works Department–Engineering Services Division. Figure 19 below illustrates the operation of a core-based point-to-multipoint high-capacity broadband wireless system like the one being implemented by the Police Department. 39 “About FirstNet,” First Responder Network Authority, http://www.firstnet.gov/about City of Palo Alto – Wireless | August 2015 49 Figure 19: Private Point-to-Multipoint Wireless This illustration includes the concept of adding other core infrastructure users to the network to expand the overall usefulness of the project to other critical service providers within the City government. For example, some of the requirements elicited from CPAU, Transportation, and Public Works can be addressed by expanding the existing network without impacting overall City of Palo Alto – Wireless | August 2015 50 system capacity. Further, expansion of the existing Police network through the addition of equipment at the core City Hall site to provide solid 360-degree coverage from this location will enhance the operation not only for public safety, but additionally for other critical infrastructure operation applications. Under the current architecture all of the core equipment is located at a single facility, which is potentially subject to failure through a building structure failure or major fire. For this type of deployment, consideration should be given to a backup or auxiliary site in the Foothills to backup or augment the single core site. 7.2.6.2 Public Safety Mobile Data Network The City’s first responders have an ever-increasing demand for information in the field, including timely access to information while traveling to an incident. Expanding requirements for video communications can and often does overload commercial networks, particularly with multiple vehicles operating on site. In certain situations, such as parades, sporting events, and other pre-planned activities, the command vehicles can serve as an access point for interconnection to a vast array of networking resources. The Police Department has been deploying smart mobile router devices that permit the vehicles to interconnect to the most desirable network connection. Figure 20 below illustrates the overall concept. The router can continuously monitor available networks and resources—which might include leased services from AT&T or another provider, public Wi-Fi, and other services such as the 4.9 GHz broadband services used to support the command vehicle. In the future the same device will be able to communicate with FirstNet. City of Palo Alto – Wireless | August 2015 51 Figure 20: Command Vehicle as Mobile Access Point Over the two decades that the City’s fiber network has been operating in Palo Alto, a large number of access points have been provided to support various municipal functions such as control equipment for utility operations and traffic signaling, links to public buildings, and other similar applications. These sites offer the potential for locating wireless access points to communicate exclusively with public safety vehicles supporting both Police and Fire department operations. Another implementation scenario to consider involves deployment of access points at either critical locations within the City or along pertinent transportation routes. We anticipate that initial deployment will leverage to the maximum degree possible existing network access points. Generally we found as a part of our evaluation that existing fiber-optic broadband services for City use are located near or coincide with the areas where there is potentially the highest need for public safety support (e.g., the downtown University Avenue business area, Stanford University, and major thoroughfares). City of Palo Alto – Wireless | August 2015 52 8 Potential Palo Alto Wireless Deployment Options Based on our research and analysis, we have developed four general options for addressing the City’s communications needs with wireless broadband deployment. The scenarios are generally independent of each other and targeted to address specific needs uncovered in the requirements analysis. They are targeted toward specific user groups and areas of deployment, and offer a range of coverage opportunities (distinguishing between public and governmental access). These scenarios could be deployed singularly or in combination. We present a system-level overview of each scenario below. We address the potential capital and operating costs for these deployment scenarios in Section 9. 8.1 Scenario 1: Deploy Public Wi-Fi and Secure City Enterprise Network Access at City Buildings In this scenario, the City would deploy Wi-Fi at all City buildings and support both free public access and secure enterprise network access for City employees. This option is basically a continuation of the Information Technology department’s ongoing efforts at the 30 locations which are currently being served. Residents and visitors would be able to access the network with any consumer-grade smartphone, tablet, or computer. The network would deliver state-of-the-art Gigabit service (1 Gbps) at each access point, and would be 802.11a/b/g/n/ac compatible. The access points would be installed to serve a defined target area with a minimum signal level of -65 dBm and sufficient capacity to simultaneously serve a number of users equivalent to 70 percent of the facility’s maximum capacity. Figure 21: Wi-Fi Access in City Buildings – RF Radiation Map City of Palo Alto – Wireless | August 2015 53 8.2 Scenario 2: Deploy Public Wi-Fi and Secure City Enterprise Network Access As in Scenario 1, the City would deploy Wi-Fi and support both free public access and secure enterprise network access for City employees. Rather than only blanketing City buildings, however, the City would make the service available either citywide or in targeted areas. This option would be more expensive to deploy, operate, and maintain than Scenario 1. We envision a two-phase approach: Phase A: Provide 100 Mbps blanketed public Wi-Fi to core City business and residential areas o 400+ wireless access points o Light pole mounted o Leverage existing fiber o Wireless mesh technology Phase B: Provide 1 Gbps blanketed public Wi-Fi to core City business and residential areas o 600+ wireless access points o Light pole mounted o Fiber connected to each wireless access point o Contingent on City upgrading fiber as part of a CPAU upgrade or FTTP deployment o Three to five years after Phase A completion Residents and visitors would be able to access the network with any consumer-grade smartphone, tablet, or computer. The network would deliver Gigabit service at each access point, and would be 802.11a/b/g/n/ac compatible. The access point would be installed to serve a defined target area with a minimum signal level of -85 dBm. In order to provide modern high-speed service, the access points would need to be installed at intervals of 500 feet or less within the defined coverage area. The access points would be installed to minimize visual clutter and would have backup power. City of Palo Alto – Wireless | August 2015 54 In this scenario, Palo Alto would be matching or exceeding the level of service available in many public locations nationwide. The nearby cities of Mountain View,40 Santa Clara, and San José have implemented Wi-Fi coverage within designated areas to support access to both the public Internet and municipal communications activities. Nationally, many communities have deployed citywide Wi-Fi either under municipal funding or in partnership with a commercial provider. These services have generally been well received by the public—but we have been unable to find any municipal implementation projects that represent an economically viable standalone business opportunity. The public clearly will use available free Wi-Fi. However, when asked to pay for the service in a public space, many consumers have little interest. Consumers often will pay for such services in confined/restricted facilities such as on an airplane, at an airport, or in a hotel. In contrast, the blanket services often referred to as “amenity communication services” are expected to be provided free of charge. Figure 22 illustrates how a blanket Wi-Fi network might be operated in a target location such as the central business district along University Avenue. This particular exhibit assumes placement of the wireless access points coincident with traffic signals; the City’s traffic signals are connected to the backbone fiber-optic network and these locations are suitable for mounting wireless devices and interconnecting through the City’s existing power/communications infrastructure. (See Section 6 for details on potential issues related to deploying access points on existing public infrastructure.) In order to provide proper signal levels to consumer smartphones and tablets, and additionally to provide signal penetration into nearby buildings, a substantial number of access points will be required. Based on our experience in other similar communities, we estimate that the City would need 35 to 40 access points per square mile to provide adequate signal levels. 40 For more details on Wi-Fi in Mountain View, see http://mountainview.gov/depts/it/wi_fi.asp City of Palo Alto – Wireless | August 2015 55 Figure 22: Illustration of Targeted Wi-Fi Deployment in Downtown Palo Alto As a part of our requirements assessment, we discussed the desirability of a universal broadband wireless service with the City’s Manager of Economic Development in the City Manager’s office. Based on this meeting there have been no specific requests from the business community or the general public for wireless services. We note that a significant number of Palo Alto businesses offer free Wi-Fi service to patrons (see Figure 23). Additionally, broadband carriers such as Comcast and AT&T have installed and operate Wi-Fi access points for their customers in many areas of the City. (Figure 24 and Figure 25 are maps showing the locations of Comcast and AT&T Wi-Fi services in the downtown University Avenue business corridor.) Given the availability of these services, it appears that commercial businesses are at least partially addressing the public’s need for Wi-Fi access (though the City’s need for wireless enterprise access remains unmet). City of Palo Alto – Wireless | August 2015 56 Figure 23: Local Businesses Offering Wi-Fi41 Figure 24: Comcast Wi-Fi Locations 41 Source: www.openwifispots.com City of Palo Alto – Wireless | August 2015 57 Figure 25: AT&T Wi-Fi Locations It should be noted, too, that other cities’ implementations of municipal Wi-Fi services generally did not develop the anticipated level of acceptance. Part of the problem with those deployments related to the speed and reliability of earlier Wi-Fi technology compared to commercial wireless options. In the same timeframe that those cities implemented municipal Wi-Fi, the commercial wireless carriers successfully deployed 3G and 4G data access technologies that have developed a high degree of consumer acceptance based on cost, performance, and the convenience of essentially universal service. In contrast, many municipal Wi-Fi deployments served only a limited area—and performance in many cases fell short of user expectations as discussed earlier in the case studies in Section 2. For the public in general, the simplicity of using a single network for voice and data has proved to be very appealing. However, with the wide deployment of smartphones and tablets, and particularly the emphasis on video and multimedia presentations, requirements for cellular capacity and bandwidth have become significant issues for users and service providers. Most cellular service providers limit the amount of data available through a basic smartphone contract. Customers that exceed the capacity limit are forced to pay extra fees for service. Recently companies like Republic Wireless and Google have arrived at an innovative solution to address the demand issue and, at the same time, potentially reduce consumer costs.42 The 42 Ryan Knutson, “The Race over Wi-Fi Phones: Google learns from Republic Wireless, which is trying to turn the business on its head,” Wall Street Journal, May 6, 2015. City of Palo Alto – Wireless | August 2015 58 concept, which is rather simple, involves using a smartphone that senses available Wi-Fi services and automatically switches away from the consumer wireless service provider networks (e.g., AT&T, Verizon, Sprint, T-Mobile) to take advantage of the free Wi-Fi connectivity. (See Section 11.2 for more details on this technology.) Assuming this device is accepted by consumers and can move into the existing environment, it will create demand for access to high-capacity, low-latency Wi-Fi network connectivity. Indeed, Wi-Fi phones in the hands of millions of users might create a demand for a level of Wi-Fi service both in capacity and reliability that far exceeds the type of infrastructure that currently exists within the primary business areas of cities nationwide. 8.3 Scenario 3: Deploy a Point-to-Multipoint Network for Secure City Enterprise Access In this scenario, the City would deploy limited wireless technology to meet only its internal needs; public access would continue to be delivered by local businesses and incumbent service providers (see Section 8.2). In this scenario, as in the Police Department’s current prototype, City Hall would serve as the core site for a point-to-multipoint deployment. The line-of-sight range for the wireless access would be 20 or more miles, operating on 4.9 GHz licensed public safety spectrum (see Figure 19). Client access devices would be carrier-grade, proprietary fixed/portable equipment capable of throughput at 5 Mbps, 10, Mbps and 100 Mbps. Typical performance characteristics for a point- to-multipoint deployment would include:  Vendor proprietary MIMO protocol  Adaptive modulation  Maximum latency of 5 msec.  Four to six sector antennas and core  125 Mbps /sector  5/10/20 MHz channel  GPS synchronization  Guaranteed Quality of Service 8.4 Scenario 4: Deploy a Citywide Mobile Data Network for Public Safety Users In this scenario, the City would create hot spots for public safety mobile data network access. The hot spots would provide radial coverage to first responders and other authorized users over a distance of 1,000 to 1,500 feet. As an initial step, access points could be deployed at City of Palo Alto – Wireless | August 2015 59 CPAU’s facilities (see Figure 26 below) to create eight hot spots and provide coverage to a significant portion of the City. These access points would operate on 4.9 GHz licensed public safety spectrum using 802.11a technology. The targeted performance levels would be a minimum 54 Mbps @ -84 dBm and a minimum 6 Mbps @ -94 dBm. Mesh functionality would be an option. The City would equip its public safety vehicles with exterior mounted antennas and mobile routers capable of acting as access points with a minimum 27 dBm signal. Figure 26: Illustration of Public Safety Mobile Network Deployment In addition to the CPAU facilities, however, the City has more than 130 locations (including traffic signals) that currently have fiber network access, power, and mounting structures—and that are suitable access points for supporting connectivity to mobile public safety vehicles (see Figure 27 below). This scenario, then, has great potential for phased deployment. Depending on the City’s needs and budget, the next phases of deployment could be either at fixed points (e.g., Stanford Stadium) or along priority routes (e.g., University Avenue). City of Palo Alto – Wireless | August 2015 60 This option for wireless deployment would directly address the Police Department’s needs for reliable communications citywide, and would eliminate the conflict between first responder communications and public communications during emergencies or large events. This deployment would also help cover areas of Palo Alto where the incumbent cellular provider has insufficient coverage. Figure 27: Candidate Access Points for Public Safety Mobile Data Network City of Palo Alto – Wireless | August 2015 61 9 System-Level Design and Cost Estimates for Wireless Deployment Scenarios In this section we review the user requirements determined as a part of our user assessment and present a preliminary system-level engineering design and cost estimate for implementing each of the four scenarios developed. We assume that these representative designs will undergo a detailed final review as a part of the City’s evaluation of this report by participating departments. These designs were developed to provide decision-makers with a baseline of potential costs, a definition of services provided in each scenario, and a list of anticipated benefits from the implementation. In preparing these estimates we have worked closely with City staff to draw from internal databases and the expertise of the staff. Once a decision has been made regarding which projects or scenarios are to be implemented, a more detailed study or review of the basic data will be required, along with the preparation of a bid request to identify a qualified system integrator to construct the selected systems. 9.1 Scenario 1 This scenario presents a strategy to implement both public wireless access and secure enterprise network access for City employees at City facilities. This option represents a continuation of the Information Technology department’s ongoing efforts at many City locations. The capital amount required for deployment at additional City sites will depend on the number of sites, and will presumably be comparable to the City’s costs for its previous deployments at major City buildings. This model assumes that the City would systematically deploy Wi-Fi at all City buildings, and would provide both free public access and secure enterprise network access for City employees. The access points would be installed to serve a defined target area with a minimum signal level of -65 dBm and sufficient capacity to simultaneously serve a number of users, equivalent to 70 percent of the facility’s maximum capacity. The wireless access would also extend outside of buildings to a limited area in the vicinity. 9.2 Scenario 2, Phase A This scenario presents a strategy to implement public wireless coverage citywide or in defined areas using 802.11g/n technology. This is a near-term implementation scenario, utilizing to the maximum extent existing fiber infrastructure. It can be deployed as an initial implementation strategy to meet citywide coverage goals. The subsequent upgrade (defined in Scenario 2, Phase B) can be implemented to increase throughput and be integrated into future FTTP deployments. City of Palo Alto – Wireless | August 2015 62 9.2.1 Basic Assumptions This model assumes that the existing City infrastructure will be used to deploy this network to the maximum extent possible. Specifically, fiber-optic backbone cable will be connected at strategic locations using existing fiber splice points. The number of connections to the fiber backbone will be determined on a cost basis. Mesh technology will be employed to interconnect access points that are not directly fiber connected. There will be a ratio of greater than or equal to 9 to 1 of unconnected to connected access points. All access points will be mounted on existing city-owned light poles, traffic signals, or other similar structures that permit mounting at a level of approximately 20 feet above ground and have existing AC power. The system will be constructed to meet performance specifications under IEEE 802.11 g/n. The estimated useful life for this technology is five years. For the purpose of equipment replacement it is assumed that the useful life for any electronic equipment is seven years or less. Fiber-optic cabling, access points mounting equipment, and hardware has a useful life of 30 years. For purposes of this estimate we assume a coverage area of 11.5 square miles. This is our estimate of the area containing most of the City’s contiguous residential neighborhoods and commercial business areas. It excludes park and preserve areas west of the City proper in the foothills and the large commercial corporate office parks. Coverage signal intensity is targeted to support smartphones, tablets, and laptops within the 11.5-square-mile service area. Due to the high density of large trees in residential areas, reliable in-building service may require users to install external receiving equipment with regeneration capability within the structure. This network will support client equipment operating in the 2.4 GHz and 5 GHz unlicensed Wi-Fi bands. 9.2.2 Financial Summary We estimate the capital cost to construct the infrastructure for this deployment to be approximately $4.7 million, and the yearly operating expenses to be $600,000 (assuming operation on a subscription basis at $20 per month, with a minimum of 2,550 customers).43 Full financial projections for this scenario are included in Appendix B. The table below provides a summary of projected capital costs for this scenario. 43 Note that in our review of the Wi-Fi industry, we have found no systems in any similar markets that have achieved this level of subscriber penetration. City of Palo Alto – Wireless | August 2015 63 Table 6: Scenario 2-A Financial Summary (Capital Costs) Item Cost Fiber Access Points $2,645,000 Backup power $345,000 Fiber Core Electronics $55,500 Fiber to splice (new) $502,500 Installation $728,750 Engineering & Oversight $384,910 Total $4,661,660 9.3 Scenario 2, Phase B This scenario presents an implementation strategy to implement public wireless coverage citywide or in defined areas using 802.11ac technology. This is a longer-term implementation scenario, utilizing a new fiber-optic-based backhaul network to link each access point to the core network, capable of supporting gigabit throughput to each access point. In Palo Alto, the existing CPAU fiber-optic infrastructure does not have sufficient citywide area coverage, points of presence, or capacity to support citywide implementation of a public Wi-Fi network. A backhaul network to support this topology would be required to connect to wireless access points with a spacing between sites of 1,000 feet or less. This scenario is feasible only with the complementary deployment of a citywide fiber network, which has a projected cost of approximately $77.6 million. 9.3.1 Basic Assumptions We assume a new backhaul infrastructure will be used to deploy this network to the maximum extent possible. Specifically, fiber-optic backbone cable will be connected to each access point. This cost estimate assumes that the fiber attachment (drop) cost will be the same as attaching a residential subscriber to an FTTP network. As in the case of Phase A, all access points will be mounted on existing City-owned light poles, traffic signals, or other similar structures that permit mounting at a level of approximately 20 feet above ground and have existing AC power.44 The system will be constructed to meet performance specifications under IEEE 802.11 ac. The estimated useful life for this technology is five years. 44 As we note in Section 5, mounting access points would require an evaluation of the impacts on City infrastructure—including potential complications related to mounting on traffic signals and the visual impact of new equipment on street lights and municipal buildings. City of Palo Alto – Wireless | August 2015 64 For the purpose of equipment replacement it is assumed that the useful life for any electronic equipment is seven years or less. Fiber-optic cabling, access points mounting equipment and hardware all have a useful life of 30 years. For purposes of this estimate we assume the coverage area to be 11.5 square miles. This is our estimate of the area containing most of the City’s contiguous residential neighborhoods and commercial business areas. It excludes park and preserve areas west of the City proper in the foothills and the large commercial corporate office parks. Coverage signal intensity is targeted to support smartphones, tablets, and laptops within the 11.5-square-mile service area. Due to the high density of large trees in residential areas, reliable in-building service may require users to install external receiving equipment with regeneration capability within the structure. This network will support client equipment operating in the 2.4 GHz and 5 GHz unlicensed Wi-Fi bands. 9.3.2 Financial Summary We estimate the capital cost to construct the infrastructure for this deployment to be approximately $3.3 million, and the yearly operating expenses to be $433,000 (assuming operation on a subscription basis at $20 per month, with a minimum of 1,880 customers). Full financial projections for this scenario are included in Appendix C. The table below provides a summary of projected capital costs for this scenario. Table 7: Scenario 2-B Financial Summary (Capital Costs) Item Cost Fiber Access drops $1,495,000 Backup power $345,000 Fiber Core Electronics $155,500 Fiber drops $287,500 Installation $743,750 Engineering & Oversight $272,410 Total $3,299,160 9.4 Scenario 3 This scenario presents an implementation strategy to create high-capacity point-to-multipoint broadband wireless coverage citywide for Public Safety, Utilities, Public Works, and Traffic engineering users. This scenario would use a primary core site at City Hall and a new backup core site to support the most critical sites (redundantly) at a to-be-determined site in the Foothills preserve area. City of Palo Alto – Wireless | August 2015 65 9.4.1 Basic Assumptions This model assumes that services will be obtained through a line-of-sight path between the core sites (City Hall and Foothills site). Multi-sector antennas will be installed all at all core sites with 90-degree sectors providing a minimum throughput of 100 Mbps/ sector. Sites to be served include:  Mobile public safety command vehicles  All Police/Fire radio sites  Utilities facilities  Utilities facilities not connected to fiber-optic network  Selected Traffic engineering sites  Portable Public Works camera sites Figure 28 shows the locations of some key fixed sites assumed for the network to prepare this estimate. The map will be expanded if the scenario is proposed for implementation and the backup site location is selected. Figure 28: Point-to-Point Links (Scenario 3) City of Palo Alto – Wireless | August 2015 66 9.4.2 Financial Summary Table 8 provides a summary of parameters and projected capital costs for this scenario. It is anticipated that the annual operational cost to support this scenario will be low. Staffing will be supported by Public Safety and Utilities as a minor add-on to their current operation of radio, fiber-optic, and other communications equipment. Hardware maintenance will likely be outsourced to equipment manufacturers/vendors. For this scenario we estimate a maximum annual expenditure of $10,000 with a useful equipment life of seven to 10 years. Table 8: Scenario 3 Financial Summary (Capital Costs) Parameters Core Sites 2 Client sites 30 Capital Costs Base Stations (2) $190,000 Client Access Units $45,000 Installation $25,000 Engineering and Oversight $25,000 Core Site Network Integration $85,000 Total $370,000 9.5 Scenario 4 This scenario presents an implementation strategy to create wireless coverage citywide for public safety vehicles at key City locations and along predefined routes. The initial deployment includes vehicle router equipment to interface with commercial cellular networks, 4.9 GHz equipment, and future FirstNet deployments. For planning purposes, a fleet deployment of 50 vehicles is assumed. 9.5.1 Basic Assumptions This model assumes that all network backhaul infrastructure is in place and will be used to deploy this network to the maximum extent possible. Specifically, the access point will be located at traffic signals (9), public schools (5), and utility facilities (9). All selected facilities have IP network connectivity and all have available AC primary power. The system will be constructed to meet performance specifications under IEEE 802.11a. The estimated useful life for this technology is five years. For purpose of equipment replacement, it is assumed that the useful life for any electronic equipment is seven years or less. Fiber-optic cabling, access points mounting equipment, and hardware all have a useful life of 30 years. Figure 29 is a map showing the locations of traffic lights (T), public schools, and utility facilities that have been selected to establish this pricing model. City of Palo Alto – Wireless | August 2015 67 Figure 29: Map of Locations for Scenario 4 Deployment 9.5.2 Financial Summary Table 9 provides the details for our projections, and assumes a six-month construction timeframe using existing IP fiber network connected backhaul. It is anticipated that the annual operational cost to support this scenario will be low. Staffing will be supported primarily by Public Safety as an addition to its operation of land mobile radio and other existing communications equipment. Hardware maintenance no doubt will be outsourced to equipment manufacturers/vendors. For this scenario we estimate a maximum annual expenditure of $30,000 with a useful equipment life of five to seven years. City of Palo Alto – Wireless | August 2015 68 Table 9: Scenario 4 Financial Summary (Capital Costs) Parameters Access Points (En Route) 9 Hot Spot Access Points 23 Vehicle Routers 50 Capital Costs (Unit) Wireless AP Hardware $2,100 Battery Backup $600 Mobile Routers $2,500 Installation Cost (Unit)45 AP Router and Power $1,250 Fiber Hub Integration $25,000 Vehicle routers $1,500 Capital Costs (Total) Access points $67,200 Mobile Routers $125,000 Fiber Core Electronics $30,000 Installation $87,500 Engineering & Oversight $27,900 Total: $337,600 45 Per unit costs used to develop total capital cost for installation. City of Palo Alto – Wireless | August 2015 69 10 Business Case for Citywide Wireless In our development of Scenario 2, we examined the advantages and disadvantages of the various business models used in other communities to deploy municipal wireless networks. Our analysis included a review of networks deployed in other cities. The business models examined included the following: 1. City-owned wholesale model: the wireless network is owned and operated by the City 2. Privately owned managed-services model: the wireless network is owned and operated by a service provider, but the City is an “anchor tenant” for the network 3. Hybrid model (public–private partnership): the City owns the network, but outsources operation and maintenance to a service provider 10.1 City-Owned Wholesale Model We examined this option in the context of either the City’s Information Technology department or the Utility providing this service. Currently the City does not have staff with the capability of supporting a major telecommunications deployment citywide. The recent deployment of wireless technology throughout major City facilities required the services of an outside contractor to support day-to-day operations. Moving from a platform of several dozen buildings to an entire citywide system consisting of more than 600 access points and possibly thousands of subscribers would represent a major departure from the way the City currently operates. Further, based on all of the available information, the revenue requirements to support such an operation greatly exceed service fees and costs for penetrations observed in other markets that do not have the wide variety of wireless availability that exists in Palo Alto. 10.2 Privately Owned Managed-Services Model As part of our analysis we examined in detail the wireless requirements for City agencies. Scenarios 3 and 4 as defined in this report are targeted to address City government needs. (For reasons of security, network capacity, or availability, the use of a common citywide municipal wireless network was dismissed for supporting City government applications.) It should be noted that most of the citywide government-related telecommunications applications are currently addressed by the existing fiber-optic network. Further, the broadband needs met by the existing network generally fall under the nature of supporting critical infrastructure and are more appropriately served by an independent wireless network with highly refined user requirements. City of Palo Alto – Wireless | August 2015 70 We did not uncover any significant need or revenues that might be directed to a partnership with a private operator whereby the operator would receive payment for City use. We note that in other communities where this approach has been used, the communities do not appear to have resources like the high-capacity fiber-optic network, as is the case in Palo Alto. 10.3 Hybrid Model (Public–Private Partnership) As noted in this report, there is a significant opportunity for an outside vendor to partner with the City and the use much of the existing infrastructure to facilitate citywide deployment of a broadband wireless system. Scenario 2 examines the cost to construct and operate a citywide network leveraging a segment of the City’s infrastructure. The City could consider issuing an RFP to solicit the interest of prospective commercial organizations for such deployment. As discussed in the next section of this report, there are opportunities for integrating or blending Wi-Fi and wireless services in the urban environment. Wi-Fi deployment would increase capacity while also possibly making available to commercial wireless service providers additional sites citywide for their small-scale antenna deployment. If the City were to move forward on this model, it would clearly need to examine the feasibility of obtaining sufficient revenue from the deployment to address the long-term cost of operation. Experience nationwide indicates that the public will use free Wi-Fi services where available; the issue here is obtaining revenue from the service. Most consumers associate access to Wi-Fi with restaurants, coffee shops, and institutional waiting rooms. For the consumer on the move, network access is normally provided through smartphones. And while residential service is feasible for Wi-Fi, specific environmental issues in Palo Alto (such as foliage, restrictions on antenna placement for access equipment, and in many cases the need for an externally mounted access units for consumers) represent impediments not just to commercial deployment, but to the use of City Wi-Fi as a replacement for wired Internet service in many residents’ homes. City of Palo Alto – Wireless | August 2015 71 11 Future Wireless Technology Innovations This report presents a pragmatic examination of current requirements for broadband wireless services within the City of Palo Alto and alternatives for using existing infrastructure to address needs in the near-term. The recommendations contained herein focus on leveraging existing assets and using off-the-shelf technology available from major vendors. All of the scenarios presented in this document represents technologically and financially viable undertakings. We note, however, that investments in physical infrastructure relating to wireless—such as mounting location for access devices, powering (either through commercial sources or renewable energy), and backhaul from access locations to network control centers over high- capacity fiber-optic technology links—represent a prudent investment to support long-term wireless deployment by either municipal entities or commercial wireless vendors. Much of the infrastructure has the potential for multiple uses—in the same way that operators often share cell towers, meaning that the same infrastructure supports competing commercial service providers. 11.1 Future 5G Technology Deployment The Next Generation Mobile Networks (NGMN) Alliance,46 an international consortium of wireless service providers and equipment manufacturers, is currently formulating the system- level requirements for “5G” next-generation public wireless networks targeted for deployment in 2020. The Alliance’s white paper published in February 2015 set out the system-level performance specifications for this new technology.47 It also addresses requirements for various categories of user access equipment such as smartphones and office technology, as well as new areas of focus such as the Internet of Things (telemetry and appliance devices) and broadcast services and emergency communications in times of natural disaster. A few of the key points addressed in this comprehensive, visionary document include:  Data transfer speed baselining at 1 Gbps. with a peak throughput up to 10 Gbps  Several hundreds of thousands of simultaneous connections to be supported for massive sensor deployments (Internet of Things).  Enhanced spectral efficiency (more throughput per segment of radio bandwidth)  Improved coverage 46 https://www.ngmn.org/home.html 47 NGMN 5G White Paper, NGMA Alliance, Frankfurt, Germany Feb 2015 City of Palo Alto – Wireless | August 2015 72  Significantly reduced latency (i.e., ≤10 msec. for all applications and ≤ 1 msec. for critical applications) The rapid growth of the Internet of Things (“IoT”)48 will require bits of information from sensors embedded in our devices; at the other end of the scale, the increase in enhanced high- definition video traffic, high-resolution photos, and terabit file transfers will require enormous amounts of bandwidth. Users will require portable equipment that can operate for long periods of time with very limited power sources. Other users’ requirements are focused on rapid access anticipating network latency of 1 msec. or less. The City of Palo Alto will need to take into account the sweeping upgrade in technology proposed by the move to 5G, because that new technology will set the benchmark for consumer expectations for any City services. Any deployment by the City of Palo Alto needs to be compatible with the community’s expectations—and specifically with competitive services that will be offered by commercial wireless providers. (As a point of comparison, consider that wireless systems implemented by commercial organizations and municipal governments prior to the deployment of 4G technology by commercial operators were essentially obsolete once the new commercial technology was deployed.) That said, investment in core wireless infrastructure will provide a foundation for supporting the continual migration of wireless technology standards for access devices. 11.2 Integrating Wi-Fi and Cellular One option for increasing the availability of wireless spectrum and increasing throughput to user devices is to bond or integrate Wi-Fi services with cellular service. Although Wi-Fi and LTE cellular technologies use different transmission, encoding, and radio spectrum, they can be linked by enhanced user access equipment that communicates simultaneously with both networks. Generally, cellular technology provides the most robust means for communicating from the user to the wireless access point. Further, in most practical applications the communications traffic is heavily weighted toward downloads to user devices. Smartphones and other devices can be preprogrammed to take advantage of the presence of both Wi-Fi and cellular service so that upstream traffic from the user can be targeted toward the cellular link (which generally exhibits greater range and reliability that a similar link to a Wi-Fi access point). 48 The “Internet of Things” is the popular name for the growing number of consumer devices like appliances and thermostats that are “Web-enabled” and can be accessed and controlled by a user over an Internet connection. See, for example: http://www.wired.com/2015/04/google-says-internet-things-will-save-electricity/. City of Palo Alto – Wireless | August 2015 73 Alcatel-Lucent is one of the organizations examining this concept and looking into integrating Wi-Fi into the existing 4G cellular infrastructure.49 This represents a stopgap measure to increase the overall download capability of existing cellular services. We recommend that the City monitor this blending technology along with other approaches to integrating cellular and Wi-Fi technology. Assuming such technologies are successful, they may create a demand for a consistent level of high-quality Wi-Fi service throughout the community and possibly create an economic justification for deploying a citywide Wi-Fi blanket. 49 Blending Wi-Fi and Cellular, Alcatel-Lucent Strategical White Paper, June 2015. City of Palo Alto – Wireless | August 2015 74 Appendix A: Summary of Potential Stakeholder Needs City of Palo Alto – Wireless | August 2015 75 Appendix B: Financial Projections for Scenario 2, Phase A City of Palo Alto – Wireless | August 2015 76 Appendix C: Financial Projections for Scenario 2, Phase B City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 The projections used in this analysis were prepared to assist in the assessment of the financial feasibility of establishing a enterprise to offer connectivity services in the identified service area. Where appropriate, the analysis includes projected operating revenues, expenses, and cash flows for the life of the system based on estimated construction costs and various market penetration rates. This analysis should not be used for any other purpose. There will be differences between the projected and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. CTC has no responsibility to update or certify this projection for events and circumstances occurring after the date of this projection. Wireless Financial Analysis - Scenario II a Financial Projections Rev 1 Palo Alto, CA Page Income Statement 3 Cash Flow Statement 4 Capital Additions 5 Depreciation 9 Expenses 10 Revenues - Site Based 11 Breakeven Analysis 12 Assumptions 13 Table of Contents Description City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n Financial Projections Rev 1 June 7, 2015 CTC Technology & Energy City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n Financial Projections Rev 1 June 7, 2015 Income Statement Year 1 2 3 4 5 6 7 a. Revenues Wireless Connection 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ Wireless Equipment and Connection Fees (non-recurring)- - - - - - - Total 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ b. Operating Expenses - Cash (not including taxes in line h) Operating Expenses 171,510$ 383,160$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ Operating Expenses - Misc.256,700 185,200 160,200 160,200 160,200 160,200 160,200 Support Allocations 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Total 478,210$ 618,360$ 605,930$ 605,930$ 605,930$ 605,930$ 605,930$ c. Revenues less Cash Operating Expenses (a-b)13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ d. Operating Expenses - Non-Cash Depreciation 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ e. Operating Income (d-c)(600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ f. Non-Operating Income Interest Income -$ -$ -$ -$ -$ -$ -$ Investment Income - - - - - - - Interest Expense (Short-Term)- - - - - - - Interest Expense (Long-Term))- - - - - - - Interest Expense (Internal)- - - - - - - Total -$ -$ -$ -$ -$ -$ -$ g. Net Income (600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ h. Taxes -$ -$ -$ -$ -$ -$ -$ i. Net Income After Fees & In Lieu Taxes (600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ CTC Technology & Energy 3 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n Financial Projections Rev 1 June 7, 2015 Cash Flow Statement Year 1 2 3 4 5 6 7 a. Net Income (From Income Statement)(600,710)$ (620,860)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ (608,430)$ b. Cash Outflows Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ Interest Reserve - - - - - - - Depreciation Operating Reserve - - - - - - - Financing - - - - - - - Capital Expenditures (4,686,660)$ -$ -$ -$ -$ -$ -$ Total (4,686,660)$ -$ -$ -$ -$ -$ -$ c. Cash Inflows Interest Reserve -$ -$ -$ -$ -$ -$ -$ Depreciation Operating Reserve - - - - - - - Debt Service Reserve - - - - - - - Short Term Financing - - - - - - - Long Term Financing (Bond)- - - - - - - Cash Start - - - - - - - Internal Loan - - - - - - - Internal Funding (non-loan)4,686,660 - - - - - - Total 4,686,660$ -$ -$ -$ -$ -$ -$ d. Total Cash Outflows and Inflows (b+c)-$ -$ -$ -$ -$ -$ -$ e. Non-Cash Expenses - Depreciation 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ f. Adjustments (Proceeds from) Short Term Financing -$ -$ -$ -$ -$ -$ -$ Long Term Financing (Bond)- - - - - - - Internal Loan - - - - - - - Internal Funding (non-loan)(4,686,660) - - - - - - Total (4,686,660)$ -$ -$ -$ -$ -$ -$ g. Adjusted Available Net Revenue (4,672,870)$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ h. Principal Payments on Debt Short Term Bond/Loan Principal -$ -$ -$ -$ -$ -$ -$ Long Term Bond Principal - - - - - - - Internal Loan Principal - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ i. Net Cash 13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ Avoided Costs (see j and k below)- - - - - - - Adjusted Net Cash 13,790$ (6,360)$ 6,070$ 6,070$ 6,070$ 6,070$ 6,070$ Cash Balance (Enterprise) Unrestricted Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ Depreciation Operating Reserve - - - - - - - Debt Service Reserve - - - - - - - Total Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ CTC Technology & Energy 4 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Capital Additions Year 1 2 3 4 5 6 7 a. Fiber Implementation Costs Fiber (30 year depreciation)502,500$ -$ -$ -$ -$ -$ -$ Expansion Fiber (30 year depreciation)- - - - - - - Headend and Hub Equipment (10 year depreciation)- - - - - - - Headend and Hub Equipment (7 year depreciation)- - - - - - - Network Equipment (6 year depreciation)- - - - - - - CAI Customer Equipment (6 year depreciation)- - - - - - - Total 502,500$ -$ -$ -$ -$ -$ -$ e. Wireless Network Costs (7 year depreciation) Microwave (10 year)-$ -$ -$ -$ -$ -$ -$ Structures (20 year)- - - - - - - Access (10 year)- - - - - - - Network Equipment (7 year)3,045,500 - - - - - - Spare Equipment (7 year)25,000 - - - - - - Installation & Engineering (7 year)1,113,660 - - - - - - Total 4,184,160$ -$ -$ -$ -$ -$ -$ f. Wireless Customer Connection Cost (5 year depreciation) CPE -$ -$ -$ -$ -$ -$ -$ Total -$ -$ -$ -$ -$ -$ -$ Total Capital 4,686,660$ -$ -$ -$ -$ -$ -$ Financial Projections Rev 1 CTC Technology & Energy 5 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Principal and Interest Payments (Year 1 Financing) Payment Year 1 2 3 4 5 6 7 Total Short Term Financing Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)7 Interest 4.00% Long Term Financing (Bond) Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)20 Interest 4.50% Internal Loan Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)3 Interest 2.00% Total Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Total (all years) Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Financial Projections Rev 1 CTC Technology & Energy 6 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Depreciation Year 1 2 3 4 5 6 7 30 Year Capital Expenditures 502,500$ -$ -$ -$ -$ -$ -$ 20 Year Capital Expenditures - - - - - - - 10 Year Capital Expenditures - - - - - - - 7 Year Capital Expenditures 4,184,160 - - - - - - 6 Year Capital Expenditures - - - - - - - 5 Year Capital Expenditures - - - - - - - Total 4,686,660$ -$ -$ -$ -$ -$ -$ Year 1 2 3 4 5 6 7 Depreciation Total 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ 614,500$ Financial Projections Rev 1 CTC Technology & Energy 7 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Expenses Year 1 2 3 4 5 6 7 Expenses Operating Expenses tbd -$ -$ -$ -$ -$ -$ -$ tbd - - - - - - - Marketing 10,000 7,500 7,500 7,500 7,500 7,500 7,500 Legal 10,000 2,500 2,500 2,500 2,500 2,500 2,500 Fiber Lease 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Site Lease 24,000 24,000 24,000 24,000 24,000 24,000 24,000 Maintenance & Monitor 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Equipment Maintanance - 211,600 211,600 211,600 211,600 211,600 211,600 Fiber Maintenance Fees 2,510$ 12,560$ 25,130$ 25,130$ 25,130$ 25,130$ 25,130$ Contingency - - - - - - - Total 171,510$ 383,160$ 395,730$ 395,730$ 395,730$ 395,730$ 395,730$ Operating Expenses - Misc. Attachment & Power Fees 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ Education and Training - - - - - - - Allowance for Bad Debts 15,000 18,000 18,000 18,000 18,000 18,000 18,000 Customer Acquisition Costs 102,500 25,000 - - - - - Internet Connection Fee 15,000 18,000 18,000 18,000 18,000 18,000 18,000 Utilities - - - - - - - Total 256,700$ 185,200$ 160,200$ 160,200$ 160,200$ 160,200$ 160,200$ Taxes Dark Fiber & IRU Taxes - - - - - - - City and State Taxes - - - - - - - Total - - - - - - - Salary Allocations Staff Allocations (Administration & Support)50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Total 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Grand Total 478,210$ 618,360$ 605,930$ 605,930$ 605,930$ 605,930$ 605,930$ Financial Projections Rev 1 CTC Technology & Energy 8 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Revenues - Site Based Year 1 2 3 4 5 6 7 Wireless Connection Mobile 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ tbd - - - - - - - Total 492,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ 612,000$ Financial Projections Rev 1 CTC Technology & Energy 9 City of Palo Alto Scenario II a - Blanket Wi-Fi 802.11 g/n June 7, 2015 Breakeven Analysis Including interest, operating expenses, and capital in cash outflows Including operating expenses, and capital in cash outflows (interest not included) Financial Projections Rev 1 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 1 2 3 4 5 6 7 Year Breakeven Projection (w/o Interest) Cumulative Outflows (Expenses and Capital) Cumulative Inflows (Service Revenues Plus Internal Funding) Cumulative Inflows (Service Revenues) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 1 2 3 4 5 6 7 Year Breakeven Projection Cumulative Outflows (Expenses, Interest, and Capital) Cumulative Inflows (Service Revenues Plus Internal Funding) Cumulative Inflows (Service Revenues) CTC Technology & Energy 10 Page Title Information Organization Plan Name Location Palo Alto, CA Date Financial Assumptions Finance Requirements Beginning Cash -$ 1 2 3 4 5 Short Term Financing -$ -$ -$ -$ -$ Long Term Financing (Bond)- - - - - Internal Loan - - - - - Internal Funding (non-loan)4,686,660 - - - - - - - - - Total 4,686,660$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 1 2 3 4 5 6 7 8 9 10 Depreciation Operating Reserve 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00% 1 2 3 4 5 6 7 8 9 10 Capital Expenditure Funded by Depreciation Reserve 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00% Unrestricted Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ (550,150)$ (1,138,080)$ (1,726,010)$ Depreciation Operating Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Cash Balance 13,790$ 7,430$ 13,500$ 19,570$ 25,640$ 31,710$ 37,780$ (550,150)$ (1,138,080)$ (1,726,010)$ City of Palo Alto Year Financial Projections Rev 1 Wireless Financial Analysis - Scenario II a Year Scenario II a - Blanket Wi-Fi 802.11 g/n Assumptions June 7, 2015 Year CTC Technology & Energy 11 Short Term Financing Bonding Finance Rate 4.00%4.00%4.00%4.00%4.00% Period (Years)7 10 10 7 7 Principal Repayment Period Start 2 2 2 1 1 Bond/Loan Issuance Cost 1.00%1.00%1.00%1.00%1.00% Debt Service Reserve 0.00%0.00%0.00%0.00%0.00% Interest Reserve no no no no no Interest Reserve Year 1 Financing -$ -$ Interest Reserve Year 2 Financing -$ -$ Interest Reserve Year 3 Financing -$ -$ Interest Reserve Year 4 Financing -$ -$ Interest Reserve Year 5 Financing -$ -$ Total -$ -$ -$ -$ -$ -$ Long Term Financing (Bond) 4.50%4.50%4.50%4.50%4.50% 20 20 20 20 20 Principal Repayment Period Start 2 4 4 4 4 Bond Issuance Cost 1.00%1.00%1.00%1.00%1.00% Debt Service Reserve 5.00%5.00%5.00%5.00%5.00% Interest Reserve yes yes yes yes yes Interest Reserve Year 1 Financing -$ -$ Interest Reserve Year 2 Financing -$ -$ Interest Reserve Year 3 Financing -$ -$ Interest Reserve Year 4 Financing -$ -$ Interest Reserve Year 5 Financing -$ -$ Total -$ -$ -$ -$ -$ -$ Internal Loan Finance Rate 2.00%2.00%2.00%2.00%2.00% Period (Years)3 3 3 3 3 Principal Repayment Period Start 2 2 2 1 1 Other Investment Income -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest Earned on Available Cash 0.00%Linked to previous year cash balance 0.00%Linked to depreciation and debt service reserve funds Use one or the other, but not both CTC Technology & Energy 12 Wireless Customers Wireless Connection 1 2 3 4 5 6 7 Mobile 2,050 2,550 2,550 2,550 2,550 2,550 2,550 tbd - - - - - - - Total 2,050 2,550 2,550 2,550 2,550 2,550 2,550 Incremental 2,050 500 - - - - - Enter in speed (Mbps) of each service under year one 1 2 3 4 5 6 7 8 9 10 Wireless - Residential 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Wireless - Business 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Average Mbps 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Total Mbps 20,500 25,500 25,500 25,500 25,500 25,500.00 25,500.00 25,500.00 25,500.00 25,500.00 13,790 7,430 13,500 19,570 25,640 31,710 37,780 Year Calculation of Average Speed per Customer CTC Technology & Energy 15 Wireless Customers Wireless Connection 1 2 3 4 5 6 7 Mobile 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ tbd -$ -$ -$ -$ -$ -$ -$ Year CTC Technology & Energy 17 Operation & Maintenance Expense Assumptions Taxes Dark Fiber & IRU Taxes 0.00% City and State Taxes 0.0000%State 0.0000%County 0.0000%City 0.0000% Sales tax is a pass through expense #DIV/0! Operating Expenses 1 2 3 4 5 6 7 8 9 10 tbd -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ tbd -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Marketing 10,000$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ Legal 10,000$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ Fiber Lease 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Site Lease 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ Maintenance & Monitor 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ Equipment Maintanance -$ 211,600$ 211,600$ 211,600$ 211,600$ 211,600$ 211,600$ 211,600$ 211,600$ 211,600$ Fiber Maintenance Fees 2,510$ 12,560$ 25,130$ 25,130$ 25,130$ 25,130$ 25,130$ 25,130$ 25,130$ 25,130$ Fiber Maintenance Fees (percentage of cumulative cost)0.50%2.50%5.00% Contingency -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Operating Expenses - Misc. Allowance for Bad Debts 3.00%of GPON, MetroE, and wireless services Customer Acquisition Costs 50.00$ per Wireless Customer 1 2 3 4 5 6 7 8 9 10 DIA Sales (Mbps) (for MAN customers)0 0 0 0 0 0 0 0 0 0 DIA Sell price 20.00$ per Mbps per month 1 2 3 4 5 6 7 8 9 10 Internet Connection Fee 15,000$ 18,000$ 18,000$ 18,000$ 18,000$ 18,000$ 18,000$ 18,000$ 18,000$ 18,000$ DIA for Services per Mbps per month 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ oversubscription ratio 25 25 25 25 25 25 25 25 25 25 Internal Use Mbps Available for Internal (total)- - - - - - - - - - per Mbps per month 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ Total Cost Annual -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 1 2 3 4 5 6 7 8 9 10 Total BW used internally (Mbps)- - - - - - - - - - Available BW to apply to other users - - - - - - - - - - Needed for Wireless users 820 1,020 1,020 1,020 1,020 1,020 1,020 1,020 1,020 1,020 Net required for other users 820 1,020 1,020 1,020 1,020 1,020 1,020 1,020 1,020 1,020 Attachment & Power Fees 575 attachements at 216.00$ per year 18.00$ per month 1 2 3 4 5 6 7 8 9 10 Utilities -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ CTC Technology & Energy 18 Salaries (Calculation Base 4) Annual escalation 0.00%Above what rate increases are (applied to the FTE's only - first five rows of table below) 1 2 3 4 5 6 7 8 9 10 Staff Allocations (Administration & Support)50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ FTE (2)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (3)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (4)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (5)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Capital Requirement Assumptions Miscellaneous Costs Misc. Equipment -$ -$ -$ 100%year 6 tbd 1 -$ -$ -$ 100%year 6 tbd 2 -$ -$ -$ 100%year 6 tbd 3 -$ -$ -$ 100%year 6 tbd 4 -$ -$ -$ 100%year 6 tbd 5 -$ -$ -$ 100%year 6 tbd 6 -$ -$ -$ 100%year 8 Additional Annual Capital Costs 0.00%Starts in year 4 Implementation Costs Base Network 1 2 3 4 5 Year 1 Build Year 2 Build Total Fiber (30 year depreciation)502,500$ -$ -$ 100%0%502,500$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ 100%0%-$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ 100%0%-$ Network Equipment (6 year depreciation)-$ -$ -$ -$ -$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ -$ -$ Customer pay?Yes For Years 1 to 5 Yes For Replenishments Incremental A Fiber (30 year depreciation)-$ -$ -$ 40%45%-$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ 40%45%-$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ 40%45%-$ Network Equipment (6 year depreciation)-$ -$ -$ 40%45%-$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ 40%45%-$ Incremental B Fiber (30 year depreciation)-$ -$ -$ -$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ -$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ -$ Network Equipment (6 year depreciation)-$ -$ -$ -$ -$ -$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ -$ -$ -$ Total Network Replacement Fiber (30 year depreciation)502,500$ -$ -$ Headend and Hub Equipment (10 year depreciation)- - - 100%Year 11 Headend and Hub Equipment (7 year depreciation)- - - 100%year 8 Network Equipment (6 year depreciation)- - - - - 100%year 8 CAI Customer Equipment (6 year depreciation)- - - - - 100%year 8 Business Development & Support Engineering - - - 502,500$ -$ -$ -$ -$ Other Misc.1 2 3 4 5 6 7 8 9 10 Administration -$ -$ -$ na na na na na na na Operation and Network Equipment -$ -$ -$ na na na na na na na Expansion Fiber (30 year depreciation)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Fiber (Accrued)502,500$ 502,500$ 502,500$ Network Equipment (Accrued)-$ -$ -$ Business Development & Support (Accrued)-$ -$ -$ 502,500$ Wireless Microwave (10 year)-$ -$ -$ Structures (20 year)-$ -$ -$ Access (10 year)-$ -$ -$ Percent of Year 1 to Year 3 fiber implementation costs CTC Technology & Energy 19 Network Equipment (7 year)3,045,500$ -$ -$ 0%year 8 Spare Equipment (7 year)25,000$ -$ -$ 0%year 8 Installation & Engineering (7 year)1,113,660$ -$ -$ 0%year 8 Total 4,184,160$ -$ -$ 3774250 409,910$ Accrued 4,184,160$ 4,184,160$ 4,184,160$ CTC Technology & Energy 20 Scenario II a - Blanket Wi-Fi 802.11 g/n 18 month construction timeframe Parameters 802.11 g/n Total Areas Sq. Mi.11.5 Access Points/Sq. Mi.50 Fiber connection (splice)67 Outdoor Routers 575 Capital Costs Fiber Access Points 2,645,000$ 7 year x Backup power 345,000$ 7 year x Fiber Core Electronics 55,500$ 7 year x Fiber to splice (new)502,500$ 20 to 30 year x Installation 728,750$ 7 year x Engineering & Oversight 384,910$ 7 year x Capital Cost 4,276,750$ 3,774,250$ 4,661,660$ Capital Cost (Unit) Wireless AP Hardware Cost 4,100$ x Battery Backup Cost 600$ x Fiber plant Extension (drop)7,500$ x Fiber Core Electronics 55,500$ x AC Power 500$ check with lee Installation Cost (Unit) AP - Router & Power 1250 x Fiber Hub Electronics 10000 x Operating Expenses (yr.) Site Lease 24000 check with PA Equipment Maintenance 211,600$ x Fiber Lease 50000 check with PA Site Power $18/mo./site 124,200$ x Maintenance & Monitor 75,000$ 130.43$ per AP City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 The projections used in this analysis were prepared to assist in the assessment of the financial feasibility of establishing a enterprise to offer connectivity services in the identified service area. Where appropriate, the analysis includes projected operating revenues, expenses, and cash flows for the life of the system based on estimated construction costs and various market penetration rates. This analysis should not be used for any other purpose. There will be differences between the projected and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. CTC has no responsibility to update or certify this projection for events and circumstances occurring after the date of this projection. Wireless Financial Analysis - Scenario II b Financial Projections Rev 1 Palo Alto, CA Page Income Statement 3 Cash Flow Statement 4 Capital Additions 5 Depreciation 9 Expenses 10 Revenues - Site Based 11 Breakeven Analysis 12 Assumptions 13 Table of Contents Description City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac Financial Projections Rev 1 June 7, 2015 CTC Technology & Energy City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac Financial Projections Rev 1 June 7, 2015 Income Statement Year 1 2 3 4 5 6 7 a. Revenues Wireless Connection 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ Wireless Equipment and Connection Fees (non-recurring)- - - - - - - Total 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ b. Operating Expenses - Cash (not including taxes in line h) Operating Expenses 170,440$ 225,990$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ Operating Expenses - Misc.242,700 150,200 150,200 150,200 150,200 150,200 150,200 Support Allocations 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Total 463,140$ 426,190$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ c. Revenues less Cash Operating Expenses (a-b)(19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ d. Operating Expenses - Non-Cash Depreciation 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ e. Operating Income (d-c)(462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ f. Non-Operating Income Interest Income -$ -$ -$ -$ -$ -$ -$ Investment Income - - - - - - - Interest Expense (Short-Term)- - - - - - - Interest Expense (Long-Term))- - - - - - - Interest Expense (Internal)- - - - - - - Total -$ -$ -$ -$ -$ -$ -$ g. Net Income (462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ h. Taxes -$ -$ -$ -$ -$ -$ -$ i. Net Income After Fees & In Lieu Taxes (462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ CTC Technology & Energy 3 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac Financial Projections Rev 1 June 7, 2015 Cash Flow Statement Year 1 2 3 4 5 6 7 a. Net Income (From Income Statement)(462,540)$ (425,590)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ (432,780)$ b. Cash Outflows Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ Interest Reserve - - - - - - - Depreciation Operating Reserve - - - - - - - Financing - - - - - - - Capital Expenditures (3,324,160)$ -$ -$ -$ -$ -$ -$ Total (3,324,160)$ -$ -$ -$ -$ -$ -$ c. Cash Inflows Interest Reserve -$ -$ -$ -$ -$ -$ -$ Depreciation Operating Reserve - - - - - - - Debt Service Reserve - - - - - - - Short Term Financing - - - - - - - Long Term Financing (Bond)- - - - - - - Cash Start - - - - - - - Internal Loan - - - - - - - Internal Funding (non-loan)3,324,160 - - - - - - Total 3,324,160$ -$ -$ -$ -$ -$ -$ d. Total Cash Outflows and Inflows (b+c)-$ -$ -$ -$ -$ -$ -$ e. Non-Cash Expenses - Depreciation 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ f. Adjustments (Proceeds from) Short Term Financing -$ -$ -$ -$ -$ -$ -$ Long Term Financing (Bond)- - - - - - - Internal Loan - - - - - - - Internal Funding (non-loan)(3,324,160) - - - - - - Total (3,324,160)$ -$ -$ -$ -$ -$ -$ g. Adjusted Available Net Revenue (3,343,300)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ h. Principal Payments on Debt Short Term Bond/Loan Principal -$ -$ -$ -$ -$ -$ -$ Long Term Bond Principal - - - - - - - Internal Loan Principal - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ i. Net Cash (19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ Avoided Costs (see j and k below)- - - - - - - Adjusted Net Cash (19,140)$ 17,810$ 10,620$ 10,620$ 10,620$ 10,620$ 10,620$ Cash Balance (Enterprise) Unrestricted Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ Depreciation Operating Reserve - - - - - - - Debt Service Reserve - - - - - - - Total Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ CTC Technology & Energy 4 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Capital Additions Year 1 2 3 4 5 6 7 a. Fiber Implementation Costs Fiber (30 year depreciation)287,500$ -$ -$ -$ -$ -$ -$ Expansion Fiber (30 year depreciation)- - - - - - - Headend and Hub Equipment (10 year depreciation)- - - - - - - Headend and Hub Equipment (7 year depreciation)- - - - - - - Network Equipment (6 year depreciation)- - - - - - - CAI Customer Equipment (6 year depreciation)- - - - - - - Total 287,500$ -$ -$ -$ -$ -$ -$ e. Wireless Network Costs (7 year depreciation) Microwave (10 year)-$ -$ -$ -$ -$ -$ -$ Structures (20 year)- - - - - - - Access (10 year)- - - - - - - Network Equipment (7 year)1,995,500 - - - - - - Spare Equipment (7 year)25,000 - - - - - - Installation & Engineering (7 year)1,016,160 - - - - - - Total 3,036,660$ -$ -$ -$ -$ -$ -$ f. Wireless Customer Connection Cost (5 year depreciation) CPE -$ -$ -$ -$ -$ -$ -$ Total -$ -$ -$ -$ -$ -$ -$ Total Capital 3,324,160$ -$ -$ -$ -$ -$ -$ Financial Projections Rev 1 CTC Technology & Energy 5 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Principal and Interest Payments (Year 1 Financing) Payment Year 1 2 3 4 5 6 7 Total Short Term Financing Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)7 Interest 4.00% Long Term Financing (Bond) Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)20 Interest 4.50% Internal Loan Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Payment -$ Loan Amount/Balance (beginning of year)-$ - - - - - - Loan Amount/Balance (end of year)-$ - - - - - - Payment Start 2 Term (years)3 Interest 2.00% Total Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Total (all years) Principal -$ -$ -$ -$ -$ -$ -$ -$ Interest - - - - - - - - Total -$ -$ -$ -$ -$ -$ -$ -$ Financial Projections Rev 1 CTC Technology & Energy 6 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Depreciation Year 1 2 3 4 5 6 7 30 Year Capital Expenditures 287,500$ -$ -$ -$ -$ -$ -$ 20 Year Capital Expenditures - - - - - - - 10 Year Capital Expenditures - - - - - - - 7 Year Capital Expenditures 3,036,660 - - - - - - 6 Year Capital Expenditures - - - - - - - 5 Year Capital Expenditures - - - - - - - Total 3,324,160$ -$ -$ -$ -$ -$ -$ Year 1 2 3 4 5 6 7 Depreciation Total 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ 443,400$ Financial Projections Rev 1 CTC Technology & Energy 7 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Expenses Year 1 2 3 4 5 6 7 Expenses Operating Expenses tbd -$ -$ -$ -$ -$ -$ -$ tbd - - - - - - - Marketing 10,000 7,500 7,500 7,500 7,500 7,500 7,500 Legal 10,000 2,500 2,500 2,500 2,500 2,500 2,500 Fiber Lease 50,000 50,000 50,000 50,000 50,000 50,000 50,000 Site Lease 24,000 24,000 24,000 24,000 24,000 24,000 24,000 Maintenance & Monitor 75,000 75,000 75,000 75,000 75,000 75,000 75,000 Equipment Maintanance - 59,800 59,800 59,800 59,800 59,800 59,800 Fiber Maintenance Fees 1,440$ 7,190$ 14,380$ 14,380$ 14,380$ 14,380$ 14,380$ Contingency - - - - - - - Total 170,440$ 225,990$ 233,180$ 233,180$ 233,180$ 233,180$ 233,180$ Operating Expenses - Misc. Attachment & Power Fees 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ 124,200$ Education and Training - - - - - - - Allowance for Bad Debts 13,000 13,000 13,000 13,000 13,000 13,000 13,000 Customer Acquisition Costs 92,500 - - - - - - Internet Connection Fee 13,000 13,000 13,000 13,000 13,000 13,000 13,000 Utilities - - - - - - - Total 242,700$ 150,200$ 150,200$ 150,200$ 150,200$ 150,200$ 150,200$ Taxes Dark Fiber & IRU Taxes - - - - - - - City and State Taxes - - - - - - - Total - - - - - - - Salary Allocations Staff Allocations (Administration & Support)50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Total 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Grand Total 463,140$ 426,190$ 433,380$ 433,380$ 433,380$ 433,380$ 433,380$ Financial Projections Rev 1 CTC Technology & Energy 8 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Revenues - Site Based Year 1 2 3 4 5 6 7 Wireless Connection Mobile 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ tbd - - - - - - - Total 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ 444,000$ Financial Projections Rev 1 CTC Technology & Energy 9 City of Palo Alto Senerio II b - Blanket Wi-Fi 802.11 ac June 7, 2015 Breakeven Analysis Including interest, operating expenses, and capital in cash outflows Including operating expenses, and capital in cash outflows (interest not included) Financial Projections Rev 1 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 1 2 3 4 5 6 7 Year Breakeven Projection (w/o Interest) Cumulative Outflows (Expenses and Capital) Cumulative Inflows (Service Revenues Plus Internal Funding) Cumulative Inflows (Service Revenues) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 1 2 3 4 5 6 7 Year Breakeven Projection Cumulative Outflows (Expenses, Interest, and Capital) Cumulative Inflows (Service Revenues Plus Internal Funding) Cumulative Inflows (Service Revenues) CTC Technology & Energy 10 Page Title Information Organization Plan Name Location Palo Alto, CA Date Financial Assumptions Finance Requirements Beginning Cash -$ 1 2 3 4 5 Short Term Financing -$ -$ -$ -$ -$ Long Term Financing (Bond)- - - - - Internal Loan - - - - - Internal Funding (non-loan)3,324,160 - - - - - - - - - Total 3,324,160$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 1 2 3 4 5 6 7 8 9 10 Depreciation Operating Reserve 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00% 1 2 3 4 5 6 7 8 9 10 Capital Expenditure Funded by Depreciation Reserve 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00% Unrestricted Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ (368,610)$ (788,990)$ (1,209,370)$ Depreciation Operating Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Debt Service Reserve -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Cash Balance (19,140)$ (1,330)$ 9,290$ 19,910$ 30,530$ 41,150$ 51,770$ (368,610)$ (788,990)$ (1,209,370)$ Year Senerio II b - Blanket Wi-Fi 802.11 ac Assumptions June 7, 2015 City of Palo Alto Year Financial Projections Rev 1 Wireless Financial Analysis - Scenario II b Year CTC Technology & Energy 11 Short Term Financing Bonding Finance Rate 4.00%4.00%4.00%4.00%4.00% Period (Years)7 10 10 7 7 Principal Repayment Period Start 2 2 2 1 1 Bond/Loan Issuance Cost 1.00%1.00%1.00%1.00%1.00% Debt Service Reserve 0.00%0.00%0.00%0.00%0.00% Interest Reserve no no no no no Interest Reserve Year 1 Financing -$ -$ Interest Reserve Year 2 Financing -$ -$ Interest Reserve Year 3 Financing -$ -$ Interest Reserve Year 4 Financing -$ -$ Interest Reserve Year 5 Financing -$ -$ Total -$ -$ -$ -$ -$ -$ Long Term Financing (Bond) 4.50%4.50%4.50%4.50%4.50% 20 20 20 20 20 Principal Repayment Period Start 2 4 4 4 4 Bond Issuance Cost 1.00%1.00%1.00%1.00%1.00% Debt Service Reserve 5.00%5.00%5.00%5.00%5.00% Interest Reserve yes yes yes yes yes Interest Reserve Year 1 Financing -$ -$ Interest Reserve Year 2 Financing -$ -$ Interest Reserve Year 3 Financing -$ -$ Interest Reserve Year 4 Financing -$ -$ Interest Reserve Year 5 Financing -$ -$ Total -$ -$ -$ -$ -$ -$ Internal Loan Finance Rate 2.00%2.00%2.00%2.00%2.00% Period (Years)3 3 3 3 3 Principal Repayment Period Start 2 2 2 1 1 Other Investment Income -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Interest Earned on Available Cash 0.00%Linked to previous year cash balance 0.00%Linked to depreciation and debt service reserve funds Use one or the other, but not both CTC Technology & Energy 12 Wireless Customers Wireless Connection 1 2 3 4 5 6 7 Mobile 1,850 1,850 1,850 1,850 1,850 1,850 1,850 tbd - - - - - - - Total 1,850 1,850 1,850 1,850 1,850 1,850 1,850 Incremental 1,850 - - - - - - Enter in speed (Mbps) of each service under year one 1 2 3 4 5 6 7 8 9 10 Wireless - Residential 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Wireless - Business 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Average Mbps 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Total Mbps 18,500 18,500 18,500 18,500 18,500 18,500.00 18,500.00 18,500.00 18,500.00 18,500.00 (19,140) (1,330) 9,290 19,910 30,530 41,150 51,770 Calculation of Average Speed per Customer Year CTC Technology & Energy 15 Wireless Customers Wireless Connection 1 2 3 4 5 6 7 Mobile 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ tbd -$ -$ -$ -$ -$ -$ -$ Year CTC Technology & Energy 17 Operation & Maintenance Expense Assumptions Taxes Dark Fiber & IRU Taxes 0.00% City and State Taxes 0.0000%State 0.0000%County 0.0000%City 0.0000% Sales tax is a pass through expense #DIV/0! Operating Expenses 1 2 3 4 5 6 7 8 9 10 tbd -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ tbd -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Marketing 10,000$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$ Legal 10,000$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ 2,500$ Fiber Lease 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Site Lease 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ 24,000$ Maintenance & Monitor 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ 75,000$ Equipment Maintanance -$ 59,800$ 59,800$ 59,800$ 59,800$ 59,800$ 59,800$ 59,800$ 59,800$ 59,800$ Fiber Maintenance Fees 1,440$ 7,190$ 14,380$ 14,380$ 14,380$ 14,380$ 14,380$ 14,380$ 14,380$ 14,380$ Fiber Maintenance Fees (percentage of cumulative cost)0.50%2.50%5.00% Contingency -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Operating Expenses - Misc. Allowance for Bad Debts 3.00%of GPON, MetroE, and wireless services Customer Acquisition Costs 50.00$ per Wireless Customer 1 2 3 4 5 6 7 8 9 10 DIA Sales (Mbps) (for MAN customers)0 0 0 0 0 0 0 0 0 0 DIA Sell price 20.00$ per Mbps per month 1 2 3 4 5 6 7 8 9 10 Internet Connection Fee 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ 13,000$ DIA for Services per Mbps per month 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ oversubscription ratio 25 25 25 25 25 25 25 25 25 25 Internal Use Mbps Available for Internal (total)- - - - - - - - - - per Mbps per month 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ 1.50$ Total Cost Annual -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 1 2 3 4 5 6 7 8 9 10 Total BW used internally (Mbps)- - - - - - - - - - Available BW to apply to other users - - - - - - - - - - Needed for Wireless users 740 740 740 740 740 740 740 740 740 740 Net required for other users 740 740 740 740 740 740 740 740 740 740 Attachment & Power Fees 575 attachements at 216.00$ per year 18.00$ per month 1 2 3 4 5 6 7 8 9 10 Utilities -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ CTC Technology & Energy 18 Salaries (Calculation Base 4) Annual escalation 0.00%Above what rate increases are (applied to the FTE's only - first five rows of table below) 1 2 3 4 5 6 7 8 9 10 Staff Allocations (Administration & Support)50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ FTE (2)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (3)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (4)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ FTE (5)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ TBD -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ 50,000$ Capital Requirement Assumptions Miscellaneous Costs Misc. Equipment -$ -$ -$ 100%year 6 tbd 1 -$ -$ -$ 100%year 6 tbd 2 -$ -$ -$ 100%year 6 tbd 3 -$ -$ -$ 100%year 6 tbd 4 -$ -$ -$ 100%year 6 tbd 5 -$ -$ -$ 100%year 6 tbd 6 -$ -$ -$ 100%year 8 Additional Annual Capital Costs 0.00%Starts in year 4 Implementation Costs Base Network 1 2 3 4 5 Year 1 Build Year 2 Build Total Fiber (30 year depreciation)287,500$ -$ -$ 100%0%287,500$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ 100%0%-$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ 100%0%-$ Network Equipment (6 year depreciation)-$ -$ -$ -$ -$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ -$ -$ Customer pay?Yes For Years 1 to 5 Yes For Replenishments Incremental A Fiber (30 year depreciation)-$ -$ -$ 40%45%-$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ 40%45%-$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ 40%45%-$ Network Equipment (6 year depreciation)-$ -$ -$ 40%45%-$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ 40%45%-$ Incremental B Fiber (30 year depreciation)-$ -$ -$ -$ Headend and Hub Equipment (10 year depreciation)-$ -$ -$ -$ Headend and Hub Equipment (7 year depreciation)-$ -$ -$ -$ Network Equipment (6 year depreciation)-$ -$ -$ -$ -$ -$ CAI Customer Equipment (6 year depreciation)-$ -$ -$ -$ -$ -$ Total Network Replacement Fiber (30 year depreciation)287,500$ -$ -$ Headend and Hub Equipment (10 year depreciation)- - - 100%Year 11 Headend and Hub Equipment (7 year depreciation)- - - 100%year 8 Network Equipment (6 year depreciation)- - - - - 100%year 8 CAI Customer Equipment (6 year depreciation)- - - - - 100%year 8 Business Development & Support Engineering - - - 287,500$ -$ -$ -$ -$ Other Misc.1 2 3 4 5 6 7 8 9 10 Administration -$ -$ -$ na na na na na na na Operation and Network Equipment -$ -$ -$ na na na na na na na Expansion Fiber (30 year depreciation)-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Fiber (Accrued)287,500$ 287,500$ 287,500$ Network Equipment (Accrued)-$ -$ -$ Business Development & Support (Accrued)-$ -$ -$ 287,500$ Wireless Microwave (10 year)-$ -$ -$ Structures (20 year)-$ -$ -$ Access (10 year)-$ -$ -$ Percent of Year 1 to Year 3 fiber implementation costs CTC Technology & Energy 19 Network Equipment (7 year)1,995,500$ -$ -$ 0%year 8 Spare Equipment (7 year)25,000$ -$ -$ 0%year 8 Installation & Engineering (7 year)1,016,160$ -$ -$ 0%year 8 Total 3,036,660$ -$ -$ #REF!#REF! Accrued 3,036,660$ 3,036,660$ 3,036,660$ CTC Technology & Energy 20 Senerio II b - Blanket Wi-Fi 802.11 ac 18 month construction timeframe - Using FTTP backhaul (cost for FTTP distribution not included) Parameters 802.11 g/n Total Areas Sq. Mi.11.5 Access Points/Sq. Mi 50 Outdoor Routers 575 Capital Costs Fiber Access drops 1,495,000$ x Backup power 345,000$ x Fiber Core Electronics 155,500$ x Fiber drops 287,500$ x Installation 743,750$ x Engineering & Oversight 272,410$ x Capital Cost 3,026,750$ 3,299,160$ Capital Cost (Unit) Wireless AP Hardware Cost 2,100$ Battery Backup Cost 600$ Fiber plant - service drop 500$ Fiber Core Electronics 155,500$ AC Power 500$ Installation Cost (Unit) AP - Router & Power 1250 Fiber Hub Electronics 25000 Operating Expenses (yr) Site Lease 24000 x Equipment Maintenance 59,800$ x Fiber Lease 50000 x Site Power $18/mo./site 124,200$ x Maintenance & Monitor 75,000$ x EXCERPTED DRAFT MINUTES OF THE SEPTEMBER 2, 2015 UTILITIES ADVISORY COMMISSION MEETING NEW BUSINESS ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Defer Issuing a Request for Information on Partnership Opportunities for a Fiber-to-the-Premise Network; Issue a Request for Proposal(s) to Expand Wi-Fi Coverage to City Facilities and Public Areas, and Improve Wireless Communications for Public Safety and Utilities Chief Information Officer Jonathan Reichental presented an update on the technological advancements in the telecommunication marketplace. There has been a lot of broadband and Internet activity since 1999 when the initial FTTP study was completed. There is an emergence of cellular technologies. Currently, 4G service allows download speed up to 12MB. There is a consortium developing 5G service, which will enable download speed of 1GB to 10GB, but 5G will probably not be available until 2020. Smart cities are paying attention to the emergence of the so-called “Internet of Things” (“IoT”), which connects people and various applications and devices (e.g. thermostats, traffic signals and multiple household appliances) to the Internet over ultra-high speed broadband connections. These innovations will change how people live and navigate within their everyday environment and will require the support of next-generation fiber networks, in addition to ubiquitous wireless connectivity in an increasingly mobile society. Todd Henderson, Senior Technologist from the Information Technology Department and Jim Fleming, Senior Management Analyst from the Utilities Department made the staff presentation. Todd provided an update on Google Fiber. Palo Alto is one of 34 cities around the country being considered for Google Fiber. In May 2014, the City completed the Google fiber checklist. The City continues to have meetings with Google regarding a potential fiber deployment in Palo Alto. These meetings are currently focused on the California Environmental Quality Act (CEQA) and the City’s permitting processes for use of the public rights-of-way, utility pole attachments, conduit usage and dark fiber licensing. Staff anticipates Google will make a final decision on the San Jose metro area (Palo Alto, Mountain View, Santa Clara, Sunnyvale and San Jose) sometime this fall. In May 2015, AT&T approached the City with intentions to bring GigaPower to Palo Alto. GigaPower will provide gigabit broadband and voice-over-IP services to residents, but will not include television programming, which will stay on their existing U-Verse system. The first phase of AT&T’s GigaPower deployment will install 27 new cabinets in Palo Alto that will be placed next to existing U-verse cabinets. AT&T has provided a sample permit application to the Public Works Department for review. AT&T plans to begin construction in Q4 2015 and offer service sometime next year. Fleming presented the scope of work, findings, and recommendations for the Fiber-to-the- Premises (FTTP) Master Plan study conducted by CTC Technology & Energy (CTC). Flemng highlighted some of the key findings from the report. The required customer take rate is between 57% - 72% depending on whether or not the City elects to use $20 million from the Fiber Reserves to build and operate a city-owned FTTP network on a positive cash flow basis. The total capital investment to build the network is $77.6 million over three years. Several factors make the required take rate and build costs higher in the Bay Area for an FTTP overbuilder (e.g. high cost of labor and materials, utility pole “make ready” requirements and replacement of utility poles). The report recommended the City not pursue a “for choice” retail broadband service. Traditional cable TV service should not be part of any offering due to the high cost of cable TV programming and consumer migration away from traditional pay-TV services offered by multi-channel video providers to “over-the-top” streaming video offerings such as Netflix. Incumbent telecommunications providers will use aggressive tactics to undermine a municipal network and customer acquisition initiatives. FTTP overbuilds by public or private entities generally do not offer an adequate return on investment, particularly in communities already well-served by the incumbent Internet service providers (ISPs). Using a public-private partnership model for FTTP deployment takes advantage of each entity’s strengths and may reduce the risk of an overbuild in a competitive market. Through a RFI process, the City should explore three potential public-private partnership models. Fleming presented the scope of work, findings, and recommendations for the wireless network plan conducted by CTC Technology & Energy. CTC made four recommendations: 1. Expand existing City Wi-Fi to other City facilities and adjoining public areas not currently served. 2. Install dedicated wireless facilities to address communication needs of Public Safety and Utilities. 3. Deploy a citywide mobile data network for public safety and other authorized users. 4. Consider citywide Wi-Fi for general public use, but deployment dependent on citywide fiber expansion. Wireless provides a mobility component to the fiber-optic At the end of the presentations, staff made two recommendations. First, defer issuing an RFI to evaluate public-private partnership opportunities for FTTP until after December 31, 2015. Second, issue RFP(s) to expand Wi-Fi to improve wireless communications for Public Safety and Utilities and to expand coverage to City facilities and public areas not currently served by the City’s existing Wi-Fi network. Public Comment Jeff Hoel sent comments on the first 111 pages of the FTTC report. One week is not enough time for the public to provide comment due to the length of the reports. Hoel does not agree with the estimated cost and some of the details in the report. The estimated cost is too high. The estimated cost for premise connections is five times too high. The cost of living in the Bay Area does not support those estimates. Herb Borock recognized the importance of data and is glad the City is addressing it. He does not agree with CTC’s recommendation to provide Active Ethernet to small businesses, instead it should be targeting homes. This approach may cannibalize the existing “value added resellers” currently licensing dark fiber from the City. Google hired CTC to conduct a study on streamlining cities processes. Herb does not agree with a partnership model. The City should use the Fiber Fund to pay for drop cables and customers can pay for home connections. Active Ethernet is better than GPON for residents. A wireless survey was recently conducted and less than 10% of respondents thought it was important for the City to provide Wi-Fi service. Bob Harrington presented a memorandum addressed to the UAC and the City of Palo Alto titled “FTTP is critical to Palo Alto infrastructure.” This memorandum was written by Harrington, Andy Poggio and Christine Moe, members of the City’s FTTP/Wireless Citizen Advisory Committee. In summary, FTTP is critical to Palo Alto because the City is situated in Silicon Valley with many startups; city-owned utilities is valuable and cost effective; emergency services and utilities can perform and respond better; universal access guaranteed by the City; and, City independence for fiber infrastructure will foster competition. Metcalfe’s Law says that the number of Internet users is growing exponentially; redundancy will provide fail-safe protection. Harrington recommended that FTTP’s goals are to provide universal access to all City residents and businesses. The memorandum recommended that the Council direct staff to immediately negotiate with potential private partners to build a city-owned FTTP network, and limit wireless investment to Public Safety and Utilities. Commissioner Comments Chair Foster asked Harrington, “Do you not fully agree with staff’s recommendations?” Harrington replied that the City should start to negotiate immediately with the providers for a “co-build with a private network” approach. Commissioner Schwartz asked Harrington about universal access and if he has any research regarding the percentage of homes in Palo Alto that do not have access to internet access. Harrington replied that he thought it was about 10 percent, but he does not really know for sure. Commissioner Schwartz said the subcommittee meetings and reports provided a thoughtful review including what happened historically, what is different now, and emerging technologies. The fiber subcommittee supported staff’s recommendation of waiting a few months because it will provide time for the major players to make their decision on whether or not they’re really coming to Palo Alto. We also need to evaluate the cost of providing universal access. Would it be less expensive for the City to assist low income residences with broadband access rather than building its own network? Commissioner Schwartz stated that the idea to upgrade fiber for Utilities and Public Safety is good. There is a feeling that the City may not have a lot of leverage to negotiate with providers; we may not be able to get anything out of them. Commissioner Schwartz asked a question about VTA rolling out fiber. Fleming replied that many transportation agencies are upgrading their systems with Wi-Fi capabilities for use by riders. Commissioner Danaher agreed with Harrington that there is a need for high-speed Internet. The report was well done, but it was completed in June. The market has changed since then. Staff should get more information in the next 60 days. It makes sense to wait and collect more information. Commissioner Danaher also asked what the City can do to assure citywide coverage and affordable rates. Since connection fees may be expensive, can customers pay off the cost over time through their utility bills? Commissioner Eglash stated that broadband is an important subject. He is impressed that we agree on the vision and goals of gigabit service, entrepreneurship and quality of life, but disagree on tactics. There is an open question about what the City does and what the private sector does. It’s hard to know what the right line is between the public and private sectors. Utilities provides uniform service. Most of the City has access to broadband. Commissioner Eglash believes the recommendation to support Public Safety is terrific. Commissioner Eglash stated he has no concern about the extended delay for issuing the RFI to evaluate a public- private partnership. Everyone is committed and the delay could be valuable. There needs to be an assurance that gigabit broadband is available to the entire city. Staff should look at cities where Google has already deployed fiber in that regard. Commissioner Eglash asked how universal access works in these Google cities. Fleming replied that Google has done a good job with “digital inclusion” programs in all of the cities they’ve worked with to deploy fiber optics (e.g. slower speed, low cost broadband service tier for low-income residents). Google’s goal is to serve all communities with their networks. Vice Chair Cook stated that it’s no longer 1999 or 2012 and we have to move forward. It is time for a consensus to take some action as Council Member Kniss has previously suggested. There is a risk of obsolescence with any technology. City may commit funds and then the network is obsolete. Don’t want to create a stranded asset. Vice Chair Cook asked a question about what appears to be contradictory information about Wi-Fi versus 5G. Reichental answered that they are two separate technologies and that the projected target date for implementation of 5G is 2020. Vice Chair Cook asked about the concept of a fiber build-out being married to undergrounding of electric utilities. Vice Chair Cook asked whether we could ensure that when fiber is installed underground, the electric utility could also be undergrounded. Fong explained that generally the electric utility leads and the fiber utility follows so when electric facilities are undergrounded, fiber follows underground, and when electric facilities are constructed overhead on utility poles, fiber is also constructed overhead. This is because the construction of electric utilities tends to be far more involved than construction of fiber facilities. Vice Chair Cook is in favor of the public safety and emergency service Wi-Fi recommendations. Vice Chair Cook agrees with Harrington’s memo advocating utility independence and limiting wireless investment until the fiber issue is resolved. He prefers to see the fiber initiative move as quickly as possible. Commissioner Hall asked if the FTTP model in the report is similar to the electric transmission open access network where the City or some entity would own the pathway and end-lighting but not be involved with the content. The content providers would be allowed to compete with one another. Commissioner Hall asked what the $70 per month charge mentioned in the report is for fiber access only and not content. Fleming clarified that in a closed network, the customer would pay a flat fee for both access and content. Commissioner Hall asked how we would ensure universal access for everyone. Fleming replied that within the RFI, services will be costed out and may depend on which private partner the City negotiates with for FTTP. For example, Google provides a low end service for those who cannot afford the regular service. It’s essentially free for seven years but the customer is required to pay a connection fee which can be spread out over time. Some models only build where there is a high rate of return on investment. Commissioner Hall said that it is his sense the UAC wants a pathway to universal access. Commissioner Hall asked if the City had to contribute a significant amount of money to ensure universal access which would eventually be recovered on utility bills, would it require a public poll or referendum or does City Council have the authority to mandate? City Attorney Molly Stump replied that more research needs to be done depending on the type of model and partnership. Commissioner Ballantine stated that he was torn on several points. Universal access makes sense but how do we achieve it. In terms of point #8 on Harrington’s memo (“The right thing to do right now”), is there an opportunity to capitalize on a public private partnership or would this be a missed opportunity. How does the City set up infrastructure like fiber and maintain it? Pipes and power lines do not change out very often. Internet infrastructure is typically replaced every 2 to 3 years. If residents are disappointed by wired connections they may go to wireless services. The better purchased wireless device offers better connectivity, so it’s not universal access. There needs to be a fourth bullet on slide 9 of staff’s presentation or CTC’s recommendation to ensure universal access while exploring the partnership models. Commissioner Danaher said that we’re still gathering a lot of new information. By end of the year, we may decide a partnership model may not make sense. In the meantime, we should think of ways to incent providers who are currently interested in building out a network we want. We have an opportunity to think creatively over the next few months. Chair Foster stated that in 2012, staff and the UAC concluded that FTTP build costs and required take rate were too high, and that financial risk worried people. What is different now is that Google, AT&T, etc. are changing the market. If AT&T and Google come to Palo Alto it may be the end of municipal FTTP in Palo Alto. The only way to proceed is if the Council does something bold such as approaching FTTP as a “public benefit” by issuing a referendum of a city funded FTTP and letting the voters decide. This approach would eliminate concerns about the take rate issue. How do we get to resolution? The staff report recommends delaying the issuance of an RFI for a municipal FTTP and expanding Wi-Fi to emergency responders and City facilities including public areas. However, Harrington’s memo is significantly different which states the goal of FTTP is to connect all households to a city-owned network, negotiate immediately with private partners to build a city network, and limit Wi-Fi to emergency responders only. Commissioner Eglash stated that the RFP for Wi-Fi for Public Safety and Utilities should be separate from city facilities and parks. ACTION: Two motions were passed as follows: On the matter of municipal Wi-Fi, Vice Chair Cook moved and Chair Foster seconded a motion to recommend that Council direct staff to: Issue Request for Proposal(s) (RFP) to add dedicated wireless facilities to improve communications for Public Safety and Utilities departments; and optionally for expanding Wi-Fi coverage of City facilities and public areas. The Commission’s vote was 7-0 in favor of the motion with all Commissioners participating. On the matter of municipal FTTP, Chair Foster moved and Vice Chair Cook seconded the recommendation that Council direct staff to recommend that the Council (1) adopt the goal of making FTTP connections to a fiber network available to all Palo Alto premises as soon as reasonably possible (potentially negotiate co-build with a private network); (2) defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide fiber-to-the-premises (FTTP) network. The intervening time between now and the end of the year should enable emerging gigabit broadband services from the private sector to be settled; (3) during the time between now and end of year, direct staff to look at possibility of offering a city-owned FTTP as a public benefit; 4) direct staff to negotiate with private ISPs to obtain their assistance with a build out of a city-owned network while City assists them with their private network build out. Commissioner Eglash moved and Commissioner Hall seconded a substitute motion to recommend Council direct staff to: 1) Defer issuing a Request for Information (RFI) until after December 31, 2015 to determine interest from the private sector in partnering with the City to build and operate a citywide fiber- to-the-premises (FTTP) network. The intervening time between now and the end of the year should enable emerging gigabit broadband services from the private sector to be settled 2) During the time between now and end of year, direct staff to evaluate the public benefit option of offering a city-owned FTTP. The substitute motion passed on a 4-3 vote in favor with Commissioners Eglash, Hall, Danaher and Schwartz voting for the motion and Chair Foster, Vice Chair Cook and Commissioner Ballantine voting against the motion obviating the need for a vote on the original FTTP motion. City of Palo Alto (ID # 6070) City Council Staff Report Report Type: Action Items Meeting Date: 9/28/2015 City of Palo Alto Page 1 Summary Title: Charleston Arastradero Corridor Project Title: Approval of the Preferred Concept Plan Line for the Charleston Arastradero Corridor Project From: City Manager Lead Department: Public Works Recommendation Staff recommends that the City Council review and approve the proposed Concept Plan Line for the Charleston-Arastradero Corridor, leading to final design and implementation of landscaped medians, bulb-outs, and other pedestrian and bicycle improvements consistent with the existing striping, which was approved for permanent retention in 2008 and 2012. Executive Summary The Charleston–Arastradero Corridor is a heavily used residential arterial road serving as an east west connector for southern Palo Alto. Among other things, it services 11 schools, several parks, shopping centers and a library. Comprehensive Plan Policy T-40 prioritizes the safety and comfort of school children in street modification projects that affect school travel routes. Trial striping plans were previously implemented and approved for permanent retention throughout the corridor. The current phase of the project would install landscaped medians, bulb-outs, and enhanced bicycle and pedestrian improvements consistent with the existing striping/roadway configuration. Throughout the planning process, staff continued to hear both from members of the community who want to roll back the prior improvements (increasing traffic capacity in recognition of existing and future traffic volumes), and from members of the community who embrace the current roadway configuration (wanting the corridor to function as a safe, residential arterial, with slow speeds and a residential character). These are two different visions for the Charleston-Arastradero Corridor. The latter has been the one adopted by the City first in 2008 and then in 2012, and would be supported by the proposed concept plan line. Extensive public outreach was done to develop the preferred concept plan line to add landscaping and pedestrian/bicycle improvements to the corridor. The City hosted four community workshops, presented the plan to Palo Alto Pedestrian and Bicycle Advisory City of Palo Alto Page 2 Committee for comments twice, and developed a preferred plan line concept that was unanimously approved by the Planning and Transportation Commission. Highlights of the proposed plan include a new multiuse trail from Gunn High School to the Hetch-Hetchy Trail, bike lanes across El Camino Real, and new landscaped medians throughout the corridor. An addendum has been prepared for the Mitigated Negative Declaration/Initial Study that was approved for the project in 2004 in compliance with the California Environmental Quality Act (CEQA). The changes to the project scope analyzed in 2004 are minor in nature and the preparers determined that the preparation of a new environmental document was not necessary for a project that will effectively perpetuate the existing roadway configuration. National Environmental Protection Act (NEPA) clearance is also necessary for the project due to federal grant funding received towards construction. Staff anticipates that the project will receive a Categorical Exclusion under NEPA. Following approval of the concept plan line, the design team will begin working on a final design for implementation in the spring of 2017. Additional public outreach will be done to complete the design. Funding to complete the design has already been approved during the FY 2015 Capital Improvement Program budget process and construction funding has been identified in the Infrastructure Funding Plan to supplement the $1.45 million the city has already received in grant funding. There are two locations where the Concept Plan Line proposes minor striping modifications to improve vehicle flow. These striping changes will be considered for possible accelerated implementation following approval of the Concept Plan Line. The first location is on westbound Charleston approaching Alma Street, where the two lane approach will be extended to add more space for cars to line up in both lanes while waiting to cross the intersection. The other location is at the intersection of Charleston Road and Fabian Way, where the westbound merge will be shifted to the east side of Fabian Way and the left turn pocket will be added in the westbound direction. Project Background The Charleston-Arastradero Corridor is a heavily used, 2.3 mile roadway servicing 11 schools, several parks, shopping centers, commercial uses, a library, day care centers, non-profits, and two community centers. The corridor extends from East Charleston Road at Fabian Way to Arastradero Road at Miranda Avenue. In 2003, Council directed staff to prepare a Charleston- Arastradero Corridor Plan to address school commute and other travel safety concerns for pedestrians, bicyclists and drivers, as well as to enhance residential amenities along the corridor, without inducing traffic to shift onto nearby residential streets and maintaining the ability to handle existing and projected traffic. In 2004, Council approved a plan for a trial demonstration to reduce the four lane road to two lanes. In 2006, Phase 1 of the plan was implemented on Charleston Road from Fabian Way to El Camino Real together with improvements at the Gunn High School/Arastradero Road City of Palo Alto Page 3 intersection. Phase 2 of the improvements was implemented in 2010 on Arastradero Road between El Camino Real and Gunn High School. These trials were approved by Council for permanent retention in 2008 and 2012, respectively. Since that time, the project has secured $1.45 million in grant funding for associated landscaping and pedestrian/bicycle improvements. The City Council included the Charleston/Arastradero Corridor in its Infrastructure Funding Plan, allocating the remaining $7.5 million needed to fully fund the project through its construction. The trial projects were implemented using pavement striping and markings without the use of hardscape improvements. This last phase of the project will complete hardscape elements and incorporate further improvements to enhance safety and address operational issues. The final phase will also identify opportunities for potential “green infrastructure” features to remove pollutants from stormwater and reduce stormwater runoff. (Refer to proposed concept plans in Attachment A) Discussion Components of the proposed project are described below, along with the process used for developing and reviewing the Concept Plan Line. Concept Plan Line Development and Components Approval of a Concept Plan Line is the first step in the design phase of a project. A Concept Plan Line identifies the approximate location of civil improvements along with improvement types, but excludes focused design details such as detailed hardscape and landscape measures. The Concept Plan Line identifies the locations of extensive civil improvements that influence the amount of review required for California Environmental Quality Act (CEQA) compliance. Development of a Concept Plan Line commonly requires three to four community meetings to help shape the location and types of improvements that each plan will include. Four community meetings were held for this project between 2014 and 2015. Each community meeting was attended by more than 40 residents. The meetings presented various options and concepts to the public and gathered feedback that was used to make improvements to the plan line. The Charleston/Arastradero Conceptual Plan Line as shown in Attachment A includes two changes from the presentation to the Planning and Transportation Committee Meeting in April intended to address comments raised at the meeting. (The minutes from this meeting are linked here.) The first change was in response to Community feedback that the median islands previously proposed for the intersection of Charleston Road and Grove Avenue/Sutherland Drive were not favored. After an internal discussion of the situation, staff decided to remove the proposed islands from the plan. Additionally, the landscaped median between Louis Road and Fabian Way has been shortened in order to allow for residents living on the westbound side of Charleston Road to access their homes when travelling east. Comments received at this meeting suggest that the plan line addresses most of the public’s concerns within the corridor that were expressed at previous meetings. Areas of continued concern include excessive delay during peak commute periods; illegal maneuvers by impatient drivers and student bicyclists; City of Palo Alto Page 4 and difficulty in making left turns from side streets onto the corridor during peak commute periods. Listed below are highlighted components of the preferred Concept Plan Line at specific intersections/areas along the corridor:  Gunn High School The plans adjust the existing “pork chop” islands for improved pedestrian crossing and adds a new 13 foot wide multi-use pathway on the eastbound side of the street from Gunn High School to existing trail to Los Altos (Hetch-Hetchy trail). It also adds a green surface treatment to the bike lane approaching the Gunn High School intersection in westbound direction and adds a new bicycle cross-walk from the multi-use trail to Gunn High School.  Terman Middle School In the eastbound direction, the plan adds a dedicated right turn lane into Terman Middle School, a green bike lane between the through lane and right turn, and a bike ramp to the sidewalk ahead of the intersection. The ramp allows school-bound bicyclists travelling east to avoid having to weave with vehicles at the intersection. On the east side of the intersection the plan provides a bus bay and increases the size of the corner sidewalk area to provide more queuing space for bikes and pedestrians waiting to cross the street. To accommodate these improvements, the plan shifts the eastbound lane merge from after the intersection to before the intersection and removes 18 parking spaces on westbound Arastradero Road between Georgia Avenue and Willmar Drive. A parking survey conducted by volunteers at twenty various times between February 6 and March 2, 2015 indicated that cars were only parked on the section of the road designated for parking removal three times with the maximum number of spaces occupied during the survey being five.  Coulombe Avenue The plan shortens the existing cross-walk distance by widening the sidewalk on the north-west corner and realigning the cross-walk to be perpendicular to the road. The plan also adds an additional cross-walk on the east side of the intersection.  Juana Briones Park On the eastbound side of street, the plan widens the sidewalk to 10 feet between Terman Middle School and Suzanne Drive. On the westbound side, it incorporates a cycle track/bike lane which is separated from vehicle travel lanes by on-street parking spaces. During final design, measures will be incorporated to encourage student bicyclists to use Los Palos Avenue to enter Terman Middle School via an entrance at the back of the campus rather than riding on the sidewalk along Arastradero Road.  Clemo Avenue/Suzanne Drive City of Palo Alto Page 5 The plan widens sidewalks on both sides of the street and adds a median island at the intersection with Suzanne Drive in order to provide a refuge for vehicles turning left onto or from Arastradero Road. During final design, measures to improve visibility of pedestrians using the crosswalk will be incorporated.  El Camino Real The plan provides new bike lanes in each direction across the intersection by narrowing the eastbound sidewalk and the travel lanes in both directions as they approach the intersection. The plan eliminates the “pork chop” island on the southeast corner of the intersection and adds a raised crosswalk across the slip ramp in the southwest corner of the intersection in order to slow the high speed right-turning traffic. The plan line also includes a bike box beside the southwest “pork chop” island to allow bicyclists to make a two-stage left turn from southbound El Camino Real onto eastbound Charleston Road if they choose. Improvements at this intersection are subject to review and approval by Caltrans.  Wilkie Way The plan adds new left-turn pockets on Charleston Road in both directions.  Ruthelma Avenue The plan calls for a new pedestrian-activated flashing beacon at the existing cross-walk.  Alma Street On the west side of Alma Street, the plan adds a new concrete median down Charleston Road from just west of Park Boulevard up to the train tracks. This new median prevents left turns from and onto Park Boulevard, thus improving the flow of through traffic on Charleston Road. The new median may have a small opening to allow bicycles to cross when it is safe to do so. The project also includes four quadrant gates and other safety improvements at the railroad crossing. These improvements can potentially help meet the requirements needed for a future “quiet zone” classification. Further discussion will be held with Caltrain and California Public Utilities Commission to identify appropriate improvements. On the east side of Alma Street, the plan extends the two-lane approach to the intersection by approximately 500 feet in order to decrease the length of the queue of vehicles crossing or turning onto Alma Street.  Carlson Court The plan widens sidewalks at three corners of the intersection to reduce pedestrian crossing distances and to discourage U-turn movements at this intersection. U-turns are accommodated in both directions at the intersection of Charleston Road and Mumford Place and also at the intersection of Charleston Road and Nelson Drive. The sidewalk along the westbound lanes is being widened between Carlson Court and the multi-use trail adjacent to Hoover Elementary School in order to accommodate the high volume of student two-way bicycle traffic between Carlson Court and the multi-use trail. City of Palo Alto Page 6  Hoover Elementary School The plan provides a new landscaped median island down the center of Charleston Road between Carlson Court and Nelson Drive. The median island prevents preclude left-turn and U-turn movements from eastbound Charleston Road. Median openings are proposed to accommodate left-turns onto eastbound Charleston Road from both the Hoover Elementary School driveway and the Stevenson House driveway. The signal at Nelson Drive is being modified to have a protected left-turn phase for both eastbound and westbound traffic, and the storage length for the eastbound left-turn/U-turn lane has been lengthened to more than 300 feet. The north side of the intersection is being modified to make it clear to vehicles heading northbound on Nelson Drive that a through-movement at the intersection is provided only for bicyclists.  Middlefield Road Currently, Charleston Road is a two-lane road on both approaches to the Middlefield Road intersection and widens to four lanes for approximately 600 feet at the intersection. The proposed plan line adds dedicated right turn lanes in both directions by shifting the westbound lane merge from after the intersection at Middlefield Road to before. To improve bike safety, curb modifications are being implemented to allow bicyclists to be able to maintain a straight path through the intersection. This requires right-turning vehicles to slowly cross the bike lanes as they enter the right-turn lanes. Green bike lanes are being incorporated to improve visibility of bicyclists in weaving or potential conflict areas.  Sutherland Drive/Grove Avenue The design initially provided new landscaped medians to improve safety of left-turning movements from Charleston Road on to the side streets. The proposed improvements allowed for left-turns out of the side streets but not into them for every direction. Left- turns into the side streets were to be accommodated by the use of U-turn maneuvers at a mid-block location near Charleston Court for westbound traffic and at Louis Road for eastbound traffic. The proposed islands were removed from the plan in response to the negative community feedback. The plan now calls for a new pedestrian crossing with a median refuge area.  Louis Road The plan widens this intersection to provide space for eastbound vehicle U-turns. Additionally, it provides a new traffic signal to help vehicles, bikes, and pedestrians to safety cross Charleston Road or to make the left turn onto Charleston Road from Louis Road. The proposed signal has received mixed reviews from the nearby residents and signal alternatives will be considered. The plan adds a green bike lane on southbound Louis Road which improves safety for bicyclists by providing a place to wait to cross Charleston Road out of the way of left turning or right turning vehicles. The existing median refuge islands for bicyclists are being enlarged. City of Palo Alto Page 7  Fabian Way In the eastbound direction, the plan adds a dedicated left-turn lane for vehicles as well as a separate left-turn lane for bicyclists. Additionally, it provides a new cross-walk across Charleston Road on the east side of the intersection. On southbound Fabian Way, the plan adds a bike lane between the right turn lane and the through lane. A separate City project will install bike lanes on Charleston Road east of Fabian Way in both directions. Concept Plan Line Review The conceptual plan lines were reviewed by Palo Alto Pedestrian and Bicycle Advisory Committee (PABAC) in November 2014 and February 2015. PABAC members provided their thoughts and comments on the features/treatments/concepts/improvements proposed, and provided input on their individual preferences for certain features. In addition, staff presented the proposed improvements at City/School Traffic Safety Committee and Parent Teacher Association (PTA) meetings at Gunn High School, Terman Middle School, Hoover Elementary School, and Fairmeadow Elementary School in February and March of 2015. The PTAs all supported the plan line and thought the improvements would be beneficial to the students and users of the corridor. Numerous comments and suggestions from PABAC, the community and from Planning and Transportation Commission were provided through the meetings. These comments and the response to the comments are included as Attachment B. The preferred plan line alternative was presented to the City’s Planning and Transportation Commission (PTC) in April 2015. The response from the Commissioners was very positive and the preferred plan line concept was approved unanimously. The PTC’s primary request was for the report transmitting the Concept Plan Line to Council to include additional data that has been assembled previously to support the project. The PTC also requested that staff provide updated traffic counts to allow comparison of current counts to the past. In response to the request for information from previous reports, staff has provided a link to the Council Staff Report from 2008 when Council approved the trial striping plan and also the Staff Report from 2012 when Council approval the Arastradero trial striping plan. Links are provided in Attachment C. Updated traffic counts are described below. Traffic Impacts of Previously Implemented Striping Changes In response to the PTC’s request, staff directed the project’s traffic engineering consultant to take additional vehicle counts on Arastradero Road and along selected nearby streets that have been counted in the past. The data taken from May 2015 compared to counts in Spring of 2012, Fall of 2011 and prior to the initial striping changes indicates that AM peak traffic has increased on Georgia Avenue but has remained consistent or has been reduced on Maybell Avenue and Donald Drive. This data shows that cut through traffic has not increased significantly because of earlier phases of the project. The increase on Georgia Avenue is best explained by an increase of Gunn parents utilizing Georgia Avenue to drop off their high school students. This data is combined with the previous counts on a graphic included in Attachment D. City of Palo Alto Page 8 The graph included in Attachment D shows the hourly traffic demands throughout the day for a typical weekday. As shown in the chart, there is a heavy westbound peak hour during the AM School peak period, and a longer duration PM peak for the eastbound direction. While traffic conditions slow during the AM and PM peak periods to the peak hour traffic, the AM peak hour delays and queuing are exacerbated by an all-pedestrian phase at the intersection of Donald/Terman and Arastradero. Traffic operating conditions generally improve upon termination of the all-pedestrian phase around 8:15 AM. Traffic Impacts of Proposed Concept Plan Line A traffic impact analysis (Appendix A of Attachment E) was conducted to analyze the expected effect of the proposed Concept Plan Line improvements along the corridor with respect to existing conditions and determined that the project would not trigger any significant impacts. The study did not evaluate increasing capacity for future growth in traffic volumes. The City funded an update to its traffic model as part of the ongoing Comprehensive Plan update, and this model anticipates that traffic volumes will increase by 15 to 55 percent along the Arastradero Corridor during the peak periods by the future year 2030. Because Arastradero Road already operates near capacity in the peak hour, the likely result with be a lengthening of the peak period, which can be expected to start earlier and end later unless there is a successful shift away from single occupant vehicles in the region. An issue of concern to the community heard at the public meetings is the general growth in traffic as a result of the strong economy, the increase in employment and other factors. The Charleston/Arastradero project does not significantly affect vehicle capacity in the corridor, but will continue and enhance changes that were made in 2006 and 2010. Those changes reflected the vision for the corridor established in the Comprehensive Plan, the Bicycle/Pedestrian Transportation Plan and other City Council actions. The project will include some traffic operations upgrades and also will improve bike and pedestrian facilities, thus providing positive benefits for all modes. The general growth in traffic is a regional and citywide issue, which the City needs to address as a community regardless of the actions undertaken in this corridor. This effort needs to include increased Caltrain capacity, citywide bicycle facility improvements, expanded commuter and community shuttle service, trip reduction strategies for new and existing employment and efforts such as the Transportation Management Association. The City Council has recently asked staff to work with Stanford to achieve a meaningful shift to alternative modes at the Research Park. In addition, current planning efforts such as the Comprehensive Plan update and Greenhouse Gas Reduction strategies will address longer term efforts to manage vehicle traffic. Next Steps City of Palo Alto Page 9 Following approval of the Concept Plan Line the design team will start work on the detailed design for the entire corridor between Charleston Road at Fabian Way and Arastradero Road at Miranda Avenue. The project will be designed to allow its construction in phases that will also correspond to the grant funding for the project. Two locations on the corridor where the Concept Plan Line proposes striping modifications to improve vehicle flow are being considered for possible accelerated implementation. The first location is on westbound Charleston approaching Alma Street where the two lane approach will be extended to add more space for cars to line up in both lanes while waiting to cross the intersection. The other location is the intersection of Charleston Road and Fabian Way where the westbound merge will be shifted to the east side of Fabian Way and the left turn pocket will be added in the westbound direction. Upon approval of the Concept Plan Line, these two locations of lane reconfigurations will be implemented in Fall 2015 or Summer 2016 in coordination with street maintenance contracts. Resource Impact This project is anticipated to cost $11.3 million and be completed over a period of several years. Funding for the design contract with Mark Thomas & Company in the amount of $736,765 was approved in March 2014 for preliminary design through environmental assessment. Of that amount, $335,000 was funded by the Charleston Road-Arastradero Road Traffic Impact Fee Fund. An additional $500,000 was approved in the FY 2015 Capital Project Budget to complete the design and prepare construction documents. The estimated construction cost for the Charleston-Arastradero Corridor Project is $10 million. Staff has secured two construction funding grants for this project to date. The first is a Caltrans Safe Routes to School (SR2S) Grant in the amount of $450,000 which was awarded in 2012 for improvements from Middlefield Road to Alma Street. The second grant is a Valley Transportation Authority – Vehicle Emissions Reductions Based at Schools (VERBS) grant awarded in 2013 in the amount of $1,000,000 for construction of improvements on Arastradero Road between Georgia Avenue and Maybell Avenue, including repaving of the Los Altos Trail between Arastradero Road and Adobe Creek. As part of the recently approved 2016 Adopted Budget and 2016-2020 Capital Improvement Program, the remaining project costs were programmed in the Capital Improvement Fund through Fiscal Year 2020. This project was included in the June 2014 City Council approved Infrastructure Plan, supported by various sources including transfers from the Stanford University Medical Center Development Agreement Fund, transient occupancy tax receipts, and accumulated savings in the Infrastructure Reserve. Policy Implications Approval of the plan line is consistent with City policies and previous Council direction. The Bicycle and Pedestrian Transportation Plan 2012 (BPTP) lays out the development of the Bicycle Boulevard network and prioritizes corridors for development of these facilities. BPTP City of Palo Alto Page 10 objectives that are furthered by the development of the Charleston/Arastradero Corridor Project include: Objective 1: Double the rate of bicycling for both local and total work commutes by 2020 (to 15% and 5%, respectively). Objective 2: Convert discretionary vehicle trips into walking and bicycling trips in order to reduce City transportation-related greenhouse gas (GHG) emissions 15% by 2020. Objective 3: Develop a core network of shared paths, bikeways, and traffic-calmed streets that connects business and residential districts, schools, parks and open spaces to promote healthy, active living. Objective 4: Plan, construct and maintain ‘Complete Streets’ that are safe and accessible to all modes and people of all ages and abilities. Objective 5: Promote efficient, sustainable and creative use of limited public resources through integrated design and planning. The Comprehensive Plan also contains goals, policies and programs that support the development of the Charleston/Arastradero Corridor Project, many of which are listed below. The Comprehensive Plan also includes policies that recognize the desire to accommodate existing traffic capacity (see Policy T-30: “The City has designated some streets as residential arterials to recognize that they carry large volumes of through-traffic… The City’s objective is to address the desires of residents of these streets who would like to have slower speeds, safer conditions for bicyclists and pedestrians, and aesthetic improvements. This must be done economically and without appreciably reducing traffic capacity…”). Overall, the City Council has found the Charleston/Arastradero Corridor Project to be generally consistent with the Comprehensive Plan as a whole based on goals and policies such as these: Goal T-1: Less Reliance on Single-Occupant Vehicles. Goal T-3: Facilities, Services and Programs that Encourage and Promote Walking and Bicycling. Goal T-4: An Efficient Roadway Network for All Users. Goal T-6: A High Level of Safety for Motorists, Pedestrians, and Bicyclists on Palo Alto Streets City of Palo Alto Page 11 Policy T-14: Improve pedestrian and bicycle access to and between local destinations, including public facilities, schools, parks, open space, employment districts, shopping centers, and multi-modal transit stations. Policy T-25: When constructing or modifying roadways, plan for usage of the roadway space by all users, including motor vehicles, transit vehicles, bicyclists and pedestrians. Policy T-39: To the extent allowed by law, continue to make safety the first priority of citywide transportation planning. Prioritize pedestrian, bicycle, and automobile safety over vehicle level of service at intersections. Policy T-40: Continue to prioritize the safety and comfort of school children in street modification projects that affect school travel routes. Program T-19: Develop, periodically update and implement a bicycle facilities improvement program and a pedestrian facilities improvement program that identify and prioritize critical pedestrian and bicycle links to parks, schools, retail centers and civic facilities. Program T-33: Develop comprehensive roadway design standards and criteria for all types of roads. Emphasize bicycle and pedestrian safety and usability in these standards. Program T-41: The following roadways are designated as residential arterials. Treat these streets with landscaping, medians, and other visual improvements to distinguish them as residential streets, in order to reduce speeds.  Middlefield Road (between San Francisquito Creek and San Antonio Road)  University Avenue (between San Francisquito Creek and Middlefield Road)  Embarcadero Road (between Alma Street and West Bayshore Road)  Charleston / Arastradero Roads (between Miranda Avenue and Fabian Way) Environmental Review The Charleston-Arastradero Corridor Project will be funded from both local and federal sources. Therefore, compliance with both the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA) is required. For CEQA compliance, the City prepared an Initial Study/Mitigated Negative Declaration (IS/MND) for the Project in 2004 and the Project was approved by the City Council. A link to the 2004 IS/MND is included in Attachment C. In addition, the project was discussed in the 2012 Mitigated Negative Declaration for the Bicycle and Pedestrian Transportation Plan. As stated above under Project Background, the largest components of the Project, namely the identified reduction in through traffic lanes from four to two along Arastradero and Charleston Roads, City of Palo Alto Page 12 were previously implemented on a trial basis and subsequently made permanent. In addition, the improvements at the entrances to Gunn High School and Hoover Elementary School were implemented. Most of the remaining components of the approved Project, all of which are relatively minor in scope, have not been implemented. These improvements include bulb outs, new and improved bicycle facilities, new and upgraded crosswalks, raised pedestrian refuges, modifications to intersection geometry, addition of trees and landscaping, and additional lighting at various locations along the 2.3-mile Corridor. The improvements that constitute the proposed Concept Plan Line represent refinements and modifications to this list of not-yet-implemented components of the approved Project, and would not appreciably affect traffic capacity. Under staff direction, the environmental compliance specialists on the consultant team undertook a preliminary review of the proposed Concept Plan Line improvements in order to compare them to the list of not-yet-implemented components of the approved Project, and also to determine if any of the proposed improvements will result in new and/or significantly greater environmental impacts than those identified in the Project’s 2004 IS/MND. Based on this review, it was concluded that implementation of the proposed Concept Plan Line improvements would not result in significant environmental impacts that are different from, or substantially greater than, those identified in the 2004 Initial Study/MND; therefore, a new environmental document is not required. An Addendum to the Final Initial Study/MND was prepared and has been reviewed by staff from the Planning and Community Environment Department and the City Attorney’s Office. The Addendum to the Final Initial Study / MND is attached to this report as Attachment E. Analyses required for NEPA compliance, to be specified by Caltrans on behalf of the Federal Highway Administration, will be undertaken. Under staff direction, the consultant team will prepare the necessary analyses for the project. Given the nature and scope of the proposed improvements, both the consultant team and staff anticipate that Caltrans will determine that a Categorical Exclusion under NEPA (analogous to a Categorical Exemption under CEQA) is applicable because the proposed improvements consist of landscaping and pedestrian/bicycle improvements that will not materially affect traffic operations or capacity. Attachments:  A - Concept Plan Line (DOCX)  B - Responses to Public Comments (PDF)  C - Links to Resource Materials (DOCX)  D - Arastradero Road Traffic Counts and Hourly Traffic Graph (PDF)  E - CEQA Addendum and Traffic Report (PDF) Attachment A Concept Plan Lines Part 1 of 3 Concept Plan Lines https://www.cityofpaloalto.org/civicax/filebank/documents/49060 Part 2 of 3 Concept Plan Lines https://www.cityofpaloalto.org/civicax/filebank/documents/49061 Part 3 of 3 Concept Plan Lines https://www.cityofpaloalto.org/civicax/filebank/documents/49062 Charleston / Arastradero Corridor Project Public comments and Responses from 2/15 PABAC Meeting, 3/15 Community Work Shop, and 4/15 PTC Meeting # Public Comment Response 1 Concern of Removal of Left turn out of Young Life Preschool and church and how much traffic is using the driveway Left turning vehicles from the preschool driveway and from Georgia Avenue face each other in the two‐way‐left‐turn lane, creating unsafe conditions. Traffic counts show 6 and 21 vehicles making these movements respectively during morning, midday, and evening peak travel times combined. The design accommodates left‐turn movement for the larger volume of left‐turning vehicles from Georgia Avenue. 2 Backup along Alma Street/Caltrain Intersection because of the Caltrain traffic The signal phasing and timing were set to optimize operations at this intersection, given the constraint of signal preemption by Caltrain. Unless this crossing is grade‐separated, Caltrain operation will continue affect operations at this intersection. 3 Safety along the railroad crossing on Charleston with bicyclists and vehicles but still giving bicyclists a head start before vehicles at the intersection For eastbound Charleston Road, the project proposes to pull back the signal stop line to be before the railroad crossing gate. If bicyclists are allowed to pull forward past the tracks during red light, they will be in danger of being hit by passing trains. 4 Left turn restrictions along Charleston frontage into residences and the for the Unitarian Universalist Church, requiring a U‐ turn at various locations Addition of landscaped medians will resulting in a safer and more aesthetically pleasing corridor but will require many drivers to make U‐turns to get to their destination. U‐turns are provided at some locations in order to accommodate this need. 5 Concern that the Charleston/Middlefield intersection is the most dangerous for bicyclists New green bike lanes are proposed to be to the left of the dedicated right turn lanes in order to prevent conflicts between right turning vehicles and bikes. 6 Concern about future growth at the Stanford Research Park and impact to the traffic conditions on the corridor This project will not materially reduce the capacity or degrade the vehicle flow of the roadway. The striping plan installed in the past is considered the existing condition for this project. 7 Concern vehicle travel time has increased along corridor from this project This project will not materially reduce the capacity or degrade the vehicle flow of the roadway. The striping plan installed in the past is considered the existing condition for this project. Charleston / Arastradero Corridor Project Public comments and Responses from 2/15 PABAC Meeting, 3/15 Community Work Shop, and 4/15 PTC Meeting 8 Congestion on Arastradero from Terman Middle School to Foothill because of parent drop‐offs along the corridor. A new dedicated right hand turn lane has been provided to decrease congestion on Arastradero due to Terman drop‐offs. 9 Vehicles are parking on bike lanes along westbound Arastradero Road. Parking will be eliminated along some portion of westbound Arastradero and the new striping plan will allow for ample space of parked vehicles. 10 Left turns from Alta Mesa Avenue onto WB Arastradero is impossible during peak hours. Adding a signal at Alta Mesa is not feasible due to the proximity to El Camino Real. 11 Add more traffic calming devices at Ruthelma/Charleston intersection and make more pedestrian and bicycle friendly Push button activated flashing beacon are proposed for this pedestrian crossing. 12 Concern of too much cut through surrounding neighborhoods near Alma to avoid the Alma/Charleston Rd intersection The westbound approach to Alma Street will be restriped to have two lanes for an additional 500’ to decrease congestion. 13 Backup along Alma Street/Caltrain Intersection because of the Caltrain preemption. The westbound approach to Alma Street will be restriped to have two lanes for an additional 500’ to decrease congestion. 14 Concern to be able to turn left at Sutherland. A modification to the Charleston/Sutherland/Grove intersection aimed at improving safety for left‐turning vehicles was proposed. However, due to requests by residents in the area, the proposed improvement has been removed from the project. 16 Concern if it is possible to make a U‐turn at Montrose/Louis/Charleston intersection. The intersection was designed to allow for eastbound vehicles to have enough space to make a U‐turn. 17 Concern about getting into driveways because medians are added in corridor. Addition of landscaped medians will resulting in a safer and more aesthetically pleasing corridor but will require many drivers to make U‐turns to get to their destination. U‐turns are provided at some locations in order to accommodate this need. Charleston / Arastradero Corridor Project Public comments and Responses from 2/15 PABAC Meeting, 3/15 Community Work Shop, and 4/15 PTC Meeting 18 Traffic conditions have worsened since the 2004 environmental document was prepared. This study should consider the increase in traffic due to the changing land use near the Charleston‐Arastradero corridor and the cut‐ through traffic that result from congestion on the corridor. The data taken from May 2015 compared to counts in Spring of 2012, Fall of 2011 and prior to the initial striping changes indicates that AM peak traffic has increased on Georgia Avenue but has remained consistent or has been reduced on Maybell Avenue and Donald Drive. This data shows that cut through traffic has not increased because of earlier phases of the project. The increase on Georgia Avenue is best explained by an increase of Gunn parents utilizing Georgia Avenue to drop off their high school students. 19 The Charleston/Louis signal was not part of the pilot project. What is the justification for this signal, and how does it operate? Concern that the signal will worsen congestion on westbound Charleston due to its proximity to the Charleston/Fabian signal. The signal has been proposed as a response to community concerns about the difficulty of making left‐turn movements from southbound Louis Road to Charleston Road. The signal will be interconnected with the Fabian Way signal for better operation. Eastbound Charleston traffic will be stopped only when pedestrians and bicyclists cross Charleston Road. 20 Concern about drivers aggressively overtaking other vehicles on stretches leading up to lane reduction merges. Currently, at the Donald/Terman intersection and the Middlefield the road turns from one lane to two lanes just before the intersection and narrow down to one lane right after the intersection. The project proposes to eliminate these merge areas on the eastbound at Terman and as well as westbound at Middlefield. Some of the remaining sections are longer stretches of two lane roads merging to one lane. At these locations, the project will provide enough distance for the merges to happen in a safe manner. Attachment C – Links to resource materials Staff Report for Planning and Transportation Hearing, April 29, 2015 Link: https://www.cityofpaloalto.org/civicax/filebank/documents/47044 Planning and Transportation Commission – Meeting minutes, April 29, 2015 Link: http://www.cityofpaloalto.org/civicax/filebank/documents/47936 Staff Report from 2008 Charleston Road Striping Trial Approval Link: http://www.cityofpaloalto.org/civicax/filebank/documents/11911 Staff Report from 2008 PTC Meeting on Charleston Road Trial Striping Link: http://www.cityofpaloalto.org/civicax/filebank/documents/11791 Staff Report from 2012 Arastradero Road Striping Trial Approval Link: http://www.cityofpaloalto.org/civicax/filebank/documents/31304 2004 Mitigated Negative Declaration Link: http://www.cityofpaloalto.org/civicax/filebank/documents/5270 Daily Traffic Count Comparison Combined Two‐Way Daily Traffic Movements Amaranta @ Florales 1, 8 4 6 (1 , 7 6 6 ) (1 , 9 1 2 ) (2 , 2 9 1 ) Maybell @ Pena Ct 2,700 (2,732) (3,348) (3,315) Donald Dr 75 5 (7 2 1 ) (7 3 3 ) (9 4 7 ) Arastradero @ McKeller 18,137 (18,855) (20,537) (23,865) Arastradero @ Pomona 18,458 (19,547) (19,635) (20,569) Arastradero @ Cemetery 18,523 (18,460) (18,518) (20,246) Los Robles 4,077 (2,365) (2,677)(2,531) 1 Am a r a n t a Matadero @ Josina Ct 1,407 (1,310) (1,695) (1,454) *2-way Maybell @ Maybell Ct 1,638 (1,356) (1,934) (1,638) Georgia Ave 82 7 (3 5 3 ) (4 1 9 ) (8 0 0 ) Before (Spring 08-10) (Fall 2011) (Spring 2012) (Spring 2015) Los Robles 194 (202) (252) (231)* 232 (167) (181) (153)* Arastradero @ Pomona 680 (707) (684) (758) 952 (965) (928)(1,051) Arastradero @ McKeller 733 (765) (770) (975) 1,016 (811) (1,075) (1,195) Maybell @ Pena Ct 408 (443)(690) (482) Georgia Ave 70 (6 4 ) (7 0 ) (1 9 0 ) Donald Dr 16 9 (2 0 7 ) (2 1 8 ) (2 1 7 ) *2-way *2-way Maybell @ Maybell Ct 488 (355) (510) (378) *2-way *2-way *2-wayPreProject (Fall 2011) (Spring 2012) (Spring 2015) Am a r a n t a Matadero @ Josina Ct 247 (256) (159) (136) *2-way Arastradero @ Cemetery 992 (888) (1,016) (1,097) 592 (731) (703) (748) Amaranta @ Florales 26 6 (2 0 9 ) (2 5 9 ) (3 2 2 ) * 2 AM Peak Hour Traffic Comparison Traffic Movements during AM School Commute * Friday Count 0 200 400 600 800 1000 1200 Vehicles Per Hour Eastbound Vehicles Per Hour Westbound CHARLESTON-ARASTRADERO CORRIDOR PLAN ADDENDUM TO THE FINAL INITIAL STUDY/MITIGATED NEGATIVE DECLARATION (SCH# 2003082062, Palo Alto 03-EIA-16) City of Palo Alto Public Project File No. PE-13011 CITY OF PALO ALTO August 2015 Table of Contents SECTION 1.0 INTRODUCTION ......................................................................................................... 1 1.1 Purpose of an Addendum ..................................................................................................... 1 1.2 Determination ....................................................................................................................... 2 SECTION 2.0 OVERVIEW OF THE CHARLESTON-ARASTRADERO CORRIDOR PLAN ........................... 3 SECTION 3.0 PROJECT DESCRIPTION .............................................................................................. 7 3.1 Overview of the Proposed Project ....................................................................................... 7 3.2 Project Description ............................................................................................................... 7 SECTION 4.0 ENVIRONMENTAL IMPACTS OF THE PROPOSED CHANGES TO THE CHARLESTON/ARASTRADERO CORRIDOR PLAN ....................................................... 11 4.1 Aesthetics ............................................................................................................................. 11 4.2 Agricultural Resources ........................................................................................................ 11 4.3 Air Quality ............................................................................................................................ 12 4.4 Biological Resources ............................................................................................................ 12 4.5 Cultural Resources ............................................................................................................... 13 4.6 Geology and Soils ................................................................................................................ 13 4.7 Greenhouse Gases ............................................................................................................... 14 4.8 Hazards and Hazardous Materials ...................................................................................... 14 4.9 Hydrology and Water Quality ............................................................................................. 15 4.10 Land Use and Planning ........................................................................................................ 15 4.11 Mineral Resources ............................................................................................................... 15 4.12 Noise .................................................................................................................................... 16 4.13 Population and Housing ...................................................................................................... 16 4.14 Public Services ..................................................................................................................... 16 4.15 Recreation ............................................................................................................................ 17 4.16 Transportation and Traffic .................................................................................................. 17 4.17 Utilities and Service Systems .............................................................................................. 19 4.18 Mandatory Findings of Significance.................................................................................... 20 SECTION 5.0 CONCLUSION ........................................................................................................... 21 SECTION 6.0 REFERENCES ............................................................................................................ 22 SECTION 7.0 REPORT AUTHORS ................................................................................................... 23 Charleston-Arastradero Corridor Plan i Initial Study Addendum City of Palo Alto August 2015 Figures Figure 1 Regional Map ..................................................................................................................... 4 Figure 2 Vicinity Map ........................................................................................................................ 5 Figure 3 Aerial Photograph .............................................................................................................. 6 Tables Table 1 Existing and Proposed Intersection Levels of Service ................................................... 18 Appendices Appendix A Traffic Study, TJKM Transportation Consultants, March 2015. Charleston-Arastradero Corridor Plan ii Initial Study Addendum City of Palo Alto August 2015 SECTION 1.0 INTRODUCTION 1.1 Purpose of an Addendum This document is an Addendum to the Final Initial Study/Mitigated Negative Declaration (IS/MND) that was prepared for the Charleston-Arastradero Corridor Plan (the “Corridor Plan”) in January 2004 in compliance with the California Environmental Quality Act (CEQA) (SCH# 2003082062; City of Palo Alto 03-EIA-16). The purpose of this Addendum is to disclose the potential for environmental impacts to result from proposed modifications to the approved Corridor Plan, which are described in detail in Section 3.0 of this Addendum. Section 15162 of the CEQA Guidelines states that when an environmental impact report (EIR) has been certified or a Negative Declaration adopted for a project, no subsequent EIR shall be prepared for that project unless the Lead Agency (in this case the City of Palo Alto) determines, on the basis of substantial evidence in light of the whole record, one or more of the following: 1. Substantial changes are proposed in the project which will require major revisions of the previous EIR or Negative Declaration due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects; 2. Substantial changes occur with respect to the circumstances under which the project is undertaken which will require major revisions of the previous EIR or Negative Declaration due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects; or 3. New information of substantial importance, which was not known and could not have been known with the exercise of reasonable diligence at the time the previous EIR was certified as complete or the Negative Declaration was adopted, shows any of the following: a. The project will have one or more significant effects not discussed in the previous EIR or Negative Declaration; b. Significant effects previously examined will be substantially more severe than shown in the previous EIR; c. Mitigation measures or alternatives previously found not to be feasible would in fact be feasible and would substantially reduce one or more significant effects of the project, but the project proponents decline to adopt the mitigation measure or alternative; or d. Mitigation measures or alternatives which are considerably different from those analyzed in the previous EIR would substantially reduce one or more significant effects on the environment, but the project proponents decline to adopt the mitigation measure or alternative. Charleston-Arastradero Corridor Plan 1 Initial Study Addendum City of Palo Alto August 2015 Section 15164 of the CEQA Guidelines states that the Lead Agency or a responsible agency may prepare an Addendum to a previously-certified EIR or Negative Declaration if some changes or additions are necessary, but that none of the conditions described in §15162 (above) calling for preparation of a subsequent EIR have occurred. 1.2 Determination As noted on the previous page and as described more fully in Section 2 of this Addendum, many components of the Corridor Plan, which was originally approved in 2004, have been implemented. The environmental impacts of the yet-to-be-implemented components of the Corridor Plan, the design of some of which has been changed, is the subject of this Addendum. Based on the project description, plans, and knowledge of the project site from previous and current environmental studies, the City of Palo Alto has concluded: • the implementation of the remaining components of the Corridor Plan would not result in any new significant impacts that were not previously disclosed in the 2004 IS/MND; and • the implementation of the remaining components of the Corridor Plan would not result in a substantial increase in the magnitude of any impacts already identified in the 2004 IS/MND. For these reasons, a supplemental or subsequent EIR or Negative Declaration is not required and this Addendum to the 2004 IS/MND has been prepared for the proposed project. Charleston-Arastradero Corridor Plan 2 Initial Study Addendum City of Palo Alto August 2015 SECTION 2.0 OVERVIEW OF THE CHARLESTON-ARASTRADERO CORRIDOR PLAN In 2004, the Palo Alto City Council approved the Charleston-Arastradero Corridor Plan (the “Corridor Plan”), consisting of various roadway modifications and streetscape improvements to a 2.3 mile continuous segment of Arastradero Road and Charleston Road. As shown in Figure 3, Aerial Photograph and Surrounding Land Uses, the project limits are Miranda Avenue to the west and Fabian Way to the east. The project limits also include the existing Los Altos – Palo Alto Bicycle Path that extends along the border of Terman Park and Alta Mesa Memorial Park from Arastradero Road to the Palo Alto/Los Altos boundary. The approved project includes a range of modifications to the Charleston-Arastradero Corridor including reduction in the number of through lanes from four to two at most locations; traffic signal relocation and modification; intersection design modifications; bicycle lane striping; median construction and landscaping; sidewalk widening and reconstruction; utility and drainage modifications; and repaving of the existing road. All work will occur within the existing rights-of- way. The purpose of the Corridor Plan is to address vehicle, bicycle and pedestrian safety, as well as to enhance the residential character of the corridor. Following the 2004 approval, the largest components of the Corridor Plan, namely the identified reduction in through traffic lanes from four to two along Arastradero and Charleston Roads, were implemented on a trial basis and subsequently made permanent by the Palo Alto City Council. In addition, the improvements at the entrances to Gunn High School and Hoover Elementary School that are part of the project were implemented. Most of the remaining components of the approved Corridor Plan, all of which are relatively minor in scope, have not been implemented. These improvements include sidewalk bulbouts, new and improved bicycle facilities, new and upgraded crosswalks, raised pedestrian refuges, modifications to intersection geometry, addition of trees and landscaping, and additional lighting at various locations along the 2.3-mile Corridor. The improvements represent refinements and modifications to this list of not-yet-implemented components of the approved Corridor Plan. Such refinements and modifications to the scope of the approved Corridor Plan are based on updated evaluations of existing conditions with the lane reductions in place and substantial input from the community in a series of workshops. The text below provides a description of these yet-to-be-completed components of the Corridor Plan. Charleston-Arastradero Corridor Plan 3 Initial Study Addendum City of Palo Alto August 2015 REGIONAL MAP FIGURE 1 MountainViewMountainView Palo AltoPalo Alto San MateoSan Mateo BelmontBelmont Half Moon BayMoon Bay San BrunoSan Bruno East Palo AltoEast Palo Alto Los AltosLos Altos Redwood CityRedwood City NewarkNewark HaywardHayward PleasantonPl AlamedaAlameda 101 280 880 880 6 580 85 82 82 92 92 9 3584 84 238 237 San Francisco Bay n Project Site 0510 Miles VICINITY MAP FIGURE 2 Mountain View Los Altos Los Altos Hills Palo Alto Alm a S t r e e t Centr a l E x p r e s s w a y F o o t h i l l E x p r e s s w a y Almond Avenue Sout h E l M o n t e A v e n u e Califo r n i a S t r e et Mid d l e f i e l d R o a d West Middlefield Road 280 237 101 101 El C a m i n o R e a l El C a m i n o R e a l El C a m i n o R e a l Pag e M i l l R o a d Stan f o r d A v e n u e Charle s t o n R o a d Arastra d e r o R o a d Charle s t o n R o a d San A n t o n i o Project Area 0 1000 2000 4000 6000 Feet City Limit AERIAL PHOTOGRAPH AND SURROUNDING LAND USES FIGURE 3 Residential Commercial Residential Residential Residential School School School Residential Residential Alta MesaMemorial Park Alm a S t r e e t Alm a S t r e e t Wes t E l C a m i n o R e a l Wes t E l C a m i n o R e a l West E l C a m i n o R e a l West E l C a m i n o R e a l Char l e s t o n R o a d Char l e s t o n R o a d Mid d l e f i e l d R o a d Mid d l e f i e l d R o a d San A n t o n i o R o a d San A n t o n i o R o a d San A n t o n i o R o a d San A n t o n i o R o a d B o l P a r k B i k e P a t h Mir a n d a A v e n u e Mir a n d a A v e n u e Los R o b l e s A v e n u e Los R o b l e s A v e n u e oMoMoMoMoMooMooMoooununuunununnnuuuuutattatatttatatininininnnnnn VVVVVVVVVVVVVVVV eeeeeeewwwwwwwwwwwwMoMoununtataininVVieieww LoLoLoLoLoLoLLLs s s s AAAAAAAAA totototototootsssLoLos s AlAltotoss PaPaPaPaPaPPPPPP ooooooooooooo AAAAAAAAAA ttttoooooooPaPaloloAAltltoo Approximate City Limit Project Area Aerial Source: Google Earth Pro, May 6, 2014.Photo Date: Feb. 2014 0 250 1000 2000 Feet SECTION 3.0 PROJECT DESCRIPTION 3.1 Overview of the Proposed Project Roadway improvements that are proposed for the entire project corridor include pavement resurfacing, striping for Class II bicycle lanes, and re-striping existing features on the roadway. Improvements to stormwater drainage systems and streetlight infrastructure, landscaping, relocation of utilities to accommodate the project design, and replacement of rolled curb with vertical curb are also included throughout the project corridor. Modifications to traffic signal timing will be implemented, as necessary, to accommodate these improvements. Unless otherwise noted, these improvements are proposed for the entire Charleston-Arastradero Corridor and are not repeated in the description below. For the purpose of describing the proposed improvements, the project corridor is divided into the following five segments, in order from west to east. 1. Arastradero Road: Miranda Avenue – Hubbartt Drive 2. Arastradero Road: Hubbartt Drive – El Camino Real (SR 82) 3. West Charleston Road: El Camino Real (SR 82) – Alma Street 4. East Charleston Road: Alma Street – Middlefield Road 5. East Charleston Road: Middlefield Road – Fabian Way 3.2 Project Description 3.2.1 Arastradero Road: Miranda Avenue – Hubbartt Drive The westernmost proposed improvement is the modification of the Arastradero Road/Gunn High School intersection. Improvements at this location would include reconfiguration of the existing island at the entrance to the high school, widening the sidewalk at the northwest corner of the intersection, and relocation of the existing traffic signal to conform to the modified intersection design. A new bicycle/pedestrian path would be constructed along the south side of Arastradero Road between Gunn High School and the existing Los Altos – Palo Alto Bicycle Path. Utilities such as fire hydrants and street lights may need to be relocated to accommodate the portions of the path along the south side of Arastradero Road. New landscaped medians would be constructed on Arastradero Road near the driveway to the Alta Mesa Memorial Park, the entrance to the Los Altos – Palo Alto Bicycle Path, and the intersection with Georgia Avenue. Charleston-Arastradero Corridor Plan 7 Initial Study Addendum City of Palo Alto August 2015 The proposed improvements on the existing Los Altos – Palo Alto Bicycle Path (only working within the Palo Alto City Limits) include reconstruction of the existing asphalt and the construction of pedestrian lighting along the path. 3.2.2 Arastradero Road: Hubbartt Drive – El Camino Real (SR 82) The intersection of Arastradero Road and Terman Drive/Donald Drive would be modified to bring the eastbound through lane merge to the west side of the intersection in order to provide a dedicated right-turn lane into Terman Middle School. As with the rest of the project alignment, Class II bicycle lanes would be striped along the outside of each through-lane in both directions. The eastbound bike lane would be located between the single through lane and the new right- turn lane in order to avoid conflicts between vehicles turning right into the school and bicyclists. Sidewalks on the south side of Arastradero Road would be reconstructed and widened from Willmar Drive eastward until approximately 400 feet east of the intersection with Suzanne Drive, which would require removal of one tree. Sidewalks on the north side of Arastradero Road would be widened at the corners of the intersections with King Arthurs Court, Cherry Oaks Place, Coulombe Drive, and Clemo Avenue. Landscaped medians would be constructed in place of existing striping at various locations between Cherry Oaks Place and El Camino Real. 3.2.3 West Charleston Road: El Camino Real (SR 82) – Alma Street Modifications to the Arastradero Road/West Charleston Road/El Camino Real (State Route 82) intersection would consist of sidewalk width reduction and reconstruction on the south side of Arastradero Road, reconstruction of the island on the west side of the intersection, removal of the island on the east side of the intersection, and widening of the sidewalks at the northeast and southeast corners. Existing signal poles would be replaced or relocated to accommodate the new intersection design, and a raised crosswalk would be constructed at the southwest corner of the intersection to connect the sidewalk with the island. Arastradero Road becomes West Charleston Road east of El Camino Real. The Corridor Plan includes new left-turn only lanes at both the eastbound and westbound approaches of West Charleston Road at the West Charleston Road/Wilkie Way intersection. The existing traffic signal phasing and mast arms would be modified to accommodate the protected left-turn movements. Other proposed modifications to West Charleston Road within this segment include installation of two raised medians west of Wilkie Way, one east of Wilkie Way, and construction of a raised median from west of Park Boulevard to Alma Street. The new raised median from west of Park Boulevard to Alma Street would restrict vehicle movements to right-turn-in-or-out-only between Park Boulevard West Charleston Road, but would allow left-turns for bicyclists. Pedestrian- activated flashing beacons would be added at the existing crosswalk east of Ruthelma Avenue and Charleston-Arastradero Corridor Plan 8 Initial Study Addendum City of Palo Alto August 2015 the sidewalk at the southwest corner of the Park Boulevard intersection would be reconstructed and widened. Modifications/upgrades to the railroad crossing gates may also be implemented. 3.2.4 East Charleston Road: Alma Street – Middlefield Road The only modifications to the Charleston Road/Alma Street intersection would be striping for eastbound and westbound bicycle lanes as well as restriping the existing crosswalks. New raised medians would be constructed on East Charleston Road immediately east of Alma Street, and pedestrian-activated flashing beacons would be added to the existing crosswalks at the Wright Place intersection. Three landscaped medians would be constructed in place of existing median striping between Alma Street and Carlson Court. Modifications at the East Charleston Road/Carlson Court intersection include the widening and reconstruction of the sidewalk at the southwest and southeast corners of the intersection, with possible relocation or replacement of signal poles. The sidewalks on the north side of East Charleston Road would be widened between Carlson Court and the bicycle/pedestrian path adjacent to Herbert Hoover Elementary School, as well as at the approach to the east of the school driveway. Raised medians would be constructed in place of existing median striping between Carlson Court and Nelson Drive. The sidewalk at the southwest corner of the Nelson Drive intersection would be reconstructed and widened along with the sidewalk on the south side of East Charleston Road in front of the Charleston Shopping Center. A raised median and striping would be added to the existing bicycle/pedestrian path that makes up the fourth leg of the East Charleston Road/Nelson Drive intersection. 3.2.5 East Charleston Road: Middlefield Road – Fabian Way The westbound merge would be relocated to the east side of the Middlefield Road intersection in order to add a dedicated right-turn lane with a bicycle lane between the through lane and right- turn lane in both directions. Associated modifications to signal phasing and mast arms would be included to accommodate the new intersection design. East of the intersection, the proposed project would include widening and reconstruction of sidewalks on the north side of East Charleston Road at the intersection with Charleston Court. Raised medians would be constructed in place of the existing striped medians between Charleston Court and Fabian Way. The sidewalk at the southwest corner of East Charleston Road/Sutherland Drive would be widened and a crosswalk with a median refuge would be installed for pedestrians crossing East Charleston Road. An ADA curb ramp would be installed at the north side of the crosswalk, which would result in the removal of one tree. The intersection of East Charleston Charleston-Arastradero Corridor Plan 9 Initial Study Addendum City of Palo Alto August 2015 Road/Louis Road-Montrose Avenue would be modified by reconstructing the sidewalk at the northwest corner, widening the intersection, and installing a new traffic signal. The south side of East Charleston Road would be widened and the sidewalks reconstructed along the curve between the Louis Road and Fabian Way intersections. The merge of westbound East Charleston Road as it approaches Louis Road would be relocated to east of the East Charleston Road/Fabian Way intersection. This modification would allow for a dedicated left-turn pocket and left-turn bike lane to be added to the intersection of eastbound East Charleston Road at Fabian Way. The westbound approach to the intersection would then feature one left-turn, one through, one bike lane, and one right-turn lane. Modifications to the signal mast arms may be required in order to accommodate the new signal phasing. 3.2.6 Depths of Excavation The estimated depths of excavation for the above-described project components are: - New/Relocated Signal Poles: 12-15 feet - Sidewalk reconstruction: 1.5 feet - Pavement (roadway) widening: 2 feet - Drainage Improvements: 5-10 feet - Tree Planting: 4 feet - Street Lights: 6 feet - Pedestrian Lights: 3 feet 3.2.7 Right-of-Way and Easements All of the above-described elements would be constructed within existing City of Palo Alto rights- of-way. No permanent right-of-way acquisition or temporary construction easements are needed for the project. Charleston-Arastradero Corridor Plan 10 Initial Study Addendum City of Palo Alto August 2015 SECTION 4.0 ENVIRONMENTAL IMPACTS OF THE PROPOSED CHANGES TO THE CHARLESTON/ARASTRADERO CORRIDOR PLAN [Introductory Note: This analysis is intended to augment the 2004 Charleston/Arastradero Corridor Plan Initial Study/Mitigated Negative Declaration (“2004 IS/MND”) and should be taken together with the project description and analysis contained therein. With one exception noted below, the analysis of environmental impacts in this document follows the same order and addresses the same topics as those contained in the 2004 IS/MND. One section has been added to address greenhouse gas emissions, the analysis of which was not required under CEQA when the 2004 IS/MND was prepared.] 4.1 Aesthetics The proposed modifications to the Charleston/Arastradero Corridor Plan (“Corridor Plan”) would not introduce any new visual elements with the potential to affect views or scenic routes. Similar to the approved Corridor Plan, the proposed project includes replacement of roadway paving with “greenery” such as landscaped medians, street trees, and median island trees. The addition of landscaping to the medians of the otherwise wide, paved corridor would be a substantial improvement in the visual character of the roadway. The implementation of the remaining components of the Corridor Plan is expected to result in the removal of eight trees. This is consistent with the tree removal anticipated in the 2004 IS/MND. The proposed project includes new tree plantings in greater numbers than those removed and would comply with all applicable tree protection mitigation measures identified in the 2004 IS/MND. Therefore, the loss of eight trees would not be a new or substantially greater aesthetic impact than the approved Corridor Plan. Conclusion: The proposed changes to the Corridor Plan would not result in any new significant or substantially greater aesthetic and visual impacts than those described in the 2004 IS/MND. 4.2 Agricultural Resources There is no farmland or forestland in the vicinity of the project alignment. Modifications to the design of the approved Corridor Plan would not cause any impacts to agricultural or forest resources. Conclusion: As with the approved Corridor Plan, the proposed project would not result in any impacts to agricultural or forest resources. Charleston-Arastradero Corridor Plan 11 Initial Study Addendum City of Palo Alto August 2015 4.3 Air Quality The approved Corridor Plan would not result in an increase in trip generation and included no new sources of air pollution emissions. Proposed modifications to the Corridor Plan would not generate vehicle trips or add sources of emissions. Therefore, the proposed modifications to the Corridor Plan would not have any new or more substantial impacts on long-term air emissions in the region and in Palo Alto. Short-term air quality impacts from construction-related dust and emissions were identified as potentially significant in the 2004 IS/MND. Best Management Practices were incorporated into the 2004 project to mitigate temporary air quality impacts to less than significant levels and would also be implemented for the currently-proposed project. Conclusion: Implementation of Best Management Practices to reduce air emissions during construction would mitigate short-term air quality impacts to less than significant levels. The proposed project would not increase traffic in the area. Therefore, the proposed modifications to the Corridor Plan would not result in new or substantially greater impacts than would the approved Corridor Plan. 4.4 Biological Resources The approved Corridor Plan was anticipated to result in the removal of street and landscape trees along the Charleston-Arastradero Corridor, though one of the goals of the project was to plant more trees than were removed. No impacts to protected or designated trees were identified. Mitigation to avoid impacts to trees to-be-preserved as well as to avoid impacts to tree nesting birds was included in the 2004 IS/MND. The currently proposed project would remove up to eight landscape and street trees. Based on the 2004 IS/MND, none of the trees to be removed from the project corridor are designated or protected trees. More street and landscape trees would be planted along the project corridor than would be removed, and the tree preservation and bird nest protection mitigation measures identified in the 2004 IS/MND would also be incorporated into the project. Therefore, the proposed project would not have any new or substantially greater impacts to biological resources than the approved Corridor Plan. Conclusion: With the mitigation identified in the 2004 IS/MND incorporated, the proposed modifications to the Corridor Plan would not result in new or substantially greater impacts to biological resources than the approved project would. Charleston-Arastradero Corridor Plan 12 Initial Study Addendum City of Palo Alto August 2015 4.5 Cultural Resources There is one historical marker, a plaque, located at 844 E. Charleston Road just beyond the eastern project limit. All proposed improvements would occur within the existing City of Palo Alto rights- of-way and no historic properties or buildings would be affected by the project. The 2004 IS/MND found that soil disturbance and excavation for sidewalk and curb replacement could have potential impacts to unknown subsurface archaeological resources. Mitigation measures were incorporated to provide a contingency should archaeological resources be discovered during the construction process. Since the proposed project includes signal modifications, which the approved project did not, the proposed project would result in excavation at greater depths than the approved project. This is an incremental increase in the potential for the Corridor Plan to cause impacts to subsurface archaeological resources. Implementation of the measures identified in the 2004 IS/MND, however, would avoid significant impacts to archaeological resources in the event that any are encountered during construction. Therefore, the proposed project would not result in new or substantially greater impacts to cultural resources than the approved Corridor Plan. Conclusion: Implementation of the mitigation measures identified in the 2004 IS/MND would reduce potential impacts to unidentified archaeological resources to less than significant levels. The proposed modification to the Corridor Plan would not result in substantially greater impacts to cultural resources than would the approved Corridor Plan. 4.6 Geology and Soils The 2004 IS/MND concluded that the Corridor Plan would have less than significant impacts to health and safety due to seismic-related hazards. No other geology or soil-related impacts were identified. Many of the features included in the proposed project such as medians, bicycle paths, and widened sidewalks, do not have the potential to create substantial hazards during a seismic event. Relocated or reconstructed signal poles would be constructed to current building and seismic safety codes. The proposed project does not include any other elements or features which could pose hazards during a seismic event. Therefore, the proposed project would not result in new or substantially greater soil- or seismic-related hazards than the approved Corridor Plan. Conclusion: Modifications to the approved Corridor Plan would not result in new or greater geology and soil-related impacts than those identified in the 2004 IS/MND. Charleston-Arastradero Corridor Plan 13 Initial Study Addendum City of Palo Alto August 2015 4.7 Greenhouse Gases Greenhouse gas emissions were not evaluated in the 2004 IS/MND because CEQA and the CEQA Guidelines did not call for such evaluation at the time. The approved Corridor Plan would not have resulted in increased long-term greenhouse gas emissions because no vehicle trips would be generated by the project and the Corridor Plan did not introduce any other sources of greenhouse gas emissions. Construction would result in temporary greenhouse gas emissions, however, given that climate change is a cumulative global impact by nature, these emissions would represent a less than significant contribution to the cumulative impacts from greenhouse gas emissions. Measures incorporated into the project to minimize vehicle idling and other construction-related air pollution would minimize construction greenhouse gas emissions. The proposed modifications to the project would not generate any vehicle trips or introduce new sources of long-term greenhouse gas emissions. Conclusion: The proposed modifications to the approved Corridor Plan would not result in new or substantially greater greenhouse gas emissions than the approved project would. 4.8 Hazards and Hazardous Materials Neither the approved Corridor Plan nor the proposed modifications would have the potential to create hazards related to airport safety, hazardous material storage facilities, or wildfires. Multiple sources of contamination in the vicinity of the project corridor were identified in the 2004 IS/MND including the Superfund site at 1911 Plymouth Street in Mountain View (EPA ID# CAD009212838), the Werner Texaco site at 830 E. Charleston Road, the former Ford Aerospace site at 910 San Antonio Road, and the Hyatt Rickey’s site at 4219 El Camino Real. None of these sites were found to pose potential hazards either because the contamination occurred outside the project limits or because the project would not excavate deeply enough to disturb groundwater. Project elements at the E. Charleston Road/Fabian Way intersection, the portion of the project corridor closest to known contamination, would not require excavation below two feet in depth. Other proposed modifications to the Corridor Plan are not close to sources of contamination and would not have the potential to create human health hazards. Therefore, the proposed modifications to the Corridor Plan would not introduce new or substantially greater hazards associated with contamination than the approved Corridor Plan. Conclusion: The proposed modifications to the Corridor Plan would not result in new or substantially greater hazards than those evaluated in the 2004 IS/MND. Charleston-Arastradero Corridor Plan 14 Initial Study Addendum City of Palo Alto August 2015 4.9 Hydrology and Water Quality The 2004 IS/MND found that the Corridor Plan would not increase flooding hazards in the area or degrade the existing conditions of stormwater pollution. Best Management Practices for stormwater pollution prevention during construction were included in the project to avoid potential water quality impacts from stormwater runoff during construction. Landscaped medians and other vegetation included in the proposed project would incrementally increase the pervious surfaces along the project corridor, which would be beneficial. Stormwater pollution prevention measures identified in the 2004 IS/MND would be implemented during construction to avoid significant short-term water quality impacts. Therefore, modifications to the approved Corridor Plan would not result in new hydrology or water quality impacts. Conclusion: The proposed modifications to the Corridor Plan would not result in any new or substantially greater impacts to hydrology and water quality than those identified in the 2004 IS/MND. 4.10 Land Use and Planning As with the approved Corridor Plan, the proposed modifications to the Corridor Plan would occur entirely within existing public rights-of-way. Adjacent land uses along the project corridor include single-family and multi-family residential, institutional, schools, and commercial services. The proposed improvements would not be incompatible with any surrounding land uses and would improve bicycle and pedestrian connectivity in the City. Potentially significant environmental impacts that might affect adjacent land uses are all mitigated to less than significant levels as detailed in this document and in the 2004 IS/MND. Conclusion: Modifications to the approved Corridor Plan would not cause any new or substantially greater land use impacts than those previously-evaluated in the 2004 IS/MND. 4.11 Mineral Resources The 2004 IS/MND found no potential for mineral resource impacts to result from the roadway project. Modifications to the approved Corridor Plan would not introduce new elements to the project design that would have the possibility of impacting mineral resources. Conclusion: Modifications to the approved Corridor Plan would not cause any new or substantially greater mineral resource impacts than those previously-evaluated in the 2004 IS/MND. Charleston-Arastradero Corridor Plan 15 Initial Study Addendum City of Palo Alto August 2015 4.12 Noise In the 2004 IS/MND, operational noise impacts from the approved Corridor Plan were found to be less than significant because the improvements would not generate additional traffic or move traffic lanes closer to adjacent receptors (i.e., schools and residences). Similarly, the proposed modifications to the approved Corridor Plan that are now being considered would not move traffic closer to receptors and would not generate additional traffic, therefore long-term noise impacts would be less than significant. Mitigation measures were identified in the 2004 IS/MND to reduce short-term noise impacts from project construction. The modified Corridor Plan would also implement these measures, therefore, temporary noise impacts would be less than significant. Conclusion: With the implementation of the mitigation measures identified in the 2004 IS/MND for short-term construction noise impacts, the proposed modifications to the Corridor Plan would have less than significant noise impacts. Modifications to the approved Corridor Plan would not cause new or substantially greater noise impacts than those previously-evaluated in the 2004 IS/MND. 4.13 Population and Housing As with the approved Corridor Plan, the proposed modifications would have no impact on population and housing. No housing would be displaced because all improvements would occur within existing City of Palo Alto right-of-way, and the improvements would not induce population growth. Conclusion: The proposed modifications to the Corridor Plan would not result in new or substantially greater population impacts than would the approved Corridor Plan. 4.14 Public Services While the approved Corridor Plan would not increase the need for public services, potentially significant impacts were identified due to the design of the Plan. Specifically, the 2004 IS/MND found that raised median islands could impair access to/from Charleston/Arastradero Roads for fire vehicles and that the lane reduction could limit the ability of drivers to pull over for emergency vehicles, both of which could increase response times. Mitigation measures were incorporated which called for the fire department to test response times and emergency access during the phased implementation of the improvements. Traffic signal pre-emption for emergency vehicles was also incorporated, which would benefit response times. Charleston-Arastradero Corridor Plan 16 Initial Study Addendum City of Palo Alto August 2015 As stated in Section 2, the components of the Corridor Plan that reduced the number of lanes from four to two were implemented a number of years ago. In the five to nine years since the changes were made, the Palo Alto Fire Department has not experienced any effects to overall response times or received comments from firefighters regarding the changes to the corridor. The proposed raised medians, which were also part of the original Corridor Plan could potentially affect response times by preventing left-turns if the out-of-the-way travel distance were to be substantial. However, the medians that are being proposed are not continuous along the entire corridor such that emergency vehicles would encounter significant delays in response times. At each proposed median location, there are either nearby intersections or breaks in the median that would allow emergency vehicles access to any destination without excess delay. Therefore, the medians proposed as part of the modifications to the Corridor Plan would not cause a significant delay in response times. Further, signal pre-emption for emergency vehicles would be utilized in any new or replaced traffic signals, which would have a beneficial effect on response times. Conclusion: The proposed modifications to the Corridor Plan would not result in any new or greater public services impacts than would the approved Corridor Plan. 4.15 Recreation The 2004 IS/MND found no impacts to recreation from the roadway improvements. The proposed modifications to the approved Corridor Plan would not create any demands on recreational resources in the City. All improvements would occur within existing City right-of-way and would not impact recreation facilities. Conclusion: The proposed modifications to the Corridor Plan would not result in any new or greater impacts to recreational resources than those described in the 2004 IS/MND. 4.16 Transportation and Traffic The 2004 IS/MND found less than significant impacts to traffic congestion, delay, and traffic- related hazards from the approved Corridor Plan. Neither the approved Corridor Plan nor the proposed modifications would generate vehicle trips. Therefore, the potential for the proposed project to affect traffic congestion would be from changes to circulation patterns that could result from new medians preventing turning movements, the addition of traffic signals, and/or modifications to the phasing of existing signals. Charleston-Arastradero Corridor Plan 17 Initial Study Addendum City of Palo Alto August 2015 A traffic study completed for the proposed project by TJKM Transportation Consultants calculated the levels of service (LOS)1 at various intersections along the project corridor for both the existing and proposed project conditions. The results of the analysis are summarized in Table 1 below and the traffic study is included as Appendix A of this Addendum. The City of Palo Alto considers a project to result in a significant impact to intersection LOS if the project would deteriorate the LOS below LOS D. Other thresholds of significance for traffic impacts are identified in the 2004 IS/MND. Table 1 Existing and Proposed Intersection Levels of Service Existing (Peak Period) Proposed (Peak Period) Study Intersection AM Midday PM AM Midday PM Arastradero Road/Miranda Avenue B B B B B C Arastradero Road/Gunn High School Driveway B B B C B A Arastradero Road/Donald Drive-Terman Drive B B B B B C Arastradero Road/Coulombe Drive B A B C B B Arastradero Road/Clemo Drive-Suzanne Drive C - C C - C Arastradero Road/Alta Mesa Avenue-McKellar Lane E B C E B C Arastradero Road-Charleston Road/El Camino Real D C D D C D Charleston Road/Wilkie Way A A A A A A Charleston Road/Park Boulevard D C C B B B Charleston Road/Alma Street E C E E D E Charleston Road/Wright Place C B B C B C Charleston Road/Mumford Place C B B B B B Charleston Road/Carlson Court B A A B A B Charleston Road/Nelson Drive A A A B A B Charleston Road/Middlefield Road D C D D C D Charleston Road/Louis Road-Montrose Avenue F F F B B C Charleston Road/Fabian Way B B C C C D Source: TJKM Transportation Consultants. Charleston-Arastradero Draft Design Report, City of Palo Alto. March 2015. -- Project would not result in any change to the LOS -- Project would result in an improvement to the LOS -- Project would result in a non-significant degradation of the LOS 1 Level of Service (LOS) is a qualitative description of traffic flow based on factors such as speed, travel time, delay, and freedom to maneuver. Six levels are defined from LOS A, with the best operating conditions, to LOS F, with the worst operating conditions. LOS E represents “at-capacity” operations. Operations are designated as LOS F when volumes exceed capacity, resulting in stop-and-go conditions. Charleston-Arastradero Corridor Plan 18 Initial Study Addendum City of Palo Alto August 2015 As shown in Table 1 above, the proposed project would not degrade the LOS of any of the study intersections below LOS D. Any degradation in LOS would be minor and less than significant. Further, the project would improve the LOS at a number of intersections, most notably at Charleston Road/Louis Road-Montrose Avenue where the LOS would improve from “F” to “B” and “C” due to the addition of a traffic signal to the intersection. The proposed project includes numerous signage and safety improvements for bicyclists and pedestrians such as flashing beacons at crosswalks, pedestrian lighting, timers on crosswalk signals, and green pavement markings for bicycle lanes. Other improvements such as landscaped medians, protected left-turn phasing at traffic signals, and right-turn pockets are intended to improve safety for motorists. Conclusion: The proposed modifications to the approved Corridor Plan would not result in any new or substantially greater traffic congestion or safety impacts than those identified in the approved 2004 IS/MND. 4.17 Utilities and Service Systems The approved Corridor Plan would not increase demands on existing utilities and services systems, however, widened sidewalks and curbs were found to have the potential to impact existing utility placements. Mitigation to further assess existing utility placements prior to final design were incorporated to avoid impacts to existing utilities. With this mitigation included in the current project, modifications to the approved Corridor Plan would not cause new or greater conflicts with utilities. Conclusion: The proposed modifications to the approved Corridor Plan would not cause new or substantially greater impacts to utility systems than those described in the 2004 IS/MND. Charleston-Arastradero Corridor Plan 19 Initial Study Addendum City of Palo Alto August 2015 4.18 Mandatory Findings of Significance As described in this Addendum, with incorporation of the mitigation measures identified in the 2004 IS/MND, modifications to the approved Corridor Plan would not result in new or substantially greater environmental impacts than those evaluated in the 2004 IS/MND. The traffic analysis completed for this project included all of the preceding potential developments and concluded that no significant impacts to traffic congestion would result. No other potential cumulative impacts are anticipated due to the localized nature of this project’s potentially significant effects (e.g. construction-related noise and dust emissions). Therefore, the proposed project would not have a cumulatively considerable contribution to any significant cumulative environmental impacts. Conclusion: Modifications to the approved Corridor Plan would not result in any new or substantially greater environmental impacts than those described in the 2004 IS/MND. Charleston-Arastradero Corridor Plan 20 Initial Study Addendum City of Palo Alto August 2015 SECTION 5.0 CONCLUSION The City of Palo Alto is implementing the final phase of the approved Charleston-Arastradero Corridor Plan, including a number of modifications to the design of various improvements. The proposed modifications are described in Section 3.0 of this Addendum. The City has evaluated the environmental effects of these modifications in Section 4.0 of the Addendum. Based upon the factual information contained in the above analyses, the City has reached the following conclusion: Approval of the proposed modifications described in Section 3.0 will not have any significant environmental impacts not previously disclosed in the 2004 Charleston/Arastradero Corridor Plan Final Initial Study/Mitigated Negative Declaration, nor would there be a substantial increase in the severity of previously-identified significant environmental impacts. Therefore, no subsequent or supplemental Negative Declaration or EIR is warranted or required. Charleston-Arastradero Corridor Plan 21 Initial Study Addendum City of Palo Alto August 2015 SECTION 6.0 REFERENCES City of Palo Alto. Charleston/Arastradero Corridor Plan, Final Initial Study and Mitigated Negative Declaration SCH#2003082062, City of Palo Alto 03-EIA-16. January 2004. California State Water Resources Control Board. Geotracker. Accessed April 30, 2015. Available at: http://geotracker.waterboards.ca.gov/ TJKM Transportation Consultants. Charleston-Arastradero Draft Design Report, City of Palo Alto. March 2015. Charleston-Arastradero Corridor Plan 22 Initial Study Addendum City of Palo Alto August 2015 SECTION 7.0 REPORT AUTHORS LEAD AGENCY City of Palo Alto Mike Sartor, Director of Public Works Holly Boyd, Senior Engineer CONSULTANT David J. Powers & Associates, Inc. Environmental Consultants & Planners John Hesler, Senior Environmental Specialist Matthew Gilliland, Associate Project Manager Zach Dill, Graphic Artist TJKM Transportation Consultants Traffic and Transportation Engineers Nayan Amin, President Ruta Jariwala, Principal Chris Higbee, Assistant Transportation Engineer Shruti Shrivastava, Assistant Transportation Engineer Charleston-Arastradero Corridor Plan 23 Initial Study Addendum City of Palo Alto August 2015 Charleston-Arastradero Final Design Report City of Palo Alto VISION THAT MOVES YOUR COMMUNITY TJKM TransportationConsultants This page intentionally left blank Executive Summary 3 Introduction 4 Corridor Map 5 Glossary 6 Standard Abbreviations 8 Study Intersections 9 Conclusion 56 Table of Contents This page intentionally left blank Executive Summary The Charleston Road-Arastradero Road corridor, considered to run east-west throughout its entirety, is proposed to be reformed to improve bicycle and pedestrian facilities. At the study intersections, listed on Page 9, changes to lane geometries have been made and analyzed using the traffic program, Synchro. This software implements Highway Capacity Manual (HCM) 2000 standards to determine level of service (LOS) based on vehicular, bicycle and pedestrian movement counts. Each intersection is discussed individually in the report. This project moves the study corridor towards a Complete Streets design enhancing bicycle and pedestrian safety along the study corridor. Proposed improvements along the study corridor are not projected to have significant impact on operations of the study intersections and LOS values do not degrade to unacceptable levels as defined by the Transportation Element of the Palo Alto General Plan. General proposed improvements along the study corridor are curb bulb-outs, bicycle lane improvements, crosswalk improvements, lane geometry improvements, and updated signal timings. Timings have been standardized and updated to accommodate bicycle and pedestrian modes and minimize impacts of facility improvements to intersection LOS as per the California Manual on Uniform Traffic Control Devices (CA MUTCD). 3 Introduction The purpose of this report is to provide a visual and explanatory summary of recommendations and associated benefits for the Charleston Road-Arastradero Road Corridor Project in the City of Palo Alto. The corridor serves as a residential street for the Palo Alto community serving multiple schools, parks and other public facilities along with commute traffic between Highway 101 and the Stanford Research Park. The corridor is approximately 2.3 miles long with several key intersection crossings for the community including Middlefield Road, Alma Street with adjoining Caltrain operations, El Camino Real, and Foothill Expressway-Miranda Avenue. Page 5 of this report presents the corridor with study intersections noted. The purpose of the project is to provide recommendations, plans, and specifications for phased implementation of community-focused streetscape improvements that will provide preferential bicycle-pedestrian measures for improved resident safety supporting Safe Routes to School and traffic calming goals for the community. All signalized intersections throughout the corridor have been evaluated and proposed improvements consider the City’s Request for Proposal Scope of Work for a.m., (midday), and [p.m.] peak hours. Adjustments made to signal timings (Minimum Green, Yellow, and Flashing Don’t Walk) are in accordance with the CA MUTCD. Minimum Green times were proposed at City’s request to be 10 seconds along Charleston-Arastradero Road and 5 seconds along minor streets if CA MUTCD standards required less. Yellow times along Charleston-Arastradero Road were made to be 4 seconds per City request. 4 Corridor Map 5 Glossary 6 Bicycle Box: A priority bicycle zone at the head of a signalized intersection allowing cyclists to position themselves in front of the traffic queue on a red light and proceed first on a green. Bicycle signal controls can be used to supplement this treatment if desired. Curb Bulb-Out: An extension of the curb at-grade of the sidewalk. These type of bulb-outs physically alter the roadway and are not traversable by vehicles. They also reduce the pedestrian crossing distance. Glossary 7 Enhanced Crosswalk: A crossing supplemented with pedestrian-activated flashing beacons. Cycle Track: A separated path with the infrastructure of a conventional bike lane. It is separated from vehicle traffic lanes, parking lanes, and sidewalks providing space exclusively for cyclists. Channelizing Median Island: A raised median that prevents left and through movements from the intersecting road and permits left-turns from the major street. Standard Abbreviations 8 Abbreviation Definition NB Northbound SB Southbound EB Eastbound WB Westbound T Through Movement L Left-turn Movement R Right-turn Movement Study Intersections 9 I.D.Intersection Page # 1.Arastradero Road/Miranda Avenue 10-11 2.Arastradero Road/Gunn High School Driveway 12-13 3.Arastradero Road/Donald Drive-Terman Drive 18-19 4.Arastradero Road/Pomona Avenue-King Arthur Court 20-21 5.Arastradero Road/Coulombe Drive 22-23 6.Arastradero Road/Los Palos Avenue 24-25 7.Arastradero Road/Clemo Drive-Suzanne Drive 26-27 8.Arastradero Road/Alta Mesa-McKellar Lane 28-29 9.Arastradero Road-Charleston Road/El Camino Real 30-31 10.Charleston Road/Wilkie Way 32-33 11.Charleston Road/Ruthelma Avenue 34-35 I.D.Intersection Page # 12.Charleston Road/Park Boulevard 36-37 13.Charleston Road/Alma Street 38-39 14.Charleston Road/Wright Place 40-41 15.Charleston Road/Mumford Place 42-43 16.Charleston Road/Carlson Court 44-45 17.Charleston Road/Hoover School Driveway 46-47 18.Charleston Road/Nelson Drive 48-49 19.Charleston Road/Middlefield Road 50-51 20.Charleston Road/Louis Road-Montrose Avenue 52-53 21.Charleston Road/Fabian Way 54-55 1. Arastradero Road/Miranda Avenue Proposed Improvements •No adjustments proposed at intersection Intersection Level of Service EXISTING VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS PROPOSED 10 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B B B Proposed Geometry & Standard Timings B B C NB: One-Way Stop Control NB: One-Way Stop Control 1. Arastradero Road/Miranda Avenue 11 No changes are proposed at the intersection. A WB left-turn pocket was analyzed but resulted in no change in intersection LOS. Additionally, installation of the pocket would reduce existing storage of the EB left-turn lane at Gunn High School Driveway which is considered a higher priority. Proposed Improvements Bicycle •Increase Minimum Green times to accommodate cyclists •Install multi-use path on south side of Arastradero Road •Install “Sharrows” in WB right-turn lane Pedestrian •Standardize Walk and Flashing Don’t Walk times •Increase size of pork-chop island MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed SBL 8 9 10 5 12 18 3 3 EBL 8 10 ----3 3 EBT 8 10 ----3 4 WBT 15 15 10 5 19 24 3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B B B Proposed Geometry & Standard Timings C B A 2. Arastradero Road/Gunn High School Driveway BICYCLE MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS EXISTING PEDESTRIAN MOVEMENT COUNTS PROPOSED 12 NB/SB: Protected EB/WB: Protected NB/SB: Protected EB/WB: Protected 2. Arastradero Road/Gunn High School Driveway 13 Bicycle Increased Minimum Green times help cyclists to clear the intersection safely. A multi-use path will provide cyclists access to the transit stop and Los Altos Bike Path located east of the intersection. “Sharrows” can increase awareness of drivers to the presence of cyclists entering the school campus. Pedestrian Standardized Flashing Don’t Walk times provide a larger pedestrian clearance interval at the intersection. A larger pork-chop island increases the buffer between pedestrians and vehicles at the intersection. Proposed Improvements Bicycle •Install multi-use path on south side of Arastradero Road Pedestrian •Install barrier along multi-use path adjacent to roadway EXISTING Arastradero Road: Gunn High School Driveway to Georgia Avenue 14 PROPOSED Arastradero Road: Gunn High School Driveway to Georgia Avenue 15 Bicycle A multi-use path is proposed to provide cyclists with access to the Los Altos Bike Path located east of the cemetery driveway. Pedestrian Installing a barrier along the multi-use path improves facility safety by separating vehicles from users. Proposed Improvements Roadway Geometry •Convert two-way left-turn median between Ynigo Way and Georgia Avenue to exclusive WB left-turn pocket and EB receiving lane Bicycle •Install one-way cycle tracks along Arastradero Road Pedestrian •Install WB crosswalks at Hubbartt Drive and Georgia Avenue EXISTING Arastradero Road: Georgia Avenue to Donald Drive-Terman Drive 16 PROPOSED Arastradero Road: Georgia Avenue to Donald Drive-Terman Drive 17 Roadway Geometry The WB left-turn pocket provides access to the preschool on the south side of Arastradero Road and the EB receiving lane provides refuge for SB left-turning vehicles from Georgia Avenue. This improvement is projected to enhance operations for all modes along the roadway segments. Bicycle One-way cycle tracks proposed in the vicinity will provide a buffer-separated lane for cyclists. Cycle tracks are projected to enhance bicycle safety along the roadway segment. Pedestrian Crosswalks can increase pedestrian visibility and safety at the intersections. Proposed Improvements Roadway Geometry •Replace EB shared through/right lane with exclusive right-turn lane •Change SB lane geometry to mirror NB approach Bicycle •Increase Minimum Green times to accommodate cyclists for left-turn phases •Install bicycle box in SB direction Pedestrian •Standardize Walk and Flashing Don’t Walk times •Restripe all crosswalks •Install bulb-out at SE corner of intersection MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NBTL 4 8 ----3.5 3.5 SBTL 6 7 6 5 17 18 3 3 EBL 4 10 ----3.5 4 EBT 6 10 6 5 12 21 3 4 WBL 4 10 ----3.5 4 WBT 6 10 6 5 12 20 3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B B B Proposed Geometry & Standard Timings B B C 3. Arastradero Road/Donald Drive-Terman Drive VEHICULAR MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS EXISTING PROPOSED 18 NB/SB: Permissive +Overlap EB/WB: Protected NB/SB: Permissive EB/WB: Protected 3. Arastradero Road/Donald Drive-Terman Drive 19 Roadway Geometry The existing EB shared through/right-turn lane will be converted to an exclusive right-turn lane. This will separate the right-turning vehicles from the traffic flow. The SB lane geometries are to be modified to mirror the NB approach to allow installation of a bicycle box. Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. A bicycle box provides cyclists with designated space at the intersection for separation from vehicles. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection. Restriping all crosswalks and installing a bulb-out reduces crossing distances for pedestrians. Proposed Improvements Bicycle •Install one-way cycle track on north side of Arastradero Road Pedestrian •Install enhanced WB crosswalk at King Arthur Court 4. Arastradero Road/Pomona Avenue-King Arthur Court EXISTING 20 PROPOSED NB/SB: Two-Way Stop Control NB/SB: Two-Way Stop Control 4. Arastradero Road/Pomona Avenue-King Arthur Court 21 Bicycle One-way cycle track proposed in the vicinity will provide a buffer-separated lane for cyclists. Cycle track is projected to enhance bicycle safety along the roadway segment. Pedestrian A WB crosswalk can help improve safety at the intersection by increasing visibility of pedestrians. Proposed Improvements Bicycle •Increase Minimum Green times to accommodate cyclists for EB and SB phases •Install one-way cycle track on north side of Arastradero Road Pedestrian •Install curb bulb-outs at NE and NW corners •Restripe SB crosswalk •Install NB crosswalk MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed SB 4 8 8 8 17 17 3 3 EBL 4 10 ----3 4 EBTL 15 15 ----3.5 4 WB 15 15 ----3.5 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B A B Proposed Geometry & Standard Timings C B B 5. Arastradero Road/Coulombe Drive EXISTING BICYCLE MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS PROPOSED 22 NB/SB: Permissive EB/WB: Protected + Permissive NB/SB: Permissive EB/WB: Protected + Permissive 5. Arastradero Road/Coulombe Drive 23 Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. One-way cycle track proposed in the vicinity will provide a buffer-separated lane for cyclists. Cycle track is projected to enhance bicycle safety along the roadway segment. Pedestrian Curb bulb-outs reduce crossing distance in NB and SB directions. The SB crosswalk will be restriped to “tee-up” the crossing and reduce crossing distance for. Installation of a NB crosswalk provides an additional facility for pedestrians and can help improve safety at the intersection. Proposed Improvements Roadway Geometry •Convert center median west of intersection to a WB receiving lane for left-turn movement from Los Palos Avenue Bicycle •Convert existing WB bicycle lane to a buffered bicycle lane Pedestrian •Widen sidewalk along south side of Arastradero Road •Install curb extensions at SE and SW corners 6. Arastradero Road/Los Palos Avenue EXISTING 24 PROPOSED NB: One-Way Stop Control NB: One-Way Stop Control 6. Arastradero Road/Los Palos Avenue 25 Roadway Geometry The painted median on the west leg is proposed to be converted into a receiving lane for left-turning vehicles from Los Palos Avenue. Vehicles using this lane will merge with WB traffic upon finding acceptable gap in the through traffic. Implementation of this improvement is projected to improve operations along the roadway and also reduce the delay for the left-turning vehicles from Los Palos Avenue. Bicycle One-way cycle track proposed in the vicinity will provide a buffer-separated lane for cyclists. Cycle track is projected to enhance bicycle safety along the roadway segment. Pedestrian Widening the sidewalk along Arastradero Road is projected to provide a more comfortable and safer pedestrian facility. Curb extensions align the newly widened sidewalk and reduce the crossing distance across Los Palos Avenue. Proposed Improvements Pedestrian •Install bulb-out at NE corner of Clemo Drive •Install curb extension at SE and SW corners of Suzanne Drive Intersection Level of Service VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS 7. Arastradero Road/Clemo Drive-Suzanne Drive EXISTING PROPOSED 26 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings C -C Proposed Geometry & Standard Timings C -C NB/SB: Two-Way Stop Control NB/SB: Two-Way Stop Control 7. Arastradero Road/Clemo Drive-Suzanne Drive 27 Pedestrian Installing a curb bulb-outs at the NE corner of Clemo Drive reduces the crossing distance for pedestrians in the NB and WB directions. The shorter crossing distance is projected to enhance safety and takes the close proximity of the Palo Alto Montessori School into consideration. Curb extensions at the corners of Suzanne Drive “tee-up” the intersection approach and reduce the EB crossing distance. Proposed Improvements •No adjustments proposed at intersection Intersection Level of Service VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS 8. Arastradero Road/Alta Mesa Avenue-McKellar Lane EXISTING PROPOSED 28 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings E B C Proposed Geometry & Standard Timings E B C NB/SB: Two-Way Stop Control NB/SB: Two-Way Stop Control 8. Arastradero Road/Alta Mesa Avenue-McKellar Lane 29 No changes are proposed at the intersection. A raised median restricting left-turns in and out of Alta Mesa Avenue-McKellar Lane was analyzed. This adjustment is not proposed in accordance with community feedback. Proposed Improvements Roadway Geometry •Decrease WB right-turn curb radius •Remove pork chop island and right-turn slip lane for NB right-turn •Install curb extensions at NW and SE corners Bicycle •Install intersection crossing markings in EB and WB directions MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NB 4 4 7 7 13 13 4.5 4.5 SB 4 4 7 7 13 13 4.5 4.5 EB 4 4 5 5 25 25 4.5 4.5 WB 4 4 5 5 25 25 3.5 3.5 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings D C D Proposed Geometry & Standard Timings D C D 9. Arastradero Road-Charleston Road/El Camino Real EXISTING PEDESTRIAN MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS PROPOSED 30 NB/SB: Protected EB/WB: Protected NB/SB: Protected EB/WB: Protected 9. Arastradero Road-Charleston Road/El Camino Real 31 Roadway Geometry There are no timing adjustments to this intersection because it is operated by Caltrans and is a part of their network which would be affected if changes were implemented. Decreasing the NE corner curb radius is projected to reduce right-turning vehicle speeds. Curb extension at SE corner reduces pedestrian crossing distance and right-turning vehicle speeds. Bicycle Slower right-turning vehicle speeds are projected to enhance safety for cyclists at the intersection. Bicycle pavement markings provide cyclists with a defined travelled way. This is projected to alert motorists to the presence of the bicycle facility and can enhance cyclist experience. Pedestrian Pedestrian safety will be enhanced at the intersections with the removal of the NB slip lane and reduced crossing distance. Proposed Improvements Roadway Geometry •Install exclusive EB and WB left-turn storage lanes Bicycle •Increase Minimum Green times to accommodate cyclists for NB and SB phases •Install bicycle boxes on NB and SB approaches Pedestrian •Standardize Walk and Flashing Don’t Walk times MUTCD Standard Timing Adjustments Intersection Level of Service VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NB/SB 6 8 7 5 17 21 3 3 EBL/WBL -10 -----4 EB/WB 12 12 ----3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings A A A Proposed Geometry & Standard Timings A A A 10. Charleston Road/Wilkie Way EXISTING PROPOSED 32 NB/SB: Permissive EB/WB: Protected NB/SB: Permissive EB/WB: Permissive 10. Charleston Road/Wilkie Way 33 Roadway Geometry Providing exclusive left-turn lanes for EB and WB traffic is projected to improve traffic operations at the intersection with protected left-turn phases. The proposed improvements are projected to enhance operations and safety for all modes at the intersection. Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Bicycle boxes are proposed along Wilkie Way to provide cyclists enhanced experience and a higher priority within the facility. Bicycle boxes provide cyclists with designated space at the intersection for separation from vehicles. Pedestrian Standardized Flashing Don’t Walk times provide a larger pedestrian clearance interval to cross Wilkie Way. Proposed Improvements Pedestrian •Install pedestrian-activated flashing beacons for the NB crosswalk 11. Charleston Road/Ruthelma Avenue EXISTING 34 PROPOSED NB: One-Way Stop Control NB: One-Way Stop Control 11. Charleston Road/Ruthelma Avenue 35 Pedestrian Pedestrian-activated flashing beacons are projected to alert the drivers when there is pedestrian activity at the intersection. Proposed Improvements Roadway Geometry •Install raised median in EB/WB direction to prohibit left-turns in and out of Park Boulevard and through movements across Charleston Road Bicycle •Provide bike slot in raised median Intersection Level of Service Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings D C C Proposed Geometry & Standard Timings B B B BICYCLE MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS EXISTING 12. Charleston Road/Park Boulevard PEDESTRIAN MOVEMENT COUNTS PROPOSED 36 NB/SB: Two-Way Stop Control NB/SB: Two-Way Stop Control 12. Charleston Road/Park Boulevard 37 Roadway Geometry Installation of a raised median along Charleston Road will prevent left turns onto Park Boulevard and traffic across Charleston Road via Park Boulevard. This is projected to enhance safety at the intersection. Implementation of this improvement will allow right-turn only movements from Park Boulevard onto Charleston Road. Bicycle Bike slot in the median will allow cyclists to cross Charleston Road when using Park Boulevard to access the bike boulevard at Wilkie Way. Proposed Improvements Bicycle •Increase Minimum Green times to accommodate cyclists •Install intersection crossing markings in EB and WB directions Pedestrian •Standardize Walk and Flashing Don’t Walk times MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NBL 4 11 ----3 3 NBT 4 7 7 5 10 20 4 4 SBL 4 10 ----3 3 SBT 4 7 ----4 4 EBTL 8 10 6 5 15 21 3 4 WBTL 8 10 6 5 15 22 3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings E C E Proposed Geometry & Standard Timings E D E PEDESTRIAN MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS EXISTING VEHICULAR MOVEMENT COUNTS13. Charleston Road/Alma Street PROPOSED 38 NB/SB: Protected EB/WB: Split NB/SB: Protected EB/WB: Split 13. Charleston Road/Alma Street 39 Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Bicycle pavement markings provide cyclists with a defined travelled way. This is projected to alert motorists to the presence of the bicycle facility and can enhance cyclist experience. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection. Proposed Improvements Roadway Geometry •Install landscaped median in EB/WB direction Transit •Relocate WB bus stop to far side of intersection Pedestrian •Restripe existing NB crosswalk Intersection Level of Service Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings C B B Proposed Geometry & Standard Timings C B C EXISTING 14. Charleston Road/Wright Place BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS PROPOSED 40 SB: One-Way Stop Control SB: One-Way Stop Control 14. Charleston Road/Wright Place 41 Roadway Geometry Installation of a landscaped median is intended to improve safety along Charleston Road which currently has a two-way left-turn median. Transit Relocating the WB transit stop to the west leg of the intersection will improve operations at the intersection for all modes. This improvement will provide a safer transit facility for users and is not projected to impact the segment between Wright Place and Alma Street. Pedestrian Restriping the existing crosswalk is a cost effective way to enhance the pedestrian facility. The landscaped median will also provide a safer experience as a buffer from vehicular traffic. Proposed Improvements Roadway Geometry •Install landscaped medians in EB/WB direction Intersection Level of Service Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings C B B Proposed Geometry & Standard Timings B B B PEDESTRIAN MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS EXISTING 15. Charleston Road/Mumford Place VEHICULAR MOVEMENT COUNTS PROPOSED 42 NB: One-Way Stop Control NB: One-Way Stop Control 15. Charleston Road/Mumford Place 43 Roadway Geometry Installation of a landscaped median is intended to improve safety along Charleston Road which currently has a two-way left-turn median. 16. Charleston Road/Carlson Court Proposed Improvements Bicycle •Increase Minimum Green times to accommodate cyclists for NB and SB phases •Install bicycle boxes at NB and SB approaches Pedestrian •Standardize Walk and Flashing Don’t Walk times •Install curb bulb-outs at SE and SW corners of intersection •Install SB crosswalk MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NB 4 8 10 5 13 18 3 3 SB 4 8 ----3 3 EBL/WBL -4 -----4 EB 12 12 10 6 8 12 4 4 WB 12 12 10 6 8 12 4 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B A A Proposed Geometry & Standard Timings B A B EXISTING VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS PROPOSED 44 NB/SB: Permissive EB/WB: Protected NB/SB: Permissive EB/WB: Permissive 16. Charleston Road/Carlson Court 45 Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Bicycle boxes are proposed at the NB and SB approaches to provide cyclists enhanced experience and a higher priority within the facility. Bicycle boxes provide cyclists with designated space at the intersection for separation from vehicles. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection which is in close proximity to Hoover Elementary and experiences high pedestrian demands. A SB crossing provides an additional pedestrian facility at the intersection helping improve safety. Curb bulb-outs reduce crossing distances in the NB and SB directions. Proposed Improvements Roadway Geometry •Install landscaped median in EB/WB direction VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS 17. Charleston Road/Hoover School Driveway EXISTING PROPOSED 46 17. Charleston Road/Hoover School Driveway 47 Roadway Geometry A landscaped median will prevent illegal EB U-turns and left-turn movements from occurring at the driveway of the elementary school. It will force vehicles to continue EB until provided with a pocket to perform their maneuver. The proposed improvement is projected to enhance operations for all modes of transportation. Proposed Improvements Roadway Geometry •Reverse church circulation •Install landscaped medians in the EB/WB direction Bicycle •Increase Minimum Green times to accommodate cyclists for NB and SB phases •Provide early Bike Phase in NB and SB direction Pedestrian •Standardize Walk and Flashing Don’t Walk times MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NB/SB 4 7 7 5 12 18 3 3 WBL 6 10 ----3.5 4 EB/WB 6 10 6 5 10 15 4 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings A A A Proposed Geometry & Standard Timings B A B 18. Charleston Road/Nelson Drive VEHICULAR MOVEMENT COUNTS BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS EXISTING PROPOSED 48 NB/SB: Permissive EB/WB: Protected NB/SB: Permissive EB/WB: Permissive 18. Charleston Road/Nelson Drive 49 Roadway Geometry The existing U-turn lane is reconfigured to allow left-turns into the driveway of the existing church parking lot at the location. U-turn volume will increase with installation of the median along Charleston Road between Carlson Court and Nelson Drive. Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Early bike phase gives cyclists a head start before the vehicles in the NB and SB directions to ensure they are able to clear the intersection. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection. Proposed Improvements Roadway Geometry •Install exclusive right-turn lanes in EB and WB directions Bicycle •Increase Minimum Green times to accommodate cyclists •Install intersection crossing markings in EB direction Pedestrian •Standardize Walk and Flashing Don’t Walk times MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NBL 4 9 ----3 3 NBT 8 8 7 5 14 20 3 3 SBL 4 9 ----3 3 SBT 6 8 7 5 14 19 3 3 EBL 4 10 ----3 4 EBT 6 10 7 5 16 23 3 4 WBL 10 10 ----3 4 WBT 8 10 7 5 14 20 3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings D C D Proposed Geometry & Standard Timings D C D 19. Charleston Road/Middlefield Road EXISTING BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS PROPOSED 50 NB/SB: Protected EB/WB: Protected NB/SB: Protected EB/WB: Protected 19. Charleston Road/Middlefield Road 51 Roadway Geometry Providing exclusive right-turn lanes for EB and WB approaches separates right-turning vehicles from the traffic flow. Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Bicycle pavement markings provide cyclists with a defined travelled way. This is projected to alert motorists to the presence of the bicycle facility and can enhance cyclist experience. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection. PEDESTRIAN MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS Proposed Improvements Roadway Geometry •Install signal at intersection Bicycle •Install bicycle boulevard signs along NB and SB approaches •Reconfigure median island to provide bicycle refuge and intersection crossings Intersection Level of Service Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings F F F Proposed Geometry & Standard Timings B B C 20. Charleston Road/Louis Road-Montrose Avenue EXISTING BICYCLE MOVEMENT COUNTS PROPOSED 52 NB/SB: Permissive EB/WB: Protected NB/SB: Two-Way Stop Control 20. Charleston Road/Louis Road-Montrose Avenue 53 Roadway Geometry Installation of a signal at the intersection is projected to enhance operations for all modes. Bicycle Installation of signs is projected to increase awareness of the bicycle boulevard along Louis Road- Montrose Avenue. A reconfigured median island provides a bicycle refuge for NB and SB through cyclists and safer passage along Louis Road-Montrose Avenue. Proposed Improvements Roadway Geometry •Install exclusive EB and WB left-turn storage lanes Bicycle •Increase Minimum Green times to accommodate cyclists Pedestrian •Standardize Walk and Flashing Don’t Walk times MUTCD Standard Timing Adjustments Intersection Level of Service Min Green Walk Flashing Don’t Walk Yellow Direction Existing Proposed Existing Proposed Existing Proposed Existing Proposed NB 8 11 ----3 3 SB 4 12 6 5 13 21 3 3 EBL -12 -----4 WBL -11 -----4 EBT/WBT 4 10 6 5 16 25 3 4 Peak Period Scenario A.M.Midday P.M. Existing Geometry & Timings B B C Proposed Geometry & Standard Timings C C D EXISTING BICYCLE MOVEMENT COUNTS PEDESTRIAN MOVEMENT COUNTS VEHICULAR MOVEMENT COUNTS21. Charleston Road/Fabian Way PROPOSED 54 NB/SB: Split EB/WB: Protected NB/SB: Split EB/WB: Permissive 21. Charleston Road/Fabian Way 55 Roadway Geometry Exclusive left-turn lanes along Charleston Road separate turning vehicles from the traffic flow. This, along with protected phasing implemented for these movements, can improve safety at the intersection. Bicycle Standardized Minimum Green times will allow cyclists to clear the intersection safely. Pedestrian Standardized Flashing Don’t Walk times will provide a larger pedestrian clearance interval at the intersection. Conclusion 56 This concludes the report for the Charleston Road-Arastradero Road Corridor Project in the City of Palo Alto. Throughout the corridor there are many types of improvements proposed at individual intersections and along roadway segments. All improvements are in compliance with the CA MUTCD, City of Palo Alto Bicycle + Pedestrian Transportation Plan, City of Palo Alto General Plan, and Americans with Disabilities Act. Many factors were taken into consideration when generating alternatives with the functionality of the roadway facility at the forefront. Bicycle and pedestrian facility improvements take the City’s recommendations and requests for evaluation into account. This report provides the recommendations, plans and specifications for phased implementation of community-focused streetscape improvements providing preferential bicycle-pedestrian measures while continuing to effectively serve motorists. These recommendations, plans and specifications are intended to help improve resident safety supporting Safe Routes to School and the Traffic Calming goals of the community. Pleasanton 4305 Hacienda Drive Suite 550 Pleasanton, CA 94588 T: 925.463.0611 F: 925.463.3690 Fresno 516 W. Shaw Avenue Suite 200 Fresno, CA 93704 T: 559.325.7530 F: 559.221.4940 Sacramento 980 9th Street 16th Floor Sacramento, CA 95814 T: 916.449.9095 F: 925.463.3690 Santa Rosa 1400 N. Dutton Avenue Suite 21 Santa Rosa, CA 95401 T: 707.575.5800 F: 707.575.5888 WWW.TJKM.COM TransportationConsultants TJKM