Agenda packet — Palo Alto City Council, December 12, 2022 (part 2 of 3)

a. In accepting this Agreement, Grantee covenants, warrants, represents, and agrees that it presently 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 this Agreement. Grantee further covenants that, in the performance of this Agreement, it will not employ any contractor, consultant or person having such an interest. Grantee, including but not limited to Grantee’s employees, contractors, subcontractors and consultants, may be subject to the disclosure and disqualification provisions of the California Political Reform Act of 1974 (the “Act”), that (1) requires such persons to disclose economic interests that may foreseeably be materially affected by the work performed under this Agreement, and (2) prohibits such persons from making or participating in making decisions that will foreseeably financially affect such interests.

b. If the disclosure provisions of the Political Reform Act are applicable to any individual providing service under this Agreement, Grantee shall ensure that all such individuals identified pursuant to this section understand that they are subject to the Act and shall conform to all requirements of the Act and other applicable laws and regulations including, as required, filing of Statements of Economic Interests within 30 days of commencing any work pursuant to this Agreement, annually by April 1, and within 30 days of their termination or cessation of work pursuant to this Agreement.

(4) Governing Law, Venue. This Agreement, and all the rights and duties of the parties arising from or relating in any way to the subject matter of this Agreement or the transaction(s) contemplated by it, shall be governed by, construed, and enforced in accordance with the law of the State of California (excluding any conflict of laws provisions that would refer to and apply the substantive laws of another jurisdiction). Any suit or proceeding relating to this Agreement, including arbitration proceedings, shall be brought only in Santa Clara County, California. EACH OF THE PARTIES CONSENT TO THE

EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN SANTA CLARA COUNTY, CALIFORNIA.

(5) Assignment. No assignment of this Agreement or of any of the rights or obligations hereunder shall be valid without the prior written consent of the County.

(6) Waiver. No delay or omission by either Party hereto to exercise any right occurring upon any noncompliance or default by the other Party with respect to any of the terms of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by either of the Parties hereto of any of the covenants, conditions, or agreements to be performed by the other shall not be construed to be a waiver of any succeeding breach thereof or of any covenant, condition, or agreement herein contained.

(7) Non-Discrimination. Grantee represents, warrants, and agrees that it and its contractors, consultants, and representatives shall comply with all applicable Federal, State, and local laws and regulations including Santa Clara County’s policies concerning nondiscrimination and equal opportunity in contracting. Such laws include but are not limited to the following: Title VII of the Civil Rights Act of 1964 as amended; Americans with

Attachment A - Lease Agreement

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Historic Grant Agreement (Program One-Round 1) CAPITAL
By and between the City of Palo Alto and the County of Santa Clara for the ‘Restoration of the Original Clay Tile Roof of the Historic Roth Building’ Project

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Disabilities Act of 1990; The Rehabilitation Act of 1973 (Sections 503 and 504); California Fair Employment and Housing Act (Government Code sections 12900 et seq.); and California Labor Code sections 1101 and 1102. Grantee represents, warrants, and agrees that it shall not discriminate against any contractor, subcontractor, employee, or applicant for employment because of age, race, color, national origin, ancestry, religion, sex/gender, sexual orientation, mental disability, physical disability, medical condition, political beliefs, organizational affiliations, or marital status in the recruitment, selection for training including apprenticeship, hiring, employment, utilization, promotion, layoff, rates of pay or other forms of compensation. Grantee also represents, warrants, and agrees that it shall not discriminate in provision of work performed in relation to this Agreement because of age, race, color, national origin, ancestry, religion, sex/gender, sexual orientation, mental disability, physical disability, medical condition, political beliefs, organizational affiliations, or marital status.

(8) County No-Smoking Policy. Grantee and its employees, agents, contractors, subcontractors and consultants, shall comply with the County’s No-Smoking Policy, as set forth in the Board of Supervisors Policy Manual section 3.47 (as amended from time to time), which prohibits smoking: (1) at the Santa Clara Valley Medical Center Campus and all County-owned and operated health facilities, (2) within 30 feet surrounding County- owned buildings and leased buildings where County is the sole occupant, and (3) in all County vehicles.

(9) Food and Beverage Standards. Except in the event of an emergency or medical necessity, County’s nutritional standards shall apply to any foods and/or beverages purchased by Grantee with Grant Funds for County-sponsored meetings or events.

(10) California Public Records Act. All documents and records provided to or made available to County under this Agreement become the property of the County, which is a public agency subject to the disclosure requirements of the California Public Records Act (“CPRA”). If Grantee proprietary information is contained in documents submitted to County, and Grantee claims that such information falls within one or more CPRA exemptions, Grantee must clearly mark such information “CONFIDENTIAL AND PROPRIETARY,” and identify the specific lines containing the information. In the event of a request for such information, County will make reasonable efforts to provide notice to Grantee prior to such disclosure. If Grantee contends that any documents are exempt from the CPRA and wishes to prevent disclosure, it is required at its own cost, liability, and expense to obtain a protective order, injunctive relief, or other appropriate remedy from a court of law in Santa Clara county before the County responds to the CPRA request. If Grantee fails to obtain such a remedy before County responds to the CPRA request, County may disclose the requested information and shall not be liable or responsible for such disclosure.

Grantee further warrants, represents, and agrees that it shall defend, indemnify, and hold County harmless against any and all claims, actions or litigation (including but not limited to all judgments, costs, fees, and attorney’s fees) that may result from denial by County of a CPRA request for any information arising from any representation, or any action (or inaction), by the Grantee, its contractors, consultants, employees, agents, or representatives.

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(11) No Third-Party Beneficiaries. This Agreement does not, and is not intended to, confer any rights or remedies upon any person or entity other than the Parties signing this Agreement. Subcontractors, sponsors, and affiliates shall have no right or claim attaching to this Agreement or to the Grant Funds and are not third-party beneficiaries of or to this Agreement.

(12) Relationship of the Parties. The Parties acknowledge and agree that nothing set forth in this Agreement shall be deemed or construed to render the parties as joint venturers, partners, agents, a joint enterprise, employer-employee, or lender-borrower. Grantee shall have no authority to employ any person as employee or agent on behalf of County for any purpose. Neither Grantee nor any person using or involved in or participating in the Project or in the use of the Grant Funds shall be deemed a third party beneficiary to this Agreement nor an employee or agent of County, nor shall any such person represent himself or herself to others as a third party beneficiary to this Agreement or as an employee or agent of County.

(13) No Indemnification and Insurance by County. Nothing contained in this Agreement is to be construed as an indemnification by County for any loss, damage, injury or death arising out of or caused, in whole or in part, by the County or its Board of Supervisors, officers, executives, attorneys, employees, agents, representatives, contractors or subcontractors. Nothing contained herein shall be construed to, and nothing shall, obligate the County to provide any insurance, indemnity or protection for or on behalf of any third party, the Project or the property owner.

(14) Subcontractors. If any obligation is performed for or on behalf of Grantee through a consultant, contractor or subcontractor, Grantee shall remain fully responsible for the performance of all obligations under this Agreement and Grantee shall be solely responsible for all payments due to its contractors, consultants, or subcontractors. No contract, subcontract, or other agreement entered into by Grantee with any third party in connection with this Agreement, or for or in relation to the use of the Grant Funds, shall provide for any indemnity, guarantee, or assumption of liability by, or other obligation of, County with respect to such arrangement. No contractor, consultant, or subcontractor will be deemed a third party beneficiary for any purposes under or to this Agreement.

(15) Nonexclusive Agreement . Grantee agrees that this Agreement is non-exclusive and County may at any time, in it s sole discretion, enter into agreements with other parties for any purpose deemed to be in the best interest of the County.

(16) Paragraph Headings. The headings and captions of the various paragraphs and subparagraphs hereof are for convenience only, and they shall not limit, expand, or otherwise affect the construction or interpretation of this Agreement.

(17) Cumulative Remedies. The rights and remedies of the Parties to this Agreement, whether pursuant to this Agreement or in accordance with law, shall be construed as cumulative, and the exercise of any single right or remedy shall constitute neither a bar to the exercise of nor the waiver of any other available right or remedy.

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(18) Counterparts and Electronic Signatures. This Agreement may be executed in any number of counterparts, and all of such counterparts so executed together shall be deemed to constitute one and the same agreement, and each such counterpart shall be deemed to be an original provided all of the Parties have fully executed the Agreement.

Unless otherwise prohibited by law or County policy, the parties agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term “electronic copy of a signed contract” refers to a transmission by facsimile, electronic mail, or other electronic means of a copy of an original signed contract in a portable document format. The term “electronically signed contract” means a contract that is executed by applying an electronic signature using technology approved by the County.

(19) Construction/Severability. This Agreement shall not be construed more strongly against either Party regardless of who is more responsible for its preparation. If any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate or render unenforceable any other part of this Agreement, but the Agreement shall be construed as not containing the particular provision or provisions held to be invalid or unenforceable.

(20) Authority. Each Party represents and warrants that it has executed this Agreement freely, fully intending to be bound by the terms and provisions contained in this Agreement and that the persons signing below are authorized to sign on each Party’s behalf.

(21) Office of Foreign Assets Control Compliance. Grantee represents to County that:
(a) Grantee and each of the Grantee Representatives are not acting, and shall not act, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule or regulation enforced or administered by the federal Office of Foreign Assets Control; and (b) Grantee, and the Grantee Representatives, are not engaged in this transaction, directly or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of any such person, group, entity, or nation.

(22) County Regulatory Authority. Grantee acknowledges and agrees that County, acting not as landlord but in its governmental regulatory capacity, has certain governmental regulatory authority over the Premises and that nothing in this Agreement binds the County to exercise or refrain from exercising this discretionary governmental authority in any particular manner.

(23) Bribery Clause. Grantee certifies, represents, and warrants that Grantee and the Grantee Representatives have not been convicted of bribery or attempting to bribe an officer or employee of County or any other municipality or state entity nor has Grantee or any of the Grantee Representatives made an admission of guilt of such conduct which is a matter of record.

Attachment A - Lease Agreement

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(24) Wage Theft Prevention.

a. Compliance with Wage and Hour Laws. Grantee, and any the Grantee Representatives it employs or contracts with to complete work under this Agreement, must comply with all applicable federal, state, and local wage and hour laws. Applicable laws may include, but are not limited to, the Federal Fair Labor Standards Act, the California Labor Code, and any local Minimum Wage Ordinance or Living Wage Ordinance.

b. Final Judgments, Decisions, and Orders. For purposes of this Section, a “final judgment, decision, or order” refers to one for which all appeals have been exhausted. Relevant investigatory government agencies include: the Federal Department of Labor, the California Division of Labor Standards Enforcement, a local enforcement agency, or any other government entity tasked with the investigation and enforcement of wage and hour laws.

c. Prior Judgments against Grantee. By signing this Agreement, grantee affirms that it has disclosed any final judgments, decisions, or orders from a court or investigatory government agency finding—in the five years prior to executing this Agreement—that Grantee has violated any applicable wage and hour laws.

Grantee further affirms that it has satisfied and complied with—or has reached agreement with the County regarding the manner in which it will satisfy—any such judgments, decisions, or orders.

d. Judgments During Term of Contract. If at any time during the term of this Agreement, a court or investigatory government agency issues a final judgment, decision, or order finding that Grantee or any subcontractor it employs to perform work under this Agreement has violated any applicable wage and hour law, or Grantee learns of such a judgment, decision, or order that was not previously disclosed, Grantee must inform the Office of the County Executive-Office of Countywide Contracting Management (OCCM), no more than 15 days after the judgment, decision, or order becomes final or of learning of the final judgment, decision, or order. Grantee and its subcontractors shall promptly satisfy and comply with any such judgment, decision, or order, and shall provide the Office of the County Executive-OCCM with documentary evidence of compliance with the final judgment, decision, or order within 5 days of satisfying the final judgment, decision, or order. County reserves the right to require Grantee to enter into an agreement with the County regarding the manner in which any such final judgment, decision, or order will be satisfied.

e. County’s Right to Withhold Payment. Where Grantee has been found in violation of any applicable wage and hour law by a final judgment, decision, or order of a court or government agency, the County reserves the right to withhold payment to Grantee until such judgment, decision, or order has been satisfied in full.

f. Material Breach. Failure to comply with any part of this Section constitutes a material breach of this Agreement. Such breach may serve as a basis for termination of this Agreement and/or any other remedies available under this Agreement and/or law.

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g. Notice to County Related to Wage Theft Prevention. Notice provided to the Office of the County Executive as required under this Section shall be addressed to: Office of the County Executive—OCCM; 70 West Hedding Street; East Wing, 11th Floor; San José, CA 95110. The Notice provisions of this Section are separate from any other notice provisions in this Agreement and, accordingly, only notice provided to the above address satisfies the notice requirements in this Section.

(25) Prevailing Wage. Grantee acknowledges and agrees that work performed under this Agreement may be considered a public work within the meaning of California Labor Code Section 1720 and that the requirements of Section 1771, et. seq. apply to such public work.

Grantee has included (and will include) consideration for this obligation in calculating compensation under this Agreement, if such prevailing wage requirements are applicable.

Grantee is solely responsible and liable for ensuring compliance with all applicable prevailing wage laws. County may at any time, without obligation to do so, audit Grantee to verify whether Grantee is in compliance with prevailing wage laws. Grantee shall cooperate with all such audits, including making available and providing copies, during the period 9:00 a.m. to 5:00 p.m., Monday through Friday, any and all records requested by County to verify compliance promptly upon request, but not later than seventy-two hours after such request.

(26) Insurance. Grantee shall provide insurance and comply with all insurance and other terms and conditions set out in the attached Exhibit C.

(27) Intellectual Property. Grantee acknowledges, represents, warrants, and agrees that Grantee owns and holds the full rights to any and all images, paintings, art work, photographs, depictions, videos, other digital representations and other intellectual property (the “Intellectual Property”) that Grantee produces, creates, generates, uses or provides as a part of the Project, and Grantee does hereby assign, transfer and grant to the County of Santa Clara the non- exclusive, non-revocable, perpetual, worldwide license to use the Intellectual Property for any County purpose, including but not limited to the right to post, reproduce, market, print, copy, use in any form and in social media or the internet, use in any marketing or advertising, display, publicly perform, publish, broadcast, distribute, combine or distribute the Intellectual Property or any of the intellectual property rights contained therein for County’s sole use, excluding the right to sell, transfer or assign any of the Intellectual Property. Grantee further waives any right it may have to inspect, view, or approve any of the uses made of the Intellectual Property.

Grantee hereby forever releases, discharges, and agrees to save and hold harmless County, its employees, agents, representatives and Board of Supervisors, from, for and against any and all liabilities, claims, causes of action, allegations and lawsuits that are made or threatened to be made in relation to any use made of any of the Intellectual Property, including but not limited to any blurring, distortion, alteration, optical illusion or use in composite or edited form, whether intentional or otherwise, that may occur or be produced in the use of any of the Intellectual Property or the processing of the Intellectual Property.

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(28) Exhibits. The following exhibits are attached to this Agreement and are incorporated herein by this reference.

Exhibit A – Historic Grant Program Procedural Guide
Exhibit B – Grant Application
Exhibit C – Insurance Requirements and Proof of Insurance

(29) Survival. All terms and conditions that by their nature should survive termination or expiration of this Agreement, shall so survive including but not limited to Sections 1, 2, 3, 5, 6, 8, and 9 inclusive.

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Attachment A - Lease Agreement

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Historic Grant Agreement (Program One-Round 1) CAPITAL
By and between the City of Palo Alto and the County of Santa Clara for the ‘Restoration of the Original Clay Tile Roof of the Historic Roth Building’ Project

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as provided below, effective as of the last date signed by all the Parties (“Effective Date”).

Grantee:

Ed Shikada, City Manager
City of Palo Alto
Dated:

Approved as to form:
7HUHQFH+RZ]HOO, &KLHI$VVLVWDQW&LW\$WWRUQH\
City of Palo Alto
COUNTY OF SANTA CLARA:

Sylvia Gallegos
Deputy County Executive
Date:

Approved as to form and legality:
(OL]DEHWK9LVVHUV
Deputy County Counsel

Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

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GRANT F

UNDING AGREEMENT
Between the County of Santa Clara and the City of Palo Alto for Restoration and Repair of the Roth Building Elevator (Fiscal Year 2022 Historic Heritage Grant Funds, $350,000) Thi
s Grant Funding Agreement (“Agreement”) is made and entered into as of the last date signed below by all parties (“Effective Date”) by and between the County of Santa Clara, a political subdivision of the State of California (“County”), and the City of Palo Alto, a California municipality, with its primary offices located at 250 Hamilton Ave, Palo Alto, CA 94301 (“Grantee”). County and Grantee shall sometimes be referred to herein individually as a “Party” or collectively as the “Parties.”
RECIT
ALS
WH
EREAS, the Grantee submitted an application to the County’s Historical Heritage Commission (“Historical Heritage Commission” or “Commission”) for funding of the Restoration and Repair of the Roth Building Elevator (“Project”) located at 300 Homer Avenue, Palo Alto, CA 94301;
WH
EREAS, the Project includes the restoration and repair of the Roth Building’s 1940’s Otis Elevator, as more fully described in Attachment A “Scope of Work and Itemized Project Budget” incorporated and made a part of this Agreement by reference herein; WH
EREAS, the Historical Heritage Commission, on April 21, 2022, reviewed the merits of the Grantee’s application and forwarded its recommendation to the Board of Supervisors that it approve the allocation of $350,000 (Three-hundred fifty thousand dollars) from the Fiscal Year 2022 Historical Heritage Park Charter Development Funds to assist the Grantee with the Project; WH
EREAS, the Board of Supervisors reviewed the information provided in support of the Project and found that the Project meets the requirements for use of Park Charter Development funds in Section 604 (b) of the County Charter; and,
WH
EREAS, the Board of Supervisors on June 7, 2022, reviewed and approved the recommendation of the Historical Heritage Commission to allocate $350,000 (“Grant”) to assist with the Project, which will acknowledge, preserve, and commemorate the historical and cultural heritage of the Santa Clara Valley.

NOW
, THEREFORE, in consideration of the mutual promises, covenants, and conditions herein, County and Grantee agree to the foregoing and as follows:

DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E X
Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

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SECTI
ON I. GRANTEE RESPONSIBILITIES
The
County and Grantee agree that the foregoing recitals of the Agreement are the basis for and incorporated into and made a part of this Agreement as terms and conditions. The County and Grantee further agree that County funding is subject to the following conditions:

A. Gen
eral.

Gr
antee, at Grantee’s sole cost and expense, shall perform or cause to be performed the Scope of Work described in Attachment A, and the Grantee shall act promptly and without delay with respect to such matters in relation to the Project. In performing the Project, the Grantee agrees to the following terms and conditions.
(1) Appr
ovals.
(a) G
rantee shall prepare all environmental documents and take all other actions required for approval and completion of the Project pursuant to the California Environmental Quality Act, National Environmental Policy Act, and any rules and/or regulations promulgated thereunder and any other applicable laws. (b) G
rantee shall secure all required approvals, including approvals from government agencies required for completion of the Project. (c) G
rantee warrants, represents, and agrees that, except where otherwise expressly prohibited by state or federal law, Grantee, as the applicant for any discretionary land use permit, development permit, license, authorization, entitlement, or other approval from County, will defend, indemnify, and hold harmless County and its officers, agents, employees, boards and commissions from, for and against any claim, action or proceeding brought by any person or entity (“third party”) other than the Grantee against County or its officers, agents, employees, boards, or commissions that arises from or is in any way related to the approval, including but not limited to claims, actions, or proceedings to attack, set aside, void, or annul the approval. County has the right to participate in the defense of any claim, action, or proceeding. This indemnity shall not apply to the gross negligence or willful misconduct of County, or of its agents, officers, employees, boards, or commissions. (2) Ac
knowledgements.
(a)
Grantee shall publicly acknowledge the Grant by providing a plaque permanently affixed to the building exterior, or on a prominent location on the Project site, visible to the public. The acknowledgement credit shall read:
“Restoration made possible in part by a grant from the County of Santa Clara DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
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Pa
rks and Recreation Department’s Historical Heritage Grant Program.” Grantee shall obtain County Parks and Recreation Department review and approval of the plaque or sign prior to manufacture and installation. (b
) Grantee shall publicly acknowledge the Grant by giving credit to County in project-related materials including newsletters, brochures, and internet messages.
(3) Re
ports and Documentation.
(a)
Grantee shall submit a bi-annual written project accomplishment report for the Project to the County Parks and Recreation Department no later than November 1 and May 1 of each year, until the Project is completed and reimbursement received.
(b) G
rantee shall provide any documentation the Historical Heritage Commission requests regarding the Project. This includes, but is not limited to, documents before construction work begins in order to ensure that the proposed Project is consistent with the United States Secretary of the Interior’s standards for rehabilitation, preservation, and restoration of historic properties. (c) G
rantee shall make a presentation at a regularly scheduled Historical Heritage Commission meeting discussing the completed Project within three (3) months of Project completion. The Grantee shall print and distribute the same photos that were submitted with the final reimbursement request to the Commission members at the presentation. County Parks and Recreation Department Staff will facilitate the scheduling of the presentation.
(4) Addi
tional Conditions for Artwork Restoration
(a) If th
e Scope of Work involves the restoration or alteration of an artwork, mural, or other original work of authorship within the meaning of 17 U.S.C. § 102, Grantee shall obtain a License from the owner of the copyright to the work prior to requesting funding. This License must grant the right to (1) reproduce the copyrighted work; (2) prepare derivative works based upon the copyrighted work; (3) distribute copies of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; and (4) display the copyrighted work publicly. As a condition of the Agreement, Grantee must assign its license to the County.

B. Ca
pital Contributions.
(1) Gr
antee shall expend the Grant exclusively for third-party expenses arising from services, permits, fees, labor, materials, and equipment required for the Scope of DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
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the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

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Wor
k and Itemized Project Budget specified in Attachment A for completion of the Project. No contribution made by County shall be used for Grantee’s internal salary or administrative expenses, including office overhead or expenses. (2) Gr
antee shall successfully demonstrate expenditure of Grantee’s cash contribution funds to County’s satisfaction prior to reimbursement through the Grant. Additional funds needed to complete the Project shall be identified in Attachment A, Scope of Work and Itemized Project Budget.
(3) Count
y recognizes that the Itemized Project Budget identified in Attachment A is an estimate and may include a contingency. To the extent that costs qualifying for reimbursement through the Grant vary from this budget, the following provisions apply:
(a) For
work to be performed that is funded by both Grantee and County as reflected in Attachment A, if Grantee’s Cash Contribution for any itemized work to be performed is reduced, then the Grant contribution shall be reduced by the same percentage;
(b) Ad
justments may be made in the costs associated with Project elements to reflect actual costs, however material changes (even if there is minor or no change in cost) that will affect the restoration or preservation of a historical element, or changes that would necessitate County funding of a non- preservation element that the Grantee was financing with other funds, must be approved by the Historical Heritage Commission. The Commission shall have sole discretion whether to approve or disapprove such adjustments. (c) G
rantee is solely responsible for expenditures that may exceed the Grant amount.

C. Pr
evailing Wages.

The
Project is a public work within the meaning of Labor Code Section 1720, to which the provisions of Labor Code Section 1770 et seq. apply. Grantee shall comply with all of the applicable provisions of the Labor Code, including, but not limited to, payment of prevailing wages. The Grantee shall include prevailing wage requirements in all agreements with third parties for work or services needed to complete the Project. Grantee is hereby notified that prevailing wage must meet the general prevailing rate of per diem wages and the rates for overtime and holiday work in the locality in which the work is to be performed for each craft, classification or type of worker needed to perform the work, as specified by the Director of Industrial Relations.

Grantee are further notified that this Project is subject to compliance monitoring and enforcement by the Department of Industrial Relations. Further information on Compliance Monitoring Unit requirements can be found at https://www.dir.ca.gov/dlse/cmu/cmu.html.

DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

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The
Labor Code requires Grantee’s compliance with the Department of Industrial Relations (DIR) electronic certified payroll reporting (eCPR) requirements which took effect on January 1, 2016.

No contract can be awarded unless the public works project has been registered with the Department of Industrial Relations. Subcontractors used on the project must also comply.

Additional information is available at http://www.dir.ca.gov/Public-Works/PublicWorks.html.

Gr
antee agrees to comply with all related provisions of the Labor Code, including but not limited to, the provisions of Labor Code Section 1775 relating to the payment of prevailing wages, Section 1777.5 relating to the employment of apprentices, and Section 1811-1813 relating to the payment of Overtime and provisions pertaining to eCPR compliance.

D. Pro
ject Conformance with the Secretary of the Interior’s Standards.

The
Project and the property upon which the Project is located shall at all times conform to the Secretary of the Interior’s Standards for the Treatment of Historic Properties. Should Grantee’s implementation of the Scope of Work fail to conform to the Secretary of the Interior’s Standards, the County may, at its sole discretion, withhold reimbursement until Grantee cures the issue.

E. Term
of Agreement.
(1) T
his Agreement is effective on the Effective Date as stated above and shall remain in effect for three (3) years from the Effective Date (“Term”). If the Project is completed before the expiration of the Term, the Agreement shall then expire on an agreed upon date by the parties or as otherwise determined by County in its sole discretion.
(2) G
rantee shall complete the Project and demonstrate the Project to be fully usable within the Term. County may, at its sole discretion, approve an extension for demonstrated delays not within the control of Grantee. The Grantee must request the extension in writing no later than three (3) months prior to the expiration of the Term.
(3) If
Grantee fails to complete the Project within the required timeframe and does not receive an extension pursuant to this section, or if the Project does not conform to the Scope of Work in Attachment A, the Grantee shall return all awarded Grant funds to the County. The County may, at its sole discretion, agree in writing to accept a partially completed Project or a Project that does not conform to the Scope of Work.

F. Ope
ration and Maintenance.

Up
on completion of the Project, the Grantee represents and warrants that it shall open the property upon which the Project is located to the public, and continuously operate and maintain the property and the Project for the benefit of the public for a period of at least twenty (20) years. Grantee shall DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

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ma
intain the property in good operating condition during this period of time. Grantee shall be solely responsible for ongoing maintenance and operation.

G. Te
rmination
The
County may, upon written notice to Grantee, terminate all or part of this Agreement at any time for County’s convenience. Upon receipt of such notice, Grantee must immediately cease all work on the date and in the manner specified in the notice. Upon termination, County shall reimburse Grantee for eligible costs incurred pursuant to Section II of this Agreement. County is under no obligation to reimburse for work not yet completed or work that does not conform to the approved Scope of Work and Itemized Project Budget.

SECTI
ON II. COMPENSATION AND REIMBURSEMENT
A. Re
imbursement Amount.

Count
y shall reimburse the Grantee in an amount not to exceed the maximum Grant amount of $350,000 for eligible costs. County’s obligation to pay is expressly conditioned upon the Grantee’s demonstrated compliance with all of the terms and conditions of this Agreement and the availability of Grant funds.

B. Rei
mbursement Requirements.
(1)
Grant funds shall be issued on a reimbursement basis only. No advanced funds shall be issued. Grantee shall keep accurate accounting records of all Project expenditures. Reimbursement shall be limited to expenditures for work approved in the Scope of Work and Itemized Project Budget (Attachment A). Expenditures shall be incurred during the Term.
(2) Rei
mbursement requests may be submitted at Grantee’s convenience but shall not exceed one request per quarter, and the Project shall have accrued at least $1,000 in claimable expenditures during that quarter. Grantees must provide the following:
(a) H
HGP Payment Request Form completed and signed by the authorized representative.
(b) HHGP Project Expenditure Worksheet which clearly shows the relationship between expenditures and the grant scope of work deliverables in the grant funding agreement.
(c) Itemized invoice(s) demonstrating expenditure of eligible costs. All Project invoices must be directed to the Grantee.
(d) Evidence that all invoices have been paid. For example, a clear copy of both sides of a check or warrant issued to pay said invoices, or a receipt evidencing such payment. Bank account statements will not be accepted.

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(e) Pro
ject Accomplishment Report that may include photos and construction inspection reports as applicable.
(3) If G
rantee is providing cash contribution funds, such funds shall be utilized before requests for reimbursement are made for HHGP funds. Documentation substantiating the expenditure of Grantee’s cash contribution funds must be provided with the first reimbursement request.
(4) I
f a reimbursement request is incomplete, County may, at its sole discretion, pay that part of the reimbursement request that is complete or decline payment until the reimbursement request is complete. If the reimbursement request is satisfactory, the County shall endeavor to provide payment to the grantee within sixty (60) days of a complete submittal.
(5)
Upon Project completion, the Grantee shall submit a final reimbursement request that includes all the items required in a standard reimbursement request and at least four photographs of the completed project and additional photographs of the permanently installed HHGP funding acknowledgement sign. (6) F
inal reimbursement requests shall be submitted at least sixty (60) days prior to the expiration of this Agreement. It is the responsibility of the Grantee to be knowledgeable of the Agreement expiration date, to ensure timely completion of the Project and take all required steps to ensure receipt of reimbursement funds.

C. Pr
oject Records, County Audit and Inspection.
(1) G
rantee shall be responsible for maintaining fiscal controls and fund accounting procedures that show the following:
(a) T
he disposition of the proceeds of Grant funds provided to Grantee; (b) T
he total costs of the Project;
(c) T
he amount and nature of that portion of the Project cost supplied by other sources; and,
(d) A
ny other records and controls that will facilitate an effective audit. (2) The
fiscal controls and accounting procedures used to record Project costs and fund receipts shall be based on generally accepted accounting standards and principles.

Grantee shall maintain Project records (including paper and electronic media, as appropriate) showing compliance with all aspects of this Agreement for three (3) years after completion of the Project or until all claims are settled, whichever occurs last. All Project records shall be available to County within five (5) working DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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days
of County’s reasonable notice. If the County determines that the Grantee used the Grant for ineligible costs, or other terms of the Agreement were breached, County may take any action permitted by law and any authorized actions under this Agreement and require Grantee to repay the Grant, with interest at the rate earned on County’s investments, and the cost of the audit.
(3)
In addition to an audit of Project Records, Grantee shall provide consent to County to access the Project during business hours any time during construction, and, following completion of the Project, during business hours following reasonable notice by County.

SECTI
ON III. INDEMNIFICATION
Gr
antee covenants, warrants, represents, and agrees that it shall indemnify, defend, save, and hold harmless the County and all of its employees, officers, directors, attorneys, agents, contractors, successors and assigns in accordance with the indemnification provisions of Exhibit C, which is incorporated herein and made a part of this Agreement by this reference.

SECTI
ON IV. NOTICES
An
y notices provided pursuant to this Agreement shall be sent by regular mail to the respective parties addressed as follows:

COUNTY OF SANTA CLARA GRANTEE
Director
Parks and Recreation Department
298 Garden Hill Drive
Los Gatos, CA 95032
Phone: (408) 355-2220
Ed Shikada, City Manager
City of Palo Alto
250 Hamilton Ave
Palo Alto, CA 94301
650-329-2280
SECTI
ON V. MISCELLANEOUS
A. En
tire Agreement.

Th
is document represents the entire agreement between the Parties in relation to the subject matter contained herein. All prior negotiations and written and/or oral agreements between the Parties with respect to the subject matter of the Agreement are merged into this Agreement.

B. Amendments. This Agreement may only be amended by a written instrument signed by authorized representatives of both Parties.

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C. Co
nflict of Interest.
(1) Gr
antee shall comply, and require its subcontractors to comply, with all applicable (i) requirements governing avoidance of impermissible client conflicts; and (ii) federal, state and local conflict of interest laws and regulations including, without limitation, California Government Code section 1090 et. seq., the California Political Reform Act (California Government Code section 87100 et. seq.) and the regulations of the Fair Political Practices Commission concerning disclosure and disqualification (2 California Code of Regulations section 18700 et. seq.). Failure to do so constitutes a material breach of this Agreement and is grounds for immediate termination of this Agreement by County.
(2) In a
ccepting this Agreement, Grantee covenants that it presently 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 this Agreement. Grantee further covenants that, in the performance of this Agreement, it will not employ any contractor or person having such an interest.

Grantee subcontractors, may be subject to the disclosure and disqualification provisions of the California Political Reform Act of 1974 (the “Act”), that (1) requires such persons to disclose economic interests that may foreseeably be materially affected by the work performed under this Agreement, and (2) prohibits such persons from making or participating in making decisions that will foreseeably financially affect such interests.
(3) If the
disclosure provisions of the Political Reform Act are applicable to any individual providing service under this Agreement, Grantee shall, upon execution of this Agreement, provide County with the names, description of individual duties to be performed, and email addresses of all individuals, including but not limited to Grantee’s employees, agents and subcontractors, who could be substantively involved in “mak[ing] a governmental decision” or “serv[ing] in a staff capacity” and in that capacity participating in making governmental decisions or performing duties that would be performed by an individual in a designated position, (2 CCR 18700.3), as part of Grantee’s service to County under this Agreement. Grantee shall immediately notify County of the names and email addresses of any additional individuals later assigned to provide such service to County under this Agreement in such a capacity. Grantee shall immediately notify County of the names of individuals working in such a capacity who, during the course of the Agreement, end their service to County.
(4) If the
disclosure provisions of the Political Reform Act are applicable to any individual providing service under this Agreement, Grantee shall ensure that all DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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suc
h individuals identified pursuant to this section understand that they are subject to the Act and shall conform to all requirements of the Act and other applicable laws and regulations, including but not limited to those listed in subpart (ii) of the first sentence of this Section VI.C including, as required, filing of Statements of Economic Interests within 30 days of commencing service pursuant to this Agreement, annually by April 1, and within 30 days of their termination of service pursuant to this Agreement.

D. Governing Law, Venue.

Thi
s Agreement, and all the rights and duties of the parties arising from or relating in any way to the subject matter of this Agreement or the transaction(s) contemplated by it, shall be governed by, construed, and enforced in accordance with the law of the State of California (excluding any conflict of laws provisions that would refer to and apply the substantive laws of another jurisdiction). Any suit or proceeding relating to this Agreement, including arbitration proceedings, shall be brought only in Santa Clara County, California. EACH OF THE

PARTIES CONSENT TO THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE

OF THE COURTS, STATE AND FEDERAL, LOCATED IN SANTA CLARA COUNTY, CALIFORNIA.

E. Assi
gnment.

No a
ssignment of this Agreement or of any of the rights or obligations hereunder shall be valid without the prior written consent of County.

F. Waive
r.

No de
lay or omission by either Party hereto to exercise any right occurring upon any noncompliance or default by the other Party with respect to any of the terms of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by either of the Parties hereto of any of the covenants, conditions, or agreements to be performed by the other shall not be construed to be a waiver of any succeeding breach thereof or of any covenant, condition, or agreement herein contained.

G. Co
mpliance with All Laws, Including Nondiscrimination, Equal Opportunity, and Wage Theft Prevention.
(1) Gr
antee shall comply with all applicable Federal, State, and local laws, regulations, rules, and policies (collectively, “Laws”), including but not limited to the non-discrimination, equal opportunity, and wage and hour Laws referenced in the paragraphs below.
(2) Gr
antee shall comply with all applicable Laws concerning nondiscrimination and equal opportunity in employment and contracting, including but not limited to the DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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follo
wing: Santa Clara County’s policies for contractors on nondiscrimination and equal opportunity; Title VII of the Civil Rights Act of 1964 as amended; Americans with Disabilities Act of 1990; the Age Discrimination in Employment Act of 1967; the Rehabilitation Act of 1973 (Sections 503 and 504); the Equal Pay Act of 1963; California Fair Employment and Housing Act (Gov. Code § 12900 et seq.); California Labor Code sections 1101, 1102, and 1197.5; and the Genetic Information Nondiscrimination Act of 2008. In addition to the foregoing, Grantee shall not discriminate against any subcontractor, employee, or applicant for employment because of age, race, color, national origin, ancestry, religion, sex, gender identity, gender expression, sexual orientation, mental disability, physical disability, medical condition, political belief, organizational affiliation, or marital status in the recruitment, selection for training (including but not limited to apprenticeship), hiring, employment, assignment, promotion, layoff, rates of pay or other forms of compensation. Nor shall Grantee discriminate in the provision of services provided under this contract because of age, race, color, national origin, ancestry, religion, sex, gender identity, gender expression, sexual orientation, mental disability, physical disability, medical condition, political beliefs, organizational affiliations, or marital status. (3) Gr
antee shall comply with all applicable wage and hour Laws, which may include but are not limited to, the Federal Fair Labor Standards Act, the California Labor Code, and, if applicable, any local minimum wage, prevailing wage, or living wage Laws.
(4) For
purposes of this Section V.G, the following definitions shall apply. A “Final Judgment” shall mean a judgment, decision, determination, or order (a) which is issued by a court of law, an investigatory government agency authorized by law to enforce an applicable Law, an arbiter, or arbitration panel and (b) for which all appeals have been exhausted or the time period to appeal has expired. For pay equity Laws, relevant investigatory government agencies include the federal Equal Employment Opportunity Commission, the California Division of Labor Standards Enforcement, and the California Department of Fair Employment and Housing. Violation of a pay equity Law shall mean unlawful discrimination in compensation on the basis of an individual’s sex, gender, gender identity, gender expression, sexual orientation, race, color, ethnicity, or national origin under Title VII of the Civil Rights Act of 1964 as amended, the Equal Pay Act of 1963, California Fair Employment and Housing Act, or California Labor Code section 1197.5, as applicable. For wage and hour Laws, relevant investigatory government agencies include the federal Department of Labor, the California Division of Labor Standards Enforcement, and the City of San Jose’s Office of Equality Assurance.
(5) By s
igning this Agreement, Grantee affirms that it has disclosed any final judgments that (A) were issued in the five years prior to executing this Agreement DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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by a c
ourt, an investigatory government agency, arbiter, or arbitration panel and (B) found that Grantee violated an applicable wage and hour law or pay equity law. Grantee further affirms that it has satisfied and complied with – or has reached Agreement with the County regarding the manner in which it will satisfy – any such final judgments.
(6) If a
t any time during the term of this Agreement, Grantee receives a Final Judgment rendered against it for violation of an applicable wage and hour Law or pay equity Law, then Grantee shall promptly satisfy and comply with any such Final Judgment. Grantee shall inform the Office of the County Executive-Office of Countywide Contracting Management (OCCM)of any relevant Final Judgment against it within 30 days of the Final Judgment becoming final or of learning of the Final Judgment, whichever is later. Grantee shall also provide any documentary evidence of compliance with the Final Judgment within 5 days of satisfying the Final Judgment. Any notice required by this paragraph shall be addressed to the Office of the County Executive-OCCM at 70 W. Hedding Street, East Wing, 11th Floor, San José, CA 95110. Notice provisions in this paragraph are separate from any other notice provisions in this Agreement and, accordingly, only notice provided to the Office of the County Executive-OCCM satisfies the notice requirements in this paragraph.
(7)
In addition to and notwithstanding any other provision of this Agreement concerning access to Grantee’s records, Grantee shall permit the County and/or its authorized representatives to audit and review records related to compliance with applicable pay equity Laws. Upon the County’s request, Grantee shall provide the County with access to any and all facilities and records, including but not limited to financial and employee records, that are related to the purpose of this Section V.G, except where prohibited by federal or state laws, regulations or rules. County’s access to such records and facilities shall be permitted at any time during Grantee’s normal business hours upon no less than 10 business days’ advance notice.
(8) G
rantee shall (1) at least once in the first year of this Agreement and annually thereafter, provide each of its employees working in California and each person applying to Grantee for a job in California (collectively, “Employees and Job Applicants”) with an electronic or paper copy of all applicable pay equity Laws or (2) throughout the term of this Agreement, continuously post an electronic copy of all applicable pay equity Laws in conspicuous places accessible to all of Grantee’s Employees and Job Applicants.
(9) M
aterial Breach: Failure to comply with any part of this section shall constitute a material breach of this Agreement. In the event of such a breach, the County may, in its discretion, exercise any or all remedies available under this Agreement and at law. County may, among other things, take any or all of the following actions:

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(a) S
uspend or terminate any or all parts of this Agreement. (b) Withhold payment to Grantee until full satisfaction of a Final Judgment concerning violation of an applicable wage and hour Law or pay equity Law. (c) Offer Grantee an opportunity to cure the breach.
(10) G
rantee shall impose all of the requirements set forth in this Section V.G on any subcontractors permitted to perform work under this Agreement. This includes ensuring that any subcontractor receiving a Final Judgment for violation of an applicable Law promptly satisfies and complies with such Final Judgment.

H. County No-Smoking Policy.

Gr
antee and its employees, agents, contractors, subcontractors and consultants, shall comply with the County’s No-Smoking Policy, as set forth in the Board of Supervisors Policy Manual section 3.47 (as amended from time to time), which prohibits smoking: (1) at the Santa Clara Valley Medical Center Campus and all County-owned and operated health facilities, (2) within 30 feet surrounding County- owned buildings and leased buildings where County is the sole occupant, and (3) in all County vehicles.

I. Foo
d and Beverage Standards.

Exc
ept in the event of an emergency or medical necessity, County’s nutritional standards shall apply to any foods and/or beverages purchased by Grantee with Grant Funds for County-sponsored meetings or events.

J. Ca
lifornia Public Records Act.

Al
l documents and records provided to or made available to County under this Agreement become the property of the County, which is a public agency subject to the disclosure requirements of the California Public Records Act (“CPRA”). If Grantee proprietary information is contained in documents submitted to County, and Grantee claims that such information falls within one or more CPRA exemptions, Grantee must clearly mark such information “CONFIDENTIAL AND PROPRIETARY,” and identify the specific lines containing the information. In the event of a request for such information, County will make reasonable efforts to provide notice to Grantee prior to such disclosure. If Grantee contends that any documents are exempt from the CPRA and wishes to prevent disclosure, it is required at its own cost, liability, and expense to obtain a protective order, injunctive relief, or other appropriate remedy from a court of law in Santa Clara county before the County responds to the CPRA request. If Grantee fails to obtain such a remedy before County responds to the CPRA request, County may disclose the requested information and shall not be liable or responsible for such disclosure.

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Gr
antee further warrants, represents, and agrees that it shall defend, indemnify, and hold County harmless against any and all claims, actions or litigation (including but not limited to all judgments, costs, fees, and attorney’s fees) that may result from denial by County of a CPRA request for any information arising from any representation, or any action (or inaction), by the Grantee, its contractors, consultants, employees, agents, or representatives.

K. No Third-Party Beneficiaries.

Thi
s Agreement does not, and is not intended to, confer any rights or remedies upon any person or entity other than the Parties signing this Agreement. Subcontractors, sponsors, and affiliates shall have no right or claim attaching to this Agreement or to the Grant Funds and are not third-party beneficiaries of or to this Agreement.

L. Re
lationship of the Parties.

Th
e Parties acknowledge and agree that nothing set forth in this Agreement shall be deemed or construed to render the parties as joint venturers, partners, agents, a joint enterprise, employer- employee, or lender-borrower. Grantee shall have no authority to employ any person as employee or agent on behalf of County for any purpose. Neither Grantee nor any person using or involved in or participating in the Project or in the use of the Grant Funds shall be deemed a third party beneficiary to this Agreement nor an employee or agent of County, nor shall any such person represent himself or herself to others as a third party beneficiary to this Agreement or as an employee or agent of County.

M. No
Indemnification and Insurance by County.

Not
hing contained in this Agreement is to be construed as an indemnification by County for any loss, damage, injury or death arising out of or caused, in whole or in part, by the County or its Board of Supervisors, officers, executives, attorneys, employees, agents, representatives, contractors or subcontractors. Nothing contained herein shall be construed to, and nothing shall, obligate the County to provide any insurance, indemnity, or protection for or on behalf of any third party, the Project, or the property owner.

N. Subco
ntractors.

If
any obligation is performed for or on behalf of Grantee through a consultant, contractor, or subcontractor, Grantee shall remain fully responsible for the performance of all obligations under this Agreement and Grantee shall be solely responsible for all payments due to its contractors, consultants, or subcontractors. No contract, subcontract, or other agreement entered into by Grantee with any third party in connection with this Agreement, or for or in relation to the use of the Grant Funds, shall provide for any indemnity, guarantee, or assumption of liability by, or other obligation of, County with respect to such arrangement. No contractor, consultant, or subcontractor will be deemed a third-party beneficiary for any purposes under or to this Agreement.

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O. Nonexclusive Agreement.

Gr
antee agrees that this Agreement is non-exclusive and County may at any time, in its sole discretion, enter into agreements with other parties for any purpose deemed to be in the best interest of the County.

P. Par
agraph Headings.

The
headings and captions of the various paragraphs and subparagraphs hereof are for convenience only, and they shall not limit, expand, or otherwise affect the construction or interpretation of this Agreement.

Q. Cu
mulative Remedies.

Th
e rights and remedies of the Parties to this Agreement, whether pursuant to this Agreement or in accordance with law, shall be construed as cumulative, and the exercise of any single right or remedy shall constitute neither a bar to the exercise of nor the waiver of any other available right or remedy.

R. Co
unterparts and Electronic Signatures.

Th
is Agreement may be executed in several counterparts, and all of such counterparts so executed together shall be deemed to constitute one and the same agreement, and each such counterpart shall be deemed to be an original. Unless otherwise prohibited by law or County policy, the Parties agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term “electronic copy of a signed contract” refers to a transmission by facsimile, electronic mail, or other electronic means of a copy of an original signed contract in a portable document format. The term “electronically signed contract” means a contract that is executed by applying an electronic signature using technology approved by the County.

S. Construction/Severability.

Th
is Agreement shall not be construed more strongly against either Party regardless of who is more responsible for its preparation. If any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate or render unenforceable any other part of this Agreement, but the Agreement shall be construed as not containing the particular provision or provisions held to be invalid or unenforceable.

T. Au
thority.

Each
Party represents and warrants that it has executed this Agreement freely, fully intending DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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to be
bound by the terms and provisions contained in this Agreement and that the persons signing below are authorized to sign on each Party’s behalf.

U. Of
fice of Foreign Assets Control Compliance.

Gr
antee represents to County that: (a) Grantee and each of the Grantee Representatives are not acting, and shall not act, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule or regulation enforced or administered by the federal Office of Foreign Assets Control; and (b) Grantee, and the Grantee Representatives, are not engaged in this transaction, directly or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of any such person, group, entity, or nation.

W. Cou
nty Regulatory Authority.

Gr
antee acknowledges and agrees that County, acting not as landlord but in its governmental regulatory capacity, has certain governmental regulatory authority over the Premises and that nothing in this Agreement binds the County to exercise or refrain from exercising this discretionary governmental authority in any particular manner.

X. Bri
bery Clause.

Gr
antee certifies, represents, and warrants that Grantee and the Grantee Representatives have not been convicted of bribery or attempting to bribe an officer or employee of County or any other municipality or state entity nor has Grantee or any of the Grantee Representatives made an admission of guilt of such conduct which is a matter of record.

Y. Insu
rance.

Gr
antee shall provide insurance and comply with all insurance and other terms and conditions set out in the attached Attachment B.

Z. Int
ellectual Property.
(1) County shall own all right, title, and interest in and to the Deliverables. For purposes of this Agreement, the term “Deliverables” shall mean any documentation and deliverables created by Grantee during the performance of services that are identified in this Agreement. Grantee hereby assigns to the County all rights, title and interest in and to any and all intellectual property whether or not patentable or registrable under patent, copyright, trademark or similar statutes, made or conceived or reduced to practice or learned by Grantee, either alone or jointly with others, during the period of Grantee’s agreement with DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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the
County or result from the use of premises leased, owned or contracted for by the County.
(2) Grantee acknowledges that all original works of authorship which are made by Grantee (either solely or jointly with others) within the scope of this Agreement and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C. Section 101), and shall belong solely to County. Grantee agrees that the County will be the copyright owner in all copyrightable works of every kind and description created or delivered by Grantee, either solely or jointly with others, in connection with any agreement with the County.
(3) If Grantee is undertaking a restoration or alteration of an original work of authorship within the meaning of 17 U.S.C. § 102, Grantee covenants that the owner of the copyright has consented to the restoration or alteration work. Grantee further covenants that it possesses a License consistent with Section I.A.4 of this Agreement and that it will assign this License to the County prior to requesting grant funding. Grantee hereby forever releases, discharges, and agrees to save and hold harmless County, its employees, agents, representatives, and Board of Supervisors, from, for and against any and all liabilities, claims, causes of action, allegations and lawsuits that are made or threatened to be made in relation to any use made of any of the Intellectual Property. These claims include, but are not limited to, the Copyright Act of 1976 (17 U.S.C. § 101 et seq.), the Visual Artists Rights Act of 1990 (17 U.S.C. §§106A and 113(d)), the California Art Preservation Act (Cal. Civ. Code §§987 and 989), or any other local, state, foreign or international law, as currently drafted or as may be hereafter amended, that conveys the same or similar rights.

AA.

Survival.

All te
rms and conditions that by their nature should survive termination or expiration of this Agreement, shall so survive including but not limited to Sections I, III, IV, and V.

BB.

Attachments.

The
following attachments are included in this Agreement and are incorporated herein by this reference.

Attachment A – Scope of Work and Itemized Project Budget Attachment B – Insurance Requirements and Proof of Insurance //
//SIGNATURES FOLLOW ON NEXT PAGE////
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as provided below, effective as of the last date signed by all the Parties.

Grantee:

Ed Shikada, City Manager
City of Palo Alto, a California municipality
Date:

Approved as to form:

Terence Howzell
Chief Assistant City Attorney
COUNT
Y OF SANTA CLARA:

Sylvia Gallegos
Deputy County Executive
Date:

Approved as to form and legality:

Elizabeth Vissers
Deputy County Counsel
DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E 9/14/2022
9/15/2022
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ATTACHMENT A

SCOPE OF WORK AND ITEMIZED PROJECT BUDGET
Res
toration and repair of the Roth Building’s 1940’s Otis Elevator.

All w
ork will be performed to meet the terms of the Historical Heritage Funding Agreement, and the Historical Heritage Grant Program Application and Procedural Guide, including any and all revisions thereto.

ITEMIZED PROJECT BUDGET
WO

RK TO BE PERFORMED GRANTEE CASH

CONTRIBUTION GRANT TOTAL

1. New Control System, new geared
machines, new devices fully regulated,
new AC motors, new wiring and traveling
cables, new door protection, new closed
loop door operator, new fixtures, remote
elevator monitoring (REM) installed, new
seismic operation.
$0 $350,000 $350,000

2. Self-closing door and locking entrance
door on machine room, main line power
feeders, main line disconnect switch,
shunt trip disconnects, cab lighting and
fan circuit, REM circuit, GFI outlets,
lighting machinery spaces and pit,
machine room ventilation, phone, fire
recall, patching cracked and missing
plaster, voids or holes in the hoist way or
machine room walls, ceiling or floor.
$105,000 $0 $105,000
TOTAL PROJECT AMOUNT $105,000 $350,000 $455,000
DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

Page 20 of 24 ends

ATTACHMENT B -- INSURANCE REQUIREMENTS AND PROOF OF INSURANCE

INSURANCE REQUIREMENTS FOR

GRANT AGREEMENT
Indemnity
The
Grantee shall indemnify, defend, and hold harmless the County of Santa Clara (hereinafter "County"), its officers, agents and employees from any claim, liability, loss, injury or damage arising out of, or in connection with, performance of this Agreement by Grantee and/or its agents, employees or sub-contractors, excepting only loss, injury or damage caused by the sole negligence or willful misconduct of personnel employed by the County. It is the intent of the parties to this Agreement to provide the broadest possible coverage for the County. The Grantee shall reimburse the County for all costs, attorneys' fees, expenses and liabilities incurred with respect to any litigation in which the Grantee contests its obligation to indemnify, defend and/or hold harmless the County under this Agreement and does not prevail in that contest.

Insurance
With
out limiting the Grantee's indemnification of the County, the Grantee shall provide and maintain at its own expense, during the term of this Agreement, or as may be further required herein, the following insurance coverages and provisions:

A. Evidence of Coverage
Prio
r to commencement of this Agreement, the Grantee shall provide a Certificate of Insurance certifying that coverage as required herein has been obt ained. Individual endorsements executed by the insurance carrier shall accompany the certificate. In addition, a certified copy of the policy or policies shall be provided by the Grantee upon request.

Thi
s verification of coverage shall be sent to the re questing County department, unless otherwise directed. The Grantee shall not receive a Notice to Proceed with the work under the Agreement until it has obtained all insurance required and such insurance has been approved by the County. This approval of insurance shall neither relieve nor decrease the liability of the Grantee.

B. Qualifying Insurers
Al
l coverages, except surety, shall be issued by companies which hold a current policy holder's alphabetic and financial size category rating of not less than A-V, according to the current Best's Key Rating Guide or a company of equal financial stability that is approved by the County's Insurance Manager.

DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

Page 21 of 24 ends

C. Notice of Cancellation
Al
l coverage as required herein shall not be canceled or changed so as to no longer meet the specified County insurance requirements without 30 days' prior written notice of such cancellation or change being delivered to the County of Santa Clara or their designated agent.

D. Insurance Required

1. Co mmercial General Liability Insurance - for bodily injury (including death) and property damage which provides limits as follows:
a. Each
occurrence - $1,000,000
b. Gen
eral aggregate - $1,000,000
c. Pro
ducts/Completed Operations aggregate - $1,000,000
d. Pe
rsonal Injury - $1,000,000

2. Gen eral liability coverage shall include:
a. Pr
emises and Operations
b. Pro
ducts/Completed
c. Pe
rsonal Injury liability
d. Se
verability of interest

3. Ge neral liability coverage shall include the following endorsement, a copy of which shall be provided to the County:

Ad
ditional Insured Endorsement, which shall read:
“C
ounty of Santa Clara, and members of the Board of Supervisors of the County of Santa Clara, and the officers, agents, and employees of the County of Santa Clara, individually and collectively, as additional insureds.”
Ins
urance afforded by the additional insured endorsement shall apply as primary insurance, and other insurance maintained by the County of Santa Clara, its officers, agents, and employees shall be excess only and not DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS

Page 22 of 24 ends

co
ntributing with insurance provided under this policy. Public Entities may also be added to the additional insured endorsement as applicable and the Grantee shall be notified by the contracting department of these requirements.

4. Fid elity Bond
Be
fore receiving any reimbursement under this Agreement, Grantee will furnish County with evidence that all officials, employees, and agents hand ling or having access to funds received or disbursed under this Agreement, or authorized to sign or countersign checks, are covered by a BLANKET FIDELITY BOND in an amount of AT LEAST fifteen percent (15%) of the maximum financial obligation of the County cited herein. If such bond is canceled or reduced, Grantee will notify County immediately, and County may withhold further payment to Grantee until proper coverage has been obtained. Failure to give such notice may be cause for termination of this Agreement, at the option of County.

E. Special Provisions
The
following provisions shall apply to this Agreement:

1. The
foregoing requirements as to the types and limits of insurance coverage to be maintained by the Grantee and any approval of said insurance by the County or its insurance consultant(s) are not intended to and shall not in any manner limit or qualify the liabilities and obligations otherwise assumed by the Grantee pursuant to this Agreement, including but not limited to the provisions concerni ng indemnification.

2. The
County acknowledges that some insurance requirements contained in this Agreement may be fulfilled by self-insurance on the part of the Grantee. However, this shall not in any way limit liabilities assumed by the Grantee under this Agreement. Any self-insurance shall be approved in writing by the County upon satisfactory evidence of financial capacity. Grantees obligation hereunder may be satisfied in whole or in part by adequately funded self -insurance programs or self- insurance retentions.

3. Sho
uld any of the work under this Agreement be sublet, the Grantee shall require each of its subcontractors of any tier to carry the aforementioned coverages, or Grantee may insure subcontractors under its own policies.

DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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CERTIFICATE OF COVERAGE I

DATE (MM/DD/YYYY)
6/20/2022

PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF EVIDENCE ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR

NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE Alliant Insurance Services, Inc. MEMORANDUM($) OF COVERAGE BELOW. 560 Mission Street, 6th Floor THIS CERTIFICATE OF COVERAGE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE San Francisco CA 94105 ISSUING COVERAGE PROVIDER, AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER.

IMPORTANT: IF THE CERTIFICATE HOLDER IS AN ADDITIONAL COVERED PARTY, THE MEMORANDUM OF COVERAGE MUST BE ENDORSED. A STATEMENT ON THIS CERTIFICATE

DOES NOT CONFER RIGHTS TO THE CERTIFICATE HOLDER IN LIEU OF SUCH

NAMED COVERED PARTY
ENDORSEMENT($).

IMPORTANT: IF SUBROGATION IS WAIVED, SUBJECT TO THE TERMS AND CONDITIONS OF THE ACCEL - City of Palo Alto MEMORANDUM($) OF COVERAGE AN ENDORSEMENT MAY BE REQUIRED. A STATEMENT ON

THE CERTIFICATE DOES NOT CONFER RIGHTS TO THE CERTIFICATE HOLDER IN LIEU OF SUCH 250 Hamilton Avenue ENDORSEMENT($).

Palo Alto CA 94301

PROGRAM AFFORDING COVERAGE
A: ACCEL
B:

COVERAGES
THIS IS TO CERTIFY THAT THE COVERAGE IS AFFORDED TO THE ABOVE NAMED MEMBER, AS PROVIDED BY THE MEMORANDUM(S) OF COVERAGE, FOR THE PERIOD SHOWN BELOW. NOT WITHSTANDING ANY

REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN THE COVERAGE AFFORDED BY THE PROGRAM DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS EXCLUSIONS, AND CONDITIONS OF SUCH MEMORANDUM($) OF COVERAGE THE FOLLOWING COVERAGE IS IN EFFECT JPA
LTR
A

TYPE OF COVERAGE

GENERAL LIABILITY

COMMERCIAL GENERAL LIABILITY
-
:JcLAIMS MADE OoccuR
GEN'L AGGREGATE LIMIT APPLIES PER:
n ��rt�- n PROJECT n LOC

AUTOMOBILE LIABILITY
-

ANY AUTO
-

ALL OWNED AUTOS
-

SCHEDULED AUTOS
-

HIRED AUTOS
-

NON-OWNED AUTOS

WORKERS' COMPENSATION AND

EMPLOYERS LIABILITY

ANY PROPRIETOR/PARTNER/

EXECUTIVE/OFFICER/MEMBER
EXCLUDED?

IF YES, DESCRIBED UNDER SPECIAL

PROVISION BELOW
OTHER Public Entity Liability
OTHER

MEMORANDUM NUMBER COVERAGE EFFECTIVE COVERAGE EXPIRATION LIMITS DATE (MM/DD/YY) DATE (MM/DD/YY) EACH OCCURRENCE $
FIRE DAMAGE (Any one fire) s
MED EXPENSE (Any one person) s
PERSONAL & ADV INJURY s
GENERAL AGGREGATE s
PRODUCTS-COMP/OP AGG s
COMBINED SINGLE LIMIT $
(Ea accident) s
_J rT�TUTORY LJ OTHER
LIMITS
E.L. EACH ACCIDENT s
E.L. DISEASE - EA EMPLOYEE s
E.L. DISEASE - POLICY LIMIT s
ACC2223PAL 171 7/1/2022 7/1/2023 $1,000,000 PerOcc
$1,000,000 S.I.R.

DESCRIPTION OF OPERATIONS/LOCATIONSNEHICLES/EXCLUSIONS ADDED BY ENDORSEMENT/SPECIAUPROVISIONS If required by written contract, County of Santa Clara and members of the Board of Supervisors of the County of Santa Clara and the officers, agents and employees of the County of Santa Clara, individually and collectively are covered as Additional Covered Parties as respects the Historic Grant Program for the Roth Building.

Subject to policy terms, conditions and exclusions.

CERTIFICATE HOLDER CANCELLATION
County of Santa Clara Office of the County Executive, Attn:

SHOULD ANY OF THE ABOVE DESCRIBED MEMORANDUM(S) OF COVERAGE

BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE Dr. Jeffrey V. Smith, Deputy County Executive DELIVERED IN ACCORDANCE WITH THE MEMORANDUM($) OF COVERAGE Eleventh Floor - East Wing PROVISIONS.
70 West Hedding Street

AUTHORIZED REPRESENTATIVE
�
�
San Jose CA 95110

GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Building Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS
Page
23 of 24
DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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ACCEL
Authority for California Cities Excess Liability
c/o Alliant Insurance Services
Corporation Insurance License No. 0C36861
560 Mission Street, 6th Floor, San Francisco, CA 94105
ww111• acce/pool. org

AUTHORITY FOR CALIFORNIA CITIES EXCESS LIABILITY (ACCEL)

A JOINT POWERS AUTHORITY

EXCESS LIABILITY COVERAGE

ADDITIONAL COVERED PARTY ENDORSEMENT
It is understood and agreed that in accordance with Section III. WHO IS A COVERED PARTY paragraph D. that the following person or organization named below is included as an additional covered party for Bodily Injury and Property Damage, but only with respect to facilities or personal property owned by such person or organization and used by the Member Agency or for liability arising out of operations performed by or on behalf of the Member Agency for such person or organization so designated.

Additional Covered Party Limit of Liability Description of Activity or Location of Facilities Used County of Santa Clara Office of $1,000,000 If required by written contract, County of Santa Clara and the County Executive members of the Board of Supervisors of the County of Santa Clara and the officers, agents and employees of the County of Santa Clara, individually and collectively are covered as Additional Covered Parties as respects the Historic Grant Program for the Roth Building.

Subject to policy terms, conditions and exclusions.

Notwithstanding any requirement, term or condition of any contract or agreement to which this coverage may apply, the coverage afforded an additional covered party shall be subject to all the terms, exclusions and conditions of this Memorandum of Excess Liability Coverage (07/22) as otherwise applicable.

This endorsement is part of the Memorandum of Excess Liability Coverage (07/22) and is effective on the date shown below.

All other terms and conditions remain unchanged.

Policy Period:

Member Agency:

Endorsement No.:

Issued to:

Date Issued:

July 1, 2022 to July 1, 2023
City of Palo Alto
2223-PAL-005-
County of Santa Clara Office of the County Executive
Attn: Dr. Jeffrey V. Smith, Deputy County Executive
Eleventh Floor - East Wing
70 West Hedding Street
San Jose, CA 951 I 0
6/20/2022
Authorized Representative for ACCEL
Alliant Insurance Services, Inc.

A Joint Powers Authority

GRANT FUNDING AGREEMENT
for the City of Palo Alto for
the Restoration and Repair of the Roth Bu ildin g Elevator project Fiscal Year 2022 HISTORIC HERITAGE GRANT FUNDS
Page
24 of 24
DocuSign Envelope ID: 11D8815A-6344-4EBB-B998-4466BB08867E Attachment A - Lease Agreement

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EXHIBIT G

MAINTENANCE PLAN

[To be prepared, approved and attached by the Parties in accordance Section 16(B) following the Commencement Date.]

Attachment A - Lease Agreement

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LICENSE AGREEMENT
FOR

CITY ARCHIVES ROOM

EXHIBIT C
TO

LEASE AGREEMENT

BY AND BETWEEN

CITY OF PALO ALTO

AS LANDLORD
AND

PALO ALTO HISTORY MUSEUM

AS TENANT
Attachment B - License Agreement

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1 IRREVOCABLE LICENSE AGREEMENT
This Irrevocable License Agreement (“ License Agreement ”) is dated as of ______________, 2022 (the “Effective Date”) and is entered into concurrently with the Lease Agreement dated _________, 2022 (“Lease”) between the City of Palo Alto (“City”) and the Palo Alto History Museum (“Museum”) (individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances:

RECITALS:

A. Pursuant to the terms of the Lease, the Museum is leasing certain real property from the City known as the Roth Bu ilding, located at 300 Homer Avenue in the City. Capitalized terms not otherwise defined in this License Agreement will have the meaning set forth in the Lease.

B. As part of its obligations under the Lease, Museum is undertaking the “warm shell” renovation of the Premises including completion of the Initial Tenant Improvements pursuant to the Tenant Work Letter.

C. Following completion of the Initial Tenant Improvements, and thereafter during the Lease Term, City will have the right to use the Ar chives Room (as defined below) and the Shared Areas (as defined below) of the Premises in accordance with the terms of this License Agreement.

NOW, THEREFORE, in consideration of the covenants, terms and conditions, the Parties mutually agree, as follows:

1. LICENSE; ARCHIVES ROOM . In accordance with the terms hereof, and in consideration for City’s entry into the Leas e, its payment of the City Contribution (as defined in the Tenant Work Letter), and its payment and performance of all obligations hereunder, along with other consideration acknowledged and received by Museum, Museum hereby grants to City the license to us e the following portions of the Premises during the License Term (as defined below):

A. City and its employees, agents, contractors, suppliers, guests and invitees (collectively, “City Parties”) will have the exclusive right to use a room on the second floor of the Building (the “ Archives Room ”) as more specifically depicted on Attachment I attached hereto and incorporated herein. The parties acknowledge that the depiction of the Archives Room in Attachment I attached hereto as of the Effective Date is derived from Museum’s space plans prepared in conjunction with Initial Tenant Improvements. If after completion of t he Initial Tenant Impr ovements the Parties reasonably determine that the depiction of the Archives Room does not accurately reflect the Archives Room in its as-built configuration and condition, Museum will prepare a new Attachment I and, following City’s reasonable approval of such new Attachment I, the Parties will promptly sign and attach the new Attachment I hereto, superseding the prior version of Attachment I.

B. As reasonably required for the use of the Archives Room and subject Attachment B - License Agreement

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2 to reasonable rules and regulations mutually agreed to by the Parties, the City and the City Parties will have the nonexclusive right to use the Premises’ public and common areas as designated by Museum, including without limitation the Premises’ interior restrooms, elevator, stairwells and corridor s, and those areas reasonably necessary for ingress to and egress from the Archives Room (the “Shared Areas”).

2. TERM OF LICENSE .

A. The term of this License Agreement (“ License Term ”) will commence (the “Commencement Date ”) on the City’s acceptance of the completed Project pursuant to the Tenant Work Letter and will expire upon the expiration or earlier termination of the Lease.

B. Notwithstanding the fo regoing, City may terminate this License Agreement upon at least sixty (60) days’ prior written notice to Museum. If City terminates this License Agreement prior to the expiration or earlier termination of the Lease, (i) City at its cost will remove any personal property and equipment from the Archives Room (and, upon Museum’s request, any City Alterations (as defined below) constructed pursuant to Section 11 below) and (ii) on the last day of the License Term, City will deliver the Archives Room to Museum broom clean and in the condition received, ordinary wear and tear excepted, and subject to the parti es’ rights upon casualty under Section 12 below.

3. CITY’S USE . During the License Term, Cit y may use the Archives Room for storage and/or display of the City’s official archives and records and any ancillary, legal related uses; provided, that such ancillary, legal related uses will not unreasonably interfere with Museum’s use of the Premises in accordance with the Lease. The City will not use the Archives Room for any other us es without the prior written approval of Museum, which may be withheld in Museum’s sole and absolute discretion. City will have access to and use of the Archives Room during standard hours (Monday to Friday 8:00 AM to 8:00 PM) and at all other times that do not unreasonably interfere with Museum’s use and occupancy of the Premises; provided, that, the public’s access to the Archives Room will be limited to those times the Museum is open to the public or such other times as agreed to by City and Museum in writing. City will promptly observe and comply with all (i) laws with respect to the Archives Room and City’s use thereof, and (ii) commercially reasonable requirements of any insurance com pany, insurance underwriter, or Board of Fire Underwriters which are necessary to ma intain the insurance coverage carried by either Museum or its agents or City pursuant to this License Agreement. City will not do or permit anything to be done in, about or with respect to the Archives Room which would (a) injure the Premises, or (b) vibrate, shake, overload, or impair the efficient operation of the Premises or the building systems serving the Premises.

4. DELIVERY OF ARCHIVES ROOM . Upon commencement of the License Term, Museum will deliver the Ar chives Room to City in its then-current as-is condition.

By taking possession of the Archives Room , City conclusively will be deemed to have accepted the Archives Room in its as-is, then-existing condition, without any warranty whatsoever of Museum with respect thereto.

Attachment B - License Agreement

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3 5. KEYS AND SECURITY SYSTEM .

A. The parties acknowledge and agree that the Initial Tenant Improvements will include construction of the entry doors to the Archives Room (including door hardware and locks) as reasonably approved by City. Museum at its cost will provide City with a set of all keys needed to access the Archives Room. If Museum installs a security system at the Premises, Museum will provide City with copies of instructions and access codes and/or devices (such as access cards) to operate such security system, to the extent necessary to provide City entry to the Archives Room.

B. City at its cost may install a secu rity system for the Archives Room as City deems reasonably nece ssary, provided that such security system will be compatible with the security system for the Premises and City will be solely responsible for the maintenance and repair of such secu rity system. City will deliver to Museum copies of instructions and access codes and/or keys to operate any security system installed by City to provide entry to the Archives Room.

6. ENTRY BY MUSEUM . Museum and its authorized representatives will have the right to enter the Archiv es Room at all reasonable times by giving reasonable prior written notice, except in the case of emergency where such notice will not be required.

7. SERVICES AND UTILITIES PROVIDED TO ARCHIVES ROOM. Museum will provide electrical, heating and air conditioni ng, water, and janitorial services to the Archives Room for City’s reasonable use of the Archives Room which costs will be included in the Premises’ Operating Expenses (as defined below). City will pay directly all charges for City’s telephone, cable and/or internet service, and other services provided to the Archives Room. Except to the ext ent caused by the gros s negligence or willful misconduct of Museum or its agents or representatives, Museum will not be liable for the interruption of any services or utilities to the Archives Room.

8. MAINTENANCE .

A. At City’s cost, City will maintain, replace, and repair the interior of the Archives Room and any systems exclusively serving the same in good condition and repair, normal wear and tear, excepted and s ubject to the parties’ rights upon casualty under Section 12 below.

B. In no way limiting Museum’s maintenance obligations for the Premises under Section 16(A) of the Lease, Museum will ma intain the building systems servicing the Archives Room, including the electrical, plumbing, HVAC system, sprinkler system, and life-safety system (but excl uding any systems exclusively serving the Archives Room), provided that costs relate d to the foregoing will be included in the Operating Expenses in accordance with Section 10 below.

9. CITY’S SHARE OF OPERATING EXPENSES; AUDIT .

A. All amounts required to be paid by City under this License Agreement will be deemed “Fees”. Fees will be due and payable during the License Term as set forth Attachment B - License Agreement

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4 in this License Agreement at the address indicated by Museum from time to time. As part of Fees and in accordance with this Se ction 9, City will pay to Museum City’s proportionate share (“ City’s Share”) of the Operating Expenses incurred during the License Term. City’s Share will be a percentage calculated by dividing the square footage of the Archives Room by the total s quare footage (less the common areas) of the Premises. The Parties acknowledge and agree that City’s Share will initially be equal to nine and 6/10th percent (9.6%) as derived from Museum’s space plans prepared in conjunction with Initial Tenant Improvements as set forth in Attachment I . If during the License Term, the Parties reasonably determine that City’s Share does not accurately reflect the proportion of the square footage of the Archives Room and the Premises in its then as-built configuration and condition, t he Parties will promptly agree in writing upon the new City’s Share. In addition, in the event that the Parties determine that the Archives Room incurs a non-proportional benefit from any expense, or is the non-proportional cause of any such expense, Museum may reasonably increase City’s Share with respect to such expense.

B. Operating Expenses will be payable by City within thirty (30) days after a reasonably detailed statement of actual expenses is presented to City by Museum.

At Museum’s option, however, an amount may be estimated by Museum from time to time of City’s portion of annual Operating Expens es and the same will be payable monthly, during each calendar year of the License Term. Such estimates may be revised by Museum at any time in its reasonable discretion. When the new estimate is delivered to City, City will, at the next monthly payment date, pay any difference between the amount paid during such calendar year and the am ount that would have been paid during such calendar year based upon the new estimate. Museum will deliver to City within ninety (90) days after the expiration of each calendar year (or as soon thereafter as is reasonably practicable) a reasonably detai led statement showing the ac tual Operating Expenses incurred during the preceding year (the “ Statement”). If City’s payments during said preceding calendar year exceed City’s obligation as indicated on the Statement, City will be entitled to credit the amount of such overpayment to Fees next coming due hereunder.

If City’s payments under this Section during said preceding calendar year were less than City’s obligation as indicated on the Statement, City will pay to Museum the amount of the deficiency within thirty (30) days after delivery by Museum to City of the Statement. If any Operating Expenses paid by Museum include periods prior to the commencement or after the termination of the License Term, su ch Operating Expenses will be prorated as of the License Term’s commencement or termination date (as applicable). Within ninety (90) days following termination of the Licens e Agreement (or as soon thereafter as is reasonably practicable), Museum will deliver a fi nal Statement to City for such calendar year through the termination date of the License Agreement . If City’s portion of any Operating Expenses as shown on the final statement is gr eater or less than the total amounts of Operating Expenses actually paid by City during the year covered by the final Statement, then within thirty (30) days thereafter the appropriate party will pay to the other party any sums owed.

C. Audit of Operating Expenses.
i. Within one (1) year of Museum’s delivery of the Statement to Attachment B - License Agreement

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5 City, City will have the right to cause an audit of the Operating Expenses provided that City delivers to Museum written notice of its elec tion to have an audit within such one (1) year period. The audit will be performed during normal business hours at a time reasonably designated by Museum following receipt of City’s election to cause an audit and subject to Museum’s reasonable office procedures.

The audit will be completed no later than sixty (60) days following the date Museum provides City access to its book and records relating to Operating Expenses. If the audit discloses that the Statement has overstated Operating Expenses, then Museum will reimburse the City within sixty (60) days. If the audit discloses that the Statement has understat ed Operating Expenses, then City will, within thirty (30) days after the completion of the audit, deliver to Museum its proportionate share of the difference. City will bear a ll fees and costs of the audit, unless the Parties determine that t he Operating Expenses hav e been overstated by five percent (5%) or more. In that event, Museum will also reimburse City for the cost of the audit.
ii. Without limiting Section 9(C)(i), the Parties acknowledge that the audit may include the determination of whether items included in the Statement were costs appropriately deemed Operat ing Expenses in accordance with the definition of Operat ing Expenses pursuant to Sect ion 10 below. City will notify Museum if City objects to the classification of an item included in the Statement as an Operating Expense. Following notice of City’s objection, the Parties will promptly meet and confer in good fait h and determine by mutual agreement whether such item should be included in the Operating Expenses or should be excluded from the Operating Expenses. City’s 60-day period to complete its audit pursuant to Section 9(C)(i) will be extended day for day during the period while the Parties seek to agree upon the classification of a Statement item in accordance with the foregoing.

D. The Parties’ rights and obligations under this Section 9 will survive the expiration or earlier termination of this License Agreement.

10. OPERATING EXPENSES .

A. “Operating Expenses ” will mean the following costs incurred by Museum during the License Term: (1) the ut ilities for the Premis es and the Building’s Exterior Common Areas, and (2) all reas onable expenses related to the repair, replacement and maintenance of the Building and the Building’s Exterior Common Areas.

Operating Expenses will include without limitation the following items:
i. replacement and repair of building systems and equipment, improvements or devices, such as the HVAC system, elevator, life safety, sprinkler systems and roof (provided that any capi tal expenses will be subject to Section 10(A)(viii) below);
ii. premiums and deductibles for all insurance carried by Museum in connection with the Building and the Building’s Exterior Common Attachment B - License Agreement

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6 Areas;
iii. the cost of water and sewer charges;
iv. the cost of license, permit, and inspection fees;
v. the cost of light, power, win dow washing, trash pickup, janitorial services, heating, ventilating an d air conditioning, supplies, materials, equipment, and tools;
vi. access control/security costs, inclusive of the reasonable cost of improvements made to enhance access control systems and procedures; vii. costs incurred in connection with compliance with any laws or changes in laws applicable to the Building or the Building’s Exterior Common Areas (provided that any capital expenses will be subject to Section 10(A)(viii) below); and
viii. the cost of all capital improvements or replacements, provided that, if any such improvem ent or replacement consti tutes a capital expenditure under generally accepted accounting prin ciples, Museum will amortize such expense over the useful life of such improvement or replacement with the monthly amortized portions deemed an Operating Expense.

B. Notwithstanding Section 10(A), Operating Expenses will not include the following items:
i. any taxes assessed against or levied upon the trade fixtures, furnishings, equipment and all other personal property of Museum or any other tenants or occupants of the Pr emises, except to the ex tent serving the Shared Areas;
ii. any and all taxes, assessments, sales, use, business, occupation or other taxes, license fees or other charges whatsoever levied, assessed or imposed upon Museum and/or any other tenants or occupants of the Premises for its/their business operations, services or sale of goods conducted in the Premises (including wit hout limitation any franchise , estate, inheritance, corporation, succession, gift, net income or excess profits tax); iii. any Property Taxes (as defined below);
iv. costs for which Museum rece ives reimbursement from insurance proceeds or a third party;
v. late fees or costs related to the payment of any Operating Expense by Museum due to Museum’s negligence or willful misconduct; vi. costs associated with Museum’s general corporate overhead Attachment B - License Agreement

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7 and general administrative expenses;
vii. costs of any renovation, improvement, painting or
redecorating of any portion of the Premises not made available for City’s use and access hereunder;
viii. costs which could properly be capitalized under generally accepted accounting principles, except as provided in Section 10(A)(viii) above; and
ix. any increase in Controllable Expenses exceeding three percent (3%) per annum on a cumulative , compounding basis over the actual Controllable Expenses incurred in the first calendar year after the Commencement Date. “Controllable Expenses” will mean all Operating Expenses except Property Taxes, insurance premiums, utilities and refuse removal, janitorial and cleaning expenses, capital expenses properly am ortized and included in Operating Expenses pursuant to Section 10(A)(viii) above, and any other items incurred due to an event of force majeure.

C. “Property Taxes” for the purposes of this Section will mean any and all taxes, assessments (special or otherwis e), fees, and charges accruing during the License Term that are levied, assessed or charged by the federal government, the state, county, City, or any other tax or assessment levying body (i) against the land that comprises the Premises and all improvements t hereon, including the Build ing, or (ii) on any activity carried on under the Lease, any in terest in the Lease, any occupancy or possessory right that Museum or any other party may have in or to the Premises, any rents and/or fees receivable by Museum for the sublease and/or use of the Premises.

11. CITY ALTERAT IONS TO ARCHIVES ROOM. At City’s cost and subject to Museum’s prior written consent, City may ma ke alterations and improvements to the Archives Room (the “City Alterations”). City will complete any City Alterations in a good and workmanlike manner and in compliance with al l applicable laws. All work related to any City Alterations will be performed by lic ensed and insured contractors. City will indemnify, defend and save Museum harmless from all claims for labor or materials related to the City Alterations, including re asonable attorney’s fees. City will keep the Premises free of any liens arising out of work performed by or for City. All alterations that cannot be removed without material damage to the Archives Room will be deemed part of the Premises upon installation. Notwithst anding anything to the c ontrary herein, City shall not be required to obtain consent of Museum to any of the following (“ Permitted Alterations”): (1) the design, location, configuration, installation or display of City’s exhibits and artifacts in the Archives Ro om and alterations required in connection therewith, (2) purely cosmetic City Alterati ons, such as painting, carpeting or floor coverings or (3) non-structural alterations, additions and improvements in the Archives Room, if the cost of any such project does not exceed Fifty Thousand Dollars ($50,000).

12. CASUALTY AND CONDEMNATION. If the Archives Room is damaged due to any peril or is taken by the exercise of the power of eminent domain or a voluntary Attachment B - License Agreement

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8 transfer in lieu thereof, Museum will have the right to terminate this License Agreement to the extent that Museum has the right to terminate the Lease in connection therewith.

If Museum does not terminate this License Agreement, any damage to or destruction of the Archives Room will be repaired by Museum at Museum’s cost in accordance with the Lease, provided that if such damage or destruction is due to the negligence or willful misconduct of City or any City Parties, City will be responsible for any reasonable applicable insurance deductible (which will be promptly paid to Museum following written notice). Notwithstanding the foregoing, City will be responsible for the repair of the interior of the Archives Room and replacement and repair of Cit y’s personal property and equipment within the Archives Room.

13. DEFAULT; REMEDIES . Either Party will be in default of this License Agreement if it fails or refu ses to perform any of its obligations under this License Agreement if the failure to perform is not cured within sixty (60) days after notice of the failure to perform has been given by the other Party. If the obligation cannot reasonably be cured within sixty (60) days, the Party will not be in default of this License Agreement if such Party commences performance of such cure within such sixty (60) day period and thereafter diligently prosecutes the same to completion. Notwithstanding the foregoing, City will be in default under either Sections 2(B) or 14 of th is License Agreement if it breaches its obligations under ei ther such Section and fails to cure such breach within ten (10) business days after written notice is given to the City by Museum of such breach.

In the event of a default beyond applicable notice and cure periods by a Party, such Party shall have all rights and remedies available to such Party with respect to such default as are available under applicable law, including, without limitation, inju nction and specific performance.

14. ASSIGNMENT . City may not assign this License Agreement or sublicense the Archives Room or permit the use of the Archives Room by anyone other than the City Parties (collectively, “ Transfer”), without the prio r written consent of Museum, which consent may be withheld in Museum’s sole discretion. Museum’s consent to one Transfer will not constitute consent to a subsequent Transfer. Notwithstanding the foregoing, Museum acknowledges that City may elect to engage another entity to operate the Archives Room (e.g., the Palo Alto Histori cal Association) and hereby consents to any such entities’ use of the Archives Room in accordance with the provisions of this License Agreement.

15. HAZARDOUS MATERIALS . City will not use, stor e, transport or dispose of any Hazardous Material in or about the Prem ises in violation of applicable law. City will indemnify, defend, protect and hold Museum and its officers, directors, employees, successors and assigns harmless from and agai nst, all losses, damages, claims, costs and liabilities, including attorneys’ fees and co sts, arising out of City’s use, discharge, disposal, storage, transport, release or emission of Hazardous Materials on or about the Premises during the License Term.

16. TAXES. City will pay befor e delinquency all taxes imposed against any personal property located in the Archives Room.

Attachment B - License Agreement

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9 17. INDEMNITY AND HOLD HARMLESS. The Parties acknowledge and agree that the provisions of Section 20 of the Lease apply to this License Agreement and the terms of such Section 20 are incorporated herein.

18. RELEASE AND WAIVER OF SUBROGATION . Notwithstanding anything to the contrary herein, Museum and City hereby release each other, and their respective agents, employees, sublessees, and contractor s, from all liability for damage to any property that is caused by or results from a risk which is actually insured against or which would normally be covered by “all risk” pr operty insurance, without regard to the negligence or willful misconduct of the entity so released.

19. WAIVER. No delay or omission in the exer cise of any right or remedy of either party on any default by the other party will impair such right or remedy or be construed as a waiver. Nothing in this Lice nse Agreement shall be deemed a waiver of any legal right or remedy which a Party is not permitted to waive under applicable law.

20. AUTHORITY . Each Party hereby represents and warrants to the other that it has proper authority and is empowered to execute this License Agreement on behalf of Museum and City, respectively, and that this License Agreement is a binding and enforceable obligation of Museum and City, respectively.

21. TIME OF ESSENCE . Time is of the essence of each and every provision of this License Agreement.

22. SEVERABILITY . If any term or provision of this License Agreement will, to any extent, be determined by a court of co mpetent jurisdiction to be invalid or unenforceable, the remaining provisions of this License Agreement will not be affected thereby, and each of the other terms and provis ions of this License Agreement will be valid and enforceable to the fullest extent permitted by law.

23. SUCCESSORS . All of the terms and conditions of this License Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors-in-interest.

24. INTERPRETATION OF LICENSE AGREEMENT . This License Agreement will be construed and interpreted in accordance with the laws of the State of California.

25. ENTIRE AGREEMEN T; MODIFICATIONS. The Lease and this License Agreement contain the entire agreement between Museum and City concerning City’s use of the Archives Room. If there is any conflict bet ween the Lease and this License Agreement, the terms of this License Agreem ent will govern. This License Agreement may not be modified or amended except by a writing executed by the Parties.

26. INCORPORATION OF RECITALS . The Recitals hereunder are incorporated herein by this reference and made a part hereof.

27. NOTICES . Any statements, demands, requests, consents, approvals, authorizations, offers, agreem ents, appointments or designa tions hereunder given by Attachment B - License Agreement

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10 either party to the other, will be in writing and made in accordance with Section 26 of the Lease.

28. SURVIVAL . All representations, co venants, warranties, and indemnification obligations hereunder will survive the expiration or earlier termination of this License Agreement.

29. COUNTERPARTS . This License Agreement may be signed in any number of counterparts with the same effect as if the signatures were upon the same instrument and all such counterparts taken together will constitute one and the same instrument.

30. EFFECT OF CONVEYANCE . As used in this License Agreement, the term “Museum” means the holder of a leasehold interest in the Premises pursuant to the Lease.

In the event of any assignment or transfer of Museum’s interest under the Lease, Museum will be and hereby is entirely relieved of all covenants and obli gations of Museum as to this License Agreement accruing after the dat e of such transfer, and it will be deemed and construed that any transferee has assumed and will carry out all covenants and obligations thereafter to be performed by Museum hereunder.

31. MISCELLANEOUS . Any executed copy of this License Agreement will be deemed an original for all purposes. The language in all parts of this License Agreement will in all cases be construed as a whole according to its fair meaning, and not strictly for or against either Museum or Cit y. The captions used in this License Agreement are for convenience only and will not be cons idered in the construction or interpretation of any provision hereof. When a party is required to do something by this License Agreement, it will do so at its sole cost and expense wit hout right of reimburs ement from the other party unless specific provision is made therefor. If either party brings any action or legal proceeding with respect to this License Agreement, the prevailing party will be entitled to recover reasonable attorneys’ and experts’ fees and court costs. Museum has not had an inspection of the Archives Room performed by a Certif ied Access Specialist as described in California Civil Code § 1938. A Certified A ccess Specialist (CASp) can inspect the Archives Room and determine whet her the Archives Room complies with all of the applicable construction-related accessi bility standards under st ate law. Although state law does not require a CASp inspecti on of the Archives Room, the commercial property owner or lessor may not prohibit t he lessee or tenant from obtaining a CASp inspection of the Archives Room for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenan t. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Archives Room.

[Signature page follows.]

Attachment B - License Agreement

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11 IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this License Agreement.

APPROVED AS TO FORM:

_______________________________
City Attorney

CITY OF PALO ALTO

_______________________________
City Manager
APPROVED:

_______________________________
Director of Administrative Services

_______________________________
Director of Public Works

PALO ALTO HISTORY MUSEUM, a
California nonprofit public benefit
corporation

_______________________________
Board President

_______________________________
Treasure
r

Attachment B - License Agreement

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1 ATTACHMENT I

DEPICTION OF THE ARCHIVES ROOM

The Archives Room is the 1305 sq foot area
designated as “Guy Miller City Archives”

Attachment B - License Agreement

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City of Palo Alto (ID # 15014)
City Council Staff Report

Meeting Date: 12/12/2022 Report Type: Action Items

City of Palo Alto Page 1

Title: Appointment of Kiely Nose as Assistant City Manager From: City Manager
Lead Department: Human Resources

Recommendation
The City Manager recommends that Council approve the appointment of Kiely Nosé as Assistant City Manager.

Background
The Palo Alto Municipal Code requires that the City Council approve the City Manager’s appointment of the Assistant City Manager.

The Assistant City Manager provides executive level support and assistance to City Departments and may act on behalf of the City Manag er at City Council meetings or with members of the public as well as at times when the City Manager is not present. The position of Assistant City Manager became vacant in March 2021 when Monique leConge Ziesenhenne retired.

Discussion
The City Manager r equests approval of the appointment of Kiely Nosé to the position of Assistant City Manager. Ms. Nos é has been successfully serving as the Interim Assistant City Manager since March 2021. The City Manager recommends approval based on Ms. Nos é’s proven abil ity to execute higher level duties and has demonstrated effective leadership in a changing environment.

Ms. Nosé joined the City of Palo Alto Office of Management and Budget in October 2015 and was promoted as the Director of OMB starting in 2016. Ms. Nosé served as the Interim Director of Administrative Services /Chief Financial Officer (CFO) in July 2018 followed by the appointment as the Director, of Administrative Services/CFO in 2019.

Ms. Nosé earned her degree in Political Science and Economics fro m Santa Clara University and has held positions with the City of San José and OpenGov (a government sector start -up) prior to her arrival at Palo Alto. She has 14 years of experience and expertise in governmental budgeting and management practices. This in ternal promotion is the result of the strong culture of professional development and succession planning in the Palo Alto workforce. 7 Packet Pg. 185

City of Palo Alto Page 2

Resource Impact
Ms. Nosé will serve in an “At Will” position, which means she will serve at the pleasure of the City Manager and can be asked to resign or be terminated at any time. The annual salary will be $275,142 which is within the management pay range for the Assistant City Manager position according to the approved salary schedule previously adopted by the City Counci l. Ms. Nosé’s benefits and terms of employment will not change and are consistent with the adopted Management Compensation Plan, authorized by Council.

The Assistant City Manager position salary is included in the current FY 2023 Budget therefore, no budget modifications or additional funding is necessary.

Timeline
With approval of this appointment, Ms. Nosé will assume the position of Assistant City Manager effective December 13, 2022.

Policy Implications (If Applicable)
This appointment is consistent with existing City policies.

Environmental Review
Not applicable
7 Packet Pg. 186

City of Palo Alto (ID # 15027)
City Council Staff Report

Meeting Date: 12/12/2022 Report Type: Consent Calendar

City of Palo Alto Page 1

Title: Approval of a Contract with Nomad Transit, LLC (Via) for City of Palo Alto On -Demand Transit Service in a total contract amount not to exceed $2,500,000 for up to two years and Approval of a Budget Amendment in the General Fund
From: City Manager

Recommendation

This report will be a late packet distribution on December 8, 2022. 8 Packet Pg. 187

City of Palo Alto (ID # 14980)
City Council Staff Report

Meeting Date: 12/12/2022 Report Type: Action Items

City of Palo Alto Page 1

Title: Approval of Amendment No. 1 to Contract # C21180078 with Blue Rhino Studios, Inc. in the Amount of $234,748 for Design and Fabrication of Additional Dinosaur Sculptures and Exhibits for the Palo Alto Junior Museum & Zoo for a total not -to-exceed amo unt of $449,464. Environmental Review:

CEQA Exemption 15301.

From: City Manager
Lead Department: Community Services

Recommendation
Staff recommends that Council approve an amendment (Attachment A) to the professional services agreement (C21180078) with B lue Rhino Studios, Inc. to increase the contract in the amount of $234,758 for a total not to exceed amount of $449,464 for fabrication of dinosaur sculptures and exhibits for the Palo Alto Junior Museum & Zoo (JMZ) “California Dinosaur Garden” Exhibition Project, Capital Improvement Program Project AC-18001.

Background
This item was previously on the November 7, 2022 City Council Agenda as a Consent item. The item was pulled from Consent by three Councilmembers (Burt, Kou, Tanaka) and is now brought forward as an Action Item.

The JMZ Renovation Capital Improvement Pro ject (AC -18001) provides funding to support the opening of the new JM Z including specific funding for new indoor and outdoor exhibits. A new permanent outdoor exhibition about dinosaurs that lived in California was included in the JMZ’s exhibit plans durin g project planning and design.

The exhibition will include live cretaceous -era plants, turtles, geologic specimens, animations, a fossil dig, and life -size sculptures of several types of dinosaurs and animals from California. Attachment B includes a rendering of the outdoor exhibit.

On February 5, 2018 , the City Council approved the Agreement between the City of Palo Alto and the Friends of the Palo Alto Junior Museum & Zoo to Replace the Existing Building and Facilities Housing the Palo Alto Junior Museum & Zoo with a New Building and Facilities (Facilities Agreement). Exhibit D of the Facilities Ag reement states that, “In consideration of the Friends’ contribution of $1,573,700 toward the parking lot 9 Packet Pg. 188

City of Palo Alto Page 2

improvements in the Construction contract, the City will expend at least $1,688,731 for the Exhibits in lieu of the Friends’ original proposal to pay $1,573,700 for Exhibit costs.”

To align with the City’s contractual requirement above, Capital Improvement Project AC-18001 included funding for new exhibits, including temporary staff for design and prototyping. In the Fiscal Year 2023 adopted Capital Bu dget, funds were re - appropriated for the exterior exhibit and completion of various project features.

On April 19, 2021, Council awarded a contract to Blue Rhino Studios in the amount of $214,706 to design and fabricate three large dinosaurs for the exh ibit. The original contract only included the large dinosaurs because design and fabrication of these main pieces of the exhibit have a longer lead time than the smaller elements (Staff Report 12071). The longer lead time of the large dinosaurs provided staff the opportunity to engage the JMZ audience, scientific advisors, and accessibility advisors in the development process for the four additional life -size smaller sculptures and fossil dig experience.

More background on the JMZ Project can be found in CMR #8851.

Discussion
Staff recommends that Blue Rhino Studios fabricate this additional scope of work to maintain artistic and scientific consistency across all elements of the exhibit. Their cos ts for the currently contracted scope of work were very competitive during the initial bid process. During that process Blue Rhino was the second lowest bid out of seven, however; price was only one of multiple factors evaluated. Refer to Staff Report 12071 for a summary of the initial bid process. Blue Rhino Studios has proven to be competent and did ex cellent quality of work on this initial contracted scope of work. Based on staff’s experience completing other exhibit development projects and research of similar vendors, staff is confident t he bid for the amended scope is also very competitively priced.

The total design and fabrication budget for this permanent exhibition is $980,000, which includes allocated funds from the CIP in the amount of $430,000, a federal grant in the amount of $250,000, and a contribution from the Friends of the Palo Alto Juni or Museum & Zoo (Friends) in the amount of $300,000 from individual donors . Council accepted the federal grant for $250,000 and the corresponding budget amendment to appropriate additional funding for the new exhibition, called “California Dinosaur Garden”, on September 14, 2020 (Staff Report 11558). The $300,000 contribution from the Friends will be expended by them for the remaining exhibit costs. Exhibition cost breakdown is as follows:

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Approval of Amendment No. 1 to the contract with Blue Rhino Studios, Inc. fulfills the City’s contractual obligation (Facilities Agreement) with the Friends of t he JMZ to fund new exhibits and expends the remaining budget that was re -appropriated in Fiscal Year 2023 for this project. In addition, not completing the additional elements as defined in Amendment No. 1 would impact the City’s ability to comply with Fe deral Grant requirements and its obligation to the Friends of the Junior Museum & Zoo for their donation, which have generously come from individual donors in the community. The California Dinosaur Garden exhibit is the final exhibit to be funded from AC -18001. All other exhibits, both indoor and outdoor, have been completed.

Timeline and Next Steps
It is standard practice for new museums and attractions to include a new exhibit or feature in the project design that has an opening date that is intentionall y delayed. This practice of delaying the opening of a new exhibition is done because museums industry-wide often experience a decline in visitation roughly two years after opening.

Planning the opening of a new exhibit during that time can help reduce or avoid the potential decline in attendance. For the JMZ, adding the outdoor exhibit to the courtyard will also increase overall visitor capacity by providing a new attraction and activity in the ticketed outdoor courtyard, thus reducing crowds in the exhibi t hall and zoo. The “California Dinosaur Garden” exhibition will open in Fall of 2023.

Staff plan to engage a consultant to perform an operational analysis and develop a business plan that will be used to guide ongoing operations of the JMZ and inform future budgetary decisions . Staff are developing a scope of work and will issue a Request for Proposals for Professional Services from an industry expert. The Friends of the JMZ are aware of this effort and will be involved in all stages of plan development.

Resource Impact
Funding for the fabrication of dinosaur sculptures and exhibits for the “California Dinosaur Garden” Exhibition Project, Capital Improvement Program Project AC -18001 is available in the FY 2023 Adopted Capital Budget. The total fabricat ion budget for this permanent exhibition is $980,000, which includes
• allocated funds from the CIP in the amount of $430,000, 9 Packet Pg. 190

City of Palo Alto Page 4

• a federal grant in the amount of $250,000, and
• a contribution from the Friends of the Palo Alto Junior Museum & Zoo (Friends) in the amount of $300,000.

Policy Implications
The exhibition discussed in this report advance many important policy objectives related to the City Comprehensive Plan Policy Goal C -1: Deliver community services effectively and efficiently. These include:
• Policy C -1.4 Promote City parks, open spaces, recreational facilities, libraries, classes and cultural activities for community members recognizing that these facilities and services build and strengthen community. • Policy C-1.16 Provide arts, science and recreational activities that foster healthy children, youth and teen development.
• Policy C -1.20 Leverage available funding to support the development of, and improved access to, programs that address all types of developmental disabilities, including physical, sensory, cognitive or social/emotional needs.

Stakeholder Engagement
Stakeholders, including the JMZ audience, scientific advisors, accessibility advisors, and museum experts, have been engaged in the exhibit development process to determine the sculptures and exhibit experiences.

Environmental Review
The new JMZ has been evaluated as a project under CEQA. In December 2017, the City Council adopted Resolution 9727 which approved a Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program for the new Junior Museum and Zoo. The scope of work of this Agreement as amended is categorically exempt pursuant to CEQA regulation 15301 (Existing Facilities).

Attachments:
• Attachment9.a: Attachment A: Amendment No. 1 to Contract with Blue Rhino Studios, Inc.
• Attachment9.b: Attachment B: Rendering of Dinosaur Garden Exhibit 9 Packet Pg. 191
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AMENDMENT NO. 1 TO CONTRACT NO. C21180078
BETWEEN THE CITY OF PALO ALTO AND BLUE RHINO STUDIO, INC.

This Amendment No. 1 (this “Amendment”) to Contract No. C21180078 (the “Contract” as defined below) is entered into as of August 11, 2022, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and BLUE RHINO STUDIO, INC., a Minnesota corporation, located at 3277 Sun Drive, Eagan, MN 55121 (“CONSULTANT”). CITY and CONSULTANT are referred to collectively as the “Parties” in this Amendment.

R E C I T A L S

A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of the artistic creation of three life-size, scientifically realistic sculptures for the Junior Museum and Zoo, as detailed therein.

B. The Parties now wish to amend the Contract in order to add the artistic creation of four life-size, scientifically realistic animal sculptures and two fossil sculptures, extend the term by two months, and increase the compensation by $234,758.00, from a total not to exceed total of $214,706.00 to $449,464.00.

NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree:

SECTION 1. Definitions. The following definitions shall apply to this Amendment:

a. Contract. The term “Contract” shall mean Contract No. C21180078 between CONSULTANT and CITY, dated April 19, 2021.

b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract.

SECTION 2. Section 3. TERM. of the Contract is hereby amended to read as follows:

“The term of this Agreement is from Jan 1, 2021 to August 30, 2023 inclusive, subject to the provisions of Sections R and W of the General Terms and Conditions.”

SECTION 3. Section 5. COMPENSATION FOR ORIGINAL TERM. of the Contract is hereby amended to read as follows:

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“CITY shall pay and CONTRACTOR agrees to accept as not- to-exceed compensation for the full performance of the Services and reimbursable expenses, if any:

A sum calculated in accordance with the fee schedule set forth at Exhibit C, not to exceed a total maximum compensation amount of Four Hundred Forty Nine Thousand Four Hundred and Sixty Four dollars ($449,464.00).

SECTION 4. The following exhibit(s) to the Contract is/are hereby amended or added, as indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are hereby incorporated in full into this Amendment and into the Contract by this reference:

a. Exhibit “A” entitled “SCOPE OF SERVICES”, AMENDED, REPLACES PREVIOUS.

b. Exhibit “A -2” entitled “ PHOTOS OF MODELS AND DRAWINGS OF INSTALLATION”, ADDED.

c. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE”, AMENDED, REPLACES PREVIOUS.

d. Exhibit “C” entitled “SCHEDULE OF FEES”, AMENDED, REPLACES PREVIOUS.

SECTION 5. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect.

SECTION 6. Incorporation of Recitals . The rec itals set forth above are terms of this Amendment and are fully incorporated herein by this reference.

(SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.)
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SIGNATURES OF THE PARTIES

IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written.

CITY OF PALO ALTO

City Manager

APPROVED AS TO FORM:

City Attorney or designee

BLUE RHINO, INC.

Officer 1

By:

Name:

Title:

Attachments:

EXHIBIT “A”: SCOPE OF SERVICES, AMENDED, REPLACES PREVIOUS EXHIBIT “A-2”: PHOTOS OF MODELS AND DRAWINGS OF INSTALLATION EXHIBIT “B”: SCHEDULE OF PERFORMANCE, AMENDED, REPLACES PREVIOUS EXHIBIT “C”: SCHEDULE OF FEES, AMENDED, REPLACES PREVIOUS

DocuSign Envelope ID: A8B00FF1-4931-4D51-9023-3D70DDBA13F5 Tim Quady
President

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EXHIBIT A

SCOPE OF SERVICES

AMENDED, REPLACES PREVIOUS

This project entails the artistic creation of three life-size, scientifically realistic sculptures.

Contract responsibilities include design, communication with JMZ’s scientific advisors, fabrication of full-size sculptures, shipment and onsite oversight during installation. The JMZ will be responsible for hiring a crane (if required) and/or installation crew.

The three sculptures include:

1. Aletopelta coombsi (a type of ankylosaur, approximately 17’ long): This is an outdoor sculpture and will be climbable by visitors and should therefore hold up to the rigors of repeated touch.

2. Augustynolophus morrisi (approximately 30’ long): This is an outdoor sculpture and will be not be touchable by visitors. It will be located in a fenced area.

3. Pteranodon (in flight, 18’ wingspan): The sculpture will be located inside the museum and hung from architectural steel beams via steel cable. It should have structural eyebolts or other hardware to connect cables to. Contractor is responsible for cable spec to ensure structural capability. It will be non-touchable and hung at a height that is out-of-reach by visitors. It must be completed and delivered by Feb. 2021 to assist in marketing and fundraising efforts.

Fabrication methods and materials should meet these specifications:

• Contractor must adhere to the previously approved models, structurally engineered designs, and stamped engineering drawings that were completed in an earlier contract as attached in Exhibit A-1 to this Agreement . Concrete footings based on the stamped drawings have already been installed during building construction by the general contractor. The two large dinosaur sculptures (Aletopelta and Augustynolophus) must structurally attach to these existing footings.

• Exterior should be durable, exterior grade fiberglass, painted in a scientifically accurate manner with detailed, scientifically accurate body textures. The JMZ has scientific advisors for the contractor to utilize and approve in process sculptures.

The Contractor will manage sculpture fabrication in accordance with the terms and conditions of the City contract. Services shall also include but are not limited to the following:

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• Participate in meetings required to coordinate the work. Submit timely requests for clarification, specifications, and scientific details to City’s Project Manager.

Communicate clearly and seek timely approvals of sculptures.

• Be onsite to manage proper installation of sculptures to existing footings to meet structural engineering drawings. JMZ will secure local contracts and crane (if necessary) for installation as well as manage those contractors.

• Prepare and maintain a schedule for regular updates to City’s Project Manager. Conduct interim sculpture reviews via email and photographs with City’s Project Manager as required.

• Ensure that punch list items are completed promptly, and that incomplete or deficient work is completed/repaired/replaced at no additional cost to the City.

• Provide documentation to the City for maintenance requirements, including a maintenance schedule and any necessary parts, material or touch-up paint specs.

AMENDMENT NUMBER 1:

Amendment Number 1 adds the following scope to the existing scope:

This scope amendment, part of the California Dinosaur Garden exhibition, includes the artistic creation of four life-size, scientifically realistic animal sculptures and two fossil sculptures for the Fossil Dig exhibit area. JMZ will direct general pose based on proposed location.

Contractor responsibilities include:
• Artistic and structural design,
• Communication with JMZ’s scientific advisors who will provide latest research on species along with JMZ and careful paleontological review throughout the sculpting process,
• Fabrication of full-size sculptures with a durable, exterior grade fiberglass, painted in a scientifically accurate manner with detailed, scientifically accurate body textures and fabrication of fossils for dig in a durable concrete to withstand the abuses of a sand matrix,
• Shipment and onsite installation.

The four sculptures include:

• One Ichthyornis (approximately the size of a tern; mounted on a railing or bench back, fish in mouth, wings are folded),

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Custom sculpted in clay at full size (roughly that of a tern), mold, and cast in two-part tinted epoxy, and paint realistically. Sculpture will include cast metal legs and feet and posed in a way that will allow for secure mounting to railing or surface (provided by JMZ) via threaded rod.

• Two Hypsilophodontids (approximately the size of a deer; 2 of these in slightly different poses),

Custom sculpted directly in foam, fiberglass, and sculpting epoxy with internal steel armatures. Finished sculptures to be approximately 6’ long x <3’ tall, painted realistically. Completed sculptures to be mounted with threaded rod or armature to concrete pads or footings provided by JMZ).

• One Saurornithelestes (feathered carnivore; like a velociraptor)

Custom sculpted at full size directly in foam, fiberglass, and sculpting epoxy with an internal steel armature. Finished sculpture to be approximately 6’ long x <3’ tall, painted realistically. Due to thinness and potential fragility of sculpted feathers, sculpture should be out of reach of visitors. JMZ to direct general pose based on proposed location.

Latest research on species to be provided by client and Scientific Advisor, Ken Kirkland.

Careful paleontological reviews to happen throughout sculpting process. Completed sculptures to be mounted with threaded rod or armature to concrete pads or footings provided by JMZ.

Reference images are below in Exhibit A-2.

Fossil Dig Sculptures:

The exhibition will also include a fossil dig exhibition in an outdoor location. One large fossil set will be in a large in-ground concrete area (already installed) and the other small fossil set will be in the above-ground steel table, accessible to people in wheelchairs.

The fossils in the fossil dig will be buried in sand, rubber granules or a matrix of sawdust and wax. Matrix to be determined.

Reference images and dimensioned drawings of installation areas are below.

Fossil specimen for fossil dig area
The fossil may be a plesiosaur or other agreed upon marine animal from California based upon available specimens and research references. Hydrotherosaurus alexandrae is desirable. This specimen is approximately 23’ in length. Fabricator to research available options and make recommendations. Final specimen choice to be approved by JMZ.

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Fossil specimen for accessible fossil dig table
There is an accessible fossil dig table for people in wheelchairs. The tabletop is approximately 2’d x 4’w. Fossil sculpture should be a section of the same specimen in ground level fossil dig, with a preference for the skull.

The Contractor will manage sculpture fabrication in accordance with the terms and conditions of the City contract. Services shall also include but are not limited to the following:

• Participate in meetings required to coordinate the work. Submit timely requests for clarification, specifications, and scientific details to City’s Project Manager.

Communicate clearly and seek timely approvals of sculptures.

• Be onsite to manage proper installation of sculptures to existing footings to meet structural engineering drawings. JMZ will be responsible for crane and scissor rentals for installation.

• Prepare and maintain a schedule for regular updates to City’s Project Manager. Conduct interim sculpture reviews via email and photographs with City’s Project Manager as required.

• Ensure that punch list items are completed promptly, and that incomplete or deficient work is completed/repaired/replaced at no additional cost to the City.

• Provide documentation to the City for maintenance requirements, including a maintenance schedule and any necessary parts, material or touch-up paint specs.

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EXHIBIT A-2

PHOTOS OF MODELS AND DRAWINGS OF INSTALLATION
ADDED

Ichthyornis

Hypsilophodontids

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Saurornithelestes

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Fossil Dig Sculptures

Hydrotherosaurus alexandrae

Example of a fossil dig from another museum
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Image shows fossil dig area on left and accessible fossil dig table.

Dimensions and layout of area
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EXHIBIT B

SCHEDULE OF PERFORMANCE

AMENDED, REPLACES PREVIOUS

CONTRACTOR shall perform the Services according to the following schedule. Phases may be completed in advance of deadlines. However, CONTRACTOR is responsible for off-site storage if completed in advance (i.e. Sculptures may not be delivered earlier than dates indicated).

Jun. 1, 2021 – PHASE 1, Fabrication of full-scale Pteranodon & 50% Fabrication of Aletopelta • Fabrication of Pteranodon (includes coordination with JMZ and scientific advisors to achieve approval on details and coloration);
• Storage of sculpture if completed in advance
• Completion of interior of full-scale Aletopelta sculpture: steel armature & foam

Nov. 1, 2021 – PHASE 2, 100% Fabrication of Aletopelta
• Completion of exterior of full-scale Aletopelta sculpture: resin, detailing & painting; • Storage of sculpture if completed in advance

Jan. 14, 2022 – PHASE 3, Shipping and Delivery of Pteranodon

Jun. 1, 2022 – PHASE 4, 50% Fabrication of Augustynolophus • Completion of interior of full-scale Augustynolophus sculpture: steel armature & foam

Nov. 1, 2022 – PHASE 5, 100% Fabrication of Augustynolophus • Completion of exterior of full-scale Augustynolophus sculpture: resin, detailing & painting;
• Storage of sculpture if completed in advance

Jan. 16, 2023 – PHASE 3, Shipping, Delivery & Installation of Aletopelta and Augustynolophus • Shipment of Aletopelta and Augustynolophus
• Onsite management of delivery and installation (NOTE: Installation to be completed by City staff and City-hired crane company)

Jan. 31, 2023 – ACCEPTANCE TEST, Two Weeks of Testing With Staff and Visitors; Resolution of Any Issues
• Maintenance documentation delivered
• Completion of any deficient work

AMENDMENT NUMBER 1:

Amendment Number 1 revises the schedule by incorporating the additional scope of work and extending the deadlines because the exhibition’s opening date was revised to mid-June.

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• Fabrication of Pteranodon (includes coordination with JMZ and scientific advisors to achieve approval on details and coloration);
• Storage of sculpture if completed in advance
• Completion of interior of full-scale Aletopelta sculpture: steel armature & foam

Nov. 1, 2021 – PHASE 2, 100% Fabrication of Aletopelta
• Completion of exterior of full-scale Aletopelta sculpture: resin, detailing & painting; • Storage of sculpture if completed in advance

Jun. 1, 2022 – PHASE 3, 100% Fabrication of Augustynolophus • Completion of interior of full-scale Augustynolophus sculpture: steel armature & foam

Jan. 1, 2023 – PHASE 4, 50% Fabrication of Ichthyornis, two Hypsilophodontids, Saurornitholestes, two Fossil Dig sculptures
• Completion of artistic direction and interior of full-scale Ichthyornis, two Hypsilophodontids, Saurornitholestes sculptures: steel armature & foam • Completion of artistic direction and 50% full-scale Ichthyornis: steel armature & clay • Completion of artistic direction and 50% of full-scale Fossil Dig sculptures in concrete • Storage of sculptures if completed in advance

Apr. 1, 2023 – PHASE 5, 100% Fabrication of Ichthyornis, two Hypsilophodontids, Saurornitholestes, two Fossil Dig sculptures
• Completion of exterior of full-scale two Hypsilophodontids, Saurornitholestes, sculptures: resin, detailing & painting;
• Completion of exterior full-scale Ichthyornis: mold & painting • Completion of two Fossil Dig sculptures in sections: concrete • Storage of sculptures if completed in advance

May 5, 2023 – PHASE 6, Shipping, Delivery & Installation of all sculptures • Shipment of all sculptures
• Onsite installation

Jun. 30, 2023 – ACCEPTANCE TEST, Two weeks of testing With Staff and Visitors after exhibition opening; Resolution of Any Issues
• Maintenance documentation delivered
• Completion of any deficient work

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EXHIBIT C

SCHEDULE OF FEES

AMENDED, REPLACES PREVIOUS

Compensation based upon deliverables
CITY shall compensate CONTRACTOR for performance of the Services according to the following schedule, with the maximum amount of compensation not to exceed the amount stated in Sections 5 and 6 of this Agreement:

PHASE OF PROJECT DELIVERABLE % OF
TOTAL
AMOUNT
(INCLUDING

REIMBURSABLES)
PHASE ONE 100% FABRICATION OF PTERANODON &
50% FABRICATION OF ALETOPELTA

9.5 $42,941.20
Completion of full-scale Pteranodon
Storage of sculpture if completed in advance
Completion of interior of full-scale
Aletopelta sculpture: steel armature & foam

PHASE TWO 100% FABRICATION OF ALETOPELTA 7 $32,205.90
Completion of exterior of full-scale
Aletopelta sculpture: resin, detailing &
painting

Storage of sculpture if completed in advance
PHASE THREE 100% FABRICATION OF AUGUSTYNOLOPHUS 21 $94,470.64 Completion of interior of full-scale
Augustynolophus sculpture: steel armature
& foam

Completion of exterior of full-scale
Ausgustynolophus sculpture: resin, detailing
& painting

Storage of sculpture if completed in advance
PHASE FOUR 50% FABRICATION OF ICHTHYORNIS, TWO

HYPSILOPHODONTIDS,

SAURORNITHOLESTES, TWO FOSSIL DIG

SCULPTURES
25 $111,805.03
Completion of artistic direction and interior
of full-scale Ichthyornis, two
Hypsilophodontids, Saurornitholestes
sculptures: steel armature & foam

Completion of artistic direction and 50% full-
scale Ichthyornis: steel armature & clay

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Completion of artistic direction and 50% of
full-scale Fossil Dig sculptures in concrete

PHASE FIVE 100% FABRICATION OF ICHTHYORNIS, TWO

HYPSILOPHODONTIDS,

SAURORNITHOLESTES, TWO FOSSIL DIG

SCULPTURES
25 $111,805.03
Completion of exterior of full-scale two
Hypsilophodontids, Saurornitholestes,
sculptures: resin, detailing & painting;

Completion of exterior full-scale Ichthyornis:
mold & painting

Completion of two Fossil Dig sculptures in
sections: concrete

Storage of sculptures if completed in
advance

PHASE SIX SHIPPING, DELIVERY & INSTALLATION OF ALL

SCULPTURES

7.5 $33,763.00
Shipment of all sculptures
Onsite installation (NOTE: City-hired crane
company)

ACCEPTANCE TEST TWO WEEKS OF TESTING WITH STAFF &
VISITORS; RESOLUTION OF ANY ISSUES
5 $22,473.20
Maintenance documentation delivered
Completion of any deficient work
TOTAL 100% $449,464.00

All Payments are based upon CITY’s acceptance of CONTRACTOR’s performance of the phase as evidenced by successful completion of the Deliverable for that Phase. CITY shall have no obligation to pay unless CONTRACTOR has successfully completed and CITY has approved the Project Phase for which payment is due.

The maximum amount of compensation to be paid to CONTRACTOR, including both payment for services and reimbursable expenses, shall not exceed the amounts stated in Sections 5 and 6 of the Agreement. Any hours worked for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to CITY.

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City of Palo Alto (ID # 14867)
City Council Staff Report

Report Type: Action Items Meeting Date: 12/12/2022

City of Palo Alto Page 1
Summary Title: Action Item: ADU Code Changes to PAMC
Title: PUBLIC HEARING/LEGISLATIVE: Adoption of Amendments to Palo Alto Municipal Code Chapter 18.09, Accessory and Junior Accessory Dwelling Units due to State Law Changes and Direction from the Californ ia Department of Housing and Community Development. Environmental Assessment: Exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21080.17 and CEQA Guidelines sections 15061(b)(3), 15301, 15302 and 15305. Planning and Transportation Commission Recommended Approval of the Ordinance.

From: City Manager
Lead Department: Planning and Development Services

Recommendation
Staff recommends the City Council adopt the attached Ordinance (Attachment A) amending Palo Alto Municipal Code Title 18 (Zoning) regulations for Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) to reflect changes in state law and direction from the California Department of Housing and Community Development (HCD).

Report Summary/Background
On October 26, 2020, the City Council adopted the updated Palo Alto’s Accessory Dwelling Unit and Junior Accessory Dwelling Unit (ADU and JADU) Ordinance. These were consolidated into Palo Alto Municipal Code (PAMC) Chapter 18.09 . On October 26, 2020, Council also directed staff to continue working with stakeholders and to present any additional changes to the Planning and Transportation Commission ( PTC). The PTC held multiple hearings to discuss potential ADU/JADU code changes, and the PTC staff reports, meeting minutes, and videos are viewable on the City’s PTC webpages.1

1 Link to 2022 PTC Staff reports, meeting minutes, and videos https://www.cityofpaloalto.org/Departments/Planning-Development-Services/Planning-and-Transportation- 10 Packet Pg. 208

City of Palo Alto Page 2

In September 2022, t he Governor signed the California State legislature ’s three new bills regarding ADU/JADU regulations (SB897, AB2221, and AB157 ). The laws will go into effect on January 1, 2023 ; they are intended to incentivize housing unit development. In addition, there was a Budget Act that appropriates $100 million to bolster CalHFA’s ADU grant program that provides up to $40,000 for low - and moderate-income homeowners to cover pre -development costs.

On September 28, 2022, t he PTC recommended Council approve a draft ordinance incorporating the new state legislation and direction from HCD as well as other changes the PTC discussed in public he arings. The attached ordinance , however, is limited only to the code updates necessary to comply with the new state law and direction from HCD . The other policy recommendations will follow early next year. The reason staff is separating these ordinances is to focus on the more time sensitive state -mandated changes to avoid having the City’s local ADU/JADU ordinance invalidated, which arguably would be the case if the City does not adopt an ordinance by January 1, 2023.

The attached draft Ordinance (Attach ment A) enables the Council to adopt the State’s 2022 ADU legislation.

Discussion
This staff report touches on the s taff response to a California Department of Housing and Community Development (HCD) letter received in late 2021 , as well as describing the 2022 State legislation regarding ADUs and JADUs.

Staff Response to HCD Letter
On December 23, 2021, the City received a letter from HCD regarding the ordinance the City adopted in November 2020 (Attachment B). HCD raised 12 issues with the City’s ordina nce where it thought the ordinance conflicted with state law or required further clarification. On February 3, 2022, City staff met with HCD staff to discuss HCD’s comments and concerns as well as to explain the structure and intent of the language incorpo rated into the City’s ordinance.

Following that discussion, City staff provided detailed responses to the HCD letter, indicating areas where the City would incorporate changes and where staff required clarification (Attachment C). Staff has sought updates from HCD on this request for additional feedback over the past year but has not received HCD’s response.

Many of the HCD’s changes were minor clarifications, which appear in the draft ordinance as noted in comment bubbles. In many cases, the proposed adju stments clarify existing policy to

Commission-PTC/Current-PTC-Agendas-Minutes; the most recent PTC hearing was September 28, 2022. Earlier PTC hearings in 2022 were July 13, 2022 and August 10, 2022. 10 Packet Pg. 209

City of Palo Alto Page 3
provide assurance to the state and the public that the City’s ordinance should be interpreted in a manner consistent with state law.

Other items (such as #3, #4, and #5 in the HCD letter) are more significant changes to City policy, where February 2022 meeting left staff uncertain about the HCD’s direction. Staff awaits further clarification from HCD before proposing a n ordinance change for those items . While staff believes that there are strong arguments in support of t he City’s position on these issues, it is possible that HCD’s eventual response will require further modifications to the ordinance.

Given the uncertainty around when the City can expect a detailed response from HCD, staff recommends proceeding with the ordinance update, though further ordinance revisions may be required based on any additional HCD feedback received.

Inclusion of 2022 State ADU Legislation
The Governor signed the following three bills pertaining to ADUs:

• SB 897 allows two-story ADUs in some places, prevents local governments from posting unnecessary notices, and prevents a local government from changing the Group R occupancy status as that relates to building codes, among other important changes. • AB 2221 prevents local governments from imposing front setbacks, establishes a 60 -day timeline for a complete review of ADUs that are denied, and makes other important changes noted below in the AB 2221 summary section.
• AB 157 , a late addition to budget trailer bills, requires Ca lHFA to convene a w orking group of experts to recommend next-phase updates to CalHFA's ADU grant program so that more homeowners can benefit.

Two of these bills, now laws, are incorporated into provisions of t he attached draft ordinance - SB897 and AB2221. AB 2221 and SB 89 7 both amended Government Code section 65852.2. AB 2221 was chaptered at 650, and SB 897 was chaptered at 664.

SB 8972 (GC 65852.2 amendment @664) Requires That:
• The City must allow a height of 18 feet for a detached ADU on a lot with an existing or proposed single-family or multifamily dwelling unit that is within one -half mile walking distance of a major transit stop or a high -quality transit corridor 3, as those terms are defined in Section 21155 of the Public Resources Code. An additional two feet in he ight shall be provided to accommodate a roof pitch on an ADU that is aligned with the roof pitch of the primary dwelling unit.
• The City must allow a height of 18 feet for a detached ADU on a lot with an existing or proposed multifamily, multi -story dwelling, regardless of proximity to a transit stop or

2 Link to Summary of SB897: https://legiscan.com/CA/text/SB897/2021 3 See Attachment D for a map of the major transit stops and high-quality transit corridor 10 Packet Pg. 210

City of Palo Alto Page 4
high-quality transit corridor . This would not affect properties with multifamily, single - story dwellings.
• The City must allow a height of 25 feet or the height limitation in the underlying zone district that applies to the primary dwelling, whichever is lower, for an ADU that is attached to a primary dwelling. The ADUs shall not exceed two stories in height. • The City cannot require modification to an existing, noncomplying, multi-family residential dwelling to satisfy the height limit or rear or side setback of four feet for an ADU.
• The City cannot reject an ADU application because an existing multi -family residential dwelling exceeds the maximum height or rear or side setbacks of less than four feet. • The City cannot impose parking standards on an ADU that is included in an application to create a new single -family dwelling unit or new multi-family residential dwelling on the same lot, provided the ADU meets other specified requirements. • Enclosed uses within th e proposed or existing single -family residence, such as attached garages, are considered part of the proposed or existing single-family residence. • A JADU that does not include a separate bathroom must include a separate entrance from the main entrance to the structure, with an interior entry to the main living area. • The City cannot deny an application for JADU due to the correction of nonconforming zoning conditions or building violations, or unpermitted structures that do not present a threat to public health and safety and are not affected by the construction of the JADU. • The City cannot deny a permit for an unpermitted ADU constructed before January 1, 2018, because, among other things, the unit is in violation of building standards or state or local stan dards applicable to ADUs, unless the local agency makes a finding that correcting the violation is necessary to protect the health and safety of the public or occupants of the structure. This prohibition does not apply to a building that is deemed substandard under specified provisions of law.

AB 22214 (GC 65852.2 amendment @650):
• Clarifies that an ADU may be attached to or located within a detached garage for the primary dwelling.
• Specifies that the permitting agency action must be approval or denial of t he application. If a permitting agency denies an application for an ADU or JADU, the law requires a permitting agency to return in writing a full set of comments to the applicant with a list of items that are defective or deficient and a description of how the application can be remedied by the applicant within the same timeframes. The law defines “permitting agency” for its purposes.

4 Link to Summary of AB2221: https://legiscan.com/CA/text/AB2221/2021 10 Packet Pg. 211

City of Palo Alto Page 5
• Prohibits a local agency from enforcing front setbacks , where such setbacks would preclude the creation of an ADU of at least 800 square feet, with four-foot side and rear setbacks and 16 feet in height.

Significant Changes
The mo st significant effects of these state law changes pertain to the increased height allowances for attached ADUs and detached ADUs located within a hal f-mile distance from high-quality transit in the City. In Palo Alto, these areas primarily occur near the University and California Avenue Caltrain Stations and along El Camino Real , as shown in Attachment D. The increased height in these areas will inevit ably create greater privacy and massing impacts on adjacent properties that the City is unable to control or prevent. This is, however, consistent with the approach the state has taken to encourage ADU development in California and will likely continue to be expanded in the future.

While other new state laws seek to limit a local jurisdiction’s ability to require front yard setbacks, staff believe that the current phrasing built into the state code only provides that ability as a last resort to homeowners , when the ADU follows a four -foot side and rear yard setback, but they would still be unable to create minimum sized 800 square foot ADU. Staff does not anticipate that this will become a prevalent issue. Many of the state law revisions do not affect the C ity’s ADU/JADU ordinance because they are requirements the City already established in the code and practices staff follow for processing ADU/JADU applications.

Quarterly ADU report dated June 20, 2022
The Council received a quarterly report on ADUs 5. In the report, the average size of ADUs was reported to be around 552 square feet which is an increase largely associated with the additional flexibility the State provides for minimum sizes of second units that homeowners can develop by right.

Environmental Review
The adoption of the Draft Ordinance would be exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21080.17 and CEQA Guidelines sections 15061(b)(3), 15301, 15302 and 15305 because it meets requirements related to accessory dwelling units as established in Government Code Section 65852.2, and these changes are also likely to result in few additional dwelling units dispersed throughout the City. As such, it can be seen with certainty th at the proposed action will not have the potential for causing a significant effect on the environment.

5 Link to June 2022 quarterly ADU report to Council: https://www.cityofpaloalto.org/files/assets/public/agendas - minutes-reports/agendas-minutes/city-council-agendas-minutes/2022/20220620/20220620pccsm-amended-final- final.pdf#page=820

10 Packet Pg. 212

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Public Notification, Outreach & Comments
The PAMC requires notice of this public hearing to be published in a local paper and mailed to owners and occu pants of property within 600 feet of the subject property at least 10 days in advance. Notice of a public hearing for this project was published in the Daily Post on December 2, which is 10 days in advance of the meeting.

Attachments:

Attachment10.a: ATTACHMENT A - Ordinance Amending Title 18 (Zoning) of the PAMC to Amend Requirements Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units (PDF)
Attachment10.b: ATTACHMENT B - HCD Letter on ADU Ordinance (PDF) Attachment10.c: ATTACHMENT C - Staff Response to HCD (PDF) Attachment10.d: ATTACHMENT D - Half Mile Buffer from High Quality Transit (PDF) 10 Packet Pg. 213
*NOT YET APPROVED*
1 0160097_20221128_ay_16
Ordinance No. _____

Ordinance of the Council of the City of Palo Alto Amending Title 18 (Zoning) of the Palo Alto Municipal Code to Amend Requirements Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units

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. Housing in California is increasingly unaffordable. In 2017, the average California home cost about 2.5 times the national average home price and the monthly rent was 50% higher than the rest of the nation. Rents in San Francisco, San Jose, Oakland, and Los Angeles are among the top 10 most unaffordable in the nation.

B. Housing in Palo Alto is especially unaffordable. The average Palo Alto home currently costs about 8 times the national average home price and the monthly rent is about

2.5 times the national average.

C. Palo Alto has a jobs/housing imbalance. When addressing this imbalance, the City must not only provide housing but also ensure affordability.

D. Assembly Bill (“AB”) 2221 and Senate Bill (“SB”) 897 (“State ADU Law”) pertain to accessory dwelling units (“ADUs”) and junior accessory dwelling units (“JADUs”) and were approved by the California Legislature in 2022 and signed by the Governor on September 30, 2022. These bills, codified primarily in California Government Code sections 65952.2 and 65952.22, are intended to spur the creation of lower cost housing by easing regulatory barriers to the creation of ADUs and JADUs. The City adopted Ordinance 5507 (now Palo Alto Municipal Code Chapter 18.09), which brought the City’s municipal code into conformance with state laws AB 68, 587, 671 and 881, and SB 13.
 SB 897 allows two‐story ADUs in some places, prevents local governments from posting unnecessary notices, and prevents a local government from changing the Group R occupancy status as that relates to building codes, among other important changes.
 AB 2221 adds front setbacks to the list of standards that must give way to permit an 800sf ADU, establishes a 60‐day timeline for complete review of ADUs that are denied, and makes other important changes.

E. This ordinance is adopted to incorporate changes in state law that have occurred since the adoption of Ordinance 5507, respond to comments the City has received from the California Department of Housing and Community Development regarding its ADU regulations, respond to additional policies advocated by members of the public, and issues staff has noticed

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when reviewing permits. This ordinance is also adopted to establish a program for deed‐ restricted affordable ADU/JADUs.

SECTION 2. Chapter 18.09 (Accessory Dwelling Units and Junior Accessory Dwelling Units) of Title 18 (Zoning) of the Palo Alto Municipal Code (“PAMC”) is amended to read as follows (additions underlined and deletions struck‐through):

18.09.010 Purpose

The intent of this Chapter is to provide regulations to accommodate accessory and junior accessory dwelling units (ADU/JADU), in order to provide for variety to the city's housing stock and additional affordable housing opportunities. These units shall be separate, self‐ contained living units, with separate entrances from the main residence, whether attached or detached. The standards below are provided to minimize the impacts of units on nearby residents and throughout the city, and to assure that the size and location of such dwellings is compatible with the existing or proposed residence(s) on the site and with other structures in the area.

18.09.020 Applicable Zoning Districts

The establishment of an accessory dwelling unit is permitted in zoning districts when single‐family or multi‐family residential is a permitted land use. The development of a single‐ family home, ADU, and/or a JADU on a lot that allows for single‐family development shall not be considered a multifamily development pursuant to PAMC Section 18.04.030, nor shall they require Architectural Review pursuant to other sections of Chapter 18.

18.09.030 Units Exempt from Generally Applicable Local Regulations

(a) Government Code section 65852.2, subdivision (e) provides that certain units shall be approved notwithstanding state or local regulations that may otherwise apply. The following types of units shall be governed by the standards in this section. In the event of a conflict between this section and Government Code section 65852.2, subdivision (e), the Government Code shall prevail.

i. An ADU and or JADU within the existing space of a single‐family dwelling or an ADU within the existing space of an accessory structure (i.e. conversion without substantial addition).
ii. An ADU and or JADU within the proposed space of a single‐family dwelling. iii. A detached, new construction ADU on a lot with a proposed or existing single‐ family dwelling, provided the ADU does not exceed 800 square feet, sixteen feet in height, or four‐foot side and rear (i.e. interior) setbacks. iv. ADUs created by conversion of portions of existing multi‐family dwellings not used as livable space.
v. Up to two detached ADUs on a lot with an existing multi‐family dwelling.

Commented [SG1]: Response to HCD item #2
Commented [SG2]: Response to HCD item #2

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(b) The Development Standards for units governed by this section are summarized in Table 1. Regulations set forth in section 18.09.040 do not apply to units created under 18.09.030.

The minimum and maximum sizes indicated in Table 1 do not prohibit units that are greater than 800 square feet. These sizes simply serve to distinguish when a unit transitions from regulations set forth in Table 1 and section 18.09.030 to regulations set forth in Table 2 and section

18.09.040.

Table 1: Development Standards for Units Described in Government Code Section 65852.2(e) Single‐Family Multi‐Family
Conversion of
Space Within an
the Existing
Space of a
Single‐Family
Home or
Accessory
Structure
Construction of
Attached ADU
Within the
Proposed Space
of a Proposed
Single‐Family
Home
New
Construction of
Detached ADU
Conversion of
Non‐Habitable
Space Within
Existing Multi‐
family Dwelling
Structure
Conversion or
Construction of
Detached(4) ADU
Number
of Units
Allowed
1 ADU and 1 JADU
25% of the
existing units
(at least one)
2 Minimum
size(1) 150 sf
Maximum
size(1) N/A2 800 sf N/A
Setbacks
N/A, if condition
is sufficient for
fire and safety
Underlying zone
standard for
Single Family
Home

(ADU must be
within
allowable space
of Single‐Family
Home)(7)
4 feet from side
and rear lot
lines;
underlying
zoning for front
setback
N/A
4 feet from side
and rear lot
lines; underlying
zoning for front
setback
Daylight
Plane N/A N/A
Maximum
Height(3) N/A 16(5)3 N/A 16(4)(5)(6)
Parking None
State Law
Reference 65852.2(e)(1)(A) 65852.2(e)(1)(A) 65852.2(e)(1)(B) 65852.2(e)(1)(C) 65852.2(e)(1)(D)

(1) Lofts where the height from the floor level to the underside of the rafter or finished roof surface is 5' or greater shall count towards the unit’s floor area. (2) Up to 150 sf may be added for the purpose of ingress and egress only.

Commented [SG3]: Response to HCD item #5, #10, #11,
#12
Commented [SG4]: Response to HCD item #1

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(3) Units built in a flood zone are not entitled to any height extensions granted to the primary dwelling.
(4) Units must be detached from existing primary dwellings but may be attached to each other.
(5) A height of 18 feet for a detached ADU on a lot with an existing or proposed single family or multifamily dwelling unit that is within one‐half of one mile walking distance of a major transit stop or a high‐quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code. An additional two feet in height shall be provided to accommodate a roof pitch on an ADU that is aligned with the roof pitch of the primary dwelling unit.
(6) A height of 18 feet for a detached ADU on a lot with an existing or proposed multifamily, multistory dwelling.
(7) A height of 25 feet or the height limitation in the underlying zone district that applies to the primary dwelling, whichever is lower, for an ADU that is attached to a primary dwelling. These ADUs shall not exceed two stories in height.

(c) Development standards stated elsewhere in this Section or Title 18, including standards related to FAR, lot coverage, and privacy, are not applicable to ADUs or JADUs that qualify for approval under this section.

(d) The establishment of accessory dwelling units and junior accessory dwelling units pursuant to this section shall not be conditioned on the correction of non‐conforming zoning conditions; provided, however, that nothing in this section shall limit the authority of the Chief Building Official to require correction of building standards relating to health and safety.

(e) The installation of fire sprinklers shall not be required in an accessory dwelling unit if sprinklers are not required for the primary residence. Nothing in this section shall preclude the Fire Marshal from accepting fire sprinklers as an alternative means of compliance with generally applicable fire protection requirements.

(f) Rental of any unit created pursuant to this section shall be for a term of 30 days or more.

(g) Attached units shall have independent exterior access from a proposed or existing single‐family dwelling. Except for JADUs, attached units shall not have an interior access point to the primary dwelling (e.g. hotel door or other similar feature/appurtenance).

(h) Conversion of an existing accessory structure pursuant to Government Code section 65852.2(e)(1)(A) may include reconstruction in‐place of a non‐conforming structure, so long as the renovation of reconstruction does not increase the degree of non‐ compliance, such as increased height, envelope, or further intrusion into required setbacks.

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(i) Street addresses shall be assigned to all units prior to building permit final to assist in emergency response.

(j) The unit shall not be sold separately from the primary residence.

(k) Replacement parking is not required when a garage, carport, or covered parking structure is converted to, or demolished in conjunction with the construction of, an ADU.

(l) JADUs shall comply with the requirements of Section 18.09.050.

18.09.040 Units Subject to Local Standards

(a) This section shall govern applications for ADUs and JADUs that do not qualify for approval under section 18.09.030 and for which the City may impose local standards pursuant to Government Code section 65852.2, subdivisions (a) through (d). Nothing in this section shall be interpreted to prohibit an ADU of up to 800 square feet, at the heights stated in Table 2, with a four foot side and rear setbacks.

(b) The Development Standards for units governed by this section are provided in Table

2. These regulations do not limit the height of existing structures converted into ADU/JADUs unless the envelope of the building is proposed to be modified beyond any existing legal, non‐conforming condition.

Table 2: All other Units
Attached Detached JADU
Number of Units
Allowed1 1 1
Minimum size 150 sf
Maximum size
900 sf (1,000 sf for two
or more bedrooms);
no more than 50% of
the size of the single‐
family home
900 sf (1,000 sf for
two or more
bedrooms)
500 sf
Setbacks 4 feet from side and rear lot lines;
underlying zone standard for front setback
Daylight Plane
Initial Height 8 feet at lot line
Angle 45 degrees
Maximum Height3
Res. Estate (RE) 30 feet
Open Space (OS) 25 feet
Commented [SG6]: Response to HCD item #6, #9; SB 897
change re height
Commented [SG7]: Response to HCD item #5

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All other eligible
zones 16 feet(5)(6)(7)
Parking None
Square Footage
Exemption Up to 800 sf(4) Up to 500 sf(4)

(1) An attached or detached ADU may be built in conjunction with a JADU on a lot with an existing or proposed single family home. One attached or detached ADU may be built in conjunction with an existing or proposed multifamily building. (2) Lofts where the height from the floor level to the underside of the rafter or finished roof surface is 5' or greater shall count towards the unit’s floor area. (3) Units built in a flood zone are not entitled to any height extensions granted to the primary dwelling.
(4) Lots with both an ADU and a JADU may exempt a maximum combined total of 800 square feet of the ADU and JADU from FAR, Lot Coverage, and Maximum House Size calculations. (5) A height of 18 feet for a detached ADU on a lot with an existing or proposed single family or multifamily dwelling unit that is within one‐half of one mile walking distance of a major transit stop or a high‐quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code. An additional two feet in height shall be provided to accommodate a roof pitch on an ADU that is aligned with the roof pitch of the primary dwelling unit.
(6) A height of 18 feet for a detached ADU on a lot with an existing or proposed multifamily, multistory dwelling.
(7) A height of 25 feet or the height limitation in the underlying zone district that applies to the primary dwelling, whichever is lower, for an ADU that is attached to a primary dwelling. These ADUs shall not exceed two stories in height.

(c) A single‐family dwelling shall exist on the lot or shall be constructed on the lot in conjunction with the construction of an ADU/JADU.

(d) ADU and/or JADU square footage shall not be included in FAR, Lot Coverage, and Maximum House Size calculations for a lot with an existing or proposed single family home, up to the amounts stated in Table 2. ADU and/or JADU square footage in excess of the exemptions provided in Table 2 shall be included in FAR, Lot Coverage, and Maximum House Size calculations for the lot.

(e) Attached units shall have independent exterior access from a proposed or existing single‐family dwelling. Except for JADUs, attached units shall not have an interior access point to the primary dwelling (e.g. hotel door or other similar feature/appurtenance).

(f) No protected tree shall be removed for the purpose of establishing an accessory dwelling unit unless the tree is dead, dangerous or constitutes a nuisance under Commented [SG8]: Response to HCD direction.

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Section 8.04.050. Any protected tree removed pursuant to this subsection shall be replaced in accordance with the standards in the Tree Technical Manual.

(g) For properties listed in the Palo Alto Historic Inventory, the California Register of Historical Resources, the National Register of Historic Places, or considered a historic resource after completion of a historic resource evaluation, compliance with the appropriate Secretary of Interior’s Standards for the Treatment of Historic Properties shall be required.

(h) Noise‐producing equipment such as air conditioners, water heaters, and similar service equipment. All such equipment shall be insulated and housed, except that the planning directorDirector
may permit installation without housing and insulation, provided that a combination of technical noise specifications, location of equipment, and/or other screening or buffering will assure compliance with the city’s Noise Ordinance at the nearest property line. All service equipment must meet the city’s Noise Ordinance in Chapter 9.10 of the Municipal Code.

(i) Setbacks

1. Detached units shall maintain a minimum three‐foot distance from the primary unit, measured from the exterior walls of structures.

2. No basement or other subterranean portion of an ADU/JADU shall encroach into a setback required for the primary dwelling.

3. Projections, including but not limited to windows, doors, mechanical equipment, venting or exhaust systems, are not permitted to encroach into the required setbacks, with the exception of a roof eave of up to 2 feet.

(j) Design

1. Except on corner lots, the unit shall not have an entranceway facing the same lot line (property line) as the entranceway to the main dwelling unit unless the entranceway to the accessory unit is located in the rear half of the lot. Exterior staircases to second floor units shall be located toward the interior side or rear yard of the property.

2. Privacy
A. Second story doors and decks shall not face a neighboring dwelling unit. Second story decks and balconies shall utilize screening barriers to prevent views into adjacent properties. These barriers shall provide a minimum five‐foot, six‐inch, screen wall from the floor level of the deck or balcony and shall not include perforations that would allow visibility between properties.

B. Second story windows, excluding those required for egress, shall have a five‐foot sill height as measured from the second‐floor level, or utilize obscured glazing on the entirety of the window when facing adjacent properties. Second story egress windows shall utilize obscured glazing on the entirety of the windows which face adjacent properties.

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C. Second story windows shall be offset from neighbor’s windows to maximize privacy.

(k) Parking

1. Replacement parking is not required when a garage, carport, or covered parking structure is converted to, or demolished in conjunction with the construction of, an ADU.

2. Replacement parking is required when an existing attached garage is converted to a JADU. These replacement spaces may be provided as uncovered spaces in any configuration on the lot including within the front or street side yard setback for the property.

A. The Director shall have the authority to modify required replacement parking spaces by up to one foot in width and length upon finding that the reduction is necessary to accommodate parking in a location otherwise allowed under this code and is not detrimental to public health, safety or the general welfare.

B. Existing front and street side yard driveways may be enlarged to the minimum extent necessary to comply with the replacement parking requirement above. Existing curb cuts shall not be altered except when necessary to promote public health, safety or the general welfare.

3. When parking is provided, the unit shall have street access from a driveway in common with the main residence in order to prevent new curb cuts, excessive paving, and elimination of street trees, unless separate driveway access will result in fewer environmental impacts such as paving, grading or tree removal.

4. If covered parking for a unit is provided in any district, the maximum size of the covered parking area for the accessory dwelling unit is 220 square feet. This space shall count towards the total floor area for the site but does not contribute to the maximum size of the unit unless attached to the unit.

(l) Miscellaneous requirements

1. Street addresses shall be assigned to all units prior to building permit final to
assist in emergency response.

2. The unit shall not be sold separately from the primary residence.

3. Rental of any unit created pursuant to this section shall be for a term of 30 days or more.

4. The installation of fire sprinklers shall not be required in an accessory dwelling unit if sprinklers are not required for the primary residence. Nothing in this section shall preclude the Fire Marshal from accepting fire sprinklers as an alternative means of compliance with generally applicable fire protection requirements.

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18.09.050 Additional Requirements for JADUs

(a) A junior accessory dwelling unit shall be created within the walls of an existing or proposed primary dwelling.

(b) The junior accessory dwelling unit shall include an efficiency kitchen, requiring the following components: A cooking facility with appliances, and; food preparation counter and storage cabinets that are of reasonable size in relation to the size of the junior accessory dwelling unit.

i. A cooking facility with appliances shall mean, at minimum a one burner installed range, an oven or convection microwave, a 10 cubic foot refrigerator and freezer combination unit, and a sink that facilitates hot and cold water. ii. A food preparation counter and storage cabinets shall be of reasonable size in relation to a JADU if they provide counter space equal to a minimum 24‐inch depth and 36‐inch length.

(c) For the purposes of any fire or life protection ordinance or regulation or for the purposes of providing service for water, sewer, or power, a junior accessory dwelling unit shall not be considered a separate or new unit.

(d) The owner of a parcel proposed for a junior accessory dwelling unit shall occupy as a primary residence either the primary dwelling or the junior accessory dwelling.

Owner‐occupancy is not required if the owner is a governmental agency, land trust, or housing organization.

(e) Prior to the issuance of a building permit for a junior accessory dwelling unit, the owner shall record a deed restriction in a form approved by the city that includes a prohibition on the sale of the junior accessory dwelling unit separate from the sale of the single‐family residence, requires owner‐occupancy consistent with subsection (d) above, does not permit short‐term rentals, and restricts the size and attributes of the junior dwelling unit to those that conform with this section.

SECTION 3. Section 18.10.030 (Land Uses) of Chapter 18.10 (Low‐Density Residential) of Title 18 (Zoning) of the Palo Alto Municipal Code (“PAMC”) is amended to read (additions underlined, deletions struck‐through, and omissions noted with bracketed ellipses):

18.10.030 Land Uses

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

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TABLE 1
PERMITTED AND CONDITIONALLY PERMITTED LOW‐DENSITY RESIDENTIAL USES

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

R‐E R‐2 RMD Subject to
Regulations in:

ACCESSORY AND SUPPORT USES
[. . .] [. . .] [. . .] [. . .] [. . .]
Accessory Dwelling
Units
P P(2) P(2) 18.0942.040
Junior Accessory
Dwelling Units
P P(2) P(2) 18.0942.040
[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Sale of Agricultural Products: No permanent commercial structures for the sale or processing of agricultural products are permitted.
(2) Junior Accessory Dwelling Units in R‐2 and RMD Zones: An accessory dwelling unit or a A Junior Accessory Dwelling Unit is permitted only in conjunction with a single family residence, subject to the provisions of Chapter 18.09.associated with a single‐family residence on a lot in the R‐2 or RMD zones is permitted, subject to the provisions of Section 18.42.040, and such that no more than two units result on the lot.
[. . .]
(4) Two Unit Development Pursuant to California Government Code Section 65852.21 (SB 9, 2021): Construction of two units is permitted on an RE‐zoned lot, subject to the regulations in Section 18.42.180 .

SECTION 4. Section 18.12.030 (Land Uses) of Chapter 18.12 (Single‐Family Residential District) of Title 18 (Zoning) of the Palo Alto Municipal Code (“PAMC”) is amended to read (additions underlined, deletions struck‐through, and omissions noted with bracketed ellipses):

18.12.030 Land Uses

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

Table 1
PERMITTED AND CONDITIONAL R‐1 RESIDENTIAL USES

R‐1 and all R‐1
Subdistricts
Subject to
Regulations for in:

ACCESSORY AND SUPPORT USES
[. . .] [. . .] [. . .]

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Accessory Dwelling Units P(1) 18.0942.040
Junior Accessory Dwelling Units P(1) 18.0942.040
[. . .] [. . .] [. . .]

Footnotes:
(1) An Accessory Dwelling Unit or a Junior Accessory Dwelling Unit associated with a single‐ family residence on a lot is permitted, subject to the provisions of Chapter 18.09Section

18.42.040, and such that no more than two total units result on the lot.

SECTION 5. Section 18.13.030 (Land Uses) of Chapter 18.13 (Multiple‐Family Residential Districts) of Title 18 (Zoning) of the Palo Alto Municipal Code (“PAMC”) is amended to read (additions underlined, deletions struck‐through, and omissions noted with bracketed ellipses):

18.13.030 Land Uses

Table 1 specifies the permitted and conditionally permitted land uses in the multiple‐family residence districts.

Table 1
Multiple Family Residential Uses
[P = Permitted Use • CUP = Conditional Use Permit Required] RM‐20 RM‐30 RM‐40 Subject to
Regulations in:

ACCESSORY AND SUPPORT USES
[. . .] [. . .] [. . .] [. . .] [. . .]
Accessory Dwelling Unit
when accessory to
permitted single‐family
residence
P(1) & (4) P(1) & (4) P(2) & (4) 18.0942.040
[. . .] [. . .] [. . .] [. . .] [. . .]
Footnotes:
(1) Permitted use only on lots less than 8,500 square feet in size. [. . .]
(4) An accessory dwelling unit associated with a single‐family residence on a lot is permitted if it is contained within the existing space of a single‐family residence or an existing accessory structure in accordance with and pursuant to Section 18.42.040(a)(5), subject to the provisions of Section 18.42.040 and such that no more than two total units result on the lot.

SECTION 6. 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.

Commented [YA10]: Response to HCD direction

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SECTION 7. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional.

SECTION 8. The Council finds that the adoption of this Ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21080.17 and CEQA Guidelines sections 15061(b)(3), 15301, 15302 and 15305 because it constitutes minor adjustments to the City’s zoning ordinance to implement State law requirements related to accessory dwelling units as established in Government Code Section 65852.2, and these changes are also likely to result in few additional dwelling units dispersed throughout the City. As such, it can be seen with certainty that the proposed action will not have the potential for causing a significant effect on the environment.

SECTION 9. This ordinance shall be effective on the thirty‐first date after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

NOT PARTICIPATING:

ATTEST:
____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning and
Development Services

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STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT

DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263-2911 / FAX (916) 263-7453
www.hcd.ca.gov

D
ecember 23, 2021

J
onathan Lait, Planning Director
Planning Department
City of Palo Alto
250 Hamilton Avenue – Fifth Floor
Palo Alto, CA 94301

D
ear Jonathan Lait:

RE: Review of Palo Alto’s Accessory Dwelling Unit (ADU) Ordinance under ADU Law (Gov. Code § 65852.2)
Thank you for submitting the City of Palo Alto (City) accessory dwelling unit (ADU) ordinance (Ordinance No.5507) adopted September 26, 2020, to the California Department of Housing and Community Development (HCD). The ordinance was received on October 20, 2020. HCD has reviewed the ordinance and is submitting these written findings pursuant to Government Code section 65852.2, subdivision (h). HCD has determined that the ordinance does not comply with section 65852.2 in the manner noted below. Under the statute, the City has up to 30 days to respond to these findings.

Accordingly, the City must provide a written response to these findings no later than January 23, 2022. HCD will review and consider any written response received from the City before that date in advance of taking further action authorized by Government Code section 65852.2.

The adopted ADU ordinance meets many statutory requirements. However, the ordinance must be revised to comply with State ADU Law (Gov. Code, § 65852.2), as follows:
• Section 18.09.030(a)(3) Units Exempt from Generally Applicable Local Regulations: The text of this Section and the applicable portion of Table 1 indicate the maximum size of a newly constructed detached ADU is 800 square feet. Although a local agency may establish minimum and maximum size requirements for ADUs pursuant to subdivision (c)(1) of Government Code section 65852.2 within limits, a local agency shall not establish a maximum square footage requirement for either attached or detached ADUs that is less than 850 square feet and 1,000 square feet for an ADU that provides more than one bedroom. (Gov. Code, § 65852.2, subd. (c)(2)(B).) Therefore, all relevant

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sections of the ordinance must be amended to comply with this mandate in State ADU Law.

•
Section 18.09.030 Units Exempt from Generally Applicable Local Regulations:

There appears to be a conflict between the text of this section and Table 1. The number of allowable units are correctly noted in Table 1 as “1 ADU and 1 JADU.” The text of section 18.09.030(a) appears to limit allowable units to “an ADU or JADU.” Government Code section 65852.2, subdivision (e)(1)(A), requires an ordinance to allow “one ADU and one JADU per lot… .” The City must amend the ordinance to correct this inconsistency, clarifying that “one ADU and one JADU” are permitted if all the conditions of section 65852.2, subdivision (e)(1)(A) apply.

•
Section 18.09.030(b) Application of Development Standards: Local agencies may establish standards for ADUs pursuant to Government Code section 65852.2, subdivision (a); however, these standards do not apply to ADUs constructed pursuant to subdivision (e). Table 1 impermissibly applies “underlying zoning” “for front setback[s]” to subdivision (e) ADUs. (Mun. Code, §18.09.030(b).) Subdivision (e)(1) describes permitted setbacks in full. Unless underlying zoning for all residential areas conforms to subdivision (e) limits, this table must be amended to comply with statute. (Gov. Code, § 65852.2, subd. (e)(1)(A).)

•
Section 18.09.030(b)(1) ADU Height in Flood Zones: The City has impermissibly restricted the height of ADUs. It appears that the City establishes minimum elevations for the first floor of structures in the flood zone, which is essentially the entire city to varying degrees. To account for this, the zoning code allows most residential structures to exceed otherwise maximum allowable heights for development. The City does not extend this accommodation to ADUs. Currently, Table 1 states that the maximum height for new, detached ADUs is 16 feet, but includes a caveat that “units built in a flood zone are not entitled to any height extension.” (Mun. Code, § 18.09.030(b).) In many instances, this would operate as an impermissible restriction on ADUs.

Under State ADU Law, the City must accommodate an ADU of at least 800 square feet and 16 feet in height. Thus, the caveat in Table 1 is potentially confusing and could restrict the height to less than 16 feet. If it would in fact operate to effectively limit the height of ADUs to less than 16 feet, it would operate as an impermissible restriction on ADUs. As such, Table 1 should be revised to clarify that this limitation does not apply where necessary to permit an 800-square foot ADU that it at least 16 feet tall. (Gov. Code, § 65852.2, subds. (c)(2)(C) and (e)(1)(B)(ii).)

•
Section 18.09.040(b) Daylight Plane and ADU Height Standards: Table 2 states that “daylight plane” acts as a limit on the height of ADUs. In many instances,

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this may not be a problem; however, daylight plane concerns cannot be used to unduly limit the height of an ADU. ADUs are permitted up to 16 feet high. (Gov.

Code, § 65852.2, subds. (c)(2)(C), (e)(1)(B)(ii).) Therefore, in considering restrictions that the City is imposing on ADUs for daylight planes, the ordinance should note the 16-foot height allowable for ADUs. This Table must be amended to clarify this point.

•
Section 18.09.040(b) Units Subject to Local Standards: Table 2 sets out the development standards for ADUs that do not qualify under section 18.09.030.

Although the City has more freedom to establish development standards for these ADUs, that is not without limitation. This section, and Table 2, must be amended to clarify that—notwithstanding the development standards—an ADU of at least 800 square feet, 16 feet in height, and with four-foot rear and side- yard setbacks is permitted as required by State ADU Law. (Gov. Code, § 65852.2, subd. (c)(2)(C).)
• Section 18.09.040(b) Floor Area and JADUs: Development standards can account for ADUs in their measurement of the floor area restrictions or ratio (FAR). But these standards may not account for or consider JADUs. A JADU may not be included in this calculation, because a JADU is a unit that is contained entirely within a single-family residence. (Gov. Code § 65852.22, subd. (h)(1).) Footnote 4 of Table 2 impermissibly includes JADUs as part of the FAR calculations. This footnote must be amended to clarify this point. • Section 18.09.040(h) Noise-Producing Equipment: Local agencies may impose development standards on ADUs; however, these standards shall not exceed state standards. Section 18.09.040(h) states that noise-producing equipment “shall be located outside of the setbacks.” This section must be revised to only refer to ADUs since setbacks are not required for JADUs. In addition, this setback for noise-producing equipment for ADUs must be revised to make clear that this setback requirement will not impede the minimum state standards of four-foot setbacks. (Gov. Code, § 65852.2, subd. (c)(2)(C).) • S ection 18.09.040(i)(2) Setbacks: Currently, this section states, “No basement or other subterranean portion of an ADU/JADU shall encroach into a setback required for the primary dwelling.” Under state law, new attached and detached ADUs have maximum four-foot rear and side-yard setbacks. (Gov. Code, § 65852.2, subds. (a)(1)(D)(vii), (c)(2)(C), (e)(1)(B), and (e)(1)(D).) Local agencies may impose setback requirements if the minimum rear and side-yard setbacks established by state law are not exceeded. This restriction is concerning on a number of grounds.

First, setbacks may not be required for JADUs as they are constructed within the walls of the primary dwelling. Second, this requirement imposes excessive restrictions on ADUs converted from an existing area of the primary dwelling or accessory structure with a basement or subterranean space. Again, these

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structures are not subject to setback requirements. Finally, this section would violate State ADU Law if the side or rear setback requirement for an ADU or JADU located in a basement or other subterranean structure exceeded four feet.

Requiring ADUs and JADUs to meet the side and rear setbacks for the primary dwellings could exceed the maximum four-foot setbacks set out in State ADU Law.

The ordinance must be revised to eliminate these concerns.

•
Section 18.09.040(j) Design: This section states, “Except on corner lots, the unit shall not have an entranceway facing the same lot line (property line) as the entranceway to the main dwelling unit unless the entranceway to the accessory unit is located in the rear half of the lot. Exterior staircases to second floor units shall be located towards the interior side or rear yard of the property.” These standards appear to apply only to the creation of ADUs and may unduly restrict the placement of an ADU on some lots. Local development standards provided by ordinance pursuant to subdivisions (a) through (d) of Government Code section 65852.2 do not apply to ADUs created under subdivision (e).

Please consider eliminating this restriction or modifying it such that it applies “when feasible.”

•
Section 18.09.040(j)(2)(A) Privacy: The section states, “Second story doors and decks shall not face a neighboring dwelling unit.” This limitation, however, may place an impermissible constraint on an ADU. For example, excessive constraints would be placed on the creation of a second story ADU if residential units were located on all adjacent parcels. In addition, when operating in conjunction with Section 18.09.040(j), noted above, this restriction may prohibit ADUs created under subdivision (e) of Government Code section 65852.2.

Accordingly, this provision must be revised to allow for more flexibility. The City could revise the first sentence of this section to state, “Second story doors and decks shall not face a neighboring dwelling unit, where feasible.”

• Section 18.09.040(k)(4) Parking: The ordinance indicates if covered parking for a unit is provided in any district, the maximum size of the covered parking area for the accessory dwelling unit is 220 square feet. Further, under this section, the space for the covered parking count towards the total floor area for the site and the ADU if attached to the unit. Covered parking should not count towards the total floor area of the site as if it would unduly limit the allowable size of an ADU established by state law, nor should it directly count toward the area available for the ADU. Although standards within an underlying zone may apply when noted in the adopted ADU ordinance, they may not be more restrictive than those contained in state statute. (See, e.g., Gov. Code, § 65852.2, subs. (a)(1)(B), (a)(1)(D)(vii), (a)(1)(D)(x), (c), and (e).) The portion of this section stating “unit unless attached to the unit” should be deleted, or the section should otherwise be modified to comply with state law.

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Jonathan Lait, Planning Director

Page 5 ends

In these respects, revisions are necessary to comply with statute.

H
CD will consider any written response to these findings, such as a revised ordinance or a detailed plan to bring the ordinance into compliance with law by a date certain, before taking further action authorized pursuant to Government Code section 65852.2.

Please note that HCD may notify the Attorney General’s Office in the event that the City fails to take appropriate and timely action under section 65852.2, subdivision (h).

H
CD appreciates the City’s efforts in the preparation and adoption of the ordinance and welcomes the opportunity to assist the City in fully complying with State ADU Law.

Please contact Lauren Lajoie of our staff, at (916) 776-7495 or at [email protected] if you have any questions or would like HCD’s technical assistance in these matters.

Sin
cerely,

D
avid Zisser
Assistant Deputy Director
Local Government Relations and Accountability

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PLANNING & DEVELOPMENT SERVICES

250 Hamilton Avenue, 5th Floor
Palo Alto, CA 94301
(650) 329-2441

February 3, 2022
Lauren Lajoie
Housing & Community Development
Division of Housing Policy Development
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
[email protected]

Dear Ms. Lajoie,

This letter represents the City of Palo Alto’s response to your letter dated December 23, 2021 received by email, and received by hard copy on January 27, 2022. The c ontent of the Housing and Community Development’s letter is italicized. The City of Palo Alto’s responses are bolded.

1. ADU Size - Section 18.09.030(a)(3) Units Exempt from Generally Applicable Local Regulations: The text of this Section and the applicable p ortion of Table 1 indicate the maximum size of a newly constructed detached ADU is 800 square feet. Although a local agency may establish minimum and maximum size requirements for ADUs pursuant to subdivision (c)(1) of Government Code section 65852.2 within limits, a local agency shall not establish a maximum square footage requirement for either attached or detached ADUs that is less than 850 square feet and 1,000 square feet for an ADU that provides more than one bedroom. (Gov. Code, § 65852.2, subd. (c)(2)(B).) Therefore, all relevant sections of the ordinance must be amended to comply with this mandate in State ADU Law.

PAMC Section 18.09.030 is intended to describe the requirements for ADUs built under Gov. Code 65852.2, subdivision (e). This is not int ended to create any limitation on ADUs built under subdivisions (a)-(d), which are governed by PAMC Section 18.09.040. The City will add clarifying language to this effect at the top of PAMC Section 18.09.030.

2. ADU & JADU - Section 18.09.030 Units Exempt from Generally Applicable Local Regulations: There appears to be a conflict between the text of this section and Table 1. The number of allowable units are correctly noted in Table 1 as “1 ADU and 1 JADU.” The text of section 18.09.030(a) appears to limit allowable units to “an ADU or JADU.” Government Code section 65852.2, subdivision (e)(1)(A), requires an ordinance to allow “one ADU and one JADU per lot… .” The City must amend the ordinance to correct this inconsistency, clarifying that “one ADU and one JADU” are permitted if all the conditions of section 65852.2, subdivision (e)(1)(A) apply.

The City will update its ordinance to reflect the changes made by AB 3182 with respect to 1 ADU and 1 JADU.

3. Front Setback - Section 18.09.030(b) Application of Development Standards: Local agencies may establish standards for ADUs pursuant to Government Code section 65852.2, subdivision (a); however, these standards do not apply to ADUs constructed pursuant to subdivision (e). Table 1 impermissibly applies “underlying zoning” “for front setback[s]” to subdivision (e) ADUs. (Mun. Code, §18.09.030(b).) Subdivision (e)(1) describes permitted setbacks in full. Unless underlying zoning for DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 all residential areas conforms to subdivisio n (e) limits, this table must be amended to comply with statute. (Gov. Code, § 65852.2, subd. (e)(1)(A).)
During our conversation on February 2, 2022, you explained that local rules may apply for front setbacks, including ADUs built under subdivision (e), and that it is not HCD’s position that subdivision (e) ADUs must be allowed at the front lot line. You explained that the issue with the current City ordinance is that it does not make clear that “underlying zoning” is only for front setbacks. The City will clarify this point in its ordinance.

4. Height - Section 18.09.030(b)(1) ADU Height in Flood Zones: The City has impermissibly restricted the height of ADUs. It appears that the City establishes minimum elevations for the first floor of structures in the flood zone, which is essentially the entire city to varying degrees. To account for this, the zoning code allows most residential structures to exceed otherwise maximum allowable heights for development. The City does not extend this accommodation to ADUs. C urrently, Table 1 states that the maximum height for new, detached ADUs is 16 feet, but includes a caveat that “units built in a flood zone are not entitled to any height extension.” (Mun. Code, § 18.09.030(b).) In many instances, this would operate as an impermissible restriction on ADUs. Under State ADU Law, the City must accommodate an ADU of at least 800 square feet and 16 feet in height. Thus, the caveat in Table 1 is potentially confusing and could restrict the height to less than 16 feet. If it would in fact operate to effectively limit the height of ADUs to less than 16 feet, it would operate as an impermissible restriction on ADUs. As such, Table 1 should be revised to clarify that this limitation does not apply where necessary to permit an 800-square foot ADU that it at least 16 feet tall. (Gov. Code, § 65852.2, subds. (c)(2)(C) and (e)(1)(B)(ii).)
For purposes of health and safety, the City of Palo Alto requires structures built in a flood zone to have a minimum finished floor height based on FEMA regulations. For a primary residence, the City provides an extra height allowance of 50% the minimum finished floor height. The City does not provide this allowance for any accessory structures, including ADUs . Nevertheless, ADUs in the flood zone can still be built to a height of 16 feet. It is unclear to the City how the failure to provide additional height above 16 feet represent s an impermissible restriction on ADUs. During our conversation, you related that HCD prefers to have as few restrictions as po ssible on ADU production. The only restriction here is on finished floor height in the flood zone, which cannot be waived or relaxed without impacts on health and safety. Even in areas requiring the most extreme height above the base flood elevation, an ADU remains feasible within the 16 foot height limit.

5. Daylight Plane - Section 18.09.040(b) Daylight Plane and ADU Height Standards: Table 2 states that “daylight plane” acts as a limit on the height of ADUs. In many instances, this may not be a problem; however, daylight plane concerns cannot be used to unduly limit the height of an ADU. ADUs are permitted up to 16 feet high. (Gov. Code, § 65852.2, subds. (c)(2)(C), (e)(1)(B)(ii).) Therefore, in considering restrictions that the City is imposing on ADUs for daylight planes, the ordinance should note the 16-foot height allowable for ADUs. This Table must be amended to clarify this point.

Please note that the City’s daylight plane regulations do not apply to subdivision (e) ADUs, which are governed by PAMC Sec tion 18.09.030. The City will add a clarifying sentence at the top of Section 18.09.040 explaining that none of the regulations in PAMC 18.09.040 apply to subdivision (e) ADUs. In addition, the City will add a clarifying statement that the regulations in PAMC

18.09.040 are not intended to limit the conversion of existing structures to ADUs or JADUs.

For all other ADUs, however, the City has requested clarity on HCD’s position on daylight plane on numerous occasions, most recently by email dated August 8, 2021. Please see this email, which is DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 attached, for an explanation of the City’s position. The City looks forward to continued discussion of this topic.

6. Clarify - Section 18.09.040(b) Units Subject to Local Standards: Table 2 sets out the development standards for ADUs that do not qualify under section 18.09.030. Although the City has more freedom to establish development standards for these ADUs, that is not without limitation. This section, and Table 2, must be amended to clarify that—notwithstanding the development standards—an ADU of at least 800 square feet, 16 feet in height, and with four-foot rear and side- yard setbacks is permitted as required by State ADU Law. (Gov. Code, § 65852.2, subd. (c)(2)(C).) The City will add a clarifying statement to this effect.

7. Floor Area & JADUs - Section 18.09.040(b) Floor Area and JADUs: Development standards can account for ADUs in their measurement of the floor area restrictions or ratio (FAR). But these standards may not account for or consider JADUs. A JADU may not be included in this calculation, because a JADU is a unit that is contained entirely within a single-family residence. (Gov. Code § 65852.22, subd. (h)(1).) Footnote 4 of Table 2 impermissibly includes JADUs as part of the FAR calculations. This foot note must be amended to clarify this point.

Footnote 4 of Table 2 provides additional FAR on a site for ADUs and JADUs. This is an incentive to promote production of such units without limiting the development potential of a primary unit.

Because a JADU is contained entirely within the space of a single -family residence, it would normally be included in the floor area of the primary unit. Footnote 4 provides an opportunity for a property owner to exempt all JADU square footage from the calculation of floor area for the primary unit. The removal of JADUs from footnote 4 would only serve to restrict the development of JADUs. The City will attempt to clarify the language of this footnote.

8. Noise-Producing Equipment - Section 18.09.040(h) Noise-Producing Equipment: Local agencies may impose development standards on ADUs; however, these standards shall not exceed state standards.

Section 18.09.040(h) states that noise -producing equipment “shall be located outside of the setbacks.” This section must be revised to on ly refer to ADUs since setbacks are not required for JADUs. In addition, this setback for noise -producing equipment for ADUs must be revised to make clear that this setback requirement will not impede the minimum state standards of four -foot setbacks. (Gov. Code, § 65852.2, subd. (c)(2)(C)).

As noted above, the City will add a clarifying statement that the regulations in PAMC 18.09.040 are not intended to limit the conversion of existing structures to ADUs or JADUs. For new construction, however, the City p ermits JADUs to build at a lesser setback than a single -family home normally would. Therefore, the removal of JADUs from this section will only serve to restrict the development of JADUs.

Additionally, the City’s ordinance states that noise producing equi pment needs to be placed outside the setback for an ADU or JADU. This means that the noise producing equipment itself cannot be placed closer than four-feet to a property line for either type of structure; not that the ADU or JADU cannot be placed at those locations. This is consistent with the state setback requirements for an ADU.

9. Basements - Section 18.09.040(i)(2) Setbacks: Currently, this section states, “No basement or other subterranean portion of an ADU/JADU shall encroach into a setback required for the primary dwelling.” Under state law, new attached and detached ADUs have maximum four-foot rear and side- yard setbacks. (Gov. Code, § 65852.2, subds. (a)(1)(D)(vii), (c)(2)(C), (e)(1)(B), and (e)(1)(D).) Local DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 agencies may impose setback requirements if the minimum rear and side -yard setbacks established by state law are not exceeded. This restriction is concerning on a number of grounds. First, setbacks may not be required for JADUs as they are constructed within the walls of the primary dwelling.

Second, this requirement imposes excessive restrictions on ADUs converted from an existing are a of the primary dwelling or accessory structure with a basement or subterranean space. Again, these structures are not subject to setback requirements. Finally, this section would violate State ADU Law if the side or rear setback requirement for an ADU or JADU located in a basement or other subterranean structure exceeded four feet. Requiring ADUs and JADUs to meet the side and rear setbacks for the primary dwellings could exceed the maximum four-foot setbacks set out in State ADU Law. The ordinance must be revised to eliminate these concerns.

As noted above, the City will add a clarifying statement that the regulations in PAMC 18.09.040 are not intended to limit the conversion of existing structures to ADUs or JADUs. In addition, as with the previous section, the inclusion of JADUs here only serves to increase flexibility of JADU production.

As noted above, the City will add a clarifying statement an ADU of at least 800 square feet, 16 feet in height, and with four -foot rear and side - yard setbacks is permitted as required by State ADU Law.

With these clarifications the City does not believe it would violate State ADU Law to require that a newly constructed ADU limit any below-grade space to a setback greater than 4 feet. It is the City’s understanding that it could simply state that basements are not permitted for ADUs built under subdivisions (a)-(d), so long as it was still feasible to construct an ADU of at least 800 square feet. If this is the case, the City should have the lesser authority to direc t the placement of below -grade development.

The City has significant concerns about basements in general, and those concerns extend to basements constructed as part of ADUs. Due to a high water table throughout most of Palo Alto, the construction of baseme nts requires dewatering (pumping water from the construction site).

While this is allowed, there are significant restrictions on timing and procedures taken during the dewatering process.

Secondly, development of homes in Palo Alto often includes requirem ents for the planting and maintenance of trees used to enhance privacy between properties. Placing ADUs with basements as close as 4 feet from the property line may jeopardize the health of these trees on the subject property as well as trees on adjacent p roperties. The trees could fail, which would both diminish the tree canopy—important for our environment and adaptation to climate change—and diminish the privacy between properties.

Building below ground is not required in order to achieve a unit which follows the requirements in Section 65852.2 and can lead to potential impacts on adjacent lots, such as to large stature trees on adjacent lots which is a common occurrence in Palo Alto. Building a basement in these scenarios may cause the tree to fail which is a life, safety, and health hazard which would unduly affect both homeowners as a result of the action by one individual. There are construction methods which can be implemented for above ground construction to help limit root damage caused by this construction to preserve trees but that is not possible for below ground construction and can lead to significant impacts as noted above.

DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441

10. Corner Lots - Section 18.09.040(j) Design: This section states, “Except on corner lots, the unit shall not have an entranceway facing the same lot line (property line) as the entranceway to the main dwelling unit unless the entranceway to the accessory unit is located in the rear half of the lot. Exterior staircases to second floor units shall be located towards the interior side or rear yard of the property.” These standards appear to apply only to the creation of ADUs and may unduly restrict the placement of an ADU on some lots. Local development standards provided by ordinance pursuant to subdivisions (a) through (d) of Government Code section 65852.2 do not apply to ADUs created under subdivision (e). Please consider eliminating this restriction or modifying it such that it applies “when feasible.” As noted above, the City will add a clarifying sentence at the top of Sect ion 18.09.040 explaining that none of the regulations in PAMC 18.09.040 apply to subdivision (e) ADUs . The City will clarify this is not applicable for subsection (e) ADUs. We are not aware of any evidence that this simple design requirement creates an excessive constraint on ADU production and that has not been our experience.

11. Privacy - Section 18.09.040(j)(2)(A) Privacy: The section states, “Second story doors and decks shall not face a neighboring dwelling unit.” This limitation, however, may place an impermissible constraint on an ADU. For example, excessive constraints would be placed on the creation of a second story ADU if residential units were located on all adjacent parcels. In addition, when operating in conjunction with Section 18.09.040(j), noted above, this restriction may prohibit ADUs created under subdivision (e) of Government Code section 65852.2. Accordingly, this provision must be revised to allow for more flexibility. The City could revise the first sentence of this section to state, “Second story doors and decks shall not face a neighboring dwelling unit, where feasible.” As noted above, the City will add a clarifying sentence at the top of Section 18.09.040 explaining that none of the regulations in PAMC 18.09.040 apply to subdivision (e) ADUs. We are not aware of any evidence that this simple design requirement creates an excessive constraint on ADU production and that has not been our experience.

The City will clarify this is not applicable for subsection (e) ADUs. We are not aware of any evidence that this creates an excessive constraint and that has not been our experience.

12. Parking - Section 18.09.040(k)(4) Parking: The ordinance indicates if covered parking for a unit is provided in any district, the maximum size of the covered parking area for the accessory dwelling unit is 220 square feet. Further, under this section, the space for the covered parking count towards the total floor area for the site and the ADU if attached to the unit. Covered parking should not count towards the to tal floor area of the site as if it would unduly limit the allowable size of an ADU established by state law, nor should it directly count toward the area available for the ADU. Although standards within an underlying zone may apply when noted in the adopted ADU ordinance, they may not be more restrictive than those contained in state statute. (See, e.g., Gov. Code, § 65852.2, subs. (a)(1)(B), (a)(1)(D)(vii), (a)(1)(D)(x), (c), and (e).) The portion of this section stating “unit unless attached to the unit” should be deleted, or the section should otherwise be modified to comply with state law.

As noted above, the City will add a clarifying sentence at the top of Section 18.09.040 explaining that none of the regulations in PAMC 18.09.040 apply to subdivision (e) ADUs.

Currently, all covered parking in the single -family zones counts towards floor area for the site and dwelling unit. The City does not understand how this creates a standard that is more restrictive than that contained in state statute; none of the subsections cited in your letter speak to whether a garage for an ADU must be exempted from the unit size for the ADU. Moreover, this provision does DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 not create a constraint on ADU production, as a property owner may always choose to provide a detached garage, uncovered parking, or no parking at all for the ADU.

The City has concerns that allowing attached garages onto these structures will incentivize individuals to illegally expand the unit into the garage , which would both exceed the City’s ordinance, contain unpermitted construction, and potentially place the health and safety of the occupants at risk.

Sincerely,

Jonathan Lait
Director of Planning and Development Services

DocuSign Envelope ID: 26247F48-AB81-46DC-AE75-91A87A8EE538

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Certificate Of Completion
Envelope Id: 26247F48AB8146DCAE7591A87A8EE538
Status: Completed
Subject: Please DocuSign: 2022-02-02 Draft HCD ADU Letter response.docx Source Envelope:

Document Pages: 6
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Madina Klicheva
AutoNav: Enabled
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Time Zone: (UTC-08:00) Pacific Time (US & Canada)
250 Hamilton Ave
Palo Alto , CA 94301
[email protected]
IP Address: 199.33.32.254
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Jonathan Lait
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Interim Director Planning and Community
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City of Palo Alto
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Coyote Hill Road
Clara Drive
Columbia Street
Georgia Avenue
Rhodes Drive
Cambridge Avenue
El Verano Avenue
La Donna Street
Parkinson Avenue
Kipling Street
Pasteur Drive
Heather Lane
Alger Drive
Florales Drive
Oxford Avenue
Forest Avenue
Greenwood Avenue
Cornell Street
Amaranta Avenue
Hillview Avenue
Nathan W
ay
Donald Drive
Harvard Street
Iris Way
Hopkins Avenue
Dana Avenue
Fife Avenue
Fulton Street
Sutherland Drive
Lambert Avenue
Vineyard Lane
Josina Avenue
Marshall Drive
(none)
David Avenue
Old Adobe Road
Geng Road
Orme Street
El Carmelo Avenue
Walnut Drive
Princeton Street
Maddux Drive
W
ildwood Lane
Morris DriveMariposa Avenue
Stanley W
ay
Fernando Avenue
Moreno Avenue
Barbara Drive
Arbutus Avenue
Chaucer Street
Shopping Center Way
W
alter Hays Drive
Jackson Drive
Kenneth Drive
Martin Avenue Patricia Lane
Cereza Drive
Guinda Street
Transport Street
Old Trace Road
Ilima Way
Santa Ana Street
Encina Grande Drive
Los Palos Avenue
Lois Lane
Gailen Avenue
Whitsell Street
Janice Way
Southampton Drive
Pomona Avenue
San Antonio Road
Evergreen Drive
Ivy Lane
Rorke Way
Stelling Drive
Ashton Avenue
Military Way
Robb Road
Jefferson Drive
Santa Rita Avenue
Saint Claire Drive
Rinconada Avenue
Seminole Way
Manuela Court
Garland Drive
Kings Lane
Oak Hill Avenue
Nevada Avenue
Madison Way
Southwood Drive
Richardson Court
Lupine Avenue
Campesino Avenue
La Calle
Suzanne Drive
Vernon Terrace
Celia Drive
Washington Avenue
Dennis Drive
Rambow Drive
Portage Avenue
Elwell Court
Stern Avenue
Maclane
Fallen Leaf Street
Wells Avenue
Tulip Lane
Ross Court
Acacia Avenue
Tasso Street
Stone Lane
Lane D East
Mark Twain Street
M
aple Street
El Cerrito Road
Foothill Expressway
Laura Lane
Lane D West
Primrose W
ay
May Court
Baker Avenue
Melville Avenue
Corina W
ay
Palm Street
Wellesley Street
Wright Place
Pistache Place
Peral Lane
Bret Harte Street
Carmel Drive
Arcadia Place
Varian Way
Saint Francis Drive
Cardinal Way
Timlott Lane
M
arlowe Street
Shauna Lane
Corporation Way
Plum Lane
Randers Court
(none)
Dana Avenue
Oregon Avenue
Fulton Street
Ramona Street
Kipling Street
North California Avenue
Bryant Street
Park Boulevard
Colorado Avenue
Tasso Street
Ramona Street
South Court
Guinda Street
Byron Street
Los Altos
Stanford University
Los Altos Hills
Menlo Park
Mountain View
East Palo Alto
Atherton
This map is a product of
City of Palo Alto GIS
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10.d
Packet Pg. 239

City of Palo Alto (ID # 15012)
Office of the City Attorney
City Council CAO Report

Meeting Date: 12/12/2022 Report Type: Action Items

Title: Approval of Response to the Grand Jury Report "If You Only Read the Ballot, You're Being Duped"
From: Molly Stump, City Attorney

Recommendation
Staff recommends that Council approve the proposed response to the Santa Clara County Civil Grand Jury Report entitled, “If You Only Read the Ballot, You’re Being Duped,” dated October 7, 2022.

Executive Summary
The Grand Jury Report surveyed several agencies in Santa Clara County and made findings and recommendations for action with respect to the drafting of ballot measure questions. A copy of the Grand Jury Report is included as Attachment A. The proposed City response for Council approval is Attachment B.

Discussion
In California, the Civil Grand Jury is convened on an annual basis by the Superior Court in each of the 58 counties to investigate and report on the operations of local government. The Civil Grand Jury is composed of citizen volunteers appointed by the Court. In conducting its work, the Grand Jury has broad access to public officials, employees, records and information.

The website of the California Courts describes the operations of the Civil Grand Jury this way:

As a truly independent body, each grand jury is free to choose which local governmental entities or public officials to investigate. With very limited exceptions, no one outside the grand jury can direct it to conduct an investigation. Ideas for investigations generally come by way of three avenues:

• citizen complaints,
• matters raised by the members of the grand jury, and
• referrals from the preceding grand jury.

11 Packet Pg. 240

Page 2 ends

During its investigations, the grand jury acts as a finder of fact. In addition to determining if the official or entity under investigation is adhering to the laws that govern the operations of that entity, the jury analyzes whether the entity is operating in a businesslike manner and providing public services effectively and economically.

While it has no authority to order or otherwise compel compliance with its recommendations, it is through its reports that the grand jury wields its power.

State law requires government entities to respond in writing to Grand Jury findings and recommendations that are directed at the entity. Responses are due no later than 90 days from issuance of the report. The City’s response to the October 7, 2021 Grand Jury report is due on January 5, 2023.

California Penal Code § 933.05 provides that responses be in the following form:

• As to each grand jury finding, the responding person or entity shall indicate one of the following:
(1) The respondent agrees with the finding.
(2) The respondent disagrees wholly or partially with the finding, in which case the response shall specify the portion of the finding that is disputed and shall include an explanation of the reasons therefor.

• As to each grand jury recommendation, the responding person or entity shall report one of the following actions:
(1) The recommendation has been implemented, with a summary regarding the implemented action.
(2) The recommendation has not yet been implemented, but will be implemented in the future, with a timeframe for implementation.
(3) The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis or study, and a timeframe for the matter to be prepared for discussion by the officer or head of the agency or department being investigated or reviewed, including the governing body of the public agency when applicable. This timeframe shall not exceed six months from the date of publication of the grand jury report.
(4) The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation therefor.

Staff recommends that Council approve the proposed response at Attachment B, which is reprinted here for convenience:

Civil Grand Jury Finding 1:

The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.
11 Packet Pg. 241

Page 3 ends

City of Palo Alto Response: The City of Palo Alto agrees in part and disagrees in part with this Finding.

The City of Palo Alto agrees that the drafting of ballot measure language is an important part of the democratic process, and that local governmental entities that sponsor ballot measures have a responsibility to ensure that ballot measure language is clear, accurate, and useful to voters.

The City of Palo Alto disagrees that the current process is “unregulated at the local level.” Ballot measure language is drafted by the City’s professional staff and approved by the elected City Council, according to requirements of the City Charter and state law. Draft ballot measure language is posted publicly in advance of the City Council meeting, and members of the public have an opportunity to provide written and oral input prior to Council approval. After Council approval, if residents believe that a ballot measure question does not meet the standards required by law, the recourse in our system is to the courts. The Grand Jury contends this is an ineffective remedy, but in fact, every election year, many pre-election lawsuits are filed in California that challenge ballot measure language. These can result in courts ordering corrections to ballot questions.

Because attorney’s fees are recoverable by a successful challenger under the private attorney general statute (Code Civ. Proc. § 1021.5), challengers with meritorious arguments are generally able to obtain counsel to represent them.

The City of Palo Alto also disagrees that the example cited from this jurisdiction—Measure L on the November 8, 2022 ballot—was misleading. The statement “until ended by voters,” to which the Grand Jury objects, is true and accurate, and not misleading.

California law requires that tax measures on the ballot include a statement on duration.

California Elections Code section 13119(b) states: “If the proposed measure imposes a tax or raises the rate of a tax, the ballot shall include in the statement of the measure to be voted on the … duration of the tax to be levied.” In addition, under California law, the voters can repeal or amend an ordinance that has been adopted by the voters. (Cal.

Elections Code section 9217 (“No ordinance that is … adopted by the voters, shall be repealed or amended except by a vote of the people, unless provision is otherwise made in the original ordinance.”).) It is therefore a true statement that if a tax ordinance is approved by the voters and does not have a fixed end date, then it will be in effect until it is ended or repealed by the voters. The Grand Jury opines that this is misleading because it implies “that the measure itself provide[s] for repeal or that voters would have an opportunity to repeal the tax when they did not.” While it is true that Palo Alto’s measure itself did not specify a process for voter repeal, that is because voters already have that power under the Elections Code. Under state law voters exercise that power by circulating a petition. For these reasons, “until ended by voters” is a true statement of the law, and therefore is not misleading.

Civil Grand Jury Recommendation 1b:
11 Packet Pg. 242

Page 4 ends

Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until recommendation 1d is implemented.

City of Palo Alto Response: The recommendation is not warranted and accordingly will not be implemented by the City of Palo Alto.

The Grand Jury’s proposal to empower the County Counsel to review ballot questions, and presumably order changes, is not appropriate for charter cities like Palo Alto, which are separate government entities with independent constitutional authority to control our own elections. Article XI, section 5, subdivision (b) of the California Constitution states that “[i]t shall be competent in all city charters to provide, in addition to those provisions allowable by this Constitution, and by the laws of the State for: … conduct of city elections.” The California Court of Appeal has recognized that “[t]he ‘conduct of city elections’ is one of the few specifically enumerated core areas of autonomy for home rule cities.” (Traders Sports, Inc. v. City of San Leandro (2001) 93 Cal.App.4th 37, 46.) The County Counsel is appointed by and serves at the pleasure of the County Board of Supervisors. Giving authority to the County Counsel to review and edit ballot questions for the City of Palo Alto would impinge on Palo Alto’s constitutional authority over its elections. The effect would be to reduce local control by shifting authority to a government entity that is not accountable to Palo Alto residents.

Civil Grand Jury Recommendation 1c:

Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendations 1d and 1e are implemented.

City of Palo Alto Response: For the reasons stated in the response to Recommendation 1b, above, the recommendation is not warranted and will not be implemented by the City of Palo Alto.

Civil Grand Jury Recommendation 1e:

Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.

City of Palo Alto Response: The recommendation is not warranted and accordingly will not be implemented by the City of Palo Alto. A commission appointed by the County Board of Supervisors poses the same problems identified in the response to Recommendation 1b, above.

11 Packet Pg. 243

Page 5 ends

Resource Impact
There is no fiscal impact resulting from approval of this Grand Jury Response.

Policy Implications
The proposed Grand Jury Response reflects the City’s commitment to transparent governance and local control.

Environmental Review
The proposed response to the Civil Grand Jury Report is not a project under the California Environmental City of Palo Alto Page 5 Quality Act (CEQA).

ATTACHMENTS:
• Attachment11.a: Attachment A: Grand Jury Report (PDF) • Attachment11.b: Attachment B: Response to Grand Jury- Ballot Measure (DOCX) 11 Packet Pg. 244

SUPERIOR COURT BUILDING • 191 NORTH FIRST STREET, S AN JOSE, CALIFORNIA 95113 • (408) 882-2721 • FAX (408) 882-2795

G R A N D J U R Y

S A N T A C L A R A C O U N T Y

October 7, 2022

City of Palo Alto
c/o Ms. Lesley Milton, City Clerk
250 Hamilton Avenue
Palo Alto, CA 94301

Sent via email: [email protected]

Dear Ms. Milton:

The 2022 Santa Clara County Civil Grand Jury is transmitting to you its Final Report, If You Only Read the Ballot, You’re Being Duped.

California Penal Code § 933(c) requires that a governing body of the particular public agency or department that has been the subject of a Grand Jury final report shall respond within 90 days to the Presiding Judge of the Superior Court on the findings and recommendations pertaining to matters under the control of the governing body. California Penal Code § 933.05 contains guidelines for responses to Grand Jury findings and recommendations and is attached to this transmission.

Please note:

1. As stated in Penal Code § 933.05(a), attached, you are required to "Agree" or "Disagree" with each applicable Finding: 1. If you disagree, in whole or part, you must include an explanation of the reasons you disagree.

2. As stated in Penal Code § 933.05(b), attached, you are required to respond with one of four possible actions to each applicable Recommendation: 1b, 1c, 1e.

Your comments are due to the office of the Honorable Beth McGowen, 2023 Presiding Judge, Superior Court of California, County of Santa Clara, 191 North First Street, San José, CA 95113, no later than January 5, 2023.

Copies of all responses shall be placed on file with the Clerk of the Court.

If you have any questions, please contact Britney Huelbig, Deputy Manager for the Civil Grand Jury, at (408) 882-2721 or [email protected].

Sincerely,

James Renalds
Foreperson, 2022 Civil Grand Jury

Enclosures

11.a
Packet Pg. 245

Page 1 of 3 ends

December 12, 2022

Honorable Beth McGowen
Presiding Judge
Santa Clara County Superior Court
191 North First Street
San Jose, CA 95113

RE: City of Palo Alto Response to 2022 Santa Clara County Civil Grand Jury Report: If You Only Read the Ballot, You’re Being Duped

Dear Honorable Judge McGowen,

The following is the City of Palo Alto’s response to the above-mentioned Grand Jury Report pursuant to California Penal Code §§ 933 and 933.05.

Civil Grand Jury Finding 1:

City of Palo Alto Response: The City of Palo Alto agrees in part and disagrees in part with this Finding.

11.b
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Page 2 of 3 ends

of the public have an opportunity to provide written and oral input prior to Council approval. After Council approval, if residents believe that a ballot measure question does not meet the standards required by law, the recourse in our system is to the courts. The Grand Jury contends this is an ineffective remedy, but in fact, every election year, many pre-election lawsuits are filed in California that challenge ballot measure language. These can result in courts ordering corrections to ballot questions. Because attorney’s fees are recoverable by a successful challenger under the private attorney general statute (Code Civ. Proc. § 1021.5), challengers with meritorious arguments are generally able to obtain counsel to represent them.

California law requires that tax measures on the ballot include a statement on duration.

Civil Grand Jury Recommendation 1b:

City of Palo Alto Response: The recommendation is not warranted and accordingly will not be implemented by the City of Palo Alto.

11.b
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Page 3 of 3 ends

Civil Grand Jury Recommendation 1c:

City of Palo Alto Response: For the reasons stated in the response to Recommendation 1b, above, the recommendation is not warranted and will not be implemented by the City of Palo Alto.

Civil Grand Jury Recommendation 1e:

Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.

11.b
Packet Pg. 248

City of Palo Alto

COLLEAGUES MEMO

December 12, 2022 Page 1 of 10
(ID # 15026)

DATE: December 12, 2022
TO: City Council Members
FROM: Council Member Stone, Council Member Kou, Council Member DuBois
SUBJECT: COLLEAGUES MEMO FROM COUNCIL MEMBERS DUBOIS, KOU, AND STONE REGARDING: WHOLE HOME SHORT TERM RENTALS

Issue:

The cost of rental housing in Palo Alto and the region has soared in recent years as the pace of job growth has far exceeded the rate of housing growth. A large number of housing units have been converted into small hotels through short term rental services, in violation of city ordinances.

Short term rental offerings vary - a key differentiator is whether a rental is owner occupied or not. In some cases, an owner is on the property renting a room to supplement their income and better use their primary residence. In other instances, owners are renting “entire unit” housing - either entire homes or ADUs. In some instances, investors are packing in as many bunk beds as possible and advertising these hidden hotels as being “in quiet neighborhoods near beautiful parks”.

The city is currently working on the new housing element, a rental registry and a business tax, all of which may intersect with short term rentals. While the number of housing units varies month to month, for the last year, there have been around 500 Short term rentals1 in Palo Alto with about 375 of those consisting of “entire unit rentals”. This represents 375 housing units which should be housing stock available for long term rental.

Goals:
● Ensure that housing stock is used as housing and our prohibition on rentals under 30 days is enforced, particularly for whole home short term rentals; ● Protect our hotels as they recover from Covid impacts; ● Consider regulations to allow some number of short term rentals for rooms when the house is owner occupied and registers with the city.

1 Data is sourced from two companies tracking short term rentals - Granicus and Azavar 12 Packet Pg. 249
December 12, 2022 Page 2 of 10
(ID # 15026)

Background and Discussion:

Approximately 44% of Palo Alto residents are renters who are predominantly long-term members of our community, contributing to our social balance and economy.

The City of Palo Alto has more Airbnb listings than units available for rent. Council recently received the City of Palo Alto “Condo Conversion Report” Information Report #14664 on Sept 19, 2022. The report showed that Palo Alto has only had greater than 2% rental vacancy once in 7 years and currently has only 100 vacant rentals out of 8057. At that same time in Sept, 2022 we had 743 airbnb listings.

Many cities throughout the county have passed short term rental ordinances to reduce the impacts on neighborhoods. The benefit of these ordinances include:

● Remove impacts on overall housing affordability
● Stem STR impact on affordable housing availability
● Ensure a level playing field between law abiding traditional lodging providers and illegal STRs
● Reduce noise, parking, traffic and trash-problems
● Eliminate party houses
● Reduce STR impact on neighborhood character
● Ensure building safety
● Improve responsiveness to neighbor complaints
● Improve compliance to increase tax revenue
● Reduce tension between short-term rental property owners and their neighbors ● Make citizens aware that STR problems are taken seriously

When the owner is not present, neighbors often feel helpless at resolving impacts on their own properties and lives.

Mountain View, Sunnyvale, Cupertino, Redwood City, Milpitas, San Mateo are all monitoring short term rental and have passed regulations. These cities are using a service from Granicus to cost effectively manage auditing and enforcement. Other vendors such as Azavar offer off- the-shelf solutions. More information is presented in the Appendix.

Many of the short term rental platform companies have been uncooperative in the past and hostile to discussions about impacts on housing supply. Their actions:

● Hide identities of hosts and locations of illegal listings ● Systematically fail to verify host identities and locations ● Refuse to follow local laws like displaying registration numbers or removing illegal 12 Packet Pg. 250
December 12, 2022 Page 3 of 10
(ID # 15026)
listings
● Threatening legal action over new regulations and filing abusive lawsuits ● Refusing to provide data for enforcement
● Failing to disclose activity for taxes collected
● Using taxes to avoid housing regulations
● Offering negotiation to avoid regulations (spoiler, most negotiations fail) ● Withdrawing negotiated agreements in retaliation
● Self regulation tools: trivial to bypass (yearly caps and “one host one home”) ● Proposing ineffective regulations to delay and block better regulations

Cities are getting smarter and moving to Ordinances 2.0 with clear primary residence requirements to foil professional investors. The onus is put on the homeowner to show that multiple key documents such as their driver license, voter record and other documents all match the home address.

While Palo Alto already prohibits short-term rentals by ordinance, the City signed an agreement with Airbnb, one of the first cities to do so in order to require payment of TOT tax.

Either party may terminate the agreement with notice.

At this point, Airbnb is routinely paying TOT tax. We should terminate the current agreement if needed to have transparent, clear discussions at Council on the impacts of short term rentals, while continuing to collect TOT.

On August 22, 2022, as part of its review of the housing element, the council passed an amendment to Program 4.2 “Housing Preservation” by a 6-0 vote with Councilmember Cormack recused:
a. Add a program to evaluate amending the muni code to restrict short term rentals, particularly where owner is not present, and insure housing stock is used for long term rentals

Some cities have implemented transparent portals available to residents to understand short term rentals in their community. For example, Pacific Grove’s website allows residents to look up an address to see if it is a registered short term rental https://www.cityofpacificgrove.org/our_city/departments/administrative_services/business_ taxes,_license___resources/short-term_rental_program/index.php

Carmel, CA, has outright banned rentals of less than 30 days in residential districts.

There was a previous colleagues memo on short term rentals in Dec 2014 and a study session in March of 20152 but no Council discussion since then.

2 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2015/id-5492-vacation.pdf
12 Packet Pg. 251
December 12, 2022 Page 4 of 10
(ID # 15026)
Recommendation:

We recommend the Council refer this matter to the Policy & Services Committee with the following recommendations:

That, for the short-term:
● Review the Airbnb agreement and, if needed for transparent discussion and the City’s ability to impose new regulations, give notice to terminate the existing agreement with Airbnb while requiring them to continue to pay tax.
● Include short term rentals in definition of required reporting in the City’s proposed rental registry (as the number of STR exceeds the number of available rental units). ● Include short term rentals as businesses required to register in the City’s business registry.
● Review with staff the opportunity to use vendors for tracking and enforcement to ease implementation
● Our housing element work should determine if we are able to get RHNA credit if we can demonstrate the return of a significant amount of housing units to our inventory.

AND

in the longer-term:
● suggest parameters for Staff to return with proposed ordinance to prohibit “whole unit” short term rental (less than 30 days)
● Consider if and how we should regulate owner occupied rooms for rent ● Evaluate enforcement / auditing vendor services in order to cost effectively enforce our ordinances, potential vendor selection
● Evaluate an update to penalties, including a penalty for illegal listings.

Resource Implications:

Staff anticipates the development of effective regulations for short-term rentals will be a significant undertaking, with the following specific considerations:
● We anticipate that a fairly large community engagement effort should be recommended.

This would recognize the potential for citywide interest, with wide-ranging perspectives on the primary issues that should be addressed by the city as well as preferred regulations. ● It should be noted that short-term rentals are not currently allowed under the Palo Alto zoning code. As such, any new regulatory framework will require reconciliation with the zoning code and likely code amendments regarding allowable zones and any associated requirements.
● Modification or termination of the City’s agreement with AirBnB will require both legal analysis as well as presumably direct staff consultation with AirBnB and other companies, with the potential for negotiations to ensue.
● The recommendation that short term rentals be included in either or both the proposed residential rental registry or the business registry may require modifying the definitions of 12 Packet Pg. 252
December 12, 2022 Page 5 of 10
(ID # 15026)
entities subject to registration. This could add a significant number of entities and raise associated concerns regarding enforcement.
● It should be noted that the staff resources needed for this effort are the same that are currently working on the residential rental registry as well as the business registry and associated implementation of the business tax registration system.

Given these considerations, staff would recommend that if the Colleague’s memo is referred to a committee for further development, the City Council includes a narrowing of the issues to be evaluated in the near term.

As an alternative, the City might consider a more incremental approach to the various issues involved with this topic. Such an approach could include:
● Conducting public meetings intended to determine the magnitude of resident concerns, such as: neighborhood impacts of non-residential use, non-resident parties, and/or owner neglect, as well as interest in supplemental income for homeowners. ● Based on the feedback received, staff would report on feedback received and recommended next steps.

While also not currently resourced, this alternative would enable initial steps with manageable impacts to current priorities. Subsequent steps would then be pursued once prioritized among other competing initiatives.

12 Packet Pg. 253
December 12, 2022 Page 6 of 10
(ID # 15026)
Appendix

VENDORS

Granicus
https://granicus.com/solution/govservice/host-
compliance/?gclid=Cj0KCQjw4omaBhDqARIsADXULuV800WbicrshIbpv3fBFDZsBwNYVr- 8OnuA128NGQMKXSES4_pSnoMaAmrlEALw_wcB

AirDNA
https://www.airdna.co/vacation-rental-data/app/us/california/palo-alto/palo-alto/overview 12 Packet Pg. 254
December 12, 2022 Page 7 of 10
(ID # 15026)

Azavar
https://www.azavar.com/solutions
12 Packet Pg. 255
December 12, 2022 Page 8 of 10
(ID # 15026)

InsideAirBnb
http://insideairbnb.com/santa-clara-county
12 Packet Pg. 256
December 12, 2022 Page 9 of 10
(ID # 15026)

Short Term Rental Example Ordinances
Provided by Kyle O’Rourke, Baker Tilly
Jan, 2022

New Orleans
Short Term Rentals - Ordinances and Enabling Legislation - City of New Orleans (nola.gov)
Short Term Rentals - City of New Orleans (nola.gov)
Short-Term Rental Enforcement Ordinance by Councilmembers Brossett and Palmer Passed by Governmental - New Orleans City Council (nola.gov)

Honolulu
CO 19-18 (Bill 89) Honolulu - New Short-Term Rental Rules For Oahu - (hawaiiliving.com) 210823_REVISED_Draft_Bill_Relating_to_Transient_Accommodations.pdf (honolulu.gov)
faqs.pdf (honolulu.gov)

12 Packet Pg. 257
December 12, 2022 Page 10 of 10
(ID # 15026)
Recents News Articles

The Impact of Airbnb on NYC Rents
https://comptroller.nyc.gov/reports/the-impact-of-airbnb-on-nyc-rents/ Between 2009 and 2016, approximately 9.2 percent of the citywide increase in rental rates can be attributed to Airbnb.

New York Now Has More Airbnb Listings Than Apartments for Rent https://www.curbed.com/2022/05/new-york-more-airbnb-listings-apartments-rentals.html NYC sues 'illegal' Airbnb operator under new law governing short-term rentals https://gothamist.com/news/nyc-sues-illegal-airbnb-operator-under-new-law-governing-short- term-rentals

Pacific Grove could beef up enforcement of short-term rentals https://www.montereyherald.com/2020/10/20/pacific-grove-could-beef-up-enforcement-of- short-term-rentals/
Short Term Rental Ban Finalized in Downtown Carmel, California https://www.36northpm.com/short-term-rental-ban-finalized-in-downtown-carmel-california/

Burlington City Council Approves Sweeping Restrictions on Short Term Rentals https://vtdigger.org/2022/06/28/burlington-city-council-approves-sweeping-restrictions-on- short-term-rentals/

Paso Robles Council approves changes to short-term rental ordinance https://pasoroblesdailynews.com/council-approves-changes-to-short-term-rental- ordinance/145223/

Dallas officials can’t agree whether short-term rentals should be banned in neighborhoods.

The city currently has no rules overseeing how short-term rentals are run https://www.dallasnews.com/news/politics/2022/06/01/dallas-officials-cant-agree-whether- short-term-rentals-should-be-banned-in-neighborhoods/

Attachments:
• Attachment12.a: Attachment A: Granicus Host Compliance Presentation • Attachment12.b: Attachment B The Process of Regulating Short-term Rentals • Attachment12.c: Attachment C: National League of Cities Rental Regulations 12 Packet Pg. 258
govService
Host Compliance
Kyle Salonga
March 2022
Palo Alto

12.a
Packet Pg. 259
2granicus.com
Monitoring Short -Term Rentals (STRs) presents both
widely known and underappreciated challenges
Getting visibility into
STR data is nearly
impossible
<10%
Of STR owners voluntarily get
registered and pay all of their taxes
20-30%
Issues with STRs growing at an
alarming rate year over year
Manual processes
weigh on my team
and drain our budget
Our internal alignment
is ineffective and
suffers
So much of my time is
wasted on finding more
room in the budget

12.a
Packet Pg. 260
3granicus.com
The Short -Term Rental Market is Exploding
Many communities are struggling to define and enforce regulations that preserve community character and keep communities safe while ensuring revenue collection.

Increase in STR
related party
complaints in the
last year
the # of short -term
rental listings since
2011
15x 239%
of different
platforms make it
nearly impossible
to manually track
STR property
listings
100s
global markets
have seen home
rentals outperform
hotels in the last
year
27 12.a
Packet Pg. 261
Without compliance, local
government knows STRs bring
significant challenges
Impact on housing affordability
Wasted time and money
Diminished neighborhood character
Lost economic opportunities

12.a
Packet Pg. 262
5granicus.com
• Reduce noise, parking, traffic and trash -problems
• Eliminate party houses
• Reduce STR impact on neighborhood character
• Ensure building safety
• Improve responsiveness to neighbor complaints
• Stem STR impact on affordable housing availability
• Improve permit and tax compliance to increase
tax revenue
• Ensure a level playing field between law abiding
traditional lodging providers and illegal STRs
• Reduce tension between short -term rental property
owners and their neighbors
• Make citizens aware that STR problems are taken
seriously
What Are Your
Top Priorities?

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How big of a challenge are short -term rentals in Palo
Alto ?
Debate Temperature
Complaints
Many
Few
Cold
Minor Concern
Problem
Issue
Crisis
Hot

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…and in Palo Alto we have identified 625 listings,
representing 453 unique rental units*
* Granicus Host Compliance's pricing is based on the count of listings and rental units that would need be to analyzed and monitored for compliance. In terms of listings, this number is 738 as we will expand our search area by several hundred yards beyond the borders of Palo Alto to capture all relevant listings. Source: Granicus Host Compliance Proprietary Data Short-term rentals in Palo Alto as of March 2022

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Palo Alto STR Market Details

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Palo Alto’s short -term rental listings are spread across a number of online platforms
Source: Granicus Host Compliance Proprietary Data
AirBnb
84%
Booking
1%
Expedia
13%
Other
1%
Trip Advisor
1%

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Historic short -term rental counts in Palo Alto
0 100
200
300
400
500
600
700
800
900
1000
Unique rental units
Unique rental units

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Automate and save
Support greater staff
efficiency with impactful tools
and process automation to
help implement and enforce
fair regulations
Protect the community
Ensure all lodging providers
meet health and safety
standards; develop short- and
long-term plans to create,
grow, or revitalize a community
or area
Understand the
market
Understand the size and
scope of short -term rentals
in your community
True Compliance Requires a Holistic Approach
Identifying STRs alone isn’t enough. You need to…
Identify revenue loss
Ensure your community has
identified every opportunity
for revenue capture,
creating an even
playing field for all types of
providers and residents
01 02
04 03

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14 Granicus
Experience
Group
A strategic team of
experts delivering
managed services
govAccess
Transactional websites designed
for today’s citizen
govRecords
Paperless records management
govDelivery
Targeted email, text, and
social media communications
govMeetings
Meeting agendas, video, and
boards management
govService
Online citizen self-service solutions
and process automation

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Compliance
Monitoring
Permitting
& Registration
24/7 Hotline Rental Activity
Monitoring
Consulting
Services
Tax
Collection
Workflow | Approvals
Data & Analytics | Professional Services
govService Host Compliance
Communications
Visitor
Resident
Business
Address Identification

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Address Identification technology and processes make
it possible to easily monitor the STR market and find the addresses and owners of all identifiable STRs
Scan
We scan the world’s 60+
largest STR websites for all
listings
Extract
We identify each listing and
extract as much information
as possible to allow our AI
models to narrow down the list
of possible address/owner
matches
Combine
We combine AI and human
analysts to identify the exact
addresses and owner
information for each
identifiable STR
1 2
3 12.a
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The data and screenshots are
made available to authorized
users in an easy-to-use online
dashboard and records
management system and easily
exported in Excel/CSV format
Address Identification monitors the STR market and finds the addresses and owners of all identifiable STRs

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Use software to automate the
systematic capture of listing screenshots
Full Screen

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Listing status, metadata and full -screen screenshots
are time stamped and made available in real time
on the rental unit record

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Provide documented evidence of every address
match to support all of Palo Alto’s enforcement efforts Example of Legal DeclarationExample of Searchable Evidence

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Easily track the status of individual rentals and create case notes on the unit's record

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Compliance Monitoring allows you to s tay in control
and save time by sending your enforcement letters with the click of a button
Select Letter
Template

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Increase your outreach effectiveness and
efficiency by automatically adding evidence to
communications

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Mobile Permitting & Registration
Simplify Palo Alto’s permitting and registration processes and significantly reduce the administrative costs on the back -end

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Tax Collection
Simplify Palo Alto’s tax collection process and significantly reduce the administrative costs on the back -end

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Report
Concerned neighbor
calls 24/7 short-term
rental hotline or reports
incident online
Proof
Complainant provides
info on alleged
incident and is asked
to submit photos,
videos or other proof of
the alleged violation
Resolution
If property is registered,
Granicus Host
Compliance
immediately calls and
texts host/emergency
contact to seek
acknowledgement
& resolution
1 2
3 Complete
Problem solved –
complaints & resolution
notes saved in
database so serial
offenders can be held
accountable
4 24/7 Hotline makes it easy for neighbors to report, substantiate and resolve non -emergency STR incidents in real -time

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Get detailed reports and dashboards to track all short -term rental related complaints in real -time

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Rental Activity Monitoring automates the selection of
audit candidates to maximize the impact of audit efforts Identifying tax fraud
and occupancy/rental
frequency violations by
STR listings for signs of
rental activity

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Streamline the audit process by requesting all
backup information through simple, interactive
online forms
Hosts can easily upload
STR revenue statements
to verify rental activity

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Short-Term Rental regulation
creation, updates, and guidance
from planning experts
✓ Experience with hundreds of communities
including 1) access to proprietary regulations
data that is the most trusted by government
and 2) support on hundreds of regulations.
✓ Custom public outreach strategy and
messaging framing.
✓ Complete draft of a custom short-term rental
ordinance.
✓ Compliance monitoring and enforcement plan
for staff and legal counsel to refine and adopt.

Consulting
Services

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How can you make sure all voices are heard while
considering short-term rental regulations?
Neighborhoods
• Organized neighborhood
groups (including HOAs,
etc.)
• Individual homeowners
• Renters
• Housing advocacy groups
Lodging
• Existing STR host groups
• Individual STR hosts
• Realtors
• Current lodging providers
• Tourism Board
Government
• Code Enforcement
• Planning & Zoning
• Public Safety
• Assessor

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With Bang The Table community engagement in
Palo Alto just got easier
Reach targeted
audiences and use
data to measure
effectiveness
Choose the right
mix of online
feedback tools for
your community
engagement
objectives
Deliver a seamless,
closed -loop
communication
experiences for
your citizens
Foster meaningful
connections and
build trust with your
community

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Truckee, California
Goal: Collect transient
occupancy tax related to the
growing number of STRs.

More taxes collected36%
Properties identified400
Compliance rate80%
“We’ve used the [Host
Compliance] data to be
able to proceed with our
compliance efforts.”
— Chrissy Earnhardt, Administrative
Services Manager

HOST COMPLIANCE

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Garden Grove, California
Goal: Obtain evidence to cite
illegal short -term rentals
Efficiency4X
Listings identified229
Citations80
”Host Compliance really
helps out with analysis.

We’re able to save a lot of
Code Enforcement time
and resources so we can
address other issues in the
community.
- Pete Roque, Code Enforcement
Supervisor

HOST COMPLIANCE

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Why Government Leaders Choose Granicus
Trusted by thousands of government agencies at all levels FedRAMP authorized; Tier III, DOD-
approved data centers; Private vs. Public
cloud.
1 Team, 24/7
Around-the-clock support and training
for your entire team; three types of
support available – technical, success,
adoption.

Secure
Supported
Streamline digital services by
consolidating to a single platform vs.
multiple vendors and applications.

Simplified
One Platform
Security -First
$20M Invested Annually in R&D, Foremost
innovator of government SaaS technology,
with 5 first-to-market solutions.

Innovation Leader
First -to-Market Technology

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In California we are currently partnering with 106
local agencies to address their STR related
challenges
•Inyo County CA
•Irvine, CA
•Petaluma, CA
•Napa, CA
•Mono County CA
•Buena Park, CA
•Newark, CA
•Garden Grove, CA
•Sunnyvale, CA
•Butte County, CA
•Nevada County CA
•Chula Vista, CA
•Indian Wells, CA
•Albany, CA
•Daly City CA
•Citrus Heights CA
•Redwood City, CA
•Coronado CA
•El Paso de Robles CA
•Marina CA
•Long Beach CA
•Marin County CA
•Milpitas CA
•Roseville CA
•Union City CA
•Fullerton, CA
•Benicia CA
•Los Angeles County CA
•Riverside CA
•Sacramento, CA
•San Mateo County CA
•El Dorado County CA
•Berkeley CA
•Mariposa County CA
•Santa Cruz County CA
•Plumas County CA
•Lake County CA
•Alpine County CA
•Calaveras County CA
•Del Norte County CA

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In the broader Far West we are already serving 137
forward -thinking local government agencies
•Las Vegas NV
•Kelowna, BC
•Mariposa County CA
•Santa Cruz County CA
•Washoe County NV
•Plumas County CA
•Lake County CA
•Ucluelet, BC
•Alpine County CA
•Calaveras County CA
•Nevada County CA
•Hood River County OR
•Chula Vista, CA
•Indian Wells, CA
•Penticton, BC
•Nelson, BC
•Albany, CA
•Daly City CA
•Citrus Heights CA
•Redwood City, CA
•Skamania County WA
•Coronado CA
•Kimberley, BC
•El Paso de Robles CA
•Marina CA
•Long Beach CA
•Lewis County WA
•Marin County CA
•Vancouver WA
•Milpitas CA
•Roseville CA
•Union City CA
•Fullerton, CA
•Benicia CA
•Los Angeles County CA
•Riverside CA
•Sacramento, CA
•San Mateo County CA
•El Dorado County CA
•Berkeley CA

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Address Identification
Automated monitoring of 60+ STR websites and online dashboard with complete address information and screenshots of all identifiable short-term rentals.

Compliance Monitoring
Ongoing monitoring of STRs for zoning and permit compliance coupled with systematic outreach to illegal short-term rental operators.

Permitting & Registration
Online forms and back-end systems to streamline the registration process and capture required documentation, signatures and payments electronically.

Tax Collection Make tax reporting and collection easy for hosts and staff to submit and review online.
24/7 Hotline
Make it easy for neighbors to report, prove, and resolve non- emergency short-term rental related problems in real-time, any day, at any hour.

Rental Activity Monitoring
Estimate occupancy or rental revenue for each property and identify audit candidates who are under-reporting on taxes or exceeding occupancy regulations.
govService Host Compliance

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To accommodate any budget and ensure a high ROI for
our clients, our services are priced based on the number of STRs that need to be monitored
Cost per STR Listing/Rental Unit
Address Identification $22.50
Per Year
Compliance Monitoring $12.75
Per Year
Permitting & Registration $11.04
Per Year
Tax Collection $11.04
Per Year
24/7 Hotline $10.20
Per Year
Rental Activity Monitoring $17.00
Per Year
Note: the pricing reflected is direct, list pricing in USD. The exact scope can be adjusted to meet Palo Alto’s exact monitoring needs in terms of geography, listing sites, listing types and other variables.

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Modular pricing tailored to Palo Alto’s short -term rental needs
Address Identification $16,605
Per Year
Compliance Monitoring $5,776
Per Year
Permitting & Registration $5,001
Per Year
Tax Collection $5,001
Per Year
24/7 Hotline $4,621
Per Year
Rental Activity Monitoring $7,701
Per Year
Note: the pricing reflected is direct, list pricing in USD. The exact scope can be adjusted to meet Palo Alto’s exact monitoring needs in terms of geography, listing sites, listing types and other variables.

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Working backwards to a solution to address Palo
Alto’s STR challenges
Set
Deadline
Gather
Team
Project
Scope
Project
Approval
Budget
Sign
Contract
Implement
STR Problem
Solved

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Next
Steps
I. Send Meeting Summary & Presentation
II. Schedule All Team Value Meeting
Participant: Administration, Finance, Planning, Code
Enforcement, Elected Officials
III. Confirm Performance Goals & Metrics
Participant: Administration, Finance, Planning, Code
Enforcement, Elected Officials
a) Return on Investment Experienced by Peer Governments b) Alignment on Success Metrics/KPIs
IV. Develop Joint Action Plan for addressing Palo Alto’s needs
Participant: Administration, Finance, Planning, Code Enforcement, Elected Officials
a) Set appropriate expectations
b) Efficiently utilize staff time
c) Address requirements, fit, and value
d) Optimize time to completion while ensuring highest quality

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Contact Info
Please feel free to contact us anytime if you have any questions about short-term rental compliance and how to best address the associated monitoring and enforcement challenges.

Kyle Salonga
[email protected]
415.874.1783

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The Process of Regulating
Short-term Rentals
Shannon Jamison, Principal, Third Space Community Planning Eric Swanson, Co-Executive Director, Generation Squeeze Jeffrey Goodman, JBGoodman Consulting for Granicus
Published June 2022

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2 The Process of Regulating Short-term Rentals
About Generation Squeeze
About Third Space Community Planning
About Jeffrey Goodman
Gen Squeeze is a national research and advocacy organization for young Canadians.

We work to address a 360-degree “squeeze” currently facing millions of Canadians in their 20s, 30s and 40s – from stagnant earnings to high costs for things like housing and childcare, to mounting debts and climate change. Housing affordability is currently our largest program area, and the appropriate regulation of short-term rentals is part of that broader work.

Third Space Community Planning is a boutique planning consultancy based out of Victoria, B.C. led by Shannon Jamison, a city planner and this project’s primary consultant.

Jeffrey Goodman is an urban planner and designer whose work has led to him to be considered one of North America’s leading authorities on short-term rentals and how they impact communities. Jeffrey has spoken about short-term rentals across the country, including at the APA’s National Planning Conference and written extensively on best practices for cities, including as the author of a featured article in Planning Magazine and in the New York Times.

This toolkit was made possible with support from the Real Estate Foundation of BC, the Federation of Canadian Municipalities, LandlordBC and the Vancouver Foundation. And thank you to all the local government staff and elected officials for participating in a national survey on STR regulations.

This toolkit has been carefully prepared and is intended to provide a summary of complex matters. It does not include all details and cannot take into account all local facts and circumstances. While this toolkit suggests a sequence of considerations, we recognize the path to regulation is not always linear. This guide refers to laws and practices that may change.

Municipalities are responsible for making local decisions, including decisions in compliance with law such as applicable statutes and regulations. For these reasons, this toolkit, as well as any links or information from other sources referred to within it, should not be relied upon as a substitute for specialized legal or professional advice.

The user is solely responsible for any use or application of this guide.

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3 The Process of Regulating Short-term Rentals
Table of Contents
Introduction 4
Part 1: Background 5
Part 2: Regulatory Roadmap 7
Conclusion 25
Appendix - Glossary of Terms 26
What is a Short-term Rental? 5
High-Level Best Practices 7
Gathering Data to Inform Your Approach 12
Developing an Enforcement Plan 19
The Range from Homesharing to Commercial Operation 6
Prioritizing Your Regulatory Goals 9
5-Step Guide to Drafting STR Regulations 15
Monitoring, Evaluation and Improvement 21
Potential Positive and Negative Consequences 6
Developing a Project Plan 11
Establishing your Enforcement Approach 18
Advocating to Higher Levels of Government 22

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4 The Process of Regulating Short-term Rentals
Introduction
While online platforms like Airbnb have
led to an explosion in short-term rentals
(STRs) across the United States and
around the world, the practice of renting
out space goes back to the very beginning
of cities. But what had been a localized,
often word-of-mouth activity has become
a billion-dollar industry dominated by
wealthy startups, excited investors, and a
rapidly changing real estate landscape.

Not surprisingly, local governments have
been playing catch-up.

Short-term rentals are here to stay — now
what? As a use that sits at the intersection
of a number of issues — housing, economic
development, neighborhood character —
that people feel very strongly about, STRs
can be a frustrating thing to regulate. But,
like any issue, local governments have
the duty and the right to regulate for their
context and the general good — even that
of the grumblers and complainers.

We created this guide as a resource, one
that allows local governments, elected
officials, and staff to follow a process that
will lead to better, more enforceable, more
equitable rules and regulations. No matter
your community’s priorities, whether your
residents want fewer STRs, more STRs,
or just better regulated STRs; or whether
your community is at the cutting edge of
regulations or just getting started, you
should be able to find resources in this
toolkit that can help.

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5 The Process of Regulating Short-term Rentals
Part 1: Background
What is a Short-term Rental?
While the idea of renting out residential space is nothing new, these days a short-term rental (STR) often refers to the rental of a residential dwelling unit (either the entire dwelling or a room (or rooms) within it 1 for a short period of time (less than a month, for example); facilitated by online platforms like Airbnb and VRBO. • Rental of a residential dwelling unit (either the entire dwelling or a room(s) within it); • In any housing type (e.g. houses, secondary suites, carriage houses, garden suites, cabins, apartments and condos);
• For a short period of time (e.g. less than a month);
• Facilitated by online platforms (e.g. Airbnb, VRBO, etc.); Because of special rights and rules related to renters’ tenancy and eviction in many jurisdictions, the definition of a short-term rental is simply anything that is not a long- term rental. The distinction between an STR, in the modern sense, and other lodging types (motels, bed & breakfasts, boarding houses) may be difficult to discern. 1 Non-dwelling units (e.g. vans, boats, parking spaces, campgrounds) can also be listed as a STR, but these represent a small fraction of STR activity.

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6 The Process of Regulating Short-term Rentals
2 Hereafter referred to as “principal dwelling unit STR” and “non-principal dwelling unit STR” for technical clarity The Range from Homesharing to Commercial Operation
There are many types of units on STR platforms, from couches to mansions. And many types of users on STR platforms, from people making a little money on the side to major commercial operations. While the platforms like to emphasize heart-warming users, much of the rapid growth in the industry has come from professionally managed, non- owner-occupied units.

Understanding the breadth of use cases is key to regulating effectively, especially in a local context. The most important distinction for many communities is separating homesharing, which takes place in an operator’s principal dwelling unit, from a commercial operation, which occurs in a unit that is not someone’s principal dwelling. 2 Non-principal dwelling unit STRs also include vacation properties or secondary residences that are not the designated principal dwelling of the owner.

Potential Positive and Negative Consequences of STRs
Short-term rentals, as a regulatory issue, can be complicated to understand, as the industry touches on housing, community development, neighborhood character, taxation, and land use simultaneously. Based on hundreds of interviews, the following positives and negatives are the most common discussion points.

The potential benefits include:

Income generation, higher housing values, greater choice, local experiences, new tourist accommodation, more efficient use of space, support for the local tourism economy, greater neighborhood distribution of wealth
The potential harms include:

Housing loss, housing unaffordability, unfair advantages, revenue loss, increased contraventions of local regulation, community disruption, reinforced inequities

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7 The Process of Regulating Short-term Rentals
Part 2: Regulatory Roadmap
High-Level Best Practices
When you’re developing your regulatory and enforcement programs and selecting regulatory tools, referring back to this list can help ensure your approach is aligned with best practices in the field.
• Say yes to regulated STRs. Outright bans on all STRs — including true homesharing — are difficult and expensive to effectively enforce. Acknowledge that STRs are here to stay and then regulate them like the business it is. • Say no to the one-size-fits-all approach. Regulations and enforcement need to be tailored to community priorities, context, and objectives. What one community has decided is appropriate may not be successful for another. Jurisdictional scans are a helpful tool, but regulations and enforcement must be localized. • Start with a goal, not a regulation. Agree on the specific goals you wish to achieve before developing regulations. Regulations can only be successful if it’s clear what success actually looks like (e.g., a particular problem is solved or benefit created). • Dedicate appropriate resources. STRs are a complex, multi-disciplinary issue; dedicated staff and financial resources are required to develop and implement meaningful and successful regulations.
• Create enforceable regulations. If a regulation cannot be enforced in a clear, cost-effective, practical manner, don't include it in the ordinance. Including unenforceable regulations in your ordinance will defeat the purpose of enacting a law in the first place and diminish the credibility of the local government.

This section lays out a basic roadmap for designing and implementing a comprehensive STR regulatory program, including key considerations and tips.

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8 The Process of Regulating Short-term Rentals
• Keep it simple. Simple, easy-to-understand regulations will achieve higher levels of voluntary compliance. They are also less onerous for staff to administer and enforce and can be just as effective as more complex regulations. • Strive for consistency. Instead of developing new, punitive approaches, apply current, relevant, and effective regulations, processes, and standards to your ordinance such as quiet hours, parking minimums, occupancy limits, zoning, building and fire codes.
• Prioritize housing for residents. Communities experiencing low vacancy rates and high costs to rent or buy a home (relative to local incomes) should consider regulatory tools such as the principal dwelling unit restriction to advance adequate housing and discourage housing loss to STR activity.
• Avoid relying on voluntary support from platforms to regulate and enforce STRs.

Municipalities and platforms often have competing objectives: the former to protect their users (operators) and maximize business and profits, and the latter to regulate STRs for the public good. These competing objectives can make it difficult, if not impossible, to negotiate voluntary data sharing agreements. • Utilize technology. Including internal technology like online business license applications and/or external technology like third-party resources for data acquisition/modeling can facilitate a streamlined application process and effective enforcement.
• Communicate widely. Proactive, widespread, and sustained communication and engagement/education about STR regulations should be used to boost levels of voluntary compliance in conjunction with proactive enforcement. • Proactively enforce. To achieve high levels of compliance, a robust and proactive enforcement strategy must accompany STR regulations. Draw on dedicated resources and utilizing technology to identify non-compliant operators. Complaint- based approaches to enforcement will yield low levels of compliance. • Be adaptable. The rapid growth and fluid nature of the industry means traditional approaches to enforcement may not work. Best practices will evolve over time and policy approaches may need to change.

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9 The Process of Regulating Short-term Rentals
Prioritizing Your Regulatory Goals
Clearly identifying and prioritizing your goals is fundamental to any successful STR regulatory program and provides a basic starting point for staff to plan their work and evaluate the effectiveness of the regulations after implementation.

Example Regulatory Goals
In the context of the potential benefits and harms of STRs , local governments can define a number of goals for their STR regulatory program.

Through the development of this toolkit, seven broad and interrelated goals emerged as being the most common:

Housing
Protecting housing availability and affordability. Restrict the type, location, size, and/or number of STRs that are permitted to operate to reduce the demand placed by this sector on limited local housing stock.

Tourism Development
Support the tourism economy. This usually means being more permissive about both the type and/or number of STRs that are permitted to operate to increase the total number of tourist accommodation options and their diversity (character, amenities, and cost). Often, this also means being more intentional about the distribution of STRs and pursuing greater regulatory equity across the range of accommodation providers (see below).

Regulatory Equity
Establish regulatory and tax equity among accommodation providers. This can mean requiring certain types of STR operators to comply with health, safety and other regulations that are already being applied to traditional accommodation providers such as B&Bs, motels and hotels that require licensed operators to pay a fee. It also usually means some level of coordination or advocacy directed at higher levels of government to assist with tax equity.

Health and Safety
Ensure health and safety. Related to regulatory equity, this often means requiring STRs to meet certain health and safety standards established in existing regulations (e.g., fire and building codes, etc.) to ensure the habitability of a STR and to protect guests, hosts, and neighbors from harm.

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10 The Process of Regulating Short-term Rentals
Revenue
Collect taxes owed. This means finding a way to collect taxes that are (or should be) owed by STR operators, but are not being voluntarily paid, including local/ regional tourism taxes/fees and state and federal taxes.

Ensure cost recovery. Virtually all local governments are keen to ensure that the cost of administering their STR regulatory program is recovered, typically through STR-specific licensing fees, tax income, or fines.

Neighborhood Compatibility
Foster respectful neighborhoods. This usually means promoting “good neighbor” behavior between STR operators, their guests, and nearby residents. A degree of neighborhood-level compatibility (e.g., sufficient parking, acceptable ratios of STRs to residents, etc.) should be established before permission is granted to operate.

Compliance
Achieve a high degree of compliance. Regardless of the other goals pursued through the STR regulatory program, many local governments have an interest in achieving and reporting a high degree of compliance to enhance the likelihood of public trust in the STR program, specifically and local government regulatory interventions, generally.

Prioritize Y our Community’s Goals
Once you have identified your community’s goals, you can then consider which of them to prioritize over others.

This is especially important where there is a natural tension between different goals such that they cannot be achieved to the same degree.

For example, local governments should be mindful of a major incompatibility between the goal of protecting housing availability and affordability (e.g. in the context of a local housing crisis) and the goal of supporting STR tourism (specifically via non- principal dwelling unit STR).

The natural scarcity of both housing and land means that increased demand from non- principal STR operators can have significant impacts on housing access and costs. Local governments should therefore consider making a clear choice between prioritizing housing or STR tourism.

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11 The Process of Regulating Short-term Rentals
As you work through each of the regulatory steps —particularly gathering additional data on STRs and undertaking public engagement— the way you initially defined or prioritized your goals may change.

Developing a Project Plan
A detailed project plan can ensure the right people are involved, there are adequate financial and human resources to support the work, and timelines and deliverables are clearly defined and realistic.

STR project plans can include:
• Draft Goals. Use the previous section of this toolkit as an example. • Scope. Clearly identify the scope of the project by collecting data on local STR activity, conducting initial public engagement to gauge interest, or going all the way by developing and implementing STR regulations. Make sure your scope matches the scale of your problem.
• Project team. This should include an interdepartmental team from planning, legislative/corporate services, economic development, zoning enforcement, legal, and finance. At the beginning, the project may be led by one department, but the involvement of staff across the organization is important to develop buy-in and support for the initiative and to ensure continuity through the regulatory and enforcement process.
• Proposed stakeholders. The impact of STRs is of interest to a broad cross-section of your community, including hotel and tourism associations, accommodation providers, housing advocacy groups and providers, STR operators, platforms, residents, and STR users. A separate communications and engagement strategy could be developed and include proposed stakeholders.
• Budget. Staff time will likely account for the majority of costs, with additional costs for communications, public engagement material, and data (if you secure third party monitoring and enforcement support).
• Timeline. It could be possible to develop a comprehensive STR regulatory program within about a year of initiation, for example, if there is a robust project plan that clearly articulates phases (research, proposed regulatory framework, public consultation, drafting, implementation, and enforcement) and is responsive to changing circumstances.

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12 The Process of Regulating Short-term Rentals
• Project risks. The regulation of STRs
can be an extremely polarizing and
highly controversial issue. Public
opposition should be expected.

Identify risks early and put a plan
in place to minimize, mitigate, and
respond to them quickly.
• Governance. STRs are an issue
that impacts multiple departments.

To eliminate uncertainty, identify
which department will lead the
project, present to council, and have
final decision-making authority
on the proposed regulation and
enforcement. The lead department
may change over the course of the
project. For example, a planning
department may lead in the
development of the regulations
while a licensing and enforcement
department will take over that
responsibility once the regulations
are adopted.

Of course, as with any plan, STR project
plans will be subject to change and
refinement over time.

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Gathering Data to Inform Your Approach
Your local government can use data to:
• Assess STR activity in your community and estimate its impact. Hard data on STR activity can help estimate impacts to housing and tourism, which will help your community identify and prioritize its regulatory goals and inform the design of your STR regulatory and enforcement approach.
• Evaluate the effectiveness of your regulatory and enforcement program. Data can be used to help evaluate the impact of your regulations in achieving desired goals related to housing, tourism development, neighborhood compatibility, regulatory equity, health and safety, and compliance. This can take the form of pre-regulation projections or post-regulation evaluation.
• Enforce the regulations. Good data is often essential to proactively enforce STR regulations and achieve high rates of compliance.

There are two basic categories of data you can draw on to get a clear picture of STRs and their impact in your community:

1. STR-specific data - The number, type and distribution of STR listings, complaints, etc.

2. Contextual data - Housing market data, lodging rates, or tourism-related data.

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Getting STR-Specific Data
Getting accurate data on STRs in your community can be difficult because platforms (that are the holders of the raw data) have been extremely protective of this information. In the absence of voluntary data-sharing agreements, or new legislation that requires data sharing, local governments have a couple of basic options to get STR-specific data:
• Gather, compile, and analyze data from free sources
• Get more detailed information from paid providers
Determining how much STR data your community truly needs and deciding which data sharing option is best will be a judgement each local government must make.

Getting 100% accurate, comprehensive data is essentially impossible, especially without voluntary or mandated cooperation from STR platforms. The fluid and seasonal nature of the industry and the difficulty of verifying third party data can make things even trickier.

That said, there are plenty of ways to obtain “good enough” data. When deciding what “good enough” means for your community you can take into consideration things like:
• Community size
• Scale of STR activity
• Regulatory goals
• Resource constraints
• Importance of the issue to your community
• Level of comfort of staff and elected officials
• Complexity of the anticipated/implemented STR regulations • Desired degree of compliance

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Getting Contextual Data
Getting a range of contextual data can help your community prioritize and refine STR regulatory goals, guide your regulatory approach, and evaluate the impact of regulations.

The following table includes some examples.

Contextual Data by Goal, Indicator and Source
Goal Area
Housing
Tourism
Neighborhood
Compatibility
Vacancy rate ACS or local realtors
Rental housing affordability
(% of income on rent and utilities) ACS and Census
Percentage of owners to
renters
Tourism as a share of the local
economy
Census Profile
Chamber of Commerce or
Economic Development board
Average housing costs
Current number and distribution of
traditional accommodation (hotels,
B&B, campgrounds)
Number and type of complaints
ACS or local realtors
Local Tourism Association
Correspondence to Council and
Staff, Calls for Service
STR as a percentage of total
dwelling units
Occupancy rates
Infrastructure constraints (e.g.
groundwater, septic fields)
Existing health and safety standards
and regulationsHealth and Safety
Local government regulatory
authority and existing regulationsRegulatory Equity
Local government financial position
(e.g. annual revenue, sources) Cost Recovery
Airdna and Census Profile
Local Tourism Association
Master Plans or utilities
Fire and Building Code, Zoning
Municipal code (business, zoning,
noise and nuisance, property
standards)
Master budget
Example Indicators Example Data Sources

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5-Step Guide to Drafting STR Regulations
Step 1
First, choose between two basic approaches:
• Stick to amending existing laws. Most STR regulations will substantively impact existing regulations such as business licensing, tickets and offences, and zoning.

References to STRs can be included in amendments to these existing rules in ways that make STR permissions or restrictions clear.
• Develop a new stand-alone STR ordinance and amend existing laws. The new STR rules can reference all of the necessary context and components of your STR regulations in one place (e.g., purpose, description, provisions, schedules, related ordinances).

Determining which route to take will depend on your community's size and complexity, current approach to ordinance creation as well as the status of existing regulations.

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Step 2
Second, determine who will be responsible for drafting the law (e.g., CAO, city attorney, city manager, planner) and involve the project team in the drafting process.

Providing staff with an opportunity to participate in the drafting stage will create staff buy-in, remove ambiguity or uncertainty about the meaning of the regulations and how they should be applied, and help preserve the intent of the regulations when transferred from an approach into a law.

Step 3
Third, draft the standalone ordinance and/or amendments.

State and local government legislation define the mandatory part of an ordinance (title, number, etc.) but there are areas to pay particular attention to regarding STRs, including:
• Definitions. Terms that are particular to the STR law and/or amendments (operator, short-term rental, principal dwelling unit, listing, platform) should be well-defined and as specific as possible. Definitions in other codes such as bed and breakfast, home occupation, business license, and dwelling unit will apply to any new laws, so confirm their accuracy and consistency now and amend these too, if needed. • General provisions and rules/responsibilities. This section contains the main components of your regulations (e.g., licensing requirements, principal residence, designated responsible person, display license number in ads) and should be clear and precise enough that staff as well as operators understand what must or must not be done to comply with the regulations.
• Severability. Should a decision by a court find a part of the law illegal, void or unenforceable, a severability clause specifies that part of the law would be removed and not affect the balance of the law. This is particularly important given the relative newness of STR regulations.
• Penalties. These should be sufficiently high to deter non-compliance and can be per instance of offense, or per each day that it occurs. State laws may limit maximums.
• Transition provisions. This is particularly important for regulations that are coming into force part way through the year to allow for pro-rated licensing fees. Effective date and signature. Once the law has received readings and has passed, this is the day the law comes into force.

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Step 4
Fourth, prior to bringing the law(s)
to council for readings and votes,
have staff review it to confirm the
enforceability of the regulations. When
passing a new ordinance, it is important
for staff to consider whether the
capacity (staff, equipment, and other
resources) exists to adequately enforce
the ordinance. Ideally, this step occurs
at the same time as staff are developing
your enforcement plan. Insufficient
enforcement capacity may defeat the
purpose of enacting the rules in the
first place and erode public trust in the
effectiveness of local government.

Step 5
Fifth, present the rules to council for
reading and adoption and prepare for
tinkering. Hopefully, if you have given
time and space for feedback both
before and during the development of
your ordinance, you can avoid anyone
in the public (or politicians!) from feeling
blindsided or attacked. There may
always be someone who won’t agree
with your ordinance but hopefully, they
understand why certain choices were
made.

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Establishing Your Enforcement Approach
Effective enforcement is important not only to achieve the desired impact of STR regulations but to maintain public confidence and trust in a local government’s authority.

Identifying your local government’s enforcement approach requires two key decisions:
• Decide on your position on the enforcement continuum. With completely voluntary compliance on one end (e.g., public education and outreach, warning letters), and consistent proactive enforcement on the other (e.g., issuing violations or tickets, seeking injunctions and prosecuting), enabling both ends of the spectrum is often the best approach.
• Determine your enforcement complement. This can include relying on existing staff and/or hiring new STR-specific enforcement staff, retaining a third-party monitoring and compliance firm, seeking to negotiate an agreement with platforms, or a combination of the above. For communities with fewer STRs (e.g., less than 100), it may be possible to develop an effective enforcement approach that relies only on local government staff. For communities with higher STR activity, staff can still effectively enforce the regulations but consider seeking the support of a third-party compliance and monitoring firm to aid and expedite the process.

Third Party Monitoring and Compliance Firms
Host Compliance is the current industry leader, with hundreds of local government clients across Canada and the United States. They provide a range of services in support of short-term rental regulations, including:
• Data snapshots on current STR activity
• On-line registration and licensing systems
• Address identification for operating STR
• STR monitoring to identify possible non-compliance
• STR operator outreach, including the issuance of warning letters • 24/7 hotline to lodge neighbor complaints
Additional third-party monitoring and compliance firms include Hamari and LODGINGRevs.

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Developing an Enforcement Plan
Developing an enforcement plan and making it readily accessible to the public (e.g. publishing it on a designated STR webpage) can help local governments manage public expectations while promoting transparency and accountability.

An enforcement plan can include:
• Goals of the regulation and enforcement program. Clearly stated goals will help STR operators and residents understand the purpose of the STR regulations and establish expectations and standards for enforcement.
• Description of the enforcement approach. As discussed in the previous section of this toolkit.
• Defined categories of non-compliance. When clearly stated, these can help STR operators, residents, and staff understand what is and is not permitted under the new regulations. Categories of non-compliance may include operating without a license, operating in an unpermitted zone, operating a STR that is not one’s principal dwelling unit, and listing or advertising a STR without displaying a business license number.
• Description of the actions that will be taken. This helps STR operators understand how and why enforcement decisions are made and can include details about warning letters, fines, suspensions and revocation of licenses, audits and inspections, and legal proceedings.
• Description of sequencing and escalation of actions. This helps STR operators understand how enforcement will be escalated (e.g. from an initial warning letter to first and subsequent offence tickets, to license revocation and even legal proceedings). Details can also be provided on how long operators will have to comply once receiving a notice of violation.
• Description of the complaints process. This provides clarity and detail to residents on how to make a complaint or report a non-compliant STR operator and what the resolution process will entail.
• Description of the appeals process. This provides clarity about how STR operators can appeal a decision like a license revocation, for example.

Local governments should expect the first year of a STR regulation and enforcement program to be more resource-intensive as you license existing operators, respond to

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Monitoring, Evaluation and Improvement
Once the STR regulatory and enforcement program has been established, things will move into a monitoring and evaluation phase.

This will be a time to assess the success of the program and its individual components, make modifications, and identify any new components to add.

Code Amendments
Our conversations with local governments that have established STR regulations sug - gest you anticipate one or more of the following types of amendments:
• Clearer definitions. To remove areas of confusion or ambiguity. • Higher business license fees. To better cover the cost of the STR regulation and enforcement program.
• Stiffer fines. To deter non-compliant operators.

Measuring Impact
To gather qualitative feedback on the effectiveness of the program consider consulting:
• Y our STR advisory committee. If established and maintained after implementation, this multi-stakeholder group can provide valuable ongoing feedback. • STR operators. Operators can provide feedback on the clarity of the regulations, enforcement plan, communications materials, and the ease of the business licensing process, along with any unanticipated consequences of the program. • Departmental staff. Interviews with all staff that engage with STRs, including front counter staff, licensing clerks, zoning and inspection personnel, and code enforcement staff can help identify what is and is not working.

Developing quantitative methods to measure the effectiveness and impact of your regulatory program can be notoriously difficult.

Conducting an annual review of the program and producing a report to council that includes proposed amendments, program improvements, and an assessment of the impact of the regulations is encouraged.
requests and complaints, conduct audits and inspections, and begin to proactively enforce the regulations.

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Advocating to Higher Levels of Government
Throughout this toolkit, we make the case — and attempt to make it easier — for local governments to regulate STRs regardless of what the state and federal governments are doing. That said, a lot of money, time, and headaches could be saved if higher levels of government did a bit more.

Here, we briefly identify four key areas of state and federal intervention that local governments could choose to prioritize for their advocacy agendas.

1. Data sharing
The problem:

Local governments need two kinds of information to effectively regulate STRs:

1. Individual information. The name of individual STR operators and the full address and booking details of their listings, for example (state or federal authorities would also benefit from details on operators’ booking revenue for income tax purposes).

2. Aggregate information. Detailing the extent and nature of STR activity in the community over time.

While local governments can play detective by using a combination of methods to get some of this data, the process can be expensive, time-consuming, and only partially accurate. Meanwhile, STR platforms have most of the necessary data, but aren’t required to share it.

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The solution:

Use local, state, and/or federal legislation to compel platforms to share individual and aggregate data on STR operators and activity with government authorities in a way that balances the protection of privacy and intellectual property with the public interest.

The benefits:

A more accurate understanding of STR activity, simplified enforcement (time and money saved), fewer illegal STRs (higher compliance), increased public trust.

2. Platform accountability
The problem:

STR platforms often publish illegal listings (i.e., listings where the unit is not permitted as a STR).

The solution:

Use local, state, and federal legislation to compel STR platforms to only include legal listings (e.g., listings that have a government-verified license number and meet other relevant criteria), including penalties and fines for non-compliant platforms.

The benefits:

Simplified enforcement (time and money saved), fewer illegal STRs (higher compliance), and increased public trust.

Data sharing and platform accountability share similar objectives. In the former, STR platforms hand over data to enable government-led enforcement. In the latter, governments hand over data to enable platform-led enforcement. A combination of the two may be the best way forward.

3. State registration systems
The problem:

While local governments are generally very used to managing business licensing programs, the unique nature of STRs requires custom licensing systems be put in place, often at high administrative costs and with challenges to enforcement.

The solution:

Establish a single state STR operator registry with a clear and streamlined licensing process and data-sharing with local governments (to ensure compliance with local regulations), tourism authorities (to enable better planning), taxation authorities (to assist with tax collection), and platforms. Platform accountability requirements will

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24 The Process of Regulating Short-term Rentals
ensure operators publish only legal/licensed listings. Then, direct license fees back to local governments and/or tourism/economic development authorities.

The benefits:

State registration simplifies the STR licensing process for all parties. Data sharing and/or platform accountability mechanisms are still likely required to simplify enforcement and achieve high compliance, but a single state/territorial registry would make both of those options much easier to implement.

4. Tax fairness
The problem:

Many operators are unlikely to voluntarily collect and remit sales taxes and any local tourism/accommodation levies on their STR bookings. Many operators are also likely failing to report STR income on their income tax returns. Furthermore, many operators of non-principal dwelling unit STRs are currently only paying residential property tax rates on STR properties, despite their commercial use.

The solutions:

A solution for the tax fairness problem is local, state, and federal legislation that requires all STR platforms to collect and remit applicable sales taxes and tourism/ accommodation levies on behalf of individual operators. Data sharing to enable thorough income tax collection (or at a minimum, state registries that better enable audit selection) would also help. Lastly, it would be beneficial to have legislation that permitted local governments to reclassify residential properties used for commercial STRs to apply differential property tax rates.

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Conclusion
Regulating STRs is not an impossible task, but one that can uphold the values and goals of your community if you follow a comprehensive and transparent process. Work from the reality on the ground— supplied by data) and your own expertise — to cut through the noise and develop targeted and contextual rules and enforcement systems that are strong and fair. Many communities around the country have solved their problems and with a little preparation, you can as well.

If you’d like to learn more about your local short-term rental market and the regulatory processes and tools that align with your community’s goals, click here for a complimentary consultation, including a map of rentals, average nightly rates and more.

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Appendix - Glossary of Terms
This section provides definitions for key terms used throughout the toolkit.

These definitions are intended to help consistently communicate key concepts and not as universal, absolute definitions. Every local government, in developing a STR regulatory and enforcement program, will need to choose their own set of STR specific definitions as well as those terms already used in existing laws.

Bed and breakfast: A private room, and often a private bathroom, is rented with guest access to common spaces (e.g., living room, kitchen) and typically includes some interaction between the operator and guest; for example, when the guest checks in or if breakfast is provided. The operator lives on the premises.

Commercial short-term rental: A short-term rental unit that is not in someone’s principal dwelling. Often identified by searching for “frequently rented entire home listings”.

Commercial operator: An operator of a short-term rental unit that is not someone’s principal dwelling; sometimes identified by searching for operators with two or more listings (see multi- listings).

Dwelling unit: A suite of rooms in a building suitable for residential occupancy by one or more people who normally live together that has a separate entrance, kitchen, and bathroom facilities.

Guest: Consumers of short-term rental services. Guests use platforms to search, reserve, and manage their bookings of STR accommodation. They pay the operator of the STR a platform service fee and, in some jurisdictions, applicable taxes if included in the booking (facilitated by operators or the platform).

Host: Provides accommodation to guests, lists their STR(s) on online platforms, sets the price, availability, and house rules (e.g., guest limits, quiet hours) and approves rentals. Hosts charge guests a nightly fee, optional additional fees like cleaning or accommodating extra people and should charge applicable taxes. Hosts can either be individuals or businesses (e.g., property management firms) and are sometimes assisted by support services such as professional cleaners.

Hotel: An accommodation type where private rooms are rented that normally include a private bathroom, with some units including private kitchen facilities or other amenities. Hotels are purpose built for guest accommodation and located in commercial zones (e.g., downtown, along highway corridors).

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Listing: Individual short-term rentals advertised on platforms. The advertisement should include the listing title, listing type (entire dwelling unit, private room, or shared room), description, operator name, number of bedrooms, availability, and prices.

Listing type: The type of unit identified in the listing, either an entire dwelling unit where the guest has complete and sole access to the entire dwelling unit during the stay, a private room where the guest has their own sleeping area but shares access to the dwelling unit’s common areas with others, or a shared room where the guest sleeps in an area shared with others, such as a sofa in a living room.

Long-term rental: A residential dwelling unit rented on a long-term basis by way of a tenancy agreement between a landlord and tenant that outlines a standard set of terms.

Multi-listings: A methodological term and concept used to help identify commercial STR operators and defined as STR operators who manage two or more entire home (dwelling unit) listings or three or more private room listings.3 Non-dwelling unit STR: A STR unit that does not meet the full definition of a dwelling unit. Often seasonal in nature, these can include vans, boats, parking spaces, yurts, and campgrounds and represent a very small portion of total STR listings.

Non-principal dwelling unit STR: A STR unit that is not a principal dwelling unit; in this document, treated as synonymous with commercial STRs and sometimes identified by searching for “frequently rented entire home listings”.

Platform: An online matching and/or payment processing platform for transactionsbetween STR operators and guests. Platforms maintain the websites and digital applications that facilitate the searching, listing, booking, and payments of STR services, which can include platform fees (charged to both operators and guests) and applicable taxes. In some cases, the platform will verify personal information through security checks and transaction protection.4
Principal dwelling unit: The usual dwelling unit where an individual lives, makes their home and conducts their daily affairs, and receives mail; generally the dwelling unit with the residential address used on documentation related to billing, identification, taxation, and insurance purposes including income tax returns, driver’s licenses, vehicle registration, and utility bills.5 We treat this term as being synonymous with “principal residence” and is the site of true homesharing. An individual may only have one principal dwelling unit. 3 https:/ /upgo.lab.mcgill.ca/publication/short-term-rentals-in-canada/short-term-rentals-in-canada.pdf 4 https:/ /www150.statcan.gc.ca/n1/en/pub/13-605-x/2019001/article/00001-eng.pdf?st=ESqrUjA_ 5 https:/ /bylaws.vancouver.ca/consolidated/12079.PDF

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Principal dwelling unit STR: A STR unit that is (or is within) someone’s principal dwelling unit (principal residence.) This term is used in place of “principal residence STR” to help communicate that the STR is confined to the dwelling unit (i.e., it doesn’t include other dwelling units on the same lot).

Principal residence: In this toolkit, we treat this term as synonymous with “principal dwelling unit” and is the site of true homesharing An individual may only designate one dwelling unit as their principal residence.

Principal resident: The person who normally resides in a dwelling unit that is their principal dwelling unit (home).

Short-term rental (“STR”): The rental of a dwelling unit or non-dwelling unit (or a room(s) within); characterized as occurring in any housing type (e.g., houses, secondary suites, carriage houses, garden suites, cabins, apartments, and condos) for a short period of time (e.g., less than a month), facilitated by online platforms (e.g., Airbnb) primarily utilized by visitors/tourists and often without in-person interaction.

Short-term rental operator: Often referred to as a host. STR operators provide accommodation to guests, list their STR(s) on online platforms, sets the price, availability, and house rules (e.g., guest limits, quiet hours) and approves rentals. They charge guests a nightly fee, optional additional fees (e.g., cleaning or accommodating extra people), and should charge applicable taxes. STR operators can either be individuals or businesses (e.g., property management firms) and are sometimes assisted by support services such as professional cleaners.

True homesharing: The STR of someone’s principal dwelling unit or room(s) within; synonymous with “principal dwelling unit STR". True home-sharing can take place while the principal resident is present or away (e.g., on vacation).

Web scraping: A process by which information is gathered and copied from the web for later retrieval and analysis. Web scraping can be conducted manually or using automated software.6
6 https:/ /www150.statcan.gc.ca/n1/en/pub/13-605-x/2019001/article/00001-eng.pdf?st=ESqrUjA_

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granicus.com

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NATIONAL
LEAGUE

OF CITIES
Short-Term
Rental Regulations:

A GUIDE FOR LOCAL GOVERNMENTS

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NATIONAL
LEAGUE

OF CITIES
About the National League of Cities
The National League of Cities (NLC) is the voice
of America’s cities, towns and villages,
representing more than 200 million people. NLC
works to strengthen local leadership, influence
federal policy and drive innovative solutions.

NLC’s Center for City Solutions provides research
and analysis on key topics and trends important
to cities, creative solutions to improve the quality
of life in communities, inspiration and ideas for
local officials to use in tackling tough issues, and
opportunities for city leaders to connect with
peers, share experiences and learn about
innovative approaches in cities.
2022 ©National League of Cities. All Rights Reserved.

All photo credited to Getty Images, 2022.

Authors
Tina Lee, Senior Research Specialist,
National League of Cities
Lauren Lowery, Director, Housing & Community
Development, National League of Cities
Lena Geraghty, Director, Sustainability
and Innovation, National League of Cities
Kyle Funk, Program Specialist,
National League of Cities
Samantha Carr, Housing & Community
Development Intern, National League of Cities
Acknowledgments
The authors wish to recognize Matthew Disler of
the Harvard Berkman Klein Center for Internet &
Society for his contributions to this report and
Kristin Szakos for copy editing. The authors also
wish to thank the city staff and elected officials
who agreed to be interviewed to inform this
report, including those from Fayetteville, AR,
San Diego, CA, Charleston, SC, Lake Placid,
NY, Columbus, OH, and Henderson, NV.

Contents
4 Foreword
7 Introduction
8 Defining Short-Term Rentals
8 What is a Short-Term Rental?
9 What Can Communities Regulate?
10 The Issue
12 Recommendations: Short-Term Rental Regulations
14 Understand the Landscape
14 Gather Data
15 Engage a Diverse Group of Stakeholders
18 Identify Policy Goal(s)
20 Develop and Pass Regulations
20 Apply a Racial Equity Lens
21 Pass Regulations Early
21 Craft Simple Regulations
24 Institute a Permit Requirement
25 Determine Fines and Fees
27 Establish a Clear Taxing Model
28 Negotiate an Agreement with Platforms
30 Enforcement
30 Dedicate Resources to Enforcement
32 Ensure Extensive Communication and Marketing
33 Move Registration and Administration Systems Online 35 Revisit and Adapt
35 Establish a Feedback Loop
37 Conclusion
38 Appendix
38 Voluntary Collection Agreements (VCAs)
40 Endnotes

INTERACTIVE

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4 Short-Term Rental Regulations: A Guide for Local Governments Foreword
I
N RECENT YEARS, short-term rentals have increased in cities, towns and villages across the United States. As a result of this growth, local leaders have had to grapple with competing benefits and challenges – in particular, how to ensure a healthy stock of affordable housing and how to support local tourism and economic development opportunities. One of the top priorities for city leaders today is to ensure that residents and visitors to their communities have access to safe, affordable lodging.

These competing priorities make passing regulations difficult, which is why it’s not surprising that short-term rentals have become a common topic of discussion among our members at the National League of Cities (NLC). Members faced with these challenges often ask us: “What tools are available to assist me with regulating short-term rentals in my community?” This persistent question led NLC to research short-term rental regulations in cities across the country and ultimately produce Short-Term Rental Regulations: A Guide for Local Governments. Based on an analysis of 60 short-term rental ordinances, this action guide lays out a detailed overview of best practices for cities to develop and pass short-term rental regulations in their communities.

While no two municipalities face the same opportunities and challenges when it comes to regulating short-term rentals, this research provides insight into how to chart a path forward successfully. This guide recommends local leaders create and enforce firm and fair regulations by focusing on clear policy objectives, centering racial equity as a critical component in their planning and actively engaging with relevant stakeholders throughout the process.

Short-term rentals can open a swath of opportunity for homeowners looking to make additional dollars, while also providing economic development opportunities in neighborhoods that may not generally see high levels of tourism. By bringing community and industry leaders together, local leaders can create policies that work for both – and maximize the potential value of short-term rentals for hosts, guests and neighbors alike, all while protecting the affordability of neighborhoods.

While short-term rentals are a prominent issue today, this challenge is not a new one for local leaders. There are often difficulties that come with maximizing economic growth while protecting community interests. Mayors, councilmembers and other local elected officials are well-equipped to help bring stakeholders together to understand and navigate potential trade-offs.

Local leaders have an incredibly important role to play in capitalizing on the benefits of short-term rentals and minimizing potential negative impacts. I hope this resource will help your community make decisions about short-term rentals that are best for your residents.

Clarence E. Anthony

CEO AND EXECUTIVE DIRECTOR
National League of Cities

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NATIONAL LEAGUE OF CITIES 7
Introduction
T
HE RAPID GROWTH of short-term rentals in cities, towns and villages across the U.S. has caused much controversy. From contentious City Hall meetings where residents advocate for more stringent or more relaxed regulations to lengthy and expensive legal battles between cities and short-term rental platforms, cities can get caught in the cross-hairs of a complicated policy issue. Short-term rentals present no shortage of challenges for local leaders, as they can affect housing availability and affordability, local tourism and economic development, neighborhood wellbeing, and health and safety. However, many cities have learned important lessons in navigating these complex issues and offer some best practices for others to learn from.

Regulation of short-term rentals has proven to be an important and effective tool in making short-term rentals work for all parts of the community.

Regulations that define what short-term rentals are and have appropriate mechanisms in place should intervention be necessary have helped city leaders steer the conversation toward solutions and meeting community needs. The purpose of regulating short-term rentals is not to be overly punitive or to prohibit them, but to put safeguards and appropriate enforcement mechanisms in place for when problems arise.

This Action Guide will not settle debates about the specific impacts of short- term rentals on each community. Instead, it aims to equip local leaders with appropriate information and tools to adopt or amend ordinances that serve their community best: policies that are equitable; that protect municipal interests such as health and safety and housing affordability; that preserve the residential quality of neighborhoods; and that enable responsible and eligible residents to earn some additional income.

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NATIONAL LEAGUE OF CITIES 9
9 What Can Communities Regulate?
Regulations vary, depending on the needs of the locality issuing them. In a community where vacant properties are a problem, regulations might focus on upkeep and oversight. In a community where housing stock is scarce, regulations might be put in place to limit the number of properties lost to residential rentals.

Generally, however, regulations include some combination of the following provisions:

PROVISIONS DETAILS

LOCATION

AND USE
Geographic limits: Cities can decide to limit the availability of STRs in specific areas of cities, such as particular residential areas or neighborhoods with specific historic character.

Commercial-residential distinctions: Cities can establish different rules for properties in residential and commercial areas to account for the different interests of communities in each of these areas.

TIMING Primary residence requirements: Cities can require that the STR is occupied by the host for most of the year, and/or that the rental is in or part of the owner’s primary residence.

Day limits: Cities can include provisions capping the number of days per year that hosts can rent their STR.

MANNER

OF RENTAL
Registration and licensing: Cities can require hosts to register their properties with the city and can require rental platforms (e.g., Airbnb, Vrbo, etc.) to ensure that properties listed on their sites are properly registered.

Taxes: Cities can require that hosts pay transient occupancy taxes, which are taxes on what guests pay for temporary lodging in the city and are usually collected and remitted by hotels, motels and similar businesses. Cities can also work with STR platforms and other third-party providers to minimize the burden of tax remittance.

Occupancy limits: Cities can limit the number of guests per stay, usually by establishing a guests-per-bedroom or per-property cap.

Health and safety regulations: Cities can require STRs to have fire safety equipment and carbon monoxide detectors; display emergency information for guests; adopt measures to maintain a sanitary residence; and adopt plans for emergencies, among other requirements.

Noise and event regulations: Cities can restrict the use of STRs for large gatherings and events, and they may explicitly require that guests comply with existing noise, trash and parking ordinances.

Defining
Short-Term
Rentals
What is a Short-Term Rental?
In general, short-term rental (STR) refers to an activity in which one party, the “host,” agrees to rent out all or part of a home to another party, the “guest,” on a temporary, time-limited basis. The precise legal definition of a short-term rental varies by community. Most short-term rental ordinances include details on the following types of provisions that define short-term rentals for a particular community:

LOCATION AND USE:

Where and how many short-term
rentals are allowed
TIMING:

How long short-term rentals
can be rented for
MANNER OF RENTAL:

Additional requirements for
hosts and guests

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NATIONAL LEAGUE OF CITIES 11
The Issue
Short-term rentals are not a new concept. Companies like Vrbo, HomeAway, Couchsurfing and Craigslist have offered consumers short-term rental options since the late 1990s without much controversy.1 The meteoric growth of the short-term rental industry in the 2010s changed that. Companies like Airbnb, Vrbo, HomeAway and FlipKey grew in popularity while consumer appetite for more original, authentic and local experiences increased, driving demand higher.

As short-term rentals become more accessible to both hosts and users, use skyrocketed over a short period. But the meteoric success of short-term rental platforms has not been welcomed unreservedly. Common complaints are that short-term rentals can drive up local rents, limit the availability of long-term residential rentals, attract an influx of tourists and create excessive noise.2
Local leaders attempting to chart the pathway forward for short-term rentals in their communities must respond to many competing interests, making passing regulations and balancing those interests difficult. Some of these issues that must be considered include:

Housing
The research is divided on whether short-term rentals contribute to the housing crisis. Regardless of whether the exact impact on the housing market is measurable, it is undeniable that many cities in the U.S. face a housing crisis – due to a shortage of affordable housing, steady decline in federal investment in low-income housing, wage growth stagnation, etc. – and that short-term rentals may contribute to housing unaffordability and unavailability.

Tourism
Short-term rentals outside of the typical tourism areas in cities can be a boon to local economies, spreading dollars across the cities in ways that traditional lodging accommodations do not. On the other hand, cities with high tourism rates face a greater share of the negative impacts of short-term rentals in communities. In high-tourism communities, large numbers of whole home rentals can affect neighborhood cohesion, as they may stand empty for weeks at a time or experience high turnover in guests.

Preemption
Preemptive state laws can limit cities’ ability to regulate short-term rentals.

The impacts of preemptive laws can range from a complete inability to regulate, to restrictions on the kinds of regulations that can be imposed.

Public Health and Safety
Poorly regulated and unsupervised short-term rentals can threaten the safety of neighborhoods for residents and guests alike. Party houses have become a significant point of contention in some communities. Guests may ignore or be unaware of noise, trash and parking ordinances.

For myriad reasons — both within and outside of city control — cities may find it difficult to enforce the regulations they do have. Some ordinances are difficult for hosts and residents to understand and difficult for the city to enforce because they are overly complicated or poorly publicized. In other instances, cities may have no systematic way to identify hosts who are not in compliance or to keep track of what properties are being used for short-term rentals, and when. Understanding the most common barriers to effective regulation — unclear rules and lack of data — is key to making sound policy choices. Despite the limitations and challenges that city leaders face, local leaders can pass regulations that effectively balance competing interests, fit community needs, and most critically, are enforceable.

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NATIONAL LEAGUE OF CITIES 13
T
HE NATIONAL LEAGUE of Cities analyzed 60 short-term rental ordinances to inform this report across 30 indicators, including the legal definition of short-term rentals, regulations and enforcement. At least one city, town or village was selected in each state, with two cities, towns or villages selected for the top ten states by population (California, Texas, Florida, New York, Pennsylvania, Illinois, Ohio, Georgia, North Carolina and Michigan) to ensure that a diversity of local context was represented in the analysis.

The recommendation sections (Understand the Landscape, Develop and Pass Regulations, Enforcement, and Revisit and Adapt) are meant to build off each other and should therefore be executed in chronological order. They are detailed in the section below.

Recommendations:

Short-Term Rental
Regulations
This Action Guide will help local leaders break down
the process of developing a short-term rental ordinance, provide relevant city examples and identify key tips.

The following recommendations are a menu of
policy principles and good practices that cities
should explore when establishing or updating
their regulations, based on research into
short-term rental ordinances and policies
across the country.

UNDERSTAND

THE LANDSCAPE

DEVELOP

AND PASS

REGULATIONS

ENFORCEMENT

REVISIT

AND ADAPT
Gather Data
Engage a Diverse Group of Stakeholders
Identify Policy Goal(s)
Apply a Racial Equity Lens
Pass Regulations Early
Craft Simple Regulations
Institute a Permit Requirement
Determine Fines and Fees
Establish a Clear Taxing Model
Negotiate an Agreement
with Platforms
Dedicate Resources to Enforcement
Ensure Extensive Communication and Marketing
Move Registration and Administration Systems Online
Establish a Feedback Loop

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NATIONAL LEAGUE OF CITIES 15 14 Short-Term Rental Regulations: A Guide for Local Governments

UNDERSTAND THE LANDSCAPE
Before passing regulations, understand the local short-term rental landscape. This should involve extensive information gathering and thorough engagement with relevant stakeholders. Be mindful of what issues are associated with short-term rentals in your community to determine the goals your policy should meet.

GATHER DATA
While anecdotes are powerful, they are not a proxy for actual data to estimate the number and location of short-term rentals operating in a community. In some cases, data may be available through third-party platforms such as Inside Airbnb or AirDNA. Knowing approximately how many units may be on the market is critical to understanding the scope of the issue.

KEY DATA POINTS INCLUDE:

How many short-term rentals are operating in your community? What is the breakdown between hosted room rentals vs. whole home rentals? Where are short-term rentals operating in your community? What neighborhoods are most affected?
What is the average daily price of short-term rentals vs. hotels? What is the occupancy rate of short-term rentals vs. hotels? How much revenue are short-term rental properties generating vs. hotels? Additional data sources that can help supplement short-term rental-specific data to develop a comprehensive picture of the local landscape can include tourism, housing and complaint data. Connect with local tourism boards to gather information such as how much money visitors are spending, where visitors are spending their money, where they are staying, where they are spending their time and how long they are staying. Leverage data sources such as the American Community Survey to understand the breakdown in renter vs. homeownership

BULLSEYE-POINTER
rates, vacancy rates and demographic information in different neighborhoods to contextualize short-term rentals in the broader housing landscape. Records of noise and nuisance complaints (e.g., through 311 calls or similar complaint or service request software) can also help cities understand where these complaints are filed and what they are.

ENGAGE A DIVERSE GROUP OF STAKEHOLDERS
Engage a network of stakeholders, including but not limited to tenants, landlords/homeowners, hotel and motel industry representatives, neighborhood organizations, housing advocates, tourism agencies and short-term rental platforms. This mix will look different for each city, but identifying relevant stakeholders will be key to understanding the challenges and opportunities each city faces.

Hold virtual or in-person town hall meetings, drop in on various group meetings (e.g., landlord associations, property owner groups, neighborhood associations, etc.) and solicit comments from members of the public to gauge the perceptions of short-term rentals directly from community members. Cities can, for example, work with neighborhood associations to map areas especially strained by short- term rentals or tourism. Residents have the closest ear to the ground. City leaders should leverage this knowledge to their advantage.

Cities have a lot to gain by partnering with platforms, but the relationship-building process can be contentious at times. These relationships are more likely to be positive when cities come to the discussion table with a clear goal in mind and communicate it with the platforms.

POTENTIAL STAKEHOLDERS INCLUDE:

Motel and lodge union
or association
Hotels or hotel union
or association
Realtor groups
or associations

Restaurant associations
City Council
Local planning groups
and organizations
Existing short-term rental
operators
Platforms (e.g., Airbnb,
Expedia, etc.)
Neighborhood
associations
Housing advocates
Tourism agencies

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NATIONAL LEAGUE OF CITIES 17 16 Short-Term Rental Regulations: A Guide for Local Governments CITY SPOTLIGHT:

SAN DIEGO, CA
While drafting its short-term rental ordinance, the City of San Diego engaged a wide variety of stakeholders including:

CITY SPOTLIGHT:

FAYETTEVILLE, AR
In 2018, the City of Fayetteville’s Sustainability Department worked with the University of Arkansas’ Public Policy Department to explore short-term rentals.

The students leveraged data sources such as AirDNA to gather the following information:
Active rentals
Average booked properties
Occupancy rate
Average booking rate per night
Average Airbnb private room price (Fayetteville)
Average hotel room price (Fayetteville)
Average Airbnb private room price (Downtown Fayetteville) Average hotel room price (Downtown Fayetteville)3
Based on this information, the students generated maps of short-term rental locations in the Fayetteville area, noting a large concentration of Airbnb rentals in the downtown area. This analysis was presented to city staff and elected officials in December 2018 to inform their discussion on short-term rentals in Fayetteville. Unite Here, a union for motel/lodges
Neighborhood groups
Hotel stakeholders, including the
hotel/motel association
Realtor groups and associations
The restaurant association
City Council
Local planning boards and
organizations
Pre-existing STR operators
Expedia Group and Airbnb
A staff member from the San Diego City Council conducted meetings with the stakeholders. The meeting format and length varied. The city representative sometimes met stakeholders individually or invited them to speak at public meetings.

Those interested in engaging longer-term were invited to a permanent stakeholder group. The stakeholder group continues to provide input on short-term rental regulation implementation.

Compromise was eventually reached, most notably in the form of a memorandum of understanding (MOU) between Unite Here and Expedia Group. Through the MOU, these two major stakeholders with different perspectives agreed to partner to help regulate the short-term rental market. The MOU also laid the foundation for the regulations that the city would push forward when engaging with other stakeholder groups. Following this engagement process, the ordinance was presented to the public, Planning Commission, mayor and Coastal Commission. The city found that putting the time in to build relationships and establish trust between the municipality and short-term rental platforms was essential to the ordinance’s success. Further, going into the process with a clear goal, while being mindful of what compromises could be made, allowed the city to achieve buy-in from a diversity of stakeholders.

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NATIONAL LEAGUE OF CITIES 19 18 Short-Term Rental Regulations: A Guide for Local Governments CITY SPOTLIGHT:

CHARLESTON, SC
The City of Charleston began regulating short-term rentals in 2012, when it adopted regulations that allowed commercially zoned properties to be rented as short-term rentals in the Cannonborough Elliotborough neighborhood. The goal of the regulation was to bring reinvestment into vacant, abandoned and distressed properties in the neighborhood. In subsequent years, the city saw an increase in the number of short-term rental units in Cannonborough Elliotborough and throughout Charleston. With a growing number of short-term rentals and an incoming mayor interested in revisiting short-term rental regulations, the policy moved to the forefront of Charleston’s agenda again.

In 2016, the mayor and City Council began the process of updating short-term rental regulations by appointing a committee of local citizens to study and provide recommendations on short-term rentals. The committee included residents, representatives of the city’s preservation and historical societies, and tourism interests. Over time, a consensus was built around the goal to preserve the historic nature of downtown Charleston and allow short-term rentals to contribute to the local tourism economy, but only in such a way that did not alter the character of the city and negatively affect residents’ quality of life.

Based on this consensus, the city developed a category-based short-term rental permitting system that requires most short-term rentals to be owner- occupied, and details additional requirements for properties located in downtown Charleston or in properties listed with the National Register of Historic Places.

IDENTIFY POLICY GOAL(S)
Develop a clear and concise policy goal for the short-term rental ordinance, driven by the city’s overarching goals and community input. Review strategic city plans (e.g., comprehensive housing plans, 5- and 10-year city visions, master plans) and identify top city priorities that may dovetail with priorities for short- term rentals. For example, a city may have a broader goal to advance housing affordability and may choose to focus on preserving the stock of affordable housing as a policy goal. Or a city may have the broader goal to attract more tourism and choose to focus its regulations on enabling short-term rentals with appropriate guardrails in place as the tourism industry continues to grow.

Cities should be intentional about setting a goal or priority before drafting regulations. Without a clear “end goal,” cities can pass regulations that may not align with community priorities, and do not have effective mechanisms to accomplish them. By deciding on a policy and community goal, cities can craft a simpler and more targeted ordinance.

Common goals, based on NLC’s analysis of 60 cities, include:
Prevent the loss of
rental housing stock
Slow or prevent the
overgrowth of STRs
Balance the needs
and rights of property
owners and neighbors
Support tourism
in a balanced way
Capture
tax revenue
Preserve the
residential quality
of neighborhoods
Combat
displacement
Ensure health and
safety for guests
and residents
Allow economic
gain for residents

KEY CONSIDERATION
Balance competing expectations. By their nature, short-term rentals can be a contentious issue, with strongly vested interests on all sides. Each stakeholder will have to make concessions from their vision of “ideal” regulations, so helping the community and STR platforms understand that compromise is needed is critical to setting realistic expectations. Having a clear policy goal will also help coalesce stakeholders around the city’s broader vision and help justify policy choices.

BULLSEYE-POINTER

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NATIONAL LEAGUE OF CITIES 21 20 Short-Term Rental Regulations: A Guide for Local Governments

DEVELOP AND PASS REGULATIONS
As the short-term rental industry continues to mature, it has become clear that complex regulations are not only cumbersome for hosts and residents of the city but are also unenforceable. Policies with clear goals, fair implementation and mechanisms for enforcement will help everyone.

APPLY A RACIAL EQUITY LENS
One of the most commonly cited benefits of short-term rentals is that they allow hosts to generate extra income from existing assets. While this may be true, hosting is most commonly available to those who own a home.

Homeownership is inseparable from race and inequality in America. According to the latest estimates from the U.S. Census Bureau, the homeownership gap between White and Black households was 30 percent in 2020. 4 According to NLC’s ordinance analysis, only 38 percent of cities surveyed specifically allowed tenants to host a short-term rental. Even then, cities that do explicitly state that tenants are allowed to host require them to acquire written consent from their landlords or a have a rental contract that allows them to sublet their unit.

Tenants face a high barrier to host even in the minority of cities that allow them to.

The ability of short-term rentals to democratize the tourism industry is overstated when a majority of Black, Indigenous and People of Color (BIPOC) do not have access to homeownership. Given the divide in homeownership in America, the direct economic benefit of short-term rentals may exacerbate existing inequality. There is also evidence that hosts may discriminate based on race and ethnicity. A 2017 study of Airbnb data found that “applications from guests with distinctively African-American names are 16 percent less likely to be accepted relative to identical guests with distinctively White names.”5 Airbnb has since made moves to fight bias and discrimination, including changing when guest pictures are shown to a host in the booking process.6 The city of Columbus, OH, passed a discrimination clause in its ordinance stipulating that a host shall not decline a potential guest, impose different terms or conditions, or discourage or indicate a preference for or against a guest based on race, gender, sexual orientation, gender identity or expression, color, religion, ancestry, national origin, age, disability, familial status or military status. 7

KEY CONSIDERATION
Recognize the role that short-term rentals play in exacerbating housing unaffordability. Consider dedicating some portion of STR permit or tax revenue towards affordable housing funds or homeownership opportunities, or earmarking general fund dollars for similar programs. Boulder, CO stipulates in its ordinance that “after administration expenses are met, any additional funds shall be placed in the city’s affordable housing fund." 8

PASS REGULATIONS EARLY
The short-term rental industry is rapidly growing. Given the complexity of the policy and regulatory space, be proactive and establish regulations before short-term rentals have a negative impact on the community. Establishing regulations gives cities the power to intervene when necessary. It is much easier to limit the spread of short-term rentals before they have proliferated than it is to retroactively remove them from the market. Establishing regulations also becomes increasingly controversial as more stakeholders have a vested interest in seeing them maintained. Even cities that have not yet faced the negative impacts of short-term rentals should pass regulations to regulate the STR market before they proliferate.

KEY CONSIDERATION
A common hurdle that cities face is what to do with pre-existing short-term rentals once a new ordinance is passed. In 58 percent of the cities reviewed in the NLC ordinance analysis, cities required existing hosts to comply with regulations or apply for a permit or license. Cities must communicate early and clearly with existing hosts about their responsibilities under a newly passed or revised ordinance to give them time to meet new regulations.

CRAFT SIMPLE REGULATIONS
Craft simple ordinances that are clear about policy goals. This will better equip leaders to engage in conversation with platforms, residents, property owners and other stakeholders invested in the ordinance outcome. Below is a list of common goals found in the ordinance analysis, and key ordinance elements to achieve those goals.

BULLSEYE-POINTER

BULLSEYE-POINTER
38%
of cities
surveyed
specifically
allowed
tenants to
host a short-
term rental.

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NATIONAL LEAGUE OF CITIES 23 22 Short-Term Rental Regulations: A Guide for Local Governments Policy Levers to Pull to Achieve Common Policy Goals

POLICY GOAL POLICY LEVERS

PREVENT THE LOSS

OF RENTAL HOUSING
Prevent long-term rental
properties from being
converted to short-term
rentals.

Adopt a permit requirement and institute a host residency requirement, which should prevent homeowners from renting properties solely as short-term rentals and prevent properties from being purchased for the sole purpose of operating as short-term rentals.

SLOW OR PREVENT THE

OVERGROWTH OF STRS
Prevent residential
neighborhoods from being
“overtaken” by guests
to the detrimental of the
neighborhood and residential
feel of a neighborhood.

Adopt a permit requirement and set a specific quota (number or percentage) on the number of short-term rental permits that will be distributed in a particular geographic area (e.g., neighborhood, census tract, ZIP code, etc.).

COMBAT DISPLACEMENT
The presence of short-term
rentals can be particularly
contentious in certain
neighborhoods (e.g.,
neighborhoods that are
experiencing displacement).

Adopt a permit requirement and set a quota on the number of short- term rentals that are allowed to operate in a specific zoning district or neighborhood, particularly areas of the city that are at risk of, or are currently experiencing displacement pressure. Beware that such quotas can limit existing low-income homeowners’ ability to earn revenues from their homes. Therefore, consider how to equitably distribute permits.

Consider dedicating some revenue generated from permit fees or taxes to affordable housing or home-ownership programs. Explicitly restrict affordable housing units from being rented out as
short-term rentals.

PRESERVE THE

RESIDENTIAL QUALITY

OF NEIGHBORHOODS
Limit problem properties
such as party houses or
houses with complaints.

Adopt a permit requirement and include a limit to the number of people that can stay in a short-term rental. This limit can be tied to the number of bedrooms in a short-term rental, or a total cap on the number that can stay in any type of property. A common limit that cities institute is two adults per bedroom.

Require that short-term rental hosts provide their guests with a “Good Neighbor Guide” that summarizes all ordinances that guests are required to comply with during their stay (e.g., noise, trash, parking, etc.).

Set restrictions on the number or percentage of short-term rentals that are allowed to operate in a particular neighborhood (or other geographic areas, such as census tract, ZIP code, etc.).

BALANCE THE NEEDS

AND RIGHTS OF PROPERTY

OWNERS AND NEIGHBORS
While lawful hosts have the
right to rent their properties
out, they should not infringe
on the rights of neighbors.

Enable hosts to rent out their
homes while also ensuring
that residents know where
and how to file a complaint.

Adopt a permit requirement and establish a process for revoking permits from properties in violation, such as a “three strikes” rule. If three verified complaints are filed within a certain time, the city can revoke a host’s permit.

Establish a 24/7 hotline that residents can phone to report non-emergencies without calling the local police department or law enforcement. Require short-term rental permit hosts to list a local contact who can be reached should an issue arise. 9

POLICY GOAL POLICY LEVERS

ENSURE HEALTH

AND SAFETY OF

GUESTS AND RESIDENTS
Ensure the safety of guests
and residents, including
minimizing public safety
risks and noise and trash
complaints.

Adopt a permit requirement that requires each listing to include a local contact who can be reached at any time. Use this emergency contact if a complaint is filed. Stipulate that if the registered contact is not responsive, the host’s permit risks being terminated.

Institute a permanent residency requirement. City leaders report that most complaints come from non-owner-occupied units. Hosts may be more invested in their property if they, too, call it home.

Require an inspection, or, if the city cannot carry out inspections, stipulate that the city has the right to inspect a property should sufficient suspicion arise that the property is not up to code.

Institute a process for revoking permits from properties in violation, such as a “three strikes” rule. If three verified complaints are filed within a certain time, the city can revoke a host’s permit.

CAPTURING

TAX REVENUE
Ensure that revenue
is being collected.

Adopt a permit requirement that will make it easier to identify whether hosts are complying and paying the appropriate taxes. Use permit and tax revenue to either hire additional staff or a third-party provider to help monitor compliance.

Reach an agreement with platforms that requires them to automatically collect and remit taxes back to the city. Be wary of the transparency of the tax remittance process and ensure that the city’s enforcement powers are not stifled.

SUPPORT TOURISM

IN A BALANCED WAY
Tourism is a key component
to many local economies and
short-term rentals can play
a role in facilitating tourism
without impacting residents
if done in a balanced way.

Adopt a permit requirement and set an annual permit reapplication. Make clear that applications can be denied if regulations change. Adopting a formal permit requirement will not deter hosts from participating, so long as the permitting process is not overly cumbersome. Ensure the permit fees are reasonable and tied to the cost of administering the permit program.

ALLOW FOR ECONOMIC

GAIN FOR RESIDENTS
Short-term rentals can
support wealth building
for community members,
although city leaders must
pay attention to who is
eligible to host.

Adopt a permit requirement. The permit system should be simple and easy to navigate, particularly if the city is trying to encourage more permanent residents to host on a part-time basis. If the administrative burden is too high, few will be willing to put in the effort.

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NATIONAL LEAGUE OF CITIES 25 24 Short-Term Rental Regulations: A Guide for Local Governments

INSTITUTE A PERMIT REQUIREMENT
Enforceable short-term rental ordinances require owners who want to host short- term rentals to acquire a permit before renting. In general, a permit requirement allows local governments to create and maintain a database of units and contact information for properties that are operating as short-term rentals. The information provided in an application is key to enforcing the ordinance, allowing the city to have a point of contact to check in with when a property is not in compliance.10 Without information on who is operating short-term rentals, cities are effectively rendered helpless in enforcing their regulations.

Having an active database of short-term rentals in operation is key to moving from a reactive to a proactive approach to enforcement.

To ensure that hosts are acquiring permits, the city must have a mechanism to check to ensure compliance. Some cities, like San Francisco, have negotiated agreements with platforms that require the platform to put a permit number on the host listing.11 In other cases, cities have hired third-party platforms to aid their enforcement efforts. The City of Nashville, TN, uses Granicus’s Host Compliance, a short-term rental compliance monitoring platform, to support enforcement efforts. According to Nashville officials, the Code Department was struggling to enforce its regulations when they were relying on a complaint-based process. The city was manually identifying STR addresses. With more than 60 active rental websites and private addresses and contact information, it proved to be too herculean an effort to maintain. Host Compliance’s online portal enables the city to identify illegal operators before there is a complaint, moving from reactive to proactive enforcement. Since implementing Host Compliance, Nashville has more than doubled its compliance rate to 91 percent.12

KEY CONSIDERATION
Without a clear and streamlined application or licensing process, applications may backlog. This leads to an unhappy and distrustful community and may encourage illegal rentals to operate while they are in the process of being considered for a permit. In some cases, operators will purposely and continuously file for permits and operate while under consideration.

Always tie the permit to the person, not the parcel. This will allow for natural attrition over time (e.g., someone sells their home, and the new owner must reapply for a short-term rental permit).

BULLSEYE-POINTER

DETERMINE FINES AND FEES
Many cities adopt fine structures to incentivize compliance by short-term rental hosts. According to NLC’s analysis, fines range from $200 a day to $2,000 per violation, which may escalate each day. Beyond deciding the fine structure, cities must have adequate staff and resources to identify hosts who are not in compliance and communicate to hosts how to stay in compliance and avoid violations.

Fines should be proportionate to or more than the economic gains that potential violators can realize from breaking the rules, and should escalate for repeat violators, including the threat of revocation of a permit or license. Host Compliance offers the following fines and fees schedule for cities to consider:

Example Fine Schedule
1st
violation
2nd
violation
3rd
violation
4th
violation
Fine for advertising a property
for short-term rent (online or
offline) without first having
obtained a permit or complying
with local listing requirements
$200
per day
$400
per day
$650
per day
Upon the fourth or subsequent
violation in any twenty-
four month period, the local
government may suspend
or revoke any permit. The
suspension or revocation can
be appealed.Fine for violating any other
requirements of the local
government’s short-term rental
regulation
$250
per day
$500
per day
$750
per day
Notes:
a. Any person found to be in violation of this regulation in a civil case brought by a law enforcement agency shall be ordered to reimburse the local government and other participating law enforcement agencies their full investigative costs, pay all back- owed taxes, and remit all illegally obtained short-term rental revenue proceeds to the local government. b. Any unpaid fine will be subject to interest from the date on which the fine became due and payable to the local government until the date of payment.
c. The remedies provided for in this fine schedule are in addition to, and not in lieu of, all other legal remedies, criminal or civil, which may be pursued by the local government to address any violation or other public nuisance.

Source: Host Compliance

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NATIONAL LEAGUE OF CITIES 27 26 Short-Term Rental Regulations: A Guide for Local Governments CITY SPOTLIGHT:

LAKE PLACID, NY
The Village of Lake Placid collaborated with its justice court to define a short-term rental fine structure based on other successful cases. Lake Placid’s short-term rental fines range from $350 to $1,000 for the first violation plus the costs that the village has incurred for enforcement (e.g., staff time and attorney fees). Each week that the violation is not remedied constitutes a separate offense. The second violation that occurs within five years will incur a fine of between $1,000 and $3,000. Short-term rental violations can be appealed within 30 days to the joint Town of North Elba/ Village of Lake Placid Short-Term Rental Appeals Board by either the short- term rental property owner or the complainant.13 In most cases, hosts do not intentionally violate regulations, and disputes are often settled without the host incurring a fine.

ESTABLISH A CLEAR TAXING MODEL
Be mindful that there are multiple ways to capture revenue. In most cases, the owner/host is responsible for remitting taxes back to the city; however, several cities are trying to move the collection burden from hosts to the platforms. According to NLC’s analysis, 82 percent of surveyed cities require the host to remit taxes directly to the city, while just 5 percent require the platform to collect and remit taxes on their behalf.

Cities like Annapolis, MD, and Charleston, SC, require platforms to remit taxes back to the city on behalf of hosts, automatically collecting tax revenue from a booking when it is made. While it may be easier for cities to require platforms to remit taxes, beware that there is some ongoing controversy around whether cities get back all the taxes they are owed. Several cities in South Carolina, including Charleston, are suing platforms, alleging that they are not remitting full taxes.14
In addition to the transient occupancy tax, some city councils may add an additional tax or surcharge on short-term rentals. For example, Chicago, IL, passed a 4 percent surcharge in 2016 and another 2 percent surcharge in 2018.15 The surcharge funds supportive homelessness services and enforcement of the ordinance. 16

KEY CONSIDERATION
Be mindful of how difficult it may be for hosts to remit taxes to the city. If a host has to remit taxes directly, consider how to make that process as simple and streamlined as possible. This not only makes it easier for hosts but ensures that the city is capturing more of the tax revenue it is owed. Include clear and concise instructions on how to remit taxes on the city’s webpage and a user-friendly platform to make payments. Consider sending notifications to all short-term rental hosts about upcoming tax payments.

BULLSEYE-POINTER
82%
of cities require the
host to remit taxes
directly to the city,
while 5 percent require
the platform to collect
and remit taxes of
hosts behalf.

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NATIONAL LEAGUE OF CITIES 29 28 Short-Term Rental Regulations: A Guide for Local Governments

NEGOTIATE AN AGREEMENT

WITH PLATFORMS
Cities have had varying success in building helpful agreements with platforms. Cities have a lot to gain by partnering with platforms; however, the relationship-building process can be contentious at times. These relationships are more likely to be positive when cities come to the discussion table with a clear goal in mind and communicate it with platforms. Cities may have the opportunity to negotiate agreements with platforms, such as voluntary collection agreements (VCAs) or memorandums of understanding (MOUs).

Voluntary Collection Agreements
A Voluntary Collection Agreement (VCA) typically involves a short- term rental platform agreeing to collect and remit transient occupancy taxes on behalf of its hosts. Agreements generally allow local governments to audit the platform, rather than the operator, but do not allow local governments to access information that could identify operators outside of the terms of the agreement.

Many short-term rental platforms have agreements with local governments. As of March 2019, Airbnb had more than 350 VCAs with state and local governments in the U.S.17 While VCAs allows local governments to receive a steady stream of transient occupancy taxes, officials in several states have expressed concerns that these agreements allow platforms to remit less to governments than they owe, a problem compounded by VCA provisions that hinder tax authorities’ ability to audit platforms.18 See the Appendix for more information on VCAs.

Memorandum of Understanding
A memorandum of understanding (MOU) typically focuses on issues such as disclosing data, posting property registration numbers and removing illegal listings. Be aware that an MOU can include provisions that limit cities’ enforcement power or create additional duties for cities. For example, in its draft MOU with the City of Denver, Airbnb included provisions that would have made the MOU confidential and require the city to resort to arbitration to resolve disputes. Together, these provisions would have limited transparency and hampered the city’s ability to use the courts for its enforcement actions. Denver rejected the draft.19
MOUs may create additional duties for cities, such as when an MOU requires a platform to take down listings for unregistered properties but places the burden on cities to inform the platform about suspicious properties — a resource-intensive task. Cities may attempt to shift some of these burdens onto the platform. In one settlement with New York City, Airbnb agreed to automatically provide information for certain listings that met specific criteria.20 In the City of Portland, OR’s MOU with Airbnb, the two parties share duties: Airbnb is responsible for regularly reporting data about hosts and properties, and Portland is responsible for using the information it receives to verify that hosts have properly registered.21

KEY CONSIDERATION
Approach negotiated agreements well informed and with a clear policy goal in mind. Because VCAs and MOUs tend to be offered with standard language and provisions that benefit platforms and hinder city oversight efforts, cities should be prepared to analyze the agreements and decide whether and how to negotiate more favorable conditions.

BULLSEYE-POINTER
Voluntary
Collection
Agreement (VCA):

A VCA typically
involves a short-term
rental platform
agreeing to collect
and remit transient
occupancy taxes on
behalf of its hosts.

Memorandum of
Understanding
(MOU): A MOU
typically focuses on
issues such as
disclosing data,
posting property
registration numbers
and removing illegal
listings.

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NATIONAL LEAGUE OF CITIES 31 30 Short-Term Rental Regulations: A Guide for Local Governments

ENFORCEMENT
The purpose of regulations should not just be to capture additional revenue but to minimize and mitigate the negative side effects associated with the uncontrolled growth of short-term rentals. Cities need to move away from reactive to proactive enforcement when possible. Effective enforcement is key to an ordinance’s success. Without regulations that clearly define what a short-term rental is, a database of units being operated, and contact information for those units, cities are effectively rendered helpless in enforcing their regulations.

DEDICATE RESOURCES TO ENFORCEMENT
Dedicated resources, time, staff and money are necessary for successful enforcement. Short-term rental regulation enforcement can be revenue neutral or positive for municipalities when license, permit and tax revenue offsets costs.22 In some cases, cities can also leverage existing resources such as 311 service to take in short-term rental complaints.

Some examples of key enforcement components that require dedicated resources include:
Hiring additional code enforcement officers to identify and flag repeat offenders
Hiring a third-party platform to help with data collection and enforcement
Hiring a web developer to create a “one-stop-shop” website for STR hosts and residents
Hiring additional staff to set up and service a complaint hotline Instituting (re)inspections for violating properties

CITY SPOTLIGHT:

COLUMBUS, OH
The most recent ordinance amendment in the City of Columbus allows the licensing department to deny, revoke or suspend a permit if there are three or more emergency calls made on a specific property in the previous 12 months (i.e., “three-call rule”). To help facilitate this system, the city’s technology department created an internal database that connects the 311 service with the city’s computer-aided dispatch software to allow enforcement to search the address on the map and know what type of emergency service was requested. City staff reference this database when an application is made or when a complaint about a property is filed. This allows the city to identify properties that have violated the ordinance or have passed the “three-call rule.”

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32 Short-Term Rental Regulations: A Guide for Local Governments

ENSURE EXTENSIVE COMMUNICATION

AND MARKETING
Transparent and clear communication and marketing are critical to the success of an ordinance. Clear communication will support the ordinance’s success (e.g., hosts, guests and residents know what the rules and regulations are) and is key to preventing community backlash when an ordinance is established or revisited.

Consistent contact with landlord associations and property owner groups allows the city to convey to hosts how to remain in compliance. This may be an opportunity to develop relationships with trusted voices in key groups who can serve as a liaison with the broader community and as a spokesperson for good hosting etiquette.

Regular contact with residents means that cities can convey the best way to file nuisance and safety complaints should there be a violation at a short-term rental. This helps communities feel like they have a trusted partner in the city to ensure community safety.

KEY CONSIDERATION
Consider hiring or assigning specific city staff to be liaisons with the community. Doing so may help establish trust among hosts, residents and the city, making room for more constructive conversations should something go awry. In addition, developing relationships with specific community members (e.g., hosts or residents) can help broaden the city’s reach into the community. For example, hosts who have good relationships with the city can promote good hosting etiquette in the community.

BULLSEYE-POINTER

MOVE REGISTRATION AND

ADMINISTRATION SYSTEMS ONLINE
To the extent possible, cities should limit the administrative burden on city staff and platform users. Moving registration or licensing systems online (while keeping the paper application option open) makes the process more seamless for hosts and less cumbersome for city staff who process those applications.

Beyond moving the registration or licensing system online, consider launching a centralized, accessible and easy-to-use webpage with all relevant short- term rental information. One common complaint that cities receive is that short-term rental regulations are difficult to understand. In most cases, it is not that the regulations themselves are too complex, but that regulations are not transparent and explained in an accessible way. Launching a webpage that is regularly updated keeps the community informed. According to a recent 2022 report and survey from Rent Responsibly and the College of Charleston, 49 percent of surveyed short-term rental hosts got information from government websites about local regulations that affect short-term rentals.23 Furthermore, this webpage can serve as a resource for city staff who are not experts on short-term rentals but may be required to liaise with the public about them.

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NATIONAL LEAGUE OF CITIES 35 34 Short-Term Rental Regulations: A Guide for Local Governments CITY SPOTLIGHT:

HENDERSON, NV
The City of Henderson set up an easily navigable webpage with information on short-term rentals, including application materials and answers to frequently asked questions.24 This webpage serves as a “one-stop-shop” for hosts, residents and staff. The short-term rental webpage has the second-highest number of hits on the Henderson website.

On the webpage hosts can:
Find the most up-to-date short-term rental ordinance and state laws that apply to short-term rentals
Register their short-term rental
· Find city contact information to support them through the registration process
· Find clear lists on how to apply and what documents are needed · Find application forms that are easy to download or file online Renew their short-term rental registration
Pay their transient lodging tax and fees
· Find tax forms that are easy to download
On the webpage residents can:
Find relevant short-term rental regulations, including the city ordinance and state laws that apply to short-term rentals
Locate the complaint phone hotline to report any illegal short-term rental or to file noise, trash, parking, occupancy or other nuisance complaints Access the complaint website to submit a complaint online

REVISIT AND ADAPT
The short-term rental market is consistently in flux, meaning regulations may have to change to meet the market and evolving community needs. Regularly revisit your ordinance to ensure that it still has the right balance of competing expectations and alignment with city goals.

ESTABLISH A FEEDBACK LOOP
Particularly when first passing an ordinance, be intentional about setting metrics of success that align with policy goals. These qualitative and quantitative policy goal-aligned metrics will determine how performance is evaluated. Setting a dedicated evaluation period following the passage of a short-term rental ordinance will allow for better evaluation and help generate ideas of how to improve an ordinance. Make sure the public and the hosts understand that the regulation may change at the end of the evaluation period.

Build in a recurring check-in with relevant stakeholders to determine whether the short-term rental ordinance is meeting the city’s originally stated goal, and if not, what needs to be adjusted. This is where the feedback loop is particularly important. Keep an open line of communication with relevant stakeholders (e.g., landlord associations, property owners, residents, housing advocates, community groups, hotels, tourism agencies, etc.) to better understand how the implementation of the ordinance is playing out.

In Fayetteville, AR, the city authorizes a 20-month sunset clause in its ordinance, allowing city leaders to conduct regular review and reauthorization of the ordinance.25 Some adjustments have been made following these regular review periods, including increasing the occupancy tax rate to better fund the cost of enforcement, adjusting the cap on the number of short-term rentals allowed in the community and requiring a unit inspection.

KEY CONSIDERATION
If there is a recurring evaluation period for the ordinance, tell the community early on. Transparency is key to making sure hosts and residents know that regulations may change in the future. This may limit the potential backlash of changing regulations after passing them.

BULLSEYE-POINTER

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NATIONAL LEAGUE OF CITIES 37
Conclusion
S
HORT-TERM RENTALS ARE here to stay and, when regulated with care and the proper safeguards in place, can be integrated into the fabric of a community. STRs can enhance tourism, stimulate economic growth in targeted neighborhoods and give residents a way to supplement their income, but can also exacerbate racial inequity, put pressures on affordable housing and disrupt neighborhoods. With proper regulation, cities can enjoy the benefits of STRs and limit their negative impacts.

Regulating short-term rentals is not about limiting their potential, but about enacting the appropriate mechanisms to keep competing priorities and interests balanced. As cities consider regulations to address short-term rentals in their communities, it is important that they act promptly, remain focused on a clear policy objective, consider racial equity, actively engage with relevant stakeholders, develop and enforce clear regulations, and provide continuous review of ordinances. The resources found in this Action Guide can help our communities find the proper balance to effectively support and regulate this growing industry.

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38 Short-Term Rental Regulations: A Guide for Local Governments NATIONAL LEAGUE OF CITIES 39 Appendix
Voluntary Collection Agreements (VCAs)

COMMON PROVISIONS THINGS TO WATCH OUT FOR

COLLECTION
AND

REMITTANCE
Platforms agree to collect transient occupancy
taxes from guests and remit the amount
collected to the government taxing authority.

Without this provision, the platform may
refuse to collect the tax, arguing that
hosts are responsible for collection. Even
with the provision, some platforms have
been accused of under delivering taxes
remitted to cities.

REPORTING

AGGREGATE

INFORMATION
The platform agrees “reasonably to report
aggregate information” related to its collection
and remittance of transient occupancy taxes
to the tax authority.

Aggregate information includes the
total amounts of receipts, exemptions,
adjustments and so forth, but does not
include individualized information for specific
properties.

Aggregate information does not allow
cities to gather individualized information
on particular properties.

DETERMINING

LIABILITY FOR
TAXES
The platform agrees to be held legally
responsible for failure to report, collect or
remit the transient occupancy taxes, and the
tax authority agrees not to hold individual
hosts responsible for reporting, collecting or
remitting taxes on their property.

WAVIER OF

LOOK-BACK
The tax authority agrees not to pursue any
actions to recover unpaid taxes that had been
due before the date the agreement went into
effect.

If the city has not yet received payments
from a large proportion of STRs, then
waiving all claims on taxes owed before
the VCA’s implementation will result in
the city potentially forfeiting a significant
amount of tax revenue. On the other
hand, a city may not have the capacity
to go after back taxes, and be mostly
concerned with collection of future taxes,
making waiver of past tax liability a lower
priority.

NOTIFICATION

TO HOSTS

AND RENTERS
The platform agrees to notify hosts
and renters that it will be collecting and
remitting transient occupancy taxes for their
transactions.

COMMON PROVISIONS THINGS TO WATCH OUT FOR
AUDITING The tax authority agrees to audit the platform on the basis of its tax returns and supporting
documentation, rather than on audits of
individual renters or hosts. Some VCAs also
state that the tax authority cannot audit
individual renters or hosts until it has finished
auditing the platform and a tax issue remains
unresolved.

All transaction and tax data reviewed by a city
tax authority must be anonymized. If the city
suspects wrongdoing on the part of a specific
host, it must first audit the anonymous
data, then pick out suspicious transactions,
and then finally obtain a subpoena to get
identifiable data from the platform.

The tax authority agrees to limit the number
of times it will audit the platform (e.g., to only
audit the platform once every two years, and
to only audit transactions conducted over a
12-month stretch.)
This may limit the tax authority’s access
to data and ability to audit individual
hosts and affect city efforts to enforce
home-sharing laws. Cities such as Culver
City, CA, have negotiated alternative
provisions ensuring that they can
continue to audit individual hosts if they
receive information about the property’s
violations from another source. 26
Anonymized data may mean that cities
can only use aggregate information,
which prevents cities from investigating
individual cases of violation. For example,
Snowmass, CO, states that it will audit
“on an anonymous numbered account
basis,” suggesting that disaggregation
is not required. 27 Cities can also suggest
alternative kinds of privacy protection
that allow for individualized reports, such
as pseudonymizing information.

VCAs typically provide that all
information about hosts and guests will
remain anonymous unless the city has
completed an audit of the platform and
served the platform with a subpoena or
similar legal process. Cities may want to
negotiate changes to this provision to
allow them to ensure that properties are
registered. For example, if cities have
already passed ordinances requiring
registration, their audits might request
information about the registration
number.

Cities can negotiate limits on audit
frequency to allow for more frequent
and tailored enforcement efforts. For
instance, the audit frequency in Pacific
Grove, CA, is once every 36 months;
although this period may still be too long
for many cities to effectively audit home-
sharing, it does indicate that VCAs’ time
provisions can vary.28

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40 Short-Term Rental Regulations: A Guide for Local Governments NATIONAL LEAGUE OF CITIES 41 Endnotes
1 The history of short-term rentals (n.d.). Keycafe Blog. https:/ /web.archive.org/ web/20220310191702/https:/ /blog.keycafe.com/the-history-of-short-term-rentals/ 2 Barron, K., Kung, E., & Proserpio, D. (2020, March 4). The effects of home-sharing on house prices and rents: Evidence from Airbnb. Marketing Science, 40(1), 1 – 191. http:/ /dx.doi.org/10.2139/ssrn.3006832 3 Resolution: 172-19 A Resolution to Request That City Staff Study and Develop an Ordinance to Regulate Short-Term Rentals in the City of Fayetteville (2019, July 16). Fayetteville City Code. https:/ /web.archive.org/web/20220310192617/https:/ /www.fayetteville-ar.gov/ DocumentCenter/View/19304/Short-Term-Rentals-Study-SIGNED-RES-172-19 4 U.S. Census Bureau. (n.d.). Quarterly homeownership rates by race and ethnicity of householder for the United States: 1994-2020. https:/ /www.census.gov/housing/hvs/data/charts/fig08.pdf 5 Edelman, B., Luca, M., & Svirsky D. (2017). Racial discrimination in the sharing economy: Evidence from a field experiment. American Economic Journal:

Applied Economics, 9(2), 1–22. https:/ /doi.org/10.1257/app.20160213 6 Airbnb. (2019, September 2019). An update on Airbnb’s work to fight discrimination. https:/ /news.airbnb.com/an-update-on-airbnbs-work-to-fight-discrimination/ 7 Chapter 598 Hotel/Motel and Short-Term Rental Operations (2018, January 30). Columbus City Codes. https:/ /library.municode.com/oh/columbus/codes/ code_of_ordinances?nodeId=TIT5BURELICO_CH598HOMOSHRMREOP 8 Chapter 15 - Short-Term Rental Tax: Legislative Intent (2015, September 1). City of Boulder, Colorado Charter and Revised Code. https:/ /library.municode.com/co/boulder/ codes/municipal_code?nodeId=TIT3RETA_CH15SHRMRETA_3-15-6--3-15-12RE 9 Binzer, U. (n.d.). A practical guide to effectively regulating short-term rentals on the local government level. Host Compliance. https:/ /web.archive.org/web/20220317135940/https:/ / www.cityofsantacruz.com/home/showpublisheddocument/57754/636177355568470000 10 Binzer, U. (n.d.). Home-sharing & short-term rentals regulations FAQs. Granicus. https:/ /granicus.com/pdfs/Home-Sharing-Short-Term-Rentals-FAQ.pdf 11 San Francisco’s registration process: Frequently asked questions. (n.d.). Airbnb. https:/ /www. airbnb.com/help/article/1849/san-franciscos-registration-process-frequently-asked-questions 12 Nashville, Tennessee: How the codes department achieves 90%+ compliance with Host Compliance. (n.d.). Granicus. https:/ /granicus.com/how-the-codes- department-achieves-90-compliance-with-host-compliance/ 13 A Local Law “Amending the Village of Lake Placid/Town of North Elba Land Use Code to Add Regulations Pertaining to Short-Term Rentals (2020). Village of Lake Placid/Town of North Elba Land Use Code. http:/ /www.northelba.org/files/TownLocalLawSubmissiontoNYSDOS.pdf 14 Brown, A. (2021, July 1). SC cities sue Airbnb and other short-term rental companies for not paying local taxes. The Post and Courier. https:/ /www.postandcourier.com/ business/real_estate/sc-cities-sue-airbnb-and-other-short-term-rental-companies-for- not-paying-local-taxes/article_f44f0f60-9bb9-11eb-a4b5-636eb8976c0f.html 15 Amendment of Municipal Code Section 3-24-030 Regarding Surcharge Associated with Vacation Rentals and Shared Housing Units (2018, June 27). Municipal Code of Chicago. https:/ /www.civicfed.org/sites/default/files/o2018-4988.pdf 16 Reuters, T. (2016, November 3). Chicago passes short-term rental ordinance. Hospitality Lawyer. https:/ /hospitalitylawyer.com/chicago-passes-short-term-rental-ordinance/ 17 Martineau, P. (2019, March 20). Inside Airbnb’s ‘guerrilla war’ against local governments. Wired. https:/ /www.wired.com/story/inside-airbnbs-guerrilla-war-against-local-governments/ 18 Bucks, R. D. (2017, March). Airbnb agreements with state and local tax agencies.

A formula for undermining tax fairness, transparency and the rule of law. https:/ / www.ahla.com/sites/default/files/Airbnb_Tax_Agreement_Report_0.pdf 19 Swanson, C. (2020, February 14). Frustrated Denver officials reject deal with Airbnb. The Denver Post. https:/ /www.denverpost.com/2020/02/14/denver-airbnb-agreement 20 Martineau, P. (2019, May 24). Airbnb and New York City reach a truce on home-sharing data.

Wired. https:/ /www.wired.com/story/airbnb-new-york-city-reach-truce-on-home-sharing-data/ 21 Templeton, A. (2019, September 4). Portland reaches rental data sharing agreement with Airbnb. Oregon Public Broadcasting. https:/ /www.opb.org/ news/article/portland-airbnb-reaches-rental-data-sharing-agreement/ 22 Binzer, U. (n.d.). Home-sharing & short-term rentals regulations FAQs. Granicus. https:/ /granicus.com/pdfs/Home-Sharing-Short-Term-Rentals-FAQ.pdf 23 Rent Responsibly & College of Charleston. (2022, January). 2022 report state of the short-term rental community. https:/ /www.rentresponsibly.org/wp-content/ uploads/2022/01/2022-State-of-the-STR-Community-Report-January-2022.pdf 24 City of Henderson, NV. (n.d.). Short-term vacation rentals. https:/ /www.cityofhenderson.com/ government/departments/community-development-and-services/short-term-vacation-rentals 25 Short-Term Regulations (2021, April 20). Fayetteville City Code. https:/ /www.fayetteville- ar.gov/DocumentCenter/View/23281/Ordinance-6427-Short-Term-Rental 26 Voluntary Collection Agreement for City of Culver City, California, Transient Occupancy Tax (2018, September 25). https:/ /www.culvercity.org/files/assets/public/documents/ city-manager/short-term-rentals/vca-agreement-with-airbnb_1.pdf 27 Voluntary Collection Agreement for Town of Snowmass Village Sales and Lodging Taxes (2016, November 30) http:/ /nwccog.org/wp-content/ uploads/2018/07/AIRBNB-Voluntary-Collection-Agreement.pdf 28 Mayberry, C. (2017, October 19). Pacific Grove’s new short-term rental policy includes agreement with Airbnb. Monterey Herald. https:/ /www.montereyherald.com/2017/10/19/ pacific-groves-new-short-term-rental-policy-includes-agreement-with-airbnb/

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(ID # 15037)City of Palo Alto
City Council
Supplemental Report
Meeting Date: 12/12/2022 Report Type: Consent Calendar
City of Palo Alto Page 1
Title: Supplemental Report Item - GreenWaste Contract Domestic Recycling Amendment
From: City Manager
Lead Department: Public Works
Following the publication of the report for Item #4 on domestic recycling, NBCNews.com published an article titled “This California city asked where its recycling went. The answer wasn’t pretty.”
The article describes Palo Alto’s efforts to track recyclables sent overseas, to collaborate with other interested cities, and to shift to domestic markets for recyclables. It was written by Saqib Rahim, a freelance reporter based in Southeast Asia, following an interview with City staff about the Council’s leadership on the topic of international recycling markets in Spring 2022.

A pdf copy of the article is included as Attachment A. The article is also available at the following link: https://www.nbcnews.com/news/us-news/palo-alto-recycling-asia-garbage- waste-rcna58633
Attachments:
• Attachment13.a: Article: This California city asked where its recycling went. The answer wasn’t pretty_
Item 4 Supplemental
Packet Pg. 351
By Saqib Rahim
Four years ago, city oﬃcials in Palo Alto, California, posed what they thought was a straightforward question: Where did their recycling go?    SAVE
This California city asked where its recycling went. The answer wasn’t pretty.

Palo Alto found that some 60% of its recyclables got shipped abroad, with little transparency as to their fate.

U.S. NEWS
U.S. recyclables are often shipped abroad, mainly to Asia, with next to no transparency about their fate.

Liza Evseeva / Getty Images / NBC News
Dec. 1, 2022, 2:43 AM PST

13.a
Packet Pg. 352
Item 4 Supplemental
Concerned citizens had seen dire headlines about plastic dumping in Southeast Asia, and they wanted to know if their waste contributed.

But the city’s investigations have not oﬀered much clarity. Palo Alto’s best reckoning, today, is that about 40% of its recyclable material stays in North America, where it’s supposed to be processed according to strict environmental and labor standards. The other roughly 60% goes abroad, mainly to Asia, with next to no transparency about its fate.

Experts say cities and towns across the United States would probably have similar diﬃculty in determining how much of their recyclables are actually recycled. “If you keep stuﬀ out of landﬁll but just dump it in Laos, that’s not achieving a good goal, ” said Martin Bourque of the Ecoloy Center in Berkeley, California, a group that advised Palo Alto in its pursuit of transparency. “That’s not what the whole idea was of recycling. ” The main obstacle that Palo Alto encountered was that the half-dozen companies that trade the city’s recyclables on world markets declined to name their trading partners, citing business reasons.

Unable to force disclosure, Palo Alto city staﬀ concluded they are stuck. “It is not possible to deﬁnitively determine whether the materials are being recycled properly or whether they may be causing environmental or social problems, ” they wrote in a report published this year.

Driven underground
The lack of transparency globally has concerned some law enforcement oﬃcials, who fear that recently tightened international rules on the plastic trade have driven parts of the business underground.

Palo Alto City CouncilDecember 12, 2022

Palo Alto City Council
December 12, 2022