Agenda packet — Palo Alto City Council, April 17, 2023 (part 1 of 6)

CITY COUNCIL
Special Meeting
Monday, April 17, 2023
Council Chambers & Hybrid
5:00 PM
Amended Agenda
Amended Agenda Items appear below in Red
Pursuant to AB 361 Palo Alto City Council meetings will be held as “hybrid” meetings with the option to attend by teleconference/video conference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person. The meeting will be broadcast on Cable TV Channel 26, live on YouTube https://www.youtube.com/c/cityofpaloalto, and streamed to Midpen Media Center https://midpenmedia.org.

VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/362027238) Meeting ID: 362 027 238 Phone:1(669)900‐6833
PUBLIC COMMENTS
Public comments will be accepted both in person and via Zoom for up to three minutes or an amount of time determined by the Chair. All requests to speak will be taken until 5 minutes after the staff’s presentation. Written public comments can be submitted in advance to [email protected] and will be provided to the Council and available for inspection on the City’s website. Please clearly indicate which agenda item you are referencing in your subject line.

PowerPoints, videos, or other media to be presented during public comment are accepted only by email to [email protected] at least 24 hours prior to the meeting. Once received, the Clerk will have them shared at public comment for the specified item. To uphold strong cybersecurity management practices, USB’s or other physical electronic storage devices are not accepted.

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

CALL TO ORDER
CLOSED SESSION 5:05 ‐ 7:30 PM

1. CONFERENCE WITH CITY ATTORNEY‐EXISTING LITIGATION
California Court of Appeal, Sixth Appellate District, Case No. H049425 Subject: Hamilton and High LLC, et al., Appellants v. City of Palo Alto, et al., Respondents Authority: Government Code Section 54956.9(d)(1)

2. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (Ed Shikada, Kiely Nose, Sandra Blanch, Tori Anthony, Molly Stump, and Jennifer Fine) Employee Organization: Service Employees International Union, (SEIU) Local 521, Utilities Management and Professional Association of Palo Alto (UMPAPA), Palo Alto Peace Officers’ Association (PAPOA), Palo Alto Police Management Association (PMA), International Association of Fire Fighters (IAFF) local 1319, Palo Alto Fire Chiefs’ Association (FCA); Authority: Government Code Section 54957.6 (a) STUDY SESSION 7:30 ‐ 8:30 PM

3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT 8:30‐8:50PM
CONSENT CALENDAR 8:50‐8:55 PM

4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

5. Finance Committee and the Utilities Advisory Commission Recommend the City Council Approve and Authorize the City Manager or Their Designee to Execute a Third Phase Agreement With Northern California Power Agency for the Purchase of up to 87,600 Megawatt Hours per Year of Geothermal Energy From Calpine Corporation's Geysers Power Company, LLC Over a Term of up to 12 Years for a Total not to Exceed Amount of $76.2 Million; CEQA status: not a project under CEQA Guidelines sections 15378(a) and (b)

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 – Supplemental Report Added

7. Approval of Amendment #3 with Professional Account Management LLC, dba Duncan Solutions Contract (C17164727) in the Amount of $80,000 and to Extend the Contract Term to April 28, 2024 for Parking Citation Management; CEQA Status – Not a Project.

8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21‐0042A1)

9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021‐22 and FY2022‐23 Annual Action Plans and the Associated Budget Amendment and Resolution Q&A

10. Staff Recommends that Council Approve Bringing the Water and Wastewater Rate Proposals to Council on June 19, 2023, Pending Proposition 218 Notifications, for a Public Hearing to Consider Two Resolutions: 1) Approving the Fiscal Year 2024 Wastewater Collection Utility Financial Plan, Proposed Reserve Transfers, and Increasing Wastewater Collection Utility Rates by Amending Wastewater Collection Rate Schedules S‐1, S‐2, S‐6 and S‐7; 2) Approving the Fiscal Year 2024 Water Utility Financial Plan, Proposed Reserve Transfers, and Increasing Water Rates by Amending Water Rate Schedules W‐1, W‐2, W‐3, W‐4, and W‐7; CEQA Status: Not a project under Public Resources Code 15378(b)(5) Q&A

11. Adoption of a Memorandum of Agreement with the Palo Alto Police Officers' Association and the Police Management Association; Adopt an Amendment to correct the Fire Chiefs‘ Association salary schedules; and, Adopt revised Management and Professional salary schedules CEQA Status ‐ Not a project

12. Approval of a Funding Agreement with the Santa Clara Valley Water District for Reimbursement Costs Incurred in Support of the Purified Water Project, and a Budget Amendment in the Wastewater Treatment Fund Advanced Water Purification Facility capital project (WQ‐19003)

13. Approval of Tenant Work Letter for Lease of 300 Homer Avenue Roth Building between the City of Palo Alto and the Palo Alto Museum; CEQA Status‐‐Not a Project AA1. Adoption of a Resolution Authorizing the City Manager to Execute Participation Agreements on Behalf of the City of Palo Alto to Enter Into Settlement Agreements Regarding Manufacture and Distribution of Opioid Products with Allergan Finance, LLC and related entities (Allergan), Teva Pharmaceutical Industries Ltd. and related entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General.

CITY MANAGER COMMENTS 8:55‐9:10 PM
ACTION ITEMS Item 14: 9:10 ‐ 10:00 PM Item 15: 10:00‐ 11:00 PM

14. PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Gas Utility Financial Plan, Including Proposed Reserve and General Fund Transfers and Amending the Gas Utility Reserve Management Practices, and Increasing Gas Rates by Amending Rate Schedules G‐1 (Residential Gas Service), G‐2 (Residential Master‐Metered and Commercial Gas Service), G‐3 (Large Commercial Gas Service), and G‐10 (Compressed Natural Gas Service); CEQA status: exempt/not a project under Public Resources Code section 21080(b)(8)

15. PUBLIC HEARING: Adoption of a Resolution Approving the Fiscal Year 2024 Electric Utility Financial Plan and Proposed Reserve Transfers, Deactivating Utility Rate Schedule E‐HRA, and Amending Utility Rate Schedules E‐1, E‐2, E‐2‐G, E‐ 4, E‐4‐G, E‐4 TOU, E‐7, E‐7‐G, E‐7 TOU, E‐NSE, and E‐EEC; CEQA Status: Not a project under Public Resources Code 15378(b)(5) and exempt under Public Resources Code 15273(a) COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS

ADJOURNMENT
AMENDED AGENDA ITEMS

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 ‐ Supplemental Report
AA1. Adoption of a Resolution Authorizing the City Manager to Execute Participation Agreements on Behalf of the City of Palo Alto to Enter Into Settlement Agreements Regarding Manufacture and Distribution of Opioid Products with Allergan Finance, LLC and related entities (Allergan), Teva Pharmaceutical Industries Ltd. and related entities (Teva); Walgreens Co.; CVS Health Corporation and CVS Pharmacy, Inc. (CVS), and Walmart, Inc.; Agree to the Terms of the Memorandum of Understanding (MOU) Allocating Settlement Proceeds; and Authorize Entry Into the MOU with the California Attorney General.

PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone.

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

2. In person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item.

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

You may download the Zoom client or connect to the meeting in‐ browser. If using your browser, make sure you are using a current, up‐to‐date browser: Chrome 30 , Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in older browsers including Internet Explorer. Or download the Zoom application onto your phone from the Apple App Store or Google Play Store and enter the Meeting ID below You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak.

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

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

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

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

Click to Join Zoom Meeting ID: 362‐027‐238 Phone: 1(669)900‐6833 AMERICANS WITH DISABILITY ACT (ADA)
Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329‐2550 (Voice) 48 hours or more in advance.

1 Special Meeting April 17, 2023
Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org
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CALL TO ORDER
CLOSED SESSION 5:05 ‐ 7:30 PM

3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT 8:30‐8:50PM
CONSENT CALENDAR 8:50‐8:55 PM

4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 – Supplemental Report Added

8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21‐0042A1)

9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021‐22 and FY2022‐23 Annual Action Plans and the Associated Budget Amendment and Resolution Q&A

CITY MANAGER COMMENTS 8:55‐9:10 PM
ACTION ITEMS Item 14: 9:10 ‐ 10:00 PM Item 15: 10:00‐ 11:00 PM

ADJOURNMENT
AMENDED AGENDA ITEMS

PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone.

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

2. In person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item.

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

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

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

2 Special Meeting April 17, 2023
Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org
.

CALL TO ORDER
CLOSED SESSION 5:05 ‐ 7:30 PM

3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT 8:30‐8:50PM
CONSENT CALENDAR 8:50‐8:55 PM

4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 – Supplemental Report Added

8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21‐0042A1)

9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021‐22 and FY2022‐23 Annual Action Plans and the Associated Budget Amendment and Resolution Q&A

CITY MANAGER COMMENTS 8:55‐9:10 PM
ACTION ITEMS Item 14: 9:10 ‐ 10:00 PM Item 15: 10:00‐ 11:00 PM

ADJOURNMENT
AMENDED AGENDA ITEMS

PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone.

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

2. In person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item.

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

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

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

3 Special Meeting April 17, 2023
Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org
.

CALL TO ORDER
CLOSED SESSION 5:05 ‐ 7:30 PM

3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT 8:30‐8:50PM
CONSENT CALENDAR 8:50‐8:55 PM

4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 – Supplemental Report Added

8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21‐0042A1)

9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021‐22 and FY2022‐23 Annual Action Plans and the Associated Budget Amendment and Resolution Q&A

CITY MANAGER COMMENTS 8:55‐9:10 PM
ACTION ITEMS Item 14: 9:10 ‐ 10:00 PM Item 15: 10:00‐ 11:00 PM

ADJOURNMENT
AMENDED AGENDA ITEMS

PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone.

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

2. In person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item.

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

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

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

4 Special Meeting April 17, 2023
Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org
.

CALL TO ORDER
CLOSED SESSION 5:05 ‐ 7:30 PM

3. Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes
AGENDA CHANGES, ADDITIONS AND DELETIONS
PUBLIC COMMENT 8:30‐8:50PM
CONSENT CALENDAR 8:50‐8:55 PM

4. Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

6. Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021‐2022 – Supplemental Report Added

8. Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21‐0042A1)

9. Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021‐22 and FY2022‐23 Annual Action Plans and the Associated Budget Amendment and Resolution Q&A

CITY MANAGER COMMENTS 8:55‐9:10 PM
ACTION ITEMS Item 14: 9:10 ‐ 10:00 PM Item 15: 10:00‐ 11:00 PM

ADJOURNMENT
AMENDED AGENDA ITEMS

PUBLIC COMMENT INSTRUCTIONS
Members of the Public may provide public comments to hybrid meetings via email, in person, teleconference, or by phone.

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

2. In person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item.

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

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

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

5 Special Meeting April 17, 2023
Materials submitted after distribution are available for public inspection at www.CityofPaloAlto.org
.

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City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: Utilities
Meeting Date: April 17, 2023
Staff Report:2304-1247
TITLE
Study Session Regarding Proposed Electric, Gas, Water and Wastewater July 2023 Rate Changes

RECOMMENDATION
This is an informational report to facilitate the Council study session on customer utility rates.

No action by Council will be taken.

EXECUTIVE SUMMARY
The overall system average proposed rate changes in FY 2024 are - 5% decrease for electric,
- 8% increase for gas (excludes changes in gas market prices), - 6% increase for water, and
- 9% increase for wastewater.

Across the Electric, Gas, Water and Wastewater utilities, costs continue to increase, including construction cost inflation, commodity price increases and the rising cost to transport energy and water. Additionally, infrastructure is aging and investment is needed to maintain the health of utilities and protect reliability.

Gas market prices spiked this winter; it cost Palo Alto Utilities five times more to buy gas in the markets this January compared to January 2022. Figure 1 summarizes the impact of the proposals on a median residential customer’s utility bill and illustrates the magnitude of the gas market price spike impacts on customer bills. With gas market price changes included, gas bills for FY 2024 are expected to be 13% lower than in FY 2023, though forecasts of gas market prices are highly uncertain.

In addition to this study session there are three rates-related items on the agenda for Council’s consideration tonight:

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•Public Hearing Action Item: FY 2024 Gas Utility Financial Plan & Rates Staff Report 2303- 1219 to adopt a resolution approving the FY 2024 Gas Utility financial plan, including proposed reserve transfers and general fund transfer (recommended at 15.5% of gross revenues), amend the Gas Utility Reserve Management Practices, and increase gas rates by amending gas rate schedules G-1, G-2, G-3 and G-10. Included in this item is the Council decision regarding whether to transfer up to 18% of the gross revenues of the gas utility to the general fund or a lesser amount in FY 2024. The Finance Committee (2-1) recommends a transfer at the 15.5% rate, though the staff report referenced above does outline alternatives for consideration.
•Public Hearing Action Item: FY 2024 Electric Utility Financial Plan & Rates Staff Report 2303-1235 to adopt a resolution approving the FY 2024 Electric Utility financial plan, including proposed reserve transfers, and modify electric rates by deactivating the hydroelectric rate adjuster and amending electric rate schedules E-1, E-2, E-2-G, E- 4, E-4-G, E-4 TOU, E-7, E-7-G, E-7 TOU, E-NSE, and E-EEC.
•Public Noticing Consent Item: Water and Wastewater FY 2024 Utility Financial Plan & Rates Staff Report 2303-1218 is a public noticing on consent calendar regarding Water, and Wastewater Collection rates, and recommends approval for a public hearing on June 19, 2023 for Water and Wastewater rates, pending Proposition 218 customer notifications, as recommended by the Finance Committee on March 21, 2023. Finance Committee Staff Report includes the financial plans and rate proposals for water and wastewater utilities presented to the Finance Committee. •The June 19, 2023 Council packet will include the rates and financial plans for water and wastewater and the CPI increases for storm drain, and fiber rates. No rate changes are recommended for refuse rates in FY 2024.

BACKGROUND
The City absorbed utility cost increases during the pandemic. Increased costs for construction, operations, energy, and water were not fully passed through to customers in 2020, 2021, and 2022 and were instead absorbed from reserves. As a result, revenues are too low to maintain normal operations in all utilities, except water. Reserves are lower than expected, because although the City intended to phase in rate increases slowly using reserves, spiking energy prices, inflation and other factors led to very low reserves in all utilities except water. As drought conditions continued to impact the City’s hydroelectric supplies and as energy prices rose and spiked this past winter, the Council took several actions.

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2022 Council Rate Actions Responding to Drought and Rising Energy Prices - Effective April 1, 2022, the Electric Hydro Rate Adjuster went into effect for every CPAU electric customer (see Staff Report 13905)1.
- On December 19, 2022 the Palo Alto City Council approved an increase to the Electric Hydro Rate Adjuster, increasing the current Electric Hydro Rate from $0.013/kWh to $0.048/kWh, effective January 1, 2023. See Staff Report 14874 2 for more details. This increase was necessary to reflect hydrological conditions and market purchase costs impacted by ongoing drought conditions at that time.
- On December 19, 2022, the Palo Alto City Council approved an increase to the gas monthly market-based commodity rate cap from $2.00 per therm to $4.00 per therm. See Staff Report 150473 for more details.

These actions protected the financial health of the electric and gas utilities. However, the rapidly shifting market prices significantly impacted customer bills.

Bill Impacts
Natural gas prices were extreme this winter due to changes in market supply and demand.

However, gas prices are dropping. March customer gas bills were less than 50% of February and April gas bill projections are expected to be even lower. Customer gas bills are expected to continue to decline through June. Although it is not possible to precisely predict commodity rates, staff monitors market prices monthly and automatically incorporates market prices into monthly supply rate adjustments, which are passed directly to customers as a line item on their utility bills. Staff projects commodity prices to decline in FY 2024. Beyond FY 2024 the forecast assumes (consistent with current gas market forecasts from various sources, including forward gas contracts on exchanges, forecasts from suppliers, and the Federal Energy Information Administration) overall supply costs will increase gradually from FY 2025 through FY 2028, remaining higher than historical gas prices.

Figure 1 shows monthly median residential bills and how they increased to unprecedented levels as the natural gas market prices spiked. The figure also shows the projected bills for this summer in June and then in July to illustrate the impacts of these proposed rate increases that are proposed to be effective July 1, 2023. Next winter (January 2024), the forecast does not anticipate another gas price spike; however, gas commodity prices are highly variable, and weather or economic factors could shift this forecast rapidly, in which case any changes in 1 Council Staff Report 13905 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2022/20220314/20220314pccsm-amended-final-revised- ppt.pdf
2 Council Staff Report 14874 https://portal.laserfiche.com/Portal/DocView.aspx?id=46283&repo=r-704298fc 3 Council Staff Report 15047 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2022/20221219/20221219pccsm-amendedtime.pdf Item 3
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commodity costs would be passed through to customers via the monthly varying commodity rate adjuster.

Figure 1: Total Monthly Median Residential Bill
Communications
The Utilities Department has been conducting outreach on the proposed rates as well as high winter gas bills through CPAU’s website www.cityofpaloalto.org/ratesoverview4 in addition to sharing public communication through OpEds and press releases for publication in the local media, blog posts, social media, Nextdoor, bill inserts, fliers for community events, utilities and other City newsletters, with neighborhood groups and key account customers, and providing customer service or other public-facing staff and management groups with frequently asked questions (FAQs).
4 City of Palo Alto Utilities Rates Overview webpage
https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-Rates Item 3
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Efficiency Programs
The City acknowledges that many may be struggling with high utility bills and is offering ways to help.
•Free efficiency assessments. The City is providing free assessments from CPAU’s home energy advisor, the Home Efficiency Genie5, to help people reduce consumption and save money.
https://www.cityofpaloalto.org/Departments/Utilities/Residential/Home-Efficiency- Genie
•Extended payment. The City is offering payment plan arrangements for those who need extra time paying their winter gas bills. Payment can be extended for 6-8 months.

Customer may pay bills in installments, by contacting Utilities Customer Service at (650) 329–2161, or visit our Utilities Customer Service web6 page. https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service • Rate assistance 7 and free home energy upgrades for income-qualified customers.

Residents struggling to pay their utilities bills may qualify for CPAU’s Rate Assistance Program, which provides a 25% discount on gas and electricity charges and a 20% discount on storm drain service fees. https://www.cityofpaloalto.org/rap • Residential Energy Assistance Program 8. Customers may be able to reduce energy and water costs by having CPAU help improve their home's efficiency through the Residential Energy Assistance Program.
• ProjectPLEDGE9. CPAU's ProjectPLEDGE may be able to help customers in need with one- time assistance. Please call Utilities Customer Service at (650) 329-2161 to determine your eligibility.
•California Arrearage Payment Program (CAPP): This newly established California Arrearage Payment Program (CAPP) 10 will offer financial assistance for California energy 5 Home Efficiency Genie https://www.cityofpaloalto.org/Departments/Utilities/Residential/Home-Efficiency-Genie 6 City of Palo Alto Utilities Customer Service webpage
https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service 7 Rate Assistance Program https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities- Assistance/Rate-Assistance-Program-RAP
8 Residential Energy Assistance Program
https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities-Assistance/Residential-Energy- Assistance-Program-REAP
9 ProjectPLEDGE https://www.cityofpaloalto.org/Departments/Utilities/Residential/Utilities-Assistance/Project- Pledge
10 California Arrearage Payment Program https://www.cityofpaloalto.org/News-Articles/Utilities/California- Arrearage-Payment-Program-CAPP
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utility customers to help reduce past due energy bill balances that increased during the COVID-19 pandemic.

Gas & Electric Utility Rebates
Additionally, on March 27, 2023, Palo Alto City Council approved a one-time residential natural gas rebate to mitigate the extraordinarily high January 2023 gas bills. On April 10, 2023, Palo Alto City Council will consider final approval of both a gas and electric utility rebate totaling $2.5 million to be funded by the City’s General Fund. Below is a table of the combined gas and electric rebates if a residential customer has both gas and electric utility services. City staff will calculate the individual residential rebate amount based on the number of services, RAP enrollment, and arrearage status. The rebates will be applied on customer’s April or May 2023 utility bill as “Winter Rebate” depending on their billing schedule. Customers who apply for the Winter Rebate hardship program will receive a subsequent rebate after their application is approved.

A customer with a low January bill (less than $400 gas bill and less than $300 electric bill) will receive a rebate of $90; they may also qualify for an additional $400 rebate if they are enrolled in RAP and have arrearages greater than 180 days. A customer with a high January bill (greater than $800 gas bill and greater than $500 electric) will receive a rebate of $165, they may also qualify for an additional $400 rebate if they are enrolled in RAP and have arrearages greater than 180 days.

Jan 2023 Residential Bill # of Accounts1 % of Total Accounts Cost Gas Rebate Electric Rebate Combined RebateHigh Billl 2,626 5.7% 245,380$ 100.00$ 65.00$ 165.00$ Med/High Bill 9,013 19.5% 698,465$ 85.00$ 45.00$ 130.00$ Low/Med Bill 34,592 74.8% 1,277,540$ 70.00$ 20.00$ 90.00$ SubTotal 100.0% 2,221,385$ Rate Assistance Program 1,101 110,100$ 100.00$ 100.00$ 200.00$ Arrearage > 180 days 669 66,900$ 100.00$ 100.00$ 200.00$ Winter Rebate Application 700 70,000$ 100.00$ 100.00$ 200.00$ SubTotal 247,000$ Total Cost 2,468,385$ 1 One customer may be grouped in multiple bill tiers and qualify for both electric and gas rebates Item 3
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ANALYSIS
Overall, staff with the Utilities Advisory Commission and Finance Committee are recommending the following rate changes:

Projected Change in Residential Median Utility Bill
1) 37% increase includes 4/1/22 hydro rate adjuster (HRA) activation (10%), 7/1/22 5% rate increase, and 1/1/23 HRA increase (19%)
2) -5% change includes a 21% increase to base electric rates and removal of the HRA 3) Gas utility rates shown exclude gas market price changes. FY 24 bill forecast w/ market price changes is (-13%).

Actual rates will vary.
4)Storm Drain fees increase by CPI index annually per approved 2017 ballot measure. 5)Analysis based on an FY 2023 average monthly bill of $369 This study session is seeking to inform the full Council and the public of rate discussions that have occurred through March 2023 with the Utilities Advisory Commission and the Finance Committee. It is intended to allow for a comprehensive understanding of the total customer bill impact expected beginning July 1, 2023 should these plans be approved. The report specifically is organized by utility as follows:
•Shared drivers of recommended rate changes
•Electric Utility
•Gas Utility
•Water Utility
•Wastewater Utility
Following these specific utility discussions is the expected schedule for approval including the potential approval of gas and electric utility rates on this same April 17 Council agenda with the remaining rates as well as fiber customer rates to be considered for adoption on June 19, 2023.

FY 2021 FY 2022
FY 2023 (Rates in effect
Jan 1, 2023)1) FY 2024(Projected) FY 2025 FY 2026 FY 2027 FY 2028$0.00 $0.00 $22.70 ($4.20) $3.90 $4.10 $4.40 $4.600% 0% 37% -5% 5% 5% 5% 5%$1.28 $1.60 $2.60 $5.20 $4.90 $3.70 $3.90 $4.102% 3% 4% 8% 7% 5% 5% 5%$0.00 $2.00 $1.30 $4.00 $4.40 $4.80 $4.60 $3.100% 3% 3% 9% 9% 9% 8% 5%$0.00 $0.00 $8.00 $5.90 $4.20 $3.30 $3.40 $5.800% 0% 9% 6% 4% 3% 3% 5%$0.00 $0.00 $0.00 $0.00 $1.50 $1.50 $1.60 $1.600% 0% 0% 0% 3% 3% 3% 3%$0.40 $0.30 $0.60 $0.80 $0.70 $0.70 $0.70 $0.803% 3% 4% 5% 4% 4% 4% 4% $1.68 $3.90 $35.20 $11.70 $19.60 $18.10 $18.60 $20.001% 1% 11% 3% 5% 5% 4% 5%Monthly Bill Change 5) Electric Utility
Gas Utility 3)
Wastewater
Water Utility
Refuse
Storm Drain 4)
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Shared Drivers of the Rate Changes
The skyrocketing winter energy prices are just one of several trends that will affect people’s utility bills in 2023, but they are one of the most impactful. However, as energy supply costs decline from the extremely high winter 2022/2023 levels, the City will continue to pass those supply cost declines through to customers through the monthly gas commodity rate adjuster and by deactivating the electric utility’s hydroelectric rate adjuster in July.

There are several shared drivers of rate increases across the four utilities. Costs continue to increase across the Electric, Gas, Water and Wastewater utilities. Construction inflation remains a difficult challenge for all public agencies in the Bay Area, and other types of inflation has affected all utility costs, including salary and benefit costs. The utilities are also recovering from the pandemic. During the pandemic the City kept rate increases low to help customer suffering from economic impacts, so in all utilities revenues are currently below costs.

The City of Palo Alto had hoped to phase in needed rate increases gradually after the pandemic using reserves, but in most utilities that is no longer possible. For electric and gas, the winter 2022/2023 energy supply cost spikes were not passed through completely to customers, and the difference was absorbed from reserves. Reserve levels in both utilities will be very low by the end of FY 2023, making it impossible to phase in rate increases slowly without bringing reserves even further below minimum guideline levels. The Wastewater Collection utility will have low reserves by the end of FY 2023 as well.

Electric Utility
Staff and the Finance Committee is proposing a set of rate changes that will decrease bills by 5%.

Staff is proposing to deactivate the hydroelectric rate adjuster while increasing base electric rates 21%, for a net decrease in utility bills of 5%. This is in contrast to the original staff proposal recommended for approval by the UAC in March of this year, which involved a 50% reduction in the hydroelectric rate adjuster and a 14% increase in the base electric rates. The new proposal is made possible by the expected receipt of a $24 million refund from the Bureau of Reclamation of overcharges associated with the Central Valley Project, where the City gets most of its hydroelectric power, as a result of a successful result in litigation the City participated in against the Bureau.

The City uses a hydroelectric rate adjuster because of the year to year variability of output from its hydroelectric resources. On average these have been low cost resources, but the costs are largely fixed and the amount of electricity generated varies year to year. This can lead to higher energy supply costs during dry years and lower energy supply costs during wet years. The City manages this variability using the hydroelectric stabilization reserve, which accumulates reserves during wet years and spends them down during dry years, and the hydroelectric rate adjuster, Item 3
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which is a surcharge on electric customer bills activated when the hydroelectric stabilization reserve reaches low levels (less than $11 million) and dry conditions continue.

The hydroelectric stabilization reserve is currently at critically low levels ($400,000), so staff would normally not recommend removing the hydroelectric rate adjuster, even with an improved outlook for hydroelectric generation. Without funds in the stabilization reserve, removing the rate adjuster entirely would make it likely that the adjuster would need to be activated again next year if next winter’s precipitation is low. However, the pending receipt of the refund from the Central Valley Project litigation allows the City to partially refill the hydroelectric stabilization reserve. Staff is proposing adding $8 million to the reserve, with the expectation that the improved outlook for hydroelectric generation will generate enough electricity supply savings to bring the stabilization reserve above $11 million. This would greatly reduce the chance that the hydroelectric rate adjuster needs to be reactivated in the next year even if conditions are dry this upcoming winter. With this increase to the reserves, staff and the Finance Committee are comfortable recommending removal of the hydroelectric rate adjuster.

Staff is also recommending that the base electric rates be increased 21%. This recommendation is due to two factors:
•First, without the hydroelectric rate adjuster, FY 2024 electric utility revenues are projected to be approximately $32 million below costs. This is due to several factors:
oRates were not increased during the pandemic while costs continued to increase. oHydroelectric output has been low and is forecasted to be lower on average going forward than it was historically.
oElectricity supply costs increased greatly in late 2022 and early 2023 and are expected to remain elevated in future years, though lower than winter of 2022/2023.
•By the end of FY 2023 the Electric Utility Supply and Distribution Operations Reserves, which are the risk management reserves for the utility, are projected to be at $19.5 million at the end of FY 2023, which is $11.3 million (36%) below the minimum guidelines of $31 million.
•In addition to being below the minimum guidelines the City has loaned $10 million from its Electric Special Projects Reserve to the Operations Reserves, which is due to be repaid over the next several fiscal years.

When Operations Reserves are above minimum guidelines, they can be drawn down to phase in rate increases over multiple years, but that is not possible this year. The Operations Reserves are currently not only below minimum guidelines but also have an outstanding internal loan. Staff is recommending closing most of the electric utility’s annual deficit this year with a 21% increase to base rates. Staff is proposing to repay the $10 million outstanding internal loan using part of the refund, which means the City does not need to raise rates further than 21% to repay this internal loan over the next few fiscal years. And because Operations Reserves are already so far below minimum, staff is proposing adding $6 million from the refund to the Operations Reserves Item 3
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to bring them closer to the minimum guidelines. Even with this addition and the rate increase, the Operations Reserves are only expected to reach minimum levels in FY 2025.

In summary, staff is proposing to use the $24 million refund as follows:
•Transfer $8 million to the Hydroelectric Stabilization Reserve to help facilitate elimination of the Hydroelectric Rate Adjuster.
•Repay $10 million in internal loans and avoid the need for additional internal loans, which also allows rates to be slightly lower in FY 2024 since future loan repayments are no longer needed.
•Add $6 million to the Operations Reserves to bring them closer to the minimum guidelines.

All $24 million of the refund is being used in ways that reduce rates indirectly in one way or another, which is why the current staff proposal results in a net 5% bill decrease as compared to the prior staff proposal presented to the UAC, which resulted in no net change in customer bills.

Additional detail on the staff proposal is available in report 11, March 21, 2023.

Gas Utility
The FY 2024 Gas Utility Financial Plan includes projections of the utility’s costs and revenues for FY 2023 through FY 2028. Gas utility costs are made up of gas supply costs (60 percent of costs in FY 2023), which represent the cost of buying gas and transporting it to Palo Alto, as well as environmental charges, and distribution-related costs (40 percent of costs in FY 2023), which represent the cost of operating Palo Alto’s gas distribution system, administration, customer service, and other day to day operations. Gas supply revenues to cover gas supply costs are collected through four rate components (commodity, transmission, cap and trade, and Carbon Neutral Gas) that pass gas supply costs through directly to customers, and which change as frequently as monthly. Gas distribution revenues are collected through a distribution rate that is typically adjusted annually. Distribution rates last increased on July 1, 2022, which resulted in a roughly 3 percent increase in the total system average gas rate (the supply rates plus the distribution rates). Staff is proposing an increase to distribution rates that is projected to increase overall customer bills approximately 8%. Note that the actual net change to customer bills will vary depending on usage and the variation in gas supply costs.

Gas market prices rose to unprecedented levels in FY 2023, leading to far higher gas supply costs for Palo Alto in FY 2023 than are projected for FY 2024 through FY 2028. As shown in Figure 2 below, customer gas bills spiked in the winter of 2022/2023 and are expected to decrease significantly by June 2023, just before this rate change would take effect, and are not currently forecasted to reach similar levels next winter, though these forecasts are uncertain. 11 Finance Committee Staff Report 2303-1109
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Figure 2: Monthly Median Residential Gas Bill
Staff is proposing to increase the distribution component of the gas rates in FY 2024 to ensure the utility is recovering its costs of operations. Revenues were already below costs after keeping rate increases low through the pandemic, but construction inflation and other factors have driven costs up. The distribution rate increase is projected to increase overall customer bills approximately 8%, though changes to gas supply costs mean that the actual impact to customer bills may be higher or lower. This 8% increase in customer bills results from increasing the distribution component of the rates 21% to fully recover distribution costs and avoid decreasing reserves further.

Even with this distribution rate increase, based on current market forecasts staff expects average annual customer gas bills to decline 13% in FY 2024 compared to FY 2023 because gas supply costs were extremely high in FY 2023, particularly in the winter. FY 2024 annual gas supply costs are forecasted to be about 36% lower than FY 2023. Gas market prices are uncertain, however, and these forecasts can change.

The distribution rate increase is driven by two things: 1) the need to replenish reserves, which were depleted by significant losses due to FY 2023 commodity costs that were not be fully passed through to customers under the City’s commodity rate cap of $4 per therm, and 2) continuing increases in capital and operating costs. Distribution rates did not keep up with these increased costs as the City pursued a Council policy to minimize rate increases during the economic downturn associated with the COVID-19 pandemic.

The gas utility's transfer to the City’s General Fund is another component of the City’s gas rates.

City voters first authorized the transfer in 1950, and in November 2022 voters approved Measure L, affirming the continuation of this practice by adding section 2.28.185 to the Municipal Code.

Each year the City Council may transfer from the gas utility to the general fund an amount up to 18% of the gross revenues of the gas utility, though Council may choose to transfer a lesser Item 3
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amount. Staff is seeking a Council decision on the amount of the FY 2024 transfer as part of its rate change proposal at tonight’s (April 17, 2023) Council meeting (Staff Report 2303-1219). All rate and cost discussions in this staff report are based on Alternative 2, which involves transferring up to 18% of gas utility gross revenues in FY 2023 and 15.5% in FY 2024. The UAC recommended Alternative 2 for adoption (with one dissenting vote for reasons unrelated to the transfer), as did the Finance Committee (with one dissenting vote specifically related to the transfer).

Additional detail on the staff proposal is available in Staff Report 2302-094612, March 21, 2023 and Staff Report 2303-1219 on tonight’s (April 17, 2023) Council agenda.

Water Utility
The City’s water rate schedules consist of a volumetric charge for each CCF (100 Cubic Feet or 748 gallons) of water consumed during the billing period and a monthly service charge for each customer, based on water meter size. The volumetric charge has two parts: a wholesale commodity rate (or San Francisco Public Utilities Commission or SFPUC wholesale rate), and a customer volumetric rate. Water rates are designed to recover the City’s costs of buying and distributing water while maintaining adequate financial reserves. The customer volumetric rate and the monthly service charge together are considered the distribution rates; revenue from those rates pay for the upkeep of Palo Alto’s distribution system. Revenue from the wholesale commodity rate pays for the City’s cost of buying water from the SFPUC.

Staff and the Finance Committee are proposing a 2% water distribution rate increase (Staff Report 2303-1218, April 17, 2023). CPAU’s operational costs for the water utility have increased by approximately 4.8% per year over the last five years and are projected to increase 3% per year on average over the next five years. Primary reasons for the cost increases are allocated charges (charges allocated to the water utility for administrative services provided by the General Fund) and operations and maintenance costs (including engineering). Capital costs have fluctuated from year to year.

The Water Utility’s healthy reserve levels allowed the Water Utility to hold rates flat for two years (FY 2021 and FY 2022). In FY 2022 and FY 2023, drought conditions and voluntary water use restrictions led to sales revenue declines and the Water Utility’s reserves had adequate funding to manage these reductions together with a 4% distribution rate increase in July 2022. The proposal for the Water Utility uses remaining reserves to mitigate distribution rate increases to 2% in FY 2024, 7% in FY 2025 and 6% annually from FY 2026 through FY 2028 while still funding essential capital investments.

Customers have a separate commodity rate for purchased water from the San Francisco Public Utilities Commission (SFPUC) relative to the rest of the distribution-related portion of the volumetric rates. This commodity charge passes through SFPUC rate increases to customers The 12 Council Staff Report 2302-0946 https://portal.laserfiche.com/Portal/DocView.aspx?id=46283&repo=r-704298fc Item 3
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pass-through commodity rate is currently $4.75 per hundred cubic feet (CCF) and will increase to $5.30 per CCF on July 1, 2023, according to SFPUC’s February 2023 forecast. The SFPUC will not determine its final wholesale customer rate for FY 2024 until May. If SFPUC’s final rate for FY 2024 does increase, Palo Alto will notify customers 30 days in advance of the pass-through rate increase via their billing statements or by any other mailing by CPAU to the customer’s regular billing address.

Staff expects the combination of the 2% water distribution rate increase together with the 11.6% commodity rate increase to have an overall combined average rate impact on water customers of 6%. If the Council does not approve the water distribution rate increase, this will put more upward pressure on water rates in subsequent years. The Council does not need to take action to pass through the SFPUC commodity rate increase as these rate changes are automatically passed-through as approved by Council on June 17, 2019 (Resolution 9844)13.

Wastewater Utility
Staff and the Finance Committee are proposing a 9% Wastewater Collection rate increase in FY 2024, 9% annual rate increases in FY 2025 and FY 2026, 8% in FY 2027 and 5% in FY 2028, to cover current and projected costs. Staff Report 2302-0944 14 to the Finance Committee on March 7, 2023 contains detailed bill and rate impacts of the Wastewater Collection rate proposals. The Financial Plan projects costs to rise over the forecast horizon due to increasing treatment costs related to capital improvements and operational costs at the Regional Water Quality Control Plant (RWQCP), as well as increasing collection system operational and Capital Improvement Program (CIP) costs. Staff recommends accelerating the rate of main replacements, from 1 mile to 2.5 miles per year beginning in FY 2026. This acceleration will allow the Wastewater Collection Utility to replace the last main no more than approximately 8 years beyond its anticipated 100- year life expectancy. Staff and the Finance Committee’s recommendation attempts to minimize rate impacts while also prudently managing the City’s infrastructure and maintaining an acceptable level of risk.

TIMELINE
For Gas rates, Council may vote on the gas item on the agenda tonight to approve the Gas Financial Plan, rate changes, reserve and general fund transfers and changes to the reserve management policies and the gas rates would go into effect July 1, 2023. 13 Resolution 9844 https://www.cityofpaloalto.org/files/assets/public/city-clerk/resolutions/reso- 9844.pdf?t=69020.51
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For Electric rates, Council may vote on the electric item on the Council agenda tonight, the Council would also approve the Electric Financial Plan and rate changes and the approved rates would go into effect July 1, 2023.

For Water rates and Wastewater rates, by approving the consent item on the Council agenda tonight, the Council would approve moving forward with the water and wastewater rate proposals for Council consideration and a public hearing on June, 19, 2023; staff will notice customers in accordance with Prop 218 requirements during April and May. Additionally, for the water commodity pass-through rate, staff expects SFPUC to vote on a wholesale water rate increase in May that will also become effective July 1, 2023. Upon final approval of the wholesale rate increase by the SFPUC, staff will provide Palo Alto customers with notice of any adjustments to the wholesale rate increase and pass through the increase.

For Storm drain and Fiber customer rates, Council will receive these CPI increases at its June 19, 2023 meeting for adoption effective July 1, 2023.

FISCAL/RESOURCE IMPACT
Utility fund resource impacts of the recommendations summarized in this report include the continued financial solvency of the various utilities through the revenue increases described below. The estimated FY 2024 revenue impact of the recommendations in this report would be:
•A $12 million increase or 6% compared to FY 2023 levels in the Electric Fund (excluding expected monies to be received from the CVPIA payment). •Sales revenues for the Gas Utility in FY 2024 are projected to increase by roughly $5.7 million or 8% compared to FY 2023 levels as a result of the proposed rate increases, not including fluctuations in commodity revenue/cost.
•Staff projects estimated revenue for the Water Utility in FY 2024 to increase by $2.9 million or 6% compared to FY 2023 levels. This estimate includes the SFPUC wholesale rate increase of 11.6% (projected by SFPUC in February 2023; staff expects the Commission to approve a final wholesale water rate increase in May 2023). •For Wastewater Collection, staff projects revenues in FY 2024 to increase by approximately $1.8 million or 9% compared to FY 2023 levels because of the proposed rate changes.

The recommendations summarized in this report are reflected in the FY 2024 Proposed Operating Budget except for the Water Utility, which will require revenue and expense adjustments to align with the final SFPUC wholesale rate increase, as that information was not available at the time the budget was produced. Staff will bring these water adjustments forward for Council consideration through the annual budget process.

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between the City Council transferring 18% and 15.5% of the gross revenues of the gas utility to the General Fund in FY 2024 is approximately $1.2 million (see Staff Report 2303-1219 on the Council’s agenda tonight for more detail).

As the City’s General Fund departments are utility ratepayers, staff expects the proposed rate changes to increase General Fund utility bill costs by $0.37 million in FY 2024 as a result of these rate changes relative to General Fund utility bills in FY 2024 without the proposed rate changes.

Table 1 summarizes the required General Fund cost increases for utility services.

Table 1: General Fund Utility Expense Increases in FY 2024 Resulting from Proposed Rate Changes
Utility General Fund Utility Expense
Increase ($ millions)
Electric $0.14
Gas $0.06
Wastewater $0.01
Water $0.16

STAKEHOLDER ENGAGEMENT
•On June 13, 2022 the Palo Alto City Council reviewed and approved staff’s proposed utility rate changes for fiscal year 2023, (see Staff Report 13661 15 for more details). Systemwide average rate increases included 5% for electric, 4% for gas, 8.9% for water, 3% for sewer, 4.2% for stormwater and 4.2% for fiber.
•Wastewater Collection main replacement: on October 12, 2022, the Utilities Advisory Commission reviewed three alternative approaches to accelerate the sanitary sewer main replacement ( Staff Report #14610) 16 and on November 20, 2022, the Finance Committee considered series of alternative rate trajectories to accelerate the sanitary sewer main replacement (Staff Report #14611)17. The UAC and Finance Committee provided feedback on additional scenarios they wanted to be reflected in the Financial Plan and staff incorporated this feedback into the final Financial Plans presented to the UAC and Finance Committee. 15 Council Staff Report 13661 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2022/20220613/20220613pccsm-final-amended- linked.pdf#page=102
16 Council Staff Report 14610 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2022/10-12-2022/10-12-2022-uac-agenda.pdf
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•On March 1, 2023 18 the Utilities Advisory Commission (UAC) reviewed and approved the FY 2024 Electric, Gas, Water and Wastewater Collection Utility Financial Plans and Rate Proposals.
•On March 7, 2023 19, the Finance Committee reviewed the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals. The Finance Committee approved the Water Utility proposals and asked staff to return with additional information for further evaluation for the Wastewater Utility.
•On March 21, 202320, the Finance Committee reviewed the FY 2024 Electric, Gas, Water, and Wastewater Collection Financial Plans and Rate Proposals and unanimously approved the Electric, Water and Wastewater Collection Proposals; the Finance Committee approved the Gas Utility Proposals 2-1 with Council Member Stone voting no.

ENVIRONMENTAL REVIEW
The Council’s study session on utility rates does not meet the California Environmental Quality Act’s definition of a project, pursuant to Public Resources Code Section 21065 and CEQA Guidelines Section 15378(a) because it will not cause a direct or indirect physical change in the environment.

APPROVED BY:

Dean Batchelor, Director Utilities
Staff:

Jonathan Abendschein, Assistant Director of Utilities
Lisa Bilir, Sr. Resource Planner
18 Utilities Advisory Commission Staff Reports https://www.cityofpaloalto.org/files/assets/public/agendas- minutes-reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and- minutes-2023/03-mar-2023/03-01-2023-agenda-and-packet.pdf 19 Finance Committee Staff Report
https://cityofpaloalto.primegov.com/meeting/document/1704.pdf?name=Staff%20Report 20 Finance Committee Staff Report
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City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: April 17, 2023
Report #:2304-1246
TITLE
Approval of Minutes from March 31, 2023 and April 3, 2023 City Council Meetings

RECOMMENDATION
That the minutes be reviewed and approved as presented.

ATTACHMENTS
Attachment A: March 31, 2023 Draft Minutes
Attachment B: April 3, 2023 Draft Minutes
APPROVED BY:

Lesley Milton
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CITY COUNCIL

DRAFT ACTION MINUTES

Special Meeting
Friday, March 31, 2023

CALL TO ORDER
The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 4:00 p.m.

Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone arrived 4:39 p.m., Veenker
Present Remotely: None

Absent: Tanaka

AGENDA CHANGES, ADDITIONS AND DELETIONS
None.

PUBLIC COMMENT

None.

ACTION ITEMS

1. Interview and Consider Appointment for Openings on the Utilities Advisory Committee, Planning and Transportation Commission and Historic Resources Board

The Council interviewed the following candidates:

Planning & Transportation Commission
George Lu
Scott O’Neil
Allen Akin
Cari Templeton (Incumbent)
Arthur Keller
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ACTION MINUTES

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Sp. City Council Meeting
Action Minutes: 3/31/2023
Alex Comsa
Forest Olaf Peterson

Historic Resources Board
Samantha Joy Rodman
Christian Pease (Incumbent)
Alisa Eagleston-Cieslewicz (Incumbent)

Utilities Advisory Commission
Jason Titus
Max Rayner
Robert Phillips
Benjamin Piiru
Greg Hood
Chris Tucher
Meagan Mauter
Claude Ezran
Siyi Zhang
Greg Scharff (Incumbent)
Rachel Croft
Natalie Geise
Bob Wenzlau

ADJOURNMENT The meeting was adjourned at 8:15 p.m.

ATTEST: APPROVED:

City Clerk Mayor
NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC)

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

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CITY COUNCIL

DRAFT ACTION MINUTES

Special Meeting
Monday, April 03, 2023

CALL TO ORDER

The City Council of the City of Palo Alto met on this date in the Council Chambers and by virtual teleconference at 5:00 P.M.

Present In Person: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Present Remotely: None

Absent: None

SPECIAL ORDERS OF THE DAY

1. Appointment of Applicants for Board and Commission Openings on the Utilities Advisory Committee, the Planning and Transportation Commission and the Historic Resources Board

MOTION: Council Member Burt moved, seconded by Mayor Kou to proceed as presented to vote first for full term, then a subsequent vote for unexpired terms.

SUBSTITUTE MOTION: Veenker/Lythcott-Haims to vote for all positions in the first round, with the top vote getters getting the full terms, and the candidate with the next number of votes getting the unexpired terms. If there are ties, then a second round of voting will commence.

MOTION FAILED: 3-4, Lauing, Kou, Burt, Stone no

ORIGINAL MOTION: Council Member Burt moved, seconded by Mayor Kou to proceed as presented to vote first for full term, then a subsequent vote for unexpired terms.

MOTION PASSED: 5-2, Lythcott-Haims, Tanaka no

Historic Resources Board
First Round of Voting for Three (3) vacancies on the Historic Resources Board ending March 31, 2026
Samantha Joy Rodman: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Item 4
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Sp. City Council Meeting
Draft Action Minutes: 4/3/2023
Christian Pease: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Alisa Eagleston-Cieslewic: Burt, Kou, Lauing, Lythcott-Haims, Stone, Tanaka, Veenker Candidate Samantha Joy Rodman receiving 7 votes is appointed to a full-term expiring March 31, 2026.

Candidate Christian Pease receiving 7 votes is appointed to a full-term expiring March 31, 2026.

Candidate Alisa Eagleston-Cieslewic receiving 7 votes is appointed to a full-term expiring March 31, 2026.

Planning and Transportation Commission

First Round of Voting for Two (2) full terms ending March 31, 2027 on the Planning and Transportation Commission

George Lu: Lythcott-Haims
Scott O’Neil: Tanaka
Allen Akin: Kou, Burt, Stone, Lauing
Cari Templeton: Burt, Lythcott-Haims, Stone, Lauing, Veenker Arthur Keller: Kou
Alex Comsa: Tanaka
Forest Olaf Peterson: Veenker
Candidate Allen Akin receiving 4 votes is appointed to a full-term expiring March 31, 2027.

Candidate Cari Templeton receiving 5 votes is appointed to a full-term expiring March 31, 2027.

Utilities Advisory Commission
First Round of Voting for Three (3) full terms ending March 31, 2026 on the Utilities Advisory Commission

Jason Titus: Burt, Veenker
Max Rayner: Tanaka
Robert Phillips: Burt, Kou, Lauing,
Benjamin Piiru:

Greg Hood:

Chris Tucher: Tanaka
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Sp. City Council Meeting
Draft Action Minutes: 4/3/2023
Claude Ezran: Kou
Siyi Zhang: Lythcott-Haims, Stone
Greg Scharff: Lauing, Stone, Tanaka
Rachel Croft: Stone
Natalie Geise: Lythcott-Haims, Veenker
Bob Wenzlau:

Candidate Megan Mauter receiving 5 votes is appointed to a full-term expiring March 31, 2026.

No other Candidate received four votes required to be appointed to the full-term expiring March 31, 2026. A second round of voting is required.

Planning and Transportation Commission

First Round of Voting for One (1) unexpired term ending March 31, 2025 on the Planning and Transportation Commission

George Lu: Burt, Lythcott-Haims, Tanaka
Scott O’Neil:

Arthur Keller: Kou, Lauing, Stone
Alex Comsa:

Forest Olaf Peterson: Veenker

No Candidate received four votes required to be appointed to the un-expired term expiring March 31, 2025. A second round of voting is required.

Utilities Advisory Commission
Second Round of Voting for two (2) full terms ending March 31, 2026 on the Utilities Advisory Commission

Jason Titus: Burt, Veenker
Max Rayner: Tanaka
Robert Phillips: Stone, Burt, Kou, Lauing
Benjamin Piiru:

Greg Hood:

Chris Tucher:

Claude Ezran:

Siyi Zhang: Lythcott-Haims, Tanaka
Greg Scharff: Stone, Kou, Lauing
Rachel Croft:

Natalie Geise: Lythcott-Haims, Veenker
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Bob Wenzlau:

Candidate Robert Phillips receiving 4 votes is appointed to a full-term expiring March 31, 2026.

No other Candidate received four votes required to be appointed to the full-term expiring March 31, 2026. A third round of voting is required.

Planning and Transportation Commission

Second Round of Voting for One (1) unexpired term ending March 31, 2025 on the Planning and Transportation Commission

George Lu: Burt, Tanaka, Lythcott-Haims, Veenker
Scott O’Neil:

Arthur Keller: Stone, Lauing, Kou
Alex Comsa:

Forest Olaf Peterson:

Candidate George Lu receiving 4 votes is appointed to an unexpired term ending March 31, 2025.

Utilities Advisory Commission
Third Round of Voting for one final full-term ending March 31, 2026 on the Utilities Advisory Commission

Jason Titus: Burt
Max Rayner:

Robert Phillips:

Benjamin Piiru:

Greg Hood:

Chris Tucher:

Claude Ezran: Kou
Siyi Zhang:

Greg Scharff: Stone, Tanaka, Lauing
Rachel Croft:

Natalie Geise: Lythcott-Haims, Veenker
Bob Wenzlau:

No Candidate received four votes required to be appointed to the full-term expiring March 31, 2026. A fourth round of voting is required.

The Council directed the elimination of candidates without votes.

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Utilities Advisory Commission
Fourth Round of Voting for one final full-term ending March 31, 2026 on the Utilities Advisory Commission

Jason Titus: Burt
Claude Ezran:

Greg Scharff: Kou, Lauing, Stone, Tanaka,
Natalie Geise: Veenker, Lythcott Haims
Candidate Greg Scharff receiving 4 votes is appointed to a full-term expiring March 31, 2026.

Utilities Advisory Commission
First Round of Voting for One (1) unexpired term ending March 31, 2025 on the Utilities Advisory Commission

Jason Titus: Lythcott-Haims, Burt
Max Rayner: Tanaka
Robert Phillips:

Benjamin Piiru:

Greg Hood:

Chris Tucher:

Meagan Mauter:

Claude Ezran: Kou
Siyi Zhang:

Greg Scharff:

Rachel Croft: Lauing, Stone
Natalie Geise: Veenker
Bob Wenzlau:

No Candidate received four votes required to be appointed to the un-expired term expiring March 31, 2025. A second round of voting is required.

Utilities Advisory Commission
Second Round of Voting for One (1) unexpired term ending March 31, 2025 on the Utilities Advisory Commission

Jason Titus:

Max Rayner: Tanaka
Claude Ezran: Kou
Rachel Croft: Veenker, Stone, Lythcott-Haims, Lauing, Burt Natalie Geise:

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Candidate Rachael Croft receiving 5 votes is appointed to an unexpired term ending March 31, 2025.

2. Introduction of Representatives from the North County TRUST (Trusted Response Urgent Support Team) alternative mental health response program

AGENDA CHANGES, ADDITIONS AND DELETIONS

PUBLIC COMMENT

CONSENT CALENDAR

Council Member Tanaka registered a no vote on Agenda Item Number 10.

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

MOTION PASSED ITEMS 3-9: 7-0
MOTION PASSED ITEM 10: 6-1, Tanaka no

3. Approval of Minutes from March 20, 2023 Meeting

4. The Utilities Advisory Commission and Staff Recommend Council Adoption of Amended Utilities Rules and Regulations, to Incorporate AMI Changes and Other Updates; CEQA review – exempt (CEQA Guidelines section 15273) Adopted Resolution 10096

5. Approval of the Utilities Department‘s 2023 Legislative Guidelines

6. 2850 West Bayshore [22PLN-00364]: Approval of Final Map for a single-lot subdivision for condominium purposes for 48 attached townhome condominiums. Environmental Assessment:

Exempt per CEQA Guidelines Section 15332. Zoning District: ROLM (Research, Office, and Manufacturing).

7. Approval of Fourth Amendment to Santa Clara Valley Urban Runoff Pollution Prevention Program Memorandum of Agreement

8. Adopt a Resolution 10097 Expressing Concern for Public Safety and Urging State and Federal Action on Firearms in Sensitive Places.

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9. Acceptance of $2,000,000 from the Consolidated Appropriation Act, 2022, Awarded by the Department of Health and Human Services Substance Abuse and Mental Health Services Administration (SAMHSA) for Assistance Related to North County TRUST (Trusted Response Urgent Support Team), an Alternative Response Pilot Program; Approval of a Contract with Momentum for Health for Assistance Related to North County TRUST with a Total Contract Amount Not to Exceed $1,931,706; and Approval of the Related Budget Amendment in the General Fund. CEQA status – not a project. Public Comments

10. Approve Amendment of Seven On-call Consulting Contracts to Increase the Not to Exceed to $3 Million Through June 2024 to Provide Expertise for Long Range Planning Projects, Application Processing, Historic and Environmental Review in the Department of Planning & Development Services, With all Work Subject to Assigned Task Order and Availability of Funds; Environmental Assessment: Exempt in Accordance with CEQA Guidelines Section 15061(b)(3).

CITY MANAGER COMMENTS

ACTION ITEMS

11. Approval of the following: 1) Contract with Flock Safety (S23187316) for Automated License Plate Recognition (ALPR) Implementation for a three-year term in an amount not to exceed $174,400; 2) ALPR Surveillance Use Policy; and 3) Budget amendment in the Supplemental Law Enforcement Services fund;

MOTION: Council Member Tanaka moved, seconded by Mayor Kou to:

A. Approve a 3 years contract with flock Safety to implement fixed ALPR technology, in an amount not to exceed $174,400
B. Approve the use of Fixed ALPR technology to deter and investigate criminal activity C. Approve the fixed ALPR Surveillance use policy
D. Amend the Fiscal Year 2023 Budget Appropriation for the Supplemental Law Enforcement Services Fund (SLESF) by
a. Increasing SLESF Contract Services expense appropriation by $61,900, and b. Decreasing the ending fund balance by $61,900.

E. Staff to return to Council one year after implementation for review and determination for continuation
F. Refer to Policy and Services discussion if the program should also be reviewed by City Auditor, IPA or other party
G. Limit the access to sworn officers, dispatchers and comparable positions

MOTION PASSED: 7-0
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12. Parks and Recreation Commission Recommend Adoption of a Park Dedication Ordinance to Dedicate the 10-acre Measure E site as Parkland. CEQA status – not a project. Public Comments

MOTION: Council Member Burt moved, seconded by Council Member Lythcott-Haims to City Council to
A. Direct staff to return with analysis on scope and timeframe to evaluate other environmental technology and facilities on a portion of the Measure E site and/or other lands.

B. Direct staff to return to Council with a proposal to evaluate a minimum buffer size to support a wildlife corridor connecting Renzel Marsh to the Baylands Harbor marsh through the Measure E site.

MOTION PASSED 6-1, Kou no

13. Update, Discussion, and Potential Direction regarding State and Federal Legislation

ACTION: None taken

COUNCIL MEMBER QUESTIONS, COMMENTS, ANNOUNCEMENTS

ADJOURNMENT The meeting was adjourned at 11:22 P.M.

ATTEST: APPROVED:

City Clerk Mayor
NOTE: Action minutes are prepared in accordance with Palo Alto Municipal Code (PAMC)

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CITY COUNCIL

STAFF REPORT
From: City Manager
Report Type: Action
Lead Department: Utilities
Meeting Date: April 17, 2023
Staff Report: 2301-0706

TITLE
Finance Committee and the Utilities Advisory Commission Recommend the City Council Approve and Authorize the City Manager or Their Designee to Execute a Third Phase Agreement With Northern California Power Agency for the Purchase of up to 87,600 Megawatt Hours per Year of Geothermal Energy From Calpine Corporation's Geysers Power Company, LLC Over a Term of up to 12 Years for a Total not to Exceed Amount of $76.2 Million; CEQA status: not a project under CEQA Guidelines sections 15378(a) and (b)

RECOMMENDATION
The Finance Committee, the Utilities Advisory Commission (UAC), and Staff recommend the City Council:

1. Authorize the City Manager, or their designee, to execute a Third Phase Agreement 1 with the Northern California Power Agency (NCPA) to purchase up to 87,600 MWh of renewable energy/year from a portfolio of geothermal projects owned by Calpine Corporation’s Geysers Power Company, LLC, over a period of 12 years, at a total cost not to exceed $76.2 million;

2. Authorize the City Manager, or their designee, to execute on behalf of the City all related documents or agreements necessary to administer the Third Phase Agreement that are consistent with the Palo Alto Municipal Code and City Council approved policies, including, but not limited to, collateral assignment agreements; and take any and all actions as are necessary or advisable to implement and administer the Third Phase Agreement;

3. Authorize the City Manager, or their designee, to approve and execute amendments to the Third Phase Agreement1, as may be required from time to time, so long as the contract price and length of the agreement remain unchanged; and

4. Waive the application of the anti-speculation requirement of Section D.1 of the City’s Energy Risk Management Policy as it may apply to surplus electricity purchases resulting 1 Third Phase Agreement: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-ncpa-agreement.pdf Item 5
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from the City’s participation in the Calpine contract, due to the variability of the City’s hydroelectric resources and uncertainty around the City’s long-term load forecast.

EXECUTIVE SUMMARY
Through a Request for Proposals (RFP) recently conducted by NCPA, the City has the opportunity to enter into a 12-year agreement to purchase renewable power from a geothermal resource owned by Calpine. NCPA has executed a power purchase agreement (PPA) with Calpine to purchase the project output (which includes renewable energy and local resource adequacy capacity), and the City and other NCPA members who have elected to participate would receive shares of the output via Third Phase Agreements with NCPA. Palo Alto’s share of the 100 MW project capacity would be 5 MW for the first two years of the agreement, and 10 MW for the remaining ten years—the output of which would be equivalent to 10.6% of Palo Alto’s 2021 retail energy sales.

The primary benefits of the Calpine project are: (1) the units are fully constructed and are already in operation—hence there is no project development risk; (2) geothermal resources are baseload generators, meaning they produce a nearly uniform level of energy on a 24-hour basis, which is a good match for the City’s load; and (3) the units provide local resource adequacy (RA) capacity, of which the City has a significant shortage. In addition, staff has determined that the contract price and value are very competitive with other renewable energy offerings in the market, and that this contract would provide a net value to the City (i.e., its total value would exceed the cost of the contract) of at least $13/MWh, which would be equivalent to over $550k/year during the first two years of the contract, and over $1.1 million/year during the remaining ten years.

BACKGROUND
SB 100 & Carbon Neutral Plan goals
As part of ongoing efforts to meet the City’s Carbon Neutral Plan requirements, as well as to comply with the state Renewable Portfolio Standard (RPS) mandate of providing at least 60% of sales from qualifying renewable resources by 2030, staff pursued a PPA opportunity presented by Calpine to NCPA. Calpine is offering to sell power from a geothermal 2 power plant, which qualifies as an in-state “Bucket 1” renewable resource under the state’s RPS requirements.

Existing RPS portfolio
Over the past three years, the City has had an average RPS level of 63% 3 and is projected to maintain a high percentage of its power from renewable resources well into the future. Figure 1 below shows Palo Alto’s projected RPS requirements along with the City’s existing supply 2 Geothermal power plants have a small amount of carbon emissions associated with their operations from the natural release of greenhouse gases from the geysers.
3 This value refers to the total renewable energy content of the City’s supply portfolio, including all of its in-state (“Bucket 1”) renewable resources and its unbundled, out-of-state (“Bucket 3”) renewable energy credits (RECs).

For state RPS reporting purposes, the volume of Bucket 3 RECs that can be counted is limited; under this more restrictive framework the City’s reported RPS level has averaged 31% over the last three years.

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resources. Starting in 2029, the City is projected to have a deficit relative to its RPS requirement level (depending on the amount of large hydroelectric output the City receives4).

Figure 1: Palo Alto’s Existing RPS Supplies and RPS Requirement Levels

ANALYSIS
The Market for Renewable Resources in California
The pricing and availability of renewable resources in California has evolved significantly over the past decade as state and federal policies have shifted the market landscape. While the trend over the last decade has been the declining cost of renewable PPAs, the last two years has seen increasing challenges to developing and building renewable projects resulting from material shortages, supply chain issues, inflation, labor shortages, and tariffs. Before 2020, the market would generally have been described as a buyer’s market, however, in the last two and a half years, this characterization has shifted to a seller’s market as there are more renewable buyers, increasing challenges to completing projects, and as a result PPA prices have risen from record lows.
4 Under the state’s RPS law, utilities that receive significant amounts of generation from certain large hydroelectric facilities are able to satisfy their RPS requirements with a lower RPS level than is required of other utilities. Such utilities are only required to achieve an RPS level equal to the difference between their total retail sales volume and the amount of generation they receive from qualifying large hydro facilities.

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While the downward trend in renewable energy pricing has reversed in the last couple of years, staff expects the generous subsidies included in the Inflation Reduction Act (IRA), which was signed into law August 16th, 2022, to eventually push renewable energy prices lower again. There are many details in the IRA that are being outlined by the Treasury Department, and the initial feedback from developers is that it is still too early to understand the net impact this law will have on Palo Alto’s renewable resource options. Ultimately staff expects the IRA to reduce the cost of renewables. However, the consensus view in the California market is that it will likely be several years before these cost reductions materialize, given the extent of the current supply- demand imbalance and the various development challenges.

While the market prices for intermittent renewable resources such as solar and wind, and energy storage systems have fluctuated in recent years, the price for baseload firm renewable resources such as geothermal energy has remained relatively steady. The price for energy from geothermal resources is relatively high, reflecting its higher cost of development and its higher value to the electrical grid.

Results of Palo Alto’s Renewable RFP (2022 RFP)
In May 2022, staff issued a Request for Proposals of new renewable and/or carbon-free generating resources and energy-storage resources. Staff’s evaluation of the four conforming project proposals (all of which were for solar resources) indicated that their “green premiums” (i.e. their net cost to the City – their total value less their total cost) ranged from $3/MWh to - $18 /MWh. In comparison, the Calpine geothermal project’s net cost is estimated at -$3/MWh (see below for more detail on this analysis). But in the course of reviewing the four responsive proposals, staff (1) became aware of efforts at the federal level to pass significant new clean energy legislation (in what became the IRA), and (2) learned about the Calpine geothermal project proposal. As a result of these two events, staff decided to reject the four conforming proposals received through this RFP.

Calpine Geothermal Project Summary
In May 2020, Calpine submitted a proposal to NCPA’s5 Renewables RFP for the sale of energy and associated attributes from Calpine’s 6 existing portfolio of geothermal projects located in The Geysers area of Northern California. At the time Calpine submitted its proposal, NCPA members were evaluating other lower-cost project proposals. But shortly thereafter, the price of renewable projects started to significantly increase, due to the confluence of factors noted above. So in September 2021, NCPA requested proposal updates from Calpine and the other RFP 5 NCPA is a not-for-profit Joint Powers Agency whose membership includes municipalities, a rural electric cooperative, and other publicly owned entities, including the City of Palo Alto. The mission of NCPA is to provide members cost effective wholesale power, energy-related services, and advocacy on behalf of public power consumers through joint action.
6 Calpine Corporation (Calpine) was founded in 1984 and, through its wholly-owned subsidiary GPC, is the largest owner of geothermal plants in The Geysers area in Northern California, with 725 MW of green energy capacity operating around the clock. The Geysers area is known as the world’s largest geothermal field spanning an area of 30 square miles in Sonoma, Lake, Mendocino, Marin, and Napa counties.

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respondents to see if their projects were still available and if there were any changes in price and/or terms initially offered. Section 2.30.340(d) of the City’s Municipal Code permits the City to procure wholesale utility commodities and services through public agencies, including NCPA.

After receiving the updated information, NCPA and member utility staff7 reviewed and analyzed the projects again and determined the geothermal output from Calpine would best diversify their renewable energy portfolios, aid them in achieving California RPS requirements, help meet their sustainability goals, and meet the needs of their expected load growth.

Over the course of 2022, NCPA staff led negotiation of a PPA with Calpine for renewable energy and RA from Calpine’s Geysers geothermal facilities on behalf of the interested NCPA members.

To enable NCPA to enter into the PPA with Calpine, participating NCPA members must execute a Third Phase Agreement with NCPA, which specifies the rights and obligations of NCPA and participating members regarding governance and administration of the PPA. The Third Phase Agreement also obligates the participating members to pay their assigned contract percentage share of all project costs (outlined in Exhibit A of the attached Third Phase Agreement), including but not limited to, administrative services costs, scheduling coordination costs, and all other costs related to the PPA.

Santa Clara, as the initial project participant, executed the Third Phase Agreement on December 23, 2022, which enabled NCPA to execute renewable energy and RA Agreements with Calpine for output from the Geysers geothermal facilities. As described in Exhibit A of the attached Third Phase Agreement, participating members become project participants by exercising their right to accept a transfer of a portion of the project participation percentage from Santa Clara by April 30, 2023.

In total, NCPA members have expressed interest in purchasing 100 MW of generating capacity from Calpine for a term of 12 years. Palo Alto requested up to 20 MW of this capacity, but given the demand from other NCPA members, has only been allocated 10 MW, with 5 MW starting in 2025, and 5 additional MW starting in 2027. This total geothermal capacity is expected to generate up to 876,000 MWh annually, of which Palo Alto would receive up to 87,600 MWh/year.

This project will increase and further diversify Palo Alto’s renewable energy portfolio in accordance with the City’s adopted Integrated Resource Plan and RPS Procurement Plan. The proposed 10 MW share of the Calpine geothermal output is equivalent to 10.6% of Palo Alto’s 2021 retail energy sales.

Due to increased demand for renewable energy generation resources, Calpine is limiting the amount of time it will reserve the quantity, price and terms of a PPA for prospective buyers.

Therefore, staff recommends authorizing the City Manager to enter into the aforementioned Third Phase Agreement with NCPA. The benefits of the Calpine project are: (1) the units are fully constructed and are already in operation; (2) geothermal resources are baseload generators, meaning they produce a nearly uniform level of energy on a 24-hour basis; and (3) the units 7 The City of Alameda, City of Biggs, City of Gridley, City of Lodi, City of Lompoc, Port of Oakland, and City of Santa Clara are all expected to sign onto the Third Phase Agreement to receive output from this project.

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provide local resource adequacy (RA) capacity, of which the City has a significant shortage. Unlike many other new renewable energy projects, this project doesn’t carry any development risk.

Economic Assessment of Calpine Geo Contract
The Calpine Geothermal PPA is expected to provide good value to CPAU customers while also reducing the supply portfolio’s seasonal energy and RA capacity deficits, thereby reducing budget uncertainty. The geothermal project provides three valuable products to the electric portfolio:
energy, resource adequacy, and renewable energy credits (RECs). If the sum of these three values is greater than the cost of the power purchase agreement, then the City will see a net monetary benefit from this contract.

The primary value provided by this PPA is from the baseload energy output that the geothermal resource produces. Based on forward energy curves as of December 12, 2022, the average value of this energy is $71.80/MWh between 2025 and 2030.8
In addition to the energy component, each MWh of geothermal generation qualifies as a “Bucket 1” renewable energy credit (REC), which historically has been valued between $12-$18/MWh.

Recently, Palo Alto sold surplus Bucket 1 RECs for as much as $25/MWh, and according to reports from independent brokers, the value of RECs has recently surged to over $40/MWh.

Finally, the geothermal plant capacity qualifies as local RA, which the City can count towards its annual local and system RA requirements. RA is typically transacted and priced on a $/kW-month basis and has ranged between $6/kW-month to $8/kW-month recently, which would translate to approximately $8 to $11/MWh for the geothermal project. Staff transacted for system RA at a price around $15/MWh in October 2022, well above historical RA prices. The increase in RA prices is driven by increasing system RA requirements and reduced qualifying capacity of solar resources, leading to a market shortage of RA in high load summer months.

These benefits of the geothermal PPA in aggregate are estimated to range between $92 to $101/MWh against a PPA price of $79/MWh.

With each of these revenue streams, there is a large degree of uncertainty around what will happen to future prices from changes to macro-economic conditions, regulations, interdependent regional power markets, and overall market uncertainty. That said, forward pricing curves project off-peak power prices to become more valuable than on-peak prices within the next few years, and proposed changes to the RA market rules would reward generators that produce in times of the grid’s greatest need. Furthermore, under the state’s RPS legislation, all load serving entities are required to increase their share of renewable energy in their portfolios (to 60% by 2030), so there is increasing demand for RECs. All of these trends support the expected long-term value of the geothermal project, given its ability to generate renewable energy around 8 Note that all energy prices in California have increased sharply over the past two years, not just those of renewable energy projects: Two years ago, forward energy curves pegged the value of this product at $33/MWh, and even three months ago its value was projected to be just $54/MWh.

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the clock. The geothermal project’s inability to reduce output during the sunshine hours will expose it to some lower prices, but these downsides are expected to be offset by the other trends mentioned. Staff conservatively estimates the geothermal project will provide a net benefit of at least $3/MWh9, with the potential for significant upside if market prices stay high and there are further challenges to bringing new resources onto the grid in the coming 5-10 years.

Risk Management Assessment
Given this project is an existing power plant, there is no development risk, and instead only operational risk. There are some unique operational risks to running a geothermal power plant, but NCPA, which owns and manages an existing geothermal plant nearby, has confidence in Calpine’s history of managing their steam fields and the plant’s ability to reliably produce power over the term of the agreement.

In general, businesses in the renewable industry lack extensive financial and operational track records, and because of the capital-intensive nature of these projects, they tend to be highly leveraged as well. In contrast to most of the City’s renewable energy suppliers, Geysers Power Company, LLC (the wholly-owned subsidiary of Calpine that controls its geothermal assets) is an investment-grade company (BBB/stable credit rating), as determined by Kroll Bond Rating Agency, a nationally recognized statistical rating organization, approved by the Securities and Exchange Commission. While Calpine has a higher projected default rate than the City’s other (non-renewable) electric and gas suppliers, Calpine does have an excellent track record of operating a large portfolio of geothermal projects in the Geysers area over many years. And the output for this project will come from a collection of Calpine’s resources in this area, so even if there are problems with one or two resources there is very little risk that the City will not receive the contracted volumes of output. To further mitigate this risk, in the event of a credit downgrade event, Calpine will provide collateral (in the form of cash or a letter of credit), in the amount of $2.5 million for the first two years of the contract and $5.0 million for the remainder of the contract, which would protect the City and the other PPA offtakers in a scenario where the facilities are unable to produce the contracted output and the market price of the replacement renewable power is higher than the price of the Calpine PPA. And perhaps most importantly, under the terms of the proposed PPA the City is not at risk for paying for output that is not delivered. As with all of the City’s PPAs, the City will make no payments under the PPA until energy from the project is delivered.

Palo Alto’s Energy Portfolio with Calpine Geo
Under the City’s Energy Risk Management Procedures, staff regularly develops procurement plans for the prompt 36-month period to mitigate the City’s market price exposure. Given the supply portfolio’s heavy concentration of hydroelectric and solar resources, these procurement plans typically result in staff buying market energy in the fall/winter months and selling surplus 9 The conservative net value estimate of $3/MWh is based on the lower-end estimates of the value of the project’s RPS and RA products ($12/MWh and $8/MWh, respectively) and an energy value of $62/MWh instead of $71.80/MWh. The lower energy value estimate is equivalent to the energy value estimate of a few months ago, before the recent run-up in power and gas market prices.

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energy during the spring/summer months. Furthermore, within any given day, the supply portfolio is routinely short during off-peak (nighttime) and long during on-peak (daytime) periods. This PPA would reduce the need for market purchases and increase the opportunity for market sales in the spring and summer months, depending on the level of output from the City’s hydroelectric resources.

The existing supply portfolio10 is projected to have an overall surplus position from 2025 through 2028 even without entering an agreement for the geothermal project, as shown in Figure 2 below. The load forecast shown in Figure 2 is based on the mid-range scenario presented at the December 2022 UAC meeting, which includes modest load growth from data centers, electric vehicles, and building electrification. The hydro generation estimates are based on long term historical averages, which have been significantly higher than actual generation in the last few years during the drought. However, as noted in the December UAC meeting discussion, there is significant uncertainty around both the load and hydro generation projections shown here. Staff recently learned about commercial development plans that could result in significantly greater data center load within the next few years; meanwhile, the impacts of climate change are likely to significantly reduce the long-term level of hydro generation. Combined, these two factors could flip the portfolio’s overall surplus positions of the next few years to deficit positions.—In light of this uncertainty, staff recommends waiving the anti-speculation requirement of the City’s Energy Risk Management Policy for this agreement.
10 All six of the City’s solar PPA extend to 2040 or later, while the landfill gas PPAs expire between 2026 and 2034.

The City has one remaining wind PPA which expires in June 2028. Furthermore, the City can renew the Western Base Resource contract for a new 30-year term that would start in 2025, and for planning purposes it is currently included in the supply portfolio baseline assumptions. Lastly, the City owns its share of the Calaveras project and it is therefore expected to remain in the portfolio indefinitely.

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Figure 2: Projected Annual Load-Resource Balance, 2025-2045

While the supply portfolio, on average, has an overall surplus position in any given year, the portfolio is short during the 1 st and 4 th quarters of the calendar year given the seasonal generation from hydro and solar. Additionally, the portfolio is generally short during the non- solar (off-peak) hours. Monthly and daily load resource balance charts are shown in Attachments B and C. The geothermal project is a baseload power plant that produces electricity evenly across the day and year. Given the portfolio is currently projected to have surplus positions during the first few years of the geothermal PPA as shown above, staff is currently monitoring the City’s actual load levels closely and will evaluate whether to sell solar energy during the 2 nd and 3 rd quarters (an amount equal to the total purchase amount from the Calpine project) to hedge being overly long on energy, while also improving the daily load-resource balance. Figure 3 below shows a monthly load-resource balance for the City’s portfolio with both the Calpine purchase and solar energy sales included. This would balance the portfolio supply and demand more evenly across the seasons within any given year. While the City’s risk management policies don’t prescribe a specific load-resource balance level, staff tries to minimize the portfolio’s overall exposure to the market in either direction to mitigate large supply cost fluctuations from market pricing volatility.

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Figure 3: Monthly Load-Resource Balance with Geothermal Energy Purchase and Q2/Q3 Solar Energy Sale Included
Palo Alto’s Resource Adequacy Portfolio with Calpine Geo Resource adequacy (RA) is another market that the City is required to participate in as a load serving entity in the California Independent System Operator (CAISO) balancing authority. The CAISO RA requirements dictate required levels of generating capacity the City must own or procure to meet local, system, and flexible resource requirements on an annual and monthly basis. Currently, staff manages the City’s RA requirements by utilizing its own resources, participating in NCPA’s Capacity Pool Program, and through bilateral transactions with other market participants.

The geothermal plant would qualify as local RA for the City, and it would also count towards the City’s system RA requirements. As Figures 4 and 5 below indicate, the City has local RA deficits of approximately 50-80 MW per month, but surpluses of system RA that average approximately 80 Item 5
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MW. This PPA would reduce the city’s Local RA deficit by 10 MW and would increase the System RA surplus by an equivalent amount.11
Figure 4: Annual Average Local RA Balance Forecast, 2025-2036 11 While the City would retain the geothermal capacity in its own portfolio to help satisfy its local RA requirements, the addition of this contract would free up capacity from other resources (which do not qualify as local RA) that the City could sell to generate additional revenue and reduce its system RA surplus positions.

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Figure 5: Annual Average System RA Balance Forecast, 2025-2036 Palo Alto’s RPS Portfolio with Calpine Geo
The PPA will also increase the City’s share of power being generated by renewable resources, as required by the state’s RPS regulations. The City is already on track to meet state RPS targets without the geothermal PPA, so this is not a driving factor for this deal, but it would further increase the amount of Bucket 1 RECs the City is able to swap for lower-cost Bucket 3 RECs through its REC Exchange Program. (The profits earned through the REC Exchange Program are earmarked toward local decarbonization initiatives, so this contract would help the City’s overall sustainability efforts.) In addition, increasing the City’s RPS level provides further flexibility in the future if the City pursues a smaller share of the Western Base Resource contract.

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Figure 6: Palo Alto’s Existing RPS Supplies and RPS Requirement Levels, with the Calpine Project

NEXT STEPS
The NPCA Commission approved Purchase Agreements Between Geysers Power Company, LLC and Northern California Power Agency, and the Third Phase Agreement for Purchase Agreements with Geysers Power Company, LLC at its December 1, 2022 meeting. Since then, NCPA, with input from attorneys representing participating members, completed PPA negotiations with Calpine.

Santa Clara has executed the Third Phase Agreement with NCPA, and as the initial project participant has been allocated the full PPA output. Once Palo Alto and other participating members obtain their governing board approvals and execute the Third Phase Agreement as well, Santa Clara will assign shares of the PPA’s energy, RECs and RA capacity to participating members, adding those members to the Third Phase Agreement between NCPA and Santa Clara. Santa Clara has asked all participating members to execute the Third Phase Agreement by the end of April 2023.

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FISCAL/RESOURCE IMPACT
If Council approves the execution of this Third Phase Agreement with NCPA, the City will purchase up to 87,600 MWh/year for a total not-to-exceed amount of $6.93 million/year during the 12- year contract term (2025-2036), up to $76.2 million. Funding for the purchase of the renewable energy will be included in the Electric Utility Fund budget beginning in FY 2025.

POLICY IMPACT
Approval of the proposed Third Phase Agreement is in conformance with the City’s Sustainability and Climate Action Plan (S/CAP), Integrated Resource Plan, Carbon Neutral Plan, and RPS Procurement Plan, specifically the City’s Renewable Portfolio Standard to meet at least 60% of the City’s electric sales from renewable energy.

STAKEHOLDER ENGAGEMENT
The UAC reviewed staff’s recommendation to recommend approval of the Third Phase Agreement with NCPA at its meeting on February 1, 2023 12. At that meeting, staff provided background on the Calpine geothermal project, the market for renewable energy in California, and the impact that the Calpine contract would have on the City’s electric supply portfolio. The UAC expressed strong approval for the Calpine contract, voting 7-0 to support staff’s recommendation. The UAC also encouraged staff to seek out additional opportunities to contract for new baseload renewable resources.

The Finance Committee reviewed the UAC’s and staff’s recommendation to approve the Third Phase Agreement with NCPA at its meeting on March 21, 2023. At that meeting the Committee asked several questions about the Calpine contract, the City’s RA requirements, and staff’s load projections. Ultimately the Committee enthusiastically agreed with the UAC’s and staff’s recommendation to support this contract and voted 3-0 to recommend that the City Council approve the Third Phase Agreement with NCPA.

ENVIRONMENTAL REVIEW
The Council’s approval of the Third Phase Agreement to purchase power generated by existing geothermal generating facilities does not constitute a “project” within the meaning of the California Environmental Quality Act (CEQA) under CEQA Guidelines sections 15378(a) and (b), because there is no potential for approval of this agreement to result in a physical change in the environment, and because this is an administrative governmental activity that will not result in a physical change in the environment. These facilities already underwent CEQA review, and no subsequent or supplemental environmental review will be required as (1) there are no substantial changes to these facilities which will require major revisions of any applicable environmental impact report; (2) there are no substantial changes that will occur with respect to the circumstances under which the facilities are being undertaken which will require major revisions in any applicable environmental impact report; and (3) no new information, which was 12 UAC Meeting Minutes, 2/1/2023: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-15051-uac-excerpt.pdf Item 5
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not known and could not have been known at the time the applicable environmental impact reports were certified as complete, has become available with respect to these facilities.

APPROVED BY:

Dean Batchelor, Director Utilities
Staff: James Stack, PhD
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: April 17, 2023
Report #:2303-1129
TITLE
Stanford University Medical Center (SUMC) Annual Report to Council for Fiscal Year 2021-2022

RECOMMENDATION
Staff recommends that the City Council:

1. Review the Stanford University Medical Center (SUMC) Annual Report for Fiscal Year 2021-2022, and find that Stanford Hospitals & Clinics, Lucile Packard Children’s Hospital, and Stanford University (SUMC Parties) have complied in good faith with the terms and conditions of the SUMC Development Agreement;

2. Find that the SUMC Parties are not in default with the terms and conditions of the Agreement in all sections, with the exception of alternative mode share targets, for which the SUMC Parties have claimed a permitted delay due to the effects of the COVID- 19 Pandemic; and

3. Accept the City of Palo Alto’s (City) Annual Report Supplements regarding the funds received from the SUMC Parties, as required under Section 12(d) of the Development Agreement (Attachment E).

EXECUTIVE SUMMARY
The City Council is required to review the SUMC Development Agreement (the “Agreement”) to confirm compliance with the Agreement’s terms. The Agreement is between Stanford Hospital and Clinics, Lucile Packard Children’s Hospital, Stanford University (SUMC Parties), and the City of Palo Alto. The City also uses this Annual Report to Council to provide information on the City’s compliance obligations, such as providing the required summary and description of how the City expended funds provided by SUMC per the Agreement.

As documented in this Annual Report to Council, both SUMC and the City are in compliance with the terms of the Agreement for the reporting period Fiscal Year 2021-2022, with the exception of alternative mode share targets. In regard to the achievement of the alternative mode share Item 6
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milestone target, SUMC was not able to meet the specific target outlined in the Agreement. This was due to the effect of the COVID-19 pandemic on SUMC employee use of alternative transportation modes, such as Caltrain and other public transit systems. As received by the City on June 14, 2022, the SUMC Parties asserted a permitted delay under the Force Majeure provision of the Agreement. The SUMC Parties and City staff are actively engaged in discussing an amendment to the Agreement to address this issue.

BACKGROUND
On June 6, 2011, the Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation, and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of the new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital (LPCH), construction of new School of Medicine (SOM) buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. The Development Agreement vesting these approvals became effective on June 6, 2011, and continues for thirty (30) years from the effective date.

This report covers activities by the SUMC Parties for Fiscal Year 2021-2022, which is the eleventh year of the Agreement. The annual report prepared for Fiscal Year 2020-2021 found the SUMC parties to be in compliance with the Agreement. 1 Previous annual reports and compliance documentation can be found via the weblinks in Attachment B.

ANALYSIS
Agreement Section 12, “Periodic Review of Compliance,” requires City Council to confirm SUMC Parties’ compliance with the terms of the Agreement. Discussion items in this report are intended to guide City Council through the many aspects that SUMC and City staff monitor and track throughout the year to ensure compliance.

The SUMC Annual Report for FY 2021-2022 (Attachment A) describes the activities related to Agreement implementation and ongoing annual progress toward meeting the following obligations in Section 5 of the Agreement, “SUMC Parties’ Promises:” Health Care Benefits;
Fiscal Benefits;
Traffic Mitigation and Reduced Vehicle Trips;
Linkages (Pedestrian, Bicycle, and Transit);
Infrastructure, Sustainable Neighborhoods & Communities, Affordable Housing; and 1 City Council Report, 03/21/22 (SUMC Annual Report Fiscal Year 2020-2021):
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/2022/20220321/20220321pccsm-amended-linked-revised.pdf Item 6
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Climate Change.

Staff prepared a summary of the Section 5 obligations and the staff-confirmed compliance status (Attachment C).

Agreement Section 12 also includes the requirement for demonstration of good faith compliance with the Agreement. Toward this end, SUMC has timely submitted all the reports required of the SUMC Parties for Fiscal Year 2021-2022.

Construction Activities and Net New Square Footage
SUMC discusses their construction activities for Fiscal Year 2021-2022 in their SUMC Annual Report (Attachment A). A summary of construction activities and tracking of square footage demolished and added can be found in Attachment D.

SUMC did not add any net new square footage in FY 2021-2022 but continued to remove occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use provides a temporary option to prevent exceedance of the total occupied square footage allowed in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new building square footage. This provision is important for ensuring that SUMC can maintain existing operations while also efficiently transferring new uses, equipment, and operations over to the new facilities.

City staff reviewed the information regarding SUMC net new square footage in the report and determined this information is complete and correct.

Traffic Mitigation and Reduced Vehicle Trips
SUMC implemented all required transportation demand management (TDM) obligations in FY 2021-2022, such as purchasing of Caltrain Go Passes, funding for the AC Transit U-Line, and other activities. Summaries of these activities can be found in Attachments A and C.

Alternative Mode Share Milestone Targets
SUMC achieved their 2021 alternative mode share milestone target of 33% for employee trips early and every year between 2013 and 2019. The alternative mode share rate was 38.1% in FY 2018 and 33.8% in FY 2019. The SUMC Parties maintained all TDM requirements in FY 2020 until Santa Clara County issued COVID-19 pandemic shelter-in-place orders in March 2020. On March 27, 2020, the City conditionally approved a one-year delay in the submittal of two reports; the FY 2020 Alternative Mode Share Report and Mitigation Measure TR 2.3 Enhanced Stanford University TDM Program report. Conditional approval of this delay was consistent with the procedures in Section 6(p) of the Agreement and no additional environmental review was required.

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In Fiscal Year 2020-2021, the SUMC parties found that the alternative mode share milestone target of 33% outlined in Agreement Section 5(c)(ix) was not met for 2021, nor was it above the previous 2018 milestone target of 30%. The alternative mode share rate for SUMC decreased to

28.8% between use of alternative modes versus driving alone, largely due to ongoing pandemic conditions. SUMC identified that the share of Caltrain riders dropped most significantly (-6.5%), followed by the carpools (-2.6%), and other forms of transit (-3%). SUMC observed modest increases in other alternative transportation modes, including in remote work and bicycling, but these increases were not sufficient to offset the decrease in transit usage and carpools.

In Fiscal Year 2021-2022, despite continuing to implement all TDM programs, as well as enhancing communications and promotions, the SUMC parties found that the alternative mode share milestone target of 33% was again not met. It had decreased to 19.9% from 28.8% in the previous year.

Under Agreement Section 5(c)(ix) Monitoring of TDM Programs, missing the alternative mode share milestone target for two consecutive years, FY 2020-2021 and FY 2021-2022, would require SUMC to provide a $175,000 payment to the City for alternative transportation funding. The City would need to use the payment to support local projects and programs that encourage use of alternative transportation modes or otherwise reduce peak period traffic trips in the intersections impacted by the project.

After submitting the FY 2021-2022 Alternative Mode Share report, SUMC sent the City a Notice of Intent to claim a permitted delay as outlined in the Development Agreement Section 18(c) Force Majeure. SUMC subsequently filed a Development Agreement Amendment application that proposes adjusted dates for achieving alternative mode share milestone target dates to account for the effect of the COVID-19 pandemic on SUMC employee use of alternative transportation modes. The Amendment application is currently under review and will be agendized for City Council consideration later this year. In the meantime, the City deferred any action to collect the $175,000 payment.

Construction Sales and Use Tax Monitoring Report
SUMC submitted the annual Construction Sales & Use Tax Monitoring Report on June 30, 2022 (fiscal year report). The City sent its required response. Based upon the City’s review of the annual Construction Sales and Use Tax Monitoring Report, revenues for calendar years 2011 through 2021 have totaled $5,405,338. This annual reporting assists in the process of ensuring that the City would receive no less than $8.1M in construction sales and use tax revenue by December 31, 2025.

Supplement to the Annual Report
Section 12 of the Agreement requires the City to prepare a Supplement to the Annual Report.

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balances, and a summary and description of expenditures from the funds for each Fiscal Year (Attachment E). Section 12 mentions preparation of the Supplement within 45-days of the June and July receipt of the annual reports by SUMC, but there is no penalty for not doing so; after the close of the Fiscal Year, the City conducts an annual audit of the funds in Fall/Winter to demonstrate good faith in implementing the Agreement.

The SUMC Parties have already paid the City approximately $44.3 million in public benefit fees since June 6, 2011 through the FY 2021-2022 reporting period. This sum includes the approximately $11.7 million third and final payment by SUMC during the FY 2017-2018 reporting period.

Regarding fund usage during the Fiscal Year 2021-2022 reporting period, the City authorized transfers for the following:
$500,000 under “Expansion Cost Mitigation” for Rail Grade Separation (PL-17001); $775,000 under “Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing” for $750,000 replacement of Fire Station Four (PE-18004) and $25,000 University Avenue Streetscape Update (PE-21004); and $1,250,000 under “Community Health and Safety” for $1.2 million Charleston/Arastradero Corridor Project (PE-13011) and $50,000 to the General Fund allocated to local non-profits through the Human Services Resource Allocation Process (HSRAP).

Use of Development Agreement Funds
The funds received by the City through the Agreement represent funding for Operations and a significant portion of funding for implementation of the City’s Capital Infrastructure Plan.

For additional information about the recent past, current, and future use of Agreement funds, please refer to the following:
Fiscal Year 2022 Adopted Operating Budget document, Special Revenue Funds section; Fiscal Year 2022 Adopted Capital Improvement Budget document; City Council Report 13609 February 28, 2022 Design Services for the University Avenue Streetscape Update Capital Improvement Project, including amendments to the FY 2022 Capital Improvement Plan;
Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section; and the
Fiscal Year 2023 Capital Improvement Budget document. 2 2 Fiscal Year 2022 Adopted Operating Budget document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy-2022-city- budget/adopted-budgets/operating-budget_web.pdf.

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The SUMC agreement Section 5(a)(iii) requires that a joint committee make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council may use reasonable discretion to accept, reject, or modify these recommendations. The joint committee includes SUMC representatives and City staff from the Office of Transportation, Administrative Services, and Public Works departments. Projects using Community Health and Safety funds for the Fiscal Year 2021-2022 reporting period have gained mutual support from members of the joint committee and approval from the City Council.

FISCAL/RESOURCE IMPACT
There are no impacts to the City’s budget resulting from this review of the SUMC Annual Reports for Fiscal Year 2021-2022. As stated above, the SUMC Parties have already paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2021-2022 reporting period. Future fund contributions are not anticipated.

As discussed earlier in this report, the City deferred collection of the $175,000 payment for alternative transportation funding, pending City Council action on the SUMC Development Agreement Amendment application. No staff analysis has been completed at this time regarding the potential use of this payment.

STAKEHOLDER ENGAGEMENT
Staff did not perform specific community outreach related to preparation of this annual report.

Community members and policy makers were extensively involved in the crafting of the Agreement and all other associated project enabling entitlements. Also, subsequent related project entitlements continue to be processed through the City’s standard review processes, as discussed in the Development Agreement and other entitlements.

ENVIRONMENTAL REVIEW
Reviewing and making findings regarding SUMC and City compliance with the Agreement is not a project under the California Environmental Quality Act and no environmental assessment is Fiscal Year 2022 Adopted Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy-2022-city- budget/adopted-budgets/capital-budget-book-web.pdf.

City Council Report 13609 February 28, 2022 Design Services for the University Avenue Streetscape Update Capital Improvement Project, including amendments to the FY 2022 Capital Improvement Plan:
https://www.cityofpaloalto.org/City-Hall/City-Council/Council-Agendas-Minutes.

Fiscal Year 2023 Adopted Operating Budget Document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy2023-city- budget/adopted-fy23/operating-budget_final-4.pdf.

Fiscal Year 2023 Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy2023-city- budget/adopted-fy23/capital-budget_final-4-online-version.pdf.

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required for the annual compliance review. An environmental impact report for the entire SUMC project was prepared and certified by the City Council prior to approval of the Agreement.

ATTACHMENTS
Attachment A: Fiscal Year 2021-2022 SUMC Annual Report
Attachment B: Weblinks to Prior SUMC Annual Reports
Attachment C: SUMC Development Agreement Section 5 Compliance Table Attachment D: SUMC Construction Activities and Square Footage Summary Attachment E: Supplement to the Annual Report
APPROVED BY:

Jonathan Lait, Planning and Development Services Director Item 6
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PREPARED FOR THE CITY OF PALO ALTO | JULY 6, 2022
2021-22 ANNUAL REPORT
Image Courtesy of Nearmap US Inc, June 2022
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CONTENTS
EXECUTIVE SUMMARY 1
BACKGROUND AND PURPOSE 2
2021-2022 SUMMARY OF PROGRESS 3
LUCILE PACKARD CHILDREN’S HOSPITAL 3
STANFORD HEAL TH CARE 4
SCHOOL OF MEDICINE 5
BLAKE WILBUR DRIVE ROADWAY EXTENSION 6
NET NEW SQUARE FOOTAGE 6
COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS 7
HEAL TH CARE BENEFITS 7
SECTION 5(A)(II). FUND FOR HEALTHCARE SERVICES 7
SECTION 5(A)(III). FUND FOR COMMUNITY HEALTH AND SAFETY PROGRAMS 7 PALO AL TO FISCAL BENEFITS 7
SECTIONS 5(B)(I) AND 5(B)(II). PAYMENT OF SALES AND USE TAXES 8 SECTION 5(B)(III). FUNDING OF OPERATING DEFICIT 8
SECTION 5(B)(IV). PAYMENT OF UTILITY USER TAX 8
SECTION 5(B)(V). SCHOOL FEES 9
TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS 9
SECTION 5(C)(II). MENLO PARK TRAFFIC MITIGATION 9
SECTION 5(C)(III). EAST PALO ALTO VOLUNTARY MITIGATION 9 SECTION 5(C)(IV). CONTRIBUTIONS TO AC TRANSIT 9
SECTION 5(C)(V). OPTICOM PAYMENTS 10
SECTION 5(C)(VI). CALTRAIN GO PASSES 10
SECTION 5(C)(VII). MARGUERITE SHUTTLE SERVICE 10
SECTION 5(C)(VIII). TRANSPORTATION DEMAND MANAGEMENT COORDINATOR 11 SECTION 5(C)(IX). MONITORING OF TDM PROGRAMS 11
LINKAGES 12
SECTION 5(D)(I). INTERMODAL TRANSIT FUND 12
SECTION 5(D)(II). QUARRY ROAD FUND 13
SECTION 5(D)(III). STANFORD BARN CONNECTION 13
INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFORDABLE HOUSING 13 SECTION 5(E). 13
CLIMATE CHANGE 14
SECTION 5(F). CLIMATE CHANGE FUND 14
SATISFACTION OF CONDITIONS OF APPROVAL 14
SECTION 5(H). SATISFACTION OF ALL CONDITIONS OF APPROVAL 14 CONCLUSION 15
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ANNUAL REPORT 2021-22 1

EXECUTIVE SUMMARY
On June 6, 2011, the Stanford University Medical Center parties (now Stanford Medicine)—comprised of Stanford Hospital and Clinics (now Stanford Health Care), Lucile Packard Children’s Hospital, and Stanford University—entered into a Development Agreement with the City of Palo Alto, committing to provide a range of community benefits in exchange for vested development rights to develop and use the Stanford Medicine Renewal and Replacement Project (“Renewal Project”) facilities in accordance with the approvals granted by the City, and a streamlined process for obtaining subsequent project approvals.

The Renewal Project—driven by a growing demand for healthcare services, state-mandated seismic safety requirements, and the need to replace outmoded facilities with modern, technologically advanced spaces—is transforming the way that healthcare is delivered and research is conducted.

Today, eleven years after the execution of the Development Agreement, the Lucile Packard Children’s Hospital Expansion and the new Stanford Hospital are now open for patient care, and the School of Medicine has completed the first phase of development of its replacement facilities, with its BioMedical Innovations building open for research. Interior renovations within the 1989 portion of the preexisting Stanford Hospital facility have now commenced, and are expected to continue for the next several years, bringing the facility up to modern healthcare standards.

Against this backdrop, Stanford Medicine submits its Annual Report in compliance with Section 12(c) of the Development Agreement, and looks forward to continued collaboration with the City of Palo Alto in advancing the goals of both Stanford Medicine and the broader community.

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2 ANNUAL REPORT 2021-22

BACKGROUND AND PURPOSE
The Palo Alto City Council’s unanimous approval of the entitlements for the Stanford Medicine Renewal and Replacement Project in July 2011 has paved the way for a historic investment in new and replacement facilities for Stanford Medicine. The project approvals—including new zoning for the Renewal Project sites, a conditional use permit, architectural review approval, and the execution of a Development Agreement—allow for the construction of approximately 1.3 million net new square feet of hospital facilities, clinics, medical offices, and medical research spaces, and are enabling the Hospitals to optimize the delivery of healthcare services to patients, and maintain their position as leading providers of world-class healthcare.

In order to facilitate this important replacement and expansion work, the Stanford Medicine parties entered into a Development Agreement with the City of Palo Alto, which includes a comprehensive package of community benefits and additional development conditions. In exchange for these benefits, the City has vested for a period of 30 years Stanford Medicine’s rights to develop and use the property in accordance with the project approvals, and agreed to streamline the process for obtaining subsequent approvals.

The terms of the Development Agreement (Section 12(c)) provide for a periodic review of compliance, and require that Stanford Medicine submit an Annual Report to the City of Palo Alto’s Director of Planning and Community Environment each year within 30 days of the anniversary of the agreement effective date (June 6, 2011). The Annual Report is to summarize Stanford Medicine’s progress on the Renewal Project, including a list of net new square footage for which a certificate of occupancy has been received, and a description of the steps that Stanford Medicine has taken to comply with the obligations listed in Section 5 of the Development Agreement. With this report, Stanford Medicine fulfills these requirements.

Within 45 days of receipt of this Annual Report, the City will prepare a Supplement to the Annual Report, to provide an accounting of the City’s balances and expenditures from each of the City Funds and how they were used.

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ANNUAL REPORT 2021-22 3
2021-2022 SUMMARY OF PROGRESS
The Renewal Project has reached key milestones in recent years, with the opening of the Lucile Packard Children’s Hospital expansion in 2017 and the opening of the New Stanford Hospital in 2019, and most recently the opening of the School of Medicine’s BioMedical Innovations building in 2020 1 . While the
COVID-19 pandemic changed the pace of progress on the Renewal Project, as Stanford Medicine focused resources on pandemic response, including launching clinical trials for therapeutic treatments for COVID-19 and establishing community testing and vaccination sites, it has also highlighted the importance of modern, state-of-the-art facilities to support Stanford Medicine’s research and patient care.

The section to follow provides an overview of central goals for the project elements that presently are under construction or nearing construction, a synopsis of progress to date, as well as a preview of near- term upcoming activities.

LUCILE PACKARD CHILDREN’S HOSPITAL
In response to growing community needs for specialized pediatric and obstetric care, Lucile Packard Children’s Hospital opened an expanded facility in late 2017. The new Main building, located adjacent to the preexisting Lucile Packard Children’s Hospital (West building), provides patients and doctors with the most modern clinical advancements and technology, while also creating a more patient- and family- centered environment of care, with additional single-patient rooms and more spaces for families to be with their child during treatment and recovery.
1 Temporary certificate of occupancy was issued in 2020; final certificate of occupancy was issued in 2021.

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4 ANNUAL REPORT 2021-22
The LPCH Main building features a new entrance lobby, public concourse with dining, three floors of nursing units, and new patient rooms. Spaces have been designed with an attention to natural light and views, and the exterior grounds—more than 3.5 acres of outdoor areas and gardens—provide a park-like setting for patients, families, and visitors.

LPCH is currently planning for improvements to its preexisting West building which will modernize its infrastructure and provide a more comfortable patient experience. These improvements include a redesigned main lobby entry and drop-off for the West Building; plans are anticipated to be formally submitted to the City for Architectural Review in Summer 2022.

STANFORD HEALTH CARE
Stanford Health Care is constructing new and replacement hospital facilities to usher in a new era of advanced patient care. Growth in patient volumes and rapidly changing medical technology have rendered much of the existing midcentury hospital infrastructure inadequate, while new seismic safety requirements have accelerated the need to construct replacement facilities.

In November 2019, Stanford Health Care’s first phase of facilities renewal completed as the New Stanford Hospital received its license from the State Department of Public Health and opened to patient care. With the new Stanford Hospital now complete, Stanford Health Care has begun a series of renovations within its preexisting facilities, including the conversion of shared patient rooms into private rooms within the 1989 portion of the Hospital; this renovation work is planned to proceed in phases over the next several 2021-2022 SUMMARY OF PROGRESS
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ANNUAL REPORT 2021-22 5
years. In addition, to continue to maintain its current 600-bed count upon conversion of existing shared patient rooms to private rooms, Stanford Health Care is also planning an addition to the preexisting Hospital of approximately 37,000 square feet. This proposed addition received Architectural Review approval in March 2022, and a City grading / excavation permit was issued in June 2022. Grading activity is expected to commence in Summer 2022

SCHOOL OF MEDICINE
The Stanford University School of Medicine is replacing its outmoded research buildings with new state-of-the-art facilities designed to support contemporary translational research. The new facilities will accommodate 21st century medical advancements and enable the development of new medical innovations, featuring integrated laboratory suites, with easier access between labs and support facilities, enabling transparency, flexibility, and collaboration.

The first phase of School of Medicine development (BioMedical Innovations Building 1, or “BMI-1”) is now complete, having received a certificate of occupancy in Spring 2021, and features four above-grade floors of research labs and light-filled gathering places, and a lower basement level for utility support, as well as a connective tunnel to other nearby research facilities. Building interiors were designed for best practices for laboratory design safety and space allocation, with a flexible template to maximize efficient use of space and ease of renovation. The four above-grade floors provide space for a mix of disciplines, basic and clinical research, wet and dry labs, and leading-edge translational studies. 2021-2022 SUMMARY OF PROGRESS
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2021-2022 SUMMARY OF PROGRESS

BLAKE WILBUR DRIVE ROADWAY EXTENSION
As required by the 2011 Project Approvals, a new link roadway will be constructed between Sand Hill Road and Welch Road; this roadway will connect Durand Way to Blake Wilbur Drive, and will provide an important automobile, bicycle, and pedestrian connection in the vicinity of the Medical Center.

Specifically, it will serve as an uncongested route for emergency vehicles accessing the medical campus via Sand Hill Road, and will provide improved access to both the Main Medical Campus and the outer Welch medical office buildings. The scope includes two travel lanes in each direction, Class II bicycle lanes, sidewalks with planter strips including new tree plantings and bioretention areas, new signal poles, and underground utilities. The roadway design was approved at the schematic level by the Architectural Review Board in 2011, but design development and construction were not immediately able to advance as the impacted site was under third-party lease until 2020. Design work resumed in 2020, and staff- level Architectural Review approval for the roadway improvements was issued in late 2021. Construction activities are anticipated to commence in 2022, pending permit issuance.

NET NEW SQUARE FOOTAGE
The following table summarizes the net new square footage for which a certificate of occupancy has been issued.

PROJECT COMPONENT GROSS SQUARE

FOOTAGE

STANFORD HEALTH CARE
1101 Welch demolished (40,100)
500 Pasteur 719,261
Total 679,161
LUCILE PACKARD CHILDREN’S HOSPITAL EXPANSION
701 Welch demolished (56,300)
703 Welch demolished (23,500)
Lucile Packard Children’s Hospital Expansion 446,088
Total 366,288

SCHOOL OF MEDICINE
BioMedical Innovations building 196,921
Partial decant of 1959 Stone Complex (18,472)
Total 178,449

HOOVER PAVILION
Miscellaneous shops and storage demolished (13,831)
Stanford Neuroscience Health Center (Hoover MOB) 91,605 Total 77,774
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COMPLIANCE WITH DEVELOPMENT AGREEMENT OBLIGATIONS
This section of the Annual Report summarizes the steps that Stanford Medicine has taken to comply with its obligations under Section 5 of the Development Agreement.

HEALTH CARE BENEFITS
In addition to the health care funds listed below, Stanford Medicine provides certain intrinsic benefits to the community, as both a global leader in medical care and research, and as a community healthcare services provider. The Renewal Project enables Stanford Medicine to continue its important work, and the addition of more beds for adults and children will help to alleviate overcrowding. Additionally, the new hospital facilities provide critical emergency preparedness and response resources for the community in the event of an earthquake, pandemic, or other major disaster.

Section 5(a)(ii). Fund for Healthcare Services
The Hospitals have designated the amount of $3 million for Healthcare Services, which will increase to $5.6 million by December 31, 2025. No further action is required until 2026. This amount will be reconciled with the construction use tax payments as described in Development Agreement Section 5(b) (ii)(C), and will be spent between 2026 and 2036.

Section 5(a)(iii). Fund for Community Health and Safety Programs Stanford Medicine has contributed a single lump-sum payment of $4 million to establish a Community Health and Safety Program Fund for the City of Palo Alto. This fund is to be distributed to selected community health programs that benefit residents of the City, including the Project Safety Net Program, a community-based mental health plan for youth well-being in Palo Alto. A joint committee is to be established to evaluate proposals regarding the other specific programs to receive funding, composed of two representatives selected by Stanford Medicine and two representatives selected by the City; this committee shall make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council shall use its reasonable discretion to decide whether to accept, reject, or modify the joint committee recommendations.

Stanford Medicine provided the entire required contribution to the Community Health and Safety Program Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision, though Stanford Medicine has recently engaged with City staff to establish the joint committee to evaluate proposals for programs to receive funding. Joint committee meetings are targeted to begin in Summer 2022. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were used.

PALO ALTO FISCAL BENEFITS
The Stanford Medicine Renewal Project brings considerable fiscal benefits to the City of Palo Alto. The project is expected to generate $8.1 million in sales and use tax revenues for the City, and multiple mechanisms have been put into place to ensure that this target is met. The Development Agreement also provides for further fiscal benefits to the City, including a payment by Stanford Medicine to fund the City’s operating deficit, and the payment of utility user taxes and school fees.

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Sections 5(b)(i) and 5(b)(ii). Payment of Sales and Use Taxes As required by the Development Agreement, Stanford Medicine submitted its annual Construction Sales and Use Tax monitoring report to the City on June 30, 2022. The Stanford Medicine parties will continue to submit such a report annually during the construction period for the Renewal Project so that the City can determine the share of construction use taxes that it has received as a result of the Renewal Project.

Each year, within 60 days of receiving the monitoring report, the City will provide its determination of the amount of construction use taxes that it has received as a result of the Renewal Project during the preceding calendar year. In August 2026 or soon thereafter, Stanford Medicine and the City will conduct a reconciliation process to confirm that the City has received at least $8.1 million in construction use taxes as a result of the Renewal Project, as further described in Development Agreement Section 5(b)(ii).

To date, Stanford Medicine has taken the following steps detailed below to maximize the City’s allocation of sales and use taxes associated with Project construction and operation. Documentation of each of these items is included in the 2021 construction use tax monitoring report already submitted. • Stanford Medicine has obtained all permits and licenses necessary to maximize the City’s allocation of construction use taxes derived from the project, including California Seller’s Permits and Use Tax Direct Pay Permits.
• Stanford Medicine has designated and required all contractors and subcontractors to designate the project site as the place of sale of all fixtures furnished or installed as part of the project. • Stanford Medicine has designated and required all contractors and subcontractors to designate the project site as the place of use of all materials used in the construction of the project. • Stanford Medicine has required all contractors and subcontractors to allocate the local sales and use taxes derived from their contracts directly to the City. Stanford Medicine has used best efforts to require contractors and subcontractors to complete and file any forms required by the State Board of Equalization to effect these designations.
• Both Hospitals have obtained use tax direct pay permits from the State of California for their existing facilities in order to increase the City tax allocation for the Hospitals’ purchases. The Hospitals will maintain the use tax direct pay permit for the life of the project. • Finally, Stanford Medicine has assisted the City in establishing and administering a Retail Sales and Use Tax Reporting District for the Renewal Project, to enable the City to track the generation, allocation, reporting and payment of sales and use taxes derived from the Project.

Section 5(b)(iii). Funding of Operating Deficit
In order to assure that City costs associated with the Renewal Project do not exceed revenues to the City resulting from construction and operation of the project, Stanford Medicine has provided to the City a single lump sum payment in the amount of $2,417,000. This payment was made on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision.

Section 5(b)(iv). Payment of Utility User Tax
Stanford Medicine will pay the City a utility user tax at a minimum rate of 5 percent of all electricity, gas, and water charges allocable to new construction completed as part of the project for the life of the project.

This rate may be increased by the City as provided by Section 2.35.100(b) of the Municipal Code. The 5 percent utility user tax is currently being paid by Stanford Medicine.

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Section 5(b)(v). School Fees
Stanford Medicine will pay to the City—which is then to forward to the Palo Alto Unified School District— school fees upon issuance of each building permit from the City or OSHPD, in the amount that is generally applicable to non-residential development at the time of payment based upon net new square footage, as defined in the Development Agreement.

School fees were paid in 2012 for LPCH and SHC in the amounts of $188,815 and $153,802, respectively. In July 2013, additional school fees were paid in the amount of $7,051 to account for additional program square footage for the New Stanford Hospital and Garage. In May 2014, an additional payment of school fees in the amount of $16,119 was made to account for the incremental square footage associated with the Hoover Medical Office Building, beyond the 60,000 square feet originally planned. In November 2015, additional school fees in the amount of $461.16 were paid to account for incremental square footage for the New Stanford Hospital Garage. In May 2022, school fees in the amount of $22,641 were paid to Palo Alto Unified School District to account for Stanford Health Care’s planned addition to the 1989 portion of the preexisting hospital.

TRAFFIC MITIGATION AND REDUCED VEHICLE TRIPS
Stanford Medicine has taken a number of steps to mitigate the potential traffic impacts projected at full project buildout. Stanford Medicine provides a robust transportation demand management program, offering a variety of incentives for employees to forego driving alone to work. As required by the Development Agreement, Stanford Medicine has taken the additional actions outlined below.

Section 5(c)(ii). Menlo Park Traffic Mitigation
Stanford Medicine agreed to contribute to the City of Menlo Park a total of $3,699,000 for use in connection with traffic mitigation, infrastructure enhancements, and the promotion of sustainable neighborhoods and communities and affordable housing. This contribution has been made in three equal payments; the first payment of $1,233,000 was made on August 19, 2011. The second payment of $1,233,000 was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit. The final payment in the amount of $1,233,000 was made on December 14, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision Section 5(c)(iii). East Palo Alto Voluntary Mitigation Stanford Medicine has contributed a single lump sum payment of $200,000 to East Palo Alto to be used for roadway and traffic signal improvements on University Avenue. This payment was made on August 19, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. In the event that Stanford Medicine does not meet the alternative transportation mode goals specified in the Development Agreement in the required timeframe, including any period of permitted delay, and is assessed a $4 million payment under Development Agreement section 5(c)(ix)(B), the City will be required to remit $150,000 of such payment to the City of East Palo Alto.

Section 5(c)(iv). Contributions to AC Transit
The Hospitals committed to the following actions within 30 days from issuance of the first Hospital occupancy permit, and have fulfilled these commitments as outlined below:

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• The Hospitals agreed to offer a one-time payment of $250,000 to AC Transit to be used for capital improvements to the U-Line to increase capacity (Section 5(c)(iv)(A)). As required, the Hospitals offered to contribute $250,000 to AC Transit for capital improvements to the U Line; this offer was accepted, and the payment was made on January 5, 2018.
• The Hospitals agreed to offer to make annual payments to AC Transit in a reasonable amount, not to exceed $50,000, to be used for operating costs of the U-Line to maintain a load factor for bus service to the Medical Center of less than 1 (Section 5(c)(iv)(B)). The Hospitals are making annual payments to AC Transit for purposes of U-Line operating costs. • In order to encourage Hospital employees living in the East Bay to use public transit for their commute, the Hospitals committed to using best efforts to lease 75 parking spaces at the Ardenwood Park and Ride lot, or an equivalent location, at a cost not to exceed $45,000 per year (Section 5(c)(iv)(C)). The Hospitals continue to meet this requirement, and currently lease 100 parking spaces in Newark (35263 Fircrest Drive). However, the Fircrest-Ardenwood route that provided service to these spaces was suspended in December 2020 due to the pandemic reducing demand and resulting low ridership. East Bay riders continue to be served by the U Line and DB Express.

Section 5(c)(v). Opticom Payments
Within 30 days from issuance of the first Hospital occupancy permit, the Hospitals committed to pay $11,200 to the City of Palo Alto to be used for the installation of Opticom traffic control systems at the following seven intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West; Galvez/Arboretum; and the Alpine/280 Northbound ramp. However, since the time that this commitment was made, the City determined that Opticom systems are outdated, and proposed the purchase and installation of the ATMS.now Emergency.now package, which would allow coordinated prioritization at all City-maintained traffic signals. Agreement to this change in traffic signal priority system is documented in a letter dated December 12, 2017 from the City Manager to the SUMC Parties, which was accepted and agreed to by the SUMC Parties by countersigned letter. The required payment was made on December 12, 2017, within 30 days of issuance of the first Hospital occupancy permit.

Section 5(c)(vi). Caltrain GO Passes
The Development Agreement requires that the Hospitals purchase annual Caltrain GO Passes for all existing and new Hospital employees who work more than 20 hours per week at a cost of up to approximately $1.8 million per year, beginning on September 1, 2015. This obligation is expected to continue for a period of 51 years.

Hospital management accelerated the purchase of the annual GO Pass for Hospital employees, and began providing free GO Passes to employees commencing on January 1, 2012. Annual passes were purchased again for all existing and new eligible employees for 2022.

Section 5(c)(vii). Marguerite Shuttle Service
The Hospitals will fund the reasonable costs, in an approximate amount of $2 million, for the purchase of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased demand for shuttle service between the project sites and the Palo Alto Intermodal Transit Station. In addition, the Hospitals will fund as annual payments the reasonable costs, in an approximate amount of $450,000 per year, to cover the net increase in operating costs for the Marguerite Shuttle. Demand

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for the Marguerite shuttle increased in 2012, and the Hospitals funded the purchase of three new hybrid shuttles to meet this increased demand. Since this time, the Hospitals have funded as annual payments the reasonable costs of the net increase in operating costs for the Marguerite Shuttle.

Section 5(c)(viii). Transportation Demand Management Coordinator The Development Agreement requires that the Hospitals employ an onsite qualified Transportation Demand Management (TDM) Coordinator for Stanford Medicine, commencing on September 1, 2015, and continuing through the life of the Renewal Project.

Because the Hospitals accelerated the purchase of the Caltrain GO Pass, the Hospitals also accelerated the hiring of the TDM Coordinator, filling this position in March 2012. The TDM Coordinator is responsible for overseeing the analysis, development, and implementation of programs to advance the Hospitals’ TDM objectives. Specific duties that are carried out in collaboration with Stanford Transportation include raising awareness among commuters about alternative transportation options and Stanford’s commute incentive programs; providing alternative commute planning assistance and responses to customer inquiries; writing and editing electronic and print communications; coordinating and staffing outreach events, such as free transit pass distributions and employee fairs; and providing alternative transportation information and resources at new employee orientations. In addition, the TDM Coordinator is responsible for overseeing the Transportation Hub within the new Stanford Hospital. The Transportation Hub serves as an alternative transportation information center available to both staff and patients, and includes a monitor screen (Transit Screen) that displays all mobility options in the area at a glance, in real time.

The Hospitals have also created a new role, Transportation/TDM Director, that is in addition to the previously established TDM Coordinator role, to lead the effort of increasing the use of alternative transportation among Hospital employees.

Section 5(c)(ix). Monitoring of TDM Programs
The Hospitals are required to submit annual monitoring reports showing the current number of employees employed over 20 hours per week; the number of employees using an alternative transportation mode as

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documented by a study or survey to be completed by the Hospitals using a method mutually agreeable to the City and the Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative Mode Targets identified in the Development Agreement. The Development Agreement specifies payments to be made in the event that such targets are not met during particular time periods. Stanford Medicine submitted its 2022 Alternative Mode Share Report to the City on May 31, 2022; this report shows an alternative mode split of 19.9% for the Hospitals, representing a significant drop in alternative mode share since the start of the COVID-19 pandemic and a further decrease relative to the Spring 2021 results (28.8%). The continued shift from alternative modes to single-occupancy vehicles among on-campus Hospital staff is consistent with generally observed changes in transit behavior during the pandemic, with the key difference that the Hospitals’ on-campus employees largely do not have the ability to perform work remotely, as they primarily occupy roles which require direct patient interface or otherwise require physical presence. Given ongoing concerns over the safety of public transportation during the pandemic, the further reduction in the Hospitals’ alternative mode share from the most recent reporting year can be more easily understood. Under the circumstances, the Hospitals are excused from achieving, on schedule, the alternative mode share targets of this section of the Development Agreement.

Due to the pandemic-induced circumstances noted above and as allowed by the Development Agreement, Stanford Medicine has filed a Notice of Intent to Claim a Permitted Delay with the City which establishes that due to the ongoing COVID-19 pandemic the Hospitals are unable to meet the alternative mode share targets on schedule. The Hospitals expect that the period of permitted delay will extend through a period ending one year after the expiration or termination of the United States Secretary of Health and Human Services’ determination that a public health emergency exists due to the COVID-19 pandemic. This anticipated period of permitted delay accounts for an end to the current public health emergency, and the gradual return of commuter confidence in alternative transit. During this period, other related obligations would continue to be met, including but not limited to implementing an enhanced TDM program, monitoring progress toward meeting the alternative mode share targets, providing annual reports to the City, striving to maximize use of alternative commute modes by Hospital employees, and meeting with the City on a regular basis to identify potential improvements to the enhanced TDM program.

Stanford Medicine plans to file an application for an amendment to the Development Agreement to implement the period of permitted delay and establish viable timelines for compliance with alternative mode share targets.

Stanford Medicine remains committed to increasing its alternative mode share, and enabling employees to travel safely to work using alternative modes.

LINKAGES
To further encourage use of Caltrain, bus, and other transit services, and to enhance and encourage use of pedestrian and bicycle connections between Stanford Medicine and downtown Palo Alto, Stanford Medicine has funded the following specific infrastructure improvements.

Section 5(d)(i). Intermodal Transit Fund
Stanford Medicine has provided to the City one lump sum payment of $2.25 million for improvements to enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing intersection of El Camino Real and Quarry Road. Up to $2 million of this amount is to be used by

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the City for the development of an attractive, landscaped passive park/green space with a clearly marked and lighted pedestrian pathway, benches, and flower borders. Stanford Medicine paid the entire required amount for the Intermodal Transit Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were used.

In Summer 2017, prior to issuance of the first Hospital Occupancy Permit, the City completed a temporary path with associated lighting, landscaping / green space, benches, and flower borders from the transit center to the existing crosswalk at the intersection of El Camino Real and Quarry Road. Available funds remaining (approximately $1.69 million) will be applied to the construction of permanent improvements in the future.

Section 5(d)(ii). Quarry Road Fund
Stanford Medicine has provided to the City one lump sum payment of $400,000 for improvements to and within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and prominent bicycle facilities. Stanford Medicine paid the entire required amount for the Quarry Road Fund on August 25, 2011. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were used. The City was required to construct the improvements prior to issuance of the first Hospital Occupancy Permit, but as agreed to with Stanford Medicine, delayed implementation of these improvements until utility trenching to the Medical Center was complete. In late 2018, the City completed these improvements, including enhanced crosswalks and bicycle striping and signage.

Section 5(d)(iii). Stanford Barn Connection
Stanford Medicine agreed to construct up to $700,000 of improvements to enhance the pedestrian connection between the Main Medical Campus and the Stanford Shopping Center from Welch Road to Vineyard Lane, in the area adjacent to the Stanford Barn prior to issuance of the first Hospital Occupancy permit. Construction of the improvements completed in November 2017, in advance of issuance of the first Hospital Occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision.

INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND

AFFORDABLE HOUSING
Section 5(e). Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund
Stanford Medicine agreed to contribute a total amount of $23.2 million toward City of Palo Alto infrastructure, sustainable neighborhoods and communities, and affordable housing. As required by the Development Agreement, this contribution has been made in three equal payments. The first payment, in the amount of $7,733,333, was made on August 25, 2011; the second payment of $7,733,333 was made

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on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment of $7,733,333 was made on December 12, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were used.

The City will use $1,720,488 of these funds in the same manner as funds collected under the City’s housing fee ordinance.

CLIMATE CHANGE
Section 5(f). Climate Change Fund
Stanford Medicine agreed to contribute a total amount of $12 million toward City projects and programs for a sustainable community, including programs identified in the City’s Climate Action Plan, carbon credits, and investments in renewable energy and energy conservation. As required by the Development Agreement, this contribution has been made in three equal payments. The first payment, in the amount of $4 million, was made on August 25, 2011; the second payment of $4 million was made on December 5, 2012, following the November 2012 issuance of the first Hospital foundation permit; and the final payment of $4 million was made on December 12, 2017, within 30 days from issuance of the first Hospital occupancy permit. No further action is required by Stanford Medicine to comply with this Development Agreement provision. As required by Development Agreement Section 12(d), the City will provide yearly Supplements to the Annual Report to provide an accounting of the City’s expenditures from this fund, and the purposes for which the expenditures were used.

SATISFACTION OF CONDITIONS OF APPROVAL
Section 5(h). Satisfaction of All Conditions of Approval Stanford Medicine will satisfy all Conditions of Approval by the dates and within the time periods required by the project approvals, subject to modifications allowed by the Development Agreement, and has taken several steps in order to ensure that this requirement is met (Section 5(h)). The Conditions of Approval encompass conditions imposed by the Architectural Review Board, mitigation measures enumerated in the Mitigation Monitoring and Reporting Program, and conditions attached to the Conditional Use Permit.

In order to implement, monitor, and report on the implementation of this diverse array of conditions, Stanford Medicine, with input from City planning staff, has created two Excel spreadsheet tracking and reporting tools. These spreadsheets serve as a centralized repository for compliance monitoring information and documentation, and are updated by the Stanford Medicine project teams on a regular basis, and reviewed by the City.

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CONCLUSION
As the Renewal Project completes its eleventh year, Stanford Medicine looks forward to continued engagement with the City of Palo Alto as the project continues to progress.

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Stanford University Medical Center (SUMC) Annual Reports Prior Fiscal Year Annual Reports:
•Fiscal Year 2011-2012
http://www.cityofpaloalto.org/civicax/filebank/documents/31976 •Fiscal Year 2012-2013
https://www.cityofpaloalto.org/civicax/filebank/documents/39991 •Fiscal Year 2013-2014
http://www.cityofpaloalto.org/civicax/filebank/documents/45631 •Fiscal Year 2014-2015
http://www.cityofpaloalto.org/civicax/filebank/documents/51645 •Fiscal Year 2015-2016
https://www.cityofpaloalto.org/civicax/filebank/documents/60896 •Fiscal Year 2016-2017
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=49142.31&BlobID=65285 •Fiscal Years 2017-2018, 2018-2019, and 2019-2020
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2021/11-november/20211101pccs-amended.pdf •Fiscal Year 2020-2021
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2022/20220321/20220321pccsm-amended-linked- revised.pdf
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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022 1 SUMC Development Agreement Compliance: FY 2021-20221
0 1
5 Health Care Benefits
DA
Section Description Summary Activity Complies?
5(a)(ii)
Fund for
Healthcare
Services
Financial assistance
for Palo Alto
residents
SUMC establishment of a $3M fund that will
grow to $5.6M by December 31, 2025. Fund
will be used in even increments over a ten-
year period from 2026-2036 to assist Palo
Alto residents who have self-payment
responsibilities beyond their financial
means, as described in Section 5(a)(ii).

Yes, complies – No activity
required in FY 2021-2022.
5(a)(iii)
Fund for
Community
Health and
Safety Programs
$4M fund for
selected community
health programs for
Palo Alto residents
First and only payment of $4M on August
25, 2011 to establish City fund. The joint
committee formed according to the
Development Agreement approved
expenditures from this fund for FY 2021-
2022. There were expenditures from this
fund during the reporting period FY 2021-
2022.

Yes, complies - Fund
activity and balances in FY
2021-2022 reported in
Attachment E.

Fiscal Benefits
DA
Section Description Summary Activity Complies?
5(b)(i), (ii)
Payment of
Sales and Use
Taxes
Activities to
maximize sales and
use taxes paid to the
City
SUMC contributes to General Fund Sales and
Use Tax revenues via construction-related
activities. The City reviews the Construction
Sales & Use Tax Monitoring Report that is
submitted by SUMC on June 30 of each year.

Yes, complies - SUMC
timely submitted the
Construction Sales & Use
Tax Monitoring Report for
the previous calendar year.

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Table

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SUMC Development Agreement, Section 5 - SUMC Parties’ Promises FY 2021-2022 2 SUMC Development Agreement Compliance: FY 2021-20221
0 1
5 The City submits a letter to SUMC each year
that notes local tax received from SUMC
project activities for the year. Based upon
the City’s review of the annual Construction
Sales and Use Tax Monitoring Report,
revenues for calendar years 2011 through
2021 have totaled $5,405,338.

The City sent their
required response. This
annual reporting assists in
the process of ensuring
that the City would receive
no less than $8.1M in
construction sales and tax
revenue by December 31,
2025.
5(b)(iii)
Funding of
Operating
Deficit /
Expansion Cost
Mitigation
$2.417M fund to
assure City costs
associated with the
project do not
exceed revenues
resulting from
construction and
operation of the
project.

Payment of $2.417M on August 25, 2011 to
establish fund. There were expenditures
from this fund during the reporting period
FY 2021-2022.

Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.
5(b)(iv) Payment of
Utility Users Tax
5% tax on all
electricity, gas and
water charges on
new construction
Utilities confirmed that billing accounts
were created in past fiscal years when new
meters were set for new construction,
including NSH, NSH Garage, LPCH, and BMI,
and the Utility Users Tax is paid through the
normal billing process for each site.

Yes, complies.
5(b)(v) School Fees
Payment of PAUSD
fees for net new
square footage
$342,617 fee paid for LPCH and NSH
expansion in 2012. $7,051 fee paid for NSH
and NSH Garage expansion in July 2013.

Yes, complies - SUMC
made payments to PAUSD
for all net new square
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Attachment C SUMC Development
Agreement Section 5 Compliance
Table

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5 $16,119 fee paid for Hoover Medical Office
Building expansion in May 2014. $461.16 fee
paid to account for incremental square
footage for the New Stanford Hospital
Garage. Additional PAUSD school fees were
paid in FY 2021-2022 for the Nursing Pod
Extension project due to OSHPD requiring
these payments prior to issuance of a
construction shoring permit.
footage for which school
fees apply at the time of
past permit receipt. Staff
will reconfirm SUMC
payment of PAUSD school
fees for the Nursing Pod
Extension project when
the City issues this permit
in a future fiscal year.

Traffic Mitigation and Reduced Vehicle Trips
DA
Section Description Summary Activity Complies?
5(c)(ii)
Menlo Park
Traffic
Mitigation
$3,699,000 payment
for traffic mitigation,
infrastructure,
sustainable
neighborhoods,
affordable housing
First of three $1.23M payments made on
August 19, 2011. Second payment of
$1.23M made on December 5, 2012. Third
and final payment of $1.23M made on
December 14, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH).

Yes, complies - SUMC
made all required
payments to Menlo Park,
including the last and final
payment in FY 2017-2018.
5(c)(iii)
East Palo Alto
Voluntary
Mitigation
$200K for roadway
and signal
improvements on
University Ave.
$200K payment made on
August 19, 2011. Yes, complies.

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Attachment C SUMC Development
Agreement Section 5 Compliance
Table

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5 5(c)(iv) Contributions
to AC Transit
U-line capital
improvements, low
load factor ratios,
parking spaces at
Ardenwood Park &
Ride
$250K payment made to AC Transit on
January 5, 2018.

SUMC is also invoiced by AC Transit for
payments throughout the year that total
over the $50K per year discussed in the
SUMC Development Agreement. Payments
to AC Transit are required for the life of the
project.

Since May 2014 and until April 30, 2018,
SUMC Parties leased a park-and-ride facility
on Kaiser Drive near the Ardenwood Park &
Ride. SUMC used an interim temporary
facility through FY 2019-2020. In FY 2020-
2021 and FY 2021-2022, SUMC leased 100
parking spaces in Newark (35263 Fircrest
Drive).

Yes, complies.
5(c)(v) Opticom
Payments
$11,200 payment
for Opticom traffic
control system at 7
intersections
$11.2K payment made to the City in FY
2017-2018 within 30 days from issuance of
the first Hospital Occupancy Permit (LPCH).

As the City has upgraded systems, the City
and SUMC agreed through a letter exchange
that the payment could be used for the new
coordinated prioritization signaling at City-
maintained traffic signals.

Yes, complies.

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Agreement Section 5 Compliance
Table

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5 5(c)(vi) Caltrain Go
Passes
SUMC purchase of
passes for all
existing and new
hospital employees
working
>20hrs/week
Go Passes have been purchased per the
Development Agreement since January 1,
2012, including for FY 2021-2022.

Yes, complies.
5(c)(vii) Marguerite
Shuttle Service
Purchase of
additional shuttles
to meet demand
Since 2011, SUMC purchased additional
shuttle buses for the Marguerite Shuttle
service which now includes five renewable
diesel-electric hybrid buses and 23 all-
electric buses. Additional all-electric buses
also came online in FY 2017-2018. Shuttles
were running in FY 2021-2022.

Yes, complies.
5(c)(viii)
SUMC
Transportation
Demand
Management
(TDM)
Coordinator
SUMC hires
coordinator to
promote alternative
transportation
options
TDM Coordinator was hired in March 2012.

This position has since been elevated to a
TDM Program Manager position and the
position remains filled.

Yes, complies.
5(c)(ix) Monitoring of
TDM Programs
Yearly report
regarding
alternative transit
mode use
The SUMC parties found that the alternative
mode share milestone target of 33%
outlined in SUMC DA Section 5(c)(ix) was not
met for 2022, nor was it above the previous
2018 milestone target of 30%; the
SUMC timely submitted
their annual Alternative
Mode Share report for FY
2021-2022. Monitoring in
FY 2021-2022 identified
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Agreement Section 5 Compliance
Table

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5 alternative mode share rate for SUMC
decreased to 19.9% in FY 2021-2022
between use of alternative modes versus
driving alone, largely due to ongoing
pandemic conditions.
that SUMC missed the
alternative mode share
target of 33% for two
consecutive years.

As received by the City on
June 14, 2022, the SUMC
Parties asserted a
permitted delay under the
Force Majeure provision of
the Agreement. The SUMC
Parties and City staff are
actively engaged in
developing an amendment
to the Agreement in order
to resolve this issue.

Linkages
DA
Section Description Summary Activity Complies?
5(d)(i) Intermodal
Transit Fund
$2.25M payment to
improve pedestrian
linkages to PA
Intermodal Transit
Center
First and only payment of $2.25M on August
25, 2011 to establish City fund. City
constructed temporary improvements prior
to the issuance of the first Hospital
Occupancy Permit (LPCH) to serve the
linkage goal and functional requirements.

Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.
5(d)(ii) Quarry Road
Fund $400K payment to
improve pedestrian
First and only payment of $400K on August
25, 2011 to establish City fund. City
Yes, complies - As of
FY2019, there is no longer
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Attachment C SUMC Development
Agreement Section 5 Compliance
Table

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5 linkages along
Quarry Road
constructed the improvements prior to the
issuance of the first Hospital Occupancy
Permit (LPCH) to serve the linkage goal and
functional requirements.
a fund balance in this
category.
5(d)(iii) Stanford Barn
Connection
SUMC budgets up to
$700K for
connections in the
vicinity of barn
SUMC constructed the Stanford Barn
Connection prior to the issuance of the first
Hospital Occupancy Permit (LPCH) to serve
the linkage goal and facilities are fully
operational.

Yes, complies.

Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing DA
Section Description Summary Activity Complies?
5(e)
Infrastructure,
Sustainable
Neighborhoods
and
Communities,
and Affordable
Housing Fund
$23.2M payment for
these uses
First of three $7,733,333 payments made on
August 19, 2011. Second payment of
$7,733,333 made on December 5, 2012. The
third and final payment of $7,733,333 made
on December 12, 2017, which was within 30
days from issuance of the first Hospital
Occupancy Permit (LPCH). There were
expenditures from this fund during the
reporting period FY 2021-2022.

Of the funds in the Infrastructure,
Sustainable Neighborhoods and
Communities, and Affordable Housing Fund,
$1,720,488 was to be used for support of
Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.

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Attachment C SUMC Development
Agreement Section 5 Compliance
Table

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5 affordable housing. SUMC funding
supported the Stevenson House project in
FY 2013 and the remaining affordable
housing funds were fully exhausted in FY
2020 to support the Wilton Court Housing
Project.

Climate Change
DA
Section Description Summary Activity Complies?
5(f)
Climate Change
– Sustainability
Programs
Benefit Fund
$12M payment for
climate change-
related projects and
programs
First of three $4M payments made on
August 19, 2011. Second payment of $4M
made on December 5, 2012. The third and
final payment of $4M made on December
12, 2017, which was within 30 days from
issuance of the first Hospital Occupancy
Permit (LPCH).

Yes, complies -Fund
activity and balances in FY
2021-2022 reported in
Attachment E.

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Table

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Stanford University Medical Center (SUMC)
FY 2021-2022 Construction Activities and Square Footage Summary SUMC did not add any net new square footage in FY 2021-2022 but continued to remove occupancy for portions of the 1959 Stone Complex by 18,472 square feet. This suspension of use provides a temporary option to prevent exceedance of the total occupied square footage allowed in their entitlements. While not triggered in the FY 2021-2022 monitoring period, there are provisions in the SUMC entitlements to have a three-year period (or up to five years with Planning Director approval) whereby SUMC is allowed to exceed the total occupied existing and net new building square footage. This provision is important for ensuring that SUMC can maintain existing operations while also efficiently transfer new uses, equipment, and operations over to the new facilities.

Overall, at the Main SUMC site, SUMC is entitled to construct and use up to 3,534,090 total square feet of hospital/clinic and research buildings, as well as associated facilities and infrastructure improvements, including up to 1,265,272 net new square feet. Overall, at the Hoover Pavilion site, SUMC is entitled to construct and use up to 153,343 total square feet of medical office/clinic buildings, as well as associated facilities, including up to 46,169 net new square feet of medical/office buildings.

A total of approximately 133,731 square feet of floor area was previously demolished at the Stanford Hospital, Lucile Packard Children’s Hospital (LPCH), and Hoover Pavilion sites.

Net new floor area across the SUMC sites reported in previous Fiscal Years include the following:
The new Neuroscience Health Center at the Hoover Pavilion site represents 91,605 new square feet.
Lucile Packard Children’s Hospital (LPCH) Expansion added 446,088 new square feet. The New Stanford Hospital (NSH) garage added 29,744 new square feet. The NSH project added 689,522 new square feet. These two new buildings therefore represent 719,266 new square feet for NSH.
The School of Medicine (SOM) added 196,921 square feet through completion of the Biomedical Innovation Building (BMI).

Item 6
Attachment D SUMC
Construction Activities
and Square Footage
Summary

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Fiscal Year 2021-2022 Annual Report Supplement
Prepared by the City of Palo Alto
March 2, 2023
Background and Purpose
On June 6, 2011, the City Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, annexation and design applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of a new Stanford Hospital and clinics buildings, an expansion of the Lucile Packard Children’s Hospital, construction of new School of Medicine buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, roadway improvements along Welch Road and Durand Way, and SUMC design guidelines. A Development Agreement (the “Agreement”) vesting these approvals was entered into between the SUMC Parties and the City and was effective on June 6, 2011 and continues for thirty (30) years from the effective date.

The Agreement requires an annual report, prepared by SUMC that outlines the activities of the preceding year and the efforts to fulfill the obligations of the Agreement.

Per the requirements of sections 12(a) and 12(c) of the Agreement, The City of Palo Alto is to prepare a supplement to the annual report that contains an accounting of the funds described in the Section 5 of the Agreement (“SUMC Parties’ Promises”) including the fund balances and expenditures and the purposes for which the expenditures were used.

Public Benefit Fund Accounting
This SUMC Annual Report Supplement covers the period during the eleventh year of the Agreement:

June 6, 2021 through June 6, 2022. Accounting for the funds outlined extends through the end of the City’s FY 2022.

The specific funding accounts reported in this SUMC Annual Report Supplement are consistent with Section 5 of the Agreement. These funds have been assigned a unique cost center number for Attachment E
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Attachment E
Supplement to the
Annual Report

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accounting purposes. This SUMC Annual Report Supplement also contains the investment earnings and the earnings allocation to the various cost centers.

In summary, the SUMC Parties have paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2021-2022 reporting period. There were no required new payments from the SUMC Parties during the FY 2021-2022 reporting period.

The first payment of $20,800,333 on August 11, 2011 was for the following funds:
•Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)); •Fund for Expansion Cost Mitigation (Section 5(b)(iii)); •Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino Real/Quarry Road Intersection (Section 5(d)(i));
•Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on Quarry Road (Section 5(d)(ii));
•Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)), and
•Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).

The second payment of $11,733,333 payment on December 5, 2012 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).

The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e));
•Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and •Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).

Public Benefit Fund Expenditures
Expenditures and other activity occurred in the following funds in Fiscal Year 2021-2022 through June 30, 2022:
•$500,000 under “Expansion Cost Mitigation” for Rail Grade Separation (PL-17001), •$775,000 under “Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing” for $750,000 replacement of Fire Station Four (PE-18004) and $25,000 University Avenue Streetscape Update (PE-21004), and
•$1,250,000 under “Community Health and Safety” for $1.2 million Charleston/Arastradero Corridor Project (PE-13011) and $50,000 to the General Fund allocated to local non-profits through the Human Services Resource Allocation Process (HSRAP).

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Attachment E
Supplement to the
Annual Report

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In FY 2021, CMR# 11877 was approved by the City Council to expense $500,000 for PF-01003 (Building System Improvements) from the Community Health and Safety Funds. In error, this was processed to expense from the Cost Expansion Finds. As part of the FY 2022 year-end clean-up, an adjustment was made to correct this.

The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund contained an original contribution of $1,720,488 for support of affordable housing. SUMC funding supported the Stevenson House project in FY 2013 and the remaining affordable housing funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project.

Item 6
Attachment E
Supplement to the
Annual Report

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Item 6
Attachment E Supplement to the
Annual Report

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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Police
Meeting Date: April 17, 2023
Report #:2303-1156
TITLE
Approval of Amendment #3 with Professional Account Management LLC, dba Duncan Solutions Contract (C17164727) in the Amount of $80,000 and to Extend the Contract Term to April 28, 2024 for Parking Citation Management; CEQA Status – Not a Project.

RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or designee to execute Amendment #3 to Contract Number C17164727 with Professional Account Management/dba Duncan Solutions to increase compensation by $80,000, for a new total not-to-exceed amount of $800,000, and to extend the contract term to April 28, 2024.

EXECUTIVE SUMMARY
The Office of Transportation and the Police Department have separate contracts with Duncan Solutions to respectively administer the parking permit program and to facilitate parking citation processing and collection. This attached amendment with Duncan Solutions extends the term for the Police Department contract to align with the Office of Transportation, in preparation for the next competitive solicitation for comprehensive parking permit and citation management services.

BACKGROUND
Parking enforcement throughout the city is divided between the two departments. The Police Department is primarily responsible for timed parking enforcement in commercial zones and enforcing the state vehicle code and city municipal code throughout the city including most Stanford property in City jurisdiction. The Office of Transportation is primarily responsible for enforcing the municipal code as it relates to the Residential Parking Program. Police Department employees provide physical enforcement for their department while Office of Transportation contracts the physical parking enforcement service to a vendor. The Police Department does not issue permits while Office of Transportation manages a parking permit Item 7
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program. Both departments use a service provider to process and collect fees and fines for the issued citations, in conjunction with the Administrative Services Department.

ANALYSIS
The City of Palo Alto contracted with Duncan Solutions to facilitate parking citation processing and collections in 2016 for the Police Department. The original contract value was not to exceed $653,0001. The contract was extended and expires April 30, 20232. Office of Transportation maintains a separate residential permit parking program also using the same provider for citation processing, contract number C19171363, with a not to exceed amount $627,000 and is due to expire March 31, 20243. Before this extension, both department contracts total $1,280,000.

The attached contract extension would align the end dates for the two contracts. By extending the Police Department contract to align closer to the expiration of Office of Transportation contract, staff would have sufficient time to further explore options for a consolidated and more comprehensive parking strategy between the two departments, if feasible. This would allow the departments to enhance coordination on services offered to the community, parking enforcement strategies, and to determine whether one service provider can meet the operational needs across programs.

FISCAL/RESOURCE IMPACT
Apart from the total not-to-exceed amount, updated to accommodate the extension, and the contract ending date, the terms and conditions of the original contract remain unchanged, including the original costs for services. The FY2023 Adopted Police Department Operating Budget has sufficient funding for this contract; no additional budgetary action required.

Funding for the term that ends in FY2024 will be subject to Council’s adoption of that budget during the normal budget cycle; no additional funding requirement is expected.

STAKEHOLDER ENGAGEMENT
This contract was reviewed and coordinated with internal departments including legal, procurement, and financial functions to ensure alignment with City policies and procedures. 1 City Council, December 5, 2016, Agenda Item #4, SR #7179 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2016/id-7179.pdf
2 City Council, May 23, 2022, Agenda Item #10, SR #14437 https://portal.laserfiche.com/Portal/PdfViewer.aspx?file=https%3A%2F%2Fportal.laserfiche.com%2FPortal%2FEle ctronicFile.aspx%3Fdocid%3D59502%26repo%3Dr-
704298fc%26pdfView%3Dtrue#%5B%7B%22num%22%3A3%2C%22gen%22%3A0%7D%2C%7B%22name%22%3A% 22XYZ%22%7D%2Cnull%2Cnull%2Cnull%5D
3 City Council, June 24, 2019, Agenda Item #5, SR 10241 #14437 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2019/id-10241.pdf
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ENVIRONMENTAL REVIEW
Adoption of this amendment is not a project under CEQA.

ATTACHMENTS
Attachment A: City of Palo Alto Contract #C17164727 Amendment No. 3 APPROVED BY:

Andrew Binder, Police Chief
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Page 1 of 4 ends

AMENDMENT NO. THREE TO CONTRACT NO. C17164727

BETWEEN THE CITY OF PALO ALTO AND

PROFESSIONAL ACCOUNT MANAGEMENT, LLC

This Amendment No. Three (this “Amendment”) to Contract No. C17164727 (the “Contract”) entered into as of April XX, 2023 by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and PROFESSIONAL ACCOUNT MANAGEMENT, LLC, a Wisconsin limited liability company, located at 633 W. Wisconsin Avenue, Suite 1600, Milwaukee, WI 53203 ("CONSULTANT").CITY and CONSULTANT are referred to collectively as the “Parties” in this Amendment.

R E C I T A L S

A. Th e Contract was entered into by and between the Parties hereto for the provision of parking citation processing and collection services, as detailed therein.

B. The Par ties now wish to amend the Contract in order to increase compensation by Eighty Thousand Dollars ($80,000) from Seven Hundred Twenty Thousand Dollars ($720,000) to a new total not-to-exceed amount of Eight Hundred Thousand Dollars ($800,000) with no increased in rates; to extend the term for one additional year, from April 29, 2023 through April 28, 2024.

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 “Con tract” s hall mean C ontract No. C17164727 between CONSULTANT and CITY, dated December 5, 2016, as amended by:

Amendment No.1, dated October 21, 2021
Amendment No.2, dated April 29, 2022

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 2, TERM, of the Contract is hereby amended to read as follows:

“The term of this Agreement shall be from the date of its full execution through April 28, 2024, unless terminated earlier pursuant to Section 19 of this Agreement.”

SECTION 3. Section 4 “COMPENSATION FOR ORIGINAL TERM” of the Contract is hereby amended to read as follows:

DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7
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Professional Account
Management LLC, dba
Duncan Solutions
Contract; C17164727
Amendment No. 3

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Page 2 of 4 ends

“The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (“Basic Services”), and reimbursable expenses, for a total not to exceed amount of Eight Hundred Thousand Dollars ($800,000). CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount with no changes to Exhibit C-1, Schedule of Rates.”

SECTION 4. 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 5. Incorporation of Rec itals. The recita ls set forth above are terms of t his Amendment and are fully incorporated herein by this reference.

(SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.)
DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7
Attachment A -
Professional Account
Management LLC, dba
Duncan Solutions
Contract; C17164727
Amendment No. 3

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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

PROFESSIONAL ACCOUNT
MANAGEMENT, LLC.

By:______________________________

Name:___________________________

Title:____________________________

Attachments:

Exhibit “C-1” entitled “Schedule of Rates”

DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 President and CEO
Tim Wendler
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Attachment A -
Professional Account
Management LLC, dba
Duncan Solutions
Contract; C17164727
Amendment No. 3

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EXHIBIT “C-1”

SCHEDULE OF RATES
2023-2024

Current Services Unit Price

1. Citation Processing - per citation entered into the system Year Seven $1.37

2. Notices Letter or Large Postcard Format
Year Seven $0.68

3. Internet Payments - Client's Processor
Year Seven $1.07

4. Obtain California Registered Owner Information Included in processing cost
Obtain Out-of-State Registration Information $0.98 to $4.50

5. Collections Services
Comprehensive Collection Services 35%

Special Note: DMV liens are currently used as a collections tool and are included as part of a comprehensive collections program we reimburse the City $3.00 for every registration hold placed.

Optional Services

Unit Price

6. Manual Citation Data Entry/Imaging $0.25

7. Phone Payments - Client's Processor
Year Seven $1.07

DocuSign Envelope ID: 593164D6-6E2F-4C63-BB98-879033C28451 Item 7
Attachment A -
Professional Account
Management LLC, dba
Duncan Solutions
Contract; C17164727
Amendment No. 3

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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: April 17, 2023
Report #:2302-1018
TITLE
Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1)

RECOMMENDATION
Staff recommends that the City Council adopt a resolution to oppose the Taxpayer Projection and Government Accountability Act (Initiative 21-0042A1) (Attachment A)

EXECUTIVE SUMMARY
The Taxpayer Protection and Government Accountability Act would amend the California Constitution with provisions that limit voters’ authority and input, adopt new and stricter rules for raising taxes and fees, and may make it more difficult to impose fines and penalties for violation of state and local laws. Staff recommends that the City Council adopt a resolution supporting opposition for this initiative.

BACKGROUND
The City’s 2023 Federal and State Legislative Guidelines1 reflect the City’s priorities and guides staff and the City’s legislative advocates on issues that are important to the City Council.

Protecting local government revenue sources is one of the Foundational Principles of the guidelines and represents the core of the City’s policy agenda.

The Taxpayer and Government Accountability Act (Initiative 21-0042A1) was filed with the California Attorney General’s Office (AGO) on November 30, 2021. On May 12, 2022, the initiative sponsors announced their intention to forego the November 2022 election and instead target the November 2024 election. On February 1, 2023, the initiative qualified for the 1 https://www.cityofpaloalto.org/files/assets/public/city-manager/legislation/2023-legislative-guidelines-final.pdf Item 8
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November 5, 2024 election. The full text of the initiative can be found on the California Office of the Attorney General website2.

The authority for local government to raise revenue through fees and taxes is restricted by State law, including the voter-approved provisions of Proposition 13 of 1978, Proposition 218 of 1996, and Proposition 26 of 2010. The Taxpayer Protection and Government Accountability Act would amend the California Constitution to further restrict the ability of the state, counties, other local agencies, and the electorate to approve or collect taxes, fees, and other revenues.

The initiative also has a retroactive effect as any tax or fee adopted after January 1, 2022 that was not adopted in compliance with the initiative is void within 12 months of the initiative’s effective date unless reenacted to comply.

On January 19, 2022, the Legislative Analyst’s Office (LAO)3 summarized the current requirements to approve taxes and fees compared to the proposed amendments to the State Constitution and outlined the amendments to the Constitution, should the initiative pass in the November 2024 election. The table below summarizes the LAO’s analysis of the components of the ballot initiative:

TABLE 1: Major Provisions of the Taxpayer Protection and Government Accountability Act

1. Expands the definition of tax Expands definition of tax and may result in the reclassification of several fees and charges
that are used to support specific service
delivery as taxes subject to voter approval.

2. Requires voter approval for state taxes Require that new or increased taxes must be passed by two-thirds note in each legislative
chamber and approved by simple majority of
voters. Applies to any state tax approved
between January 1, 2022 and the effective
date of the measure, unless the tax fulfills
certain requirements.

3. Requirements for approving local taxes Require that new or increased taxes must be passed by two-thirds vote of the electorate.

Prohibits local advisory measures where local
voters express a preference for how local
general tax dollars should be spent.

Taxes

4. Allowable uses and duration of state and
local tax revenues must be specified
Requires that state and local tax measures
identify the type and amount (or rate) of the
2California Office of Attorney General, Ballot Initiatives, Active Measures, #21-0041A1, Full Text of Amended Ballot Initiative: https://oag.ca.gov/system/files/initiatives/pdfs/21-0042A1%20%28Taxes%29.pdf 3 California Office of Attorney General, Ballot Initiatives, Active Measures, #21-0041A1, Legislative Analyst’s Office letter dated January 19, 2022: https://oag.ca.gov/system/files/initiatives/pdfs/fiscal-impact-estimate- report%2821-0042A1%29.pdf
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TABLE 1: Major Provisions of the Taxpayer Protection and Government Accountability Act tax and duration of the tax; must state that the
revenue can be used for general purposes.

5. Requires the legislature and local
government bodies to impose state and
local fees
Requires that fees be imposed by majority
vote of the local governing body; restricts the
ability of local governments to delegate fee
changes to administrative entities. Any fee
approved between January 1, 2022 and the
effective date of the measure, if passed by
voters, unless the tax fulfills requirements of
the measure.

Fees, Charges, Fines, and Penalties

6. Some new state and local fees cannot
exceed actual costs
Except for licensing and other regulatory fees,
fees and charges may not exceed “the
minimum amount necessary.”
Fees and charges paid for use of government
property and the amount paid to purchase or
rent property must be “reasonable.” These
fees and charges are currently allowed to be
market based.

ANALYSIS
The initiative would significantly restrict the flexibility of state and local governments to raise revenue for services and projects, and potentially jeopardizes billions in annual revenue across California. The City’s major tax revenues are property tax, sales tax, utility users tax, documentary transfer tax, and transient occupancy tax. Tax revenues are used to fund a variety of services such as public safety, emergency response, library, and repair and maintenance of streets and roads. Most proposed taxes require a two-thirds vote of Council before being presented to the voters. Special taxes require two-thirds vote by the electorate while general taxes require a majority vote of the electorate. The initiative expands the definition of a tax that may result in the reclassification of a fees and charges that are used to support specific service delivery as taxes subject to voter approval.

In addition to these taxes, a variety of fees and other charges are levied for a variety of services provided by the City. Cities, counties, and special districts must regularly (e.g., annually) adopt increases to fee rates and charges and revise rate schedules to adjust for changes in service delivery costs (“actual cost”) or level of service. “Actual cost” is defined as the “minimum amount necessary” to provide the service, however the initiative adds provisions that all fees must be “reasonable to the payor” and does not define what “reasonable” is. The initiative also increases the burden to show that a levy, charge or exaction is not a tax from a preponderance of the evidence to a clear and convincing standard.

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Finally, the initiative’s retroactive application is problematic as hundreds of local measures were approved by the voters in 2022 which may not comply with the initiative’s requirements.

The City’s own Business Tax (Measure K) and Measure to Affirm the Natural Gas Utility Transfer (Measure L) were approved by voters in November 2022. While we believe the two measures comply with the requirements of the Initiative, they, like many other local tax measures across the State, are subject to additional, unexpected scrutiny despite voter-approval.

FISCAL/RESOURCE IMPACT
Staff recommends the Council adopt an oppose position on this ballot initiative, as it restricts the City’s local control and diminish the ability of voters and taxpayers to weigh in on local spending decisions. The measure would significantly restrict the City’s flexibility to recover cost for specific services and raise revenue for City services, projects and identified unfunded needs.

The City has been in close coordination with the League of California Cities as this process develops.

STAKEHOLDER ENGAGEMENT
This report transmits a proposed resolution for Council adoption opposing the Taxpayer Protection and Government Accountability Act (#21-0042A1).

This ballot initiative is supported by:
•California Business Roundtable
•California National Association for Industrial and Office Parks •Howard Jarvis Taxpayers Association
This ballot initiative is opposed by:
•League of California Cities
•California State Association of Counties
•California Special Districts Association
•California Contract Cities Association

ENVIRONMENTAL REVIEW
This report is not a project under California Environmental Quality Act (CEQA) as defined in CEQA Guidelines, section 15378, because it has no potential for resulting in either a direct or reasonably foreseeable indirect physical change in the environment.

ATTACHMENTS
Attachment A: Resolution to Oppose the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1)
Attachment B: Fiscal and Program Effects of Initiative 21-0042A1 on Local Governments APPROVED BY:

Kiely Nose, Assistant City Manager
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*NOT YET APPROVED*
1 0003_20230322_MV30
RESOLUTION NO. ____

RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO EXPRESSING

OPPOSITION TO THE TAXPAYER PROTECTION AND GOVERNMENT
ACCOUNTABILITY ACT (INIATIVE 21-0042A1)

WHEREAS, the measure would amend the Constitution to further restrict the ability of the state, counties, other local agencies, and the electorate to approve or collect taxes, fees, and other revenues; and

WHEREAS, the measure includes provisions that would make it more difficult for local voters to pass measures needed to fund local services and infrastructure, and would limit voter input by prohibiting local advisory measures where voters provide direction on how they want their local tax dollars spent; and

WHEREAS, th e measure puts billions of dollars across the State curren tly dedicated to local services at risk and could force cuts to fire and emergency response, law enforcement, public health, parks, libraries, affordable housing, services to support homeless residents, mental health services, and more; and

WHEREAS, the measure would significantly restrict the City’s flexibility to recover cost for specific services and raise revenue for City services, projects and identified unfunded needs; and

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALO ALTO, CALI FORNIA DOES HEREBY RESOLVES AS FOLLOWS:

SECTION 1
. Opposition to the Taxpayer Protection and Government Accountability Act (Initiative 21-0042A1);

SECTION 2. The City of Palo Alto will join the No on Initiative 21 -0042A1 coalition, a growing coalition of public safety, education, labor, local government, and infrastructure groups throughout the state.

//
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*NOT YET APPROVED*
2 0003_20230322_MV30
SECTION 3. This resolution shall take effect as of the date of its passage and adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Administrative Services

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Fiscal and Program Effects of
Initiative 21-0042A1 on Local Governments

If Initiative 21-0042A1 is placed on the ballot and passed by voters, it will result in:
 Over $20 billion of local governmen t fee and charge revenues over 10 years placed at heightened legal peril. Related public service reductions across virtually every aspect of city, county, special district, and school services especially for drinking water, sewer sanitation, and public health and safety.  About $2 billion of revenues each year from fees and charges a dopted after January 1, 2021 subject to legal peril.1
 Over $2 billion dollars of annual revenues from dozens o f tax measures approved by voters between January 1, 2022 and the effective date of the act2 subject to additional voter approval if not in compliance with the initiative.
 Indeterminable legal and administrative burdens and costs on l ocal government from new and more empowered legal challenges, and bureaucratic cost tracking requirements.  The delay and deterrence of municipal annexations.
 Substantially higher legal and administrative cost of public i nfrastructure financing which will delay and deter new residential and commercial development.
 Service and infrastructure declines including in fire and emer gency response, law enforcement, public health, drinking water, sewer sanitation, parks, libraries, public schools, affordable housing, homelessness prevention and mental health services.

1. Local Government Taxes and Services Threatened
With regard to taxes, Initiative 21-0042A1:
 Prohibits advisory, non-binding measures as to use of tax proc eeds on the same ballot. o Voters may be less informed and more likely to vote against me asures.  Eliminates the ability of special tax measures proposed by cit izen initiative to be enacted by majority voter approval (Upland).3
o Because the case law regarding citizen initiative special taxe s approved by majority vote (Upland) is so recent, it is unknown how common these sorts of measures might be in the future. This initiative would prohibit such measures after the effective date of the initiative. Any such measures adopted after January 1, 2022 through the effective date of the Act should it pass would be void a year after the effective date of the initiative.  Requires tha t tax measures include a specific duration of time that the tax will be imposed. This seems to require that all tax increases or extensions contain a sunset (end date). o This would require additional tax measures to extend previousl y approved taxes.  A city charter may not be amended to impose, extend, or increa se a tax might interfere with the ability of cities that do not already have such authority in their charters to adopt Property Transfer Taxes. o There are no more than a few of these every few years, but it is a valuable tax for those that adopt it.

1 Assumes fee increases since January 1, 2022 would be subject to possible legal challenge if not adopted in compliance with the Initiative.
2 The effective date of the initiative would be sometime in December 2024, the date the California Secretary of State certifies the election results of the November 5, 2024 election.
3 Unlike the initiative 17-0050, this initiative does not eliminate that ability of cities and counties to adopt general taxes by majority voter approval.
2217 Isle Royale Lane • Davis, CA • 95616-6616
Phone: 530.758.3952 • Fax: 530.758.3952
Rev . January 14, 2023
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 Requires that a tax measure adopted after January 1, 2022 and before the effective date of the initiative that was not adopted in accordance with the measure be readopted in compliance with the measure or will be void twelve months after the effective date of the initiative. o If past election patterns and elections in 2022 are an indicat ion, over 200 tax measures approving more than $2 billion annual revenues to support local public services would not be in compliance and would be subject to reenactment. Most will be taxes without a specific end date and special taxes (including parcel taxes). Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, the measures would each require declaration of emergency and unanimous vote of the governing board to be placed on a special election ballot within a year for approval or the tax will be void after that date. I would expect most to succeed, but some will not, in particular citizen initiative majority vote special taxes which would have to meet a higher voter approval threshold to continue.  Requires voter approval to expand an existing tax to new terri tory (annexations). This would require additional tax measures and would deter annexations and land development in cities. o If a tax is "ext ended" to an annexed area without a vote after January 1, 2022, it will be void 12 months later until brought into compliance. Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, such extensions would each require unanimous vote of the agency board to be placed on a special election ballot or would be void a year later.

1.a. Number of Measures and Value of Local Taxes at Risk4 Over a hundred local measures were approved in 2022 that likely do not comply with the provisions of Initiative 21-0042A1. Nearly $2 billion of annual revenues from these voter approved measures will cease a year after the effective date of the measure, reducing the local public services funded by these measures. We can expect a similar volume of measures in 2024 and a similar volume of non-compliance. So the combined total of annual local funding directly affected by Initiative 21-0042A1 due to its retroactivity provision is about $4 billion.

Citizen Initiative Special Taxes in 2022.

Special taxes placed on the ballot by citizen initiative and approved after January 1, 2022 by a majority but less than two-thirds of the voters are out of compliance with Initiative 21-0042A1.

On June 7, 2022, there were three local special tax measures placed on the ballot by citizen initiative. Two failed to get majority voter approval. A one percent transactions and use tax (sales tax) for the John C. Fremont Healthcare District in Mariposa County received 69.6 percent approval, over the two thirds needed for any special tax under California Constitution Article XIIIC. So this measure was passed in compliance with Initiative 21- 0042A1.

On November 8, 2022, there were 14 local special taxes placed on the ballot by citizen initiative. Seven of these

4 Source: Compilation and summary of data from County elections offices.

June 2022 Initiative Special Taxes - majority voter approval Agency Name County Tax/Fee Rate
Estimated
Annual Revenue Use Sunset YES%
John C. Fremont
Healthcare District Mariposa Measure N Transactions
& Use Tax 1 cent $ 150,000 hospital 40yrs 69.6% PASS
County of Kings Kings Measure F Transactions
& Use Tax 1/2 cent $ 11,700,000 fire none 37.6% FAIL
Manhattan Beach
USD Los Angeles Measure A School Parcel
Tax $1095/yr $ 12,000,000 s chools 12yrs 31.2% FAIL
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measures failed with less than majority voter approval. The other seven measures received majority, but less than two-thirds, voter approval. These measures passed under current law but are out of compliance with Initiative 21- 0042A1. Taken together these seven taxes will provide estimated annual revenues of from $900,000 to $1.4 billion in support of parks and recreation, zoo, library, affordable housing, transportation, homelessness prevention, and schools in these communities.

Non-Specific Tax Durations in 2022
Voters approved 106 measures in June 2022 (10) and November 2022 (96) that do not provide a specific duration of time that the tax will be imposed (end date). Typically, the ballot titles for these measures state that the tax would be imposed “until ended by voters.” Four of these measures also did not include any estimate of the annual revenues that the tax would generate, another violation of initiative 21-0042A1. Taken together, these approved local measures generate $561 million per year that will expire a year after the effective date of the initiative if Initiative 21-0042A1 passes.

November 2022 Initiative Special Taxes - majority voter approval Agency Name County Tax/Fee Rate
Estimated
Annual Revenue Use Sunset YES%
Crockett Com m unity
Services District Contra Costa Measure L Parcel Tax $50/parcel $ 60,000 parks/recr none 62.8% PASS Oakland Alameda Measure Y Parcel Tax $68/parcel $ 12,000,000 zoo 2 0yrs 62.5% PASS County of Mendocino Measure O Transactions
& Use Tax
1/8 cent then 1/4
cent in 2027 $ 4,000,000 library none 60.8% PASS
Los Angeles Los Angeles Measure ULA Property
Transfer Tax
4% if >$5m, 5.5%
if >$10m $600 m to $1.1 b affordable
housing none 57.3% PASS
County of Sacram ento Measure A Transactions
& Use Tax same 1/2 cent $ 212,512,500

transportati
on
40yrs 55.3% PASS
San Francisco Proposition M B usiness
Operations Tax
$2500-$5000/
vacant resid unit $ 20,000,000 housing 30yrs 54.5% PASS Santa Monica Los Angeles Measure GS Property
Transfer Tax
$56/$1000 if
>$8m $ 50,000,000
schools,
hom elessne
ss, afford.
housing
none 53.3% PASS
Total $900,000 to
$1.4 billion
Agency Name County Tax/Fee Rate
Estimated
Annual Revenue Use Sunset YES%
County of Calaveras Measure A Transactions
& Use Tax 1 cent $ 5,000,000 fire none 49.4% FAIL
South San Francisco
(for Schools) San Mateo Measure DD School Parcel
Tax $2.50/sf $ 55,900,000 schools none 47.2% FAIL
County of Fresno (for CSU ) Measure E Transactions
& Use Tax
1/5 ct,
1/40 ct (Reedley) $ 36,000,000 Calif State
Univ 20yrs 46.9% FAIL
Santa Cruz Santa Cruz Measure N Parcel Tax $6k/v acant SFU x xx vacant property xxx 44.2% FAIL
County of Monterey Measure Q Parcel Tax $49/parcel $ 5,500,000 ch ildcare 10yrs 41.1% FAIL San Francisco City
College
San
Francisco Measure O School Parcel
Tax $150/sfu $ 37,000,000 schools 10yrs 36.7% FAIL
Morro Bay San Luis
Obispo Measure B Parcel Tax $120+/parcel $ 680,000 harbor none 36.0% FAIL Inverness Public
Utility District Marin Measure O Parcel Tax $0.20/s f,
$150/vacant $ 276,000 fire none 27.0% FAIL
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Measures in 2022 with Non-Specific Durations
Agency Name County Tax/Fee Ra te
Annual
Re venue Us e Sunset YES%
Oakland Alameda Measure T B usi ness Tax
Ge n e ra lvarious $ 20,900,000 none 71.4% PASS
Culver City Los Angeles Measure BL B usi ness Tax
Ge n e ra lvarious $ 10,000,000 none 60.5% PASS
El Segundo Los Angeles Measure BT B usi ness Tax
Ge n e ra lvarious $ 3,000,000 none 51.2% PASS
Pico Rivera Los Angeles Measure AB B usi ness Tax
Ge n e ra lvarious $ 5,800,000 none 75.5% PASS
Santa Ana Orange Measure W B usi ness Tax
Ge n e ra lvarious neutral none 64.8% PASS
Tracy San Joaquin Measure B B usi ness Tax
Ge n e ra lvarious $ 3,200,000 none 72.6% PASS
Burlingame San Mateo Measure X B usi ness Tax
Ge n e ra lvarious $ 2,500,000 none 75.1% PASS
Los G atos Santa Clara Measure J B usi ness Tax
Ge n e ra lvarious $ 1,100,000 none 53.4% PASS
Santa Clara Santa Clara Measure H B usi ness Tax
Ge n e ra l
$45/employee,
$15/rental unit $ 6,000,000 none 59.5% PASS
Brisbane San Mateo Measure O B usi ness Tax
lodging bus n $2.50/rm/day $ 250,000 none 69.2% PASS
East Palo Alto San Mateo Measure L B usi ness Tax
resid. rentals

2.5%
grossRcpts $ 1,480,000 none 69.9% PASS
County of Santa Cruz Unincorporated Measure C Bus n Tax - disp cups 12.5cents/cup $ 700,000 none 68.2% PASS
South L ake Tahoe El Dorado Measure G Bus n Tax
Cannabis
6% retail,
manufacturing $ 950,000 none 62.9% PASS
McFarland Kern Measure O Bus n Tax
Cannabis
8% of gross
receipts retail, $ 1,800,000 none 63.5% PASS
Avenal Kings Measure C Bus n Tax
Cannabis
$25+/sf or
15% gr rcpts $ 600,000 none 61.8% PASS
Baldwin Park Los Angeles Measure CB Bus n Tax
Cannabis
4%
grossRcpts $ 300,000 none 51.3% PASS
Claremont Los Angeles Measure CT Bus n Tax
Cannabis
4%-7% gr
rcpts, $1- $ 500,000 none 61.1% PASS
County of Los Angeles Unincorporated Measure C Bus n Tax Cannabis
4% gross
receipts retail, $ 15,170,000 none 60.1% PASS
Cudahy Los Angeles Measure BA Bus n Tax
Cannabis
15%
grossRcpts $ 3,600,000 none 54.0% PASS
El Segundo Los Angeles Measure Y Bus n Tax
Cannabis
10%
G rossR cpt, $ 1,500,000 none 72.8% PASS
Hermosa Beach Los Angeles Measure T Bus n Tax
Cannabis
10%
G rossR cpt, $ 1,500,000 none 67.6% PASS
Lynwood Los Angeles Measure TR Bus n Tax
Cannabis 5%to10% $ 3,000,000 none 66.4% PASS
Santa Monica Los Angeles Measure H M Bus n Tax
Cannabis
10% gross
Rcpts $ 5,000,000 none 66.4% PASS
South E l Monte Los Angeles Measure C M Bus n Tax
Cannabis
6% special
ex cise tax on $ 126,000 none 53.7% PASS
Monterey Monterey Measure J Bus n Tax
Cannabis 6% grossRcpt $ 1,300,000 none 65.2% PASS
Pacific G rove Monterey Measure N Bus n Tax
Cannabis 6% grossRcpt $ 300,000 none 70.8% PASS
Huntington Beach Orange Measure O Bus n Tax
Cannabis
6% retail, 1%
other $ 600,000 none 54.7% PASS
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Notes
?= Ballot measure title did not include an estimate of annual revenues, also not in compliance with Initiative 21-0042A1. n/a*= Arcadia Measure SW passed but sports betting remains illegal after the failure of Propositions 26 and 27 on the November statewide ballot.

Measures in 2022 with Non-Specific Durations
Agency Name County Tax/Fee Rate
Annual
Revenue Us e Sunset YES%
L aguna Woods Orange Measure T Bus n Tax
Cannabis
4%-10% of
gross recei pts $ 750,000 none 61.1% PASS
Corona Riverside Measure G Bus n Tax
Cannabis
9% of gross
receipts for $ 5,000,000 none 61.6% PASS
Montclair San Bernardino Measure R Bus n Tax
Cannabis
7%
grossRcpts $ 3,500,000 none 70.3% PASS
County of San Diego Unincorporated Measure A Bus n Tax
Cannabis
6% retail, 3%
distribution, $ 5,600,000 none 57.4% PASS
Encinitas San Diego Measure L Bus n Tax
Cannabis
4% to 7% of
gross recei pts $ 1,400,000 none 65.1% PASS
Healdsburg Sonoma Measure M Bus n Tax
Cannabis 8% grossRcpt $ 500,000 none 72.7% PASS
Exeter Tulare Measure B Bus n Tax
Cannabis
10% retail and
other, $10/sf ? none 66.5% PASS
Tulare Tulare Measure Y Bus n Tax
Cannabis
10% retail and
other, $10/sf ? none 65.2% PASS
Woodland Y olo Measure K Bus n Tax
Cannabis
10%
grossRcpts ? none 66.2% PASS
Redlands San Bernardino Measure J Bus n Tax
Distrib centers
from $0.047/sf
to $0.105/sf $ 530,000 none 53.5% PASS
Arcadia Los Angeles Measure S W Busn Tax
Sports Betting
5%
grossRcpts n/a* none 63.9% PASS
Albany Alameda Measure K ParcelTax $0.074+/sf $ 1,950,000 fire/EMS n o n e 76.0% PASS Cameron Park Airport
District El Dorado Measure J ParcelTax by $600 to
$900/parcel $ 117,900 airport/
streets none 78.2% PASS
Highlands Village
L ighting Benefit Zone El Dorado Measure L ParcelTax $140+/parcel $ 10,920 streets none 86.3% PASS Knolls Property
Owners CSD El Dorado Measure P ParcelTax by $300+ to
$600+/parcel $ 8,400 streets none 75.5% PASS
Sundance Trail Zone of
Benefit El Dorado Measure C ParcelTax $600+/yr $ 24,000 roads none 73.2% PASS South Pasadena Los Angeles Measure L L ParcelTax x x x ? library none 86.2% PASS River Delta Fire District Sacramento Measure H ParcelTax $90/yr $ 1 30,000 fire none 72.1% PASS Emeryville Alameda Meas ure O PropTrans fTax $15/$1000 if $1m-$2m, $ 5,000,000 none 71.6% PASS
San Mateo San Mateo Measure CC PropTransfTax by 1% to 1.5% if >$10m $ 4,800,000 none 71.8% PASS
Alameda Alameda Measure F TOT by 4% to 14% $ 910,000 none 59.2% PASS Clovis Fresno Measure B TOT by 2% to 12% $ 500,000 none 69.7% PASS Kerman Fresno Measure G TOT 10% $ 40,000 none 62.3% PASS Trinidad Humboldt Measure P TOT by 4% to 12% $ 65,000 none 77.6% PASS Imperial Imperial Measure G TOT by 4% to 12% $ 600,000 none 56.2% PASS Arcadia Los Angeles Measure HT TOT by 2% to 12% $ 730,000 none 54.1% PASS Santa Monica Los Angeles Measure CS TOT by 1%, 3%
hom e shares $ 4,100,000 none 73.7% PASS
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Measures in 2022 with Non-Specific Durations
Agency Name County Tax/Fee Rate
Annual
Revenue Us e Sunset YES%
Anaheim Orange Measure J TOT online travel
companies $ 3,000,000 none 59.2% PASS
La Palma Orange Measure P TOT by 4% to 12% $ 200,000 none 71.1% PASS Colfax Placer Measure B TOT by 2% to10% $ 29,000 none 73.5% PASS Rocklin Placer Measure F TOT by 2% to 10% $ 300,000 none 59.8% PASS Ros eville Placer Meas ure C TOT by 4% to 10% $ 3,000, 000 none 73.0% PASS Big Bear Lake San Bernardino Measure P TOT by 2% to 10% $ 1,300,000 n o n e 54.4% PASS Grand Terrace San Bernardino Measure M TOT new 10% $ 250,000 none 51.9% PASS Yucca Valley San Bernardino Measure K TOT by 5% to 12% $ 1,300,000 none 71.9% PASS Im perial Beach San Diego Measure R TOT by 4% to 14% $ 400,000 none 67.4% PASS El Paso de Robles San Luis Obisp oMeasure F TOT by 1% to 11% $ 750,000 none 61.2% PASS Belmont San Mateo Measure K TOT by 2% to 14% $ 600,000 none 79.3% PASS Millbrae San Mateo Meas ure N TOT by 2% to 14% $ 1,500, 000 none 75.8% PASS County of Humboldt Unincorporated Measure J TOT by 2% to 12% $ 3,0 80,000 none 63.3% PASS County of Placer -
North Tahoe TOT Area Measure A TOT by 2% to 10% $ 4,000,000 none 90.0% PASS County of Santa Cruz Unincorporated Measure B TOT by 1% to 12% $ 2 ,300,000 none 69.2% PASS County of El Dorado -
East Slope Tahoe Measure S TOT 2/3 by 4% to 14% $ 2,500,000 none 81.8% PASS Chico Butte Measure H TrUT 1 cent $ 24,000,000 none 52.4% PASS Mendota Fresno Measure H TrUT 1.25 cent $ 493,498 none 57.2% PASS Blue Lake Humboldt Measure R TrUT 1 cent $ 30,000 none 55.4% PASS Rio Dell Humboldt Measure O TrUT 3/4cent $ 400,000 none 53.3% PASS County of Kern unincorporated areas Measure K TrUT 1 cent $ 54,000 ,000 none 50.8% PASS McFarland Kern Measure M TrUT 1 cent $ 579,662 none 62.2% PASS Tehachapi Kern Measure S TrUT 1 cent $ 4,000,000 none 57.2% PASS Avenal Kings Measure A TrUT 1 cent $ 500,000 none 72.5% PASS Sus anville Lass en Meas ure P TrUT 1 cent $ 1,750, 000 none 54.7% PASS Baldwin Park Los Angeles Measure BP TrUT 3/4 cent $ 6,000,000 none 58.1% PASS Malibu Los Angeles Measure M C TrUT 1/2 cent $ 3,000,000 none 52.6% PASS Monterey Park Los Angeles Measure M P TrUT 3/4 cent $ 6,000,000 none 58.5% PASS Torrance Los Angeles Measure SS T TrUT 1/2 cent $ 18,000,000 none 55.0% PASS Larkspur Marin Measure G TrUT 1/4 cent $ 700,000 none 59.4% PASS Sand City Monterey Measure L TrUT by 1/2cent to

1.5cents $ 1,400,000 none 68.7% PASS
Hemet Riverside Measure H TrUT same 1 cent $ 15,000,000 none 58.0% PASS Elk Grove Sacramento Measure E TrUT 1 cent $ 21,000,000 none 54.1% PASS Galt Sacramento Measure Q TrUT 1 cent $ 3,600,000 none 52.4% PASS Colton San Bernardino Measure S TrUT 1 cent $ 9,500,000 none 66.8% PASS Ontario San Bernardino Measure Q TrUT 1 cent $ 95,000,000 none 53.2% PASS Solana Beach San Diego Measure S TrUT 1 cent $ 3,000, 000 none 66.7% PASS Brisbane San Mateo Measure U TrUT 1/2 cent $ 2,000,000 none 63.9% PASS Goleta Santa Barbara Measure B TrUT 1 cent $ 10,600,000 none 64.7% PASS Solvang Santa Barbara Measure U TrUT 1 cent $ 1,600,000 none 63.1% PASS Item 8
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Program Effects of
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Co-temporal Advisory Measures in 2022
At the November 2022 election, there was just one local general tax measure that was accompanied by an advisory measure as to the use of funds. The City of Santa Monica’s Measure DT property transfer tax failed with just 34 percent approval as voters instead chose the citizen initiative Measure GS.

There was also just one such tax use advisory measure on the June 2022 election. Susanville’s voters passed Measure P, a 1 percent transactions and use (sales) tax that generates $1.75 million per year5 for general city services. The measure was accompanied by advisory Measure Q, accompanied the city’s It asked, “If Measure P passes, should the revenues be used to balance the budget to maintain and enhance existing public safety services (police and fire), and provide funding to support street infrastructure improvements and provide funding to support economic development efforts designed to increase businesses, jobs and visitors to Susanville?” Both measures passed. Under Initiative 21-0042A1, the tax will expire a year after the effective date of the initiative (i.e., in December 2025).

1.b. Additional Costs and Public Service Effects of the Tax Provisions Assuming a similar volume of local measures through 2024 as we saw in 2022, there will be over 200 local measures that will need to be redrafted to comply with the Initiative and placed back on the ballot for the taxes to continue after December 2025. The costs of re-drafting, re-placing and re-voting on these measures, previously legally approved by voters, will be in the tens of millions in total statewide.

2. “Exempt Charges” (fees and charges that are not taxes) and Services Threatened With regard to fees and charges adopted after January 1, 2022, Initiative 21-0042A1:
 Subjects new fees and charges for a product or service to a ne w "actual and reasonable test."  Subjects fees and charges for entrance to local government pro perty; and rental and sale of local government property to a new, undefined, “reasonable” test.  Allows legal challenge to any tax adopted before the effective date of the initiative and after January 1,

5 The Susanville measure also did not include a specific end date and so is included in the list and totals of those measures.

Measures in 2022 with Non-Specific Durations
Agency Name County Tax/Fee Rate
Annual
Revenue Us e Sunset YES%
Watsonville Santa Cruz Meas ure R TrUT 1/2 cent $ 5,000,000 none 64.4% PASS V allejo Solano Measure P TrUT 7/8 cent $ 18,000,000 none 54.7% PASS Modesto Stanislaus Measure H TrUT 1 cent $ 39,000,000 none 62.8% PASS County of Colusa Measure A TrUT 2/3 1/2 cent $ 2,400,000 EMS none 69.4% PASS Atwater Merced Measure B TrUT 2/3 same 1 cent $ 4,000,000 police/fi re none 73.7% PASS Truckee Nevada Measure U TrUT 2/3 by 1/4 cent to
1/2 cent $ 3,000,000 open space
/ trails none 76.4% PASS
Palo Alto Santa Clara Meas ure L UtilityTrans fer 18% gas $ 7,000,000 none 77.7% PASS Santa Clara Santa Clara Meas ure G UtilityTrans fer 5 % $ 30,000,000 none 84.2% PASS Hercules Contra Costa Measure N UUT 8% $ 3,600,000 none 69.3% PASS Carson Los Angeles Measure U U UUT 2% electr, gas $ 8,000,000 none 78.4% PASS Sebastopol Sonom a Measure N UUT 3.75% (sam e) $ 700,000 none 83.5% PASS Item 8
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2022. Such a lawsuit could enjoin (stop) the enactment of the tax pending the outcome of the legal challenge.
 Subjects a challenged fee to new, higher burdens of proof if l egally challenged.

2.a. Value on New Local Government Fees and Charges at Risk6 Virtually every city, county, and special district must regularly (e.g., annually) adopt increases to fee rates and charges and revise rate schedules to accommodate new users and activities. Most of these would be subject to new standards and limitations under threat of legal challenge. Based on the current volume of fees and charges imposed by local agencies and increases in those fees simply to accommodate inflation, the amount of local government fee and charge revenue placed at risk is about $2 billion per year including those adopted since January 1, 2022. Of $2 billion, about $900 million (45 percent) is for special districts, $800 million (40 percent) is cities, and $300 million (15 percent) is counties.7 Major examples of affected fees and charges are:

1. Certain water, sanitary sewer, wastewater, garbage, electric , gas service fees.

2. Nuisance abatement charges - such as for weed, rubbish and g eneral nuisance abatement to fund community safety, code enforcement, and neighborhood cleanup programs.

3. Emergency response fees - such as in connection with DUI.

4. Advanced Life Support (ALS) transport charges.

5. Business improvement district charges.

6. Fees for processing of land use and development applications such as plan check fees, use permits, design review, environmental assessment, plan amendment, subdivision map changes.

7. Document processing and duplication fees.

8. Facility use charges, parking fees, tolls.

9. Fines, penalties.

10. Fees for parks and recreation services.

2.b. Additional Costs and Public Service Effects of the Fee/Charge Provisions In addition to service delays and disruptions due to fee and charge revenues placed at greater legal risk, there would be substantial additional costs for legal defense. The risk to fees and charges will make infrastructure financing more difficult and will deter new residential and commercial development.

***********
mc

6 Source: California State Controller Annual Reports of Financial Transactions concerning cities, counties and special districts , summarized with an assumed growth due to fee rate increases (not population) of 2 percent annually. 7 School fees are also affected but the amount is negligible by comparison.

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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: April 17, 2023
Report #:2302-0991

TITLE
Approve Substantial Amendments to the Community Development Block Grant (CDBG) FY2021- 22 and FY2022-23 Annual Action Plans and the Associated Budget Amendment in Various Funds and Resolution

RECOMMENDATION
Staff recommends City Council take the following actions:

1. Approve an amendment to the Fiscal Year 2023 Budget Appropriation for the following funds (requires 2/3 approval):
a. Community Development Block Grant Fund by:
i. Increasing the revenue estimate by $300,000; and
ii. Increasing the transfer to the Capital Improvement Fund appropriation by $300,000;
b. Capital Improvement Fund by:
i. Increasing the appropriation for the Sidewalk Repairs Capital Project (PO- 89003) by $300,000; and
ii. Increasing the transfer from the Community Development Block Grant Fund by $300,000.

2. Adopt a Resolution (Attachment A) approving the following Substantial Amendments to the 2021-22 and 2022-23 Annual Action Plans:
a. For Fiscal Year 2021-22, reallocate funding from Ravenswood Family Health Network to Sidewalk Repairs Capital Project (PO-89003) for ADA ramp improvements.
b. For Fiscal Year 2022-23, amend the text for the description of the 525 E.

Charleston Road project to reflect the correct project activity.

EXECUTIVE SUMMARY
The City is required to process a Substantial Amendment to a previously approved Community Development Block Grant (CDBG) Annual Action Plan (AAP) when certain changes occur to the Item 9
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contents of those plans. This report discusses two substantial amendments that need to be completed for compliance with the CDBG program. The two amendments are as follows:

1. FY2021-22 AAP - Reallocate $300,000 from Ravenswood Family Health Network to a City project for ADA ramp improvements. Ravenswood was not able to move forward with their project and informed the City they no longer needed the CDBG funds.

2. FY2022-23 AAP – Revise the text of the project summary for Mitchell Park Place/525 E.

Charleston Road to reflect the correct project activity.

The first of these amendments requires approval of an amendment to the Fiscal Year 2023 Budget Appropriation.

BACKGROUND
The CDBG program, administered by U.S. Department of Housing and Urban Development (HUD), provides annual grants on a formula basis to states, cities, and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income persons. The program is authorized under Title 1 of the Housing and Community Development Act of 1974.

The HUD regulations require all CDBG funded activities to meet one of the three national objectives:
• Benefit low-and very-low-income persons;
• Aid in the prevention or elimination of slums or blight; or • Meet other community development needs having urgency or posing a serious and immediate threat to the health or welfare of the community.

Palo Alto’s CDBG program has been primarily directed towards housing-related work.

Specifically, local CDBG funds are allocated to expanding and maintaining existing affordable housing supply; promoting housing opportunities and choices; and providing supportive services for targeted low-income groups including unhoused persons, persons with disabilities, the elderly, and others. For general information on Palo Alto’s CDBG program, please visit:
https://www.cityofpaloalto.org/CDBG.

Annual Action Plan Amendments
As part of the CDBG program, HUD requires the preparation of a five-year strategic action plan (i.e. Consolidated Plan) to address priority housing and community development needs and to set goals for attaining identified objectives. The implementation of the Consolidated Plan is reflected in the Annual Action Plan that is prepared for every fiscal year. The Annual Action Plan (AAP) identifies the specific projects to be funded that implement the strategies identified Item 9
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in the Consolidated Plan. Council adopted the updated FY2020-25 Consolidated Plan and the FY2020- 21 Annual Action Plan on June 15, 2020.

When the City’s CDBG funding situation changes, amendments to the Annual Action Plan may be required. There are two types of amendments:

1. Minor Amendments: Changes to a previously adopted Consolidated Plan or Annual Action Plan that does not meet the thresholds to qualify as a Substantial Amendment.

Minor amendments are typically processed at a staff level.

2. Substantial Amendments:
(a) A change in the use of CDBG funds from one eligible activity to another; (b) The implementation of an activity not previously identified in sufficient detail to provide affected citizens an opportunity to submit comments; or (c) A change in an activity’s program budget which exceeds ten percent of the City’s latest annual entitlement grant; and
(d) Council approval required for all substantial amendments.

DISCUSSION
This section includes information on the required Annual Action Plan amendments. The Substantial Amendments approved by the City Council will be incorporated into the FY2021-22 AAP and the FY2023-23 AAP as required by HUD.

Substantial Amendment to FY2021-22 Annual Action Plan – Ravenswood Funding Reallocation The approved FY2021-22 AAP included funding of $300,000 for Ravenswood Family Health Network for eligible improvments at its Palo Alto clinic. 1 The project included the rehabilitation of the existing entrance and exit ramps and conversion into ADA-accessible ramps. In an email dated November 29, 2022, Ravenswood Family Health Network informed the City that they no longer needed the funds due to the lack of contracts to bid for the project and the inability to expend the funds.

With funding reallocation in mind, staff investigated other public facilities improvement projects that were CDGB-eligible activities. Due to the CDBG funding limitations, staff could not identify an eligible project from the current agencies supported by the program to reallocate funds to. In exploring eligible City projects, the Public Works Department, in consultation with the City’s ADA Coordinator, suggested adding additional ramps within an existing community-wide ADA ramp improvement project that slated for bid in Spring 2023 (Sidewalk Repairs Capital Project PO- 1 This project funding was recorded in Resolution No. 98933 adopted by Council on June 15, 2020.

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89003). An ADA ramp improvement project is a CDBG public facility eligible project (Matrix Code:
03K).

The staff recommendation is to reprogram the Ravenswood $300,000 to the City’s ADA ramp improvement project to better support and enhance the major curb ramp improvement project.

Substantial Amendment to FY2022-23 Annual Action Plan – 525 E. Charleston Road The approved FY2022-23 AAP included funding of $356,330 for the Mitchell Park Place/525 E.

Charleston Road2 project. CDBG funding was to be allocated for predevelopment costs associated with an affordable housing development. This activity supports the development of affordable housing at a Santa Clara County-owned property; Eden Housing will develop 50 affordable housing units, half of which are for people with disabilities. As the owner of the property, the County plans to execute a long-term lease with the developer, Eden Housing.

In late Summer 2022, the City was informed by HUD that the Mitchell Park Place project description was incorrectly represented in the FY2022-23 Annual Action Plan. A substantial amendment is needed to amend section AP-38 Project Summary of the FY2022-23 Annual Action Plan. The text edits are detailed in Table 1 below (new text is underlined and removed text has strikeouts).

Table 1: CDBG Project Description Change
Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide
Goals Supported Affordable Housing Strengthen Neighborhoods Needs Addressed Affordable Housing Community Services and Public Improvements 8 Funding CDBG: $356,330
2 This project funding was recorded in Resolution No. 10056 adopted by the Council on June 20, 2022.

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Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site. Eden Housing is developing 50 units of affordable housing.

Approximately half the units are for persons with disabilities. The parcel is owned by the County and will be a long-term lease with the developer. The City intends to use CDBG funding for predevelopment costs as per HUD regulation. Note: At the initial public comment period for the 2022 2023 AAP, the project focused on affordable housing. The City is reevaluating this project and the details are to be determined. The City will follow the Citizen Participation Plan and will proceed with protocols if a substantial amendment is required.

Target Date 6/30/2023 12/30/2023
Estimate the number
and type of families
that will benefit from
the proposed activities
TBD 50 families will benefit from public improvements
Location Description 525 E. Charleston Road
Planned Activities TBD

POLICY IMPLICATIONS
The project recommended for the reallocated CDBG funds is consistent with the priorities established in the City’s adopted FY 2020-2025 Consolidated Plan.

FISCAL/RESOURCE IMPACT
The recommendations in this report are cost neutral. This action is a reallocation of unspent funds dedicated by HUD in the FY2021-22 CDBG cycle and does not constitute a new funding source. The CDBG program runs on a reimbursement basis. Approval of this action will reallocate existing Community Development Block Grant funding to a new project and allow for the distribution of funds. There is no impact to the General Fund.

STAKEHOLDER ENGAGEMENT
The draft Substantial Amendments to the FY2021-22 and FY2022-23 Annual Action Plans, reflected in red-lined versions of the AAPs, were made available on the City’s webpage for public review beginning March 7, 2023 through April 6, 2023; this was advertised in the Daily Post on March 3, 2023. This constituted the required 30-day public review period.

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Additionally, the notice provided details of this City Council public hearing, initially scheduled for April 10, 2023. Due to changes in the Council agenda, the public hearing was moved to April 17, 2023 and a correction notice was placed in the newspaper on April 5, 2023.

At the time of this report preparation, no public comments were received.

ENVIRONMENTAL REVIEW
For purposes of the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA), budgeting by itself is not a project. Prior to commitment or release of funds for each of the proposed projects, staff will carry out the required environmental reviews or assessments and certify that the review procedures under CEQA, HUD and NEPA regulations have been satisfied for each project.

ATTACHMENTS
Attachment A: Draft Resolution
Attachment B: Draft Amended FY2021-22 Annual Action Plan, with red-lines on page 26 Attachment C: Draft Amended FY2022-23 Annual Action Plan, with red-lines on page 36 APPROVED BY:

Jonathan Lait, Planning and Development Services Director Item 9
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Resolution No. _____
Resolution of the Council of the City of Palo Alto Approving the Substantial Amendments to the Community Development Block Grant Annual Action Plans for Fiscal Years 2021-2022 and 2022- 2023

A. On June 15, 2020, the Palo Alto City Council approved and adopted a document entitled “Consolidated Plan” which identified and established the Palo Alto housing and non - housing community development needs, objectives, and priorities for the period July 1, 2020 to June 30, 2025.

B. The Substantial Amendments to the Annual Action Plans for Fiscal Year 2021-2022 and 2022-2023, were subjected to public review and commentary during the period from March 7, 2023 through April 6, 2023.

C. The potential uses of Community Development Block Grant funds were evaluated in light of the needs and objectives identified in the Consolidated Plan and reflected in the recommendations and comments of interested citizens.

D. Under the CDBG program, the highest priority for funding is given to activities which will benefit persons with low and moderate incomes.

E. The City Council held a publicly noticed public hearing on the proposed use of the reallocated CDBG funds for Fiscal Year 2021-2022 and the text amendments for Fiscal Year 2022- 2023.

F. CDBG funds allocated to the City for Fiscal Years 2021 -2022 and 2022- 2023 are proposed to implement the programs described in this resolution.

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

SECTION 1.

The uses of CDBG funds for Fiscal Year 2021 -2022 are hereby approved and authorized for the following program:

Name of Program Amount
City of Palo Alto ADA Ramp Improvement Project

$300,000

TOTAL
$300,000

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Resolution Approving the
Substantial Amendments
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Action Plans for FY21-22
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SECTION 2. The project description changes for the Fiscal Year 2022-2023 Annual Action Plan are hereby approved and authorized for the following program:

Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements Funding CDBG: $356,330
Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site. Eden Housing is developing 50 units of affordable housing. Approximately half the units are for persons with disabilities. The parcel is owned by the County and will be a long-term lease with the developer.

Target Date 12/30/2023
Estimate the number and
type of families that will
benefit from the
proposed activities
50 families will benefit from public improvements
Location Description 525 E. Charleston Road
Planned Activities TBD

SECTION 3. The total amount set forth under Section 1 of this resolution represents the proposed reallocation of $300,000 in CDBG funds from the United States Department of Housing and Urban Development (HUD) for Fiscal Year 2021-2022.

SECTION 4. The City staff is hereby authorized to submit the CDBG Substantial Amendments to the Fiscal Year 2021 -2022 and Fiscal Year 2022 -2023 Annual Action Plans, and such money shall be spent as set forth in this resolution. The Mayor, City Manager and any other designated City staff or officials are hereby authorized to execute such application forms and any other necessary documents to secure these funds. The City Manager or designee is authorized to sign all necessary grant agreements with the program providers set forth in Section 1.

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Resolution Approving the
Substantial Amendments
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Action Plans for FY21-22
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SECTION 5. The funding amounts set forth in Section 1 of this resolution are based on final allocation amounts from CDBG HUD appropriations; City Staff is authorized to make adjustments increasing or decreasing the funding amounts set forth herein as consistent with the adopted Citizen Participation Plan.

SECTION 6. The City Council hereby finds that the CDBG programs authorized under Section 1 and 2 of this resolution are not a project under the California Environmental Quality Act (CEQA). However, the Council furth er authorizes and directs City staff to prepare certifications that may be required, under CEQA and the National Environmental Policy Act (NEPA), for each project under the CDBG program prior to the release of funds for any such project.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning and
Development Services

____________________________
Director of Administrative Services

____________________________
CDBG Coordinator
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Resolution Approving the
Substantial Amendments
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Action Plans for FY21-22
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DRAFT
Substantial Amendment #1
FY 2021-2022 Annual Action Plan
April 17, 2023
Initially Approved on May 3, 2021

Refer to pages 3, 29, & 31 for revisions.

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Substantial Amendment 04/10/2023
Annual Action Plan
2021
2 OMB Control No: 2506-0117 (exp. 09/30/2021)
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9 Executive Summary
AP-05 Executive Summary - 91.200(c), 91.220(b)

1. Introduction
The City of Palo Alto (City) Fiscal Year (FY) 2021-22 One Year Action Plan contains the City’s one-year plan to carry out housing and community development activities funded by Federal formula grant funds received from the U.S. Department of Housing and Urban Development (HUD), Community Development Block Grant (CDBG) program. This Action Plan covers the second of five program years covered by the City’s 2020-2025 Consolidated Plan which was adopted by the Palo Alto City Council on June 15, 2020.

The Department of Planning and Development Services is the lead agency for the Consolidated Plan and submits the Annual Action Plan for the City’s CDBG program.

HUD requires entitlement jurisdictions to submit an Annual Action Plan to report the distribution of federal entitlement grant funds over the Consolidated Plan’s five-year period identifying how funding allocations help meet the goals covered in the Consolidated Plan.

A total of $746,715 is available for funding projects and programs during the 2021 Program Year. The City received $536,756 from the federal CDBG program, approximately $136,049 in program income and $73,910 in reallocated funds from previous years.

The City’s Action Plan covers the time period from July 1, 2021 to June 30, 2022, (HUD Program Year 2021). The City’s FY 2021-22 Action Plan reports on the status of needs and outcomes the City expects to achieve in the coming year. All of the activities mentioned in this Action Plan are based on current priorities. By addressing these priorities, the City hopes to meet those objectives stated in the 2020- 2025 Consolidated Plan. All the proposed projects and activities are intended to principally benefit residents of the City who have extremely low-, low- and moderate-income, and populations that have special needs, such as the elderly, disabled, and homeless.

2. Summarize the objectives and outcomes identified in the Plan This could be a restatement of items or a table listed elsewhere in the plan or a reference to another location. It may also contain any essential items from the housing and homeless needs assessment, the housing market analysis or the strategic plan.

The City is part of the San Francisco Metropolitan Bay Area, located 35 miles south of San Francisco and 14 miles north of San José. The City is located within the County of Santa Clara, borders San Mateo County, and encompasses an area of approximately 26 square miles, one-third of which consists of open space. According to Quick facts data provided by the U.S. Census Bureau[1] The City's total resident population is 65,364. The City has the most educated residents in the country and is one of the most expensive cities to live in. In Silicon Valley, the City is considered a central economic focal point and is home to over 9,483 businesses.

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Substantial Amendment 04/10/2023
Annual Action Plan
2021
3 OMB Control No: 2506-0117 (exp. 09/30/2021)
8 4
9 The Action Plan provides a summary of how the City will utilizes its allocation to the meet the needs of the City’s lower income population. According to the U.S. census data[2], 6.1% of all residents within the City had incomes below the federal poverty level.

Additionally, according to the 2019 Point in Time Homeless Census.[3] There are 299 unsheltered homeless individuals living within the City of Palo Alto. This number represents an increase of 17% from the 256 individuals that were counted in 2017.

As mentioned previously, a total of $746,715 is available for funding projects and programs during FY2021-22. The City received $536,756 from the federal CDBG program, approximately $136,049 in program income and $73,910 in reallocated funds from previous years. Table 1, “Fiscal Year 2021 CDBG Budget” below summarizes the uses of the funds proposed during FY 2021-22.

Applicant Agency Allocation
Public Services
Palo Alto Housing Corporation – SRO Resident Supportive Services $24,535 Catholic Charities of Santa Clara County – Long Term Care Ombudsman $10,000 Life Moves – Case Management at Opportunity Center $31,545 Silicon Valley Independent Living Center – Case Management Services $14,021 Sub-total $80,101
Planning and Administration
Project Sentinel – Fair Housing Services $33,698
City of Palo Alto Administration $99,304
Sub-total $133,002
Economic Development
Downtown Streets – Workforce Development Program $160,477 Sub-total $160,477
Public Facilities and Improvement
Ravenswood Family Health Network – Construction of ADA ramp ADA Ramp Improvement Project-City of Palo Alto
$300,000
Sub-total $300,000
Housing Rehabilitation
Rebuilding Together Peninsula – Safe at Home $73,135
Sub-Total $73,135
Grand Total 746,715
Table 1: Fiscal Year 2021 CDBG Budget

3. Evaluation of past performance
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Substantial Amendment 04/10/2023
Annual Action Plan
2021
4 OMB Control No: 2506-0117 (exp. 09/30/2021)
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9 This is an evaluation of past performance that helped lead the grantee to choose its goals or projects.

The City is responsible for ensuring compliance with all rules and regulations associated with the CDBG entitlement grant program. The City’s Annual Action Plans and Consolidated Annual Performance and Evaluation Reports (CAPER) have provided many details about the goals, projects and programs completed by the City. A review of past CAPERs reveals a strong record of performance in the use of CDBG funds. For example, during the 2015-2020 Consolidated Plan period, 244 affordable rental units were rehabilitated, 130 jobs were created or retained, and nearly 2,600 households were assisted through public service activities for low- and moderate-income housing The City evaluates the performance of subrecipients on a semiannual basis. Subrecipients are required to submit semiannual progress reports, which include client data, performance objectives, as well as data on outcome measures. Prior to the start of the program year, program objectives are developed collaboratively by the subrecipient and the City, ensuring that they are aligned with the City's overall goals and strategies. The City utilizes the semiannual reports to review progress towards annual goals.

4. Summary of Citizen Participation Process and consultation process Summary from citizen participation section of plan.

The City solicited input throughout the development of the FY 2021-22 Annual Action Plan. As required by HUD, the City provides multiple opportunities for public review and comment on the Action Plan and on any substantial amendments to it. Per the City’s adopted Citizen Participation Plan, the City held a 30-day public review comment period for the Action Plan. The City published notifications of upcoming public hearings and the 30-day public review comment period in a local newspaper of general circulation, on the City’s CDBG webpage and via email blasts to stake holders. The City held two advertised public hearings on March 11, 2021 and May 3, 2021. The Action Plan 30-day public review period occurred from March 15, 2021 through April 16, 2021.

5. Summary of public comments
This could be a brief narrative summary or reference an attached document from the Citizen Participation section of the Con Plan.

There were no public comments received during the public review period.

6. Summary of comments or views not accepted and the reasons for not accepting them The City accepts and responds to all comments that are submitted. As mentioned above, no public comments were received regarding the FY 2021-22 Action Plan.

7. Summary
Please see above.

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9 PR-05 Lead & Responsible Agencies - 91.200(b)

1. Agency/entity responsible for preparing/administering the Consolidated Plan The following are the agencies/entities responsible for preparing the Consolidated Plan and those responsible for administration of each grant program and funding source.

Agency Role Name Department/Agency
Lead Agency PALO ALTO
CDBG Administrator PALO ALTO Department of Planning & Development Services HOPWA Administrator
HOME Administrator
HOPWA-C Administrator
Table 1 – Responsible Agencies
Narrative
The City is the Lead and Responsible Agency for the United States Department of Housing and Urban Development’s (HUD) entitlement programs in Palo Alto. The Department of Planning and Development Services is responsible for administering the City’s CDBG program. The City joined the HOME Consortium in 2015 and receives federal HOME Investment Partnership (HOME) funds through the County.

Entitlement jurisdictions receive entitlement funding (i.e., non-competitive, formula funds) from HUD. HUD requires the City to submit a five- year Consolidate Plan and Annual Action Plan to HUD listing priorities and strategies for the use of its federal funds.

The Consolidate Plan helps local jurisdictions to assess their affordable housing and community development needs and market conditions to meet the housing and community development needs of its populations. As a part of the Consolidate Plan process for 2020-2025, the City collaborated with the County of Santa Clara(County) as the Urban County representing the Cities of Campbell, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Morgan Hill, and Saratoga; the Cities of Cupertino, Gilroy, Mountain View, Sunnyvale, San José, and Santa Clara; and the Santa Clara County Housing Authority (SCCHA) to identify and prioritize housing and community development needs across the region, and to Item 9
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9 develop strategies to meet those needs. The FY 2021-22 Annual Action Plan represents the second year of CDBG funding of the 2020-2025 Consolidated Plan.

Consolidated Plan Public Contact Information
Erum Maqbool, CDBG Staff Specialist
City of Palo Alto Department of Planning and Development Services 250 Hamilton Avenue, 5th Floor
Palo Alto, CA 94301
E-mail: [email protected]
Phone: (650) 329-2660
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9 AP-10 Consultation - 91.100, 91.200(b), 91.215(l)

1. Introduction
The Action Plan is a one-year plan which describes the eligible programs, projects and activities to be undertaken with funds expected during FY 2021-22 and their relationship to the priority housing, homeless and community development needs outlined in the 2020-25 Consolidated Plan.

Provide a concise summary of the jurisdiction’s activities to enhance coordination between public and assisted housing providers and private and governmental health, mental health and service agencies (91.215(l)).

During Fiscal Year 2021-22, the City will continue to work with non-profit organizations to provide programs and services for low-income households; private industry, including financial and housing development groups, to encourage the development of affordable housing opportunities regionally and within the City; and other local jurisdictions, including the County of Santa Clara, in carrying out and monitoring regional projects in a coordinated and cost-effective manner. The City will provide technical assistance to the public service agencies it funds with CDBG dollars and will continue to attend the biweekly Regional CDBG/Housing Coordinators meetings.

Describe coordination with the Continuum of Care and efforts to address the needs of homeless persons (particularly chronically homeless individuals and families, families with children, veterans, and unaccompanied youth) and persons at risk of homelessness.

The Santa Clara County Office of Supportive Housing is the administrator of the regional Continuum of Care (CoC). The City continuously coordinates with the Santa Clara County CoC to end and prevent homelessness in the County. City staff attends monthly meetings. The Santa Clara County CoC is a group comprising stakeholders throughout the County, including governmental agencies, homeless service and shelter providers, homeless population, housing advocates, affordable housing developers, and various private parties, including businesses and foundations.

The City’s representation on the CoC Board is its Human Services Manager. Members of the CoC meet monthly to plan CoC programs, identify gaps in homeless services, establish funding priorities, and pursue a systematic approach to addressing homelessness. City staff, as well as staff of other cities, meet and consult with the County’s CoC staff during the bi-weekly countywide CDBG Coordinators Group meetings, and communicate more frequently via email and/or phone on joint efforts.

The CoC is governed by the CoC Board, which takes a systems-change approach to preventing and ending homelessness. This same CoC Board is comprised of the same individuals who serve on the Destination: Home (Destination Home) Leadership Board. Destination Home is a public-private partnership that is committed to collective impact strategies to end chronic homelessness. Destination Home is the governing body for the CoC and is responsible for implementing by-laws and operational protocols of the CoC.

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9 Regional efforts of the CoC include the development of The Community Plan to End Homelessness, which identifies strategies to address the needs of people experiencing homelessness in the County, including chronically homeless individuals and families, families with children, veterans, and unaccompanied youth. The plan also addresses the needs of persons at risk of homelessness. The CoC is now in the process of updating a new plan for the next five years and the City plans to participate in these efforts.

Also, during the development of the 2020-25 ConPlan, the City consulted both the CoC and County Office of Supportive Housing for their expertise and experience for identifying community needs.

Describe consultation with the Continuum(s) of Care that serves the jurisdiction’s area in determining how to allocate ESG funds, develop performance standards for and evaluate outcomes of projects and activities assisted by ESG funds, and develop funding, policies and procedures for the operation and administration of HMIS The City is not an ESG entitlement jurisdiction and therefore does not receive ESG funds. However, the City does administer federal grant programs that help homeless and low-income families in Santa Clara County. The City also helps fund and conduct the Point in Time (PIT) count, the biennial regional collaborative effort to count and survey people experiencing homelessness. The latest count and survey were conducted in January 2019. The data from the 2019 County of Santa Clara PIT count is used to plan, fund, and implement actions for reducing chronic homelessness and circumstances that bring about homelessness.

The Santa Clara County Office of Supportive Services takes the role of Homeless Management Information System (HMIS) administration. The County, and its consultant Bitfocus, work jointly to operate and oversee HMIS. Both software and HMIS system administration are now provided by Bitfocus. Funding for HMIS in Santa Clara County comes from HUD, the County of Santa Clara, and the City of San Jose. The CountyÃ¿Â¢Ã¿Â¿Ã¿Â¿s HMIS is used by many City service providers across the region to record information and report outcomes.

2. Agencies, groups, organizations and others who participated in the process and consultations
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9 Table 2 – Agencies, groups, organizations who participated Agency/Group/Organization Boys and Girls Clubs of Silicon Valley Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment 1 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Healthier Kids Foundation Santa Clara County Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment 2 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization COMMUNITY SERVICES AGENCY OF MOUNTAIN VIEW AND LOS ALTOS Agency/Group/Organization Type Services-Elderly Persons What section of the Plan was addressed by Consultation? Housing Need Assessment 3 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/15/19 as part of the 2020-25 Consolidated Plan process Agency/Group/Organization San Jose Conservation Corps Charter Agency/Group/Organization Type Services-Education
4 What section of the Plan was addressed by Consultation? Housing Need Assessment Item 9
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9 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Gilroy focus group meeting on 11/18/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization CommUniverCity San Jose
Agency/Group/Organization Type Services-Education
What section of the Plan was addressed by Consultation? Strategic Plan 5 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/25/19 and regional forum meeting in San Jose on 11/20/19 as part of the 2020-25 Consolidated Plan process.

Agency/Group/Organization The Health Trust
Agency/Group/Organization Type Services-Persons with Disabilities Services-Persons with HIV/AIDS
Services-Health
What section of the Plan was addressed by Consultation? Housing Need Assessment Strategic Plan
6 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 11/21/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Rebuilding Together, Silicon Valley Agency/Group/Organization Type Services - Housing
What section of the Plan was addressed by Consultation? Housing Need Assessment 7 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/21/19 and San Jose regional forum on 11/20/19 as part of the 2020-25 Consolidated Plan process
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9 Agency/Group/Organization City of Cupertino Community Development Department Housing Division
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
8 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?

Agency/Group/Organization City of Gilroy9
Agency/Group/Organization Type Other government - Local Item 9
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9 What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Market Analysis
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was consulted and provided emailed feedback as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Mountain View10
Agency/Group/Organization Type Other government - Local Item 9
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9 What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Market Analysis
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization BILL WILSON CENTER
Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Families with children
11 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19, community meetings on 11/4/19 at Morgan Hill and 11/20/19 at Roosevelt as part of the 2020-25 Consolidated Plan process Agency/Group/Organization HEART OF THE VALLEY
Agency/Group/Organization Type Services-Elderly Persons 12 What section of the Plan was addressed by Consultation? Housing Need Assessment Item 9
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9 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was consulted through interview questions. Agency provided emailed feedback as part of the 2020-25 Consolidated Plan process Agency/Group/Organization City of San Jose
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 13 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was contacted for consultation as a partner in addressing the needs of the County as part of the 2020-25 Consolidated Plan process Agency/Group/Organization CITY OF MORGAN HILL
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 14 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Sunnyvale
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 15 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Palo Alto on 11/7/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Servant Partners16
Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization
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9 What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Attended community meeting on 11/13/19 at Hillview library as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization SENIOR ADULTS LEGAL ASSISTANCE (SALA) Agency/Group/Organization Type Service-Fair Housing
What section of the Plan was addressed by Consultation? Housing Need Assessment 17 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Palo Alto and San Jose public engagement meeting on 11/17/19 and 11/19/19, regional forum meeting on 11/4/19 at Morgan Hill and 11/7/19 at Palo Alto as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization HomeFirst
Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Chronically homeless
18 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Santa Clara County Office of Supportive Housing Agency/Group/Organization Type Other government - County What section of the Plan was addressed by Consultation? Housing Need Assessment 19 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 and at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan process
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9 Agency/Group/Organization City of Santa Clara
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 20 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Vista Center for the Blind and Visually Impaired Agency/Group/Organization Type Services-Persons with Disabilities What section of the Plan was addressed by Consultation? Non-Homeless Special Needs 21 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 12/9/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Destination: Home
Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed by Consultation? Housing Need Assessment 22 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 11/11/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization COMMUNITY SOLUTIONS
Agency/Group/Organization Type Services-Victims of Domestic Violence What section of the Plan was addressed by Consultation? Housing Need Assessment 23 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
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9 Agency/Group/Organization St Mary Parish
Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization
What section of the Plan was addressed by Consultation? Housing Need Assessment 24 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Community and Neighborhood Revitalization Committee - Gilroy Agency/Group/Organization Type Community Organization
What section of the Plan was addressed by Consultation? Housing Need Assessment 25 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency co-hosted the AFH and ConPlan joint meeting on 12/11/18 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
Identify any Agency Types not consulted and provide rationale for not consulting Through the countywide development of the Consolidated Plan, AT@T was consulted regarding broadband. For Palo Alto specific information on this topic, staff in the future will contact the City of Palo Alto Utilities Advisory Commission regarding the Cityâ¿¿s Fiber Network Expansion Project. In regard to resilience specific organizations, Grid Alternatives, an environmental sustainability organization, provided a stakeholder interview during the Consolidated Plan process. Staff plans to expand outreach in this area through contact with the Santa Clara County Office of Emergency Management and the City of Palo Alto Emergency Services which has developed a local hazard mitigation plan.

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9 Other local/regional/state/federal planning efforts considered when preparing the Plan Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Continuum of Care Regional Continuum of
Care Council
Identifies housing inventory count to facilitate the provision of housing services to those experiencing homelessness
City of Palo Alto
Housing Element
(2015-2023)
City of Palo Alto Identifies barriers to affordable housing, such as land-use controls, inefficiencies of the development review process, and strategies to alleviate such barriers 2012-2014
Comprehensive HIV
Prevention and Care Pl
Santa Clara County HIV
Planning Council for
Prevention and Care
This plan provides a roadmap for the Santa Clara County HIV Planning Council for Prevention and Care to provide a comprehensive and compassionate system of HIV prevention and care services for the County. This effort aligns with the Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements
SCCHA Moving to Work
Annual Plan
Santa Clara County
Housing Authority
Addresses housing authority updates and strategies pertaining to public housing and vouchers
Regional Housing Need
Plan for San Francisco
Bay A
Association of Bay Area
Governments
This plan analyzes the total regional housing need for the County and all of the Bay Area.

This effort aligns with the Strategic Plan's goal to assist in the creation and preservation of affordable housing.

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9 Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? City of Palo Alto
Comprehensive Plan
(2030)
City of Palo Alto
This plan is the primary tool for guiding future development in Palo Alto. It provides a guide for long-term choices and goals for the City future. This effort aligns with the Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements Table 3 – Other local / regional / federal planning efforts Narrative
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AP-12 Participation - 91.401, 91.105, 91.200(c)

1. Summary of citizen participation process/Efforts made to broaden citizen participation Summarize citizen participation process and how it impacted goal-setting The Planning and Development Services Department is the lead agency for overseeing the development of the Consolidated Plan and Action Plan. Per the City’s adopted Citizen Participation Plan, the City is to allow a 30-day public review and comment period for the Action Plan. The City has published notifications of upcoming public hearings and the 30-day public review comment period in the local newspaper of general circulation, on its CDBG webpage and via email blasts. The City held two advertised public hearings on March 11, 2021 and May 3, 2021. The Action Plan 30-day public review period occurred from March 15, 20121 through April 16, 2021. The City did not receive any public comments on the Action Plan.

Citizen Participation Outreach
Sort
Orde
r
Mode of
Outreac
h
Target of
Outreac
h
Summary
of
response/
attendanc
e
Summary
of
comment
s receive
d
Summary o
f comment
s not
accepted
and reason
s
URL (If applicable)
1 Public
Hearing
Non-
targeted/
broad
communi
ty
The
Human
Relations
Commissi
on met on
March 11,
2021 to
discuss
the
FY2021-
22 funding
allocations
and
review the
draft
FY2021-22
Annual
Action
Plan
One
member
of the
public
provided
comment
s on the
funding
allocation
. Three
members
represent
ing two
funding
applicant
s
provided
comment
s at the
meeting.

All
comments
were
accepted.
https://www.cityofpaloalto.o
rg/files/assets/public/agenda
s-minutes-reports/agendas-
minutes/human-relations-
commission/2021/03-11-21-
hrc-agenda.pdf
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Orde
r
Mode of
Outreac
h
Target of
Outreac
h
Summary
of
response/
attendanc
e
Summary
of
comment
s receive
d
Summary o
f comment
s not
accepted
and reason
s
URL (If applicable)
2 Public
Hearing
Non-
targeted/
broad
communi
ty
The City
Council
met on
May 3,
2021 to
discuss
the
FY2021-22
funding
allocations
and adopt
the draft
FY2021-22
AAP
One
member
of the
public
provided
comment
s on the
funding
allocation
.

All
comments
were
accepted.
https://www.cityofpaloalto.o
rg/files/assets/public/agenda
s-minutes-reports/agendas-
minutes/city-council-
agendas-minutes/2021/05-
03-21-ccm-agenda-revis
3 Newspa
per Ad
Non-
targeted/
broad
communi
ty
Notice of
Public
Hearing
and Public
Comment
Period on
the Draft
AAP was
published
in the
Daily Post
on
February
25, 2021.

N/A N/A
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Annual Action Plan
2021
22 OMB Control No: 2506-0117 (exp. 09/30/2021)
Sort
Orde
r
Mode of
Outreac
h
Target of
Outreac
h
Summary
of
response/
attendanc
e
Summary
of
comment
s receive
d
Summary o
f comment
s not
accepted
and reason
s
URL (If applicable)
4 Newspa
per Ad
Non-
targeted/
broad
communi
ty
Notice of
Public
Hearing
and Public
Comment
Period on
the Draft
AAP was
published
in the
Daily Post
on March
6, 2021.

N/A N/A
5 Newspa
per Ad
Non-
targeted/
broad
communi
ty
Notice of
City
Council
Public
Hearing
was
published
in the
Daily Post
on April
17, 2021.

N/A N/A
6 Internet
Outreac
h
Non-
targeted/
broad
communi
ty
Draft AAP
FY2021-22
for public
review
and
comments
for posted
at the City
of Palo
Alto's
CDBG
webpage.

N/A N/A
https://www.cityofpaloalto.o
rg/Departments/Planning-
Development-Services/Long-
Range-Planning/Community-
Development-Block-Grant
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Annual Action Plan
2021
23 OMB Control No: 2506-0117 (exp. 09/30/2021)
Sort
Orde
r
Mode of
Outreac
h
Target of
Outreac
h
Summary
of
response/
attendanc
e
Summary
of
comment
s receive
d
Summary o
f comment
s not
accepted
and reason
s
URL (If applicable)
7 Email
Blasts
Non-
targeted/
broad
communi
ty
Notice of
City
Council
Public
Hearing
was
emailed to
approxima
tely 55
stakehold
ers.

N/A N/A
Table 4 – Citizen Participation Outreach
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Annual Action Plan
2021
24 OMB Control No: 2506-0117 (exp. 09/30/2021)
Expected Resources
AP-15 Expected Resources - 91.420(b), 91.220(c)(1,2)
Introduction
In FY 2021-22, the City will allocate $746,715 to eligible activities that address the needs identified in the Consolidated Plan. It should be noted that while the HUD CDBG allocations are critical, the allocations are not sufficient to overcome barriers and address all needs that low-income individuals and families face in attaining self-sufficiency. The City will continue to leverage additional resources as described below to provide support and services to the populations in need within the community. The following section discusses the anticipated resources available during the next five years for community development activities.

Anticipated Resources
Expected Amount Available Year 1Program Source
of Funds
Uses of Funds
Annual
Allocation:
$
Program
Income:
$
Prior Year
Resources:
$
Total:
$
Expected
Amount
Available
Remainder
of ConPlan
$
Narrative Description
CDBG public -
federal
Acquisition
Admin and
Planning
Economic
Development
Housing
Public
Improvements
Public Services 536,756 136,049 73,910 746,715 2,250,000 CDBG funds will be used for the creation
and preservation of affordable rental
units, improvements in lower income
neighborhoods, and public services that
benefit low income and special needs
households
Other public -
federal
Other
0 0 0 0 0

Table 2 - Expected Resources – Priority Table
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Explain how federal funds will leverage those additional resources (private, state and local funds), including a description of how matching requirements will be satisfied
Entitlement Funds Leverage, in the context of the CDBG and HOME Investment Partnerships Program (HOME), means bringing other local, state, and federal financial resources to maximize the reach and impact of the City’s HUD Programs. HUD, like many other federal agencies, encourages the recipients of federal monies to demonstrate that efforts are being made to strategically leverage additional funds in order to achieve greater results.

The City joined the Santa Clara County's HOME Consortium in 2015 and does not receive federal HOME funds on an entitlement basis from HUD. The HOME Consortia consists of the cities of Cupertino, Gilroy, Palo Alto, and the Urban County. HOME funds can be used to fund eligible affordable housing projects for acquisition, construction and rehabilitation. Starting in FY 2015-16 developers of affordable housing projects were eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto. Applications will be directly submitted through the County's request for proposal process for available HOME funds. Certain nonprofit organizations known as Community Housing Development Organizations (CHDOs) may also apply for funding from State HCD for housing projects located within Palo Alto. The City received one HOME grant from 1992 HOME funding for the Barker Hotel project. Proceeds from HOME loan repayments must be deposited into a HOME Program Income Fund and used in accordance with the HOME program regulations. In addition, the County will only fund a project that has the local support of the City. If the City receives HOME dollars from its participation in the HOME consortium, the required 25 percent matching funds will be provided from the City’s Affordable Housing Fund, which is comprised of two sub-funds: The Commercial Housing Fund & the Residential Housing Fund. To date, no projects within the City have been funded through the HOME Consortium. Moving forward, the City plans to increase outreach to developers in the City to provide additional information on the HOME Consortium & available funding.

Other State & Federal Grant Programs In addition to the CDBG entitlement dollars, the federal government has several other funding programs for community development & affordable housing activities. These include: Section 8 Housing Choice Voucher Program, Section 202, Section 811, the Federal Home Loan Bank Affordable Housing Program (AHP) & others. It should be noted that in most cases the City would not be the applicant for these funding sources as many of these programs offer assistance to affordable housing developers rather than local jurisdictions.

The State of California has recently passed approximately 20 bills with the intent of increasing or preserving affordable housing with the State.

According to the Governor’s State of the State address, bills that help increase housing production, both market-rate & affordable, will be a priority. The City will continue to track & look for opportunities to leverage State resources for the City.

Local Housing & Community Development Sources: Other local resources that support housing & community development programs include:

Palo Alto Commercial Housing Fund & Palo Alto Residential Housing Fund. The City will continue to seek opportunities for projects that meet Item 9
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local bond requirements in order to bring additional resources to help the City’s affordable housing shortage.

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Annual Action Plan
2021
27 OMB Control No: 2506-0117 (exp. 09/30/2021)
If appropriate, describe publically owned land or property located within the jurisdiction that may be used to address the needs identified in the plan The City has no surplus public land. However, in 2019, the Governor Newsome signed Executive Order N-06-19 that ordered the California Department of General Services (DGS) and the California Department of Housing and Community Development (HCD) to identify and prioritize excess state- owned property and aggressively pursue sustainable, innovative, cost-effective housing projects. There is no excess state property in the City of Palo Alto.

Discussion
Please see information provided in previous sections.

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Annual Action Plan
2021
28 OMB Control No: 2506-0117 (exp. 09/30/2021)
Annual Goals and Objectives
AP-20 Annual Goals and Objectives - 91.420, 91.220(c)(3)&(e) Goals Summary Information
Sort
Order
Goal Name Start
Year
End
Year
Category Geographic
Area
Needs Addressed Funding Goal Outcome Indicator
1 Affordable
Housing
2020 2025 Affordable
Housing
Affordable Housing CDBG:
$73,135
Homeowner Housing Rehabilitated:
6 Household Housing Unit
2 Homelessness 2020 2025 Homeless Homelessness CDBG:
$56,080
Public service activities other than
Low/Moderate Income Housing
Benefit: 169 Persons Assisted
3 Strengthen
Neighborhoods
2020 2025 Non-Homeless
Special Needs
Non-Housing
Community
Development
Community Services
and Public
Improvements
CDBG:
$324,021
Public Facility or Infrastructure
Activities other than Low/Moderate
Income Housing Benefit: 1,200
Persons Assisted
Public service activities other than
Low/Moderate Income Housing
Benefit: 74 Persons Assisted
4 Fair Housing 2020 2025 Non-Housing
Community
Development
Fair Housing CDBG:
$33,698
Public service activities other than
Low/Moderate Income Housing
Benefit: 13 Persons Assisted
5 Economic
Development
2015 2020 Non-Housing
Community
Development
Economic
Development
CDBG:
$160,477
Jobs created/retained: 15 Jobs
Table 3 – Goals Summary
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2021
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Goal Descriptions
Goal Name Affordable Housing1
Goal
Description
Assist in the creation and preservation of affordable housing for low income and special needs households.

Goal Name Homelessness2
Goal
Description
Support activities to prevent and end homelessness, such as funding affordable housing opportunities, resource centers for homeless individuals, and support for tenants of single-room occupancy units.

Goal Name Strengthen Neighborhoods3
Goal
Description
Provide community services and public improvements to benefit low-income and special needs households. This includes assisting those with disabilities to transition from unstable housing to permanent housing, supporting residents of long- term care facilities, and supporting individuals experiencing domestic violence.

Goal Name Fair Housing4
Goal
Description
Promote fair housing choice by funding fair housing organizations to provide fair housing services, such as education, tenant-landlord mediation, and testing.

Goal Name Economic Development5
Goal
Description
Support economic development activities that promote employment growth and help lower-income people secure and maintain jobs. This includes funding nonprofits working toward developing the skills of low-income and homeless individuals.

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Annual Action Plan
2021
30 OMB Control No: 2506-0117 (exp. 09/30/2021)
AP-35 Projects - 91.420, 91.220(d)
Introduction
The Consolidated Plan goals below represent high priority needs for the City of Palo Alto (City) and serve as the basis for the strategic actions the City will use to meet these needs. The goals, listed in no particular order, are:

1. Assist in the creation and preservation of affordable housing for low income and special needs households.

2. Support activities to end homelessness.

3. Support activities that strengthen neighborhoods through the provision of community services and public improvements to benefit low income and special needs households.

4. Promote fair housing choice.

5. Expand economic opportunities for low income households. # Project Name
1 Ravenswood Family Health Network: ADA Accessible Clinic Entrance and Exit at the Palo Alto Clinic ADA Ramp Improvement Project-City of Palo Alto
2 Catholic Charities of Santa Clara County: Long Term Care Ombudsman 3 Silicon Valley Independent Living Center: Housing and Emergency Housing Services. 4 Project Sentinel - Fair Housing Services
5 City of Palo Alto - Planning and Administration
6 Downtown Streets Inc. - Workforce Development Program. 7 Rebuilding Together Peninsula Safe at Home
8 LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management 9 Alta Housing (Former: Palo Alto Housing Corporation Management and Services Corporation) Table 4 – Project Information
Describe the reasons for allocation priorities and any obstacles to addressing underserved needs
The City awards CDBG funding to projects and programs that will primarily benefit low-income, homeless and special needs households. The City operates on a two-year grant funding cycle for CDBG public service grants and a one-year cycle for CDBG capital housing rehabilitation and public facilities and improvement projects. Projects are only considered for funding within the Consolidated Plan period if they address the goals discussed above.

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Annual Action Plan
2021
31 OMB Control No: 2506-0117 (exp. 09/30/2021)
AP-38 Project Summary
Project Summary Information
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Annual Action Plan
2021
32 OMB Control No: 2506-0117 (exp. 09/30/2021)
Project Name Ravenswood Family Health Network: ADA Accessible Clinic Entrance and Exit at the Palo Alto Clinic ADA Ramp Improvement Project-City of Palo Alto
Target Area Citywide
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements Funding CDBG: $300,000
Description ADA Accessible Clinic Entrance and Exit at the Palo Alto Clinic. Eligible Activity (Matrix Code):03P. CDBG National Objective:570.208(a)(2).

CDBG Citation:24 CFR 570.201(C). Recipient Type: LMC. This project will help in rehabilitating existing ramp and convert it into a safe and accessible ADA ramp at 270 Grant Ave, Palo Alto to allow for adequate social distancing to prevent the spread of COVID-19 as well as improve patients' access to the clinic. The City intends to fund and manage a major curb ramp improvement project that will bring an estimated 70 curb ramps up to current ADA accessibility standards. CDBG Eligible Activity: Public Facilities and Improvements: Health Facilities (HUD Matrix Code). The Project meets the following Consolidated Plan Goal(s):
#3 - Support provision of essential human services, particularly for special needs populations, and maintain/expand community facilities and infrastructure.

Target Date 6/30/2022 12/30/2023
Estimate the number
and type of families
that will benefit from
the proposed
activities
Approximately 1,200 Palo Alto residents belonging to 80% and low income bracket will benefit from the proposed activity Approximately 70 curb ramps at many intersections will be improved benefitting elderly populations and persons with disabilities. 2,283 persons in the City live with disabilities.

Location Description Palo Alto, CA 94306 Street intersection locations TBD 1 Planned Activities Project activities include removal of the existing ramp and replacement with an ADA accessible ramp and a stair option. Additionally, a motion sensor door will be installed to allow safe and easy access to the clinic.

The City intends to competitively bid the removal of noncompliant ADA intersections and installation of current DOT standard ADA ramp improvements to be completed in 2023.

Project Name Catholic Charities of Santa Clara County: Long Term Care Ombudsman Target Area
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements 2 Funding CDBG: $10,000
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Annual Action Plan
2021
33 OMB Control No: 2506-0117 (exp. 09/30/2021)
Description Long-Term Care Ombudsman Program. Eligible Activity (Matrix Code):05A. CDBG National Objective: 570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
The program will provide advocacy and complaint investigation for 50 elderly residents of long-term care facilities in Palo Alto.

Location Description Long-term care and skilled nursing facilities throughout the City.

Planned Activities Regular contact with Palo Alto Residential Care Facilities to observe and monitor conditions of care.

Project Name Silicon Valley Independent Living Center: Housing and Emergency Housing Services.

Target Area
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements Funding CDBG: $14,021
Description Housing and Emergency Housing Services. Eligible Activity (Matrix Code):05B. CDBG National Objective:570.208(a)(2). CDBG
Citation:570.201(e). Recipient Type: LMC
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
24 unduplicated Palo Alto residents will benefit from one on one housing assistance.

Location Description Citywide
3 Planned Activities Silicon Valley Independent Living Center provides assistance for individuals with disabilities and their families to transition from homelessness, health care facilities, unstable or temporary housing to permanent affordable, accessible, integrated housing with emergency assistance, security deposits, rent, information, and referral, and other basic essentials.

Project Name Project Sentinel - Fair Housing Services
Target Area
4 Goals Supported Fair Housing
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Annual Action Plan
2021
34 OMB Control No: 2506-0117 (exp. 09/30/2021)
Needs Addressed Fair Housing
Funding CDBG: $33,698
Description Fair Housing Services. Eligible Activity (Matrix Code):21D. CDBG National Objective:570.208(a)(2). CDBG Citation: 570.206(c). Recipient Type: LMC Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
13 unduplicated individuals will be provided with fair housing services of complaint counseling, investigation and where appropriate enforcement referral.

Location Description Citywide
Planned Activities Project Sentinel will provide community education and outreach regarding fair housing law and practices, investigation, counseling and legal referral for victims of housing discrimination, and analyses for City staff and officials regarding fair housing practices. California and federal fair housing laws assure specific protected classes the right to be treated in terms of their individual merits and qualifications in seeking housing. Unfortunately, some people are not aware of the law or their rights.

Project Name City of Palo Alto - Planning and Administration Target Area
Goals Supported Affordable Housing
Homelessness
Strengthen Neighborhoods
Fair Housing
Economic Development
Needs Addressed Affordable Housing
Homelessness
Community Services and Public Improvements
Fair Housing
Economic Development
Funding CDBG: $99,304
Description Planning and Administration: CDBG Citation: 570.206(a) 5 Target Date 6/30/2022
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Annual Action Plan
2021
35 OMB Control No: 2506-0117 (exp. 09/30/2021)
Estimate the number
and type of families
that will benefit from
the proposed
activities
The City will provide general administrative support to the CDBG program.

Location Description Citywide
Planned Activities Administer the Administrative costs for the overall management, coordination, and evaluation of the CDBG program, and the project delivery costs associated with bringing projects to completion.

Project Name Downtown Streets Inc. - Workforce Development Program.

Target Area
Goals Supported Economic Development
Needs Addressed Economic Development
Funding CDBG: $160,477
Description Workforce Development Program. Eligible Activity (Matrix Code):
05H.CDBG National Objective: 570.208(a)(2)(A). CDBG Citation:
570.204(a)(2). Recipient Type: LMC
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
15 unduplicated homeless and unemployed persons will be placed in jobs through job training/employment readiness classes and outreach to local employers.

Location Description Citywide
6 Planned Activities The Workforce Development Program will provide a transition from unemployment and homelessness to regular employment and housing through case management, job training, mentoring, housing, and transportation assistance. Downtown Streets Team will screen and prepare applicants and will use their community connections to provide training and job opportunities.

Project Name Rebuilding Together Peninsula Ã¿Â¢Ã¿Â¿Ã¿Â¿ Safe at Home Target Area
Goals Supported Affordable Housing
Needs Addressed Affordable Housing
7 Funding CDBG: $73,135
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Annual Action Plan
2021
36 OMB Control No: 2506-0117 (exp. 09/30/2021)
Description Safe at Home Program. Eligible Activity (Matrix Code): 14A/B.CDBG National Objective: 570.208(a)(3). CDBG Citation: 570.202(b)(11).

Recipient Type: LMH
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
6 households
Location Description Citywide
Planned Activities Provide home safety repairs, mobility and accessibility improvements for low- income households in Palo Alto with the primary consideration being the correction of safety hazards.

Project Name LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management
Target Area
Goals Supported Homelessness
Needs Addressed Homelessness
Funding CDBG: $31,545
Description Opportunity Services Center Eligible Activity (Matrix Code):03TCDBG National Objective: 570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities
38 unduplicated individuals (homeless and/or very low income individuals per year) will receive case management services including assistance with housing/job
searches, referrals and mentoring through the Opportunity Services Center.

Location Description 33 Encina Way, Palo Alto, CA 94301 8 Planned Activities Case management services will be provided to Opportunity Services Center and Hotel De Zink clients in locating housing and/or employment and be connected to
benefits.

Project Name Alta Housing (Former: Palo Alto Housing Corporation Management and Services Corporation)
Target Area
9 Goals Supported Homelessness
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Annual Action Plan
2021
37 OMB Control No: 2506-0117 (exp. 09/30/2021)
Needs Addressed Homelessness
Funding CDBG: $24,535
Description SRO Resident Support Program. Eligible Activity (Matrix Code):05OCDBG National Objective:570.208(a)(2). CDBG Citation:570.201(e). Recipient Type: LMC
Target Date 6/30/2022
Estimate the number
and type of families
that will benefit from
the proposed
activities

Location Description 439 Emerson Street, Palo Alto, CA 94301 735 Alma Street Palo Alto, CA 94301
Planned Activities Palo Alto Housing Corporation engages a service coordinator to provide 40 hours weekly services to provide case management and support counseling services to residents at Alma Place and Barker Hotel to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention and case management. Both Alma Place and Barker Hotel are single-room occupancy facilities.</ Item 9
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Annual Action Plan
2021
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AP-50 Geographic Distribution - 91.420, 91.220(f)
Description of the geographic areas of the entitlement (including areas of low-income and minority concentration) where assistance will be directed The City allocates CDBG funds to benefit low-moderate income (LMI) households and does not have target areas. Instead, the City focuses its services and capital improvements across the City as a whole.

Geographic Distribution
Target Area Percentage of Funds
Table 5 - Geographic Distribution
Rationale for the priorities for allocating investments geographically Not applicable.

Discussion
Please see discussion above.

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Annual Action Plan
2021
39 OMB Control No: 2506-0117 (exp. 09/30/2021)
Affordable Housing
AP-55 Affordable Housing - 91.420, 91.220(g)
Introduction
One Year Goals for the Number of Households to be Supported Homeless
Non-Homeless
Special-Needs
Total
Table 6 - One Year Goals for Affordable Housing by Support Requirement One Year Goals for the Number of Households Supported Through Rental Assistance
The Production of New Units
Rehab of Existing Units
Acquisition of Existing Units
Total
Table 7 - One Year Goals for Affordable Housing by Support Type Discussion
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Annual Action Plan
2021
40 OMB Control No: 2506-0117 (exp. 09/30/2021)
AP-60 Public Housing - 91.420, 91.220(h)
Introduction
Actions planned during the next year to address the needs to public housing Actions to encourage public housing residents to become more involved in management and participate in homeownership
If the PHA is designated as troubled, describe the manner in which financial assistance will be provided or other assistance
Discussion
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Annual Action Plan
2021
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AP-65 Homeless and Other Special Needs Activities - 91.420, 91.220(i) Introduction
Describe the jurisdictions one-year goals and actions for reducing and ending homelessness including
Reaching out to homeless persons (especially unsheltered persons) and assessing their individual needs
Addressing the emergency shelter and transitional housing needs of homeless persons Helping homeless persons (especially chronically homeless individuals and families, families with children, veterans and their families, and unaccompanied youth) make the transition to permanent housing and independent living, including shortening the period of time that individuals and families experience homelessness, facilitating access for homeless individuals and families to affordable housing units, and preventing individuals and families who were recently homeless from becoming homeless again
Helping low-income individuals and families avoid becoming homeless, especially extremely low-income individuals and families and those who are: being discharged from publicly funded institutions and systems of care (such as health care facilities, mental health facilities, foster care and other youth facilities, and corrections programs and institutions); or, receiving assistance from public or private agencies that address housing, health, social services, employment, education, or youth needs.

Discussion
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Annual Action Plan
2021
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AP-75 Barriers to affordable housing -91.420, 91.220(j) Introduction
The incorporated and unincorporated jurisdictions within the County face barriers to affordable housing that are common throughout the Bay Area. High on the list of market barriers is the lack of developable land, which increases the cost of available lands and increases housing development costs. Local opposition is another common obstacle as many neighbors have strong reactions to infill and affordable housing developments. Their opposition is often based on misconceptions, such as a perceived increase in crime; erosion of property values; increase in parking and traffic congestion; and overwhelmed schools. However, to ensure a healthy economy the region must focus on strategies and investment that provide housing for much of the region’s workforce – for example, sales clerks, secretaries, waiters, baristas, teachers, and health service workers – whose incomes significantly limit their housing choices.

It should be noted that in a constrained housing supply market, when housing developments produce housing that is relatively affordable, higher income buyers and renters generally outbid lower income households. A home’s final sale or rental price will typically exceed the projected sales or rental costs.

Public subsidies are often needed to guarantee affordable homes for low and moderate income households.

Actions it planned to remove or ameliorate the negative effects of public policies that serve as barriers to affordable housing such as land use controls, tax policies affecting land, zoning ordinances, building codes, fees and charges, growth limitations, and policies affecting the return on residential investment
Palo Alto is addressing the barriers to affordable housing through:

•Context-Based Design Codes: The City adopted form-based codes in 2006 to ensure and encourage residential development by following context-based design guidelines to incentivize increased density needs.
•Density Bonus Ordinance: The City adopted a Density Bonus Ordinance in January 2014 to allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided, the regulations also allow for exceptions to applicable zoning and other development standards, to further encourage development of affordable housing. •Below Market Rate (BMR) Housing Program: Established in 1974, the City’s BMR requires developers to provide a certain percentage of units as BMR in every approved project of three units or more. The program originally required that for developments on sites of less than five acres, the developer must provide 15 percent of the total housing units as BMR housing units. If the site was larger than five acres, the developer was required to provide 20 percent of the units as BMR housing. The City of Palo Alto have historically used in-lieu fees and the use of development impact fees charged on new, market-rate housing and/or commercial Item 9
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development. The City updated its Commercial and Residential Impact Fee Nexus Studies and adopted two ordinances to make changes to its BMR program and adopted a new fee structure.

The ordinances became effective on June 19, 2017.
•Fair Housing: The City provides funding to Project Sentinel. Project Sentinel provides expertise in fair housing law and tenant-landlord disputes. Services include information, referrals, community outreach and education. In addition, Project Sentinel resolve fair housing complaints via investigation, mediation, education and outreach to both property owners and tenants about fair housing policies.
•Housing Implementation Ordinance (HIP): Effective May 2, 2019, this Ordinance adopted changes to the following zoning districts: Citywide – where multifamily uses are permitted, Multifamily Residential Districts (RM), Downtown (CD-C), California Avenue (CC ((2)), and El Camino Real (CS and CN).
•Affordable Housing (AH) Combining District: In 2018, The City Council adopted the Affordable Housing Combining District to provide flexible development standards beyond the State Density Bonus Law to allow 100% affordable housing projects located in a commercial zoned area. •Workforce Housing (WH) Combining District: The City Council also adopted in 2018 the Workforce Housing Combining District to encourage the development of housing within half- mile of major fixed rail transit by modifying flexible development standards for the public facilities (PF) zoning district.

Discussion
Please see above.

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AP-85 Other Actions - 91.420, 91.220(k)
Introduction
This section discusses the City’s efforts in addressing the underserved needs, expanding and preserving affordable housing, reducing lead-based paint hazards, and developing institutional structure for delivering housing and community development activities.

Actions planned to address obstacles to meeting underserved needs The diminishing amount of funds continues to be the most significant obstacle to addressing the needs of underserved populations. To address this, the City supplements its CDBG funding with other resources and funds, such as:
• In FY2020-21, The City’s Human Service Resource Allocation Process (HSRAP) provided $549,306 from the General Fund in support of human services. The HSRAP funds, in conjunction with the CDBG public service funds, are distributed to local non-profit agencies. Additionally, approximately $78,000 was provided to nonprofit organizations serving Palo Alto residents with short-term and/or urgent funding to address emergency, critical or emerging human services needs through the Emerging Needs Fund.
• The Palo Alto Commercial Housing Fund is used primarily to increase the number of new affordable housing units for Palo Alto’s work force. It is funded with mitigation fees required from developers of commercial and industrial projects.
• The Palo Alto Residential Housing Fund is funded with mitigation fees provided under Palo Alto’s BMR housing program from residential developers and money from other miscellaneous sources, such as proceeds from the sale or lease of City property. The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation or the preservation of existing housing for affordable housing.
• The City’s Below Market Rate Emergency Fund was authorized in 2002 to provide funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City’s stock of BMR ownership units. • HOME Program funds are available on an annual competitive basis through the State of California HOME program, and the County’s HOME Consortium. • The Housing Authority of the County of Santa Clara (HACSC) administers the federal Section 8 program countywide. The program provides rental subsidies and develops affordable housing for low income households, seniors and persons with disabilities living within the County.

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stock of BMR ownership units.
• The Commercial Housing Fund is used primarily to increase the number of new affordable housing units for Palo Alto’s work force.
• The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation or the preservation of existing housing for affordable housing. • The Density Bonus Ordinance adopted by the City Council in January 2014. The density bonus regulations allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided.
• The City’s participation in the County's HOME Consortium will allow developers of affordable housing projects to be eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto, including acquisition, construction and rehabilitation.

Actions planned to reduce lead-based paint hazards
The City’s housing and CDBG staff provides information and referral to property owners, developers, and non-profit organizations rehabilitating older housing about lead-based paint (LBP) hazards. Any house to be rehabilitated with City financial assistance is required to be inspected for the existence of LBP and LBP hazards. The City will provide financial assistance for the abatement of LBP hazards in units rehabilitated with City funding. The City also requires that contractors are trained and certified in an effort to decrease the risk of potential use of LBP in new units. All development and rehabilitation projects must be evaluated according to HUD’s Lead Safe Housing Rule 24 CFR Part 35.

Actions planned to reduce the number of poverty-level families The City, in its continuing effort to reduce poverty, will prioritize funding agencies that provide direct assistance to the homeless and those in danger of becoming homeless. In FY 2021-2022, these programs will include the following:
•LifeMoves provides basic necessities for persons who are homeless or at risk of becoming homeless. The Opportunity Services Center is a comprehensive, one-stop, multi-service, day drop-in center that provides critical services for homeless Palo Alto residents. Specifically, the facility provides showers, laundry, clothing, snacks, case management, and shelter/housing referral services.
•Palo Alto Housing Corporation will provide counseling and supportive case management services for low-income residents of single-room occupancy facilities to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention, and case management. •Downtown Streets Team works to reduce homelessness through a “work first” model.

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opportunities to homeless people, specifically in the downtown area.

Actions planned to develop institutional structure
The City is striving to improve intergovernmental and private sector cooperation to synergize efforts and resources and develop new revenues for community service needs and the production of affordable housing. Collaborative efforts include:
•Regular bi-weekly meetings between entitlement jurisdictions at the CDBG Coordinators Meeting and Regional Housing Working Group.
•Joint jurisdiction Request for Proposals and project review committees. •Coordination on project management for projects funded by multiple jurisdictions. •HOME Consortium meetings between member jurisdictions for affordable housing projects.

Actions planned to enhance coordination between public and private housing and social service agencies
The City benefits from a strong jurisdiction and region-wide network of housing and community development partners, such as the County and the Continuum of Care. To improve intergovernmental and private sector cooperation, the City will continue to participate with other local jurisdictions and developers in sharing information and resources.

In addition to the actions listed above, the City will continue to coordinate with the City’s human services funding efforts to comprehensively address community needs.

Discussion
Please see discussions above.

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Program Specific Requirements
AP-90 Program Specific Requirements - 91.420, 91.220(l)(1,2,4) Introduction
The following provides additional information about the CDBG program income and program requirements.

Community Development Block Grant Program (CDBG)
Reference 24 CFR 91.220(l)(1)
Projects planned with all CDBG funds expected to be available during the year are identified in the Projects Table. The following identifies program income that is available for use that is included in projects to be carried out.

1. The total amount of program income that will have been received before the start of the next program year and that has not yet been reprogrammed 0

2. The amount of proceeds from section 108 loan guarantees that will be used during the year to address the priority needs and specific objectives identified in the grantee's strategic plan. 0

3. The amount of surplus funds from urban renewal settlements 0

4. The amount of any grant funds returned to the line of credit for which the planned use has not been included in a prior statement or plan 0

5. The amount of income from float-funded activities 0
Total Program Income: 0
Other CDBG Requirements

1. The amount of urgent need activities 0

2. The estimated percentage of CDBG funds that will be used for activities that benefit persons of low and moderate income.Overall Benefit - A consecutive period of one, two or three years may be used to determine that a minimum overall benefit of 70% of CDBG funds is used to benefit persons of low and moderate income. Specify the years covered that include this Annual Action Plan. 100.00% Item 9
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Please see discussion above.

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Attachments
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Citizen Participation Comments
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DRAFT
Substantial Amendment #1
FY 2022-2023 Annual Action Plan
April 17, 2023
Initially Approved on June 20, 2022
Refer to page 37 for revisions.

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AP-05 Executive Summary - 91.200(c), 91.220(b)

1. Introduction
The City of Palo Alto (City) Fiscal Year (FY) 2022-23 One Year Action Plan contains the City’s one- year plan to carry out housing and community development activities funded by Federal formula grant funds received from the U.S. Department of Housing and Urban Development (HUD), Community Development Block Grant (CDBG) program. This Action Plan covers the third of five program years covered by the City’s 2020-2025 Consolidated Plan which was adopted by the Palo Alto City Council on June 15, 2020.

The Department of Planning and Development Services is the lead agency for the Consolidated Plan and submits the Annual Action Plan for the City’s CDBG program.

The CDBG federal appropriations for FY2022-2023 were released by HUD on May 13, 2022. The total amount available for allocation in FY2022-2023 is $653,168, which includes the entitlement grant ($513,168) and program income ($140,000) and is available for funding projects and programs during the 2022 Program Year.

The City’s Action Plan covers the time period from July 1, 2022, to June 30, 2023, (HUD Program Year 2022). The City’s FY 2022-23 Action Plan reports on the status of needs and outcomes the City expects to achieve in the coming year. All of the activities mentioned in this Action Plan are based on current priorities. By addressing these priorities, the City hopes to meet those objectives stated in the 2020- 2025 Consolidated Plan. All the proposed projects and activities are intended to principally benefit Item 9
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0 residents of the City who have extremely low-, low- and moderate- income, and populations that have special needs, such as the elderly, disabled, and homeless.

According to Quick facts data provided by the U.S. Census Bureau[1], the City's total resident population is 68,572, per the Census on April 1, 2020. The City has the most educated residents in the country and is one of the most expensive cities to live in. In Silicon Valley, the City is considered a central economic focal point and is home to over 9,483 businesses.

The Action Plan provides a summary of how the City will utilize its CDBG allocation to the meet the needs of the City’s lower income population. According to the U.S. census data, 6.1% of all residents within the City had incomes below the federal poverty level.

Additionally, according to the 2019 Point in Time Homeless Census[2], there are 299 unsheltered homeless individuals living within the City of Palo Alto. This number represents an increase of 17% from the 256 individuals that were counted in 2017.

As mentioned previously, a total of $653,168 is available for funding projects and programs during FY2022-23. In FY 2022-23 the City received $513,168 from the federal CDBG program and approximately $140,000 in program income. Table 1, “Fiscal Year 2023 CDBG Budget” below summarizes the uses of the funds proposed during FY 2022-23.

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3. Evaluation of past performance
This is an evaluation of past performance that helped lead the grantee to choose its goals or projects.

This is an evaluation of past performance that helped lead the grantee (the City) to choose its goals or projects.

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0 The City evaluates the performance of subrecipients on a semiannual basis. Subrecipients are required to submit semiannual progress reports, which include client data, performance objectives, as well as data on outcome measures. Prior to the start of the program year, program objectives are developed collaboratively by the subrecipient and the City, ensuring that they are aligned with the City's overall goals and strategies. The City utilizes the semiannual reports to review progress towards annual goals.

4. Summary of Citizen Participation Process and consultation process Summary from citizen participation section of plan.

The City solicited input throughout the development of the FY 2022-23 Annual Action Plan. As required by HUD, the City provides multiple opportunities for public review and comment on the Action Plan and on any substantial amendments to it. Per the City’s adopted Citizen Participation Plan, the City held a 30-day public review comment period for the Action Plan. The City published notifications of upcoming public hearings and the 30-day public review comment period in a local newspaper of general circulation, on the City’s CDBG webpage and via email blasts to stake holders. The City held two advertised public hearings on March 10, 2022, and May 20, 2022. The Action Plan 30-day public review period occurred from May 20, 2022, through June 20, 2022.

5. Summary of public comments
This could be a brief narrative summary or reference an attached document from the Citizen Participation section of the Con Plan.

There were no public comments received during the public review period for both public hearings. However, six (6) members of the public provided comments during the Human Relations Committee meeting regarding the CDBG funding recommendations. Refer to Appendix A for a summary of comments.

6. Summary of comments or views not accepted and the reasons for not accepting them Refer to Appendix A for a summary of comments. The City accepts and responds to all comments that are submitted.

7. Summary
Please see above.

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Entitlement jurisdictions receive entitlement funding (i.e., non-competitive, formula funds) from HUD. HUD requires the City to submit a five- year Consolidated Plan and Annual Action Plan to HUD listing priorities and strategies for the use of its federal funds.

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0 The Consolidated Plan helps local jurisdictions to assess their affordable housing and community development needs and market conditions to meet the housing and community development needs of its populations. As a part of the Consolidated Plan process for 2020-2025, the City collaborated with the County of Santa Clara (County) as the Urban County representing the cities of Campbell, Los Altos, Los Altos Hills, Los Gatos, Monte Sereno, Morgan Hill, and Saratoga; the cities of Cupertino, Gilroy, Mountain View, Sunnyvale, San José, and Santa Clara; and the Santa Clara County Housing Authority (SCCHA) to identify and prioritize housing and community development needs across the region, and to develop strategies to meet those needs. The FY 2022-23 Annual Action Plan represents the third year of CDBG funding of the 2020-2025 Consolidated Plan.

Consolidated Plan Public Contact Information
Clare Campbell, Manager of Long Range Planning
City of Palo Alto
Department of Planning and Development Services
250 Hamilton Avenue, 5th Floor
Palo Alto, CA 94301
E-mail: [email protected] Phone: (650) 617-3191 Item 9
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1. Introduction
The Action Plan is a one-year plan which describes the eligible programs, projects, and activities to be undertaken with funds expected during FY 2022-23 and their relationship to the priority housing, homeless and community development needs outlined in the 2020-25 Consolidated Plan.

During Fiscal Year 2022-23, the City will continue to work with non-profit organizations to provide programs and services for low-income households; private industry, including financial and housing development groups, to encourage the development of affordable housing opportunities regionally and within the City; and other local jurisdictions, including the County of Santa Clara, in carrying out and monitoring regional projects in a coordinated and cost-effective manner. The City will provide technical assistance to the public service agencies it funds with CDBG dollars and will continue to attend the biweekly Regional CDBG/Housing Coordinators meetings.

The Santa Clara County Office of Supportive Housing is the administrator of the regional Continuum of Care (CoC). The Citys Office of Human Services Manager is in contact with the Santa Clara County Office of Supportive Housing and Destination Home regarding issues of homelessness in the community. The Santa Clara County CoC is a group comprising of stakeholders throughout the County, including governmental agencies, homeless service and shelter providers, homeless population, housing advocates, affordable housing developers, and various private parties, including businesses and foundations.

City staff attend a bi-weekly CDBG/Housing Coordinator meeting. Members of the CoC meet monthly to plan CoC programs, identify gaps in homeless services, establish funding priorities, and pursue a systematic approach to addressing homelessness.

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0 Destination: Home (Destination Home) Leadership Board. Destination Home is a public- private partnership that is committed to collective impact strategies to end chronic homelessness.

Regional efforts of the CoC include the development of The Community Plan to End Homelessness, which identifies strategies to address the needs of people experiencing homelessness in the County, including chronically homeless individuals and families, families with children, veterans, and unaccompanied youth. The plan also addresses the needs of persons at risk of homelessness. The new community plan to end homelessness can be viewed at https://destinationhomesv.org/community-plan.

Also, during the development of the 2020-25 Consolidated Plan, the City consulted both the CoC and County Office of Supportive Housing for their expertise and experience for identifying community needs.

Describe consultation with the Continuum(s) of Care that serves the jurisdiction’s area in determining how to allocate ESG funds, develop performance standards for and evaluate outcomes of projects and activities assisted by ESG funds, and develop funding, policies and procedures for the operation and administration of HMIS The City is not an ESG entitlement jurisdiction and therefore does not receive ESG funds. However, the City does administer federal grant programs that help homeless and low-income families in Santa Clara County. The City also helps fund and conduct the Point in Time (PIT) count, the biennial regional collaborative effort to count and survey people experiencing homelessness. The latest count and survey were conducted on February 24, 2022. The data from the 2022 County of Santa Clara PIT count is used to plan, fund, and implement actions for reducing chronic homelessness and circumstances that bring about homelessness.

The Santa Clara County Office of Supportive Services takes the role of Homeless Management Information System (HMIS) administration. The County, and its consultant Bitfocus, work jointly to operate and oversee HMIS. Both software and HMIS system administration are now provided by Bitfocus. Funding for HMIS in Santa Clara County comes from HUD, the County of Santa Clara, and the City of San Jose. The Countys HMIS is used by many City service providers across the region to record information and report outcomes.

2. Agencies, groups, organizations and others who participated in the process and consultations
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Table 2 – Agencies, groups, organizations who participated Agency/Group/Organization Boys and Girls Clubs of Silicon Valley Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment 1 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Healthier Kids Foundation Santa Clara County Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment 2 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization COMMUNITY SERVICES AGENCY OF MOUNTAIN VIEW AND LOS ALTOS Agency/Group/Organization Type Services-Elderly Persons What section of the Plan was addressed by Consultation? Housing Need Assessment 3 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/15/19 as part of the 2020-25 Consolidated Plan process Agency/Group/Organization San Jose Conservation Corps Charter Agency/Group/Organization Type Services-Education
4 What section of the Plan was addressed by Consultation? Housing Need Assessment Item 9
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5 0
Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Gilroy focus group meeting on 11/18/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization CommUniverCity San Jose
Agency/Group/Organization Type Services-Education
What section of the Plan was addressed by Consultation? Strategic Plan 5 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/25/19 and regional forum meeting in San Jose on 11/20/19 as part of the 2020-25 Consolidated Plan process.

Agency/Group/Organization The Health Trust
Agency/Group/Organization Type Services-Persons with Disabilities Services-Persons with HIV/AIDS
Services-Health
What section of the Plan was addressed by Consultation? Housing Need Assessment Strategic Plan
6 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 11/21/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Rebuilding Together, Silicon Valley Agency/Group/Organization Type Services - Housing
7 What section of the Plan was addressed by Consultation? Housing Need Assessment Item 9
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Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation conference call on 11/21/19 and San Jose regional forum on 11/20/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Cupertino Community Development Department Housing Division
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
8 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?

Agency/Group/Organization City of Gilroy9
Agency/Group/Organization Type Other government - Local Item 9
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What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Market Analysis
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was consulted and provided emailed feedback as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Mountain View10
Agency/Group/Organization Type Other government - Local Item 9
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5 0
What section of the Plan was addressed by Consultation? Housing Need Assessment Public Housing Needs
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
Homelessness Strategy
Non-Homeless Special Needs
Market Analysis
Economic Development
Anti-poverty Strategy
Lead-based Paint Strategy
Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization BILL WILSON CENTER
Agency/Group/Organization Type Services-Children
What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Families with children
11 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Santa Clara focus group meeting on 11/7/19, community meetings on 11/4/19 at Morgan Hill and 11/20/19 at Roosevelt as part of the 2020-25 Consolidated Plan process Agency/Group/Organization HEART OF THE VALLEY12
Agency/Group/Organization Type Services-Elderly Persons Item 9
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What section of the Plan was addressed by Consultation? Housing Need Assessment Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was consulted through interview questions. Agency provided emailed feedback as part of the 2020-25 Consolidated Plan process Agency/Group/Organization City of San Jose
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 13 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency was contacted for consultation as a partner in addressing the needs of the County as part of the 2020-25 Consolidated Plan process Agency/Group/Organization CITY OF MORGAN HILL
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 14 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Sunnyvale
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 15 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Palo Alto on 11/7/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process
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Agency/Group/Organization Servant Partners
Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization
What section of the Plan was addressed by Consultation? Housing Need Assessment 16 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Attended community meeting on 11/13/19 at Hillview library as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization SENIOR ADULTS LEGAL ASSISTANCE (SALA) Agency/Group/Organization Type Service-Fair Housing
What section of the Plan was addressed by Consultation? Housing Need Assessment 17 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended Palo Alto and San Jose public engagement meeting on 11/17/19 and 11/19/19, regional forum meeting on 11/4/19 at Morgan Hill and 11/7/19 at Palo Alto as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization HomeFirst
Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed by Consultation? Housing Need Assessment Homeless Needs - Chronically homeless
18 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 as part of the 2020-25 Consolidated Plan process
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Agency/Group/Organization Santa Clara County Office of Supportive Housing Agency/Group/Organization Type Other government - County What section of the Plan was addressed by Consultation? Housing Need Assessment 19 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 and at Palo Alto on 11/7/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization City of Santa Clara
Agency/Group/Organization Type Other government - Local What section of the Plan was addressed by Consultation? Housing Need Assessment 20 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended regional forum meeting at Morgan Hill on 11/4/19 and provided emailed feedback as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Vista Center for the Blind and Visually Impaired Agency/Group/Organization Type Services-Persons with Disabilities What section of the Plan was addressed by Consultation? Non-Homeless Special Needs 21 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 12/9/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Destination: Home
Agency/Group/Organization Type Services-homeless
22 What section of the Plan was addressed by Consultation? Housing Need Assessment Item 9
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Briefly describe how the Agency/Group/Organization was
consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended stakeholder consultation on 11/11/19 as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization COMMUNITY SOLUTIONS
Agency/Group/Organization Type Services-Victims of Domestic Violence What section of the Plan was addressed by Consultation? Housing Need Assessment 23 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization St Mary Parish
Agency/Group/Organization Type Neighborhood Organization Neighborhood Organization
What section of the Plan was addressed by Consultation? Housing Need Assessment 24 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency attended the AFH and ConPlan joint meeting on 12/11/19 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
Agency/Group/Organization Community and Neighborhood Revitalization Committee - Gilroy Agency/Group/Organization Type Community Organization
What section of the Plan was addressed by Consultation? Housing Need Assessment 25 Briefly describe how the Agency/Group/Organization was consulted. What are the anticipated outcomes of the
consultation or areas for improved coordination?
Agency co-hosted the AFH and ConPlan joint meeting on 12/11/18 at the Gilroy Council Chambers as part of the 2020-25 Consolidated Plan process
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Identify any Agency Types not consulted and provide rationale for not consulting Through the countywide development of the Consolidated Plan, AT@T was consulted regarding broadband. For Palo Alto specific information on this topic, staff in the future will contact the City of Palo Alto Utilities Advisory Commission regarding the City's Fiber Network Expansion Project.

In regard to resilience specific organizations, Grid Alternatives, an environmental sustainability organization, provided a stakeholder interview during the Consolidated Plan process. Staff plans to expand outreach in this area through contact with the Santa Clara County Office of Emergency Management and the City of Palo Alto Emergency Services which has developed a local hazard mitigation plan.

Other local/regional/state/federal planning efforts considered when preparing the Plan Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Continuum of Care Regional Continuum of
Care Council
Identifies housing inventory count to facilitate the provision of housing services to those experiencing homelessness
City of Palo Alto
Housing Element
(2015-2023)
City of Palo Alto Identifies barriers to affordable housing, such as land-use controls, inefficiencies of the development review process, and strategies to alleviate such barriers 2012-2014
Comprehensive HIV
Prevention and Care Pl
Santa Clara County HIV
Planning Council for
Prevention and Care
This plan provides a roadmap for the Santa Clara County HIV Planning Council for Prevention and Care to provide a comprehensive and compassionate system of HIV prevention and care services for the County. This effort aligns with the Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements
SCCHA Moving to Work
Annual Plan
Santa Clara County
Housing Authority
Addresses housing authority updates and strategies pertaining to public housing and vouchers
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Name of Plan Lead Organization How do the goals of your Strategic Plan overlap with the goals of each plan? Regional Housing Need
Plan for San Francisco
Bay A
Association of Bay Area
Governments
This plan analyzes the total regional housing need for the County and all of the Bay Area.

This effort aligns with the Strategic Plan's goal to assist in the creation and preservation of affordable housing.

Community Plan to End
Homelessness in Santa
Clara
Destination: Home
The Community Plan to End Homelessness in the County is a five-year plan to guide governmental actors, nonprofits, and other community members as they make decisions about funding, programs, priorities and needs. This effort aligns with the Strategic Plan's goal to support activities to end homelessness
Palo Alto's
Infrastructure: Catching
Up, Keeping U
City of Palo Alto
Infrastructure Blue
Ribbon Plan
This plan details recommendations for infrastructure maintenance and replace, as well as identifies potential sources of funding. This effort aligns with the Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements
City of Palo Alto
Comprehensive Plan
(2030)
City of Palo Alto
This plan is the primary tool for guiding future development in Palo Alto. It provides a guide for long-term choices and goals for the City future. This effort aligns with the Strategic Plan's goal to support activities that strengthen neighborhoods through the provision of community services and public improvements Table 3 - Other local / regional / federal planning efforts Narrative
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AP-12 Participation - 91.401, 91.105, 91.200(c)

1. Summary of citizen participation process/Efforts made to broaden citizen participation Summarize citizen participation process and how it impacted goal-setting The Planning and Development Services Department is the lead agency for overseeing the development of the Consolidated Plan and Action Plan. Per the City’s adopted Citizen Participation Plan, the City is to allow a 30-day public review and comment period for the Action Plan. The City has published notifications of upcoming public hearings and the 30-day public review comment period in the local newspaper of general circulation, on its CDBG webpage and via email blasts. The City held two advertised public hearings on March 10, 2022, and June 20, 2022. The Action Plan 30-day public review comment period occurred from May 20, 2022, through June 20, 2022. The City did not receive any public comments.

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Citizen Participation Outreach
Sort Or
der
Mode of Out
reach
Target of Out
reach
Summary of
response/atten
dance
Summary of
comments rec
eived
Summary of com
ments not
accepted
and reasons
URL (If applicable)
1 Public
Hearing
Non-
targeted/broa
d community
The Human
Relations
Commission
met on March
10, 2022 to
discuss the
FY2022-23
funding
allocations and
review the draft
FY2022-23
Annual Action
Plan.

Six members
of the public
provided
comments on
the
CityÃ¿Â¢Ã¿Â¿
Ã¿Â¿s funding
allocations.

Refer to
Appendix A for
detailed
summary
All comments
were accepted.
2 Public
Hearing
Non-
targeted/broa
d community
The City Council
met on June 20,
2022, to discuss
the FY2022-23
funding
allocations and
adopt the draft
FY2022-23 AAP.

No comments
were received.

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Sort Or
der
Mode of Out
reach
Target of Out
reach
Summary of
response/atten
dance
Summary of
comments rec
eived
Summary of com
ments not
accepted
and reasons
URL (If applicable)
3 Newspaper
Ad
Non-
targeted/broa
d community
Notice of Public
Hearing and
Public comment
period on the
Second Draft
AAP was
published in the
Daily post on
April 2, 2022,
and May 20,
2022.

No comments
were received.

No comments
were received.
4 Newspaper
Ad
Non-
targeted/broa
d community
Notice of Public
Hearing and
Public comment
period on the
Second Draft
AAP was
published in the
Daily post on
April 2, 2022,
and May 20,
2022.

No comments
were received.

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Sort Or
der
Mode of Out
reach
Target of Out
reach
Summary of
response/atten
dance
Summary of
comments rec
eived
Summary of com
ments not
accepted
and reasons
URL (If applicable)
5 Internet
Outreach
Non-
targeted/broa
d community
Draft AAP
FY2022-23 for
public review
and comments
for posted at
the City of Palo
Alto's CDBG
webpage.

No comments
were received.

No comments
were received.
https://www.cityofpaloalto.org/Departm
ents/Planning-Development-
Services/Long-Range-
Planning/Community-Development-
Block-Grant
Table 4 – Citizen Participation Outreach
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Expected Resources
AP-15 Expected Resources - 91.420(b), 91.220(c)(1,2)
Introduction
In FY2022-23, the City will allocate $653,168 to eligible activities that address the needs identified in the Consolidated Plan. It should be noted that while the HUD CDBG allocations are critical, the allocations are not sufficient to overcome barriers and address all needs that low- income individuals and families face in attaining self-sufficiency. The City will continue to leverage additional resources as described below to provide support and services to the populations in need within the community. The following section discusses the anticipated resources available for community development activities during the next remaining three years of the City’s 5-Year Consolidated Plan.

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Anticipated Resources
Expected Amount Available Year 1Program Source
of Funds
Uses of Funds
Annual
Allocation:
$
Program
Income:
$
Prior Year
Resources:
$
Total:
$
Expected
Amount
Available
Remainder
of ConPlan
$
Narrative Description
CDBG public -
federal
Acquisition
Admin and
Planning
Economic
Development
Housing
Public
Improvements
Public Services 513,168 140,000 0 653,168 1,026,336
CDBG funds will be used for the creation
and preservation of affordable rental
units, improvements in lower income
neighborhoods, and public services that
benefit low income and special needs
households
Other public -
federal
Other
0 0 0 0 0

Table 5 - Expected Resources – Priority Table
Explain how federal funds will leverage those additional resources (private, state and local funds), including a description of how matching requirements will be satisfied
Entitlement Funds
Leverage, in the context of the CDBG and HOME Investment Partnerships Program (HOME), means bringing other local, state, and federal financial resources to maximize the reach and impact of the City’s HUD Programs. HUD, like many other federal agencies, encourages the Item 9
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recipients of federal monies to demonstrate that efforts are being made to strategically leverage additional funds in order to achieve greater results.

The City joined the Santa Clara County's HOME Consortium in 2015 and does not receive federal HOME funds on an entitlement basis from HUD.

The HOME Consortia consists of the cities of Cupertino, Gilroy, Palo Alto, and the Urban County. HOME funds can be used to fund eligible affordable housing projects for acquisition, construction, and rehabilitation. Starting in FY 2015- 16 developers of affordable housing projects were eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto. Applications will be directly submitted through the County's request for proposal process for available HOME funds. Certain nonprofit organizations known as Community Housing Development Organizations (CHDOs) may also apply for funding from State HCD for housing projects located within Palo Alto. The City received one HOME grant from 1992 HOME funding for the Barker Hotel project. Proceeds from HOME loan repayments must be deposited into a HOME Program Income Fund and used in accordance with the HOME program regulations.

In addition, the County will only fund a project that has the local support of the City. If the City receives HOME dollars from its participation in the HOME consortium, the required 25% matching funds will be provided from the City’s Affordable Housing Fund, which is comprised of two sub-funds: The Commercial Housing Fund and the Residential Housing Fund. To date, no projects within the City have been funded through the HOME Consortium. Moving forward, the City plans to increase outreach to developers in the City to provide additional information on the HOME Consortium and available funding.

Other State and Federal Grant Programs
In addition to the CDBG entitlement dollars, the federal government has several other funding programs for community development and affordable housing activities. These include Section 8 Housing Choice Voucher Program, Section 202, Section 811, the Federal Home Loan Bank Affordable Housing Program (AHP), and others. It should be noted that in most cases the City would not be the applicant for these funding sources as many of these programs offer assistance to affordable housing developers rather than local jurisdictions.

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The State of California has recently passed approximately 20 bills with the intent of increasing or preserving affordable housing with the State.

According to the Governor’s State of the State address, bills that help increase housing production, both market-rate and affordable, will be a priority in 2020. The City will continue to track and look for opportunities to leverage State resources for the City.

Local Housing and Community Development Sources
Other local resources that support housing and community development programs include:
•Palo Alto Commercial Housing Fund, which is for the development of below market rate (BMR) housing units and paid by mitigation fees on commercial and industrial projects; and
•Palo Alto Residential Housing Fund, which is for the development of below market rate (BMR) housing units and paid by miscellaneous funding sources.

The City will continue to seek opportunities for projects that meet local bond requirements in order to bring additional resources to help the City’s affordable housing shortage.

If appropriate, describe publically owned land or property located within the jurisdiction that may be used to address the needs identified in the plan
The City has no surplus public land. However, in 2019, the Governor Newsome signed Executive Order N-06-19 that ordered the California Department of General Services (DGS) and the California Department of Housing and Community Development (HCD) to identify and prioritize excess state-owned property and aggressively pursue sustainable, innovative, cost-effective housing projects. There is no excess state property in the City of Palo Alto.

Discussion
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Please see information provided in previous sections.

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Annual Goals and Objectives
AP-20 Annual Goals and Objectives - 91.420, 91.220(c)(3)&(e) Goals Summary Information
Sort
Order
Goal Name Start
Year
End
Year
Category Geographic
Area
Needs Addressed Funding Goal Outcome Indicator
1 Affordable
Housing
2020 2025 Affordable
Housing
Affordable Housing CDBG:
$424,560
Homeowner Housing
Rehabilitated: 4 Household
Housing Unit
2 Homelessness 2020 2025 Homeless Homelessness CDBG:
$49,073
Public service activities other
than Low/Moderate Income
Housing Benefit: 161 Persons
Assisted
3 Strengthen
Neighborhoods
2020 2025 Non-Homeless
Special Needs
Non-Housing
Community
Development
Community Services
and Public
Improvements
CDBG:
$24,021
Public service activities other
than Low/Moderate Income
Housing Benefit: 77 Persons
Assisted
4 Fair Housing 2020 2025 Non-Housing
Community
Development
Fair Housing CDBG:
$33,698
Public service activities other
than Low/Moderate Income
Housing Benefit: 15 Persons
Assisted
5 Economic
Development
2015 2020 Non-Housing
Community
Development
Economic
Development
CDBG: $0 Other: 0 Other
Table 6 – Goals Summary
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Goal Descriptions
Goal Name Affordable Housing1
Goal
Description
Assist in the creation and preservation of affordable housing for low income and special needs households.

Goal Name Fair Housing4
Goal
Description
Promote fair housing choice by funding fair housing organizations to provide fair housing services, such as education, tenant-landlord mediation, and testing.

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AP-35 Projects - 91.420, 91.220(d)
Introduction
The Consolidated Plan goals below represent high priority needs for the City of Palo Alto (City) and serve as the basis for the strategic actions the City will use to meet these needs. The goals, listed in no particular order, are:

1. Assist in the creation and preservation of affordable housing for low income and special needs households.Support activities to end homelessness.

2. Support activities that strengthen neighborhoods through the provision of community services and public improvements to benefit low income and special needs households.Promote fair housing choice.Expand economic opportunities for low-income households.

It is important to note, Project Sentinel, whom will be providing fair housing services will be under two categories, Planning and Administration and Public Services. # Project Name
1 Catholic Charities of Santa Clara County: Long Term Care Ombudsman 2 LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management 3 Alta Housing SRO Resident Support Program
4 Silicon Valley Independent Living Center: Housing and Emergency Housing Services 5 Project Sentinel - Fair Housing Services
6 City of Palo Alto - Planning and Administration
7 Rebuilding Together Peninsula Safe at Home
8 Mitchell Park Place 525 E. Charleston Road
Table 7 – Project Information
Describe the reasons for allocation priorities and any obstacles to addressing underserved needs
The City awards CDBG funding to projects and programs that will primarily benefit low-income, homeless, and special needs households. The City operates on a two-year grant funding cycle for CDBG public service grants and a one-year cycle for CDBG capital housing rehabilitation and public facilities and improvement projects. Projects are only considered for funding within the Consolidated Plan period if they address the goals discussed above.

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Project Summary Information
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Project Name Catholic Charities of Santa Clara County: Long Term Care Ombudsman Target Area
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements Funding CDBG: $10,000
Description Long-Term Care Ombudsman Program. Eligible Activity (MatrixCode):05A. CDBG National Objective: LMC
Target Date 6/30/2023
Estimate the number
and type of families
that will benefit from
the proposed activities
The program will provide advocacy and complaint investigation for 50 elderly residents of long-term care facilities in Palo Alto.

Location Description Citywide
1 Planned Activities Regular contact with Palo Alto Residential Care Facilities to observe and monitor conditions of care.

Project Name LifeMoves - Opportunity Services Center and Hotel De Zink (HDZ): Case Management
Target Area
Goals Supported Homelessness
Needs Addressed Homelessness
Funding CDBG: $26,660
Description Opportunity Services Center Eligible Activity (Matrix Code):03T CDBG National Objective: LMC
Target Date 6/30/2023
Estimate the number
and type of families
that will benefit from
the proposed activities
30 unduplicated individuals (homeless and/or very low-income individuals per year) will receive case management services including assistance with housing/job searches, referrals and mentoring at the Opportunity Services Center and Hotel De Zink.

Location Description Citywide
2 Planned Activities Case management services will be provided to Opportunity Services Center and Hotel De Zink clients in locating housing and/or employment and be connected to benefits.

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Project Name Alta Housing SRO Resident Support Program
Target Area
Goals Supported Homelessness
Needs Addressed Homelessness
Funding CDBG: $22,413
Description SRO Resident Support Program. Eligible Activity (Matrix Code):05O CDBG National Objective: LMC
Target Date 6/30/2023
Estimate the number
and type of families
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Case management and support counseling services will be provided to residents of Barker Hotel and Alma Place
Location Description Residents of Barker Hotel (25 units) and Alma Place (106 units) 3 Planned Activities Planned Activities Alta Housing engages a service coordinator to provide 40 hours weekly services to provide case management and support counseling services to residents at Alma Place and Barker Hotel to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention and case management. Both Alma Place and Barker Hotel are single-room occupancy facilities.

Project Name Silicon Valley Independent Living Center: Housing and Emergency Housing Services
Target Area
Goals Supported Strengthen Neighborhoods
Needs Addressed Community Services and Public Improvements Funding CDBG: $14,021
Description Housing and Emergency Housing Services. Eligible Activity (Matrix Code):05B. CDBG National Objective: LMC
Target Date 6/30/2023
4 Estimate the number
and type of families
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27 unduplicated Palo Alto residents will benefit from one-on-one housing assistance.

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Location Description Citywide
Planned Activities Silicon Valley Independent Living Center provides assistance for individuals with disabilities and their families to transition from homelessness, health care facilities, unstable or temporary housing to permanent affordable, accessible, integrated housing with emergency assistance, security deposits, rent, information, and referral, and other basic essentials.

Project Name Project Sentinel - Fair Housing Services
Target Area
Goals Supported Fair Housing
Needs Addressed Fair Housing
Funding CDBG: $33,698
Description Description Planning & Administration - Fair Housing Services.

Eligible Activity (Matrix Code):21D - $13,722. CDBG National Objective:

LMC. Public Service - Fair Housing Services. Eligible Activity (Matrix Code):05J - $19,976. CDBG National Objective: LMC.

Target Date 6/30/2023
Estimate the number
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15 unduplicated individuals will be provided with fair housing services of complaint counseling, investigation, and where appropriate enforcement referral.

Location Description Citywide
5 Planned Activities Project Sentinel will provide community education and outreach regarding fair housing law and practices, investigation, counseling, and legal referral for victims of housing discrimination, and analyses for City staff and officials regarding fair housing practices. California and federal fair housing laws assure specific protected classes the right to be treated in terms of their individual merits and qualifications in seeking housing. Unfortunately, some people are not aware of the law or their rights.

Project Name City of Palo Alto - Planning and Administration6 Target Area
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Goals Supported Affordable Housing
Homelessness
Strengthen Neighborhoods
Fair Housing
Economic Development
Needs Addressed Affordable Housing
Homelessness
Community Services and Public Improvements
Fair Housing
Economic Development
Funding CDBG: $116,911
Description Planning and Administration: CDBG Citation: 570.206(a) Target Date 6/30/2023
Estimate the number
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The City will provide general administrative support to the CDBG program.

Project Name Rebuilding Together Peninsula Safe at Home Target Area
Goals Supported Affordable Housing
Needs Addressed Affordable Housing
Funding CDBG: $73,135
Description Preserves affordable housing by transforming homes through critical repairs and accessibility modifications, at no cost to the service recipient. The majority of the low-income homeowners served will be elderly seniors and/or people with disabilities, who are physically and financially unable to maintain safe living conditions for themselves and their families Eligible Activity (Matrix Code):14A. CDBG National Objective: LMH
7 Target Date 6/30/2023
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4 households
Location Description Citywide
Planned Activities Provide home safety repairs, mobility, and accessibility improvements for low- income households in Palo Alto with the primary consideration being the correction of safety hazards.

Project Name Mitchell Park Place 525 E. Charleston Road Target Area Citywide
Goals Supported Affordable Housing Strengthen Neighborhoods Needs Addressed Affordable Housing Community Services and Public Improvements Funding CDBG: $356,330
Description The City intends to use the CDBG Funds for public facilities improvements near the proposed Eden Housing development site.

Eden Housing is developing 50 units of affordable housing.

The City will follow the Citizen Participation Plan and will proceed with protocols if a substantial amendment is required.

Target Date 6/30/2023 12/30/2023
Estimate the number
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TBD 50 Families will benefit from public improvements
Location Description 525 E. Charleston Road
8 Planned Activities TBD
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AP-50 Geographic Distribution - 91.420, 91.220(f)
Description of the geographic areas of the entitlement (including areas of low-income and minority concentration) where assistance will be directed The City allocates CDBG funds to benefit low-moderate income (LMI) households and does not have target areas. Instead, the City focuses its services and capital improvements across the City as a whole.

Geographic Distribution
Target Area Percentage of Funds
Table 8 - Geographic Distribution
Rationale for the priorities for allocating investments geographically Not applicable.

Discussion
Please see discussion above.

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AP-75 Barriers to affordable housing -91.420, 91.220(j) Introduction
The incorporated and unincorporated jurisdictions within the County face barriers to affordable housing that are common throughout the Bay Area. High on the list of market barriers is the lack of developable land, which increases the cost of available lands and increases housing development costs. Local opposition is another common obstacle as many neighbors have strong reactions to infill and affordable housing developments. Their opposition is often based on misconceptions, such as a perceived increase in crime; erosion of property values; increase in parking and traffic congestion; and overwhelmed schools. However, to ensure a healthy economy the region must focus on strategies and investment that provide housing for much of the region’s workforce – for example, sales clerkssalesclerks, secretaries, waiters, baristas, teachers, and health service workers – whose incomes significantly limit their housing choices.

Actions it planned to remove or ameliorate the negative effects of public policies that serve as barriers to affordable housing such as land use controls, tax policies affecting land, zoning ordinances, building codes, fees and charges, growth limitations, and policies affecting the return on residential investment Palo Alto is addressing the barriers to affordable housing through:

•Density Bonus Ordinance: The City recently updated its Density Bonus ordinance which lowered the eligibility requirements to qualify for a higher density bonus percentage up to 80% as well as providing more exceptions to applicable zoning and development standards.

One significant update is if a 100% affordable development is located within a half a mile of a major transit stop, the City cannot impose any density limits and entitled to a maximum height increase of three additional stories or 33 feet. •Below Market Rate (BMR) Housing Program: Established in 1974, the City’s BMR requires developers to provide a certain percentage Item 9
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of units as BMR in every approved project of three units or more. The program originally required that for developments on sites of less than five acres, the developer must provide 15 percent of the total housing units as BMR housing units. If the site was larger than five acres, the developer was required to provide 20 percent of the units as BMR housing. The City of Palo Alto have historically used in-lieu fees and the use of development impact fees charged on new, market-rate housing and/or commercial development to finance 100% affordable developments. The City updated its Commercial and Residential Impact Fee Nexus Studies and adopted two ordinances to make changes to its BMR program and adopted a new fee structure. The ordinances became effective on June 19, 2017. •Fair Housing: The City provides funding to Project Sentinel. Project Sentinel provides expertise in fair housing law and tenant-landlord disputes. Services include information, referrals, community outreach and education. In addition, Project Sentinel resolve fair housing complaints via investigation, mediation, education and outreach to both property owners and tenants about fair housing policies. •Housing Incentive Program (HIP): Effective May 2, 2019, this Ordinance adopted changes to the following zoning districts: Citywide – where multifamily uses are permitted, Multifamily Residential Districts (RM), Downtown (CD-C), California Avenue (CC ((2)), and El Camino Real (CS and CN).
•Affordable Housing (AH) Combining District: In 2018, The City Council adopted the Affordable Housing Combining District to provide flexible development standards beyond the State Density Bonus Law to allow 100% affordable housing projects located in a commercial zoned area.
•Workforce Housing (WH) Combining District: The City Council also adopted in 2018 the Workforce Housing Combining District to encourage the development of housing within half-mile of major fixed rail transit by modifying flexible development standards for the public facilities (PF) zoning district.

Discussion
Please see above.

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AP-85 Other Actions - 91.420, 91.220(k)
Introduction
This section discusses the City’s efforts in addressing the underserved needs, expanding, and preserving affordable housing, reducing lead-based paint hazards, and developing institutional structure for delivering housing and community development activities.

Actions planned to address obstacles to meeting underserved needs The diminishing amount of funds continues to be the most significant obstacle to addressing the needs of underserved populations. To address this, the City supplements its CDBG funding with other resources and funds, such as:
•In FY2020-21, The City’s Human Service Resource Allocation Process (HSRAP) provided $549,306 from the General Fund in support of human services. The HSRAP funds, in conjunction with the CDBG public service funds, are distributed to local non-profit agencies. Additionally, approximately $50,000 was provided to nonprofit organizations serving Palo Alto residents with short-term and/or urgent funding to address emergency, critical or emerging human services needs through the Emerging Needs Fund.
•The Palo Alto Commercial Housing Fund is funded with mitigation fees provided under Palo Alto’s BMR housing program from developers of commercial and industrial projects and used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing
•The Palo Alto Residential Housing Fund is funded with mitigation fees provided under Palo Alto’s BMR housing program from residential developers and money from other miscellaneous sources, such as proceeds from the sale or lease of City property. The Residential Housing Fund is used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing.
•The City’s Below Market Rate Emergency Fund was authorized in 2002 to provide funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City’s stock of BMR ownership units. •HOME Program funds are available on an annual competitive basis through the State of California HOME program, and the County’s HOME Consortium. •The Housing Authority of the County of Santa Clara (HACSC) administers the federal Section 8 program countywide. The program provides rental subsidies and develops affordable housing Item 9
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for low-income households, seniors and persons with disabilities living within the County.

Actions planned to foster and maintain affordable housing The City will foster and maintain affordable housing by continuing the following programs and ordinances:
•The Below Market Rate Emergency Fund which provides funding on an ongoing basis for loans to BMR owners for special assessment loans and for rehabilitation and preservation of the City’s stock of BMR ownership units.
•The Commercial Housing Fund and Residential Housing Fund are used to assist new housing development or the acquisition, rehabilitation, or the preservation of existing housing for affordable housing.
•The Density Bonus Ordinance adopted by the City Council in January 2014. The density bonus regulations allow for bonuses of 20 to 35 percent, depending on the amount and type of affordable housing provided.
•The City’s participation in the County's HOME Consortium will allow developers of affordable housing projects to be eligible to competitively apply through an annual RFP process directly to the County for HOME funds to help subsidize affordable housing projects in Palo Alto, including acquisition, construction, and rehabilitation.

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homeless. The Opportunity Services Center is a comprehensive, one-stop, multi-service, day drop-in center that provides critical services for homeless Palo Alto residents. Specifically, the facility provides showers, laundry, clothing, snacks, case management, and shelter/housing referral services.
•Alta Housing will provide counseling and supportive case management services for low-income residents of single-room occupancy facilities to help them maintain housing stability. Activities include financial counseling, health maintenance, information and referral, problem solving, employment assistance, crisis intervention, and case management.

Actions planned to develop institutional structure
•Regular bi-weekly meetings between entitlement jurisdictions at the CDBG Coordinators Meeting and Regional Housing Working Group.
•Joint jurisdiction Request for Proposals and project review committees. •Coordination on project management for projects funded by multiple jurisdictions. •HOME Consortium meetings between member jurisdictions for affordable housing projects.

In addition to the actions listed above, the City will continue to coordinate with the City’s human services funding efforts to comprehensively address community needs.

Discussion
Please see discussions above.

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Program Specific Requirements
AP-90 Program Specific Requirements - 91.420, 91.220(l)(1,2,4) Introduction
The following provides additional information about the CDBG program income and program requirements.

1. The total amount of program income that will have been received before the start of the next program year and that has not yet been reprogrammed 0

2. The amount of proceeds from section 108 loan guarantees that will be used during the year to address the priority needs and specific objectives identified in the grantee's strategic plan. 0

3. The amount of surplus funds from urban renewal settlements 0

4. The amount of any grant funds returned to the line of credit for which the planned use has not been included in a prior statement or plan 0

5. The amount of income from float-funded activities 0
Total Program Income: 0
Other CDBG Requirements

1. The amount of urgent need activities 0

2. The estimated percentage of CDBG funds that will be used for activities that benefit persons of low and moderate income.Overall Benefit - A consecutive period of one, two or three years may be used to determine that a minimum overall benefit of 70% of CDBG funds is used to benefit persons of low and moderate income. Specify the years covered that include this Annual Action Plan. 70.00% Item 9
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Discussion
Please see discussion above.

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Citizen Participation Comments
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Grantee SF-424's and Certification(s)
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: April 17, 2023
Staff Report:2303-1218
TITLE
Staff Recommends that Council Approve Bringing the Water and Wastewater Rate Proposals to Council on June 19, 2023, Pending Proposition 218 Notifications, for a Public Hearing to Consider Two Resolutions: 1) Approving the Fiscal Year 2024 Wastewater Collection Utility Financial Plan, Proposed Reserve Transfers, and Increasing Wastewater Collection Utility Rates by Amending Wastewater Collection Rate Schedules S-1, S-2, S-6 and S-7; 2) Approving the Fiscal Year 2024 Water Utility Financial Plan, Proposed Reserve Transfers, and Increasing Water Rates by Amending Water Rate Schedules W-1, W-2, W-3, W-4, and W-7; CEQA Status: Not a project under Public Resources Code 15378(b)(5)

RECOMMENDATION
Staff recommends that Council direct staff to proceed with Proposition 218 notification of Water and Wastewater Rate changes recommended by Finance Committee on March 21, 2023 1, and agendize a public hearing for these rates on June 19, 2023. For the Water Financial Plan, staff presented a plan with a 3% distribution rate increase to the Finance Committee (Staff Report 2301-1011)2 on March 7, 2023, but on March 21, 2023 revised this recommendation to a 2% water distribution rate increase and the Finance Committee agreed with the staff recommendation. Staff will incorporate those changes and attach the updated Financial Plan and rate sheets to the June 19, 2023 Council report. The Finance Committee recommended approval of the Wastewater Financial Plan as written in Staff Report 2302-09443 and staff will include the Financial Plan and supporting documents in the June 19, 2023 Council report for Council consideration of the Wastewater Collection rate increase.

Finance Committee recommended the Council adopt the following resolutions, after notice of the proposed rate changes is sent as required by Proposition 218:

1. For the Water Utility, a Resolution:
a. Approving the FY 2024 Water Utility Financial Plan, including a 2% water distribution rate increase; and
1 Finance Committee Staff Report
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=11228 2 Finance Committee Staff Report 2301-1011
https://cityofpaloalto.primegov.com/meeting/document/1759.pdf?name=Staff%20Report 3 Utilities Advisory Commission Staff Report 2302-0944
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf Item 10
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b. Approving a transfer of up to $3.746 million from the Capital Improvement Program (CIP) Reserve to the Operations Reserve in FY 2023; and
c. Approving a transfer of up to $3.0 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and
d. Increasing Water Utility Rates via the Amendment of Rate Schedules W-1 (General Residential Water service), W-2 (Water Service from Fire Hydrants), W3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service)

2. For the Wastewater Collection Utility, a Resolution4:
a. Approving the Fiscal Year 2024 Wastewater Collection Financial Plan5, including a 9% wastewater rate increase; and
b. Approving a transfer of up to $3.178 million from the Capital Improvement Projects Reserve to the Operations Reserve in FY 2023; and
c. Approving a transfer of up to $342 thousand from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and
d. Increasing the Wastewater Collection Utility Rates via the Amendment of Rate Schedules6 S- 1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger)

EXECUTIVE SUMMARY
In March 2023, the Utilities Advisory Commission (UAC) and Finance Committee reviewed the proposed rate changes recommended by Staff for Fiscal Year (FY) 2024. The overall system average proposed rate changes are a 9% increase for wastewater, and 6% increase for water. This report summarizes the Water and Wastewater utilities rate proposals. Drivers of the rate changes include rising costs of construction inflation, commodity prices and the rising cost to transport water. Additionally, infrastructure is aging and investment is needed to maintain the health of utilities and protect reliability.

This report requests Council approve moving forward with Proposition 218 customer notifications of the rate proposals recommended by the Finance Committee on March 21, 2023, with a Council public hearing on June 19, 2023 for Water and Wastewater utility rate changes. If approved, staff would proceed with Proposition 218 customer notifications and update the Financial Plans and proposed rate sheets for the water and wastewater utilities to reflect the motion above. 4 Draft Wastewater Resolution https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-01-2023-id-2301-0798-ww-resolution.pdf 5 Fiscal Year 2024 Wastewater Financial Plan https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-2302-0944-ww-financial-plan-lisa.pdf 6 Wastewater Rate Schedules https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-2302-0944-attachment-b-ww-rate- schedules.pdf
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BACKGROUND
Water
Utilities staff presented to the UAC on March 1, 20237, the Finance Committee on March 7, 20238 and March 21, 20239 a recommendation that Council approve the FY 2024 Water Utility Financial Plan as follows:

Staff recommended the following transfers at the end of FY 2023:

1. up to $3.746 million from the Capital Improvement Program (CIP) Reserve to the Operations Reserve in FY 2023; and

2. up to $3.0 million from the Rate Stabilization Reserve to the Operations Reserve in FY 2023; and Staff also recommended the following rate actions for FY 2024:

3. An increase to retail Water Distribution Utility Rates W-1 (General Residential Water service), W-2 (Water Service from Fire Hydrants), W3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non-Residential Water Service), and W-7 (Non-Residential Irrigation Water Service) of 2% effective July 1, 2023
The Finance Committee unanimously recommended approval of this proposal on March 21, 2023.

Wastewater Collection
Utilities staff presented to the UAC on March 1, 2023,10 the Finance Committee on March 7, 202311 and March 21, 202312 a recommendation that Council approve the FY 2024 Wastewater Utility Financial Plan as follows:

Staff recommended the following transfers at the end of FY 2023:

1. up to $3.178 million from the Capital Improvement Projects Reserve to the Operations Reserve; and

2. up to $342 thousand from the Rate Stabilization Reserve to the Operations Reserve; and Staff also recommended the following rate actions for FY 2024:

3. An increase to retail Wastewater Collection Utility Rates S-1 (Residential Wastewater Collection and Disposal), S-2 (Commercial Wastewater Collection and Disposal), S-6 (Restaurant 7 Utilities Advisory Commission March 1, 2023 Meeting
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-agenda-and- packet.pdf
8 Finance Committee March 7, 2023 Staff Report 2302-1011 https://cityofpaloalto.primegov.com/meeting/document/1759.pdf?name=Staff%20Report 9 Finance Committee March 21, 2023 Staff Report 2302-1125 https://cityofpaloalto.primegov.com/meeting/document/1871.pdf?name=Item%201%20Staff%20Report 10 Utilities Advisory Commission March 1, 2023 Meeting
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf 11 Finance Committee Staff Report 2302-0944
https://cityofpaloalto.primegov.com/meeting/document/1691.pdf?name=Staff%20Report 12 Finance Committee Staff Report 2302-1107
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Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) of 9% effective July 1, 2023
When staff first made this recommendation to the Finance Committee at the March 7, 2023 meeting the Finance Committee did not approve it, but instead asked staff to return with additional information for further evaluation for the Wastewater Utility. When staff returned to the Finance Committee on March 21, 2023 the Committee unanimously recommended approval of this proposal after reviewing the additional information.

ANALYSIS
Refer to the study session report 2304-1247 on the Council’s agenda tonight (April 17, 2023).

TIMELINE
By approving this item the Council would approve moving forward with rate proposals to the Council for a public hearing on June, 19, 2023; staff will provide notice to customers in accordance with Proposition 218 requirements during April and May. Additionally, for the water commodity pass-through rate, staff expects SFPUC to vote on a wholesale water rate increase in May that will become effective July 1, 2023.

Upon final approval of the wholesale rate increase by the SFPUC, staff will provide Palo Alto customers with notice of any adjustments to the wholesale rate increase and pass through the increase.

Should the City Council take action to approve any of these rates, they will become effective July 1, 2023.

FISCAL/RESOURCE IMPACT
Refer to the study session report 2304-1247 on the Council’s agenda tonight.

STAKEHOLDER ENGAGEMENT
On March 1, 202313 the Utilities Advisory Commission (UAC) reviewed and approved the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals.

On March 7, 2023 14, the Finance Committee reviewed the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals. The Finance Committee approved the Water Utility proposals and asked staff to return with additional information for further evaluation for the Wastewater Utility.
13 Utilities Advisory Commission Meeting of March 1, 2023 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisory- commission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-agenda-and- packet.pdf
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On March 21, 2023 15, the Finance Committee reviewed the FY 2024 Water, and Wastewater Collection Financial Plans and Rate Proposals and unanimously approved the Water and Wastewater Collection Proposals.

ENVIRONMENTAL REVIEW
The Council’s approval to move the water and wastewater rate proposals forward to the June 19, 2023 Council public hearing does not meet the California Environmental Quality Act’s definition of a project, under Public Resources Code Section 21065 and CEQA Guidelines section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental assessment is required.

APPROVED BY:

Dean Batchelor, Director Utilities
Staff: Lisa Bilir, Sr. Resource Planner
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: April 17, 2023
Report #:2303-1152
TITLE
Adoption of a Memorandum of Agreement with the Palo Alto Police Officers' Association and the Police Management Association; Adopt an Amendment to correct the Fire Chiefs‘ Association salary schedules; and, Adopt revised Management and Professional salary schedules CEQA Status - Not a project

RECOMMENDATION
Staff recommends that Council:

1. Adopt a new memorandum of agreement between the City of Palo Alto and the Palo Alto Police Officers' Association (PAPOA) effective upon adoption through June 30, 2025 (Attachment A) and corresponding salary schedule (Attachment C), and

2. Adopt a new memorandum of agreement between the City of Palo Alto and the Palo Alto Police Management Association (PMA) effective upon adoption through June 30, 2025 (Attachment B) and corresponding salary schedule (Attachment D), and

3. Adopt a corrected Fire Chiefs‘ Association (FCA) salary schedule (Attachment E, corrected from February 27, 2023), and

4. Adopt revised Management and Professional salary schedules, effective December 31, 2022 through June 30, 2025 (Attachment F, revised from December 19, 2022).

BACKGROUND
In accordance with California state law regulating local public agencies, the City of Palo Alto (City) meets and confers in good faith with our recognized labor organizations. The team of negotiators representing the City, comprised of Human Resources staff, outside counsel and management representatives, met with labor representatives and successfully reached Tentative Agreement on successor Memoranda of Agreement (MOA).

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The Palo Alto Police Officers’ Association (POA) currently has 76 FTE that are covered under the MOA. Employees in this unit include the City’s Police Officers, Police Agents and Police Sergeants. The Palo Alto Police Managers’ Association (PMA) currently has 6FTE that are covered under the MOA including the classifications of Lieutenant and Captain. Employees within PMA provide middle and upper-level management for the Police Department’s personnel and training, field services including patrol and police response, and investigative services. The prior agreement with POA and PMA was in effect until December 31, 2022 and a summary of the agreement terms is included in this memo and the proposed MOAs are attached to this report.

The Fire Chief’s Association reached agreement with the City and the new Memorandum of Agreement was approved on February 27, 2023.1

ANALYSIS
In alignment with the citywide workforce strategy on recruitment and retention, the parties negotiated the following terms and conditions targeting competitive market placement and prioritizing salary and flexibility in benefits increasing employee choice. When coming to agreement on the prior contract in 2018, the City faced significant vacancies in the Police Department and recognized the cost and challenges of turnover. The impact of each loss of an officer is estimated at $200,000 in turnover costs, 12 to 18 months to train a new officer and the loss of experience and institutional knowledge. The prior agreement helped stabilize vacancies; however, with the continued industry-wide sparseness of applicants it remains critical for the City to continue to provide competitive wages and benefits to support workforce retention. Recent exit survey results identify the top reasons for separation include career advancement, higher salary, commute, and cost-of-living.

After evaluating the City’s current market placement for these groups in accordance with the MOA, the MOAs before Council are intended to hold Palo Alto’s targeted competitive market placement and provide continued uninterrupted services for the community.

The following summarizes the changes to the terms of the agreement with POA and PMA:
•A 2.5 year contract term ending June 30, 2025.
•Targeted market adjustment of 5% upon adoption.
•4% general salary increase in the first full pay period following July 1, 2023, and 4% general salary increase in the first full pay period following July 1, 2024. 1 City Council February 27, 2023, Agenda Item #3, Staff Report 2301-0906 https://portal.laserfiche.com/Portal/DocView.aspx?id=64866&repo=r-704298fc&searchid=4a83a038-7e32-49dd- aa9f-ca5aed97e4d1
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•Changes to specific specialty pays
oPOA: Traffic Team premium; Field Training Officer pay (for term of contract only) oPMA: POST Management Education Certification
•Health Benefits Contributions – City’s contributions will be increased to a maximum of $2,260 per month for calendar year 2023. This contribution, which reflects a 4% increase, brings POA and PMA into alignment with other groups including International Association of Firefighters (IAFF), FCA and Management and Professional employees and will not increase in Year 2 of the contract; employees will instead be provided with flexible compensation to increase employee choice.
•Flexible Compensation – increase base salary in order to provide more flexibility for employees with different goals and interests allowing choices for employees o$100 per month compensation upon adoption
oAdditional $100 per month (for a total of $200/month) effective January 2024 •Addition of one floating holiday in recognition of days of historical significance (in-lieu Holiday Pay)
Salary Schedule Corrections & Revisions:

Fire Chiefs‘ Association (FCA)
Staff recommends adopting the corrected salary schedule for the Fire Chiefs‘ Association (FCA).

A decimal error was made in the calculation of the salary schedule presented and adopted by City Council on February 27, 2023 (Agenda Item #3). Attachment E to this report reflects the corrected salary schedule for the Fire Chief’s Association for Council adoption.

Management and Professional Salary Schedule
Staff recommends adopting the revised Management and Professional salary schedule (Attachment F) adopted by Council on December 19, 20222 (ID#15004) for the following classifications in the unrepresented Management and Professional group: Fire Chief, Deputy Fire Chief, and Fire Marshal. These classifications supervise the staff in the FCA and/or the IAFF Firefighters group and their salary ranges were impacted by the FCA market adjustments (over term of Fire contracts, a 12% market adjustment was approved). The adjustment to these ranges are recommended in order to maintain an internal spread between the represented classifications that is consistent with the City’s practices. The City Manager will review and 2 City Council December 19, 2022, Item #7, Staff Report 15004, https://portal.laserfiche.com/Portal/DocView.aspx?id=59178&repo=r-704298fc Item 11
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approve adjustments for these classifications within authority outlined in the Management and Professional Compensation Plan.

FISCAL/RESOURCE IMPACT
Approval of the staff recommendations outlined in this report for the Police Officer Association and Police Management Association will result in cumulative costs of approximately $5.2 million in the General Fund over the 2.5 year term of the agreements. Ongoing annual costs for these agreements once the contract term ends are estimated at $2.7 million in the General Fund. Below is a breakdown by unit:

Total Contract
Over 2.5-yr Term
% Budget Change
Over 2.5-yr Term
Annual Ongoing
Cost
POA $4.5M 8.9% $2.3M
PMA $0.7M 12.6% $0.4M
There is no additional financial impact for the adoption of the corrected Salary Schedule for FCA (Attachment E).

Approval of the revised salary schedule for the unrepresented Management and Professional group will result in cumulative cost of $325,000 in the General Fund over the term of the agreement which extends until June 2025. Ongoing annual costs are estimated at approximately $130,000.

STAKEHOLDER ENGAGEMENT
City staff will post the Memoranda of Agreement and salary schedules on the City’s website after Council adoption for public access. Human Resources will communicate the changed to the terms of these agreements to highlight in job postings to attract new talent, fill vacancies and support employee retention.

ATTACHMENTS
Attachment A: POA Memorandum of Agreement
Attachment B: PMA Memorandum of Agreement
Attachment C: POA Salary Schedule
Attachment D: PMA Salary Schedule
Attachment E: Corrected FCA Salary Schedule
Attachment F: Revised Management and Professional Salary Schedule Item 11
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APPROVED BY:

Sandra Blanch, Human Resources Director
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Palo Alto
Peace Officers' Association
Memorandum of Agreement
July 1, 2018April 10January 1,
2023-June 30, 20212025

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TABLE OF CONTENTS

PREAMBLE 1
Section 1. Recognition 1
Section 2. No Discrimination 1
Section 3. Association Security 2
Section 4. Payroll Deduction 2
Section 5. No Strikes 2
Section 6. Probationary Period 3
Section 7. Salary Provisions 4
Section 8. Night Shift Differential 9
Section 9. Paid Holidays 9
Section 10. Working Out of Class Pay 10
Section 11. Retention/Career Incentive Program (Special Compensation) 11 Section 12. Dependent Care Assistance Program 11
Section 13. Court Pay 12
Section 14. Health Plans 12
Section 15. Dental Benefits 15
Section 16. Life Insurance Benefits 16
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iii

Section 17. Effective date of Coverage for New Employees 16 Section 18. Retirement Benefits 16
Section 19. Retirement Medical Plan 18
Section 20. Psychological Counseling Program 20
Section 21. Uniforms 20
Section 22. Work Schedule 21
Section 23. Overtime Pay and Compensatory Time Off 34
Section 24. Overtime Sign-Up 35
Section 25. Jury Duty 36
Section 26. Vacation Accrual 36
Section 27. Use of Vacation 37
Section 28. Vacation Pay at Termination 39
Section 29. Vacation Benefits for Deceased Employees 39 Section 30. Effect of Extended Military Leave 39
Section 31. Sick Leave 39
Section 32. Leaves of Absence Without Pay 42
Section 33. Leave of Absence With Pay 43
Section 34. Reduction in Force 44
Section 35. Agents 44
Section 36. Commute Incentives and Parking in Civic Center Garage 44 Item 11
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Section 37. Disciplinary Action and Unsatisfactory Work or Conduct 45 Section 38. Grievance Procedure 47
Section 39. Bulletin Boards and Telephones 50
Section 40. Access to Association Representatives 50
Section 41. Meeting Places 51
Section 42. Voluntary Leave Program: 51
Section 43. Utilization of Reserves for Field Services Division Events 52 Section 44. Overtime Meals for Investigative Services Division 53 Section 45. Hiring Incentives 53
Section 46. Full Understanding 54
Section 47. Printed Agreement 55
Section 48. Duration 55

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City of Palo Alto and PAPOA
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1 MEMORANDUM OF AGREEMENT
CITY OF PALO ALTO and PALO ALTO PEACE OFFICERS' ASSOCIATION

July 1, 2018 2021April 10, 2022January 1, 2023- June 30, 20212025

PREAMBLE

This Memorandum of Agreement is pursuant to and subject to Sections 3500 -3510 of the Government Code of the State of California, the Charter of the City of Palo Alto, and the City of Palo Alto Merit System Rules and Regulations. (This Memorandum of Agreement made and entered into at Palo Alto, California, by and between the City of Palo Alto, a municipal corporation (hereinafter referred to as "City") and the Palo Alto Peace Officers' Association, Incorporated, a California corporation (hereinafter referred to as "Association"), is intended to define agreements reached during the meet and confer process concerning wages, hours, working conditions, and other terms and conditions of employment for the represented group of employees.

Section 1. Recognition

The City recognizes the Association as the exclusive representative of an employee group consisting solely of Police Officer Trainees, Police Officers, Police Agents, and Police Sergeants who are regularly employe d by the City and othe rs who might be amended into the representation unit from time to time under existing law and the Merit System Rules and Regulations.

Section 2. No Discrimination

(a) The Association and the City hereby agree that there shall be no discrimination because of race, color, age, disability , sex, sexual orientation, national origin, political or religious affiliation, or any other protected classification as provided by applicable local, state or federal law. There shall be no discrimination in employment conditions or treatment of employees on the basis of membership or non-membership in the Association, or participation in the lawful activities of the Association.

(b) The Association and the City hereby agree to protect the rights of all employees to exercise their free choice to join the Association and to abide by the express provisions of applicable State and local laws.

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2 Section 3. Association Security

(a) When a person is hired in any of the covered job classifications, the City shall notify that person that the Association is the recognized bargaining representative for the employee in said Unit and give the employee a current copy of the Memorandum of Agreement.

(b) If there is no disruption of work, members of the Association Board of Directors may use a reasonable amount of on- duty time without loss of pay to attend to Association business sp ecifically related to r epresentation of employ ees. Such release time must be cleared in advance by the appropriate division manager who is a member of management.

For purposes of this section, representation shall include:

(i) Meetings with represented emp loyees or management related to a grievance or disciplinary action, including investigation and preparation time. (ii) A meeting with management related to benefits, working conditions or other terms and conditions of employment.

Section 4. Payroll Deduction

The City shall deduct Association membership dues and any other mutually agreed upon payroll deduction from the bi-weekly pay of member employees. The dues deduction must be authorized in writing by the employee on an authorization card acceptable to the City and the Association. The City shall remit the deducted dues to the Association as soon as possible after deduction.

Section 5. No Strikes

The Association, its represen tatives, or member s, sh all not engage in or ca use, instigate, encourage, sanction, or condone a strike, withholding of services, concerted abuse of leave of absence provisions, work stoppage or work slowdown of any kind. No employee shall refuse to cross any picket line in the conduct of Police Department business, nor shall the Association, its representatives, or members discriminate in any way toward anyone who refuses to participate in a strike, or any of the job actions cited above.

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3 Section 6. Probationary Period

(a) The probationary period for new emplo yees entering the classifications of Police Academy Trainee or Police Officer shall end 12 months following the successful completion of Police Academy training. The probationary period for lateral entry positions, where Police Acade my training is waived, shall be 12 months. In the event a probationary employee is absent for a period exceeding one-hundred and twenty (120) hours during the probationary period, probation will be extended by an equivalent number of duty hours.

(b) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee's qualifications, for ensuring the effective adjustment of a new employee to the pos ition and for rejecting any probationary empl oyee who in the opinion of management is not suitable to attain permanent status.

(c) During the probationary period a new employee may be terminated at any time by the appointing authority without cause. The existence of cause for termination shall not be arbitrable.

Probationary employees shall not be terminated for reasons that violate Section 2. No Discrimination, of this Agreement, or for reasons that are unconstitutional or unlawful.

(d) Probationary Period for New Supervisors

(1) The probationary period for newly promoted Agents and Sergeants shall end 12 months from the effective date of the promotion, excluding time off due to any unscheduled absence or leave.

(2) The probationary period shall be regarded as part of the testing process and shall be utilized for closely observing all aspects of the employee’s qualifications, for ensuring the effective adjustment of a newly promoted employee to the position and for rejecting any newly promoted probationary employee who in the opinion of management is not suitable to attain permanent status in the newly promoted rank.

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4 (3) During the 12 month promotional probationary period the newly promoted employee shall be evaluated by his/her direct supervisor on a quarterly basis.

(4) Any on-going and/or significant perceived deficiencies in the probationary employee’s work performance or supervisory aptitude shall be promptly communicated to the emplo yee. When appropr iate, the employee shall be provided with additional training and given opportunities to demonstrate their performance in response to the training. Such perceived deficiencies, any related training, and performance improvement or lack of response to training shall be documented by the employee’s superviso r and recorded in the employee’s quarterly evaluation for the quarter(s) in which the matter was addressed.

(5) During the promotional probationary period, a newly promoted employee may be demoted to their previous rank at any time by the appointing authority if the employee demonstrates a lack of suitability for the newly promoted position.

The demotion shall be based upon deficiencies in the performance or aptitude that have been addressed and documented as outlined in subsection (5). The existence of cause for demotion shall not be arbitrable. Promotional probationary employees shall; not be demoted for reasons that violate Section 2 of the Memorandum of Agreement, No Discrimination; or for reasons that are unconstitutional or unlawful.

(6) In the event that management elects to demote an employee during his or her probationary period, pursuant to subsection (6), the affected employee may request a hearing with the Chief of Police. The hearing shall be held promptly and prior to the intended effective date of demotion, so as to afford the employee with a meaningful and timely opportunity to respond to the stated reason(s) for demotion.

Section 7. Salary Provisions

(a) General Salary Increase. Effective the first full pa y period following ado ption of this MOA by City Council, salary ranges of all represented classifications will be increased by three percent (3%).Market Adjustment: Effective the first full pay period including City Council Adoption, salary ranges of all bargaining unit classifications will be increased by five percent (5.0%), which is sufficient to bring them to the top quartile of market median as determined by the City’s market study.

(b) Equity Adjustment: Effective the first full pay period following adoption of this MOA by Item 11
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5 City Council, salary ranges of all represented classifications will be increased by one and three quarters percent (1.75%).General Salary Increase: Effective the first full pay period following July 1, 2023, salary ranges of all represented classifications will be increased by four percent (4.0%).

(c) General Salary Increase. Effective the first full pay period folllowing July 1, 2019 salary ranges of all represented classifications will be increased by threepercent (3%).2024 salary ranges of all represented classifications will be increased by four percent (4.0%.)

(d) Equity Adjustment: Effective the first full pay period followingJuly 1, 2019, salary ranges of all represented classifications will be increased byforty five one hundredths of a percent (0.45%).Flexible Compensation: Effective the first full pay period following City Council Adoption, and in lieu of an increase to the City contribution towards medical premiums, each represented classification will have their monthly income increased by $100.

(e) General Salary Increase. Effective the first full pay period following July 1, 2020, salary ranges of all represented classifications will be increased by three percent (3%).Flexible Compensation: Effective the first full pay period following January 1, 2024, and in lieu of an increase to the C ity contribution towards medical premiums, each represented classification will have their monthly income increased by an additional $100 (total of $200).

(f) Total Compensation and Survey Database. Management and the Union have agreed to a compensation survey database structure. Survey Cities include: Alameda, Berkeley, Concord, Fremont, Hayward, Milpitas, Mountain View, Redwood City, San Leandro, San Mateo, Santa Clara, Vallejo, and Walnut Creek. Compensation Criteria includes: top step salary, maximum longevity, maximum education/POST, uniform allowance, holiday pay, deferred compensation, employee pick up of employer pension costs (Negative EPMC), and maximum City paid benefits (medical, dental, vision, life insurance, LTD, and EAP).

The database is intended to p rovide one source of information concerning how the compensation paid to employees in bargaining unit job classifications compares to that paid by other employers.

(g) Salary Steps & Ranges (Eligibility)

New officers attending the basic police academy will be compensated at the “Police Trainee” level.

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6 Academy Graduates and Lateral Officers with less than two years experience will be compensated at the “Police Officer” “Step 1” Level or higher.

Jr. First Class Exam : Officers become eligible t o take the exam anytime after they complete the Field Training Program. However, the pay increase will not become effective until they ha ve su ccessfully completed the test and have been with the department for a year from the academy graduation (Laterals a year from hire date).

For employees hired prior to July 1, 2018, the pay increase for Jr. First Class is compensated at the “Police Offi cer” “Step 4” level (Approxi mate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for Jr. First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 4.

First Class Exam: Officers become eligible to take the exam any time after they have successfully completed the Jr. First Class Exam. However, the pay increase will not take effect until one year from the date of the merit increase for the Jr. First Class exam. (Lateral officers’ pay increase may b e effective one year fr om the date of hire) For employees hired prior to July 1, 2018, the pay increase for First Class is compensated at the “Police Officer” “Step 5” Level (Approximate 5% Increase). For employees hired on or after July 1, 2018, the pay increase for First Class is one step on the salary schedule (approximate 5% increase), no higher than Step 5.

Effective the first full pay period following adoption of this MOA by City Council, the City will Implement a new step 6 following the same percentage difference as steps 1 -5.

Employees with one (1) year or more of service with the City of Palo Alto at Step 5 will be moved to Step 6.

(h) POST Certificate/Incentives

Basic Post: Officers become eligible upon completion of their probationary period.

The certificate must be obtained within 18 months of hire date. (No Salary Increase)

Intermediate POST: Employees that qualify for the Intermediate POST certificate will be compensated at the corresponding salary schedule (e.g., “Police Officer/Inter”), effective the first full pay period after the employee provides proof of submission of the required paperwork to POST (approximate 5% increase).

Advanced POST: Employees that qualify for the Advanced POST certificate w ill be compensated at the corresponding salary schedule (e.g., “Police Officer/Adv”), effective Item 11
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7 the first full pay period after the employee provides proof of submission of the required paperwork to POST (approximate 2.5% increase).

Employees are responsible for contacting Personnel & Training in order to arrange taking tests and application for POST certificates.

(i) Special assignment premium pay

Effective with the pay period including July 1, 2001, biweekly premium pay for employees assigned to the indicated specialties will be as follows:

Field Training Premium: 5% of base pay per pay period.

Applies to management-assigned Officers and Agents and Traffic Team members during each pay period in which they provide training to police recruits , Community Service Officers or Level II reserve officers who are working on their Level I certificate. Applies to management-assigned FTO Sergeants during each pay period in which they supervise assigned FTO Officers or Agents who are actively training p olice recruits, Community Service Officers or Level II reserve officers who are working on their Level I certificate.

The parties agree that, for the period beginning the first full pay period following the City Council adoption of the agreement a nd ending the last full pa y period in June 2025, Officers, Agents and Traffic Team members who management designates as Fi eld Training Officers and Sergeants designated as FTO Sergeants will Receive the 5% FTO premium for all pay pe riods, w ithout regard to whether they are assigned a po lice recruit during that pay period. The Parties also agree to revisit this section to determine whether to continue this program prior to June 30, 2025.

Traffic Premium: 5% of base pay per pay period.

Effective the first full pay period following City Council adoption of the MOA in 2023 , Officers, Agents and Sergeants who management assigns to routinely and consistently operate or patrol on a motorcycle.

K-9 Program Premium: 5% of base pay per pay period.,

Effective January 1 , 2008, K -9 Officers/Agents shall receive 5% of base pay per pay period to compensate for the time spent by the K-9 Officer/Agent outs ide regularly scheduled work hours to feed, groom, house, exercise, attend to the medical and dental needs of and otherwise maintain the dog.

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Attachment A POA
Memorandum of
Agreement

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8 Bilingual Premium: 5% of base pay per pay period.

Applies to representation unit employees certified by management as proficient in other languages as outlined below.

(i) Approved Languages

Spanish, Chinese (Mandarin and Cantonese), Japanese, Tagalog, Korean, Vietnamese, Russian, American Sign Language, and such other languages as determined by management.

(ii) Proficiency Requirements

Officers, Agents, and Sergeants who pass a basic “first responder” proficiency test administered by a professional linguist will be eligible for bilingual pay. This proficiency test will b e a one time test to ensure the candidate has the ability to verbally communicate (with the e xception of American Sign Language) as a first responder in the selected Language. First responder proficiency will include, but is not limited to, the ability to take basic crime and accident reports; issue a citation and explain the court process; complete a field interview card; give directions; give a Miranda admonition; and generally be able to communicate with a non -English speaking person in need of basic police services.

Study material will be provided by the City to all employees to assist in test preparation.

(iii) Testing Process

In order to best accommodate the wide range of languages, proficiency testing will be conducted by professional linguists outside the Police Departme nt that have been agreed upon by the Association and Management. A basic first responder proficiency exam has been developed based upon the needs of the organization.

The City will pay for the initial test for each employee. Employees who do not pass the initial test may retest as many times as necessary. However, subsequent tests will be at the employee’s expense.

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Attachment A POA
Memorandum of
Agreement

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July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

9 Section 8. Night Shift Differential

(a) Night shift differential shall be paid at the rate of 5% t o all FSD personnel for all hours worked between 6:00 p.m. and 8:00 a.m.

(b) All employees covered under Section 23(d) working a regular shift between 7:00 a.m. and 7:00 p.m. shall receive 5% night shift premium for hours worked be tween 7:00 p.m. and 7:00 a.m.

Vacation and administrative leave pay for employees who regularly work night shifts shall include appropriate night shift premiums, relating to night shift hours regularly worked.

Shift adjustment hours for employees who regularly work the 4-11 work schedule shall include the appropriate night shift premium based on the percentage of usual night shift hours worked to regular hours.

Section 9. Paid Holidays

(a) All represented employees on leave of absence without pay shall not receive in-lieu holiday accrual during such leave, or any compensation for holidays occurring during such leave.

(b) Effective with the pay period following adoption of this MOA, eEmployees shall not receive paid holidays, but in lieu thereof shall receive 3.462 hours straight time pay each full pay period that they are in paid status, to a maximum payment of ninety (90) hours per year.

Effective the first full pay period following City Council adoption of the MOU in 2023, this amount shall be increased to 3.846 hours straight time pay each pay period that they are in paid status, to a maximum payment of one hundred (100) hours per year. Holiday hours will be pro-rated for employees in paid status a portion of a pay period.

In-lieu hours may be taken as pay or time off. Eligible employees will elect, at the beginning of each fiscal year, the manner in which the in-lieu hours will be taken. Hours under this provision will accrue be paid each pay period while in a paidy status and will be paid semi- annually in June and December. If time off is elected under this provision, such time off may be taken to the maxi mum of current accrual balances and subject to management scheduling approval. Employees working non-field services assignments shall be eligible to use accrued holiday paid leav e time balances for any of the following recognized City holidays subject to management scheduling approval:

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Attachment A POA
Memorandum of
Agreement

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July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

10 January 1
Third Monday in January
Third Monday in February
Last Monday in May
July 4
First Monday in September
Second Monday in October
November 11
Thanksgiving Day
Day after Thanksgiving Day
December 25
Either December 24 or December 31, see below
A Day of Reflection in recognition of a day of the employee’s choosing, including Juneteenth Freedom Day (June 19) or Cesar Chavez/Dolores Huerta Day (March 31)

Additionally, effective with the pay period following adoption o f this MOA, in lieu of restoring Holiday pay to 120 hours, salary ranges of all represented classifications will be increased by 1.44%.

Section 10. Working Out of Class Pay

Officers, Agents and Sergeants working out of class for a period of four or more consecutiveshifts) shall be compensated with the following premium pay;

Officers and Agents working as an Acting Sergeant: 7% of base pay for all shifts

Sergeants working as an Acting Lieutenant: 10% of base pay for all shifts

Agents, and Sergeants fulfilling the role of an Acting Sergeant and/or Acting Lieutenant for individual shifts and/or a number of hours within a shift, shall not receive additional compensation.

Periodically working in this capacit y shall be deemed a basic duty within an employee’s job description.

In accordance with Government Code 20 480, an employee assigned to work in an out- of-class appointment may not ex ceed 960 hours work ed in the appointment within a fiscal year if the employee is appointed to an upgraded position or higher classification that is vacant during Item 11
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11 recruitment for a p ermanent appointment. This limitation does not apply to a position that is temporarily available due to a leave of absence.

Section 11. Retention/Career Incentive Program (Special Compensation)

(a) Retention/Career Incentive Program

On July 1, 2007 the City will initiate a Retention/Career Incentive Program. It is recognized that hiring, training, and retaining qualified law enforcement personnel is becoming increasingly difficult, time consuming, and very expensive. This program is designed to provide greater incentives for hiring new employees, retaining long-term employees, and attracting quality lateral candidates from other law enforcement agencies. This program will provide special compensation in the form of premium pay at various levels as employees reach different career milestones. Both parties acknowledge that in the 2007 negotiations, the cost of the program was partially offset thro ugh salary and/or benefit reductions agreed to elsewhere in this Memorandum of Agreement.

All employees with more than 10 years of service shall receive special compensation in the form of retention pay at 3% of straight time base pay.

All employees with more than 15 years service shall receive special compensation in the form of retention pay at 6% of straight time base pay. Maximum under this provision is 6%.

As an incentive to recruit and hire lateral law enforcement personnel from other agencies, the following shall apply. At the Chiefs discretion, up to 5 years of full time law enforcement service may be counted towards the years of service outlined above.

Special Compensation/Retention Pay outlined in the Retention/Career Incentive Program shall be deemed PERSable for the purpose of income and retirement however will not be a factor when calculating “MOU” (non-FLSA) overtime compensation.

Section 12. Dependent Care Assistance Program and Medical Flexible Spending Accounts.

The City will provide a Dependent Care Assistance Program (DCAP) and Medical Flexible Spending Account (FSA) for employees according to the provisions of the Federal Economic Recovery Act of 1981, Code Sections 125 and 129. With the exception of matters within the Item 11
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12 City’s sole control (e.g., establishment of the FSA), all matters related to the FSA shall be excluded from the MOA grievance procedure. Disputes regarding the administration of the plan shall be subject to the dispute resolution procedure provided by the plan document.

The FSA will be available to representation unit employees effective January 1, 2019, and remain in effect subject to a reasonable minimum partic ipation level and availability of third -party administrative services at a reasonable cost.

Section 13. Court Pay

Sworn Police Personnel appearing in court or in an administrative forum in the course and scope of their normal duties will be compensated according to the following:

Period Rate Minimum

(a) Scheduled day off. Time and one-half 4 hours

(b) During scheduled shift
or immediately preceding
or following a shift
Straight time during shift.

Time and one-half for period
before or after scheduled
shift.

None

(c) Appearance on a
scheduled work day by
employees of Team #3
(prior to 12 p.m.)
Time and one-half 3 hours
(d) Appearance on a
scheduled work day by
employees of Team #4 or
Team #5
Time and one-half 3 hours
(e) All other court
appearances
Time and one- half 3 hours

Section 14. Health Plans

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13 (a) PEMHCA Health Plan

During the term of this contract, the maximum City contribution towards medical premiums for eligible f ull time employees per employee category shall be up to a maximum of the following for any plan:

Medical Premium
Category
PEMHCA
Contribution*
Total Maximum City
Contribution
(inclusive of
PEMHCA
contribution)
effective from time
of ratification
through December
31, 2018
Total Maximum City
Contirbution
(inclusive of
PEMHCA
contribution)
effective Janaury 1,
2019first month
following City
Council Adoption
Employee Only $133151.00 $804 $840871
Employee plus one $133151.00 $1606 $16801742
Employee Family $133151.00 $2088 $21802260

The City’s total maximum contribution towards medical pre miums for eligible part time employees shall be prorated based on the number of hours per week the part -time employee is assigned to work.

*PEMHCA minimum changes annually. Any increases to the PEMHCA minimum during the term of this contract will result in a corresponding decrease to the amount of the additional City contribution, so that the total maximum City contribution never exceeds the amount listed in the “Total Maximum City Contribution” columns above.

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14 If the State of California or federal governm ent re quires the City to participate and contribute toward coverage under any medical plan outside of PEMHCA including but not limited to t he Affordable Care Act, the City’s total liability for enrolled employees and retirees and their eligible family members shall not exceed what the City would have paid toward PEMHCA coverage in the absence of such state or federal plan. The parties will meet an d c onfer over the impact of such change on matters within the scope of representation before implementing any change.

(b) Vision Care

The City will offer vision care coverage for employees and de pendents. Coverage is equivalent to $20 deductible Plan A under the Vision Service Plan, with monthly premiums paid by the employer. Dependents will include domestic partners, as defined under Section 14 (c).

Active employee domestic partners whose domestic partnership is registered with the State of California may add their domestic partner as a dependent to their electe d health plan coverage if the domestic partnership is registered with the Secretary of State.

Active employee domestic partners whose domestic partnership is not registered with the State, but who meet the requirements of the City of Palo Alto Declaratio n of Domestic Partnership, and are registered with the Human Resources Department, will be eligible for a stipend of two hundred eighty four dollars ($284.00) per month toward the cost of an individual health plan. Evidence of premium payment will be required w ith request for stipend.

(d) Alternative Medical Benefit Program

If a regular employee and/or the employee’s dependent(s) are eligible fo r and elect to receive medical insurance through any other non-City of Palo Alto employer-sponsored or association-sponsored medical plan, the Employee may choose to waive his/her right to the City of Palo Alto’s medical insurance and receive cash payments in the amount of two hundred eighty four dollars ($284) for each month City coverage is waived.

Examples of waivers eligible for this payment are:

• Employee waives all applicable City medical coverage; or Item 11
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15 • Employee is eligible to enroll his or her spouse or domestic partner and waives medical coverage for the spouse or domestic partner; or • Employee has additional eligible dependents and waives family-level medical coverage.

Participation must result in a health insurance cost savi ngs to the City and payments per employee shall not exceed a total of two hundred eighty four dollars ($284.00) per month. To participate in the program the employee and dependents must be eligible for coverage under PEMHCA medical plans, complete a waiver of medical coverage form, and provide proof of eligible alternative medical coverage.

Payments will be made in the employee’s paycheck beginning the first month following the employee’s completion of the waiver form. Payments are subject to state and federal taxes and are not considered earnings under PERS law. Employees are responsible for notifying the City of any change in status affecting eligibility for this program (for example, life changes affecting dependent’s eligibility for medical coverage through the employee) and will be responsible for repayment of amounts paid by the City contrary to the terms of this program due to the employee’s failure to notify the City of a change in status.

(e) Dual Coverage

When a City employee is married to another City employee each shall be covered only once (as an individual or as a spouse of the other City employee, but not both) and dependent children, if any, shall be covered by only one spouse

Section 15. Dental Benefits

(a) The City will maintain the present level of benefits on the City-sponsored dental program for current employees and their dependents, except that the maximum benefits per calendar year shall be $2,000 effective in 1988. Dental Coverage shall in clude composite (tooth colored) fillings for all teeth.

(b) The City provides a 50% of reasonable charges, $2,000 lifetime maximum orthodontic benefit for representation unit employees and their dependents.

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Memorandum of
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16 (d) Dental implants in conjunction with one or more missing natural teeth, and removal of dental implants will be covered as a Major Dental Service at 50% usual, customary a nd reasonable (UCR).

Section 16. Life Insurance Benefits

The City agrees to continue the basic life insurance plan as currently in effect for the term of this Memorandum of Agreement.

Section 17. Effective date of Coverage for New Employees

For newly hired regular employees coverage begins on the first day of the month following date of hire for the health plan, dental plan, vision care plan, and life insurance plans if these benefits are elected.

Section 18. Retirement Benefits

(a) Safety Pension Group A: “3% at 50” Safety Retirement

The City will continue the present benefits under the Public Employees’ Retirement System (PERS) “3 percent at 50” (3% @ 50) Retirement Formula per California Government Code §21362.2 for employees hired before the effective date of the “3 percent at 55” (3% @ 55) formula for new hires as described herein. The final year compensation for employees hired under the 3% at 50 formula will continue to be the “single highest year” or the highest average annual compensation earnable by the member during one (1) year of employment immediately preceding retirement or the one- year period otherwise designated by the member (Government Code 20042). Current employees continu ed to be covered under Government Code 20692, Employer Paid Member Contribution, to the extent there is a City paid member contribution in the final year.

(b) Safety Pension Group B: 3% at 55 Safety Retirement

Effective December 7, 2012, the City amended its contract with Cal PERS t o provide employees hired on or after that date who are not “new members” of CalPERS as defined in the Public Employees’ Pension reform act (often referred to as “Classic” CalPERS members) with the CalPERS retirement formula three percent of final salary at age 55 (3% at 55), with the final salary determination for such employees of “three highest consecutive years” based on the highest a verage annual compensation earnable by the member during three (3) consecutive years of employment immediately prec eding retirement or the three year Item 11
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17 period otherwise designated by the member (Government Code Section 20037). This new tier also eliminated Section 20692, Employer Paid Member Contribution.

Employees hired on or after January 1, 2013 meeting the definition of “new member” under the Public Employees’ Pension Reform Act (Gov’t. Code s. 7522 et seq.) shall be subject to all of the provisions of that law, including but not limited to the two point seven percent at age 57 (2.7%@57) retirement formula with a three year final compensation period.

(d) Employee Share of PERS Contribution

Employees in all sworn represented classes in Pension Groups A and B described above will make a 12% PERS member contributions by payroll deduction.

Employees in all sworn represented classes in Pension Group C described above shall pay the employee contribution required by the Public Employees’ Pension Reform Act, currently calculated at fifty percent (50%) of the normal cost, plus an additional 3%.

Trainees will pay the same employee contribution as miscellaneous members while attending Basic Academy (see section (g) below).

The City will continue to provide for member contributions to be made as allowed under the provisions of IRS Code §414(h)(2).

(e) Additional Employee PERS Contributions
• Effective the first full pay period following July 1, 2019 or as soon as administratively possible, all employees regardless of pension formula in this unit shall contribute an additional 0.5% to the Employer share of pension for a total of 3.5% contribution toward the Employer share of pension. (Total Employee contribution will be 12.5% for Classic; 50% of Normal Cost plus 3.5% for PEPRA.)

• Additional contributions will coincide with the City amending its contract with CalPERS to reflect these changes. However, should CalPERS delay or the Association fail to approve the CalPERS amendment required to incorporate the additional 0.5% contribution, the City may implement the additional 0.5% effective July 1, 2019 without a contract amendment., and additional employee PERS contributions under CalPERS 20516 will be provided on a pre-tax basis to the extent allowable by law.

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18 (f) 457 Deferred Compensation Plan

Effective the first full pay period following July 1, 2019 all employees who are classified as “New Members” by PERS or “Group C’ by the MOA will receive $ 50 per month contributed into their 457 deferred compensation plan. Eligible employees must have an active 457 plan in order to receive City contirbutions.

1959 Survivor Benefit

The City will continue to provide the basic level (Level 1) of 1959 Survivor Benefit to eligible employees in accordance with California Government Code §21571.

(g) Military Service Credit

The City’s contract with the Public Employees' Retirement System provides for Section 20930.3, Military Service Credit as Public Service.

(h) Retirement Privileges
All retired employees and spouses of deceased employees shall have residential privileges at City libraries, refuse disposal area, golf course, and swimming pools. (i) PERS Status While in Basic Academy.

While an employee is attending Basic Academy, he or she shall participate in the City’s PERS Miscellaneous Employee retirement plan with the same employee and employer contribution rates as applies to Miscellaneous City employees represented by SEIU (classified unit). When the employee successfully completes Basic Academy and is sworn in by the Police Chief, he or she shall prospectively participate in the PERS Safety Employee retirement plan.

Section 19. Retirement Medical Plan

(a) Retiree Medical Coverage - Employees hired before January 1, 2006 who have not voluntarily elected to participate in the Retirement Healthcare B enefits provided in Government Code section 22893:

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July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

19 Monthly City-paid premium contributions for a retiree-selected PEMHCA optional plan will be m ade in accordance with the Public Employees' Medical and Hospital Care Act Resolution for employees who retire on or before December 31, 2007. Effective March 1, 2009, for an employee retiring on or after that date, the City will pay up to the monthly medical premium for the second most expensive plan among the existing array of plans during the Agreement term. Effective April 1, 2015, for an employee retiring on or after that date, the City contribution shall be the same contribution amount it makes for active City employees. The parties mutually agree that the benefits provided in this paragraph for employees retiring on or after April 1, 2015 will fluctuate from time to time based on the City’s contributions to health care for active employees. Accordingly, Association members who retire on or after April 1, 2015 and have not elected to participate in the Retirement Healthcare Benefits provided in Government Code section 22893, do not maintain a vested interest in any particular contribution by the City abov e the amount required under the PEMHCA.

(b) Retiree Medical Coverage - Employees who voluntarily elect to participate in Government Code section 22893, and all Employees hired on or after January 1. 2006:

The CalPERS vesting schedule set forth in California Government Code § 22893 will apply to all Association members hired on or after January 1, 2006, and e mployees hired prior to January 1, 2006 who voluntarily elect to participate in the Retirement Healthcare Benefits provided in Government Code § 22893.

Under this law, an employee is eligible for 50% of the specified employer health premium contribution after ten (10) years of service credit, provided at least five (5) of those years were perform ed with the City of Palo Alto. After ten (10) years of service credit, each additional year of service credit will increase the employer contribution percentage by 5% until, at twenty (20) years' service credit, the employee will be eligible upon retirement for 100% of the specified employer contribution. However, the maximum contribution for family members will be 90% of the specified employer contribution. Notwit hstanding any other term of this section, the City of Palo Alto's health premium contribution for employees hired on or after January 1, 2006, an d employees who voluntarily elect to participate in Retirement Healthcare Benefits provided by Government Code § 2289 3, will be the minimum contribution set by CalPERS under California Government Code § 22893 based on a weighted average of available health plan premiums.

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20 Section 20. Psychological Counseling Program

The psychological counseling program currently in effect shall be continued. The program shall provide 24-hour emergency counseling by independent professional consultants.

Section 21. Uniforms

(a) The City will supply complete uniforms to all sworn personnel. All uniform items are the property of the City. One complete uniform consists of: (1) three pair of trousers, (2) three short-sleeved shirts with patches and zippers if desired, (3) three long-sleeved shirts with patches and zippers if desired, (4) three cotton or two synthetic fiber turtleneck shirts, (5) hat, (6) duty jacket with patches, (7) necktie, and (8) rain gear. The value of the purchase, rental and/or maintenance of the required uniforms s hall b e reported as special compensation to the extent legally permissible, pursuant to Title 2 CCR, Section 571(a)(5) as Uniform Allowance. Bas ed upon existing uniform standards and the City’s cost experience, the value of this benefit shall be reported as $42.31 per pay period.

(b) At the time of initial employment, every sworn employee will be issued one complete uniform. Uniform items will b e replaced on an as -needed basis subject to verificat ion by management.

(d) Personnel are accountable for all uniform items issued to them. If a particular item is lost or damaged due to employee negligence, the employee will be required to reimburse the City for value of the item(s) lost or damaged.

(e) The City shall reimburse employees for the full cost of job-related safety boots up to $400 per fiscal year. The City will make the reimbursement only upon proof that the previous boots have become unserviceable due to w ear or damage and upon verification of such purchase by the employee . (Job -related safety boots shall mean well -constructed, high topped boots that provide full ankle and foot support, which are selected from list agreed to by Management and the Associat ion.) All Department -provided safety boots shall be purchased through this program.

Employees are responsible for the full cost of any low-top, black shoes that are worn with the uniform.

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21 Section 22. Work Schedule

(a) Field Services Division 4/11 Schedule

The patrol schedule will have two sides, “A-Side” and “B-Side.” There will be ten patrol teams each supervised by a Sergeant or Acting Sergeant under the management of patrol lieutenants. Five Patrol teams will work an “A” schedule and five Patrol teams will work a “B” schedule.

Patrol officers, agents, and sergeants will report for duty promptly at the designated times for each team. Patrol team schedules are as follows.

Patrol Division Team Schedules

A-Side B-Side

Team 1A 0500 to 1600 Team 1B 0500 to 1600

Team 2A 0700 to 1800 Team 2B 0700 to 1800

Team 3A 1400 to 0100 Team 3B 1400 to 0100

Team 4A 1800 to 0500 Team 4B 1800 to 0500

Team 5A 2000 to 0700 Team 5B 2000 to 0700

Team’s 2A, 3A, and 4A are designated as field training teams.

(1) 4/11 Work Schedule

The work schedule will be based on an eight (8) day cycle with each employee working four (4) consecutive days on and having four (4) consecutive days off. The eight (8) day cycle will advance the employee’s workdays and days off within the calendar week one day every cycle. The overall cycle repeats itself every eight (8) weeks.

Over the course of a year (26 pay periods) each employee wo rks 182 eleven (11) hour Item 11
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22 regular patrol shifts totaling 2002 hours, 78-hours short of the required fulltime equivalent work year of 2080 hours.

In the Patrol Division and with the approval of the P atrol Captain, a maximum of two (2) paired “fixed days” schedules (4 Employees) may be established, at the employees’ request.

The regularly scheduled hours of work for such a position must cover the days off of the position with which it is paired. For example, one position could have Sunday, Monday, and Tuesday off while the other could have Thursday, Friday, and Saturday off. It shall be the responsibility of employees interested in a paired fixed day schedule to identify another employee who is willing to participate in the paired arrangement. If either employee or the Department desires to terminate a paire d schedule once it is in effect, the employee or Department, as applicable, must give the other affected parties to the arrangement at least one (1) full pay period advance written notice. Resumption of the employees’ participation in the normal rotation shall begin on the first day of the second full pay period following the date notice is delivered to the other parties.

Employees on a fixed schedule will be required to attend the designated CPT (Continued Professional Training) training days either on their regularly scheduled workday or on a day off. If they attend training on their regularly scheduled day off, they will be compensated by receiving an adjusted day off within the same pay period.

Employees requesting a schedule different from the rotati ng 4/11 must submit their request in writing prior to the team selection process. The requests will only be considered on an extreme hardship basis

The following hours and minimum staffing levels will be observed on both sides of the Patrol Division. During team overlaps, the combined staffing levels of the teams will serve to meet minimum staffing levels.

0700-2400 hours 1 Lieutenant/Sergeant Watch Commander
1 Sergeant/Agent Supervisor
6 Officers/Agents

0001-0300hours 1 Lieutenant/Sergeant Watch Commander
1 Sergeant/Agent Supervisor
5 Officers/Agents

0300- 0700 hours 1 Sergeant Supervisor
5 Officers/Agents
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23 Under routine circumstances, personnel will be able to receive time off as long as minimum staffing numbers remain available for duty. Management may deny time off to maintain staffing greater than the minimum numbers outlined above. It’s anticipated this will only occur in special situations where greater staffing is needed.

(2) Designated CPT Training Days within the 4/11 Schedule:

The 4/11 Schedule will have designated CPT training days and flexible training hours to make up the seventy-eight (78) hours necessary to complete a full work year. A training bank will be created for each employee on the 4/11 Schedule to track and monitor the use and balance of the 78-hours. The training bank and its use are outlined in the next section.

For CPT training days which require employees to travel outside the City of Palo Alto, an additional two (2) hours of training bank time will be made available to account for all travel time related to attendance at training. The Division Captain may authorize additional time on a case-by-case basis.

Management will determine the number of designated CPT training days and stagger them throughout the year in order to avoid overtime insofar as possible.

Designated CPT training days will be scheduled prior to the beginning of each shift year.

Unless otherwise determined by the Department, the re will be five (5) designated CPT training days each year. These training days will vary in duration but will in most cases be approximately eight (8) to ten (10) hours in duration. The exact number of designated CPT training days, their duration in hours, and the remaining flexible training bank time will be determined prior to shift change and vacation selection. If it’s anticipated that the number of training days will vary in any given year, Management will notify and, on request, meet with PAPOA to consider any concerns the Association may have.

Patrol personnel will not be permitted to take vacation on any one of these pre-designated CPT training days. The Division Captain may authorize an exception based on compelling circumstances.

The course content and training provided on the designated CPT tr aining days can vary from year to year to meet current and changing training needs. It will be the responsibility of the Personnel and Training Divis ion to schedule and coordinate the training on designated CPT training days. Training days may be schedule d during daytime and/or nighttime hours to accommodate training needs.

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24 Sworn employees not on the 4/11 Schedule will be required to attend desig nated C.P.T. training days. Each of the training days will be broken into two (2) single day sessions for Patrol (A side and B side). It is anticipated that approximately fifty percent (50%) of the non-4/11 employees will attend one (1) of the two (2) day s during each of the training cycles.

If the nature and/or complexity of the training does not allow for a larger groups, multiple sessions can be scheduled on additional training days.

(3) Flexible Training Hours

This schedule results in seventy -eight (78) hours that will be made up during the year through designated CPT training days and flexible training time. It is anticipated that approximately fifty (50) hours will be set aside each year for designated CPT training days (exact number to be determined each year). Once the hours set aside for designated CPT training days is established, the remaining hours shall be used for flexible training as follows.

Employees on the 4/11 Schedule attending training on a day off or outside their normal shift shall use their available Flexible Training Bank hours (No n-CPT Hours) prior to using overtime. All Flexible Training Bank hours must be used prior to earning overtime. The only limitation on the use of these training hours is that no employee can exceed the on e hundred seventy -one (171) hour FLSA limit in any tw enty-eight (28) day cycle. The combination of regular work shifts, designated CPT training days, and flexible training time cannot exceed one hundred seventy-one (171) hours in any FLSA Cycle. Any hours worked over one hundred seventy -one (171) in a twenty -eight (28) day cycle are considered premiums hours and must therefore be paid at the overtime rate.

The following is a list of some of the forms of training that could use hours from the bank;

SWAT DRO Range Masters
Quarterly Shoots FTO Meetings K-9
Sergeant’s meetings FTO School 11550 School
Radar School Supervisor school All other Training

If an employee doesn’t use his or her flexible training hours during the year, he or she will be required to make up the difference by either working extra shifts, partial shifts or by Item 11
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25 using vacation, compensatory time off, and/or holiday time from one of their banks at the end of each fiscal year. The Watch Commander and Supervisor will work with employees to schedule extra shifts or use vac ation, holiday or compensatory time off balances. The se hours are hours the employee is being compensated for during the normal twenty-six (26) pay periods. The employee must work the hours on a straight time basis or use vacation, holidays or compensatory time off for the compensation received throughout the year.

(4) Other Training (not covered by the flexible training bank)

The 4/11 Schedule significantly impacts designated CPT training days, shift training, and to some extent training compensated under the flexible training hours. The following guidelines should be followed when attending training not covered by the flexible training hours. All training bank hours, adjusted time off associated with training, and/or overtime associated to training shall be approved in advance by the employee’s watch commander or supervisor.

One full day of
training on a day off.

The employee will either receive overtime for the number of hours at training o r ad justment for one patrol shift.

Adjustments will be documented in the City timekeeping
system.

One full day of
training on a day on.

The employee will be adjusted off their patrol shift for the day. Adjustments will be documented in the City
timekeeping system.

More than one day,
but less than a
week.

For each full day of training, the employee will be adjusted off one patrol shift. Adjustments will be documented in the City timekeeping system

Partial day of
training on a day off.

Overtime or adjustment for the number of hours actually in training. Adjustments will be documented in the City timekeeping system.

Partial day of
training on day on.

The employee will be adjusted from duty for the time of the training and be expected to work the remainder of
their shift. Adjustments will be documented in the City timekeeping system.

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26 A four (4) or five (5)
day (week) training
session that doesn’t
exceed forty-four
(44) hours.

Whenever possible, and depending upon where the
employee is in their twenty-eight (28) day cycle, the
employee will be adjust ed off the patrol schedule when attending four or five day training sessions. The employee will be adjusted from four (4) eleven (11) hour shifts as compensation for attending the course. The four (4 )
adjusted days will be as close to the days the employee attended training as possible. Employees will not receive overtime under this situation unless the total time training exceeds forty-four (44) hours. Adjustments will be noted in the comment section of the timekeeping system.

(5) Assignments of Sworn Personnel on the 4/11 Schedule

Each year assignments are made for management staff for the coming fiscal year.

Subsequent to those assignments, officers, agents, and sergeants apply for specialty positions. At the conclusion of those specialty selections, the Patrol Team Selection process begins. Each year, the following process will be used for patrol team selection.

Field Services Division Shift Assignment Process:

Field Services sergeants, age nts, and officers will select their work team based on th e following criteria.

a. Sergeants, in order of seniority, shall select one of the ten patrol teams. Sergeants may select any open team with the exception of those teams designated as Field Training te ams. FTO Sergeants, in order of seniority, will selec t one of the designated FTO teams.

b. Field Training Officers/Agents, in order of seniority, shall select one of the slots open and designated as FTO slots on one of the three FTO teams. The following teams have been pre-designated as training teams: Team 2A, Team 3A, and Team 4A.

c. K-9 Officers/Agents – K-9 officers/agents will generally select one of the night shift teams: Teams 4 and 5. Selections will be based on rank and seniority. Only one K-9 will be allowed per team and K-9’s will be evenly split between the two sides

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27 Any exception to these assignments must be requested and approved by the Field Services Coordinator prior to the start of the selection process.

d. Agents, in order of seniority, shall select any of the open agent’s slots remaining on any of the patrol teams. A minimum of three (3) agents will be assigned to the A- Side and a minimum of three (3) agents will be assigned to the B-Side. If a greater number of agents are assigned to patrol, management will evenly designate agent’s slots insofar as possible to as many of the patrol teams as possible with the goal being to have one agent on each patrol team.

e. Officers, in order of seniority, shall select any remaining slot available on any of the patrol teams.

f. Probationary Officers - May be assigned to teams at the discretion of the Field Services Division Coordinator. These assignments will be made based on the developmental needs of the new employee, the staffing needs of the organization, and in a manner that minimizes the loss of prime bidding slots for more senior officers/ agents.

Additional Team Selection Guidelines

Prior to the selection process, management shall determine the number of agents, and officers assigned to each team.

Additionally, management will determine which teams are available for selection by K -9 Officers/Agents. Field Training Officers/Agents, Field Training Sergeants, and probationary employees shall be subject to administrative assignment.

In the spring of each year, all employees participating in the patrol team selection process will receive a schedule identifying available slots, the process for team selection, and a date and time for the employee to make their selection Team Selection Reservations – Once Officers/Agents/Sergeants select a team, they will be guaranteed that team even if they are unable to work that team at the start of the shift year due to special assignment, internship, leave of absence, disability, illness etc.

Officers, Agents and Sergeants may not remain in the same time slot for more then two consecutive years.

Team change request will be considered with the approval of management.

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28 Any request for an anticipated change to the assignment of sworn perso nnel shall be routed to the Field Services Division Coordinator prior to the selection process.

(6) Vacation Selection

Concurrent Vacation Authorization – Officers and Agents

Patrol Division – Four (4) slots are authorized on the A -Side and four (4) slots are authorized on the B-Side. It is anticipated that this would equate to two (2) slots on night shift (Teams 3, 4, and 5) and two (2) slots on day shift (Teams 1, and 2) for each side.

Any exceptions to these rules may be made by the Field Services Division Coordinator based on special circumstances.

Concurrent Vacation Authorization - Sergeants

Patrol Division – Two (2) slots are authorized in patrol on the A -Side and two (2) slots are authorized in patrol on the B-Side. It is anticipated that this would equate to one (1) slot on the night shift (Teams 3, 4, and 5) and one (1) slot on the dayshift (Teams 1 and 2) for each side. Exceptions to allow two (2) sergeants vacation at the same time for special circumstances may be made by the shift lieu tenant. Other exceptions to this rule may be made by the Field Services Division Coordinator.

a. The A-side and B-side will have separate vacation signups. It’s also anticipated that the dayshift and nightshift will have separate signups. For agents and above, selection will be based on rank and time in ra nk. Personnel having the greatest tenure in rank will have priority. For officers, selection will be based on seniority. If seniority is equal, low badge number shall have priority.

b. Sergeants will have a separate signup sheet from agents and officers. During the initial sign up sergeants will have two guaranteed slots per side, one (1) on day shift and one (1) on night shift. Agents/officers will have four (4) guaranteed slots per side, two (2) on day shift and two (2) on night shift.

Vacation Selection Process: Vacation selection will occur within a few weeks of the team selection process each spring. Selections will take place on two days, one day for the A -Side and one day for the B -Side. Sergeant, agents, and officers will be Item 11
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29 given time slots to come in, call in, or may submit in advance written instructions on choice for vacation weeks. The selections will be made based on rank and seniority.

Both sides agree to monitor the outcome of the proc ess and enter into a mutual agreement to continue or discontinue the process.

(7) Time Keeping and Payroll

All employees working under the 4/11 schedule will work eleven (11) hours a day, four (4) consecutive days a week. These eleven (11) hours will be entered in the timekeeping system on the day they are worked and/or prior to pay period payroll deadlines. Employees attending one (1) of the designated CPT training days will enter the hours of training on a “training timesheet” and enter the time in the timekeeping system. Employees using hours from their flexible training bank shall complete a “training timesheet” and enter the time in the timekeeping system.

Employees working the 4/11 Schedule will not receive overtime compensation for hours worked under the following conditions.

• Hours worked as part of a regular 11-hour work day.
• Hours worked on a designated CPT training days.
• Hours associated to training where hours from the flexible training bank could be used.
• Non-Mandatory training where adjustments from the patrol schedule are possible.

Overtime shall be paid for “Mandatory” training once trai ning bank hours have been exhausted.

Overtime shall be paid for “Mandatory” meetings that fall outside the specialty exemption listed below.

Participation in department specialties including training, meetings, and other activities is not considered a mandatory activity when it comes to overtime compensation. Wherever possible, employees participating in department specialties and other non- mandatory activities will be adjusted off the patrol schedule for these activities. Schedule adjustments will occur as close to the activity outside the employee’s normal work schedule as possible and within the same FLSA Cycle.

Schedule adjustments for personnel working nights: All personnel attending a full day of training on a work day will be adjusted off the patrol schedule for their work shift that day.

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30 In addition to being adjusted off any shift that starts on the day the training occurs, employees working Teams 3, 4, and 5 the night before the training will be adjusted off the night before as follows. If the t raining is all day starting in the morning hours, these adjustments will apply.

Team 3: Adjusted off at 2200 hours.

Teams 4 & 5: Adjusted off the entire shift.

If a night shift employee is scheduled for a full day of “Mandatory” training on the morning of his or her first day off, the same adjustments listed above will apply. In addition to the necessary adjustment, employees will receive compensation for the training hours through the use of training bank hours. When training bank hours are exhausted, the employee will receive overtime.

The time keeping system e ntries: Each employee must enter his or her time in the timekeeping system that accurately reflects the hours he or she works . When schedule adjustments are made, overtime is worked, or training bank time is used, employees must make appropriate notes in the comment section of the timekeeping system. Supervisors and timekeepers may complete the timekeeping system entries when e mployees are unavailable due to illness or other situations and employees will thereafter verify the timekeeping entry is accurate upon their return to work.

Managers and supervisor will approve time entries made in the time keeping system.

Managers and supervisors will pay special attention to the use of traini ng bank time and overtime. Time entries should be reviewed for regular hours and training hours that may exceed the FLSA guideline of 171 hours in a 28 day cycle.

With the 4-day on 4-day off rotation, employees will work either 66 or 88 hours in each pay period. The timekeeping system will shift adjust the appropriate number of hours into (+14) and out of (-8) the employees bi-weekly totals so each employee receives compensation for 80 hours. Rega rdless of the number of hours worked under the FLSA ex emption, an employee will be compensated for 80 regular hours every bi-weekly payroll cycle.

These shift adjusted hours (-8 or +14) will be added to or taken away from the timecard at the appropriate day/night shift differential rates for each employee. As an example, if an employee’s normal shift is paid at 75 percent day rate and 25 percent night rate, all hours shift-adjusted on to or off the timecard will be adjusted using the same approximate ratio of 75/25 percent for day/night rates.

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31 If an emplo yee l eaves city service while on the 4/11 schedule, staff and payroll shall perform the training bank reconciliation of the number of hours the employee is over or under the normal forty (40) hour workweek rate since the beginning of the current one (1) year (twenty-six [26] pay period) 4/11 cycle. If the employee has worked more hours than the forty (40) hour a week average, he or she shall be compensated for those hours at the regular rate. If the employee is under the forty (40) hour a week average, the hours will be taken from the employee’s vacation, holiday, or comp time bank and/or deducted at the regular rate from the employee’s last check.

If an employee’s assignment changes from the 4/11 schedule or to the 4/11 schedule, his or her over/under rate will be calculated the same as above. Time off, extra shifts worked, and/or the adjustment of holiday, vacation, and/or comp. time banks will be used to resolve any differences between actual hours wor ked and the forty (40) hour weekly average.

Daylight Savings Time/Pacific Standard Time Changes – Personnel on Team 4 and Team 5 will follow these guidelines when working either the spring forward or fall back. Individuals working in the spring who would lose an hour of work due to the change to Daylight Savings Time will report for duty one (1) hour early and work an eleven (11) hour shift at straight time. Individuals working in the fall will work one (1) additional hour (for a total shift of twelve (12) hours) due to the change to Pacific Standard Time. Such employees will put in for one (1) hour of overtime. Nothing in this section prevents an employee from leaving early or using time off to off set the time when staffing allows and approved by the Supervisor or Watch Commander.

(8) Maximum Hours Worked - Turn Around Time

Sergeants, agents, and officers may work up to a maximum number o f 16 hours in a 24- hour period. Any work beyond 16 hours m ust be approved by a watch commander or member of management and only under exigent circumstances. Any time an emplo yee works 16 hours or more, they must receive an 8-hour break before returning to duty. If the 8-hour break runs into the employees next shift, those hours are considered adjusted hours off.

Sergeants, agents, and officers shall not exceed a maximum of one hundred forty (140) hours in a 14 day pay period. Any work beyond one hundred forty (140) hours must be approved by the employee’s Lieutenant and Captain, and should rarely occur only under extreme situations.

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32 Sergeants and Lieutenants authorizing ove rtime in excess of the daily limit (16 -hours) and/or the bi -weekly limit (140 hours) shall send a short email to their Lieutenant and Captain explaining the reason for the excess work.

It is the employee’s responsibility to monitor their hours and notify the supervisor and/or watch commander of their hours worked when approaching the daily or bi-weekly limits or being requested to work overtime.

(9) Shift Exchanges

Sergeants, agents, and offic ers may exchange work shifts with another employee of the same rank. Agents and officers may be interchangeable if simply filling the role of an officer on the schedule. Personnel must submit a shift exchange request form to their supervisor and lieutenant. Shift exchanges require a lieutenant’s approval except when short notice makes that impossible. Shift exchanges can only occur for entire shifts, Shift exchange request forms must contain the pay back date for the second half of the shift exchange.

Both halves of the exchange must occur in the same 28-day FLSA Cycle (refer to Yearly 4/11 patrol Schedule for FLSA Cycles). Once an employee agrees to an exchange shift, he or she is responsible for that shift. If he or she fails to show up for the shift and/or is sick, the time will be deducted from his or her a pplicable leave balance to the extent the employee qualifies for such deduction under the applicable leave policy. Failure to show up for a shift may also result in disciplinary action.

(10) On-duty workout period and sign up:

When staffing allows and with supervisory approval, employees may workout on-duty for a period of up to one (1) hour. The hour shall include the work out, a shower, and dressing time. Specific guidelines and conditions are outlined in the Wellness Program Policy.

(11) Upon written request of either party, Section 22(a) of this MOU will reopen and the parties will meet and confer over the issue of the patrol work schedule. Any changes will be by mutual agreement of the City and the Association.

(b) Traffic Team

Sworn members of the Traffic Team shall work a ten-hour (10) day, four (4) day workweek schedule.

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33 Traffic Team officers/agents may be assigned as part of minimum staffing at the discretion of management.

Effective July 1, 2008, the Take Home Motor Program will be discontinued.

On a one time basis, employees assigned to motors who are in paid status the first full pay period after Council adoption of this MOU, will receive one time non PERSable stipend representing 2.5% of base salary of the employee’s classification minus applicable state and federal taxes.

The Special Operations Sergeant and team members shall generally work a ten (10) hour day, fo ur (4) day workweek schedule. Given the nature of the team’s assignment, it is anticipated and expected that their schedules should be flexible and adapt to organizational needs.

(d) ISD and Other Sworn Classifications

All sworn personnel assigned to ISD, Staff Assistant, Personnel and Training and Community Policing shall work a ten (10) hour day, four-day work week schedule.

(1) Work Schedule
The ten hours shall generally be worked between the hours of 0700 and 1900, with specific schedules subject to approval by appropriate supervisors. The ten (10) -hour work schedule shall be worked within a period of ten hours, with a working lunch period not to exceed thirty (30 ) minutes. As an alternativ e, w ith Management approval, the ten-hour work schedule may be worked within eleven hours, with a one (1) hour unpaid lunch break. Changing alternatives will require prior approval by Management.

(2) Work Week
For ISD personnel, one -half of the Division will wo rk Monday through Thursday, while the other half will work Tuesday through Friday. All other sworn personn el covered under Section 23 (b) & (c) will also work either Monday through Thursday, or Tuesday through Friday.

(3) Late Detective Shift
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34 Two detectives will be assigned on a rotational basis to the late shift from 1200 to 2200 to provide evening coverag e. Assignment to the late detective shift, where possible, will be by advanced sign up with each detective selecting two weeks each quarter according to a protocol determined by seniority, needs of the division and needs of the employee. Generally, there will be one detective from each half of the division working the late detective shift during each week.

(e) Forty-hour Training Schedule

For all sworn employees who attend training that is four (4) or five (5) days in duration (a week), their schedules will be adjusted from the normal work week. Employees will not receive overtime during scheduled training as described here unless it exceeds their normal forty (40 ) or forty -four (44) hour wor kweek. Schedule adjustments will be documented in the notes section when making the timekeeping system entries.

Section 23. Overtime Pay and Compensatory Time Off

(a) Overtime pay shall be provided at the rate of time and one-half of the employee's regular rate, including night shift differential, working out of classification pay, an d specialty assignment premium pay as defined under Section 7, 8 and 10.

(b) Compensatory time off, which is approved by management in-lieu of overtime payment on a staffing available basis, will be taken at the rate of 1 -1/2 hours for every hour of credited overtime. In the event compensatory time off is used as the method of compensating for overtime, the time off will be taken prior to the end of the quarter in which it is earned except as provided herein. All compensatory time balances over 80 hours shall be paid at the end of each quarter (i.e., employee to carry over 80 hours). During the final calendar year quarter only, employees have the option to:

(1) Employees who have vacation accrual balances of less than two times their annual accrual rate, less 80 hours, may request in writing prior to the payroll dead line to convert up to 80 hours of unused compensatory time to vacation per calendar year, to be transferred in the first pay period of the calendar year.

(2) Employees may cash out their entire compensatory balance but must make this request before payroll deadline.

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35 (c) Employees called out to perform wo rk, attend meetings or required training shall be compensated for at least three hours pay for each occurrence at the appropriate overtime rate.

Section 24. Overtime Sign-Up

(a) Planned Overtime Planned overtime includes patrol staffing, special events, traffic control functions or any other overtime needs which can be identified prior to the 20 th day of the
preceding month. On or about the 20th of each month, watch commanders will post a list of dates/shifts requiring overtime for the next month.

Officers, Agents, and Sergeants will be given a reasonable period of time to sign up for the available overtime assignments. On or about the 25
th of the month, planned overtime will be
filled from the sign up list using the rotational overtime call out list.

Agents may place themselves on the sign up list for supervisor overtime, however will only be considered if no sergeant requests the shift.

Overtime that isn’t filled during the planned overtime process may be filled at management’s discretion.

Employees assigned to a fixed work schedule such as ISD, P&T, and Staff Assistant may adjust their work schedule with their manager’s approval in order to work a planned patrol overtime assignment. This schedule adjustment must be completed within the same work week as the planned overtime assignment. Schedule adjustments will normally be approved unless there is a conflict with a previously scheduled activity within the work unit or the schedule adjustment would be disruptive to the operation of the unit. Employees bidding for planned overtime requiring a shift adjustment must make a notation next to the assignment indicating a shift adjustment would be necessary. Only one overtime shift requiring a shift adjustment can be worked per work week.

(b) Unplanned Overtime. Unplanned overtime is overtime that wasn’t identified prior to the 20 th of the preceding month. Unplanned overtime will be filled by the following procedures.

1) The Watch Commander or Supervisor may request an employee extend their shift or come in early. If a volunteer cannot be identified to hold over or come in early, the rotational overtime list will be used.

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36 2) Employees interested in work ing unplanned overtime will be placed on a rotational overtime list in order of seniority . When an overtim e shift is available, a manager or supervisor will call the next person on the list. If that person declines the opportunity, is not available, is a lready working, or takes the overtime, he/she will be placed at the bottom of the list. The lists will be continually updated in order to rotate the names.

There will be separate lists for sergeants and officers/agents for unplanned overtime. A separate supervisory list will be maintained for agents interested in working supervisory overtime. Agents will be offered supervisory overtime positions only if no sergeants have accepted the opportunity.

3) If the watch commander or supervisor is unable t o fill overtime through any of these procedures, he or sh e may order an individual to extend their shift, come in early, or come in on a day off. A log on those required to work mandatory overtime will be kept in the overtime book. Mandatory overtime shou ld b e rotated in order of reverse seniority.

c) Overtime Minimum. With regard to both planned and unplanned patrol team overtime, there is no minimum number of hours. Planned overtime postings and unplanned overtime will be offered for the actual number of hours needed. If small blocks of overtime aren’t filled by on-duty personnel adding them to an existing shift, managers may apply a 6-hour minimum to a shift for personnel coming in on a day off.

(d) These overtime procedures may be reviewed and/or modified at the mutual agreement of both management and PAPOA.

Section 25. Jury Duty

No employee shall be required to work a combination of jury duty and work time to exceed 12 hours during a 24-hour period. The period shall commence at the required time of appearance for jury duty. Jury duty is defined as the time between required time of appearance and dismissal.

Work time excused as a result of jury duty will be compensated at the regular rate of pay.

Section 26. Vacation Accrual

Vacation will be accrued when an employee is in pay st atus and will be credited on a bi -weekly basis. Such accrual and credit shall not exceed three times the annual rate of accrual. Each eligible employee shall accrue vacation at the following rate for c ontinuous service performed in pay status:

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37 (a) Less than four (4) years - For employees completing less than four years continuous service; (8) Shifts vacation leave per year.

(b) Four, but less than nine years - For employees completing four, but not more than nine (9) years continuous service; 12 Shifts vacation leave per year.

(c) Nine (9), but less than fourteen (14) years - For employees completing nine (9), but not more than fourteen (14) years continuous service; (16) Shifts vacation per year.

(d) Fourteen (14), but less than nineteen (19) years - For employees completing fourteen (14), but not more than nineteen (19) years continuous service; (18) Shifts vacation leave per year.

(e) Nineteen (19) or more years - For employees completing ninete en (19) or more years continuous service; (20) Shifts vacation leave per year.

Example: An employee with less than four (4) years working a 4/10 Schedule will receive eight (8) Shifts or eighty (80) hours of vacation. The same employee working the 4/11 Schedule will receive eight (8) Shifts or eighty-eight (88) hours of vacation.

Section 27. Use of Vacation

(a) When to be taken. The time at which an employee may use his/her accrued vacation leave and the amount to be taken at any one time shall be determined by the department head with particular regard for the needs of the City, but insofar as possible, considering the wishes of the employee.

(b) Limitation on use. Employees may not use more than their annual rate of accrual in any calendar year period, provided, however, that a department head my grant exceptions to this limitation.

(d) Double compe nsation prohibited. Employees shall not work for the City d uring their vacation.

(e) Vacation splitting. It is the intention of the City that vacation be taken in units of one week; however, with the approval of the department head, an employee may u se one week of Item 11
Attachment A POA
Memorandum of
Agreement

Item 11: Staff Report
Pg.
46 Packet Pg. 291 of 853

City of Palo Alto and PAPOA
July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

38 his/her accrued vacation in any calendar year in units of less than one work week, but in no instance in units of less than one-half of the normal workday or shift. Requests for exception to this procedure must be approved by the City Manager.

(f) Vacation Cashout. Once each calendar year an employee may cash out eight or more hours of vacation accrual in excess of 80 hours to a maximum of 120 hours, provided that the employee has taken at least 80 hours as vacation in the previous 12 months.

1. Effective for the 2012 tax year and each subsequent year, to be eligible to cash out vacation, employees must pre-elect the number of vacation hours they will cash out during the following calendar year, up to the maximum of 120 hours, prior to the start of that calendar year. The election will apply only to vacation hours accrued in the next tax year and eligible for cash out.

2. The election to cash out vacation hours in each designated year will be irrevocable.

This means that employees who elect to cash out vacation hours must cash out the number of accrued hours pre-designated on the election form provided by the City.

3. Employees who do not pre-designate or decline a cash out amount by the annual deadline established by the City will be deemed to have waived the right to cash out any leave in the following tax year and will not be eligible to cash out vacation hours in the next tax year.

4. Employees who pre-designate cash out amounts may request a cash out at any time in the designated tax year by submitting a cash out form to payroll. Payroll will complete the cash out upon request, provided the requested cash out amount has accrued and is consistent with the amount the employee predesignated. If the full amount of hours designated for cash out is not available at the time of cash out request, the maximum available will be paid.

5. For employees who have not requested payment of the elected cash out amount by November 1 of each year, Payroll w ill automatically cash out the pre-designated amount in a paycheck issued on or after the payroll date including November 1.

Within 90 days of adoption of this MOA, the parties agree to talk further about the administration and communication of the vacation cash out process.

Item 11
Attachment A POA
Memorandum of
Agreement

Item 11: Staff Report
Pg.
47 Packet Pg. 292 of 853

City of Palo Alto and PAPOA
July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

39 Section 28. Vacation Pay at Termination

Employees leaving the municipal service with accrued vacation leave shall be paid the amounts of accrued vacation to the date of termination. Payments for accrued vacation shall be at the employee's current rate of pay.

Section 29. Vacation Benefits for Deceased Employees

An employee who is eligible for vacation leave and w ho dies while in the municipal service shall have the amount of any accrued vacation paid to the employee's est ate within thirty days. This proration will be computed at the last basic rate of pay.

Section 30. Effect of Extended Military Leave

An employe e who interrupts his service because of an extended military leave shall be compensated for accrued vacation at the time the leave becomes effective.

Section 31. Sick Leave

(a) Statement of Policy. Sick leave shall be allowed and used only in case of actual personal sickness or disability, medical or dental treatment, or as authorized in Subsection 33 (e), personal business chargeable to sick leave. Up to 8 days sick leave per year may be used for illness in the immedi ate family (spouse, child, parent, parent -in-law, brother, s ister, registered domestic partner, or close relative residing in the household of the employee).

(b) Eligibility. Regular and part-time employees shall be eligible to accrue and use sick leave.

(c) Accrual. Sick leave shall be accrued bi- weekly provided the employee has been in a pay status for 50 percent or more of a bi-weekly pay period. Sick leave shall be accrued at the rate of 3.7 hours per bi-weekly pay period.

(d) Accumulation. Accrued sick leave may be accumulated without limit, except as provided in Section 31(h).

(e) Use. Sick leave may be used as needed and approved, to the point of depletion, at which time the employee will no longer receive pay for sick leave. A new employee may, if necessary, use up to forty-eight hours or shift equivalent of sick leave at any time during the first six months of employment. Any negative balances generated by such utilization will be charged against future accrual or deducted from final paycheck in the event of termination.

Item 11
Attachment A POA
Memorandum of
Agreement

Item 11: Staff Report
Pg.
48 Packet Pg. 293 of 853

City of Palo Alto and PAPOA
July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

40 An employee who has been disabled for 60 consecutive days and who is otherwise eligible both for payment under the long-term disability group insurance coverage and accrued sick leave benefits may, at his/her option, choose either to receive the long -term disability benefits or to utilize the remainder of his/her accrued sick leave prior to applying for long-term disability benefits.

Sick leave will not be granted for illness occurring during any leave of absence ot her than sick leave, unless the employee can demonstrate that it was necessary to come under the care of a doctor while on such other leave of absence.

When an employee finds it necessary to be absent for any reason, he/she should cause the facts to be reported to the department within one hour after his/her regular starting time on the first working day of absence, and shall regularly report on, or account in advance for each work day thereafter unless hospitalized or otherwise indisposed. Such reports may be subject to written documentation if there is reasonable evidence that sick leave abuse has occurred. Sick leave shall not be granted unless such report or advance accounting has been made, provided, however, that the department head may grant excep tion to this policy where the circumstances warrant.

Documentation may also be required if there is a reasonable basis to believe that the employee may not be medically fit to return to work.

(f) Depletion of Sick Leave Benefits . Upon depletion of si ck leave or the beginning of the period to be covered by payments under the long-term disability group insurance coverage, whichever comes first, an employee may be granted a medical leave of absence without pay for a period not exceeding sixty days. If the employee is unable to return to work at the end of this per iod, he/she must request further medical leave which will be subject to the approval of the City Manager. If further leave is granted, the employee must notify the City of intent to return to work every thirty days. If further leave is not granted, the employee's service with the City shall be considered terminated.

(g) Forfeiture Upon Termination . Employees leaving the municipal serv ice s hall forfeit all accumulated sick leave, except as otherwise provided by law and Subsection 32(h). In the event that notice of resignation is given, sick leave may be used only through the day which was designated as the final day of work by such notice.

(h) Payment for Accumulated Sick Leave. Employees hired before August 1, 1986 who leave the municipal service in good standing, or who die while employed in good standing by the Item 11
Attachment A POA
Memorandum of
Agreement

Item 11: Staff Report
Pg.
49 Packet Pg. 294 of 853

City of Palo Alto and PAPOA
July 1, 2018 2021April 10January 1, 2023 – June 30, 20212025

41 City, and who have fifteen or more years of continuous service shall receive compensation for unused sick leave hours in a sum equal to two and one-half percent of their unused sick leave hours multiplied by their years of continuous service and their basic hourly rate of pay at termination.

For all employees entering the servi ce of the City prior to March 2, 1983, full sick leave accrual will be paid in the event of termination due to disability.

For all employees hired after August 1, 1986, sick leave accrual accumulation shall be limited to 1,000 hours with no payoff provision for unused balance at termination.

(i) Sick Leave Re-opener. Upon written request of either party, the parties agree to meet to confer over the issue of sick leave incentive, including but not limited to: (1) sick leave payout for employees hired after August 1, 1986 and (2) converting to a paid time off policy in lieu of both vacation and sick leave. Any changes will be by mutual agreement of the City and the Association.

Palo Alto City CouncilApril 17, 2023

Palo Alto City Council
April 17, 2023