Agenda packet — Palo Alto City Council, January 24, 2022 (part 2 of 2)

Assigned – This category is comprised of amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by the City Council or the City Manager, to whom the City Council has delegated the authority to assign amounts to be used for specific purposes.

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

88 NOTE 10 – NET POSITION AND FUND BALANCES (Continued)

Unassigned –This category is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose.

Other governmental funds may report negative unassigned fund balance, which occurs when a fund has a residual deficit after allocation of fund balance to the nonspendable, restricted or committed categories.

The fund balances of all governmental funds are presented by th e above‐mentioned categories on the face of the financial statements. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance categories, fund balance is depleted in the order of restricted, committed, assigned, and unassigned.

The General Fund Budget Stabilization Reserve (BSR) is establis hed by authority of the General Fund Reserve Policy, which is approved by the City Council and inclu ded in the City’s annual adopted budget.

The BSR is maintained in the range of 15 to 20 percent of Gener al Fund expenditures and operating transfers, with a target of 18.5 percent. Any reserve level below 15 percent requires City Council approval.

At the discretion of the City Manager, a reserve balance above 18.5 percent may be transferred to the Infrastructure Reserve within the Capital Projects Fund. The purpose of the General Fund BSR is to fund unbudgeted, unanticipated one‐time costs. The BSR is not meant to fund ongoing, recurring General Fund expenditures.

As of June 30, 2021, total outstanding encumbrances and reappropriations related to governmental funds were $10.9 million for the General Fund, $148.0 million for the Capital Projects Fund, and $3.2 million for the Special Revenue Funds.

Enterprise Funds
At June 30, 2021, enterprise funds’ unrestricted net position (in thousands) were as follows:

Water Electric Fiber Optics Gas
Wastewater
Collection
Wastewater
Treatment Refuse
Storm
Drainage Airport Total
Unrestricted
Rate stabilization
Supply ‐ $ ‐ $ ‐ $ 2,766$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 2,766$ Distribution 9,070 ‐ 33,343 ‐ 342 (4,988) 20,014 4,745 (14,006) 48,520 9,070 ‐ 33,343 2,766 342 (4,988) 20,014 4,745 (14,006) 51,286 Operations
Supply ‐ 19,875 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 19,875 Distribution 20,773 10,026 ‐ 11,982 6,578 ‐ ‐ ‐ ‐ 49,359 20,773 29,901 ‐ 11,982 6,578 ‐ ‐ ‐ ‐ 69,234 Emergency plant replacement ‐ ‐ 1,000 ‐ ‐ 1,980 ‐ ‐ ‐ 2,980 Electric special projects ‐ 46,665 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 46,665 Reappropriations 4,451 10,050 202 443 716 ‐ ‐ 3,553 ‐ 19,415 Commitments 6,181 7,142 2,186 8,709 541 18,760 1,484 831 11,469 57,303 Underground loan ‐ 727 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 727 Notes and loans ‐ ‐ ‐ ‐ ‐ 1,651 ‐ ‐ ‐ 1,651 Landfill corrective action ‐ ‐ ‐ ‐ ‐ ‐ 681 ‐ ‐ 681 Hydro stabilization reserve ‐ 15,400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15,400 Public benefit program ‐ 3,028 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3,028 Reserve for LCFS ‐ 6,944 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,944 CIP reserve 10,707 880 ‐ 3,820 3,178 ‐ ‐ ‐ ‐ 18,585 Geng Road reserve ‐ ‐ ‐ ‐ ‐ ‐ 268 ‐ ‐ 268 Cap & Trade ‐ 1,189 ‐ 4,542 ‐ ‐ ‐ ‐ ‐ 5,731 GASB 68 Pension (14,143) (34,212) (2,238) (14,792) (8,368) (21,278) (5,896) (3,987) (754) (105,668) GASB 75 OPEB (4,054) (13,233) (1) (5,849) (2,236) (6,945) (2,485) (1,094) (408) (36,305) Total 32,985 $ 74,481 $ 34,492 $ 11,621 $ 751 $ (10,820)$ 14,066 $ 4,048 $ (3,699) $ 157,925 $

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

89 NOTE 10 – NET POSITION AND FUND BALANCES (Continued)

The City Council has set aside unrestricted net position for general contingencies, and future capital and debt service expenditures including operating and capital contingencies for unusual or emergency expenditures.

Internal Service Funds
At June 30, 2021, Internal Service Funds unrestricted net position (in thousands) were as follows:

Vehicle
Replacement
and
Maintenance Technology
Printing and
Mailing
Services
General
Benefits
Workers'
Compensation
Insurance
Program
General
Liabilities
Insurance
Program
Retiree Health
Benefits Total
Unrestricted net position:

Commitments 4,608 $ 3,236 $ 40 $ 325 $ 178 $ 11 $ ‐ $ 8,398 $ Future catastrophic losses ‐ ‐ ‐ ‐ ‐ 3,670 ‐ 3,670 Retiree health care ‐ ‐ ‐ ‐ ‐ ‐ 2,694 2,694 GASB 68 pension (3,235) (11,509) (263) ‐ 37 ‐ ‐ (14,970) GASB 75 OPEB (1,549) (3,162) (142) ‐ ‐ ‐ ‐ (4,853) Available 7,065 18,557 85 5,572 1,326 ‐ ‐ 32,605 Total 6,889 $ 7,122 $ (280) $ 5,897 $ 1,541 $ 3,681 $ 2,694 $ 27,544 $

 Commitments represent the portion of net position set aside for open purch ase orders and reappropriations.
 Future catastrophic losses represent the portion of net position to be used for unforesee n future losses.
 Retiree health care represents the portion of net position set aside to defer futu re costs of retiree health care coverage.
 GASB 68 pension represents the net impact of net pension liability and related deferred outflows/inflows of resources balances.
 GASB 75 OPEB represents the net impact of net OPEB liability and related deferred outflows/inflows of resources balances.

Deficit Fund Balance and Net Position:

At June 30, 2021, the City’s Printing and Mailing Services internal service fund had a deficit net position of $254,000. The deficit is due to the impact of Pension and OPEB liabilities and related balances. The deficit is expected to be funded by future internal service charges to other City funds.

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

90 NOTE 11 – PENSION PLANS

(a) General Information about the Pension Plans

P l a n D e s c r i p t i o n s ‐ Substantially all permanent City employees are eligible to par ticipate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple‐employer defined benefit pension plans administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. Benefits provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans including benefits provisions, assumptions and me mbership information. The reports can be found on the CalPERS website at www.calpers.ca.gov.

Benefits Provided ‐ CalPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to Plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service (equal to one year of full‐time em ployment), age at retirement and final compensation. The death benefit is one of the following: the 1959 Survivor Benefit, or the pre‐retirement option 2W Death Benefit for local fire members only.

The Plans’ provisions and benefits in effect at June 30, 2021, are summarized in the following table.

Contribution rates are based on the Actuarial Valuation Report as of June 30, 2018.

Fire Fighters,
Fire Chief
Association,
Police Officers,
Fire Fighters,
Fire Chief Association
Police Officers,
Police Management
Fire Fighters,
Fire Chief
Association,
Police Officers,
Hire Date Prior to June 8, 2012
On or after June 8,
2012
On or after Dec. 8,
2012
On or after Jan 1,
2013
Benefit formula1 3% at 55 3% at 55 3% at 50 2.7% at 57
Benefit vesting schedule 5 years service 5 years service 5 years s ervice 5 years service Benefit payment monthly for life monthly for life monthly for life monthly for life Retirement age 50 55 1 551 571
Monthly benefit as % of eligible compensation 3% 3% 3% 2.7% Actuarially determined contribution rate ‐ EE 9% 9% 9% 11.25% Actuarially determined contribution rate ‐ ER 65.332% 65.332% 65.3 32% 65.332% Hire Date Prior to July 17, 2010
On or after July 17,
2010
On or after Jan 1,
2013
Benefit formula 2.7% at 55 2 2% at 602 2% at 623
Benefit vesting schedule 5 years service 5 years service 5 years s ervice Benefit payments monthly for life monthly for life monthly for lif e Retirement age 55 2 602 623
Monthly benefit as % of eligible compensation 2 2.70% 2.0% ‐ 2.418% 2% Actuarially determined contribution rate ‐ EE 8% 7% 6.25% Actuarially determined contribution rate ‐ ER 38.367% 38.367% 38.3 67% 1 Employees can retire at age 50 with reduced benefits of 2.4% ‐ 2.88% if hired before Jan 1, 2013, or 2.0% ‐ 2.6% if hired on or after Jan 1, 2013.
2 Employees can retire at age 50 with reduced benefits of 2.0% ‐ 2.56% if hired before July 17, 2010, or 1.092% ‐ 1.874% if hired on or after July 17, 2010.
3 Employees can retire at age 52 with reduced benefits of 1.0% ‐ 1.9% Miscellaneous Plan
Safety Plan

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

91 NOTE 11 – PENSION PLANS (Continued)

Employees Covered – Based on the Actuarial Valuation Report as of June 30, 2020, th e most recent information available, the following employees were covered by the benefits terms for each Plan:

Miscellaneous
Plan Safety Plan
Inactive employees or beneficiaries currently receiving benefit s 1,223 435 Inactive employees entitled to but not yet receiving benefits 83 5 104 Active employees 777 174
Total 2,835 713

Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liabi lity. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Further detail of contributions can be found in the Required Supplement al Information Schedules of Pension Contributions.

In April 2017, the City established a Section 115 irrevocable t rust with the Public Agency Retirement Services (PARS). The Council approved an initial deposit of $2.1 million in General Fund proceeds into the General Fund subaccount of the City’s PARS Trust Account. The Trust Account allows more control and flexibility in investment allocations compared to City’s portfolio which is restricted by State regulations to fixed income instruments. The City proactively contributes to the Section 115 irrevocable trust amounts reflective of what retirement costs would be if the normal cost of contributions was budgeted at a 6.2% discount rate. During the year, the City contributed $5.0 million to the PARS Trust. As of June 30, 2021, the City reported the account balance of $37.1 million as restr icted investments in the General Benefits Internal Service Fund.

(b) Net Pension Liability

The City’s net pension liability for each plan is measured as t he total pension liability, less each plan’s fiduciary net position. Net pension liability is measured as o f June 30, 2020 (measurement date), using the Actuarial Valuation Report as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures.

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

92 NOTE 11 – PENSION PLANS (Continued)

Actuarial Assumptions ‐ The total pension liabilities were determined using the foll owing actuarial assumptions:

Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortality
1 Post Retirement Benefit Increase
Derived using CalPERS membership data
for all funds.

The lessor of contract COLA or 2.50% until
Purchasing Power Protection Allowance
Floor on purchasing power applies, 2.50%
thereafter.

Varies by Entry Age and Service
1 The mortality table used was developed based on CalPERS' speci fic data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre‐retirement and post‐retirement mortality rates includes 15 years of projected mortality improvements using 90% of Scale MP‐2016 published by the Society of Actuaries. For more details on this table, please refer to the 2017 CalPERS Experience Study available on the CalPERS website.

Miscellaneous and Safety Plans
June 30, 2019
June 30, 202
0 Entry Age Normal

7.15%

2.50%

All other actuarial assumptions used in the June 30, 2019 actua rial valuation were based on the 2017 CalPERS Experience Study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. Further details of the 2017 CalPERS Experience Study can be found on the CalPERS website under Forms and Publications.

Discount Rate – The discount rate used to measure the total pension liability was 7.15 percent for each Plan. The projection of cash flows used to determine the discou nt rate assumed that the contributions from employers will be made at current member contribution rates and that contributions from employers will be made at statutorily required rates, actuariall y d e t e r m i n e d . B a s e d o n t h o s e assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long‐ term expected rate of return on plan investments was applied to all periods of projected benefit pay ments to determine the total pension liability.

The long‐term expected rate of return on pension plan investmen ts was determined using a building‐ block method in which expected future real rates of return (exp ected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

93 NOTE 11 – PENSION PLANS (Continued)

In determining the long‐term expected rate of return, CalPERS took into account both short‐term and long‐term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short‐term (first 10 years) and the long‐te rm (11+ years) using a building‐block approach. Using the expected nominal returns for both short‐ter m and long‐term, the present value of benefits was calculated for each fund. The expected rate of ret urn was set by calculating the rounded single equivalent expected return that arrived at the same pres ent value of benefits for cash flows as the one calculated using both short‐term and long‐term returns. The expected rate of return was then set equal to the single equivalent rate calculated and adjusted to account for assumed administrative expenses.

The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The long‐term expected real rate of return by asset class and the target allocation adopted by the CalPERS Board effective on July 1, 2019, are as follows:

Asset Class
Current
Target
Allocation
Real Return
Years 1 ‐ 10 1
Real Return
Years 11+ 2
Global Equity 50.0% 4.80% 5.98%
Global Fixed Income 28.0 1.00 2.62
Inflation Sensitive 0.0 0.77 1.81
Private Equity 8.0 6.30 7.23
Real Estate 13.0 3.75 4.93
Liquidity 1.0 0.00 (0.92)

(1) An expected inflation rate of 2.00% is used for this period. (2) An expected inflation rate of 2.92% is used for this period.

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

94 NOTE 11 – PENSION PLANS (Continued)

The following table is based on the GASB 68 Accounting Valuatio n Report and shows the changes in the net pension liability for the Miscellaneous and Safety Plans (in thousands):

Total Pension
Liability
Plan Net
Position
Net Pension
Liability
Miscellaenous Plan:

Balances calculated at July 1, 2020 849,004 $ 573,840$ 275,164$ Changes for the year:

Service cost 14,267 ‐ 14,267 Interest on total pension liability 59,995 ‐ 59,995 Differences between expected and actual experiences 4,85 0 ‐ 4,85 0 Contributions from employer ‐ 28,889 (28, 889) Contributions from employees ‐ 7,189 (7, 189) Net investment income ‐ 28,735 (28, 735) Benefit payments, including refunds of employee contributions (4 3,781) (43, 781) ‐ Administrative expense ‐ ( 809) 809 Net changes 35,331 20,223 15,108 Balances reported at June 30, 2021 884,335 594,063 290,272 Safety Plan:

Balances calculated at July 1, 2020 456,817 $ 289,028$ 167,789$ Changes for the year:

Service cost 7,898 ‐ 7,898 Interest on total pension liability 32,469 ‐ 32,469 Differences between expected and actual experiences 6,314 ‐ 6,314 Contributions from employer ‐ 14,297 (14, 297) Contributions from employees ‐ 3,459 (3, 459) Net investment income ‐ 14,310 (14, 310) Benefit payments, including refunds of employee contributions (2 5,948) (25, 948) ‐ Administrative expense ‐ ( 407) 407 Net changes 20,733 5,711 15,022 Balances reported at June 30, 2021 477,550 294,739 182,811 Total 1,361,885 $ 888,802$ 473,083$

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

95 NOTE 11 – PENSION PLANS (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate ‐ The following table presents the net pension liability of the Plans as of the measurement date, calculated using the discount rate of 7.15 percent, compared to a discount rate that is 1 percentage point lower (6.15 percent) or 1 percentage point higher (8.15 percent). Amounts shown below are in thousands:

Discount Rate ‐ 1%
(6.15%)
Current Discount Rate
(7.15%)
Discount Rate + 1%
(8.15%)
Miscellaneous Plan:

Plan's Net Pension Liability 401,532 $ 290,272 $ 197,747$ Safety Plan:

Plan's Net Pension Liability 244,169 $ 182,811 $ 132,093$

Plan Fiduciary Net Position – Detailed information about the Plan’s fiduciary net position is available in the separately issued CalPERS financial report.

(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

For the year ended June 30, 2021, the City recognized a pension expense of $34.7 million and $25.7 million for the Miscellaneous and Safety Plan, respectively, for a total of $60.4 million. At June 30, 2021, the City reported pension related deferred outflows of resources for the Miscellaneous and Safety Plans from the following sources (in thousands):

Miscellaneous Plan:

Deferred
Outflows
of Resources
Pension contributions subsequent to
measurement date 32,782 $
Difference between expected and actual experience 5,051 Net difference between projected and actual earnings
on plan investments 3,887
Balance reported at June 30, 2021 41,720
Safety Plan:

Pension contributions subsequent to
measurement date 14,796
Difference between expected and actual experience 5,157 Net difference between projected and actual earnings
on plan investments 1,977
Balance reported at June 30, 2021 21,930
Total, Miscellaneous and Safety Plans 63,650$

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

96 NOTE 11 – PENSION PLANS (Continued)

The $47.6 million reported as deferred outflows of resources relates to contributions paid by the City from July 1, 2020 through June 30, 2021 which is subsequent to the City’s measurement date of June 30, 2020 for both the Miscellaneous and Safety Plans. This amount will be recognized as a reduction of the net pension liability in the year ended June 30, 2022.

The net differences reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in future pension expense as follows (in thousands):

Year Ended June 30,
Miscellaneous
Plan
Safety
Plan Total
2022 975 $ 1,931$ 2,906 $ 2023 2,732 2,505 5,237
2024 2,849 1,494 4,343
2025 2,382 1,204 3,586
8,938$ 7,134 $ 16,072$

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

97 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB)

(a) General Information about the OPEB Plan

In addition to providing pension benefits, the City participates in the California Public Employees’ Medical and Health Care Act program to provide certain health care bene fits for retired employees. The City’s Other Post‐Employment Benefit plan is an agent multiple‐employer defined benefit plan. Employees who retire directly from the City are eligible for retiree health benefits if they retire on or after age 50 with 5 years of service and are receiving a monthly pension from CalPE RS. Details of benefits to retirees are noted in the following tables:

Unit Hired Before
Retiree
Coverage1
Dependent
Coverage
Retired on or
After
Retiree
Contribution
Management & Professional2 1/1/2004 100% 100% 5/1/2011 Flat rate 4 Police Management2 1/1/2004 100% 100% 6/1/2012 Flat rate 4 Fire Fighters2 1/1/2004 100% 100% 12/1/2011 Flat rate 4 Fire Chiefs Association2 1/1/2004 100% 100% 1/1/2013 Flat rate 4 SEIU2 1/1/2005 100% 100% 5/1/2011 Flat rate 4
Police Officers3 1/1/2006 100% 100% 4/1/2015 Flat rate 4 Utilities Managers & Professional2 1/1/2004 100% 100% 5/1/2011 10% 2 Effective 1/1/2007 plan capped at the second highest CalPERS B ay Area Basic plan premium. 3 Effective 7/1/2014 plan capped at the second highest CalPERS B ay Area Basic plan premium. 4 For the year ended June 20, 2021, City pays $840‐$871 for empl oyee, $1,680‐1,742 for employee +1, and $2,180‐$2,260 for famil y.

Unit
Hired on or
After
Retiree
Coverage1
Dependent
Coverage2
Management & Professional 1/1/2004 50%‐100% Max. 90%
Police Management 1/1/2004 50%‐100% Max. 90%
Fire Fighters 1/1/2004 50%‐100% Max. 90%
Fire Chiefs Association 1/1/2004 50%‐100% Max. 90%
Utilities Managers & Professional 1/1/2004 50%‐100% Max. 90% SEIU 1/1/2005 50%‐100% Max. 90%
Police Officers 1/1/2006 50%‐100% Max. 90%
specified employer contribution, with the City portion incre asing by 5% for each additional year of service credit. 2 The City will contribute an additional 90 percent of the weigh ted average of the additional premiums required for enrollment of those family members, during the benefit year to which the forumla is applied. 1 100% of benefits if the employee has five years CalPERS servic e credit and the employee retired from the City. 1 Employees with ten years of CalPERS service, at least five of which are at the City of Palo Alto, receive 50% of the Retiree contributions for units with the following hire dates a re determined by Government Code Section 22893, 20 year graduated schedule:

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

98 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)

In fiscal year 2008, the City elected to participate in an irrevocable trust to provide a funding mechanism for retiree health benefits. The Trust, California Employers’ Retirees Benefit Trust (CERBT), is administrated by CalPERS and managed by a separately appointed board, which is not under control of the City Council. This Trust is not considered a component unit of the City.

Employees Covered – Employees covered by the benefit terms as of June 30, 2020, the most recent information available, are as follows:

Inactive employees or beneficiaries currently
receiving benefits 1,011
Inactive employees entitled to but not yet
receiving benefits 75
Active employees 897
Total 1,983

Contributions – The City’s OPEB funding policy is to contribute 100 percent o r more of the actuarially determined contribution each year pursuant to City Council Resolution. For the year ended June 30, 2021, the City’s contributions totaled $14.6 million.

(b) Net OPEB Liability

The City’s net OPEB liability is measured as the total OPEB lia bility, less the OPEB plan’s fiduciary net position. The net OPEB liability is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. A summary of principal assumptions and methods used to determine the net OPEB liability is shown below.

Valuation Date June 30, 2019
Measurement Date June 30, 2020
Actuarial Cost Method Entry‐Age, level percentage of payroll Actuarial Assumptions:

Discount Rate 6.75%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase 2017 CalPERS Experience Study for the period from 1997 to 2015
Medical Trend Non‐Medicare ‐ 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076
Medicare ‐ 6.3% for 2021, decreasing to an ultimate
rate of 4.0% in 207
6 Disability, Termination, Retirement CalPERS 1997‐2015 Exper ience Study Mortality 2017 CalPERS Experience Study for the period from 1997 to 2015
Mortality Improvement Post‐retirement mortality projected f ully generational with Society of Actuaries Scale MP‐
2019
Increase to Group 3 Flat Dollar Caps 1/2 of Medical Trend, not less than assumed inflation (2.75%)
Healthcare Participation for Future Future retirees: 95‐98 %, based on Plan experience ACA Excise Tax None

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

99 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)

Change of Assumptions – During measurement period 2020, actuarial assumptions for ACA Exercise Tax was changed from 2% load on cash subsidy to none.

Discount Rate – The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that the City’s contribution will be made equal to the actuarially determined contribution. Based on those ass umptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long‐term expected rate of return on OPEB plan investments applied to all periods of projected benefit payments to determine the total OPEB liability.

The long‐term expected rate of return for OPEB plan investments was 6.75%. The asset class target allocation and geometric real rates of return for each major as set class are summarized in the following table.

Asset Class
Current
Target
Allocation
Expected Real
Rate of Return
Global Equity 59.0% 4.82%
Fixed Income 25.0 1.47
TIPS 5.0 1.29
Commodities 3.0 0.84
REITS 8.0 3.76
Assumed long‐term rate of inflation of 2.75%

The following table shows the changes in the net OPEB liability (in thousands):

Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
Balance at June 30, 2020 245,509 $ 118,479 $ 127,030 $ Changes during the measurement period:

Service cost 6,366 ‐ 6,366 Interest on the total OPEB liability 16,572 ‐ 16,572 Changes in assumptions (4,426) ‐ (4,426) Contributions ‐ employer ‐ 16,475 (16,475) Investment income ‐ 4,327 (4,327) Administrative expenses ‐ (58) 58 Benefit payments (12,728) (12,728) ‐ Net changes 5,784 8,016 (2,232) Balance at June 30, 2021 251,293 $ 126,495 $ 124,798 $ Increase (Decrease)

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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

100
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)

Sensitivity of the Net OPEB Liability to Changes in the Discoun t Rate – The following presents the net OPEB liability of the City as of the measurement date, calculated using the discount rate of 6.75 percent, as well as what the City’s net OPEB liability would be if it we re calculated using a discount rate that is 1 percentage‐point lower (5.75 perc ent) or 1 percentage‐point hig her (7.75 percent) than the current discount rate:

Discount Rate
‐1% (5.75%)
Current
Discount Rate
(6.75%)
Discount Rate
+1% (7.75%)
157,131$ 124,798 $ 98,126 $

Sensitivity of the Net OPEB Liability to Changes in the Healthca r e C o s t T r e n d R a t e – The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trends rates that are 1% lower or 1% higher than the current healthcare cost trend rates.

Healthcare Trend
Rate ‐ 1%
Healthcare Trend
Current Rate
Healthcare Trend
Rate + 1%
94,719$ 124,798 $ 161,763 $

OPEB Plan Fiduciary Net Position – Detailed information about the OPEB plan’s fiduciary net positi on is available in the separately issued CalPERS financial report.

(d) OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB

For the fiscal year ended June 30, 2021, the City recognized an OPEB expense of $10.0 million for the OPEB plan. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands):

Deferred
Outflows
of Resources
Deferred
Inflows
of Resources
OPEB contributions subsequent to
measurement date $         14,592 $                 ‐ Differences between expected and
actual experience ‐                                   19,031 Changes in assumptions 4,491                             3,621 Net differences between projected and actual
earnings on plan investments 2,200                                   ‐ Total $         21,283 $         22,652

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NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)

The $14.6 million reported as deferred outflows of resources re lates to contributions made by the City from July 1, 2020 through June 30, 2021, which is subsequent to the City’s measurement date of June 30, 2020. This amount will be recognized as a reduction o f the net OPEB liability in the fiscal year ended June 30, 2022.

The net differences reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in future OPEB expense as follows (in thousands):

Fiscal Year Ending June 30,
2022 (4,964) $
2023 (4,336)
2024 (4,125)
2025 (2,135)
2026 (401)
Total (15,961) $

NOTE 13 – DEFERRED COMPENSATION PLAN

City employees may defer a portion of their compensation under City sponsored Deferred Compensation Plans created in accordance with Internal Revenue Code Section 457. Under these Plans, participants are not taxed on the deferred portion of their compensation until d istributed to them. Distributions may be made only at termination, retirement, death or in an emergency as defined by the Plans.

The laws governing deferred compensation plan assets require pl an assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City’s property and are not subject to City control, they have been excluded from these financial statements.

NOTE 14 – RISK MANAGEMENT

Coverage
The City provides dental coverage to employees through a City plan, which is administered by a third party service agent. The City is self‐insured for dental claims.

The City has a workers’ compensation insurance policy with coverage up to the statutory limit set by the State of California. The City retains the risk for the first $750,000 in losses for each accident and employee under this policy.

The City also has public employee dishonesty insurance with a $5,000 deductible and coverage up to $1.0 million per loss. The Director of Administrative Services/CFO and City Manager each have coverage up to $4.0 million per loss.

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NOTE 14 – RISK MANAGEMENT (Continued)

The City’s property, boiler, and machinery insurance policy has various deductibles and coverage based on the type of property.

The City is a member of the Authority for California Cities Excess Liability (ACCEL), which provides excess general liability insurance coverage, including auto liability, up to $200 million per occurrence. The City retains the risk for the first $1.0 million in losses for each occurrence under this policy.

ACCEL was established for the purpose of creating a risk management pool for central California municipalities. ACCEL is governed by a Board of Directors consi sting of representatives of its member cities. The board controls the operations of ACCEL, including s election of claims management, general administration and approval of the annual budget.

The City’s deposits with ACCEL equal the ratio of the City’s payroll to the total payroll of all entities. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating.

During the year ended June 30, 2021, the City paid $2.1 million to ACCEL for current year coverage.

Audited financial statements are available from ACCEL at 100 Pi ne Street, 11 th Floor, San Francisco,
California 94111.

Claims Liability
The City provides for the uninsured portion of claims and judgm ents in the General Liabilities insurance program funds. Claims and judgments, including a provision for claims incurred but not reported, and claim adjustment expenses are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims.

The City’s liability for uninsured claims is limited to dental, general liability, and workers’ compensation claims, as discussed above. Dental liability is based on a perc entage of current year actual expense.

General and workers’ compensation liabilities are based on the results of actuarial studies, and include amounts for claims incurred but not reported as follows as of June 30 (in thousands):

2021 2020
Beginning balance 29,713 $           28,365 $
Claims expense, including claims incurred but not
reported (IBNR) 11,197              6,914
Claims paid (8,379)                (5,566)
Ending balance 32,531 $           29,713 $
Current portion 6,811 $              6,198 $
Year Ended June 30

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NOTE 14 – RISK MANAGEMENT (Continued)

The City also recorded claims payable of $12.6 million on its governmental activities’ financial statements for a class action lawsuit filed against the City that challenged the City’s gas and electric rates. See Note

16. The City has not incurred a claim that has exceeded its insuran ce coverage limits in any of the last three years, nor have there been any significant reductions in insurance coverage.

NOTE 15 – JOINT VENTURES

General
The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full powers and authorities within the scope of the related Joint Powers Ag reement, including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations a nd liabilities of the JPAs, inclu ding the long‐term debt in which the City participates in repayment, are not obligations and liabilities of the City, and are not reported on the City’s financial statements.

Each JPA is governed by a board consisting of representatives f rom each member agency. Each board controls the operations of its respective JPA, including selection of management and approval of operating budgets, independent of any influence by member agencies beyond their representation on the Board.

Northern California Power Agency
The City is a member of Northern California Power Agency (NCPA), a joint powers agency which operates under a joint powers agreement among fifteen public agencies. T he purpose of NCPA is to use the combined strength of its members to purchase, generate, sell an d interchange electric energy and capacity through the acquisition and use of electrical generation and transmission facilities. Each agency member has agreed to fund a pro rata share of certain assessmen ts by NCPA and enter into take‐or‐pay power supply contracts with NCPA. While NCPA is governed by its members, none of its obligations are those of its members unless expressly assumed by them.

During the year ended June 30, 2021, the City incurred expenses totaling $92.1 million for purchased power and assessments earned by NCPA.

The City’s interest in NCPA projects and reserves, as computed by NCPA, was $8.1 million at June 30, 2021.

This amount represents the City’s portion of funds, which resulted from the settlement with third parties of issues with financial consequences and reconciliations of several prior years’ budgets for programs. It is recognized that all the funds credited to the City are linked to the collection of revenue from the City’s ratepayers, or to the settlement of disputes relating to electr ic power supply and that the money was collected from the City’s ratepayers to pay power bills. Additionally, the NCPA Commission identified and approved the funding of specific reserves for working capital, accumulated employees’ post‐retirement

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NOTE 15 – JOINT VENTURES (Continued)

medical benefits, and billed property taxes for the geothermal project. The Commission also identified a number of contingent liabilities that may or may not be realized, the cost of which in most cases is difficult to estimate at this time. One such contingent liability is the steam field depletion, which will require funding to cover debt service and operational costs in excess of the expected value of the electric power.

The General Operating Reserve (G OR) is intended to minimize the number and amount of individual reserves needed for each project, protect NCPA’s financial cond ition and maintain its credit worthiness.

There are no funds on deposit with NCPA as a reserve against these contingencies identified by NCPA.

Members of NCPA may participate in an individual project of NCP A without obligation for any other project. Member assessments collected for one project may not be used to finance other projects of NCPA without the member’s permission.

NCPA’s financial statements can be obtained from NCPA, 651 Commerce Drive, Roseville, CA 95678.

Calaveras Hydroelectric Project
In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the North Fork Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service payments to NCPA began in February 1990 when the project was declared su bstantially complete and power was delivered to the participants. Under its power purchase agreement with NCPA, the City is obligated to pay

22.9 percent of this Project’s debt service and operating costs . At June 30, 2021, the book value of this Project’s plant, equipment and other assets was $303.8 million, while its long‐term debt totaled $255.8 million and other liabilities totaled $44.5 million. The City’s share of the Project’s long‐term debt amounted to $58.6 million at that date.

Transmission Agency of Northern California (TANC)
The City is a member of a joint powers agreement with 14 other entities in Transmission Agency of Northern California (TANC). TANC’s purpose is to provide electrical transmission or other facilities for the use of its members. While governed by its members, none of TANC’s obligations are those of its members unless expressly assumed by them. The City was obligated to pay 4 percent of TANC’s debt‐service and operating costs. However, a Reso lution was approved authorizing the execution of a Long‐Term Layoff Agreement (LTLA) between the Cities of Palo Alto and Roseville. These two agencies desired to “layoff” their entitlement rights to the California‐Oregon Transmission Project (COTP) (and Roseville’s South of Tesla entitlement rights) for a period of 15 years to those acq uiring members (Sacramento Municipal Utility District, Turlock Irrigation District, and Modesto Irri gation District). The effective date of this Agreement was February 1, 2009. As a result, the City is not ob ligated to pay TANC’s debt‐service and operating costs starting February 1, 2009, for a period of fifteen years.

TANC’s financial statements can be obtained from TANC, P.O. Box 15129, Sacramento, CA 95851.

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NOTE 15 – JOINT VENTURES (Continued)

Bay Area Water Supply and Conservation Agency (BAWSCA)
The City is a member of a regional water district with 26 other entities, the Bay Area Water Supply and Conservation Agency (BAWSCA). BAWSCA was created on May 27, 2003 to represent the interests of 24 cities and water districts and two private utilities in Alameda , Santa Clara and San Mateo counties that purchase water on a wholesale basis from the San Francisco regi onal water system. It has the power to issue debt and plan, finance, construct, and operate water supply, transmission, reclamation, and conservation projects on behalf of its members.

In 2013 the City participated in a debt issuance by BAWSCA. Th e debt was issued to repay certain long‐ term costs associated with the San Francisco Public Utilities Commission (SFPUC) water supply contract.

During the fiscal year, the City paid its share of the annual d ebt service of $1.9 million, which will vary based on annual water purchases of the City compared to other BAWSCA agencies.

BAWSCA’s financial statements can be obtained from BAWSCA, 155 Bovet Road, Suite 650, San Mateo, California 94402.

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Palo Alto Unified School District – The City leased 27 acres of the former Cubberley School site and twelve extended day care sites from Palo Alto Unified School District (PAUSD) through December 31, 2019. The City and the PAUSD reached new agreements for the Cubberley School site through December 31, 2024, and the twelve extended day care sites through June 30, 2022. Under the new Cubberley lease, the City leases approximately 65,046 rentable square feet of building area and 15.94 acres of outdoor recreational area. The City has the right to reduce the leased premises by surrendering the Junior Museum and Zoo (JMZ) Building and/or the Building S. The City intends to surrender the JMZ Building after the completion of the new museum building that is not located on the property.

The total lease expenditures for the year ended June 30, 2021 amounted to $4.1 million. Future minimum annual lease payments are as follows (in thousands):

Year Ending
June 30 Payment
2022 3,406 $
2023 2,568
2024 2,568
2025 1,284
9,826$

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NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)

GreenWaste of Palo Alto – GreenWaste of Palo Alto is the City’s contractor for waste co llection, transportation, and processing services. The agreement expires June 30, 2026. The base compensation for GreenWaste is adjusted annually based on CPI indicators stipulated in the contract. In fiscal year 2021 payments to GreenWaste were $11.0 million.

City of Palo Alto Regional Water Quality Control Plant – The cities of Palo Alto, Mountain View and Los Altos (the Partners) participate jointly in the cost of maintai ning and operating the City of Palo Alto Regional Water Quality Control Plant and related system (the Plant). The City is the owner and administrator of the Plant, which provides the transmission, tr eatment and disposal of sewage for the Partners. The cities of Mountain View and Los Altos are entitle d to use a portion of the capacity of the Plant for a specified period of time. Each partner has the right to rent unused capacity from/to the other partners. The expenses of operations and maintenance are paid q uarterly by each partner based on its pro rata share of treatment costs. Additionally, joint system r evenues are shared by the partners in the same ratio as expenses are paid. The amended agreement will terminate on December 31, 2060, but may be terminated by any partner upon ten years’ written notice to the other partners. All sewage treatment property, plant and equipment are included in the Wastewater Treatment Enterprise Fund’s capital assets balance. If the City initiates the termination of the contracts, it is required to pay the other partners their unamortized contribution towards the capital assets.

Sunnyvale Materials Recovery and Transfer Station (SMaRT Station) – On September 30, 1991, as amended on June 9, 1992, the City, the City of Sunnyvale, and the City of Mountain View, entered into a Memorandum of Understanding (MOU) to participate in the constru ction and operation of the SMaRT Station, which recovers recyclable materials from the municipal solid waste delivered from participating cities. Per the MOU, the City has a capital share of 21.3 perce nt of this facility and reimburses its proportionate capital share of design, construction and operation costs to Sunnyvale.

In fiscal year 2008, the members agreed to finance an Equipment Replacement Project from existing reserves and proceeds from the Solid Waste Revenue Bond, Series 2007. The City has committed to repay

27.8 percent of the remaining debt service on the Bonds. During the year ended June 30, 2021, the City made the last debt service payment of $0.2 million and the City ’s obligation to pay related debt service payments is completed. The MOU is expiring on December 31, 2021.

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NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)

UTILITIES ENERGY RESOURCE MANAGEMENT

Electric Power Supply Purchase Agreements
– The City has numerous power purchase agreements with
power producers to purchase capacity and energy to supply a por tion of its load requirements. As of June 30, 2021, the approximate minimum obligations for the contracts, assuming the energy is delivered over the next four years, are as follows:

Fiscal Year Projected Obligation
2022 $63.66 million
2023 $57.61 million
2024 $55.60 million
2025 $52.02 million
2026 $52.63 million

Contractual Commitments beyond 2022 (Electricity) – Several of the City’s purchase power and transmission contracts extend beyond the five‐year summary pres ented above. These contracts expire between 2026 and 2051 and provide for power under various terms and conditions. The City also has a new solar power purchase agreement that is schedule to start in January 2023. The City estimates that its annual minimum commitments under all of its contracts, assu ming the energy is delivered, ranges between $62.06 million in 2025 and $67.13 million in 2034. The City’s largest single purchase power source is the Western Base Resource contract, whereby the City receives 12.31 percent of the amount of energy made available by Western, after meeting Central Valley Project use requirements, in any given year at a 12.31 percent share of their revenue requirement. The Western contract expires on December 31, 2024. The City has the option to extend the Weste rn contract for an additional 30‐year period beyond 2024, although at a slightly lower share of the total energy output and revenue requirement (12.06 percent instead of 12.31 percent).

Gas Transmission and Local Transportation Rates – The City relies on Pacific Gas and Electric Company’s (PG&E) natural gas pipeline infrastructure, including both high ‐pressured transmission and medium‐ pressure local transportation, to move gas from the California border to the City’s distribution system.

Rates are determined through proceedings at the California Public Utilities Commission. The gas transmission and local transportation rates increased by 26% and 8%, respectively, from fiscal year 2020 to fiscal year 2021. The gas transmission and local transporta tion rates are expected to increase by 4% and 3%, respectively, in fiscal year 2022.

San Francisco Public Utilities Commission – The City purchases water from the San Francisco Public Utilities Commission (SFPUC) under a Water Supply Agreement (WS A) terminating in 2034. The City’s wholesale water rate under this contract is determined by a rat emaking process under the authority of the SFPUC, with contractual limitations on the types of costs t hat may be allocated to wholesale water purchasers like the City. The WSA contains certain restriction s regarding water purchases from other water suppliers, though those restrictions do not apply to recy cled water or emergency water supplies.

The City’s cost of water under this contract is projected to remain flat through 2022.

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NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)

Litigation
The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney, there is no pending litigation, claims or assessments that are likely to have a materially adverse effect on the City’s financial condition.

A class action lawsuit was filed against the City in October 2016 that challenged the City’s gas and electric rates under Proposition 26. On June 24, 2021, a trial court entered judgment partially against the City and ordered the City to pay $12.6 million to a common fund to refun d gas rate payers and for payment of incurred litigation costs. The City and the plaintiffs have appealed the trial court’s judgment. Payment of refunds due to gas rate payers under the trial court judgment are stayed pending a decision by the Court of appeal (expected in late 2022/early 2023) on the parties’ re spective appeals. While the ultimate outcome of the claim is uncertain, the City has recorded a claims payable equal to the trial court judgment.

This liability is not due and payable at June 30, 2021 and the City recorded a non‐current claims payable of $12.6 million on its governmental activities’ financial statements for this lawsuit. In 2022, the City has set aside funding in the General Fund for the potential financial impacts.

A personal injury lawsuit was filed against the City in August 2018. Plaintiff, a bicyclist, alleges that the City created a dangerous condition of public property that caused him to suffer catastrophic injuries. The City Attorney is of the opinion that a loss is reasonably possi ble but cannot be reasonably estimated at this time.

Grant Programs
The City participates in Federal and State grant programs. These programs have been audited by the City’s independent auditors in accordance with the provisions of the F ederal Single Audit Act amendments of 1996 and applicable State requirements. No costs were questioned as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies c annot be determined at this time. The City expects such amounts, if any, to be immaterial.

Uncertainties
In March 2020, the World Health Organization declared coronavir us COVID‐19 a global pandemic. This contagious disease outbreak and any related adverse public health developments have adversely affected workforces, customers, economies, and financial markets globall y. It has also disrupted the normal operations of many governments, including the City. The City e xpects this outbreak to impact the City’s operations for future reporting periods. It is not possible for the City to predict the duration or magnitude of the adverse results of the outbreak and its effects on the City’s operations.

Note 17 – SUBSEQUENT EVENT

On July 12, 2021, the SWRCB and the City executed a direct loan agreement for an award up to $17.5 million to finance the rehabilitat e and upgrade the RWQCP prima ry sedimentation tanks and ancillary systems. The loan interest rate is 0.9% and has a final maturity on February 15, 2053.

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Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*

109
I. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – MISCELLANEOUS PLAN (In thousands)

Fiscal year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14 Total pension liability
Service cost 14,267 $ 15,045 $ 14,724 $ 14,423 $ 12,582 $ 12,183 $ 12,442 $ Interest 59,995 57,523 54,903 52,831 51,531 49,345 46,963 Changes of assumptions ‐ ‐ (5,673) 42,239 ‐ (11, 552) ‐ Difference between expected and actual experience 4,850 6,230 4,271 (6,378) 757 3,507 ‐ Benefit payments, including refunds of employee contributions (4 3,781) (41,124) (37,624) (36,405) (34,825) (32, 980) (31,781) Net change in total pension liability 35,331 37,674 30,601 66,710 30,045 20,503 27,624 Total pension liability ‐ beginning 849,004 811,330 780,729 714,019 683,974 663,471 635,847 Total pension liability ‐ ending (a) 884,335 $ 849,004 $ 811,330 $ 780,729$ 714,019 $ 683,974 $ 663,471$ Plan fiduciary net position
Contributions ‐ employer 28,889 $ 25,423 $ 23,342 $ 20,638 $ 18,840 $ 18,610 $ 17,400 $ Contributions ‐ employee 7,189 6,939 6,654 6,314 5,812 5,730 6,345 Net investment income 28,735 36,322 43,690 53,259 2,464 10,597 70,989 Benefit payments, including refunds of employee contributions (4 3,781) (41,124) (37,624) (36,405) (34,825) (32, 980) (31,781) Administrative expense (809) (390) (799) (694) (291) ( 538) ‐ Other non‐investment income (expenses) ‐ 1 (1,518) 30 ‐ ‐ ‐ Net change in fiduciary net position 20,223 27,171 33,745 43,142 (8,000) 1,419 62,953 Plan fiduciary net position ‐ beginning 573,840 546,669 512,924 469,782 477,782 476,363 413,410 Plan fiduciary net position ‐ ending (b) 594,063 $ 573,840 $ 546,669 $ 512,924$ 469,782 $ 477,782 $ 476,363$ Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 290,272 $ 275,164 $ 264,661 $ 267,805$ 244,237 $ 206,192 $ 187,108$ Plan fiduciary net position as a percentage of total pension liability 67.18% 67.59% 67.38% 65.70% 65.79% 69.85% 71.80% Covered payroll 81,017 $ 82,573 $ 80,634 $ 77,606 $ 73,722 $ 69,837 $ 66,373 $ Plan net pension liability/(asset) as a percentage of covered payroll 358.29% 333.24% 328.23% 345.08% 331.29% 295.25% 281.90% Notes to Schedule:

Change in assumptions ‐ During measurement period 2014, the discount rate was 7.50%. During measurement period 2015, the discount rate was increased from 7.50 percent to 7.65 percent. There is no change in discount rate during measurement period 2016. During measurement period 2017, the discount rate was reduced from 7.65 percent to

7.15 percent. During measurement period 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There are no change in assumptions during measurement periods 2019 and 2020. * Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only seven years of information is shown.

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Required Supplementary Information (Unaudited)
Last 8 Fiscal Years*

110
II. SCHEDULE OF PENSION CONTRIBUTIONS– MISCELLANEOUS PLAN (In thousands)

Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 201 3‐14 Contractually required
contribution (actuarially determined) 32,782 $ 28,889 $ 25,423 $ 23,342 $ 20,638 $ 18,840 $ 18,610 $ 17,400 $ Actual contribution (32,782) (28,889) (25,423) (23,342) (20,638) (18,840) (18,610) (17,400) Contribution deficiency/(excess) ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Covered payroll 87,177 $ 81,017 $ 82,573 $ 80,634 $ 77,606 $ 73,722 $ 69,837 $ 66,373 $ Contributions as percentage of covered payroll 37.60% 35.66% 30.79 % 28.95% 26.59% 25.56% 26.65% 26.22%

Notes to Schedule:

The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:

ADC for fiscal year June 30, 2021
Actuarial valuation date June 30, 2018
Actuarial cost method Entry‐Age Normal Cost Method
Asset valuation method Actuarial value of assets
Inflation 2.50%
Salary increases Varies by entry age and services
Payroll growth 2.75%
Investment rate of return
Retirement age
Mortality

7.00%, net of pension plan investment and administrative expens es, includes inflation.

The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period 1997 to 2015.

The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre‐retirement and post‐ retirement mortality rates includes 15 years of projected mortality improvements using 90% of Scale MP‐2016 published by the Society of Actuaries.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only eight years of information is shown.

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Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*

111
III. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – SAFETY PLAN (In thousands)

Fiscal year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14 Total pension liability
Service cost 7,898 $ 7,259 $ 7,168 $ 6,584 $ 5,916 $ 5,959 $ 6,221 $ Interest 32,469 31,066 29,871 28,272 27,816 27,047 26,113 Changes of assumptions ‐ ‐ (1, 374) 22,566 ‐ (6, 327) ‐ Difference between expected and actual experience 6,314 3,841 11,604 (2,790) (1,516) 75 ‐ Benefit payments, including refunds of employee contributions (2 5,948) (24,757) (23, 636) (22,413) (21,669) (21, 148) (19,985) Net change in total pension liability 20,733 17,409 23,633 32,219 10,547 5,606 12,349 Total pension liability ‐ beginning 456,817 439,408 415,775 383,556 373,009 367,403 355,054 Total pension liability ‐ ending (a) 477,550 $ 456,817$ 439,408 $ 415,775$ 383,556 $ 373,009 $ 367,403$ Plan fiduciary net position
Contributions ‐ employer 14,297 $ 12,370 $ 11,030 $ 10,220 $ 9,403 $ 8,617 $ 7,616 $ Contributions ‐ employee 3,459 3,225 2,799 2,475 2,059 2,047 2,762 Net investment income 14,310 18,217 22,724 28,112 1,259 5,774 40,033 Benefit payments, including refunds of employee contributions (2 5,948) (24,757) (23, 636) (22,413) (21,669) (21, 148) (19,985) Administrative expense (407) (201) ( 418) (370) (157) ( 290) ‐ Other non‐investment income (expenses) ‐ 1 ( 794) (30) ‐ ‐ ‐ Net change in fiduciary net position 5,711 8,855 11,705 17,994 (9,105) (5, 000) 30,426 Plan fiduciary net position ‐ beginning 289,028 280,173 268,468 250,474 259,579 264,579 234,153 Plan fiduciary net position ‐ ending (b) 294,739 $ 289,028$ 280,173 $ 268,468$ 250,474 $ 259,579 $ 264,579$ Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 182,811 $ 167,789$ 159,235 $ 147,307$ 133,082 $ 113,430 $ 102,824$ Plan fiduciary net position as a percentage of total pension liability 61.72% 63.27% 63.76% 64.57% 65.30% 69.59% 72.01% Covered payroll 26,189 $ 24,263 $ 24,131 $ 21,906 $ 21,822 $ 21,912 $ 21,896 $ Plan net pension liability/(asset) as a percentage of covered payroll 698.04% 691.54% 659.88% 672.45% 609.85% 517.66% 469.60% Notes to Schedule:

Benefit changes ‐ The figures above do not include any liability that may have re sulted from plan changes which occurred after the June 30, 2019 valuation date. This applies for voluntary benefit changes as well as any offers of two year s additional service credit (a.k.a. Golden Handshake). * Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only seven years of information is shown.

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Required Supplementary Information (Unaudited)
Last 8 Fiscal Years*

112
IV. SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN
(In thousands)

Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 201 3‐14 Contractually required
contribution (actuarially determined) 14,796 $ 14,297 $ 12,370 $ 11,030 $ 10,220 $ 9,403 $ 8,617 $ 7,616 $ Actual contribution (14,796) (14,297) (12,370) (11,030) (10,220) (9,403) (8,617) (7,616) Contribution deficiency/(excess) ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Covered payroll 25,615 $ 26,189 $ 24,263 $ 24,131 $ 21,906 $ 21,822 $ # 21,912$ 21,896 $ Contributions as percentage of covered payroll 57.76% 54.59% 50.98 % 45.71% 46.65% 43.09% 39.33% 34.78%

Notes to Schedule:

The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:

7.00%, net of pension plan investment and administrative expens es, includes inflation.

The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period 1997 to 2015.

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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 4 Fiscal Years*

113
V. SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS (In thousands)

Fiscal year 2020‐21 2019‐2 0 2018‐19 2017‐18
Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17
Total OPEB liability
Service cost 6,366 $ 6,622 $ 6,429 $ 6,242 $ Interest 16,572 17,292 16,546 15,853 Changes in benefit terms ‐ 972 ‐ ‐ Changes of assumptions (4,426) 7,057 ‐ ‐ Difference between expected and actual experience ‐ (29,907) ‐ ‐ Benefit payments, including refunds of employee contributions (1 2,728) (12,157) (12, 104) (11,916) Net change in total OPEB liability 5,784 (10,121) 10,871 10,179 Total OPEB liability ‐ beginning 245,509 255,630 244,759 234,580 Total OPEB liability ‐ ending (a) 251,293 $ 245,509 $ 255,630$ 244,759 $ Plan fiduciary net position
Contributions ‐ employer 16,475 $ 15,997 $ 21,349 $ 14,739 $ Net investment income 4,327 6,852 7,519 8,628 Benefit payments, including refunds of employee contributions (1 2,728) (12,157) (12, 104) (11,916) Administrative expense (58) (23) ( 204) (44) Net change in fiduciary net position 8,016 10,669 16,560 11,407 Plan fiduciary net position ‐ beginning 118,479 107,810 91,250 79,843 Plan fiduciary net position ‐ ending (b) 126,495 $ 118,479 $ 107,810$ 91,250 $ Plan net OPEB liability/(asset) ‐ Ending (a) ‐ (b) 124,798 $ 127,030 $ 147,820$ 153,509 $ Plan fiduciary net position as a percentage of total OPEB liability 50.34% 48.26% 42.17% 37.28% Covered employee payroll 125,676 $ 118,014 $ 119,090$ 118,774 $ Plan net OPEB liability/(asset) as a percentage of covered employee payroll 99.30% 107.64% 124.12% 129.24% Notes to Schedule:

Benefit changes ‐ The figures above do not include any liability that may have re sulted from plan changes which occurred after the measurement dates.

Changes in assumptions ‐ During measurement period 2020, demographic assumptions were change in accordance to the 2017 CalPERS Experience Study while mortality improvement scale was updated to Scale MP‐2019. * Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only four years of information is shown.

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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 5 Fiscal Years*

114
VI. SCHEDULE OF EMPLOYER OPEB CONTRIBUTIONS
(In thousands)

Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17
Contractually required contribution (actuarially determined) 14, 566$ 16,482 $ 15,997 $ 16,938 $ 16,365 $ Actual contribution (14,592) (16,475) (15,997) (21,349) (14,739) Contribution deficiency/(excess) (26) $ 7 $ ‐ $ (4,411)$ 1,626 $ Covered employee payroll 120,869 $ 125,676 $ 118,014 $ 119,090 $ 118,774 $ Contributions as percentage of covered employee payroll 12.07% 13 .11% 13.56% 17.93% 12.41%

Notes to Schedule:

The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:

ADC for fiscal year June 30, 2021
Actuarial valuation date June 30, 2019
Actuarial cost method Entry‐Age, level percentage of payroll Amortization method Level percent of pay
Amortization period 24‐year fixed period for 2020/21
Asset valuation method Market value, no smoothing
Inflation 2.75%
Payroll growth 3.00%
Investment rate of return
Medical trend
Mortality
Mortality Improvement

6.75%
* Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only five years of information is shown.

Non‐Medicare ‐ 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076 Medicare ‐ 6.3% for 2021, decreasing to an ultimate rate of 4.0% in 2076 CalPERS 1997‐2015 Experience Study
Post‐retirement mortality projected fully generational with Soc iety of Actuaries Scale MP‐2019

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Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
ASSETS:

Cash and investments available for operations 60,487 $ 3,728 $ 2,543 $ 66,758 $ Receivables, net:

Accounts and intergovernmental 517 2 ‐ 519 Interest 357 19 13 389 Notes and loan receivable 52,851 ‐ ‐ 52,851 Restricted cash and investments with fiscal agents ‐ 4,655 ‐ 4,655 Total assets 114,212 $ 8,40 4$ 2,556 $ 125,172$ Liabilities:

Accounts payable and accruals 495 $ ‐ $ ‐ $ 495 $ Accrued salaries and benefits 34 ‐ ‐ 34 Due to other funds 341 ‐ ‐ 341 Total liabilities 870 ‐ ‐ 870 Fund balances:

Nonspendable
Eyerly family ‐ ‐ 2,556 2,556 Restricted for:

Transportation mitigation 12,512 ‐ ‐ 12,512 Federal revenue 5,293 ‐ ‐ 5,293 Street improvement 28 ‐ ‐ 28 Local law enforcement 756 ‐ ‐ 756 Public benefit 18,282 ‐ ‐ 18,282 Debt service ‐ 8,40 4 ‐ 8,40 4 Committed for:

Developer impact fee 13,30 0 ‐ ‐ 13,30 0 Housing In‐Lieu 58,883 ‐ ‐ 58,883 Special districts 3,186 ‐ ‐ 3,186 Downtown business 50 ‐ ‐ 50 Assigned for:

Unrealized gain on investment 1,052 ‐ ‐ 1,052 Total fund balances 113,342 8,40 4 2,556 124,302 Total liabilities and fund balances 114,212$ 8,40 4$ 2,556 $ 125,172$ LIABILITIES AND FUND BALANCES:

CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
115

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Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
REVENUES:

Property tax ‐ $ 4,329$ ‐ $ 4,329$ Special assessments 5 ‐ ‐ 5 Other taxes and fines 2,816 ‐ ‐ 2,816 Intergovernmental 1,337 ‐ ‐ 1,337 Licenses, permits and fees:

University Avenue Parking 83 ‐ ‐ 83 California Avenue Parking 22 ‐ ‐ 22 Other licenses, permits and fees 2,056 ‐ ‐ 2,056 Investment earnings 169 (10) 16 175 Housing In‐Lieu ‐ residential 5,804 ‐ ‐ 5,804 Other revenue 154 ‐ ‐ 154 Total revenues 12,446 4,319 16 16,781 EXPENDITURES:

Current:

Administrative Services 261 ‐ ‐ 261 Public Works 1,427 ‐ ‐ 1,427 Planning and Development Services 1,285 ‐ ‐ 1,285 Office of Transportation 1,437 ‐ ‐ 1,437 Police 36 ‐ ‐ 36 Community Services 236 ‐ ‐ 236 Non‐Departmental 255 ‐ ‐ 255 Debt service:

Principal retirement ‐ 2,595 ‐ 2,595 Interest and fiscal charges ‐ 6,147 ‐ 6,147 Total expenditures 4,937 8,742 ‐ 13,679 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 7,509 (4,423) 16 3,102 OTHER FINANCING SOURCES (USES):

Transfers in 570 2,910 ‐ 3,480 Transfers out (9,564) ‐ ‐ (9,564) Total other financing sources (uses) (8,994) 8,939 ‐ (55) Change in fund balances (1,485) 4,516 16 3,047 FUND BALANCES, BEGINNING OF YEAR 114,827 3,888 2,540 121,255 FUND BALANCES, END OF YEAR 113,342 $ 8,404 $ 2,556 $ 124,302$ CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
116

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117
NON‐MAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Street Improvement
This fund accounts for revenues received from state gas tax. Allocations must be spent on the construction and maintenance of the road network system of the City.

Federal Revenue
This fund accounts for grant funds received under the Community Development Act of 1974 and HOME Investment Grant Programs, for activities approved and subject to federal regulations.

Housing In‐Lieu
This fund accounts for revenues from commercial and residential developers to provide housing under the City’s Below Market Rate program.

Special Districts
This fund accounts for revenues from parking permits and for maintenance of various parking lots within the City’s parking districts.

Transportation Mitigation
This fund accounts for revenues from fees or contributions requ ired for transportation mitigation issues encountered as a result of City development.

Local Law Enforcement
This fund accounts for revenues received in support of City’s law enforcement program.

Asset Seizure
This fund accounts for seized property and funds associated with drug trafficking. Under California Assembly Bill No. 4162, the monies are released to the City for specific expenditures related to law enforcement activities.

Developer Impact Fee
This fund accounts for fees imposed on new developments to be u sed for parks, community centers and libraries.

Downtown Business Development District
The Downtown Business Developmen t District Fund was established to account for the activities of the Palo Alto Downtown Business Development District, which was established to enhance the viability of the downtown business district.

Public Benefit
This fund accounts for the activities of the Stanford University Medical Center (SUMC) Development Agreement (DA) whereby SUMC will enhance and expand their facilities and the City will grant SUMC the right to develop the facilities in accordance with the DA.

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Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
ASSETS:

Cash and investments available for operations ‐ $ ‐ $ 11,573$ 3,546 $ Receivables, net:

Accounts and intergovernmental 234 283 ‐ ‐ Interest ‐ ‐ 92 27 Notes and loan receivable ‐ 5,351 47,50 0 ‐ Total assets 234 $ 5,63 4$ 59,165 $ 3,573 $ Liabilities:

Accounts payable and accruals ‐ $ 203 $ 10 $ 282 $ Accrued salaries and benefits ‐ 3 1 26 Due to other funds 206 135 ‐ ‐ Total liabilities 206 341 11 308 Fund balances:

Restricted
Transportation mitigation ‐                   ‐                   ‐                   ‐ Federal revenue ‐                   5,293              ‐                   ‐ Street improvement 28                     ‐                   ‐                   ‐ Local law enforcement ‐                   ‐                   ‐                   ‐ Public benefit ‐                   ‐                   ‐                   ‐ Committed
Developer impact fee ‐                   ‐                   ‐                   ‐ Housing In‐Lieu ‐                   ‐                   58,883            ‐ Special districts ‐                   ‐                   ‐                   3,186 Downtown business ‐                   ‐                   ‐                   ‐ Assigned
Unrealized gains on investments ‐                   ‐                   271                  79 Total fund balances 28                     5,293              59,15 4            3,265 Total liabilities and fund balances 234$               5,63 4$            59,165 $          3,573 $ LIABILITIES AND FUND BALANCES:

CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
118

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Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue Mitigation Enforcement Seizure Impact Fee District Benefit Funds 12,635$ 760 $ 3 $ 13,446$ 51 $ 18,473$ 60,487 $ ‐ ‐ ‐ ‐ ‐ ‐ 517 64 3 ‐ 73 ‐ 98 357 ‐ ‐ ‐ ‐ ‐ ‐ 52,851 12,699$ 763 $ 3 $ 13,519$ 51 $ 18,571$ 114,212$ ‐$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 495 $ ‐ ‐ ‐ 4 ‐ ‐ 34 ‐ ‐ ‐ ‐ ‐ ‐ 341 ‐ ‐ ‐ 4 ‐ ‐ 870 12,512 ‐ ‐ ‐ ‐ ‐ 12,512 ‐ ‐ ‐ ‐ ‐ ‐ 5,293 ‐ ‐ ‐ ‐ ‐ ‐ 28 ‐ 753 3 ‐ ‐ ‐ 756 ‐ ‐ ‐ ‐ ‐ 18,282 18,282 ‐ ‐ ‐ 13,30 0 ‐ ‐ 13,30 0 ‐ ‐ ‐ ‐ ‐ ‐ 58,883 ‐ ‐ ‐ ‐ ‐ ‐ 3,186 ‐ ‐ ‐ ‐ 50 ‐ 50 187 10 ‐ 215 1 289 1,052 12,699 763 3 13,515 51 18,571 113,342 12,699$ 763 $ 3 $ 13,519$ 51 $ 18,571$ 114,212$ 119

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Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
REVENUES:

Special assessments ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines 2,793 ‐ ‐ 23 Intergovernmental ‐ 1,172 ‐ ‐ Licenses, permits and fees:

University Avenue Parking ‐ ‐ ‐ 83 California Avenue Parking ‐ ‐ ‐ 22 Other licenses, permits and fees ‐ ‐ ‐ 49 Investment earnings (3) ‐ 9 1 Housing In‐Lieu ‐ residential ‐ ‐ 5,804 ‐ Other revenue ‐ ‐ 85 29 Total revenues 2,790 1,172 5,898 207 EXPENDITURES:

Current:

Administrative Services ‐ ‐ ‐ 261 Public Works ‐ ‐ ‐ 1,427 Planning and Development Services ‐ 1,100 179 6 Office of Transportation ‐ ‐ ‐ 1,437 Police ‐ ‐ ‐ ‐ Community Services ‐ ‐ ‐ 32 Non‐Departmental ‐ ‐ 75 160 Total expenditures ‐ 1,100 254 3,323 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 2,790 72 5,644 (3,116) OTHER FINANCING SOURCES (USES):

Transfers in ‐ ‐ ‐ 400 Transfers out (2,837) ‐ ‐ (838) Total other financing sources (uses) (2,837) ‐ ‐ (438) Change in fund balances (47) 72 5,644 (3,554) FUND BALANCES, BEGINNING OF YEAR 75 5,221 53,510 6,819 FUND BALANCES, END OF YEAR 28 $ 5,293$ 59,154 $ 3,265 $ CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
120

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Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue Mitigation Enforcement Seizure Impact Fee District Benefit Funds ‐$ ‐ $ ‐ $ ‐ $ 5 $ ‐ $ 5 $ ‐ ‐ ‐ ‐ ‐ ‐ 2,816 ‐ 165 ‐ ‐ ‐ ‐ 1,337 ‐ ‐ ‐ ‐ ‐ ‐ 83 ‐ ‐ ‐ ‐ ‐ ‐ 22 429 ‐ ‐ 1,578 ‐ ‐ 2,056 66 7 ‐ 14 ‐ 75 169 ‐ ‐ ‐ ‐ ‐ ‐ 5,804 ‐ ‐ ‐ 40 ‐ ‐ 154 495 172 ‐ 1,632 5 75 12,446 ‐ ‐ ‐ ‐ ‐ ‐ 261 ‐ ‐ ‐ ‐ ‐ ‐ 1,427 ‐ ‐ ‐ ‐ ‐ ‐ 1,285 ‐ ‐ ‐ ‐ ‐ ‐ 1,437 ‐ 36 ‐ ‐ ‐ ‐ 36 ‐ ‐ ‐ 204 ‐ ‐ 236 ‐ ‐ ‐ ‐ 20 ‐ 255 ‐ 36 ‐ 204 20 ‐ 4,937 495 136 ‐ 1,428 (15) 75 7,509 ‐ ‐ ‐ 170 ‐ ‐ 570 (400) ‐ ‐ (3,539) ‐ (1,950) (9,564) (400) ‐ ‐ (3,369) ‐ (1,950) (8,994) 95 136 ‐ (1,941) (15) (1,875) (1,485) 12,604 627 3 15,456 66 20,446 114,827 12,699$ 763 $ 3 $ 13,515$ 51 $ 18,571$ 113,342 121

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Street Improvement Federal Revenue
Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance REVENUES:

Special assessments ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines 2,793 2,793 ‐ ‐ ‐ ‐ Intergovernmental ‐ ‐ ‐ 1,384 1,172 (212) Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐ Investment earnings 9 (1) (10) ‐ ‐ ‐ Rental income ‐ ‐ ‐ ‐ ‐ ‐ Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐ Other:

Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐ Other revenue ‐ ‐ ‐ ‐ ‐ ‐ Total revenues 2,802 2,792 (10) 1,384 1,172 (212) EXPENDITURES:

Current:

Administrative Services ‐ ‐ ‐ ‐ ‐ ‐ Public Works ‐ ‐ ‐ ‐ ‐ ‐ Planning and Development Services ‐ ‐ ‐ 1,886 1,462 424 Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐ Police ‐ ‐ ‐ ‐ ‐ ‐ Community Services ‐ ‐ ‐ ‐ ‐ ‐ Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐ Total expenditures ‐ ‐ ‐ 1,886 1,462 424 Excess (deficiency) of revenues
over (under) expenditures 2,802 2,792 (10) (502) (290) 212 OTHER FINANCING SOURCES (USES):

Transfers in ‐ ‐ ‐ ‐ ‐ ‐ Transfers out (2,837) (2,837) ‐ ‐ ‐ ‐ Total other financing sources (uses) (2,837) (2,837) ‐ ‐ ‐ ‐ Change in fund balances, budgetary basis (35) $ (45) (10)$ (502)$ (290) 212 $ Adjustment to Budgetary Basis:

Unrealized gain (loss) on investments (2)                         ‐ Changes in notes receivable ‐                       ‐
Current year encumbrances/reappropriations ‐                       362 (47)                      72
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 75                        5,221 FUND BALANCES, END OF YEAR, GAAP BASIS 28 $                     5,293 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2020
122

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Housing In‐Lieu Special Districts Transportation Mitigation Actual, Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance Budge t Budgetary Basis Variance ‐$            ‐ $                   ‐ $            ‐ $          ‐ $                   ‐ $            ‐ $          ‐ $                   ‐ $ ‐               ‐                       ‐               52               23                        (29)              ‐             ‐                       ‐ ‐               ‐                       ‐               ‐              ‐                       ‐               ‐             ‐                       ‐ ‐               ‐                       ‐               2,464        83                        (2,381)        ‐             ‐                       ‐ ‐               ‐                       ‐               880             22                        (858)            ‐             ‐                       ‐ ‐               ‐                       ‐               1,198        49                        (1,149)        276            429                      153 463              366                      (97)               109             92                        (17)              260            217                      (43) 9                  ‐                       (9)                 ‐              ‐                       ‐               ‐             ‐                       ‐ 2,150          5,804                  3,654           ‐              ‐                       ‐               ‐             ‐                       ‐ 25                ‐                       (25)              ‐              ‐                       ‐               ‐             ‐                       ‐ 170              85                        (85)              ‐              29                        29                 ‐             ‐                       ‐ 2,817          6,255                  3,438           4,703         298                      (4,405)        536            646                      110 ‐               ‐                       ‐               330             261                      69                 ‐             ‐                       ‐ ‐               ‐                       ‐               1,697        1,634                  63                 ‐             ‐                       ‐ 20,462        20,720                (258)             1                 7                          (6)                ‐             ‐                       ‐ ‐               ‐                       ‐               3,539        2,005                  1,534           ‐             ‐                       ‐ ‐               ‐                       ‐               ‐              ‐                       ‐               ‐             ‐                       ‐ ‐               ‐                       ‐               43               42                        1                   ‐             ‐                       ‐ 695              75                        620             206             410                      (204)            ‐             ‐                       ‐ 21,157        20,795                362              5,816        4,359                  1,457           ‐             ‐                       ‐ (18,340)       (14,540)               3,800           (1,113)        (4,061)                 (2,948)         536            646                      110 ‐               ‐                       ‐               400             400                      ‐               ‐             ‐                       ‐ ‐               ‐                       ‐               (838)           (838)                   ‐               (400)          (400)                    ‐ ‐               ‐                       ‐               (438)           (438)                   ‐               (400)          (400)                    ‐ (18,340)$    (14,540)               3,800 $        (1,551)$     (4,499)                 (2,948) $      136 $         246                      110 $ (357)                   (91)                       (151) 18,752               ‐                       ‐
1,789                 1,036                  ‐
5,644                 (3,554)                 95
53,510               6,819                  12,604
59,154$             3,265 $               12,699 $
123

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Local Law Enforcement Asset Seizure
Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance REVENUES:

Special assessments ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines ‐ ‐ ‐ ‐ ‐ ‐ Intergovernmental 105 165 60 ‐ ‐ ‐ Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐ Investment earnings 7 11 4 ‐ ‐ ‐ Rental income ‐ ‐ ‐ ‐ ‐ ‐ Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐ Other:

Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐ Other revenue ‐ ‐ ‐ ‐ ‐ ‐ Total revenues 112 176 64 ‐ ‐ ‐ EXPENDITURES:

Current:

Administrative Services ‐ ‐ ‐ ‐ ‐ ‐ Public Works ‐ ‐ ‐ ‐ ‐ ‐ Planning and Development Services ‐ ‐ ‐ ‐ ‐ ‐ Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐ Police 105 36 69 ‐ ‐ ‐ Community Services ‐ ‐ ‐ ‐ ‐ ‐ Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐ Total expenditures 105 36 69 ‐ ‐ ‐ Excess (deficiency) of revenues
over (under) expenditures 7 140 133 ‐ ‐ ‐ OTHER FINANCING SOURCES (USES):

Transfers in ‐ ‐ ‐ ‐ ‐ ‐ Transfers out ‐ ‐ ‐ ‐ ‐ ‐ Total other financing sources (uses) ‐ ‐ ‐ ‐ ‐ ‐ Change in fund balances, budgetary basis 7 $ 140 133 $ ‐ $ ‐ ‐ $ Adjustment to Budgetary Basis:

Unrealized gain (loss) on investments (4)                         ‐ Changes in notes receivable ‐                       ‐
Current year encumbrances/reappropriations ‐                       ‐ 136                     ‐
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 627                      3 FUND BALANCES, END OF YEAR, GAAP BASIS 763 $                  3 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in Thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2021
124

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Developer Impact Fee Downtown Business Improvement District Actual, Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance Budge t Budgetary Basis Variance ‐$          ‐ $                   ‐ $            140 $         5 $                       (135)$          ‐ $          ‐ $                   ‐ $ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ 875           1,578                 703              ‐             ‐                       ‐               ‐             ‐                       ‐ 352           227                      (125)            ‐             ‐                       ‐               370            324                      (46) ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            40                        40                 ‐             ‐                       ‐               ‐             ‐                       ‐ 1,227        1,845                  618              140            5                          (135)            370            324                      (46) ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ 203           204                      (1)                 ‐             ‐                       ‐               ‐             ‐                       ‐ ‐            ‐                       ‐               203            20                        183             ‐             ‐                       ‐ 203           204                      (1)                 203            20                        183             ‐             ‐                       ‐ 1,024        1,641                  617              (63)             (15)                       48                 370            324                      (46) 170           170                      ‐               ‐             ‐                       ‐               ‐             ‐                       ‐ (3,539)      (3,539)                 ‐               ‐             ‐                       ‐               (1,950)      (1,950)                 ‐ (3,369)      (3,369)                 ‐               ‐             ‐                       ‐               (1,950)      (1,950)                 ‐ (2,345)$    (1,728)                 617 $           (63) $          (15)                       48 $             (1,580)$    (1,626)                 (46) $ (213)                   ‐                       (249)
‐                      ‐                       ‐
‐                      ‐                       ‐
(1,941)                (15)                       (1,875) 15,456               66                        20,446
13,515$             51 $                     18,571$
Public Benefit
125

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127
NON‐MAJOR GOVERNMENTAL FUNDS

DEBT SERVICE FUNDS

2018 Golf Course Capital Improvement
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2018 Golf Course Capital Improveme nt Certificates of Participation as they become due.

2019 California Avenue Parking Garage COPs
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2019 California Avenue Parking Gar age Certificates of Participation as they become due.

Library Projects
This fund accounts for revenues received from property taxes to provide payment of principal and interest associated with the 2010 and 2013A General Obligation Bonds as they become due.

Public Safety Building
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2021 Public Safety Building Certificates of Participation as they become due.

5.b
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CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Public Safety Debt Service Improvement Garage COPs Projects Building Funds
ASSETS:

Cash and investments available for operations 1 $ 5 $ 3,722$ ‐ $ 3,728$ Receivables:

Accounts and intergovernmental ‐ ‐ 2 ‐ 2 Interest ‐ ‐ 19 ‐ 19 Restricted cash and investments with fiscal agents 18 16 ‐ 4,621 4,655 Total assets 19 $ 21 $ 3,743$ 4,621 $ 8,404 $ FUND BALANCES:

Restricted:

Debt service 19 $ 21 $ 3,743$ 4,621 $ 8,404 $ 128

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CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Public Safety Debt Service Improvement Garage COPs Projects Building Funds
REVENUES:

Property tax ‐ $ ‐ $ 4,329$ ‐ $ 4,329$ Investment earnings ‐ ‐ (10) ‐ (10) Total revenues ‐ ‐ 4,319 ‐ 4,319 EXPENDITURES:

Debt service:

Principal retirement 185 630 1,780 ‐ 2,595 Interest and fiscal charges 345 1,748 2,646 1,408 6,147 Total expenditures 530 2,378 4,426 1,408 8,742 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (530) (2,378) (107) (1,408) (4,423) OTHER FINANCING SOURCES (USES):

Issuance of debt ‐ ‐ ‐ 6,029 6,029 Transfers in 530 2,380 ‐ ‐ 2,910 Total other financing sources (uses) 530 2,380 ‐ 6,029 8,939 Change in fund balances ‐ 2 (107) 4,621 4,516 FUND BALANCES, BEGINNING OF YEAR 19 19 3,850 ‐ 3,888 FUND BALANCES, END OF YEAR 19 $ 21 $ 3,743$ 4,621 $ 8,40 4$ 129

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Actual, Actual, Actual, Actual,
Budgetary Budgetary Budgetary Budgetary
Budget Basis Variance Budget Basis Variance Budget Basis Variance Budget Basis Variance REVENUES:

Property tax ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 4,559$ 4,329 $ (230) $ ‐ $ ‐ $ ‐ $ Investment earnings ‐ ‐ ‐ ‐ ‐ ‐ 29 32 3 ‐ ‐ ‐ Total revenues ‐ ‐ ‐ ‐ ‐ ‐ 4,588 4,361 (227) ‐ ‐ ‐ EXPENDITURES:

Debt service:

Principal retirement 185 185 ‐ 630 630 ‐ 1,780 1,780 ‐ ‐ ‐ ‐ Interest and fiscal charges 345 345 ‐ 1,750 1,748 2 2,646 2,646 ‐ 1,408 1,408 ‐ Total expenditures 530 530 ‐ 2,380 2,378 2 4,426 4,426 ‐ 1,408 1,408 ‐ Excess (deficiency) of revenues
over (under) expenditures (530) (530) ‐ (2,380) (2,378) 2 162 (65) (227) (1,408) (1,408) ‐ OTHER FINANCING SOURCES (USES):

Issuance of debt ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,029 6,029 ‐ Transfers in 530 530 ‐ 2,380 2,380 ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total other financing sources (uses) 530 530 ‐ 2,380 2,380 ‐ ‐ ‐ ‐ 6,029 6,029 ‐ Change in fund balances, budgetary bas ‐$ ‐ ‐ $ ‐ $ 2 2 $ 162$ (65) (227)$ 4,621 $ 4,621 ‐ $ Adjustment to Budgetary Basis:

Unrealized gain (loss) on investments ‐ ‐ (42) ‐ ‐ 2 (107) 4,621
FUND BALANCES, BEGINNING OF YEAR 19 19 3,850 ‐ FUND BALANCES, END OF YEAR 19 $ 21 $ 3,743 $ 4,621 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2021
2018 Golf Course Capital
Improvement
2019 California Avenue Parking
Garage COPs Library Projects Public Safety Building
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NON‐MAJOR GOVERNMENTAL FUNDS

PERMANENT FUND

Eyerly Family
This fund accounts for the revenues received from assets donated by Mr. and Mrs. Fred Eyerly for the City and or its citizenry.

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Eyerly Family Permanent Fund
Variance
Actual, Positive
Budget Budgetary Basis (Negative)
REVENUES:

Investment earnings 42 $ 44 $ 2 $ Change in fund balance 42 $ 44 2 $ Adjustment to Budgetary Basis:

Unrealized gain (loss) on investments (28)
16 FUND BALANCE, BEGINNING OF YEAR 2,540
FUND BALANCE, END OF YEAR 2,556 $
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Permanent Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance ‐ Budget and Actual
For the Year Ended June 30, 2021
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INTERNAL SERVICE FUNDS

INTRODUCTION
Internal Service Funds are used to finance and account for special activities and services performed by a designated department for other departments in the City on a cost reimbursement basis.

Vehicle Replacement and Maintenance
This fund accounts for the maintenance and replacement of vehic les and equipment used by all City departments. The source of revenue is from reimbursement of fleet replacement and maintenance costs allocated to each department by usage of vehicle.

Technology
This fund accounts for replacement and upgrade of technology, and covers four primary areas used by all City departments: desktop, infrastructure, applications, and technology research and development. The source of revenue is from reimbursement of costs for support provided to other departments.

Printing and Mailing Services
This fund accounts for central duplicating, printing and mailing services provided to all City departments.

Source of revenue for this fund is from reimbursement of costs for services and supplies purchased by other departments.

General Benefits
This fund accounts for the administration of compensated absences and health benefits.

Workers’ Compensation Insurance Program
This fund accounts for the administration of the City’s self‐insured workers’ compensation programs.

General Liabilities Insurance Program
This fund accounts for the administration of the City’s self‐insured general liability programs.

Retiree Health Benefits
This fund accounts for the retiree health benefits contributions.

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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technolog y Services Benefits Program Program Benefits Funds ASSETS:

Current Assets:

Cash and investments available for operations 11,524$ 22,009 $ 231 $ 22,833$ 27,555 $ 9,970 $ 2,684 $ 96,806$ Accounts receivable, net 70 ‐ ‐ 16 12 ‐ ‐ 98 Interest receivable 62 119 1 108 134 50 10 484 Inventory of materials and supplies 116 ‐ ‐ ‐ ‐ ‐ ‐ 116 Restricted cash and investments with fiscal agents and trustees ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Total current assets 11,772 22,128 232 60,046 27,701 10,020 2,694 134,593 Noncurrent Assets:

Capital assets:

Nondepreciable 1,839 3,748 ‐ ‐ ‐ ‐ ‐ 5,587 Depreciable, net 15,419 1,909 26 ‐ ‐ ‐ ‐ 17,35 4 Total noncurrent assets 17,258 5,657 26 ‐ ‐ ‐ ‐ 22,941 Total assets 29,030 27,785 258 60,046 27,701 10,020 2,694 157,53 4 DEFERRED OUTFLOWS OF RESOURCES:

Pension related 469 2,058 10 ‐ 41 ‐ ‐ 2,578 OPEB related 271 552 10 ‐ 11 ‐ ‐ 844 Total deferred outflows of resources 740 2,610 20 ‐ 52 ‐ ‐ 3,422 LIABILITIES:

Current Liabilities:

Accounts payable and accruals 62 195 105 1,253 94 ‐ ‐ 1,709 Accrued salaries and benefits 37 140 2 ‐ 71 ‐ ‐ 250 Accrued compensated absences ‐ ‐ ‐ 6,327 ‐ ‐ ‐ 6,327 Accrued claims payable ‐ current ‐ ‐ ‐ 160 4,240 2,411 ‐ 6,811 Total current liabilities 99 335 107 7,740 4,405 2,411 ‐ 15,097 Noncurrent liabilities:

Accrued compensated absences ‐ ‐ ‐ 9,320 ‐ ‐ ‐ 9,320 Accrued claims payable ‐ ‐ ‐ ‐ 21,792 3,928 ‐ 25,720 Net pension liabilities 3,704 13,567 273 ‐ 4 ‐ ‐ 17,548 Net OPEB liabilities 1,532 3,127 141 ‐ ‐ ‐ ‐ 4,800 Total noncurrent liabilities 5,236 16,69 4 414 9,320 21,796 3,928 ‐ 57,388 Total liabilities 5,335 17,029 521 17,060 26,201 6,339 ‐ 72,485 DEFERRED INFLOWS OF RESOURCES:

OPEB related 288 587 11 ‐ 11 ‐ ‐ 897 NET POSITION:

Net Investment in capital assets 17,258 5,657 26 ‐ ‐ ‐ ‐ 22,941 Restricted for supplemental pension ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Unrestricted 6,889 7,122 (280) 5,897 1,541 3,681 2,694 27,54 4 Total net position 24,147 $ 12,779 $ (254) $ 42,986$ 1,541 $ 3,681 $ 2,694 $ 87,57 4$ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Fund Net Position
June 30, 2021
(Amounts in thousands)
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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technology Services Benefits Program Program Benefits Fund s OPERATING REVENUES:

Charges for services 6,522 $ 12,322$ 1,314 $ 72,224$ 6,578 $ 2,892 $ 13,577$ 115,429$ Other ‐ 27 ‐ ‐ 162 11 ‐ 200 Total operating revenues 6,522 12,349 1,314 72,224 6,740 2,903 13,577 115,629 OPERATING EXPENSES:

Administrative and general 1,478 7,801 948 137 613 2,208 27 13,212 Operations and maintenance 3,269 7,463 253 1,577 203 ‐ ‐ 12,765 Depreciation 2,751 395 7 ‐ ‐ ‐ ‐ 3,153 Claim payments and change in estimated
self‐insured liability ‐ ‐ ‐ 1,524 6,075 1,146 ‐ 8,745 Refund of charges for services 105 10 ‐ ‐ ‐ ‐ ‐ 115 Employment benefits ‐ ‐ ‐ 61,205 ‐ ‐ 14,570 75,775 Total operating expenses 7,603 15,669 1,208 64,443 6,891 3,354 14,597 113,765 Operating income (loss) (1,081) (3,320) 106 7,781 (151) (451) (1,020) 1,864 NONOPERATING REVENUES (EXPENSES):

Investment earnings 83 83 (1) 3,380 224 65 57 3,891 Gain on disposal of capital assets 385 ‐ ‐ ‐ ‐ ‐ ‐ 385 Other nonoperating revenues 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Total nonoperating revenues (expenses) 473 83 (1) 3,380 224 65 57 4,281 Income (loss) before transfers (608) (3,237) 105 11,161 73 (386) (963) 6,145 Transfers in 105 1,340 ‐ ‐ ‐ 5 2,347 3,797 Transfers out (326) (31) ‐ (2,347) ‐ ‐ ‐ (2,704) Change in net position (829) (1,928) 105 8,814 73 (381) 1,384 7,238 NET POSITION, BEGINNING OF YEAR 24,976 14,707 (359) 34,172 1,468 4,062 1,310 80,336 NET POSITION, END OF YEAR 24,147 $ 12,779 $ (254) $ 42,986$ 1,541 $ 3,681 $ 2,694 $ 87,574$ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended June 30, 2021
(Amounts in thousands)
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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technology Services Benefits Program Program Benefits Fund s Cash flows from operating activities:

Cash received from customers 6,455$ 12,354$ 1,314 $ 72,225$ 6,572 $ 2,903 $ 13,577$ 115,400$ Cash payments to suppliers for goods and services (2,895) (7,615) (1,011) 59 (430) (2,218) ‐ (14,110) Cash payments to employees (2,191) (7,694) (146) (61,422) (368) ‐ (14,597) (86,418) Cash payments for judgments and claims ‐ ‐ ‐ (1,524) (3,814) (427) ‐ (5,765) Other cash receipts 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Net cash flows provided by (used in)
operating activities 1,374 (2,955) 157 9,338 1,960 258 (1,020) 9,112 Cash flows from noncapital financing activities:

Transfers in 105 1,340 ‐ ‐ ‐ 5 2,347 3,797 Transfers out (326) (31) ‐ (2,347) ‐ ‐ ‐ (2,704) Net cash flows provided by (used in)
noncapital financing activities (221) 1,309 ‐ (2,347) ‐ 5 2,347 1,093 Cash flows from capital and related financing activities:

Acquisition of capital assets (3,317) (1,511) ‐ ‐ ‐ ‐ ‐ (4,828) Proceeds from sale of capital assets 484 ‐ ‐ ‐ ‐ ‐ ‐ 484 Net cash flows (used in)
capital and related financing activities (2,833) (1,511) ‐ ‐ ‐ ‐ ‐ (4,344) Cash flows from investing activities:

Investment interest received (expenses paid) 88 110 (1) 3,377 223 66 51 3,914 Net change in cash and cash equivalents (1,592) (3,047) 156 10,368 2,183 329 1,378 9,775 Cash and cash equivalents, beginning of year 13,116 25,056 75 49,554 25,372 9,641 1,306 124,120 Cash and cash equivalents, end of year $ 11,524 $ 22,009 $ 231 $ 59,922 $ 27,555 $ 9,970 $ 2 ,684 $ 133,895 Financial statement presentation:

Cash and investments available for operations 11,524$ 22,009 $ 231 $ 22,833$ 27,555 $ 9,970 $ 2,684 $ 96,806$ Restricted cash and investments with
fiscal agents and trustees ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Cash and cash equivalents, end of year 11,524$ 22,009 $ 231 $ 59,922$ 27,555 $ 9,970 $ 2,684 $ $ 133,895 Reconciliation of operating income (loss) to net cash
flows provided by (used in) operating activities:

Operating income (loss) (1,081) $ (3,320) $ 106 $ 7,781$ (151) $ (451)$ (1,020)$ 1,864 $ Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:

Depreciation 2,751 395 7 ‐ ‐ ‐ ‐ 3,153 Othe
r 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Change in assets and liabilities:

Accounts receivable (67) 5 ‐ 1 (6) ‐ ‐ (67) Inventory of materials and supplies (14) ‐ ‐ ‐ ‐ ‐ ‐ (14) Deferred outflows of resources ‐ pension plans 32 (330) 23 ‐ ‐ ‐ ‐ (275) Deferred outflows of resources ‐ OPEB 12 24 1 ‐ ‐ ‐ ‐ 37 Accounts payable and accruals (74) (16) 63 153 25 (10) ‐ 141 Accrued salaries and benefits 3 9 (2) ‐ 37 ‐ ‐ 47 Accrued compensated absences ‐ ‐ ‐ 1,403 ‐ ‐ ‐ 1,403 Accrued claims payable ‐ ‐ ‐ ‐ 2,099 719 ‐ 2,818 Net pension liability 8 747 (33) ‐ (41) ‐ ‐ 681 Net OPEB liability (29) (58) (2) ‐ ‐ ‐ ‐ (89) Deferred inflows of resources ‐ pension plans (131) (326) (3) ‐ (2) ‐ ‐ (462) Deferred inflows of resouces ‐ OPEB (41) (85) (3) ‐ (1) ‐ ‐ (130) Net cash flows provided by (used in)
operating activities 1,374 $ (2,955)$ 157 $ 9,338$ 1,960 $ 258 $ (1,020)$ 9,112 $ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Cash Flows
For the Year Ended June 30, 2021
(Amounts in thousands)
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FIDUCIARY FUNDS

INTRODUCTION
Fiduciary Funds are used to account for assets held by the City acting in a fiduciary capacity for other entities and individuals. The funds are operated to carry out t he specific actions required by the trust agreements, ordinances and other governing regulations.

Fiduciary Funds are presented separately from the Citywide and Fund financial statements.

Custodial Funds are fiduciary funds used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private purpose trust funds. The City maintains two agency custodial funds as follows:

Cable Joint Powers Authority
The fund was established to account for the activities of the c able television system on behalf of the members.

University Avenue Area Off‐Street Parking Assessment District The fund accounts for the receipts and disbursements associated with the Series 2012 Limited Obligation Refunding Improvement Bonds.

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University Avenue
Cable Area Off‐Street
Joint Powers Parking Assessment
Authority District Total
ASSETS:

Cash and investments available for operations (Note 3) 1,207$ 2,069 $ 3,276 $ Accounts receivable 459 32 491 Interest receivable 5 11 16 Restricted cash and investments with fiscal agents (Note 3) ‐ 2,705 2,705 Total assets 1,671 4,817 6,488 LIABILITIES:

Accounts payable and accruals 411 ‐ 411 NET POSITION:

Restricted for:

Governmental entities 1,260 ‐ 1,260 Bondholders of special assessment bonds ‐ 4,817 4,817 Total net position 1,260 $ 4,817 $ 6,077 $ CITY OF PALO ALTO
Custodial Funds
Combining Statement of Fiduciary Net Position
June 30, 2021
(Amounts in thousands)
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University Avenue
Cable Area Off‐Street
Joint Powers Parking Assessment
Authority District Total
ADDITIONS:

Franchise and other fees collected 1,821 $ ‐ $ 1,821$ Special assessments collected ‐ 2,407 2,407 Investment earnings 14 (5) 9 Other ‐ 5 5 Total additions 1,835 2,407 4,242 DEDUCTIONS:

Administrative and general 34 5 39 Distribution to governmental entities 1,538 ‐ 1,538 Debt services payments ‐ 2,409 2,409 Total deductions 1,572 2,414 3,986 Changes in net position 263 (7) 256 NET POSITION, BEGINNING OF YEAR 997 4,824 5,821 NET POSITION, END OF YEAR 1,260 $ 4,817 $ 6,077 $ CITY OF PALO ALTO
Custodial Funds
Combining Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2021
(Amounts in thousands)
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STATISTICAL SECTION

The statistical section contains comprehensive statistical data, which relates to physical, economic, social and political characteristics of the City. It is intended to provide users with a broader and more complete understanding of the City and its financial affairs than is pos sible from the financial statements and supporting schedules included in the financial section.

In this section, readers will find comparative information related to the City’s revenue sources, expenditures, property tax valuations, levies and collections, general obligation bonded debt, utility revenue debt service, and demographics. Where available, the comparative information is presented for the last ten fiscal years.

In addition, this section presents information related to the City’s legal debt margin computation, principal taxpayers, notary and security bond coverages, and other miscel laneous statistics pertaining to services provided by the City.

In contrast to the financial section, the statistical section information is not usually subject to independent audit.

Financial Trends
These schedules contain trend information to help the reader un derstand how the City’s financial performance and well‐being have changed over time:
 Net Position by Component
 Changes in Net Position
 Fund Balances of Governmental Funds
 Changes in Fund Balances of Governmental Funds

Revenue Capacity
These schedules contain information to help the reader assess t he City’s most significant local revenue sources, property tax and electric charges:
 Electric Operating Revenue by Source
 Power Supply Resources
 Supplemental Disclosure for Water Utilities
 Supplemental Disclosure for Gas Utilities
 Assessed Value of Taxable Property
 Property Tax Rates, All Overlapping Governments
 Property Tax Levies and Collections
 Principal Property Taxpayers
 Assessed Valuation and Parcels by Land Use
 Per Parcel Assessed Valuation of Single Family Residential

Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future:
 Ratio of Outstanding Debt by Type
 Computation of Direct and Overlapping Debt
 Computation of Legal Bonded Debt Margin
 Revenue Bond Coverage

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STATISTICAL SECTION

Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place:
 Taxable Transactions by Type of Business
 Demographic and Economic Statistics
 Principal Employers

Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the servi ces the City provides and the activities it performs:
 Operating Indicators by Function/Program
 Capital Asset Statistics by Function/Program
 Full‐Time Equivalent City Government Employees by Function

Sources
Unless otherwise noted, the information in these schedules is d erived from the Annual Comprehensive Financial Reports for the relevant year.

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Governmental Activities
Investment in capital assets 370,111 $         378,047 $          386,696$         405,921 $         425,179 $         453,878 $          473,233$         493,706 $         497,378 $         480,620 $ Restricted 52,934               71,717               68,331               55,963               47,907               38,138               46,724               59,669               73,274              80,265 Unrestricted 142,102            165,810             187,386            1,972                 37,905              35,273               (92,587)            (103,392)          (130,078)          (137,748) Total Governmental Activities Net Position 565,147$         615,574 $          642,413 $         463,856 $         510,991 $         527,289 $          427,370 $         449,983 $         440,574 $         423,137 $ Business‐type Activities
Investment in capital assets 437,151 $         446,597 $          473,795$         490,874 $         512,918 $         532,063 $          573,688$         602,136 $         621,354 $         642,018 $ Restricted ‐                          4,060                 4,166                 4,142                 4,115                 4,073                  4,014                 4,016                 4,060                3,340 Unrestricted 262,602            269,926             266,794            172,802            162,806            163,158             110,429            135,391            159,592            161,861 Total Business‐type Activities Net Position 699,753$         720,583 $          744,755 $         667,818 $         679,839 $         699,294 $          688,131 $         741,543 $         785,006 $         807,219 $ Primary Government
Investment in capital assets 807,262 $         824,644 $          860,491$         896,795 $         938,097 $         985,941 $          1, 046,921$      1,095,842 $      1,118,732 $     1,122,638 $ Restricted 52,934               75,777               72,497               60,105               52,022               42,211               50,738               63,685               77,334              83,605 Unrestricted 404,704            435,736             454,180            174,774            200,711            198,431             17,842               31,999               29,514              24,113 Total Primary Government Net Position 1,264,900$      1,336,157 $      1,387,168 $      1,131,674 $      1,190,830 $      1,226,583 $      1,115,501 $      1,191,526 $      1,225,580 $     1,230,356 $ Notes:

Source: Annual Financial Statements, Statement of Net Position

The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, effective July 1, 2014, and GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension, effective July 1, 2017. The City's unrestricted net position decreased in FY 2015 and again in FY 2018 as a result.

Fiscal Year Ended June 30
CITY OF PALO ALTO
Net Position by Component
Last Ten Fiscal Years
(Amounts in thousands)
(Accrual basis of accounting)
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Primary Government
Investment in capital assets Restricted Unrestricted
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PROGRAM REVENUES 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Governmental Activities
Charges for services
Administrative Services 1,647 $              15,629$        4,055 $           5,460 $           9,444 $           5,242 $           6,536 $             6,413 $             5,758 $             1,150 $ Public Works 1,008                 1,314              1,093              1,209              599                 878                 781                   1,478               990                   937 Planning & Community Environment 31,491              28,768            12,896            8,090              9,071              6,067              5,119                11,997             ‐                        ‐ Development Services1&2 ‐                         ‐                      ‐                      12,019           12,570            11,768            16,000              13,904              ‐                        ‐ Planning & Development Services2 ‐                         ‐                      ‐                      ‐                      ‐                      ‐                      ‐                        ‐                        16,173             21,228 Office of Transportation3 ‐                         ‐                      ‐                      ‐                      ‐                      ‐                      ‐                        ‐                        1,161               80 Public Safety 15,658               16,139            14,902            15,726            13,945            12,670            13,507              14,179              12,101              11,135 Community Services 11,365               13,808            20,882            20,912            21,551            20,472            21,285              22,805              20,808              20,893 Library 1,600                 187                 166                 137                 198                 139                 145                   134                   94                     47 Operating grants and contributions 3,441                5,038              5,360              5,300              2,164              1,990              14,054             2,100                2,619                3,033 Capital grants and contributions 1,064                 515                 917                 619                 344                 1,929             1,534                8,247                9,021                11,326 Total Governmental Activities
Program Revenues 67,274              81,398            60,271           69,472           69,886           61,155           78,961              81,257              68,725              69,829 Business‐type Activities
Charges for services
Water 31,467               37,746            40,291            35,847            37,588            42,678            45,087              45,571              48,740              48,812 Electric 118,886             121,805         121,916         120,842         120,743         137,543         154,142            163,514            169,389            162,240 Fiber Optics 3,662                 4,382              4,485              4,627              4,505              4,553              4,529                4,657                4,576                3,936 Gas 41,774               34,633            35,737            30,751            30,212            36,431            37,044              42,113              37,402              39,520 Wastewater Collection 14,942               16,077            15,599            16,182            16,496            17,748            17,990              20,219              20,933              20,484 Wastewater Treatment 22,200               21,528            18,460            24,120            23,825            23,649            27,382              27,573              29,310              30,522 Refuse 30,645               30,583            30,297            31,576            32,169            33,918            34,647              33,996              32,695              30,636 Storm Drainage 5,892                 6,053              6,183              6,281              6,520              6,693              6,964                7,249                7,543                7,785 Airport ‐                          ‐                      ‐                      683                826                 1,286             2,382                2,483                2,362                2,585 Operating grants and contributions 605                    572                 549                 534                 744                 512                 501                   488                   473                   462 Capital grants and contributions 1,526                 2,224              2,005              2,080              1,061              4,265              14,19 4             6,677                6,449                6,391 Total Business‐type Activities
Program Revenues 271,599            275,603         275,522         273,523         274,689         309,276         344,862            354,540           359,872           353,373 Total Primary Government
Program Revenues 338,873$          357,001 $      335,793 $      342,995 $      344,575 $      370,431 $      423,823 $        435,797 $        428,597 $        423,202 $

EXPENSES
Governmental Activities
City Council 345 $                 94 $                387$              271 $              352 $              329 $              345 $                270 $                172 $                178 $ City Manager 1,960                 1,237              2,180              2,155              2,662              1,975              2,757                3,336                3,616                2,466 City Attorney 1,656                 1,642              1,797              1,759              2,472              2,140              2,511                3,086                2,845                2,292 City Clerk 908                    330                 641                 680                 582                 762                 931                   822                   748                   702 City Auditor 235                    464                 489                 362                 414                 847                 994                   1,081               645                   641 Administrative Services 10,100               7,614              11,388           9,980              10,637           11,887            13,949              19,169              15,919              22,985 Human Resources 1,071                 1,420              1,346              1,464              2,224              2,272              2,674                3,021                3,060                2,518 Public Works 14,568               20,816            24,577            21,075            24,613            25,539            30,349              36,617              45,609              52,727 Planning & Community Environment2 12,074              13,549            14,926            8,423              10,208           10,918            11,357              12,169              ‐                        ‐ Development Services1&2 ‐                         ‐                      ‐                      10,449           11,158            11,102            12,664              12,622              ‐                        ‐ Planning & Development Services2 ‐                         ‐                      ‐                      ‐                      ‐                      ‐                      ‐                        ‐                        21,725             18,141 Office of Transportation3 ‐                         ‐                      ‐                      ‐                      ‐                      ‐                      ‐                        ‐                        4,693               3,636 Public Safety (Police and Fire) 62,817               59,452            62,883            58,660            56,653            73,320            83,923              89,189              92,187              80,758 Community Services 21,915               22,705            23,822            24,688            28,547            27,866            33,709              36,815              34,147              30,289 Library 7,323                 7,319              7,758              7,721              10,825           11,437            12,208              12,557              12,971              11,145 Interest on long term debt 2,575                 2,562              3,367              3,658              3,552              2,846              2,761                3,653                4,576                6,317 Total Governmental
Activities Expenses 137,547            139,204         155,561         151,345         164,899         183,240         211,132            234,407           242,913           234,795 Business‐type Activities
Water 29,093               30,707            31,593            33,205            35,120            37,535            40,836              40,606              43,034              43,556 Electric 102,030             106,438         113,004         122,499         120,319         128,603         146,033            139,605            142,426            156,105 Fiber Optics 1,489                 1,437              1,661              1,891              2,107              2,159              2,653                2,476                2,761                2,529 Gas 28,878               26,749            26,869            23,525            20,879            26,783            27,930              30,915              27,212              28,556 Wastewater Collection 14,825               14,313            13,235            14,595            15,199            16,405            16,801              17,324              18,877              19,577 Wastewater Treatment 20,712               20,635            21,018            21,553            22,546            23,498            27,518              27,070              28,755              28,403 Refuse 31,900               28,542            28,413            27,974            30,370            30,665            28,808              30,391              36,947              29,138 Storm Drainage 3,103                 3,703              3,644              3,721              3,735              4,106              5,059                4,951                5,514                4,897 Airport 153                    246                 466                 1,004             970                 1,274             1,656                1,790                2,131                1,499 Total Business‐type
Activities Expenses 232,183            232,770         239,903         249,967         251,245         271,028         297,294            295,128           307,657           314,260 Total Primary
Government Expenses 369,730$          371,974 $      395,464 $      401,312 $      416,144 $      454,268 $      508,426 $        529,535 $        550,570 $        549,055 $ CITY OF PALO ALTO
Changes in Net Position
Last Ten Fiscal Years
(Accrual basis of accounting)
(Amounts in thousands)
Fiscal Year Ended June 30
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
NET (EXPENSE)/REVENUE
Governmental Activities (70,273) $          (57,806)$       (95,290)$       (81,873)$       (95,013)$       (122,085)$     (132,171)$       (153,150)$       (174,188)$       (164,966)$ Business‐type Activities 39,416               42,833            35,619           23,556           23,44 4           38,248           47,568              59,412              52,215              39,113 Total Primary Government
Net (Expense)/Revenue (30,857)$          (14,973)$       (59,671)$       (58,317)$       (71,569)$       (83,837)$       (84,603)$         (93,738)$         (121,973)$       (125,853)$ GENERAL REVENUES AND OTHER CHANGES IN NET POSITION
Governmental Activities
Taxes
Property tax 30,104 $            31,929 $        35,299 $        38,750 $        41,189 $        43,953 $        47,170 $           51,718 $           55,604 $           60,901 $ Sales tax 22,132               25,606            29,424            29,675            30,018            29,923            31,091              36,508              30,563              29,127 Utility user tax 10,834               10,861            11,008            10,861            12,469            14,240            15,414              16,402              16,140              14,642 Transient occupancy tax 9,664                 10,794           12,255            16,699            22,366            23,477            24,937              25,649              18,553              5,179 Other taxes 8,173                 10,504           9,660              11,867           7,868              8,989              11,337             9,525                9,775                13,471 Investment earnings 6,238                 (1,228)           5,859              5,010              8,639              (711)                420                   15,375             13,850              4,939 Miscellaneous 14,943               518                 2,575             3,428              894                 168                 1,973               1,906                60                     183 Transfers 17,426               19,249            17,103           16,405           18,705           18,34 4           19,077              18,680              20,23 4             19,087 Total Governmental Activities 119,514            108,233         123,183         132,695         142,148         138,383         151,419            175,763           164,779           147,529 Business‐type Activities
Investment earnings 7,605                 (2,754)           6,379              4,857              7,282              (449)                596                   12,680             11,482              2,187 Transfers (17,426)              (19,249)         (17,103)         (16,405)         (18,705)         (18,344)         (19,077)           (18,680)           (20,234)           (19,087) Total Business‐type Activities (9,821)               (22,003)         (10,724)         (11,548)         (11,423)         (18,793)         (18,481)           (6,000)               (8,752)              (16,900) Total Primary Government 109,693$          86,230 $        112,459$      121,147 $      130,725 $      119,590 $      132,938 $        169,763 $        156,027 $        130,629 $ CHANGE IN NET POSITION
Governmental Activities 49,241 $            50,427 $        27,893 $        50,822 $        47,135 $        16,298 $        19,248 $           22,613 $           (9,409) $           (17,437)$ Business‐type Activities 29,595               20,830            24,895           12,008           12,021           19,455           29,087              53,412              43,463              22,213 Total Primary Government
Change in Net Position 78,836$            71,257 $        52,788 $        62,830 $        59,156 $        35,753 $        48,335 $           76,025$           34,054$           4,776 $ Notes: 1The Development Services Department was formed in FY15.

Source: Annual Financial Statements, Statement of Activities 2In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department.
3In FY20, the City established the Office of Transportation.

Fiscal Year Ended June 30
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Nonspendable 6,007$ 5,749 $ 6,188 $ 6,296 $ 7,088 $ 7,709 $ 8,049 $ 7,647 $ 8,967 $ 9,376 $ Committed ‐ ‐ ‐ ‐ ‐ ‐ 373 5,100 4,505 4,651 Assigned 6,400 5,415 5,432 7,976 8,261 7,280 7,098 7,657 12,496 12,520 Unassigned 29,616 30,913 36,690 48,198 51,582 48,118 52,826 54,811 35,871 49,089 Total General Fund 42,023$ 42,077 $ 48,310 $ 62,470 $ 66,931 $ 63,107 $ 68,346 $ 75,215 $ 61,839 $ 75,636 $ Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (General Fund)
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Committed Assigned Unassigned
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
All Other Governmental Funds
Nonspendable 11,112 $ 18,189 $ 14,869 $ 1,468 $ 1,505$ 1,499$ 1,498$ 2,438$ 2,540$ 2,556$ Restricted 61,324 84,688 68,468 59,650 47,113 35,298 40,317 85,940 55,548 136,795 Committed 14,284 20,400 27,145 48,434 65,745 71,566 72,781 84,616 83,973 85,324 Assigned 33,264 45,514 55,211 52,627 64,411 63,225 68,261 56,842 62,825 65,331 Unassigned ‐ ‐ ‐ ‐ ‐ ‐ (32) (32) ‐ ‐ Total All Other
Governmental Funds 119,984$ 168,791 $ 165,693 $ 162,179 $ 178,774 $ 171,588 $ 182,825 $ 229,804 $ 204,886 $ 290,006 $ Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (All Other Governmental Funds) Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Restricted Committed Unassigned
($50,000)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Restricted Committed Assigned Unassigned
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Revenues
Property tax 30,216 $       32,040 $       35,393 $       38,836 $       41,289 $       44,050 $       47,242 $       51,776 $       55,628 $       60,906 $ Sales tax 22,132          25,606          29,424          29,675          30,018          29,923          31,091          36,508          30,563          29,127 Other taxes and fines 29,231          32,141          35,305          41,576          44,909          48,875          53,837          53,525          45,729          33,947 Contributions5 ‐                    ‐                     ‐                     ‐                     ‐                     ‐                     11,733         ‐                     ‐                     ‐ Charges for services 46,273          38,976          23,962          25,973          23,910          22,267          26,835          27,346          24,127          25,106 From other agencies 1,116             4,109            5,700            7,727            4,417            5,443            5,392            4,689            12,315         15,252 Permits and licenses 7,136             8,218            8,990            9,179            11,228         10,523          12,786          17,759          13,144          9,422 Interest and rentals 18,583          12,136          18,445          18,658          22,269          15,348          16,288          32,905          26,123          20,145 Other revenue 12,739          17,570          7,471             12,837         13,827          4,985             6,067            7,955            1,091            1,033 Total Revenues 167,426       170,796        164,690        184,461        191,867        181,414        211,271        232,463        208,720        194,938 Expenditures
Administration1 9,412            8,291            9,961            10,806         11,501          13,192          14,721          15,799          16,527          13,954 Public Works 11,304          11,489          12,439          12,276          13,112          14,485          15,426          14,764          14,793          14,692 Planning and Community Environment3 11,966         13,474          14,761          8,628             9,722            10,568         10,332          10,911          ‐                     ‐ Development Services2, 3 ‐                    ‐                     ‐                     11,152         10,643          10,908          11,749          11,549          ‐                     ‐ Planning and Development Services2 ‐                    ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     20,170         17,115 Office of Transportation4 ‐                    ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     4,175            3,373 Public Safety (Police and Fire) 62,418          59,537          62,028          61,447          63,784          71,164          73,916          76,344          82,173          76,282 Community Services 20,860          21,661          22,644          23,553          25,511          25,408          29,831          31,619          29,868          26,490 Library 7,072             6,902            7,340            7,980            7,960            8,953            9,120            9,288            9,988            8,528 Non‐departmental 6,819             4,567            8,135            6,180            8,068            6,566            7,579            12,231         9,498             4,854 Capital Outlay 29,154          29,542          37,035          41,754          24,457          39,643          40,971          46,914          66,362          48,114 Debt service ‐ principal payments 1,743             1,489            1,524            1,948            7,130            2,066            2,961            2,101            2,280            2,595 Debt service ‐ interest and fiscal fees 2,757             2,659            3,196            3,404            4,266            3,032            2,956            3,398            5,025            6,147 Payment to bond refunding escrow 586                540               ‐                    ‐                    ‐                    ‐                    ‐                    ‐                    ‐                    ‐ Total Expenditures 164,091       160,151        179,063        189,128        186,154        205,985        219,562        234,918        260,859        222,144 Excess (Deficiency) of Revenues
Over (Under) Expenditures 3,335            10,645         (14,373)        (4,667)           5,713             (24,571)        (8,291)           (2,455)          (52,139)        (27,206) Other Financing Sources (Uses)
Issuance of Debt ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     8,970            42,297         ‐                     101,505 Original debt premium ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     6,524 Proceeds from sale of capital assets ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     2,442            ‐                     100 Transfers in 47,200          50,343          41,683          45,137          61,835          58,331          56,882          54,711          58,397          43,558 Transfers out (29,782)         (33,833)        (24,175)        (29,824)        (46,492)        (44,770)        (41,085)        (43,147)        (44,552)        (25,564) Proceeds from long term debt 3,222             21,706         ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐                     ‐ Payments to refund bond escrow (3,104)          ‐                    ‐                    ‐                    ‐                    ‐                    ‐                    ‐                    ‐                    ‐ Total Other Financing Sources (Uses) 17,536         38,216          17,508          15,313          15,343          13,561          24,767          56,303          13,845          126,123 Net Change in Fund Balances 20,871$       48,861 $       3,135 $         10,646$       21,056 $       (11,010)$      16,476 $       53,848 $       (38,294)$      98,917 $ Debt Service as a Percentage of
Non‐Capital Expenditures 3.3% 2.6% 2.6% 2.8% 6.1% 2.5% 2.7% 2.3% 2.8% 4.6% Notes:

Source: Annual Financial Statements, Governmental Funds, Stateme nt of Revenues, Expenditures and Changes in Fund Balances 4In FY20, the City established the Office of Transportation. 5Represents contributions from the Stanford University Medical Center in FY18. 2The Development Services Department was formed in FY15.

Fiscal Year Ended June 30
CITY OF PALO ALTO
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
1Comprised of the following departments: City Council, City Manager, City Attorney, City Clerk, City Auditor, Administrative Services, and Human Resources. 3In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department.
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Fiscal Commercial & City of
Year Residential Industrial Palo Alto Total
2012 20,328 85,895 3,352 109,575 2013 19,951 86,998 3,265 110,214 2014 18,744 88,419 3,225 110,388 2015 17,404 88,257 3,234 108,895 2016 18,191 86,715 3,127 108,033 2017 20,269 90,635 3,780 114,684 2018 22,764 100,200 4,264 127,228 2019 23,613 103,509 4,404 131,526 2020 25,466 107,335 4,286 137,087 2021 26,719 98,582 4,167 129,468 * The electric operating revenues include sales to customers and City departments, and excludes the sale of surplus energy, utility billing discounts, and bad debt expense.

City of Palo Alto Municipal
Communications & Power Industries (CPI) Research
Lucille Packard Children's Hospital Hospital
Space Systems/Loral, LLC Satellite & Satellite Systems
Stanford Health Care Hospital/Health Care
Stanford Hospital & Clinics Hospital
Tesla, Inc. Manufacturing
Varian Medical Systems, Inc. Manufacturing
Veterans Administration Hospital Hospital
VMware, Inc. Computer
Average Kilowatt‐hour
Installations Billed
1 Sales (kWh) Revenue
Residential 25,074 165,102,659 26,719 $ Commercial 3,599 501,635,237 81,235 Industrial 62 122,154,960 17,347 City of Palo Alto 143 24,991,825 4,167 Total 28,878 813,884,681 129,468 $ Source: City of Palo Alto, Utilities and Accounting Departments 1Values provided are in terms of average number of meters (installations) billed per month. Individual customers may utilize multiple meters or facilities within Palo Alto which encompass one or more designations (commercial, industrial and/or residential), thus aggregation on the basis of ‘number of customers’ does not hold for this type of breakdown. The number of active meters in any given month may vary due to patterns of move in, move outs, as well as meter reading cycles. 1The top ten customers accounted for approximately 38.1% of total kWh consumption (309,840,850 kWh) and 33.9% of revenue ($45,815,976). The largest top ten customer accounted for 9.4% of total kWh consumption and 8.1% of revenue. The smallest top ten customer accounted for 2% of total kWh consumption and 1.9% of revenue. Revenue used to determine top ten electric customers includes metered and non‐metered charges, adjustments, surcharges and discounts. Revenue does not include Utility Users Tax (UUT) and deposits.

Customer (alphabetical order) Type of Business
CITY OF PALO ALTO
Electric Operating Revenue by Source *
Last Ten Fiscal Years
(Amounts in thousands)
Top Ten Electric Customers by Revenue1
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Source
Capacity Available
(MW)
Actual Energy
(GWh)
Percent of
Total Energy
Purchased Power:

Solar 130 311 38% Wind 21 120 15% Landfill Gas 14 104 13% Hydro (NCPA) 58 49 6% Hydro (Western) 182 246 30% Net Forward Market Sales/Purchases 60 (30) ‐4% Net Spot Market Sales/Purchases ‐ 27 3% Total N/A 1 827 100%
Notes:

Source: City of Palo Alto, Utilities Department
In the fiscal year ended June 30, 2021, Palo Alto's average cost of power delivered to the Palo Alto electric system was approximately $0.10 per kWh.

CITY OF PALO ALTO
For the Fiscal Year Ended June 30, 2021
1Capacity availability varies by season and is not necessarily additive at any given time.

Department of Utilities
Power Supply Resources
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Top Ten Largest Water Utility Customers (alphabetical order) City of Palo Alto
Palo Alto Hills Golf & Country Club
Lucille Packard Children's Hospital
Palo Alto Unified School District
Simon Property Group
Stanford Hospital & Clinics
Stanford West Management
Veterans Administration Hospital
Vi at Palo Alto
VMware, Inc.

The top ten customers total consumption is 866,031 CCF with revenue of $8,293,613.

This amount accounts for approximately 18.2% of total consumption and 16.6% of total revenue. The largest top ten customer (other than the City of Palo Alto) accounted for 2.1% of consumption and 2.1% of revenue. The smallest top ten customer accounted for 0.7% of consumption and 0.6% of revenue. Revenue used to determine top ten water utility customers includes metered and non‐metered charges, adjustments, surcharges and discounts. Revenue does not include Utility Users Tax (UUT) and deposits.

Note:

Source: City of Palo Alto, Utilities Department
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Utility Revenue Bond and is not required by Governmental Accounting Standards Board (GASB).

CITY OF PALO ALTO
Supplemental Disclosure for Water Utilities
For the Fiscal Year Ended June 30, 2021
151

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Top Ten Largest Gas Utility Customers (alphabetical order) City of Palo Alto
Genencor International
Lucille Packard Children's Hospital
Palo Alto Unified School District
Space Systems/Loral, LLC
Stanford Health Care
Stanford Hospital & Clinics
Stanford University
Veterans Administration Hospital
VMWare, Inc.

The top ten customers total consumption is 5,993,550 THM with revenue of $7,292,737.

This amount accounts for approximately 23.4% of total consumption and 18.9% of total revenue. The largest top ten customer (other than the City of Palo Alto) accounted for 8.1% of consumption and 6.3% of revenue. The smallest top ten customer accounted for 0.9% of consumption and 0.8% of revenue.

Note:

CITY OF PALO ALTO
Supplemental Disclosure for Gas Utilities
For the Fiscal Year Ended June 30, 2021
152

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net Local Secured Roll
Land 11,352,993 $ 12,255,515$ 13,357,851$ 14,409,837$ 15,718,665$ 17,333,969$ 18,770,642$ 20,386,904$ 22,186,582$ 24,028,178$ Improvements 11,703,597 12,381,306 12,984,735 13,633,986 14,998,502 16,752,295 18,642,970 19,845,666 21,183,768 22,706,856 Personal property 257,436 287,296 307,499 290,590 310,929 306,576 300,352 181,381 194,646 198,396 23,314,026 24,924,117 26,650,085 28,334,413 31,028,096 34,392,840 37,713,964 40,413,951 43,564,996 46,933,430 Less:

Exemptions net of state aid (2,346,728) (2,589,653) (2,610,521) (2,761,495) (3,409,836) (4,244,500) (5,203,968) (5,522,323) (6,233,220) (6,781,123) Total Net Local Secured Roll 20,967,298 22,334,464 24,039,564 25,572,918 27,618,260 30,148,340 32,509,996 34,891,628 37,331,776 40,152,307 Public utilities 2,573 2,573 2,573 2,573 2,573 2,573 2,573 7,004 7,004 7,004 Unsecured property 1,516,837 1,355,970 1,493,922 1,622,636 1,794,921 1,803,468 1,922,170 1,902,781 1,946,680 2,194,615 Total Assessed Value 22,486,708$ 23,693,007$ 25,536,059$ 27,198,127$ 29,415,754$ 31,954,381$ 34,434,739$ 36,801,413$ 39,285,460$ 42,353,926$ Total Direct Tax Rate 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Note: The State Constitution requires property to be assessed at 100% of the most recent purchase price, plus an increment of no more than 2% annually, plus any local over‐rides. These values are considered to be full market values.

Source: County of Santa Clara Assessor's Office
CITY OF PALO ALTO
Assessed Value of Taxable Property
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
$20,000,000
$22,000,000
$24,000,000
$26,000,000
$28,000,000
$30,000,000
$32,000,000
$34,000,000
$36,000,000
$38,000,000
$40,000,000
$42,000,000
$44,000,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Total Assessed Value
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Basic County County Total
County County Hospital City Library Santa Clara Affordable Direct an d Fiscal Wide Retirement G.O. Bond G.O. Bond Valley Water School Communi ty Midpeninsula Housing Bond Overlapping Year Levy Levy (Measure A) (Measure N) District District College Open Space1 (Measure A)2 Rates
2012 1.00 0.0388 0.0047 0.0155 0.0064 0.0742 0.0297 ‐ ‐ 1.17 2013 1.00 0.0388 0.0051 0.0129 0.0069 0.0718 0.0287 ‐ ‐ 1.16 2014 1.00 0.0388 0.0035 0.0177 0.0070 0.0655 0.0290 ‐ ‐ 1.16 2015 1.00 0.0388 0.0091 0.0159 0.0065 0.0657 0.0276 ‐ ‐ 1.16 2016 1.00 0.0388 0.0088 0.0148 0.0057 0.0604 0.0240 0.0008 ‐ 1.15 2017 1.00 0.0388 0.0086 0.0129 0.0086 0.0591 0.0234 0.0006 ‐ 1.15 2018 1.00 0.0388 0.0082 0.0118 0.0062 0.0570 0.0220 0.0009 0.0127 1.16 2019 1.00 0.0388 0.0072 0.0111 0.0042 0.0858 0.0217 0.0018 0.0105 1.18 2020 1.00 0.0388 0.0069 0.0106 0.0041 0.0783 0.0208 0.0016 0.0100 1.17 2021 1.00 0.0388 0.0069 0.0096 0.0037 0.1113 0.0364 0.0015 ‐ 1.21 Notes: 1The Midpeninsula Regional Open Space District Bond Issue and Property Tax, Measure AA, passed in 2014.

Rates were first levied for the 2015‐16 fiscal year.
2The Santa Clara County Affordable Housing Bond ‐ Measure A 2016 passed on November 8, 2016.

Rates were first levied for the 2017‐18 fiscal year.

Source: County of Santa Clara, Tax Rates and Information CITY OF PALO ALTO
Property Tax Rates
All Overlapping Governments
Last Ten Fiscal Years
$1.14
$1.15
$1.16
$1.17
$1.18
$1.19
$1.20
$1.21
$1.22
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Rate per $100 of Assessed Value
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Fiscal Year Total Tax Percentage Collections in Percentage of Ended June 30 Levy for FY1 Amount of Levy Subsequent Years2 Amount Levy 2012 26,494$ 26,494 $ 100% ‐ 26,494$ 100% 2013 28,742 28,742 100% ‐ 28,742 100% 2014 30,587 30,587 100% ‐ 30,587 100% 2015 34,117 34,117 100% ‐ 34,117 100% 2016 36,607 36,607 100% ‐ 36,607 100% 2017 39,381 39,381 100% ‐ 39,381 100% 2018 42,839 42,839 100% ‐ 42,839 100% 2019 47,327 47,327 100% ‐ 47,327 100% 2020 51,089 51,089 100% ‐ 51,089 100% 2021 56,572 56,572 100% ‐ 56,572 100% Notes:

Source: Annual Financial Statements, Government Funds, Statement of Revenues, Expenditures and Changes in Fund Balances.
1During fiscal year 1995, the County of Santa Clara began providing the City 100% of its tax levy under an agreement which allows the County to keep all interest and delinquency charges collected.
2Effective fiscal year 1994, the City is on the Teeter Plan, under which the County of Santa Clara pays the full tax levy due.

CITY OF PALO ALTO
Property Tax Levies and Collections
Last Ten Fiscal Years
(Amounts in thousands)
Collected within the
Fiscal Year of the Levy Total Collections to Date
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5.b
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Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Leland Stanford Jr. University 6,529,897 $     1 15.4% 3,035,075 $     1 13.5% Google Inc. 303,697            2 0.7%
ARE‐San Francisco 80 LLC 291,000            3 0.7%
SVF Sherman Palo Alto Corporation 143,575            4 0.3% ARE‐San Francisco 69 LLC 141,494            5 0.3%
395 Page Mill LLC 123,083            6 0.3%
530 Lytton Owner LLC 119,850            7 0.3%
Hohbach Realty Co. LP 110,392            8 0.3%
SI 45 LLC 84,423              9 0.2%
PA Hotel Holdings LLC 82,600              10 0.2%
Space Systems/Loral, Inc. 226,246            2 1.0%
Arden Realty Limited Partnership 112,472            3 0.5% Whisman Ventures, LLC 105,066            4 0.5%
ECI 2 Bayshore LLC/ECI Hamilton LLC 73,901              5 0.3% Ronald & Ann Williams Charitable Foundation 58,804              6 0.3% Blackhawk Parent LLC 50,196             7 0.2%
300 / 400 Hamilton Associates 41,433              8 0.2% Thoit Bros., Inc. 31,740             9 0.1%
529 Bryant St. 31,737             10 0.1%
Total 7,930,011 $     18.7% 3,766,670 $     16.7%
Total City Taxable Assessed Value:

FY 2021 42,353,926 $
FY 2012 22,486,708 $
Source: California Municipal Statistics, Inc.

Fiscal Year 2021 Fiscal Year 2012
Taxpayer
CITY OF PALO ALTO
Principal Property Taxpayers
Current Year and Nine Years Ago
(Amounts in thousands)
156

5.b
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2020‐2021 No. of
Assessed % of No. of % of Taxable % of
Valuation1 Total Parcels Total Parcels Total
Non‐Residential:

Agricultural/forest 37,697,860 $ 0.09 % 49 0.23 % 31 0.15 % Commercial 2,192,486,496 5.46 459 2.20 457 2.23 Professional/office 6,506,771,625 16.21 560 2.68 540 2.64 Industrial/research & development 2,295,767,267 5.72 230 1.10 229 1.12 Recreational 77,145,645 0.19 16 0.08 14 0.07 Government/social/institutional 44,228,709 0.11 115 0.55 50 0.24 Miscellaneous 11,435,20 6 0.03 18 0.09 17 0.08 Subtotal Non‐Residential 11,165,532,808 27.81 1,447 6.92 1,338 6.53 Residential:

Single family residence 23,266,022,527 57.94 15,096 72.20 15,024 73.31 Condominium/townhouse 2,863,724,800 7.13 3,151 15.07 3,146 15.35 Mobile Home 114,938 0.00 8 0.04 8 0.04 2‐4 Residential units 534,551,067 1.33 497 2.38 497 2.43 5+ Residential units 1,944,144,849 4.84 345 1.65 329 1.61 Subtotal Residential 28,608,558,181 71.25 19,097 91.33 19,004 92.73 Vacant Parcels 378,215,314 0.94 365 1.75 151 0.74 Total 40,152,306,303$ 100 % 20,909 100 % 20,493 100 % Notes: This schedule is provided as required by the Continuing D isclosure Agreement for the City's 2010 and 2013A General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB).

Therefore, ten years of comparison data is not presented. 1Local secured assessed valuation, excluding tax‐exempt property.

Source: California Municipal Statistics, Inc.

CITY OF PALO ALTO
Assessed Valuation and Parcels by Land Use
As of June 30, 2021
157

5.b
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No. of
Taxable Average
Parcels1 Assessed Valuation
Single Family Residential 15,024 $1,548,590
No. of % of Cumulative % of Cumulative
Taxable Total % of Total Total Total % of Total
Parcels1 Parcels Parcels Valuation Valuation Valuation
774 5.15 % 5.15 % 62,751,790$ 0.27 % 0.27 % 1,627 10.83 15.98 226,741,96 6 0.97 1.24 736 4.90 20.88 181,708,519 0.78 2.03 636 4.23 25.11 221,115,384 0.95 2.98 552 3.67 28.79 248,397,391 1.07 4.04 565 3.76 32.55 311,648,230 1.34 5.38 604 4.02 36.57 392,667,685 1.69 7.07 534 3.55 40.12 401,042,038 1.72 8.79 445 2.96 43.08 377,885,136 1.62 10.42 517 3.44 46.53 492,018,891 2.11 12.53 517 3.44 49.97 542,105,280 2.33 14.86 484 3.22 53.19 557,127,718 2.39 17.26 432 2.88 56.06 539,458,161 2.32 19.58 361 2.40 58.47 487,217,064 2.09 21.67 392 2.61 61.08 566,176,362 2.43 24.10 369 2.46 63.53 571,850,964 2.46 26.56 353 2.35 65.88 582,441,439 2.50 29.07 325 2.16 68.04 567,977,334 2.44 31.51 297 1.98 70.02 548,853,685 2.36 33.87 283 1.88 71.90 551,751,152 2.37 36.24 4,221 28.10 100.00 14,835,086,33 8 63.76 100.00 15,024 100.00 % 23,266,022,52 7$ 100.00 % Notes:

Source: California Municipal Statistics, Inc.

This schedule is provided as required by the Continuing Disclosure Agreement for the City's 2010 and 2013A General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB). Therefore, ten years of comparison data is not presented.
1Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. $1,900,000‐1,999,999
$2,000,000 and greater
Total
$1,800,000‐1,899,999
$700,000‐799,999
$800,000‐899,999
$900,000‐999,999
$1,000,000‐1,099,999
$1,100,000‐1,199,999
$1,200,000‐1,299,999
$1,300,000‐1,399,999
$1,400,000‐1,499,999
$1,500,000‐1,599,999
$1,600,000‐1,699,999
$1,700,000‐1,799,999
$600,000‐699,999
$23,266,022,527 $1,096,758
2020‐2021
Assessed Valuation
$0‐99,999
$100,000‐199,999
$200,000‐299,999
$300,000‐399,999
$400,000‐499,999
$500,000‐599,999
Assessed Valuation
Assessed Valuation
2020‐2021 Median
CITY OF PALO ALTO
Per Parcel Assessed Valuation of Single Family Residential As of June 30, 2021
158

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1,685$ 1,560$ 1,430$ 1,285$ 1,135$ 975 $ 8,970$ 46,305$ 45,750 $ 146,440$ 54,540 74,235 73,215 71,795 65,210 63,710 62,140 60,500 58,775 56,995 2011 Lease‐Purchase Agreement 2,764 2,400 2,026 1,643 1,248 842 426 ‐ ‐ ‐ Add: unamortized premium 3,514 4,400 4,242 4,084 3,926 3,768 3,610 8,331 7,980 14,099 62,503 82,595 80,913 78,807 71,519 69,295 75,146 115,136 112,505 217,534 65,879 63,104 60,224 57,224 54,095 50,825 47,400 43,815 40,060 36,130 Energy Tax Credits 1,000 900 800 700 600 500 400 300 200 100 State Water Resources Loan 15,900 15,109 14,309 13,500 12,681 15,034 17,711 29,589 33,808 32,288 580 543 867 803 737 673 608 544 468 392 83,359 79,656 76,200 72,227 68,113 67,032 66,119 74,248 74,536 68,910

Outstanding Debt 145,862$ 162,251 $ 157,113 $ 151,034 $ 139,632 $ 136,327 $ 141,265 $ 189,384$ 187,041 $ 286,444 $

3.36% 3.36% 3.24% 2.94% 2.42% 2.22% 2.13% 2.64% 2.48% 3.81% Population 65,544 66,368 66,861 66,029 66,968 66,478 66,649 67,082 67,019 66,573

2.23$ 2.44 $ 2.35 $ 2.29 $ 2.09 $ 2.05 $ 2.12 $ 2.82 $ 2.79 $ 4.30 $ Notes:

Sources:
2020 Official City Data Set (population)
California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income) Annual Financial Statements and Note 7 Long‐Term Debt
Debt Per Capita
1See the schedule of Demographic and Economic Statistics for personal income data. Per capita personal income is only available for Santa Clara County, therefore personal income is the product of the countywide per capita amount and the City's population.

County of Santa Clara (assessed valuation)
Percentage of Personal Income1
Certificates of Participation
General Obligation Bonds
Total Governmental Activities
Business‐type Activities
Utility Revenue Bonds
Add: unamortized premium
(discount), net
Total Business‐type Activities
Total Primary Government
Governmental Activities
CITY OF PALO ALTO
Ratio of Outstanding Debt by Type
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Total Governmental Activities Total Business‐type Activities 159

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2020‐2021 Assessed Value 42,353,925,962$
Percentage Amount
Applicable Applicable
Total Debt to City of to City of
Outstanding Palo Alto1 Palo Alto
Santa Clara County 812,685,000 $            7.69% 62,471,096 $ Foothill‐DeAnza Community College District 707,932,142               21.92% 155,214,122 Palo Alto Unified School District 241,738,172               90.39% 218,499,882 Fremont Union High School District 617,160,088               0.01% 55,544 Los Gatos‐Saratoga Joint Union High School District 86,585,000                 0.01% 11,256 Mountain View‐Los Altos Union High School District 207,011,101               0.85% 1,755,454 Cupertino Union School District 284,223,303               0.02% 48,318 Los Altos School District 164,070,000               1.13% 1,860,554 Mountain View‐Whisman School District 279,115,000               0.61% 1,691,437 Saratoga Union School District 19,249,458                 0.03% 5,775 Whisman School District 8,380,054                    1.62% 135,505 City of Palo Alto 56,995,000                100% 56,995,000 El Camino Hospital District 116,290,000              0.07% 82,566 Midpeninsula Regional Open Space District 86,400,000                12.58% 10,872,576 City of Palo Alto Special Assessment Bonds 17,915,000                100% 17,915,000 Santa Clara Valley Water District Benefit Assessment District 57,010,000                7.69% 4,382,359 Total Direct and Overlapping Tax and Assessment Debt 531,996,444 914,957,860              7.69% 70,332,811
341,399,194 7.69%                  26,243,356
2,670,000 7.69%                       205,243
22,085,000 21.92%                    4,842,136
1,709,000 0.01%                                222
2,489,970 0.85%                          21,11 5
2,750,000 0.03%                                825
Los Altos School District Certificates of Participation                    1,954,070 1.13%                          22,159 City of Palo Alto General Fund Obligations               146,440 ,000 100%                146,440,000 1,765,000 7.69%                       135,676
Midpeninsula Regional Open Space Park District General Fund Obligation s 106,000,600              12.58%                  13,339,116 $           261,582,659
1,943,066
$           259,639,593
$           791,636,037
Ratio to
Assessed Value
Total Direct Debt 0.51% 217,534,000 $             3
Total Overlapping Debt 1.39% 588,201,037
Total Direct and Overlapping Debt 1.90% 805,735,037 $             2 Notes:
2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non‐bonded capital lease obligations Source: California Municipal Statistics, Inc .
3Includes unamortized premium of $14,099,000.

Santa Clara County Pension Obligations
Santa Clara County Board of Education Certificates of Participation Foothill‐DeAnza Community College District Certificates of Participation Los Gatos‐Saratoga Joint Union High School District Certificates of Participation Mountain View‐Los Altos Union High School District Certificates of Participation Saratoga Union High School District Certificates of Participation Less: Santa Clara County supported obligations
Total Net Direct and Overlapping General Fund Debt
Santa Clara County Vector Control District Certificates of Participation Total Gross Direct and Overlapping General Fund Debt
Total Combined Debt
1The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value.

Santa Clara County General Fund Obligations
CITY OF PALO ALTO
Computation of Direct and Overlapping Debt
As of June 30, 2021
Direct and Overlapping Tax and Assessment Debt
Direct and Overlapping General Fund Debt
160

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Assessed Valuation:

Secured property assessed value,
net of exempt real property 42,353,92
6$
Bonded Debt Limit (3.75% of Assessed Value) 1
1,588,272
Direct Debt:

Certificates of Participation 146,44 0
General Obligation bonds 56,995
Total Direct Debt3 203,435
Less: Amount of Debt Not Subject to Limit 2
146,440
Total Net Debt Applicable to Limit 56,995
Legal Bonded Debt Margin 1,531,277$
Total Bonded Total Net Debt Legal Total Net Debt Ratio of Net General Fiscal Assessed Debt Limit Applicable to Bonded Debt Applicable as % of Debt to Bonded Debt Year Value (AV) (3.75% of AV) Limit Margin Population Bonded Debt Limit Assessed Value Per Capita 2012 22,486,70 8 843,252 54,54 0 788,712 65,54 4 6.47% 0.002 4 0.83 2013 23,693,00 7 888,48 8 74,235 814,253 66,36 8 8.36% 0.0031 1.12 2014 25,536,05 8 957,602 73,215 884,38 7 66,861 7.65% 0.0029 1.10 2015 27,198,12 7 1,019,93 0 71,795 948,135 66,029 7.04% 0.0026 1.09 2016 29,415,75 4 1,103,09 1 65,21 0 1,037,88 1 66,96 8 5.91% 0.0022 0.97 2017 31,954,38 1 1,198,28 9 63,71 0 1,134,57 9 66,47 8 5.32% 0.0020 0.96 2018 34,434,73 9 1,291,30 3 62,14 0 1,229,16 3 66,649 4.81% 0.0018 0.93 2019 36,801,41 3 1,380,05 3 60,50 0 1,319,55 3 67,082 4.38% 0.0016 0.90 2020 39,285,46 0 1,473,20 5 58,775 1,414,43 0 67,019 3.99% 0.0015 0.88 2021 42,353,92 6 1,588,27 2 56,995 1,531,27 7 66,573 3.59% 0.0013 0.86 Notes:

Source: Annual Financial Statements, Assessed Value of Taxable P roperty and Note 7 Long‐Term Debt 2In accordance with California Government Code Section 43605, only the City's General Obligation bonds are subject to the legal debt limit of 15%.

Enterprise Fund debt is not subject to legal debt margin.

CITY OF PALO ALTO
Computation of Legal Bonded Debt Margin
As of June 30, 2021
(Amounts in thousands)
1California Government Code, Section 43605 sets the debt limit at 15% of the assessed value of all real and personal property of the City. Because this Code section was enacted when assessed value was 25% of market value, the limit is calculated at one‐fourth, or 3.75%. This legal debt margin applies to General Obligation debt. Prior year limits have been adjusted to conform to the current year methodology. 3Total direct debt excludes any premiums, discounts or other amortization amounts. 161

5.b
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Less: Net Revenue
Fiscal Gross Direct Operating Available for
Year Revenue Expenses2 Debt Service Principal Interest3 Total Coverage Ratio 2012 235,160 169,777 65,383 2,945 2,959 5,904 11.07 2013 237,842 173,510 64,332 2,875 3,167 6,042 10.65 2014 239,948 176,718 63,230 2,980 3,073 6,053 10.45 2015 234,025 188,276 45,749 3,100 2,954 6,054 7.56 2016 235,386 186,793 48,593 3,230 2,823 6,053 8.03 2017 264,734 205,102 59,632 3,370 2,678 6,048 9.86 2018 288,610 231,255 57,355 3,525 2,524 6,049 9.48 2019 306,237 227,824 78,413 3,685 2,359 6,044 12.97 2020 313,317 237,223 76,094 3,855 2,419 6,274 12.13 2021 309,363 247,962 61,401 4,030 2,008 6,038 10.17 Notes: 1Airport, Refuse and Fiber Optics funds have no debt and are therefore excluded from this schedule. 2Excludes depreciation and amortization expense.
3Excludes joint venture debt service and federal interest subsidy.

Source: City of Palo Alto , Accounting Department
Debt Service
CITY OF PALO ALTO
Revenue Bond Coverage
Business‐type Activities1
Last Ten Fiscal Years
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Net Revenue Available for Debt Service Total Debt Service 162

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Fiscal
Year
2012 2,445 2,937 1,590 1,492 387 722 257 5,049 7,034 21,913 2013 2,478 3,160 1,465 1,656 424 765 259 4,056 13,729 27,992 2014 2,097 3,541 1,555 2,041 392 772 444 4,845 9,890 25,577 2015 2,398 3,894 1,672 1,708 435 699 265 3,674 11,253 25,998 2016 2,250 4,134 1,410 1,694 448 582 257 4,949 12,423 28,147 2017 2,036 4,079 1,513 1,794 542 502 259 3,810 14,325 28,860 2018 2,001 4,224 1,716 1,647 428 614 243 3,184 15,663 29,720 2019 1,934 4,299 1,795 1,994 409 706 810 2,245 22,254 36,446 2020 1 1,260 3,488 1,421 1,391 417 572 1,413 1,597 18,313 29,872 2021 1 1,125 2,410 980 1,283 332 489 700 2,062 18,744 28,125 Source: California State Board of Equalization, compiled by MuniServices LLC Sales Tax Rates for the Fiscal Year Ended June 30, 2021 State Rate: 7.25%
Special District Tax Rates:

Santa Clara County Transit District (SCCT) 0.50%
Santa Clara County Valley Transportation Authority (SCVT) 0.50% Santa Clara VTA BART Operating and Maintenance Transactions and Use Tax (SVTB) 0.125% Santa Clara Retail Transactions and Use Tax (SCCR) 0.125% Silicon Valley Transportation Solutions Tax (SVTS) 0.50% Total Sales and Use Tax Rate: 9.000%
Notes: 1Decrease due to the adverse impact of coronavirus COVID‐19 since March 2020.

Source: California Stat e Board of Equalization
CITY OF PALO ALTO
Taxable Transactions by Type of Business
Last Ten Fiscal Years
(Amounts in thousands)
Total
ECONOMIC SEGMENT
Department
Stores Restaurants
Furniture/
Appliance
Food
Markets
Service
Stations
Drug
Stores Other Retail All Other
Apparel
Stores
Department Stores
4%
Restaurants
9% Furniture/ Appliance
3%
Apparel Stores
5%Food Markets
1%
Service Stations
2%
Drugs Stores 2%
Other Retail
7%
All Other
67%
Fiscal Year 2019
Department Stores 0
5% Restaurants 0
12%
Furniture/ Appliance 0
5%
Apparel Stores 0
6%
Food Markets 0
1%
Service Stations 0
2%
Drugs Stores 2%
Other Retail 0
6%
All Other 0
61%
Fiscal Year 2019
Department Stores
4%
Restaurants 9%
Furniture/ Appliance3%
Apparel Stores 5%
Food Markets 1%
Service Stations 2%
Drugs Stores 2%
Other Retail7%
All Other
67%
Fiscal Year 2021
163

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Santa Clara
City of Palo Alto City of Palo Al to Santa Clara City Population Co unty Total Santa Clara Fiscal City of Palo Alto Unemploym ent School County as a Percentage of Personal Income County Per Capita Year Population Rate Enrollment Population County Population (in thousands) Personal Income 2012 65,544 4.7% 12,286 1, 813,860 3. 61% 120,100,000 66,212 2013 66,368 3.6% 12,396 1, 840,218 3. 61% 134,000,000 72,817 2014 66,861 2.8% 12,483 1, 866,208 3. 58% 135,200,000 72,446 2015 66,029 2.7% 12,532 1, 890,929 3. 49% 147,300,000 77,898 2016 66,968 2.9% 12,488 1, 919,736 3. 49% 165,300,000 * 86,106 * 2017 66,478 2.4% 12,261 1, 933,839 3. 44% 178,500,000 * 92,303 * 2018 66,649 2.5% 12,230 1, 945,829 3. 43% 193,700,000 * 99,546 * 2019 67,082 2.1% 11,938 1, 955,946 3. 43% 209,000,000 * 106,854 * 2020 67,019 5.7% 11,683 1, 961,117 3. 42% 220,400,000 * 112,385 * 2021 66,573 3.2% 10,801 1, 967,525 3. 38% 222,200,000 112,934 Note: Data on personal income and per capita personal income is only available for Santa Clara County.

Source:

State of California Employment Development Office (unemployment rate) Palo Alto Unified School District (school enrollment)
* California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income). Forecasts from prior years are updated.

CITY OF PALO ALTO
Demographic and Economic Statistics
Last Ten Fiscal Years
Beginning in 2015 City population is sourced from the US Census Bureau American Community Survey (via the City of Palo Alto's Official City Data Set).
63,000
64,000
65,000
66,000
67,000
68,000 City Population
10,000
10,500
11,000
11,500
12,000
12,500
13,000 School Enrollment

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%
City Unemployment Rate
164

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Number of
Employees Rank
Percentage of Total
City Employment
Number of
Employees
Rank
Percentage of Total
City Employment
Stanford Health Care2 5,500           1 4.1% 5,059            2 4.6% Hewlett‐Packard Company2 5,000           2 3.7% 2,201            5 2.0% Stanford University2 4,060           3 3.0% 10,680          1 9.7% Veteran's Affairs Palo Alto Health Care System 3,900            4 2.9% 3,500            4 3.2% Stanford Children's Health/Lucile Packard Children's H 3,500           5 2.6% 4,750            3 4.3% VMware Inc. 3,500            6 2.6%
SAP Labs Inc. 3,500            7 2.6%
Varian Medical Systems 3,300            8 2.5%
Tesla Inc. 2,650            9 2.0%
Palo Alto Medical Foundation2 2,200           10 1.6% 2,200            6 2.0% Space Systems/Loral 1,870           7 1.7%
Wilson Sonsini Goodrich & Rosati 1,650            8 1.5% Palo Alto Unified School District 1,362            9 1.2% City of Palo Alto 1,017           10 0.9%
Total 37,110         27.6% 34,289          31.2%
Estimated Total City Day Population:

FY 2021 134,582
FY 2012 110,000
Notes:

Source:

Employer
1Available data sources are limited and may be unreliable. The City does not affirm the validity of this data. 2021 numbers are rounded. Figures may include employees not located within City limits. 2FY21 data was not available. Prior years data was used. 2020 Official City Data Set (total City day population); AtoZ databases; Stanford Comprehensive Plan Economic Impact Report, Stanford University Land Use Planning, "Stanford Facts 2021." CITY OF PALO ALTO
Principal Employers
Current Year and Nine Years Ago
FY 20211 FY 2012
165

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2011 2012 2013 2014
Governmental activities
Community Services
Number of theater performances 175                           175                          184                          108 Total hours of athletic field usage2 42,687                    44,226                    ‐ ‐ Number of rounds of golf 67,381                     65,653                    60,153                    46,527 Enrollment in recreation classes (includes summer camps) 12,310                     11,703                    11,598                    11,997 Planning and Community Environment
Planning applications completed 238                           204                          307                          310 Building permits issued 3,559                       3,320                       3,682                       3,624 Caltrain average weekday boarding3 4,923                      5,730                       6,763                       7,564 Police
Calls for service 52,159                     51,086                    54,628                    58,559 Total arrests 2,288                       2,212                       2,274                       2,589 Parking citations issued 40,426                     41,875                    43,877                    36,551 Animal Services
Number of service calls 2,804                       3,051                       2,909                       2,398 Number of animals handled 3,323                       3,379                       2,675                       2,480 Fire
Calls for service 7,555                       7,796                       7,904                       7,829 Number of fire incidents 165                           186                          150                          150 Number of fire inspections4 1,807                      1,654                       2,069                       1,741 Library
Total number of cardholders 53,246                     60,283                    51,007                    46,950 Total number of items in collection 314,101                   306,160                  277,749                  361,103 Total checkouts 1,476,648               1,559,932               1,512,975               1,364,872 Public Works
Street resurfacing (lane miles) 29                             40                            36                            36 Number of potholes repaired 2,986                       3,047                       2,726                       3,418 Sq. ft. of sidewalk replaced or permanently repaired 71,174                     72,787                    82,118                    74,051 Number of trees planted 150                           143                          245                          148 Tons of materials recycled or composted 56,586                     51,725                    47,941                    49,594 Business‐type activities
Electric
Number of customer accounts 29,708                     29,545                    29,299                    29,338 Residential MWH consumed 160,318                   160,604                  156,411                  153,190 Gas
Number of customer accounts 23,816                     23,915                    23,659                    23,592 Residential therms consumed 11,476,609             11,522,999             10,834,793             10,253,776 Water
Number of customer accounts 20,248                     20,317                    20,043                    20,037 Residential water consumption (CCF) 2,442,415               2,513,595               2,521,930               2,496,549 Wastewater collection
Number of customer accounts 22,320                     22,421                    22,152                    22,105 Millions of gallons processed 8,652                       8,130                       7,546                       7,186 Notes:
2According to the department, this measure was not accurately tracked during FY13, FY14 and FY20 and thus are not presented. 3Beginning 2015, data source is Official City Data Set. In FY20 the count was not provided due to COVID‐19.

Source:

FUNCTIONS/PROGRAMS
4The method for calculating the number of fire inspections changed in FY17. The department uses a more detailed feature which categorizes inspections by type and location.

CITY OF PALO ALTO
Operating Indicators by Function/Program
Last Ten Fiscal Years1
City of Palo Alto Performance Report (formerly the Service Efforts and Accomplishments Report); Official City Data Set (Caltrain); 2019 and 2020 data supplied by City of Palo Alto Departments. 1Ten most recent years available.

Fiscal Year Ended June 30
166

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2015 2016 2017 2018 2019 2020
172 161 171 160 175 191 47,504 65,723 71,431 65,443 67,608 ‐ 42,048 42,573 ‐ 6,790 54,619 42,429 12,586 12,974 11,649 10,652 13,553 12,997 335 383 365 376 327 262 3,844 3,492 2,970 3,105 2,918 2,476 8,294 9,622 9,994 9,977 10,400 ‐ 59,795 53,870 53,901 55,480 54,479 48,394 3,273 2,988 2,745 2,678 2,388 1,568 41,412 37,624 33,661 37,441 33,496 20,261 2,013 2,421 1,674 1,737 2,550 3,081 2,143 2,184 2,211 2,077 2,125 2,361 8,548 8,882 9,153 8,981 8,843 8,102 135 150 155 189 133 140 1,964 2,806 5,476 9,581 10,984 9,602 51,792 57,307 54,676 56,159 68,034 66,530 429,460 461,292 427,548 472,895 485,157 515,032 1,499,406 1,400,926 1,524,614 1,538,118 1,467,038 1,048,676 31 39 39 31 10 7 2,487 3,435 3,449 2,835 2,929 1,761 120,776 115,293 17,275 38,557 66,662 48,847 305 387 319 411 403 346 50,546 56,438 60,582 57,744 55,900 51,852 29,065 29,304 29,616 29,475 29,616 29,849 145,284 150,112 148,986 149,526 146,036 153,976 23,461 23,467 23,637 23,395 23,664 23,770 8,537,754 9,535,377 10,233,669 10,261,276 9,794,177 10,382,762 20,061 19,994 20,213 20,000 20,012 20,608 2,052,176 1,696,383 1,856,879 2,120,588 2,058,663 2,241,461 21,990 22,016 22,216 21,979 22,216 22,410 6,512 6,387 7,176 6,464 6,958 6,294 Fiscal Year Ended June 30
167

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2012 2013 2014 2015 2016

FUNCTION/PROGRAM
Public Safety
Fire:

Fire Stations Operated 7 7 7 7 7 Police:

Police Stations 1                   1                   1                   1                   1 Police Patrol Vehicles 30                30                30                30                30 Community Services
Acres ‐ Downtown/Urban Parks2 157             157              157              157              ‐ Acres ‐ Open Space2 3,744          3,744           3,744           3,752           ‐ Acres ‐ Parks and Preserves2 ‐                  ‐                   ‐                   ‐                   3,921 Acres ‐ Open Space2 ‐                  ‐                   ‐                   ‐                   4,489 Acres ‐ Municipal Golf Course2 ‐                  ‐                   ‐                   ‐                   ‐ Parks and Preserves3 36               36                36                36                36 Golf Course (see above for acreage) 1                   1                   1                   1                   1 Tennis Courts 51                51                51                51                51 Athletic Center 4                   4                   4                   4                   4 Community Centers 4                   4                   4                   4                   4 Theaters 3                   3                   3                   3                   3 Cultural Center/Art Center 1                   1                   1                   1                   1 Junior Museum and Zoo 1                   1                   1                   1                   1 Swimming Pools 1                   1                   1                   1                   1 Nature Center 3                   3                   3                   3                   3 Libraries
Libraries 5                   5                   5                   5                   5 Public Works:

Number of Trees Maintained 31,890         31,923         31,757         31,652         31,699 Electric Utility1
Miles of Overhead Lines 223              222              223              223              222 Miles of Underground Lines 245              246              249              262              268 Water Utility
Miles of Water Mains 234              233              236              236              235 Gas Utility
Miles of Gas Mains 210              210              214              211              209 Waste Water
Miles of Sanitary Sewer Lines 217              217              217              217              216 Note:

Source: City of Palo Alto
1The City of Palo Alto Utilities Department completed the conversion of its electric system maps to a GIS mapping system database. Therefore, the distances reported for FY 11/12 and forward are more accurate than the distances reported in previous years.
3Williams Park is excluded from the list as the City does not operate it as a park. Located near downtown and across from Heritage Park, the land is leased to a non‐profit that operates it as the Museum of American Heritage.

CITY OF PALO ALTO
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Fiscal Year Ended June 30
2Beginning in 2016 park acreage is sourced from the Official City Data Set. The discrepancy between FY16 and FY17 is because FY16 numbers were derived off GIS parcels identified as parks or zoned in the Open Space Zoning District.

For FY17, Council approved Parks Master Plan numbers were used. 168

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2017 2018 2019 2020 2021
7 7 7 7 7 1 1 1 1 1 30 30 30 29 29 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 174 174 174 174 174 4,030 4,030 4,030 4,018 4,018 181 181 181 181 181 36 36 36 36 36 1 1 1 1 1 51 51 51 50 50 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 5 5 5 5 5 31,712 31,849 31,815 31,819 31,716 223 222 220 220 221 264 272 274 279 287 236 236 236 236 236 210 210 210 210 211 216 216 216 216 216 Fiscal Year Ended June 30
169

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Governmental Funds
General Fund:

Administration 83 85 83 84 86 87 89 87 86 85 Community Services 74 74 74 76 77 78 79 78 76 75 Development Services5 ‐ ‐ ‐ 38 38 36 36 36 ‐ ‐ Fire 122 119 116 107 107 109 109 98 98 98 Library 41 41 42 44 48 48 48 48 47 47 Office of Emergency Services4 ‐ ‐ 3 3 3 3 3 3 3 3 Planning and Community Environment5 43 48 49 28 31 32 30 30 ‐ ‐ Planning and Development Services5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 62 62 Office of Transportation6 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6 6 Police 157 154 155 155 155 155 155 155 149 149 Public Works1
56 5 7 5 6 5 3 5 4 5 6 5 5 5 1 4 9 5 1 Subtotal General Fund 576 578 578 588 599 604 604 586 576 576 All Other Funds:

Capital Projects Fund 24           26          27          27          28          31          34          33          36          36 Special Revenue Fund 2            2            9            1 0         9            1 0         9            1 0         1 1          1 1 Total Governmental Funds 602       606        614        625        636        645        647        629        623        623 Enterprise Funds
Public Works2 115        104        99           100        95           99          101        101        101        101 Utilities3
251        254        255        258        256        255        257        257        257        257 Total Enterprise Funds 366       358        354        358        351        354        358        358        358        358 Internal Service Funds
Printing and Mailing 2             2             2             2             2             2             2             2             2             2 Technology 30           31          32          32          34          35          36          36          36          36 Vehicle Replacement 16          1 7          1 7          1 7          1 7          1 6          1 6          1 6          1 6          1 6 Total Internal Service Funds 48          50           51           51           53           53           54           54           54           54 Total 1,016    1,014     1,019     1,034     1,040     1,052     1,059     1,041     1,035     1,035 Notes: 1Fleet and Facilities Management
2Refuse, Storm Drainage, Wastewater Treatment
Numbers adjusted for rounding purposes.

Source: City of Palo Alto ‐ Fiscal Year 2021 Adopted Operating Budget 5ln FY15, staff was moved from Planning and Community Environment (PC&E), Public Works and Fire to create Development Services; In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department. 6ln FY20, the City established the Office of Transportation. Staffing in prior years was included in the Development Services Department and Planning and Community Environment Department. 4In FY14, emergency services and disaster preparation activities were transferred from the Fire Department and are shown in newly created Office of Emergency Services.
3Electric, Fiber Optics, Gas, Wastewater Collection, Water Fund CITY OF PALO ALTO
Full‐Time Equivalent City Government Employees by Function Last Ten Fiscal Years
Full Time Equivalent Employees as of June 30
0 5
10 15
20 25
30 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Full Time Equivalents
Governmental Funds Internal Service Funds
0 200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Full Time Equivalents
Governmental Funds Enterprise Funds Internal Service Funds 0 200
400
600
800
1,000
1,200
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Full Time Equivalents
Governmental Funds Enterprise Funds Internal Service Funds 170

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Americans with Disabilities Act Statement

IN COMPLIANCE WITH
AMERICANS WITH DISABILITIES ACT (ADA) OF 1990,

THIS DOCUMENT MAY BE PRO
VIDED
IN OTHER ACCESSIBLE FORMATS.

For information contact:

ADA Coor
dinator
City of Palo Alto
250 Hamilton Ave
(650) 329-2550
[email protected]

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CITY OF PALO ALTO
250 HAMILTON AVENUE,
PALO ALTO, CA 94301
P 650.329.2100
W CITYOFPALOALTO.ORG
Spanish explorers named the area
for the tall, twin-trunked redwood
tree they camped beneath in 1769.

Palo Alto incorporated in 1894 and
the State of California granted its
first charter in 1909. The City has
long been known for its innovative
people and its exploration of ideas
that have changed the world. In
Palo Alto, our history has always
been about the future.

PALO ALTO

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FINANCE COMMITTEE

ACTION MINUTES

Page 1 of 2 ends

Special Meeting
November 30, 2021
The Finance Committee of the City of Palo Alto met on this date in virtual teleconference at 6:00 P.M.

Present: Burt, Cormack, Filseth

Absent:

Agenda Items

1. Discussion and Recommendation to the City Council Accept the Macias Gini & O’Connell’s (MGO) Audit of the City of Palo Alto’s Financial Statements as of June 30, 2021.

MOTION: Council Member Cormack moved, seconded by Council Member Filseth to recommend the City Council approve the City of Palo Alto's audited financial statements for the fiscal year ending June 30, 2021, and the accompanying reports provided by Macias, Gini & O'Connell LLP.

MOTION PASSED: 3-0

2. Recommendation to the City Council to Approve the Fiscal Year (FY) 2021 Annual Comprehensive Financial Report (ACFR) and FY 2021 Budget Amendments in Various Funds.

MOTION: Council Member Filseth moved, seconded by Council Member Cormack to forward to the City Council for its approval:

A. The City’s FY 2021 Annual Comprehensive Financial Report (ACFR) (Attachment C); and
B. Amended the Fiscal Year (FY) 2021 Budget Appropriation Ordinance for various funds as identified in the attached Recommended Amendments to the City Manager’s FY 2021 Budget (Operating Budget: Attachment B – Exhibit 1; Capital Budget: Attachment B –Exhibit 2).

MOTION PASSED: 3-0
Attachment III

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ACTION MINUTES

Page 2 of 2 ends

Sp. Finance Committee Meeting
Action Minutes: 11/30/2021

3. FY 2022 Finance Committee Referrals Update.

NO ACTION TAKEN
Adjournment: The meeting was adjourned at 7:02 P.M.

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City of Palo Alto (ID # 13895)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: Adoption of a Resolution Declaring Weeds to be a Public Nuisance and Setting January 24, 2022 for a Public Hearing for Objections to the Proposed Weed Abatement
From: City Manager
Lead Department: Fire

Recommendation
Staff recommends that Council adopt the attached resolution:
1) Declaring weeds to be a public nuisance;
2) Setting February 28, 2022, for a public hearing on objections to proposed weed abatement; and
3) Directing staff to publish a notice of hearing in accordance with the provisions of the Palo Alto Municipal Code.

Background
On April 18, 1977, the City Council approved an agreement with Santa Clara County for the administration of weed abatement within the City of Palo Alto. This agreement has reduced the City’s costs and staff time required for the administration of weed abatement. For the past 42 seasons, the weed abatement program has been expeditiously carried out by the County Department of Agriculture and Resource Management with results satisfactory to Palo Alto residents.

Discussion
Palo Alto Municipal Code Chapter 8.08 specifies weed abatement procedures. The chapter requires property owners or occupants to remove certain weeds, as defined in Section 8.08.010 that exist upon their premises, public sidewalks, streets, o r alleys. It also specifies the procedures to be followed to abate weeds, in the event owners do not remove them. The procedures are as follows:

- Resolution of the City Council declaring weeds to be a public nuisance. This resolution sets the time and place for hearing any objections to the proposed weed abatement.
6 Packet Pg. 340

City of Palo Alto Page 2

- Public Notice. This notice informs property owners of the passage of the resolution and provides that property owners shall remove weeds from their property, or the abatement will be carr ied out by Santa Clara County (County). The City then publishes a legal advertisement in the local newspaper announcing the date of the public hearing.
- Public Hearing. The Council must conduct a public hearing, at which time any property owner may appear and object to the proposed weed destruction or removal. After the City Council hearing and considering any objections the Council may allow or overrule any or all objections. If objections are overruled, the County will be asked to perform the work of destruction and removal of weeds. The action taken by the Council at the January 24, 2022 meeting will set this public hearing date for February 28, 2022.

An overview of the program and annual calendar for the steps involving City Council action is provided in Attachment B.

Resource Impact
There is no direct fiscal impact of this action on the City. The City of Palo Alto administers the weed abatement program with the County Department of Agriculture and Resource Management with a minimal amount of sta ff time. All charges for the weed abatement services are included as a special assessment on bills for taxes levied against the respective lots and parcels of land. Such charges are considered liens on these properties.

The Weed Abatement Program is a cost recovery program and does not receive funding from City or County general funds.

Policy Implications
This procedure is consistent with existing City policies.

Environmental Review
The Santa Clara County Counsel has determined the Weed Abatement Program be Categorically Exempt from CEQA pursuant to CEQA Guidelines Section 15308.

Attachments:
• Attachment6.a: Attachment A- Declaring Weeds to be Nuisance Setting Public Hearing
• Attachment6.b: Attachment B - ANNUAL WEED ABATEMENT CYCLE 6 Packet Pg. 341

NOT YET APPROVED

ATTACHMENT A
{date] sh ________ 1

Resolution No. _____
Resolution of Intention of the Council of the City of Palo Alto Declaring Weeds to be a Nuisance and Setting ___[INSERT DATE]__for a Public Hearing for Objections to Proposed Weed Abatement

R E C I T A L S

A. Weeds, as defined in Section 8.08.010(b) of the Palo Alto Municipal Code, are anticipated to develop during calendar year _______ upon streets, alleys, sidewalks, and parcels of private property within the City of Palo Alto sufficient to constitute a public nuisance as a fire menace when dry or are otherwise combustible, or otherwise to constitute a menace to the public health as noxious or dangerous.

NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows:

SECTION 1. Weeds, as defined in Section 8.08.010(b) of the Palo Alto Municipal Code, which are anticipated to develop during calendar year _____ upon streets, alleys, sidewalks, and parcels of private property within the City of Palo Alto, are hereby found and determined to constitute a public nuisance. Such nuisance is anticipated to exist upon some of the streets, alleys, sidewalks, and parcels of private property within the City, which are shown, described, and delineated on the several maps of the properties in said City which are recorded in the Office of the County Recorder of the County of Santa Clara, reference in each instance for the description of any particular street, alley, or parcel of private property being hereby made to the several maps aforesaid, and, in the event of there being several subdivision maps on which the same lots are shown, reference is hereby made to the latest subdivision map.

SECTION 2. THEREFORE, IT IS ORDERED that the said public nuisance be abated in the manner provided by Chapter 8.08 of the Palo Alto Municipal Code:

IT IS FURTHER ORDERED that a public hearing shall be held on _______, the ____ day of _______, ______, at the hour of ____pm, or as soon thereafter as the matter may be heard, at the Council Chambers of the Civic Center of said City, at which the Council shall hear objections to the proposed weed abatement of such weeds and give any objections due consideration;

IT IS FURTHER ORDERED that the Fire Chief of the City of Palo Alto is directed to give notice of the public hearing in the time, manner and form provided in Chapter 8.08 of the Palo Alto Municipal Code.

SECTION 3. Unless the nuisance is abated without delay by the destruction and removal of such weeds, the work of abating such nuisance will be done by the County of Santa Clara Department of Agriculture and Resource Management Office on behalf of the City of Palo

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NOT YET APPROVED

ATTACHMENT A
{date] sh ________ 2

Alto, and the expenses thereof assessed upon the lots and lands from which, and/or in the front and rear of which, such weeds shall have been destroyed and removed.

SECTION 4. The Santa Clara County, County Counsel has determined the Weed Abatement Program to be categorically exempt from the provisions of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15308.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

__________________________ _____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

__________________________ _____________________________ Assistant City Attorney City Manager

_____________________________
Fire Chief

_____________________________
Director of Administrative Services

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City of Palo Alto Weed Abatement
The City of Palo Alto contracts with the Santa Clara County Department of Agriculture and Environmental Management (SCCDAEM) to remove and destroy weeds in its efforts to mitigate potential fire hazards (as defined in Palo Alto Municipal Code Chapter 8.08). The entire weed abatement program is coordinated by the SCCDAEM. Abatement proceedings must follow a legally established course. This is an annual process with weed abatement occurring in late Spring. City of Palo Alto involvement is limited to the following 3 steps for City Council:
1) (Nov-Dec) City of Palo Alto Declares Weeds a Nuisance to allow for County abatement and sets a later date (Jan-Feb) for a public hearing to review the Annual Commencement Report (list of” nuisance” parcels).
2) (Jan-Feb) Public Hearing to review the Annual Commencement Report and approve the County abatement proceedings. At this public hearing, property owners may appear and object to the proposed weed destruction or removal. After the hearing and consideration of any objections, the Council may sustain or overrule any or all objections. Upon adoption of the resolution confirming the weed abatement commencement report and ordering weed nuisances abated, the County will be asked to perform the abatement work to destroy and remove any weeds. 3) (June) Public Hearing to approve the invoices for the abatement work performed by the SCCDAEM.

The Santa Clara County Weed Abatement Program
The Santa Clara County Department of Agriculture and Environmental Management and the City of Palo Alto work together to protect our community from fire. The purpose of the Weed Abatement Program is to prevent fire hazards posed by vegetative overgrowth and the accumulation of combustible materials.

Typically, a property is placed on the program list by a County Weed Abatement Inspector who identifies a potential fire hazard on the property. The Palo Alto Fire Department (PAFD) & Code Enforcement also report addresses of concern and forward (verified) complaints from residents to the SCCDAEM. Residents can report addresses of concern to PAFD, code enforcement, or directly to the County Weed Abatement Program.

Santa Clara County program staff annually inspect “nuisance” parcels at the beginning of the fire season, which is typically April 30
th for CPA parcels.

The Weed Abatement program is entirely funded from fees charged to residents. All parcels on the list will be charged a basic inspection fee. If the parcel is not in compliance at the time of inspection, the property owner will be charged a n additional failed inspection fee, and they will receive a final courtesy notice as a reminder to abate their weeds within 2 weeks.

If the weeds are not abated by the property owner, the work will be completed by the County contractor. The property owner will pay the contractor’s fees plus a County administrative fee.

All fees will be included in their property tax bill.

Attachment B 6.b
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Properties that meet and maintain the minimum fire safety standards will only be charged for the annual fee. These properties will be removed from the list after three years of compliance.

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City of Palo Alto (ID # 13727)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: Adoption of a Resolution Scheduling the City Council Summer Break and Winter Closure for 2022
From: City Manager
Lead Department: City Clerk

RECOMMENDATION
Adopt the attached R esolution scheduling the City Council 20 22 Summer Break and Winter Closure on dates determined by Council.

BACKGROUND
Under Municipal Code Section 2.04.010(b), each year, no later than the third meeting in February, the Council shall, by Resolution, schedule its vacation for that year. During the vacation period, the Code states that there shall be no regular meetings of the Council or its standing committees. Under the Code, t he Mayor or a majority of the Council may call a special meeting during the scheduled vacation, if necessary.

Staff proposes Wednesday, June 2 2, 202 2 through Sunday, July 31, 2022 for the summer break. Additionally, Staff proposes Wednesday, December 2 1, 202 2 through Sunday, January 8, 202 3 for the winter closure.

Staff respectfully requests Council’s determination regarding the dates to be set for the Council breaks and adoption of the attached Resolution.

Attachments:
• Attachment7.a: Draft Resolution
7 Packet Pg. 346

NOT YET APPROVED

Resolution No.

Resolution of the Council of the City of Palo Alto Scheduling the City Council Summer Vacation and Winter Closure for Calendar Year 2022

R E C I T A L S

A. Pursuant to Section 2.04.010 of the Municipal Code, the City Council must schedule its annual vacation for each calendar year no later than the third meeting in February.

B. The City Council desires to set its annual vacation for 2022.

NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows:

SECTION 1. The City Council sets its summer vacation for calendar year 2022 from Wednesday June 22, 2022 through Sunday, July 31, 2022 and winter closure from Wednesday, December 21, 2021 through Sunday, January 8, 2022.

SECTION 2. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required.

INTRODUCED AND PASSED: January 24, 2022
AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST: APPROVED:

___________________________________ ____________________________________ City Clerk Mayor

APPROVED AS TO FORM:

______________________________ ____________________________________ City Attorney City Manager

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City of Palo Alto (ID # 13928)
Office of the City Attorney
City Council CAO Report

Meeting Date: 1/24/2022

Title: Adoption of a Resolution Authorizing Use of Teleconferencing for Council Meetings During Covid-19 State of Emergency
From: Molly Stump, City Attorney

Recommendation
Adopt a Resolution (Attachment A) authorizing the use of teleconferencing under Government Code Section 54953(e) for meetings of the Council and its committees due to the Covid-19 declared state of emergency.

Background
In February and March 2020, the state and the County declared a state of emergency due to the Covid-19 pandemic. Both emergency declarations remain in effect.

On September 16, 2021, the Governor signed AB 361, a bill that amends the Brown Act, effective October 1, 2021, to allow local policy bodies to continue to meet by teleconferencing during a state of emergency without complying with restrictions in State law that would otherwise apply, provided that the policy bodies make certain findings at least once every 30 days.

AB 361, codified at California Government Code Section 54953(e), empowers local policy bodies t o convene by teleconferencing technology during a proclaimed state of emergency under the State Emergency Services Act in any of the following circumstances:

(A) The legislative body holds a meeting during a proclaimed state of emergency, and state or local o fficials have imposed or recommended measures to promote social distancing.

(B) The legislative body holds a meeting during a proclaimed state of emergency for the purpose of determining, by majority vote, whether as a result of the emergency, meeting in pers on would present imminent risks to the health or safety of attendees.
8 Packet Pg. 348

Page 2 ends

(C) The legislative body holds a meeting during a proclaimed state of emergency and has determined, by majority vote, pursuant to subparagraph (B) (B), that, as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees. (Gov. Code § 54953(e)(1).)

In addition, Section 54953(e)(3) requires that policy bodies using teleconferencing reconsider the state of emergency within 30 days of the first teleconferenced meeting after October 1, 2021, and at least every 30 days thereafter, and find that one of the following circumstances exists:

1. The state of emergency continues to directly impact the ability of the members to meet safely in person.

2. State or local officials continue to impose or recommend measures to promote social distancing.

8 Packet Pg. 349

Page 3 ends

Discussion
At this time, the circumstances in Section 54953(e)( 1)(A) exist. The Santa Clara County Health Officer continues to recommend measures to promote outdoor activity, physical distancing and other social distancing measures, such as masking, in certain contexts. (See August 2, 2021 Order.) In addition, the California Department of Industrial Relations Division of Occupational Safety and Health (Cal/OSHA) has promulgated Section 3205 of Title 8 of the California Code of Regulations, which requires most employers in California, including in the City, to train and instruct employees about measures that can decrease the spread of COVID-19, including physical distancing and other social distancing measures.

Accordingly, Section 54953(e)(1)(A) authorizes the City to continue using teleconferencing for public meetings of its policy bodies, provided that any and all members of the public who wish to address the body or its committees have an opportunity to do so, and that the statutory and constitutional rights of parties and the members of the public attending the meeting via teleconferencing are protected.

To comply with public health directives and promote public safety, Palo Alto policy bodies have been meeting via teleconference since March 2020. On September 27, 2021, Council considered the format for future Council, committee, and Board and Commission meetings.

Council determined that beginning November 1, 2021, Council meetings would be conducted using a hybrid format that allows Council Members and the public to decide whether to attend in person, following masking and distancing protocols, or participate via teleconference. Council directed that Council standing and ad-hoc committees and Boards and Commissions would continue meeting via teleconference through January 2022.

Adoption of the Resolution at Attachment A will make the findings required by Section 54953(e)(3) to allow the continued use of teleconferencing for Council meetings (for those Council Members who elect to participate remotely) and for Council standing and ad hoc committees. Each Board and Commission will consider and make similar findings.

ATTACHMENTS:
• Attachment8.a: Attachment A: Resolution Allowing Hybrid In-Person and Teleconferenced Meetings under Section 54953(e) (PDF)
8 Packet Pg. 350

NOT YET APPROVED
Resolution No. ____

Resolution Making Findings to Allow Teleconferenced Meetings Under California Government Code Section 54953(e)

R E C I T A L S

A. California Government Code Section 54953(e) empowers local policy bodies to convene by teleconferencing technology during a proclaimed state of emergency under the State Emergency Services Act so long as certain conditions are met; and

B. In March 2020, the Governor of the State of California proclaimed a state of emergency in California in connection with the Coronavirus Disease 2019 (“COVID-19”) pandemic, and that state of emergency remains in effect; and

C. In February 2020, the Santa Clara County Director of Emergency Services and the Santa Clara County Health Officer declared a local emergency, which declarations were subsequently ratified and extended by the Santa Clara County Board of Supervisors, and those declarations also remain in effect; and

D. On September 16, 2021, the Governor signed AB 361, a bill that amends the Brown Act to allow local policy bodies to continue to meet by teleconferencing during a state of emergency without complying with restrictions in State law that would otherwise apply, provided that the policy bodies make certain findings at least once every 30 days; and

E. While federal, State, and local health officials emphasize the critical importance of vaccination and consistent mask-wearing to prevent the spread of COVID-19, the Santa Clara County Health Officer has issued at least one order, on August 2, 2021 (available online at here), that continues to recommend measures to promote outdoor activity, physical distancing and other social distancing measures, such as masking, in certain contexts; and

F. The California Department of Industrial Relations Division of Occupational Safety and Health (“Cal/OSHA”) has promulgated Section 3205 of Title 8 of the California Code of Regulations, which requires most employers in California, including in the City, to train and instruct employees about measures that can decrease the spread of COVID-19, including physical distancing and other social distancing measures; and

G. The Palo Alto City Council has met remotely during the COVID-19 pandemic and can continue to do so in a manner that allows public participation and transparency while minimizing health risks to members, staff, and the public that would be present with in-person meetings while this emergency continues; now, therefore,

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NOT YET APPROVED
The Council of the City of Palo Alto RESOLVES as follows:

1. As described above, the State of California remains in a state of emergency due to the COVID-19 pandemic. At this meeting, the Palo Alto City Council has considered the circumstances of the state of emergency.

2. As described above, State and County officials continue to recommend measures to promote physical distancing and other social distancing measures, in some settings.

AND BE IT FURTHER RESOLVED, That for at least the next 30 days, meetings of the Palo Alto City Council and its committees will occur in a hybrid format, where both members of the policy body and members of the public may elect to be present in person, utilizing appropriate distancing and masking practices, or participate by teleconferencing technology. Such meetings of the Palo Alto City Council and its committees that occur using teleconferencing technology will provide an opportunity for any and all members of the public who wish to address the body its committees and will otherwise occur in a manner that protects the statutory and constitutional rights of parties and the members of the public attending the meeting via teleconferencing; and, be it

FURTHER RESOLVED, That the City Clerk is directed to place a resolution substantially similar to this resolution on the agenda of a future meeting of the Palo Alto City Council within the next 30 days. If the Palo Alto City Council does not meet within the next 30 days, the City Clerk is directed to place a such resolution on the agenda of the immediately following meeting of Palo Alto City Council.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

City Attorney City Manager

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City of Palo Alto (ID # 13944)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: SECOND READING: Adopt a Park Improvement Ordinance for the Replacement of the Palo Alto Flood Basin Tide Gate Structure in the City's Baylands (FIRST READING: January 10, 2022 PASSED: 7 -0) From: City Manager
Lead Department: City Clerk

This was heard by the City Council on January 10, 2022 for a first reading and was approved 7-0.

No changes were made to the Ordinance; it is now before you for a second reading.

Attachments:
• Attachment9.a: Attachment A: Park Improvement Ordinance for Replacement of the Palo Alto Flood Basin Tide Gate at Baylands
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1 ORDINANCE NO. _____
Ordinance of The Council of The City of Palo Alto Approving a Plan for Improvements to the
Palo Alto Flood Basin Tide Gate Structure as part of the Palo Alto Flood Basin Tide Gate Structure Replacement Project

The Council of the City of Palo Alto does ORDAIN as follows:

SECTION 1. Findings. The City Council finds and declares that:

(a) Article VIII of the Charter of the City of Palo Alto and Section 22.08.005 of the Palo Alto Municipal Code (PAMC) require that, before any substantial building, construction, reconstruction or development is commenced or approved, upon or with respect to any land held by the City for park purposes, the Council shall first cause to be prepared and by ordinance approve and adopt a plan therefor.

(b) The Palo Alto Flood Basin Tide Gate Structure (Structure) is part of the Adobe Creek Loop Trail (Trail). The Structure is located in the City’s Baylands, which is dedicated parkland (See PAMC § 22.08.020 et seq.) Based on the Conditional Structural Assessment of the existing Structure and reduced functionality, the Structure is planned to be replaced.

(c) The City of Palo Alto intends to authorize Santa Clara Valley Water District (Valley Water) to construct a replacement Structure. The new Structure will replace the existing 1957- built Structure which has outlived its intended service life and has been recommended for replacement.

(d) The Plan of improvements shall comprise, as follows:

(1) The Project will construct a replacement Structure near the existing Structure, and new levees to connect the Trail to the replacement Structure. The project will re-align a portion of the levees and Trail as required to accommodate the replacement Structure location. The existing Structure will be removed after the replacement Structure and levees are constructed. Select plan sheets showing the in-progress design are attached as Exhibit “A”.
(2) The Project will require temporary closures to portions of the Trail to accommodate construction of the replacement Structure and connecting levee work. A diagram illustrating anticipated Trail closures is attached as Exhibit “B”. If the replacement Structure is not constructed, future degradation of the existing Structure will occur and would eventually require closure of the Trail for an unknown duration of time.
(3) The replacement Structure will include a dedicated concrete bay with motor driven sluice gate solely for the City’s use of maintaining water quality within the PAFB and controlling mosquito breeding. This new motor operated sluice gate will replace the existing motor operated sluice gate which is owned and operated by

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2 the City. The Structure will also include new water level sensors and Supervisory Control and Data Acquisition (SCADA) system to improve flexibility and efficiency for the City’s sluice gate operations. The new sluice gate will enable remote operation of the sluice gate.

The replacement Structure with its improved operations and maintenance features and improved hydraulic performance is anticipated to reduce mosquito breeding within the PAFB compared to the existing conditions.

(e) The Project described above and as otherwise depicted in the attached exhibits is consistent with recreation and conservation purposes

(f) The Council desires to approve the Plans for the Project described above and as depicted in Exhibit "A" and Exhibit “B”.

SECTION 2. The Council hereby approves the Plan for construction of the Palo Alto Flood Basin Tide Gate Structure Replacement Project as described in this Ordinance.

SECTION 3. Valley Water is the Lead Agency for the Project under the California Environmental Quality Act (CEQA). Valley Water performed an Initial Study and determined that a Mitigated Negative Declaration (MND) is the appropriate level of review. A resolution adopting the Final MND (Resolution) was signed by Valley Water’s Board on April 27, 2021. The Final MND and Resolution are available online from the project website:
https://www.valleywater.org/pafbtidegates. The City Council finds that the City of Palo Alto is a responsible agency under CEQA for the Project and certifies that it has reviewed and considered the information contained in Valley Water’s MND.

Valley Water has applied for regulatory permits from six resource agencies and are currently working with the resource agencies for mitigation requirements and permit conditions.

SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

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3 ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Deputy City Attorney City Manager

____________________________
Director of Community Services

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EXHIBIT A
PAGE 1 OF 4

EXHIBIT A

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EXHIBIT A

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EXHIBIT B PAGE 1 OF 3
Dates above are tentative target dates subject to change pending project development and acquisition of all required project permits.

Year 1 Construction 9/1/2022 1/31/2023 5 months CLOSED CLOSED CLOSED CLOSED CLOSED No Construction 2/1/2023 8/31/2023 7 months OPEN OPEN CLOSED OPEN OPEN Year 2 Construction 9/1/2023 1/31/2024 5 months CLOSED CLOSED CLOSED CLOSED CLOSED No Construction 2/1/2024 8/31/2024 7 months OPEN OPEN CLOSED OPEN OPEN Year 3 Construction 9/1/2024 1/31/2025 5 months CLOSED CLOSED CLOSED CLOSED OPEN No Construction 2/1/2025 8/31/2025 7 months OPEN OPEN OPEN OPEN OPEN Year 4 Construction 9/1/2025 11/30/2025 3 months CLOSED CLOSED CLOSED CLOSED OPEN Project completed 12/1/2025 Onward N/A OPEN OPEN OPEN OPEN OPEN Total Cummulative Trail Closure Duration Per Trail Location = 21.5 months 21.5 months 35.5
months

21.5 months

13.5 months

Target Time Period Trail Location (See Map Below)
Activity Start End Duration Segment #1 Tide Gate Structure Segment #2 Segment #3 Segment #4

3.5 18 months
18 months
32 months
18 months
10 months

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OTHER TRAIL

ROUTES & DETOUR

OPEN ALL THE TIME
Byxbee Park
Parking Lot
Embarcadero Rd
HWY 101
San Antonio Rd

EXISTING

TIDE GATE

STRUCTURE
TRAIL SEGMENT #1
TRAIL SEGMENT #2
TRAIL SEGMENT #3
TRAIL SEGMENT #4

CONSTRUCTION
SIGN
EXHIBIT B PAGE 2 OF 3

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SIGN SIZE
4’ x 4’
48” x 48”
5’ x 3”

DETAIL - (TRUCK AND PEDESTRIAN USE)
12' TO 14'
Construction Sign for Palo Alto Flood Basin Project
EXHIBIT B PAGE 3 OF 3

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City of Palo Alto (ID # 13945)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: SECOND READING: Adoption of an Interim Ordinance Amending Titles 16, 18 and 21 in Response to Senate Bills 9 and 478, Including Amendment to the City's Affordable Housing Requirements for SB 9 Projects. CEQA Status:

This Action is not Considered a P roject or is Exempt from CEQA in Accordance With Government Code Sections 66411.7(n) and 65852.21(j) or Section 15061 of the State CEQA Guidelines. (FIRST READING: January 10, 2022 PASSED: 7 -0) From: City Manager
Lead Department: City Clerk

This was heard by the City Council on January 10, 2022 for a first reading and was approved 7-0.

No changes were made to the Ordinance; it is now before you for a second reading.

Attachments:
• Attachment10.a: Attachment A: Interim Ordinance to Implement SB 9 (INC AF HSG) 10 Packet Pg. 364
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Ordinance No. ______

Interim Ordinance of the Council of the City of Palo Alto Modifying Chapters

16.65 (Citywide Affordable Housing Requirements), 18.10 (Low-Density Residential, RE, R-2, and RMD Districts), 18.12 (R-1 Single-Family Residential District), 18.13 (Multiple Family Residential, RM20, RM30, RM40), 18.16 (Commercial Districts, CN, CC, CS), 18.18 (Downtown Commercial, CD-C, CD-S, CD-N), 18.40 (General Standards and Exceptions), and 18.42 (Standard for Special Uses) of Title 18 (Zoning) and Adding Chapter 21.10 (Parcel Maps for Urban Lot Splits) of the Palo Alto Municipal Code to Implement Recent State Housing Bills

The Council of the City of Palo Alto ORDAINS as follows:

SECTION 1. Findings and declarations. The City Council finds and declares as follows:

A. On September 16, 2021, Governor Newsom signed into law Senate Bill 9 (SB 9), which requires, among other things, that local agencies ministerially approve both two-unit construction and urban lot splits on single-family zoned lots.

B. SB 9 authorizes the creation of lots as small as 1,200 square feet, and requires approval of two residential units of at least 800 square feet (for a total of 1,600 square feet) each on such lots. This represents a significant departure from existing minimum lot sizes and development standards in Palo Alto’s single-family zones.

C. The increased density and intensity of development authorized by SB 9 has the potential to negatively impact privacy, access for emergency vehicles, and aesthetics of residential neighborhoods. In addition, the ministerial review required by SB 9 could result in the unintentional loss of historic resources in Palo Alto’s single family zones.

D. SB 9 authorizes local jurisdictions to apply objective zoning standards, objective subdivision standards, and objective design standards, subject to certain limitations in statute.

E. On September 16, 2021, Governor Newsom signed into law Senate Bill 478 (SB 478), which requires, among other things, that local agencies provide specified minimum floor area ratios for housing development projects containing 3 to 10 dwelling units.

F. There is insufficient time for consideration of and recommendation on objective standards related to SB 9, code amendments related to SB 478, and associated code amendments to Title 18 by the Planning and Transportation Commission (PTC) prior to action by the City Council. The Council therefore declares that an interim ordinance, pursuant to Palo Alto Municipal Code (PAMC) Section 18.80.090 is an appropriate

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measure to adopt standards, pending consideration of a permanent ordinance by the PTC.

SECTION 2. Section 18.10.020 (Applicable Regulations) of Chapter 18.10 (Low-Density Residential (RE, R-2 and RMD) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through):

18.10.020 Applicable Regulations
The specific regulations of this chapter and the additional regulations and procedures established by Chapters 18.52 to 18.80 inclusive shall apply to all low-density residential districts. Such regulations shall apply to construction of two units on an RE-zoned lot pursuant to California Government Code Section 65852.21 (SB 9, 2021), except as modified by Section

18.42.180.

SECTION 3. Section 18.10.030 (Land Uses) of Chapter 18.10 (Low-Density Residential (RE, R-2 and RMD) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.10.030 Land Uses

Table 1 shows the permitted and conditionally permitted uses for the low-density residential districts.

TABLE 1

PERMITTED AND CONDITIONALLY PERMITTED LOW-DENSITY RESIDENTIAL USES [P = Permitted Use -- CUP = Conditional Use Permit Required]

RE R-2 RMD Subject to
Regulations in:
[. . .] [. . .] [. . .] [. . .] [. . .]

RESIDENTIAL USES
Single-Family P P P

Two-Family use, under one ownership P (4) P P

Mobile Homes P P P 18.42.100
Residential Care Homes P P P

[. . .] [. . .] [. . .] [. . .] [. . .]
P = Permitted Use CUP = Conditional Use Permit
Required

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Footnotes:
(1) Sale of Agricultural Products: No permanent commercial structures for the sale or processing of agricultural products are permitted.
(2) Accessory Dwelling Units in R-2 and RMD Zones: An accessory dwelling unit or a Junior Accessory Dwelling Unit associated with a single-family residence on a lot in the R-2 or RMD zones is permitted, subject to the provisions of Section 18.42.040, and such that no more than two units result on the lot.
(3) Bed and Breakfast Inns: Bed and breakfast inns are limited to no more than 4 units (including the owner/resident's unit) in the RMD district. (4) Two Unit Development Pursuant to California Government Code Section 65852.21 (SB 9, 2021): Construction of two units is permitted on an RE-zoned lot, subject to the regulations in Section 18.42.180.

SECTION 4. Section 18.10.040 (Development Standards) of Chapter 18.10 (Low-Density Residential (RE, R-2 and RMD) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.10.040 Development Standards
(a) Site Specifications, Building Size, Height and Bulk, and Residential Density The development standards for the low-density residential districts are shown in Table 2:

TABLE 2

LOW-DENSITY RESIDENTIAL DEVELOPMENT STANDARDS
R-E (6) R-2 RMD Subject to
Regulations in:
[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Minimum Lot Size: Any lot less than the minimum lot size may be used in accordance with the provisions of Chapter 18.40.
(2) R-2 Floodzone Heights: Provided, in a special flood hazard area as defined in Chapter

16.52, the maximum heights are increased by one-half of the increase in elevation required to reach base flood elevation, up to a maximum building height of 33 feet. (3) R-2 Floodzone Daylight Plane: Provided, if the site is in a special flood hazard area and is entitled to an increase in the maximum height, the heights for the daylight planes shall be adjusted by the same amount.
(4) Exemption from Floor Area for Covered Parking Required for Two-Family Uses: In the R-2 and RMD districts, for two-family uses, floor area limits may be exceeded by a maximum of two hundred square feet, for purposes of providing one required covered parking space. (5) Maximum House Size: The gross floor area of attached garages and attached accessory dwelling units and junior accessory dwelling units are included in the calculation of maximum

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house size. If there is no garage attached to the house, then the square footage of one detached covered parking space shall be included in the calculation. This provision applies only to single-family residences, not to duplexes allowed in the R-2 and RMD districts. (6) Two Unit Development Pursuant to California Government Code Section 65852.21 (SB 9, 2021): Construction of two units on an RE-zoned lot shall be subject to the development standards in this Section 18.10.040, except as modified by Section 18.42.180.

[. . .]

SECTION 5. Table 3 (PARKING REQUIREMENTS FOR R-E, R-2 AND RMD USES) of Section

18.10.060 (Parking) of Chapter 18.10 (Low-Density Residential (RE, R-2 and RMD) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

[. . .]

TABLE 3
PARKING REQUIREMENTS FOR R-E, R-2 AND RMD USES
Use Minimum Off-Street Parking Requirement
Single-family residential use (excluding
accessory dwelling units)
2 spaces per unit, of which one must be covered.

Two family in the RE district, pursuant to
California Government Code Section
65852.21 (SB 9, 2021)
1 space per unit. No spaces required if located
within one-half mile walking distance of either a
high-quality transit corridor or a major transit stop,
or located within one block of a car share vehicle.

Two family (R2 & RMD districts) 3 spaces total, of which at least two must be covered
Accessory dwelling unit, attached or
detached:

No parking required
Junior accessory dwelling unit No parking required
Other Uses See Chapter 18.40

[. . .]

SECTION 6. Section 18.10.070 (Accessory and Junior Accessory Dwelling Units) of Chapter

18.10 (Low-Density Residential (RE, R-2 and RMD) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck- through):

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18.10.070 Accessory and Junior Accessory Dwelling Units Accessory Dwelling Units and Junior Accessory Dwelling Units are subject to the regulations set forth in Chapter 18.09 Section 18.42.040.

SECTION 7. Section 18.12.020 (Applicable Regulations) of Chapter 18.12 (R-1 Single Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through):

18.12.020 Applicable Regulations
The specific regulations of this chapter and the additional regulations and procedures established by Chapters 18.52 to 18.80 inclusive shall apply to the R-1 district including the R-1 subdistricts. Such regulations shall apply to construction of two units on an R1-zoned lot pursuant to California Government Code Section 65852.21 (SB 9), except as modified by Section

18.42.180.

SECTION 8. Section 18.12.030 (Land Uses) of Chapter 18.12 (R-1 Single Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.12.030 Land Uses
The permitted and conditionally permitted uses for the single family residential districts are shown in Table 1:

Table 1
PERMITTED AND CONDITIONAL R-1 RESIDENTIAL USES
R-1 and all R-1
Subdistricts
Subject to
Regulations in:
[. . .] [. . .] [. . .]

RESIDENTIAL USES
Single-Family P

Two-Family use, under one ownership P 18.42.180
Mobile Homes P 18.42.100
Residential Care Homes P

[. . .] [. . .] [. . .]
P = Permitted Use CUP = Conditional Use Permit Required

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SECTION 9. Section 18.12.040 (Site Development Standards) of Chapter 18.12 (R-1 Single Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.12.040 Site Development Standards

(a) Site Specifications, Building Size, Height and Bulk, and Residential Density The development standards for the R-1 district and the R-1 subdistricts are shown in Table 2, except to the extend such standards may be modified by Section 18.42.180 for two-family uses pursuant to California Government Code Section 65852.21 (SB 9, 2021):

[. . .]

SECTION 10. Section 18.12.060 (Parking) of Chapter 18.12 (R-1 Single Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.12.060 Parking
Off-street parking and loading facilities shall be required for all permitted and conditional uses in accord with Chapters 18.52 and 18.54 of this title. The following parking requirements apply in the R- 1 districts. These requirements are included for reference purposes only, and in the event of a conflict between this Section 18.12.060 and any requirement of Chapters 18.52 and 18.54, Chapters 18.52 and 18.54 shall apply, except in the case of parcels created pursuant to Section 18.10.140(c) (subdivision incentive for historic preservation).

(a) Parking Requirements for Specific Uses

Table 4 shows the minimum off-street automobile parking requirements for specific uses within the R-1 district.

Table 4
Parking Requirements for Specific R-1 Uses
Use Minimum Off-Street Parking Requirement
Single-family residential use
(excluding accessory dwelling units)
2 spaces per unit, of which one must be covered.

Two family use pursuant to
California Government Code Section
65852.21 (SB 9, 2021)
1 space per unit. No spaces required if located
within one-half mile walking distance of either a
high-quality transit corridor or a major transit stop,
or located within one block of a car share vehicle.

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Accessory dwelling unit, attached or
detached
No parking required
Junior accessory dwelling unit No parking required
Other Uses See Chs. 18.52 and 18.54

[. . .]

SECTION 11. Section 18.12.070 (Accessory and Junior Accessory Dwelling Units) of Chapter

18.12 (R-1 Single Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through):

18.12.070 Accessory and Junior Accessory Dwelling Units Accessory Dwelling Units and Junior Accessory Dwelling Units are subject to the regulations set forth in Chapter 18.09 Section 18.42.040.

SECTION 12. Section 18.40.160 (Replacement Project or Discretionary Review Required) of Chapter 18.40 (General Standards and Exceptions) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck- through):

18.40.160 Replacement Project or Discretionary Review Required (a) No permit required under Title 2 (Administrative Code), Title 12 (Public Works and Utilities), or Title 16 (Building Regulations) shall be issued for demolition or deconstruction of a single family residence or duplex in the Low-Density Residential District (Chapter 18.10) or Single Family Residential District (Chapter 18.12), except for deconstruction pursuant to Section 16.14.130 or where necessary for health and safety purposes (as determined by the City's Building Official), unless building permit plans for a replacement project have been approved. This subsection shall also apply to demolition of a single family residence or duplex in the Multiple Family Residential District (Chapter 18.13) when the replacement project does not require discretionary review.
(b) No permit required under Title 2 (Administrative Code), Title 12 (Public Works and Utilities), or Title 16 (Building Regulations) shall be issued for any project requiring discretionary review under Title 18 or Title 21, unless the application for discretionary review has been approved.

SECTION 13. Section 18. 52.020 ( Definitions) of Chapter 18. 52 (Parking and Loading Requirements) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

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18.52.020 Definitions
For purposes of this chapter:

[. . .]

(h) “Within one block of a car share vehicle” means within 600 feet of a parking space permanently reserved for use by a car share vehicle.
(h)(i) Definitions for other parking-related terms can be found in Section 18.04.030(a) (Definitions), including “Parking as a principal use,” “Parking facility,” and “Parking space.”

SECTION 14. Table 1 (Minimum Off-Street Parking Requirements of Section 18.52.040 (Off- Street Parking, Loading, and Bicycle Facility Requirements) of Chapter 18.52 (Parking and Loading Requirements) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.52.040 Off-Street Parking, Loading and Bicycle Facility Requirements

[. . .]

Table 1
Minimum Off-Street Parking Requirements
Use Vehicle Parking Requirement
(# of spaces)
Bicycle Parking Requirement

Spaces Class 1 Long
Term (LT) and
Short Term (ST)

RESIDENTIAL USES
[. . .] [. . .] [. . .] [. . .]
Two-Family
Residential
(R-2 & RMD Districts)

1.5 spaces per unit, of which at least
one space per unit must be covered
Tandem Parking Allowed, with one
tandem space per unit, associated
directly with another parking space
for the same unit
1 space per
unit
100% - LT
(R-1 and RE Districts,
pursuant to Section

18.42.180)
At least one space per unit. No
spaces required if the unit is located
within one-half mile walking
distance of either a high-quality
transit corridor or a major transit
1 space per
unit
100% - LT

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stop, as defined in California Public
Resources Code Sections 21155 and
21064.3 respectively, or located
within one block of a car share
vehicle.
[. . .] [. . .] [. . .] [. . .]

[. . .]

SECTION 15. Section 18.42.180 (Interim Standards for Two Units on Single Family Zoned Lots Pursuant to Senate Bill 9) of Chapter 18.42 (Standards for Special Uses) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:

18.42.180 Interim Standards for Two Units on Single Family Zoned Lots Pursuant to Senate Bill 9.

(a) Purpose. This section sets forth special regulations applicable to the construction of two dwelling units on single family lots in the R-1 (and R-1 subdistricts) and R-E zone districts, pursuant to California Government Code Sections 65852.21 and 66411.7 (SB 9, 2021). In the event of a conflict between the provisions of this section and the generally applicable regulations of Chapters 18.10, 18.12, and 18.52-18.80, inclusive, the provisions of this section shall prevail.

(b) Definitions. As used in this section:
(1) “Specific, adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified written public health or safety or physical environmental standards, policies, or conditions as they existed on the date the application was deemed complete. Inconsistency with the zoning ordinance or general plan land use designation shall not constitute a specific, adverse, impact.
(2) “Sufficient to allow separate conveyance” means the two dwelling units constitute clearly defined, separate, and independent housekeeping units without interior access points to the other dwelling unit. (3) “Two dwelling units” means the development proposes two new units on a vacant lot or proposes to add one new unit to one existing unit on a lot. This does not include the development of a single dwelling unit on a vacant lot. (4) “Unit” means any dwelling unit, including, but not limited to a primary dwelling unit, an accessory dwelling unit, or a junior accessory dwelling unit.

(c) Applicability. When an application is submitted that includes both (1) the construction of two dwelling units under this section and (2) other redevelopment work that is not integral to creation of a new dwelling unit and would generally require discretionary review, only the

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portions required for construction of dwelling units shall be reviewed ministerially. In addition, this section shall not apply in any of the following circumstances:
(1) Parcels described California Government Code Section 65913.4, subdivisions (a)(6)(B) through (a)(6)(K) inclusive. Such parcels include, for example, parcels located in wetlands, in very high fire severity zones (unless the site has adopted certain fire hazard mitigation measures), and in special flood hazard areas or regulatory floodways (unless the site meets certain federal requirements for development).
(2) Parcels on which an owner of residential real property has exercised the owner’s rights under state law to withdraw accommodations from rent or lease within the past 15 years.
(3) The development would require alteration or demolition of any of the following types of housing
(A) Housing that is subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of moderate, low, or very low income.
(B) Housing that is subject to any form of rent or price control through a public entity’s valid exercise of its police power.
(C) Housing that has been occupied by a tenant in the last three years. (4) The development would result in the demolition of more than 25 percent of the existing exterior structural walls of a site that has been occupied by a tenant in the last three years.
(5) The development is located within a historic district or property included on the State Historic Resources Inventory, as defined in California Public Resources Code Section 5020.1, or within a site that is designated or listed on the City’s historic inventory.
(6) The building official finds that the development would have a specific, adverse impact on public health and safety or the physical environment that cannot be feasibly mitigated or avoided.

(d) Application Process.
(1) The Director is authorized to promulgate regulations, forms, and/or checklists setting forth application requirements for the development of dwelling units under this section.
(2) The City shall ministerially approve or disapprove an application pursuant to this section.

(e) Development Standards.
(1) A project proposing two dwelling units on a parcel in the R-1 or RE districts shall be subject to the development standards set forth in Chapters 18.12 and 18.10, respectively except as provided herein.
(2) All construction pursuant to this section shall comply with objective design standards adopted by the City Council. However, an applicant seeking to deviate from the objective design standards (except to the extent necessary to construct

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a unit of 800 square feet) may elect to submit an application under the base requirements of Chapters 18.10, or 18.12, including, if applicable, Single Family Individual Review.
(3) If the application of any development standard or design standard would necessarily require that one or more proposed units be less than 800 square feet, such standard shall be relaxed to the minimum extent necessary to allow construction of a unit or units of at least 800 square feet. The Director may publish regulations governing the order in which objective standards shall be waived or relaxed in such circumstances.
(4) Setbacks from side and rear property lines, including street-side property lines, shall be no less than four feet, except in the case of existing non-complying structures or structures reconstructed in the same location and to the same dimensions as an existing structure, in which case existing setbacks less than four feet may be maintained.
(5) Off-street parking shall be provided pursuant to Chapters 18.52 and 18.54. (6) In the event that a project is proposed on a site that has been subject to an Urban Lot Split under Chapter 21.10, and the project would result in three or more detached units across the two parcels created by the urban lot split, any new units shall not exceed 800 square feet.
(7) Accessory structures, such as garages and shed are permitted consistent with the provisions of the zoning district; however, no accessory structure shall have a floor area exceeding 500 square feet.

(f) General Requirements.
(1) A maximum of two units may be located on any parcel that is created by an Urban Lot Split under Chapter 21.10. Accessory dwelling units and junior accessory dwelling units shall not be permitted on any such parcel already containing two units.
(2) On parcels that are not the result of an Urban Lot Split under Chapter 21.10, accessory dwelling units may be proposed in addition to the primary dwelling unit or units, consistent with Chapter 18.09, provided, however, that ADUs associated with projects proceeding under this Section shall not receive any exemption from Floor Area Ratio except to the minimum extent required by California Government Code Section 65852.2.
(3) A rental of any unit created pursuant to this Section shall be for a term longer than 30 consecutive days.
(4) For residential units connected to an onsite wastewater treatment system, a percolation test completed within the last 5 years, or, if the percolation test has been recertified, within the last 10 years.
(5) Each unit shall have a permanent street address.
(6) The owner and all successors in interest in the subject property shall agree to participate in any City survey of properties that have constructed dwelling units pursuant to this Section.

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(g) Effective Dates. This section shall remain in effect until such time as Government Code Section 65852.21 is repealed or superseded or its requirements for ministerial approval of no more than two units on a single family zoned lot are materially amended, whether by legislation or initiative, at which time this section shall become null and void.

SECTION 16. Chapter 21.10 (Urban Lot Splits) of Title 21 (Subdivisions and Other Divisions of land) of the Palo Alto Municipal Code is added to read as follows:

Chapter 21.10

PARCEL MAPS FOR URBAN LOT SPLITS IN SINGLE-FAMILY ZONES Section 21.10.010 Purpose
Section 21.10.020 Definitions
Section 21.10.030 Applicability
Section 21.10.040 General Requirements
Section 21.10.050 Application and Review of an Urban Lot Split Section 21.10.060 Effective dates
Section 21.10.010 Purpose
This chapter sets forth special regulations applicable to the subdivision of a single family lot in the R-1 district (and R-1 subdistricts) or R-E district into two new lots, pursuant to California Government Code Section 66411.7 (SB 9, 2021).

Section 21.10.020 Definitions
As used in this chapter:
(a) “Acting in concert” means pursuing a shared goal to split adjacent lots pursuant to an agreement or understanding, whether formal or informal. (b) “Specific, adverse impact” means a significant, quantifiable, direct, and unavoidable impact, based on objective, identified written public health or safety or physical environmental standards, policies, or conditions as they existed on the date the application was deemed complete. Inconsistency with the zoning ordinance or general plan land use designation shall not constitute a specific, adverse, impact. (c) “Unit” means any dwelling unit, including, but not limited to, a unit or units created pursuant to Section 18.42.180, a primary dwelling unit, an accessory dwelling unit, or a junior accessory dwelling unit.
(d) “Urban Lot Split” means the subdivision of an existing legal parcel in the R-1 district (and R-1 subdistricts) or R-E district to create no more than two new parcels of approximately equal area, pursuant to this Chapter and California Government Code Section 66411.7.

Section 21.10.030 Applicability
The provisions of this chapter shall apply only to lots in the R-1 district (and R-1 subdistricts) or R-E zone district. An Urban Lot Split is not available in any of the following circumstances:

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(a) A parcel described California Government Code Section 65913.4, subdivisions (a)(6)(B) through (a)(6)(K) inclusive. Such parcels include, for example, parcels located in wetlands, in very high fire severity zones (unless the site has adopted certain fire hazard mitigation measures), and in special flood hazard areas or regulatory floodways (unless the site meets certain federal requirements for development). (b) A parcel on which an owner of residential real property has exercised the owner’s rights under state law to withdraw accommodations from rent or lease within the past 15 years.
(c) A parcel that was created by prior exercise of an Urban Lot Split. (d) A parcel adjacent to a parcel that was created by prior exercise of an Urban Lot Split by the owner, or a person acting in concert with the owner of the parcel sought to be split. (e) The Urban Lot Split would require alteration or demolition of any of the following types of housing
(1) Housing that is subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of moderate, low, or very low income.
(2) Housing that is subject to any form of rent or price control through a public entity’s valid exercise of its police power.
(3) Housing that has been occupied by a tenant in the last three years. (f) The Urban Lot Split is located within a historic district or property included on the State Historic Resources Inventory, as defined in California Public Resources Code Section 5020.1, or within a site that is designated or listed on the City’s historic inventory. (g) The building official finds that the development would have a specific, adverse impact on public health and safety or the physical environment that cannot be feasibly mitigated or avoided.

Section 21.10.040 General Requirements
(a) The minimum size for a parcel created by an Urban Lot Split is 1,200 square feet. (b) The lots created by an Urban Lot Split must be of approximately equal area, such that no resulting parcel shall be smaller than 40 percent of the lot area of the original parcel proposed for subdivision.
(c) Each parcel created by an Urban Lot Split shall adjoin the public right of way by means of a minimum fifteen foot street frontage.
(d) Where existing dwelling units on the property are to remain, no lot line may be created under this Chapter in a manner that would bisect any structure or that would result in more than two dwelling units on any resulting parcel.
(e) Newly created lot lines shall not render an existing structure noncomplying in any respect (e.g. floor area ratio, lot coverage, parking), nor increase the degree of noncompliance of an existing noncompliant structure.
(f) Each parcel shall comply with any objective lot design standards for Urban Lot Splits adopted by the City Council.
(g) The Director of Planning shall determine the appropriate fee required for an application for parcel map for an Urban Lot Split, which may be the fee currently established for a Preliminary Parcel Map or Parcel Map.

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Section 21.10.050 Application and Review of an Urban Lot Split (a) The director of planning is authorized to promulgate regulations, forms, and/or checklists setting forth application requirements for a parcel map for an Urban Lot Split under this Chapter. An application shall include an affidavit from the property owner, signed under penalty of perjury under the laws of California, that:
(1) The proposed urban lot split would not require or authorize demolition or alteration of any of the housing described in Section 21.10.030, subdivision (e). (2) The proposed urban lot split is not on a parcel described in Section 21.10.030. (3) The owner intends to occupy one of the housing units located on a lot created by the parcel map as their principal residence for a minimum of three years from the date of the recording of the parcel map.
(4) The rental of any unit on the property shall be for a term longer than 30 consecutive days.
(5) The resulting lots will be for residential uses only. (b) A parcel map for an Urban Lot Split must be prepared by a registered civil engineer or licensed land surveyor in accordance with Government Code sections 66444 – 66450 and this Chapter. Unless more specific regulations are adopted by the director of planning, the parcel map shall be in the form and include all of the information required of a Preliminary Parcel Map by Chapter 21.12, as well as any additional information required of a Parcel Map by Chapter 21.16. In addition, the face of the Parcel Map shall contain a declaration that:
(1) Each lot created by the parcel map shall be used solely for residential dwellings. (2) That no more than two dwelling units may be permitted on each lot. (3) That rental of any dwelling unit on a lot created by the parcel map shall be for a term longer than 30 consecutive days.
(4) A lot created by a parcel map under this Chapter shall not be further subdivided. (c) Upon receipt of a parcel map for an Urban Lot Split, the director of planning shall transmit copies to the city engineer, chief building official, director of utilities, chief of police, fire chief, director of transportation, and such other departments of the city, and any other agencies, as may be required by law or deemed appropriate.

(d) The director of planning shall cause a notice of the pending application to be posted at the site of the proposed Urban Lot Split and for notice to be mailed to owners and residents of property within 600 feet of the property.
(e) The director of planning shall ministerially review and approve a parcel map for Urban Lot Split if they determine that the parcel map application meets all requirements of this Chapter. The director of planning shall deny a parcel map application that does not meet any requirement of this Chapter.

Section 21.10.060 Effective Dates.

This chapter shall remain in effect until such time as Government Code Section 66411.7 is repealed or superseded or its requirements for ministerial approval of an Urban Lot Split on a

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single family zoned lot are materially amended, whether by legislation or initiative, at which time this chapter shall become null and void.

SECTION 17. Section 18.13.040 (Development Standards) of Chapter 18.13 (Multiple Family Residential (RM-20, RM-30 and RM-40) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.13.040 Development Standards
(a) Site Specifications, Building Size and Bulk, and Residential Density

[. . .]

Table 2
Multiple Family Residential Development Table

RM-20 RM-30 RM-40 Subject to
regulations in:
[. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Floor
Area Ratio
(FAR)(4)

0.5:1 0.6:1 1.0:1 18.13.045
[. . .] [. . .] [. . .] [. . .] [. . .]

SECTION 18. Section 18.13.045 (Increased Floor Area for Housing Developments of 3-10 Units) of Chapter 18.13 (Multiple Family Residential (RM-20, RM-30 and RM-40) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:

18.13.045 Increased Floor Area for Housing Developments of 3-10 Units

(a) A housing development project, as defined in California Government Code Section 65589.5, that is in an RM-20, RM-30 or RM-40 District shall be allowed to increase its floor area ratio as follows:
(i) A housing development project of three to seven units shall have a maximum floor area ratio of 1.0:1.
(ii) A housing development project of eight to ten units shall have a maximum floor area ratio of 1.25:1.
(b) This section shall not apply within a historic district or property included on the State Historic Resources Inventory, as defined in California Public Resources Code Section 5020.1, or within a site that is designated or listed on the City’s historic inventory.

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SECTION 19. Section 18.16.060 (Development Standards) of Chapter 18.16 (Neighborhood, Community, and Service Commercial (CN, CC and CS)) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck- through; omissions are noted with [. . .] for large sections of unchanged text):

(a) Exclusively Non-Residential Uses

[. . .]

(b) Mixed Use and Residential
Table 4 specifies the development standards for new residential mixed use developments and residential developments. These developments shall be designed and constructed in compliance with the following requirements and the context-based design criteria outlined in Section 18.16.090, provided that more restrictive regulations may be recommended by the architectural review board and approved by the director of planning and development services, pursuant to Section 18.76.020.

Table 4
Mixed Use and Residential Development Standards
CN CC CC(2) CS Subject to
regulations in
Section
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]
Maximum
Residential
Floor Area
Ratio (FAR)

0.5:1 (4) See sub-
section (e)
below

0.6:1 0.6:1 18.16.065
Maximum
Nonresidential
Floor Area
Ratio (FAR)

0.4:1 2.0:1 0.4:1
Total Mixed
Use Floor Area
Ratio (FAR)

0.9:1 (4) 2.0:1 1.0:1 18.16.065
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]

[. . .]

SECTION 20. Section 18.16.065 (Increased Floor Area for Housing Developments of 3-10 Units) of Chapter 18.16 (Neighborhood, Community, and Service Commercial (CN, CC and CS)) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:

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18.16.065 Increased Floor Area for Housing Developments of 3-10 Units (a) A housing development project as defined in paragraph (2) of subdivision (h) of Section 65589.5 of the Government Code of the State of California that is in a CN, CC or CS District shall be allowed to increase its floor area ratio as follows:
(i) A housing development project of three to seven units shall have a maximum floor area ratio of 1.0:1.
(ii) A housing development project of eight to ten units shall have a maximum floor area ratio of 1.25:1.
(b) This bonus shall not apply within a historic district or property included on the State Historic Resources Inventory, as defined in Section 5020.1 of the Public Resources Code of the State of California, or within a site that is designated or listed as a city or county landmark or historic property or district pursuant to a city or county ordinance. (c) For mixed use development, total mixed use floor area ratio shall be increased to the extent necessary to accommodate a non-residential floor area ratio of 0.4:1 for retail and retail-like uses only.

SECTION 21. Section 18.18.060 (Development Standards) of Chapter 18.18 (Downtown Commercial (CD) District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):
(a) Exclusively Non-Residential Use
[. . .]
(b) Mixed Use and Residential
Table 3 specifies the development standards for new residential mixed use developments and residential developments. These developments shall be designed and constructed in compliance with the following requirements and the context-based design criteria outlines in Section 18.18.110, provided that more restrictive regulations may be recommended by the architectural review board and approved by the director of planning and development services, pursuant to Section 18.76.020:

TABLE 3

MIXED USE AND RESIDENTIAL DEVELOPMENT STANDARDS
CD-C CD-S CD-N Subject to
regulations in
Section:
[. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Residential
Floor Area Ratio (FAR)

1.0:1(3) 0.6:1(3) 0.5:1(3) 18.18.065,

18.18.070

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Maximum Nonresidential
Floor Area Ratio (FAR)

1.0:1(3) 0.4:1 0.4:1

Total Floor Area Ratio
(FAR)(3)

2.0:1(3) 1.0:1(3) 0.9:1(3) 18.18.065,

18.18.070
[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Required usable open space: (1) may be any combination of private and common open spaces; (2) does not need to be located on the ground (but rooftop gardens are not included as open space except as provided below); (3) minimum private open space dimension 6; and (4) minimum common open space dimension 12 For CN and CS sites on El Camino Real, CS sites on San Antonio Road between Middlefield Road and East Charleston Road and CC(2) sites that do not abut a single- or two-family residential use or zoning district, rooftop gardens may qualify as usable open space and may count as up to 60% of the required usable open space for the residential component of a project. In order to qualify as usable open space, the rooftop garden shall meet the requirements set forth in Section 18.40.230.
[. . .]
(3) FAR may be increased with transfers of development, increased floor area for housing development projects with 3-10 residential units and/or bonuses for seismic and historic rehabilitation upgrades, not to exceed a total site FAR of 3.0:1 in the CD-C subdistrict or

2.0:1 in the CD-S or CD-N subdistrict.
[. . .]
(5) The weighted average residential unit size shall be calculated by dividing the sum of the square footage of all units by the number of units. For example, a project with ten 800- square foot 1-bedroom units, eight 1,200-square foot 2-bedroom units, and two 1,800- square foot 3-bedroom units would have a weighted average residential unit size of ((10x800)+(8x1,200)+(2x1,800)) ÷ (10+8+2) = 1,060 square feet.

[. . .]

SECTION 22. Section 18.18.065 (Increased Floor Area for Housing Developments of 3-10 Units) of Chapter 18.18 (Downtown Commercial (CD) District) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:

18.16.065 Increased Floor Area for Housing Developments of 3-10 Units

(a) A housing development project as defined in paragraph (2) of subdivision (h) of Section 65589.5 of the Government Code of the State of California that is in a CD Districts shall be allowed to increase its floor area ratio as follows:
(i) A housing development project of three to seven units shall have a maximum residential floor area ratio of 1.0:1.
(ii) A housing development project of eight to ten units shall have a maximum residential floor area ratio of 1.25:1.

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(b) This bonus shall not apply within a historic district or property included on the State Historic Resources Inventory, as defined in Section 5020.1 of the Public Resources Code of the State of California, or within a site that is designated or listed as a city or county landmark or historic property or district pursuant to a city or county ordinance. (c) For mixed use development in the CD-N and CD-S subdistricts, total floor area ratio shall be increased to the extent necessary to accommodate a non-residential floor area ratio of 0.4:1 for retail and retail-like uses only.
(d) In no event shall total floor area ratio exceed 3.0:1 in the CD-C subdistrict, or 2.0:1 in the CD-N and CD-S subdistricts.

SECTION 23. Section 16.65.025 (Exemptions) of Chapter 16.65 (Citywide Affordable Housing Requirements) of Title 16 (Building Regulations) of the Palo Alto Municipal Code is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

16.65.025 Exemptions.

The following development projects are exempt from the provisions of this chapter:
(a) Residential projects consisting of the construction of one or two units, other than accessory dwelling units and junior accessory dwelling units, unless: (1) included in a mixed use project, (2) constructed on a lot created by an Urban Lot Split under Chapter

21.10; or (3) resulting in a two-family use on a single-family zoned lot; (b) Accessory dwelling units, unless: (1) constructed on a lot created by an Urban Lot Split under Chapter 21.10; or (2) the accessory dwelling unit is constructed on a single-family zoned lot containing a two-family use;
(c) Junior accessory dwelling units and, notwithstanding subsection (b), all accessory dwelling units less than 750 square feet;

[. . .]

SECTION 24. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid.

SECTION 25. The City Council finds that this Ordinance is statutorily exempt from the requirements of the California Environmental Quality Act (CEQA) for the following reasons. Under Government Code Sections 66411.7(n) and 65852.21(j), an ordinance adopted to implement the requirements of SB 9 shall not be considered a project under CEQA. Additional sections of this ordinance implementing SB 478 are exempt pursuant to Section 15061 of the State CEQA Guidelines because they simply reflect pre-emptive state law that will be effective January 1,

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2022. As such, this ordinance does not reflect a change from the status quo and it therefore can be seen with certainty that there is no possibility that the ordinance will have a significant effect on the environment.

SECTION 26. This ordinance shall be effective on the thirty-first day after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning
and Development Services

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City of Palo Alto (ID # 13770)
City Council Staff Report
Meeting Date: 1/24/2022
City of Palo Alto Page 1
Title: Discuss Polling Results, Analysis, and Community and Stakeholder Engagement Plan; Recommend Further Refined Parameters for a Possible Local Tax Ballot Measure for November 2022 Election (Business License Tax and Utility Tax Proposals); and Direct St aff on Related Items such as Community and Stakeholder Engagement Plan
From: City Manager
Lead Department: Administrative Services

EXECUTIVE SUMMARY
A staff report for this item will be published as part of the next packet released on January 20, 2022 which will include a summary of the Finance Committee discussion on January 18, 2022 and the Committee recommendations for Council consideration.

This report is issued to transmit the information intended to be discussed for this City Council agenda item. The Finance Committee has received and reviewed (12/7/21) / will review (1/18/22) a significant volume of information regarding potential local revenue generating measures for the November 2022 ballot. This City Council agenda item will review these prior discussions, the material presented at these prior committee meetings , and the Finance Committee recommendations. Below are links to the materials:

December 7, 2021 Finance Committee: Agenda Item #2, Staff Report #13728 (begins on page 55) - Modeling of two methods to replace the General Fund Equity Transfer (GFET) at risk due to legal challenges
January 18, 2022 Finance Committee: Agenda Item #1, Staff Report #13875 (begins on page 3) - Refined modelin g of a potential business tax at a monthly rate of $0.05 to $0.20 per square foot, potential exemptions, and escalators for rate of tax - Results from the initial round of polling conducted in November/December 2021 related to potential business license and utility tax proposals - Community and Stakeholder Engagement Plan

BACKGROUND
City Council’s November 8th direction to staff and the Finance Committee:
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A. Direct staff to model a business license tax at monthly rates of $0.05 to $0.20 per square foot, with a preference for no sunset and an annual escalator, and with thresholds for square footage size and possible exemptions for:
i. Small retail, measured by square footage;
ii. Grocery stores;
iii. No exemptions;
B. Direct staff to model two methods to replace the General Fund Equity Transfer (GFET) at risk in the Green case:
i. Seek voter approval in modifying the 2009 GFET formula to transfer a percentage of gas utility gross revenues;
ii. Distribute the change across gas and electric as an increase in the percentage of Utility Users Tax (UUT); and
C. Direct staff to execute initial round of polling (Attachment A), delegate review of the polls to the Finance Committee, pending availability to stay on the workplan timeline, and incorporate the Council’s feedback of the poll, including the modeling assumptions identified in Parts A and Parts B of the motion; and
D. Remove the parcel tax as an option from the polling questions.

MOTION PASSED 6-1 (Tanaka no)

DISCUSSION

Summary of December 7, 2021 Finance Committee: Utility On-Bill Tax Staff presented updated analysis and other information for a potential utility on -bill tax at the Finance Committee’s December 7, 2021 meeting ( CMR 13728). After reviewing the analysis the Finance Committee unanimously recommended that Council direct staff to pursue preparation of a utility tax that replaces the General Fund Equity Transfer (GFET) at risk in the Green case with the following parameters:
• Using a percentage of utility revenue methodology rather than changing the UUT; • Focusing cost recovery on the gas utility only; and
• Relying on polling to determine whether to cap growth in the utility tax.

The Finance Committee and staff recognized that some of these questions would be further informed by the initial round of polling, and with the information presented Council can review the initial polling results and modify this recommendation if necessary.

A summary of the staff analysis for the two approaches to replace GFET revenue is below:

Method 1: Distribute the change across gas and electric as an increase in the percentage of Utility Users Tax (UUT)

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Method 2: Seek voter approval in modifying the 2009 GFET formula to transfer a percentage of gas utility gross revenues
Although both achieve the goal of recovering 100 percent of the GFET revenue currently at risk in the Green case, differences in revenue volatility (stability per the EASE Fram ework), distribution of tax between residential and non -residential customers, and impacts on sustainability efforts are key differences between these two approaches. Highlights of these key differences are summarized below:

Method 1:

Increase Gas and Electric UUT
Method 2:

Percent of Gas Utility Revenue
Recovers GFET revenue
currently at risk
Both approaches recover 100% of GFET revenue currently at risk Ease of explanation Changes practice, more complex Simple, confirms existing practice Revenue growth
(Increase in annual
revenue from FY 2023 to
FY 2025)
Increase from $7.34 million to
$8.76 million
Increase from $7.34 million to
$8.61 million
Note: due to expected utility cost and rate increases in FY 2023 to FY 2025, either of these methods would i ncrease the GFET significantly faster than the current GFET methodology, which only is forecasted to increase from $7.34 million to $7.9 million through FY 2025.

EASE (Stability):

Revenue volatility1
+/- 4% to 6% variation in revenue
each year based on utility use
+/- 10% to 15% variation in
revenue each year based on utility
use
EASE (Equity):

Percentage of revenue
collected form business
Increases share of tax collection on
business and non -residential
taxpayers (20% residential, 80%
business / non-residential)
No change in share of revenue
collected from business and non -
residential from current GFET
methodology (40% residential, 60%
business / non-residential)
EASE (Economic Impact):

Impact on sustainability
efforts
Decreases cost -effectiveness of
building and vehicle electrification
No impact to sustainability efforts
EASE (Stability):

Impact of S/CAP goals on
revenues
Achieving building and vehicle
electrification goals outlined in
April 2021 S/CAP impact analysis
results in little change in revenue.

Achieving building and vehicle
electrification goals outlined in
April 2021 S/CAP impact analysis
results in $3.9 million (46%)
decrease in revenue.

Staff found a few notable differences between Method 1, modifying the UUT rate, and Method 2, transferring a percentage of gas utility revenues. Method 2 was easier to explain.

Method 1 was less volatile, collected a higher proportion of tax from businesses than Method 2, and decreased the cost-effectiveness of building electrification.

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Further on relati onship to the City’s Sustainability and Climate Action Plan (S/CAP) goals , Method 1 was significantly less affected by major shifts in electric and gas use associated with long-term S/CAP goals. That said, this is a longer term revenue stability issue that could be solved later as part of a future year S/CAP-related ballot measure. In this context, if an option were to not replace the gas GFET while continuing the electric GFET, a similar disincentive for electrification could be created.

Both approaches increased the amount of revenue transferred to the General Fund at a faster rate than the current GFET approach. The current GFET escalates at roughly 2.5% per year, while utility rates are expected to increase at a higher rate in the next few years. If Co uncil wanted to limit the growth of either tax method to be more consistent with the rate of growth of the current GFET methodology, some alternatives were discussed in the Finance Committee report (Attachment D), in the section titled “Revenue Growth and Volatility of Various Utility Tax Methods vs. Current GFET.”
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City of Palo Alto (ID # 13864)
City Council Staff Report

Report Type: Action Items Meeting Date: 1/24/2022

City of Palo Alto Page 1
Summary Title: Council Review of Changes to Height Transitions Title: Public Hearing: Adoption of Ordinance Clarifying Ambiguities in Height Transitions and Amending the Setback for the RM -40 Zone District From: City Manager
Lead Department: Planning and D evelopment Services

Recommendation:

Staff recommends that Council consider proposed changes to height transitions and other development standards (Attachment A), take public comment, and adopt the ordinance.

Staff will return to Council at a future he aring with changes to objective design standards and other zoning regulations based on feedback from the Council at previous meetings . These documents would modify Title 18 (Zoning) of the Palo Alto Municipal Code (PAMC).

Executive Summary:

The objective standards project aims to respond to State law by making changes to the Zoning Ordinance (Title 18) to transform subjective findings and context -based design criteria into objective design standards and streamline other Sections of Title 18 to encourage housing production. This report is a next step in the Council’s review of objective standards, based on feedback received on October 4 and November 8, 2021.

The issue of height transition development standards is tangential to the objective standards project. However, it was included in the preliminary ordinance , reviewed by the Planning & Transportation Commission (PTC), as a clarifying update to improve usability of the code . This report and draft ordinance is the first of two ordinances expected in the first half of the year as part of the objective standards project.

This report provides an overview of height transitions, including how they apply to different districts and uses. It presents two key issues. First, that the language governing height transitions var ies across districts and is sometimes ambiguous; this has resulted in the code 12 Packet Pg. 389

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being interpreted and implemented different ly over time. Second, community members have expressed concern that these lower height limits generally do not apply to the RM-40 district which is a high-density district.

Staff recommends a moderated approach to modifying the ambiguous code to codify a clear objective standard and avoid creating non -complying facilities. This moderated approach sets the horizontal measurement at the far end of the range —150 feet—but allows for reduction by the Planning Director, upon recommendation by the ARB. This avoids creating non -complying facilities for previously- and legally-approved projects and allows applicants to ask the ARB to take a more nuanced look at height transitions based on context.

Additionally, this report proposes change s to the RM -40 front and side setbacks to be consistent with all RM zones and to transform the subjectiv e variable setbacks to objective standards. This change is being made at this time since it was a straightforward request by the Council and relates to the development standards tables already being modified herein.

A near -future second ordinance will address all other aspects of the objective stand ards project, based on feedback received from the Council on October 4 and November 8, 2021.

Background:

The California State legislature has made several changes to State housing laws in recent years to streamline housing approvals. These steps include reducing the amount of subjective discretion jurisdictions have to deny or reduce the density of residential and residential mixed - use projects. Instead, in many contexts, jurisdictions must rely solely on objective design and development standards. The ob jective standards project aims to respond to State law by making changes to the Zoning Ordinance (Title 18).

Relationship to State Housing Laws

SB330 Permit Review
Effective January 1, 2020, SB330 made several changes to existing State housing law, in cluding the Housing Accountability Act and Permit Streamlining Act . The two most notable aspects of the bill for this report’s purposes are as follows:

1. No Loss in Intensity of Housing : SB330 prohibits jurisdictions from enacting development policies, sta ndards or conditions that would change current zoning and land use designations where housing is an allowable use. In such cases, jurisdictions cannot lessen the intensity of housing —such as reducing height, density, or floor area ratio, requiring new or i ncreased open space, lot size, setbacks, or frontage, or limiting maximum lot coverage; effectively, this clause prohibits downzoning, though the City 12 Packet Pg. 390

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may rebalance density between districts (Gov. Code 66300(b)(1)(A)); and

2. Uniformly Verifiable Standards : SB330 defines the meaning of “objective” as “involving no personal or subjective judgment by a public official and being uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development appl icant or pr oponent and the public official” (Gov. Code 65589.5 (h)(8). “Housing development projects” undergoing streamlined review are only required to meet objective standards. Therefore, standards that are ambiguous may not be considered objective standards, requiring compliance.

Summary of Public Hearings

The topic of height transitions was discussed with the Architectural Review Board (ARB) on April 15, 2021 and P lanning and Transportation Commission (PTC) on March 10 and June 9, 2021, as part of the objective standards project.

ARB Review
At its April 1, 2021 meeting, the ARB voted to recommend City Council approval of the objective standards project in a 4-1 vote, following 13 meetings with the full ARB or Ad Hoc Committee .

Additionally, the ARB discussed two aspects of height transition requirements between lower and higher density zoning districts during a study session on April 15 th. First, the ARB discussed proposed text modifications recommended by City staff and later , by the PTC. Second, the ARB held a more holistic discussion of height transitions, focused on the best ways to regulate height and massing across districts in order to mitigate potential impacts while maintaining architectural quality and development feasibility.

PTC Review
At its June 9, 2021 meeting, the PTC made a motion to recommend that City Council adopt the objective standards project on a 4 -1-1 vote , following two study sessions to review the objective standards. The PTC unanimously supported the draft objective design standards.

However, several Commissioners had concerns about the issue of height transitions between lower and higher density districts. Public comments focused on concerns about modifications to the height transition language across several of district regulations’ chapters. Specifically, community members expressed concern that the existing code does not require height reductions for new projects adjacent to RM -40 districts. These participants were concerned about privacy, light, and air impacts. As des cribed in the analysis below, height transitions are not currently required for projects adjacent to RM -40 zoned sites; this is because the RM-40 is already a high -density district with some of the talle st permitted heights in the city at 40 feet .

Therefore, modifications in the draft ordinance did not include changes that would impact the RM-40 district.
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Community Webinar
At the request of the PTC, staff held a community webinar o n July 19, 2021, to discuss the topic of existing height transitions and proposed modifications. Approximately 27 residents attended the online discussion. Many participants advocated for adding a height transition standard for the RM-40 district and generally for light, air, and privacy protections.

Records from previous meetin gs described above and the other 13 ARB meetings and 3 PTC meetings focused on objective standards can be found on the project webpage:
bit.ly/ObjectiveStandards

City Council
The City Council reviewed the objective standards project over the course of two meetings:

October 4 and November 8, 2021 (continued without discussion from September 27 and October 25, respectively). Given the public interest in the topic of height transitions , staff proposed to main tain the status quo and did not include the proposed changes to height transitions in the draft ordinance to the Council. As part of its November 8th motion, the Council voted 5-2 to include it (see item G in Table 1 below) along with other standards that would increase privacy and reduce the height of new buildings when adjacent to lower height residences.

As a result, staff has revived amendments to height transition standards and included them here in a stand -alone ordinance that only addresses develop ment standards’ tables in Title 18.

In response to community members and decision -makers’ requests, staff proposed a more moderated interpretation of ambiguous language.

Still, staff recommends revisiting the broader topic of height transitions as a subs tantive policy discussion in the near future , through the Housing Element update process . At that time, the City could consider more nuanced approaches that balance supporting high -density housing in appropriate locations with privacy/light/air access for existing residential uses.

Table 1 states the November 8 th Council motion and identifies when the issue could be taken up: through the draft ordinance in Attachment A as part of this report, or a near future ordinance that brings back objective design st andards and revisions to Title 18, or a different process. The table also identifies design-related topics that require work with the ARB to refine.

A schedule for community meetings (Motion Item E) will be presented verbally at the Council hearing.

Table 1: November 8, 2021 Council Motion and Next Steps for Amendments Motion #/Topic
Tonight
(January 24th)
Near Future
Ordinance Other
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Motion #/Topic
Tonight
(January 24th)
Near Future
Ordinance Other

A. Take Council feedback on overlays and then take to
housing element working group and return to Council for further discussion;
n/a n/a
Referred
to Housing
Element
B. Direct Staff to retain current Context -Based Design Criteria and Chapter 18 laws for development applications that do not fall under the State housing laws requiring objective standards;
✓
C. Direct Staff to return with proposed objective standards and intent statements and to provide: ✓
i. A detailed side -by-side comparison of the existing
Context-Based Design Criteria and the proposed new
laws;

✓
ii. Adoptable changes to existing and proposed law s
that would provide standards for privacy and other
protections for all residents, regardless of their zones.

Regarding privacy, to come back with stronger
protections for elevated floors looking into neighboring lots. Stronger definitions of sight lines and how this
applies. Address concerns about allowing 15% windows.

In RM-40, retain 25’ front set back;
✓
(RM-40
setback)
✓
(window
and privacy
standards)
Pending
Review
with ARB
iii. Refer to the S/CAP Ad Hoc Committee on the
evaluation of approximate G HG impacts in
construction;
n/a n/a
Referred
to S/CAP
Ad Hoc
D. Prior to any rezoning of PF to workforce housing, the City Council would re -examine the affordability threshold of workforce housing;
n/a n/a
Defer to
Housing
Element
E. Hold at least two m eetings on the proposed changes
before the next Council session for free -form discussion by the general public;
n/a n/a February
and March
F. In Building Massing / Facades sections where there is a menu of choices, increase the number of required choices per category;
✓
Pending
Review
with ARB
G. Put in place a temporary height transition backstop.

Initial ordinance should include objective height transition language, for example “No part of the building can be
more than X’ higher than the lowest adjacen t building, up to the applicable height limit”. Come back with a specific proposal along these lines for adoption this year and Staff can then propose additional amendments in the future;
and
✓
(height
transition
development
standards)
✓
(other
height
transitions
standards)
Pending
Review
with ARB
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Motion #/Topic
Tonight
(January 24th)
Near Future
Ordinance Other
H. Evaluate and return with strengthened language to use “design standards” instead of “design intents”; ✓
I. Evaluate whether "decision by director" option
throughout objective standards puts those at risk and
should be changed /remove; and
✓
J. On appeal, consider sending directly to Council if
required to meet streamlining requirements. ✓

Additionally, Table 2 begins to respond to City Council comments on the objective standards project during its O ctober 4, 2021 hearing. The table is divided into two sections, based on the level of consensus among Council members:
• Tier 1 issues mentioned or agreed upon by several Council members • Tier 2 issues mentioned by just one or two Council members

Feedback on these topics will inform changes to the draft ordinance which the City Council will consider in the near-future ordinance.

Table 2: October 4, 2021 Council Discussion and High-Level Responses Topic City Staff Response
Tier 1: Issues Mentioned Or Agreed Upon By Several Council Members

1. Meet Narrowest
Application of
State
Requirements
The draft ordinance herein does not go beyond the minimum requirements of State law. The near-future objective design standards are proposed to apply to a narrow set of “housing development projects” as defined by the State (i.e., 3+ unit multifamily residential, mixed use with 2/3 residential floor area, and supportive/transitional housing).

2. Show
Transformation of
Design Criteria
City staff and consultants will include additional code citations in the crosswalk of existing context-based design criteria and proposed objective standards previously provided for consideration.

3. Prevent Privacy,
Light and Air
Impacts
The near-future ordinance and supporting staff report will highlight how the code includes privacy protections, including minimizing sight lines between neighboring properties, limiting shade impacts, daylight plane requirements, and screening through landscaping and fencing. These standards will be reviewed with the ARB prior to the Council’s consideration.

4. Clarify Terms, in
Particular
“Adjacent”
The near-future ordinance will clarify the terms adjacent and abutting.

5. Clarify Height
Transitions
This issue is addressed in this staff report through proposed changes to eliminate ambiguities in the code.
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Topic City Staff Response

Tier 2: Questions/Comments Posed by Just One or Two Council Members

6. Applicability to
Faith-Based
Institutions
Most faith-based institutions are located in R-1 districts that do not allow multi-family housing. However, new regulations in Government Code Section 65913.5 allow religious institutions to develop at higher densities. Specifically, religious institutions can develop 100% affordable housing in a residential or mixed use zone at densities up to 20 du/ac (even in an R-1 district), if the project meets objective standards. Currently, draft objective design standards do not apply in the R-1 district, since the existing Context-Based Design Criteria do not apply in the R-1. However, the Council could consider applying the objective design standards in this circumstance.

7. Relationship to
Draft Tree
Ordinance
City staff will add a reference to the proposed tree ordinance in Title 18, when the former is complete.

8. Standards for
Rooftop Open
Spaces
Title 18 currently allows rooftop gardens to satisfy a portion of the open space requirement in the CD-C (Downtown),CN/CS (El Camino Real Only) and CC(2) (Cal Ave.) districts. 15-25% of rooftop open space is required to be landscaped.

No changes are proposed as part of the draft objective standards ordinance, except to relocate the code section. Rooftop decks may be built in all zones, as long as they are designed under height limit, but can only count toward the open space requirement in the narrow circumstances described above. The Council could consider adding criteria to increase privacy on rooftop decks.

9. Relationship to
Historic Resources
Historic or eligible historic resources are unlikely to be able to meet objective standards in the case of rehabilitation proposals. Such projects would go through the typical discretionary review process subject to review and approval by the Historic Resources Board and/or Architectural Review Board.

Historic resources on the National, State, or local register (i.e., Class 1 through 4 structures) are not eligible for streamlining under SB35. However, “eligible” but not “listed” historic resources following a State streamlining review process are currently not protected from demolition and new construction.

The Council could direct staff to proceed with Comprehensive Plan program

7.1.1 to place properties deemed “eligible” for the National and State registers on the City’s local historic inventory, requiring HRB review and recommendations to Council.

10. Reduce Rooftop
Equipment
Height
Title 18 currently allows rooftop equipment to exceed height requirements up to 15 feet to allow for mechanical equipment. This standard is currently duplicated in PAMC Sections 18.23.050: Visual, Screening and Landscaping and PAMC Section 18.40.090: Height Exceptions. Proposed code revisions maintain the height exception in Section 18.40.090 only and consolidate screening requirements into a new subsection 18.40.230 so that screening applies to all 12 Packet Pg. 395

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Topic City Staff Response
projects, not just those adjacent to lower density residential districts. The Council could consider reducing the 15-foot allowance, but this could make several existing structures legal non-conforming.

11. Relationship to
Baylands Master
Plan
Objective design standards would apply to ROLM-zoned sites within the Baylands Master Plan area, since the ROLM district allows multifamily housing.

Discretionary projects require Site and Design Review with the ARB, PTC and Council. The Baylands Master Plan primarily includes subjective guidelines, which can only provide guidance for projects that are only required to meet objective standards.

12. Bird Safe Glass
Regulations
The City does not have bird safe glass regulations. However, the City has been enforcing good practices to limit bird strikes through architectural review findings and discretionary review of projects in the Baylands (e.g., auto dealerships with large expanses of glass) and projects with curtain walls (i.e., floor to ceiling windows) throughout the City. Requirements have included fritted glass or similar treatments, and reduced night lighting. The Council may wish to develop an objective standard that codifies this practice.

Discussion
This section provides an overview of height transitions, including how they apply to different districts and uses. It p resents two key issues . First, height transitions vary across districts and are sometimes ambiguous. Second, they generally do not apply to the RM -40 district which is a high-density district. The discussion then offers a recommended approach to remove ambiguity and codify a clear objective standard for when height transitions apply, by district and use.

Additionally, this report responds to one component of Motion Cii, identified in Table 1. It recommends a change to the RM-40 front setback to be consistent with all RM zones.

Height Transitions Overview
Title 18 currently includes two sets of height standards within most zoning districts. First, a general height standard. Second, a lower height standard for multifamily and commercial mixed-use districts when located abutting and within a certain horizon tal distance from a residential district (typically, excluding RM-40 or PC zones).

Figure 1 illustrates the general concept for how height transitions are regulated in Title 18.

Most zoning districts specify the following measurements which correspond to Figure 1:

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(A) horizontal distance from a residential zone;
(B) reduced height limit within A; and
(C) standard height limit beyond A.

Figure 1: Prototypical Transitional Height Standard, Existing

Variation by Zoning District

Table 3 repor ts height standards, by district. (Circled letters in the header row correspond to the labels on Figure 1.) Depending on the district, the height limits can also vary by use (non - residential only vs. residential/mixed use). The table reveals two issues:

(1) Different Zones Identify Different Horizontal Height Transition Zones.

For example, in Downtown, the transition zone is clearly within 150 feet of an abutting residential district; height transitions are required within this horizontal distance , except in the RM-40 and PC zones. The regulations are also clear in the Office/Research/Manufacturing zoning districts where regulations express three layers of height transition: a standard height, a reduced height within 150 feet of a residential district, and a further reduced height within 40 feet of a residential district. However, this district does not specify that the lower height only applies to “abutting” lots . As a result, the standard could theoretically be interpreted to apply 12 Packet Pg. 397

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to sites separated by a s treet or even another lot. In practice, City staff have historically interpreted the standard to only apply to abutting parcels.

In contrast, height limits in the CS/CC/CN mixed use districts and Workforce Housing (WH) overlay are ambiguous. These standar ds refer to a 50 -foot distance, a 150 -foot distance and refer to distances relative to the “site” and the “side” of the abutting parcel, further adding to interpretation challenges.

Ambiguity in the regulations are problematic for several reasons. First, they are difficult for City staff and decision -makers to implement consistently. Notably, height standards in these districts have been interpreted and implemented inconsistently over time. This creates a problem for property owners and developers who are considering whether to make significant investments in Palo Alto. Second, ambiguity presents a challenge in light of recent changes in State law which —as described in the description of SB330 above —require standards to be “uniformly verifiable” and “involving no personal or subjective judgement” if the standards are going to be enforced for projects undergoing streamlined review (Gov. Code 65589.5 (h)(8).

(2) The RM-40 district is treated differently than other residential zones.

Reduced heights are many ti mes not required w hen abutting the RM -40 district. I n fact, the code allows taller heights adjacent to the RM -40, up to 50 feet in some districts. Presumably this is because the RM -40 district is considered high density in that it allows heights up to 40 feet. As a result, a 50 -foot building adjacent to a site that allows a 40 -foot building represents similar massing potential, with only a 10 -foot difference in the height allowance. As noted throughout this report, there are many other development standards and performance standards that require modulation of the massing, privacy and light protection, including:
daylight plane, setbacks, screening, landscaping, and fencing.

Table 3: Existing Height Standards, by Zoning District
Zoning District (Use)
General Vertical
Height Standard
Reduced Height Limit
Height Within
Horizontal
Feet of Residential Zone
Horizontal Feet
Distance Threshold
Multifamily Residential Districts
RM-20 30 N/A N/A RM-30 35
RM-40 40 35, Except RM-40 or PC 50
Commercial/ Mixed Use Districts
CD-C/
CD-S
Non-Residential Only 50 Max. height of abutting
residential district 150 Residential/Mixed
Use 50 40
50, abutting RM-40/PC
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Zoning District (Use)
General Vertical
Height Standard
Reduced Height Limit
Height Within
Horizontal
Feet of Residential Zone
Horizontal Feet
Distance Threshold
CD-N
Non-Residential Only 25 Max. height of abutting
residential district
Residential/Mixed
Use 35 40
50, abutting RM-40/PC
CN
Non-Residential Only 25 N/A N/A
Residential/Mixed
Use 35 (40 on ECR) 35, Except RM-40 or PC
50 or 150
(Ambiguous)
CC/CS
Non-Residential Only 50 35, Except RM-40 or PC
Residential/Mixed
Use 50 35
50, abutting RM-40/PC
CC(2)
Non-Residential Only 37 35, Except RM-40 or PC
Residential/Mixed
Use 37 35
50, abutting RM-40/PC
Office/Research/Manufacturing Districts
MOR
Non-Residential Only 50 35 40
35 150
Residential/Mixed
Use
35 N/A N/A
ROLM
Non-Residential Only 35 25 40
35 150
Residential/Mixed
Use
35 N/A N/A

ROLM(E)
Non-Residential Only 35 25 40
35 150
Residential/Mixed
Use
30 N/A N/A
RP
Non-Residential Only 35-40 25 40
35 150
Residential/Mixed
Use
35 30, Except all RMs and
similar density PCs
150
Overlay/Other Districts
PF 50 35, Except PC 150
WH 50 35, Except RM-40 or PC 50 or 150
(Ambiguous)
AH 50 35, Except RM-40 or PC 50, Director may
waive
PTOD 40 N/A N/A

Determining an Appropriate Threshold
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If Council agrees the standard should be made unambiguous and objective, the next question is what is the appropriate standard ? This is a policy question tha t needs to balance State law requirements, flexibility for new housing design, and access to light/air/privacy for existing adjacent uses.

The ARB held a study session on April 15, 2021 to discuss height transitions generally and its implications for des ign. The majority of ARB members agreed with staff’s recommendations, outlined in a March 18, 2021 memo1 to the ARB, as to how to streamline this Code language for ease of interpretation. Board members believed that the height limits and densities in the surrounding context mattered, concluding that the 150 -foot threshold is likely too deep in places like Downtown, but that other locations may warrant transition areas in excess of 50 feet. Board members also suggested that setback and daylight plane require ments—which are already codified in Title 18 --are better methods for regulating this transition area than a horizontal threshold.

Recommendation
To resolve the ambiguity at this time and respond to community and Council feedback, staff recommends a moderated approach. In the districts with ambiguous language --the CN, CC, CC(2), and CS districts and WH overlay--require a lower height standard abutting and within the 150 horizontal feet (rather than the 50 feet threshold as originally proposed to the PTC ), but allow for a reduction up to 50 horizontal feet by the Planning Director, upon recommendation by the ARB.

The draft ordinance also recommends clarifying that the reduced height limit only applies to abutting conditions. This is consistent with how Cit y staff have historically interpreted the standard. The lower height limit is not intended to apply to situations where parcels are separated by another lot or by a street. Most zoning districts with the lower height standard already include this “abutting ” condition. However, to bring consistency and eliminate ambiguity across Title 18, the draft ordinance adds the term “abutting” to the lower height standard in the following zones: RM-40, ROLM, AH overlay, and PC.

Staff believes the 150-foot horizontal measurement is supportable under SB330 prohibitions on limited density, since the standard has been interpreted inconsistently over the years.

Moreover, development (i.e., building footprint and massing) is still permitted within the 150 - foot distance, jus t at lower limits. No changes are proposed to height limits overall; nor do changes propose extending lower height limits to projects adjacent to a RM-40 zoned site.

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This moderated approach serves two purposes. First, it avoids creating non -conforming conditions for residential, commercial, and mixed -use projects that were previously approved with standard height limits within 150 feet of a lower density residential district. These legally - approved projects would not be considered non -conforming and would be eligible for modifications, subject to review by the ARB.

Second, it allows for development --most importantly multifamily residential and residential mixed-use projects that are supported by the Comprehensive Plan and Housing Work Plan --to be feasibly developed at the heights and densities permitted by the zoning district. Requiring review by the ARB to reduce the 150 -foot threshold allows for the City’s qualified architect ural reviewers to take a more contextual approach to evaluating height transitions.

The Council could consider reducing heights adjacent to the RM -40 district. However, this would be a substantive policy change to Title 18, beyond the scope of the objective standards project. For residential uses, such a change would need to be eva luated under the “no net loss” provision of the City’s Housing Element and State law, since it could reduce developable area for housing projects. The Council could consider reducing heights adjacent to RM -40 for non - residential uses only, which are not regulated by State law.

Notably, qualifying housing development projects that propose using State Density Bonus Law, may seek to use waivers or concessions to exceed the height standard (both the general height standard and the lower standard when adjacent to a lower density residential use).

Additionally, staff expects that the Housing Element update process will look at height standards—both overall height limits and these transitional height standards. Further changes are likely to be recommended through that process.

Finally, the near-future objective standards ordinance will further expand privacy, light, and air protections to all residentially zoned properties, based on feedback from the Council and ongoing work with the ARB.

RM-40 Setback Requirements
As noted in Table 1, Motion Item Cii, the Council moved to change the RM -40 front setback from a variable 0-25 feet to a standard 25 feet. This motion item is being taken up here, since it is a straightforward change and modifies the development stand ards table being modified as part of the height transitions regulations described above. In the same vein, City staff recommend a change to the RM-40 variable side setback standard of 0 -16 feet, to a standard 16 feet, consistent with the RM-20 and RM-30 zones.

Staff recommends a clear front setback standard of 20 feet, rather than 25 feet, to be consistent with the RM -20 and RM -30 districts. As part of the Housing Element update, staff expects that some RM -30 zoned parcels will be up -zoned to RM -40. A fro nt setback of 20 feet 12 Packet Pg. 401

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will eliminate issues of non-conformity on existing properties and provide a consistent standard for all RM zones. Moreover, the code will still allow for adjustments —above and below 20 feet—based on a recommendation from the ARB and in some cases, to meet special setbacks described on zoning maps . This is important since i n more urban conditions, a reduced setback may be more appropriate to maintain a street wall, whereas larger sites in more suburban parts of the city may support deeper landscaped setbacks.

Stakeholder Engagement
As with all citywide projects, the eight (8) ARB hearings and the three (3) PTC hearings were noticed in the Daily Post. The ARB Ad Hoc meetings were not publicly noticed meetings. On January 22nd, March 23rd, May 10th, July 22nd, and September 15th, 2021, staff sent an email to a wide range of architect and consultants that have worked with the City in the recent past on development projects to solicit comments on the draft objective standards ; six out o f 30 stakeholders provided feedback.

Detailed comments can be found in the October 4, 2021 City Council staff report:
• Public Comments: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/public-letters-to-council/2021/20211004-oct-4/20211004plccs-item-aa1.pdf • Stakeholder Comments (Attachment E) :
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2021/10-october/20211004/20211004pccsm- amended-linked.pdf

Several members of the public addressed the PTC at its June 9, 2021 hearing regarding height transition language, as summarized above . On July 19, 2021, staff held a webinar to discuss the topic of height transitions. Approximately 27 residents attended the online discussion.

Environmental Review
The ordinance revisions represent implementation of adopted plans and policy. Therefore, the revisions are exempt und er CEQA and covered by the CEQA documents prepared for the Comprehensive Plan. The project aims to facilitate implementation of State law. The project does not propose to increase development beyond what was analyzed in the Comprehensive Plan.

Attachments:

Attachment12.a: Attachment A: Ordinance Amending Title 18 to Clarify Transitional Height Standards and Update Setbacks for RM-40 Zone District (PDF) 12 Packet Pg. 402
*NOT YET ADOPTED*
1 0160063_2022013_ay16
Ordinance No. ____

Ordinance of the Council of the City of Palo Alto Amending Various Chapters of Title 18 (Zoning) to Clarify Transitional Height Standards and Update Setbacks for the RM-40 Zone District

The Council of the City of Palo Alto ORDAINS as follows:

SECTION 1. Findings and Declarations.

A. Title 18 (Zoning) of the Palo Alto Municipal Code contains development standards governing the maximum height of structures in close proximity to lower density residential zones. The purpose of these development standards is to ensure the harmonious transition between lower and higher intensity development.

B. The existing language on height transitions has created confusion among the public, project applicants, and City staff. This confusion, in turn, has resulted in differing interpretations of the law over the years.

C. The City Council now wishes to clarify the zoning code with respect to height transitions.

The clarifications to height transition standards contained in this ordinance are declarative of existing law.

SECTION 2
. Section 18.08.030 (References to Districts) of Chapter 18.08 (Designation and Establishment of Districts) of Title 18 (Zoning) is amended as follows (new text underlined):

18.08.030 References to Districts

Reference within this title to residential districts generally and as a grouping, includes all districts identified in this section. Where references are made to more restrictive or less restrictive residential districts, such references shall apply sequentially between the most restrictive and the least restrictive.

Residential District Restrictive Reference
RE Most Restrictive
R-1 (20,000)
R-1 10,000)
R-1 (8,000)
R-1 (7,000)
R-1

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R-2

Least Restrictive
RMD
RM-20
RM-30
RM-40

SECTION 3. Section 18.13.040 (Development Standards) of Chapter 18.13 (Multiple Family Residential (RM-20, RM-30 and RM-40) Districts) of Title 18 (Zoning) is amended as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.13.040 Development Standards

(a) Site Specifications, Building Size and Bulk, and Residential Density

The site development regulations in Table 2 shall apply in the multiple-family residence districts, provided that more restrictive regulations may be recommended by the Architectural Review Board and approved by the Director of Planning and Development Services, pursuant to the regulations set forth in Chapter 18.76, performance criteria set forth in Chapter 18.23, and the context-based design criteria set forth in Section 18.13.060.

Table 2
Multiple Family Residential Development Table
RM-20 RM-30 RM-40 Subject to
regulations
in:
[. . .] [. . .] [. . .] [. . .] [. . .]
Minimum Setbacks Setback lines imposed by a special
setback map pursuant to Chapter

20.08 of this code may apply

Front Yard (ft) 20 20 0-2520 (1)

18.13.040(b)
On arterial roadways (1) 0-20 (1) 0-20 (1) 0-25 (1)
Interior Side Yards (ft)
For lots with width of 70 feet or greater 10 10 10
For lots with width of less than 70 feet 6 feet
Interior Rear Yards (ft)3 10 10 10
Street Side and Street Rear Yards (ft)

16 16 0-16(2)

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Maximum Height (ft) 30 35 40
Maximum height for those portions of a
site w Within 50 feet of a more
restrictive abutting residential district
or a site containing a residential use in
a nonresidential district
35 18.08.030

[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Minimum front setbacks shall be determined by the Architectural Review Board upon review pursuant to criteria set forth in Chapter 18.76 and the context-based criteria outlined in Section 18.13.060. Arterial roadways, do not include residential arterials. In the RM-40 district, lesser setbacks may be allowed by the Planning Director, upon recommendation by the Architectural Review Board pursuant to criteria set forth in Chapter 18.76. Special setbacks of greater than 25 feet may not be reduced except upon approval of a design enhancement exception or variance.
(2) Lesser setbacks may be allowed by the Planning Director, upon recommendation Minimum street side setbacks in the RM-40 zone may be from 0 to 16 feet and shall be determined by the Architectural Review Board upon review pursuant to criteria set forth in Chapter 18.76and the context-based criteria outlined in Section 18.13.060.

[. . .]

(8) The minimum density for a site may be reduced by the Director if, after the proposal is reviewed by the Architectural Review Board, the Director finds that existing site improvements or other parcel constraints, preclude the development from meeting the minimum density. A site with an existing single-family use or two-family use may be redeveloped at the existing density, either single-family or two-family as applicable. An existing or replaced single-family or two-family residence shall not be considered a nonconforming use, and the provisions of Chapter 18.70
shall not apply, solely based on the
minimum density requirement.

[. . .]

SECTION 4. Section 18.16.060 (Development Standards) of Chapter 18.16 (Neighborhood, Community, And Service Commercial (CN, CC And CS) Districts) of Title 18 (Zoning) is amended as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.16.060 Development Standards

(a) Exclusively Non-Residential Uses
Table 3 specifies the development standards for exclusively non-residential uses and alterations to non-residential uses or structures in the CN, CC, CC(2) and CS districts. These

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developments shall be designed and constructed in compliance with the following requirements and the context-based design criteria outlined in Section 18.16.090, provided that more restrictive regulations may be recommended by the architectural review board and approved by the director of planning and development services, pursuant to Section 18.76.020.

Table 3
Exclusively Non-residential Development Standards

CC(2)

CS
Subject to
regulations in
Section

[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Height (ft)
Standard
25' and 2
stories
50' 37' (4) 50'
Within 150 ft. of an
abutting residential
district (other than an
RM-40 or PC zone) (9)
abutting or located within
50 feet of the site

35'

18.08.030
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard.

[. . .]

(9) 150-foot measurement may be reduced to 50 feet at minimum, subject to approval by the Planning Director, upon recommendation by the Architectural Review Board pursuant to criteria set forth in Chapter 18.76.

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Table 4
Mixed Use and Residential Development Standards
CN CC CC(2) CS Subject to
regulations in:
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Height (ft)
Standard 35'(4) 50' 37' 50'
Within 150 ft. of an abutting
residential zone district (other
than an RM-40 or PC zone) (5)
abutting or located within 50
feet of the side

35'

35'(5)

18.08.030

[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Twenty-five-foot driveway access permitted regardless of frontage; build-to requirement does not apply to CC district.

[. . .]

(5) For sites abutting an RM-40 zoned residential district or a residential Planned Community (PC) district, maximum height may be increased to 50 feet.150-foot measurement may be reduced to 50 feet at minimum, subject to approval by the Planning Director, upon recommendation by the Architectural Review Board pursuant to criteria set forth in Chapter

18.76. [. . .]

(10) In the CC(2) zone and on CN and CS zoned sites on El Camino Real, there shall be no minimum mixed use ground floor commercial FAR for a residential project, except to the extent that the retail preservation requirements of Section 18.40.180 or the retail shopping (R) combining district (Chapter 18.30(A)) applies.

(1) Nonresidential uses that involve the use or storage of hazardous materials in excess of the exempt quantities prescribed in Title 15 of the Municipal Code, including but not limited to dry cleaning plants and auto repair, are prohibited in a mixed use development with residential uses.
(2) Residential mixed use development is prohibited on any site designated with an Automobile Dealership (AD) Combining District overlay.

[. . .]

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SECTION 5. Section 18.18.060 (Development Standards) of Chapter 18.18 (Downtown Commercial (CD) District) of Title 18 (Zoning) is amended as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.18.060 Development Standards

(a) Exclusively Non-Residential Use
Table 2 specifies the development standards for new exclusively non-residential uses and alterations to non-residential uses or structures in the CD district, including the CD-C, CD-S, and CD-N subdistricts. These developments shall be designed and constructed in compliance with the following requirements and the context-based design criteria outlined in Section 18.18.110 ,
provided that more restrictive regulations may be recommended by the architectural review board and approved by the director of planning and development services, pursuant to Section

18.76.020:

Table 2
Exclusively Non-Residential Development Standards

CD-C

CD-S

CD-N
Subject to regulations
in Section:
[. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Height (ft)
Standard 50 50 25
Within 150 ft. of an abutting
residential zone district
– (3) – (3) – (3) 18.08.030

[. . .] [. . .] [. . .] [. . .] [. . .]

(b) Mixed Use and Residential
Table 3 specifies the development standards for new residential mixed use developments and residential developments. These developments shall be designed and constructed in compliance with the following requirements and the context-based design criteria outlines in Section 18.18.110, provided that more restrictive regulations may be recommended by the architectural review board and approved by the director of planning and development services, pursuant to Section 18.76.020:

TABLE 3

MIXED USE AND RESIDENTIAL DEVELOPMENT STANDARDS
CD-C CD-S CD-N Subject to regulations in
Section:
[. . .] [. . .] [. . .] [. . .] [. . .]
Maximum Height (ft)
Standard 50' 50' 35' 18.08.030

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Within 150 ft. of an
abutting residential zone
district (other than an
RM-40 or PC zone)
40'(4) 40'(4) 35'(4) 18.08.030

[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Required usable open space: (1) may be any combination of private and common open spaces; (2) does not need to be located on the ground (but rooftop gardens are not included as open space except as provided below); (3) minimum private open space dimension 6; and (4) minimum common open space dimension 12.

For CN and CS sites on El Camino Real, CS sites on San Antonio Road between Middlefield Road and East Charleston Road and CC(2) sites that do not abut a single- or two-family residential use or zoning district, rooftop gardens may qualify as usable open space and may count as up to 60% of the required usable open space for the residential component of a project. In order to qualify as usable open space, the rooftop garden shall meet the requirements set forth in Section 18.40.230.

[. . .]

(4) Reserved. For sites abutting an RM-40 zoned residential district or a residential Planned Community (PC) district, maximum height may be increased to 50 feet. (5) The weighted average residential unit size shall be calculated by dividing the sum of the square footage of all units by the number of units. For example, a project with ten 800- square foot 1-bedroom units, eight 1,200-square foot 2-bedroom units, and two 1,800- square foot 3-bedroom units would have a weighted average residential unit size of ((10x800)+(8x1,200)+(2x1,800)) ÷ (10+8+2) = 1,060 square feet.

[. . .]

SECTION 6. Section 18.20.040 (Site Development Standards) of Chapter 18.20 (Office, Research, And Manufacturing (MOR, ROLM, RP And GM) Districts) of Title 18 (Zoning) is amended as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.20.040 Site Development Standards

Development in the office research, industrial, and manufacturing districts is subject to the following development standards, provided that more restrictive regulations may be required as part of design review under Chapter 18.76
of the Palo Alto Municipal Code.

(a) Development Standards for Non-Residential Uses

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Table 2 shows the site development standards for exclusively non-residential uses in the industrial and manufacturing districts.

TABLE 2

INDUSTRIAL/MANUFACTURING NON -RESIDENTIAL SITE DEVELOPMENT STANDARDS

MOR

ROLM

ROLM(E)

RP(5)

GM
Subject to
Regulations in
Chapter:
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .] [. . .] [. . .] Maximum Height (ft)
Standard 50 35(4) 35(4) 50
Within 150 ft. of an
abutting residential zone
(5)
35 35 35 35 18.08.030
Within 40 ft. of an abutting
residential zone(5)
35 25 25 35 18.08.030
[. . .] [. . .] [. . .] [. . .] [. . .] [. . .]

[. . .]

SECTION 7. Section 18.30(J).090 (Development Standards) of Subchapter 18.30(J) (Affordable Housing (AH) Combining District Regulations) of Chapter 18.30 (Combining Districts) of Title 18 (Zoning) is amended to read as follows (new text underlined and deletions struck- through; omissions are noted with [. . .] for large sections of unchanged text):

18.30(J).090 Development Standards

The following development standards shall apply to projects subject to the AH affordable housing combining district in lieu of the development standards for the underlying zoning district, except where noted below:

Table 1
Development Standards
AH Combining District (1)
Minimum Site Specifications Subject to regulations in:
[. . .] [. . .] [. . .]
Maximum Height (ft) 50'
Within 50 ft of an abutting
residential district (other than an
RM-40 or PC zone) R1, R-2, RMD,
RM-20, or RM-30 zoned property
35'(3) 18.08.030

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[. . .] [. . .] [. . .]

[. . .]

SECTION 8. Section 18.30(K).070 (Development standards) of Subchapter 18.30(K) (Workforce Housing (WH) Combining District Regulations) of Chapter 18.30 (Combining Districts) of Title 18 (Zoning) is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.30(K).070 Development Standards

(a) Where the WH combining district is combined with the public facilities district, the following development standards shall apply for workforce housing projects, including permitted incidental uses, in lieu of the development standards for the underlying PF zoning district:

Table 1
Development Standards
WH Combining District
Minimum Site
Specifications
Subject to regulations in:
[. . .] [. . .] [. . .]
Maximum Height (ft)
Standard 50'
Within 150 ft. of an abutting
residential district (other than
an RM-40 or PC zone) abutting
or located within 50 feet of
the site
35', except as limited by
applicable daylight plane
requirements

18.08.030
[. . .] [. . .] [. . .]

[. . .]

SECTION 9. Section 18.38.150 (Special requirements) of Chapter 18.38 (PC Planned Community District Regulations) of Title 18 (Zoning) is amended to read as follows (new text underlined and deletions struck-through; omissions are noted with [. . .] for large sections of unchanged text):

18.38.150 Special requirements.

Sites abutting or and having any portion located with one hundred fifty 150 feet of any RE, R-1,
R-2, RM, or any PC district permitting single-family development or multiple-family development shall be subject to the following additional height and yard requirements:

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(a) Parking Facilities. The maximum height shall be equal to the height established in the most restrictive adjacent zone district.

(b) All Other Uses. The maximum height within one hundred fifty 150 feet of any abutting RE, R-1, R-2, RM-20, or applicable PC district shall be thirty-five 35 feet; provided, however, that for a use where the gross floor area excluding any area used exclusively for parking purposes, is at least
sixty 60 percent residential, the maximum height within one hundred fifty 150 feet of an abutting RM-4 30 or RM-5 40 district shall be fifty 50 feet.

[. . .]

SECTION 10. Any provision of the Palo Alto Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance.

SECTION 11. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional.

SECTION 12. The Council finds that the Ordinance is within the scope of and in furtherance of the Comprehensive Plan 2030 which was evaluated in that certain Final Environmental Impact Report certified and for which findings were adopted by Council Resolution Nos. 9720 and 9721 on November 13, 2017, all in accordance with the California Environmental Quality Act. The Ordinance does not propose to increase development beyond what was analyzed in the Comprehensive Plan. Pursuant to Section 15168 of the State CEQA Guidelines, the City has determined that no new effects would occur from and no new mitigation measures would be required for the adoption of this Ordinance.

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SECTION 13. This ordinance shall be effective on the thirty-first date after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning & Development
Services

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City of Palo Alto (ID # 12392)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: City of Palo Alto's Energy Risk Management Report for the Second Half of Fiscal Year 2021 (January 1, 2021 -June 30, 2021)
From: City Manager
Lead Department: Administrative Services

Recommendation
This is an informational report and no City Council action is required.

Executive Summary
Staff continues to purchase electricity and gas in compliance with the City’s Energy Risk Management Policies, Guidelines, and Procedures. This report is based on market prices and load and supply data as of June 30, 2021, the end of the second half of Fiscal Year (FY) 2021.

The projected cost of the City’s fixed-price electricity purchases is $0.66 million higher than the market value of that electricity as of June 30, 2021 for the 12-month period beginning July 1, 2021. In the second half of FY 2021 (January 1, 2021 through June 30, 2021) the City’s credit exposure to fixed price contracts is minimal. The projected Electric Supply Operations Reserve is above the FY 2021 minimum guideline reserve level and the projected gas reserve is also above the FY 2021 guideline reserve level range.

There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures during the second half of FY 2021.

Background
The purpose of this report is to info rm the Council about the status of the City’s energy portfolio and transactions executed with energy suppliers as of the end of the second half of FY 2021. The City’s Energy Risk Management Policy requires that staff report on a quarterly basis but due to lower trading activity levels the Utility Risk Oversight Coordinating Committee (UROCC) has approved providing this report on a semi -annual basis to Council on: 1) the City’s energy portfolio; 2) the City’s credit and market risk profile; 3) portfolio per formance; and 4) other key market and risk information.

The City’s Energy Risk Management Policy describes the management organization, authority, and processes to monitor, measure, and control market risks. Market risks include price and 13 Packet Pg. 414
City of Palo Alto Page 2
counterparty credit risk. These are risks that the City is exposed to on a regular basis in procuring electric supplies, and to a lesser extent for gas supplies which are purchased at market rates via a monthly index price. The Treasury Division of the Administrative Department manages the City’s Energy Risk Management function; their role is to monitor and mitigate the City’s exposure to market risks.

This second half of FY 2021 Energy Risk Management report contains information on the following:
• Electric Supplies
• Hydroelectricity
• Fixed-Price Forward Electricity Purchases
• Gas Supplies
• Credit Risk
• Electric Forward Mark-to-Market Values
• Electric and Gas Supply Operations Reserves Adequacy
• Exceptions to Energy Risk Management Policies, Guidelines, or Procedures Discussion
Electric Supplies
In order to serve the City’s electric supply demands, the City obtains electricity from hydroelectric resources (from Western and Calaveras Hydroelectric Projects); long -term renewable energy contracts (from landfill gas converted to electricity, wind, and solar projects); wholesale purchases which are carried out via fixed -priced forward market purchase contracts; and the electric spot market.

Figure 1 below illustrates the projected sources and expected purchases of electrici ty supplies by month for the 36 months from July 1, 2021 to June 30, 2024, in megawatt -hours (MWh). The negative bars represent sales of excess power on the wholesale market. 13 Packet Pg. 415

City of Palo Alto Page 3

-60,000
-40,000
-20,000
0 20,000
40,000
60,000
80,000
100,000
120,000
140,000
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Mar-24
May-24
Megawatt Hours
Figure 1 - Electric Balance Wind
Wholesale
Western
Solar
Landfill
Calaveras
Total Load

Hydroelectricity
The cost of hydroelectricity received from Western over the 12-month period ending June 30, 2021 is more than the market value of electricity by $1.0 million. Hydroelectric power from Calaveras was expected to cost $2.7 million (as of June 30, 2021) more than the market value of electricity. Note that Calaveras p rovides benefits not reflected in the mark -to-market (MTM, defined in the following section) calculation, including, for example, ancillary services (e.g., the ability to regulate energy output when the electric grid needs change), and that much of the above-market costs are related to debt service on the cost of constructing the dam. This debt is due to be retired in 2032, and retirement will substantially improve the value of the project relative to the market price of electricity.

Fixed-Price Forward Electricity Purchases
The City, as of June 30, 2021, has purchased and sold fixed -priced supplies of electricity for the next 12 months totaling 31,200 MWh with an average price of $43.72 per MWh and totaling 54,080 MWh with an average price of $39.23 per MWh, respectively. The City contracted for these purchases with three of its approved counterparties: SENA (Shell Energy North America), EDF, and NextEra Energy Resources. The 12 -month MTM value of the City’s forward transactions for wholesale power was $0.66 million at the end of the second half of FY 2021. A positive MTM means that the sales price for these transactions was lower than the market value as of June 30, 2021. The City tracks the mark to market value of its forward contracts to measure the value that would be lost due to a counterparty failing to deliver on its contractual commitments, forcing the City to purchase replacement electricity in the market. The exposure 13 Packet Pg. 416
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listed above is well within risk management guidelines and presents little risk t o the City’s financial outlook.

The figures below represent the electric forward volumes (Figure 2) and MTM positions (Figure 3) for each electric supplier by month of delivery for all forward fixed -price electricity contracts over the 12-month period ending June 30, 2022.
-25,000
-20,000
-15,000
-10,000
-5,000
0 5,000
10,000
15,000
07/01/21
08/01/21
09/01/21
10/01/21
11/01/21
12/01/21
01/01/22
02/01/22
03/01/22
04/01/22
05/01/22
06/01/22
Megawatt Hours
Figure 2 - Electric Forward Volumes ending as of 06/30/21 EDF
SENA
NextEra Energy Resources
(2,000,000)
(1,500,000)
(1,000,000)
(500,000)
-
500,000
1,000,000
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
MTM Dollar Amount
Figure 3 - Electric Mark-to-Market Values ending as of 06/30/21 EDF
SENA
NextEra Energy Resources
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Gas Supplies
In order to serve the City’s natural gas needs, the City purchases gas on the monthly and daily spot markets. The City purchases all its forecasted gas needs for the month ahead at a price based on the published monthly spot market index price for that month. Within the month, the City’s gas operator buys and sells gas to match the City’s daily needs if the actual daily usage is different from the forecasted average daily usage. Those daily transactions are made at an average price based on the published daily spot market index. These costs are passed through directly to customers using a monthly rate adjustment mechanism, leaving the City with little or no price risk or counterparty risk exposure for the gas utility.

Credit Risk
Staff monitors and reports on counterparty credit risk based on the major credit rating agencies (S&P and Moody’s) scores, Ameresco has a 0.22 percent Expected Default Frequency (EDF) which is higher than the recommended EDF level of 0.08 percent. The EDF has improved, the prior year it was 0.24 percent and, as of writing of this report, (December 14, 2021), the EDF is

0.16 percent. Staff is continuing to monitor Ameresco’s EDF and will continue to report to City Council in this semi-annual report. Table 1 below shows the EDF values for the City’s renewable energy counterparties. Table 2 below shows the EDF values and credit exposure for the City’s electric suppliers. There is virtually no credit exposure to the City’s gas suppliers since t he supplies are purchased on a short-term basis.

Table 1 - Renewable Counterparties Credit Ratings and EDFs as of 06/30/21 Current
Expected
Default
Frequency
Moody's
(EDF)
Implied
Rating
Ameresco 0.22% Ba1

0.03% Aa3
Source: CreditEdge website
Renewable Counterparty
Avangrid (fomerly Iberdrola)

Table 2 - Credit Exposure and Expected Default Frequency of Electric Suppliers as of 06/30/21 Electric
Counterparty
Cost of
Transaction
Market Value
of Transaction
Current
Expected
Default
Frequency
Moody's
(EDF)
Implied
Rating
Exelon -$ -$
NextEra 591,008 714,079 0.012% Aa1
SENA (918,096) (1,653,555) 0.051% Aa2
EDF (430,560) (632,646) n/a Baa2
Totals (757,648)$ (1,572,122)$
(202,086) -
A-
-$ BBB -$
- 123,071
656,443$ -$
Cost vs.

Market
(MTM) Value
S
&
P
C
r
e
Expected Loss
(MTM x
Expected
Default
Frequency)
735,459 AA- -

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City of Palo Alto Page 6

Electric Forward Mark-to-Market Values
It is important to note that, for contracts with renewable energy companies, Council waived the investment grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do business with the City. In addition, the City does not pay for renewable energy until it is received, thereby reducing risk.

An EDF of 0.08 percent or below indicate supplier’s current expected default frequency falls within the investment grade range. An EDF above 0.08 percent indicates the supplier may have financial issues that require monitoring.

Electric and Gas Supply Operations Reserves Adequacy
As shown in Table 3 below, the Electric Supply Operations reserve’s audited balance as of June 30, 2021 is $29.9 million, which is $4.7 million above the minimum reserve guideline level. The audited Gas Operations reserve balance is $12.0 million, which is $6.1 million above the minimum reserve guideline level.
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Table 3 - Electric Supply Operations and Gas Operations Reserve Levels for FY 2021 Fund
Audited
Reserve for
Operations
Balance as
of 06/30/2021
($ Millions)
Changes
to the
Reserves
for
Operations
($ Millions)
Unaudited Reserve for
Operations Balance as
of 06/30/21
($ Millions)
Minimum
Guideline
Reserve
Level
($ Millions)
Maximum
Guideline
Reserve
Level
($ Millions)
Electric $29.9 $0.0 $29.9 $25.2 $46.9
Gas $12.0 $0.0 $12.0 $5.8 $11.7
FY 2021

Exceptions to Energy Risk Management Policies, Guidelines, or Procedures There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures to report during the second half of FY 2021.
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City of Palo Alto (ID # 13535)
City Council Staff Report
Meeting Date: 1/24/2022
City of Palo Alto Page 1
Title: Informational Report on the GreenWaste of Palo Alto Certificate of End Use & Traceability Report and Update on Council Direction Regarding Recyclable Materials.

From: City Manager
Lead Department: Public Works
Recommendation
This is an informational report and no Council action is required.

Background
The City required GreenWaste of Palo Alto (GWPA) , under the existing collection contract , to report on the disposition of recyclable materials as well as to gather information on the environmental and social implications associated with the processing of Palo Alto’s recyclable materials. GWPA was to request information regarding the disposition of specific materials from each of their primary purchasers to whom the GreenWaste Materials Recovery Faci lity (GreenWaste MRF) directly sells the recyclable materials and annually report the information to the City. The first two GWPA reports can be found at the following links:
• Fiscal Year 2019 – Initial Review of Certificate of End Use & Traceability Data, 2019 • Fiscal Year 2020 – Initial Review of Certificate of End Use & Traceability Data, 2020 Staff has learned that the marketing of recyclable materials is commonly conducted through brokers that orchestrate the processing of materials internationally . This leaves unknowns and raises questions about whether the international processing facilities are recycling the materials and if the processing and disposal is causing environmental or social issues. The information GWPA provide d is very limited and restricted due to confidentiality concerns from their vendors. In May 2021, during discussions on this topic as part of the new solid waste processing contract with GreenWaste Recovery (ID # 11632), Council directed staff to:

1. Pursue, with other cities, to have GreenWaste provide greater accounting of secondary markets that they utilize;

2. Direct the City Manager to return with an amendment to authori ze a quick response to opportunities to utilize domestic mixed paper recycling;

3. Provide GreenWaste reports to the public and City Council on a regular basis;

4. Work with other cities on legislation to spur domestic or in-state recycling; and 14 Packet Pg. 421
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5. If GreenWaste i s unable to provide additional secondary market accounting, return to Council for consideration of further actions.

Discussion
GWPA 2021 Certificate of End Use & Traceability Data Report Palo Alto’s recyclable materials are processed at GreenWaste’s MRF in San Jose where they are combined with recyclables from other communities, separated by type, baled, and prepared for marketing. GWPA’s Fiscal Year 2021 report titled “Initial Review of Certificate of End Use & Traceability Data, 2021” (Attachment A) su mmarizes the traceability data and online review of company information relative to sustainability and international markets. This report highlights the GreenWaste MRF’s upgrades, their goal to seek domestic processing, the development of a new mixed paper composting pilot in collaboration with the City, and updates on the pursuit o f other advanced processing technologies for recyclable materials. This report also includes the supplementary marketing, processing, and disposal information from GreenWaste’s p rimary purchasers and summarizes the recyclable materials tonnages by commodity types, the spread of domestic vs. export markets, and the location of secondary processing , if applicable. In Fiscal Year 2021, approximately 14,000 tons of recyclable material s were processed from Palo Alto with approximately 39 percent staying in the United States and approximately 61 percent being exported internationally to India, Indonesia, Korea, Malaysia, Mexico, Taiwan, Thailand, Vietnam, and other countries . However, the GWPA reports are generalized and do not explain which shipments go to which facilities within those countries. Therefore, it is not possible to definitively determine whether the materials are being recycled properly or whether they may be causing environmental or social problems.

Update on Council’s Direction
Staff developed a plan to address Council’s direction including to connect and collaborate with other jurisdictions and entities to determine final disposition of their recyclable materials and to determine support and interests to create legislation requiring marketers, brokers, and businesses in the recycling industry to disclose the entire flow of material s to final disposition .

Below is an update to each of Council’s direction:

1. Communication with other cities
Staff is finalizing discussions with local cities and jurisdictions which have recyclable materials processed at the GreenWaste MRF to determine interest levels in requesting greater accounting of secondary markets utilized for recyclabl e materials . Initial feedback is that the majority of jurisdictions do not have recycling traceability requirements within their contracts but are interested in either joining a discussion forum or minimally being informed of Palo Alto’s progress.

2. Amendment for a quick response to domestic processing opportunities Council directed staff to bring an amendment to the GWPA contract to allow for a quick response to handling mixed paper domestically, and staff plans to bring the amendment 14 Packet Pg. 422
City of Palo Alto Page 3
forward to Council in Spring 2022. Meanwhile, GWPA is assisting staff with further research and pilot projects as potential alternatives to current processing of recyclable materials and to determine the additional cost implications . There are two pilots currently in progress. A mixed paper composting pilot is being conducted to determine its breakdown capabilities and the possibility for a larger scale processing operation to accommodate the amount of mixed paper generated in Palo Alto . Staff expects information and analytics on this pilot in January . Additionally, a second pilot on a recycling supply chain verification is in progress to test a chain of custody track ing of a specific plastic from the GreenWaste MRF in San Jose to a domestic plastics processor in Southern California.

3. Provide GreenWaste reports
This information report includes the 2021 Certificate of End U se and Traceability report from GWPA.

4. Legislation to spur domestic or in-state recycling
Staff is communicating with local legislators and CalRecycle and requesting collaboration to develop policies requiring a system to ensure that recyclable materials can be tracked to disclose the entire flow of materials to final disposition ; to create a third -party certification process to verify that recyclables intended to be recycled are actually recycled; and to keep recyclables within the United States where laws and regulations can protect the environment and human health. Staff developed a survey for local cities and jurisdictions to determine interest levels in joining a task force to create legislation.

Staff is having similar discussions with other entities including the National Stewardship Action Council, the Basel Action Network, the California Stewardship Action Council, California’s Statewide Commission on Re cycling Markets and Curbside Recycling, and CalRecycle, the State’s waste management agency.

5. Additional secondary market accounting
There is no update on this specific motion ye t, but staff is searching for reliable and descriptive information on secondary markets.

Staff plans to provide Council with updates and developments o n these Council directives and individual projects as more information is available to be reported.

Resource Impact
This informational report does not have a direct resource impact at this time; however, some of the options staff is exploring may require additional funding within the Refuse Fund Operating Budget for increased future expenses. For example, one of the alternatives to sending mixed paper to international markets for recycling include s finding domestic processing facilities, which would result in additional processing and transportation expenses be ing incurred. Staff plans to bring the amendment to the GWPA contract forward to Council to allow for a quick response to recycling mixed paper domestically . Associated adjustments to the Refuse Fund 14 Packet Pg. 423

City of Palo Alto Page 4

Operating Budget will be considered as part of the FY 2023 budget development process , subject to Council’s annual appropriation of funds.

Stakeholder Engagement
This is an informational report and update . When more information on international markets becomes available, input from the public will be sought.

Environmental Review
This informational report does not require environmental review.

Attachments:
• Attachment14.a: Attachment A: 2021 GreenWaste of Palo Alto Traceability Report 14 Packet Pg. 424
In
itial Review of Certificate of End Use & Traceability Data, 2021 Summary of submitted traceability data and online review of company information relative to sustainability and international markets
July 21, 2021
Updated August 10, 2021
Updated December 13, 2021

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Background & Expectations
GreenWaste of Palo Alto and GreenWaste Recovery
GreenWaste of Palo Alto (GWPA) is the City of Palo Alto’s Solid Waste, Recyclable Materials, and Compostable Materials Collection Contractor. This Collection Agreement commenced in October 2008, was amended and restated in June 2015, and was again amended and restated in January 2019, with the term extended through June 30, 2026.

The GWPA Collection Agreement states that Recyclable Materials are to be delivered to the GreenWaste Recovery (GWR) Materials Recovery Facility (MRF), where the materials are to be processed for recovery. At the MRF, initial processing is conducted on the single stream recyclables collected throughout the region. In this process, GreenWaste separates all materials by commodity type and removes contamination. GreenWaste then sells the separate commodities to brokers and/or secondary processors.

Currently, GWPA transports Solid Waste to the SMaRT Station in Sunnyvale. In August 2020, the City of Palo Alto released an RFP for the processing of Solid Waste, and in May 2021, GWR was awarded that Processing Agreement. Effective January 1, 2022, GWPA will begin transporting Solid Waste to the GWR MRF for processing.

The material managed by the GWPA Collection Agreement and the material managed by the GWR Processing Agreement are disparate. GWPA collects approximately 18,000 tons of Recyclable Materials annually for processing at the GWR MRF. Meanwhile, less than 1,000 tons of recyclables are projected to be recovered out of the City’s Solid Waste annually. The real value of the GWR Processing Agreement is the assurance that organics material will be recovered and not sent to landfill.

Commodities Markets & Trade Secrets
GWR is a recyclables processor, and markets its own recyclable commodities. Recycling is a complex industry, and has gotten more complex over the past five years.

CalRecycle succinctly summarizes some of the recent changes that have had significant impacts on the recycling industry:
“The export of recyclable materials is a key component of California's recycling infrastructure.

Changes to international policies restricting imports of recyclable materials, the declining global market for plastic and paper scrap, and the impending Basel Convention plastic waste amendments that will make exporting plastic scrap more challenging continue to pose a significant challenge to the solid waste and recycling industry, local governments, and Californians.” https://www.calrecycle.ca.gov/markets/nationalsword
GWR has witnessed firsthand the impacts resulting from the change in international markets. In 2017, a paper mill in Santa Clara closed due to high productions costs. The products were moved to mills in the Midwest, Louisiana and Georgia. The closure came as industry leaders spoke about the need for more domestic mill capacity to handle material that could no longer be shipped to China. There was major price instability due to a freeze in issuance of new Chinese import licenses. These fluctuating Old Corrugated Cardboard (OCC) prices contributed to the decision to close the California plant.

As the marketers of their own recyclable commodities, GWR has borne witness to how unstructured the commodities market can be. Brokers only have limited information about the ports to which commodities are intended to ship. Once at the ports, materials are sent to various plants, making the

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full life-cycle of commodities extremely difficult to track. Furthermore, with the current state of the markets, recyclables brokers are not in a position to place requirements on customers.

Moreover, information on commodity markets, pricing, buyers and other information pertaining to commodity sales transactions constitute confidential and proprietary corporate Trade Secrets. This information is not of public knowledge or general knowledge in the trade or business and that have an intrinsic value preserved by being safeguarded from disclosure. GreenWaste and its brokers stand to be harmed by the disclosure of Trade Secrets as follows:
• Losing markets for specific materials (e.g. clamshells or film plastics), • Losing local markets and only having available domestic or international markets, • Losing domestic markets and only having available international markets, or • Jeopardizing relationships with buyers, with the potential to lose business.

For all of the reasons detailed above, it has been quite a challenge to try to ascertain additional information regarding the final disposition of recovered recyclables. GWR and GWPA are not alone in this challenge to gather a complete data set. The World Wildlife Fun (WWF) recently established Resource: Plastic in cooperation with five Principal Members (Keurig Dr Pepper, McDonald’s Corporation, Procter & Gamble, Starbucks, and The Coca-Cola Company), and released its inaugural Transparent 2020 report. The report identified the significant data gaps: “The lack of data on waste management globally is a shared challenge—no one institution can address it alone…” (https://resource-
plastic.com/pdf/Transparent2020.pdf).

New Agreement Amendment & Expectations
At the end of 2018, while City staff was updating their Zero Waste Plan and wrapping up negotiations with GWPA on an Agreement Amendment and extension, Council gave City staff direction to report on the intermediate and final disposition of Palo Alto’s recovered paper and plastic. City staff and GWPA agreed that as a goal, GWPA would attempt to gather information on the environmental and social implications associated with the full life-cycle of Palo Alto Recyclable Materials.

The expectation of the new Attachment to the Agreement, “Environmental and Social Impacts of Processing Recyclable Materials”, was that GWPA would request information from the “primary purchasers” of Palo Alto’s Recyclable Materials and then conduct a desk study based on the provided information. The ultimate goal is for the City of Palo Alto to have a better understanding of the final disposition of the materials, and therefore guide their materials management program.

Progress & Action Plan
GWR Facility upgrades
In order to ensure that all materials leaving the MRF are in proper condition to be recycled, GreenWaste focuses on ensuring clean, contamination-free commodities. GWR completed an upgrade to its single stream recyclables line (the line on which Palo Alto’s recyclable materials are processed) in May of 2019. The upgrade included the installation of six optical sorters designed to reduce contamination and produce cleaner, higher quality recovered recyclables. More specifically, these optical sorters improve the quality of mixed paper and newsprint by repelling plastic away from paper using infrared lasers. These lasers identify the various types of plastics that inadvertently end up mixed in the paper stream and recover them based on their unique resin type. Both the paper and plastics are separated, sorted, and then baled.

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Then again in February of 2020, GWR performed another upgrade to the facility. Two Max-AI systems (one featuring two sorting units) were installed and programmed to identify specific material types and extract anything that does not belong in the stream. The first unit removes non-HDPE contamination and the second unit selects HDPE-natural. By ensuring a clean product, GWR gains a strong position in the market, and reduces the risk of downstream issues.

Domestic processing availability
Recycling operations across North America are adding additional processing capacity in order to accommodate a growing amount of material displaced by export market upheavals. Domestic innovation is growing, but still far from providing sufficient capacity for all domestic commodities generated domestically.

GreenWaste of Palo Alto has also worked with GreenWaste Recovery to identify more domestic markets for paper and plastic, which would provide greater assurances regarding the ultimate disposition of the material, and would also ensure that the processing adheres to the United States’ environmental standards. Domestic markets are generally more expensive than international markets, and GWR would need to act very quickly in order to secure a space with a domestic processor should space become available. In October of 2019, GWR secured a domestic mill for Palo Alto’s mixed paper. Securing this space for paper processing was dependent on approval from Palo Alto City Council, which takes more time than allowable by timelines within the market. GWPA, GWR and City staff are developing methodologies to more readily allow a quick response to market developments. Meanwhile, in spring of 2021, GreenWaste expanded domestic contracts by adding a new domestic three-year supply agreement.

Recycling entities have made efforts to track the locations of the expanding capacity, as follows:
• NERC – North American Recycled Plastic Processing Capacity Increases, published 1/17/20.

This is a list of increases in North American capacity to process recyclable plastics into products such as plastic lumber, pellets or resins for end-markets. The list covers facilities that have bee n
pu
blicly identified in either the trade or local press.
https://nerc.org/documents/North%20American%20Recycled%20Plastic%20Processing%20Cap acity%20Increases%20-%20January%202020.pdf
• Resource Recycling – End Market Expansions for Recovered Fiber Resource Recycling charted North American paper mill expansions on a map. All the included pr
ojects were announced or completed in 2017 or later.
https://resource-recycling.com/recycling/2019/08/27/these-projects-are-boosting-domestic- capacity-for-recycled-paper/
• Resource Recycling – End Market Expansions for Recovered Plastic Resource Recycling charted North American plastic processing expansions on a map. All the included projects were announced or completed in 2017 or later. https://resource-recycling.com/recycling/2020/02/25/domestic-plastics-recycling-capacity-is- expanding/
Mixed Paper Composting Pilot
Due to the limitations of available traceability information and insufficient domestic markets for fiber material, the GreenWaste partners have considered alternative handling and processing options for mixed paper. Together with Z-Best Composting Facility, GWR has offered the City of Palo Alto a pilot project to determine the effectiveness and associated costs relative to composting mixed paper

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recovered from the single stream recyclables line. This is an unconventional approach because the “highest and best use” of clean recovered paper is to be recycled. However, GWR and GWPA are eager to provide the analysis that will inform the City’s materials management plan. An outline of the pilot’s methodology and associated analysis follows.

Methodology
• Mixed paper bales recovered from the single-stream recyclables line, amounting approximately 10 tons, will be opened at the MRF and transported separately to Z-Best for processing. • At Z-Best, the paper will be shredded and then transported to the composting area, where it will b
e mixed with other organics (wood fines or green fines) to approximate a normal feedstock profile prior to being injected into the composting bag. • The bagged area containing the mixed paper will be marked for future analysis. • The pilot material will undergo the standard composting process, which includes a retention time of approximately four months.
• After the composting process, the mixed paper segment will be screened and compared with typical processed post-consumer organics (with lower fiber content). o If the material has sufficiently composted, it will undergo the standard curing process. o If the material has insufficiently composted, it will be disposed.

Analysis
• The process will be documented as follows:
o Dates & photos of notable steps in the process
o Weights will be assessed during important milestones
• Material will be screened and the compost fraction will be evaluated for particle size, maturity and visible paper remnants.
• The overs fraction will be evaluated for un-composted paper content. • If the pilot illustrates that this is a feasible processing option, a per-ton rate estimate and/or other associated costs will be provided.

Advanced Processing Technologies
Energy Conversion/Gasification
GreenWaste of Palo Alto has had a number of conversations with innovative companies over the years to determine alternative approaches to processing various material types, ranging from diapers to difficult-to-recycle plastics, and has signed a number of NDAs as conversations have progressed. These technologies include plastic-to-oil and gasification of problematic plastics and diapers. Thus far, the costs associated with these technologies have been prohibitive.

Novoloop (previously BioCellection)
GWR has been in a public-private partnership with Novoloop and the City of San Jose to develop chemical processing methodologies for film plastic. This process upcycles the plastic by breaking it down to its basic elements, which are the building blocks for new, more durable plastics. GWR is currently working with Novoloop to install equipment that would pelletize plastic film, which would integrate Novoloop’s technology with solid waste facility recovered plastics.

Alternative Approaches
In order to expand the scope and success of the traceability work detailed in the report, GreenWaste of Palo Alto and the City of Palo Alto have discussed potential next steps. The discussion has included research into technological advancements, including GPS trackers, to understand where material is

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actually ending up. GreenWaste staff participated in discussions with the Ecology Center in Berkeley, which partnered with Basel Action Network’s Earth Eye to deploy GPS units in bales. When GWR has explored this option with brokers, it has become clear that 1) brokers do not want these units in their bales, and 2) bales may be sent back to the sender (from the ultimate purchaser) if a GPS tracking unit is found (which come at a great cost). The resistance to this approach continues.

Summary
GWR and GWPA staff worked in coordination to obtain supplementary marketing, processing, and disposal information from GWR’s primary purchasers. The following tables summarize materials sorted by commodity types, and the spread of domestic vs. export markets as reported by GWR’s primary purchasers.

Tonnage Summary
G
reenWaste Material Recovery Facility
Product
Specifications Domestic Export FY 2021 Actual Tonnage
(Recovered from SS & MSW)
Material Type
Breakdown
Aluminum Cans 100% Domestic 0% Export 1,726.32 1.05%
Aluminum Foil/Scrap 100% Domestic 0% Export 306.53 0.19% Ferrous/Tin 100% Domestic 0% Export 3,290.33 2.00%
Glass, Commingled 100% Domestic 0% Export 36,688.30 22.28% Plastic, HDPE ~99% Domestic ~1% Export 4,618.66 2.81%
Plastic, PET ~99% Domestic ~1% Export 4,956.05 3.01%
Rigid Plastic ~10% Domestic ~90% Export 2,129.78 1.29%
Film Plastics ~5% Domestic ~95% Export 204.12 0.12%
Paper
(mixed, news, office) 0% Domestic 100% Export 34,788.14 21.13% Cardboard ~5% Domestic ~95% Export 67,593.19 41.05%
Scrap Metal
(all grades) 100% Domestic 0% Export 8,283.89 5.03%
E-Waste 100% Domestic 0% Export 65.84 0.04%
Total 38.53% 61.47% 164,651.15 100%
% Palo Alto 8.6% of overall recyclable material

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Primary Purchaser Summary
The following table provides a summary of the types of recyclables marketed by GWR and the associated primary purchasers.

Product Specifications: Primary Purchasers/Countries
(for material types covered in this report)
Plastic, HDPE Berg Mill: International
Envision Plastics: North Carolina & California (per 2020) Plastic, PET Berg Mill: Domestic & International
Rigid Plastic Berg Mill: International
Newport CH International: International
Mixed Plastic Containers Berg Mill: International
Film Plastics Berg Mill: International
Newport CH International: International
Mixed Paper
Newport CH International: International
Fibre Trade: Domestic, Southeast Asia, Mexico
OGO Fibers: Thailand, Vietnam, Malaysia, Korea
Newspaper
Berg Mill: International
Fibre Trade: Domestic, Southeast Asia, Mexico
Newport CH International: International
OGO Fibers: Thailand, Vietnam, Malaysia, Korea, India
Old Corrugated
Berg Mill: International
CellMark: International & Domestic (per 2020)
Newport CH International: International
OGO Fibers: Thailand, Vietnam, Korea, Malaysia, India
Super Link Plastic: Vietnam, Korea, Thailand, India, Indonesia, Taiwan, Malaysia
Berg Mill is the primary recipient/purchaser of GreenWaste’s processed recyclables, however, the actual quantity directed to Berg Mill changes every month as all movement is dependent on pricing and bookings available. Overall, GreenWaste’s primary purchasers continue to be hesitant to provide details regarding the life-cycle of the materials they buy because this data set often includes proprietary information.

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CellMark Inc. (Novato, CA)
CellMark did not provide traceability data for the cardboard it purchases from GreenWaste, but did provide basic information about the company.

CellMark is both a brokerage and a secondary processor, and its purchasers are secondary processors.

The secondary processing includes chipping, washing, and pelletizing (for plastic products). Per the Cellmark website, CellMark ships to facilities in North America, Europe, South America, the Caribbean and Asia (www.cellmark.com/recycling/).

Per the CellMark website, CellMark participates in initiatives to ensure global sustainability. CellMark comments on its sustainability via its CSR webpages (https://www.cellmark.com/ideas-values/sustainability-csr/):
“CellMark recognizes that a healthy environment is fundamental to our business. As such, we respect and comply with local legislation and environmental regulations in our global operations.” “CellMark is a member of the National Association of Chemical Distributors (NACD) and as such, is committed to product stewardship and responsible distribution in every phase of chemical storage, handling, transportation and disposal.”
“We do not ship any restricted material, for example dual-use goods, without proper permit… Each employee is encouraged to share the Code of Conduct with our business partners. We expect them to acknowledge and respect it in the context of their own particular culture.” (https://www.cellmark.com/wp-content/uploads/2015/11/CellMark-Code-of-Conduct.pdf) CellMark’s 2020 Annual Sustainability Report, published in April 2021, highlighted maintaining Silver status in the Eco Vadis supply chain audit. The audit investigates four core areas: Labor & Human Rights, Environment, Ethics, and Sustainable Procurement (https://ecovadis.com/ratings/).

Following is a diagram showing to which countries the materials are sent.

An internet search resulted in a pertinent article posted on July 22, 2019:

New Frontiers in paper production
In mid-July, Crossroads Paper held a press conference to announce its plans to build a paper mill in the Salt Lake City area that will recycle old corrugated containers (OCC) and residential mixed paper into new paper that will then be used to make boxes for manufacturers, farmers and e-commerce companies.

The Sasine brothers’ partners include […]Sweden-based Cellmark, which specializes in international trade and distribution of raw materials related to the global pulp and paper industry. https://www.recyclingtoday.com/article/crossroads-paper-recycled-containerboard-salt-lake-valley/ The most recent update on the Crossroads Paper Plant was a press release published in Utah Business on June 22, 2021:

Peterson Real Assets makes growth equity investment in Crossroads Paper Cardboard Did not provide

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Peterson Real Assets, a subsidiary of Peterson Partners, Inc. has made a growth equity investment in Crossroads Paper, a 100 percent recycled paper mill to be built in the Mountain West to serve for the growing demand for e-commerce, agriculture, and industrial packaging in the Western United States.

The Crossroads Paper site selection process is underway, with a final determination expected by year end.

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Berg Mill Supply/Classic Fibres (Los Angeles, CA)
Berg Mill did not submit any traceability data, but did provide basic information about the company.

Berg Mill purchases a number of materials from GreenWaste, including HDPE, Cardboard, Film Plastic, Mixed Plastic, Mixed Rigid Plastic, Newspaper, PET Clamshells, and PET.

Berg Mill Supply is a brokerage. Berg Mill elected to not complete the traceability form as to not provide proprietary data. Berg Mill provides general data on its website about the destination of its exports. Per the Berg Mill Supply website: (https://bergmill.com/about/where-berg-mill-ships/) “Berg Mill Supply Co., Inc. redirects waste from material recovery facilities (MRF) in the United States to end users in international locations, where the material is processed and a new material is produced.”
“We sell material suitable for many different countries abroad such as China Indonesia Korea Vietnam Thailand India Myanmar Malaysia Pakistan Laos Costa Rica Brazil USA.”

Following is a diagram showing to which countries the materials are sent.

A blog posted by Berg Mill on December 2, 2019, stated the following:

HDPE Did not provide
LDPE Film Did not provide
Mixed Plastic Did not provide
Newspaper Did not provide
PET Did not provide
Cardboard Did not provide

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“But it isn’t just China’s import restrictions that have caused a downswing in mixed paper value. The market started taking a dive after the U.S. economic downturn in 2010, nearly a decade ago. The good news is that new international markets are opening for U.S. mixed paper, for example India, where U.S. Corrugated, a box manufacturer that uses recovered fiber, is opening a plant in the coming months.”
(https://bergmill.com/2019/12/02/turning-over-a-new-leaf-in-paper-recycling-with-ai-technology/)

A blog posted by Berg Mill on August 12, 2019, stated the following:
“With no global regulations against these exports, it is poor and developing nations that will end up paying the price for cleaning up after the U.S.… For recycling to flourish to its full potential, we must process our recyclables in domestic, modern factories that are designed to properly shelter toxins from workers and the environment.”
(https://bergmill.com/2019/08/12/your-recycling-may-not-be-going-where-you-think/) A blog posted by Berg Mill on June 10, 2019, stated the following:
“While recent news in recycling has been discouraging due to China’s National Sword and other foreign imported scrap bans, Berg Mill is ever committed to keeping your recyclables moving… Ultimately, domestic recycling has the potential to become superior to importing scrap both economically and environmentally."
(https://bergmill.com/2019/06/10/recycling-challenges-bring-opportunities-for-growth/) An internet search resulted in a pertinent article posted on June 3, 2018:

According to leading US recycling firm Berg Mill Supply, “all grades of plastic have seen a major shift to secondary markets” from 2016 to 2017, when China’s import restrictions came to light. In that period, Malaysia took in five times more polyvinyl chloride (PVC), while Vietnam more than doubled imports of polyethylene terephthalate (PET).
(https://www.channelnewsasia.com/news/singapore/china-bans-plastic-waste-whats-next-for-recycling-in-singapore-10281026)

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Fibre Trade Inc. (Burlingame, CA)
F
ibre Trade submitted partial traceability data for the mixed paper, newspaper and office paper it purchases from GreenWaste.

Fibre Trade is a brokerage. Per its website, Fibre Trade is a direct exporter of recovered paper, pulp and mineral products from the USA, Europe, Australia, New Zealand and Japan to affiliated paper mills all over the world. (https://www.fibretrade.net/)
Following is a diagram showing to which countries and regions the materials are sent.

An art
icle in Recycling Today published on October 24th, 2016 illustrates Fibre Trade’s engagement in the paper industry, stating that a staff member served as the specifications committee chair for Paper Stock Industries. (https://www.recyclingtoday.com/article/pprc-2016-psi-paper-specifications-rates/) Mixed Paper Southeast Asia, Mexico, USA
Newspaper Southeast Asia, Mexico, USA
Office Paper Southeast Asia, Mexico, USA

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Newport CH International (Orange, CA)
Newport CH International did not submit traceability data but did provide basic information about the company. Newport purchases cardboard, mixed paper, mixed rigid plastics and film plastics from GreenWaste.

Newport both manufactures products and is a brokerage. Per its website, Newport focuses on the purchase and direct export sale of recyclable paper, plastics, as well as agricultural products. The following statement is made on the Newport CH International website. “Our expertise is sourcing recyclable paper and plastics throughout North America. We are direct export shippers for the recycling industry, supplying numerous mills in China, as well as many other Asian countries. We provide quality raw material for their state of the art mills and manufacturing facilities.

Our overseas customers have the assurance of consistent supply and quality. Newport CH handles all logistics in-house, including shipping line rate negotiations, bookings and local drayage assistance.

We take care of all required export documentation and banking transactions from our corporate office in Orange, California. To facilitate our exports to China we are AQSIQ certified and are an approved CCIC self-inspection company. In addition, we hold ISO 9001 and ISO 14001 certifications for our global quality management system, demonstrating our organizations continued commitment to quality. Newport CH strives to encourage growth in the recycling industry by being supportive and involved with numerous state and local government agencies.

Through our office in Shanghai, China we are able to work directly with the mill buyers in order to meet their requirements. We are in constant communication with our Shanghai office to stay apprised of any market changes or concerns with material arriving into China. .” (http://newportch.com/)
Following is a diagram showing to which countries the materials are sent.

An internet search resulted in a pertinent article posted on March 25, 2021:

Malaysia declares reported shipments of US plastic wastes to Asia are illegal Governments are beginning to react to recent warnings issued by the Basel Action Network (BAN) of likely illegal exports of plastic waste from the US.

Due to recent amendments adopted by the 188 Parties to the Basel Convention, as of January 1, 2021, parties will be unable to import US plastic wastes unless they are very pure and unmixed. In its announcement, BAN highlighted recent data showing the US exports have not diminished despite the new rules and flagged three active shipments moving to Indonesia, Malaysia, and India.

Cardboard Did not provide
Mixed Paper Did not provide
Rigid Plastic Did not provide
Film Plastic Did not provide

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In Indonesia, the government appears to be uncertain as to what to do about the two containers of plastic waste that have already arrived at the port of Belwan on board a Mediterranean Shipping Company (MSC) vessel from California, USA. Three more from the same exporter — Newport CH International, are also on their way to Indonesia.
(https://www.recycling-magazine.com/2021/03/25/malaysia-declares-reported-shipments-of-us-plastic-wastes-to-asia- are-illegal/)
An internet search resulted in a pertinent article posted on December 3, 2019:

Signals point to all-out recycled fiber ban in China
“We’re diversifying, we’re going to try to maximize our sales to other countries,” said Jimmy Yang, CEO of Newport Beach, Calif.-based Newport CH International, a major broker of recovered fiber to China. “We’re expecting volume to drop, that’s just reality – we enjoyed great markets for the past 20 years, and maybe things are going to change now.”
At the meeting, officials told the companies to anticipate lower import license volumes during the fourth quarter of this year, said Yang, whose business has at times moved up to 90% of its fiber to China. He noted Chinese officials said a ban is coming in 2021 for all paper grades except newsprint, which could continue to enter the country for newspaper production. (https://resource-recycling.com/recycling/2019/12/03/signals-point-to-all-out-recycled-fiber-ban-in-china/) An internet search resulted in a pertinent article posted on April 3, 2019:

China's recyclers look at Latin America, Caribbean
Hamilton Wen, director of the plastics division at trading firm Newport CH International LLC in Orange, Calif., said in a panel at the conference that recyclers face complex questions as they analyze where it makes business sense to recycle and also react to governments worldwide limiting imports of scrap.
"It's definitely cheaper in these other countries, but how long are they going to let you do it," he said. "I think eventually, end game, it probably will come back here [to the United States]. Whatever we're creating probably we should recycle it here”… added that the business case can make it too expensive to do some types of recycling in higher-cost countries. (https://www.plasticsnews.com/article/20190403/NEWS/190409967/china-s-recyclers-look-at-latin-america-caribbean) An internet search resulted in a pertinent article posted on February 28, 2018:

Exporters talk Chinese ban’s operational and financial impacts Newport CH International, like many exporters, has made dramatic operational changes since the ban impact started to spread. The company acts as a broker, so it tries to find markets offering the best price and stable demand. For the past 20 years, that has consistently been China, Wen said. The only variation was where inside China the company would send the material. “Now, that’s completely off the table as far as scrap, so we’ve had to completely reshift, and look for new markets basically anywhere in the world,” Wen said. “Places we’ve never looked for previously, but now we’re having to travel to look for processors, look for end users. It’s pretty much a complete upheaval of our entire plastic brokerage business.”

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Wen said there are not enough end users to handle all the material on the market, so they are able to demand higher quality, whereas it used to be a seller’s market. Wen predicts markets will develop for low-grade plastics, although they will take time to develop. He said there is already a little more demand coming back for the materials as a result of market development that’s taken place since the ban, and that further development is currently underway.

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OGO Fibers (Ontario, Canada)
OGO Fibers submitted partial traceability data for the mixed paper and cardboard it purchases from GreenWaste.

OGO Fiber is a brokerage and performs secondary processing in the form of pulpifying and manufacturing. OGO Fibers confirmed in 2020 that the material is never double brokered and all the material goes directly to an overseas mill with a direct order. Following is a diagram showing to which countries the materials are sent.

Per its website, OGO Fibers has received ISO 9001 certification (for quality management system) and holds both AQSIQ and CCIC licenses. (http://www.ogofibers.com/ps) An internet search shows that OGO Fibers is a Journal of Commerce Top Exporter (number 100). The article, posted on May 25, 2020, in which this information appears discusses the challenges of both trade policy uncertainty and asymmetrical market conditions between international and domestic transportation modes. (http://www.joc.com/maritime-news/top-100-us-importer-and-exporter-rankings- 2019_20200525.html)

Cardboard Thailand, Vietnam, Malaysia, Korea, India
Mixed Paper Thailand, Vietnam, Malaysia, Korea

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Envision Plastics (Chino, CA)
Envision Plastics is a leading recycler of HDPE plastics and supplier of Post Consumer Resin (PCR).

Envision purchases HDPE from GreenWaste and washes, chips and pelletizes the material. Envision lists six different products that it creates from recovered plastic: Ecoprime®, Natural Color, Mixed Color, Oceanbound Plastic, Prisma®, and Deodorized.

Following is a diagram showing to which countries the materials are sent.

E
nvision Plastics is headquartered in Reidsville, North Carolina and has a West Coast plant in Chino, California. Envision’s parent company, Altium Packaging (previously Consolidated Container Company) includes “Act with Integrity and in Compliance” as one of its core values. ( (https://altiumpkg.com/why- altium/our-guiding-principles/)
Envison Plastics OceanBound Plastic recycling program aims to remove 10 million pounds of plastic before it enters the ocean at “At Risk Zones” defined by areas within 50km of coastline, with a focus on communities lacking formal waste collection. According to their FAQ webpage on the program, Envision Plastics works with partners “to professionalize the collection stream, collect this plastic, and manufacture it into usable products.” (https://envisionplastics.com/oceanbound-plastic/) HDPE North Carolina & California (per 2020 data)

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Super Link Plastic (Oakland, CA)
Super Link Plastic submitted partial traceability data as well as basic information about the company.

Super Link purchases cardboard from GreenWaste.

Super Link is a brokerage. Per its website, Super Link sources scrap plastic, cardboard, mixed paper, e-waste, and other recyclables from post-industrial, post-commercial and post-consumer waste streams.

Super Link Plastic disclosed cardboard exports are sent to secondary brokerage in Vietnam, Korea, Thailand, India, Indonesia, Taiwan and Malaysia. Per Super Link, all processing occurs in facilities following local environmental laws and policy.

Following is a diagram showing to which countries the materials are sent.

No further pertinent information was found on this company and/or its exports via a simple internet search.

Cardboard Thailand, Vietnam, Indonesia, Korea, Malaysia, Taiwan, India

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City of Palo Alto (ID # 13847)
City Council Staff Report
Meeting Date: 1/24/2022
City of Palo Alto Page 1
Title: Contracts Awarded by the City Manager and Procurement Officer From: City Manager
Lead Department: Administrative Services
Recommendation
This is an information report, no action is required.

Discussion
Palo Alto Municipal Code (PAMC) Section 2.30. 710 requires the City Manager to provide a biannual report to Council consisting of contracts awarded by the City Manager, Procurement Officer or other designated employees for:
1) General and professional services in excess of $25,000 (Attachment B); and 2) Public works and goods in excess of $85,000 (Attachment A).

Attachment A (regarding contracts for goods in excess of $85,000) and Attachment B (regarding contracts for services in excess of $25,000) fulfill this PAMC reporting requirement for the period from July 1, 2021 through December 31,2021.

The contracts in Attachment A consist of eight (8) distinct awards for goods, and the contracts in Attachment B consist of 41 distinct awards for a wide range of services. These awards are a core element of the efficient and effective provision of services by the City to our community and reflect extensive coordination and prudent decision-making among operating departments, the Administrative Services Department, the City Attorney's Office, and City Clerk's Office.

For informational purposes, Attachment C provides excerpts from the Palo Alto Municipal Code that set forth the authority designated by Council to the Procurement Officer to award and sign contracts (PAMC 2.30.200), City Manager to award and sign con tracts (PAMC 2.30.210 ), and exemptions from competitive solicitation (PAMC 2.30.360 and 2.30.900), as noted for certain contracts listed in Attachments A and B.

It should be noted, that the City officially sunset the designation of a local emergency on Ju ne 31, 2021 in response to the ongoing coronavirus pandemic. However, the State declaration of emergency has remain in effect during this reported period. 15 Packet Pg. 443

City of Palo Alto Page 2

Attachments:
• Attachment15.a: Attachment A: Material Contracts Awarded by CPO & CM July 1, 2021 through December 31, 2021
• Attachment15.b: Attachment B: Services Contracts Awarded by CPO & CM July 1, 2021 through December 31, 2021
• Attachment15.c: Attachment C: Excerpts from the Palo Alto Municipal Code 15 Packet Pg. 444

ATTACHMENT A
Goods Contracts Awarded ($85,000 through $250,000 per year) July 1, 2021 to December 31,2021
Contract Award To Award Date Award Amount Bidding Exemption or Number of Bids Sent/Received Description

ADVANCED CONTROL SYSTEMS,
INC.
07/16/2021 233,333.33 2.30.360(d) Purchase of SCADA Equipment-Year 3 HOWDEN ROOTS LLC 12/06/2021 93,249.48 2.30.360 (d) Spare parts for Aeration Blowers LN CURTIS & SONS 07/14/2021 120,000.00

2.30.360(d) Various fire, safety & rescue equipment - Year 2 NATIONAL AUTO FLEET GROUP 10/07/2021 177,997.11 2.30.360 (j) Purchase of one new 2022 Ford F-550 SuperDuty OLIN CHLOR ALKALI PRODUCTS 07/26/2021 124,069.50
92/3 Purchase order for 12.5% Bulk Sodium
Hypochlorite- Year 2
PIVOT INTERIORS INC. 11/22/2021 125,811.31 2.30.360(j) Herman Miller Furniture for the Water Quality Control Plant
TMT ENTERPRISES INC 07/14/2021 150,000.00
518/3 Sand Rock Gravel Water Gas Waste- Year 2
WATCHGUARD VIDEO 12/21/2021 117,844.00 2.30.360(j) Watchguard MAV and BWC units for Police Department

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ATTACHMENT B
Service Contracts Awarded ($25,000 through $85,000 per year) July 1, 2021 to December 31, 2021
Contract Award To Award Date Award Amount
Bidding Exemption
or Number of Bids
Sent/Received
Description
ACCELA INC 11/16/2021 26,673.97 2.30.360(b) 5-Year Accela Mobile Office M&S and MS
ASSETWORKS, INC. 12/21/2021 38,793.31 2.30.360(d) Annual software maintenance and support
BEST BEST & KRIEGER LLP 12/21/2021 25,000.00 2.30.360(g) Professional Legal Services BING HUO 12/01/2021 52,600.00 4/4/ Implementation of the CITY’s Sustainability and Climate Action Plan
BSI EHS SERVICES AND SOLUTIONS 10/25/2021 40,000.00 2.30.360(i) Return to Work Consultant CALTRAIN 12/14/2021 77,206.50 2.30.360(d) Go Pass Program CAREFUL MOVERS INC 11/23/2021 25,000.00 4/4 Furniture Relocation Services CDW GOVERNMENT 08/02/2021 37,530.00 2.30.360 (j) Armorblox: Inbound

CDW GOVERNMENT
12/16/2021 72,696.58 2.30.60(j) Procurement of CrowdStrike software and services
CINTAS CORPORATION 07/27/2021 30,000.00 2.30.360(j) Electric Operations Uniform Rental CINTAS CORPORATION 07/28/2021 57,000.00 2.30.360(j) Water Gas Wastewater Operations Uniform Rental
COMFORT INTERNATIONAL INC 11/01/2021 36,737.00 6/6 Annual HVAC Maintenance Services- 3 Year Term
COOPER COMPLIANCE CORPORATION 09/01/2021 39,900.00 2.30.360(i) WECC/NERC Consultant DLT SOLUTIONS LLC 08/24/2021 37,224.30 3/3 AutoCAD Government Single User EDGEWORTH INTEGRATION LLC 11/23/2021 28,073.68 2.30.360(i) Hardware update Police Department camera system
FLYNN RESOURCE CONSULTANTS INC 09/29/2021 49,900.00 2.30.360(i) Consulting Services - CAISO GARDA CL WEST, INC. 10/28/2021 33,495.00 2.30.360(b) Armored Truck Transport Services GLOBAL RENTAL COMPANY INC 09/24/2021 43,000.00 3/3 Rental of AA55 Altec Bucket Truck

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ATTACHMENT B
Service Contracts Awarded ($25,000 through $85,000 per year) July 1, 2021 to December 31, 2021
Contract Award To Award Date Award Amount
Bidding Exemption
or Number of Bids
Sent/Received
Description
GROUP 4 ARCHITECTURE RESEARCH &
PLANNING INC.
09/28/2021 84,910.00 271/13 Design services to install 3 new Automated Material Handling (AMH)
Systems at the CITY’s College Terrace,
Children’s, and Downtown Libraries.

INTEGRATED DESIGN 360 LLC 07/01/2021 50,000.00 2.30.360(i) Dewatering Monitoring Services ITECH SOLUTION 12/16/2021 37,300.28 3/3 Data Cabling Replacement JACKSON LEWIS PC 08/27/2021 85,000.00 2.30.360(g) Professional Legal Services JARVIS, FAY & GIBSON, LLP 07/07/2021 50,000.00 2.30.360(g) Professional Legal Services JARVIS, FAY & GIBSON, LLP 07/12/2021 25,000.00 2.30.360(g) Professional Legal Services JARVIS, FAY & GIBSON, LLP 08/18/2021 30,000.00 2.30.360(g) Professional Legal Services KIS 10/18/2021 33,685.00 3/3 Subscription Barracuda CloudGen Firewall Renewal
LENAHAN SLATER PEARSE & MAJERNIK 09/21/2021 35,000.00 2.30.360(g) Professional Legal Services LIEBERT CASSIDY WHITMORE 07/12/2021 30,000.00 2.30.360(g) Professional Legal Services LIEBERT CASSIDY WHITMORE 09/20/2021 40,000.00 2.30.360(g) Professional Legal Services MBS ENGINEERING, INC. 11/10/2021 26,202.25 6/1 Recoating Gas Main line- Matadero Creek
METROPOLITAN PLANNING GROUP INC 09/28/2021 31,680.00 2.30.360(h) 1700 Embarcadero Rd - Site & Design- Cost Recovery
MOORE IACOFANO GOLTSMAN INC 10/08/2021 38,073.00 2.30.360(i) Baylands CEQA study NORTHWEST LINEMAN COLLEGE 12/16/2021 85,000.00 2.30.360(d) Apprentice Training for the Utilities Department
PALO ALTO HISTORICAL ASSOCIATION 08/05/2021 35,000.00 2.30.360(i) Archive of the CITY's collection and facilitate public access to information
and materials relating to the history of
Palo Alto.

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PROJECT SENTINEL
12/17/2021 70,954.00 2.30.360 (b) Mediation Services for the Palo Alto Mediation Program- Year 1
RINCON CONSULTANTS, INC. 10/28/2021 125,383.00 2.30.360(h) 200 Portage Ave for an EIR-Deposit based contract
RINCON CONSULTANTS, INC. 10/28/2021 38,767.00 2.30.360(h) 1700 Embarcadero Rd - Initial Study- Mitigated Negative Declaration- Cost
Recovery
RINCON CONSULTANTS, INC. 10/28/2021 40,355.00 2.30.360(h) 2850 West Bayshore for a Class 32 Categorical Exemption-Deposit Based
Contract
STANFORD UNIVERSITY KZSU 07/19/2021 25,000.00 2.30.360(i) Broadcast City Council Meetings YOUTH COMMUNITY SERVICES 11/16/2021 50,000.00 2.30.360(i) Youth Connectedness Initiative

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ATTACHMENT C
Excerpts from the Palo Alto Municipal Code
Chapter 2.30 – Contracts and Purchasing Procedures

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2.30.200 Procurement officer contract award authority.

The Procurement Officer may award and sign the following contracts:
(a) Public Works Contracts. Public works contracts, where the term does not exceed three years, and the contract priceand any price contingency established for change orders, but excluding sales tax or use tax, do not exceed $85,000.00 in the first contract year, and do not exceed the sum of $85,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(b) Contracts for Goods. Contracts to purchase goods, where the term does not exceed three years, and the contract price and any price contingency established for change orders, but excluding sales tax or use tax, do not exceed $85,000.00 in the first year, and do not exceed the sum of $85,000.00and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(c) General Services Contracts. General services contracts, where the term does not exceed three years, and the contract priceand any price contingency established for change orders or additional services, but excluding sales tax or use tax, do not exceed $85,000.00 in the first contract year, and do not exceed $85,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(d) Professional Services Contracts. Professional services contracts, where the term does not exceed three years, and the contract price, and any price contingency established for additional services, but excluding sales tax or use tax, do not exceed the sum of $85,000.00 in the first contract year, and do not exceed the sum of $85,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(e) Software and Hardware Purchase, Licensing, Maintenance and Support Contracts.

Notwithstanding Subsection 2.30.200(c), the Procurement Officer may award and sign contracts other than general services agreements, including, without limitation, vendor-based standard form hardware and software purchase and licensing contracts, for the purchase of hardware and software, the licensing of software, and the maintenance and support of hardware and software, where the term of licensing or maintenance and support services does not exceed five years and the contract price, excluding sales tax or use tax, does not exceed $85,000.00 per year in the first contract year and does not exceed the sum of $85,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year. The contracts referred to herein may include contracts for data storage services, which shall be subject to the city's information security policies, terms, conditions and other requirements established by the chief information officer with the concurrence and approval of the City Attorney.
(Ord. 5494 § 9, 2020: Ord. 5387 § 1 (part), 2016: Ord. 4827 § 1 (part), 2004)

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2.30.210 City Manager contract award authority.

The City Manager may award and sign the following contracts:
(a) Public Works Contracts. Public works contracts, where the term does not exceed three years, and the contract price and any price contingency established for change orders, but excluding sales tax or use tax, do not exceed $250,000.00 in the first contract year, and do not exceed the sum of $250,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(b) Contracts for Goods. Contracts to purchase goods, where the term does not exceed three years and the contract price and any contingency established for change orders, but excluding sales tax or use tax, do not exceed $250,000.00 in the first contact year, and do not exceed the sum of $250,000.00 and any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(c) General Services Contracts. Contracts for services associated with the leasing or licensing of personal property other than hardware or software, where the term does not exceed seven years, and the contract price and any price contingency established for change orders, but excluding sales tax or use tax, do not exceed $85,000.00 in the first contract year, and do not exceed the sum of $85,000.00 plus any unexpended monies carried forward from a prior contract year, in any subsequent contract year.
(d) Contracts for Studies and Services Related to Private Development. Professional services contracts for: (1) the preparation of environmental assessments or other studies deemed necessary by the director of planning and development services for the processing of applications for private development projects, or (2) inspection and plan review services deemed necessary by the director of planning and development services to evaluate conformity of private development projects with applicable building codes, regardless of the cost or term thereof, provided the applicant for the private development project agrees, in writing, to bear responsibility for the entire contract cost, and the contract does not require the expenditure of city funds in any amount. (e) Rewards. The City Manager may offer and pay rewards where the amount of the reward does not exceed $25,000.00, in accordance with the procedures of Section 2.30.800. (f) Emergency Contracts. The City Manager is authorized to expend city funds for emergency contracts, as defined in Section 2.30.160, without limitation on the contract cost or amount and without following the contract solicitation and award procedures otherwise required by this chapter, provided that any procurement of goods and services obtained during an emergency declared by the Federal Emergency Management Agency shall comply with applicable FEMA Public Assistance Program's procurement orders, rules, regulations, guidelines and control procedures for cost reimbursement purposes. Expenditures made during an emergency must be reported to the Council at the next regular meeting if approval for such expenditures would otherwise have been made by the Council.

The City Manager may issue a verbal report to the Council before a written report is delivered. (g) Contracts to Rent, Lease, License, Acquire, Transfer or Purchase Interests in Real Property from Other Parties. Contracts for the rental, leasing, licensing, or purchase by installment interests in real property from other parties for a term of seven years or less, where the contract price does not exceed $85,000.00 per year, or to encumber or transfer any interest in real property from other parties for any term of years. The City Manager may enter into and sign a contract to acquire or purchase an interest in real property, where the contract price does not exceed $85,000.00. (h) Contracts to Rent, Lease, or License City Real Property to Other Parties. The authority granted under this Section is distinct from the authority of the director of community services to grant individuals and groups permits for the exclusive temporary use of buildings and facilities located in, and the areas of, city parks and open spaces, as described in Chapter 22.04 of this municipal code or in the park and open space regulations. The City Manager may award and sign contracts to rent,

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lease or license city real property to other parties regardless of the price for a term not exceeding three years. Notwithstanding the preceding sentence, the City Manager may enter into and sign contracts for the rental, lease or licensing of real property at the Cubberley Community Center for terms of up to five years.
(i) Contracts to Provide Municipal Services to other Public Entities or Utilities. A contract to provide municipal services and functions to any other public agency, public utility or other public entity in any amount for a term not exceeding three years, provided the contract is in compliance with all Council- adopted policies covering such contracts. The authority granted herein does not include the authority of the City Manager to add permanent employee positions. (j) Contracts Providing for Indemnity or Risk of Loss. The City Manager, with the concurrence and approval of the City Attorney and the insurance risk manager, may enter into and sign contracts, otherwise within the limits of his or her authority under Section 2.08.140 of this municipal code, that provide for the city or its officers or employees to defend, indemnify, or assume the risk of damage, loss, or liability for, or subrogate to any other contracting party respecting claims, demands, actions, losses or liabilities arising from the city's performance or non-performance under the contract. (k) Wholesale Utility Commodities and Services Contracts. Wholesale utility commodities and services contracts, where the term does not exceed five years and the contract price does not exceed $250,000.00 in any contract year.
(l) Software and Hardware Purchase, Licensing, Maintenance and Support Contracts.

Notwithstanding Subsection 2.30.210(c), the City Manager may award and sign contracts other than general services agreements, including, without limitation, vendor-based standard form hardware and software purchase and licensing contracts, for the purchase of hardware and software, the licensing of software, and the maintenance and support of hardware and software, where the term of licensing or maintenance and support services does not exceed seven years and the contract price, excluding sales tax or use tax, does not exceed $85,000.00 per year in the first contract or fiscal year and does not exceed the sum of $85,000.00 and any unexpended monies carried forward from a prior fiscal year, in any subsequent contract or fiscal year. The contracts referred to herein may include contracts for data storage services, which shall be subject to the city's information security policies, terms, conditions and other requirements established by the chief information officer with the concurrence and approval of the City Attorney.
(m) Other Contracts. All other types of contracts for which the contract term does not exceed three years and the total expenditure by the city does not exceed $85,000.00 in the first contract or fiscal year, and does not exceed the sum of $85,000.00 and any unexpended monies carried forward from a prior fiscal year, in any subsequent contract or fiscal year. (Ord. 5494 §§ 3, 10, 2020: Ord. 5387 § 1 (part), 2016: Ord. 4827 § 1 (part), 2004)

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2.30.360 Exemptions from competitive solicitation requirements.

The following are exemptions from the informal and formal competitive solicitation requirements of this chapter, except as otherwise provided. These exemptions will be narrowly interpreted and applied.

The department requesting an exemption shall provide all relevant information supporting the application of the exemption to the Procurement Officer. Based upon this information, the Procurement Officer shall make a recommendation to the City Manager and the City Manager shall determine whether an exemption from the competitive solicitation requirements applies. Nothing herein is intended to preclude the use of competitive solicitations, as practicable. (a) Emergency Contracts, provided that any procurement of goods and services obtained during an emergency declared by the Federal Emergency Management Agency shall comply with applicable FEMA Public Assistance Program's orders, rules, regulations, guidelines and control procedures for cost reimbursement purposes.
(b) Whenever solicitations of bids or proposals would for any reason be impracticable, unavailing or impossible, provided that in the case of a public works project, the project is not otherwise required by the charter to be formally bid. These situations are those where solicitations of bids or proposals would not be useful or produce any operational or financial advantage for the city. Situations where solicitations of bids or proposals would be impracticable, unavailing or impossible, include, without limitation, the following:
(1) Contract specifications cannot be drawn in a way that would enable more than one vendor, consultant or contractor to meet them;
(2) Due to circumstances beyond the control of the city, the time necessary to use the competitive solicitation process, procedures and requirements would result in a substantial economic loss to the city or the substantial interference with a required city operation; (3) Special conditions attached to a grant, donation or gift requires the use of particular goods and/or services.

All requests for exemptions under this subsection shall be supported by written documentation (facsimile or electronic mail may be used), approved by the department head and the Procurement Officer.
(c) Where competitive bids or requests for proposals have been solicited and no bid or proposal has been received, or where no bid or proposal meeting the requirements of the invitation to bid or request for proposals has been received, provided that, in the case of a public works project, the project is not otherwise required by the charter to be formally bid. (d) Contracts for goods, wholesale commodities and services, general services or professional services available from only one source, where the Procurement Officer has determined, in writing, there is no adequate substitute or equivalent provider. Examples of acceptable sole source acquisitions or purchases may include, without limitation: equipment or services for equipment, for which there is no comparable competitive product or service except that provided by the equipment manufacturer, distributor or dealer; proprietary products sold directly by the manufacturer; a component or replacement part, for which there is no commercially available substitute and which can be obtained only from the manufacturer; goods where there is only one authorized distributor in the area; and goods where compatibility with goods in use by the city is an overriding consideration. All requests for sole source acquisitions or purchases shall be supported by written documentation (facsimile or electronic mail may be used), approved by the office or department head, and forwarded to the Procurement Officer.
(e) Contracts for goods where, pursuant to Section 2.30.900, the City Manager has determined that standardization of the supplies, materials or equipment is permissible. (f) Placement of insurance coverage and surety bonds.

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(g) Legal services contracts, including, without limitation, the services of outside counsel, consultants and other experts needed for litigation, administrative or other legal proceedings. (h) Professional services contracts for private development related studies and services whenever the services are funded wholly by private developers.
(i) Professional services contracts, where the estimated total expenditure by the city, regardless of term, does not exceed $50,000.00.
(j) Cooperative purchases, with one or more other public agencies or through a cooperative purchasing agency, provided: (i) the services are solicited using methods substantially similar to those required by this chapter, as determined by the Procurement Officer; and (ii) the contract is consistent with the requirements specified in this municipal code. (k) The use of another governmental or public agency's contract or substantially the same contract terms provided: (i) the agency uses a solicitation method substantially similar to the method required by this chapter; (ii) the contract is consistent with the requirements specified in this municipal code; and (iii) the Procurement Officer determines that the city will realize overall value to utilizing the other agency's contract or contract terms compared to the city performing its own solicitation. (l) Contracts with, or solicited on the city's behalf by, Northern California Power Agency, Transmission Agency of Northern California, and Western Area Power Administration to procure wholesale utility commodities and services that meet the requirements of Section 2.30.340(d) or

2.30.360(k).
(m) Contracts with Pacific Gas and Electric Company and the California Independent System Operator Corporation for energy transmission services to the extent necessary and expedient to provide for the general health, safety and welfare of the city's utility customers. (n) Contracts with any public agency or governmental body to construct a public work, where the Procurement Officer determines the public agency or governmental body has used methods similar to those required by this chapter to contract for the public work. (o) Contracts with any public utility holding a certificate of public convenience and necessity or any entity holding a cable service or video service franchise pursuant to chapter 2.10 of this municipal code to construct a public works, where such works involves property of such public utility or cable service or video service franchisee and is otherwise of direct concern to both the city and such public utility or cable service or video service franchisee, provided that the project is not otherwise required by the charter to be formally bid.
(p) Contracts with private developers to construct public improvements in connection with their development projects, even if the city contributes funds to the improvement project, provided that the projects are not otherwise required by the charter to be formally bid. (q) Projects, where the public work is performed by the city with its own employees. (r) Contracts, where the estimated total expenditure by the city does not exceed $10,000.00. (s) Contracts with entities to procure at wholesale prices utility commodities and services under a city "feed-in tariff" energy program that meets the requirements of Section 2.30.340(c). (t) Professional services contracts in relation to personnel matters for: recruitment consultants, workplace investigations, threat assessments, conflict intervention, and industrial safety. (Ord. 5494 § 21, 2020: Ord. 5387 § 1 (part), 2016: Ord. 5148 § 2, 2012: Ord. 5081 § 1, 2010: Ord. 4827 § 1 (part), 2004)

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PART 10 – STANDARDIZATION

2.30.900 Standardization.

Where the City Manager has determined that it is required by the health, safety or welfare of the people or employees of the city, or that significant costs savings have been demonstrated, the standardization of supplies, materials or equipment, including, without limitation, information technology property, for purchase or to be used in a public works project is permitted and the supplies, materials or equipment specifications may specify a single brand or trade name. The City Manager may consider the following factors in determining to standardize on a single brand or trade name:
(a) Repair and maintenance costs would be minimized;
(b) User personnel training would be facilitated thereby; (c) Supplies or spare parts would be minimized;
(d) Modifications to existing equipment would not be necessary; (e) Training of repair and maintenance personnel would be minimized; and (f) Matching existing supplies, materials or equipment is required for proper operation of a function or program.
(Ord. 5494 § 40, 2020: Ord. 5387 § 1 (part), 2016: Ord. 4827 § 1 (part), 2004)

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City of Palo Alto (ID # 13782)
City Council Staff Report

Meeting Date: 1/24/2022

City of Palo Alto Page 1

Title: Update on the Implementation of the Deconstruction and Construction Materials Management Ordinance (Ordinance 5472/ Palo Alto Municipal Code Title 5, Chapter 5.24).

From: City Manager
Lead Department: Public Works

Recommendation
This is an informational report only and no Council action is required.

Background
In August 2018, Council accepted the 2018 Zero Waste Plan containing 48 initiatives to help the City meet its s ustainability and climate action goals. In June 2019, Council approved the Deconstruction and Construction Materials Management Ordinance (Deconstruction Ordinance, Ordinance 5472/PAMC Title 5, Chapter 5.24 , ID#10148) with the effective date of July 1, 2020. The ordinance aligns with the 2018 Zero Waste Plan and implements key provisions including Initiative #1, Require Deconstruction and Source Separation of Construction Materials; Initiative #2, Direct Mixed Construction Materials to High Diversion Construction Materials Recycling Facilities; and Initiative #4, Construction Project Recycling Technical Assistance. In addition, implementing and expanding the Deconstruction Ordinance is a key action identified in the Sustainability and Climate Action Plan to support diverting waste from landfills.

The Deconstruction Ordinance applies to all residential and commercial projects undergoing a whole structure demolition needing to submit a building permit application for deconst ruction on or after July 1, 2020. The objectives of the ordinance are to 1) increase salvage/reuse to the highest extent possible and 2) increase the amount and quality of recyclable materials for all construction and demolition projects, beginning with whole structure deconstruction projects.

During the development of the ordinance, staff estimated based on historical data that it would affect approximately 114 projects annually.

Discussion
Outreach and education were developed explaining the ordinance requirements and resources available and sent to stakeholders prior to the ordinance’s effective date. Beginning July 2020, 16 Packet Pg. 456

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staff proactively reached out to homeowners, general contractors, and architects when building permit applications were submitted t o provide information on the newly enacted ordinance requirements and to schedule video conference calls to explain the ordinance and answer questions from the applicants and their contractors. When the deconstruction permits were issued, staff reached out again to meet the general contractors and subcontractors hired for deconstruction onsite to review the requirements, walk through the property together, and ensure expectations were communicated. During deconstruction, staff inspected each project site to document progress, reiterate requirements for source separation and hauling of single stream materials, and address any concerns observed.

During the development of the ordinance, staff estimated that the new ordinance would affect approximately 114 pro jects annually (100 residential and 14 commercial) ; however, in Fiscal Year 2021, the first year of the ordinance, the City’s Development Center only received 44 building permit applications for projects that involved whole structure demolition (41 residential and 3 commercial) covered under the Deconstruction Ordinance. The main variable that may have impacted the lower number of applications is the COVID -19 pandemic. As summarized in Graph 1, of the total building permit applications in Fiscal Year 2021, the City issued 18 deconstruction permits (16 residential and 2 commercial), and 16 buildings were removed (15 residential and 1 commercial). Staff expects the number of building permit applications to increase in Fiscal Year 2022 while the economy and the development industry slowly recover from the COVID-19 pandemic, which postponed a significant number of projects.

Additionally, it is expected that permits for many applications received in Fiscal Year 2021 will be issued in Fiscal Year 2022.

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Graph 1: Fiscal Year 2021 Deconstruction Permit Application and Project Status

Table 1 below summarizes the tonnages generated from the 15 residential projects that received building permits and had the whole structures removed. The tonnages of materials were documented in Green Halo Systems, a waste management tracking tool for development projects required by the Planning and Development Service Department. Graph 2 provides a visual of the percentage of material categories from these projects. In summary, althoug h the salvaged materials recovered for reuse (mostly lumber, cabinets, doors, and windows) accounted for only three percent of the materials from the 15 residential projects, only eleven percent of the mater ials were landfilled. Examples of materials landf illed include d insulation and painted wood. Materials recovered for recycling included clean wood debris and drywall aside from concrete.

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Table 1: Fiscal Year 2021 Residential Deconstruction Tonnage

Tonnage Percentage (%)
Salvaged for Reuse 47 3.0
Recycled 391 24.7
Concrete Recycled 961 60.7
Landfilled 184 11.6
Total 1,582

Graph 2: Fiscal Year 2021 Residential Deconstruction Tonnage Percentages

Palo Alto’s Deconstruction Ordinance is the first of its kind in the United States that covers a ll commercial and residential projects undergoing whole s tructure removal reg ardless of the age of the buildings. Although some deconstruction projects were occuring voluntarily in the City prior to the ordinance, the requirements and process were new to m ost permit applicants and contractors and, consequently, require contractors to learn the new process. Staff emphasize s continuous communication, outreach, and education with each covered project and the stakeholders involved. Oversight and instances of no ncompliance were documented and addressed by Zero Waste staff while continuing to streamline and improve the implementation of the ordinance.

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Staff will continue to implement requirements and monitor qualifying projects , and in the coming fiscal year wil l explore how to potentially expand the Deconstruction Ordinance to include more projects through a future Council action.

Resource Impact
The resources undertaken for the implementation of the new ordinance were primarily staff time to develop outreach a nd education as well as communication with stakeholders including project owners and contractors for each project, and collaboration with City staff in different departments and industry representatives. In Fiscal Year 2021, this effort totaled approximately

0.3 full time equivalents of staff time.

Stakeholder Engagement
Outreach was conducted during Fiscal Year 2021 as the new Deconstruction Ordinance was implemented and included communicating directly with stakeholders with upcoming and active deconstruction projects. A new webpage at www.cityofpaloalto.org/deconstruction was also developed to provide information and resources for the community and stakeholders.

Environmental Review
This informational report does not require an environmental review. 16 Packet Pg. 460
Schedule of Meetings
Published January 13, 2022
This is a courtesy notice only. Meeting dates, times, and locations are subject to chang e. Almost all Palo Alto Council and some Standing C ommittee meetings are cablecast live on Channel 26. If there ha ppens to be concurrent meetings, one meeting will be broadcast on Channel 29.

Until further notice, all meetings will be held virtually.

Persons with disabilities who require auxiliary aids or services in using City facilities or programs, or who woul d like information on the City’ s compliance with the America ns with Disabilities Act (ADA) of 1990, may contact: ADA Coordinator, City of Palo Alt o, 650-329-2550 (v oice) or 329-1199 (T DD), [email protected]. Listening assistive devices are avai lable in the Counci l Chambers. S ign language interpreters will be provided upon request with 72 hours advance notice. Please advise the City Clerk's Office (650-329-2571) of meetings or changes by 3:00 p.m. on Wednesdays for inclusion in the following week’s schedule. 1/13/2022
MONDAY, JANUARY 17
City Council Meeting, 6 p.m. (CANCELLED DUE TO HOLIDAY) TUESDAY, JANUARY 18
Sp. Finance Committee Meeting, 6 p.m.

WEDNESDAY, JANUARY 19
Sp. Planning & Transportation Commission Meeting, 6 p.m.

Sp. Human Relations Commission Meeting, 6 p.m.

THURSDAY, JANUARY 20
Architectural Review Board Meeting, 8:30 a.m.

Public Art Commission Meeting, 7 p.m.

MONDAY, JANUARY 24
Sp. City Council Meeting, 5 p.m.

TUESDAY, JANUARY 25
Parks & Recreation Commission Meeting, 7 p.m.

WEDNESDAY, JANUARY 26
Planning & Transportation Commission Meeting, 6 p.m.

THURSDAY, JANUARY 27
Historic Resources Board Meeting, 8:30 AM
MONDAY, JANUARY 31
Sp. City Council Meeting, 5 p.m.

TUESDAY, FEBRUARY 1
Finance Committee Meeting, 7 p.m.

WEDNESDAY, FEBRUARY 2
Sp. Utilities Advisory Commission Meeting, 5 p.m.

THURSDAY, FEBRUARY 3
Architectural Review Board Meeting, 8:30 a.m.

MONDAY, FEBRUARY 7
Sp. City Council Meeting, 5 p.m.

TUESDAY, FEBRUARY 8
Policy & Services Committee Meeting, 7 p.m.

WEDNESDAY, FEBRUARY 9
Planning & Transportation Commission Meeting, 6 p.m.
a
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City of Palo Alto (ID # 13963)
City Council Staff Report
Meeting Date: 1/24/2022
City of Palo Alto Page 1
Title: Discuss Polling Results, Analysis, and Community and Stakeholder Engagement Plan; Recommend Further Refined Parameters for Possible Ballot Measures for November 2022 Election (Business License Tax and Utility Tax Proposal); and Direct Staff on Relat ed Items such as Community and Stakeholder Engagement Plan
From: City Manager
Lead Department: Administrative Services

RECOMMENDATION
The Finance Committee recommends that the City Council:

A. Direct Staff to pursue preparation of a square footage business l icense tax with the following characteristics:
a. Continue to review the rates, adding option 3 (flat fee of $50 for first 5,000 square footage occupied and apply a monthly tax rate per square foot beyond the 5,000 threshold) as a starting point;
b. Exemptions for businesses subject to the Transient Occupancy Tax and grocery stores;
c. Annual escalator uses CPI as a basis;
B. Accept the result of the Initial Poll and draft Community and Stakeholder Engagement Plan;
C. Direct Staff to develop a proposal for voter ratifi cation of the existing gas General Fund Equity Transfer and eliminate the UUT option, with exploration of whether to cap growth of the transfer to be explored via polling; and
D. Consider a third poll in the ballot measure workplan

EXECUTIVE SUMMARY
In Novem ber 2021, the City Council directed staff to perform analysis to further refine a potential square footage business license tax and a potential utility tax and to launch initial polling. This report is an update on the evaluation of potential tax proposals for the November 2022 election. The following items are discussed in this staff report and action by Council is detailed in the Recommendation section of this report:

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1. Business License Tax: refined analysis was presented to the Finance Committee on January 18, 2022 ( Agenda Item #1, p. 3, CMR 13875 ). The Finance Committee reviewed the analysis and recommended further exploration of a square footage business license tax rate, using staff’s proposed Option 3 as a starting point (summarized later in this report).

2. Utility Tax: staff is requesting Council action on the Finance Committee recommendations from i ts December 7, 2021 meeting ( Agenda Item #2, p. 55, CMR 13728), where the Committee discusse d refinement of the utility tax proposal and recommended that Council eliminate the UUT option from consideration. This recommendation was reaffirmed in the Finance Committee’s January 18, 2022 motion.

3. Review and acceptance of the results from the Palo Alt o Community Issues survey presented to the Finance Committee on January 18, 2022 ( Agenda Item #1, p. 31, CMR 13875), which includes polling related to potential business license and utility tax proposals, and

4. Review, acceptance and direction to staff to implement the 2022 Community and Stakeholder Engagement Plan, presented to the Finance Committee on January 18, 2022 (Agenda Item #1, p. 13, CMR 13875).

For reference, Attachment A of this staff report includes a summary of work done to date on the potential revenue generating ballot measure(s).

BACKGROUND
The Finance Committee serves as the public body to review periodic progress reports and allow for structured public discussion for feedback and recommendations of the potential revenue generating ballot measure. Following the two meetings with the Finance Committee in September and October 2021, discussion on November 8, 2021 with the City Council ( CMR 13687) considered the Finance Committee’s recommendation to further explore a business license tax and a utility tax. In addition to direction regarding tax structure and modeling, the City Council also delegated the review of polls to the Finance Committee, provided that the overall ballot measure workplan stays on its timeline. The following is Council’s direction to staff and the Finance Committee on November 8th:

A. Direct staff to model a business license tax at monthly rates of $0.05 to $0.20 per square foot, with a preference for no sunset and an annual escalator, and with thresholds for square footage size and possible exemptions for:
i. Small retail, measured by square footage;
ii. Grocery stores;
iii. No exemptions;
B. Direct staff to model two methods to replace the General Fund Equity Transfer (GFET) at risk in the Green case:
i. Seek voter approval in modifying the 2009 GFET formula to transfer a percentage of gas utility gross revenues;
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ii. Distribute the change across gas and electric as an increase in the percentage of Utility Users Tax (UUT); and
C. Direct staff to execute initial round of polling ( Attachment A ), delegate review of the polls to the Finance Committee, pending availability to stay on the workplan timeline, and incorporate the Council’s feedback of the poll, including the modeling assumptions identified in Parts A and Parts B of the motion; and
D. Remove the parcel tax as an option from the polling questions.

MOTION PASSED 6-1 (Tanaka no)

DISCUSSION & ANALYSIS
Staff presented updated analysis and other information for a potential utility on -bill tax at the Finance Committee’s December 7, 2021 meeting ( Agenda Item #2, begins on p. 55, CMR 13728). For continuity of work by the 2021 Finance Committee, the 2021 Committe e met on January 18, 2022 to review the third round of analysis of a potential business license tax ballot measure ( Agenda Item #1, p. 3, CMR 13875 ), along with a report of Initial Polling Results (Agenda Item #1, p. 31, CMR 13875 ) and staff’s draft Community Engagement and Outreach Plan.

Square Footage Business License Tax
In the January 18 th report to the Finance Committee, staff modeled a baseline scenario for a square footage business license tax and three options for the Finance Committee consideration:

Baseline Scenario: No Exemptions
• Excludes properties likely to be
exempt per CA law (banks, healthcare,
religious, education property types)
• Est. revenues: $15M to $59M
Option 1: Exemption for Retail (less
than or equal to 5,000 sf) and all
grocery stores
• Est. revenues: $14M to $57M
Option 2: Tiered Rates
• Flat fee for businesses less than or
equal to 5,000 sf ($50/year)
• For all others, assume monthly rate
per square foot
• Est. revenues: $14M to $56M
Option 3: Tiered Rates After Square
Footage Threshold
• Flat fee for first 5,000 sf
($50/year) and apply monthly
rate/sf beyond threshold
• Est. revenues $12M to $47M
The Finance Committee tentatively recommends that the Council direct staff to continue review of rates, using Option 3 as a starting point. This option would assess an annual flat fee of $50 for the first 5,000 square feet occupied by a business (regardless of business type) and apply a monthly rate for square footage occupied beyond 5,000 square feet. The Committee recommends exemptions for businesses subject to the City’s Transiency Occupancy Tax and grocery stores. The Committee identified preference for this model to address potential tax Packet Pg. 464
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rate ‘cliffs’ between establishments that are 4,999 square feet v ersus 5,001 square feet smoothing the financial impact . In addition, the committee discussed at length the threshold for a flat rate, the nexus between a potential tax for voter consideration as well as the nexus with the existing Business Registry Certif icate program. There was general acknowledgement by staff and the committee that there is a desire to smooth the process between these two potential structures to avoid duplication and confusion should a tax measure be approved by the voters.

Utility On-Bill Tax
Information for the Utility On -Bill Tax can be found in the staff report released on January 13, 2021 for this item ( CMR 13770, p. 384 ). Staff provided additional analysis of a utility on -bill tax to the Finance Committee on December 7, 2021 in response to the direction by Council at its November 8, 2021 meeting. This inform ation was presented to inform Finance Committee recommendations to Council regarding the form of the utility on -bill tax proposals and is detailed in CMR 13728. Based on initial poll results presented to the Finance Committee, the Committee recommends that the City Council direct staff to develop a proposal that ratifies the existing gas General Fund Equity Transfer by establishing a transfer based on a percentage of utility revenues and remove the proposal to increase the utility users tax from potential ballot measure consideration. Through the engagement and polling process, staff will gather feedback about whether to cap the transfer at CPI to align it with current practice rather than having it increase with utility rates, which are expected to increase at a rate greater than inflation over the next few years.

Palo Alto Community Engagement, Outreach & Initial Polling Results Public opinion research, ballot measure strategic planning, and community and stakeholder engagement are integral components of the Ballot Measure Workplan, which is designed with a goal of establishing an iterative appr oach with multiple touchpoints throughout the development and refinements of a potential ballot measure. The Finance Committee and Council provided feedback on a summary outline of the Palo Alto Community Issues survey at their October 19, 2021 and November 8, 2021 meetings, respectively.

The summary of initial polling results can be found in the January 18, 2022 Finance Committee staff report under Agenda Item #1, p. 31, CMR 13875 . This staff report also summarizes the 2022 City of Palo Alto Community and Stakeholder Engagement Plan that will be launched in February 2022.

Consideration for an Additional Poll (Three Polls in Total) The Finance Committee discussed the possibility of incorporating an additional poll (for a total of three rather than two polls) into the ballot measure workplan to inform undecided characteristics of a square footage business license tax and the development of ballot language.

The City’s consultant recommends that if the City chooses to add a poll, the remaining two polls be briefer than the initial poll and also likely smaller sample sizes. The next round of polling would test ch aracteristics of a potential business license tax (rate, exemptions etc.) and Packet Pg. 465
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clarifying questions from the initial round of polling such as the impact of two potential measures on one ballot. The third and final poll would continue to test the formal ball ot language.

Accommodating this additional poll would impact the timing, frequency, and volume of community and stakeholder outreach and the governance structure for Committee and Council review and direction . The outreach component of the workplan would be extended with final results not available until FY 2022 Q4 versus FY 2022 Q3. Outreach would need to be modified to conduct fewer sessions within the current plan schedule to accommodate the additional step from a workload capacity perspective with som e follow -up outreach between the two remaining polls as well . Previous City Council direction was to delegate review of polls to the Finance Committee as time allows on the workplan. Polling, when time permits, would be reviewed directly with the City Coun cil, omitting the Finance Committee review step , and at times potentially delegating to the City’s consultant FM3 the full process of drafting, review and execution of the poll . It is likely that at least one of the two remaining polls outline would be delegated to the City’s polling consultant for full development, review, and execution. There will also be a cost for the addition of the poll, and additional outreach and print/mailer media.

Staff expects these hard costs to not exceed $ 50,000, however ne ed time to refine these figures.

Staff recommends if the Council wishes for a workplan with three polls, that the Council both provide that direction as part of this item, identify as part of this item, priorities for questions to be tested as part of the next round of polling , and direct staff to work with the consultant to draft and execute the next round.

Conclusion & Next Steps
Further narrowing the focus of the potential revenue generating ballot measure is critical so that staff can continue advancing the Ballot Measure Workplan that was approved by Council in August. This staff report provides the Finance Committee’s recommendations to the City Council regarding polling results, a stakeholder engagement plan, and refined analysis for the potential b usiness license tax and utility on -bill tax. Additional exemptions and/or threshold considerations can be further refined as the ballot measure workplan proceeds and be tested through the second round of opinion research and outreach and engagement efforts.

TIMELINE
The below table recaps the Ballot Measure Workplan, as approved by the City Council in August, with minor adjustments, based on the process and discussion so far. The workplan does not assume an additional poll, as discussed by the Finance Committee.

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Ballot Measure Workplan Timeline
November 2021

COMPLETED
Council:
- Confirm potential revenue -generating proposals, including refined modeling and analysis
- Direction to complete initial polling and initial stakeholder outreach December 2021

COMPLETED
Finance Committee:
- Consideration of additional refinements and updates for potential revenue generating tax measure(s)
January 2022

TONIGHT
Recommended Special Finance Committee:
- Consideration of additional refinements and updates for potenti al revenue generating tax measure(s), business license tax City Council:

Review the results of the first round of polling and the Finance Committee’s recommendation from staff analysis related to the utility tax and seek direction to refine the utility ta x proposal and to proceed with stakeholder outreach.

February 2022 Community and Stakeholder Engagement Plan Launched - Community discussions and Focus Groups through March
April 2022 Finance and Council:
- Results of Community and Stakeholder Engagement re ported to Council
- Formalized discussion of funding resource allocation
- Outline of second round of polling to be reviewed
- Preliminary review of draft ballot language (April/May) May 2022 Second Round of Polling launched (early May)
June 2022 Council:
- Results of second round polling reported
- Final Approval of November 2022 Ballot Measures, including ballot measure language
August 2022 Language submitted to Santa Clara County Registrar of Voters November 2022 Election

FISCAL/RESOURCE IMPACT
Implementation of this workplan to develop a revenue generating local ballot measure will require significant resources that include internal staff, consultant expertise, as well as stakeholder engagement. Resource needs will scale proportionately based on the ba llot measure option and the complexity of the measure that the Finance Committee and City Council direct staff to pursue. It is important that the scope of the potential ballot measure(s) Packet Pg. 467
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be clearly defined and effectively narrowed for staff to successfull y progress through the workplan.

This initiative has required an equivalent of approximately two full time dedicated staff positions, however, as work continues to progress it is expected to take a significant increase in staffing resources including additional focused executive support from the Executive Leadership Team. This will have an impact on other projects. In addition, support is required from outside consultants and engagement with internal stakeholders in key departments. The City Council appropriated funding for this activity as part of the FY 2022 Preliminary 1 st Quarter. Additional contracts and/or proposed budget amendments will be brought forward for approval as appropriate.

The Santa Clara County Registrar of Voters estimates that placi ng two measures on the November 2022 election ballot will cost approximately $160,000, or $80,000 each.

Appropriation for these funds will be brought forward in the FY 2023 Proposed Budget.

The Finance Committee discussed the possibility of an additional round of polling in the ballot measure workplan. An additional round of polling requires an amendment to the professional services agreement with Fairbank, Maslin, Maullin, Metz & Associates ( FM3) and would require approval by the City Council, based on c ontract authority set forth in the Palo Alto Municipal Code. In addition to this, additional outreach for print and mailing would be needed as well.

STAKEHOLDER ENGAGEMENT
The Ballot Measure Workplan integrates stakeholder engagement through constituent p olling and stakeholder outreach. Staff, throughout the process and from previous conversations, has solicited input and feedback with the Finance Committee, the City Council, residents, and the business community. Staff received direction to proceed with i nitial polling at the November 8, 2021 Council meeting and reviewed results with the Finance Committee on January 18 2021 (CMR 13875). Based on the Ballot Measure Workplan, staff seeks the City Council’s direction to move forward with the Community and Stakeholder Outreach Plan to begin in February 2022.

The City has engaged with FM3 to perform polling, Lew Edwa rds Group for stakeholder engagement planning, and the Public Dialogue Consortium (PDC) for stakeholder engagement.

ENVIRONMENTAL REVIEW
This activity is not a project under California Environmental Quality Act (CEQA) as defined in CEQA Guidelines, secti on 15378, because it has no potential for resulting in either a direct or reasonably foreseeable indirect physical change in the environment. .

Attachments:
• AttachmentA: Attachment A: Summary of Prior Work on Potential Revenue Generating Ballot Measures
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ATTACHMENT A
Attachment A - 1
Summary of Prior Work on
Potential Revenue Generating Ballot Measures
The City of Palo Alto has been discussing its options for potential revenue-generating ballot measures through 2019 and 2020. This work was suspended at City Council direction in March 2020 in order to marshal available resources to manage through the COVID-19 pandemic. A brief timeline of the CMRs and discussions with the Finance Committee and the City Council since April of 2019, when staff was formally directed to begin working on this project by the City Council, is included below for additional context. The date, the forum of the meeting (Finance Committee or City Council), the summary title, and the CMR number are included for ease of reference.

Timeline
4/22/2019 City Council, “2019 Fiscal Sustainability Workplan”, CMR 10267 4/22/2019 City Council, “Approve Workplan for a Potential Revenue Generated Ballot Measure”, CMR 10261
6/18/2019 Finance Committee, “Review, Comment, and Accept Preliminary Revenue Estimates for Consideration of a Ballot Measure”, CMR 10392
8/20/2019 Finance Committee, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures”, CMR 10445
9/16/2019 City Council, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures and Budget Amendment”, CMR 10615
10/1/2019 Finance Committee, “Revised Workplan for Consideration of a Ballot Measure”, CMR 10712
10/15/2019 Finance Committee, “Stakeholder Outreach, Initial Polling, and Discussion of a Potential Ballot Measure”, CMR 10743
11/4/2019 City Council, “Potential Ballot Measure Polling/Outreach, Contract, Solicitation Exemption and Budget Amendment”, CMR 10792
12/2/2019 City Council, “Structure and Scenarios of Initial Round of Polling for a Potential Local Tax Measure”, CMR 10891
12/17/2019 Finance Committee, “Consideration, Evaluation, and Discussion of a Revenue Generating Local Tax Ballot Measure, Review of Refined Modeling, Analysis, Tax Structure and Recommendation to the City Council”, CMR 10655
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ATTACHMENT A
Attachment A - 2
1/27/2020 City Council, “Update, Consideration, and Potential Direction on Possible Local Tax Measure for 2020 Election”, CMR 11019
3/23/20 City Council, “Consideration of Analysis, Public Outreach, and Refined Polling and Further Direction on a Potential Local Business Tax Ballot Measure for 2020 Election”, CMR 11161
3/23/20 City Council, “Consideration of Analysis, Public Outreach, and Refined Polling and Further Direction on a Potential Local Business Tax Ballot Measure for 2020 Election”, At-Places Memorandum
6/15/2021, Finance Committee Staff Report, “Recommend the City Council Approve the Workplan for Pursuit of a Revenue-Generating Local Ballot Measure for the November 2022 General Election; Review and Potential Guidance to Staff on Affordable Housing Funding as Referred by the Council”, CMR 12299
8/16/2021 City Council, “Approve the Workplan for Development of a Revenue-Generating Local Ballot Measure for the November 2022 General Election; Review and Potential Guidance to Staff on Affordable Housing Funds as Referred by the City Council”, CMR 12381 9/21/2021 Finance Committee, “Discuss Updates and a Recommended Further Refinement of Potential Revenue Generating Local Ballot Measures,” CMR 13514 10/19/2021 Finance Committee, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures, and Review Draft Initial Polling Outline”, CMR 13648
11/8/2021 City Council, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures, and Review Draft Initial Polling Outline”, CMR 13687
12/7/2021 Finance Committee, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures”, CMR 13728 1/18/2022 Finance Committee, “Discuss Poll Results Regarding Potential 2022 Revenue Generating Ballot Measures and Recommend Further Refinement of Business License Tax and Utility Tax Proposals”, CMR 13875
1/24/2022 City Council, “Discuss Polling Results, Analysis, and Community Stakeholder Engagement Plan; Recommend Further Refined Parameters for a Possible Local Tax Ballot Measure for November 2022 Election (Business License Tax and Utility Tax Proposals); and Direct Staff on Related Items such as Community and Stakeholder Engagement Plan,” CMR 13770
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Palo Alto City CouncilJanuary 24, 2022

Palo Alto City Council
January 24, 2022