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Home My WebLink About0253.093- ~< ~ < < • 0 . , April 22, 1993 HONORABLE CITY COUNCIL Palo Altc l California A.ttention~ Finance Committee Members of the Council: REPORT IN BR~E~ There are a numb~r of program issues that staff has identified as part of the interim budget process. In this r-aport, background is provided on these issues, to be discussed at the April 27 and May 4 Finance committee meetings. program issues identified include: World cup Soccer East palo Alto Assistance Parking Citation Processing z~d AB 408 Paramedic Staffing Fixed Assets Human Services Resource Allocation Process Enterprise Fund Rates and Reserves CMP;253:93 - WORLD CUP SOCCER The ~ederation Internationale de ~ootball ASSDciatiou (FIFA). the ir,t.ern~tional governing body for soccer. has designated the United states as tr,e host country for the 1994 world Cup. the world's largest sin.gle spor'tir::'3 event~ The ,""arId Cup tournament consists of 24 national teams playing a total of 52 ga:rr.es over a one-month period. Sine venues across the nation h3ve been selected by FIFA to host the games, San Francisco has been designated as a host venue site; however, the soccer games will be played at Stanford Stadium. Six World cup tourr,arroent gamE's ""i 11 be played at stanford in 1994: June 20, 24, 26, 28 and July 4 and 10. The July 10 game is a quarterfinal. Capacity croll,'ds of 86. 000 are predicted at each qame 4 The start time of the qal!1es 'wo'ill be in the early afternoon, for the convenience of internationa 1 television vie .... ers. Th irty five to forty percent of the c:r;owd is expected to be foreign. visitors. The participating t~ams ~ill not be known until December. staff has recently learned that a seventh World Cup-related soccer game ..,ill be played at stanto=d Stadium on Decerr.ber 16. 1993. Meant to be a major :media event immediately preceding the final cira'" tor participating t,eams, the United states will play Germany (the host tea!!', Versus the defendi ng cha.:mpion). Over two years ago the city of Palo Alto was approached by the Bay he.a organizing committee; ..... hich .,.,as preparing a bid package to subzcit for selection as a \'I'orld Cup venue. At that time; the committee 'Was proPQsing t.hat local gdrnes be divided bet .... een t ... 'o locations, candlestick Park and Stanford Stadium. During the co~rse of bid consider~tionl the Pale Alto city Council was asked by the organizing committee to adopt two resolutions indicating its support for selection of the San Francisco Bay Area as a World Cup 1994 venue {see Attachnents la, lb, Ie and Id). The resolutions include .an understanding that the City "'ill be reimbursed by the local org~niling committee for police. fire, and paramedic costs incurred by the City. Five of the seven games described above 'w'il1 be played during the 1993-94 fiscal year. In order to estimate the potential impacts upon the City orqanlzation; departments have reviewed their experier.ces .ith the 1985 Super Bowl, the 19S4 Olympics and the recent visits of various world leaders to Stanford. Those events provided models of the costs related to personnel and the provision of security, traffic cor.trol, crowd rr.anagement; communications, and the ~elated supplies and equipment. CMR:253:9) 2 L ..... --------------------------~ None of those events ~as of the magnit~de of what is expected ~ith World. Cup~ ho ...... ever. Rather than CI single event 1 there 'Wi 11 be .several in quit:k succession~ Three of the games ""ill occur on weekdays and thus must be coordir.ated with the :cegular .... ork-co!T'.mute traffic. Many of the fans attending the games will be u~familiar l>1ith the area and even the ]anguage. The estimated costs associated with World Cup Soccer during fi6cal year 1~93-94 are included in the interim budget. They include $131,000 for Police Dcpartruent services and $57,000 for Public Works Departme~t costs. Many details related to World Cup are not available at this time. Until it is kno· .... n ",hat tee_ms ..... ill play at Stanford, it is difficult to judge the level of security and crowd control that must b.;! provided. The World cup San. Francisco B~y Area host committ,ee is still developing its plans for special events, thus the level of local involvement to be expected is still unknown~ The host committee predicts that "'~orld C ..... p visitcrs ...... ill .mean ~~bsLantial revenue generation for the Bay Area. Based on Palo Alto's experip..nce "ilI'ith the 1985 Super Bo","'1, the city's exp~nses could significantly exceed its revenues unless visitors actually stay at Palo Alto hotels and motels, dine at Palo Alto restaurants, and shop extensively in Palo Al to stores. To assure that, a concerted promotional effort by the local business community will be required. staf.( wi 11 proceed negc.tiating ar; agreement .i th the Warl':'! CUp san Francisco Bay Area host committee concerning rei~bursement for City costs in the provi~ion of services i~r World Cup~ ISSUE: 'l'he Interim BuClget for 1993~94 will propose that,. since expenses related to World cup Soccer are Qne-time and extraordinary in nature, they be ta);el'1 from the Budget stabiliza.tion Reserve rather than be absorbed in tha operatinq budget. EAST PA-L.Q ALTO ASSIS'rANC:E Included in the interim budget are three positions in the Police Department for the East Palo Alto RED l'ei'll'!1 and a .5 Full-Time Equivalent: (F'l'E) management assistant in the Community Services Department to assist iJith grant •• !riting. These positions a!"e not per.manent additions to staffing, but instead are considered authoI""ization to exceed authorized staffing levels for the 1993-94 fiscal year~ This authorizatiC'!l. can be reviewed again, should Council choose, during the 1994-96 budget process. Please seQ Attachment 2 (Memorandum dated March 18~ 1993 from Mayor ~ean McCown to Council, "Cooperative Efforts with East Palo Alto" and AttachmQnt 3 (CMR:207:93, "RecOI1'.rn.endaticn to Con.tinue Partici pation in the RED Team and to Exceed Police Staffing Levels")~ CMR::253:9J 3 ) I I J I I -'.:-~ ! ;:~~i;'-'~ '-;:;,~:;;S, f4c · _. __ ~_~ - ISSUE: rhe 1,,3-9. Interim Budget ~vntains $293,000 to tun~ the RED Team and $29,100 for qrant vriting support services for East Pale Alto. Tbe •• expenditures will be shown in the proposed budqet .s being absorbs4 in the operating budget. Flease see Attachment 4, CMR;:205;93, "Proposed Implementation Plan for AR 408 and Parking Citation Processi~gn. ISSUE: The 1993-9. Interim Budget will propose that the city Make permanent its currently temporary arranqement to provide parking citation processing an4 customer service within th. Finance Depart.ent. Tbis will re~~ir. the a4dition of 2.5 FTE, at a net eost of" $'4,000. In 3d4ition, to comply with AB 408, !l 1.0 PTE: vill be propoge~ to ~. added in the Police Depar~~ent, at an annual coat o~ $'0,000 for the pro9ram. P~MEDIC STAFFING The Fire Department evaluated alternative paramedic service delivery methods, to meet the current a.nd future de:rnands for service in the Palo Alto service are~. The evaluation was intended to provide an analysis and overvie .... ' of existing service levels, paramedic progrart'. trends, service deliver~' opticns~ and financing options from which Fire Department management could mal-'.e recommen dations t~ better meet current and future service demands. The evaluation identifi£d several problem areas in the existing paramedic program. First, existing demands for service exct'!2Q the capabilities of the or,s. 24-hour paI"amedic unit, · .... hile "maintaining a :T1edically responsi ble response time to second and third simultaneous calls. Palo Alto Paramedics response time;; average less than six minutes (5.8 ever the last t",'o years). However. when Palo Alto Fire De.partment {PAFD) medics are unavailable to respond on "second simultans.ous calls" because they are on another call or they are in the process of transporting a patient to the hospital, backup parawedic services are provided by the county contractor. A special study done in 1990 showed that county contractor response times into Palo Alto averaqed 17 minutes. This results in daily incidents ~here the patient experiences long waiting periods for non-fire paramedic units to arrive in Polo AltCi. "The study also sho .... ·ed that the County non-fire contractor transported 303 patients from Palo Alto, or 14 percent of all transports. Second, Emergency Medical Service (EMS) calls are continuing to rise annually. The projected patient transport demand is projected to increase 28 percent to reach 2,330 by 19~5. CMR: 25): 93 - - The par~medic service volume, and the resulting out-of-servic~ time fer paramed~c units hos increased significantly over the past sevEral years. The par~medic progra~ evaluation indicated this trend is expected to co~tinue dlJe to: 1) the local resjdential popul.ation is. getting older, and 2) the Palo Alto/Stanford area population increases during the dayti~e hours. This increase is evident when compari.ng 1975 Palo Alto paramedics' 400 annual emergency medical calls with FY 1990-91 total of 2,216 e~ergency medical calls and 1~691 patient transports to lecal hospitals. Thes~ two findings, increasing service demand and an elder population, indicate a sl?cond paramedic unit is needed. In addition, the count)~ has recentl:r~ m'!ndatcd that tr~e City may not utiliZe non-paramedic ambulances to transport ernerge!'!cy m~dical patients who have minor illnesses or injuries. The I!'.andate has resul ted in a 25 percent increase in s!;rvice dentands for paramedic transports in Palo Alto (CMR:140:9J). Finally, the City of Palo .~lto paramedic fees are th€'o la_'cst of the surrounding paramedic service areas and should be adjusted. The Palo Al-co Medicare profile by ""hich Medicare determines payment aroount is lo~. Medicare's profile for the City is based on what f~es the City currently charges~ but also on what they ..... ere in 1983. This has kept .'hat Medicare will pay the City unreasonably loW' when ·compared to other provi ders. Since approximately -40 percent of paramedic patients in Palo Alto are covered by Medicare, the. rate profile has had a significant i!!",pact on the amount of revenue qenerated. Recently, aT'!. adj'Jstn!ent in Palo Alto~s rate profile ~as obtained by the Finance Department's appeal. The City has accepted payments by Medicare as payment in full, even though it does not cover the full cost of the fees. Paramedic Servic:e De 1 i ve.:ry"'.pptioDS A v~riety of service delivery options were evaluated. The options were rated in terms of servics g8a15, staffing efficiency, and cost effectiveness. The three options t:r.at ~ ... 'ere given most consider at.ion ... ere as follows: 1. Add two paramedics per shift and staff a second paramedic unit for 24 hours each day. The advantages to this option include: meeting service goals~ minimal movement of personnel, and red\,;ce..:!. firefighter stress. The disadvantages are the high cost, since ~his option requires 6 additional staff; and the tact that peak de~and for service is only during the t .. elve hours (8 a.m. to 8 p.m.). 2. Staff a second paramedic unit for 12 hours each day~ This is the recommended option ar,d is discussed in the following section. CMR:253:93 5 ]r';~; .~y,~'7 .. , - 3. Discontinue providing paramedic SE'[-vic~. Allow pt"ivate ambulance company to provide service into Palo Altc. The advantage to this option is the reduced liabilitj'. The disadvantages ir.clude: lower levEl of service (increased ro&sponse times), loss of revenue to the General Fund, and union labor opposition. Staff is reco~~ending the fol1o~ing in the 1993-94 Interim Budget: 1. Authorize the Fire Department to train nine current fire fighters as paramedics to increa$~ the total from 15 to 24, to have 8 medics assigned per shift. 2. Constantly staff a second paramedic ambulance (Medi.::-2) during the high demand period, 12 hours per da:,r, apprv;drnatelj' 8 a.m. to S p.m. This ~ill result in approximately 480 additional transports per yea,!". 3. To process the increase in paritrnedic bills, a .5 Control Account Specialist position ~ill be proposed to be added to Revenue Ccllections~ This posItion ... ·ill be char:Jed to the Fire Department. 4. During non-peak hours (8 p.m. - 8 a.m.), operate a conbination paramedic engine company/Medic-2, lr,,'hich ... i 11 respond as Medic- 2 for "simultaneous medical calls n when Kedic-l is unavail able~ When :fires occur, this company 'Will also retain fireiighting cbpability. 5. Increase the fle'at from 2" tc 3 pararneolc units, by including the purchase of a paramedic van {$75,OOO) in the 199)-94 Capital Itnprovernent Program. ~. Modif}' the fee schedule to el itninat.e the provision ",'hich sets $440 as the rnaxll'l'.um allowable fee. The Fil:e Department has proposed an increase in fees. Santa clara county presently has the lo~est para~edic fees in the Bay Area and Palo Alto/s .fees are eve.rt lower than t.he County's. The proposed average increase in fees is $100 per transport to $425~ Of this, $365 ~ill be paid under the current Medicare rei1t'.bl.lrse1'lent guide lines. Ho\tiever. third part}' insurers will pay 80 to 100 p~rCQn~ of the amount charged. In conclusion, including the fee increases, the net cost of adding the second paramedic unit is $34.000~ That is, the net effect of all revem.le and expenditure increases due to the second unit is an additional $:3 4, 000 loss to the General Fund. The proposed paramedic program vill be functioning at 85 percent of full cost recovery. In comparison r in 1992-93 the paramedic program ,",'as at 70 percent cost recovery~ CHR:253:93 6 -•• , , . - In addition, staff inten~s, d~ring the coming year, to continue to negotiate adjustments of the City's Medicare Profile, 'With the Medicare Contractor to provide more equitable payrn~nts to the city for paramedic services, develop an EMS rnutu~l aid agreene~t with Santa Clara county and Sa;"J. Mateo C'c,unty paral'!'.edic pro;,;iders, and evaluate the ieasibil i ty of implerr,enting Er.:ergency Medical Dispatching. This includes pre-arrival instructions and priority dispatchi~g by trained dispatchers. ISSUB: The 1'93-94 Interim ~u~qet will pro~ose a higher level of paramedio service witb the &4dition of a second paramedic unit. This vill require ca.pital costs fer a second ambulance unit, !as well as a~4itional operating costs of $131,000 annually. Increased paramedic fees will bring the net cost to tbe General Pun~ of III seCOJ'l.~ paramecHe 'Unit to $34,COO. FILlMAN SERVICES RESOURCE l>.LLOCATIQ_~ PROCESS rHS&:" __ Fl Please see CMR: 14 3! 93, Recomrnendations"~ ~hich lIH~rT'.an Services Resource Allol:::ation is included in this council packet. Plan :ISSO~: City Council will be asked 't.o approve the recommencSations for human services contracts funClir..q ma4e &s part of the HSRAP proc&ss. ENT~PRISE FUND RA'l'E'S AND P.ESERV~ Reserve Pol:: cy Re_£Q;::llnendat ions Flease see. l>.ttacr-.. ntent 5, a me:rr.oranoun1 dated March 26, 1993, to the uti li ties Advisory Carnmi ssion titled UL'tili ties Rascrve Pol icy RecQ!!I.1!1endations." It should be noted that s'taff -..:ill also be proposing similar change~ to the F.efus-e and Io."'aste\l,iater Treatment Fund reserves. These changes are not discussed in the attachments, as staff is still finalizing these reports. reSOE: stat~ vill recommend that Council adopt a revised Enter prise Fun~ Reserve Policy. Distributicm--2_f Electric Fu~_g_ Surplu~ and can_g§.J)atior: of Electric_ Rat~ I_nqrease Please see Attachment 6, a memorandum dated March 26, 1993 to the Utilities Advisory Commissi~n, "Recommendation for DiEposition of Electric Fund Surplus." CMR:253;93 7 I" ; - ISSUE: In view of the surplus in the .Elel;tric Fun~, sta.ft plans t.o ~.~omm.ad cancellation of a 8ebe~ul.d 8 percent rate increase in 1"3-" sn~ & rebate of the excess balanoe in the Electric Fu~~ re •• rve. will ~. proposed. r~e rebato is estimated to be approxi mately $13 million. Increase in Electric Fund Rates f __ QL...Gen~~:r;_?lffic Signal:>i The electric utility o~ns and operates the traffic signal system within Palo Alto, '9xcepting those oper.atcd by the state or county. The utilit}· charges those gov-e.rn'll'er.t entities as ... 'ell as the City of Palo Alto (Public Works Department) for traffic signal mainte nance and capital programs under Rate Schedule £-6. However l the E-Ei rates for this activity have been significantly undercollecting the costs of service. For exalT.ple, in FY 1991-~2, the electric utility expended approxirnately $530 1 00D 011 traffic. signals and collected only $200,000. This represents a $330, ODD revenue snortfall to the electric: util ity. To close the gap on this deficit and in accordance 'With cost of service objectives, staff plans to recorn.11end increasing the rate crlarged for traffic signals during FY 1993-94 approximately 38 percent, or $76,000 on an annual basis. This adj ustrnent begins a planned three-year cycle of 38 percent rate adjust-rnents, which '..'i 11 lead to full cost recovery for this activity. ISSUE: .At_tf will reC'cctmend tate increases in tbe Ciharqes for tr~tfic signals over three years of 38 percent a year to brinq tbe •• rvice to full cost reeovery~ In 1993-'4 the rate increase will ~rin9 .~ additional $76,000 in revenue to the Electric Fund~ Refuse Rate~ For fiscal year 199J-1994~ the Refuse FiJnd will require a collec tion rate increase of 30 p~rcent. The last refuse collection rate increase Wrias in fiscal year 1991-92. The increase is to meet additional solid waste requirenents l including hauling refuse to the SMaRT Station site in Sunnyvale, disposal at Kirby Canyon landfill in San Jcse~ and continued funding of the post-closure fund for the landfill. In addition, a new Sta~e Water Board ruling requires the City to set aside $118,000 per year, for financial assurance against poter".tial .... ;ater environmental problems that could result from the landfill operation (desc=ibed below in ,rFinanci&l AS5urance Required bJl the State ~-ater Resources Boara f1) ~ The proposed rate structure charges the same amount per can, regardless of the number of cans. This rate structure ~as approved by Council in fiscal year 1992-93. The proposed residential rate structure for one can would be $14.30 per month, with each add~tion31 can at $14.30. This proposed rate structure continues CMR:2S3:93 s L - to encourage SOU:C8 red~ction and recycling for all categories of ~ate payers a~d will help the City to achieve the AB 939 goals of solid .... ~ste reduction of 25 percent by 1994, and 50 percer1t by 1999. ISSUE; staff will recommend. re.fuse rate ;j,ncre:s.se for 1993-~" of 3:0 percent. This is require!! to meet additional $oli4 waste requirltments. Financial Assural'1cE! _____ :R-Ml,Jired by the State !'o'.::tt..er-P.esO'..!I'ce:s Boax!LJor the Refuse Lund In 19'92, the State passed legislation rec!,,,,iring owner/operators of sanitary landfills to obtain and !!"aintain an assurance of financial responsibility to morl.itor, mitigate and restore any State \,'aters which potentiall1~ could be contaminated by releases from landfill.s. This financial assurance is sinilar but distinctly separate from the Closure/post-Closure ReSErve required by the california Integrated Waste Management Board. To comply .. dth the new legislation, staff' used the consultir.g firm EMCON Associates to conduct a study and ger.E:r'at:e a report tor subD',ittal to the State Water Resources Board. The report discusses the programs required by the state to mo~itor and detect releases, estimated costs of the programs and f'.lnding necessary for compli ance. Using the state of California-provided for~ula, the ~otal cost of the financial assurance reserve is $508,000 in 1992 dollars (present value) ~ The regulations alloOl.· the City t\o'o options: (1) a single payment of '$50~ 1000 this year (199J) j or (2) five pay:ments of $117,807. This will fully fund the reserve as of the January 1. 1997 deadline. Using ~he State prov!ded formula of an B percent interest rate, the fund will have a balance of $691,128 by January l~ 1997. ISSU~~ staff will recommend the creation of a reserve to comply with requirements from the St ... te Water Resources Board. The funding tor this vill be $~~7,807 per year to build the reserve to $'~1,~28 in 5 years. Waste~ater Collection Rate ~n~ea?e III order to lessen the rate impact on our custo:r:1ers over the next couple of years, staff recoJ:1rr.ends a 9.9 percent ,,-'astewater co!.lection rate increase effective f iscaJ year 199J-94. The FY 1992-94 two-year budget did not provide for any increase in 'Wastewater collection rates, due in part to the fact that water and CMR:253:93 electric r~tes were schedLl]ed to rise during FY 19S3-94. Now that staft is reconmending cancellation of the electric and water rate increases, the overall bill impact on utilities CU5to~ers will ~e less than anticip~ted in FY 199)-94. This provides an opportunity to accol'tunodate a wastewater rate increase in FY 199 )-94; which .... ·as scheduled to be 24 percent in FY 1994-95 to finance the infrastruc ture project. ISSUE: Staff viJ.l recommend a !L 9 percent v.!lstew.&ter ccllecticn rate increase to b~ild re~e=ves fer the start e! the infrastructure progr~ i~ 1994-95. Residenti31 Rate A~sistaDce Progra~ See Attachment 7. Utilities AdvisOl-Y Program."' a me;ncrandum dated March 26. 199) to Commission, "Residential Rat~ Assistance the 'ISSUE~ A Resit3ential Rate J\ssistance pr~qram is pr:)posed to provide lo'Wer rates for electric, water a.nd gas to low ineoma r •• i4ents ¢r those in nardsbip situaticns. Trans] ti on to Norma 1 Water tt..icingiWatcr Rat_'§:!~ __ P._gju5tment Given recent anr:o!.lnce1tle:"lts that the drought in California has ended, the: San Francisco -Water Department {SFWP) has suspended mandatory conservation targets tor its customers, including Palo Alto. The SYWD is now asking customers to voluntarily maintain usage levels at least 15 percent below 1987 consumption levels. In re.sponse to tt,.;, lessening rE:e;:tr.ictions frcm snm and in recognition that the · .... at.e:r supply sit>.:;.ation has improved subs.tan tially, staff plans to introduce new water rate schedules during this budge-t:. process and elinlir,ate the existir,g drought rate sCheoules. Because promoting conservat ion .,.,i11 continue t.o be a rat.emakinq obj~ctive, staff plans to I-etain an inverted residential rate schedule Yo'hicl"'. iS I ho .. 'ever, not as steeply inverted as the current drought rate schedule. For non-residential customers, staff is evaluating either a flat commodity rate for all customers or creation of several different rate schedules to apply to vaLicus size customers. The transition to nor~al water pricing from drought rate schedules 'Will necessarily result in reversing the pro.c',ess used to achieve steeply inverted rates. Since the drought began in 1977, small water users have ~ec~ived rate decreases or rela~ively small rate increases While large ·,.,.ater users have received so~e very large rate increase.s. Because of the necessary 'lppli~atioTt of rate CMR:253:93 10 .... , ~ II inc.reases in this rnd;1;"]l;!r, a trarl5itioi"J to r'lormal .... ater service schedules mey result in s~all users experiencing a bill in~rease or no change in their bill ... 'hile large u.sers may experience percentage bill decreases. Finally, it should be noted that the Fi 1992-94 two-year budget provided for a 24 percent ~ater revenue increase effective J~ly 1, 1993 in order to finance the infr;,:struct'o.lre pr"oject. Ho·,.,re'ler ~ because water sales have ris.en and the Welter Fund equity trar:;sfer to the General Fund is being recommended at a 10''''er level (see beloW') i etaff plans to can·-::el the 24 percent revenue increase in the water Fund for F'i 1993-94. At the time of this ",'ritina, there are indications tha~ the San Francisco 'h",ater Department is pl.::trming tf) decrease wholesale rates. Depending on the size of thp.. decrease, it could result in a staff proposal tc decrease Palo Alto's retail rates. ISSO~~ Staff will propose elimination of mac~~tory rationing an~ • transition to normal vater pricinq due to ~he an~ouncement of the end. of the drouqht. Ie addition., the planned 24 percent rate increase will be c~neele~ ~~~ t~e~e cou~d be a proposal to decrease vater retail rates as part of the budget process. Proposed Reduction to ~ater Fund Tr~rt§.Jer to t.he G~.!l~.:ral Fund The Interim BUdget will reco~mend that the transfer to the General Fund from the water uti Ii ty for F'i 1993-94 be based on a lor",rer rate of return (8 percent) t.han -is currently provided for (11.25 percent) in the t~o-year budget. The FY 1992-94 two-year budget provided for a transfer to the General fund from the ~ater utility, based on a reduced rat€ of return fo~ FY 1992-93 and a full rate of return fer FY 199J-34. Sp€cifically~ the trcnsfers for FY 1992-93 and FY 199'::;-94 are b'...ld~e:ted as "51,123,000 {based or, a 7.9 percent rate of return on ratebase) and $1,7<1,000 (based on an 11.25 percent rate of return on rat€b~se), re5pectively~ The FY ]993-94 transfer would be rEduced to a level of $1,300,000 which translates to an 8 percent. rate of return on a revised ratebase. The Wat-2r Fund transfer to the General Fund -",ill be gradually ramped up over the next three years to a level bdsed on a full rate of return on rateba:;e~ This proposal is consistent with the utility Enterprise fllethod adopted by the Council and recornmend~d by the price Waterhouse study in 1982. That study recommends that the City Council consider a f<.lll range of operational and financial data when exercising its authority to set rates. Included among such information are the utility'S cash flow requirements and the competitiveness of its rates. It is because of the current. financially weakened state of the Water Fund {reserves beloW' minimum gUidelines) and its marginally competitive rates that staff CMR:253:93 11 .~~\~';; .. , - iF recomrne!"lding council ex-ercisF. flexibility ir~ arriving at an appropriate transfer t.o the General Fund by the water utility. ISSUEI OUe to the fin4ncial healtb Qf the Water FUD~, atatt will reco ... nd all equity transfer :from th-e Water Fund to the General Fulltl at less than the t\l.11 level~ Tile transfer is $ .... 1.000 leliS than tbe full equity transfer and is proposed to be incre.se~ over tbe nezt 3 years to tbe full equity transter~ t'IXED ASSETS The need to install and maintain a fixed asset Jr:anaqelt".ent system has consistently reslJlted irl a qualification in the independent auditor's report on the City's Comprehensive Annual Fil'_ancial Report (CAFR) since 1986. In the Fi~ance Co~nittee's discussion of the Mana.gement Letter cOi;);r.ents received in the al..ldit for fiscal year 1991-92, staff · .. as asked to include the necessary funding tor a fixed asset system in the 1993-94 inte!:'"iICl budget. A cost benefit analysis, presented ~ithin the framework of other budget priori ties, ~as also requested at that time. Benefits AlthQugh the resour-:::es necessary to implement and :maintain a fixed asset system can be identified and cost.s. readily established, the benefits derived from such a project are difficult to quantify. As with many long-t_erm financial determinations, a major benefit can be defined in terms of an avoidance of risk. The risks associated with the lack of fiXed asset roa~agenent include: o Use of equipment 0," other assets for other t:-.an the City's benefitj a Unauthorized disposal of assets or diverted proc~eds from the sale of assets; o Physical loss of assets through inadequate security or in.sur ance coverage; o Payment of insurance or maintenance on assets no longer owned or utilized; o pre.paration of financial statements ',.-bich do not accurately reflect ~xisting assetsi o Potential loss of grants or other state or federal mandated reimbursements. CKR:253:93 12 --...... L!!"':~~""'··.!fi ... f .. ~.· .. '-... , .. ""'--"'--.-. ... -~------------------------------------------------ o Possible purchase of unnee:ded assets. The tot~l ri~ks 1ncrease as the City/s investment in fixed assets continu~$ to gro~. The city of Falo .l..lto reported General Fixed t\ssets a3 af .June 30, 1992 in exceS6 of $100 million, as sho~n below. However, as the audit~["s point out~ there is rIc way to st;.bstantiate the accuracy of this larqe invest-rnent, .. o'ithout a comprehensive revie\o', afpraisal and a'Jd.it. Land and Improvements B~ildings & Structures Equipll'Ient Total at ~0192 $59,519 35;<:.35 11. 261 $106,215 % Cro'Wth since §jl.QL.ll 20.0% 5.7% 29.0\ In addition to the protection Qf the City's assets, maintaining adequate fixed asset records ,;;,rou::'d remove the current qualification of the City's financial reports. The oenefits of aM unqualified audit opinion transcends the award of a ~Certificate of Achievement tor Excellence in Financial Reporting"', which is available only 'With an unqualified aucUt opinion. ~n unqualif.led independer.t audit opinion indicates "fair presentation-, in confonrdty with generally accepted accounting principles (CJ....AP), and thus lends credibility to the financial $tate~ents. An audit qualification often impairs a gove:::-nT1ent.'s bond rating, as it re:flects an inapility to maintain adequate acco'...lnting records. In this instance, the lack of an unqua.lified opinion c.ould result in a .' higher interest rate on the City's finar,cings. Finally, proper accounting for fixed assets serves to demonstrate a proper dis;;:.harge of the ste'Hardship of public "monies, including those invested in fixed assets. With ever-rising demands for effect.ive and efficient. use of available resources I tr.e city would be able to assure accountabi Ii t:t for all assets. Again~ the.se benefits carmot be valuated in t.ec!!',s of dollar amounts .. A cost of $74,500 plus one FTE pOSition has been included in the 199J-94 budget for development and implementation of a fixed asset CMll:25J:93 13 -"." " mar.aqement system. Ongoing cc.:;ts of the FTE i!nd system maintenance 'Would approximate $67,OOD/year. ISSOE: The 1!U:!J-9" Interim Bud.get will propose tbat the Cit} cr •• t. & f"iX9cS asset aeeountill9" system. The Interim Budget contains $138,000, mad.. up o~ an addition of 1.0 PTE stat!" accountant and costa to develop an4 main'tain the system for the General Fl.ind.. KICHAEL s. FP_~K Senior Financial A~alyst Attachments: CMR:253! 93 la Ib 1e Id 2 3 4 5 6 7 Letter to Charles cale, April 26, 1991 City of Palo Alto Resolution 6983 Lr:tter to Peter Bridgwater .. December 4 I 1991 City of Palo Alto Resolution 7047 Mayor Jean McCown Memo, March IB, 1993 CMR:207:93 C'~..R: 206: 93 Utilities Reserve Pc,licy Memo. March .26~ 1993 Electric Fund Surplus Memo, March 26. 1993 Residential Rate Assist.ance Program Memo~ March 26, 1993 14 j ! i I i or,~c:~ er ,. ... r. ...... rOF" [ ... ,:, 3l .. ·.i:3 e .. Mr. Charles G. Cale ATIACHH£HT r. Ott' of Jhlo tllto '". c. e·:" rc~.!!.;) ~"''-';: ,1...-::..::..1 :; .... .Jc,:, April 26, 1991 cO-Chairman and Chief Executive Officer World CUp U.S.A. 1994 2029 Ce~tllry Park East #400 Los &~gel~s, CA 900~7 Dear Mr. Cale:: The city of Palo Alto enthusiasticallj' welcomes the 1994 World cup to the San Francisco Bay Area and more spe~ific311y the Palo Alto/Stanford area. This 'Week the City Council passed a resolutior. of support (copy enclosed). Our City Manager and Folice, Fire and Recreation Departments have 'Worked closelz· ..... ith a lc,cal orga!l.izir-,g committee to lay the ground ... ·ork for a very successful event. Our goal is to achieve the same kind of results that 'Were achieved in the 1984 OlympiCS when StanforQ 5tadiu~ ~as the hast to Olympic soccer matches. Palo Alto coordinated closely ",dtb. Stanford and t.'1.e local organiz ing com.:ni ttee. I -know-that you ... ·.::re involved in that Ol:i"'mpic effort and are a' .... d.re c,f the succe$'.s of a::c local support for these matches. Importantly, 1994 is the cente:'l1'lial year ot the city of Palc, Alto. The Center~ial Coa~ittee has already expressed its support for the World cup and its intent to tie-in a number of local events emphasizing the theme of international cooperation .and frie.ndly competition. We since:re:l~· hope that your selection conu:nittee \lill look favorably upon the bid of the San Francisco Bay An:aj Wore look forward to \oi'elcoming the international cOI:ll::nmity to tr-.e Palo }-.lto/ Stanford area in 1994. If ,",'e can be of any furthe!: assistance: I please do not hesitate to call on us. JDS/cjl SinCErely, ~ ~~ D. s:r!:ORn: s ayor Enclosure -"'.- ~nAC_"T Ib RESOLUTION NO .. €9SJ kESOLUTION OF THE COUNCIL OF Tn CITY CoF PALO ALTO S't1PPORTIX:::; 1'RE SAN FRANCIS;:O SAY AREA &ID FoR WORLD CUP 19'~ WHEREAS, upon application mad'S! by the United States Soccer Federation (the "Fedet"aticm'l'l), the recognized national governing body for soccer within the Cnited States, the Fe:ieration Internaticnale de Football Association ("FIF.~n), the vorld governing body for soccer, has designated th~ United States as the host countcy for thp. 1994 World C'..l.P, the \o'orld's largest sinqle: sportinq event; and WHEREAS, the San Francisco Bay Area~ officialli' represented by World CUp San Francisco Say Area ~9941 is bidding to bece'me one of the twelve comm~,ities t~-roughout the United States that viII host World CUp matche_s, .... ith up to nine such matches to be held at Stanford. StaQium and Car,dlestic:k Park, and; WrlEREAS J Stanford st2ei~~, lcca~ed a~ Stanfcrd University in the Pale Alto area,r offers: a superb facility fer staging maj or international soccer matches, as de!:lonstrated in 198(, whe.n the Palo Alto/Stanford area very successfully supported r.ine matches at Star.ford Stadium in the. p:.relir,inary rou~ds cf the Olympic soccer competition, and; WF~, the City of Palo ~lto and adjoining cc~unities have within their jurisdictions facilities including hotels, restaurants, shopping districts and transpo~taticn services that may be used for purposes of organizing I financing, acco-:n.r:.od2t tng, staging and conducting 1994 K;:.rid Cup I" a:1Q loI"H£REAS, the .city cf Palo Alto and adjoining communitie~ ~aintain ~he highest quality physical infrastructu:e and provide the qovernment~l services needed to support a ~ajor international event like ~~e World Cup, and; ~~EF~, it is anticipated that hosting World Cup 1994 .ill result in a positive eco!"lomic impact on the Palo J..lto and Mid Peninsula areas .. hile enhancing the inte~nati~nal reputation of the area; THEREFORE, BE IT RESOLVED that tbe City cf P~lo Ji.1 to 'Welcomes the 1994 World cup to its jurisdiction and to that end declares its full support of the efforts of local organizing cOr:.!l1ittee, \Oiorla cup San Francisco Bay Area 1994, to have the San F'ra."lcisco Bay Area sele~ted as a 1994 World cup site, and be it fucthe~ 1 i L --- 'f;f~;'l,··· .~"" .. " , - -. RESOLVED that the Cit}" Council of the Citr or Palo Alto encourages all affected City departments to cooperate fully w'ith world CUp San Francisco Bay Area 1994 and the World Cup organizers so t:hat the San Francisco 8.ay Area and sta!'1.ford StadiuIr!" it";. particular, will ultimately be selected as a 1994 World cup site; and be it further RESOLVED tha~, upon being selected ~s a venu€ site for World CUp 1994, the City of Palo Alto will endeavor to provide all of the necessary services to ensure a safe, success!ul ana enjoyable World O~p 1994 at the lowest cost possible; and be it further RESOLVED that, upon being sel~cted as a VEnue site for World Cup 1994, the City M2nage~ is authorized and enccuraged LO negotiate agreements with the local crga!'lizing cOml!:.ittee to ensur02 that adequate se!"vices are ava ilable to World Cup and F1FAi and that the City of palo ~'lto will be fully reimb:.:irsed for the reasonable and actual C~5tS of providing such servicesi ar.d be it further RESOLVED that, upon being selectad as a venue site for Worl:! ~~p 1994, City departments, such as Recreation and Parks} and other City organizations, such as the center~ial committee, are encouraged to work ~ith the local ocganizing co~ittee to pla~ and carry out events, such as ethnic festivals and art exbibit5, that will take 2.dvantage. of the international flavor of cooperation and competition engendered by this event and help raise funds to defray some of the costs of providing the local services that support. World CUp ~994~ INTRODUCED: PASSED: A~ril 22. 1991 AYES: E_"1.derse.r,. Ci:l~b. Fazzir.c, K:-.iss, leV'.;, ~::;CCIo.-n, F-enzel, Sl..ltc:ius, w"e 1T NOES: ' o_~ey ABSTENTIONS: ABSENT: ATTEST: ~~~ Ci ty' clerk 1;,<,oJ?' ,/ AP//7 r ?L .. ~ .. _' ~~ey 2 Peter Bridgwater Chairman A TIACHMENT Ie ~,c. !!!:::x :C2~:: =.:..:: ,"y-'::, :: ..... ;::-• .:. Dece:mbE'.r 4, 199-1 World cup San Francisco Bay Area i9~4 1265 El camino Real suite lOS Santa Clara, CA 95050 Dear Mr. Bridgwater: As a further indication of its SUPPOLt for the venue pia ~y your or9ani~ation. the Palo Alto City Ccuncil passed the enclosed rssoluticn at its meeting of November 25, 1991. We sincerely hope that the selection ccrmmittee 'Will accept your bid and that several matches will be played at Stanford Stadium. We are confident that the successful experience enjoyed ~hen the 19S4 Ol~pic5 soccer ~atches were played at St~nford can be duplicated. Let us know i.f ... ·e can be of turtho:!!" e.5sistance~ JSIVR/cjl Enclosure sincerely, ',~ <'-~~-.<,.~, . . -_.'J' Ac..~ SUTOFI1JS Mayor ~-~~------~--~---------.------~--<-- RESOLUTION'" NO. 7047 RESOLUTION OF TEE COUNCIL OF THE CITY OF PALO ALTO SUPPORTING THE VE~"UE BID BY WOP-LD CUP SA.,."l FR.~CIS CO BAY ARE..lt,. 1994 FOR THE WORLD CTJP 1994 SOCCER MATCHES AT STANFORD STADn.i1o!: A.IIlD ACKNOWLEDGING RESPCNSIBIL!'ry FOR PROVISION OF C'EP.TAlN GQI,.'ERNMEN TAL S'EP .. VICES ;'''HEREAS i upon application made b~{ the enited States Soccer FeCEratioll (the "Federation orJ ), tr.e reccgnized r.aticnal governing l:::ccy for soccer ..... i thin the YJni ted States, t!le. Federat ien .I!'lternati onale de Football Association ("FIF;...n) I thE". loo"crld gcverning body for 5c,ccer, has c.esignated the United States as the host country for the 1994 World cup, the world~s la:::-gest single spo::-tir.g event; anc WrlEREAS, the Federation has delegated responsitility fo~ plar'.r.ing and implementing the 1994 ~crld Cup to tr.e ~·iorld Cup '$I'; Orqanizing COInl!'littee" Inc:~ ("'Werld CLJP USA. 1994"), which, in tur:1, bas recognized the local Organizing ccm...'1li ttee ("Werld Cup Sa.n Frar,cisco Bay Area 1994"} as the official re:pres.entati ve of the San Frc:.r.cisco Bay Area for matters relating to planning fer World Cup 1954; and WHEREAS, World Cup San Francisco Bay Area 1994 has su~rwitted a :bid to become on<e of the i;omrour.i ties wi thin the t:.,ited Stat.es that 'Will host World Cup rr.atches in 1994. at Star"ford Sta~i~m and Candlestick park: and r as part of that bi~. ass~es fin~ncial responsibility for providing local support services as en-...:.z:erated in the venue bid package; and WrlER.~AS, the city of Palo Alto prolJid€s police services for those areas adjoining the Stanford university, campus and stadium, i~cluding supervision of pedestria~ and automocile traffic on the streets and sidewalks to and from the stadium, and supe~~ision of other related activities, such as street vending, which may take pl2.ce as a result of the 1994 World Cup matches; and i',i"'HEREAS 1 the City of Palo Alto provides fire and paramedic ser-~ices for those areas adjoining the Stanford Urliversity campus anc stadium, and, under contract ""ith Stanford University, for the er.~ire campus itself; and WHEREAS, the City of Palo A.1to Police and Fire Departments havE: exi::::.-Isive experience in providing their respective services in sU:::f:0rt of major athletic events .... hicz,. occur regularly at Stanford Sta::'ium (such as Stanford football games, the annual East-West Shrine All-Star football game, the 1984 Olympic soccer events, and the 1986 Super Bc~l); and ~;\ "';" ';'. ':: - WHEREAS, thE'. City of Palo J..lto on April 22, 1991 passed a rssolution of general support for staging and c~nducting 1994 World CtJp matches in the Palo Al to/Star. fora area.: NOW, Th'LREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION' L Gpo~ b~in-.:; selected as a venue site for ~'orld 0~p 1994, the City Manager is authoriZed and directed to enter into any necessary agre.ements to provide police and fire/pa::-amedic services at the lc~est possible cost in order to enable a safe, successful and enj o~rable World Cup 199-4. SECTION 2" '1"he City Manager of the city ~f Pale Alto is authorized and directed to enter intlJ agreements W"ith World Cup S~.n Francisco Bay Area 1994 that ~ill ensure that th~ ci~y of Pale Alto "'i11 be fully r'E!i!4bursed for the actual costs of providing p~lice and fire/paramedic ser .. rices. SECTION ~4 T~e abcve-referenced agree~ent or agreements may provide that neither FIF~, the Federation. World CUp USA 1994 nor any director, meIWer, officer or employee of any of these three organizations shall be held accountable for, or incur any financial re~ponsibility or liability i:::. con''1ccticn llrith, t.."':l.e police and fire/paramedic services planned and/or provided to the 1994 World CUp by the city of Palo Alto. Such agreements sh:!.ll expressly disclaim any undertaking, agreement Or' duty on the part of the city of Palo Alto to defend, indemnify or hold harmless FIFA J the Federation, World CUp ~SA 1994, nor any director, member, officer or. employee for cl~ims or liability for any reason, including specifically claims or actions arising out of or related to the police and fire/para::::edic services pla.'"lned and/or provided to the 1994 World CUp by the city of Palo Alto. SECTICIN 4. The. Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary~ I~"TRODUCED AND PASSED: ~!ove:::tber 25 J 1991 NOES: ABSENT: ABSTENTIONS: , .' , , t: I I ATTEST: f" ',-~ ---~:.... ~ City Manager T,"':: ;:':::JR;:GOING :'G,:U,"I~"'1 :s C~~T';IEC' TlJ B£ A CO~"'=C"''!" CO!".,-00:-T;->~ O"I':ir~''''L 01, ;::ILE GLOP:':' YOUNG CITY CLERK, C:TYOFPAlOA.LTO JJ./z /q I / Da.e.a ;:Ja::e "I c:e-;o:! Cy 10' d€,(:;J''"I ~,,~~, o!!::1arty 01 .:;.rf'c;r"r' 1~a~ ~r-!! fiJi e-;()I~';; IS :r",e a:1(] C~rI~~: - fa!:u jI Ie; en • ATTACHllEHT 2 CITY OF ?ALO ALTO HeIilor:lnc2um March 18, 1993 'IO; Colleagues FROM: Jean McColm, Mayor SUBJECT; Cooperativ4 Efforts ~ith East Palo A1to E'or the past two months Palo Alto (represented by our East Palo Alto Liaison COllU!iittee} has been meeting ... ith representatives from Menlo ParK, East Palo Alto and more recently, Sar, Mateo county. This memo is to brief you on those meetings. Each meeting has been extremely productive. Attendance and participation has been expand ing. For example, the February meeting was attended by representatives from the three cities, t~e Board of Supervisors, County, the California Highway Patrol, and offices of Congress Member Anna Eshoo, Asse:mbl:y:nan Byron Sher and Senator Becky Morgan. At the initial meeting in January, ~e discu5seq the following ~r~as as the main topics for joint efforts by members of the group: 1993 Plan for Funding Increases for Police Services Grant Writing Economic Development Coordination o! State and county ServicEs Community Involvement participants assumed responsibility for follow-through on the areas listed above. Below is a summary of ac~ivity to date for each area. 19S3 Plan .tor FUn~Jnq Increa~e);; for Poliee .se~.YiceJl The Police Chiefs and city and Cou;].ty Managers are principally involved on this issue. A five year fu~ding and staffing plan for the East Palo Alto Police Department has been developed. An interim plan has also been developed J which indicates the personnel and resources needed to sustain the East Palo Alto Police Department until the first yoar of the five year plan has been 1 implemented. The interim plan is being refined so that elected officials can use it to seek the add.iti·::mal c'Ooperative suppcrt from neighboring municipalities as part of a r~gional apprvech to providing East palo Alto \olith adeq"..Jat-e police protection. Immediate assistance in the to~ of 18 Sheriff's officers is new beinq considered by tha Sa..., Mateo County Sheriff~ Beginning April 1" the california Highway Patrol \Jill provide 14 officers to East Falo Alto for a minimu~ of 60 days. All F~st Palo Alto police support staffing plans involve the need to maintai~ the RED Team until the first year or th~ five year plan is r.e,alize.d. lirant Writing In an ~ffort to assist East Palo Alto in secuYing and identifying qrants which would be beneficial to the City~ ~ Grant Writing Task Force has been developed. The Task =o=ce will he coordinated hy Palo Alto City staff member David Martin. He t"Ii11 be provided with clerical assistance by Menlo Park ar1d San Mateo county. A potential grant has bee:1 ider.titied with a March 2-8 application deadline. Menlo Park has agreed to fund a gra~t writer to assist David in meeting this deadline. Menlo Park and San Mateo County vil! provide the funding for continuing grant writer assistance. The East Palo A~to contact for this effort is Mayor Sharifa Wilson. Sir.ce the efforts in these areas have been pUblicized in the medial several volunteers have called and offered their assistance. All offers will be pursued. Economic Oevelopme~~ A team will be fO~cd to develop an economic development strate~y and to prcvide assistance to East Palo Al t·) in the area of econo.ruc development. The lead on our end ~ill be Gary Fazzino and staff member Carol Jansen~ Menlo Park and San Mateo County ~ill provide a planner to complete the team. The group will ~ork witt. East Palo Alto to assist in the pursuit of economic develop~ent possibilities and yill report reqularly to the steering group. This group is led by East Palo Alto Vice Mayor William vines. coordination of State and county servi~~3 San Mateo County representatives Hill take the lead en this issue and will work directly with East Palo Alto. 2 ~- ----------- Menlo Park Mayor Gail slocum i$: leading an effort on the part of the three mayor-s to develop ~ plan of pt"ograr:.s and activities to increase community involvement in the effort to provide assistance to East Palo Al to. Many other gro".Jps and organlzatl'JMs are involved in similar activities, su~h as the Second Annual Picnic. East Palo Alto council Member Rose GibsQn is actively involved in this effort. The steering group will continue to meet regularly, and I will keep you informed of their actions. Present plans 3re to :i:leet Donthlr_ JMjJFjcf 3 ---~,,--,,---,,--- "';.: " .. AflACIJI1ENT "r-------, . . '-., staff THIS REPORT ~ THE SUBJECT OF r--.-".-. _._._ .... _____ =t._ el~COUNC:~ :RIORITY 13 - MarCh 18, 1993 THE HONORABLE CiTY COUNCIL Palo Me, California RecoIT'mendalion to Continue Parocjqatipn ·,n the RED T~am and to Excel d PQ~ Department's AvthoriZM Staffing Levs!. Report in Brief lne Regional Enlorcemem Detail (RED Team) has been actively assisting me East Palo Afto Potice Department (EPAPD) for almost one year, having commenced operation on April 1, 1992. ThiS report summarizes the RED Team success \0 dale, briefly describes the current criminal environment in EPA and p'oposes 15 months Of oontinued partir.ipation in the RED Team through June 30, 1994. To date, overtime expendrtures have been used to backlili for RED Team acti"ity. Pending Council approval of cor:tinueo assistance, staff requests approval to exceed authOfized staffing levels to backfill for those officers assigned in East Palo Alto, To:al cost foc the 15 month continuation equals $668, i SS. Stall proposes to tal<e this from the Budget Stabilization Reserve since funding ~ not sufficient \0 oover the additional expendrtures from on-going revenue sources. RacJsground From its incep~on, RED Team efforts have been 10 targat crime in East Palo Alto via a proactive, highly visible enfOfcsment operation. ~ was clear from the start that the RED Teare alone was not a "fix" to the crime problems in East Palo Aho. The concept behind the Team's cre~on aOO uOOerlying its deployment fOf the iast Y08' has been \0 augment the severely understaffec Eas! PaiD Mo Poli~ Department. Team accomplishments toward that end have been remarkable, especially jn l'ight of the adverse conditions untie, . whicl1 the Tearn has had to operate. Some of these include high reoognitioo by criminals and their resentment at the curtailment of their 8ctr-vities, routine violent confrontatforrs and the need to maintain constant levels of vigilance throughout the rire workday. Oesprte these impediments, operational success can be measureo on many levels. During the eleven months of RED Team operation through Febnuary 1993, toe Team has made 491 arrests ~or criminai vlo\atio.'1S ranging from theft to murder. During these arrests, 39 rifles and shotguns were seized, in addrtioo to 49 handguns and B daggers. Narcotics, with a street value of $50,000, were recovered These included crael< cocaine, heroi", marijuana and other illegal substances. Opera!i(){ls also netted the recovery of 31 stolen vehicles. The clanar value of property recovered during RED Team ope'atioos totaled approximately $216,000. ~',-..$", •• -... ,-..... ---~---,---'"' 3-18-93 -1- - ~'-. - '. Statistical counts, however, do not tell lhe whole story, In aOOrliO<1 to the removal of crimirl8ls, Drugs and weapons from the ":eeI, the RED Team ha. amassed considerable pubrlC support from the broader citizenry, Residents in Palo ,A,1I0 have expressed support for RED T ea;n activities as a mach anis m to assist a beleague rad neighbor. Those people rlVi;>g in areas prOximate to the boundary with East Palo Alto feel the RED Team has provided some relief from Ih.e contjnual nightly guo!ice h~ard in those neighborhoods and the falUng bullets that have been reported in the past Menlo Park residants, particularly those in the Willows area, feel similarly. RED Team members report hearty applause for their efforts from East Palo Alto citizens, and EPAPD officers 1961 ttleir burden is mada considerebly fighter and safer when the RED Team is working. Sorr.e opposition to the RED Tea", concept and the funds necessary to support iI have come from members of the public who feel that East Palo Alto's crime problem is better left to San Matec County and its poI:1ical sutxfrvisiQ(1s. TheSE opponents do nol give credence 10 the concept of crime as a regional problem. Overall, however, public support appears to heavily outweigh !he oppositiQ(!, This is based on comments to !he pence agencies involved, press reports and public comments at Council meetings. Current Criminal Ciir!)!lie in East PalQ Alto Last year, East Palo Alto acquired the unique status of becoming America's deadliest ci!y, when 42 homicides and approximateiy 200 other shootings occurred withir. the City "mits. The title Of murder capitol, however, has fortunately not carried over into the new year. In fad, so far this year, no! one murder has occurred in East Palo Alto. The raasons for this sudden downturn are no! claar, although some speculation cae be offered, Since the major arrest operation this past summer, coord'r""ted with FBI assistance, a number of those arrested haw since been sentenced and are off the street. The sarne holds Irue for many of those arrested by tne RED Team. Several k,"Own 'shooters' have been arrested and are, at least for the cme being. out of circulalion. It would be unwise to presume that crime is trending downward despite the reduction In homicides. Many nonfatal shootings have OCCIJtTed, and a disturbing new trend is emerging. Recently, there has been a dramatic incfease in !he number of incidents wherein the pofIce have been the targets of gunfire. In 1992, five incidents occurred where officers were fired upoo; during the first two months of 1993, there already have been five additior1a1 SUCh incidents, There ha'Je been several other s!tuations involving shootings where !he perrce were not certain _er indeed they were the intended targets. The ten incidents cited, however, were ocrni.rmed s!tuations wherein the police were irwalved in actual exchange Of fire or were shot at directly, Several police cars haw sustained hits from gunfire. Fortunately, none of !he officers have beer, injured. CMA:207:93 3-18-S3 -2- - East Palo Mo's Long-Term Plan In March 1992, when Council originally sult'.orized hJndir>g for the RED Team, continued assisla'lCS to East PaIo Alto was preolcated on that City's Gevelopment of a long-term p<lbfic safety plan. The staffing portion of the plan !1as been developed and is attact1ed as Appendix A for Cooncil review. The Poijce Chiefs' Associations of both Santa Clara and San Mateo counties have reviewed and endorSed the pian. Because significant attention has focused on East Palo Mo, the next year holds S01'e promise t~at add~ionai outside assistance may be ava~able. A r,umber of influential officials at both state and federal 1ev",ls have been made aware Of t~!e sit~ati()(1 by local ot:icials including Mayors McCown, Slocum and Wilson representing the crues of Palo Alto, Menlo Park. and East PaIo Alto. East Palo Alto Poiice r..hief Matthews has also approached several grant fundi"-d e~ies and reports some promise exists if1 this area. The Gaifomia Highway Patrol Com missioner has recently authorized a contLngen! Of highway patrol officers to woT!< exclusively in East Palo Alto lor a minimum of 60 days, beginning April 1. Fourteen officers will wOO< traffic-relaled matters, but will also respo0d to ElfTh)rgencies and serve as baCk-up. It appears the San Mateo County Sheriff's Department may take a new direction ~h respect to East Palo AIIo. Leading candidates lor the office 01 sheriff have pubflCly expressed a willingness 10 help with the situation; and ~ is staff's understanding that the acting sheriff has agreed to provide 18 deputies, beginning April 1, for an undetermined period. Alter the June 8 special election, actiOr by the newfy-elected shen" and Board of Supervisors will be needed jor continued partcipatior of sheriff's deputies. In short, hope el<ists now where previously very f.'!tle did. As!oistance to East Palo Alto lor the next year wi" no! only help with a regiooal crime problem, but may enhance the East Palo Alto Police Department's viability until substantial financial assistance is rendered. It is important to note that the funding portion of East Paio Alto's pian is stiii being developed. The assistance pro'ided by San Mateo County, the Cal~omia Highway Patrol, < Menlo Pari< and Palo Alto on an interim basis will only bridge the gap until the funding for the East Palo Alia plan is obtained. Red Team Continuation S1aff recommends providing continued assistance to EPA by extending RED Team participation. The RED Team, in ~ present form and deployment, provides East Palo Alto with a proactive enforcement group that can be flexibly applied to address crime problems which the normal patrol staff cannot. The RED Team also reduces the frequency lor Palo AIt" patrol officers to respond to East Palo Alto for assistance. Palo CMR:207:93 3-1sro -3- • , ' . \,, . ~~' :1~!- Mo ~'<1its would respona' even more !requently than t'Wy do now ii 00 RED Team "f similar componant were operative. Wh!le ~ is unclear what the future will hoid for crime rottes in East ?alo Mo, it is clear L'1at the financial, emotional and physical costs to fight crime have been significant Assignment of four Palo Me officers to the RED Team has required overtme fIIHn to !r,aintain Palo Alto Pofice Department's contractual minimum staffing levels. During 1M RED Team's ten month operation. total actual costs associated with Palo Alto's participation equal approximately $339,600 (refer to Appendix B for breakdown.) This i<'Icludes the salaries jbenefitS and equipment of the four Police Department employees on the RED Team. CoIloo] authorized overtime e<pendil'Jr9S at $100,000. Actusl minimum staffi"9 overtime expense, pius RED T earn overtime, >las tGtaled $69, 7S5lor the RED Team operational period of April 1992 to February 1S'd3. To reduce overtime dema'lds on off.cers, staff did r10t attempt to raise patrol staffing lev. Is to those that normally would NNe exisled had RED T earn officers not been assigned. Some difficulty has been experienced in filling the minimum staffing 'lIcancies. To have attempted to go beyond that tevel would have likely required mandatO<')' overtime assignment of officers. Staff is concerned that Palo Alto officers have become fatigued by working c'/erome assignments. Continual overtime assignments at this past year's level would likely resu~ in a general service dedine. The overtime use associated With RED Team participation has been compounded by the fact that duhng the same ~me period, the department has expefiel"C6d an inordinately high injury rate requiring even morEl overtime. Staff befieves that continual use 01 officers wOflting overtime lor the same period 01 bme creates an undesirable situation. Pending CouncIl 8pp(0VII1 for continued participatiort of the RED Team and in ()fder to mrtigate overtime demandS 00 officers and to help maintain staffing levels, staff befieves that addition8l sworn personnel are needed to backfiil t()f officers assigned to t'1e RED Team. These addrtiona! officers will reduce the need for mandato<y overtime. 'Theral",e, staff requests approval to e.ceed current authoriZed staffing levels by one sergeant and two officers lor the duratTon of the City's commitment . to East Palo Alto. ~ Council oonceptUaRy approves this reque~ staR anticipates that rt wilt lake a minimum of three months to recrurt and hire these pefSOMei. Funds \0 cover these costs would be included in the 1993-94 Interim Budge!. Because it win take at leasl an additional four months to train these new officers. overtime funds wO<Jld be needed to maintain minimum staffing levels during that seven month period. Staff feels rt is important to provide Council With total actual costs associated with continued RED Team participation. These expenditures ir.cluoe bOth costs lor RED Team CMR:207:93 ,~-'. 3-1&00 -4- ~ ; • ! members (already included in the Po~ce Department's budget) and new costs. n sMuld be noted that costs include sala')' and benefits Council authOril:ed overtime expen6rtures of $00,000 associated with RED Team partk:ipetioo this fiscal year. n is projected, based 00 current ussge, that these funds will be expended by the middle of May. Staff anticipates that approximateiy $1 C, 000 in addition,,1 "· ... emme costs wI] be needed from May 15. 1993 un~l June 30, 1993. Staff berteYeS sufficienl t .. nds exist in the POlice Department's current Oudget to cover these expenartures, but W '1Ot, staff will request a transfer from t"e City Manager's Cor>"Jngency Acoount. Costs Already Included in police Department 1992·94 BudgJ!t RED Team Members 1 Sergeant 1 Agent 2 Officers 1 Sergeant 1 Agent 2 Officers April 1, 1993 • June 30, 1993 SUBTOTAL RED Team Members July 1, 1993 -June 30, 1994 SUBTOTAL $ 20,474 $ 19,001 $~ $ 65,683 $61,914 $ 76,003 $140,649 $296,5136 AdditiooaJ Costs Not 11lCiJd¢ in Police Deoartment's 1992'94 8uc!\jet o.>er'jrr.e backfili (Ma,' 15. ',993 . June, 30 1993) $ 10,000 EstimeIed Costs -ior exceeding a ... 1horized staffing level (July 1, 1993 to June 30, 1994) 1 Sergeant 2 Officers 'Overtime SUBTOTAL $81,914 $140,649 $ 52 693 $275,256 • For RED Team members and backfin ontl new officers hired. Equipment {AppendIx Ci TOTAL COST CMR207:93 $~ $668,155 3-18·93 -5- ConcIusill!J The RED Team ,'las dramatically acted during the past year to mitigate crime ill East Palo Alto and in the surrounding communm'9s. The combined efforts o! a regional approach have been a worthy display 01 cooperative Jaw enforcement under very difficu~ circumstances. With additional assistance apparently coming from the San Mateo County Shertlf's Office and the California Highway Patrol, staff berleVes cornir.u9d RED Tea", aaMrt will further decrease crime and provicle time lor East Palo Alto to implement the long-term pubflc safety plan. Recommendations Stall recommerods that Counal i) Authorize continued assistance to the City 01 East Palo Mo in their efforts to reduce crime by ext6l'ldir.g the RED Team to June 30, ,SS4 and 2) Authorize the Police Department to exceed its b1 Jdgeted staffing )evel by one sergeant and two officer posiliDns. CMR:207:93 3-18-S3 -6- ----------------,-- Datoe: To: From: Subject~ ,~ppErm!X ~ C~: ,,:, '-~ EAST PALO AL TO POLICE DEPARTMENT'cC MEMORANDUM Me:;,bers, $t!I"", r-':ateo C'::Jl..;"ty ?81:!.,:;~ C:-:ief's .t.ssociat':'c:l E...:.:r-nr.G;:7'; E. ~~att:--'E:t""s Chief c,f Pol ice EPA Task Force Report Due to ~he tremendous crime proble:':15 b~ir.g cr:·,,:!'"':.n'ted by tr.e E3.st Palo Alta PolicE Depa~trnent, it is felt in or~er to gain control of the streets, a supe~ior torce cf en i fC'-!:'!r'.e1 F'·::lice preser,ce be made. This sho ..... of force cann,:.t be c: a lir.-,ited d:.Jration. Therefore., at the request of the SNCPCP-. E:PA Task Force. the attached proposal of anticipated ?·~lice depart~.e!"::t needs .tas been drafted. The plan calls for a der ini ti ve inc::ecse in the r-.ll.::',!::;er of officers tlon ti".e street rr at any ,::n~ tir..e, or a :"inimul':l of: e~g::r_t plus a supe!."'visor-. AdditicnalJy, the plan also calls fer an "overlap" shift bet· ... een the hour'S of 1600 to {J2 J(~ hours. ::n trlis I:lanner the maximum number of ur,iformed person.r.el .... ill be avz.ilal::le to handle not only calls for se~~ice, but initiat~ a ~ro-active work mode as well. Historically, the ability to be pro-active in attacking the cri:e problems has r~t bee~ possltle. Furthcrrnore, clue to the tY?E o~ a;;~~5siva pclice ~ctivity ~~~~~ is anticipated, it is i=peretive the superV1SCrj a~d ~~ddle . management cf the departne:-.t be strengther,ed. The nurrber-'~f investigators has also ceen in,::reased to s',J.p'p'~rt th~ · .... o!:"k of the uniformed officers. This proposel has been revie'.;ed by t.he Task Fcrce and adj',Jstner.ts made. It is I'Cly, as ' ... ell as the '!'ask Fo:::-ce l S opi!lion t':1at t:-le pri:::ary factor in this proposal is te, IT,cr-e'3.5e drastlcally t.he: specific 5ched~ling can be altered to ~~e~ the ~ever e~jing changes in crime. patterns. The plan alsD arlticlpates t~at after a five year intensi "fied e.nforce.merrt:. program, the: :need fer t11<2 high number of officers may be di~.inished. This fac'C is indic2.ted in the change of years six through ten, re~lecting 2. decrease in the need of persormeL , , .. This i%uld be only possible if the ",root ca1..i.ses" of the r::r.i~er i.e., poverty, employment, education, can be addre~s~d thro~;h an intens.;l social services program by city, cOtInty, state as ' .. '~ll as federal agenci es. The pol ice depa.rtrT1ent a lor.e car.not !":,,ake any appreciable i:r.:pact on c!"'i::1e ..... i ti"'.O'...lt the aicrer.-e!"'.t ioned support of the social services ~etwork. Additionally, and ~ost impor7an~ly is the n~ed for intensive econc~,:'c developrr.erit in the city to support badly needed city services. ~ithcut adeq~ate dzvelopment of a tax b~se, the sustained police presence in t~e city ~ill ~ot be possible.. It is requested ~ha~ upon revie~ of the plan, minus mi~or cha~ges to the deplo}"litent. of the perscnr:~l, t-"e Sa:"', }iateo Ccun-:.y Police Chief's .l\.::;,scciat,ion approve of the proposal in the concept. Along ~ith the Association's approval, the plan ~ould be proposed tD the East Palo Alto City Council to advise them of what the courty's police chiefls feel che real need is to attack the overt st~e€t cril'r.e problem. -. ., I r , I ""I ! }~;.-\ 5~~'i I~~;~; 100 S~: I ~~:: ---~ T~ __ , ":~ I T:~~ ! ~-~ -i-:-s-~-I' ," --I I _1 1 , I' -'C--'!-~,~ ",I 0}00-020'::. I 16 ; 16 1, ___ :6 ~, ____ ~ __ S c .:.. --r ---'I ,']200-0300 I, 2 I 8 i E i 8 i s I 8 I 2 /1 03 CO-O'OC t" 8 18--1 -3 I~ -+] -8"---+1-', -!,-J , 1-, 1"--lsI811 0.;. 0 G -0 5 0 0 0 i a ~ :; i 8 ,; ~ ,i G5-Cl:.O:....'"G",E",O"O,-_ 1 §-J B I 8 i __ 8 r 0 J s i 5 I: ! 0600-0700 =+== S 8 .cs=---+l_...:sc...... 5 _t-_8_-t_8 _~[ ~oo -G80C I 8 C .; I 8 5 6 II OSQC-_",,9-,C_'O ___ r-_8 8 1 ~ 1_-'8_----_ .. _:~~~"8--t 8 8 ~ 0<;00-1000 f--'S_-+_.cS=--_ L...:s,-_-+-I_-=2_ i a c \ sli 1 coo -11 0,,0'-_-i-1 __ 8,,--, 8 +-.:::---t-_8=-_--+-1_ -_ -'-,8~==~=--'&:'" -r 8 ~( UOD-1ZCO I' 3 g 8 I 8 I 8 S I' 8 Ii I I' -'--+-1' -"'--TI I' If-'1:..:2:..:0:..:0,,-....:;1,,3,,O,,O ___ -+_:..:8=--_r--8 ,,8=--+_....:8 _-+' _-,8=--.:~ Sell ~: : ::,,"::-'-, ~:..:, :c......-+l-.-':-+I-..::-+~:-+-:=---+1_.::.:--t : I : ~ 1500-1600 I" I 8 -,-, --;--8--+ 8 I 8 I~il If-'~,c::..:~-:-~--'::..::--'::..:'~--+t :_-+-1 -.;:8-a~~::'--~~:: ~~~;_-~~:..:-+-: ~-: 1-;-.11\ 1 .,.. '", +-1' --''----+' c-1--;-',',' iI1800-19<'C~ 8 6 t:, ~ '"". ' ~ 1:-----:..:.-=-_+-"-! 1, -~I 1 I " i! 1'900-2."::00 S S .~ a, 2· I ·3 !I '; 0, oc -21 0c.,0 _-+-.::'.:." _+-~, ~ -1,1 1': L I " 1160 I, 1 6 ~ ___ I 1 s -]1 2100-22QO 16 _0', 15 _J 10 I 16 J 2200-2300 -j--,,-1_6_",1-,1~.! "--L~_ 16 I 16 1"6 il L 16 E J _'6 T 16 I 16 ! 16 II 23r.;O-24G':) 16 ]l,.BOVE NLo/..EERS EXCLUDE SUPERVIse?s I I , I, I , ; I _,:, ~''C'::.: :";;r:"~~ 1:?'..:':!.-::~~ Eaf.t~ . .A.."?.....AL~_pro~Al 1_Q.......ygA.r.Ji..l:!.i!q~t. p~.c~~ct~ion:? Years 1 -5 I~MI'LOYEE SERVICES =J'~oar 1 Yoar 2 ~ear 3 ~j Year 4 Year 5 Ii 11~_~AL1\RJ-~;-~----~---~-1.~-6~~~-.. ,~-;;:-;65 .. ,()06~-;;;--·-~-:790,"?7 4,9Q2,095 i I ~;l~GE; DE~~Jo'~!~--____ ~l,-~~O~2.!'_2_ 1,3~~_Ol~ __ 1,.27-.!.'.IJO -__ ~051~4~ __ ._1,!J~, .. ~ OVER'fIME I 3"~,OOO 375,O~_I. 375.000 175,090 . __ !~,OOO 6,9 0 1,5.44 ~ SUBTO'l-:-~==-=r= 5, 95-i_~~?-t~-· --~?~~~09, 1~~50_' -5~~ __ , I I i-r--------·---+~------I ~~~VI~ES (!} UPp~.:~~_~--f ____ .___ --------4 ---i-------~ i-----·------t-----~--i Ol"FICE EXPENSE :~ 75,000 t= 7",000 01,120 84,365' 67,719 --,--------------~--.. -.-------~ -------1----------~- CON'l'JU\CT SERVICES 239,000. 144,560 150,342 156,356 ~,61U I ~~~~£.I:_~_~~;-~~rE~~~~_ . ---~,~.~y~ ~~-~!!.~~-~~~~~:-;~~ ~~;6~~;-:--~j:~~1 SUO'l'OTAL . 764'OO~ 6'0,560 716,682 746,910 77<',785 I ~~""""'":,J=.,:~~:, ... --.=-+-:,.. "'~ .. 43,056_.I_~~!~_~__ 4b,~~69 1--~~432_: 'I' 72~_1.J "SUDTOTAL ====t14,OOO ii---------------·--~ ------ ~OTl\L_,:~~ =~ -~..:~~~=-R 1_ 6~!.: 0, 6,;.~J 7.! 172 I 817 1; , 444, 004 . The abovo figures inoludo Cl cost of living increa6e ot 4\ por year for each cat.@go,l"Y. No cant of living inoreaso added to overtime amoUhts as it ig antiolpated t.hat these amounts could be reduced each year. r'1"""""~""""~~-, .. ~ . .....,...~.-~ •• --- ., I ' f ','-"',-- i I I ~ paJ,.Q ..... Al!.-o prop9.~~]. lQ __ '!~~~~1J_g9.~t... J~LillQ...tiQ-'J3 Years 6 -lO i SALARIES -4,995.222 4..'l~J1.73,) 4,99(),IJtil 4,81)9,9'11! 4,194,'122 ! I~~~P~~!~E S~~V;;S . _~YHar ---; _ I'~ar_ 7 t'Jft.UT 6 YO~~~ __ l Yft~r 1~ II~;;~~G.E ~DENE-; I TS ~--'1-,5~" ,-';'~!_ ~ 1, 5.-; ,09_ _1 ,~-6 , H!____ _ 1, ;1 ~.!!.~-~=.'-' •. !_"-~~~jl. '_(Jy.!'~TI~ '_~ ]"5~~O.?-" I ]'''-, OOO_'''_I .. ~_37S' 000 ~_:ns, O~~_~ 3'75, OO~~\ !rSU~T:m-~ 1:~'91~2~1 6,91~_~ ___ ~.~1"8:__ ~ .793 /962_ 6,656,006 11 F:;:f:~:;:~~~~~~ .. j,.--:;:~~ ~1=-~l:; i::::i,~=' VEllICLl; MAINTENANCE! ~10, 460 516, ~50 505,326_ ---.. ,.~'-,.~------,---~.-., ,-, ---,---.--'--.----r SUDTOTA!, J 790,023 787,028 786,934 ± ~~L=~~-=~_-_______ -.. i==.~~~~==~ ==--==--=r-~===-=---. -------~~-~ ~~~---._------ .02,642 lOu,74.8 -.. ---~---~--.--.- 90,231 19"',840 ~~--~-. -~-.--- 73,53-4 ""2.5-49 .--""--- 66,40,"} 'I'rt,137 ~~-- ~ -- I I----~--.. ---_, __ ... _____ __ .. __ , ______ . __ ~ __ . ______ _ , 56,659 .~~_56,925 \_~~!_~OT~L __ 50,]6? S2/_~~~~__ _~4.'E_'! _____ '---____ . ___ '_ CAPITAL I::XPENSEC 50,36'.) 52, 3~054'4'J9 ~.:.~-r:-----=_:___=~ -:;~;~;::;;;::, 2~:-';-;~~ -." 75J:-]9;-. f., ~ 617, OZ8~_~ [" •• ~: 14d Tha above fiqures include a 4.0;; cost of liv-ing increase in each category and roflect the reductioQ::J itl manpower and v(~hicloB for Yflars 6-10. r J.. _ __ ,~ ", ,.; " ' ----::--",--~. ,-"~m:':'-'-c", t~ ;" "",,', .. \ :'!",.-" , .. .'. , >~ , ----_____ . ___ --. ... "..::..."'-'~~;;;J __ ~ .. -~ ........ _._~.:~~ .. -------J"'i'!f,'".-""' .•. i ,W i ............ -,.----....--- ~.HtLg~..!L1\ 1 'tQ. . .l"LoI?9~aJ,. lJ!_'LI~ilCJ3udget-frmctionr? Years 1 - 5 "... -~ EMPLOYEE SERVICES YaAr 5 .. _------.. _.-------- SALARIES _:ea"--'-___ ~.~3~~--~ Ya4r 3 . f."-~-~-·------- _~EO/716_ 412Se.11~ 4/258~71611 .t,258,716 _.______ 4J.?~!' 116 I OVER'rIME 375,000 :315,000 3'15,000 375,O!)O ]7~.OOO I --------_. -._ ... _----_. -------~ W""" .,,",U' -"""-. "'1 ''', ,.~ .""". '" ~" uo, '" '" uo, '" suaT~~~A~ ____ -=_ 5~:~~-,~18 _ ~,95.J,~l!--_I_S~~" _~53,~1._ 5~5_3~.~_11 Ir .... '--------~·--------.-----.. --------.-~-----.----" SERVICES/SUPPLIES i ~ Ii OPFICE EXPENSE ._·L~~OOO __ . 75 ... ~~~ ____ ~~~ ________ 7~~_?~ 7SrO()~~1 23'},OOO \ 1:!9,O()O 139,OQO 139,000 IJ'j'OOO~1 - - - ---r-------. --------.----,,-.-.. -.-- YEHIC.LE M1\!~_T_ENANCE _.L_ 4~O,_O~~_---i __ 45-",OO"--__ ~:~--"-,,-o....__ 450,000 __ '50.0~~' ! SUDT_O.:1I.L ______ ~_._!---" ~ ~ , ~_O~--i ~!-'_~~~_ __~4 , 0 0 ~_ ---~~~.~--l 664 I ~~?_I CONTR~CT S~RVlcES --------~. ~--------- I;;:_;;~'~_-~~~;q~ =_-~-=: 1 ~~j~::: r:TAL, _~~~~c~~7,'~l,-~16~~.5.,31~ .,65',31B 1_~'6s9'J~B I <,65',J1B The above f1qures ropresent 19<]3 dollars and cost. ot living increases are not !a.otQre<l into those c)lartB. l ( , ! fl \ , i 1;~'!_t Pa19--.l\~Pr<W-Q~ JJL3_~_~-!J';:'" .l.Ludy!-Lt __ e.roi ect;jg_n~ Yeilr6 6 -10 r-~-j] EliPI,OY"tE SEUVICES Year (i rear., 1 Year 8 Year IJ Year 10 fi ~---~-~-~-.----.-.. -----------,--~-----------~----I, S1\LARtE.S 4,105,716 j,':J4.5,060 .1,792,060 3,580,404 3,360,748 il -~---.--------... "---------~---------'-'-'-~----------I FRINGt, DENF~FIT.s 1,272,7'/2 1,222.,969 1.,175,529 1,109,9:!S 1,044 /312] i~;-E;'rl~~---' .-... -------]75,~;;O-----)75,000 . -3-;;:-~';-~ -175,0~-;;' '~--,~,OQO ! il SUOT~;~:;". -------;~:-;~:;-,~;~~j-'~;~-3,029 5,3;2.~~_ --,,06~,3;~~_ ~:;~-8~~~ !:~~;~::-=~F ~~£=,:;: :~~~ _ ~::~; -! ~;;-: -t~~il !,I\_~E~.nC~~~_~'I_~--.!_~N1I._~_~.E_.j_-,_",_ .... ----'"., .... --b-"" ··~t-~~-~[~~~~~~~·I I SUDTO'l'}\f, 650,000 62Z,oOO 59B /000 560,000 54£.,000 I Ir------------·---~· .------.------..... -.--.--------------------~--------- +~-----+----- 41,'00 I --~::oo r-~.~~~' -------,--------~--~-~ CAPITAL EXPENSES ----..... ~~-.~.-~--~~- 41,400 ---.--~~~~~--, '""'~"-=-_ -==t~:~::~ ;:;~~t :.;:::: +~,.::~;;:l.,,:::d '------~--------' ~---~ .. '------' --.---=-==~~~----- These ligures represent 1993 dollars and cost of llvinq ihct"eaae8 ar~ not factored into thase charts. i~_ I , ' : I i I 'j \ t ! , 1,'.\' ,-' ., \' " YEARS l-S 1 Chief 1 Capta.in 4 Lieuten~n~s 10 Se~geants n .QJ:.t_iclO!rs j 1 s· ... 'orn YEAR E 1 1 4 10 g 68 YEAR 7 1 1 • 9 ~ 65 YEAR ! 1 1 4 9 .i.Z 62 XEAR 1 1 s li 58 1 1 , 9 Chief Captain Lieutenan~s Sercreants QtJieers s ... ·c,rn Chief Captain Lieutenan"!:s Sergeants .Office!'s sworn Chief Capt a. in Lieutenants Sergea.nts Officer~ sworn Cr.ief Captain !.ielltenants Sergeants Officers s .... orn 7 .ti 54 Chief Captain Lieutena!'lts Sergeants Off icers sworn 1 1 , 3 1 , 7 3 13 1 7 3 1 13 13 1 1 7 3 1 13 1 1 7 J .1 1J ?ec~r s Supervisor Secre ary Reeor s Cl=::;:\.~s CSO's :::-.§ .. ~'} .. Lc.: 1 e !"!ec~ n ~.;: r.O:l-s· .. ·or~ Records Supervisor Secrec:ary Re::'n-ds Clerks esc's Ve~L icl'§: ___ X,-~.chanic !",O:-: -s ;",'or n Pecor,~s Supervisor Secretary Reccrds Clerks esc's Vehi ele r·r.-e::h~jJic :"":0:'1. 5""""r:1 Records Supervisor secretary F.ecords Clerks eso's Vehicle Mechanic nor.-S'*G!"n Eecc·rds Super-vis.or Secretary P"€cords Clerks eso's Ve:-" icJ...g.--11 . .;:.chanic non-sw'orn Records Superviso~ secretary Records Clerks CSO's ~Cg:r.icle Meche....D . .lc nen-SWorn • c ~_):I'>o;;e&l~~~ __ ""~"-__ ·"-: _____ n The salary c:osts include n::axillll.un certif ica.te .anO eClucation paJ anCl are based on establishing a. base sala.ry at officer level and increasi~q the ~alary at each supervision level using B stan~ard 15% increase. Tbe two levels o! middle manaqenent (Captain and Lieutenant) are sepa.rated by 10%) " Officer > sergeant = 15% sergeant > Lieutenant : 10% Lieutenant > ~aptain = 10% captain > Chief = l5% The folloving initial pay sebedule was established: Chief $,,801/~O captain $5,914jmo Lieutenant $5,,377/111C serqeall.t S4,888;rr.o Officer $4,2SQ/mo Records Supervisor $3,600/mo Records Clerk $2,793/rno eso S2,793/rno vehlcle Mecha.nic $3,40SIl4lo Benefits Were set at 31% of salary 100 Eacxground in"Jest ig2:t io!"!s, i:nc-l w.di:-:g pc"lygrap:'l, ps/::h and t;'Iedical at $1,000 per cackgrc-'::ld $100:QOO 1,000 Bookings at co~nty jail a: $l:~ e~. Sl14 t OOO Radio rnai~tenance to service radios $10,ODQ CN'I'F c ontr ibu t i or~ $15,000 TOTAl: £230,<00 YEARS 2-10 1/000 Bookings at. county jail at $}14 ea. $114,000 Radio maintenance to service radios CN'!'F contrib'J"':.ions $15/0CO TOTAL: -;.;i.~1;. ~. '"~~" The vehicle maintenance accou~t cov~rs the operati~g ccsts of ~he vehicles and a veh icle replace_T:er:t CiCC01..:!"",t. Tbe .;:lrrtow::.ts us ed are; $~4,000 Marked Patrol Unit $10.000 Unmay-ked car The am:::unt f'C'r eaci'. year is dete:r::-;i:-Je;j z'y tr.€-r:"..!::-:t:er of \'o?~i,::les iT. service fer tr~at yea::-. YEAR l-~ ~5 ?-larked Patt"ol Cars 10 Umr.arked cars 'lea~ 6 24 Mark@d Patrol Ca~5 10 l-nm2.rXea Cars Y~ar 7 22 Marked Patrol Cars 10 Unmarked Cars Year 8 :21 t1arked Patrol Cars 9 Unmarked Cars Year 9 19 MarKed Fa'::-c,l ca.!'"s 6 Unme.!"J!:.ed C.;;l.rs "'iear 10 lS Marked Patrol cars 8 Unmarked cars ,,----, •• _-,--' -" ----~----------------- c~prT~L EXPENDI~UR~~ 11 marked p~trol units with light bars, radios and cages at 524,OCW ea. $264,000 5 unmarked cara with radios and lights at $12,000 ea. $60,0'200 20 Portable radios with batter~· chargers at 51,500 ~a. New officer safety equipme!it, vests, guns, belts, rain gear, flashlights. $60,000 TOTAL YEAR 1 ~ ~_l, __ -tLQ __ O 0 Equipment replacement account to ~fur:d L;tur-e re;t:'l acerr-,er:ts for '.·O:r~1 out equip~ent other than vehicles (set at lot of original capital expenditure). TOTAL, $41,400. Current Level • 14 marked units 5 unmarked cars 15 portable radios Additional 11 markec unit::; 5 unmarked cars 20 port,9b2.e radios 35 portable radios ,- ~-.. -~~,,~.------. 1 I ,'" \.0 CO '" U CJ~ 0 '-c...- 0 -'-' ~ ~ o ':0 CL ~ ':1) C:) UJ Cj o :: l '--, i i --' ! I , .L; L--,~ -. , ;;; ii '--'-lilU~ l! 1i ; ; -------- I _ I ~ , , i; l - ;; ;;. , " I -'--'--- _l ~, I J I -_ i ", ::--:',1 I ;.;. ., :,-----~, . -'---JilJ! ~~ ::' E ! , , I t! o ,"' (J L < (J CD II c r:i Q 6 C'') C o W L- CD 0.. o , . 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Of f ieer ~1 0 0 I -0 .x X t X X 0 I~~~~~~-+-~---:-----J."':''--+-~--+'''':::'----I-~-+~-~I Of f ice!" 11 0 0 0 X X X X x ~O"f~'f:.:~,-,c,-,e:,r:....:l::2,-_-_ --tl_'x,,-_+_o~_+-,o ,_--1-'o"-_+...::x ___ I_"x'---_l--'x'--! s.-:D~f~f:.l~'c~e~r'-1"3:....._+-~X~_+--'!--i_~-_+--'o'---~-__J.I-'x~-+,,..:::x-__1! ~~::..:':..T::f=~:::.::.~r...:.l~4'--+-~:--+-~--l-~-...:.~-:::---1i-O::8-",-_=-t-+--':::.."-_-,,~,,....::::==--i • APPENDIX B City's Actual Costs for RED Team Participation April 4, 1992· February 19, 1993 Sergeant Agent Two Officers Subtotal Overtime costs (RED Team and patraj backfill) Total Cost '~---"---..--,-,, -'",,' '" $ 74,034 $ 68,695 $127,125 $269,854 $ 69,765 $339,619 $ 3,000 B60 450 150 1,250 560 750 6,300 $18,650 Total APPENDIX C Two Laptop computers Trinium sights ($115 each) and fiashnght attachments ($100 each) Compact door ram Ballistic shield SWAT mirror with extension Video equipment with zoom capab'ilities Nylon duty bar.s, mesh uniform shirts, raid jackets ($140 each) R'llltal 01 undercover vehicles. (Average cost is $45-69 per day) Personal computer and Laser Jet printer Night vision equipment • l I --- -- AnACHM£NT 4 OJ; sta!fe.J«t ______ ---. March la, 1993 THE HONORABLE CITY COUNCIL Palo Altc~ California propose.q Imple'rnentetion Plan fQ..~ A8 4.08 ami ... , P:.rking ci,tation proces.a.i..ng Report in Brief This informational report provides a summary of the plan for implementing the park.ing adi,udication program as required by Assembly Bill 4. 08 (AB 4 OS) I ~s 'We 11 as the proposed lO::1g-range solution to parking citation processing 'activities. Associated staffing recol'1U:lendations and costs ar-e provided. No council action is required at this time. ~~):9r9und Recent legislative. changes, problems with administration necessitating changes in the citation program~ as well as the city's co~tinued of parking citation collections, are .... ·ay the City administers its parking Assembly Bill 4:08 was signed into law by the Governo:c in 1992. This bill decriminalizes parking citations, removes parr:.ing citation processing from the courts l and establis!".es a syst.er;\ of adrr: .. inistrative adjudication for parking !:lffenses. Deer imj na 1- ization of parking citations will co:rr:pletelY re:nOVe then from the criminal justice $ystem and repl~ce cri~inal prosecution with a civil judgement process. In lieu of the complex criminal court procedure, an administrative adj~dication process ~il1 be implemented that includes a no-charge review of citations by the issuing agency, offers: a :mail-in or personal conference ~ith an adjudicator, and permits a final review by a civil court~ Appendix A reflects the sequence of events that will occur under the prOVisions of AS 4-88. The City has also been faCed in the past year ~ith recurrence of chronic problems ...rith ito;; parking citation contractor. A brief history of the problems experienced vith parking citation vendors during the past seven years provides information important to CMR:206:93 -L , I !-;:;. , , I ---------------""'" . '":,~ -~«:..~ , ;!~l·· - ------...... page 'J";,.to under-standing staff's re'::om~en-~ation on a long-term solution to citatio:1 preces:sir.g~ In september 1986 (CMR: 4~5: 6}, a OflE:-year cont.ract for parking citation precessing '10 .. <3.6 a' ... ·arde-d to Vertical Management (,,'MS) ~ During the teLl:': of the contract, it ... ·o3s deterreined that V},;,S was delinquent in making paYlr.ents for fines received Oil behalf of the city. In August 1987, \!HS I • .'as nQtified that its contract was terminated for material breach. In October 1927, a settlement agreement was signee: by VMS O'\l,.'l"le~s and all revenues o .. :ed to the City ~ere recovered. After termination of the \"MS contraC't r Finance Department statf temporarilr assumed parking citation processing r-espClnsibilities for an eight-month period, at ~ cost of $e3 I OOQ. Due ~o the lack cf coInlt1ercial computer software tc support in-house processing and the difficulties in manually p:l-ocessing high volumes of papen .. 'ork, staff could handle only the ~'i tial collecti.on of fine payments. Delinquent citation processing .... ·as put on r.old until a neW' vendor was found. A multi-year agr-ee!!'e~t ... ·2S a·..;arded to Datacom Syste:r.ls corporation in Mar-ch 1988 CCMR.:195:8). Datacom Systems .... ·as later rer.amed to Lockheed Information Manage~e11t Services Company. During tr.e second year of the agreerneilt I staff was informed of Lockheed I s intention to increase the cost of citation proce_ssing by ~7 percent for the third year of the agreement. Due to this significant increase, a request for proposal (RFF) process was initiated to ensure tha.t services would be provided at a competitive price. !n August 1990, as a resul t of the RFt?, staff recommended a ne .. · two year agreement with West Co:rr.putil. About eighteen months later ~ staff uncovered cash handlir.g irre;ularities, including evide:::'"l'::e of ~he!t by West computil personnel. An increase in the numbe~ of complaints about West Computil's custo;;-,er services ... ·as also ob$erved~ As a resultr in May 1992, Finance staff once again ;.;ssumed cash handling. payment processing. and cLlstomer se!"vice functions," West Computil was responsible only for managing the database and for the mailing of delinquent notices. In September 1992, staff determined that the cumulative c.::.sh handling irreqularities, service proble~s and evidence of lost and stolen funds warranted a change in vendors. After yet another RFP process, Council approved a multi -year agreement yith the City of Inglewood. The contract calls for the Palo ,}.lto staff to continue the casrl handling, collection and processing and customer service functions fo~ citation processing. The City of Inglewood is responsible for maintenance of the CMR::206:93 1 Page Three inform.ati..:lnal databA.se, for mai 1 i~g delinquent notices and for placil"'.g regi~tration holds .... "1 th the DeparU''ccnt of ~lotor Vehicles. While the effective date of AS 40E. is ,July 1, 1933, the legislation requires that by January 1, 1994. parkin'; aqt2:1cies lr.ust assume responsibilitr for the adjudication p:-oces5 and fully irnp2c::.1ent a citation adjudication exa::tlner program, Recently, staff v,.'as informed by the AdJ...linistrative Office of the Santa Clara county M;,micipal Court th1."lt the County ,",'i 11 cease handl ing parkir.g citations as cf June 30, 1993. 'I'his means the City t"iust have a plan in place, operational g<..l idelinss developed and approved, the a$sociated staff positions hired and trained and citation forms amended prior to that dat~. Work on n-,any of the abovc~tasks has already begun. Staff anticipates retun-,ing to Ccuncl.l ... r~th the Interim Budget ",ith specific requests [or staffing positions and funding to cover the pr-ogram costs. Becat)se of the July 1, 1993 implementation date, staff plans on hiring a temporary adjudicator .. \lith Existing funds during toid-Ju.ne in order to be operatio:')al in time, Preliminary esti~ates call for th~ addition of a half-time a.djudicator and half-time office assistant, togeth€t" with equipn',€:,""t and furniture. Estimated costs total $64,000. Once the adjudication program is c,perational~ staff plans on pursuing the possibility of Vl'orking with other adjacent agencies to determine the feasibility of a joint pO''''ers authority' that would help to ~ecrease the costs of the program. Parking Citation PrcG"essir.g Staff hired two and one-half ternpCr-3TY e:.:-.ploye€5 to assume the handling and processing of in-person customer inquiries, telephone and mail inquiries, payment processing and the scheduling of court dates. Due to the etficier,cy of in-hOUse processing. cash controls have significantly improved, custoner se!:"vice levels and collection rates have incr~ascd, and the co~plain~s regarding irregularity of ser-vice have virtually disappea!:"ed. The le.vel of service and support from Inglewood staff has been satisfactory. Staff believes that in-ho'J.se ci tatiofl processing and related customer services should continue, especially in light of the changes associated with A3 408. To maintain in-house processing, staff 'Will propose in the Interim Budget that the. two and o!",e-half temporary positions curre~tly staffing the program be converted to CMR:206:93 1 1 , t i • Page Fcu:- permanent positions. The positions include one full-tilr.e lead control account specialist, O!"le full-time lead control account specialist, a!id one. half-ti:;~e control/account assistant. Cc'sts related to these positions total $119,737. "'"bile the d&tails of the AB 408 implerrLentat.ion plan are still being devaloped, it is evident that the parking citation progra~ will be significantly different frem the way it is currently and ",·ill req-,Jire additi'onal General Y·...:.nd expenditures. Staff believes that with the history of problems with parking citation vendors and the changes created by AB 408, it would be beneficial and mo~e cost effective to maintain an in-house citation precessing. I / Finance Director Attachment CMR:206:9J _v \ I , J- ',j 'II'" --I il\' 'iL I.rl • \. . "0 l·'o'. "- LYt'lNE JOH..~SON Assistant Police Chief • • ~endix A AB408 Administrative RevieH' Process PelUllry paid by milll or in paron atRewnue Collections, Citation iHued. De/,inquellr n~l'in' .!Jem afier 2 j days.. Penalty paid. ViolaJor requcJ1s hearing. Occurs K'l'rhin 2·4 l1'eeks. Hearing by mil;1 or pefl'Vnal cotifi'rencc. Decision m.ade by A:ijudica!or. '.-----=---,/ ~ I I I ! Cire dismissed. P<JJQ/,y refonde<1 I to \iiolmor. . Effecti .. July I, 1993. eire upheld. Penalty rerained b)' city. : lnfria! rew'ew i'it;I 't'Jrigartonj rtq;wsr~d, In\'C'srigatirm wmp;('f~d. Via?olO.f'" f1..onfied. L-...a. Ciu' dismissed : --...-J for couse. L __ • r--:-'--1---, Cue upheld. ~ l/iolalOrhflJ 15 ......: days from. mailing to request hearing. Pena'ry paid b} vi{J{w(lr. ConrcsraJU has 20 da)'5 from mailing o/decision ro j"Jn'ate ~~I in d~'il coun. r..--.-- No n::'p!l1lse TO nc.tiCr', De!iiiljltl.'nf non'a 5ent rn 'H.'a!ar(lr -.... ---~--.-..... -.... ,-.... , ....... ~.-- - ...... ~"' .•. ~_:: ;. c AIT"CHMENT ; M E M 0 RAN DUM TO: UWfties Adv[sory Commissron FROM: Randy Saldschun SUBJECT: Utilities Reserve Policy Recommendations DATE: Marcn 26, 1993 This report provides tine Utilrties Reserve poncy Recommendations for your consideration. The recommerdations herein are the ::::ame as the March 3rd report c·n Utilities Reser'lie poncy Recommendations, however t'1is report indicates the projected reserve level guideliMS fOi a Rate S~abHfzation Reser\le (RSA) and also includes some text revisrons. This report does not mclude a staff recommendation en dispositfoo of the electric tvnd reserve surplus but ~ does estimate the resutting surplus unde, the RSR concept compared to the current reserve policy. A separate report will provide staff's recommendation regarding the electric fund reserve surplus. The recommendations in this report are based on a prospective ana:ysis of the financial exposure of each utility fund and an evaluation of those expend·~ures which should appropriately be funded through rates and lhose which are better su.'ted to reserve funding. The approach taken in a,'(ving at appropriate reserve level guidelines was to identify events which could impact the reserves in order to determine ~ the proposed guid.3lines would prodlJ"..e reserves sufficient to cover such events. Staff has conciuded lhat tine proposed guidennes should be adequate in tihis regard. A review of reserve policies for other munic'~pc' utilities was also conducted. Not surprisingly, policies varied between cities, largely infiueneed by local conditions. This report is o:-ganlzed as fo!lows: execLrtiv€ summary, reser ... e policy, reserves inverrtory. RSR level guidelines, impact, identifIcation of major revenue requirements and contingencies, and electric fund contingencies. 1. EXECUTIVE SUMMARY· Staff recommends that a Rate Siabilization Reserve (RSR) be estabnshed to replace and incorporate t>,e existing System Improvement Reserve (SIR) and Trensfer Stabilizati"n Reserve(TSR). An RSR would be created for the water, gas, elec1ric, and wastewater collection funds. 8ased on FYS2-93 financial data, tine impact of implementing the fonowing reserve policy recommendations is not expected to be significant relatiye to current reserve poney. Adoption of the proposed policy will continue to provide prudent reser .... e 1eve1 ~uidelines for t1e utilities to meet the financial challenges if1 the future. -·~L j i '-'. 2. RESERVE PO~PCy- The fo"owing narrative reflects the recommended reserve policy on which the proposed changes are fC>Jnded upon: Generall'y speaking. reserves shcu:d be established to finance extraordinary Oi"I&~tirne contingencies. Reserves should not be used 10 solvalong·lerrn financial problems. Rates should be eslabrtshed la finance currentaperaii"g. aapitai. and fins""ial obligations which are cf an on 4 going nature. Thus, current operations are funded from currsnt revenues. Also. reserves should not be fur'lded 10 cover major catastrophic disasters. The City has in9Ufance coverage at certain levels and other gOIlE'rnmenta1 resources can be made av;anable in disaster situations. In the event current operating costs e:c-ceed current revenues, resetves should be u5sd to cover increased operaUng costs li1 the short4 run v¥nue anowing rates 10 gradually increase over a reasonable period to meet Such cost levels. Reserve level guidelines should be set to allow reserves to float up or down wtthout unduly fa1ling below th'f! minimum or above the maximum and thereby trigger a ·warning siren". Reserve targets should not be ccnstrued as a rigidly defined slar'ldard that dictates t"le lever of financial resources to be maintained for contingencies. The deciSion to set aside more m~ey Of iess money than the target should be based 00 an assessment of the uncertainties and financial rjsk facing the utJlities The reserve level guiOelines are idenUfied lal~r in this report Current reserve policy regarding procedures of Council notrfJcation and dispos~ioo of a surplus will continue. CounCJl wil! be informed in the Midyear Financial Repo!'\ as we~ as the Fourth Quarter Financial Report of any existing or potentia! issues Known at thaI time involving the reserves. In the absence af direction fro"] the Councii to immediately address disposition of a reserve surplus. the disposition will be addressed io the following year budget cycle. Disposition may lnclude a ra:e reduction, customer rebate, app!ying U,e surplus: towards a financial ob;~gat~on. Q( if justmec. allowing the reserve to remain in 8 surplus for 3 stated peroo o~ time. Existing porte,), requirirlg Council authorlZation of the use of the reserve is continued. Thus. the mere fact Of !he existence of a reserve as a resourC9 10 fund expend~ures will not guaranlee \tIal such exper'lditures will be funded ..!.!:O.fti§ the CouncU authorzes such action. In this manner, utildJes management is held accountable fo: operating efficiently ar'ld the Ccu""ii makes the decision regarding \tie use of reserves. As a matter r;,I public pOlicy. it is desirable thaI annual revenue requirements (rales) be driven primar~y by feal or known cost factO<~5 ,-ather than by planning assumptions. Each year in the budget formulatie>n process. reasonable assumptions (bath favorable and unfavorable) will be put forth. The primary assumptions affecting the validity of the util~ies budget include: wholesale commooity costs including expected weather and stream ~QW COfl(frtioos, the level of capital improvement activi~i and general fund transfer, debt service 2 ---....... ",..--, ...... , --..,~.-, -L - <.:---';>, i . ! - obligations, and sales forecasts. To !nsure long-term finarlciai stabHity, assumptions should be based on base case scenarios taking ir.to account those contingencies which favorably imp.act the utilitfes as weir as those which do not. Decfsior'1s related to appropriate reserve and i'ate leve-ts should be made in t"'e context of a five to te!"1 year financial planning htxfzon. 3, RESERVES INVEN1:QR'f= • Continue the Eme~ger;cy PIEmt Rep~acement Rese;ve wit' no changes. • Continue the Calaveras Reserve with rrO changes. • Continue the Gas Supplemental Supply Reserve with no changes. • Continue the Gas ConsErvation Loan Aeser.te witt, no changes . • Create a Rate Stabilization Reserve (RSR) to replace and incorporate the existing System Improvement Reserve (SIR) and Transfe' Stabilization Reserve (TSR). An RSR would be created fof the water, gas, electric, and wastewater collection funds. An operating surplu, would be deposned inlo the RSR while operating deficits would be made up from the RSR. There are three reasons fer consoHdaiing the TSA and S! R. The first reason is that the uncertainty and fluctuation re!3ted to the utilities transfer to the general fund has substantially cflminished since adoption of the utmty enlenprlse method. Since FY 86-87 the utilities have been able to make whatever transfer to the general fund has been <lOOpted. The second reason is t'lat recently we have already, Q( will be, raising rates 10 finance 'the iniTastructure Projects for t~e 1990's. This reduces the need to have a specific SIR 10 address these larges! of Capital Improvement Projects. The third reason is to revise our poneies to reflect current practice. The TSR and SIR are presently being used p:imaray to stabilize rates; thus they are C'Jirently rate stabilization reserves, 4. GUIDELINES FOR THE RSR· A review of reserve policies by a sample of other utilitres jndicates t,at there are a number of facto(s contrit)l..rte to a dJversrry of reserves and reserve levei meaSUiemeF'ts. Such factors include the Iocole (exposure to storms). politICal ctimate, competitive rates, system renabUIly, infrastructure status, bond ratings, legal requirements, etc. Different approaches include settir.g reserves: as a percent of undeprecialed fixed assets, to a achieve dab! service ccverage, based on a number of days cash requirement, based on a certain number 01 months (2-12 monlhs) of gross sales revenue, or as a percent (5-25 percent) of operating expenditures. The approaches are tailored 10 meet local requirements and necessari;y involve uncertainties tr,at t;,ey face. The proposed RSR level guideones are designed to serve as warning sirens while allowing reserves 10 float within thes~ guideflnes withOut creatrng a deficit/surplus situation. When a reserve Jever falls below a minimum level or exceeds a maximum level, it triggers a management response, Guidelines which are set too low can place the utiltty in a 3 _._--"",.-, "'--'-"", ~. ' . .' -,"(~:..-:,' :~c ~ - financially vulnerable condition whi!e too generous a gurde~lne can allow a wseNe surplus to accumulate unintentionally, Since sefectlng a guideline involves a degree of judgement and uncertainty, the adequacy and prude r"lC)i of these gu ide lines w[lj be revJewed inte marly eacn year and if 3ppropriate, revised guicJennes wHi b-e recommended. The R.SR level guideiines are bas-ed on an klentical formiJla for water, gas, and wastewater collection. However, because of some majo!' , outstandlng contirlgencies which could impact electric purchases cost, a different formula is used for the electric t.Jnd RSR to better recognize this polential cost burden. The outstanding contingencies for the Waler, Gas, and Wastewater Collection Funds do not appear to be of the same quanlity 3nd magn~ude as for the Electric FUnd . • Water, Gas, Wastewater Colleetlon Reserve Level Guidelines Reserve Balance Minimum {;uidel~-The sum of: 1) 15 percenl of sales revenue fO( thai year; piuS 2) Estimated annua' net sa~es revenue decline due to abnormal weather. Reserve LS\lel Target Guide!ine-Midpoint of minimum and maximum guideltne. Reserve 8ala.r"ICe _~a)(imum Guiderine-Twice the min:mum guidenne. 1) 15 percent of sales revenue is recommended as one of the two elements for this guidertne. This element is intended to cover oorma! operating budget variances as wen as current operating and cap ita! costs not covered by current rates. Since budgets are prospective by nature, end of the year variances often resuit and are ~.Jnded by a reserve to balance the budget In addition. any expenditure may rise from year 10 year between rate adlustments. To finance such budgeted expenses and to help stabilize rates, reserves are withdrawn. Such financi2i flexibilIty allows rate increases of the six utilities to be planned and staggered in order to mi n:mize the oil! impact on ()U( customers. Depending on the magnitude of the expense and other factOfs, the RS R could fi nance an expend~ure unhl such time as the rates are raised to the needed level to commence covering the expense. Idea~, the RSR would S6'Ve as a subs!ijute ft;nding source lor rates for a period of one to three years. However, given :ertain condh:ions, the period could ext."'6€:J several years for understa:ldab!e reasons. Gwen the above objectives for the RSR, a review of the nature, liming, and magn~ude 01 expenditures identified in this report which coufd draw down on the reserve .indicates that a resulting guide~ne level based on 15 percent of sales revenue should be adequate to meet t~ese objectves. Such a guideline range is reasonably consistent with the current General Fund Reserve Poijcy which is based on a 10 percent minimum and 30 percent maximum or annual budgeted General Fund operatir~ expenditures. 2) In addition, there is a need to have funding available to cover fixeo costs during abnormal weather periods such as a drought, or warm weather. This js especially impor'.ant for the Water Fund and Wastewaler Fund. This amount i. calculated fO( each fund based on the impact of one year abnormal weather on net sales revenue. 4 p .. - TheS'9 two items, when added, should ordinar~1y be sufficjent to also cover extraordinary one-time conti.ngencies. The mrueimum lever eouid prav'lde addiUonaj resources fC)( unforeseen contingencies in the Mure . • Electric Reserve level Guidelines-The minimum reserve level guideline is an amount based on 35 percent Of next year's power purchases cost The maximum reserve level guldeflne is an amount based en 70 pe(cent of next year's power purchases cost Thl! tar;lEl! is halfway between the minimum e.nd maximum. The percentages were derived by correlating m9 expectec cost or approximately 12 contingencies with annual power purchases cost -as a measurabfe yardstick" ever t"'e next five years. Among these contingencies is an amount I".ecessary to cover on-~ng budget variances, the 'Impact or poor hydro conditions on power costs, and a number Of contingencies Which could cause the Western Area Power Administration to charge more for eiectrfcrty. A more detailec discussion of these contingencies is included at the end 01 this report. 5. I MPACT- A compSl;son afthe proposed RSR reserve guideflnes with exisUng reseNe guideDnes '0< the SIR and TSR combined is shown below pased on FY 92-93.. Tne numbers in parenthesis under the RSR column represent the formula for the electric fund and represent the two elements of the minimum calculation for the other funds. Thus, for the water ~.;nd. the sun1 01 $2.1 mmion representing 15 percent of 92-93 adjusted budget sales revenue pi us an estimate or $2.2 mi Ilion for a sales decline in a W()(st drought year constitutes the indicated minimum level guideijne or $4.3 million. The numbers in parenthesis under the column SIR and TSR are the respective SIR and TSR levels before summation. Tne numbers in parenthesis under the SIR & TSR projected balance is aiso the respective SIR and TSR projected balances before summation. Minimum Balance Target Balance Maximum Balance Projected Balance WATER FUND (SMllUONS) PROPOSED RSR 4.3 (2.1 +2.2) 6.5 (midpoint) 5 SIR & TSR FOR FY92-93 5.2 (3.0+ 2.2) 7.1 (4.0+3.1) SIR & TSR PROJECTED BAlANCE FY92-93 1.7 (.4+ 1.3) In the water fund, the prOpOsed reS6i\1e poHcy would ra:se the minimum, target and rooximum giJjde~Ms 21 ... '30 percent. This is considered a favO!"abie resutt since this fund has tracfltionolly been underlunded. Minimum Sa/Bllee T argal Balance Maximum Balance PrOjected Balance GAS FUND (SMILUONS) PROPOSED RSR 3.B (2.9+.9) 5.7 (midpobt) 7.6 (2)< 3.8) SIR & TSR FOR FY92-93 4.2 (2.3+1.9) 6.1 (3.4 +27) 8.1 (4.6+ 3.5) SIR & TSR PROJECTED BALANCE FY92-93 8.6 (5.6+3.0) In the gas fund. adopting the prcpo.;ed reser,e po"C)I would lower tile minimum. target, and maximum guidelines approximately 6 to 10 percent. WASTEWATER COLLECTION FUND (SMILlIONS) SIR SIR PROJECTED PROPOSED FOR BALANCE B.~'! FY92-~ FY92-9~ Minimum Balance 2.2 (1.2+1.0) 1.1 (1.1) Target Balance 3.3 (midpoint) 1.7 (1.7) Maximum Balance 4.4 (2)< 2.2) 2.3 (2.3) Projected Balance 1.5(1.5) In the wastewater collection fund. adopllng the proposed reserve poiiC)l would raise the minimum. target, and maximum guidelines approximately 100 percent based on FY92-93. However. because a major infrastructure cap~al project is planned for 1994. tt,e resulting reserve guidannes for this fund will actually decrease under the ASA formula. The reason 6 ..,.-. ......... _ .. _--- is that tt"'.e current SIR formuia IS based on the next year's CJP whict"~ w'lll rise substanflany in 1994. For example. the SIR minimum guidelin€ level lor FY93·94 would be $3.4 milficX1 (75% of S4.5 millien, which is FY94-95 CIP). In comparison. the RSR minirn~m guidelioe for FY93-94 is $2.4 million. Therefore. adop~on of the RSR would resun in a 29 percent lower Quideflne fOr FYSJ.94. Minimum Balance Target Balance Maximum BaIanes Projected Balance ELECTRIC FUND ($MllLIONS) PROPOSED RSR 13.3 (.35x 38.1) 20.0 (midpoint) 26.6 (2x 13.3) SIR & TSR FOR fY92-9~ 12.0 (5.2+6.8) 17.6 (7.6+10.0) 23.6 (10.3+13.3) SIR" TSR PROJECTED BALANCE FY92-93 41.2 (11.2+30.0) The ASR guider,nes are based on applying 35 percent and 70 percent to L"e FY93-94 power purchases cost of $38. 1 mil lion. The projected TSR and R SR balance for the end of FY 92-93 is based on a 3-1E>-93 projection. It does not ixlude an adcfrtional $10 miilion pending settlemem between Western and Pacific Gas & Electric Company. The timing of this cred~ from Westem ;5 ur.!<nown at this time. When and if this occurs, the projected RSR balance would necessarily increase by the $10 miiiion cred~. In tr,e electric fune, adopting the proposed reserve policy is not expected to represent a major change relative to existing reserve guide"ces. For example, lor f'Y92-93 adorton of the RSR would have resu~ed in a 10.8 percent ixrease in the minimum guideline and a 12.7 percent increase in the maximum guidefine relative to existing guidelines for the SIR and TSR combined. Under ether the eXistng or proposed reserve policy, a substantal reserve surplus is presem. The appropriate disposition of this surplus is the subject of another repor1. Based on FY92-93 financial information. tihe result:ng surplus above the maximum RSR guideiine is $14.6 m;lIion,. wh~e under the existing reserve maximum guidenne tl,e resulting surplus is $17.6 million. These numbers change for FY93-94. 7 -~--- 1 I ,,---',,-----"------- - 6. rDF.NTIFICATIONQH~AJOR [!;YENUEBEQUIREMENTSANOCONJI!'lGENCIES- This section of the report is an ana'ysis of the kinds of planned and unp!anned events which repcesent major expenditures for each utility. The purpose of this exercise is to gain an unde.l'stand\r"g of tt"e financ(st exposure facing the uti\ities in the futur-e by categorizing each kfentified cost item in terms of whether it represents a one-tJme extraordinary expense or fs an on·gclng cost. This cf.stinctlon is neces&ary 10 plan how such expendrtures should be financed, erther through rates or reserves. In this manner we can plan to establisn a prudent le ..... e~ of reserves. The information "in t'liS sEfCtjon is necessan1y based upon informed judgemenl regarding the probability of certain Mure ever,1s coming te pass, To be sure, !~ese estimates will change (p<;rh~ps weekly) and be updared as new information becomes availab!e. Some of the informat~on has been used to derive reserve leve:s wnile other information has not been used for such purpose, But to gain an understanding of a broader financiai picture, all tne information is presenied here. Ali reser.res tn ea::;h fund are accounted for WATER FUND 'Eni6rg8ncy'Repairs and Replacefr.ent Fina/lcad Through !he Emergency Plant RepIacemef1I Ressr.·" (EPR): 1. Unplanned Emergencies Reguidr'Q Rep!acement Q( Repair of Damaged Equipment· ~'Ooo-time Contingencies 10 be FIJl8f1Ced Thtough fila Rate SlabiJiZaIion ~.(R$8)' 1. Significant Sales Revenue Erosio~ Due to a Drought· • Estimated probability of occurrence: 10 percent (20 year statisti.:af average) • Estimated net revenue decline: 52,200,000 w~h a 23 percent sales decline, 2. New M~ Non.recurring CfP_ s:.Jcr~tanford West Pr'Ji,€ct I! Estimated probability of occurrence: 1997, 50 pelcer.! • ES'Jmated cost impact: 5500,000 1. Sa!1 Francisco Water DepartrnentCSFYJQl...Water Purchases Cost· (AI Norma I Wholesale Rate INCREASES· • Estimated probability of occurrence: every other year • Estimated cost impact $800,000 (15 percenl increase); Total SFWD purcha.ses cost IO!' FY91·92 was $3,987,000, 8 - (SJHetdl Hetchy Fi~ration Plant to Mee.t Kealt~ and Enyironmental .Aeoula~ions- • Estimated probabilltj of occurrence: 33 percent • Estimated cost impact: 11 a S300 mHiJon fiitr3tion pla'1t is buill, Palo A!to's estimated share 01 annual debt ser.rice is approximately $1.400,00') which WOiJld be incorpora:ed in SFWD wholesale rates. 2. Jnfrastructufe Capita! Imprcyement PrQject- II Estimated probability of occurrence: 100 percent beginning in FY93-S4. • Estimated ODS! impact: $2,000,000 annually 3. General fund Equity Transfer- • Estimated probability of oocurrence: 100 percent • Estimated cost impact: $1,500,000 anrluany 4. Reclaimed Waler Project- • Estma!ed probability of occurrence: 30 percent • Estmated cost impact: Annual debt service cost of $300,00-$600,000. ELECTRtC FUND ~Repalrs and RepIacemen! Fir.anced 11!tough !he EPR: 1. Unplanned Em~rgenc\es Requiring Repf~ment or Repair of Damaged Equipment- 1. Calaveras Debt service Costs Partially Funded by the CaI,;veras Reserve Until 2000- 1. Sigr.if1cant Sales Revenue Erosion Due to Unusua~y Cool Weather- • Estimated prObability of occurrence: 5 percent (20 year statistical average) • Estimated net revenue decline: $1,500,000 based on 4.6 percent sales decline. 2. Impact oj Drv Year on Calaveras Eneco' Available • Estmated probability Of occurrence; 20 percent a Estimated cast impact: $2,000,000 3. New. Major Non~recurrir:g CIP's such as __ '@l_~_dditional Urtdergroundinq Pro/acts and (b) Undergrouro;llg c~ 60 1<\1 Lines- • Estimated probability of occurrence' (a) 1996, 20 percent (h) 2000, 25 percent 9 -- !! Estimateo COS! impact (0)$1,600,000 (b)Sl,800,OOO 4(A1Westem Revenue Ad:ustment Qftuse (RAC) Impacts Due.to One-time EI/'3nts~ (A1\lmpact Of a OrO\JQht Year Forcing Western to Purchase Non-Hydro Based Electricity- • Estimated prooability of OCCUl"ence: 20 percent • Estimated cost impact: $10,000,000 annual cos! to Palo Alto, (A2IPending PG&E /Western Settlement on Transmission Rate Issue- • Estimateo probability of occurrence: 75 percent during 93-94, • Estimated cost reductiQn impact: A one-time S10,000,000 Western c,eort on Palo Alto power bills, 4(B)Western RAC Impacts Due te A Regulatory Delay in Incorporating Certain QQ§!s in Western Rates- (Bl)President Clinlon's Proposed Energy Tax· • E,stimated prababil<l'I ol occurrence: 90 percent • Estimated cost impact: $2,900,000 annually (B2)1mpact of H,R. 429 Mandating FishlYv1ldiHe Enhancements, • Estimated probab;!ity of occurrence: 75 percent in 1994·95 • Estimated cost impact: $6,200,000 annually (B3lWeslemIPG&E Resetting 01 Project Dependable Capacity tor Central Vafley Project From 87QMW to 4OOMW- • EsUmateo probability of OCCurrence: 20 percent in 1995-96 • Estimated cost impact: $10,200,000 annually (B4-~act From Failuie of the Snasta Dam Temperatuf~_ ~vice· • Estimated probability of occurrence: 15 percent in 1996 • Estimated cost impact: $11,200,000 annually (B5l1mpac! of Weslern/PG&E 294BA Reneootiation to Reduce Energy Account Two- • Estimated probability of occurrence: 30 percent in 1994 • Estimated cost impact: $2,400,000 annuany (B6lf.D1oact of Charging Market Rafes for Central Vaney Project Power- • Estimated probability of occurrence: 15 percerrt in 1994-95 • Estimated costimpact $35,000,000 annually, ~ should be recognized that ~ market rates were adopted, the rates could become effective over 2 staggered rate cycle of three to fwe years. 10 • -•• -' ___ ,0" __ ._ •••• __ -_. I 'I ! - NOTE: A~ estimated cost Impacts shown above are for the first year. Subsequent ~Jear costs would rise due to inflation and other factors. 1, ~slern Power Purchases Cost INCREASES- • Estimaled probability of cccurrence: 80 percent • Estimated cost impact Approximately $700,000 or 2 percent annually; Total Wester power purchases cost for FY91-92 was $28,397,000, 2. infrastructure Capital Im.Q[Qvement PrQjects· • Estimated probability of occurrence: 100 percent • Estimalec cost impact Approximately $1,500,00::> annually 3, General Fund Egl!ilY-Transfer- • Estimated probability of occur<encs: 100 percent • Estimated cost impact Approximately $6,300,000 annually 4, Calaveras Debt Ser.ice- • Es!imated probability of occu rrence: annually • Estimated cost impact: Calaveras Gebt ."Nice ranges from $7,' million to $10,9 mmion annually through 2024, Currentl)', the Calaveras ReseNe partiall,' funds this obligation. By the year 2000, rates shoilid be established to shoulder t'lls burden attogether, GAS FUND 1. Unplanned Emergencies Ae~iring Repi8cement Of Repair of Damaged E!;tuipment- ~fIaty O1l6-fjme Contingencies 10 be financed Through the Gas Su~ Supply Reseive: 1. ConstructiOO of DistribOJtf® Facilrties to Acceot Delivery from MoJave Pipenne~ • Estimated probability 0' occurrence: 1995, 50 percent • Estimated cost impact: $4,45G,000 2, Gas Exploration Prooram- • Estmated probabHity of occurrence: 20 percent • Estimatec cost impact: $3,000,000 11 • 30' , - Cr.ls!p!ner Gat C<l!!SeMi1ioo Loans 10 be Financed Through 1h6 Gils caawvatJon Loan 8"""""" 1. A Revolving Reserve Account Availabfe tor Customer loans to Improve Energy EfficieDC'i: 1. Significant Sales Re'/enue Erosion Ove to Unusuafly Warm Weather· • EStimated probability of occurrence: 15 percent (20 year statistical average) • Estimated net revenue decOne: $90:),000 based 00 a 12 percant sales decline. 2. Financial Obligation Triggered by Take or Pa.y Penalties with Suppliel-- • Estimated probability of occurrence: 10 percent • Estimated cost impact S6OO,ooo 1. Gas Purchases CQ~ (A) Normal Gas Price INCREASES from Wholesale SupD!ierfsJ:. • Estimated probability of occurrence: 75 percent • Estimated cost impact: $500,000 or 5 percent annually; Total gas purchases cost for F"YS1-92 was $9,203,000. (B1President Clinton's Proposed Energy Tax· • Estimated probab~ity Of occurrence: 75 percem • Estimated cost impact: $930,000 annually 2. IllfrastnJC11Jre Canrtar Improvement Proiect- • Estimated probability of occurrence: began 1992, or-going • Estimated cost impact: 52,200.000 annually 3. General Fund Equity Transfer- • Esflmated probability of OCCurrence: annual!y • Estimated cost impact: Approximately $1,700,000 annually WASTEWATERCQklECTION FUND ~ Repairs and Replacement Financed Through the EM: 1. ,Unplanned Emergencies R~_qurring Replacement or Rep_air of Damaged Equipment~ 12 1. Sigr;ificanl Sales Revenue Erosion DuE' !o Drought- • Estimated probability of occurren,:-e: 10 perceni f.C!r 23% water sales decline. • Estimated cost impact' $1,(X;'O,1XXJ 2. New, major CIP such 8~fQrd West Project· • Estimated probabilltj of OCClJrrance: 1997,50 percent • Estimated cost impact: $500,000 1. I!:eatment Cost AJlocalion- • Estimated probability' of occurrence: 100 percent • Estimated cost impact: $4,QC(J,(X)() annua:1y 2. lnfrastructure Capita! lmprovement Proiect- • Estimated probability of OCCurrence: 100 percent, beginning in FY94-95. • Estimated cost impact $4,4oo,1XXJ annually 7_ ELECTRIC FUND CONTINGENCIES- To arrive at the proposed electric fund RSR guidelines, the following table was used to correlate contingencres of an e>..1raordinarj nature and ongoing nature to power purchases cost as a measurement or "yardstick~. 7_ExmsOtrJinary COntingencies: (SMillio"s) FY 93-94 94·95 95·96 96-97 97-98 A. Sales Reyenue Erosion/cool weather 1.6 1,7 1,7 1,8 1,9 8. Calaveras Dry Year 20 2.1 2,2 2,3 2.4 C, Drought Year impact on CVP pewer 2.,4 2.e §J 6,5 9.0 Subtotal Extraordinary Contingencies 9.0 9,5 10.1 10,6 13.3 2_ NonnaJ But:iget VarianCe Contingency: A.. 7 percent of revenue requirsment 5,4 5.8 6,0 6.1 6,4 13 !~ i "...1 : . ; , 'i - 3. 0rii]0Ing ow CooJj~: FY 93·94 ~4·95 95·96 ~ ~~ A Shasta Bypass 0.0 a.D 1.7 1.8 1.8 B. H.P.. 429 .$30 million fundi ng 2.8 3.0 3.1 3.3 3A -Project use up 270 GWH 0.3 0.3 0.3 0.4 0.4 -PDC reduced 60 MW 0.5 0.6 0.6 06 0.7 C. 2S4SA Renegotiation ·EA-2 Reduced 1000 GW'H 0.7 0.8 0.8 C.B 0.9 ·Resetting PDC to 400MW 0.0 20 0.8 0.8 0.9 D. Market Rates 5.3 56 5.9 6.1 6.5 E. Prf'Sident Clinton fuel tax Q.j .u! ~ 2Jl M Subtotal Ongoing CVP Contingencies 10.5 14.2 16.1 16.7 17.6 ASR MIN. based en sum of 1 and 2 above 14.4 15.3 16.1 16.7 19.7 RSP. MAX based on sum of 1, 2, & 3 above 24.9 29.5 32.2 33.4 37.3 Projected Power Purchases Cost 36.1 43.0 45.3 46.7 48.1 49.4 MIN as a % of next year's power purchases cost= 35.4 percent (5 year average). MAX as a % 01 next year's power purchases cost= 67.6 percent (5 year average). ROUNDED OFF, THE GUIDELINES FOR THE ELECTRIC RSR ARE: MINIMUM LEVEL: 3S PERCENT OF NEXT YEARS POWER PURCHASES COST TARGET LEVEL: HALFWAY BETWEEN MINIMUM AND MAXIMUM GU/DEUNES MAXIMUM LEVEL: 70 PERCENT OF NEXT YEARS POWER PURCHASES COST The resulting RSR Ievei.Q;Jideiines are therefore: !'lSR MINIMUM LEVEL RSR TARGET LEVEL RSP. MAXIMUM lEVEL ($Millions) FY 93-94 94,95 95096 96·97 15.0 15.8 16.3 16.8 22.5 23.7 24.4 25.2 30.0 31.6 32.S 33.6 14 97·98 17.3 26.0 34.6 - -::~--,,*,-,;" .... "'''"'"'''''''''''''~'''''--.. , .... ~-~'"'-,--,...,. '-,- ATTACHMENT 6 MEMORANDUM TO: Utililie~ Advisor:-' Corr:;mi~sion FROM: Randy Baldschun SUBJEL"T: Recommendation for Di~po5ition of Electric Fund Surplus DA 1E: March 26, 1993 In December, 1992 the Utilitie<~ Advisory Commi!!sion received a staff report entitle-d. Electric Fund Reserves-End-ai-Year Bala_nces (CMR:498:92). This report explained that a number of events caused large savings in the electric power purchases during FY91-92 resulting in an electrk fiJnd reserve surph.:s. Tn.:: report rec0mmended that the disposition of the surplus would be addressed during the budget proce50s in the spring of 1993. Accordingly, this report provides the staff recommendation on how to dispo~e of the current electric fund reseNe surplus. After considering a wide-range of alternatives. staff recommends chat the surplus be applied a'i a customer rebate~ This approilzh would pro'i:~dc immediate rate relief io all dtizeru. and businesses in Palo Alto l,I,hile also representing the best alternative in terms of !he financial implications for the electric fund on a long-term basis. The primary negative is that relative to other alternati ..... es. it presents. hie greatest workJoad on the staff to administer 31'ld implement However. :he ad .... antages out~:eigh this shoncoming. and staff i~ confident that a rebate;,vill be effectively implemented with current resources since the "drought workload~ has diminis.hed. Upo~ Council apprmral, staff plans; to implement the rebate this fali. Since the rebate occurs during FY93-94, the corresponding finanda i and bl!dget data to determine Ihe s.ize of tbe rebate will be FY93-94 data. Induded in this packet are the tt:n-year financia! forecasts for the four utilities whidl reflect tP.e depa;tment's budget recent!y submitted for FY93-94_ Based on this information, !he projected reserve balance in the Rate S:abi:ization Reserve at the e"d of FY92-93 is $40,844,000. Based on this projection, the anticipated withdrawl of the RSR during FY93-94, the proposed maximum reseIVe level guidelines for the RSR, and the objective of ending FY93-94 v.ith the RSR at a balance midpoint between Lie target and maximu.m, staff proJects at this time a rebate amount or approximately $13 miIJioD. In th momhs ahead this amount may rise Oi fall depending on a number of factors. A list of the options on how to di!Jopose of the surplus was compiled by the staff. Some of these options are viable while other~ are not. The entire list is shov.-n for informational pmposes. ; .. .".' Suggestiom for Dis.pos.iticn of Electric Fund Surp!!..lSo Nc. Description Distribute i'n"pIus 10 cusfomers I Rztc Decrea..ce 2. ]We R~4te (Customer bill !:redi:) 3. Rebat.e in form of coupons fQr re.>Ource-dfid ~nt devi<:o' 4. No-Cor very low-)inlere&t k1aru; for purchase of rn'ou:--.::e-eftkieot to.:-hnotoi~ 5. D'~tn'bute ~I:! rerunJ,s 6. IOC:eoti1lei for purchase of energy-efficien! dc:vlre5 Oty·wide-Resource ('.ons.enatjon Programs '1. lavest if!' City Facility effi;;;iMC), improvements 8. E..sUblisb EJcctnc Coruerv8tion Resen-e to fur.d re${lurce cODservatio!l pilot programj Op:nwonaJ ]mp1'fJ,'e-menls 9. Acquire Automated Meter Reading TochIlOhg), lO. Accelerate infrastructure uptrad-: I I. Invest in electric system loss-reduction {veri WW loss :ransformers. rc-condu.<;:torin~. additional power- fllCt::Jc correction) 1:2. Diversify into "Nind power rertenltion 13. P Drive Allgmr.:r::tatior. 14. UP&'1'3diD, all HP Vec1.ra/ES/E.!H2 peT'5OnaT computers 15". Staodardizatkln oial! cornp.lter ~rlr; bubs ;6. SC.'.DA S)'>,= U~ 17. Estabiish SCADA-based Utility Dispatcb Facility 18. Sllpport for ors Project 1 g. Provide racflOS for Meter Readers 20. Add Ii Meter Reader positioll to read ·skip· mUles 21. Establish. Watr:r Meter Maintenance project FinanclaJ Applications 2:;!. Acce%erale tt'p8yment of ele>:.-"trX: utility dclx, to red\!.;e i::Jterest c.l:pe:nse '- . :"--.,">:':..... -,. \~i:;~" '. JI'. ' ..... ,. ·_~·~·'~' __ .I":U"PI"'-""'''. Ii<' ~.,.-,,,,.- - - ATTAC~ENT 7 MEMORANDUM TO: Utilfties Advlsory Commission FRO M: Randy Baldsch un SUBJECT: Residential Ra,s Assistance Program DATE'. March 26, 1992 (revised April 7, 1993) In o;-der to accommodate the special needs of residential customers who lack financial resources as "",-eli as residents who depend on uWities services for medical reasons, a utiHti8s prog,a;m providing rate re~ef is recommended. The program is the Utilities Rosidentia'i Rate Assistance PrD-dram (RAP) which provides a 15 percent rate reducticn for qua!ifying residents. The applicoble utilities are water. gas, and electric. Staff recommends that t.,is rate relief progra m become effective during the second quartsr of FY93-94. Many investor-owned and municipally.owned utilities offer reduced ,ates to residential customers wno 'l'Jalffy as "Jow·inccme' as well as to customers who require I~e-sustaining equipment SUCh as kidney-dialysis Of iron lung machines. Pacific Gas & Electric (PG&E). Southem california Edison (SCE). San Diego Gas and Electric (SDG&E). Sacramento Municipal Util~ies District (SMUD), a'ld Los Angeles Department of Ught and Power (lADWP) are examples. To date, Pale Mo has not oftered such rates for several reasons. FII'S!. the City already charges electric rates wen below the "low-income" rates of other utilijies. Secondly. once a special rate is made available for one group of customers, other ratepayers with ·some relaTed need" win want rate rei;ef and have to be deniE'd. Th:ra1y, suet'! ·social ratemaking* involving subsidized rates is ~nconsistent with cost of service prindples, and flr,8iiy. the adminjstralion of such progfams can impose a substan'jal staff workload. Ye~ there are also important reasons for estabnshing utility programs tD address the financial needs of the community and to recognize additional utility usage requirements of residents on life-sustaining equipment. The first reason js humanitarian. In Palo Alto, there is a growing number of people experiencing finane'!al hardship, especially the working poor, recently unempfoyed, e~derly and disab(ed. fn recent years, the number of utility customers experiencing financiai difficuiLes has increased approximatety 40 percent Ackfttionajiy, SOrrie residents require life support equlpment whic.'"1 causes electric consump~on to ,ise while other residents may require additional amounts of gas and water for medical reasons, 1 , .1 Regu.latory bodies and the utility inoustry have increas:ngly recognized the importance of rasporn:fing to these customer needs .and establiShed non·traditiona' programs to help L~e need)'. the enllkonment (PG&E Tree Program, APPA. Treepower), and lh.e community. Simfiariy, the current Palo A~o City Council has assigned a high priority t'J developing programs to addr6ss ·People in Crisis'. Accordingly, the program recommended in this report reflects this ·socia1 responsibility objectjve~ to help the community and better serve people with special hardships. A second reason for providing rate relief to these customers relates to the fact that Galifomia State Law requires In .... estor -owned utilities to offer an energy discount to low income custOO1srs. Since these programs are widespread, some residents have come to question wtr.; the Palo Alto l.o1i\ities de nvt aHer similar programs. With regard to the administrative costs associated with RAP, staff an~cipates a signmcant workload to administer the program, but dOes not expeel program costs to be prohibitive or excessive. RAP is aimed to try and minimize such costs. For example, the utilities plan to utilize the contracting services of te,e California Department of Economic Opportunity (OEO) to handle the processing of applications and thereby avoid the need to hire addrtional staff in-l'\ouse. This approach is more cost effective. Finally, with respect to the argument that ·socfa~ ratemaking" is a departure from cost of ser'\ice prindples, rt can be said t~at cost of service is not the sole objective or function of ratemaking. There existotherratemaking principles a.e, socia-economic, varue--of·service. abHity to pay, competitive pricing, energy effiCiency) which lead to a departure from a tracf.iional COs! of service approach. Examp!es are load-retention rates, senior citizen rates, eJecti"ic vehicle rates, the recognition of environmental €xternallties in Demand Side M&r.agement (DSM) evaluatiOl1s, economic deveiopm."t rates, Irleline rates, \OW"income rates, and as wITh the Bonnev11le Power Autt'tOd!y, industrial fa~es which are linked to the priCe ot aluminum. Residentiaf Rate Assistance program ~n developing t'1e Resrdentiai Rate Assistance Program, staff completed a ten step review. 1. Perform a review and evaluation of Similar programs offered by other ulll~les, RAP is largely panernea after existing programs of other Calilomia utilities. 2. Evaluation of \he ability of \he current and fUlure ulillties computer billing system to accommodate \he new program. The existing utilities billing system would better accommodate a program based on a percentage discount applied to a biil, rather than utilization of aoo~ional rate schedule s at reduced charges. On that basis, and to make it more understandable to the customer, a percentage bill reduction approach is preferred over estabflshing separate rate schedules. The new utllitles biliing system will accommodate this program as well. Introcuction of Rate Schedule C-4 will identify RAP, establise, the 15 p<lrcent applicable rate discount. and meet the City's legal requirement 2 • .' '0 L ---. - to provide a rate 5chedu~e. 3. Oatermln. w~lch 01 me siX utiillies shoul" apply to the program Oi the six utiifties, only electric, gas, and/or water may be rSQuired due to nledica~ necessrty, With regard to the '"economic hardship" criteria, the same three ut:lities are recommended to apply to RAP. These three utilities are arnong the three largest components of a total utW+jes bill. Furthermore, ·t~e refuse utility is piann;ng 10 introduce a new "mini· can-rat'9 this year which will al50 provide some .ate rflief to residents experiencing economic hardship. For these reasons slaif recommends thai for tNs trial program, RAP be applicable to waler, gas, and Electric 4. Determine the iavel of percentage bill ,eduction, Pacific Gas & Electric Company (PG&E). Sa~ Di6go Gas and Electric Company, and Southern Cal~omia Edison offer a 15 percent discount 10 low-income ratepayers. Based on this yardstick, the RAP levsl of rate reduction is recommended at 1S percent app:icable to water, gas, and electr~ charges 10< qual~ing customers who are eligible for financial assistance. Also, residents who consume adcrrtional power, water, 0f gas fOf medical reasons would simllarty receive a 15 percem rate reduction cn the applicable utili!)!. To be consistenl with an exisMg onflnarlC6, the residem would contlnue to pay the utilrty users tax based on the gross charges (before the discount is applied). It is proposed thaI customers wr.o meet bo'.h the financial and medica! ellgibility crrt:er~a receive the standard 15 percent discount. Thus, to avoid ~compoljnding discour.ts", customers who receive one discount would be Iner.gible lor a secono' discount ~ is imp-:>f'tanllC note thaI with this t 5 percent rale discount, the resu~ing bill will continue to cover, with a sufficient margin. the utilnies marginal wholesale commod'rty cost. In other words, the proposed rate relief will no! put the utilities in a posrtion whereby services are sold at a loss. Therefore, util~ sales le,rough HAP wUi continue to make a posrtille contribution to the utiiity's fixed cosls, which benefits al: ratepayers. 5, Define eUgibiitty criteria for the Residential Rate Assistance Program. To q"alify for RAP, a resident must prcvfde proof or financial need or provide a do..."1:or's Jetter indicating w'ny addrtiooa\ amounts of utilities seNices sre needed due to the patient's medicsl condrtion. Customers who qual ify will need to be recertified annually to assure that they continue to remain eligible. TM Cal,jornia Department of Econor.1ic Opportunily (OEO) provides a certification senrice for C'.Jstomers applying for PG&E's low-income rate assistance (URAl. PG&E customers send their appncations tOf LIRA directly to oEO and they are processed within 30 days. The utJIity and tl',e customer are noL'fied by OEO d an appncant qualifies. 1ne currenl charge by OED to utilrties for this service is $2.60 per application. Staff has been in contact with DEO and such services can be made a'w'aflable to Palo Alto as wen. Staff recommends that the Citj utilizes OEO contract Services to certify engibility fOf RAP with one exception. Residents who qualify fOf RAP based on medical reasons should apply directly to the utilities Customer Service Center. 3 L I ,I (, " l I gi '" I ; e. . '. ~ a Wrth regard to proof of finar-eJaf need, the erig~bir:t'f criteria below are based on criteria adopted by the CaWomia Pubrtc l.~!itlE'S Commission fQ.l $nve:'itor-owned t.;tilities. To qualffy, proof of at Iflast O!'IS of the followir.g types Or financiaI assistance Wiil be required. 1. Supplemental Security lnccme (SS!) Of 51 .. te Supp;emental Payment (SSP) such as a copyo! 'Statement of Benefits' for the current year; 2. Food stamps witt1 written verification >-om wettar. office. 3. Aid to Families Wrth Dependent CI1~dren (MOC) , (copy o! the most recent 'Notice of Action" from count; Department of Social Services); Of 4. Velera,r, and Sur.tJor PMsion Elenefits. Residents who provide slIe--h prOOf have arready supplied app-Dpfiate housshoki income cIocumentation to the appropriate agency in order to qualify witt1 that agency for the respective benefit. Thus, by accepbng such prool of benefi'.s 10 qualify for RAP, residents would not have to recertify income in these cases. Howev ... , ff none of the above can be prOvided, the" verification of income would be necessa')l. In such cases, an appfica'" can qUalify for RAP if househoid ir,come criteria as described below can be cIocumented such as through recent tax returns. For purposes 01 this program, the income levels are based on approximately 150 percent 01 the Federal Poverty levels (same guiden"e used by PG&E). The gross annual income lor 3n persons in the apprtean1s household may not exceed the fonowing levels; Maximum 1992 Number 01 Persons in Househo!d Gross Annual Household Income lor2 3 4 5 6 7 eacl1 addi'Jonal pe rs 00 $14,900 17,400 20,900 24,400 27,900 31,400 add 3,500 For residents who have a medical con<frtion and/C)( are disabled, a physicla"s' letter documenting the patient's medical needs and requiremer1l for addltio"ai waw, gas, and/or electricity is required 10 be submitted 10 the utiln;es Customer Service Center. The person must be a full·time resident. A paraplegic, hemiplegic, or quadriplegic persoo qualifies. Sjm~arfy. a multiple sclerosis patient or a scleroderma patient wrth special :.eating needs qualifies. In many cases a qua!if'jing resident will depend on life support equipment. Life support equipment is defined as "equipment that utilizes mechanical or artificial means to sustlin, restore, or supplanl a vital functiOl1, or mechanical equipment Which is reiled upon for mobility. Such eqUipment includes, respirators, iron lungs, hemocfiatysis machines, suction machines, electric nBrve stimulators, pressure pads and p~mps, aerosol tents, electrostatic and urtrasonlc nebulizers, compressors, IPPB 4 ·--_~r' ____ ._1 "--'"L - .1 .-Il - machines, and motorized wheelchairs (Sanate Bill 987;,· To the extent a customer utilizes equipment not contai,ned on this !ist, a decision to extend the program to such wstomer wQu'd be made 0,' a case b)' case oasis. The ~;ey criteria is that a resfdent must demonstrate that additional amounts of water, gas, and/o( electricity is rieeded bi3cause of a !'!'ledical condition of a tu:!-tJme household member. 6. Estimate the first year RAP participation. Without havi,,;;) po!led our C<Jstomers, we estimate roughly that there are approximately 200 residents who require additionai amounts of watei. gas, and/o. efectricity for medical reasons. For t"'e first year, staff projec'.s a 50 percent participation rate. According to a 1990 Census, 7.8 percent or all Palo Alto nouseMcids have income less than 150 percent of the Federal Poverty level guide~nes. The C<Jrrent number of electric metered households 0nc1uding separately metered apartments) is approximately 27,000. Therefore, an estimate of the number Of potentia! qualifying custom.rs is approximately 2,000. Of the 2,000 households a\ or below 150 percent 01 the fede,al poverty guidelines, many will elec! not to apply for RAP or will miss U,e announcements of its existence. Therefore, we estimate th~ lever cf first year participation at 50 percent or 1,CX.JO custOr.'lers. 7, Determine ,,!effing requirements and program costs to effectively administer \he programs. RAP has been designed with an aim to hold down program operating costs. The gee! is to operate RAP with existing staff in a timely and effective manner. Grven this goal, it was determined to make the qualification and recertification process tree of lengthy staff investigations Into custom~r inDome and background. As mentioned earlier, the OEO will process a resident's RAP application for $2.50. Thus. estimated costs to provide this service through DEO are approximately $2600-$3500 annually (some residents will not qualify but will be processed and Oilled by DEO). Ot~er costs associated with administration of RAP include postage, forms, advertising, etc. estimated at $2,000 year. tfthis program is approved, staR would plan to move funds from existing programs to cover these costs sir)C€: the amounts are small rglatlve to the utiHties total budget Softvvare progfam costs would be absorbed in-house by the Information Resources Departmef"lt and not require add'rtional fur,diflg from the outside. 8. Estimate 111& revenue impact 01 RAP. As indicated above, staff 8slima'.es that the number of first year participating reSidents is approximately 1,000 based 00 the financial criteria and 100 based on medicaf criteria, The projected revenue decli ne for approximately 100 residents who mee! the medical erijeria is $3,OOO/year. In ac!ditioo, a 15 percent reduction tor approximately 1,000 RAP customers who meet the finaClCial crlter~ translates to an estrmated annua! revenue decline 0' approximately $35,000, $20,000, and $40,000 for electric, water, and gas funds respectively. From the perspective of an individual single-famify household, the electric, water, and gas bil! savings are approximately $3S/year, $JO/year, and $6O/year respectively. However, ij is expected that approximately 40 percent of the qualifying residents ~ve in multi-family housing where the only utility bill they pay is electric. The landlord typicany pays t'1e water and gas w.'1idl are billed through a single master meter. In these instances, a 5 L - , ", qualifying resident would receive a 15 percen! reduction in t.'1e electric bill they pay and the randlord would not recei..,."e a discount on the water or gas which also serves the entire houSing complex. In terms of fate impact, these revenue reductions represent 0,1 percent, 0.1 percent, and 0.2 percent for electric, waler, and gas respectively. Thus, the impact ofthi~ program on utilities revenue or ora non-participating customers biiis is inslgntficant. As mentioned earlier, administrative costs are not projected to be of significance either. Finally, as more qualifying customerS apply in subsequent years, the revenue impact is nol expected to be S ignrficarn. 9. Evaluate funding enerllY efficiency measures In lieu of a bill discount. k may be noted that one approach which was considered is to finance energy efficiency improvements for qualifying residents instead of providing a percer.tage reduction on their bill. A prerequisite for RAP could also be that a Ci.lstomer must have taken a minimum amount of measures such as instaned water heater insulation, sealedlinsulated ducts, weather-stripped doors, high efficiency showerhead, etc. Such an apprcach is oonsister.t with another utility goal to promote resource efficiency. However, despile the appeal of tt115 approach from a resource c:ons9r-.... ation perspective, it was rejected for this rate re:ief program tor severa! reasons. TIle first reason relates to the high percentage of qualifying customers who rent anc therefore ar6 not likely 10 invest in measures which improve the resource efficiency of a dwellillg which they do not own. Secondly, by qualifying fo' RAP, these roviduals have s9riouS financial problems and ~ mited castl on hand . Taking out a loan is not going to be a va11d aftarnafrve nor ts expending ~mited resources to reap r6sour:e conservation benefits o...er a longer ~meframe. From their perspective, they need immediate rate rerief which is met thlough a bill reduction. Also. many are elderly who do not have the resources or skGls necessary to instaO many resource conservati,O(') measures. Thirdly, current staffing lel/e!s are inadequate to verrty (>(1-srte resource conservation improvements. Pfesent~y, there is one temporary staff person responSible for energy efficiency audits of residential dwellings. To effectively perform audits on approximately 10C,0 homes without k>ng delays would require il1creasing staff or require significant private contractor costs. A Simpler approach could inVOlve the rasident providing receipts or bills to confirm that the requisrte measures have been taken. Even assuming that residents KepI all documentation, this approacl1 could r.ot be effective Iy addres~ed in a ~mely manner with existing staff. Fourthly, customers who are near the lederal poverty guidelines are not likely to be wasting resources. A consumption analysis ind'icats5 that residents who are near the federa: povertj line use approximatel,30 percent less water, 35 percent less electricify, and 12 percent more gas than toe resjden~al system average. TIle higher gas usage can be attributed to the likelihood that there is a high percentage of elderly in this group who generally requ'"e aoortional space heating in the winter. In summary, tncIus10n of resource conservation measures as a prerequisite for RAP courd 6 .... ··'·L·· . :', ~;':~.~:.'~ .: <., . ;;; • , J I ~ I 1 - help promote resource flfficienr.;y but cc·uid resuit in lengthy delajo's for fi:1arlCially·limited residents qualifying, and is impractical to adminfster given the goal of operating AAP with existing staff. Oesptte these shortcomlngs, t'1e r e is appear to linking the subsidization of resource conservation measures for f.nancially·iimited persons and other programs coufd be developed in the future. Certarnly, eS1abiishing this P.AP program could assist in targeting these customers. for future resource conservation programs. 1(1. Develop measures to Iow&r!he Incidence offraud. Two measures are proposed 10 fower the incidence of fraudufent information suppned to the utilrties. First, an annual recertification wil! be conducted by DEO and 51aff to assure mntinuing eligibility of residents. Secondly, staff recommends the approval of an oedinance making ~ unlawful for a lJtjiit'1 customer to knowingly provide incorrect, inaccurate, fafse, or mis'eading information of any kind in connection wrtr, an appncation for this and other utility programs. Since H: would become a 'w'iolation Of the municipal code, it could resu~ L'" a penalty of up to six months in jail Of a $1,000 fine. Such ~nes could be levied in additiot> to backbilling the cuslomer to recoup the 15 percent discou"t. Implementation r, the Council approves this program, staff would fonow-up w~h nolification to residents Of the existence of RAP and provide forms to residents interested in the program. At the same time, tihe necessary software programming WOJld be periormed to the utilities bill,ng system to accommodate RAP. In prerrminary discussioos with the DEO, they ha_e indicated that they require some lead time to accomplish tasks on their end. Based on tihe foeegoing. staff projects that RAP would not be rully implemented u,ntil the second qua'ler of FY93·94. Since this is a new program. some flexibility in timing and budgel is important 10 deal with unforeseen circumstances. 7 •