Palo Alto City Council
May 2, 2022

1 City Council & Public Improvement Corporation
Joint Special Meeting
Monday, May 2, 2022
5:00 PM
Council Chamber & Virtual
Amended Agenda
Amended agenda items appear in red below.

Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with the option to attend by teleconference/video conference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person.

HOW TO PARTICIPATE

VIRTUAL PARTICIPATION
CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/362027238) Meeting ID: 362 027 238 Phone:1(669)900-6833
The meeting will be broadcast on Cable TV Channel 26, live on YouTube at https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media Center at https://midpenmedia.org.

TIME ESTIMATES
Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public.

PUBLIC COMMENTS
Public Comments will be accepted both in person and via Zoom meeting. All requests to speak will be taken until 5 minutes after the staff’s presentation. Written public comments can be submitted i n advance to [email protected]

and will be provided to the Council and available for inspection on the City’s website. Ple ase clearly indicate which agenda item you are referencing in you r email subject line.

CALL TO ORDER
CLOSED SESSION (5:00 - 6:30 PM)
Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker.

1. CONFERENCE WITH CITY ATTORNEY-POTENTIAL LITIGATION
Subject: Threatened litigation regarding interpretation and application Public Letters
2 Spec ial Meeting May 2, 2022
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for publi
c inspection at www.CityofPaloAlto.org.
of non-conforming use provisions for 340 Portage and associated addresses, as set forth in September 10, 2021 letter from Sobrato Organization Authority: Potential Exposure to Litigation Under Government Code Section 54956.9(d)(2)
One Case, as Defendant
SPECIAL ORDER OF THE DAY (6:30 - 6:35 PM)

2. Appointment of Candidates for the Parks and Recreation Commission

RECESS FOR COUNCIL MEETING AND CALL TO ORDER PUBLIC IMPROVEMENT CORPORATION (6:35-6:45 PM)

3. Approval of Fiscal Year 2021 Palo Alto Public Imp rovement Corporation's Annual Financial Statement

ADJOUNRN PUBLIC IMPROVEMENT CORPORATION AND RECONVENE COUNCIL

MEETING
STUDY SESSION (6:45 - 8:15 PM)

4. Fiscal Year 2023 Proposed Budget Study Session Late Packet Report

AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT (8:15 - 8:30 PM)
Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes.

CONSENT CALENDAR (8:30 - 8:35 PM)
Items will be voted on in one motion unless removed from the calendar by three Council Members.

5. Approve Minutes from the April 11, 2022 City Council Meeting

6. Policy and Services Committee recommends that the City Council accept the recommendations from the September 14, 2021 and February 8, 2022 committee meetings regarding race and equity, with the following change: schedule a City Council Action Item (May 9, 2022) on whether to pursue a misdemeanor ordinance and other methods to deter hateful speech while complying with the constitution

7. Parks and Recreation Commission Recommend Adopting an Or dinance to Amend the Foothills Nature Preserve Attendance Range to 400 -600 Guests
Public Letters
Presentation
3 Spec ial Meeting May 2, 2022
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for publi
c inspection at www.CityofPaloAlto.org.

8. PUBLIC HEARING: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning), Chapters 18.04 (Definitions),

18.16 (Neighborhood, Community, and Serv ice Commercial (CN, CC and CS) Districts), 18.18 (Downtown Commercial (CD) Districts) and

18.30 (A) and (C) the Retail and Ground Floor Combining Districts.

Environmental Review: Exempt Under California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3) until December 16, 2022.

9. Approval of Contract No. C22183462 with Macias Gini & O'Connell LLP (MGO) for External Financial Audit Services in an Amount Not to Exceed $599,319 (Including a 10 Percent Contingency Additional Services Amount of $54,934) Through March 31, 2025.

10. Policy and Services Committee Recommends the City Council Accept the City Auditor’s Quarterly Status Report (Q2 of Fiscal Year 2021)

11. SECOND READING: Adoption of an Ordinance Amending Existing Palo Alto Municipal Code C hapter 5.30, Disposable Foodware Items and Other Disposable Products, to Comply with California Assembly Bill 1276 (Single -Use Foodware Accessories and Stan dard Condiments) Requiring Additional Restrictions on the Use of Disposable Foodware and Condiments (FIRST READING: April 18, 2022: PASSED 7-0) CITY MANAGER COMMENTS (8:35 - 8:50 PM)
BREAK (8:50 - 9:00 PM)

ACTION ITEMS
Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters.

12. Adoption of a Resolution Authorizing the Issuance and Sale of One or More Series of General Obligation Refunding (Refinancing) Bonds (Election of 2008) in an Aggregate Principal Amount Not to Exceed $58 million, and Execution of a Paying Agency Agreement, and Certain Other Related Documents and Authorizing Official Actions Related Thereto (9:00 – 9:15 PM)

13. Policy and Services Committee Recommends that the City Council Direct Staff to Reduce the Length of the Community Survey and Work with the Chair of the Policy & Services Committee as an Ad Hoc (9:15 – 9:30PM)

14. Clarification of In-Person Attendance Protocols for Council Committees and Boards and Commissions (Continue d from April 4, 2022 Meeting)(9:30 – 10:00 PM)
Q&A
Presentation
Presentation
4 Sp ecial Meeting May 2, 2022
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for publ
ic inspection at www.CityofPaloAlto.org.

COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS
Members of the public may not speak to the item(s)
CLOSED SESSION (10:00 – 10:30 PM)

15. CONFERENCE WITH REAL PROPERTY NEGOTIATORS Authority:

Government Code Section 54956.8 Property: 300 Homer Avenue, Assessors Parcel Numbe r 120- 17-093 Negotiating Party: Palo Alto Museum City Negotiators: Ed Shikada, Kiley Nose Subject of Potential Negotiations: lease Price and Terms of Payment

ADJOURNMENT

INFORMATION REPORTS
Information reports are provided for informational purposes only to the Council and the public but are not listed for action during this meeting’s agenda.

16. Informational Report on Two Developments on International Shipments of Palo Alto's Recyclable Materials

17. Sales Tax Digest Summary Calendar 2021 Q4

18. Investment Activity Report for the Third Quarter, Fiscal Year 2022

OTHER INFORMATION
Standing Committee Meetings
F
inance Committee May 3, 2022
P
ublic Letters to Council
Schedule of Meetings
5 Sp ecial Meeting May 2, 2022
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for publ
ic inspection at www.CityofPaloAlto.org.

PUBLIC COMMENT INSTRUCTIONS
M
embers of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone.

1. Written public comments may be submitted by email to [email protected].

2. Spoken public comments using a computer will be accepted through the teleconference meeting. To address the Council, click on the link below to access a Zoom -based meeting. Please read the following instructions carefully.

A. You may download the Zoom client or connect to the meeting in- browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers including Internet Explorer.

B. You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak.

C. When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak.

D. When called, please limit your remarks to the time limit allotted.

E. A timer will be shown on the computer to help keep track of your comments.

3. Spoken public comments using a smart phone will be accepted through t
he teleconference meeting. To address the Council, download the Zoom application onto your phone from the Apple App Store or Google Play Store and enter the Meeting ID below. Please follow the instructions B-E above.

4. Spoken public comments using a phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long yo u
hav
e to speak. When called please limit your remarks to the agenda item and ti
me limit allotted.

C
LICK HERE TO JOIN Meeting ID: 362 027 238 Phone:1(669)900-6833

City of Palo Alto (ID # 14332)
Office of the City Clerk
City Council CAO Report

Meeting Date: 5/2/2022 Report Type: Special Orders of the Day

Title: Appointment of Candidates for the Parks and Recreation Commission
From: Lesley Milton, City Clerk

Recommendation

Staff recommends City Council vote to appoint candidates to the following position on the Parks and Recreation Commission:

• One (1) position with a term ending on March 31, 2023.

**A majority vote (4 yes’s) is required to appoint each applicant.

Background

Boards and Commissions are established as advisory bodies to the City Council, made up of community volunteers that provide ess ential feedback on matters of importance to the community. The City Clerk’s office advertises and recruits for vacancies, the Council considers the applications, interviews desired candidates, and makes recommendations for appointment for the open positions.

On December 13, 2021, City Council appointed Parks and Recreation Commissioner Keith Reckdahl to the Planning and Transportation Commission. As such, the current vacancy staff is requesting to be filled is:

• One (1) position on the Parks and Recreatio n Commission, with term expiring March 31, 2023

For the Parks and Recreation Commission special r ecruitment effort, The City received a total of 5 qualified applications; 2 new applications were submitted during the 2022 recruitment period and 3 applicati ons were from the previous Fall recruitment.

Interviews

At the April 11, 2022 City Council meeting, the Council elected to interview 2 Packet Pg. 7

all 5 applicants received (04-11 PRC Recruitment Report). Interviews will be conducted on April 25, 2022 at approximately 5:30 PM as a special City Council meeting. Video recordings of the interviews will be made available on our City of Palo Alto YouTube Channel for the public and Council Members who are unable to attend.

All applications received for these positions can be accessed online ( All PRC Applications). City Council will incorporate all interviews into the final selection.

Membership Requirements

Per PAMC 2.25.010, The Parks and Recreation Commissio n requires each member of the commission to have Palo Alto residency and demonstrated interest in parks, open space and recreation matters.

Parks and Recreation Commission: One position
Term ending March 31, 2023
• Palo Alto Residency
• Each member of the Commission shall have a demonstrated interest in parks, open space and recreation matters.
• NEWLY RECEIVED APPLICANTS:

1. Lester Ezrati

2. Jason Schmidt
• PREVIOUSLY RECEIVED APPLICANTS:

3. Joy Oche

4. Mark Weiss

5. Eve Klein

Public Outreach

Palo Alto Municipal Code 2.16. 060 requires public notification regarding vacancies of the Commissions as follows, “The City Clerk shall exercise their discretion in choosing the method of advertisement that will most effectively reach potential candidates. ” Based on the September 14, 202 1 Policy & Services Committee meeting report (available here ) regarding Board and Commission Member demogr aphics and community representation the City Clerk’s office expanded recruitment efforts through additional means to “most effectively reach potential candidates”.

The Fall 2021 Boards and Commission recruitment invited applications from September 16, 2021 through October 26, 2021 through the new online application process. From that previous recruitment, 3 unselected applicants of the 15 confirmed their continued interest for the vacancy.

The Parks and Recreation Commission special recruitment invited applications from March 14, 2022 t hrough April 4, 2022 . The vacancy was advertised through various methods in partnership with the Communications team. This included paid and digital print advertisements 2 Packet Pg. 8

in the Daily Post; via the City’s website and soci al media channels; in physical locations of the Palo Alto Libraries and Community Centers; and distributed by e -mail and through the City subscription -based notification lists.
2 Packet Pg. 9
(ID # 14317)City of Palo Alto
Public Improvement Corporation
Staff Report
Meeting Date: 5/2/2022 Report Type: Public Improvement Corp. Board City of Palo Alto Page 1
Title: Approval of Fiscal Year 2021 Palo Alto Public Improvement Corporation's Annual Financial Statement
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Board of Directors of the Palo Alto Public Impro vement Corporation (PIC) approve the Fiscal Year (FY) 2021 Annual Financial Report for the Palo Alto Public Improvement Corporation.

Background
The PIC is a nonprofit corporation formed by the City in 1983, allowing the City to issue Certificates of Parti cipation (COPs) to fund capital improvements. The PIC, through a lease structure, finances the acquisition, improvement, and construction of City facilities. The PIC uses the lease payments by the City’s General Fund to pay the debt service on the COPs. On July 13, 1998, Council adopted a resolution establishing itself as the Board of Directors of the PIC.

The bylaws of the PIC require the Board of Directors of the Corporation to meet at least annually and approve the annual financial report for the Corpora tion. Therefore, the City Council is required to meet annually as the Board of the PIC.

In 1983 and 1998, the City of Palo Alto issued COPs to fund improvements to the Civic Center and the Golf Course, respectively. In 2002, the Civic Center bonds were re financed due to a lower interest rate environment and COPs were issued to finance the construction of commercial space adjacent to the new parking structure on Bryant/Florence Street. These bonds (referred to as the Downtown Parking Improvement bonds or 20 02B COP) were used to build a two story above -ground structure of approximately 7,638 square feet which was leased to a commercial tenant (Form Fitness Gym).

In fiscal year 2018, the City issued the 2018 Capital Improvement Project and Refinancing COPs in the amount of $9 million to refinance the 2002B COPs ($0.6 million) and to finance renovations for the Palo Alto Municipal Golf Course ($8.4 million). Fire Station 1 was used as the leased property and collateral for these COPs since it had a market value closer to the COPs issuance amount. Besides the net present value savings of $0.2 million or 6.47 percent on the 2002B refunded bonds, an added benefit was to substitute the Civic Center with Fire Station 1 3 Packet Pg. 10

City of Palo Alto Page 2

as the leased property/collateral. This provides flexibility to leverage the high value of the Civic Center to finance future infrastructure COPs bond issuance (e.g. Public Safety building COPs).

In fiscal year 2019, the City issued the California Avenue Parking Garage Tax -exempt Series A ($26.8 millio n plus $4.9 million premium) and Taxable Series B ($10.6 million) COPs. These bonds were issued to fund the construction of the new California Avenue parking garage.

Rinconada Library was used as collateral during the garage construction and, upon complet ion of the garage, the newly build California Avenue Parking garage became the leased property/collateral for these COPs. Since this garage is open, the substitute in collateral to the garage is being done. To preserve greater operational flexibility to us e this garage facility over the life of the bonds (e.g. lease portion of the garage for private parking or other commercial use), a portion of the bonds were issued as taxable bonds.

In fiscal year 2021, the City issued the 2021 Public Safety Building ta x-exempt COPs ($101.5 million plus $6.5 million premium) for the construction of the City’s new public safety building.

The debt service is payable solely from and secured by the lease payments to be made by the City’s General Fund to the Public Improvemen t Corporation pursuant to the Lease Agreement.

Civic Center was used as collateral during the building construction and, upon completion of the building, the newly build Public Safety Building will become the leased property/collateral for these COPs.

The reserve account requirement was waived on all the outstanding COPs due to the City being a highly rated bond issuer. This resulted in additional interest savings and cost of bond issuance amount.

Discussion
The attached financial statement shows the f inancial condition of the PIC. The debt service payments have been made on time and all financial requirements have been met. At year -end, June 30, 2021, total outstanding debt principal on the COPs equaled $146.5 million as follows:

COPs Description
Principal
Outstanding
(millions)
Fiscal Year Debt
will be Retired
2018 Capital Improvement (2002B
Refinance and Golf Course) $ 8.6 2048
2019 California Ave. Parking Garage $ 36.4 2049 2021 Public Safety Building $101.5 2051
Total COPs $146.5

Staff recommends that the Board of Directors of the Palo Alto Public Improvement Corporation (PIC) approve the FY 2021 financial statement for the PIC.

3 Packet Pg. 11

City of Palo Alto Page 3

Stakeholder Engagement
Staff works internally and coordinates with the City Auditor’s Office third party external auditor Macias Gini & O’Connell LLP (MGO) to prepare this report.

Resource Impact
Approval of the Palo Alto Public Improvement Corporation’s financial statements will have no resource impact.

Policy Implications
Approval of the Palo Alto Public Improvement Corporation’s financial statements is consistent with prior Council policy direction and resolutions.

Environmental Review
Approval of the annual PIC financial statement is not a project, as defined in Section 21065 of the California Environmental Quality Act (CEQA).

Attachments:
• Attachment3.a: Attachment A: FY 2021 PIC Annual Financial Statement 3 Packet Pg. 12

PALO ALTO PUBLIC IMPROVEMENT

CORPORATION
(A Component Unit of the
City of Palo Alto, California)
Annual Financial Report
For the Year Ended June 30, 2021
Attachment A
Attachment A - 1

3.a
Packet Pg. 13

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Annual Financial Report
For the Year Ended June 30, 2021

Table of Contents

Page

Independent Auditor’s Report ................................................................................................................... 1

Management’s Discussion and Analysis (Unaudited) .............................................................................. 3

Basic Financial Statements

Government-wide Financial Statements:

Statement of Net Position ................................................................................................................... 5 Statement of Activities ....................................................................................................................... 6

Debt Service Fund Financial Statements:

Balance Sheet ..................................................................................................................................... 7 Statement of Revenues, Expenditures and Changes in Fund Balance ................................................ 8

Notes to the Basic Financial Statements .................................................................................................. 9

Attachment A
Attachment A - 2

3.a
Packet Pg. 14
www.mgocpa.com
Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596

1 Independent Auditor’s Report

The Honorable Mayor and
Members of the City Council of the
City of Palo Alto, California

We have audited the accompanying financial statements of the governmental activities and the major fund of Palo Alto Public Improvement Corporation (Corporation), a co mponent unit of the City of Palo Alto, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively co mprise the Corporation’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for t he preparation and fair presenta tion of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from materia l misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express opinions on these financial st atements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan a nd perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to d esign audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opi nion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An a udit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficie nt and appropriate to provide a basis for our audit opinions.

Opinions
In our opinion, the financial statements referred to above pres ent fairly, in all material respects, the respective financial position of the governmental activities an d the major fund of the Corporation as of June 30, 2021, and the respectiv e changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Attachment A
Attachment A - 3

3.a
Packet Pg. 15

2 Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States o f America require that the management’s discussion and analysis on pages 3 through 4 be presented to su pplement the basic financial statements.

Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, econo mic, or historical context. We have applied certain limited procedures to the required supplementary inform ation in accordance with auditing standards generally accepted in the United States of America, w hich consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial s tatements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Walnut Creek, California
November 15, 2021
Attachment A
Attachment A - 4

3.a
Packet Pg. 16

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Management’s Discussion & Analysis (Unaudited)
For the Year Ended June 30, 2021

3 The Palo Alto Public Improvement Corporation (Corporation), a c omponent unit of the City of Palo Alto (City), follows the provisions of Governmental Accounting Stand ards Board (GASB) Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments. The Corporation is controlled by the City and was organized to assist the City in financing public improvements. The Corporation issues debt and turns the proceeds of the debt over to the City under lease agreements that provide a revenue source for the repayment of this debt. The Corporation has three outstanding debts and has turned over the proceeds to the City, which pledged certain lease payments as collateral for this debt as discussed in Note 4 to the financial statements.

FINANCIAL HIGHLIGHTS

GASB Statement No. 34 requires the issuance of government-wide financial statements as well as fund financial statements. The governme nt-wide financial statements report the balance of the Corporation’s long-term debt while the individual fund statements do not.

In fiscal year 2018, the City issued 2018 Capital Improvement P roject and Refinancing Certificates of Participation (2018 COPs) in the amount of $9.0 million to refi nance the 2002B Downtown Parking Improvements Certificates of Participation remaining balance of $805 thousand, and also to fund the Palo Alto Municipal Golf Course renovations.

In fiscal year 2019, the City issued the 2019 California Avenue Parking Garage tax exempt Series A and taxable Series B Certificates of Participation (2019A and 2019B COPs) in the amount of $26.8 million plus $4.9 million premium, and $10.6 million, respectively. Th e 2019A and 2019B COPs are issued to fund the construction of the new California Avenue parking garage.

In fiscal year 2021, the City issued the 2021 Public Safety Building Certificates of Participation (2021 COPs) in the amount of $101.5 million plus $6.5 million premium. The 2021 COPs are issued to fund the construction of the new public safety building.

As of June 30, 2021, the Corporation has the following outstand ing debt: the 2018 COPs, 2019A and 2019B COPs, and 2021 COPs

At the government-wide level, the interest and fiscal agent cha rges were $4.0 million for fiscal year 2021, an increase of $2.0 million from the prior year. The interest on leases from the City of Palo Alto was $8.6 million, an increase of $6.6 million from the prior year. The i ncreases of interest and fiscal charges and interest on leases are due to the issuance of the 2021 COPs during the year which lead to the increase of outstanding bonds and incurrence of one-time costs of issuance.

The Corporation ended fiscal year 2021 with total assets of $16 3.1 million, an increase of $112.3 million from the prior year. Total assets consisted of $4.7 million in cash and investments, $1.1 million of lease interest receivable from the City of Palo Alto, and $157.4 million of investment in leases to the City of Palo Alto. The total liabilities were $158.5 million, an increase of $107.7 million from the prior year. The increases of assets and liabilities resulted from the issuance of the 2021 COPs during the year.

At the fund level, the Corporation’s expenditures exceeded revenues by $103.4 million due to the payment of lease proceeds to the City of Palo Alto in relation to the issuance of 2021 COPS during the year. As of June 30, 2021, the C orporation had one fund, the De bt Service Fund, which reported a $4.7 million restricted fund balance.

Attachment A
Attachment A - 5

3.a
Packet Pg. 17

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Management’s Discussion & Analysis (Unaudited) (Continued) For the Year Ended June 30, 2021

4 OVERVIEW OF THE CORPORATION’S BASIC FINANCIAL STATEMENTS

The annual financial report is comprised of two parts:

1) Management’s discussion and analysis (this part),

2) The basic financial statements, which include the government-wide and the fund financial statements, along with the notes to these financial statements.

The basic financial statements comprise the government-wide fin ancial statements and the fund financial statements. These two sets of financial statements provide two different views of the Corporation’s financial activities and financial positions, both short-term and long-term.

The government-wide financial st atements provide a long-term vi ew of the Corporation’s activities as a whole, and comprise the statement of net position and the state ment of activities. The statement of net position provides information about the financial position of the Corporation as a whole, including all its long-term liabilities on the full accrual basis, similar to tha t used by corporations. The statement of activities provides information about all the Corporation’s rev enues and expenses on the full accrual basis, with the emphasis on measuring net revenues or expenses of the Corporation’s program. The statement of activities explains in detail the change in net position for the year.

The fund financial statements r eport the Corporation’s operatio ns in more detail than the corporate-wide statements and focus primarily on the short-term activities of the debt service fund. Fund financial statements measure only current revenues and expenditures; curr ent assets, liabilities and fund balances; and they exclude capital assets and long-term debt.

Together, these statements along with the notes to the financia l statements are called the basic financial statements.

DEBT ADMINISTRATION

The Corporation issues debt in the form of Certificates of Part icipation (COPs) to be repaid from future lease receipts from the City. Legally, these COPs issues are th e Corporation’s debt only; the City is liable only for the payment of the amounts set forth in the lease securing each debt issue.

As of June 30, 2021, the Corporation has the following outstand ing debt: 2018 COPs, 2019A and 2019B COPs, and 2021 COPs with outstandi ng principal balances of $8.6 million, 36.4 million and $101.5 million, respectively.

ECONOMIC OUTLOOK AND MAJOR INITIATIVES

The economy of the City and its major initiatives for the comin g year are discussed in detail in the City’s Comprehensive Annual Financial Report.

CONTACTING THE CORPORATION’S FINANCIAL MANAGEMENT

These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the Corporation’s finances. Questions abo ut these financial statements should be directed to the Finance Department of the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301.

Attachment A
Attachment A - 6

3.a
Packet Pg. 18
Assets
Cash held for operations 5,597 $
Cash and investments held by trustee 4,655,285
Lease interest receivable 1,057,878
Investment in leases to the City of Palo Alto 157,403,773 Total assets 163,122,533
Liabilities
Interest payable 1,057,878
Long-term debt:

Due in one year 1,243,353
Due in more than one year 156,160,420
Total liabilities 158,461,651
Net Position
Restricted for debt service 4,660,882 $

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Statement of Net Position
June 30, 2021
See accompanying notes to financial statements.
5 Attachment A
Attachment A - 7

3.a
Packet Pg. 19
Expenses
Interest and fiscal agent charges 3,962,421 $
Program revenues
Interest on leases from the City of Palo Alto 8,585,169 Net program revenues 4,622,748
General revenues
Investment earnings 56
Change in net position 4,622,804
Net position, beginning of the year 38,078
Net position, end of the year 4,660,882$

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Statement of Activities
For the Year Ended June 30, 2021
See accompanying notes to financial statements.
6 Attachment A
Attachment A - 8

3.a
Packet Pg. 20
Assets
Cash held for operations 5,597 $
Cash and investments held by trustee 4,655,285
Lease interest receivable 1,057,878
Investment in leases to City of Palo Alto 157,403,773
Total assets 163,122,533$
Deferred Inflows of Resources
Unavailable lease receipts from the City of Palo Alto 158,461,651$ Fund balance
Restricted for debt service 4,660,882
Total deferred inflows of resources and fund balance 163,122,533$ Reconciliation of fund balance to net position
Fund balance restricted for debt service 4,660,882$
Long-term receivables are not available to pay for current period expenditures and are considered unavailable on the governmental fund balance sheet 158,461,651 Some liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the Fund:

Interest payable (1,057,878)
Long-term debt due within one year (1,243,353)
Long-term debt due in more than one year (156,160,420)
Net position of governmental activities 4,660,882$

PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Balance Sheet
June 30, 2021
Debt Service Fund
See accompanying notes to financial statements.
7 Attachment A
Attachment A - 9

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Revenues:

Lease receipts from the City of Palo Alto:

Principal 815,000$
Interest 2,093,576
Others 1,588
Investments earnings 56
Total revenues 2,910,220
Expenditures:

Intergovernmental disbursement to the City of Palo Alto 102,000,000 Debt service:

Principal repayment 815,000
Interest and fiscal agent charges 2,093,576
Costs of issuance 1,408,212
Total expenditures 106,316,788
Deficiency of revenues under expenditures (103,406,568) Other Financing Sources:

Issuance of bonds 101,505,000
Bond premium 6,524,372
Total other financing sources 108,029,372
Net change in fund balance 4,622,804
Fund balance, beginning of the year 38,078
Fund balance, end of the year 4,660,882$
Reconciliation of net change in fund balance to change in net position Net change in fund balance - debt service fund 4,622,804$ Amounts reported for governmental activities in the statement of activities are different because:

Repayment of bond principal is an expenditure in the governmental funds, but in the statement of net position the repayment reduces long-term liabilities. 815,000 Interest accrued on long-term debt and amortization of bond premium do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.

Change in interest payable (707,124)
Amortization of bond premium 246,491
The issuance of bonds are reported as other financing sources in governmental funds and thus contribute to the change in fund balances. However, bonds issuance change long-term liabilities in the statement of net position and do not affect the statement of activities.

Issuance of bonds (101,505,000)
Bonds premium (6,524,372)
Some amounts reported in the statement of revenues, expenditures and changes in fund balances reflect the timing of collection of assets which are not includable as revenues on the statement of activities.

Lease receipt for bond principal repayment (815,000)
Lease receipt for interest payment 707,124
Intergovernmental disbursement to the City of Palo Alto 102,000,000 Lease proceeds from new bond issuance 6,029,372
Impact of bond premium amortization on lease receipt (246,491) Change in net position of governmental activities 4,622,804$

PALO ALTO PUBLIC IMPROVEMENT CORPORATIO
N
(A Component Unit of the City of Palo Alto)
Statement of Revenues, Expenditures and Changes in Fund Balance For the Year Ended June 30, 2021
Debt Service Fund
See accompanying notes to financial statements.
8 Attachment A
Attachment A - 10

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements
For the Year Ended June 30, 2021

9 NOTE 1 – DESCRIPTION OF REPORTING ENTITY

The Palo Alto Public Improvement Corporation (the Corporation) was incorporated in September 1983 under the General Nonprofit Corporation Law of the State of Cal ifornia to acquire, construct and lease capital improvement projects. The Corporation is exempt from fe deral income taxes under Section 501(c)(4) of the Internal Revenue Code. The Corporation provides financing of public capital improvements for the City through the issuance of Certificates of Participation (COPs), a form of debt which allows investors to participate in a stream of future lease payments. Proceeds from the COPs are used to construct projects which are leased to the City for lea se payments which are sufficient in timing and amount to meet the debt service requirements of the COPs.

The Corporation is an integral part of the City of Palo Alto, C alifornia (City). It primarily services the City and its governing body is composed of the City Council. Therefore, the financial data of the Corporation has also been included as a blended component unit within the City’s comprehensive annual financial report for the year ended June 30, 2021.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation
Government-wide Statements: The statement of net position and the statement of activities include the financial activities of the Corporation. Eliminations have been made to minimize the double counting of internal activities.

The statement of activities presents a comparison between direc t expenses and program revenues for each function of the Corporation’s activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program.

Revenues that are not classifie d as program revenues, including investment earnings, are presented as general revenues.

Fund Financial Statements: The fund financial statements p rovide information about the Co rporation’s funds. The emphasis of fund financial statements is on major in dividual funds, of which the Corporation only reports one debt service fund.

(b) Major Fund
Major funds are defined as funds that have either assets, liabi lities, revenues or expenditures equal to ten percent of their fund-type total and five percent of the grand total. The Corporation has one fund which is reported as a major governmental fund in the accompanying financial statements as follows:

Debt Service Fund – This fund accounts for debt service payments on the Corporation’s long-term debt.

Attachment A
Attachment A - 11

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
10 NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) Basis of Accounting
The government-wide financial statements are reported using the e conomic resources measurement focus
and the full accrual basis of accounting. Revenues are recorded when earned ad expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Governmental funds are reported using the current financial res ources measurement focus and the modified accrual basis of accounting. Under this method, reven ues are recognized when measurable and available. The City considers revenues susceptible to accrual to be available if the revenues are collected within ninety days after year-e nd. Expenditures are recorded w hen the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. (d) Investment in Leases
Improvements financed by the Corporation are leased to the City for their entire estimated useful life and
will become the City property at the conclusion of the lease on November 1, 2050. The Corporation therefore records the present value of the lease and considers the leased improvement to have been sold for this amount when leased.
(e)
Net Position
The
government-wide financial statements utilize a net position presentation. Net position is further categorized as net investment in capital assets, restricted and /or unrestricted. As of June 30, 2021, the entire net position was considered restricted.

Restricted Net Position – This category presents external restrictions imposed by credi tors, grantors, contributors or laws or regulations of other governments and re strictions imposed by law through constitutional provisions or enabling legislation.
(f) Deferred Inflows of Resources
A
deferred inflow of resources is defined as an acquisition of net position or fund balances applicable to a future reporting period and will not be recognized as an inflow of resources (revenue) until that time. On the governmental fund balance sheet, the lease receipts from th e City corresponding to the debt are recorded as deferred inflows of resources since the balances are not current financial resources. (g) Fund Balances
At
June 30, 2021, the Corporation’s governmental fund’s fund ba lances include the following classification:

Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabli ng legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.

Attachment A
Attachment A - 12

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021

11 NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h) Effects of New Pronouncements
The Corporation is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following Governmental Accounting Standards Board (GASB) Statement:

In June 2017, the GASB issued Statement No. 87, Leases. The objective of this statement is to better meet the information needs of financial statement users by impr oving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilitie s for leases that previously were classified as operating leases and recognized as inflows of resources or outf lows of resources based on the payment provisions of the contract. It establishes a single model for l ease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right -to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activitie s. The requirements of this statement are effective for the Corporation’s fiscal year ending June 30, 2022.

(i) Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make est imates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

NOTE 3 – CASH AND INVESTMENTS HELD BY TRUSTEE

(a) Interest Rate Risk
Interest rate risk is the risk that a change in market interest rates will adversely affect the fair value of an investment. Normally, the longe r it takes an investment to reach maturity, the greater will be that investment’s sensitivity to changes in market rates. Information about the sensitivity of the fair values of the Corporation’s investments to market interest rate fluctuati ons is provided by the following table that shows the distribution of the Corporation’s investments by maturity:

Investment Type Amount Maturity Date
Money Market Mutual Fund 4,655,285$ 19 days

Credit Risk
Generally, credit risk is the risk that an issuer of an investm ent will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rati ng by a nationally recognized statistical rating organization. As of June 30, 2021, the Corporation’s in vestments in money market mutual funds are rated AAAm by Standard & Poor’s.

(b) Fair Value Hierarchy
The City categorizes its fair value measurements within the fai r value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active m arket for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are sig nificant unobservable inputs. The Corporation’s investments in money market mutual funds are not subject to the fair value hierarchy.

Attachment A
Attachment A - 13

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
12 NOTE 3 – CASH AND INVESTMENTS HELD BY TRUSTEE (Continued) (c) Investment Policy
The Corporation must maintain required amounts of cash and inve stments by trustee under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the Corporation fails to meet its obligation under these debt issue s. The California Government Code (Code) requires these funds to be invested in accordance with bond ind entures or State statutes. All these funds have been invested as permitted under the Code. The Investment Policy is described in detail in the City’s Annual Comprehensive Financial Report.

The table below identifies the investment types that are author ized by the City’s Investment Policy. The table also identifies certain provisions of the City’s Investment Policy that address interest rate risk, credit risk and concentration of credit risk.

Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
Portfolio
Maximum
Investment in
One Issuer
U.S. Government Securities 10 years (*) N/A No Limit No Limit U.S. Government Agency Securities 10 years (*) N/A No Limit (A) No Limit Certificates of Deposit 10 ye ars (*) N/A 20% 10% of the par value of
portfolio
Bankers Acceptances 180 days N/A 30% $5 million
Commercial Paper 270 days A-1 15% $3 million (B)
Local Agency Investment Fund N/A N/A No Limit $75 million per account
Short-Term Repurchase Agreements 1 year N/A No Limit No Limit City of Palo Alto Bonds N/A N/A No Limit No Limit
Money Market Deposit Accounts N/A N/A No Limit No Limit Mutual Funds N/A N/A 20% 10%
Negotiable Certificates of Deposit 10 years (*) N/A 10% $5 million Medium-Term Corporate Notes 5 years AA 10% $5 million
10 years (*) AA/AA2 30% No Limit
Supranational 5 years AA/AA2 20% 10% of the par
value of
portfolio
(A)
(B) The lesser of $3 million or 10% of outstanding commercial paper of any one institution. (*) The maximum maturity is based on the Investment Policy that is approved by the City Coun cil
a
nd is less restrictive than the California Governmental Code.

Authorized Investment Type
Bonds of State of California Municipal
Agencies & Other U.S. States
Callable and multi-step securities are limited to no more than 25% of the par value of the portfolio, provided that:
1) the potential call dates are known at the time of purchase, 2) the interest rates at which they "step-up" are known at the time of purchase, and 3) the entire face value of the security is redeemed at the call date.

Attachment A
Attachment A - 14

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021

13 NOTE 4 – CERTIFICATES OF PARTICIPATION

The Corporation’s long-term debt activities are presented below:

Balance Balance Amount due
July 1, 2020 Additions Retirements June 30, 2021 in one year Certificates of Participation
2018 Capital Improvement Project

2.20-4.22%, due 11/1/2047 8,755,000$ -$ 185,000$ 8,570,000$ 190,000$ 2019 California Ave. Parking Garage
Series A & B

2.5%-5%, due 11/1/2048 36,995,000 - 630,000 36,365,000 645,000 2021 Public Safety Building
2%-5%, due 11/1/2050 - 101,505,000 - 101,505,000 - Add: Unamortized Premium 4,685,892 6,524,372 246,491 10,963,773 408,253 Total 50,435,892$ 108,029,372$ 1,061,491$ 157,403,773$ 1,243,253$

On June 1, 2018, the City issued the 2018 Capital Improvement P roject and Refinancing Certificates of Participation (2018 COPs) in the amount of $9.0 million to full y refinance the 2002B COPs and to fund the renovation of the Palo Alto Municipal Golf Course. Princip al payments are due annually on November 1 and interest payments semi-annually at various rates on May 1 and November 1. The 2018 COPs are secured by lease revenues received by the Corporation from any City’s General Fund revenue source.

On March 21, 2019, the City issued the 2019 California Avenue P arking Garage tax exempt Series A and taxable Series B Certificates of Participation (2019A and 2019B COPs) in the amount of $26.8 million plus $4.9 million premium, and $10.6 million, respectively, for the construction of the new California Avenue Parking Garage. Principa l payments are due annually on N ovember 1 and interest payments semi-annually at various rates on May 1 and November 1. The 201 9A and 2019B COPs are secured by lease revenues received by the Corporation from any City’s General Fund revenue source.

On March 24, 2021, the City issued the 2021 Public Safety Build ing Certificates of Participation (2021 COPs) in the amount of $101.5 million plus $6.5 million premium for the construction of the new public safety building. Principal payments are due annually on November 1 and interest payments semi-annually at various rates on May 1 and November 1. The 2021 COPs are secured by lease revenues received by the Corporation from any City’s General Fund revenue source.

Attachment A
Attachment A - 15

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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto, California) Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021

14 NOTE 4 – CERTIFICATES OF PARTICIPATION (Continued)

Future annual debt service on the outstanding debt is shown below:

For the Year Interest Total
Ending June 30, Principal Payment Payment
2022 835,000$ 3,534,317$ 4,369,317$ 2023 860,000 4,970,244 5,830,244 2024 3,025,000 4,880,640 7,905,640 2025 3,170,000 4,729,195 7,899,195 2026 3,335,000 4,569,844 7,904,844 2027-2031 19,340,000 20,154,727 39,494,727 2032-2036 23,975,000 15,481,970 39,456,970 2037-2041 28,105,000 11,306,264 39,411,264 2042-2046 32,530,000 6,831,131 39,361,131 2047-2051 31,265,000 1,836,486 33,101,486 146,440,000$ 78,294,818$ 224,734,818$

Events of Default and Acceleration Clauses
Generally, the Corporation is considered to be in default if th e Corporation fails to pay the principal of and interest on the outstanding long-term debt when become due and payable. If an event of default has occurred and is continuing, the principal of the long-term debt , together with the accrued interest, may be declared due and payable immediately.

Attachment A
Attachment A - 16

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City of Palo Alto (ID # 14333)
City Council Staff Report
Meeting Date: 5/2/2022 Report Type: Study Session
City of Palo Alto Page 1
Title: Fiscal Year 2023 Proposed Budget Study Session
From: City Manager
Lead Department: Administrative Services
This item will present the F iscal Year (FY) 2023 Proposed Budget and provide for discussion by the City Council regarding the FY 2023 Budget and priorities. Proposed Budget documents are expected to be released by the end of April 2022 . Once released, these documents will be linked to this agenda.

Detailed discussions are scheduled to occur with the Finance Committee on May 10th and 11th, with a final wrap -up discussion scheduled May 24th. The Budget will return to Council in June 4 Packet Pg. 29
for final adoption.

Late Packet Revision
The following reports have been linked on the City's
Website as of Friday April 29th:

FY 2023 Proposed Capital budget
FY 2023 Proposed Operating Budget
City of Palo Alto (ID # 14289)
Office of the City Clerk
City Council CAO Report
Meeting Date: 5/2/2022 Report Type: Consent Calendar
Title: Approve Minutes from the April 11, 2022 City Council Meeting
From: Lesley Milton, City Clerk
Staff recommends Council to review and approve the minutes as presented.

ATTACHMENTS:
• Attachment5.a: Attachment A: 20220411amCCs (PDF)
5 Packet Pg. 30

CITY COUNCIL

DRAFT ACTION MINUTES

Special Meeting
April 11, 2022
The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:02 P.M.

Present: Burt, Cormack, DuBois, Filseth, Kou, Stone, Tanaka

Absent: None

Special Orders of the Day

1. Select Applicants to Interview for the Parks & Recreation Commission.

Public comment: None

MOTION: Council Member Cormack moved, seconded by mayor Burt to schedule interviews with all new applicants for one vacancy on the Parks and Recreation Commission.

MOTION PASSED: 7-0

Study Session

2. Annual Earth Day Report Study Session.

NO ACTION TAKEN

Agenda Changes, Additions and Deletions

Public Comment

Consent Calendar

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DRAFT ACTION MINUTES

Sp. City Council Meeting
Draft Action Minutes: 4/11/2022
Council Member Tanaka registered a no vote on Agenda Item Number 5, 6.

MOTION: Mayor Burt moved, seconded by Council Member DuBois to approve Agenda Item Numbers 3-10.

3. Approval of Contract Number C22181467 with Bureau Veritas Technical Assessments LLC, for an Amount Not to Exceed $359,779 for a City Facility Condition and Electrification Assessment and Use of Brightly Cloud-based Capital Planning Software, Capital Improvement Program Projects (PE-20002 and TE-13004) and Budget Amendments in the Electric Fund and Capital Improvement Fund.

4. Approval of the Economic Recovery Advisory Report as Recommended by the Policy and Services Committee.

5. Adoption of Resolution 10028 Authorizing an Installment Sale Agreement with the California State Water Resource Control Board for Financing of the Design and Construction of the Secondary Treatment Upgrades Project Funded in Wastewater Treatment Enterprise Fund Capital Improvement Program, Project WQ -19001, at the R egional Water Quality Control Plant.

6. Approval of Amendment No. 1 to Professional Services Contract Number S22183902 Teri Black and Company, LLC to Increase the Not - to-Exceed Compensation by $180,000 (to $265,000) and to Extend the Term of the Contract to J anuary 2024 for City Wide Executive Recruitments and Approve a Budget Amendment in the General Fund.

7. Approval of Amendment Number 4 to Contract Number C14152163 With Townsend Public Affairs for State Legislative Advocacy to Extend the Term for one Additional Year and add $102,000 for a Total Not -to- Exceed Amount of $901,000.

8. Easement Vacation at 14244 Amherst Court, Los Altos Hills, CA.

9. SECOND READING: Adoption of an Ordinance Dedicating 0.64 Acres of Land Adjacent to 3350 Birch Street to Become Part of the Boulware Park (FIRST READING: February 10, 2020 PASSED: 7-0).

10. SECOND READING: Adoption of an Interim Ordinance Establishing Objective Urban Lot Split Standards and Further Refinements to SB 9 Development Standards; Authorizing the Public Works Director to Publish Objective Standards Regarding Adjacent Improvements

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DRAFT ACTION MINUTES

Sp. City Council Meeting
Draft Action Minutes: 4/11/2022
Related to SB 9 Projects; and Direction Regarding Listing Properties Eligible for Historic Status (FIRST READING: March 21, 2022 Council Meeting, MOTION PASSED: 6 -0, DuBois absent); Adoption of Resolution Approving Objective Standards for Urban Lot Splits.

MOTION SPLIT FOR THE PURPOSE OF VOTING
MOTION TO APPROVE ITEM 3, 4, 6-10 PASSED: 7-0
MOTION TO APPROVE ITEM 5-6 PASSED: 6-1, Tanaka no

City Manager Comments
Ed Shikada, City Manager

Action Items

11. TEFRA HEARING: Regarding Conduit Financing for the Silicon Valley International School Project Located at 151 Laura Lane and 1066 East Meadow Circle, Palo Alto, and Approving the Issuance of a Tax Exempt Loan by the California Municipal Finance Authority for the Purpose of Financing and Refinancing the Acquisition, Construction, Improvement, Equipping and Maintenance of Educational, Support and Administrative Facilities Owned and Operated Within the City by Silicon Valley International School.

MOTION: Council Member Cormack moved, seconded by Mayor Burt to adopt a Resolution approving the issuance of the bonds by the Californ ia Municipal Finance Authority (CMFA) for the benefit of Silicon Valley International School.

MOTION PASSED: 7-0

12. Public Hearing: Adoption of Ordinance Clarifying Ambiguities in Height Transitions, Adding RMD to the list of Residential Districts an d Amending the Setback for the RM-40 Zone District.

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DRAFT ACTION MINUTES

Sp. City Council Meeting
Draft Action Minutes: 4/11/2022
MOTION: Council Member DuBois moved, seconded by Council Member Filseth to:

A. Approve the proposed changes to the height transitions and other development standards as included in the staff report and At Places memo as follows:

Section 9 – PC District (18.38.150):

Keep “Sites abutting or having….”
Change “…R-1, R-2, RMD, RM-20…” to “…R-1, R-2, RMD, RM…” Remove “Abutting” where added
B. Reinsert to Section 18.13.040 Development Sta ndards, as listed in Table 2 F ootnote 12 “…and the context-based criteria outlined in Section 18.13.160.”
MOTION APPROVED: 6-1, Kou No

13. Review and Approval of Workplans for City Council Committees in 2022.

ORIGINAL MOTION: Council Member Filseth moved, seconded by Council Member Kou to approve the list of tentative topics and regularly scheduled work that the City Council Standing Committees of Policy and Services and Finance expect for 2022.

PROPOSED AMENDMENT: Motion b y Council Member Cormack and seconded by Mayor Burt to add to the Policy & Services topic list a review of the Board and Commission Handbook
MOTION PASSES: 6-1 Tanaka no
AMENDED MOTION: Council Member Filseth moved, seconded by Council Member Kou to approve the list of tentative topics and regularly scheduled work that the City Council Standing Committees of Policy and Services and Finance expect for 2022 including an add ition to the Policy & Services topic list a review of the Board and Commission Handbook

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DRAFT ACTION MINUTES

Sp. City Council Meeting
Draft Action Minutes: 4/11/2022
MOTION PASSED: 7-0
Council Member Questions, Comments and Announcements

Closed Session
AA1. CONFERENCE WITH CITY ATTORNEY-POTENTIAL LITIGATION Subject:

February 1, 2022 letter from the Law Offices of Randal M. Barnum, representing Andrea Jordan, re allegations of harassment, discrimination and retaliation against the Cities Association and member cities Authority: Potential Exposure to Litigation Under Government Code Section 54956.9(d)(2) One Case, as Defendant.

MOTION: Council Member Filseth moved, seconded by Council Member Kou to go into Closed Session.

MOTION PASSED: 7-0
Council went into Closed Session at 9:24 P.M.

Council returned from Closed Session at 10:13 P.M.

Mayor Burt announced no reportable action.

Adjournment: The meeting was adjourned at 10:13 P.M.

ATTEST: APPROVED:
____________________ ____________________
City Clerk Mayor NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC) 2.04.160(a) and (b) . Summary minutes ( sense) are prepared in accordance with PAMC Section 2.04.160(c). Beginning in January 2018, in accordance with Ordinance No. 5423 , the City Council found action minutes and the video/audio recordings of Council proceedings to be the official records of both Council and committee proceedings. These recordings are available on the City’s website.

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City of Palo Alto (ID # 14194)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: Policy and Services Committee recommends that the City Council accept the recommendations from the September 14, 2021 and February 8, 2022 committee meetings regarding race and equity, with the following change: schedule a City Council Action Item ( May 9, 2022) on whether to pursue a misdemeanor ordinance and other methods to deter hateful speech while complying with the constitution
From: City Manager
Lead Department: City Manager

Recommendation
Policy and Services Committee recommends that the City Council accept the recommendations from the September 14, 2021 and February 8, 2022 committee meetings regarding race and equity, with the following change : schedule a City Council Action Item (currently scheduled for May 9, 2022) on whether to pursue a local misdemeanor ordinance and other methods to deter hateful speech while complying with the constitution.

Background
The Policy and Services Committee received quarterly race and equity updates in September 2021 and February 2022. At both meetings, the Committee pushed forward unanimous recommendations to the City Council related to a variety of topics. Staff expressed to the Committee that , though unanimously approved, the Committee’s proposal to pursue a local hate crimes ordinance would have to go to the City Council for discussion given its impact. That item is scheduled for City Council discussion and action on May 9, 2022. The rest of the items recommended by Policy and Services are listed in this Consent Agenda staff report. Some items are already completed or in progress and those items are noted below.

At the September 14, 2021 Policy and Services Committee meeting the Committee took the following action based on discussion of CMR #13568/Minutes:

To recommend the City Council to discuss the following 5 areas of consideration; support the HRC work regarding the 100 conversations [completed], enable the HRC to further develop the idea of a misdemeanor ordi nance and other method to deter hateful speech while complying with the constitution [scheduled for May 2022 City Council] ; and continue the 6 Packet Pg. 36

City of Palo Alto Page 2

City’s Race and Equity Work:

A. Should the notes from the Summit breakout sessions and Jamboard of Summit participants on affordable housing and the ways that it specifically affects women be referred to the City’s Housing Element Working Group for consideration? [completed]
B. Should the City Council initiate additional work on an ordinance addressing topics related to the United Nation’s CEDAW initiative? [in progress] C. Should the City conduct a review of the City’s Recreation Division in collaboration with the Park & Recreation Commission in order to better understand programs and services equity? [in progress]
D. Should the City share the findings regarding youth with the City’s Teen Advisory Council for consideration of further action including training on microaggressions and youth mentorship programs? [completed]
E. Should the City host an annual convening through the Offic e of Human Services to work to address issues related to greater opportunity and equity for women and girls?

The City Co uncil met with the Human Relations Commission (HRC) on January 24, 2022 CMR #13841 in a Study Session to hear and discuss the 100 Community Conversations.

At the February 8, 2022 Policy and Service s Committee meeting the Committee took the following action based on discussion of CMR #13997/Minutes:

To recommend the City Council:

A. Request the Human Relations Commission to research the lived experience of Asian American and Pacific Islanders and suggest related workplan items as desired; B. Request the Police Department to provide hate crime data over time by race; [data below; completed]
C. Recommend that Council Members commit to complete Microaggression training by June 2022; and
D. Request the City Manager and Mayor schedule a study session to discuss police radio encryption, and how best to allow the public and the media to be rapidly informed for calls to service [completed].

Discussion
As noted above, there has been p rogress on many of the items from the Policy and Services Committee September 2021 and February 2022 meeting discussions . The information below summarizes the items completed, in progress, and items not yet impl emented. Each item references which meeting the recommendations come from.

The completed items include the following:
- Support for the HRC’s 100 Community Conversations: the City Council heard the report on January 24, 2022 (CMR #13841) and commended the HRC for the initiative taken to 6 Packet Pg. 37

City of Palo Alto Page 3

convene conversations on this very important topic in the community. They encouraged the HRC to continue such efforts. (P&S Sept. 14 Recommendation) - Notes and findings from the Summit on Women and Girls were shared with the Housing Element Working Group staff as well as with the City’s Y outh Advisory Commission staff liaison. (P&S Sept. 14 Recommendation)
- Sharing hate crime data . This data represents 3 years of data and is included in Attachment A to this report. Since 2021, the Police Department included a designation in the computer aided dispatch (CAD) system that makes it easier going forward to run a hate crime data report. (P&S Sept. 14 Recommendation). *Note, the data in Attachment A does not include hate incident information.
- Hold a City Council Study Session on police radio encryption: The City Manager scheduled an action item for the City Council on April 4, 2022 of the Police Department’s annual report which also included extensive information about police radio encryption.

The City Council voted at that meeting to develop progr ams to pursue near real time streaming of Calls for Services and to narrow location of the calls. Registration will be required to access the platform. Staff shall confer with labor on implementation of this direction; Support Senator Becker’s proposed SB -1000; Increase communications between PAPD senior staff and the media, as staffing permits; and to refer to Policy and Services Committee the review and discussion of Use of Force (UOF) reports to evaluate current policies and effectiveness of the UOF repo rts and recommend modifications if necessary. (P&S Feb. 8 Recommendation)

The following items have been started and are in progress:
- Initiation of additional work on an ordinance addressing topics related to the United Nation’s CEDAW initiative . Staff is drafting an ordinance for City Council review and discussion. (P&S Sept. 14 Recommendation)
- The HRC discussed recent hate crimes at the March 10, 2022 meeting and passed a motion to support a recommendation to bring the F ederal Bureau of Investigation (FBI) and community resources to Palo Alto to support community education on hate crimes.

In addition, the HRC recommends the City Council support an increase in public awareness and marketing on how to report a hate crime and hate incidents. This recommendation will be included in the May 9, 2022 City Council discussion on hate crimes. (P&S Sept. 14 Recommendation)
- Staff has begun a review of the City’s Recreation Division in order to better understand programs and services equity by gender. (P&S Sept. 14 Recommendation)

The following items are not yet implemented : (Following City Council acceptance of this staff report, these items would be further developed by staff.) A. Alignment from the City Council for the City host an annual convening through the Office of Human Services to work to address issues related to greater opportunity and equity for women and girls (P&S Sept. 14 Recommendation) 6 Packet Pg. 38

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B. Request the Human Relations Commission to research the lived experience of Asian American and Pacific Islanders and suggest related workplan items as desired. (P&S Feb. 8 Recommendation)
C. Recommend that Council Members commit to complete Microaggression training by June 2022. (P&S Feb. 8 Recommendation) . The trainings will be conducted by Circle Up Education. There will be three separate trainings scheduled that the City Council and Board/Commission/Committees (BCC) will be able to choose from to attend. The trainings will take place mostly in June 2022.

D. Scheduled for May 9, 2022 as an Action item: whether to pursue a local misdemeanor ordinance and other method s to deter hateful speech while complying with the constitution. (P&S Sept. 14 Recommendation)

Timeline, Resource Impact, Policy Implications
Resource requirements for the topics and recommendations within this rep ort vary. For the items implemented already, staff time has been expended on those. For the in progress and not yet completed items, further staff time will be required to work on and complete the items. The training is also an outside contract for less th an $15,000 which will come from the race and equity support funds. Costs for hosting an annual convening on issues related to equity for women and girls would be incorporated into annual budget discussions.

Stakeholder Engagement
Community engagement is an integral part of Palo Alto’s race and equity work. Engaging the community at large to provide feedback for the City’s Race and Equity strategy has been a priority throughout this process as shown in the Race and Equity Framework. The City continues to engage the community through a series of Race and Equity conversations. Updates on the City’s efforts can be found on the City ’s website at www.cityofpaloalto.org/raceandequity.

Environmental Review
This is not a project as defined by CEQA.

Attachments:
• Attachment6.a: Attachment A: Hate Crime Reports 2019-April 8 2022 6 Packet Pg. 39
Attachment A
Hate Reports taken by PAPD Jan-Dec 2019
Case # Occur Date Protected Characteristics Description 190000849 02/14/2019 protected characteristic other than race (sexual orientation) & race/ethnicity: Black
Criminal threats
190004689 08/17/2019 protected characteristic other than race (religion) Vandalize private property 190005557 10/25/2019 protected characteristic other than race (sexual orientation) & race/ethnicity: Hispanic
Assault with a deadly weapon
190006636 12/23/2019 protected characteristic other than race (religion) Criminal Threats Hate Reports taken by PAPD Jan-Dec 2020
Case # Occur Date Protected Characteristics Description 200000106 01/05/2020 protected characterisitc other than race (religion) & race/ethnicity: Black
Vandalize City property
200001552 04/14/2020 race/ethnicity: Black Criminal threats 200001890 05/15/2020 race/ethnicity: Black Brandish weapon 200002788 07/23/2020 race/ethnicity: Black Vandalize private property Hate Reports taken by PAPD Jan-Dec 2021
Case # Occur Date Protected Characteristics Description 210000212 01/22/2021 race/ethnicity: Middle Eastern Assault with a deadly weapopn 210000813 03/20/2021 race/ethnicity: Black Vandalize City property 210001344 05/07/2021 race/ethnicity: White Vandalize City property 210002077 07/07/2021 race/ethnicity: White Vandalize City property 210002480 08/07/2021 protected characteristic other than race (religion) Vandalize City property 210002963 09/15/2021 race/ethnicity: Black Vandalize City property 210003032 09/21/2021 race/ethnicity: White Vandalize City property 210003072 09/24/2021 race/ethnicity: Black Vandalize City property 210003267 10/10/2021 protected characteristic other than race (sexual orientation) Battery causing serious bodily injury Hate Reports taken by PAPD Jan-Mar 15 2022
Case # Occur Date Protected Characteristics Description 220000236 1/22/2022 race/ethnicity: Black Vandalize private property 220001053 4/5/2022 race/ethnicity: Black Vandalize private property 220001080 4/6 - 4/7/2022 protected characetristic other than race (nationality) Vandalize private property Hate Crime Data 2019 - April 2022
Note: Hate incident data not included within this report.

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City of Palo Alto (ID # 14245)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: Parks and Recreation Commission Recommend Adopting an Ordinance to Amend the Foothills Nature Preserve Attendance Range to 400 -600 Guests From: City Manager
Lead Department: Community Services

Recommendation
Staff and the Parks and Recreation Comm ission recommend that City Council adopt an ordinance amending section 22.04.150(k) of the Palo Alto Municipal Code to amend the visitor capacity range for Foothills Nature Preserve (Attachment A) and receive an update on park entry discounts and photography policies.

Background
On November 2, 2020, City Council passed the following motion regarding Foothills Nature Preserve (Minutes):

A. Open Foothills Park to the general public by removing limits on non -residents, while maintaining the maximum capacity of 1,000 persons and providing residents first access to reservations for all facilities; B. Amend or delete outdated and duplicative code language; C. For the first 90 days, temporarily limit the capacity to 750 peopl e at any one time;
D. Return to Council and the Parks and Recreation Commission with proposals for fee, capacity, and park management/environmental integrity studies; and E. Direct staff to use the renaming process to consider renaming Foothills Park to Foothills Nature Preserve.

Foothills Nature Preserve opened to the general public on December 17, 2020. On January 26, 2021 ( Minutes), the Parks and Recreation Commission (PRC) discussed several items related to Foothills Nature Preserve that were referred to them by Ci ty Council (fees, discounts, rules, and enforcement policies). Included in this discussion was a concern that the pending ordinance and emergency ordinance scheduled for the February 1, 2021 City Council Consent Calendar (attached to Agenda Item Number 3 ) did not include an option for an annual pass, which could limit frequent park users from visiting the park if they must pay a daily entrance fee each time they visit. The PRC also 7 Packet Pg. 41

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discussed the limitation on number of visitors allowed in the park at one time, which the emergency ordinance limited to 400 people, not to exceed a maximum of 500 people.

On February 1, 2021 ( Minutes), City Council approved the ordinance and emergency ordinance for a $6 vehicle entry fee and visitor limit of 400 people at one time, not to exceed 500 people for Foothills Nature Preserve.

On February 11, 2021, the PRC held a special meeting to discuss an annual pass option and the visitor capacity limit for Foothills Nature Preserve ( Minutes). On February 22 (Staff Report and Minutes), City Council adopted an ordinance to change the name of Foothills Park to Foothills Nature Preserve, established an annual pass including several discounts and fee waivers for entry to Foothills Nature Preserve, adjusted the visitor limit to Foothills Nature Preserve, and identi fied groups (e.g. visitors with reservations in Towle Campground) who do not count toward the visitor limit. Staff began collecting vehicle entrance fees for weekends and holidays beginning Saturday, February 27, 2021.

On February 23, 2021 ( Minutes), the PRC reviewed and discussed a range of Foothills Nature Preserve Daily/Annual Entrance Fee and Visitor Limit policy considerations. This included some policy guidelines that had been recently adopted by City Council but had not previously been commented on by the PRC. The PRC agreed to support some guidelines, while referring additional details back to the Ad Hoc Committee for additional assessment and follow-up recommendation.

On March 23, 2021 ( Staff Report and Minutes), the PRC discussed several Foothills Nature Preserve policies and voted unanimously (6 -0, 1 absent) to recommend that Council adopt an ordinance to amend the Municipal Fee Schedule to include several new vehicle entry f ees and discounts for Foothills Nature Preserve, including new fees for medium and large vehicles/buses, free entry on six specified days per year, free passes to be distributed at libraries; and free entry for student field trips and all fourth - grade stud ents; and direct staff to permanently remove the nine hillside BBQs at Foothills Nature Preserve to help improve fire safety.

On May 10, 2021, City Council ( Staff Report ) approved the Parks and Recreation Commission’s March 23 recommendation.

Discussion
On December 14, 2021, the PRC discussed Foothills Nature Preserve Policies ( Staff Report) and passed the following motion:

The PRC recommend s that City Council adopt the following policies related to Foothills Nature Preserve:

1. Continue the current practice of allowing 500 visitors at any one time and adjust the visitor limit range to allow 400 to 600 p eople at any one time at staff discretion;
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2. Prioritize capital budget funds towards the infrastructure improvements outlined by the Infrastructure Stakeholder group and PRC review of the infrastructure plan details;

3. Maintain the existing daily use fees, sta ndard annual passes, free entry days, free library entry passes, and free entry for pedestrians and bicycles;

4. Adopt free entry policy for select groups to simplify entrance station operations, facilitate entry fee enforcement on weekdays, and expand the li st of permanent disabilities to be more inclusive:

A. Change the existing active military and veteran free entry policy to a free annual pass for active military and veteran policy B. Change the existing student driver free entry policy to a 50% discount on an annual pass for students aged 16 to 24 and require that the student be present for entry
C. Expand on the existing free entry policy for vehicles with a Disabled Person Placard/License Plate to include a free annual pass for people with permanent disabilities as defined by California State Parks (developmental, hearing, speech, visual, mental, or physical disabilities);

5. Do not pursue implementation of a reservation system at this time;

6. Monitor and evaluate potential policy changes in conjunction with available staff resources, while maintaining the current policy prohibiting bicycle through access at Gate D, at this time;

7. Update the dog policy under Towle Camp rules to state: when the preserve is closed, dogs must be confined to campsites, and must be in a tent unless supervised and accompanied at night; and

8. Request that the Palo Alto Fire Department recommend actions necessary to mitigate wildfire safety concerns related to eucalyptus trees, campfires, and BBQs.

Items 1-5, 7, 8: Approved 6:0. Item 6: Approved 4:1:1 (Reckdahl—no, Moss-- abstain)

The PRC and staff recommend that Council adopt an ordinance amending section

22.04.150(k) of the Palo Alto Municipal Code to amend the capacity range for Foothills Nature Preserve. The other items in the PRC motion eith er don’t require action or may be approved by the City Manager.

Visitor Limit
On February 22, 2021 (Staff Report and Minutes), City Council adopted an ordinance to authorize the City Manager (or designee) to establish a capacity limit of Foothills Nature Preserve in the range of 300 people to 650 people in order to protect health safety and welfare of preserve users, to protect the natural resources in the preserve , and/or due to limits in parking, facilities, or staff availability. Staff have used 500 peo ple (200 vehicles) at any one time as the working visitor limit since February 2021. The preserve 7 Packet Pg. 43

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has not reached capacity since April 5, 2021. Park Rangers have not observed traffic or parking issues in the preserve while the 500 -person limit has been in place. The PRC recommended continuing the current practice of allowing 500 visitors at any one time and adjusting the visitor limit range from 300 to 650 people to 400 to 600 people at any one time. This recommendation is based on the observation that when the visitor limit was reduced to 500 people at one time and a weekend entrance fee was implemented, preserve visitation and capacity have been noticeably more manageable. Previously observed issues with visitors going off -trail, increased traffic, and par king issues were greatly diminished. The PRC noted that continuing to allow the City Manager (or designee) flexibility to make adjustments within the range of the visitor limit would be helpful in addressing unforeseen circumstances that may impact the preserve.

The PRC recommended narrowing the visitor range because a visitor limit of fewer than 400 visitors leads to frequent and unnecessary preserve closures due to reaching capacity. Having more than 600 visitors at one time contribute s to problems with traffic and parking, especially in the more popular areas of the preserve.

Updates Not Requiring Council Action
Entrance Fees and Passes
The PRC recommends three changes to the entry fees and passes:
• Change the existing active military and veteran daily free entry policy to a free annual pass for active military and veteran;
• Change the existing student driver free entry policy to a 50% discount on an annual pass for students aged 16 to 24 and require that the student be present for entry; and
• Expand on the existing free entry vehicles with a Disabled Person Placard/License Plate to include a free annual pass for people with permanent disabilities as defined by California State Parks (developmental, hearing, speech, visual, mental, or physical disabilities).

These changes are aimed at simplifying entrance station operations, reducing entrance queues, ensuring that entrance fees can be fairly enforced once weekday entry fee collection begins (targeting Summer 2022), and making the disabled free entry policy more inclusive of people with different types of disabilities.

Active Military and Veteran Free Entry
The active military and veteran free entry would be changed to a free annual pass option. The reason is there will not be a way to enforce daily free pass es on weekdays when staff are not present at the entrance station. Staff will not be able to identify active military or veteran visitors on weekdays.

Student Driver Free Entry
The PRC wants to support and encourage youth and students to visit Foothills Nature Preserve. Unfortunately, there have been some challenges with the existing free entry 7 Packet Pg. 44

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for student drivers. It has resulted in confusion for many park visitors, in particular the fact that the student needs to be driving the vehicle. It has led to a number of arguments with park visitors at the entrance station, which sometimes contributes to vehicles backed up waiting to get into the preserve. An additional challenge with the free entry for student drivers is that it will not be enforceable during we ekdays when the entrance station is not staffed. Staff will not be able to identify student driven vehicles on weekdays. The PRC recommends that the student driver free entry be changed to a 50% discount on an annual pass for students aged 16 to 24 and require that the student be present for entry.

Vehicles with a Disabled Person Placard/License Plate Free Entry The PRC recommends adding an additional free annual pass option for people with permanent disabilities as defined by California State Parks , which has a 50% discount on their passes for people with permanent developmental, hearing, speech, visual, mental, or physical disabilities. The PRC noted that the City’s existing free entry for vehicles with disabled person placard/license plate would be more inclusive if it included people with different types of disabilities. The Ad Hoc recommends modeling the program after the California State Park example.

Staff will implement these changes by amendi ng the City’s Park and Open Space Regulations and will take effect upon approval of the City Manager and 15 days notice to the City Council.

Open Space and Parks Photography and Film Policy
On December 14, 2021, the PRC also discussed an Open Space and Parks Photography and Film Policy ( Staff Report ). The Foothills Nature Preserve Ad Hoc Committee reviewed the existing film and video policies for Foothills Nature Preserve and recommended a broader consideration of policy changes which would ap ply to all Open Space and Parks, which was discussed on a separate agenda item from the Foothills Nature Preserve policy discussion. The PRC passed a motion recommending the adoption of an Open Space and Parks Photography and Film Policy (Attachment B), which can be approved by the City Manager.

Timeline
If City Council adopts an ordinance amending Section 22.04.150(k) of the Palo Alto Municipal Code to amend the capacity range for Foothills Nature Preserve, there would be a second reading of the ordinance at the May 16, 2022 City Council meeting. The ordinance would take effect 31 days following the second reading of the ordinance.

Resource Impact
The recommendations in this report are not anticipated to materially impact resources.

The FY 2022 Municipal Fee Schedule includes a range of $0 - $80 for annual passes to Foothills Nature Preserve, which can accommodate the PRC’s recommendations. The proposed changes to the free entry policy for select groups to simplify entrance station 7 Packet Pg. 45

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operations and the expa nded list of permanent disabilities that would qualify for free entry to the preserve are expected to have an insignificant impact on the preserve entrance revenue:
a. Change the existing active military and veteran free entry policy to a free annual pass for active military and veteran policy; b. Change the existing student driver free entry policy to a 50% discount on an annual pass for students aged 16 to 24 and require that the student be present for entry; and
c. Expand on the existing free entry policy for ve hicles with a Disabled Person Placard/License Plate to include a free annual pass for people with permanent disabilities as defined by California State Parks (developmental, hearing, speech, visual, mental, or physical disabilities).

The FY 2022 Adopted C apital Budget includes several Foothills Nature Preserve improvement projects with funding in FY 2022 and proposed over the next several years. These projects will address infrastructure improvements at the Preserve that would help address public safety an d environmental concerns due to the increased visitation (pedestrian pathway to allow visitors to avoid walking on the roadway, fencing to protect habitat, and improvements to the parking, etc.).

Stakeholder Engagement
Foothills Nature Preserve policies were discussed at the following meetings:
• November 2, 2020, City Council meeting
• January 19, 2021, City Council meeting
• January 26, 2021, Parks and Recreation Commission meeting • February 1, 2021, City Council meeting
• February 11, 2021, Parks and Recreation Commission meeting • February 22, 2021, City Council meeting
• February 23, 2021, Parks and Recreation Commission meeting • March 23, 2021, Parks and Recreation Commission meeting • May 10, 2021, City Council meeting
• December 14, 2021, Parks and Recreation Commission meeting

Meeting agendas and minutes can be reviewed at https://www.cityofpaloalto.org/City- Hall/City-Council/Council-Agendas-Minutes (Council meetings) and https://www.cityofpaloalto.org/City-Hall/Boards-Commissions/Parks-and-Recreation- Commission (Commission meetings).

Environmental Review
The project includes modifications to Foothills Nature Preserve that do not include any physical improvements to this existing facility, including any improvements that would generate increased use (e.g., new amenities). The project is therefore exempt from the California Environmental Quality Act ( CEQA) in accordance with CEQA Guidelines 7 Packet Pg. 46

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Section 15301(operation of existing facilities). Adoption of the ordinance would amend the visitor capacity range for Foothills Nature Preserve to allow 400 to 600 users at a given time. The ordinance continues to provide the City Manager with the authority to establish the total capacity at the preserve at a given time in order to protect the health, safety, and welfare of preserve users, to protect the natural resources in the preserve, and/or due to limits in parking, facilities, or staff availability. The adoption of this ordinance would not affect the normal operations of this facility and are therefore exempt from CEQA in accordance with CEQA Guidelines Section 15323.

Attachments:
• Attachment7.a: Attachment A: Ordinance Amending Section 22.04.150(k) of PAMC to Amend Capacity Range for Foothills Nature Preserve • Attachment7.b: Attachment B: PRC Open Space Photography and Film Policy 7 Packet Pg. 47
*NOT YET APPROVED*
1 248_20220414_ts24
Ordinance No. ___

Ordinance of the Council of the City of Palo Alto Amending Section 22.04.150(k) of the Palo Alto Municipal Code to Amend the Capacity Range for Foothills Nature Preserve

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. The City’s Foothills Nature Preserve is reserved for park, playground, recreation, or conservation purposes by Palo Alto Municipal Code (PAMC) 22.08.090 et seq.; B. Based on recommendation from the Parks and Recreation Commission, the City Council desires to modify the capacity range of Foothills Nature Preserve and make amendments to some Preserve discounts.

SECTION 2. Subsection (k) of s ection 22.04.150 (Foothills Nature Preserve ) of Chapter

22.04 (Parks and Recreation Building Use and Regulations) of Title 22 (Parks) is hereby amended as follows (new text in
underline, deleted text in strikethrough):

(k) No more than 650 600 people shall be permitted in Foothills Nature Preserve at any one time.
(1) The city manager or designee may establish a capacity limit in the range of 300 to 650 400 to 600 people at Foothills Nature Preserve in order to protect the health, safety, and welfare of preserve users; to protect the natural resources in the preserve; and/or due to limits in parking, facilities, or staff availability. The city shall not distinguish between residents and non -residents in setting any limits under this subsection.
(2) The following persons shall not count toward the limit in this subsection: visitors with reservations in the Towle Campground, Oak Grove Picnic Area, and Interpretive Center Meeting Room; city-sanctioned recreation and education groups (including city-run programs for summer camps, field trips, and community partner youth groups); group permit holders; city -sanctioned park volunteers; and visitors arriving in a vehicle with a valid disabled person parking placard or license plate.

SECTION 3
. 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 O rdinance would be subsequently declared invalid or unconstitutional.

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*NOT YET APPROVED*
2 248_20220414_ts24
SECTION 4. The Council finds that this project is categorically exempt from the provisions of the California Environmental Quality Act (“CEQA”) under sections 15301 (Existing Facilities) and 15323 (Normal Operations of Facilities for Public Gatherings).

SECTION 5. This Ordinance shall be effective on the thirty-first date after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

NOT PARTICIPATING:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Community Services

____________________________
Director of Administrative Services

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Attachment A
The Parks and Recreation Commission recommends that City Council adopt the following Open Space and Parks Photography and Film policy (Attachment A):

Palo Alto Open Space and Parks Photography and Film Policy

Photography and Film Permit overview
• Photography and film is defined as the recording on any medium of still or motion images
• Permits are not required for personal photography and film • Permits are required for low-impact photography and film • High-impact photography and film are not permissible
• Please allow a minimum of two weeks (14 calendar days) for permit approval and processing
• Permit fees may apply
• Parking is limited, and vehicles generally are not permitted outside of designated parking lots and roadways
• The use of drones is not permitted
• To protect wildlife and habitat, access is limited to designated trails (see exclusions below) and established use areas such as turf and picnic areas Personal Photography and Film—No Permit Required
Permits are not required for photography and film that meets all the following requirements:
• Non-commercial (still, motion picture, video, digital, and other) • No impacts to vegetation, habitat, wildlife, or visitor use • 24 or fewer people
• Duration of one hour or less
• No exclusive use of parks and preserves (blocking trails, parking spaces, roads, pathways, or any public access)
• In compliance with all municipal codes and park regulations. Municipal Code and Park Regulations may be found here:
https://www.cityofpaloalto.org/Departments/Community-Services/Open-Space- Parks/Open-Space-Preserves/Rules-Regulations

• Examples of personal photography and film include photography that does not require additional permits, small professional group shoots with limited subjects and crew (e.g., one photographer, 1-5 subjects) such as an engagement or immediate family photography session, and shoots with no impact to vegetation, habitat, wildlife, or visitor use.

Photography and Film--Permit Required
Low-impact photography and film may be permitted. This is generally associated with smaller shoots that do not significantly impact City-owned property, the public right-of-way, and other visitors use of the park or preserve. Permits cannot be issued for shoots that will have any significant impacts to vegetation, habitat, wildlife, or visitor use.

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Low-impact photography or film requires that a completed Photography and Film Permit application be submitted to the manager of the desired park or preserve. The application will be reviewed, and a permit may be granted once all fees and forms have been submitted. Wedding photography and film may, depending on the circumstances, require a permit and fees.

Permits are required for photography and film that includes:
• Commercial shoot (as defined in Palo Alto Open Space and Parks Regulations R1-21A) • Duration of up to two hours
• Multi-camera shoot
• Additional lighting, sound, and other equipment
Permits for photography and film will not allow the following:
• Commercial shoots that significantly impact City-owned property or the public right-of- way, either by utilizing a large area of City-property, negatively impacting the property, or requiring traffic control/street closures. Typically, these shoots include a crew with multiple photographers/cameras, and assistants and talent. • Shoots on weekends and City holidays
• Shoots during park closure hours
• Duration of shoot for more than two hours, including set up and tear down • Exclusive use of a significant area within a park or preserve Photography and Film Permit Application Conditions
All permit applicants shall accept and agree to comply with the following photography and film general conditions:

1. Utmost care will be exercised to ensure that wildlife, habitat, and natural/historic/cultural resources are not disturbed or impacted.

2. Photography and film of wildlife will be permitted only when such wildlife will not be approached within 100’, fed, harmed, or otherwise disturbed from their natural behavior.

3. Drones are not allowed.

4. No employee of the City of Palo Alto may work for the permittee in any capacity whatsoever while in uniform or if directly involved in supervision of the permittee.

5. Amplified sound such as gunfire, sirens, public address systems, and other similar noise - producing equipment are not permitted under any circumstances. Other amplified sound such as music requires an additional noise abatement permit for a level more than fifteen dB above the local ambient at a distance of twenty-five feet or more. PAMC 22.04.180/PAMC 9.10.050 https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-83686#JD_22.04.180 https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0 -0-0-66214#JD_9.10.050

6. Production vehicles shall park according to an approved parking p lan.

7. Areas of filming shall be cleared, and the site left as found at end of each day’s shooting.

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8. Smoking, vaping, or any open flame are not permitted.

9. Exclusive use of any significant areas is not permitted, including:
• Closing roads and trails
• Off-trail access
• Access to trails less than 48” (must allow at least 5’ of trail width for other park visitors to pass)
• Use of generators requires an additional permit and fees (see Special Event Permit Application)

11. Fees will be determined during th e permit review process and will be discussed with applicant prior to permit issuance. A refundable deposit of up to $1,000 may be required to ensure compliance with permit conditions. The amount, if any, to be refunded to the permittee is solely at the di scretion of the City of Palo Alto.

12. A permit is required for all groups of 25 people or more https://www.cityofpaloalto.org/Departments/Community-Services/Open-Space- Parks/Open-Space-Preserves/Rules-Regulations

13. The Special Event Permit fee range (currently $324 - $2,163) applies to Parks and Open Space Photography and Film Permits

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City of Palo Alto (ID # 14261)
City Council Staff Report

Report Type: Consent Calendar Meeting Date: 5/2/2022

City of Palo Alto Page 1
Summary Title: Retail Temporary Ordinance Extension
Title: PUBLIC HEARING: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning), Chapters 18.04 (Definitions), 18.16 (Neighborhood, Community, and Service Commercial (CN, CC and CS) Districts), 18.18 (Downtown Commercial (CD) Districts) and 18.30 (A) and (C) the Retail and Ground Floor Combining Districts. Environmental Review:

Exempt Under California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3) until December 16, 2022.

From: City Manager
Lead Department: Planning and Development Services

Recommendation
Staff recommend s Council adopt an ordinance (Attachment A) extending the existing temporary ordinance (#5517), which broadens permissible uses and raises cond itional use permit thresholds for some land uses in the City with certain exceptions , for an additional six months.

Executive Summary
The existing temporary ordinance (#5517) that broadens permissible uses and raises thresholds for Conditional Use Permits (CUPs) for some land uses throughout the City is due to expire on June 30, 2022. At the March 30, 2022 , PTC meeting, the PTC considered a proposed ordinance making permanent changes contained within the temporary ordinance. In its motion, the PTC moved to continue the item to a date uncertain to allow additional time to evaluate the substantive changes.

This necessitates the extension of the temporary ordinance to avoid a lapse in the policy due to time constraints. While Council is considering this ex tension, the PTC will continue its review of the temporary ordinance and prepare a recommendation for the City Council later this year.

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The proposed ordinance does not make any changes to the details of the temporary ordinance, but specifically modifies the term to extend for six months, until December 16, 2022.

Background
On November 9, 2020, the City Council received an update on the City’s community and economic recovery strategies. The City Council directed 1 staff to return on December 14, 2020 with an ordinance to temporarily implement discrete amendments to the zoning code that would broaden the definition of retail uses and relax the CUP threshold for certain uses; the temporary ordinance was passed on first reading without any changes.2,3

The second reading of the ordinance was presented to the City Council on January 11, 2021; the item was pulled from the consent calendar and placed on the January 19, 2021 agenda. Staff prepared an at -places memo4 to respond to Councilmember questions. Due to t he lateness of the meeting, the item was continued to a Council date uncertain.

On March 8, 2021 5, the second reading of the ordinance was presented to the City Council. At that meeting, the Council directed several amendments to the ordinance 6. Another s econd reading of the ordinance was presented to the City Council on April 12, 2021 7 and, with the inclusion of the amendments, a temporary ordinance was adopted. This temporary ordinance is set to expire June 30, 2022 unless Council adopts replacement (extension) legislation.

On March 30, 2022 8, staff presented the PTC with a proposed ordinance that would have codified the temporary standards with some adjustments . After hearing public testimony 9, the

1 November 9, 2020 Action Meeting Minutes:
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t= 42635.86&BlobID=79443 2 December 14, 2020 Staff Report:
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=60118.96&BlobID=79480 3 December 14, 2020 Action Meeting Minutes:
https://www.cityofpaloalto.org/civicax/filebank/documents/79829 4 At Places Memo, dated January 19, 2021:
https://www.cityofpaloalto.org/civicax/filebank/documents/79946 5 March 8, 2021 Staff Report
https://www.cityofpaloalto.org/files/assets/public/agendas -minutes-reports/reports/city-manager-reports- cmrs/current-year/2021/id-12054.pdf
6 Action Meeting Minutes, March 8, 2021
https://www.cityofpaloalto.org/files/assets/public/agendas -minutes-reports/agendas-minutes/city-council- agendas-minutes/2021/03-08-21-ccm-action-minutes.pdf
7 April 12, 2021 Staff Report
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/current-year/2021/id-12165.pdf
8 March 30, 2022 Staff Report
https://www.cityofpaloalto.org/files/assets/public/agendas -minutes-reports/agendas-minutes/planning-and- transportation-commission/2022/ptc-03.30.2022-cup.pdf
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PTC discussed a desire to evaluate the proposed change s more thoroughly. The PTC moved to continue the item to a date uncertain, while staff seeks an extension of the temporary ordinance.

Discussion
The temporary ordinance responds to Council direction for minor amendments to the definitions section of the zoning code and adjustments to the thresholds to determine when a conditional use permit (CUP) is required. The purpose of the amendments is to promote retail activity and decrease commercial vacancies.

Temporary a mendments were to the ‘eating and drinki ng’ establishments, ‘personal service ’, ‘retail services’ and ‘take-out service’ definitions. The square footage thresholds for requiring a CUP temporarily increased for ‘commercial recreation ’, ‘medical office ’ and some ‘personal services’ uses in various commercial districts.

The temporary ordinance also includes the Council’s additional amendments for exceptions to the thresholds for certain uses located along University Avenue, California Avenue , and Town & Country Village Shopping Center because of c oncerns that certain personal service uses may replace traditional retail spaces . The changes were relatively minor and reserve d more significant policy recommendations to future public hearings and analysis before the PTC.

Planning and Transportation Commission Review
The PTC reviewed a draft Ordinance on March 30, 2022 that was intended to make permanent the revisions contained in the temporary ordinance . The PTC voted 6 -0 to continue the discussion of the item to a date uncertain until staff receives an extension to the temporary ordinance allowing further evaluation. PTC members expressed a desire to study the issues more thoroughly.

Proposed Schedule
Staff plans to bring this discussion forward to the PTC later this year for consideration of making permanent the temporary ordinance. The PTC’s review will focus exclusively on the contents of the temporary ordinance and whether the thresholds and definitions are advisable, if changes should be made, or if policy should revert to previous definitions and size thresholds for CUPs.

Additional items were referred to the PTC on March 8, 202 1, when Council considered the temporary ordinance. These items will be discussed separately from the temporary ordinance.

In particular, further staff and PTC work on t hese items will benefit from the economic

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development consultant the Council has directed be identified as well as the economic development position in the City Manager’s Office. These topics for future review include:

• Evaluating the most appropriate way to define eating and drinking uses, • evaluating the 1,800 square foot CUP threshold for gyms on University Avenue, California Avenue and within Town and Country Village Shopping Center, and • evaluating the occupancy of commercial recreation facilities.

This work will coincide with the greater effort by the City to evaluate retail uses on a Citywide or district by district level as directed by the City Council on November 9, 202210 but is currently un-resourced and not being pursued at this time. Based on th e foregoing , staff propose extending the ordinance to preserve the existing temporary regulations and allow time to bring forward a new ordinance.

Summary of Key Issues
The City Council enacted a temporary ordinance to help businesses and property owners with the effects of the pandemic on the economy. In this report, Council is asked to approve an extension of the temporary ordinance for an additional six months, ending December 16, 2022.

Policy Implications
The various changes contained with the tempor ary ordinance are intended to streamline the process for certain new businesses. Since the adoption of the temporary ordinance only four businesses have taken advantage of the changes. It is difficult to ascertain whether the limited effects of the ordinance are because of the ongoing pandemic or other reasons. It is too soon to establish a trend.

If the ordinance is not extended as recommended, the temporary standards would expire and revert to the previous code provisions.

Resource Impact
This action has no significant budget or fiscal impact.

Timeline
If City Council adopts the ordinance on May 2, 2022 (First Reading), the Second Reading is tentatively scheduled for May 16, 2022. The ordinance will become effective 31 days following the Second Reading on June 16, 2022. The new expiration date will be December 16, 2022.

10 11.09.20 Council Action Minutes: https://www.cityofpaloalto.org/files/assets/public/agendas -minutes- reports/agendas-minutes/city-council-agendas-minutes/2020/november-09-2020-city-council-meeting-action- minutes.pdf

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Stakeholder Engagement
Internal coordination with applicable city staff and departments was held for this specific report and ordinance. Opportunities for public engagement continue for the draft ordinance being reviewed by the PTC.

Environmental Review
The project is exempt from the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines 15061(b)(3) in that it can be seen with certainty that ordinance will not hav e a significant impact on the environment. The ordinance makes minor adjustments to land use definitions and modest changes to the thresholds for discretionary review.

Attachments:

Attachment8.a: Attachment A: Ordinance Temporarily Extending Ord 5517 Amending PAMC Ch 18.04, 18.16, 18.18, 18.30 (PDF)
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Ordinance No. _____

Ordinance of the Council of the City of Palo Alto Temporarily Extending Ordinance 5517, Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning), Chapters 18.04 (Definitions), 18.16 (Neighborhood, Community, and Service Commercial (CN, CC and CS) Districts), 18.18 (Downtown Commercial (CD) Districts) and 18.30 (A) and (C) – the Retail and Ground Floor combining districts

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

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

A. On April 5, 2021 the City Council adopted Ordinance 5517 to temporarily relax certain zoning regulations in the City’s commercial zoning districts to address some of the economic challenges created by the COVID-19 pandemic and to spur economic activity.

B. The City Council directed the Planning and Transportation Commission (PTC) to review certain elements of the temporary ordinance and provide a recommendation to the City Council.

C. On March 30, 2022 the PTC recommended that the term of Ordinance 5517 be extended to allow additional time for consideration of whether the temporary relaxation of zoning regulations should remain indefinitely, and whether such regulations should be otherwise amended.

D. The public health, safety, or welfare require that the amendments temporarily enacted by Ordinance 5517 remain in effect without interruption while the PTC conducts its additional review.

SECTION 2
. The effective date of Ordinance 5517 of the Palo Alto City Council, attached hereto as Exhibit A and incorporated herein, is hereby extended so that the Ordinance shall expire upon the earlier of December 16, 2022 or adoption of replacement legislation by the City Council. Upon expiration of Ordinance 5517, the City Clerk shall direct the City’s codifier to update the Palo Alto Municipal Code as appropriate.

SECTION 3
. 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 4. 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

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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 5.

The Council finds that the adoption of this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to CEQA Guideline sections 15061(b)(3) because it can be seen.

SECTION 6. This ordinance shall be effective on the thirty-first date after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

NOT PARTICIPATING:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning & Development
Services

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Ordinance No. 5517

Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning), Chapters 18.04 (Definitions), 18.16 (Neighborhood, Community, and Service Commercial (CN, CC and CS) Districts), 18.18 (Downtown Commercial (CD) Districts) and 18.30 (A) and (C) – the Retail and Ground Floor Combining Districts

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

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

A. On March 4, 2020, California Governor Gavin Newsom declared a State of Emergency due to the threat of Coronavirus Disease 2019 (“COVID-19”).

B. As a result of the COVID-19 pandemic and the public health response, restaurant, retail, tourism, and hospitality business has significantly declined and the nation is experiencing a recession.

C. The City Council desires to relax certain zoning regulations in the City’s commercial zoning districts to address some of the economic challenges created by the COVID-19 pandemic and to spur economic activity.

D. The public health, safety, or welfare require that such changes to the City’s zoning regulations be enacted for a temporary period and as expediently as possible, without review by the Planning and Transportation Commission pursuant to Palo Alto Municipal Code section 18.80.090.

SECTION 2. Section 18.04.030 (Definitions) of Ch apter 18.04 (Definitions) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows:

18.04.030 Definitions
(a) Throughout this title the following words and phrases shall have the meanings ascribed in this section.
[. . .]
(45) “Drive-in/drive-through service” means a feature or characteristic of a use involving sales of products or provision of services to occupants in vehicles, including drive-in or drive-up windows and drive- through services such as mechanical automobile washing, pharmacy windows, coffee stands, automatic teller machines, etc. [. . .]







 







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(47) “Eating and drinking service” means a use providing preparation and retail sale of food and beverages with a full menu and providing indoor seating area. Eating and drinking service include presence of a full commercial kitchen and commercial dishwasher. including restaurants, fountains, cafes, coffee shops, sandwich shops, ice cream parlors, taverns, cocktail lounges and similar uses. For establishments with incidental sale alcoholic beverages, a minimum of 50% of revenues from an ‘eating and drinking service’ must be derived from the sale of food. Related definitions are provided in subsections (45) (Drive-in/drive-through service), (125)(B) (Intensive retail service) and (136) (Take-out service). [. . .]
(95) “Medical office” means a use providing consultation, diagnosis, therapeutic, preventive, or corrective personal treatment services by doctors, dentists, medical and dental laboratories, and similar practitioners of medical and healing arts for humans, licensed for such practice by the state of California. Incidental medical and/or dental research within the office is considered part of the office use, where it supports the on-site patient services. Medical office use does not include the storage or use of hazardous materials in excess of the permit quantities as defined in Title 15 of the Municipal Code. Medical gas storage or use shall be allowed up to 1,008 cubic feet per gas type and flammable liquids storage and use shall be allowed up to 20 gallons total (including waste).
(95.1) (A) “Medical research” means a use related to medical and/or dental research, testing and analysis, including but not limited to trial and clinical research. Biomedical and pharmaceutical research and development facilities are not included in this definition. Medical Research does not include the storage or use of quantities of hazardous materials above the exempt quantities listed in Title 15 of the Municipal Code nor any toxic gas regulated by Title

15. Additionally, Medical Research may include storage and use of etiological (biological) agents up to and including Risk Group 2 or Bio Safety Level 2 (Center for Disease Control). (95.2) (B) “Medical support retail” means a retail use providing sales, rental, service, or repair of medical products and services to consumers or businesses, and whose location near hospitals or medical offices facilitates the provision of medical care or medical research.

Examples of medical retail uses typically include, but are not limited to, pharmacies, sale of prosthetics, and sale of eyeglasses or other eye care products. (95.3) (C) “Medical support service” means a use providing administrative support functions for healthcare providers or facilities, intended to support the operations of hospitals or of medical and dental office uses, and whose location near those medical facilities enhances the interaction between medical providers and/or facilitates the provision of medical care or medical research. Examples of medical support service uses typically include, but are not limited to, administration and billing services, public relations, training, and fundraising.

Hospitals and ambulance services are not included in this definition. [. . .]







 







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(114) “Personal service” means a use providing services of a personal convenience nature, and cleaning, repair or sales incidental thereto, including:
(A) Beauty shops, nail salons, day spas, and barbershops; (B) Self-service laundry and cleaning services; laundry and cleaning pick-up stations where all cleaning or servicing for the particular station is done elsewhere; and laundry and cleaning stations where the cleaning or servicing for the particular station is done on site, utilizing equipment meeting any applicable Bay Area Air Quality Management District requirements, so long as no cleaning for any other station is done on the same site, provided that the amount of hazardous materials stored does not at any time exceed the threshold which would require a permit under Title 17 (Hazardous Materials Storage) of this code; (C) Repair and fitting of clothes, shoes, and personal accessories; (D) Quick printing and copying services where printing or copying for the particular service is done on site, so long as no quick printing or copying for any off-site printing or copying service is done on the same site;
(E) Internet and other consumer electronics services; (F) Film, data and video processing shops, including shops where processing for the particular shop is done on site, so long as no processing for any other shop is done on the same site;
(G) Art, dance or music studios intended for an individual or small group of persons in a class (see “commercial recreation” for other activities); and (H) Fitness and exercise studios, or similar uses, in a space having of 1,800 5,000 square feet or fewer of gross floor area (see “commercial recreation” for uses exceeding 5,000 square feet other activities).
(I) Learning centers intended for individual or small group settings, including tutoring, standardized test preparation, language classes, after-school programs, cooking classes, and similar uses.
[. . .]
(125) “Retail service” means a use open to the public during typical business hours and predominantly engaged in providing retail sale, rental, service, processing, or repair of items primarily intended for consumer or household use.
(A) “Extensive retail service,” as used with respect to parking requirements, means a retail sales use having more than seventy-five percent of the gross floor area used for display, sales, and related storage of bulky commodities, including household furniture and appliances, lumber and building materials, carpeting and floor covering, air conditioning and heating equipment, and similar goods, which uses have demonstrably low parking demand generation per square foot of gross floor area.







 







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(B)  “Intensive retail service” as used with respect to parking requirements, means any retail service use not defined as extensive retail service and including limited food service (i.e. ‘ready-to-eat’ food and/or beverage shops without a full commercial kitchen, where food and/or beverages are ready to consume at the time of sale and any seating area is limited; examples include sandwiches, frozen desserts, non-alcoholic beverages, and baked items). [. . .]
(136) “Take-out service” means a characteristic of an eating or drinking service which encourages, on a regular basis, consumption of food or beverages, such as prepared or prepackaged items, outside of a building, in outdoor seating areas where regular table service is not provided, in vehicles parked on the premises, or off-site. Take-out service does not include intensive retail service uses, as defined in subsection (125)(B). [. . .]
SECTION 3. Section 18.16.040 (Land Uses) of Chapter 18.16 (Neighborhood, Community, and Service Commercial (CN, CC, CS) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows:

The uses of land allowed by this chapter in each commercial zoning district are identified in the following tables. Land uses that are not listed on the tables are not allowed, except where otherwise noted. Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the use; however, provisions in other sections may apply as well. (a) Commercial Zones and Land Uses
Permitted and conditionally permitted land uses for each commercial zone are shown in Table 1:

TABLE 1

PERMITTED AND CONDITIONALLY PERMITTED USES
P = Permitted Use CUP = Conditional Use Permit Required LAND USE CN(4) CC, CC(2) CS (4) Subject to Regulations In:

ACCESSORY AND SUPPORT
USES

Accessory facilities and activities
customarily associated with or
essential to permitted uses, and
operated incidental to the principal
use.

P P P 18.42
Drive-in services or take-out
services associated with permitted
uses
(3)
CUP CUP CUP 18.42







 







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Tire, battery, and automotive service
facilities, when operated incidental to
a permitted retail service or
shopping center having a gross floor
area of more than 30,000 square
feet.

CUP 18.42, 18.40.160
Safe Parking 18.42.160

EDUCATIONAL, RELIGIOUS, AND

ASSEMBLY USES

Business and Trade Schools P P
Churches and Religious Institutions P P P
Private Educational Facilities CUP P P
Private Clubs, Lodges, or Fraternal
Organizations

CUP P P

MANUFACTURING AND

PROCESSING USES

Recycling Centers CUP CUP CUP
Warehousing and Distribution CUP

OFFICE USES
Administrative Office Services P 18.16.050
Medical Offices CUP
(5)
CUP (5) CUP (5) 18.16.050
Professional and General Business
Offices
P P P 18.16.050

PUBLIC/QUASI-PUBLIC USES
Utility Facilities essential to provision
of utility services but excluding
construction or storage yards,
maintenance facilities, or corporation
yards.

CUP CUP CUP

RECREATION USES
Commercial Recreation CUP
(5)
CUP (5) CUP (5) 18.40.160
Outdoor Recreation Services CUP CUP CUP







 







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RESIDENTIAL USES
Multiple-Family P(1) P(1) P(1) 18.16.060(b) and (c)
Home Occupations P P P
Residential Care Homes P P P

RETAIL USES
Eating and Drinking Services,
excluding drive-in and take-out
services
P P P 18.40.160
Retail Services, excluding liquor
stores
P P P 18.40.160
Liquor stores CUP P P 18.40.160
Shopping Centers P 18.16.060(e), 18.40.160

SERVICE USES
Ambulance Services CUP CUP CUP
Animal Care, excluding boarding
and kennels
P P P
Boarding and Kennels CUP
Automobile Service Stations CUP CUP CUP 18.30(G)
Automotive Services CUP
Convalescent Facilities CUP P P
Day Care Centers P P P 18.40.160
Small Family Day Care Homes P P P
Large Family Day Care Homes P P P
Small Adult Day Care Homes P P P
Large Adult Day Care Homes CUP P P
Banks and Financial Services V CUP P(2) P(2)
General Business Services CUP P
Hotels P P 18.16.060(d), 18.40.160







 







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Mortuaries CUP P P
Neighborhood Business Services P 18.16.060(f)
Personal Services P P (6) P 18.16.060(f), 18.40.160
Reverse Vending Machines P P P

TEMPORARY USES
Farmer's Markets CUP CUP CUP
Temporary Parking Facilities,
provided that such facilities shall
remain no more than five years.

CUP CUP CUP

TRANSPORTATION USES
Parking as a principal use CUP CUP
Transportation Terminals CUP CUP
P = Permitted Use CUP = Conditional Use Permit Required

(1) Residential is only permitted: (i) as part of a mixed use development, pursuant to the provisions of Section 18.16.060(b), or (ii) on sites designated as housing inventory sites in the Housing Element of the Comprehensive Plan, (iii) on CN or CS sites on El Camino Real, or (iv) on CC(2) sites, all pursuant to the provisions of Section 18.16.060(b) and (c).
(2) Except drive-in services.
(3) So long as drive up facilities, excluding car washes, provide full access to pedestrians and bicyclists. A maximum of two such services shall be permitted within 1,000 feet, and each use shall not be less than 150 feet from one another.
(4) For properties in the CN and CS zone districts, businesses that operate or have associated activities at any time between the hours of 10:00 p.m. and 6:00 a.m. require a conditional use permit. (5) A conditional use permit is not required for medical office or commercial recreation uses up to 5,000 square feet of gross floor area, with the following exceptions, for which a conditional use permit is always required: (A) medical office fronting on California Avenue and in the Midtown Shopping District; (B) commercial recreation uses fronting on California Avenue and in the Town and Country Village Shopping Center.
(6) A conditional use permit is required for the following uses when fronting on California Avenue: (A) Fitness or exercise studios, and similar uses exceeding 1,800 square feet in gross floor area; and (B) Learning centers intended for individual or small group settings. A conditional use permit is required for 






 







EXHIBIT A

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fitness or exercise studios, and similar uses exceeding 1,800 square feet in gross floor area in Town and Country Village Shopping Center.
[. . .]
SECTION 4. Section 18.16.060 (Development Standards) of Chapter 18.16 (Neighborhood, Community, and Service Commercial (CN, CC, CS) Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows:

18.16.060 Development Standards
[. . .]
(f) Size of Establishments in the CN District
In the CN district, permitted commercial uses shall not exceed the floor area per individual use or business establishment shown in Table 5.  Such uses may be allowed to exceed the maximum establishment size, subject to issuance of a conditional use permit in accord with Section

18.76.010.  The maximum establishment size for any conditional use shall be established by the director and specified in the conditional use permit for such use.

TABLE 5

MAXIMUM SIZE OF ESTABLISHMENT

Type of Establishment Maximum Size (sq ft)
Personal Services 2,500 3,000
Retail services, except grocery stores 15,000
Grocery stores 20,000
Eating and drinking services 5,000
Neighborhood business services 2,500 3,000

[. . .]
(h) Outdoor Sales and Storage
(2) In the CC district and in the CC (2) district, the following regulations shall apply to outdoor sales and storage:
(A) Except in shopping centers, all permitted office and commercial activities shall be conducted within a building, except for:
(i) Incidental sales and display of plant materials and garden supplies occupying no more than 2,000 square feet of exterior sales and display area, (ii) Outdoor eating areas operated incidental to permitted eating and drinking services or intensive retail uses,
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(iv) Recycling centers that have obtained a conditional use permit. (B) Any permitted outdoor activity in excess of 2,000 square feet shall be subject to a conditional use permit.

SECTION 5. Sections 18.18.050 (Lan d Uses) of Chapter 18.18 (Commercial Downtown (CD) District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows:

18.18.050 Land Uses
The uses of land allowed by this chapter in each commercial zoning district are identified in the following table. Land uses that are not listed on the tables are not allowed, except where otherwise noted. Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the use; however, provisions in other sections may apply as well.

Permitted and conditionally permitted land uses for the CD district are shown in Table 1:

Table 1
CD Permitted and Conditionally Permitted Uses
P Permitted Use • CUP Conditional Use Permit Required CD-C CD-S CD-N Subject to
regulations in
Chapter
:

ACCESSORY USES
Accessory facilities and activities associated with or
essential to permitted uses, and operated incidental
to the principal use
P P P
Drive-in or Take-out Services associated with
permitted uses (2)

CUP CUP CUP
Tire, battery, and automotive service facilities, when
operated incidental to a permitted retail service or
shopping center having a gross floor area of more
than 30,000 square feet
CUP 18.40.160
Safe Parking 18.42.160

EDUCATIONAL, RELIGIOUS, AND ASSEMBLY
USES

Business and Trade Schools P P
Churches and Religious Institutions P P P







 







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Private Educational Facilities P P CUP
Private Clubs, Lodges, or Fraternal Organizations P P CUP

MANUFACTURING AND PROCESSING USES
Recycling Centers CUP CUP CUP
Warehousing and Distribution CUP

OFFICE USES
Administrative Office Services P 18.18.060(f)
Medical, Professional, and General Business Offices P P P 18.18.060(f)

PUBLIC/QUASI-PUBLIC FACILITY USES
Utility Facilities essential to provision of utility
services but excluding construction or storage yards,
maintenance facilities, or corporation yards

CUP CUP

RECREATION USES
Commercial Recreation CUP
(3)
CUP
(3)
CUP
(3)

Outdoor Recreation Services CUP CUP CUP

RESIDENTIAL USES
Multiple-Family P (1) P (1) P (1) 18.18.060(b)
Home Occupations P P P
Residential Care Homes P P P

RETAIL USES
Eating and Drinking Services, except drive-in or take-
out services
P P P 18.18.060(g) , 1

8.40.160
Retail Services, excluding liquor stores P P P 18.18.060(g) , 1

8.40.160
Shopping Centers P 18.18.060(g) , 1







 







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8.40.160
Liquor Stores P P CUP 18.40.160

SERVICE USES
Animal Care, excluding boarding and kennels P P P
Ambulance Services CUP CUP CUP 18.30(G)
Automobile Service Stations CUP CUP CUP
Automobile Services CUP
Convalescent Facilities P P CUP
Day Care Centers P P P 18.40.160
Small Family Day Care Homes P P P
Large Family Day Care Homes P P P
Small Adult Day Care Homes P P P
Large Adult Day Care Homes
Financial Services, except drive-up services P P CUP
General Business Services CUP P P
Hotels P P P 18.18.060(d) , 1

8.40.160
Mortuaries P P CUP
Personal Services P (4) P (4) P (4) 18.18.060(g) , 1

8.40.160
Reverse Vending Machines P P P

TRANSPORTATION USES
Parking as a principal use CUP CUP
Passenger Transportation Terminals CUP







 







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TEMPORARY USES
Indoor Farmers’ Markets CUP CUP CUP
Temporary Parking Facilities, provided that such
facilities shall remain no more than five years

CUP CUP CUP
P Permitted Use CUP Conditional Use Permit Required (1) Residential is only permitted as part of a mixed use development, pursuant to the provisions of Section 18.18.060(b), or on sites designated as Housing Opportunity Sites in the Housing Element of the Comprehensive Plan, pursuant to the provisions of Section 18.18.060(c). (2) Drive-up facilities, excluding car washes, provide full access to pedestrians and bicyclists. A maximum of two such services shall be permitted within 1,000 feet and each use shall not be less than 150 ft from one another.
(3) A conditional use permit is not required for commercial recreation uses up to 5,000 square feet of gross floor area, with the following exceptions, for which a conditional use permit is always required: (A) medical office fronting on University Avenue; (B) commercial recreation uses fronting on University Avenue.
(4) A conditional use permit is required for the following uses when fronting on University Avenue: (A) Fitness or exercise studios, and similar uses; and (B) Learning centers intended for individual or small group settings.

SECTION 6. Section 18.18.060 (Development Standards) of Chapter 18.18 (Commercial Downtown (CD) District) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows:
[. . .]
(g) Restrictions on Size of Commercial Establishments in CD-N Subdistrict In the CD-N subdistrict, permitted commercial uses shall not exceed the floor area per individual use or business establishment shown in Table 4. Such uses may be allowed to exceed the maximum establishment size, subject to the issuance of a conditional use permit in accordance with Chapter 18.76. The maximum establishment size for any conditional use shall be established by the director and specified in the conditional use permit for such use. //
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TABLE 4

MAXIMUM SIZE OF ESTABLISHMENT

Type of Establishment Maximum Size (ft 2 )
Personal Services 2,500 3,000
Retail services, except grocery stores 15,000
Grocery stores 20,000
Eating and drinking services 5,000

(h) Outdoor Sales and Storage.

The following regulations shall apply to outdoor sales and storage in the CD district:
(1) CD-C Subdistrict
In the CD-C subdistrict, the following regulations apply:
(A) Except in shopping centers, all permitted office and commercial activities shall be conducted within a building, except for:
(i) Incidental sales and display of plant materials and garden supplies occupying no more than 2,000 square feet of exterior sales and display area, (ii) Outdoor eating areas operated incidental to permitted eating and drinking services or intensive retail uses,
(iii) Farmers' markets which have obtained a conditional use permit, and (iv) Recycling centers that have obtained a conditional use permit. (B) Any permitted outdoor activity in excess of 2,000 square feet shall be subject to a conditional use permit.
(C) Exterior storage shall be prohibited, except recycling centers which have obtained a conditional use permit.
(2) CD-S Subdistrict
In the CD-S subdistrict, outdoor sales and display of merchandise, and outdoor eating areas operated incidental to permitted eating and drinking services and intensive retail uses shall be permitted subject to the following regulations:
(A) Outdoor sales and display shall not occupy a total site area exceeding the gross building floor area on the site, except as authorized by a conditional use permit. 






 







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(B) Areas used for outdoor sales and display of motor vehicles, boats, campers, camp trailers, trailers, trailer coaches, house cars, or similar conveyances shall meet the minimum design standards applicable to off-street parking facilities with respect to paving, grading, drainage, access to public streets and alleys, safety and protective features, lighting, landscaping, and screening.
(C) Exterior storage shall be prohibited, unless screened by a solid wall or fence of between 5 and 8 feet in height.
(3) CD-N Subdistrict
In the CD-N subdistrict, all permitted office and commercial activities shall be conducted within a building, except for:
(A) Incidental sales and display of plant materials and garden supplies occupying not more than 500 square feet of exterior sales and display area, and (B) Farmers' markets that have obtained conditional use permits. [. . .]
SECTION 7. Section 18.30(A).040 (Permitted Uses) of Chapter 18.30(A) (Retail Shopping (R) Combining District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code are amended to read as follows:

Except to the extent a conditional use permit is required pursuant to Section 18.30(A).050, the following uses shall be permitted in an R district:
(a) Eating and drinking services, except drive-in and take-out services. (b) Personal services, except the following on California Avenue: beauty shops; nail salons; barbershops; and laundry and cleaning services as defined in Section 18.04.030(114)(B); fitness or exercise studios exceeding 1,800 square feet in gross floor area; and learning centers intended for individual or small group settings.
(c) Retail services.
(d) All other uses permitted in the underlying commercial district, provided they are not located on a ground floor.

SECTION 8. Section 18.30(A).050 (Conditional Uses) of Chapter 18.30(A) (Retail Shopping (R) Combining District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code are amended to read as follows:

The following uses may be conditionally permitted in an R district, subject to the issuance of a conditional use permit in accord with Chapter 18.76 (Permits and Approval):
(a) Financial services, except drive-in services, on a ground floor. (b) All other conditional uses allowed in the underlying commercial district provided they are not located on a ground floor.
(c) Formula retail businesses on California Avenue.







 







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(d) Beauty shops, nail salons, and barbershops, fitness or exercise studios exceeding 1,800 square feet in gross floor area; and learning centers intended for individual or small group settings.

SECTION 9. Section 18.30(C).020 (Permitted Uses ) of Chapter 18.30(C) (Ground Floor (GF) Combining District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code are amended to read as follows:
(a) The following uses shall be permitted in the GF combining district, subject to restrictions in Section 18.40.160180:
(1) Eating and drinking;
(2) Hotels;
(3) Personal services, except for parcels with frontage on University Avenue, where uses defined in Section 18.04.030(114)(B), (G), and (H), and (I) are not permitted; (4) Retail services;
(5) Theaters;
(6) Travel agencies;
(7) Commercial Recreation up to 5,000 square feet in gross floor area, except for parcels with frontage on University Avenue;
(78) All other uses permitted in the underlying district, provided such uses are not on the ground floor.
(b) Elimination or conversion of basement space currently in retail or retail-like use or related support purposes is prohibited.
(c) Entrance, lobby, or reception areas serving non-ground floor uses may be located on the ground floor to the extent reasonably necessary, provided they do not interfere with the gound ground floor use(s), and subject to the approval of the Director.

SECTION 10. Section 18.30(C).030 (Conditional Uses) of Chapter 18.30(C) (Ground Floor (GF) Combining District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code are amended to read as follows:
(a) The following uses may be conditionally allowed on the ground floor in the GF ground floor combining district, subject to issuance of a conditional use permit in accord with Chapter 18.76 (Permits and Approvals) and with the additional finding required by subsection (b), subject to restrictions in Section 18.40.160:
(1) Business or trade school;
(2) Commercial recreation over 5,000 square feet in gross floor area or with frontage on University Avenue;
(3) Day care;
(4) Financial services, except drive in services;
(5) General business service;
(6) Learning centers intended for individual or small group settings; 






 







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(7) All other uses conditionally permitted in the applicable underlying district, provided such uses are not on the ground floor.
(b) The director may grant a conditional use permit under this section only if he or she makes the following findings in addition to the findings required by Chapter 18.76 (Permits and Approvals):
(1) The location, access or design of the ground floor space of the existing building housing the proposed use, creates exceptional or extraordinary circumstances or conditions applicable to the property involved that do not apply generally to property in the same district. (2) The proposed use will not be determined to the retail environment or the pedestrian-oriented design objectives of the GF combining district. (c) Any use conditionally permitted pursuant to this section shall be effective only during the existence of the building that created the exceptional circumstance upon which the finding set forth in subsection (b) was made.

SECTION 11. 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 12. If any section, subsection, sentence, cl ause, 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 13. The Council finds that the adoption of this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to CEQA Guideline sections 15061(b)(3) because it can be seen.

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SECTION 14. This ordinance shall be effective on the thirty-first date after the date of its adoption and shall expire upon the earlier of June 30, 2022 or adoption of replacement legislation by the City Council. Upon expiration of this ordinance, the City Clerk shall direct the City’s codifier to update the Palo Alto Municipal Code as appropriate.

INTRODUCED: March 8, 2021
PASSED: April 12, 2021
AYES: BURT, DUBOIS, FILSETH, KOU, STONE
NOES: CORMACK, TANAKA
ABSENT:

ABSTENTIONS:

NOT PARTICIPATING:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning & Development
Services







 







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Certificate Of Completion
Envelope Id: 2FFD3DF938C64D8A8AAD4B626E119FA7 Status: Completed Subject: Please DocuSign: ORD 5517 Ordinance Amending PAMC Title 18 Ch 18.04 Definitions 18.16 Neighborh...

Source Envelope:

Document Pages: 17 Signatures: 5 Envelope Originator:

Certificate Pages: 2 Initials: 0 Danielle Kang
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
250 Hamilton Ave
Palo Alto , CA 94301
[email protected]
IP Address: 199.33.32.254
Record Tracking
Status: Original
4/16/2021 4:40:29 PM
Holder: Danielle Kang
[email protected]
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp
Albert Yang
[email protected]
Assistant City Attorney
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 97.113.131.147
Sent: 4/16/2021 4:45:43 PM
Viewed: 4/19/2021 10:27:07 AM
Signed: 4/19/2021 10:28:38 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Jonathan Lait
[email protected]
Interim Director Planning and Community
Environment
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Uploaded Signature Image
Using IP Address: 99.88.42.180
Sent: 4/19/2021 10:28:40 AM
Viewed: 4/19/2021 4:12:00 PM
Signed: 4/19/2021 4:12:27 PM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Ed Shikada
[email protected]
Ed Shikada, City Manager
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 4/19/2021 4:12:30 PM
Viewed: 4/19/2021 5:07:55 PM
Signed: 4/19/2021 5:08:31 PM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Tom DuBois
[email protected]
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 24.5.55.204
Sent: 4/19/2021 5:08:33 PM
Viewed: 4/26/2021 10:08:06 AM
Signed: 4/26/2021 10:08:30 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign

EXHIBIT A

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Signer Events Signature Timestamp
Beth Minor
[email protected]
City Clerk
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 4/26/2021 10:08:32 AM
Viewed: 4/26/2021 10:09:22 AM
Signed: 4/26/2021 10:09:45 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 4/16/2021 4:45:43 PM
Certified Delivered Security Checked 4/26/2021 10:09:22 AM Signing Complete Security Checked 4/26/2021 10:09:45 AM Completed Security Checked 4/26/2021 10:09:45 AM
Payment Events Status Timestamps

EXHIBIT A

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City of Palo Alto (ID # 14167)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: Approval of Contract No. C22183462 with Macias Gini & O'Connell LLP (MGO) for External Financial Audit Services in an Amount Not to Exceed $599,319 (Including a 10 Percent Contingency Additional Services Amount of $54,934) Through March 31, 2025.

From: City Manager
Lead Department: City Auditor

Recommendation
The Office of the City Auditor recommend s that City Council approve and authorize the City Manager or their designee to execute the external financial auditor contract with Macias Gini & O'Conn ell LLP (MGO) , Contract No. C22183462 (Attachment A), for external financial audit services for fiscal years 2022, 2023 and 2024, in an amount not to exceed $599,319 (including a 10 percent contingency Additional Services amount of $54,934), with a contract term of approximately three years through March 31, 2025.

Background
The City Charter requires the City Council, through the City Auditor , to engage an independent certified public accounting firm to conduct the annual external financial audit, and repo rt the results of the audit, in writing, to the City Council. The previous contract was a five -year contract with MGO for a total not to exceed amount of $875,569 for fiscal years ending on June 30, 2017, through June 30, 2021. Accordingly, in October 2021, the City initiated a formal Request for Proposal (RFP) process that encouraged competition from all qualified firms, including the current external auditors, MGO.

The RFP was publicly posted and sent directly to nine (9) accounting firms. In response, the City received proposals from four audit firms: MGO, Eide Bailly, Maze & Associates, and Vasquez.

Discussion
An evaluation team of four, including the City Auditor , the Chair of the Finance Committee, the Director of the Administrative Services Depa rtment / CFO, and the Finance Manager , reviewed and evaluated the four proposals and interview ed three firms including Maze & Associates, Eide Bailly, and MGO. 9 Packet Pg. 79

City of Palo Alto Page 2

The RFP evaluation process considered the following evaluation criteria/factors:

• Quality and completeness of the proposal
• Quality, performance, and effectiveness of the services to be provided • Firm and team member experience
• Cost to the City
• Consultant’s financial condition
• Consultant’s ability to perform the work within the specified time • Record of prior performance with similar entities
• Availability for year-round consulting
• Compliance with laws and regulations

As part of the evaluation, the team contacted references for each of the proposed vendors. The reference checks resulted in generally positive feedback for each vendor, and no discernable “red flags”.

The evaluation committee was concerned with the experience each audit firm had in working with utilities, including electric utilities. As such, both the RFP and the interviews of each firm sought to ascertain whether the respondents were experienced in working with municipal utilities. MGO demonstrated experience in the RFP and responded well to interview questions focused on this experience.

MGO was the top rated (or tied for the t op rated) firm amongst the three finalists in all but one of the above -listed evaluation factors – that factor being cost to the City.

Despite being the more costly option to the City, the overall firm and team experience, use of technology in the audit p rocess, availability during the year, demonstrated understanding of the City’s needs, and utility experience, the evaluation team scored the MGO proposal and interview the highest taking all evaluation factors into account , and is thus recommending the for external financial audit services to MGO.

The City does not have a formal rotation policy for its external auditor. With that said, MGO proposed a rotation of audit management.

The attached contract has been negotiated by and between the parties. If approved by City Council, the City Manager will execute the contract on behalf of the City.

Resource Impact
The total three -year cost not to exceed $599,319 will be funded in the City Auditor’s Office operating budget beginning in Fiscal Year 2023 throu gh the life of the contract , subject to Council appr opriation of funds for future fiscal year budgets . The payment per year for professional services and reimbursable expenses shall not exceed:

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2022 – 2023 $193,600
2023 – 2024 $199,408
2024 – 2025 $206,311

Stakeholder Engagement
The Office of the City Auditor worked primarily with the Administrative Services Department and the Chair of the Finance Committee in the evaluation process. The Office of the City Attorney assisted in negotiation of the contra ct. The request for proposal was publicly advertised on the City’s application for solicitations.

Policy Implications
This recommendation does not present any changes to existing City policies and aligns with the City’s Charter requirements.

Environmental Review
Environmental review is not applicable to this activity.

Attachments:
• Attachment9.a: Attachment A: Macias Gini & O'Connell LLP (MGO) Contract; C22183462
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Professional Services
Rev. Dec.15, 2020

CITY OF PALO ALTO CONTRACT NO. C22183462

AGREEMENT FOR PROFESSIONAL SERVICES

BETWEEN THE CITY OF PALO ALTO AND MACIAS GINI & O’CONNELL LLP

This Agreement for Professional Services (this “Agreement”) is entered into as of the 25th day of March, 2022 (the “Effective Date”), by and between the CITY OF PALO ALTO , a California chartered municipal corporation (“CITY”), and MACIAS GINI & O’CONNELL LLP, a Limited Liability Partnership, located at 2121 N. California Blvd., Suite 750, Walnut Creek, CA 94596 (“CONSULTANT”).

The following recitals are a substantive portion of this Agreement and are fully incorporated herein by this reference:

RECITALS

A. CITY intends to engage a consultant to provide External Audit Services to the City (the “Project”) and desires to engage the Consultant to provide such services in connection with the Project (the “Services”, as detailed more fully in Exhibit A).

B. CONSULTANT represents that it, its employees and subconsultants, if any, possess the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services.

C. CITY, in reliance on these representations , desires to engage CONSULTANT to provide the Services as more fully described in Exhibit A, entitled “SCOPE OF SERVICES”.

NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree as follows:

SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit A in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY.

SECTION 2. TERM. The term of this Ag reement shall be from the date of its full execution through March 31, 2025 unless terminated earlier pursuant to Section 19 (Termination) of this Agreement.

SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit B, entitled “SCHEDULE OF PERFORMANCE”. Any Services for which times for performance are not sp ecified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT.

CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT.

DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be based on the compensation structure detailed in Exhibit C, entitled “COMPENSATION,” including any reimbursable expenses specified therein, and the maximum total compensation shall not exceed Five Hundred Forty - Four Thousand Eight Hundred Thirty -Five Dollars ($544,835.00). T he hourly schedule of rates, if applicable, is set out in Exhibit C -1, entitled “ SCHEDULE OF RATES.” Any work performed or expenses incurred for which payment would result in a total exceeding the maximum compensation set forth in this Section 4 shall be at no cost to the CITY.

SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the S ervices performed and the applicable charges (including, if applicable, an identification of personnel who performed the Services, hours worked, hourly rates, and reimbursable expenses), based upon Exhibit C or, as applicable, CONSULTANT’s schedule of rates set forth in Exhibit C -1. If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s invoices shall be subject to verification by CITY. CONSULTANT shall send all invoices to CI TY’s Project Manager at the address specified in Section 13 (Project Management) below. CITY will generally process and pay invoices within thirty (30) days of receipt of an acceptable invoice.

SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it , its employees and subcontractors, if any, possess the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subcontractors, if any, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All Services to be furnished by CONSULTANT under this A greement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances.

SECTION 7. COMPLIANCE WITH LAWS . CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement , as amended from time to time . CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services.

SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services , arising from or caused by CONSULTANT’s errors and omissions, including, but not limited to, the costs of corrections such errors and omissions, any c hange order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions.

SECTION 9. [OMITTED (COST ESTIMATES).]

SECTION 10. INDEPENDENT CONTRACTOR. CONSULTANT acknowledges and agrees DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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that CONSULTANT and any agent or employee of CONSULTANT will act as and shall be deemed at all times to be an independent contractor and shall be wholly responsible for the manner in which CONSULTANT performs the S ervices requested by CITY under this Agreement.

CONSULTANT and any agent or employee of CONSULTANT will not have employee status with CITY, nor be entitled to participate in any plans, arrangements, or distributions by CITY pertaining to or in connection with any retirement, health or other benefits that CITY may offer its employees. CONSULTANT wi ll be responsible for all obligations and payments, whether imposed by federal, state or local law, including, but not limited to, FICA, income tax withholdings, workers’ compensation, unemployment compensation, insurance, and other similar responsibilities re lated to CONSULTANT’s performance of the Services, or any agent or employee of CONSULTANT providing same. Nothing in this Agreement shall be construed as creating an employment or agency relationship between CITY and CONSULTANT or any agent or employee of CONSULTANT. Any terms in this Agreement referring to direction from CITY shall be construed as providing for direction as to policy and the result of CONSULTANT ’s provision of the Services only, and not as to the means by which such a result is obtained.

SECTION 11. ASSIGNMENT . The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any i nterest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written approval of the C ity Manager. Any purported assignment made without the prior written approval of the City Manager will be void and without effect. Subject to the foregoing, the covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, succes sors, executors, administrators and assignees of the parties.

SECTION 12. SUBCONTRACTING. CONSULTANT shall not subcontract any portion of the Services to be performed under this Agreement without the prior written authorization of the City Manager or designee. In the event CONSULTANT does subcontract any portion of the work to be performed under this Agreement, CONSULTANT shall be fully responsible for all acts and omissions of subcontractors.

SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign David Bullock as the CONSULTANT’s Project Manager to have supervisory responsibility for the performance, progress, and execution of the Services and represent CONSULTANT during the day -to-day performance of the Services. If circumstances cause the substitution of the CONSULTANT’s Project Manager or any other of CONSULTANT’s key personnel for any reason, the appointment of a substitute Project Manager and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s P roject Manager. CONSULTANT, at CITY’s request, shall promptly remove CONSULTANT personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Services or a threat to the safety of persons or property.

CITY’s Project Manager is Kyle O’Rourke, Office of the City Auditor , 250 Hamilton Avenue, Palo Alto, CA , 94301, Telephone: (847)436-2671. CITY’s Project Manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate Project Manager from time to time.

SECTION 1 4. OWNERSHIP OF MATERIALS . Except for CONSULTANT ’s Audit DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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Documentation, as defined herein below which shall remain the exclusive property of CONSULTANT, all work product, including without limitation, all writings, drawings, studies, sketches, photographs, plans, reports, specifications, computations, models, recordings, data, documents, and other materials and copyright interests developed under this Agreement , in any form or media, shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees tha t all copyrights which arise from creation of the work product pursuant to this Agreement are vested in CITY, and CONSULTANT hereby waives and relinquishes all claims to copyright or other intellectual property rights in favor of CITY. Neither CONSULTANT nor its subcontractors, if any, shall make any of such work product available to any individual or organization without the prior written approval of the City Manager or designee.

CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the Scope of Services.

“Audit Documentation” shall mean all records r elated to the Agreement, excluding financial records that report CONSULTANT’s professional hours and expenses, that are required by professional standards or CONSULTANT ’s internal policies to support the services performed under the Agreement. Examples of Audit Documentation are audit programs, analysis, memoranda, letters of confirmation and representation, extract or copies of City documents, and schedules or commentaries prepared by or obtained by CONSULTANT . Audit Documentation may be in paper form, electronic form, or other media. The reports issued by the CONSULTANT to CITY shall become the property of CITY.

SECTION 15. AUDITS . CONSULTANT agrees to permit CITY and its authorized representatives to audit, at any reasonable time during the term of this Agreement and for four (4) years from the date of final payment, CONSULTANT’s records pertaining to matters covered by this Agreement, including without limitation records demonstrating compliance wi th the requirements of Section 10 (Independent Contractor). CONSULTANT further agrees to maintain and retain accurate books and records in accordance with generally accepted accounting principles for at least four (4) years after the expiration or earlier termination of this Agreement or the completion of any audit hereunder, whichever is later.

SECTION 16. INDEMNITY.

To the fullest extent permitted by law, CONSULTANT shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney’s fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party.

16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from a Claim arising from the active negligence or willful misconduct of an Indemnified Party that is not contributed to by any act of, or by any omission to perform a duty imposed by law or agreement by, CONSULTANT, its officers, employees, agents or contractors under this Agreement.

DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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16.3. The acceptance of CONSULTANT’s Services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement.

SECTION 17. WAIVERS. No waiver of a condition or nonperformance of an obligation under this Agreement is effective unless it is in writing in accordance with Section 2 9.4 of this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. Any waiver granted shall apply solely to the specific instance expressly stated. No single or parti al exercise of any right or remedy will preclude any other or further exercise of any right or remedy.

SECTION 18. INSURANCE.

18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit D, entitled “INSURANCE REQUIREMENTS”. CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies.

18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A -:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above.

18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days ’ prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT , CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSUL TANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement.

18.4. The procuring of such require d policy or policies of insurance will not be construed to limit CONSULTANT ’s liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired.

SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES.

19.1. The City Manager may suspend the performance of the Services, in whole DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to C ONSULTANT. If CONSULTANT fails to perform any of its material obligations under this Agreement, in addition to all other remedies provided under this Agreement or at law, the City Manager may terminate this Agreement sooner upon written notice of termination. Upon receipt of any notice of suspension or termination , CONSULTANT will discontinue its performance of the Services on the effective date in the notice of suspension or termination.

19.2. In event of suspension or termination, CONSULTANT wi ll deliver to the City Manager on or before the effective date in the notice of suspension or termination, any and all work product, as detailed in Section 14 (Ownership of Materials), whether or not completed, prepared by CONSULTANT or its contractors, if any, in the performance of this Agreement. Such work product is the property of CITY, as detailed in Section 14 (Ownership of Materials).

19.3. In event of suspension or termination, CONSULTANT will be paid for the Services rendered and work products delivered to CITY in accordance with the Scope of Services up to the effective date in the notice of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s S ervices provided in material conformity with this Agreement as such determination is made by the City Manager acting in the reasonable exercise of his/her discretion . The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 17, 19.2, 19.3, 19.4, 20, 25, 27, 28, 29 and 30.

19.4. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement, unless made in accordance with Section 17 (Waivers).

SECTION 20. NOTICES.

All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows:

To CITY: Office of the City Clerk
City of Palo Alto
Post Office Box 10250
Palo Alto, CA 94303

With a copy to the Purchasing Manager

To CONSULTANT: Attention of the P roject Manager at the address of CONSULTANT recited on the first page of this Agreement.

CONSULTANT shall provide written notice to CITY of any change of address.

SECTION 21. CONFLICT OF INTEREST.

21.1. In executing this Agreement, CONSULTANT covenants that it presently DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services.

21.2. CONSULTANT further c ovenants that, in the performance of this Agreement, it will not employ subcontractors or other persons or parties having such an interest.

CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California, as amended from time to time . CONSULTANT agrees to notify CITY if any conflict arises.

21.3. If the CONSULTANT meets the definition of a “Consultant” as defined by the Regulations of the Fair Political Practices Commission, CONSULTANT will file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act of 1974, as amended from time to time.

SECTION 22. NONDISCRIMINATION; COMPLIANCE WITH ADA.

22.1. As set forth in Palo Alto Municipal Code S ection 2.30.510, as amended from time to time, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person due to that person’s race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregna ncy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section

2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment.

22.2. CONSULTANT understands and agrees that pursuant to the Americans Disabilities Act (“ADA”), programs, services and other activities provided by a public entity to the public, whether directly or through a contractor or subcontractor, are required to be accessible to the disabled public. CONSULTANT will provide the Services specified in this Agreement in a manner that complies with the ADA and any other applicable federal, state and local disability rights laws and regulations, as amended from time to time. CONSULTANT will not discriminate against persons with disabilities in the provision of services, benefits or activities provided under this Agreement.

SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with t he CITY’s Environmentally Preferred Purchasing policies which are available at CITY ’s Purchasing Department , hereby incorporated by reference and as amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include, first, minimizing and reducing waste; second, reusing waste ; and, third, recycling or composting waste. In particular, C ONSULTANT shall comply with the following Zero Waste requirements:
(a) All printed materials provided by CONSULTANT to C ITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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post-consumer content paper, unless otherwise approved by CITY ’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable-based inks. (b) Goods purchased by C ONSULTANT on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Department’s office.
(c) Reusable/returnable pallets shall be taken back by CONSULTANT , at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed.

SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE .

CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the Cit y, CONSULTANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code Section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code Section 4.62.060.

SECTION 25. NON-APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code , as amended from time to time. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This S ection shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement.

SECTION 2 6. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS.

26.1. This Project is not subject to prevailing wages and related requirements. CONSULTANT is not required to pay prevailing wages and meet related requirements under the California Labor Code and California Code of Regulations in the performance and implementation of the Project if the contract:
(1) is not a public works contract;
(2) is for a public works construction project of $25,000 or less, per California Labor Code Sections 1782(d)(1), 1725.5(f) and 1773.3(j); or (3) is for a public works alteration, demolition, repair, or maintenance project of $15,000 or less, per California Labor Code Sections 1782(d)(1), 1725.5(f) and 1773.3(j).

SECTION 27. CLAIMS PROCEDURE FOR “9204 PUBLIC WORKS PROJECTS” . For purposes of this Section 27, a “9204 Public Works Project” means the erection, construction, alteration, repair, or improvement of any public structure, building, road, or other public improvement of any kind. ( Cal. Pub. Cont. Code § 9204.) Per California Public Contract Code DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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Section 9204, for Public Works Projects , certain claims procedures shall apply, as set forth in Exhibit F, entitled “Claims for Public Contract Code Section 9204 Public Works Projects”.

This Project is not a 9204 Public Works Project.

SECTION 28. CONFIDENTIAL INFORMATION.

28.1. In the performance of this Agreement, CONSULTANT may have access to CITY’s Confidential Information (defined below). CONSULTANT will hold Confidential Information in strict confidence, not disclose it to any third party, and will use it only for the performance of its obligations to CITY under this Agreement and for no other purpose.

CONSULTANT will maintain reasonable and appropriate administrative, technical and physical safeguards to ensure the security, confidentiality and integrity of the Confidential Information.

Notwithstanding the foregoing, CONSULTANT may disclose Confidential Information to its employees, agents and subcontractors, if any, to the extent they have a need to know in order to perform CONSULTANT’s obligations to CITY under this Agreeme nt and for no other purpose, provided that the CONSULTANT informs them of, and requires them to follow, the confidentiality and security obligations of this Agreement.

28.2. “Confidential Information” means all data, information (including without limitation “Personal Information” about a California resident as defined in Civil Code S ection 1798 et seq., as amended from time to time) and materials, in any form or media, tangible or intangible, provided or otherwise made available to CONSULTANT by CITY, directly or indirectly, pursuant to this Agreement. Confidential Information excludes information that CONSULTANT can show by appropriate documentation: (i) was publicly known at the time it was provided or has subsequently become publicly known other than by a breach of this Agreement; (ii) was rightfully in CONSULTANT’s possession free of any obligation of confidence prior to receipt of Confidential Information; (iii) is rightfully obtained by CONSULTANT from a third party without breach of any confidentiality obligation; (iv) is independently developed by employees of CONSULTANT without any use of or acce ss to the Confidential Information; or (v) CONSULTANT has written consent to disclose signed by an authorized representative of CITY.

28.3. Notwithstanding the foregoing, CONSULTANT may disclose Confidential Information to the extent required by order of a court of competent jurisdiction or governmental body, provided that CONSULTANT will notify CITY in writing of such order immediately upon receipt and prior to any such disclosure (unless CONSULTANT is prohibited by law from doing so), to give CITY an opportunity to oppose or otherwise respond to such order.

28.4. CONSULTANT will notify City promptly upon learning of any breach in the security of its systems or unauthorized disclosure of, or access to, Confidential Information in its possession or cont rol, and if such Confidential Information consists of Personal Information, CONSULTANT will provide information to CITY sufficient to meet the notice requirements of Civil Code Section 1798 et seq., as applicable, as amended from time to time.

28.5. Prior to or upon termination or expiration of this Agreement, CONSULTANT will honor any request from the CITY to return or securely destroy all copies of Confidential Information. All Confidential Information is and will remain the property of the CITY DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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and not hing contained in this Agreement grants or confers any rights to such Confidential Information on CONSULTANT.

28.6. If selected in Section 30 (Exhibits), this Agreement is also subject to the terms and conditions of the Information Privacy Policy and Cybersecurity Terms and Conditions.

SECTION 29. MISCELLANEOUS PROVISIONS.

29.1. This Agreement will be governed by California law, without regard to its conflict of law provisions.

29.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California.

29.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys’ fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties.

29.4. This Agreement, including all exhibits, constitutes the entire and integrated agreement between the parties with respect to the subject matter of this Agreement, and supersedes all prior agreements, negotiations, representations, statements and undertakings, either oral or written. This Agreement may be amended only by a written instrument, which is signed by the authorized representatives of the parties and approved as required under Palo Alto Munic ipal Code, as amended from time to time.

29.5. If a court of competent jurisdiction finds or rules that any provision of this Agreement is void or unenforceable, the unaffected provisions of this Agreement will remain in full force and effect.

29.6. In t he event of a conflict between the terms of this Agreement and the exhibits hereto (per Section 30) or CONSULTANT’s proposal (if any), the Agreement shall control. In the event of a conflict between the exhibits hereto and CONSULTANT’s proposal (if any), the exhibits shall control.

29.7. The provisions of all checked boxes in this Agreement shall apply to this Agreement; the provisions of any unchecked boxes shall not apply to this Agreement.

29.8. All section headings contained in this Agreement are for convenience and reference only and are not intended to define or limit the scope of any provision of this Agreement.

29.9. This Agreement may be signed in multiple counterparts, which, when executed by the authorized representatives of the parties, shall together constitute a single binding agreement.

SECTION 30. EXHIBITS. Each of the following exhibits, if the check box for such exhibit is DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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selected below, is hereby attached and incorporated into this Agreement by reference as though fully set forth herein:

EXHIBIT A: SCOPE OF SERVICES
EXHIBIT B: SCHEDULE OF PERFORMANCE
EXHIBIT C: COMPENSATION
EXHIBIT C-1: SCHEDULE OF RATES
EXHIBIT D: INSURANCE REQUIREMENTS

THIS AGREEMENT IS NOT COMPLETE UNLESS ALL SELECTED EXHIBITS ARE ATTACHED.

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CONTRACT NO. C22183462 SIGNATURE PAGE

IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement as of the date first above written.

CITY OF PALO ALTO

____________________________
City Manager

APPROVED AS TO FORM:

__________________________
City Attorney or designee
MACIAS GINI & O’CONNELL LLP

Officer 1

By:________________________________

Name:_____________________________

Title:______________________________

DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29 Partner
David Bullock

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EXHIBIT A

SCOPE OF SERVICES

CONSULTANT shall provide the Services detailed in this Exhibit A, entitled “SCOPE OF SERVICES”.

PROJECT SPECIFICATIONS

Unless otherwise noted, all audit services cover the CITY 's fiscal years ending on June 30, 2022 through June 30, 2024, with the option to continue such services for each of the two subsequent fiscal years. Such option shall be contingent upon satisfactory performance. The audit services are to be performed in accordance with generally accepted auditing standards, the standards for financial audits set forth in the United States Government Accountability Office's Government Auditing Standards (2011 revision, or subsequent revisions), the provisions of the federal Single Audit Act of 1984, as amended in 1996, and the United States Office of Management and Budget Circular A-133, Audits states, Local Governments, and Non-Profit Organizations.

Generally accepted accounting principles provide for certain required supplementary information, such as Management's Discussion and Analysis to a ccompany the CITY 's basic financial statements. CONSULTANT shall apply certain limited procedures consisting principally of inquiries of management regarding the methods of measurement and presentation, which the CITY shall affirm to the CONSULTANT in the CITY's Management Letter.

Basic Audit Services Required

CONSULTANT shall audit the CITY's financial statements for the Palo Alto Public Improvement Corporation for the fiscal years ending on June 30, 2022 through June 30, 2024. In providing these services, CONSULTANT shall:

1) Audit the basic financial statements and supplementary entity-wide combining and individual fund financial statements included in the CITY 's Annual Comprehensive Financial Report (ACFR), including all funds under the jurisdiction and control of the CITY , a nd render a professional opinion thereon.

Prior to year -end and preferably during March and April, CONSULTANT shall perform interim work to test internal controls of accounting processes. The auditor shall provide the City Auditor and the Director of Adm inistrative Services with a draft management letter on issues noted at completion of the interim work.

2) Prepare a management letter to the City Council which will include observations and recommendations noted and identified during the audit. This may include:

a) issues regarding internal control structure (e.g., information systems, functions, and procedures),

b) items concerning compliance with laws, rules, and regulations,

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c) opportunities for economies and efficiencies inherent in the accounting functions or reporting activities of the CITY, and

d) other matters of interest to the City Council and management.

3) Audit the financial statements of the Regional Water Quality Control Plant and issue a report thereon in accordance with the requirements in the "Basic Agreement between the Cities of Palo Alto, Mountain View and Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System", and all addenda thereto.

4) Audit and issue a report on the financial statements of the Palo Alto Public Improvement Corporation, which the CITY has created to finance the construction of specific.

5) Audit the CITY's federal financial assistance program and issue reports thereon in accordance with the provisions of the Single Audit Act of 1984, including 1996 amendments to the Single Audit Act, and any other amendments which become effective during the term of this contract.

6) Audit the CITY 's state financial assistance program (Transportation Development Act) and issue reports thereon in accordance with applicable State requirements.

7) Perform agreed upon procedures on the Gann Limit calculation and prepare a letter certifying compliance, as required.

8) Audit the statements of, an d issue a report thereon, cable television franchise receipts and disbursements, for the current period, relating to the Joint Operating Agreement signed on October 13, 1988, by and among the City of Palo Alto, Town of Atherton, City of Menlo Park, City of East Palo Alto, the County of San Mateo, and the County of Santa Clara.

9) Prepare the Annual Financial Transactions Report and Annual Street Report, in accordance with instructions from the California State Controller’s Office.

10) Assist the CITY in the transition to adhere to any new GASB pronouncements including plan for implementation of GASB Statements such as GASB 87 Leases, GASB 84 Fiduciary Activities, GASB 90 Majority Equity Interests, and additional GASB recommended issues for implementation for fis cal year ending and beyond. To the extent possible, this assistance should be provided during the interim work, and may include reviewing reports, transactions, Management Discussion and Analysis, and GASB 54 Fund Balance Reporting and Governmental Fund Type Definitions.

11) Provide the electronic data used to prepare the ACFR, word processing services, and use the CITY’s worksheet and template to prepare the ACFR, including the entity- wide statements.

The ACFR should be prepared in the format recommended by the Government Finance Officers Association, in accordance with City standards, and with website-compatibility.

12) Prepare and provide the CITY a ACFR template in Excel and Word formats at the start of the year-end audit. The CITY provides electronic data of financial statements prior to the start of the year-end audit. The template financial reports (Excel) are mapped to the CITY’s general ledger accounts by the CONSULTANT. During audit fieldwork, adjustments (prepared by DocuSign Envelope ID: 4A32DECD-1FD2-434F-870A-6614017A0D29

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CITY staff or recomme nded by CONSULTANT), eliminations, and entity- wide consolidations and reconciliations are compiled and entered into the template by the CONSULTANT, The CONSULTANT will compile the draft ACFR including all financial statements and notes. CITY staff will provide the transmittal letter, Management’s Discussion and Analysis, and statistical schedules for the CONSULTANT to include in the ACFR. At the completion of the audit, the CONSULTANT will provide a draft ACFR for CITY review. The ACFR should be prepared in the format recommended by the Government Finance Officers Association, in accordance with CITY requirements, and with website compatibility.

13) Meet with the City Auditor or designee independently to review internal control issues noted during the audit. T his will include reportable conditions, if applicable, reflected in the draft Management Letter.

14) Upon completion of the audit, hold an exit conference with the City Auditor, Director of Administrative Services, and appropriate staff. At this meeting, the CONSULTANT will present the financial statements and first draft of the management letter.

15) Attend a minimum of one City Council and one Council Finance Committee meeting for the purpose of discussing the audit and the Management Letter.

16) Provide professi onal publications and software including applicable licenses as described below:

a) The CONSULTANT will provide to the City Auditor and Director of Administrative Services or designee, at no additional cost, any publications produced by the CONSULTANT, the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), the Government Finance Officers Association (GFOA), and the United States Government Accountability Office (GAO). Examples of these publications include:

i) AICPA Professional Standards
ii) State and Local Governments - Audit and Accounting Guide (AICPA) iii) FASB Accounting Standards
iv) Codification of Governmental Accounting and Financial Reporting Standards (GASB) v) Governmental Accounting, Auditing and Financial Reporting (GFOA) vi) Government Auditing Standards (GAO)

In addition, the CONSULTANT will make available any past, current or new GASB statements.

17) Provide training for the CITY 's personnel regarding important industry developments and technical matters as described below:

GASB pronouncements and major projects may significantly impact the CITY ’s financial reporting over the next several years. The CONSULTANT will provide th e CITY, at no additional cost, with proactive guidance on complying with such requirements. Formal training classes will be offered to the City Auditor and Director of Administrative Services or designee regarding industry developments and new accounting regulations.

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EXHIBIT B

SCHEDULE OF PERFORMANCE

CONSULTANT shall perform the Services so as to complete each milestone on the timelines identified below.

1) CONSULTANT shall deliver the following items:

Items 1-4 are to be delivered to the City Auditor. For items 5 -8, one courtesy copy is to be delivered to the City Auditor and the number of the copies indicated below are to be delivered to the Director of Administrative Services Department. The report issuance dates are shown for the fiscal year ending June 30, 2022. The report issuance dates for subsequent fiscal years are expected to be around the same dates, with the exact dates to be determined.

a) Five (5) draft reports by October 24, 2022 or one week after fieldwork concludes at the exit conference and five (5) final bound reports by November 14, 2022 on the following:

Palo Alto Improvement Corporation
Regional Water Quality Control Plant
Transportation Development Act

b) A copy of the comprehensive Management Letter delivered to the City Auditor and to the Director of Administrative Services as follows:

Draft Management Letter for interim work May 31, 2022 (for subsequent years, it is
anticipated that the letter
be completed around
mid-April)

Draft Management Letter for completed fieldwork October 7, 2022 or one week after fieldwork
concludes at the exit
conference

Final comprehensive Management Letter November 14, 2022

c) Seven (7) bound copies of the cable report on November 14, 2022.

d) Two (2) original copies and a complete electronic version in a website- compatible format of the Annual Comprehensive Financial Report, including the Single Audit Report, on November 14, 2022.

e) Forty (40) (30 in color) bound copies of the Annual Comprehensive Financial Report including the Opinion Letter and the Single Audit Report by November 14, 2022. Also, provide one copy to the City Auditor.

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f) Five (5) copies of the Gann Limit Letter on May 30, 2022. Also, provide one copy to the City Auditor.

g) Two (2) copies of the Annual Financial Transactions Report on November 14, 2022, Annual Street Report on December 16, 2022, to be delivered to the CITY ’s Accounting Manager before the due date for s ignature and mailing. Also, provide one copy of each report to the City Auditor.

2) Meet with the City Auditor and the Assistant Director of Administrative Services or their designees on a weekly basis during the audit engagement, to report on the progress of CONSULTANT's examinations and on their preliminary audit findings and recommendations.

3) Provide the Director of Administrative Services with comments to responses on issues noted at completion of the interim audit work (Accounting Issues memo). The CONSULTANT's comments will be provided within three weeks.

4) Schedule for Audit of the Fiscal Year ending June 30, 2022 (exact dates to be determined)

Interim Work May 2, 2022
(for subsequent years, it is
anticipated that interim work be
completed in March and April)

Fieldwork Completed September 30, 2022

Initial Draft Report October 14, 2022

Final Report October 31, 2022

Presentation of Audit Results to
Finance Committee and City Council December 6, 2022.

5) The City Auditor may, upon notice and showing of good cause therefore given and made by the CONSULTANT at least fifteen (15) days before the above scheduled dates, grant an extension of time for completion of such audit and completion and delivery of such reports and Management Letter for a reasonable period of time after the specified delivery dates.

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EXHIBIT C

COMPENSATION

CITY agrees to compensate CONSULTANT for the S ervices performed in accordance with the terms and conditions of this Agreement, including Services, any specified reimbursable expenses, and Additional Services (if any, per Section 4 of the Agreement), based on the hourly rate schedule attached as Exhibit C-1.

The compensation to be paid to CONSULTANT under this Agreement for all S ervices, any specified reimbursable expenses, and Additional Services (if any, per Section 4), shall not exceed the amount(s) stated in Section 4 of this Agreement . CONSULTANT agrees to complete all Services, any specified reimbursable expenses, and Additional Services (if any, per Section 4) , within this/these amount(s). Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to the CITY.

REIMBURSABLE EXPENSES

CONSULTANT’S ordinary business expenses , such as administrative, overhead, administrative support time /overtime, information systems, software and hardware, photocopying, telecommunications (telephone, internet), in-house printing, insurance and other ordinary business expenses , are NOT included within the scope of payment for Services and are NOT reimbursable expenses hereunder.

The expenses (by type, e.g. travel) for which CONSULTANT will be reimbursed are:

NONE up to the not-to-exceed amount of: $0.00.

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EXHIBIT C-1

SCHEDULE OF RATES

CONSULTANT’s schedule of rates is as follows:

Position FY 2021-2022
Hourly Rate
Partner/Director $350
Manager $240
IT Consultant $245
Auditor In Charge $175
Staff Auditor $135
Support Staff $90

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EXHIBIT D

INSURANCE REQUIREMENTS

CONSULTANTS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE

CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, O R HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA.

AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS AS SPECIFIED HEREIN.

REQUIRED TYPE OF COVERAGE REQUIREMENT

MINIMUM LIMITS
EACH

OCCURRENCE AGGREGATE
YES
YES
WORKER’S COMPENSATION
EMPLOYER’S LIABILITY

STATUTORY

STATUTORY STATUTORY STATUTORY
YES

GENERAL LIABILITY, INCLUDING

PERSONAL INJURY, BROAD FORM

PROPERTY DAMAGE BLANKET

CONTRACTUAL, AND FIRE LEGAL

LIABILITY

BODILY INJURY

PROPERTY DAMAGE

BODILY INJURY & PROPERTY
DAMAGE COMBINED.
$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

$1,000,000

YES

AUTOMOBILE LIABILITY,

INCLUDING ALL OWNED, HIRED,

NON-OWNED

BODILY INJURY
- EACH PERSON
- EACH OCCURRENCE

PROPERTY DAMAGE

BODILY INJURY AND PROPERTY

DAMAGE, COMBINED
$1,000,000
$1,000,000
$1,000,000

$1,000,000

$1,000,000

$1,000,000
$1,000,000
$1,000,000

$1,000,000

$1,000,000

YES

PROFESSIONAL LIABILITY,

INCLUDING, ERRORS AND

OMISSIONS, MALPRACTICE (WHEN

APPLICABLE), AND NEGLIGENT

PERFORMANCE
ALL DAMAGES $1,000,000
YES

THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST

AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM

OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONSULTANT AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.

I. INSURANCE COVERAGE MUST INCLUDE:

A. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONSULTANT’S AGREEMENT TO INDEMNIFY CITY.

II. THE CONSULTANT MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT THE FOLLOWING URL: HTTPS://WWW.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569

III. ENDORSEMENT PROVISIONS WITH RESPECT TO THE INSURANCE AFFORDED TO ADDITIONAL INSUREDS:

A. PRIMARY COVERAGE

WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED,

INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR

CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS.

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Professional Services
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B. CROSS LIABILITY

THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER

THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE

INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE

INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY.

C. NOTICE OF CANCELLATION

1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON

OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.

2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.

EVIDENCE OF INSURANCE AND OTHER RELATED NOTICES ARE REQUIRED TO BE FILED WITH THE CITY OF PALO ALTO AT THE FOLLOWING URL:

HTTPS://WWW.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569

OR

HTTP://WWW.CITYOFPALOALTO.ORG/GOV/DEPTS/ASD/PLANET_BIDS_HOW_TO.ASP

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City of Palo Alto (ID # 14163)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: Policy and Services Committee Recommends the City Council Accept the City Auditor’s Quarterly Status Report (Q2 of Fiscal Year 2021) From: City Manager
Lead Department: City Auditor

Recommended Motion
The Policy and Services Committee and the City Auditor recommend the City Council take the following action:

1) Accept the Office of the City Auditor’s Quarterly Status Report covering October – December 2021

Discussion
Quarterly Status Report – October – December 2021

In accordance with Task 5 of our agreement with the City , Baker Tilly is required to report quarterly on a variety of topics, generally including progress to plan.

Our presentation incl udes the following high level status updates organized by task within our agreement with the City:

• Task 1 – Citywide Risk Assessment
o Kicked-off the Risk Assessment process to be reported in Q3 of FY22 (March 2022)
• Task 2 – Annual Audit Plan
o Kicked-off the Audit Planning process to be reported in Q3 of FY22 (March 2022)
• Task 3 – Financial Audit
o Solicited and evaluated proposals for the Financial Auditor, to be presented to the Finance Committee in March/April 2022
o Presented, in conjunction with the Adminis trative Services Department, the Financial Audit report prepared by Macias, Gini, O’Connell LLP ( Action Minutes; Video)
• Task 4 – Execute Audit Plan
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City of Palo Alto Page 2

o Presented the Asset Management Audit Activity Report to the Policy & Services Committee, which was subsequently approved by City Council (Action Minutes, Video)
o Presented the IT Risk Management Audit Activity Report to Policy & Services Committee, which was subsequently approved by City Council (Action Minutes, Video)
o Presented the Construction Project Controls Audit Report to the Policy & Services Committee, which was subsequently approved by City Council in January 2022 (Action Minutes, Video)
o Presented the Power Purchase Agreement Report to the Policy & Services Committee, to be presented to Council for approval in Q3 of FY22 ( Action Minutes, Video)
o Presented the Initial Public Safety Building Initial Monitoring Memo to the Policy & Services Committee, which was subsequently approved by City Council in January 2022 (Video)
o Initiated the Power Purchase Agreement Audit Activity as approved by City Council on November 15, 2021 (Action Minutes, Video)
o Sought and received Policy & Services Approval for a Task Order to Compete a Wire Payment Process and Controls Review (Video) • Task 5 – Periodic Reporting and Hotline Monitoring
o No hotline reports were received during this period.
o Presented the Office of the City Auditor’s Annual Report ( Action Minutes; Video)
• Task 6 – City Auditor evaluation
o N/A

The Quarterly Status Report was unanimously approved by the Policy and Services Committee on March 8, 2022 (#14011).

Timeline, Resource Impact, Policy Implications
The task order and corresponding budget associated with this report by the City Auditor were previously approved. Thus, this report has no impact on City resources.

However, it can be noted that the activities described reflect the dedication of significant resources across City departments to support these reviews.

Environmental Review
The Committee’s approval of the quarterly report does not meet the definition of a “project” under Public Resources Code 21065, therefore California Environmental Quality Act review is not required.
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City of Palo Alto (ID # 14312)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: SECOND READING: Adoption of an Ordinance Amending Existing Palo Alto Municipal Code Chapter 5.30, Disposable Foodware Items and Other Disposable Products, to Comply with California Assembly Bill 1276 (Single - Use Foodware Accessories and Standard Con diments) Requiring Additional Restrictions on the Use of Disposable Foodware and Condiments (FIRST READING: April 18, 2022: PASSED 7 -0)
From: City Manager
Lead Department: Public Works

This was heard by the City Council on April 18, 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:
• Attachment11.a: Attachment A - Updates to PAMC 5.30 Redline 11 Packet Pg. 105

ATTACHMENT A
*Yet to be passed*
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Chapter 5.30 (Disposable Foodware Items and Other Disposable Products) Title 5 (Health and Sanitation) of the Palo Alto Municipal Code to Conform with Changes in State Law Related to Single-Use Foodware accessories and Standard Condiments

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. Disposable foodware items are intended to be used once then discarded. These items pose waste management challenges and can persist in the environment for many years, causing harm to wildlife and blight to waterways. The production, use and disposal of these items have significant environmental impacts, including environmental contamination; consumption of energy, water, and non-renewable polluting fossil fuels; emissions of greenhouse gases; release of air and water pollutants; depletion of natural resources; litter on streets and in waterways; plastic pollution; and increased litter clean-up and waste management costs.

B. Plastics in waterways and oceans break down into smaller pieces that are not biodegradable. Among other hazards, plastic debris attracts and concentrates ambient pollutants in seawater and freshwater, which can transfer to fish, other seafood and salt that is eventually sold for human consumption.

C. The practice of freely giving consumers disposable foodware encourages consumers, retailers, and food vendors to pay little attention to the quantity of disposable packaging products they consume and the associated environmental impact.

D. The City of Palo Alto updated its Zero Waste Plan in 2018, with new provisions designed to help the City reach its goal of 95% diversion of materials from landfills by 2030, and 80% reduction of greenhouse gases by the same year. Disposable foodware poses difficulties for composting or recycling, and therefore hampers Palo Alto’s goal of zero waste.

E. Policies that restrict the use of disposable foodware encourage reduction of pollutants and are crucial for conserving resources and protecting the environment, and integral to Palo Alto’s goal of zero waste.

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ATTACHMENT A
SECTION 2. Section 5.30.010 (Definitions) of Chapter 5.30 (Disposable Foodware Items and Other Disposable Products of Title 5 (Health and Sanitation) of the Palo Alto Municipal Code is amended as follows (new text underlined and deleted text struck through):

5.30.010 Definitions.
(a) "City Facilities" refers to any real property, building, structure or vehicle owned or operated by the City of Palo Alto, its agents, departments and franchises. (b) "Compostable" means items deemed acceptable within the city's compost collection program as determined by the Director of Public Works and identified on the city's website. (c ) “Condiment” means relishes, spices, sauces, confections, or seasonings that require no additional preparation and that are usually used on a food item after preparation, including ketchup, mustard, mayonnaise, soy sauce, hot sauce, salsa, salt, pepper, sugar, and sugar substitutes.
(dc) "Disposable" means items designed to be used once or a limited number of times and then discarded, whether the item is non-recyclable, Recyclable or Compostable. (ed) "Food Service Container" means a product used by Food Service Establishments for serving or transporting prepared and ready-to-consume food or beverages. This includes but is not limited to plates, cups, bowls, lids, trays and hinged or lidded containers. (fe) "Food Service Establishment" means any establishment, located or providing food within the City of Palo Alto, which provides prepared and ready to consume food or beverages, for public consumption including but not limited to any Retail Service Establishment, eating and drinking service (as defined in Title 18), takeout service (as defined in Title 18), supermarket, delicatessen, restaurant, food vendor, sales outlet, shop, cafeteria, catering truck or vehicle, cart or other sidewalk or outdoor vendor or caterer which provides prepared and ready-to- consume food or beverages, for public consumption, whether open to the general public or limited to certain members of the public (i.e., company cafeteria for employees). For the purpose of this ordinance “Food Service Establishment” shall include all entities found in “Food Facility” as listed in CA HSC Ch.2 Section 113789(a).
(gf) "Foodware Item" means any item used or provided by Food Service Establishments to serve or consume food or beverages. Foodware Items include Food Service Containers, condiment cups and packets, straws, utensils (forks, spoons, sporks, knives, chopsticks), drink stirrers, beverage spill plugs, napkins, and other drink or food accoutrements. (hg) "Plastic Foam" means blown expanded and extruded plastic foams made from polystyrene or other resins which are processed by any number of techniques including, but not limited to, fusion of monomer spheres (expanded bead plastic), injection molding, foam molding and extrusion-blown molding (extruded foam plastic). Expanded polystyrene and other plastic foam resins are generally used to make disposable cups, bowls, plates, trays, egg cartons, clamshell containers, ice chests, shipping boxes and packing materials. (ih) "Plastic Foam Products" means Disposable Plastic Foam ice chests, cups, bowls, plates, clamshells, shipping boxes containers, egg cartons, packaging peanuts, packing blocks or other packaging materials that are not wholly encapsulated or encased by a more durable material.

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ATTACHMENT A
Additional Plastic Foam Products may be added by administrative regulation promulgated by the Director of Public Works.
(ji) "Prepared Food" means any food or beverage prepared for consumption using any cooking, packaging, or food preparation technique, including but not limited to cooking, chopping, slicing, mixing, freezing, squeezing, or brewing, and which requires no further preparation to be consumed. Prepared food includes uncooked fruits or vegetables, "take-out" food, or food prepared to be consumed off the Food Service Establishment premises. Prepared Food does not include any uncooked meat, fish or poultry. (kj) "Recyclable" means items deemed acceptable within the city’s recycling collection program as determined by the Director of Public Works and identified on the city’s website. (lk) "Retail Service Establishment" shall have the same meaning as Retail Service as defined in Title 18 of this Code.
(ml) "Reusable Foodware" means a Foodware Item made of durable materials and designed to be used repeatedly with a useful life greater than one year. (n) “Third-party food delivery platform” means a business engaged in the service of online food ordering and delivery from a food service establishment to a consumer.

Section 3. Section 5.30.025 (Limitation on the use of Disposable Foodware Items and other Disposable products) of Chapter 5.30 (Disposable Foodware Items and Other Disposable Products of Title 5 (Health and Sanitation) of the Palo Alto Municipal Code is amended as follows (new text underlined and deleted text struck through):

5.30.025 Limitation on the use of Disposable Foodware Items and other Disposable products.

Effective January 1, 2020:
(a) Food Service Establishments are prohibited from providing the following Disposable Foodware Items:

1. Plastic straws

2. Plastic utensils (e.g., forks, knives, spoons, sporks, chopsticks)

3. Plastic drink stirrers, drink plugs, and other drink accoutrements such as novelty cocktail accessories

4. Plastic food picks and toothpicks
(b) Food Service Establishments, City Facilities, and vendors at City-sponsored events shall provide the following Foodware Items only if they are Reusable or Compostable:

1. Straws

2. Utensils (e.g., forks, knives, spoons, sporks, chopsticks)

3. Drink stirrers, drink plugs, and other drink accoutrements such as novelty cocktail accessories

4. Food picks and toothpicks
(c) Food Service Establishments shall provide permitted Disposable Foodware Items, other than Food Service Containers, only upon customerconsumer request or at a self-serve station.

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ATTACHMENT A
(d) Food Service Establishments are prohibited from providing consumers with wrapped bundled foodware and condiments.

1. Food Service Establishments may provide unwrapped disposable foodware accessories by a single serve dispenser to a consumer using refillable self-service dispensers that dispense one item at a time to allow for disposable foodware accessories to be obtained.

2. Food Service Establishments may provide condiments to a consumer using refillable self- service dispensers to allow for condiments to be obtained. (e) Third-party food delivery platforms are prohibited from providing foodware and condiments unless the consumer selects or requests the items.

1. Consumers must have the option to opt-in to request disposable foodware and condiments including the number of each unit identified on the third-party food delivery platform application, food service establishment web site, or any vendor website or app when picking-up food from a food service establishment and delivering food to a consumer.

2. If a consumer does not select any disposable foodware accessories or condiments, no disposable foodware accessory or condiment shall be provided by the food service establishment or third-party vendor for delivery with ready-to-eat food.

Section 4. Section 5.30.030 (Exemptions) of Chapter 5.30 (Disposable Foodware Items and Other Disposable Products of Title 5 (Health and Sanitation) of the Palo Alto Municipal Code is amended as follows (new text underlined and deleted text struck through):

5.30.030 Exemptions.
(a) The following exemptions shall apply:
(i) Foods prepared or packaged outside the City of Palo Alto are exempt from the provisions of this Chapter. Purveyors of food prepared or packaged outside the City of Palo Alto are encouraged to follow the provisions of this Chapter.
(ii) The Director of Public Works may exempt a Food Service Establishment, Retail Service Establishment or City Facility/vendor from the requirements of this Chapter for a period of up to one year, if the applicant for such exemption can demonstrate that the conditions of this Chapter would cause an undue hardship. An "undue hardship" includes, but is not limited to situations unique to the applicant where there are no reasonable alternatives to Plastic Foam Products or non-recyclable plastic Disposable Food Service Containers and compliance with this Chapter would cause significant economic hardship to that applicant, or cause them to be deprived of a legally protected right.
(iii) A Food Service Establishment, Retail Service Establishment or City facility/vendor seeking an exemption application shall include all information necessary for the City to make its decision, including but not limited to documentation showing the factual support for the claimed exemption. The Director may require the applicant to provide additional information to permit the Director to determine facts regarding the exemption application. This exemption does not apply to the requirements found in California Public Resource Code Chapter 5.2 Single-Use Foodware Accessories and Condiments.
(iv) Emergency Supplies and Service Procurement. City facilities, Food Service Establishments, Retail Service Establishments, City contractors and vendors doing business with

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ATTACHMENT A
the City shall be exempt from the provisions of this chapter, in a situation deemed by the City Manager to be an emergency for the immediate preservation of the public peace, health or safety.
(v) Nothing in this Chapter shall restrict, or be construed to restrict, the availability of single- use plastic straws to individuals who may require and request the use of single-use plastic straws due to disability or other medical or physical conditions or circumstances.

It shall not be a violation of this Chapter for any Food Service Establishment, City Facility or City- sponsored event vendor to provide single-use plastic straws to such individuals who request plastic straws.
(vi) The following facilities are not required to comply with the provisions in this chapter. (1) Health Care Facilities (patient rooms only)
(2) Residential Care Facilities

Section 5. 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 6. This ordinance is exempt from the requirements of the California Environmental Quality Act (CEQA) because under Section 15378(b)(1) of CEQA Guidelines, it is a general policy making activity and therefore not a “Project” within the meaning of CEQA.

Section 7. This ordinance shall be effective on the thirty-first day after the date of its adoption.

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City of Palo Alto (ID # 13438)
City Council Staff Report

Meeting Date: 5/2/2022 Report Type: Action Items

City of Palo Alto Page 1

Title: Adoption of a Resolution Authorizing the Issuance and Sale of One or More Series of General Obligation Refunding (Refinancing) Bonds (Election of 2008) in an Aggregate Principal Amount Not to Exceed $58 million, and Execution of a Paying Agency Agre ement, and Certain Other Related Documents and Authorizing Official Actions Related Thereto From: City Manager
Lead Department: Administrative Services

Recommendation
Staff recommends that the City Council approve a resolution (Attachment A):

1. Authorizing the refinancing of the outstanding Series 2010A and Series 2013A General Obligation (Library) Bonds through the issuance of tax -exempt and federally taxable General Obligation Bonds (Bonds) in the not to exceed amount of $58,000,000.

2. Approving the Paying Agency Agreement, Official Notice of Sale, Preliminary Official Statement, Irrevocable Refunding Instructions related to the Series 2010A Bonds, Escrow Deposit and Trust Agreement related to the Series 2013A Bonds Between City of Palo Alto and U.S. Bank T rust Company National Association; and authorize related documents and actions.

Executive Summary
The refinancing of the Series 2010A and Series 2013A General Obligation (GO) Bonds as Series 2022A tax-exempt and Series 2022B taxable GO bonds results in net present value (NPV) savings conservatively estimated at $5.5 million, equating to 10.1 percent of the refunded bonds’ principal amount. These bonds were issued based on the voter approved Measure N in November 2008. Proceeds from this financing were used for capital investments to the City’s library system at three locations. Annually, an assessment is levied on property owners via the property tax bill to service the annual debt associated with these investments. If this refinancing is approved, savings will be realized by property owners through lower annual assessments.

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Background
On November 4, 2008, City voters passed Measure N, which gave the City the authority to issue a maximum amount of $76 million of general obligation bonds (the “Bonds”) for capital improvements to the Mitchell Park, Downtown, and Rinconada (formerly Main) libraries and to the Mitchell Park community center.

On May 10, 2010 (CMR: 242:10) and May 6, 2013 (CMR: 3753) Council authorized the issuance of two series of Bonds. The Series 2010A Bonds ($55.3 million) were issued on June 30, 2010 with a True Interest Cost (TIC) of 4.21 percent and the Series 2013A Bonds ($20.7 million) were issued on June 26, 2013 with a TIC of 3.85 percent.

At the completion of the library and community center capital projects, $6.1 million in bond funds remained with $0.6 million being set aside to address the Mitchell Park Library roof and gutter repair. In June 2016 (CMR: 6993), the $6.1 million funds were used to defease/payoff some of the outstanding bonds early which resulted in net present value (interest) savings of $1.6 million.

Debt service payments on these Bonds are paid through ad valorem taxes on all taxable land and improvements (both secured and unsecured assessment roll) within the City. Annually, staff seeks Council approval (via a resolution) which authorizes the placement of an ad valorem property tax levy. The most recent (for fiscal year 2022) tax levy rates were $0.00926 per $100 or $9.26 per $100,000 in AV for the secured tax roll; and $0.00956 per $100 or $9.56 per $100,000 in AV for the unsecured tax roll. In comparison, prior year’s secured and unsecured tax levy was $9.56 and $10.62 respectively, per $100,000 of AV. With the assessment for FY 2022, a house with an assessed value of $1.0 million, for example, would see an annual assessment of $92.60 on their property tax bill. In comparison, in FY 2021, a $1.0 million home had an assessment of $95.60.

Discussion
The principal (aka par) amount of outstanding General Obligation (GO) Bonds recommended to be refinanced totals $54.2 million
(Series 2010A is $40.6 million and
Series 2013A is $13.6 million). The
City’s Financial Advisor, PFM
Financial Advisors LLC (PFM), estimates that annual debt service costs will likely be reduced by $418,000 annually over the next eighteen plus years as a result of this refinancing. Since Palo Alto property owners are supporting the debt service payments through ad valorem taxes, this savings will be realized by property owners in the City through reduced property tax assessments. At this time, total cash savings are estimated at $7.5 million ($7.1 million is attributable to the Series 2010A Bonds and $0.4 million is attributable to the Series 2013A Bonds) and the net present value (NPV) savings are estimated at $5.5 million (attributable to the series 2010A), equating to 10.1 percent of the refunded bonds’ principal amount. The NPV savings of 10.1 percent exceeds the Debt Service Policy threshold which states NPV “savings of 2010A Bonds 2013A Bonds TOTAL
Original Bonds Issuance $55.3M $20.7M $76.0M
Outstanding Bonds $40.6M $13.6M $54.2M
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City of Palo Alto Page 3

at least 3 percent is a standard guideline for initiating a refunding”, therefore staff recommends moving forward at this time. The City expects the bond sale to occur on or around May 17, 2022. It is important to note that potential savings cited in this report are estimates and that final savings are dependent on prevailing interest rates and underwriter bids on the day of the bond sale.

The tax reform bill passed by Congress and signed into law on December 22, 2017 prohibits the issuance of tax-exempt advance refunding bonds during the (ten-year) call protection period.

The call protection period has passed on the Series 2010A Bonds, but it has not passed for the Series 2013A Bonds. As a result, staff is recommending that the Series 2010A bonds be refinanced with tax-exempt Series 2022A bonds and the Series 2013A bonds be refinanced with Series 2022B federally taxable bonds. Though the federally taxable refinancing of the Series 2013A Bonds generates significantly less cash savings than the larger tax-exempt refinancing of the Series 2010A Bonds, staff recommends that the City nevertheless refinance the Series 2013A Bonds because of the conservatively estimated cash savings. The City is seeking to have its current high rating (triple A) affirmed and if there’s aggressive bidding, it’s possible the actual underwriter’s bids could result in both positive cash and NPV savings. Undertaking the two refinancing at the same time offers economies of scale as the incremental cost of issuance is not significant for including the 2013A bonds in this refinancing. As a contingency, should the actual interest rates for the federally taxable refinancing bonds be at or higher than currently conservatively expected resulting in no NPV savings, staff will exercise its option to reject the bids for the refinancing of the Series 2013A Bonds and only proceed with the refinancing of the Series 2010A Bonds.

Staff’s requesting authorization for the issuance and sale of one or more series of GO Bonds in an aggregate principal amount not to exceed $58 million; this flexibility will allow staff to adjust the structure of the bonds to maximize interest from potential underwriters with the goal of getting the lowest possible borrowing interest rate.

Refinancing Administration
The refinancing will include the City contributing the pending $2.7 million accrued debt service payment, which was scheduled for August 1, 2022. The funds for this payment were included in the fiscal year (FY) 2022 GO Bond property tax assessment levy. In addition, $0.35 million in savings from funds set aside to address the Mitchell Park Library roof and gutter repair will be applied toward this refinancing.

Staff expects the debt issuance to be competitively solicited; the underwriter’s discount fee is estimated at $500,750, which equates to 1% of the estimated principal amount of the refinancing bonds. Other issuance costs of $223,880 are primarily made up of the financial advisor (PFM), bond counsel (Jones Hall), disclosure counsel (Quint & Thimmig, LLP), and the paying agency (U.S. Bank) (Attachment B). Precise costs for the underwriter will not be known until the day of sale.

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The interest rates on the principal amounts of the Series 2022A (Tax-Exempt) and 2022B (Federally Taxable) bonds will be determined on the day of the sale and will reflect prevailing market conditions at that time. When the interest rates are established, annual debt service payments will be calculated and used to determine the FY 2023 property tax assessment. This is typically placed, annually, on the first meeting after the Council’s return from Summer Break in early August. As noted above in the background section, the current (FY 2022) levy for the GO Bonds is $9.26 per $100,000 in Assessed Value (AV) for the secured1 and utility tax roll and $9.56 per $100,000 in AV for the unsecured tax roll2. A June refinancing bond closing allows sufficient time to notify the County of the levy for next year based on the lower debt service requirement.

Rating Agency Presentation
To minimize interest expense and to promote the bond issu ance staff will deliver a ratings presentation to Standard and Poor’s (S&P) on April 28 , 2022. The City Manager and Administrative Services departments, as well as the Ci ty’s financial advisor and bond counsel, will participate in the presentation. Information on City demographics, property values, businesses, educational institutions, and financial condition will be provided to the rating agency.

This information is fac tored into the rating agency’s credit rating, which investors use in determining whether or not to buy the City’s bonds. A higher credit rating results in lower interest costs and vice versa. The current underlying issuer credit rating for the City’s G O Bonds are triple A from Standard and Poor’s and Moody’s, the highest possible. Once S&P’s rating is received, staff will relay the results to Council and the public.

Refinancing Mechanics
Council approval is required to sell up to $58,000,000 in tax -exempt and federally taxable General Obligation (Refunding) Bonds through a competitive sale process targeted on or around May 17, 2022. The settlement or closing of the bond sale is expected to occur on or around June 16, 2022. The City’s Financial Advisor (PFM ) will assist the City in receiving and evaluating bids from underwriters for the bonds and in selecting the optimal bid. Underwriters are investment-banking firms, and the underwriter selected will resell the bonds to investors, typically institutional in vestors like mutual funds and high net worth individuals. The underwriter with a bid resulting in the lowest TIC to the City will be selected on the bid day.

The timeline for selling bonds is provided below assuming approval of this item . If not approved, timelines and financial projections would need to be revised and reconsidered.

If approved, staff would issue a maximum amount of $58,000,000 in GO Bonds to refinance the tax-exempt Series 2010A and Series 2013A Bonds issued under the authority of voter approved

1 Secured property are Assessed Value (AV) on real property such as land and structures. 2 Unsecured are AV of personal property such as business equipment, boats, aircraft, and possesso ry interests. 12 Packet Pg. 114

City of Palo Alto Page 5

Measure N. To issue Bonds, the Council will need to adopt the attached resolution (Attachment A) which:

1. Authorizes the issuance and sale of up to $58,000,000 in (principal) Bonds (“Series 2022A Tax-Exempt and 2022B Federally Taxable Bonds”).

2. Approves the required legal documents (Exhibits 1, through 5) which are discussed below.

Approving the resolution would confer formal acceptance of the following documents:

a. Paying Agency Agreement (Exhibit 1)
This agreement outlines the responsibilities of the City and U.S. Bank in all financial transactions related to receipt of bond proceeds, disbursement of funds, payment of debt service, and payments to bond holders. This will be executed when the bond closing is done which is expected to occur on June 16, 2022.

b. Official Notices of Sale (Exhibit 2a and 2b)
Exhibit 2a describes the Series 2022A (Tax-Exempt) and Exhibit 2b for 2022B (Federally Taxable) Bonds to the investment community (potential bidders), for the purpose of seeking bids to be received via an electronic platform, on or around May 17, 2022.

c. Preliminary Official Statement (POS) (Exhibit 3)
The POS containing and discussing information about the City, its economic and property tax base, the Series 2022A (Tax-Exempt) and 2022B (Federally Taxable) Bonds, and other information material to the offering and sale of the Bonds, which will be approved by the Council in near “final” form (i.e., it is substantially complete, except for the interest rates and amount of final numbers which will result from the sale of the Series 2022A (Tax-Exempt) and 2022B (Federally Taxable) Bonds).

The POS is the offering document for municipal securities. After the COPs have been sold to the underwriter, the City will prepare a final Official Statement, which should be identical to the POS except that it will include the final pricing information about the Bonds, including principal amount, interest rate, and prepayment terms.

The distribution of the POS by the City is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the POS to include all facts that would be material to an investor in the Bonds. Material information is information that there is a substantial likelihood would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the Bonds. If the Council concludes that the POS includes all facts that would be material to an investor in the Bonds, it must adopt a resolution that authorizes staff 12 Packet Pg. 115

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to execute a certificate to the effect that the Preliminary Official Statement has been “deemed final.”

The Securities and Exchange Commission (the “SEC”), the agency with regulatory authority over the City’s compliance with the federal securities laws, has issued guidance as to the duties of the Council with respect to its approval of the POS. In its “Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors” (Release No. 36761 / January 24, 1996) (the “Release”), the SEC stated that, if a member of the Council has knowledge of any facts or circumstances that an investor would want to know about prior to investing in the Bonds, whether relating to their repayment, tax-exempt status (if applicable), undisclosed conflicts of interest with interested parties, or otherwise, they should endeavor to discover whether such facts are adequately disclosed in the POS. In the Release, the SEC stated that the steps that a member of the Council could take include becoming familiar with the POS and questioning staff and consultants about the disclosure of such facts.

Appendix F to the POS is the Continuing Disclosure Certificate, under which the City will agree to provide certain financial and operating data of the type included in the POS to owners of the Bonds on an annual basis, and information about certain enumerated events when they occur. This information is already being provided on the current GO Bonds so staff will continue doing this for the refinanced Bonds.

d. Irrevocable Refunding Instructions Agreement (Exhibit 4) This document by the City of Palo Alto to U.S. Bank Trust Company National Association (aka Paying Agency) for the refunding of the Series 2010A Bonds. It directs the Paying Agency for (1) Establishment of Escrow Fund, (2) Deposit and Investment of Amounts in Escrow Fund, (3) Application of Amounts in Escrow Fund and related tasks.

e. Escrow Deposit and Trust Agreement (Exhibit 5)
This document between City of Palo Alto and U.S. Bank Trust Company National Association for the refunding of the Series 2013A Bonds which is an irrevocable escrow securing the payment and redemption of the refunded bonds.

Timeline (2022)
April 28, 2022 Standard and Poor’s (S&P) Rating Presentation May 5, 2022 Receive S&P’s Rating
May 6, 2022 Post Preliminary Official Statement
Week of May 9th Pre‐marketing Calls to Bidders
May 17, 2022 Competitive Bond Sale
Week of May 23rd Final Official Statement Printed and Posted June 16, 2022 Bond Sale Closing
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Resource Impact
Refinancing of the tax-exempt Series 2010A and 2013A General Obligation Bonds is estimated to reduce the city’ annual debt service payment by $418,000 annually over the next eighteen plus years. Bond Issuance expenses that include bond and disclosure counsel, financial advisor, rating agency fees, underwriter’s discount fee, etc. estimated at $724,630 (Cost of Issuance is $223,880 and Underwriter’s Discount Fee is $500,750) will be paid through the sale of bonds.

Precise debt service payments will not be known until competitive bids are received from the underwriting firms. At this time, the current interest rate environment is favorable for issuing or refinancing debt.

Policy Implications
While there is no Council policy on the methods of refinancing debt, the traditional approach has been to sell bonds with competitive bids in the open bond market (Debt Policy, Section III, item C).

Environmental Review
The financing proposed for approval is not a project under the California Environmental Quality Act; therefore, an environmental review is not required.

Attachments:
• Attachment12.a: Attachment A: Resolution Authorizing the Issuance and Sale of One or More Series of General Obligation Refunding Bonds in Aggregate Principal Amount NTE $58,000,000
• Attachment12.b: Attachment B Bond Issuance Expense Estimates • Attachment12.c: Exhibit 1 Paying Agency Agreement
• Attachment12.d: Exhibit 2a 2022A (Tax-Exempt) Official Notice of Sale • Attachment12.e: Exhibit 2b 2022B (Federally Taxable) Official Notice of Sale • Attachment12.f: Exhibit 3 Preliminary Official Statement • Attachment12.g: Exhibit 4 Irrevocable Refunding Instructions (2010A Bonds) • Attachment12.h: Exhibit 5 Escrow Deposit and Trust Agreement (2013A Bonds) 12 Packet Pg. 117
Resolution No. _____

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALO ALTO

AUTHORIZING THE ISSUANCE AND SALE OF ONE OR MORE

SERIES OF GENERAL OBLIGATION REFUNDING BONDS (ELECTION
OF 2008) IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $58,000,000, AND AUTHORIZING ACTIONS RELATED THERETO
R

E C I T A L S
A. The
City of Palo Alto (the “City”) is empowered under Chapter 4 (
commencing with Section 43600) of Division 4 of Title 4 of the Government Code of the State of Californi a t o its issue general obligat ion bonds which are authoriz ed by two- thirds of the electors voting on the proposition.

B. Mo
re than two-thirds of the electors voting at a special municipal election held on November 4, 2008, voted for a proposition, designa ted Measure N, authorizing the issuance by the City of general obligation bonds in the aggregate principal amount of $76,000,000 for the purpose of fi nancing the costs of constructing a new energy efficient, environmentally friendly Mitchell Park Library a nd Community Center, renovating and expanding the Main Library, and renovating the Downtown Library, including enhancements at all three facilities for seismic safety and disabled access, expanded space for library collections, meeting and study areas, and new air conditioning, ventilation and lighting systems.

C. P
ursuant to such authorization the City previously issued general obligation bonds in two series:
(a) $55,
305,000 City of Palo Alto General Obligation Bonds, E lection of 2008, Series 2010A (the “2010 Bonds”) and
(
b) $30,695,000 City of P alo Alto General Obligation Bonds, E lection of 2008, Series 2013A ( “the 2013 Bonds”; together with the 2010 Bonds, the “Prior Bonds”).

D. The
City Council has determined at this time to issue and sell one or more series of General Obligation Refunding Bonds (Election of 2008) in the aggregate principal amount of not to exceed $58,000,000 (the “Bonds”) for the purpose of refunding all of the outstanding Prior B onds and thereby realizing financial savings to the pr operty tax payers of the City.

E. Th
e 2010 Bonds are subject to redemption on any date on and after August 1, 2020, without premium.

F. A
s se t forth in the 2013 Bonds and the Official Statement for the 2013 Bonds, the 2013 Bonds maturing on and after August 1, 2024 are subject to optional redemption on August 1, 2023, without premium.

G. In o
rder to comply with federal tax law in e ffect as of the date hereof, the C
ity expects to issue one series of tax -exempt bonds (the “Tax-Exempt Bonds”) to Attachment A

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refund t he 2010 Bonds and one series o f federally taxable bonds to refund the 2013 Bonds (the “Federally Taxable Bonds”).

H. The City Council is authorized to provide for the issuance and sale of the Bonds under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53550 of said Code (the “Refunding Bond Law”).

I. As required by Government Code Section 5852.1 enacted January 1, 2018 by Senate Bill 450, attached hereto as Appendix B is the information relating to the Bonds that has been obtained by the City C ouncil and is hereby disclosed and made public.

HJ On April 11, 2017, this City Council previously approved a Debt Policy which complies with Government Code Section 8855, and the delivery of the Bonds will be in compliance with said policy, or any non-compliance is hereby waived.

NOW, THEREFORE, THE COUNCIL OF THE CITY OF PALO ALTO does resolve AS FOLLOWS:

ARTICLE I

DEFINITIONS; AUTHORITY

SECTION 1.01. Definitions. The terms defined in this Sect ion 1.01, as used and capitalized herein, shall, for all purposes of this Resolution, have the meanings given them below, unless the context clearly requires some other meaning.

“Bond Counsel” means (a) Jones Hall, A Professi onal Law Corporation, and (b) any other attorney or firm of attorneys nationally rec ognized for expertise in rendering opinions as to the legality and tax exempt status of securities issued by public entities.

“Bond Purchase Agreement ” means the Bond Purc hase Agreement for the Bonds, which is approved under Section 3.01(b).

“Bond Sale D ocumentation” means (a) if the Bonds are sold by competitive bidding in accordance with Section 3.01(a), the Official Notice of Sale and the winning bid of the Original Pur chaser, or (b) if the Bonds ar e sold by negotiation in accordance with Section 3.01(b), the Bond Purchase Agreement between the City and the Original Purchaser.

“Bonds” means the City of Palo Alto General Obligation Refunding Bonds (Election of 2008) authorized to be issued in one or more series under this Resolution in the aggregate principal amount of not to exceed $58,000,000 , including the Tax-Exempt Bonds and the Federally Taxable Bonds.

“City” means the City of Palo Alto , a charter city and munici pal corporation organized under the Constitution and laws of the State of California, and any successor thereto.

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“City Representative” means the City Manager, the Assistant City Manager , the Director of Administrative Services or the Chief Financial Offic er, or any other officer of the City authorized by resolution of the City Council of t he City to act on behalf of the City with respect to this Resolution and the Bonds.

“Closing Date ” means the date upon which there is a physical delivery of the Bonds in exchange for the amount represent ing the purchase price of the Bonds by the Original Purchaser.

“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the City and related to the authorization, issuance, sale and delivery of the Bonds and the refunding of the Prior Bonds , including but not limi ted to the costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Paying Agent and its counsel, legal fees and charges, fees and disbursements of consultants and professionals, rati ng agency fees, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds and the refunding of the Prior Bonds.

“County
” means the County of Santa Clara, a political subdivision of the State of California, duly organized and existing under the Constitution and laws of the State of California.

“Debt Service Fund ” means t he account established and held by the City under Section 4.02.

“Depository” means (a) initially, DTC, and (b) any other Securities Depository acting as Depository under Section 2.09.

“Depository System Participant
” means any participant in the Depositor y’s book-
entry system.

“DTC
” me ans The Depository Trust Company, New York, New York, and its successors and assigns.

“Escrow Agreement ( 2013 Bonds)” means the Escrow Deposit and Trust Agreement (2013 Bonds), dated as of the Closing Date, by and between the City and the Prior Bonds Paying Agent, relating to the defeasance, payment and redemption of the outstanding 2013 Bonds.

“Federal Securities
” means United States Treasury notes, bonds, bills or
certificates of indebtedness, or any other obligati ons the timely payment of which is directly or indirectly guaranteed by the faith and credit of the United States of America.

“Federally Taxable Bonds” has the meaning given that term in the Recitals.

“Interest Payment Date
” means February 1 , 2023, and the firs t d ay of each succeeding March and September.

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“Irrevocable Refunding Instructions (2010 Bonds) ” means the Irrevocable Refunding Instructions (2010 Bonds), dated as of the Closing Date, by and between the City and the Prio r Bonds Paying Agent, relati ng to the defeasance, payment and redemption of the outstanding 2010 Bonds.

“Official Notice of Sale” means the Official Notice of Sale for the Bonds, which is approved under Section 3.01(a).

“Original Purchaser” means the origi nal purchaser of the Bonds at the p ublic or negotiated sale thereof.

“Outstanding,” when used as of any particular time with reference to Bonds, means all Bonds except: (a) Bonds theretofore canceled by the Paying Agent or surrendered to the Paying Agent for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of Section 9.02; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City under this Resolution.

“Owner
”, whenever used herein with respect to a Bond, means t he person in whose name the ownership of such Bond is registered on the Registration Books.

“Paying Agent ” means the Paying Agent appointed by the City and acting as paying agent, registrar and authenticating agent for the B onds, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 6.01.

“Principal Office
” means the office or offices of the Paying Agent for the payment of the Bonds and the administration of its duties hereunder, as such office or offices shall be identified in a written notice filed with the City by the Paying Agent.

“Prior Bonds Paying Agent ” means U.S. Bank Trust Company National Association, in its capacity as successor paying agent for the Prior Bonds.

“Prior Bonds
” has the meaning given that term in the Recitals.

“Record Date” means the 15 th day of the month preceding an Interest Payment Date, whether or not such day is a business day.

“Refunding Bond Law” means Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, as amended from time to time.

“Registration Books” means the records maintai ned by the Paying Agent for th e registration of ownership and registration of transfer of the Bonds under Section 2.08.

“Resolution” means this Resolution, as originally adopted by the City Council on May 2, 2022, and including all amendments hereto and supplements hereof which are duly adopted by the City Council from time to time in accordance herewith.

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“Securities Depositories ” means DTC; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the City may designate.

“Supplemental Resolution” means any resolution supplemental to or amendatory of this Resolution, adopted by the City in accordance with Article VIII.

“Tax Code
” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (excep t as otherwise referenced herei n) as it m ay be amend ed to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under said Code.

“Tax-Exempt Bonds
” has the meaning given that term in the Recitals.

“Written Request of the City ” means an instrument in writing signed by a City Representative or by any other officer of the City duly authorized to act on behalf of the City under a written certificate of a City Representative.

SECTION 1.02. Interpretation.

(a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deeme d to include the neuter, masculine or feminine gender, as appropriate.

(b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, d o not constitute a part hereof and shall not affect the meaning, construction or effect hereof.

(c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Resolution; the words “herein,” “hereof,” “her eby,” “hereunder” and other wor ds of similar import refer to this Resolution as a whole and not to any particular Article, Section or subdivision hereof.

S
ECTION 1.03. Authority for this Resolution; Findings. This Resolution is entered into under the provisions of the Refunding Bond Law. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of the Bonds do exist, have happened or have been performed in due and regular time and manner as required by the laws of the State of California, and that the amount of the Bonds, together with all other indebtedness of the City, does not exceed any limit prescribed by any laws of the State of California. This City Council hereby finds that the Recitals are true and correct, and ratifies the provisions of the 2013 Bonds and the 2013 Official Statement as to the fact that the 2013 Bonds maturing on and after August 1, 2024 are subje ct to redemption on August 1, 2023, having concluded that any contradictory provisions in the 2013 Paying Agent Agreement are in error.

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ARTICLE II

THE BONDS

SECTION 2.01. Authorization. The City hereby determines that the prudent management of the fi scal affairs of the City requi res that i t issue refunding bonds to refund the Prior Bonds. One or more series of Bonds in the aggregate original principal amount of not to exceed $58,000,000 ar e hereby authorized by the City to be issued by the City under and subject to the terms of the Refunding Bond Law and this R esolution, for the purpose of pr oviding funds to refund and defease the outstanding Prior Bonds and to pay the Costs of Issuance inc urred in connection therewith. This Resolution constitutes a continuing agreement between the City and the Owners of all of the Bonds issued or to be issued hereunder and then Outstanding to secure the full and final payment of principal of and interest and premium, if any, on all Bonds which may be Outstanding hereunder, subject to the covenants, agreements, provisions and conditions herein contained. The B onds are designated the “City of Palo Alto General Obligation Refunding Bonds (Election of 2008).”

As provided in Section 53552 of the Refunding Bond Law, the Bonds shall not be issued unless the total net interest cost to maturity on the Bonds plus the princi pal amount of the Bonds is less than the total net interest cost to maturity on the Prior Bonds to be refunded plus the principal amount of the Prior Bonds to be refunded. Before issuing the Bonds, the City shall receive confirmation from the City’s municipal advisor that the requirements of Section 53552 of the Refunding Bond Law have been satisfied.

SECTION 2.02. Terms of Bonds.

(a) Principal Amount of Bonds . The Bonds are authorized to be issued in one or more series in the aggregate principal amount of not to exceed $58,000,000.

(b) Form; Numbering
. The Bonds will be issued in fully r egistered form, without coupons, in authorized denominations of $5,000 each or any integral m ultiple thereof.

The Bonds will be lettered and numbered as the Paying Agent prescribes.

(c) Date of Bonds
. The Bonds will be dated as of the Closing Date.

(d) CUSIP Identification Numbers
. “CUSIP” identification numbers will be
imprinted on the Bonds , but such numbers do not cons titute a part of the contract evidenced by the Bonds and no error or omission with respect thereto will constitute cause for refusal of the Original Purchaser to accept delivery of and pay for the Bonds.

In addition, failure on the part of the City to use such CUSIP numbers in any notice to Owners of the Bonds will not constitute an event of default or any violation of the City’s contract with such Owners and will not impair the effectiveness of any such notice.

(e) Determination of Maturities and Interest Rates
. The Bonds shall mature (or,
alternatively, be subject to mandatory sinking fund redemption as hereinafter provided) on August 1 in each year in which principal on the Bonds is payable. The final schedule of Bond maturities shall be determined upo n the sale of the Bonds as set forth in the Notice Inviting Bids.

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Each Bond will bear interest at the respective rates to be det ermined upon the sale of the Bonds in accordance with Article III. Interest on the Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless:

• a Bond is authent icated as of an Interest Payment Date, in which event it will bear interest from such date,

• a Bond is authenticat ed prior to an Interest Pay ment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date,

• a Bond is authentica ted on or before the first Record Date, in which event it shall bear interest from the Closing Date, or

• at the time of authentication of a Bond, interest is in default thereon, in which event it will bear in terest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

(f) Manner of Payment . Interest on the Bonds (includi ng t he final interest payment upon matur ity) is payable by check of the Paying Agent mailed to the Owner thereof at such Owner’s address as it appears on the Registration Books at the close of business on the preceding Rec ord Date; except that at the writ ten request of the Owner of at least $1,000,000 aggregate principal amount of the Bonds, which written request is on file with the Paying Agent as of any Record Date, interest on such Bonds shall be paid by wire transfer on the succeeding Interest Payment Date to an account in the United States of America as shall be specified in such w ritten request. Principal of and premium (if any) on the Bonds is payable in lawful money of the United States of America upon presentation and surrender at the Principal Office of the Paying Agent.

SECTION 2.03. Redemption.

(a) Optional Redemption. The Bonds may be made subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as designated by the City and by l ot wi thin a maturity, from any available so urce of funds, on the dates and upon payment of a redemption price (equal to the princi pal amount of Bonds to be redeemed together with a redemption prem ium, if any), all as determined upon the sale of the Bonds and as set forth in the Notice Inviting Bids.

(b) Mandatory Sinking Fund Redemption . If and to the extent specified in the bid of the Original Purchaser, any maturity of the Bonds will be designated as “Term Bonds” which are subject to mandatory sinking f und redemption on August 1 in each of the years and in the respective principal amount s set forth in such bid, at a redemption price equal to 100% of the principal amount of the Bonds to be redeem ed, in each case without premium, together with interest accrued thereon to the redemption date. If some but not all of the Term Bonds have been redeemed under the preceding subsection ( a) of this Section, the aggregate principal amount of Term Bonds to b e redeemed in each year under this subsection (b) shall be r educed on a pro rata basis in integral mult iples of $5,000, as designated in written notice filed by the City with the Paying Agent.

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(c) Selection of Bonds for Redemption . Whenever less than all of the Outstanding Bonds of any one maturity are designated for redemption, the Paying Agent shall s elect the Outstanding Bonds of such maturity to be redeemed by lot in any manner deemed fair by the Paying Agent. For purposes of such selection, each Bond shall be deemed to con sist of individual Bonds of $5,000 de nominations which may be separately redeemed.

(d) Redemption Procedure
. The Paying Agent shall cause notice of any
redemption to be mailed, first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redempt ion, (i) to the Securities Depositories and the Municipal Securities Rulemaking Board’ s EMMA website , and (ii) to the respectiv e Owners of any Bonds designated for redemption, at their addresses appearing on the Registration Books. Such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice shall not affect the validity of the proceedings for the redemption of Bonds.

Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the serial numbers of the Bonds to be redeemed by giving the individual number of each Bond or by stating t hat all Bonds between tw o stated numbers, both inclusive, or by stating that all of the Bonds of one or more maturities have been called for redemption, and shall require that such Bonds be then surrendered at the Principal Office of the Paying Agent for redemption at the said redemption price, giving notice also t hat further interest on such Bonds will not accrue from and after the redemption date.

The City is entitled to send a redemption notice that declares that the redemption is conditional upon the availability of moneys to accomplish the redemption, and the City may re scind any notice of optional r edemption of the Bonds by written notice to the Paying Agent on or prior to the date f ixed for redemption, and the Paying Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this section. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption. The City and the Paying Agent shall have no l iability to th e Owners or any other party related to or arising from such rescission.

Upon surrender of Bonds redeemed in part only, the Ci ty shall execute and the Paying Agent shall authenticate and deliver to the Owner, at the expense of the City, a new Bond or Bonds , of the s ame maturity, of authorized denom inations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.

From and after the date fixed for redemption, if notice of such redemption has been duly given and funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under this Resolution other than the right to receive payment of the redemption price, and no interest wi ll accrue thereon on or after the redemption date specified in such notice. The Payi ng Agent shall cancel all Bonds redeemed under this Section 2.03, and shall submit to the Cit y a certificate of cancellation.

S
ECTION 2.04. Form of Bonds. The form of t he Bonds, including the form of the Paying Agent’s Certificate of Authentication and the form of Assignment to appear

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thereon, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Resolution, are set forth in Appendix A attached hereto.

SECTION 2.05. Execution of Bonds . The Bonds shall be executed on behalf of the City by the facsimile signatures of its May or and City Clerk who ar e in office on the date of adoption of this Resolution or at any time thereafter, and the seal of the City shall be impressed , imprinted or reproduced by facsimile thereon. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the Original Purchaser, such signature will neverthel ess be as effective as if the officer had remained i n office until the delivery of the Bonds to the Original Purchaser . Any Bond may be signed and attested on behalf of the Ci ty by such persons as at the actual date of the execution of such Bond are the proper officers of the City although at the nominal date of such Bond any such person does not serve as such officer of the City.

Only those Bonds beari ng a Certificate of Authentication in the form set forth in Appendix A attached hereto, executed and dat ed by the Paying Agent, will be valid or obligatory for any purpose or entitled to the benefits of this Resolution, and such Certificate of Authentication of the Paying Agent constitutes conclusive evidence that the Bonds so registered have been duly aut henticated, registered and delivered hereunder and are entitled to the benefits of this Resolution.

S
ECTION 2.06. Transfer of Bonds. Any Bond may, in a ccordance with its terms, be transferred, upon the Registrati on B ooks, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office at the Paying Agent, acc ompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly ex ecuted.

The City may charge a reasonable sum for each new Bond issued upon any transfer.

Whenever any Bond or Bonds is surrendered for transfer, the C ity shall execute and the Paying Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate principal amount.

SECTION 2.07. Exchange of Bonds . Bonds may be exchanged at the Principal Office of the Paying Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The City may charge a reaso nable sum for each new Bond issued upon any exchange.

SECTION 2.08. Registration Books. The Paying Agent shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds, which shal l a t all times be open to inspection by th e City upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or c ause to be registered or transferred, on said books, Bonds as herein before provided.

SECTION 2.09. Book -Entry System. Except as provided below, DTC will be the Owner of all of the Bonds, and the Bonds will be registered in the name of Cede & Co. as nominee for DTC. The Bonds shall be initially executed and delivered in the form of a single fully registered Bond for each maturity date of the Bonds in the full aggregate principal amount of the Bonds maturing on such date. The Pay ing Agent and the City may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for all purposes of this Resolution, and neither the Paying Agent nor the City

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shall be affected by any notice to the contrary. The P aying Agent and the City shall not have any responsibility or obligation to any Depository System Part icipant, any person claiming a beneficial ownership interest in the Bonds under or th rough DTC or a Depository System Participant, or any other person which is not shown on the register of the City as being an owner , with respect to the accuracy of any rec ords maintained by DTC or any Depository System Participant or the payment by DTC or any Depository System Participant by DTC or any Depository System Par ticipant of any amount i n respect of the principal or interes t with respect to the Bonds. The City shal l cause to be paid all principal and interest with respect to the Bonds only to DTC , and all such payments shall be valid and effective to fully satisfy and discharge the City’s obligations with respect to the pri ncipal and interest with respect to the B onds to the extent of the sum or sums so paid. Except under the conditions noted bel ow, no person other than DTC shall receive a Bond. Upon delivery by DTC to the City of writt en notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the term “Cede & Co.” in this Resolution shall refer to such new nominee of DTC.

If the City determines that it is in the best inte rest of the beneficial owners that they be able to obtain Bonds and delivers a written certificate to DTC and the City to that effect, DTC shall notify the Deposit ory System Participants of the availability through DTC of Bonds. In such event, the City shall issue, transfer and exchange Bonds as requested by DTC and any other owners in appropriate amounts . DTC may determine to discontinue providing its services wi th respect to the Bonds at any time by giving notice to the City and discharging its responsi bilities with respect th ereto under applicable law. Under such c ircumstances (if there is no successor securities depository), the City shall be obligated to deli ver Bonds as described i n this Resolution.

Whenever DTC requests the City to do so, the City will cooperate with DTC in taking appropriate action after r easonable notice to (a) make available one or more separate Bonds evidencing the Bonds to any Deposito ry System Participant having Bonds credited to its DTC account or (b) arrange for another sec urities depository to maintain custody of certificates evidencing the Bonds.

Notwithstanding any other provision of this Resolution to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal and int erest with respect to such Bond and al l notices with respect to such Bond shal l be made and given, respectively, to DTC as provided as in the representation letter delivered on the date of issuance of the Bonds.

SECTION 2.10. Bonds Mutilated, Lost, Destr oyed or Stolen. If any Bond becomes mutilated the City, at the expense of the Owner of said Bond, shall execute, and the Paying Agent shal l thereupon authenticate and deliver, a new Bond of like maturity and principal amount in exc hange and substitution f or the Bond so mutilated, but only upo n s urrender to the Paying Agent of the B ond so mutilated. The Paying Agent shall cancel every mutilated Bond so surrendered to it. If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the City and, if such evidence is satisfactory to the Cit y and the City receives satisfactory indemnity, the City, at the expense of the Owner , shall execute, and the Paying Agent shall thereupon authenticate and deliver, a new Bond of like maturity and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen.

The City may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses whic h may be

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incurred by the City and the Paying Agent. Any Bond issued under the provisions of this Section 2.10 in lieu of any Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual obligation of the City whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and such Bond will be equally and proportionately entitled to the benefits of this Resolution with all other Bonds issued under this Resolution.

Notwithstanding any other provision of this Section 2. 10, in lieu of delivering a new Bond for which principal has or is about to become due for a Bond whi ch has been mutilated, lost, destroyed or stolen, the Paying Agent may make payment of such B ond in accordance with its terms.

ARTICLE III

SALE OF BONDS

SECTION 3.01. Sale, Issuance and Delivery of Bonds.

(a) Approval of Official Notice of Sale; Competitive Sale Procedures . The Bonds shall be offered for sale by competitive bid in accordanc e with the provisions of the Official Notice of Sale in subst antially the form on file with the City C lerk together with such additions thereto and changes therein as may be approved by a City Representative. The City authorizes the Federally Taxable Bonds and the Tax -Exempt to be separately sold pursuant to separat e Notices of Sale. City Council hereby authorizes and directs a City Representative to accept the best responsible bid for the Bonds, to be determined in accordance with the r elated Official Notice of Sale. A City Representative, on behalf of the City, may exercise his or her own discretion and judgment in awarding the sale of the Bonds, and may, in his or her discretion, reject any and all bids and waive any irregularity or i nformality in any bi d. Sale of the Bonds shall be awarded, or all bids shall be rejected, not later than 24 hours after t he expiration of the time prescribed for the receipt of proposals unless such time of award is waived by the successful bidder.

The City Council hereby approves and authorizes the publication by Bond Counsel of one or more notices of the City’s intention to sell the Bonds, in form and substance acceptable to Bond Counsel, in accordance with applicable law.

The municipal advisor to the City, P FM Financial Advisors LLC, is hereby authorized and directed by the City t o cause to be furnished to prospective bid ders a reasonable number of copies of such Official Notices of Sale and a reasonabl e number of copies of the preliminary Official Statement relating to the Bonds described in Section

3.02. (b) Negotiated Sale of B onds. One or more series of the Bonds are authorized to be sold by negotiated sale if either (a) no bids are received when s uch Bonds are offered for public sale under Section 3.01 (a), or (b) b ids are received but suc h bids are not satisfactory as to pri ce o r responsibility of the bidders as de termined by a City Representative, as a result of which all bids for such Bonds are rejected. In such event, such Bonds are authorized to be sold by nego tiation with an underwri ter or investment

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bank which is design ated by a City Represe ntative upon consult ation with the City ’s municipal advisor. Such Bonds shall be sold to such underwri ter or investment bank under the Bond Purchase Agreement in a form deemed advisable by a City Representative, whose execution shal l be conclusive evidence of the City Counci l’s approval of such Bond Purchase Agreement. A City Representative is hereby authorized to accept a bid from such underwriter or investment bank to purchase such Bonds, and t o execute the Bond Purchase Agreement on behalf of the City; provided that (i) the rate of interest on the Federally Taxable Bonds shall not exceed 4.00 % and the underwriter’s discount on the Federally Taxable Bonds shall not exceed 2.00% of the principal amount of the Federally Taxable Bonds and (ii) the rate of interest on the Tax - Exempt Bonds shall not exceed 4.50% and the underwriter’s discount on the Tax- Exempt Bonds shall not exceed 2.00% of the principal amount of the Tax-Exempt Bonds.

SECTION 3.02. Official Statement. The City Council hereby approves and deems nearly fi nal, within the meaning of Rule 15c2- 12 of the Securities Exchange Act of 1934, the preliminary Official Statement describing the Bonds in the for m on file with the City Clerk. A Cit y Representative is hereb y a uthorized to execute an appropriate certificate stating the City Council’s determination that the preliminary Official Statement has been deemed nearly final within the meaning of such Rule. A City Representative is hereby authorized and directed to approve any changes in or additions to a final for m of the Official Statement, and the execution thereof by a City Representati ve shall be conclusive evidence of approval of any such changes and additions. A City Representative shall execute the final Offi cial Statement in the name and on behalf of the C ity. The City Council hereby authorizes the distribution of the final Offici al Statement by the Original Purchaser.

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ECTION 3.03. Application of Proceeds of Sale of Bonds . On the Closing Date, the Original Purchaser(s) shall pay the purchase price of t he Bonds to U.S. Bank Trust Company National Association, in its capacity as e scrow agent under the Esc row Agreement (2013 Bonds) and the Irrevocable Refunding Instructions and as cus todian under the ag reement approved pursuant to Section 3.05, to be appli ed as provided in Section 4.01.

SECTION 3.04. Approval of Es crow Agree ment and Irrevocable R efunding Instructions. The City Council hereby approves the Escrow Agreement (2013 Bonds) and the Irrevocable Refunding Instructions (2010 Bonds) in substantially the forms on file with t he City Clerk, together with any changes ther ein or additions thereto deemed advisable by a City Representative, whose execution thereof shall be conclusive evidence of such approv al. A City Representative is authorized and direc ted for and in the name and on behalf of the City to execute, and the C ity Clerk is hereby authorized and directed to attest, if applicable, the final form of the Escrow Agreement (2013 Bonds) and the Irrevocable Refunding Instructions (2010 Bonds).

SECTION 3.05. Costs of Issuance Custodian Agreement . For the purpose of providing for the payment of Costs of Issuance, the City Council hereby authorizes a City Representative to enter into one or more Costs of Issuance Custodian Agreements with U.S. Bank Trust Company National Association in substantially the form on file with the City Clerk. As provided in said agreement s, amounts provided for payment of the costs of issuing the Bonds shall be deposited there under and the payment of costs shall be requisitioned by a City Representative in accordance with said agreement.

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SECTION 3.06. Engagement of Professional Services. In connection with the issuance of the Bonds, the City Council hereby appoints PFM Financial Advisors LLC to act as municipal advisor to the City, the f irm of Jones Hall, A Professional Law Corporation, to act as bond counsel to the City, and the firm of Quint & Thimmig LLP, to act as disclosure counsel to the City . A City Representative is authorized and directed to execute an agreement with each of suc h firms, in the respective forms on file with the City Clerk. As pro vided in each such agree ment, compensation payable to each firm is entirely contingent upon the successful issuance and sale of the Bonds.

ARTICLE IV

FUNDS AND ACCOUNTS

SECTION 4.01. Use of Proceeds. Upon the payment by the Original Purchasers of the purchase pri ce of the Bonds on the Closing Date, the proceeds thereof shall be applied as follows:

Federally Taxable Bonds

(a) there shall be transferred to the Prior Bonds Paying Agent the amount required to be held and administered in accordance with the Escrow Agreement (2013 Bonds) for the purpose of refunding and defeasing the 2013 Bonds, and

(b) the remainder of s uch amounts shall be transferred to U.S. Bank Trust Company National Association, as custodian under the related agreement approved pursuant to Section 3. 05, to be applied to the payment of Costs of Issuance, and

Tax-Exempt Bonds

(c) there shall be trans ferred to the Prior Bonds Paying Agent the amount required to be held and administered in accordance with the Irrevocable Refunding Instructions (2010 Bonds) for the purpose of refunding and defeasing the 2010 Bonds, and

(d) the rem ainder of such amounts shall be t ransferred to U.S. Bank Trust Company National Association, as custodian under the related agreement approved pursuant to Section 3. 05, to be applied to the payment of Costs of Issuance.

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ECTION 4.02. Debt Service Fund. The City Council hereby establishes a special fund to be held by the City separate and apart from all other funds of the City, to be known as the Debt Service Fund. All taxes levied by the County, as directed by the City herein, for t he payment of the pri ncipal of and interest and premium (if any) on the Bonds in accordance wi th Section 5.03 shall be deposited in the Debt Service Fund by the City promptly upon the receipt ther eof from the County. The Debt Service Fund is hereby pledged for the payment of the principal of and in terest and premium (if any) on

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the Bonds when and as the same become due. The City shall transfer amounts in the Debt Service Fund, to the extent neces sary to pay the principal of and interest on the Bonds as the same become due and payable, to the Paying Agent as required to pay the principal of and int erest and premium (if any) on the Bonds. In the event that t he amounts in the Debt Service Fund are no t sufficient to pay the principal of and interest on the Bonds as the same become due and payable, the Paying Agent shall apply such amounts in the Debt S ervice Fund to pay the principal of and interest on the Federally Taxable Bonds and the Tax -Exempt Bonds on a pro rata basis based on the amounts then due and payable.

If, after payment in full of the Bonds , any amounts remain on deposit in the Debt Service Fund, the City shall transfer such amounts to its General Fund, to be applied solely in a manner w hich is consistent with the requirements of applicable state and federal tax law.

SECTION 4.03. Investments. Th e City shall invest all moneys held in any of the funds or accounts establ ished with it hereunder in accordance with the investment policies o f the City, as such poli cies shall exist at the time of investment, and in accordance with Section 53601 of the California Government Code.

All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder s hall be deposited in the fund or account from which such investment was made, and shall be expended for the purposes thereof. The City covenants that all investments of amounts deposited in any fund or account created by or under this Resolution, or other wise containing proceeds of the Bonds, shall be acquired and disposed of at the Fair Market Value thereof. For purposes of this Section

4.03, the term “Fair Market Value” means, with res pect to any investment, the price at which a willing buyer would purc hase such investment fro m a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the mean ing of Section 1273 of t he Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition pr ice in a bona fide arm’s length transaction (as described above) if (i) the inves tment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement w ith specifically negoti ated withdrawal or reinvestment provisions and a specifically negotiated interest r ate that is acquired in accordance with applicable regulations under the Tax Code, or (iii) t he investment is a United States Treasury Security - State and Local Government Series tha t is acquired in accordance with applicable regulations of the United States Bureau of Public Debt.

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ARTICLE V

OTHER COVENANTS OF THE CITY;

SECURITY FOR THE BONDS

SECTION 5.01. Punctual Payment. The City shall punctual ly pay, or cause to be paid, the principal of and interest on the Bonds i n strict conformity with the term s of the Bonds and of this Resolution, and shall faithfully observe and perform all of the conditions, covenants and requirements of this Resolution and of the Bonds. Nothi ng herein contained prevents the City from making advances of its own moneys howsoever derived to any of the uses or purposes permitted by law.

SECTION 5.02. Extension of Tim e for Payment . In order to prevent any accumulation of c laims for interest after maturity, the City will not, dire ctly or indirec tly, extend or consent to the ext ension of the time for the payment of any claim for interest on any of the Bonds and will not, directly or indirectly, approve any such arrangement by purchasing or funding said claims for interest or in any other manner.

SECTION 5.03. Security for the B onds. The Bonds are general obligations of the City and the City has the power, is obligated and hereby covenants to levy ad valorem taxes upon all property within the City subject to taxation by the City, without limitation of rate or amount, for the pay ment of the Bonds and the interest thereon, in accordance with Section 43632 of the Government Code of the State of California. Amounts in the General Fund of the City are not pledged to the payment of the B onds. However, nothing herein limits the abilit y of the City to provide for payment of the principal of and interest and premium (if any) on the Bonds from any source of legally available funds of the City. Any amounts so advanced by the City from legall y available funds may be reimbursed from ad valor em property taxes subsequently collected under this Section

5.03. S
ECTION 5.04. Books and Accounts; Financial Statement . The City will keep, or cause to be kept, proper book s of record and accounts, separ ate from all ot her records and accounts of the C ity in which complete and correct entries are made of all transactions relating to the Bonds. Such books of record and accounts shall at all times during business hours be su bject to the inspection of the Paying Agent and the Owners of not less than 10% i n aggregate principal amount of the Bonds then Outstanding, or their representatives authorized in writing.

SECTION 5.05. Protection of Security and Rights of Bond Owners . The City will preserve and protect the security of the Bonds and the rights of the Bond Owners, and will warrant and defend their rights against all c laims and demands of all persons. From and after the sale and delivery of any of the Bonds by the City, the City may not contest the authorization, issuance, sale or repayment of the Bonds.

SECTION 5.06. Tax Covenants Relating to the Tax-Exempt Bonds. The City shall take all actions necessary to assure the exclusion of interest on the Tax-Exempt Bonds from the gross income of the Owners of the Tax-Exempt Bonds to the same extent as such interest is permitted to be excl uded from gross income under the Ta x Code as in effect on t he Closing Date. To that end, and without limiting the generality of the

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foregoing covenant, the City hereby covenants with the O wners of the Tax-Exempt Bonds as follows:

(a) Private Activity Bond Limitation . The proceeds of the Tax -Exempt Bonds may not be so used as to cause the Tax-Exempt Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code.

(b) Federal Guarantee Prohibition
. The City may not take any action or
permit or suffer any action to be taken if the result of the same would be t o cause the Tax-Exempt Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Tax Code.

(c) No Arbitrage
. The City may not tak e, or permit or suffer to be taken by the Paying Agent or otherwise, any action w ith respect to the Tax-Exempt Bond proceeds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Tax-Exempt Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Tax Code.

(d) Rebate of Excess Investment Earnings. The City shall cal culate or cause to be calculated all amounts of excess investment ear nings with respect to the Tax-Exempt Bonds which are required to be rebated to the United States of Amer ica under Section 148(f) of the Tax Code, at the t imes and in the manner required under the Tax Code. The City shall pay or cause to be paid when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code, such payments to be m ade from any source of legally available funds of the City. The City shall keep or cause to be kept, and retai n or cause to be retained for a period of six years following th e retirement of the Tax-Exempt Bonds, records of the determinations made under this subsection (d).

(e) Maintenance of Tax -Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Tax-Exempt Bonds from the gross inco me of th e owners of the Tax -Exempt Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in ef fect on the date of issuance of the Tax-Exempt Bonds.

(f) Record Retention
. The City will retain its re cords of all accounting
and monitoring it carries out with respect to the Tax -Exempt Bonds for at least 3 years after the Tax-Exempt Bonds mature or are redeemed (whichever is earlier); however, if the Tax-Exempt Bonds are redeemed and refunded, the City will retain its records of accounting and monitoring at least 3 years after the earl ier of the maturity or redemption of the obligations that refunded the Tax- Exempt Bonds.

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(g) Compliance with Tax Certificate . The City will comply with the provisions of th e Certificate as to Arbitrage and the Certificate Regarding Use of Proceeds with respect to the Tax-Exempt Bonds.

The covenants of this Section will survive payment in full or defeasance of the Tax-Exempt Bonds.

SECTION 5.06. Tax Covenants Relating to the 2013 Bonds. The City shall ta ke all actions necessary to assure the exclusion of interest on the 2013 Bonds from the gross income of the Owners of the 2013 Bonds until the redemption in full of the 2013 Bonds. Without limiting the generality of the foregoing, the City covenants and agrees as follows:

(a) Private Activity Bond Limitatio n. The C ity will take all actions necessary to assure that the proceeds of the 2013 Bonds are not used as to cause the 2013 Bonds to satisfy th e private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code.

(b) Federal Guarantee Prohibition. The Ci ty will not take any action or permit or suffer any action to be taken if the result of the same would be t o cause the 2013 Bonds to be “feder ally guaranteed ” within the meaning of Section 149(b) of the Tax Code.

(c) No Arbitrage
. The City will not take, or permit or suffer t o be taken by the Paying Agent or otherwise, any action with r espect to the 2013 Bond proceeds which, if such action had been reasonabl y expected to have bee n taken, or had been deliberately and intentionally taken, on the date of issuance of the 2013 Bonds , would have caused the 2013 Bonds to be “arbitrage bonds” wi thin the meaning of Section 148 of the Tax Code.

(d) Rebate Requirement. The City will take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, i f any, to the federal government, to the exten t that such section is applicable t o the 2013 Bonds.

(e) Record Retention. The City will retain its records of all accounting and monitoring it carries out with respect to the 2013 Bonds for at least 3 years after the 2013 are fully redeemed.

(f) Unspent Proceeds. As of the date of thi s Resolution, the City is holding approximately $598,921 of 2013 Bond proceeds in the Project Fund established for the 2013 Bonds. The City has awarded and will execute prior to the Closing Date a c ontract for roof and gutter work at Mitche ll Park Library with a n expected completion date of October 1, 2022 . A City Representative is hereby directed on the Closing Date to reserve $250,000 of the amounts in the Project Fund to pay for the costs of such project and to transfer any other amounts in the Project Fund to the Prior Bonds Paying Agent

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for deposit in the Escrow Fund establ ished under the Escrow Agreement (2013 Bonds).

SECTION 5.08. Continuing Discl osure. The City hereby covenants and agrees that it will comply with and carry out all of t he provisions of the Continuing Disclosure Certificate, which a City Representative is hereby authorized and directed to execute and deliver on the Closing Date. N otwithstanding any other provision of this Resolution, failure of t he City to comply with th e Continuing Disclosure Cer tificate will not be considered a default by the City hereunder or under the Bonds; however, any Participating Underwriter (as such term is defined in the C ontinuing Disclosure Certificate) or any holder or beneficial owner of the Bonds may, take such acti ons as may be necessary and appropriate to compel performance, inc luding seeking mandate or specific performance by court order.

SECTION 5.09. Further Ass urances. The City will ado pt, make, execute and deliver any and all such further res olutions, instr uments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Resolution, and for the bet ter assuring and confirmi ng unto the Owners of the Bonds of the rights and benefits provided in this Resolution.

ARTICLE VI

THE PAYING AGENT

SECTION 6.01. Appointment of Paying Agent . U.S. Bank Trust Company National Association is hereby appointed to act as Paying Agent for the Bonds. The Paying A gent undertakes to perform such d uties, and only such duties, as are specifically set fort h in this Resolution, and even during the continuance of an event of default with respect to the Bonds, no implied covenants or obligations shall be read into this Resolution against the Paying Agent. The Paying Agent shall signify its acceptance of the duties and obligations im posed upon it by this Resolution by executing and delivering to the City a certificate to that effect.

The City may remove the Paying A gent i nitially appointed, and any succe ssor thereto, and may appoint a successor or successors t hereto, but any such suc cessor shall be a bank or trust company doing business and having an office in the State o f California, having a combined capital (exclusiv e of borrowed capital) and surplus o f at least $50, 000,000, and subject to supervision or examination by federal or s tate authority. If such bank or trust company publishes a report of condition at least annually, under law or under the requirements of any supervising or examini ng authority above referred to, then for the purposes of this Section 6.01 the combined capit al and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

The Paying Agent may at any time resign by giving written notice to the City and the Bond Owners of such resignation. Upon receiving notice of such resignation, the City shall pr omptly appoint a successor Paying Agent by an instrument in writing. Any resignation or removal of the Paying Agent and appointment of a succ essor Paying

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Agent becom es effective upon acceptance of appointment by the successor Paying Agent.

The City Council hereby approves an agree ment with the Paying Agent in substantially the form on file with the Cit y Clerk, together with any changes therein or additions thereto deemed advisable by a City Representative, whose execution thereof shall be conclusive evidence of such approval. A Ci ty Representative is authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, if applicable, the final form of the agreement with the Paying Agent.

SECTION 6.02. Paying Agent May Hold Bonds . The Paying Agent m ay become the Owner of any o f the Bonds in its own or any other capacity with the same rights it would have if it were not Paying Agent.

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ECTION 6.03. Liability of Paying Agent . The recitals of facts, cov enants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City, and the Paying Agent assumes no responsibi lity for the correctness of the same, nor makes any representations as to the validity or su fficiency of this Resolution or of the Bonds , nor shall incur any responsib ility in respect thereof, other than as set forth in this Resolut ion. The Paying Agent i s not liable in connection with the performance of its duties hereunder, except for its ow n negligence or willful default.

In the absence of bad faith, the Paying Agent may conclusively rely, as to the truth of the statements and t he correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and co nforming to the requirements of this Resolution.

The Paying Agent has no liability for any error of judgment made in good faith by a responsible officer of its corporate trust department in the absence of the negligence of the Paying Agent.

No provision of this Resolution requires the Paying Agent to expend or ri sk its own funds or otherwise incur any financial liability in the performance o f any of its duties hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

The Paying Agen t may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Paying Agent is not responsi ble for any m isconduct or ne gligence on the part of any agent or attorney appointed with due care by it hereunder.

SECTION 6.04. Notice to Paying Agent . The Paying Agent may rely and shall be protected in acting or refraining from ac ting upon any not ice, r esolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Paying Agent may consult with counsel, who may be of counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete

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authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.

Whenever in the administration of its duties under this Resolution the Paying Agent deems it nec essary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Paying Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate wi ll be full warrant to the Pay ing Agent for any action taken or suffered under the provisions of this Resolution upon the faith thereof, but in its discretion the Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

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ECTION 6.05. Compensation; Indemnification. The City will pay to the Paying Agent from tim e to time reasonable com pensation for all services rendered under this Resolution, and also all reasonable expense s, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Resolution. The City further agrees to indemnify the Paying Agent against any liabilities which it m ay incur in the exercise and perf ormance of its powers and duties hereunder which are not due to its negligence or bad faith.

ARTICLE VII

REMEDIES OF BOND OWNERS

SECTION 7.01. Remedies of Bond Owners . Upon the happening and continuation of any defaul t by the City her eunder or under the Bonds, any Bond Owner has the right, for the equal benefit and protection of all Bond Owners similarly situated:

(a) by mandamus, suit, action or proceeding, to compel the City and its members, officers, agents or employees to perform each and every term, provision and covenant contained in this Resolution and in the Bonds, and to require the carrying out of any or all such covenants and agreements of the City and the fulfillment of all duti es imposed upon it;

(b) by suit, action or pr oceeding in equi ty, to enjo in any acts or things which are unlawful, or the violation of any of the Bond Owners’ rights; or

(c) by suit, action or proceeding in any court of competent jurisdiction, to require the City and its members and employees to account as if it and they were the trustees of an express trust.

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ECTION 7.02. Remedies Not Exclus ive. No remedy herein c onferred upon the Owners of Bonds is exclusive of any other remedy. Each remedy is cumulati ve and shall be in addition to every other remedy given hereunder or thereafter conferred on the Bond Owners.

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ARTICLE VIII

AMENDMENT OF THIS RESOLUTION

SECTION 8.01. Amendments Effective Without Consent of the Owners . For any one or more of the fol lowing purposes and at any ti me or from time t o time, the City Council ma y by Supplemental Resolution amend this Resolution in whole or in par t, without the consent of any of the Bond Owners:

(a) to add to the covenants and agreements of the City in this Resolution, other covenants and agreements to be observed by the City which are not contrary to or inconsistent with this Resolution as theretofore in effect;

(b) to confirm, as further assurance, any pledge under, and to subject to any lien or pledge creat ed or t o be created by, thi s Resolution, of any moneys, securities or funds, or to establish any additional funds or accounts to be held under this Resolution;

(c) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Resolution, which in any event does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the City; or

(d) to make such additions, deletions or modifications as may be necessary to assur e com pliance with the applicable provisions o f the Tax Code relating to the rebate of excess investment earnings to the United States or otherwise as may be neces sary to assure that the interest on the Bonds remains excludable from gross income of the Owners th ereof for federal income tax purposes , i n the opinion of Bond Counsel filed with the City.

S
ECTION 8.02. Amendments Effective With Consent to the Owners . Any modification or amendment of this Resolution and of the rights and obligations of the City and of the Owners of the Bonds, in any pa rticular, may be made by a Supplemental Resolution, with the written consent of the Owners of a majority in aggregate pr incipal amount of the Bonds Outstanding at the time such consent is given. Without the consent of the Owners of all af fected Bonds, no such modification or amendment may (a) change the maturity of the principal of any Bonds or any interest payable thereon, (b) reduce the principal amount of the Bonds or the rate of interest thereon, (c) reduce the percentage of Bonds the consent of the Ow ners of which is required t o effect any such modification or amendment, (d) change any of the provisions in Section 7.01 relating to a default by the City hereunder or under the Bonds, (e) reduce the amount of moneys pledged for the repaym ent of the Bonds. Without the consent of the Pa ying Agent, no such modification or amendment may change or modif y any of the rights or obligations of the Paying Agent.

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ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Benefits of Reso lution Limited to Parties . Nothing in this Resolution, expressed or im plied, is intended to give to any person other than the City, the Paying Agent and the Owners of the Bonds, any right, remedy, claim under or by reason of this Resolution. Any covenant s, stipulations, promises o r agreements in t his Resolution contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners of the Bonds.

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ECTION 9.02. Defeasance.

(a) Discharge of Resolution. Bonds may be paid by the City, in whole or in part, in any of the followin g ways provided that the City also pays or causes to be paid any other sums payable hereunder by the City:

(i) by paying or causing to be paid the principal of and interest on such Bonds, as and when the same become due and payable;

(ii) by irrevocably d epositing, in trust, at or b efore maturity, money or securities in the necessary amount to pay such Bonds as provided in Section 9.02(c); or

(iii) by delivering such Bonds to the Paying Agent for cancellation by it.

If the City pays all Outstanding Bonds and also pays or causes to be paid all other sums payable hereunder by the City, then and in that case, at the elect ion of the City (evidenced by a certificate of a City Representative filed with the Paying Agent, signifying the intent ion of the City t o d ischarge all s uch indebt edness and this Resolution), and notwithstanding that any Bonds have not been surrendered for payment, this Resolution, all taxes and other assets pledged under this Resolution and all covenants, agreements and other obligations of the City under this Resolution shall cease, terminate, become void and be completely discharged and satisfied, except only as provided in Section 9.02(b). In such event, upon request of the City, the Paying Agent shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and shall execute and deliver to the City all such instruments as may be necessary to evidence such discharge and satisfaction, and the Paying Agent shall pay over, transf er, assign or del iver to th e Ci ty all moneys or securities or other property held by it under this Resolution which are not required for the payment of Bonds not theretofore surrendered for such payment.

(b) Discharge of Liability on Bonds
. Upon the deposit , i n trust, at or before
maturity, of money or securities in the necessary amount to pay any Outstanding Bond Bonds as provided in Section 9.02(c), then all liability of the City in respect of such Bond will cease and be completely disc harged, except only that thereafter the Owner th ereof is entitled only to payment of the principal of and interes t on such Bond by the Ci ty, and the City remains liable for such payment, but only out of such money or securities deposited with the Paying Agent as aforesaid for such payment, provided further, however, that the provisions of Section 9.02(d) apply in all events.

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The City may at any time surrender to the Paying Agent for cancellation by it any Bonds previously issue d and del ivered, which the Ci ty acquires in any m anner whatsoever, and such B onds, upon such surrender and cancellation, will be deemed paid and retired.

(c) Deposit of Money or Securities with Paying Agent . Whenever in this Resolution it is provided or pe rmitted that there be deposited with or held in trust by the Paying Agent m oney or securities in the necessary amount to pay any Bonds, the money or securities so t o be deposited or held may include money or securities held by the Paying Agent in the funds and accounts established under this Resolution and must be:

(i) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity; or

(ii) Federal Securities the principal of and interest on which when due, in the opi nion of a certifi ed public accountant delivered to the City, will provide money sufficient to pay the principal of and all unpaid interest to maturity on the Bonds to be paid, as such principal and interest become due.

(d) Payment of Bonds After Discharge of Resolution
. Notwithsta nding any
provisions of this Resolution, any moneys held by the Paying Agent in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two years after the principal of al l of the Bonds has b ecome due and payable, i f su ch moneys were so held at such date, or two years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall, upon request of the City, be repaid to the City free from the trusts created by this Resolution, and all liability of the Paying Agent with respect to such moneys shall the reupon cease.

Before the repayment of such moneys to the City as aforesaid, the Paying Agent may (at the cost of the City) first mail to the Owners of all Bonds which have not been paid at the addresses shown on the Registration Books a notice in such for m as may be deemed appropriate by the Paying Agent, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof.

SECTION 9.03. Execution of Doc uments and Proof of Ownership by Bond Owners. Any request, declaration or other instrument which this Resolution may require or permit to be executed by Bond Owners may be in one or more instruments of similar tenor, and shall be executed by Bond Owners i n person or by their attorneys appointed in writing.

Except as otherwise herein expressly provided, the fact and date of the execution by any Bond Owner or his attorney of such request, declaration or other instrument, or of such w riting appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.

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Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same are proved by the Registration Books.

Any request, declaration or other instrument or wri ting of the Owner of any Bond binds all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Paying Agent in good faith and in accordance therewith.

SECTION 9.04. Waiver of Personal Liability. No City Council member, officer, agent or employee of the City has any individual or personal liability for the payment of the principal of or interest on the Bonds. Nothing herein contained relieves any City Council member, of ficer, agent or employee fr om the performanc e of a ny official duty provided by law.

SECTION 9.05. Destruction of Canceled Bonds . Whenever in this Resolution provision is made for the surrender to the City of any Bonds which have been paid or canceled under the provisions of this Resolution, a cer tificate of destr uction dul y executed by the Paying Agent constitutes the equivalent of the surr ender of such canceled Bonds and the City is entitled to rely upon any statement of fact contained in any certificate with respect to the destruction of any such Bonds therein referred to.

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ECTION 9.06. Partial Invalidity. If any section, paragraph, sen tence, clause or phrase of this Resolution is for any reason held illegal or unenforceable, such holding will not affect the validity of the re maining portions of this Resolution. The Ci ty hereby declares that it would have adopted this Resolution and eac h and every other section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant hereto irrespective of t he fact that any one or more secti ons, paragraph s, sentences, clauses, or phrases of this Resolution may be held illegal, invalid or unenforceable.

SECTION 9.07. Execution of Documents. Each City Representative, and any and all other officers of the City, are each authorized and directed in the name and on behalf of the City to make any and all certificates, requi sitions, agreements, notices, consents, warrants and other documents, which they or any of them might deem necessa ry or appropriate in order to consummate the lawful issuance, sale and delivery of the Bonds.

Whenever in this Resolution any officer of the City is authorized to ex ecute or countersign any document or take any action, such execution, countersigning or ac tion may be taken on behalf of such officer by any person designated by s uch officer to act on his or her behalf in the case such officer shall be absent or unavailable.

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SECTION 9.08. Effective Date of Resolution. This Resolution becomes effective upon the date of its passage and adoption.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

__________________________ ______________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

__________________________ ______________________________ Chief Assistant City Attorney City Manager

______________________________
Director of Administrative
Services

I HEREBY CERTIFY that the foregoing resolution was duly and regularly passed and adopted by the C ity Council of the City of Palo Alto at a regu lar m eeting thereof held on t he 2nd day of May , 2022, and that the foregoing is a full, true and correct copy of said Resolution.

City Clerk

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APPENDIX A

FORM OF BOND

REGISTERED BOND NO. ______ $____________

CITY OF PALO ALTO

GENERAL OBLIGATION REFUNDING BONDS (ELECTION OF
2008), SERIES _____

INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP
______% per
annum
August 1, ____

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT:

The C
ITY OF PALO ALTO, a charter city and municipal corpora tion duly organized and existing under the Constitution and laws of the State of California (t he “City”), for value received, hereby promises to pay to the Registered Owner named above, or registered assigns, the Principal Amount set for th above on the M aturity Date set forth above, together with interest thereon at the Interest Rate set forth above, calculated on a 30/360 day basis, until the Principal Amount hereof is paid or provided for, such interest to be paid on February 1 and August 1 of each year, commencing February 1, 2023 (the “Interest Payment Dates”). This Bond will bear interest from the Interest Payment Date next preceding the date of authentication hereof, unless (a) it is authentic ated as of a business day following the 15th day of the m onth i mmediately preceding any Inter est Payment Date and on or before such Interest Payment Date, in which event it shal l bear interest from such Interest Payment Date, or (b) it is authenticated on or before January 15, 2023, in which event it shall bear interest from the Dated Date set forth above.

Principal, interest and redemption premium (if an y) are payable in lawful money of the United States of America to the person in whose name this Bond is registered (the “Registered Owner”) on the Bond registr ation books maintained by t he Paying Agent, initially U.S. Bank Trust Company National Association , San Francisco, Calif ornia.

Principal hereof and any redemption premium hereon are payable upon presentation and surrender of this Bond at the principal cor porate trust office of the Paying Agent.

Interest hereon is payable by check mailed by the Paying Agent on each Interes t Payment Date to the Registered Owner of this Bond by first -class mail at the address appearing on the Bond registration books at the close of business on the 15 th day of the
calendar month next preceding such Interest Payment Date (the “Record Date”);

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provided, however, that at the written request of the registered owner of Bonds i n an aggregate principal amount of at least $1,000,000, w hich written request is on file with the Paying Agent prior to any Record Date, interest on such Bonds shall be paid on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of Americ a as shal l be specified in such written request.

This Bond is one of a duly authorized issue of Bonds of the City designated as “City of Palo Alto 2022 General Obligation Refunding Bonds (Election of 2008), Seri es ______” (the “ Bonds”), in an aggregate pr incipal a mount of $__________, all of li ke tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates and other prov isions) and all issued under the provisions o f Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (t he “Bond Law”), and under a resolution adopted by the City Council of the City on May 9, 2022 (the “Resolution”) authorizing the issuance of the Bonds. Reference is hereby made to the Resolution (copies of which are on file at the office of the City Cl erk) and the Bond Law for a description of the terms on which the Bonds are issued and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Paying Agent and the rights and obligations of the City thereunder, to all of the provisions of which Resolution the Owner of this Bond, by acceptance hereof, assents and agrees.

The Bonds have been issued by the C ity t o refund and discharge outstanding general obligation bonds of the City, the issuance of which was authorized by a vote of more than two- thirds of the qualified voters of the City voting at a s pecial mu nicipal election held on November 4, 2008.

The principal of and interest and redemption premium, if any, on this Bond do not constitute a debt of the County, the St ate of California, or any of its political subdivisions other than the City, or any of the officers, agents and employees thereof, and neither the County, the Stat e of Califor nia, any of its political subdivisions other than the City , nor any of the officers, agents and employees thereof shall be liable hereon. In no event shall the pr incipal o f and interest and redemption premium, i f any, on this Bond be payable out of any fu nds or properties of the City other than ad valorem taxes levied upon all taxable property in the City.

The Bonds are issuable only as fully registered Bonds in t he denominations of $5,000 or any integral multiple thereof. This Bond is exchangeable and t ransferable for Bonds of other authorized denominations at the principal corporat e trust office of the Paying Agent, by the Registered Owner or by a person legally empowered to do so, upon presentation and surrender hereof to the Paying Agent, together with a request for exchange or an assignment signed by the Re gistered Owner or by a person legally empowered to do so, in a form satisfactory to the Paying Agent, all subject to the terms, limitations and c onditions provided in t he Bond Resolution. Any tax o r governmental charges shall be paid by the transferor. The City and the Paying Agent may deem and treat the Registered Owner as the absolute owner of this Bond f or the purp ose of receiving payment of or on account of principal or interest and for all other purposes, and neither the City nor the Paying Agent shall be affected by any notice to the contrary.

The Bonds maturing on or before August 1, 20__, are not subject to redemption prior to their respective sta ted matur ities. The Bonds ma turing on or af ter August 1,

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20__, are subject to redemption prior to mat urity as a whole, or in part among maturities on such basis as shall be designated by the City and by lot within a maturity, at the option of the City, from any av ailable source of funds, on August 1, 20__, and on any Interest Payment Date thereafter, at a redemption price (expressed as a percentage of the principal amount of Bonds to be redeemed) as set fort h in the following table, together with interest thereon to the date fixed for redemption.

Redemption Dates Redemption Price

[If applicable:] The Bonds ma turing on August 1, 20__ (the “Term Bonds”) are also subject to mandatory sinking fund redemption on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to 100% of the principal amount t hereof t o be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of th e Term B onds have been redeemed under the preceding paragraph, the aggregate principal amount of Term Bonds to be redeemed under this paragraph shall be reduced on a pro rata basis in integral multi ples of $5,000, as shall be designated i n written notice filed by the City with the Paying Agent.

Sinking Fund
Redemption Date
(August 1)
Principal
Amount To Be
Redeemed

The Paying Agent shall give notice of the redemption of the Bonds at the expense of the City. Such notice shall s pecify: ( a) that t he Bo nds or a designated portion thereof are to be redeemed, (b) the numbers and CUSIP number s of the Bonds to be redeemed, (c) the date of notice and the date of redemption, (d) the place or places where the redemption will be made, and (e) descr iptive information regarding the Bonds including the dated date, interest rate and stated maturity date. Such notice shall further state that on the specified date there shall become due and payable upon each Bond to be redeemed, the portion of the principal amount of such Bond to be redeemed, together with in terest accrued to said date, the redemption pr emium, if any, and that from and after such date interest with respect thereto shall cease to accrue and be payable.

Notice of any redemption of Bonds shall be ma iled by first class mail, postage prepaid, at l east 20 days but not more than 60 days prior t o the date fixed for redemption, to the respective Owners of any Bonds designated for redemption, at thei r addresses appearing on the Bond regist ration books maintained by the Paying Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice shall not affect the validity of the proceedings f or the

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redemption of such Bonds or the c essation of accrual of interest thereon from and after the redemption date. The redemption notice may be conditional and may be rescinded in the circumstances set forth in the Resolution.

Neither the City nor the Paying Agent will be required: (a) to issue or transfer any Bond during a period beginning with the opening of business on the 15 th calendar day next preceding either any Interest Payment Date or any date of selection of any Bond to be redeemed and ending wi th the cl ose of business on the Interest Payment Date or a day on which the applicable notice of redemption is given, or (b) to transfer any Bond which has been selected or called for redemption in whole or in part.

Reference is made to the Bond Resolution for a more complete description of the provisions, among others, with respect to the nature and extent of the security for the Bonds, the rights, dut ies a nd obligations of the City, the Paying Agent and the Registered Owners, and the terms and conditions upon which the Bonds are issued and secured. The owner of this Bond assents, by acceptance hereof, to all of the provisions of the Bond Resolution.

It is certified, recited and declared that all acts and conditions required by the Constitution and laws of the State of California to exist, to be perfor med or to have been met precedent to and in the issuing of the Bonds in order to make them legal, vali d and binding general obligations of the City, have been performed and have been met in regular and due f orm as re quired by law; that payment in full for the Bonds has been received; that no statutory or constitutional limitation on indebtedness or taxation has been exceeded in issuing the Bonds; and that due provision has been made for levying and collecting ad valorem property taxes on all of the taxable property within the City in an amount suffic ient to pay principal and interest when due, and for levyi ng and collecting such taxes the full faith and credit of the City are hereby pledged.

This Bond shall not be val id or obligatory for any purpos e and shall not be entitled to any security or benefi t under the Bond Resolution until the Certificate of Authentication below has been manually signed by the Paying Agent.

Unless this Bond is presented by an author ized representative of The Depository Trust Company, a New York corporation (“DTC”), to the C ity or the Paying Agent for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or t o such other entity as is requested by an authorized representa tive of DTC), ANY TRANSFER, PLEDGE,

OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered ow ner hereo f, Cede & Co., has an interest herein.

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IN W ITNESS WHEREOF, the City of Palo Alto has caused this Bond to b e executed by the facsimile signature of its Mayor and attes ted by the facsimile signature of its City Clerk, and has caused the seal of the City to be reprodu ced hereon, all as of the date stated above.

CITY OF PALO ALTO

By
Mayor
Attest:

City Clerk

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CERTIFICATE OF AUTHENTICATION

This Bond is one of th e Bonds described in the Bond Resolution referred to herein.

Date of Authentication:

U.S. BANK TRUST COMPANY
NATIONAL ASSOCIATION, as Paying
Agent

By
Authorized Signatory

FORM OF ASSIGNMENT

For value received, the undersigned do(es) hereby sell, assign and transfer unto

(Name, Address and Tax Identification or Social Security Number of Assignee)

the within Bond and do(es) hereby irrevocably constitute and appoint ______________________
attorney, to transfer the same on the registration books of the Bond Registrar, with full power of substitution in the premises.

Dated: ______________

Signature Guaranteed:

Note: Signature(s) must be guaranteed by a an
eligible guarantor institution.

Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face
of the within Bond in ev ery parti cular wit hout
alteration or enlargement or a ny change
whatsoever.

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APPENDIX B

REQUIRED DISCLOSURES PURSUANT TO
GOVERNMENT CODE SECTION 5852.1*

The following information consists of estimates that have been provided by the City’s municipal advisor which has been represented by such party to have been provided in good faith:

Federally Taxable Bonds

1. Estimated True Interest Cost of the Federally Taxable Bonds: 3.82%

2. Estimated finance charge of the Federally Taxable Bonds, being the sum of all fee s and cha rges paid to third parties, in the amount of approximately $189,286.24. Such amount consists of costs of issuing the Federally Taxable Bonds in the amount of approximately $60,301.43, together with estimated underw riter’s compensation in the amount of $128,984.81.

3. Estimated proceeds of the Federally Taxable Bonds expected to be received by the City for deposit pursuant to the Escrow Agreement (2013 Bonds), net of proceeds for Costs of Issuance in (2 ) above to paid, capitalized i nterest and reserv es (if an y) from t he pr incipal amount of the Federally Taxable Bonds: $13,485,713.76

4. Estimated Total Payment Amount for the Federally Taxable Bonds, being the sum of all debt service to be paid on the Federally Taxable Bonds to final maturity: $19,423,309.44.

Tax-Exempt Bonds

1. Estimated True Interest Cost of the Tax-Exempt Bonds: 3.14%

2. Estimated finance charge of the Tax-Exempt Bonds, being the sum of all fees and charges paid to third parties, in the amount of approximately $ 535,343.37. Such amount consists of costs of issuing the Tax-Exempt Bonds in the a mount of approximately $163,578.18, together with estimated underwriter’s compensation in the amount of $371,765.19.

3. Estimated proceeds of the Tax-Exempt Bonds expected to be received by the City for depos it pursuant to the Irrevocable Refunding Instructions (2010 Bonds), net of proceeds f or Costs of Issuance in ( 2) above to paid, c apitalized interest and reserves (if any) from the principal amount of the Tax-Exempt Bonds:
$38,879,289.28.

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4. Estimated Total Payment Amount for the Tax-Exempt Bonds, being the sum of all debt service to be paid on the Tax -Exempt Bonds to final maturity: $51,318,000

*All amounts and percentages are estimates, and are made in good faith by the City based on information available as of the d ate of adopt ion of this Resolution . Estimates include certain assumptio ns regarding tax-exempt interest rates available in the bond market at the time of pricing the Bonds.

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Attachment B
Costs of Issuance (COI) Estimates:

Bond Counsel (Jones Hall), includes expenses 66,500 $ 29.7% Disclosure Counsel (Quint & Thimmig, LLP) 30,000 13.4% Financial Advisor (PFM Financial Advisors, LLC), includes expenses 63,000 28.1% Trustee (U.S. Bank) 10,000 4.5%
Rating Agency (Standard & Poor's) 31,750 14.2% Verfification Agent (TBD) 1,750 0.8%
Printer 1,000 0.4%
Parity Bid Platform 1,000 0.4%
Contingency 18,880 8.4%
Total Cost of Issuance (COI) 223,880 $ 100%
Underwriter's Discount Fee 500,750
Total Bond Issuance Expense Estimates 724,630 $
City of Palo Alto
General Obligation (Refunding) Bonds
Series 2022A (Tax-Exempt) and Series 2022B (Federally Taxable) Bonds Bond Issuance Expense Estimates

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PAYING AGENCY AGREEMENT
This Pa
ying Agency Agreement (the “Agreement”), entered into as of June __, 2022, by and between the City of Palo Alto (the “Issuer”) and U.S. Bank Trust Company National Association, a national banking association having a corporate trust office at San Francisco, California (the “Paying Agent”),
WITNESSETH:

WHEREAS, by the resolutions described in Exhibit A attached hereto (the “Authorization”), the Issuer authorized the issuance of its Bonds or Notes as described in Exhibit A attached hereto (the “Bonds” or “Notes”) and
WHEREAS, said Authorization authorized the Issuer to enter into an agreement of appointment with a bond registrar/transfer agent and paying agent to service such Bonds or Notes.

NOW, THEREFORE, the Issuer and the Paying Agent agree as follows:

Section 1. Appointment and Acceptance. The Issuer hereby appoints U.S. Bank Trust Company National Association as bond registrar/transfer agen t and paying agent for the Bonds or Notes, and the Paying Agent accepts such appointmen ts, acknowledging the duties, obligations and responsibilities of the Paying Agent as set forth herein.

Section 2. Documents to be Filed with the Paying Agent. The following documents shall be filed with the Paying Agent in connection with its appointment:
(i)
a copy of the Authorization.
(
ii) if not printed on the Bonds or Notes, an opinion of bond counsel stating that (a) th e Bo
nds or Notes are valid and legally bindin g obligations of the Issuer, payable in accordance with their terms and (b) if applicab le, the interest on such Bonds or Notes is not included in gross income for federal income tax purposes; (iii)
a specimen certificate in the form approved by the Issuer; (iv) if the Bonds or Notes have been delivered prior to the Paying Agent’s appointment:
(1)
a list containing the name, address an d taxpayer identification number of each h
older of the Bonds or Notes as of the date of Paying Agent’s appointmen t, in
dicating the date of issuance, the au thentication date, the certificate number and the denomination for each outstanding certificate, and (2)
a list of stop transfer orders maintained by the Issuer (or its prior paying agen ts) agai
nst outstanding Bond or Note certificates giving details as to certificat e nu
mbers, denominations, names of registered owners and dates of stop transfer orders, and, if such certificates have been replaced, the numbers and denomi
nations of the replacement certificates, dates of replacements and documents evidencing the indemnity accepted in connection with the issuance of the replacement certificates; and
(v
) such other instruments and certificates as the Paying Agent may reasonably request.

Section

3. Registration, Authentication and Delivery of Initial Bonds or Notes. If the Bonds or Notes are to be newly issued, the Issuer will, or will cause its underwriter to:

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2 (i) deliver to Paying Agent, not later than five (5) business days prior to the required delivery date, written notice setting forth the matu rity date, principal amount and interest rate borne by the Bonds or Notes;

(ii) notify the Paying Agent in writing, not late r than three (3) business days prior to the required delivery date, of the name(s) in whic h Bonds or Notes are to be registered, the mailing addresses of the respective register ed holders and their respective taxpayer identification numbers, and the quantity, denominations, interest rates, maturity dates and CUSIP numbers of the certificates to be issued to each registered holder.

The Paying Agent shall inscribe the Bonds or Notes as directed in Section 3(ii) above, authenticate the initial Bonds or Notes an d deliver same in accordance with the wr itten directions of the Issuer or its underwriter. If delivered before the Closing, such initial Bonds or Notes shall remain subject to the control of the Paying Agent, as agent for the Issuer, until released by the Paying Agent.

Section 4. Transfer or Exchange of Certificates. The Paying Agent is authorized, empowered and directed to inscribe, to count ersign or authenticate as registra r, and to record and deliver new certificates for Bonds or No tes of the Issuer pursuant to requests for transfer and cancellation of other certificates theretofore outstanding, or to replace lost , destroyed, stolen or mutilated certificates, as provided in Section 6 hereof.

If the transfer and/or exchange of the Bond or Note certificate shall have been documented in the manner authorized or required by law, and if the rules, regulations, policies and procedures of the Issuer and of the Paying Agent, governing the transfer and registration of the Bonds or Notes shall have been met, then the Paying Agent sha ll cancel such certificate being transferre d and/or exchanged and shall inscribe, authenticate, record and deliver a ne w certificate for the Bonds or Notes so transferred or exchanged. In the transfer of Bond or Note certificates, the Paying Agent may require a guarantee of signature by an eligible guarantor institution participating in a recognized signature guarantee program.

The Paying Agent shall incur no liability for the refusal in good faith to make transfers which it, in its judgment, deems improper or unauthorized. The Paying Agent may, in effecting transfers, rely upon the Uniform Commercial Code of the Stat e of California and/or the rules of the Stock Transfer Association, Inc.

Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall pr ovide or cause to be provided to the Paying Agent all information necessary to allow the Paying Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Paying Agent shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information. The Paying Agent acknowledges th at the Issuer has no obligation to enforce any obligations imposed by this paragraph on the owners of the Bonds.

Section 5. Bond or Note Certificates. The Issuer will furnish to the Paying Agent a sufficient supply of blank Bond or Note certifi cates and, from time to time, will re plenish such supply upon request of the Paying Agent. Such blank Bond or Note cer tificates shall be signed by officers of the Issuer, authorized by the Issuer to sign Bond or Note certificat es, and shall bear the seal of the Issuer or shall bear, to the extent permitted by law, the f acsimile signature of each such officer and a facsimiles of the seal. If an officer of the Issuer, whose signature appears on any Bond or Note certificate, ceases to be an officer of the Issuer before delivery of said Bond or Note certifi cate, such signature nevertheless shall be valid and sufficient for all purposes, the same as if such of ficer of the Issuer had remained in office until such delivery and the Paying Agent may inscribe, authenticate, and deliver such certificate as being that of the Issuer whose signature properly shall have been inscribed on such Bond or Note certificate prior to its issuance.

Section 6. Records of Certificat es; Lost or Destroyed Certificates . The Paying Agent may open and keep such books and other records, including a bond register, as shall be required for, or

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3 convenient in, the performance of its duties. If Bonds or Notes have been issued and delivered prior to the Paying Agent’s appointment, the Paying Agent may accept and adopt as a part of such records all lists of holders of records as may have been employed by any former bond registrar/transfer agent and paying agent for such Bonds or Notes if cer tified by such former bond registrar/transfer agent and paying agent.

The Paying Agent shall use such list of holders of reco rd of the Issuer’s Bond or Note certificates as sufficient basis for its records and verification of Bond or Note certificates therein described.

Upon receiving written instructions from the Issuer and indemnity satisfactory to the Paying Agent and the Issuer, the Paying Agent may inscribe, authenticate and deliver, to the persons entitled thereto, new certificates in place of certificates represented to have been lost, stolen or destroyed and likewise may issue a new certificate in exchange for, and upon surrender of, an identifiable mutilated certificate.

Section 7. Payments of Interest and Principal. The Paying Agent shall act as paying agent for the Bonds or Notes and in such capacity it shall:

(i) with funds provided by Issuer, pay the interest upon the Bonds or Notes by mailing checks to the persons entitled to receive such interest, as determined by the registry of the Issuer maintained by the Paying Agent, provided that Issuer shall have deposited with the Paying Agent, on or before the day upon which interest checks are to be mailed, sufficient immediately available funds to cover payment of such interest;

(ii) with funds provided by Issuer, pay the principal amount (including premium, if any) of the Bonds or Notes to the registered holders of such Bonds or Notes, upon the maturity date or earlier redemption date upon which the principal is to become payable and upon delivery to the Paying Agent of a Bond Note certificate with respect to which such principal payment shall have become payable, provided that the Issuer shall have deposited with the Paying Agent, on or before the payment date, sufficient immediately available funds to pay the aggregate principal amount (including premium, if any) due on all Bonds or Notes so payable;

(iii) if a Bondholder or Noteholder shall report to the Paying Agent that any check so mailed for the payment of interest or principal has been lost and that the proceeds thereof, have not been received and if the check has not been paid then, upon provision of an indemnity satisfactory to the Paying Agent and the Issuer , stop payment upon such check, and issue and deliver to such Bondholder or Noteholder a new check for like amount; provided, however, that it may, at its discretion, defer the issuance of the new check for a reasonable period of time;

(iv) record the fact of payment and cancel Bonds or Notes surrendered to it for payment, coincident with such payment being made to the person thereto entitled; and

(v) have no liability for interest on, or inve sting, any funds received by it; any unclaimed funds remaining in the possession of the Paying Agent for payment of the Bonds or Notes will be escheated in accordance with applicab le law and the Paying Agent’s policies and procedures.

Section 8. Redemption Prior to Stated Maturity. If the Bonds or Notes are subject to redemption prior to their stated maturity date(s), the Paying Agent shall be governed by the redemption provisions set forth in the Authorization or as stated in the provisions as set forth on the bond/note form.

The Paying Agent shall not be required to transfer any Bond or Note, or portion thereof, that has been called for redemption. Payment of the principal amount (including premium, if any) of any Bond or Note, or portion thereof, called for redemption shall be made by check payable to the registered owner, only upon presentation of the Bond or Note, at the designated corporate trust office of the Paying Agent on or after the redemption date. Where the entire principal amount of the Bond or Note has not been called for redemption, a new Bond or Note of the same series, maturity and interest rate in the amount of the unredeemed portion will be issued to the registered holder or its assignee. Whether or not promptly submitted for redemption, interest on any Bond or No te, or portion thereof, called for redemption shall

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4 cease to accrue on and after the rede mption date provided th at sufficient moneys therefore are on deposit with the Paying Agent.

Section 9. Compensation; Indemnification. The Issuer agrees to pay the Paying Agent fees as set forth in Exhibit B attached hereto and made a part hereof, and, if applicable, to reimburse Paying Agent for its out-of-pocket expenses (including without lim itation attorneys; fees and expenses). The Issuer assumes full responsibility and, to the extent permitte d by law, will indemnify the Paying Agent and its officers, directors, agents and employees and save it and them harmless from and against any and all actions or suits, whether groundless or otherwise, an d from and against any and all losses, liabilities, costs and expenses (including attorneys’ fees and expenses) arising out of the agency relationship created by this Agreement, unless such losses, liabilities, costs and expe nses shall have been finally adjudicated to have resulted from the willful misconduct or negligence of the Paying Agent, and such indemnification shall survive the Paying Agent’s resignation or removal for any reason, or the termination of this Agreement.

Section 10. Instructions From the Issuer and Opinion From Counsel. At any time the Paying Agent may apply to any duly authorized representative of the Issuer for instructions, and shall have the right, but not the obligation, to consult with counsel of choice at the reasonable expense of the Issuer and shall not be liable for action taken or omitted to be take n either in accordance with such instruction or such advice of counsel, or in accordance with any opinion of counsel to the Issuer addressed to the Paying Agent.

Section 11. Concerning the Paying Agent. The Paying Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. The Paying Agent shall not be answerable for other than its negligence or willful misconduct. The Paying Agent shall have no responsibility for the form of inscription of ownership upon any Bond or Note certificate which has been made in accordance with directions of the Issuer, the Issuer’s underwriter, a broker or a holder of a Bond or Note. The Paying Agent shall be protected in acting upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Issuer. The Paying Agent shall also be protected in recognizing Bond or Note certificates which it reasonably believes to bear the proper manual or facsimile signatures on behalf of the Issuer. The Paying Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Paying Agent either in accordance with th e advice of such counsel or in accordance with any opinion of counsel to the Issuer addressed and delivered to the Paying Agent The Paying Agent shall not be under any obligation to prosecute any action or suit in respect of the agency relationship which, in its sole judgment, may involve it in expense or liability. In any action or suit the Is suer shall, as often as requested, reimburse the Paying Agent for any expense or liability growing out of such action or suit by or against the Paying Agent in its agen cy capacity; provided, however, that no such reimbursement shall be made for any expense or liability arising as a result of Paying Agent’s negligence or willful misconduct.

No provision of this Agreement shall require the Paying Agent to risk or expend its own funds.

The Paying Agent shall not be responsible or liable for any failure or delay in the performance of its obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; wars; terrorism; military disturbances; sabotage; epidemic; riots; interr uptions; loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that Paying Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances.

Anything in this Agreement to the contrary notwithstanding, in no event shall the Paying Agent be liable for special, punitive, indirect or consequential lo ss or damage of any kind whatsoever (including but not limited to lost profits), even if the Paying Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

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5 The Paying Agent shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and deliver ed using Electronic Means (“Electronic Means” means mean the following commun ications methods: e-mail, facsimile transmission, secure electronic transmission contai ning applicable authorization code s, passwords and/or authentication keys issued by the Paying Agent, or another method or system specified by the Paying Agent as available for use in connection with its services hereunder); provided, however, that the Issuer shall provide to the Paying Agent an incumbency certifi cate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Issuer whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Paying Agent Instructions using Electronic Means and the Paying Agent in its discretion elects to act upon such Instructions, the Paying Agent’s understanding of such Instructions shall be deemed controlling. The Issuer understands and agrees that the Paying Agent cannot determine the identity of the actual sender of such Instructions and that the Paying Agent shall conclusively presume that directions that purport to have been se nt by an Authorized Officer listed on the incumbency certificate provided to the Paying Ag ent have been sent by such Author ized Officer. The Issuer shall be responsible for ensuring that only Authorized Officer s transmit such Instructions to the Paying Agent and that the Issuer and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Issuer.

The Paying Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Paying Agent’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written inst ruction. The Issuer agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Paying Agent, including without limitation the risk of the Paying Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Paying Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Issuer; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions prov ide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Paying Agent immediately upon learning of any compromise or unauthorized use of the security procedures.

Any banking association or corporation into which the Paying Agent may be merged, converted or with which the Paying Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Paying Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Paying Agent shall be transferred, shall succeed to all the Paying Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of the parties hereto, anything herein to the contrary notwithstanding.

Section 12. Notices. Until changed by notice in writing, communications between the parties shall be delivered to:

If to Issuer:

City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Adminstrative Services Director

If to the Paying Agent:

U.S. Bank Trust Company National Association
633 West 5th Street, 24th Floor
Los Angeles, CA 90071
Attn: Corporate Trust

Section 13. Destruction of Instruments, Records and Papers. The Paying Agent may retain in its files records, instruments, and papers maintained by it in relation to its agency as long as the Paying

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6 Agent shall consider that such retention is necessa ry. The Paying Agent shall destroy or dispose of canceled Bonds or Notes in accordance with its customary procedur es, unless contrary instructions are received from the Issuer.

Section 14. Resignation or Removal of Paying Agent. Any time, other than on a day during the forty-five (45) day period preceding any payment date for Issuer’s Bonds or Notes, the Paying Agent may resign by giving at least forty-five (45) days’ prior written notice to Issuer; and the Paying Agent’s agency shall be terminated and its duties shall cease upon expiration of such forty-five (45) days or such lesser period of time as shall be mutually agreeable to Payi ng Agent and Issuer. At any time, following at least forty-five (45) days’ prior written notice (or such lesser period of time as shall be mutually agreeable to the Paying Agent and the Issuer) from the Issuer, the Paying Agent may be removed from its agency. Such removal shall become effective upon th e expiration of the forty-five (45) day or agreed lesser time period, and upon payment to the Paying Agent of all amounts payable to it in connection with its agency. In such event, the Paying Agent shall deliver to the Issuer, or to the Issuer’s designated representative, all Bonds or Notes and cash belonging to the Issuer and, at the Issu er’s expense, shall furnish to the Issuer, or to the Issuer’s designated representative, reasonably detailed information regarding the status of the Issuer’s outstanding Bonds or Notes and copies of other pertinent records then in the Paying Agent’s possession, reasonably requested by the Issuer.

Section 15. Effectiveness and Term. If the Bonds or Notes already are outstanding as of the date of the execution and delivery of this Agreement, this Agreement is effective as of the date hereof and shall continue until terminated as provided herein.

If the Bonds or Notes are to be newly issued, then this Agreement shall become effective as of the date that the Bonds or Notes are delivered to the or iginal purchaser(s) thereof, and shall continue until terminated. If said Bonds/Notes are not delivered to original purchaser(s), this Agreement shall be null, void and of no effect.

This Agreement shall remain in effect and the agency established by the Agreement shall continue until (i) terminated by mutual agreement of Issuer an d Paying Agent, (ii) the resignation or removal of Paying Agent pursuant to Section 14 hereof, or (iii) af ter all Bonds or Notes have been retired by payment or otherwise, or funds have been deposited for their retirement, and any remaining funds have either been returned to the Issuer or escheated in accordance with law.

Section 16. Conflicts Between Documents. In the event of any conflict between any provision of this Agreement and the Authorization, the terms of the Authorization shall govern.

Section 17. Jury Trial Waiver. Each party hereto hereby agrees not to elect a trial by jury of any issue triable of right by jury, and waives any right to trial by jury fully to the extent that any such right shall now or hereafter exist with regard to this Ag reement, or any claim, co unterclaim or other action arising in connection herewith. This waiver of right to trial by jury is given knowingly and voluntarily by each party, and is intended to enco mpass individually each instance and each issue as to which the right to a trial by jury would otherwise accrue.

Section 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

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7 IN WITNESS WHEREOF , the parties hereto have caused these presents to be signed by their duly authorized officers as of the date first above written.

CITY OF PALO ALTO

By
Name: Kiely Nose
Title: Administrative Services Director

U.S. BANK TRUST COMPANY

NATIONAL ASSOCIATION

By
Name: Mary Wong
Title: Vice President

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8 EXHIBIT A

DESCRIPTION OF BONDS OR NOTES

Resolution Number Name of Bonds
City of Palo Alto Refunding General Obligation
Bonds (Election of 2008), Series 2022A (Tax-
Exempt)
City of Palo Alto Refunding General Obligation
Bonds (Election of 2008), Series 2022B (Federally
Taxable)

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9 EXHIBIT B

FEE SCHEDULE

Registrar, Transfer Agent and Paying Agent
For Fully Registered Bond / Note Issues

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OFFICIAL NOTICE OF SALE
$_______________

CITY OF PALO ALTO
(Santa Clara County, California)

REFUNDING GENERAL OBLIGATION BONDS
(ELECTION OF 2008),
SERIES 2022A (TAX-EXEMPT)
NOTICE IS HEREBY GIVEN by the City of Palo Alto (the “City”), that bids will be received by a representative of t
he City for the purchase of $________* principal amount of bonds of the City designated the “City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022A (Tax-Exempt)” (the “Bonds”). Bids will be received in electronic form through BiDCOMP
TM/Parity® (“Parity”) on:
_____, 2022
starting at 8:30 a.m. and ending at 9:00 a.m. Pacific Time.

The City reserves the right to postpone or change the time or sale date upon notice delivered via Bloomberg News Service or Thomson Municipal Market Monitor (http://www.tm3.com).

The Bonds will be issue
d under the provisions of a resolution adopted by the City Council of the City on May 9, 2022 (the “Bond Resolution”), and under the laws of the State of California.

The Bonds are more particularly described in the proposed form of the Bond Resolution on file with the City (which is incorporated herein by reference) and copies thereof will be furnished to the bidder upon request.

The City is proposing to sell an additional series of bonds pursuant to a separate Notice of Sale at a different time, and those bonds will be designated the City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022B (Federally Taxable). The sale of the Bonds pursuant to this Notice of Sale is completely unrelated to the sale of such other bonds.

DESCRIPTION OF THE BONDS
PURPOSE: The proceeds of the Bonds will be applied by the City for the purpose of refunding outstanding general obligation bonds of the City in order to realize debt service savings for the benefit of the taxpayers of the City.

I
SSUE; BOOK-ENTRY FORM: The Bonds will be issued in the aggregate principal amount of _______________* in the form of fully registered Bonds without coupons. The Bonds will be dated as of as of their original delivery, and will be issued in minimum denominations of $5,000.

The Bonds will be issued in a book entry only system with no physical distribution of the Bonds made to the public. The Depository Trust Company, New York, New York (“DTC”), will act as depository for the Bonds which will be immobilized in its custody. The Bonds will be registered in  Preliminary, subject to change.

Exhibit 2a

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the name of Cede & Co., as nominee for DTC, on behalf of the participants in the DTC system and the subsequent beneficial owners of the Bonds.

MATURITIES: The Bonds will mature, or be subject to mandatory sinking fund redemption, on August 1 in each of the years, and in the amounts, as set forth in the following table. The final principal amount of the Bonds, and the final amount of each maturity of the Bonds, is subject to increase or reduction as described below under the heading “Adjustment of Principal Maturities”.

Each bidder must specify in its bid whether, for any particular year, the Bonds will mature or, alternately, be subject to mandatory sinking fund redemption in such year.

Maturity Date
(August 1)
Principal
Amount
Maturity Date
(August 1)
Principal
Amount

PAYMENT PROVISIONS: Interest on the Bonds will be payable on February 1, 2023, and on succeeding February 1 and August 1 (the “Interest Payment Dates”), to the registered owners by check or draft of The Bank of New York Mellon Trust Company, N.A., as paying agent (the “Paying Agent”) or, in the case of the owner of Bonds in an aggregate principal amount of at least $1,000,000, at the written request of such owner by wire transfer. Principal of and premium (if any) on any Bond will be paid upon presentation and surrender thereof at the office of the Paying Agent. Principal, interest and premium (if any) on the Bonds are payable in lawful money of the United States of America.

O
PTIONAL REDEMPTION: The Bonds maturing on or before August 1, _____, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after August 1, _____, are subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as designated by the City and by lot within a maturity, from any available source of funds, on August 1, _____, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.

S
INKING FUND REDEMPTION: Any bidder may, at its option, specify that one or more maturities of the Bonds will consist of term Bonds which are subject to mandatory sinking fund redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder. If the bid of the Purchaser (as defined below) specifies that any maturity of Bonds will be term Bonds, such term Bonds will be subject to mandatory sinking fund redemption on August 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading “MATURITIES”, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest to the redemption date, without premium.

S
ECURITY: The Bonds are general obligations of the City, and the City will direct the appropriate officials of Santa Clara County to levy ad valorem taxes for the payment of the Bonds

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and the interest thereon without limitation as to rate or amount for the payment of the Bonds and the interest thereon.

TAX-EXEMPT STATUS: In the opinion of Jones Hall, A Professional Law Corporation, bond counsel to the City (“Bond Counsel”), interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax. Bidders are referred to the Preliminary Official Statement for a description of the proposed opinion of Bond Counsel. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes.

If prior to the delivery of the Bonds either (a) the interest on other obligations of the same type and character shall be declared to be taxable (either at the time of such declaration or at any future date) under any federal income tax laws, either by the terms of such laws or by ruling of a federal income tax authority or official which is followed by the Internal Revenue Service, or by decision of any federal court, or (b) any federal income tax law is adopted which will have a substantial adverse effect upon owners of the Bonds as such, the Purchaser may, at its option, prior to the tender of the Bonds, be relieved of its obligation under the contract to purchase the Bonds, and in such case the deposit accompanying its proposal will be returned.

L
EGAL OPINION: The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, approving the validity of the Bonds, will be furnished to the purchaser of the Bonds without cost. A copy of the legal opinion, certified by the official in whose office the original is filed, will be printed on each Bond at the expense of the City.

F
URTHER INFORMATION: A copy of the Preliminary Official Statement describing the Bonds, and any other information concerning the proposed financing, will be furnished upon request to the municipal advisor to the City as follows (“Municipal Advisor”): PFM Financial Advisors LLC, 44 Montgomery Street, 3rd Floor, San Francisco, CA 94104, telephone: (415) 393-7245 (Nick Jones) or [email protected], website: www.pfm.com. The Official Notice of Sale and Preliminary Official Statement are available from the Municipal Advisor.

TERMS OF SALE

RIGHT TO CANCEL, POSTPONE OR RESCHEDULE SALE: The City reserves the right to cancel, postpone or reschedule the sale of the Bonds upon notice delivered via Bloomberg News Service or Thomson Municipal Market Monitor (www.tm3.com). If the sale is postponed, bids will be received at the above place at such date and hour as set forth in the notice. Failure of any bidder to receive such notice or any other form of notice of canceled, postponed or rescheduled sale will not affect the legality or validity of any sale.

S
UBMISSION OF BIDS: Bids will be received electronically as described below, provided that such electronic bid must be received no later than the date and time set for receipt of bids.

All bidders, by submitting a bid, acknowledge that they have an established industry reputation for underwriting new issuances of municipal bonds.

E
LECTRONIC BIDS: Solely as an accommodation to bidders, the City will accept bids in electronic form solely from Ipreo, a KKR portfolio company, through its BiDCOMP Competitive Bid Calculation System and Parity Electronic Bid Submission System (“Ipreo”). For information about Ipreo, bidders may contact Ipreo at 395 Hudson Street, New York, New York 10014,

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telephone: (212) 849-5023. If any provision of this Notice of Sale conflicts with information provided by Ipreo, this Notice of Sale shall control. Each bidder submitting an electronic bid understands and agrees by doing so that it is solely responsible for all arrangements with Ipreo, that the City does not encourage the use of Ipreo, and that Ipreo is not acting as an agent of the City. Instructions for submitting electronic bids must be obtained from Ipreo, and the City does not assume any responsibility for ensuring or verifying bidder compliance with Ipreo procedures.

Ipreo has advised the City that bidders must subscribe to Ipreo if such bidders intend to use Ipreo to submit bids. The City shall be entitled to assume that any bid received via Ipreo has been made by a duly authorized agent of the bidder.

Neither the City, the Municipal Advisor nor Bond Counsel has any responsibility for proper functioning of the Ipreo system, for any error contained in any bid submitted electronically, or for failure of any bid to be transmitted, received or opened at the official time for receipt of bids. The official time for receipt of bids will be determined by the City at the place of bid opening, and the City will not be required to accept the time kept by Parity as the official time. The City assumes no responsibility for informing any bidder prior to the deadline for receiving bids that its bid is incomplete, or not received.

F
ORM OF BID; PURCHASE PRICE: Each proposal must be for not less than all of the Bonds hereby offered for sale.

The City will accept par, discount or premium bids for the Bonds.

D
ESIGNATION OF INTEREST RATES: Each bidder must specify the rate or rates of interest which the Bonds will bear. The maximum rate bid on any Bonds may not exceed ______% per annum. A bidder will be permitted to bid different rates of interest for each maturity of Bonds, but:

 each interest rate specified must be in a multiple of 1/20% or 1/8%;

 no Bond may bear more than one rate of interest;

 interest on each Bond will be computed from the date of original delivery to its stated maturity at the interest rate specified in the proposal, payable on the Interest Payment Dates as set forth above; and

 all Bonds maturing at any one time will bear the same rate of interest.

D
ETERMINATION OF BEST BID: The Bonds will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Bonds. The true interest cost specified in any bid will be that rate which, when used in computing the present worth of all payments of principal and interest to be paid on all Bonds from the date of original delivery (which is assumed to be _____, 2022) to their respective maturity dates or mandatory sinking fund redemption dates, produces an amount equal to the purchase price specified in such bid. For purposes of computing the true interest cost represented by any proposal, the purchase price specified in such proposal shall be equal to the par amount of the Bonds plus any premium specified in such proposal, and the true interest cost shall be calculated by the use of a semiannual interval of compounding interest based on the Interest Payment Dates for the Bonds.

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If two or more bids setting forth identical interest rates and premium, if any, are received, such officer may exercise discretion and judgment in making the award and may award the Bonds on a pro rata basis in such denominations as he or she determines.

A
DJUSTMENT OF PRINCIPAL MATURITIES: In order to achieve the financial goals of the City, the City may need to adjust the schedule of principal maturities for the Bonds based on the bids that are received. Therefore, the City reserves the right to increase or decrease the principal amount of any maturity of the Bonds (or, in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking fund redemption on August 1 in any year). The aggregate principal amount of the Bonds may be reduced as a result of such adjustment, in an amount not exceeding 10% of the amount of Bonds hereby offered for sale. Notice of such increase or decrease shall be given to the winning bidder as soon as practicable following the notification of award, as described below. The City will attempt to maintain total underwriter compensation when adjusting maturities. No such adjustment will have the effect of altering the basis upon which the best bid is determined.

R
IGHT OF REJECTION: The City reserves the right, in its discretion, to reject any and all bids and to the extent not prohibited by law to waive any irregularity or informality in any bid.

PLACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY: It is expected that the Bonds will be delivered to DTC for the account of the winning bidder on ______, 2022. The winning bidder has the right, at the winning bidder’s option, to cancel the contract of purchase if the Bonds are not tendered for delivery within 60 days from the date of the sale thereof, and in such event the winning bidder shall be entitled to the return of the deposit accompanying its bid. In such event, the successful bidder will be entitled to the return of the deposit accompanying the bid (see “- GOOD FAITH DEPOSIT”).

PROCESS OF AWARD. The City will take final action awarding the Bonds or rejecting all bids not later than thirty (30) hours after the time for receipt of bids, unless such time period is extended by the City.

The following steps constitute the City’s process for a final award of the Bonds:

(1) The City’s municipal advisor, on behalf of the City, will give a verbal notice of award to the apparent winning bidder (the “Apparent Winning Bidder”) to be determined as described under “–DETERMINATION OF BEST BID” above.

(2) The Apparent Winning Bidder shall provide within one hour of verbal notice the initial reoffering prices and confirm that it is prepared to execute the Issue Price Certificate described under “ESTABLISHMENT OF ISSUE PRICE” below.

(3) The Apparent Winning Bidder shall provide the Good Faith Deposit by wire transfer, as described under “GOOD FAITH DEPOSIT.”

(4) The City’s municipal advisor will fax or email to the Apparent Winning Bidder confirmation of the final principal amortization schedule and purchase price for the Bonds, after adjustments, if any, are made, as described under “ ADJUSTMENT OF PRINCIPAL MATURITIES.”

(5) The City will fax or email to the Apparent Winning Bidder written confirmation of the final award.

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Upon completion of all the steps described above, the Apparent Winning Bidder will be deemed the Purchaser of the Bonds (the “Purchaser”) and will be bound by the terms of the contract to purchase the Bonds, which contract shall consist of: (a) this Official Notice of Sale; (b) the information that is transmitted electroni cally by the bidder through Parity®; and (c) any adjustments to the final principal amortization schedule and purchase price made as described under “ADJUSTMENT OF PRINCIPAL MATURITIES.”

G
OOD FAITH DEPOSIT: A good faith deposit in the amount of $________ for the Bonds (the “Good Faith Deposit”) must be provided by the Apparent Winning Bidder. The Good Faith Deposit must be submitted by wire transfer (as described below). The Bonds will not be officially awarded to a bidder who has not submitted a Good Faith Deposit.

Upon the determination by the City of the Apparent Winning Bidder (as described above under “PROCESS OF AWARD”), the City’s municipal advisor will request the Apparent Winning Bidder to (i) immediately wire the Good Faith Deposit to the Trustee, as described below, and (ii) provide, within ninety (90) minutes of such request, the Federal wire reference number of such Good Faith Deposit to the City’s municipal advisor by email ([email protected] or [email protected]). The wire transfer is to be made to U.S. Bank Trust Company National Association, using the following wire instructions:

Bank Name: U.S. Bank Trust Company National Association ABA No.: [_____]
A/C No.: [_____]
A/C Name: [_____]
Attention: [_____]

In the event that the Apparent Winning Bidder does not wire the Good Faith Deposit as required, or does not provide the Federal wire reference number confirming the wire-transfer of such deposit to the municipal advisor within the time specified above, the City may reject the bid of the Apparent Winning Bidder and may award the Bonds to a responsible bidder that submitted a conforming bid that represents the next lowest true interest cost to the City.

No interest will be paid upon a Good Faith Deposit made by an Apparent Winning Bidder.

Upon receipt of the Good Faith Deposit by the City, the Good Faith Deposit will immediately become the property of the City. The Good Faith Deposit will be held and invested for the exclusive benefit of the City. The Good Faith Deposit, without interest thereon, will be credited against the purchase price of the Bonds purchased by the Purchaser at the time of delivery thereof.

If the purchase price is not paid in full upon tender of the Bonds, the City shall retain the Good Faith Deposit and the Purchaser will have no right in or to the Bonds or to the recovery of its Good Faith Deposit, or to any allowance or credit by reason of such deposit, except pursuant to a right of cancellation. See “P
LACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY.” In the event of nonpayment of the purchase price for the Bonds by the Purchaser, the City reserves any and all rights granted by law to recover the full purchase price of the Bonds and, in addition, any damages suffered by the City.

P
AYMENT OF PURCHASE PRICE: The Purchaser, will be required to pay the purchase price of the Bonds (less the amount of the Good Faith Deposit described above) in funds that are

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immediately available to the City. Such payment shall be made on the date of original delivery of the Bonds to DTC.

STATEMENT OF TRUE INTEREST COST: Each bidder is requested, but not required, to state in its proposal the percentage true interest cost represented by its proposal, determined as described above, which will be considered as informative only and not binding on either the bidder or the City.

E
STABLISHMENT OF ISSUE PRICE: (a) The Purchaser shall assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at closing an “issue price” or similar certificate setting forth the reasonably expected initial offering price to the public of the Bonds, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit 1, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Purchaser, the City and Bond Counsel. All actions to be taken by the City under this Notice of Sale to establish the issue price of the Bonds may be taken on behalf of the City by the City’s municipal advisor identified herein and any notice or report to be provided to the City may be provided to the City’s municipal advisor.

(b) The City intends that the provisions of Treasury Regulation Section 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Bonds) will apply to the initial sale of the Bonds (the “competitive sale requirements”) because:

(1) the City shall disseminate this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters;

(2) all bidders shall have an equal opportunity to bid;

(3) the City may receive bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and

(4) the City anticipates awarding the sale of the Bonds to the bidder who submits a firm offer to purchase the Bonds at the highest price (or lowest interest cost), as set forth in this Notice of Sale.

Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. By submitting a bid for the Bonds, each bidder certifies that it has an established industry reputation for underwriting new issuances of municipal bonds . The City will not accept bids from firms without an established industry reputation for underwriting new issuances of municipal bonds.

(c) In the event the City receives less than three bids that conform to the parameters contained herein such that the competitive sale requirements are not satisfied, the City intends to treat the initial offering price of each maturity of the bonds set forth in the bid submitted by the winning bidder (the “initial offering price”) as the issue price of that maturity (the "hold-the-offering- price rule"). Consequently, each bidder should assume for purposes of making its bid that for each maturity of the Bonds, the City will treat the initial offering prices as of the date that the Bonds are awarded by the City to the successful bidder ("sale date") as the issue price of the Bonds. The City will advise the winning bidder within one hour of receipt of bids if the hold-the- offering-price rule will apply. In the event that the competitive sale requirements are not satisfied and issue price is established pursuant to the hold-the-offering-price rule, the issue price

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certificate shall be modified as necessary in the reasonable judgment of Bond Counsel and the City.

(d) By submitting a bid, the Purchaser shall, on behalf of the underwriters participating in the purchase of the Bonds, (i) confirm that the underwriters have offered or will offer each maturity of the Bonds to the public on or before the sale date at the initial offering price set forth in the bid submitted by the winning bidder, and (ii) agree that the underwriters will neither offer nor sell any maturity of the Bonds to any person at a price that is higher than the initial offering price for such maturity during the period starting on the sale date and ending on the earlier of the following:

(1) the close of the fifth business day after the sale date; or

(2) the date on which the underwriters have sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price for such maturity.

The Purchaser shall promptly advise the City when the underwriters have sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price if that occurs prior to the close of the fifth (5th) business day after the sale date.

(e) The City acknowledges that, in making the representation set forth above, the Purchaser will rely on (i) the agreement of each underwriter to comply with the hold-the-offering- price rule, as set forth in an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter is a party to a retail distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold-the-offering-price rule, as set forth in the retail distribution agreement and the related pricing wires. The City further acknowledges that each underwriter shall be solely liable for its failure to comply with its agreement regarding the hold-the-offering-price rule and that no underwriter shall be liable for the failure of any other underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement to comply with its corresponding agreement regarding the hold-the-offering-price rule as applicable to the Bonds.

(f) By submitting a bid, each bidder confirms that:

(1) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to

(A) report the prices at which it sells to the public the Bonds of each maturity allotted to it until it is notified by the successful bidder that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public and

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(B) comply with the hold-the-offering-price rule, if and for so long as directed by the successful bidder and in the related pricing wires, and

(2) any agreement among underwriters relating to the sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to

(A) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the successful bidder or such underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public and

(B) comply with the hold-the-offering-price rule, if and for so long as directed by the successful bidder or such underwriter and as set forth in the related pricing wires.

Sales of any Bonds to any person that is a related party to an underwriter shall not constitute sales to the public for purposes of this Official Notice of Sale.

(g) For purposes of this Official Notice of Sale:

(1) "public" means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an underwriter or a related party,

(2) "underwriter" means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public),

(3) a purchaser of any of the Bonds is a "related party" to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and

In addition, the City reserves the right to cancel the public sale of the Bonds if the City receives fewer than three bids that conform to the parameters contained herein such that the competitive sale requirements are not satisfied.

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NO LITIGATION: There is no litigation pending concerning the validity of the Bonds, the corporate existence of the City or the entitlement of the officers thereof to their respective offices, and the purchaser will be furnished a no-litigation certificate certifying to the foregoing as of and at the delivery of the Bonds.

CUSIP
NUMBERS: It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds nor any error with respect thereto will constitute cause for a failure or refusal by the purchaser to accept delivery of and pay for the Bonds in accordance with the terms hereof. All expenses in relation to the printing of CUSIP numbers on the Bonds will be paid for by the City, except that the CUSIP Service Bureau charge for the assignment of said numbers will be the re sponsibility of and shall be paid for by the purchaser.

C
ALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEES: All fees payable to the California Debt and Investment Advisory Commission in connection with the issuance of the Bonds are the sole responsibility of the purchaser of the Bonds.

O
FFICIAL STATEMENT: The City has approved a preliminary Official Statement relating to the Bonds. Copies of such preliminary Offici al Statement will be distributed to any bidder, upon request, prior to the sale in a form “deemed final” by the City for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Rule”). Within seven business days from the sale date, the City will deliver to the purchaser copies of the final Official Statement, executed by an authorized representative of the City and the City and dated the date of delivery thereof to the purchaser, in sufficient number to allow the purchaser to comply with paragraph (b)(4) of the Rule and to satisfy the Municipal Securities Rulemaking Board (the “MSRB”) Rule G-32 or any other rules adopted by the MSRB, which shall include information permitted to be omitted by paragraph (b)(1) of the Rule and such other amendments or supplements as are been approved by the City (the “Final Official Statement”). The purchaser agrees that it will not confirm the sale of any Bonds unless the confirmation of sale is accompanied or preceded by the delivery of a copy of the Final Official Statement. Upon request, the City will furnish to the winning bidder, at no charge, not in excess of 20 printed copies of the Official Statement for use in connection with any resale of the Bonds.

C
ERTIFICATE REGARDING OFFICIAL STATEMENT: A responsible officer of the City will certify to the original purchaser of the Bonds, as a condition of closing, that based on such officer’s participation in the preparation of the Official Statement, nothing has come to his or her attention to lead him or her to believe that the Official Statement (except for certain financial statements, statistical data and other information) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

C
ONTINUING DISCLOSURE. In order to assist bidders in complying with S.E.C. Rule 15c2- 12(b)(5), the City will execute and deliver a Continuing Disclosure Certificate, under which the City undertakes to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the preliminary Official Statement and will also be set forth in the final Official Statement. Such Continuing Disclosure Certificate will be a document required to be delivered at closing by the City, and the failure by the City to deliver such document in form and substance acceptable to Bond Counsel and the winning bidder will relieve the winning bidder of its obligation to purchase the Bonds.

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ACKNOWLEDGEMENT OF NO FIDUCIARY DUTY. The City acknowledges and agrees that (i) the purchase and sale of the Bonds is an arm’s-length commercial transaction between the City and the underwriter, (ii) in connection with such transaction, the underwriter is acting solely as a principal and not as an advisor, (including, without limitation, a Municipal Advisor (as such term is defined in Section 975(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act)), agent or a fiduciary of the City, (iii) the underwriter has not assumed (individually or collectively) a fiduciary responsibility in favor of the City with respect to the offering of the Bonds or the process leading thereto (whether or not the underwriter, or any affiliate of an underwriter, has advised or is currently advising the City on other matters) or any other obligation to the City except as described in this Notice of Sale, (iv) the underwriter has financial and other interests that differ from those of the City and (v) the City has consulted with its own legal and municipal advisors to the extent it deemed appropriate in connection with the offering of the Bonds.

GIVEN by order of the City Council of the City of Palo Alto by a resolution adopted on May 9, 2022.

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EXHIBIT 1
Issue Price Certificate

$__________________*

CITY OF PALO ALTO
REFUNDING GENERAL OBLIGATION BONDS (ELECTION OF 2008),
SERIES 2022A (TAX-EXEMPT)

The undersigned, on behalf of [ NAME OF UNDERWRITER ] ( “Underwriter”), hereby certifies as set forth below with respect to the sale of the above-captioned obligations (the “Bonds”).

1. Reasonably Expected Initial Offering Price.

(a) As of the Sale Date, the reasonably expected initial offering prices of the Bonds to the Public by Underwriter are the pr ices listed in Schedule A (the “Expected Offering Prices”). The Expected Offering Prices are the prices for the Maturities of the Bonds used by the Underwriter in formulating its bid to purchas e the Bonds. Attached as Schedule B is a true and correct copy of the bid provided by Underwriter to purchase the Bonds.

(b) Underwriter was not given the opportunity to review other bids prior to submitting its bid.

(c) The bid submitted by Underwriter constituted a firm offer to purchase the Bonds.

2. Defined Terms.

(a) Issuer means the City of Palo Alto.

(a) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate Maturities.
(b) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.

(c) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is ______, 2022.

(d) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).

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The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Underwriter’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Certificate of Arbitrage and with respect to compliance with the federal income tax rules affecting the Bonds, and by Jones Hall, A Professional Law Corporation in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. [UNDERWRITER]

By:______
______________________________
Name:_________________________________
Dated: [ISSUE DATE]

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SCHEDULE A

EXPECTED OFFERING PRICES

Maturity Date Principal Interest Reoffering
(August 1) Amount Rate Price *
$ % %

* Stated as a percentage of par.

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SCHEDULE B

COPY OF UNDERWRITER’S BID

(attached)

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1 OFFICIAL NOTICE OF SALE
$_______________

CITY OF PALO ALTO
(Santa Clara County, California)

REFUNDING GENERAL OBLIGATION BONDS
(ELECTION OF 2008),
SERIES 2022B (FEDERALLY TAXABLE)
NOTICE IS HEREBY GIVEN by the City of Palo Alto (the “City”), that bids will be received by a representative of t
he City for the purchase of $____________* principal amount of bonds of the City designated the “City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022B (Federally Taxable)” (the “Bonds”). Bids will be received in electronic form through BiDCOMP
TM/Parity® (“Parity”) on:
_____, 2022
starting at 9:30 a.m. and ending at 10:00 a.m. Pacific Time.

The City reserves the right to postpone or change the time or sale date upon notice delivered via Bloomberg News Service or Thomson Municipal Market Monitor (http://www.tm3.com).

The Bonds will be issued under the provision
s of a resolution adopted by the City Council
of the City on May 9, 2022 (the “Bond Resolution”), and under the laws of the State of California.

The Bonds are more particularly described in the proposed form of the Bond Resolution on file with the City (which is incorporated herein by reference) and copies thereof will be furnished to the bidder upon request.

The City is proposing to sell an additional series of bonds pursuant to a separate Notice of Sale at a different time, and those bonds will be designated the City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022A (Tax-Exempt). The sale of the Bonds pursuant to this Notice of Sale is completely unrelated to the sale of such other bonds.

DESCRIPTION OF THE BONDS
PURPOSE: The proceeds of the Bonds will be applied by the City for the purpose of refunding outstanding general obligation bonds of the City in order to realize debt service savings for the benefit of the taxpayers of the City.

I
SSUE; BOOK-ENTRY FORM: The Bonds will be issued in the aggregate principal amount of _______________* in the form of fully registered Bonds without coupons. The Bonds will be dated as of as of their original delivery, and will be issued in minimum denominations of $5,000.

The Bonds will be issued in a book entry only system with no physical distribution of the Bonds made to the public. The Depository Trust Company, New York, New York (“DTC”), will act as depository for the Bonds which will be immobilized in its custody. The Bonds will be registered in  Preliminary, subject to change.

Exhibit 2b

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2 the name of Cede & Co., as nominee for DTC, on behalf of the participants in the DTC system and the subsequent beneficial owners of the Bonds.

MATURITIES: The Bonds will mature, or be subject to mandatory sinking fund redemption, on August 1 in each of the years, and in the amounts, as set forth in the following table. The final principal amount of the Bonds, and the final amount of each maturity of the Bonds, is subject to increase or reduction as described below under the heading “Adjustment of Principal Maturities”.

Each bidder must specify in its bid whether, for any particular year, the Bonds will mature or, alternately, be subject to mandatory sinking fund redemption in such year.

Maturity Date
(August 1)
Principal
Amount
Maturity Date
(August 1)
Principal
Amount

PAYMENT PROVISIONS: Interest on the Bonds will be payable on February 1, 2023, and on succeeding February 1 and August 1 (the “Interest Payment Dates”), to the registered owners by check or draft of The Bank of New York Mellon Trust Company, N.A., as paying agent (the “Paying Agent”) or, in the case of the owner of Bonds in an aggregate principal amount of at least $1,000,000, at the written request of such owner by wire transfer. Principal of and premium (if any) on any Bond will be paid upon presentation and surrender thereof at the office of the Paying Agent. Principal, interest and premium (if any) on the Bonds are payable in lawful money of the United States of America.

O
PTIONAL REDEMPTION: The Bonds maturing on or before August 1, _____, are not subject to redemption prior to their respective stated maturities. The Bonds maturing on or after August 1, _____, are subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as designated by the City and by lot within a maturity, from any available source of funds, on August 1, _____, and on any date thereafter, at a redemption price equal to 100% of the principal amount of Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.

S
INKING FUND REDEMPTION: Any bidder may, at its option, specify that one or more maturities of the Bonds will consist of term Bonds which are subject to mandatory sinking fund redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder. If the bid of the Purchaser (as defined below) specifies that any maturity of Bonds will be term Bonds, such term Bonds will be subject to mandatory sinking fund redemption on August 1 in each year so designated in the bid, in the respective amounts for such years as set forth above under the heading “MATURITIES”, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest to the redemption date, without premium.

S
ECURITY: The Bonds are general obligations of the City, and the City will direct the appropriate officials of Santa Clara County to levy ad valorem taxes for the payment of the Bonds

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3 and the interest thereon without limitation as to rate or amount for the payment of the Bonds and the interest thereon.

FEDERALLY TAXABLE STATUS: In the opinion of Jones Hall, A Professional Law Corporation, bond counsel to the City (“Bond Counsel”), interest on the Bonds is not intended to be excluded from gross income for federal income tax purposes. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. Bidders are referred to the Preliminary Official Statement for a description of the proposed opinion of Bond Counsel.

L
EGAL OPINION: The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, approving the validity of the Bonds, will be furnished to the purchaser of the Bonds without cost. A copy of the legal opinion, certified by the official in whose office the original is filed, will be printed on each Bond at the expense of the City.

F
URTHER INFORMATION: A copy of the Preliminary Official Statement describing the Bonds, and any other information concerning the proposed financing, will be furnished upon request to the municipal advisor to the City as follows (“Municipal Advisor”): PFM Financial Advisors LLC, 44 Montgomery Street, 3rd Floor, San Francisco, CA 94104, telephone: (415) 393-7245 (Nick Jones) or [email protected], website: www.pfm.com. The Official Notice of Sale and Preliminary Official Statement are available from the Municipal Advisor.

TERMS OF SALE

RIGHT TO CANCEL, POSTPONE OR RESCHEDULE SALE: The City reserves the right to cancel, postpone or reschedule the sale of the Bonds upon notice delivered via Bloomberg News Service or Thomson Municipal Market Monitor (www.tm3.com). If the sale is postponed, bids will be received at the above place at such date and hour as set forth in the notice. Failure of any bidder to receive such notice or any other form of notice of canceled, postponed or rescheduled sale will not affect the legality or validity of any sale.

S
UBMISSION OF BIDS: Bids will be received electronically as described below, provided that such electronic bid must be received no later than the date and time set for receipt of bids.

All bidders, by submitting a bid, acknowledge that they have an established industry reputation for underwriting new issuances of municipal bonds.

E
LECTRONIC BIDS: Solely as an accommodation to bidders, the City will accept bids in electronic form solely from Ipreo, a KKR portfolio company, through its BiDCOMP Competitive Bid Calculation System and Parity Electronic Bid Submission System (“Ipreo”). For information about Ipreo, bidders may contact Ipreo at 395 Hudson Street, New York, New York 10014, telephone: (212) 849-5023. If any provision of this Notice of Sale conflicts with information provided by Ipreo, this Notice of Sale shall control. Each bidder submitting an electronic bid understands and agrees by doing so that it is solely responsible for all arrangements with Ipreo, that the City does not encourage the use of Ipreo, and that Ipreo is not acting as an agent of the City. Instructions for submitting electronic bids must be obtained from Ipreo, and the City does not assume any responsibility for ensuring or verifying bidder compliance with Ipreo procedures.

Ipreo has advised the City that bidders must subscribe to Ipreo if such bidders intend to use Ipreo to submit bids. The City shall be entitled to assume that any bid received via Ipreo has been made by a duly authorized agent of the bidder.

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4 Neither the City, the Municipal Advisor nor Bond Counsel has any responsibility for proper functioning of the Ipreo system, for any error contained in any bid submitted electronically, or for failure of any bid to be transmitted, received or opened at the official time for receipt of bids. The official time for receipt of bids will be determined by the City at the place of bid opening, and the City will not be required to accept the time kept by Parity as the official time. The City assumes no responsibility for informing any bidder prior to the deadline for receiving bids that its bid is incomplete, or not received.

F
ORM OF BID; PURCHASE PRICE: Each proposal must be for not less than all of the Bonds hereby offered for sale.

The City will accept par, discount or premium bids for the Bonds.

D
ESIGNATION OF INTEREST RATES: Each bidder must specify the rate or rates of interest which the Bonds will bear. The maximum rate bid on any Bonds may not exceed ______% per annum. A bidder will be permitted to bid different rates of interest for each maturity of Bonds, but:

 each interest rate specified must be in a multiple of 1/20% or 1/8%;

 no Bond may bear more than one rate of interest;

 interest on each Bond will be computed from the date of original delivery to its stated maturity at the interest rate specified in the proposal, payable on the Interest Payment Dates as set forth above; and

 all Bonds maturing at any one time will bear the same rate of interest.

D
ETERMINATION OF BEST BID: The Bonds will be awarded to the responsible bidder whose bid produces the lowest true interest cost on the Bonds. The true interest cost specified in any bid will be that rate which, when used in computing the present worth of all payments of principal and interest to be paid on all Bonds from the date of original delivery (which is assumed to be _____, 2022) to their respective maturity dates or mandatory sinking fund redemption dates, produces an amount equal to the purchase price specified in such bid. For purposes of computing the true interest cost represented by any proposal, the purchase price specified in such proposal shall be equal to the par amount of the Bonds plus any premium specified in such proposal, and the true interest cost shall be calculated by the use of a semiannual interval of compounding interest based on the Interest Payment Dates for the Bonds.

If two or more bids setting forth identical interest rates and premium, if any, are received, such officer may exercise discretion and judgment in making the award and may award the Bonds on a pro rata basis in such denominations as he or she determines.

A
DJUSTMENT OF PRINCIPAL MATURITIES: In order to achieve the financial goals of the City, the City may need to adjust the schedule of principal maturities for the Bonds based on the bids that are received. Therefore, the City reserves the right to increase or decrease the principal amount of any maturity of the Bonds (or, in the case of the term Bonds, the principal amount thereof which is subject to mandatory sinking fund redemption on August 1 in any year). The aggregate principal amount of the Bonds may be reduced as a result of such adjustment, in an amount not exceeding 10% of the amount of Bonds hereby offered for sale. Notice of such increase or decrease shall be given to the winning bidder as soon as practicable following the

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5 notification of award, as described below. The City will attempt to maintain total underwriter compensation when adjusting maturities. No such adjustment will have the effect of altering the basis upon which the best bid is determined.

R
IGHT OF REJECTION: The City reserves the right, in its discretion, to reject any and all bids and to the extent not prohibited by law to waive any irregularity or informality in any bid.

P
LACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY: It is expected that the Bonds will be delivered to DTC for the account of the winning bidder on ______, 2022. The winning bidder has the right, at the winning bidder’s option, to cancel the contract of purchase if the Bonds are not tendered for delivery within 60 days from the date of the sale thereof, and in such event the winning bidder shall be entitled to the return of the deposit accompanying its bid. In such event, the successful bidder will be entitled to the return of the deposit accompanying the bid (see “- GOOD FAITH DEPOSIT”).

PROCESS OF AWARD. The City will take final action awarding the Bonds or rejecting all bids not later than thirty (30) hours after the time for receipt of bids, unless such time period is extended by the City.

The following steps constitute the City’s process for a final award of the Bonds:

(1) The City’s municipal advisor, on behalf of the City, will give a verbal notice of award to the apparent winning bidder (the “Apparent Winning Bidder”) to be determined as described under “–DETERMINATION OF BEST BID” above.

(2) The Apparent Winning Bidder shall provide the Good Faith Deposit by wire transfer, as described under “GOOD FAITH DEPOSIT.”

(3) The City’s municipal advisor will fax or email to the Apparent Winning Bidder confirmation of the final principal amortization schedule and purchase price for the Bonds, after adjustments, if any, are made, as described under “ ADJUSTMENT OF PRINCIPAL MATURITIES.”

(4) The City will fax or email to the Apparent Winning Bidder written confirmation of the final award.

Upon completion of all the steps described above, the Apparent Winning Bidder will be deemed the Purchaser of the Bonds (the “Purchaser”) and will be bound by the terms of the contract to purchase the Bonds, which contract shall consist of: (a) this Official Notice of Sale; (b) the information that is transmitted electroni cally by the bidder through Parity®; and (c) any adjustments to the final principal amortization schedule and purchase price made as described under “ADJUSTMENT OF PRINCIPAL MATURITIES.”

G
OOD FAITH DEPOSIT: A good faith deposit in the amount of $________ for the Bonds (the “Good Faith Deposit”) must be provided by the Apparent Winning Bidder. The Good Faith Deposit must be submitted by wire transfer (as described below). The Bonds will not be officially awarded to a bidder who has not submitted a Good Faith Deposit.

Upon the determination by the City of the Apparent Winning Bidder (as described above under “PROCESS OF AWARD”), the City’s municipal advisor will request the Apparent Winning Bidder to (i) immediately wire the Good Faith Deposit to the Trustee, as described below, and (ii)

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6 provide, within ninety (90) minutes of such request, the Federal wire reference number of such Good Faith Deposit to the City’s municipal advisor by email ([email protected] or [email protected]). The wire transfer is to be made to U.S. Bank Trust Company National Association, using the following wire instructions:

Bank Name: U.S. Bank Trust Company National Association ABA No.: [_____]
A/C No.: [_____]
A/C Name: [_____]
Attention: [_____]

In the event that the Apparent Winning Bidder does not wire the Good Faith Deposit as required, or does not provide the Federal wire reference number confirming the wire-transfer of such deposit to the municipal advisor within the time specified above, the City may reject the bid of the Apparent Winning Bidder and may award the Bonds to a responsible bidder that submitted a conforming bid that represents the next lowest true interest cost to the City.

No interest will be paid upon a Good Faith Deposit made by an Apparent Winning Bidder.

Upon receipt of the Good Faith Deposit by the City, the Good Faith Deposit will immediately become the property of the City. The Good Faith Deposit will be held and invested for the exclusive benefit of the City. The Good Faith Deposit, without interest thereon, will be credited against the purchase price of the Bonds purchased by the Purchaser at the time of delivery thereof.

If the purchase price is not paid in full upon tender of the Bonds, the City shall retain the Good Faith Deposit and the Purchaser will have no right in or to the Bonds or to the recovery of its Good Faith Deposit, or to any allowance or credit by reason of such deposit, except pursuant to a right of cancellation. See “P
LACE OF DELIVERY; CANCELLATION FOR LATE DELIVERY.” In the event of nonpayment of the purchase price for the Bonds by the Purchaser, the City reserves any and all rights granted by law to recover the full purchase price of the Bonds and, in addition, any damages suffered by the City.

P
AYMENT OF PURCHASE PRICE: The Purchaser will be required to pay the purchase price of the Bonds (less the amount of the Good Faith Deposit described above) in funds that are immediately available to the City. Such payment shall be made on the date of original delivery of the Bonds to DTC.

S
TATEMENT OF TRUE INTEREST COST: Each bidder is requested, but not required, to state in its proposal the percentage true interest cost represented by its proposal, determined as described above, which will be considered as informative only and not binding on either the bidder or the City.

N
O LITIGATION: There is no litigation pending concerning the validity of the Bonds, the corporate existence of the City or the entitlement of the officers thereof to their respective offices, and the purchaser will be furnished a no-litigation certificate certifying to the foregoing as of and at the delivery of the Bonds.

CUSIP
NUMBERS: It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds nor any error with respect thereto will constitute cause for a failure or refusal by the purchaser to accept delivery of and pay for the Bonds in accordance with the terms hereof. All expenses in relation to the printing of CUSIP

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7 numbers on the Bonds will be paid for by the City, except that the CUSIP Service Bureau charge for the assignment of said numbers will be the re sponsibility of and shall be paid for by the purchaser.

C
ALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEES: All fees payable to the California Debt and Investment Advisory Commission in connection with the issuance of the Bonds are the sole responsibility of the purchaser of the Bonds.

O
FFICIAL STATEMENT: The City has approved a preliminary Official Statement relating to the Bonds. Copies of such preliminary Offici al Statement will be distributed to any bidder, upon request, prior to the sale in a form “deemed final” by the City for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Rule”). Within seven business days from the sale date, the City will deliver to the purchaser copies of the final Official Statement, executed by an authorized representative of the City and the City and dated the date of delivery thereof to the purchaser, in sufficient number to allow the purchaser to comply with paragraph (b)(4) of the Rule and to satisfy the Municipal Securities Rulemaking Board (the “MSRB”) Rule G-32 or any other rules adopted by the MSRB, which shall include information permitted to be omitted by paragraph (b)(1) of the Rule and such other amendments or supplements as are been approved by the City (the “Final Official Statement”). The purchaser agrees that it will not confirm the sale of any Bonds unless the confirmation of sale is accompanied or preceded by the delivery of a copy of the Final Official Statement. Upon request, the City will furnish to the winning bidder, at no charge, not in excess of 20 printed copies of the Official Statement for use in connection with any resale of the Bonds.

C
ERTIFICATE REGARDING OFFICIAL STATEMENT: A responsible officer of the City will certify to the original purchaser of the Bonds, as a condition of closing, that based on such officer’s participation in the preparation of the Official Statement, nothing has come to his or her attention to lead him or her to believe that the Official Statement (except for certain financial statements, statistical data and other information) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

C
ONTINUING DISCLOSURE. In order to assist bidders in complying with S.E.C. Rule 15c2- 12(b)(5), the City will execute and deliver a Continuing Disclosure Certificate, under which the City undertakes to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the preliminary Official Statement and will also be set forth in the final Official Statement. Such Continuing Disclosure Certificate will be a document required to be delivered at closing by the City, and the failure by the City to deliver such document in form and substance acceptable to Bond Counsel and the winning bidder will relieve the winning bidder of its obligation to purchase the Bonds.

A
CKNOWLEDGEMENT OF NO FIDUCIARY DUTY. The City acknowledges and agrees that (i) the purchase and sale of the Bonds is an arm’s-length commercial transaction between the City and the underwriter, (ii) in connection with such transaction, the underwriter is acting solely as a principal and not as an advisor, (including, without limitation, a Municipal Advisor (as such term is defined in Section 975(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act)), agent or a fiduciary of the City, (iii) the underwriter has not assumed (individually or collectively) a fiduciary responsibility in favor of the City with respect to the offering of the Bonds or the process leading thereto (whether or not the underwriter, or any affiliate of an underwriter, has advised or is currently advising the City on other matters) or any other obligation to the City except as described in this Notice of Sale, (iv) the underwriter has financial and other interests

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8 that differ from those of the City and (v) the City has consulted with its own legal and municipal advisors to the extent it deemed appropriate in connection with the offering of the Bonds.

GIVEN by order of the City Council of the City of Palo Alto by a resolution adopted on May 9, 2022.

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This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

PRELIMINARY OFFICIAL STATEMENT DATED MAY 5, 2022
TWO NEW ISSUES— FULL BOOK-ENTRY RATING:

Standard & Poor’s: “___”
See “RATING” herein.

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to ce rtain qualifications described herein, under existing law, the interest on the 2022A Bonds is excluded from gross income for federa l income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2022B Bonds is not excludable from gross income of the owners thereof for federal income tax purposes. In the further opinion of Bond Counsel, interest on the 2022 Bonds is exempt from California personal income taxes. See “TAX MATTERS.”
$___________*

CITY OF PALO ALTO
(Santa Clara County, California)
Refunding General Obligation
Bonds (Election of 2008),
Series 2022A
(Tax-Exempt)
$___________*

CITY OF PALO ALTO
(Santa Clara County, California)
Refunding General Obligation
Bonds (Election of 2008),
Series 2022B
(Federally Taxable)
Dated: Date of Delivery Due: August 1, as shown on inside cover Authority for Issuance. The City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022A (Tax-Exempt) (the “2022A Bonds”) , and the City of Palo Alto Refunding General Obligation Refunding Bonds (Election of 2008), Series 2022B (Federally Taxable) (the “2022B Bonds” and, with the 2022A Bonds, the “ 2022 Bonds”) are being issued by the City of Palo Alto, California (the “City”) under provisions of the California Government Code and under a Resolution adopted by the City Council of the City (the “City Council”) on April 18, 2022 (the “Bond Resolution”). See “THE 2022 BONDS— Authority for Issuance” herein Purpose. The 2022A Bonds are being issued to refund, (a) on a current basis, the City’s outstanding City of Palo Alto General Obligation Bonds, Election of 2008, Series 2010A (the “2010 Bonds”) , and (b) on an advance basis, the callable portion of the City’s outstanding City of Palo Alto General Obligation Bonds, Election of 2008, Series 2013A (the “2013 Bonds” and, with the 2010 Bonds, the “Prior Bonds”). The Prior Bonds were issued to finance projects approved by the voters of the City in 2008. See “REFUNDING PLAN” herein.

Security. The 2022 Bonds are general obligations of the City, and the City Council of the City has the power to direct Santa Clara County (the “County”) to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount, for the payment of the 2022 Bonds and the interest thereon. Under the Bond Resolution, the City directs the County to levy on all the taxable property in the City, in addition to all other taxes, a continuing dir ect and ad valorem tax annually during the period the 2022 Bonds are outstanding in an amount sufficient to pay the principal of and interest on the 2022 Bonds when due, without limitation of rate or amount (except certain personal property which is taxable at limited rates). See “SECURITY FOR THE 2022 BONDS” herein.

Book-Entry Only. The 2022 Bonds will be issued in book -entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The 2022 Bonds are issuable as fully registered securities in denom inations of $5,000 or any integral multiple of $5,000.

Purchasers of the 2022 Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interest in the 2022 Bonds. See “THE 2022 BONDS” herein and APPENDIX F— DTC AND THE BOOK-ENTRY ONLY SYSTEM.

Payments. Interest on the 2022 Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing August 1, 2022.

Payments of principal and interest on the 2022 Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., as paying agent, to DTC for subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the 2022 Bonds. See “THE 2022 BONDS— Description of the 2022 Bonds.” Redemption. The 2022 Bonds are subject to optional and sinking fund redemption prior to maturity. See “THE 2022 BONDS— Redemption” herein.

Municipal Advisor. Public Financial Management, San Francisco, California, serving as municipal advisor to the City, has structured this issue.

MATURITY SCHEDULE
(See inside cover)
Bids for the purchase of the 2022A Bonds will be received by the City on Tuesday, May 17, 2022, electronically only, through the I-Deal LLC BiDCOMP/PARITY® system, until 8:30 A.M., Pacific Daylight time. The 2022A Bonds will be sold pursuant to the terms of sale set forth in the Official Notice of Sale for the 2022A Bonds, dated May 10, 2022.

Bids for the purchase of the 2022B Bonds will be received by the City on Tuesday, May 17, 2022, electronically only, through the I-Deal LLC BiDCOMP/PARITY® system, until 9:30 A.M., Pacific Daylight time. The 2022B Bonds will be sold pursuant to the terms of sale set forth in the Official Notice of Sale for the 2022B Bonds, dated May 10, 2022.

Cover Page. This cover page contains certain information for general reference only. It is not a summary of all the provisions of the 2022 Bonds. Prospective investors must read the entire Official Statement to obtain information essential to making an informed investment decision.

The 2022 Bonds are offered when, as and if issued and received by the purchasers thereof, and subject to the approval as to their legalit y by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed upon for the City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel. Certain legal matters will be passed upon for the City by the City Attorney. It is anticipated that the 2022 Bonds will be delivered in book -entry form through the facilities of DTC on or about June 16, 2022.

The date of this Official Statement is __________, 2022. *Preliminary, subject to change.

Exhibit 312.f
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$___________* CITY OF PALO ALTO (Santa Clara County, California) Refunding General Obligation Bonds (Election of 2008), Series 2022A (Tax-Exempt) MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND PRICES CUSIP† Prefix ______ Maturity Principal Interest CUSIP† (August 1) Amount Rate Yield Price Suffix $___________* CITY OF PALO ALTO (Santa Clara County, California) Refunding General Obligation Bonds (Election of 2008), Series 2022B (Federally Taxable) MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND PRICES CUSIP† Prefix ______ Maturity Principal Interest CUSIP† (August 1) Amount Rate Yield Price Suffix *Preliminary, subject to change. †Copyright 2022, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by S&P Capital IQ. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the registered owners of the Bonds. Neither the District nor the Underwriter is responsible for the selection or uses of these CUSIP numbers and no representation is made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the delivery of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

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For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended (“Rule 15c2-12”), this Preliminary Official Statement constitutes an “official statement” of the City with respect to the 2022 Bonds that has been deemed “final” by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-12. Use of Official Statement. This Official Statement is submitted in connection with the sale of the 2022 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the City or the purchasers indicated in this Official Statement. This Official Statement should be considered in its entirety. Where statutes, ordinances, reports or other documents are referenced in this Official statement, reference should be made to those documents and those sources for complete information regarding the subject matter. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the City or the Purchasers to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Purchasers. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the 2022 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. Certain of the information set forth in this Official Statement has been furnished by sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Document Summaries. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The 2022 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The 2022 Bonds have not been registered or qualified under the securities laws of any state. Estimates and Projections. When used in this Official Statement and in any continuing disclosure by the City, in any press release and in any oral statement made with the approval of an authorized officer of the City, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. IN CONNECTION WITH THIS OFFERING, THE PURCHASERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2022 BONDS AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE PURCHASERS MAY OFFER AND SELL THE 2022 BONDS TO CERTAIN SECURITIES DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE PURCHASERS. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2022 Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, the County, the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement. Website. The City maintains a website. Unless specifically indicated otherwise, the information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the 2022 Bonds.

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CITY OF PALO ALTO LOCATION MAP

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TABLE OF CONTENTS INTRODUCTION .......................................................................... 1 The City ....................................................................................... 1 Purpose of the Issuance of the 2022 Bonds .................................. 2 Authority for Issuance .................................................................. 2 Security and Sources of Payment for the 2022 Bonds .................. 2 Description of the 2022 Bonds ..................................................... 2 Redemption .................................................................................. 3 Tax Matters .................................................................................. 3 Offering and Delivery ................................................................... 3 Continuing Disclosure .................................................................. 3 Professionals Involved in the Bond Offering ................................ 3 Other Information ........................................................................ 4 THE 2022 BONDS .......................................................................... 5 Authority for Issuance .................................................................. 5 Purposes of Issuance .................................................................... 5 Description of the 2022 Bonds ..................................................... 5 Payment ....................................................................................... 5 Redemption .................................................................................. 6 Registration, Transfer and Exchange of Bonds ............................ 7 Defeasance ................................................................................... 8 ESTIMATED SOURCES AND USES OF FUNDS ....................... 8 REFUNDING PLAN ....................................................................... 9 DEBT SERVICE SCHEDULES .................................................... 11 SECURITY FOR THE 2022 BONDS ........................................... 11 Ad Valorem Taxes ..................................................................... 11 Debt Service Fund ..................................................................... 12 Statutory Lien ............................................................................ 12 PAYING AGENT .......................................................................... 13 BOOK-ENTRY ONLY SYSTEM ................................................. 13 THE CITY ..................................................................................... 13 PROPERTY TAXATION ............................................................. 14 Property Taxation Generally ...................................................... 14 Property Tax Collection Procedures .......................................... 14 Taxation of State-Assessed Utility Property .............................. 15 Assessed Valuation ..................................................................... 15 Bonding Capacity ....................................................................... 24 CERTAIN RISK FACTORS ......................................................... 24 Risks to Assessed Values Generally ........................................... 24 Natural Calamities ..................................................................... 24 Risk of Changing Economic Conditions ..................................... 26 Public Health Emergencies ........................................................ 26 Bankruptcy Risks ........................................................................ 26 Cybersecurity Risks .................................................................... 27 Article XIIIA of the State Constitution ...................................... 27 Legislation Implementing Article XIIIA ..................................... 28 Article XIIIB of the State Constitution ...................................... 29 Articles XIIIC and XIIID of the State Constitution ................... 29 Proposition 62 ............................................................................ 30 Proposition 1A; Proposition 22 .................................................. 31 Proposition 19 ............................................................................ 31 Possible Future Initiatives .......................................................... 31 LEGAL MATTERS ....................................................................... 32 Possible Limitations on Remedies; Bankruptcy ......................... 32 Legal Opinions ........................................................................... 33 TAX MATTERS ........................................................................... 34 2022A Bonds .............................................................................. 34 2022B Bonds .............................................................................. 35 Other Tax Considerations .......................................................... 35 MUNICIPAL ADVISOR ............................................................... 36 CONTINUING DISCLOSURE .................................................... 36 LEGALITY FOR INVESTMENT IN CALIFORNIA .................. 36 ABSENCE OF MATERIAL LITIGATION .................................. 37 RATING ........................................................................................ 37 UNDERWRITING ........................................................................ 37 ADDITIONAL INFORMATION ................................................. 37 EXECUTION ................................................................................ 38 APPENDIX A: GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY APPENDIX B: CITY FINANCIAL INFORMATION APPENDIX C: ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021 APPENDIX D: CITY INVESTMENT POLICY APPENDIX E: FORM OF OPINION OF BOND COUNSEL APPENDIX F: FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX G: BOOK-ENTRY SYSTEM

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CITY OF PALO ALTO 250 Hamilton Avenue Palo Alto, California 94301 http://www.cityofpaloalto.org CITY COUNCIL MEMBERS Patrick Burt, Mayor Lydia Kou, Vice Mayor Alison Cormack, Councilmember Tom DuBois, Councilmember Eric Filseth, Councilmember Greer Stone, Councilmember Greg Tanaka, Councilmember CITY OFFICIALS Edward K. Shikada, City Manager Kiely Nose, Acting Assistant City Manager/Chief Financial Officer/Administrative Services Director Meghan Horrigan-Taylor, Chief Communications Officer David Ramberg, Assistant Director of Administrative Services Brad Eggleston, Director of Public Works Tarun Narayan, Manager of Treasury, Debt & Investments Molly S. Stump, Esq., City Attorney Lesley Milton, City Clerk SPECIAL SERVICES Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Disclosure Counsel Quint & Thimmig LLP Larkspur, California Financial Advisor PFM Financial Advisors LLC San Francisco, California Paying Agent and Escrow Bank U.S. Bank Trust, National Association San Francisco, California VERIFICATION AGENT __________ ________, _______ *Information therein is not incorporated by reference into this Official Statement.

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$___________* CITY OF PALO ALTO Refunding General Obligation Bonds (Election of 2008), Series 2022A (Tax-Exempt) $___________* CITY OF PALO ALTO Refunding General Obligation Bonds (Election of 2008), Series 2022B (Federally Taxable) INTRODUCTION This Official Statement, which includes the cover page and the appendices hereto, provides information in connection with the sale of the $_______* City of Palo Alto Refunding General Obligation Bonds (Election of 2008), Series 2022A (the “2022A Bonds”) and the $_________* City of Palo Alto Refunding General Obligation Refunding Bonds (Election of 2008), Series 2022B (Federally Taxable) (the “2022B Bonds” and, with the 2022A Bonds, the “2022 Bonds”). This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and the appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the 2022 Bonds to potential investors is made only by means of the entire Official Statement. The City The City of Palo Alto (the “City”) is located in northern Santa Clara County (the “County”), approximately 35 miles south of the city of San Francisco. The City is part of the San Francisco Bay metropolitan area, and was incorporated in 1894. The City’s first Charter was granted by the State in 1909 and the City continues to operate as a charter city. Located between the cities of San Francisco and San Jose, the City is a largely built-out community. The City covers an area of twenty-six square miles and has dedicated almost one-half of the area to open spaces of parks and wildlife preserves. Public facilities include five libraries, four community centers, a cultural arts center, an adult and children’s theater, a junior museum and zoo, and a golf course. The City is located adjacent to Stanford University, one of the premier institutions of higher education in the nation. The City shares its borders with East Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford, Portola Valley, and Menlo Park. The City’s current population is approximately 68,000. The City is a charter city and is governed by a city council of seven representatives (the “City Council”). City Council members are elected city-wide on an at-large basis for staggered four-year terms. At the first meeting of each calendar year, Council elects a Mayor and Vice-Mayor from its membership, with the Mayor having the duty of presiding over Council meetings. Council is the appointing authority for * Preliminary, subject to change.

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the positions of City Manager and three other officials, the City Attorney, City Clerk, and City Auditor, all of whom report to Council. For more complete information concerning the City, including certain financial information, see “THE CITY,” APPENDIX A—GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY and APPENDIX B—CITY FINANCIAL INFORMATION. The City’s audited financial statements for the fiscal year ended June 30, 2021, are included as APPENDIX C— ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021. Purpose of the Issuance of the 2022 Bonds The 2022A Bonds are being issued to refund, (a) on a current basis, the City’s outstanding City of Palo Alto General Obligation Bonds, Election of 2008, Series 2010A (the “2010 Bonds”), and (b) on an advance basis, the portion of the City’s outstanding City of Palo Alto General Obligation Bonds, Election of 2008, Series 2013A, maturing on and after August 1, 2024 (the “2013 Bonds” and, with the 2010 Bonds, the “Prior Bonds”). The Prior Bonds were issued to finance project approved by the voters of the City in 2008. See “THE 2022 BONDS” and “REFUNDING PLAN.” The Prior Bonds were authorized at an election of the registered voters of the City held on November 4, 2008, at which more than two-thirds of the persons voting on the measure voted to authorize the issuance and sale of not to exceed $76,000,000 principal amount of general obligation bonds. Authority for Issuance The 2022 Bonds are being issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the “Bond Law”) and a resolution adopted by the City Council on May 2, 2022 (the “Bond Resolution”). Security and Sources of Payment for the 2022 Bonds The 2022 Bonds are general obligations of the City, and the City Council has the power to direct the County to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount, for the payment of the 2022 Bonds and the interest thereon. Under the Bond Resolution, the City directs the County to levy on all the taxable property in the City, in addition to all other taxes, a continuing direct and ad valorem tax annually during the period the 2022 Bonds are Outstanding in an amount sufficient to pay the principal of and interest on the 2022 Bonds when due, without limitation of rate or amount (except certain personal property which is taxable at limited rates). See “SECURITY FOR THE 2022 BONDS.” Description of the 2022 Bonds The 2022 Bonds are being issued as current interest bonds. The 2022 Bonds will be dated as of their date of delivery, will be issued as fully registered bonds, without coupons, in the denominations of $5,000 principal amount or any integral multiple thereof. Interest on the 2022 Bonds accrues from their date of delivery and is payable semiannually on each February 1 and August 1 (each an “Interest Payment Date”), commencing August 1, 2022.

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The 2022 Bonds will be issued in fully registered form only, registered in the name of Cede & Co. as nominee of The Depository Trust Company (“DTC”), and will be available to actual purchasers of the 2022 Bonds (the “Beneficial Owners”) in the denominations set forth on the cover page hereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the 2022 Bonds. See “BOOK-ENTRY ONLY SYSTEM” and APPENDIX G—BOOK-ENTRY SYSTEM. In event that the book-entry system described below is no longer used with respect to the 2022 Bonds, the 2022 Bonds will be registered in accordance with the Resolution as described herein. See “THE 2022 BONDS—Registration, Transfer and Exchange of Bonds.” Individual purchases of interests in the 2022 Bonds will be available to purchasers of the 2022 Bonds in the denominations of $5,000 principal amount or any integral multiple thereof. Redemption Certain of the 2022 Bonds are subject to optional and sinking fund redemption prior to maturity. See “THE 2022 BONDS—Redemption.” Tax Matters Assuming compliance with certain covenants and provisions of the Internal Revenue Code of 1986, in the opinion of Bond Counsel, interest on the 2022A Bonds will be excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2022B Bonds is not excludable from gross income of the owners thereof for federal income tax purposes. Also, in the opinion of Bond Counsel, interest on the 2022 Bonds will be exempt from State of California (the “State”) personal income taxes. See “LEGAL MATTERS—Tax Matters” Offering and Delivery The 2022 Bonds are offered when, as and if issued and received by the purchasers, subject to approval as to their legality by Bond Counsel. It is anticipated that the 2022 Bonds will be available for delivery through the facilities of DTC on or about June 16, 2022. Continuing Disclosure The City has covenanted for the benefit of the holders and Beneficial Owners of the 2022 Bonds to make available certain financial information and operating data relating to the City and to provide notices of the occurrence of certain enumerated events in compliance with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be made available and of the notices of enumerated events is summarized below under the caption “CONTINUING DISCLOSURE.” Also, see APPENDIX F—FORM OF CONTINUING DISCLOSURE CERTIFICATE. Professionals Involved in the Bond Offering Several professional firms have provided services to the City with respect to the sale and delivery of the 2022 Bonds. Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, will deliver its legal opinion in substantially the forms set forth in APPENDIX E—FORM OF OPINION OF BOND COUNSEL. Quint & Thimmig LLP, Larkspur, California, is serving as disclosure counsel to the City with respect to the 2022 Bonds (“Disclosure Counsel”). PFM Financial Advisors LLC, San Francisco, California, will act as municipal advisor to the City with respect to the 2022 Bonds. The payment

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of fees and expenses of such firms with respect to the 2022 Bonds is contingent on the sale and delivery of the 2022 Bonds. The City’s financial statements for the fiscal year ended June 30, 2021, have been audited by CliftonLarsonAllen LLP, Glendora, California. See APPENDIX C— ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021. The purchasers of the 2022 Bonds are not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information in this Official Statement. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the 2022 Bonds are available for inspection at the office of the City Clerk, City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301, telephone (650) 329-2571. The City may impose a charge for copying, mailing and handling. This Official Statement is not to be construed as a contract with the purchasers of the 2022 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive and are qualified in their entireties by reference to each of such documents, statutes and constitutional provisions. The information set forth herein has been obtained from official sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the City. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof. This Official Statement is submitted in connection with the sale of the 2022 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Exchange Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” or other similar words. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. All terms used in this Official Statement and not otherwise defined shall have the meanings given such terms in the Resolution.

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THE 2022 BONDS Authority for Issuance The 2022 Bonds are issued pursuant to the Bond Law and the Bond Resolution. Purposes of Issuance The 2022A Bonds are being issued to refund, (a) on a current basis, the 2010 Bonds, and (b) on an advance basis, the callable portion of the 2013 Bonds. The Prior Bonds were issued to finance project approved by the voters of the City in 2008. See “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.” Description of the 2022 Bonds The 2022 Bonds will be issued in book-entry form only and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Beneficial Owners will not receive physical certificates representing their interests in the 2022 Bonds. See “BOOK-ENTRY ONLY SYSTEM” and APPENDIX G—BOOK-ENTRY SYSTEM. Interest on the 2022 Bonds accrues from their date of issuance and is payable semiannually on each Interest Payment Date. Interest on the 2022 Bonds accrues on the basis of a 360-day year comprised of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the month next preceding any Interest Payment Date to that Interest Payment Date, inclusive, in which event it will bear interest from such Interest Payment Date, or unless it is authenticated on or before July 15, 2022, in which event it will bear interest from its date of delivery. The 2022 Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The 2022 Bonds mature on the dates, in the years and amounts set forth on the inside cover page hereof. The principal of and interest on the 2022 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check or draft of the Paying Agent mailed by first-class mail to the Owner at the Owner’s address as it appears on the registration books maintained by the Paying Agent as of the close of business on the fifteenth day of the month next preceding such interest payment date (the “Record Date”), or at such other address as the Owner may have filed with the Paying Agent for that purpose; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the United States of America to any Owner of the 2022 Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Paying Agent at least five (5) days before the applicable Record Date. See also “Book Entry Only System” below. See the maturity schedule on the cover page hereof and “Debt Service Schedule.” Payment The redemption price, if any, on the 2022 Bonds will be payable upon maturity or redemption upon surrender of such Bonds at the principal office of the Paying Agent. The interest, principal and redemption price, if any, on the 2022 Bonds will be payable in lawful money of the United States of America. The Paying Agent is authorized to pay the 2022 Bonds when duly presented for payment at maturity, and to cancel all

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Bonds upon payment thereof. The 2022 Bonds are general obligations of the City and do not constitute obligations of the County. No parts of any fund of the County are pledged or obligated to the payment of the 2022 Bonds. Redemption Optional Redemption. 2022A Bonds. The 2022A Bonds maturing on and prior to August 1, ____, are not callable for redemption prior to their stated maturity date. The 2022A Bonds maturing on and after August 1, ____, are callable for redemption prior to their stated maturity date at the option of the City, in whole or in part on any date on or after August 1, ____, from any source lawfully available therefor, at a redemption price equal to the principal amount of the 2022A Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium. 2022B Bonds. The 2022B Bonds maturing on and prior to August 1, ____, are not callable for redemption prior to their stated maturity date. The 2022B Bonds maturing on and after August 1, ____, are callable for redemption prior to their stated maturity date at the option of the City, in whole or in part on any date on or after August 1, ____, from any source lawfully available therefor, at a redemption price equal to the principal amount of the 2022B Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium. Sinking Fund Redemption. 2022A Bonds. The 2022A Bonds maturing on August 1, ____ (the “2022A Term Bonds”), are also subject to redemption prior to maturity from mandatory sinking fund payments in part by lot on August 1, ____, and on each August 1 thereafter, to and including August 1, ____, at a redemption price equal to the principal amount thereof, without premium, in the aggregate respective amounts and on the respective dates as set forth in the following table. Sinking Account Redemption Date Principal Amount (August 1) to be Redeemed †Maturity If any 2022A Term Bonds are redeemed pursuant to optional redemption, the total amount of all future sinking fund payments with respect to such 2022A Term Bonds shall be reduced by the aggregate principal amount of such 2022A Term Bonds so redeemed, to be allocated among such

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payments on a pro rata basis in integral multiples of $5,000 principal amount (or on such other basis as the City may determine) as set forth in written notice given by the City to the Paying Agent. 2022A Bonds. The 2022A Bonds maturing on August 1, ____ (the “2022A Term Bonds”), are also subject to redemption prior to maturity from mandatory sinking fund payments in part by lot on August 1, ____, and on each August 1 thereafter, to and including August 1, ____, at a redemption price equal to the principal amount thereof, without premium, in the aggregate respective amounts and on the respective dates as set forth in the following table. Sinking Account Redemption Date Principal Amount (August 1) to be Redeemed †Maturity If any 2022B Term Bonds are redeemed pursuant to optional redemption, the total amount of all future sinking fund payments with respect to such 2022B Term Bonds shall be reduced by the aggregate principal amount of such 2022B Term Bonds so redeemed, to be allocated among such payments on a pro rata basis in integral multiples of $5,000 principal amount (or on such other basis as the City may determine) as set forth in written notice given by the City to the Paying Agent. Registration, Transfer and Exchange of Bonds If the book-entry system as described above and in APPENDIX G—BOOK-ENTRY SYSTEM is no longer used with respect to the 2022 Bonds, the following provisions will govern the registration, transfer, and exchange of the 2022 Bonds. The Paying Agent will keep or cause to be kept sufficient books for the ownership and registration of transfer of the 2022 Bonds (the “Registration Books”), which will at all times be open to inspection by the City upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the 2022 Bonds. Any Refunding Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Refunding Bond for cancellation at the principal office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. The City may charge a reasonable sum for each new Refunding Bond issued upon any transfer.

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Whenever any Bond or Bonds are surrendered for transfer, the City will execute and the Paying Agent will authenticate and deliver a new Refunding Bond or Refunding Bonds, for like aggregate principal amount. Refunding Bonds may be exchanged at the principal office of the Paying Agent for a like aggregate principal amount of Refunding Bonds of authorized denominations and of the same maturity. The City may charge a reasonable sum for each new Bond issued upon any exchange. Defeasance The City has the option to pay and discharge the entire indebtedness on all or any portion of the outstanding Refunding Bonds in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest on such Refunding Bonds, as and when the same become due and payable; (b) by irrevocably depositing, in trust, at or before maturity, (i) money in an amount equal to the principal amount of such Refunding Bonds and all unpaid interest thereon to maturity or (ii) Federal Securities, the principal of and interest on which when due, in the opinion of a certified public accountant delivered to the City, will provide money sufficient to pay the principal of and all unpaid interest to maturity on the 2022 Bonds to be paid, as such principal and interest become due; or (c) by delivery such Refunding Bonds to the Paying Agent for cancellation by it. “Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds in connection with the 2022 Bonds are as follows: Sources of Funds: 2022A Bonds 2022B Bonds Total Principal Amount of 2022 Bonds Total Sources of Funds Uses of Funds: Refunding of 2010 Bonds Refunding of 2013 Bonds Costs of Issuance (1) Total Uses of Funds (1) Includes the underwriters’ discounts, the fees of the municipal advisor, bond counsel, disclosure counsel, the rating agency

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and other third-party providers. Any excess in the Costs of Issuance Fund will be transferred to the City’s Debt Service Fund. REFUNDING PLAN Refunding of the 2010 Bonds. A portion of the proceeds of the 2022A Bonds will be deposited into an escrow fund (the “2010 Escrow Fund”) created by U.S. Bank Trust Company, National Association, as escrow agent (the “Escrow Bank”), pursuant to Irrevocable Refunding Instructions given to the Escrow Bank by the City. Amounts deposited in the 2010 Escrow Fund will be held by the Escrow Bank in cash, uninvested. The cash in the 2010 Escrow Fund will be applied to redeem the 2010 Bonds on June 23, 2022, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to such date. ______________ (the “Verification Agent”), will verify that the cash in the 2010 Escrow Fund will be sufficient for the purposes described above. See “VERIFICATION OF MATHEMATICAL COMPUTATIONS.” The 2010 Bonds to be refunded are as follows: Issue Maturity Interest Redemption Principal Redemption CUSIP† Date Date Rate Date Amount Price Number 6/30/10 8/1/22 4.500% 6/16/22 $ 1,450,000 100.000 697362 TG6 6/30/10 8/1/23 4.500 6/16/22 1,515,000 100.000 697362 TH4 6/30/10 8/1/24 4.500 6/16/22 1,585,000 100.000 697362 TJ0 6/30/10 8/1/25 4.500 6/16/22 1,655,000 100.000 697362 TK7 6/30/10 8/1/26 5.000 6/16/22 1,730,000 100.000 697362 TL5 6/30/10 8/1/27 5.000 6/16/22 1,820,000 100.000 697362 TM3 6/30/10 8/1/28 5.000 6/16/22 1,910,000 100.000 697362 TN1 6/30/10 8/1/29 5.000 6/16/22 2,005,000 100.000 697362 TP6 6/30/10 8/1/32 4.375 6/16/22 6,595,000 100.000 697362 TQ4 6/30/10 8/1/34 4.375 6/16/22 4,890,000 100.000 697362 TR5 6/30/10 8/1/40 5.000 6/16/22 15,415,000 100.000 697362 TS0 A portion of the proceeds of the 2022A Bonds will be retained by the Paying Agent in a costs of issuance account (the “2022A Costs of Issuance Account”) and used to pay costs associated with the issuance of the 2022A Bonds. Any proceeds of sale of the 2022A Bonds not needed to redeem the 2010 Bonds or to pay costs of issuance of the 2022A Bonds will be held by the Paying Agent in the Debt Service Fund to be used only for payment of principal of and interest on the 2022A Bonds when due. Refunding of the 2013 Bonds. A portion of the proceeds of the 2022B Bonds will be deposited into an escrow fund (the “2013 Escrow Fund”) established under an escrow agreement (the “2013 Escrow Agreement”) by and between the City and the Escrow Bank. A portion of the amounts deposit in the 2013 Escrow Fund will be invested in direct obligations of the United States of America (the “Escrowed Securities”). The maturing Escrowed Securities, the investment earnings thereon and the cash in the 2013 Escrow Fund will be applied to (1) pay interest on the 2013 Bonds to and including August 1, 2023, and to redeem the 2013 Bonds maturing on and after August 1, 2024, on August 1, 2023, at a redemption price equal to 100% of the principal amount thereof. † Copyright 2021, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services.

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The Verification Agent will verify that the maturing Escrowed Securities, the investment earnings thereon and the cash in the Escrow Fund will be sufficient for the purposes described above. See “VERIFICATION OF MATHEMATICAL COMPUTATIONS.” The 2013 Bonds to be refunded are as follows: Issue Maturity Interest Redemption Principal Redemption CUSIP† Date Date Rate Date Amount Price Number 6/26/13 8/1/24 5.000% 8/1/23 $ 525,000 100.000 697362 UH2 6/26/13 8/1/25 5.000 8/1/23 555,000 100.000 697362 UJ8 6/26/13 8/1/26 5.000 8/1/23 585,000 100.000 697362 UK5 6/26/13 8/1/27 5.000 8/1/23 610,000 100.000 697362 UL3 6/26/13 8/1/28 5.000 8/1/23 645,000 100.000 697362 UM1 6/26/13 8/1/29 3.500 8/1/23 670,000 100.000 697362 UN9 6/26/13 8/1/30 4.000 8/1/23 695,000 100.000 697362 UP4 6/26/13 8/1/31 4.000 8/1/23 725,000 100.000 697362 UQ2 6/26/13 8/1/33 4.000 8/1/23 1,540,000 100.000 697362 UR0 6/26/13 8/1/35 4.000 8/1/23 1,670,000 100.000 697362 US8 6/26/13 8/1/38 4.000 8/1/23 2,765,000 100.000 697362 UT6 6/26/13 8/1/41 4.000 8/1/23 2,590,000 100.000 697362 UU3 A portion of the proceeds of the 2022B Bonds will be retained by the Paying Agent in a costs of issuance account (the “2022B Costs of Issuance Account”) and used to pay costs associated with the issuance of the 2022B Bonds. Any proceeds of sale of the 20022B Bonds not needed to redeem the 2013 Bonds or to pay costs of issuance of the 2022B Bonds will be held by the Paying Agent in the Debt Service Fund to be used only for payment of principal of and interest on the 2022B Bonds when due. † Copyright 2021, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services.

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DEBT SERVICE SCHEDULES The following table shows the debt service schedule with respect to the 2022 Bonds (assuming no optional redemptions). Bond Year Ending 2022A Bonds 2022B Bonds August 1 Principal* Interest(1) Total Principal* Interest(1) Total Total 2022 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Total *Preliminary, subject to change. (1) Interest on the 2022 Bonds is payable semiannually on each February 1 and August 1, commencing August 1, 2022. SECURITY FOR THE 2022 BONDS Ad Valorem Taxes Bonds Payable from Ad Valorem Property Taxes. The 2022 Bonds are general obligations of the City, and the City Council has the power to direct the County to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount, for the payment of the 2022 Bonds and the interest thereon. Under the Bond Resolution, the City directs the County to levy on all the taxable property in the City, in addition to all other taxes, a continuing direct and ad valorem tax annually during the period the 2022 Bonds are Outstanding in an amount sufficient to pay the principal of and interest on the 2022 Bonds when due, without limitation of rate or amount (except certain personal property which is taxable at limited rates). Levy and Collection. The City has covenanted to direct the County to levy such ad valorem taxes in such amounts and at such times as is necessary to ensure the timely payment of debt service. Such taxes,

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when collected, will be deposited into a debt service fund for the 2022 Bonds, which is maintained by the City and which is irrevocably pledged for the payment of principal of and interest on the 2022 Bonds when due. See “–Debt Service Fund” below. Property taxes within the City are assessed and collected by the County in the same manner and at the same time, and in the same installments as other ad valorem taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency, as do the other ad valorem taxes on real property. The City has elected not to participate in the County Teeter Plan. See “PROPERTY TAXATION – Tax Levies and Delinquencies.” Annual Tax Rates. The amount of the annual ad valorem tax levied by the County, as directed by the City, to repay the 2022 Bonds will be determined by the relationship between the assessed valuation of taxable property in the City and the amount of debt service due on the 2022 Bonds. Fluctuations in the annual debt service on the 2022 Bonds and the assessed value of taxable property in the City may cause the annual tax rate to fluctuate. Natural, economic and other factors both within and out of the City’s control, such as economic recession, deflation of land values, a relocation out of the City or financial difficulty or bankruptcy by one or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood or other natural disaster, could cause a reduction in the assessed value within the City and necessitate a corresponding increase in the annual tax rate. For additional discussion, see “CERTAIN RISK FACTORS” below. Debt Service Fund The City will establish the Debt Service Fund (the “Debt Service Fund”), which will be established as a separate fund to be maintained distinct from all other funds of the City. All taxes levied by the County, as directed by the City, pursuant to the Refunding Bond Resolution for the payment of the principal of and interest and premium (if any) on the 2022 Bonds will be deposited in the Debt Service Fund held by the City promptly upon the receipt by the City from the County. The Debt Service Fund is pledged for the payment of the principal of and interest and premium (if any) on the 2022 Bonds when and as the same become due. The City will transfer amounts in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the 2022 Bonds as the same become due and payable, to the Paying Agent as required to pay the principal of and interest and premium (if any) on the 2022 Bonds. If, after payment in full of the 2022 Bonds, any amounts remain on deposit in the Debt Service Fund, the City shall transfer such amounts to its General Fund, to be applied solely in a manner which is consistent with the requirements of applicable state and federal tax law. Statutory Lien In accordance with Section 53515 of the California Government Code, the 2022 Bonds are secured by a statutory lien on all revenues received pursuant to the levy and collection of the ad valorem tax. This lien automatically arises without the need for any action or authorization by the City or the City Council, and shall be valid and binding from the time the 2022 Bonds are executed and delivered. The revenues received pursuant to the levy and collection of the ad valorem tax shall be immediately subject to the lien, and the lien shall immediately attach to the revenues and be effective, binding, and enforceable against the

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City, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any physical delivery, recordation, filing, or further act. PAYING AGENT U.S. Bank Trust Company, National Association will act as the transfer agent, bond registrar, authenticating agent and paying agent for the 2022 Bonds (the “Paying Agent”). As long as DTC is the registered owner of the 2022 Bonds and DTC’s book-entry method is used for the 2022 Bonds, the Paying Agent will send any notice of redemption or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the redemption of the 2022 Bonds called for redemption or of any other action premised on such notice. The Paying Agent, the City, the County and the Underwriters (as hereinafter defined) have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests for the 2022 Bonds. BOOK-ENTRY ONLY SYSTEM The Depository Trust Company, New York, New York, will act as securities depository for the 2022 Bonds. The 2022 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. See APPENDIX G—BOOK-ENTRY SYSTEM. THE CITY The City is located approximately 35 miles south of the City of San Francisco. The City was incorporated in 1894. Its first Charter was granted by the State in 1909 and the City continues to operate as a charter city. Located between the cities of San Francisco and San Jose, the City is a largely built-out community. The City covers an area of twenty-six square miles and has dedicated almost one-half of the area to open spaces of parks and wildlife preserves. The City’s public facilities include five libraries, four community centers, a cultural arts center, an adult and children’s theater, a junior museum and zoo, and a golf course. The City shares its borders with East Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford, Portola Valley, and Menlo Park. The City’s current population is approximately 68,000. Stanford University covers a 700-acre area in the City, and the City is home to high-tech leaders such as SAP America, Varian Medical Systems, VMware, Tibco Software, the Electric Power Research Institute, Communications and Power Industries and Skype. The City is also a major employment center, including U.S. Department of Veterans Affairs, Palo Alto Health Care System, Stanford Hospitals and Clinics, Lockheed Martin Missiles and Space, Palo Alto Medical Foundation, Stanford Shopping Center, the law offices of Wilson Sonsini Goodrich and Rosati, and the Xerox Palo Alto Research Center. The City is a charter city and is governed by a City Council of seven representatives. City Council members are elected city-wide on an at-large basis for staggered four-year terms. At the first meeting of each

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calendar year, Council elects a Mayor and Vice-Mayor from its membership, with the Mayor having the duty of presiding over Council meetings. Council is the appointing authority for the positions of City Manager and three other officials, the City Attorney, City Clerk, and City Auditor, all of whom report to Council. Members of the Council and key administrative personnel of the City are listed at the front of this Official Statement. For more complete information concerning the City, including certain financial information, see APPENDIX A—GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY and APPENDIX B—CITY FINANCIAL INFORMATION. The City’s audited financial statements for the fiscal year ended June 30, 2021, are included as APPENDIX C—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021. PROPERTY TAXATION The information in this section describes ad valorem property taxation, assessed valuation, and other measures of the tax base of the City. The 2022 Bonds are payable solely from ad valorem taxes levied and collected by the County on taxable property in the City. The City’s General Fund is not a source for the repayment of the 2022 Bonds. Property Taxation Generally The City levies property taxes for general operating purposes as well as the payment of voter-approved general obligation bonds. Taxes levied to pay debt service for general obligation bonds may only be applied for that purpose. In general, if overall assessed values of taxable property in the City were to decline, then the City, in order to generate sufficient tax revenues to pay debt service on the 2022 Bonds ,would increase tax rates applicable to the 2022 Bonds. Property Tax Collection Procedures In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The “secured roll” is that part of the assessment roll containing state assessed public utilities’ property and property, the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. Property taxes on the secured roll are due in two installments, on November 1 and August 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax defaulted on or about June 30 of the fiscal year. Such property may

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thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County. Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB813 provided increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date and result in increased assessed value. Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes for the amount of taxes which are delinquent. Taxation of State-Assessed Utility Property The State Constitution provides that most classes of property owned or used by regulated utilities be assessed by the State Board of Equalization (“SBE”) and taxed locally. Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as “unitary property,” a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and “operating nonunitary” property (which excludes nonunitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special County-wide rates and tax proceeds are distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year. Assessed Valuation Assessed Valuation. The assessed valuation of property in the City is established by the County Assessor, except for public utility property which is assessed by the SBE. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution. Certain classes of property, such as churches, colleges, not-for-profit hospitals and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions. Property taxes allocated to the City are collected by the County at the same time and on the same tax rolls as are county and special district taxes. The valuation of secured

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property by the County Assessor is established as of January 1 and is subsequently equalized in September of each year. Future assessed valuation growth allowed under Article XIIIA of the State Constitution (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year. Assessed Valuation History. The table below shows the assessed valuation of taxable property in the City for the most recent fiscal years. TABLE 1 CITY OF PALO ALTO HISTORIC ASSESSED VALUATIONS Total Assessed % Fiscal Year Local Secured Utility Unsecured Valuation Change 2011-12 $20,967,297,668 $2,572,716 $1,516,837,280 $22,486,707,664 n/a 2012-13 22,334,464,145 2,572,716 1,355,969,707 23,693,006,568 5.36% 2013-14 24,039,563,713 2,572,716 1,493,921,967 25,536,058,396 7.78 2014-15 25,572,917,948 2,572,716 1,622,636,368 27,198,127,032 6.51 2015-16 27,618,260,149 2,572,716 1,794,920,762 29,415,753,627 8.15 2016-17 30,148,340,720 2,572,716 1,803,467,979 31,954,381,415 8.63 2017-18 32,509,995,986 2,572,716 1,922,170,300 34,434,739,002 7.76 2018-19 34,891,627,511 7,004,400 1,902,781,228 36,801,413,139 6.87 2019-20 37,331,775,663 7,004,400 1,946,679,944 39,285,460,007 6.75 2020-21 40,152,306,303 7,004,400 2,194,615,259 42,353,925,962 7.81 2021-22 41,743,865,568 7,004,400 2,232,482,077 43,983,352,045 3.85 Source: California Municipal Statistics, Inc. Assessments may be adjusted during the course of the year when real property changes ownership or new construction is completed. Assessments may also be appealed by taxpayers seeking a reduction as a result of economic and other factors beyond the City’s control, such as a general market decline in property values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc. When necessitated by changes in assessed value in the course of a year, taxes are pro-rated for each portion of the tax year. Appeals of Assessed Valuation; Blanket Reductions of Assessed Values. There are two basic types of property tax assessment appeals provided for under State law. The first type of appeal, commonly referred to as a base year assessment appeal, involves a dispute on the valuation assigned by the assessor immediately subsequent to an instance of a change in ownership or completion of new construction. If the base year value assigned by the assessor is reduced, the valuation of the property cannot increase in subsequent years more than 2% annually unless and until another change in ownership and/or additional new construction activity occurs.

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The second type of appeal, commonly referred to as a Proposition 8 appeal (which Proposition 8 was approved by the voters in 1978), can result if factors occur causing a decline in the market value of the property to a level below the property’s then current taxable value (escalated base year value). Pursuant to State law, a property owner may apply for a Proposition 8 reduction of the property tax assessment for such owner’s property by filing a written application, in the form prescribed by the SBE, with the appropriate county board of equalization or assessment appeals board. A property owner desiring a Proposition 8 reduction of the assessed value of such owner’s property in any one year must apply to the county assessment appeals board (the “Appeals Board”). Following a review of the application by the county assessor’s office, the county assessor may offer to the property owner the opportunity to stipulate to a reduced assessment or may confirm the assessment. If no stipulation is agreed to, and the applicant elects to pursue the appeal, the matter is brought before the Appeals Board (or, in some cases, a hearing examiner) for a hearing and decision. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level (escalated to the inflation rate of no more than 2%) following the year for which the reduction application is filed. However, the county assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year and any intervening years as well. In practice, such a reduced assessment may and often does remain in effect beyond the year in which it is granted. In addition to the above-described taxpayer appeals, county assessors may independently reduce assessed valuations based on changes in the market value of property, or for other factors such as the complete or partial destruction of taxable property caused by natural or man-made disasters such as earthquakes, floods, fire, drought or toxic contamination pursuant to relevant provisions of the State Constitution. In addition, Article XIIIA of the State Constitution provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year or may be reduced to reflect a reduction in the consumer price index or comparable local data. This measure is computed on a calendar year basis. The City typically experiences increases in assessment appeals activity during economic downturns and decreases in assessment appeals as the economy rebounds. Risk of Decline in Property Values; Fire; Earthquake Risk. Property values could be reduced by factors beyond the City’s control, including fire, earthquake and a depressed real estate market due to general economic conditions in the County, the region and the State. Other possible causes for a reduction in assessed values include the complete or partial destruction of taxable property caused by other natural or manmade disasters, such as flood, fire, drought, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes). No assurance can be given that property tax appeals and/or blanket reductions of assessed property values will not significantly reduce the assessed valuation of property within the City in the future. For additional discussion, see “CERTAIN RISK FACTORS.”

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Assessed Valuation by Land Use. The following table gives a distribution of taxable real property located in the City by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use. TABLE 2 CITY OF PALO ALTO ASSESSED VALUATION AND PARCELS BY LAND USE FY2021-22 Assessed % of No. of % of Valuation (1) Total Parcels Total Non-Residential: Agricultural/Forest $ 38,144,744 0.09% 49 .23% Commercial 2,311,401,779 5.54 460 2.19 Professional/Office 6,546,290,199 15.68 562 2.68 Industrial/Research & Development 2,339,223,961 5.60 230 1.10 Recreational 68,559,232 0.16 14 .07 Government/Social/Institutional 40,361,772 0.10 119 .57 Miscellaneous 8,441,040 0.02 19 .09 Subtotal Non-Residential 11,352,422,727 27.20 1,453 6.93 Residential: Single Family Residence 24,897,037,849 59.64 15,188 72.40 Condominium/Townhouse 2,900,176,661 6.95 3,156 15.05 Mobile Home 120,444 0.00 8 .04 2-4 Residential Units 603,513,001 1.45 497 2.37 5+ Residential Units/Apartments 1,773,572,738 4.25 346 1.65 Subtotal Residential 30,174,420,693 72.28 19,195 91.50 Vacant Parcels 217,022,148 0.52 329 1.57 Total $41,743,865,568 100.00% 20,9727 100.00% Source: California Municipal Statistics, Inc. (1) Total secured assessed valuation, excluding tax-exempt property.

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Assessed Valuation of Single-Family Homes. The following table focuses on single-family residential properties only, which comprise approximately 72.4% of the assessed value of taxable property in the City. TABLE 3 CITY OF PALO ALTO PER PARCEL - ASSESSED VALUATION OF SINGLE-FAMILY HOMES Average Median No. of FY2021-22 Assessed Assessed Parcels Assessed Valuation Valuation Valuation Single Family Residential 15,115 $ 24,897,037,849 $ 1,647,174 $ 1,166,660 FY2021-22 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total $0 - $199,999 2,271 15.025% 15.025% $ 276,277,479 1.110% 1.110% $200,000 - $399,999 1,336 8.839 23.864 394,435,821 1.584 2.694 $400,000 - $599,999 1,096 7.251 31.115 550,350,000 2.211 4.904 $600,000 - $799,999 1,102 7.291 38.406 767,133,798 3.081 7.986 $800,000 - $999,999 935 6.186 44.591 843,257,652 3.387 11.373 $1,000,000 - $1,199,999 981 6.490 51.082 1,075,650,158 4.320 15.693 $1,200,000 - $1,399,999 767 5.074 56.156 992,045,086 3.985 19.678 $1,400,000 - $1,599,999 752 4.975 61.131 1,124,935,157 4.518 24.196 $1,600,000 - $1,799,999 696 4.605 65.736 1,182,734,029 4.751 28.946 $1,800,000 - $1,999,999 574 3.798 69.534 1,090,034,969 4.378 33.325 $2,000,000 - $2,199,999 509 3.368 72.901 1,065,876,882 4.281 37.606 $2,200,000 - $2,399,999 459 3.037 75.938 1,054,350,224 4.235 41.841 $2,400,000 - $2,599,999 472 3.123 79.061 1,177,587,290 4.730 46.570 $2,600,000 - $2,799,999 476 3.149 82.210 1,284,583,642 5.160 51.730 $2,800,000 - $2,999,999 380 2.514 84.724 1,101,428,927 4.424 56.154 $3,000,000 - $3,199,999 341 2.256 86.980 1,054,947,701 4.237 60.391 $3,200,000 - $3,399,999 284 1.879 88.859 936,318,727 3.761 64.152 $3,400,000 - $3,599,999 211 1.396 90.255 737,732,583 2.963 67.115 $3,600,000 - $3,799,999 188 1.244 91.499 694,817,993 2.791 69.906 $3,800,000 - $3,999,999 168 1.111 92.610 654,847,649 2.630 72.536 $4,000,000 and greater 1,117 7.390 100.000 6,837,692,082 27.464 100.000 Total 15,115 100.000% $24,897,037,849 100.000% Source: California Municipal Statistics, Inc. (1) Improved single-family residential parcels. Excludes condominiums and parcels with multiple family units. Principal Taxpayers. In general, the more property (by assessed value) owned by any single assessee, the more exposure property tax collections have to weakness in that taxpayer’s financial situation and ability or that taxpayer’s willingness to pay property taxes. Based on Fiscal Year 2021-22 locally assessed taxable valuations, the top twenty taxable property owners in the City represent approximately 21.0% of the total Fiscal Year 2021-22 taxable value.

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The following table shows the 20 largest owners of taxable property in the City as determined by secured assessed valuation in Fiscal Year 2021-22. TABLE 4 CITY OF PALO ALTO LARGEST LOCAL SECURED PROPERTY TAXPAYERS FY2021-22 Assessed % of Property Owner Primary Land Use Valuation Total(1) 1. Board of Trustees Leland Stanford Jr. University Various Land Uses $6,650,707,376(2) 15.93% 2. Google Inc. Industrial/Office 324,307,837 0.78 3. ARE-San Francisco 80 LLC Industrial 294,014,758 0.70 4. ARE-San Francisco 69 LLC Office Building 142,960,280 0.34 5. 395 Page Mill LLC Office Building 124,357,864 0.30 6. SVF Sherman Palo Alto Corporation Office Building 120,500,000 0.29 7. Hohbach Realty Co. LP Apartments 111,535,894 0.27 8. KRE El Camino Real Owner LLC Office Building 103,600,000 0.25 9. PA Hotel Holdings LLC Hotel 92,275,077 0.22 10. 530 Lytton Owner LLC Office Building 91,500,000 0.22 11. Palo Alto Tech Center LLC Office Building 86,018,514 0.21 12. Gwin Property Inc. Office Building 82,559,560 0.20 13. SI 45 LLC Office Building 80,735,316 0.19 14. BVK Hamilton Ave. LLC Office Building 76,934,719 0.18 15. M10 Dev LLC Hotel 70,455,423 0.17 16. Ronald & Ann Williams Shopping Center 69,600,610 0.17 17. GPCA Owner LLC Apartments 68,429,235 0.16 18. PPC Forest Towers LLC Apartments 62,839,402 0.15 19. 130 Lytton Owner LLC Office Building 60,022,946 0.14 20. 2747 Park PA LLC Office Building 57,675,001 0.14 Total Top 20 $8,771,029,812 21.01% Source: California Municipal Statistics, Inc. (1) FY2021-22 Local Secured Assessed Valuation: $41,743,865,568. (2) Net taxable value. Tax Levies and Delinquencies. Beginning in 1978-79, Article XIIIA and its implementing legislation shifted the function of property taxation primarily to the counties, except for levies to support prior-voted debt, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.

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The following table sets forth the secured tax charges and delinquencies for the most recent fiscal years. TABLE 5 CITY OF PALO ALTO SECURED TAX CHARGES AND DELINQUENCIES Fiscal Secured Amt. Del. % Del. Year Tax Charge (1) June 30 June 30 2010-11 $3,443,434.30 $29,254.95 0.85% 2011-12 3,208,610.90 21,029.74 0.66 2012-13 Not available 2013-14 4,304,606.92 33,648.91 0.78 2014-15 4,122,948.88 44,016.83 1.07 2015-16 4,112,476.21 67,220.43 1.63 2016-17 3,895,321.53 47,443.37 1.22 2017-18 3,806,759.16 11,434.14 0.30 2018-19 3,844,666.46 26,401.65 0.69 2019-20 3,972,942.77 15,960.60 0.40 2020-21 3,813,649.97 28,528.14 0.75 Source: California Municipal Statistics, Inc. (1) 1% General Fund apportionment Teeter Plan. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. The Teeter Plan guarantees distribution of 100% of the general taxes levied to the taxing entities within the County, with the County retaining all penalties and interest penalties affixed upon delinquent properties and redemptions of subsequent collections. Under the Teeter Plan, the County apportions secured property taxes on a cash basis to local political subdivisions, including the City, for which the County acts as the tax-levying or tax-collecting agency. At the conclusion of each fiscal year, the County distributes 100% of any taxes delinquent as of June 30th to the respective taxing entities. The County cash position is protected by a special fund, known as the “Tax Loss Reserve Fund,” which accumulates moneys from interest and penalty collections. In each fiscal year, the Tax Loss Reserve Fund is required to be funded to the amount of delinquent taxes plus one percent of that year’s tax levy. Amounts exceeding the amount required to be maintained in the tax loss reserve fund may be credited to the County’s general fund. Amounts required to be maintained in the tax loss reserve fund may be drawn on to the extent of the amount of uncollected taxes credited to each agency in advance of receipt. The Teeter Plan is to remain in effect unless the County Board orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the County Board receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the County Board is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. The County Board may also, after holding a public hearing on the matter, discontinue the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll in that agency. If the Teeter Plan is discontinued subsequent to its implementation, only those secured property taxes actually

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collected would be allocated to political subdivisions (including the City) for which the County acts as the tax-levying or tax-collecting agency, but penalties and interest would be credited to the political subdivisions. The City is not aware of any petitions for the discontinuance of the Teeter Plan in the County. Direct and Overlapping Debt. Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and effective March 1, 2022. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The contents of the Debt Report are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City; (2) the second column shows the percentage that the City’s assessed valuation represents of the total assessed valuation of each public agency identified in the first column; and (3) the third column is an apportionment of the dollar amount of each public agency’s outstanding debt to property in the City, as determined by multiplying the total outstanding debt of each agency by the percentage of the City’s assessed valuation represented in the second column.

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TABLE 6 CITY OF PALO ALTO STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT (as of March 1, 2022) CITY OF PALO ALTO 2021-22 Assessed Valuation: $43,983,352,045 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/22 Santa Clara County 7.632% $ 87,497,827 Foothill-De Anza Community College District 21.622 142,246,451 Palo Alto Unified School District 90.013 188,315,935 Fremont Union High School District .009 52,449 Los Gatos-Saratoga Joint Union High School District .013 10,924 Mountain View-Los Altos Union High School District .827 1,579,629 Cupertino Union School District .016 43,483 Los Altos School District 1.114 1,623,711 Mountain View-Whisman School District .587 1,591,915 Saratoga Union School District .029 5,001 Whisman School District 1.478 86,245 City of Palo Alto 100.000 55,135,000 (1) El Camino Hospital District .070 77,868 Midepninsula Regional Open Space District 12.443 10,523,667 City of Palo Alto Special Assessment Bonds 100.000 16,315,000 Santa Clara Valley Water District Benefit Assessment District 7.632 3,674,808 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 508,779,913 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Santa Clara County General Fund Obligations 7.632% 95,102,304 Santa Clara County Pension Obligation Bonds 7.632 25,615,928 Santa Clara County Board of Education Certificates of Participation 7.632 203,774 Foothill-DeAnza Community College District Certificates of Participation 21.622 4,775,219 Los Gatos-Saratoga Joint Union High School District Certificates of Participation .013 145 Mountain View-Los Altos Union High School District Certificates of Participation .827 17,818 Los Altos School District Certificates of Participation 1.114 19,702 Saratoga Union School District Certificates of Participation .029 677 City of Palo Alto General Fund Obligations 100.000 145,605,000 Santa Clara County Vector Control District Certificates of Participation 7.632 134,705 Midpeninsula Regional Open Space Park District General Fund Obligations 12.443 12,406,368 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 283,881,640 Less: Santa Clara County supported obligations 1,379,771 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 282,501,869 GROSS COMBINED TOTAL DEBT 792,661,553 (2) NET COMBINED TOTAL DEBT 791,281,782 Ratios to 2021-22 Assessed Valuation: Direct Debt ($55,135,000) ................................................... 0.13% Direct and Overlapping Tax and Assessment Debt .......................... 1.16% Total Direct Debt ($200,740,000) ......................................... 0.46% Gross Combined Total Debt ............................................................. 1.80% Net Combined Total Debt ................................................................ 1.80% Source: California Municipal Statistics, Inc. (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

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Bonding Capacity The City may issue bonds in an amount up to 2.50% of the assessed valuation of taxable property within its boundaries. Based on the fiscal year 2021-22 assessment roll, the City’s gross bonding capacity is approximately $109,958,380, and its net bonding capacity is $54,823,380 (taking into account current outstanding debt including the Prior Bonds). Refunding bonds may be issued without regard to this limitation; however, once issued, the outstanding principal of any refunding bonds is included when calculating the City’s bonding capacity. CERTAIN RISK FACTORS The following information should be considered by prospective investors in evaluating the 2022 Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to investing in the 2022 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The 2022 Bonds are payable from and secured by a voter-approved property tax levy on all taxable property within the City. The City is not obligated to pay the debt service on the 2022 Bonds from any other sources. This official statement, including Appendix B hereto, provides information on the City’s overall operations and financings with an emphasis on its General Fund and therefore includes information on revenues and funds that are not pledged to the 2022 Bonds and should not be considered available to pay debt service on the 2022 Bonds. Risks to Assessed Values Generally Natural and economic forces can affect the assessed value of taxable property in the City. The City is located in a seismically active region, and damage from an earthquake in or near the City could cause moderate to extensive or total damage to taxable property. Other natural or man-made disasters, such as flood and sea level rise, fire, the presence of hazardous materials, acts of terrorism or public health emergencies could also cause a reduction in the assessed value of taxable property within the City. Economic and market forces, such as a downturn in the local economy can also affect assessed values. For additional discussion, see “Natural Calamities,” “Limitations on Development,” and “Risk of Changing Economic Conditions” below. Natural Calamities General. From time to time, the City has been and could be subject to natural calamities, including, but not limited to, earthquake, flood or wildfire, that may adversely affect economic activity in the City, and which could have a negative impact on the City’s finances and on the taxable assessed values of property located within the City. Seismic. Like most regions in California, the City is located in an area of significant seismic activity. There are numerous earthquake faults near the City, including particularly the San Andreas and Hayward faults. The San Andreas fault runs along the Marin and Sonoma Coast through the Santa Cruz Mountains. The Hayward fault covers the hills on the east side of the San Francisco Bay and into San Pablo Bay, directly north and east of the City. Both can cause damaging earthquakes. Numerous other faults can produce damaging earthquakes similar in magnitude to the 1989 Loma Prieta earthquake. Soils in lowland areas away from major faults may also be unable to support buildings during major earthquakes. Landslides are likely

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on hillsides during major earthquakes. Coastal areas are also at risk of tsunamis, generated from earthquakes on local faults or across the Pacific. If there were to be an occurrence of severe seismic activity in the City, the damage resulting from such an event could have a material adverse effect on the City’s financial condition and on the valuation of taxable property located within the City. Drought. The State is currently experiencing drought conditions. The Governor of the State has issued targeted emergency drought proclamations to nearly all counties across the State, including the County. The emergency drought proclamations allow for the set-aside of certain state regulatory requirements until the subsistence of drought conditions. The City and the County are presently experiencing drought conditions and are likely to continue to be effected by drought conditions in the future. Lasting drought conditions could have a material negative effect on the value of taxable property within the City. Wildfire. In recent years, wildfires have caused extensive damage to cities throughout the State. In some instances, entire neighborhoods have been destroyed. Areas effected by wildfires may be more prone to flooding and mudslides. In addition to the direct impact of wildfires on health and safety and property damage, the smoke from wildfires has negatively impacted the quality of life in the City and may have short-term and future impacts on residential and commercial activity in the City. Recent wildfires in the State have been driven in large measure by drought conditions and low humidity. Experts expect that California will continue to be subject to wildfire conditions as a result in changing weather patterns due to climate change. While the City is not in a wildfire severity zone and the City believes the possibility of wildfire damage to taxable property within the City is low, there can be no assurances that wildfires will not occur within the City or the region or that the City will not be negatively impacted by sustained smoky conditions caused by wildfires. Damage resulting from such an event could have a material adverse effect on the City’s financial condition and on the value of taxable property within the City. Climate Change/Sea Level Rise. Climate change caused by human activities may have adverse effects on the City and its finances. Climate change can also result in more variable weather patterns throughout the State, rising bay water levels, increased risk of flooding, changes in salinity and tidal patterns of San Francisco Bay, coastal erosion, drought, water restrictions and vegetation changes. Portions of the City are located adjacent to the San Francisco Bay and may be negatively impacted by these and other results of climate change. The City considers the potential effects of climate change in its planning. The State of California anticipates that relative sea level rise projections stemming from greenhouse gas emissions and related climate change pose significant economic, environmental and social risks to communities along the San Francisco Bay Shoreline, including the City. Research shows that these projections may worsen if greenhouse gas emission trajectories continue unabated. Greenhouse gases and thermal expansion are the primary cause of Antarctic and Greenland ice melt which in turn are the primary source of sea level rise globally and in San Francisco Bay. San Francisco Bay sea level rise projections range between 1-3’ in 2050, and 3.4’ to more than 10’ in 2100. To prepare for rising tides in the years ahead, the City Council of the City adopted a Sea Level Rise Adaptation Policy in March, 2019 which bridges the high-altitude general policy statements in various City

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plans (such as the Comprehensive Plan and sea level rise components of the Sustainability and Climate Action Plan) to an eventual nuts-and-bolt Sea Level Rise Adaptation Plan and timeline which staff aims to complete in 2022. When complete, the City’s Sea Level Rise Vulnerability Assessment will be available on the City’s website at https://www.cityofpaloalto.org/Departments/Public-Works/Watershed-Protection/Sea-Level-Rise. Such website is not incorporated herein by this reference. Sustainability and Climate Action Plan. The City recognizes that the best way to avoid long-term impacts from the worst Sea Level Rise predictions and to minimize adaption response costs is to reduce greenhouse gas (“GHG”) contributions locally and to support regional, state and national initiatives that reduce GHGs. In early 2020, the City launched an update to the Sustainability and Climate Action Plan (“S/CAP”) to develop the strategies needed to meet its sustainability goals, including our goal of reducing GHG emissions 80 percent below 1990 levels by 2030 (the “80 x 30” goal). More generally, the City’s S/CAP aims to reduce the City and community’s greenhouse gas emissions to meet climate protection goals while considering the broader issues of sustainability, such as land use and natural resources. The City’s S/CAP can be found on the City’s website at https://www.cityofpaloalto.org/City-Hall/Sustainability/SCAP. Such website is not incorporated herein by this reference. Risk of Changing Economic Conditions While the City has historically enjoyed strong economic and financial performance, the City faces several long-term financial challenges including climate change and sea level rise, changes to the economy of the region and the nation, and the management of pension and post-employment retirement obligations. While the City has adopted measures and policies to better position its operating budgets for future risks and future economic downturns, such measures may not be sufficient. Property values could be reduced by factors beyond the City’s control, including a depressed real estate market due to general economic conditions in the County, the region, and the State. The general economy of the City is also subject to the types of risks generally associated with all urban real estate markets. Real estate prices may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in home improvement costs and by other similar factors. In addition, if there is a significant decline in the general economy of the City, the owners of property within the City may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of property tax revenues by the City. Public Health Emergencies The COVID-19 Pandemic is ongoing, and its duration and severity and economic effects are uncertain in many respects and difficult to forecast. The ultimate impacts of the COVID-19 Pandemic on the City’s operations and financings and on the local economy, real estate market and development within the City is not fully known, and it may be some time before the full adverse impact of the COVID-19 Pandemic is known. Further, there could be future outbreaks of other COVID-19 variants or other public health emergencies that could have material adverse effects on the City’s operations and finances. Bankruptcy Risks In bankruptcy, the voluntary application of pledged special revenues to indebtedness secured by such revenues is not subject to the automatic stay. A recent decision by the United States Court of Appeals

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for the First Circuit in a case involving revenue bonds of the Puerto Rico Highways & Transportation Authority, however, concludes that an action by bondholders to compel the application of pledged special revenues is not exempt from the automatic stay. See “LEGAL MATTERS” below. Cybersecurity Risks The City and the County may each face various cyber security threats, including, but not limited to, hacking, viruses, malware, ransomware and other attacks on their computers and their networks. No assurance can be given that the City’s or County’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City or the County. The City owns and operates its own enterprise class data network serving the municipal city government and its operations. The City has retained information technology professionals to support, maintain and protect these operations locally in a purpose-built and physically secure environment. This network and its operations are governed by and in compliance with all applicable governmental regulations as well as the City’s own administrative regulations. Within the City’s operations and guidance is an active cyber-security program designed to protect from, and to quickly identify and mitigate, a multitude of complex security threats. While no network is completely immune from all possible compromise, the City exercises its due diligence in protecting the data it possesses and the systems it operates. To date, there have been no significant cyber-attacks on the City’s computers and technologies. The City is reliant on the County in connection with the administration of the 2022 Bonds, including without limitation the County’s tax collectors for the levy and collection of ad valorem taxes, and the Paying Agent. No assurance can be given that the City, the County, and these other entities will not be adversely affected by cyber threats and attacks in a manner that may affect owners of the 2022 Bonds. CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY REVENUES AND APPROPRIATIONS Principal of and interest on the 2022 Bonds are payable from the proceeds of an ad valorem tax levied by the County, as directed by the City, for the payment thereof. See “THE REFUNDING BONDS” and “SECURITY FOR THE REFUNDING BONDS” above. Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 62, 111, and 218 and 1A, and certain other provisions of law discussed below are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the County to levy, and the City to spend, tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the County to levy taxes for payment of the 2022 Bonds. The tax levied by the County, as directed by the City, for payment of the 2022 Bonds was approved by the City’s voters in compliance with Article XIIIA and all applicable laws. Article XIIIA of the State Constitution On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay

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debt service (i) on indebtedness approved by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two-thirds vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters voting on the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under ‘full cash value,’ or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. All taxable property is shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

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Article XIIIB of the State Constitution In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual “appropriations limit” imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” “Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on Bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate “proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s taxpayers through tax rate or fee reductions over the following two years. The City has never exceeded its appropriations limit. Articles XIIIC and XIIID of the State Constitution General. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to Vote on Taxes Act.” Proposition 218 adds Articles XIIIC and XIIID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. The amendments to Article XIIIC define “taxes” that are subject to voter approval as “any levy, charge, or exaction of any kind imposed by a local government,” with certain exceptions.

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Taxes. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City (“general taxes”) require a majority vote; taxes for specific purposes (“special taxes”), even if deposited in the City’s General Fund, require a two-thirds vote. Property-Related Fees and Charges. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property-related fees, charges, and assessments for municipal services and programs. Reduction or Repeal of Taxes, Assessments, Fees and Charges. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City’s General Fund. If such repeal or reduction occurs, the City’s ability to pay debt service on the 2022 Bonds could be adversely affected. Burden of Proof. Article XIIIC provides that local government “bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.” Similarly, Article XIIID provides that in “any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance” with Article XIIID. Judicial Interpretation of Proposition 218. The interpretation and application of Articles XIIIC and XIIID will ultimately be determined by the courts, and it is not possible at this time to predict with certainty the outcome of such determination. Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the governmental entity’s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988. California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62

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were not addressed in the Supreme Court’s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative. Proposition 1A; Proposition 22 Proposition 1A. Proposition 1A, proposed by the Legislature in connection with the State’s Fiscal Year 2004-05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07, provided that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibited the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county had to be approved by two-thirds of both houses of the Legislature. Proposition 22. Proposition 22, entitled “The Local Taxpayer, Public Safety and Transportation Protection Act,” was approved by the voters of the State in November 2010. Proposition 22 eliminates or reduces the State’s authority to (i) temporarily shift property taxes from cities, counties and special districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect property tax increment from redevelopment agencies to any other local government, (iv) use State fuel tax revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of State fuel tax revenues. Proposition 19 Proposition 19, entitled “Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment,” was approved by the voters of the State in November 2020. Proposition 19 amends Article XIIIA to: (i) expand special rules that give property tax savings to homeowners that are over the age of 55, severely disabled, or whose property has been impacted by wildfire or natural disaster, when they buy a different home; (ii) narrow existing special rules for inherited properties; and (iii) dedicate most of the potential new State revenue generated from Proposition 19 toward fire protection. The City cannot predict the impact that Proposition 19 might have on assessed values or property tax revenues in the City, or any other impacts on the local economy or the City’s financial condition. Possible Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City.

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LEGAL MATTERS Possible Limitations on Remedies; Bankruptcy General. Following is a discussion of certain considerations relating to potential bankruptcies of school districts in California. It is not an exhaustive discussion of the potential application of bankruptcy law to the City. State law contains a number of safeguards to protect the financial solvency of school districts. See “APPENDIX B—CITY FINANCIAL INFORMATION.” If the safeguards are not successful in preventing a school district from becoming insolvent, the State Superintendent of Public Instruction (the “State Superintendent”), operating through an administrator appointed by the State Superintendent, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”) on behalf of a district for the adjustment of its debts, assuming that such district meets certain other requirements contained in the Bankruptcy Code necessary for filing such a petition. School districts under current State law are not themselves authorized to file a bankruptcy proceeding, and they are not subject to involuntary bankruptcy. Bankruptcy courts are courts of equity and as such have broad discretionary powers. If the City were to become the debtor in a proceeding under Chapter 9 of the Bankruptcy Code, the parties to the proceedings may be prohibited from taking any action to collect any amount from the City (including ad valorem tax revenues) or to enforce any obligation of the City, without the bankruptcy court’s permission. In such a proceeding, as part of its plan of adjustment in bankruptcy, the City may be able to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other terms or provisions of the 2022 Bonds and other transaction documents related to the 2022 Bonds, if the bankruptcy court were to determine that the alterations were fair and equitable. In addition, in such a proceeding, as part of such a plan, the City may be able to eliminate the obligation of the County to raise taxes if necessary, to pay the 2022 Bonds. There also may be other possible effects of a bankruptcy of the City that could result in delays or reductions in payments on the 2022 Bonds. Moreover, regardless of any specific adverse determinations in any City bankruptcy proceeding, a City bankruptcy proceeding could have an adverse effect on the liquidity and market price of the 2022 Bonds. As stated above, if a school district were to go into bankruptcy, the bankruptcy petition would be filed under Chapter 9 of the Bankruptcy Code. Chapter 9 provides that it does not limit or impair the power of a state to control, by legislation or otherwise, a municipality of or in such state in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise. For purposes of the language of Chapter 9, a school district is a municipality. State law provides that the ad valorem taxes levied to pay the principal and interest on the 2022 Bonds shall be used for the payment of principal and interest of the City’s general obligation bonds and for no other purpose. If this restriction on the expenditure of such ad valorem taxes is respected in a bankruptcy case, then the ad valorem tax revenue could not be used by the City for any purpose other than to make payments on the 2022 Bonds. It is possible, however, that a bankruptcy court could conclude that the restriction should not be respected. Statutory Lien. Pursuant to Senate Bill 222 (2015) (“SB 222”) that became effective on January 1, 2016, all general obligation bonds issued by local agencies in California, including the 2022 Bonds, will be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax. SB 222 provides that the lien will automatically arise, without the need for any action or authorization by the local agency or its governing board and will be valid and binding from the time the bonds are executed and delivered. Although a statutory lien would not be automatically terminated by the filing of a Chapter 9

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bankruptcy petition by the City, the automatic stay provisions of the Bankruptcy Code would apply and payments that become due and owing on the 2022 Bonds during the pendency of the Chapter 9 proceeding could be delayed unless the 2022 Bonds are determined to be secured by a pledge of “special revenues” within the meaning of the Bankruptcy Code and the pledged ad valorem taxes are applied to pay the 2022 Bonds in a manner consistent with the Bankruptcy Code. Special Revenues. If the ad valorem tax revenues that are pledged to the payment of the 2022 Bonds (see “THE 2022 BONDS – Security”) are determined to be “special revenues” within the meaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem revenues that are collected after the date of the bankruptcy filing should not be subject to the automatic stay. “Special revenues” are defined to include, among others, taxes specifically levied to finance one or more projects or systems of the debtor, but excluding receipts from general property, sales, or income taxes levied to finance the general purposes of the debtor. The City has specifically pledged the ad valorem taxes for payment of the 2022 Bonds. Additionally, the ad valorem taxes levied for payment of the 2022 Bonds are permitted under the State Constitution only where either (i) the applicable bond proposition is approved by 55% of the voters and such proposition contains a specific list of school facilities projects, or (ii) if the applicable bond proposition is approved by two-thirds of voters and such bonds must be issued for the acquisition or improvement of real property. Because State law prohibits the use of the tax proceeds for any purpose other than payment of the bonds and the bond proceeds can only be used to fund the acquisition or improvement of real property and other capital expenditures included in the proposition, such tax revenues appear to fit the definition of special revenues. However, there is no binding judicial precedent dealing with the treatment in bankruptcy proceedings of ad valorem tax revenues collected for the payments of bonds in California, so no assurance can be given that a bankruptcy court would not hold otherwise. In addition, even if the ad valorem tax revenues are determined to be “special revenues,” the Bankruptcy Code provides that special revenues can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. Thus, a bankruptcy court could determine that the City is entitled to use the ad valorem tax revenues to pay necessary operating expenses of the City and its schools, before the remaining revenues are paid to the owners of the 2022 Bonds. Possession of Tax Revenues; Remedies. If one or more of the County or the City go into bankruptcy and have possession of tax revenues (whether collected before or after commencement of the bankruptcy), and if the County or the City, as applicable, does not voluntarily pay such tax revenues to the owners of the 2022 Bonds, it is not clear what procedures the owners of the 2022 Bonds would take or how effective they would be in obtaining possession of such tax revenues. Opinion of Bond Counsel Qualified by Reference to Bankruptcy, Insolvency and Other Laws Relating to or Affecting Creditor’s Rights. The proposed form of opinion of Bond Counsel, attached hereto as Appendix E, is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights. Legal Opinions The proceedings in connection with the issuance of the 2022 Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, Bond Counsel for the City. Certain legal matters will also be passed upon for the City by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel. The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the 2022 Bonds.

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TAX MATTERS 2022A Bonds Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2022A Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the 2022A Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2022A Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a Refunding Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a Refunding Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “bond premium” for purposes of federal income taxes and State of California personal income taxes. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2022A Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Refunding Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2022A Bonds who purchase the 2022A Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2022A Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2022A Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2022A Bonds is sold to the public. Under the Tax Code, bond premium is amortized on an annual basis over the term of the Refunding Bond (said term being the shorter of the Refunding Bond's maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the Refunding Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a Refunding Bond is amortized each year over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations

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between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2022A Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2022A Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the 2022A Bonds is exempt from California personal income taxes. The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of the 2022A Bonds is set forth in APPENDIX E—FORM OF OPINION OF BOND COUNSEL. 2022B Bonds Interest on the 2022B Bonds is not excludable from gross income of the owners thereof for federal income tax purposes. In the opinion of Bond Counsel, interest on the 2022B Bonds is exempt from California personal income taxes. The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of the 2022B Bonds is set forth in APPENDIX E—FORM OF OPINION OF BOND COUNSEL. Other Tax Considerations Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2022A Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2022A Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2022A Bonds, or as to the consequences of owning or receiving interest on the 2022A Bonds, as of any future date. Prospective purchasers of the 2022A Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Owners of the 2022A Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2022A Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2022A Bonds, the ownership, sale or disposition of the 2022A Bonds, or the amount, accrual or receipt of interest on the 2022A Bonds.

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MUNICIPAL ADVISOR PFM Financial Advisors LLC, San Francisco, California (“PFM”), is an independent financial advisory firm registered as a “Municipal Advisor” with the Securities Exchange Commission and Municipal Securities Rulemaking Board. PFM does not underwrite, trade or distribute municipal or other public securities. PFM has assisted the City in connection with the planning, structuring, sale and issuance of the 2022 Bonds. PFM is not obligated to undertake, and has not undertaken to make, an independent verification of or to assume responsibilities for the accuracy, completeness or fairness of the information contained in this Official Statement not provided by PFM. The fees of PFM in respect to the 2022 Bonds are contingent upon their sale and delivery. CONTINUING DISCLOSURE Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”), the City has agreed, for the benefit of holders of the 2022 Bonds, to provide certain financial information and operating data relating to the City and the balances of funds relating to the 2022 Bonds, by not later than March 31 of each year commencing with the report for the 2021-22 fiscal year (the “Annual Information”), and to provide notices of the occurrence of certain enumerated events. The Annual Information and notices of enumerated events will be filed by the City with the Municipal Securities Rulemaking Board (the “MSRB”), via its Electronic Municipal Market Access (“EMMA”) system. The nature of the information to be provided in the Annual Information and the notices of material events is set forth in APPENDIX F—FORM OF CONTINUING DISCLOSURE CERTIFICATE. For fiscal year 2017-18 the City’s annual report was not properly associated on EMMA with all appropriate CUSIPs. Correcting EMMA filings have been made. Other than as noted, the City has made all required continuing disclosure filings required in the past five years. The City has established internal policies to ensure that all future required filings are made as required. Substantially all of the City’s required financial information and operating data is included in its Annual Comprehensive Financial Report (the “ACFR”) which is historically filed in advance of the required March 31 deadline. Any financial information and operating data not included in the Annual Comprehensive Financial Report is compiled by the City’s Treasury staff and its Assistant Administrative Services Director. The City has established a ticker system to provide staff with advance notice so that the reports are prepared in time to allow review and timely filing. LEGALITY FOR INVESTMENT IN CALIFORNIA Under provisions of the California Financial Code, the 2022 Bonds are legal investments for commercial banks in California to the extent that the 2022 Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and under provisions of the California Government Code, are eligible for security for deposits of public moneys in California.

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ABSENCE OF MATERIAL LITIGATION No litigation is pending or threatened concerning the validity of the 2022 Bonds, and a certificate to that effect will be furnished by the City to the purchasers at the time of the original delivery of the 2022 Bonds. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the County’s abilities to receive ad valorem taxes or contesting the City’s ability to issue and retire the 2022 Bonds. RATING S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”) has assigned the rating of “___” to the 2022 Bonds. Such rating reflects only the view of S&P and any desired explanation of the significance of such rating should be obtained from S&P. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period or that such rating will not be revised downward or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price for the 2022 Bonds. UNDERWRITING The 2022A Bonds were sold by competitive bidding on May 24, 2022, to ________ (the “2022A Underwriter”). The 2022A Underwriter has agreed to purchase the 2022A Bonds at a purchase price of $________ (being equal to the aggregate principal amount of the 2022A Bonds ($_______), less an underwriter’s discount of $______, plus a premium of $_______). The 2022A Underwriter will purchase all of the 2022A Bonds if any are purchased, the obligation to make such purchase being subject to the approval of certain legal matters by counsel and certain other conditions. The 2022A Underwriter may offer and sell 2022A Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the 2022A Underwriter. The 2022B Bonds were sold by competitive bidding on May 24, 2022, to ________ (the “2022B Underwriter” and, with the 2022A Underwriter, the “Underwriters”). The 2022B Underwriter has agreed to purchase the 2022B Bonds at a purchase price of $________ (being equal to the aggregate principal amount of the 2022B Bonds ($_______), less an underwriter’s discount of $______). The 2022B Underwriter will purchase all of the 2022B Bonds if any are purchased, the obligation to make such purchase being subject to the approval of certain legal matters by counsel and certain other conditions. The 2022B Underwriter may offer and sell 2022B Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the 2022B Underwriter. ADDITIONAL INFORMATION Quotations from and summaries and explanations of the 2022 Bonds, the Resolution, the Continuing Disclosure Certificate of the City and the constitutional provisions, statutes and other

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documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions. All data contained herein has been taken or constructed from City records. Appropriate City officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the City Board. EXECUTION Execution and delivery of this Official Statement have been duly authorized by the City. CITY OF PALO ALTO By Ed Shikada, City Manager

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Appendix A Page 1
APPENDIX A GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO THE CITY AND THE COUNTY The information in this Appendix A concerning the City of Palo Alto and Santa Clara County is included only for the purpose of supplying general information regarding the City and the County. The 2022 Bonds are secured solely by an ad valorem property tax levied by the County, on behalf of the City, in an amount sufficient to pay principal of and interest on the 2022 Bonds each year. The 2022 Bonds are not payable from any other funds or revenues. Although reasonable efforts have been made to include up-to-date information in this Appendix A, some of the information is not current due to delays in reporting of information by various sources. It should not be assumed that the trends indicated by the following data would continue beyond the specific periods reflected herein. Introduction City of Palo Alto. Palo Alto (the “City”) is located in northern Santa Clara County (the “County”), approximately 35 miles south of the City of San Francisco. It is part of the San Francisco Bay metropolitan area. The City is considered the birthplace of the high technology industry and a center of the Silicon Valley. Stanford University covers a 700-acre area in the City, and the City is home to high-tech leaders such as SAP America, Varian Medical Systems, VMware, Tibco Software, the Electric Power Research Institute, Communications and Power Industries and Skype. The City is also a major employment center, including U.S. Department of Veterans Affairs, Palo Alto Health Care System, Stanford Hospitals and Clinics, Lockheed Martin Missiles and Space, Palo Alto Medical Foundation, Stanford Shopping Center, the law offices of Wilson Sonsini Goodrich and Rosati, and the Xerox Palo Alto Research Center. Santa Clara County. Located at the southern end of the San Francisco Bay, the County is the most populous county in the San Francisco Bay Area region, and one of the most affluent counties in the United States. The County was one of the original counties of California, formed in 1850 at the time of statehood. The County seat is San Jose, the tenth-most populous city in the United States. According to the U.S. Census Bureau, the county has a total area of 1,304 square miles (3,380 km2), of which 1,290 square miles (3,300 km2) is land and 14 square miles (36 km2) (1.1%) is water. The highly urbanized Santa Clara Valley within the County is also known as Silicon Valley. The County is the headquarters for approximately 6500 high technology companies, including many of the largest tech companies in the world, among them hardware manufacturers AMD, Cisco Systems and Intel, computer and consumer electronics company Apple Inc. and internet companies eBay, Facebook, Google and Yahoo!

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Population The table below summarizes population of the City, the County, and the State of California for the last five years. TABLE A1 CITY OF PALO ALTO, SANTA CLARA COUNTY, and CALIFORNIA Population Year City of Palo Alto Santa Clara County State of California 2017 68,679 1,937,008 39,352,398 2018 68,482 1,943,579 39,519,535 2019 68,272 1,944,733 39,605,361 2020 68,145 1,945,166 39,648,938 2021 67,657 1,934,171 39,466,855 Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-21, with 2010 Census Benchmark.

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Employment The following table summarizes historical employment and unemployment for the County, the State of California and the United States: TABLE A2 SANTA CLARA COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Unemployment Year Area Labor Force Employment Unemployment Rate (1) 2016 Santa Clara County 1,026,500 987,900 38,600 3.8% California 19,102,700 18,065,000 1,037,700 5.4 United States 159,187,000 151,436,000 7,751,000 4.9 2017 Santa Clara County 1,042,000 1,008,600 33,400 3.2 California 19,312,000 18,393,100 918,900 4.8 United States 160,320,000 153,337,000 6,982,000 4.4 2018 Santa Clara County 1,048,800 1,021,500 27,300 2.6 California 19,398,200 18,582,800 815,400 4.2 United States 162,075,000 155,761,000 6,314,000 3.9 2019 Santa Clara County 1,053,700 1,027,500 26,200 2.5 California 19,411,600 18,627,400 784,200 4.0 United States 163,539,000 157,538,000 6,001,000 3.7 2020(2) Santa Clara County 1,020,700 949,400 71,300 7.0 California 18,821,200 16,913,100 1,908,100 10.1 United States 160,742,000 147,795,000 12,947,000 8.1 Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-20, and US Department of Labor. (1) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures available in this table. (2) Latest available full-year data.

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Major Industries in the City and the County The following tables list the ten largest employers in the City and in the County by employment in 2021. TABLE A3 CITY OF PALO ALTO Top 10 Employers as of June 30, 2021 Employer Employees % of Total City Employment Stanford Health Care 5,500 4.1% Hewlett-Packard Company 5,000 3.7 Stanford University 4,060 3.0 Veteran’s Affairs Palo Alto Health Care System 3,900 2.9 Stanford Children’s Health 3,500 2.6 VMware Inc. 3,500 2.6 SAP Labs Inc. 3,500 2.6 Varian Medical Systems 3,300 2.5 Tesla Inc. 2,650 2.0 Palo Alto Medical Foundation 2,200 1.6 Total Top 10 37,110 27.6 Source: City of Palo Alto FY2020-21 ACFR. TABLE A4 SANTA CLARA COUNTY Top 10 Employers as of June 30, 2021 Employer Employees % of Total County Employment Apple Inc. 25,000 2.60% Google LLC 25,000 2.60 Santa Clara County 20,638 2.15 Stanford University 15,314 1.59 Stanford Health Care 14,574 1.52 Tesla Motors Inc. 13,000 1.35 Cisco Systems Inc. 12,740 1.32 Kaiser Permanente 12,442 1.29 City of San Jose 7,641 .79 Intel Corporation 7,143 .74 Total Top 10 153,492 15.96 Source: Santa Clara County FY2020-21 ACFR.

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Construction Activity The following tables reflects the five-year history of building permit valuation for the City and the County: TABLE A5 CITY OF PALO ALTO Building Permits and Valuation (Dollars in Thousands) 2016 2017 2018 2019 2020(1) Permit Valuation: New Single-family $ 58,795 $ 76,244 $ 72,564 $ 76,229 $ 49,894 New Multi-family 5,764 9,262 - - 31,725 Res. Alterations/Additions 36,423 70,538 33,568 14,563 6,001 Total Residential 100,983 156,046 106,133 90,792 87,621 Total Nonresidential 298,797 357,789 342,597 110,092 30,278 Total All Building 399,780 513,835 448,731 200,884 117,900 New Dwelling Units: Single Family 96 119 110 105 68 Multiple Family 30 28 - - 8 Total 126 147 110 105 76 TABLE A6 SANTA CLARA COUNTY Building Permits and Valuation (Dollars in Thousands) 2016 2017 2018 2019 2020(1) Permit Valuation: New Single-family $ 660,301 $ 732,652 $ 728,590 $ 693,032 $ 465,531 New Multi-family 564,761 1,027,651 1,098,643 567,726 384,856 Res. Alterations/Additions 484,820 547,991 558,024 555,483 314,179 Total Residential 1,709,882 2,308,295 2,385,258 1,816,242 1,164,567 Total Nonresidential 4,698,158 3,359,316 4,132,146 5,447,642 2,816,509 Total All Building 6,408,041 5,667,612 6,517,404 7,263,884 3,981,077 New Dwelling Units: Single Family 1,608 2,022 2,011 1,814 1,329 Multiple Family 3,297 6,629 6,342 3,216 2,245 Total 4,905 8,631 8,353 5,030 3,574 Source: Construction Industry Research Board: “Building Permit Summary.” Note: Columns may not sum to totals due to independent rounding. (1) Latest available full year data. Household Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of

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wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the median household effective buying income for the City, the County, the State and the nation for the past five years. TABLE A7 CITY OF PALO ALTO, SANTA CLARA COUNTY, STATE OF CALIFORNIA AND UNITED STATES Median Household Effective Buying Income 2017 2018 2019 2020 2021 City of Palo Alto $121,376 $123,583 $133,985 $140,963 $152,326 Santa Clara County 88,243 92,773 98,882 103,458 118,652 California 59,646 62,637 65,870 67,956 77,058 United States 50,735 52,841 55,303 56,790 64,448 Source: Nielsen, Inc.

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Appendix B Page 1
APPENDIX B CITY FINANCIAL INFORMATION The information in this appendix concerning the operations of the City and the City’s finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of and interest on the 2022 Bonds is payable from the general fund of the City or from State revenues. The 2022 Bonds are payable solely from the proceeds of an ad valorem tax approved by the voters of the City pursuant to all applicable laws and State Constitutional requirements and required to be levied by the County on property within the City in an amount sufficient for the timely payment of principal and interest on the 2022 Bonds. See “SECURITY FOR THE 2022 BONDS” in the Official Statement. Financial Statements and Budgetary Process The City’s accounting policies conform to generally accepted accounting principles. The audited financial statements also conform to the principles and standards for public financial reporting established by the Governmental Accounting Standards Board. Basis of Accounting and Financial Statement Presentation. The government-wide financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. Audited Financial Statements. The City retained Macias Gini & O’Connell LLP, Walnut Creek, California (the “City’s Auditor”), to examine the general purpose financial statements of the City as of and for the year ended June 30, 2021. The audited financial statements for fiscal year ended June 30, 2021, are included in APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021. The City has not requested, and the City’s Auditor has not provided, any review or update of such financial statements in connection with their inclusion in this Official Statement. Budget Process. The City Council is required to adopt a final budget by no later than the close of its fiscal year. The annual budget serves as the foundation for the City’s financial planning and control. Budget control is maintained at the fund and department level. The City Manager has the authority to approve appropriation transfers within the same department/fund. Transfers between funds/departments and amendments to the budget require City Council approval. A comprehensive mid-year budget review is done in February or March to update revenue and expenditure projections. In addition, the City Council receives quarterly budget updates. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated

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Appendix B Page 2
budget approved by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) for the City’s operating budget is at the fund/department level with departmental oversight of major expenditure categories as well as by program area within each fund. For the City’s capital improvement budget each individual capital improvement project with budget transfers between subprojects is subject to City Manager approval and budget transfers between projects are subject to City Council approval. Appropriation increases, decreases or transfers between funds require the approval of the City Council. All appropriations lapse at the end of the fiscal year unless specific carryovers are approved by the City Council. Certain of the City’s revenues are collected and dispersed by the State (such as sales tax and motor-vehicle license fees) or allocated in accordance with State law (most importantly, property taxes). Therefore, the State’s budget decisions can have an impact on City finances.

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General Fund Balance Sheet The following table shows the City’s audited General Fund balance sheet for the past five fiscal years. TABLE B1 CITY OF PALO ALTO GENERAL FUND BALANCE SHEET (Dollars in Thousands) Fiscal Year Ended June 30, 2017 2018 2019 2020 2021 Audited Audited Audited Audited Audited ASSETS Cash and Investments $47,779 $49,250 $55,139 $ 48,853 $ 67,397 Accounts and Intergovernmental Receivables 17,418 18,881 21,669 11,944 14,053 Interest Receivable 738 950 1,167 695 645 Notes and Loans Receivable 496 479 - 845 826 Prepaid Items - - - - 291 Deposits - 15 15 15 15 Due from other fund - - 843 1,895 943 Advance to Other Funds 2,915 3,128 3,115 3,233 3,036 Inventory of Materials and Supplies 4,298 4,427 4,517 4,874 5,208 Total Assets 73,644 77,130 86,465 70,354 92,414 LIABILITIES Accounts Payable and Accruals 4,984 4,293 6,501 3,581 5,115, Accrued Salaries and Benefits 1,466 1,525 1,562 2,046 2,254 Unearned Revenue 4,087 2,966 2,976 2,479 9,400 Total Liabilities 10,537 8,784 11,039 8,106 16,769 DEFERRED INFLOWS OF RESOURCES Unavailabe revenue - - 211 409 9 FUND BALANCES Nonspendable: Notes and Loans Receivable 496 479 - 845 826 Prepaid Items - - - - 291 Deposits - 15 15 15 15 Inventories 4,298 4,427 4,517 4,874 5,208 Advances to Other Funds 2,915 3,128 3,115 3,233 3,036 Committed for: Development Services - 373 4,399 3,804 3,950 Edgewood Plaza - - - - 701 Assigned for: Unrealized Gain on Investments - - 709 3,199 1,891 Other General Governmental Purposes 6,150 5,325 5,622 7,219 5,912 Electric charger - - 17 25 30 College Terrace finces - - 160 160 - Reappropriations 1,130 1,773 1,149 1,893 4,687 Unassigned for: Budget Stabilization 48,118 52,826 54,811 35,871 49,089 Total Fund Balances 63,107 68,346 75,215 61,839 75,636 Total Liabilities, Deferred Inflows of Resources and Fund Balances 73,644 77,130 86,465 70,354 92,414 Source: City of Palo Alto 2017-21 ACFRs.

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Appendix B Page 4
General Fund Revenues, Expenditures, and Changes in Fund Balances The following table shows the City’s audited results for General Fund revenues and expenditures for Fiscal Years 2017-18 through 2020-21 and budgeted projections for Fiscal Year 2021-22. TABLE B2 CITY OF PALO ALTO GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (Dollars in Thousands) Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Audited Audited Audited Audited Budget REVENUES Property Tax $ 42,839 $ 47,327 $ 51,089 $ 56,572 $ 51,228 Sales Tax 31,091 36,508 30,563 29,127 28,184 Utility Users Tax 15,414 16,402 16,140 14,642 14,370 Transient Occupancy Tax 24,937 25,649 18,553 5,179 8,428 Documentary Transfer Tax 9,229 6,923 6,903 10,627 7,137 Other Taxes and Fines 2,141 1,888 1,172 683 1,434 Charges for Services 26,824 27,346 24,127 25,105 23,870 Intergovernmental 3,205 2,863 3,783 3,828 22,686 Permits and Licenses 8,560 8,410 7,467 7,261 8,406 Investment Earnings (828) 5,672 4,037 (161) 852 Rental Income 15,896 16,338 15,964 13,293 14,476 Other Revenue 776 1,753 587 632 2,260 Total Revenues 180,084 197,079 180,385 166,788 183,331 EXPENDITURES City Council 337 265 214 224 433 City Manager 2,509 2,883 3,273 2,304 3,319 City Attorney 2,244 2,649 2,509 2,149 3,945 City Clerk 819 805 815 748 1,327 City Auditor 870 865 680 645 972 Administrative Services 5,347 5,512 5,960 5,202 8,923 Human Relations 2,369 2,567 2,792 2,421 3,921 Public Works 14,569 13,757 13,577 13,265 18,785 Planning and Community Environment 8,312 8,132 19,269(1) 15,830(1) 17,673 Development Services 11,749 11,549 —(1) —(1) —(1) Office of Transportation — — 2,052 1,936 1,747 Police 40,326 42,854 45,679 41,328 43,115 Fire 33,522 33,489 36,440 34,918 36,914 Community Services 27,122 28,903 29,603 26,254 31,052 Library 9,120 9,288 9,988 8,528 8,903 Non-Departmental 5,973 11,769 9,255 4,599 13,478 Capital Outlay — — — — — Debt Service - Principal 416 426 — — — Debt Service – Interest 16 5 — — — Total Expenditures 165,620 175,718 182,106 160,351 194,507 EXCESS OF REVENUES OVER EXPENDITURES 14,464 21,361 (1,721) 6,437 (11,176) OTHER FINANCING SOURCES Proceeds from Sale of Capital Assets — 2,442 — 100 — Transfers In 20,310 20,154 20,568 20,880 23,121 Transfers Out (29,535) (37,088) (32,223) (13,620) (14,702) Total Other Financing Sources (9,225) (14,492) (11,655) 7,360 8,419 Change in Fund Balances 5,239 6,869 (13,376) 13,797 (2,757) FUND BALANCES, BEGINNING OF YEAR 63,107 68,346 75,215 61,839 75,636 FUND BALANCES, END OF YEAR 68,346 75,215 61,839 75,636 72,879 Source: City of Palo Alto 2018-21 ACFRs and City of Palo Alto Finance Department. (1) Planning and Community Environment and Development Services totals are combined in FY2019-20 and future years.

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Appendix B Page 5
Reductions in General Fund Revenues and Expenditures in FY2019-20 and FY2020-21 due to the COVID-19 Pandemic The City’s general fund revenues for sales taxes, utility users taxes, rental income and transient occupancy taxes in fiscal years 2019-20 and 2020-21 fell below historical expectations due to the unanticipated and severe disruptions caused by the COVID-19 Pandemic. The City’s fiscal year 2020-21 results reflect the one full year of the economic impacts of the COVID-19 Pandemic including the stark, immediate results stemming from shelter in place orders. The City’s expenditures for the 2019-20 and 2020-21 fiscal years reflect certain temporary and permanent reductions in expenses to offset the revenue losses, including staffing reductions, reductions in service/operating hours/programs at City owned facilities, and labor and bargaining unit concessions. All City General Fund department functional expenses decreased except for Public Works which increased due to various repairs and maintenance of capital assets such as streets, sidewalks, facilities, and parks all of which are non-capitalizable and Administrative Services mainly due to the expenses incurred for claims related to a class action lawsuit. For additional discussion, see “Principal Sources of General Fund Revenues,” “Sales and Use Taxes”, and “Transient Occupancy Taxes” herein.

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Appendix B Page 6
General Fund Budget to Actuals Comparison The following table shows the City’s General Fund adopted budget figures and a comparison of the final General Fund budgets versus audited actuals for Fiscal Year 2019-20 and Fiscal Year 2020-21. TABLE B3 CITY OF PALO ALTO GENERAL FUND BUDGET COMPARISON Fiscal Years 2019-20 and 2020-21 (Dollars in Thousands) Fiscal Year Ending June 30, 2020 Fiscal Year Ending June 30, 2021 Adopted Final Audited Adopted Final Audited Budget Budget Actuals Budget Budget Actuals REVENUES Sales Tax $ 34,346 $ 30,617 $ 30,563 20,500 25,030 29,127 Property Tax 48,634 50,853 51,089 52,000 53,173 56,572 Transient Occupancy Tax 29,309 19,425 18,553 14,900 5,123 5,179 Documentary Transfer Tax 8,369 6,676 6,903 4,700 6,875 10,627 Utility User Tax 17,581 16,133 16,140 15,100 14,080 14,642 Other Taxes and Fines 2,032 1,237 1,172 1,925 392 683 Charges for Services 30,127 25,196 24,127 25,984 24,414 25,105 Permits and Licenses 8,667 6,597 7,467 7,770 8,366 7,708 Investment Earnings 1,433 1,433 1,558 1,145 1,145 1,062 Rental Income 16,326 16,041 15,964 15,949 15,331 13,293 Intergovernmental 2,756 3,245 4,301 2,448 4,580 4,222 Other Revenue 587 619 587 674 666 732 Charges to other funds and departments 10,908 10,908 11,099 11,992 11,992 11,661 Prior year encumberances - 6,469 6,469 - 7,570 7,570 Total Revenues 211,075 195,449 195,992 175,087 178,737 188,183 EXPENDITURES City Attorney 3,387 3,896 3,789 3,485 3,744 3,589 City Auditor 1,235 1,157 981 828 981 962 City Clerk 1,346 1,402 1,186 1,245 1,293 1,147 City Council 498 542 414 419 509 366 City Manager 4,546 4,734 4,671 3,161 3,562 3,492 Administrative Services 8,519 8,770 8,515 8,362 8,338 7,897 Community Services 30,929 31,591 31,489 28,379 28,839 27,769 Police 46,369 46,845 46,844 41,733 42,441 42,441 Fire 34,889 36,773 36,772 33,607 35,354 35,354 Human Resources 3,902 4,107 3,994 3,554 3,622 3,545 Library 10,314 10,187 10,092 8,421 8,655 8,636 Planning and Community Enviornment 20,356 22,021 21,098 17,386 19,611 18,782 Public Works 19,142 19,341 18,932 18,397 19,089 18,553 Non-Departmental 9,028 12,312 10,156 8,237 9,332 9,259 Total Expenditures 196,772 206,411 201,293 179,118 187,509 183,802 EXCESS OF REVENUES OVER EXPENDITURES 14,303 (10,962) (5,301) (4,031) (8,772) 4,381 OTHER FINANCING SOURCES Transfers In 20,999 20,842 20,568 21,359 21,154 21,154 Transfers Out (33,985) (32,223) (32,223) (17,801) (13,620) (13,620) Total Other Financing Sources (12,986) (11,381) (11,655) 3,558 7,534 7,534 Change in Fund Balances, Budgetary Basis 1,317 (22,343) (16,956) (473) (1,238) 11,915 Change in Fund Balances, GAAP Basis (13,376)(1) 13,797(2) FUND BALANCES, BEGINNING OF YEAR, GAAP Basis 75,215 61,839 FUND BALANCES, END OF YEAR, GAAP Basis 61,839 75,636 Source: City of Palo Alto 2020-21 ACFRs. (1) Reflects adjustments for an unrealized gain of $2,479, current year encumbrances and reappropriations of $7,570 and prior year encumbrances and reappropriations of $(6,469). (2) Reflects adjustments for an unrealized loss of $(1,297), changes in interfund balances of $(197), current year encumbrances and reappropriations of $10,946 and prior year encumbrances and reappropriations of $(7,570).